The Marketing Alliance Announces Financial Results for Its Fiscal 2018 Fourth Quarter and Year Ended March 31, 2018

FY 2018 Annual Financial Highlights (all comparisons to the prior year)

  • Revenues increased 17.6% to $31,228,916.
  • Operating income increased over 77% to $917,877, as compared to $516,592 for the prior year. The increase was mostly due to increases in gross revenues in the insurance distribution and construction businesses, which offset a decrease in the family entertainment business revenue.
  • Operating EBITDA (excluding investment portfolio income) was $1,691,704 compared to $1,484,142.
  • Net income was $1,450,272, or $0.18 per share, as compared to net income of $1,063,149, or $0.13 per share
  • In August 2017, the Company announced an 8:7 stock split that increased TMA’s shares outstanding from 7,028,233 to 8,032,266 shares outstanding after the stock split.
  • During the fiscal year, the Company’s Board of Directors authorized a $0.23 per share cash dividend for shareholders of record on December 29, 2017, paid on or about January 31, 2018. The dividend represented the fourteenth year of consecutive increased cash disbursements paid to TMA’s shareholders.

ST. LOUIS--()--The Marketing Alliance, Inc. (OTC: MAAL) (“TMA”), today announced financial results for its fiscal 2018 fourth quarter and year ended March 31, 2018.

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “We were pleased with our financial results for the fiscal year as the construction and insurance distribution businesses recorded notable increases in revenues. The addition of new carriers and adoption of new digital processes has helped to drive revenue growth for the insurance distribution business. We have received a positive response from our distributors with the addition of our newest carrier, Pacific Life, a relationship that was initiated in the prior fiscal year. The continued adoption of digital applications by our distributors has also contributed to the increase in revenue for our insurance business, as more producers began using our digital platform to submit applications. Revenues more than doubled in our construction business from the prior fiscal year, as TMA realigned its focus on new uses for the Company’s equipment. We began providing drainage for roadway projects as part of larger jobs managed by larger general contractors. This allowed TMA to undertake and complete several projects during the year in new areas of business, as opposed to being limited exclusively to agricultural projects prior to the planting season or after the harvest season, as was the case in prior years. Finally, in the family entertainment business, although we recorded a 4% increase in revenue for the three months ended March 31, 2018, we have undertaken steps to change the business to grow revenues at a higher rate. During the fiscal year, we assessed our pricing strategy at each of our Monkey Joe facilities in an effort to find the ideal balance of offering a superior family entertainment experience at a value to our customers, while capturing more revenues for our business. While we believe that during the previous quarter we started to see some of the benefits of our new pricing model, our expense level relative to sales was identified as needing further improvement, and the execution of that plan was expected to continue forward.”

Fiscal 2018 Fourth Quarter Financial Review

  • Total revenues for the three-month period ended March 31, 2018, were $8,555,984 as compared to $7,057,547 in the prior year quarter. This was due to increases in insurance commission and family entertainment revenue for the period which offset a decrease in construction revenue over the prior year period.
  • Net operating revenue (gross profit) for the quarter was $2,908,347 compared to net operating revenue of $3,033,667 in the prior-year fiscal period. The decrease in gross profit for the quarter was partially the result of increases in distributor bonuses and commissions paid, which exceeded a corresponding increase in revenue. A contributing factor of this change was related to the annuity business, where proposed changes due to the Department of Labor’s Fiduciary Rule caused many producers to cease selling annuities in expectation of the implementation of the Fiduciary Rule and certain related actions by insurance carriers attributed to the rule. The negative expense (credit) associated with business processing and distributor costs in the quarter relates to the revaluation of an annual accrued liability that occurs during the quarter, which is also the end of the fiscal year.
  • Operating expenses slightly increased to $2,238,227 or 26.2% of total revenues for the fiscal 2018 fourth quarter as compared to $2,194,979, or 31.1% of total revenues for the same period of the prior year. This increase is due in part to increases in compensation and rent and occupancy expenses.
  • Operating income decreased to $670,120, compared to operating income of $838,688 reported in the prior-year period. Operating income for the quarter decreased, in part, as a result of an increase in expenses and due to the timing of bonuses and commissions being paid, less annuity sales as mentioned above, and less construction revenue.
  • Operating EBITDA (excluding investment portfolio income) for the quarter was $871,138 compared to $1,044,148 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 fourth quarter ended March 31, 2018 was $144,096, as compared to $412,977, for the same quarter of the previous fiscal year.
  • Net income for the fiscal 2018 fourth quarter was $611,672, or $0.08 per share, as compared to a net income of $746,445, or $0.09 per share, in the prior year period. The decrease in net income was attributable to a decrease in income before provision for income taxes and less investment gain, net, as compared to the prior year, which was partially offset by an increase in total revenues for the period.

Fiscal 2018 Financial Review

  • Total revenues for the 2018 fiscal year increased 17.6% to $31,228,916, compared to $26,552,613, for the prior-year period. The increase was due to gains in insurance distribution and construction revenue for the period, which offset a decrease in the family entertainment business.
  • Net operating revenue (gross profit) was $9,774,020, which compares to net operating revenue of $9,239,376 in the prior-year fiscal period.
  • Operating expenses for the 2018 fiscal year was $8,856,143, a slight increase when compared to the same twelve-month period of the prior year.
  • The Company reported operating income of $917,877 for the year-ended March 31, 2018, compared to operating income of $516,592 for the prior-year period due to the factors discussed above.
  • Operating EBITDA (excluding investment revenue) for the fiscal 2018 year was $1,691,704 as compared to $1,484,142 for 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 twelve months ended March 31, 2018 was $839,471, as compared to $1,324,211, for the same period of the previous fiscal year.
  • Net income for the year ended March 31, 2018, was $1,450,272, or $0.18 per share, compared to a net income of $1,063,149, or $0.13 per share, for the prior-year period. The year over year increase was supported in part by an increase in total revenue, an increase in operating income, and recorded tax benefits.
  • The Tax Cuts and Jobs Act (“The Tax Act”) signed into law on December 22, 2017, changed many aspects of U.S. corporate income taxation and included the reduction of the corporate income tax rate from 35% to 21%, effective January 1, 2018. As a result of this change, the Company revalued its net deferred tax assets at December 31, 2017. For the fiscal year ended March 31, 2018, the Company anticipated a blended federal statutory tax of 30.75%. The Company recognized the tax effect of The Tax Act in the quarter ended December 31, 2017, and as a result, recorded $335,015 in tax benefits as it relates to the re-measurement of deferred tax assets and liabilities to the 21% tax rate.

Balance Sheet Information

  • TMA’s balance sheet at March 31, 2018 reflected cash and cash equivalents of approximately $3.4 million, working capital of $9.7 million, and shareholders’ equity of $10.4 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
 
Three-months ended   Twelve-months ended
March 31, March 31,
(Unaudited) (Unaudited)
2018   2017 2018   2017
 
Commission revenue $ 6,851,514 $ 5,406,606 $ 25,049,876 $ 20,559,833
Construction revenue 4,311 100,706 901,270 413,010
Family entertainment revenue 1,412,959 1,358,649 4,809,029 5,189,950
Other operating income   287,200     191,586     468,741     389,820  
Total revenues   8,555,984     7,057,547     31,228,916     26,552,613  
 
Distributor related expenses:
Distributor bonuses and commissions 5,290,777 3,647,899 18,337,855 14,216,912
Business processing and distributor costs (112,414 ) (15,577 ) 1,096,628 1,322,465
Depreciation   2,064     2,527     8,200     10,575  
Total   5,180,427     3,634,849     19,442,683     15,549,952  
 
Family entertainment costs of sales:   396,824     317,729     1,337,571     1,272,350  
 
Costs of construction:
Direct and indirect costs of construction 42,637 59,321 618,607 342,401
Depreciation   27,749     11,981     56,035     148,534  
Total   70,386     71,302     674,642     490,935  
 
Net operating revenue   2,908,347     3,033,667     9,774,020     9,239,376  
 
Operating Expenses   2,238,227     2,194,979     8,856,143     8,722,784  
 
Operating income   670,120     838,688     917,877     516,592  
 
Other income (expense):
Investment (loss) gain, net 144,096 412,977 839,471 1,324,211
Interest expense (78,260 ) (67,561 ) (282,773 ) (233,127 )
(Loss) Gain on disposal of assets - (577 ) (6,924 ) (13,100 )
Swap settlement (expense) income (295 ) (8,926 ) (13,207 ) (49,267 )
Interest rate swap, fair value adjustment   26,310     15,485     47,998     117,115  
 
Income (loss) before provision for income taxes 761,971 1,190,086 1,502,442 1,662,424
 
Provision for income taxes (benefit)   150,299     443,641     52,170     599,275  
 
Net income $ 611,672 $ 746,445 $ 1,450,272 $ 1,063,149
 
Average Shares Outstanding 8,032,266 8,032,266 8,032,266 8,032,266
 
Operating Income per Share $ 0.08 $ 0.10 $ 0.11 $ 0.06
Net Income per Share $ 0.08 $ 0.09 $ 0.18 $ 0.13
 
 

Consolidated Selected Balance Sheet Items

 
    As of
Assets 3/31/18   3/31/17
Cash & Equivalents $ 3,431,155 $ 4,538,393
Investments 8,627,202 7,719,319
Receivables 8,917,928 7,664,743
Other   889,233   1,230,189
Total Current Assets 21,865,518 21,152,644
 
Property and Equipment, Net 2,234,797 2,629,719
Intangible Assets, net 1,169,497 1,316,807
Other   871,738   807,273

Total Non Current Assets

  4,276,032   4,753,799
 
Total Assets $ 26,141,550 $ 25,906,443
 
Liabilities & Stockholders' Equity
Total Current Liabilities $ 12,154,086 $ 10,784,318
 
Long Term Liabilities  

3,593,254

 

4,330,766

 
Total Liabilities   15,747,340   15,115,084
 
Stockholders' Equity   10,394,210   10,791,359
 
Liabilities & Stockholders' Equity $ 26,141,550 $ 25,906,443
 

Note – Operating EBITDA (excluding investment portfolio income)

Q4FY2018 Operating EBITDA (excluding investment portfolio income) was determined by adding Q4FY 2018 Operating Income of $670,120 and Depreciation and Amortization Expense of $201,018 for a total of $871,138. Q4FY2017 Operating EBITDA (excluding investment portfolio income) was determined by adding Q4FY 2017 Operating Income of $838,688 and Depreciation and Amortization Expense of $205,460 for a total of $1,044,148. The Company elects not to include investment portfolio income because the Company believes it is non-operating in nature.

Fiscal 2018 year-end Operating EBITDA (excluding investment portfolio income) was determined by adding FY2018 year-end Operating Income of $917,877 and Depreciation and Amortization Expense of $773,827 for a sum of $1,691,704. FY2017 year-end Operating EBITDA (excluding investment portfolio income) was determined by adding Operating Income of $516,592 and Depreciation and Amortization Expense of $967,550 for a sum of $1,484,142. 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.

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
(314) 275-8713
tklusas@themarketingalliance.com
www.TheMarketingAlliance.com
or
The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com
or
Terry Downs, Senior Associate
(212) 836-9615
tdowns@equityny.com

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
(314) 275-8713
tklusas@themarketingalliance.com
www.TheMarketingAlliance.com
or
The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
aprior@equityny.com
or
Terry Downs, Senior Associate
(212) 836-9615
tdowns@equityny.com