8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 8, 2018

 

 

RigNet, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-35003   76-0677208

(State or other jurisdiction

of incorporation)

 

(Commission

file number)

 

(I.R.S. Employer

Identification No.)

 

15115 Park Row Blvd, Suite 300, Houston, Texas   77084-4947
(Address of principal executive offices)   (zip code)

(281) 674-0100

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Item 2.02

— Results of Operations and Financial Condition

The following information is disclosed pursuant to Item 2.02—Results of Operations and Financial Condition:

On November 8, 2018, RigNet, Inc. issued a press release announcing its operating results for the three and nine months ended September 30, 2018. The press release is attached as Exhibit 99.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including the exhibits, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

— Financial Statements and Exhibits

 

(d)

Exhibits

 

Exhibit

Number

  

Exhibit Description

99    Press release of RigNet, Inc. dated November 8, 2018, announcing its operating results for the three and nine months ended September 30, 2018

 

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

RIGNET, INC.
By:        

/s/ LEE AHLSTROM

Lee Ahlstrom

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: November 8, 2018

 

3

EX-99

Exhibit 99

 

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RigNet Announces Third Quarter 2018 Earnings Results

 

   

Quarterly revenue increased 7.9% sequentially to $64.8 million consisting of:

 

  -

Managed Services revenue of $44.9 million

 

  -

Applications and Internet-of-Things (Apps & IoT) revenue of $7.5 million

 

  -

Systems Integration revenue of $12.4 million

 

   

Quarterly Net Loss attributable to common stockholders improved 34.2% to $2.8 million or $0.15 per share

 

   

Quarterly Adjusted EBITDA increased 7.8% sequentially to $8.7 million

 

   

Project backlog more than doubled sequentially to $41.4 million

 

   

Site count increased across all categories to 1,350 total sites

HOUSTON – November 8, 2018 – 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

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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.

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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

 

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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.

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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RIGNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     September 30,
2018
    December 31,
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  
  

 

 

   

 

 

 

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  
  

 

 

   

 

 

 

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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 withheld 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  
  

 

 

   

 

 

 

 

15115 PARK ROW BLVD, SUITE 300, HOUSTON, TEXAS 77084-4947 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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RIGNET, INC.

Selected Operational Data

(Unaudited)

 

     3rd Quarter
2018
     2nd Quarter
2018
     1st Quarter
2018
     4th Quarter
2017
     3rd Quarter
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

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