RigNet Announces Third Quarter 2017 Earnings Results

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| Source: RigNet, Inc.
  • 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.