The Marketing Alliance Announces Financial Results for its Fiscal 2022 Third Quarter Ended December 31, 2021

ST. LOUIS--(BUSINESS WIRE)--The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2022 third quarter ended December 31, 2021.

FY 2022 Third Quarter Financial Highlights (all comparisons to the prior year period)

• Operating income increased to $1,121,784 compared to $581,519 in the prior year period despite a 29% decrease in revenue to $5,694,085
• Operating income (from continuing operations) increased in the quarter due in part to an Employee Retention Credit of $657,099 which reduced payroll and compensation expenses
• Net income from continuing operations for the quarter was $1,078,508, or $0.13 per share, as compared to net income of $941,389, or $0.12 per share, for the quarter in the previous year

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “We were pleased with our progress this quarter which resembled our performance in the previous one, where despite the reduction in revenue versus the prior year period, our insurance distribution business was relatively consistent in terms of gross profit and saw an increase in gross profit as a percentage of revenue. The calculation of revenue in our insurance business is a function of sales activity with carriers that pay us different commission levels for equal volumes of sales, agencies that receive different commission levels for equal levels of sales depending on their mixture of products which at times may reduce our revenue, and individual products that may have different commission levels despite equal sales levels, all of which contribute to the difficulty in making meaningful comparisons between quarters on the basis of revenue alone, due to the fact that these factors are rarely the same quarter-to-quarter. We prefer to call attention to gross profit as a means to compare, and on that basis, we performed at a relatively consistent level to the prior year quarter. As we have noted in previous quarters, carriers and agents have continued to adjust to underwriting clients among the presence of COVID restrictions and agencies have also adjusted to the new challenges of simulating in-person client meetings and physical exams, many of which still remain more complicated than prior to the emergence of COVID. It is also helpful to remember that during this quarter much of the country saw the emergence of the Omicron variant, which caused fluctuations in the pace of life insurance operations and sales activity. As much as the pandemic has been a disruption for our business, we also think the broader acceptance of no-contact business solutions is a positive for our platform. In addition, insurance carriers and agents have an increased appreciation for maintaining a diversity of tools and solutions that allow them to cultivate customer relationships. We believe we were well-positioned for this new ‘normal’, should it continue indefinitely.”

Mr. Klusas concluded, “In our Construction business, this quarter and the year could be characterized as sluggish due to complications that emerged due to the current business environment. We saw reductions in projects being put out for bid, we saw delays in permitting projects preventing them from proceeding on time, and we saw disruptions in supply chains for parts and materials such as drainage pipe, tile, and steel, and even disruptions with equipment in finding spare parts or equipment available for rent. We also believed that the sum of these factors plus fiscal stimulus contributed to a period of some competitors aggressively chasing too few jobs, which prompted our company to deliberately pass on projects and look to expand into other adjacent areas such as worksite preparation and building site construction, which we think could be beneficial once these temporary factors abate.”

Fiscal 2022 Third Quarter Financial Review

• Total revenues for the three-month period ended December 31, 2021, were $5,694,085, as compared to $8,047,127 in the prior year quarter. This decrease was due mostly to reduced insurance commission and fee revenue resulting from a different mix of business from carriers and agencies as described above. The decrease was also due in part from the construction business where the company had projects lasting into the winter months in the previous year quarter.

• Net operating revenue (gross profit) for the quarter was $1,534,785, compared to net operating revenue of $1,426,818, in the prior-year fiscal period. Net operating revenue was greater than the previous year period due to cost of revenues decreasing more than revenues decreased, and better performance in the construction business.

• Operating expenses decreased to $413,001, or 7.3% of total revenues for the fiscal 2021 third quarter, as compared to $845,299, or 10.5% of total revenues for the same period of the prior year. The reduction in operating expenses was due in part to less compensation and payroll expense due to the one-time benefit of the Employee Retention Credit recognized this quarter.

• The Company reported operating income from continuing operations of $1,121,784, compared to operating income of $581,519 in the prior-year period, due to the improved gross margin and reduced operating expenses discussed above.

• Operating EBITDA (excluding investment portfolio income) was $1,182,131 compared to $721,439 in the prior year quarter. 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 ($13,697) loss, as compared to a gain of $671,841 for the same quarter of the previous fiscal year.

• Net income from continuing operations for the fiscal 2021 third quarter was $1,078,508, or $0.13 per share, as compared to net income from continuing operations of $941,389, or $0.12 per share, in the prior year period. The increase was largely due to increased operating income and a $92,241 benefit from Paycheck Protection Program loan forgiveness, offset by a decrease in net investment gain compared to the prior year period.

Fiscal 2021 Nine Months Financial Review

• Total revenues for the nine months ended December 31, 2021, were $17,931,618, compared to $23,805,772, for the prior-year period due to the continuation of the factors discussed above in both the insurance distribution and construction businesses.

• Net operating revenue (gross profit) was $4,265,481, which compares to net operating revenue of $4,578,705 in the prior-year fiscal period. The year over year decline was due primarily to reduced revenues in both the insurance and construction businesses, offset by improved margins in the insurance and construction businesses.

• Operating expenses increased to 13.2% of revenues during the first nine months of fiscal 2022 to $2,369,058, compared to 11.1% of revenues in the first nine months in the prior-year fiscal period. On a nominal basis, operating expenses declined by approximately $275,000 aided by the Employee Retention Credit.

• The Company reported operating income from continuing operations of $1,896,396 for the nine months ended December 31, 2021, compared to operating income from continuing operations of $1,934,308 for the prior-year period. The year over year decline was due the combination of lower revenues offset by improved margins and lower expenses noted in the factors discussed above.

• Operating EBITDA (excluding investment revenue) for the nine months was $2,074,617 versus $2,192,121 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, 2021, was $2,084,651, or $0.26 per share, compared to a net income from continuing operations of $2,479,581, or $0.31 per share, for the prior-year nine-month period. The year over year decrease was the result of lower operating income and greater investment gain in the previous year compared to this one.

Balance Sheet Information

• TMA’s balance sheet at December 31, 2021, reflected cash and cash equivalents of $1,526,110, working capital of $7,713,616, and shareholders’ equity of $7,929,340; compared to cash and cash equivalents of $1,771,280, working capital of $8,022,941, and shareholders’ equity of $7,200,540 as of March 31, 2021.

• 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, including the broader acceptance of no-contact business solutions, the distribution of new life insurance products, 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 and ways that insurance carriers may react to them in their underwriting policies; 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, 2021 and December 31, 2020 Unaudited
	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2021		2020		2021		2020
Insurance commission and fee revenue	$	5,292,484	$	7,129,328	$	16,708,425	$	21,717,663
Construction revenue		349,101		757,299		1,055,093		1,927,609
Other insurance revenue		52,500		160,500		168,100		160,500
Total revenues		5,694,085		8,047,127		17,931,618		23,805,772
Insurance distributor related expenses:
Distributor bonuses and commissions		3,517,231		5,400,596		11,536,412		16,548,516
Business processing and distributor costs		465,079		507,615		1,466,578		1,393,833
Depreciation		3,800		6,600		11,373		19,800
		3,986,110		5,914,811		13,014,363		17,962,149
Costs of construction:
Direct and indirect costs of construction		127,572		670,461		518,556		1,166,286
Depreciation		45,618		35,037		133,218		98,632
		173,190		705,498		651,774		1,264,918
Total costs of revenues		4,159,300		6,620,309		13,666,137		19,227,067
Net operating revenue		1,534,785		1,426,818		4,265,481		4,578,705
Operating expenses		413,001		845,299		2,369,085		2,644,397
Operating income from continuing operations		1,121,784		581,519		1,896,396		1,934,308
Other income (expense):
Investment gain, net		(13,697)		671,841		313,435		1,412,833
Interest expense		(49,204)		(61,321)		(157,915)		(160,613)
Interest rate swap, fair value adjustment loss		-		-		-		(216)
Interest rate swap settlement income		-		-		-		(3,063)
Paycheck Protection Program		92,241				465,766
Gain on sale of equipment		-		35,750		-		59,832
Income from continuing operations before provision for income taxes		1,151,124		1,227,789		2,517,682		3,243,081
Income tax expense		72,616		286,400		433,031		763,500
Income from continuing operations		1,078,508		941,389		2,084,651		2,479,581
Discontinued Operations:
Loss from discontinued operations, net of income taxes		-		(470,265)		110,332		(1,121,519)
Loss on disposal of discontinued operations, net of income taxes		-		(8,416)		-		(10,833)
Net loss from discontinued operations		-		(478,681)		110,332		(1,132,352)
Net income	$	1,078,508	$	462,708	$	2,194,983	$	1,347,229
Average Shares Outstanding		8,081,266		8,032,266		8,081,266		8,032,266
Operating Income from continuing operations per Share	$	0.14	$	0.07	$	0.23	$	0.24
Net Income per Share	$	0.13	$	0.06	$	0.27	$	0.17

CONSOLIDATED BALANCE SHEETS As of December 31, 2021 and December 31, 2020 Unaudited
	December 31, 2021		December 31, 2020
ASSETS
Cash and cash equivalents	$	1,526,110	$	1,771,280
Investments		5,496,055		5,026,725
Restricted Cash		531,746		516,583
Receivables		10,561,051		12,901,910
Inventory		-		1,140
Other		430,965		331,074
Assets related to discontinued operations		22,126		34,108
Total current assets		18,568,053		20,582,820
Property and Equipment, net		947,726		850,323
Restricted Cash		2,913,401		3,168,417
Operating lease right-of-use assets		274,061		135,704
Other assets related to discontinued operations		-		-
Other		672,612		648,905
Total Non-Current Assets		4,807,800		4,803,349
Total Assets	$	23,375,853	$	25,386,169
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities		10,217,756		11,752,282
Current liabilities related to discontinued operations		636,681		807,597
Total Current Liabilities		10,854,437		12,559,879
Other liabilities		4,592,076		5,480,750
Other liabilities related to discontinued operations		-		145,000
Total Long-term Liabilities		4,592,076		5,625,750
Total Liabilities		15,446,513		18,185,629
Total Shareholders' Equity		7,929,340		7,200,540
Total Liabilities and Shareholders' Equity	$	23,375,853	$	25,386,169

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2022 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2022 third quarter operating income from continuing operations of $1,121,784 and depreciation and amortization expense of $60,347 for a total of $1,182,131. Fiscal 2021 third quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 third quarter operating income from continuing operations of $581,519 and depreciation and amortization expense of $139,920 for a total of $721,439.

Fiscal 2021 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating income from continuing operations of $1,896,396 and depreciation and amortization expense of $178,221 for a total of $2,074,617. Fiscal 2020 nine months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 nine-month operating income from continuing operations of $1,934,308 and depreciation and amortization expense of $257,813 for a total of $2,192,121.

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.