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

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

• Revenues decreased to $9,949,443 compared to $10,576,939, largely due to lower family entertainment revenues as the Company was forced to close its family entertainment locations in March due to the COVID-19 pandemic. The Company also had six locations this quarter compared to nine in the prior year period
• Commission and fee revenues from the Company’s core insurance distribution business remained largely flat (down 1%) despite disruption caused from the pandemic
• Operating loss was ($462,478), as compared to operating income of $552,826 in the prior year quarter. The loss was due in part to reduced revenues in the family entertainment business, lower annuities revenue, deferred first year commissions reconciliations in the insurance business, and goodwill and long-lived asset impairment charges in the quarter due to the family entertainment business
• Operating EBITDA (excluding investment portfolio income) was $382,854, compared to $1,142,249 in the prior year quarter
• Non-operating investment gain (loss), net, of ($2,045,335) compared to a gain of $815,444 in the prior year quarter, which was related to unrealized losses due to disruption in financial markets related to the COVID-19 pandemic
• Net loss for the quarter was ($1,832,289), or ($0.23) per share, as compared to net income of $950,841, or $0.12 per share in the prior year period

FY 2020 Annual Financial Highlights (all comparisons to the prior year)

• Revenues increased 2.7% to $36,133,935
• Operating income was $216,824 compared to $540,086, due in part to results of forced closures and impairment charges (found in operating expenses) in the Company’s family entertainment business
• Operating EBITDA (excluding investment portfolio income and impairment charges) was $1,469,626 compared to $1,682,487
• Net loss was ($1,276,453), or ($0.16) per share, as compared to net income of $269,751, or $0.03 per share

Dividend Policy

Subsequent to the end of the fiscal year, the Company announced a planned change in its shareholder distribution plan to evaluate and declare dividend distributions on a quarterly basis to have the benefit of the most recent information to make these decisions. The Company declared a $0.05 per share cash dividend for shareholders of record on June 19, 2020, which was paid on or about June 30, 2020.

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, “Like so many throughout the world, our lives and businesses were impacted by the COVID-19 pandemic. We rapidly implemented procedures to minimize disruption in our insurance distribution business. We believe our results were largely due to our long-standing relationships with our agency and carrier partners, and especially progress in our initiative to adopt digital applications and virtual customer facing competencies, which minimize paper handling and in-person medical exams. We believe that our value proposition became stronger with our distributors as we provided turnkey back office support that helped to maximize the reach and potential of customers’ digital and online capabilities. Despite our efforts, these results were affected by complications due to the pandemic such inability to complete medical exams and obtain physician reports on prospective clients where required, inability of agents to meet clients to discuss insurance, and continued weakness in the annuity business with fluctuating interest rates. Finally, the pandemic contributed to our cautious view of deferred first year commissions reconciliation and economic conditions assumptions for the next four quarters. The reconciliation had a net effect of decreasing gross profit by approximately $107,000 this year versus an increase of approximately $410,000 in the prior year.”

Mr. Klusas continued, “While the construction business was in its seasonal down time and able to continue to build its pipeline for the coming year, some projects were delayed as offices vacated and the customary planning process was put on hold. The business’s performance was negatively affected by an inventory reduction (write down in value) of approximately $20,000 as we liquidated outdated inventory from the agricultural land excavating business.

Finally, the pandemic’s preventing indoor proximity with others and timing of our fiscal year end at the height of the resulting economic and business uncertainty, led our team to aggressively devalue the prospects of our family entertainment business. This business weakened as the effects of the pandemic became known and authorities mandated closures in March, the month which has historically been the highest revenue time for this business. This resulted in the recording of a goodwill and intangible charge of $405,866 and long-lived asset impairment charge of $319,389 in the quarter for a sum of $725,255. These charges are included in operating expenses. Despite these circumstances, our focus has been on the safety and well-being of our employees and customers, and we will continue to follow local guidelines in terms of re-opening locations as appropriate. We are continuing to evaluate the business as the situation changes. The effects of the pandemic also reached the non-operating parts of our business, as we reported investment losses, net, of $2,045,335 in the quarter largely due to mark-to-market unrealized losses in our investment portfolio valued at March 31, 2020 (fiscal year end).”

Fiscal 2020 Fourth Quarter Financial Review

• Total revenues for the three-month period ended March 31, 2020, were $9,949,443 as compared to $10,576,939 in the prior year quarter. This decrease was due mostly to decrease in family entertainment revenue relative to the prior year period.

• Net operating revenue (gross profit) for the quarter was $1,969,735 compared to net operating revenue of $3,000,621 in the prior-year fiscal period due to declines in the family entertainment business and the insurance business.

• Operating expenses decreased to $2,432,213, or 24.4% of total revenues for the fiscal 2020 fourth quarter, as compared to $2,447,795, or 23.1% of total revenues for the same period of the prior year. The reduction in operating expenses was due in part to less rent and compensation expenses of six family entertainment locations versus nine in the previous year period, however, this reduction was offset by increased impairment charges in the quarter. Operating expenses increased as a percentage of total revenues, mainly due to lower revenues from the Company’s family entertainment business compared to fixed costs and increases in impairment charges.

• The Company reported an operating loss of ($462,478), compared to operating income of $552,826 in the prior-year period. This operating loss for the period was in part the result of the aforementioned impacts on the family entertainment business due to COVID-19.

• Operating EBITDA (excluding investment portfolio income and impairment charges) for the quarter was $382,854, compared to $1,142,249 in the prior year period. 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 ($2,045,335), as compared to $815,444 for the same quarter of the previous fiscal year.

• Net loss for the fiscal 2020 fourth quarter was ($1,832,289), or ($0.23) per share, as compared to net income of $950,841, or $0.12 per share, in the prior year period. The net loss was largely due to decreased operating income and a higher investment loss due to unrealized losses from the Company’s equity portfolio at the March 31 fiscal year end when compared to the prior year period.

Fiscal 2020 Year-End Financial Review

• Total revenues for the year-ended March 31, 2020 of $36,133,935 increased 2.7% from $35,167,518 reported in the prior-year. Increases in insurance distribution revenues of approximately $1.8 million and an increase in construction revenue helped to offset a decrease in family entertainment revenue for the year.

• Net operating revenue (gross profit) was $8,379,240, compared to net operating revenue of $9,747,661 in the prior fiscal year.

• Operating expenses decreased by approximately $1.0 million compared to last year driven by lower expenses across the business, including compensation, rent expense and other general and administrative expenses of maintaining six family entertainment locations at the end of the fiscal year versus nine in the previous year.

• The Company reported operating income of $216,824 for the year-ended March 31, 2020, compared to operating income of $540,086 for the prior-year due to the factors discussed above.

• Operating EBITDA (excluding investment revenue and impairment charges) for the 2020 fiscal year was $1,469,626 compared to $1,682,487 in the prior year. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.

• Net loss for the year-ended March 31, 2020, was ($1,276,453), or ($0.16) per share, compared to net income of $269,751, or $0.03 per share, for the prior-year. The year over year increase was the result of lower operating income and investment gain compared to the prior year period.

Balance Sheet Information

• TMA’s balance sheet at March 31, 2020 reflected cash and cash equivalents of $2,130,973, working capital of $10,241,394, and shareholders’ equity of $7,299,119; compared to cash and cash equivalents of $3,636,824, working capital of $9,449,557, and shareholders’ equity of $10,101,702, 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 six 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, and our ability and intent to pay dividends 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 our annuity business 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, 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.

Note – Operating EBITDA (excluding investment portfolio income)

Fiscal 2020 fourth quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 fourth quarter operating loss of ($462,478) and depreciation and amortization expense of $120,077 and impairment charge of $725,255 for a total of $382,854. Fiscal 2019 fourth quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2019 fourth quarter operating income of $552,826 and depreciation and amortization expense of $173,015 and impairment charge of $416,408 for a total of $1,142,249.

Fiscal 2020 year-end operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2020 year-end operating income of $216,824 and depreciation and amortization expense of $527,547 and impairment charge of $725,255 for a total of $1,469,626. Fiscal 2019 year-end operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 year-end operating income of $540,086 and depreciation and amortization expense of $725,993 and impairment charge of $416,408 for a total of $1,682,487.

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.