The Marketing Alliance Announces Financial Results for Quarter and Year Ended March 31, 2023

The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2023 fourth quarter and year ended March 31, 2023.

FY 2023 Financial Key Items (all comparisons to the prior year period)

• Revenues were $17,940,089 compared to $23,691,799, the decrease due primarily to changes in carrier and product mix in the insurance distribution business and an increase in construction revenue
• Operating income from continuing operations of $1,217,844 compared to $2,703,570 in the prior year period. Operating income in the prior year period benefited from an employee retention tax credit of $875,635, which reduced payroll and compensation expenses. The tax credit, which was part of the federal government’s coronavirus relief program, was not available this year
• Net income from continuing operations was $574,930 or $0.07 per share compared to $2,540,398 or $0.31 per share

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “As we report our fiscal year end results, the comparison to the previous year was particularly difficult due to the benefit of the employee retention credit last year, which was not available this year. In addition, the fluctuation among carriers and agencies in our insurance distribution business produced a deferred first year commission reconciliation of ($468,000) in this fiscal year. Despite these two factors, this year saw positive momentum generated in our construction business and we felt our insurance distribution business performed well in a difficult time for the industry with increasing interest rates and increasing inflation weighing on consumers.”

Mr. Klusas added, “In our insurance business, as we have discussed in prior quarters the revenue could fluctuate due to different commission levels among carriers. Most of the time, we were able to offset these differences by adjusting the amounts we in turn pay out to our distributors, and the net effect of both of these is reflected in the gross profit. In some cases, we were not able to find suitable replacements for agents when carriers either exited our market or chose to reduce sales by changing to the attributes to make their products less competitive relative to alternatives. In addition, private equity entrants to the industry and post-pandemic market conditions have caused some realignment of agencies in our industry. In response to these and other factors, we have initiated a concerted effort to establish new carrier relationships to complement the product portfolio we offer our distributors and evaluate other products and services that could benefit our agencies.”

Mr. Klusas continued, “As I have mentioned in prior quarters this year, our construction business executed at a high level, both in completing work plans ahead of schedule and establishing new and broader relationships to set the stage for future potential jobs.”

Fiscal 2023 Financial Review

• Total revenues for the twelve-month period ended March 31, 2023, were $17,940,089, compared to $23,691,799 in the prior year. The decrease was primarily due to a shift of the business and carrier mix in the insurance distribution business. Construction revenue increased to $2,016,248 compared to $1,029,555 in the prior year, due to increased activity levels compared with the prior year period.

• Net operating revenue (gross profit) for the quarter was $5,047,658, compared to net operating revenue of $5,760,631 in the prior-year fiscal period, where the impact of less revenue could not be overcome with improved gross margins.

• Operating expenses increased to $3,829,814 compared to $3,057,061 for the prior year. Payroll and compensation expense was reduced by $875,635 in the prior year due to the benefit of the employee retention credit.

• The Company reported operating income from continuing operations of $1,217,844, compared to operating income of $2,703,570 in the prior-year period, due to a combination of the factors noted above.

• Operating EBITDA (excluding investment portfolio income) declined to $ $1,468,886 from $2,950,821 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 quarter was $(304,488), as compared with $284,208 during the previous fiscal year.

• Net income from continuing operations was $574,930 or $0.07 per share compared to $2,540,398 or $0.31 per share.

Balance Sheet Information

• TMA’s balance sheet on March 31, 2023, reflected cash and cash equivalents of $2.0 million; working capital of $7.1 million; and shareholders’ equity of 6.6 million; compared to cash and cash equivalents of $1.4 million, working capital of $8 million, and shareholders’ equity of $7.8 million as of March 31, 2022.

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 in future periods, our ability to obtain industry acceptance and competitive advantages of digital and no-contact business solutions, 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 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, the ways that insurance carriers may react to the COVID-19 pandemic in their underwriting policies and procedures; privacy and cyber security regulations; 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 . 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
Unaudited
		Three Months Ended						Twelve Months Ended
		March 31,						March 31,
		2023			2022			2023			2022
Insurance commission and fee revenue	$	3,607,443		$	5,499,618		$	15,224,236		$	22,208,043
Construction revenue		(4,515)			(25,538)			2,016,248			1,029,555
Other insurance revenue		357,745			286,101			699,605			454,201
Total revenues		3,960,673			5,760,181			17,940,089			23,691,799
Insurance distributor related expenses:
Distributor bonuses and commissions		2,813,078			3,747,797			9,695,115			15,284,209
Business processing and distributor costs		475,390			453,057			1,863,575			1,919,635
Depreciation		2,049			3,407			11,834			14,780
		3,290,517			4,204,261			11,570,524			17,218,624
Costs of construction:
Direct and indirect costs of construction		(197,067)			7,809			1,129,623			526,365
Depreciation		49,238			52,961			192,284			186,179
		(147,829)			60,770			1,321,907			712,544
Total costs of revenues		3,142,688			4,265,031			12,892,431			17,931,168
Net operating revenue		817,985			1,495,150			5,047,658			5,760,631
Operating Expenses		1,286,149			687,976			3,829,814			3,057,061
Operating income from continuing operations		(468,164)			807,174			1,217,844			2,703,570
Other income (expense):
Investment gain, net		132,464			(29,227)			(304,488)			284,208
Paycheck protection program forgiveness		0			0			0			398,025
Interest expense		(49,453)			(48,836)			(199,817)			(206,751)
Income from continuing operations before		(385,153)			729,111			713,539			3,179,052
provision for income taxes
Income tax expense		(122,851)			205,623			138,609			638,654
Income from continuing operations		(262,302)			523,488			574,930			2,540,398
Discontinued operations:
Income (loss) from discontinued operations, net of income taxes		(23,321)			(34,702)			78,289			75,630
Gain on disposal of discontinued operations, net of income taxes		0			0			0			0
Net gain (loss) from discontinued operations		(23,321)			(34,702)			78,289			75,630
Net Income	$	(285,623)		$	488,786		$	653,219		$	2,616,028
Average Shares Outstanding		8,081,266			8,081,266			8,081,266			8,081,266
Operating Income from continuing operations per Share	$	(0.06)		$	0.10		$	0.15		$	0.33
Net Income per Share	$	(0.04)		$	0.06		$	0.08		$	0.32

CONSOLIDATED BALANCE SHEETS
Unaudited
		March 31,			March 31,
		2023			2022
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,994,763		$	1,404,655
Equity securities		4,109,381			5,427,642
Restricted cash		554,525			536,212
Accounts receivable		7,766,243			10,903,808
Inventory		11,777			5,732
Current portion of notes receivable		125,297			166,661
Prepaid expenses		437,924			280,137
Assets related to discontinued operations		1,030			16,039
Total current assets		15,000,940			18,740,886
PROPERTY AND EQUIPMENT, net		642,180			878,693
OTHER ASSETS
Notes receivable, net of current portion		571,557			591,595
Restricted cash		2,050,737			2,908,935
Operating lease right-of-use assets		321,340			238,459
Total other assets		2,943,634			3,738,989
	$	18,586,754		$	23,358,568
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	6,907,579		$	9,344,358
Current portion of notes payable		831,787			804,318
Current portion of finance lease liability		41,044			66,819
Current portion of operating lease liability		154,280			100,702
Liabilities related to discontinued operations		677			470,030
Total current liabilities		7,675,102			10,786,227
LONG-TERM LIABILITIES
Lines of credit payable		600,000			525,000
Notes payable, net of debt issuance costs		2,908,521			3,732,717
Finance lease liability, net of current portion		142,602			183,797
Operating lease liability, net of current portion		155,987			147,390
Deferred taxes		190,000			200,000
Total long-term liabilities		3,997,110			4,788,904
Total liabilities		11,932,477			15,575,131
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares authorized,
no shares issued and outstanding		0			0
Common stock, no par value; 50,000,000 shares authorized,
8,081,266 and 8,032,266 shares issued and outstanding, respectively		1,025,341			1,025,341
Retained earnings		5,628,936			6,758,096
Total shareholders' equity		6,654,277			7,783,437
	$	18,586,754		$	23,358,568

Note – Operating EBITDA (excluding investment portfolio income)

		FY 2023			FY 2022
Operating Income continuing operations	$	1,217,844		$	2,703,570
Add:
Depreciation/Amortization		251,443			247,251
EBITDA (Operating Income from Continuing Operations)	$	1,468,886		$	2,950,821

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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The Marketing Alliance Stock at the time of publication of the news with a fall of -1,82 % to 2,70USD on Nasdaq OTC stock exchange (26. Juli 2023, 16:29 Uhr).