RigNet
Nov 9, 2015

RigNet Announces Third Quarter 2015 Earnings Results


HOUSTON, Nov. 09, 2015 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ:RNET), a leading global provider of managed remote communications solutions to the oil and gas industry, today reported quarterly results for the quarter ended September 30, 2015.

Quarterly revenue was $66.3 million, representing decreases of $21.5 million, or 24.5%, and $8.8 million, or 11.7%, respectively, as compared to the prior year and prior quarters.  Telecoms Systems Integration contributed $8.2 million and $4.9 million, respectively, to the revenue decline as compared to the prior year and prior quarters, primarily as a result of reduced activity and backlog.  Managed Services revenue decreased $13.3 million and $3.9 million, respectively, as compared to the prior year and prior quarters, primarily due to reduced spending by oil and gas operators on upstream drilling projects as a result of lower commodity prices.

Quarterly Adjusted EBITDA was $14.5 million, or 21.9% of revenue, representing decreases of $5.7 million, or 28.2%, and $4.0 million, or 21.7%, respectively, over the prior year and prior quarters.  These decreases resulted primarily from lower revenue partially offset by benefits from cost containment actions.  

Quarterly Cash Earnings were $12.2 million, or $0.69 per diluted share, representing decreases of $2.6 million, or 17.7%, and $3.2 million, or 20.5%, respectively, over the prior year and prior quarters.

Capital expenditures were $6.1 million compared to $10.0 million in the prior year quarter.  Unlevered Free Cash Flow, defined as Adjusted EBITDA less capital expenditures, was $8.4 million, a decrease of $1.8 million, or 17.6%, over the prior year quarter.

Included in the 2015 financial results, the Company has recorded a $12.6 million charge related to impairment of goodwill and intangibles in the three and nine months ended September 30, 2015 in our North America land operations.  Additionally, the Company has incurred $1.3 million and $7.5 million of restructuring charges for the three and nine months ended September 30, 2015, respectively, related to resource reallocation and headcount reductions implemented in connection with the decline in oil and gas activity.  Both the impairment of goodwill and intangibles and restructuring charges are added back to net income in our non-GAAP measures below.

Mark B. Slaughter, chief executive officer and president, commented, "The RigNet team executed well in the quarter, including winning new sites and new customers, but reduced customer spending impacted our existing business as offshore rigs were stacked and scrapped.  We further adjusted our cost structure in the quarter to align with market activity levels while maintaining customer service levels and long-term investments important for when market conditions improve.  Our efforts continue to strengthen our capabilities, defend and expand our market presence and overall emerge as a better 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 3:00 p.m. Eastern Time (2:00 p.m. Central Time) on Tuesday, November 10, 2015, to discuss RigNet's 2015 third 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 nine months ended September 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 1,100 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 Nine Months Ended 
  September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
 
  (in thousands) 
Unaudited Consolidated Statements of Comprehensive Income Data:         
Revenue $66,318  $75,106  $87,819  $219,074  $243,518  
Expenses:           
Cost of revenue (excluding depreciation and amortization)  38,191   39,736   49,217   121,860   141,394  
Depreciation and amortization  8,094   8,211   7,530   24,401   21,607  
Impairment of goodwill and intangibles  12,592   -   -   12,592   -  
Selling and marketing  1,624   1,668   1,599   5,115   4,892  
General and administrative  14,043   16,388   17,772   51,777   48,769  
Total expenses  74,544   66,003   76,118   215,745   216,662  
Operating income (loss)  (8,226)  9,103   11,701   3,329   26,856  
Other income (expense), net  (864)  (348)  (1,020)  (2,292)  (1,466) 
Income before income (loss) taxes  (9,090)  8,755   10,681   1,037   25,390  
Income tax expense  (1,789)  (2,635)  (4,751)  (6,738)  (11,404) 
Net income (loss) $(10,879) $6,120  $5,930  $(5,701) $13,986  
            
Income (loss) Per Share - Basic and Diluted           
Net income (loss) attributable to RigNet, Inc. common stockholders $(10,944) $6,039  $5,857  $(5,934) $13,719  
Net income (loss) per share attributable to RigNet, Inc. common stockholders, basic $(0.62) $0.35  $0.34  $(0.34) $0.79  
Net income (loss) per share attributable to RigNet, Inc. common stockholders, diluted $(0.62) $0.34  $0.33  $(0.34) $0.77  
Weighted average shares outstanding, basic  17,567   17,499   17,443   17,510   17,268  
Weighted average shares outstanding, diluted  17,567   17,893   17,987   17,510   17,905  
            
Unaudited Non-GAAP Data:           
Gross Profit (excluding depreciation and amortization) $28,127  $35,370  $38,602  $97,214  $102,124  
Gross Profit (excluding depreciation and amortization) margin  42.4%  47.1%  44.0%  44.4%  41.9% 
Adjusted EBITDA $14,498  $18,506  $20,180  $50,118  $55,194  
Adjusted EBITDA margin  21.9%  24.6%  23.0%  22.9%  22.7% 
Unlevered Free Cash Flow $8,427  $10,423  $10,224  $27,891  $24,013  
Cash Earnings $12,207  $15,363  $14,841  $41,859  $42,156  
Cash EPS $0.69  $0.86  $0.83  $2.39  $2.35  

 

            
  Three Months Ended Nine Months Ended 
  September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
 
  (in thousands) 
Reconciliation of Gross Profit to Gross Profit (excluding depreciation and amortization):           
Gross profit $20,354  $27,508  $31,400  $73,840  $81,527  
Depreciation and amortization related to cost of revenue  7,773   7,862   7,202   23,374   20,597  
Gross Profit (excluding depreciation and amortization) $28,127  $35,370  $38,602  $97,214  $102,124  
            

 

            
  Three Months Ended Nine Months Ended 
  September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
 
  (in thousands) 
Reconciliation of Net Income (loss) to Adjusted EBITDA, Cash Earnings, Cash EPS and Unlevered Free Cash Flow:     
Net income (loss) $  (10,879) $  6,120  $  5,930  $  (5,701) $  13,986  
Interest expense    502     508     588     1,521     1,634  
Depreciation and amortization    8,094     8,211     7,530     24,401     21,607  
Impairment of goodwill and intangibles    12,592     -     -     12,592     -  
Gain on sales of property, plant and equipment, net of retirements    (10)    (1)    74     (23)    (9) 
Stock-based compensation    973     1,033     1,307     2,955     3,650  
Restructuring costs    1,316     -     -     7,514     -  
Acquisition costs    121     -     -     121     2,922  
Income tax expense    1,789     2,635     4,751     6,738     11,404  
Adjusted EBITDA (non-GAAP measure) $  14,498  $  18,506  $  20,180  $  50,118  $  55,194  
Interest expense    (502)    (508)    (588)    (1,521)    (1,634) 
Income tax expense    (1,789)    (2,635)    (4,751)    (6,738)    (11,404) 
Cash Earnings (non-GAAP measure) $  12,207  $  15,363  $  14,841  $  41,859  $  42,156  
Diluted Shares    17,567     17,893     17,987     17,510     17,905  
Cash EPS (non-GAAP measure) $  0.69  $  0.86  $  0.83  $  2.39  $  2.35  
            
Adjusted EBITDA (non-GAAP measure) $  14,498  $  18,506  $  20,180  $  50,118  $  55,194  
Capital expenditures    6,071     8,083     9,956     22,227     31,181  
Unlevered Free Cash Flow (non-GAAP measure) $  8,427  $  10,423  $  10,224  $  27,891  $  24,013  
            

 

     
  September 30, December 31,
   2015   2014 
  (in thousands)
Unaudited Consolidated Balance Sheet Data:    
Cash and cash equivalents $64,795  $66,576 
Restricted cash - current portion  753   1,200 
Total assets  275,461   299,837 
Current maturities of long-term debt  8,417   8,405 
Long-term debt  71,344   77,706 
     
     
  Nine Months Ended
September 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  27,045   29,415 
Net cash used in investing activities  (21,307)  (53,493)
Net cash provided by (used in) financing activities  (5,524)  26,109 
Changes in foreign currency translation  (1,995)  (801)
Cash and cash equivalents, September 30, $64,795  $61,052 
     

 

            
  3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 
  2014 2014 2015 2015 2015 
Selected Operational Data (4):           
Offshore drilling rigs (1) 285 278 281 270 255 
Strategic initiatives (2) 548 562 526 515 537 
Other sites (3) 691 676 493 442 436 
Total 1,524 1,516 1,300 1,227 1,228 
            
(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 Nine Months Ended 
  September 30,
2015
 June 30,
2015
 September 30,
2014
 September 30,
2015
 September 30,
2014
 
  (in thousands) 
Eastern Hemisphere:           
Revenue $  36,235  $  38,085  $  43,759  $  113,291  $  121,623  
Cost of revenue    18,103     18,734     19,091     54,737     56,988  
Gross Profit (non-GAAP measure)    18,132     19,351     24,668     58,554     64,635  
Gross Profit margin  50.0%  50.8%  56.4%  51.7%  53.1% 
Depreciation and amortization    3,682     3,988     3,452     11,642     9,528  
Selling, general and administrative    3,027     3,664     3,932     10,219     10,699  
Operating income $  11,423  $  11,699  $  17,284  $  36,693  $  44,408  
Adjusted EBITDA (non-GAAP measure) $  14,994  $  15,735  $  20,159  $  48,204  $  54,037  
Adjusted EBITDA margin  41.4%  41.3%  46.1%  42.5%  44.4% 
            
Western Hemisphere:           
Revenue $  24,578  $  26,654  $  30,366  $  79,360  $  81,827  
Cost of revenue    12,184     11,714     16,582     37,852     45,826  
Gross Profit (non-GAAP measure)    12,394     14,940     13,784     41,508     36,001  
Gross Profit margin  50.4%  56.1%  45.4%  52.3%  44.0% 
Depreciation and amortization    2,892     2,964     2,857     8,872     8,302  
Impairment of goodwill and intangibles    12,592     -     -     12,592     -  
Selling, general and administrative    3,454     4,326     4,084     12,334     10,412  
Operating income (loss) $  (6,544) $  7,650  $  6,843  $  7,710  $  17,287  
Adjusted EBITDA (non-GAAP measure) $  8,865  $  10,707  $  9,222  $  28,821  $  25,366  
Adjusted EBITDA margin  36.1%  40.2%  30.4%  36.3%  31.0% 
            
Telecoms Systems Integration:           
Revenue $  5,505  $  10,367  $  13,694  $  26,423  $  40,068  
Cost of revenue    5,819     7,715     11,051     21,607     31,459  
Gross Profit (non-GAAP measure)    (314)    2,652     2,643     4,816     8,609  
Gross Profit margin  -5.7%  25.6%  19.3%  18.2%  21.5% 
Depreciation and amortization    791     774     930     2,329     2,939  
Selling, general and administrative    467     1,356     920     2,903     2,416  
Operating income (loss) $  (1,572) $  522  $  793  $  (416) $  3,254  
Adjusted EBITDA (non-GAAP measure) $  (977) $  1,318  $  1,737  $  1,590  $  6,139  
Adjusted EBITDA margin  -17.7%  12.7%  12.7%  6.0%  15.3% 
            
NOTE:  Consolidated balances include the three segments above along with corporate activities and intercompany eliminations. 

 


Investor contact
Marty Jimmerson   Tel:  +1 (281) 674-0699
Chief Financial Officer, RigNet, Inc.   investor.relations@rig.net