The rapid rise in oil prices over the past year is starting to have a positive impact on RigNet's (NASDAQ:RNET) financial results. While the company still hasn't returned to profitability, its revenue is rising fast thanks to that recovery and the impact of its growth initiatives, which has helped narrow its loss. Meanwhile, a more meaningful uptick in offshore drilling activity appears to be only a few quarters away, which suggests even better days could lie ahead for the remote communications solutions provider.

RigNet results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$60.0 million

$49.2 million

22.1%

Net income (loss)

($4.3 million)

($4.2 million)

N/A

Earnings (loss) per share

($0.23)

($0.24)

N/A

Data source: RigNet Inc.

What happened with RigNet this quarter? 

Dual engines fueled revenue growth during the quarter.

  • Revenue not only jumped versus last year's second quarter, but was 11.5% higher than the first quarter.
  • The company experienced across-the-board year-over-year revenue growth during the quarter. Leading the way was its recently established applications and Internet of Things (apps & IoT) segment, where revenue catapulted 170.6% versus the year-ago quarter to $6.5 million. The systems integration segment was also strong as sales surged 91.9% year over year to $11.7 million. The high-octane growth in those two segments helped offset a more modest 2.7% increase in managed services revenue, which rose to $41.7 million. 
  • Sites managed increased to 1,297 during the quarter, which was higher both year over year and sequentially. While the biggest increase came from other sites such as land sites and remote offices, the company added two new offshore drilling rigs sites over the past quarter as it continues to benefit from the early stages of a recovery in that segment of the oil market.
  • RigNet's net loss narrowed both year-over-year and versus the first quarter even though expenses rose because the company received a large tax benefit during the quarter.
An offshore drilling rig at sunset.

Image source: Getty Images.

What management had to say 

CEO Steven Pickett commented on the company's results:

In the second quarter of 2018, the RigNet team delivered 22.1% revenue growth compared to the prior year quarter and 170.6% growth in the Apps & IoT segment compared to the prior year quarter. The RigNet team continues to demonstrate their ability to execute against our strategic growth plan. That plan has made RigNet uniquely able to support our customers' digital transformation with services that are always connected, always secure, and always learning.

As Pickett highlighted, one of the drivers this quarter was the big surge in Apps & IoT revenue, driven by the company's expansion efforts into those areas in the last year. One of the catalysts was the acquisition of Energy Satellite Services (ESS) last July, which strengthened the company's U.S. land and IoT market position. The addition of ESS enabled the company to "provide customers with the latest industrial IoT technology platforms," which is a business it has been able to grow in the past year.

Looking forward 

While acquisitions like ESS have helped boost revenue in the last few periods, RigNet could see an even bigger boost in the coming quarters from the looming recovery of the offshore drilling sector. Several offshore-focused service providers recently noted that they'd witnessed an uptick in drilling project approvals, which should yield an improvement in activity as those projects ramp up over the next several quarters. That increase in drilling activities should grow the number of sites RigNet manages, which would boost its revenue and could eventually help the company to return to profitability.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends RigNet. The Motley Fool has a disclosure policy.