ex99_1.htm

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.”

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.

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.

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.

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.

	UNAUDITED
	Six months ended June 30,					Quarter ended 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.

	UNAUDITED
	June 30,				December 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

	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.

	Six months ended June 30, 2009							Six months ended June 30, 2008
	Travel Programs and Other			BookRags (1)		Consolidated		Travel Programs and Other			BookRags (1)		Consolidated
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

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.


	UNAUDITED
	June 30,								December 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

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.

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.

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.


	Quarter ended June 30, 2009							Quarter ended June 30, 2008
	Travel Programs and Other			BookRags (1)		Consolidated		Travel Programs and Other			BookRags (1)		Consolidated
Gross margin		$	39,568	$	724	$	40,292		$	36,434	$	283	$	36,717
Operating income			27,240		491		27,731			24,480		194		24,674