ST. LOUIS–(BUSINESS WIRE)–The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2021 third quarter ended December 31, 2020.

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

  • Revenues were $8,047,127 compared to $7,818,351, an increase largely due to a $301,370 increase in construction revenues versus the prior year period
  • Operating income of $581,519 compared to $679,376 in the prior year period
  • Net income from continuing operations for the quarter was $941,389, or $0.12 per share, as compared to net income of $421,937, or $0.05 per share, in the prior year period
  • Due to the effects of the pandemic, the Company has elected to exit the family entertainment business, resulting in net loss from discontinued operations of ($470,265) for the quarter

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Our results were highlighted by relatively consistent performance by our insurance distribution business through the difficult conditions of the pandemic and growth in our construction business. The Company has elected to exit the family entertainment business due to 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.”

Mr. Klusas added, “Like many industries, the pandemic caused disruption in the insurance distribution business leading insurance agents to immediately adopt and implement a variety of solutions in order to maintain doing business in a no-contact and no in-person meetings environment. In many instances, we suspect these solutions could become permanent, especially where cost savings were realized and agent productivity increased. This dynamic underpinned continued growth in our call center, due to the increased appetite for non-contact back-office solutions driven by technology that were preferred by clients.”

Mr. Klusas concluded, “The results from our construction business reflected our movement away from the agricultural cycles that formerly dominated the pace of our business. We have been able to provide more value -added solutions outside of agriculture, such as drainage solutions for road construction and earth moving that have allowed us to improve our planning and execution of projects.”

Fiscal 2021 Third Quarter Financial Review

  • Total revenues for the three-month period ended December 31, 2020, were $8,047,127, as compared to $7,818,351 in the prior year quarter. This increase was due mostly to an increase in construction revenue that more than offset a slight decline in the insurance distribution business.
  • Net operating revenue (gross profit) for the quarter was $1,426,818, compared to net operating revenue of $1,586,252 in the prior-year fiscal period. Two contributing factors to the decline were unfavorable business mix in the construction business in this quarter versus the prior year period and start-up expenses this quarter in the insurance business to accommodate growth in the call center.
  • Operating expenses decreased to $845,299, or 10.5% of total revenues for the fiscal 2020 third quarter, as compared to $906,876, or 11.6% of total revenues for the same period of the prior year. The reduction in operating expenses was due in part to less compensation expense and less travel and meetings expense due to pandemic conditions.
  • The Company reported operating income from continuing operations of $581,519, compared to operating income of $679,376 in the prior-year period, due to the effects on net operating revenue discussed above.
  • Operating EBITDA (excluding investment portfolio income) was $643,705, compared to $706,450 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 $671,841, as compared to a loss of $52,301 for the same quarter of the previous fiscal year.
  • Net income from continuing operations for the fiscal 2021 third quarter was $941,389, or $0.12 per share, as compared to net income of $421,937, or $0.05 per share, in the prior year period. The increase was largely due to the increase in net investment gain, and the benefit of a gain on sale of equipment in the construction business, compared to the prior year period.

Fiscal 2020 Nine Months Financial Review

  • Total revenues for the nine months ended December 31, 2020 were $23,805,772, compared to $23,680,084, for the prior-year period. Increases in construction revenue offset a decrease in insurance commission revenue for the nine-month period, which declined in part due to the effects on the business from COVID-19.
  • Net operating revenue (gross profit) was $4,578,705, which compares to net operating revenue of $4,582,780 in the prior-year fiscal period. Although net operating revenue was approximately the same, a slight increase due to growth in the construction business was offset by a slightly unfavorable mix in the insurance distribution business and an increase in start-up expenses associated with the call center.
  • Operating expenses decreased to 11.1% of revenues during the first nine months of fiscal 2021 to $2,644,397, driven by lower expenses across the business, including compensation, rent expense and other general and administrative expenses.
  • The Company reported increased operating income from continuing operations of $1,934,308 for the nine months ended December 31, 2020, compared to an operating income from continuing operations of $1,699,076 for the prior-year period due the combination of higher revenues and lower expenses noted in the factors discussed above.
  • Operating EBITDA (excluding investment revenue) for the nine months was $2,114,387 versus $1,774,133 in the prior-year period. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.
  • Net income from continuing operations for the nine months ended December 31, 2020, was $2,479,581, or $0.31 per share, compared to a net income of $1,347,000, or $0.17 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, 2020, reflected cash and cash equivalents of $1,771,280, working capital of $8,022,941, and shareholders’ equity of $7,200,540; compared to cash and cash equivalents of $2,130,973, working capital of $10,241,394, and shareholders’ equity of $7,299,119 as of March 31, 2020.
  • Due to collateral requirements related to refinancing bank debt in the quarter, the Company lists Restricted Cash separately on the balance sheet from cash and cash equivalents to reflect the cash balances collateralizing debt and specifies in Current Assets the restricted amount scheduled to become unrestricted in the next twelve months.

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 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 Nine Months Ended December 31, 2020 and September 30, 2019

Unaudited

Three Months Ended

Nine Months Ended

December 31,

December 31,

2020

2019

2020

2019

Insurance commission and fee revenue

$

7,129,328

$

7,279,352

$

21,717,663

$

22,108,864

Construction revenue

757,299

455,929

1,927,609

1,435,550

Other insurance revenue

160,500

83,070

160,500

135,670

Total revenues

8,047,127

7,818,351

23,805,772

23,680,084

Insurance distributor related expenses:

Distributor bonuses and commissions

5,400,596

5,511,359

16,548,516

16,773,453

Business processing and distributor costs

507,615

430,217

1,393,833

1,206,431

Depreciation

6,600

1,350

19,800

4,050

5,914,811

5,942,926

17,962,149

17,983,934

Costs of construction:

Direct and indirect costs of construction

670,461

273,573

1,166,286

1,066,570

Depreciation

35,037

15,600

98,632

46,800

705,498

289,173

1,264,918

1,113,370

Total costs of revenues

6,620,309

6,232,099

19,227,067

19,097,304

Net operating revenue

1,426,818

1,586,252

4,578,705

4,582,780

Operating expenses

845,299

906,876

2,644,397

2,883,704

Operating income from continuing operations

581,519

679,376

1,934,308

1,699,076

Other income (expense):

Investment gain, net

671,841

(52,301)

1,412,833

330,877

Interest expense

(61,321)

(83,739)

(160,613)

(257,967)

Interest rate swap, fair value adjustment loss

2,821

(216)

(30,166)

Interest rate swap settlement income

1,130

(3,063)

10,230

Gain on sale of equipment

35,750

9,250

59,832

9,250

Income from continuing operations before provision for income taxes

1,227,789

556,537

3,243,081

1,761,300

Income tax expense

286,400

134,600

763,500

414,300

Income from continuing operations

941,389

421,937

2,479,581

1,347,000

Discontinued Operations:

Loss from discontinued operations, net of income taxes

(470,265)

(248,813)

(1,121,519)

(774,973)

Loss on disposal of discontinued operations, net of income taxes

(8,416)

(16,191)

(10,833)

(16,191)

Net loss from discontinued operations

(478,681)

(265,004)

(1,132,352)

(791,164)

Net income

$

462,708

$

156,933

$

1,347,229

$

555,836

Average Shares Outstanding

8,032,266

8,032,266

8,032,266

8,032,266

Operating Income from continuing operations per Share

$

0.12

$

0.05

$

0.31

$

0.17

Net Income per Share

$

0.06

$

0.02

$

0.17

$

0.07

CONSOLIDATED BALANCE SHEETS

As of December 31, 2020 and March 31, 2020

Unaudited

December 31, 2020

March 31, 2020

ASSETS

Cash and cash equivalents

$

1,771,280

$

2,130,973

Investments

5,026,725

6,762,510

Restricted Cash

516,583

Receivables

12,901,910

12,642,870

Other

332,214

577,484

Assets related to discontinued operations

34,108

139,092

Total current assets

20,582,820

22,252,929

Property and Equipment, net

850,323

582,512

Restricted Cash

3,168,417

Operating lease right-of-use assets

135,704

261,535

Other assets related to discontinued operations

3,485,151

Other

648,905

742,738

Total Non-Current Assets

4,803,349

5,071,936

Total Assets

$

25,386,169

$

27,324,865

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities

11,752,282

11,168,921

Current liabilities related to discontinued operations

807,597

842,614

Total Current Liabilities

12,559,879

12,011,535

Other liabilities

5,480,750

5,516,271

Other liabilities related to discontinued operations

145,000

2,497,940

Total Long-term Liabilities

5,625,750

8,014,211

Total Liabilities

18,185,629

20,025,746

Total Shareholders’ Equity

7,200,540

7,299,119

Total Liabilities and Shareholders’ Equity

$

25,386,169

$

27,324,865

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2021 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2021 third quarter operating income from continuing operations of $581,519 and depreciation and amortization expense of $62,186 for a total of $643,705. Fiscal 2020 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 third quarter operating income from continuing operations of $679,376 and depreciation and amortization expense of $27,074 for a total of $706,450.

Fiscal 2021 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating income from continuing operations of $1,934,308 and depreciation and amortization expense of $180,079 for a total of $2,114,387. Fiscal 2020 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating income from continuing operations of $1,699,076 and depreciation and amortization expense of $75,057 for a total of $1,774,133.

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.

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