10-Q: Boston Omaha Narrows Loss, Broadband & Insurance Drive Growth

Boston Omaha Corporation reported a significantly reduced net loss for the first half of 2025, driven by revenue growth in its broadband and insurance segments and lower operating expenses, despite substantial investment losses.

Summary

• Net loss attributable to common stockholders improved to $(2.99) million for the first six months of 2025, compared to $(5.04) million in the same period of 2024.
• Total revenues increased by 6.3% to $55.93 million for the first six months of 2025, up from $52.64 million in 2024.
• Broadband services revenue grew by 5.6% to $20.55 million, reflecting subscriber growth across several markets.
• Premiums earned from the insurance subsidiary (UCS) increased by 27.3% to $11.13 million, driven by increased production.
• Net loss from operations significantly improved to $(1.62) million for the first six months of 2025, compared to $(6.45) million in 2024.
• Total costs and expenses decreased by $1.54 million, primarily due to lower employee and professional fees compared to the prior year, which included one-time severance and legal costs.
• Other investment losses totaled $(9.57) million, mainly from a $9.42 million unrealized loss on Sky Harbour warrants and $4.66 million in BOAM fund fair value changes, partially offset by $4.13 million in realized gains from Sky Harbour stock sales.
• Equity in income of unconsolidated affiliates improved to $3.83 million, compared to a loss of $(7.21) million in the prior year, mainly due to the Sky Harbour investment.
• Cash provided by operating activities increased slightly to $7.11 million for the first six months of 2025.
• Net cash used in investing activities was $11.38 million, primarily due to $14.16 million in capital expenditures for broadband, partially offset by proceeds from investment sales.
• Net cash provided by financing activities was $9.91 million, including $7.5 million from the BOB credit facility and $4.86 million in collateral receipts, offset by distributions to noncontrolling interests and debt payments.

Sentiment

Score: 7

Explanation: The company demonstrated significant improvement in its net loss and operating loss, driven by revenue growth in key segments (broadband, insurance) and effective cost management. While substantial investment losses impacted the bottom line, these were largely unrealized and related to specific market conditions for warrants. The strategic wind-down of the asset management segment, though contributing to current losses, is a proactive measure to optimize capital allocation. The company maintains adequate liquidity and access to credit facilities for future growth, although the expiration of the shelf registration and the Investment Company Act compliance risk warrant attention.

Positives

• Net loss attributable to common stockholders improved significantly to $(2.99) million for the first six months of 2025, compared to $(5.04) million in the prior year period.
• Net loss from operations improved substantially from $(6.45) million to $(1.62) million for the first six months of 2025.
• Total revenues increased by 6.3% to $55.93 million for the first six months of 2025.
• Broadband services revenue grew by 5.6% to $20.55 million, driven by subscriber growth and improved operating efficiency (cost of broadband revenues decreased as a percentage of revenue from 25.5% to 22.8%).
• Insurance premiums earned increased by 27.3% to $11.13 million, reflecting strong production growth.
• Employee costs decreased by $2.99 million and professional fees decreased by $1.40 million for the six months ended June 30, 2025, largely due to the absence of prior year one-time severance and legal fees.
• Equity in income of unconsolidated affiliates showed a positive swing of over $11 million, moving from a loss of $(7.21) million to an income of $3.83 million.
• Cash provided by operating activities increased to $7.11 million for the first six months of 2025.
• Realized gains on the sale of Sky Harbour Class A common stock amounted to $4.13 million for the first six months of 2025.

Negatives

• Total equity decreased from $562.72 million at December 31, 2024, to $555.28 million at June 30, 2025.
• Other investment losses were substantial at $(9.57) million for the first six months of 2025, primarily due to a $9.42 million unrealized loss on Sky Harbour warrants and $4.66 million in fair value changes within BOAM funds.
• Cost of insurance revenues increased significantly from 38.3% to 48.7% of insurance revenues, mainly due to higher loss and loss adjustment expenses from increased claim payments.
• The Asset Management segment (BOAM) reported a net loss of $(1.05) million for the first six months of 2025, an increase from $(0.48) million in the prior year, as operations are being wound down.
• Billboard segment net income decreased by 17.9% to $2.74 million for the first six months of 2025, despite flat revenues, due to increased ground rent, employee, and general & administrative expenses as a percentage of revenue.
• Investment and other income decreased by $245,671 for the first six months of 2025.
• Net cash used in investing activities was $11.38 million for the first six months of 2025, a significant shift from $30.16 million provided in the prior year, largely due to increased capital expenditures.

Risks

• The company must ensure no more than 40% of its total assets are invested in investment securities to avoid being deemed an investment company under the Investment Company Act of 1940, which could force the sale of marketable securities at unattractive prices or require incurring debt/issuing equity not otherwise attractive.
• Investments in public equity securities, such as Sky Harbour warrants, are subject to significant unrealized gains and losses based on market price fluctuations, which can materially impact reported earnings.
• If Sky Harbour's stock price drops below the carrying value of $6.14 per share for a sustained period, or if expectations about its prospective results decline, it could lead to an impairment of the investment.
• The ability to successfully identify and complete future acquisitions and expansions is subject to risks and uncertainties, including the realization of anticipated benefits and cost savings.
• Existing credit facilities for Link Media Holdings and Boston Omaha Broadband impose financial covenants (e.g., consolidated leverage ratio, fixed charge coverage ratio) that, if breached, could lead to acceleration of loans and termination of credit commitments.
• Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions, including general economic trends and inflationary pressures.
• Increased claim payments in the insurance segment can significantly raise the cost of insurance revenues and impact profitability.

Future Outlook

The company aims to continue acquiring billboard assets, insurance businesses, and broadband service providers, as well as exploring new business acquisitions and investments in other sectors, with a primary emphasis on growing existing business lines. It expects to finance future acquisitions and investments with cash, debt, and seller or third-party financing. The 2022 shelf registration statement expired, but a new one may be filed for future equity or debt offerings. The asset management operations (BOAM) are being wound down, with plans to sell assets and return capital to fund partners. The company will continue to review its investment in Sky Harbour for impairment quarterly.

Management Comments

• This report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
• The financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.
• We hope to continue to expand in Arizona, Florida, Nevada, Utah, and other locales (regarding broadband services).
• We hope to continue to grow this business through acquisitions of billboard assets (regarding outdoor advertising).
• We expect to expand the range of services we provide in the insurance sector, seek to continue to expand our billboard operations and broadband services and to possibly consider acquisitions of other businesses, as well as investments, in other sectors, although we expect to place a primary emphasis on growing our existing business lines over the next several years.
• The high costs and significant risks associated with 'fund financing' based on current market conditions led us to conclude that it would be more appropriate to pursue self-funding, bank debt, and other funding options for our fiber business at this time. As a result, we are winding down BOAM's operations and over the past several months have implemented significant cost cutting measures as BOAM now only manages real estate funds.
• With respect to our funds under management (the 24th Street Funds and the BFR Fund), we plan to sell the assets at the highest price the market will bear while maintaining the business plans for these assets. Additionally, we will be returning capital to our fund partners during the wind-down process on the remaining portion of these assets.
• We believe that our existing cash and short-term investments, funds available through the Credit Agreement Link entered into on August 12, 2019, as amended, funds available through the Credit Agreement Boston Omaha Broadband entered into on September 17, 2024, any funds that we may receive from cash flows from operations, future potential sales of our Sky Harbour stock, and any funds that we may receive through the sale of real estate assets in the 24th Street and BFR Funds will be sufficient to meet working capital requirements and anticipated capital expenditures for the next 12 months.

Industry Context

Boston Omaha operates in diverse sectors: outdoor advertising, broadband, surety insurance, and asset management. The billboard business benefits from government restrictions limiting new construction, while digital displays offer revenue improvement opportunities. The surety insurance business leverages state licensing hurdles and new distribution channels. Broadband services capitalize on the demand for high-speed fiber-to-the-home, competing with traditional cable operators. The asset management segment is undergoing a strategic wind-down due to market conditions making 'fund financing' less attractive for fiber business growth, shifting focus to real estate fund management and asset sales. The company's investment strategy includes minority stakes in real estate, banking, and private aviation infrastructure (Sky Harbour).

Management Changes

Corporate Governance

Legal Proceedings

• The company is involved in routine litigation, disputes, or claims in the ordinary course of business, including workers' compensation claims and employment-related disputes. Management believes none of these pending matters will have a material adverse effect individually or in the aggregate on financial condition, cash flows, or results of operations.

Related Party Transactions

• Alex Rozek Separation Agreement: The company repurchased 210,000 shares of Class A Common Stock, 527,780 shares of Class B Common Stock, and 51,994 warrants from Mr. Rozek and Boulderado Partners, LLC (an entity controlled by Mr. Rozek) for an aggregate of $9,175,605 (Mr. Rozek) and $9,951,113 (Boulderado). Consideration included cash and Sky Harbour Class A Common Stock.
• Local Asset Management LLC: The company has a services agreement with Local Asset Management LLC to provide management services associated with the wind-down of the 24th Street and BFR Funds, resulting in professional fees.
• First National Bank of Omaha: This bank is the lender for both the Link Credit Facility (billboard operations) and the Boston Omaha Broadband Credit Facility.
• Sky Harbour Group Corporation: Boston Omaha holds a 15.4% equity interest in Sky Harbour and retains one seat on its Board of Directors.
• CB&T Holding Corporation: Boston Omaha holds a 15.60% investment in this privately held parent company of Crescent Bank & Trust.
• Logic Real Estate Companies, LLC: Boston Omaha owns 30% of Logic, which is managed by an entity controlled by a member of Boston Omaha's board of directors.

Stakeholder Impact

• Shareholders: Potential for increased value through the share repurchase program, but also exposure to investment losses (e.g., Sky Harbour warrants) and the risk of dilution from future equity offerings. Improved net loss and operating performance could positively impact investor sentiment.
• Employees: Headcount reductions in broadband and asset management segments indicate workforce adjustments. Changes in management compensation structure for Link Media Holdings.
• Customers: Continued expansion of broadband services aims to provide high-speed internet to more customers. Billboard and insurance operations continue to serve their respective customer bases.
• Creditors: The company is in compliance with financial covenants for its Link and BOB credit facilities, indicating sound debt management.
• Fund Partners (BOAM): Capital will be returned to fund partners during the wind-down process of the 24th Street and BFR Funds.

Next Steps

• Continue to acquire additional billboard assets through acquisitions of existing billboard businesses.
• Expand broadband services in Arizona, Florida, Nevada, Utah, and other locales.
• Expand the range of services provided in the insurance sector.
• Possibly consider acquisitions of other businesses and investments in other sectors, with a primary emphasis on growing existing business lines.
• May file a new shelf registration statement in the future to allow for potential offerings of Class A common stock, preferred stock, debt securities, and/or warrants.
• Wind down BOAM's operations, sell assets, and return capital to fund partners for the 24th Street Funds and BFR Fund.
• Continue to review the investment in Sky Harbour for other-than-temporary impairment on a quarterly basis.
• Comply with financial covenants under the Link and BOB Credit Agreements.
• Manage assets to avoid being deemed an investment company under the Investment Company Act of 1940.

Key Dates

Recommendation

While Boston Omaha Corporation demonstrated significant operational improvements and reduced its net loss, the substantial 'other investment losses' primarily from unrealized warrant values and asset management fund adjustments introduce volatility. The strategic wind-down of the asset management segment is a positive step towards focus, but the overall portfolio still carries considerable investment risk. The company's core businesses (broadband, insurance, billboards) show mixed performance, with broadband and insurance growing, but billboards remaining flat and facing increased costs. The expiration of the shelf registration and the ongoing need to manage Investment Company Act compliance add uncertainty. For a seasoned investor, the current situation suggests a 'hold' position, awaiting clearer signs of sustained profitability across core segments and more stable investment performance, particularly given the inherent risks in its diversified, acquisition-focused strategy.

Keywords

Boston Omaha, BOC, SEC Filing, 10-Q, Quarterly Report, Financial Results, Billboard Advertising, Broadband Services, Surety Insurance, Asset Management, Sky Harbour Group, Investment Losses, Revenue Growth, Net Loss Improvement, Capital Expenditures, Debt Facilities, Share Repurchase, Investment Company Act