Boston Omaha Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated results. Boston Omaha operates billboard advertising, broadband, surety insurance and brokerage, asset management, and investment activities.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $22.8 million | $16.3 million |
| Operating loss | $3.0 million | $2.4 million |
| Net income (loss) attributable to common stockholders | $(3.3) million; $(0.11) per diluted share | $16.3 million; $0.55 per diluted share |
| Cash provided by (used in) operations | $1.4 million | $(15.7) million |
| Cash used in investing activities | $37.8 million | Cash provided: $158.0 million |
| Cash provided by (used in) financing activities | $30.3 million | $(121.7) million |
- Revenue increased 40.0%. Billboard revenue rose 12.7%, broadband revenue 109.5%, and earned insurance premiums 35.8%; insurance commissions declined 31.7%. Broadband growth primarily reflected the April 2022 InfoWest and Go Fiber acquisition.
- Billboard gross margin improved to 63.0% from 61.4%; insurance gross margin was 60.7% versus 61.6%. Broadband gross margin narrowed to 69.9% from 77.7%, as segment operating loss increased to $1.7 million from $0.4 million.
- The consolidated net loss contrasts with prior-year income, which included a $25.0 million non-cash gain on deconsolidation of Yellowstone. Q1 2023 also included a $5.0 million equity-method loss from unconsolidated affiliates, mainly Sky Harbour, partly offset by $2.9 million of other investment income.
- Operating cash flow improved year over year, partly because the prior-year period included $15.0 million of management incentive bonus payments. Investing outflow reflected net purchases of investments, capital expenditures of $8.0 million, and acquisition-payable payments.
Financial position and liquidity
- At March 31, 2023, total assets were $706.4 million and total liabilities were $152.2 million. Boston Omaha stockholders’ equity was $527.9 million; total equity including noncontrolling interests was $538.5 million.
- Cash and cash equivalents were $15.9 million; short-term U.S. Treasury securities were $57.7 million. The company also reported $11.4 million of cash held by consolidated BOAM funds and other entities, which it says is not available for Boston Omaha’s general liquidity needs, and $21.2 million of funds held as collateral.
- Long-term debt was $28.1 million, including $1.6 million current; no revolving-credit borrowings were outstanding. The term loan bears fixed interest of 4.00%, matures December 2028, and is secured by billboard-business assets. The company reported compliance with its covenants at quarter-end.
- Operating lease liabilities totaled $64.0 million, with a 16.9-year weighted-average remaining term. The filing says existing cash, short-term investments, credit availability, and operating cash flows are expected to cover working capital and anticipated capital expenditures for the next 12 months.
Changes, outlook and risks
- Q1 ATM stock sales raised $28.1 million gross through issuance of 1.10 million Class A shares. After quarter-end, the company sold another 433,396 shares for approximately $9.1 million net proceeds.
- No acquisitions were completed in Q1. On May 1, 2023, Boston Omaha Asset Management acquired the remaining ownership interests in 24th Street Asset Management for aggregate consideration valued at approximately $5.0 million, including cash, shares, and potential additional payments.
- Management provided no quantified earnings or revenue guidance. It described plans to pursue growth in billboards, broadband, insurance, real estate and other investments, while noting that future acquisitions are uncertain and may require additional equity or debt financing.
- Risks highlighted include Sky Harbour investment valuation and impairment: the equity-method carrying value was $7.73 per share, and the filing says a sustained stock price below that level would likely result in impairment. The company also cites market risk in securities, acquisition execution and funding risk, debt covenant constraints, and the possibility it could be deemed an investment company under the Investment Company Act. Approximately $22.9 million of deposits exceeded federally insured limits.
- Insurance loss reserves were $2.0 million at March 31; the quarter included $20,420 of unfavorable prior-year loss development. Management said routine legal matters were not expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material change in internal control reported.
Investor verification points
- Reconcile reported cash and investments with amounts restricted, held as collateral, or unavailable for general corporate use.
- Assess whether broadband revenue growth can translate into improved segment profitability given higher operating costs, depreciation, and amortization.
- Review the carrying value, market value, impairment assumptions, and liquidity constraints associated with Sky Harbour and other equity-method investments.
- Track ATM issuance, dilution, subsequent 24th Street acquisition payments, capital spending, and financing needs for planned expansion.
- Confirm Link’s covenant headroom and the implications of its credit amendments, including the revolving line’s August 2023 maturity.