Ambassadors Group, Inc. Reports First Quarter 2014 Results

Ambassadors Group, Inc. Reports First Quarter 2014 Results

SPOKANE, Wash., April 30, 2014 (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, 2014.

Overview

  *Gross revenue, from all sources including non-directly delivered programs,
    of $1.6 million during the seasonally slower first quarter compared to
    $2.9 million in the prior year period. Traveled 183 delegates compared to
    572 delegates in the first quarter of 2013, which included the
    Presidential Inauguration Program that traveled in January 2013.
    
  *Gross margin of $1.1 million compared to $1.4 million in the 2013 period.
    
  *Operating expenses for the quarter, excluding the impact of special items,
    of $10.0 million, a decrease of $2.0 million year-over-year.
    
  *Net loss before special items of $7.3 million compared to $6.7 million
    last year; Net loss of $7.6 million, compared to net loss of $8.1 million
    in the first quarter of 2013.
    
  *Cash and cash equivalents and available-for-sale securities balance of
    $64.4 million; deployable cash, as defined, of $15.0 million and no debt
    outstanding.
    
  *Enrolled revenue for 2014 programs down 6.8 percent year-over-year for all
    programs and 8.4 percent year-over-year for core Student Ambassador
    Programs.Prior year enrolled travelers for Discovery Student Adventures
    and People to People China programs have been excluded for year-over-year
    comparability given the Company's decision during the third quarter of
    2013 to no longer operate these programs in 2014.

Financial Highlights
(in thousands except percent and per share data)
                                                             
                                                  UNAUDITED
                                                  Quarter ended March 31,
                                                  2014        2013
Gross revenue, all travel programs                 $560        $1,894
Internet content and advertising revenue           $1,008      $999
Gross revenue, all sources                         $1,568      $2,893
Gross margin, all travel programs                  $180        $522
Gross margin, internet content and advertising     $876        $870
Gross margin, all sources                          $1,056      $1,392
Gross margin percentage                            67.3%       48.1%
Operating expense                                  $10,241     $14,185
Operating expense, before special items            $9,952      $11,994
Operating income, internet content and advertising $336        $332
Net loss before special items                      $(7,310)   $(6,663)
Net loss                                           $(7,551)   $(8,059)
Loss per diluted share before special items        $(0.44)    $(0.39)
Loss per diluted share                             $(0.45)    $(0.47)

Commenting on the Company's results, Anthony Dombrowik, Ambassadors Group
Interim Chief Executive Officer said, "We gained efficiencies this quarter,
evidenced by the $2 million reduction in operating expenses before special
items.As we continue to focus on protecting our profitability, we are
targeting a $3 million to $4 million reduction in operating expenses on a full
year basis during 2014, in addition to the $10.8 million of cost savings
achieved in 2012 and 2013."

Dombrowik continued, "While being fiscally responsible, we have also made
meaningful progress in our evolution to a year-round, integrated multi-channel
marketing and sales strategy. In the first quarter we saw the integrated model
begin to deliver important efficiencies on a year-over-year basis as we
applied what we have learned in the last year from multiple test initiatives.
For instance, the recently completed winter campaign, aimed at 2014 travel
season enrollments, delivered about 90 percent of last year's campaign on a 35
percent reduction in spend. We have also driven meaningful efficiencies in our
spring campaign aimed at 2015 travel season enrollments owing to our ongoing
efforts to source, nurture, and enroll leads across existing and new direct
mail, digital, and relationship based marketing and sales channels. As a
reminder, we held our first-ever spring campaign last year; it was designed to
uncover the optimal volume, targeting, timing, messaging and markets for this
time period. Based on our findings, we deliberately ran a smaller campaign
this spring, which thus far has delivered our anticipated enrollments on
decreased spend, while also exhibiting notable year- over- year improvements
in response rates and meeting attendance."

Dombrowik concluded, "We have delivered gross Student enrollments for the 2014
travel season on par with the prior year, while materially improving our
marketing and financial model.While we are encouraged by the results of our
recent campaigns, the reality is that we continue to face a higher withdrawal
rate for the 2014 travel season in spite of our augmented retention efforts.
Personal financial reasons are by far the number one factor for families that
withdraw -- even more so than in 2013.As a result, we have seen our net
enrollments for the 2014 travel season remain on the trajectory we noted last
quarter, with point in time enrolled revenue now down 6.8 percent. We are
disappointed with these results; however, we firmly believe the long-range
changes we are making to our sales and marketing strategies are the right ones
to put us on track to not only drive delegate growth, but also do so in a more
cost effective manner.Our extended sales and delivery business cycle demands
that we take a long-term view and rigorously apply what we have learned over
each seasonal campaign. The spring campaign for 2015 travel is a strong
foundation as we prepare for our next push for enrollments this fall for
2015."

First Quarter 2014 Results

During the first quarter of 2014, the Company traveled 183 delegates, compared
to 572 delegates during the prior year quarter, which included travelers on
the Company's Presidential Inauguration Program in January 2013. As a result,
total revenue of $1.6 million declined 46 percent from $2.9 million in the
prior year quarter. Gross margin for the quarter was $1.1 million compared to
$1.4 million in the first quarter of 2013. Gross margin percentage increased
to 67.3 percent from 48.1 percent in the prior year period due primarily to a
higher mix of revenue contribution 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.

First quarter 2014 operating expenses were $10.2 million, down 28 percent from
$14.2 million in the prior year period.Excluding special items, first quarter
2014 operating expenses declined $2.0 million, or 17 percent.Selling and
marketing expenses decreased approximately $1.5 million year- over -year
mainly due to a purposeful reduction in marketing spend as well as lower
overall personnel costs.General and administrative expenses decreased
approximately $2.5 million primarily due to separation expenditures incurred
in the first quarter of 2013 that did not recur in the current period.

Net loss for the first quarter of 2014 was $7.6 million, or $0.45 per diluted
share, compared to net loss of $8.1 million, or $0.47 per diluted share, in
the prior year period. First quarter 2014 net loss before special items was
$7.3 million compared to $6.7 million in 2013.

Balance Sheet and Liquidity

Total assets at March 31, 2014 were $114.8 million including cash, cash
equivalents and short-term available-for-sale securities of $64.4 million.
Long-term assets totaled $32.0 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 $66.0 million, including $60.6 million
in participant deposits for future travel. The Company had no debt outstanding
and deployable cash of $15.0 million at March 31, 2014.Deployable cash is a
non-GAAP measure defined in the attached schedules.

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 purchases of property, equipment
and intangibles, is also noted (in thousands):

                                                 UNAUDITED
                                                 Three months ended March 31,
                                                 2014           2013
Net cash provided by operating activities         $19,365        $20,131
Purchases of property, equipment and intangibles  (760)         (688)
Free cash flow                                    18,605        19,443
                                                               
Net proceeds from sale (purchase) of              (15,489)      (15,444)
available-for-sale securities
Dividend payments to shareholders                --           (1,017)
Repurchase of common stock                        --           (487)
Other cash flows, net                             (15)          (346)
Net increase in cash and cash equivalents         $3,101         $2,149

Outlook for 2014

As of April 27, 2014, enrolled revenue for 2014 travel programs was 102.3
million, down 6.8 percent from the same point last year, based on enrolled
travelers of 16,849 compared to 18,149. Enrolled revenue for the Company's
core product, Student Ambassadors, is down 8.4 percent to 91.9 million
compared to 100.3 million at the same date last year, based on enrolled
travelers of 13,138 compared to 14,591. Prior year data excludes the impact of
enrolled travelers for Discovery Student Adventures and China programs as of
this time last year to reflect year-over-year comparability given the
Company's decision to no longer operate these programs in 2014.

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 updating its guidance for 2014 as follows:

  *Consolidated gross revenues for all programs and operations to be between
    $104 million and $110 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 and $2 million.

Conference Call and Webcast Information

The Company will host a conference call to discuss first quarter 2014 results
of operations on Thursday, May 1, 2014, 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
877-280-2342 or 212-444-0896 (international) and providing the passcode:
1896989.Approximately 24 hours following the call,a webcast will be
available through August 1, 2014 at www.ambassadorsgroup.com/EPAX. A replay of
the call will alsobe available through May 6, 2014 and can be accessed by
dialing 888-203-1112 or 719-457-0820 (international) and providing the pass
code: 1896989.

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.

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 27, 2014, and its proxy statement filed April 11, 2014.

AMBASSADORS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
                                                                  
                                         UNAUDITED
                                         Quarter ended March 31,
                                         2014     2013      $ Change % Change
Net revenue, non-directly delivered       $116     $--       $116     100%
programs (1)
Gross revenue, directly delivered         273     1,894    (1,621) -86%
programs(2)
Internet content and advertising revenue  1,008   999      9       1%
Total revenue                             1,397   2,893    (1,496) -52%
Cost of sales, directly delivered         209     1,372    (1,163) -85%
programs (2)
Cost of sales, internet content and       132     129      3       2%
advertising
Gross margin (3)                          1,056   1,392    (336)   -24%
                                                                  
Operating expenses:                                                
Selling and marketing                    6,993   8,519    (1,526) -18%
General and administration                3,140   5,666    (2,526) -45%
Restructuring costs                       108     --      108     100%
Total operating expenses                  10,241  14,185   (3,944) -28%
                                                                  
Operating loss                            (9,185) (12,793) 3,608   28%
                                                                  
Other income (expense):                                            
Interest and dividend income              131     127      4       3%
Foreign currency and other income         3       20       (17)    -85%
Total other income                        134     147      (13)    -9%
Loss before income tax benefit            (9,051) (12,646) 3,595   28%
Income tax benefit                        1,500   4,587    (3,087) -67%
Net loss                                  $(7,551) $(8,059) $508     6%
                                                                  
Weighted average shares outstanding –     16,755  17,001   (246)   -1%
basic
Weighted average shares outstanding –     16,755  17,001   (246)   -1%
diluted
                                                                  
Net loss per share — basic               $(0.45) $(0.47)  $0.02   4%
Net loss per share — diluted              $(0.45) $(0.47)  $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.
                                                        
                        UNAUDITED
                        Quarter ended March 31,
                        2014             2013             % Change
Gross revenue           $287             $--              100%
Cost of sales            171             --              100%
Net revenue             $116             $--              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
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)
                                                          
                                          UNAUDITED         AUDITED
                                          March 31,         December 31,
                                          2014     2013     2013
Assets                                                    
Current assets:                                            
Cash and cash equivalents                 $12,574  $8,299   $9,473
Available-for-sale securities             51,834  47,634  36,174
Foreign currency exchange contracts       20      79      --
Prepaid program cost and expenses         14,661  26,361  7,069
Accounts receivable                       1,312   1,353   1,792
Deferred tax assets                        2,382   375     1,295
Total current assets                      82,783  84,101  55,803
Property and equipment, net               17,925  25,737  18,452
Available-for-sale securities             723     729     719
Foreign currency exchange contracts       15      32      --
Deferred tax assets                        --     779     --
Intangibles                                3,502   3,553   3,522
Goodwill                                  9,781   9,781   9,781
Other long-term assets                     84      82      82
Total assets                              $114,813 $124,794 $88,359
                                                          
Liabilities and Stockholders' Equity                      
Current liabilities:                                       
Accounts payable and accrued expenses     $3,339   $4,954   $3,587
Participants' deposits                    59,877  62,821   26,362
Foreign currency exchange contracts       134     56      244
Other liabilities                          130     101      119
Total current liabilities                 63,480  67,932  30,312
Participants' deposits                    712     357     --
Foreign currency exchange contracts       --     --     52
Deferred tax liabilities                   1,835   --     2,087
Total liabilities                         66,027  68,289  32,451
Stockholders' equity                      48,786  56,505   55,908
Total liabilities and stockholders' equity $114,813 $124,794 $88,359


AMBASSADORS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                                                  
                                                         UNAUDITED
                                                         March 31,
                                                         2014      2013
Cash flows from operating activities:                              
Net loss                                                  $(7,551) $(8,059)
Adjustments to reconcile net loss to net cash provided by          
operating activities:
Depreciation and amortization                             1,307    1,326
Stock-based compensation                                  202      1,751
Deferred income tax benefit                               (1,484)  (3,724)
Loss on disposition and impairment of property and        --      4
equipment
Excess tax shortfall from stock-based compensation        15       351
Change in assets and liabilities:                                  
Accounts receivable and other assets                      478      (500)
Prepaid program costs and expenses                        (7,592)  (9,197)
Accounts payable, accrued expenses, and other current     (237)    736
liabilities
Participants' deposits                                    34,227   37,443
Net cash provided by operating activities                 19,365   20,131
                                                                  
Cash flows from investing activities:                              
Purchase of available-for-sale securities                 (15,609) (15,633)
Proceeds from sale of available-for-sale securities       120      189
Purchase of property and equipment                        (678)    (606)
Purchase of intangibles                                   (82)     (82)
Net cash used in investing activities                     (16,249) (16,132)
                                                                  
Cash flows from financing activities:                              
Repurchase of common stock                                --      (487)
Dividend payment to shareholders                          --      (1,017)
Proceeds from exercise of stock options                   --      5
Excess tax shortfall from stock-based compensation        (15)     (351)
Net cash used in financing activities                     (15)     (1,850)
                                                                  
Net increase in cash and cash equivalents                 3,101    2,149
Cash and cash equivalents, beginning of period            9,473    6,150
Cash and cash equivalents, end of period                  $12,574   $8,299

                                Special Items

During the third quarter of 2013, the Company announced its decision to
restructure two of its travel programs believed to be no longer financially
viable in their current form – Discovery Student Adventures and People to
People China.During the first quarter of 2014, the Company incurred
additional expenditures of approximately $0.1 million related to the continued
transition out of these travel programs.

In connection with the February 2013 resignations of two executives, the
Company incurred separation payments of approximately $2.7 million recorded
during the first quarter of 2013.

In addition, as previously disclosed, the Company has incurred legal and other
fees in relation 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 Forms 10-K and 10-Q.These two matters were
settled in 2012, however, the Company received a recovery of funds from
insurance coverage on these matters during the first quarter of 2013.

As a result of these events, the operations as presented in the accompanying
financial statements for the three months ended March 31, 2014 and 2013 do not
necessarily 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 March 31, Three months ended March
                                                      31,
                        2014           2013          2014         2013
Amount before special    $(7,310)      $(6,663)     $(0.44)     $(0.39)
items
Restructuring costs      (108)         --          --         --
Legal and other fees    (181)         547          (0.01)      0.03
Separation payments      --           (2,738)      --         (0.16)
Tax impact               48            795          --         0.05
Amount per consolidated  $(7,551)      $(8,059)     $(0.45)     $(0.47)
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, 2014 and 2013 (in
thousands):

                                             UNAUDITED
                                             March 31,           December 31,
                                             2014      2013      2013
Cash, cash equivalents and short-term         $64,408   $55,933   $45,647
available-for-sale securities
Prepaid program cost and expenses            14,661   26,361   7,069
Less: Participants' deposits                 (60,589) (63,178) (26,362)
Less: Accounts payable / accruals / other     (3,469)  (5,055)  (3,706)
liabilities
Deployable cash                              $15,011   $14,061   $22,648

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

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