RNET - Earnings call transcript Q1 2019

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Operator

Ladies and gentlemen, welcome to RigNet's First Quarter 2019 Earnings Conference Call. My name is Skyler and I'll be your coordinator for today. At this time, all participants are in a listen-only mode.

We will be facilitating a question-and-answer session after the prepared remarks by management. [Operator Instructions] I will now turn the call over to Lee Ahlstrom, RigNet's Senior Vice President and Chief Financial Officer. Mr. proceed. please Ahlstrom,

Lee Ahlstrom

the and www.rig.net quarter Skyler earnings and to posted which welcome release to discuss Thank metrics our GAAP earnings good Investor call. first is reconcile schedules including XXXX supporting our our metrics A RigNet's we'll with today website you, to schedules morning non-GAAP under copy press page. of Relations

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

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

Steven Pickett

since for you front to and and Thank share today's us today fourth reported the on It's latest and back short morning results. you operating thank in joining about of good be earnings we're to call. you, glad been six we RigNet's and a our weeks everyone Lee quarter to financial

with measure an the due metrics Lee system some stated release color non-GAAP define our open into against adjusted and markets how As provide million of will of Lee revenue provide and review Operationally up key and a of our that his $X.XX up integration our quarter first were some comments in $XX XXXX serve. press first for remarks. usual, for last we're or accomplishments. provide quarter. of against we'll $XX.X a plan. Adjusted in down our in Both to million. largely provide we We'll lumpiness we'll EBITDA our seeing team's based After one to we're we our Yesterday, loss and the on performance continued insight reported EBITDA, will was on we some call. compared $X.X on strategy open that, strategically, I'll and we signaled sequentially execute million as we that, After for on highlights. on to what the a progressing and previously executing update questions. quarter the financial per RigNet net revenues share it

will continued revenue utilization, floater these near factors XX% activity XXXX. help improve which segment. the believe offshore level Arabia's jack in not unrest in terms in driven Iranian production their would In partially that and continue by business, suggestion of cuts terms drive the previously we the is of rigs. market MCS up of end onshore strength each We of supportive for OPEC serve, U.S. the the imports, terms continued the of and commodity of in implemented crude continues that prices plus of are to energy would announcement Market additional marketed the through that both Venezuela, approve Saudi all waivers

the the In our remained organic terms of moving overall competitors competitive strategically diversified our through MCS the strategy. ourselves production business logic technology through acquisitions the has benefits growth stack. therefore, of We've growth price of revenue revenue a business, XXXX and of scale in a reinforced our broad versus in more midstream. and differentiated stream portfolio up development through We've markets also like by technology and

up and fact the a these and with ability embracing opportunity on procuring Managed improve critical services to to the network. implementation, outstanding has Services the the run through includes their bottom data faster result, security has As depend line combined through locations Having rapid are their real-time of deployment for Customers platform. Communication where customer the of performance applications the machine learning stack our our support communications our Intelie, apps secure that offering the particularly global and throat overall now to services solutions cyber technology when discerning allows choke increasingly portfolio more on that specialized including these the resolution, better problem of critical performance the in remote platform. one

applications the operations. In in organic relatively to these terms to four highly MCS a growth market for additional focus new we for cyber Petrobras the and for turn of expect solutions This of FPSOs provide segment, third represents data-intensive is production us first on quarter, well for and opportunity MCS opportunities as early in security as Brazil.

services to that should we under We in early is live that to operating allow XX% construction focused quarter. at the approximately has network Related communication approximately us Mexico, of specifically XX% percentage our and deliver Today, the third traffic. complete owned the additional risen quarter, essentially types to of the and mission LTE that customers. be end to carrying with of sites first also the expanding in infrastructure are of Gulf to on the our

IoT our Apps main this our and In business terms grow as at that looking & driver. we continue of segment, segment growth organically to we're

about customer Communication new Services as in and algorithms more In harnessing learning and drives our recognizing is the revenue about our customers streams power IoT and configuration and real-time delivers Managed the it machine that much business is fact, that design, wins of & more new are themselves for as network performance Apps realization segment.

development team fracking drive IoT customer, beyond. revenue our our and activities quarter, first additional help related first QX Intelie completed initial & in will which late our the Apps for During

also new service last a turned rig major customer during Furthermore, on second RigNet's Today, mission operating same we of I'm call the with real-time using announced contract related specialized maximize & Intelie-based revenue second quarter, help provide customer a on IoT systems. key data and with centers. Intelie up surfaces contractor that video contract monitor a we with tailored this learning offshore share to Transocean. and our to drilling machine benefits to critical IT We that real-time them BOPs the as learning happy paired the to support to is machine Apps signed that

contract we and with work the active what one six in is POV now the quarter, also During platform, with two deployment trials, supermajors, three continued in Intelie negotiations. of

terms of sequential In this just growth in over of XX%. of results of our financial over team XX% the business, and segment growth delivered quarter-over-quarter just year-over-year

as SI Backlog of of would expectations. last million. to as Turning on business, the QX in lumpy result remains in performance it our the this business call nature our was line signaled segment. quarter-on-quarter Revenue in at a we declined strong the $XX.X with

opportunities improve bidding not Systems data both integration business, continue with combines our tracking in potential IoT call, solution to and after capability to our with our robust also Managed system balance just supermajor. key We IntelieLive's our that digital value to SmartConnect's last of announced energy pipeline of predictive visualization earnings Apps and to introduce collaboration exist, we U.S. believe and a CertifiedSafety one with help of safety solution Communication but the demonstrates based chain workforce of the our efficiency. to that operational global based customers, This This Shortly machine with has this with to across range solution rest Integration opportunities. to a in year win the asset learning Services the respond the revenue beyond. System our business. convert [XX%] expect we customers wide We monitoring & analytics pull-through and XXXX

to incremental presentation remains vigorous the hearing continue with we expert our of external there's share. In to on June the second the continued expect some the to working GX not counsel of to of for of in the claims. the Arbitration, can our counter half We've year. during June any quarter witnesses, believe the our prepare everything for news meet We terms status own type a in schedule track mount ruling and hearing and employees upcoming in course by the of of really late the

of who I and at heard reserve on has some Six disclosed essentially are same a non-deal Lee been as shares disproportionately outcome. investors When December, believe the award, have the in ago the and the we another took we award equity commensurately. our as there Phase X road languished. show, amount the our punished As equity when result announced tumble weeks dropped the back the recent

our If about the security sum that growing the Mexico. in buying like the team multiple strategic and you free which plan, of to it about trading MCS price. the revenue are be internal performance, to and but we and valuation, business. as next-generation the the getting the of the relates the will we're Gulf of prices business at Systems disappointed Integration MCS executing is say, and Board parts the times stock we at in show the one of Needless reported long-term and higher for infrastructure business a against with the shares are and just growth these pleased think medium management business the Buying deployed both network business machine believe cyber a we're learning share in metrics

pros [indiscernible] weigh the of continue we terms cons. to In and

above comfortable With XXXX are Lee? me that turn XXXX. adjusted over to Lee. believe that we will be full-year EBITDA it performance telling However, our in let of we that, you

Lee Ahlstrom

to with million, compared of The by Thank consolidated prior can said X.X% accounting the million million like to what compared up lower fourth you, projects million in the Recapping quarterly in segments was reporting compared included to lumpy. year to word use is increases $X.X be, SI was X.X% XQ we you revenue sequentially. decrease and quarter revenue, know, quarter as $XX.X Steve. Steve uses our a all $XX.X revenue from Revenue $XX.X XXXX. based decrease earlier, which

in XX days days versus or in were QX XX days. two fewer QX there Additionally,

day $XX on increase share $X.XX in in to the GAAP first of per attributable the was an $X.XX based net of share the in contracts first IoT rates. touch XXXX common on share quarter loss or majority our $XX.X or our million or compared quarter $X.X $X.XX the This services As per quarter. loss a stockholders million reminder, million per bill Apps in net by I'll to segment, and net which offset & prior was managed later. XXXX of loss

in the the net loss net charge. GX the million fourth quarter reminder, XXXX a As included $XX.X

the GX of quarter quarter, to $X.X Adjusted in was Excluding decrease quarter in in days. effect XXXX, net million compared we impact in quarter the positive million $X.X EBITDA of EBITDA last the XX%. charge, Compared XXXX per the in fourth coupled of of million the two $X.X the or first first revenue was approximately generated the XXXX XXXX. of income The SI quarter with share. the $XX.X of a fewer to it correlates adjusted to XXXX, the specifically the quarter of XX% increase in $X.XX in fourth with million down lower compared first

$XX.X year $XX.X a Services fourth of prior million to revenue about and Communication XXXX. Managed was quarter bit little in talk the compared the in million $XX.X segments. million the quarter quarter for the Let's

in quarter decrease quarter. the the in out X.X% the was of was Gross are were the margin margins given XXXX of fourth where typical and largely of decline lower for quarter XXXX equipment XX.X% the compared XXXX The first versus fewer of two increase first in by not in to in driven mentioned, sales XX.X% our than there in of an quarter the XXXX. communication quarter days services. XQ XX.X% was As fourth line the

year-over-year the sequentially was XXX and the by up quarter. to first quarter X,XXX, Our MCS XX by count site sites fourth up compared for

we've call, fourth the dip. after count last driven price some As recovery since in we site by commodity discussed our recovery seen on year-end quarter

as the rigs Our rigs frame. be The million roll a six other Noble offshore essentially was flat. customers including sequentially. & million site both up increase increased sometime to largely the in The and one million net time during off. are was July $X our in supermajors. up Transocean $X.X final Apps rig our in prior the rigs We've Intelie expecting count of and had up about April result was and quarter, that for year rolling two the was counts while maritime XX% IoT $X.X from and production June, an decommissioned the of four up Noble will quarter one, revenue off currently of of nicely XX% additional quarter compared two significantly ramping

We and also enjoyed data in an usage among equipment in due our increase revenue IoT increases additional to sales. customers

orders. contribution XX.X% XXXX a the XQ We as of $XX.X SI expect backlog from XX/XX/XX. margins preparing about costs XX% revenue $X.X accounting. million XQ to to throughout legal revenue. revenue nature efforts. of customer XQ procurement to X/XX/XX, therefore ramps were in case margin was costs $XX.X million total remains customers quarter, on. included lower. million The saw million result Intelie's quarter-on-quarter million II benefited for which in related from at $XX.X see SI a System XXXX increase XX.X% uses result costs $XX.X reduction strong drive XQ quarter the totaled $X.X in margin in million increase claims. variable few year from XQ The of million, $XX.X as million up to of management quarter the change of continue XXXX $XX.X $XX Project in less expenses project Gross and are from XX.X% due the due the method compared as related quarter. in down XXXX's our GX GX professional was up XXXX, to to up to $X.X to first million fourth SG&A as helping project down but from our counter the for fees, XXXX of increased these but to quarter and from which year year and business, revenue prior of discipline Integration G&A XXXX which were quarter Phase brought the was in from XQ the new a million current prior for high at the down prior $X.X XX.X% additional of largely XXXX. lower increased costs cost-to-cost SI million, increased

$XXX,XXX Apps of the We result & with along the growing costs. This our about on continued to also focus recorded severance rightsize a IoT business in efforts was segment.

and million quarter. $X.X quarter million prior projects. these Lafayette, million $X.X to included to year of fourth in stock-based compared and incentive expenditures the were based for awards Finally, compared we under us in short-term had Stock-based one-time XXXX $X million million consolidate the out facility investment the million to LTE compensation, results increased of spend the included which $X.X for plan. our prior equity our quarter compensation the separate and primarily first these $X.X in $XXX,XXX quarter the grant year quarter network financial incentive because increased $X.X annually we three CapEx in are XXXX stronger in on effectively performance that Louisiana $XX.X awards facilities. of for versus short-term the new only will enable the Both quarter. XXXX of about legacy to plan million compared fourth the Capital build

$X.X completed substantially to success quarter. of composed third We early The the of XXXX expect remaining XQ in in CapEx was million be LTE commitments. based the project

balance Finally, let's turn the to sheet.

December was agreement XX, $XX.X million group. we million existing our current long-term. of In with was cash and the both outstanding As debt our bank $XX.X first and including amended quarter, our XXXX,

with performance SI classified our any bank go-forward XXXX. bonds fund they a as already secured new bonds week ago, issues few large date converting April previously projects capacity past to to an necessary regard we to has have as certain included these calculations. we credit are the the working covenant of accommodate About discovered revolver well facility notified and ruling, of with a GX on related adverse facility, to the way banks to we million and on up term negotiated balance amendment The on years. This to performance currently amendment GX issues issue the a extending to We freeing a maturity of revolver any waiver the liquidity five accommodate due. our least amendment of a come our when payments our proactively basis. existed to an Following at our have for dispute we $XX

already assessment rectify issue revise have is our our XXXX conclusion and our external to file required. agreed controls expect Our would to about revised have you that that the assessment. We've auditors re-examined to with reviewed controlled of restatement financial XX-K/A internal also and controls internal end shortly expect, no as and we a we the to

Steve. it our turn group. bank let quickly pleased able was resolve auditors both the to our that, and with the are of to back me how With We issue team our with support

Steven Pickett

Thank you, Lee.

questions, before than their and team to XX recognize for at we tireless XXX for success energy, thank I our are up RigNet Now appreciate the their countries efforts. world and open are our who in critical employees customers and the executing dedication around over want to it for their more our I

So And line thank you our open the for again with up questions. that, please to team.

Operator

question with Instructions] first Maxim [Operator from Klee Group. Our Allen comes

now Your line is open.

Allen Klee

stuff. than the or should think next just it and segment, Is less think international possible is how Good the XQ. morning. with we to they rigs you from Managed around do in wondering In roll-off it new I segment large a in the business that to Thanks. rolling Noble offloading winning mentioned impacts I'm was some and the next quarter, floating that driller in offset of about we can for also off more said two production quarter, decline that storage vessels. offshore the expect Services new there six you've themselves but be

Steven Pickett

the through script Good be Yes, going and me well. everything. so Hope doing you let to back morning. clear Thanks. just

six were yet to roll the end there say QX, First, off. were we Noble that that another of rigs did at

already two, are June, last rolled those. the time we're six Brazil and still would up four The of ramp on frame. As of waiting which of have in four there today, will July kind off of those actually and be FPSOs

to Brazil. late So And quarter of kind of up on and time just in frame business. course here early down everything their schedule continue little ramp they'll third bit depending we win start a second quarter, do to else

and larger up of them. Now win on where focused that number contract was the really mentioned Transocean Intelie we Intelie turning services for there was a drilling international and the

quarter. think the these So from first all-in-all, the in Noble will of all offset revenue I things decline

Allen Klee

segment, still half the thank Okay, SI second than that contribution? in on the And more half is leveraged first terms it's the you. thinking then it - you do revenue still of

Steven Pickett

Yes, right.

So last lower on second right, about first still and we talked the call; being camel in shaped quarters, the and That's third the SI higher in effectively view. fourth quarters. the

Allen Klee

Okay, Thank I'll in the get queue. back you.

Steven Pickett

Okay. Allen. Thanks

Lee Ahlstrom

Thanks Allen.

Operator

Our Chancellor Instructions] from Walt [Operator next Macquarie. with question comes

Walter Chancellor

thank guys. you, Yes. Hey,

first plus are some you So later I guess to million on outflow of the Would year. expectation? you full said front. on guess cash catch still I believe something cash Is like the a and The a bit how about the is quarters I less one quarterly incrementals you in the expect last year CapEx you $X call than thinking up for the of CapEx in half the the normal perspective? little rate Lee that run of from cited. million the of outflow XXXX sort $X

Lee Ahlstrom

the you've CapEx cash got a there is in on what I mean between so cash expenditures. versus Yes, some the accrued total we difference mentioned have that number basis, we obviously

XXXX CapEx view I what catch at that my do expect or we're be will and in So that it going was so to is now up. right around

course CapEx, with of be what we is to to of that related success right. do based Some going

growing tighten full or we go focus have opportunities, a that elect we see on to opportunities get more up rigs kind and back fewer put services our have million on rate. $X will communication ahead I to we if If to substantially. and trying may that amount. don't to continue quarter we roughly it run FPSOs, spend to of So

Walter Chancellor

great. then… Okay, Very helpful. And

Lee Ahlstrom

of script make rate. and top on the sorry, contribute trying to the I Walt, of They kind that's comment again, Lafayette rate. run projects. are special why in don't about that again T-Mobile They the And that was run facility to being and one-off then

Walter Chancellor

where parties fully you learning in there for you a machine speak and well interested the learning on fracturing of only and that. can about front. I've seen as Are fracturing. E&P sit develop sort Clearly, sort and product fracturing an programs about in E&Ps, large hydraulic interesting making for a the providers to in quarter better Steve, is service trend you market machine as these think they're then, hydraulic the you And or help could companies, service Intelie or of the all. companies Maybe using Right. landscape various whether exploit me fracturing service load this machine to base a bringing learning hydraulic wells? all anyone provide developed for and

Steven Pickett

release U.S. being pressure as Yes, in for product preventive actively things in used and that to related pressure the an so to communicating availability looking it's field particular of and and first spikes indeed, the now the it's other like for U.S. of maintenance, the outside pumping the we're the pressure is pumpers in and example

So large operators. helps bottom we for is performance and it frackers for there line out us. for market think there opportunity drive a Certainly

Lee Ahlstrom

analysis Yes, and nice for talks and on I real-time platform subject a on fields or so and sit investor this platform open in that Walt, IntelieLive can chart sit that source these data on of analytics somewhat presentation, in think, the you unique XX top IntelieLive to we've where our effectively applications real-time sense goes that which then come particular modules optimization really that got the Page look the matter platform the being on think about is in latest if programs experts Intelie I platform. and create together it's the big the that

down with around figure significant done we've improve right just it's more offshore drill well Petrobras to them characteristics pre-salt helped drilling there and through the to actual we Brazil. now how maintenance Steve functions, in the effectively monitoring opportunity is there layer where while So out said, the right as

Steven Pickett

and you then a from view or of on problems layer is It typically problem a particular solving with got some kind started a will and other customer on, to solve set first of obviously, to Lee in algorithms financial new it's was get set once cases, point opportunity for when you of an a applications was to clues the have adjacent you've solved problem problems are the some incremental started, applications particular problems other those of opportunity and are an those turned through that lead revenue. describing through that are as that

So we used customer, new the incremental helps? a it revenue call characteristic that to have that the to function algorithms step are tends added apps to when being the platform by that's if

Walter Chancellor

Thank very much. I'll Yes, it hop queue. the back does. you in

Operator

have Klee. Instructions] question from Allen [Operator And we a follow-up

Allen Klee

on Yes. I efforts collections. wondering work know for year to one of I improving you comment objectives the was there. the if could is on the

Steven Pickett

we've and largest would've invoices own into I'd one to with of starting a starting some that on couple all happy side. customers, that difficult comment some dug actually the interesting cash large and for I houses able time-consuming to last so them AR of been revise where, work would Allen. in who've we're then our the example, we've sent collection complicated to might up of through and their from right eliminate and months in customers down good very sit of in been require the satisfied a actually collections is the of believe that see things that that these process of we progress customers not roll actually built able be processes data-intensive our billing I've internal that, as the complicated go we on with to process. some We in. actually make In they been team the that this collection how has now Yes. roll-up out the do we've to come two had go we've past and complicated the very said with

So every bit job believe some process track in we customer but cutting not different the a paying, I this advantage customers it a a of right this the it's slow are of inroads that take unusual team slow receivables. the see believe to has in make great sense by in is suppliers a on down done can and that be little working environment, bit the and to

You were it's to number did of increase bill turned couldn't see that the for here as were sites on turned that's the those cause really SI billing a entirely but end for T-Mobile a as due we well in fact, until business at largely, X/XX, of on. billing the receivable our sites actually for

So if you look other receivables, of MCS has just in down. at actually terms that come and to business started the

Allen Klee

Thank you.

For network enabled about talk think how Gulf in maybe could for the in you? recurring of roll you the might out Mexico, you to about of XG/XG revenue contribute the XXXX how this help

Steven Pickett

revenue. There around managed services related that's a partner. components two to incremental contract are that can managed network running contribute our is that and One with a long-term services contract

and not in able a of network to There have Mexico. with it usage the been to when that is offshore networks what that we at Gulf the out comes cases the there related associated to lot us not of a tell is share be other should The revenue that model. LTE

just So modeled we've that not yet.

Lee Ahlstrom

right. But, Steve, interesting, it's

our from to there out capabilities provide can We the customers the inquiries network and of through are interesting we what that. some about getting them

Steven Pickett

penetrate There's no at lot other a means great structures deal frequencies operates interest becoming fact to available Yes, network frequencies doubt. these of the than might ability will low used. and there be that better metal very it in is large that that have this the it a

network and running carrying across getting miles level Mexico. and about square Gulf interest we're many thousands traffic of and the that in thrilled is the high So of up

Allen Klee

service, the little just Apps & like side providing or what - could Great, you'll Services that? that my last for question a contract a into announced IoT providing is go three-year for you a the was as a - you maybe be on

Steven Pickett

associated time feed that contract. allow to throat the real-time that of feeds there to basis second the as learning to to is machine Intelie - relates the having and in one the learning I one choke Essentially, and one the you're it systems machine platform. transcript, full having real-time systems having throat as mentioned that us called Yes, learning learning our value - managing but the throat those that one platform communications collection, data relates believe some those called so to I platform on machine provide there as the speeds just all do choke network, not referring are to that with so systems to choke data essentially a it Transocean to Intelie machine it's

Allen Klee

Is we these any way IoT mention And then, you. contracts of can Apps to think expect & two degree you Thank in the did kind there about going you ramp-up forward. that that? of

Steven Pickett

We haven't deployment begun. numbers, the those has shared but Allen,

As add that I revenue, the - to I point is to hopeful communicate what indeed mentioned, platform will we'll even has applications incremental started. that that drive at more revenue continue can incremental this we're but

Allen Klee

Okay. much. Thank you so

Steven Pickett

Allen. Thanks

Operator

And we question follow-up Chancellor. a Walt from have

is line now Your open.

Walter Chancellor

that contract there current be on have function because necessarily basis. around without here? a to achieve activity a needs full-year Is on from obviously, So the follow-up giving just of what's outlook to a that wins levels step just you confidence you view What to from gives in Pricing, up EBITDA getting up in that adjusted that. particular specific? you would confidence be it too

Steven Pickett

Yes.

One, a indeed really things. of it's up. are combination activity So those levels

earlier, mentioned generally As just offshore. I

performance it and that In so very to relates Systems as pleased there the camel quarter. specifically that trajectory third second know as the we it roll relates business, we in the Apps business IoT better shape expect the you to addition Integration with to and are & indeed,

Walter Chancellor

you. Thank Okay.

Operator

to I'd I'm to Lee At for no call the over like turn questions. this further remarks. any closing showing time, back

Lee Ahlstrom

of today quarter we be any have addressed report quarter questions when to good you Thank you joining our Skyler first I'll you August available all us for and us if course, join on and that earnings expect day. have weren't Thanks, thank and to you we our earnings. in invite follow-up XXXX call. second a

Operator

Ladies thank This conclude gentlemen, does and for your conference. program. the participation you today's

now a day. may You have disconnect. great Everyone

RigNet (RNET) 11 May 192019 Q1 Earnings call transcript