MachTen, Inc. Reports Audited 2023 & First Half 2024 Financial Results

/EIN News/ -- TRAVERSE CITY, Mich., July 31, 2024 (GLOBE NEWSWIRE) -- MachTen, Inc. (“MACT”) (OTC: MACT) today reported audited financial results for the year ended December 31, 2023, along with an interim operational and financial update for the first half of 2024.

2023 Financial Highlights

Financial Highlights (Audited)	Year Ended
(In thousands, except per share data)	December 31, 2023				December 31, 2022
Operating revenue	$	15,939			$	15,815
Operating income	$	6,072			$	5,409
Net income	$	4,317			$	4,017
Earnings per share	$	1.36			$	1.27

“Since emerging as a standalone business in September 2023, we have invested significant resources into building a foundation for future growth,” commented Dan Miller, Chief Executive Officer.

“I’m grateful to the Michigan Broadband staff in Carney and Traverse City, our skilled technicians in the field, and our strategic partners for identifying countless opportunities to upgrade our systems, processes, and reporting infrastructure. While there is much work to be done, we have made substantial progress towards executing our 5-year growth plan that will transform Michigan Broadband from a small rural ILEC into a fiber-based regional communications provider.”

The 2023 audit was finalized in late July, delayed by several one-time, non-cash adjustments related to the spin-off from LICT Corporation.

For the year ended December 31, 2023, MachTen generated $15.9 million of operating revenue, $6.1 million of operating income, and net income of $4.3 million.

2023 EBITDA of approximately $8.1 million compares to $7.6 million in 2022.

Capital investments of approximately $10 million were put into service in late 2023, a large portion of which includes fiber-to-the-home (FTTH) capabilities in both incumbent and competitive markets. As a result, MachTen ended 2023 with $5.8 million of federal tax-loss carryovers, which have no expiration.

First Half 2024 Financial Highlights

Financial Highlights (Unaudited)	Six Months Ended
(In thousands, except per share data)	June 30, 2024				June 30, 2023
Operating revenue	$	8,423			$	7,855
Operating income	$	2,853			$	2,690
Net income	$	1,653			$	2,002
Earnings per share	$	0.52			$	0.63

In the six months ended June 30, 2024, MachTen generated $8.4 million of revenue, compared to $7.9 million in the prior year, driven primarily by additional support from participation in Enhanced-ACAM.

Operating profit was $2.9 million in the first half of 2024, compared to $2.7 million in 2023.

Net income was $1.7 million for the first half of 2024, compared to $2.0 million in 2023, and basic earnings per share was $0.52 vs. $0.63. Net income and EPS were impacted by interest expense on the note payable to LICT of $0.5 million in the first half of 2024, and depreciation expense of $1.5 million vs. $1.0 million in the prior year.

EBITDA was $4.3 million in the first half of 2024 compared to $3.7 million in the 2023 period.

First Half 2024 Operational Highlights

In anticipation of the significant capital required to comply with Enhanced-ACAM (“E-ACAM”) and grants awarded by the Michigan CMIC and ReConnect America programs, Michigan Broadband has made considerable investments in equipment, software, personnel and third-party vendor relationships that will be instrumental in delivering state-of-the-art fiber-based networks with a competitive cost structure.

In the twelve months ending June 30, 2024, the Michigan Broadband team has built almost 100 miles of fiber-optic network, passing nearly 2,500 potential customers. This brings total fiber-based passings to almost 7,000, with another 1,500 or so expected by year-end 2024. As of June 30, 2024, Michigan Broadband had approximately 1,200 fiber-based Internet subscribers (17% take rate).

Sales efforts to increase market penetration will be bolstered by the May 2024 launch of a TiVo-based video solution, and the upcoming introduction of a mobile MVNO offering. In addition, all fiber-based services can now be ordered on www.michbbs.com, relaunched this spring with interactive functionality, including the implementation of CrowdFiber. Michigan Broadband will also be initiating a Referral & Affiliate Marketing program in August 2024.

Balance Sheet

As of December 31, 2023, cash and cash equivalents were $1.5 million, compared with $1.2 million as of December 31, 2022. As of June 30, 2024, cash and equivalents were $0.7 million.

Prior to being spun-off from LICT Corporation, MachTen declared a $15 million distribution to its former parent. Interest has been accruing to LICT at a rate of SOFR (Secured Overnight Financing Rate) + 1.5% under the terms of a promissory note dated August 30, 2023.

MachTen was approved for a term loan of up to $20 million from the National Cooperative Services Corporation (NCSC) that is anticipated to close in August 2024. Proceeds will be used to repay the $15 million to LICT, with the balance available for general working capital. The interest rate on the term loan will be fixed at approximately 6.3%.

In March, MachTen submitted a ReConnect America loan application that, if awarded, would finance a significant portion of its’ capital investment obligations under Enhanced A-CAM. The ReConnect loan carries a 2% interest rate with a 3-year deferral and 20-year amortization.

Capital Investments

MachTen and its’ operating subsidiaries are in the early stages of significant capital investments that coincide with participation in E-CAM, while also targeting attractive returns in strategic growth markets.

A $4 million project being funded through a 50% Connecting Michigan Communities 3.0 grant to bring fiber-based services to more than 700 homes and businesses in Wallace and Carney should be complete by September 2024.

Construction will begin in September 2024 on several ReConnect America 3 (“RC3”) projects that will bring fiber-based service to more than 2,500 locations over 600 miles. These grants were awarded by the United States Department of Agriculture’s Rural Utility Service, and will impact areas that are considered amongst the highest cost to serve. On a combined basis, the RC3 grant projects may have a total cost of approximately $85 million over a 5-year period, inclusive of a matching investment from MachTen of up to $16 million.

The deployment of fiber-based broadband services to more than 8,900 locations in Michigan Broadband’s incumbent network, supported by E-CAM, will accelerate in the fall of 2024.  At the same time, we are closely monitoring potential developments at the FCC related to E-ACAM funding in light of the recent ruling in the 5^th Circuit Court of Appeals related to the Universal Service Fund mechanism.

About MachTen, Inc.

MachTen is a holding company for Michigan Broadband Services, Upper Peninsula Telephone Company (UPTC), Michigan Central Broadband Company (MCBC), and Alpha Enterprises Ltd. MachTen’s subsidiaries provide broadband internet access and communications services, including voice, video, home automation and managed hosting services. Investors should refer to filings that have been posted to www.machteninc.com

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(in thousands, except per share data)
	December 31,				December 31,
		2023				2022
	(Audited)				(Audited)
Assets
Cash and cash equivalents	$	1,533			$	1,202
Accounts receivable		1,555				868
Materials and supplies		2,276				1,408
Other current assets		332				507
Current assets	$	5,696			$	3,985
Property, plant and equipment, net		25,725				20,818
Right-of-use assets, net		679				747
Goodwill		100				100
Other noncurrent assets		256				70
Total assets	$	32,456			$	25,720
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable	$	2,020			$	3,362
Note payable to LICT		15,000				-
Accrued liabilities		386				1,157
Current operating lease liability		78				74
Total current liabilities		17,484				4,593
Deferred income taxes		2,864				2,726
Long term operating lease liability		644				710
Other noncurrent liabilities		147				162
Total Long-Term Liabilities		3,655				3,598
Shareholders' equity
Common Stock		3
Additional paid-in capital		10,530
Unearned Compensation		(405	)
Retained earnings		1,189				17,529
Total shareholders' equity		11,317				17,529
Total liabilities and shareholders' equity	$	32,456			$	25,720
Basic shares outstanding		3,172				3,172

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(in thousands, except per share data)
	June 30,				December 31,
		2024				2023
	(Unaudited)				(Audited)
Assets
Cash and cash equivalents	$	720			$	1,533
Accounts receivable		1,165				1,555
Materials and supplies		3,660				2,276
Other current assets		358				332
Current assets	$	5,903			$	5,696
Property, plant and equipment, net		29,864				25,725
Right-of-use assets, net		679				679
Goodwill		100				100
Other noncurrent assets		176				256
Total assets	$	36,722			$	32,456
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable	$	3,055			$	2,020
Note payable to LICT		15,000				15,000
Accrued liabilities		1,965				386
Current operating lease liability		78				78
Total current liabilities		20,098				17,484
Deferred income taxes		2,857				2,864
Long term operating lease liability		644				644
Other noncurrent liabilities		153				147
Total Long-Term Liabilities		3,654				3,655
Shareholders' equity
Common Stock		3				3
Additional paid-in capital		10,530				10,530
Unearned Compensation		(405	)			(405	)
Retained earnings		2,842				1,189
Total shareholders' equity		12,970				11,317
Total liabilities and shareholders' equity	$	36,722			$	32,456
Basic shares outstanding		3,172				3,172

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Audited)
(in thousands, except per share data)
	12 Months Ended
	Dec 31, 2023				Dec 31, 2022
Operating Revenue:
Local Voice Services	$	1,306			$	1,347
Access Revenue and Support		11,868				10,908
Internet Services		2,006				2,930
Other Services		759				630
Total operating revenue		15,939				15,815
Operating Costs:
Cost of revenue		5,589				5,623
General and administrative		2,248				2,597
Depreciation and accretion		2,030				2,186
Total costs		9,867				10,406
Operating income		6,072				5,409
Other Income (Expense):
Interest expense		(350	)			-
Investment income		45				10
Misc.		(9	)			-
Total non-operating income / (loss)		(314	)			10
Income before provision for income taxes		5,758				5,419
Provision for income taxes		1,441				1,402
Net income	$	4,317			$	4,017
Earnings per share attributable to common
stockholders:
Basic	$	1.36			$	1.27
Diluted	$	1.36			$	1.27
Weighted average shares outstanding:
Basic		3,172				3,172
Diluted		3,174				3,172

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
	6 Months Ended
	June 30, 2024				June 30, 2023
Operating Revenue:
Local Voice Services	$	614			$	640
Access Revenue and Support		5,835				5,398
Internet Services		1,641				1,496
Other Services		333				321
Total operating revenue		8,423				7,855
Operating Costs:
Cost of revenue		2,927				2,700
General and administrative		1,166				1,448
Depreciation and accretion		1,476				1,017
Total costs		5,569				5,165
Operating income		2,854				2,690
Other Income (Expense):
Interest (expense) / income		(511	)			33
Investment income		6				-
Total non-operating income / (loss)		(505	)			33
Income before provision for income taxes		2,349				2,723
Provision for income taxes		696				721
Net income	$	1,653			$	2,002
Earnings per share attributable to common
stockholders:
Basic	$	0.52			$	0.63
Diluted	$	0.52			$	0.63
Weighted average shares outstanding:
Basic		3,172				3,172
Diluted		3,200				3,172

EBITDA   

EBITDA is an established measure of operating performance and liquidity that is commonly reported and widely used by analysts, investors, and other interested parties in the telecommunications industry because it eliminates many differences in financial, capitalization, and tax structures. We believe that EBITDA trends are a valuable indicator of whether our operations are able to produce sufficient operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures.

EBITDA is calculated as Operating Profit from Continuing Operations plus depreciation and amortization expense and corporate expenses.

EBITDA Reconciliation	12 Months Ended
	December 31, 2023				December 31, 2022
Operating Profit	$	6,072			$	5,409
Depreciation & Amortization		2,030				2,186
Total EBITDA		8,102				7,595
EBITDA Reconciliation	6 Months Ended
	June 30, 2024				June 30, 2023
Operating Profit	$	2,854			$	2,690
Depreciation & Amortization		1,470				1,011
Total EBITDA		4,324				3,701

Contact:	Dan Miller
	Chief Executive Officer (914) 921-5193