SPOKANE, Wash., July 22, 2009 (GLOBE NEWSWIRE) -- Ambassadors Group, Inc. (Nasdaq:EPAX), a leading provider of educational travel experiences and online education research materials, announced $0.99 fully diluted per share earnings for the quarter ended June 30, 2009, a 14 percent improvement over $0.87 fully diluted per share earnings for the same period one year ago. Net income for the second quarter of 2009 was $19.2 million, compared to $17.2 million for the second quarter of 2008. Comparing the six months ended June 30, 2009 and 2008, fully diluted per share earnings increased 22 percent to $0.72 in 2009 from $0.59 in 2008, and net income increased to $13.9 million in 2009 from $11.7 million in 2008.
"During these challenging economic times, we are pleased to be showing increased earnings for both the second quarter and first half of 2009," stated Jeff Thomas, president and chief executive officer of Ambassadors Group, Inc. "We have focused our efforts in several key areas throughout 2009, including: emphasizing the importance of global experience and education, managing customer retention, and seeking opportunities for cost savings, both within our cost of goods sold as well as in our operating expenses. At the same time, we strive to offer the highest quality programs for our delegates and to ensure their safety while they travel around the world."
Quarter Ended June 30, 2009
During the second quarter of 2009, we traveled 15,995 delegates, an 11 percent decrease from 17,885 delegates traveled during the same quarter one year ago. Gross receipts were $99.3 million in the second quarter of 2009 compared to $104.0 million in the second quarter of 2008. Gross margin increased 10 percent, to $40.3 million in the second quarter of 2009 from $36.7 million in the same period of 2008. Gross margin as a percentage of gross receipts was 41 percent and 35 percent for the quarter ended June 30, 2009 and 2008, respectively. The decrease in gross receipts is primarily due to traveling fewer delegates. At the same time, we had higher program prices and tuitions, which had been driven by inflated prices in the travel industry in 2008, the result of high fuel prices and increased demand. The global economic slowdown has reduced travel demand and supplier prices, which enabled us to purchase our travel components better than expected and increase our gross margins. In addition, including a full quarter of BookRags' results plus its year-over-year growth, increased second quarter gross receipts and gross margin in 2009 to $0.8 million and $0.7 million, respectively. In 2008, these same numbers in the second quarter were $0.3 million in gross receipts and $0.3 million in gross margin.
Operating expenses were $12.6 million in the second quarter of 2009 compared to $12.0 million in the second quarter of 2008, an increase of 4 percent. Selling and marketing expenses increased $0.4 million primarily due to the earlier start-up of marketing activities for future year travel programs offset by the continued decline in personnel costs from the reduction of employees in January of 2009. General and administrative expenses increased $0.1 million primarily due to increased legal and professional costs, offset by the continued savings in personnel costs. Operating income was $27.7 million for the second quarter of 2009, compared to $24.7 million for the second quarter of 2008, a 12 percent improvement.
Other income for the second quarter of 2009 was $0.6 million in comparison to $0.9 million in the second quarter of 2008. The $0.3 million decrease is due to lower interest rates.
Six months ended June 30, 2009
During the six months ended June 30, 2009, we traveled 19,487 delegates, an 8 percent decrease from 21,250 delegates traveled during the same period one year ago. Comparing the six months ended June 30, 2009 and 2008, gross receipts decreased 3 percent to $109.7 million from $112.9 million, and gross margin increased 13 percent to $45.6 million from $40.2 million, respectively. Gross margin as a percent of gross receipts was 42 percent and 36 percent for the six months ended June 30, 2009 and 2008, respectively. The decrease in gross receipts and increase in gross margin resulted primarily from traveling fewer delegates at lower costs during the first six months of 2009 compared to the same period in 2008. In addition, BookRags' year-over-year growth as well as including their results for the full six months of 2009 led to gross receipts and gross margin of $1.7 million and $1.5 million, respectively. For the comparable period in 2008, BookRags reported $0.3 million in gross receipts and gross margin.
Operating expenses for the six months ended June 30, 2009 and 2008 were $24.8 million and $24.4 million, respectively. The $0.4 million increase is primarily due to increased legal and professional costs, offset by reductions in personnel costs. Operating income was $20.8 million and $15.8 million for the six months ended June 30, 2009 and 2008, respectively.
Other income was $0.1 million for the six months ended June 30, 2009, compared to $1.8 million for the six months ended June 30, 2008. The decrease in other income is due to $1.0 million foreign currency loss recorded on closing out our over-hedged foreign currency contracts for 2009 coupled with $0.7 million less in interest and dividend income that was caused by lower interest rates.
Cash Flow and Balance Sheet
Total assets at June 30, 2009 were $191.7 million, of which 57 percent, or $109.5 million, were cash and short-term investments. Our deployable cash increased $11.5 million or 36 percent to $43.4 million at the end of the second quarter of 2009. Participant deposits were $83.5 million at the end of the second quarter of 2009, a 17 percent decrease from one year ago. Our free cash flow for the first six months of 2009 increased 12% to $1.91 per share from $1.71 per share in the six months ended June 30, 2008, primarily due to increased earnings year over year. See definition of deployable cash and free cash flow following the cash flow statement.
Cash provided by operations was $39.8 million and $38.6 million during the six months ended June 30, 2009 and 2008, respectively. The increase in 2009 resulted from a decline in prepaid program expenses offset by a decrease in cash provided by participant deposits, both of which are driven by lower enrolled participants for our 2009 programs while prepaid program expenses also reflect decreased travel costs. Cash used in investing activities was $22.2 million and $26.6 million during the six months ended June 30, 2009 and 2008, respectively. The fluctuation is due to a decline in cash paid for BookRags from 2008 offset by an increase in cash used to purchase available-for-sale securities.
Cash used in financing activities was $2.4 million and $10.8 million during the six months ended June 30, 2009 and 2008, respectively. Financing activities during the first six months of 2009 consisted of $0.4 million of common stock repurchases and $2.3 million of cash dividends distributed to our shareholders, compared to $6.5 million and $4.4 million, respectively, during the first six months of 2008.
Outlook
As of July 20, 2009, the Company's enrolled revenue for 2009 travel programs in comparison to the same date one year ago had decreased 15 percent. Enrolled revenue is $195.7 million, driven by our 34,657 net enrolled participants, including those that have already traveled, for 2009 travel programs compared to $230.8 million in enrolled revenue due to our 42,667 net enrolled participants, including those that already traveled, for 2008 on this same day one year ago. The decrease in enrolled revenue year over year is primarily due to the 19 percent decrease of net enrolled participants. Enrolled revenue consists of estimated gross receipts to be recognized, in the future, upon travel of an enrolled participant. Net enrollments consist of all participants who have enrolled in the Company's programs less those that have already withdrawn. 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 following summarizes our unaudited statements of operations for the quarters ended and six months ended June 30, 2009 and 2008 (in thousands, except per share amounts).
UNAUDITED
--------------------------------------
Six months ended Quarter ended
June 30, June 30,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
Gross receipts $109,691 $112,917 $ 99,286 $104,027
Gross margin $ 45,573 $ 40,187 $ 40,292 $ 36,717
Operating expenses:
Selling and marketing 18,130 18,269 9,258 8,875
General and administration 6,672 6,156 3,303 3,168
-------- -------- -------- --------
Total operating expenses 24,802 24,425 12,561 12,043
Operating income 20,771 15,762 27,731 24,674
Other income (expense)
Interest and dividend income 1,088 1,808 574 905
Foreign currency and
other expense (961) -- -- --
-------- -------- -------- --------
Total other income 127 1,808 574 905
-------- -------- -------- --------
Income before income tax 20,898 17,570 28,305 25,579
Income tax provision 6,973 5,860 9,126 8,395
-------- -------- -------- --------
Net income $ 13,925 $ 11,710 $ 19,179 $ 17,184
======== ======== ======== ========
Net income per share
-- basic (1) $ 0.73 $ 0.60 $ 1.01 $ 0.89
Weighted average shares
outstanding - basic 19,056 19,367 19,040 19,321
Net income per share
-- diluted (1) $ 0.72 $ 0.59 $ 0.99 $ 0.87
Weighted average shares
outstanding - diluted 19,352 19,898 19,401 19,859
Gross receipts reflect total payments received by us for directly delivered and non-directly delivered programs, internet content sales, and advertising revenues. Gross receipts, less program pass-through expenses for non-directly delivered programs, cost of sales for directly delivered programs, and content constitute our gross margins. For non-directly delivered programs, we do not actively deliver the operations of each program. For directly delivered programs however, we organize and operate all activities, including speakers, facilitators, events, accommodations and transportation.
(1) The Company adopted FSP EITF 03-6-1 on January 1, 2009 and has
adjusted earnings per share ("EPS") accordingly. Previously
reported EPS has also been adjusted retroactively.
The following summarizes our unaudited balance sheets as of June 30, 2009, June 30, 2008, and December 31, 2008 (in thousands):
----------------------------
UNAUDITED
----------------------------
June 30, Dec. 31,
------------------ --------
2009 2008 2008
-------- -------- --------
Assets
------
Cash and cash equivalents $ 22,176 $ 18,489 $ 6,989
Available-for-sale securities 87,309 81,325 67,436
Foreign currency exchange contracts -- 3,292 --
Prepaid program cost and expenses 39,843 54,829 4,160
Accounts receivable 1,610 646 1,966
Deferred tax asset 431 -- 2,780
-------- -------- --------
Total current assets 151,369 158,581 83,331
Property and equipment, net 29,007 27,320 29,148
Available-for-sale securities 1,362 2,100 2,100
Deferred tax asset 320 1,490 241
Intangibles 2,570 2,365 2,404
Goodwill and other long-term assets 7,029 6,441 7,053
-------- -------- --------
Total assets $191,657 $198,297 $124,277
======== ======== ========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable and accruals $ 22,239 $ 21,995 $ 4,342
Foreign currency exchange contracts 1,505 -- 6,641
Participants' deposits 83,531 100,610 44,166
Deferred tax liability -- 1,174 --
Other liabilities 128 191 131
-------- -------- --------
Total current liabilities 107,403 123,970 55,280
Foreign currency exchange contracts -- -- 1,764
Total liabilities 107,403 123,970 57,044
Stockholders' equity 84,254 74,327 67,233
-------- -------- --------
Total liabilities and stockholders'
equity $191,657 $198,297 $124,277
======== ======== ========
The following summarizes our unaudited statements of cash flows for the six months ended June 30, 2009 and 2008 (in thousands):
UNAUDITED
------------------
Six months ended
June 30,
------------------
2009 2008
-------- --------
Cash flows from operating activities:
Net income $ 13,925 $ 11,710
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,108 1,609
Deferred income tax benefit (162) (56)
Stock-based compensation 941 1,055
Excess tax benefit from stock-based compensation (19) (30)
Gain on sale of assets (1) (31)
Loss on foreign currency contracts 676 --
Change in assets and liabilities:
Accounts receivable and other current assets 356 299
Prepaid program costs and expenses (35,683) (51,202)
Accounts payable, accrued expenses, and other
current liabilities 18,271 17,408
Participants' deposits 39,365 57,887
-------- --------
Net cash provided by operating activities 39,777 38,649
-------- --------
Cash flows from investing activities:
Net change in available-for-sale securities (19,377) (15,682)
Net purchase of property and equipment and other (2,521) (2,133)
Net purchase of intangibles (311) (43)
Net additions to goodwill (13) --
Net cash paid for acquisition -- (8,736)
-------- --------
Net cash used in investing activities (22,222) (26,594)
-------- --------
Cash flows from financing activities:
Dividend payment to shareholders (2,288) (4,422)
Repurchase of common stock (409) (6,463)
Proceeds from exercise of stock options 321 107
Excess tax benefit from stock-based compensation 19 30
Capital lease payments and other (11) (99)
-------- --------
Net cash used in financing activities (2,368) (10,847)
-------- --------
Net increase in cash and cash equivalents 15,187 1,208
Cash and cash equivalents, beginning of period 6,989 17,281
-------- --------
Cash and cash equivalents, end of period $ 22,176 $ 18,489
======== ========
Our operations are organized into two reporting segments, (1) Travel Programs and Other, which provides educational travel services to students, professionals and athletes through multiple itineraries within five travel program types and (2) BookRags, which provides online research capabilities through book summaries, critical essays, online study guides, biographies, and references to encyclopedia articles.
The following presents the segment operating performance during the quarters ended June 30, 2009 and 2008, incorporating BookRags, Inc. into the consolidated financial statements effective May 15, 2008 (in thousands):
Quarter ended Quarter ended
June 30, 2009 June 30, 2008
------------------------- -------------------------
Travel Travel
Programs Programs
and BookRags Consol- and BookRags Consol-
Other (1) idated Other (1) idated
------- ------- ------- ------- ------- -------
Gross margin $39,568 $ 724 $40,292 $36,434 $ 283 $36,717
Operating income 27,240 491 27,731 24,480 194 24,674
The following presents the segment operating performance during the six months ended June 30, 2009 and 2008 and total assets as of June 30, 2009 and 2008, incorporating BookRags, Inc. into the consolidated financial statements effective May 15, 2008 (in thousands):
Six months ended Six months ended
June 30, 2009 June 30, 2008
------------------------- -------------------------
Travel Travel
Programs Programs
and BookRags Consol- and BookRags Consol-
Other (1) idated Other (1) idated
------- ------- ------- ------- ------- -------
Gross margin $ 44,074 $ 1,499 $ 45,573 $ 39,904 $ 283 $ 40,187
Operating income 19,775 996 20,771 15,568 194 15,762
Total assets 180,515 11,142 191,657 189,274 9,023 198,297
(1) BookRags, Inc. was acquired on May 15, 2008, therefore the
quarter and six months ended June 30, 2008 do not represent
full periods as they do in 2009.
Deployable cash is a non-GAAP liquidity measure. Deployable cash is calculated as the sum of cash and cash equivalents, current 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. Free cash flow per share is calculated as net cash provided by operating activities less purchases of property, equipment, and intangibles divided by weighted average diluted shares outstanding. We believe these non-GAAP measures are useful to investors in understanding the cash available to deploy for future business opportunities.
The following summarizes our unaudited deployable cash as of June 30, 2009, June 30, 2008, and December 31, 2008 (in thousands):
UNAUDITED
----------------------------
June 30, Dec. 31,
------------------ --------
2009 2008 2008
-------- -------- --------
Cash, cash equivalents and short-term
available-for-sale securities $109,485 $ 99,814 $ 74,425
Prepaid program cost and expenses 39,843 54,829 4,160
Less: Participants' deposits (83,531) (100,610) (44,166)
Less: Accounts payable / accruals
/ other liabilities (22,367) (22,186) (4,473)
-------- -------- --------
Deployable cash $ 43,430 $ 31,847 $ 29,946
======== ======== ========
The following summarizes our unaudited free cash flow as of June 30, 2009 and 2008 (in thousands):
UNAUDITED
------------------
June 30,
------------------
2009 2008
-------- --------
Cash flow from operations as reported $ 39,777 $ 38,649
Purchase of property, equipment and intangibles (2,851) (4,581)
-------- --------
Free cash flow $ 36,926 $ 34,068
======== ========
Weighted average shares outstanding 19,352 19,898
======== ========
Free cash flow per share $ 1.91 $ 1.71
======== ========
Quarterly conference call and webcast
We will host a conference call to discuss second quarter 2009 results of operations on Thursday, July 23, 2009 at 8:30 A.M. Pacific Time. You may join the call by dialing 800.299.0433 then using the pass code: Ambassadors Group. Or, you may also join the call via the Internet at www.ambassadorsgroup.com/EPAX. For post-view access, you may dial 888.286.8010 with the pass code 68273347 and follow the prompts, or visit www.ambassadorsgroup.com/EPAX. Post-view dial-in access and post-view Webcast access will be available beginning July 23, 2009 at 11:30 a.m. until September 23, 2009.
Business overview
Ambassadors Group, Inc. (Nasdaq:EPAX) is a socially conscious, 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 http://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 our 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 our 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 the conflict in the Middle East and international unrest, outbreak of disease, conditions in the travel industry, 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 our 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 these and other factors, please refer to the Ambassadors Group, Inc. 10-K filed March 12, 2009 and proxy statement filed April 6, 2009.