RigNet Announces Second Quarter 2015 Earnings Results

  • Quarterly revenue of $75.1 million, representing decreases of 6.9% and 3.3% over the prior year and prior quarters, respectively


  • Quarterly Adjusted EBITDA of $18.5 million, a decrease of 1.6% over the prior year quarter, but an increase of 8.1% over the prior quarter

  • Quarterly Cash Earnings of $15.4 million, representing increases of 3.8% and 7.5% over the prior year and prior quarters, respectively

HOUSTON, Aug. 04, 2015 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ:RNET), a leading global provider of digital technology solutions to the oil and gas industry, today reported quarterly results for the quarter ended June 30, 2015.

Quarterly revenue was $75.1 million, representing a decrease of $5.6 million, or 6.9%, as compared to the prior year quarter. The decrease was primarily due to reduced offshore and onshore drilling budgets resulting from depressed commodity prices. Compared to the first quarter, revenue decreased by 3.3% for the same reasons.

Quarterly Adjusted EBITDA was $18.5 million, or 24.6% of revenue, representing a decrease of $0.3 million, or 1.6%, over the prior year quarter. The decrease primarily resulted from lower revenue partially offset by benefits from cost containment actions taken over the first half of the year. Principally as a result of cost containment and strong operational execution, Adjusted EBITDA grew 8.1% over the prior quarter and Adjusted EBITDA margin expanded by 130 and 260 basis points over the prior year and prior quarters, respectively.

Quarterly Cash Earnings were $15.4 million, or $0.86 per diluted share, an increase of $0.6 million, or 3.8%, over the prior year quarter. Compared to the first quarter, Cash Earnings increased $1.1 million, or 7.5%.

Capital expenditures were $8.1 million compared to $11.6 million in the prior year quarter. Unlevered Free Cash Flow ("UFCF"), defined as Adjusted EBITDA less capital expenditures, was $10.4 million, an increase of $3.2 million, or 44.1%, over the prior year quarter. The increased UFCF was due primarily to reduced capital expenditures.

Mark B. Slaughter, chief executive officer and president, commented, “The RigNet team demonstrated strong operational execution in the quarter against market headwinds of significantly reduced oil prices and customer spending. By adjusting our cost structure to the available market, we were able to lift EBITDA and EBITDA margins in the quarter, even as revenues declined, while maintaining needed long-term investments critical for our future success when the macro environment improves. Despite the near-term market challenges, we continue efforts to strengthen our capabilities, defend and expand our market presence and emerge as a stronger and more capable company. Moreover, with our strong financial position, we are well-positioned to execute against our long-term growth plans, both organically and inorganically, under the current market conditions.”

A conference call for investors will be held at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Wednesday, August 5, 2015, to discuss RigNet’s 2015 second quarter results. The call may be accessed live over the telephone by dialing +1 (877) 845-0777, or, for international callers, +1 (760) 298-5090. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto RigNet’s website at www.rig.net in the Investors – Webcasts and Presentations section. A replay of the conference call webcast will also be available on our website for approximately thirty days following the call.

Non-GAAP Financial Measures

This press release contains the following non-GAAP measures: Gross Profit (excluding depreciation and amortization), Adjusted EBITDA, Unlevered Free Cash Flow, Cash Earnings and Cash EPS. Gross Profit (excluding depreciation and amortization), Adjusted EBITDA, Unlevered Free Cash Flow, Cash Earnings and Cash EPS are financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We refer you to the Company’s most recent 10-K and 10-Q filings for the year ended December 31, 2014 and the three and six months ended June 30, 2015, respectively, for a more detailed discussion of the uses and limitations of our non-GAAP financial measures.

GAAP defines gross profit as revenue less cost of revenue, and includes in costs of revenue depreciation and amortization expenses related to revenue-generating long-lived and intangible assets. We define Gross Profit (excluding depreciation and amortization) as revenue less cost of revenue (excluding depreciation and amortization). This measure differs from the GAAP definition of gross profit as we do not include the impact of depreciation and amortization expenses related to revenue-generating long-lived and intangible assets which represent non-cash expenses. We use this measure to evaluate operating margins and the effectiveness of cost management.

We define Adjusted EBITDA as net income (loss) plus interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, foreign exchange impact of intercompany financing activities, (gain) loss on retirement of property, plant and equipment, change in fair value of derivatives, stock-based compensation, IPO or merger/acquisition costs and related bonuses, restructuring charges and non-recurring items. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.

We define Unlevered Free Cash Flow as Adjusted EBITDA less capital expenditures. Unlevered Free Cash Flow should not be considered as an alternative to net income (loss), operating income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.

We define Cash Earnings as net income (loss), plus depreciation and amortization, impairment of goodwill, foreign exchange impact of intercompany financing activities, (gain) loss on retirement of property and equipment, change in fair value of derivatives, stock-based compensation, IPO or merger/acquisition costs and related bonuses, restructuring charges and non-recurring items. We define Cash EPS as Cash Earnings divided by diluted shares. Cash Earnings and Cash EPS should not be considered as an alternative to net income (loss), operating income (loss), basic or diluted earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP.

About RigNet

RigNet (NASDAQ:RNET) is a leading global provider of digital technology solutions to the oil and gas industry, serving offshore and onshore drilling rigs, energy production facilities and energy maritime vessels. RigNet provides solutions ranging from fully-managed voice and data networks to more advanced applications that include video conferencing and real-time data services to more than 1,200 remote sites in 50 countries on six continents, effectively spanning the drilling and production industry. RigNet is based in Houston, Texas. For more information, please visit www.rig.net. RigNet is a registered trademark of RigNet, Inc.

Forward Looking Statements

This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 – that is, statements related to the future, not past, events. Forward-looking statements are based on the current expectations and include any statement that does not directly relate to a current or historical fact. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “anticipate,” “believe,” “intend,” “expect,” “plan” or other similar words. These forward-looking statements involve certain risks and uncertainties that ultimately may not prove to be accurate. Actual results and future events could differ materially from those anticipated in such statements. For further discussion of risks and uncertainties, individuals should refer to RigNet’s SEC filings. RigNet undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement.


Three Months Ended Six Months Ended
June 30,
2015
March 31,
2015
June 30,
2014
June 30,
2015
June 30,
2014
(in thousands)
Unaudited Consolidated Statements of Comprehensive Income Data:
Revenue $ 75,106 $ 77,650 $ 80,656 $ 152,756 $ 155,699
Expenses:
Cost of revenue (excluding depreciation and amortization) 39,736 43,933 45,656 83,669 92,177
Depreciation and amortization 8,211 8,096 7,280 16,307 14,077
Selling and marketing 1,668 1,823 1,764 3,491 3,293
General and administrative 16,388 21,346 16,154 37,734 30,997
Total expenses 66,003 75,198 70,854 141,201 140,544
Operating income 9,103 2,452 9,802 11,555 15,155
Other income (expense), net (348) (1,080) (616) (1,428) (446)
Income before income taxes 8,755 1,372 9,186 10,127 14,709
Income tax expense (2,635) (2,314) (3,438) (4,949) (6,653)
Net income (loss) $ 6,120 $ (942) $ 5,748 $ 5,178 $ 8,056
Income (loss) Per Share - Basic and Diluted
Net income (loss) attributable to RigNet, Inc. common stockholders $ 6,039 $ (1,029) $ 5,667 $ 5,010 $ 7,862
Net income (loss) per share attributable to RigNet, Inc. common stockholders, basic $ 0.35 $ (0.06) $ 0.32 $ 0.29 $ 0.45
Net income (loss) per share attributable to RigNet, Inc. common stockholders, diluted $ 0.34 $ (0.06) $ 0.31 $ 0.28 $ 0.44
Weighted average shares outstanding, basic 17,499 17,463 17,490 17,482 17,379
Weighted average shares outstanding, diluted 17,893 17,463 18,108 17,857 18,029
Unaudited Non-GAAP Data:
Gross Profit (excluding depreciation and amortization) $ 35,370 $ 33,717 $ 35,000 $ 69,087 $ 63,522
Gross Profit (excluding depreciation and amortization) margin 47.1% 43.4% 43.4% 45.2% 40.8%
Adjusted EBITDA $ 18,506 $ 17,114 $ 18,806 $ 35,620 $ 35,014
Adjusted EBITDA margin 24.6% 22.0% 23.3% 23.3% 22.5%
Unlevered Free Cash Flow $ 10,423 $ 9,041 $ 7,234 $ 19,464 $ 13,790
Cash Earnings $ 15,363 $ 14,289 $ 14,803 $ 29,652 $ 27,315
Cash EPS $ 0.86 $ 0.82 $ 0.82 $ 1.66 $ 1.52



Three Months Ended Six Months Ended
June 30,
2015
March 31,
2015
June 30,
2014
June 30,
2015
June 30,
2014
(in thousands)
Reconciliation of Gross Profit to Gross Profit (excluding depreciation and
amortization):
Gross profit $ 27,508 $ 25,978 $ 28,073 $ 53,486 $ 50,127
Depreciation and amortization related to cost of revenue 7,862 7,739 6,927 15,601 13,395
Gross Profit (excluding depreciation and amortization) $ 35,370 $ 33,717 $ 35,000 $ 69,087 $ 63,522

Three Months Ended Six Months Ended
June 30,
2015
March 31,
2015
June 30,
2014
June 30,
2015
June 30,
2014
(in thousands)
Reconciliation of Net Income (loss) to Adjusted EBITDA, Cash Earnings, Cash EPS and Unlevered Free Cash Flow:
Net income (loss) $ 6,120 $ (942) $ 5,748 $ 5,178 $ 8,056
Interest expense 508 511 565 1,019 1,046
Depreciation and amortization 8,211 8,096 7,280 16,307 14,077
Gain on sales of property, plant and equipment, net of retirements (1) (12) (10) (13) (83)
Stock-based compensation 1,033 949 1,195 1,982 2,343
Restructuring costs - 6,198 - 6,198 -
Acquisition costs - - 590 - 2,922
Income tax expense 2,635 2,314 3,438 4,949 6,653
Adjusted EBITDA (non-GAAP measure) $ 18,506 $ 17,114 $ 18,806 $ 35,620 $ 35,014
Interest expense (508) (511) (565) (1,019) (1,046)
Income tax expense (2,635) (2,314) (3,438) (4,949) (6,653)
Cash Earnings (non-GAAP measure) $ 15,363 $ 14,289 $ 14,803 $ 29,652 $ 27,315
Diluted Shares 17,893 17,463 18,108 17,857 18,029
Cash EPS (non-GAAP measure) $ 0.86 $ 0.82 $ 0.82 $ 1.66 $ 1.52
Adjusted EBITDA (non-GAAP measure) $ 18,506 $ 17,114 $ 18,806 $ 35,620 $ 35,014
Capital expenditures 8,083 8,073 11,572 16,156 21,224
Unlevered Free Cash Flow (non-GAAP measure) $ 10,423 $ 9,041 $ 7,234 $ 19,464 $ 13,790

June 30, December 31,
2015 2014
(in thousands)
Unaudited Consolidated Balance Sheet Data:
Cash and cash equivalents $ 61,524 $ 66,576
Restricted cash - current portion 781 1,200
Total assets 294,502 299,837
Current maturities of long-term debt 8,413 8,405
Long-term debt 73,461 77,706
Six Months Ended
June 30,
2015 2014
(in thousands)
Unaudited Consolidated Statements of Cash Flows Data:
Cash and cash equivalents, January 1, $ 66,576 $ 59,822
Net cash provided by operating activities 13,435 10,040
Net cash used in investing activities (13,891) (37,875)
Net cash provided by (used in) financing activities (4,295) 27,572
Changes in foreign currency translation (301) 1,448
Cash and cash equivalents, June 30, $ 61,524 $ 61,007

2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter
2014 2014 2014 2015 2015
Selected Operational Data (4):
Offshore drilling rigs (1) 277 285 278 281 270
Strategic initiatives (2) 553 548 562 526 515
Other sites (3) 705 691 676 493 442
Total 1,535 1,524 1,516 1,300 1,227
(1) Includes jack up, semi-submersible and drillship rigs
(2) Includes production facilities, energy support vessels and international land rigs
(3) Includes U.S. onshore drilling rigs, completion sites, man-camps, remote offices and supply bases
(4) Includes sites acquired from Inmarsat's Enterprise Energy business unit

Three Months Ended Six Months Ended
June 30,
2015
March 31,
2015
June 30,
2014
June 30,
2015
June 30,
2014
(in thousands)
Eastern Hemisphere:
Revenue $ 38,085 $ 38,971 $ 39,842 $ 77,056 $ 77,864
Cost of revenue 18,734 17,900 19,204 36,634 37,897
Gross Profit (non-GAAP measure) 19,351 21,071 20,638 40,422 39,967
Gross Profit margin 50.8% 54.1% 51.8% 52.5% 51.3%
Depreciation and amortization 3,988 3,972 3,353 7,960 6,076
Selling, general and administrative 3,664 3,528 3,783 7,192 6,767
Operating income $ 11,699 $ 13,571 $ 13,502 $ 25,270 $ 27,124
Adjusted EBITDA (non-GAAP measure) $ 15,735 $ 17,475 $ 17,187 $ 33,210 $ 33,878
Adjusted EBITDA margin 41.3% 44.8% 43.1% 43.1% 43.5%
Western Hemisphere:
Revenue $ 26,654 $ 28,128 $ 30,053 $ 54,782 $ 51,461
Cost of revenue 11,714 13,954 16,572 25,668 29,244
Gross Profit (non-GAAP measure) 14,940 14,174 13,481 29,114 22,217
Gross Profit margin 56.1% 50.4% 44.9% 53.1% 43.2%
Depreciation and amortization 2,964 3,016 2,682 5,980 5,445
Selling, general and administrative 4,326 4,554 4,039 8,880 6,328
Operating income $ 7,650 $ 6,604 $ 6,760 $ 14,254 $ 10,444
Adjusted EBITDA (non-GAAP measure) $ 10,707 $ 9,249 $ 9,564 $ 19,956 $ 16,144
Adjusted EBITDA margin 40.2% 32.9% 31.8% 36.4% 31.4%
Telecoms Systems Integration:
Revenue $ 10,367 $ 10,551 $ 10,761 $ 20,918 $ 26,374
Cost of revenue 7,715 8,073 7,466 15,788 20,408
Gross Profit (non-GAAP measure) 2,652 2,478 3,295 5,130 5,966
Gross Profit margin 25.6% 23.5% 30.6% 24.5% 22.6%
Depreciation and amortization 774 764 954 1,538 2,009
Selling, general and administrative 1,356 1,080 843 2,436 1,496
Operating income (loss) $ 522 $ 634 $ 1,498 $ 1,156 $ 2,461
Adjusted EBITDA (non-GAAP measure) $ 1,318 $ 1,249 $ 2,391 $ 2,567 $ 4,402
Adjusted EBITDA margin 12.7% 11.8% 22.2% 12.3% 16.7%
NOTE: Consolidated balances include the three segments above along with corporate activities and intercompany eliminations.

Investor contact Marty Jimmerson Senior Vice President and Chief Financial Officer, RigNet, Inc. Tel: +1 (281) 674-0699 investor.relations@rig.net

Source:RigNet