ST. LOUIS--(BUSINESS WIRE)--The Marketing Alliance, Inc. (OTC: MAAL) (“TMA”), today announced financial results for its fiscal 2018 second quarter and six months ended September 30, 2017.
Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “We are pleased with this quarter’s results, as we continued to reinvest in our insurance business and made progress in our effort to support our distributors’ use of digital applications, which expands their agent base and provides convenience for agents and clients who prefer to do business that way. Our insurance distribution revenue increased by over $1.2 million compared to the prior year quarter, and we remained committed to helping our distributors build their businesses. We believe that our distributors’ success has been, in part, due to their ability to offer a wide variety of products from a diverse network of carriers. In the last year we introduced Pacific Life to our distributors and supported its adoption among our distributors, which contributed to the increase in revenues in this quarter and this fiscal year. Included in our diverse network and with the continued rapid advance of technology, TMA has worked with our agencies to utilize a multi-carrier digital platform for life insurance applications. This digital initiative provided a competitive offering for our distributors to help them appeal to more producers and advisers who value the convenience of a digital life insurance application process. Finally, with respect to annuity sales and as previously noted, the Department of Labor’s Fiduciary ruling continued to adversely affect our annuity business due to uncertainty about its final form.”
“For our construction business, we grew revenue by over $300,000 versus this quarter last year as we pursued projects outside of our traditional agricultural end market. The increase in revenue this quarter was due to the Company continuing to seek new ways to utilize our equipment, and in this case, we provided our expertise in trenching and drainage to roadway projects. Our intention was to gain additional exposure to new potential customers through these projects which could result in additional revenue opportunities, especially once we had attained at least a minimum level of experience by completing the initial projects.”
“In regard to our family entertainment business, during the quarter we continued to evaluate and assess our pricing strategy at our facilities. This adjustment has resulted in a decrease in revenue as we strive to find the ideal balance between customer value and price changes, in a way that captures more revenues for our business and meets the customers’ expectations. Our goal in the coming quarters remains centered around optimizing revenue over the long-term as we continue to evaluate costs and focus on growth at each of our centers.”
Fiscal 2018 Second Quarter Financial Review
- Total revenues for the three-month period ended September 30, 2017, were $7,688,047, as compared to $6,342,562 in the prior year quarter. The increase was attributable to significant increases in commission and construction revenue, offset by a decrease in family entertainment revenue.
- Net operating revenue (gross profit) for the quarter was $2,187,837 compared to net operating revenue of $1,918,772 in the prior-year fiscal period. This was largely due to increases in construction (increase of over $300,000) and commission revenue (increase of over $1.2 million) for the period which exceeded the increases in distributor related expenses (increase of approximately $970,000) and cost of construction (increase of approximately $125,000).
- Operating expenses decreased by $74,945 for the fiscal 2018 second quarter as compared to the prior year, due in part to decreases in office expenses.
- Operating income (loss) improved to ($30,771), compared to operating income (loss) of ($374,781) reported in the prior-year period. The increase in operating income for the fiscal 2018 second quarter was primarily attributable to increases in revenue and net operating revenue (gross profit), as well as a decrease in operating expenses.
- Operating EBITDA (excluding investment portfolio income) for the quarter was $163,649 compared to ($128,022) in the prior-year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.
- Investment gain, net (from investment portfolio) for the second quarter ended September 30, 2017 was $362,384, as compared to $316,853, for the same quarter of the previous fiscal year.
- Net income for the fiscal 2018 second quarter was $166,976, or $0.02 per share, as compared to a net loss of ($59,682), or ($0.01) per share, in the prior year period. The increase in net income was largely due to increases in total revenue, net operating revenue and operating income.
Fiscal 2018 Six Months Financial Review
- Total revenues for the six months ended September 30, 2017 were $15,117,246, compared to $12,710,700, for the prior-year period. Increases in commission (increase of approximately $2.38 million) and construction revenue (increase of approximately $360,000) helped to offset a slight decrease in family entertainment revenue for the six-month period.
- Net operating revenue (gross profit) was $4,398,486, which compares to net operating revenue of $4,053,235 in the prior-year fiscal period.
- Operating expenses decreased in the first six months of this fiscal year compared to the same period last year due, in part, to decreases in operating expenses such as compensation, office, amortization and depreciation expense.
- The Company reported an operating loss of ($38,531) for the six months ended September 30, 2017, compared to an operating loss of ($532,160) for the prior-year period due to the factors discussed above.
- Operating EBITDA (excluding investment revenue) for the six months was $348,059 versus $5,859 in the prior-year period. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.
- Net income for the six months ended September 30, 2017, was $233,874, or $0.03 per share, an increase of $274,558 compared to a net loss of ($40,684), or ($0.01) per share, for the prior-year period. The year over year increase was the result of an increase in total revenue and a reduction in general and administrative expenses which combined to produce increased operating profit (loss). The net loss for the six months ended September 30, 2016, was the result of an operating loss of ($532,160).
Balance Sheet Information
- TMA’s balance sheet at September 30, 2017 reflected cash and cash equivalents of approximately $5.1 million, working capital of $10.7 million, and shareholders’ equity of $11.0 million; compared to cash and cash equivalents of approximately $4.5 million, working capital of $10.4 million, and shareholders’ equity of $10.8 million, at March 31, 2017.
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 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 during fiscal 2018 and future periods 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 distribution of new life insurance products, the effects of ongoing uncertainty regarding the Department of Labor’s Fiduciary Rule in our annuity business, our ability to diversify our earth moving and excavating business and our ability to increase revenue and reduce costs 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; 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, 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|
|Quarter Ended||Year to Date|
|3 Months Ended||6 Months Ended|
|Family entertainment revenue||1,152,541||1,345,435||2,282,636||2,622,863|
|Other operating income||$||65,000||$||60,058||$||111,541||$||102,058|
|Distributor Related Expenses|
|Bonus & commissions||4,515,604||3,512,182||8,834,191||6,828,242|
|Processing & distribution||399,388||430,261||841,658||886,468|
|Cost of Construction|
|Direct and Indirect costs of construction||253,290||101,037||394,203||179,331|
|Family entertainment cost of sales||320,688||340,493||625,476||636,684|
|Net Operating Revenue||2,187,837||1,918,772||4,398,486||4,053,235|
|Other Income (Expense)|
|Investment gain, (loss) net||362,384||316,853||548,130||592,173|
|Interest rate swap, fair value adjustment||3,504||31,055||(1,619)||9,543|
|Swap settlement (expense) income||(3,644)||(13,547)||(9,752)||(28,319)|
|Loss on disposal of property and equipment||-||-||(6,924)||-|
|Income (Loss) Before Provision for Income Tax||265,076||(91,205)||357,144||(62,320)|
|Income tax (benefit) expense||98,100||(31,523)||123,270||(21,636)|
|Net Income (loss)||$||166,976||$||(59,682)||$||233,874||$||(40,684)|
|Average Shares Outstanding||8,032,266||8,032,266||8,032,266||8,032,266|
|Operating Income per Share||$||0.00||$||(0.05)||$||(0.01)||$||(0.07)|
|Net Income per Share||$||0.02||$||(0.01)||$||0.03||$||(0.01)|
|Note: * - Operating EPS and Net EPS stated after giving effect to 8:7 stock split for shareholders of record as of August 25, 2017 and paid September 15, 2017 for all periods. Shares outstanding increased to 8,032,266 from 7,028,233 with this stock split and have been retroactively adjusted to account for the split.|
|Consolidated Selected Balance Sheet Items|
|Cash & Equivalents||$||5,101,243||$||4,538,393|
|Total Current Assets||22,052,697||21,152,644|
|Property and Equipment, Net||2,412,538||2,629,719|
|Intangible Assets, net||1,229,858||1,316,807|
Total Non Current Assets
|Liabilities & Stockholders' Equity|
|Total Current Liabilities||$||11,316,959||$||10,784,318|
|Long Term Liabilities||
|Liabilities & Stockholders' Equity||$||26,426,414||$||25,906,443|
Note – Operating EBITDA (excluding investment portfolio income)
Fiscal year 2018 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2018 second quarter operating income (loss) of ($30,771) and depreciation and amortization expense of $194,420 for a sum of $163,649. Fiscal year 2017 second quarter operating income (loss) of ($374,781) and depreciation and amortization expense of $246,759 for a sum of ($128,022).
Fiscal year 2018 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2018 six month operating income (loss) of ($38,531) and depreciation and amortization expense of $386,590 for a sum of $348,059. Fiscal year 2017 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal year 2017 six month operating income (loss) of ($532,160) and depreciation and amortization expense of $538,019 for a sum of $5,859. 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.