Boston Omaha Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited consolidated results. The company operates billboard advertising, surety insurance and brokerage, broadband services, and minority investments.
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $13.21 million | $11.41 million |
| Operating loss | $1.49 million | $1.18 million |
| Net income (loss) attributable to common stockholders | $84.44 million | $(24.73) million |
| Diluted earnings (loss) per share | $3.09 | $(1.05) |
| Cash from operating activities | $4.03 million | $(0.11) million |
- Revenue grew 15.7%, largely due to broadband acquisitions. Billboard revenue declined 0.9%; earned insurance premiums fell 48.3%, mainly after the company suspended its rental guarantee bond program. Broadband revenue was $3.80 million, versus $0.27 million in the prior-year quarter.
- Operating costs exceeded revenue in both periods; the operating loss margin widened to 11.3% from 10.3%. Segment gross margins were 60.0% for billboards, 50.0% for insurance, and 80.1% for broadband. Billboard and broadband reported operating income of $0.11 million and $0.78 million, respectively; insurance reported an operating loss of $0.79 million.
- Q1 2021 net income was dominated by $104.47 million of unrealized securities gains, mainly from the company’s DFH investment after Dream Finders Homes went public. Other income also included $2.84 million of gains on investment sales and a $2.18 million warrant-liability remeasurement gain. These non-operating gains are market-sensitive and do not represent recurring operating performance.
Financial position and liquidity
- At March 31, 2021, total assets were $750.10 million, cash and cash equivalents $84.31 million, and restricted cash $0.31 million. The company also held $54.50 million of U.S. Treasury trading securities and $143.99 million of marketable equity securities.
- Operating cash flow was $4.03 million. Investing cash flow was $36.05 million, including investment sales and repayment of DFH’s $20 million loan; financing cash outflow was $0.51 million. Cash, cash equivalents, and restricted cash increased $39.57 million to $94.52 million.
- Long-term debt, including current maturities, totaled $22.76 million; no revolving-credit balance was outstanding. The debt is secured by billboard subsidiary assets, and the company reported compliance with covenants. Lease liabilities totaled $55.68 million. Total liabilities were $135.50 million.
- Management said available cash, short-term investments, operating cash flow, and credit availability were expected to meet working-capital needs and anticipated capital expenditures for the next 12 months. It also reported approximately $89.41 million in bank deposits above federally insured limits.
Changes, outlook, risks, and unusual items
- The January 2021 acquisition of 238 Kansas billboard structures cost approximately $6.1 million; purchase accounting was provisional. An insurance brokerage acquisition for $2.23 million closed April 1, after quarter-end.
- Management described business activity as improving and said it was resuming acquisitions and capital projects. It plans to pursue growth in billboards, broadband, insurance, and investments, but provided no quantified financial guidance and reported no specific material acquisition commitment.
- COVID-19 effects differed by business: billboard demand remained somewhat weak, while the suspension of rental guarantee bonds reduced insurance premiums. Management cautioned that a pandemic resurgence could adversely affect results.
- The company released its U.S. federal and state deferred-tax-asset valuation allowance, recording an approximately $7.17 million non-cash tax benefit; the quarter nevertheless reported a net income-tax provision of $20.52 million.
- Disclosure controls and internal control over financial reporting were reported ineffective because of a material weakness involving technical accounting for the Yellowstone SPAC. The weakness had resulted in a 2020 financial-statement restatement; remediation was ongoing and not yet complete.
- On April 6, 2021, the company completed a public offering that generated approximately $58.6 million of gross proceeds for Boston Omaha, before discounts and expenses. Management identified possible future equity or debt financing, acquisition execution, investment-value volatility, and the risk of being deemed an investment company as important considerations.
Facts investors should verify
- How much of reported earnings reflects recurring operating performance versus unrealized investment gains, and how DFH’s lock-up and marketability discounts affect valuation.
- Whether insurance premiums, claims reserves, and loss experience stabilize after the rental-bond program suspension.
- Progress and testing of controls remediation following the Yellowstone-related material weakness and 2020 restatement.
- Use of April offering proceeds, future financing or dilution, and compliance with the Investment Company Act asset limits.
- The cash-flow discussion contains an apparent comparison error: it states Q1 2020 investing cash flow as $36.05 million, while the cash-flow statement reports $35.83 million. The statement’s reported figure should be checked against the filed XBRL and original document.