The Marketing Alliance Announces Financial Results for Its Fiscal 2019 First Quarter Ended June 30, 2018

The Marketing Alliance, Inc. (OTC:MAAL) ("TMA” or the "Company”), today announced financial results for its fiscal 2019 first quarter ended June 30, 2018.

FY 2019 Financial Highlights (all comparisons to the prior year)

• Revenues increased 6.5% to $7,910,668, largely due to higher commission and fee revenue in the insurance business and a 23% increase in construction revenue versus the prior year quarter
• Operating loss was ($174,686), as compared to operating loss of ($7,760) in the prior year period, the difference was primarily due to increases in expenses in the family entertainment business specifically to grow revenue
• Operating EBITDA (excluding investment portfolio income) was $4,654 compared to $184,410
• Net loss was ($156,792), or ($0.02) per share, as compared to net income of $66,898, or $0.01 per share

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, "We continued to be supported by a robust network of carriers and independent brokerage general agencies, which helped to drive higher revenues in our insurance distribution business. We saw increased distributor adoption of our digital application platform designed to improve the client experience, improve agent efficiency, and reduce an agent’s time to complete a life insurance application. Also, as we continued to grow revenue with new carriers, our expenses increased more than our revenues increased in the quarter, due to our reinvesting in the business to drive growth. As for construction, while we saw revenues increase this quarter due to new customers and applications in our construction business, some additional projects were rescheduled to start after the end of the quarter which adversely affected our gross profit (construction net operating revenue) in this quarter as we ramped up activity to start jobs that actually started after the end of the quarter. Lastly, we continued to work diligently to grow the family entertainment business by reinvesting in the business through improvements and new staffing plans to focus more on the customer. The new staffing plans increased compensation expense by approximately $110,000 in the quarter by adding to payroll costs, and not surprisingly, we did not immediately realize any meaningful revenue gains to offset the additional expenses and investments as the benefits were expected in subsequent quarters.”

Fiscal 2019 First Quarter Financial Review

• Total revenues for the three-month period ended June 30, 2018, were $7,910,668 as compared to $7,429,199 in the prior year quarter. This was due to increases in insurance commission and construction revenue for the period which offset a slight decrease in family entertainment revenue over the prior year period.
• Net operating revenue (gross profit) for the quarter was $2,103,900 compared to net operating revenue of $2,210,649 in the prior-year fiscal period. The decrease in gross profit for the quarter was partially the result of increases in distributor bonuses and commissions paid which exceeded a corresponding increase in revenue (due in part to the timing of fee income versus the prior year quarter) as well as a slight decrease in sales in the family entertainment business coupled with an increase in cost of sales in the family entertainment business versus the prior year quarter.
• Total general and administrative expenses were $2,278,586, or 28.8% of total revenues for the fiscal 2019 first quarter, as compared to $2,218,409, or 29.9% of total revenues for the same period of the prior year. While the expenses increased in the quarter in part due to increases in compensation and rent and occupancy expenses, general and administrative expenses declined as a percentage of total revenue.
• The Company reported an operating loss of ($174,686), compared to operating loss of ($7,760) reported in the prior-year period. The decrease was partially the result of higher bonuses and commissions being paid in the insurance distribution business and higher compensation expense associated with the family entertainment business in adjusted staffing plans that focused on intending to increase future levels of revenue.

• Operating EBITDA (excluding investment portfolio income) for the quarter was $4,654 compared to $184,410 in the prior year period. A note reconciling operating EBITDA to operating income can be found at the end of this release.
• Investment gain, net (from investment portfolio) for the first quarter ended June 30, 2018, was $41,779, as compared to $185,746 for the same quarter of the previous fiscal year.
• Net loss for the fiscal 2019 first quarter was ($156,792), or ($0.02) per share, as compared to a net income of $66,898, or $0.01 per share, in the prior year period. The decrease in net income was attributable to a decrease in income before provision for income taxes and less investment gain, net, as compared to the prior year, which was partially offset by an increase in total revenues and a $52,400 tax benefit.

Balance Sheet Information

• TMA’s balance sheet at June 30, 2018, reflected cash and cash equivalents of approximately $4.0 million, working capital of $9.4 million, and shareholders’ equity of $10.2 million; compared to cash and cash equivalents of approximately $3.4 million, working capital of $9.7 million, and shareholders’ equity of $10.4 million, at March 31, 2018.

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 business and nine 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 during fiscal 2019 and 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, our expectations as to the future benefits from reinvesting in our businesses, especially our insurance and family entertainment businesses, the effects of ongoing uncertainty regarding the Department of Labor’s Fiduciary Rule on our annuity business, our ability 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, 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 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.

Fiscal 2018 First Quarter Operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2018 First Quarter Operating Loss of ($7,760) and Depreciation and Amortization Expense of $192,170 for a total of $184,410.

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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