Mesa Air Group Reports Second Quarter Fiscal 2022 Results

Rhea-AI Summary

Mesa Air Group, Inc. (NASDAQ: MESA) reported a significant net loss of $42.8 million or $(1.19) per diluted share for Q2 FY22, compared to a net income of $5.7 million or $0.14 per diluted share in Q2 FY21. The pre-tax loss was $55.2 million, with an adjusted net loss of $10.3 million, excluding a $39.5 million non-cash impairment charge. Despite a revenue increase to $123.2 million, a 26.7% year-over-year growth, increased pilot attrition and ongoing challenges impacted operational performance. Liquidity stands at $75.9 million in unrestricted cash.

Positive

• Operating revenues increased by 26.7% year-over-year to $123.2 million.
• Total contract revenue rose by $30.3 million due to return to normal rates.

Negative

• Net loss of $42.8 million for Q2 FY22 compared to a net income of $5.7 million in Q2 FY21.
• Adjusted EBIDTA dropped to $15.8 million from $41.5 million year-over-year.
• Significant pilot attrition and Covid-related challenges continue to impact operational performance.

PHOENIX, May 09, 2022 (GLOBE NEWSWIRE) -- Mesa Air Group, Inc. (NASDAQ: MESA) today reported second quarter fiscal 2022 financial and operating results.

Financial Summary Q2:

• Pre-tax loss of $55.2 million, net loss of $42.8 million or $(1.19) per diluted share.
• Adjusted net loss¹ of $10.3 million or $(0.29) per diluted share.
• Adjusted net loss excludes a $39.5 million (pre-tax) non-cash charge related to 12 CRJ aircraft held for sale.
  

Quarter Highlights:

• Mesa took delivery of its third 737-400F freighter aircraft in the quarter.
• Added an additional E175 flight simulator.

Fiscal Year Q2 Results:

Mesa’s Q2 FY22 results reflect a net loss of $42.8 million, or $(1.19) per diluted share, compared to net income of $5.7 million, or $0.14 per diluted share for Q2 FY21. Mesa’s Q2 FY22 adjusted pre-tax loss¹ was $13.1 million versus an adjusted pre-tax income¹ of $12.1 million in Q2 FY21. The year over year decrease in adjusted pre-tax income of $25.2 million was primarily due to lower block hours and the impact of the PSP program.

Jonathan Ornstein, Chairman and CEO, said, “While demand for our product remains strong, our financial results this quarter reflect the ongoing challenge of heightened pilot attrition. In January, our operational and financial performance was significantly impacted by Covid-related higher pilot absence rates which have since subsided. We remain focused on taking steps to address pilot attrition, including increased hiring, simulator capacity, and training capabilities, which has been exacerbated by the industry wide pilot shortage.”

Fiscal Q2 details:

Total operating revenues in Q2 2022 were $123.2 million, an increase of $25.9 million (26.7%) from $97.3 million for Q2 2021. Contract revenue increased $30.3 million. This was due to the return to normal rates from our partners which were temporarily reduced last year related to the PSP program. These were partially offset by a reduction in block hours. Mesa’s Q2 2022 results include, per GAAP, the recognition of $0.8 million of previously deferred revenue, versus the deferral of $4.9 million of revenue in Q2 2021. The remaining deferred revenue balance will be recognized as flights are completed over the remaining terms of the contracts.

Mesa’s Adjusted EBITDA¹ for Q2 2022 was $15.8 million, compared to $41.5 million in Q2 2021, and Adjusted EBITDAR¹ was $25.2 million for Q2 2022, compared to $51.5 million in Q2 2021.

Operationally, the Company ran a controllable completion factor of 96.8% for American and 96.7% for United during Q2 2022. This is compared to a controllable completion factor of 99.8% for American and 100.0% for United during Q2 2021. This excludes cancellations due to weather and air traffic control. As Covid-related cancellations declined, our controllable completion factors for both American and United were both 99.9% for the month of March.

With respect to a total completion factor that includes all cancellations, Mesa reported a total completion factor of 93.5% for American and 93.7% for United during Q2 2022. This is compared to a total completion factor of 95.0% for American and 94.2% for United during Q2 2021.

¹ See Reconciliation of non-GAAP financial measures

Liquidity and Capital Resources:

Mesa ended the quarter at $75.9 million in unrestricted cash and equivalents. As of March 31, 2022, the Company had $652.0 million in total debt secured primarily with aircraft and engines.

Fleet:

For the three months ended March 31, 2022, 47% of the Company’s total revenue was derived from our contracts with United, 46% from American, 1% from DHL, and 6% from leases of aircraft to a third party.

Below is our current and future fleet plan by partner and fleet type for FY22:

Fleet Plan (FY22)	Q1 (Dec '21)	Q2 (Mar '22)	Q3 (Jun '22)	Q4 (Sep '22)
	Actual	Actual	Forecast	Forecast
E-175 – UA	80	80	80	80
CRJ-900 – AA	40	40	40	40
737-400F – DHL	2	3	3	3
Sub-total	122	123	123	123
CRJ-700 Leased	17	18	20	20
CRJ-700 to be Leased
to Third party	3	2	-	-
CRJs Spares/Parked	25	13	13	13
CRJs Held for Sale	-	12	12	12
Total Fleet	167	168	168	168

Mesa Air Group will host a conference call with analysts on May 9^th 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.

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, 2022 and March 31, 2021. 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, 2022											Three Months Ended March 31, 2021
	Income (Loss) Before Taxes			Income Tax (Expense)/ Benefit		Net Income (Loss)		Net Income (Loss) per Diluted Share				Income Before Taxes			Income Tax (Expense)/ Benefit		Net Income		Net Income per Diluted Share
GAAP Income (Loss)	$	(55,165	)	12,382		(42,783	)	$	(1.19	)		$	7,579		(1,890	)	5,689		$	0.14
Adjustments (1) (2) (3)		39,843		(9,097	)	30,746		$	0.85				4,508		(1,124	)	3,384		$	0.09
Loss on Investments, Net (4)		2,261		(522	)	1,739		$	0.05
Adjusted Income (Loss)		(13,061	)	2,763		(10,298	)	$	(0.29	)			12,087		(3,014	)	9,073		$	0.23
Interest Expense		8,120											8,755
Interest Income		(42	)										(79	)
Depreciation and Amortization		20,747											20,705
Adjusted EBITDA		15,764											41,468
Aircraft Rent		9,434											9,992
Adjusted EBITDAR	$	25,198										$	51,460

(1) Includes adjustment for lease termination expense of $4.5 million for the three months ended March 31, 2021 related to the purchase of a CRJ-900 aircraft, which was previously leased from Bombardier Capital.
(2) Includes adjustment for impairment charges of $39.5 million for the three months ended March 31, 2022 related to certain of the Company's aircraft which are classified as held for sale.
(3) Includes adjustment for operating lease right of use asset impairment charges of $0.4 million during the three months ended March 31, 2022 related to the abandonment of one of the Company's leased facilities.
(4) Includes losses resulting from changes in the fair value of the Company's investments in equity securities of $2.3 million for the three months ended March 31, 2022.

	Six Months Ended March 31, 2022											Six Months Ended March 31, 2021
	Income (Loss) Before Taxes			Income Tax (Expense)/ Benefit		Net Income (Loss)		Net Income (Loss) per Diluted Share				Income Before Taxes			Income Tax (Expense)/ Benefit		Net Income		Net Income per Diluted Share
GAAP Income (Loss)	$	(73,551	)	16,494		(57,057	)	$	(1.58	)		$	26,518		(6,711	)	19,807		$	0.52
Adjustments (1)(2)(3)(4)		39,843		(9,097	)	30,746		$	0.85				3,558		(900	)	2,658		$	0.07
Loss on Investments, Net (5)		8,723		(1,992	)	6,731		$	0.19
Adjusted Income (Loss)		(24,985	)	5,405		(19,580	)	$	(0.54	)			30,076		(7,611	)	22,465		$	0.59
Interest Expense		16,050											17,837
Interest Income		(93	)										(205	)
Depreciation and Amortization		41,775											41,175
Adjusted EBITDA		32,747											88,883
Aircraft Rent		19,020											20,040
Adjusted EBITDAR	$	51,767										$	108,923

(1) Includes adjustment for gain on extinguishment of debt of $1.0 million related to repayment of the Company’s aircraft debts during the six months ended March 31, 2021.
(2) Includes adjustment for lease termination expense of $4.5 million for the six months ended March 31, 2021 related to the purchase of a CRJ-900 aircraft, which was previously leased from Bombardier Capital.
(3) Includes adjustment for impairment charges of $39.5 million for the six months ended March 31, 2022 related to certain of the Company's aircraft which are classified as held for sale.
(4) Includes adjustment for operating lease right of use asset impairment charges of $0.4 million during the six months ended March 31, 2022 related to the abandonment of one of the Company's leased facilities.
(5) Includes losses resulting from changes in the fair value of the Company's investments in equity securities of $8.7 million for the six months ended March 31, 2022.

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 110 cities in 40 states, the District of Columbia, the Bahamas, and Mexico as well as cargo services out of Cincinnati/Northern Kentucky International Airport. As of March 31, 2022, Mesa operated a fleet of 168 aircraft with approximately 349 daily departures and 2,800 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., United Airlines, Inc., and 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. Many of the risks identified in the periodic reports have been and will continue to be heightened as a result of the ongoing and numerous adverse effects arising from the COVID-19 pandemic. 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.

MESA AIR GROUP, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts) (Unaudited)

		Three Months Ended March 31,								Six Months Ended March 31,
			2022				2021				2022				2021
Operating revenues:
Contract revenue		$	111,988			$	81,712			$	248,882			$	208,870
Pass-through and other revenue			11,225				15,568				22,088				38,781
Total operating revenues			123,213				97,280				270,970				247,651
Operating expenses:
Flight operations			42,410				37,403				90,008				74,367
Maintenance			47,357				51,773				106,338				104,637
Aircraft rent			9,434				9,992				19,020				20,040
General and administrative			7,860				11,164				20,438				24,237
Depreciation and amortization			20,747				20,705				41,775				41,175
Lease termination			—				4,508				—				4,508
Impairment of assets held for sale			39,475				—				39,475				—
Other operating expenses			685				941				2,657				2,232
Government grant recognition			—				(55,967	)			—				(67,278		)
Total operating expenses			167,968				80,519				319,711				203,918
Operating income (loss)			(44,755	)			16,761				(48,741	)			43,733
Other income (expense), net:
Interest expense			(8,120	)			(8,755	)			(16,050	)			(17,837		)
Interest income			42				79				93				205
Loss on investments, net			(2,261	)			—				(8,723	)			—
Other income (expense), net			(71	)			(506	)			(130	)			417
Total other (expense), net			(10,410	)			(9,182	)			(24,810	)			(17,215		)
Income (loss) before taxes			(55,165	)			7,579				(73,551	)			26,518
Income tax expense (benefit)			(12,382	)			1,890				(16,494	)			6,711
Net income (loss)		$	(42,783	)		$	5,689			$	(57,057	)		$	19,807
Net income (loss) per share attributable to common shareholders
Basic		$	(1.19	)		$	0.16			$	(1.58	)		$	0.56
Diluted		$	(1.19	)		$	0.14			$	(1.58	)		$	0.52
Weighted-average common shares outstanding
Basic			36,048				35,628				36,005				35,579
Diluted			36,048				39,432				36,005				38,382

MESA AIR GROUP, INC.
Condensed Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)

		March 31, 2022			September 30, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	75,896		$	120,517
Restricted cash			3,351			3,350
Receivables, net			6,849			3,167
Expendable parts and supplies, net			26,255			24,467
Prepaid expenses and other current assets			7,608			6,885
Total current assets			119,959			158,386
Property and equipment, net			1,064,349			1,151,891
Intangible assets, net			6,281			6,792
Lease and equipment deposits			8,371			6,808
Operating lease right-of-use assets			79,706			93,100
Deferred heavy maintenance, net			5,289			3,499
Assets held for sale			36,528			—
Other assets			32,873			36,121
TOTAL ASSETS		$	1,353,356		$	1,456,597
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and finance leases		$	111,671		$	111,710
Current portion of deferred revenue			2,675			6,298
Current maturities of operating leases			16,601			32,652
Accounts payable			76,733			61,476
Accrued compensation			10,285			12,399
Other accrued expenses			31,406			33,657
Total current liabilities			249,371			258,192
NONCURRENT LIABILITIES:
Long-term debt and finance leases, excluding current portion			521,457			539,700
Noncurrent operating lease liabilities			29,936			33,991
Deferred credits			3,508			3,934
Deferred income taxes			53,281			69,940
Deferred revenue, net of current portion			26,868			28,202
Other noncurrent liabilities			36,394			34,591
Total noncurrent liabilities			671,444			710,358
Total liabilities			920,815			968,550
STOCKHOLDERS' EQUITY:
Preferred stock of no par value, 5,000,000 shares authorized; no shares issued and outstanding			—			—
Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 36,126,724 (2022) and 35,958,759 (2021) shares issued and outstanding, and 4,899,497 (2022) and 4,899,497 (2021) warrants issued and outstanding			257,923			256,372
Retained earnings			174,618			231,675
Total stockholders' equity			432,541			488,047
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	1,353,356		$	1,456,597

MESA AIR GROUP, INC.
Operating Highlights (unaudited)

		Three months ended
		March 31
		2022		2021		Change
Available Seat Miles (thousands)		1,616,896		1,771,498		-8.7%
Block Hours		65,613		73,942		-11.3%
Average Stage Length (miles)		671		690		-2.8%
Departures		31,983		35,270		-9.3%
Passengers		1,921,635		1,684,043		14.1%
Controllable Completion Factor*
American		96.76%		99.83%		-3.1%
United		96.71%		99.99%		-3.3%
Total Completion Factor**
American		93.51%		95.01%		-1.6%
United		93.74%		94.22%		-0.5%

*Controllable Completion Factor excludes cancellations due to weather and air traffic control
**Total Completion Factor includes all cancellations

Source: Mesa Air Group, Inc.

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

Investor Relations
Susan M. Donofrio
IR@mesa-air.com

FAQ

What were the financial results for Mesa Air Group in Q2 FY22?

Mesa Air Group reported a net loss of $42.8 million or $(1.19) per diluted share for Q2 FY22, a significant decline from a net income of $5.7 million in Q2 FY21.

How did Mesa Air Group's revenue perform in Q2 FY22?

Mesa's operating revenue for Q2 FY22 increased to $123.2 million, reflecting a growth of 26.7% year-over-year.

What factors contributed to Mesa Air Group's losses in Q2 FY22?

The losses were primarily attributed to increased pilot attrition and a $39.5 million non-cash impairment charge related to aircraft held for sale.

What is the current cash position of Mesa Air Group?

Mesa ended the quarter with $75.9 million in unrestricted cash and equivalents.

What measures is Mesa Air Group taking to address pilot attrition?

Mesa is focusing on increased hiring, simulator capacity, and training capabilities to combat pilot attrition.