RigNet
Aug 4, 2015

RigNet Announces Second Quarter 2015 Earnings Results

 

HOUSTON, Aug. 04, 2015 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ:RNET), a leading global provider of digital technology solutions to the oil and gas industry, today reported quarterly results for the quarter ended June 30, 2015.

Quarterly revenue was $75.1 million, representing a decrease of $5.6 million, or 6.9%, as compared to the prior year quarter.  The decrease was primarily due to reduced offshore and onshore drilling budgets resulting from depressed commodity prices.  Compared to the first quarter, revenue decreased by 3.3% for the same reasons.

Quarterly Adjusted EBITDA was $18.5 million, or 24.6% of revenue, representing a decrease of $0.3 million, or 1.6%, over the prior year quarter.  The decrease primarily resulted from lower revenue partially offset by benefits from cost containment actions taken over the first half of the year. Principally as a result of cost containment and strong operational execution, Adjusted EBITDA grew 8.1% over the prior quarter and Adjusted EBITDA margin expanded by 130 and 260 basis points over the prior year and prior quarters, respectively.

Quarterly Cash Earnings were $15.4 million, or $0.86 per diluted share, an increase of $0.6 million, or 3.8%, over the prior year quarter. Compared to the first quarter, Cash Earnings increased $1.1 million, or 7.5%.

Capital expenditures were $8.1 million compared to $11.6 million in the prior year quarter.  Unlevered Free Cash Flow ("UFCF"), defined as Adjusted EBITDA less capital expenditures, was $10.4 million, an increase of $3.2 million, or 44.1%, over the prior year quarter.  The increased UFCF was due primarily to reduced capital expenditures.

Mark B. Slaughter, chief executive officer and president, commented, "The RigNet team demonstrated strong operational execution in the quarter against market headwinds of significantly reduced oil prices and customer spending.  By adjusting our cost structure to the available market, we were able to lift EBITDA and EBITDA margins in the quarter, even as revenues declined, while maintaining needed long-term investments critical for our future success when the macro environment improves.  Despite the near-term market challenges, we continue efforts to strengthen our capabilities, defend and expand our market presence and emerge as a stronger and more capable company.  Moreover, with our strong financial position, we are well-positioned to execute against our long-term growth plans, both organically and inorganically, under the current market conditions."

A conference call for investors will be held at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Wednesday, August 5, 2015, to discuss RigNet's 2015 second quarter 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: Gross Profit (excluding depreciation and amortization), Adjusted EBITDA, Unlevered Free Cash Flow, Cash Earnings and Cash EPS.  Gross Profit (excluding depreciation and amortization), Adjusted EBITDA, Unlevered Free Cash Flow, Cash Earnings and Cash EPS 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 and 10-Q filings for the year ended December 31, 2014 and the three and six months ended June 30, 2015, respectively, for a more detailed discussion of the uses and limitations of our non-GAAP financial measures.

GAAP defines gross profit as revenue less cost of revenue, and includes in costs of revenue depreciation and amortization expenses related to revenue-generating long-lived and intangible assets.  We define Gross Profit (excluding depreciation and amortization) as revenue less cost of revenue (excluding depreciation and amortization).  This measure differs from the GAAP definition of gross profit as we do not include the impact of depreciation and amortization expenses related to revenue-generating long-lived and intangible assets which represent non-cash expenses.  We use this measure to evaluate operating margins and the effectiveness of cost management.

We define Adjusted EBITDA as net income (loss) plus interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, foreign exchange impact of intercompany financing activities, (gain) loss on retirement of property, plant and equipment, change in fair value of derivatives, stock-based compensation, IPO or merger/acquisition costs and related bonuses, restructuring charges and non-recurring items.  Adjusted EBITDA 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.

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

We define Cash Earnings as net income (loss), plus depreciation and amortization, impairment of goodwill, foreign exchange impact of intercompany financing activities, (gain) loss on retirement of property and equipment, change in fair value of derivatives, stock-based compensation, IPO or merger/acquisition costs and related bonuses, restructuring charges and non-recurring items.  We define Cash EPS as Cash Earnings divided by diluted shares.  Cash Earnings and Cash EPS should not be considered as an alternative to net income (loss), operating income (loss), basic or diluted earnings per share or any other measure of financial performance calculated and presented in accordance with GAAP.

About RigNet

RigNet (NASDAQ:RNET) is a leading global provider of digital technology solutions to the oil and gas industry,  serving offshore and onshore drilling rigs, energy production facilities and energy maritime vessels.  RigNet provides solutions ranging from fully-managed voice and data networks to more advanced applications that include video conferencing and real-time data services to more than 1,200 remote sites in 50 countries on six continents, effectively spanning the drilling and production industry.  RigNet is based in Houston, Texas.  For more information, 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.

 

                     
     Three Months Ended   Six Months Ended
    June 30,
2015
  March 31,
2015
  June 30,
2014
  June 30,
2015
  June 30,
2014
    (in thousands)
Unaudited Consolidated Statements of Comprehensive Income Data:                
Revenue   $   75,106     $   77,650     $   80,656     $   152,756     $   155,699  
Expenses:                    
Cost of revenue (excluding depreciation and amortization)       39,736         43,933         45,656         83,669         92,177  
Depreciation and amortization       8,211         8,096         7,280         16,307         14,077  
Selling and marketing       1,668         1,823         1,764         3,491         3,293  
General and administrative       16,388         21,346         16,154         37,734         30,997  
Total expenses       66,003         75,198         70,854         141,201         140,544  
Operating income       9,103         2,452         9,802         11,555         15,155  
Other income (expense), net       (348 )       (1,080 )       (616 )       (1,428 )       (446 )
Income before income taxes        8,755         1,372         9,186         10,127         14,709  
Income tax expense       (2,635 )       (2,314 )       (3,438 )       (4,949 )       (6,653 )
Net income (loss)   $   6,120     $   (942 )   $   5,748     $   5,178     $   8,056  
                     
Income (loss) Per Share - Basic and Diluted                    
Net income (loss) attributable to RigNet, Inc. common stockholders   $   6,039     $   (1,029 )   $   5,667     $   5,010     $   7,862  
Net income (loss) per share attributable to RigNet, Inc. common stockholders, basic   $   0.35     $   (0.06 )   $   0.32     $   0.29     $   0.45  
Net income (loss) per share attributable to RigNet, Inc. common stockholders, diluted   $   0.34     $   (0.06 )   $   0.31     $   0.28     $   0.44  
Weighted average shares outstanding, basic       17,499         17,463         17,490         17,482         17,379  
Weighted average shares outstanding, diluted       17,893         17,463         18,108         17,857         18,029  
                     
Unaudited Non-GAAP Data:                    
Gross Profit (excluding depreciation and amortization)   $   35,370     $   33,717     $   35,000     $   69,087     $   63,522  
Gross Profit (excluding depreciation and amortization) margin     47.1 %     43.4 %     43.4 %     45.2 %     40.8 %
Adjusted EBITDA   $   18,506     $   17,114     $   18,806     $   35,620     $   35,014  
Adjusted EBITDA margin     24.6 %     22.0 %     23.3 %     23.3 %     22.5 %
Unlevered Free Cash Flow   $   10,423     $   9,041     $   7,234     $   19,464     $   13,790  
Cash Earnings   $   15,363     $   14,289     $   14,803     $   29,652     $   27,315  
Cash EPS   $   0.86     $   0.82     $   0.82     $   1.66     $   1.52  


 

                       
     Three Months Ended   Six Months Ended  
    June 30,
2015
  March 31,
2015
  June 30,
2014
  June 30,
2015
  June 30,
2014
 
    (in thousands)  
Reconciliation of Gross Profit to Gross Profit (excluding depreciation and                            
amortization):                      
Gross profit   $   27,508     $   25,978     $   28,073     $   53,486     $   50,127    
Depreciation and amortization related to cost of revenue       7,862         7,739         6,927         15,601         13,395    
Gross Profit (excluding depreciation and amortization)   $   35,370     $   33,717     $   35,000     $   69,087     $   63,522    
                       

 

                       
     Three Months Ended   Six Months Ended  
    June 30,
2015
  March 31,
2015
  June 30,
2014
  June 30,
2015
  June 30,
2014
 
    (in thousands)  
Reconciliation of Net Income (loss) to Adjusted EBITDA, Cash Earnings, Cash EPS and Unlevered Free Cash Flow:          
Net income (loss)   $   6,120     $   (942 )   $   5,748     $   5,178     $   8,056    
Interest expense       508         511         565         1,019         1,046    
Depreciation and amortization       8,211         8,096         7,280         16,307         14,077    
Gain on sales of property, plant and equipment, net of retirements       (1 )       (12 )       (10 )       (13 )       (83 )  
Stock-based compensation       1,033         949         1,195         1,982         2,343    
Restructuring costs       -         6,198         -         6,198         -    
Acquisition costs       -         -         590         -         2,922    
Income tax expense       2,635         2,314         3,438         4,949         6,653    
Adjusted EBITDA (non-GAAP measure)   $   18,506     $   17,114     $   18,806     $   35,620     $   35,014    
Interest expense       (508 )       (511 )       (565 )       (1,019 )       (1,046 )  
Income tax expense       (2,635 )       (2,314 )       (3,438 )       (4,949 )       (6,653 )  
Cash Earnings (non-GAAP measure)   $   15,363     $   14,289     $   14,803     $   29,652     $   27,315    
Diluted Shares       17,893         17,463         18,108         17,857         18,029    
Cash EPS (non-GAAP measure)   $   0.86     $   0.82     $   0.82     $   1.66     $   1.52    
                       
Adjusted EBITDA (non-GAAP measure)   $   18,506     $   17,114     $   18,806     $   35,620     $   35,014    
Capital expenditures       8,083         8,073         11,572         16,156         21,224    
Unlevered Free Cash Flow (non-GAAP measure)   $   10,423     $   9,041     $   7,234     $   19,464     $   13,790    
                       

 

           
    June 30,   December 31,  
      2015       2014    
    (in thousands)  
Unaudited Consolidated Balance Sheet Data:          
Cash and cash equivalents   $   61,524     $   66,576    
Restricted cash - current portion       781         1,200    
Total assets       294,502         299,837    
Current maturities of long-term debt       8,413         8,405    
Long-term debt       73,461         77,706    
           
           
    Six Months Ended
June 30,
 
      2015       2014    
    (in thousands)  
Unaudited Consolidated Statements of Cash Flows Data:          
Cash and cash equivalents, January 1,   $   66,576     $   59,822    
Net cash provided by operating activities       13,435         10,040    
Net cash used in investing activities       (13,891 )       (37,875 )  
Net cash provided by (used in) financing activities       (4,295 )       27,572    
Changes in foreign currency translation       (301 )       1,448    
Cash and cash equivalents, June 30,   $   61,524     $   61,007    
           

 

                             
    2nd Quarter   3rd Quarter   4th Quarter   1st Quarter   2nd Quarter      
    2014   2014   2014   2015   2015      
Selected Operational Data (4):                          
Offshore drilling rigs (1)   277   285   278   281   270      
Strategic initiatives (2)   553   548   562   526   515        
Other sites (3)   705   691   676   493   442        
Total   1,535   1,524   1,516   1,300   1,227      
                           
(1) Includes jack up, semi-submersible and drillship rigs      
(2) Includes production facilities, energy support vessels and international land rigs      
(3) Includes U.S. onshore drilling rigs, completion sites, man-camps, remote offices and supply bases       
(4) Includes sites acquired from Inmarsat's Enterprise Energy business unit       
                           

 

                       
     Three Months Ended   Six Months Ended  
    June 30,
2015
  March 31,
2015
  June 30,
2014
  June 30,
2015
  June 30,
2014
 
    (in thousands)  
Eastern Hemisphere:                      
Revenue   $   38,085     $   38,971     $   39,842     $   77,056     $   77,864    
Cost of revenue       18,734         17,900         19,204         36,634         37,897    
Gross Profit (non-GAAP measure)       19,351         21,071         20,638         40,422         39,967    
Gross Profit margin     50.8 %     54.1 %     51.8 %     52.5 %     51.3 %  
Depreciation and amortization       3,988         3,972         3,353         7,960         6,076    
Selling, general and administrative       3,664         3,528         3,783         7,192         6,767    
Operating income   $   11,699     $   13,571     $   13,502     $   25,270     $   27,124    
Adjusted EBITDA (non-GAAP measure)   $   15,735     $   17,475     $   17,187     $   33,210     $   33,878    
Adjusted EBITDA margin     41.3 %     44.8 %     43.1 %     43.1 %     43.5 %  
                       
Western Hemisphere:                      
Revenue   $   26,654     $   28,128     $   30,053     $   54,782     $   51,461    
Cost of revenue       11,714         13,954         16,572         25,668         29,244    
Gross Profit (non-GAAP measure)       14,940         14,174         13,481         29,114         22,217    
Gross Profit margin     56.1 %     50.4 %     44.9 %     53.1 %     43.2 %  
Depreciation and amortization       2,964         3,016         2,682         5,980         5,445    
Selling, general and administrative       4,326         4,554         4,039         8,880         6,328    
Operating income   $   7,650     $   6,604     $   6,760     $   14,254     $   10,444    
Adjusted EBITDA (non-GAAP measure)   $   10,707     $   9,249     $   9,564     $   19,956     $   16,144    
Adjusted EBITDA margin     40.2 %     32.9 %     31.8 %     36.4 %     31.4 %  
                       
Telecoms Systems Integration:                      
Revenue   $   10,367     $   10,551     $   10,761     $   20,918     $   26,374    
Cost of revenue       7,715         8,073         7,466         15,788         20,408    
Gross Profit (non-GAAP measure)       2,652         2,478         3,295         5,130         5,966    
Gross Profit margin     25.6 %     23.5 %     30.6 %     24.5 %     22.6 %  
Depreciation and amortization       774         764         954         1,538         2,009    
Selling, general and administrative       1,356         1,080         843         2,436         1,496    
Operating income (loss)   $   522     $   634     $   1,498     $   1,156     $   2,461    
Adjusted EBITDA (non-GAAP measure)   $   1,318     $   1,249     $   2,391     $   2,567     $   4,402    
Adjusted EBITDA margin     12.7 %     11.8 %     22.2 %     12.3 %     16.7 %  
                       
NOTE:  Consolidated balances include the three segments above along with corporate activities and intercompany eliminations.  
                       
Investor contact
Marty Jimmerson
Senior Vice President and Chief Financial Officer, RigNet, Inc.
Tel:  +1 (281) 674-0699
investor.relations@rig.net