The Marketing Alliance Announces Financial Results for its Fiscal 2022 Fourth Quarter and Year Ended March 31, 2022

Rhea-AI Summary

The Marketing Alliance, Inc. (OTC: MAAL) reported its FY 2022 fourth quarter and annual results, highlighting a shift in financial performance despite revenue declines. The fourth quarter saw operating income rise to $807,164 from a loss of $86,590 the previous year, with net income from continuing operations up to $455,747 or $0.08 per share. For the full fiscal year, operating income increased to $2,703,570, though total revenues fell 22% to $23,691,799. The company benefitted from employee retention credits which helped reduce operating expenses. As of March 31, 2022, cash and cash equivalents totaled $1.4 million.

Positive

• Operating income for Q4 increased to $807,164 from a loss of $(86,590) year-over-year.
• Net income for Q4 rose to $455,747 or $0.08 per share compared to $180,579 or $0.03 per share previously.
• Operating income for the fiscal year increased to $2,703,570 from $1,847,718.
• Operating EBITDA increased to $2,950,821 from $2,123,612 for the fiscal year.

Negative

• Total revenues declined 22% to $23,691,799 for FY 2022.
• Fourth quarter revenues dropped 16% to $5,760,181 from $6,863,682 year-over-year.
• Net income for the fiscal year decreased to $2,616,028 or $0.39 per share from $1,455,794 or $0.18 per share the previous year.

ST. LOUIS--(BUSINESS WIRE)-- The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2022 fourth quarter and year ended March 31, 2022.

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

• Operating income of $807,164 compared to a loss of ($86,590) in the prior year period, despite a reduction in revenue of 16% to $5,760,181.
• Operating income (from continuing operations) increased in the quarter due in part to an employee retention credit of $192,549 which reduced payroll and compensation expenses
• Net income from continuing operations was $455,747, or $0.08 per share, as compared to net income from continuing operations of $180,579, or $0.03 per share, in the prior year period.

FY 2022 Annual Financial Highlights (all comparisons to the prior year)

• Operating income of $2,513,058, compared to $1,847,718 in the prior fiscal year despite a reduction in revenue of 22% to $23,691,799.
• Operating income (from continuing operations) increased in the fiscal year due in part to an employee retention credit of $875,635 which reduced payroll and compensation expenses.
• Operating EBITDA (excluding investment portfolio income) was $2,950,821 compared to $2,123,612.
• Income from continuing operations was $2,540,398 or $0.39 per share, as compared to income from continuing operations of $2,660,160 or $0.43 per share, in the prior year.

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Our fiscal year 2022 results show the continuation of a trend that started a few quarters ago, where despite a reduction in revenue versus the prior year period, our insurance distribution business was relatively consistent and, in some cases, improved in terms of gross profit, and saw an increase in gross profit as a percentage of revenue. Recall that the calculation of revenue in our insurance business is a function of sales activity with carriers that pay us different commission levels for equal volumes of sales, agencies that receive different commission levels for equal levels of sales depending on their mixture of products which at times may increase or reduce our revenue, and individual products that may have different commission levels despite equal sales levels, all of which contribute to the complexity in making meaningful comparisons between quarters and fiscal years on the basis of revenue alone, due to the fact that these factors are rarely the same quarter-to-quarter or year-to-year. We prefer to call attention to gross profit to compare, and on that basis, we performed at a relatively consistent level to the prior year periods. Also, in this quarter the Company reported its annual Deferred First Year Commission Reconciliation, which was a reduction of ($224,967) compared to a reduction ($685,776) in the prior year, the lesser reduction improved profit this year compared to last fiscal year.

Mr. Klusas added, “As we have noted in previous quarters, carriers and agents have continued to adjust to underwriting clients among the presence of COVID restrictions and agencies have also adjusted to the new challenges of simulating in-person client meetings and physical exams, many of which remain more complicated than prior to the emergence of COVID. As much as the pandemic has been a disruption for our business, we also think the broader acceptance of no-contact business solutions is a positive for our platform. In addition, insurance carriers and agents have an increased appreciation for maintaining a diversity of tools and solutions that allow them to cultivate customer relationships.”

Mr. Klusas concluded, “Although our Construction business experienced a decline compared with the prior year, we prioritized building a pipeline of jobs with trusted customers to build a business that offers a meaningful source of diversified revenues that would be positioned to benefit from increased investment in our country’s infrastructure.”

Fiscal 2022 Fourth Quarter Financial Review

• Total revenues for the three-month period ended March 31, 2022, were $5,760,181, as compared to $6,863,682 in the prior year quarter. This decrease was due mostly a different mix of insurance distribution business that produced less revenue (although the levels of gross profit remained relatively consistent) as well as a negative variance in the construction business as a billings in excess of costs were reversed at the end of the fiscal year (and subsequently re-instated after the end of the quarter when the work was completed).
• Net operating revenue (gross profit) for the quarter was $1,495,150, compared to net operating revenue of $725,791 in the prior-year fiscal period due improved gross profit margins in the insurance business and the reduced effect of the annual Deferred First Year Commission reconciliation versus the prior year period.
• Operating expenses decreased to $687,976 as compared to $812,381 for the same period of the prior year due largely to the employee Retention Credit discussed above. The employee retention credit is a refundable tax credit, authorized under the federal COVID-19 relief legislation, against certain employment taxes paid by TMA after March 12, 2020, and before the tax credit’s expiration during, 2021.
• The Company reported operating income from continuing operations of $807,174, compared to operating income of $(86,590) in the prior-year period, due to the improving gross profit margin, employee retention credit and reduced effect of Deferred First Year Commission reconciliation discussed above.
• Operating EBITDA (excluding investment portfolio income) was $863,542, compared to ($36,544) 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 $(29,227), as compared to an investment gain, net (from non-operating investment portfolio) of $310,410 for the same quarter of the previous fiscal year.
• Net income from continuing operations for the fiscal 2022 fourth quarter was $455,747, or $0.08 per share, as compared to net income of $180,579, or $0.0.3 per share, in the prior year period. The increase was largely due to higher operating income.

Fiscal 2022 Year End Financial Review

• Total revenues for the twelve months ended March 31, 2022, were $23,691,799, compared to $30,669,454 in the prior fiscal year. The decline was primarily due to reduced insurance commission and fee revenue resulting from a different mix of business from carriers and agencies. Although the change in business mix resulted in reduced revenues, the level of gross profit was relatively consistent. Net operating revenue (gross profit) was $5,760,631 compared to net operating revenue of $5,304,496 in the prior-year fiscal year. The increase in net operating revenue was primarily due to an increase in gross profit in the insurance distribution business.
• Operating expenses during fiscal 2022 were $3,057,061 or 12.9% of revenues, compared to $3,456,778, or 11.3% of total revenues, for the prior year. Operating expenses were slightly reduced on an absolute dollar basis while reduced total revenues resulted in operating expenses increasing on a percentage basis.
• The Company reported operating income of $2,703,570 for the twelve months ended March 31, 2022, compared to operating income of $1,847,718 for the prior-year period due to factors discussed above.
• Operating EBITDA (excluding investment revenue) for the twelve months was $2,950,821 versus $2,123,612 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 year ended March 31, 2022, was $2,616,028 million, or $0.39 per share, compared to a net income of $1,455,794, or $0.18 per share, for the prior year. The increase was primarily attributed to the improvement in operating income in the insurance distribution business.

Balance Sheet Information

• TMA’s balance sheet on March 31, 2022, reflected cash and cash equivalents of $1.4 million (excluding Restricted Cash of $0.5 million), working capital of $7.8 million, and shareholders’ equity of $7.8 million; compared to cash and cash equivalents of $1.1 million, working capital of $7.7 million, and shareholders’ equity of $7.3 million as of March 31, 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, including the broader acceptance of no-contact business solutions, the distribution of new life insurance products, 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 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
Three and Twelve Months Ended March 31, 2022 and March 31, 2021
Unaudited

	Three Months Ended									Twelve Months Ended
	March 31,									March 31,
		2022				2021					2022					2021
Insurance commission and fee revenue	$	5,499,618			$	6,736,172				$	22,208,043			$		28,453,835
Construction revenue		(25,538	)			1,430					1,029,555					1,929,039
Other insurance revenue		286,101				126,080					454,201					286,580
Total revenues		5,760,181				6,863,682					23,691,799					30,669,454
Insurance distributor related expenses:
Distributor bonuses and commissions		3,747,797				5,492,828					15,284,209					22,041,344
Business processing and distributor costs		453,057				520,864					1,919,635					1,914,697
Depreciation		3,407				4,400					14,780					24,200
		4,204,261				6,018,092					17,218,624					23,980,241
Costs of construction:
Direct and indirect costs of construction		7,809				74,153					526,365					1,240,439
Depreciation		52,961				45,646					186,179					144,278
		60,770				119,799					712,544					1,384,717
Total costs of revenues		4,265,031				6,137,891					17,931,168					25,364,958
Net operating revenue		1,495,150				725,791					5,760,631					5,304,496
Operating expenses		687,976				812,381					3,057,061					3,456,778
Operating income (loss) from continuing operations		807,174				(86,590	)				2,703,570					1,847,718
Other income (expense):
Investment gain, net		(29,227	)			310,410					284,208					1,723,243
Interest expense		(48,836	)			(57,187	)				(206,751	)				(217,800	)
Interest rate swap, fair value adjustment loss		-				-					-					(216	)
Interest rate swap settlement income		-				-					-					(3,063	)
Paycheck Protection Program forgiveness		(67,741	)								398,025					-
Gain on sale of equipment		-				68,000					-					127,832
Income from continuing operations before
provision for income taxes		661,370				234,633					3,179,052					3,477,714
Income tax expense (benefit)		205,623				54,054					638,654					817,554
Income (loss) from continuing operations		455,747				180,579					2,540,398					2,660,160
Discontinued Operations:
(Loss) from discontinued operations, net of income taxes		(34,702	)			(106,940	)				75,630					(1,222,499	)
Gain (loss) on disposal of discontinued operations,
net of income taxes		-				34,926					-					18,133
Net (loss) from discontinued operations		(34,702	)			(72,014	)				75,630					(1,204,366	)
Net income (loss)	$	421,045			$	108,565				$	2,616,028			$		1,455,794
Average Shares Outstanding		8,081,266				8,032,266					8,081,266					8,032,266
Operating Income from continuing operations per Share	$	0.10			$	(0.10	)			$	0.31			$		0.23
Net Income per Share	$	0.08			$	0.01				$	0.39			$		0.18

CONSOLIDATED BALANCE SHEETS
As of March 31, 2022 and March 31, 2021
Unaudited

		2022			2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,404,655		$	1,142,039
Equity securities		5,427,642			5,704,794
Restricted cash		536,212			518,330
Accounts receivable		10,903,808			11,972,268
Inventory		5,732			1,140
Prepaid expenses		280,137			246,684
Assets related to discontinued operations		16,039			19,920
Total current assets		18,740,886			19,791,219
PROPERTY AND EQUIPMENT, net		878,693			1,012,477
OTHER ASSETS
Notes receivable, net of current portion		591,595			713,107
Restricted cash		2,908,935			3,166,670
Operating lease right-of-use assets		238,459			94,711
Total other assets		3,738,989			3,9674,488
	$	23,358,568		$	24,778,184
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	9,344,356		$	10,344,620
Current portion of notes payable		804,318			777,495
Current portion of finance lease liability		66,819			70,126
Current portion of operating lease liability		100,702			94,711
Liabilities related to discontinued operations		470,030			639,117
Total current liabilities		10,786,225			11,926,069
LONG-TERM LIABILITIES
Lines of credit payable		525,000			0
Notes payable, net of debt issuance costs		3,732,717			4,926,065
Finance lease liability, net of current portion		183,797			256,404
Operating lease liability, net of current portion		147,390			0
Other liabilities related to discontinued operations		0			92,241
Deferred taxes		200,000			268,300
Total long-term liabilities		4,788,904			5,543,010
Total liabilities		15,575,129			17,469,079
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares authorized, no shares issued and outstanding		0			0
Common stock, no par value; 50,000,000 shares authorized,
8,081,266 and 8,032,266 shares issued and outstanding, respectively		1,025,341			903,023
Retained earnings		6,758,096			6,406,082
Total shareholders' equity		7,783,437			7,309,105
	$	23,358,566		$	24,778,184

Note – Operating EBITDA (excluding investment portfolio income)

		Q4				FY
		2022	2021			2022	2021
Operating Income/(Loss) from Continuing Operations	$	807,174	(86,590)		$	2,703,570	1,847,718
Add: Depreciation Expense		56,368	50,046			247,251	275,894
Operating EBITDA (excluding investment portfolio income)	$	863,542	(36,544)			2,950,821	2,123,612

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/20220630005916/en/

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

Source: The Marketing Alliance, Inc.

FAQ

What were the Q4 2022 earnings for The Marketing Alliance, Inc. (MAAL)?

In Q4 2022, MAAL reported a net income of $455,747 or $0.08 per share.

How much did MAAL's revenue decline in FY 2022?

MAAL's total revenues declined by 22% to $23,691,799 for FY 2022.

What drove the operating income increase for MAAL in Q4 2022?

The increase in operating income was aided by an employee retention credit reducing payroll expenses.

What is MAAL's cash position as of March 31, 2022?

As of March 31, 2022, MAAL had cash and cash equivalents of $1.4 million.