In December, RigNet (NASDAQ: RNET) lost an arbitration hearing against a supplier, with the panel finding that the company owed $50.8 million on a contract it initially signed in January 2014. While RigNet is working to reduce this amount by filing counterclaims, it recorded a sizable loss during the fourth quarter just in case it needed to make this payment. That clouded what was a solid quarter as the company's underlying financial results continued to improve.
RigNet results: The raw numbers
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What happened with RigNet this quarter?
RigNet's underlying operations performed well:
- Revenue rose 6% versus the year-ago period driven by across-the-board growth in all three of the company's segments thanks to improving market conditions. The biggest boost came from the systems integration segment, where revenue jumped 18.3% year over year while sales from the applications and internet-of-things (apps and IoT) segment rose 9.7%, offsetting slower growth in its core managed communications services segment.
- Full-year revenue surged 16.6% to $238.9 million due to strong growth in both systems integration and apps and IoT, which both delivered greater than 60% sales growth compared to 2017, thanks in large part to recent acquisitions.
- While RigNet reported a steep loss during the quarter, that was entirely due to the $50.6 million charge it took relating to the arbitration panel ruling. If we adjust for that one-time item, RigNet would have reported $0.9 million, or $0.05 per share, of net income during the quarter. Meanwhile, adjusted EBITDA was $10.5 million during the quarter, up 23.4% year over year.
- For the full year, RigNet reported a net loss of $62.5 million, or $3.34 per share, though that loss narrows quite a bit after adjusting for the arbitration award, with the adjusted net loss coming in at $11.8 million, or $0.63 per share. Full-year adjusted EBITDA, in the meantime, was $34.8 million, up 17.3% year over year.
- The company ended the quarter with a project backlog of $45.5 million, which is up from $41.4 million during the third quarter and $26 million in the year-ago period due to new project wins in the U.S.
What management had to say
CEO Steven Pickett commented on the company's results by saying:
As Pickett noted, the company's underlying business performed well during the fourth quarter despite continued challenges in the offshore drilling market. That's due in no small measure to the company's strategic investments in recent years to expand its technology offerings, which helped drive revenue growth last year.
While RigNet lost the first phase of its dispute, the company plans to "vigorously pursue our counterclaims in Phase II with the goal of minimizing any final award amount," according to Pickett. However, it did proactively negotiate with its creditors to ensure it has the borrowing capacity necessary to make any payments when they come due, after having ended the year with only $21.7 million in cash.
On a more positive note, Pickett stated that "looking ahead, we remain focused on the business and I believe we are well positioned to continue our overall growth in 2019, which will largely come in the back half of the year, through our bundled offerings combining ultra-secure network communications, specialized apps, and actionable machine-learning insight."
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