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RigNet Announces Third Quarter 2017 Earnings Results

  • Quarterly revenue of $50.8 million consisting of:
    - Managed Services revenue of $40.2 million
    - Applications and Internet-of-Things (Apps & IoT) revenue of $5.0 million
    - Systems Integration revenue of $5.6 million

  • Quarterly GAAP Net Loss attributable to common stockholders of $4.2 million, $0.23 per share

  • Quarterly Adjusted EBITDA of $7.8 million

  • Quarterly Unlevered Free Cash Flow of $2.0 million after capital expenditures of $5.9 million

HOUSTON, Nov. 06, 2017 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ:RNET), a global technology company that provides customized communications services, applications and cybersecurity solutions, today reported results for the quarter ended September 30, 2017.

Quarterly revenue was $50.8 million representing an increase of $1.7 million compared to the prior quarter and an increase of $0.2 million compared to the prior year quarter. The revenue increase compared to the prior quarter reflects a $2.6 million increase in Apps & IoT partially offset by a $0.5 million decrease in Systems Integration revenue and a $0.4 million decrease in Managed Services revenue. The increase compared to the prior year quarter reflects a $3.4 million increase in Apps & IoT and a $2.2 million increase in Systems Integration revenue partially offset by a $5.4 million decrease in Managed Services revenue. Revenue increased due to our strategy of growth into the application layer and internet-of-things space coupled with the acquisition of DTS and ESS, partially offset by previously announced sluggishness in offshore drilling.

GAAP net loss attributable to common stockholders was $4.2 million, or $0.23 per share, compared to net loss attributable to common stockholders of $4.2 million, or $0.24 per share, in the prior quarter and net loss attributable to common stockholders of $1.7 million, or $0.09 per share, in the prior year quarter.

Quarterly Adjusted EBITDA was $7.8 million compared to $6.1 million in the prior quarter and $8.5 million in the prior year quarter. The increase compared to the prior quarter was due primarily to increased revenue. The decrease compared to the prior year quarter was due primarily to ongoing operating expenses partially offset by increased revenue.

Capital expenditures were $5.9 million compared to $4.9 million in the prior quarter and $1.9 million in the prior year quarter. Unlevered Free Cash Flow, defined as Adjusted EBITDA less capital expenditures, was $2.0 million compared to $1.1 million in the prior quarter and $6.6 million in the prior year quarter.

In the third quarter of 2017, after the acquisition of ESS, the Company reorganized its business and reportable segments into Managed Services, Apps & IoT and Systems Integration. All historical segment financial data has been recast to conform to the current presentation. In the quarter ended September 30, 2017, the Company recorded $0.8 million in acquisition costs and $0.8 million in restructuring charges. In the quarter ended June 30, 2017, the Company recorded $1.9 million in acquisition costs and a gain of $0.8 million for the change in fair value of an earn-out. In the quarter ended September 30, 2016, the Company recorded net restructuring charges of $0.8 million offset by $1.3 million from the change in the fair value of an earn-out. The restructuring charges, acquisition costs and change in fair value of the earn-out are added back to net loss in our non-GAAP measures below.

Steven E. Pickett, chief executive officer and president, commented, "I am proud of how the team responded to our customers’ needs during and in the wake of Hurricane Harvey. Despite those challenges, the team delivered revenue growth for the second consecutive quarter and site count growth for the third consecutive quarter. During the third quarter, our team expanded RigNet's market position by increasing site count by approximately 12% quarter over quarter while delivering $2.0 million in Unlevered Free Cash Flow.”

A conference call for investors will be held at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Tuesday, November 7, 2017, to discuss RigNet’s third quarter 2017 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: Adjusted EBITDA and Unlevered Free Cash Flow. Adjusted EBITDA and Unlevered Free Cash Flow 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 filing for the year ended December 31, 2016 for a more detailed discussion of the uses and limitations of our non-GAAP financial measures.

We define Adjusted EBITDA as net income (loss) plus interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, intangibles, property, plant and equipment, foreign exchange impact of intercompany financing activities, (gain) loss on retirement of property, plant and equipment, change in fair value of earn-outs and contingent consideration, stock-based compensation, merger and acquisition costs, executive departure costs, restructuring charges and non-recurring items.

We define Unlevered Free Cash Flow as Adjusted EBITDA less capital expenditures. Adjusted EBITDA and 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.

About RigNet

RigNet (NASDAQ:RNET) is a global technology company that provides customized communications services, applications and cybersecurity solutions enhancing customer decision making and business performance. RigNet is headquartered in Houston, Texas with operations around the world.

For more information on RigNet, 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.

Investor contact
Charles E. Schneider
Chief Financial Officer, RigNet, Inc.
Tel: +1 (281) 674-0699
investor.relations@rig.net

Three Months Ended Nine Months Ended
September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
(in thousands, except per share amounts)
Unaudited Consolidated Statements of Comprehensive Income Data:
Revenue $50,844 $49,162 $50,612 $148,078 $167,864
Expenses:
Cost of revenue (excluding depreciation and amortization) 32,385 33,038 29,860 95,298 99,412
Depreciation and amortization 7,999 7,552 8,305 22,867 25,561
Impairment of intangible assets - - - - 397
Selling and marketing 2,400 2,132 1,724 5,968 5,559
General and administrative 11,011 9,878 10,476 31,401 39,393
Total expenses 53,795 52,600 50,365 155,534 170,322
Operating income (loss) (2,951) (3,438) 247 (7,456) (2,458)
Other expense, net (480) (873) (1,155) (1,859) (2,437)
Loss before income taxes (3,431) (4,311) (908) (9,315) (4,895)
Income tax benefit (expense) (762) 101 (540) (1,075) (2,676)
Net loss $(4,193) $(4,210) $(1,448) $(10,390) $(7,571)
Loss Per Share - Basic and Diluted
Net loss attributable to RigNet, Inc.
common stockholders
$ (4,232) $ (4,249) $ (1,658) $ (10,507) $ (7,742)
Net loss per share attributable to
RigNet, Inc. common stockholders, basic
$ (0.23) $ (0.24) $ (0.09) $ (0.58) $ (0.44)
Net loss per share attributable to
RigNet, Inc. common stockholders, diluted
$ (0.23) $ (0.24) $ (0.09) $ (0.58) $ (0.44)
Weighted average shares outstanding, basic 18,086 17,985 17,782 17,982 17,677
Weighted average shares outstanding, diluted 18,086 17,985 17,782 17,982 17,677
Unaudited Non-GAAP Data:
Adjusted EBITDA $ 7,843 $ 6,053 $ 8,534 $ 21,121 $ 27,824
Unlevered Free Cash Flow $ 1,990 $ 1,142 $ 6,598 $ 7,197 $ 16,313

Three Months Ended Nine Months Ended
September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
(in thousands)
Reconciliation of Net Loss to Adjusted EBITDA and Unlevered Free Cash Flow:
Net loss $(4,193) $(4,210) $(1,448) $(10,390) $(7,571)
Interest expense 689 613 729 1,921 2,040
Depreciation and amortization 7,999 7,552 8,305 22,867 25,561
Impairment of intangible assets - - - - 397
(Gain) loss on sales of property, plant and equipment, net of retirements 5 13 (14) 55 (164)
Stock-based compensation 1,007 1,116 866 2,949 2,708
Restructuring costs 767 - 835 767 1,332
Change in fair value of earn-out/contingent consideration - (846) (1,279) (846) (1,279)
Executive departure costs - - - - 1,884
Acquisition costs 807 1,916 - 2,723 240
Income tax expense 762 (101) 540 1,075 2,676
Adjusted EBITDA (non-GAAP measure) $7,843 $6,053 $8,534 $21,121 $27,824
Adjusted EBITDA (non-GAAP measure) $7,843 $6,053 $8,534 $21,121 $27,824
Capital expenditures 5,853 4,911 1,936 13,924 11,511
Unlevered Free Cash Flow (non-GAAP measure) $1,990 $1,142 $6,598 $7,197 $16,313


September 30, December 31,
2017 2016
(in thousands)
Unaudited Consolidated Balance Sheet Data:
Cash and cash equivalents $32,900 $57,152
Restricted cash - current portion 43 139
Restricted cash - long-term portion 1,500 1,514
Total assets 237,848 230,972
Current maturities of long-term debt 8,545 8,478
Long-term debt 51,455 52,990
Nine Months Ended
September 30,
2017 2016
(in thousands)
Unaudited Consolidated Statements of Cash Flows Data:
Cash and cash equivalents, January 1, $57,152 $60,468
Net cash provided by operating activities 20,888 22,754
Net cash used in investing activities (45,007) (16,886)
Net cash used in financing activities (1,052) (8,111)
Changes in foreign currency translation 919 (986)
Cash and cash equivalents, September 30, $32,900 $57,239

3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
2017 2017 2017 2016 2016
Selected Operational Data:
Offshore drilling rigs (1) 184 173 173 175 194
Offshore Production 316 296 290 280 287
Maritime 165 134 124 122 128
International Land 132 112 104 104 101
Other sites (2) 378 336 304 240 238
Total 1,175 1,051 995 921 948
(1) Includes jack up, semi-submersible and drillship rigs
(2) Includes U.S. onshore drilling and production sites, completion sites, man-camps, remote offices, and supply bases and offshore-related supply bases, shore offices, tender rigs and platform rigs

Three Months Ended Nine Months Ended
September 30,
2017
June 30,
2017
September 30,
2016
September 30,
2017
September 30,
2016
(in thousands)
Managed Services
Revenue $40,243 $40,625 $45,653 $122,531 $146,766
Cost of revenue 24,902 25,549 26,253 75,798 85,455
Depreciation and amortization 5,263 6,222 6,716 17,509 20,032
Selling, general and administrative 3,013 4,983 5,235 12,435 20,631
Operating income $7,065 $3,871 $7,449 $16,789 $20,648
Applications and Internet-of-Things
Revenue $4,985 $2,430 $1,552 $9,846 $5,079
Cost of revenue 3,394 1,995 696 6,844 2,176
Depreciation and amortization 835 7 - 849 -
Selling, general and administrative 363 298 67 1,149 201
Operating income $393 $130 $789 $1,004 $2,702
Systems Integration
Revenue $5,616 $6,107 $3,407 $15,701 $16,019
Cost of revenue 4,089 5,494 2,911 12,656 11,781
Depreciation and amortization 615 611 631 1,813 2,127
Selling, general and administrative 280 422 499 1,179 2,141
Operating income (loss) $632 $(420) $(634) $53 $(30)
NOTE: Consolidated balances include the segments above along with corporate activities and intercompany eliminations.

Source:RigNet, Inc.