Earlier this morning, Boston Omaha (BOMN) priced its up-sized 6.5 million share IPO at $13, generating total gross proceeds of $84.5 million. The deal was originally expected to consist of 5.5 million shares, which translates into BOMN raising $13 million, or, 18%, more than anticipated. The IPO, which was led by Cowen & Company, will open for trading later this morning on the Nasdaq.
BOMN launched its business in June 2015 and it currently operates three separate business lines including outdoor billboards, surety insurance, and investments in real estate. Here is a closer look at each:
- Billboards: As of March 31, 2017, BOMN owned 491 billboard structures, of which 26 are digital displays. Its billboards are located in Alabama, Florida, Georgia, and Wisconsin. BOMN continues to evaluate acquisitions of additional billboards and it expects to use a significant portion of the cash proceeds from this offering to expand its presence in its current markets and in new regions across the U.S.
- Surety Insurance: Its insurance subsidiary is General Indemnity Group, which is designed to own and operate insurance businesses handling high volume, lower policy limit commercial lines of property and casualty insurance. BOMN's initial entrance into the market was its April 2016 acquisition of The Warnock Insurance Agency -- a national surety brokerage firm. Then, in December 2016, it completed an acquisition of United Casualty & Surety Insurance (UC&S), a provider of surety bonds for contractors, small businesses, and individuals. BOMN is currently expanding UC&S' reach from nine states to all 50 states. As of April 21, 2017, UC&S is now authorized to issue insurance in 17 states.
- Real Estate Investments: Since September 2015, BOMN has acquired a minority interest in a full-service commercial real estate brokerage, property management and real estate services company located in Las Vegas, Nevada, and minority interests in several other commercial and residential real estate ventures located in Colorado and Nevada.
In regards to its billboard business, BOMN is attracted to that industry from a variety of reasons. For instance, it is a very large market, estimated to exceed $4.9 billion in the U.S. There are also high regulatory barriers to building new billboards in some states. Billboards also have low maintenance costs, and, unlike other advertising media, the internet has not had a material impact on outdoor advertising revenue.
BOMN generated revenue of $3.8 million for FY16, up 426% year/year. Billboard revenue, which accounts for 82% of the total, spiked by 344% to $3.2 million.
Expenses were up 281% to $6.9 million. Its biggest expense is Cost of Billboard revenue (30% of revenue), which soared by nearly 400% to $1.14 million. This was due to higher lease expense as it brought newly acquired billboards online, as well as increases in sub-contracted services.
The surge in expenses more than offset the growth in revenue as it suffered a net loss from operations of ($3.1) million for the year. That was a wider loss than the ($1.1) million figure in FY15. However, on a percentage of revenue basis, it improved to 82% from 153%.
Net cash used in operating activities was cash outflow of $1,482,311 compared to cash outflow of $813,356 for FY15. The decrease in operating cash flows was primarily attributable to costs associated with the commencement of its insurance operations and increased general and administrative costs, including the costs of hiring additional personnel and its costs incurred as a public company.