The Marketing Alliance Announces Financial Results for Quarter Ended March 31, 2024

The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), announced its financial results today for its fiscal 2024 fourth quarter ended March 31, 2024.

FY 2024 Financial Key Items (all comparisons to the prior year period)

  • Revenues were $19,585,772 compared to $17,940,089, the 9% increase was primarily due to growth in the insurance distribution business that was partially offset by a decrease in construction revenue
  • Operating income from continuing operations of $1,099,267 compared to $1,542,958 in the prior year period. Operating income in the prior year period was increased by $325,114 due to a restatement of commission expense
  • Net income from continuing operations was $1,043,214 or $0.13 per share compared to $815,338 or $0.10 per share in the prior year period

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Our team was very pleased to report the growth of the insurance distribution business this year. While most of the growth could be attributed to organic growth in the business, we welcomed a few new relationships which also contributed to the increase in revenues. We continue to invest in this business, and as in prior years we hoped to see the positive results of these investments in future quarters and years. While our construction business revenue was off this year, we continued to be discerning about the projects we undertake and maintained our cost discipline as we executed these projects, which we believed positions us well in future quarters.”

Mr. Klusas added, “Getting back to our insurance business, our growth in the business was somewhat overshadowed by an adverse carrier mix associated with different commission levels among carriers whose payments fluctuate with the volume of business. Although an adverse carrier mix is expected with newer relationships, as these relationships mature and grow the business mix should improve, as it has with other new relationships in the past. We also experienced certain cost overruns in staffing connected to new initiatives which we started to address this quarter. While we made progress on costs, the staffing overruns affected our margins and profitability. We plan to continue to take measures to reduce these costs. The combination of an adverse business mix and costs over plan were large areas of focus for our team. Moving to construction, last quarter we announced a $143,629 charge - off at the end of a large job due to reconciling material bills on a job that spanned over multiple years. The billing of these materials in the prior year ($143,629) and reversal of these materials billings in this fiscal year (reversal of $143,629) account for a portion of the difference in financial performance in the construction business between fiscal years.”

Mr. Klusas continued, “We also took steps on our balance sheet to reduce our exposure to equities in our non-operating investment portfolio by liquidating securities and investing the proceeds into money market accounts. Subsequent to the end of the quarter, we also repaid our line of credit to a zero balance.”

Fiscal 2024 Financial Review

  • Total revenues for the twelve-month period ended March 31, 2024, were $19,585,772, compared to $17,940,089 in the prior year. The increase was primarily due to growth in the insurance distribution business that was supplemented by new carrier and agency relationships. Construction revenue of $1,284,021 decreased compared to the prior year revenue of $2,016,248, due to a large job in the previous year where we were project manager with a large portion outsourced to subcontractors.
  • Net operating revenue (gross profit) for the fiscal year was $4,655,172, compared to net operating revenue of $5,372,772 in the prior-year fiscal period, where the restatement of commission expense increased net operating revenue by $325,114 in the prior fiscal year.
  • Operating expenses decreased to $3,555,905, compared to $3,829,814 for the prior year. The reduction was due to various cost reduction efforts throughout the company.
  • The Company reported operating income from continuing operations of $1,099,267, compared to operating income of $1,542,958 in the prior-year period, due to a combination of the factors noted above, notably operating income in the prior year period was increased by $325,114 due to a restatement of commission expense.
  • Operating EBITDA (excluding investment portfolio income) declined to $1,388,524 from $1,794,401 in the prior year. A note reconciling operating EBITDA to operating income can be found at the end of this release.
  • Investment gain (loss), net (from non-operating investment portfolio) for the fiscal year was $493,334, as compared with ($304,488) during the previous fiscal year.
  • Other income (expense) was ($67,390) at the end of the fiscal year due to a valuation allowance on a note receivable. The Company reported other income in its current year interim financial statements that was subsequently reclassified as reduced commission expense in the previous fiscal year (see operating income note above).
  • Net income from continuing operations was $1,043,214 or $0.13 per share compared to $815,338 or $0.10 per share.

Balance Sheet Information

  • TMA’s balance sheet on March 31, 2024, reflected cash and cash equivalents of $2.9 million; working capital of $7.6 million; and shareholders’ equity of 6.7 million; compared to cash and cash equivalents of $2.0 million, working capital of $7.3 million, and shareholders’ equity of $6.9 million as of March 31, 2023.

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 the timing of our receipt and recognition of fee revenues, our plan to reduce expenses and cost overruns associated with various business initiatives, and our ability to generate earnings from our construction 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; the ways that insurance carriers may react in their underwriting policies and procedures to the continuing risks they perceive from public health matters; the ability of our construction business to be engaged for projects and for those projects to commence on the anticipated timetable; our reliance on a limited number of insurance carriers and any potential termination of those relationships or failure to develop new relationships; privacy and cyber security matters and our ability to protect confidential information; 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; and weather and environmental conditions in the areas served by our construction business. 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 Months Ended

Twelve Months Ended

March 31,

March 31,

(Unaudited)

2024

2023

2024

2023

 

Insurance commission and fee revenue

$

5,518,767

$

3,607,443

$

17,756,951

$

15,224,236

Construction revenue

22,425

(4,515)

1,284,021

2,016,248

Other insurance revenue

305,000

357,745

544,800

699,605

Total revenues

5,846,192

3,960,673

19,585,772

17,940,089

 

Insurance distributor related expenses:

Distributor bonuses and commissions

4,396,109

2,813,078

12,137,471

9,370,001

Business processing and distributor costs

581,184

475,390

1,780,758

1,863,575

Depreciation

0

2,049

9,382

11,834

4,977,293

3,290,517

13,927,611

11,245,410

Costs of construction:

Direct and indirect costs of construction

(86,558)

(197,067)

757,064

1,129,623

Depreciation

65,949

49,238

245,925

192,284

(20,609)

(147,829)

1,002,989

1,321,907

 

Total costs of revenues

4,956,684

3,142,688

14,930,600

12,567,317

 

Net operating revenue

889,508

817,985

4,655,172

5,372,772

 

Operating Expenses

1,048,936

1,286,149

3,555,905

3,829,814

 

Operating income (losses) from continuing operations

(159,428)

(468,164)

1,099,267

1,542,958

 

Other income (expense):

Investment gain, net

156,114

132,464

493,334

(304,488)

Interest expense

(46,925)

(49,453)

(196,620)

(199,817)

Other income

(268,242)

-

(67,390)

-

 

Income (losses) from continuing operations before provision for income taxes

(318,481)

(385,153)

1,328,591

1,038,653

 

Income tax expense

(119,483)

(122,851)

285,377

222,315

 

Income(losses) from continuing operations

(198,998)

(262,302)

1,043,214

815,338

 

Discontinued operations:

Income (loss) from discontinued operations, net of income taxes

-

(23,321)

-

78,289

 

Net gain (loss) from discontinued operations

-

(23,321)

-

78,289

 

Net Income (Loss)

$

(198,998)

$

(285,623)

$

1,043,214

$

893,627

 
 

Average Shares Outstanding

8,081,266

8,081,266

8,081,266

8,081,266

Operating Income from continuing operations per Share

$

(0.02)

$

(0.06)

$

0.14

$

0.19

Net Income per Share

$

(0.02)

$

(0.04)

$

0.13

$

0.11

 

CONSOLIDATED BALANCE SHEETS

 

March 31,

March 31,

 

 

2024

 

 

2023

 

 

 

 

 

(restated)

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

Cash and cash equivalents

$

2,949,323

 

$

1,994,763

Equity securities

 

2,837,506

 

 

4,109,381

Restricted cash

 

573,841

 

 

554,525

Accounts receivable

 

7,492,812

 

 

7,766,243

Current portion of notes receivable

 

548,552

 

 

125,297

Prepaid expenses

 

506,456

 

 

366,025

Total current assets

 

14,908,490

 

 

14,928,011

PROPERTY AND EQUIPMENT, net

 

829,680

 

 

642,180

OTHER ASSETS

 

 

 

 

 

Notes receivable, net due to the allowance

 

63,614

 

 

571,557

Restricted cash

 

1,523,812

 

 

2,050,737

Operating lease right-of-use assets

 

179,218

 

 

321,340

Total other assets

 

1,766,644

 

 

2,943,634

 

$

17,504,814

 

$

18,502,048

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

Accounts payable and accrued expenses

 

6,198,078

 

 

6,582,465

Current portion of notes payable

 

938,068

 

 

831,787

Current portion of finance lease liability

 

36,174

 

 

41,044

Current portion of operating lease liability

 

95,305

 

 

154,280

Liabilities related to discontinued operations

 

677

 

 

677

Total current liabilities

 

7,252,021

 

 

7,610,253

 

 

 

 

 

 

LONG-TERM LIABILITIES

 

 

 

 

 

Line of credit payable

 

675,000

 

 

600,000

Notes payable, net of current portion and debt issuance costs

 

2,359,132

 

 

2,908,521

Finance lease liability, net of current portion

 

103,200

 

 

142,602

Operating lease liability, net of current portion

 

78,982

 

 

155,987

Deferred taxes

 

313,000

 

 

190,000

Total long-term liabilities

 

3,529,314

 

 

3,997,110

Total liabilities

 

10,781,335

 

 

11,607,363

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

Common stock, no par value; 50,000,000 shares authorized,

 

 

 

 

 

8,081,266 shares issued and outstanding December 31, 2022

 

 

 

 

 

8,081,266 shares issued and outstanding December 31, 2023

 

1,025,341

 

 

1,025,341

Retained earnings

 

5,698,138

 

 

5,869,344

Total shareholders' equity

 

6,723,479

 

 

6,894,685

 

 

 

 

 

 

 

$

17,504,814

 

$

18,502,048

Note – Operating EBITDA (excluding investment portfolio income)

Twelve Months Ended

EBITDA Calculation

March 31,

March 31,

2024

2023

Operating Income continuing operations

$ 1,099,267

$ 1,542,948

Add:

Depreciation/Amortization

289,257

251,443

EBITDA (Operating Income from Continuing Operations)

$ 1,388,524

$ 1,794,401

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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