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The Marketing Alliance Announces Financial Results for Quarter Ended June 30, 2022

·12 min read

ST. LOUIS, September 12, 2022--(BUSINESS WIRE)--The Marketing Alliance, Inc. (OTC: MAAL) ("TMA" or the "Company"), today announced financial results for its fiscal 2023 first quarter ended June 30, 2022.

FY 2023 First Quarter Financial Key Items (all comparisons to the prior year period)

  • Operating income from continuing operations of $383,810 compared to $381,465 in the prior year period, despite a reduction in revenue of 32% to $4,382,845

  • Operating EBITDA (excluding investment income) was $446,480 compared to $439,249 in the prior year quarter

  • Net income (loss) from continuing operations was $(257,992) or $(.03) per share compared to $546,898 or $.07 per share

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, "While our results reflect consistent operating profit and performance, this quarter was affected by a difficult economic climate and differences in timing on projects. The insurance distribution business performed well despite a reduction in revenue from a changing mix of carriers from previous quarters. While the change in business mix reduced revenue, these factors also correspond to reduced expenses, and resulted in similar levels of profitability. We also felt that a difficult and changing economic environment punctuated by rapid increases in rates of inflation affected consumer decisions. While this phenomenon could continue, we feel we have products and solutions for our agencies and agents to assist consumers in weathering this period. We continued to believe our no-contact business solutions offer significant value in the marketplace as insurance carriers and agents have an increased appreciation for these technological tools that allow them to maintain strong relationships with their customers. Our platform enables our insurance carrier partners to fill an important gap in their distribution in a cost-effective manner."

Mr. Klusas added, "Last year our construction business completed its largest job of the year in the prior year quarter. Due to timing this year, we have a similar job, but it is scheduled in the next quarter, making a difficult comparison to last year through only one quarter. In fact, the results from this past quarter represent some of the buildup in materials and mobilization of resources from a similar job without the corresponding revenue. This uneven timing of the project between years should offset, at which point our performance would be more comparable to the previous year."

Mr. Klusas continued, "We have been focused on reducing expenses where possible. Additionally, our net income from continuing operations was affected by adverse performance in our non-operating investment income versus the prior year, reflected in a generally less robust performance of the equity portion of our investment portfolio. The difficult economic environment also factored into our decision to declare a $.05 dividend compared to a $.07 dividend in the previous quarter, as our preference would be to err in being prudent too quickly over being slow and prone to panic should challenging economic conditions continue and use that prudence to continue to improve our balance sheet."

Fiscal 2023 First Quarter Financial Review

  • Total revenues for the three-month period ended June 30, 2022, were $4,382,845, compared to $6,490,443 in the prior year quarter. The decrease was due to a shift of the business and carrier mix in the insurance distribution business. Construction revenue decreased to $205,661 compared to $490,147 in the first quarter of FY2022, which was due primarily to the timing of a large project last year versus this year.

  • Net operating revenue (gross profit) for the quarter was $1,262,026, compared to net operating revenue of $1,385,126 in the prior-year fiscal period due to increased gross profit margins in the insurance business.

  • Operating expenses decreased to $878,216 compared to $1,003,661 for the same period of the prior year as the company continued to focus on cost reduction efforts.

  • The Company reported operating income from continuing operations of $383,810, compared to operating income of $381,465 in the prior-year period, due to consistent performance in the insurance business offset by adverse timing in the construction business.

  • Operating EBITDA (excluding investment portfolio income) was $446,480, compared to $439,249 in the prior year quarter. A note reconciling operating EBITDA to operating income can be found at the end of this release.

  • Investment loss, net (from non-operating investment portfolio) for the quarter was $(670,618), as compared to an investment gain, net (from non-operating investment portfolio) of $221,146 for the same quarter of the previous fiscal year as the value of the Company’s equity portfolio declined. While the Company had realized and unrealized losses in its non-operating investment portfolio, most of the losses were unrealized losses.

  • Net loss for the fiscal 2023 first quarter was ($243,574), or ($0.03) per share, as compared to net income of $657,230, or $0.08 per share, in the prior year period. This decrease was largely due to the decline in net investment income.

Balance Sheet Information

  • TMA’s balance sheet on June 30, 2022, reflected cash and cash equivalents of $2.5 million; working capital of $6.9 million; and shareholders’ equity of $6.9 million; compared to cash and cash equivalents of $1.6 million, working capital of $8.0 million, and shareholders’ equity of $7.5 million as of June 30, 2021.

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 "insuretech" 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 in future periods, 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 relative permanence of no-contact business solutions, and the distribution of new life insurance products. 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 and ways that insurance carriers may react to them in their underwriting policies; 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

Unaudited

Three Months Ended

June 30,

2022

2021

Insurance commission and fee revenue

$

4,002,084

$

5,920,296

Construction revenue

205,661

490,147

Other insurance revenue

175,100

80,000

Total revenues

4,382,845

6,490,443

Insurance distributor related expenses:

Distributor bonuses and commissions

2,318,794

4,273,268

Business processing and distributor costs

456,511

513,549

Depreciation

2,958

3,900

2,778,263

4,790,717

Costs of construction:

Direct and indirect costs of construction

297,352

270,800

Depreciation

45,204

43,800

342,556

314,600

Total costs of revenues

3,120,819

5,105,317

Net operating revenue

1,262,026

1,385,126

Total general and administrative expenses

878,216

1,003,661

Operating income from continuing operations

383,810

381,465

Other income (expense):

Investment gain, net

(670,618

)

221,146

Interest expense

(52,884

)

(54,138

)

Paycheck protection program forgiveness

24,500

128,525

Gain on sale of equipment

0

0

Income from continuing operations before provision for income taxes

(315,192

)

676,998

Income tax expense

(57,200

)

130,100

Income (loss) from continuing operations

(257,992

)

546,898

Discontinued operations:

Income from discontinued operations, net of income taxes

14,418

110,332

Net income from discontinued operations

14,418

110,332

Net Income (Loss)

$

(243,574

)

$

657,230

Average Shares Outstanding

8,081,266

8,081,266

Operating Income from continuing operations per Share

$

0.05

$

0.05

Net Income per Share

$

(0.03

)

$

0.08

CONSOLIDATED BALANCE SHEETS

Unaudited

June 30, 2022

March 31, 2022

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

2,461,956

$

1,561,037

Equity securities

3,904,217

6,037,254

Restricted cash

536,212

522,800

Accounts receivable

9,710,905

11,188,833

Inventory

7,534

1,140

Current portion of notes receivable

146,645

185,473

Prepaid expenses

189,036

164,068

Assets related to discontinued operations

6,822

22,126

Total current assets

16,963,327

19,682,731

PROPERTY AND EQUIPMENT, net

817,945

969,512

OTHER ASSETS

Notes receivable, net due to the allowance

586,435

674,633

Restricted cash

2,369,036

2,922,347

Operating lease right-of-use assets

402,534

55,161

Other assets related to discontinued operations

0

0

Total other assets

3,358,005

3,652,141

$

21,139,277

$

24,304,384

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses

7,930,566

9,769,064

Dividends payable

566,949

0

Line of credit payable

400,000

350,000

Current portion of notes payable

811,223

784,170

Current portion of finance lease liability

67,276

70,781

Current portion of operating lease liability

131,851

55,161

Liabilities related to discontinued operations

87,194

636,681

Total current liabilities

9,995,059

11,665,857

LONG-TERM LIABILITIES

Notes payable, net of current portion and debt issuance costs

3,529,616

4,601,703

Finance lease liability, net of current portion

165,191

238,460

Operating lease liability, net of current portion

276,497

0

Deferred taxes

200,000

275,400

Total long-term liabilities

4,171,304

5,115,563

Total liabilities

14,166,363

16,781,420

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY

Common stock, no par value; 50,000,000 shares authorized,

8,081,266 shares issued and outstanding June 30, 2021

8,081,266 shares issued and outstanding June 30, 2022

1,025,341

1,025,341

Retained earnings

5,947,573

6,497,623

Total shareholders' equity

6,972,914

7,522,964

$

21,139,277

$

24,304,384

Note – Operating EBITDA (excluding investment portfolio income)

Three Months Ended

EBITDA Calculation

June 30,

2022

2021

Operating Income/(Loss) from Continuing Operations

$

383,810

$

381,465

Add:

Depreciation/Amortization

62,670

57,784

EBITDA

$

446,480

$

439,249

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/20220912005917/en/

Contacts

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

-OR-

The Equity Group Inc.
Jeremy Hellman, Vice President
(212) 836-9626
jhellman@equityny.com