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

Rhea-AI Summary

The Marketing Alliance, Inc. (OTC: MAAL) reported its fiscal 2023 second-quarter results ending September 30, 2022. Revenue decreased to $4.84 million, down from $5.75 million year-over-year, due to changes in insurance carrier mix. Operating income increased to $452,731 from $393,147, driven by a strong construction segment which saw revenues rise to $724,084. Net income fell to $199,015 or $0.02 per share, reduced from $459,245 or $0.06 per share in the prior year. The company also declared a $0.05 dividend amid economic challenges.

Positive

• Operating income from continuing operations increased to $452,731 from $393,147.
• Construction revenue grew significantly to $724,084 from $215,845.

Negative

• Total revenues decreased to $4,839,242 from $5,747,090.
• Net income dropped to $199,015 or $0.02 per share from $459,245 or $0.06 per share.
• Investment loss of $(33,756) recorded compared to a gain of $105,986 in the prior year.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221213005767/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 financial results for MAAL in the second quarter of 2023?

MAAL reported revenues of $4.84 million, down from $5.75 million in the prior year, with net income of $199,015 or $0.02 per share.

What factors contributed to MAAL's revenue decline in Q2 2023?

The decrease was primarily attributed to changes in the carrier and product mix in the insurance distribution business.

How did MAAL's construction business perform in the second quarter of 2023?

Construction revenue rose significantly to $724,084, compared to $215,845 in the prior year, reflecting increased activity.

What dividend did MAAL declare amidst economic challenges?

The company declared a dividend of $0.05 per share as a precaution against economic uncertainty.

What was MAAL's operating income for Q2 2023?

Operating income from continuing operations was $452,731, an increase from $393,147 in the prior year.