Loading, Please Wait...

CST: 18/11/2019 23:19:06   

RigNet Announces Third Quarter 2019 Earnings Results

11 Days ago

HOUSTON, Nov. 07, 2019 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ: RNET, the “Company”), the leading provider of ultra-secure, intelligent networking solutions and specialized applications, announced today its results for the quarter ended September 30, 2019.

  • Increased quarterly revenue 1.1% to $61.0 million compared to the prior quarter
  • Net loss of $0.5 million or $0.02 per share; compared to net loss of $6.2 million or $0.32 per share in the prior quarter
  • Increased quarterly Adjusted EBITDA by 12.6% to $11.0 million compared to the prior quarter
  • Increased Managed Communications Services (MCS) Sites served by 2.7% to 1,386 compared to the prior year quarter
  • Project backlog of $35.9 million

“RigNet delivered solid operating results in the third quarter of 2019, growing total revenue by 1.1% and improving Adjusted EBITDA by 12.6% compared to the prior quarter,” said Steven Pickett, Chief Executive Officer and President. “Revenue from our Apps & IoT segment, including Intelie, LIVE-IT, and our other SaaS solutions, increased to 15% of total revenues in the third quarter, highlighting the progress of RigNet’s strategy to move ‘up the stack’ by providing new, innovative solutions to enable our customers’ digital transformation.  Profitability within the segment improved as well with the gross margin expanding to 55.8% during the quarter.  Business in the Managed Services segment remained steady in spite of the volatility in commodity prices and revenue from site count gains in offshore rigs, maritime and production sites more than offset a lower onshore site count.  Revenues in our Systems Integration segment were lower quarter-on-quarter due to the project-based nature of the business. Our project backlog at quarter end was $35.9 million and our outlook for this segment is positive.  Finally, our team is focused on delivering value to our shareholders through a number of ongoing efforts which include increased attention to controlling costs and reducing leverage.”

Quarterly revenue was $61.0 million, an increase of $0.7 million, or 1.1%, compared to $60.3 million in the prior quarter, and a decrease of $3.8 million, or 5.8%, compared to $64.8 million in the third quarter 2018. Compared to the prior quarter, Apps & IoT revenue grew by $1.3 million, or 15.7%, and Managed Communications Services (MCS) revenue grew $0.9 million or 2.1%. The increase in Apps & IoT and MCS was partially offset by a Systems Integration (SI) revenue decrease of $1.4 million, or 13.0%, due to the variable nature of the business. Compared to the third quarter 2018, Apps & IoT revenue grew $1.8 million, or 24.1%. The increase in Apps & IoT revenue compared to the third quarter of 2018 was offset by a $2.9 million decrease in MCS revenue and a $2.7 million decrease in SI revenue.  

Net loss attributable to common stockholders in the third quarter 2019 was $0.5 million, or $0.02 per share, compared to net loss attributable to common stockholders of $6.2 million, or $0.32 per share, in the second quarter 2019 and net loss attributable to common stockholders of $2.8 million, or $0.15 per share, in the third quarter 2018.

Adjusted EBITDA, a non-GAAP measure defined and reconciled to GAAP net loss (as described below), was $11.0 million, a 12.6% increase compared to $9.8 million in the prior quarter and a 26.1% increase compared to $8.7 million in the third quarter 2018.

Net loss and Adjusted EBITDA in the third quarter of 2019 compared to the prior quarter and prior year quarter were positively impacted by reduced costs. Net loss was also impacted by reduced costs related to the GX dispute, which was settled during the second quarter of 2019, and reduced depreciation and amortization, which are added back and reconciled to Adjusted EBITDA below.

Capital expenditures for the three months ending September 30, 2019 totaled $5.9 million compared to $4.6 million for the quarter ending June 30, 2019 and $6.5 million for the three months ending September 30, 2018. Capital expenditures were $17.5 million and $19.7 million for the nine months ended September 30, 2019 and 2018, respectively.

Contracting and Operational Update

During the third quarter of 2019, RigNet renewed a long-term contract with its largest MCS customer, global offshore drilling contractor Valaris (which is the new name for the former Ensco and Rowan who recently merged and are the largest drilling contractor globally). RigNet has also signed an exclusive three-year agreement to provide enhanced MCS to Borr Drilling, a leading offshore drilling contractor. Additionally, RigNet has signed a multi-year agreement to provide Intelie Live, the Company’s real-time machine learning-based analytics platform to Ocyan, one of Brazil’s largest providers of solutions to the upstream oil and gas industry. RigNet signed with Galoc Production its first “triple play” contract, which is a contract to provide a combination of MCS, Cyphre, Enhanced Cyber Security (ECS) services and Intelie AI based real-time machine learning. This is the ongoing expansion of RigNet’s portfolio of FPSO clients including 10 FPSOs won in offshore Brazil in the last 9 months. Further RigNet has signed two multi-year agreements with Transocean, a leading offshore drilling contractor, to provide rig analytic applications through Intelie Live coupled with our enhanced remote Adaptive Video Intelligence (AVI) capability to help improve operational integrity and efficiency. RigNet has also introduced its first implementation of LIVE-IT, RigNet’s edge computing solution services that assist customers with collecting and standardizing the complex data produced by edge devices.

MCS Site count in the third quarter 2019 increased by 0.1% to 1,386 from 1,384 in the prior quarter and grew by 2.7% from 1,350 in the third quarter 2018.

Project backlog (using percentage of completion accounting) was $35.9 million as of September 30, 2019, compared $37.1 million in the prior quarter and $41.4 million in the third quarter 2018.

Additional Detail

In the quarter ended September 30, 2019, the Company recorded $0.2 million in restructuring costs associated with consolidating three legacy facilities into our new Lafayette, Louisiana office and a credit of $0.4 million in GX dispute phase II costs. In the quarter ended June 30, 2019, the Company recorded $2.2 million in GX dispute Phase II costs and $1.3 million increase in the fair value of earn-out/contingent consideration related to Intelie. 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 and $0.9 million in acquisition costs. All items listed above are added back to net loss in our non-GAAP measure Adjusted EBITDA.

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 8, 2019, to discuss RigNet’s third quarter 2019 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 andPresentations 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) delivers advanced software and communications infrastructure that allow our customers to realize the business benefits of digital transformation. With world-class, ultra-secure solutions spanning global IP connectivity, bandwidth-optimized OTT applications, IIoT big data enablement, and industry-leading machine learning analytics, RigNet supports the full evolution of digital enablement, empowering businesses to respond faster to high priority issues, mitigate the risk of operational disruption, and maximize their overall financial 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 future, not past, events.  Opinions, expectations with respect to conditions in the oil and gas industry, customer perceptions of value, entry into new customer contracts, growth prospects, and the ultimate payout amount of any earnout / contingent consideration are examples of forward-looking statements in this press release.  Forward-looking statements are based on 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 Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on Friday, March 15th, 2019 (as amended), 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; the GX dispute; the GX dispute Phase II costs 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, SVP & CFO                                                                                Tel:  +1 (281) 674-0699
RigNet, Inc.                                                                                                            investor.relations@rig.net




                     
RIGNET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
                     
                     
     Three Months Ended   Nine Months Ended
    September 30,
2019
  June 30,
2019
  September 30,
2018
  September 30,
2019
  September 30,
2018
    (in thousands, except per share amounts)
                     
Revenue   $ 60,993     $ 60,332     $ 64,770     $ 178,835     $ 178,610  
Expenses:                    
Cost of revenue (excluding depreciation and amortization)     35,662       36,519       40,734       108,637       110,661  
Depreciation and amortization     7,172       7,679       8,413       23,763       24,756  
Change in fair value of earn-out/contingent consideration     -       1,284       (750 )     1,284       2,050  
Selling and marketing     2,784       2,952       2,728       9,529       9,866  
General and administrative     12,377       14,458       14,666       43,305       41,098  
Total expenses     57,995       62,892       65,791       186,518       188,431  
Operating income (loss)     2,998       (2,560 )     (1,021 )     (7,683 )     (9,821 )
Other expense, net     (2,270 )     (1,362 )     (1,465 )     (4,798 )     (2,813 )
Income (loss) before income taxes     728       (3,922 )     (2,486 )     (12,481 )     (12,634 )
Income tax benefit (expense)     (998 )     (2,204 )     (312 )     (5,868 )     11  
Net loss   $ (270 )   $ (6,126 )   $ (2,798 )   $ (18,349 )   $ (12,623 )
                     
Loss Per Share - Basic and Diluted                    
Net loss attributable to RigNet, Inc. common stockholders   $ (494 )   $ (6,156 )   $ (2,847 )   $ (18,633 )   $ (12,732 )
Net loss per share attributable to RigNet, Inc. common stockholders, basic   $ (0.02 )   $ (0.32 )   $ (0.15 )   $ (0.94 )   $ (0.69 )
Net loss per share attributable to RigNet, Inc. common stockholders, diluted   $ (0.02 )   $ (0.32 )   $ (0.15 )   $ (0.94 )   $ (0.69 )
Weighted average shares outstanding, basic     19,970       19,082       18,905       19,777       18,566  
Weighted average shares outstanding, diluted     19,970       19,082       18,905       19,777       18,566  
                     
Unaudited Non-GAAP Data:                    
Adjusted EBITDA   $ 11,010     $ 9,775     $ 8,730     $ 29,171     $ 24,247  



                     
RIGNET, INC.
Reconciliation of Net Loss to Adjusted EBITDA
(Unaudited)
                     
     Three Months Ended   Nine Months Ended
    September 30,
2019
  June 30,
2019
  September 30,
2018
  September 30,
2019
  September 30,
2018
    (in thousands)
Reconciliation of Net Loss to Adjusted EBITDA:                    
Net loss   $ (270 )   $ (6,126 )   $ (2,798 )   $ (18,349 )   $ (12,623 )
Interest expense     1,784       1,269       807       4,291       2,773  
Depreciation and amortization     7,172       7,679       8,413       23,763       24,756  
Loss on sales of property, plant and equipment, net of retirements     8       18       66       19       34  
Stock-based compensation     1,504       1,170       1,086       7,132       4,368  
Restructuring costs     158       -       664       731       664  
Change in fair value of earn-out/contingent consideration     -       1,284       (750 )     1,284       2,050  
Executive departure costs     -       -       -       -       161  
Acquisition costs     76       60       930       486       2,075  
GX dispute Phase II costs     (420 )     2,217       -       3,946       -  
Income tax expense (benefit)     998       2,204       312       5,868       (11 )
Adjusted EBITDA (non-GAAP measure)   $ 11,010     $ 9,775     $ 8,730     $ 29,171     $ 24,247  
                     



                     
RIGNET, INC.
Segment Information
(Unaudited)
                     
                     
     Three Months Ended   Nine Months Ended
    September 30,
2019
  June 30,
2019
  September 30,
2018
  September 30,
2019
  September 30,
2018
    (in thousands)
Managed Communication Services                    
Revenue   $ 42,055   $ 41,205   $ 44,943   $ 125,593   $ 128,705
Cost of revenue     24,156     25,019     27,930     76,160     78,982
Depreciation and amortization     5,037     5,059     5,641     16,360     17,012
Selling, general and administrative     3,303     3,346     3,779     10,446     13,017
Operating income   $ 9,559   $ 7,781   $ 7,593   $ 22,627   $ 19,694
                     
Applications and Internet-of-Things                    
Revenue   $ 9,265   $ 8,005   $ 7,463   $ 25,285   $ 19,375
Cost of revenue     4,091     4,387     3,677     12,975     9,927
Depreciation and amortization     1,218     1,226     1,661     3,675     3,344
Selling, general and administrative     1,599     835     520     2,999     1,304
Operating income   $ 2,357   $ 1,557   $ 1,605   $ 5,636   $ 4,800
                     
Systems Integration                    
Revenue   $ 9,673   $ 11,122   $ 12,364   $ 27,957   $ 30,530
Cost of revenue     7,415     7,113     9,127     19,502     21,752
Depreciation and amortization     155     639     605     1,456     1,922
Selling, general and administrative     464     570     380     2,158     1,260
Operating income   $ 1,639   $ 2,800   $ 2,252   $ 4,841   $ 5,596
                     
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,
        2019       2018  
      (in thousands, except share amounts)
  ASSETS
  Current assets:      
    Cash and cash equivalents $ 14,267     $ 21,711  
    Restricted cash   39       41  
    Accounts receivable, net   61,895       67,450  
    Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB)   11,589       7,138  
    Prepaid expenses and other current assets   6,795       6,767  
  Total current assets   94,585       103,107  
  Property, plant and equipment, net   60,283       63,585  
  Restricted cash   1,522       1,544  
  Goodwill   45,484       46,631  
  Intangibles, net   30,083       33,733  
  Right-of-use lease asset   3,891       -  
  Deferred tax and other assets   7,312       10,325  
  TOTAL ASSETS $ 243,160     $ 258,925  
           
  LIABILITIES AND EQUITY
  Current liabilities:      
    Accounts payable $ 26,624     $ 20,568  
    Accrued expenses   16,810       16,374  
    Current maturities of long-term debt   10,795       4,942  
    Income taxes payable   1,789       2,431  
    GX dispute accrual   750       50,765  
    Deferred revenue and other current liabilities   10,897       5,863  
  Total current liabilities   67,665       100,943  
  Long-term debt   103,641       72,085  
  Deferred revenue   180       318  
  Deferred tax liability   2,889       652  
  Right-of-use lease liability - long-term portion   3,576       -  
  Other liabilities   21,702       28,943  
  Total liabilities   199,653       202,941  
           
  Equity:      
  Stockholders' equity      
    Preferred stock - $0.001 par value; 10,000,000 shares authorized; no
shares issued or outstanding at September 30, 2019 or December 31, 2018
  -       -  
    Common stock - $0.001 par value; 190,000,000 shares authorized;
19,970,308 and 19,464,847 shares issued and outstanding at
September 30, 2019 and December 31, 2018, respectively
  20       19  
    Treasury stock - 201,622 and 91,567 shares at September 30, 2019 and December 31,
2018, respectively, at cost
  (2,682 )     (1,270 )
    Additional paid-in capital   183,081       172,946  
    Accumulated deficit   (115,150 )     (96,517 )
    Accumulated other comprehensive loss   (21,831 )     (19,254 )
  Total stockholders' equity   43,438       55,924  
  Non-redeemable, non-controlling interest   69       60  
  Total equity   43,507       55,984  
  TOTAL LIABILITIES AND EQUITY $ 243,160     $ 258,925  
           



RIGNET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
             
        Nine Months Ended September 30,
          2019       2018  
        (in thousands)
Cash flows from operating activities:      
  Net loss $ (18,349 )   $ (12,623 )
  Adjustments to reconcile net loss to net cash provided by operations:      
    Depreciation and amortization   23,763       24,756  
    Stock-based compensation   7,132       4,368  
    Amortization of deferred financing costs   252       141  
    Deferred taxes   4,902       (117 )
    Change in fair value of earn-out/contingent consideration   1,284       2,050  
    Accretion of discount of contingent consideration payable for acquisitions   262       368  
    (Gain) loss on sales of property, plant and equipment, net of retirements   19       34  
  Changes in operating assets and liabilities, net of effect of acquisition:      
    Accounts receivable, net   4,995       (15,428 )
    Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB)     (4,536 )     (1,095 )
    Prepaid expenses and other assets   128       (1,634 )
    Right-of-use lease asset   1,214       -  
    Accounts payable   5,355       3,986  
    Accrued expenses   36       (1,584 )
    GX Dispute payment   (50,000 )     -  
    Deferred revenue   1,635       1,512  
    Right-of-use lease liability   (1,593 )     -  
    Other liabilities   (2,444 )     (1,807 )
    Payout of TECNOR contingent consideration - inception to date change in fair value portion   -       (1,575 )
Net cash provided by (used in) operating activities   (25,945 )     1,352  
             
Cash flows from investing activities:      
  Acquisitions (net of cash acquired)   -       (5,405 )
  Capital expenditures   (16,776 )     (18,791 )
  Proceeds from sales of property, plant and equipment   300       685  
Net cash used in investing activities   (16,476 )     (23,511 )
             
Cash flows from financing activities:      
  Issuance of common stock upon the exercise of stock options and the vesting of restricted stock   4       967  
  Stock withheld to cover employee taxes on stock-based compensation   (1,412 )     (1,130 )
  Subsidiary distributions to non-controlling interest   (275 )     (157 )
   Payout of TECNOR contingent consideration - fair value on acquisition date portion      -       (6,425 )
  Proceeds from borrowings   48,500       16,750  
  Repayments of long-term debt   (11,413 )     (3,848 )
  Payment of financing fees   (486 )     -  
Net cash provided by financing activities   34,918       6,157  
Net change in cash and cash equivalents   (7,503 )     (16,002 )
             
Cash and cash equivalents including restricted cash:      
  Balance, January 1,   23,296       36,141  
  Changes in foreign currency translation   35       2,175  
Balance, September 30, $ 15,828     $ 22,314  
             



                     
RIGNET, INC.
Selected Operational Data
(Unaudited)
                     
    3rd Quarter   2nd Quarter 1st Quarter   4th Quarter   3rd Quarter
      2019     2019     2019     2018     2018
                     
Offshore drilling rigs (1)     184     182     185     184     191
Offshore Production     384     375     368     347     332
Maritime     184     183     180     181     187
Other sites (2)     634     644     627     611     640
Total Managed Communications Services Sites     1,386     1,384     1,360     1,323     1,350
                     
Project Backlog (000s)   $ 35,855   $ 37,116   $ 43,058   $ 45,536   $ 41,411
                     
(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
                     

Is your business listed correctly on America’s largest city directory network of 1,000 portals?