The Marketing Alliance Announces Financial Results for its Fiscal 2019 Second Quarter Ended September 30, 2018

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

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

• Revenues increased 5.3% to $8,098,472, largely due to higher commission and fee revenue in the insurance business and an increase in construction revenue
• Operating loss was ($48,144), as compared to operating loss of ($30,771) in the prior year quarter, largely due to an increase in operating expenses which offset higher net operating revenue
• Operating EBITDA (excluding investment portfolio income) was $148,509, compared to $163,702 in the prior year quarter
• Net income was $280,151, or $0.03 per share, as compared to net income of $166,976, or $0.02 per share in the prior year period, driven in this period non-operating income from a gain (approximately $240,000 pre-tax) on the sale of excess construction equipment

Management Comments

Timothy M. Klusas, TMA’s Chief Executive Officer, commented, "On balance, we were pleased with our results this quarter, most notably the revenue growth in the insurance business as we continued to work with our carriers and agencies to increase their use of digital applications and related technologies. Our insurance agencies continued to work with their agents to increase adoption and we have seen more carriers express interest in increasing their presence on our platform. Construction revenues grew this quarter as we continued to seek new ways to utilize our equipment, particularly for roadway projects to offset the weakness in agricultural prices, such as corn and soybeans, which drive demand for our traditional field drainage services. This effort has also helped to mitigate the impact of seasonality in agriculture as well, as these months were difficult to access the farm fields filled with crops to install drainage plans. Our margin was affected adversely in the quarter by the end-of-job reconciliation of a project that started last year and ended in this quarter. Also, we made progress in right-sizing the equipment necessary for the business by divesting excess equipment not being used in our roadway projects, or foreseeably used by the agricultural drainage businesses when demand returns. Our family entertainment business was challenged in the quarter due to weather related closures in the Charlotte, NC, metropolitan area, where we have four of our nine stores. While hurricane and tropical storm damage to the stores was minor, we closed the stores for multiple days for the safety of customers and employees getting to the stores. In addition, we worked to implement pricing and training initiatives throughout all of our locations to find the right balance between optimizing revenues and providing an outstanding value for our customers.”

Fiscal 2019 Second Quarter Financial Review

• Total revenues for the three-month period ended September 30, 2018, were $8,098,472 as compared to $7,688,047 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 $2,292,352 compared to net operating revenue of $2,187,837 in the prior-year fiscal period. Increases in gross profit in the insurance distribution business offset decreases in the construction and family entertainment businesses.
• Operating expenses increased to $2,340,496, or 28.9% of total revenues for the fiscal 2019 second quarter, as compared to $2,218,608, or 28.9% of total revenues for the same period of the prior year. While operating expenses remained flat as a percentage of total revenues, expenses increased due to higher professional fees and compensation, specifically in the family entertainment business as we implemented new initiatives and training (above), which was offset by a decrease in administrative and technology expenses.
• The Company reported an operating loss of ($48,144), compared to operating loss of ($30,771) reported in the prior-year period. This increase in operating loss (decrease in operating profit) was the result of the factors mentioned above.

• Operating EBITDA (excluding investment portfolio income) for the quarter was $148,509 compared to $163,702 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 non-operating investment portfolio) for the second fiscal quarter ended September 30, 2018 was $243,972, as compared to $362,384 for the same quarter of the previous fiscal year.
• Net income for the fiscal 2019 second quarter was $280,151, or $0.03 per share, as compared to a net income of $166,976, or $0.02 per share, in the prior year period. The increase in net income was primarily due to the one-time gain on equipment sales in the construction business.

Fiscal 2019 Six Months Financial Review

• Total revenues for the six months ended September 30, 2018 were $16,009,140, compared to $15,117,246, for the prior-year period. Increases in insurance distribution revenues of approximately $900,000 and in increase in construction revenue helped to offset a decrease in family entertainment revenue for the six-month period.
• Net operating revenue gross profit was $4,396,252, which compares to net operating revenue of $4,398,486 in the prior-year fiscal period.
• Operating expenses increased in the first six months of this fiscal year compared to the same period last year due, in part, to increases in operating expenses such as compensation and professional fees, primarily in the family entertainment business, offset by a decrease in technology expenses.
• The Company reported an operating loss of ($222,487) for the six months ended September 30, 2018, compared to an operating loss of ($38,531) for the prior-year period due to the factors discussed above.
• Operating EBITDA (excluding investment revenue) for the six months was $153,347 versus $348,059 in the prior-year period. A note reconciling Operating EBITDA to Operating Income can be found at the end of this release.
• Net income for the six months ended September 30, 2018, was $123,359 or $0.02 per share, compared to a net income of $233,874, or $.03 per share, for the prior-year six-month period. The year over year decrease was the result of lower operating profit, lower investment gain, net this year of $285,751 compared to $548,130 in the prior year period. These were partially offset by a gain on sale of equipment and a lower tax rate in this six-month period compared to the prior year period.

Balance Sheet Information

• TMA’s balance sheet at September 30, 2018 reflected cash and cash equivalents of approximately $4.3 million, working capital of $9.6 million, and shareholders’ equity of $10.5 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, the effects of ongoing uncertainty regarding the Department of Labor’s Fiduciary Rule in 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 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 second quarter operating loss of ($48,144) and depreciation and amortization expense of $196,653 for a total of $148,509. Fiscal 2018 second quarter operating EBITDA (excluding investment portfolio income) was determined by adding Fiscal 2018 second quarter operating loss of ($30,771) and depreciation and amortization expense of $194,473 for a total of $163,702.

Fiscal 2019 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2019 six-month operating loss of ($222,487) and depreciation and amortization expense of $375,834 for a total of $153,347. Fiscal 2019 six months operating EBITDA (excluding investment portfolio income) was determined by adding fiscal 2018 six-month operating loss of ($38,531) and depreciation and amortization expense of $386,590 for a total of $348,059.

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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