RigNet (NASDAQ:RNET) continued to battle a sluggish offshore drilling market in the third quarter, which weighed on results. However, the company has been working to overcome those weak market conditions by acquiring new technologies to diversify and grow its business. Those recent deals have provided the company with what it hopes will be a new growth engine while it waits for the eventual recovery in the offshore market. 

RigNet results: The raw numbers


Q3 2017

Q3 2016

Year-Over-Year Change


$50.8 million

$50.6 million


Net income (loss)

($4.2 million)

($1.7 million)






Data source: RigNet Inc. EPS = earnings per share.

An oil worker holding a laptop while looking at an oil pump jack.

Image source: Getty Images.

What happened with RigNet this quarter? 

RigNet's revenue rose thanks to recent acquisitions.

  • RigNet's sales not only increased versus the year-ago quarter but were $1.7 million higher than the second quarter. The primary driver was its newly established applications and Internet of Things segment (apps and IoT), which contributed $5 million in revenue during the quarter, $3.4 million higher year over year and $2.6 million above last quarter's results. The company created that business unit after completing its acquisitions of ESS and DTS. RigNet now operates three business segments: managed services, systems integration, and apps and IoT.
  • The revenue growth in the new segment helped offset weaker revenue in the managed services segment. Overall, those sales were $40.2 million during the quarter, which was $0.4 million lower sequentially and $5.4 million less than last year's third quarter. Meanwhile, revenue in the systems integration segment was $5.6 million in the quarter, which was down $0.5 million from last quarter but $2.2 million higher year over year.
  • While RigNet reported a wider loss than it did in the year-ago period, that was due in part to an additional $1.6 million of acquisition and restructuring costs during this year's third quarter. In the meantime, its net loss narrowed slightly from the second quarter when it reported a loss of $4.25 million, or $0.24 per share.
  • The company's unlevered free cash flow also improved sequentially, from $1.14 million to $1.99 million, though it's down sharply from the $6.6 million it pulled in during the year-ago quarter due to the additional acquisition costs.

What management had to say 

CEO Steven Pickett felt this way about the company's third-quarter results:

Proud of how the team responded to our customers' needs during and in the wake of Hurricane Harvey. Despite those challenges, the team delivered revenue growth for the second consecutive quarter and site count growth for the third consecutive quarter. During the third quarter, our team expanded RigNet's market position by increasing site count by approximately 12% quarter over quarter while delivering $2.0 million in unlevered free cash flow.

RigNet faced several headwinds during the quarter, including persistently weak oil prices and Hurricane Harvey, which weighed on offshore drilling activities. However, the company was able to partially overcome those headwinds by completing several acquisitions that enabled it to increase the number of sites it serves while also improving the products and services it can offer customers.

Looking forward 

While RigNet has taken steps to diversify away from the offshore drilling market, the company remains levered to that market. While it has been under pressure again this year, optimism is starting to grow. Oil prices are up sharply in recent months, which is giving drillers the confidence to sanction new projects. In fact, during the third quarter, oil and gas producers announced several final investment decisions to move forward with new projects starting in 2018. As a result, analysts now believe that drilling rig utilization will improve slightly next year followed by stronger growth in 2019 and 2020. Those trends bode well for RigNet because revenue should rise as more offshore drilling rigs head back to work.

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