The improvement in the oil market is starting to have a noticeable impact on RigNet's (NASDAQ:RNET) financial results. While the company lost money again in the first quarter, revenue rose sharply versus the year-ago period due to the impact of improving market conditions and recent acquisitions. Those two catalysts should continue acting as tailwinds in 2018, which looks like it will be a much better year for the offshore oil service company.

RigNet results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$53.8 million

$48.1 million


Net income (loss)

($5.6 million)

($2.0 million)






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

An offshore drilling rig at sea.

Image source: Getty Images.

What happened with RigNet this quarter? 

Recent acquisitions and improving activity levels helped push revenue higher.

  • Revenue jumped versus the year-ago period as sales increased in all three segments. Leading the way was the recently established applications and Internet-of-Things (apps & IoT) segment, where revenue rose $2.9 million to $5.3 million. Systems integration revenue, meanwhile, increased $2.5 million to $6.4 million. Finally, managed services revenue was up $0.4 million to $42.1 million. Driving the increase in sales was the company's strategy to grow into the apps and IoT space, increased activity on systems integration projects due to higher oil prices, and the impact of acquisitions.
  • Sales, however, did decline by 5.2% sequentially, mainly as a result of lower systems integration activity.
  • Overall, sites managed rose more than 20% versus the year-ago period to 1,199. While the biggest gain came from onshore land sites, which was up nearly 29%, the company saw a 9% uptick in offshore drilling rigs sites.
  • RigNet's net loss deepened despite the year-over-year improvement in revenue. That's because selling and marketing costs more than doubled, while general and administrative expenses rose 30%.
  • The company's unlevered free cash flow also declined, going from $4.1 million in the year-ago period to just $806,000 in the first quarter due to not only the higher operating costs but also a $2.6 million increase in capital expenses.

What management had to say 

CEO Steven Pickett commented on the company's results, stating:

In the first quarter of 2018, the RigNet team delivered 12% revenue growth compared to the prior-year quarter, two consecutive quarters of managed service segment revenue growth, and increased site count in all categories compared to the prior-year quarter and prior quarter. RigNet's bundling of applications and IoT to our core offering contributed to site count growth of 20.5% in the last 12 months. The recent acquisitions of Auto-Comm and SAFCON will grow both our managed services and systems integration businesses and will further enhance our relationships within the oil and gas industry.

As Pickett notes, RigNet's revenue continues to grow due to the impact of a recovering oil market and the company's efforts to expand both organically and via acquisitions. One of the benefits of its recent deals is that the company has been able to cross-sell newly acquired products and services to its customers, which provided an additional revenue boost. 

Looking forward 

After several challenging years, the oil market is clearly in recovery mode this year. Oil prices recently topped $70 a barrel, which is incentivizing oil producers to boost investments in major offshore projects. After sanctioning 20 major projects last year, the industry should greenlight 25 to 30 more this year, which will necessitate more drilling rigs heading back out to sea in the coming months. That upcoming wave of activity will provide more work for RigNet, which could help accelerate the recovery in its financial results. 

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