Boston Omaha(BOC) - 2023 Q4 - Annual Report

Stock and Equity - As of March 22, 2024, there were approximately 30,299,408 shares of Class A common stock outstanding[14] - The company sold all 4,801,099 shares of Dream Finders Homes Class A common stock for gross proceeds of approximately $81 million since its IPO[20] - From January through April 2023, the company raised gross proceeds of approximately $37.5 million by selling 1,532,065 shares of Class A common stock through its ATM Program[39] - The company has the potential to raise up to $500 million in equity securities through its 2022 Shelf Registration Statement[39] - As of December 31, 2023, Sky Harbour's Class A common stock closed at $9.66 per share, with the company holding 13,118,474 shares and warrants for 7,719,779 shares at an exercise price of $11.50 per share[48] - The company owns approximately 20% of Sky Harbour's common stock, which is recorded under the equity method, and any drop below this ownership percentage may lead to mark-to-market accounting, affecting reported earnings[49] - Total investment in Sky Harbour amounts to $107.8 million, with significant purchases including $55 million for Class B Preferred Units and $45 million for additional Class A common stock[53] Financial Performance and Capital Needs - The company may need significant additional capital in the future to continue planned acquisitions, which could lead to substantial dilution for existing shareholders[38] - The company has incurred losses from operations since inception and anticipates continuing to do so for the foreseeable future[103] - The net loss from operations for the fiscal years ended December 31, 2023 and 2022 was approximately $8.9 million and $5.2 million, respectively[210] - The company expects its current cash to be sufficient to fund existing operations for at least the next 12 months[203] - As of December 31, 2023, the company had approximately $22 million in unrestricted cash and $18 million in short-term treasury securities[203] - The company may need to rely on Link for funds necessary to meet financial obligations, which could be affected by Link's debt servicing requirements[68] Business Operations and Strategy - The company generated revenues primarily through billboard advertising, surety insurance, and broadband services[32] - The company plans to expand its broadband services in Arizona, Florida, Nevada, and Utah, and continue to grow its billboard advertising business through acquisitions[31] - The company has expanded the licensing of its surety insurance business to all 50 states and the District of Columbia[31] - The company has made significant investments, including $5,016,494 for 100% membership interests in 24th Street and $19 million in CB&T Holding Corporation, representing 15.6% of its outstanding common stock[97][99] - The company acquired substantially all business assets of multiple broadband providers, including FibAire and Utah Broadband, enhancing its service offerings in rural areas[95] - The company is exploring further acquisitions in sectors with potential for durable profitability, including broadband services and surety insurance[123] - The company has made six acquisitions in the surety insurance sector, paying a combined purchase price of approximately $21.7 million and contributing $16.3 million in statutory capital to UCS[124] Market Conditions and Competition - The billboard advertising market is characterized by high regulatory barriers and low maintenance costs, providing a favorable environment for growth[92] - The company operates in a competitive outdoor advertising market dominated by three major players, which account for over 50% of total industry revenues[160] - The broadband services aim to provide high-speed internet to underserved communities, facing potential competition from major cable operators and new technologies like 5G[161] - The surety market is estimated at $8.6 billion based on 2022 industry reports, indicating a significant opportunity for the company in this sector[153] Management and Operational Challenges - The executive management team has limited experience in day-to-day operations in certain industries, which may impact operational efficiency and overall business performance[55] - Increased operating expenses from business expansion may negatively impact operating income, particularly through acquisitions, geographic expansion, and capital expenditures[51] - The company’s acquisitions are subject to risks and uncertainties regarding the realization of anticipated benefits and cost savings[179] Future Outlook and Growth - The company anticipates continued growth in demand for broadband services, driven by the rising need for higher bandwidth and faster connections[132] - The company has a strategy focused on acquiring additional billboard assets when opportunities arise at attractive prices relative to other investments[108] - The company is focusing on expanding its rural broadband business, targeting underserved communities in Arizona, Nevada, and Utah, where demand for higher speed internet is increasing[184] - The company plans to wind down its asset management operations and focus on self-funding and bank debt for its fiber business due to high costs and risks associated with fund financing[111] Employee and Organizational Structure - As of March 1, 2024, the company employed 463 individuals, with 304 in broadband operations, 88 in billboard operations, and 56 in insurance services[187] - The company controls approximately 42% of the aggregate voting power through its major shareholders, which may influence corporate transactions and policies[120] Investment and Financing - The company has entered contracts with home builders to expand fiber-to-the-home services in large residential developments[184] - The Term Loan has a fixed interest rate of 4.00% per annum and is payable in full on December 6, 2028[200] - The company may prepay up to 10% of the loan principal in each of the first three years without penalty[200] - The company is open to leveraging attractive terms for future borrowings to acquire assets or for general corporate purposes[204]