Mesa Air Group Reports Second Quarter Fiscal 2023 Results

Mesa Air Group Reports Second Quarter Fiscal 2023 Results

PHOENIX, May 09, 2023 (GLOBE NEWSWIRE) — Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter fiscal 2023 financial and operating results.

Fiscal Second Quarter Update:

  • Total operating revenues of $121.8 million
  • Pre-tax loss of $37.2 million, net loss of $35.1 million or $(0.88) per diluted share
  • Adjusted net loss1 of $21.3 million or $(0.53) per diluted share
  • Adjusted net loss excludes $13.8 million primarily related to impairment of assets held for sale
  • Initiated CRJ-900 transition to United Airlines in March, with last American Airlines flight operated April 3rd
  • Experiencing pilot attrition below pre-COVID levels
  • Reduced debt by approximately $80 million primarily with proceeds from asset sales

Jonathan Ornstein, Chairman and CEO, said, “While our financial results reflect the ongoing transition of CRJ flying to United, we believe these actions will prove to be the right long-term strategic decision for the company. We began operating CRJ-900 flights for United Airlines in March, representing the culmination of months of diligent preparation and coordination between Mesa and United teams. We have already started to realize significantly improved pilot retention and attraction as a result of our expanded agreement with United. While we were ultimately more conservative in the timing of our transition than we had projected through second-quarter end, we have now transitioned 24 CRJ-900s.”

Fiscal Second Quarter Details:

Total operating revenues in Q2 2023 were $121.8 million, a decrease of $1.4 million, or 1.1%, from $123.2 million for Q2 2022. Contract revenue decreased $8.2 million, or 7.3%. These decreases were driven by deferred revenue and lower block hours, partially offset by higher United block-hour rates for new pilot payscales. Pass-through revenue, driven by maintenance and property taxes, increased by $6.8 million. Mesa’s Q2 2023 results include, per GAAP, the deferral of $5.7 million, versus the recognition of $0.8 million of previously deferred revenue in Q2 2022. The remaining deferred revenue balance of $24.5 million will be recognized as flights are completed over the remaining term of the United contract.

Total operating expenses in Q2 2023 were $148.7 million, a decrease of $19.3 million, or 11.5%, versus Q2 2022. This decrease was primarily due to $22.7 million lower non-cash impairment of assets held for sale versus Q2 2022, an $8.6 million decrease in aircraft rent attributable to the reclassification from operating lease to finance lease for certain CRJ-900s, and a $4.2 million decrease in depreciation primarily driven by the lower depreciable base from the CRJ-900 asset impairment charge in Q4 2022. The decrease was partially offset by a $12.4 million increase in flight operations expense to $54.8 million, reflecting higher pilot pay scales and increased training costs as we continue to drive pilot throughput, as well as a $5.7 million increase in general and administrative expense, reflecting higher pass-through property tax costs. Total adjusted operating expenses, excluding one-time items, were $132 million, an increase of 2.7% compared to the prior year period.

Mesa’s Q2 2023 results reflect a net loss of $35.1 million, or $(0.88) per diluted share, compared to a net loss of $42.8 million, or $(1.19) per diluted share for Q2 2022. Mesa’s Q2 2023 adjusted net loss1 was $21.3 million, or $(0.53) per diluted share, versus an adjusted net loss1 of $10.3 million, or $(0.29) per diluted share, in Q2 2022.

Mesa’s Adjusted EBITDA1 for Q2 2023 was $7.1 million, compared to $15.8 million in Q2 2022, and Adjusted EBITDAR1 was $7.9 million for Q2 2023, compared to $25.2 million in Q2 2022.

Operationally, the Company reported a controllable completion factor of 99.6% for United and 99.8% for American during Q2 2023. This is compared to a controllable completion factor of 96.7% for United and 96.8% for American during Q2 2022. This excludes cancellations due to weather and air traffic control.

With respect to a total completion factor that includes all cancellations, Mesa reported a total completion factor of 98.5% for United and 94.7% for American during Q2 2023. This is compared to a total completion factor of 93.7% for United and 93.5% for American during Q2 2022.

For Q2 2023, 55% of the Company’s total revenue was derived from our contracts with United, 40% from American, 4% from DHL, and 1% from leases of aircraft to a third party. Upon our completion of the transition of the American CRJ-900s to United, our contracted regional fleet will consist of 80 large (70/76 seats) jets, comprising a mix of E-175s and CRJ-900s. Additionally, we will continue to operate four 737-400/800s at DHL.

Balance Sheet and Cash Flow:

Mesa ended the quarter at $51.4 million in unrestricted cash and equivalents. As of March 31, 2023, the Company had $608.7 million in total debt secured primarily with aircraft and engines.

During the quarter, the Company closed on the sale of 4 of the 11 CRJ-900s agreed to be sold to a third-party. Mesa also sold to United the remaining eight CRJ-550s and ten out of the 30 engines previously agreed upon. Net proceeds from these transactions were used to pay down $52 million of debt. Additionally, we made $28 million of scheduled debt payments in the quarter.

Conference Call Details:

Mesa Air Group will host a conference call with analysts on May 9th at 4:30 pm EDT. The conference call number is 888-469-2054 (Passcode: Phoenix (7463649)). The conference call can also be accessed live via the web by visiting https://investor.mesa-air.com.

A recorded version will be available on Mesa’s website approximately two hours after the call for approximately 14 days.

About Mesa Air Group, Inc.

Headquartered in Phoenix, Arizona, Mesa Air Group, Inc. is the holding company of Mesa Airlines, a regional air carrier providing scheduled passenger service to 105 cities in 42 states, the District of Columbia, the Bahamas, Cuba, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of March 31, 2023, Mesa operated or leased a fleet of 109 aircraft with approximately 325 daily departures and 2,388 employees. Mesa operates all of its flights as either American Eagle, United Express, or DHL Express flights pursuant to the terms of capacity purchase agreements entered into with American Airlines, Inc. and United Airlines, Inc. and a flight service agreement with DHL.

Forward-Looking Statements

Certain statements contained in this press release that are not historical facts contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that are subject to the “safe harbor” created by those sections. Forward-looking statements can be identified by the use of words such as “estimate,” “anticipate,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “seek,” “approximate” or “plan,” or the negative of these words and phrases or similar words or phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. For more information on risk factors for Mesa Air Group, Inc.’s business, please refer to the periodic reports the Company files with the Securities and Exchange Commission from time to time. These forward-looking statements herein speak only as of the date of this press release and should not be relied upon as predictions of future events. Mesa Air Group, Inc. expressly disclaims any obligation or undertaking to update or revise any forward-looking statements contained herein, to reflect any change in Mesa Air Group, Inc.’s expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based, except as required by law.

Contact:

Mesa Air Group, Inc.
Media
Media@mesa-air.com

Investor Relations
Doug Cooper
investor.relations@mesa-air.com

 
MESA AIR GROUP, INC.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share amounts) (Unaudited)
 
    Three Months Ended
March 31
  Six Months Ended
March 31
      2023       2022       2023       2022  
Operating revenues:                
Contract revenue (2023—$52,399 and $111,769   $ 103,782     $ 111,988     $ 232,232     $ 248,882  
and 2022—$48,295 and $110,880 from related                                
party)                                
Pass-through and other revenue     18,052       11,225       36,776       22,088  
Total operating revenues     121,834       123,213       269,008       270,970  
                 
Operating expenses:                
Flight operations     54,830       42,410     113,150      90,008  
Maintenance     45,985       47,357       94,272     106,338  
Aircraft rent     835       9,434       4,918     19,020  
General and administrative     13,538       7,860       27,526     20,438  
Depreciation and amortization     16,541       20,747       31,744     41,775  
Impairment of assets held for sale     16,743       39,475       20,462     39,475  
Other operating expenses     233       685       1,359     2,657  
Total operating expenses     148,705       167,968       293,431       319,711  
Operating income (loss)     (26,871 )     (44,755 )     (24,423 )     (48,741 )
                 
Other income (expense), net:                
Interest expense     (13,030 )     (8,120 )     (24,306 )     (16,050 )
Interest income     49       42       120       93  
Gain on investments, net     2,095       (2,261 )     416       (8,723 )
Other income (expense), net     538       (71 )     955       (130 )
Total other income (expense), net     (10,348 )     (10,410 )     (22,815 )     (24,810 )
Income (loss) before taxes     (37,219 )     (55,165 )     (47,238 )     (73,551 )
Income tax expense (benefit)     (2,097 )     (12,382 )     (3,027 )     (16,494 )
Net income (loss)   $ (35,122 )   $ (42,783 )   $ (44,211 )   $ (57,057 )
                 
Net income (loss) per share attributable to common shareholders                
Basic   $ (0.88 )   $ (1.19 )   $ (1.16 )   $ (1.58 )
Diluted   $ (0.88 )   $ (1.19 )   $ (1.16 )   $ (1.58 )
                 
Weighted-average common shares outstanding                
Basic     39,932       36,048       38,135       36,005  
Diluted     39,932       36,048       38,135       36,005  
                                 

MESA AIR GROUP, INC.
Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)
    March 31,
2023
  September 30,
2022
ASSETS      
         
CURRENT ASSETS:        
Cash and cash equivalents   $ 51,428   $ 57,683
Restricted cash     3,144     3,342
Receivables, net     9,924     3,978
Expendable parts and supplies, net     26,754     26,715
Prepaid expenses and other current assets     6,341     6,616
Total current assets     97,591     98,334
         
Property and equipment, net     868,027     865,254
Intangible assets, net         3,842
Lease and equipment deposits     1,686     6,085
Operating lease right-of-use assets     11,593     43,090
Deferred heavy maintenance, net     9,532     9,707
Assets held for sale     40,530     73,000
Other assets     26,398     16,290
TOTAL ASSETS   $ 1,055,357   $ 1,115,602
         
LIABILITIES AND STOCKHOLDERS’ EQUITY      
         
CURRENT LIABILITIES:        
Current portion of long-term debt and finance leases ($30,630 and $0 from related party)   $ 145,046   $ 97,218
Current portion of deferred revenue     5,174     385
Current maturities of operating leases     5,562     17,233
Accounts payable     48,480     59,386
Accrued compensation     9,745     11,255
Other accrued expenses     28,081     29,000
Total current liabilities     242,088     214,477
         
NONCURRENT LIABILITIES:        
Long-term debt and finance leases, excluding current portion     463,646     502,517
Noncurrent operating lease liabilities     8,459     16,732
Deferred credits ($1,965 and $2,193 from related party)     3,300     3,082
Deferred income taxes     14,512     17,719
Deferred revenue, net of current portion     19,306     23,682
Other noncurrent liabilities     28,829     29,219
Total noncurrent liabilities     538,052     592,951
Total liabilities     780,140     807,428
         
STOCKHOLDERS’ EQUITY:        
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 40,619,274 (2023) and 36,376,897 (2022) shares issued and outstanding, 4,899,497 (2023) and 4,899,497 (2022) warrants issued and outstanding     270,432     259,177
Retained earnings     4,785     48,997
Total stockholders’ equity     275,217     308,174
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 1,055,357   $ 1,115,602

MESA AIR GROUP, INC.
Operating Highlights (unaudited)
 
    Three months ended
    March 31
    2023     2022     Change  
Available seat miles (thousands)   1,065,771     1,616,896     -34.1%  
Block hours   48,186     65,613     -26.6%  
Average stage length (miles)   542     671     -19.2%  
Departures   26,450     31,983     -17.3%  
Passengers   1,545,489     1,921,635     -19.6%  
Controllable completion factor*            
American   99.76%     96.76%     3.1%  
United   99.63%     96.71%     3.0%  
Total completion factor**            
American   94.68%     93.51%     1.3%  
United   98.48%     93.74%     5.1%  
                   

*Controllable completion factor excludes cancellations due to weather and air traffic control
**Total completion factor includes all cancellations

1Reconciliation of non-GAAP financial measures

Although these financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), certain non-GAAP financial measures may provide investors with useful information regarding the underlying business trends and performance of Mesa’s ongoing operations and may be useful for period-over-period comparisons of such operations. The tables below reflect supplemental financial data and reconciliations to GAAP financial statements for the three and six months ended March 31, 2023 and March 31, 2022. Readers should consider these non-GAAP measures in addition to, not a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures exclude some, but not all items that may affect the Company’s net income or loss. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

1Reconciliation of GAAP versus non-GAAP Disclosures
(In thousands, except for per diluted share) (Unaudited)
 
  Three Months Ended March 31, 2023   Three Months Ended March 31, 2022
  Income (Loss) Before Taxes Income Tax (Expense)
Benefit
Net Income (Loss) Net Income (Loss) per Diluted Share   Income
(Loss)
Before Taxes
Income Tax (Expense)
Benefit
Net
Income
(Loss)
Net Income (Loss) per Diluted Share
GAAP income (loss) $ (37,219 ) $ 2,097   $ (35,122 ) $ (0.88 )   $ (55,165 ) $ 12,382   $ (42,783 ) $ (1.19 )
Gain on investments, net   (2,095 )   139     (1,956 ) $ (0.05 )     2,261     (522 )   1,739   $ 0.05  
Deferred financing write-off on sale of assets   663     (44 )   619   $ 0.02                    
Gain of disposal of fixed assets   (549 )   36     (513 ) $ (0.01 )                  
Asset Impairment   16,743     (1,112 )   15,631   $ 0.39       39,843     (9,097 )   30,746   $ 0.85  
Adjusted income                  
(loss)   (22,457 )   1,117     (21,340 ) $ (0.53 )     (13,061 )   2,763     (10,298 ) $ (0.29 )
Interest expense   13,030           8,120      
Interest income   (49 )           (42 )      
Depreciation and amortization   16,541             20,747        
Adjusted EBITDA   7,065             15,764        
Aircraft rent   835             9,434        
Adjusted EBITDAR $ 7,900           $ 25,198        

  Six Months Ended March 31, 2023   Six Months Ended March 31, 2022
  Income (Loss) Before Taxes Income Tax (Expense)Benefit Net Income (Loss) Net Income (Loss) per Diluted Share   Income
(Loss)
Before Taxes
Income Tax (Expense)Benefit Net Income
(Loss)
Net Income (Loss) per Diluted Share
GAAP income (loss) $ (47,238 ) $ 3,027   $ (44,211 ) $ (1.16 )   $ (73,551 ) $ 16,494   $ (57,057 ) $ (1.58 )
Adjustments(1)(2)(3)(4)(5)(6)(7)(8)   20,160     (1,568 )   18,592   $ 0.49       48,566     (11,089 )   37,477   $ 1.04  
                   
Adjusted income                  
(loss)   (27,078 )   1,459     (25,619 ) $ (0.67 )     (24,985 )   5,405     (19,580 ) $ (0.54 )
Interest expense   24,306             16,050        
Interest income   (120 )           (93 )      
Depreciation and amortization   31,744             41,775        
Adjusted EBITDA   28,852             32,747        
Aircraft rent   4,918             19,020        
Adjusted EBITDAR $ 33,770           $ 51,767        

(1)   $0.4 million impairment loss on operating lease right of use asset related to the abandonment of one the Company’s leased facilities during the six months ended March 31, 2022.
(2)   $39.5 million impairment loss on held for sale accounting treatment on twelve (12) CRJ 900 aircraft during the six months ended March 31, 2022.
(3)   $8.7 million loss resulting from changes in the fair value of the Company’s investments in equity securities for the six months ended March 31, 2022.
(4)   $16.7 million impairment loss on Held for Sale accounting treatment on seven (7) CRJ 900 aircraft during the six months ended March 31, 2023.
(5)   $3.7 million impairment loss on intangible asset during the six months ended March 31, 2023.
(6)   $0.5 million gain from sale of ten (10) engines during the six months ended March 31, 2023.
(7)   $0.7 million loss on deferred financing costs related to retirement of debts during the six months ended March 31, 2023.
(8)   $0.4 million gain resulting from changes in the fair value of the Company’s investments in equity securities for the six months ended March 31, 2023.

Source: Mesa Air Group, Inc.

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