YTB Posts Q1 Financial Data
We’ve been getting a bunch of financial data over the last few weeks. When you look at the first quarter results you find alarming losses from many companies. Just in the travel industry alone, you find a loss of $9 million in Q1 for Dollar Thrifty, Wynn Resorts reports a Q1 loss of $33.8 million, Marriott loses $23 million in Q1, Royal Caribbean loses $36 million in Q1, Delta loses $794 million in Q1 along with United losing $382 million, and Orbitz realizes a $336 million loss.
Revenue has also dropped significantly in the industry. Hawaii’s Q1 hotel occupancy sinks to 69%, Starwood’s Q1 profit plummets 81%, and Disney’s Q1 operating income down 24% for parks and resorts. Let’s not forget about Mexico and what it’s gone through the last few weeks. Anyone want to take a stab at what the swine flu has done to the economy there thus far?
And what do you imagine critics will be talking about? YTB of course!
YTB’s Q1 Financials (YTBLA.OB) were posted last evening with a sharp decline in revenue, along with a $1.9 million loss. Not great by any means. When you look at the majority of companies in our market posting huge losses, it doesn’t come as a big surprise. Couple that with Q1 losses each of the last 3 years and you’re looking at a quarter that is certainly difficult for YTB in regards to it’s bottom line.
With revenue down considerably due to a number of factors, the filing focuses on the economy for this reason. It doesn’t accurately credit the less than favorable suits that have been levied against the company. While the California AG nor any of YTB’s critics will look at the legal letter of the law concerning pyramid schemes, the tentative settlement being finalized at this time will shed plenty of light on that subject. (More on that a little later in this article, and considerably more when the settlement is made public.) Combine that with very heavy recruiting and pillaging of our sales force from other companies feeding on the fears of the litigation the company is defending, and former members of our company who have changed companies. As a result, YTB’s active members have been cut just short of half of what it was a year ago.
Yeah…yeah…”What do they know that I don’t”.
If you want to look at the numbers and let that be the be all and end all for you, you are welcome to it. It makes little difference to me these days what a few obsessed zealots want to pitch to the public right now. While they choose to ignore how far out of bounds they are, the truth will surface in due time. The rumors, lies, and myths about this pyramid idea will be brought to light for everyone else to see. Talk is cheap, and I like to look at how the company is walking in response the the challenges it’s facing.
What many of you are here for are the facts and findings that you won’t find anywhere else. The statements in the filing that everyone wants to hide because if found, could change the momentum of the mud slide the company is currently experiencing. These are very difficult times for any company in business right now. Only those who respond correctly to the current financial climate are going to make it through these difficult economic times. We’ve already seen a number of agencies such as Joystar and Cruise Value Center bite the dust. Suppliers like Happy Vacations have closed their doors as well.
Clearly, the problem here is a flawed business model right?
I think not.
YTB is a vastly different company than it was a year ago. If it refused to respond to the challenges brought up against them (as some would have you believe) we might be looking at a deficit twice as large instead cutting our quarterly loss in half over what it was a year ago. ($3.5 million Q1 2008) Combine the deficit with considerably less revenue and the company has cut it’s spending considerably in a number of areas. The company clearly gets the fact that it can’t spend the way it has in the past. A huge expense that has been a part of Q1 for years was Coach’s Birthday Bash. Typically this Leadership Event is announced during the National Convention each year, costing the company millions for these trips. For the 18,000 plus who made it to Convention in 2008, the absence of any January trip hosted by the company was certainly missed. Red Carpet Days at the companies expense have slowed to once per month. We have also not seen any news about a grand presentation like we did last year at this time for Convention.
Because YTB is watching it’s spending, cash reserves have tripled over the last 3 quarters from $600K ending Q3 to $1.8 million Q1. Part of this was pinned to the sale of the Corporate Jet and some land that was sold. We’ve come to find that the the 9.9 acres that was sold is now being foreclosed on due to payment not being received by the buyer. Since the land (an out parcel of the 56 total acres YTB currently owns) never produced any revenue for the company, the additional funds realized between December 31 and March 31 came from controlling expenses not selling of assets.
In another myth gone south, how does a company spend $8 million on a foam statue when the financial data provided documents less than half that paid to Beryl Martin for all of 2008? Remember they did most of the printing for YTB as well. I guess we need to put the word ‘estimated’ back into the news report that made the quote over a year ago.
Critics like to call the company “Coach and Scotties personal piggy bank”. Based on what “Coach and Scottie” have done in recent months, I wonder why that myth persists. A number of measures have been put in place to look at cost structure to improve the overall profitability of the Company. Bob Van Patten was brought in early April to do just that. Bob’s job is to cut spending, while Coach and Scott’s job is to produce revenue. YTB also put in place an Audit Committee as a measure of checks and balances for any expense in excess of $50K to require Board approval. Critics will probably point out that the Board is considerably smaller with the departure of both Clay Winfield and Tim Kaiser, but will likely ignore Bob Van Pattens role in leveling the playing field when it comes to any piggy bank that Coach and Scott may be dipping into.
We’ve also gained little better picture of the pending litigation that has been brought against the company.
On August 4, 2008, a day before YTB’s National Convention, a civil action was filed against against YTB and it’s Executives by the California Attorney General. Among the 17 complaints it claims that YTB is a gigantic pyramid scheme. The complaint was filed after 18 months of dialogue, initiated by the Company with the Attorney General to discuss the implementation of a new California travel laws that went into effect in January of 2007. (Anybody remember why YTB now has minimum booking requirements to apply for CLIA?) The penalties consist of at least $15.0 million, and restitution of at least $10.0 million totaling $25 million dollars. The largest claim filed in California history. On April 6, 2009, the Company reached a tentative settlement agreement with the State of California and papers stating this were filed by James Toma with the courts on April 8th in Los Angeles. The tentative settlement agreement is currently awaiting execution by both parties in addition to final court approval.
There have been rumors that a deal is final, but we will await final word from either YTB, the California AG, or both before any further word is mentioned here.
I’m simply glad that someone was finally able to educate the California AG that no one pays a single dime to YTB for the opportunity to recruit others into the business. Nor does anyone earn a single dime without a product being attached to it. (AKA: a booking engine.) I know all about the myths and the perceptions surrounding YTB and pyramid schemes. Here, we deal in facts. I’ve been with YTB for 4 years, and it’s never cost me a red cent for the opportunity to recruit others. Hard for anyone to lose money when no money is required. Thus we have a tentative settlement instead of dragging this into the courts in September to find out what I already know to be true.
In addition, on February 9, 2009, the Company filed motions to dismiss the consolidated complaint (formerly two that were filed) and these motions are now pending before the Court. The motions to dismiss were fully briefed and the Court has set a hearing for June 1, 2009. YTB believes the Company has meritorious defenses and intends to vigorously defend these cases. With the settlement pending in California, and from what I know to be true about pyramid laws and the proper structure of YTB, I like the odds of this being dismissed.
That’s not to say that it will be dismissed…I just like the odds.
I realize it’s difficult to read the crap out there on the internet with all the doom and gloom. The predictions of YTB filing for bankruptcy, or even better, Coach, Scott and Kim preparing to fly off with all your hard earned money. I’ve been reading it for years, and still holding my breath for that shoe to drop. Because none of it has ever come to fruition I take it with a grain of salt and chalk it up to wishful thinking.
Once the California situation is behind us, and YTB pays the fine due the state, the legal costs due them for filing the complaint, and what ever restitution they come up with for the “victims” they claim their trying to protect, we can get back to building our business. At this point it’s clear that the California Attorney Generals plan of shutting YTB down completely isn’t going to happen. If you never figured it out on your own, or if nobody told you, California never had that type of authority to begin with. (Small detail or fact that critics never considered.) While Illinois is still a little more uncertain in which way that will go, we will have some finalization to that ordeal in less than a month.
For those that have hung around to see what will actually come of this fiasco, we are about to find out.
Challenges like we’ve seen can either make or break a company. YTB’s been skating along for a number of years without facing much adversity. If you actually look at what it’s been able to do, instead of ignoring it, it looks to me like YTB is planning on sticking around for some time to come.
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Tags: Bob Van Patten, Inc., SEC, YTB International, YTB Marketing
