RigNet (RNET) Q4 2018 Earnings Conference Call Transcript

RigNet (RNET)
Q4 2018 Earnings Conference Call
March 15, 2019 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

See all our earnings call transcripts.

Prepared Remarks:

Operator

Ladies and gentlemen, welcome to RigNet's fourth-quarter 2018 conference call. My name is Victor, and I will be your coordinator for today. [Operator instructions] And I will now turn over the presentation to Lee Ahlstrom, RigNet's senior vice president and chief financial officer. Mr.

Ahlstrom, please proceed.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Thank you, Victor, and good morning, and welcome to RigNet's fourth-quarter and full-year 2018 earnings call. A copy of our earnings press release with supporting schedules, including schedules which reconcile the non-GAAP metrics we'll discuss today to the appropriate GAAP metrics, is posted to our website, www.rig.net, under our Investor Relations page. For those of you who would like the release in PDF format, that is posted as well. Before we get started, I'd like to make you aware that we will be making forward-looking statements today.

Any statements that are not historical facts, including statements related but not limited to market expectations and future plans are forward-looking statements that involve certain risks, uncertainties and assumptions. These include, but are not limited to risks associated with the general nature of the oil and gas industry, customer and other third-party interactions, any discussion of the GX arbitration proceedings and possible outcomes and other factors detailed in the Risk Factors section of RigNet's most recent annual report on Form 10-K, and in our other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated. RigNet disclaims any duty to update the information presented on this call.

And now, I'd like to turn the call over to Steve Pickett, RigNet's chief executive officer and president. Steve?

Steve Pickett -- Chief Executive Officer and President

Thank you, Lee. Welcome, everyone, to the call and thank you for joining the call. This morning, we'll review some of the key highlights of the fourth quarter and the full year and we'll share a bit about our roadmap ahead. Then Lee will go through some of the financial highlights.

Following that, as always, we'll open it up for questions. Yesterday, after the market closed, RigNet reported a net loss for the fourth quarter of $49.7 million or $2.62 per share based on revenues of $60.2 million. For the full year, we reported a net loss of $62.5 million or $3.34 per share on revenues of $238.9 million. Earnings for both the fourth quarter and the full year included a $50.6 million net noncash charge related to the results from Phase I of the GX arbitration proceedings.

We'll talk a little more about that, but if we adjust out this onetime, noncash charge, earnings for the fourth quarter would have been $0.9 million or $0.05 per share, and for the full year, net loss would have been $11.8 million or $0.63 per share. Adjusted EBITDA, a non-GAAP measure we define in our press release and one of our key performance metrics, was $10.5 million for the fourth quarter, up just under 21% from the third quarter. Full-year adjusted EBITDA was $34.8 million, up 17% from 2017. Our fourth quarter was marked by continuing strong operational performance despite a decline in quarterly revenue, driven largely by lower equipment sales in our managed communication services segment and our Apps & IoT segment, which are difficult to predict, the company executed well across all three of our business segments in the face of headwinds created by a nearly $30 drop in Brent oil prices during the quarter.

Let me touch on some highlights for the quarter in each of the segments. In our managed communication services business, we won a number of new contracts and expanded our business with our fleet customers. Business in the Gulf of Mexico was strong despite competition. We did lose a number of sites during the quarter, particularly in the land business where customers tend to respond more quickly to commodity price changes.

We've already seen a rebound in that category since the start of the year. Our offshore rigs site count declined by seven net rigs, including five Noble rigs between the third and fourth quarter. We're expecting the final Noble rigs to roll off during the first and possibly second quarter of 2019. These roll-offs, along with other softness due to offshore oil and gas market challenges, cause us to forecast quarter-over-quarter declines in revenue and adjusted EBITDA in the first half of the year.

Despite this, we're looking forward to continued improvement in the offshore industry, and based on public announcements made by our customers, we expect off-shore spending to be up modestly later in 2019 and more significantly in 2020. Nonetheless, one highlight for the MCS, or the managed communication services business, is that we executed a new exclusive fleetwide contract with an offshore drilling contractor with a term of three years. This includes rigs currently in operation, some of which were already served by RigNet as well as any rigs which were brought online during the three-year contract period. I'm also pleased to share that we now have approximately 60% of the Gulf of Mexico LTE network now operating and carrying live traffic.

This is a significant achievement by the team and is an important service upgrade to RigNet's current Gulf of Mexico digital microwave infrastructure, adding 4G and 5G-enabled LTE capability with mobility including rowing coverage in addition to making available point-to-point LTE business services. When fully complete, this network will span a coverage area of up to approximately 45,000 square miles for B2B applications and up to approximately 30,000 square miles for consumer applications. This new LTE network leverages low-band spectrum, which is able to penetrate offshore assets more effectively than higher-frequency solutions. We look forward to sharing more about this important investment in the near future.

In our Apps & IoT segment, we had our strongest year yet with year-over-year growth of 65%, while launching new products and driving new business lines. Intelie, our real-time machine learning platform, is being received with enthusiasm by customers as they discover the diverse applications where we can deliver actionable results that drive operational and financial improvement. During the quarter, we signed a new Intelie contract with a major drilling contractor for a three-year term where we will be helping the company monitor its BOPs and key rig systems. In addition, Intelie is also being considered by a second drilling contractor, the one I mentioned earlier, where we had exclusively secured the managed communications services business.

So our strategy of closing business in one of our business segments and then pulling through business in another is working. We also continued to make progress on serving oil and gas operators with Intelie. We've just signed an agreement with Petrobras, the national oil company of Brazil, that allows us to resell the applications that we have developed together. Additionally, we've just signed agreements with another supermajor to develop applications for Intelie where they will fund development of individual modules through their R&D budgets and we will have the full intellectual property.

This will help us rapidly increase the offerings we have in the Intelie app store, which runs on the Intelie platform. A number of paid proof-of-value trials are under way at other operators with opportunities which range from real-time monitoring of offshore rigs to planning new wells, to monitoring fracking performance on unconventional wells in the Permian Basin. Since the acquisition of Intelie, just 11 months ago, we secured orders with three supermajors, one of the largest drilling contractors in the world and with the growing North American-based fracking company. We've also secured orders for paid POVs, proof-of-value trials, with two other supermajors.

In terms of our cybersecurity solution, Cyphre, it's also seeing significant interest, both with our direct sales team as well as through our channel partners, which now include AT&T, SingTel and Arabsat, which was announced in the fourth quarter. We have a group of companies trialing Cyphre in the energy space and we've made some encouraging progress in the government vertical. We've also launched a few new solutions, including video motion analytics for our AVI, our Adaptive Video Intelligence product, that enables intelligent analysis of videos feeds to detect hazards at remote worksites and CrewFlix, part of our CrewConnect suite of products designed to enhance crew welfare and morale. Our SI team, System Integration team, continues to perform impressively.

In 2018, we increased our project backlog by 75% to end 2018 at $45.5 million by delivering some significant wins in this project-based business. Our renewed focus on project execution discipline and customer service are paying dividends compared to the performance from several years ago. Additionally, we're seeing pull-through business as a result of our projects. One example is that in one of our large SI project, a customer has selected Intelie, partnered with another firm, to provide real-time monitoring and tracking of personnel within the facility to enhance safety and security.

We expect to announce more about that shortly. Before turning the call over to Lee, to talk more about the numbers, let me comment on the GX dispute. In December of 2018, we announced that an arbitration panel had ruled against us in the first phase of our dispute with Inmarsat over a $65 million take-or-pay contract and had declared an interim award to Inmarsat of $50.8 million. We were surprised and shocked at the ruling and still fundamentally disagree with the panel's Phase I conclusions.

Nevertheless, let me make a couple of key observations. The award is an interim award. No cash is due at this time. We are well into Phase II of the proceedings where we have the opportunity to present our counterclaims to the panel to reduce the amount of the award.

The Phase II hearing is planned for June, and if the proceedings follow a similar time line to Phase I hearing and results, we would expect to hear the panel's decision in late 2019. We've already concluded an amendment to our existing bank facility to provide financial flexibility in the event that the panel finds we still owe a significant amount, following Phase II. Lee will talk more about the specifics of that amendment. As a result of the Phase I ruling, our focus will change slightly in 2018 until we know the ultimate outcome.

We've been fairly aggressive in our M&A activity over the last two years and we will prudently take a pause from considering larger transactions. Instead, we'll continue focusing on increasing customer service and operational excellence, manage our balance sheet and continue to improve the integration of the businesses we've already purchased that are now under the RigNet umbrella, including developing new and more valuable bundled solutions, which will capitalize on the synergies we've already achieved. In closing, the GX news was unexpected but it has not changed our approach or our commitment to delivering ultra-secure communication services coupled with our growing catalog of applications including real-time machine learning-based artificial intelligence. With that, let me turn it over to Lee.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

All right. Thank you, Steve. Let me begin by recapping what Steve mentioned earlier, which is that consolidated quarterly revenue was $60.2 million, up 6% compared to $56.8 million in the prior year quarter and down 7% from $64.8 million in the fourth quarter of 2017. All of our segments reported revenue increases compared to the prior year quarter.

Now the decrease compared to the third quarter included a $2.2 million decrease in equipment resale, consisting of a $1.7 million decrease of equipment resale in MCS and another $0.5 million decrease in equipment resale in Apps & IoT. The remainder of the Q-on-Q revenue decline is largely attributable to billings related to our SI business, which, as you know, uses project-based accounting and can be a bit lumpy. For full-year 2018, revenue was $238.9 million compared to $204.9 million in 2017, up 16.6%. GAAP net loss attributable to common stockholders in the fourth-quarter 2018 was $49.7 million or $2.62 per share compared to a net loss of $5.7 million or $0.31 per share in the fourth-quarter 2017 and a net loss of $2.8 million or $0.15 per share in the prior quarter.

Net loss attributable to common stockholders for the year ended December 31, 2018, was $62.5 million or $3.34 per share compared to a net loss of $16.2 million or $0.90 per share in the year ended December 31, 2017. The net losses in the fourth quarter and full-year 2018 include the $50.6 million GX charge, net of approximately $0.2 million of prior accruals related to the previously disclosed interim ruling in the GX dispute that Steve discussed. If we exclude the impact of the GX charge, we generated positive earnings in the fourth-quarter 2018 of $0.9 million or $0.05 per share. This is actually the first time the company has delivered a positive quarter on an adjusted basis since June 2015.

Again, if we exclude the impact of the GX charge from the full-year results, net loss for 2018 was $11.8 million or $0.63 per share. Now let's talk a little bit about the segments. Managed communication services, or MCS, revenue was $42.9 million for the quarter compared to $41.7 million in the prior year quarter and $44.9 million in the third quarter of '18. And as I mentioned, $1.7 million of that $2.1 million decrease quarter-on-quarter was due to equipment sales, which, as I think you know, deliver smaller margin than our bandwidth sales and are more difficult to predict.

Full-year 2018 MCS revenue was $171.6 million compared to $164.2 million in 2017, which was up about 4.5% despite the Noble losses during the year. And this is probably the right place to make a few comments about site count, which was 1,323, up by 152 year over year, but down by 27 sites in the fourth quarter compared to the third quarter. Although the site count was impacted by the 40% decline in oil prices in the fourth quarter, production sites actually increased while offshore drilling rigs, maritime and other sites decreased. With respect to our Noble business, we had 10 Noble rigs roll off in 2018.

But if you look at our drilling rig category count at year-end 2017, which was 182, we made up for the lost Nobel business given our rig count of 184 at the end of 4Q '18. In general, the Noble changeover has proceeded more slowly than we originally anticipated, which has allowed us to continue to generate revenue on active assets. Since the end of the year, we've decommissioned about fivemore of the Noble assets, and we currently expect that the final seven rigs would be decommissioned sometime by 2Q '19, so there will be some additional revenue impact in Q1 and Q2 from those rigs, unless we're able to secure opportunities to replace that revenue. Our other three site count categories, production, maritime and other, which is mostly onshore North America, all grew during the year, and as Steve mentioned, overall site counts have actually grown since the end of 2018.

In Apps & IoT, revenue was $6.3 million for the quarter compared to $5.8 million in 4Q '17 and $7.5 million in 3Q '18. For full-year 2018, Apps & IoT revenue was $25.7 million compared with $15.6 million in 2017. The main drivers here were increases in SaaS revenue as well as some equipment sales. Now a couple of factors were responsible for the higher revenues in the third quarter relative to the fourth quarter of '18, and I already mentioned the $0.5 million of equipment resales that we had in the third quarter.

But the remainder of the delta was primarily result of onetime items in Q3, largely related to acquisitions. I think the important thing here is the growth year over year in this segment, which was about 65% and the growth trajectory were on as described by the some of the wins that we're getting in the business. System Integration revenue for the quarter was up -- was $11 million, up 18% from $9.3 million in the prior year quarter but down from $12.4 million in the prior quarter. Full-year 2018 SI revenue was $41.6 million compared to $25 million in 2017.

And the revenue reduction from 3Q to 4Q was due to the project-based nature of the business. Gross margin for SI increased to 42.3% from 26.2% in Q3 and 34.8% in 4Q '17. As a result of project management discipline helping to drive SI cost lower, we often find as we get to close to the end of a project, we're able to benefit from higher-margin change orders, which thus, drives up the overall gross margin for SI. As discussed, in the quarter, we recognized the $50.6 million of net expense for the GX dispute as well as $1.5 million of change in fair value contingent consideration and are announced.

G&A expenses totaled $12.1 million in Q4 compared to $12.6 million in the prior year quarter and $14.7 million in 3Q '18. The G&A decrease relative to 3Q was largely due to decreased labor cost and professional fees including GX legal fees. Full-year G&A was $53.2 million compared to $44.8 million in 2017. The increase between '17 and '18 is largely driven by the 2018 acquisitions of Intelie, SAFCON and Auto-Comm.

Adjusted EBITDA was $10.5 million in the fourth-quarter 2018, a $23.4 million increase compared to $8.5 million in the fourth quarter of '17 and a 20.8% increase compared to $8.7 million in the prior quarter. Fourth quarter benefit -- benefited from lower G&A, which included the reduced employee cost and GX legal fees I mentioned as well as some of the cost reductions in the SI segment. For full-year '18, adjusted EBITDA was $34.8 million, a 17.3% increase compared to $29.7 million for the year ended December 31, 2017. We're pleased with the continued growth in this metric, which we believe is an important indicator of the health of the company.

Capital expenditures were $10.8 million compared to $4.0 million in the prior year quarter and $6.5 million in 3Q '18. Capex spend for the quarter included a total of $4.6 million of investments in our LTE network and the purchase of a new facility in Lafayette, Louisiana, that will enable us to consolidate three separate legacy facilities. We still expect the LTE project to be completed within the first half of 2019. The remaining $5 million of capex was substantially composed of success-based commitments.

Full-year 2018 capex was $30.5 million compared to $17.9 million in 2017. Now if we adjust out for the total of $5.8 million of LTE and facility investments, full-year capex was about $24.7 million and the delta between the 2017 amount and the 2018 amount was largely due to an increase in success-based capex in 2018. On to the balance sheet. We ended the year with $21.7 million in cash and outstanding debt of $77.2 million, including both current and long-term.

As Steve mentioned, we amended our credit agreement with our bank group and we announced that last month, following the adverse GX ruling, we proactively negotiated the amendments to ensure that we'll have the liquidity necessary to fund any GX dispute payments when they come due. The amendment included converting $30 million of our revolver balance to a new term facility, freeing up capacity on the revolver as well as extending the maturity date to April of 2021. Before I turn it back to Steve, let me make a few general comments about the business. As you know, we don't provide formal guidance and we're not going to start today, but a few qualitative comments may help you think about our business in 2019.

As we mentioned, the MCS business will be under a bit of pressure in the first two quarters as we see the remainder of the Noble rigs role off and general softness in the offshore market. Additionally, we benefited in Q4 from lower legal fees related to GX, and we're now preparing our vigorous presentation of our counterclaims for Phase II, so fees are going to be a higher in the first half of 2019. With the great opportunities Steve mentioned during his remarks, we expect the Apps & IoT business to continue to grow during the year, and with our strong SI backlog, we believe that the business will continue to deliver, although we will always have some variability in terms of recording revenue as costs are incurred under POC accounting. So for 2019, we expect to see more revenue recognition in SI in the second and third quarters compared to the first and fourth quarters.

Overall, we're very pleased by the performance the team delivered in all segments in 2018. As a closing reminder, MCS was up 4.5%, which was strong relative to our competitors in energy; Apps & IoT was up 64.6% and SI was up 66.1%. We're encouraged by this growth and look forward to continuing to deliver in 2019. And with that, let me turn it back to Steve.

Steve Pickett -- Chief Executive Officer and President

Thank you, Lee. Now we're about to open the line for questions. But before we do that, I did want to share that earlier this month, we launched a redesign of our website at www.rig.net. We streamlined the site, making it easier for customers to learn about our capabilities and we think we've made it -- made our story easier to follow for investors as well.

If you haven't already visited this new site, we encourage you to do so, and we'd love your feedback. I also want to provide a big thanks to our RigNet team for outstanding operational results in 2018. You've delivered revenue growth in every segment and delivered growth in adjusted EBITDA during the year. The entire executive management team appreciates the hard work that has already started in 2019 in order to ensure a successful year this year as well.

And so with that, let's open up the line for questions, please. 

Questions and Answers:

Operator

[Operator instructions] And our first question comes from the line of Allen Klee from Maxim Group. You may begin.

Allen Klee -- Maxim Group -- Analyst

Yes. Good morning. Could you just go over again with Noble -- did I hear correctly that there were five rigs that were lost in the quarter? And then, kind of, how many more you expect to lose in the first and second quarter? And then, you had also mentioned a win in a McDermott contract earlier and to any extent the timing that, that could potentially offset some of it? Thank you.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

So we did say that we had 10 of the Noble rigs roll off throughout 2018. And we did, already this year, according to the decommissioning schedule that Noble provided to us, we've got five more that have already rolled off here through today, and we expect seven more that get decommissioned between now and the end of Q2. Although those are subject to potential slippage, I mean, we typically are subject to Noble's drilling schedule and their customers.

Steve Pickett -- Chief Executive Officer and President

And in terms of McDermott, that fleet is now completely fired up, and we are delivering service across that fleet to McDermott who's also selected us for a number of Over-the-Top solutions as well.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Just to close that out. We did also say that, of the 10 that we've rolled off with Noble in 2018, five were in the fourth quarter.

Allen Klee -- Maxim Group -- Analyst

Perfect. Thank you. So in terms of capex for 2019, is it -- how do we think about how much extra spending there will be related to the LTE project left? And then, what the run rate is going in just on the base case of where you stand?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Yes. So I would expect the remainder of the LTE capex to hit us here in the first and second quarter so with the build-out done by sometime in the second quarter. We are obviously, subject to weather issues in the wintertime here in the Gulf of Mexico, which sometimes prevents you from getting out to a site as well as just access from our landing rights locations. In terms of overall capex for 2019, you should think that it's going to be down from where we were in 2018 but not significantly down.

I would expect -- I think that we've talked in the past about having a run rate on success-based capex of roughly $6 million a quarter. That's how I would tend to think about this. That can be a combination, I guess, of success-based capex as well as renewal capex. Sometimes, for example, when you've had a contract with a customer for a long time and it comes up for renewal, there's some routers that needed to be changed out or equipment that needed to be upgraded that will ultimately fall in the capex.

So hopefully, that gives you a little bit of color on the shape of how capex is going to shake out.

Steve Pickett -- Chief Executive Officer and President

And to supplement that. In addition to finishing the build-out of the LTE network in the first half of the year, we will also be finishing the build-out of the facility in Lafayette. And as a reminder, we're building out that facility in order to consolidate three different operations that we have around Lafayette that came to -- two of which came to us as a result of acquisitions.

Allen Klee -- Maxim Group -- Analyst

OK. Thank you very much.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

OK. Thanks, Allen.

Steve Pickett -- Chief Executive Officer and President

Thanks, Allen.

Operator

[Operator instructions] Our next question comes from the line of Walt Chancellor from Macquarie. You may begin.

Walt Chancellor -- Macquarie Group -- Analyst

Good morning. So I guess, as it relates to the GX settlement, appreciate all the color there. In terms of potential cash outflows, what's the earliest if you were to get in an adverse ruling in Phase II that you could see cash outflows? Would it be at the end of '19 or 2020, 2021? Can you provide any context on that?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Well, yes, I guess we can try to. I mean, I guess, simple fact of the matter is we don't really know. So let me use history as prologue. At Phase I, the hearing was in June last year and on, I would say, less complex and less numerous legal matters.

It took the panel roughly five months to deliver that decision. So I think, we've said, we expect the ruling on Phase II in the back half of this year. I think my expectation, personally, is that it's probably closer to the end of the year than it is to the midpoint of the year. So we could see a cash outflow potentially late fourth quarter or potentially even into 2020.

I don't think it goes out into '21, I would be surprised if the panel took that long to render its ruling. Does that help?

Walt Chancellor -- Macquarie Group -- Analyst

Yes. Thank you. I appreciate it.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

I'm afraid, that's about all we can give you on it.

Walt Chancellor -- Macquarie Group -- Analyst

And then, I guess, one for Steve. As you think about Intelie and the market opportunity there, we're continuing to see shale mature, we're continuing to see a focus on data. It's a very iterative process, bigger players are getting involved. That would seem like an interesting end market.

It sounds like you're making some progress there. U.S. onshore relative to international, relative to offshore, where do you see the biggest opportunity for that offering if you sort of think about an end market for the oil and gas business?

Steve Pickett -- Chief Executive Officer and President

Yes. Sure, Walt. First of all, thanks for the question. So a couple of comments.

One, no doubt, there is an enormous amount of industry focus on capitalizing on the data that's generated from these sites where work is done, in order to create a safer environment for employees and in order to drive operational efficiencies. And, by the way, I think the addressable market here over time becomes larger than the comms, the communications market, it's a very meaningful addressable market for real-time machine learning-based artificial intelligence. In terms of the specific areas within oil and gas, we're seeing early attraction in the drilling market, particularly the offshore drilling market, I think that's largely driven by the early success that Intelie had with Petrobras in Brazil where they had been working together for seven years now. So there's really quite a head start as it relates to building meaningful applications for offshore activity.

As we've announced, we've also now engaged with a fracking company here in North America. So I think that's another opportunity that's developing, but it develop more slowly than the drilling opportunities, given the existing application portfolio that we have for -- to support offshore drilling activities.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Yes. It's interesting, Walt. Obviously, there are applications on both onshore and offshore because both sets of customers are very focused on margins and breakeven prices and doing anything they can to get the edge, which will help deliver their operational results. Offshore, I think is a little bit less elastic when it comes to activity levels versus oil price whereas, of course, onshore, you can turn those rigs on and off much more quickly.

So I think there's some great opportunity to expand in the fracking market, onshore, but also to do other well monitoring activities for the majors and the independents who are focused on trying to make sure that they can get their breakeven prices as low as possible to continue to produce when you've got a $30 price swing in a quarter.

Steve Pickett -- Chief Executive Officer and President

Maybe just to add a little more color to that and the overall business, the other thing I'd ask you to consider is that as there's a further deployment of HTS technologies, there's an opportunity to increase the amount of data that flows from these sites, which creates an opportunity to connect more things, and the more things that are connected and the more data that traverses the network, frankly, the bigger and better the results are in terms of real-time machine learning-based artificial intelligence. And now, as you begin to think through bigger networks, more things connected, you do begin to think through the potential unintended consequence of more things being susceptible to cyber attack. And so, I think what goes hand-in-hand with this growth in AI is the need to protect the networks. And so what we're seeing in our business, indeed, is a fair amount of enthusiasm not just about what we can do to help drive operational improvement, machine learning, but also our ability to step in and provide that extra protection on the network and protection of the data for our customers.

Walt Chancellor -- Macquarie Group -- Analyst

Thank you all very much for the answers. Great articulation of how those technologies complement each other. Have a good day.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Yes. Walt, it might be worth commenting too, one of the things we're starting to see in the -- particularly in the Intelie contracts that we're signing is, we have an initial set of products which we deliver, which creates a certain set -- or certain amount of monthly recurring revenue but then often, these contracts are actually specifying some additional development, which needs to take place, which, once we hit the development milestone and turn on the next set of apps on the Intelie platform, can substantially increase the amount of revenue that comes to us under that contract. We then are able to take those apps because we've got the intellectual property and continue to sell those apps to other customers who are interested. So it does have a bit of a virtuous effect as we continue to develop and put more product into the marketplace.

Steve Pickett -- Chief Executive Officer and President

Yes. It scales nicely.

Walt Chancellor -- Macquarie Group -- Analyst

Great. Thank you, guys.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

You bet.

Operator

Thank you. And our next question comes from the line of Josh Goldberg from G2. You may begin.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Good morning, Josh. Josh, you might be on mute.

Operator

All right. And our next question comes from the line of Allen Klee from Maxim Group. You may begin.

Allen Klee -- Maxim Group -- Analyst

Hi. Just one follow-up. In the managed communications segment, you talked about the roll-off of some Noble contracts but you also spoke about a win and an exclusive three-year contract with an offshore driller. Is there a way to think about the potential offset that that could have to the -- which you mentioned of the declines from Noble?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

So there are -- I won't get too specific on who the contractor is or the nature of their fleet, we already have a number of their rigs under contract. However, this contractor is also winning new business. And as they reactivate rigs or activate rigs from shipyards, we will be putting the comms business on there. So fundamentally, it's going to really depend on the shape of the recovery in the offshore market.

I think -- I was at a conference a couple of weeks ago in Oslo, the oil and gas industry players, I think, are speaking about the industry more positively, they're very much focused on controlling costs, on utilization, particularly for the drillers and on digital transformation that was actually one of the buzzwords that was mentioned in just about every presentation I attended. But in terms of the ultimate impact to the MCS business, it really will depend on how many of these contractors rigs are able to get jobs and we're able to turn on.

Allen Klee -- Maxim Group -- Analyst

Thank you.

Operator

Thank you. And our next question comes from the line of Josh Goldberg. You may begin.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Hi, can you hear me? Can hear me OK?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Yes. Now we've got you, Josh.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Yes, I'm so sorry. So just a couple of questions. I guess, question No. 1.

On the MCS business, and obviously, you have some puts and takes, but I guess what I'm trying to understand and really our thought about the company is a situation where you have an installed base that you're getting a monthly recurring revenue stream from, that is a profitable business, this quarter you reported $10 million of EBITDA, some quarters, you reported $6 million or $8 million. A very profitable business as it stands right now. And with all the puts and takes about losing a customer and some software, the net of it is that you grew this year in 2018 nicely and you're continuing to expand and add to your product offerings on the IoT side as well as the SI side to really drive additional business from your existing customers as you see this digital transformation. And I'm just curious if that's sort our view that we're just waiting for increased spending from some of these customers and the digital transformation opportunity? It would seem to me that -- again, with all the puts and takes and I know you don't give guidance, that this past year, you thoroughly grew double digits and the environment in front of you is such that extra contract losses, which I know you don't want to get into the amount of, but on a current customer basis, you feel comfortable that this company is a double-digit grower just based on what you see in front of you with some of these new opportunities, both in SI and with the Internet of things.

That's my first question. I know you're not giving guidance because some of it has to do with these puts and takes but just tell investors why, at this price, what the future looks like for the company that's so exciting and obviously, the market share and the oligopoly in terms of pricing that could really put you forward in a big way?

Steve Pickett -- Chief Executive Officer and President

Yes. Josh, I think it was a very good description. You're right, we've decided not to provide specific guidance, but maybe a couple of comments on your comments. No.

1, indeed, we think we're poised to benefit from increased spending by the industry, in general. But the other thing that we're seeing and I think this is reflected in -- I think this is reflected in the growth rate that you're seeing is that we're also capturing an increased share of wallet from our customers due to the fact that we're now offering things that ride on top of the communications networks that we provide. And by the way, we're also finding that those things that ride on top of the network that we provide, ride on tops of other networks that they might use as well. So there's yet another opportunity to increase the growth rate due to those things being adopted by other companies in the energy sector and by other companies outside the energy sector through some of our other partners, which of course include AT&T, SingTel in Asia and in Arabsat.

So I think the share of wallet consideration is an important one as well.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Let me also say, I would -- you're exactly right, I think, in how you characterized the MCS business. It's a nice profitable business. And we were able to grow it this year but it was in the face of some of our competitors announcing double-digit declines in that part -- in their energy business. So we're really pleased with that.

But I will tell you it's a challenging business because it is tied to the overall macro of the oil and gas industry. So to think that...

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Which is showing improvement.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

There's no doubt it's showing improvement. We are seeing more of our customers go back to work but -- and again, the enthusiasm that I heard in the conference in Norway, the other week, was very positive compared to where we were six months or a year ago. We just need to really see that translate into more rigs, going back to work, delivering more value to customers.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Just adding to that. I mean, it would seem to me that based on how EBITDA you're generating on $60 million of revenue that even with a loss of a couple of million dollars from some MCS contracts, that you're very confident that your EBITDA should continue to show healthy numbers and possibly grow from here?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

I think -- yes, I mean I think now we're getting into the area of guidance potentially, and I'll just go back to the remarks that we made or that I made in talking qualitatively about the business and sort of the shape of what revenue might look like and some of the cost that we will see in various quarters. But I would say, overall, we do believe this is a business that's going to grow. It's a business clearly where the Apps & IoT segment growing 65% year over year. I don't expect it to grow 65% this year because you know you're dealing with the laws of smaller numbers getting bigger, but I would expect some healthy growth in Apps & IoT this year, and I know the SI team is continuing to add backlog and work that backlog off very efficiently.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

An important question on the...

Steve Pickett -- Chief Executive Officer and President

In terms of EBITDA, at some point, we will be done with the GX matter and so the headwinds from a cost point of view, legal cost point of view will get -- at some point, come to an end as well.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Just on the SI business, the fact that your backlog went up two x last quarter, we kind of thought that, that would grow your SI business a little bit more in the fourth quarter. Obviously, it was very good margin. But you actually added backlog to $44 million or so entering this year. And I think you talked about that, kind of, rolling off in the next 12 to 18 months.

I'm just curious, I know it's a gateway drive, I know it helps you get into winning additional contracts. But just the cadence of that backlog number, are you confident that, that number will be -- will you be able to record that revenue in the first half of 2019? Or these are much longer contracts that, even though it looks impressive that you doubled your backlog, it won't recognize it as revenue this year? Thank you so much.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Sure. Thanks, Josh. And I think I sort of described how we saw the backlog or the revenue coming into the SI business being more focused on Q2 and Q3 this year versus Q1 and Q4. A couple of other comments.

These SI projects typically tend to be anywhere from 12 months to two years. So the backlog right now goes out about two years. The bids team on the SI business is not sleeping. They certainly are focused on responding to ongoing bids.

And that maybe another positive sign that we've seen in the energy industry, it's the number of projects that are available for bidding. There was a big pause in large capital projects in the industry after the downturn hit in 2015, 2016. We've definitely seen an uptick, that uptick continues. Our guys are right in there in responding to frankly, almost more business than they could respond to in terms of the number of opportunities out there.

So don't think that us saying that we're going to grow the backlog by another 100% here, but I think we feel very good about where the SI businesses is and their ability to continue to win work, and as you rightly pointed out, then use that as our gateway drug into the world of comms as well as Apps & IoT.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

So just the -- you're talking about the second and third quarter of '19 you're going to see more revenue? Or are you talking about 2018 when you said that?

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

No, no. I'm sorry, I was talking about 2019 and sort of the shape of revenue which will hit us this year in '19 will be more heavily focused in Q2 and Q3 versus Q1 and Q4.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

OK. Got it. And in terms of some those SI contracts, have you been able to get the additional IoT or MCS business? I know, sometimes, it's not on your systems but the ones that are on your systems?

Steve Pickett -- Chief Executive Officer and President

Yes. In some cases, we have. And that is a strategic mission of the System Integration group here to indeed find opportunities to pull through revenue in other categories. So we did -- we have specifically talked about an opportunity that has developed to basically provide a ruthless management solution on one of the larger projects that we're currently executing, but we'll look for other such opportunities to pull through not just that solution, but other solutions as well.

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

Thanks so much.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

All right. Thanks, Josh.

Steve Pickett -- Chief Executive Officer and President

Thanks, Josh.

Operator

And I'm seeing no further questions at this time. I'd like to turn the call back to Lee Ahlstrom for closing remarks.

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

All right. Thank you, Victor, and thank you all for joining us here on the fourth quarter and full-year earnings call for RigNet. We will be back in May 2019 to report our first quarter of 2019 earnings. I'll be in the office today, available, if you have any follow-up questions that weren't addressed on the call.

So please feel free to give me a ring. Thanks and have a good day.

Operator

[Operator signoff]

Duration: 51 minutes

Call Participants:

Lee Ahlstrom -- Senior Vice President and Chief Financial Officer

Steve Pickett -- Chief Executive Officer and President

Allen Klee -- Maxim Group -- Analyst

Walt Chancellor -- Macquarie Group -- Analyst

Josh Goldberg -- G2 Investment Partners Management LLC -- Analyst

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