Mesa Airlines(MESA) - 2025 Q3 - Quarterly Results

Executive Summary & Key Highlights Third Quarter Fiscal 2025 Performance Summary Mesa achieved GAAP net income of $20.9 million in Q3 FY2025, a significant turnaround from a prior year net loss, with adjusted net loss near breakeven - Mesa's third-quarter results reflect the significant operational and financial restructuring that the company has undergone[4] Q3 FY2025 Key Financial Performance (YoY) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :-------------------------------- | :--------- | :--------- | :------- | | GAAP Net Income (Loss) | $20.9 million | $(19.9) million | +$40.8 million | | GAAP Diluted EPS | $0.50 | $(0.48) | +$0.98 | | Adjusted Net Loss | $0.6 million | $9.4 million | -$8.8 million | | Adjusted EBITDAR | $6.1 million | $10.6 million | -$4.5 million | Strategic Operational and Financial Restructuring Mesa streamlined operations by transitioning to a single Embraer 175 fleet and retraining CRJ crews, improving daily block hour utilization for enhanced efficiency - The company now operates a single fleet type of Embraer 175s, simplifying operations, with all CRJ crews trained on E-Jet flying, anticipating stabilized utilization[4] - Daily block hour utilization increased to 9.8 hours in Q3, up 15.4% year-over-year and 5.1% sequentially, consistent with regional peers[4][6] Asset Transactions Update Mesa strengthened its balance sheet and reduced interest expense by selling surplus CRJ assets, using all proceeds to repay U.S. Treasury debt - Strengthening the balance sheet and reducing interest expense through the sale of surplus CRJ assets[5] - During Q3 FY2025, closed sales for $17.2 million gross proceeds (13 spare engines, 6 surplus CRJ-900 airframes), all used to repay U.S. Treasury debt[6] - Subsequent to Q3 FY2025, closed sales for $11.7 million gross proceeds (8 spare engines, 5 surplus CRJ-900 airframes), all used to repay U.S. Treasury debt[6] Proposed Merger Update Mesa's proposed merger with Republic Airways projects $1.8 billion to $2.0 billion in annual revenues, supported by a new 10-year United Airlines agreement - Estimated combined company twelve-month run-rate annual revenue in the range of approximately $1.8 billion to $2.0 billion[8] Combined Adjusted EBITDA (First Six Months CY2025) | Entity | Period | Adjusted EBITDA | | :------- | :---------------------- | :---------------- | | Republic | First six months CY2025 | ~$169 million | | Mesa | First six months CY2025 | $14 million | | Combined | First six months CY2025 | $183 million | - Post-Merger, 60 E-175 aircraft will be supported by a new and enhanced 10-year capacity purchase agreement with United Airlines[9] Mesa Air Group Financial Results (Q3 FY2025) Operating Revenues Total operating revenues for Q3 FY2025 decreased by 16.3% year-over-year, primarily driven by a reduction in contractual aircraft with United Airlines and lower aircraft ownership revenue, despite increased pass-through revenue Operating Revenues (Q3 FY2025 vs Q3 FY2024) | Revenue Type | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :------------------------ | :--------- | :--------- | :----------- | | Total Operating Revenues | $92.8 million | $110.8 million | -16.3% | | Contract Revenue | $69.9 million | $95.6 million | -26.8% | | Pass-through and other revenue | $22.8 million | $15.2 million | +50.3% | - Decreases in contract and total operating revenues were driven by the reduction in contractual aircraft with United Airlines and disposition of certain Embraer 175 aircraft[10] Operating Expenses Total operating expenses decreased by 22.4% in Q3 FY2025, mainly due to lower flight operations expense from fewer contracted aircraft, reduced pilot training costs, and significantly lower depreciation, amortization, and asset impairment Operating Expenses (Q3 FY2025 vs Q3 FY2024) | Expense Type | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :-------------------------- | :--------- | :--------- | :----------- | | Total Operating Expenses | $92.9 million | $119.8 million | -22.4% | | Flight Operations | $36.6 million | $45.5 million | -19.6% | | Depreciation and Amortization | $3.4 million | $9.7 million | -65.3% | | Asset Impairment | $(0.05) million | $7.9 million | -$7.95 million | - The decrease in expenses primarily reflects lower flight operations due to fewer contracted aircraft and reduced pilot training, and lower depreciation/amortization from CRJ aircraft/engine retirements and sales[12] Net Income and Adjusted Profitability Mesa achieved a net income of $20.9 million in Q3 FY2025, a significant improvement from a prior year net loss, with a considerably narrowed adjusted net loss, despite declines in Adjusted EBITDA and EBITDAR Net Income and Adjusted Profitability (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change (YoY) | | :-------------------- | :--------- | :--------- | :----------- | | Net Income (Loss) | $20.9 million | $(19.9) million | +$40.8 million | | Diluted EPS | $0.50 | $(0.48) | +$0.98 | | Adjusted Net Loss | $0.6 million | $9.4 million | -$8.8 million | | Adjusted EBITDA | $6.0 million | $8.9 million | -$2.9 million | | Adjusted EBITDAR | $6.1 million | $10.6 million | -$4.5 million | Consolidated Statements of Operations (Table) This section provides the detailed consolidated statements of operations for Mesa Air Group for the three and nine months ended June 30, 2025, and 2024, presenting a comprehensive view of revenues, expenses, and net income or loss Consolidated Statements of Operations and Comprehensive Income (Loss) (In thousands) | | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Nine months ended June 30, 2025 | Nine months ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Operating revenues: | | | | | | Contract revenue | $69,940 | $95,596 | $219,041 | $310,516 | | Pass-through and other revenue | 22,844 | 15,197 | 71,723 | 50,636 | | Total operating revenues | 92,784 | 110,793 | 290,764 | 361,152 | | Operating expenses: | | | | | | Flight operations | 36,551 | 45,455 | 108,021 | 146,602 | | Maintenance | 41,417 | 44,266 | 131,483 | 137,165 | | Aircraft rent | 98 | 1,684 | 3,038 | 4,296 | | General and administrative | 11,585 | 9,715 | 32,588 | 32,857 | | Depreciation and amortization | 3,377 | 9,730 | 17,311 | 32,846 | | Asset impairment | (52) | 7,880 | 111,786 | 50,923 | | Loss on sale of assets | — | — | 54,397 | 150 | | Other operating expenses | (46) | 1,090 | 335 | 5,098 | | Total operating expenses | 92,930 | 119,820 | 458,959 | 409,937 | | Operating income (loss) | (146) | (9,027) | (168,195) | (48,785) | | Other income (expense), net: | | | | | | Interest expense | (3,256) | (9,032) | (15,654) | (30,832) | | Interest income | 74 | 17 | 115 | 45 | | Other income, net | 23,946 | 125 | 21,126 | (234) | | Total other income (expense), net | 20,764 | (11,691) | 10,034 | (17,186) | | Income (loss) before taxes | 20,618 | (20,718) | (158,161) | (65,971) | | Income tax expense (benefit) | (238) | (810) | (5,829) | 126 | | Net income (loss) | $ 20,856 | $ (19,908) | $ (152,332) | $ (66,097) | | Net income (loss) per share attributable to common shareholders | | | | | | Basic | $ 0.50 | $ (0.48) | $ (3.68) | $ (1.61) | | Diluted | $ 0.50 | $ (0.48) | $ (3.68) | $ (1.61) | Mesa Air Group Operating Performance (Q3 FY2025) Key Operating Metrics Mesa demonstrated improved operational reliability in Q3 FY2025 with a higher controllable completion factor for United flights, while available seat miles and block hours saw modest increases, and departures and passengers decreased year-over-year Operating Highlights (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :-------------------------- | :--------- | :--------- | :------- | | Controllable Completion Factor (United) | 99.99% | 99.94% | +0.05 pts | | Total Completion Factor (United) | 97.75% | 96.86% | +0.89 pts | | Available Seat Miles (thousands) | 996,290 | 962,669 | +3.5% | | Block Hours | 44,100 | 43,813 | +0.7% | | Departures | 22,162 | 24,144 | -8.2% | | Passengers | 1,357,129 | 1,513,581 | -10.3% | Fleet and Pilot Transition Mesa successfully completed its transition to a single fleet of 60 Embraer 175 jets for its capacity purchase agreement with United Airlines, including retraining all CRJ crews for E-Jet operations, anticipating simplified operations and stable utilization - The Company operated 60 large (70/76 seats) E-175 jets under its CPA with United[16] - Achieved single fleet operation, training 160 pilots to transition from CRJ fleet to E-175 fleet[6] Mesa Air Group Financial Position Balance Sheet and Liquidity Mesa significantly improved its liquidity and reduced its debt burden, ending Q3 FY2025 with a substantial increase in unrestricted cash and a considerable reduction in total debt, primarily through asset sales and scheduled payments Balance Sheet and Liquidity Highlights (YoY) | Metric | June 30, 2025 | June 30, 2024 (or Sept 30, 2024) | Change (YoY) | | :-------------------------- | :-------------- | :------------------------------- | :----------- | | Unrestricted Cash & Equivalents | $42.5 million | $15.6 million (Sept 30, 2024) | +$26.9 million | | Total Debt | $113.7 million | $366.4 million (June 30, 2024) | -$252.7 million | - During the quarter, the Company paid $17.9 million in debt, comprising payments related to CRJ asset sale transactions and scheduled obligations[17] Consolidated Balance Sheets (Table) This section presents the detailed consolidated balance sheets for Mesa Air Group as of June 30, 2025, and September 30, 2024, providing a comprehensive overview of the company's assets, liabilities, and stockholders' equity Consolidated Balance Sheets (In thousands) | ASSETS | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :-------------- | :----------------- | | CURRENT ASSETS: | | | | Cash and cash equivalents | $42,472 | $15,621 | | Restricted cash | 3,048 | 3,009 | | Receivables, net | 8,724 | 5,263 | | Expendable parts and supplies, net | 16,172 | 28,272 | | Assets held for sale | 60,311 | 5,741 | | Prepaid expenses and other current assets | 2,714 | 3,371 | | Total current assets | 133,441 | 61,277 | | Property and equipment, net | 31,850 | 426,351 | | Lease and equipment deposits | 637 | 1,289 | | Operating lease right-of-use assets | 7,255 | 7,231 | | Deferred heavy maintenance, net | — | 6,396 | | Assets held for sale | — | 86,605 | | Other assets | 5,466 | 7,709 | | TOTAL ASSETS | $178,649 | $596,858 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | CURRENT LIABILITIES: | | | | Current portion of long-term debt and finance leases | $84,725 | $50,455 | | Current portion of deferred revenue | 5,532 | 3,932 | | Current maturities of operating leases | 1,693 | 1,681 | | Accounts payable | 50,132 | 72,096 | | Accrued compensation | 9,294 | 12,797 | | Customer deposits | 226 | 1,189 | | Other accrued expenses | 23,015 | 32,308 | | Total current liabilities | 174,617 | 174,458 | | NONCURRENT LIABILITIES: | | | | Long-term debt and finance leases, excluding current portion | 28,245 | 259,816 | | Noncurrent operating lease liabilities | 6,872 | 6,863 | | Deferred credits | — | 3,020 | | Deferred income taxes | 575 | 8,173 | | Deferred revenue, net of current portion | 7,787 | 5,707 | | Other noncurrent liabilities | 1,837 | 28,579 | | Total noncurrent liabilities | 45,316 | 312,158 | | Total liabilities | 219,933 | 486,616 | | STOCKHOLDERS' EQUITY: | | | | Common stock of no par value and additional paid-in capital, 125,000,000 shares authorized; 41,861,544 (2025) | 273,183 | 272,376 | | and 41,331,719 (2024) shares issued and outstanding, 4,899,497 (2025) and 4,899,497 (2024) warrants issued | | | | and outstanding | | | | Accumulated deficit | (314,467) | (162,134) | | Total stockholders' equity | (41,284) | 110,242 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $178,649 | $596,858 | Merger with Republic Airways Holdings Inc. Merger Status and Approvals The proposed merger with Republic Airways Holdings Inc. is progressing, with the HSR Act waiting period expired, and Mesa preparing to file a definitive proxy statement/prospectus for stockholder approval, while Republic has already secured necessary stockholder consents - Waiting period under the HSR Act with respect to filings by Mesa and Republic expired on June 16, 2025[14] - Mesa will file a definitive proxy statement/prospectus with the SEC for a stockholder vote after the registration statement is declared effective[14] - Republic has obtained sufficient consents from its stockholders to approve the Merger[14] Combined Company Financial Projections Projections for the combined Mesa-Republic entity indicate robust financial performance, with estimated annual revenues between $1.8 billion and $2.0 billion and a combined adjusted EBITDA of $183 million for the first half of calendar year 2025, with Mesa contributing no debt - The combined company is estimated to have twelve-month run-rate annual revenue in the range of approximately $1.8 billion to $2.0 billion[8] Combined Adjusted EBITDA (First Six Months CY2025) | Entity | Period | Adjusted EBITDA | | :------- | :---------------------- | :---------------- | | Republic | First six months CY2025 | ~$169 million | | Mesa | First six months CY2025 | $14 million | | Combined | First six months CY2025 | $183 million | - Pro forma cash and debt balances of the combined company post-Merger closing are anticipated to be in excess of $300 million and approximately $1.1 billion, respectively, with Mesa contributing no debt[9] Company Overview About Mesa Air Group, Inc. Mesa Air Group, Inc. is a regional air carrier based in Phoenix, Arizona, operating a fleet of 60 Embraer 175 aircraft and providing scheduled passenger service to 79 cities across 31 states, Cuba, and Mexico, exclusively as United Express under a capacity purchase agreement with United Airlines - Mesa Air Group, Inc. is a regional air carrier providing scheduled passenger service to 79 cities in 31 states, Cuba, and Mexico[20] - As of June 30, 2025, Mesa operated a fleet of 60 Embraer 175 regional aircraft, with approximately 254 daily departures and 1,645 employees[20] - All flights operate as United Express pursuant to a capacity purchase agreement with United Airlines, Inc[20] Non-GAAP Financial Measures Reconciliation Mesa Air Group Reconciliation This section provides a detailed reconciliation of Mesa Air Group's GAAP net income (loss) to its adjusted net income (loss), adjusted EBITDA, and adjusted EBITDAR for the three and nine months ended June 30, 2025, and 2024, outlining specific adjustments for non-recurring items - Non-GAAP financial measures are provided to offer useful information regarding underlying business trends and performance, and for period-over-period comparisons, supplementing GAAP financial statements[29] Mesa Air Group Reconciliation of GAAP vs. Non-GAAP Disclosures (In thousands) | Metric | Q3 FY2025 | Q3 FY2024 | 9M FY2025 | 9M FY2024 | | :-------------------- | :--------- | :--------- | :---------- | :---------- | | GAAP Net Income (Loss) | $20,856 | $(19,908) | $(152,332) | $(66,097) | | Adjustments | $(21,420) | $10,494 | $145,088 | $43,220 | | Adjusted Net Income (Loss) | $(564) | $(9,414) | $(7,244) | $(22,877) | | Adjusted EBITDA | $6,001 | $8,948 | $25,329 | $40,800 | | Adjusted EBITDAR | $6,099 | $10,632 | $28,367 | $45,096 | - Key adjustments for Q3 FY2025 include a $25.1 million gain on the write-off of warrant liabilities[33] - Key adjustments for 9M FY2025 include a $54.4 million net loss on the sale of assets and a $60.7 million impairment loss related to aircraft write-down[34] Republic Airways Holdings Inc. Reconciliation This section provides the reconciliation of Republic Airways Holdings Inc.'s net income to Adjusted EBITDA for the three and six months ended June 30, 2025, clarifying that Adjusted EBITDA is a non-GAAP measure used for performance evaluation - Adjusted EBITDA is a non-GAAP financial measure that should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP[35] Republic Airways Holdings Inc. Adjusted EBITDA (in millions) | (in millions) | Three Months Ended March 31, 2025 | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------ | :-------------------------------- | :------------------------------- | :----------------------------- | | Net income | 27.1 | 37.4 | 64.5 | | Plus: | | | | | Interest expense | 14.3 | 14.8 | 29.1 | | Investment loss and other, net | 2 | -11.1 | -9.1 | | Income tax expense | 9.5 | 13.3 | 22.8 | | Depreciation and amortization | 30.6 | 30.9 | 61.5 | | Adjusted EBITDA | 83.5 | 85.3 | 168.8 | Legal and Regulatory Information Forward-Looking Statements This section provides a cautionary statement regarding forward-looking information, highlighting that such statements are subject to inherent risks and uncertainties that could cause actual results to differ materially, particularly concerning the proposed merger, and the company disclaims any obligation to update these statements - Forward-looking statements are subject to risks and uncertainties that could cause actual events and results to differ materially, including those related to the proposed merger with Republic[21] - The Company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by applicable laws[21] Participants in the Solicitation Mesa's directors and executive officers may be considered participants in the solicitation of proxies for the proposed merger, with detailed information regarding their direct or indirect interests to be disclosed in the proxy statement filed with the SEC - Mesa and its directors and certain executive officers may be deemed participants in the solicitation of proxies from Mesa's stockholders with respect to the Merger[22] - Additional information regarding participants' identity and interests will be set forth in the proxy statement and other materials filed with the SEC[22] No Offer or Solicitation This communication serves solely for informational purposes and does not constitute an offer to sell or buy securities, nor a solicitation of any vote or approval, as securities related to the proposed merger cannot be sold until the registration statement filed with the SEC becomes effective - A registration statement relating to these securities has been filed with the SEC but has not yet become effective; securities may not be sold nor offers to buy accepted prior to effectiveness[23] - This communication is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell or buy any securities or any vote or approval[23] Additional Information and Where to Find It Mesa filed a preliminary proxy statement/prospectus on Form S-4/Form S-1 with the SEC on July 10, 2025, concerning the proposed business combination, and investors are strongly advised to review these documents, which contain crucial information and are available on the SEC's website and Mesa's investor relations site - Mesa filed a registration statement on Form S-4/Form S-1 containing a preliminary proxy statement/prospectus with the SEC on July 10, 2025, regarding the proposed business combination[24] - Investors and security holders are urged to read the proxy statement/prospectus and other filed documents carefully for important information about the proposed transaction[24] - Documents are available free of charge on the SEC's website (www.sec.gov) and Mesa's investor relations website (https://investor.mesa-air.com)[24](index=24&type=chunk)