RigNet Inc (NASDAQ:RNET) reported its second-quarter results after the market closed on Tuesday. While its revenue was affected by the downturn in the oil market, the company's bottom line improved as it cut costs. Because of that bottom-line improvement, as well as its strong balance sheet, the company believes it's well positioned to continue delivering solid results despite the near-term challenges in the energy marketplace.
A look at the numbers
RigNet reported second-quarter revenue of $75.1 million. That represented a 6.9% decline over the prior year and 3.3% over last quarter and missed analysts' estimates by roughly $1 million. Driving this decrease was the significant downturn in the oil market, which is shrinking drilling budgets and therefore RigNet's market opportunity.
Despite the weaker revenue, RigNet delivered a noticeable improvement on the bottom line, as it delivered cash earnings of $15.4 million, or $0.86 per share. That represents a 3.8% increase from the year-ago quarter and a 7.5% increase from last quarter. Meanwhile, GAAP earnings came in at $0.34 per share, which was a vast improvement from last quarter's $0.06-per-share loss while also beating the consensus estimate by $0.08 per share. Driving this better-than-expected result were adjustments that RigNet made to its cost structure, as general and administrative expenses fell 23% quarter over quarter to $16.4 million.
The company also kept its capex spending at bay, spending only $8.1 million during the quarter, which is significantly lower than the $11.4 million it spent in the year-ago quarter. This development resulted in a significant increase to the company's unlevered free cash flow, which surged 44.1% year over year to $10.4 million. As a result, the company's balance sheet remains very strong, with $61.5 million in cash against just $73.5 million in debt.
A look at the outlook
RigNet expects the market to remain challenging in the near term, as the continued weakness in the oil price is a big headwind for customer spending. That said, it maintains a very strong financial position, which will enable it to execute its long-term growth plans even under current market conditions. Further, the company has the capacity to pursue acquisitions if a compelling opportunity is available.
RigNet delivered a better-than-expected quarter thanks to come cost-cutting, which drove bottom-line growth even as the top line continues to shrink. The company will need to continue to keep its costs down as the oil market remains weak, with few signs of improvement especially after oil plunged 20% last month from its recent peak. Still, RigNet has the financial strength to weather this storm and wait for conditions to improve in the future.