Fiscal First Quarter Update:
- Total operating revenues of $147.2 million
- Pre-tax loss of $10.0 million, net loss of $9.1 million or $(0.25) per diluted share
- Adjusted net loss1 of $4.3 million or $(0.12) per diluted share
- Adjusted net loss excludes a $3.7 million impairment related to intangible assets and $1.7 million related to investments in equity securities
- As previously reported, closed on United Airlines, American Airlines, and aircraft-related transactions
- Subsequent to quarter end, closed sale of 8 remaining CRJ-550s to United Airlines
Jonathan Ornstein, Chairman and CEO, said, “The first quarter was an important one for Mesa, as we executed several key agreements that will materially enhance our operational and financial position and alleviate significant issues that we have faced. While block hour production continued to be challenged by the industry-wide pilot shortage during the quarter, we believe all the pieces are in place to begin restoring capacity across our fleets. We are preparing for the transition of our CRJ-900 operation to United next month. Our pilot pipeline continues to strengthen and pilot attrition has remained significantly lower since we have enhanced our payscales and expanded our participation in the Aviate program with United.”
Fiscal First Quarter Details:
Total operating revenues in Q1 2023 were $147.2 million, a decrease of $0.6 million (0.4%) from $147.8 million for Q1 2022. Contract revenue decreased $8.4 million, or 6.2%. These decreases were driven by lower block hours, offset by increased block-hour revenue for new pilot payscales. Mesa’s Q1 2023 results include, per GAAP, the recognition of $5.3 million, versus the recognition of $4.2 million of previously deferred revenue in Q1 2022. The remaining deferred revenue balance of $18.8 million will be recognized as flights are completed over the remaining terms of the contracts.
Mesa’s Adjusted EBITDA1 for Q1 2023 was $21.8 million, compared to $17.0 million in Q1 2022, and Adjusted EBITDAR1 was $25.9 million for Q1 2023, compared to $26.6 million in Q1 2022.
Mesa’s Q1 2023 results reflect a net loss of $9.1 million, or $(0.25) per diluted share, compared to a net loss of $14.3 million, or $(0.40) per diluted share for Q1 2022. Mesa’s Q1 2023 adjusted net loss1 was $4.3 million, or $(0.12) per diluted share, versus an adjusted net loss1 of $9.3 million, or $(0.26) per diluted share, in Q1 2022. The year over year increase in adjusted net income of $5.0 million was primarily due to increased block-hour revenue for new pilot payscales and lower maintenance, D&A, and aircraft rent expenses, partially offset by higher expenses for flight operations due to increased costs for training and employee wages.
Operationally, the Company ran a controllable completion factor of 99.4% for American and 99.9% for United during Q1 2023. This is compared to a controllable completion factor of 97.7% for American and 98.3% for United during Q1 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 97.9% for American and 99.2% for United during Q1 2023. This is compared to a total completion factor of 95.8% for American and 95.8% for United during Q1 2022.
For Q1 2023, 50% of the Company’s total revenue was derived from our contracts with United, 45% from American, 3% from DHL, and 2% from leases of aircraft to a third party.
1 See Reconciliation of non-GAAP financial measures
Balance Sheet and Cash Flow:
Mesa ended the quarter at $56.1 million in unrestricted cash and equivalents. As of December 31, 2022, the Company had $701.3 million in total debt secured primarily with aircraft and engines. This amount includes $64.2 million corresponding to the reclassification from operating lease to finance lease on 15 CRJ-900s. Additionally, we borrowed $25.5 million in the form of a term loan from United, of which $15 million is forgivable upon the meeting of certain performance criteria.
MESA AIR GROUP, INC.
Consolidated Statements of Operations and Comprehensive (Loss) Income
(In thousands, except per share amounts) (Unaudited)
| Three Months Ended December 31 | ||||||||
| 2022 | 2021 | |||||||
| Operating revenues: | ||||||||
| Contract revenue | $128,450 | $136,894 | ||||||
| Pass-through and other revenue | 18,723 | 10,863 | ||||||
| Total operating revenues | 147,174 | 147,757 | ||||||
| Operating expenses: | ||||||||
| Flight operations | 58,320 | 47,598 | ||||||
| Maintenance | 48,287 | 58,981 | ||||||
| Aircraft rent | 4,083 | 9,586 | ||||||
| General and administrative | 13,988 | 12,578 | ||||||
| Depreciation and amortization | 15,203 | 21,028 | ||||||
| Impairment of assets | 3,719 | — | ||||||
| Other operating expenses | 1,126 | 1,972 | ||||||
| Total operating expenses | 144,727 | 151,743 | ||||||
| Operating income (loss) | 2,447 | (3,986 | ) | |||||
| Other income (expense), net: | ||||||||
| Interest expense | (11,276 | ) | (7,930 | ) | ||||
| Interest income | 71 | 51 | ||||||
| Loss on investments, net | (1,679 | ) | (6,462 | ) | ||||
| Other income (expense), net | 417 | (59 | ) | |||||
| Total other expense, net | (12,467 | ) | (14,400 | ) | ||||
| Income (loss) before taxes | (10,020 | ) | (18,386 | ) | ||||
| Income tax expense (benefit) | (930 | ) | (4,112 | ) | ||||
| Net income (loss) | $(9,090 | ) | $(14,274 | ) | ||||
| Net income (loss) per share attributable to common shareholders | ||||||||
| Basic | $(0.25 | ) | $(0.40 | ) | ||||
| Diluted | $(0.25 | ) | $(0.40 | ) | ||||
| Weighted-average common shares outstanding | ||||||||
| Basic | 36,378 | 35,963 | ||||||
| Diluted | 36,378 | 35,963 | ||||||
MESA AIR GROUP, INC.
Consolidated Balance Sheets
(In thousands, except shares) (Unaudited)
| December 31, 2022 | September 30, 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $56,077 | $57,683 | ||||||
| Restricted cash | 3,343 | 3,342 | ||||||
| Receivables, net | 13,115 | 3,978 | ||||||
| Expendable parts and supplies, net | 25,509 | 26,715 | ||||||
| Prepaid expenses and other current assets | 3,953 | 6,616 | ||||||
| Total current assets | 101,997 | 98,334 | ||||||
| Property and equipment, net | 945,545 | 865,254 | ||||||
| Intangible assets, net | — | 3,842 | ||||||
| Lease and equipment deposits | 1,781 | 6,085 | ||||||
| Operating lease right-of-use assets | 11,896 | 43,090 | ||||||
| Deferred heavy maintenance, net | 10,311 | 9,707 | ||||||
| Assets held for sale | 73,000 | 73,000 | ||||||
| Other assets | 14,984 | 16,290 | ||||||
| TOTAL ASSETS | $1,159,514 | $1,115,602 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current portion of long-term debt and finance leases | $88,802 | $97,218 | ||||||
| Current portion of deferred revenue | 1,204 | 385 | ||||||
| Current maturities of operating leases | 5,354 | 17,233 | ||||||
| Accounts payable | 51,257 | 59,386 | ||||||
| Accrued compensation | 9,097 | 11,255 | ||||||
| Other accrued expenses | 30,561 | 29,000 | ||||||
| Total current liabilities | 186,275 | 214,477 | ||||||
| NONCURRENT LIABILITIES: | ||||||||
| Long-term debt and finance leases, excluding current portion | 597,816 | 502,517 | ||||||
| Noncurrent operating lease liabilities | 9,533 | 16,732 | ||||||
| Deferred credits | 2,869 | 3,082 | ||||||
| Deferred income taxes | 16,705 | 17,719 | ||||||
| Deferred revenue, net of current portion | 17,607 | 23,682 | ||||||
| Other noncurrent liabilities | 28,938 | 29,219 | ||||||
| Total noncurrent liabilities | 673,468 | 592,951 | ||||||
| Total liabilities | 859,743 | 807,428 | ||||||
| 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; 36,378,550 (2023) and 36,376,897 (2022) shares issued and outstanding, 4,899,497 (2023) and 4,899,497 (2021) warrants issued and outstanding | 259,864 | 259,177 | ||||||
| Retained earnings | 39,907 | 48,997 | ||||||
| Total stockholders' equity | 299,771 | 308,174 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $1,159,514 | $1,115,602 | ||||||
MESA AIR GROUP, INC.
Operating Highlights (unaudited)
| Three months ended | |||||||||
| December 31 | |||||||||
| 2022 | 2021 | Change | |||||||
| Available seat miles (thousands) | 1,175,745 | 2,104,621 | -44.1 | % | |||||
| Block hours | 50,940 | 86,079 | -40.8 | % | |||||
| Average stage length (miles) | 565 | 644 | -12.3 | % | |||||
| Departures | 27,776 | 43,447 | -36.1 | % | |||||
| Passengers | 1,746,376 | 2,693,468 | -35.2 | % | |||||
| Controllable completion factor* | |||||||||
| American | 99.36 | % | 97.17 | % | 2.3 | % | |||
| United | 99.96 | % | 98.33 | % | 1.7 | % | |||
| Total completion factor** | |||||||||
| American | 97.85 | % | 95.76 | % | 2.2 | % | |||
| United | 99.21 | % | 97.58 | % | 3.6 | % | |||
*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 nine months ended December 31, 2022 and December 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 December 31, 2022 | Three Months Ended December 31, 2021 | ||||||||||||||||||||||||
| 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 | Net Income per Diluted Share | ||||||||||||||||||
| GAAP income (loss) | $(10,020 | ) | $930 | $(9,090 | ) | $(0.25 | ) | $(18,386 | ) | $4,112 | $14,274 | $(0.40 | ) | ||||||||||||
| Adjustments(1)(2) | 5,398 | (589 | ) | 3,313 | $0.13 | 6,462 | (1,470 | ) | 4,992 | $0.14 | |||||||||||||||
| Adjusted income | |||||||||||||||||||||||||
| (loss) | (4,622 | ) | 341 | (4,281 | ) | $(0.12 | ) | (11,924 | ) | 2,642 | (9,282 | ) | $(0.26 | ) | |||||||||||
| Interest expense | 11,276 | 7,930 | |||||||||||||||||||||||
| Interest income | (71 | ) | (51 | ) | |||||||||||||||||||||
| Depreciation and amortization | 15,203 | 21,028 | |||||||||||||||||||||||
| Adjusted EBITDA | 21,786 | 16,983 | |||||||||||||||||||||||
| Aircraft rent | 4,083 | 9,586 | |||||||||||||||||||||||
| Adjusted EBITDAR | $25,869 | $26,569 | |||||||||||||||||||||||
| (1) | Includes adjustment for impairment charges of $3.7 million during our three months ended December 31, 2022, related to the intangible asset under the American CPA. |
| (2) | Includes losses resulting from changes in the fair value of the Company's investments in equity securities of $1.7 million and $6.5 million for the three months ended December 31, 2022 and 2021, respectively. |
Source: Mesa Air Group, Inc.