Ambassadors : Reports First Quarter 2014 Results

NEWS FOR IMMEDIATE RELEASE April 30, 2014
Inves tor Relations : Stacy Feit
Financial Relations Board
(213) 486-6549

Spokane, WA, April 30, 2014 - Am bas s adors Group, Inc. (NASDAQ:EPAX), a leading provider of educational tra vel experiences and online education res earch m aterials , today announced its res ults for the firs t quarter ended March 31,
2014.

Overview

 Gros s revenue, from all s ources including non -directly delivered program s, of $1.6 m illion during the s eas onally s lower firs t quarter com pared to $2.9 m illion in the prior year period. Traveled 1 83 delegates com pared to 572 delegates in the firs t quarter of 2013, which included the Pres idential Inauguration Program that traveled in January 2013.

 Gros s m argin of $1.1 m illion com pared to $1.4 m illion in the 2013 period.

 Operating expens es for the quarter, excluding the im pact of s pecial item s , of $10.0 m illion, a decreas e of $2.0 m illion year-over-year.

 Net los s before s pecial items of $7.3 m illion com pared to $6.7 m illion las t year; Net los s of $7.6 m illion, com pared to net los s of $8.1 m illion in the firs t quarter of 2013 .

 Cas h and cas h equivalents and available -for-s ale s ecurities balance of $64.4 m illion; deployable cas h, as defined, of

$15.0 million and no debt outs tanding.

 Enrolled revenue for 2014 program s down 6.8 percent year-over-year for all program s and 8.4 percent year-over-year for core Student Am bas s ador Program s . Prior year enrolled travelers for Dis covery Student Adventures and People to People China program s have been excluded for year-over-year com parability given the Com pany's decis ion during the third quarter of 2013 to no longer operate thes e program s in 20 14.

Financial Highlights

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)

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Com m enting on the Com pany's res ults, Anthony Dom browik, Am bas sadors Group Interim Chief Executive Officer s aid, "We gained efficiencies this quarter, evidenced by the $2 m illion reduction in operating expens es before s pecial item s . As we continue to focus on protecting our profitability, we are targeting a $3 m illion to $4 m illion reduction in operating expens es on a full year bas is during 2014, in addition to the $10.8 m illion of cos t s avings achieved in 2012 and 2013."
Dom browik continued, "While being fis cally res ponsible, we have als o m ade m eaningful progress in our evolution to a year- round, integrated m ulti-channel m arketing and s ales s trategy. In the firs t quarter we s aw the integrated m odel begin to deliver im portant efficiencies on a year-over-year bas is as we applied what we have learned in the las t year from m ultiple tes t initiatives . For ins tance, the recently com pleted winter cam paign , aim ed at 2014 travel s eas on enrollments, delivered
about 90 percent of las t year's cam paign on a 35 percent reduction in s pend. We have als o driven m eaningful efficiencies in our s pring cam paign aimed at 2015 travel s eas on enrollments owing to our ongoing efforts to s ou rce, nurture, and enroll leads acros s exis ting and new direct m ail, digital , and relations hip based m arketing and s ales channels. As a rem inder, we held our firs t-ever s pring cam paign las t year; it was des igned to uncover the optim al volum e, targeting, tim ing, m es saging and m arkets for this tim e period. Bas ed on our findings , we deliberately ran a s m aller cam paign this s pring, which thus far has delivered our anticipated enrollm ents on decreas ed s pend, while als o exhibiting notable year- over- year im provem ents in res ponse rates and m eeting attendance."
Dom browik concluded, "We have delivered gros s Student enrollments for the 2014 travel s eas on on par with the prior year, while m aterially im proving our m arketing and financial m odel. While we are encouraged by the res ults of our recent cam paigns , the reality is that we continue to face a higher withdrawal rate for the 2014 travel s eas on in s pite of our augm ented retention efforts . Pers onal financial reas ons are by far the num ber one factor for fam ilies that withdraw -- even m ore s o than in 2013. As a res ult, we have s een our net enrollm ents for the 2014 travel s eas on rem ain on the trajectory we noted las t quarter, with point in tim e enrolled revenue now down 6.8 percent. We are dis appointed with thes e res ults ; however, we firm ly believe the long-range changes we are m aking to our s ales and m arketing s trategies are the right ones to put us on track to not only drive delegate growth, but als o do s o in a m ore cos t effective m anner. Our extended s ales and delivery bus ines s cycle dem ands that we take a long-term view and rigorous ly apply what we have learned over each s eas onal cam paign. The s pring cam paign for 2015 travel is a s trong foundation as we prepare for our next pus h for enrollm ents this fall for 2015."

First Quarter 2014 Results

During the firs t quarter of 2014, the Com pany traveled 183 delegates , com pared to 572 delegates during the prior year quarter, which included travelers on the Com pany's Pres idential Inauguration Program in January 2013. As a res ult, total revenue of $1.6 m illion declined 46 percent from $2.9 m illion in the prior year quarter. Gros s m argin for the quarter was $1.1 m illion com pared to $1.4 m illion in the firs t quarter of 2013. Gros s m argin percentage increas ed to 67.3 percent from 48.1 percent in the prior year period due prim arily to a higher m ix of revenue contribution from BookRags , the Com pany's online education res earch bus ines s . Gros s m argin is calculated as the s um of gros s revenue non -directly delivered program s , gros s revenue directly delivered program s and internet content and advertis ing revenue les s cos t of s ales non -directly delivered program s , cos ts of s ales directly del ivered program s and cos t of s ales internet content and advertis ing.
Firs t quarter 2014 operating expens es were $10.2 m illion, down 28 percent from $14.2 m illion in the prior year period. Excluding s pecial item s , firs t quarter 2014 operating expens es declined $2.0 m illion, or 17 percent. Selling and m arketing expens es decreased approxim ately $1.5 m illion year- over -year m ainly due to a purpos eful reduction in m arketing s pend as well as lower overall pers onnel cos ts. General and adm inistrative expens es decreased approximately $2.5 m illion prim arily due to s eparation expenditures incurred in the firs t quarter of 2013 that did not recur in the current period.
Net los s for the firs t quarter of 2014 was $7.6 m illion, or $0.45 per diluted s hare, com pared to net los s of $8.1 m illion, or
$0.47 per diluted s hare, in the prior year period. Firs t quarter 2014 net los s before s pecial item s was $7.3 m illion com pared to $6.7 m illion in 2013.

Balance Sheet and Liquidity

Total as s ets at March 31, 2014 were $114.8 m illion including cas h, cas h equivalents and s hort-term available-for-s ale s ecurities of $64.4 m illion. Long-term ass ets totaled $32.0 m illion prim arily reflecting goodwill and intangible as s ets of the BookRags bus iness, technology, hardware and s ys tem s used to deliver s ervices , and the Com pany's office buildin g, which has been lis ted for s ale. Total liabilities were $66.0 m illion, including $60.6 m illion in participant depos its for future travel . The Com pany had no debt outs tanding and deployable cash of $15.0 m illion at March 31, 2014. Deployable cas h is a non- GAAP m eas ure defined in the attached s chedules .

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The following table s um marizes the cas h flows as further dis clos ed in the accom panying financial s tatem ents . Free cas h flow, a non-GAAP m eas ure, which is defined as cas h flow from operations les s purchas e s of property, equipm ent and intangibles , is als o noted (in thous ands ):

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

Outlook for 2014

As of April 27, 2014, enrolled revenue for 2014 travel program s was 102.3 m illion, down 6.8 percent from the s am e point las t year, bas ed on enrolled travelers of 16,849 com pared to 18,149. Enrolled revenue for the Com pany's core product, Student Am bas s adors, is down 8.4 percent to 91.9 m illion com pared to 100.3 m illion at the s am e date las t year, bas ed on enrolled travelers of 13,138 com pared to 14,591. Prior year data excludes the im pact of enrolled travelers for D is covery Student Adventures and China program s as of this tim e las t year to reflect year-over-year com parability given the Com pany's decis ion to no longer operate thes e program s in 2014.
Enrolled revenue cons is ts of es tim ated gros s receipts to be recognized upon travel of an enrolled participant and revenue recognized for any delegates who have com pleted travel for the travel year referenced . Reported net enrollm ents cons is t of all participants who have enrolled in the Com pany's program s les s tho s e that have already withdrawn, including travel th at has been com pleted. Enrolled revenue m ay not res ult in actual gros s receipts eventually recognized by the Com pany due to both withdrawals from the Com pany's program s and expected future enrollm ents .
The Com pany is updating its guidance for 2014 as follows :

 Cons olidated gros s revenues for all program s and operations to be between $104 m illion and $110 m illion ;

 Cons olidated gros s m argin as a percentage of gros s revenue for all program s and operations of 36 percent to 37 percent; and

 Net incom e before any s pecial item s of between $0 and $2 m illion.

Conference Call and Webcast Information

The Com pany will hos t a conference call to dis cus s firs t quarter 2014 res ults of operations on Thurs day, May 1, 2014, at
11:30 a.m . Eas tern Tim e (8:30 a.m . Pacific Tim e). Participants can acces s the call via the internet at www.am bas s adors group.com /EPAX. The call can als o be acces s ed by dialing 877-280-2342 or 212-444-0896 (international) and providing the pas s code: 1896989. Approxim ately 24 hours following the call, a webcas t will be available through Augus t 1, 2014 at www.am bas s adors group.com /EPAX. A replay of the call will als o be available through May 6,
2014 and can be acces s ed by dialing 888 -203-1112 or 719-457-0820 (international) and providing the pas s code:
1896989.

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About Ambassadors Group, Inc.

Am bas s adors Group, Inc. (NASDAQ: EPAX) is a n education com pany located in Spokane, Was hington. Am bas s adors Group, Inc. is the parent Com pany of Am bas s ador Programs, Inc., World Adventures Unlim ited, Inc. and BookRags , Inc., an educational res earch webs ite. The Com pany als o overs ees the Was hington School of World Studies , an accredited travel s tudy and dis tance learning s chool. Additional inform ation about Am bas sadors Group, Inc. and its s ubs idiaries is available at www.am bas sadorsgroup.com. In this pres s releas e, "Com pany", "we", "us ", and "our" refer to Am bas s adors Group, Inc. and its s ubs idiaries.

Forward-Looking Statements

This pres s releas e contains forward -looking s tatem ents regarding actual and expected financial perform ance and the reas ons for variances between period -to-period res ults . Forward-looking s tatem ents , which are included per the "s afe harbor" provis ions of the Private Securities Litigation Reform Act of 1995, m ay involve known and unknown ris ks , uncertainties and other factors that m ay caus e actual res ults and perform ance in future periods to be m aterially different from any future res ults or perform ance s ugge s ted by the forward-looking s tatem ents in this releas e. Such forward -looking s tatem ents s peak only as of the date of this releas e and m ay not reflect ris ks related to international unres t, outbreak of dis eas e, conditions in the travel indus try, the direct m arketing environm ent, changes in economic conditions and changes in the com petitive environm ent. We expres s ly dis claim any obligation to provide public updates or revis ions to any forward - looking s tatem ents found herein to reflect any changes in expectati ons or any change in events . Although we believe the expectations reflected in s uch forward -looking s tatem ents are bas ed upon reas onable as s um ptions , we can give no as s urance that our expectations will be m et. For a m ore com plete dis cus s ion of certain ris k s and uncertainties that could caus e actual res ults to differ m aterially from anticipated res ults , pleas e refer to the Am bas s adors Group, Inc. 10 -K filed March 27, 2014, and its proxy s tatem ent filed April 11, 2014.

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Operating expenses:

UNAUDITED Quarter ended March 31,

(1) Net revenue, non-directly delivered programs consists of gross revenue, less program pass -through expenses f or non-directly delivered programs because w e primarily engage third-party operators to perf orm these services.

Gros s revenue $ 287 $ - 100% Cos t of s ales 171 - 100%

(2) Gross revenue and cost of sales f or directly delivered programs are reported as separate items because w e plan, organize and operate all activities, including speakers, f acilitators, 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 intern et content and advertising revenue.

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Asse ts

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

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

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Net loss

Adjustments to reconcile net loss to net cash provided by operating activities:

$ (7,551) $

(8, 059)

Depreciation and amortization Stock-based compensation Deferred income tax benefit

Loss on disposition and impairment of property and equipment

Excess tax shortfall from stock-based compensation

Change in assets and liabilities:

1,307 1,326

202 1,751 (1,484) (3,724)

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15 351

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During the third quarter of 2013, the Com pany announced its decision to res tructure two of its travel program s believed to be no longer financially viable in their current form - Dis covery Student Adventures and People to People China. During the firs t quarter of 2014, the Com pany i ncurred additional expenditures of approxim ately $0.1 m illion related to the continued trans ition out of thes e travel program s .
In connection with the February 2013 res ignations of two executives , the Com pany incurred s eparation paym ents of approxim ately $2.7 m illion recorded during the firs t quarter of 2013 .
In addition, as previous ly dis clos ed, the Com pany has incurred legal and other fees in relation to a s hareholder clas s action s uit and to an inquiry by the U.S. Securities and Exchange Com m is s ion ( "SEC") m ore fully des cribed in the Com pany's filings with the SEC on Form s 10-K and 10-Q. Thes e two m atters were s ettled in 2012, however, the Com pany received a recovery of funds from ins urance coverage on thes e m atters during the firs t quarter of 2013.
As a res ult of thes e events , the operations as pres ented in the accom panying financial s tatem ents for the three m onths ended March 31, 2014 and 2013 do not neces s arily reflect a m eaningful com paris on between periods or in relation to the operational activities of the Com pany. In order to provide m ore m eaningful dis clos ure, the following table repres ents a reconciliation of certain earnings m eas ures before s pecial item s to thos e s am e item s after the im pact of s pecial item s (in thous ands except per s hare data):

UNAUDITED

Net Loss EPS

Three months ended March 31, Three months ended March 31,

2014 2013 2014 2013

Amount before special items $ (7,310) $ (6,663) $ (0.44) $ (0.39) 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 statement of operations $ (7,551) $ (8,059) $ (0.45) $ (0.47)

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Deployable cas h is a non-GAAP liquidity m eas urem ent and is calculated as the s um of cas h and cas h equivalents , s hort - term available-for-s ale s ecurities , and prepaid program cos ts and expens es , les s the s um of accounts payable, accrued expens es and other s hort-term liabilities (excluding deferred taxes ) and participant depos its . We believe this non -GAAP m eas urem ent is us eful to inves tors in unders tanding im portant characteris tics of our bus ines s .
The following s um m arizes deployable cas h at March 31, 2014 and 2013 (in thous ands ):

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