Bay Street News

RigNet Announces Third Quarter 2018 Earnings Results

Bay Street

HOUSTON, Nov. 08, 2018 (GLOBE NEWSWIRE) — RigNet, Inc. (NASDAQ: RNET), a global technology company that provides customized communications services, applications, real-time machine learning, and cybersecurity solutions, today reported results for the quarter ended September 30, 2018.

“RigNet continues to execute on our strategic growth plan which focuses on enabling our customers to realize the tangible business benefits of digital transformation,” said Steven Pickett, Chief Executive Officer and President. “In the third quarter of 2018, and for the second consecutive quarter, the team grew both consolidated revenue and Adjusted EBITDA.  Furthermore, revenue grew across all segments during the third quarter of 2018, both sequentially and year-on-year. Our customers continue to see increasing value in our bundled Apps & IoT solutions, particularly with respect to IntelieTM, our real time machine learning and artificial intelligence platform which secured new contracts with both onshore and offshore customers during the quarter.”

Quarterly revenue was $64.8 million, an increase of $13.9 million, or 27.4%, compared to the third quarter 2017 and an increase of $4.8 million, or 7.9%, compared to the prior quarter. Compared to the third quarter 2017, revenue grew in all segments: a $6.7 million increase in Systems Integration (SI) revenue, a $4.7 million increase in Managed Services (MS) revenue, and a $2.5 million increase in Apps & IoT. The revenue increase compared to the prior quarter reflects a $3.2 million increase in MS revenue, a $0.9 million increase in Apps & IoT, and a $0.6 million increase in SI revenue.

Net loss attributable to common stockholders was $2.8 million, or $0.15 per share, compared to net loss attributable to common stockholders of $4.2 million, or $0.23 per share, in the third quarter 2017 and net loss attributable to common stockholders of $4.3 million, or $0.23 per share, in the prior quarter. 

Project backlog (using percentage of completion accounting) was $41.4 million compared to $31.5 million in the third quarter 2017 and $19.6 million in the prior quarter. The increase was driven by new project wins primarily in the United States, both onshore and offshore.

Adjusted EBITDA, a non-GAAP measure defined below, was $8.7 million in the third quarter 2018 compared to $7.8 million in the third quarter 2017 and $8.1 million in the prior quarter. Adjusted EBITDA was $24.2 million for the nine months ended September 30, 2018 compared to $21.1 million for the nine months ended September 30, 2017.

The Company recorded $0.7 million in restructuring charges in the third quarter of 2018, as well as a $0.8 million decrease in the fair value of an earn-out related to the TECNOR acquisition, bringing the fair value to zero, and $0.9 million in acquisition costs. In the previous quarter, the Company recorded $2.8 million for the change in fair value of an earn-out related to the TECNOR acquisition and $0.3 million in acquisition costs. In the quarter ended September 30, 2017, the Company recorded $0.8 million in acquisition costs and $0.8 million in restructuring charges. The acquisition costs, restructuring charges and change in fair value of the earn-out are added back to net loss in our non-GAAP measure Adjusted EBITDA.  

Capital expenditures for the three and nine months ending September 30, 2018 totaled $6.5 million and $19.7 million, respectively, compared to $5.9 million and $13.9 million, respectively, for the three and nine months ending September 30, 2017.  Capital expenditures for the second quarter ending June 30, 2018 totaled $6.6 million.

Site count in the third quarter 2018 increased across all categories to 1,350 from 1,175 in the third quarter 2017 and 1,297 in the prior quarter.

Earnings Call Information

An Earnings Call for investors will be held at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Friday, November 9, 2018, to discuss RigNet’s third quarter 2018 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.

About RigNet

RigNet (NASDAQ: RNET) is a global technology company that provides customized communications services, applications, real-time machine learning, and cybersecurity solutions to enhance customer decision-making and business performance. RigNet delivers a digital transformation bundle that accelerates technology adoption and empowers customers to be always connected, always secure, and always learning. 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.  Opinions, expectations with respect to conditions in the oil and gas industry, and customer perceptions of value are examples of forward-looking statements in this press release.  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, including the expected benefits of acquiring and integrating other businesses, and often contain words such as “anticipate,” “believe,” “intend,”, “will”, “expect,” “plan” or other similar words.  These forward-looking statements involve certain risks and uncertainties, including those risks set forth in Item 1A – Risk Factors of the Company’s most recent 10-K filing, and 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.

Non-GAAP Financial Measure

This press release contains the non-GAAP measure Adjusted EBITDA, a measure we believe is useful to investors as a supplemental measure to evaluate overall operating performance and is an integral component of financial covenant ratios in our credit agreement.  Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles, or GAAP.  We refer you to the Company’s recent 10-K filing for the year ended December 31, 2017 for a more detailed discussion of the uses and limitations of Adjusted EBITDA.

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

A reconciliation of net loss to Adjusted EBITDA is found in the table below.

Media / Investor Relations Contact
Lee M. Ahlstrom     Tel:  +1 (281) 674-0480
RigNet, Inc.     investor.relations@rig.net

                     
RIGNET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
                     
                     
     Three Months Ended   Nine Months Ended
    September 30,
2018		   June 30,
2018		   September 30,
2017		   September 30,
2018		   September 30,
2017
    (in thousands, except per share amounts)
                     
Revenue   $   64,770     $   60,007     $   50,844     $   178,610     $   148,078  
Expenses:                    
Cost of revenue (excluding depreciation and amortization)       40,734         36,246         32,385         110,661         95,298  
Depreciation and amortization       8,413         8,356         7,999         24,756         22,867  
Selling and marketing       2,728         4,189         2,400         9,866         5,968  
General and administrative       13,916         15,546         11,011         43,148         31,401  
Total expenses       65,791         64,337         53,795         188,431         155,534  
Operating loss       (1,021 )       (4,330 )       (2,951 )       (9,821 )       (7,456 )
Other expense, net       (1,465 )       (895 )       (480 )       (2,813 )       (1,859 )
Loss before income taxes        (2,486 )       (5,225 )       (3,431 )       (12,634 )       (9,315 )
Income tax benefit (expense)       (312 )       926         (762 )       11         (1,075 )
Net loss   $   (2,798 )   $   (4,299 )   $   (4,193 )   $   (12,623 )   $   (10,390 )
                     
Loss Per Share – Basic and Diluted                    
Net loss attributable to RigNet, Inc. common stockholders   $   (2,847 )   $   (4,329 )   $   (4,232 )   $   (12,732 )   $   (10,507 )
Net loss per share attributable to RigNet, Inc. common stockholders, basic   $   (0.15 )   $   (0.23 )   $   (0.23 )   $   (0.69 )   $   (0.58 )
Net loss per share attributable to RigNet, Inc. common stockholders, diluted   $   (0.15 )   $   (0.23 )   $   (0.23 )   $   (0.69 )   $   (0.58 )
Weighted average shares outstanding, basic       18,905         18,639         18,086         18,566         17,982  
Weighted average shares outstanding, diluted       18,905         18,639         18,086         18,566         17,982  
                     
Unaudited Non-GAAP Data:                    
Adjusted EBITDA   $   8,730     $   8,098     $   7,843     $   24,247     $   21,121  

 

                       
RIGNET, INC.  
Reconciliation of Net Loss to Adjusted EBITDA  
(Unaudited)  
                       
     Three Months Ended   Nine Months Ended  
    September 30,
2018		   June 30,
2018		   September 30,
2017		   September 30,
2018		   September 30,
2017		  
    (in thousands)  
                       
Net loss   $   (2,798 )   $   (4,299 )   $   (4,193 )   $   (12,623 )   $   (10,390 )  
Interest expense       807         1,007         689         2,773         1,921    
Depreciation and amortization       8,413         8,356         7,999         24,756         22,867    
Loss on sales of property, plant and equipment, net of retirements       66         21         5         34         55    
Stock-based compensation       1,086         837         1,007         4,368         2,949    
Restructuring costs       664         –         767         664         767    
Change in fair value of earn-out/contingent consideration       (750 )       2,778         –         2,050         (846 )  
Executive departure costs       –         4         –         161         –    
Acquisition costs       930         320         807         2,075         2,723    
Income tax expense (benefit)       312         (926 )       762         (11 )       1,075    
Adjusted EBITDA (non-GAAP measure)   $   8,730     $   8,098     $   7,843     $   24,247     $   21,121    
                       

 

                     
RIGNET, INC.
Segment Information
(Unaudited)
                     
                     
     Three Months Ended   Nine Months Ended
    September 30,
2018		   June 30,
2018		   September 30,
2017		   September 30,
2018		   September 30,
2017
    (in thousands)
Managed Services                    
Revenue   $   44,943   $   41,712   $   40,243   $   128,705   $   122,531
Cost of revenue       27,930       25,307       24,902       78,982       75,798
Depreciation and amortization       5,641       5,645       5,263       17,012       17,509
Selling, general and administrative       3,779       5,023       3,013       13,017       12,435
Operating income   $   7,593   $   5,737   $   7,065   $   19,694   $   16,789
                     
Applications and Internet-of-Things                    
Revenue   $   7,463   $   6,576   $   4,985   $   19,375   $   9,846
Cost of revenue       3,677       3,165       3,394       9,927       6,844
Depreciation and amortization       1,661       836       835       3,344       849
Selling, general and administrative       520       430       363       1,304       1,149
Operating income    $   1,605   $   2,145   $   393   $   4,800   $   1,004
                     
Systems Integration                     
Revenue   $   12,364   $   11,719   $   5,616   $   30,530   $   15,701
Cost of revenue       9,127       7,774       4,089       21,752       12,656
Depreciation and amortization       605       665       615       1,922       1,813
Selling, general and administrative       380       557       280       1,260       1,179
Operating income    $   2,252   $   2,723   $   632   $   5,596   $   53
                     
NOTE:  Consolidated balances include the segments above along with corporate activities and intercompany eliminations.

 

RIGNET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
         
      September 30,   December 31,
        2018       2017  
      (in thousands, except share amounts)
  ASSETS
  Current assets:      
    Cash and cash equivalents $   20,726     $   34,598  
    Restricted cash     42         43  
    Accounts receivable, net      68,161         49,021  
    Costs and estimated earnings in excess of billings on uncompleted contracts     4,395         2,393  
    Prepaid expenses and other current assets     6,388         5,591  
  Total current assets     99,712         91,646  
  Property, plant and equipment, net     60,835         60,344  
  Restricted cash     1,546         1,500  
  Goodwill     46,275         37,088  
  Intangibles, net     34,485         30,405  
  Deferred tax and other assets     8,385         9,111  
  TOTAL ASSETS $    251,238     $    230,094  
           
  LIABILITIES AND EQUITY
  Current liabilities:      
    Accounts payable $   17,579     $   12,234  
    Accrued expenses     17,021         16,089  
    Current maturities of long-term debt     4,943         4,941  
    Income taxes payable     –         1,601  
    Deferred revenue and other current liabilities     4,419         8,511  
  Total current liabilities     43,962         43,376  
  Long-term debt     66,214         53,173  
  Deferred revenue     369         546  
  Deferred tax liability     3,281         189  
  Other liabilities     32,101         25,533  
  Total liabilities     145,927         122,817  
  Commitments and contingencies       
  Equity:      
  Stockholders’ equity      
    Preferred stock – $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2018 or December 31, 2017     –         –  
    Common stock – $0.001 par value; 191,000,000 shares authorized; 19,411,467 and 18,232,872 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively     19         18  
    Treasury stock – 89,880 and 5,516 shares at September 30, 2018 and December 31, 2017, respectively, at cost     (1,246 )       (116 )
    Additional paid-in capital     172,599         155,829  
    Accumulated deficit     (46,796 )       (33,726 )
    Accumulated other comprehensive loss     (19,295 )       (14,806 )
  Total stockholders’ equity     105,281         107,199  
  Non-redeemable, non-controlling interest     30         78  
  Total equity     105,311         107,277  
  TOTAL LIABILITIES AND EQUITY $    251,238     $    230,094  
 

 

RIGNET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
             
        Nine Months Ended September 30,
          2018       2017  
        (in thousands)
Cash flows from operating activities:       
  Net loss $   (12,623 )   $   (10,390 )
  Adjustments to reconcile net loss to net cash provided by operations:      
    Depreciation and amortization     24,756         22,867  
    Stock-based compensation     4,368         2,949  
    Amortization of deferred financing costs     141         192  
    Deferred taxes     (117 )       (271 )
    Change in fair value of earn-out/contingent consideration     2,050         (846 )
    Accretion of discount of contingent consideration payable for acquisitions     368         417  
    Loss on sales of property, plant and equipment, net of retirements     34         55  
  Changes in operating assets and liabilities, net of effect of acquisition:      
    Accounts receivable, net     (15,428 )       (122 )
    Costs and estimated earnings in excess of billings on uncompleted contracts     (1,095 )       716  
    Prepaid expenses and other assets     (1,634 )       3,714  
    Accounts payable     3,986         1,697  
    Accrued expenses     (1,584 )       1,733  
    Deferred revenue     1,512         6,212  
    Other liabilities     (1,807 )       (8,035 )
    Payout of TECNOR contingent consideration – inception to date change in fair value portion     (1,575 )       –   
Net cash provided by operating activities     1,352         20,888  
             
Cash flows from investing activities:      
  Acquisitions (net of cash acquired)     (5,405 )       (32,205 )
  Capital expenditures     (18,791 )       (13,186 )
  Proceeds from sales of property, plant and equipment     685         274  
Net cash used in investing activities     (23,511 )       (45,117 )
             
Cash flows from financing activities:      
  Proceeds from issuance of common stock net of stock witheld to cover employee taxes on stock-based compensation     967         800  
  Stock withheld to cover employee taxes on stock-based compensation     (1,130 )       (116 )
  Subsidiary distributions to non-controlling interest     (157 )       (76 )
  Payout of TECNOR contingent consideration – fair value on acquisition date portion     (6,425 )       –   
  Proceeds from borrowings     16,750         15,000  
  Repayments of long-term debt     (3,848 )       (16,660 )
Net cash provided by (used) in financing activities     6,157         (1,052 )
Net change in cash and cash equivalents     (16,002 )       (25,281 )
             
Cash and cash equivalents including restricted cash:      
  Balance, January 1,     36,141         58,805  
  Changes in foreign currency translation     2,175         919  
Balance, September 30, $    22,314     $    34,443  
             

 

                     
RIGNET, INC.
Selected Operational Data
(Unaudited)
                     
    3rd Quarter   2nd Quarter   1st Quarter   4th Quarter   3rd Quarter
    2018   2018   2018   2017   2017
                     
Offshore drilling rigs (1)   191   190   188   182   184
Offshore Production   332   320   310   304   316
Maritime   187   177   176   172   165
Other sites (2)   640   610   525   513   510
Total   1,350   1,297   1,199   1,171   1,175
                     
(1) Includes jack up, semi-submersible and drillship rigs
(2) Includes U.S. and International land sites, completion sites, man-camps, remote offices, and supply bases and offshore-related supply bases, shore offices, tender rigs and platform rigs