TRAVERSE CITY, Mich., Dec. 03, 2024 (GLOBE NEWSWIRE) -- MachTen, Inc. (“MACT”) (OTC: MACT) today reported financial results for the quarter ended September 30, 2024.
Financial Highlights
| Financial Highlights | Quarter Ended | ||||||
| (In thousands, except per share data) | September 30, 2024 | September 30, 2023 | |||||
| Operating revenue | $ | 4,307 | $ | 4,131 | |||
| Operating income | $ | 1,864 | $ | 1,553 | |||
| Net income | $ | 1,667 | $ | 1,082 | |||
| Earnings per share | $ | 0.52 | $ | 0.34 | |||
“Michigan Broadband delivered net subscriber growth in the third quarter, while increasing efforts to deploy fiber across incumbent and competitive markets. While significant operational planning for the satisfaction of our Enhanced-ACAM and ReConnect American obligation remains, our team is making steady progress towards building the infrastructure required to grow the business and maximize shareholder value over the long-term,” commented Dan Miller, Chief Executive Officer.
Revenue was $4.3 million in the quarter vs. $4.1 million in the prior year. For the nine months ended September 30, revenue was $12.7 million vs. $11.9 million in 2023.
EBITDA was $2.5 million in the third quarter vs. $2.1 million in the prior year, and $6.8 million for the first nine months of 2024 compared to $5.8 million in 2023.
After consulting for several months, Marc Blom joined MachTen full-time as Chief Financial Officer on October 1. Marc brings considerable finance and accounting experience, having held key positions with companies in the asset management, medical device and consumer products industries. “I am looking forward to continuing the long legacy of the Michigan based companies in providing exceptional telecommunication services and expanding the company into new markets,” added Marc Blom.
Third Quarter 2024 Operational Highlights
Michigan Broadband continues to invest significant capital in equipment, software, and personnel to update systems and processes following its spin-off from LICT Corporation.
Approximately 100 miles of fiber-optic network has been constructed over the last twelve months, passing nearly 2,500 potential customers. This brings total fiber-based passings to almost 8,000, with another 2,500 expected by year-end 2025. Following the investment period mandated by E-ACAM and the ReConnect American grants, Michigan Broadband anticipates being able to provide at least 100 Mbps / 20 Mbps data service to more than 20,000 locations. As of September 30, 2024, Michigan Broadband had approximately 1,450 fiber-based Internet subscribers.
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. Michigan Broadband also implemented a Referral & Affiliate Marketing program in August 2024.
Capital Investments
A $4 million project funded by a Connecting Michigan Communities 3.0 grant to bring fiber-based services to more than 700 homes and businesses in Wallace and Carney is nearing completion, with final reimbursement by the State expected in January 2025. It is anticipated that the take-rate should be more than 50% after 18 months.
Construction has begun on the ReConnect America 3 (“RC3”) grant projects that will ultimately 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 2025. As previously disclosed, satisfaction of the E-ACAM obligation could cost up to $100 million, with most of the investment required by year-end 2028, 10-years earlier than expiration of support payments that should reach $150 million in aggregate.
We continue to monitor potential developments related to E-ACAM funding in light of the recent ruling in the 5th Circuit Court of Appeals. The ruling impacts the funding mechanism and oversight of the Universal Service Fund and will be reviewed by the US Supreme Court in 2025. We are also monitoring the potential impact of the presidential election on broadband funding.
Balance Sheet
As of September 30, 2024, cash and cash equivalents were $1.3 million, compared with $1.5 million as of December 31, 2023, and $0.7 million on June 30, 2024.
Prior to being spun-off from LICT Corporation, MachTen declared a $15 million distribution to its former parent, and a Promissory Note was issued that included interest expense at a rate of SOFR (Secured Overnight Financing Rate) + 1.5%.
In August, MachTen executed a $20 million term loan from the National Cooperative Services Corporation (NCSC). Concurrently, $16 million was drawn down to repay the LICT Note and for working capital. Accrued interest due LICT at the time of repayment of $1.02 million was reduced to $514,000 and converted to non-voting preferred equity with a 5% interest rate. The interest rate on the funds advanced from the NCSC term loan is fixed at approximately 5.5%.
MachTen continues to explore scenarios for efficiently financing its capex obligations under E-ACAM and ReConnect America.
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) | |||||||||||
| September 30, | June 30, | December 31, | |||||||||
| 2024 | 2024 | 2023 | |||||||||
| (Unaudited) | (Unaudited) | (Audited) | |||||||||
| Assets | |||||||||||
| Cash and cash equivalents | $ | 1,295 | $ | 720 | $ | 1,533 | |||||
| Accounts receivable | 1,099 | 1,165 | 1,555 | ||||||||
| Materials and supplies | 3,095 | 3,660 | 2,276 | ||||||||
| Other current assets | 425 | 358 | 332 | ||||||||
| Current assets | $ | 5,914 | $ | 5,903 | $ | 5,696 | |||||
| Property, plant and equipment, net | 31,837 | 29,864 | 25,725 | ||||||||
| Right-of-use assets, net | 679 | 679 | 679 | ||||||||
| Goodwill | 100 | 100 | 100 | ||||||||
| Other noncurrent assets | 153 | 176 | 256 | ||||||||
| Total assets | $ | 38,683 | $ | 36,722 | $ | 32,456 | |||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Trade accounts payable | $ | 1,843 | $ | 3,055 | $ | 2,020 | |||||
| Note payable to LICT | - | 15,000 | 15,000 | ||||||||
| Accrued liabilities | 1,955 | 1,965 | 386 | ||||||||
| Current operating lease liability | 78 | 78 | 78 | ||||||||
| Total current liabilities | 3,877 | 20,098 | 17,484 | ||||||||
| Deferred income taxes | 2,855 | 2,857 | 2,864 | ||||||||
| Term Loan (NCSC) | 16,000 | - | - | ||||||||
| Long term operating lease liability | 644 | 644 | 644 | ||||||||
| Other noncurrent liabilities | 156 | 153 | 147 | ||||||||
| Total Long-Term Liabilities | 19,655 | 3,654 | 3,655 | ||||||||
| Shareholders' equity | |||||||||||
| Common Stock | 3 | 3 | 3 | ||||||||
| Preferred Stock | 514 | - | - | ||||||||
| Additional paid-in capital | 10,530 | 10,530 | 10,530 | ||||||||
| Unearned Compensation | (405 | ) | (405 | ) | (405 | ) | |||||
| Retained earnings | 4,509 | 2,842 | 1,189 | ||||||||
| Total shareholders' equity | 15,151 | 12,970 | 11,317 | ||||||||
| Total liabilities and shareholders' equity | $ | 38,683 | $ | 36,722 | $ | 32,456 | |||||
| Basic shares outstanding | 3,192 | 3,172 | 3,172 | ||||||||
| MachTen, Inc. and Subsidiaries | |||||||
| Condensed Consolidated Statements of Operations (Unaudited) | |||||||
| (in thousands, except per share data) | |||||||
| Three Months Ended | |||||||
| September 30, 2024 | September 30, 2023 | ||||||
| Revenue: | |||||||
| Regulated revenue | $ | 3,243 | $ | 3,079 | |||
| Non-regulated revenue | 1,064 | 1,052 | |||||
| Total revenue | 4,307 | 4,131 | |||||
| Operating Costs: | |||||||
| Cost of revenue | 1,205 | 1,426 | |||||
| General and administrative | 560 | 639 | |||||
| Depreciation and accretion | 678 | 513 | |||||
| Total costs | 2,443 | 2,578 | |||||
| Operating income | 1,864 | 1,553 | |||||
| Other Income (Expense): | |||||||
| Interest income / (expense) | 234 | (88 | ) | ||||
| Investment income | 1 | 4 | |||||
| Total non-operating income / (loss) | 235 | (84 | ) | ||||
| Income before provision for income taxes | 2,099 | 1,469 | |||||
| Provision for income taxes | (431 | ) | (379 | ) | |||
| Net income | $ | 1,667 | $ | 1,090 | |||
| Earnings per share attributable to common stockholders: | |||||||
| Basic | $ | 0.52 | $ | 0.34 | |||
| Diluted | $ | 0.52 | $ | 0.34 | |||
| Weighted average shares outstanding: | |||||||
| Basic | 3,192 | 3,172 | |||||
| Diluted | 3,192 | 3,172 | |||||
* Reflects one-time interest expense forgiveness of $514,000
EBITDA
EBITDA is an established non-GAAP financial 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 | 3 Months Ended | ||||||
| September 30, 2024 | September 30, 2023 | ||||||
| Operating Profit | $ | 1,864 | $ | 1,553 | |||
| Depreciation & Amortization | 678 | 513 | |||||
| Total EBITDA | 2,542 | 2,066 | |||||
| EBITDA Reconciliation | 9 Months Ended | ||||||
| September 30, 2024 | September 30, 2023 | ||||||
| Operating Profit | $ | 4,717 | $ | 4,240 | |||
| Depreciation & Amortization | 2,148 | 1,522 | |||||
| Total EBITDA | 6,865 | 5,762 | |||||
| Contact: | Dan Miller Chief Executive Officer (914) 921-5193 | |
