EX-99.1 2 c71491exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
 

Exhibit 99.1
(YOUBET LOGO)
For Immediate Release
YOUBET.COM REPORTS RESULTS FOR THE THREE
AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2007
Earnings Per Share of $0.00 Versus a Loss of $0.01 for the Comparable Prior-Year Quarter
Total Revenue Improved 3% on 5.5% Decline in Combined Handle
Woodland Hills, CA, November 7, 2007 — Youbet.com, Inc. (NASDAQ:UBET) announced flat earnings for the third quarter of 2007. Total handle for the three months ended September 30, 2007, declined 5.0% as compared to the third quarter of 2006, to $205.8 million. Total revenue for the quarter, however, improved 3% from the third quarter of 2006 to $38.1 million, as a result of an improved handle at Youbet Express, our online ADW platform. Handle for the three-month period ended September 30, 2007 at Youbet Express increased 12.6% with yield on this handle improving to 6.7% from 6.0% in the prior-year period. For the three months ended September 30, 2007, handle at IRG declined 26% with yield declining to 2.0% from 2.3% in the prior-year period. The decline in total handle was a result of the loss of racetrack content from TrackNet Media LLC, primarily affecting our IRG subsidiary. For the third quarter of 2007, the Company reported net income of $67,000, or $0.00 per diluted share compared to a loss of $0.01 per share in the prior-year quarter.
For the third quarter of 2007, totalizator service revenue at United Tote of $6.2 million was flat compared to the prior-year period Equipment sales improved slightly to $0.3 million from $0.1 million in the prior-year period.
For the three months ended September 30, 2007, the cost of revenue remained essentially flat at $25.8 million compared to the prior-year period. Gross profit for the three months ended September 30, 2007 improved 9% to $12.3 million versus $11.3 million in the prior-year period.
                 
(in 000's, except per share figures)   Three months ended September 30,   Nine months ended September 30,
    2007   2006   2007   2006
Total Revenue
  $38,128   $37,050   $110,399   $104,396
Gross Profit (1)
  $12,304   $11,294   $36,710   $33,875
Net Income (Loss)
  $67   ($440)   $1,295   $3,105
Diluted EPS
  $0.00   ($0.01)   $0.03   $0.08
(1) Gross profit is total revenues less track fees, licensing fees, contract costs, equipment costs and network operations, each as calculated in accordance with GAAP and as presented on the condensed consolidated statements of operations found at the end of this release.

 

 


 

Youbet CEO Chuck Champion commented: “So far, 2007 has been challenging for several reasons, but we are making progress despite some negative outside influences. Our initiatives at Youbet Express to redirect wagering activity to more profitable tracks, as well as drive volume through promotions and marketing programs, are reflected in the strong performance at this division. Our cost-cutting initiatives, some of which were reflected in our improved operating margins for the quarter, are beginning to take hold. Unfortunately, our IRG subsidiary has struggled with the loss of content, although it still showed a profit for the quarter.”
Champion added, “Recent events outside of our control, including the federal investigation of several IRG customers and the ORC decision to stop taking wagers from the District of Columbia, both occurring subsequent to the end of the third quarter have again put the company in a less than ideal operating environment. Despite these distractions, we continue to move forward on our cost containment program and to grow our Youbet Express wagering platform. We continue to work within the industry to secure a level playing field for all ADW providers, and we believe recent positive events in California could be the beginning of a significant change in how the industry addresses the ADW distribution channel.”
Operating expenses for the three months ended September 30, 2007 increased $0.4 million, or 4%, to $12.0 million from $11.6 million in the prior-year period. Research and development, as well as sales and marketing costs, remained relatively static with 2006. Total general and administrative expense, which includes payroll-related costs, transaction processing fees and professional consulting fees, decreased $1.1 million, or 17%, in the third quarter of 2007 compared to the third quarter of 2006. Youbet Express’ general and administrative expense decreased $1.5 million, attributable to reduced payroll and incentive compensation, consulting costs and $0.8 million of nonrecurring legal expenses associated with the TVG arbitration and bank debt refinancing incurred in the third quarter of 2006. This was offset by a $0.4 million increase to IRG’s bad debt reserve, in connection with the investigation of several customers by the U.S. Attorney’s office. Accordingly, general and administrative expense declined, as a percentage of total revenue, to 13.4% in the third quarter of 2007 from 16.7% in the third quarter of 2006. Depreciation and amortization increased $1.0 million, or 45%, compared to the third quarter of 2006. This increase was primarily due to higher depreciation expense and intangible amortization expense at United Tote subsequent to the final purchase price allocation completed at year-end 2006 and the amortization of $0.5 million of capitalized software development costs associated with our King Contest product. The company also recorded a non-cash $0.4 million impairment of goodwill related to our Bruen operations as a result of our annual review of impairment in accordance with SFAS 142.
The company may be required to take a one-time charge of approximately $1.5 million in the fourth quarter of this year associated with the seizure of funds by federal agents in Nevada in connection with the investigation of several customers by the U.S. Attorney’s office. The company also anticipates that other charges that are one-time and non-cash in nature may also have to be addressed in the fourth quarter. We expect these charges would be at the IRG operating subsidiary and related to the ongoing investigation.
Liquidity and Capital Resources
As of September 30, 2007, we had net working capital of $1.3 million, compared to $5.0 million at December 31, 2006 (including the current portion of our deferred tax assets). The decline in working capital primarily relates to a decline in year-over-year earnings, continued pay down of our term loan by $0.8 million, a one-time make-whole payment to the former owners of United Tote of $4.5 million and a $1.0 million increase in performance earn-out payment to the former owners of IRG. As of September 30, 2007, we had $11.1 million in cash and cash equivalents, $5.3 million in restricted cash and $16.2 million in debt. Net cash provided by operating activities for the nine months ended September 30, 2007 was $5.1 million. Net cash used in investing activities for the nine months ended September 30, 2007 was $9.8 million, of which $3.1 million was associated with the IRG acquisition earn-out. Net cash used in financing activities was $5.3 million, with most of this attributed to debt reduction and the repurchase of shares. During the quarter, we utilized $1.0 million to repurchase 586,766 shares of our common stock at a weighted average price of $1.71 per share under our share repurchase program (which allows the company to repurchase up to two million common shares by March 2009 at an aggregate price not to exceed $10 million).

 

 


 

Outlook
Given recent events surrounding the current investigation by the U.S. Attorney’s Office concerning several IRG customers who may have used telephone rebate wagering services, including those offered by IRG, in an allegedly illegal manner, as well as the possible suspension of IRG’s license by the ORC, we are suspending guidance.
Nine Month Operating Results
Total revenue for the nine months ended September 30, 2007 improved 6% to $110.4 million from $104.4 million in the year-ago period. Total handle for the nine months ended September 30, 2007 increased 2% to $594.9 million. Handle for the nine-month period ended September 30, 2007 at Youbet Express increased 8.9%, with yield on this handle improving to 7.1% from 6.6% in the prior-year period. For the nine months ended September 30, 2007, the handle at IRG declined 7%, with the yield at 2.3% as compared to the prior-year period of 2.4%.
Totalizator service revenue for the nine months ended September 30, 2007, improved 7.0% to $18.3 million from $17.1 million in the comparable prior-year period, largely due to including results for a full nine months, as United Tote was acquired in mid-February 2006.
For the nine months ended September 30, 2007, the cost of revenue increased by 4% compared to the prior-year period. For the nine months ended September 30, 2007, track fees, licensing fees and network operations recorded year-over-year percentage changes of 2%, 1% and -7%, respectively, versus the prior-year period. Contract costs for the nine months ended September 30, 2007 increased to $12.6 million from $9.9 million in the year-ago period, with most of the increase due to a full nine months worth of results for United Tote (acquired in mid-February 2006) in 2007. Gross profit for the nine months ended September 30, 2007 increased 8% to $36.7 million compared to $33.9 million in the year-ago period.
The company will host a conference call and webcast at 5:00 p.m. EST on November 7, 2007. Both the call and webcast are open to the general public.
The conference call number is 888-233-7975. Please call five 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.
The following table summarizes the key ADW components of revenue in the three-month and nine-month periods ended September 30, 2007 and 2006.

 

 


 

                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006     2007     2006  
    (in thousands, except for Yield)     (in thousands, except for Yield)  
Youbet Express
                               
Total Wagers (Handle)
  $ 133,336     $ 118,368     $ 377,768     $ 346,959  
 
                       
Commissions from Handle
    25,656       22,689       73,331       67,305  
Other Revenue
    961       911       2,848       2,793  
 
                       
Total Revenue
    26,617       23,600       76,179       70,098  
 
                       
Net Track Revenue (1)
  $ 8,891     $ 7,153     $ 26,848     $ 23,032  
Yield (2)
    6.7 %     6.0 %     7.1 %     6.6 %
 
                               
International Racing Group
                               
Total Wagers (Handle)
  $ 72,493     $ 98,408     $ 217,177     $ 233,836  
Commissions from Handle
  $ 4,845     $ 6,939     $ 15,381     $ 17,136  
Net Track Revenue (1)
  $ 1,481     $ 2,261     $ 5,006     $ 5,555  
Yield (2)
    2.0 %     2.3 %     2.3 %     2.4 %
(1)  
Net track revenues is calculated from 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)  
Yield is defined as net track revenue as a percentage of handle. The increases in Youbet Express yield for the three- and six- month period ended September 30, 2007 compared to the prior-year periods are due to contract terms, a change in track mix, and adjustments to player incentive programs. Management believes that yield is useful to evaluate profitability. Yield should not be considered an alternative to operating income or net income as indicators of financial performance, and may not be comparable to similarly titled measures used by other companies.

 

 


 

YOUBET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
                 
    September 30,     December 31,  
    2007     2006  
ASSETS   (Unaudited)      
Current assets
               
Cash and cash equivalents
  $ 11,146     $ 21,051  
Current portion of restricted cash
    5,308       4,862  
Accounts receivable, net
    12,525       13,287  
Inventory
    2,260       2,587  
Current portion of deferred tax asset
    2,490       2,367  
Prepaid expenses and other current assets
    1,908       1,072  
 
           
 
    35,637       45,226  
Property and equipment, net
    27,043       30,110  
Intangible assets other than goodwill, net
    14,242       13,369  
Goodwill
    14,859       15,243  
Other assets
    1,340       1,657  
 
           
 
  $ 93,121     $ 105,605  
 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities
               
Trade payables
  $ 11,731     $ 13,759  
Current portion of long-term debt
    6,948       8,311  
Accrued expenses
    6,533       9,489  
Customer deposits
    8,790       8,441  
Deferred revenues
    368       207  
 
           
 
    34,370       40,207  
Long-term debt, net of current portion
    9,202       12,054  
Deferred tax liability
          570  
 
           
 
    43,572       52,831  
 
           
Stockholders’ equity
               
Preferred stock, $0.001 par value, 1,000,000 shares authorized, none issued
           
Common stock, $0.001 par value, 100,000,000 shares authorized, 42,562,805 and 42,118,446 shares issued
    42       42  
Additional paid-in capital
    134,048       137,597  
Deficit
    (82,260 )     (83,555 )
Accumulated other comprehensive income (loss)
    21       (10 )
Treasury stock, 1,029,828 and 443,062 common shares at cost
    (2,302 )     (1,300 )
 
           
 
    49,549       52,774  
 
           
 
  $ 93,121     $ 105,605  
 
           
Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

 

 


 

YOUBET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Revenues
                               
Commissions
  $ 30,501     $ 29,628     $ 88,712     $ 84,441  
Contract revenues
    6,379       6,374       18,038       16,089  
Equipment sales
    287       137       801       1,088  
Other
    961       911       2,848       2,778  
 
                       
 
    38,128       37,050       110,399       104,396  
 
                       
Cost of revenues
                               
Track fees
    13,138       14,171       41,427       40,531  
Licensing fees
    6,991       6,043       15,431       15,323  
Network operations
    1,154       1,335       3,838       4,135  
Contract costs
    4,352       4,150       12,595       9,942  
Cost of equipment sales
    189       57       398       590  
 
                       
 
    25,824       25,756       73,689       70,521  
 
                       
Gross profit
    12,304       11,294       36,710       33,875  
 
                       
Operating expenses
                               
General and administrative
    5,114       6,192       15,459       16,184  
Sales and marketing
    2,311       2,399       8,623       6,952  
Research and development
    1,024       813       2,870       2,488  
Depreciation and amortization
    3,198       2,204       7,506       5,074  
Goodwill impairment
    384             384        
 
                       
 
    12,031       11,608       34,842       30,698  
 
                       
Income (loss) from operations
    273       (314 )     1,868       3,177  
Interest income
    168       137       553       423  
Interest expense
    (460 )     (551 )     (1,478 )     (1,272 )
Other income
    27       161       45       756  
 
                       
Income (loss) before income taxes benefit
    8       (567 )     988       3,084  
Income tax benefit
    (59 )     (127 )     (307 )     (21 )
 
                       
Net income (loss)
  $ 67     $ (440 )   $ 1,295     $ 3,105  
 
                       
                                 
Earnings (loss) per share — basic
  $ 0.00     $ (0.01 )   $ 0.03     $ 0.09  
 
                       
Earnings (loss) per share — diluted
  $ 0.00     $ (0.01 )   $ 0.03     $ 0.08  
 
                       
Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

 

 


 

YOUBET.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
                 
    Nine Months Ended  
    September 30,  
    2007     2006  
Operating activities
               
Net income
  $ 1,295     $ 3,105  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization of property
    6,007       3,842  
Amortization of intangibles
    1499       1,232  
Impairment writedown of goodwill
    384        
Stock-based compensation
    660       525  
Bad debts
    1,105        
Net increase in operating (assets) liabilities
    (5,801 )     785  
 
           
Net cash provided by operating activities
    5,149       9,489  
 
           
                 
Investing activities
               
Cash paid in connection with acquisition of United Tote Company, net of $160 in cash acquired in 2006
    (4,473 )     (10,094 )
Purchases of property and equipment
    (2,474 )     (4,099 )
Cash paid for IRG acquisition earn-out
    (3,106 )     (1,900 )
Decrease in restricted cash
    259       1,013  
Increase in restricted cash
          (250 )
Other
          845  
 
           
Net cash used in investing activities
    (9,794 )     (14,485 )
 
           
                 
Financing activities
               
Proceeds from long-term debt
    2,894        
Repayment of long-term debt
    (8,512 )     (3,568 )
Proceeds from sale-leaseback transaction
    1,065        
Repurchase of common stock
    (1,002 )      
Proceeds from exercise of stock options
    352       267  
Other
    (88 )      
 
           
Net cash used in financing activities
    (5,291 )     (3,301 )
 
           
Foreign currency translation adjustment
    31       (26 )
 
           
Decrease in cash and cash equivalents
    (9,905 )     (8,323 )
Cash and cash equivalents, beginning of period
    21,051       16,686  
 
           
Cash and cash equivalents, end of period
  $ 11,146     $ 8,363  
 
           
Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

 

 


 

About Youbet.com, Inc.
Youbet.com is a diversified provider of technology and pari-mutuel horse racing content for consumers through Internet and telephone platforms and is a leading supplier of totalizator systems, terminals and other pari-mutuel wagering services and systems to the pari-mutuel industry through its United Tote subsidiary. Youbet.com’s International Racing Group subsidiary is the only pari-mutuel rebate provider to be licensed by a U.S. racing regulatory jurisdiction.
Youbet.com’s website offers members the ability to watch and, in most states, wager on the widest variety of horse racing content available worldwide. Through this platform, Youbet offers members commingled track pools, live audio/video, up-to-the-minute track information, real-time wagering information, phone wagering, race replays, simultaneous multi-race viewing and value-added handicapping products. Youbet.com’s Players Trust(SM) revolutionized advanced deposit wagering by placing player deposits in the custody of a major U.S. financial institution.
The Youbet Advantage™ Player Rewards Program is the only player incentive program of its kind in the U.S. pari-mutuel market; and Youbet’s play-for-points racing education website — www.Youbet.net — is helping to attract new fans to racing. Youbet.com is the exclusive provider of horse racing content for CBS SportsLine.com. More information on Youbet.com can be found at www.youbet.com.
Forward-Looking Statements
This press release contains certain forward-looking statements. Statements containing expressions such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “potential,” “continue,” or “pursue,” or the negative or other variations thereof or comparable terminology used in Youbet’s press releases and in its reports filed with the Securities and Exchange Commission are intended to identify forward-looking statements. These forward-looking statements, which are included in accordance with the 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. These risks, uncertainties and other factors include our ability to successfully manage expenses and execute on revenue enhancements and wagering ceasing to be legal in jurisdictions where we currently operate, the limitation, conditioning or suspension of any of our licenses, the progress and ultimate outcome of the federal government investigation involving IRG customers. Other risks are discussed in Youbet’s Form 10-K for the year ended December 31, 2006, 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.
# # #
CONTACT:
         
Youbet.com, Inc.
  Beacon Advisors   Integrated Corporate Relations
Jim Burk, CFO
  Hud Englehart (Media)   William Schmitt (Investors)
818.668.2100 
  513.533.4800    203.682.8200