MachTen, Inc. Reports Results for the Third Quarter 2023

Rhea-AI Summary

MachTen, Inc. (MACT) Reports Strong 3rd Quarter Earnings and Plans for Future Growth. The press release highlights the company's financial performance, including regulated and non-regulated revenue, operating profit, net income, and expenses. It also discusses the company's spin-off from LICT, its focus on operating efficiencies, and significant opportunities for future growth. MachTen emphasizes its commitment to capital investments and strategic growth markets, including fiber-based broadband services in rural areas.

Positive

• Strong foundation reflected in 3rd quarter earnings
• Significant opportunities for future growth
• Commitment to capital investments and strategic growth markets

Negative

• Elimination of a Michigan Universal Service Fund (USF) program in 2022 impacting regulated revenue

TRAVERSE CITY, Mich., Nov. 14, 2023 (GLOBE NEWSWIRE) -- MachTen, Inc. (“MACT”) (OTC: MACT) today reported its operating results for the quarter ended September 30, 2023.

“It’s an exciting time for MachTen! We completed the spin-off from LICT on August 31, and appreciate the unwavering efforts of our teams in Carney, Traverse City and Rye. While our 3^rd quarter earnings reflect a strong foundation, we have very significant opportunities to improve operating efficiencies as a standalone public company with a focused management team. We are well positioned to benefit from industry trends, and have a clear plan for meaningful growth in the years ahead,” commented Dan Miller, Chief Executive Officer.

Financial Highlights

(In thousands)		Three Months Ended
		September 30, 2023			September 30, 2022
Regulated revenue		$	3,079		$	3,120
Non-regulated revenue		$	1,052		$	941
Operating profit		$	1,553		$	1,502
Net income		$	1,090		$	1,082

Revenue        
Regulated revenue was $3.08 million in the 3^rd quarter of 2023, down slightly from the prior year, attributable to the elimination of a Michigan Universal Service Fund (USF) program in 2022.

Regulated revenue included $2.2 million from the Federal Communications Commission’s Alternative Connect America Model (“A-CAM”) program. As previously disclosed, ACAM will be replaced by Enhanced-ACAM (“E-ACAM”) beginning in January 2024. Annual support from E-ACAM will be approximately $9.7 million for 15 years, through 2038, and replaces current ACAM support of $8.7 million that was scheduled to expire in 2028. Local access revenue of $355,000 in the 3^rd quarter was generated from providing services to 3,971 access lines.

Non-regulated revenue increased to $1.05 million in the 3^rd quarter of 2023, up from $941,000 in the prior year period. The increase is attributable to growth in fiber-based broadband subscribers in expansion markets including Escanaba, Traverse City and Bergland. Fiber passings in competitive markets continue to increase, and were approximately 4,200 as of September 30. Fiber-based subscribers increased to 900 as of quarter-end, up from 753 on June 30, and 428 a year ago.

Expenses

The cost of revenue for the 3^rd quarter increased to $1.43 million from $1.42 million in the prior year, primarily attributable to additional staffing, sales and marketing expense. General and administrative costs, along with depreciation expense, remained relatively consistent with the year ago period.

Balance Sheet        

As of September 30, 2023, cash and cash equivalents were $1.57 million, compared with $1.2 million as of December 31, 2022. Prior to being spun-off from LICT Corporation, MachTen declared a $15 million distribution to its former parent. While MachTen continues to evaluate financing options that will facilitate payment of the distribution, and address long-term investment priorities, interest will be paid to LICT at a rate of SOFR + 1.5% under the terms of a promissory note dated August 30, 2023.

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 began this summer in Wallace and Carney. Once complete, this grant will bring fiber-based services to more than 700 homes and businesses.

Construction will begin in 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 in the nineteen incumbent exchanges that benefit from E-CAM support will also accelerate in 2024. MachTen is committed to delivering at least 100 Mbps download / 20 Mbps upload speeds to 8,900 locations in its rural network, bringing state of the art communications services to the communities of Northern Michigan.

About MachTen, Inc.

MachTen is a holding company for Upper Peninsula Telephone Company (UPTC), Michigan Central Broadband Company (MCBC), and Alpha Communications. MachTen’s subsidiaries provide broadband internet access and communications services, including voice, video, home automation and managed hosting services. Investors should refer to our 10-Q and other filings that have been posted to www.machteninc.com

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this press release, which do not present historical information, contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements convey our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, the economy, and other conditions, there can be no assurance that our actual results will not differ materially from what we expect or believe. Therefore, you should proceed with caution in relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that are difficult to predict and could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Some of the factors that may cause our actual results to differ from our expectations include risks associated with the duration and scope of the ongoing coronavirus pandemic resulting in volatile market conditions, a decline in the securities markets that adversely affect our assets under management, negative performance of our products, the failure to perform as required under our investment management agreements, and a general downturn in the economy that negatively impacts our operations. We also direct your attention to the more specific discussions of these and other risks, uncertainties and other important factors contained in our Annual Report and other public filings. Other factors that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations whether as a result of new information, future developments or otherwise, except as may be required by law.

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Financial Condition
(in thousands, except per share data)
		September,				December 31,
		2023				2022
		(Unaudited)				(Audited)
Assets
Cash and cash equivalents		$	1,567			$	1,202
Accounts receivable			906				868
Materials and supplies			2,505				1,408
Other current assets			474				507
Current assets		$	5,452			$	3,985
Property, plant and equipment, net			23,707				20,818
Right-of-use assets, net			679				747
Goodwill			100				100
Other noncurrent assets			66				70
Total assets		$	30,004			$	25,720
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable		$	92			$	3,362
Note payable		$	15,000			$	-
Accrued liabilities			3,112				1,157
Current operating lease liability			78				74
Total current liabilities			18,282				4,593
Deferred income taxes			2,486				2,726
Long term operating lease liability			644				710
Asset retirement obligations			144				136
Other noncurrent liabilities			26				26
Total liabilities			21,582				8,191
Shareholders' equity
Additional paid-in capital			23,009
Dividends declared			(15,000	)
Retained earnings			410				17,529
Total shareholders' equity			8,422				17,529
Total liabilities and shareholders' equity		$	30,004			$	25,720
Basic shares outstanding			3,172				3,172

MachTen, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
		Three Months Ended
		Sept 30, 2023				June 30, 2023
Revenue:
Regulated revenue		$	3,079			$	3,120
Non-regulated revenue			1,052				941
Total revenue			4,131				4,061
Operating Costs:
Cost of revenue			1,426				1,420
General and administrative			639				610
Depreciation and accretion			513				529
Total costs			2,578				2,559
Operating income			1,553				1,502
Other Income (Expense):
Interest expense			(88	)			-
Investment income			4				3
Total non-operating income / (loss)			(84	)			3
Income before provision for income taxes			1,469				1,505
Provision for income taxes			(379	)			(423	)
Net income		$	1,090			$	1,082
Earnings per share attributable to common
stockholders:
Basic		$	0.34			$	0.34
Diluted		$	0.34			$	0.34
Weighted average shares outstanding:
Basic			3,172				3,172
Diluted			3,172				3,172

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

FAQ

What are MachTen, Inc.'s financial highlights for the 3rd quarter of 2023?

In the 3rd quarter, regulated revenue was $3.08 million, non-regulated revenue was $1.05 million, operating profit was $1.55 million, and net income was $1.09 million.

What is the impact of the spin-off from LICT on MachTen?

The spin-off has positioned MachTen as a standalone public company with a focused management team, aiming to improve operating efficiencies and achieve meaningful growth.

What are MachTen's capital investments focused on?

MachTen is focusing on significant capital investments, including expansion of fiber-based broadband services in strategic growth markets, such as rural areas in Northern Michigan.

How is MachTen addressing the elimination of the Michigan USF program?

MachTen is addressing the impact by emphasizing growth in non-regulated revenue, including expansion of fiber-based broadband subscribers in competitive markets.

What is MachTen's plan for future growth?

MachTen has a clear plan for meaningful growth, including accelerating the deployment of fiber-based broadband services and capital investments in strategic growth markets.