The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q.

Statements contained in this Quarterly Report on Form 10-Q, which are not historical in nature, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the "Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements include, without limitation, statements in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, regarding matters which are not historical fact, including our intent, belief or current expectations of our company or our officers with respect to, among other things, trends in the travel industry, business and growth strategies, use of technology, ability to integrate acquired businesses, future actions, future performance or results of operations, and the outcome of contingencies such as legal proceedings.

Forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from anticipated results. These risks and uncertainties include factors affecting the travel and education industry generally, competition, dependence on key personnel and vendor relationships, our ability to successfully integrate the operations of existing or acquired companies, and a variety of factors such as periods of international unrest, the outbreak of disease, changes in the direct-mail environment, protection of intellectual rights, unidentified taxation exposure, recession, weather conditions and concerns for passenger safety that could cause a decline in travel demand, as well as the risk factors, and other factors as may be identified from time to time in our SEC filings or in our press releases. For a more complete discussion of these risks, please refer to Item 1A Risk Factors disclosure in our Annual Report on Form 10-K filed on March 12, 2009 and those factors set forth under Part II, Item 1A Risk Factors set forth in this Quarterly Report on Form 10-Q. All forward-looking statements are expressly qualified in their entirety by these factors and all related cautionary statements. We do not undertake any obligation to update any forward-looking statements.

Executive Overview

We are a leading educational company that (1) organizes and promotes worldwide travel programs for students, athletes and professionals and (2) provides over 8 million pages of online research content.

Ambassador Programs, Inc. provides worldwide travel programs for youth, student leaders and professionals. Youth travel programs provide opportunities for grade school, middle school and high school students to learn about the history, government, economy and culture of the foreign and domestic destinations they visit, as well as for middle and high school athletes to participate in international sports challenges. Our student leader programs provide educational opportunities for middle school and high school students to learn leadership, government, college admissions and community involvement skills at domestic destinations. Our professional programs emphasize meetings and seminars between delegates and persons in similar professions abroad. World Adventures Unlimited, Inc. provides adventure based travel packages for students, kindergarten through twelfth grade, to destinations outside of North America. Travel for these programs is not expected to start until 2010.

The BookRags' website, www.bookrags.com, is an educational website that attracts millions of users each month. Students and teachers are able to "research anything" through over 8 million pages of content, including BookRags-created material, licensed material, user-generated content, and other third party content. This acquisition, which aligns with our mission of bridging cultural and political borders through education, is a thriving young business and is a complementary revenue stream to the seasonal nature of the student travel industry. Its key website metrics, including but not limited to, monthly page views, website visitors, and unique users, have had year-over-year growth. This acquisition was made for the purpose of owning a business that attracts millions of similar customers, however, we do not expect this business to perform at the level of our travel programs. We expect BookRags to continue to be profitable as it is still in a growth phase. We believe its revenues and earnings will be negatively impacted by the current economic conditions, but not to the extent of our educational travel business.

The key financial indicators that we use in managing our business and in evaluating our financial condition and operating performance are: program operating results; net operating income; deployable cash; free cash flow; net enrollments; various website metrics, including monthly page views, website visitors, and unique users; financial ratios; and leverage as shown on our consolidated balance sheet. Deployable cash, free cash flow, and net enrollments are non-GAAP measurements we utilize and are defined and further described in the sections captioned "Key Performance Non-GAAP Financial Indicators" below. The key macro-economic factors and non-financial indicators that affect our financial condition and operating performance include: military actions; terrorism; health concerns; economic stability; consumer discretionary spending; consumer confidence; foreign currency fluctuations; and interest rates.

Because our operating results depend primarily on income from our travel programs, delegate acquisition and retention costs influence our operating results. Additionally, the level of expenses required to promote and operate our programs will impact our operating results. The seasonality of our business is always a consideration, as the majority of our travel programs occur in June and July of each year, complimented by the majority of our content sales, which we expect to occur during the school year, from September to June. We have historically earned more than 80 percent of our annual revenues in the second and third quarters, which we anticipate will continue for the foreseeable future. Historically these seasonal revenues have more than offset operating losses incurred during the rest of the year.

For the remainder of 2009, our focus is targeted at the following: increase net enrollments for 2010 travel programs; improve margin through effective program cost management; manage operating expenses; maximize utilization of cash; develop our websites; improve brand recognition; investigate growth opportunities; and increase efficiency through improved business processes and automation. We will continue to seek opportunities to improve our performance and add complementary revenue streams, such as the agreement we signed with Discovery Education, Inc. during the first quarter of 2009. Please see "2010 Net Enrollments" below for further discussion on our 2010 outlook on delegate registrations.

Results of Operations

The following table sets forth the consolidated financial results and change in
dollars and percentages for the periods indicated (in thousands):

Comparison of the Three Months Ended September 30, 2009 to the Three Months
Ended September 30, 2008

                                                 Three Months Ended September 30,

                                        2009         2008       $ Change       % Change
Total revenue                         $ 36,407     $ 40,119     $  (3,712 )          (9 %)
Cost of goods sold                       3,206        7,101        (3,895 )         (55 %)
Gross margin                            33,201       33,018           183             1 %
  Selling and marketing                 11,281       11,272             9             0 %
General and administrative expenses      3,252        2,822           430            15 %
Operating income                        18,668       18,924          (256 )          (1 %)
Other income                               501          667          (166 )         (25 %)
Income before tax                       19,169       19,591          (422 )          (2 %)
Income tax provision                     6,664        6,293           371             6 %
Net income                            $ 12,505     $ 13,298     $    (793 )          (6 %)

During the quarter ended September 30, 2009, we traveled 12,967 delegates, a decrease of 27 percent from 17,676 delegates during the comparable 2008 quarter. In the third quarter of 2009, total revenue decreased $3.7 million to $36.4 million from $40.1 million in the third quarter of 2008. Gross margin increased to $33.2 million in the third quarter of 2009 compared to $33.0 million in the third quarter in 2008. The decrease in revenue is due primarily to travelling fewer delegates partially offset by increased program prices and a larger percent of

international travelers compared to the previous year. Increased gross margin resulted from the global economic slowdown, that reduced travel demand and supplier prices in 2009,
enabling us to purchase our travel components at better than expected prices. In addition, BookRags' year-over-year growth in the third quarter of 2009 resulted in revenue and gross margin of $0.7 million and $0.6 million, respectively. BookRags revenue and gross margin in the third quarter of 2008 was $0.6 million and $0.5 million, respectively.

Selling and marketing expenses were $11.3 million during both of the third quarters of 2009 and 2008. Expenses were flat year over year due to a $0.3 million write-off of computer equipment, which did not occur in the comparable 2008 quarter, a $0.2 million increase in depreciation expense, offset by a $0.4 million decrease in personnel costs from the reduction of employees in January of 2009. General and administrative expenses were $3.3 million and $2.8 million during the third quarters of 2009 and 2008, respectively. The $0.4 million increase was due to a $0.2 million increase in legal and professional fees, a $0.1 million write-off of computer equipment, and a $0.1 million increase in depreciation on new technology assets, offset by a $0.1 million decrease in personnel costs.

Other income consisted primarily of interest income generated by our cash, cash equivalents and available-for-sale securities. We realized interest and dividend income of $0.5 million in the quarter ended September 30, 2009, compared to $0.7 million in the quarter ended September 30, 2008. The decrease in interest and dividend income is due to lower prevailing interest rates.

The income tax provision has been recorded based on a 34.8 percent and 32.1 percent estimated annual effective income tax rate, applied to the pre-tax income for the quarters ended September 30, 2009 and 2008, respectively. The difference from the statutory rate of 35 percent is primarily due to tax exempt interest income earned during the periods.

Comparison of the Nine Months Ended September 30, 2009 to the Nine Months Ended

September 30, 2008

                                                Nine Months Ended September 30,

                                        2009          2008     $ Change      % Change
Total revenue                         $ 92,589     $ 90,285     $  2,304             3 %
Cost of goods sold                      13,815       17,080       (3,265 )         (19 %)
Gross margin                            78,774       73,205        5,569             8 %
Selling and marketing                   29,411       29,606         (195 )          (1 %)
General and administrative expenses      9,924        8,913        1,011            11 %
Operating income                        39,439       34,686        4,753            14 %
Other income                               628        2,475       (1,847 )         (75 %)
Income before tax                       40,067       37,161        2,906             8 %
Income tax provision                    13,637       12,153        1,484            12 %
Net income                            $ 26,430     $ 25,008     $  1,422             6 %

During the nine months ended September 30, 2009, we traveled 32,454 delegates, a decrease of 17 percent from 38,926 delegates during the same period one year ago. In the first nine months of 2009, total revenue increased $2.3 million to $92.6 million from $90.3 million in the first nine months of 2008. Gross margin increased to $78.8 million in the nine months ended September 30, 2009 compared to $73.2 million in the nine months ended September 30, 2008. The increase in revenue is mainly due to higher program prices as compared to the same period in 2008. The increase in gross margin is primarily due to traveling delegates at lower costs during the first nine months of 2009 compared to the same period in 2008. In addition, BookRags' year-over-year growth in revenue, as well as including its results for the full nine months of 2009, led to revenue and gross margin of $2.3 million and $2.1 million, respectively. In 2008, from acquisition at May 15, 2008 to September 30, 2008, BookRags reported $0.9 million in revenue and $0.8 million in gross margin.

Selling and marketing expenses were $29.4 million and $29.6 million during the first nine months of 2009 and 2008, respectively. The $0.2 million decrease was primarily due to $0.6 million savings in personnel costs offset by a $0.3 million increase in depreciation expense. General and administrative expenses were $9.9 million and $8.9 million during the first nine months of 2009 and 2008, respectively. The $1.0 million increase was due to a $0.8 million increase in legal and professional fees and a $0.4 million increase in depreciation expense, which were partially offset by a $0.5 million reduction in personnel costs.

Other income consisted primarily of interest income generated by our cash, cash equivalents and available-for-sale securities and foreign currency losses. We realized other income of $0.6 million in the nine months ended September 30, 2009, compared to $2.5 million in the nine months ended September 30, 2008. The decrease in other income is due to $1.0 million foreign currency loss recorded early in the year on over-hedged foreign currency contracts for 2009 coupled with $0.9 million less in interest income that was caused by lower prevailing interest rates.

The income tax provision has been recorded based on a 34.0 percent and 32.7 percent estimated annual effective income tax rate, applied to the pre-tax income for the nine months ended September 30, 2009 and 2008, respectively. The difference from the statutory rate of 35 percent is primarily due to tax exempt interest income earned during the periods.

Results of Operations by Segment

With the acquisition of BookRags on May 15, 2008, we changed from having one reporting segment to having two reporting segments, consisting of (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, an internet research site housing content sales and advertising revenue.

Our travel programs' gross margin is comprised of gross receipts less direct program costs, including accommodations, transportation, speakers, facilitators, and event costs. BookRags' gross margin is comprised of content, subscription, and advertising revenues via www.bookrags.com, less commissions and amortization of intangible assets directly associated with sales.

Segment results of operations for the three and nine months ended September 30, 2009 and 2008 are as follows (in thousands):

                                       Three months ended September 30, 2009                           Three months ended September 30, 2008
                             Travel Programs                                                 Travel  Programs
                                and Other           BookRags (1)         Consolidated           and Other            BookRags (1)         Consolidated
Total revenue               $          35,752       $         655       $        36,407     $           39,504       $         615       $        40,119
Cost of goods sold                      3,111                  95                 3,206                  7,026                  75                 7,101
Gross margin                           32,641                 560                33,201                 32,478                 540                33,018
Selling and marketing                  11,123                 158                11,281                 11,126                 146                11,272
General and
administrative expenses                 3,187                  65                 3,252                  2,780                  42                 2,822
Operating income                       18,331                 337                18,668                 18,572                 352                18,924
Other income                              501                   -                   501                    657                  10                   667
Income before tax                      18,832                 337                19,169                 19,229                 362                19,591
Income tax provision                    6,549                 115                 6,664                  6,104                 189                 6,293
Net income                  $          12,283       $         222       $        12,505     $           13,125       $         173       $        13,298

                               Nine months ended September 30, 2009                  Nine months ended September 30, 2008
                          Travel                                                 Travel
                         Programs            Book                               Programs            Book
                         and Other         Rags (1)          Consolidated       and Other         Rags (1)         Consolidated
Total revenue           $    90,246       $     2,343       $       92,589     $    89,352       $      933       $       90,285
Cost of goods sold           13,531               284               13,815          16,970              110               17,080
Gross margin                 76,715             2,059               78,774          72,382              823               73,205
Selling and marketing        28,876               535               29,411          29,388              218               29,606
General and
administrative
expenses                      9,733                19                9,924           8,854               59                8,913
Operating income             38,106             1,333               39,439          34,140              546               34,686
Other income                    627                 1                  628           2,460               15                2,475
Income before tax            38,733             1,334               40,067          36,600              561               37,161
Income tax provision         13,188               449               13,637          11,898              255               12,153
Net income              $    25,545       $       885       $       26,430     $    24,702       $      306       $       25,008

(1) BookRags was acquired on May 15, 2008.Therefore the nine months ended September 30, 2008 do not represent full periods as they do in 2009 and are not comparable to the nine months ended September 30, 2009.

See 'Results of Operations' above for a discussion of year over year variances for Travel Programs and details regarding the portion that was contributed by BookRags.

Key Performance Non-GAAP Financial Indicators

We analyze our performance on a net income, cash flow and liquidity basis in accordance with GAAP as well as on a non-GAAP operating, cash flow and liquidity basis referred to below as "non-GAAP operating results" or "non-GAAP cash flows and liquidity measures." These measures and related discussions are presented as supplementary information in this analysis to enhance the readers' understanding of, and highlight trends in, our core financial results. Any non-GAAP financial measure used by us should not be considered in isolation or as a substitute for measures of performance or liquidity prepared in accordance with GAAP.

2010 Net Enrollments

Net enrollments consist of all participants who have enrolled in our programs less those that have already withdrawn. As of October 19, 2009, we had 19,919 net enrolled participants for our 2010 travel programs, compared to 26,925 net enrolled participants as of the same date last year for our 2009 travel programs. The 26 percent decrease in net enrollments for our 2010 programs is likely to negatively impact our 2010 results. We believe the decline is caused primarily by the current economic conditions, a decline in consumer confidence and an increase in the unemployment rate. We have taken and will continue to take measures to mitigate these negative impacts, such as but not limited to implementing new enrollment strategies to increase retention efforts toward 2010 travel, and continuing to tightly manage our expenses. However, there can be no assurances that any of these measures will have any success, and if so, to what extent.

Deployable Cash

Deployable cash is a non-GAAP liquidity measure. Deployable cash is calculated as the sum of cash, cash equivalents, short-term 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. We believe the deployable cash measurement is useful in understanding cash available to deploy for current and future business opportunities. See the 'Liquidity' section below for explanations of cash sources and uses.

Deployable Cash Reconciliation (in thousands)
                                                         September 30,            December 31,
                                                      2009           2008             2008

Cash, cash equivalents and short-term
available-for-sale securities                        $  80,301     $  61,838     $       74,425
Prepaid program cost and expenses                        5,326         8,638              4,160
Less: Participants' deposits                           (16,539 )     (21,976 )          (44,166 )
Less: Accounts payable/accruals/other liabilities      (13,606 )     (10,850 )           (4,473 )
Deployable cash                                      $  55,482     $  37,650     $       29,946

Free Cash Flow

Free cash flow is a non-GAAP cash flow measure. Free cash flow is calculated as
cash flow from operations less purchase of property, plant, equipment and
intangibles. Management believes this non-GAAP measure is useful to investors in
understanding the cash generated within the current period for future use in
operations. Free cash flow per share is calculated as free cash flow divided by
weighted average shares outstanding at period end.

Free Cash Flow Reconciliation (in thousands except per share data)
                                                          Nine months ended
                                                             September 30,
                                                           2009          2008
Cash flow from operations as reported                  $      12,708   $  8,637
Purchase of property, plant, equipment and intangibles       (4,129)    (4,164)
Free cash flow                                         $       8,579   $  4,473
Weighted average shares outstanding - diluted                 19,356     19,678
Free cash flow per share                               $        0.44   $   0.23

Liquidity

At September 30, 2009, we had $80.3 million of cash, cash equivalents and short-term available-for-sale securities, including program participant funds of $16.5 million. At September 30, 2008, we had $61.8 million of cash, cash equivalents and short-term available-for-sale securities, including program participant funds of $22.0 million.

Net cash provided by operations for the nine months ended September 30, 2009 and 2008 was $12.7 million and $8.6 million, respectively. The increased cash flow from operations was primarily related to improved cash management. Positive operating cash flow was created by $6.9 million reduction in participant deposits, offset by $1.4 million increase in earnings, $1.6 million reduction in accounts receivable, $3.8 million reduction in prepaid program costs and a $1.9 million increase in accounts payable.

Net cash used in investing activities was $13.0 million and $1.7 million for the nine months ended September 30, 2009 and 2008, respectively. The increase is primarily due to a $20.5 million increase in cash used to purchase available-for-sale securities, offset by an $9.3 million decline in cash paid for BookRags in 2008.

Net cash used in financing activities for the nine months ended September 30, 2009 and 2008 was $3.5 million and $16.1 million, respectively. The net change in financing activities is primarily related to the change in stock repurchases and dividend payments. We repurchased $0.4 million of our Common Stock, or approximately 57,000 shares, during the first nine months of 2009 in comparison to $9.9 million of stock repurchases, or approximately 607,000 shares, during the first nine months of 2008. During the first nine months of 2009 and 2008, we paid $3.4 million and $6.6 million, respectively, in cash dividends to our shareholders.

Capital Resources

Our business is not capital intensive. However, we do retain funds for operating purposes in order to conduct sales and marketing efforts for future programs.

During the first nine months of 2009, we had an unused line of credit in the amount of $20.0 million. The line of credit covenants include deployable cash greater than zero, tangible net worth greater than $40.0 million and net income after taxes for the current and previous three quarters of greater than $4.0 million. At September 30, 2009, we were in compliance with all covenants. Additionally, we have no plans to draw any of these funds in the immediate future.

We continue to consider acquisitions of educational, travel and youth businesses that may require the use of cash and cash equivalents. No such acquisitions are currently pending and no assurance can be given that definitive agreements for any such acquisitions will be entered into, or, if they are entered into, that they will be on terms favorable to us.

We do not have any material capital expenditure commitments for 2009, not already presented within our September 30, 2009 financial statements. We believe . . .