Ambassadors Group, Inc. Reports First Quarter 2013 Results

Ambassadors Group, Inc. Reports First Quarter 2013 Results

SPOKANE, Wash., May 1, 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 first
quarter ended March 31, 2013.


  *Gross revenue, from all sources including non-directly delivered programs,
    of $2.9 million during the seasonally slower first quarter compared to
    $2.7 million in the prior year period. Traveled 572 delegates compared to
    747 delegates in the first quarter of 2012.
  *Net loss of $8.1 million, or $0.47 per diluted share, compared to $7.9
    million, or $0.45 per diluted share, in the first quarter of 2012. Net
    loss before special items of $6.7 million compared to $7.4 million in the
    2012 period.
  *Gross margin of $1.4 million, in line with prior year period.
  *Operating expenses down $0.2 million year-over-year, excluding special
  *Cash and cash equivalents and available-for-sale securities balance of
    $55.9 million compared to $83.7 million at the same point in 2012; no debt
  *Enrolled revenue for 2013 programs down 19.4 percent year-over-year for
    all programs and 21.5 percent year-over-year for the core Student
    Ambassadors Programs, consistent with statistics noted last quarter.
  *Retention rates for enrolled students continuing to trend better than
  *Launched first ever spring sales campaign for 2014; early results from
    multichannel approach positive.

Financial Highlights
(in thousands except percent and per share data)
                                                  Quarter ended March 31,
                                                  2013        2012
Gross revenue, all travel programs                 $ 1,894    $ 1,489
Internet content and advertising revenue           $ 999      $ 1,198
Gross revenue, all sources                         $ 2,893    $ 2,687
Gross margin, all travel programs                  $ 522      $ 381
Gross margin, internet content and advertising     $ 870      $ 1,028
Gross margin, all sources                          $ 1,392    $ 1,409
Gross margin percentage                            48.1%       52.4%
Operating expense                                  $ 14,185   $ 12,894
Operating expense, before special items            $ 11,994   $ 12,161
Operating income, internet content and advertising $ 332      $ 477
Net loss before special items                      $ (6,663)  $(7,391)
Net loss                                           $ (8,059)  $ (7,906)
Loss per diluted share                             $ (0.47)   $ (0.45)

Commenting on the Company's results, Anthony Dombrowik, Ambassadors Group
Interim Chief Executive Officer said, "Our efforts during the seasonally
slower first quarter were focused on solidifying our 2013 delegate counts
through securing late enrollments and strengthening retention as we prepare
for our peak summer travel season.Our increased social media presence,
digital engagement and high touch customer service have all contributed to our
improvement in retention rates relative to prior year levels.Our selling
efforts will run right up to June in an effort to capture incremental
enrollments from last minute demand. Through increased customized family
engagement, we are working hard to preserve our delegate base."

Dombrowik continued, "Consistent with our goal to evolve to a year-round
marketing strategy, we began selling 2014 travel in February and launched our
first-ever spring campaign in March. Thus far, the results have been
encouraging.We have generated almost 1,900 enrollments for the 2014 travel
season and saw an improvement in meeting attendance rates relative to the fall
campaign.We believe our multi-channel strategy, with an emphasis on
cross-channel coordination of direct mail and digital, is playing a
significant role in these initial results.It is still very early in the 2014
selling season and it would be very premature to call this a trend. However,
we are encouraged and will work to hold these rates through the balance of our
2014 sales efforts."

"To further support the 365 days a year marketing effort, we are launching a
slate of new programs this year to meet a demand for select destinations that
favor winter season travel.We believe these programs will contribute to our
2013 enrollments and revenue.This year-round strategy better aligns us with
consumer interest, while mitigating some of the risk associated with the
historical reliance on a one-time fall marketing campaign.It will also offset
some of the seasonality inherent in our summer-focused travel business.These
changes will further enhance our ability to offer a life changing educational
experience that resonates with our target audience and give them choices for
when they are ready to participate."

Dombrowik concluded, "For the balance of 2013, we will continue to focus on
our core business.We are executing and refining our multichannel marketing
approach while rightsizing our cost structure, which for the rest of the year
is primarily focused on securing 2014 travelers.Most importantly, we are
carrying out our mission to deliver our unique People to People experiences
while preparing the next generation of globally aware citizens.We look
forward to another rewarding and safe summer travel season."

First Quarter 2013 Results

During the first quarter of 2013, the Company traveled 572 delegates, compared
to 747 delegates during the prior year quarter.The decrease in delegate count
is primarily due to the timing of the Company's Student Leadership Programs in
2013 compared to 2012, partially offset by the Presidential Inauguration
Program that traveled in January 2013.In spite of the lower delegate count,
total revenue increased 17 percent year-over-year to $2.9 million in the first
quarter of 2013 compared to $2.5 million during the prior year quarter.This
reflects increased contribution from higher price-point programs.

Gross margin for the quarter was $1.4 million, in line with the first quarter
of 2012.Gross margin percentage decreased to 48.1 percent from 52.4 percent
in the prior year period, primarily due to a lower 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

First quarter operating expenses were $14.2 million compared to $12.9 million
in the prior year period.The first quarter of 2013 included net expenses for
certain special items totaling $2.2 million, more fully described in a table
to this release and primarily related to separation payments and expenses for
two former executives.The first quarter of 2012 also included expenses for
certain special items, totaling $0.7 million.Excluding the special items,
first quarter operating expenses would have been $12.0 million compared to
$12.2 million in the prior year period, reflecting planned cost reductions to
protect profitability, partially offset by increased expenditures related to
the enhancement of the Company's year-round marketing approach.

Net loss for the first quarter of 2013 was $8.1 million, or $0.47 per diluted
share, compared to a net loss of $7.9 million, or $0.45 per diluted share, in
the prior year period.Excluding the special items, net loss for the quarter
would have been $6.7 million compared to $7.4 million, an improvement of $0.7

Balance Sheet and Liquidity

Total assets at March 31, 2013 were $124.8 million, including $55.9 million in
cash, cash equivalents and short-term available-for-sale securities. Long-term
assets totaled $40.7 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 but is categorized as held for use.Total liabilities were $68.3 million,
including $63.2 million in participant deposits for future travel.The Company
has no debt outstanding and deployable cash of $14.1 million at March 31,
2013.Deployable cash is a non-GAAP measure defined in the attached schedules.

The Company paid a quarterly dividend of $0.06 per share on March 13, 2013.On
April 16, 2013, the Company announced that its Board of Directors suspended
the quarterly dividend to preserve liquidity and enhance the Company's
financial flexibility.

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):

                                                    Quarter ended March 31,
                                                    2013        2012
Cash flow from operations                            $ 20,131   $ 26,934
Purchases of property, equipment and intangibles     (688)      (851)
Free cash flow                                       19,443     26,083
Net purchase of available-for-sale securities        (15,444)   (34,371)
Dividend payments to shareholders                    (1,017)    (1,054)
Repurchase of common stock                           (487)      --
Other cash flows, net                                (346)      (137)
Net increase (decrease) in cash and cash equivalents $ 2,149    $ (9,479)

The change in cash flow from operations between periods, and in turn free cash
flow, was driven primarily by a 14.4 percent decline in participant deposits
due to a lower number of enrollments for future travel periods.

Outlook for 2013

As of April 28, 2013, enrolled revenue for 2013 travel programs was $113.1
million, down 19.4 percent from the same point last year, based on enrolled
travelers of 18,911 compared to 22,537. Enrolled revenue for the Company's
core product, Student Ambassadors, is down 21.5 percent to $100.6 million
compared to $128.3 million at the same date last year, based on enrolled
travelers of 14,637 compared to 18,627

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.

The Company is adjusting its guidance for 2013 previously provided on February
6, 2013 as follows:

  *Consolidated gross revenues for all programs and operations to be between
    $115 million and $125 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 first quarter 2013 results
of operations on Thursday, May 2, 2013, at 11:30 a.m. Eastern Time (8:30 a.m.
Pacific Time).Participants can access the callvia the internet at The call can also be accessedbydialing
888-264-8931 or 913-312-0686 (international) and providing the passcode:
7010368.Approximately 24 hours following the call,a webcast will be
available through August 2, 2013 at A replay of
the call will alsobe available through May 7, 2013 and can be accessed by
dialing 888-203-1112 or 719-457-0820 (international) and providing the pass
code: 7010368.

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 In this press release,
"Company", "we", "us", and "our" refer to Ambassadors Group, Inc. and its

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 11, 2013, and its proxy statement filed May 9, 2012.

(in thousands, except per share data)
                                     Quarter ended March 31,
                                     2013      2012      $ Change % Change
Net revenue, non-directly delivered   $ --     $ 89      $ (89)   -100%
programs (1)
Gross revenue, directly delivered     1,894     1,178     716      61%
Internet content and advertising      999       1,198     (199)    -17%
Total revenue                         2,893     2,465     428      17%
Cost of sales, directly delivered     1,372     886       486      55%
programs (2)
Cost of sales, internet content and   129       170       (41)     -24%
Gross margin (3)                      1,392     1,409     (17)     -1%
Operating expenses:                                                
Selling and marketing               8,519     8,687     (168)    -2%
General and administration           5,666     4,207     1,459    35%
Total operating expenses              14,185    12,894    1,291    10%
Operating loss                        (12,793)  (11,485)  (1,308)  11%
Other income:                                                      
Interest and dividend income         127       241       (114)    -47%
Foreign currency expense and other   20        2         18       900%
Total other income                    147       243       (96)     -40%
Loss before income tax benefit        (12,646)  (11,242)  (1,404)  -12%
Income tax benefit                    4,587     3,336     1,251    38%
Net loss                              $ (8,059) $ (7,906) $ (153)  -2%
Weighted average shares outstanding – 17,001    17,576    (575)    -3%
Weighted average shares outstanding – 17,001    17,576    (575)    -3%
Net loss per share — basic           $ (0.47)  $ (0.45)  $ (0.02) -4%
Net loss per share — diluted          $ (0.47)  $ (0.45)  $ (0.02) -4%

(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.

             Quarter ended March 31,
             2013   2012    % Change
Gross revenue $ -- $ 310  -100%
Cost of sales --   221    -100%
Net revenue   $ -- $ 89   -100%

(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

(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.

(in thousands, except per share data)
                                          UNAUDITED             AUDITED
                                          March 31,             December 31,
                                          2013       2012       2012
Current assets:                                                
Cash and cash equivalents                  $ 8,299   $ 10,040  $ 6,150
Available-for-sale securities              47,634    73,659    32,122
Foreign currency exchange contracts        79        --       837
Prepaid program cost and expenses          26,361    23,053    17,217
Accounts receivable                        1,353     4,112     850
Deferred tax assets                        375       142       221
Total current assets                       84,101    111,006   57,397
Property and equipment, net                25,737    25,734    26,344
Available-for-sale securities              729       703       723
Foreign currency exchange contracts        32        164       --
Deferred tax assets                        779       --       --
Intangibles                                3,553     3,440     3,565
Goodwill                                   9,781     9,781     9,781
Other long-term assets                     82        85        85
Total assets                               $ 124,794 $ 150,913 $ 97,895
Liabilities and Stockholders' Equity                           
Current liabilities:                                           
Accounts payable and accrued expenses      $ 4,954   $ 5,335    $ 4,238
Participants' deposits                     62,821    73,449     25,735
Foreign currency exchange contracts        56        531       --
Other liabilities                          101       104        111
Total current liabilities                  67,932    79,419    30,084
Participants' deposits                     357       326       --
Deferred tax liabilities                   --       1,918      2,688
Total liabilities                          68,289    81,663    32,772
Stockholders' equity                       56,505    69,250     65,123
Total liabilities and stockholders' equity $ 124,794 $ 150,913 $ 97,895

(in thousands)
                                                        March 31,
                                                        2013       2012
Cash flows from operating activities:                              
Net loss                                                 $ (8,059) $ (7,906)
Adjustments to reconcile net loss to net cash provided             
by operating activities:
Depreciation and amortization                            1,326     1,181
Stock-based compensation                                 1,751     350
Deferred income taxes                                    (3,724)   (89)
Loss on disposition and impairment of property and       4         --
Excess tax benefit from stock-based compensation         351       137
Change in assets and liabilities:                                  
Accounts receivable and other assets                     (500)     (2,717)
Prepaid program costs and expenses                       (9,197)   (9,754)
Accounts payable, accrued expenses, and other current    736       (647)
Participants' deposits                                   37,443    46,379
Net cash provided by operating activities                20,131    26,934
Cash flows from investing activities:                              
Purchase of available for sale securities                (15,633)  (37,764)
Proceeds from sale of available-for-sale securities      189       3,393
Purchase of property and equipment                       (606)     (719)
Purchase of intangibles                                  (82)      (132)
Net cash used by investing activities                    (16,132)  (35,222)
Cash flows from financing activities:                              
Repurchase of common stock                               (487)     --
Dividend payment to shareholders                         (1,017)   (1,054)
Proceeds from exercise of stock options                  5         --
Excess tax benefit from stock-based compensation         (351)     (137)
Net cash used in financing activities                    (1,850)   (1,191)
Net increase (decrease) in cash and cash equivalents     2,149     (9,479)
Cash and cash equivalents, beginning of period           6,150     19,519
Cash and cash equivalents, end of period                 $ 8,299   $ 10,040

                                Special Items

In connection with the February 2013 resignations of two executives, the
Company's President and Chief Executive Officer and the President and Chief
Operating Officer of the operating subsidiary Ambassador Programs, Inc., as
well as workforce reductions during 2012, the Company incurred separation
payments during both periods.The company also incurred legal and other fees
relating to a proxy contest that occurred during the first half of 2012.

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 or
at the SEC website the first quarter of 2013, the company
received an insurance reimbursement for previously expensed legal costs
related to these matters.

As a result of these events, the operations as presented in the accompanying
financial statements for the three months ended March 31, 2013 and 2012 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):

                            Net Loss                 EPS
                            Three months ended March Three months ended March
                             31,                      31,
                            2013         2012        2013         2012
Amount before special items  $ (6,663)   $ (7,391)  $ (0.39)    $ (0.42)
Legal fees – class action    547         (180)      0.03        (0.01)
and SEC, net
Legal and other fees - proxy --         (380)      --         (0.02)
Separation payments          (2,738)     (173)      (0.16)      (0.01)
Tax impact                   795         218        0.05        0.01
Amount per consolidated      $ (8,059)   $ (7,906)  $ (0.47)    $ (0.45)
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 March 31, 2013 and 2012 (in

                                             March 31,           December 31,
                                             2013      2012      2012
Cash, cash equivalents and short-term         $ 55,933 $ 83,699 $ 38,272
available-for-sale securities
Prepaid program cost and expenses             26,361   23,053   17,217
Less: Participants' deposits                  (63,178) (73,775) (25,735)
Less: Accounts payable / accruals / other     (5,055)  (5,439)  (4,349)
Deployable cash                               $ 14,061 $ 27,538 $ 25,405

CONTACT: Investor Relations:
         Stacy Feit
         Financial Relations Board
         (213) 486-6549

company logo
Press spacebar to pause and continue. Press esc to stop.