Mesa Airlines(US:MESA)2019-02-05 21:58Financial Data and Key Metrics Changes - The company reported earnings before taxes of $25 million for Q1 2019, a significant increase from $800,000 in the same quarter last year [13] - Net income for the quarter was $19.1 million, or $0.55 per share, with an income tax expense of $5.9 million [13] - EBITDA was $58.2 million and EBITDAR was $72.3 million, both showing significant increases from $30.9 million and $49.2 million in the same quarter last year [15] - The company ended the quarter with $103.6 million in cash and total debt decreased to $878 million, down $37 million from the previous quarter [21] Business Line Data and Key Metrics Changes - Block hours for the quarter were 115,000, representing a 17.7% increase year-over-year and a 2.2% increase from the prior quarter [8] - The company provided guidance for next quarter's block hours to be 112,105, which is flat when adjusted for February having only 28 days [8] Market Data and Key Metrics Changes - The company reported CPA revenue excluding pass-through items of $175 million, a 10.4% increase from $154.5 million in the same quarter last year [16] - Pass-through revenue for the first quarter was $7.7 million, down from $10.3 million in the same quarter last year [16] Company Strategy and Development Direction - The company is exploring potential expansions, including increased CPA flying and new partnerships, positioning itself as a low-cost regional operator [11] - The company signed a term sheet with GECAS for the purchase of 10 CRJ-700 aircraft, reducing the number of leased aircraft to third parties to 18 [10] - The management emphasized the importance of investing in pilot hiring to prepare for future growth opportunities, with a current hiring rate of 50 pilots per month [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the government shutdown would not affect operations, although a simulator delay was noted [9] - The company remains optimistic about the CPA extension with United and believes it will lead to further opportunities [10][29] - Management acknowledged the need to improve performance metrics to meet new industry standards set by partners like American and United [78] Other Important Information - The company has a significant net operating loss (NOL) of approximately $415 million, which will prevent cash tax payments until 2024 or 2025 [14] - The company is planning to increase C-check expenses by $4 million to $5 million for the remainder of the year due to timing issues [19] Q&A Session Summary Question: Clarification on block hour production - Management indicated that the block hour production for Q1 and Q2 is expected to be stable, with no anticipated reduction in the back half of 2019 [39][44] Question: Impact of off-lease purchases on earnings - Management confirmed a pre-tax benefit of approximately $4.5 million from off-lease purchases, expected to close by June [41] Question: Update on the United contract - Management expressed confidence in the United contract, stating that the purchase of aircraft was a good economic decision and reflects confidence in the partnership [55][59] Question: Impact of CPA agreement changes on profits - Management indicated that the changes would have a minimal impact on profitability, less than $1 million for fiscal 2019 [82] Question: Performance metrics to monitor - Key metrics include controllable completion factor and on-time departures, with recent improvements noted [78] Question: Potential for dividends or stock buybacks - Management is considering various options, including stock buybacks, but has not made any decisions yet [106] Question: Net effect of various moving pieces on earnings - Management indicated that the net effect is neutral to slightly negative due to increased pilot costs and C-check expenses [109]