The Marketing Alliance Announces Financial Results for its Fiscal 2022 Second Quarter Ended September 30, 2021

Rhea-AI Summary

The Marketing Alliance, Inc. (OTC: MAAL) reported its fiscal 2022 second-quarter results. Revenues dropped to $5.75 million from $8.16 million due to declines in both insurance distribution and construction sectors. Operating income fell to $393,147 compared to $899,878 in the prior year. Net income was $459,245 or $0.06 per share, down from $565,956 or $0.07 per share. Increased operating expenses were noted, rising to 16.6% of total revenues. The company faces challenges from project delays and shifting insurance carrier strategies but remains optimistic about future improvements following recent federal infrastructure legislation.

Positive

• Insurance distribution gross profit maintained consistency despite revenue declines.
• Balance sheet improvement with cash and cash equivalents increasing to $1.2 million.

Negative

• Revenue decreased by 30% compared to the prior year.
• Operating income fell by 56% from the previous year.
• Net income decreased 18% year-over-year.
• Operating expenses increased to 16.6% of revenues.
• Absence of large construction projects significantly impacted performance.

ST. LOUIS--(BUSINESS WIRE)-- The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2022 second quarter ended September 30, 2021.

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

• Revenues decreased to $5,747,090 from $8,161,290 due to revenue decreases in both the insurance distribution business and the construction business versus the prior year quarter
• Operating income from continuing operations was $393,147, as compared to operating income from continuing operations of $899,878 in the prior year quarter
• Net income was $459,245 or $0.06 per share, as compared to net income of $565,956, or $0.07 per share, in the prior year period

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Despite the reduction in revenue in the quarter versus the prior year period, our insurance distribution business was relatively consistent in terms of gross profit and saw an increase in gross profit as a percentage of revenue. Revenue in our insurance business is a function of the composition of sales with specific carriers, specific agencies and even specific to which products are sold in that quarter. In an attempt to normalize the changes in a quarter when many of these factors are changing, we prefer to turn to gross profit as a means to compare, and on that basis, we performed at a relatively consistent level to the prior year quarter. As we have noted in previous quarters, carriers and agents have continued to adjust to underwriting clients among the presence of COVID continuations 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. It is also helpful to remember that during the second fiscal quarter much of the country saw the emergence of the Delta variant, which caused fluctuations in the pace of life insurance operations and resuming normal activities.”

Mr. Klusas continued, “Our insurance distribution revenue decrease was also due, in part and again, to disruption caused by certain insurance carriers and agencies changing their distribution strategy as was the case last quarter. Replacing those relationships and subsequently driving those new relationships to a similar performance level does take several quarters and we were optimistic we are making progress.”

Mr. Klusas concluded, “Our construction business experienced a challenging quarter due to the accumulation of delays in permitting new projects to bid and supply chain complications that pushed back work already under contract. Most of the operating income deficiency compared to the prior year quarter was due to not having an exceptional large project like we did last year. “Transitory” or not, the absence of a large highway project in the quarter hurt our performance in this quarter. However, we felt these delays would abate and past projects would re-emerge, especially with the recent passage of the federal infrastructure bill.”

Fiscal 2022 Second Quarter Financial Review

• Total revenues for the three-month period ended September 30, 2021, were $5,747,090 as compared to $8,161,290 in the prior year quarter. This was due mostly to decreases in insurance commission and fee revenues along with a decrease in construction revenue relative to the prior year period.

• Net operating revenue (gross profit) for the quarter was $1,345,570 compared to net operating revenue of $1,761,057 in the prior-year fiscal period, due mostly to the absence of a large construction project comparable to what the company completed in the prior year period.

• Operating expenses increased slightly to $952,423, or 16.6% of total revenues for the fiscal 2022 second quarter, as compared to $861,179, or 10.6% 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 and one-time professional fees in this quarter.

• The Company reported operating income from continuing operations of $393,147, compared to operating income from continuing operations of $899,878 in the prior-year period mainly due to factors discussed above.

• Operating EBITDA (excluding investment portfolio income) for the quarter was $453,237, compared to $962,064 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 $105,986, as compared to $200,423 for the same quarter of the previous fiscal year.

• Net income from continuing operations for the fiscal 2022 second quarter was $459,245 as compared to net income from continuing operations of $821,303 in the prior year period. The decrease in net income from continuing operations was primarily due to the decrease in gross profit in the construction business compared to the same quarter in the prior year.

• Net income was $459,245, or $0.06 per share, as compared to net income of $565,956, or $0.07 per share, in the prior year period.

Balance Sheet Information

• TMA’s balance sheet at September 30, 2021, reflected cash and cash equivalents of approximately $1.2 million, working capital of $7.4 million, and shareholders’ equity of $7.4 million; compared to cash and cash equivalents of approximately $1.1 million, working capital of $7.9 million, and shareholders’ equity of $7.3 million, at March 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, including our progress with respect to increasing the performance levels of insurance carriers and agencies and increases in revenues from our construction business, especially in relation to the federal infrastructure bill, 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 construction business, the integration of our operations with those of businesses or assets we 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,
		2021			2020			2021			2020
Insurance commission and fee revenue		$	5,495,645		$	7,209,629		$	11,415,941		$	14,588,335
Construction revenue			215,845			951,661			705,992			1,170,310
Other insurance revenue			35,600			-			115,600			-
Total revenues			5,747,090			8,161,290			12,237,533			15,758,645
Insurance distributor related expenses:
Distributor bonuses and commissions			3,745,913			5,505,102			8,019,181			11,147,920
Business processing and distributor costs			487,950			459,176			1,001,499			886,218
Depreciation			3,673			6,600			7,573			13,200
			4,237,536			5,970,878			9,028,253			12,047,338
Costs of construction:
Direct and indirect costs of construction			120,184			381,360			390,984			495,825
Depreciation			43,800			47,995			87,600			63,595
			163,984			429,355			478,584			559,420
Total costs of revenues			4,401,520			6,400,233			9,506,837			12,606,758
Net operating revenue			1,345,570			1,761,057			2,730,696			3,151,887
Total general and administrative expenses			952,423			861,179			1,956,084			1,856,161
Operating income from continuing operations			393,147			899,878			774,612			1,295,726
Other income (expense):
Investment gain, net			105,986			200,423			327,132			740,992
Interest expense			(54,573)			(52,163)			(108,711)			(99,292)
Interest rate swap, fair value adjustment loss			-			-			-			(216)
Interest rate swap settlement income			-			(217)			-			(3,063)
Paycheck protection program forgiveness			245,000						373,525			-
Gain on sale of equipment			-			24,082			-			24,082
Income from continuing operations before provision for income taxes			689,560			1,072,003			1,366,558			1,958,229
Income tax expense			230,315			250,700			360,415			463,300
Income from continuing operations			459,245			821,303			1,006,143			1,494,929
Discontinued operations:
Income (loss) from discontinued operations, net of income taxes			-			(272,580)			110,332			(639,485)
Gain on disposal of discontinued operations, net of income taxes			-			17,233			-			29,077
Net income (loss) from discontinued operations			-			(255,347)			110,332			(610,408)
Net Income		$	459,245		$	565,956		$	1,116,475		$	884,521
Average shares outstanding			8,081,266			8,032,266			8,032,266			8,032,266
Operating Income from Continuing Operations per Share		$	0.05		$	0.11		$	0.10		$	0.16
Net Income per Share		$	0.06		$	0.07		$	0.14		$	0.11

CONSOLIDATED BALANCE SHEETS
Unaudited
		September 30, 2021			March 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	1,202,620		$	1,142,039
Investments			5,774,482			5,704,794
Restricted cash			483,883			518,330
Accounts receivable			10,623,548			11,972,268
Current portion of notes receivable			162,283			251,870
Prepaid expenses			83,482			78,233
Assets related to discontinued operations			22,126			19,920
Total current assets			18,352,424			19,791,219
PROPERTY AND EQUIPMENT, net			963,778			1,012,477
OTHER ASSETS
Notes receivable, net of current portion			674,628			713,107
Restricted cash			2,961,264			3,166,670
Operating lease right-of-use assets			309,777			94,711
Other assets related to discontinued operations			-			-
Total other assets			3,945,669			3,974,488
		$	23,261,871		$	24,778,184
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities			4,222,133			11,926,069
Total long-term liabilities			4,912,179			5,543,010
Total liabilities			15,845,350			17,469,079
Total shareholders' equity			7,416,521			7,309,105
LIABILITIES AND SHAREHOLDERS' EQUITY		$	23,261,871		$	24,778,184

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2022 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2022 second quarter operating income from continuing operations of $393,147 and depreciation and amortization expense of $60,090 for a total of $453,237.

Fiscal 2021 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2019 second quarter operating income from continuing operations of $899,878 and depreciation and amortization expense of $62,186 for a total of $962,064.

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/20211123006127/en/

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

Source: The Marketing Alliance, Inc.

FAQ

What were the financial results for The Marketing Alliance, Inc. for Q2 2022?

The Marketing Alliance reported revenues of $5.75 million, a decrease from $8.16 million in Q2 2021, with net income at $459,245 or $0.06 per share.

What is the stock symbol for The Marketing Alliance?

The stock symbol for The Marketing Alliance is MAAL.

What were the major challenges faced by The Marketing Alliance in Q2 2022?

Key challenges included revenue declines in both insurance distribution and construction due to project delays and changes in carrier strategies.

How did the operating expenses change for The Marketing Alliance in Q2 2022?

Operating expenses increased to 16.6% of total revenues, up from 10.6% in the same period last year.

What does the future outlook look like for The Marketing Alliance following the Q2 2022 results?

The company remains optimistic for future improvements, especially with the recent federal infrastructure bill anticipated to alleviate project delays.