Executive Summary / Key Takeaways

• Boston Omaha Corporation (BOC) operates a diversified portfolio of essential services, including outdoor advertising, high-speed broadband, and surety insurance, underpinned by a strategic vision for long-term value creation through disciplined capital allocation and targeted acquisitions.
• The company delivered a 4.1% year-over-year consolidated revenue increase in Q2 2025 to $28.20 million, primarily fueled by robust subscriber growth in its broadband segment (+4.6%) and significant premium expansion in insurance (+17.5%).
• BOC is strategically winding down its Asset Management segment (BOAM) to streamline operations and reallocate capital to its higher-growth, core businesses, particularly the capital-intensive fiber broadband expansion.
• Technological differentiation, such as fiber-to-the-home services and an electronic surety bond portal, combined with strong regulatory barriers in its billboard and insurance operations, provides BOC with a defensible competitive moat.
• Despite a net loss in Q2 2025, an improved operating loss, healthy operating cash flow of $7.11 million for H1 2025, and ample liquidity position the company to fund ongoing strategic investments and pursue accretive acquisitions.

A Conglomerate's Calculated Play in Enduring Assets

Boston Omaha Corporation (BOC) has quietly cultivated a unique investment thesis, building a diversified portfolio of businesses centered on what it deems "durable assets." Since present management took the helm in February 2015, BOC has strategically acquired and developed operations in outdoor billboard advertising, high-speed broadband services, and surety insurance. This deliberate diversification aims to generate long-term, sustainable value by focusing on sectors often characterized by high barriers to entry and consistent demand. The company's journey has been marked by a series of calculated acquisitions, from its initial foray into billboards in 2015 to expanding its insurance footprint and launching its broadband segment in 2020, all while carefully managing its broader investment portfolio.

BOC's overarching strategy involves expanding its geographic reach and market share within its existing business lines, seeking to develop competitive advantages and strong brand recognition. While the company remains open to opportunistic acquisitions in other sectors, its primary emphasis for the foreseeable future rests on growing its current core businesses. This approach is particularly relevant in today's dynamic economic environment, where the stability of essential services can offer a compelling counter-narrative to more volatile growth plays.

Technological Edge and Operational Moats

BOC's competitive positioning is significantly bolstered by its technological differentiators and the inherent operational moats within its core segments.

In broadband services, the company's fiber-to-the-home (FFH) infrastructure represents a critical technological advantage. This technology delivers "higher rates of transmission and improved speed to consumers" compared to traditional cable operators. As of June 30, 2025, BOC's broadband operations serve approximately 48,400 customers, including 17,800 fiber subscribers, with 43,400 fiber passings completed. The strategic implication for investors is clear: once this capital-intensive fiber infrastructure is built, "other competitors may be less willing to compete in communities which we serve," creating a strong, localized competitive moat and securing long-term revenue streams.

The surety insurance segment, through its BOSS Bonds tradename, leverages an "electronic portal allowing independent insurance agents to more easily and efficiently purchase surety insurance." This technological enhancement streamlines the application process, fostering agent loyalty and operational efficiency. For investors, this digital capability translates into a more agile and scalable distribution channel, enhancing the segment's competitive standing against more traditional insurance providers.

While less about cutting-edge R&D, BOC's outdoor advertising business benefits from "advances in billboard technology," particularly the adoption of digital displays. These technologies "provide the opportunity to improve revenues" by offering more dynamic advertising solutions and greater flexibility for clients. This continuous, albeit incremental, technological evolution helps maintain the segment's relevance and revenue-generating capacity.

Beyond technology, BOC's businesses are protected by substantial operational moats. In outdoor advertising, "government restrictions often limit the number of additional billboards that may be constructed," creating a significant barrier to entry for new competitors. Similarly, the surety insurance business benefits from stringent regulatory hurdles, as "new insurance companies must be licensed by state agencies that impose capital, management and other strict requirements." These regulatory barriers, coupled with BOC's technological and operational efficiencies, form a robust foundation for its diversified growth strategy.

Segment Performance: A Tale of Three Businesses

BOC's recent financial performance, as detailed in its Q2 2025 filing, reflects the distinct dynamics of its core operating segments.

The Outdoor Advertising (Link Media Holdings) segment demonstrated stability, with net billboard rentals remaining flat at $11.44 million in Q2 2025 compared to the prior year, and a modest 0.3% increase to $22.20 million for the first six months of 2025. This performance reflects "steady rental and occupancy rates across a number of our markets." Gross margin for the segment improved slightly to 67.6% in Q2 2025 from 66.1% in Q2 2024. Operational costs saw shifts; commissions paid decreased as a percentage of revenue due to a management compensation structure change, while employee costs increased for the same reason. Ground rent expense as a percentage of revenue also rose in H1 2025 due to ASC 842 lease accounting entries. BOC operates approximately 3,950 billboards with 7,570 advertising faces. In this space, larger competitors like Lamar Advertising (LAMR) and Outfront Media (OUT) boast greater scale and often faster digital innovation. However, BOC's strategy of acquiring additional billboard assets in its specific markets, combined with regulatory barriers to new construction, allows it to carve out a defensible niche.

Broadband Services (Boston Omaha Broadband) emerged as a key growth driver. Revenue from broadband services increased by 4.6% in Q2 2025 to $10.23 million and 5.6% in H1 2025 to $20.55 million, "mainly reflecting subscriber growth across a number of our markets." The segment's gross margin expanded to 77.4% in Q2 2025 from 74.7% in Q2 2024. Cost of broadband revenues decreased as a percentage of revenue due to "reduced equipment costs, fuel costs, as well as software costs" and "reduced maintenance costs related to our fixed wireless networks." Employee costs and general and administrative expenses also saw reductions due to "headcount reductions as well as organic revenue growth." Depreciation expense, however, increased by $530,961 in Q2 2025, driven by "continued capital investments across all of our broadband businesses," underscoring the capital-intensive nature of fiber expansion. BOC's broadband business competes with telecommunications giants like Verizon (VZ) and AT&T (T). While BOC may lack their sheer scale and network breadth, its focused fiber-to-the-home strategy in specific, often underserved, communities provides a localized competitive advantage.

The Surety Insurance (General Indemnity Group) segment demonstrated strong top-line growth but faced margin pressures. Total operating revenues increased by 12.1% in Q2 2025 to $6.53 million and 21.1% in H1 2025 to $13.16 million. Premiums earned from the UCS insurance subsidiary surged by 17.5% in Q2 2025 and 27.3% in H1 2025, "primarily due to increases in production throughout fiscal 2024 and the first six months of fiscal 2025." However, insurance commissions declined by 15.0% in Q2 2025 due to "decreased production through outside insurance carriers." The segment's gross margin compressed significantly to 45.6% in Q2 2025 from 61.3% in Q2 2024. This was largely driven by a substantial increase in "Losses and loss adjustment expenses" as a percentage of total segment operating revenues, rising from 11.5% to 27.4% in Q2 2025, "mainly due to an increase in claim payments." Employee costs also increased due to headcount and salary adjustments. UCS is licensed in all 50 states and D.C., and its electronic portal offers a competitive edge. However, it operates in a market with established players like Travelers (TRV), which typically possess greater expertise and scale.

Strategic Realignment: Winding Down Asset Management

A significant strategic shift for BOC involves the wind-down of its Asset Management (Boston Omaha Asset Management, BOAM) operations. This decision stems from "high costs and significant risks associated with fund financing based on current market conditions." The company has "implemented significant cost-cutting measures," including the complete removal of employee costs within the segment. While professional fees increased due to a services agreement for managing the wind-down of the 24th Street and BFR Funds, the overall objective is to streamline operations and reallocate capital. The Fund One Boston Omaha Build for Rent, LP (BFR Fund) is being wound down "earlier than originally targeted" due to "challenges in the market, including the increase in interest rates and the inability to achieve what we believe are appropriate risk-adjusted returns." BOC plans to "sell the assets at the highest price the market will bear" and return capital to fund partners. This strategic divestment underscores management's commitment to focusing resources on core, cash-generating businesses and adapting to market realities, even if it means exiting non-performing ventures.

Consolidated Financial Health and Capital Allocation

On a consolidated basis, BOC's total revenues for Q2 2025 reached $28.20 million, a 4.1% increase year-over-year, and $55.93 million for H1 2025, up 6.3% from the prior year. The company reported a net loss from operations of $0.82 million in Q2 2025, a notable improvement from a $4.40 million loss in Q2 2024. This improvement was primarily driven by enhanced broadband operations and reduced expenses in the asset management segment and at the parent company, partially offset by increased costs in insurance and billboards. For H1 2025, the net loss from operations stood at $1.62 million, an improvement from $6.45 million in H1 2024.

Profitability metrics for the trailing twelve months (TTM) show a Gross Profit Margin of 81.97% and an EBITDA Margin of 25.97%, indicating strong underlying business economics before significant operating expenses. However, the TTM Operating Profit Margin was -3.25% and Net Profit Margin was 0.68%, reflecting the ongoing investments and operational costs across its diverse portfolio.

Liquidity remains a strength, with approximately $29.70 million in unrestricted cash and $18.40 million in short-term U.S. Treasury securities as of June 30, 2025. Net cash provided by operating activities for H1 2025 was $7.11 million, an increase from $6.92 million in H1 2024, largely due to improved cash flow generation in broadband and reduced expenses from the asset management wind-down. Capital expenditures totaled $14.16 million in H1 2025, predominantly directed towards broadband expansion.

BOC's capital structure includes credit facilities for its Link Media Holdings and Boston Omaha Broadband subsidiaries. Link has a Term Loan of approximately $26.10 million and a revolving line of credit with $9.10 million outstanding as of June 30, 2025. Boston Omaha Broadband has a credit facility allowing for up to $20.00 million in term loans for capital expenditures, with approximately $10.60 million outstanding. Both subsidiaries were in compliance with their financial covenants as of June 30, 2025. Management believes that existing cash, short-term investments, available credit facilities, cash flows from operations, and potential future sales of Sky Harbour stock and real estate assets from the winding-down funds will be "sufficient to meet working capital requirements and anticipated capital expenditures for the next 12 months." The company also has a share repurchase program, authorized for up to $20 million of Class A common stock, which commenced in August 2024 and terminates in September 2025.

Investment Portfolio and Regulatory Headwinds

BOC's investment portfolio includes a significant stake in Sky Harbour Group Corporation (SKYH), with 11.67 million shares of Class A common stock and 7.72 million warrants as of June 30, 2025. Due to its percentage ownership and board representation, BOC accounts for this investment using the equity method, meaning unrealized gains or losses from Sky Harbour's stock price fluctuations are not reflected in its reported earnings. However, the company recorded a $10.65 million unrealized loss on its Sky Harbour warrants in Q2 2025 and a $9.42 million unrealized loss in H1 2025.

A persistent challenge for BOC is managing its investment portfolio to avoid being classified as an investment company under the Investment Company Act of 1940, which limits investment securities to no more than 40% of total assets. This regulatory constraint can force BOC to sell marketable securities, "including at times at a loss," or deploy cash into non-investment assets, potentially impacting its financial results and strategic flexibility. This risk is influenced by factors beyond its control, such as market value fluctuations of its public holdings.

Risks and Challenges

While BOC's diversified strategy offers resilience, several risks warrant investor attention. The company's growth relies on successful acquisitions, and "failure to successfully identify and complete future acquisitions... could reduce future potential earnings, available cash, and slow our anticipated growth." The significant investment in Sky Harbour carries impairment risk; if Sky Harbour's stock price drops below BOC's carrying value of $6.14 per share for a sustained period, or if its prospective results decline, an impairment charge would likely occur.

Compliance with the Investment Company Act of 1940 remains a material risk, potentially forcing BOC to make suboptimal asset sales. Furthermore, the existing credit facilities for Link and Boston Omaha Broadband impose restrictions on incurring additional debt, making acquisitions, paying dividends, and repurchasing stock, which could limit strategic flexibility. The wind-down of the asset management business, while strategic, is subject to market conditions for asset sales, which could impact the timing and value of capital returned.

Conclusion

Boston Omaha Corporation presents a compelling, albeit complex, investment narrative built on a foundation of diversified, enduring assets. The company's strategic focus on billboard advertising, high-speed fiber broadband, and surety insurance leverages inherent industry barriers to entry and targeted technological advantages. The recent financial results for Q2 2025 highlight the growth momentum in broadband and insurance, alongside the stability of its billboard operations, even as the company proactively streamlines its portfolio by winding down its asset management arm.

BOC's disciplined capital allocation, supported by robust operating cash flow and a healthy liquidity position, enables continued investment in its core growth engines, particularly the capital-intensive fiber network expansion. While challenges such as investment portfolio volatility and regulatory compliance risks persist, management's demonstrated adaptability and commitment to long-term value creation through essential services position BOC as a unique play in the market. Investors should monitor the execution of its broadband expansion, the profitability trends in its insurance segment, and its ongoing capital allocation decisions as key indicators of its ability to translate its diversified playbook into sustained shareholder returns.