RigNet
Nov 7, 2016

RigNet Announces Third Quarter 2016 Earnings Results

HOUSTON, Nov. 07, 2016 (GLOBE NEWSWIRE) -- RigNet, Inc. (NASDAQ:RNET), a leading global provider of customized systems and solutions serving customers with complex data networking and operational requirements, today reported results for the quarter ended September 30, 2016.

Quarterly revenue was $50.6 million representing a decrease of $4.3 million compared to the prior quarter and a decrease of $15.7 million compared to the prior year quarter. The revenue decrease compared to the prior quarter was primarily due to a $3.0 million decrease in Managed Services revenue (which consists of our Eastern and Western Hemisphere reporting segments) coupled with a $1.3 million decrease in TSI revenue. The decrease compared to the prior year quarter resulted primarily from Managed Services revenue, which decreased $13.6 million, coupled with a $2.1 million decrease in TSI revenue. These decreases were primarily due to reduced spending by oil and gas operators on upstream drilling projects as a result of lower commodity prices.

GAAP net loss attributable to common stockholders was $1.7 million, or $0.09 per share, compared to $4.8 million, or $0.27 per share, in the prior quarter and $10.9 million, or $0.62 per share, in the prior year quarter.

Quarterly Adjusted EBITDA was $8.5 million compared to $8.6 million in the prior quarter and $14.5 million in the prior year quarter. The decrease resulted primarily from lower revenue partially offset by savings generated from cost containment actions.

Capital expenditures were $1.9 million compared to $4.7 million in the prior quarter and $6.1 million in the prior year quarter.  Unlevered Free Cash Flow, defined as Adjusted EBITDA less capital expenditures was $6.6 million compared to $4.0 million in the prior quarter and $8.4 million in the prior year quarter.

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 the TECNOR earn-out. In the quarter ended June 30, 2016, the Company recorded restructuring charges of $1.1 million, $0.4 million of impairment of intangible assets, $0.2 million of CEO search costs and ERP implementation costs of $0.6 million. In the quarter ended September 30, 2015, the Company recorded a $12.6 million charge related to impairment of goodwill and intangible assets in our North America land operations and incurred $1.3 million of restructuring charges.  The restructuring charges, change in fair value of the TECNOR earn-out, and the impairment of goodwill and intangibles are added back to net loss in our non-GAAP measures below.

Steven E. Pickett, chief executive officer and president, commented, "Despite continued headwinds in the energy market, we are pleased with the progress we have made related to cost containment and capex management, which helped improve our Unlevered Free Cash Flow to $6.6 million for this quarter.  We remain focused on continuing implementation of initiatives to improve operating leverage of the Company, developing a broad range of SaaS and cyber security solutions for our customers, and growing our business in new vertical markets."

A conference call for investors will be held at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) on Tuesday, November 8, 2016, to discuss RigNet's 2016 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 and Unlevered Free Cash Flow.  Gross Profit (excluding depreciation and amortization), 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 filings for the year ended December 31, 2015 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, 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 derivatives, stock-based compensation, merger/acquisition costs, executive departure costs, 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.

About RigNet

RigNet, Inc. (NASDAQ:RNET), a leading global provider of customized systems and solutions serving customers with complex data networking and operational requirements. RigNet provides solutions ranging from fully-managed voice and data networks to more advanced applications that include video conferencing, crew welfare, asset monitoring and real-time data services. RigNet is based in Houston, Texas and has operations around the globe.  

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.


   Three Months Ended Nine Months Ended
  September 30, June 30, September 30, September 30, September 30,
  2016 2016 2015 2016 2015
  (in thousands)
Unaudited Consolidated Statements of Comprehensive Income Data:          
Revenue $  50,612  $  54,911  $  66,318  $  167,864  $  219,074 
Expenses:          
Cost of revenue (excluding depreciation and amortization)    29,860     33,276     38,191     99,412     121,860 
Depreciation and amortization    8,305     9,013     8,094     25,561     24,401 
Impairment of goodwill and intangible assets    -     397     12,592     397     12,592 
Selling and marketing    1,724     1,943     2,129     5,559     7,069 
General and administrative    10,476     13,576     13,538     39,393     49,823 
Total expenses    50,365     58,205     74,544     170,322     215,745 
Operating income (loss)    247     (3,294)    (8,226)    (2,458)    3,329 
Other income (expense), net    (1,155)    (328)    (864)    (2,437)    (2,292)
Income (loss) before income taxes     (908)    (3,622)    (9,090)    (4,895)    1,037 
Income tax expense    (540)    (1,234)    (1,789)    (2,676)    (6,738)
Net loss $  (1,448) $  (4,856) $  (10,879) $  (7,571) $  (5,701)
           
Loss Per Share - Basic and Diluted          
Net loss attributable to RigNet, Inc. common stockholders $  (1,658) $  (4,751) $  (10,944) $  (7,742) $  (5,934)
Net loss per share attributable to RigNet, Inc. common stockholders, basic $  (0.09) $  (0.27) $  (0.62) $  (0.44) $  (0.34)
Net loss per share attributable to RigNet, Inc. common stockholders, diluted $  (0.09) $  (0.27) $  (0.62) $  (0.44) $  (0.34)
Weighted average shares outstanding, basic    17,782     17,634     17,567     17,677     17,510 
Weighted average shares outstanding, diluted    17,782     17,634     17,567     17,677     17,510 
           
Unaudited Non-GAAP Data:          
Gross Profit (excluding depreciation and amortization) $  20,752  $  21,635  $  28,127  $  68,452  $  97,214 
Gross Profit (excluding depreciation and amortization) margin  41.0%  39.4%  42.4%  40.8%  44.4%
Adjusted EBITDA $  8,534  $  8,624  $  14,498  $  27,824  $  50,118 
Adjusted EBITDA margin  16.9%    15.7%  21.9%  16.6%  22.9%
Unlevered Free Cash Flow $  6,598  $  3,954  $  8,427  $  16,313  $  27,891 

 

           
   Three Months Ended Nine Months Ended
  September 30,
2016
 June 30,
2016
 September 30,
2015
 September 30,
2016
 September 30,
2015
  (in thousands)
Reconciliation of Gross Profit to Gross Profit (excluding depreciation and amortization):          
Gross profit $  12,773  $  13,476  $  20,354  $  44,549  $  73,840 
Depreciation and amortization related to cost of revenue    7,979     8,159     7,773     23,903     23,374 
Gross Profit (excluding depreciation and amortization) $  20,752  $  21,635  $  28,127  $  68,452  $  97,214 
           

 

           
   Three Months Ended Nine Months Ended
  September 30,
2016
 June 30,
2016
 September 30,
2015
 September 30,
2016
 September 30,
2015
  (in thousands)
Reconciliation of Net Loss to Adjusted EBITDA and Unlevered Free Cash Flow:          
Net loss $  (1,448) $  (4,856) $  (10,879) $  (7,571) $  (5,701)
Interest expense    729     643     502     2,040     1,521 
Depreciation and amortization    8,305     9,013     8,094     25,561     24,401 
Impairment of goodwill and intangible assets    -     397     12,592     397     12,592 
Gain on sales of property, plant and equipment, net of retirements    (14)    (134)    (10)    (164)    (23)
Stock-based compensation    866     1,128     973     2,708     2,955 
Restructuring costs    835     1,129     1,316     1,332     7,514 
Change in fair value of TECNOR earn-out    (1,279)    -     -     (1,279)    - 
Executive departure costs    -     -     -     1,884     - 
Acquisition costs    -     70     121     240     121 
Income tax expense    540     1,234     1,789     2,676     6,738 
Adjusted EBITDA (non-GAAP measure) $  8,534  $  8,624  $  14,498  $  27,824  $  50,118 
           
Adjusted EBITDA (non-GAAP measure) $  8,534  $  8,624  $  14,498  $  27,824  $  50,118 
Capital expenditures    1,936     4,670     6,071     11,511     22,227 
Unlevered Free Cash Flow (non-GAAP measure) $  6,598  $  3,954  $  8,427  $  16,313  $  27,891 
           

 

      
  September 30, December 31, 
   2016   2015  
  (in thousands) 
Unaudited Consolidated Balance Sheet Data:     
Cash and cash equivalents $  57,239  $  60,468  
Restricted cash - current portion    141     543  
Restricted cash - long-term portion    1,500     -  
Total assets    244,678     258,116  
Current maturities of long-term debt    8,515     8,421  
Long-term debt    60,090     69,238  
      
      
  Nine Months Ended
September 30,
 
   2016   2015  
  (in thousands) 
Unaudited Consolidated Statements of Cash Flows Data:     
Cash and cash equivalents, January 1, $  60,468  $  66,576  
Net cash provided by operating activities    22,754     27,045  
Net cash used in investing activities    (16,886)    (21,307) 
Net cash used in financing activities    (8,111)    (5,524) 
Changes in foreign currency translation    (986)    (1,995) 
Cash and cash equivalents, September 30, $  57,239  $  64,795  
 

 

           
  3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter
  2016 2016 2016 2015 2015
Selected Operational Data:          
Offshore drilling rigs (1) 194 211 232 238 255
Offshore Production 287 287 291 283 289
Maritime 128 105 107 121 127
International Land 101 99 101 115 121
Other sites (2) 238 236 287 373 436
Total 948 938 1,018 1,130 1,228
           
(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,
2016
 June 30,
2016
 September 30,
2015
 September 30,
2016
 September 30,
2015
  (in thousands)
Eastern Hemisphere:          
Revenue $  27,000  $  29,131  $  36,235  $  87,581  $  113,291 
Cost of revenue    14,603     15,643     18,103     46,742     54,737 
Gross Profit (non-GAAP measure)    12,397     13,488     18,132     40,839     58,554 
 Gross Profit margin  45.9%  46.3%  50.0%  46.6%  51.7%
Depreciation and amortization    4,011     4,085     3,682     11,890     11,642 
Selling, general and administrative    1,593     2,911     3,027     7,580     10,219 
Operating income $  6,793  $  6,492  $  11,423  $  21,369  $  36,693 
Adjusted EBITDA (non-GAAP measure) $  13,027  $  10,613  $  14,994  $  35,337  $  48,204 
Adjusted EBITDA margin  48.2%  36.4%  41.4%  40.3%  42.5%
           
Western Hemisphere:          
Revenue $  20,205  $  21,088  $  24,578  $  64,264  $  79,360 
Cost of revenue    10,849     12,080     12,184     36,058     37,852 
Gross Profit (non-GAAP measure)    9,356     9,008     12,394     28,206     41,508 
 Gross Profit margin  46.3%  42.7%  50.4%  43.9%  52.3%
Depreciation and amortization    2,705     2,721     2,892     8,142     8,872 
Impairment of goodwill and intangible assets    -     -     12,592     -     12,592 
Selling, general and administrative    2,976     3,286     3,454     9,432     12,334 
Operating income (loss) $  3,675  $  3,001  $  (6,544) $  10,632  $  7,710 
Adjusted EBITDA (non-GAAP measure) $  6,187  $  6,204  $  8,865  $  19,062  $  28,821 
Adjusted EBITDA margin  30.6%  29.4%  36.1%  29.7%  36.3%
           
Telecoms Systems Integration:          
Revenue $  3,407  $  4,692  $  5,505  $  16,019  $  26,423 
Cost of revenue    2,911     3,594     5,819     11,781     21,607 
Gross Profit (non-GAAP measure)    496     1,098     (314)    4,238     4,816 
Gross Profit margin  14.6%  23.4%  (5.7)%  26.5%  18.2%
Depreciation and amortization    631     788     791     2,127     2,329 
Selling, general and administrative    499     721     467     2,141     2,903 
Operating income (loss)  $  (634) $  (411) $  (1,572) $  (30) $  (416)
Adjusted EBITDA (non-GAAP measure) $  (284) $  80  $  (977) $  1,450  $  1,590 
Adjusted EBITDA margin    (8.3)%    1.7 %    (17.7)%  9.1%  6.0%
           
NOTE:  Consolidated balances include the three segments above along with corporate activities and intercompany eliminations.


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