The Attractive Project Economics of BOC’s Broadband Segment

To better understand a business I find it helpful to break down the relevant unit (or project) economics. Here I looked at the project economics of 3 project types in Boston Omaha’s broadband segment. This exercise helped me to better understand future cash flows and management’s stated IRR figures.

Greenfield Projects

Management shared:

Which when extrapolated we get the following cash flow predictions:

Year	Net Cash Flow ($)	ROI
0	-1,950,000
1	8,400	0.43%
2	113,400	5.82%
3	134,400	6.89%
4	396,900	20.35%
5	417,900	21.43%
6	680,400	34.89%
7	705,600	36.18%
8	1,020,600	52.34%
9	1,020,600	52.34%
10+	1,020,600	52.34%

For these estimates to match management’s guidelines I had to assume a 10% variable annual cost of revenue for ongoing service and maintenance.

Manufactured Home Projects

Management shared:

For this we get the following extrapolation, assuming a 200 home project:

Year	Net Cash Flow ($)	ROI
0	-220,000
1	-3,960	-1.80%
2	14,040	6.38%
3	4,140	1.88%
4	49,140	22.34%
5	39,240	17.84%
6	84,240	38.29%
7	72,360	32.89%
8	126,360	57.44%
9	126,360	57.44%
10+	126,360	57.44%

For these estimates to match management’s guidelines I had to assume an additional 10-20% variable cost on revenue (as a fee to the property owner) to arrive at a 18-23% return.

Brownfield Projects

Management shared:

Which I lay out like:

Year	Net Cash Flow ($)	ROI
0	-60,000
1	-4,280	-7.13%
2	6,720	11.20%
3	-3,980	-6.63%
4	23,520	39.20%
5	12,820	21.37%
6	40,320	67.20%
7	27,480	45.80%
8	60,480	100.80%
9	60,480	100.80%
10+	60,480	100.80%

For this to match management guidelines I had to add an additional 10% variable cost of revenue to account for the franchise fee / pole rights.

Conclusion

This allayed whatever concerns I had left over the broadband segment of BOC. You can see that on the project level, net cash flows look dismal for the first 3 years of the project, which is what we are seeing on the income statements now. However, at a project level it is clear that BOC management is making good investments that will provide steady future cash flows.

Sources:

Management’s Presentation to Shareholders: https://www.sec.gov/ix?doc=/Archives/edgar/data/0001494582/000143774924029649/bomn20240919_8k.htm

My Spreadsheet: https://docs.google.com/spreadsheets/d/1shoFrDwd8KMUiAm3C11csPqtSrauCEWm/edit?usp=sharing&ouid=101547994977893799459&rtpof=true&sd=true