ST. LOUIS--(BUSINESS WIRE)--The Marketing Alliance, Inc. (OTC:MAAL) (“TMA”), today announced financial results for its fiscal 2016 fourth quarter and year ended March 31, 2016.
Mr. Timothy M. Klusas, TMA’s Chief Executive Officer, stated, “We were pleased with increases in operating income and EBITDA during the fourth quarter given our challenges during the year. Although we did not meet the levels of operating income or EBITDA in the prior fiscal year, we were able to bring our performance closer in line to the previous year than where we were after the December quarter. We were pleased to be able to finish the year on a favorable comparison to the prior year period considering the adverse operating environment in the earth moving business, because of its high dependence on agriculture, and the increase in operating expenses we incurred connected with the acquisition and integration of four new family entertainment centers in the Charlotte metropolitan area earlier in the year and costs in this fiscal year associated with opening one new center in the St. Louis area after the fiscal year end.
Insurance Distribution business: “We were pleased overall with our performance in the insurance business this year given the challenges and volatility in the industry, which was a combination of low interest rates causing strain on insurance carriers, which reduces the number of products offered and the features on the existing products remaining, historically prominent carriers such as Genworth discontinuing life and annuity sales altogether, and the public announcement of the Department of Labor fiduciary standard regulations that have added uncertainty that we expect to continue until the effects of the new rules become more clear. While we were able to help our distributors adjust to most of the turbulence in the life and annuity business, one of the biggest detractors to our performance was declining sales in long-term care insurance. We initiated new carrier relationships with John Hancock Life Insurance Company and One America. As previously mentioned, Genworth was one of our largest carrier relationships and we anticipated the cessation of new life insurance policies and annuities by Genworth would impact our new insurance sales as our distributors adjust their sales efforts and become acclimated with new carriers and life insurance product offerings. In addition, in an effort to drive growth with these newer carriers, we typically experience an increase in expenses as we familiarize our agents with new products in hope of driving future sales. We are focused on offering our customers a wide variety of products from a diverse network of carriers and believe that in doing so our distributors are better able to adapt to changes in carriers and product mix to remain competitive in this environment. Finally, the ruling from the Department of Labor, which was generally intended to protect investors by requiring all who provide retirement investment advice to retirement plans and IRAs to abide by a “fiduciary” standard, adds uncertainty to our insurance distribution business. Our distributors, and agents generally, await further clarification on the direct and indirect impacts the new rule may have to their practices, particularly how life insurance carriers, product development, and other agent selling relationships, such as broker-dealers, will react to comply with the ruling. In addition, various industry groups have formally challenged the ruling in court, which further adds uncertainty to the ruling’s final form and ultimate time to implementation.
Earth Moving (Land Improvement) business: “General industry weakness caused by low crop and energy prices has caused projects to be reduced, eliminated, or deferred. Farmers have been reluctant to undertake projects with paybacks in the future and larger companies whose products are energy substitutes have deferred projects, as energy prices remain low. These factors contributed to a decrease in the use of our services and therefore resulted in a decline in construction revenue for the Company for both the quarter and year. The Company continued to adapt to the lower crop prices by exploring ways to drive business and utilize the Company’s resources with commercial construction customers. While we have many projects agreed upon and booked, these have been not been given the final approval to proceed or scheduled into the fall. We have been disciplined about our costs, and are committed to pursuing revenue opportunities that best suit the business for long-term success.
Family Entertainment business: “Since January 2015, we have completed the addition of seven Monkey Joe franchised locations, which includes four during the fiscal 2016 year, and another opened in April 2016, after the fiscal year end. During the last fiscal year we reinvested in this business with improvements at these facilities, and as we continue to integrate these locations into our operations we aspire to achieve economies of scale leveraging our existing management across several locations. Although we opened our ninth location in April after the end of the 2016 fiscal year, we realized non-recurring expenses for this location in this fiscal year.”
Fiscal 2016 Fourth Quarter Financial Review
- Total revenues for the three-month period ended March 31, 2016, were $7,325,504, as compared to $7,054,087 in the prior year quarter. The increase in total revenue was attributable to a $572,186 increase in family entertainment revenue over the prior year quarter, which offset decreases in commission revenue and construction revenue for the three-month period.
- Net operating revenue (gross profit) for the quarter was $2,980,318 compared to net operating revenue of $2,331,093 in the prior-year fiscal period. The increase in net operating revenues for the quarter was due to the addition of four family entertainment franchises owned by the Company when compared to the prior year period, an increase in insurance net operating revenue, and offset by a decline in the earth moving business.
- Operating income was $879,297, compared to an operating income of $552,690 reported in the prior-year period, due to the increase in net operating revenue being greater than the increase in operating expenses.
- Operating EBITDA (excluding investment portfolio income) for the quarter was $1,157,946, as compared to $746,685 in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release. Operating EBITDA was affected by increased revenue and increased operating profit mentioned above, and increases in depreciation and amortization expenses.
- Net income for the fiscal 2016 fourth quarter was $587,099, or $0.08 per share, as compared to a net income of $283,733, or $0.04 per share for the prior year period. Net Income was positively impacted by an Investment gain of $149,219 for the quarter as compared to an investment gain of $32,550 for the prior year period.
Fiscal 2016 Financial Review
- Total revenues for the year ended March 31, 2016 increased to $28,614,449, as compared to $27,239,640 in revenues for the prior-year period. Revenues in the Family Entertainment business increased while revenue decreased in the Earth Moving business and in the Insurance Distribution business.
- Net operating revenue (gross profit) was $8,816,102, which compares to a net operating revenue of $7,782,691 in the prior-year fiscal period.
- Operating income for the 2016 fiscal year was $1,006,593 compared to $1,818,811 for the prior-year period. The decrease in operating income for twelve-month period was largely due to an increase in operating expenses associated with the addition of four new stores. Roughly two-thirds of the increase in operating expenses was due to increases in compensation expense and rent expense from four new locations. The increase in operating expenses also included non-recurring costs associated with the acquisition and integration of these stores, as well as increased depreciation and amortization expenses.
- Operating EBITDA (excluding investment portfolio income) for the year ended March 31, 2016 was $1,923,192 versus $2,488,729 in the prior-year period. The decrease in Operating EBITDA for the fiscal year ended March 31, 2016 was the result of a decrease in operating income, compared to the prior year, as previously mentioned. 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, 2016 decreased to $312,542, or $0.04 per share, compared to $1,037,229, or $0.15 per share, in the prior-year period. Net Income was adversely affected by an investment loss of $300,078 as compared to an investment loss of $104,481 for the prior year period, as well as increased interest expenses. Net income was also impacted by a decrease in construction revenue and rise in operating expenses as compared to the twelve-month period ended March 31, 2015.
Balance Sheet Information
- TMA’s balance sheet at March 31, 2016 reflected cash and cash equivalents of approximately $5.5 million, working capital of $10.5 million, and shareholders’ equity of $11.4 million; compared to $5.7 million, $10.2 million, and $12.6 million, respectively, at March 31, 2015.
About The Marketing Alliance, Inc.
Headquartered in St. Louis, MO, TMA operates three businesses. TMA provides support to independent insurance brokerage agencies, with a goal of providing members value-added services on a more efficient basis than they can achieve individually. The Company also owns an earth moving and excavating business and nine children’s play and party facilities. 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 Statements
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 during fiscal 2017 and the production of favorable returns to shareholders, the effects of new Department of Labor regulations, our ability to obtain new carriers and more economical and faster ways for carrier products to be distributed, our ability to diversify our earth moving and excavating business and increases in revenue from our family entertainment 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; future regulatory actions and conditions in the states in which we conduct our business; pricing and other payment decisions and policies of the carriers in our insurance distribution business, 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 Statement of Operations | ||||||||||||
| 3 Months Ended | 12 Months Ended | |||||||||||
| 3/31/16 | 3/31/15 | 3/31/2016 | 3/31/2015 | |||||||||
| Commission revenue | $ 5,807,217 | $ 6,068,999 | $ 23,242,027 | $ 23,566,230 | ||||||||
| Construction revenue | 93,311 | 132,298 | 1,250,509 | 1,728,736 | ||||||||
| Family entertainment revenue | $ 1,424,976 | $ 852,790 | $ 4,121,913 | $ 1,944,674 | ||||||||
| Revenues | 7,325,504 | 7,054,087 | 28,614,449 | 27,239,640 | ||||||||
| Distributor Related Expenses | ||||||||||||
| Bonus & commissions | 3,437,885 | 3,725,038 | 15,862,934 | 15,824,905 | ||||||||
| Processing & distribution | 296,317 | 499,642 | 1,493,112 | 1,846,574 | ||||||||
| Depreciation | 2,887 | 2,704 | 11,085 | 10,818 | ||||||||
| Total | 3,737,089 | 4,227,384 | 17,367,131 | 17,682,297 | ||||||||
| Cost of Construction | ||||||||||||
| Direct and Indirect costs of construction | 119,737 | 116,666 | 913,457 | 913,280 | ||||||||
| Depreciation | 84,297 | 87,152 | 346,978 | 342,261 | ||||||||
| Total | 204,034 | 203,818 | 1,260,435 | 1,255,541 | ||||||||
| Family entertainment cost of sales | 404,063 | 291,792 | 1,170,781 | 519,111 | ||||||||
| Net Operating Revenue | 2,980,318 | 2,331,093 | 8,816,102 | 7,782,691 | ||||||||
| Operating Expenses | 2,101,021 | 1,778,403 | 7,809,509 | 5,963,880 | ||||||||
| Operating Income | 879,297 | 552,690 | 1,006,593 | 1,818,811 | ||||||||
| Other Income (Expense) | ||||||||||||
| Investment gain, (loss) net | 149,219 | 32,550 | (300,078) | (104,481) | ||||||||
| Interest rate swap, fair value adjustment | (71,569) | (1,530) | (97,177) | 4,990 | ||||||||
| Gain (Loss) on disposal | - | 6,937 | 23,537 | 15,478 | ||||||||
| Interest expense | (66,060) | (29,869) | (204,983) | (115,344) | ||||||||
| Other income | - | - | 20,000 | - | ||||||||
| Income Before Provision for Income Tax | 890,887 | 560,778 | 447,892 | 1,619,454 | ||||||||
| Provision for income taxes | 303,788 | 277,045 | 135,350 | 582,225 | ||||||||
| Net Income | $ 587,099 | $ 283,733 | $ 312,542 | $ 1,037,229 | ||||||||
| Average Shares Outstanding | 7,028,233 | 7,028,233 | 7,028,233 | 7,028,233 | ||||||||
| Operating Income per Share | $ 0.13 | $ 0.08 | $ 0.14 | $ 0.26 | ||||||||
| Net Income per Share | $ 0.08 | $ 0.04 | $ 0.04 | $ 0.15 | ||||||||
Note: * - Operating EPS and Net EPS stated after giving effect to 7:6 stock split for shareholders of record as of August 21, 2015 and paid September 25, 2015 for all periods. Shares outstanding increased to 7,028,233 from 6,024,200 with this stock split and have been retroactively adjusted to account for the split.
| Consolidated Selected Balance Sheet Items | |||||||||||||||
| As of | |||||||||||||||
| Assets | 3/31/16 | 3/31/15 | |||||||||||||
| Cash & Equivalents | $ | 5,535,256 | $ | 5,678,445 | |||||||||||
| Investments | 5,802,222 | 5,406,399 | |||||||||||||
| Receivables | 8,387,938 | 8,250,089 | |||||||||||||
| Other | 1,325,135 | 1,532,021 | |||||||||||||
| Total Current Assets | 21,050,551 | 20,866,954 | |||||||||||||
| Property and Equipment, Net | 3,088,588 | 1,837,916 | |||||||||||||
| Intangible Assets, net | 1,502,004 | 991,006 | |||||||||||||
| Other | 978,783 | 760,851 | |||||||||||||
|
Total Non Current Assets |
5,569,375 | 3,589,773 | |||||||||||||
| Total Assets | $ | 26,619,926 | $ | 24,456,727 | |||||||||||
| Liabilities & Stockholders' Equity | |||||||||||||||
| Total Current Liabilities | $ | 10,561,554 | $ | 10,714,388 | |||||||||||
| Long Term Liabilities |
4,643,386 |
1,163,966 |
|||||||||||||
| Total Liabilities | 15,204,940 | 11,878,354 | |||||||||||||
| Stockholders' Equity | 11,414,986 | 12,578,373 | |||||||||||||
| Liabilities & Stockholders' Equity | $ | 26,619,926 | $ | 24,456,727 | |||||||||||
Note – Operating EBITDA (excluding investment portfolio income)
Q4FY2016 Operating EBITDA (excluding investment portfolio income) was determined by adding Q4FY 2016 Operating Income of $879,297 and Depreciation and Amortization Expense of $278,649 for a total of $1,157,946. Q4FY2015 Operating EBITDA (excluding investment portfolio income) was determined by adding Q4FY 2015 Operating Income of $552,690 and Depreciation and Amortization Expense of $193,995 for a total of $746,685. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.
Fiscal 2016 year-end Operating EBITDA (excluding investment portfolio income) was determined by adding FY2016 year-end Operating Income of $1,006,593 and Depreciation and Amortization Expense of $916,599 for a sum of $1,923,192. Fiscal 2015 year-end Operating EBITDA (excluding investment portfolio income) was determined by adding FY2015 year-end Operating Income of $1,818,811 and Depreciation and Amortization Expense of $669,918 for a sum of $2,488,729. 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.
