Youbet.com, Inc. (NASDAQ: UBET) today announced its results for
the three-month period ended March 31, 2010. The Company reported
first quarter 2010 loss per diluted share from continuing
operations of $0.01, compared to earnings per diluted share of
$0.02 in the first quarter of 2009. Excluding $1.0 million in
professional and legal fees related to the impending merger with
Churchill Downs Incorporated, first quarter 2010 net loss per
diluted share from continuing operations of $0.01 would have been
earnings per diluted share of $0.01.
The following table sets forth certain operating data, income
(loss) per share data and Youbet Express handle for the three-month
periods ended March 31, 2010 and 2009.
(in 000's, except per share amounts)
Three months ended
March 31, 2010 2009
Change Total revenue $ 25,965 $ 28,048 $ (2,083 )
Gross profit (1) 8,465 9,365 (900 )
Net income
(loss) from continuing operations (527 ) 836 (1,363 )
Loss
from discontinued operations (2) - (16 ) 16
Net
income (loss) $ (527 ) $ 820 $
(1,347 )
Diluted income (loss) per share 2010 2009
Change Income (loss) from continuing
operations $ (0.01 ) $ 0.02 $ (0.03 )
Income (loss) from
discontinued operations - - -
Net income (loss) per common
share $ (0.01 ) $ 0.02 $ (0.03 )
Youbet Express handle (3) $
115,700 $ 123,981 $ (8,281 )
(1)
Gross profit is total revenues
less track fees, licensing fees, contract costs, equipment costs
and network operations, each as calculated in accordance with
accounting principles generally accepted in the United States
(GAAP) and as presented on the condensed consolidated statements of
operations included with this release.
(2)
Effective February 15, 2008,
Youbet ceased operations at International Racing Group (IRG), and
accordingly, has accounted for such operations retroactively as
discontinued operations.
(3)
Amount wagered by players.
“We were very pleased that our shareholders recently voted to
approve the acquisition of Youbet by Churchill Downs, and, subject
to receipt of required regulatory approvals and other customary
conditions to closing, we expect the transaction to close in the
second quarter,” said Youbet President and Chief Executive Officer
David Goldberg. "In terms of our performance, first quarter results
were largely affected by $1.0 million in legal and other
professional expenses directly related to the impending Churchill
merger and the industry losing 9.2% of its thoroughbred racing days
versus the prior-year quarter due to poor weather at many key
tracks, continued overall weakness in the U.S. economy and
significantly higher unemployment rates versus the prior-year
quarter. We were also affected by the broadening of access to
certain racing content. However, the impact of the general industry
decline on the company was mitigated by our efforts to attract
handle via our marketing activities, with the company’s handle in
the first quarter declining 6.7% compared to the overall
thoroughbred industry-wide decline of 10.4%. During the quarter, we
saw an increase of 7% in weekly unique wagerers at Youbet Express,
offset by a decline of 13% in the average handle per unique weekly
wagerer versus the prior-year quarter. We continue to add new
players each quarter and are beginning to see some reversal of the
negative unemployment trends for the past few months.”
Kentucky Derby Performance
Youbet produced a record for Kentucky Derby Day handle, as well
as its highest single handle day in company history, with over $6.1
million wagered on the day of the Kentucky Derby. In addition,
Youbet had a two-day handle record of $8.6 million wagered on the
combined Kentucky Oaks and Kentucky Derby days.
Total Youbet handle on Derby Day was up 9.4% compared to the
prior Derby record in 2006 and up 7.3% versus the 2006 Breeders’
Cup, which previously held the record for the company’s highest
wagering day. Total Oaks and Derby Day handle increased 14.4% from
the prior year and was up 11.9% from the previous record weekend in
2006.
United Tote’s system and operations teams had a very successful
Derby weekend. Based on preliminary numbers, United Tote processed
$162.7 million in all-source handle on the 13-race Derby Day
program, up 4.3% from 2009; total all-source wagering processed by
United Tote on the Kentucky Derby race itself, which includes
on-track and off-track wagers, was $112.7 million. Additionally, as
the Kentucky Oaks continues to draw large crowds, attendance and
handle were both up, with handle increasing 20% from 2009 to $36
million.
“A record Kentucky Derby weekend, combined with an essentially
flawless performance of our platform and customer service, as well
as United Tote, has positioned the company well with players going
into the remaining Triple Crown season,” added Mr. Goldberg.
Segment Results
Youbet Express
United Tote Three months ended March 31, Three
months ended March 31, (in 000's)
2010
2009 % Change 2010 2009
% Change Revenue (1) $21,762
$23,681 (8.1%) $4,482 $4,659 (3.8%)
Gross profit (2)
7,268 8,004 (9.2%) 1,197 1,361 (12.0%)
Operating expenses
6,967 5,743 21.3% 2,460 2,581 (4.7%)
Income (loss) from
continuing operations before other income (expense) and
income tax $301 $2,261 (86.7%) ($1,263) ($1,220) (3.5%)
Gross profit margin 33.4% 33.8%
26.7% 29.2%
(1)
Revenues exclude intersegment
eliminations of $0.3 million in 2010 and $0.3 million in 2009,
respectively.
(2)
Gross profit for Youbet Express is
commissions and other revenues less track fees, licensing fees, and
network operations. Gross profit for United Tote is total contract
revenues and equipment sales less contract costs and equipment
costs. Each line item is calculated in accordance with GAAP and
presented on the condensed consolidated statements of operations
data included with this release.
Revenue at Youbet Express for the first quarter of 2010 declined
8% year-over-year to $21.8 million, while gross profit declined 9%
when compared to the prior-year quarter, primarily due to an
increase in player incentives and an overall wagering decline in
the thoroughbred racing industry during the quarter as a result of
lost racing days at key tracks, continued economic weakness and
higher unemployment rates. Income from continuing operations before
other income (expense) and income tax at Youbet Express was $0.3
million during the first quarter of 2010, down $2.0 million or 87%
from the first quarter of 2009 primarily due to reduced revenue,
and merger and acquisition costs of $1.0 million related to the
impending Churchill Downs merger. EBITDA from continuing operations
at Youbet Express in the first quarter of 2010 was $1.0 million,
down $1.8 million or 65% from the first quarter of 2009.
For the first quarter of 2010, revenue at United Tote decreased
4%, primarily as a result of declining contract revenue. United
Tote’s loss from continuing operations before other income
(expense) and income tax for the first quarter of 2010 was $1.3
million, compared to a loss of $1.2 million in the first quarter of
2009. EBITDA from continuing operations at United Tote in the first
quarter of 2010 was a loss of $0.2 million, compared to EBITDA of
$0.2 million in the first quarter of 2009 primarily due to lower
revenue and higher employee benefit expenses.
First Quarter 2010 Operating Results
The following table summarizes the key Youbet Express components
of revenue for the three-month periods ended March 31, 2010 and
2009.
Three Months Ended March 31,
2010
2009
Change
(in thousands, except for Yield)
Youbet Express
Total Wagers (Handle) $ 115,700 $ 123,981 (6.7
%) Commissions from Handle 21,213 23,118 (8.2 %) Other Revenue
549 563 (2.5 %) Total Revenue
21,762 23,681 (8.1 %) Net Track
Revenue (1) $ 7,922 $ 8,738 (9.3 %) Yield (2) 6.8 % 7.0 % -20 bps
Handle
Handle Detail
(in thousands) 1Q09 Handle $ 123,981 1Q10 New Content
1,534 1Q09 Proforma same-track and same-state (3) 125,515
1Q10 Same-track change (9,779 ) 1Q10 Lost handle (36 ) 1Q10
Handle $ 115,700
(1)
Net track revenue is calculated as
commission revenue less track and licensing fees, each as
calculated in accordance with GAAP and presented in the condensed
consolidated statements of operations information attached to this
release and is used to calculate yield.
(2)
Youbet Express yield, is calculated as “commission revenue less
track and licensing fees as a percentage of handle” (each
calculated in accordance with generally accepted accounting
principles).
(3)
Estimated handle wagered in the first quarter of 2009 on tracks
that Youbet Express received content on in the first quarter of
2010 to provide a same-track comparison.
Total revenue in the first quarter of 2010 was $26.0 million, a
decrease of 7% from $28.0 million in the prior-year quarter.
Youbet Express revenue was $21.8 million for the first quarter
of 2010, down 8% from first quarter 2009 based on handle of $115.7
million, a 7% decline from the prior-year quarter. Youbet Express
yield in the first quarter of 2010 was 6.8%, a decrease of 20 basis
points from the prior-year quarter primarily due to an increase in
player incentives.
The handle decline of 6.7% in the first quarter of 2010 was
primarily due to an overall general industry wagering decline of
10.4% as a result of unfavorable weather conditions providing for
9.2% fewer race days from the prior-year quarter, continued overall
weakness in the U.S. economy, higher unemployment rates and the
broadening of access to certain content.
For the first quarter of 2010, contract revenue at United Tote
of $4.4 million was down $0.2 million, or 4%, from the prior-year
quarter, while equipment sales were flat compared to the prior-year
quarter. Contract costs of $3.2 million were consistent with the
prior-year quarter as the cost structure at United Tote is fairly
rigid and less variable to fluctuations in handle processed and
reduction in race days. Gross profit for the first quarter of 2010
of $1.2 million was down 12% from the prior-year quarter, with
gross profit margin falling to 26.7% from 29.2%, primarily as a
result of the decline in contract revenue and flat cost
structure.
Total operating expenses associated with continuing operations
for the first quarter of 2010 were $9.4 million, an increase of
$1.1 million or 13% from the prior-year quarter. Research and
development costs of $1.0 million were up 6% from the same quarter
in 2009. Sales and marketing costs of $1.6 million were up $0.2
million, or 16%, from 2009 levels due to increases in
employee-related costs and new initiatives undertaken in relation
to marketing programs and customer acquisition activities. General
and administrative expense, which includes payroll-related costs,
transaction processing fees and professional consulting fees, was
$5.1 million in the first quarter of 2010, an increase of $1.0
million, or 23%, from the first quarter of 2009. The increase was
primarily due to $1.0 million in professional fees for merger and
acquisition costs associated with the impending merger with
Churchill Downs. Depreciation and amortization expense of $1.7
million declined $0.1 million, or 8%, compared to the first quarter
of 2009.
EBITDA from continuing operations in the first quarter of 2010
was $0.8 million, down 72% from $3.0 million in the first quarter
of 2009.
For the first quarter of 2010, net loss from continuing
operations, which includes Youbet Express and United Tote, was $0.5
million, or $0.01 per diluted share, compared to net income from
continuing operations of $0.8 million, or $0.02 per diluted share,
in the prior-year period. Excluding $1.0 million in professional
and legal fees related to the impending merger with Churchill Downs
Incorporated, first quarter 2010 net loss from continuing
operations of $0.5 million, or $0.01 per diluted share, would have
been net income from continuing operations of $0.5 million, or
$0.01 per diluted share.
Liquidity and Capital Resources
As of March 31, 2010, the company had net working capital of
$8.2 million, compared to net working capital of
$7.1 million at December 31, 2009. As of March 31, 2010,
the company had $12.1 million in cash and cash equivalents,
$4.8 million in restricted cash and $2.7 million in debt, all
of which is current. Net cash provided by operating activities from
continuing operations for the first three months of 2010 was $1.1
million, a $1.4 million decrease from the prior year due to a
decline in net income and cash requirements associated with the
paydown of various liabilities. Net cash used in investing
activities for the first three months of 2010 was $0.4 million, a
decrease of $0.2 million from the prior year due to lower
expenditures on property and equipment. Net cash used in financing
activities in the first three months of 2010 of $4.5 million
increased $3.0 million when compared to that used in 2009, due to
higher loan repayments in 2010.
Conference Call Information
The company will host a conference call and webcast today at
5:00 p.m. Eastern time. Both the call and webcast are open to the
general public.
The conference call number is 877-681-3375. Please call ten
minutes in advance to ensure that you are connected prior to the
presentation. Interested parties may also access the live call on
the Internet at http://www.youbet.com (select About Youbet.com).
Please log-on 15 minutes in advance to ensure that you are
connected prior to the call's initiation. Questions and answers
will be reserved for call-in analysts and investors. Following its
completion, a replay of the call can be accessed for 30 days on the
Internet at the above link.
Reconciliation of Non-GAAP Financial Measures
This release contains disclosure regarding EBITDA from
continuing operations, which is a financial measure that is not
calculated in accordance with GAAP. A reconciliation between EBITDA
from continuing operations and a GAAP measure follows:
Youbet.com Reconciliation of EBITDA From
Continuing Operations from Income from Continuing Operations
($ in thousands) Three months ended March
31, 2010 2009 Income (Loss) from
Continuing Operations $ (527 ) $ 836 Income tax (427 ) 88 Interest
expense, net 96 198 Depreciation and amortization 1,692
1,834 EBITDA from Continuing Operations $ 834
$ 2,956 EBITDA by Segment ADW $ 989 $ 2,796 Totalizator
(155 ) 160 EBITDA from Continuing Operations $ 834
$ 2,956
Management believes that the presentation of EBITDA from
continuing operations provides useful information to investors
regarding the Company’s results of operations because this non-GAAP
financial measure is among the primary metrics by which management
evaluates operating performance of the Company’s business, on which
internal budgets are based, by which management and other employees
within the Company are compensated, and on which the Company’s debt
covenants are based. The Company uses and believes investors and
other external users of the Company’s financial statements benefit
from the presentation of EBITDA from continuing operations in
evaluating its operating performance because:
- This measure provides greater
insight into management’s decisions as EBITDA from continuing
operations is one of management’s primary internal metrics for
evaluating the operating performance of the Company’s overall
business and underlying segment results. Management believes that
investors should have access to the same information that it uses
internally to analyze the Company’s results;
- This measure is useful for the
Company to assess the performance of its employees and business
segments because by excluding such costs as interest expense,
income taxes and depreciation and amortization expense, many of
which are outside of the control of employees, management is better
able to evaluate the performance of employees and determine the
extent to which they have met performance goals to be eligible for
incentive compensation awards; and
- EBITDA is widely used by
investors to measure a company’s operating performance without
regard to items such as interest expense, income taxes,
depreciation and amortization, which can vary substantially from
company to company depending upon accounting methods and book value
of assets, capital structure and the method by which assets were
acquired. Accordingly, the Company believes this measure
facilitates external comparisons to competitors’ historical
operating performance.
EBITDA from continuing operations is not defined under or
prepared in accordance with GAAP and should not be considered an
alternative to income from continuing operations, which the Company
believes is the most comparable GAAP measure, and should not be
considered a measure of the Company’s liquidity. Although the
Company uses EBITDA from continuing operations as a financial
measure to assess the performance of its business, the use of
EBITDA from continuing operations is limited because it does not
consider certain material costs necessary to operate the Company’s
business. These costs include the cost to service debt, the
non-cash depreciation and amortization associated with long-lived
assets, the cost of federal and state tax obligations and the
operating results of the Company’s discontinued businesses. This
presentation of EBITDA may not be comparable to similarly titled
measures used by other companies.
YOUBET.COM, INC. AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (Dollars in thousands, except share
amounts) March 31,
December 31, 2010 2009 ASSETS
(unaudited) Current assets Cash and cash equivalents $ 12,061 $
15,884 Restricted cash 4,787 4,616 Accounts receivable, net of
allowance for doubtful collections of $814 and $578 3,364 3,413
Inventories 1,241 1,278 Prepaid expenses and other 1,060 1,141
Deferred tax assets 2,700 2,700 25,213
29,032 Property and equipment, net of accumulated depreciation and
amortization of $36,471 and $34,928 11,835 12,890 Intangible
assets, net of amortization of $2,962 and $2,802 3,788 3,948
Deferred tax assets 5,400 5,400 Other assets 312
374 $ 46,548 $ 51,644
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
Current portion of long-term debt $ 2,675 $ 7,196 Trade payables
4,881 5,430 Accrued expenses 4,364 4,622 Customer deposits 4,776
4,558 Deferred revenues 359 162 17,055
21,968 Long-term debt, net of current portion -
- 17,055 21,968
Stockholders’ equity Preferred stock, $0.001 par value, authorized
1,000,000 shares, none issued or outstanding Common stock, $0.001
par value, authorized 100,000,000 shares, 42,829,373 shares issued
43 43 Additional paid-in capital 137,291 136,970 Deficit (105,333 )
(104,806 ) Accumulated other comprehensive loss (129 ) (152 ) Less
treasury stock, 1,099,335 common shares (2,379 )
(2,379 ) 29,493 29,676 $ 46,548
$ 51,644
Disclosures necessary to conform to GAAP and SEC Regulation S-X
have been omitted
YOUBET.COM, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in
thousands, except per share amounts)
Three Months Ended March 31, 2010
2009 Revenues Commissions $ 21,213 $ 23,118 Contract
services 4,123 4,281 Equipment sales 81 86 Other 548
563 25,965 28,048
Costs and expenses Track fees 12,451 13,063 Licensing fees
840 1,317 Network costs 923 1,005 Contract costs 3,237 3,240
Equipment costs 49 58 17,500
18,683
Gross profit 8,465
9,365
Operating expenses General and
administrative 5,147 4,181 Sales and marketing 1,627 1,406 Research
and development 961 903 Depreciation and amortization 1,692
1,834 9,427 8,324
Income (loss) from continuing operations before other
income (expense) and income tax (962 ) 1,041
Other
income (expense) Interest income 1 26 Interest expense (97 )
(224 ) Other 104 81
Income (loss)
from continuing operations before income tax (benefit)
(954 ) 924 Income tax (benefit) (427 ) 88
Net income (loss) from continuing operations (527 ) 836 Loss
from discontinued operations, without tax effect -
(16 )
Net income (loss) $ (527 ) $ 820
Basic income (loss) per share Income (loss) from continuing
operations $ (0.01 ) $ 0.02 Loss from discontinued operations
0.00 0.00 Net income (loss) $ (0.01 ) $
0.02
Diluted income (loss) per share Income (loss)
from continuing operations $ (0.01 ) $ 0.02 Loss from discontinued
operations 0.00 0.00 Net income (loss)
$ (0.01 ) $ 0.02
Weighted average shares outstanding
Basic 41,730,038 41,463,470 Diluted 44,713,780 42,109,982
Disclosures necessary to conform to GAAP and SEC Regulation S-X
have been omitted
YOUBET.COM, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) (in
thousands) Three Months
Ended March 31, 2010 2009
Operating activities Net income (loss) $ (527 ) $ 820
Loss from discontinued operations - (16
)
Income (loss) from continuing operations (527 ) 836
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by operating activities,
continuing operations Depreciation and
amortization of property and equipment 1,532 1,674 Amortization of
intangibles 160 160 Stock-based compensation 321 300 Provision for
bad debt 249 161 Increase in operating (assets) and liabilities
(641 ) (663 )
Net cash provided by continuing
operations 1,094 2,468
Net cash provided by discontinued
operations - 788
Net cash
provided by operating activities 1,094
3,256
Investing activities Purchase of
property and equipment (477 ) (626 ) Decrease in restricted cash
(other than Players Trust SM) 58 -
Net cash used in investing activities (419 )
(626 )
Financing activities Repayment of debt
(4,521 ) (1,489 )
Net cash used in financing
activities (4,521 ) (1,489 )
Foreign
currency translation adjustments 23 (5 )
Net increase (decrease) in cash and cash equivalents (3,823
) 1,136
Cash and cash equivalents, beginning of period
15,884 16,538
Cash and cash
equivalents, end of period $ 12,061 $ 17,674
Disclosures necessary to conform to GAAP and SEC Regulation S-X
have been omitted
About Youbet.com, Inc.
Youbet.com, Inc. (NASDAQ: UBET) is a leading domestic online
horse racing and horse betting site, the exclusive provider of live
horse racing footage and racing results to ESPN.com and
CBSSports.com and a leading supplier of totalizator systems to the
pari-mutuel industry. Youbet’s website enables its customers to
securely wager on horse races at over 200 racetracks each year
worldwide from the convenience of their homes or other locations.
Through its online platform, Youbet offers members real-time
wagering, co-mingled track pools, conditional wagering
capabilities, high quality live audio/video, up-to-the-minute track
information, mobile wagering, race replay library, simultaneous X2
Video multi-race viewing capability and sophisticated ROI-based
player analysis tools. In addition, through its United Tote
totalizator systems subsidiary, Youbet provides hardware and
software to its track partners, allowing them to process
pari-mutuel wagers, issue and pay tickets, and calculate payoff
odds.
Forward-Looking Statements
This press release contains certain forward-looking statements.
These forward-looking statements, which are included in accordance
with Section 21E of the Securities Exchange Act of 1934, as
amended, may involve known and unknown risks, uncertainties and
other factors that may cause Youbet's actual results and
performance in future periods to be materially different from any
future results or performance suggested by the forward-looking
statements in this press release. Although Youbet believes the
expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that actual
results will not differ materially from these expectations.
Important factors that could cause actual results to differ
materially from those in the forward looking statements include the
timely development and market acceptance of new products and
technologies; Youbet's ability to achieve further cost reductions;
Youbet's assessment of strategic alternatives for United Tote,
including a possible sale, as to which there can be no assurance of
success; increased competition in the advance deposit wagering
business; a decline in the public acceptance of wagering; wagering
ceasing to be legal in jurisdictions where Youbet currently
operates; the limitation, conditioning, or suspension of any of
Youbet's licenses; increases in or new taxes imposed on wagering
revenues; the adoption of future industry standards; the loss or
retirement of key executives; Youbet's ability to meet its
liquidity requirements and maintain its financing arrangements; and
general economic and market conditions; as well as the risks and
uncertainties discussed in Youbet's Form 10-K for the year ended
December 31, 2009, and in Youbet's other filings with the
Securities and Exchange Commission. Readers are cautioned not to
place undue reliance on forward-looking statements, which speak
only as of the date of this press release. Youbet does not
undertake, and specifically disclaims any obligation, to publicly
release the result of any revisions that may be made to any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements.
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