MESA AIR GROUP, INC. (Exact Name of Registrant As Specified in Its Charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File Number 001-38626 MESA AIR GROUP, INC. (Exact name of registrant as specified in its charter) Nevada 85-0302351 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 410 North 44th Street, Suite 700 Phoenix, Arizona 85008 85008 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (602) 685-4000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value MESA Nasdaq Global Select Market Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of March 31, 2021, the registrant had 35,700,161 shares of common stock, no par value per share, issued and outstanding. TABLE OF CONTENTS PART I – FINANCIAL INFORMATION Item 1. Financial Statements 2 Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Operations and Comprehensive Income 3 Condensed Consolidated Statements of Stockholders' Equity 4 Condensed Consolidated Statements of Cash Flows 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk 37 Item 4. Controls and Procedures 38 PART II – OTHER INFORMATION 39 Item 1. Legal Proceedings 39 Item 1A. Risk Factors 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 Item 3. Defaults Upon Senior Securities 39 Item 4. Mine Safety Disclosures 39 Item 5. Other Information 39 Item 6. Exhibits 39 SIGNATURES 41 Cautionary Note Regarding Forward Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects", "intends," "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include but are not limited to, those discussed in Part I, Item 1A of this Annual Report on Form 10-K under the heading "Risk Factors." Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ended September 30 and the associated quarters, months, and periods of those fiscal years. Each of the terms the "Company," "Mesa Airlines," "we," "us" and "our" as used herein refers collectively to Mesa Air Group, Inc. and its wholly owned subsidiaries, unless otherwise stated. We do not assume any obligation to revise or update any forward-looking statements. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include: ▪ public health epidemics or pandemics such as COVID-19; ▪ the severity, magnitude and duration of the COVID-19 pandemic, including impacts of the pandemic and of business’ and governments’ responses to the pandemic on our operations and personnel, and on demand for air travel; ▪ the supply and retention of qualified airline pilots and mechanics; ▪ the volatility of pilot attrition and mechanics; ▪ dependence on, and changes to, or non-renewal of, our capacity purchase agreements; ▪ increases in our labor costs; ▪ reduced utilization (the percentage derived from dividing (i) the number of block hours actually flown during a given month under a particular capacity purchase agreement by (ii) the maximum number of block hours that could be flown during such month under the particular capacity purchase agreement) under our capacity purchase agreements; ▪ the direct operation of regional jets by our major airline partners; ▪ the financial strength of our major airline partners and their ability to successfully manage their businesses through the unprecedented decline in air travel attributable to the COVID-19 pandemic or any other public health epidemic; ▪ limitations on our ability to expand regional flying within the flight systems of our major airline partners' and those of other major airlines; ▪ our significant amount of debt and other contractual obligations; ▪ our compliance with ongoing financial covenants under our credit facilities; and ▪ our ability to keep costs low and execute our growth strategies. Additionally, the risks, uncertainties and other factors set forth above or otherwise referred to in the reports we have filed with the SEC may be further amplified by the global impact of the COVID-19 pandemic. While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law. 1 Part I – Financial Information Item 1. Financial Statements MESA AIR GROUP, INC. Condensed Consolidated Balance Sheets (In thousands, except share amounts) (Unaudited) March 31, September 30, 2021 2020 ASSETS Current assets: Cash and cash equivalents $ 147,867 $ 99,395 Restricted cash 3,351 3,446 Receivables, net 13,867 13,712 Expendable parts and supplies, net 23,044 22,971 Prepaid expenses and other current assets 8,956 16,067 Total current assets 197,085 155,591 Property and equipment, net 1,180,684 1,212,415 Intangibles, net 7,412 8,032 Lease and equipment deposits 8,242 1,899 Operating lease right-of-use assets 105,521 123,251 Other assets 20,647 742 Total assets $ 1,519,591 $ 1,501,930 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long-term debt and financing leases $ 103,980 $ 189,268 Current portion of deferred revenue 4,356 9,389 Current maturities of operating leases 44,016 43,932 Accounts payable 70,012 53,229 Accrued compensation 10,449 12,030 Other accrued expenses 28,610 45,478 Total current liabilities 261,423 353,326 Noncurrent liabilities: Long-term debt and financing leases, excluding current portion 600,058 542,456 Noncurrent operating lease liabilities 38,405 62,531 Deferred credits 7,442 5,705 Deferred income taxes 70,929 64,275 Deferred revenue, net of current portion 29,502 14,369 Other noncurrent liabilities 20,988 1,409 Total noncurrent liabilities 767,324 690,745 Total liabilities 1,028,747 1,044,071 Commitments and contingencies (Note 14) 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