The Marketing Alliance Announces Financial Results for Quarter Ended December 31, 2022

Rhea-AI Summary

The Marketing Alliance, Inc. (OTC: MAAL) reported its fiscal 2023 third quarter results, ending December 31, 2022. Revenues decreased to $4,757,329 from $5,694,086 due to shifts in the insurance distribution sector, despite a notable increase in construction revenue to $1,091,018. Operating income from continuing operations fell to $849,467 from $1,121,784, largely impacted by the absence of a prior year employee retention tax credit of $657,099. Net income was $999,527 or $0.12 per share. The company declared a $.05 dividend while highlighting the resilience of its bottom line amidst challenging economic conditions.

Positive

• Construction revenue rose significantly to $1,091,018 from $349,101 year-over-year.
• Maintained net operating revenue (gross profit) at $1,711,262, an increase from $1,534,785.

Negative

• Overall revenues declined by $936,757 compared to the prior year.
• Operating income decreased to $849,467 from $1,121,784.

ST. LOUIS, Mo.--(BUSINESS WIRE)-- The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2023 third quarter ended December 31, 2022.

FY 2023 Third Quarter Financial Key Items (all comparisons to the prior year period)

• Operating income from continuing operations of $849,467 compared to $1,121,784 in the prior year period, reflecting an increased contribution in the quarter from the construction business and improved margins in the insurance business. The prior year period benefited from an employee retention tax credit of $657,099, which reduced payroll and compensation expense. The tax credit, which was part of the federal government’s coronavirus relief program, was not available in the current year quarter
• Revenues were $4,757,329 compared to $5,694,086, due in part to changes in carrier and product mix in the insurance distribution business and an increase in construction revenue
• Operating EBITDA (excluding investment income) declined to $914,611 from $1,046,153 in the prior year quarter, as the prior year quarter benefitted from the employee retention tax credit described above
• Net income from continuing operations was $999,527 or $0.12 per share compared to $1,078,508 or $0.13 per share

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “We have regularly noted that while changes in our product, agency and carrier mix have had the effect of reducing revenue, our bottom line has remained relatively consistent. Our commitment to digital and no-contact business solutions has helped to mitigate the changes in mix of business while continuing to add value for our agencies and their customers by bringing forward new solutions, services and products.”

Mr. Klusas added, “Our construction business results displayed another exceptional quarter as our team completed a substantial amount of work to finish a large highway project that commenced in the prior quarter. We were able to finish the first part of the project, and working in coordination with the general contractor were able to return and complete a significant portion of what was left late in 2022 against adverse weather and reduced daylight hours, and plan to finish the minor remaining work in 2023. In short, our construction business and its leadership continued to execute extraordinarily well.”

Mr. Klusas continued, “While our overall income from continuing operations and operating EBITDA (excluding non-operating investment income, net) declined year over year, we feel it is important to note that our operating results benefited from an employee retention tax credit last year (mentioned above). A difficult economic environment continued to factor 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 Third Quarter Financial Review

• Total revenues for the three-month period ended December 31, 2022, were $4,757,329, compared to $5,694,086 in the prior year quarter. The decrease was primarily due to a shift of the business and carrier mix in the insurance distribution business. Construction revenue increased to $1,091,018 compared to $349,101 in the third quarter of 2022, due to increased activity levels compared with the prior year period.

• Net operating revenue (gross profit) for the quarter was $1,711,262, compared to net operating revenue of $1,534,785 in the prior-year fiscal period, reflecting the combination of better margins in the insurance business along with an improvement in construction revenue.

• Operating expenses increased to $861,795 compared to $413,011 for the same period of the prior year during which compensation expense was reduced with the benefit of the employee retention credit.

• The Company reported operating income from continuing operations of $849,467, compared to operating income of $1,121,784 in the prior-year period, due to a combination of the factors noted above.

• Operating EBITDA (excluding investment portfolio income) declined to $914,611 from $1,046,153 in the prior year quarter. A note reconciling operating EBITDA to operating income can be found at the end of this release.

• Investment gain, net (from non-operating investment portfolio) for the quarter was $267,422, as compared to an investment loss, net (from non-operating investment portfolio) of $(13,697) for the same quarter of the previous fiscal year.

• Net income (loss) from continuing operations was $999,527 or $0.12 per share compared to $1,078,508 or $0.13 per share.

Balance Sheet Information

• TMA’s balance sheet on December 31, 2022, reflected cash and cash equivalents of $2.2 million; working capital of $7.3 million; and shareholders’ equity of 7.3 million; compared to cash and cash equivalents of $1.5 million, working capital of $7.7 million, and shareholders’ equity of $7.9 million as of December 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 in future periods, our ability to obtain industry acceptance and competitive advantages of digital and no-contact business solutions, 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 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, the ways that insurance carriers may react to the COVID-19 pandemic in their underwriting policies and procedures; privacy and cyber security regulations; 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 . 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						Nine Months Ended
			December 31,						December 31,
			2022			2021			2022			2021
Insurance commission and fee revenue		$	3,503,981		$	5,292,484		$	11,616,793		$	16,708,425
Construction revenue			1,091,018			349,101			2,020,763			1,055,093
Other insurance revenue			162,330			52,500			341,860			168,100
Total revenues			4,757,329			5,694,085			13,979,416			17,931,618
Insurance distributor related expenses:
Distributor bonuses and commissions			1,781,183			3,517,231			6,882,037			11,536,412
Business processing and distributor costs			463,140			465,079			1,388,185			1,466,578
Depreciation			2,976			3,800			9,785			11,373
			2,247,299			3,986,110			8,280,007			13,014,363
Costs of construction:
Direct and indirect costs of construction			751,086			127,572			1,326,690			518,556
Depreciation			47,682			45,618			143,046			133,218
			798,768			173,190			1,469,736			651,774
Total costs of revenues			3,046,067			4,159,300			9,749,743			13,666,137
Net operating revenue			1,711,262			1,534,785			4,229,673			4,265,481
Total general and administrative expenses			861,795			413,001			2,543,665			2,369,085
Operating income from continuing operations			849,467			1,121,784			1,686,008			1,896,396
Other income (expense):
Investment gain, net			267,422			(13,697)			(436,952)			313,435
Interest expense			(49,262)			(49,204)			(150,364)			(157,915)
Paycheck protection program forgiveness			0			92,241			0			465,766
Gain on sale of equipment			0			0			0			0
Income from continuing operations before provision			1,067,627			1,151,124			1,098,692			2,517,682
for income taxes
Income tax expense			68,100			72,616			251,100			433,031
Income from continuing operations			999,527			1,078,508			847,592			2,084,651
Discontinued operations:
Income from discontinued operations,
net of income taxes			1,216			0			84,092			110,332
Net income from discontinued operations			1,216			0			84,092			110,332
Net Income		$	1,000,743		$	1,078,508		$	931,684		$	2,194,983
Average Shares Outstanding			8,081,266			8,081,266			8,081,266			8,081,266
Operating Income from continuing operations per Share		$	0.11		$	0.14		$	0.21		$	0.23
Net Income per Share		$	0.12		$	0.13		$	0.12		$	0.27

CONSOLIDATED BALANCE SHEETS Unaudited
			December 31,			December 31,
			2022			2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	2,243,262		$	1,526,110
Equity securities			4,043,262			5,496,055
Restricted cash			550,091			531,746
Accounts receivable			8,954,945			10,561,051
Inventory			5,732			0
Current portion of notes receivable			127,158			142,042
Prepaid expenses			67,351			288,923
Assets related to discontinued operations			1,030			22,126
Total current assets			15,992,831			18,568,053
PROPERTY AND EQUIPMENT, net			697,278			947,726
OTHER ASSETS
Notes receivable, net due to the allowance			574,970			672,612
Restricted cash			2,087,189			2,913,401
Operating lease right-of-use assets			335,230			274,061
Total other assets			2,997,389			3,860,074
		$	19,687,498		$	23,375,853
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses			6,557,626			8,911,500
Dividends payable			404,963			0
Line of credit payable			700,000			325,000
Current portion of notes payable			825,135			797,619
Current portion of finance lease liability			49,870			72,108
Current portion of operating lease liability			131,851			111,529
Liabilities related to discontinued operations			677			636,681
Total current liabilities			8,670,122			10,854,437
LONG-TERM LIABILITIES
Notes payable, net of current portion and debt issuance costs			3,116,886			3,949,719
Finance lease liability, net of current portion			152,226			196,010
Operating lease liability, net of current portion			210,858			170,947
Deferred taxes			200,000			275,400
Total long-term liabilities			3,679,970			4,592,076
Total liabilities			12,350,092			15,446,513
SHAREHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares authorized,
8,081,266 shares issued and outstanding December 31, 2021
8,081,266 shares issued and outstanding December 31, 2022			1,025,341			1,025,341
Retained earnings			6,312,065			6,903,999
Total shareholders' equity			7,337,406			7,929,340
		$	19,687,498		$	23,375,853

Note – Operating EBITDA (excluding investment portfolio income)

				Three Months Ended						Nine Months Ended
EBITDA Calculation				December 31,						December 31,
				2022			2021			2022			2021
Operating Income from Continuing Operations			$	849,467		$	1,121,784		$	1,686,008		$	1,896,396
Add:
Depreciation/Amortization Expense			$	65,144		$	60,347		$	196,344		$	178,221
EBITDA (Excluding Investment Portfolio Income)			$	914,611		$	1,046,153		$	1,882,352		$	2,074,617

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/20230316005250/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 The Marketing Alliance (MAAL) in Q3 2023?

The Marketing Alliance reported revenues of $4,757,329 and net income of $999,527, or $0.12 per share.

How did the absence of the employee retention tax credit affect MAAL's Q3 financials?

The absence of the employee retention tax credit of $657,099 impacted operating income and overall revenue.

What is the current dividend declared by The Marketing Alliance (MAAL)?

The company declared a dividend of $0.05 per share.

How much did construction revenue increase for The Marketing Alliance in Q3 2023?

Construction revenue increased to $1,091,018 from $349,101 in the prior year.