Business
LICT Corporation Reports Results for the 2nd Quarter 2024
LICT Corporation Reports Results for the 2nd Quarter 2024.
About this update from Lict Corp.
LICT Corporation (“LICT” or the “Company”; OTC Pink ® : LICT) reports financial results for the quarter ended June 30, 2024. Data for all periods has been adjusted for the spin-off of MachTen on August 31, 2023, and 2023 results are presented as discontinued operations. Total revenues in the second quarter of 2024 increased by $4.6 million to $33.7 million versus $29.1 million in the same quarter a year ago. Regulated revenues were $14.9 million in the second quarter of 2024, an increase of $3.2 million versus the prior year’s second quarter of $11.7 million. The acceptance of Enhanced ACAM (E-ACAM) accounted for a $3.5 million increase in regulated revenues for the quarter. Non-regulated revenues for the second quarter of 2024 increased 8% to $18.8 million from the prior year’s second quarter $17.4 million driven by sales of broadband services and high-speed data circuits. Further, our results for the second quarter of 2024 include $750K in revenues from the Manti Non-Regulated entities which were acquired on December 1, 2023. Total EBITDA was $14.2 million in the second quarter of 2024 as compared to $11.7 million in the second quarter of 2023. The $2.5 million increase in EBITDA was driven by the election of E-ACAM as well as an increase in our non-regulated business, which was offset by higher operating expenses, including labor costs, professional and engineering expenses. Regulated EBITDA in the second quarter of 2024 was $7.2 million compared to $4.5 million during the same period last year, driven by E-ACAM and offset by increases in operating expenses. Non-regulated EBITDA in the second quarter was $7.0 million compared to $7.2 million last year. The decrease was driven by an increase in operating expenses, offset by an increase in internet revenues. OTHER INCOME/(EXPENSES) – Other income/expenses remained flat at $0.5 million in the second quarter of 2024 versus 2023. EARNINGS PER SHARE – Earnings per share from continuing operations for the second quarter of 2024 were $293 per share compared to $220 per share in the same period last year. Shareholder Designated Charitable Contribution Program LICT Corporation (OTC Pink: LICT) will continue its Shareholder Charitable Contribution program for all registered shareholders. Each registered shareholder will be eligible to designate a 501 c3 charity to which a $100 per share donation on behalf of the shareholder will be made. We believe charitable giving is a cornerstone of society and an obligation for those with means to make a difference in the world. As an organization, LICT will have no control over the donations, but we are happy to make them on behalf of our shareholders. Over the past 7 years, LICT has made more than $7.5 million in charitable contributions. Details will be announced before year end regarding the details of the contribution. Share Repurchase Program During the three months ended June 30, 2024, the Company repurchased 205 shares for $3.2 million, with an average price of $15,559 per share. For the six months ended June 30, 2024, the company has repurchased 297 shares for $4.7 million, with an average price of $15,943 per share. As of June 30, 2024, 16,674 shares were outstanding. LICT’s Board of Directors increased the Company’s authorization to repurchase shares by an additional 400 shares, bringing the total to 514 authorized for repurchase. We will continue to repurchase shares on an opportunistic basis. FCC Programs and Other Capital Expenditures With the acceptance of the FCC’s E-ACAM program effective January 1, 2024, LICT now has buildout requirements to a minimum speed of 100/20 Mbps to almost 20,000 locations which must be completed by December 31, 2028 (the company has already commenced the buildout process). E-ACAM increased LICT’s federal Universal Service Fund (USF) revenues an incremental $14 million per year ($3.5 million per quarter) to a total of $37.2 million annually through 2038 (subject to a one-time true-up in 2025 for more precise E-ACAM location counts). The total gross capital expenditures to meet the buildout requirements for E-ACAM, along with Federal (ReConnect III & IV) and State grants are estimated at $511 million ($349 million net of grant funding). I. SUPREME COURT ENDS THE CHEVRON DEFERENCE DOCTRINE On June 28, 2024 the U.S. Supreme Court ended the Chevron deference doctrine. With this ruling, the Supreme Court cut back sharply on the power of federal agencies to interpret the laws they administer and ruled that courts should rely on their own interpretation of ambiguous laws. Management will continue to monitor the impacts of this ruling on the business of the company and specifically any funding provided by government programs.   II. ENHANCED ALTERNATIVE CONNECT AMERICA COST MODEL (E-ACAM) PROGRAM The Federal Communications Commission proposed an increase in ACAM funding through a program known as E-ACAM, which began January 1, 2024. In the new program LICT entities will receive $37.2 million per year through 2038, as compared to $23.2 million received in both 2023 and 2022, with minimum speed requirements of 100/20 Mbps.   III. RECONNECT III and RECONNECT IV - As previously announced, LICT has been awarded $157.5 million for seven United States Department of Agriculture (USDA) ReConnect III and ReConnect IV grants with a total project cost of $171.2 million, of which, our share of cost will be approximately $13.7 million. These grants require us to provide 1 Gig of fiber broadband speed. Five of the seven awards are still pending environmental clearance approval before construction can commence.   IV. LICT EXTENDED THE FCC’S AFFORDABLE CONNECTIVITY PROGRAM (ACP) ACP was terminated in May of 2024. LICT informed its ACP customers that the Company will continue an equivalent credit through January 31, 2025, at LICT’s cost. Eligible ACP customers received a continuation of their broadband credit of up to $30 per month (up to $75 for households on Tribal Lands) towards their qualifying internet plan. During June 2024, LICT provided approximately 1,544 ACP eligible customers with the same credits for which they were previously eligible, at the company’s expense. Strategic Initiatives The spin-off of our Michigan entity, MachTen (OTC Pink: MACT), occurred on August 31, 2023. At the time of the spin-off each shareholder of LICT received 150 shares of MachTen per one share of LICT. We continue to own 20% of MachTen as well as holding a note receivable of $15 million plus accrued interest. LICT’s acquisition of Manti Telephone Communications Company (MTCC), and AFConnect (AFI) is complete, the non-regulated facet of the Manti transaction closed on December 1, 2023. The regulated portion, Manti Telephone Company (MTC) transaction is still pending regulatory approval. As previously reported, during the fourth quarter of 2023, LICT completed the sale of 40% of its 20% ownership of Brick Skirt Holding Company (formerly DFT Communications) to CIBL, Inc. LICT’s sale of its remaining 12% ownership of Brick Skirt, is still pending regulatory approval. Bretton Woods continues to utilize Brick Skirt for certain administrative functions as it has since 2014. FIXED WIRELESS - Sound Broadband LLC, the wireless subsidiary of LICT Corporation specializing in fixed wireless solutions, has successfully completed 5G deployments in its existing service areas and expanded into new markets across New Mexico, California, and Utah. The company is now poised to introduce additional 5G deployments in Kansas and Oregon this year. Ongoing analysis aims to further extend 5G wireless broadband services across all operational regions, enhancing broadband speeds and connectivity for communities served by LICT. OPERATING STATISTICS/BROADBAND DEPLOYMENT - LICT owns and operates 6,713 miles of fiber optic cable, 9,040 miles of copper cable, 841 miles of coaxial cable and 95 towers. June 30, December 31, Increase Percent Increase   2024 2023 (Decrease) (Decrease) Broadband lines 45,358   44,367   991 2.2% Voice Lines             ILEC 17,114   17,549   (435) (2.5%) Out of franchise 6,280   6,287   (7) (0.1%) Total 23,394   23,836   (442) (1.9%) Video Subscribers 3,510   3,341   169 5.1% Revenue Generating Units 72,262   71,544   718 1.0% This release contains certain forward-looking information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation anticipated financial results, financing, capital expenditures and corporate transactions. It should be recognized that such information is based upon certain assumptions, projections and forecasts, including without limitation, business conditions and financial markets, regulatory and other approvals, and the cautionary statements set forth in documents filed by LICT on its website, www.lictcorp.com . As a result, there can be no assurance that any possible transactions will be accomplished or be successful, or that financial targets will be met. Such forward-looking information is subject to uncertainties, risks and inaccuracies, which could be material. LICT Corporation is a holding company with subsidiaries in broadband and other telecommunications services that actively seeks acquisitions, principally in its existing business. LICT Corporation Statements of Operations (In Thousands, Except Per Share Data)     Three Months Ended June 30,     Six Months Ended June 30, 2024 (Unaudited) 2023 (Unaudited) 2024 (Unaudited) 2023 (Unaudited)       Operating Revenues $ 33,684   $ 29,088     $ 67,183   $ 58,093             Operating Expenses:           Cost of revenue   16,763     14,631       32,836     29,532   General and administrative costs at operations   2,730     2,748       5,476     5,381   Corporate office expenses   1,158     1,166       2,437     2,230   Depreciation and amortization   5,803     4,767       11,807     10,065   Total Operating Expenses   26,454     23,312       52,556     47,208               Operating Income   7,230     5,776       14,627     10,885               Other Income (Expense)           Investment income   315     155       1,208     980   Interest expense   (1,096 )   (629 )     (2,066 )   (1,266 ) Unrealized loss on investment   (42 )   -       (636 )   -   Equity in earnings of affiliated companies   252     24       225     24   Other   28     (49 )     67     (110 ) Total Other Income (Expense)   (543 )   (499 )     (1,202 )   (372 )             Income from continuing operations   6,687     5,277       13,425     10,513   Provision for Income Taxes   (1,780 )   (1,484 )     (3,541 )   (2,773 ) Income from continuing operations, net of tax     4,907         3,793         9,884       7,740       Income from discontinued operations       -           1,766         -         3,277     Tax Provision for discontinued operations   -     (493 )     -     (851 ) Income from discontinued operations, net of tax   -     1,273       -     2,426     Net Income $ 4,907   $ 5,066       $ 9,884   $ 10,166     Capital Expenditures $ 11,761   $ 9,191     $ 28,115   $ 18,867                         Basic & Diluted Weighted Average Shares   16,775     17,224       16,859     17,267               Actual shares outstanding at end of period   16,674     17,165       16,674     17,165               Earnings Per Share: Income from continuing operations $ 293   $ 220   $ 586 $ 448 Income from discontinued operations   -     74       -     141   Basic & Diluted Earnings Per Share $ 293   $ 294     $ 586   $ 589     LICT Corporation Balance Sheet (In Thousands, Except Per Share Data)     (Unaudited) June 30, 2024 (Audited) December 31, 2023 ASSETS     Current assets:     Cash and cash equivalents $ 14,377 $ 11,545 Accounts receivable, less allowances of $137 and $140, respectively 9,719 7,123 Note receivable from affiliate, including accrued interest Material and supplies     16,202 14,533     15,345 16,825 Prepaid expenses, and other current assets   4,453   4,417 Total current assets   59,284   55,255       Property, plant, and equipment, net   165,233   150,112 Goodwill   48,251   48,251 Other intangibles   34,363   34,590 Investments in Affiliated Companies   7,006   7,396 Other assets   13,671   11,436 Total assets $ 327,808 $ 307,040       LIABILITIES AND SHAREHOLDERS’ EQUITY           Current liabilities:     Trade accounts payable $ 6,928 $ 7,773 Accrued interest payable   400   272 Accrued liabilities   8,497   7,696 Current maturities of long-term debt   50,075   3,876 Total current liabilities   65,900   19,617       Long-term debt   19,839   49,576 Deferred income taxes   28,803   28,898 Other liabilities   13,429   14,261 Total liabilities   127,971   112,352 Total shareholders’ equity   199,837   194,688 Total liabilities and shareholders’ equity $ 327,808 $ 307,040   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. Three Months Ended   Six Months Ended June 30,   June 30, 2024   2023   2024   2023 EBITDA Reconciliation:     Operating Profit from Continuing Operations $ 7,230   $   5,776   $ 14,627 $ 10,885 Additions:           Corporate expenses   1,158   1,166     2,437   2,230 Depreciation and amortization   5,803   4,767     11,807   10,065 EBITDA from Operations $ 14,191 $ 11,709   $ 28,871 $ 23,180   Sources and Uses of Cash:     (Unaudited)     June 30, 2024     Three Months Ended   Six Months Ended         Net Income $ 4,907     $ 9,884   Adjustments to reconcile net income to net cash provided by operating activities         Cash Activity (Net Use of Cash)   (2,636 )     (3,401 )   Non-cash Activity (Depreciation, amortization & other activity)   4,541       12,635   Total Net Cash provided by Operating Activities   6,812       19,118             Cash Flows from Investing Activities         Capital Expenditures   (11,761 )     (28,115 )   Other Investing Activities   (67 )     102   Total Net Cash Used in Investing Activities   (11,828 )     (28,013 )           Cash Flows from Financing Activities         Borrowing from Line of credit, net   12,000       16,500     Purchase of treasury stock   (3,189 )     (4,735 )   Payments to reduce long-term debt   (20 )     (38 ) Total Net Cash Provided by (Used in) Financing Activities   8,791       11,727             Net Increase (Decrease) in Cash and Cash Equivalents   3,775       2,832   Cash & Cash Equivalents at the beginning of the period   10,602       11,545   Cash & Cash Equivalents at the end of the period $ 14,377     $ 14,377   LIQUIDITY - The company is in the process of closing on a new $100 million secured revolving credit facility with CoBank for an extended five-year term. This new facility will provide the company with an additional $50 million in available liquidity with terms similar to our current revolving credit facility, we expect the facility to be closed by the end of August. For the period ended June 30, 2024, the funds drawn on the existing $50 million CoBank facility are presented on the balance sheet as Current Maturities of Long-Term debt, as required under the terms of US Generally Accepted Accounting Principles (US GAAP), as the debt is due within one year of the financial statement date (due June 30, 2025). Once the new five-year facility has been closed the related borrowings will be classified as Long-term Debt on the balance sheet. CAPITAL EXPENDITURES – For the second quarter of 2024, capital expenditures were $11.7 million versus $9.2 million in the second quarter of 2023. Year to date capital expenditures totaled $28.1 million in 2024 vs. $18.9 million in 2023. This increase in capital spending was driven by the build out requirements of E-ACAM. View source version on businesswire.com: https://www.businesswire.com/news/home/20240812695338/en/