MAAL - The Marketing Alliance Announces Financial Results for its Fiscal 2020 First Quarter Ended June 30 2019

The Marketing Alliance, Inc. (OTC: MAAL) (“TMA” or the “Company”), today announced financial results for its fiscal 2020 first quarter ended June 30, 2019.

FY 2020 First Quarter Financial Highlights (all comparisons to the prior year period)

• Revenues increased 13% to $8,935,704, largely due to higher commission and fee revenue in the insurance distribution business
• Operating income was $176,662, as compared to operating loss of $(174,686) in the prior year quarter, largely due to higher revenues and lower operating expenses during the quarter
• Operating EBITDA (excluding investment portfolio income and impairment charges) was $309,981, compared to $4,654 in the prior year quarter
• Non-operating investment gain, net, of $289,378 compared to a gain of $41,779 in the prior year quarter primarily related to an increase in the market value of the equity securities the Company held at June 30, 2019
• Net income was $278,193, or $0.03 per share, as compared to net loss of $(156,792), or $(0.02) per share in the prior year period, driven in this period by an increase in revenues, increase in operating profit, and investment gain

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Revenues grew during the quarter in our insurance distribution business as we continued to support our independent agency partners with increased access to a larger network of carriers while enhancing their digital and back-office capabilities. Over the past year, we have worked diligently to help drive the utilization of technology for many of our affiliated agencies, as integrating digital applications into their producer offerings has served to make their processes increasingly faster and more cost-efficient. In addition, TMA is continuing to work with carriers to extend their fulfillment capabilities through our platform. During the quarter a fourth carrier began to utilize our fulfillment service for our network of independent agencies, and we continued to focus on expanding the use of technology to help our agency partners to increase the speed of processing and assist in the overall growth of their business.”

Mr. Klusas also commented, “We had an uneven quarter in our construction business where we incurred expenses without corresponding revenue due to large projects that were expanded beyond their initial scope and the timing of revenues (above contract amounts). While we anticipate that the eventual addition of these revenues would reduce our uneven financial results, we have been pleased, overall, with our continued progress in stabilizing this business, which was historically very seasonal due to the nature of the agricultural cycles of crop planting and fall harvest. The Company continues to seek projects that supplement the traditional agricultural market for our field drainage services and in order to optimize our assets.”

Mr. Klusas concluded, “In our family entertainment business, we reported lower revenues due to divesting one of our locations in an asset sale as the associated lease was coming to expiration. We will continue to monitor our progress in this business and seek the appropriate balance of revenue growth and expense control.”

Fiscal 2020 First Quarter Financial Review

• Total revenues for the three-month period ended June 30, 2019, were $8,935,704 as compared to $7,910,668 in the prior year quarter. This was due mostly to increases in insurance commission which offset a decrease in family entertainment revenue relative to the prior year period.

• Net operating revenue (gross profit) for the quarter was $2,169,520 compared to net operating revenue of $2,103,900 in the prior-year fiscal period.

• Operating expenses decreased to $1,992,858, or 22.3% of total revenues for the fiscal 2020 first quarter, as compared to $2,278,586, or 28.8% of total revenues for the same period of the prior year. Operating expenses decreased as a percentage of total revenues, mainly due to lower compensation and rent expense in the quarter compared to the prior year quarter.

• The Company reported operating income of $176,662, compared to operating loss of $(174,686) in the prior-year period. This increase in operating income was the result of lower operating expense during the quarter, versus the prior year period, as previously mentioned.

• Operating EBITDA (excluding investment portfolio income) for the quarter was $309,981, compared to $4,654 in the prior year period. 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 $289,378, as compared to $41,779 for the same quarter of the previous fiscal year.

• Net income (loss) for the fiscal 2020 first quarter was $278,193, or $0.03 per share, as compared to net loss of $(156,792), or $(0.02) per share, in the prior year period. The increase in net income was primarily due to an increase in operating income and the increase in investments seen in Investment gain (loss), net, during the quarter.

Balance Sheet Information

• TMA’s balance sheet at June 30, 2019 reflected cash and cash equivalents of approximately $3.5 million, working capital of $7.3 million, and shareholders’ equity of $8.9 million; compared to cash and cash equivalents of approximately $3.6 million, working capital of $9.4 million, and shareholders’ equity of $10.1 million, at March 31, 2019.

About The Marketing Alliance, Inc.

Headquartered in St. Louis, MO, TMA operates three businesses. TMA provides support to independent insurance brokerage agencies, with a goal of providing members value-added services on a more efficient basis than they can achieve individually. The Company also owns an earth moving and excavating (construction) business and eight children’s play and party facilities. 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 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 distribution of new life insurance products, the effects of ongoing uncertainty regarding the Department of Labor’s Fiduciary Rule in our annuity business, our ability to continue to diversify our earth moving and excavating business and our ability to increase revenue and reduce costs from our family entertainment 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; future 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.

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2020 first quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 first quarter operating income of $176,662 and depreciation and amortization expense of $133,319 for a total of $309,981.

Fiscal 2019 first quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2019 first quarter operating loss of $(174,686) and depreciation and amortization expense of $179,340 for a total of $4,654.

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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