YTB growth stalls in Q3, sells assets
Online travel company YTB International reported late Friday that it had a sharp drop in earnings in the third quarter, as its growth continued to stall amid legal and cash-flow challenges. It also said it plans to sell an Edwardsville office building and its corporate jet to raise cash.
The Wood River-based company, which faces a deceptive lawsuit from the California Attorney General’s Office, turned a small profit of $288,000 in the three months ending Sept. 30, that’s down from a $2.2 million in the same period last year.
YTB, which makes more than 70 percent of its money selling online travel agencies at a rate of $450 up front and $50 a month, saw its ranks of paying travel agents fall sharply during the quarter, from 131,572 to 114,614, the steepest decline in the company’s history.
Still, the company’s revenue grew 7.5 percent to $42.8 million on the strength of new agent sales and a jump in commissions for selling travel. Expenses grew 13 percent.
So far this year, YTB has lost $3.4 million, and YTB said Friday it has taken steps “to ensure that the company continues as a growing concern,” including layoffs at its Wood River headquarters and other cost cutting.
Last week, it announced a deal to sell an office building for $1.5 million to Prestige Management Services, LLC, of Edwardsville; it paid $1.8 million for the building in August, 2007. On Friday, YTB also said it had reached a deal to sell its company Learjet for $900,000; it paid $1.3 million to buy it in February.
As the Post-Dispatch first reported in August, YTB bought both the building and the jet from companies owned by members of its board of directors, part of a long string of insider deals at the company. A $2.5 million deal to buy a second Edwardsville office building next year from the same director-owned company is still in place, according to YTB’s regulatory filings.
While those deals were properly disclosed and have not attracted legal scrutiny, YTB still faces the deceptive marketing lawsuit in California and two class-action lawsuits filed by attorneys for former agents in the U.S. District Court in East St. Louis. It has said it will fight those suits “vigorously.”
More details on YTB’s third-quarter earnings are available here.
The interesting part of the story is that 70% of YTB’s income is from selling the online travel agencies. Therefore, there is more emphasis on becoming a member and getting others to join rather than actually selling the service of travel. This is typical of MLM companies.