Boston Omaha(BOC) - 2022 Q4 - Annual Report

Part I Business Boston Omaha Corporation operates in outdoor advertising, surety insurance, broadband services, and asset management - The company operates four primary business lines: outdoor billboard advertising, surety insurance and brokerage, broadband services, and asset management[211] - As of December 31, 2022, the company operated approximately 4,000 billboards with 7,600 advertising faces, and its surety subsidiary is licensed in all 50 states[213][216] - The broadband segment has grown through acquisitions of providers in Arizona and Utah and the launch of Fiber Fast Homes, LLC (FFH)[218] - The company holds several minority investments, including a 15.6% stake in CB&T Holding Corporation and a significant investment in Sky Harbour Group Corporation[224][225] - A key business objective is to continue acquiring additional assets in its core segments when available at attractive prices[213] Risk Factors The company faces risks from operating losses, acquisition integration, key personnel, and significant investment impairments - The company has a history of incurring losses from operations, with net losses from operations of $5.3 million in 2022 and $23.8 million in 2021[376][377] - A significant risk is the potential for material impairment charges on its investment in Sky Harbour Group Corporation if its stock price drops below the carrying value of $8.15 per share[390][423] - There is a risk of being deemed an investment company under the Investment Company Act of 1940 due to significant minority investments[438] - Entities managed by the Co-CEOs control approximately 44.2% of the aggregate voting power, effectively controlling all stockholder matters[31] - The company does not intend to pay dividends for the foreseeable future, and return on investment will depend on stock price appreciation[67][2] - The insurance subsidiary is subject to extensive state regulation, including restrictions on its ability to pay dividends to the parent company[562][566] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[18] Properties The company leases most of its office and billboard locations while owning some land for its broadband business - The company's corporate headquarters is in Omaha, Nebraska, and it maintains various leased offices with expirations from 2023 to 2042[475] - The majority of billboard sites are leased from third parties, with lease terms typically ranging from one to twenty years[302][475] Legal Proceedings Management believes no pending litigation will materially affect the company's financial condition - The company is involved in routine litigation from time to time, but management does not expect any pending proceedings to have a material adverse effect on its financial condition[476] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[478] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's Class A stock trades on the NYSE, with no plans for dividends as earnings are retained for growth - The company's Class A common stock trades on the NYSE under the symbol "BOC" as of January 14, 2022[481] - As of March 20, 2023, there were 29,764,994 Class A shares and 1,055,560 Class B shares outstanding[484] - The company has never paid cash dividends and does not intend to in the foreseeable future, retaining earnings to finance business growth[487] - In August 2022, shareholders approved the 2022 Incentive Plan, and in January 2023, 20,896 shares were granted to officers and directors[491] Selected Financial Data This item is not applicable as the company is a "smaller reporting company" - Not applicable as the company is a "smaller reporting company"[493] Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2022 revenue grew 42.6% to $81.2 million, driven by broadband, while net income declined due to prior-year investment gains Fiscal Year 2022 vs. 2021 Revenue Breakdown | Revenues | 2022 Amount | % of Total | 2021 Amount | % of Total | $ Variance | |:---|---:|---:|---:|---:|---:| | Billboard rentals, net | $39,244,726 | 48.3% | $31,499,235 | 55.3% | $7,745,491 | | Broadband services | $28,627,271 | 35.3% | $15,234,266 | 26.7% | $13,393,005 | | Premiums earned | $10,649,089 | 13.1% | $7,686,400 | 13.5% | $2,962,689 | | Insurance commissions | $2,050,838 | 2.5% | $2,212,849 | 3.9% | ($162,011) | | Investment and other income | $662,270 | 0.8% | $339,061 | 0.6% | $323,209 | | Total Revenues | $81,234,194 | 100.0% | $56,971,811 | 100.0% | $24,262,383 | - Net loss from operations decreased to $5.2 million in fiscal 2022 from $23.8 million in fiscal 2021, primarily due to management bonus payments of $15 million recognized in 2021[112][97] Net Income Attributable to Common Stockholders | Metric | Fiscal 2022 | Fiscal 2021 | |:---|---:|---:| | Net Income Attributable to Common Stockholders | $7,139,548 | $52,748,177 | | Diluted EPS | $0.24 | $1.82 | | Diluted Weighted Average Shares Outstanding | 29,766,247 | 29,046,514 | - As of December 31, 2022, the company had approximately $25 million in unrestricted cash and $34 million in short-term treasury securities[139][196] - The company utilizes an "at the market" (ATM) equity offering program, raising approximately $28.1 million in gross proceeds in early 2023[177] Results of Billboard Operations Billboard revenues grew 24.6% in 2022, driven by acquisitions and improved rental and occupancy rates - Net billboard revenues increased by 24.6% in fiscal 2022, driven by acquisitions and improved rental and occupancy rates[120] Billboard Segment Performance (2022 vs. 2021) | Metric | 2022 | 2021 | |:---|---:|---:| | Billboard rentals, net | $39,244,726 | $31,499,235 | | Gross margin | $24,849,099 | $19,404,401 | | Gross margin % | 63.3% | 61.6% | | Segment Income from Operations | $5,734,917 | $2,744,468 | Results of Broadband Operations Broadband revenues increased 87.9% in 2022, primarily reflecting revenues from recent acquisitions - Broadband operating revenues increased by 87.9% in fiscal 2022, primarily reflecting revenues from the InfoWest and Go Fiber acquisitions[126] Broadband Segment Performance (2022 vs. 2021) | Metric | 2022 | 2021 | |:---|---:|---:| | Broadband revenues | $28,627,271 | $15,234,266 | | Gross margin | $21,088,770 | $11,920,506 | | Gross margin % | 73.7% | 78.2% | | Segment (Loss) Income from Operations | ($2,241,926) | $391,356 | Results of Insurance Operations Insurance revenues grew 30.5% in 2022, driven by a significant increase in earned premiums - Insurance operating revenues increased by 30.5% in fiscal 2022, mainly due to a 38.5% increase in earned premiums at the UCS insurance subsidiary[132] Insurance Segment Performance (2022 vs. 2021) | Metric | 2022 | 2021 | |:---|---:|---:| | Total operating revenues | $13,362,197 | $10,238,310 | | Gross margin | $8,606,614 | $7,055,813 | | Gross margin % | 64.4% | 68.9% | | Segment Income (Loss) from Operations | $1,083,247 | ($778,703) | - Losses and loss adjustment expenses increased as a percentage of insurance revenues from 8.4% in 2021 to 11.5% in 2022[134] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company is a "smaller reporting company" - Not applicable as the company is a "smaller reporting company"[272] Financial Statements and Supplementary Data This section contains the company's audited consolidated financial statements and related notes for fiscal years 2022 and 2021 - The independent auditor's report from KPMG LLP provides an opinion that the consolidated financial statements present fairly in conformity with U.S. GAAP[394][359] - The auditor identified two critical audit matters: evaluating the fair value of acquired intangible assets and estimating insurance loss reserves[362][396][400] Notes to Consolidated Financial Statements The notes provide detailed explanations of accounting policies and financial details underlying the consolidated statements - The company's goodwill is tested for impairment annually on October 1st, and no impairment was required in 2022 or 2021[595][598] - In April 2022, the company acquired InfoWest and Go Fiber for an aggregate purchase price of $48.6 million, adding $18.1 million in goodwill[363][667] - The company's investment in Sky Harbour Group Corporation is accounted for under the equity method and was determined to not be impaired[732] - As of December 31, 2022, the company had federal net operating loss (NOL) carryforwards of approximately $25.4 million[13][891] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This item is not applicable to the company - Not applicable[273] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that as of December 31, 2022, the company's disclosure controls and procedures were effective[51] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[278] - The assessment of internal controls excluded the recently acquired InfoWest and GoFiber businesses, in accordance with SEC guidance[276] Other Information The company reports no other information for this item - None[284] Part III Directors, Executive Officers and Corporate Governance This information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information is incorporated by reference to the company's Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[285] Executive Compensation This information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information is incorporated by reference to the company's Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[286] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information is incorporated by reference to the company's Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[287] Certain Relationships and Related Transactions, and Director Independence This information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information is incorporated by reference to the company's Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[288] Principal Accountant Fees and Services This information is incorporated by reference from the company's 2023 Definitive Proxy Statement - Information is incorporated by reference to the company's Definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[98][289] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the annual report - This section includes the consolidated financial statements and the report of the Independent Registered Public Accounting Firm[344] - An Exhibit Index is provided, listing all exhibits filed with the report, including material contracts and required certifications[345][347] Form 10-K Summary The company has elected not to include a summary for this item - The Company has determined not to include a summary of information required by Item 16[290]