Boston Omaha Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Unaudited consolidated results. Boston Omaha operates billboard advertising, broadband, surety insurance and brokerage, and investment businesses.
Financial performance
- Q2 revenue: $20.9 million, up 47.4% from $14.2 million a year earlier. Billboard rentals were $9.8 million (+23.5%), broadband $8.1 million (+114.8%), and earned premiums $2.4 million (+38.7%).
- Six-month revenue: $37.2 million, up 35.8% from $27.4 million. Growth reflected billboard acquisitions and improved occupancy, the April broadband acquisition, and higher earned premiums.
- Operating results: Q2 operating loss was $0.7 million, improved from $1.1 million; six-month operating loss was $3.2 million, compared with $2.6 million. Costs and expenses exceeded revenue in both periods.
- Net income attributable to common stockholders: Q2 net loss of $11.5 million, or $0.39 per diluted share, versus income of $8.6 million, or $0.29 per share. Six-month income was $4.8 million, or $0.16 per diluted share, versus $93.1 million, or $3.26 per share.
- Investment effects: Q2 included $16.9 million of other investment losses, largely from public securities. Six-month results included $14.3 million of other investment losses, partly offset by a $25.0 million noncash gain from deconsolidating Yellowstone following its Sky Harbour combination. In the first half of 2021, investment income was $118.7 million.
- Segment gross profit: $14.2 million in Q2, versus $9.4 million; $24.8 million for the first half, versus $17.8 million. Billboard operating income improved, while broadband operating income declined to $0.1 million for Q2 and a $0.3 million loss for the first half.
- Cash flow: First-half operating cash use was $14.7 million, versus $5.3 million provided in 2021. Investing activities provided $110.8 million, primarily from investment and trust-account proceeds; financing activities used $116.1 million, including Yellowstone-related redemptions and fees. Cash, cash equivalents, and restricted cash ended at $61.7 million.
Financial position and liquidity
- At June 30, 2022, total assets were $673.9 million, down from $807.1 million at year-end 2021. Stockholders’ equity was $501.4 million; redeemable noncontrolling interest was $15.3 million.
- Cash and cash equivalents were $40.0 million. The company also reported $40.6 million of U.S. Treasury trading securities and $21.3 million of marketable equity securities. Management said existing liquidity and expected resources should cover working capital and anticipated capital expenditures for the next 12 months.
- Long-term debt was $29.2 million, including $1.5 million current; no revolving-credit borrowings were outstanding. The billboard subsidiary’s term loan has a 4.00% fixed rate and matures December 2028. The company reported compliance with its financial covenants.
- Operating lease liabilities totaled $62.6 million. The filing reports approximately $56.9 million in deposits above federally insured limits.
Material developments, outlook, and risks
- On April 1, 2022, the company acquired InfoWest and Go Fiber, Utah-based broadband providers serving more than 20,000 customers, for a stated purchase price of $48.6 million. Their reported Q2 revenue and earnings from the acquisition date were $4.0 million and $0.8 million. Purchase accounting remained preliminary and subject to valuation and allocation updates.
- Management plans to pursue further billboard, broadband, insurance, and other investments and acquisitions, but reported no specific material acquisition that was probable of closing. It may use cash, debt, equity, seller financing, or other funding; the filing provides no numerical earnings or revenue guidance.
- Management cited market-price volatility in public securities as a significant source of earnings variability. Further risks include the ability to fund future acquisitions, debt covenant restrictions, insurance reserve estimates, and the possibility that investment-asset levels could trigger Investment Company Act concerns and require asset sales or other actions.
- The company said COVID-19 had generally had limited or no material adverse impact to date, but a resurgence could affect demand. Routine litigation and claims were disclosed; management did not expect them to have a material adverse effect. Disclosure controls were deemed effective; the newly acquired broadband businesses were excluded from the quarter’s internal-control assessment while integration continues.
Important facts for investors to verify
- How much of revenue growth and broadband profitability is organic versus attributable to acquisitions, and whether the new broadband assets can improve margins.
- The final purchase-price allocation for InfoWest and Go Fiber and the assumptions underlying goodwill and intangible assets.
- The composition, valuation, and liquidity of public investments, and how investment gains and losses may affect reported earnings.
- Cash generation after the $15.0 million incentive-plan payment, acquisition spending, and capital expenditures; reconcile available liquid resources with stated funding needs.
- Insurance loss-reserve estimates and development on prior-year claims, along with compliance with Link’s debt covenants and the company’s Investment Company Act status.