What: Shares of RigNet (NASDAQ:RNET) slumped more than 15% by 10:45 a.m. ET on Tuesday after the company's fourth-quarter results yesterday revealed some troubling developments.
So what: RigNet's results were weighed down by the oil market downturn as well as a dispute the company is having with a customer. That caused it to post two sets of financial results for the quarter that weren't all that great.
For the quarter, revenue came in at $61.8 million without the contract dispute and $52.2 million including it. Both numbers are down substantially over the prior year, with the adjusted revenue number down 28.7% while the non-adjusted number was down 39.8%.
Meanwhile, quarterly cash earnings were even weaker when taking the contract dispute into account. That's because while the conflict resulted in a $9.6 million negative impact to revenue, its impact to earnings was even greater at $15.6 million. This is due to it taking into account not only the revenue impact but project cost and accruals of $6 million as well. The net result was a more than 95% year-over-year drop in earnings. Having said that, without the dispute, earnings would have increased by 15.7% due to the company's ability to control its costs.
Now what: RigNet is having a tough time right now. Not only is its core business being affected by the slowdown in the offshore drilling sector that's showing no signs of improving, but now it has to deal with friction with a key customer. Given that investors hate uncertainty, the contract dispute is only adding to an already uncertain situation at RigNet.