The Marketing Alliance Announces Financial Results for Quarter Ended March 31, 2024

Rhea-AI Summary

The Marketing Alliance (OTC: MAAL) reported its fiscal 2024 fourth-quarter financial results, highlighting a 9% increase in revenue to $19.59 million, driven by growth in the insurance distribution business.

However, construction revenue decreased, affecting overall financial performance. Operating income from continuing operations fell to $1.10 million from $1.54 million. Net income rose to $1.04 million or $0.13 per share, up from $0.82 million or $0.10 per share the previous year.

The company faced challenges including an adverse carrier mix and staffing cost overruns, but continued cost reduction measures. Investment gains improved to $493,334 from a loss of $304,488, and TMA repaid its line of credit to zero post-quarter end. Cash and cash equivalents were $2.9 million, with working capital of $7.6 million and shareholders’ equity of $6.7 million.

Positive

• Revenues increased by 9% to $19.59 million, primarily due to growth in insurance distribution.
• Net income from continuing operations rose to $1.04 million or $0.13 per share from $0.82 million or $0.10 per share.
• Investment gains improved to $493,334 from a loss of $304,488.
• Cash and cash equivalents increased to $2.9 million, up from $2.0 million.

Negative

• Operating income from continuing operations decreased to $1.10 million from $1.54 million.
• Construction revenue decreased significantly to $1.28 million from $2.02 million.
• Operating EBITDA declined to $1.39 million from $1.79 million.
• Net operating revenue fell to $4.66 million from $5.37 million.
• The adverse carrier mix and staffing cost overruns negatively affected profitability.

ST. LOUIS--(BUSINESS WIRE)-- The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), announced its financial results today for its fiscal 2024 fourth quarter ended March 31, 2024.

FY 2024 Financial Key Items (all comparisons to the prior year period)

• Revenues were $19,585,772 compared to $17,940,089, the 9% increase was primarily due to growth in the insurance distribution business that was partially offset by a decrease in construction revenue
• Operating income from continuing operations of $1,099,267 compared to $1,542,958 in the prior year period. Operating income in the prior year period was increased by $325,114 due to a restatement of commission expense
• Net income from continuing operations was $1,043,214 or $0.13 per share compared to $815,338 or $0.10 per share in the prior year period

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Our team was very pleased to report the growth of the insurance distribution business this year. While most of the growth could be attributed to organic growth in the business, we welcomed a few new relationships which also contributed to the increase in revenues. We continue to invest in this business, and as in prior years we hoped to see the positive results of these investments in future quarters and years. While our construction business revenue was off this year, we continued to be discerning about the projects we undertake and maintained our cost discipline as we executed these projects, which we believed positions us well in future quarters.”

Mr. Klusas added, “Getting back to our insurance business, our growth in the business was somewhat overshadowed by an adverse carrier mix associated with different commission levels among carriers whose payments fluctuate with the volume of business. Although an adverse carrier mix is expected with newer relationships, as these relationships mature and grow the business mix should improve, as it has with other new relationships in the past. We also experienced certain cost overruns in staffing connected to new initiatives which we started to address this quarter. While we made progress on costs, the staffing overruns affected our margins and profitability. We plan to continue to take measures to reduce these costs. The combination of an adverse business mix and costs over plan were large areas of focus for our team. Moving to construction, last quarter we announced a $143,629 charge - off at the end of a large job due to reconciling material bills on a job that spanned over multiple years. The billing of these materials in the prior year ($143,629) and reversal of these materials billings in this fiscal year (reversal of $143,629) account for a portion of the difference in financial performance in the construction business between fiscal years.”

Mr. Klusas continued, “We also took steps on our balance sheet to reduce our exposure to equities in our non-operating investment portfolio by liquidating securities and investing the proceeds into money market accounts. Subsequent to the end of the quarter, we also repaid our line of credit to a zero balance.”

Fiscal 2024 Financial Review

• Total revenues for the twelve-month period ended March 31, 2024, were $19,585,772, compared to $17,940,089 in the prior year. The increase was primarily due to growth in the insurance distribution business that was supplemented by new carrier and agency relationships. Construction revenue of $1,284,021 decreased compared to the prior year revenue of $2,016,248, due to a large job in the previous year where we were project manager with a large portion outsourced to subcontractors.
• Net operating revenue (gross profit) for the fiscal year was $4,655,172, compared to net operating revenue of $5,372,772 in the prior-year fiscal period, where the restatement of commission expense increased net operating revenue by $325,114 in the prior fiscal year.
• Operating expenses decreased to $3,555,905, compared to $3,829,814 for the prior year. The reduction was due to various cost reduction efforts throughout the company.
• The Company reported operating income from continuing operations of $1,099,267, compared to operating income of $1,542,958 in the prior-year period, due to a combination of the factors noted above, notably operating income in the prior year period was increased by $325,114 due to a restatement of commission expense.
• Operating EBITDA (excluding investment portfolio income) declined to $1,388,524 from $1,794,401 in the prior year. 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 fiscal year was $493,334, as compared with ($304,488) during the previous fiscal year.
• Other income (expense) was ($67,390) at the end of the fiscal year due to a valuation allowance on a note receivable. The Company reported other income in its current year interim financial statements that was subsequently reclassified as reduced commission expense in the previous fiscal year (see operating income note above).
• Net income from continuing operations was $1,043,214 or $0.13 per share compared to $815,338 or $0.10 per share.

Balance Sheet Information

• TMA’s balance sheet on March 31, 2024, reflected cash and cash equivalents of $2.9 million; working capital of $7.6 million; and shareholders’ equity of 6.7 million; compared to cash and cash equivalents of $2.0 million, working capital of $7.3 million, and shareholders’ equity of $6.9 million as of March 31, 2023.

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 the timing of our receipt and recognition of fee revenues, our plan to reduce expenses and cost overruns associated with various business initiatives, and our ability to generate earnings from our construction 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, expectations of the economic environment, material adverse changes in economic conditions in the markets we serve and in the general economy; the ways that insurance carriers may react in their underwriting policies and procedures to the continuing risks they perceive from public health matters; the ability of our construction business to be engaged for projects and for those projects to commence on the anticipated timetable; our reliance on a limited number of insurance carriers and any potential termination of those relationships or failure to develop new relationships; privacy and cyber security matters and our ability to protect confidential information; 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; and weather and environmental conditions in the areas served by our construction business. 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						Twelve Months Ended
		March 31,						March 31,
		(Unaudited)
		2024			2023			2024			2023
Insurance commission and fee revenue	$	5,518,767		$	3,607,443		$	17,756,951		$	15,224,236
Construction revenue		22,425			(4,515)			1,284,021			2,016,248
Other insurance revenue		305,000			357,745			544,800			699,605
Total revenues		5,846,192			3,960,673			19,585,772			17,940,089
Insurance distributor related expenses:
Distributor bonuses and commissions		4,396,109			2,813,078			12,137,471			9,370,001
Business processing and distributor costs		581,184			475,390			1,780,758			1,863,575
Depreciation		0			2,049			9,382			11,834
		4,977,293			3,290,517			13,927,611			11,245,410
Costs of construction:
Direct and indirect costs of construction		(86,558)			(197,067)			757,064			1,129,623
Depreciation		65,949			49,238			245,925			192,284
		(20,609)			(147,829)			1,002,989			1,321,907
Total costs of revenues		4,956,684			3,142,688			14,930,600			12,567,317
Net operating revenue		889,508			817,985			4,655,172			5,372,772
Operating Expenses		1,048,936			1,286,149			3,555,905			3,829,814
Operating income (losses) from continuing operations		(159,428)			(468,164)			1,099,267			1,542,958
Other income (expense):
Investment gain, net		156,114			132,464			493,334			(304,488)
Interest expense		(46,925)			(49,453)			(196,620)			(199,817)
Other income		(268,242)			-			(67,390)			-
Income (losses) from continuing operations before provision for income taxes		(318,481)			(385,153)			1,328,591			1,038,653
Income tax expense		(119,483)			(122,851)			285,377			222,315
Income(losses) from continuing operations		(198,998)			(262,302)			1,043,214			815,338
Discontinued operations:
Income (loss) from discontinued operations, net of income taxes		-			(23,321)			-			78,289
Net gain (loss) from discontinued operations		-			(23,321)			-			78,289
Net Income (Loss)	$	(198,998)		$	(285,623)		$	1,043,214		$	893,627
Average Shares Outstanding		8,081,266			8,081,266			8,081,266			8,081,266
Operating Income from continuing operations per Share	$	(0.02)		$	(0.06)		$	0.14		$	0.19
Net Income per Share	$	(0.02)		$	(0.04)		$	0.13		$	0.11

CONSOLIDATED BALANCE SHEETS
		March 31,			March 31,
		2024			2023
					(restated)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,949,323		$	1,994,763
Equity securities		2,837,506			4,109,381
Restricted cash		573,841			554,525
Accounts receivable		7,492,812			7,766,243
Current portion of notes receivable		548,552			125,297
Prepaid expenses		506,456			366,025
Total current assets		14,908,490			14,928,011
PROPERTY AND EQUIPMENT, net		829,680			642,180
OTHER ASSETS
Notes receivable, net due to the allowance		63,614			571,557
Restricted cash		1,523,812			2,050,737
Operating lease right-of-use assets		179,218			321,340
Total other assets		1,766,644			2,943,634
	$	17,504,814		$	18,502,048
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses		6,198,078			6,582,465
Current portion of notes payable		938,068			831,787
Current portion of finance lease liability		36,174			41,044
Current portion of operating lease liability		95,305			154,280
Liabilities related to discontinued operations		677			677
Total current liabilities		7,252,021			7,610,253
LONG-TERM LIABILITIES
Line of credit payable		675,000			600,000
Notes payable, net of current portion and debt issuance costs		2,359,132			2,908,521
Finance lease liability, net of current portion		103,200			142,602
Operating lease liability, net of current portion		78,982			155,987
Deferred taxes		313,000			190,000
Total long-term liabilities		3,529,314			3,997,110
Total liabilities		10,781,335			11,607,363
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares authorized,
8,081,266 shares issued and outstanding December 31, 2022
8,081,266 shares issued and outstanding December 31, 2023		1,025,341			1,025,341
Retained earnings		5,698,138			5,869,344
Total shareholders' equity		6,723,479			6,894,685
	$	17,504,814		$	18,502,048

Note – Operating EBITDA (excluding investment portfolio income)
	Twelve Months Ended
EBITDA Calculation	March 31,		March 31,
	2024		2023
Operating Income continuing operations	$ 1,099,267		$ 1,542,948
Add:
Depreciation/Amortization	289,257		251,443
EBITDA (Operating Income from Continuing Operations)	$ 1,388,524		$ 1,794,401

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/20240701846209/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 Marketing Alliance's financial results for the fourth quarter of fiscal 2024?

The Marketing Alliance reported revenues of $19.59 million, net income of $1.04 million or $0.13 per share, and operating income from continuing operations of $1.10 million.

What caused the increase in revenue for The Marketing Alliance in Q4 FY 2024?

The 9% increase in revenue to $19.59 million was primarily due to growth in the insurance distribution business.

How did The Marketing Alliance's construction revenue perform in fiscal 2024?

Construction revenue decreased significantly to $1.28 million from $2.02 million compared to the prior year.

What was The Marketing Alliance's net income from continuing operations in fiscal 2024?

Net income from continuing operations was $1.04 million or $0.13 per share, up from $0.82 million or $0.10 per share in the prior year.

What were the primary challenges faced by The Marketing Alliance in fiscal 2024?

Challenges included an adverse carrier mix, staffing cost overruns, and a decline in construction revenue.

What was the status of The Marketing Alliance's cash and cash equivalents at the end of fiscal 2024?

At the end of fiscal 2024, cash and cash equivalents were $2.9 million, up from $2.0 million at the end of the previous year.

How did The Marketing Alliance's investment gains change in fiscal 2024?

Investment gains improved to $493,334 from a loss of $304,488 in the previous fiscal year.