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

ST. LOUIS–(BUSINESS WIRE)–The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2023 second quarter ended September 30, 2022.

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

  • Operating income from continuing operations of $452,731 compared to $393,147 in the prior year period, reflecting an increased contribution in the quarter from construction business activity
  • Revenues were $4,839,242 compared to $5,747,090, largely due to the continued change in carrier and product mix in the insurance distribution business
  • Operating EBITDA (excluding investment income) increased by 15% to $521,261 from $453,237 in the prior year quarter
  • Net income was $199,015 or $0.02 per share compared to $459,245 or $0.06 per share

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “On balance, we have managed through a changing insurance business environment marked by shifts in revenue among our various carriers and corresponding changes in expenses. Because insurance carriers may offer different payment rates depending on the product sold, relative revenue comparisons could be misleading without relative expense comparisons. Our team prefers to look to our bottom line after revenue and expenses to assess our performance. Our message has remained consistent during this time in that we continue 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 access to their customers. Our platform also enables our insurance carriers to pursue an important segment in their distribution in a cost-effective manner. With business conditions in the economy and inflation challenging consumers’ budgets, the services of our agencies and the products they distribute could not be more essential than they are at times like these.”

Mr. Klusas added, “A key element of our long-term business strategy continued to be earnings generation in businesses that are not correlated with our core insurance distribution business, such as our construction business. As noted previously, our construction business completed a large job in this quarter as opposed to the fiscal first quarter last year, making the year-to-date operating results more comparable to assess performance than comparing each quarter individually to the prior year quarter. Our construction business continued to execute exceptionally well and our confidence in its leadership was well-placed.”

Mr. Klusas continued, “Continued interest rate increases and broad market performance impacted our investment portfolio, weighing on our overall results when non-operating investment gains and losses are included. The difficult economic environment also factored into our decision to declare a $.05 dividend, 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 all the while continue to take steps to improve our balance sheet.”

Fiscal 2023 Second Quarter Financial Review

  • Total revenues for the three-month period ended September 30, 2022, were $4,839,242, compared to $5,747,090 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 increased to $724,084 compared to $215,845 in the second quarter of 2022, due to increased activity levels compared with the prior year period.
  • Net operating revenue (gross profit) for the quarter was $1,256,385, compared to net operating revenue of $1,345,570 in the prior-year fiscal period, reflecting the combination of reduced insurance net operating revenue, offset by an improvement in construction revenue and gross operating margin.
  • Operating expenses decreased to $803,654 compared to $952,423 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 $452,731, compared to operating income of $393,147 in the prior-year period, due to a combination of the factors noted above.
  • Operating EBITDA (excluding investment portfolio income) increased by 15% to $521,261 from $453,237 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 $(33,756), as compared to an investment gain, net (from non-operating investment portfolio) of $105,986 for the same quarter of the previous fiscal year.
  • Net income (loss) from continuing operations was $130,557 or $0.02 per share compared to $459,245 or $0.06 per share.

Balance Sheet Information

  • TMA’s balance sheet on September 30, 2022, reflected cash and cash equivalents of $1.7 million; working capital of $6.7 million; and shareholders’ equity of $6.7 million; compared to cash and cash equivalents of $1.2 million, working capital of $7.4 million, and shareholders’ equity of $7.4 million as of September 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 our ability to generate earnings in businesses not correlated with our core insurance 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 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

Six Months Ended

September 30,

September 30,

 

2022

2021

2022

2021

 

Insurance commission and fee revenue

$

4,110,728

$

5,495,645

$

8,112,812

$

11,415,941

Construction revenue

724,084

215,845

929,745

705,992

Other insurance revenue

4,430

35,600

179,530

115,600

Total revenues

4,839,242

5,747,090

9,222,087

12,237,533

 

Insurance distributor related expenses:

Distributor bonuses and commissions

2,782,060

3,745,913

5,100,854

8,019,181

Business processing and distributor costs

468,534

487,950

925,045

1,001,499

Depreciation

3,851

3,673

6,809

7,573

3,254,445

4,237,536

6,032,708

9,028,253

Costs of construction:

Direct and indirect costs of construction

278,252

120,184

575,604

390,984

Depreciation

50,160

43,800

95,364

87,600

328,412

163,984

670,968

478,584

 

Total costs of revenues

3,582,857

4,401,520

6,703,676

9,506,837

 

Net operating revenue

1,256,385

1,345,570

2,518,411

2,730,696

 

Total general and administrative expenses

803,654

952,423

1,681,870

1,956,084

Operating income from continuing operations

452,731

393,147

836,541

774,612

Other income (expense):

Investment gain, net

(33,756)

105,986

(704,374)

327,132

Interest expense

(48,218)

(54,573)

(101,102)

(108,711)

Paycheck protection program forgiveness

245,000

373,525

Gain on sale of equipment

 

Income from continuing operations before provision for income taxes

370,757

689,560

31,065

1,366,558

 

Income tax expense

240,200

230,315

183,000

360,415

 

Income (loss) from continuing operations

130,557

459,245

(151,935)

1,006,143

 

Discontinued operations:

Income from discontinued operations, net of income taxes

68,458

82,876

110,332

 

Net income from discontinued operations

68,458

82,876

110,332

 

Net Income (Loss)

$

199,015

$

459,245

$

(69,059)

$

1,116,475

 
 

Average Shares Outstanding

8,081,266

8,081,266

8,081,266

8,081,266

Operating Income from continuing operations per Share

$

0.06

$

0.05

$

0.10

$

0.10

Net Income per Share

$

0.02

$

0.06

$

(0.01)

$

0.14

CONSOLIDATED BALANCE SHEETS

Unaudited

 

September 30,

September 30,

 

2022

 

2021

ASSETS

 

CURRENT ASSETS

Cash and cash equivalents

$

1,733,435

$

1,202,620

Equity securities

3,885,669

5,774,482

Restricted cash

536,212

483,883

Accounts receivable

9,452,907

10,623,548

Inventory

5,732

1,140

Current portion of notes receivable

133,504

162,283

Prepaid expenses

122,814

82,342

Assets related to discontinued operations

1,030

22,126

Total current assets

15,871,303

18,352,424

PROPERTY AND EQUIPMENT, net

762,804

963,778

 

OTHER ASSETS

Notes receivable, net due to the allowance

580,187

674,628

Restricted cash

2,235,747

2,961,264

Operating lease right-of-use assets

368,589

309,777

Other assets related to discontinued operations

Total other assets

3,184,523

3,945,669

$

19,818,630

$

23,261,871

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts payable and accrued expenses

7,174,813

9,081,179

Dividends payable

404,963

Line of credit payable

550,000

300,000

Current portion of notes payable

818,188

725,825

Current portion of finance lease liability

67,276

71,441

Current portion of operating lease liability

131,851

118,045

Liabilities related to discontinued operations

677

636,681

Total current liabilities

9,147,768

10,933,171

 

LONG-TERM LIABILITIES

Notes payable, net of current portion and debt issuance costs

3,332,579

4,222,133

Finance lease liability, net of current portion

153,099

214,499

Operating lease liability, net of current portion

243,558

200,147

Deferred taxes

200,000

275,400

Other liabilities related to discontinued operations

Total long-term liabilities

3,929,236

4,912,179

Total liabilities

13,077,004

15,845,350

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY

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

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

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

1,025,341

1,025,341

Retained earnings

5,716,285

6,391,180

Total shareholders’ equity

6,741,626

7,416,521

$

19,818,630

$

23,261,871

Note – Operating EBITDA (excluding investment portfolio income)

 

Three Months Ended

Six Months Ended

September 30,

September 30,

2022

2021

2022

2021

Operating Income/(Loss) from Continuing Operations

$

452,731

$

393,147

$

836,541

$

774,612

Add:

Depreciation/Amortization Expense

68,530

60,090

131,200

117,874

EBITDA (Excluding Investment Portfolio Income)

$

521,261

$

453,237

$

967,741

$

892,486

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.

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