Business Overview Boston Omaha Corporation (BOC) is a diversified holding company that has evolved significantly over the past decade. Founded in 2009 and led by co-CEOs Adam Peterson and Alex Rozek since 2015, the company has built a portfolio of subsidiaries spanning outdoor advertising, surety insurance, broadband services, and asset management.
Boston Omaha was organized in August 2009, with present management taking over operations in February 2015. The company's operations include an outdoor advertising business with multiple billboards across several states, an insurance business that specializes in surety bond underwriting and brokerage, a broadband business providing high-speed internet services, and an asset management business.
The company's billboard operations are conducted through its subsidiary, Link Media Holdings, LLC, while its insurance operations are handled by General Indemnity Group, LLC. Boston Omaha's broadband services are provided through Boston Omaha Broadband, LLC, and its asset management activities are carried out by Boston Omaha Asset Management, LLC.
Boston Omaha made its first acquisition in the outdoor advertising industry in June 2015, and has since completed over 20 additional acquisitions of outdoor advertising businesses. In April 2016, the company acquired a surety bond brokerage business, and in December 2016, it acquired United Casualty and Surety Insurance Company (UCS), which at the time was licensed to issue surety bonds in only nine states but now has licenses to operate in all 50 states and the District of Columbia. Over the following years, Boston Omaha also acquired several additional surety brokerage businesses.
The company's foray into the broadband industry began with the establishment of Boston Omaha Broadband, LLC in April 2019. In March 2020, it acquired FibAire, a rural broadband internet provider in Arizona. This was followed by the acquisition of UBB, a broadband internet provider in Utah, in December 2020, and the acquisition of InfoWest and Go Fiber in Utah, Arizona, and Nevada in April 2022. As of September 30, 2024, Boston Omaha had approximately 45,600 broadband customers, including 14,000 fiber subscribers and 37,200 fiber passings completed.
Since September 2015, Boston Omaha has made a series of investments in commercial real estate, a commercial real estate management and brokerage services business, and an asset management business. The company currently owns 30% of Logic Real Estate Companies, LLC. In May 2023, Boston Omaha's asset management subsidiary, Boston Omaha Asset Management, LLC, acquired 100% of the membership interests in 24th Street Asset Management LLC.
Financial Performance Boston Omaha's financial performance has been mixed in recent years. For the fiscal year ended December 31, 2023, the company reported total revenue of $96.25 million, a 19.5% increase from the prior year's $81.23 million. However, the company incurred a net loss of $7.00 million, compared to net income of $10.38 million in 2022.
The company's adjusted EBITDA, a non-GAAP metric, stood at $17.27 million in 2023, down from $29.73 million in 2022. This decline was primarily due to higher operating expenses, including increased depreciation and amortization costs, as well as the impact of the COVID-19 pandemic on certain business segments.
For the third quarter of fiscal 2024, Boston Omaha reported total revenues of $27.70 million, a 12.8% increase from $24.55 million in the same period of the previous year. The company's net loss attributable to common stockholders was $1.60 million, or $0.05 per diluted share, a slight improvement from the $1.64 million loss in Q3 2023.
The increase in revenue was primarily driven by growth across all major segments: - Billboard rentals increased by 5.6% - Broadband services revenue grew by 7.4% - Premiums earned from the insurance subsidiary rose by 45.6% - Insurance commissions increased by 37.4%
Segment Performance Boston Omaha operates in four primary business segments: Billboards, Broadband, Insurance, and Asset Management.
Billboard Segment The billboard segment, operated through Link Media Holdings, owns and operates approximately 4,000 billboards with 7,600 advertising faces across 16 states in the Midwest and Southeastern United States. In Q3 2024, this segment generated $11.50 million in net billboard rental revenue, a 5.6% increase year-over-year. The segment's gross margin was 64.8%, and it contributed $2.15 million in segment income from operations, representing an 18.6% operating margin. Improved rental and occupancy rates, along with lower ground rent expense and commissions, contributed to the segment's performance.
Broadband Segment Boston Omaha Broadband provides high-speed internet, including fiber-to-the-home, to approximately 45,600 customers across Arizona, Florida, Nevada, and Utah. In Q3 2024, this segment generated $9.66 million in revenue, a 7.4% increase year-over-year. The broadband segment achieved a 75.1% gross margin and $1.88 million in segment income from operations, representing a 19.4% operating margin. Growth was driven by subscriber additions and improvements in network operations and data costs.
Insurance Segment The insurance operations, conducted through General Indemnity Group, LLC, include United Casualty and Surety Insurance Company and several surety insurance brokerage firms. In Q3 2024, the insurance segment generated $6.49 million in revenue, a 41.4% increase compared to the prior year period. This segment achieved a 60.5% gross margin and $804,410 in segment income from operations, representing a 12.4% operating margin. The improved results were driven by significant increases in premiums earned and insurance commissions.
Asset Management Segment Boston Omaha Asset Management, LLC manages investments in various real estate, aviation, and other alternative assets. In Q3 2024, this segment generated $47,560 in investment and other income. However, the segment recorded a $314,420 loss from operations as the company has been winding down this business unit and implementing cost-cutting measures.
Liquidity As of September 30, 2024, Boston Omaha had $19.4 million in unrestricted cash and $15.3 million in short-term treasury securities. The company's balance sheet remains relatively strong, with a current ratio of 2.09 and a debt-to-equity ratio of 0.18.
Link Media Holdings, BOC's billboard subsidiary, has a $15 million revolving credit facility with First National Bank of Omaha, with $9.60 million drawn as of September 30, 2024. Additionally, Boston Omaha Broadband has a $20 million credit facility with First National Bank of Omaha, with no amounts drawn as of the same date.
Recent Developments and Outlook On May 10, 2024, Boston Omaha announced the departure of co-CEO Alex Rozek, with Adam Peterson continuing to lead the company as sole CEO and Chair. This leadership change came amid some uncertainty about the company's future direction, but Peterson has since shifted the focus towards optimizing existing business units rather than pursuing new ventures.
The company has also taken steps to enhance its financial flexibility, including the implementation of a $20 million share repurchase program in July 2024. This program, which runs through September 2025, reflects management's belief that Boston Omaha's shares are trading at a discount to their intrinsic value.
Despite the challenges faced in recent years, Boston Omaha remains committed to its diversified business model and continues to explore opportunities for growth, both organically and through strategic acquisitions. The company's leadership believes that its strong market positions, diverse revenue streams, and financial resources position it well to navigate the changing landscape and deliver long-term value for shareholders.
Risks and Considerations As with any diversified holding company, Boston Omaha faces a range of risks, including those specific to its various business segments. In the outdoor advertising industry, the company's operations are subject to factors such as changes in billboard regulations, competition, and shifting consumer behavior. The insurance business, meanwhile, is exposed to underwriting risks, regulatory changes, and market conditions.
The company's broadband operations are capital-intensive and face competition from established providers, while the asset management segment is dependent on the performance of its investments and the broader financial markets.
Additionally, Boston Omaha's acquisition-driven growth strategy carries integration risks, and the company's ability to successfully identify, evaluate, and integrate new businesses is crucial to its long-term success.
Conclusion Boston Omaha Corporation has evolved into a diversified holding company with a portfolio of businesses spanning outdoor advertising, insurance, broadband services, and asset management. The company has navigated a challenging operating environment in recent years, but its leadership remains focused on optimizing existing operations and exploring strategic opportunities for growth.
While the company faces a range of risks, its diversified business model, strong market positions, and financial resources provide a solid foundation for long-term value creation. The recent growth across all major segments, particularly in insurance and broadband, demonstrates the company's resilience and potential for future expansion. However, the ongoing process of winding down the asset management business underscores the need for continued strategic realignment.
Investors will want to closely monitor Boston Omaha's progress as it continues to navigate the changing landscape, execute on its strategic priorities, and capitalize on opportunities in its core business segments. The company's ability to maintain its growth trajectory while improving profitability will be key factors in determining its long-term success and shareholder value creation.