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| YTBL.PK > SEC Filings for YTBL.PK > Form 10QSB/A on 29-Aug-2005 | All Recent SEC Filings |
29-Aug-2005
Quarterly Report
The merger gives YTBL a competitive advantage because few travel related companies have expertise in travel, marketing and technology. In addition, the combined company has gained more favorable pricing terms with its vendors. The combined company is also beginning to realize economies of scale. For example, it recently signed an agreement that will reduce its credit card processing costs by 33%.
YTBL is a leading provider of Internet based travel related services. YTBL operates three subsidiaries: Your Travelbiz.com, establishes online travel agencies and compensates its Sales Rep's via multilevel marketing commission structure; YTB Travel Network contracts with the online travel agencies, provides online booking systems, fulfills travel orders & pays travel commissions. REZconnect Technologies is a travel technology provider, including online travel booking engine technologies and is a franchisor of travel agencies.
The Company operates the businesses under various trade names "YourTravelBiz.com," "YourTravelBiz," "YTBnet.com," "YTB Travel and Cruises," "Travel Network," "Global Travel Network," "Travel Network Vacation Central," as well as web sites "Bookmytravel.com," and "REZconnect.com." We offer our customers a reliable source of travel products and services through our agreements with selected travel providers, including major airlines, cruise lines, hotels and car rental agencies, as well as wholesale travel providers. In addition, we offer our customers the ability to make reservations on over 400 airlines, at more than 57,000 hotels and with most major car rental companies, cruise lines and tour package operators.
Your Travel Biz.com markets and establishes online travel agencies on behalf of YTB Travel Network the fees from which sales of online travel agencies should account for 66% of the 2005 gross revenue. Your Travel Biz.com has a unique business model. Its strategy is to create a network of commissioned sales representatives who exclusively market the online travel agencies of and serviced by YTB Travel Network. Purchasers of online travel agencies are known as Referral Travel Agents (RTAs). Each RTA pays an initial fee of $349.95, plus the first month's membership dues of $49.95. Each month, YTB automatically charges the RTA's monthly membership dues of $49.95 to their credit cards via an automatic draft against the RTA's bank account. YTB Travel Network retains a percentage of the travel
commissions generated by the RTAs. In contrast Travelocity, Priceline.com, Expedia and Orbitz focus their promotion efforts on the customer. Whereas YTB Travel Network spends nothing on advertising, the major companies spend up to 50% of their revenue on advertising. YourTravelBiz.com and its sales of online travel agencies through Your TravelBiz.com is not subject to the seasonality of the travel business, nor should a decline in travel significantly impact it, since the $49.95 monthly fee is its primary source of revenue. Also, typical online travel merchants sell a commodity (travel), which does not engender strong customer loyalty. RTAs have a significant advantage over the major online travel companies: They have personal relationships with their customers, who book travel through the RTAs' own online travel stores. Usually, the cost to book a trip through an RTA is comparable to booking a trip through a major online travel company. By virtue of REZconnect's technology, the RTAs' stores provide access to more than 60 booking engines, including World Choice (a subsidiary of Travelocity), Priceline.com, Hotels.com, Apple Vacations, Funjet Vacations, Ourvacationstore.com and more.
YTB International's subsidiary REZconnect offers consumer driven websites which provides strong content and travel book-ability with over 60 booking engines incorporated into one site, covering all aspects of the travel industry. Sites are available for use 24 hours, 7 days a week, allowing travel agents the ability to personally follow-up with the online consumer and provide customer service.
YTB Travel Network services a Referring Travel Agent (RTA) network, while REZconnect services the travel agent community. They both typically charge $49.95 per month on a monthly non-contract basis to own and operate an online travel site. The agencies pay month to month via credit card.
Currently, there are over 14,800 RTA consumer websites in operation and over 8,000 registered travel agents, which includes frenchisees and independent travel agents, using the Vacation Central travel portal site. Site owners are permitted to solicit organizations and associations for travel sites allowing for site owners to earn more revenue.
YTB Travel Network should represent 22% of YTBL's 2005 gross revenue. This division processes all of the travel transactions, negotiates deals with over 60 preferred vendors, and receives incentives based on the volume of business that it produces. YTB Travel Network revenue should increase 111.5% in 2005 to $5.0 million. We project that it will increase 60% next year to $8.0 million. Future revenue growth should accelerate as more RTA's are added to the system, and as they go through the various training programs that the Company provides.
REZconnect Technologies should generate 12% of YTBL's 2005 gross revenue. Through 7,000 registered travel agents and over 60 active franchised travel agencies, REZconnect operates under the following brands: Travel Network, Global Travel Network and Travel Network / Vacation Central. The franchisees book their customers' travel through REZconnect.com because they generally receive more favorable pricing.
The travel booking operating group is YTB Travel Network and is a travel management subsidiary that processes travel sales from several different marketing systems including storefront and online business models, and processes and handles bookings (reservations) from over 17,000 websites. The fulfillment is offered through interactive, real time booking engines and access to preferred deals with leading travel industry suppliers. The emerging market shift to the Internet for travel services presents the opportunity for advancement of products and services by referral relationships.
The Marketing operating group, YourTravelBiz.com, is a direct sales organization selling the RTA online business opportunity and has sold the 14,800 RTAs which are currently in the system. The RTAs have the ability to book individual and group travel. YourTravelBiz conducts business through recruitment, enrollment, initial training, and support of its sales force. This operating subsidiary is a referral marketing group providing support products and services for the sales representatives.
OVERVIEW
For 2005, net revenue is projected to rise 96.1% to $21.7 million, and 1% taxed diluted earnings per share are forecast at $.07. The pre tax profit margin is estimated at 12.5%. Monthly RTA membership dues should advance 131.2% to $8.7 million, reflecting an increase in the number of RTAs from 8,438 at the end of 2004 to an estimated 20,000 by December 31, 2005. Initial RTA fees should advance 151.0% to $3.9 million, which will be attributable to enrolling more than 23,000 RTAs, as compared to 10,005 for 2004. Printing and administrative service fees, which include revenue received from the sale of training materials, marketing brochures and the certification conferences, should climb 173.5% to $2.3 million. This is also attributable to an increase in the number of RTAs. Online travel income, which includes the contribution from web sites powered by REZconnect Technologies, is projected to increase 138.2% to $1.2 million, reflecting the increase in the number of active RTAs.
Commissions are projected to decline as a percentage of net sales from 68.5% to 49.5%, as ancillary revenue should represent a larger percentage of net sales. Also, monthly membership fees where commissions represent 28% of the $49.95 monthly dues is expected to be a larger percentage of the product mix. General and administrative expense is projected to decline from 36.2% of net revenue 33.8%, as overhead, utilities, insurance should not increase at the same rate as net revenue.
Our revenues are comprised of initial and monthly RTA hosting and maintenance fees, franchise fees and franchise service fees, commissions paid by travel providers and the retail value of travel agency related sales plus online hosting fees for websites. Additional revenue is derived from other travel products and services. Certain travel suppliers pay performance-based compensation known as "override commissions" or "overrides." Commission revenues and gross retail sales, net of allowances for cancellations, are recognized generally based on the expected date of travel. Overrides are recognized on an accrual basis once the amount has been confirmed with the travel supplier. Franchise fees are recognized when all material services and conditions required have been performed and the collectability of the franchise fee is relatively assured. We generally defer recognition of franchise fees until such amounts have been collected from the franchisee. Franchise service fees are recognized on the accrual basis as earned. Online travel income is recorded when earned and is recognized based on the websites hosted.
With respect to travel services, revenues are generated by transactions with customers who purchase travel services supplied by participating vendors. Because the Company is the merchant of record in these transactions, revenue for these services includes the total amount billed to the customer.
The commission rates paid by travel suppliers, in addition to overrides, are determined by individual travel suppliers and are subject to change. Historically, typical standard base commission rates paid by travel suppliers have been approximately 10% for hotel reservations, 5% to 10% for car rentals and 10% to 16% for cruises and vacation packages. Based on the past several years leisure vendors (including tour operators, cruise lines, hotel and car packagers) have not reduced their commission levels but, in fact, have offered the YTB Travel Network incentive commissions above the standard compensation for its volume business. The YTB Travel Network expects that its weighted average commission of online transaction revenues will increase due to the fact that its leisure bookings are much greater as a percentage of total sales than airline ticketing, the latter offering the Company lower commissions. There can be no assurance that travel suppliers will not reduce commission rates paid to YTB Travel Network or eliminate such commissions entirely, which could, individually or in the aggregate, have a material adverse effect on the Company's business, operating results and financial condition. Each website travel storeowner pays a monthly fee of $5.00-$49.95 (depending upon multiple user contracts) plus YTB International can earn transactional compensation from travel purchased off each website.
The Company believes it is at the forefront of several growing trends: the increase in consumer spending in the travel industry, the boom in home-based businesses, and the growing acceptance of conducting retail business on the Internet. Tourism accounts for nearly 11% of all consumer spending worldwide. The travel industry, currently a $7 trillion business, is growing 23% faster than the global economy and spending on travel is expected to double in the next five years. Industry research shows that one "baby boomer," a segment comprised of nearly a billion people worldwide, will retire every eight seconds for the next 20 years. Luxury cruise ship companies and resort builders are gearing up for this wave of retirees. Secondly, with job security, as well as an ability to spend time with the family, an ever-increasing concern, we believe the ability to own a home-based business is becoming an even more attractive option. Finally, we believe online travel planning will continue to make tremendous inroads in the marketplace as more people use the Internet to become better informed and save time and money.
Results of Operations
NOTE: The consolidated results for the six-months ended June 30, 2005 include the accounts of YTB International, Inc. and its three wholly-owned subsidiaries, REZconnect Technologies, Inc.; YTB Travel Network, Inc.; and YourTravelBiz.com. Inc. The results for the six-months ended June 30, 2004 represent the accounts of the former REZconnect Technologies, Inc. only, because at June 30, 2004 the merger and subsequent consolidation had not yet occurred. As such, comparisons between June 30, 2005 and June 30, 2004 will reflect variances causing incompatibility between those two periods.
REVENUES
Commissions. Commission revenue in 2005 is attributable to the YTB Travel Network subsidiary. (See note above).
Franchise Fees. Franchise fees decreased by $52,463 or 96% in the six-month period as compared to the 2004 six-month period. The decrease is a result of decrease in service fees of storefront travel agency franchisees in the system.
Franchise Service Fees and online service fees and other fees decreased similarly as compared to 2004 by approximately $150,340 or 52% in the 2005 six-month period as compared to the 2004 six-month period. This is attributable to a decrease in service fees of storefront travel agency franchisees in the franchise system.
Travel Products and Services. Travel products and services increased by $1,200,459 in the 2005 six-month period, an increase of approximately 134%. The increase is attributable to an increase in the RTA's utilizing the Company as their customer travel provider.
Online Travel Income. Online travel income increased $199,246 or 86% due to the fact the Company's consumer website program has grown significantly.
Advertising and Other. Advertising and other revenues increased approximately $94,495 or 4023% due to the fact that the Company is active in this area in 2005.
New RTA Sales. New RTA sales revenue of $1,190,715 is attributable to the YourTravelBiz.com, Inc. subsidiary (see note above).
Monthly Maintenance Fees. The revenue in 2005 is attributable to the merger of the two companies. (See note above).
Printing and Administrative Service Sees. The revenue in 2005 of $3,446,611 is attributable to the merger of the two Companies. (See note above).
OPERATING EXPENSES
Commissions. Commissions increased by $3,169,704. The increase is mainly attributable to YourTravelBiz.com, Inc. (See note above).
Cost of Travel Products and Services. Cost of travel products and services increased by approximately $796,484 or 96% in 2005 as compared to 2004 six-month period.
Depreciation and Amortization. Depreciation and amortization expenses increased by approximately $268,432 which is attributable mainly to the amortization of the sales representative agreements acquired in the merger.
General and Administrative. Combined Companies the General and administrative expenses increased by approximately $2,675,519 in 2005. As a percentage of total revenues, general and administrative expenses were 39% in 2005 as compared to 40% in 2004. The increase in general and administrative expense in 2005 is attributable to the merger of the two Companies.
Variability of Results
The Company's travel products and services gross bookings have increased from 2004 to 2005 due to increase in the number of hosted websites including additional franchises derived from REZcity.com and an increase in products and services sold to travel agencies utilizing our unique private label agent only web-based booking site. Cost of travel revenues have similarly increased from 2004 to 2005.
As a result of the Company's operating history in online commerce and the variability that can be experienced by our franchising operations, the Company is unable to accurately forecast its revenues. The Company's current and future expense levels are based predominantly on its operating plans. The Company may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly, any significant shortfall in revenues would likely have an adverse effect on the Company's business, operating results and financial condition. Further, the Company currently intends to substantially increase its operating expenses to develop and offer new and expanded travel services, to fund increased sales and marketing and customer service operations and to develop its technology and transaction processing systems. To the extent such expenses precede or are not subsequently followed by increased revenues, the Company's operating results will fluctuate and anticipated net losses in a given period may occur.
The Company expects to experience fluctuations in its future quarterly
operating results due to a variety of other factors, many of which are outside
the Company's control. Factors that may adversely affect the Company's quarterly
operating results include, but are not limited to (i) the Company's ability to
retain existing customers, attract new customers at a steady rate and maintain
customer satisfaction, (ii) changes in inventory availability from third party
suppliers or commission rates paid by travel suppliers, (iii) the announcement
or introduction of new or enhanced sites, services and products by the Company
or its competitors, (iv) general economic conditions specific to the Internet,
online commerce or the travel industry, (v) the level of use of online services
and consumer acceptance of the Internet and commercial online services for the
purchase of consumer products and services such as those offered by the
Company,(vi) the Company's ability to upgrade and develop its systems and
infrastructure and to attract new personnel in a timely and effective manner,
(vii) the level of traffic on the Company's online sites, (viii) technical
difficulties, system downtime or Internet brownouts, (ix) the amount and timing
of operating costs and capital expenditures relating to expansion of the
Company's business, operations and infrastructure, (x) governmental regulation
and (xi) unforeseen events affecting the travel industry, including terrorist
activities similar to September 11 and the conflict with Iraq.
In addition, the Company expects that it will experience seasonal business, reflecting seasonal fluctuations in the travel industry, Internet and commercial online service usage and advertising expenditures. The Company anticipates that travel bookings will typically increase during the first and second quarter in anticipation of summer travel and will typically decline during the third quarter. Internet and commercial online service usage and the rate of growth of such usage may be expected typically to decline during the summer. Depending on the extent to which the Internet and commercial online services are accepted as an advertising medium, seasonality in the level of advertising expenditures could become more pronounced for Internet-based advertising.
Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast, and the Company believes that period-to-period comparisons of its operating results will not necessarily be meaningful and should not be relied upon as an indication of future performance. It is likely that the Company's future quarterly operating results from time to time will not meet the expectations of security analysts or investors. In such event, the price of the Company's Common Stock would likely be materially and adversely affected.
The material effects on our operations that we anticipate as a result of the merger with YTB will be a significant increase in RTA's and membership revenue, as well as a commensurate increase in related commission expense.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities in 2005 was approximately $7,601 as compared to cash provided by in operating activities of $37,493 in 2004.
Net cash used by investing activities was approximately $80,760 in 2005 as compared to cash used by investing activities of approximately $41,991 in 2004.
Cash provided by financing activities was approximately $3,058,873 in 2005 and provided by financing activities was approximately $33,080 in 2004. As of June 30, 2005, we had approximately $2,995,961 in cash and approximately $339,855 in marketable securities, as a result of raising of capital from the sale of a convertible note which occurred in January 2005 for 2 million dollars, and from the proceeds from the issuance of stock in a private placement memorandum.
The Company believes that cash and short term investments on hand at June 30, 2005 and its cash flow from operations will be sufficient to meet its obligations on a timely basis for the next 12 months.
FORWARD-LOOKING STATEMENTS
All statements other than statements of historical fact included in this quarter report, including without limitation statements regarding the company's financial position, business strategy and the plans and objectives of the company's management for future operations is forward-looking statements. When used in this annual report, words such as "anticipate", "believe," "estimate," "expect," "intend", and similar expressions, as they relate to the company or its management, identify forward-looking statements. Such forward-looking statements are based on the beliefs of the company's management, as well as assumptions made by and information currently available to the company's management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors, including but not limited to, business and economic conditions. Competitive factors and pricing pressures, capacity and supply constraints. Such statements reflect the views of the company with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the operations, results of operations, growth strategy And liquidity of the company. Readers are cautioned not to place undue reliance on these forward-looking statements. The company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
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