Mesa Air Group Announces Fourth Quarter and Fiscal Year 2018 Results

Mesa Air Group, Inc. (NASDAQ: MESA) today reported fourth quarter and Fiscal Year 2018 financial and operating results.

Highlights for Fourth Quarter and Fiscal Year 2018 (ending September 30, 2018)

Mesa's Q4 2018 results reflect net income of $19.4 million, or $0.65 per diluted share, compared to net income of $5.5 million, or $0.23 per diluted share for Q4 2017. Mesa's Q4 2018 income before taxes was $26.6 million, compared to $10.2 million for Q4 2017. In addition, Mesa's EBITDA1 for Q4 2018 was $59.3 million, compared to $38.5 million in Q4 2017 and EBITDAR1 was $73.6 million, compared to $56.7 million in Q4 2017.

Mesa reported net income of $33.3 million, or $1.32 per diluted share for the 2018 fiscal year, compared to net income of $32.8 million, or $1.40 per diluted share for the 2017 fiscal year. Excluding special items for both periods adjusted net income1 was $31.0 million for the 2018 fiscal year compared to $32.8 million for the 2017 fiscal year. Mesa reported income before taxes of $15.8 million for the 2018 fiscal year compared to $53.7 million in the 2017 fiscal year. Excluding special items for both periods adjusted income before taxes1 was $42.0 million compared to $53.7 million in the 2017 fiscal year. In addition, Adjusted EBITDA1 was $163.8 million, compared to $160.8 million in the 2017 fiscal year. Similarly, Adjusted EBITDAR1 was $232.7 million, compared to $233.4 million in the 2017 fiscal year.

Mesa operated 112,475 block hours during the fourth quarter, an increase of 9.3% from Q3 2018 of 102,939 and an increase of 14.9% from Q2 2018 of 97,853.

"In spite of industry challenges, there were a number of positive developments in the quarter, most notably the progress we have made increasing the utilization of our aircraft through a combination of strong hiring and declining attrition among our pilots, reduced training backlog, and improved utilization of existing resources," stated Jonathan Ornstein, Chairman and Chief Executive Officer of Mesa Air Group. "We appreciate the hard work and dedication of all of our employees for their very important and meaningful contribution to our improving operational capabilities."

Mike Lotz, President and Chief Financial Officer continued, "On August 14, 2018, we successfully completed our IPO. Including the partial exercise of the underwriters' option to purchase additional shares, we raised approximately $112 million and subsequently paid down $25.6 million outstanding on our revolving credit facility, reducing annual interest expense by $1.2 million per year. We are currently negotiating the purchase of ten additional aircraft currently on lease to us and hope to complete the transaction by the end of March 2019. In addition, we are finalizing negotiations to refinance our high-cost debt primarily associated with spare engine purchases by the end of this year. This is expected to result in a further reduction of interest expense going forward," said Lotz.

1 See Reconciliation of non-GAAP financial measures

Outlook

The Company is providing the following guidance for the fourth quarter of FY 2018:

Fleet, Block Hours, Engine Expense - Actual and Forecast for Q1 FY 2019

Reconciliation 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 table below reflects supplemental financial data and reconciliations to GAAP financial statements for the three months and twelve months ended September 30, 2018. 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. Additionally, these calculations may not be comparable with similarly titled measures of other companies.

Reconciliation of GAAP versus Non-GAAP Disclosures (unaudited)

(In thousands, except for per diluted share)

2 As of 9/30/18 we had 23,902,903 common shares and 10,614,990 warrants outstanding for total diluted shares outstanding of 34,517,893.

2018 fiscal year special items:

1. Includes one-time non-cash adjustments of $11.1 million in General and Administrative expense related to an increase in accrued compensation as a result of the increase in the fair value of the Company's common stock at the S-1 filing date and $15.1 million related to the acquisition of nine CRJ-900 aircraft previously leased in Lease termination expense.
   Includes adjustment for tax benefit resulting from the Tax Cuts and Jobs Act enacted during Q1 2018. The Act reduces the corporate tax rate to 21 percent, effective January 1, 2018. Consequently, we have recorded a decrease related to our net deferred tax liabilities of $22.0 million. The Company has also estimated an increase to its valuation allowance of $0.5 million due to the rate change. We have recorded a corresponding net adjustment to deferred income tax benefit of $21.5 million for the period ending September 30, 2018.

Operating Highlights (unaudited)