MESA AIR GROUP INC (MESA)·Q2 2024 Earnings Summary

Executive Summary

• Q2 FY2024 delivered a return to profitability: total operating revenues of $131.6M ($0.132B), GAAP net income of $11.7M ($0.28 diluted EPS), and adjusted net income of $6.3M ($0.15 EPS), marking the first GAAP and adjusted net profits in ~11 quarters; operating performance remained strong with 99.85% controllable completion factor .
• Cost structure improved materially vs prior year on lower asset impairments, depreciation and flight operations expense as Mesa divested surplus CRJ assets; adjusted EBITDA rose to $26.8M and adjusted EBITDAR to $28.2M .
• Revenue growth vs Q2 FY2023 was driven by higher E-175 block-hour rates under the United CPA (effective Oct 1, 2023), including recognition of $8.8M related to Q1 FY2024 and $7.9M of previously deferred revenue in Q2 .
• Balance sheet de-risking continued: total debt declined to $400.0M (from $621.6M YoY) aided by asset sales and $10.5M loan forgiveness from United tied to operational performance; management expects to remain cash-flow neutral for the remainder of FY2024, supporting sentiment and potential stock reaction catalysts around sustainable profitability and debt reduction .

What Went Well and What Went Wrong

What Went Well

• Profitability inflection: “we achieved our first GAAP and adjusted net profits in 11 quarters, as well as our best adjusted EBITDAR result over that period” — Jonathan Ornstein, Chairman & CEO .
• Revenue and rates: Q2 revenues rose 8.0% YoY to $131.6M, supported by higher E-175 block-hour rates and recognition of $8.8M for Q1 flying plus $7.9M of previously deferred revenue .
• Operational execution and debt reduction: 99.85% controllable completion factor; total debt reduced by $221.5M (~36%) over the past year including Q2 actions and $10.5M loan forgiveness from United .

What Went Wrong

• Contract revenue declined YoY by $10.0M (−9.7%) despite higher rates, reflecting fleet transition and mix; pass-through revenue also decreased slightly (−$0.3M) .
• Sequential demand/production softness: block hours fell to 43,270 in Q2 from 46,658 in Q1, with passengers declining QoQ to 1.423M (from 1.608M) amid lower ASMs .
• Continued reliance on non-recurring items: Q2 included $10.5M debt forgiveness and gains/losses on investments; while adjustments are disclosed, they underscore ongoing transition dynamics .

Financial Results

Guidance Changes

Note: No formal numerical guidance ranges (revenue, margins, OpEx, OI&E, tax rate, dividends) were provided in the Q2 press release/8-K .

Earnings Call Themes & Trends

No Q2 earnings call transcript was available in our document catalog; prior Q4 noted no call .

Management Commentary

• “Given meaningfully improved block-hour rates on our E-175 flying, coupled with our initiatives to eliminate surplus CRJ assets, we achieved our first GAAP and adjusted net profits in 11 quarters… Mesa has reduced its total debt by $221.5 million, or 36%, over the past year.” — Jonathan Ornstein, Chairman & CEO .
• “We expect to remain cash-flow neutral for the remainder of the fiscal year… and look forward to returning to consistent profitability in the future.” — Jonathan Ornstein .
• On RASPRO: “This is a significant financial obligation that we are putting behind us… we look forward to enhancing our focus on returning to profitable performance.” — Jonathan Ornstein .
• Strategic investments: Mesa outlined holdings in XTI Aerospace and warrants subject to milestones aligned with regional aviation innovation .

Q&A Highlights

• No Q2 FY2024 earnings call transcript was found; Q4 FY2023 explicitly noted no conference call. As such, no Q&A themes or guidance clarifications were available from a Q2 call .

Estimates Context

• Attempts to retrieve Wall Street consensus (S&P Global) for Q2 FY2024 EPS and revenue estimates encountered rate limits, and were unavailable at time of analysis; therefore, estimate comparisons are not provided (S&P Global consensus unavailable) [GetEstimates error].
• Given the unavailability, investors should note the significant positive surprise in GAAP profitability and strong adjusted EBITDA/EBITDAR, with drivers including improved United CPA block-hour rates, deferred revenue recognition, and lower impairment/Depreciation costs .

Key Takeaways for Investors

• Profitability inflection supported by structurally improved United CPA economics and disciplined cost actions; strong adjusted EBITDA/EBITDAR enhance visibility to sustained profitability targets .
• Operating performance remains robust (99.85% controllable completion), underpinning contractual incentives (e.g., loan forgiveness) and reinforcing reliability with United .
• Fleet transition is progressing (CRJ exit; E-175 emphasis), with lease renegotiations lowering payments and asset sales reducing debt, improving capital efficiency and margin potential .
• Balance sheet materially de-risked: debt at $400.0M with ongoing paydowns; cash-flow neutrality expected for FY2024 supports near-term liquidity and reduces financing risk .
• Revenue tailwinds from rate increases ($8.8M retro for Q1; $7.9M deferred revenue recognition in Q2) provide near-term uplift while operational focus shifts to sustaining higher-margin flying .
• Limited external estimate context (unavailable) suggests the narrative itself — profitability return, debt reduction, and execution on fleet strategy — is the catalyst for stock reaction and potential estimate revisions by the Street once accessible .
• Monitor continued asset sale milestones (RASPRO progress), pilot pipeline throughput, and any updates to the United CPA scope/rates as key drivers of trajectory into 2H FY2024 .