The Marketing Alliance Announces Financial Results for Its Fiscal 2020 Third Quarter Ended December 31, 2019

ST. LOUIS--()--The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2020 third quarter and nine months ended December 31, 2019.

FY 2020 Third Quarter Financial Highlights (all comparisons to the prior year period)

  • Revenues remained largely steady at $8,553,065, with higher commission and fee revenue in the insurance distribution business and higher construction revenue offset by lower family entertainment revenue
  • Operating income improved to $351,962 compared to operating income of $209,747 in the prior year quarter, largely due to lower operating expenses during the quarter versus the prior year
  • Operating EBITDA (excluding investment portfolio income and impairment charges) was $484,047, compared to $388,991 in the prior year quarter
  • Net income was $156,933, or $0.02 per share, as compared to a net loss of ($804,449), or ($0.10) per share in the prior year period, reflecting an increase in operating profit in this period and non-operating investment loss, net, of ($52,301) compared to a loss of ($1,190,132) in the prior year

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “We reported commission income growth from our insurance distribution business, where we continued to see a steady flow of revenues though our long-time agency partners. There is a continuing trend of our agency network utilizing digital applications and platforms to enhance their customer facing capabilities, and we are helping to maximize those applications through a seamless integration of back office support and capabilities. We expect to see this adoption accelerate in the coming months and feel that the Company is well positioned to take advantage of these insurance technology initiatives on behalf of our agency network and carrier partners. The Company also had solid revenue growth in our construction business, as we continued to find additional applications of our trenching work in larger highway and roadwork jobs. Finally, during the quarter we divested the assets of two entertainment facilities, which brings our total down to six. We are continuing to evaluate the business and will make appropriate capital allocation decisions as current leases expire.”

Mr. Klusas continued, “Operating income increased compared to last year as we have continued to streamline our operating expenses by improving efficiencies throughout the business. We will continue to look for opportunities for cost savings and implement cost reduction programs where appropriate.”

Fiscal 2020 Third Quarter Financial Review

  • Total revenues for the three-month period ended December 31, 2019, were $8,553,065 as compared to $8,595,839 in the prior year quarter. This was due mostly to increases in insurance commission and construction revenue which offset a decrease in family entertainment revenue relative to the prior year period, reflecting the reduction of stores from eight to six during the quarter.
  • Net operating revenue (gross profit) for the quarter was $2,120,678 compared to net operating revenue of $2,350,788 in the prior-year fiscal period.
  • Operating expenses decreased to $1,768,716, or 20.7% of total revenues for the fiscal 2020 third quarter, as compared to $2,141,041, or 24.9% of total revenues for the same period of the prior year. Operating expenses decreased as a percentage of total revenues, mainly due to lower compensation, rent, depreciation and amortization expense, and professional fees in the quarter compared to the prior year quarter.
  • The Company reported operating income of $351,962, a 68% increase compared to operating income of $209,747 in the prior-year period. This increase in operating income was mostly the result of lower operating expense during the quarter versus the prior year period, as previously mentioned.
  • Operating EBITDA (excluding investment portfolio income) for the quarter was $484,047, compared to $388,991 in the prior year period. 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 ($52,301), as compared to ($1,190,132) for the same quarter of the previous fiscal year.
  • Net income for the fiscal 2020 third quarter was $156,933, or $0.02 per share, as compared to net loss of ($804,449), or ($0.10) per share in the prior year period. The increase in net income was primarily due to higher operating profit and a decreased investment loss when compared to the prior year period.

Fiscal 2020 Nine Months Financial Review

  • Total revenues for the nine months ended December 31, 2019 were $26,184,492, compared to $24,604,929, for the prior-year period. Increases in insurance distribution revenues of approximately $1.9 million and an increase in construction revenue helped to offset a decrease in family entertainment revenue for the nine-month period.
  • Net operating revenue gross profit was $6,409,505, which compares to net operating revenue of $6,747,040 in the prior-year fiscal period.
  • Operating expenses decreased in the first nine months of this fiscal year by approximately $1.0 million compared to the same period last year driven by lower expenses across the business, including compensation, rent expense and other general and administrative expenses
  • The Company reported operating income of $679,302 for the nine months ended December 31, 2019, compared to an operating loss of ($12,740) for the prior-year period due to the factors discussed above.
  • Operating EBITDA (excluding investment revenue) for the nine months was $1,086,772 versus $540,238 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 nine months ended December 31, 2019, was $555,836, or $0.07 per share, compared to a net loss of ($681,090), or ($0.08) per share, for the prior-year nine-month period. The year over year increase was the result of higher operating income and higher investment gain compared to the prior year period.

Balance Sheet Information

  • TMA’s balance sheet at December 31, 2019 reflected cash and cash equivalents of approximately $2.6 million, working capital of $7.7 million, and shareholders’ equity of $9.1 million; compared to cash and cash equivalents of approximately $3.6 million, working capital of $9.4 million, and shareholders’ equity of $10.1 million, at March 31, 2019.

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 (construction) business and six 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 in 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 and our ability to continue to diversify our earth moving and excavating 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, 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 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

Three and Nine Months Ended December 31, 2019 and 2018

Unaudited

 
Three Months Ended Nine Months Ended
December 31, December 31,

2019

 

2018

 

2019

 

2018

 
Commission and fee revenue

$ 7,279,352

$ 7,079,895

$ 22,108,864

$ 20,175,839

Family entertainment revenue

734,714

997,678

2,504,408

3,214,729

Construction revenue

455,929

414,982

1,435,550

1,029,690

Other operating income

83,070

103,284

135,670

184,721

Total revenues

8,553,065

8,595,839

26,184,492

24,604,979

 
Distributor related expenses:
Distributor bonuses and commissions

5,511,359

5,235,678

16,773,453

14,867,778

Business processing and distributor costs

430,217

435,946

1,206,431

1,220,921

Depreciation

1,350

4,200

4,050

6,300

5,942,926

5,675,824

17,983,934

16,094,999

Costs of construction:
Direct and indirect costs of construction

273,573

265,280

1,066,570

763,345

Depreciation

15,600

16,500

46,800

49,500

289,173

281,780

1,113,370

812,845

 
Family entertainment costs of sales

200,288

287,447

677,683

950,095

 
Total costs of revenues

6,432,387

6,245,051

19,774,987

17,857,939

 
Net operating revenue

2,120,678

2,350,788

6,409,505

6,747,040

 
Operating expenses

1,768,716

2,141,041

5,730,203

6,759,780

 
Operating income (loss)

351,962

209,747

679,302

(12,740)

 
Other income (expense):
Investment gain (loss), net

(52,301)

(1,190,132)

330,877

(904,381)

Interest expense

(83,739)

(90,853)

(257,967)

(266,782)

Interest rate swap, fair value adjustment income (loss)

2,821

(27,709)

(30,166)

(15,308)

Swap settlement income (expense)

1,130

3,184

10,230

8,969

Gain (loss) on disposal of property and equipment

(12,040)

8,500

(12,040)

256,638

 
Income (loss) before provision for income taxes

207,833

(1,087,263)

720,236

(933,604)

 
Income tax expense (benefit)

50,900

(282,814)

164,400

(252,514)

 
Net income (loss)

$ 156,933

$ (804,449)

$ 555,836

$ (681,090)

 
Average Shares Outstanding

8,032,266

8,032,266

8,032,266

8,032,266

 
Operating Income per Share

$ 0.04

$ 0.03

$ 0.08

$ (0.00)

Net Income per Share

$ 0.02

$ (0.10)

$ 0.07

$ (0.08)

 

CONSOLIDATED BALANCE SHEETS

As of December 31, 2019 and March 31, 2019

Unaudited

 
December 31, 2019 March 31, 2019
ASSETS
 
Cash and cash equivalents

$ 2,622,475

$ 3,636,824

Investments

8,259,110

8,566,183

Receivables

11,158,615

11,086,215

Other

555,515

703,442

Total Current Assets

22,595,715

23,992,664

 
Property and Equipment, net

1,423,643

1,765,521

Intangible Assets, net

97,034

125,137

Operating lease right-of-use assets

3,171,322

-

Other

1,328,296

1,465,895

Total Non Current Assets

6,020,295

3,356,553

 
Total Assets

$ 28,616,010

$ 27,349,217

 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Current Liabilities

14,873,728

14,570,833

 
Long Term Liabilities

4,610,874

2,676,682

 
Total Liabilities

19,484,602

17,247,515

 
Shareholders' Equity

9,131,408

10,101,702

 
Total Liabilities and Shareholders' Equity

$ 28,616,010

$ 27,349,217

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2020 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 third quarter operating income of $351,962 and depreciation and amortization expense of $132,085 for a total of $484,047. Fiscal 2019 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2019 third quarter operating income of $209,747 and depreciation and amortization expense of $179,244 for a total of $388,991.

Fiscal 2020 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating income of $679,302 and depreciation and amortization expense of $407,470 for a total of $1,086,772. Fiscal 2019 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating loss of ($12,740) and depreciation and amortization expense of $552,978 for a total of $540,238.

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

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