Old Market Capital: Reconnecting Value in Rural Broadband (OMCC) - OMCC Stock Research Report

## Executive Summary / Key Takeaways * Old Market Capital Corporation (OMCC) has undergone a profound strategic transformation, divesting its legacy consumer finance business to pivot entirely into the high-growth rural broadband sector through its majority-owned subsidiary, Amplex Electric Inc. * Amplex leverages a dual-technology approach, combining advanced fiber-to-the-home (FTTH) with fixed wireless solutions, to serve underserved communities in Ohio, capitalizing on surging demand for high-speed internet and a fragmented market ripe for consolidation. * While the fiscal year ended March 31, 2025, reflects the transitional impact with a reported net loss of $5.15 million and negative operating cash flow of $1.90 million, the company's revenue surged to $9.37 million from $0 in the prior year, driven entirely by the Amplex acquisition. * OMCC's strong balance sheet and access to a $21.34 million USDA RUS Reconnect loan provide significant capital for aggressive FTTH expansion, positioning it to capture market share against larger, less agile competitors in its niche. * Key risks include intense competition from well-resourced incumbents, regulatory changes, and the need for continued investment in technology and infrastructure to maintain a competitive edge and drive long-term profitability. ## A Strategic Reconnection: From Subprime Loans to High-Speed Fiber Old Market Capital Corporation (OMCC) is no longer the specialized consumer finance company it once was. What began in 1986 as Nicholas Financial, Inc., primarily acquiring and servicing automobile finance contracts, has undergone a dramatic and deliberate metamorphosis. This strategic pivot, initiated in November 2023 with the divestiture of its entire consumer finance portfolio to Westlake Financial for $65.60 million, marks a decisive shift away from a capital-intensive, cyclical lending business. The company's re-domestication to Delaware and rebranding to OMCC in September 2024 solidified its new identity as a holding company with a singular, compelling focus: the burgeoning rural broadband market. This transformation is not merely a change of business but a strategic re-alignment towards a sector characterized by robust demand and significant growth potential. The COVID-19 pandemic underscored the critical need for reliable, high-speed internet, accelerating reliance on remote connectivity for work, education, and telehealth. Studies consistently highlight that many U.S. households, particularly outside major metropolitan areas, remain underserved due to limited all-fiber infrastructure. This connectivity gap presents a substantial opportunity for agile, focused providers. OMCC's entry into this space, through its majority acquisition of Amplex Electric Inc. in June 2024, positions it to capitalize on this secular trend. Amplex, OMCC's new operating subsidiary, is a provider of broadband internet, Voice over Internet Protocol (VOIP), and video services primarily in Northwest and North Central Ohio. As of March 31, 2025, Amplex served approximately 13,000 broadband customers, including 4,400 fiber subscribers, with over 12,000 fiber passings completed. This operational footprint underscores Amplex's commitment to bridging the digital divide in its target regions. ## Technological Edge and Operational Scale Amplex's core technological differentiation lies in its dual-pronged approach: leveraging both advanced fiber optic and fixed position wireless connectivity. Fiber optic technology, the gold standard for high-speed internet, offers significant advantages over traditional copper cables. It provides substantially greater bandwidth, enabling a far higher volume of data transmission in less time. Furthermore, fiber optics experience low power loss, allowing for longer transmission distances, are less susceptible to electromagnetic interference, and are lighter, potentially offering cost benefits over copper wire in the long run. While fiber installation can be more complex and costly, requiring specialized equipment and permitting, its long-term performance and capacity benefits are undeniable. For areas where fiber deployment is not yet feasible or cost-prohibitive, Amplex maintains a robust fixed position wireless network. This technology provides a high-bandwidth solution, ensuring connectivity in truly rural and hard-to-reach communities. This hybrid approach allows Amplex to serve a broader customer base and expand its reach efficiently, adapting to the unique geographical and economic realities of its service areas. The company's strategic focus on Fiber-to-the-Home (FTTH) is a testament to its belief in the durability of this asset and its potential for attractive pre-tax returns on invested capital. OMCC's strategy is to drive growth in intrinsic value per share by reinvesting capital into Amplex's expansion and pursuing additional strategic investments in other sectors. The company's management team is committed to an opportunistic approach, identifying ventures that promise stable and attractive returns. This capital allocation discipline, combined with Amplex's operational capabilities, forms the bedrock of OMCC's new investment thesis. ## Financial Performance: A Transformative Year The fiscal year ended March 31, 2025, represents a pivotal period for OMCC, marked by the full impact of its strategic transformation. The company reported total revenue of $9.37 million, a dramatic increase from $0 in the prior fiscal year. This surge is directly attributable to the acquisition and consolidation of Amplex's operations, which now contribute wireless internet services ($5.43 million), fiber internet services ($2.60 million), and other revenue, including VOIP and video services ($1.33 million). \ However, this transition also brought significant expenses. Total operating expenses increased by 161% to $16.33 million in FY25, up from $6.24 million in FY24. This rise was primarily driven by the costs associated with Amplex's operations, including wireless and fiber internet services ($0.55 million), other revenue costs ($0.64 million), plant-specific operations ($1.24 million), and plant non-specific operations ($0.77 million). General and administrative expenses also saw a substantial increase to $10.81 million from $6.16 million, largely due to professional fees and restructuring costs related to the Amplex acquisition. Depreciation and amortization expenses climbed to $2.01 million from $0.08 million, reflecting the significant increase in property, plant, and equipment, and intangible assets acquired with Amplex. The company's net loss for the fiscal year was $5.15 million, compared to a loss of $20.80 million in FY24. While still a loss, the improvement was partly due to the positive income from discontinued operations, which contributed $3.04 million in FY25, a stark contrast to the $14.70 million loss in FY24. This improvement in discontinued operations was driven by a decrease in general and administrative expenses and reduced credit losses following the sale of the finance receivables. Non-recurring charges in FY25 included a $1.71 million emigration tax expense due to the company's re-domestication and a $1.10 million loss on dissenting shareholders liability, both directly tied to the strategic restructuring.

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\ From a liquidity standpoint, OMCC's cash and cash equivalents stood at $24.52 million as of March 31, 2025, up from $18.98 million in the prior year. The company's primary sources of liquidity are its ongoing operations and a significant $21.34 million loan under the USDA's Rural Utilities Service (RUS) Reconnect program. This RUS loan, secured by all of Amplex's assets and bearing a 2% annual interest rate with a three-year deferral period for payments, is crucial for financing broadband infrastructure projects in rural areas. Management believes that its current cash balance, expected operating cash flows, and available borrowing capacity under the RUS Loan will be sufficient to meet its cash needs and planned expenditures over the next 12 months.

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\ ## Competitive Landscape and Strategic Positioning OMCC, through Amplex, operates in a highly competitive broadband market, facing off against both established national players and emerging technologies. Major operators like Charter Communications (TICKER:CHTR), T-Mobile (TICKER:TMUS), Verizon (TICKER:VZ), and AT&T (TICKER:T) represent formidable competition. These incumbents possess substantially greater financial, marketing, and human resources, enabling them to offer a broader array of products, invest more aggressively in customer acquisition, and retain existing customers more effectively. For instance, while OMCC's operating profit margin stands at -9.41% (TTM), Charter boasts 0.24%, T-Mobile 0.22%, Verizon 0.21%, and AT&T 0.16%, reflecting the scale advantages of these larger players. However, OMCC strategically targets rural and underserved communities in Ohio, a niche where existing providers often fail to deliver adequate speed and bandwidth. This regional focus allows OMCC to achieve estimated 10-15% lower operating costs per subscriber compared to national averages, translating to a potential competitive pricing advantage. OMCC's localized operations also foster stronger customer relationships, leading to estimated 20% higher retention rates in Ohio compared to T-Mobile's national average. This customer intimacy and localized support are critical differentiators that larger, more standardized competitors struggle to replicate. The broadband space remains highly fragmented, with many small operators. This fragmentation presents a significant opportunity for OMCC to pursue continued growth through acquisitions, a core component of its strategy to drive intrinsic value per share. By leveraging its strong balance sheet and the RUS loan, OMCC is well-positioned to consolidate smaller players and expand its FTTH footprint. Despite these advantages, OMCC faces vulnerabilities. Its smaller scale can lead to higher energy consumption per unit (estimated 20-30% higher) and slower technology deployment (estimated 15-25% slower) compared to larger rivals. Emerging technologies like 5G home internet, championed by T-Mobile and Verizon, pose a threat by offering new alternatives to traditional FTTH services. T-Mobile's AI investments, for example, could further reduce its operating costs by 10-15% through energy-efficient networks, putting pressure on OMCC's cost leadership. OMCC's management acknowledges these rapid technological advancements and remains focused on adapting Amplex's strategy to stay competitive. ## Risks and Outlook Investing in OMCC carries several pertinent risks. The company's revenue, primarily from Amplex, is susceptible to prevailing economic conditions, as discretionary spending patterns could lead customers to reduce or discontinue services, especially with the expanded availability of free or lower-cost competitive streaming and wireless options. Regulatory changes, particularly from the FCC and state/local governments, could significantly increase compliance costs or impose restrictions on Amplex's services. The company's reliance on key executive and senior management personnel, including Amplex's leadership, means that unexpected departures could materially impact operations. Furthermore, OMCC's growth strategy, which includes future acquisitions, may necessitate additional equity capital, potentially leading to material dilution for existing shareholders. While the company currently has no significant debt outside the RUS loan, future debt financing could impose restrictive covenants and increase financial risk, potentially limiting flexibility or leading to debt acceleration if covenants are breached. Cybersecurity threats also remain a significant concern, given the heavy reliance on IT systems for managing customer data and operations. Despite robust measures, the company cannot guarantee the security of its systems, and a breach could lead to significant financial and reputational damage.

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\ Looking ahead, OMCC's outlook is cautiously optimistic. The company's strategic pivot into rural broadband aligns with a strong secular growth trend. The $21.34 million RUS loan provides a clear pathway for significant infrastructure expansion, particularly in fiber. Management's stated goal to drive intrinsic value per share growth through reinvestment in Amplex and opportunistic acquisitions in other stable, high-return sectors suggests a disciplined capital allocation approach. The fragmented nature of the broadband market also offers a fertile ground for inorganic growth. ## Conclusion Old Market Capital Corporation has executed a bold and comprehensive transformation, shedding its legacy consumer finance business to embrace the promising future of rural broadband. The acquisition of Amplex Electric Inc. is not just a change of industry; it is a strategic re-founding, positioning OMCC to address a critical market need with a differentiated technological approach. While the fiscal year ended March 31, 2025, reflects the financial complexities of this transition, the underlying narrative is one of strategic clarity and growth potential. The company's ability to leverage its strong balance sheet, the substantial RUS loan, and its localized operational model to expand its FTTH footprint will be paramount. Success hinges on its capacity to outmaneuver larger, more generalized competitors by focusing on underserved markets and delivering superior local service. Investors should monitor Amplex's customer growth, fiber passing rates, and the company's execution of its broader acquisition strategy. OMCC represents a compelling, albeit transitional, investment opportunity for those seeking exposure to the high-growth rural broadband sector, driven by a management team committed to long-term value creation through strategic capital allocation and technological advancement.