EPAX (MM)

Ambassadors Group, Inc. (NASDAQ:EPAX), a leading provider of educational travel experiences, announced $0.17 loss per share for the quarter ended March 31, 2006, compared to $0.13 loss per share, in the first quarter of 2005. The net loss for the first quarters of 2006 and 2005 were $3.4 million and $2.6 million, respectively. Due to the seasonal nature of our business, we anticipate and plan for both first and fourth quarters of the year to be loss quarters. Jeff Thomas, president and chief executive officer of Ambassadors Group, Inc., stated, "We are pleased to report our first quarter results for 2006. As planned, we are reporting a loss for the quarter of $0.17 per share. Operationally, we achieved our planned results for the quarter, in terms of net revenue realized, delegates traveled, operating expenses, and delegates enrolled. More importantly, we are currently preparing for our two most significant revenue quarters -- the second and third -- by working to retain already enrolled delegates, finalize logistical arrangements and ensure high quality program delivery. Thank you for your continued support." Quarter ended March 31, 2006 During the first quarter of 2006, we traveled approximately 1,950 delegates compared to approximately 2,500 delegates in the first quarter of 2005. Gross revenue decreased 10 percent quarter over quarter, to $5.4 million from $6.0 million in the comparable quarter of 2005. Net revenue, however, increased 15 percent to $2.5 million in the first quarter of 2006 from $2.2 million in the comparable 2005 quarter. Gross margin for the first quarter of 2006 increased to 46 percent compared to 36 percent in the comparable quarter one year ago. Operating expenses were $8.5 million in the first quarter of 2006 and $6.6 million in the first quarter of 2005. The $1.9 million increase in operating expenses was primarily due to increased marketing for 2006 and 2007 program campaigns as well as incurring these expenditures earlier in the year than in the previous year. The operating loss was $6.0 million for the first quarter of 2006, compared to $4.5 million for the first quarter ended March 31, 2005. We realized other income of $1.0 million in the first quarter of 2006, compared to $0.5 million in the first quarter of 2005. Other income consists primarily of interest income generated by cash, cash equivalents, and available-for-sale securities. Interest income more than doubled when comparing quarters, due to increased cash balances and increased rates of return on these investments between the two quarters. Cashflow and Balance Sheet Cash provided by operations during the first quarter 2006 was $37.3 million, an increase of $3.9 million in comparison to the first quarter 2005, as a result of increased participant deposits collected in the first quarter of 2006. Cash used in investing activities increased $9.0 million in the corresponding periods primarily due to the timing of the purchase of short-term investments. Cash used in financing activities increased to $3.0 million from $1.6 million as a result of increased quarterly dividends and our common stock repurchase plan. During the first quarters of 2006 and 2005, we distributed $1.8 million and $1.3 million in cash dividends to our shareholders and repurchased $1.5 million and $0.7 million of common stock, respectively. On March 28, 2006, we entered into an agreement to purchase approximately 11 acres of real property in Spokane, Washington to be used for our new corporate headquarters. Total consideration for the real property was $1.8 million and was paid on April 4, 2006. Construction of the new facility is expected to begin in the third quarter of 2006 with completion in 2007. Comparing year over year quarters, our cash and investment balances at March 31, 2006 and 2005 were $150.6 million and $118.6 million, of which $104.3 million and $86.4 million represented participant deposits, respectively. Deployable cash (see definition on final page of the press release) increased $15.2 million between March 31, 2006 and 2005 to $52.4 million from $37.2 million, respectively. The following summarizes our statements of operations for the quarters ended March 31, 2006 and 2005 (in thousands, except per share amounts). Certain prior-period amounts have been reclassified to conform to current year financial presentation. Such reclassification had no impact on previously reported net loss or stockholders' equity. -0- *T UNAUDITED ------------------- Quarter ended March 31, ------------------- 2006 2005 --------- --------- Gross program revenue $ 5,407 $ 5,978 Net revenue $ 2,505 $ 2,179 Operating expenses: Selling and tour promotion 6,515 5,512 General and administration 2,013 1,137 --------- --------- Total operating expenses 8,528 6,649 Operating loss (6,023) (4,470) Other income, net 955 475 --------- --------- Loss before income tax benefit (5,068) (3,995) Income tax benefit 1,620 1,358 --------- --------- Net loss $ (3,448) $ (2,637) ========= ========= --------- --------- Loss per share - basic and diluted $ (0.17) $ (0.13) ========= ========= Weighted average shares outstanding - basic and diluted 20,534 20,184 *T Gross program revenue reflects total payments received by us for directly delivered and non-directly delivered programs. Gross program revenue less program pass-through expenses for non-directly delivered programs and cost of sales for directly delivered programs constitute our net revenues. 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. We have a single operating segment consisting of the educational travel and sports programs for students, athletes and professionals. These programs have similar economic characteristics and offer comparable products to participants, as well as utilize similar processes for program marketing. -0- *T The following summarizes our balance sheets as of March 31, 2006, March 31, 2005, and December 31, 2005 (in thousands): UNAUDITED --------------------------------- March 31, December 31, -------------------- ------------ 2006 2005 2005 ---------- --------- ------------ Assets ------- Cash and cash equivalents $ 41,523 $ 32,076 $ 26,916 Available-for-sale securities 109,063 86,556 89,688 Foreign currency exchange contracts -- 2,368 -- Prepaid program cost and expenses 15,178 12,808 1,596 Other current assets 2,769 1,487 955 ---------- --------- ------------ Total current assets 168,533 135,295 119,155 Property and equipment, net 6,857 4,267 5,140 Deferred income tax 558 710 584 Other assets 167 126 167 ---------- --------- ------------ Total assets $ 176,115 $140,398 $ 125,046 ========== ========= ============ Liabilities and Stockholders' Equity ------------------------------------ Accounts payable and accruals $ 6,323 $ 3,934 $ 6,022 Foreign currency exchange contracts 1,745 -- 1,896 Other liabilities 2,559 3,793 2,596 Participants' deposits 104,289 86,360 47,463 Deferred tax liability -- 610 -- Current portion of long-term capital lease 183 148 180 ---------- --------- ------------ Total current liabilities 115,099 94,845 58,157 Capital Lease, long term 340 416 387 ---------- --------- ------------ Total Liabilities 115,439 95,261 58,544 ---------- --------- ------------ Stockholders' equity 60,676 45,137 66,502 ---------- --------- ------------ Total liabilities and stockholders' equity $ 176,115 $140,398 $ 125,046 ========== ========= ============ The following summarizes our statements of cash flows for the quarters ended March 31, 2006 and 2005 (in thousands): UNAUDITED --------------------- 2006 2005 ---------- ---------- Cash flows from operating activities: Net loss $ (3,448) $ (2,637) Adjustments: Depreciation 358 231 Amortization of unearned compensation 181 90 Stock option expense 384 -- Change in assets and liabilities: Prepaid program costs and expenses (13,582) (10,347) Accounts payable and accrued expenses (1,543) (356) Participants' deposits 56,826 47,752 Other current assets (1,827) (1,339) ---------- ---------- Net cash provided by operating activities 37,349 33,394 ---------- ---------- Cash flows from investing activities: Net change in available-for-sale securities (19,435) (10,130) Purchase of investments -- (6) Purchase of property and equipment (268) (587) ---------- ---------- Net cash used in investing activities (19,703) (10,723) ---------- ---------- Cash flows from financing activities: Dividend payment to shareholders (1,758) (1,318) Repurchase of common stock (1,471) (703) Proceeds from exercise of stock options 234 427 Capital lease payments (44) (37) ---------- ---------- Net cash used in financing activities (3,039) (1,631) ---------- ---------- Net increase in cash and cash equivalents 14,607 21,040 Cash and cash equivalents, beginning of period 26,916 11,036 ---------- ---------- Cash and cash equivalents, end of period $ 41,523 $ 32,076 ========== ========== Deployable cash is a non-GAAP liquidity measure. Deployable cash is calculated as the sum of cash and cash equivalents, 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 foreign exchange currency contracts), participant deposits and the current portion of long-term capital lease. We believe this non-GAAP measure is useful to investors in understanding the cash available to deploy for future business opportunities. The following summarizes our deployable cash as of March 31, 2006, March 31, 2005, and December 31, 2005 (in thousands): UNAUDITED ----------------------------------- March 31, December 31, --------------------- ------------- 2006 2005 2005 ---------- ---------- ------------- Cash, cash equivalents and available-for-sale securities $ 150,586 $ 118,632 $ 116,604 Prepaid program cost and expenses 15,178 12,808 1,596 Less: Participants' deposits (104,289) (86,360) (47,463) Less: Accounts payable / accruals / other liabilities (9,065) (7,875) (8,798) ---------- ---------- ------------- Deployable cash $ 52,410 $ 37,205 $ 61,939 ========== ========== ============= *T Quarterly conference call and webcast We will host a conference call to discuss first quarter 2006 results of operations on Thursday, April 20, 2006 at 8:30 a.m. Pacific Time. You may join the call by dialing 866-578-5788 then entering 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 19327625 and follow the prompts, or visit www.ambassadorsgroup.com/EPAX. Post-view dial-in access will be available beginning April 20, 2006 at 1:30 p.m. until April 27, 2006. Post-view Webcast access will be available following the conference call through June 20, 2006. Business overview Ambassadors Group, Inc. is a leading educational travel organization that organizes and promotes international and domestic programs for students, athletes, and professionals. These programs provide the opportunities for grade school, junior, and senior high school students to visit foreign and domestic destinations to learn about the history, government, economy and culture of such areas, as well as for junior and senior high school athletes to participate in international sports challenges. Our professional programs emphasize meetings and seminars between participants and persons in similar professions abroad. We are headquartered in Spokane, Washington, with associates also in Denver, Colorado and Washington, D.C. In this press release, "Company," "we," "us," and "our" refer to Ambassadors Group, Inc. 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 attained. For a more complete discussion of these and other factors, please refer to the Ambassadors Group, Inc. 10K filed March 9, 2006 and proxy filed April 7, 2006.