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8-K - 8-K - RigNet, Inc.d95561d8k.htm

Exhibit 99

 

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PRESS RELEASE    FOR IMMEDIATE RELEASE

RigNet Announces Third Quarter 2015 Earnings Results

 

    Quarterly revenue of $66.3 million, representing decreases of 24.5% and 11.7%, respectively, over the prior year and prior quarters

 

    Quarterly Adjusted EBITDA of $14.5 million, representing decreases of 28.2% and 21.7%, respectively, over the prior year and prior quarters

 

    Quarterly Cash Earnings of $12.2 million, representing decreases of 17.7% and 20.5%, respectively, over the prior year and prior quarters

HOUSTON – November 9, 2015 – 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.”

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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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.

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 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. 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

 

Marty Jimmerson

Chief Financial Officer, RigNet, Inc.

  

Tel: +1 (281) 674-0699

investor.relations@rig.net

 

     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,     September 30,  
     2015     2015     2014     2015     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   

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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     Three Months Ended      Nine Months Ended  
     September 30,      June 30,      September 30,      September 30,      September 30,  
     2015      2015      2014      2015      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,     June 30,     September 30,     September 30,     September 30,  
     2015     2015     2014     2015     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   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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     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

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net


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     Three Months Ended     Nine Months Ended  
     September 30,     June 30,     September 30,     September 30,     September 30,  
     2015     2015     2014     2015     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.

###

 

1880 SOUTH DAIRY ASHFORD, SUITE 300 HOUSTON, TEXAS 77077 PHONE 281.674.0100 FAX 281.674.0101 http://www.rig.net