The Marketing Alliance Announces Financial Results for its Fiscal 2021 Fourth Quarter and Year Ended March 31, 2021

ST. LOUIS, June 28, 2021–(BUSINESS WIRE)–The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2021 fourth quarter and year ended March 31, 2021.

FY 2021 Fourth Quarter Financial Highlights (all comparisons to the prior year period)

  • Revenues were $6,863,682 compared to $9,387,273 in the previous year period, the decline largely due to a challenging operating environment and an annual deferred first-year commission reconciliation in the quarter

  • Operating loss of $(86,590) compared to $542,341 in the prior year period, due in part to the timing of the annual deferred first-year commission reconciliation in the quarter

  • Net income from continuing operations was $180,579, or $0.02 per share, as compared to net loss of $(1,017,011), or $(0.13) per share, in the prior year period

FY 2021 Annual Financial Highlights (all comparisons to the prior year)

  • Revenues were $30,669,454, representing a decline of over 7% due primarily to the impact of the COVID-19 pandemic in all operations despite a 22% increase in Construction revenue

  • Operating income of $1,847,718 compared to $2,241,417

  • Operating EBITDA (excluding investment portfolio income) was $2,045,878 compared to $2,343,436

  • Net income from continuing operations was $2,660,160 or $0.33 per share, as compared to net income from continuing operations of $329,989, or $0.04 per share, in the prior year

  • Due to the effects of the pandemic, the Company has elected to exit the family entertainment business during the year, resulting in net loss from discontinued operations of $(1,204,366) for the year

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Despite relatively consistent results in previous quarters and through most of the year, this quarter the insurance business reflected the difficulties brought by pandemic conditions as our pipeline of new cases during this time was not as robust as previous years. Despite the growth of processes we adopted to minimize in-person contact for our agents and distributors on a sizeable share of cases, the challenges of agents being able to reach new clients or obtain medical records, COVID-underwriting restrictions by carriers, or even having proposed insureds complete medical exams, hindered our results. The difficulties of operating in this environment were evident in our deferred first-year commission reconciliation, which had the net effect of reducing gross profit by approximately $685,000 this fiscal year versus a reduction of $107,000 in the previous fiscal year, during the first few months at the onset of the pandemic. The deferred first year commission reconciliation is the net effect of the change in the estimated net commissions expected to be received in the next twelve months compared to the previous twelve months, and as such reflects the challenges of replenishing our pipeline last year as well a carrier adversely changing their distribution strategy. While our insurance operations experienced headwinds, our construction business was able to grow revenues by almost 22% and expanded gross profit margin while continuing to move the business into projects and markets that better utilize our technology and expertise.”

Mr. Klusas added, “We are encouraged by numerous insurance carriers recently reducing or even eliminating self-imposed COVID-restrictions that excluded persons with various conditions from obtaining new life insurance policies. We believe the tools that allowed our agencies to conduct business digitally will remain post-pandemic, as well as the new level of growth and activity we have seen in our call center assisting clients in completing applications. As conditions improve, our call center stands to assist agencies growth accordingly.”

Mr. Klusas concluded, “During the fiscal year just ended the Company announced its election to exit the family entertainment business due to the impossible circumstances presented to operate such a business during and after a pandemic. We have classified the family entertainment business as a discontinued operation and have included our after-tax financial performance, including realized one-time charges and our estimate of any further costs, associated with this exit.”

Fiscal 2021 Fourth Quarter Financial Review

  • Total revenues for the three-month period ended March 31, 2021, were $6,863,682, as compared to $9,387,273 in the prior year quarter. This decrease was due mostly to the aforementioned impact of the operating conditions associated with the COVID-19 pandemic on insurance operations. In addition, other insurance revenue was down this year as many in-person meetings were postponed. Construction revenue was down compared to the prior year period due to this year’s winter weather postponing ideal early starts to projects, unlike last year.

  • Net operating revenue (gross profit) for the quarter was $725,791, compared to net operating revenue of $1,567,338 in the prior-year fiscal period due in part to the gross profit reduction of approximately $320,000 in this quarter due to the deferred first year commission reconciliation.

  • Operating expenses decreased to $812,381 as compared to $1,024,997 for the same period of the prior year. The percentage reduction in operating expenses was consistent with the change in revenue.

  • The Company reported an operating loss from continuing operations of $(86,590), compared to operating income of $542,341 in the prior-year period, due to the effects discussed above.

  • Operating EBITDA (excluding investment portfolio income) was $(68,509), compared to $569,303 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 $310,410, as compared to a loss of $(2,045,335) for the same quarter of the previous fiscal year.

  • Net income from continuing operations for the fiscal 2021 fourth quarter was $180,579, or $0.02 per share, as compared to net loss of $(1,017,011), or $(0.13) per share, in the prior year period. The increase was largely due to the increase in Investment gain, net.

Fiscal 2021 Year End Financial Review

  • Total revenues for the twelve months ended March 31, 2021 were $30,669,454, compared to $33,067,357 in the prior year. An increase in construction revenue was not able to offset a decrease in insurance commission revenue, which declined in part due to the impacts of the COVID-19 pandemic.

  • Net operating revenue (gross profit) was $5,304,496 compared to net operating revenue of $6,150,118 in the prior-year fiscal period. The decline in net operating revenue was primarily due to the decline in insurance commission and fee revenues, of which the net impact of deferred first year commissions reconciliations for the year was approximately $685,000.

  • Operating expenses during fiscal 2021 were $3,456,778, or 11.3% of revenues, compared to $3,908,701, or 11.8% of total revenues, for the prior year. The decrease in operating expenses was driven by reduced compensation, office expense and travel/entertainment expenses.

  • The Company reported operating income of $1,847,718 for the twelve months ended March 31, 2021, compared to operating income of $2,241,417 for the prior-year period due to factors discussed above.

  • Operating EBITDA (excluding investment revenue) for the twelve months was $2,045,878 versus $2,343,436 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 year ended March 31, 2021, was $1,455,794, or $0.18 per share, compared to a net loss of $(1,276,453), or $(0.16) per share, for the prior year. The increase was primarily attributed to an investment gain, net, of $1,723,243 compared to an investment loss of $(1,714,458) in the prior year.

Balance Sheet Information

  • TMA’s balance sheet at March 31, 2021, reflected cash and cash equivalents of $1,142,039 (excluding Restricted Cash of $3,685,000), working capital of $7,865,150, and shareholders’ equity of $7,309,105; compared to cash and cash equivalents of $2,115,934, working capital of $10,142,438, and shareholders’ equity of $7,299,119 as of March 31, 2020.

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 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 relative permanence of insurance sales responses to the COVID-19 pandemic, the distribution of new life insurance products, the effects of ongoing uncertainty regarding our annuity business, our ability to exit the family entertainment business in accordance with our estimated costs 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, the effect of the COVID-19 pandemic and the reduction or elimination by carriers of pandemic-based restrictions on our business, financial condition and results of operations, as well as the pandemic’s effect of heightening other risks within our business, 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 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, 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 Twelve Months Ended March 31, 2021 and March 31, 2020

Unaudited

Three Months Ended

Twelve Months Ended

March 31,

March 31,

2021

2020

2021

2020

Insurance commission and fee revenue

$

6,736,172

$

8,915,565

$

28,453,835

$

31,024,429

Construction revenue

1,430

150,608

1,929,039

1,586,158

Other insurance revenue

126,080

321,100

286,580

456,770

Total revenues

6,863,682

9,387,273

30,669,454

33,067,357

Insurance distributor related expenses:

Distributor bonuses and commissions

5,492,828

7,172,649

22,041,344

23,946,102

Business processing and distributor costs

520,864

439,543

1,914,697

1,645,974

Depreciation

4,400

4,850

24,200

8,900

6,018,092

7,617,042

23,980,241

25,600,976

Costs of construction:

Direct and indirect costs of construction

74,153

197,307

1,240,439

1,263,877

Depreciation

45,646

5,586

144,278

52,386

119,799

202,893

1,384,717

1,316,263

Total costs of revenues

6,137,891

7,819,935

25,364,958

26,917,239

Net operating revenue

725,791

1,567,338

5,304,496

6,150,118

Operating expenses

812,381

1,024,997

3,456,778

3,908,701

Operating income (loss) from continuing operations

(86,590

)

542,341

1,847,718

2,241,417

Other income (expense):

Investment gain, net

310,410

(2,045,335

)

1,723,243

(1,714,458

)

Interest expense

(57,187

)

(58,213

)

(217,800

)

(316,180

)

Interest rate swap, fair value adjustment loss

(31,544

)

(216

)

(61,710

)

Interest rate swap settlement income

(63

)

(3,063

)

10,167

Gain on sale of equipment

68,000

262,238

127,832

271,488

Income from continuing operations before

provision for income taxes

234,633

(1,330,576

)

3,477,714

430,724

Income tax expense (benefit)

54,054

(313,565

)

817,554

100,735

Income (loss) from continuing operations

180,579

(1,017,011

)

2,660,160

329,989

Discontinued Operations:

(Loss) from discontinued operations, net of income taxes

(106,940

)

(763,720

)

(1,222,499

)

(1,538,693

))

Gain (loss) on disposal of discontinued operations,

net of income taxes

34,926

(51,558

)

18,133

(67,749

)

Net (loss) from discontinued operations

(72,014

)

(815,278

)

(1,204,366

)

(1,606,442

)

Net income (loss)

$

108,565

$

(1,832,289

)

$

1,455,794

$

(1,276,453

)

Average Shares Outstanding

8,032,266

8,032,266

8,032,266

8,032,266

Operating Income from continuing operations per Share

$

(0.1

)

$

.07

$

0.23

$

0.28

Net Income per Share

$

0.01

$

(0.23

)

$

0.18

$

(0.16

)

CONSOLIDATED BALANCE SHEETS

As of March 31, 2021 and March 31, 2020

Unaudited

March 31, 2021

March 31, 2020

ASSETS

Cash and cash equivalents

$

1,142,039

$

2,115,934

Investments

5,704,794

6,762,510

Restricted Cash

518,330

Receivables

11,972,268

12,652,183

Other

433,868

571,784

Assets related to discontinued operations

19,920

156.242

Total current assets

19,791,219

22,258,653

Property and Equipment, net

1,012,477

582,512

Restricted Cash

3,166,670

Operating lease right-of-use assets

94,711

261,535

Other assets related to discontinued operations

3,424,351

Other

713,107

797,814

Total Non-Current Assets

4,986,965

5,066,212

Total Assets

$

24,778,184

$

27,324,865

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

11,286,952

11,1250,501

Current liabilities related to discontinued operations

639,117

865,714

Total Current Liabilities

11,926,069

12,116,215

Other liabilities

5,450,769

5,426,971

Other liabilities related to discontinued operations

92,241

2,482,560

Total Long-term Liabilities

5,543,010

7,909,531

Total Liabilities

17,469,079

20,025,746

Total Shareholders’ Equity

7,309,105

7,299,119

Total Liabilities and Shareholders’ Equity

$

24,778,184

$

27,324,865

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2021 fourth quarter operating EBITDA was determined by adding fiscal 2021 fourth quarter operating loss from continuing operations of $(86,590) and depreciation and amortization expense of $18,081 for a total of $(68,509). Fiscal 2020 fourth quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 fourth quarter operating income from continuing operations of $542,341 and depreciation and amortization expense of $26,962 for a total of $569,303.

Fiscal 2021 twelve months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2021 twelve-month operating income from continuing operations of $1,847,718 and depreciation and amortization expense of $198,160 for a total of $2,045,878. Fiscal 2020 twelve months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 twelve-month operating income from continuing operations of $2,241,417 and depreciation and amortization expense of $102,019 for a total of $2,343,436.

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/20210628005210/en/

Contacts

The Marketing Alliance, Inc.
Timothy M. Klusas, President
(314) 275-8713
[email protected]
www.TheMarketingAlliance.com

-OR-

The Equity Group Inc.
Adam Prior, Senior Vice President
(212) 836-9606
[email protected]