Ambassadors Group, Inc. Reports Fourth Quarter 2012 Results SPOKANE, Wash., Feb. 6, 2013 (GLOBE NEWSWIRE) -- Ambassadors Group, Inc. (Nasdaq:EPAX), a leading provider of educational travel experiences and online education research materials, today announced its results for the fourth quarter and year ended December 31, 2012. Overview *Gross revenue, from all sources including non-directly delivered programs, for the year ended December 31, 2012 of $139.9 million compared to $155.1 million in 2011. Full year 2012 total reported revenue of $58.1 million compared to $66.4 million last year. *Full year 2012 net income of $1.7 million, or $0.10 per diluted share, compared to $3.0 million, or $0.17 per diluted share, in 2011. Net income before special items of $3.2 million compared to $4.6 million in 2011. *Traveled 21,252 delegates in 2012 compared to 23,928 delegates in 2011. *2012 gross margin of 36.7 percent compared to 38.1 percent last year. *For the full year 2012, total operating expenses down $5.9 million compared to 2011. *Company completed approximately 48 percent of its $25 million return of capital commitment; paid $8.8 million special dividend and executed $3.1 million share repurchase during the fourth quarter of 2012. *Cash and cash equivalents and available-for-sale securities balance of $38.3 million and no debt outstanding. *Enrolled revenue for 2013 programs down 19.2 percent year-over-year for all programs and 21.7 percent year-over-year for the core Student Ambassadors Programs. *Withdraw rates for enrolled students trending 10.9percent better than 2012. Financial Highlights (in thousands except percent and per share data) UNAUDITED Quarter ended December 31, Year ended December 31, 2012 2011 2012 2011 Gross revenue, all travel $ 1,179 $ 3,679 $ 135,742 $ 151,035 programs Internet content and $ 1,101 $ 1,195 $ 4,207 $ 4,046 advertising revenue Gross revenue, all sources $ 2,280 $ 4,874 $ 139,949 $ 155,081 Gross margin, all travel $ 313 $ 873 $ 47,738 $ 55,570 programs Gross margin, internet $ 968 $ 1,026 $ 3,653 $ 3,471 content and advertising Gross margin percentage 56.2% 39.0% 36.7% 38.1% Operating expense $ 12,497 $ 13,098 $ 51,069 $ 56,931 Operating income, internet $ 269 $315 $ 1,327 $ 1 ,176 content and advertising Net income (loss) before $ (10,064) $ (7,488) $ 3,208 $ 4,565 special items Net income (loss) $ (10,033) $ (7,798) $ 1,744 $ 2,956 Income (loss) per diluted $ (0.58) $ (0.45) $ 0.10 $ 0.17 share Commenting on the Company's results, Jeff Thomas, Ambassador Group's President and Chief Executive Officer said, "We completed 2012 in line with our expectations.During the year, we focused our efforts on executing our strategic plan to continue to evolve our multichannel marketing approach to secure travelers, right size our cost structure and return value to shareholders.We have made significant progress in all three of these areas." Thomas continued, "We continued to strengthen our sales and marketing team in 2012 by refocusing existing resources and with additional hires to support our digital efforts.At the same time, we reduced operating expenses by $5.9 million, meeting our target, and protecting our profitability in the face of an 11 percent decline in total delegates traveled for the year.We also returned capital to our shareholders in the form of a special dividend and an accelerated share repurchase program during the fourth quarter." "We made significant strides on our multi-channel strategy this year as we refine the right mix of digital, direct mail, and other methods in our approach.We continued to roll out market-specific coordination of direct mail and digital and also continue to test higher touch conversion channels including webinars and telesales, both of which have performed well thus far in generating incremental enrollments for the 2013 programs.In 2013, we will continue to adjust the direct mail component to further increase the productivity of the campaign while reinvesting these savings in digital initiatives as we continue to focus on synchronization of the direct mail and digital channels." "In addition, we will be testing a selling cycle shift this spring to accelerate the timing of our early enrollment efforts.Moving to multiple campaigns will serve two purposes: to provide a last enrollment opportunity for the 2013 travel season as well as kick off the selling season for our 2014 programs much earlier than we have historically.The changes we have made to our business, as well as improved information from our database suppliers, are enabling us to evolve to a year-round marketing strategy that better aligns us with consumer behavior while mitigating some of the risk associated with such a strong emphasis on the fall marketing campaign." "We are seeing our hard work have an impact.The withdraw rate to this point in the campaign for 2013 travel has improved compared to the same point in 2012.We believe enhanced social media engagement, coupled with higher touch, customer service-driven tools, were significant contributors to the current year-over-year improvements in retaining delegates to this point in the sales cycle." Thomas concluded, "While we still expect 2013 travel to be less than in 2012 and we are cognizant of the challenges we face, we remain concentrated on adapting our marketing in ways that will support our long term success in order to focus our efforts on creating shareholder value." Fourth Quarter 2012 Results During the fourth quarter of 2012, the Company traveled 162 delegates, compared to 491 delegates during the prior year quarter, reflecting anticipated decline in the Company's Citizen Ambassador program. Total revenue of $1.3 million declined 32 percent from $2.0 million during the prior year quarter primarily driven by a 68 percent decline in travel-related revenue. Net loss for the fourth quarter of 2012 was $10.0 million, or $0.58 per diluted share, compared to a net loss of $7.8 million, or $0.45 per diluted share, in the prior year period. Gross margin for the quarter was $1.3 million, down from $1.9 million in the fourth quarter of 2011 primarily related to the aforementioned revenue decline.Gross margin percentage increased to 56.2 percent from 39.0 percent in the prior year period primarily due to a higher mix of revenue from BookRags, the Company's online education research business. Gross margin is calculated as the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue less cost of sales non-directly delivered programs, costs of sales directly delivered programs and cost of sales internet content and advertising.Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue. Full Year 2012 Results For the year ended December 31, 2012, the Company traveled 21,252 delegates, an 11 percent decrease compared to 23,928 delegates in 2011. Total revenue of $58.1 million declined 13 percent from $66.4 million last year, driven primarily by a 14 percent decline in travel-related revenue, partially offset by a 4 percent increase in internet content and advertising revenue related to BookRags. 2012 net income was $1.7 million, or $0.10 per diluted share, compared to net income of $3.0 million, or $0.17 per diluted share, in 2011. 2012 gross margin was $51.4 million, down from $59.0 million in 2011.Gross margin percentage decreased to 36.7 percent from 38.1 percent last year primarily due to higher air and land costs year-over-year. Total operating expenses for 2012 decreased $5.9 million, or 10 percent, compared to 2011, as a result of the Company's cost cutting initiatives. Balance Sheet and Liquidity Total assets at December 31, 2012 were $97.9 million, including $38.3 million in cash, cash equivalents and short-term available-for-sale securities. Long-term assets totaled $40.5 million primarily reflecting goodwill and intangible assets of the BookRags business, technology, hardware and systems used to deliver services, and the Company's office building which has been listed for sale.Total liabilities were $32.8 million, including $25.7 million in participant deposits for future travel.The Company has no debt outstanding with deployable cash of $25.4 million at December 31, 2012.Deployable cash is a non-GAAP measure defined in the attached schedules. The Company paid a special cash dividend of $0.50 per share on November 22, 2012 and a regular quarterly dividend of $0.06 per share on December 6, 2012. During the fourth quarter of 2012, the Company repurchased 650,121 shares for approximately $3.1 million including brokerage fees.At December 31, 2012, the Company had 17,047,470 shares of common stock issued and outstanding. Approximately $13.1 million remains available for repurchase under the Company's plan. The following table summarizes the cash flows as further disclosed in the accompanying financial statements.Free cash flow, a non-GAAP measure, which is defined as cash flow from operations less purchase of property, equipment and intangibles, is also noted (in thousands): UNAUDITED Twelve months ended December 31, 2012 2011 Cash flow from operations $ 2,219 $ (6,655) Purchases of property, equipment and (5,672) (3,594) intangibles Free cash flow (3,453) (10,249) Net proceeds from available-for-sale 6,499 34,342 securities Dividend payments to shareholders (13,012) (4,258) Repurchase of common stock (3,056) (7,590) Other cash flows, net (347) 436 Net change in cash and cash equivalents $ (13,369) $ 12,681 The change in cash flow from operations between periods, and in turn free cash flow, was driven primarily by the timing of recurring prepaid program costs and expenses relative to 2011. Purchases of property and equipment increased as we focused on sales and marketing systems and website improvements. Outlook for 2013 As of February 3, 2013, enrolled revenue for 2013 travel programs was $127.2 million, down 19.2 percent from the same point last year, based on enrolled travelers of 20,846 compared to 24,881.Enrolled revenue for the Company's core product, Student Ambassadors, is down 21.7 percent to $115.7 million compared to $147.9 million at the same date last year, based on enrolled travelers of 16,886 compared to 21,476. Enrolled revenue consists of estimated gross receipts to be recognized upon travel of an enrolled participant and revenue recognized for any delegates who have completed travel for the travel year referenced. Reported net enrollments consist of all participants who have enrolled in the Company's programs less those that have already withdrawn, including travel that has been completed.Enrolled revenue may not result in actual gross receipts eventually recognized by the Company due to both withdrawals from the Company's programs and expected future enrollments. Based on current visibility for the balance of the year, the Company is providing guidance as follows: *Consolidated gross revenues for all programs and operations to be between $125 and $135 million; *Consolidated gross margin as a percentage of gross revenue for all programs and operations of 36 percent to 37 percent; and *Net income before any special items of between $0 million and $2 million. Conference Call and Webcast Information The Company will host a conference call to discuss fourth quarter and full year 2012 results of operations on Thursday, February 7, 2013, at 11:30 a.m. Eastern Time (8:30 a.m. Pacific Time).Participants can access the callvia the internet at www.ambassadorsgroup.com/EPAX. The call can also be accessedbydialing 888-715-1397 or 913-312-0855 (international) and providing the passcode: 9875414.Approximately 24 hours following the call,a webcast will be available through April 5, 2013 at www.ambassadorsgroup.com/EPAX. A replay of the call will alsobe available through February 12, 2013 and can be accessed by dialing 888-203-1112 or 719-457-0820 (international) and providing the pass code: 9875414. About Ambassadors Group, Inc. Ambassadors Group, Inc. (Nasdaq:EPAX) is an education company located in Spokane, Washington. Ambassadors Group, Inc. is the parent company of Ambassador Programs, Inc., World Adventures Unlimited, Inc. and BookRags, Inc., an educational research website. The Company also oversees the Washington School of World Studies, an accredited travel study and distance learning school. Additional information about Ambassadors Group, Inc. and its subsidiaries is available at www.ambassadorsgroup.com. In this press release, "Company", "we", "us", and "our" refer to Ambassadors Group, Inc. and its subsidiaries. The Ambassadors Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3541 Forward-Looking Statements This press release contains forward-looking statements regarding actual and expected financial performance and the reasons for variances between period-to-period results. Forward-looking statements, which are included per the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, may involve known and unknown risks, uncertainties and other factors that may cause actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this release. Such forward-looking statements speak only as of the date of this release and may not reflect risks related to international unrest, outbreak of disease, conditions in the travel industry, the direct marketing environment, changes in economic conditions and changes in the competitive environment. We expressly disclaim any obligation to provide public updates or revisions to any forward-looking statements found herein to reflect any changes in expectations or any change in events. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be met. For a more complete discussion of certain risks and uncertainties that could cause actual results to differ materially from anticipated results, please refer to the Ambassadors Group, Inc. 10-K filed March 12, 2012, and its proxy statement filed May 9, 2012. AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) UNAUDITED Quarter ended December 31, 2012 2011 $ Change % Change Net revenue, non-directly $ 248 $ 713 $ (465) -65% delivered programs (1) Gross revenue, directly -- 70 (70) -100% delivered programs(2) Internet content and advertising 1,101 1,195 (94) -8% revenue Total revenue 1,349 1,978 (629) -32% Cost of sales, directly (65) (90) 25 28% delivered programs (2) Cost of sales, internet content 133 169 (36) -21% and advertising Gross margin (3) 1,281 1,899 (618) -33% Operating expenses: Selling and marketing 8,386 8,961 (575) -6% General and administration 4,111 4,137 (26) -1% Total operating expenses 12,497 13,098 (601) -5% Operating loss (11,216) (11,199) (17) 0% Other income (expense) Interest and dividend income 276 250 26 10% Foreign currency expense and (8) (1) (7) -700% other Total other income 268 249 19 8% Loss before income tax benefit (10,948) (10,950) 2 0% Income tax benefit 915 3,152 (2,237) -71% Net loss $ (10,033) $ (7,798) $ (2,235) -29% Weighted average shares 17,333 17,493 (160) -1% outstanding – basic Weighted average shares 17,333 17,493 (160) -1% outstanding – diluted Net loss per share — basic $ (0.58) $ (0.45) $ (0.13) -29% Net loss per share — diluted $ (0.58) $ (0.45) $ (0.13) -29% (1) Net revenue, non-directly delivered programs consists of gross revenue, less program pass-through expenses for non-directly delivered programs because we primarily engage third-party operators to perform these services. UNAUDITED Quarter ended December 31, 2012 2011 % Change Gross revenue $ 1,178 $ 3,610 -67% Cost of sales 930 2,897 -68% Net revenue $ 248 $ 713 -65% (2) Gross revenue and cost of sales for directly delivered programs are reported as separate items because we plan, organize and operate all activities, including speakers, facilitators, events, accommodations and transportation. (3) Gross margin is calculated as the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue less cost of sales non-directly delivered programs, costs of sales directly delivered programs and cost of sales internet content and advertising.Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue. AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) UNAUDITED Twelve months ended December 31, 2012 2011 $ Change % Change Net revenue, non-directly delivered $ 44,837 $ 51,966 $ (7,129) -14% programs (1) Gross revenue, directly delivered 9,008 10,426 (1,418) -14% programs(2) Internet content and advertising 4,207 4,046 161 4% revenue Total revenue 58,052 66,438 (8,386) -13% Cost of sales, directly delivered 6,107 6,822 (715) -10% programs (2) Cost of sales, internet content and 554 575 (21) -4% advertising Gross margin (3) 51,391 59,041 (7,650) -13% Operating expenses: Selling and marketing 34,845 40,367 (5,522) -14% General and administration 16,224 16,564 (340) -2% Total operating expenses 51,069 56,931 (5,862) -10% Operating income 322 2,110 (1,788) -85% Other income (expense) Interest and dividend income 1,730 1,340 390 29% Foreign currency expense and other (13) 155 (168) -108% Total other income 1,717 1,495 222 15% Income before income tax provision 2,039 3,605 (1,566) -43% Income tax provision (295) (649) 354 55% Net income $ 1,744 $ 2,956 $ (1,212) -41% Weighted average shares outstanding 17,530 17,746 (216) -1% – basic Weighted average shares outstanding 17,530 17,869 (339) -2% – diluted Net income per share — basic $ 0.10 $ 0.17 $ (0.07) -41% Net income per share — diluted $ 0.10 $ 0.17 $ (0.07) -41% (1) Net revenue, non-directly delivered programs consists of gross revenue, less program pass-through expenses for non-directly delivered programs because we primarily engage third-party operators to perform these services. UNAUDITED Twelve months ended December 31, 2012 2011 % Change Gross revenue $ 126,734 $ 140,609 -10% Cost of sales 81,897 88,643 -8% Net revenue $ 44,837 $ 51,966 -14% (2) Gross revenue and cost of sales for directly delivered programs are reported as separate items because we plan, organize and operate all activities, including speakers, facilitators, events, accommodations and transportation. (3) Gross margin is calculated as the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue less cost of sales non-directly delivered programs, costs of sales directly delivered programs and cost of sales internet content and advertising.Gross margin percentage is calculated as gross margin divided by the sum of gross revenue non-directly delivered programs, gross revenue directly delivered programs and internet content and advertising revenue. AMBASSADORS GROUP, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) UNAUDITED AUDITED 2012 2011 % Change Assets Current assets: Cash and cash equivalents $ 6,150 $ 19,519 -68% Available-for-sale securities 32,122 39,128 -18% Foreign currency exchange contracts 837 -- 100% Prepaid program cost and expenses 17,217 13,299 29% Accounts receivable 850 1,395 -39% Deferred tax asset 221 668 -67% Total current assets 57,397 74,009 -22% Property and equipment, net 26,344 26,104 1% Available-for-sale securities 723 700 3% Foreign currency exchange contracts -- -- 0% Deferred tax asset -- -- -100% Intangibles 3,565 3,421 4% Goodwill 9,781 9,781 0% Other long-term assets 85 85 0% Total assets $ 97,895 $ 114,100 -14% Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 4,238 $ 5,858 -28% Participants' deposits 25,735 27,396 -6% Foreign currency exchange contracts -- 1,671 -100% Deferred tax liability -- -- 100% Other liabilities 111 112 -1% Total current liabilities 30,084 35,037 -14% Participants' deposits -- -- 0% Foreign currency exchange contracts -- 102 -100% Deferred tax liabilities 2,688 2,004 34% Total liabilities 32,772 37,143 -12% Stockholders' equity 65,123 76,957 -15% Total liabilities and stockholders' equity $ 97,895 $ 114,100 -14% AMBASSADORS GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) UNAUDITED December 31, 2012 2011 Cash flows from operating activities: Net Income $ 1,744 $ 2,956 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 5,273 4,742 Stock-based compensation 1,455 1,475 Deferred income taxes 387 420 Gain on foreign currency exchange contracts -- -- Loss on disposition and impairment of property and 24 246 equipment Excess tax benefit (shortfall) from stock-based 347 (160) compensation Change in assets and liabilities: Accounts receivable and other assets 545 581 Prepaid program costs and expenses (3,918) (10,069) Accounts payable, accrued expenses, and other current (1,977) 194 liabilities Participants' deposits (1,661) (7,040) Net cash provided by (used in) operating activities 2,219 (6,655) Cash flows from investing activities: Purchase of available for sale securities (74,022) (48,693) Proceeds from sale of available-for-sale securities 80,521 83,035 Purchase of property and equipment (5,139) (3,101) Proceeds from sale of property and equipment -- 49 Purchase of intangibles (533) (493) Net cash provided by investing activities 827 30,797 Cash flows from financing activities: Repurchase of common stock (3,056) (7,590) Dividend payment to shareholders (13,012) (4,258) Proceeds from exercise of stock options -- 227 Excess tax shortfall (benefit) from stock-based (347) 160 compensation Net cash used in financing activities (16,415) (11,461) Net increase (decrease) in cash and cash equivalents (13,369) 12,681 Cash and cash equivalents, beginning of period 19,519 6,838 Cash and cash equivalents, end of period $ 6,150 $ 19,519 Special Items Due to cost cutting initiatives, the Company incurred charges throughout 2012 related to severance payments made as the workforce was reduced.The company also incurred legal and other fees relating to a proxy contest. Lastly, as previously disclosed, the Company was party to a shareholder class action suit and to an inquiry by the U.S. Securities and Exchange Commission ("SEC") more fully described in the Company's filings with the SEC on Form 10-K and 10-Q available on the Company's website www.ambassadorsgroup.com or at the SEC website www.sec.gov. As a result of these events, the operations as presented in the accompanying financial statements for the three months and year ended December 31, 2012 and 2011, do not reflect a meaningful comparison between periods or in relation to the operational activities of the Company.In order to provide more meaningful disclosure, the following table represents a reconciliation of certain earnings measures before special items to those same items after the impact of special items (in thousands except per share data): UNAUDITED Net Loss EPS Three months ended December Three months ended 31, December 31, 2012 2011 2012 2011 Amount before special items $ (10,064) $ (7,488) $ (0.58) $ (0.43) Asset impairments and loss -- (114) -- (0.01) on sale Foreign currency -- -- -- -- de-designation gain Legal fees – class action 74 (258) -- (0.01) and SEC, net Legal and other fees - proxy -- -- -- -- contest Separation payments (40) -- -- -- Tax impact (3) 62 -- -- Amount per consolidated $ (10,033) $ (7,798) $ (0.58) $ (0.45) statement of operations UNAUDITED Net Income EPS Twelve months ended Twelve months ended December 31, December 31, 2012 2011 2012 2011 Amount before special items $ 3,208 $ 4,565 $ 0.18 $ 0.26 Asset impairments and loss -- (236) -- (0.01) on sale Foreign currency -- 183 -- 0.01 de-designation gain Legal fees – class action (60) (1,909) -- (0.11) and SEC, net Legal and other fees - proxy (1,370) -- (0.08) -- contest Separation payments (282) -- (0.01) -- Tax impact 248 353 0.01 0.02 Amount per consolidated $ 1,744 $ 2,956 $ 0.10 $ 0.17 statement of operations Deployable Cash Deployable cash is a non-GAAP liquidity measurement and is calculated as the sum of cash and cash equivalents, short-term available-for-sale securities, and prepaid program costs and expenses, less the sum of accounts payable, accrued expenses and other short-term liabilities (excluding deferred taxes) and participant deposits. We believe this non-GAAP measurement is useful to investors in understanding important characteristics of our business. The following summarizes deployable cash at December 31, 2012 and 2011 (in thousands): UNAUDITED December 31, 2012 2011 Cash, cash equivalents and short-term available-for-sale $ 38,272 $ 58,647 securities Prepaid program cost and expenses 17,217 13,299 Less: Participants' deposits (25,735) (27,396) Less: Accounts payable / accruals / other liabilities (4,349) (5,970) Deployable cash $ 25,405 $ 38,580 CONTACT: Company Contact: Anthony Dombrowik (509) 568-7800 Investor Relations: Stacy Feit Financial Relations Board (213) 486-6549 company logo
Ambassadors Group, Inc. Reports Fourth Quarter 2012 Results
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