The Marketing Alliance Announces Financial Results for its Fiscal 2022 First Quarter Ended June 30, 2021

Rhea-AI Summary

The Marketing Alliance reported a revenue decline in Q1 FY 2022, totaling $6.49 million, down from $7.6 million in the previous year, mainly due to lower insurance commission revenues. Operating income from continuing operations was $381,465, with net income decreasing to $546,898 or $0.07 per share. The company's construction business showed growth, countering challenges in its insurance segment. Operating expenses rose slightly to 15.5% of total revenues. Cash and equivalents were approximately $1.1 million as of June 30, 2021.

Positive

• Construction business revenues increased despite pandemic challenges.
• Adaptability demonstrated in shifting carrier relationships.

Negative

• Total revenues decreased by 14.6% compared to the previous year.
• Net income from continuing operations declined by 19% year-over-year.
• Operating expenses rose to 15.5% of total revenues.

The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2022 first quarter ended June 30, 2021.

FY 2022 First Quarter Financial Highlights (all comparisons to the prior year period)

• Revenues decreased to $6,490,443 from $7,597,355, largely due to lower commission and fee revenue in the insurance distribution business
• Operating income from continuing operations was $381,465, as compared to operating income from continuing operations of $395,848 in the prior year quarter
• Net income from continuing operations was $546,898, or $0.07 per share, as compared to net income of $673,626, or $0.08 per share, in the prior year period

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Our first quarter included consistent profitability despite continued headwinds due to COVID-19 and changes among our insurance carriers. While our digital insurance application capabilities are complementary to a remote working environment, the genesis of life insurance applications remain somewhat reliant on in-person client meetings and physical exams, many of which remain more complicated than prior to the emergence of COVID. On a positive note, we have seen previous carrier underwriting restrictions, in general, reduced (more normalized) in that there are less COVID - restrictions and it seems more policies have been completed in which carriers waived physical exams, all of which was encouraging.”

Mr. Klusas continued, “Our insurance distribution revenue decrease was due, in part, to disruption caused by certain insurance carriers changing their distribution strategy. The consistency of our results, however, showed the adaptability of our business model and the exceptional execution of the agencies in overcoming this disruption as the agencies were able to shift to different carrier relationships. Our Company continued to leverage a broad base of carrier relationships in order to facilitate any smooth transition for agencies, however this has had a tendency to create volatility on a quarter-to-quarter basis.”

Mr. Klusas concluded, “Our construction business performed very well despite lingering pandemic conditions such as delays in permitting new projects, as revenues increased versus the prior year quarter.”

Fiscal 2022 First Quarter Financial Review

• Total revenues for the three-month period ended June 30, 2021, were $6,490,443 as compared to $7,597,355 in the prior year quarter. This was due mostly to decreases in insurance commission and fee revenues which were offset somewhat by an increase in construction revenue relative to the prior year period.

• Net operating revenue (gross profit) for the quarter was $1,385,126 compared to net operating revenue of $1,390,830 in the prior-year fiscal period.

• Operating expenses increased slightly to $1,003,661, or 15.5% of total revenues for the fiscal 2022 first quarter, as compared to $994,982, or 12.6% of total revenues for the same period of the prior year. Operating expenses increased as a percentage of total revenues, mainly due to lower revenues in the quarter compared to the prior year quarter.

• The Company reported operating income from continuing operations of $381,465, compared to operating income from continuing operations of $395,848 in the prior-year period.

• Operating EBITDA (excluding investment portfolio income) for the quarter was $439,249, compared to $451,555 in the prior year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.

• Investment gain (loss), net (from non-operating investment portfolio) for the quarter was $221,146, as compared to $540,569 for the same quarter of the previous fiscal year.

• Net income from continuing operations for the fiscal 2022 first quarter was $546,898, or $0.07 per share, as compared to net income from continuing operations of $673,626, or $0.08 per share, in the prior year period. The decrease in net income from continuing operations was primarily due to the decrease in revenues during the quarter.

Balance Sheet Information

• TMA’s balance sheet at March 31, 2021, reflected cash and cash equivalents of approximately $1.1 million, working capital of $7.9 million, and shareholders’ equity of $7.3 million; compared to cash and cash equivalents of approximately $1.6 million, working capital of $8.0 million, and shareholders’ equity of $7.5 million, at 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 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 relative permanence of insurance sales responses to the COVID -19 pandemic, the distribution of new life insurance products, the effects of ongoing uncertainty regarding our annuity business, our ability to exit the family entertainment business in accordance with our estimated costs 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 and the reduction or elimination by carriers of pandemic-based restrictions 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 Months Ended June 30, 2021 and 2020
Unaudited
	Three Months Ended
	June 30,
		2021				2020
Insurance commission and fee revenue	$	5,920,296			$	7,378,706
Construction revenue		490,147				218,649
Other insurance revenue		80,000				-
Total revenues		6,490,443				7,597,355
Insurance distributor related expenses:
Distributor bonuses and commissions		4,273,268				5,642,818
Business processing and distributor costs		513,549				427,042
Depreciation		3,900				6,600
		4,790,717				6,076,460
Costs of construction:
Direct and indirect costs of construction		270,800				114,465
Depreciation		43,800				15,600
		314,600				130,065
Total costs of revenues		5,105,317				6,206,525
Net operating revenue		1,385,126				1,390,830
Total general and administrative expenses		1,003,661				994,982
Operating income from continuing operations		381,465				395,848
Other income (expense):
Investment gain, net		221,146				540,569
Interest expense		(54,138	)			(47,129	)
Interest rate swap, fair value adjustment loss		-				(216	)
Interest rate swap settlement income		-				(2,846	)
Payroll protection program forgiveness		128,525				-
Income from continuing operations before provision for income taxes		676,998				886,226
Income tax expense		130,100				212,600
Income from continuing operations		546,898				673,626
Discontinued operations:
Gain (loss) from discontinued operations, net of income taxes		110,332				(366,905	)
Gain on disposal of discontinued operations, net of income taxes		-				11,844
Net income (loss) from discontinued operations		110,332				(355,061	)
Net Income	$	657,230			$	318,565
Average Shares Outstanding		8,081,266				8,032,266
Operating Income from Continuing Operations per Share	$	0.05			$	0.05
Net Income per Share	$	0.08			$	0.04

CONSOLIDATED BALANCE SHEETS
As of June 30, 2021 and March 31, 2021
Unaudited
	June 30, 2021			March 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,561,037		$	1,142,039
Investments		6,037,254			5,704,794
Restricted cash		522,800			518,330
Accounts receivable		11,188,833			11,972,268
Current portion of notes receivable		185,473			251,870
Prepaid expenses		165,208			78,233
Assets related to discontinued operations		22,126			19,920
Total current assets		19,682,731			19,791,219
PROPERTY AND EQUIPMENT, net		969,512			1,012,477
OTHER ASSETS
Notes receivable, net of current portion		674,633			713,107
Restricted cash		2,922,347			3,166,670
Operating lease right-of-use assets		55,161			94,711
Other assets related to discontinued operations		-			-
Total other assets		3,652,141			3,974,488
	$	24,304,384		$	24,778,184
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities		11,665,857			11,926,069
Total long-term liabilities		5,115,563			5,543,010
Total liabilities		16,781,420			17,469,079
Total shareholders' equity		7,522,964			7,309,105
LIABILITIES AND SHAREHOLDERS' EQUITY	$	24,304,384		$	24,778,184

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2022 first quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2022 first quarter operating income from continuing operations of $381,465 and depreciation and amortization expense of $57,784 for a total of $439,249.

Fiscal 2021 first quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2019 first quarter operating income from continuing operations of $395,848 and depreciation and amortization expense of $55,707 for a total of $451,555.

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.

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FAQ

What were the revenue figures for MAAL in Q1 FY 2022?

MAAL reported revenues of $6.49 million in Q1 FY 2022, down from $7.6 million in the same quarter last year.

What was the net income per share for MAAL in Q1 FY 2022?

The net income per share for MAAL in Q1 FY 2022 was $0.07, down from $0.08 in the prior year period.

How did MAAL's operating income change in Q1 FY 2022?

MAAL's operating income from continuing operations fell to $381,465 in Q1 FY 2022, compared to $395,848 in Q1 FY 2021.

What are the cash and working capital figures for MAAL as of June 30, 2021?

As of June 30, 2021, MAAL had cash and cash equivalents of approximately $1.1 million and working capital of $7.9 million.