EDGAR 10-K Filing

Company CIK: 1162112
Filing Year: 2021
Filename: 1162112_10-K_2021_0001564590-21-013172.json

---

ITEM 1. BUSINESS
Item 1. Business
For convenience in this Annual Report on Form 10-K, “RigNet”, the “Company”, “we”, “us”, and “our” refer to RigNet, Inc. and its subsidiaries taken as a whole, unless otherwise noted.
Overview
We are a global technology company that provides customized data and communications services. Customers use our private networks to manage information flows and execute mission-critical operations primarily in remote areas where conventional telecommunications infrastructure is either unreliable or unavailable. We provide our clients what is often the sole means of communications for their remote operations. On top of and vertically integrated into these networks we provide services ranging from fully-managed voice, data, and video to more advanced services including: cybersecurity threat detection and prevention; applications to improve crew welfare, safety or workforce productivity; and a real-time AI-backed data analytics platform to enhance customer decision making and business performance.
We deliver advanced software and communications infrastructure that allows our customers to realize the business benefits of digital transformation. With world-class, ultra-secure solutions spanning global IP connectivity, bandwidth-optimized Over-The-Top (OTT) applications, Industrial Internet of Things (IIoT) big data enablement, and industry-leading machine learning analytics, we support the full evolution of digital enablement, empowering businesses to respond faster to high priority issues, mitigate the risk of operational disruption, and maximize their overall financial performance.
Historically, our primary focus has been on customers in the upstream exploration and production segment of the energy industry, including offshore drilling rigs and production facilities. In recent years, we have increased our service offerings across the energy value chain to provide solutions to midstream and downstream customers where systems integration and IoT solutions are key elements. In addition, we have created channel partners around the world, creating opportunities to sell our industry-leading security, IoT, and machine-learning solutions outside of our traditional energy-focused markets.
Recent Development
On December 21, 2020, we announced that our Board of Directors unanimously approved the Company's entry into a definitive agreement whereby Viasat Inc. (Viasat) will acquire the Company in an all-stock transaction representing an enterprise value of $222 million, including the Company’s net debt as of September 30, 2020, based on the closing price of Viasat common stock on December 18, 2020 (the Viasat Merger). Under the terms of the agreement, the Company’s stockholders will receive a fixed exchange ratio of 0.1845 shares of Viasat stock for each share of the Company’s common stock owned by the stockholder. Based on the parties' volume weighted average prices ("VWAPs") for the 20 trading days ending on December 18, 2020, the transaction represents a 17.9% premium for the Company's stockholders. Upon closing, the Company’s stockholders are expected to own approximately 5.7% of Viasat's outstanding common stock. The all-stock transaction is intended to be tax-free to the Company’s stockholders. The transaction, which is expected to close by mid-calendar year 2021, is subject to customary closing conditions and regulatory approvals, including the approval of RigNet's stockholders.
The Viasat Merger has been approved by both the Company’s Board of Directors and the Board of Directors of Viasat. The completion of the Viasat Merger is subject to customary closing conditions, including, among others, the required approvals of RigNet’s stockholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the transaction is expected to close in mid-year 2021.
For additional information regarding the Viasat Merger, including associated risks and uncertainties, see Part I, Item 1A - Risk Factors, Part II, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 17 in our consolidated financial statements included in this Annual Report in Part IV, Item 15(a) of this Annual Report.
Our Operations
Our business operations are divided into the following segments:
•
Managed Communications Services (MCS). Our MCS segment provides remote communications, telephony, and technology services for offshore and onshore drilling rigs and production facilities, support vessels, and other remote sites. In addition, our MCS segment sells communications equipment and associated installation and maintenance services. Our services are generally contracted with terms that typically range from one month to five years and are billed as monthly recurring or usage-based fees.
•
Applications and Internet-of-Things (Apps & IoT). Our Apps & IoT segment provides applications over-the-top of the network layer including Software as a Service (SaaS) offerings such as a real-time machine learning and AI data platform (Intelie Pipes™ and Intelie LIVE®), Cyphre® Encryption, Enhanced Cybersecurity Services (ECS), applications for safety and workforce productivity such as weather monitoring primarily in the North Sea (MetOcean™), and certain other value-added services such as Advanced Video Intelligence (AVI™). This segment also includes the private machine-to-machine IoT data networks including Supervisory Control and Data Acquisition (SCADA) provided primarily for pipelines. We generate revenue through software licenses, subscription fees, equipment sales, customization and commissioning services, and recurring network and usage-based fees.
•
Systems Integration (SI). Our SI segment provides design and implementation services for customer telecommunications systems. Solutions are delivered based on the customer’s specifications, adhering to international industry standards and best practices. Project services may include consulting, design, engineering, project management, procurement, testing, installation, commissioning, and maintenance. Additionally, SI provides complete monitoring and maintenance for fire and gas detection systems and PLC/automation control systems. Projects are bid on a fixed-cost or time and materials basis with revenue recognized on a percentage of completion basis.
•
Corporate. Corporate costs and eliminations primarily represent unallocated executive and support activities, including back-office software development, interest expense, income taxes, and eliminations.
For financial information about our reportable segments, see Note 12 ─ “Segment Information” in our consolidated financial statements included in this Annual Report on Form 10-K
Managed Communications Services (MCS)
As of December 31, 2020, MCS represented 65.3% of our total revenues. We were the primary provider of remote communications and collaborative services to approximately 650 customers reaching over 1,100 remote sites located in approximately 50 countries on six continents. For the year ended December 31, 2020, our revenue generated from countries outside of the U.S. represented 74.2% of MCS revenue. Key aspects of our services include:
•
a secure end-to-end global network to ensure greater network availability, enhanced network cybersecurity and higher Quality of Service (QoS) control to optimize latency-sensitive business applications;
•
a multi-tenant network designed to accommodate multiple customer groups residing at a site, including drilling contractors, exploration and production operators and oilfield service providers;
•
a comprehensive bundle of network optimization value-added services, such as wide-area network acceleration, policy-based content filtering and firewall Wi-Fi hotspot access management, to maximize public-private sharing of assets for multiple tenants and customer groups at one site;
•
proactive network monitoring and management through Network Operations Centers (NOC) that actively manage network availability and serve as in-bound call centers for troubleshooting, 24 hours per day, 365 days per year; and
•
maintenance and support through geographically deployed engineering and service support teams as well as warehoused spare equipment inventories.
Global MCS Site Counts
We report the number of sites serviced by MCS on a regular basis and currently define sites based on four categories, which include Offshore Drilling Rigs, Offshore Production sites, Maritime, and Other sites, which includes U.S. and International onshore drilling and production sites, completion sites, man-camps, remote offices, and supply bases, as well as offshore-related supply bases, shore offices, tender rigs, and platform rigs. The MCS
site count does not include IoT sites. As of December 31, 2020, we provided MCS to a total of 1,142 U.S. and non-U.S. sites, a 14.8% decrease from 1,340 sites served as of December 31, 2019. Site counts fluctuate with industry conditions and are influenced by oil prices, customer capital spending, and other factors. When we provide services for multiple customers at one location, for example, to the drilling contractor, exploration and production operator, and other service companies, we count this as one site. The table below provides site count data as of December 31 of the respective year.
We procure bandwidth from independent commercial satellite-services operators and terrestrial wireless and landline providers to meet the needs of our customers for end-to-end IP-based communications. This allows RigNet to provide hybrid network solutions, which greatly improves network up-time by using multiple and diverse sources of bandwidth. We generally own the network infrastructure and communications equipment we install at remote sites as well as equipment co-located in third-party teleport facilities and data centers, all of which we procure through various equipment providers. By owning the network infrastructure and communications equipment on the customer premises, we are better able to select the optimal equipment for each customer solution as well as ensure the quality of our services.
Applications & Internet-of-Things (Apps & IoT)
Apps & IoT is our fastest growing segment and is leading our value delivery for our customers’ digital transformation efforts. In addition to already having grown to 16.6% of 2020 revenue compared to 14.6% and 10.8% of 2019 and 2018 revenue, respectively, the value proposition from Apps & IoT is allowing us to gain share in the MCS market for energy.
The energy sector has embraced “Digital Transformation”, a term that encompasses using technology to significantly reduce human operational process time and increase operating margins. Digital transformation typically uses a combination of Industrial IoT (Internet of Things) combined with powerful Artificial Intelligence (AI) backed predictive analytics to monitor and optimize processes in real-time.
Through our Apps & IoT segment, we deliver a combination of turn-key network solutions, value-added services that simplify the management of multiple communications needs, and digital accelerators that collect, secure and analyze operational intelligence data, allowing our customers to increase margins and focus on core operations. Apps & IoT revenue generated from countries outside of the U.S. represented 20.8% of Apps & IoT revenue. Our strategy in selling Apps & IoT services is to employ both direct and indirect sales channels, enabling us to target customers in industry verticals where we have not established a focused salesforce. In some cases, non-energy customers have sought us out because of our unique capabilities.
Apps & IoT services delivered over-the-top of the network layer include:
•
The Intelie LIVE and Intelie Planning platforms, which provide AI backed advanced real-time predictive analytics and machine learning;
•
Software as a Service (SaaS) applications to enhance remote operations efficiency, safety or crew welfare, including weather monitoring primarily in the North Sea (MetOcean) and Advanced Video Intelligence (AVI), including video analytics and a Video Management System (VMS);
•
An increasingly wide range of Enhanced Cybersecurity Services (ECS) monitoring and protection services, including a Security Operations Center (SOC), Cyphre encryption, AI-backed intrusion detection, Conditional Access, and security ratings; and
•
Machine-to-machine IoT networks such as: Supervisory Control and Data Acquisition (SCADA), Broadband Global Access networks (BGAN), and custom Long-Range Access (LoRA).
Intelie, our real-time machine learning platform, delivers value to the energy sector and has applications that improve performance and operational safety, enhance well control, and reduce non-productive time (NPT). Examples of Intelie applications are as follows:
•
Industry-proven algorithms transform heterogenous sensor data into key performance indicators (KPIs) to reduce NPT, such as connection time for drill pipe or slip-to-slip time. Another set of models can monitor and advise how to improve the drilling rate of penetration (ROP), the speed at which a drill bit drills through a formation.
•
Intelie improves safety performance using algorithms that verify whether operational policies are being followed, including pressure testing and emergency disconnect sequence (EDS) checks. We can also corroborate that the correct personnel are on board, enhancing a customers’ ability to track personnel and respond during an emergency.
•
Intelie machine learning assists customers with optimizing well-cleaning procedures, the process of bringing up the cuttings that the drill bit generates while drilling. As an example of how this delivers value, the faster the ROP, the more drilling cuttings are generated, which in turn can slow down the ROP as the bit gets stuck on its cuttings. Intelie helps to ensure that the ROP is optimized preventing the drill bit from becoming stuck and thus potentially reducing the overall time and cost to drill a well.
•
Essential equipment such as blow-out preventers (BOPs), top drives, and pumps send data to Intelie, which models and monitors equipment condition, enabling more predictive and preventative maintenance.
Intelie has delivered significant results, helping drilling contractors and operators generate time and cost savings in their upstream operations. Examples include reducing NPT by more than 20%. Intelie has also contributed as much as $3.0 million in software savings for a customer by eliminating extra software by consolidating functionality. For one customer, the Intelie platform processed over 300,000 measurements per second at its peak, synthesizing and displaying actionable results to the end-user. Intelie has recently signed a contract to implement Intelie LIVE to support BP’s Remote Collaboration Center and has also been used in oil production and pipeline monitoring use cases. The increased linkage between IoT solutions and Intelie allows us to not only provide communications but also to be directly involved in driving valuable business outcomes for our customers.
RigNet’s IoT network supports over 10,000 different sites, predominantly in the U.S. A key element of our network, devices using the L-band satellite technology, remained stable at over 6,100 L-Band enabled IoT sites as of December 2020, consuming on average 66 gigabytes per month of IoT traffic.
We believe the Apps and IoT segment is an important element of our long-term growth.
System Integration (SI)
Due to our deep knowledge of the energy sector’s needs and a wide range of expertise around critical communications in challenging environments, our clients also turn to us to build large network projects, both offshore and onshore. Solutions are delivered based on the customer’s specifications, adhering to international industry standards and best practices. Project services may include consulting, design, engineering, project management, procurement, testing, installation, commissioning, and maintenance. Additionally, SI provides complete monitoring and maintenance for fire and gas detection systems and PLC/automation control systems. Projects are bid on a fixed-cost or time and materials basis with revenue recognized on a percentage of completion
basis. As of December 31, 2020, SI represented 18.1% of our total revenues and revenue generated from countries outside of the U.S. represented 38.0% of SI revenue.
RigNet typically operates as a subcontractor on SI projects, working with other major Engineering, Procurement, and Construction (EPC) companies to deliver the project scope to the end customer. The business is both competitive and cyclical. The typical project length for our SI projects is anywhere from less than one year to approximately three years. Project backlog declined in 2020 largely as a result of customers delaying decision on new project awards due to the industry slowdown caused by COVID-19. As a result, although we added $14.0 million in backlog in 2020, we recognized more revenue and project descoping than we added. Project backlog, or the amount of revenue secured subject to firm contract awards that will be recognized over the life of each project, as of December 31 for the respective years is provided in the table below.
Putting the parts back together
RigNet’s three revenue-generating operating segments can each stand alone as separate services, but many of our global customers are seeing the value in how these products stack together. This has the potential to create what we have termed a synergistic “Flywheel Effect,” illustrated in the graphic below. Customers who are embracing digital transformation are trying to unlock the operational technology potential of Industrial IoT. We believe this will create a proliferation of connected sensors, forming a large neural-network of data, wrapped in cybersecurity for protection and interpreted through SaaS-based machine learning platforms. Customers will be able to accelerate their time to value by working with a set of services that are already vertically integrated and optimized to work under the most extreme of operating conditions. This can lower their execution risk for complex systems integrations and reduce upfront capital risk as a fully-managed SaaS service. For RigNet, the effect creates new streams of revenue, while at the same time stimulates pull-through bandwidth demand for our core network services illustrated in figure 4 below.
Customer Needs
The technology and remote telecommunications industries are highly dynamic and increasingly evolving with customer needs. We serve customers with customized communications, applications and cybersecurity solutions that connect to remote locations via networks, driving demand for reliable, managed communications services in a variety of environmental conditions. For several decades, our core customer base has primarily been off-shore and remote land oil and gas drilling contractors, exploration and production operators, and oilfield service companies. As part of our growth strategy, we are seeking to expand to other adjacent markets that share substantially similar technical requirements; these include: global enterprise, midstream pipelines, maritime, engineering and construction, disaster recovery services, banking and government verticals.
The customers we serve depend on maximum reliability, quality and continuity of products and services. Our customers also are generally geographically dispersed and/or have remote operations. These customers are particularly motivated to use secure and highly reliable communications networks because they may require:
•
real-time data collection and transfer methods for safe and efficient operational coordination;
•
the ability to maintain safety standards and optimize performance;
•
data and network security designed to defend up to and against state-level actors’ threats;
•
access to key decision makers to enable customers to maximize safety, operational results and financial performance; and
•
access to the internet to allow rig crews and other employees in remote areas to keep in communication with their friends and family and for entertainment during their off-time.
Our Customers, Their Industry, and Its Impact on RigNet
In 2020, almost all of RigNet’s revenue was derived from customers with some connection to the oil and gas industry. These included our traditional customers in the Upstream segment (drilling contractors, large integrated and independent oil and gas operating companies, and other oilfield service and maritime support companies, etc.), as well as customers in the Midstream segment (pipelines, LNG plants, etc.) and large Engineering, Procurement, and Construction companies working across the industry value chain. Although no single customer accounted for 10.0% or more of revenue in 2020, our top 5 customers accounted for 31.2% of our total revenue for 2020.
The oil and gas industry is both cyclical and competitive. Our customers’ business plans and activities are significantly impacted by changes in, among other factors, oil and gas prices, global supply and demand for these commodities, geopolitical events, weather, and specific industry sub-segment dynamics (e.g., an oversupply of offshore drilling rigs). Commodity prices are volatile and it is not unusual for our customers to experience rapid increases or declines which can have both short- and long-term impacts on their spending patterns.
In 2020, oil gas prices declined as result of OPEC+ group actions on the price of oil and in conjunction with significantly reduced demand as of result of COVID-19 pandemic. In response to continued low oil and gas prices and the COVID-19 pandemic, the industry reduced both capital and operating expenses significantly and negatively impacting RigNet’s business. Recovery for the industry remains challenging. Offshore drilling rig utilization levels in 2020 were flat compared to 2019, driven by offshore production declines and reduced capital spending by oil and gas companies. However, we continue to believe that the industry we support has a proven resilient need for our advanced software and communications solutions to realize their digital transformation. While we expect conditions for the industry to continue to improve gradually, given our growing Apps & IoT business segment activity and continued expansion in the FPSO market, our long-term growth strategy does not rely solely on significant increases in global offshore drilling activity.
Customer Contracts
In order to streamline the addition of new projects and solidify our position in the market, we have signed master service agreements with most customers. Generally, we prefer to sign long-term contracts with our customers to increase our confidence in our projected financial performance. Nevertheless, the nature of the oil and gas industry requires us to be flexible to ensure we meet the needs of our customers. The specific services being provided are defined under individual service orders that generally have a term of one to five years for offshore customers with renewal options. These contracts have provisions for early termination or reduced payments for warm or cold stacking of assets, with compensation paid to us based on an agreed formula. Land-based contracts are generally shorter term or terminable on short notice without penalty. Service orders are executed under the contracts
for individual remote sites or groups of sites, and generally may be terminated early on short notice without penalty in the event of force majeure, breach of the agreement or cold stacking of a drilling rig.
Our Strategy
RigNet’s basic strategy remains unchanged: accelerate digital transformation for our customers by leveraging our core MCS business and introducing new, value-added service solutions. The strategy is composed of three elements:
•
expand the scale and scope of our services within our primary industry vertical, energy;
•
expand into adjacent industry verticals; and
•
acquire new capabilities and/or scale our business through selective mergers, acquisitions, or in-house development;
As of December 31, 2020, our merger and acquisition activity has been paused as a result of our current debt load and our equity price. Additionally, the Viasat Merger Agreement requires that we receive Viasat’s prior consent to most acquisitions. At this time, we believe that we have largely acquired the necessary capability set and that future merger and acquisition activity may be driven by our belief that networks benefit from scale.
Expand the scale and scope of our services
Our market presence and proven quality of service offer significant organic growth opportunities in energy segments adjacent to upstream where we are well-positioned to deliver remote communications solutions.
In the MCS segment, we seek to leverage our current strong market position in drilling rigs, production facilities, and support vessels to grow additional share. Because of established relationships with our customers, reliable and robust service offerings, and high-quality customer service, we believe that we are well-positioned to capture new build rigs that our customers add to their fleets as well as stacked rigs that are reactivated. We also seek to organically gain market share against our competitors. We are continuously working with our suppliers to ensure that we have the newest and most cost-effective solutions for our customers. We continue to grow our network as well. In 2019, we invested in our Gulf of Mexico communications infrastructure, which we believe is the largest over-water microwave-based network in the world. This upgrade, in a partnership with T-Mobile, added 4G LTE services and 5G capabilities to the pre-existing network to provide both enhanced fixed and mobile services to our customers. This LTE network supports a coverage area of more than 60,000 square miles. Furthermore, as the onshore unconventional drilling and production industry has evolved, we have expanded our services to include not only onshore drilling rigs, but other onshore oilfield service providers.
We also intend to expand our Apps & IoT market share on a stand-alone basis and by bundling our new capabilities, including machine learning and cybersecurity, with our MCS offerings for both existing and new customers. Our acquisition of Intelie in 2018 enabled us to offer new solutions to help customers across the value chain continue to focus on improving their operational and financial performance. Through Cyphre, we assist our customers in protecting their mission-critical data both onshore and offshore. Furthermore, we continue to develop additional applications via our internal development team, including AVI, CrewConnect™, and other solutions which deliver increased value to our customers. We have also built in significant presence in the energy IoT market, particularly in energy’s midstream segment, where our robust, bandwidth-optimized applications enable customers to safely, reliably, and efficiently monitor and manage their remote sites and networks.
We continue to seek to expand our SI market share by pursuing new SI customers and bids for projects globally to address the growing demand for the buildout of large capital projects. We expect to continue to target traditional upstream and downstream opportunities, such as new fixed production platforms or onshore operating shorebases, as well as expanding our opportunity set to include new FPSOs and midstream projects, such as remote LNG liquefaction facilities. Additionally, our Apps & IoT capabilities are opening opportunities to introduce our machine learning and other solutions to our customers on these projects, potentially leading to pull-through business where we not only provide our SI solution, but possibly a bundle which includes managed communications and applications.
Expand into adjacent industry verticals
We believe revenue diversity is desirable in terms of product offerings as well as industry exposure. We also believe that networks benefit from scale regardless of which end markets we serve with our managed communications product. As such, we will continue to look for and review opportunities in other remote
communications market adjacencies that offer significant opportunities for growth and where we are well positioned to take advantage of these opportunities such as aviation, government, and mining.
Competitive Strengths
As a global technology company that provides customized communications services, applications, real-time machine learning, and cybersecurity solutions, our competitive strengths include:
•
mission-critical services delivered by a trusted provider with global operations;
•
leading-edge technology with proven track record in-market;
•
high-quality customer support with full-time monitoring and regional service centers;
•
scalable systems using standardized equipment that leverage our global infrastructure;
•
customized Systems Integration solutions provided by expert telecoms systems engineers;
•
flexible, provider-neutral technology platforms;
•
long-term relationships with leading companies in the oil and gas, maritime, pipeline and engineering and construction industries; and
•
ability to design and implement a broad range of communication solutions using a range of frequencies and modes of communication.
Mission-critical services delivered by a trusted provider with global operations: Our longstanding relationships with customers provide us with an in-depth understanding of the mission-critical needs of our customers that enables us to tailor our services to their requirements. Our global presence allows us to serve our clients around the world, except where government restrictions may apply. Our global terrestrial network also allows us to provide quality of service to prioritize various forms of data traffic for a more effective way to prioritize network traffic. Our ability to offer our customers global coverage sets us apart from regional competitors and allows us to match the breadth of our customers’ global operations and speed of deployment. Our Cyphre offering allows us to offer state-of-the-art encryption and network security services for the data communications necessary to safely and efficiently manage remote operations. In addition, our OTT offerings allow us to leverage our network to provide additional offerings for safety, business productivity improvement, and crew comfort.
Leading-edge technology with proven track record in-market: Our Intelie machine learning and real-time predictive analytics including Intelie Pipes and Intelie LIVE are optimized for remote locations in high-latency, high-packet loss environments. We also deliver Advanced Video Intelligence (AVI) and a wide range of Enhanced Cybersecurity Services (ECS), including a Security Operations Center (SOC), Cyphre encryption, AI-backed intrusion detection, conditional access, and security ratings. We also leverage third party relationships and technologies and have a proven track record of delivering technology in high latency remote locations that others lack.
High-quality customer support with full-time monitoring and regional service centers: Our global end-to-end owned and operated network allows us to provide high-quality customer care by enabling us to fully monitor our network. We can easily and rapidly identify and resolve any network problems that our customers may experience. As of December 31, 2020, we had 27 service operations centers and warehouses located around the world to support and service our customers’ remote sites. We maintain field technicians as well as adequate spare parts and equipment in these service operations centers. Our Global Customer Care (GCC) team staffs our Network Operations Center (NOC) and Security Operations Center (SOC) 24 hours per day, 365 days per year and provides engineering, service delivery, and change management to customers globally. We provide non-stop, end-to-end monitoring and technical support for every customer. This proactive network monitoring allows us to detect problems instantly and keep our services running at optimum efficiency. Fully managed technology is a key reason why we can support solutions that deliver high performance and new technologies that improve productivity.
Scalable systems using standardized equipment that leverages our global infrastructure: We have built our global satellite and terrestrial network with a sufficient amount of flexibility to support our growth. Our knowledge and capabilities can be applied to remote sites located anywhere in the world. We generally install standardized equipment at each remote site, which allows us to provide support and maintenance services for our equipment in a cost-efficient manner. Not all of the components of equipment that we install at each site are the same, but the components that vary are limited in number and tend to be the same for sites located in the same geography. As of December 31, 2020, we contracted capacity from 64 satellites that are co-located at 16 teleports and 25 datacenters
worldwide in order to provide our end-to-end solutions. By owning the on-site equipment at each site, we are able to both minimize the capital investment required by the base network infrastructure and maintain the flexibility to install high-quality equipment at each site tailored to its locale and environmental conditions. We own and manage the IP layer end-to-end. The standardized nature of our equipment minimizes execution risk, lowers maintenance and inventory carrying costs, and enables ease of service support. In addition, we are able to remain current with technology upgrades due to our back-end flexibility. Our product and service portfolio offers best-in-class technology platforms using the optimal suite of communications and networking capabilities for customers.
Customized Systems Integration solutions provided by expert telecoms systems engineers: We provide global customized Systems Integration solutions. As the demand for additional telecommunications products and telecoms systems increases with each new technological advance, the need for well-designed, efficient and reliable network infrastructures becomes increasingly vital to customers. Our solutions are custom-designed, built and tested by expert engineers based on the customer’s specifications and requirements, as well as international industry standards and best practices. For those customers requiring reliable remote communications services, maintenance and support services and customized solutions for their network infrastructures, RigNet provides a one-stop-shop to satisfy these demands.
Flexible, provider-neutral technology platform: Because we procure communications connections and network equipment from third parties, we are able to customize the best solution for our customers’ needs and reduce our required fixed capital investments. We aim to preserve the flexibility to select particular service providers and equipment so that we may access multiple providers and avoid downtime if any of our initial providers were to experience any problems. By procuring bandwidth from a variety of communications providers instead of owning our own satellites, we are able to minimize capital investment requirements and can expand our geographic coverage in response to customers’ needs with much greater flexibility.
Long-term relationships with leading companies in the oil and gas, maritime, pipeline, and engineering and construction industries: We have established relationships with some of the largest companies in the oil and gas, maritime, pipeline and engineering and construction industries. Some of our key customers are the leading drilling contractors around the world, with combined fleets of hundreds of rigs, as well as leading oil and gas, oilfield service, maritime, pipeline and engineering and construction companies. In most cases, these customers have high standards of service that favor strategic providers such as RigNet and work in partnership with us to serve their remote operations.
The ability to design and implement a broad range of communication solutions using a range of frequencies and modes of communication: We have the ability to design and implement a broad range of communication solutions using a range of frequencies and modes of communication. These modes of communication include wireless satellite Ku, Ka, C and L frequency bands, wireless WiMAX and Line-of-Sight (LOS) microwave, 3G and 4G LTE services, and 5G-capabilities. This range of communications solutions allows us to offer competitive and reliable communications solutions in a broad range of remote geographic locations where our customers operate. This helps us meet our customers’ requirements for choosing their provider(s) based on network availability while factoring in price.
Environmental, Social and Corporate Governance (ESG)
We believe that the digital transformation solutions that we deliver will lead to a safer and more sustainable energy industry. With our highly reliable network and real-time machine learning solutions, our customers can optimize the efficiency of their own operations and monitor and respond to high priority issues faster and with better information. Some of the solutions we have developed to enhance safety and sustainability include:
•
Advanced Video Intelligence, which assists customers with real-time risk detection;
•
Machine learning applications for a) well planning and optimization of drilling operations leading to increased safety and efficiency and less demand on resources and b) fuel optimization for international shipping;
•
Workforce safety solutions including workforce tracking, which enables our customers to know where all employees are at safety-sensitive sites, and man-down technology, which enables customers to detect when an employee has fallen or become injured allowing for a speedier emergency response; and
•
Solutions that enable customers to detect and respond to faulty valves in environmentally sensitive areas.
Finally, we are committed to practicing good corporate governance. We believe that a strong, diverse board and management, following good governance practices and engaging in robust discussion and debate will deliver better results to all of our stakeholders, including shareholders, customers, suppliers, employees, and the communities in which we work. We encourage investors to visit the Corporate Responsibility section of our website. The information found on our website is not incorporated into this Annual Report on Form 10-K.
Suppliers
Although we have preferred suppliers of technology, telecommunications, and networking equipment, nearly all technology utilized in our solutions is available from more than one supplier.
In addition, we do not rely on one satellite provider for our entire satellite bandwidth needs except for certain instances in which only one satellite bandwidth provider is available in an operating location, which is typically due to licensing restrictions or where only one satellite provider can offer a particular bandwidth. This approach generally allows us the flexibility to use the satellite provider that offers the best service for specific areas and to change providers if one provider experiences any problems.
Competition
The technology and remote telecommunications industry is highly competitive. We expect competition in the markets that we serve to persist, intensify and change. We face varying degrees of competition from a wide variety of companies, including potential new entrants from providers to adjacent vertical markets and from forward integration by some of our suppliers deeper in the industry value chain.
Our primary global competitor in MCS is Speedcast International Ltd. Panasonic, through its ITC Global subsidiary, Tampnet and Marlink, each of which have expanded their presence as active providers of communications services to the oil and gas, mining and maritime markets. We also compete with regional competitors in the countries in which we operate. Specifically, in our U.S. onshore operations, we face competition from: wireless network providers, drilling instrumentation providers, living quarters companies, and other pure-play providers like us.
With the downturn in the oil and gas industry, price-based competition has become more important. However, our customers require high quality and availability of the service as well as a provider with the ability to restore service quickly when there is an outage. Breadth of service offerings are also important to our oil and gas customers. Our customers depend on maximum availability, quality and continuity of products and services.
While we experience competition in our markets, we believe that our Apps & IoT offerings are a key differentiator that strategically aligns with our customers’ need to achieve digital transformation and business synergy goals. However, as our serviceable market has seen significant expansion due to our organic and inorganic growth in Apps & IoT, so has our competitor list. Our competitors now include IBM, Microsoft, Google, Kongsberg Gruppen and other smaller pure-play providers, as well as large, established oilfield technology providers like Schlumberger and Haliburton. Additionally, in the SI space, we compete primarily with ABB Ltd., Speedcast, and other construction contractors.
Our customers choose the accelerated speed and value created by a vertically aligned stack. We believe that we are unique in our vertical offering of Apps & IoT solutions over-the-top of our MCS offering.
Government Regulation
The following is a summary of the regulatory environment in which we currently operate and does not describe all present or proposed international, federal, state and local legislation and regulations affecting the communications industry, some of which may change the way the industry operates as a result of administrative or judicial proceedings or legislative initiatives. We cannot predict the outcome of any of these matters or the impact on our business.
The telecommunications industry is highly regulated. Most of the services we provide in our MCS segment require licenses or approvals from regulatory authorities in various countries. In the United States, we are subject to the regulatory authority of the Federal Communications Commission (FCC). Regulation of the telecommunications industry continues to change rapidly. Our U.S. services are currently provided on a private carrier basis, rather than a common carrier basis, and are therefore subject to lighter regulation under the U.S. Communications Act of 1934, as amended (the Act), and the regulations of the FCC. If the FCC determines that the services of RigNet or its subsidiaries constitute common carrier offerings subject to common carrier regulations, we may be subject to
significant costs to ensure compliance with the applicable provisions of those laws and regulations. We may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, or other penalties if we fail to comply with all applicable requirements.
For our U.S. business, we maintain licenses with rights to the electromagnetic spectrum, including fixed microwave licenses, very small aperture terminal (VSAT) earth station licenses, various private and commercial mobile radio service licenses, and various wireless licenses. Failure to maintain appropriate licenses could subject RigNet to fines imposed by the FCC.
The FCC constantly reviews spectrum policy to ensure it is in alignment with national communications strategy. One such example is the Facilitate America’s Superiority in 5G Technology (FAST), whereby the FCC aims to propel the United States into global 5G leadership. As part of such strategies, the FCC may decide to reallocate spectrum or introduce spectrum sharing among various services. If the FCC introduces spectrum sharing in the frequency bands where RigNet has existing licenses, the new services could cause harmful interference to RigNet’s network and thus degrade its quality. RigNet may not be able to migrate to other frequency bands without incurring significant equipment and logistics costs.
As a non-dominant international and domestic communications carrier, among other requirements, RigNet must pay various fees including contribution of a percentage of its revenues from telecommunications services to the FCC’s Universal Service Fund (USF) and other federal program funds to subsidize certain user segments, file various reports, and comply with rules that protect customer information and the processing of emergency calls. RigNet is also subject to the Communications Assistance for Law Enforcement Act (CALEA) and associated FCC regulations that require telecommunications service providers to configure their networks to facilitate electronic surveillance by law enforcement authorities.
Like the FCC, the state public utility commissions (PUCs) impose various regulatory fees, universal service requirements, reporting and prior approval requirements for transfer or assignments. The FCC and state PUCs have jurisdiction to hear complaints regarding the compliance or non-compliance with these and other carrier requirements of the Act and the FCC’s rules, and similar state laws and regulations.
If the FCC or any state PUC determines that RigNet has not complied with federal and/or state regulatory requirements, we may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, license revocation, or other penalties.
Several proceedings pending before the FCC have the potential to significantly alter our USF contribution obligations. The FCC is considering: (1) changing the basis upon which USF contributions are determined from a revenue percentage measurement, as well as increasing the breadth of the USF contribution base to include certain services now exempt from contribution; (2) the classification of MPLS; and (3) the classification of various IP-enabled services. Adoption of these proposals could have a material adverse effect on our costs of providing service. We are unable to predict the timing or outcome of these proceedings. We cannot predict the application and impact of changes to the federal or state USF contribution requirements on the communications industry generally and on certain of our business activities in particular.
We must generally register to provide our telecommunications services in each country in which we do business. The foreign laws and regulations governing these services are often complex and subject to change with short or no notice. At times, the rigs or vessels on which our equipment is located and to which our services are provided will need to operate in a new location on short notice, and we must quickly make regulatory provisions to provide our services in such countries. Failure to comply with any of the laws and regulations to which we are subject may result in various sanctions, including fines, loss of authorizations and denial of applications for new authorizations or for renewal of existing authorizations.
We must comply with export control laws and regulations, trade and economic sanction laws and regulations of the United States and other countries with respect to the export of telecommunications equipment and services. State and local regulations additionally apply to certain aspects of our business. We are also subject to various anti-corruption laws, including the Foreign Corrupt Practices Act, that prohibit the offering or giving anything of value to government officials for the purpose of obtaining or retaining business or for gaining an unfair advantage.
Employees
As of December 31, 2020, we had approximately 658 full-time employees consisting of 275 in North America, 197 in Latin/South America, 113 employees in Europe/Africa and 73 employees in the Middle East and the Asia Pacific.
Geographic Information
See Note 12 - “Segment Information,” in our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding revenues and assets attributable to our domestic and international operations.
Other Information
Corporate Structure and History
We were incorporated in Delaware on July 6, 2004. Our predecessor began operations in 2000 as RigNet, Inc., a Texas corporation. In July 2004, our predecessor merged into us. The communications services we provide to the offshore drilling and production industry were established in 2001 by our predecessor, who launched initial operations in the Asia Pacific region. Through companies recently acquired, our experience dates back more than 40 years. We have since evolved into one of the leading global providers of remote communications services.
Principal Executive Offices
Our corporate headquarters is located at 15115 Park Row Blvd, Suite 300, Houston, Texas. Our main telephone number is +1 (281) 674-0100.
Company Website and Available Information
The Company’s internet website is www.rig.net. The information found on our website is not incorporated into this Annual Report on Form 10-K. The Company makes available free of charge on its website Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. This information can also be found on the SEC website at www.sec.gov.
In addition, in the “Governance” section of the Investors page on our web site, we make available our code of ethics and business conduct, our corporate governance guidelines, the charters for our audit, compensation, and corporate governance and nominating committees and various other corporate governance policies and documents.
Additionally, in the “Corporate Responsibility link on our main website contains important information about our Environmental, Social and Governance (ESG) initiatives including relevant information on policies, safety performance, and employee statistics, as well as our commitment to following good corporate governance practices.
Forward-Looking Statements
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Exchange Act that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These statements may include statements about:
•
the uncertainties as to the timing of the completion of the Viasat Merger and the ability of each party to complete the merger;
•
the effects of the COVID-19 pandemic and its effect on the general economic activities, including reduced demand for oil and gas;
•
the expected forgiveness of our PPP Loan;
•
the level of drilling and production activity and the number of offshore drilling rigs, floating production storage and offloading units and other vessels that are removed from service, either temporarily or permanently;
•
the timing and number of new site additions;
•
competition and competitive factors in the markets in which we operate;
•
demand for our services and solutions;
•
the advantages of our services compared to others;
•
changes or advances in technology (including satellite capacity) and customer preferences and our ability to adapt our product and services offerings;
•
our ability to develop and maintain positive relationships with our customers;
•
our ability to retain and hire necessary employees and appropriately staff our marketing, sales and distribution efforts;
•
our cash and liquidity needs and expectations regarding cash flow from operations, capital expenditures and borrowing availability under our RCF;
•
our expectations regarding the deductibility of goodwill for tax purposes;
•
the amount and timing of contingent consideration payments arising from our acquisitions;
•
our ability to manage and grow our business and execute our business strategy, including developing and marketing additional Apps & IoT solutions, expanding our market share, increasing secondary and tertiary customer penetration at remote sites, enhancing systems integration and extending our presence into complementary remote communication segments through organic growth and strategic acquisitions;
•
our ability to develop and market additional products and services;
•
our cost reduction, restructuring activities and related expenses;
•
our ability to maintain our WiMax microwave and LTE networks in the Gulf of Mexico; and
•
our financial performance, including our ability to expand Adjusted EBITDA through our operational leverage.
Forward-looking statements may be found in Item 1. “Business;” Item 1A. “Risk Factors;” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other items within this Annual Report on Form 10-K. In some cases, forward-looking statements can be identified by terminology such as “may,” “could,” “should,” “would,” “expect,” “plan,” “project,” “intend,”, “will”, “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms and other comparable terminology that convey uncertainty of future events or outcomes. All of these types of statements, other than statements of historical fact included in this Annual Report on Form 10-K, are forward-looking statements.
The forward-looking statements contained in this Annual Report on Form 10-K are largely based on Company expectations, which reflect estimates and assumptions made by management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors. Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Annual Report on Form 10-K are not guarantees of future performance, and it cannot assure any reader that such statements will be realized, or the forward-looking statements or events will occur. Risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements include, without limitation:
•
the effect of economic conditions in the oil and gas industry, including fluctuations in commodity prices and the level of oil and gas exploration, development and production;
•
changes in the demand for our services and solutions;
•
the availability of labor at reasonable prices and/or rates of labor cost inflation;
•
changes in laws and regulations in the telecommunications, technology or oil and gas industries;
•
our ability to renew, extend or retain our contracts or to obtain new contracts with significant customers;
•
our lack of long-term, committed-volume purchase contracts with our customers;
•
increased competition and competitive factors in the markets in which we operate;
•
the concentration of our customer base as well as our dependence on a limited number of key customers;
•
our ability to protect our intellectual property and the cost of doing so;
•
our ability to extend our presence into other verticals and complementary remote communication segments;
•
our ability to increase secondary and tertiary customer penetration at remote sites;
•
our ability to develop and market additional products and services;
•
the possibility that we or our third-party providers may violate the complex regulatory schemes, including anti-corruption laws, in foreign countries in which we operate;
•
the impact on our business, or the business of our customers, as a result of credit rating downgrades and fluctuating interest rates;
•
changes in currency exchange rates;
•
our ability to comply with the financial covenants in our credit agreement and the consequences of failing to comply with such financial covenants;
•
changes in technology and customer preferences and our ability to adapt our product and services offerings;
•
our ability to develop and maintain positive relationships with our customers;
•
the effect of changes in political conditions in the U.S. and other countries in which we operate;
•
the possibility that we, or our third-party providers, may experience equipment failures, natural disasters, cyber-attacks or terrorist attacks;
•
the possibility that we experience failures in compliance with applicable consumer-protection and data privacy laws and regulations;
•
the possibility that we are unable to operate in certain foreign countries due to export control laws; and
•
other risks and uncertainties described under “Item 1A. Risk Factors” and other sections in this Annual Report on Form 10-K and as included in our other filings with the SEC.
If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual future results, performance or achievements may vary materially from any projected future results, performance or achievements expressed or implied by these forward-looking statements. The forward-looking statements speak only as of the date made, and other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
Factors that could materially affect our business, financial position, operating results or liquidity and the trading price of our common stock are described below. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.
The announcement and pending agreement to merge with Viasat may adversely affect our business, financial condition, results of operations and stock price.
Uncertainty relating to the pending Viasat Merger could have an adverse effect on our employees, customers, partners and other third parties that may materially disrupt key business activities and may adversely impact our financial condition, results of operations and stock price. Moreover, we are subject to various additional risks in connection with the announcement and pendency of the Viasat Merger, including:
•
the fact that the conditions to the closing of the Viasat Merger may not be satisfied or waived, including that the required approval of our stockholders may not be obtained;
•
uncertainty relating to the pending Viasat Merger may cause current and prospective customers to consider alternatives and potentially change suppliers;
•
potential adverse effects on our ability to attract, recruit, retain and motivate current and prospective employees who may be uncertain about their future roles following the Viasat Merger;
•
the significant diversion of internal resources and key employees’ and management’s attention due to the pending Viasat Merger;
•
legal proceedings that have arisen challenging the Viasat Merger and the related transactions contemplated by the Viasat Merger Agreement may require us to incur significant legal fees and expenses, and may result in unfavorable outcomes that could delay or prevent the completion of the Viasat Merger;
•
the restrictions imposed on our business and operations under the Viasat Merger Agreement may prevent us from pursuing opportunities without Viasat’s approval or taking other action that we might
have undertaken in the absence of the proposed Viasat Merger, which may interfere with our ability to effectively respond to competitive pressures, execute business strategies and meet financial goals;
•
the Viasat Merger Agreement contains customary provisions that restrict our ability to pursue alternative transactions to the Viasat Merger and that may discourage potential competing acquires from considering or proposing an alternative transaction that may provide a higher value to our stockholders; and
•
the required regulatory approvals from governmental entities (U.S. and non-U.S.) may delay the completion of the Viasat Merger or result in the imposition of conditions that would allow Viasat to terminate the Viasat Merger Agreement in certain circumstances.
Any failure of the pending Viasat Merger to be completed may adversely affect our business, financial condition, results of operations, and stock price.
Each of our and Viasat’s obligations to complete the Viasat Merger is subject to a number of conditions in the Viasat Merger Agreement, including among others (i) the adoption of the Viasat Merger Agreement by holders of a majority of the outstanding shares of our common stock; (ii) the expiration or termination of review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the receipt of certain other material regulatory consents and approvals; (iv) the authorization for listing of shares of Viasat common stock to be issued in the Viasat Merger on Nasdaq; (v) the absence of any court order or regulatory injunction prohibiting completion of the Viasat Merger; (vi) subject to specified materiality standards, the accuracy of the representations and warranties of each party; (vii) compliance by each party in all material respects with covenants; (viii) the absence of any effects that have constituted or resulted in, or would reasonably be expected to constitute or result in, a material adverse effect with respect to either party; and (ix) the receipt by each party of closing tax opinions. There can be no assurance that these conditions to the completion of the Viasat Merger will be satisfied within the timeframe specified in the Viasat Merger Agreement or at all.
Regulatory and governmental authorities may impose conditions on the granting of the required regulatory approvals, including divestitures of certain assets or businesses, which may result in extended negotiations among these entities, Viasat and us, which may delay completion of the Viasat Merger and increase the risk that the Viasat Merger may not be completed.
If the Viasat Merger is not completed, our stock price could decline to the extent that our current share price reflects an assumption that the Viasat Merger will be completed. Furthermore, if the Viasat Merger is not completed, we may suffer other consequences that could adversely affect our business, financial condition, results of operations and stock price, including the following:
•
we have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs in connection with the Viasat Merger, and may of the fees and costs are payable by s regardless of whether the Viasat Merger is completed;
•
we could be required to pay a termination fee of up to $5.5 million to Viasat under circumstances described in the Viasat Merger Agreement, including a circumstance in which our board of directors changes its recommendation concerning the approval of the Viasat Merger or if the Company were to receive an alternative proposal;
•
the failure to complete the Viasat Merger may result in adverse publicity, negatively impact the reputation of the Company in the capital markets and investment community, and result in critical responses from our customers, partners and other third parties;
•
legal proceedings have been instituted against us, our directors and other relating to the Viasat Merger and related transactions;
•
any disruptions to our business resulting from the announcement and pendency of the Viasat Merger, including any adverse changes to our relationships with customers, vendors and employees, may continue or intensify in the event the Viasat Merger is not completed;
•
we may experience employee departures; and
•
we may not be able to take advantage of alternative business opportunities or effectively respond to competitive pressures.
The COVID-19 pandemic has significantly reduced demand for our services, and has had, and may continue to have, a material adverse impact on our financial condition, results of operations and cash flows.
The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have adversely affected the demand for oil and natural gas, as well as for our services. The collapse in demand for oil caused by this unprecedented global health and economic crisis, coupled with oil oversupply, has had and is reasonably likely to continue to have, a material adverse impact on the demand for our services. The decline in our customers’ demand for our services has had and is likely to continue to have, a material adverse impact on our financial condition, results of operations and cash flows.
While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees. These effects have included and may continue to include adverse revenue, net income, and Adjusted EBITDA effects; disruptions to our operations; customer shutdowns of oil and gas exploration and production; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities and the facilities of our customers and suppliers.
The extent to which our operating and financial results continue to be affected by COVID-19 will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions taken by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. COVID-19 may also materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.
Recently, we have experienced increased cancellations of platform space agreements which are having a material adverse effect on our Gulf of Mexico infrastructure.
We enter License of Platform Space (LOPS) agreements with operators of platforms in the Gulf of Mexico to place equipment necessary for our WiMax, microwave and LTE networks in the Gulf of Mexico. These agreements allow the operator to cancel the agreement with short notice periods if the operator intends to decommission or abandon the platform. The downturn in demand for oil and gas triggered by the COVID-19 outbreak has led to a high number of notifications of cancelations of our LOPS agreements. When LOPS agreements are cancelled, we have to relocate equipment to another platform in order to maintain our network infrastructure. These moves increase our costs and may have a material adverse effect on our financial results. In addition, we cannot guarantee that alternative platform space is available for all required network moves resulting from the cancellation of LOPS agreements. Failure to secure alternative space could result in gaps in our network coverage or degraded network performance and could have a material adverse effect on our financial condition, results of operations and cash flows.
A large portion of our business fluctuates with the level of global oil and natural gas exploration, development and production, as a large portion of our customers are energy-related.
Demand for our remote communication services and collaborative applications depends on our customers’ willingness to make operating and capital expenditures to explore, develop and produce oil and natural gas. Our business will suffer if these expenditures decline. Our customers’ willingness to explore, develop and produce oil and natural gas depends largely upon prevailing market conditions that are influenced by numerous factors over which we have no control, including:
•
the supply, demand and price expectations for oil and natural gas;
•
capital expenditure levels of producers of oil and natural gas and drilling contractors;
•
the addressable market and utilization rate for drilling rigs and oilfield services;
•
the ability of the Organization of Petroleum Exporting Countries (OPEC) or non-OPEC countries to influence and maintain production levels and pricing;
•
the worldwide political, regulatory and economic environment;
•
natural disasters, acts of war or terrorism, pandemics, or other “acts of God” affecting significant oil-importing countries, including the recent worldwide outbreak of coronavirus and its effect on travel, commerce and industry;
•
the degree to which alternative energy sources displace oil and natural gas; and
•
advances in exploration, development and production technology.
Oil and gas prices are volatile, and the oil and gas business is cyclical. When prices are perceived as being too low to generate acceptable returns, companies reduce expenditures for exploration and production. At the start of 2020, oil prices significantly decreased largely as a result of the Saudi state producer, Aramco, reducing crude pricing in response to a split and price war with Russia. Following the Saudi reduction in pricing, Brent crude spot prices declined steeply to a mid-30 dollar per barrel range. As a result, we have seen a material decline in the demand for our products and services and significant pressure on the prices we can charge. Furthermore, our customers have experienced declines in their cash flows which has led to delays in payment, or nonpayment, for our products and services. Commodity price declines and increased volatility have particularly affected our customers’ budgets for offshore capital investments and expenditures, which has had a material and adverse effect on our addressable market.
Furthermore, the COVID-19 pandemic has increased the volatility of oil and gas prices and has caused delays, supply chain disruptions and travel restrictions that have impacted the oil and gas industry and certain projects in the Asia Pacific region.
These conditions have had and may continue to have, a material adverse effect on our financial condition, results of operations and cash flows.
Continued growth in satellite capacity has adversely affected our MCS segment revenues.
New digital applications are driving demand growth for bandwidth in our core MCS segment. However, we also continue to see growth in available satellite capacity and expect that growth to continue over the intermediate-term. While we have experienced bandwidth price declines from our satellite suppliers, due to competition for our oil and gas customers and declining capital investment by our customers, we have passed much of our realized savings onto our customers. If satellite capacity growth continues to outstrip demand growth or is expected to continue, we may be forced to reduce our prices in the MCS segment further, which could have a material adverse effect on our financial condition, results of operations and cash flows.
If we fail to timely collect receivables, our business and financial results may be harmed.
Some of our customers in the oil and gas industry have been through bankruptcy proceedings or other restructurings. In addition, as the global oil and gas industry has continued to experience reduced activity, many of our customers have unilaterally extended their payment practices. We actively manage our credit exposures and accounts receivable collections, but restructuring or insolvency proceedings by our largest customers, or continued lengthening of payment cycles could significantly and materially harm our business, financial condition and results of operations.
Our industry is characterized by rapid technological change, and if we fail to keep pace with these changes or if access to telecommunications in remote locations becomes easier or less expensive, our business, financial condition and results of operations may be harmed.
Recently some remote communications providers are offering the use of LTE and high-throughput satellite (HTS) service, instead of or in addition to the conventional Ku-band, Ka-Band, and C-band satellite space segments used today. Our business may be harmed if our competitors are more successful than us in introducing LTE and or HTS services to meet customer needs.
If alternative telecommunications services to remote locations become more readily accessible or less expensive, our business will suffer. New disruptive technologies could make our VSAT-based networks or other services obsolete or less competitive than they are today, requiring us to reduce the prices that we are able to charge for our services or causing us to undergo expensive transitions to new technologies. We may not be able to successfully respond to new technological developments and challenges or identify and respond to new market
opportunities, services or solutions offered by competitors. In addition, our efforts to respond to technological innovations and competition may require significant capital investments and resources. Furthermore, if we invest either organically or through acquisition in new technology and any such technology is not successful, our business, financial conditions and results of operations may be harmed.
Our business model has historically required significant capital expenditures to win new business. To the extent we are unsuccessful in shifting some of those capital expenditures to our customers or suppliers, our business, financial condition and results of operations may be harmed.
Historically we have purchased much of the equipment to provide new services to our customers and recovered the cost of that equipment through service charges over the life of the contract. This business model requires large capital expenditures at the start of new customer contracts. We are attempting to shift some of the upfront capital expenditures to our customers and/or suppliers through new contractual arrangements with them. However, we may be unsuccessful in shifting those required capital investments to our customers and/or suppliers. To the extent we are unable to finance growth capital or to change our business model, our business, financial condition and results of operations may be harmed. Furthermore, future new technologies could be capital intensive and may require capital expenditures in order for us to remain competitive.
Failure to obtain and retain skilled personnel could impede our business and growth strategy.
Our operations depend on a highly qualified executive, sales, technical, development, service and management team. Competition for personnel talent in the artificial intelligence, machine learning, engineering and cybersecurity industry is intense, and these roles are critical to our operation. Failure to attract, recruit, retain and develop qualified personnel could have a material adverse effect on our business, financial condition and results of operations.
In the event that our cybersecurity measures fail or are otherwise inadequate, our systems or reputation may be damaged which could harm our business, financial conditions and results of operations. Further, failure to comply with data privacy requirements applicable to us could result in costly regulatory enforcement actions and the imposition of significant penalties.
We rely heavily on information systems to run our business and our customers rely on our networks and security measures in running their businesses. Given that our customers own and operate critical infrastructure, the nature of cybersecurity threats are advanced and persistent. There can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient to prevent or detect such attacks. If such incidents or attacks do occur, they could have a material impact on our systems including degradation of service, service disruption, excessive call volume to call centers and damage to our facilities, equipment and data. In addition, we could be adversely affected by the theft or loss of confidential customer data or intellectual property. With the acquisition of Cyphre, we now market our cybersecurity services as an expertise. A successful cyberattack against us or one of our cybersecurity customers may create negative publicity resulting in reputation or brand damage with customers. We may be required to expend significant resources to protect against these events or to alleviate problems, including reputational harm, customer loss and litigation, caused by these events or the failure or inadequacy of our security systems, which could have a material adverse effect on our business, financial condition and results of operations.
In a widely publicized attack in 2020, SolarWinds software, which we utilize for certain network management and monitoring functions, was compromised by alleged foreign State Actors. The Company learned of this hack on December 14, 2020 when the owner of SolarWinds notified the public. By December 15, 2020, we determined that we had not updated to the infected patch because of our policy of waiting to implement patches until they had been thoroughly market tested. Nevertheless, we installed the fix and upgraded to the latest version of SolarWinds in January 2021. There can be no assurance that the Company will successfully avoid future attacks which could have a material adverse effect on our reputation, business, financial condition and results of operations. Furthermore, our policy of waiting for patches to be market tested could lead to other vulnerabilities which could have a material adverse effect on our reputation, business, financial condition, and results of operations.
Further, the regulatory framework for privacy issues worldwide is complex and evolving, and we believe it is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government entities and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission and state breach notification laws. Internationally, certain of the jurisdictions in which we operate have established their own data security and privacy legal framework with which we must
comply. For example, the European Union has issued the General Data Protection Regulation (GDPR), which applies to anyone doing business in Europe. In general, GDPR sets a higher bar for privacy compliance, including new data subject rights, new mandatory security breach notification requirements, requirements to conduct data protection impact assessments and extensive record-keeping requirements. Failure to comply with GDPR can have significant consequences, including substantial fines and reputational damage. We continue to analyze the GDPR in respect of its burden and applicability to our global business operations. We may fail to comply with any of these requirements, and compliance with these requirements may increase our compliance burden and costs.
Attempts to enter new verticals may not be successful.
As part of our growth strategy, we attempt to enter new verticals, and offer new and innovative products and services. We have and intend to enter new verticals and launch new products. Our attempts to enter new verticals and launch new products and services may not be successful, costing us money and diverting management time and attention.
Our customers may terminate many of our contracts on short notice without penalty, which could harm our business, financial condition and results of operations.
Customers may switch service providers without incurring significant expense relative to the annual cost of the service. Our contracts generally provide that in the event of prolonged loss of service or for other good reasons, our customers may terminate service without penalty. In addition, some of our contracts may be terminated by our customers for no reason and upon short notice. Terms of contracts typically vary with a range from short-term call out work to five years. Work orders placed under such agreements may have shorter terms than the relevant customer agreement. As a result, we may not be able to retain our customers through the end of the terms specified in the contracts, resulting in harm to our business, financial condition and results of operations.
Our Credit Agreement requires us to maintain certain financial covenant ratios. These ratios may limit our capacity to finance our growth strategy and operations. Furthermore, if we fail to comply with the covenants contained in our Credit Agreement, including as a result of events beyond our control, technical or other default could result, which could materially and adversely affect our operating results and our financial condition.
Our credit agreement contains certain covenants and restrictions, including restricting the payment of cash dividends under default and maintaining certain financial covenants such as a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00. Additionally, the Credit Agreement requires a consolidated leverage ratio, as defined in the Credit Agreement, of less than or equal to 3.00 to 1.00 as of December 31, 2020. The Consolidated Leverage Ratio requirement then steps down to 2.75 for all remaining quarters after June 30, 2021. If any default occurs related to these covenants that is not cured or waived, the unpaid principal and any accrued interest can be declared immediately due and payable. The RCF under the Credit Agreement are secured by substantially all the assets of the Company.
If we approach our covenant limits, we will be limited in our ability to finance capital and operating expenditures and any acquisitions we may pursue in the future. Should this happen we would pursue additional financing, through either debt and / or equity offerings. We may incur financing and legal fees attempting to amend our current Credit Agreement, or in pursuing other debt and or equity financing. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.
Our growth strategy may require substantial capital expenditures. We may be unable to obtain required capital or financing on satisfactory terms.
To support our growth strategy, we expect to continue to make substantial capital expenditures. Many of our customers now demand newer HTS services, requiring significant capital expenditures to upgrade equipment. We expect to fund capital expenditures, with cash generated by operations and borrowings under RCF or capital markets transactions; however, our financing needs may require us to alter or increase our capitalization substantially through the issuance of debt or equity securities. The issuance of additional indebtedness would require that a portion of our cash flow from operations be used for the payment of interest and principal on our indebtedness, thereby reducing our ability to use cash flow from operations to fund working capital, capital expenditures and acquisitions. Furthermore, raising equity capital would generally dilute existing stockholders. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.
Our strategy of moving up the technology stack entails entering new business lines that could fail to attract or retain users or generate revenue.
A key element of our growth strategy is to move up the technology stack, that is to leverage our existing network to provide application layer solutions to our network customers. In 2017, we began reporting a new segment, Apps & IoT, to capture results from these new OTT services, such as SCADA, MetOcean, BlackTIE, CyphreLink and Advanced Video Intelligence. In addition, in 2018, we acquired Intelie which provides us a real-time machine-to-machine learning offering, Intelie LIVE. We continue to expect to invest in new lines of business, new products and other new initiatives to generate revenue. Our customers may not adopt some of our new offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our investments in them. Furthermore, efforts at establishing new lines of business could divert management attention from our core MCS network and Systems Integration businesses. If any of this were to occur, it could damage our reputation, limit our growth and negatively affect our operating results.
We rely on third parties, particularly satellite owners, to provide products and services for the operation of our business. Failures by third-party providers have caused, and in the future could cause, service interruptions, harm our business and reputation and result in loss of customers and revenue.
A significant part of our operations and growth depends on third-party providers delivering reliable communications connections, networks, equipment, maintenance, repair and satellite transponder capacity, subjecting our business, reputation and customer revenue to risks beyond our control, such as:
•
telecommunications, satellite manufacturing, equipment or control system errors, faults or failures;
•
saturation of communication connection points, networks and third-party facilities;
•
in-orbit risks for satellites including malfunctions, commonly referred to as anomalies, and collisions with meteoroids, decommissioned spacecraft or other space debris;
•
lack of communication service alternatives, including failure of satellite providers to timely replace aging satellites with more modern technology and updated capacities;
•
human error;
•
natural disasters;
•
power loss;
•
labor strikes or work stoppages;
•
unauthorized access or security risks; and
•
sabotage or other intentional acts of vandalism, terrorism or war.
Our results in 2019 and 2018 were negatively impacted by certain satellite outages and interruptions by certain of our providers. These incidents caused RigNet to lose forecasted revenues and to experience increased costs as we had to make alternative arrangements for our customers. We cannot assure you that we will not suffer future satellite outages or that any potential future outage will not have a material impact on our business, results of operations or financial condition. Under most of our contracts with satellite service providers, our satellite service providers do not indemnify us for such loss or damage to our business resulting from certain risks, including satellite failures. If any potential claims result in liabilities, we could be required to pay damages or other penalties.
If we lose the right to use or upgrade any products or services provided by a third-party, our customers could experience delays or be unable to access our own services until we can obtain and integrate equivalent technology. There might not always be commercially reasonable hardware or software alternatives to the third-party infrastructure, products and services that we currently license for our operations. Any such alternatives could be more difficult or costly to replace than the third-party infrastructure, products and services we currently use, and integration of the alternatives into our operations could require significant work and substantial time and resources. Any delays or failures associated with our operations may injure our reputation with customers and potential customers and result in an adverse effect on our business, results of operations and financial condition.
Failure of our Line-of-Site network or loss of platform access could materially impact our results of operations.
Our microwave network is a Line-of-Site (LOS) system that operates by relaying microwave communications from one microwave site to another that must be within visible sight. Furthermore, our LTE network is built on the existing infrastructure of our microwave network. We secure access to our customers’ offshore platforms to house our LOS, microwave and LTE network, but the agreements are subject to termination for various reasons, including decommissioning of the platform. When a microwave site on a microwave relay is rendered inoperable subsequent dependent sites can also be rendered inoperable. As such the risk of a LOS, microwave or LTE site being rendered inoperable by weather, technical failure, loss of access to an operator’s platform space or other means will likely negatively affect other dependent microwave sites. We do not insure for loss of a LOS, microwave or LTE site or business interruption caused by the loss of such a site as we believe the cost of such insurance outweighs the risk of potential loss, so the loss of a LOS, microwave or LTE site or any business interruption could require us to spend significant capital to restore network service and / or harm our business, financial condition and results of operations.
We are subject to anti-corruption and export control laws that have stringent compliance standards.
We are subject to a number of applicable export control laws and regulations of the United States as well as comparable laws of other countries. We cannot provide services to or in certain countries subject to United States trade sanctions administered by the Office of Foreign Asset Control of the United States Department of the Treasury or the United States Department of Commerce unless we first obtain the necessary authorizations. If our customers move their sites into countries subject to certain sanctions, we may not be able to serve them, in which case, our revenues will be adversely impacted, and we may incur additional costs. In addition, we are subject to the Foreign Corrupt Practices Act and other anti-corruption laws that, generally, prohibit bribes or unreasonable gifts to governments or officials. Violations of these laws or regulations could result in significant additional sanctions including fines, more onerous compliance requirements, and more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. In certain countries, we engage third-party agents or intermediaries to act on our behalf in dealings with government officials, such as customs agents, and if these third-party agents or intermediaries violate applicable laws, their actions may result in penalties or sanctions being assessed against us.
Many of our potential customers are resistant to new solutions and technologies, which may limit our growth.
Although there is a strong focus on technology development within the oil and gas industry, some of the companies in the upstream oil and gas industry are relatively conservative and risk-averse with respect to adopting new solutions and technologies in the area of remote communications. As a result of the sustained downturn in oil and gas prices, many of our customers focus on price rather than the value new technologies bring them, further slowing the uptake of new solutions and technologies. Some drilling contractors, oil and gas companies and oilfield service providers may choose not to adopt new solutions and technology, such as our OTT offerings, which may limit our growth potential.
SI projects are heavily dependent on cost, productivity, schedule and performance management.
We account for SI contracts using accounting rules for construction-type contracts. Factors that may affect future project costs and margins include the price and availability of labor, equipment and materials, productivity, as well as the time necessary to obtain approvals and permits. If we make inaccurate estimates, or if we find errors or ambiguities as to contract specifications or if circumstances change due to, among other things, unanticipated technical problems, changes in local labor conditions, weather delays, changes in the costs of equipment and materials, or our suppliers’ or subcontractors’ inability to perform, or changes in foreign exchange rates, then cost overruns may occur. We may be required to pay liquidated damages upon our failure to meet schedule or performance requirements of our contracts. In accordance with the accounting guidance, we would record a cumulative adjustment to reduce the margin previously recorded on the related project in the period a change in estimate is needed. If the contract is significant, or we encounter issues that impact multiple contracts, cost overruns could have a material adverse effect on our business, financial condition and results of operations.
The uncertainty of our contract award timing can also present difficulties in matching workforce size with contract needs. In some cases, we maintain and bear the cost of a ready workforce that is larger than necessary under existing contracts in anticipation of future workforce needs for expected contract awards. If an expected contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities which could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, SI contracts can require performance bonds, surety bonds and similar instruments. Any inability to secure required performance bonds, surety bonds and similar instruments, could limit business. Although we have not previously had performance bonds, surety bonds and similar instruments called, should such instruments be called in the future, it could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenue is derived from a relatively small number of customers and the loss of any of these customers would materially harm our business, financial condition and results of operations.
Although we continue to diversify our customer base, we still receive a significant portion of our revenue from a relatively small number of large customers, among them being Royal Dutch Shell Plc, Valaris Plc, Transocean Ltd, Exxon Mobil Corporation, BP Plc, Baker Hughes Company, Halliburton Company, Bechtel Corporation, and Seadrill Ltd.. Although none of these customers represents more than 10% of our annual revenue, should one or more of these customers terminate or significantly reduce their business with us and we were not able to replace such revenue, our business, financial condition and results of operations would be materially harmed. As our top customers are concentrated in energy, should there be any adverse impact on the energy business that caused our customers to reduce demand for our services our financial condition and results of operations would be materially harmed.
We may not be able to compete successfully against current and future competitors.
We expect both product and pricing competition to persist and intensify. Increased competition could cause reduced revenue, price reductions, reduced profits and loss of market share. Our industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology. Our primary global competitor is Speedcast International Ltd. Panasonic, through its ITC Global subsidiary, Marlink and Tampnet Inc. have begun to expand their presence as active providers of communications services to the oil and gas, mining and maritime markets. We also compete with regional competitors in the countries in which we operate. In addition, in certain markets outside of the U.S., we face competition from local competitors that provide their services at a lower price due to lower overhead costs, including lower costs of complying with applicable government regulations and their willingness to provide services for a lower profit margin. Furthermore, in the Apps and IoT space we compete with IBM, Microsoft, Google, Kongsberg Gruppen and other smaller pure-play companies, as well as large, established oilfield technology providers like Schlumberger and Haliburton. Additionally, in the SI space, we compete primarily with Speedcast and ABB Ltd and other construction contractors. Strong competition and significant investments by competitors to develop new and better solutions may make it difficult for us to maintain our customer base, force us to reduce our prices or increase our costs to develop new solutions.
Furthermore, competition may emerge from companies that we have not previously perceived as competitors or consolidation of our industry may cause existing competitors to become bigger and stronger with more resources, market awareness and market share. For example, we have experienced customer projects where we have bid directly against some of our satellite bandwidth providers, either acting alone or in conjunction with one of our direct competitors. Competition with our satellite bandwidth providers, either alone or in restrictive arrangements with our suppliers or competitors may materially and adversely affect the availability and pricing of our products and services.
As we expand into new markets, we may experience increased competition from some of our competitors that have prior experience or other business in these markets or geographic regions. In addition, some of our customers may decide to insource some of the MCS solutions that we provide, in particular our terrestrial communication services (e.g., Line-of-Site (LOS) or Worldwide Interoperability for Microwave Access (WiMAX)), which do not require the same level of maintenance and support as our other services. Our success will depend on our ability to adapt to these competitive forces, to adapt to technological advances, to develop more advanced services and solutions more rapidly and less expensively than our competitors, to continue to develop and deepen our global sales and business development network, and to educate potential customers about the benefits of using our solutions rather than our competitors’ services or in-sourced solutions. Our failure to successfully respond to these competitive challenges could harm our business, financial condition and results of operations.
Our international operations are subject to additional or different risks than our United States operations, which may harm our business and financial results.
We operate in many countries around the world, including countries in Asia, the Middle East, Africa, Latin America and Europe and intend to continue to expand the number of countries in which we operate. However, because operations in some countries may be temporary, the total number of countries in which we operate fluctuates. There are many risks inherent in conducting business internationally that are in addition to or different than those affecting our United States operations, including:
•
foreign laws and regulations that may be vague or arbitrary, lack traditional concepts of due process, and be subject to unexpected changes or interpretations, resulting in difficulty enforcing contracts or timely collection of receivables;
•
tariffs, import and export restrictions and other trade barriers;
•
difficulty in staffing and managing geographically dispersed operations and culturally diverse work forces in countries with varying employment laws and practices including restrictions on terminating employees;
•
increased travel, infrastructure and legal compliance costs associated with multiple international locations;
•
differing technology standards;
•
currency exchange rate fluctuation and currency controls;
•
potential political and economic instability, which may include military conflict, nationalization or expropriation;
•
potentially adverse tax consequences;
•
difficulties and expense of maintaining international sales distribution channels; and
•
difficulties in maintaining and protecting our intellectual property.
The authorities in the countries where we operate may introduce additional regulations for the oil and gas and communications industries. New rules and regulations may be enacted, or existing rules and regulations may be applied or interpreted in a manner which could limit our ability to provide our services. Recently, some of our foreign telecommunications regulators have adopted new interpretations of existing regulations when we have renewed our licenses, causing increased costs in certain jurisdictions. Future amendments to current laws and regulations governing operations and activities in the oil and gas industry and telecommunications industry could harm our operations and financial results. Compliance with and changes in tax laws or adverse positions taken by taxing authorities could be costly and could affect our operating results.
Compliance related tax issues could also limit our ability to do business in certain countries. Changes in tax laws or tax rates, the resolution of tax assessments or audits by various taxing authorities, disagreements with taxing authorities over our tax positions and the ability to fully utilize our tax loss carry-forwards and tax credits could have a significant financial impact on our future operations and the way we conduct, or if we conduct, business in the affected countries.
Our intellectual property rights are valuable, and any failure or inability to sufficiently protect them could harm our business and our operating results.
We own, and maintain certain intellectual property assets, including patents, patent applications, copyrights and trademarks, trade secrets, and rights to certain domain names, which we believe are collectively among our most valuable assets. We seek to protect our intellectual property assets through the laws of the U.S. and other countries of the world, and through contractual provisions. However, the efforts we have taken to protect our intellectual property assets and proprietary rights might not be sufficient or effective at stopping unauthorized use of those rights. If we are unable to protect our proprietary rights from unauthorized use, the value of our intellectual property assets may be reduced.
Internal restructuring activities may negatively impact the Company.
Reductions in resources may adversely affect or delay various sales, marketing, product development and operational activities, which could have a material adverse effect on our financial results. Additionally, restructuring activities could have negative effects on our internal control over financial reporting and employee morale.
Information technology infrastructure and systems are critical to supporting our operations, accounting and internal controls; any potential failure of our information technology infrastructure or systems could adversely affect our business, financial conditions and results of operations.
We continue to update and enhance our information systems. If a problem occurs that impairs or compromises this infrastructure, systems upgrades and/or new systems implementations; the resulting disruption could impede our ability to perform accounting, invoice, process orders, generate management reports or otherwise carry on business in the normal course. Any such events could cause us to lose customers and/or revenue and could require us to incur significant expenses to remediate. Additionally, any such events could adversely harm our legal, accounting and compliance capabilities including but not limited to: our ability to (i) timely file reports with the SEC; (ii) maintain effectiveness of internal control; (iii) timely file financial statements required by certain statutes; (iv) timely file compliance reports with our lenders under our credit agreement; and (v) timely file income taxes with the IRS, foreign taxing authorities, and local taxing authorities.
Severe weather in the Gulf of Mexico or other areas where we operate could harm our business, financial condition and results of operations.
Certain areas in and near the Gulf of Mexico and other areas in which our clients operate experience unfavorable weather conditions, including hurricanes and other extreme weather conditions, on a relatively frequent basis. A major storm or threat of a major storm in these areas may harm our business. Our clients’ drilling rigs, production platforms and other vessels in these areas are susceptible to damage and/or total loss by these storms, which may cause them to no longer need our communication services. Our equipment on these rigs, platforms or vessels could be damaged causing us to have service interruptions and lose business or incur significant costs for the replacement of such equipment. Even the threat of a very large storm will sometimes cause our clients to limit activities in an area and thus harm our business. Changing weather conditions could impair satellite connectivity, cause more sites to be shut down and generally cause activities to be limited so that our business may be harmed. This risk is more pronounced for LOS microwave service, as there is a likely loss of service for multiple subsequent microwave sites in the network relay.
Changes in the regulatory framework under which we operate could adversely affect our business prospects or results of operations.
Our U.S. services are provided on a private carrier basis. As such, these services are subject to light or no regulation by the FCC and state PUCs. If the FCC or one or more PUCs or any other telecommunications regulator determine that these services or the services of our subsidiaries or affiliates constitute common carrier offerings or change the regulations applicable to private carriers, we may be subject to significant costs to ensure compliance with the applicable provisions of those laws and regulations. We may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, or other penalties if we fail to comply with those requirements.
Our international operations are also regulated by various non-U.S. governments and international bodies. These regulatory regimes frequently require that we maintain licenses for our operations and conduct our operations in accordance with prescribed standards and requirements. The adoption of new laws or regulations, changes to the existing regulatory framework, new interpretations of the laws that apply to our operations, or the loss of, or a material limitation on, any of our material licenses could materially harm our business, results of operations and financial condition. Recently, some of our foreign telecommunications regulators have adopted new interpretations of existing regulations when we have renewed our licenses, causing increased costs in certain jurisdictions.
The FCC is considering reallocating 6 GHZ technology to allow unlicensed use of this spectrum. Much of our Gulf of Mexico backbone network traffic is carried over 6 GHZ spectrum which we own. Unlicensed use of this spectrum could interfere with our client’s safety critical communications and degrade our overall network performance. Any such interference or degradation of performance could have a material adverse effect on our business, financial condition and results of operations.
If we infringe, or if third parties assert that we infringe, third-party intellectual property rights we could incur significant costs and incur significant harm to our business.
Third parties may assert infringement or other intellectual property claims against us, which could result in substantial damages if it is ultimately determined that our services infringe a third-party’s proprietary rights. Even if claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from our other business concerns.
Many of our contracts are governed by the laws of countries that may make them difficult or expensive to interpret or enforce.
Many of our contracts are governed by the laws of countries other than the U.S., which may create both legal and practical difficulties in case of a dispute or conflict. We operate in regions where the ability to protect contractual and other legal rights may be limited. In addition, having to pursue arbitration or litigation in some countries may be more difficult or expensive than pursuing litigation in the United States.
Some of our stockholders could exert control over the Company.
As of February 28, 2021, funds associated with Kohlberg Kravis Roberts & Co. L.P., or KKR, owned in the aggregate shares representing approximately 23.8% of our outstanding voting power and have a seat on our board of directors. Additionally, as of February 28, 2021, funds associated with FMR, LLC, owned in the aggregate shares representing approximately 5.1% of our outstanding voting power, and funds associated with Arrowmark Colorado Holding, LLC, owned in the aggregate shares representing approximately 6.3% of our outstanding voting power. As a result, any of these stockholders could potentially exert significant influence over all matters presented to our stockholders for approval, including election or removal of our directors and change of control transactions. The interests of these stockholders may not always coincide with the interests of the other holders of our common stock.
We are subject to fluctuations in currency exchange rates and limitations on the expatriation or conversion of currencies, which may result in significant financial charges, increased costs of operations or decreased demand for our services and solutions.
During the year ended December 31, 2020, 11.8% of our revenues were earned in non-U.S. currencies, while a significant portion of our capital and operating expenditures and all of our outstanding debt, was priced in U.S. dollars. In addition, we report our results of operations in U.S. dollars. Accordingly, fluctuations in exchange rates relative to the U.S. dollar could have a material effect on our reported earnings or the value of our assets. In the future, a greater portion of our revenues may be earned in non-U.S. currencies, increasing this risk of fluctuations in exchange rates.
Any depreciation of local currencies in the countries in which we conduct business may result in increased costs to us for imported equipment and may, at the same time, decrease demand for our services and solutions in the affected markets. If our operating companies distribute dividends in local currencies in the future, the amount of cash we receive will also be affected by fluctuations in exchange rates. In addition, some of the countries in which we have operations do or may restrict the expatriation or conversion of currency making such cash unavailable for financing of our global operations and capital investments.
Furthermore, a majority of our cash balances are held outside of the United States. Repatriating cash to the United States can require paying taxes in one or more countries making the cash available to us less than that reported in our financial statements.
We are a smaller reporting company and, as such, our common stock may be less attractive to investors.
We are a smaller reporting company, (i.e. a company with less than $250 million of public float) and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We cannot predict if investors will find our common stock less attractive as a result of our smaller reporting company status. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.
We may not be entitled to forgiveness of our PPP Loan, and our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.
In May 2020, we borrowed $6.3 under the Paycheck Protection Program of the CARES Act, a portion of which may be forgiven. All or a portion of the PPP Loan may be forgiven by the Small Business Administration (the “SBA”) upon our application in accordance with the forgiveness rules set out in the CARES Act. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered lease payments, covered mortgage interest and covered utilities during the twenty-four-week period beginning on the date the loan is advanced, but not to exceed December 31, 2020. Not more than 40% of the forgiven amount may be for non-payroll costs. In addition, the amount of the PPP Loan eligible for forgiveness related to payroll costs is subject to additional
limitations as outlined in the CARES Act. Although we intend to use the entire PPP Loan for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the Paycheck Protection Program, no assurance can be given that we will obtain forgiveness of the PPP Loan in whole or in part. Furthermore, on April 28, 2020, the Secretary of the U.S. Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan.
We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, through monthly principal and interest payments. These payments will commence following the end of the deferment period as defined in the PPP Loan. The PPP bears interest at a rate of 1% per annum. We may prepay the principal at any time without penalty.
As part of our application for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good faith belief that given our Company’s circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan in its entirety. In addition, receipt of a PPP Loan may result in adverse publicity and damage to reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
Not applicable.

---

ITEM 2. PROPERTIES
Item 2. Properties
Facilities
We lease 28,808 square feet of headquarters office space located in Houston, Texas. The term of this lease runs through June 2025. We also own a custom built, approximately 26,000 square foot facility in Aberdeen, Scotland and a 55,000 square foot facility in Lafayette, Louisiana.
We have other offices under lease in Denver, Colorado; Stavanger, Norway; Doha, Qatar and Singapore, and additional leased offices, warehouses and service centers in the United States, Brazil, Mexico, Nigeria, Malaysia, Australia, United Arab Emirates and Saudi Arabia. We believe our facilities are adequate for our current needs and for the foreseeable future.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
In 2021, seven substantially similar actions were filed against the Company, its directors and certain Viasat entities alleging, among other things, that the registration statement related to the Viasat Merger on Form S-4 and form of proxy statement included therein filed by Viasat with the SEC on February 1, 2021, contained incomplete and misleading information. The actions are as follows:
Style
Court
Date Filed
Shiva Stein v. RigNet, Inc., et.al
United States District Court for the Southern District of California
February 17, 2021
Christine Waugh v. RigNet, Inc., et. al.
United States District Court for the District of Colorado
February 20, 2021
Christine Waugh v. RigNet, Inc., et al.
United States District Court for the Southern District of New York
February 21, 2021
Lewis D. Baker v. RigNet, Inc., et. al.
United States District Court for the District of Colorado
February 25, 2021
Heather DiMichele v. RigNet, Inc., et. al.
United States District Court for the Southern District of New York
March 2, 2021
Jacob Wheeler v. RigNet, Inc., et. al.
United States District Court for the District of Delaware
March 5, 2021
Robert Wilhelm v. RigNet, Inc., et. al.
United States District Court for the District of Colarado
March 5, 2021
While the Company believes all of these cases are meritless and intends to vigorously defend them, the lawsuits are in the very early stages and no assurance can be given that these suits will not have a material adverse effect on the business, financial condition or results of operations of the Company, or that the lawsuits will not materially and adversely affect the ability of the Company to close the Viasat Merger.
In June 2019, the Company announced that it reached a settlement with Inmarsat plc that concludes the GX Dispute. Pursuant to the settlement the Company paid $45.0 million in June 2019 and paid $5.0 million in July 2019 and paid the final $0.8 million in the third quarter of 2020.
The Company, in the ordinary course of business, is a claimant or a defendant in various other legal proceedings, including proceedings as to which the Company has no insurance coverage and those that may involve the filing of liens against the Company or its assets. The outcome of any such claims or proceedings cannot be predicted with certainty.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
RigNet’s common stock, $0.001 par value, is traded on the NASDAQ Global Select Market (NASDAQ), under the ticker symbol RNET. There were approximately 104 holders of record of RigNet’s common stock as of February 28, 2021.
Dividends
We have not paid any cash dividends on our common stock and do not intend to do so in the foreseeable future. Further, our Credit Agreement restricts our ability to pay cash dividends. We currently intend to retain all available funds and any future earnings to support the operation and to finance the growth and development of our business.
Recent Sales of Unregistered Securities
During the year ended December 31, 2020, we did not have any sales of securities in transactions that were not registered under the Securities Act that have not been reported on Form 8-K or Form 10-Q.
Issuer Purchases of Equity Securities
The following table sets forth certain information with respect to repurchases of our common stock during the quarter ended December 31, 2020:
Period
Total number of
shares (or units)
purchased (1)
Average price paid
per share (or unit)
Total number of
shares (or units) purchased as part
of publicly announced plan or programs
Maximum number (or approximate dollar value) of
shares (or units) that may yet be purchased under the plans
October 1 - October 31, 2020
$
3.91
N/A
N/A
November 1 - November 30, 2020
36,920
$
5.39
N/A
N/A
December 1 - December 31, 2020
$
5.41
N/A
N/A
37,588
$
5.37
N/A
N/A
(1) All shares repurchased were surrendered by employees to pay taxes withheld upon the vesting of restricted stock awards

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data
Omitted pursuant to amendments to Item 301 of Regulations S-K effective February 10, 2021.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
General
The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements about our business and operations. Our future results may differ materially from those we currently anticipate as a result of the factors we describe under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Executive Overview
On December 21, 2020, we announced that our Board of Directors unanimously approved the Company's entry into a definitive agreement whereby Viasat will acquire the Company in an all-stock transaction representing an enterprise value of $222 million, including the Company’s net debt as of September 30, 2020, based on the closing price of Viasat common stock on December 18, 2020. Under the terms of the agreement, the Company’s stockholders will receive a fixed exchange ratio of 0.1845 shares of Viasat stock for each share of the Company’s common stock owned by the stockholders. Based on the parties' volume weighted average prices ("VWAPs") for the 20 trading days ending on December 18, 2020, the transaction represents a 17.9% premium for the Company's stockholders. Upon closing, the Company’s stockholders are expected to own approximately 5.7% of Viasat's outstanding common stock. The all-stock transaction is intended to be tax-free to the Company stockholders. The transaction, which is expected to close by mid-calendar year 2021, is subject to customary closing conditions and regulatory approvals, including the approval of RigNet's stockholders.
We deliver advanced software and communications infrastructure that allow our customers to realize the business benefits of digital transformation. With world-class, ultra-secure solutions spanning global IP connectivity, bandwidth-optimized OTT applications, IIoT big data enablement, and industry-leading machine learning analytics, we support the full evolution of digital enablement, empowering businesses to respond faster to high priority issues, mitigate the risk of operational disruption, and maximize their overall financial performance.
Our Operations
We are the leading provider of ultra-secure, intelligent networking solutions and specialized applications. Customers use our private networks to manage information flows and execute mission-critical operations primarily in remote areas where conventional telecommunications infrastructure is either unreliable or unavailable. We provide our clients with what is often the sole means of communication for their remote operations. On top of and vertically integrated into these networks we provide services ranging from fully-managed voice, data, and video to more advanced services including: cyber-security threat detection and prevention; applications to improve crew welfare, safety or workforce productivity; and a real-time AI-backed data analytics platform to enhance customer decision making and business performance.
Segment information is prepared consistent with the components of the enterprise for which separate financial information is available and regularly evaluated by the chief operating decision-maker for the purpose of allocating resources and assessing performance.
•
Managed Communications Services (MCS). Our MCS segment provides remote communications, telephony and technology services for offshore and onshore drilling rigs and production facilities, support vessels, and other remote sites.
•
Applications and Internet-of-Things (Apps & IoT). Our Apps & IoT segment provides applications over-the-top of the network layer including SaaS offerings such as a real-time machine learning and AI data platform (Intelie Pipes and Intelie LIVE), Cyphre Encryption, ECS, applications for safety and workforce productivity such as weather monitoring primarily in the North Sea (MetOcean), and certain other value-added services such as AVI. This segment also includes the private machine-to-machine IoT data networks including SCADA provided primarily for pipelines.
•
Systems Integration (SI). Our SI segment provides design and implementation services for customer telecommunications systems. Solutions are delivered based on the customer’s specifications, adhering to international industry standards and best practices. Project services may include consulting, design, engineering, project management, procurement, testing, installation, commissioning and maintenance. Additionally, Systems Integration provides complete monitoring and maintenance for fire and gas detection systems and PLC/automation control systems.
Corporate and eliminations primarily represents unallocated executive and support activities, including back-office software development, interest expense, income taxes, eliminations, the GX dispute and change in fair value of earn-out/contingent consideration.
Customers in our MCS and Apps & IoT segments are primarily served under fixed-price contracts, either on a monthly, usage or day rate basis or for equipment sales. Our contracts are generally in the form of Master Service Agreements, or MSAs, with specific services being provided under individual service orders. Offshore contracts generally have a term of up to five years with renewal options. Land-based contracts are generally shorter term or terminable on short notice without a penalty. Service orders are executed under the MSA for individual remote sites or groups of sites, and generally permit early termination on short notice without penalty in the event of force majeure, breach of the MSA or cold stacking of a drilling rig (when a rig is taken out of service and is expected to be idle for a protracted period of time). SI customers are served primarily under fixed-price, long-term contracts.
Cost of revenue consists primarily of satellite charges, voice and data termination costs, network operations expenses, internet connectivity fees, equipment purchases for SI projects and direct service labor. Satellite charges consist of the costs associated with obtaining satellite bandwidth (the measure of capacity) used in the transmission of service to and from contracted satellites. Direct service labor consists of field technicians, our Network Operations Center (NOC) employees, and other employees who directly provide services to customers. Network operations expenses consist primarily of costs associated with the operation of our NOC, which is maintained 24 hours a day, seven days a week. Depreciation and amortization are recognized on all property, plant and equipment either installed at a customer’s site or held at our corporate and regional offices, as well as intangibles arising from acquisitions and internal-use software. Selling and marketing expenses consist primarily of salaries and commissions, travel costs and marketing communications. General and administrative expenses consist of expenses associated with our management, finance, contract, support and administrative functions.
Profitability generally increases or decreases at an MCS site as we add or lose customers and value-added services. Assumptions used in developing the rates for a site may not cover cost variances from inherent uncertainties or unforeseen obstacles, including both physical conditions and unexpected problems encountered with third party service providers.
Recent Developments
As of December 31, 2020, we provided MCS to a total of 1,142 U.S. and non-U.S. sites
As of December 31, 2020, we had backlog for our cost to cost projects (formerly known as percentage of completion) of $7.7 million.
Known Trends and Uncertainties
Operating Matters
Uncertainties in the oil and gas industry may continue to impact our profitability. The fundamentals of the oil and gas industry we serve expect to remain challenged at least into the first half of 2021 particularly offshore. In 2020, our customers and we were adversely impacted by the COVID-19 pandemic. Our customers have had certain of their work-sites for large projects closed and are operating certain sites with only essential employees. Travel to and from remote locations has been restricted and, in some cases, suspended. The global oil industry we serve has experienced reduced demand and layoffs as a result. Furthermore, in the first half of 2020, the Saudi state oil producer, Saudi Aramco, and Russia, along with the broader OPEC+ group, initially failed to reach an agreement to continue production cuts and collectively launched a price war with the goal of attempting to recapture market share that OPEC+ had lost to U.S. oil producers in recent years. Following the OPEC+ actions on price and in conjunction with significantly reduced demand as a result of the COVID-19 pandemic, Brent crude prices which were $67.77 as of December 31, 2019, fell to $9.12 as of April 21, 2020, and rose to $51.22 per barrel as of December 31, 2020. There is no guarantee that OPEC+ will continue the current production cuts and an increase in oil supply could have an adverse effect on our industry. The oil and gas environment continues to be challenged with operators focusing on projects with shorter pay-back periods that generally require less capital investment and lower costs from service providers and drilling contractors. We generally anticipate that oil and gas demand will begin to recover as the impact of COVID-19 eases and that the oil and gas industry will begin to recover in 2021. However, we cannot anticipate when the impact of the COVID-19 on the global economic conditions will ease substantially. We expect that customers will begin to move forward on major projects and drilling campaigns and that the importance of digital transformation in the oil and gas industry will continue to accelerate. Generally, a prolonged lower oil price environment decreases exploration and development drilling investment, utilization of drilling rigs and the activity of the global oil and gas industry that we serve.
In addition, uncertainties that could impact our profitability include service responsiveness to remote locations, communication network complexities, political and economic instability in certain regions, cyber-attacks, export restrictions, licenses and other trade barriers. These uncertainties may result in the delay of service initiation, which
may negatively impact our results of operations. Additional uncertainties that could impact our operating cash flows include the availability and cost of satellite bandwidth, timing of collecting our receivables, and our ability to increase our contracted services through sales and marketing efforts while leveraging the contracted satellite and other communication service costs.
Sales Tax Audit
We are undergoing a routine sales tax audit from a state where we have operations. The audit can cover up to a four-year period. We are in the early stages of the audit and do not have any estimates of further exposure, if any, for the tax years under review.
The Company closed a prior year sales tax audit from a state where we have operations. The assessment had no material impact to the Company’s Consolidated Financial Statements
Critical Accounting Policies
Certain of our accounting policies require judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on our historical experience, terms of existing contracts, observance of trends in the industry, information provided by our customers, and information available from other outside sources, as appropriate. Future results may differ from these judgments under different assumptions or conditions. Our accounting policies that require management to apply significant judgment include:
Revenue Recognition - Revenue from Contracts with Customers
Revenue is recognized to depict the transfer of promised goods or services in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.
Revenue Recognition - MCS and Apps & IoT
MCS and Apps & IoT customers are primarily served under fixed-price contracts, either on a monthly, usage or day rate basis or for equipment sales and consulting services. Our contracts are generally in the form of Master Service Agreements, or MSAs, with specific services being provided under individual service orders. Offshore contracts generally have a term of up to five years with renewal options. Land-based contracts are generally shorter term or terminable on short notice without a penalty. Service orders are executed under the MSA for individual remote sites or groups of sites, and generally permit early termination on short notice without penalty in the event of force majeure, breach of the MSA or cold stacking of a drilling rig (when a rig is taken out of service and is expected to be idle for a protracted period of time).
Performance Obligations Satisfied Over Time-The delivery of service represents the single performance obligation under MCS and Apps & IoT contracts. Revenue for contracts is generally recognized over time as service is transferred to the customer and we expect to be entitled to the agreed monthly, day rate or usage rate in exchange for those services.
Performance Obligations Satisfied at a Point in Time-The delivery of equipment represents the single performance obligation under equipment sale contracts. Revenue for equipment sales is generally recognized upon delivery of equipment to customers.
Revenue Recognition - Systems Integration
Revenues related to long-term, fixed-price SI contracts for customized network solutions are recognized based on the percentage of completion for the contract. At any point, RigNet has numerous contracts in progress, all of which are at various stages of completion. Accounting for revenues and profits on long-term contracts requires estimates of total estimated contract costs and estimates of progress toward completion to determine the extent of revenue and profit recognition. Progress towards completion on fixed-price contracts is measured based on the ratio of costs incurred to total estimated contract costs (the cost-to-cost method). These estimates may be revised as additional information becomes available or as specific project circumstances change.
Performance Obligations Satisfied Over Time - The delivery of a SI solution represents the single performance obligation under SI contracts. Progress towards completion on fixed-price contracts is measured based on the ratio of costs incurred to total estimated contract costs (the cost-to-cost method). These estimates may be revised as additional information becomes available or as specific project circumstances change.
We review all material contracts on a monthly basis and revise the estimates as appropriate for developments such as providing services, purchasing third-party materials and equipment at costs differing from those previously estimated, and incurring or expecting to incur schedule issues. Changes in estimated final contract revenues and costs can either increase or decrease the final estimated contract profit or loss. Profits are recorded in the period in which a change in estimate is recognized, based on progress achieved through the period of change. Anticipated losses on contracts are recorded in full in the period in which they become evident. Revenue recognized in excess of amounts billed is classified as a current asset under Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB).
Variable Consideration - SI - We record revenue on contracts relating to certain probable claims and unapproved change orders by including in revenue an amount less than or equal to the amount of costs incurred to date relating to these probable claims and unapproved change orders, thus recognizing no profit until such time as claims are finalized or change orders are approved. The amount of unapproved change orders and claim revenues is included in our Consolidated Balance Sheets as part of CIEB. No material unapproved change orders or claims revenue was included in CIEB as of December 31, 2020 and 2019. As new facts become known, an adjustment to the estimated recovery is made and reflected in the current period.
SI contracts are billed in accordance with the terms of the contract which are typically either based on milestones or specified time intervals. As of December 31, 2020 and 2019, the amount of CIEB related to Systems Integration projects was $12.0 million and $13.3 million, respectively. Under long-term contracts, amounts recorded in CIEB may not be realized or paid, respectively, within a one-year period. As of December 31, 2020 and 2019, $1.0 million and $1.0 million, respectively, of amounts billed to customers in excess of revenue recognized to date are classified as a current liability, under deferred revenue. Additionally, as of December 31, 2020 and 2019, there were $3.6 million and $2.6 million of retention included in Accounts Receivable.
Accounts Receivable
Trade accounts receivable are recognized as customers are billed in accordance with customer contracts. We report an allowance for doubtful accounts for probable credit losses existing in accounts receivable. Management determines the allowance which is adjusted based on historical experience, current economic conditions, and reasonable assumptions. Individual receivables and balances which have been outstanding greater than 120 days are reviewed individually. Account balances, when determined to be uncollectible, are charged against the allowance.
Property, Plant and Equipment
Property, plant and equipment consists of (i) telecommunication and computer equipment, (ii) furniture and other office equipment, (iii) leasehold improvements, (iv) building and (v) land. All property, plant and equipment, excluding land, is depreciated and stated at acquisition cost net of accumulated depreciation. Depreciation is calculated using the straight-line method over the expected useful lives of the respective assets, which range from one to ten years. We assess the value of property, plant and equipment for impairment when we determine that events and circumstances indicate that the recorded carrying value may not be recoverable. An impairment is determined by comparing estimated future net undiscounted cash flows to the carrying value at the time of the assessment. No impairment to property, plant and equipment was recorded in the years ended December 31, 2020, 2019 or 2018.
Any future downturn in our business could adversely impact the key assumptions in our impairment test. While we believe that there appears to be no indication of current or future impairment, historical operating results may not be indicative of future operating results and events and circumstances may occur causing a triggering event in a period as short as three months.
Intangibles
Intangibles consist of customer relationships, covenants-not-to-compete, brand name, licenses, developed technology and backlog acquired as part of our acquisitions. Intangibles also include internal-use software. Intangibles have useful lives ranging from 5.0 to 20.0 years and are amortized on a straight-line basis. We assess the value of intangibles for impairment when we determine that events and circumstances indicate that the recorded carrying value may not be recoverable. An impairment is determined by comparing estimated future net undiscounted cash flows to the carrying value at the time of the assessment.
In September 2020, we identified a triggering event in the Apps & IoT segment associated with Cyphre as a result of market conditions, which resulted in a reduction in our cash flow projections during a revision of our internal forecast. We performed a recoverability analysis and determined the carrying value of the intangible assets acquired with the Cyphre acquisition, which included trade name, customer relationship and developed technology, was in excess of their recoverable value and we recognized an impairment of $3.8 million.
No impairment to intangibles was recorded in the years ended December 31, 2019 or 2018.
Any future downturn in our business could adversely impact the key assumptions in our impairment test. While we believe that there appears to be no indication of current or future impairment, historical operating results may not be indicative of future operating results and events and circumstances may occur causing a triggering event in a period as short as three months.
Goodwill
Goodwill resulted from prior acquisitions as the consideration paid for the acquired businesses exceeded the fair value of acquired identifiable net tangible and intangible assets. Goodwill is reviewed for impairment at least annually, as of July 31, with additional evaluations being performed when events or circumstances indicate that the carrying value of these assets may not be recoverable.
The goodwill impairment test is used to identify potential impairment by comparing the fair value of each reporting unit to the book value of the reporting unit, including goodwill. Fair value of the reporting unit is determined using a combination of the reporting unit’s expected present value of future cash flows and a market approach. The present value of future cash flows is estimated using our most recent forecast and our weighted average cost of capital. The market approach uses a market multiple on the reporting unit’s cash generated from operations. Significant estimates for each reporting unit included in our impairment analysis are cash flow forecasts, our weighted average cost of capital, projected income tax rates and market multiples. Changes in these estimates could affect the estimated fair value of our reporting units and result in an impairment of goodwill in a future period. If the fair value of a reporting unit is less than its book value, goodwill of the reporting unit is considered to be impaired. If the book value of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. Any impairment in the value of goodwill is charged to earnings in the period such impairment is determined.
The combination of the COVID-19 pandemic and unprecedented oil and gas prices during the first quarter of 2020 impacted our internal forecast. As a result, we performed an interim goodwill impairment test during the first quarter of 2020 and determined that two of our reporting units had carrying values in excess of their fair value which resulted in a goodwill impairment charge of $23.1 million. The charge fully impaired goodwill previously reported in MCS of $21.8 million and Systems Integration of $1.4 million.
Apps & IoT had $20.5 million of goodwill as of December 31, 2020, and fair value exceeded carrying value by over 100% as of the July 31, 2020 annual impairment test. Any future downturn in our business could adversely impact the key assumptions in our impairment test.
While we believe that there appears to be no indication of current or future impairment, historical operating results may not be indicative of future operating results and events and circumstances may occur causing a triggering event in a period as short as three months.
We recorded no goodwill impairments in the years ending December 31, 2019 or 2018.
Taxes
Current income taxes are determined based on the tax laws and rates in effect in the jurisdictions and countries that we operate in and revenue is earned. Deferred income taxes reflect the tax effect of net operating losses, foreign tax credits and the tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or the entire deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment.
From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty. In the normal course of business, we prepare and file tax returns based on interpretation of tax laws and regulations, which are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. We evaluate our tax positions and recognize only tax benefits for financial purposes that, more likely than not, will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits of the position.
We have elected to include income tax related interest and penalties as a component of income tax expense.
New Accounting Pronouncements
No standard implemented during 2020 or 2019 had a material effect on our financial position, cash flow or results of operations. See our audited consolidated financial statements and the notes thereto included in this Annual Report on Form 10-K for more details regarding our implementation and assessment of new accounting standards.
Results of Operations
The following table sets forth selected financial and operating data for the periods indicated.
Percentage Change
Year Ended December 31,
2019 to
2018 to
(in thousands, except percentages)
Revenue
$
207,921
$
242,931
$
238,854
(14.4
)%
1.7
%
Expenses:
Cost of revenue (excluding depreciation and amortization)
130,330
149,753
146,603
(13.0
)%
2.1
%
Depreciation and amortization
26,534
31,129
33,154
(14.8
)%
(6.1
)%
Impairment of goodwill and intangible assets
26,977
-
-
*
*
Change in fair value of earn-out/contingent consideration
4,048
2,499
3,543
62.0
%
29.5
%
Gain on sales of property, plant and
equipment, net of retirements
-
(4,240
)
-
*
*
GX dispute
-
-
50,612
*
*
Selling and marketing
9,631
12,230
12,844
(21.3
)%
(4.8
)%
General and administrative
43,810
53,630
53,193
(18.3
)%
0.8
%
Total expenses
241,330
245,001
299,949
(1.5
)%
(18.3
)%
Operating loss
(33,409
)
(2,070
)
(61,095
)
1,514.0
%
(96.6
)%
Other expense, net
(5,555
)
(5,971
)
(3,965
)
(7.0
)%
50.6
%
Loss before income taxes
(38,964
)
(8,041
)
(65,060
)
384.6
%
(87.6
)%
Income tax (expense) benefit
(6,564
)
(10,745
)
2,746
(38.9
)%
(491.3
)%
Net loss
(45,528
)
(18,786
)
(62,314
)
142.4
%
(69.9
)%
Less: Net income attributable to non-controlling
interests
(24.3
)%
166.2
%
Net loss attributable to RigNet, Inc.
stockholders
$
(45,808
)
$
(19,156
)
$
(62,453
)
139.1
%
(69.3
)%
Other Non-GAAP Data:
Adjusted EBITDA (1)
$
33,272
$
41,100
$
34,793
(19.0
)%
18.1
%
(1) See Non-GAAP Financial Measures for a reconciliation of our net loss to Adjusted EBITDA
The following represents selected financial operating results for our segments:
Year Ended December 31,
Percentage Change
2019 to
2018 to
(in thousands, except percentages)
Managed Communications Services:
Revenue
$
135,754
$
164,857
$
171,574
(17.7
)%
(3.9
)%
Cost of revenue (excluding depreciation and
amortization)
86,825
100,394
105,101
(13.5
)%
(4.5
)%
Depreciation and amortization
18,707
21,403
22,759
(12.6
)%
(6.0
)%
Impairment of goodwill
21,755
-
-
*
*
Selling, general and administrative
10,310
13,288
16,448
(22.4
)%
(19.2
)%
Managed Communications Services operating
income (loss)
$
(1,843
)
$
29,772
$
27,266
(106.2
)%
9.2
%
Applications and Internet-of-Things:
Revenue
$
34,458
$
35,368
$
25,713
(2.6
)%
37.5
%
Cost of revenue (excluding depreciation and
amortization)
14,520
17,239
13,386
(15.8
)%
28.8
%
Depreciation and amortization
4,544
4,892
4,570
(7.1
)%
7.0
%
Impairment of intangible assets
3,836
-
-
*
*
Selling, general and administrative
5,955
4,551
1,961
30.9
%
132.1
%
Applications and Internet-of-Things operating
income
$
5,603
$
8,686
$
5,796
(35.5
)%
49.9
%
Systems Integration:
Revenue
$
37,709
$
42,706
$
41,567
(11.7
)%
2.7
%
Cost of revenue (excluding depreciation and
amortization)
28,985
32,120
28,116
(9.8
)%
14.2
%
Depreciation and amortization
1,627
2,511
(60.8
)%
(35.2
)%
Impairment of goodwill
1,386
-
-
*
*
Selling, general and administrative
1,500
2,530
1,698
(40.7
)%
49.0
%
Systems Integration operating income
$
5,200
$
6,429
$
9,242
(19.1
)%
(30.4
)%
Years Ended December 31, 2020 and 2019
Revenue. Revenue decreased by $35.0 million, or 14.4%, to $207.9 million for the year ended December 31, 2020 from $242.9 million for the year ended December 31, 2019. Revenue for the MCS segment decreased $29.1 million, or 17.7% due to a decrease in site counts as a result of the deteriorating conditions in the oil and gas industry that we serve as well as from the effect of the COVID-19 pandemic and non-recurring service installation revenue related to the expansion of the LTE network in the Gulf of Mexico that occurred in the prior year. Revenue for the Systems Integration segment decreased $5.0 million, or 11.7%, due primarily to timing of certain projects. Revenue for the Apps & IoT segment decreased $0.9 million, or 2.6%, despite an increase in Intelie’s revenue of 32%, due to lower equipment sales and bandwidth usage in our IoT business.
Cost of Revenue (excluding depreciation and amortization). Cost of revenue (excluding depreciation and amortization) decreased by $19.4 million, or 13.0%, to $130.3 million for the year ended December 31, 2020 from $149.8 million for the year ended December 31, 2019. Cost of revenue (excluding depreciation and amortization) decreased in the MCS segment by $13.6 million and was directly related to the decrease in revenue which was a result of stacking rigs and decreased site counts. Cost of revenue (excluding depreciation and amortization) decreased in the Systems Integration segment by $3.1 million due to the timing of certain projects. Cost of revenue (excluding depreciation and amortization) decreased in the Apps & IoT segment by $2.7 million due to the decrease in equipment re-sales and bandwidth in IoT compared to the prior year.
Depreciation and Amortization. Depreciation and amortization expenses decreased by $4.6 million to $26.5 million for the year ended December 31, 2020 from $31.1 million for the year ended December 31, 2019. The decrease is primarily attributable to the intangibles from the July 2012 acquisition of Nessco being fully amortized coupled with lower capital expenditures compared to the prior year.
Impairment of Goodwill and Intangible Assets. The combination of the COVID-19 pandemic and unprecedented low oil and gas prices during the first quarter of 2020 impacted our internal forecast. As a result, we
performed an interim goodwill impairment test during the first quarter of 2020 and determined that two of our reporting units had carrying values in excess of their fair value which resulted in a goodwill impairment charge of $23.1 million. The charge fully impaired goodwill previously reported in MCS of $21.8 million and Systems Integration of $1.4 million. In September 2020, we identified a triggering event in the Apps & IoT segment associated with Cyphre as a result of market conditions, which resulted in a reduction in our cash flow projections during a revision of our internal forecast. We performed a recoverability analysis and determined the carrying value of the intangible assets acquired with the Cyphre acquisition, which included trade name, customer relationship and developed technology, was in excess of their recoverable value and we recognized an impairment of $3.8 million.
Gain on sales of property, plant and equipment, net of retirements. During the year ended December 31, 2019, the Company recognized a gain of $4.2 million on the sale of certain assets.
Selling and Marketing. Selling and marketing expenses decreased by $2.6 million to $9.6 million for the year ended December 31, 2020 from $12.2 million for the year ended December 31, 2019. This decrease was due to the reductions in travel, contract labor and trade shows in response to the COVID-19 pandemic.
General and Administrative. General and administrative expenses decreased by $9.8 million to $43.8 million for the year ended December 31, 2020 from $53.6 million for the year ended December 31, 2019. General and administrative costs decreased due to reduced stock based-compensation, non-recurring legal cost attributable to the settlement of the GX Dispute during 2019, reduced travel and reduced professional fees in response to the COVID-19 pandemic.
Income Tax Expense. Our effective income tax rate was (16.8%) and (133.6%) for the years ended December 31, 2020 and 2019, respectively. Our effective tax rate is affected by factors including changes in valuation allowances, fluctuations in income across jurisdictions with varying tax rates, and changes in income tax reserves, including related penalties and interest. See Note 13 - “Income Taxes,” to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding the items comprising our effective tax rates.
Years Ended December 31, 2019 and 2018
Revenue. Revenue increased by $4.1 million, or 1.7%, to $242.9 million for the year ended December 31, 2019 from $238.9 million for the year ended December 31, 2018, driven by growth in the Apps & IoT segment. Revenue for the Apps & IoT segment grew $9.7 million, or 37.5%, due to our focus on the growth of the application layer, including Intelie. Revenue for the Systems Integration segment increased $1.1 million, or 2.7%, due primarily to productivity on certain large projects. Revenue for the MCS segment decreased $6.7 million, or 3.9% largely due to the loss of drilling contractor Noble Corporation plc as a customer at the end of 2017, with decommissioning occurring throughout 2018.
Cost of Revenue (excluding depreciation and amortization). Cost of revenue (excluding depreciation and amortization) increased by $3.2 million, or 2.1%, to $149.8 million for the year ended December 31, 2019 from $146.6 million for the year ended December 31, 2018. Cost of revenue (excluding depreciation and amortization) increased in the Systems Integration segment by $4.0 million. Cost of revenue (excluding depreciation and amortization) increased in the Apps & IoT segment by $3.9 million as we continue our strategy to grow our application layer and IoT space, including Intelie. Cost of revenue (excluding depreciation and amortization) decreased in the MCS segment by $4.7 million from cost reductions.
Depreciation and Amortization. Depreciation and amortization expenses decreased by $2.0 million to $31.1 million for the year ended December 31, 2019 from $33.2 million for the year ended December 31, 2018. The decrease is primarily attributable to the intangibles from the July 2012 acquisition of Nessco being fully amortized coupled with lower capital expenditures.
Gain on sales of property, plant and equipment, net of retirements. During the year ended December 31, 2019, the Company recognized a gain of $4.2 million on the sale of certain assets.
Selling and Marketing. Selling and marketing expenses decreased by $0.6 million to $12.2 million for the year ended December 31, 2019 from $12.8 million for the year ended December 31, 2018. This decrease was due to cost reductions and reduced personnel costs, offset partially as we re-allocated resources to our Apps & IoT segment.
General and Administrative. General and administrative expenses increased by $0.4 million to $53.6 million for the year ended December 31, 2019 from $53.2 million for the year ended December 31, 2018. General and administrative costs increased primarily due to increased stock-based compensation and increased GX Dispute legal expenses, partially offset by reduced personnel costs.
Income Tax Expense. Our effective income tax rate was (133.6%) and 4.2% for the years ended December 31, 2019 and 2018, respectively. Our effective tax rate is affected by factors including changes in valuation allowances, fluctuations in income across jurisdictions with varying tax rates, and changes in income tax reserves, including related penalties and interest. See Note 13 - “Income Taxes,” to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding the items comprising our effective tax rates.
Liquidity and Capital Resources
At December 31, 2020, we had working capital, including cash and restricted cash, of $14.8 million. See Note 1 - “Business and Summary of Significant Accounting Policies,” to our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding the item comprising our restricted cash.
Over the past three years, annual capital expenditures have ranged from $13.1 million to $30.1 million. Based on our current expectations, we believe our liquidity and capital resources will be sufficient for the conduct of our business and operations for the foreseeable future.
After settlement of intercompany payables and notes at December 31, 2020, there is no cash in foreign subsidiaries available for repatriation to our domestic parent. No deferred tax liability has been recognized as of December 31, 2020 for those earnings that are not considered permanently reinvested.
During the next twelve months, we expect our principal sources of liquidity to be cash flows from operating activities, cash and cash equivalents, borrowing availability under our Credit Agreement and additional financing activities we may pursue, which may include debt or equity offerings. In forecasting our cash flows we have considered factors including contracted and expected services for customers, and contracted and available satellite bandwidth.
Year Ended December 31,
(in thousands)
Consolidated Statements of Cash Flows Data:
Cash, cash equivalents and restricted cash, January 1,
$
14,505
$
23,296
$
36,141
GX Dispute payment
(750
)
(50,000
)
-
Remaining net cash provided by operating
activities
33,398
29,716
7,673
Net cash provided by (used in) operating activities
32,648
(20,284
)
7,673
Net cash used in investing activities
(13,026
)
(16,543
)
(34,198
)
Net cash provided by (used in) financing activities
(19,373
)
28,098
11,855
Changes in foreign currency translation
(1,220
)
(62
)
1,825
Cash, cash equivalents and restricted cash, December 31,
$
13,534
$
14,505
$
23,296
Currently, the Norwegian Kroner, the British Pound Sterling and the Brazilian Real are the foreign currencies that could materially impact our liquidity. We presently do not hedge these risks, but evaluate financial risks on a regular basis and may utilize financial instruments in place in the future if deemed necessary. During the years ended December 31, 2020, 2019 and 2018, 88.2%, 90.6% and 91.6% of our revenue was denominated in U.S. dollars, respectively.
Operating Activities
Net cash provided in operating activities was $32.6 million for the year ended December 31, 2020 compared to net cash used in operations of $20.3 million for the year ended December 31, 2019. The increase in cash from operating activities of $52.9 million was primarily due to payment of $50.0 million towards the GX Dispute settlement prior year and the timing of paying our accounts payables, partially offset by the timing of collecting receivables.
Net cash used in operating activities was $20.3 million for the year ended December 31, 2019 compared to net cash provided by operations of $7.7 million for the year ended December 31, 2018. The decrease in cash from operating activities of $28.0 million was primarily due to payment of $50.0 million towards the GX Dispute
settlement, partially offset by the timing of collecting receivables. Excluding the $50.0 million GX Dispute settlement payment, the remaining net cash provided by operating activities was $29.7 million.
Our cash provided by operations is subject to many variables including the volatility of the oil and gas industry and the demand for our services. Other factors impacting operating cash flows include the availability and cost of satellite bandwidth, as well as the timing of collecting our receivables. Our future cash flow from operations will depend on our ability to increase our contracted services through our sales and marketing efforts while leveraging our contracted satellite and other communication service costs.
Investing Activities
Net cash used in investing activities was $13.0 million, $16.5 million and $34.2 million in the years ended December 31, 2020, 2019 and 2018, respectively. Of these amounts $13.1 million, $22.4 million, and $30.1 million, respectively, were for capital expenditures, a decrease of $9.3 million and a decrease of $7.7 million for the years ended December 31, 2020 and 2019, respectively, compared to each of the respective prior periods. The decrease is due to a slowdown in activity as a result of the decrease in the oil and gas as well as COVID-19. We expect our 2021 capital expenditures to be focused on success-based growth. In the years ended December 31, 2020, 2019 and 2018, there were $0.1 million, $5.8 million, and $1.1 million, respectively, of proceeds from the sales of property, plant and equipment.
Net cash used in investing activities was $16.5 million in the years ended December 31, 2019. Of this amount $22.4 million were for capital expenditures, a decrease of $7.7 million for the year ended December 31, 2019, compared to the year ended December 31, 2020. Capital expenditures for the year ended December 31, 2019 included $2.8 million for the buildout of the LTE network in the Gulf of Mexico with our partner T-Mobile and $2.4 million for the build-out of our new Lafayette office, which consolidates what was previously three facilities into one facility. Furthermore, the Company had $2.8 million of non-cash vendor financed capital expenditures, which in the first quarter of 2020 has become a debt obligation. In the year ended December 31, 2019, there were $5.8 million of proceeds from the sales of property, plant and equipment.
Financing Activities
Net cash used in financing activities was $19.4 million in the year ended December 31, 2020. Net cash provided by financing activities was $28.1 million and $11.9 million in the year ended December 31, 2019 and 2018, respectively.
Cash used in financing activities for the year ended December 31, 2020 included borrowings on the RCF and Paycheck Protection Program Loan (PPP Loan) of $15.6 million and $6.3 million, respectively, offset by $39.5 million which includes principal and other voluntary prepayments on the credit facility as well as vendor finance payments on our long term debt, $1.0 million withheld to cover employee taxes on stock-based compensation and $0.5 million in financing fees related to the Credit Agreement.
Net cash provided by financing activities was $28.1 million and $11.9 million in the year ended December 31, 2019 and 2018, respectively.
Cash provided by financing activities for the year ended December 31, 2019 included $49.5 million in proceeds from borrowings primarily related to the GX Dispute, partially offset by $19.2 million in principal payments on our long-term debt, $1.4 million withheld to cover employee taxes on stock-based compensation and $0.5 million in financing fees related to the consents, waiver and amendment to the Credit Agreement.
Net cash provided by financing activities for the year ended December 31, 2018 included draws of $23.8 million on our revolving credit facility partially offset by $5.1 million in principal payments on our long-term debt. Additionally, we paid the $8.0 million TECNOR earnout in July 2018, of which $6.4 million is recorded as cash used in financing activities and $1.6 million is recorded as cash used in operating activities. The Company received proceeds from the issuance of common stock upon the exercise of stock options of $1.0 million offset by $1.2 million for stock withheld to cover employee taxes on stock-based compensation
Credit Agreement
The Credit Agreement provides for a $16.0 million Term Loan, a $100.0 million RCF and a $30.0 million accordion feature.
The Credit Agreement bears interest at a rate of LIBOR plus a margin ranging from 1.75% to 3.25% based on the Company’s Consolidated Leverage Ratio. LIBOR is scheduled to cease to exist entirely after 2021. The Credit Agreement addresses this situation with a LIBOR successor rate, being one or more Secured Overnight Financing Rates (SOFR) or another alternate benchmark rate. The Credit Agreement also addresses the situation in which no LIBOR successor rate has been determined. Interest on the Credit Agreement is payable monthly with principal payments of $2.0 million due quarterly beginning June 30, 2020.
The weighted average interest rate for the years ended December 31, 2020 and 2019 was 3.9% and 5.2%, respectively, with an interest rate of 3.1% at December 31, 2020.
As of December 31, 2020, the outstanding principal amounts were $10.0 million for the Term Loan and $74.7 million for the RCF.
The Company’s Credit Agreement contains certain covenants and restrictions, including restricting the payment of cash dividends under default, and maintaining certain financial covenants such as a Consolidated Leverage Ratio, of less than or equal to 3.25 through the third quarter of 2020. The Consolidated Leverage Ratio requirement stepped down to 3.00 through the second quarter of 2021 and then steps down to 2.75 for all remaining quarters. The Consolidated Fixed Charge Coverage ratio requirement is greater than or equal to 1.25 through the maturity of the Credit Agreement. If any default occurs related to these covenants that are not cured or waived, the unpaid principal and any accrued interest can be declared immediately due and payable. The facilities under the Credit Agreement are secured by substantially all the assets of the Company.
On September 8, 2020, we entered into a fourth amendment to the Credit Agreement (the Fourth Amendment), which permits us to exclude the PPP Loan from the calculation of Consolidated Funded Indebtedness for all periods prior to and including March 31, 2021.
We believe we have accurately calculated and reported our required debt covenant calculations for the reporting period ended December 31, 2020 and are in compliance with the required covenant ratios. As of December 31, 2020, the Consolidated Leverage Ratio was 2.76 and the Consolidated Fixed Charge Coverage was 2.00. We expect to remain in compliance with our required debt covenant calculations for the foreseeable future. In the event that there are changes in economic conditions we can limit or control our spending through reductions in discretionary capital or other types of controllable expenditures, monetization of assets, or any combination of these alternatives if needed to remain in compliance with such covenants.
Vendor Finance Agreement
As of December 31, 2020, we had a vendor financing agreement (Vendor Finance Arrangement) in place, with an outstanding balance of $2.1 million. The outstanding balance bears interest at a rate of 6% and has quarterly payments of $0.3 million of principal and interest through January 2023. Subsequently, in January 2021, we had paid off the Vendor Finance Arrangement.
Paycheck Protection Program Loan
In May 2020, we entered into the PPP Loan. Under the PPP Loan, the Company borrowed $6.3 million which we expect to be eligible for forgiveness pursuant to the applicable regulations of the PPP.
We submitted a loan forgiveness application to Bank of America on December 1, 2020, which approved the application and forwarded it to the SBA for confirmation. The forgiveness regulations are subject to change as a result of administrative or judicial proceedings or legislative initiatives including additional regulations that are anticipated to be released by the SBA. While we cannot determine the ultimate outcome, based on our assessments on the current rules in place, we believe it should qualify for full forgiveness.
Any amounts not forgiven must be repaid in two years and will accrue interest at a rate of 1.0% per year. No interest or principal payments are due for six months, at which time interest and principal payments will be made on any unforgiven balance under terms established by Bank of America, N.A. at that time. The SBA has publicly stated that it intends to review all loans in excess of $2.0 million when loan forgiveness is requested. The SBA has not provided any further details of this review and we cannot assure the results of any such review.
Off-Balance Sheet Arrangements
We have not engaged in any off-balance sheet arrangements.
Non-GAAP Financial Measures
We refer to Adjusted EBITDA in this Annual Report on Form 10-K and from time to time in other filings that we make with the SEC. Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP and should not be considered as an alternative to net income (loss), operating income (loss), basic or diluted earnings (loss) per share or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate Adjusted EBITDA or similarly titled measures in the same manner as we do. We prepare Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. We encourage you to evaluate these adjustments and the reasons we consider them appropriate.
We define Adjusted EBITDA as net income (loss) plus (minus) interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, intangibles, property, plant and equipment; (gain) loss on sales of property, plant and equipment, net of retirements, stock-based compensation, restructuring charges, change in fair value of earn-outs and contingent consideration, executive departure costs, merger and acquisition costs, the GX dispute; GX Dispute Phase II costs, COVID-19 Costs (defined below) and non-recurring items.
We believe Adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:
•
investors and securities analysts use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies, and we understand investor’s and analyst’s analyses include Adjusted EBITDA;
•
by comparing our Adjusted EBITDA in different periods, investors may evaluate our operating results without the additional variations caused by items that we do not consider indicative of our core operating performance and which are not necessarily comparable from year to year; and
•
Adjusted EBITDA is an integral component of Consolidated EBITDA, as defined and used in the financial covenant ratios in our Credit Agreement.
Our management uses Adjusted EBITDA:
•
to indicate profit contribution;
•
for planning purposes, including the preparation of our annual operating budget and as a key element of annual incentive programs;
•
to allocate resources to enhance the financial performance of our business; and
•
in communications with our Board of Directors concerning our financial performance.
Although Adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under GAAP. Some of these limitations are:
•
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or other contractual commitments;
•
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•
Adjusted EBITDA does not reflect interest expense or principal payments on debt;
•
Adjusted EBITDA does not reflect cash requirements for income taxes;
•
Adjusted EBITDA does not reflect impairment of goodwill, intangibles and property, plant and equipment;
•
Adjusted EBITDA does not reflect foreign exchange impact of intercompany financing activities;
•
Adjusted EBITDA does not reflect (gain) loss on sales of property, plant and equipment, net of retirements;
•
Adjusted EBITDA does not reflect the stock-based compensation component of employee compensation;
•
Adjusted EBITDA does not reflect mergers & acquisitions costs;
•
Adjusted EBITDA does not reflect change in fair value of earn-outs and contingent consideration, which may require settlement in cash in the future;
•
Adjusted EBITDA does not reflect executive departure costs;
•
Adjusted EBITDA does not reflect restructuring charges;
•
Adjusted EBITDA does not reflect the GX dispute;
•
Adjusted EBITDA does not reflect the GX Dispute Phase II costs;
•
Adjusted EBITDA does not reflect the one-time costs directly related to the COVID-19 pandemic such as costs associated with cleaning, testing, quarantine of employees, and modifications to our Gulf of Mexico microwave network (the COVD-19 Costs); and
•
although depreciation and amortization are non-cash charges, the assets being depreciated or amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements.
The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented. Net loss is the most comparable GAAP measure to Adjusted EBITDA.
Year Ended December 31,
(in thousands)
Net loss
$
(45,528
)
$
(18,786
)
$
(62,314
)
Interest expense
5,299
5,958
3,969
Depreciation and amortization
26,534
31,129
33,154
Impairment of goodwill and intangible assets
26,977
-
-
(Gain) loss on sales of property, plant and
equipment, net of retirements
(4,240
)
Stock-based compensation
5,738
8,621
4,712
Restructuring Costs
Change in fair value of earn-out/contingent
consideration
4,048
2,499
3,543
Executive departure costs
-
Mergers and Acquisitions costs
1,826
2,284
COVID-19 Costs
-
-
GX dispute
-
-
50,612
GX dispute Phase II costs
-
3,946
-
Income tax expense (benefit)
6,564
10,745
(2,746
)
Adjusted EBITDA (non-GAAP measure)
$
33,272
$
41,100
$
34,793
We evaluate Adjusted EBITDA generated from our operations to assess the potential recovery of historical capital expenditures, determine timing and investment levels for growth opportunities, extend commitments of satellite bandwidth cost, invest in new products and services, expand or open new offices and service centers, and assess purchasing synergies.
During the year ended December 31, 2020, Adjusted EBITDA decreased by $7.8 million from $41.1 million in 2019 to $33.3 million in 2020.
During the year ended December 31, 2019, Adjusted EBITDA increased by $6.3 million from $34.8 million in 2018 to $41.1 million in 2019.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our consolidated financial statements, together with the related notes and report of independent registered public accounting firm, are set forth on the pages indicated in Item 15.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective and provide reasonable assurance that information required to be disclosed by the Company is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations of the Effectiveness of Internal Control
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met. Because of the inherent limitations of any internal control system, internal control over financial reporting may not detect or prevent misstatements. Projections of any evaluation of the effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies and procedures may deteriorate.
Management's Annual Report on Internal Control over Financial Reporting
The management report called for by Item 308(a) of Regulation S-K is provided below.
Management’s Report on Internal Control over Financial Reporting
The management of RigNet, Inc. and its subsidiaries (the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to management and the Board of Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Even those systems determined to be effective can provide only reasonable assurance with respect to financial statement presentation and preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
As of December 31, 2020, our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management determined that we maintained effective internal control over financial reporting as of December 31, 2020, based on those criteria.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.
PART III
Certain information required by Part III is omitted from this Annual Report on Form 10-K as we intend to file our definitive Proxy Statement for the 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”) pursuant to Regulation 14A of the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and certain information included in the Proxy Statement is incorporated herein by reference.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Code of Ethics and Business Conduct
We have adopted a code of ethics and business conduct (code of conduct) applicable to our principal executive, financial and accounting officers. A copy of the code of conduct is available, without charge, on our website at www.rig.net. We intend to satisfy the disclosure requirements of Form 8-K regarding any amendment to, or a waiver from, any provision of our code of ethics by posting such amendment or waiver on our website.
Pursuant to General Instruction G of Form 10-K, the Company incorporates by reference into this Item 10 the remaining information required by this Item 10 from information to be disclosed in the 2021 Proxy Statement.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Pursuant to General Instruction G of Form 10-K, the Company incorporates by reference into this Item 10 the remaining information required by this Item 10 from information to be disclosed in the 2021 Proxy Statement.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Pursuant to General Instruction G of Form 10-K, the Company incorporates by reference into this Item 10 the remaining information required by this Item 10 from information to be disclosed in the 2021 Proxy Statement.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Pursuant to General Instruction G of Form 10-K, the Company incorporates by reference into this Item 10 the remaining information required by this Item 10 from information to be disclosed in the 2021 Proxy Statement.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services
Pursuant to General Instruction G of Form 10-K, the Company incorporates by reference into this Item 10 the remaining information required by this Item 10 from information to be disclosed in the 2021 Proxy Statement.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules
(A)
Consolidated Financial Statements
1.
Consolidated Financial Statements. The consolidated financial statements listed in the accompanying “Index to Consolidated Financial Information” are filed as part of this Annual Report.
2.
Consolidated Financial Statement Schedules. All schedules have been omitted because the information required to be presented in them is not applicable or is shown in the financial statements or related notes.
(B)
Exhibits
The exhibits listed below are filed as part of this Annual Report for Form 10-K.
INDEX TO EXHIBITS
2.1
Share Purchase and Sale Agreement between RigNet, Inc. and the shareholders of Intelie Solucoes Em Informatica S.A. dated January 15, 2018 (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 17, 2018, and incorporated herein by reference)
2.2
First Amendment to Share Purchase and Sale Agreement between RigNet, Inc. and the shareholders of Intelie Solucoes Em Informatica S.A. dated January 15, 2018 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 2019, and incorporated herein by reference)
2.3
Second Amendment to Share Purchase and Sale Agreement between RigNet, Inc. and the shareholders of Intelie Solucoes Em Informatica S.A. dated January 15, 2018 (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 2019, and incorporated herein by reference)
2.4
Third Amendment to the Share Purchase and Sale Agreement and Other Pacts between RigNet, Inc. and the shareholders of Intelie Solucoes Em Informatica S.A. dated January 15, 2018 (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the SEC on June 18, 2020, and incorporated herein by reference)
2.5
Agreement and Plan of Merger, dated as of December 20, 2020, by and among Viasat, Inc., Royal Acquisition Sub, Inc. and RigNet, Inc. (filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2020, and incorporated herein by reference)
3.1
Amended and Restated Certificate of Incorporation, as amended (filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016, and incorporated herein by reference)
3.2
Amendment to Amended and Restated Certificate of Incorporation, effective May 18, 2016. (filed as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016, and incorporated herein by reference)
3.3
Second Amended and Restated Bylaws of the Registrant, as amended (filed as Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 6, 2018, and incorporated herein by reference)
4.1
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (filed as Exhibit 4.1 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 11, 2020, and incorporated herein by reference)
4.2
Specimen certificate evidencing common stock (filed as Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 [File No. 333-169723], as amended, and incorporated herein by reference)
10.1+
2006 Long-Term Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1 [File No. 333-169723], as amended, and incorporated herein by reference)
10.2+
2010 Omnibus Incentive Plan (filed as Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1 [File No. 333-169723], as amended, and incorporated herein by reference)
10.3+
Amendment to the 2010 Omnibus Incentive Plan (filed as Exhibit 99.2 to the Registrant’s Registration Statement on Form S-8 [File No. 333-211471] and incorporated herein by reference)
10.4+
2019 Omnibus Incentive Plan (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2019, and incorporated herein by reference)
10.5+
Form of Option Award Agreement under the 2006 Plan (filed as Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1 [File No. 333-169723], as amended, and incorporated herein by reference)
10.6+
Amendment to 2019 Omnibus Incentive Plan (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q with the SEC on August 7, 2020, and incorporate herein by reference)
10.7+
Form of Nonqualified Stock Option Award Agreement under the 2010 Plan (filed as Exhibit 10.5 to the Registrant’s Registration Statement on Form S-1 [File No. 333-169723], as amended, and incorporated herein by reference)
10.8+
Form of Restricted Stock Unit Award Agreement under the 2010 Omnibus Incentive Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2016, and incorporated herein by reference)
10.9+
Form of Performance Unit Award Agreement under the 2010 Omnibus Incentive Plan (filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2016, and incorporated herein by reference)
10.10+
Form of Incentive Stock Option Award Agreement under the 2010 Omnibus Incentive Plan (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2016, and incorporated herein by reference)
10.11+
Form of Nonqualified Stock Option Award Agreement under the 2010 Omnibus Incentive Plan (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2016, and incorporated herein by reference)
10.12+
Form of Restricted Stock Award Agreement under the 2010 Omnibus Incentive Plan (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2016, and incorporated herein by reference)
10.13+
Form of 2017 Performance Unit Award Agreement under the RigNet, Inc. 2010 Omnibus Incentive Plan, as amended (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 21, 2017, and incorporated herein)
10.14+
Form of 2019 Target Performance Unit Agreement under the RigNet, Inc. 2019 Omnibus Incentive Plan (filed as Exhibit 10.14 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 11, 2020, and incorporated herein by reference)
10.15+
Form of 2019 Maximum Performance Unit Agreement under the RigNet, Inc. 2019 Omnibus Incentive Plan (filed as Exhibit 10.15 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 11, 2020, and incorporated herein by reference)
10.16+
Form of Indemnification Agreement entered into with each director and executive officer (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 13, 2017, and incorporated herein by reference)
10.17+
Employment Agreement between the Registrant and Steven E. Pickett dated May 31, 2016 (filed as Exhibit 10.9 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016, and incorporated herein by reference)
10.18+
Form of 2019 Restricted Stock Unit Agreement (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2019, and incorporated herein by reference)
10.19+
Form of 2019 Performance Share Unit Agreement (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2019, and incorporated herein by reference)
10.20+
Form of 2019 Stock Option Agreement (filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2019, and incorporated herein by reference)
10.21
Third Amended and Restated Credit Agreement dated as of November 6, 2017 among RigNet, Inc. as Borrower, the Subsidiaries of RigNet party hereto as Guarantors, Bank of America, N.A. as Administrative Agent, Swingline Lender and L/C Issuer, BBVA Compass, as Syndication Agent, the Lenders party hereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Sole Bookrunner. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 6, 2017, and incorporated herein by reference)
10.22+
Omnibus Amendment to Incentive Plan Award Agreements (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 2018, and incorporated herein by reference)
10.23+
Form of Restricted Stock Unit Award Agreement (filed as exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2018, and incorporated herein by reference)
10.24+
Form of Incentive Stock Option Award Agreement (filed as exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2018, and incorporated herein by reference)
10.25
Registration Rights Agreement among Digital Oilfield Investments LP and RigNet, Inc. dated as of August 14, 2018 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 20, 2018, and incorporated herein by reference)
10.26
First Amendment to the Third Amended and Restated Credit Agreement dated as of February 13, 2019 among RigNet, Inc. as Borrower, the Subsidiaries of RigNet party hereto as Guarantors, Bank of America, N.A. as Administrative Agent, Swingline Lender and L/C Issuer, BBVA Compass, as Syndication Agent, the Lenders party hereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Sole Bookrunner. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 13, 2019, and incorporated herein by reference).
10.27
Second Amendment to the Third Amended and Restated Credit Agreement dated as of February 13, 2019 among RigNet, Inc. as Borrower, the Subsidiaries of RigNet party hereto as Guarantors, Bank of America, N.A. as Administrative Agent, Swingline Lender and L/C Issuer, BBVA Compass, as Syndication Agent, the Lenders party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Sole Bookrunner. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 13, 2019, and incorporated herein by reference)
10.28
Consent and Waiver to Third Amended and Restated Credit Agreement dated as of November 6, 2017 among RigNet, Inc. as Borrower, the Subsidiaries of RigNet party hereto as Guarantors, Bank of America, N.A. as Administrative Agent, Swingline Lender and L/C Issuer, BBVA Compass, as Syndication Agent, the Lenders party thereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Sole Bookrunner. (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2019, and incorporated herein by reference)
10.29
Third Amendment and Joinder to Third Amended and Restated Credit Agreement, dated as of February 21, 2020, among RigNet, Inc., as Borrower, the Subsidiaries of RigNet, Inc. party thereto as Guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the Lenders party thereto. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2020, and incorporated herein by reference).
10.30
Fourth Amendment to Third Amended and Restated Credit Agreement, dated as of September 8, 2020, among RigNet, Inc., as Borrower, the Subsidiaries of RigNet, Inc. party thereto as Guarantors, Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the Lenders party thereto (filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K with SEC on September 9, 2020, and incorporated herein by reference)
10.31+
RigNet’s Executive Severance Program
21.1
Subsidiaries of the Registrant
23.1
Consent of Deloitte & Touche LLP, independent registered public accounting firm
31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH
Inline XBRL Schema Document
101.CAL
Inline XBRL Calculation Linkbase Document
101.LAB
Inline XBRL Label Linkbase Document
101.PRE
Inline XBRL Presentation Linkbase Document
101.DEF
Inline XBRL Definition Linkbase Document
Cover Page Interactive Data File (embedded within the Inline XBRL document)
+
Indicates management contract or compensatory plan.