10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-35003

RigNet, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0677208
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
15115 Park Row Blvd, Suite 300 Houston, Texas	77084-4947
(Address of principal executive offices)	(Zip Code)

(281) 674-0100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RNET	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.  

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer  ☐	Smaller reporting company ☒	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At October 31, 2020, there were outstanding 20,559,781 shares of the registrant’s Common Stock.

Table of Contents

		Page
	PART I – FINANCIAL INFORMATION
Glossary		3
Item 1	Condensed Consolidated Financial Statements (Unaudited)	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4	Controls and Procedures	37
	PART II – OTHER INFORMATION
Item 1	Legal Proceedings	38
Item 1A	Risk Factors	38
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3	Defaults Upon Senior Securities	40
Item 4	Mine Safety Disclosures	40
Item 5	Other Information	40
Item 6	Exhibits	40

2

Glossary

The table below sets forth a number of terms commonly used in our current and periodic reports filed with the Securities and Exchange Commission and is provided as a reference for the readers of our filings.

Adjusted EBITDA	A non-GAAP measure. Net loss plus (minus) interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, intangibles, property, plant and equipment, foreign exchange impact of intercompany financing activities, (gain) loss on sales of property, plant and equipment, net of retirements, change in fair value of earn-outs and contingent consideration, stock-based compensation expense, mergers and acquisitions costs, executive departure costs, restructuring charges, the GX Dispute, the GX Dispute Phase II costs, COVID-19 costs, and non-recurring items. A reconciliation of Adjusted EBITDA to Net loss can be found in Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
AI	Artificial Intelligence
Apps	Applications
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
AVI	Adaptive Video Intelligence
B2B	Business to Business
BOP	Blow-Out Preventer
CARES Act	The Coronavirus Aid, Relief, and Economic Security Act of 2020
CIEB	Costs and Estimated Earnings in Excess of Billings on uncompleted contracts
Credit Agreement	Third Amendment and Joinder to the 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, BBVA Compass, as Syndication Agent, the Lenders party hereto and Merrill Lynch, Pierce, Fenner & Smith Incorporated as Sole Lead Arranger and Sole Bookrunner, as amended.
Consolidated Leverage Ratio	The ratio, as of any given date, of Consolidated Funded Indebtedness to Consolidated EBITDA for the most recently completed Measurement Period (as each such capitalized term is defined in the Credit Agreement)
COVID-19	The novel Coronavirus, the response to which resulted in a global economic slowdown which had significant negative effects on the oil and gas industry.
Cyphre®	Cyphre Security Solutions, LLC, acquired in 2017, provides cybersecurity solutions with advanced enterprise data protection
ECS	Enhanced Cyber Security
EPC	Engineering, Procurement and Construction
EPS	Earnings Per Share
Exchange Act	The United States Securities Exchange Act of 1934, as amended
FASB	Financial Accounting Standards Board
FCC	Federal Communications Commission
GAAP	Generally Accepted Accounting Principles in the United States
GX	Inmarsat plc’s Global Express satellite bandwidth service
GX Dispute	Inmarsat, a satellite telecommunications company, filed arbitration with the International Centre for Dispute Resolution tribunal in October 2016 concerning a January 2014 take-or-pay agreement to purchase up to $65.0 million, under certain conditions, of GX capacity from Inmarsat over several years. This arbitration and related developments are collectively referred to as the GX Dispute.

3

GX Dispute Phase II	The portion of the GX Dispute arbitration which was to address RigNet’s counterclaims against Inmarsat on a variety of subjects, as well as Inmarsat’s additional claims and for interest and attorneys’ fees.
Intelie	Intelie soluções em Informática SA, acquired in 2018, provides machine learning and real-time predictive analytics
IoT	Internet-of-Things
LIBOR	London Interbank Offered Rate
LTE	A 4G and 5G technology, Long Term Evolution
MCS	Managed Communications Services
NASDAQ	NASDAQ Global Select Market, where RigNet’s common shares are listed for trading
Nessco	Nessco Group Holdings LTD, acquired in 2012, provides Systems Integration solutions
NOC	Network Operations Center
OPEC	Organization of Petroleum Exporting Countries
PLC	Programmable Logic Controller
PPP	Paycheck Protection Program of the SBA pursuant to the CARES Act
PPP Loan	Loan agreement with Bank of America, N.A., as the lender, pursuant to the PPP
PSU	Performance Share Unit
RCF	Revolving Credit Facility available under the Credit Agreement
RSU	Restricted Stock Unit
SaaS	Software as a Service
SAB	Staff Accounting Bulletin
SBA	U.S. Small Business Administration
SCADA	Supervisory Control and Data Acquisition
SEC	The United States Securities and Exchange Commission
SI	Systems Integration
TECNOR	Orgtec S.A.P.I. de C.V., d.b.a. TECNOR, acquired in March 2016, increases solutions offerings in Mexico
The Tax Act	The Tax Cuts and Jobs Act of 2017

4

PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

RIGNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
		2020			2019
	(in thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	16,887		$	12,941
Restricted cash		1,500			42
Accounts receivable, net		58,583			67,059
Costs and estimated earnings in excess of billings on uncompleted    contracts (CIEB)		14,421			13,275
Prepaid expenses and other current assets		5,141			6,500
Total current assets		96,532			99,817
Property, plant and equipment, net		51,005			60,118
Restricted cash		-			1,522
Goodwill		19,982			46,792
Intangibles, net		20,392			30,145
Right-of-use lease asset		6,193			6,829
Deferred tax and other assets		5,378			5,757
TOTAL ASSETS	$	199,482		$	250,980
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	21,226		$	28,517
Accrued expenses		16,828			16,660
Current maturities of long-term debt		8,836			10,793
Income taxes payable		1,223			2,649
GX dispute accrual		-			750
Deferred revenue and other current liabilities		19,121			11,173
Total current liabilities		67,234			70,542
Long-term debt		100,241			96,934
Deferred revenue		767			855
Deferred tax liability		1,989			2,672
Right-of-use lease liability - long-term portion		5,764			6,329
Other liabilities		16,304			26,771
Total liabilities		192,299			204,103
Commitments and contingencies (Note 10)
Equity:
Stockholders' equity
Preferred stock - $0.001 par value; 10,000,000 shares authorized; no    shares issued or outstanding at September 30, 2020 and December 31, 2019		-			-
Common stock - $0.001 par value; 190,000,000 shares authorized;    20,556,408 and 19,979,284 shares issued and outstanding at    September 30, 2020 and December 31, 2019, respectively		21			20
Treasury stock - 448,586 and 203,756 shares at September 30, 2020 and    December 31, 2019, respectively, at cost		(3,285	)		(2,693	)
Additional paid-in capital		189,753			184,571
Accumulated deficit		(152,373	)		(115,673	)
Accumulated other comprehensive loss		(27,011	)		(19,502	)
Total stockholders' equity		7,105			46,723
Non-redeemable, non-controlling interest		78			154
Total equity		7,183			46,877
TOTAL LIABILITIES AND EQUITY	$	199,482		$	250,980

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

RIGNET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(in thousands, except per share amounts)
Revenue	$	48,722		$	60,993		$	160,874		$	178,835
Expenses:
Cost of revenue (excluding depreciation and amortization)		29,995			35,662			101,632			108,637
Depreciation and amortization		6,375			7,172			20,219			23,763
Impairment of goodwill and intangible assets		3,836			-			26,977			-
Change in fair value of earn-out/contingent consideration		-			-			3,916			1,284
Selling and marketing		2,262			2,784			7,281			9,529
General and administrative		9,295			12,377			32,577			43,305
Total expenses		51,763			57,995			192,602			186,518
Operating income (loss)		(3,041	)		2,998			(31,728	)		(7,683	)
Other expense:
Interest expense		(1,315	)		(1,784	)		(4,168	)		(4,291	)
Other income (expense), net		(416	)		(486	)		(750	)		(507	)
Income (loss) before income taxes		(4,772	)		728			(36,646	)		(12,481	)
Income tax (expense) benefit		(695	)		(998	)		156			(5,868	)
Net loss		(5,467	)		(270	)		(36,490	)		(18,349	)
Less: Net loss attributable to    non-redeemable, non-controlling interest		70			224			210			284
Net loss attributable to RigNet, Inc.    stockholders	$	(5,537	)	$	(494	)	$	(36,700	)	$	(18,633	)
COMPREHENSIVE LOSS
Net loss	$	(5,467	)	$	(270	)	$	(36,490	)	$	(18,349	)
Foreign currency translation		39			(2,913	)		(7,509	)		(2,577	)
Comprehensive loss		(5,428	)		(3,183	)		(43,999	)		(20,926	)
Less: Comprehensive income attributable to    non-controlling interest		70			224			210			284
Comprehensive loss attributable to    RigNet, Inc. stockholders	$	(5,498	)	$	(3,407	)	$	(44,209	)	$	(21,210	)
LOSS PER SHARE - BASIC AND DILUTED
Net loss attributable to RigNet, Inc. common    stockholders	$	(5,537	)	$	(494	)	$	(36,700	)	$	(18,633	)
Net loss per share attributable to RigNet, Inc.    common stockholders, basic	$	(0.25	)	$	(0.02	)	$	(1.69	)	$	(0.94	)
Net loss per share attributable to RigNet, Inc.    common stockholders, diluted	$	(0.25	)	$	(0.02	)	$	(1.69	)	$	(0.94	)
Weighted average shares outstanding, basic		22,573			19,970			21,776			19,777
Weighted average shares outstanding, diluted		22,573			19,970			21,776			19,777

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

RIGNET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2020			2019
	(in thousands)
Cash flows from operating activities:
Net loss	$	(36,490	)	$	(18,349	)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization		20,219			23,763
Impairment of goodwill and intangible assets		26,977			-
Stock-based compensation		5,188			7,132
Amortization of deferred financing costs		284			252
Deferred taxes		(595	)		4,902
Change in fair value of earn-out/contingent consideration		3,916			1,284
Accretion of discount of contingent consideration payable for acquisitions		468			262
(Gain) loss on sales of property, plant and equipment, net of retirements		195			19
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net		7,501			4,995
Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB)		(243	)		(4,536	)
Prepaid expenses and other assets		1,472			128
Right-of-use lease asset		636			1,214
Accounts payable		(4,366	)		5,355
Accrued expenses		(225	)		36
GX Dispute payment		(750	)		(50,000	)
Deferred revenue		(1,257	)		1,635
Right-of-use lease liability		(827	)		(1,593	)
Other liabilities		(3,383	)		(2,444	)
Net cash provided by (used in) operating activities		18,720			(25,945	)
Cash flows from investing activities:
Capital expenditures		(10,698	)		(16,776	)
Proceeds from sales of property, plant and equipment		27			300
Net cash used in investing activities		(10,671	)		(16,476	)
Cash flows from financing activities:
Issuance of common stock upon the exercise of stock options and the vesting of restricted stock		1			4
Stock withheld to cover employee taxes on stock-based compensation		(598	)		(1,412	)
Subsidiary distributions to non-controlling interest		(286	)		(275	)
Proceeds from borrowings		15,550			48,500
Proceeds from Paycheck Protection Program Loan		6,298			-
Repayments of long-term debt		(23,163	)		(11,413	)
Payment of financing fees		(485	)		(486	)
Net cash provided by (used in) financing activities		(2,683	)		34,918
Net change in cash and cash equivalents		5,366			(7,503	)
Cash and cash equivalents including restricted cash:
Balance, January 1,		14,505			23,296
Changes in foreign currency translation		(1,484	)		35
Balance, September 30,	$	18,387		$	15,828
Supplemental disclosures:
Income taxes paid	$	3,698		$	3,881
Interest paid		3,349			3,645
Property, plant and equipment acquired under finance leases		-			556
Non-cash investing - capital expenditures accrued		566			2,873
Non-cash investing and financing - issuance of common stock for the Intelie earn-out		-			3,000
Right-of-use operating lease entered into		582			539

	September 30,		September 30,
		2020		2019
Cash and cash equivalents	$	16,887	$	14,267
Restricted cash - current portion		1,500		39
Restricted cash - long-term portion		-		1,522
Cash and cash equivalents including restricted cash	$	18,387	$	15,828

The accompanying notes are an integral part of the condensed consolidated financial statements.

7

RIGNET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Common Stock				Treasury Stock					Additional					Accumulated Other			Total			Non-Redeemable,
	Shares		Amount		Shares		Amount			Paid-In Capital		Accumulated Deficit			Comprehensive Loss			Stockholders' Equity			Non-Controlling Interest			Total Equity
	(dollars and shares in thousands)
Balance, June 30, 2019		19,969	$	20		201	$	(2,676	)	$	181,577	$	(114,656	)	$	(18,918	)	$	45,347		$	(15	)	$	45,332
Issuance of common stock upon the      vesting of Restricted Stock Units,      net of share cancellations		1		-		-		-			-		-			-			-			-			-
Stock withheld to cover employee taxes on stock-based compensation		-		-		1		(6	)		-		-			-			(6	)		-			(6	)
Stock-based compensation		-		-		-		-			1,504		-			-			1,504			-			1,504
Foreign currency translation		-		-		-		-			-		-			(2,913	)		(2,913	)		-			(2,913	)
Non-controlling owner distributions		-		-		-		-			-		-			-			-			(140	)		(140	)
Net income (loss)		-		-		-		-			-		(494	)		-			(494	)		224			(270	)
Balance, September 30, 2019		19,970	$	20		202	$	(2,682	)	$	183,081	$	(115,150	)	$	(21,831	)	$	43,438		$	69		$	43,507
Balance, June 30, 2020		20,551	$	21		446	$	(3,281	)	$	189,251	$	(146,836	)	$	(27,050	)	$	12,105		$	139		$	12,244
Issuance of common stock upon the      vesting of Restricted Stock Units,      net of share cancellations		5		-		-		-			-		-			-			-			-			-
Stock withheld to cover employee taxes on stock-based compensation		-		-		3		(4	)		-		-			-			(4	)		-			(4	)
Stock-based compensation		-		-		-		-			502		-			-			502			-			502
Foreign currency translation		-		-		-		-			-		-			39			39			-			39
Non-controlling owner distributions		-		-		-		-			-		-			-			-			(131	)		(131	)
Net income (loss)		-		-		-		-			-		(5,537	)		-			(5,537	)		70			(5,467	)
Balance, September 30, 2020		20,556	$	21	$	449	$	(3,285	)	$	189,753	$	(152,373	)	$	(27,011	)	$	7,105		$	78		$	7,183

The accompanying notes are an integral part of the condensed consolidated financial statements.

8

RIGNET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Common Stock				Treasury Stock					Additional						Accumulated Other			Total			Non-Redeemable,
	Shares		Amount		Shares		Amount			Paid-In Capital			Accumulated Deficit			Comprehensive Loss			Stockholders' Equity			Non-Controlling Interest			Total Equity
	(dollars and shares in thousands)
Balance, January 1, 2019		19,465	$	19		92	$	(1,270	)	$	172,946		$	(96,517	)	$	(19,254	)	$	55,924		$	60		$	55,984
Issuance of common stock upon the    exercise of stock options		1		-		-		-			3			-			-			3			-			3
Issuance of common stock upon the    vesting of Restricted Stock Units,    net of share cancellations		296		1		-		-			-			-			-			1			-			1
Issuance of common stock for the    Intelie earn-out		208		-		-		-			3,000			-			-			3,000			-			3,000
Stock withheld to cover employee    taxes on stock-based compensation		-		-		110		(1,412	)		-			-			-			(1,412	)		-			(1,412	)
Stock-based compensation		-		-		-		-			7,132			-			-			7,132			-			7,132
Foreign currency translation		-		-		-		-			-			-			(2,577	)		(2,577	)		-			(2,577	)
Non-controlling owner distributions		-		-		-		-			-			-			-			-			(275	)		(275	)
Net income (loss)		-		-		-		-			-			(18,633	)		-			(18,633	)		284			(18,349	)
Balance, September 30, 2019		19,970	$	20		202	$	(2,682	)	$	183,081		$	(115,150	)	$	(21,831	)	$	43,438		$	69		$	43,507
Balance, January 1, 2020		19,979	$	20		204	$	(2,693	)	$	184,571		$	(115,673	)	$	(19,502	)	$	46,723		$	154		$	46,877
Issuance of common stock upon the    vesting of Restricted Stock Units,    net of share cancellations		577		1		-		-			-			-			-			1			-			1
Stock withheld to cover employee    taxes on stock-based compensation		-		-		245		(592	)		(6	)		-			-			(598	)		-			(598	)
Stock-based compensation		-		-		-		-			5,188			-			-			5,188			-			5,188
Foreign currency translation		-		-		-		-			-			-			(7,509	)		(7,509	)		-			(7,509	)
Non-controlling owner distributions		-		-		-		-			-			-			-			-			(286	)		(286	)
Net income (loss)		-		-		-		-			-			(36,700	)		-			(36,700	)		210			(36,490	)
Balance, September 30, 2020		20,556	$	21	$	449	$	(3,285	)	$	189,753		$	(152,373	)	$	(27,011	)	$	7,105		$	78		$	7,183

The accompanying notes are an integral part of the condensed consolidated financial statements.

9

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The interim unaudited condensed consolidated financial statements of RigNet, Inc. (the Company or RigNet) include all adjustments which, in the opinion of management, are necessary for a fair presentation of the Company’s financial position and results of operations. All such adjustments are of a normal recurring nature. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and Rule 10-01 of Regulation S-X. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Estimates and assumptions about future events and their effects cannot be perceived with certainty. Estimates may change as new events occur, as more experience is acquired, as additional information becomes available and as the Company’s operating environment changes. Actual results could differ from estimates. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2020.

Significant Accounting Policies

In addition to the accounting policies described below, please refer to RigNet’s Annual Report on Form 10-K for the fiscal year 2019 for information regarding the Company’s accounting policies.

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 the Company expects to be entitled in exchange for those goods or services.

Revenue Recognition – Managed Communications Services (MCS) and Applications and Internet-of-Things (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. 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). With certain customers, our contracts require that the contract backlog on stack rigs be transferred to other units, preserving the total contract value.

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 the Company expects to be entitled to the agreed monthly, usage or day 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 Systems Integration contracts for customized network solutions are recognized based on the cost to cost (formerly known as 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.

Performance Obligations Satisfied Over Time — The delivery of a Systems Integration solution represents the single performance obligation under Systems Integration 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).

10

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These estimates may be revised as additional information becomes available or as specific project circumstances change.

The Company reviews all material contracts on a monthly basis and revises 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 the 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).

Systems Integration contracts are billed in accordance with the terms of the contract which are typically either based on milestones or specified time intervals. As of September 30, 2020, and December 31, 2019, the amount of CIEB related to Systems Integration projects was $14.4 million and $13.3 million, respectively. Under long-term contracts, amounts recorded in CIEB may not be realized or paid within a one-year period. As of September 30, 2020 and December 31, 2019, $0.6 million and $1.0 million, respectively, of amounts billed to customers in excess of revenue recognized to date were classified as a current liability, under deferred revenue and other current liabilities.  

Variable Consideration – Systems Integration - The Company records 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 the Company’s Condensed Consolidated Balance Sheets as part of CIEB. No material unapproved change orders or claims revenue were included in CIEB as of September 30, 2020, and December 31, 2019. As new facts become known, an adjustment to the estimated recovery is made and reflected in the current period.

Backlog - As of September 30, 2020, we have a backlog for our cost to cost projects of $12.4 million, which will be recognized over the remaining contract term for each contract. The cost to cost contract terms are typically one to three years. As of December 31, 2019, we had a backlog for our cost to cost projects of $26.2 million.

Leases

Effective with adoption of Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (the new lease standard) on January 1, 2019, we now determine if an arrangement is a lease at inception. Operating leases right-of-use assets and liabilities are included in right-to-use lease asset, deferred revenue and other current liabilities, and right-to-use lease liability – long-term portion on our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment; current maturities of long-term debt; and long-term debt on our condensed consolidated balance sheets.  

Operating lease right-to-use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13), which measures credit losses on most financial assets and certain other instruments that are not measured at fair value through net income. The update amends the impairment model to utilize a current expected credit loss (CECL) methodology in place of the incurred loss methodology for financial instruments, including trade receivables. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Companies applied this standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019. The

11

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issues ASU No. 2017-04 (ASU 2017-04), which removes the requirement to compare the implied fair value of the goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The ASU is effective for impairments tests in annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.  

In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), which eliminates disclosures, modifies existing disclosures and adds new Fair Value disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15 (ASU 2018-15), which provides guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU  2019-12), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.  This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. We will be required to adopt the amended guidance in annual and interim periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment.  We are in the process of evaluating the impact this amendment will have on our consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU  2020-04), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting or recognizing the effects of the LIBOR or another reference rate reform on financing rate. The amendments are effective through December 31, 2022.  We are currently in the process of evaluating the impact of the transition from LIBOR to alternative reference rates, but we do not expect a material impact on our consolidated financial statements.

Note 2 – Business and Credit Concentrations

The Company is exposed to various business and credit risks including interest rate, foreign currency, credit and liquidity risks.

Interest Rate Risk

The Company has significant interest-bearing liabilities at variable interest rates which generally price monthly. The Company’s variable borrowing rates are presently tied to LIBOR resulting in interest rate risk (see Note 5 – Long-Term Debt). The Company presently does not use financial instruments to hedge interest rate risk, but evaluates this on a regular basis and may utilize financial instruments in the future if deemed necessary.

Foreign Currency Risk

The Company has exposure to foreign currency risk, as a portion of the Company’s activities are conducted in currencies other than U.S. dollars. Currently, the Norwegian Kroner, the British Pound Sterling and the Brazilian Real are the currencies that could materially impact the Company’s financial position and results of operations. The Company presently does not hedge these risks, but evaluates financial risk on a regular basis and may utilize

12

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

financial instruments in the future if deemed necessary. Foreign currency translations are reported as accumulated other comprehensive income (loss) in the Company’s condensed consolidated financial statements.

Credit and Customer Concentration Risk

Credit risk, with respect to accounts receivable, is due to customers being concentrated in the oil and gas, maritime, pipeline, engineering and construction industries. The Company mitigates the risk of financial loss from defaults through defined collection terms in each contract or service agreement and periodic evaluations of the collectability of accounts receivable. The Company provides an allowance for credit losses, which is adjusted based on historical experience, current economic conditions, and reasonable assumptions. Although no single customer comprised over 10% of our revenue for the nine months ended September 30, 2020, our top 5 customers generated 30.1% of the Company’s revenue for the nine months ended September 30, 2020.

Liquidity Risk

The Company maintains cash and cash equivalent balances with major financial institutions which, at times, exceed federally insured limits. The Company monitors the financial condition of the financial institutions and has not experienced losses associated with these accounts during 2020 or 2019. Liquidity risk is managed by continuously monitoring forecasted and actual cash flows and by matching the maturity profiles of financial assets and liabilities (see Note 5 – Long-Term Debt).

Note 3 – Goodwill and Intangibles

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 with additional evaluations being performed when events or circumstances indicate that the carrying value of these assets may not be recoverable.

The Company performs its annual impairment test as of July 31^st of each year. The oil and gas industry experienced an unprecedented disruption during the nine months ended September 30, 2020 as a result of a combination of factors, including COVID-19 pandemic and disagreements between the members of OPEC in March 2020 regarding reduction on production of oil. These market conditions significantly impacted the Company’s internal forecast. As a result, the Company performed an interim goodwill impairment test in the first quarter 2020. The Company used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using the Company’s discount rate. Some of the significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected the assumptions used in the discounted cash flow projections using historical information with supplemental data by current and anticipated market conditions and estimated growth rates. The Company's estimates are based upon assumptions believed to be reasonable. The Company determined that the carrying amount in two of our reporting units was in excess of their fair value which resulted in a goodwill impairment charge of $23.1 million during the first quarter 2020. The charge fully impairs goodwill previously reported in MCS of $21.8 million and Systems Integration of $1.4 million during the nine months ended September 30, 2020.

In connection with the July 31, 2020 impairment test for Apps & IoT, the most recent annual test performed prior to September 30, 2020, the fair value of the Apps & IoT was in excess of its carrying value and no impairment was noted. Apps & IoT had $20.0 million of goodwill as of  September 30, 2020, and fair value exceeded carrying value by over 100% as of the July 31, 2020 annual impairment test. The Company used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using the Company’s discount rate. Some of the significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected the assumptions used in the discounted cash flow projections using historical information with supplemental data by current and anticipated market conditions and estimated growth rates. The Company's estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from

13

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

those used in the Company's valuations. Any future downturn in our business could adversely impact the key assumptions in our impairment test.

As of September 30, 2020, and December 31, 2019, goodwill was $20.0 million and $46.8 million, respectively. Goodwill increases or decreases in value due to the effect of foreign currency translation, increases with acquisitions, and decreases in the event an impairment is recognized.

Intangibles

Intangibles consist of customer relationships, brand name, backlog, developed technology, covenants-not-to-compete and licenses acquired as part of the Company’s acquisitions. Intangibles also include internal-use software. The Company’s intangibles have useful lives ranging from 5.0 to 20.0 years and are amortized on a straight-line basis. Impairment testing is performed when events or circumstances indicate that the carrying value of the assets may not be recoverable.

The Company reviews its finite-lived assets and certain other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company identified a triggering event in the Apps & IoT segment associated with Cyphre as a result of market conditions. This circumstance resulted in a reduction in the Company’s cash flow projection during a revision of the internal forecast. The Company performed a recoverability analysis and determined the carrying value of the intangibles acquired with the Cyphre acquisition, which included trade name, customer relationship and developed technology, was in excess of its recoverable value and recognized an impairment of $3.8 million.

As of September 30, 2020, and December 31, 2019, intangibles were $20.4 million and $30.1 million, respectively. During the three months ended September 30, 2020 and 2019, the Company recognized amortization expense of $1.5 million and $2.0 million, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized amortization expense of $5.5 million and $6.9 million, respectively

The following table sets forth expected amortization expense of intangibles for the remainder of 2020 and the following years (in thousands):

2020		1,336
2021		5,181
2022		4,772
2023		4,173
2024		3,277
2025		861
Thereafter		792
	$	20,392

Note 4 – Restricted Cash

As of September 30, 2020, the Company had restricted cash of $1.5 million in current assets and none in long-term assets. As of December 31, 2019, the Company had restricted cash of $0.1 million in current assets and $1.5 million in long-term assets. The restricted cash in long-term assets was primarily used to collateralize a performance bond in the MCS segment (see Note 5 – Long-Term Debt).

14

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 5 – Long-Term Debt

As of September 30, 2020, and December 31, 2019, the following credit facilities and long-term debt arrangements with financial institutions were in place:

	September 30,			December 31,
		2020			2019
	(in thousands)
Term Loan	$	12,000		$	5,000
Term-Out Loan		-			25,500
Revolving credit facility (RCF)		88,700			77,150
Vendor Finance Arrangement		2,328			-
Paycheck Protection Program Loan		6,298			-
Unamortized deferred financing costs		(667	)		(466	)
Finance lease		418			543
		109,077			107,727
Less: Current maturities of long-term debt		(7,640	)		(10,627	)
Current maturities of Vendor Finance Arrangement		(1,030	)		-
Current maturities of finance lease		(166	)		(166	)
	$	100,241		$	96,934

Credit Agreement

The Company and certain of its subsidiaries are party to the Third Amendment to the Third Amended and Restated Credit Agreement, dated as of February 21, 2020, with four participating financial institutions (as amended from time to time, the Credit Agreement), which provides for a $16.0 million term loan (Term Loan), a $100.0 million RCF and a $30.0 million accordion feature. The Term Loan matures on March 31, 2022 with principal installments of $2.0 million due quarterly beginning June 30, 2020. Under this schedule the Term Loan is expected to be fully repaid at its maturity. The RCF and accordion, if exercised, mature on August 31, 2022.

The Credit Agreement bears interest at a rate of LIBOR plus a margin ranging from 1.75% to 3.25%, determined 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. The weighted average interest rate for the three months ended September 30, 2020 and 2019 were 3.6% and 5.3%, respectively. The weighted average interest rate for the nine months ended September 30, 2020 and 2019 were 4.0% and 5.3%, respectively, with an interest rate of 3.4% at September 30, 2020.

Term Loan

As of September 30, 2020, the outstanding principal amount of the Term Loan was $12.0 million, excluding the impact of unamortized deferred financing costs.

RCF

As of September 30, 2020, outstanding draws on the RCF were $88.7 million.

15

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Covenants and Restrictions

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 then steps 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 is 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, the Company entered into a fourth amendment to the Credit Agreement (Fourth Amendment), which permits the Company to exclude the amount borrowed pursuant to the Paycheck Protection Program established under the CARES Act from the Company’s 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 September 30, 2020 reporting period and are in compliance with the required covenant ratios. As of September 30, 2020, the Consolidated Leverage Ratio was 2.97 and Consolidated Fixed Charge Coverage Ratio was 2.13.

Vendor Finance Agreement

As of September 30, 2020, the Company had a vendor financing agreement in place, with an outstanding balance of $2.3 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.

Paycheck Protection Program Loan

In May 2020, the Company entered into the PPP Loan. Under the PPP Loan, the Company borrowed $6.3 million which the Company expects to be eligible for forgiveness pursuant to the applicable regulations of the PPP.   Currently, the regulations provide for loan forgiveness to the extent that (i) the proceeds are used in the Cover Period, as defined in the application for loan forgiveness, after the funding of the loan, (ii) at least 60% of the forgiven amount is used for eligible payroll costs and (iii) the remaining proceeds are used for interest on mortgages, rents, or utilities, and interest on other debt obligations incurred before February 15, 2020.

The amount eligible for forgiveness may be reduced if, among other things, the Company reduces its full-time headcount or if the Company reduces salaries and wages beyond certain limits. While the Company expects all $6.3 million will be used in accordance with the regulations for forgiveness, not all costs are within the control of the Company and these 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 the Company cannot determine the ultimate outcome, based on the Company’s assessments on the current rules in place, the Company believes 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 the Company cannot assure the results of any such review.

Performance Bonds, Surety Bonds and Other Similar Instruments

As of September 30, 2020, there were $4.3 million of performance bonds, surety bonds and similar instruments outstanding of which $2.0 million is issued by the parties under the Credit Agreement.

In June 2016, the Company secured a performance bond facility with a lender in the amount of $1.5 million for its MCS segment. This facility has a maturity date of June 2021. The Company maintains restricted cash on a dollar for dollar basis to secure this facility.

16

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Debt Maturities

The following table sets forth the aggregate principal maturities of long-term debt, net of deferred financing cost amortization, for the remainder of 2020 and the following years (in thousands):

2020		2,179
2021		8,731
2022		97,862
2023		306
Total debt, including current maturities	$	109,077

Note 6 – Fair Value Disclosures

The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

• Cash and Cash Equivalents — Reported amounts approximate fair value based on quoted market prices (Level 1).

• Restricted Cash — Reported amounts approximate fair value.

• Accounts Receivable — Reported amounts, net of the allowance for doubtful accounts, approximate fair value due to the short-term nature of these assets.

• Accounts Payable, Including Income Taxes Payable and Accrued Expenses — Reported amounts approximate fair value due to the short-term nature of these liabilities.

• Long-Term Debt — The carrying amount of the Company’s floating-rate debt approximates fair value since the interest rates paid are based on short-term maturities and recent quoted rates from financial institutions. The estimated fair value of debt was calculated based upon observable (Level 2) inputs regarding interest rates available to the Company at the end of each respective period.

The Company’s non-financial assets, such as goodwill, intangibles and property, plant and equipment, are measured at fair value, based on level 3 inputs, when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

The earn-out for Intelie is measured at fair value in each reporting period, based on level 3 inputs, with any change to the fair value recorded in the Condensed Consolidated Statements of Comprehensive Loss. The earn-out is payable in RigNet stock in portions and is based on certain post-closing performance targets under the acquisition agreement. In May 2019, the Company issued 208,356 shares of its common stock, with an aggregate value of $3.0 million, as payment for the portion of the earn-out earned as of the first anniversary of the closing of the acquisition.  

The earn-out was originally payable on the first, second and third anniversary of the March 23, 2018 closing of the acquisition. However, on June 11, 2020, the Company, Intelie and the former shareholders of Intelie entered into the Third Amendment to the Purchase Agreement dated as of January 15, 2018. The Amendment clarified the calculation of certain contingent consideration, extended the earn-out achievement period by six months, and delayed the time of payment of a portion of that contingent consideration until September 23, 2021, but did not change the amount or form of consideration that could be paid pursuant to the Purchase Agreement. The value of the maximum remaining earn-out consideration is $13.9 million.

As of September 30, 2020, the fair value of the earn-out was $13.7 million, all of which is reported in deferred revenue and other current liabilities on the Company’s condensed consolidated balance sheet. During the three and nine months ended September 30, 2020, RigNet recognized an increase in the fair value of the earn-out of none and $3.9 million, respectively. Additionally, during the three and nine months ended September 30, 2020, RigNet recognized accreted interest expense on the Intelie earn-out of $ 0.1 million and $0.2 million, respectively, with corresponding increases to other liabilities.

As of December 31, 2019, the fair value of the earn-out was $9.7 million with $4.4 million in deferred revenue and other current liabilities and $5.3 million in other long-term liabilities. During the three and nine months ended September 30, 2019, RigNet recognized an increase in the fair value of the earn-out of none and $1.3 million, respectively. Additionally, during the three and nine months ended September 30, 2019, RigNet recognized accreted

17

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

interest expense on the Intelie earn-out of $0.1 million and $0.2 million, respectively, with corresponding increases to other liabilities.

The contingent consideration for Cyphre, a cybersecurity company acquired in May 2017, is measured at fair value in each reporting period, based on level 3 inputs, with any change to the fair value recorded in the Condensed Consolidated Statements of Comprehensive Loss. As of September 30, 2020, the fair value of the contingent consideration was $3.0 million of which $0.3 million is in other current liabilities and $2.7 million is in other long-term liabilities. As of December 31, 2019, the fair value of the contingent consideration was $3.1 million, of which $0.3 million is in other current liabilities and $2.7 million is in other long-term liabilities. During the three and nine months ended September 30, 2020, RigNet recognized accreted interest expense on the Cyphre contingent consideration of $0.2 million and $0.3 million, respectively, with corresponding increases to other liabilities. During the three and nine months ended September 30, 2019, RigNet recognized accreted interest expense on the Cyphre contingent consideration of $0.1 million and $0.1 million respectively, with corresponding increases to other liabilities. During the three and nine months ended September 30, 2020, RigNet paid cash of $0.2 million and $0.3 million, respectively, in required royalty payments, with corresponding decreases to other liabilities. During the three and nine months ended September 30, 2019, RigNet paid cash of $0.1 million and $0.3 million, respectively, in required royalty payments, with corresponding decreases to other liabilities.

Note 7 – Income Taxes

The Company’s effective income tax rate was (14.6%) and 0.4% for the three and nine months ended September 30, 2020. The Company’s effective income tax rate was 137.1% and (47.0%) for the three and nine months ended September 30, 2019. The Company’s 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.

The Company has computed the provision for taxes for the current and comparative periods using the actual year-to-date effective tax rate. The Company’s financial projections for those periods did not provide the level of detail necessary to calculate a forecasted effective tax rate.

The Company received notices informing us of audits of the Company’s 2016-2018 income tax returns in Malaysia, the 2010-2014 income tax returns in Qatar and the 2018 income tax return in Saudi Arabia. It is unclear if the audits and the appeals processes, if necessary, will be completed within the next twelve months. The Company is in the early stages of the audits and is unable to quantify any potential settlement or outcome of the audits at this time. The authorities closed the audit of the Company’s 2016-2017 income tax returns in Singapore with no additional assessments.      

The Company believes that it is reasonably possible that a decrease of up to $4.4 million in unrecognized tax benefits, including related interest and penalties, may be necessary within the coming year due to lapse in statute of limitations.

Note 8 – Stock-Based Compensation

During the nine months ended September 30, 2020, the Company granted a total of 1,906,328 shares of stock-based awards to certain directors, officers and employees of the Company under the Company’s 2019 Omnibus Incentive Plan (2019 Plan). Of these, the Company granted (i) 603,983 shares of common stock associated with the payment of the Company’s 2019 short term incentive plan to certain officers and employees, which were fully vested on issuance, (ii) 233,982 RSUs to outside directors that vest in 2021 and (iii) 1,068,363 performance share units (PSUs) to certain officers and employees that vest on the third anniversary of the grant date, are subject to continued employment and achievement of certain performance based targets. The fair value of shares of common stock and RSUs awarded pursuant to the 2019 Plan is determined based on the closing trading price of the Company’s common stock on the grant date of the award. Compensation expense is recognized on a straight-line basis over the requisite service period of the entire award, net of forfeitures.

During the nine months ended September 30, 2020, the Company granted a total of 42,272 shares of stock-based awards to a newly-hired executive officer of the Company pursuant to an inducement award. These awards consisted of (i) 18,787 RSUs to such officer that vest over a three year period of continued employment, with 33% of the RSUs vesting on each of the first three anniversaries of the grant date and (ii) 23,485 that vest on the third anniversary of the grant date, are subject to continued employment and achievement of certain performance criteria.

18

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The fair value of the RSUs grants pursuant to the inducement award is determined based on the closing trading price of the Company’s common stock on the grant date of the award. Compensation expense is recognized on a straight-line basis over the requisite service period of the entire award, net of forfeitures In addition to the foregoing, the executive officer was also granted 10,299 of stock options with an exercise price of $6.20. The options granted have a contractual term of seven years and vest over a three-year period of continued employment, with 33% of the options vesting of each of the first three anniversaries of the grant date.

The fair value of each stock option award is estimated on the grant date using a Black-Scholes option valuation model, which uses certain assumptions as of the date of grant. The assumptions used for the stock option grants made during the nine months ended September 30, 2020, were as follows:

	Nine Months Ended September 30,
	2020
Expected volatility	51%
Expected term (in years)	7
Risk-free interest rate	1.8%
Dividend yield	-

Based on these assumptions, the weighted average grant date fair value of stock options granted during the nine months ended September 30, 2020 was $3.27 per option.

During the nine months ended September 30, 2020, 40,245 RSUs, 18,811 PSUs and 24,905 stock options were forfeited.

Stock-based compensation expense related to the Company’s stock-based compensation plans for the three and nine months ended September 30, 2020, was $0.5 million and $5.2 million respectively, and reported as a general and administrative expense in the Corporate segment. Stock-based compensation expense related to the Company’s stock-based compensation plans for the three and nine months ended September 30, 2019, was $1.5 million and $7.1 million, respectively. As of September 30, 2020, there was $8.3 million of total unrecognized compensation cost related to unvested options, RSUs and restricted stock expected to vest. This cost is expected to be recognized over a remaining weighted-average period of 2.0 years.

Note 9 – Earnings (loss) per Share

Basic EPS are computed by dividing net loss attributable to RigNet common stockholders by the weighted average number of basic shares outstanding during the period. Basic shares equal the total of the common shares outstanding, but excludes the dilutive effect of common shares that could potentially be issued due to the exercise of stock options or vesting of restricted stock, RSUs or PSUs. Diluted EPS is computed by dividing loss attributable to RigNet common stockholders by the weighted average number of diluted shares outstanding during the period. Diluted shares equal the total of the basic shares outstanding and all potentially issuable shares, other than anti-dilutive shares, if any. The Company uses the treasury stock method to determine the dilutive effect. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect if included, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same.

The effect of stock-based awards was not included in the Company’s calculation of diluted EPS for the three and nine months ended September 30, 2020, due to the net loss for the periods.

The effect of stock-based awards was not included in the Company’s calculation of diluted EPS for the three and nine months ended September 30, 2019, due to the net loss for the periods.

Note 10 – Commitments and Contingencies

Global Xpress (GX) Dispute

Inmarsat plc (Inmarsat), a satellite telecommunications company, filed arbitration with the International Centre for Dispute Resolution tribunal (the panel) in October 2016 concerning a January 2014 take-or-pay

19

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

agreement to purchase up to $65.0 million, under certain conditions, of GX capacity from Inmarsat over several years.

In June 2019, the Company announced that it reached a settlement with Inmarsat that concluded the GX Dispute. Pursuant to the settlement the Company paid $45.0 million in June 2019, $5.0 million in July 2019 and the final $0.8 million in July 2020.

The Company incurred credit of ($0.4) million and cost of $3.9 million in GX Dispute Phase II legal costs for the three and nine months ended September 30, 2019.

Other Litigation

The Company, in the ordinary course of business, is a claimant or a defendant in various legal proceedings, including proceedings as to which the Company has insurance coverage and those that may involve the filing of liens against the Company or its assets.

Sales Tax Audit

The Company is undergoing a routine sales tax audit from a state where the Company has operations. The audit can cover up to a four-year period. It is expected that the audit and the appeals process, if necessary, will be completed within the year. The Company does not believe that the outcome of the audit will result in a material impact to the consolidated financial statements.

Operating Leases

The Company’s leasing activities primarily consist of leases of real estate including office space under lease agreements expiring on various dates through 2030. For the three and nine months ended September 30, 2020, the Company recognized expense under operating leases, which approximates cash paid and includes short-term leases, of $0.5 million and $1.7 million, respectively. For the three and nine months ended September 30, 2019, the Company recognized expense under operating leases, which approximates cash paid and includes short-term leases, of $0.6 million and $1.9 million, respectively.

As of September 30, 2020, future undiscounted minimum lease obligation maturities for the remainder of 2020 and future years were as follows (in thousands):

2020	$	522
2021		1,686
2022		1,307
2023		1,264
2024		1,202
2025		854
Thereafter		2,168
Total lease payments	$	9,003
Less present value discount		(1,416	)
Amounts recognized in Balance Sheet	$	7,587
Amounts recognized in Balance Sheet
Deferred revenue and other current liabilities		1,823
Right-of-use lease liability - long-term portion		5,764
Total right-to-use lease liability	$	7,587

Operating lease right-of-use assets for leases were $6.2 million as of September 30, 2020.

The right-of-use assets and liabilities for leases were discounted at a weighted-average discount rate of 5.0%. The weighted-average remaining lease term as of September 30, 2020 was 6.7 years.

20

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commercial Commitments

The Company enters into contracts for satellite bandwidth and other network services with certain providers.

As of September 30, 2020, the Company had the following commercial commitments related to satellite and network services for the remainder of 2020 and the future years thereafter (in thousands):

2020		5,527
2021		13,626
2022		6,058
2023		323
	$	25,534

Note 11 – Segment Information

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.

RigNet considers its business to consist of the following segments:

• Managed Communications Services (MCS). The 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). The 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, edge computing solution services that assist customers with collecting and standardizing the complex data produced by edge devices (LIVE-IT), 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). The 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 and eliminations, the GX Dispute and change in fair value of earn-out/contingent consideration.

21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company’s reportable segment information as of and for the three and nine months ended September 30, 2020 and 2019, is presented below.

	Three Months Ended September 30, 2020
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	31,939	$	8,367		$	8,416	$	-		$	48,722
Cost of revenue (excluding    depreciation and amortization)		19,523		3,382			7,090		-			29,995
Depreciation and amortization		4,510		1,290			157		418			6,375
Impairment of intangible assets		-		3,836			-		-			3,836
Selling, general and administrative		2,454		1,332			374		7,397			11,557
Operating income (loss)	$	5,452	$	(1,473	)	$	795	$	(7,815	)	$	(3,041	)
Capital expenditures		1,442		537			25		-			2,004
	Three Months Ended September 30, 2019
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	42,055	$	9,265		$	9,673	$	-		$	60,993
Cost of revenue (excluding    depreciation and amortization)		24,156		4,091			7,415		-			35,662
Depreciation and amortization		5,037		1,218			155		762			7,172
Selling, general and administrative		3,303		1,599			464		9,795			15,161
Operating income (loss)	$	9,559	$	2,357		$	1,639	$	(10,557	)	$	2,998
Capital expenditures	$	4,818	$	720		$	-	$	326		$	5,864

22

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Nine Months Ended September 30, 2020
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	105,971		$	25,915	$	28,988	$	-		$	160,874
Cost of revenue (excluding    depreciation and amortization)		68,010			11,164		22,458		-			101,632
Depreciation and amortization		14,012			3,626		478		2,103			20,219
Impairment of goodwill and intangible assets		21,755			3,836		1,386		-			26,977
Change in fair value of earn-    out/contingent consideration		-			-		-		3,916			3,916
Selling, general and administrative		7,697			4,515		1,080		26,566			39,858
Operating income (loss)	$	(5,503	)	$	2,774	$	3,586	$	(32,585	)	$	(31,728	)
Total assets	$	120,659		$	30,674	$	26,154	$	21,995		$	199,482
Capital expenditures		6,181			1,962		25		588			8,756
	Nine Months Ended September 30, 2019
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	125,593		$	25,285	$	27,957	$	-		$	178,835
Cost of revenue (excluding    depreciation and amortization)		76,160			12,975		19,502		-			108,637
Depreciation and amortization		16,360			3,675		1,456		2,272			23,763
Change in fair value of earn-out/contingent consideration		-			-		-		1,284			1,284
Selling, general and administrative		10,446			2,999		2,158		37,231			52,834
Operating income (loss)	$	22,627		$	5,636	$	4,841	$	(40,787	)	$	(7,683	)
Total assets	$	154,268		$	42,886	$	26,782	$	19,224		$	243,160
Capital expenditures	$	15,143		$	1,556	$	-	$	827		$	17,526

The following table presents revenue earned from the Company’s domestic and international operations for the three and nine months ended September 30, 2020 and 2019. Revenue is based on the location where services are provided or goods are sold. Due to the mobile nature of RigNet’s customer base and the services provided, the Company works closely with its customers to ensure rig or vessel moves are monitored to ensure the location of service information is properly reflected.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Domestic	$	21,018	$	27,360	$	66,875	$	80,868
International		27,704		33,633		93,999		97,967
Total	$	48,722	$	60,993	$	160,874	$	178,835

23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents goodwill, right-of-use lease assets and long-lived assets, net of accumulated depreciation, for the Company’s domestic and international operations as of September 30, 2020 and December 31, 2019.

	September 30,		December 31,
	2020		2019
	(in thousands)
Domestic	$	60,041	$	76,253
International		37,531		67,631
Total	$	97,572	$	143,884

Note 12 – Related Party Transactions

The Company has a reseller arrangement with Darktrace, which is an artificial intelligence company in cybersecurity that is partially owned by KKR & CO. Inc. (KKR). KKR is a significant stockholder of the Company. Under the arrangement, the Company sells Darktrace’s cybersecurity audit services with the Company’s cybersecurity offerings.  In the three and nine months ended September 30, 2020, the Company purchased $0.1 million and $0.1 million, respectively, from Darktrace in the ordinary course of business. In the three and nine months ended September 30, 2019, the Company purchased $0.1 million and $0.1 million, respectively, from Darktrace in the ordinary course of business.

Vissim AS is now a vendor following a competitive request for a quote from RigNet in the ordinary course of business. A customer specified Vissim AS by name as a provider for an SI project. Vissim AS is 24% owned by AVANT Venture Capital AS, which is owned by and has as the chairman of its board one of our board members. In the three and nine months ended September 30, 2020, the Company purchased none and $0.1 million, respectively, from Vissim AS in the ordinary course of business. In the three and nine months ended September 30, 2019, the Company purchased $0.2 million and $0.8 million, respectively, from Vissim AS in the ordinary course of business.

Note 13 – Restructuring Costs – Cost Reduction Plans

During the nine months ended September 30, 2019, the Company incurred a net pre-tax restructuring expense of $0.7 million reported as a general and administrative expense, of which $0.2 million was incurred in the three month months ended September 30, 2019 related to consolidating three separate legacy facilities into our new office in Lafayette, Louisiana and $0.5 million was incurred in the first quarter of 2019 associated with the reduction of 25 employees.

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Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 included elsewhere herein, and with our Annual Report on Form 10-K for the year ended December 31, 2019 (our “Annual Report”). The following discussion and analysis contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our Annual Report and elsewhere in this Quarterly Report on Form 10-Q. See “Forward-Looking Statements” below.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, 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. Forward-looking statements may include statements about:

• the effects of the COVID-19 pandemic and its effect on general economic activities, including reduced demand for oil and gas;

• our intentions regarding the use of the proceeds of the PPP Loan and the expected forgiveness of any loan obtained by the Company pursuant to the Paycheck Protection Program of the United States Small Business Administration;

• 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 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;

• 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, covenant compliance and borrowing availability under our Revolving Credit Facility;

• our expectations regarding the deductibility of goodwill for tax purposes;

• our business and corporate development strategy, including statements concerning our ability to pursue, consummate and integrate merger and acquisition opportunities successfully;

• 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;

25

• 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.

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 or other comparable terminology that convey the uncertainty of future events or outcomes. All of these types of statements, other than statements of historical fact included in this Quarterly Report on Form 10-Q, are forward-looking statements.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are largely based on Company expectations, which reflect estimates and assumptions made by Company 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 our control. In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Quarterly Report on Form 10-Q are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking statements or events will occur. Future results may differ materially from those anticipated or implied in forward-looking statements due to factors listed in the “Risk Factors” section of our Annual Report and elsewhere in this Quarterly Report on Form 10-Q. 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. Additionally, the COVID-19 pandemic has had and continues to have a material adverse impact on the world economy and the oil and gas industry, the results of which may exacerbate any or all of the risk factors described in our Annual Report or herein. As both the spread of the virus as well as government and industry reactions thereto are occurring at a rapid pace, the ultimate effect of the virus on our business, financial condition and results of operations remains uncertain. 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.

Our Operations

We are a 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, edge computing solution services that assist customers with collecting and standardizing the complex data produced by edge devices (LIVE-IT), 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

26

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.

Customers in our MCS and Apps & IoT segments are primarily served under fixed-price contracts, either on a monthly 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 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

On September 8, 2020, we entered into a fourth amendment to the Credit Agreement (Fourth Amendment), which permits us to exclude the amount borrowed pursuant to the Paycheck Protection Program established under the CARES Act from the calculation of Consolidated Funded Indebtedness for all periods prior to and including March 31, 2021.

In 2021, we will be considered a “smaller reporting company” and “non-accelerated filer” under the rules of the Securities and Exchange Commission. We are therefore exempt from certain disclosure requirements, such as providing selected financial data and executive compensation information. We are also no longer required to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section 404(b) of the Sarbanes-Oxley Act. We have not yet decided which, if any, of these exemptions we will utilize. If we decide to rely on some of these exemptions, we do not anticipate changing or reducing our controls environment. If we decide to use the exemption from the external audit of our internal control over financial reporting environment, our auditors will not opine on our internal control environment and it may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.  

As of September 30, 2020, we have a backlog for our cost to cost (formerly known as percentage of completion) projects of $12.4 million.

Known Trends and Uncertainties

Operating Matters

In 2020, our customers and we were adversely impacted by the COVID-19 pandemic. Our customers and we have had to close certain offices and have the majority of our employees working from home. Our customers have had certain of their work-sites for large projects closed and are operating certain sites with only essential employees. Global economic activity and the oil and gas industry declined substantially in the nine months ended September 30,

27

2020. 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 have risen to $40.30 per barrel as of September 30, 2020. There is no guarantee that OPEC+ will continue the current production cuts and an increase in oil supply could have an adverse effect in our industry.

Uncertainties in the oil and gas industry will continue to impact our profitability. The fundamentals of the oil and gas industry we serve are expected to remain challenged into at least the first half of 2021. Many oil and gas companies have already cut their capital expenditure budgets significantly, reduced and/or furloughed their workforces, and delayed decisions on future projects or canceled them altogether. Both onshore and offshore drilling activity has declined during 2020 compared to the previous year. SI project decision-making has slowed, though construction on existing projects has generally continued despite certain delays caused by the impacts of COVID-19. Finally, while our Apps & IoT segment has also been impacted by slower than anticipated customer decision-making, we believe our products provide much-needed solutions that enable our customers to be more productive, efficient, safe, and financially competitive.

In response to this rapidly changing environment, RigNet has taken proactive measures to reduce costs, including eliminating all travel that is not customer-facing, reducing professional fees, eliminating discretionary spending, and temporarily reducing compensation for our executives, our employees, and our board of directors.  We are also working with both customers and suppliers to reduce our bandwidth costs as sites move from working to idle. However, our ability to significantly reduce our bandwidth commitments is limited given the nature of our contracts with those satellite providers. RigNet has also sought to take advantage of certain government relief programs available in the various jurisdictions in which we work.

As we look ahead to 2021, 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. 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. We recently signed a new global, fleet-wide, multi-year contract with a premiere offshore drilling company to provide fully managed communications services. In addition, we recently expanded the number of FPSOs we will serve with an existing customer. We anticipate that these new sites will start to come online in the fourth quarter of 2020, with additional sites being added throughout 2021. However, a resurgence of COVID-19 cases and their impact on global oil demand could produce additional delays in a cyclical recovery, and could lead to additional sites being decommissioned in spite of new contract wins.

In addition, uncertainties that could impact our profitability include service responsiveness to remote locations, communication network complexities, political and economic instability in certain regions, continued switching of demand to renewable energy sources, cyber-attacks, export restrictions, licenses and other trade barriers, any or all of which could be further exacerbated by the COVID-19 pandemic.  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. We believe these trends have made lenders more reluctant to provide financing to companies operating in and serving the oil and gas industry. We may be unable to access additional credit to fund ongoing operations.

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. It is expected that the audit and the appeals process, if necessary, will be completed within the year. We do not believe that the outcome of the audit will result in a material impact to the consolidated financial statements.

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Results of Operations

The following table sets forth selected financial and operating data for the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(in thousands)
Revenue	$	48,722		$	60,993		$	160,874		$	178,835
Expenses:
Cost of revenue (excluding depreciation and amortization)		29,995			35,662			101,632			108,637
Depreciation and amortization		6,375			7,172			20,219			23,763
Impairment of goodwill and intangible assets		3,836			-			26,977			-
Change in fair value of earn-out/contingent consideration		-			-			3,916			1,284
Selling and marketing		2,262			2,784			7,281			9,529
General and administrative		9,295			12,377			32,577			43,305
Total expenses		51,763			57,995			192,602			186,518
Operating income (loss)		(3,041	)		2,998			(31,728	)		(7,683	)
Other expense, net		(1,731	)		(2,270	)		(4,918	)		(4,798	)
Income (loss) before income taxes		(4,772	)		728			(36,646	)		(12,481	)
Income tax (expense) benefit		(695	)		(998	)		156			(5,868	)
Net loss		(5,467	)		(270	)		(36,490	)		(18,349	)
Less: Net income attributable to non-controlling interest		70			224			210			284
Net loss attributable to RigNet, Inc. stockholders	$	(5,537	)	$	(494	)	$	(36,700	)	$	(18,633	)
Other Non-GAAP Data:
Adjusted EBITDA	$	7,536		$	11,010		$	25,588		$	29,171

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The following represents selected financial operating results for our segments:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019
	(in thousands)
Managed Communications Services:
Revenue	$	31,939		$	42,055	$	105,971		$	125,593
Cost of revenue (excluding depreciation and amortization)		19,523			24,156		68,010			76,160
Depreciation and amortization		4,510			5,037		14,012			16,360
Impairment of goodwill		-			-		21,755			-
Selling, general and administrative		2,454			3,303		7,697			10,446
Managed Communication Services operating income (loss)	$	5,452		$	9,559	$	(5,503	)	$	22,627
Applications and Internet-of-Things:
Revenue	$	8,367		$	9,265	$	25,915		$	25,285
Cost of revenue (excluding depreciation and amortization)		3,382			4,091		11,164			12,975
Depreciation and amortization		1,290			1,218		3,626			3,675
Impairment of intangible assets		3,836			-		3,836			-
Selling, general and administrative		1,332			1,599		4,515			2,999
Applications & Internet-of-Things operating income (loss)	$	(1,473	)	$	2,357	$	2,774		$	5,636
Systems Integration:
Revenue	$	8,416		$	9,673	$	28,988		$	27,957
Cost of revenue (excluding depreciation and amortization)		7,090			7,415		22,458			19,502
Depreciation and amortization		157			155		478			1,456
Impairment of goodwill		-			-		1,386			-
Selling, general and administrative		374			464		1,080			2,158
Systems Integration and Automation operating income	$	795		$	1,639	$	3,586		$	4,841

Three Months Ended September 30, 2020 and 2019

Revenue. Revenue decreased by $12.3 million, or 20.1%, to $48.7 million for the three months ended September 30, 2020 from $61.0 million for the three months ended September 30, 2019. This decrease was driven by lower revenues across the segments. Revenue in the MCS segment decreased by $10.1 million, or 24.1% due to a decrease in site count and stacking of rigs in the current quarter as a result of the deteriorating conditions in the oil and gas industry that we serve as well as from the effects of the COVID-19 pandemic. While we did not lose any material customers, our customers decreased the number of sites they operate, reducing demand for our services. Revenue in the Apps & IoT segment decreased by $0.9 million, or 9.7%, due to lower equipment sales and bandwidth usage in our IoT business. Systems Integration revenue decreased by $1.3 million, or 13.0%, due to the timing of certain projects.

Cost of Revenue (excluding depreciation and amortization). Cost of revenue (excluding depreciation and amortization) decreased by $5.7 million, or 15.9%, to $30.0 million for the three months ended September 30, 2020 from $35.7 million for the three months ended September 30, 2019. Cost of revenue (excluding depreciation and amortization) decreased in the MCS segment by $4.6 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 Apps & IoT segment by $0.7 million was due to a decrease in equipment resales and SCADA compared to the prior-year quarter. Cost of revenue (excluding depreciation and amortization) decreased in the Systems Integration segment by $0.3 million due to the timing of certain projects.

Depreciation and Amortization. Depreciation and amortization expense decreased by $0.8 million to $6.4 million for the three months ended September 30, 2020 from $7.2 million for the three months ended September 30, 2019. The decrease is primarily attributable to lower levels of capital expenditures.

Impairment of Goodwill and Intangible Assets. In September 2020, we identified a triggering event in Apps & IoT segment associated with Cyphre as a result of market conditions, which resulted in a reduction in our cash

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flow projections during a revision of the 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.

Selling and Marketing. Selling and marketing expenses decreased by $0.5 million to $2.3 million for the three months ended September 30, 2020 from $2.8 million for the three months ended September 30, 2019 due to reduction in travel, contract labor and trade show expenditures in the current quarter in response to the COVID-19 pandemic.

General and Administrative. General and administrative expenses decreased by $3.1 million to $9.3 million for the three months ended September 30, 2020 from $12.4 million for the three months ended September 30, 2019. General and administrative costs decreased due to reduced stock based-compensation, reduced travel and reduced professional fees in response to the COVID-19 pandemic.

Income Tax Expense. Our effective income tax rates were (14.6%) and 137.1% for the three months ended September 30, 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.

Nine Months Ended September 30, 2020 and 2019

Revenue. Revenue decreased by $18.0 million, or 10.0%, to $160.9 million for the nine months ended September 30, 2020 from $178.8 million for the nine months ended September 30, 2019. Revenue for the Apps & IoT segment increased by $0.6 million, or 2.5%, due to our focus on the growth of the application. Systems Integration revenue increased by $1.0 million, or 3.7%, due to the timing of certain projects. These increases were offset by a $19.6 million decrease in MCS segment revenue 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 effects 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.

Cost of Revenue (excluding depreciation and amortization). Cost of revenue (excluding depreciation and amortization) decreased by $7.0 million, or 6.4%, to $101.6 million for the nine months ended September 30, 2020 from $108.6 million for the nine months ended September 30, 2019. Cost of revenue (excluding depreciation and amortization) increased in the Systems Integration segment by $3.0 million due to the timing of System Integration projects. Cost of revenue (excluding depreciation and amortization) decreased in the MCS segment by $8.2 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 Apps & IoT segment by $1.8 million.

Depreciation and Amortization. Depreciation and amortization expense decreased by $3.5 million to $20.2 million for the nine months ended September 30, 2020 from $23.8 million for the nine months ended September 30, 2019. The decrease is primarily attributable to the intangibles from the July 2012 acquisition of Nessco being fully amortized coupled with lower capital expenditures.

Impairment of Goodwill and Intangible Assets. 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. 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.

Selling and Marketing. Selling and marketing expenses decreased by $2.2 million to $7.3 million for the nine months ended September 30, 2020 from $9.5 million for the nine months ended September 30, 2019. The decrease is due to reductions in travel, contract labor and trade shows in the current quarter in response to the COVID-19 pandemic.

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General and Administrative. General and administrative expenses decreased by $10.7 million to $32.6 million for the nine months ended September 30, 2020 from $43.3 million for the nine months ended September 30, 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, and reduced travel and reduced professional fees in response to the COVID-19 pandemic.

Income Tax Expense. Our effective income tax rates were 0.4% and (47.0%) for the nine months ended September 30, 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.

Liquidity and Capital Resources

At September 30, 2020, we had working capital, including cash and cash equivalents, of $29.3 million.

During the next twelve months, we expect our principal sources of liquidity to be cash flows from operating activities, cash and cash equivalents on hand, and any additional financing activities we may pursue, which may include debt or equity offerings. We believe we have sufficient liquidity and capital resources to meet our current operating requirements. During the COVID-19 pandemic and the contemporaneous reduction of oil and gas activity, the Company has reduced spending including board, executive, and employee pay, professional fees, capital expenditures and other operating costs.  

Beyond the next twelve months, we expect our principal sources of liquidity to be cash flows provided by operating activities, cash and cash equivalents on hand, availability under our Credit Agreement and additional financing activities we may pursue, which may include debt or equity offerings.

	Nine Months Ended September 30,
	2020			2019
	(in thousands)
Condensed Consolidated Statements of Cash Flows Data:
Cash and cash equivalents including restricted cash, January 1,	$	14,505		$	23,296
GX Dispute payment		(750	)		(50,000	)
Remaining net cash provided by operating activities		19,470			24,055
Net cash provided by (used in) operating activities		18,720			(25,945	)
Net cash used in investing activities		(10,671	)		(16,476	)
Net cash provided by (used in) financing activities		(2,683	)		34,918
Changes in foreign currency translation		(1,484	)		35
Cash and cash equivalents including restricted cash, September 30,	$	18,387		$	15,828

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 against foreign currency exchange risks, but evaluate financial risk on a regular basis and may utilize financial instruments in the future if deemed necessary. During the nine months ended September 30, 2020 and 2019, 91.6% and 91.9% of our revenue was denominated in U.S. dollars, respectively.

Operating Activities

Net cash provided by operating activities was $18.7 million for the nine months ended September 30, 2020 compared to net cash used in operating activities of $25.9 million for the nine months ended September 30, 2019. The increase in cash from operating activities of $44.7 million was primarily due to the $50.0 million GX Dispute payment made during the nine months ended September 30, 2019 and the timing of paying our accounts payable partially offset by to the timing of collection of our receivables.

Our cash provided by operations is subject to many variables including the volatility of the oil and gas industry, the demand for our services, the cost of satellite bandwidth and the timing of collecting our receivables.

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Our future cash flow from operations will depend on our ability to increase our contracted services through our sales and marketing efforts while managing our contracted satellite and other communication service costs.

Investing Activities

Net cash used in investing activities was $10.7 million and $16.5 million for the nine months ended September 30, 2020 and 2019, respectively, both of which were for capital expenditures.

Financing Activities

Net cash used in financing activities was $2.7 million for the nine months ended September 30, 2020. Cash used in financing activities for the nine months ended September 30, 2020, included borrowings on the RCF and Paycheck Protection Program loan of $15.6 million and $6.3 million, respectively, and offset by $23.2 million which includes principal and other voluntary prepayments on the credit facility as well as vendor finance payments on our long-term debt, $0.6 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 $34.9 million for the nine months ended September 30, 2019. Cash provided by financing activities for the nine months ended September 30, 2019, included $48.5 million in proceeds from borrowings, partially offset by $11.4 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 Credit Agreement.

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 three months ended September 30, 2020 and 2019 were 3.6% and 5.3%, respectively. The weighted average interest rate for the nine months ended September 30, 2020 and 2019 were 4.0% and 5.3%, respectively, with an interest rate of 3.4% at September 30, 2020.

As of September 30, 2020, the outstanding principal amounts were $12.0 million for the Term Loan and, $88.7 million for the RCF.

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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 then steps 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 September 30, 2020 reporting period and are in compliance with the required covenant ratios. As of September 30, 2020, the Consolidated Leverage Ratio was 2.97 and the Consolidated Fixed Charge Coverage Ratio was 2.13.

Vendor Finance Agreement

As of September 30, 2020, the Company had a vendor financing agreement in place, with an outstanding balance of $2.3 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.

Paycheck Protection Program Loan

In May 2020, the Company 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. Currently, the regulations provide for loan forgiveness to the extent that (i) the proceeds are used in the Cover Period, as defined in the application for loan forgiveness, after the funding of the loan, (ii) at least 60% of the forgiven amount is used for eligible payroll costs and (iii) the remaining proceeds are used for interest on mortgages, rents, or utilities, and interest on other debt obligations incurred before February 15, 2020.

The amount eligible for forgiveness may be reduced if, among other things, we reduce its full-time headcount or if the Company reduces salaries and wages beyond certain limits. While we expect all $6.3 million will be used in accordance with the regulations and will be eligible for forgiveness, not all costs are within our control and these 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 do not engage in any off-balance sheet arrangements.

Non-GAAP Measure

Adjusted EBITDA should not be considered as an alternative to net loss, operating income (loss), basic or diluted 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. Net loss is the most comparable GAAP measure to Adjusted EBITDA.

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We define Adjusted EBITDA as net loss plus (minus) interest expense; income tax expense (benefit); depreciation and amortization; impairment of goodwill, intangibles, property, plant and equipment; foreign exchange impact of intercompany financing activities; (gain) loss on sales of property, plant and equipment, net of retirements; stock-based compensation expense; restructuring charges; change in fair value of earn-outs and contingent consideration; executive departure costs; mergers and acquisitions 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 the 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, property, plant and equipment;

• Adjusted EBITDA does not reflect the foreign exchange impact of intercompany financing activities;

• Adjusted EBITDA does not reflect (gain) loss on sales of property, plant and equipment;

• 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 the 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;

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• 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);

• 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; and

• Other companies in our industry may calculate Adjusted EBITDA or similarly titled measures differently than we do, limiting its usefulness as a comparative measure.

The following table presents a reconciliation of our net loss to Adjusted EBITDA.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
	(in thousands)
Net loss	$	(5,467	)	$	(270	)	$	(36,490	)	$	(18,349	)
Interest expense		1,315			1,784			4,168			4,291
Depreciation and amortization		6,375			7,172			20,219			23,763
Impairment of goodwill and intangible assets		3,836			-			26,977			-
Loss on sales of property, plant and equipment, net of retirements		79			8			195			19
Stock-based compensation		502			1,504			5,188			7,132
Restructuring		-			158			-			731
Change in fair value of earn-out/contingent consideration		-			-			3,916			1,284
Executive departure costs		-			-			553			-
Mergers and Acquisitions costs		67			76			213			486
COVID-19 Costs		134			-			805			-
GX Dispute Phase II costs		-			(420	)		-			3,946
Income tax expense (benefit)		695			998			(156	)		5,868
Adjusted EBITDA (non-GAAP measure)	$	7,536		$	11,010		$	25,588		$	29,171

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.

Adjusted EBITDA decreased by $3.5 million to $7.5 million for the three months ended September 30, 2020 from $11.0 million for the three months ended September 30, 2019. Adjusted EBITDA decreased by $3.6 million to $25.6 million for the nine months ended September 30, 2020, from $29.2 million for the nine months ended September 30, 2019.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to a variety of risks, including foreign currency exchange rate fluctuations relating to foreign operations and certain purchases from foreign vendors. In the normal course of business, we assess these risks and have established policies and procedures to manage our exposure to fluctuations in foreign currency values.

Our objective in managing our exposure to foreign currency exchange rate fluctuations is to reduce the impact of adverse fluctuations in earnings and cash flows associated with foreign currency exchange rates. We presently do not hedge these risks, but evaluate financial risk on a regular basis and may utilize financial instruments in the future if deemed necessary. During the nine months ended September 30, 2020 and 2019, 8.4% and 8.1%, respectively, of our revenues were earned in non-U.S. currencies. As of September 30, 2020 and 2019, we had no significant outstanding foreign exchange contracts.

Our results of operations and cash flows are subject to fluctuations due to changes in interest rates primarily from our variable interest rate long-term debt. We presently do not hedge these risks, but evaluate financial risk on a regular basis and may utilize financial instruments in the future if deemed necessary. The following analysis reflects the annual impacts of potential changes in our interest rate to a net loss attributable to us and our total stockholders’ equity based on our outstanding long-term debt at September 30, 2020 and December 31, 2019, assuming those liabilities were outstanding for the previous twelve months:

	September 30,		December 31,
	2020		2019
Effect on Net Income (Loss) and Equity - Increase/Decrease:	(in thousands)
1% Decrease/increase in rate	$	1,091	$	1,077
2% Decrease/increase in rate	$	2,182	$	2,155
3% Decrease/increase in rate	$	3,272	$	3,232

Item 4. 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 September 30, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (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 September 30, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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 September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management included all consolidated entities in its assessment of internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company, in the ordinary course of business, is a claimant or a defendant in various legal proceedings, including proceedings as to which the Company has insurance coverage and those that may involve the filing of liens against the Company or its assets.

Item 1A. Risk Factors

Reference is made to Part I, Item 1A. “Risk Factors” included in our Annual Report for the information concerning risk factors.  In addition to the risk factors discussed below, the impact of the COVID-19 pandemic may also exacerbate other risks discussed in Item 1A. Risk Factors in our Annual Report, any of which could have a material adverse effect on us.

         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.

In 2021, we will be a “smaller reporting company” and “non-accelerated filer” and the reduced disclosure requirements applicable to such companies may make our common stock less attractive to investors.

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For 2021, we will be considered a “smaller reporting company” and “non-accelerated filer” under the rules of the Securities and Exchange Commission. We therefore will be exempt from certain disclosure requirements, such as providing selected financial data and executive compensation information. We will also no longer be required to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section 404(b) of the Sarbanes-Oxley Act. We have not yet decided which, if any, of these exemptions we will utilize. If we decide to use the exemption from the external audit of our internal control over financial reporting environment, our auditors will not opine on our internal control environment and it may make it harder for investors to analyze our results of operations and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.  

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None. 

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The exhibits required to be filed with this Quarterly Report on Form 10-Q are listed in the Exhibit Index attached hereto and are incorporated herein by reference.

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INDEX TO EXHIBITS

2.1	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 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.	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 SEC on June 18, 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)
10.1	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)
10.2	Nonqualified Stock Option Award Agreement by and between the Company and Errol Olivier
10.3	Performance Unit Award Agreement by and between the Company and Errol Olivier
10.4	Performance Unit Award Agreement by and between the Company and Errol Olivier
10.5	Restricted Stock Unit Award Agreement by and between the Company and Errol Olivier
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
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

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+ Indicates management contract or compensatory plan.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		RIGNET, INC.
Date: November 6, 2020	By:	/s/ LEE M. AHLSTROM
		Lee M. Ahlstrom
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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EX-10.2

Exhibit 10.2

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

This NONQUALIFIED STOCK OPTION AWARD AGREEMENT (this “Agreement”) is made by and between RigNet, Inc. a Delaware corporation (the “Company”),and Errol Olivier (the “Holder”)effective as of January 8, 2020 (the “Grant Date”).  The Company hereby grants to the Holder an option to purchase 10,299 shares of Stock of the Company at a price per share of $6.20 (the “Option Price”) as specified herein (the “Option”):

Vesting Schedule The Option that is granted hereby shall vest and become exercisable in accordance with the following schedule, provided that the Holder’s employment with the Company and its Affiliates has not terminated prior to the applicable vesting date:

1/3 of the Option Shares shall vest and become exercisable on each of the first, second and third anniversary of the Grant Date.

1. Definitions.For purposes of this Agreement, the following terms shall have the meanings indicated below:

a. “Affiliate” means any corporation, partnership, limited liability company or association, trust or other entity or organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (a) to vote more than fifty percent (50%) of the securities having ordinary voting power for the election of directors or comparable individuals of the controlled entity or organization, or (b) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

b. “Cause” is defined as any of the following: (i) the Holder’s plea of guilty or nolo contendere, or conviction of a felony or a misdemeanor involving moral turpitude; (ii) any act by the Holder of fraud or dishonesty with respect to any aspect of the Company’s business including, but not limited to, falsification of Company records; (iii) the Holder’s failure to perform his duties (other than by reason of Disability); (iv) the Holder’s engagement in misconduct that is materially injurious to the Company (monetarily or otherwise); (v) the Holder’s breach of any confidentiality, noncompetition or non-solicitation obligations to the Company, including but not limited to engagement in Detrimental Activity; (vi) the Holder’s commencement of employment with an unrelated employer; (vii) material violation by the Holder of any of the Company’s written policies, including but not limited to any harassment and/or non-discrimination policies; or (viii) the Holder’s gross negligence in the performance of his or her duties.

c. “Change in Control” means (i) a change in ownership occurring as the result of a person or group acquiring Stock of the Company, which, when combined with the Stock held by such person or group, constitutes more than seventy-five percent (75%) of the total fair market value or total voting power of the Company; provided the person or group was not considered as owning more than seventy-five percent (75%) of the value or voting power prior to the acquisition; (ii) a change in effective control of the Company occurring as the result of the replacement of a majority of the members of the Board by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (iii) a change in the ownership of a substantial portion of the assets of the Company occurring as the result of a person or group acquiring assets from the Company that have a total gross fair market value equal to or more than seventy-five percent (75%) of the total gross fair market value of all the assets of the Company immediately prior to such acquisition.  The determination of whether a Change of Control has occurred will be made in accordance with Code Section 409A and the regulations thereunder.

d. “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

e. “Confidential Information” means material of a secret or confidential nature relating to the business, products, or services of the Company or any Affiliate acquired by the Holder during employment with the Company or any Affiliate. “Confidential Information” excludes any information readily available to members of the general public.

f. “Detrimental Activity” shall include, unless otherwise modified by the Company in connection with a Change in Control: (i) rendering services for any person or organization, or engaging directly or indirectly in any business, which is or becomes competitive with the Company or any Affiliate; (ii) disclosing to anyone outside the Company or any Affiliate, other than the Company’s or any Affiliate’s business, without prior written authorization from the Company or any Affiliate, any Confidential Information; (iii) soliciting, interfering, inducing, or attempting to cause any employee of the Company or any Affiliate to leave his or her employment, whether done on the Holder’s own account or on account of any person, organization, or business which is or becomes competitive with the Company or any Affiliate; or (iv) directly or indirectly soliciting the trade or business of any customer of the Company or any Affiliate.  

g. “Disability” or “Disabled” means a determination by the Company’s long‑term disability carrier that a Holder is disabled in accordance with the Company’s long‑term disability insurance plan (or, in the case of a non-U.S. Holder, in accordance with a comparable disability plan), provided the definition of disability applied under such plan complies with the requirements of Treas. Reg. Section 1.409A-3(i)(4), or, in the case of a Holder who is not covered under such plan, a determination made by the Social Security Administration (or, in the case of a non-U.S. Holder, a determination made by a comparable governmental entity) that the Holder is totally disabled.

h. “Good Reason” means the occurrence of any of the following without the Holder’s prior written consent: (i) a material adverse change in the Holder’s position, authority, duties or responsibilities, excluding a change in reporting relationships; (ii) a material reduction in the Holder’s base salary; (iii) a material diminution of the Holder’s employee benefits (including but not limited to medical, dental, life insurance and long-term disability plans); (iv) the relocation of the Holder’s principal place of employment by more than 50 miles from such location as of the Grant Date; or (v) should Steven Pickett no longer serve as the Company’s Chief Executive Officer for any reason.  Notwithstanding the foregoing, a “Good Reason” shall not exist unless the Holder notifies the Company of the existence of the condition described in this Section 1(c) within ninety (90) days of the initial existence of the condition and the Company does not remedy the condition within thirty (30) days following receipt of such notice.

i. “Mature Shares” means shares of Stock that the Holder has held for at least six (6) months.

j. “Retirement” shall mean the Holder’s voluntary election to retire from employment with the Company or any Affiliate at any time after you have reached both the age of 60 and 5 years of service.

k. “Stock” means the common stock of the Company, $0.001 par value per share (or such other par value as may be designated by act of the Company’s stockholders).

2. Grant of Option. The Option is not intended to be an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code (the “Code”). The Option shall expire on January 8, 2027 (the “Expiration Date”).

3. Vesting.

a. Forfeiture. If the Holder ceases to be employed by the Company or an Affiliate for any reason before the applicable vesting date, other than in accordance with subsections (b) and (c) below, the unvested portion of the Option shall be forfeited to the Company on the date the Holder ceases to be employed by the Company or an Affiliate.  If the Holder breaches, before the applicable vesting date, any non-competition, confidentiality, restrictive covenant or other similar agreement with the Company to which the Holder is subject, the unvested portion of the Option shall be forfeited to the Company on the date the Holder breaches such agreement or covenant.  The Holder may exercise the vested portion of the Option, but only within such period of time ending on the earlier of: (i) the date three (3) months following the termination of the Holder’s employment with the Company, or (ii) the Expiration Date.  

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b. Death, Retirement or Disability.If the Holder’s employment terminates due to death, Retirement or Disability, the unvested portion of the Option shall automatically become 100% vested on the Holder’s date of termination.  The Holder or, in the case of the Holder’s death, the Holder’s executor, administrator, heir or legatee, as the case may be, may exercise the vested portion of the Option, but only within such period of time ending on the earlier of: (i) the date twelve (12)months following the termination of the Holder’s employment with the Company, or (ii) the Expiration Date.  

c. Change in Control. If a Change in Control occurs and the Holder’s employment is terminated by the Company or an Affiliate without Cause or by the Holder for Good Reason, and the Holder’s date of termination occurs within twelve (12) months following the Change in Control, the unvested portion of the Option shall automatically become 100% vested on the Holder’s date of termination.  The Holder may exercise the vested portion of the Option, but only within such period of time ending on the earlier of: (i) the date three (3) months following the termination of the Holder’s employment with the Company, or (ii) the Expiration Date.  

4. Option Does Not Award Any Rights of a Shareholder.  The Holder shall not have the voting rights or any of the other rights, powers or privileges of a holder of Stock with respect to the Option that is awarded hereby.  Only after the Option is exercised will the Holder have all of the rights of a shareholder with respect to each share of Stock issued in exchange for the Option.

5. Manner of Exercise.

a. Election to Exercise.  To exercise the Option, the Holder or in the case of exercise after the Holder’s death or incapacity, the Holder’s executor, administrator, heir or legatee, as the case may be shall deliver to the Company a fully completed and executed notice of exercise (“Notice of Exercise”), in such form as may be designated by the Company in its sole discretion, which shall set forth, inter alia:

i. the Holder’s election to exercise the Option;

ii. the number of shares of Stock being purchased;

iii. any restrictions imposed on the shares; and

iv. any representations, warranties and agreements regarding the Holder’s investment intent and access to information as may be required by the Company to comply with applicable securities laws.

If someone other than the Holder exercises the Option, then such person must submit documentation reasonably acceptable to the Company verifying that such person has the legal right to exercise the Option.

b. Payment of Option Price. The Option Price for the shares of Stock to be acquired on exercise of the Option shall be payable in full at the time of exercise as amended from time to time, plus an amount sufficient to satisfy any tax withholding obligations of the Company that arise in connection with such exercise (as determined by the Company) in any combination of the following (i) cash, certified check, bank draft or postal or express money order for an amount equal to the Option Price or (ii) except as specified below, any other form of payment which is acceptable to the Compensation Committee of the Board of Directors of the Company (the “Committee”).  If Mature Share are used for payment by the Holder and allowed by the Committee, the aggregated fair market value of the shares of Stock tendered mut be equal to or less than the aggregate Option Price of the shares of Stock being purchased upon exercise of the Option, and any difference must be paid by cash, certified check, bank draft or postal or express money order payable to the order of the Company.  The Committee may permit Holder to elect to pay the Option Price and any applicable tax withholding resulting from such exercise by (A) authorizing a third-party broker to sell all or a portion of the shares of Stock acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the Option Price and any applicable federal, state, local and foreign tax withholding

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resulting from such exercise; or (ii) directing the Company to reduce the number of shares of Stock that will be delivered pursuant to the exercise of the Option.

c. Issuance of Shares. Provided that the exercise notice and payment are in form and substance satisfactory to the Company, the Company shall issue the shares of Stock registered in the name of the Holder, the Holder’s authorized assignee, or the Holder’s legal representative which shall be evidenced by stock certificates representing the shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, and such shares shall be transferable by the Holder (except to the extent that any proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of applicable securities law).

6. Transferability. No portion of the Option may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.

7. Capital Adjustments and Reorganizations. The existence of the Option shall not affect in any way the right or power of the Company or any company the stock of which is awarded pursuant to this Agreement to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate act or proceeding.

8. Covenant Not To Compete; Solicit or Disclose Confidential Information.  

a. The Holder acknowledges that he or she is in possession of and has access to Confidential Information and that he or she will continue to have such possession and access during employment by the Company.  The Holder also acknowledges that the Company’s business, products and services are highly specialized and that it is essential that they be protected, and, accordingly, the Holder agrees that as partial consideration for the Option granted herein that should the Holder engage in any Detrimental Activity at any time during his or her employment or during a period of one year following his or her termination, the Company shall be entitled to: (i) recover from the Holder any shares that have been issued under the Option; (ii) seek injunctive relief against the Holder pursuant to the provisions of subsection (b) below; (iii) recover all damages, court costs, and attorneys’ fees incurred by the Company in enforcing the provisions of this Agreement; and (iv) set off any such sums to which the Company is entitled hereunder against any such sum which may be owed to the Holder by the Company.

b. Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, the Holder agrees that the foregoing covenants may be enforced by the Company in the event of breach by him or her by injunction relief and restraining order, without the necessity of posting a bond, and that such enforcement shall not be the Company’s exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company.

c. The covenants and provisions of this Section 8 are severable and separate, and the unenforceability of any specific covenant or provision shall not affect the enforceability of any other covenant or provision.  Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope or time set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the panel or court deems reasonable, and this Agreement shall thereby be reformed.

d. Each of the covenants in this Section 8 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Holder against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants or provisions.  

9. Tax Withholding. To the extent that the receipt of the Option, any payment in cash or shares of Stock or the vesting of the Option results in income to the Holder for federal, state or local income, employment or other tax

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purposes with respect to which the Company or any Affiliate has a withholding obligation, the Holder shall deliver to the Company at the time of such receipt, payment or vesting, as the case may be,such amount of money as the Company or any Affiliate may require to meet its obligation under applicable tax laws or regulations, and, if the Holder fails to do so, the Company is authorized to withhold from the shares granted hereby or from any cash or stock remuneration then or thereafter payable to the Holder in any capacity any tax required to be withheld by reason of such resulting income.

10. No Fractional Shares. All provisions of this Agreement concern whole shares.  If the application of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.

11. Nontransferability. This Agreement is not transferable by the Holder otherwise than by will or by the laws of descent and distribution.

12. Employment Relationship. For purposes of this Agreement, the Holder shall be considered to be in the employment of the Company and its Affiliates as long as the Holder has an employment relationship with the Company and its Affiliates.  The Committee shall determine any questions as to whether and when there has been a termination of such employment relationship, and the cause of such termination, and the Committee’s determination shall be final and binding on all persons.

13. Not an Employment Agreement. This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create an employment relationship between the Holder and the Company or any Affiliate, to guarantee the right to remain employed by the Company or any Affiliate for any specified term or require the Company or any Affiliate to employ the Holder for any period of time.

14. Legend. The Holder consents to the placing on the certificate for the shares issued hereunder an appropriate legend restricting resale or other transfer of the shares except in accordance with all applicable securities laws and rules thereunder.

15. Notices.Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be deemed to have been duly given when delivered or mailed to the Company or the Holder, as applicable, by (a) personal delivery; (b) United States registered mail, return receipt requested, postage prepaid, addressed to the Company at the then current address of the Company’s principal corporate office, or to the Holder at the Holder’s residential address indicated in the Company’s records; or (c) email to the Company at LegalDesk@Rig.Net or to the Holder at the Holder’s email address indicated in the Company’s records.

16. Amendment and Waiver. This Agreement may be amended, modified or superseded only by written instrument executed by the Company and the Holder.  Only a written instrument executed and delivered by the party waiving compliance hereof shall make any waiver of the terms or conditions.  Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized executive officer of the Company other than the Holder.  The failure of any party at any time or times to require performance of any provisions hereof shall in no manner effect the right to enforce the same.  No waiver by any party of any term or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any other term or condition.

17. Arbitration.  In the event of any difference of opinion concerning the meaning or effect of this Agreement, such difference shall be resolved by the Committee.  Any controversy arising out of or relating to this Agreement shall be resolved by arbitration conducted in Houston, Texas pursuant to the arbitration rules of the American Arbitration Association.  The arbitration shall be final and binding on the parties.

18. Governing Law and Severability. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.  The invalidity of any provision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.

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19. Successors and Assigns.Subject to the limitations which this Agreement imposes upon the transferability of the Option granted hereby, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and its successors and assigns, and to the Holder, the Holder’s permitted assigns, executors, administrators, agents, legal and personal representatives.

20. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original for all purposes but all of which taken together shall constitute one and the same instrument.

21. Recoupment. If the Holder is subject to the Company’s clawback policy (the “Policy”), the Holder agrees that the Option is subject to the terms of the Policy, as may be amended from time to time.

22. Compliance with Section 409A.  It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A.  Specifically, any taxable benefits or payments provided under this Agreement are intended to qualify for the statutory stock option exception to Section 409A to the maximum extent possible and, to the extent they do not so qualify, are intended to qualify for the nonstatutory stock option exception to Section 409A to the maximum extent possible. Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits is not warranted or guaranteed.  Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Holder (or any other individual claiming a benefit through the Holder).

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Holder and the Company agree and acknowledge that this Option is granted under and governed by the terms and conditions of this Agreement.

Holder	RigNet, Inc.
By: /s/ ERROL OLIVIER	By:/s/ STEVEN E. PICKETT
Name: Errol Olivier	Name: Steven E. Pickett
	Title: Chief Executive Officer and President

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EX-10.3

Exhibit 10.3

PERFORMANCE UNIT AWARD AGREEMENT

This PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”) is made by and between RigNet, Inc. a Delaware corporation (the “Company”), and Errol Oliver (the “Holder”) effective as of January 8, 2020 (the “Grant Date”).  The Company hereby grants to the Holder the Performance Units specified herein (the “Performance Units”), which each Performance Unit represents a right to receive a share of Stock based upon the terms and conditions of this Agreement, as well as the achievement of the metrics set forth herein in exchange for such awarded Performance Units:

1. Definitions.  For purposes of this Agreement, the following terms shall have the meanings indicated below:

a. “2020 Performance Period” means January 1, 2020 through December 31, 2020.

b. “AEBITDA” means Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization as reported by Company in its filings with the Securities and Exchange Commission as adjusted to eliminate foreign exchange impacts and as further adjusted by the Board pursuant to Section 6 hereof.

c. “Affiliate” means any corporation, partnership, limited liability company or association, trust or other entity or organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (a) to vote more than fifty percent (50%) of the securities having ordinary voting power for the election of directors or comparable individuals of the controlled entity or organization, or (b) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

d. “Confidential Information” means material of a secret or confidential nature relating to the business, products, or services of the Company or any Affiliate acquired by the Holder during employment with the Company or any Affiliate. “Confidential Information” excludes any information readily available to members of the general public other than as a result of the unauthorized disclosure, directly or indirectly, by the Holder.

e. “Detrimental Activity” shall include, unless otherwise modified by the Company in connection with a Change in Control: (i) rendering services for any person or organization, or engaging directly or indirectly in any business, which is or becomes competitive with the Company or any Affiliate; (ii) disclosing to anyone outside the Company or any Affiliate, other than the Company’s or any Affiliate’s business, without prior written authorization from the Company or any Affiliate, any Confidential Information; (iii) soliciting, interfering, inducing, or attempting to cause any employee of the Company or any Affiliate to leave his or her employment, whether done on the Holder’s own account or on account of any person, organization, or business; or (iv) directly or indirectly soliciting the trade or business of any customer of the Company or any Affiliate, which is or becomes competitive with the Company or any Affiliate.  

f. “Forfeiture Restrictions” means the prohibitions and restrictions set forth herein with respect to the sale or other disposition of the Performance Units issued to the Holder hereunder and the obligation to forfeit and surrender such Performance Units to the Company.

g. “Payment Date” means the date shares of Stock are issued pursuant to this Agreement, provided such date is in calendar year 2021.

h. “Stock” means the common stock of the Company, $0.001 par value per share (or such other par value as may be designated by act of the Company’s stockholders).

2. Grant of Performance Units.  

a. Value of Performance Units. The Target value of the award of Performance Units is $310,000.  The actual value of the Performance Units will be determined by achievement of the Financial Goals below for 75% of the value ($232,500) and achievement of the Department Goals set forth on Appendix A for 25% of the value of the achievement ($77,500); provided, however, no Performance Units will be earned if both of the Financial Goals do not achieve at least the Threshold level.  

b. Financial Goals.  For purposes of determining the vesting of, and the payment, if any, to be made with respect to, the Performance Units, the Financial Goals for the Performance Units are based on two independent and alternative metrics: (1) AEBITDA, and (2) Consolidated Revenue. The actual number of Performance Units that may be earned by the Holder will be determined as described below, based upon the actual results for the 2020 Performance Period:

Metric(1)	Weighting	Threshold	Target	Maximum
Consolidated Revenue	50%	$205,361	$256,701	$320,876
Consolidated AEBITDA(2)	50%	$37,974	$42,193	$52,741
Performance Factor	Applied to each metric separately	25%	100%	250%

(1) Plan AEBITDA and Consolidated Revenues to be adjusted for acquisitions and divestitures during performance period.

(2) Plan AEBITDA to be adjusted in the event funding mechanism is changed to cash from equity.

c. Certification of Results.  When financial results for the 2020 Performance Period are available, the Compensation Committee will certify the level of achievement for both Financial Goals and the Department Goals.  Provided the Compensation Committee certifies that both Financial Goals were achieved at least the Threshold level, then the actual achievement for each Financial Goal will be certified by interpolating performance between Threshold and Target for the measure, with the actual award value for such metric being 75% at Threshold performance level and 100% at the Target performance level and 250% at the Maximum performance level.

d. Calculation of Number of Shares Issued.  The number of shares of Stock to be issued shall be calculated pursuant to the final formula (provided no shares shall be granted if the achievement of either Financial Goal is below threshold):

[0.75 * (0.5 * Consolidated Revenue achievement + 0.5 * Consolidated AEBITDA achievement) + 0.25 * Department Goal achievement]*$310,000, provided, however, the maximum value that can be awarded shall be capped at $775,000.

The actual number of shares of Stock issued shall be based on the value calculated by the formula in the previous sentence divided by the average of the closing price of the Company’s Stock for the ten trading days preceding the date that is three days before the payout date.

The Holder shall have no vested interest in the Performance Units credited to his or her account except as set forth in this Section 2. On or before the Payment Date, and after satisfaction of the Holder’s tax withholding obligations described in Section 8, the Company shall issue to the Holder that number of shares of Stock, if any, calculated or otherwise determined pursuant to this Agreement in exchange for the Performance Units that vested as a result of the lapse of the applicable Forfeiture Restrictions and thereafter the Holder shall have no further rights with respect to such vested Performance Units.

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e. Forfeiture.  If the Holder ceases to be employed by the Company or an Affiliate for any reason before the applicable lapse date, the Forfeiture Restrictions then applicable to the Performance Units shall not lapse and all the Performance Units then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder ceases to be employed by the Company or an Affiliate. If the Holder breaches, before the applicable lapse date, any non-competition, confidentiality, restrictive covenant or other similar agreement with the Company to which the Holder is subject, the Forfeiture Restrictions then applicable to the Performance Units shall not lapse and all the Performance Units then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder breaches such agreement or covenant.

3. Delivery of Shares.  On the Payment Date, for that amount of shares for which there has been a lapse of the Forfeiture Restrictions with respect to the Performance Units granted, the Company shall cause to be delivered to the Holder any shares of Stock that are to be issued under the terms of this Agreement in exchange for all vested Performance Units awarded hereby. The shares shall be evidenced by stock certificates with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, and such shares shall be transferable by the Holder.

4. Performance Units Do Not Award Any Rights of a Shareholder.  The Holder shall not have the voting rights or any of the other rights, powers or privileges of a holder of Stock with respect to the Performance Units that are awarded hereby. Only after a share is issued in exchange for a Performance Unit will the Holder have all of the rights of a shareholder with respect to such share of Stock issued in exchange for a Performance Unit.

5. Transfer Restrictions.  The Performance Units granted hereby may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will or the applicable laws of descent and distribution). Any such attempted sale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be void and the Company shall not be bound thereby. Further, any shares of Stock issued to the Holder in exchange for Performance Units awarded hereby may not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws. The Holder also agrees that the Company may (a) refuse to cause the transfer of any such shares to be registered on the applicable stock transfer records of the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law; and (b) give related instructions to the transfer agent, if any, to stop registration of the transfer of such shares of Stock.

6. Capital Adjustments and Reorganizations; Acquisitions and Divestitures.  The existence of the Performance Units shall not affect in any way the right or power of the Company or any company the stock of which is awarded pursuant to this Agreement to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate act or proceeding. If, during the Performance Award Period, the Company or any of its subsidiaries acquire or dispose of, by any means including by asset or equity purchase or sale or by merger, any entity, business or material group of assets in a transaction reported by the Company under Item 2.01 on a Current Report on Form 8-K filed with the Securities and Exchange Commission, the Committee shall revise the threshold, target and maximum for the 2020 Performance Period of such acquisition or disposition and all subsequent Performance Periods as the Committee determines is necessary to properly adjust such amounts to reflect the results of such transaction.

7. Covenant Not To Compete; Solicit or Disclose Confidential Information.  

a. The Holder acknowledges that he or she is in possession of and has access to Confidential Information and that he or she will continue to have such possession and access during employment by the Company. The Holder also acknowledges that the Company’s business, products and services are highly specialized and that it is essential that they be protected, and, accordingly, the Holder agrees that as partial consideration for the Performance Units granted herein that should the Holder engage in any Detrimental Activity at any time during his or her employment or during a period of one (1) year following his or her termination of employment, the Company shall be entitled to: (i) recover from the Holder the value of any portion of the Performance Units that has been paid; (ii) seek injunctive relief against the Holder pursuant to the provisions of subsection (b) below; (iii) recover all damages, court costs, and attorneys’ fees incurred by the Company

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in enforcing the provisions of this Agreement; and (iv) set off any such sums to which the Company is entitled hereunder against any such sum which may be owed to the Holder by the Company.  All such rights of the Company shall be in addition to, and not in lieu of, any additional such rights the Company may have under any other non-competition, confidentiality, restrictive covenant, or other similar agreement with the Holder, all of which shall remain in effect and survive in accordance with their terms.

b. Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, the Holder agrees that the foregoing covenants may be enforced by the Company in the event of breach by him or her by injunction relief and restraining order, without the necessity of posting a bond, and that such enforcement shall not be the Company’s exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company.

c. The covenants and provisions of this Section 7 are severable and separate, and the unenforceability of any specific covenant or provision shall not affect the enforceability of any other covenant or provision. Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope or time set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the panel or court deems reasonable, and this Agreement shall thereby be reformed.

d. Each of the covenants in this Section 7 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Holder against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants or provisions.

e. The Holder shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Should the Holder file a lawsuit for retaliation by an employer for reporting a suspected violation of law the Holder may disclose the trade secret to the Holder’s attorney and use the trade secret information in the court proceeding, if the Holder: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

8. Tax Withholding.  To the extent that the receipt of the Performance Units, any payment in cash or shares of Stock or the lapse of any Forfeiture Restrictions results in income to the Holder for federal, state or local income, employment or other tax purposes with respect to which the Company or any Affiliate has a withholding obligation, the Holder shall deliver to the Company at the time of such receipt, payment or lapse, as the case may be, such amount of money as the Company or any Affiliate may require to meet its obligation under applicable tax laws or regulations, and, if the Holder fails to do so, the Holder will be deemed to have elected for the Company to withhold the amount of shares necessary to cover applicable tax withholding.

9. No Fractional Shares.  All provisions of this Agreement concern whole shares. If the application of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.

10. Nontransferability.  This Agreement is not transferable by the Holder otherwise than by will or by the laws of descent and distribution.

11. Employment Relationship.  For purposes of this Agreement, the Holder shall be considered to be in the employment of the Company and its Affiliates as long as the Holder has an employment relationship with the Company and its Affiliates. The Committee shall determine any questions as to whether and when there has been a termination of such employment relationship, and the Committee’s determination shall be final and binding on all persons.

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12. Not an Employment Agreement.  This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create an employment relationship between the Holder and the Company or any Affiliate, to guarantee the right to remain employed by the Company or any Affiliate for any specified term or require the Company or any Affiliate to employ the Holder for any period of time.

13. Legend.  The Holder consents to the placing on the certificate for any shares of Stock issued under this Agreement in certificated form an appropriate legend restricting resale or other transfer of such shares except in accordance with all applicable securities laws and rules thereunder.

14. Notices.  Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be deemed to have been duly given when delivered or mailed to the Company or the Holder, as applicable, by (a) personal delivery; (b) United States registered mail, return receipt requested, postage prepaid, addressed to the Company at the then current address of the Company’s principal corporate office, or to the Holder at the Holder’s residential address indicated in the Company’s records; or (c) email to the Company at LegalDesk@rignet.com or to the Holder at the Holder’s email address indicated in the Company’s records.

15. Amendment and Waiver.  Except as otherwise provided herein, this Agreement may be amended, modified or superseded only by written instrument executed by the Company and the Holder. Only a written instrument executed and delivered by the party waiving compliance hereof shall make any waiver of the terms or conditions. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized executive officer of the Company other than the Holder. The failure of any party at any time or times to require performance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any other term or condition.

16. Disputes.  In the event of any difference of opinion concerning the meaning or effect of the this Agreement, such difference shall be resolved by the Committee. Any controversy arising out of or relating to this Agreement shall be resolved by the state and federal courts sitting in Harris County, Texas.

17. Governing Law and Severability.  The validity, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of any provision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.

18. Successors and Assigns.  Subject to the limitations which this Agreement imposes upon the transferability of the Performance Units granted hereby and any shares of Stock issued hereunder, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and its successors and assigns, and to the Holder, the Holder’s permitted assigns, executors, administrators, agents, legal and personal representatives.

19. Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be an original for all purposes but all of which taken together shall constitute but one and the same instrument.

20. Recoupment.  The Holder acknowledges and agrees that all payments made under this Agreement are subject to the Company’s clawback policy, as it may be amended from time to time (the “Policy”). If at any time after an amount is paid under this Agreement the financial results of the Company and/or its Affiliates are restated (other than a restatement caused by a change in applicable accounting rules or interpretations) and such restated financial results would have resulted in fewer shares of Stock being paid under this Agreement if such restated financial results had been taken into account originally in determining the vesting of the Performance Units then the vesting of the Performance Units shall be recalculated under the applicable provisions of this Agreement taking into account such restated financial results and the Holder or, if the Holder has died, the Holder’s estate, will, to the extent required by governing law or regulations, as they may be amended from time to time, and/or the Policy, repay to the Company, upon demand by the Company, any shares of Stock delivered under this Agreement in excess of the number of shares that would have been delivered if the restated financial results had been taken into account originally in determining the vesting of the Performance Units.

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21. Compliance with Section 409A. This Agreement is subject to, and intended to comply with, to the extent applicable, or to be exempt from the requirements of, Section 409A. This Agreement shall be administered in a manner that is intended to meet those requirements and shall be construed and interpreted in accordance with such intent. Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits provided under Section 409A or otherwise is not warranted or guaranteed.  Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Holder (or any other individual claiming a benefit through the Holder) as a result of this Agreement. Notwithstanding anything to the contrary in this Agreement, to the extent any payment or benefit provided under this Agreement constitutes “nonqualified deferred compensation” for purposes of Section 409A, such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Holder, and (B) the date of the Holder’s death, to the extent required under Section 409A.  For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments to be made under this Agreement upon a termination of employment shall be made upon a “separation from service” to the extent required under Section 409A.

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IN WITNESS WHEREOF, the Holder and the Company agree and acknowledge that this grant of Performance Units is granted under and governed by the terms and conditions of the Plan and this Agreement.

Holder	RigNet, Inc.
By: /s/ ERROL OLIVIER	By:/s/ STEVEN E. PICKETT
Name: Errol Olivier	Name: Steven E. Pickett
	Title: Chief Executive Officer and President

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EX-10.4

Exhibit 10.4

PERFORMANCE UNIT AWARD AGREEMENT

This PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”) is made by and between RigNet, Inc. a Delaware corporation (the “Company”), and Errol Oliver (the “Holder” effective as of January 8, 2020 (the “Grant Date”).  The Company hereby grants to the Holder 23,485 Performance Units at Target (the “Target Units”), 117,425 Performance Units at Maximum (the “Maximum Units”) and 18,788 Performance Units at Threshold (the “Threshold Units”) specified herein (the Target Units, Maximum Units and Threshold Units are collectively referred to as the “Performance Units”), which each Performance Unit represents a right to receive a share of Stock based upon the terms and conditions of this Agreement, as well as the achievement of the metrics set forth herein in exchange for such awarded Performance Units:

1. Definitions.  For purposes of this Agreement, the following terms shall have the meanings indicated below:

a. “2020 Performance Period” means January 1, 2020 through December 31, 2020.

b. “2021 Performance Period” means January 1, 2021 through December 31, 2021.

c. “2022 Performance Period” means January 1, 2022 through December 31, 2022.

d. “AEBITDA” means Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization as reported by Company in its filings with the Securities and Exchange Commission as adjusted to eliminate foreign exchange impacts and as further adjusted by the Board pursuant to Section 6 hereof.

e. “Affiliate” means any corporation, partnership, limited liability company or association, trust or other entity or organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (a) to vote more than fifty percent (50%) of the securities having ordinary voting power for the election of directors or comparable individuals of the controlled entity or organization, or (b) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

f. “Cause” is defined as any of the following: (i) the Holder’s plea of guilty or nolo contendere, or conviction of a felony or a misdemeanor involving moral turpitude; (ii) any act by the Holder of fraud or dishonesty with respect to any aspect of the Company’s business including, but not limited to, falsification of Company records; (iii) the Holder’s failure to perform his duties (other than by reason of Disability); (iv) the Holder’s engagement in misconduct that is materially injurious to the Company (monetarily or otherwise); (v) the Holder’s breach of any confidentiality, noncompetition or non-solicitation obligations to the Company, including but not limited to engagement in Detrimental Activity; (vi) the Holder’s commencement of employment with an unrelated employer; (vii) material violation by the Holder of any of the Company’s written policies, including but not limited to any harassment and/or non-discrimination policies; or (viii) the Holder’s gross negligence in the performance of his or her duties.

g. “Change in Control” means (i) a change in ownership occurring as the result of a person or group acquiring Stock of the Company, which, when combined with the Stock held by such person or group, constitutes more than seventy-five percent (75%) of the total fair market value or total voting power of the Company; provided the person or group was not considered as owning more than seventy-five percent (75%) of the value or voting power prior to the acquisition; (ii) a change in effective control of the Company occurring as the result of the replacement of a majority of the members of the Board by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (iii) a change in the ownership of a substantial portion of the assets of the Company occurring as the result of a person or group acquiring assets from the Company that have a total gross fair market value equal to or more than seventy-five percent (75%) of the total gross fair market value of all the assets of the Company

immediately prior to such acquisition.  The determination of whether a Change of Control has occurred will be made in accordance with Code Section 409A and the regulations thereunder.

h. “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

i. “Confidential Information” means material of a secret or confidential nature relating to the business, products, or services of the Company or any Affiliate acquired by the Holder during employment with the Company or any Affiliate. “Confidential Information” excludes any information readily available to members of the general public other than as a result of the unauthorized disclosure, directly or indirectly, by the Holder.

j. “Detrimental Activity” shall include, unless otherwise modified by the Company in connection with a Change in Control: (i) rendering services for any person or organization, or engaging directly or indirectly in any business, which is or becomes competitive with the Company or any Affiliate; (ii) disclosing to anyone outside the Company or any Affiliate, other than the Company’s or any Affiliate’s business, without prior written authorization from the Company or any Affiliate, any Confidential Information; (iii) soliciting, interfering, inducing, or attempting to cause any employee of the Company or any Affiliate to leave his or her employment, whether done on the Holder’s own account or on account of any person, organization, or business; or (iv) directly or indirectly soliciting the trade or business of any customer of the Company or any Affiliate, which is or becomes competitive with the Company or any Affiliate.

k. “Disability” or “Disabled” means a determination by the Company’s long‑term disability carrier that a Holder is disabled in accordance with the Company’s long‑term disability insurance plan (or, in the case of a non-U.S. Holder, in accordance with a comparable disability plan), provided the definition of disability applied under such plan complies with the requirements of Treas. Reg. Section 1.409A-3(i)(4), or, in the case of a Holder who is not covered under such plan, a determination made by the Social Security Administration (or, in the case of a non-U.S. Holder, a determination made by a comparable governmental entity) that the Holder is totally disabled.  

l. “Forfeiture Restrictions” means the prohibitions and restrictions set forth herein with respect to the sale or other disposition of the Performance Units issued to the Holder hereunder and the obligation to forfeit and surrender such Performance Units to the Company.

m. “Payment Date” means the calendar year 2023.

n. “Performance Award Period” means the three (3) year period that begins on the first day of the 2020 Performance Period and ends on the last day of the 2022 Performance Period.

o. “Retirement” shall mean Holder’s voluntary election to retire from employment with the Company or any Affiliate at any time after Holder has reached both the age of 60 and 5 years of service.

p. “Stock” means the common stock of the Company, $0.001 par value per share (or such other par value as may be designated by act of the Company’s stockholders).

q. “Stock Price Achievement” means the average price for the thirty (30) trading days ending on November 15 in each year in the performance period.

2. Grant of Performance Units.  

a. Metrics. For purposes of determining the vesting of, and the payment, if any, to be made with respect to, the Performance Units, the Performance Units are based on two independent and alternative metrics: (1) AEBITDA, and (2) Stock Price Achievement. The Performance Units will be attributed to attainment of either metric. The actual number of Performance Units that may be earned by the Holder will be determined as described below, based upon the actual results for the Performance Award Period:

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Funding Metric	Threshold	Target	Maximum
Stock Price Target	$8.19	$10.91	$21.38
AEBITDA for 2020 Performance Period	N/A	$42.2MM	$50.6MM
AEBITDA for 2021 Performance Period	N/A	$52.6MM	N/A
Aggregate AEBITDA for Performance Periods 2020-2021	N/A	N/A	$113.8MM
AEBITDA for 2022 Performance Period	N/A	$60.2MM	N/A
Aggregate AEBITDA for Performance Award Period 2020-2022	$139.5MM	$155.0MM	$186.0MM

The Performance Units that are granted hereby shall be subject to the Forfeiture Restrictions.  If the Company achieves Target performance for either Stock Price Achievement or AEBITDA in any one of the 2020, 2021 or 2022 Performance Periods then the Forfeiture Restrictions on the Target Units shall lapse at the end of such year.  If the Company achieves Maximum performance for either Stock Price Achievement or AEBITDA in any one of the 20202, 2021 or 2022 Performance Periods than the Forfeiture Restrictions shall lapse at the end of such year on the Maximum Units.  If at the end of the Performance Award Period, the Forfeiture Restrictions have not lapsed in accordance with the foregoing, but the Company has achieved Threshold performance for either the Stock Price Achievement or Aggregate AEBITDA for the Performance Award Period (or the higher of the two if Threshold has been hit for both), then the Forfeiture Restrictions shall lapse for that number of Performance Units determined by interpolating performance between Threshold and Target for the measure, with the Forfeiture Restrictions lapsing on the Threshold Units at Threshold performance and the Forfeiture Restrictions lapsing on 100% of the Target Units at Target performance. If at the end of the Performance Award Period, the Forfeiture Restrictions have not lapsed on the Maximum Units, but the Company has achieved Target Performance for either the Stock Price Achievement in 2022 or Aggregate AEBITDA for Performance Periods 2020-2022 (or the higher of the two if Target has been hit for both), then the Forfeiture Restrictions shall lapse for that number of Performance Units determined by interpolating performance between Target and Maximum for the Measure, with the Forfeiture Restrictions lapsing on the Target Units at Target Performance and the Forfeiture Restrictions lapsing on the Maximum Units at Maximum performance.

The Holder shall have no vested interest in the Performance Units credited to his or her account except as set forth in this Section 2. On or before the Payment Date, and after satisfaction of the Holder’s tax withholding obligations described in Section 8, the Company shall issue to the Holder that number of shares of Stock, if any, calculated or otherwise determined pursuant to this Agreement in exchange for the Performance Units that vested as a result of the lapse of the applicable Forfeiture Restrictions and thereafter the Holder shall have no further rights with respect to such vested Performance Units.

b. Forfeiture.  If the Holder ceases to be employed by the Company or an Affiliate for any reason before the applicable lapse date, other than in accordance with subsections (c), (d) and (e) below, the Forfeiture Restrictions then applicable to the Performance Units shall not lapse and all the Performance Units then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder ceases to be employed by the Company or an Affiliate. If the Holder breaches, before the applicable lapse date, any non-competition, confidentiality, restrictive covenant or other similar agreement with the Company to which the Holder is subject, the Forfeiture Restrictions then applicable to the Performance Units shall not lapse and all the Performance Units then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder breaches such agreement or covenant.

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c. Death, Disability and Retirement.  If the Holder’s employment terminates due to (i) death, (ii) Disability, or (iii) Retirement before the last day of the Performance Award Period, all unvested Performance Units (assuming the Target achievement) shall automatically become 100% vested on the Holder’s date of termination.

d. Change in Control.  If a Change in Control occurs on or before the last day of the Performance Award Period while the Holder is employed with the Company, all unvested Performance Units (assuming the Target achievement) shall automatically become 100% vested upon such Change in Control.

e. Termination not for Cause.  If the Holder’s employment is terminated by Company for any reason other than for Cause before the last day of the Performance Award Period, a percentage of the Performance Units (assuming the Target achievement) equal to the percentage of the Performance Award Period that has elapsed prior to termination shall automatically become vested upon such termination.

3. Delivery of Shares.  On the Payment Date, for that amount of shares for which there has been a lapse of the Forfeiture Restrictions with respect to the Performance Units granted, the Company shall cause to be delivered to the Holder any shares of Stock that are to be issued under the terms of this Agreement in exchange for all vested Performance Units awarded hereby. The shares shall be evidenced by stock certificates with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, and such shares shall be transferable by the Holder. The maximum number of shares of Stock that may be paid under this Agreement is equal to the Maximum Units granted under this Agreement.

4. Performance Units Do Not Award Any Rights of a Shareholder.  The Holder shall not have the voting rights or any of the other rights, powers or privileges of a holder of Stock with respect to the Performance Units that are awarded hereby. Only after a share is issued in exchange for a Performance Unit will the Holder have all of the rights of a shareholder with respect to such share of Stock issued in exchange for a Performance Unit.

5. Transfer Restrictions.  The Performance Units granted hereby may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will or the applicable laws of descent and distribution). Any such attempted sale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be void and the Company shall not be bound thereby. Further, any shares of Stock issued to the Holder in exchange for Performance Units awarded hereby may not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws. The Holder also agrees that the Company may (a) refuse to cause the transfer of any such shares to be registered on the applicable stock transfer records of the Company if such proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law; and (b) give related instructions to the transfer agent, if any, to stop registration of the transfer of such shares of Stock.

6. Capital Adjustments and Reorganizations; Acquisitions and Divestitures.  The existence of the Performance Units shall not affect in any way the right or power of the Company or any company the stock of which is awarded pursuant to this Agreement to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate act or proceeding. If, during the Performance Award Period, the Company or any of its subsidiaries acquire or dispose of, by any means including by asset or equity purchase or sale or by merger, any entity, business or material group of assets in a transaction reported by the Company under Item 2.01 on a Current Report on Form 8-K filed with the Securities and Exchange Commission, the Committee shall revise the threshold, target and maximum for the Performance Period of such acquisition or disposition and all subsequent Performance Periods as the Committee determines is necessary to properly adjust such amounts to reflect the results of such transaction.

7. Covenant Not To Compete; Solicit or Disclose Confidential Information.  

a. The Holder acknowledges that he or she is in possession of and has access to Confidential Information and that he or she will continue to have such possession and access during employment by the Company. The Holder also acknowledges that the Company’s business, products and services are highly specialized and that

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it is essential that they be protected, and, accordingly, the Holder agrees that as partial consideration for the Performance Units granted herein that should the Holder engage in any Detrimental Activity at any time during his or her employment or during a period of one (1) year following his or her termination of employment, the Company shall be entitled to: (i) recover from the Holder the value of any portion of the Performance Units that has been paid; (ii) seek injunctive relief against the Holder pursuant to the provisions of subsection (b) below; (iii) recover all damages, court costs, and attorneys’ fees incurred by the Company in enforcing the provisions of this Agreement; and (iv) set off any such sums to which the Company is entitled hereunder against any such sum which may be owed to the Holder by the Company.  All such rights of the Company shall be in addition to, and not in lieu of, any additional such rights the Company may have under any other non-competition, confidentiality, restrictive covenant, or other similar agreement with the Holder, all of which shall remain in effect and survive in accordance with their terms.

b. Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, the Holder agrees that the foregoing covenants may be enforced by the Company in the event of breach by him or her by injunction relief and restraining order, without the necessity of posting a bond, and that such enforcement shall not be the Company’s exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company.

c. The covenants and provisions of this Section 7 are severable and separate, and the unenforceability of any specific covenant or provision shall not affect the enforceability of any other covenant or provision. Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope or time set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the panel or court deems reasonable, and this Agreement shall thereby be reformed.

d. Each of the covenants in this Section 7 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Holder against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants or provisions.

e. The Holder shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (A) is made (x) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (y) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Should the Holder file a lawsuit for retaliation by an employer for reporting a suspected violation of law the Holder may disclose the trade secret to the Holder’s attorney and use the trade secret information in the court proceeding, if the Holder: (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).

8. Tax Withholding.  To the extent that the receipt of the Performance Units, any payment in cash or shares of Stock or the lapse of any Forfeiture Restrictions results in income to the Holder for federal, state or local income, employment or other tax purposes with respect to which the Company or any Affiliate has a withholding obligation, the Holder shall deliver to the Company at the time of such receipt, payment or lapse, as the case may be, such amount of money as the Company or any Affiliate may require to meet its obligation under applicable tax laws or regulations, and, if the Holder fails to do so, the Holder will be deemed to have elected for the Company to withhold the amount of shares necessary to cover applicable tax withholding.

9. No Fractional Shares.  All provisions of this Agreement concern whole shares. If the application of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.

10. Nontransferability.  This Agreement is not transferable by the Holder otherwise than by will or by the laws of descent and distribution.

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11. Employment Relationship.  For purposes of this Agreement, the Holder shall be considered to be in the employment of the Company and its Affiliates as long as the Holder has an employment relationship with the Company and its Affiliates. The Committee shall determine any questions as to whether and when there has been a termination of such employment relationship, and the cause of such termination and the Committee’s determination shall be final and binding on all persons.

12. Not an Employment Agreement.  This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create an employment relationship between the Holder and the Company or any Affiliate, to guarantee the right to remain employed by the Company or any Affiliate for any specified term or require the Company or any Affiliate to employ the Holder for any period of time.

13. Legend.  The Holder consents to the placing on the certificate for any shares of Stock issued under this Agreement in certificated form an appropriate legend restricting resale or other transfer of such shares except in accordance with all applicable securities laws and rules thereunder.

14. Notices.  Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be deemed to have been duly given when delivered or mailed to the Company or the Holder, as applicable, by (a) personal delivery; (b) United States registered mail, return receipt requested, postage prepaid, addressed to the Company at the then current address of the Company’s principal corporate office, or to the Holder at the Holder’s residential address indicated in the Company’s records; or (c) email to the Company at LegalDesk@rignet.com or to the Holder at the Holder’s email address indicated in the Company’s records.

15. Amendment and Waiver.  Except as otherwise provided herein, this Agreement may be amended, modified or superseded only by written instrument executed by the Company and the Holder. Only a written instrument executed and delivered by the party waiving compliance hereof shall make any waiver of the terms or conditions. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized executive officer of the Company other than the Holder. The failure of any party at any time or times to require performance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any other term or condition.

16. Disputes.  In the event of any difference of opinion concerning the meaning or effect of the this Agreement, such difference shall be resolved by the Committee. Any controversy arising out of or relating to this Agreement shall be resolved by the state and federal courts sitting in Harris County, Texas.

17. Governing Law and Severability.  The validity, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of any provision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.

18. Successors and Assigns.  Subject to the limitations which this Agreement imposes upon the transferability of the Performance Units granted hereby and any shares of Stock issued hereunder, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and its successors and assigns, and to the Holder, the Holder’s permitted assigns, executors, administrators, agents, legal and personal representatives.

19. Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be an original for all purposes but all of which taken together shall constitute but one and the same instrument.

20. Recoupment.  The Holder acknowledges and agrees that all payments made under this Agreement are subject to the Company’s clawback policy, as it may be amended from time to time (the “Policy”). If at any time after an amount is paid under this Agreement the financial results of the Company and/or its Affiliates are restated (other than a restatement caused by a change in applicable accounting rules or interpretations) and such restated financial results would have resulted in fewer shares of Stock being paid under this Agreement if such restated financial results had been taken into account originally in determining the vesting of the Performance Units then the vesting of the Performance Units shall be recalculated under the applicable provisions of this Agreement taking into

- 6 -

account such restated financial results and the Holder or, if the Holder has died, the Holder’s estate, will, to the extent required by governing law or regulations, as they may be amended from time to time, and/or the Policy, repay to the Company, upon demand by the Company, any shares of Stock delivered under this Agreement in excess of the number of shares that would have been delivered if the restated financial results had been taken into account originally in determining the vesting of the Performance Units.

21. Compliance with Section 409A. This Agreement is subject to, and intended to comply with, to the extent applicable, or to be exempt from the requirements of, Section 409A. This Agreement shall be administered in a manner that is intended to meet those requirements and shall be construed and interpreted in accordance with such intent. Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits provided under the Plan under Section 409A or otherwise is not warranted or guaranteed.  Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Holder (or any other individual claiming a benefit through the Holder) as a result of the Plan. Notwithstanding anything to the contrary in this Agreement, to the extent any payment or benefit provided under this Agreement and the Plan constitutes “nonqualified deferred compensation” for purposes of Section 409A, such payment or benefit shall not be made or provided until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Holder, and (B) the date of the Holder’s death, to the extent required under Section 409A.  For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment.  Any payments to be made under this Agreement upon a termination of employment shall be made upon a “separation from service” to the extent required under Section 409A.

- 7 -

IN WITNESS WHEREOF, the Holder and the Company agree and acknowledge that this grant of Performance Units is granted under and governed by the terms and conditions of the Plan and this Agreement.

Holder	RigNet, Inc.
By: /s/ ERROL OLIVIER	By:/s/ STEVEN E. PICKETT
Name: Errol Olivier	Name: Steven E. Pickett
	Title: Chief Executive Officer and President

- 8 -

EX-10.5

Exhibit 10.5

RESTRICTED STOCK UNIT AWARD AGREEMENT

This RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”) is made by and between RigNet, Inc. a Delaware corporation (the “Company”),and Errol Olivier (the “Holder”)effective as of January 8, 2020 (the “Grant Date”).  The Company hereby grants to the Holder the 18,787 Restricted Stock Units specified herein (the “RSUs”):

Vesting Schedule The RSUs that are granted hereby shall be subject to the Forfeiture Restrictions during the Period of Restriction. The Forfeiture Restrictions shall lapse as to the RSUs that are awarded hereby in accordance with the following schedule, provided that the Holder’s employment with the Company and its Affiliates has not terminated prior to the applicable lapse date:

1/3 of the shares shall vest and the forfeiture restrictions shall lapse on each of the first, second and third anniversary of the Grant Date.

1. Definitions.For purposes of this Agreement, the following terms shall have the meanings indicated below:

a. “Affiliate” means any corporation, partnership, limited liability company or association, trust or other entity or organization which, directly or indirectly, controls, is controlled by, or is under common control with, the Company.  For purposes of the preceding sentence, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any entity or organization, shall mean the possession, directly or indirectly, of the power (a) to vote more than fifty percent (50%) of the securities having ordinary voting power for the election of directors or comparable individuals of the controlled entity or organization, or (b) to direct or cause the direction of the management and policies of the controlled entity or organization, whether through the ownership of voting securities or by contract or otherwise.

b. “Cause” is defined as any of the following: (i) the Holder’s plea of guilty or nolo contendere, or conviction of a felony or a misdemeanor involving moral turpitude; (ii) any act by the Holder of fraud or dishonesty with respect to any aspect of the Company’s business including, but not limited to, falsification of Company records; (iii) the Holder’s failure to perform his or her duties (other than by reason of Disability); (iv) the Holder’s engagement in misconduct that is materially injurious to the Company (monetarily or otherwise); (v) the Holder’s breach of any confidentiality, noncompetition or non-solicitation obligations to the Company, including but not limited to engagement in Detrimental Activity; (vi) the Holder’s commencement of employment with an unrelated employer; (vii) material violation by the Holder of any of the Company’s written policies, including but not limited to any harassment and/or non-discrimination policies; or (viii) the Holder’s gross negligence in the performance of his or her duties.

c. “Change in Control” means (i) a change in ownership occurring as the result of a person or group acquiring Stock of the Company, which, when combined with the Stock held by such person or group, constitutes more than seventy-five percent (75%) of the total fair market value or total voting power of the Company; provided the person or group was not considered as owning more than seventy-five percent (75%) of the value or voting power prior to the acquisition; (ii) a change in effective control of the Company occurring as the result of the replacement of a majority of the members of the Board by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election; or (iii) a change in the ownership of a substantial portion of the assets of the Company occurring as the result of a person or group acquiring assets from the Company that have a total gross fair market value equal to or more than seventy-five percent (75%) of the total gross fair market value of all the assets of the Company immediately prior to such acquisition.  The determination of whether a Change of Control has occurred will be made in accordance with Code Section 409A and the regulations thereunder.

d. “Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

e. “Confidential Information” means material of a secret or confidential nature relating to the business, products, or services of the Company or any Affiliate acquired by the Holder during employment with the Company or any Affiliate. “Confidential Information” excludes any information readily available to members of the general public.

f. “Detrimental Activity” shall include, unless otherwise modified by the Company in connection with a Change in Control: (i) rendering services for any person or organization, or engaging directly or indirectly in any business, which is or becomes competitive with the Company or any Affiliate; (ii) disclosing to anyone outside the Company or any Affiliate, other than the Company’s or any Affiliate’s business, without prior written authorization from the Company or any Affiliate, any Confidential Information; (iii) soliciting, interfering, inducing, or attempting to cause any employee of the Company or any Affiliate to leave his or her employment, whether done on the Holder’s own account or on account of any person, organization, or business which is or becomes competitive with the Company or any Affiliate; or (iv) directly or indirectly soliciting the trade or business of any customer of the Company or any Affiliate.  

g. “Disability” or “Disabled” means a determination by the Company’s long‑term disability carrier that a Holder is disabled in accordance with the Company’s long‑term disability insurance plan (or, in the case of a non-U.S. Holder, in accordance with a comparable disability plan), provided the definition of disability applied under such plan complies with the requirements of Treas. Reg. Section 1.409A-3(i)(4), or, in the case of a Holder who is not covered under such plan, a determination made by the Social Security Administration (or, in the case of a non-U.S. Holder, a determination made by a comparable governmental entity) that the Holder is totally disabled.

h. “Forfeiture Restrictions”shall mean the prohibitions and restrictions set forth herein with respect to the sale or other disposition of the RSUs issued to the Holder hereunder and the obligation to forfeit and surrender such RSUs to the Company.

i. “Good Reason” means the occurrence of any of the following without the Holder’s prior written consent: (i) a material adverse change in the Holder’s position, authority, duties or responsibilities, excluding a change in reporting relationships; (ii) a material reduction in the Holder’s base salary; (iii) a material diminution of the Holder’s employee benefits (including but not limited to medical, dental, life insurance and long-term disability plans); (iv) the relocation of the Holder’s principal place of employment by more than 50 miles from such location as of the Grant Date; ; or (v) should Steven Pickett no longer serve as the Company’s Chief Executive Officer for any reason.  Notwithstanding the foregoing, a “Good Reason” shall not exist unless the Holder notifies the Company of the existence of the condition described in this Section 1(i) within ninety (90) days of the initial existence of the condition and the Company does not remedy the condition within thirty (30) days following receipt of such notice.

j. “Period of Restriction”shall mean the period during which RSUs are subject to Forfeiture Restrictions.

k. “Retirement” shall mean the Holder’s voluntary election to retire from employment with the Company or any Affiliate at any time after you have reached both the age of 60 and 5 years of service.

l. “Stock” means the common stock of the Company, $0.001 par value per share (or such other par value as may be designated by act of the Company’s stockholders).

Capitalized terms not otherwise defined in this Agreement shall have the meanings given to such terms in the Plan.

2. Transfer Restrictions. The RSUs granted hereby may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of. Any such attempted sale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be void and the Company shall not be bound thereby. Further, any shares of the Stock granted hereby upon vesting of the RSUs (the “Shares”) may not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable securities laws. The Holder also agrees that the Company may (a) refuse to cause the transfer of the Shares to be registered on the applicable stock transfer records of the Company if such proposed transfer would,

- 2 -

in the opinion of counsel satisfactory to the Company, constitute a violation of any applicable securities law; and (b) give related instructions to the transfer agent, if any, to stop registration of the transfer of the Shares.

3. Vesting.

a. Forfeiture. If the Holder ceases to be employed by the Company or an Affiliate for any reason before the applicable lapse date, other than in accordance with subsections (b) and (c) below, the Forfeiture Restrictions then applicable to the RSUs shall not lapse and all the RSUs then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder ceases to be employed by the Company or an Affiliate. If the Holder breaches, before the applicable lapse date, any non-competition, confidentiality, restrictive covenant or other similar agreement with the Company to which the Holder is subject, the Forfeiture Restrictions then applicable to the RSUs shall not lapse and all the RSUs then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date the Holder breaches such agreement or covenant.

b. Death, Retirement or Disability. If the Holder’s employment terminates due to death, Retirement or Disability, all unvested RSUs shall automatically become 100% vested on the Holder’s date of termination.

c. Change in Control. If a Change in Control occurs and the Holder’s employment is terminated by the Company or an Affiliate without Cause or by the Holder for Good Reason, and the Holder’s date of termination occurs within twelve (12) months following the Change in Control, all unvested RSUs shall automatically become 100% vested on the Holder’s date of termination.

4. RSUs Do Not Award Any Rights of a Shareholder.  The Holder shall not have the voting rights or any of the other rights, powers or privileges of a holder of Stock with respect to the RSUs that are awarded hereby. Only after a share is issued in exchange for an RSU will the Holder have all of the rights of a shareholder with respect to such share of Stock issued in exchange for an RSU.

5. Delivery of Shares. Upon the lapse of the Forfeiture Restrictions with respect to the RSUs granted hereby, the Company shall cause to be delivered to the Holder the Shares evidenced by stock certificates representing the Shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company, and such Shares shall be transferable by the Holder.

6. Capital Adjustments and Reorganizations. The existence of the RSUs shall not affect in any way the right or power of the Company or any company the stock of which is awarded pursuant to this Agreement to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate act or proceeding.

7. Covenant Not To Compete; Solicit or Disclose Confidential Information.  

a. The Holder acknowledges that he or she is in possession of and has access to Confidential Information and that he or she will continue to have such possession and access during employment by the Company. The Holder also acknowledges that the Company’s business, products and services are highly specialized and that it is essential that they be protected, and, accordingly, the Holder agrees that as partial consideration for the RSUs granted herein that should the Holder engage in any Detrimental Activity at any time during his or her employment or during a period of one year following his or her termination, the Company shall be entitled to: (i) recover from the Holder the value of any portion of the RSUs that has been paid; (ii) seek injunctive relief against the Holder pursuant to the provisions of subsection (b) below; (iii) recover all damages, court costs, and attorneys’ fees incurred by the Company in enforcing the provisions of this Agreement; and (iv) set off any such sums to which the Company is entitled hereunder against any such sum which may be owed to the Holder by the Company.

b. Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, the Holder agrees that the foregoing covenants

- 3 -

may be enforced by the Company in the event of breach by him or her by injunction relief and restraining order, without the necessity of posting a bond, and that such enforcement shall not be the Company’s exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company.

c. The covenants and provisions of this Section 7 are severable and separate, and the unenforceability of any specific covenant or provision shall not affect the enforceability of any other covenant or provision. Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope or time set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the panel or court deems reasonable, and this Agreement shall thereby be reformed.

d. Each of the covenants in this Section 7 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of the Holder against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants or provisions.

8. Tax Withholding. To the extent that the receipt of the RSUs or the lapse of any Forfeiture Restrictions results in income to the Holder for federal, state or local income, employment or other tax purposes with respect to which the Company or any Affiliate has a withholding obligation, the Holder shall deliver to the Company at the time of such receipt or lapse, as the case may be, such amount of money as the Company or any Affiliate may require to meet its obligation under applicable tax laws or regulations, and, if the Holder fails to do so, the Company is authorized to withhold from the Shares granted hereby or from any cash or stock remuneration then or thereafter payable to the Holder in any capacity any tax required to be withheld by reason of such resulting income.

9. No Fractional Shares. All provisions of this Agreement concern whole shares. If the application of any provision hereunder would yield a fractional share, such fractional share shall be rounded down to the next whole share if it is less than 0.5 and rounded up to the next whole share if it is 0.5 or more.

10. Nontransferability. This Agreement is not transferable by the Holder otherwise than by will or by the laws of descent and distribution.

11. Employment Relationship. For purposes of this Agreement, the Holder shall be considered to be in the employment of the Company and its Affiliates as long as the Holder has an employment relationship with the Company and its Affiliates. The Compensation Committee of the Company’s Board of Directors (the “Committee”) shall determine any questions as to whether and when there has been a termination of such employment relationship, and the cause of such termination, and the Committee’s determination shall be final and binding on all persons.

12. Not an Employment Agreement. This Agreement is not an employment agreement, and no provision of this Agreement shall be construed or interpreted to create an employment relationship between the Holder and the Company or any Affiliate, to guarantee the right to remain employed by the Company or any Affiliate for any specified term or require the Company or any Affiliate to employ the Holder for any period of time.

13. Legend. The Holder consents to the placing on the certificate for the Shares an appropriate legend restricting resale or other transfer of the Shares except in accordance with all applicable securities laws and rules thereunder.

14. Notices.Any notice, instruction, authorization, request or demand required hereunder shall be in writing, and shall be deemed to have been duly given when delivered or mailed to the Company or the Holder, as applicable, by (a) personal delivery; (b) United States registered mail, return receipt requested, postage prepaid, addressed to the Company at the then current address of the Company’s principal corporate office, or to the Holder at the Holder’s residential address indicated in the Company’s records; or (c) email to the Company at legaldesk@rig.net or to the Holder at the Holder’s email address indicated in the Company’s records.

15. Amendment and Waiver. Except as otherwise provided herein, this Agreement may be amended, modified or superseded only by written instrument executed by the Company and the Holder. Only a written instrument executed and delivered by the party waiving compliance hereof shall make any waiver of the terms or conditions. Any waiver granted by the Company shall be effective only if executed and delivered by a duly authorized

- 4 -

executive officer of the Company other than the Holder. The failure of any party at any time or times to require performance of any provisions hereof shall in no manner effect the right to enforce the same. No waiver by any party of any term or condition, or the breach of any term or condition contained in this Agreement, in one or more instances, shall be construed as a continuing waiver of any such condition or breach, a waiver of any other condition, or the breach of any other term or condition.

16. Arbitration.  In the event of any difference of opinion concerning the meaning or effect of the Plan or this Agreement, such difference shall be resolved by the Committee. Any controversy arising out of or relating to this Agreement shall be resolved by arbitration conducted in Houston, Texas pursuant to the arbitration rules of the American Arbitration Association. The arbitration shall be final and binding on the parties.

17. Governing Law and Severability. The validity, construction and performance of this Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. The invalidity of any provision of this Agreement shall not affect any other provision of this Agreement, which shall remain in full force and effect.

18. Successors and Assigns. Subject to the limitations which this Agreement imposes upon the transferability of the RSUs granted hereby, this Agreement shall bind, be enforceable by and inure to the benefit of the Company and its successors and assigns, and to the Holder, the Holder’s permitted assigns, executors, administrators, agents, legal and personal representatives.

19. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original for all purposes but all of which taken together shall constitute one and the same instrument.

20. Recoupment. If the Holder is subject to the Company’s clawback policy (the “Policy”), the Holder agrees that the RSUs are subject to the terms of the Policy, as may be amended from time to time.

21. Compliance with Section 409A.  It is the Company’s intent that this Agreement be exempt from the application of, or otherwise comply with, the requirements of Section 409A.  Specifically, any taxable benefits or payments provided under this Agreement are intended to qualify for the short term deferral exception to Section 409A to the maximum extent possible. Although the Company will use its best efforts to avoid the imposition of taxation, interest and penalties under Section 409A, the tax treatment of the benefits provided is not warranted or guaranteed.  Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by the Holder (or any other individual claiming a benefit through the Holder).

[signature page follows]

- 5 -

IN WITNESS WHEREOF, the Holder and the Company agree and acknowledge that this grant of Restricted Stock Units is granted under and governed by the terms and conditions of this Agreement.

Holder	RigNet, Inc.
By: /s/ ERROL OLIVIER	By:/s/ STEVEN E. PICKETT
Name: Errol Olivier	Name: Steven E. Pickett
	Title: Chief Executive Officer and President

- 6 -

EX-31.1

Exhibit 31.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF RIGNET, INC.

PURSUANT TO 15 U.S.C. SECTION 7241, AS ADOPTED

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Steven E. Pickett, certify that:

a. I have reviewed this Quarterly Report on Form 10-Q of RigNet, Inc. (the “Registrant”);

b. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

c. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

d. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

e. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 6, 2020	By:	/s/ STEVEN E. PICKETT
		Steven E. Pickett
		Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF RIGNET, INC.

PURSUANT TO 15 U.S.C. SECTION 7241, AS ADOPTED

PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Lee Ahlstrom, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of RigNet, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s Board of Directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: November 6, 2020	/s/ LEE AHLSTROM
	Lee Ahlstrom
	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

OF RIGNET, INC.

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the period ended September 30, 2020 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven E. Pickett, Chief Executive Officer of RigNet, Inc. (the “Company”), hereby certify, to my knowledge, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2020	/s/ STEVEN E. PICKETT
	Steven E. Pickett
	Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

OF RIGNET, INC.

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report on Form 10-Q for the period ended September 30, 2020 filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lee Ahlstrom, Chief Financial Officer, of RigNet, Inc. (the “Company”), hereby certify, to my knowledge, that:

1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2020	/s/ LEE AHLSTROM
	Lee Ahlstrom
	Chief Financial Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Oct. 31, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Trading Symbol	RNET
Entity Registrant Name	RigNet, Inc.
Entity Central Index Key	0001162112
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Interactive Data Current	Yes
Security Exchange Name	NASDAQ
Title of 12(b) Security	Common Stock, $0.001 par value per share
Entity Common Stock, Shares Outstanding		20,559,781
Entity File Number	001-35003
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	76-0677208
Entity Address, Address Line One	15115 Park Row Blvd
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77084-4947
City Area Code	281
Local Phone Number	674-0100
Document Quarterly Report	true
Document Transition Report	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 16,887	$ 12,941
Restricted cash	1,500	42
Accounts receivable, net	58,583	67,059
Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB)	14,421	13,275
Prepaid expenses and other current assets	5,141	6,500
Total current assets	96,532	99,817
Property, plant and equipment, net	51,005	60,118
Restricted cash		1,522
Goodwill	19,982	46,792
Intangibles, net	20,392	30,145
Right-of-use lease asset	6,193	6,829
Deferred tax and other assets	5,378	5,757
TOTAL ASSETS	199,482	250,980
Current liabilities:
Accounts payable	21,226	28,517
Accrued expenses	16,828	16,660
Current maturities of long-term debt	8,836	10,793
Income taxes payable	1,223	2,649
GX dispute accrual		750
Deferred revenue and other current liabilities	19,121	11,173
Total current liabilities	67,234	70,542
Long-term debt	100,241	96,934
Deferred revenue	767	855
Deferred tax liability	1,989	2,672
Right-of-use lease liability - long-term portion	5,764	6,329
Other liabilities	16,304	26,771
Total liabilities	192,299	204,103
Commitments and contingencies (Note 10)
Stockholders' equity
Preferred stock - $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding at September 30, 2020 and December 31, 2019
Common stock - $0.001 par value; 190,000,000 shares authorized; 20,556,408 and 19,979,284 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively	21	20
Treasury stock - 448,586 and 203,756 shares at September 30, 2020 and December 31, 2019, respectively, at cost	(3,285)	(2,693)
Additional paid-in capital	189,753	184,571
Accumulated deficit	(152,373)	(115,673)
Accumulated other comprehensive loss	(27,011)	(19,502)
Total stockholders' equity	7,105	46,723
Non-redeemable, non-controlling interest	78	154
Total equity	7,183	46,877
TOTAL LIABILITIES AND EQUITY	$ 199,482	$ 250,980

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Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	190,000,000	190,000,000
Common stock, shares issued	20,556,408	19,979,284
Common stock, shares outstanding	20,556,408	19,979,284
Treasury stock, shares	448,586	203,756

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Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Statement [Abstract]
Revenue	$ 48,722	$ 60,993	$ 160,874	$ 178,835
Expenses:
Cost of revenue (excluding depreciation and amortization)	29,995	35,662	101,632	108,637
Depreciation and amortization	6,375	7,172	20,219	23,763
Impairment of goodwill and intangible assets	3,836		26,977
Change in fair value of earn-out/contingent consideration			3,916	1,284
Selling and marketing	2,262	2,784	7,281	9,529
General and administrative	9,295	12,377	32,577	43,305
Total expenses	51,763	57,995	192,602	186,518
Operating income (loss)	(3,041)	2,998	(31,728)	(7,683)
Other expense:
Interest expense	(1,315)	(1,784)	(4,168)	(4,291)
Other income (expense), net	(416)	(486)	(750)	(507)
Income (loss) before income taxes	(4,772)	728	(36,646)	(12,481)
Income tax (expense) benefit	(695)	(998)	156	(5,868)
Net loss	(5,467)	(270)	(36,490)	(18,349)
Less: Net loss attributable to non-redeemable, non-controlling interest	70	224	210	284
Net loss attributable to RigNet, Inc. stockholders	(5,537)	(494)	(36,700)	(18,633)
COMPREHENSIVE LOSS
Net loss	(5,467)	(270)	(36,490)	(18,349)
Foreign currency translation	39	(2,913)	(7,509)	(2,577)
Comprehensive loss	(5,428)	(3,183)	(43,999)	(20,926)
Less: Comprehensive income attributable to non-controlling interest	70	224	210	284
Comprehensive loss attributable to RigNet, Inc. stockholders	(5,498)	(3,407)	(44,209)	(21,210)
LOSS PER SHARE - BASIC AND DILUTED
Net loss attributable to RigNet, Inc. common stockholders	$ (5,537)	$ (494)	$ (36,700)	$ (18,633)
Net loss per share attributable to RigNet, Inc. common stockholders, basic	$ (0.25)	$ (0.02)	$ (1.69)	$ (0.94)
Net loss per share attributable to RigNet, Inc. common stockholders, diluted	$ (0.25)	$ (0.02)	$ (1.69)	$ (0.94)
Weighted average shares outstanding, basic	22,573	19,970	21,776	19,777
Weighted average shares outstanding, diluted	22,573	19,970	21,776	19,777

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities:
Net loss	$ (36,490)	$ (18,349)
Adjustments to reconcile net loss to net cash provided by operations:
Depreciation and amortization	20,219	23,763
Impairment of goodwill and intangible assets	26,977
Stock-based compensation	5,188	7,132
Amortization of deferred financing costs	284	252
Deferred taxes	(595)	4,902
Change in fair value of earn-out/contingent consideration	3,916	1,284
Accretion of discount of contingent consideration payable for acquisitions	468	262
(Gain) loss on sales of property, plant and equipment, net of retirements	195	19
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net	7,501	4,995
Costs and estimated earnings in excess of billings on uncompleted contracts (CIEB)	(243)	(4,536)
Prepaid expenses and other assets	1,472	128
Right-of-use lease asset	636	1,214
Accounts payable	(4,366)	5,355
Accrued expenses	(225)	36
GX Dispute payment	(750)	(50,000)
Deferred revenue	(1,257)	1,635
Right-of-use lease liability	(827)	(1,593)
Other liabilities	(3,383)	(2,444)
Net cash provided by (used in) operating activities	18,720	(25,945)
Cash flows from investing activities:
Capital expenditures	(10,698)	(16,776)
Proceeds from sales of property, plant and equipment	27	300
Net cash used in investing activities	(10,671)	(16,476)
Cash flows from financing activities:
Issuance of common stock upon the exercise of stock options and the vesting of restricted stock	1	4
Stock withheld to cover employee taxes on stock-based compensation	(598)	(1,412)
Subsidiary distributions to non-controlling interest	(286)	(275)
Proceeds from borrowings	15,550	48,500
Proceeds from Paycheck Protection Program Loan	6,298
Repayments of long-term debt	(23,163)	(11,413)
Payment of financing fees	(485)	(486)
Net cash provided by (used in) financing activities	(2,683)	34,918
Net change in cash and cash equivalents	5,366	(7,503)
Cash and cash equivalents including restricted cash:
Cash and cash equivalents including restricted cash	14,505	23,296
Changes in foreign currency translation	(1,484)	35
Cash and cash equivalents including restricted cash	18,387	15,828
Supplemental disclosures:
Income taxes paid	3,698	3,881
Interest paid	3,349	3,645
Property, plant and equipment acquired under finance leases		556
Non-cash investing - capital expenditures accrued	566	2,873
Non-cash investing and financing - issuance of common stock for the Intelie earn-out		3,000
Right-of-use operating lease entered into	582	539
Cash and cash equivalents	16,887	14,267
Restricted cash - current portion	1,500	39
Restricted cash - long-term portion		1,522
Cash and cash equivalents including restricted cash	$ 18,387	$ 15,828

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Condensed Consolidated Statements of Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total Stockholders' Equity [Member]	Non-Redeemable, Non-Controlling Interest [Member]
Beginning Balance at Dec. 31, 2018	$ 55,984	$ 19	$ (1,270)	$ 172,946	$ (96,517)	$ (19,254)	$ 55,924	$ 60
Beginning Balance, shares at Dec. 31, 2018		19,465,000	92,000
Issuance of common stock upon the exercise of stock options	3			3			3
Issuance of common stock upon the exercise of stock options, shares		1,000
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations	1	$ 1					1
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares		296,000
Issuance of common stock for the Intelie earn-out	3,000			3,000			3,000
Issuance of common stock for the Intelie earn-out, shares		208,000
Stock withheld to cover employee taxes on stock-based compensation	(1,412)		$ (1,412)				(1,412)
Stock withheld to cover employee taxes on stock-based compensation, shares			110,000
Stock-based compensation	7,132			7,132			7,132
Foreign currency translation	(2,577)					(2,577)	(2,577)
Non-controlling owner distributions	(275)							(275)
Net income (loss)	(18,349)				(18,633)		(18,633)	284
Ending Balance at Sep. 30, 2019	43,507	$ 20	$ (2,682)	183,081	(115,150)	(21,831)	43,438	69
Ending Balance, shares at Sep. 30, 2019		19,970,000	202,000
Beginning Balance at Jun. 30, 2019	45,332	$ 20	$ (2,676)	181,577	(114,656)	(18,918)	45,347	(15)
Beginning Balance, shares at Jun. 30, 2019		19,969,000	201,000
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares		1,000
Stock withheld to cover employee taxes on stock-based compensation	(6)		$ (6)				(6)
Stock withheld to cover employee taxes on stock-based compensation, shares			1,000
Stock-based compensation	1,504			1,504			1,504
Foreign currency translation	(2,913)					(2,913)	(2,913)
Non-controlling owner distributions	(140)							(140)
Net income (loss)	(270)				(494)		(494)	224
Ending Balance at Sep. 30, 2019	43,507	$ 20	$ (2,682)	183,081	(115,150)	(21,831)	43,438	69
Ending Balance, shares at Sep. 30, 2019		19,970,000	202,000
Beginning Balance at Dec. 31, 2019	$ 46,877	$ 20	$ (2,693)	184,571	(115,673)	(19,502)	46,723	154
Beginning Balance, shares at Dec. 31, 2019	19,979,284	19,979,000	204,000
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations	$ 1	$ 1					1
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares		577,000
Stock withheld to cover employee taxes on stock-based compensation	(598)		$ (592)	(6)			(598)
Stock withheld to cover employee taxes on stock-based compensation, shares			245,000
Stock-based compensation	5,188			5,188			5,188
Foreign currency translation	(7,509)					(7,509)	(7,509)
Non-controlling owner distributions	(286)							(286)
Net income (loss)	(36,490)				(36,700)		(36,700)	210
Ending Balance at Sep. 30, 2020	$ 7,183	$ 21	$ (3,285)	189,753	(152,373)	(27,011)	7,105	78
Ending Balance, shares at Sep. 30, 2020	20,556,408	20,556,000	449,000
Beginning Balance at Jun. 30, 2020	$ 12,244	$ 21	$ (3,281)	189,251	(146,836)	(27,050)	12,105	139
Beginning Balance, shares at Jun. 30, 2020		20,551,000	446,000
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares		5,000
Stock withheld to cover employee taxes on stock-based compensation	(4)		$ (4)				(4)
Stock withheld to cover employee taxes on stock-based compensation, shares			3,000
Stock-based compensation	502			502			502
Foreign currency translation	39					39	39
Non-controlling owner distributions	(131)							(131)
Net income (loss)	(5,467)				(5,537)		(5,537)	70
Ending Balance at Sep. 30, 2020	$ 7,183	$ 21	$ (3,285)	$ 189,753	$ (152,373)	$ (27,011)	$ 7,105	$ 78
Ending Balance, shares at Sep. 30, 2020	20,556,408	20,556,000	449,000

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Basis of Presentation

9 Months Ended

Sep. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Basis of Presentation

Note 1 – Basis of Presentation

The interim unaudited condensed consolidated financial statements of RigNet, Inc. (the Company or RigNet) include all adjustments which, in the opinion of management, are necessary for a fair presentation of the Company’s financial position and results of operations. All such adjustments are of a normal recurring nature. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and Rule 10-01 of Regulation S-X. The preparation of these financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying footnotes. Estimates and assumptions about future events and their effects cannot be perceived with certainty. Estimates may change as new events occur, as more experience is acquired, as additional information becomes available and as the Company’s operating environment changes. Actual results could differ from estimates. These interim financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2020.

Significant Accounting Policies

In addition to the accounting policies described below, please refer to RigNet’s Annual Report on Form 10-K for the fiscal year 2019 for information regarding the Company’s accounting policies.

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 the Company expects to be entitled in exchange for those goods or services.

Revenue Recognition – Managed Communications Services (MCS) and Applications and Internet-of-Things (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. 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). With certain customers, our contracts require that the contract backlog on stack rigs be transferred to other units, preserving the total contract value.

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 the Company expects to be entitled to the agreed monthly, usage or day 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 Systems Integration contracts for customized network solutions are recognized based on the cost to cost (formerly known as 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.

Performance Obligations Satisfied Over Time — The delivery of a Systems Integration solution represents the single performance obligation under Systems Integration 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.

The Company reviews all material contracts on a monthly basis and revises 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 the 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).

Systems Integration contracts are billed in accordance with the terms of the contract which are typically either based on milestones or specified time intervals. As of September 30, 2020, and December 31, 2019, the amount of CIEB related to Systems Integration projects was $14.4 million and $13.3 million, respectively. Under long-term contracts, amounts recorded in CIEB may not be realized or paid within a one-year period. As of September 30, 2020 and December 31, 2019, $0.6 million and $1.0 million, respectively, of amounts billed to customers in excess of revenue recognized to date were classified as a current liability, under deferred revenue and other current liabilities.  

Variable Consideration – Systems Integration - The Company records 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 the Company’s Condensed Consolidated Balance Sheets as part of CIEB. No material unapproved change orders or claims revenue were included in CIEB as of September 30, 2020, and December 31, 2019. As new facts become known, an adjustment to the estimated recovery is made and reflected in the current period.

Backlog - As of September 30, 2020, we have a backlog for our cost to cost projects of $12.4 million, which will be recognized over the remaining contract term for each contract. The cost to cost contract terms are typically one to three years. As of December 31, 2019, we had a backlog for our cost to cost projects of $26.2 million.

Leases

Effective with adoption of Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (the new lease standard) on January 1, 2019, we now determine if an arrangement is a lease at inception. Operating leases right-of-use assets and liabilities are included in right-to-use lease asset, deferred revenue and other current liabilities, and right-to-use lease liability – long-term portion on our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment; current maturities of long-term debt; and long-term debt on our condensed consolidated balance sheets.  

Operating lease right-to-use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13), which measures credit losses on most financial assets and certain other instruments that are not measured at fair value through net income. The update amends the impairment model to utilize a current expected credit loss (CECL) methodology in place of the incurred loss methodology for financial instruments, including trade receivables. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Companies applied this standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019. The

Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issues ASU No. 2017-04 (ASU 2017-04), which removes the requirement to compare the implied fair value of the goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The ASU is effective for impairments tests in annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.  

In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), which eliminates disclosures, modifies existing disclosures and adds new Fair Value disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15 (ASU 2018-15), which provides guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU  2019-12), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.  This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. We will be required to adopt the amended guidance in annual and interim periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment.  We are in the process of evaluating the impact this amendment will have on our consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU  2020-04), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting or recognizing the effects of the LIBOR or another reference rate reform on financing rate. The amendments are effective through December 31, 2022.  We are currently in the process of evaluating the impact of the transition from LIBOR to alternative reference rates, but we do not expect a material impact on our consolidated financial statements.

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Business and Credit Concentrations

9 Months Ended

Sep. 30, 2020

Risks And Uncertainties [Abstract]

Business and Credit Concentrations

Note 2 – Business and Credit Concentrations

The Company is exposed to various business and credit risks including interest rate, foreign currency, credit and liquidity risks.

Interest Rate Risk

The Company has significant interest-bearing liabilities at variable interest rates which generally price monthly. The Company’s variable borrowing rates are presently tied to LIBOR resulting in interest rate risk (see Note 5 – Long-Term Debt). The Company presently does not use financial instruments to hedge interest rate risk, but evaluates this on a regular basis and may utilize financial instruments in the future if deemed necessary.

Foreign Currency Risk

The Company has exposure to foreign currency risk, as a portion of the Company’s activities are conducted in currencies other than U.S. dollars. Currently, the Norwegian Kroner, the British Pound Sterling and the Brazilian Real are the currencies that could materially impact the Company’s financial position and results of operations. The Company presently does not hedge these risks, but evaluates financial risk on a regular basis and may utilize

financial instruments in the future if deemed necessary. Foreign currency translations are reported as accumulated other comprehensive income (loss) in the Company’s condensed consolidated financial statements.

Credit and Customer Concentration Risk

Credit risk, with respect to accounts receivable, is due to customers being concentrated in the oil and gas, maritime, pipeline, engineering and construction industries. The Company mitigates the risk of financial loss from defaults through defined collection terms in each contract or service agreement and periodic evaluations of the collectability of accounts receivable. The Company provides an allowance for credit losses, which is adjusted based on historical experience, current economic conditions, and reasonable assumptions. Although no single customer comprised over 10% of our revenue for the nine months ended September 30, 2020, our top 5 customers generated 30.1% of the Company’s revenue for the nine months ended September 30, 2020.

Liquidity Risk

The Company maintains cash and cash equivalent balances with major financial institutions which, at times, exceed federally insured limits. The Company monitors the financial condition of the financial institutions and has not experienced losses associated with these accounts during 2020 or 2019. Liquidity risk is managed by continuously monitoring forecasted and actual cash flows and by matching the maturity profiles of financial assets and liabilities (see Note 5 – Long-Term Debt).

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Goodwill and Intangibles

9 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangibles

Note 3 – Goodwill and Intangibles

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 with additional evaluations being performed when events or circumstances indicate that the carrying value of these assets may not be recoverable.

The Company performs its annual impairment test as of July 31^st of each year. The oil and gas industry experienced an unprecedented disruption during the nine months ended September 30, 2020 as a result of a combination of factors, including COVID-19 pandemic and disagreements between the members of OPEC in March 2020 regarding reduction on production of oil. These market conditions significantly impacted the Company’s internal forecast. As a result, the Company performed an interim goodwill impairment test in the first quarter 2020. The Company used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using the Company’s discount rate. Some of the significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected the assumptions used in the discounted cash flow projections using historical information with supplemental data by current and anticipated market conditions and estimated growth rates. The Company's estimates are based upon assumptions believed to be reasonable. The Company determined that the carrying amount in two of our reporting units was in excess of their fair value which resulted in a goodwill impairment charge of $23.1 million during the first quarter 2020. The charge fully impairs goodwill previously reported in MCS of $21.8 million and Systems Integration of $1.4 million during the nine months ended September 30, 2020.

In connection with the July 31, 2020 impairment test for Apps & IoT, the most recent annual test performed prior to September 30, 2020, the fair value of the Apps & IoT was in excess of its carrying value and no impairment was noted. Apps & IoT had $20.0 million of goodwill as of  September 30, 2020, and fair value exceeded carrying value by over 100% as of the July 31, 2020 annual impairment test. The Company used the income approach to estimate the fair value of its reporting units, but also considered the market approach to validate the results. The income approach estimates the fair value by discounting each reporting unit’s estimated future cash flows using the Company’s discount rate. Some of the significant assumptions inherent in the income approach include the estimated future net annual cash flows for each reporting unit and the discount rate. The Company selected the assumptions used in the discounted cash flow projections using historical information with supplemental data by current and anticipated market conditions and estimated growth rates. The Company's estimates are based upon assumptions believed to be reasonable. However, given the inherent uncertainty in determining the assumptions underlying a discounted cash flow analysis, particularly in the current volatile market, actual results may differ from

those used in the Company's valuations. Any future downturn in our business could adversely impact the key assumptions in our impairment test.

As of September 30, 2020, and December 31, 2019, goodwill was $20.0 million and $46.8 million, respectively. Goodwill increases or decreases in value due to the effect of foreign currency translation, increases with acquisitions, and decreases in the event an impairment is recognized.

Intangibles

Intangibles consist of customer relationships, brand name, backlog, developed technology, covenants-not-to-compete and licenses acquired as part of the Company’s acquisitions. Intangibles also include internal-use software. The Company’s intangibles have useful lives ranging from 5.0 to 20.0 years and are amortized on a straight-line basis. Impairment testing is performed when events or circumstances indicate that the carrying value of the assets may not be recoverable.

The Company reviews its finite-lived assets and certain other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company identified a triggering event in the Apps & IoT segment associated with Cyphre as a result of market conditions. This circumstance resulted in a reduction in the Company’s cash flow projection during a revision of the internal forecast. The Company performed a recoverability analysis and determined the carrying value of the intangibles acquired with the Cyphre acquisition, which included trade name, customer relationship and developed technology, was in excess of its recoverable value and recognized an impairment of $3.8 million.

As of September 30, 2020, and December 31, 2019, intangibles were $20.4 million and $30.1 million, respectively. During the three months ended September 30, 2020 and 2019, the Company recognized amortization expense of $1.5 million and $2.0 million, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized amortization expense of $5.5 million and $6.9 million, respectively

The following table sets forth expected amortization expense of intangibles for the remainder of 2020 and the following years (in thousands):

2020		1,336
2021		5,181
2022		4,772
2023		4,173
2024		3,277
2025		861
Thereafter		792
	$	20,392

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Restricted Cash

9 Months Ended

Sep. 30, 2020

Cash And Cash Equivalents [Abstract]

Restricted Cash

As of September 30, 2020, the Company had restricted cash of $1.5 million in current assets and none in long-term assets. As of December 31, 2019, the Company had restricted cash of $0.1 million in current assets and $1.5 million in long-term assets. The restricted cash in long-term assets was primarily used to collateralize a performance bond in the MCS segment (see Note 5 – Long-Term Debt).

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Long-Term Debt

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Long-Term Debt

Note 5 – Long-Term Debt

As of September 30, 2020, and December 31, 2019, the following credit facilities and long-term debt arrangements with financial institutions were in place:

	September 30,			December 31,
		2020			2019
	(in thousands)
Term Loan	$	12,000		$	5,000
Term-Out Loan		-			25,500
Revolving credit facility (RCF)		88,700			77,150
Vendor Finance Arrangement		2,328			-
Paycheck Protection Program Loan		6,298			-
Unamortized deferred financing costs		(667	)		(466	)
Finance lease		418			543
		109,077			107,727
Less: Current maturities of long-term debt		(7,640	)		(10,627	)
Current maturities of Vendor Finance Arrangement		(1,030	)		-
Current maturities of finance lease		(166	)		(166	)
	$	100,241		$	96,934

Credit Agreement

The Company and certain of its subsidiaries are party to the Third Amendment to the Third Amended and Restated Credit Agreement, dated as of February 21, 2020, with four participating financial institutions (as amended from time to time, the Credit Agreement), which provides for a $16.0 million term loan (Term Loan), a $100.0 million RCF and a $30.0 million accordion feature. The Term Loan matures on March 31, 2022 with principal installments of $2.0 million due quarterly beginning June 30, 2020. Under this schedule the Term Loan is expected to be fully repaid at its maturity. The RCF and accordion, if exercised, mature on August 31, 2022.

The Credit Agreement bears interest at a rate of LIBOR plus a margin ranging from 1.75% to 3.25%, determined 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. The weighted average interest rate for the three months ended September 30, 2020 and 2019 were 3.6% and 5.3%, respectively. The weighted average interest rate for the nine months ended September 30, 2020 and 2019 were 4.0% and 5.3%, respectively, with an interest rate of 3.4% at September 30, 2020.

Term Loan

As of September 30, 2020, the outstanding principal amount of the Term Loan was $12.0 million, excluding the impact of unamortized deferred financing costs.

RCF

As of September 30, 2020, outstanding draws on the RCF were $88.7 million.

Covenants and Restrictions

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 then steps 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 is 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, the Company entered into a fourth amendment to the Credit Agreement (Fourth Amendment), which permits the Company to exclude the amount borrowed pursuant to the Paycheck Protection Program established under the CARES Act from the Company’s 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 September 30, 2020 reporting period and are in compliance with the required covenant ratios. As of September 30, 2020, the Consolidated Leverage Ratio was 2.97 and Consolidated Fixed Charge Coverage Ratio was 2.13.

Vendor Finance Agreement

As of September 30, 2020, the Company had a vendor financing agreement in place, with an outstanding balance of $2.3 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.

Paycheck Protection Program Loan

In May 2020, the Company entered into the PPP Loan. Under the PPP Loan, the Company borrowed $6.3 million which the Company expects to be eligible for forgiveness pursuant to the applicable regulations of the PPP.   Currently, the regulations provide for loan forgiveness to the extent that (i) the proceeds are used in the Cover Period, as defined in the application for loan forgiveness, after the funding of the loan, (ii) at least 60% of the forgiven amount is used for eligible payroll costs and (iii) the remaining proceeds are used for interest on mortgages, rents, or utilities, and interest on other debt obligations incurred before February 15, 2020.

The amount eligible for forgiveness may be reduced if, among other things, the Company reduces its full-time headcount or if the Company reduces salaries and wages beyond certain limits. While the Company expects all $6.3 million will be used in accordance with the regulations for forgiveness, not all costs are within the control of the Company and these 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 the Company cannot determine the ultimate outcome, based on the Company’s assessments on the current rules in place, the Company believes 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 the Company cannot assure the results of any such review.

Performance Bonds, Surety Bonds and Other Similar Instruments

As of September 30, 2020, there were $4.3 million of performance bonds, surety bonds and similar instruments outstanding of which $2.0 million is issued by the parties under the Credit Agreement.

In June 2016, the Company secured a performance bond facility with a lender in the amount of $1.5 million for its MCS segment. This facility has a maturity date of June 2021. The Company maintains restricted cash on a dollar for dollar basis to secure this facility.

Debt Maturities

The following table sets forth the aggregate principal maturities of long-term debt, net of deferred financing cost amortization, for the remainder of 2020 and the following years (in thousands):

2020		2,179
2021		8,731
2022		97,862
2023		306
Total debt, including current maturities	$	109,077

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Fair Value Disclosures

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Note 6 – Fair Value Disclosures

The Company uses the following methods and assumptions to estimate the fair value of financial instruments:

• Cash and Cash Equivalents — Reported amounts approximate fair value based on quoted market prices (Level 1).

• Restricted Cash — Reported amounts approximate fair value.

• Accounts Receivable — Reported amounts, net of the allowance for doubtful accounts, approximate fair value due to the short-term nature of these assets.

• Accounts Payable, Including Income Taxes Payable and Accrued Expenses — Reported amounts approximate fair value due to the short-term nature of these liabilities.

• Long-Term Debt — The carrying amount of the Company’s floating-rate debt approximates fair value since the interest rates paid are based on short-term maturities and recent quoted rates from financial institutions. The estimated fair value of debt was calculated based upon observable (Level 2) inputs regarding interest rates available to the Company at the end of each respective period.

The Company’s non-financial assets, such as goodwill, intangibles and property, plant and equipment, are measured at fair value, based on level 3 inputs, when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

The earn-out for Intelie is measured at fair value in each reporting period, based on level 3 inputs, with any change to the fair value recorded in the Condensed Consolidated Statements of Comprehensive Loss. The earn-out is payable in RigNet stock in portions and is based on certain post-closing performance targets under the acquisition agreement. In May 2019, the Company issued 208,356 shares of its common stock, with an aggregate value of $3.0 million, as payment for the portion of the earn-out earned as of the first anniversary of the closing of the acquisition.  

The earn-out was originally payable on the first, second and third anniversary of the March 23, 2018 closing of the acquisition. However, on June 11, 2020, the Company, Intelie and the former shareholders of Intelie entered into the Third Amendment to the Purchase Agreement dated as of January 15, 2018. The Amendment clarified the calculation of certain contingent consideration, extended the earn-out achievement period by six months, and delayed the time of payment of a portion of that contingent consideration until September 23, 2021, but did not change the amount or form of consideration that could be paid pursuant to the Purchase Agreement. The value of the maximum remaining earn-out consideration is $13.9 million.

As of September 30, 2020, the fair value of the earn-out was $13.7 million, all of which is reported in deferred revenue and other current liabilities on the Company’s condensed consolidated balance sheet. During the three and nine months ended September 30, 2020, RigNet recognized an increase in the fair value of the earn-out of none and $3.9 million, respectively. Additionally, during the three and nine months ended September 30, 2020, RigNet recognized accreted interest expense on the Intelie earn-out of $ 0.1 million and $0.2 million, respectively, with corresponding increases to other liabilities.

As of December 31, 2019, the fair value of the earn-out was $9.7 million with $4.4 million in deferred revenue and other current liabilities and $5.3 million in other long-term liabilities. During the three and nine months ended September 30, 2019, RigNet recognized an increase in the fair value of the earn-out of none and $1.3 million, respectively. Additionally, during the three and nine months ended September 30, 2019, RigNet recognized accreted

interest expense on the Intelie earn-out of $0.1 million and $0.2 million, respectively, with corresponding increases to other liabilities.

The contingent consideration for Cyphre, a cybersecurity company acquired in May 2017, is measured at fair value in each reporting period, based on level 3 inputs, with any change to the fair value recorded in the Condensed Consolidated Statements of Comprehensive Loss. As of September 30, 2020, the fair value of the contingent consideration was $3.0 million of which $0.3 million is in other current liabilities and $2.7 million is in other long-term liabilities. As of December 31, 2019, the fair value of the contingent consideration was $3.1 million, of which $0.3 million is in other current liabilities and $2.7 million is in other long-term liabilities. During the three and nine months ended September 30, 2020, RigNet recognized accreted interest expense on the Cyphre contingent consideration of $0.2 million and $0.3 million, respectively, with corresponding increases to other liabilities. During the three and nine months ended September 30, 2019, RigNet recognized accreted interest expense on the Cyphre contingent consideration of $0.1 million and $0.1 million respectively, with corresponding increases to other liabilities. During the three and nine months ended September 30, 2020, RigNet paid cash of $0.2 million and $0.3 million, respectively, in required royalty payments, with corresponding decreases to other liabilities. During the three and nine months ended September 30, 2019, RigNet paid cash of $0.1 million and $0.3 million, respectively, in required royalty payments, with corresponding decreases to other liabilities.

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Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 7 – Income Taxes

The Company’s effective income tax rate was (14.6%) and 0.4% for the three and nine months ended September 30, 2020. The Company’s effective income tax rate was 137.1% and (47.0%) for the three and nine months ended September 30, 2019. The Company’s 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.

The Company has computed the provision for taxes for the current and comparative periods using the actual year-to-date effective tax rate. The Company’s financial projections for those periods did not provide the level of detail necessary to calculate a forecasted effective tax rate.

The Company received notices informing us of audits of the Company’s 2016-2018 income tax returns in Malaysia, the 2010-2014 income tax returns in Qatar and the 2018 income tax return in Saudi Arabia. It is unclear if the audits and the appeals processes, if necessary, will be completed within the next twelve months. The Company is in the early stages of the audits and is unable to quantify any potential settlement or outcome of the audits at this time. The authorities closed the audit of the Company’s 2016-2017 income tax returns in Singapore with no additional assessments.      

The Company believes that it is reasonably possible that a decrease of up to $4.4 million in unrecognized tax benefits, including related interest and penalties, may be necessary within the coming year due to lapse in statute of limitations.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 8 – Stock-Based Compensation

During the nine months ended September 30, 2020, the Company granted a total of 1,906,328 shares of stock-based awards to certain directors, officers and employees of the Company under the Company’s 2019 Omnibus Incentive Plan (2019 Plan). Of these, the Company granted (i) 603,983 shares of common stock associated with the payment of the Company’s 2019 short term incentive plan to certain officers and employees, which were fully vested on issuance, (ii) 233,982 RSUs to outside directors that vest in 2021 and (iii) 1,068,363 performance share units (PSUs) to certain officers and employees that vest on the third anniversary of the grant date, are subject to continued employment and achievement of certain performance based targets. The fair value of shares of common stock and RSUs awarded pursuant to the 2019 Plan is determined based on the closing trading price of the Company’s common stock on the grant date of the award. Compensation expense is recognized on a straight-line basis over the requisite service period of the entire award, net of forfeitures.

During the nine months ended September 30, 2020, the Company granted a total of 42,272 shares of stock-based awards to a newly-hired executive officer of the Company pursuant to an inducement award. These awards consisted of (i) 18,787 RSUs to such officer that vest over a three year period of continued employment, with 33% of the RSUs vesting on each of the first three anniversaries of the grant date and (ii) 23,485 that vest on the third anniversary of the grant date, are subject to continued employment and achievement of certain performance criteria.

The fair value of the RSUs grants pursuant to the inducement award is determined based on the closing trading price of the Company’s common stock on the grant date of the award. Compensation expense is recognized on a straight-line basis over the requisite service period of the entire award, net of forfeitures In addition to the foregoing, the executive officer was also granted 10,299 of stock options with an exercise price of $6.20. The options granted have a contractual term of seven years and vest over a three-year period of continued employment, with 33% of the options vesting of each of the first three anniversaries of the grant date.

The fair value of each stock option award is estimated on the grant date using a Black-Scholes option valuation model, which uses certain assumptions as of the date of grant. The assumptions used for the stock option grants made during the nine months ended September 30, 2020, were as follows:

	Nine Months Ended September 30,
	2020
Expected volatility	51%
Expected term (in years)	7
Risk-free interest rate	1.8%
Dividend yield	-

Based on these assumptions, the weighted average grant date fair value of stock options granted during the nine months ended September 30, 2020 was $3.27 per option.

During the nine months ended September 30, 2020, 40,245 RSUs, 18,811 PSUs and 24,905 stock options were forfeited.

Stock-based compensation expense related to the Company’s stock-based compensation plans for the three and nine months ended September 30, 2020, was $0.5 million and $5.2 million respectively, and reported as a general and administrative expense in the Corporate segment. Stock-based compensation expense related to the Company’s stock-based compensation plans for the three and nine months ended September 30, 2019, was $1.5 million and $7.1 million, respectively. As of September 30, 2020, there was $8.3 million of total unrecognized compensation cost related to unvested options, RSUs and restricted stock expected to vest. This cost is expected to be recognized over a remaining weighted-average period of 2.0 years.

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Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Note 9 – Earnings (loss) per Share

Basic EPS are computed by dividing net loss attributable to RigNet common stockholders by the weighted average number of basic shares outstanding during the period. Basic shares equal the total of the common shares outstanding, but excludes the dilutive effect of common shares that could potentially be issued due to the exercise of stock options or vesting of restricted stock, RSUs or PSUs. Diluted EPS is computed by dividing loss attributable to RigNet common stockholders by the weighted average number of diluted shares outstanding during the period. Diluted shares equal the total of the basic shares outstanding and all potentially issuable shares, other than anti-dilutive shares, if any. The Company uses the treasury stock method to determine the dilutive effect. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect if included, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same.

The effect of stock-based awards was not included in the Company’s calculation of diluted EPS for the three and nine months ended September 30, 2020, due to the net loss for the periods.

The effect of stock-based awards was not included in the Company’s calculation of diluted EPS for the three and nine months ended September 30, 2019, due to the net loss for the periods.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 10 – Commitments and Contingencies

Global Xpress (GX) Dispute

Inmarsat plc (Inmarsat), a satellite telecommunications company, filed arbitration with the International Centre for Dispute Resolution tribunal (the panel) in October 2016 concerning a January 2014 take-or-pay

agreement to purchase up to $65.0 million, under certain conditions, of GX capacity from Inmarsat over several years.

In June 2019, the Company announced that it reached a settlement with Inmarsat that concluded the GX Dispute. Pursuant to the settlement the Company paid $45.0 million in June 2019, $5.0 million in July 2019 and the final $0.8 million in July 2020.

The Company incurred credit of ($0.4) million and cost of $3.9 million in GX Dispute Phase II legal costs for the three and nine months ended September 30, 2019.

Other Litigation

The Company, in the ordinary course of business, is a claimant or a defendant in various legal proceedings, including proceedings as to which the Company has insurance coverage and those that may involve the filing of liens against the Company or its assets.

Sales Tax Audit

The Company is undergoing a routine sales tax audit from a state where the Company has operations. The audit can cover up to a four-year period. It is expected that the audit and the appeals process, if necessary, will be completed within the year. The Company does not believe that the outcome of the audit will result in a material impact to the consolidated financial statements.

Operating Leases

The Company’s leasing activities primarily consist of leases of real estate including office space under lease agreements expiring on various dates through 2030. For the three and nine months ended September 30, 2020, the Company recognized expense under operating leases, which approximates cash paid and includes short-term leases, of $0.5 million and $1.7 million, respectively. For the three and nine months ended September 30, 2019, the Company recognized expense under operating leases, which approximates cash paid and includes short-term leases, of $0.6 million and $1.9 million, respectively.

As of September 30, 2020, future undiscounted minimum lease obligation maturities for the remainder of 2020 and future years were as follows (in thousands):

2020	$	522
2021		1,686
2022		1,307
2023		1,264
2024		1,202
2025		854
Thereafter		2,168
Total lease payments	$	9,003
Less present value discount		(1,416	)
Amounts recognized in Balance Sheet	$	7,587
Amounts recognized in Balance Sheet
Deferred revenue and other current liabilities		1,823
Right-of-use lease liability - long-term portion		5,764
Total right-to-use lease liability	$	7,587

Operating lease right-of-use assets for leases were $6.2 million as of September 30, 2020.

The right-of-use assets and liabilities for leases were discounted at a weighted-average discount rate of 5.0%. The weighted-average remaining lease term as of September 30, 2020 was 6.7 years.

Commercial Commitments

The Company enters into contracts for satellite bandwidth and other network services with certain providers.

As of September 30, 2020, the Company had the following commercial commitments related to satellite and network services for the remainder of 2020 and the future years thereafter (in thousands):

2020		5,527
2021		13,626
2022		6,058
2023		323
	$	25,534

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Segment Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Information

Note 11 – Segment Information

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.

RigNet considers its business to consist of the following segments:

• Managed Communications Services (MCS). The 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). The 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, edge computing solution services that assist customers with collecting and standardizing the complex data produced by edge devices (LIVE-IT), 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). The 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 and eliminations, the GX Dispute and change in fair value of earn-out/contingent consideration.

The Company’s reportable segment information as of and for the three and nine months ended September 30, 2020 and 2019, is presented below.

	Three Months Ended September 30, 2020
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	31,939	$	8,367		$	8,416	$	-		$	48,722
Cost of revenue (excluding    depreciation and amortization)		19,523		3,382			7,090		-			29,995
Depreciation and amortization		4,510		1,290			157		418			6,375
Impairment of intangible assets		-		3,836			-		-			3,836
Selling, general and administrative		2,454		1,332			374		7,397			11,557
Operating income (loss)	$	5,452	$	(1,473	)	$	795	$	(7,815	)	$	(3,041	)
Capital expenditures		1,442		537			25		-			2,004
	Three Months Ended September 30, 2019
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	42,055	$	9,265		$	9,673	$	-		$	60,993
Cost of revenue (excluding    depreciation and amortization)		24,156		4,091			7,415		-			35,662
Depreciation and amortization		5,037		1,218			155		762			7,172
Selling, general and administrative		3,303		1,599			464		9,795			15,161
Operating income (loss)	$	9,559	$	2,357		$	1,639	$	(10,557	)	$	2,998
Capital expenditures	$	4,818	$	720		$	-	$	326		$	5,864

	Nine Months Ended September 30, 2020
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	105,971		$	25,915	$	28,988	$	-		$	160,874
Cost of revenue (excluding    depreciation and amortization)		68,010			11,164		22,458		-			101,632
Depreciation and amortization		14,012			3,626		478		2,103			20,219
Impairment of goodwill and intangible assets		21,755			3,836		1,386		-			26,977
Change in fair value of earn-    out/contingent consideration		-			-		-		3,916			3,916
Selling, general and administrative		7,697			4,515		1,080		26,566			39,858
Operating income (loss)	$	(5,503	)	$	2,774	$	3,586	$	(32,585	)	$	(31,728	)
Total assets	$	120,659		$	30,674	$	26,154	$	21,995		$	199,482
Capital expenditures		6,181			1,962		25		588			8,756
	Nine Months Ended September 30, 2019
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	125,593		$	25,285	$	27,957	$	-		$	178,835
Cost of revenue (excluding    depreciation and amortization)		76,160			12,975		19,502		-			108,637
Depreciation and amortization		16,360			3,675		1,456		2,272			23,763
Change in fair value of earn-out/contingent consideration		-			-		-		1,284			1,284
Selling, general and administrative		10,446			2,999		2,158		37,231			52,834
Operating income (loss)	$	22,627		$	5,636	$	4,841	$	(40,787	)	$	(7,683	)
Total assets	$	154,268		$	42,886	$	26,782	$	19,224		$	243,160
Capital expenditures	$	15,143		$	1,556	$	-	$	827		$	17,526

The following table presents revenue earned from the Company’s domestic and international operations for the three and nine months ended September 30, 2020 and 2019. Revenue is based on the location where services are provided or goods are sold. Due to the mobile nature of RigNet’s customer base and the services provided, the Company works closely with its customers to ensure rig or vessel moves are monitored to ensure the location of service information is properly reflected.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Domestic	$	21,018	$	27,360	$	66,875	$	80,868
International		27,704		33,633		93,999		97,967
Total	$	48,722	$	60,993	$	160,874	$	178,835

The following table presents goodwill, right-of-use lease assets and long-lived assets, net of accumulated depreciation, for the Company’s domestic and international operations as of September 30, 2020 and December 31, 2019.

	September 30,		December 31,
	2020		2019
	(in thousands)
Domestic	$	60,041	$	76,253
International		37,531		67,631
Total	$	97,572	$	143,884

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Note 12 – Related Party Transactions

The Company has a reseller arrangement with Darktrace, which is an artificial intelligence company in cybersecurity that is partially owned by KKR & CO. Inc. (KKR). KKR is a significant stockholder of the Company. Under the arrangement, the Company sells Darktrace’s cybersecurity audit services with the Company’s cybersecurity offerings.  In the three and nine months ended September 30, 2020, the Company purchased $0.1 million and $0.1 million, respectively, from Darktrace in the ordinary course of business. In the three and nine months ended September 30, 2019, the Company purchased $0.1 million and $0.1 million, respectively, from Darktrace in the ordinary course of business.

Vissim AS is now a vendor following a competitive request for a quote from RigNet in the ordinary course of business. A customer specified Vissim AS by name as a provider for an SI project. Vissim AS is 24% owned by AVANT Venture Capital AS, which is owned by and has as the chairman of its board one of our board members. In the three and nine months ended September 30, 2020, the Company purchased none and $0.1 million, respectively, from Vissim AS in the ordinary course of business. In the three and nine months ended September 30, 2019, the Company purchased $0.2 million and $0.8 million, respectively, from Vissim AS in the ordinary course of business.

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Restructuring Costs - Cost Reduction Plans

9 Months Ended

Sep. 30, 2020

Restructuring And Related Activities [Abstract]

Restructuring Costs - Cost Reduction Plans

Note 13 – Restructuring Costs – Cost Reduction Plans

During the nine months ended September 30, 2019, the Company incurred a net pre-tax restructuring expense of $0.7 million reported as a general and administrative expense, of which $0.2 million was incurred in the three month months ended September 30, 2019 related to consolidating three separate legacy facilities into our new office in Lafayette, Louisiana and $0.5 million was incurred in the first quarter of 2019 associated with the reduction of 25 employees.

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Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2020

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Revenue Recognition

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 the Company expects to be entitled in exchange for those goods or services.

Revenue Recognition – Managed Communications Services (MCS) and Applications and Internet-of-Things (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. 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). With certain customers, our contracts require that the contract backlog on stack rigs be transferred to other units, preserving the total contract value.

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 the Company expects to be entitled to the agreed monthly, usage or day 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 Systems Integration contracts for customized network solutions are recognized based on the cost to cost (formerly known as 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.

Performance Obligations Satisfied Over Time — The delivery of a Systems Integration solution represents the single performance obligation under Systems Integration 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.

The Company reviews all material contracts on a monthly basis and revises 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 the 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).

Systems Integration contracts are billed in accordance with the terms of the contract which are typically either based on milestones or specified time intervals. As of September 30, 2020, and December 31, 2019, the amount of CIEB related to Systems Integration projects was $14.4 million and $13.3 million, respectively. Under long-term contracts, amounts recorded in CIEB may not be realized or paid within a one-year period. As of September 30, 2020 and December 31, 2019, $0.6 million and $1.0 million, respectively, of amounts billed to customers in excess of revenue recognized to date were classified as a current liability, under deferred revenue and other current liabilities.  

Variable Consideration – Systems Integration - The Company records 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 the Company’s Condensed Consolidated Balance Sheets as part of CIEB. No material unapproved change orders or claims revenue were included in CIEB as of September 30, 2020, and December 31, 2019. As new facts become known, an adjustment to the estimated recovery is made and reflected in the current period.

Backlog - As of September 30, 2020, we have a backlog for our cost to cost projects of $12.4 million, which will be recognized over the remaining contract term for each contract. The cost to cost contract terms are typically one to three years. As of December 31, 2019, we had a backlog for our cost to cost projects of $26.2 million.

Leases

Leases

Effective with adoption of Accounting Standards Update No. 2016-02 (ASU 2016-02), Leases (the new lease standard) on January 1, 2019, we now determine if an arrangement is a lease at inception. Operating leases right-of-use assets and liabilities are included in right-to-use lease asset, deferred revenue and other current liabilities, and right-to-use lease liability – long-term portion on our condensed consolidated balance sheets. Finance leases are included in property, plant and equipment; current maturities of long-term debt; and long-term debt on our condensed consolidated balance sheets.  

Operating lease right-to-use assets and liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13), which measures credit losses on most financial assets and certain other instruments that are not measured at fair value through net income. The update amends the impairment model to utilize a current expected credit loss (CECL) methodology in place of the incurred loss methodology for financial instruments, including trade receivables. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. Companies applied this standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019. The

Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In January 2017, the FASB issues ASU No. 2017-04 (ASU 2017-04), which removes the requirement to compare the implied fair value of the goodwill with its carrying amount as part of step two of the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The ASU is effective for impairments tests in annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.  

In August 2018, the FASB issued ASU No. 2018-13 (ASU 2018-13), which eliminates disclosures, modifies existing disclosures and adds new Fair Value disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15 (ASU 2018-15), which provides guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU is effective for annual and interim reporting periods beginning after December 15, 2019. The Company adopted the guidance effective January 1, 2020, and the guidance did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU  2019-12), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.  This ASU removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. We will be required to adopt the amended guidance in annual and interim periods beginning after December 15, 2020, with early adoption permitted. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment.  We are in the process of evaluating the impact this amendment will have on our consolidated financial statements.

In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (ASU  2020-04), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.  This ASU provides optional guidance for a limited period of time to ease the potential burden in accounting or recognizing the effects of the LIBOR or another reference rate reform on financing rate. The amendments are effective through December 31, 2022.  We are currently in the process of evaluating the impact of the transition from LIBOR to alternative reference rates, but we do not expect a material impact on our consolidated financial statements.

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Goodwill and Intangibles (Tables)

9 Months Ended

Sep. 30, 2020

Goodwill And Intangible Assets Disclosure [Abstract]

Amortization Expense for Intangibles

The following table sets forth expected amortization expense of intangibles for the remainder of 2020 and the following years (in thousands):

2020		1,336
2021		5,181
2022		4,772
2023		4,173
2024		3,277
2025		861
Thereafter		792
	$	20,392

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Credit Facilities and Long-Term Debt Arrangements

As of September 30, 2020, and December 31, 2019, the following credit facilities and long-term debt arrangements with financial institutions were in place:

	September 30,			December 31,
		2020			2019
	(in thousands)
Term Loan	$	12,000		$	5,000
Term-Out Loan		-			25,500
Revolving credit facility (RCF)		88,700			77,150
Vendor Finance Arrangement		2,328			-
Paycheck Protection Program Loan		6,298			-
Unamortized deferred financing costs		(667	)		(466	)
Finance lease		418			543
		109,077			107,727
Less: Current maturities of long-term debt		(7,640	)		(10,627	)
Current maturities of Vendor Finance Arrangement		(1,030	)		-
Current maturities of finance lease		(166	)		(166	)
	$	100,241		$	96,934

Aggregate Principal Maturities of Long-Term Debt

The following table sets forth the aggregate principal maturities of long-term debt, net of deferred financing cost amortization, for the remainder of 2020 and the following years (in thousands):

2020		2,179
2021		8,731
2022		97,862
2023		306
Total debt, including current maturities	$	109,077

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Assumptions Used for Stock Option Grants

The assumptions used for the stock option grants made during the nine months ended September 30, 2020, were as follows:

	Nine Months Ended September 30,
	2020
Expected volatility	51%
Expected term (in years)	7
Risk-free interest rate	1.8%
Dividend yield	-

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Lease Obligations

As of September 30, 2020, future undiscounted minimum lease obligation maturities for the remainder of 2020 and future years were as follows (in thousands):

2020	$	522
2021		1,686
2022		1,307
2023		1,264
2024		1,202
2025		854
Thereafter		2,168
Total lease payments	$	9,003
Less present value discount		(1,416	)
Amounts recognized in Balance Sheet	$	7,587
Amounts recognized in Balance Sheet
Deferred revenue and other current liabilities		1,823
Right-of-use lease liability - long-term portion		5,764
Total right-to-use lease liability	$	7,587

Commercial Commitments Related to Satellite and Network Services

As of September 30, 2020, the Company had the following commercial commitments related to satellite and network services for the remainder of 2020 and the future years thereafter (in thousands):

2020		5,527
2021		13,626
2022		6,058
2023		323
	$	25,534

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Company's Business Segment Information

The Company’s reportable segment information as of and for the three and nine months ended September 30, 2020 and 2019, is presented below.

	Three Months Ended September 30, 2020
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	31,939	$	8,367		$	8,416	$	-		$	48,722
Cost of revenue (excluding    depreciation and amortization)		19,523		3,382			7,090		-			29,995
Depreciation and amortization		4,510		1,290			157		418			6,375
Impairment of intangible assets		-		3,836			-		-			3,836
Selling, general and administrative		2,454		1,332			374		7,397			11,557
Operating income (loss)	$	5,452	$	(1,473	)	$	795	$	(7,815	)	$	(3,041	)
Capital expenditures		1,442		537			25		-			2,004
	Three Months Ended September 30, 2019
	Managed Communication Services		Applications and Internet-of-Things			Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	42,055	$	9,265		$	9,673	$	-		$	60,993
Cost of revenue (excluding    depreciation and amortization)		24,156		4,091			7,415		-			35,662
Depreciation and amortization		5,037		1,218			155		762			7,172
Selling, general and administrative		3,303		1,599			464		9,795			15,161
Operating income (loss)	$	9,559	$	2,357		$	1,639	$	(10,557	)	$	2,998
Capital expenditures	$	4,818	$	720		$	-	$	326		$	5,864

	Nine Months Ended September 30, 2020
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	105,971		$	25,915	$	28,988	$	-		$	160,874
Cost of revenue (excluding    depreciation and amortization)		68,010			11,164		22,458		-			101,632
Depreciation and amortization		14,012			3,626		478		2,103			20,219
Impairment of goodwill and intangible assets		21,755			3,836		1,386		-			26,977
Change in fair value of earn-    out/contingent consideration		-			-		-		3,916			3,916
Selling, general and administrative		7,697			4,515		1,080		26,566			39,858
Operating income (loss)	$	(5,503	)	$	2,774	$	3,586	$	(32,585	)	$	(31,728	)
Total assets	$	120,659		$	30,674	$	26,154	$	21,995		$	199,482
Capital expenditures		6,181			1,962		25		588			8,756
	Nine Months Ended September 30, 2019
	Managed Communications Services			Applications and Internet-of- Things		Systems Integration		Corporate and Eliminations			Consolidated Total
	(in thousands)
Revenue	$	125,593		$	25,285	$	27,957	$	-		$	178,835
Cost of revenue (excluding    depreciation and amortization)		76,160			12,975		19,502		-			108,637
Depreciation and amortization		16,360			3,675		1,456		2,272			23,763
Change in fair value of earn-out/contingent consideration		-			-		-		1,284			1,284
Selling, general and administrative		10,446			2,999		2,158		37,231			52,834
Operating income (loss)	$	22,627		$	5,636	$	4,841	$	(40,787	)	$	(7,683	)
Total assets	$	154,268		$	42,886	$	26,782	$	19,224		$	243,160
Capital expenditures	$	15,143		$	1,556	$	-	$	827		$	17,526

Revenue Earned from Domestic and International Operations

The following table presents revenue earned from the Company’s domestic and international operations for the three and nine months ended September 30, 2020 and 2019. Revenue is based on the location where services are provided or goods are sold. Due to the mobile nature of RigNet’s customer base and the services provided, the Company works closely with its customers to ensure rig or vessel moves are monitored to ensure the location of service information is properly reflected.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)
Domestic	$	21,018	$	27,360	$	66,875	$	80,868
International		27,704		33,633		93,999		97,967
Total	$	48,722	$	60,993	$	160,874	$	178,835

Long - Lived Assets, Net of Accumulated Depreciation for Both Domestic and International Operations

The following table presents goodwill, right-of-use lease assets and long-lived assets, net of accumulated depreciation, for the Company’s domestic and international operations as of September 30, 2020 and December 31, 2019.

	September 30,		December 31,
	2020		2019
	(in thousands)
Domestic	$	60,041	$	76,253
International		37,531		67,631
Total	$	97,572	$	143,884

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Basis of Presentation - Additional Information (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Revenue recognized from customers	$ 0.6	$ 1.0
Systems Integration Projects [Member]
Costs and estimated earnings	14.4	13.3
Backlog from revenue contract	$ 12.4	$ 26.2
Systems Integration Projects [Member] | Maximum [Member]
Remaining contract term	1 year
Systems Integration Projects [Member] | Minimum [Member]
Remaining contract term	3 years

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Business and Credit Concentrations - Additional Information (Detail) - Sales Revenue, Net [Member]	9 Months Ended
	Sep. 30, 2020 Customer
Business Combination, Separately Recognized Transactions [Line Items]
Percentage of revenue generated from top five customers	30.10%
Number of significant customers	0
Royal Dutch [Member]
Business Combination, Separately Recognized Transactions [Line Items]
Maximum percentage of revenue generated from single customer	10.00%

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Goodwill and Intangibles - Additional Information (Detail)	3 Months Ended			9 Months Ended
	Sep. 30, 2020 USD ($)	Mar. 31, 2020 USD ($) ReportingUnit	Sep. 30, 2019 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Jul. 31, 2020	Dec. 31, 2019 USD ($)
Goodwill And Intangible Assets Impairment [Line Items]
Reporting units | ReportingUnit		2
Impairment of goodwill		$ 23,100,000
Goodwill	$ 19,982,000			$ 19,982,000			$ 46,792,000
Impairment of intangibles				3,800
Intangibles, net	20,392,000			20,392,000			$ 30,145,000
Amortization expense	1,500,000		$ 2,000,000.0	$ 5,500,000	$ 6,900,000
Minimum [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Intangible assets useful life				5 years
Maximum [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Intangible assets useful life				20 years
Managed Communication Services [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Goodwill	21,800,000			$ 21,800,000
Applications and Internet-of-Things [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Goodwill	20,000,000.0			20,000,000.0
Applications and Internet-of-Things [Member] | Goodwill [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Percentage of fair value of goodwill in excess of carrying amount						100.00%
Systems Integration [Member]
Goodwill And Intangible Assets Impairment [Line Items]
Goodwill	$ 1,400,000			$ 1,400,000

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Goodwill and Intangibles - Amortization Expense for Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
2020	$ 1,336
2021	5,181
2022	4,772
2023	4,173
2024	3,277
2025	861
Thereafter	792
Total amortization expense of intangibles	$ 20,392	$ 30,145

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Restricted Cash - Additional Information (Detail) - USD ($)	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Restricted cash, current	$ 1,500,000	$ 42,000	$ 39,000
Restricted cash, non-current		1,522,000	$ 1,522,000
Current assets [Member]
Restricted cash, current	1,500,000	100,000
Long-term assets [Member]
Restricted cash, non-current	$ 0	$ 1,500,000

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Long-Term Debt - Credit Facilities and Long-Term Debt Arrangements (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
Term Loan	$ 12,000	$ 5,000
Term-Out Loan		25,500
Revolving credit facility (RCF)	88,700	77,150
Vendor Finance Arrangement	2,328
Paycheck Protection Program Loan	6,298
Unamortized deferred financing costs	(667)	(466)
Finance lease	418	543
Total debt, including current maturities	109,077	107,727
Less: Current maturities of long-term debt	(7,640)	(10,627)
Current maturities of Vendor Finance Arrangement	(1,030)
Current maturities of finance lease	(166)	(166)
Long-term debt, non current portion	$ 100,241	$ 96,934

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Long-Term Debt - Additional Information (Detail) $ in Thousands		1 Months Ended	3 Months Ended			9 Months Ended
	Feb. 21, 2020 USD ($) Institution	May 31, 2020 USD ($)	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Sep. 30, 2019	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jun. 30, 2016 USD ($)
Debt Instrument [Line Items]
Number of participating financial institutions | Institution	4
Line of credit outstanding amount			$ 88,700			$ 88,700		$ 77,150
Maturity of Term Loan / Maturity date						Jan. 31, 2023
Debt Instrument, Description of Variable Rate Basis			LIBOR
Supplementary leverage ratio			0.0297			0.0297
Weighted average interest rate						6.00%
Fixed Charge Coverage Ratio			2.13%			2.13%
Vendor finance agreement , outstanding amount			$ 2,300			$ 2,300
Quartely payments						300
Proceeds from borrowings						15,550	$ 48,500
Performance bonds outstanding amount			4,300			4,300
Surety Bonds And Similar Instruments Outstanding			2,000			$ 2,000
Performance bond facility									$ 1,500
Maturity date of performance bond facility						Jun. 30, 2021
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Line of credit outstanding amount			$ 88,700			$ 88,700
Revolving credit facility	$ 100,000
Amendment Credit Agreement [Member] | Term Out Loan [Member]
Debt Instrument [Line Items]
Maturity of Term Loan / Maturity date	Aug. 31, 2022
Credit Agreement [Member]
Debt Instrument [Line Items]
Fixed Charge Coverage Ratio			1.25%			1.25%
Credit Agreement [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Weighted average interest rate			3.60%		5.30%	4.00%	5.30%
Interest rate			3.40%			3.40%
Credit Agreement [Member] | Revolving Credit Facility [Member] | Minimum [Member]
Debt Instrument [Line Items]
Supplementary leverage ratio	0.0175
Credit Agreement [Member] | Revolving Credit Facility [Member] | Maximum [Member]
Debt Instrument [Line Items]
Supplementary leverage ratio	0.0325
Third Quarter 2020 [Member]
Debt Instrument [Line Items]
Funded debt to Adjusted EBITDA ratio			3.25%			3.25%
Second Quarter 2021 [Member]
Debt Instrument [Line Items]
Funded debt to Adjusted EBITDA ratio			3.00%			3.00%
Remaining Quarter [Member]
Debt Instrument [Line Items]
Funded debt to Adjusted EBITDA ratio			2.75%			2.75%
Paycheck Protection Program Loan | Bank of America, N.A [Member]
Debt Instrument [Line Items]
Proceeds from borrowings		$ 6,300
Borrowing capacity description		(i) the proceeds are used in the Cover Period, as defined in the application for loan forgiveness, after the funding of the loan, (ii) at least 60% of the forgiven amount is used for eligible payroll costs and (iii) the remaining proceeds are used for interest on mortgages, rents, or utilities, and interest on other debt obligations incurred before February 15, 2020.
Debt repayment term		2 years
Accrued interest		1.00%
Forgiveness of loan		$ 2,000
Paycheck Protection Program Loan | Minimum [Member] | Bank of America, N.A [Member]
Debt Instrument [Line Items]
Loan forgiveness, percentage		60.00%
Term Loan [Member]
Debt Instrument [Line Items]
Line of credit outstanding amount			$ 12,000			$ 12,000
Maturity of Term Loan / Maturity date						Mar. 31, 2022
Debt Instrument, Periodic Payment, Principal				$ 2,000
Term Loan [Member] | Amendment Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit outstanding amount	$ 16,000
Accordion Feature [Member] | Amendment Credit Agreement [Member]
Debt Instrument [Line Items]
Line of credit outstanding amount	$ 30,000

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Long-Term Debt - Aggregate Principal Maturities of Long-Term Debt (Detail) $ in Thousands	Sep. 30, 2020 USD ($)
Debt Disclosure [Abstract]
2020	$ 2,179
2021	8,731
2022	97,862
2023	306
Total debt, including current maturities	$ 109,077

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Fair Value Disclosure - Additional Information (Detail) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended		9 Months Ended
	May 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Change in fair value of earn-out/contingent consideration				$ 3,916	$ 1,284
Royalty payments			$ 100		300
Intelie Solucoes Em Informatica S A [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Contingent consideration earn-out, estimated payment		$ 13,700		13,700		$ 9,700
Maximum remaining earn-out consideration		13,900
Business combination, contingent consideration, liability, current		13,700		13,700		4,400
Business combination, contingent consideration, liability, noncurrent		5,300		5,300		5,300
Change in fair value of earn-out/contingent consideration		0	0	3,900	1,300
Number of Stock Issued For Acquisition	208,356
Stock issued for acquisition	$ 3,000
Intelie Solucoes Em Informatica S A [Member] | Interest Expense [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Change in fair value of earn-out/contingent consideration		100	100	200	200
Cyphre Security Solutions [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Contingent consideration earn-out, estimated payment		3,000		3,000		3,100
Business combination, contingent consideration, liability, current		300		300		300
Business combination, contingent consideration, liability, noncurrent		2,700		2,700		$ 2,700
Royalty payments		200		300
Cyphre Security Solutions [Member] | Interest Expense [Member]
Fair Value Inputs Assets Liabilities Quantitative Information [Line Items]
Accreted interest expense on earn-out liability		$ 200	$ 100	$ 300	$ 100

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Income Tax Disclosure [Abstract]
Effective income tax rate	14.60%	137.10%	0.40%	47.00%
Reductions related to lapses in statue of limitations			$ 4.4

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Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted average grant date fair value of stock options granted			$ 3.27
Stock options, forfeited			24,905
Stock-based compensation	$ 500	$ 1,500	$ 5,188	$ 7,132
Total unrecognized compensation cost	$ 8,300		$ 8,300
Performance Share Units (PSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units, forfeited			18,811
Restricted Stock Units RSUs [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units, forfeited			40,245
2019 Omnibus Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted common stock granted, net of share repurchase from employees and share cancellations, shares			1,906,328
2019 Omnibus Incentive Plan [Member] | Vest Over a Three Year Period of Continued Employment [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares			603,983
2019 Omnibus Incentive Plan [Member] | Vest Over a Three Year Period of Continued Employment [Member] | Certain Officers and Employees [Member] | Performance Share Units (PSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted			1,068,363
2019 Omnibus Incentive Plan [Member] | Vesting Twenty Twenty One [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares			233,982
Inducement Grant Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted common stock granted, net of share repurchase from employees and share cancellations, shares			42,272
Inducement Grant Plan [Member] | Certain Officers and Employees [Member] | Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock options granted			10,299
Exercise price			$ 6.20
Contractual term			7 years
Period of employment			3 years
Inducement Grant Plan [Member] | Vest Over a Three Year Period of Continued Employment [Member] | Certain Officers and Employees [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Issuance of common stock upon the vesting of Restricted Stock Units, net of share cancellations, shares			18,787
Vesting period for restricted stock			3 years
Vesting percentage for restricted shares issued to officers and employees			33.00%
Inducement Grant Plan [Member] | Vest Over a Three Year Period of Continued Employment [Member] | Certain Officers and Employees [Member] | Performance Share Units (PSUs) [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units granted			23,485
Inducement Grant Plan [Member] | Vest Over a Three Year Period of Continued Employment [Member] | Certain Officers and Employees [Member] | Stock Options [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Vesting percentage for restricted shares issued to officers and employees			33.00%
2006 Long Term Incentive Plan [Member]
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average period			2 years

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Stock-Based Compensation - Assumptions Used for Stock Option Grants (Detail)	9 Months Ended
	Sep. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Expected volatility	51.00%
Expected term (in years)	7 years
Risk-free interest rate	1.80%

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Commitments and Contingencies - Additional Information (Detail) - USD ($) $ in Millions	1 Months Ended			3 Months Ended		9 Months Ended
	Jul. 31, 2020	Jul. 31, 2019	Jun. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Commitments And Contingencies [Line Items]
Recognized expense under operating leases				$ 0.5	$ 0.6	$ 1.7	$ 1.9
Operating lease right-of-use assets				$ 6.2		$ 6.2
Operating lease,weighted-average discount rate				5.00%		5.00%
Weighted-average remaining lease term				6 years 8 months 12 days		6 years 8 months 12 days
GX Dispute [Member]
Commitments And Contingencies [Line Items]
Long term purchase commitment amount, maximum						$ 65.0
Damages Paid	$ 0.8		$ 45.0
Legal expenses		$ 5.0					$ 3.9
Legal fees reimbursements					$ (0.4)

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Commitments and Contingencies - Future Minimum Lease Obligations (Detail) $ in Thousands	Sep. 30, 2020 USD ($)
Operating Leases Future Minimum Payments Due [Abstract]
2020	$ 522
2021	1,686
2022	1,307
2023	1,264
2024	1,202
2025	854
Thereafter	2,168
Total lease payments	9,003
Less present value discount	(1,416)
Amounts recognized in Balance Sheet	7,587
Amounts recognized in Balance Sheet
Deferred revenue and other current liabilities	1,823
Right-of-use lease liability - long-term portion	5,764
Total right-to-use lease liability	$ 7,587

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Commitments and Contingencies - Commercial Commitments Related to Satellite and Network Services (Detail) $ in Thousands	Sep. 30, 2020 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2020	$ 5,527
2021	13,626
2022	6,058
2023	323
Other Commitment total	$ 25,534

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Segment Information - Company's Business Segment Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Segment Reporting Information [Line Items]
Revenue	$ 48,722	$ 60,993	$ 160,874	$ 178,835
Cost of revenue (excluding depreciation and amortization)	29,995	35,662	101,632	108,637
Depreciation and amortization	6,375	7,172	20,219	23,763
Impairment of goodwill and intangible assets	3,836		26,977
Change in fair value of earn-out/contingent consideration			3,916	1,284
Selling, general and administrative	11,557	15,161	39,858	52,834
Operating income (loss)	(3,041)	2,998	(31,728)	(7,683)
Total assets	199,482	243,160	199,482	243,160	$ 250,980
Capital expenditures	2,004	5,864	8,756	17,526
Reportable Segments [Member] | Managed Communication Services [Member]
Segment Reporting Information [Line Items]
Revenue	31,939	42,055	105,971	125,593
Cost of revenue (excluding depreciation and amortization)	19,523	24,156	68,010	76,160
Depreciation and amortization	4,510	5,037	14,012	16,360
Impairment of goodwill and intangible assets			21,755
Selling, general and administrative	2,454	3,303	7,697	10,446
Operating income (loss)	5,452	9,559	(5,503)	22,627
Total assets	120,659	154,268	120,659	154,268
Capital expenditures	1,442	4,818	6,181	15,143
Reportable Segments [Member] | Applications and Internet-of-Things [Member]
Segment Reporting Information [Line Items]
Revenue	8,367	9,265	25,915	25,285
Cost of revenue (excluding depreciation and amortization)	3,382	4,091	11,164	12,975
Depreciation and amortization	1,290	1,218	3,626	3,675
Impairment of goodwill and intangible assets	3,836		3,836
Selling, general and administrative	1,332	1,599	4,515	2,999
Operating income (loss)	(1,473)	2,357	2,774	5,636
Total assets	30,674	42,886	30,674	42,886
Capital expenditures	537	720	1,962	1,556
Reportable Segments [Member] | Systems Integration [Member]
Segment Reporting Information [Line Items]
Revenue	8,416	9,673	28,988	27,957
Cost of revenue (excluding depreciation and amortization)	7,090	7,415	22,458	19,502
Depreciation and amortization	157	155	478	1,456
Impairment of goodwill and intangible assets			1,386
Selling, general and administrative	374	464	1,080	2,158
Operating income (loss)	795	1,639	3,586	4,841
Total assets	26,154	26,782	26,154	26,782
Capital expenditures	25		25
Corporate and Eliminations [Member]
Segment Reporting Information [Line Items]
Depreciation and amortization	418	762	2,103	2,272
Change in fair value of earn-out/contingent consideration			3,916	1,284
Selling, general and administrative	7,397	9,795	26,566	37,231
Operating income (loss)	(7,815)	(10,557)	(32,585)	(40,787)
Total assets	$ 21,995	19,224	21,995	19,224
Capital expenditures		$ 326	$ 588	$ 827

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Segment Information - Revenue Earned from Domestic and International Operations (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 48,722	$ 60,993	$ 160,874	$ 178,835
Domestic [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	21,018	27,360	66,875	80,868
International [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Revenue	$ 27,704	$ 33,633	$ 93,999	$ 97,967

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Segment Information - Long - Lived Assets, Net of Accumulated Depreciation for Both Domestic and International Operations (Detail) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Revenues From External Customers And Long Lived Assets [Line Items]
Long lived assets	$ 97,572	$ 143,884
Domestic [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Long lived assets	60,041	76,253
International [Member]
Revenues From External Customers And Long Lived Assets [Line Items]
Long lived assets	$ 37,531	$ 67,631

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Related Party Transactions - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Related Party Transaction [Line Items]
Purchases from related party	$ 100,000	$ 100,000	$ 100,000	$ 100,000
Avant Venture Capital AS [Member]
Related Party Transaction [Line Items]
Purchases from related party	$ 0	$ 200,000	$ 100,000	$ 800,000
Equity method investment, Ownership percentage	24.00%		24.00%

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Restructuring Costs - Cost Reduction Plans - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Mar. 31, 2019 USD ($) Employee	Sep. 30, 2019 USD ($)
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges, pre-tax		$ 0.5
Number of employees lay off | Employee		25
General and Administrative Expenses [Member]
Restructuring Cost and Reserve [Line Items]
Restructuring charges, pre-tax	$ 0.2		$ 0.7