RigNet Announces Fourth Quarter and Full Year 2020 Earnings Results

    

 March 15, 2021

RigNet, Inc. announced its results for the quarter ended December 31, 2020.

Full year 2020 revenue of $207.9 million, net loss of $45.8 million or $2.22 per share

Fourth quarter 2020 revenue of $47.0 million, net loss of $9.1 million or $0.44 per share

Revenue decreased by 14.4% compared to prior year and 3.4% compared to prior quarter

Adjusted EBITDA increased by 2.0% to $7.7 million compared to prior quarter; decreased by 19.0% to $33.3 million compared to prior year

System Integration project backlog of $7.7 million

"RigNet closed 2020 having again delivered strong market share growth in both MCS and machine learning in spite of industry headwinds," said Steven Pickett, Chief Executive Officer and President. "During the fourth quarter, our gross margin increased sequentially and we delivered important wins in Managed Communications, capturing significant global fleet opportunities that will drive future revenues.  Intelie, our machine learning business, remains the foundation of our Apps & IoT strategy and despite the impacts of COVID-19, delivered nearly 32% revenue growth over 2019, topping $10 million for full year 2020.  Enquiries in our SI business remain robust and we have already received a new FPSO buildout award in the first quarter of 2021. We are optimistic about this business segment as we are seeing SI customers begin to reach decision points on the many opportunities where we have submitted competitive bids."

Mr. Pickett continued, "The board and management of RigNet are extremely proud of what the team accomplished in 2020 and over the last several years. Since we embarked on RigNet 2.0 in 2016, the team has grown our offshore market share by 30% and has grown our Apps & IoT business by over 400%. We built strategic relationships among our Managed Communications customers and delivered outstanding service and great value.  Our SI segment is well positioned to see new awards as customers recognize that our disciplined management approach to new projects will yield operational and financial benefits.  Financially, the team managed our balance sheet well and reduced debt significantly. There is no doubt that 2020 was a challenging year and while that challenge has not yet ended, we are confident that our employees will continue to execute against our growth plans."

"Finally," Mr. Pickett concluded, "Progress on activities related to our acquisition by Viasat continue apace, with both teams working well together and driving towards a mid-2021 close in the belief that our combination will increase value for both sets of shareholders. The waiting period under the Hart-Scott-Rodino Act has ended with no actions taken. Our next major milestone is our shareholder vote which we expect to hold in the second half of April."

Quarterly revenue was $47.0 million, a decrease of $1.7 million, or 3.4%, compared to $48.7 million in the prior quarter and a decrease of $17.0 million, or 26.6%, compared to $64.1 million in the fourth quarter 2019, primarily as a result of continued lower activity in the oil and gas industry related to the impact of the COVID-19 pandemic. Apps & IoT revenue grew by $0.2 million quarter-over-quarter, or 2.1%, primarily due to Intelie. Systems Integration (SI) revenue grew by $0.3 million, or 3.6%, primarily due to the timing of projects. These increases were offset by a $2.2 million or, 6.8% decrease in Managed Communications Services (MCS) revenue due to a decrease in site count and new site delays compared to the prior quarter. Compared to the fourth quarter of 2019, MCS revenue decreased by $9.5 million compared to fourth quarter 2019 due to decreased site counts including rig stacking, and non-recurring service installation revenue related to the expansion of the LTE network in the Gulf of Mexico that occurred in the prior year. Apps & IoT revenue decreased by $1.5 million, or 15.3%, primarily due to lower equipment sales and bandwidth usage in IoT. SI revenue decreased by $6.0 million or 40.9%, compared to the fourth quarter of 2019 primarily due to differences in the timing on certain projects.

Net loss attributable to common stockholders in the fourth quarter of 2020 was $9.1 million, or $0.44 per share, compared to net loss attributable to common stockholders of $5.5 million, or $0.25 per share, in the third quarter of 2020 and net loss attributable to common stockholders of $0.5 million, or $0.03 per share, in the fourth quarter of 2019. The net loss in the third quarter of 2020 included a one-time, non-cash impairment charge on certain intangible assets of $3.8 million. Excluding this charge, net loss in the third quarter of 2020 was $1.7 million, or $0.08 per share. The net loss in the fourth quarter of 2019 included a gain on the sale of certain non-core assets of $4.2 million, or $0.21 per share. Excluding this gain, net loss attributable to common stockholders in the fourth quarter of 2019 was $4.8 million or $0.24 per share.

Revenue for the full year 2020 decreased by $35.0 million or 14.4% to $207.9 million, compared to the full year 2019 revenue of $242.9 million. Revenue in each segment decreased year-over-year, primarily due to the impact of the COVID-19 pandemic on the global economy and the oil and gas industry in particular. Full year 2020 MCS revenue declined 17.7% to $135.8 million , SI revenue declined 11.7% to $37.7 million, and Apps & IoT revenue declined 2.6% to $34.5 million. Net loss attributable to common stockholders for the year ended December 31, 2020 was $45.8 million or $2.22 per share, compared to 2019 net loss attributable to common stockholders of $19.2 million or $0.97 per share. 

Net loss for the year ended 2020 included non-cash impairment charges related to intangibles and goodwill of $27.0 million, or $1.31 per share. Excluding these charges, net loss attributable to common stockholders was $18.8 million or $0.91 per share.

Adjusted EBITDA, a non-GAAP measure defined and reconciled to GAAP net loss (as described below), was $7.7 million for fourth quarter 2020, an increase of 2.0% compared to $7.5 million in the third quarter of 2020 and a decrease of 35.6% compared to $11.9 million  in the fourth quarter of 2019. Full year 2020 Adjusted EBITDA was $33.3 million, a 19.0% decrease from 2019 full year Adjusted EBITDA of $41.1 million.

Capital expenditures for the three months ending December 31, 2020 totaled $2.7 million compared to $2.0 million for the three months ending September 30, 2020 and $8.0 million for the quarter ending December 31, 2019. Capital expenditures for the year ended December 31, 2020 totaled $11.5 million compared to $25.5 million for the year ended December 31, 2019. After accounting for accrued capital expenditures, capital expenditures on a cash basis were $2.4 million for the three months ending December 31, 2020 compared to $2.1 million and $5.6 million in the quarters ended September 30, 2020 and December 31, 2019, respectively. Capital expenditures on cash basis was $13.1 million for the year ended December 31, 2020 compared to $22.4 million for the year ended December 31, 2019.

Contracting and Operational Update

In December 2020, RigNet announced that its Board of Directors unanimously approved the Company's entry into a definitive agreement whereby Viasat Inc. will acquire RigNet in an all-stock transaction representing an enterprise value of $222 million, including RigNet's net debt as of September 30, 2020, based on the closing price of Viasat common stock on December 18, 2020.  The strategic combination is expected to create a vertically integrated communications company serving customers in industries that include government, aviation, residential, energy, and others by providing cutting-edge connectivity from the satellite to the end customer and delivering premier managed communications services coupled with a suite of advanced application solutions that include real-time machine learning and advanced cybersecurity. The waiting period under the Hart-Scott-Rodino Act has expired. RigNet is preparing to file its proxy filing in preparation for scheduling a special meeting of stockholders to vote on RigNet's board of directors' recommendation to approve the merger.

During the fourth quarter 2020, RigNet announced a significant new multi-year contract with a global offshore drilling contractor, expected to commence in April 2021 whereby RigNet will provide fully managed communications services in addition to services already being supplied, which include Intelie and other over-the-top applications and network security solutions.  RigNet also increased managed communications services being provided to one of the largest owners of floating offshore production, storage, and offtake vessels in Brazil.  Finally, the company secured a long-term contract to deliver Intelie's real-time machine learning and software solutions to a premier independent exploration and production company operating in the Permian Basin.

MCS Site count in the fourth quarter of 2020 decreased by 4.0% to 1,142 compared to 1,190 in the third quarter of 2020 and decreased by 14.8% compared to 1,340 in the fourth quarter of 2019. 

Project backlog (using costs to costs accounting, formerly known as percentage of completion accounting) was $7.7 million in the fourth quarter of 2020 and $12.4 million in the third quarter of 2020 and was $26.2 million in the fourth quarter of 2019.

Additional Detail

In the fourth quarter of 2020, the Company recorded $1.6 million in merger and acquisition costs largely related to the Viasat acquisition, $0.2 million in restructuring charges, and $0.1 million in one-time costs directly related to COVID-19 pandemic, such as costs associated with cleaning, testing, quarantine of employees, and modifications to our Gulf of Mexico microwave network. Additionally, the Company recorded a $0.1 million increase in the fair value of contingent consideration related to Cyphre. As of December 31, 2020, the Consolidated Leverage Ratio was 2.76 and Consolidated Fixed Charge Coverage Ratio was 2.00. In the third quarter 2020, the Company recorded a non-cash intangible assets impairment charge of  $3.8 million as a result of the carrying amounts on certain intangible assets which were in excess of their recoverable value. Additionally, the Company recorded $0.1 million in one-time costs directly related to the COVID-19 pandemic, such as costs associated with cleaning, testing, quarantine of employees, and modifications to our Gulf of Mexico microwave network, and $0.1 million in merger and acquisition costs. In the quarter ended December 31, 2019, the Company recorded $4.3 million in net gain on the sale of property plant and equipment, and net $1.2 million increase in fair value of earn-outs/contingent consideration consisting of a $1.6 million increase in the fair value of the Intelie earn-out partially offset by $0.4 million decrease in the Cyphre contingent consideration.