Boston Omaha Corporation — FY2022 Form 10-K
Reporting period: Year ended December 31, 2022. This filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement.
Business context
Boston Omaha is a diversified holding company operating outdoor billboard advertising, broadband services, surety insurance and brokerage, and asset management businesses, alongside minority investments. Its strategy emphasizes acquisitions and reinvestment of capital. In April 2022 it acquired InfoWest and Go Fiber, adding more than 20,000 broadband customers; it also acquired billboard assets from Elevation Outdoor Advertising in November.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $81.2 million | $57.0 million |
| Operating loss | $(5.2) million | $(23.8) million |
| Net income attributable to common stockholders | $7.1 million | $52.7 million |
| Diluted EPS | $0.24 | $1.82 |
| Cash from operating activities | $(5.2) million | $7.8 million |
| Cash from investing activities | $87.9 million | $(45.7) million |
| Cash from financing activities | $(109.7) million | $64.6 million |
Revenue rose 42.6%, led by broadband growth of 87.9% to $28.6 million, billboard revenue growth of 24.6% to $39.2 million, and earned premiums growth of 38.5% to $10.6 million. Insurance commissions fell 7.3% to $2.1 million. Consolidated segment gross profit was $54.5 million, approximately 67% of revenue; total costs and expenses remained above revenue at 106.4% of sales, improved from 141.7% in 2021.
- Billboards: Segment operating income was $5.7 million, versus $2.7 million; gross margin improved to 63.3% from 61.6%.
- Broadband: Segment operating loss was $2.2 million, versus operating income of $0.4 million; gross margin declined to 73.7% from 78.2%. Acquisitions and expansion costs contributed to higher expenses.
- Insurance: Segment operating income was $1.1 million, versus an operating loss of $0.8 million. Losses and loss adjustment expenses increased to $1.5 million from $0.9 million.
At year-end, total assets were $683.7 million and total equity was $510.9 million. Cash and cash equivalents were $25.5 million; the company also reported approximately $34 million of short-term Treasury securities. Of reported cash, $8.1 million held by BOAM funds and other entities was not available for Boston Omaha’s general liquidity needs; $21.0 million of collateral funds also supports surety obligations. Current assets were $114.0 million and current liabilities $53.0 million.
Long-term debt was $28.5 million, including $1.5 million current; the balance was Link’s billboard-business term loan at a fixed 4.00% rate, secured by Link assets. No revolving credit was drawn. The company was covenant-compliant at year-end. Operating lease liabilities totaled $64.5 million, with a 17-year weighted-average remaining term.
Changes, unusual items and outlook
- The operating loss narrowed substantially, but reported net income fell from 2021. FY2022 included a $25.0 million noncash gain on Yellowstone’s deconsolidation and $1.8 million from warrant remeasurement, offset in part by $15.6 million of investment losses and a $1.4 million equity-method loss. FY2021 included $93.2 million of investment income, making year-over-year net income comparisons unusually volatile.
- Operating cash flow turned negative, partly because $15.0 million of management incentive bonuses accrued in 2021 were paid in January 2022, as well as spending on Fiber Fast Homes and build-for-rent development. Investing cash inflows included proceeds from Yellowstone’s trust account and sales or maturities of investments; the company also spent $51.2 million on acquisitions and $40.1 million on capital expenditures.
- Management expects existing cash to fund current operations for at least 12 months, but says additional financing may be needed for significant acquisitions or investments. It reported raising approximately $28.1 million gross through ATM share sales in January and February 2023. The company provided no earnings guidance and states it does not intend to publish earnings guidance.
- The company has incurred operating losses since 2015 and expects losses to continue for the foreseeable future. Management highlights acquisition execution, inflation and recession exposure, competition, access to capital, insurance claims and reserves, and regulatory and cybersecurity risks.
- Sky Harbour is a material investment risk: Boston Omaha carries its 22.96% equity-method investment at approximately $106 million, while its quoted market value at December 31, 2022 was approximately $34.9 million. Management reported no other-than-temporary impairment, citing its assessment and intent to hold; it said a sustained share price below its $8.15-per-share carrying value would likely result in impairment. The March 20, 2023 closing price was $8.36. The holding’s size and trading restrictions may limit sales.
- The InfoWest/Go Fiber transaction includes a seller-owned 20% interest with put/call provisions tied to an earnings multiple. The 2022 Elevation purchase price allocation was preliminary. These arrangements and acquisition valuations merit monitoring.
- Auditors issued an unqualified opinion on the consolidated financial statements. Management concluded disclosure controls and internal control over financial reporting were effective at December 31, 2022; InfoWest and Go Fiber were excluded from the internal-control assessment in their acquisition year. A 2020 material weakness relating to SPAC accounting was remediated in 2021, after a restatement.
Important facts for investors to verify
- Reconcile reported earnings to recurring operating performance, separating the Yellowstone gain, investment losses and volatile securities-related items.
- Assess the carrying value, impairment sensitivity, liquidity and potential sale constraints of the Sky Harbour investment and warrants.
- Review broadband unit economics and cash needs, including acquisition integration, expansion spending, and the InfoWest/Go Fiber put/call terms.
- Confirm available unrestricted liquidity after excluding BOAM-held cash and surety collateral; monitor negative operating cash flow, capital spending and future equity issuance/dilution.
- Track Link’s debt covenants and the August 2023 revolving facility maturity, along with the company’s substantial lease commitments.
- Evaluate surety loss-reserve adequacy and claims trends, and consider governance: Class B shares carry ten votes each, with affiliated holders controlling approximately 44% of aggregate voting power.