Yesterday Boston Omaha Corporation released its 2023 Annual Letter. It is blissfully free of the fuzzy-management-consulting-speak which clogs many public company annual reports and letters. Here are three things about Link Media Outdoor (Boston Omaha’s out of home subsidiary) which SignValue learned from reading the Boston Omaha 2023 Annual Letter.
An eye on expenses means expanding margins as Link Media Outdoor grows.
By careful expense controls, Link Media Outdoor has improved margins. Look at this table of the company’s performance for 2021-2023.
Free Cashflow, Free Cashflow, Free Cashflow
One of the strengths of investing in out of home is that maintenance capital expenditures are small. A mature out of home plant is a cash machine. The annual letter says this: “Most businesses require substantial portions of earnings to be retained to grow over time or even to tread water, because they either require more physical capital to expand (i.e. working capital and property plant & equipment) or they require an acquisition or other investment to remain competitive. Link requires little of either, as a static billboard structure has a long useful life with little maintenance required and in the billboard business generally, it is exceedingly difficult to increase the roadside supply of advertising faces….as a result of…free cashflow coupled with conservative debt levels, Link has funded other investments at Boston Omaha to the tune of approximately $45mm to date.”
Easements and Digital Conversions.
Boston Omaha 2023 capital expenditures focused on easement purchases and digital billboard conversions. Here’s what the annual letter says: “During 2023, we were able to deploy some capital into Link, mostly in the form of purchasing perpetual easements to eliminate land costs and also in converting some static billboards to digital.”
SignValue’s Take: Easements are a great use of funds because they lower the risk of the business by eliminating expenses and are a sure return regardless of future economic conditions. Digital conversions can easily result in a 25-35% return on capital if the location is sound.
SignValue can be reached at (480) 657-8400 or info@signvalue.com for a confidential consultation.
To receive a free morning newsletter with each day’s Billboard insider articles email info@billboardinsider.com with the word “Subscribe” in the title. Our newsletter is free and we don’t sell our subscriber list.
Paid Advertisement
