Executive Summary

Q2 revenue was $3.99M, up 1% YoY, with operating profit (EBIT) of $1.44M and net income of $1.06M; non‑regulated revenue grew 7% YoY to $0.95M on broadband uptake, while regulated revenues were stable as ACAM support offset the elimination of Michigan intrastate USF .
Management highlighted stable ~$2.2M quarterly ACAM funding and the FCC’s exploration of “Enhanced ACAM” that may increase support from Jan 2024 and extend the program to 2038; cash rose to $2.44M from $1.20M at year‑end as working capital improved .
Spin-off mechanics: LICT distributed 81% of MachTen on Aug 31, 2023 (150 MACT per LICT), leaving 3,172,407 MACT shares outstanding; MachTen expects to draw a ~$20M revolver (CoBank) to pay a $15M dividend to LICT, altering capital structure post‑quarter .
Near‑term stock catalysts: FCC decision on Enhanced ACAM; execution on fiber build (ReConnect/CMIC grants), broadband net adds, and clarity on leverage after the $15M distribution tied to the spin .

What Went Well and What Went Wrong

What Went Well
- Non‑regulated revenue +7% YoY to $0.95M on new broadband customers outside the incumbent territory; “In the last two years, MachTen has invested approximately $6 million in constructing fiber optic facilities…pass more than 5,000 locations…approximately 600 have signed contracts” .
- Regulated revenue stability, with ACAM at ~$2.2M in Q2 and ~$8.7M annually through 2028, providing predictable cash flow to fund builds .
- Liquidity improved: cash $2.44M at 6/30/23 vs $1.20M at 12/31/22; working capital swung to a $2.9M surplus from a $0.6M deficit, supporting near‑term project execution .
What Went Wrong
- Intrastate USF eliminated in Michigan; intrastate access/USF fell to $18k vs $91k YoY in Q2, a structural headwind to regulated revenue mix .
- Cost pressure from expansion: cost of revenue rose to $1.33M (+4% YoY), primarily staffing, sales and marketing tied to residential FTTH expansion; management fees also increased .
- Access line attrition: 3,911 vs 4,050 (‑3%) YoY, reflecting legacy voice decline even as broadband grows; internal controls were not effective as of Q2 (material weaknesses continue) .

Financial Results

Metric (USD)	Q2 2022	Q1 2023	Q2 2023
Revenue ($M)	$3.95	$3.87 (calc from H1 $7.856–Q2 $3.985)	$3.99
Operating Profit / EBIT ($M)	$1.48	$1.26 (calc from H1 $2.692–Q2 $1.435)	$1.44
Net Income ($M)	$1.05	$0.94 (calc from H1 $2.003–Q2 $1.060)	$1.06
EBITDA ($M)	$1.99	$1.78 (calc from H1 $3.737–Q2 $1.957)	$1.96
EBIT Margin (%)	37.4% (calc)	32.5% (calc)	36.0% (calc)
EBITDA Margin (%)	50.3% (calc)	46.0% (calc)	49.1% (calc)
Net income per share (carve‑out)	$10,530 (on 100 shs)	n/a	$10,600 (on 100 shs)

Notes: Q1 2023 values are derived from the six‑month totals minus Q2 reported figures from the same 10‑Q. EPS is presented on a carve‑out basis using 100 shares and is not indicative of post‑spin diluted EPS .

Segment revenue breakdown

Segment ($M)	Q2 2022	Q2 2023
Regulated Revenue	$3.07	$3.04
Non‑regulated Revenue	$0.89	$0.95

Selected KPIs and mix

KPI	Q2 2022	Q2 2023
ACAM revenue (quarter)	~$2.20M	~$2.20M
Access lines	4,050	3,911
Fiber passings (cumulative, last 2 yrs)	–	>5,000; 600 signed

Balance sheet snapshot

Metric ($M)	12/31/2022	6/30/2023
Cash & Cash Equivalents	$1.20	$2.44
Total Assets	$25.72	$28.86
Total Liabilities	$8.19	$6.53
Shareholders’ Equity	$17.53	$22.33

Estimates vs actuals (S&P Global)

Metric	Q2 2023 Consensus	Actual
Revenue	N/A (S&P access limit)	$3.99M
EPS	N/A (S&P access limit)	Carve‑out $10,600/sh (100 shs)

S&P Global consensus values were unavailable due to access limits; therefore, we cannot assess beat/miss against S&P Global at this time.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal revenue/EPS guidance	FY 2023	None disclosed	None disclosed	Maintained (no formal guidance)
ACAM support	Through 2028	~$8.7M per year	~$8.7M per year; FCC exploring Enhanced ACAM potentially from Jan 2024 and extension to 2038	Maintained; upside optionality from FCC process
Capital structure	Spin closing	n/a	~$20M revolver to fund $15M distribution to LICT in spin	New leverage introduced post‑quarter
Grants/funding for FTTH	Multi‑year	CMIC 3.0 $2.0M grant (match required)	ReConnect III grants (environmental clearance underway) to fund ~75% of $75–85M FTTH projects	Increased external funding potential

Earnings Call Themes & Trends

Note: The press release included call details, but no public transcript was available in our corpus; themes below are drawn from the Q2 10‑Q and press release .

Topic	Previous Mentions (Q‑2)	Previous Mentions (Q‑1)	Current Period (Q2 2023)	Trend
ACAM / Enhanced ACAM	n/a (pre‑spin)	H1: ~$8.7M/yr through 2028	~$2.2M Q2; FCC exploring Enhanced ACAM, possible increase from Jan 2024 and extension to 2038	Stable base with potential upside
Fiber expansion	n/a (pre‑spin)	H1: deploying FTTH, expect growth to accelerate	~$6M invested over 2 yrs; >5,000 passings; 600 signed	Accelerating buildout
Costs/inflation	n/a (pre‑spin)	H1: higher sales/marketing & staffing	COR +4% YoY on staffing/marketing; G&A stable in Q2	Manageable cost growth
Regulatory/legal	n/a (pre‑spin)	CMIC 3.0 grant; AEG litigation noted	CMIC inflow $0.5M YTD; AEG litigation ongoing/no accrual	Neutral/ongoing
Internal controls	n/a (pre‑spin)	Material weaknesses at YE22 persisted	Controls not effective as of Q2; remediation underway	Remediation in progress

Management Commentary

“Non-regulated revenue increased to $950,000 in the 2nd quarter of 2023, up from $885,000 in the prior year…primarily attributable to new broadband internet customers in competitive markets…invested approximately $6 million [in] fiber…pass more than 5,000…approximately 600…signed” .
“ACAM revenues were approximately $2.2 million in the 2nd quarter…The FCC recently announced the exploration of an ‘Enhanced’ ACAM that may increase annual revenue starting in January 2024, with an extension…through 2038” .
“We expect…broadband growth to accelerate as we deploy FTTH to more locations” .
“We expect to generate $8.7 million annually in revenue from the FCC’s A‑CAM program…through December 31, 2028” .

Q&A Highlights

A Q2 call was scheduled (dial‑in provided), but a transcript was not available in our source set; themes above reflect disclosures in the 10‑Q and press release .
No new quantitative guidance was issued; management emphasized ACAM stability, potential Enhanced ACAM benefits, and fiber execution funded by grants .

Estimates Context

S&P Global consensus for Q2 2023 revenue/EPS was unavailable due to access limits; as a result, we cannot determine beat/miss vs S&P Global consensus at this time. Actuals: revenue $3.99M; carve‑out EPS $10,600 per 100 shares .

Key Takeaways for Investors

Regulated revenue stability (ACAM ~$2.2M/quarter; ~$8.7M/year through 2028) underpins cash flows while the company scales fiber, limiting downside amid macro uncertainty .
Broadband growth vector intact: >5,000 passings and 600 contracted, with grants (ReConnect/CMIC) lowering capex burden; watch conversion rates and ARPU as fiber rollout progresses .
Structural headwind persists from Michigan intrastate USF elimination; mix shifting toward interstate/USF and non‑regulated broadband .
Cost discipline matters: expansion raised staffing/sales costs (+4% COR YoY); maintaining margins near ~49% EBITDA and ~36% EBIT in Q2 will hinge on broadband scale economies .
Capital structure changing post‑spin: ~$20M revolver and $15M distribution to LICT introduce leverage—monitor interest expense and covenant flexibility vs build cadence .
Potential Enhanced ACAM decision is a catalyst; a favorable ruling (higher support/extension) could increase visibility and fund faster builds through 2038 .
Internal control remediation remains a watch item; sustained progress is important as the company operates independently post‑spin .

Citations: All figures, quotes, and statements sourced from MachTen’s Q2 2023 8‑K press release and 10‑Q as cited inline – –, and related 8‑K filings on August 14, 2023 –.

MachTen, Inc. (MACT)·Q2 2023 Earnings Summary