UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20192020

or

For the transition period from __________ to __________

Commission file number 001-35003

RigNet, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (281)(281) 674-0100

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

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑

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.

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

As of June 30, 20192020, which was the last business day of the registrant's most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock, $0.001 par value per share (the “Common Stock”) held by non-affiliates of the registrant on such date was approximately $147.7$32.1 million. At March 9, 2020,11, 2021, there were outstanding 19,979,28421,016,003 shares of the registrant’s Common Stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement for its 20202021 Annual Meeting of Stockholders to be filed with the Commission within 120 days of December 31, 20192020 are incorporated herein by reference in Part III of this Annual Report.

Table of Contents

GlossaryGlossary

PARTPART I

Item 1. Business

For convenience in this Annual Report on Form 10-K, “RigNet”, the “Company”, “we”, “us”, and “our” refer to RigNet, Inc. and its subsidiaries taken as a whole, unless otherwise noted.

Overview

We are a global technology company that provides customized data and communications services. Customers use our private networks to manage information flows and execute mission-critical operations primarily in remote areas where conventional telecommunications infrastructure is either unreliable or unavailable. We provide our clients what is often the sole means of communications for their remote operations. On top of and vertically integrated into these networks we provide services ranging from fully-managed voice, data, and video to more advanced services including: cybersecurity threat detection and prevention; applications to improve crew welfare, safety or workforce productivity; and a real-time AI-backed data analytics platform to enhance customer decision making and business performance.

We deliver advanced software and communications infrastructure that allowallows our customers to realize the business benefits of digital transformation. With world-class, ultra-secure solutions spanning global IP connectivity, bandwidth-optimized Over-The-Top (OTT) applications, Industrial Internet of Things (IIoT) big data enablement, and industry-leading machine learning analytics, we support the full evolution of digital enablement, empowering businesses to respond faster to high priority issues, mitigate the risk of operational disruption, and maximize their overall financial performance.

Historically, our primary focus has been on customers in the upstream exploration and production segment of the energy industry, including offshore drilling rigs and production facilities.  In recent years, we have increased our service offerings across the energy value chain to provide solutions to midstream and downstream customers where systems integration and IoT solutions are key elements.  In addition, we have created channel partners around the world, creating opportunities to sell our industry-leading security, IoT, and machine-learning solutions outside of our traditional energy-focused markets.

Recent Development

On December 21, 2020, we announced that our Board of Directors unanimously approved the Company's entry into a definitive agreement whereby Viasat Inc. (Viasat) will acquire the Company in an all-stock transaction representing an enterprise value of $222 million, including the Company’s net debt as of September 30, 2020, based on the closing price of Viasat common stock on December 18, 2020 (the Viasat Merger). Under the terms of the agreement, the Company’s stockholders will receive a fixed exchange ratio of 0.1845 shares of Viasat stock for each share of the Company’s common stock owned by the stockholder. Based on the parties' volume weighted average prices ("VWAPs") for the 20 trading days ending on December 18, 2020, the transaction represents a 17.9% premium for the Company's stockholders. Upon closing, the Company’s stockholders are expected to own approximately 5.7% of Viasat's outstanding common stock. The all-stock transaction is intended to be tax-free to the Company’s stockholders. The transaction, which is expected to close by mid-calendar year 2021, is subject to customary closing conditions and regulatory approvals, including the approval of RigNet's stockholders.

The Viasat Merger has been approved by both the Company’s Board of Directors and the Board of Directors of Viasat. The completion of the Viasat Merger is subject to customary closing conditions, including, among others, the required approvals of RigNet’s stockholders and the receipt of various regulatory approvals. Subject to the satisfaction or (to the extent permissible) waiver of such conditions, the transaction is expected to close in mid-year 2021.

For additional information regarding the Viasat Merger, including associated risks and uncertainties, see Part I, Item 1A – Risk Factors, Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 17 in our consolidated financial statements included in this Annual Report in Part IV, Item 15(a) of this Annual Report.

Our Operations

Our business operations are divided into the following segments:

For financial information about our reportable segments, see Note 12 ─ “Segment Information” in our consolidated financial statements included in this Annual Report on Form 10-K.10-K

Managed Communications Services (MCS)

As of December 31, 2019,2020, MCS represented 67.9%65.3% of our total revenues. We were the primary provider of remote communications and collaborative services to approximately 500650 customers reaching over 1,3001,100 remote sites located in approximately 50 countries on six continents.  For the year ended December 31, 2019,2020, our revenue generated from countries outside of the U.S. represented 69.0%74.2% of MCS revenue. Key aspects of our services include: 

Global MCS Site Counts

We report the number of sites serviced by MCS on a regular basis and currently define sites based on four categories, which include Offshore Drilling Rigs, Offshore Production sites, Maritime, and Other sites, which includes U.S. and International onshore drilling and production sites, completion sites, man-camps, remote offices, and supply bases, as well as offshore-related supply bases, shore offices, tender rigs, and platform rigs. The MCS

site count does not include IoT sites. As of December 31, 2019,2020, we provided MCS to a total of 1,3401,142 U.S. and non-U.S. sites, a 1.3% increase14.8% decrease from 1,3231,340 sites served as of December 31, 2018.2019. Site counts fluctuate with industry conditions and are influenced by oil prices, customer capital spending, and other factors.  When we provide services for multiple customers at one location, for example, to the drilling contractor, exploration and production operator, and other service companies, we count this as one site.  The table below provides site count data as of December 31 of the respective year.  

We procure bandwidth from independent commercial satellite-services operators and terrestrial wireless and landline providers to meet the needs of our customers for end-to-end IP-based communications.  This allows RigNet

to provide hybrid network solutions, which greatly improves network up-time by using multiple and diverse sources of bandwidth. We generally own the network infrastructure and communications equipment we install at remote sites as well as equipment co-located in third-party teleport facilities and data centers, all of which we procure through various equipment providers.  By owning the network infrastructure and communications equipment on the customer premises, we are better able to select the optimal equipment for each customer solution as well as ensure the quality of our services.

Applications & Internet-of-Things (Apps & IoT)

Apps & IoT is our fastest growing segment and is leading our value delivery for our customers’ digital transformation efforts.  In addition to already having grown to 14.6%16.6% of 20192020 revenue compared to 14.6% and 10.8% and. 7.6% of 2018 2019 and 20172018 revenue, respectively, the value proposition from Apps & IoT is allowing us to gain share in the MCS market for energy.

The energy sector has embraced “Digital Transformation”, a term that encompasses using technology to significantly reduce human operational process time and increase operating margins. Digital transformation typically uses a combination of Industrial IoT (Internet of Things) combined with powerful Artificial Intelligence (AI) backed predictive analytics to monitor and optimize processes in real-time.

Through our Apps & IoT segment, we deliver a combination of turn-key network solutions, value-added services that simplify the management of multiple communications needs, and digital accelerators that collect, secure and analyze operational intelligence data, allowing our customers to increase margins and focus on core operations. Apps & IoT revenue generated from countries outside of the U.S. represented 32.5%20.8% of Apps & IoT revenue. We sell ourOur strategy in selling Apps & IoT services not only viais to employ both direct and indirect sales but also through a series of channel partners around the world, which enableschannels, enabling us to target customers in industry verticals where we have not established a focused salesforce. In some cases, non-energy customers have sought us out because of our unique capabilities.

Apps & IoT services delivered over-the-top of the network layer include:

Intelie, our real-time machine learning platform, delivers value to the energy sector and has applications that improve performance and operational safety, enhance well control, and reduce non-productive time (NPT).   Examples of Intelie applications follow.are as follows:

Intelie has delivered significant results, helping drilling contractors and operators generate time and cost savings in their upstream operations. Examples include reducing NPT by more than 20%. Intelie has also contributed as much as $3.0 million in software savings for a customer by eliminating extra software by consolidating functionality. For one customer, the Intelie platform processed over 300,000 measurements per second at its peak, synthesizing and displaying actionable results to the end-user. Intelie has recently signed a contract to implement Intelie LIVE to support BP’s Remote Collaboration Center and has also been used in oil production and pipeline monitoring use cases. The increased linkage between IoT solutions and Intelie allows us to not only provide communications but also to be directly involved in driving valuable business outcomes for our customers.

RigNet’s IoT network supports almost 11,000over 10,000 different sites, predominantly in the U.S. A key element of our network, devices using the L-band satellite network, grew substantially during 2019 to includetechnology, remained stable at over 6,200 active6,100 L-Band enabled IoT sites at the endas of December 2019,2020, consuming approximately 80on average 66 gigabytes per month of IoT traffic, or roughly 12.9 megabytes per month per site.traffic.  

We believe the Apps and IoT segment is an important element of our long-term growth.

System Integration (SI)

Due to our deep knowledge of the energy sector’s needs and a wide range of expertise around critical communications in challenging environments, our clients also turn to us to build large network projects, both offshore and onshore. Solutions are delivered based on the customer’s specifications, adhering to international industry standards and best practices. Project services may include consulting, design, engineering, project management, procurement, testing, installation, commissioning, and maintenance. Additionally, SI provides complete monitoring and maintenance for fire and gas detection systems and PLC/automation control systems. Projects are bid on a fixed-cost or time and materials basis with revenue recognized on a percentage of completion

basis. As of December 31, 2019, Systems Integration2020, SI represented 17.6%18.1% of our total revenues and revenue generated from countries outside of the U.S. represented 26.9%38.0% of SI revenue.

RigNet typically operates as a subcontractor on SI projects, working with other major Engineering, Procurement, and Construction (EPC) companies to deliver the project scope to the end customer.  The business is both competitive and cyclical.  The typical project length for our SI projects is anywhere from less than one year to approximately three years. Project backlog declined in 2019, meaning that2020 largely as a result of customers delaying decision on new project awards due to the industry slowdown caused by COVID-19. As a result, although we added $15.7$14.0 millionin backlog in 2019, but2020, we recognized more revenue and project descoping than we added. Project backlog, or the amount of revenue secured subject to firm contract awards that will be recognized over the life of each project, as of December 31 for the respective years is provided in the table below.

Putting the parts back together

RigNet’s three revenue-generating operating segments can each stand alone as separate services, but many of our global customers are seeing the value in how these products stack together. This has the potential to create what we have termed a synergistic “Flywheel Effect,” illustrated in the graphic below. Customers who are embracing digital transformation are trying to unlock the operational technology potential of Industrial IoT. We believe this will create a proliferation of connected sensors, forming a large neural-network of data, wrapped in cybersecurity for protection and interpreted through SaaS-based machine learning platforms. Customers will be able to accelerate their time to value by working with a set of services that are already vertically integrated and optimized to work under the most extreme of operating conditions. This can lower their execution risk for complex systems integrations and reduce upfront capital risk as a fully-managed SaaS service. For RigNet, the effect creates new streams of revenue, while at the same time stimulates pull-through bandwidth demand for our core network services illustrated in figure 4 below.

Customer Needs

The technology and remote telecommunications industries are highly dynamic and increasingly evolving with customer needs. We serve customers with customized communications, applications and cybersecurity solutions that connect to remote locations via networks, driving demand for reliable, managed communications services in a variety of environmental conditions. For several decades, our core customer base has primarily been off-shore and remote land oil and gas drilling contractors, exploration and production operators, and oilfield service companies. As part of our growth strategy, we seekare seeking to expand to other adjacent markets that share substantially similar technical requirements; these include: global enterprise, midstream pipelines, maritime, engineering and construction, disaster recovery services, banking and government verticals.

The customers we serve depend on maximum reliability, quality and continuity of products and services.  Our customers also are generally geographically dispersed and/or have remote operations. These customers are particularly motivated to use secure and highly reliable communications networks because they may require:

Our Customers, Their Industry, and Its Impact on RigNet

In 2019,2020, almost all of RigNet’s revenue was derived from customers with some connection to the oil and gas industry. These included our traditional customers in the Upstream segment (drilling contractors, large integrated and independent oil and gas operating companies, and other oilfield service and maritime support companies, etc.), as well as customers in the Midstream segment (pipelines, LNG plants, etc.) and large Engineering, Procurement, and Construction companies working inacross the Downstream segment.  industry value chain. Although no single customer accounted for 10.0% or more of revenue in 2019,2020, our top 5 customers accounted for 25.9%31.2% of our total revenue for 2019. 2020.

The oil and gas industry is both cyclical and competitive. Our customers’ business plans and activities are significantly impacted by changes in, among other factors, oil and gas prices, global supply and demand for these commodities, geopolitical events, weather, and specific industry sub-segment dynamics (e.g., an oversupply of offshore drilling rigs). Commodity prices are volatile and it is not unusual for our customers to experience rapid increases or declines which can have both short- and long-term impacts on their spending patterns.

In 2020, oil gas prices declined as result of OPEC+ group actions on the price of oil and in conjunction with significantly reduced demand as of result of COVID-19 pandemic. In response to continued low oil and gas prices and the COVID-19 pandemic, the industry reduced both capital and operating expenses significantly and negatively impacting RigNet’s business. Recovery for the industry has beenremains challenging. However, 2018 and 2019 saw improvedOffshore drilling rig utilization levels for offshore drilling rigs,in 2020 were flat compared to 2019, driven by offshore production declines. Thedeclines and reduced capital spending by oil and gas companies. However, we continue to believe that the industry we support has a proven resilient need for our advanced software and communications solutions to realize their digital transformation. Additionally, we saw more major construction projects approved for commencement.  While we expect conditions for the industry to continue to improve gradually, given our growing Apps & IoT business segment activity and continued expansion in the FPSO market, our long-term growth strategy does not rely solely on significant increases in global offshore drilling activity.

Customer Contracts

In order to streamline the addition of new projects and solidify our position in the market, we have signed master service agreements with most customers. Generally, we prefer to sign long-term contracts with our customers to increase our confidence in our projected financial performance.  Nevertheless, the nature of the oil and gas industry requires us to be flexible to ensure we meet the needs of our customers.  The specific services being provided are defined under individual service orders that generally have a term of one to five years for offshore customers with renewal options. These contracts have provisions for early termination or reduced payments for warm or cold stacking of assets, with compensation paid to us based on an agreed formula. Land-based contracts are generally shorter term or terminable on short notice without penalty. Service orders are executed under the contracts

for individual remote sites or groups of sites, and generally may be terminated early on short notice without penalty in the event of force majeure, breach of the agreement or cold stacking of a drilling rig.

Our Strategy

RigNet’s basic strategy remains unchanged: accelerate digital transformation for our customers by leveraging our core MCS business and introducing new, value-added service solutions.  The strategy is composed of three elements:  

As of December 31, 2019,2020, our merger and acquisition activity has been paused as a result of our current debt load and our equity price. We expectAdditionally, the Viasat Merger Agreement requires that we receive Viasat’s prior consent to re-engage in M&A activity at the appropriate time.most acquisitions. At this time, we believe that we have largely acquired the necessary capability set and that future merger and acquisition activity may be driven by our belief that networks benefit from scale.

Expand the scale and scope of our services

Our market presence and proven quality of service offer significant organic growth opportunities in energy segments adjacent to upstream where we are well-positioned to deliver remote communications solutions.

In the MCS segment, we seek to leverage our current strong market position in drilling rigs, production facilities, and support vessels to grow additional share.  Because of established relationships with our customers, reliable and robust service offerings, and high-quality customer service, we believe that we are well-positioned to capture new build rigs that our customers add to their fleets as well as stacked rigs that are reactivated.  We also seek to organically gain market share against our competitors. We are continuously working with our suppliers to ensure that we have the newest and most cost-effective solutions for our customers. We continue to grow our network as well.  In 2019, we invested in our Gulf of Mexico communications infrastructure, which we believe is the largest over-water microwave-based network in the world. This upgrade, in a partnership with T-Mobile, added 4G LTE services and 5G capabilities to the pre-existing network to provide both enhanced fixed and mobile services to our customers. This LTE network supports a coverage area of more than 60,000 square miles. Furthermore, as the onshore unconventional drilling and production industry has continued to grow,evolved, we have expanded our services to include not only onshore drilling rigs, but other onshore oilfield service providers.  

We also intend to expand our Apps & IoT market share on a stand-alone basis and by bundling our new capabilities, including machine learning and cybersecurity, with our MCS offerings for both existing and new customers.  Our acquisition of Intelie in 2018 enabled us to offer new solutions to help customers across the value chain continue to focus on improving their operational and financial performance.  Through Cyphre, we assist our customers in protecting their mission-critical data both onshore and offshore.  Furthermore, we continue to develop additional applications via our internal development team, including AVI, CrewConnect™, and other solutions which deliver increased value to our customers.  We have also continued to grow ourbuilt in significant presence in the energy IoT market, particularly in energy’s midstream segment, where our robust, bandwidth-optimized applications enable customers to safely, reliably, and efficiently monitor and manage their remote sites and networks.

We continue to seek to expand our Systems IntegrationSI market share by pursuing new Systems IntegrationSI customers and bids for projects globally to address the growing demand for the buildout of large capital projects. We expect to continue to target traditional upstream and downstream opportunities, such as new fixed production platforms or onshore operating shorebases, as well as expanding our opportunity set to include new FPSOs and midstream projects, such as remote LNG liquefaction facilities.  Additionally, our Apps & IoT capabilities are opening opportunities to introduce our machine learning and other solutions to our customers on these projects. In 2019,projects, potentially leading to pull-through business where we not only provide our SI business pulled-through Intelie development work forsolution, but possibly a workforce tracking project.  We are looking at ways to enhance the pull-through business our SI business generates for our other segments.bundle which includes managed communications and applications.

Expand into adjacent industry verticals

We believe revenue diversity is desirable in terms of product offerings as well as industry exposure.  We also believe that networks benefit from scale regardless of which end markets we serve with our managed communications product.  As such, we will continue to look for and review opportunities in other remote

communications market adjacencies that offer significant opportunities for growth and where we are well positioned to take advantage of these opportunities such as aviation, government, and mining.  

Acquire New Capabilities

In 2017, we began to build new capabilities that would be complimentary both to our core MCS business and our improving SI business while enabling us to deliver secure, mission-critical solutions to enable our customers to enjoy the benefits of their digital transformation efforts.  The graphic below illustrates our significant strategic acquisitions beginning in 2017, their timing, and our rationale for the transaction in terms of whether the acquired company added a capability, expanded our reach to more customers, or both.

Cyphre was our first acquisition in 2017.  As digital transformation efforts continue to touch every part of our customers’ businesses from offshore high-pressure blowout preventers to onshore operations planning, data security has become critical and Cyphre expanded our cybersecurity capabilities with advanced enterprise data protection by leveraging hardware-based encryption.

We acquired two additional companies in 2017, ESS and DTS.  ESS expanded our product offering, added to our existing midstream SCADA customer portfolio, and strengthened our IoT market position. DTS enhanced our comprehensive communications and IT services to the onshore, offshore, and maritime industries, as well as disaster relief solutions to global corporate clients.  

In 2018, we completed the acquisition of Intelie.  Intelie is a real-time, predictive analytics company that combines operational expertise with a machine learning approach. Intelie facilitates innovation via Intelie Pipes, a distributed query language with a complex event processor to aggregate and normalize real-time data from a myriad of data sources.  The Intelie platform empowers clients to make timely, data-driven decisions in mission-critical real-time operations, including drilling, and longer-term, data-intensive projects, such as well planning.

Finally, in 2018, we completed the separate, but related, acquisitions of Auto-Comm and SAFCON.  Auto-Comm provided a broad range of communications services to the oil and gas industry for both onshore and offshore remote locations. Auto-Comm brought over 30 years of systems integration experience in engineering and design, installation, testing, and maintenance. SAFCON offers a diverse set of safety, security, and maintenance services to the oil and gas industry. Auto-Comm and SAFCON have developed strong relationships with major energy companies that complement the relationships that we have established over the years.

We believe that the capabilities acquired through this set of acquisitions have enabled us to provide a unique set of solutions to our customers that will help them to realize the benefits of their digital transformation efforts and provide us with a differentiating competitive advantage

Competitive Strengths

As a global technology company that provides customized communications services, applications, real-time machine learning, and cybersecurity solutions, our competitive strengths include:

Mission-critical services delivered by a trusted provider with global operations:  Our longstanding relationships with customers provide us with an in-depth understanding of the mission-critical needs of our customers that enables us to tailor our services to their requirements.  Our global presence allows us to serve our clients around the world, except where government restrictions may apply. Our global terrestrial network also allows us to provide quality of service to prioritize various forms of data traffic for a more effective way to prioritize network traffic.  Our ability to offer our customers global coverage sets us apart from regional competitors and allows us to match the breadth of our customers’ global operations and speed of deployment. The addition ofOur Cyphre offering allows us to offer state-of-the-art encryption and network security services for the data communications necessary to safely and efficiently manage remote operations.  In addition, our OTT offerings allow us to leverage our network to provide additional offerings for safety, business productivity improvement, and crew comfort.

Leading-edge technology with proven track record in-market: Our Intelie machine learning and real-time predictive analytics including Intelie Pipes and Intelie LIVE are optimized for remote locations in high-latency, high-packet loss environments. We also deliver Advanced Video Intelligence (AVI) and a wide range of Enhanced Cybersecurity Services (ECS), including a Security Operations Center (SOC), Cyphre encryption, AI-backed intrusion detection, conditional access, and security ratings. We also leverage third party relationships and technologies and have a proven track record of delivering technology in high latency remote locations that others lack.

High-quality customer support with full-time monitoring and regional service centers: Our global end-to-end owned and operated network allows us to provide high-quality customer care by enabling us to fully monitor our network.  We can easily and rapidly identify and resolve any network problems that our customers may experience. As of December 31, 2019,2020, we had 2927 service operations centers and warehouses located around the world to support and service our customers’ remote sites. We maintain field technicians as well as adequate spare parts and equipment in these service operations centers. Our Global Customer Care (GCC) team staffs our Network Operations Center (NOC) and Security Operations Center (SOC) 24 hours per day, 365 days per year and provides engineering, service delivery, and change management to customers globally. We provide non-stop, end-to-end monitoring and technical support for every customer. This proactive network monitoring allows us to detect problems instantly and keep our services running at optimum efficiency. Fully managed technology is a key reason why we can support solutions that deliver high performance and new technologies that improve productivity.

Scalable systems using standardized equipment that leverages our global infrastructure: We have built our global satellite and terrestrial network with a sufficient amount of flexibility to support our growth.  Our knowledge and capabilities can be applied to remote sites located anywhere in the world.  We generally install standardized equipment at each remote site, which allows us to provide support and maintenance services for our equipment in a cost-efficient manner. Not all of the components of equipment that we install at each site are the same, but the components that vary are limited in number and tend to be the same for sites located in the same geography.  As of December 31, 2019, 2020, we contracted capacity from 5564 satellites that are co-located at 2116 teleports and 2725 datacenters

worldwide in order to provide our end-to-end solutions. By leasing rather than owning our satellite capacity and backhaul and owning the on-site equipment at each site, we are able to both minimize the capital investment required by the base network infrastructure and maintain the flexibility to install high-quality equipment at each site tailored to its locale and environmental conditions. We do own and manage the IP layer end-to-end. The standardized nature of our equipment minimizes execution risk, lowers maintenance and inventory carrying costs, and enables ease of service support.  In addition, we are able to remain current with technology upgrades due to our back-end flexibility. Our product and service portfolio offers best-in-class technology platforms using the optimal suite of communications and networking capabilities for customers.  

Customized Systems Integration solutions provided by expert telecoms systems engineers: We provide global customized Systems Integration solutions.  As the demand for additional telecommunications products and telecoms systems increases with each new technological advance, the need for well-designed, efficient and reliable network infrastructures becomes increasingly vital to customers. Our solutions are custom-designed, built and tested by expert engineers based on the customer’s specifications and requirements, as well as international industry standards and best practices.  For those customers requiring reliable remote communications services, maintenance and support services and customized solutions for their network infrastructures, RigNet provides a one-stop-shop to satisfy these demands.

Flexible, provider-neutral technology platform:  Because we procure communications connections and network equipment from third parties, we are able to customize the best solution for our customers’ needs and reduce our required fixed capital investments.  We aim to preserve the flexibility to select particular service providers and equipment so that we may access multiple providers and avoid downtime if any of our initial providers were to experience any problems.  By procuring bandwidth from a variety of communications providers instead of owning our own satellites, we are able to minimize capital investment requirements and can expand our geographic coverage in response to customers’ needs with much greater flexibility.

Long-term relationships with leading companies in the oil and gas, maritime, pipeline, and engineering and construction industries:  We have established relationships with some of the largest companies in the oil and gas, maritime, pipeline and engineering and construction industries.  Some of our key customers are the leading drilling contractors around the world, with combined fleets of hundreds of rigs, as well as leading oil and gas, oilfield service, maritime, pipeline and engineering and construction companies.  In most cases, these customers have high standards of service that favor strategic providers such as RigNet and work in partnership with us to serve their remote operations.

The ability to design and implement a broad range of communication solutions using a range of frequencies and modes of communication: We have the ability to design and implement a broad range of communication solutions using a range of frequencies and modes of communication. These modes of communication include wireless satellite Ku, Ka, C and L frequency bands, wireless WiMAX and Line-of-Sight (LOS) microwave, 3G and 4G LTE services, and 5G-capabilities.  This range of communications solutions allows us to offer competitive and reliable communications solutions in a broad range of remote geographic locations where our customers operate. This helps us meet our customers’ requirements for choosing their provider(s) based on network availability while factoring in price.

Environmental, Social and Corporate Governance (ESG)

We believe that the digital transformation solutions that we deliver will lead to a safer and more sustainable energy industry. With our highly reliable network and real-time machine learning solutions, our customers can optimize the efficiency of their own operations and monitor and respond to high priority issues faster and with better information. Some of the solutions we have developed to enhance safety and sustainability include:

Finally, we are committed to practicing good corporate governance. We believe that a strong, diverse board and management, following good governance practices and engaging in robust discussion and debate will deliver better results to all of our stakeholders, including shareholders, customers, suppliers, employees, and the communities in which we work. We encourage investors to visit the Corporate Responsibility section of our website. The information found on our website is not incorporated into this Annual Report on Form 10-K.

Suppliers

Although we have preferred suppliers of technology, telecommunications, and networking equipment, nearly all technology utilized in our solutions is available from more than one supplier.

In addition, we do not rely on one satellite provider for our entire satellite bandwidth needs except for certain instances in which only one satellite bandwidth provider is available in an operating location, which is typically due to licensing restrictions or where only one satellite provider can offer a particular bandwidth. This approach generally allows us the flexibility to use the satellite provider that offers the best service for specific areas and to change providers if one provider experiences any problems.

Competition

The technology and remote telecommunications industry is highly competitive.  We expect competition in the markets that we serve to persist, intensify and change.  We face varying degrees of competition from a wide variety of companies, including potential new entrants from providers to adjacent vertical markets and from forward integration by some of our suppliers deeper in the industry value chain.

Our primary global competitor in MCS is Speedcast International Ltd. Both Panasonic, through its ITC Global subsidiary, Tampnet and TampnetMarlink, each of which have expanded their presence as active providers of communications services to the oil and gas, mining and maritime markets.  We also compete with regional competitors in the countries in which we operate.  Specifically, in our U.S. onshore operations, we face competition from: wireless network providers, drilling instrumentation providers, living quarters companies, and other pure-play providers like us.

With the downturn in the oil and gas industry, price-based competition has become more important.  However, our customers require high quality and availability of the service as well as a provider with the ability to restore service quickly when there is an outage.  Breadth of service offerings are also important to our oil and gas customers. Our customers depend on maximum availability, quality and continuity of products and services.

While we experience competition in our markets, we believe that our Apps & IoT offerings are a key differentiator that strategically aligns with our customers’ need to achieve digital transformation and business synergy goals.  However,as our serviceable market has seen significant expansion due to our organic and inorganic growth in Apps & IoT, so has our competitor list.  Our competitors now include IBM, Microsoft, Google, Kongsberg Gruppen and other smaller pure-play providers, as well as large, established oilfield technology providers like Schlumberger and Haliburton. Additionally, in the SI space, we compete primarily with ABB Ltd., Speedcast, and other construction contractors.

Our customers choose the accelerated speed and value created by a vertically aligned stack. We believe that we are unique in our vertical offering of Apps & IoT solutions over-the-top of our MCS offering.

Employees

As of December 31, 2019, we had approximately 625 full-time employees consisting of 296 in North America, 149 in Latin America, 105 employees in Europe/Africa and 75 employees in the Middle East and the Asia Pacific.

Geographic Information

See Note 12 — “Segment Information,” in our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding revenues and assets attributable to our domestic and international operations.

Other Information

Corporate Structure and History

We were incorporated in Delaware on July 6, 2004. Our predecessor began operations in 2000 as RigNet, Inc., a Texas corporation. In July 2004, our predecessor merged into us. The communications services we provide to the

offshore drilling and production industry were established in 2001 by our predecessor, who launched initial operations in the Asia Pacific region. Through companies recently acquired, our experience dates back more than 40 years. We have since evolved into one of the leading global providers of remote communications services.

Principal Executive Offices

Our corporate headquarters is located at 15115 Park Row Blvd, Suite 300, Houston, Texas.  Our main telephone number is +1 (281) 674-0100.

Company Website and Available Information

The Company’s internet website is www.rig.net.  The information found on our website is not incorporated into this Annual Report on Form 10-K. The Company makes available free of charge on its website Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act). This information can also be found on the SEC website at www.sec.gov.

In addition, in the “Governance” section of the Investors page on our web site, we make available our code of ethics and business conduct, our corporate governance guidelines, the charters for our audit, compensation, and corporate governance and nominating committees and various other corporate governance policies and documents.

Additionally, in the “Corporate Responsibility link on our main website contains important information about our Environmental, Social and Governance (ESG) initiatives including relevant information on policies, safety performance, and employee statistics, as well as our commitment to following good corporate governance practices.

Smaller Reporting Company Status

In June 2018, the SEC issued Release 33-10513; 34-83550, Amendments to Smaller Reporting Company Definition, which changed the definition of a smaller reporting company in Rule 12b-2 of the Exchange Act. Under this release, the new thresholds for qualifying are (1) public float of less than $250 million or (2) annual revenue of less than $100 million and a public float of less than $700 million (including no public float). Under the amended rule, RigNet now qualifies as a smaller reporting company. A smaller reporting company may choose to comply with scaled or non-scaled financial and non-financial disclosure requirements on an item-by-item basis. The Company may determine to provide scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a smaller reporting company under SEC rules.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended, that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control.  These statements may include statements about:

Forward-looking statements may be found in Item 1. “Business;” Item 1A. “Risk Factors;” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other items within this Annual Report on Form 10-K.  In some cases, forward-looking statements can be identified by terminology such as “may,” “could,” “should,” “would,” “expect,” “plan,” “project,” “intend,”, “will”, “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms and other comparable terminology that convey uncertainty of future events or outcomes. All of these types of statements, other than statements of historical fact included in this Annual Report on Form 10-K, are forward-looking statements.  

The forward-looking statements contained in this Annual Report on Form 10-K are largely based on Company expectations, which reflect estimates and assumptions made by management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors.  Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control.  In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Annual Report on Form 10-K are not guarantees of future performance, and it cannot assure any reader that such statements will be realized, or the forward-looking statements or events will occur. Risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements include, without limitation:

If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual future results, performance or achievements may vary materially from any projected future results, performance or achievements expressed or implied by these forward-looking statements. The forward-looking statements speak only as of the date made, and other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Government Regulation

The following is a summary of the regulatory environment in which we currently operate and does not describe all present or proposed international, federal, state and local legislation and regulations affecting the communications industry, some of which may change the way the industry operates as a result of administrative or judicial proceedings or legislative initiatives.  We cannot predict the outcome of any of these matters or the impact on our business.

The telecommunications industry is highly regulated. Most of the services we provide in our MCS segment require licenses or approvals from regulatory authorities in various countries. In the United States, we are subject to the regulatory authority of the Federal Communications Commission (FCC). Regulation of the telecommunications industry continues to change rapidly. Our U.S. services are currently provided on a private carrier basis, rather than a common carrier basis, and are therefore subject to lighter regulation under the U.S. Communications Act of 1934, as amended (the Act), and the regulations of the FCC. If the FCC determines that the services of RigNet or its subsidiaries constitute common carrier offerings subject to common carrier regulations, we may be subject to

significant costs to ensure compliance with the applicable provisions of those laws and regulations. We may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, or other penalties if we fail to comply with all applicable requirements.

For our U.S. business, we maintain licenses with rights to the electromagnetic spectrum, including fixed microwave licenses, very small aperture terminal (VSAT) earth station licenses, various private and commercial mobile radio service licenses, and various wireless licenses.  Failure to maintain appropriate licenses could subject RigNet to fines imposed by the FCC. 

The FCC constantly reviews spectrum policy to ensure it is in alignment with national communications strategy.  One such example is the Facilitate America’s Superiority in 5G Technology (FAST), whereby the FCC aims to propel the United States into global 5G leadership. As part of such strategies, the FCC may decide to reallocate spectrum or introduce spectrum sharing among various services. If the FCC introduces spectrum sharing in the frequency bands where RigNet has existing licenses, the new services could cause harmful interference to RigNet’s network and thus degrade its quality. RigNet may not be able to migrate to other frequency bands without incurring significant equipment and logistics costs.

As a non-dominant international and domestic communications carrier, among other requirements, RigNet must pay various fees including contribution of a percentage of its revenues from telecommunications services to the FCC’s Universal Service Fund (USF) and other federal program funds to subsidize certain user segments, file various reports, and comply with rules that protect customer information and the processing of emergency calls. RigNet is also subject to the Communications Assistance for Law Enforcement Act (CALEA) and associated FCC regulations that require telecommunications service providers to configure their networks to facilitate electronic surveillance by law enforcement authorities.

Like the FCC, the state public utility commissions (PUCs) impose various regulatory fees, universal service requirements, reporting and prior approval requirements for transfer or assignments. The FCC and state PUCs have jurisdiction to hear complaints regarding the compliance or non-compliance with these and other carrier requirements of the Act and the FCC’s rules, and similar state laws and regulations.  

If the FCC or any state PUC determines that RigNet has not complied with federal and/or state regulatory requirements, we may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, license revocation, or other penalties.

Several proceedings pending before the FCC have the potential to significantly alter our USF contribution obligations. The FCC is considering: (1) changing the basis upon which USF contributions are determined from a revenue percentage measurement, as well as increasing the breadth of the USF contribution base to include certain services now exempt from contribution; (2) the classification of MPLS; and (3) the classification of various IP-enabled services. Adoption of these proposals could have a material adverse effect on our costs of providing service. We are unable to predict the timing or outcome of these proceedings. We cannot predict the application and impact of changes to the federal or state USF contribution requirements on the communications industry generally and on certain of our business activities in particular.

We must generally register to provide our telecommunications services in each country in which we do business. The foreign laws and regulations governing these services are often complex and subject to change with short or no notice. At times, the rigs or vessels on which our equipment is located and to which our services are provided will need to operate in a new location on short notice, and we must quickly make regulatory provisions to provide our services in such countries. Failure to comply with any of the laws and regulations to which we are subject may result in various sanctions, including fines, loss of authorizations and denial of applications for new authorizations or for renewal of existing authorizations.

We must comply with export control laws and regulations, trade and economic sanction laws and regulations of the United States and other countries with respect to the export of telecommunications equipment and services. State and local regulations additionally apply to certain aspects of our business. We are also subject to various anti-corruption laws, including the Foreign Corrupt Practices Act, that prohibit the offering or giving anything of value to government officials for the purpose of obtaining or retaining business or for gaining an unfair advantage.

Employees

As of December 31, 2020, we had approximately 658 full-time employees consisting of 275 in North America, 197 in Latin/South America, 113 employees in Europe/Africa and 73 employees in the Middle East and the Asia Pacific.

Geographic Information

See Note 12 — “Segment Information,” in our consolidated financial statements included in this Annual Report on Form 10-K for more information regarding revenues and assets attributable to our domestic and international operations.

Other Information

Corporate Structure and History

We were incorporated in Delaware on July 6, 2004. Our predecessor began operations in 2000 as RigNet, Inc., a Texas corporation. In July 2004, our predecessor merged into us. The communications services we provide to the offshore drilling and production industry were established in 2001 by our predecessor, who launched initial operations in the Asia Pacific region. Through companies recently acquired, our experience dates back more than 40 years. We have since evolved into one of the leading global providers of remote communications services.

Principal Executive Offices

Our corporate headquarters is located at 15115 Park Row Blvd, Suite 300, Houston, Texas.  Our main telephone number is +1 (281) 674-0100.

Company Website and Available Information

The Company’s internet website is www.rig.net.  The information found on our website is not incorporated into this Annual Report on Form 10-K. The Company makes available free of charge on its website Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. This information can also be found on the SEC website at www.sec.gov.

In addition, in the “Governance” section of the Investors page on our web site, we make available our code of ethics and business conduct, our corporate governance guidelines, the charters for our audit, compensation, and corporate governance and nominating committees and various other corporate governance policies and documents.

Additionally, in the “Corporate Responsibility link on our main website contains important information about our Environmental, Social and Governance (ESG) initiatives including relevant information on policies, safety performance, and employee statistics, as well as our commitment to following good corporate governance practices.

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Exchange Act that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These statements may include statements about:

Forward-looking statements may be found in Item 1. “Business;” Item 1A. “Risk Factors;” Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other items within this Annual Report on Form 10-K.  In some cases, forward-looking statements can be identified by terminology such as “may,” “could,” “should,” “would,” “expect,” “plan,” “project,” “intend,”, “will”, “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms and other comparable terminology that convey uncertainty of future events or outcomes. All of these types of statements, other than statements of historical fact included in this Annual Report on Form 10-K, are forward-looking statements.  

The forward-looking statements contained in this Annual Report on Form 10-K are largely based on Company expectations, which reflect estimates and assumptions made by management. These estimates and assumptions reflect management’s best judgment based on currently known market conditions and other factors.  Although the Company believes such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond its control.  In addition, management’s assumptions may prove to be inaccurate. The Company cautions that the forward-looking statements contained in this Annual Report on Form 10-K are not guarantees of future performance, and it cannot assure any reader that such statements will be realized, or the forward-looking statements or events will occur. Risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements include, without limitation:

If one or more of these factors materialize, or if any underlying assumptions prove incorrect, our actual future results, performance or achievements may vary materially from any projected future results, performance or achievements expressed or implied by these forward-looking statements. The forward-looking statements speak only as of the date made, and other than as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Item 1A.  Risk Factors

Factors that could materially affect our business, financial position, operating results or liquidity and the trading price of our common stock are described below. This information should be considered carefully, together with other information in this report and other reports and materials we file with the SEC.

The announcement and pending agreement to merge with Viasat may adversely affect our business, financial condition, results of operations and stock price.

Uncertainty relating to the pending Viasat Merger could have an adverse effect on our employees, customers, partners and other third parties that may materially disrupt key business activities and may adversely impact our financial condition, results of operations and stock price. Moreover, we are subject to various additional risks in connection with the announcement and pendency of the Viasat Merger, including:

Any failure of the pending Viasat Merger to be completed may adversely affect our business, financial condition, results of operations, and stock price.

Each of our and Viasat’s obligations to complete the Viasat Merger is subject to a number of conditions in the Viasat Merger Agreement, including among others (i) the adoption of the Viasat Merger Agreement by holders of a majority of the outstanding shares of our common stock; (ii) the expiration or termination of review under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (iii) the receipt of certain other material regulatory consents and approvals; (iv) the authorization for listing of shares of Viasat common stock to be issued in the Viasat Merger on Nasdaq; (v) the absence of any court order or regulatory injunction prohibiting completion of the Viasat Merger; (vi) subject to specified materiality standards, the accuracy of the representations and warranties of each party; (vii) compliance by each party in all material respects with covenants; (viii) the absence of any effects that have constituted or resulted in, or would reasonably be expected to constitute or result in, a material adverse effect with respect to either party; and (ix) the receipt by each party of closing tax opinions. There can be no assurance that these conditions to the completion of the Viasat Merger will be satisfied within the timeframe specified in the Viasat Merger Agreement or at all.

Regulatory and governmental authorities may impose conditions on the granting of the required regulatory approvals, including divestitures of certain assets or businesses, which may result in extended negotiations among these entities, Viasat and us, which may delay completion of the Viasat Merger and increase the risk that the Viasat Merger may not be completed.

If the Viasat Merger is not completed, our stock price could decline to the extent that our current share price reflects an assumption that the Viasat Merger will be completed. Furthermore, if the Viasat Merger is not completed, we may suffer other consequences that could adversely affect our business, financial condition, results of operations and stock price, including the following:

The COVID-19 pandemic has significantly reduced demand for our services, and has had, and may continue to have, a material adverse impact on our financial condition, results of operations and cash flows.

The effects of the COVID-19 pandemic, including actions taken by businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have adversely affected the demand for oil and natural gas, as well as for our services. The collapse in demand for oil caused by this unprecedented global health and economic crisis, coupled with oil oversupply, has had and is reasonably likely to continue to have, a material adverse impact on the demand for our services. The decline in our customers’ demand for our services has had and is likely to continue to have, a material adverse impact on our financial condition, results of operations and cash flows.

While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on commodity demands and on our customers, as well as on our operations and employees.  These effects have included and may continue to include adverse revenue, net income, and Adjusted EBITDA effects; disruptions to our operations; customer shutdowns of oil and gas exploration and production; employee impacts from illness, school closures and other community response measures; and temporary closures of our facilities and the facilities of our customers and suppliers.

The extent to which our operating and financial results continue to be affected by COVID-19 will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic; additional actions taken by businesses and governments in response to the pandemic; and the speed and effectiveness of responses to combat the virus. COVID-19 may also materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.

Recently, we have experienced increased cancellations of platform space agreements which are having a material adverse effect on our Gulf of Mexico infrastructure.

We enter License of Platform Space (LOPS) agreements with operators of platforms in the Gulf of Mexico to place equipment necessary for our WiMax, microwave and LTE networks in the Gulf of Mexico.  These agreements allow the operator to cancel the agreement with short notice periods if the operator intends to decommission or abandon the platform.  The downturn in demand for oil and gas triggered by the COVID-19 outbreak has led to a high number of notifications of cancelations of our LOPS agreements. When LOPS agreements are cancelled, we have to relocate equipment to another platform in order to maintain our network infrastructure.  These moves increase our costs and may have a material adverse effect on our financial results.  In addition, we cannot guarantee that alternative platform space is available for all required network moves resulting from the cancellation of LOPS agreements.  Failure to secure alternative space could result in gaps in our network coverage or degraded network performance and could have a material adverse effect on our financial condition, results of operations and cash flows.

A large portion of our business fluctuates with the level of global oil and natural gas exploration, development and production, as a large portion of our customers are energy-related.

Demand for our remote communication services and collaborative applications depends on our customers’ willingness to make operating and capital expenditures to explore, develop and produce oil and natural gas. Our business will suffer if these expenditures decline. Our customers’ willingness to explore, develop and produce oil and natural gas depends largely upon prevailing market conditions that are influenced by numerous factors over which we have no control, including:

Oil and gas prices are volatile, and the oil and gas business is cyclical. When prices are perceived as being too low to generate acceptable returns, companies reduce expenditures for exploration and production. Oil prices declined

significantly in the last quarter of 2018 and remained depressed throughout 2019. At the start of 2020, oil prices significantly decreased further largely as a result of anticipated declines in demand from the coronavirus outbreak. Subsequently, in March 2020, the Saudi state producer, Aramco, reducedreducing crude pricing in response to a split and price war with Russia. Following the Saudi reduction in pricing, Brent crude spot prices declined steeply to a mid-30 dollar per barrel range. As a result, we have seen a material decline in the demand for our products and services and significant pressure on the prices we can charge.  Furthermore, our customers have experienced declines in their cash flows which has led to delays in payment, or nonpayment, for our products and services.  Commodity price declines and increased volatility have particularly affected our customers’ budgets for offshore capital investments and expenditures, which has had a material and adverse effect on our addressable market.  

Furthermore, the coronavirusCOVID-19 pandemic has increased the volatility of oil and gas prices and has caused delays, supply chain disruptions and travel restrictions that have impacted the oil and gas industry and certain projects in the Asia Pacific region.

These conditions have had and may continue to have, a material adverse effect on our financial condition, results of operations and cash flows.

Continued growth in satellite capacity has adversely affected our MCS segment revenues.

New digital applications are driving demand growth for bandwidth in our core MCS segment.  However, we also continue to see growth in available satellite capacity and expect that growth to continue over the intermediate-term. While we have experienced bandwidth price declines from our satellite suppliers, due to competition for our oil and gas customers and declining capital investment by our customers, we have passed much of our realized savings onto our customers. While our site count has increased in the MCS segment, our revenue has continued to decline.  If satellite capacity growth continues to outstrip demand growth or is expected to continue, we may be forced to reduce our prices in the MCS segment further, which could have a material adverse effect on our financial condition, results of operations and cash flows.

If we fail to timely collect receivables, our business and financial results may be harmed.

Some of our customers in the oil and gas industry have been through bankruptcy proceedings or other restructurings.  In addition, as the global oil and gas industry has continued to experience reduced activity, many of our customers have unilaterally extended their payment practices.  We actively manage our credit exposures and accounts receivable collections, but restructuring or insolvency proceedings by our largest customers, or continued lengthening of payment cycles could significantly and materially harm our business, financial condition and results of operations.

Our industry is characterized by rapid technological change, and if we fail to keep pace with these changes or if access to telecommunications in remote locations becomes easier or less expensive, our business, financial condition and results of operations may be harmed.

Recently some remote communications providers are offering the use of LTE and high-throughput satellite (HTS) service, instead of or in addition to the conventional Ku-band, Ka-Band, and C-band satellite space segments used today.  Our business may be harmed if our competitors are more successful than us in introducing LTE and or HTS services to meet customer needs.  

If alternative telecommunications services to remote locations become more readily accessible or less expensive, our business will suffer. New disruptive technologies could make our VSAT-based networks or other services obsolete or less competitive than they are today, requiring us to reduce the prices that we are able to charge for our services or causing us to undergo expensive transitions to new technologies.  We may not be able to successfully respond to new technological developments and challenges or identify and respond to new market

opportunities, services or solutions offered by competitors.  In addition, our efforts to respond to technological innovations and competition may require significant capital investments and resources. Furthermore, if we invest either organically or through acquisition in new technology and any such technology is not successful, our business, financial conditions and results of operations may be harmed.

Our business model has historically required significant capital expenditures to win new business.  To the extent we are unsuccessful in shifting some of those capital expenditures to our customers or suppliers, our business, financial condition and results of operations may be harmed.

Historically we have purchased much of the equipment to provide new services to our customers and recovered the cost of that equipment through service charges over the life of the contract.  This business model requires large capital expenditures at the start of new customer contracts.  We are attempting to shift some of the upfront capital expenditures to our customers and/or suppliers through new contractual arrangements with them.  However, we may be unsuccessful in shifting those required capital investments to our customers and/or suppliers.  To the extent we are unable to finance growth capital or to change our business model, our business, financial condition and results of operations may be harmed. Furthermore, future new technologies could be capital intensive and may require capital expenditures in order for us to remain competitive.

Failure to obtain and retain skilled personnel could impede our business and growth strategy.

Our operations depend on a highly qualified executive, sales, technical, development, service and management team. Competition for personnel talent in the artificial intelligence, machine learning, engineering and cybersecurity industry is intense, and these roles are critical to our operation. Additionally, at our 2020 annual meeting of stockholders we are seeking approval to add additional shares to our 2019 Omnibus Incentive Plan.  If stockholders fail to approve this amendment, we will not have sufficient shares available for future inducement and retention awards.  If we are unable make future awards, our ability to attract and retain qualified personnel will be materially affected. Failure to attract, recruit, retain and develop qualified personnel could have a material adverse effect on our business, financial condition and results of operations.

In the event that our cybersecurity measures fail or are otherwise inadequate, our systems or reputation may be damaged which could harm our business, financial conditions and results of operations. Further, failure to comply with data privacy requirements applicable to us could result in costly regulatory enforcement actions and the imposition of significant penalties.

We rely heavily on information systems to run our business and our customers rely on our networks and security measures in running their businesses.  Given that our customers own and operate critical infrastructure, the nature of cybersecurity threats are advanced and persistent.  There can be no assurance that the systems we have designed to prevent or limit the effects of cyber incidents or attacks will be sufficient to prevent or detect such attacks.  If such incidents or attacks do occur, they could have a material impact on our systems including degradation of service, service disruption, excessive call volume to call centers and damage to our facilities, equipment and data. In addition, we could be adversely affected by the theft or loss of confidential customer data or intellectual property. With the acquisition of Cyphre, we now market our cybersecurity services as an expertise.  A successful cyberattack against us or one of our cybersecurity customers may create negative publicity resulting in reputation or brand damage with customers.  We may be required to expend significant resources to protect against these events or to alleviate problems, including reputational harm, customer loss and litigation, caused by these events or the failure or inadequacy of our security systems, which could have a material adverse effect on our business, financial condition and results of operations.

In a widely publicized attack in 2020, SolarWinds software, which we utilize for certain network management and monitoring functions, was compromised by alleged foreign State Actors. The Company learned of this hack on December 14, 2020 when the owner of SolarWinds notified the public. By December 15, 2020, we determined that we had not updated to the infected patch because of our policy of waiting to implement patches until they had been thoroughly market tested. Nevertheless, we installed the fix and upgraded to the latest version of SolarWinds in January 2021. There can be no assurance that the Company will successfully avoid future attacks which could have a material adverse effect on our reputation, business, financial condition and results of operations.  Furthermore, our policy of waiting for patches to be market tested could lead to other vulnerabilities which could have a material adverse effect on our reputation, business, financial condition, and results of operations.

Further, the regulatory framework for privacy issues worldwide is complex and evolving, and we believe it is likely to remain uncertain for the foreseeable future. Many federal, state and foreign government entities and agencies have adopted or are considering adopting laws and regulations regarding the collection, use and disclosure of personal information. In the United States, these include rules and regulations promulgated under the authority of the Federal Trade Commission and state breach notification laws. Internationally, certain of the jurisdictions in which we operate have established their own data security and privacy legal framework with which we must

comply. For example, the European Union has issued the General Data Protection Regulation (GDPR), which applies to anyone doing business in Europe. In general, GDPR sets a higher bar for privacy compliance, including new data subject rights, new mandatory security breach notification requirements, requirements to conduct data protection impact assessments and extensive record-keeping requirements. Failure to comply with GDPR can have significant consequences, including substantial fines and reputational damage. We continue to analyze the GDPR in respect of its burden and applicability to our global business operations. We may fail to comply with any of these requirements, and compliance with these requirements may increase our compliance burden and costs.

We have made and may in the future make selective acquisitions.  We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, or such acquisitions may underperform, which could disrupt our operations and adversely impact our business and operating results.

Although we presently do not have any acquisitions under consideration as of this filing, acquisitions have been a critical part of our strategy in the past and maybe in the future.  Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results to differ from our expectations.  For example:

In addition, our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of key customers or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent liabilities of acquired businesses or assets.

If we fail to conduct due diligence on our potential targets effectively, we may not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration.  Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations.  The integration process may disrupt and, if new technologies, products or businesses are not implemented effectively, may preclude the realization of the full benefits expected by us and could harm our results of operations.  In addition, the overall integration of new technologies, products or businesses may result in unanticipated problems, expenses, liabilities and competitive responses.  The difficulties in integrating acquisitions include, among other things:

In addition, even if we integrate successfully the operations of an acquisition, we may not realize the full benefits of the acquisition, including the synergies or growth opportunities we expect.  These benefits may not be achieved within the anticipated time frame, or at all.

Further, acquisitions may cause us to:

Furthermore, our acquisitions may not yield the value anticipated at the time of the acquisition, or may underperform.

Attempts to enter new verticals may not be successful.

As part of our growth strategy, we attempt to enter new verticals, and offer new and innovative products and services. We have and intend to enter new verticals and launch new products both organically and through selective mergers and acquisitions.products. Our attempts to enter new verticals and launch new products and services may not be successful, costing us money and diverting management time and attention.

Our customers may terminate many of our contracts on short notice without penalty, which could harm our business, financial condition and results of operations.

Customers may switch service providers without incurring significant expense relative to the annual cost of the service. Our contracts generally provide that in the event of prolonged loss of service or for other good reasons, our customers may terminate service without penalty. In addition, some of our contracts may be terminated by our customers for no reason and upon short notice. Terms of contracts typically vary with a range from short-term call out work to five years.  Work orders placed under such agreements may have shorter terms than the relevant customer agreement. As a result, we may not be able to retain our customers through the end of the terms specified in the contracts, resulting in harm to our business, financial condition and results of operations.

Our updated credit agreementCredit Agreement requires us to maintain certain financial covenant ratios. These ratios may limit our capacity to finance our growth strategy and operations. Furthermore, if we fail to comply with the covenants contained in our credit facility,Credit Agreement, including as a result of events beyond our control, technical or other default could result, which could materially and adversely affect our operating results and our financial condition.

Our credit agreement contains certain covenants and restrictions, including restricting the payment of cash dividends under default and maintaining certain financial covenants such as a consolidated fixed charge coverage ratio of not less than 1.25 to 1.00. Additionally, the Credit Agreement requires a consolidated leverage ratio, as defined in the Credit Agreement, of less than or equal to 3.253.00 to 1.00 as of December 31, 2019.2020. The consolidated leverage ratioConsolidated Leverage Ratio requirement then decreasessteps down to 3.00 to 1.00 for three quarters as of June 30, 2020, and then decreases to 2.75 to 1.00 for all remaining quarters.quarters after June 30, 2021. If any default occurs related to these covenants that is not cured or waived, the unpaid principal and any accrued interest can be declared immediately due and payable. The facilitiesRCF under the credit agreementCredit Agreement are secured by substantially all the assets of the Company.

If we approach our covenant limits, we will be limited in our ability to finance capital and operating expenditures and any acquisitions we may pursue in the future. Should this happen we would pursue additional financing, through either debt and / or equity offerings. We may incur financing and legal fees attempting to amend our current Credit Agreement, or in pursuing other debt and or equity financing. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.

Our growth strategy may require substantial capital expenditures.  We may be unable to obtain required capital or financing on satisfactory terms.

To support our growth strategy, we expect to continue to make substantial capital expenditures and may in the future make select acquisitions.expenditures. Many of our customers now demand newer HTS services, requiring significant capital expenditures to upgrade equipment.  We expect to fund capital expenditures, and acquisitions, if any, with cash generated by operations and borrowings under our revolving credit facilityRCF or capital markets transactions; however, our financing needs may require us to alter or increase our capitalization substantially through the issuance of debt or

equity securities. The issuance of additional indebtedness would require that a portion of our cash flow from operations be used for the payment of interest and principal on our indebtedness, thereby reducing our ability to use cash flow from operations to fund working capital, capital expenditures and acquisitions. Furthermore, raising equity capital would generally dilute existing stockholders. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.  

Our strategy of moving up the technology stack entails entering new business lines that could fail to attract or retain users or generate revenue.

A key element of our growth strategy is to move up the technology stack, that is to leverage our existing network to provide application layer solutions to our network customers.  In 2017, we began reporting a new segment, Apps & IoT, to capture results from these new OTT services, such as SCADA, MetOcean, BlackTIE, CyphreLink and Advanced Video Intelligence.  In addition, in 2018, we acquired Intelie which provides us a real-time machine-to-machine learning offering, Intelie LIVE.  We continue to expect to invest in new lines of business, new products and other new initiatives to generate revenue.  Our customers may not adopt some of our new offerings.  These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues.  In addition, profitability, if any, in our newer activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our investments in them.  Furthermore, efforts at establishing new lines of business could divert management attention from our core MCS network and Systems Integration businesses.  If any of this were to occur, it could damage our reputation, limit our growth and negatively affect our operating results.

We rely on third parties, particularly satellite owners, to provide products and services for the operation of our business.  Failures by third-party providers have caused, and in the future could cause, service interruptions, harm our business and reputation and result in loss of customers and revenue.

A significant part of our operations and growth depends on third-party providers delivering reliable communications connections, networks, equipment, maintenance, repair and satellite transponder capacity, subjecting our business, reputation and customer revenue to risks beyond our control, such as:

Our results in 2019 2018 and 20172018 were negatively impacted by certain satellite outages and interruptions by certain of our providers.  These incidents caused RigNet to lose forecasted revenues and to experience increased costs as we had to make alternative arrangements for our customers.  We cannot assure you that we will not suffer future satellite outages or that any potential future outage will not have a material impact on our business, results of operations or financial condition.  Under most of our contracts with satellite service providers, our satellite service providers do not indemnify us for such loss or damage to our business resulting from certain risks, including satellite failures. If any potential claims result in liabilities, we could be required to pay damages or other penalties.

If we lose the right to use or upgrade any products or services provided by a third-party, our customers could experience delays or be unable to access our own services until we can obtain and integrate equivalent technology. There might not always be commercially reasonable hardware or software alternatives to the third-party infrastructure,

products and services that we currently license for our operations. Any such alternatives could be more difficult or costly to replace than the third-party infrastructure, products and services we currently use, and integration of the alternatives into our operations could require significant work and substantial time and resources. Any delays or failures associated with our operations may injure our reputation with customers and potential customers and result in an adverse effect on our business, results of operations and financial condition.

Failure of our Line-of-Site network or loss of platform access could materially impact our results of operations.

Our microwave network is a Line-of-Site (LOS) system that operates by relaying microwave communications from one microwave site to another that must be within visible sight. Furthermore, our LTE network is built on the existing infrastructure of our microwave network. We secure access to our customers’ offshore platforms to house our LOS, microwave and LTE network, but the agreements are subject to termination for various reasons, including decommissioning of the platform.  When a microwave site on a microwave relay is rendered inoperable subsequent dependent sites can also be rendered inoperable. As such the risk of a LOS, microwave or LTE site being rendered inoperable by weather, technical failure, loss of access to an operator’s platform space or other means will likely negatively affect other dependent microwave sites. We do not insure for loss of a LOS, microwave or LTE site or business interruption caused by the loss of such a site as we believe the cost of such insurance outweighs the risk of potential loss, so the loss of a LOS, microwave or LTE site or any business interruption could require us to spend significant capital to restore network service and / or harm our business, financial condition and results of operations.

We are subject to anti-corruption and export control laws that have stringent compliance standards.

We are subject to a number of applicable export control laws and regulations of the United States as well as comparable laws of other countries. We cannot provide services to or in certain countries subject to United States trade sanctions administered by the Office of Foreign Asset Control of the United States Department of the Treasury or the United States Department of Commerce unless we first obtain the necessary authorizations. If our customers move their sites into countries subject to certain sanctions, we may not be able to serve them, in which case, our revenues will be adversely impacted, and we may incur additional costs. In addition, we are subject to the Foreign Corrupt Practices Act and other anti-corruption laws that, generally, prohibit bribes or unreasonable gifts to governments or officials. Violations of these laws or regulations could result in significant additional sanctions including fines, more onerous compliance requirements, and more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. In certain countries, we engage third-party agents or intermediaries to act on our behalf in dealings with government officials, such as customs agents, and if these third-party agents or intermediaries violate applicable laws, their actions may result in penalties or sanctions being assessed against us.

Many of our potential customers are resistant to new solutions and technologies, which may limit our growth.

Although there is a strong focus on technology development within the oil and gas industry, some of the companies in the upstream oil and gas industry are relatively conservative and risk-averse with respect to adopting new solutions and technologies in the area of remote communications. As a result of the sustained downturn in oil and gas prices, many of our customers focus on price rather than the value new technologies bring them, further slowing the uptake of new solutions and technologies.  Some drilling contractors, oil and gas companies and oilfield service providers may choose not to adopt new solutions and technology, such as our OTT offerings, which may limit our growth potential.  

Systems IntegrationSI projects are heavily dependent on cost, productivity, schedule and performance management.

We account for Systems IntegrationSI contracts using accounting rules for construction-type contracts.  Factors that may affect future project costs and margins include the price and availability of labor, equipment and materials, productivity, as well as the time necessary to obtain approvals and permits. If we make inaccurate estimates, or if we find errors or ambiguities as to contract specifications or if circumstances change due to, among other things, unanticipated technical problems, changes in local labor conditions, weather delays, changes in the costs of equipment and materials, or our suppliers’ or subcontractors’ inability to perform, or changes in foreign exchange rates, then cost overruns may occur. We may be required to pay liquidated damages upon our failure to meet schedule or performance requirements of our contracts. In accordance with the accounting guidance, we would record a cumulative adjustment to reduce the margin previously recorded on the related project in the period a change in estimate is needed. If the contract is significant, or we encounter issues that impact multiple contracts, cost overruns could have a material adverse effect on our business, financial condition and results of operations.

 The uncertainty of our contract award timing can also present difficulties in matching workforce size with contract needs. In some cases, we maintain and bear the cost of a ready workforce that is larger than necessary under existing contracts in anticipation of future workforce needs for expected contract awards. If an expected contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities which could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, Systems IntegrationSI contracts can require performance bonds, surety bonds and similar instruments. Any inability to secure required performance bonds, surety bonds and similar instruments, could limit business. Although we have not previously had performance bonds, surety bonds and similar instruments called, should such instruments be called in the future, it could have a material adverse effect on our business, financial condition and results of operations.

A significant portion of our revenue is derived from a relatively small number of customers and the loss of any of these customers would materially harm our business, financial condition and results of operations.

Although we continue to diversify our customer base, we still receive a significant portion of our revenue from a relatively small number of large customers, among them being Royal Dutch Shell Plc, Valaris Plc, John Wood Group Plc,Transocean Ltd, Exxon Mobil Corporation, BP Plc, Baker Hughes Company, Seadrill Ltd.,Halliburton Company, Bechtel Corporation, Halliburton Company, McDermott International, Chevron Corporation and Veripos Inc..Seadrill Ltd.. Although none of these customers represents more than 10% of our annual revenue, should one or more of these customers terminate or significantly reduce their business with us and we were not able to replace such revenue, our business, financial condition and results of operations would be materially harmed.  As our top customers are concentrated in energy, should there be any adverse impact on the energy business that caused our customers to reduce demand for our services our financial condition and results of operations would be materially harmed.

We may not be able to compete successfully against current and future competitors.

We expect both product and pricing competition to persist and intensify. Increased competition could cause reduced revenue, price reductions, reduced profits and loss of market share. Our industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology. Our primary global competitor is Speedcast International Ltd. Panasonic, through its ITC Global subsidiary, Marlink and Tampnet Inc. have begun to expand their presence as active providers of communications services to the oil and gas, mining and maritime markets. We also compete with regional competitors in the countries in which we operate. In addition, in certain markets outside of the U.S., we face competition from local competitors that provide their services at a lower price due to lower overhead costs, including lower costs of complying with applicable government regulations and their willingness to provide services for a lower profit margin. Furthermore, in the Apps and IoT space we compete with IBM, Microsoft, Google, Kongsberg Gruppen and other smaller pure-play companies, as well as large, established oilfield technology providers like Schlumberger and Haliburton. Additionally, in the SI space, we compete primarily with Speedcast and ABB Ltd and other construction contractors. Strong competition and significant investments by competitors to develop new and better solutions may make it difficult for us to maintain our customer base, force us to reduce our prices or increase our costs to develop new solutions.

Furthermore, competition may emerge from companies that we have not previously perceived as competitors or consolidation of our industry may cause existing competitors to become bigger and stronger with more resources, market awareness and market share. For example, we have experienced customer projects where we have bid directly against some of our satellite bandwidth providers, either acting alone or in conjunction with one of our direct competitors. Competition with our satellite bandwidth providers, either alone or in restrictive arrangements with our suppliers or competitors may materially and adversely affect the availability and pricing of our products and services.

As we expand into new markets, we may experience increased competition from some of our competitors that have prior experience or other business in these markets or geographic regions. In addition, some of our customers may decide to insource some of the MCS solutions that we provide, in particular our terrestrial communication services (e.g., Line-of-Site (LOS) or Worldwide Interoperability for Microwave Access (WiMAX)), which do not require the same level of maintenance and support as our other services. Our success will depend on our ability to adapt to these competitive forces, to adapt to technological advances, to develop more advanced services and solutions more rapidly and less expensively than our competitors, to continue to develop and deepen our global sales and business development network, and to educate potential customers about the benefits of using our solutions rather than our competitors’ services or in-sourced solutions. Our failure to successfully respond to these competitive challenges could harm our business, financial condition and results of operations.

Our international operations are subject to additional or different risks than our United States operations, which may harm our business and financial results.

We operate in many countries around the world, including countries in Asia, the Middle East, Africa, Latin America and Europe and intend to continue to expand the number of countries in which we operate. However, because operations in some countries may be temporary, the total number of countries in which we operate fluctuates. There are many risks inherent in conducting business internationally that are in addition to or different than those affecting our United States operations, including:

The authorities in the countries where we operate may introduce additional regulations for the oil and gas and communications industries. New rules and regulations may be enacted, or existing rules and regulations may be applied or interpreted in a manner which could limit our ability to provide our services. Recently, some of our foreign telecommunications regulators have adopted new interpretations of existing regulations when we have renewed our licenses, causing increased costs in certain jurisdictions. Future amendments to current laws and regulations governing operations and activities in the oil and gas industry and telecommunications industry could harm our operations and financial results. Compliance with and changes in tax laws or adverse positions taken by taxing authorities could be costly and could affect our operating results.

Compliance related tax issues could also limit our ability to do business in certain countries. Changes in tax laws or tax rates, the resolution of tax assessments or audits by various taxing authorities, disagreements with taxing authorities over our tax positions and the ability to fully utilize our tax loss carry-forwards and tax credits could have a significant financial impact on our future operations and the way we conduct, or if we conduct, business in the affected countries.

Our intellectual property rights are valuable, and any failure or inability to sufficiently protect them could harm our business and our operating results.

We own, and maintain certain intellectual property assets, including patents, patent applications, copyrights and trademarks, trade secrets, and rights to certain domain names, which we believe are collectively among our most valuable assets. We seek to protect our intellectual property assets through the laws of the U.S. and other countries of the world, and through contractual provisions. However, the efforts we have taken to protect our intellectual property assets and proprietary rights might not be sufficient or effective at stopping unauthorized use of those rights. If we are unable to protect our proprietary rights from unauthorized use, the value of our intellectual property assets may be reduced.

Internal restructuring activities may negatively impact the Company.

Reductions in resources may adversely affect or delay various sales, marketing, product development and operational activities, which could have a material adverse effect on our financial results. Additionally, restructuring activities could have negative effects on our internal control over financial reporting and employee morale.

Information technology infrastructure and systems are critical to supporting our operations, accounting and internal controls; any potential failure of our information technology infrastructure or systems could adversely affect our business, financial conditions and results of operations.

We continue to update and enhance our information systems. If a problem occurs that impairs or compromises this infrastructure, systems upgrades and/or new systems implementations; the resulting disruption could impede our ability to perform accounting, invoice, process orders, generate management reports or otherwise carry on business in the normal course. Any such events could cause us to lose customers and/or revenue and could require us to incur significant expenses to remediate. Additionally, any such events could adversely harm our legal, accounting and compliance capabilities including but not limited to: our ability to (i) timely file reports with the SEC; (ii) maintain effectiveness of internal control; (iii) timely file financial statements required by certain statutes; (iv) timely file compliance reports with our lenders under our credit agreement; and (v) timely file income taxes with the IRS, foreign taxing authorities, and local taxing authorities.

Severe weather in the Gulf of Mexico or other areas where we operate could harm our business, financial condition and results of operations.

Certain areas in and near the Gulf of Mexico and other areas in which our clients operate experience unfavorable weather conditions, including hurricanes and other extreme weather conditions, on a relatively frequent basis. A major storm or threat of a major storm in these areas may harm our business. Our clients’ drilling rigs, production platforms and other vessels in these areas are susceptible to damage and/or total loss by these storms, which may cause them to no longer need our communication services. Our equipment on these rigs, platforms or vessels could be damaged causing us to have service interruptions and lose business or incur significant costs for the replacement of such equipment. Even the threat of a very large storm will sometimes cause our clients to limit activities in an area and thus harm our business. Changing weather conditions could impair satellite connectivity, cause more sites to be shut down and generally cause activities to be limited so that our business may be harmed. This risk is more pronounced for LOS microwave service, as there is a likely loss of service for multiple subsequent microwave sites in the network relay.

Changes in the regulatory framework under which we operate could adversely affect our business prospects or results of operations.

Our U.S. services are provided on a private carrier basis. As such, these services are subject to light or no regulation by the FCC and state PUCs. If the FCC or one or more PUCs or any other telecommunications regulator determine that these services or the services of our subsidiaries or affiliates constitute common carrier offerings or change the regulations applicable to private carriers, we may be subject to significant costs to ensure compliance with the applicable provisions of those laws and regulations. We may be subject to enforcement actions including, but not limited to, fines, cease and desist orders, or other penalties if we fail to comply with those requirements.

Our international operations are also regulated by various non-U.S. governments and international bodies. These regulatory regimes frequently require that we maintain licenses for our operations and conduct our operations in accordance with prescribed standards and requirements. The adoption of new laws or regulations, changes to the existing regulatory framework, new interpretations of the laws that apply to our operations, or the loss of, or a material limitation on, any of our material licenses could materially harm our business, results of operations and financial condition. Recently, some of our foreign telecommunications regulators have adopted new interpretations of existing regulations when we have renewed our licenses, causing increased costs in certain jurisdictions.

The FCC is considering reallocating 6 GHZ technology to allow unlicensed use of this spectrum. Much of our Gulf of Mexico backbone network traffic is carried over 6 GHZ spectrum which we own. Unlicensed use of this spectrum could interfere with our client’s safety critical communications and degrade our overall network performance. Any such interference or degradation of performance could have a material adverse effect on our business, financial condition and results of operations.

If we infringe, or if third parties assert that we infringe, third-party intellectual property rights we could incur significant costs and incur significant harm to our business.

Third parties may assert infringement or other intellectual property claims against us, which could result in substantial damages if it is ultimately determined that our services infringe a third-party’s proprietary rights. Even if claims are without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from our other business concerns.

Many of our contracts are governed by the laws of countries that may make them difficult or expensive to interpret or enforce.

Many of our contracts are governed by the laws of countries other than the U.S., which may create both legal and practical difficulties in case of a dispute or conflict. We operate in regions where the ability to protect contractual and other legal rights may be limited. In addition, having to pursue arbitration or litigation in some countries may be more difficult or expensive than pursuing litigation in the United States.

Some of our stockholders could exert control over the Company.

As of February 28, 2020,2021, funds associated with Kohlberg Kravis Roberts & Co. L.P., or KKR, owned in the aggregate shares representing approximately 25.0%23.8% of our outstanding voting power and have a seat on our board of directors. Additionally, as of February 28, 2020,2021, funds associated with FMR, LLC, owned in the aggregate shares representing approximately 14.8%5.1% of our outstanding voting power, and funds associated with Arrowmark Colorado Holding, LLC, owned in the aggregate shares representing approximately 14.2%6.3% of our outstanding voting power. As a result, any of these stockholders could potentially exert significant influence over all matters presented to our stockholders for approval, including election or removal of our directors and change of control transactions. The interests of these stockholders may not always coincide with the interests of the other holders of our common stock.

We are subject to fluctuations in currency exchange rates and limitations on the expatriation or conversion of currencies, which may result in significant financial charges, increased costs of operations or decreased demand for our services and solutions.

During the year ended December 31, 2019, 9.4%2020, 11.8% of our revenues were earned in non-U.S. currencies, while a significant portion of our capital and operating expenditures and all of our outstanding debt, was priced in U.S. dollars.  In addition, we report our results of operations in U.S. dollars. Accordingly, fluctuations in exchange rates relative to the U.S. dollar could have a material effect on our reported earnings or the value of our assets. In the future, a greater portion of our revenues may be earned in non-U.S. currencies, increasing this risk of fluctuations in exchange rates.

Any depreciation of local currencies in the countries in which we conduct business may result in increased costs to us for imported equipment and may, at the same time, decrease demand for our services and solutions in the affected markets. If our operating companies distribute dividends in local currencies in the future, the amount of cash we receive will also be affected by fluctuations in exchange rates. In addition, some of the countries in which we have operations do or may restrict the expatriation or conversion of currency making such cash unavailable for financing of our global operations and capital investments.

Furthermore, a majority of our cash balances are held outside of the United States.  Repatriating cash to the United States can require paying taxes in one or more countries making the cash available to us less than that reported in our financial statements.

The average daily trading volume of our common stock is low, which can cause price volatility unrelated to our actual operations and performance.

The average daily trading volume of our common stock in 2019 was approximately 49 thousand shares. Due to the low trading volume, our common stock may be subject to more market volatility than other more liquid stocks, without regard to our performance. Stock price volatility and sustained decreases in our share price could subject our stockholders to losses and subject us to takeover bids or lead to action by NASDAQ. The trading price of our common stock has been, and may continue to be, subject to fluctuations in price in response to various factors, some of which are beyond our control, including, but not limited to:

In addition, we have little research analyst coverage which could lead to less independent analysis for stockholders.

We are a smaller reporting company and, as such, our common stock may be less attractive to investors.

We are a smaller reporting company, (i.e. a company with less than $250 million of public float) and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies. We cannot predict if investors will find our common stock less attractive as a result of our smaller reporting company status. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

We may not be entitled to forgiveness of our PPP Loan, and our application for the PPP Loan could in the future be determined to have been impermissible or could result in damage to our reputation.

In May 2020, we borrowed $6.3 under the Paycheck Protection Program of the CARES Act, a portion of which may be forgiven. All or a portion of the PPP Loan may be forgiven by the Small Business Administration (the “SBA”) upon our application in accordance with the forgiveness rules set out in the CARES Act. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered lease payments, covered mortgage interest and covered utilities during the twenty-four-week period beginning on the date the loan is advanced, but not to exceed December 31, 2020. Not more than 40% of the forgiven amount may be for non-payroll costs. In addition, the amount of the PPP Loan eligible for forgiveness related to payroll costs is subject to additional

limitations as outlined in the CARES Act. Although we intend to use the entire PPP Loan for designated qualifying expenses and to apply for forgiveness in accordance with the terms of the Paycheck Protection Program, no assurance can be given that we will obtain forgiveness of the PPP Loan in whole or in part.  Furthermore, on April 28, 2020, the Secretary of the U.S. Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan.

We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, through monthly principal and interest payments. These payments will commence following the end of the deferment period as defined in the PPP Loan. The PPP bears interest at a rate of 1% per annum. We may prepay the principal at any time without penalty.

As part of our application for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, our financial situation and access to alternative forms of capital, and believe that we satisfied all eligibility criteria for the PPP Loan and that our receipt of the PPP Loan is consistent with the broad objectives of the Paycheck Protection Program of the CARES Act. The certification described above does not contain any objective criteria and is subject to interpretation. On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith. The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans. If, despite our good faith belief that given our Company’s circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any of the laws or governmental regulations that apply to us in connection with the PPP Loan, such as the False Claims Act, or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be subject to penalties, including significant civil, criminal and administrative penalties and could be required to repay the PPP Loan in its entirety. In addition, receipt of a PPP Loan may result in adverse publicity and damage to reputation, and a review or audit by the SBA or other government entity or claims under the False Claims Act could consume significant financial and management resources. Any of these events could have a material adverse effect on our business, results of operations and financial condition.

Item 1B.  Unresolved Staff Comments

Not applicable.

Item 2.  Properties

Facilities

Welease 28,808 square feet of headquarters office space located in Houston, Texas. The term of this lease runs through June 2025. We also own a custom built, approximately 26,000 square foot facility in Aberdeen, Scotland and a 55,000 square foot facility in Lafayette, Louisiana.

We have other offices under lease in Denver, Colorado; Stavanger, Norway; Doha, Qatar and Singapore, and additional leased offices, warehouses and service centers in the United States, Brazil, Mexico, Nigeria, Malaysia, Australia, United Arab Emirates and Saudi Arabia. We believe our facilities are adequate for our current needs and for the foreseeable future.

Item 3.  Legal Proceedings

In 2021, seven substantially similar actions were filed against the Company, its directors and certain Viasat entities alleging, among other things, that the registration statement related to the Viasat Merger on Form S-4 and form of proxy statement included therein filed by Viasat with the SEC on February 1, 2021, contained incomplete and misleading information. The actions are as follows:

While the Company believes all of these cases are meritless and intends to vigorously defend them, the lawsuits are in the very early stages and no assurance can be given that these suits will not have a material adverse effect on the business, financial condition or results of operations of the Company, or that the lawsuits will not materially and adversely affect the ability of the Company to close the Viasat Merger.

In June 2019, the Company announced that it reached a settlement with Inmarsat plc that concludes the GX Dispute. Pursuant to the settlement the Company paid $45.0 million in June 2019 and paid $5.0 million in July 2019 and will paypaid the final $0.8 million in the third quarter of 2020. The Company has an accrued liability of $0.8 million as of December 31, 2019.

The Company, in the ordinary course of business, is a claimant or a defendant in various other legal proceedings, including proceedings as to which the Company has no insurance coverage and those that may involve the filing of liens against the Company or its assets. The outcome of any such claims or proceedings cannot be predicted with certainty.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

RigNet’s common stock, $0.001 par value, is traded on the NASDAQ Global Select Market (NASDAQ), under the ticker symbol RNET. There were approximately 105104 holders of record of RigNet’s common stock as of February 28, 2020.2021.

Dividends

We have not paid any cash dividends on our common stock and do not intend to do so in the foreseeable future. Further, our term loan agreementCredit Agreement restricts our ability to pay cash dividends. We currently intend to retain all available funds and any future earnings to support the operation and to finance the growth and development of our business.

Stockholder Return Performance PresentationRecent Sales of Unregistered Securities

During the year ended December 31, 2020, we did not have any sales of securities in transactions that were not registered under the Securities Act that have not been reported on Form 8-K or Form 10-Q.

Issuer Purchases of Equity Securities

The following graph compares the change in the cumulative total stockholder return ontable sets forth certain information with respect to repurchases of our common stock during the period fromquarter ended December 31, 2014 through December 31, 2019, with2020:

(1) All shares repurchased were surrendered by employees to pay taxes withheld upon the cumulative total return on the NASDAQ Composite Index, the PHLX Oil Service Sector Index and the NASDAQ Telecommunications Index. The Oil Service Sector Index is a price-weighted index composedvesting of the common stocks of 15 companies that provide oil drilling and production services, oilfield equipment, support services, and geophysical/reservoir services. The Telecommunications Index tracks NASDAQ listed telecommunications and telecommunications equipment companies. The comparison assumes that $100 was invested on December 31, 2014 in our commonrestricted stock and in each of the foregoing indices and assumes reinvestment of dividends, if any.awards

Comparison of Cumulative Total Return

Investors are cautioned against drawing any conclusions from the data contained in the graph as past results are not necessarily indicative of future performance.

Notwithstanding anything to the contrary set forth in any of the Company’s previous or future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 that might incorporate this Annual Report on Form 10-K or future filings with the SEC, in whole or in part, the preceding performance information shall not be deemed to be “soliciting material” or to be “filed” with the SEC or incorporated by reference into any filing except to the extent this performance presentation is specifically incorporated by reference therein.

Item 6.  Selected Financial Data

The following table sets forth our selected consolidated financial data for the periods indicated. Data was derived from RigNet, Inc.’s audited consolidated financial statements. The data set forth should be read together withOmitted pursuant to amendments to Item 7. “Management’s Discussion and Analysis301 of Financial Condition and Results of Operations” and with Item 8. “Financial Statements and Supplementary Data.”  Our historical results for any prior period are not necessarily indicative of the results to be expected in the future.

Regulations S-K effective February 10, 2021.

We have never declared or paid any cash dividends on our common stock.

The 2018 acquisitions of Auto-Comm, SAFCON and Intelie contributed revenue and net income of $17.7 million and $2.2 million, respectively, for the year ended December 31, 2018. The 2017 acquisitions of ESS, DTS and Cyphre

contributed $5.1 million of revenue for the year ended December 31, 2017. The 2017 acquisitions contributed $1.4 million to net income for the year ended December 31, 2017.

Non-GAAP Financial Measures

We refer to Adjusted EBITDA in this Annual Report on Form 10-K and from time to time in other filings that we make with the SEC. Adjusted EBITDA is a financial measure that is not calculated in accordance with GAAP and should not be considered as an alternative to net income (loss), operating income (loss), basic or diluted earnings (loss) per share or any other measure of financial performance calculated and presented in accordance with GAAP. Our Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate Adjusted EBITDA or similarly titled measures in the same manner as we do. We prepare Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. We encourage you to evaluate these adjustments and the reasons we consider them appropriate.

We define Adjusted EBITDA as net income (loss) plus interest expense, income tax expense (benefit), depreciation and amortization, impairment of goodwill, intangibles, property, plant and equipment, (gain) loss on sales of property, plant and equipment, net of retirements, stock-based compensation, restructuring charges, change in fair value of earn-outs and contingent consideration, executive departure costs, acquisition costs, the GX dispute and non-recurring items.

We believe Adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:

Our management uses Adjusted EBITDA:

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:

The following table presents a reconciliation of net loss to Adjusted EBITDA for each of the periods presented. Net loss is the most comparable GAAP measure to Adjusted EBITDA.

Item 7.  Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

General

The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements about our business and operations. Our future results may differ materially from those we currently anticipate as a result of the factors we describe under “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Executive Overview

On December 21, 2020, we announced that our Board of Directors unanimously approved the Company's entry into a definitive agreement whereby Viasat will acquire the Company in an all-stock transaction representing an enterprise value of $222 million, including the Company’s net debt as of September 30, 2020, based on the closing price of Viasat common stock on December 18, 2020. Under the terms of the agreement, the Company’s stockholders will receive a fixed exchange ratio of 0.1845 shares of Viasat stock for each share of the Company’s common stock owned by the stockholders. Based on the parties' volume weighted average prices ("VWAPs") for the 20 trading days ending on December 18, 2020, the transaction represents a 17.9% premium for the Company's stockholders. Upon closing, the Company’s stockholders are expected to own approximately 5.7% of Viasat's outstanding common stock. The all-stock transaction is intended to be tax-free to the Company stockholders. The transaction, which is expected to close by mid-calendar year 2021, is subject to customary closing conditions and regulatory approvals, including the approval of RigNet's stockholders.

We deliver advanced software and communications infrastructure that allow our customers to realize the business benefits of digital transformation. With world-class, ultra-secure solutions spanning global IP connectivity, bandwidth-optimized OTT applications, IIoT big data enablement, and industry-leading machine learning analytics, we support the full evolution of digital enablement, empowering businesses to respond faster to high priority issues, mitigate the risk of operational disruption, and maximize their overall financial performance.

Our Operations

We are the leading provider of ultra-secure, intelligent networking solutions and specialized applications. Customers use our private networks to manage information flows and execute mission-critical operations primarily in remote areas where conventional telecommunications infrastructure is either unreliable or unavailable. We provide our clients with what is often the sole means of communication for their remote operations. On top of and vertically integrated into these networks we provide services ranging from fully-managed voice, data, and video to more advanced services including: cyber-security threat detection and prevention; applications to improve crew welfare, safety or workforce productivity; and a real-time AI-backed data analytics platform to enhance customer decision making and business performance.  

Segment information is prepared consistent with the components of the enterprise for which separate financial information is available and regularly evaluated by the chief operating decision-maker for the purpose of allocating resources and assessing performance.

Corporate and eliminations primarily represents unallocated executive and support activities, including back-office software development, interest expense, income taxes, eliminations, the GX dispute and change in fair value of earn-out/contingent consideration.

Customers in our MCS and Apps & IoT segments are primarily served under fixed-price contracts, either on a monthly, usage or day rate basis or for equipment sales. Our contracts are generally in the form of Master Service Agreements, or MSAs, with specific services being provided under individual service orders. Offshore contracts generally have a term of up to five years with renewal options. Land-based contracts are generally shorter term or terminable on short notice without a penalty. Service orders are executed under the MSA for individual remote sites or groups of sites, and generally permit early termination on short notice without penalty in the event of force majeure, breach of the MSA or cold stacking of a drilling rig (when a rig is taken out of service and is expected to be idle for a protracted period of time). Systems IntegrationSI 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 Systems IntegrationSI projects and direct service labor. Satellite charges consist of the costs associated with obtaining satellite bandwidth (the measure of capacity) used in the transmission of service to and from contracted satellites. Direct service labor consists of field technicians, our Network Operations Center (NOC) employees, and other employees who directly provide services to customers. Network operations expenses consist primarily of costs associated with the operation of our NOC, which is maintained 24 hours a day, seven days a week. Depreciation and amortization are recognized on all property, plant and equipment either installed at a customer’s site or held at our corporate and regional offices, as well as intangibles arising from acquisitions and internal-use software. Selling and marketing expenses consist primarily of salaries and commissions, travel costs and marketing communications. General and administrative expenses consist of expenses associated with our management, finance, contract, support and administrative functions.

Profitability generally increases or decreases at an MCS site as we add or lose customers and value-added services. Assumptions used in developing the rates for a site may not cover cost variances from inherent uncertainties or unforeseen obstacles, including both physical conditions and unexpected problems encountered with third party service providers.

Recent Developments

On June 24, 2019, we announced that we reached a settlement with Inmarsat plc that concludes the GX Dispute. Pursuant to the settlement we paid $45.0 million in June 2019 and paid $5.0 million in July 2019 and will pay $0.8 million in the third quarter of 2020. We have an accrued liability of $0.8 million asAs of December 31, 2019. As previously disclosed, 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. We incurred cost of $3.9 million in GX Dispute Phase II costs for the year ended December 31, 2019. We incurred legal expenses of $2.2 million in connection with the GX dispute for the year ended December 31, 2018.

In the U.S. Gulf of Mexico, we have substantially completed the buildout of our 4G LTE and 5G-enabled network, where we are partnered with T-Mobile, and we are already carrying live traffic. Additionally, we purchased and built-out an office in Lafayette, Louisiana that will consolidate three separate legacy facilities. We moved into the new facility in the third quarter of 2019.

On February 21, 2020, we entered intoprovided MCS to the Third Amendment to the Third Amendeda total of 1,142 U.S. and Restated Credit Agreement (Amended Credit Agreement), with the same four financial institutions that are part of the current credit agreement. The Amended Credit Agreement provides for a $16.0 million 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. The RCF and accordion, if exercised, mature on August 31, 2022.  The Consolidated Leverage Ratio, as defined in the Amended Credit Agreement is set at 3.25 times through third quarter 2020, thereafter stepping down to 3.0 times through second quarter 2021, thereafter stepping down to 2.75 times through the maturity of the revolving facility. The Amended Credit Agreement bears interest at a rate of LIBOR plus a margin ranging from 1.75% to 3.25% based on a consolidated leverage ratio defined in the Amended Credit Agreement. As of February 21, 2020, the outstanding principal amount of the Term Loan was $16.0 million, and the outstanding draws on the RCF were $95.4 million.non-U.S. sites