RigNet
RigNet, Inc. (Form: 8-K, Received: 08/07/2017 16:28:49)

 

 

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): August 7, 2017

 

 

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 August 7, 2017, RigNet, Inc. issued a press release announcing its operating results for the three and six months ended June 30, 2017. 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 August 7, 2017, announcing its operating results for the three and six months ended June 30, 2017

 

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/ CHARLES E. SCHNEIDER

Charles E. Schneider

Chief Financial Officer

(Principal Financial Officer)

Date: August 7, 2017

 

3

Exhibit 99

 

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PRESS RELEASE

FOR IMMEDIATE RELEASE

RigNet Announces Second Quarter 2017 Earnings Results

 

    Quarterly revenue of $49.2  million consisting of:

 

    Managed Services revenue of $43.1  million,

 

    Systems Integration and Automation (SI&A) revenue of $6.1  million

 

    Quarterly GAAP Net Loss attributable to common stockholders of $4.2  million, $0.24 per share

 

    Quarterly Adjusted EBITDA of $6.1  million

 

    Quarterly Unlevered Free Cash Flow of $1.1  million after capital expenditures of $4.9  million

HOUSTON – August  7, 2017 – 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 June 30, 2017.

Quarterly revenue was $49.2 million representing an increase of $1.1 million compared to the prior quarter and a decrease of $5.7 million compared to the prior year quarter. The revenue increase compared to the prior quarter reflects a $2.1 million increase in SI&A revenue partially offset by a $1.0 million decrease in Managed Service revenue. The decrease compared to the prior year quarter reflects a $7.2 million decrease in Managed Services revenue partially offset by a $1.4 million increase in SI&A revenue. Revenue continues to be impacted by previously announced reductions in offshore drilling.

GAAP net loss attributable to common stockholders was $4.2 million, or $0.24 per share, compared to net loss attributable to common stockholders of $2.0 million, or $0.11 per share, in the prior quarter and net loss attributable to common stockholders of $4.8 million, or $0.27 per share, in the prior year quarter.

Quarterly Adjusted EBITDA was $6.1 million compared to $7.2 million in the prior quarter and $8.6 million in the prior year quarter. The decrease compared to the prior quarter was due primarily to ongoing operating expenses. The decrease compared to the prior year quarter was due primarily to decreased revenue partially offset by a reduction in ongoing operating expenses.

Capital expenditures were $4.9 million compared to $3.2 million in the prior quarter and $4.7 million in the prior year quarter. Unlevered Free Cash Flow, defined as Adjusted EBITDA less capital expenditures, was $1.1 million compared to $4.1 million in the prior quarter and $4.0 million in the prior year quarter.

 

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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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 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. The restructuring charges and acquisition costs are added back to net loss in our non-GAAP measures below.

Steven E. Pickett, chief executive officer and president, commented, “Our recent acquisition of Cyphre, in conjunction with our acquisitions of substantially all of the assets of DTS and ESS, have helped advance our stated strategies to build and grow our over-the-top portfolio and to diversify our revenue stream. These acquisitions also demonstrate our commitment to expand the RigNet value proposition to our customers while increasing RigNet’s addressable market. Furthermore, during the second quarter, our team expanded RigNet’s core market position by increasing the number of sites we serve by 5% quarter over quarter while delivering $1.1m 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, August 8, 2017, to discuss RigNet’s second 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 filings 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, stock-based compensation, merger/acquisition costs, executive departure costs, restructuring charges and non-recurring items.

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.

 

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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About RigNet

RigNet (NASDAQ:RNET) is a leading global specialized 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.

 

Investor contact   
Charles E. Schneider      Tel: +1 (281) 674-0699  
Chief Financial Officer, 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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     Three Months Ended     Six Months Ended  
     June 30,
2017
    March 31,
2017
    June 30,
2016
    June 30,
2017
    June 30,
2016
 
     (in thousands)  

Unaudited Consolidated Statements of Comprehensive Income Data:

          

Revenue

   $ 49,162     $ 48,072     $ 54,911     $ 97,234     $ 117,252  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

          

Cost of revenue (excluding depreciation and amortization)

     33,038       29,875       33,276       62,913       69,552  

Depreciation and amortization

     7,552       7,316       9,013       14,868       17,256  

Impairment of intangible assets

     —         —         397       —         397  

Selling and marketing

     2,132       1,436       1,943       3,568       3,835  

General and administrative

     9,878       10,512       13,576       20,390       28,917  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     52,600       49,139       58,205       101,739       119,957  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (3,438     (1,067     (3,294     (4,505     (2,705

Other income (expense), net

     (873     (506     (328     (1,379     (1,282
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (4,311     (1,573     (3,622     (5,884     (3,987

Income tax benefit (expense)

     101       (414     (1,234     (313     (2,136
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (4,210   $ (1,987   $ (4,856   $ (6,197   $ (6,123
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss Per Share - Basic and Diluted

          

Net loss attributable to RigNet, Inc. common stockholders

   $ (4,249   $ (2,026   $ (4,751   $ (6,275   $ (6,084

Net loss per share attributable to RigNet, Inc. common stockholders, basic

   $ (0.24   $ (0.11   $ (0.27   $ (0.35   $ (0.35

Net loss per share attributable to RigNet, Inc. common stockholders, diluted

   $ (0.24   $ (0.11   $ (0.27   $ (0.35   $ (0.35

Weighted average shares outstanding, basic

     17,985       17,873       17,634       17,929       17,624  

Weighted average shares outstanding, diluted

     17,985       17,873       17,634       17,929       17,624  

Unaudited Non-GAAP Data:

          

Adjusted EBITDA

   $ 6,053     $ 7,225     $ 8,624     $ 13,278     $ 19,290  

Unlevered Free Cash Flow

   $ 1,142     $ 4,065     $ 3,954     $ 5,207     $ 9,715  

 

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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     Three Months Ended     Six Months Ended  
     June 30,
2017
    March 31,
2017
    June 30,
2016
    June 30,
2017
    June 30,
2016
 
     (in thousands)              

Reconciliation of Net Loss to Adjusted EBITDA and Unlevered Free Cash Flow:

          

Net loss

   $ (4,210   $ (1,987   $ (4,856   $ (6,197   $ (6,123

Interest expense

     613       619       643       1,232       1,311  

Depreciation and amortization

     7,552       7,316       9,013       14,868       17,256  

Impairment of intangible assets

     —         —         397       —         397  

(Gain) loss on sales of property, plant and equipment, net of retirements

     13       37       (134     50       (150

Stock-based compensation

     1,116       826       1,128       1,942       1,842  

Restructuring costs

     —         —         1,129       —         497  

Change in fair value of earn-out/contingent consideration

     (846     —         —         (846     —    

Executive departure costs

           —         —         —         1,884  

Acquisition costs

     1,916       —         70       1,916       240  

Income tax expense (benefit)

     (101     414       1,234       313       2,136  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP measure)

   $ 6,053     $ 7,225     $ 8,624     $ 13,278     $ 19,290  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP measure)

   $ 6,053     $ 7,225     $ 8,624     $ 13,278     $ 19,290  

Capital expenditures

     4,911       3,160       4,670       8,071       9,575  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Unlevered Free Cash Flow (non-GAAP measure)

   $ 1,142     $ 4,065     $ 3,954     $ 5,207     $ 9,715  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     June 30,
2017
     December 31,
2016
 
     (in thousands)  

Unaudited Consolidated Balance Sheet Data:

     

Cash and cash equivalents

   $ 42,699      $ 57,152  

Restricted cash - current portion

     41        139  

Restricted cash - long-term portion

     1,500        1,514  

Total assets

     222,705        230,972  

Current maturities of long-term debt

     8,546        8,478  

Long-term debt

     38,570        52,990  
     Six Months Ended
June 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

     9,283        18,440  

Net cash used in investing activities

     (11,063      (15,343

Net cash used in financing activities

     (13,845      (3,859

Changes in foreign currency translation

     1,172        (250
  

 

 

    

 

 

 

Cash and cash equivalents, June 30,

   $ 42,699      $ 59,456  
  

 

 

    

 

 

 

 

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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     2nd Quarter
2017
     1st Quarter
2017
     4th Quarter
2016
     3rd Quarter
2016
     2nd Quarter
2016
 

Selected Operational Data:

              

Offshore drilling rigs (1)

     173        173        175        194        211  

Offshore Production

     296        290        280        287        287  

Maritime

     134        124        122        128        105  

International Land

     112        104        104        101        99  

Other sites (2)

     336        304        240        238        236  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,051        995        921        948        938  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(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      Six Months Ended  
     June 30,
2017
    March 31,
2017
    June 30,
2016
     June 30,
2017
    June 30,
2016
 
     (in thousands)               

Managed Services

           

Revenue

   $ 43,055     $ 44,094     $ 50,219      $ 87,149     $ 104,640  

Cost of revenue

     27,544       26,802       29,682        54,346       60,682  

Depreciation and amortization

     6,229       6,031       7,585        12,260       14,774  

Selling, general and administrative

     5,272       4,956       7,635        10,237       15,530  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income

   $ 4,010     $ 6,305     $ 5,317      $ 10,306     $ 13,654  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP measure)

   $ 10,319     $ 12,448     $ 14,587      $ 22,767     $ 28,764  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Systems Integration and Automation

           

Revenue

   $ 6,107     $ 3,978     $ 4,692      $ 10,085     $ 12,612  

Cost of revenue

     5,494       3,073       3,594        8,567       8,870  

Depreciation and amortization

     611       587       9        1,198       38  

Selling, general and administrative

     422       470       721        892       1,642  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Operating income (loss)

   $ (420   $ (152   $ 368      $ (572   $ 2,062  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Adjusted EBITDA (non-GAAP measure)

   $ 192     $ 435     $ 80      $ 627     $ 1,734  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

NOTE: Consolidated balances include the three 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