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The Marketing Alliance Announces Financial Results for its Fiscal 2021 Second Quarter Ended September 30, 2020

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The Marketing Alliance, Inc. (OTC: MAAL) ("TMA" or the "Company"), today announced financial results for its fiscal 2021 second quarter ended September 30, 2020.

FY 2021 Second Quarter Financial Highlights (all comparisons to the prior year period)

  • Revenues were $8,169,534 compared to $8,695,723, largely due to a $902,116 decline in family entertainment revenues as family entertainment locations remained closed during the quarter due to the COVID-19 pandemic

  • Commission and fee revenues from the Company’s core insurance distribution business increased slightly as some of the obstacles to selling insurance presented by COVID abated during the quarter

  • Operating expenses declined by 38% to $1,215,427

  • Operating income increased to $541,918, compared to operating income of $150,678 in the prior year quarter

  • Operating EBITDA (excluding investment portfolio income) was $621,569, compared to $292,744 in the prior year quarter

  • Non-operating investment gain, net, increased to $200,423 compared to $93,800 in the prior year quarter

  • Net income for the quarter was $565,956, or $0.07 per share, as compared to net income of $120,710, or $0.02 per share, in the prior year period

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, "The results during the quarter were a testament to the adaptability of our associated agencies, carriers, and our internal team. Our insurance business accelerated its transition to solutions that utilized the Company’s capabilities through our call center and adoption of digital applications where clients do not need to physically see an agent or handle paper. This provided agents with the ability to continue assisting customers with their life insurance needs despite challenges created from the reduction of in-person contact, such as conducting medical exams and obtaining physical signatures necessary for completing the insurance application process. Throughout the quarter we were able to work with our agencies to bring insurance applications to completion in a manner that met the customer’s expectations and level of comfort with personal contact. The execution of our construction business in the quarter was exceptional, as a large project was pulled forward which should allow for additional projects this year before winter weather slows progress."

Mr. Klusas concluded, "Our family entertainment business reported minimal revenues during the period as locations remained closed to the public. Due to the uncertainty of the business for the foreseeable future, we wrote-down asset values in prior periods and continued to evaluate operations on an ongoing basis. We permanently closed two additional locations during the quarter, leaving two remaining locations"

Quarterly Dividend Distribution

During the quarter, the Company’s Board of Directors declared a $0.06 per share cash dividend for shareholders of record on September 22, 2020, which was paid on September 30, 2020. In June 2020, the Company announced a change in its distribution plan to move to declare dividend distributions on a quarterly basis to have the benefit of the most recent information to make these decisions.

Fiscal 2021 Second Quarter Financial Review

  • Total revenues for the three-month period ended September 30, 2020, were $8,169,534, as compared to $8,695,723 in the prior year quarter. This decrease was due mostly to a decrease in family entertainment revenue relative to the prior year period due to the COVID-19 pandemic, offset by slightly higher insurance revenue and increased construction revenue.

  • Net operating revenue (gross profit) for the quarter was $1,757,345, compared to net operating revenue of $2,119,307 in the prior-year fiscal period. The decline was due to almost no revenue in the family entertainment business but was offset by significantly higher revenue and gross profit in the construction business.

  • Operating expenses decreased to $1,215,427, or 14.9% of total revenues for the fiscal 2020 second quarter, as compared to $1,968,629, or 22.6% of total revenues for the same period of the prior year. The reduction in operating expenses was due in part to less rent and compensation expenses of four closed family entertainment locations, versus eight in the previous year period, and less travel and meetings expense due to the pandemic.

  • The Company reported operating income of $541,918, compared to operating income of $150,678 in the prior-year period. Higher operating income for the period was largely due to higher gross margins in the Company’s insurance and construction businesses, and lower overall general and administrative expenses.

  • Operating EBITDA (excluding investment portfolio income) was $621,569, compared to $292,744 in the prior year quarter. A note reconciling operating EBITDA to operating income can be found at the end of this release.

  • Investment gain, net (from non-operating investment portfolio) for the quarter was $200,423, as compared to $93,800 for the same quarter of the previous fiscal year.

  • Net income for the fiscal 2021 second quarter was $565,956, or $0.07 per share, as compared to net income of $120,710, or $0.02 per share, in the prior year period. The increase was largely due to higher operating income mentioned above, and an increase in investment income, and the benefit of a gain on sale of equipment in the construction business, compared to the prior year period.

Fiscal 2020 Six Months Financial Review

  • Total revenues for the six months ended September 30, 2020 were $15,771,100, compared to $17,631,427, for the prior-year period. Increases in construction revenue helped to offset a decrease in family entertainment revenue for the six-month period and insurance commission revenue, which declined due to COVID-19. The impact of the pandemic on insurance operations were more pronounced in the Company’s fiscal first quarter but rebounded slightly in the current fiscal quarter.

  • Net operating revenue (gross profit) was $3,131,500, which compares to net operating revenue of $4,288,837 in the prior-year fiscal period. The decline for the six months ended September 30, 2020 was due to substantially the same reasons as the decline for the quarter ended September 30.

  • Operating expenses decreased by 33.5% during the first half of fiscal 2021 to $2,635,665, driven by lower expenses across the business, including compensation, rent expense and other general and administrative expenses. This decrease was mostly due to the reduction in family entertainment locations and less expenses due to the facilities being closed

  • The Company reported increased operating income of $495,835 for the six months ended September 30, 2020, compared to an operating income of $327,340 for the prior-year period due lower expenses noted in the factors discussed above.

  • Operating EBITDA (excluding investment revenue) for the six months was $682,797 versus $602,725 in the prior-year period. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.

  • Net income for the six months ended September 30, 2020, was $884,521, or $0.11 per share, compared to a net income of $398,903, or $0.05 per share, for the prior-year six-month period. The year over year increase was the result of higher operating income and higher investment gain compared to the prior year period.

Balance Sheet Information

  • TMA’s balance sheet at September 30, 2020, reflected cash and cash equivalents of $1,084,317, working capital of $7,202,232, and shareholders’ equity of $7,301,952; compared to cash and cash equivalents of $2,130,973, working capital of $10,241,394, and shareholders’ equity of $7,299,119 as of March 31, 2020.

  • Due to collateral requirements related to refinancing bank debt in the quarter, the Company lists Restricted Cash separately on the balance sheet from cash and cash equivalents to reflect the cash balances collateralizing debt and specifies in Current Assets the restricted amount scheduled to become unrestricted in the next twelve months.

About The Marketing Alliance, Inc.

Headquartered in St. Louis, MO, TMA provides support to independent insurance brokerage agencies, with a goal of integrating insurance and "insurtech" engagement platforms to provide members value-added services on a more efficient basis than they can achieve individually.

Investor information can be accessed through the shareholder section of TMA’s website at:
http://www.themarketingalliance.com/shareholder-information.

TMA’s common stock is quoted on the OTC Markets (http://www.otcmarkets.com) under the symbol "MAAL".

Forward Looking Statement

Investors are cautioned that forward-looking statements involve risks and uncertainties that may affect TMA's business and prospects. Examples of forward-looking statements include, among others, statements we make regarding our expectations for our performance, and our ability and intent to pay dividends in future periods and the production of favorable returns to shareholders, our ability to obtain industry acceptance and competitive advantages of a multi-carrier digital platform for life insurance applications, our expectations with respect to the distribution of new life insurance products, the effects of ongoing uncertainty regarding our annuity business and our ability to continue to diversify our earth moving and excavating business. Any forward-looking statements contained in this press release represent our estimates, expectations or intentions only as of the date hereof, or as of such earlier dates as are indicated, and should not be relied upon as representing our views as of any subsequent date. These statements involve a number of risks and uncertainties, including, but not limited to, the effect of the COVID-19 pandemic on our business, financial condition and results of operations, as well as the pandemic’s effect of heightening other risks within our business, privacy and cyber security regulations, expectations of the economic environment; material adverse changes in economic conditions in the markets we serve and in the general economy; future state and federal regulatory actions and conditions in the states in which we conduct our business; our ability to work with carriers on marketing, distribution and product development; pricing and other payment decisions and policies of the carriers in our insurance distribution business, changes in the public securities markets that affect the value of our investment portfolio, weather and environmental conditions in the areas served by our earth moving and excavation business, the integration of our operations with those of businesses or assets we have acquired or may acquire in the future and the failure to realize the expected benefits of such acquisition and integration. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and Six Months Ended September 30, 2020 and September 30, 2019

Unaudited

Three Months Ended

Six Months Ended

September 30,

September 30,

2020

2019

2020

2019

Insurance commission and fee revenue

$

7,209,629

$

7,176,583

$

14,588,335

$

14,829,512

Family entertainment revenue

8,244

910,360

12,455

1,769,694

Construction revenue

951,661

576,280

1,170,310

979,621

Other operating revenue

-

32,500

-

52,600

Total revenues

8,169,534

8,695,723

15,771,100

17,631,427

Insurance distributor related expenses:

Distributor bonuses and commissions

5,505,102

5,529,122

11,147,920

11,262,094

Business processing and distributor costs

459,176

389,057

886,218

776,214

Depreciation

6,600

1,650

13,200

2,700

5,970,878

5,919,829

12,047,338

12,041,008

Costs of construction:

Direct and indirect costs of construction

381,360

366,637

495,825

792,997

Depreciation

47,995

20,800

63,595

31,200

429,355

387,437

559,420

824,197

Family entertainment costs of sales

11,956

269,150

32,842

477,395

Total costs of revenues

6,412,189

6,576,416

12,639,600

13,342,600

Net operating revenue

1,757,345

2,119,307

3,131,500

4,288,827

Operating expenses

1,215,427

1,968,629

2,635,665

3,961,487

Operating income

541,918

150,678

495,835

327,340

Other income (expense):

Investment gain, net

200,423

93,800

740,992

383,178

Interest expense

(52,163

)

(86,448

)

(99,292

)

(174,228

)

Interest rate swap, fair value adjustment loss

-

(6,697

)

(216

)

(32,987

)

Interest rate swap settlement income

(217

)

3,777

(3,063

)

9,100

Net loss on disposal of property, equipment, and operating entities

45,995

-

20,865

-

Income before provision for income taxes

735,956

155,110

1,155,121

512,403

Income tax expense

170,000

34,400

270,600

113,500

Net income

$

565,956

$

120,710

$

884,521

$

398,903

Average Shares Outstanding

8,032,266

8,032,266

8,032,266

8,032,266

Operating Income per Share

$

0.07

$

0.02

$

0.06

$

0.04

Net Income per Share

$

0.07

$

0.02

$

0.11

$

0.05

CONSOLIDATED BALANCE SHEETS

As of September 30, 2020 and March 31, 2020

Unaudited

September 30, 2020

March 31, 2020

ASSETS

Cash and cash equivalents

$

1,084,317

$

2,130,973

Investments

4,696,075

6,762,510

Restricted Cash

509,685

-

Receivables

12,747,342

12,642,870

Other

387,856

716,576

Total current assets

19,425,275

22,252,929

Property and Equipment, net

911,693

1,072,685

Restricted Cash

3,490,315

-

Operating lease right-of-use assets

2,004,170

3,091,711

Other

753,246

907,540

Total Non Current Assets

7,159,424

5,071,936

Total Assets

$

26,584,699

$

27,324,865

LIABILITIES AND SHAREHOLDERS' EQUITY

Total Current Liabilities

12,223,043

12,011,535

Total Long-term Liabilities

7,059,704

8,014,211

Total Liabilities

19,282,747

20,025,746

Total Shareholders' Equity

7,301,952

7,299,119

Total Liabilities and Shareholders' Equity

$

26,584,699

$

27,324,865

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2021 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2021 second quarter operating income of $541,918 and depreciation and amortization expense of $79,651 for a total of $621,569. Fiscal 2020 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 second quarter operating income of $150,678 and depreciation and amortization expense of $142,066 for a total of $292,744.

Fiscal 2021 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 six-month operating income of $495,835 and depreciation and amortization expense of $186,962 for a total of $682,797. Fiscal 2020 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 six-month operating income of $327,340 and depreciation and amortization expense of $275,385 for a total of $602,725.

The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

The Company uses Operating EBITDA as a measure of operating performance. However, Operating EBITDA is not a recognized measurement under U.S. generally accepted accounting principles, or GAAP, and when analyzing its operating performance, investors should use Operating EBITDA in addition to, and not as an alternative for, income as determined in accordance with GAAP. Because not all companies use identical calculations, its presentation of Operating EBITDA may not be comparable to similarly titled measures of other companies and is therefore limited as a comparative measure. Furthermore, as an analytical tool, Operating EBITDA has additional limitations, including that (a) it is not intended to be a measure of free cash flow, as it does not consider certain cash requirements such as tax payments; (b) it does not reflect changes in, or cash requirements for, its working capital needs; and (c) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Operating EBITDA does not reflect any cash requirements for such replacements, or future requirements for capital expenditures or contractual commitments. To compensate for these limitations, the Company evaluates its profitability by considering the economic effect of the excluded expense items independently as well as in connection with its analysis of cash flows from operations and through the use of other financial measures.

The Company believes Operating EBITDA is useful to an investor in evaluating its operating performance because it is widely used to measure a company’s operating performance without regard to certain non-cash or unrealized expenses (such as depreciation and amortization) and expenses that are not reflective of its core operating results over time. The Company believes Operating EBITDA presents a meaningful measure of corporate performance exclusive of its capital structure, the method by which assets were acquired and non-cash charges, and provides additional useful information to measure performance on a consistent basis, particularly with respect to changes in performance from period to period.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201123005562/en/

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
(314) 275-8713
tklusas@themarketingalliance.com
www.TheMarketingAlliance.com

-OR-

The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com