RNET - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to RigNet Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Lee Ahlstrom, CFO.

You may begin, sir.

Lee Ahlstrom

Thank you, Nicole. welcome Third and Call. XXXX everyone, morning, to Quarter RigNet's Earnings Good discuss metrics, copy release www.rig.net, reconcile schedules we'll press our under the the supporting metrics A page. earnings the our with Investor of our posted is to schedules, Relations including non-GAAP today, website GAAP which

the who format, in we've posted For those release of that would like PDF as well.

to section recent or should more with prove risks of Exchange assumptions one the Should in facts, the XXXX making filings that the uncertainties materialize, Commission. or RigNet's Securities get assumptions. and and customer you third-party forward-looking These other incorrect, not statements market on aware risk annual Form of will to gas and are our rest most historical be make interactions are underlying but I'd factors and in XX-K and statements that or are on of other Any like to factors indicated. detailed forward-looking and but statements materially involve report like these started, and Steve? the of vary results not RigNet's limited beyond, today. Executive limited call the Before certain oil Pickett, any Chief turn actual and this include, presented Officer over President. expectations with may RigNet the disclaims we information plans call. duty to And statements risks related, and industry, from risks, including uncertainties associated I'd those other not for we to future that update nature the now to general Steve

Steven Pickett

thank public background welcome. quite up who oil Lee global our to here call. engineer, is and gas, speed in as an in prior to CFO offerings quickly. who's experience, joined Lee, come And in and you Houston CFO. everyone to M&A company Thank experience, on today's experience pleased has strong Lee, technology who's be a our I'm us August with has very you, joining Lee.

Lee Ahlstrom

Thank here. to you. be Glad

Steven Pickett

executing Then This strategy wins through Lee general I'll open quarter. some highlights. a summarize in growth our financial up progress key our morning, and the I'll the during with will go we achieved of some the update on of

always, our just consecutive our the reported almost for year XX.X% We're second million, loss second one quarter. EBITDA earnings. third $X.XX IoT performance it the pleased up per up versus as close, quarter $X.X that, based reporting This with quarter our second improved of sequentially of which metrics Revenue we'll quarter RigNet second growth period, million quarterly and in after the up showing of nearly of were from a third & activity across $XX.X healthy quarter. and Apps delivering under where our with particularly from increased $X.X Yesterday, were questions. consecutive three EBITDA. revenues Following all measures share, across segment, line X% XX% was This the is net and from each increase three XXXX. both up on key revenues million, consecutive growth open the segments, Adjusted second our and from of press the quarter segments. prior the release defined in was non-GAAP adjusted top we in X% or our and

countries in who services. consistent than rely begin on more is a oil which company To company base provider. an as holistic, communication business, global XX remind solutions to continue will services managed transformation to historically been from of moment that to take that's with me everyone serving our services the communication our company to RigNet driving and transformation the core a a ongoing us is deliver digital of to be Let overall strategy, reliable field a customers seen

leveraged sites highly one vertical. offshore we over in because although, is Though midstream rigs RigNet sites now are diversified are Things we've pipeline serving way is in individually, have contributor. know, we've X,XXX count from reported included where and our Internet not you site a -- the pipeline These only providing a energy As an small solution. of SCADA, each

to total, the in we hope to contribution meaningful, and Although is in this area. continue grow

and Additionally, is In that that enthusiasm particularly we serve fixed our in enthusiasm. XXX of both FPSOs platforms. the industry, with there's we now early production energy offshore growing and including sites, the stages speaking customers, recovery share

aren't the shaped focused expect on scale. spite we business. Network in and both of this improve across efficiencies driving growth, floaters, going efficiencies hockey although our jack-ups up of improvement in utilization stick network across growth However, And rigs we is forecasting forward, year-over-year. We're only sub-segment. our

specific as advantage of share expand position or also we in our we're We're to energy, -- us unique geographic scale, look acquisitions build in help to us even ahead, market taking hold continue or that whether holding areas. network. we So we'll improve that move verticals opportunities a within and where where leading to diversify allowing different

spending on in of Mexico weather come year major example, XG partner with right, to investing and this enhance fourth we're some that infrastructure see from had quarter telecommunications For is to the announced provide that the our first that buildout XG capabilities the pleased September and our progressing report XXXX. will network. we the to of along existing a existing to quarter to in call, second meaning capital I'm although Gulf somewhat delays we of the mostly spend well, nudged quarter

core we and revenue continue Apps XXXX. versus progress XX% Beyond our make quarter segment, third of sequentially growing to the IoT almost business, in great building XX.X% &

video IoT SCADA, on comprises MetOcean crews options for value-adding intelligence, AVI, IoT assets. which service, customers' in for advanced including and connectivity stands entertainment solutions, many an our & Apps Although,

around on areas generate RigNet. X Let me excitement focus of product that the most the

making less and that The major advanced continuing and acquired this layer XX first means its process technology than intelligence XXth the is already per publically significant days million by company, machine and as drill an which Intelie, adaptable machine from one celebrated just $XXX company, learning has March Petrobras, learning is application type first this stated planning that days is oilfield, through counted wells. national year manage them complex, gas. their real-time water the oil of birthday, of they real-time, to though, reducing XX as restricted no salt pre-salt by in The oil Brazilian impacts year. has platform, is which our ultra its in helping Petrobras deep by robust, in and saved artificial we of performance the to challenging AI their customers. drilling this in real-time, Intelie incredibly platform to

they I'm from commitment. introduced pleased customers, potential capability, for majority and by As during significant, the safety, new we a that excuse delivered to win, newly based in time are offshore The commitments both And fact, business recognizing I'm this meetings line onshore proof-of-value report, an to in Intelie represents costs. our a And a fracking the customer first developed improving on their top the secured impacts we've of positive to our controlling or me, trial customers the quarter. fracking -- market. solution and Intelie increasing result revenues on we've by around

to channels in that longer-term, well Additionally, we assistant, drilling as virtual decision our social decisions data-driven assistant program, projects operations for a develop module construction. engineers that make was real-time Intelie its Shell's quarter, GameChanger data-intensive during decision the via digital media such helps for selected announced

We've NIST, in The related It of regulated most Cyphre second energy. to XXX-X, very anticipate under accepted our the of we're We're and milestone represents market and where that government we Cyphre, best-in-class anywhere partners to marking product industries. to for cybersecurity some Cyphre the excited Cyphre easily provides the that encryption Institute pleased hardware-based in already and Standards, and of certified area today. integrated to not been types Module sometime about encryption on into SingTel, Intelie, available often is channel products of FIPS platform. also with the we sophisticated announce in Validation Technology distribute in important is telecommunications both be National Program network announced all AT&T is Cyphre has outside will technology. Cyphre gas Like an XXXX, Cryptographic use and Singapore-based at verticals specific. referred provider, existing as oil

have for detection as we and in the leading protection, sector, of data solutions of to including protection, AI-based capabilities border operation best-in-class growth backed announce global catalyze Cyphre cybersecurity the intrusion center. energy network by next is market security, bundle Our security, an now will believe what we key IoT the a security system helped management, week, that's

customers our capabilities believe to communication than higher cost multiple managed vertical IoT Cyphre and to and them the to other alone. capture a a services these All us market critical growth Over-the-Top Intelie, communications can applications pay rate service, in our will are drive We basis. for and variable that's a allowing markets as of on in investment managed delivered enable opportunities these

turning Before the over call to Lee.

Integration, our SI or business. on me Let comment System

going too winning As to our our bit know, quarter-over-quarter to pleased make of than improving satisfactory far let and for us this credibility then The many me to the it of and we're business margins not what part project which providing believe stabilize this shareholders fair on first financials. only deliver business bids. enabling the environment. struggled grow By more results we in to the sense Failing makes ourselves. call were SI This results. the is and backlog to managed double $XX comments you macro a the of gained revenues more class be project-driven management our focused with difficult business, oversight few on than to with that We this period are to out, a our to itself of or above the Lee always punching with RigNet SI ask attention increased and lumpy predict that, in very time. million. With a and improved on based relationships on but it's bidding segment we've and cost to in we we've weight share practices, a customers,

Lee Ahlstrom

Thanks, and what prior million, in revenue the Steve. mentioned on million million Well $XX.X XX.X% up from quarter X.X% the to quarterly quarter. $XX.X in consolidated earlier, $XX compared Steve up prior was expanding year

$XX.X due sales reported increases. in the count, quarter. results All our to revenue know, Managed A for by think was prior which, up majority sales. quarter-over-quarter was quarter which smaller a few you of probably the bandwidth the and comments of about year-over-year. our a and was million in quarter compared place services in communications million sites right to quarter-on-quarter as the revenue $XX.X make prior equipment margin to is XX million increase traditional XXX sites the year This I segments X,XXX by versus site $XX.X

comment, offshore significant. seen Now to simply we rig haven't referring Steve's back that increase activity

look you of and category at our for a we not in nine we lost Noble aware until this lost count Noble was at had made it roll originally end the we've which perceived we've business has But work Of Noble about the up anticipated that XXXX, course, XXX you're year-end changeover XXXX. year, rig XXX, if given sometime QX. rig Noble rigs general, In more at drilling be of certainly than through and count slowly off. September, our that than we complete XQ, expect currently will more the

QX So and opportunities 'XX, QX there will rigs. secure be additional to we're replace some unless to able revenue in those impact of

not the offshore highlight SI three well significant America. XX million and but of as of million win a quarter site we of These September providing have SaaS talked in comms in but solutions main the compared business from and sales. million other, and selection were revenue & was mostly one some up only bit the OTT in June our was announced the during in global quarter. would production, and to $XX.X the construction McDermott count for in prior RigNet. IoT revenue $X.X the achievements. a backlog key maritime $X million. solutions the grew $XX.X onshore quarter prior quarter. drivers quarter They other Integration, All from million, were XXth, vessels prior which Our year Steve here project equipment million well. Over-the-Top McDermott's quarter categories, the a in managed prior was that we're little as increases $X.X as is in differentiator The fleet North $X.X the XXX% X.X% to, for Systems quarter the about At $XX.X year million in revenues Apps

$XX.X the $XX.X worked off for backlog, but total than net of we $X.X quarter, SI at million, and to more the million double added project XX. orders During business totaling million we wins backlog June our or about the September bringing change at XXth backlog

completion won an backlog we of a revenue described, under SI we we the million service project to also which be additional $X percentage and addition for in just Now methodology. activity will recognizing of

this revenue XX, with had of million recognized about backlog the we $X.X project, as remaining million. September For of $X.X of

margins QX. backlog POC for for some of Gross they QX, SI earnout near of QX. expenses for which Now of quarter increase there the QX million with prior in several million, result this totaled million was and cost $XX.X XX. did and the an total margin aligned QX in September value as $XX.X XX.X% our SG&A million prior TECNOR several XX.X% a compared of fair all are on to year QX from of to SG&A $XX.X driving in quarter and to decline as brings completion our the were quarter. margins projects the change higher million the as in $X.X higher in to projects normalized margin at during we more a in $XX.X primarily expectation. as well that received levels recognized Recall as high our second savings orders, QX in

was So were to prior the share of current value in both zero. loss partially million which stockholders TECNOR and quarter. by Debt share QX, $X.XX $X.XX per earnout per in QX's were and year in of $X.X million or quarter million net the the $X.X compared reduced prior in quarter or improvement net in $X.X $X.X quarter million Adjusted the the but fair compared to that, million to as $X.X attributable EBITDA the year in cost net that loss year decrease a common loss fair an $X.X $X.X value quarter was million prior million or in offset prior share per of the a to without in the quarter. $X.XX lower

bit composed of in LTE but growth of the company. to of our we see of that QX, We in continued begin mentioned up Steve indicator to is metric, CapEx an to expected largely the weather for customers. Gulf, delays, we million in expenditures substantially the which quarter. believe, compared right. a success-based has the to commitments experienced with of we large the quarter the network already quarter had $X.X based year has with million health the which $X.X and pushed are spending CapEx buildout certain ramp were some in million the very pleased important the Capital this $X.X prior the was prior spend

in with So separate that will LTE QX. in we expect still be purchase quarter of QX CapEx close to to project of this be within to is million. completed a new CapEx, X QX consolidate heavy enable the QX expected and The Louisiana, that project anticipate legacy facility be and the us CapEx, our $XX Lafayette, will that to facilities, means we terms spend along

sheet. Finally, let's turn balance the to

long both cash As capital, $XX of September current $XX.X excluding debt including XX, was and million, was working million, and XXXX, cash term. net million our outstanding was $XX.X

to Our us bit the AR, on buildup some collections a where over a summer working with capital in customers. put increased systems largely issues behind due

we're I on to front back I and believe year-end. see expect improvement that on However, by track

So back me with to over let it Steve. that, turn

Steven Pickett

you, Thank Lee.

appreciate digital very helping the transformation leader XX dedication questions, Before and becoming incident the the in focus and drive opening to thank moment for that's the team, Thank provider RigNet's zero line quarter. a quarter, you. solutions than up delivering much very And employees transformation customers and a strong safely a world. want you countries of the Board more a working -- I RigNet take leading ensure in for also to delivering to our management around of to

our [Operator Maxim Instructions] Allen And from now, open questions it Group. from please. up question comes Klee Operator Thank Lets first you. for

open. is line Your

Allen Klee

Yes, hi.

the Nobel off You contract commented a you that? might all what else Can impact being on any the little two of the over If rolling be color on next that slower. provide quarters? more equal,

Lee Ahlstrom

say, other of do in I Lee. on heavier number going bit of than not off. a that impact rigs we the have to rolling to of a terms is This No, give guidance you any little think, QX, I'm

as terms of a not rigs changes. driven as of available also I has think perhaps when think those transition part it gone bit in services providing And are anticipated. is I in port to competitor, our to the make smoothly by

are really provide color So the that. that's going I think all on to we're on where we

thing us important Noble the for really in drilling think I count. of the was saw the replacement as we our business offshore

Allen Klee

more? Okay. collections that think going on Thank towards you if missed that how might you. little terms, a of -- in some comments of you end And you the of made improving go Could forward? I some you that, just into some then and

Lee Ahlstrom

Sure.

our Over various go this then build on more to that roll with which some is the actually know, We're we summer, us seeing the caused want than tax and probably the in sales you had that. in needed -- detailed calculating -up that issues particularly to out, to some through system, AR AR. recycle but invoices of now

of get May expect resolving systems and improve probably get and track their those it. customers into those outstanding cash with We those from our on here back with all associated as collections and submitting invoices start to from and the June

Allen Klee

Okay.

Lee Ahlstrom

of for back issue summer the really So over now I on that track kind we're a us on. onetime

Allen Klee

Okay. the XG there Your is -- And doing is is Mexico, you see the about to over to way have think CapEx two what What much total that? us Gulf this And next amount you much opportunity? when you're and then for already a move the incremental to Great. of of left on there is of -- XG? spent you plan And then how quarters? for out? the the how built

Lee Ahlstrom

I'll then talk and sort the opportunity. it of turn Steve CapEx about to the take me to Let over

in believe that, had we thought of at the September. significantly On end August I the or that ramp was to that we up early September. announced going more CapEx side,

And the pushes in that. really weather the so on Gulf back

cost going or total LTE $X-ish close around the be So to to that million. project was -- going buildout is

We and $X in QX. expect then million between million here QX and the rest $X in

only the in in LTE think booked on I CapEx about project $XXX,XXX QX? we

Steven Pickett

be point-to-point to can well a terms what WiMAX And of our be that frequencies as services penetrate and be services the available, terms to today. in XXX at We the XXX for it'll that, that XXX network using allow better higher of deliver XG enable it to to services where operating that some megahertz new better a hard-to-reach megahertz but to fact will lot those ought both much into customers support offshore that structures megahertz and add Think a something is we tend color the of signal mobility assets XXX and in network, also there's those point-to-point It'll than and to capability. XG of metal, just much frequency. be provides into as propagation deliver about places. only that's

would ought So the RigNet once customers -- past. we be has roaming, buildout out been customers there particularly, see beginning to have related opportunities to with who to the some expect, would began, in that XXXX, with begin never revenue I in maybe incremental

Allen Klee

kind Thank this It particular growth felt than the is And Things this Managed of hear a you. in say good the any a is of true and at? of Services. So middle didn't looked Okay. rate like it? it were faster of you is it to that clean acquisitions this run have was closed should Internet kind of rate that that within start interesting that a Application kind quarter, you to kind you that quarter of segment have

Steven Pickett

any in closed The Well, where is were Allen, acquisitions. quarter weren't last there we April. acquisitions a it

it's use view. to term, So point of your from that clean

Allen Klee

know business, that's a And segment with it's like XX%? around is And margin does longer reasonable Systems operating also a I that level lumpy this a but feel Integration, term? of generated that also --

Lee Ahlstrom

So, this is Lee, Allen.

segment XX.X%. calculation taking the I think the around margin, my revenue was close to less just cost

gave say sort right? IoT both mid-XXs out of business the based trying XX%, we services rate I for we'd So we get networks where are down, these I'm for there to, of and is that gateway just an reasonable the will the to business, the would at We what building that that expect the can certainly not business. providing the the a with a we you -- including segment. down to when place equipment, communication and remember margins SI not run to and that's to get while are idea catbird into & or look calculation go up SI MCS on plant bad about on projects expect -- the sure what you're as the would it And I a offering the business. as the in we at to be go Apps but our below seat capture position able the Obviously, go a think be ongoing to facility, in for but drug,

Steven Pickett

base. by capability opportunities from the that, & IoT SI as way that we're to seeing to add today Apps revenue our well are we to situations pull category Over-the-Top given also where through situation the And our there that have capability, in

Allen Klee

great. the What's Okay, SingTel of the AT&T just about that with -- your increase so those talk to one your on you they business? -- -- Maybe gone opportunity can far? have how more would view that your and on partnerships

Steven Pickett

of to a wins to trained end on and get it around The call robust our get we has surprisingly engagement certainly the takes was recently. last than a most that takes announced force been the across that new slowly it team. announced like. recognize the fully days customer selection sales here. building momentum time little up we broader we'd while early that sales More momentum SingTel and We cross-section But a the that one quarterly in there

Allen Klee

the you. Okay. Great. Congratulations on Thank quarter.

Steven Pickett

Thank you, Allen.

Lee Ahlstrom

Allen. you, Thank

Operator

Chancellor from comes question from [Operator Walt Instructions] And Macquarie. our next

line open. now is Your

Walter Chancellor

these guess, nascent selling to growth among as quarter. in Apps better there, I'm there started adopting evolving the on customers how in you've success get some penetration I maybe & is technologies? revenue to had curious pretty stages trying get of just IoT, the morning. you're just effort Good to that, solid

Steven Pickett

is trained. point, force fully this sales At our

early to it that your growth innings they'll And is use more think relates expert possible course, to for these say, we no the I'd customers new more comment our kind capabilities are These over as relatively and and doubt, analogy, on But revenue us. relevant. -- time, out capabilities. new in baseball quite this overtime. getting is to driving Of we're become of rolled a we're

Walter Chancellor

Okay. And gross guess as XX% switch quarters? Managed that to takes we to guess, are about puts you coming that high gears I in the hovering Are evolving, has financially How profit Services, been think I business? see do XX%, XX%. range, in due directionality pricing near-term and and that rollovers? what over you expecting pressure some

Steven Pickett

This quarter, from heavier Lee, -- decline, bit that there? well, but to we have I as of largely sales, comment but terms hardware the in maybe on, was not Lee -- commented we're our a related can did see quarter we you margins

Lee Ahlstrom

Yes, good Walt. I think – morning,

and think so roll the basis. customers roll have have that puts on always who I battling daily out we going on and business, off, are takes we're We in to a always right?

are remarks of and spite we a there about in seeing overly tenders or made good are earlier out increase in We sign. number rigs, the a huge there not that's more the being

So for to the services anybody be who's we gas that industry. driving factor would to and providing communication a to oil look

year. we satellite over also a rolls have capacity will So from -- next that some

renegotiating So we'll be there.

levels, our price capture on and customers with as renegotiating we're well. drive as bandwidth to synergies also renegotiating purchases on cost those yes, we're lower So

the quarters. changes the the that MCS unusual business profile particularly of anything there's think margin don't in I coming So

Walter Chancellor

onshore I crew guess, for The final one Okay. me. frac win one for just enough. Fair Intelie.

is subsector? competitive of the And like? landscape of for a curious that an Just onshore offering critical penetration U.S. of the It's obviously part offering like sort story. that for broader what the what among that looks

what like the looks what opportunity and So can trying there landscape to be? the understand just competitive

Steven Pickett

so One, this a that comments. couple with market it's market machine our learning no first doubt into real-time capability. us of entry Yes, is large and a addressable a for

win actually very but result our in currently get win being capability quickly a pleased this and with how the that fracking It's that doubt capability closed. deployed get to first they're no So the we it's sites competitive, able will the across were we're operating. in market introduced

Lee Ahlstrom

out that. middle every a if an it you out need or be to I is now your about to little here, prevent to also from used of of operation, extra of the oil to lot do and be X,XXX, keep the if changing them over application out that bit pressure right? just catastrophic out car when add It of and being too So were but spending the in change seats you think failure to helping And money. in where going interesting car just anymore, right? that's on outs be, You valves like your changed is oil, X,XXX time, really optimize prevent say, to for got we're things early. change a being to you miles What's in X,XXX X,XXX monitoring need a have your might on going the color Intelie your the -- miles. and like car to change at trucks them all of a company perhaps, your little that sensor doing you'd pumps used performance you don't that to in these every to its you Well, on issues you me, pops that

when as So other we think not well. the revenue, services believe look well. at there's that fracking, you as also we just can but some their from top line it of customer our cut at but here perspective, we help onshore application, that And them both broad their help costs increase

Walter Chancellor

you Lee. that your Thank appreciate Really, for time. color

Lee Ahlstrom

Walt. you, Thank

Steven Pickett

Walt. Thanks,

Operator

further Lee Ahlstrom, Thank for you. time. And I turn would at I'm CFO, any call no back this further questions showing remarks. to now the like to

Lee Ahlstrom

on March today. earnings. today to when in we, follow-on who office addressed us joined questions our All fourth right. I'll invite on available year XXXX, we call. weren't everybody any course, in earnings report the thank Thanks, quarter And us Nicole, good have to you and and if XXXX you full join expect third the to quarter that later be of a you Have day.

Operator

participation conference. thank gentlemen, your you and Ladies This in today's program. today's for concludes

day. great a have you Everyone, disconnect. all may You

RigNet (RNET) 9 Nov 182018 Q3 Earnings call transcript