RigNet Inc
Q2 2013 Earnings Call Transcript

Published: 6 Aug 2013

[Operator:]

Good day, ladies and gentlemen, and welcome to the RigNet Second Quarter 2013 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference, Marty Jimmerson, RigNet's Chief Financial Officer. Sir, you may begin.

[Martin L. Jimmerson:]

Thank you, Sam, and welcome to our participants from around the world. We appreciate you joining us today to discuss RigNet's second quarter 2013 results. Today’s conference call was preceded by our earnings release yesterday afternoon after the markets closed. This release is available from our Investor Relations section of our website. Today's conference call should be considered together with our earnings release and related financial information. With me on today's call is Mark Slaughter, our CEO and President. Mark will open this morning's call with a review of our second quarter of 2013 highlights, and then I will provide financial details. We will then open the call up for a few general questions. Part of our discussion today may include forward-looking statements. Please review the Safe Harbor language found in our press release and in our SEC filings that describes factors which could cause our actual results to differ materially from those projected by us in our forward-looking statements. Also, we will mention financial terms, such as adjusted EBITDA and other non-GAAP measures of financial performance. We believe the presentation of these non-GAAP financial measures provides useful information regarding additional financial and business trends relating to the company's financial condition and results of operations. A reconciliation of GAAP and non-GAAP measures has been provided in our earnings press release. At this time, I will turn the call over to Mark Slaughter.

[Mark B. Slaughter:]

Thanks, Marty. Again, to all our listeners, I want to thank you for joining our second quarter 2013 earnings call. RigNet continues to advance its strategy of providing managed remote communications solutions to the global energy sector across the life of the field from drilling to production. I am pleased to report in the second quarter that RigNet posted record adjusted EBITDA of $13.9 million and showed broad growth over the first quarter in our core business of serving offshore drilling rigs, as well as our strategic initiatives of serving offshore production facilities, energy maritime vessels and international land energy sites. Compared to some recent quarters, this growth was led more by increases in sites served, which bodes well for additional revenue growth, perspectively, as we add secondary customers and upsell additional value-added services over time. Speaking briefly to our financials, second quarter revenue was $51.3 million, down slightly over the second quarter, with solid growth from our core recurring revenue business with lower revenues due to the project timing from our project-based systems integration business. As I mentioned, adjusted EBITDA was a quarterly record $13.9 million and net income improved $4.9 million, or $0.28 per diluted share. RigNet reported higher capital expenditures of $8.5 million, which was primarily represented by our revenue generating capital expenditures at the edge, but also included the buildup of spare equipment for expected future opportunities and upgrades to our global trust field, [ph] private cloud networks that will increase with both capacity and redundancy. In our core offshore rigs communications business, the overall count of active and addressable rigs in the marketplace grew in the quarter from 780 to 796, including growth of both jackup and floater rigs. We showed improvement in the quarter in the number of offshore rigs served from 245 to 255 rigs, increasing our global share of addressable offshore rigs to almost 32%. This improved global share is for both fixed and floating rigs served and we captured both new builds and existing rigs. Our average revenue per offshore rig also improved slightly in the quarter, further driving growth in our core business. As a reminder, improvement in average revenue per rig can be driven by any combination of secondary customer penetration, value-added solutions and bandwidth, as well as rig mix. Our sales and fulfillment pipeline remains strong in our core offshore rig communications business. In fact, as our investors know, Ensco plc, which was RigNet's original launch customer is our second biggest largest customer today, acquired Pride International in May 2011. This acquisition brought them an offshore rig fleet consisting today of 26 rigs that includes 21 floater rigs and 5 premium jackup rigs, with 6 of the 26 being newbuilds. I am pleased to report that subsequent to the end of the second quarter, we have signed a contract with Ensco for 17 of these 26 offshore rigs. These 17 offshore rigs consist of 12 floater rigs and 5 jackup rigs, with 11 being existing rigs and 6 being newbuilds. Subject to preoperational contingencies, we expect these rigs to be placed under RigNet service over the next 21 months, in regions that include Brazil, West Africa, the Middle East and the North Sea. Along with a single legacy Pride rig awarded to us in the fourth quarter of 2012, this will bring us to a total of 18 of the 26 legacy Pride rigs for Ensco that we will be serving. The remaining 8 in the legacy Pride fleet are floaters with contracts that we believe extend beyond this 21-month time window. We are obviously delighted to be extending our services for Ensco over more of their legacy Pride fleet. Turning to our U.S. land rig communications business, the overall rig count lowered slightly in the quarter from 1,703 to 1,692 rigs as gas-directed drilling declined faster than improvement in oil-directed drilling. We declined as well from 271 to 261 U.S. land rigs served, bringing our share down to under 16% in a highly competitive market. Non-rig site count in U.S. land held steady from quarter-to-quarter. These other sites in U.S. onshore include completion sites, production sites and man camps. Globally, our other site count accelerated by 54% to 662 sites in the quarter, bringing our overall physical site count to 1,178 physical sites served around the world. These so-called other sites captured the counts from our strategic growth initiatives, field office supporting offshore drilling, as well as completion of production sites in our U.S. land business. In our energy maritime strategic growth initiative, I am pleased to report that subsequent to the second quarter end, we were awarded 23 liftboats and a field office in West Africa for a multinational offshore drilling client. Also in our systems integration business, subsequent to quarter end, we awarded $8 million in new projects for a major offshore production client. As announced late last week, RigNet has entered into a strategic arrangement with Inmarsat plc, a leading global provider of mobile satellite communications, to acquire their Energy Broadband business and to purchase high-throughput satellite capacity over 4 years from their Global Xpress program once the satellite constellation is launched and fully operational in the next couple of years or so. Subject to satisfaction of customer and closing conditions, we expect to close on the Energy Broadband business in the first quarter of 2014 or sooner. Global Xpress offers the prospect of more bandwidth at lower cost which, we believe, will allow for more value-added services to be utilized by our customers at the edge. The network for that global coverage, which when coupled with Inmarsat's excellent reputation for reliability and customer service, will allow us to advance our offerings to the energy industry in meaningful ways. The Energy Broadband business from Inmarsat, which I ran from 2003 to 2004 when it was under different ownership, is a more natural fit with RigNet. This acquisition will expand RigNet's portfolio of technology solutions, broaden our geographic coverage and deepen our management potential at a time of high market activities. For Inmarsat, the combination creates a stronger distribution partner for a takeup of Global Xpress services. For our investors, the strategic arrangement means RigNet is positioned with a great partner to offer high-throughput satellite services worldwide and we are acquiring a business that is complementary to our own offerings and positioning in the market, both of which will create a stronger RigNet, focused on servicing our customers with distinction and enhancing value for our shareholders. In closing, I am pleased with the solid and broad-based performance in the second quarter of this management team and our dedicated employees around the world, as we deliver record profitability and gain traction in both core services to offshore rigs and in the secondary areas of our growth strategy, all of which positions RigNet to serve the oil and gas industry with remote communications solutions across the life of the field from drilling to production. I remain encouraged by the traction we are gaining in the business organically, as well as looking forward to our strategic relationship with Inmarsat will contribute as it comes into play. With that, I'll turn the call back to Marty for a more detailed financial review. Marty?

[Martin L. Jimmerson:]

Thank you, Mark. Now, let me share some more detail about our second quarter 2013 financial results. During the second quarter of 2013, we reported revenue of $51.3 million. Revenue decreased $1.5 million or 2.8% quarter-on-quarter. The decrease in revenue compared to the prior quarter was primarily attributable to systems integration, or SI revenue, of $4.8 million offset by continued growth in our core business of serving offshore rigs and traction against our strategic initiatives serving offshore production facilities, energy maritime and international land sites. Excluding SI, our organic revenue increased $6.1 million or 18.2% compared to the second quarter of 2012, primarily due to increases in sites served and increased revenue per site. Adjusted EBITDA increased $1.3 million or 10.1% quarter-on-quarter to a record $13.9 million in the second quarter of 2013. The increase is primarily attributable to frozen revenues in serving offshore rigs, production platforms, international land rigs and energy maritime vessels served offset by decreased contributions from SI revenues during the quarter. Adjusted EBITDA increased $3.8 million or 37.8% as compared to the prior year quarter, primarily due to increased sites serve, improvement in average revenue earned per site and contributions from SI. Adjusted EBITDA margin increased to 27.1% in the second quarter from 23.9% in the first quarter of 2013, but decreased from 30.4% in the prior year quarter that did not include the margin dilution from SI. As discussed in our first quarter earnings call, our internal compliance program recently detected potential violations of U.S. sanction regulations by one of our foreign subsidiaries. We continue to work with authorities on this matter and project that the fourth quarter will be the earliest that we may have additional information to report. Based upon information available at this time, we currently believe a range of penalties that we may incur associated with these potential violations will be within a range of $200,000 to $1.5 million. The company approved a reserve in the first quarter of $800,000 for such a potential penalties. We did incur $500,000 of legal expenses on this matter during the second quarter, which was primarily attributable to services incurred during April and early May. Our total legal expenses incurred on this matter were $900,000 this first half of the year, bringing our total charges, including estimated fines and penalties to $1.6 million. We want to caution that we may incur future legal fees and related expenses, that fines and penalties may be higher than the we've estimated and the investigations may require significant management time which detracts from running the business. Excluding the charges related to this [indiscernible] matter, the normalized adjusted EBITDA for second quarter would have been $14.4 million, or 28.1% of revenue compared to normalized adjusted EBITDA of $13.7 million or 26.0% for the first quarter. Now turning to our fourth segment and leading with the Americas. This segment generated revenue of $13.1 million in the second quarter, which was up 5.8% quarter-on-quarter, and up 8% over the same quarter last year due to higher site count in average revenue per rig, partially offset by fewer U.S. land rigs served. I would highlight that our energy maritime initiatives provided positive contributions during the quarter over the prior quarter, and we expect this trend to continue. Americas' adjusted EBITDA was $4.9 million in the second quarter compared to $5.4 million in the prior quarter, a decrease of $500,000 or 10.4%, primarily due to increased bandwidth expenses, supplies expenses and some bad debt charges. Americas' adjusted EBITDA margin decreased to 36.9% from 43.6% in the prior quarter. Next, Europe/Africa generated revenue of $23.1 million, a decrease of $4.5 million, or 16.4% over the prior quarter. The decrease in revenue was primarily attributable to the SI revenue that decreased $4.8 million during the quarter to $7.0 million, partially offset by increased revenues in serving offshore drilling rigs, offshore production facilities and energy maritime vessels. We stated previously that our SI business can fluctuate quarter-on-quarter due to the timing of projects. We believe our SI business remains soft. Our SI contracted backlog was $19.3 million as of June 30, 2013, which was down slightly from $19.9 million at March 31, 2013. We know that subsequent to quarter end, our SI business has won $8 million in new projects, which gives us further confidence in the strength of this business. We view backlog as a key sign of a healthy business and a leading indicator that reminds everyone that it is project-based and can fluctuate due to timing as we experienced here in the second quarter. During the quarter, this segment, Europe/Africa, added a total of 17 new sites from our production platform, energy maritime and international land initiatives. Europe/Africa adjusted EBITDA of $8.8 million in the second quarter compares to $8.3 million in the prior quarter, an increase of $500,000 or 6.7%. This increase is primarily related to improvement in revenue mix and lower SG&A in search for lower professional fees. Adjusted EBITDA margin percentages increased in Europe/Africa to 38.2% in the current quarter compared to 29.9% in the prior quarter. For the final segment, Middle East/Asia Pacific, this generated revenue of $15.1 million in the second quarter, an increase of $2.3 million or 17.9% quarter-on-quarter. Our increase in revenue as compared to the first [ph] quarter in 2013, was primarily attributable to increases in sites served. We were extremely pleased with our growth in offshore rigs, production units and energy maritime vessels during the second quarter of -- in this MEAP segment. During this quarter, MEAP added a total of 17 sites from our energy maritime and international land initiatives. We did re-classed $1.1 million of first quarter 2013 expenses associated with the compliance matter discussed earlier, as a result, MEAP adjusted EBITDA of $6.7 million in the second quarter, including the re-class of the first quarter expenses associated with the compliance matter and flat compared to $6.7 million in the prior quarter. MEAP adjusted EBITDA margins declined to 54.0% from 52.3% in the prior quarter. Excluding expenses associated with the compliance matter, normalized adjusted EBITDA margin would have been 54.6%. Turning back to the total business results. We reported total SG&A expenses of $12.6 million in the second quarter compared to $12.5 million in the first quarter of 2013, an increase of $100,000. The increase is primarily attributable to increased headcount and professional fees offset by lower compliance matter [ph] expenses. We reported consolidated net income, attributable to common stockholders of $4.9 million or $0.28 per diluted share in the second quarter, compared to $3.7 million or $0.22 per diluted share in the first quarter. Our effective tax rate for the second quarter was 34.2% compared to 40.0% in the prior quarter. Now turning to the balance sheet. As of June 30, 2013, our cash included -- including restricted cash, decreased to $50.8 million from $57.2 million as of March 31, 2013. Our restricted cash, which serves performance bonds related to our SI business, decreased $300,000 during the quarter to $2.2 million. Our net working capital was $65.0 million, our debt is $56.5 million, and we had no borrowings outstanding against our $10 million revolving facility. Our bank debt to adjusted EBITDA leverage ratio was 1.1x. Wrapping up, we are pleased with our second quarter financial and operational performance and look forward towards the remainder of 2013, including finalizing the integration plans for Inmarsat's Energy Broadband business that we will be acquiring. With that, Mark and I are happy to answer your questions. Sam, please open the lines for questions.

[Operator:]

[Operator Instructions] Our first question comes from Brett Feldman of Deutsche Bank.

[Brett Feldman:]

You gave us an update there on what's going on with Pride and I didn't quite catch the whole thing. Could you just recap that for us really quickly?

[Martin L. Jimmerson:]

Yes, I can go back to that. Thanks, Brett. We're pretty excited. We had announced in the fourth quarter of 2012 that we had secured one newbuild rig from that legacy Pride fleet. And then, in this announcement today, we had signed a contract with Ensco, subsequent to second quarter end, for an additional 17 rigs. And in terms of the cut of that, I think it's 5 jackup rigs and 12 floaters. And cut another way, it's 11 existing rigs and 6 newbuilds. And these will come online with us, we believe, over the next 21 months, subject to operational contingencies. So out of that, so we're now -- once that's complete, we'll be 18 of 26 rigs. The other 8 rigs are all floater rigs, semi-submersibles and drill ships, that we believe are on contract with another provider, will pass that 21-month window.

[Brett Feldman:]

And then just thinking about the M&A strategy that you guys have been pursuing. It'd be interesting just to get a recap in terms of what you have sort of accomplished in terms of your business structure. Meaning that, if I think back almost 2 years, you sort of talked about ways you could get bigger in the businesses you are already in, and then, adjacencies. How do you feel you've executed against some of those opportunities? For example, do you feel pretty well structured with regards to the core business that you were running 2 years ago? And what do you think is the potential here to do even more step outs as you have evaluated the market opportunities?

[Mark B. Slaughter:]

Yes. Thanks, Brad. That's a great question. The strategy hasn't been evolved in 2011, right after we've gone public. We did evaluate a number of M&A opportunities that were in clear adjacencies to the oil and gas sector, as many of our providers had moved. However, as we looked at the margins and returns that you get in those markets and the degree of competitive behavior, we quickly pulled back to a pure oil and gas focus, which is where we are today. And our acquisitions, I think reflect that. We like where we are. The questions had been, for us and perhaps for our investors, how much runway is there within oil and gas? And we think, by broadening, from focusing just on drilling to actually looking at life of the field approaches, looking at the production market, looking at the energy maritime vessels that serve the oil and gas industry, there is plenty of runway. And so our Ensco acquisition a year ago brought us an engineering house that really positions us well to serve the production market. This latest acquisition of Inmarsat's Energy Broadband business, which we're very, very, familiar with, we believe extends us in the production market, but also expands our geography and expands our solution set. And then when you couple that with the strategic need to transition into high-throughput satellite that's coming over the next 2 or 3 years, we're just absolutely delighted, after teaming with Inmarsat to offer the Global Xpress market or transport options into our portfolio.

[Brett Feldman:]

I have a question about that. So any -- essentially, the new product of Inmarsat that you're going to be distributing, it's just the higher speed version of the satellite links that you're using to support your customers right now. Is that correct?

[Mark B. Slaughter:]

Yes. What the high-throughput satellites will offer is more bandwidth at lower cost. And they do this through what's called frequency reuse and spot beams. And there'll be different flavors of that out in the marketplace. As we've struck this first arrangement with Inmarsat, over time, you may find we will announce others as well that help us to meet the needs of the oil and gas industry. We're very excited about this, we need it to transition correctly. This ensures us a seat at a table, with a very, very reputable, world-renowned provider of mobile satellite services that's moving in to this high-throughput satellite arena. And we think it's going to be very important. We think the lower cost and higher bandwidth may actually unleash demand at the edge for the application layer, where we really like to play. We really want to play at layer 3, the IP layer in the application layer. And lower bandwidth cost, we think, can help bring more services to the edge.

[Brett Feldman:]

And so last question on this. To what extent does the infrastructure that you own and have already deployed on your customer's rigs accommodate the technology? In other words, are you going to have to go through a CapEx cycle where you upgrade existing rigs in order to take advantage of the higher bandwidth that you can achieve through the Inmarsat platform?

[Mark B. Slaughter:]

A lot of the equipment at the edge will stay. There are certain electronics that we'll have to switch. We'll be -- we are working with Inmarsat to the extent that, that's done. There will be some incentives around that, that will help encourage that adoption. So we don't find that to be a material event for us.

[Operator:]

Our next question comes from Veny Aleksandrov of FIG Partners.

[Veny Aleksandrov:]

Very exciting to hear the news about price, and I know that you cannot give us a lot of details right now, but if we look at 11 new builds and 5 existing rigs, today's tracks, the revenues tracks [ph], so it's probably going to be second half of 2013, second half of 2014 and 2015. Is this correct?

[Mark B. Slaughter:]

Well, I was having a little trouble hearing you, but I think what you're asking is the timing with respect to the Ensco rig. I think what we're prepared to offer is that, this we expect to occur over the next 21 months. As you can imagine, newbuilds aside, these are existing rigs, and there has to be a window of opportunity for us to move on those rigs. And that's subject to any sorts of variabilities. I mean, these are operating assets. So we'll just be working with Ensco within that time window to find the best opportunity to move on to the rigs.

[Veny Aleksandrov:]

Right, that was my question. And then my second question is on international lands. It seems like you are making a lot of progress there. It's relatively a new market for you, but you're so successful. Can you give us a little bit more details?

[Mark B. Slaughter:]

Yes. I think we were pleased with all 3 of our strategic growth initiatives, which we've defined as international land energy sites, energy maritime and then offshore production. And with respect to international land, that's a very natural corollary to our U.S. land business. We've learned how to compete very successfully in the North American land market, and we've been taking those skills and capabilities and know-how out to attractive international markets, where the variability count is not as severe where we could earn some higher day rates. And the prices [ph] like that is going to be in places like the Middle East. It's a bit in Brazil and a bit scattered beyond that. But we're very pleased with the traction there. It's not just serving drilling rigs, but also the oilfield services industry and production sites. So it's a fairly open market for us. We're moving aggressively, and with the addition, we believe, of the Russian business that will come within Inmarsat's Energy Broadband business that we should close early next year, that will open up another big wide footprint for us for lands activities.

[Operator:]

[Operator Instructions] Our next question comes from Tim Horan of Oppenheimer.

[Timothy K. Horan:]

A couple of questions. Could you maybe just discuss what you're seeing in terms of the overall rigs offshore? Are we seeing a lot of newbuilds happening with the price of oil up a lot and maybe on the mix from deep-sea to kind of inshore a little bit more? And are there any other areas where you can kind of gain share other than Pride out there? You think the share trends here will continue?

[Mark B. Slaughter:]

Yes. With respect to the newbuild market, it remains robust. I think since Marty and I have been here in 2007, they've always been around 120 to 150 newbuilds on schedule, and generally, that outlook is around 2 to 3 years where you get visibility into those schedules. And there are databases that you can subscribe to, to see that. So it remains robust. For us, the mix is more attractive compared to the mix in the existing fleet today because it's more slanted towards floater rigs, semi-submersibles and drill ships, as well as premium jack-ups that are coming into the market. That affords us higher revenue opportunities, our ability to serve the operator on top of the driller and the service companies as well, is improved with those more complex rigs. And we're seeing the capital expenditures and the level of bandwidth required, much higher with a lot of these new rigs coming out. So we're extremely focused on trying to capture those, not just with our strong customers today, but also across the board looking at every opportunity to get our assets out there on those rigs. With respect to Pride or Ensco and their legacy fleet, we were obviously very delighted to be announcing that. We know that's been a question in the marketplace. We were out there pursuing everything within our core offshore rig business. Performing well there affords us the opportunity to look at energy maritime and offshore production and international land. And just very pleased in the quarter that we are advancing our offshore rig communications business, but also advancing our strategies.

[Timothy K. Horan:]

So that's about 60 or so new rigs a year and hitting the market of that 120, 150 you're talking about. Is that about right?

[Mark B. Slaughter:]

Yes. I have the exact number. We can probably give that to you after the call. But in general, our focus is to land at least our current existing rig share with an aspiration, obviously, to do an excess of that. We're not going to capture them all. I mean, there's another very strong competitor out there in the offshore rigs space, but we certainly want to capture our fair share. And hopefully, at a percentage that's higher than our existing share, which we could grow our market share.

[Timothy K. Horan:]

And on -- could you discuss a little bit more drilling of -- you've moved up to the full range of, I think you called it the life of the field here and Ensco's helped that a lot. But you really think that accelerated the growth on these other areas, the platform areas, and a bunch of these other shipping areas you were talking about. Can you give us a little bit more detail why you've been so successful there?

[Mark B. Slaughter:]

Well, I think it's a natural corollary to take relationships that you have with drillers and operators, and then move down the hall from the drilling department to the production department with the operator, and demonstrate as you've done a great job on the drilling side and we have a very relevant skills and capabilities to serve the production side. And then I think with the addition of Inmarsat's Energy Broadband business, we're going to bring more tools to the table in terms of being able to serve that, particularly on the production side of the business. If I look at the Gulf of Mexico, where we've been essentially a broadband VSAT provider, with the addition of the microwave and WiMAX networks and the L-Band capabilities, as the distribution partner for Inmarsat, we're going to have a whole suite of ways to serve the oil and gas industry across drilling, production and maritime -- energy maritime. So we're very excited right now.

[Timothy K. Horan:]

Last thing, Marty, can you talk a little bit more on the expense trends here. Are you able to buy a little bit more bulk satellite capacity, transponder capacity, to get some expenses out? Are there other areas you're working on where you can see some real expense improvements over the next year?

[Martin L. Jimmerson:]

Yes. We will -- we'll continue to evaluate that in terms of where it does makes sense to buy bulk. As we've grown, we've seized that opportunity in a couple of areas of the world. And I think you noted in Americas we did go a little bit long on bandwidth in the current quarter for future expected business that we're confident that we'll be able to utilize. So any increase in bandwidth is more about capacity, but you can assume the pricing per bit, if you will, is the same or slightly favorable to what we've historically experienced.

[Timothy K. Horan:]

And any other SG&A areas of expense for improvements?

[Martin L. Jimmerson:]

Improvements, I would say, should be steady. The one area that continues to kind of continue to be an area, as we stepped out geographically, would be costs associated with getting into new countries. As we noted in Europe/Africa, we did incur professional fees in the second quarter that we didn't meet -- that was taken up by the second quarter. But as our sales teams and operations teams continue to identify areas, we could have some impact there as we reach out into other countries.

[Operator:]

Our next question comes from Kunal Madhukar of Jefferies.

[Kunal Madhukar:]

On the ARPU. I find that the ARPU has slowed down considerably over the past 2, 3 quarters. What I understand is that the growth in the ARPU story, once you have Ka-band capacity out there. But what have -- what will bridge the gap between now and then, in terms of ARPU growth?

[Mark B. Slaughter:]

Well, again, let's go back to what drives that. Once we're out there on a rig, the ARPU can be driven by secondary customer penetration. So that's the signing up of operators, as well as the service companies that help during the well construction phase. And then selling additional value-added solutions to drillers, operators and service companies, is another point. And then just the rig mix can also impact it. When you look at floater rigs, semi-submersibles and drill ships, we find that there are higher bandwidth needs, more needs for complex value-added solutions and our penetration rate, with respect to operators and service companies, is much higher. So the rig mix can affect that as well. But what we've seen in prior quarters were some very significant bandwidth upgrades at the edge, by our driller and operator customers. And as an example, today, the average rig per customer today, based on an independent study that we have, is 1 meg per rig and that's serving about 250 to 300 employees out on a rig. Think of your home, you may have a wife, the kids and yourself sharing 6 to 12 megs, right? So it's still a very small portion of bandwidth that's out there that we have to make work across a pretty wide population of employees around mission critical operations. That same study, by the way, says that the average megabits per rig, per customer, is only going to grow over the next 4 or 5 years to 2.2 megs. So pretty interesting that it's still going to be tight out there. So we just think there's a lot of pressure at the edge to increase bandwidth, to support application use at the edge. We're explaining that increasing the mission critical role, and we're only thinking about high-throughput satellite and the Global Xpress arrangement that's going to allow us to deliver bandwidth in certain applications at lower cost, higher bandwidth and we think that's going to allow other more applications that use as well.

[Operator:]

And at this time, I'm not showing any further questions. So I'd like to turn the call back to management for any closing comments.

[Mark B. Slaughter:]

Thank you, Sam. To everyone, we'd like to thank you for joining us today and we will look forward to speaking with you after our third quarter results. Have a great day.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may now disconnect. Everyone, have a wonderful day.