Youbet.com Inc. (UBET) filed Quarterly Report for the period ended 2009-09-30.
Youbet.com, Inc. is a technology company that facilitates live events and is focused on entertainment services, network deployment, and event management via a cross-platform environment. The company's mission is to be the premier technology and service provider for interactive wagering worldwide. The company's goal is to create a widely accessible interactive race and sports environment, filled with rich and exciting content, and to provide unsurpassed service to its clients. Youbet.com Inc. has a market cap of $111.6 million; its shares were traded at around $2.69 with a P/E ratio of 24.4 and P/S ratio of 1.
Highlight of Business Operations:
The segment discussions below are based upon the following table, which sets forth, for the periods indicated, certain operating data for each of our operating segments prior to the elimination of intersegment revenues of $0.2 million and $0.3 million in the third quarter of 2009 and 2008, respectively. Additionally, in the second quarter of 2009, the ADW segment began charging the totalizator segment for its share of executive management services approximating $0.2 million per quarter. The data for the 2008 period in the table below has been adjusted to include a similiar $0.2 million charge for comparability purposes:
ADW segment revenues, which consist primarily of commissions on wagers placed by our customers, net of player incentives, decreased by approximately $0.9 million, or 4%, in the third quarter of 2009 compared to the third quarter of 2008. Gross commissions revenues, before deduction of player incentives, during the third quarter of 2009 increased $0.3 million compared to the same period in 2008 due to changes in track mix favoring higher commission tracks. Changes in track mix are driven by player track preferences due to such things as race type, time of day and wagering pool size. However, the increase in gross commissions was more than offset by an increase in player incentives during the third quarter of 2009. Player incentives increased $1.0 million or approximately 41% when compared with the third quarter of 2008 due to an increase in player promotions and a $0.3 million prospective change in estimate relating to the value of player reward points.
Totalizator segment revenues, which consist of contract revenues associated with the service of totalizator systems and equipment sales, decreased $0.7 million, or approximately 12%, in the third quarter of 2009 when compared to the third quarter of 2008 due to a decrease in service revenues and a significant reduction in equipment sales, as described below. Contract revenues from the service of totalizator systems, which is driven by wagering handle at tracks serviced, were $5.5 million in the third quarter of 2009, representing a decrease of $0.4 million, or approximately 7%, compared to the third quarter of 2008, primarily as a result of track closures, a general industry decline in wagering and reduced racing days. Equipment sales in the third quarter of 2009 were $26,000, representing a decrease of $0.3 million, or approximately 92%, compared to the third quarter of 2008 due to reluctance of track owners to invest in new equipment in the current world economy.
Track fees: Track fees, which primarily consist of host and market access fees paid and payable to various tracks increased $2.2 million or approximately 21% in the third quarter of 2009 compared to the third quarter of 2008. The quarter-over-quarter increase is primarily attributable to a shift of costs from license fees to tracks fees resulting from a reduced number of TVG exclusive tracks. Expense increases were experienced in television fees ($0.8 million); host fees ($0.8 million); source market fees ($0.5 million). These increases were supplemented by $0.8 million in revenue share payments relating to our co-branding agreement with tracks in Illinois that did not exist in the third quarter of 2008. These increases were partially offset by a $0.6 million reduction in California market access fees, due to reduced wagering at California tracks.
General and administrative: General and administrative expense of $4.3 million in the third quarter of 2009 increased $0.6 million or approximately 17%, when compared to the third quarter of 2008 and represented 15% of total revenue for the third quarter of 2009 versus 12% of total revenue in the third quarter of 2008. The increase is primarily due to increased legal fees and other costs associated with the investigation of various strategic opportunities of $0.4 million; increased bad debt associated with our Totalizator segment of $0.1 million and travel costs.
ADW segment revenue, which consists primarily of commissions on wagers placed by our customers, net of player incentives, increased approximately $5.6 million, or 9% in the nine month period ended September 30, 2009, when compared to the same period in 2008. Gross commissions, before deduction of player incentives, during the first nine months of 2009 increased $9.3 million compared to the same period of 2008 due primarily to a 13% improvement in handle resulting from increased track content. However, the increase in gross commissions was partially offset by higher customer incentives in the first nine months of 2009 of $3.2 million, a 57% increase compared to the first nine months of 2008. Approximately $0.4 million of the increase relates to the redemption of expired player reward points in the first quarter of 2009, $0.3 million relates to a prospective change in estimate of the value of outstanding reward points and the remainder is associated with the impact of our more aggressive incentive marketing efforts.
UBET is in the portfolios of Arnold Van Den Berg of Century Management.
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