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.
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