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Increasing ADW Competition Weighs on Youbet Q3 Revenues

12th November 2009 7:10 am GMT

Alongside announcing plans to merge with rival Churchill Downs Incorporated, U.S horse racing content and wagering provider Youbet.com has reported total revenues of $27.9 million for the third quarter ended September 30th, a 5% drop on the corresponding period last year, impacted by continued difficulties at its United Tote subsidiary.

Revenues from the company's Youbet Express online wagering service fell 4% to $22.5 million, including a one-time charge of $0.3 million as a result of a change in accounting relating to the value of player reward points.

Revenues at United Tote declined by 12% to $5.6 million, which the company attributed to the result of track closures, a general decline in wagering, reduced racing days and lower equipment sales.

Total operating expenses increased marginally to $8.4 million, with sales and marketing costs up 15% to $1.5 million due to increases in personnel and recent initiatives undertaken in relation to new content and customer acquisition activities. Research and development costs remained stable at $0.8 million, while general and administrative expenses rose 17% to $4.3 million.

Following the drop in revenue during the period, net income from continuing operations fell to $0.9 million or $0.02 per diluted share from $2.8 million or $0.07 per diluted share a year ago.

"In spite of the continued weakness in the economy, we are encouraged by several key long term growth metrics including a 14% year-over-year increase in new customer acquisition - delivered through our highly efficient ROI-based acquisition channels - coupled with a 6% year-over-year increase in the average number of active weekly wagerers on the platform," said Youbet President and CEO David Goldberg.

"In addition to the weak economy, the availability of certain key tracks on additional ADW platforms in the quarter contributed to downward pressure on player handle, which declined an average of 6% on a per player basis. However, we believe that over the long-term, increases in new and active customer accounts should position the company well when the economy rebounds."

For the nine month period, total revenues increased 4% to $86.1 million, following a 9% improvement in Youbet Express revenues, with a net income from continuing operations of $3.2 million versus $6.2 million last year.

"As our United Tote business continues to see challenges, we have made several key management changes, including the appointment of Dawn Haden as the new President of United Tote. We believe her focus on process improvements and fiscal responsibility will make a big difference going forward for United Tote," added Goldberg.

As at September 30th the company had cash and cash equivalents of $16.9 million, $4.8 million in restricted cash and $8.5 million in total debt.

Shares in Youbet.com Inc (Co. Profile) (NASDAQ:UBET) will commence trading at $2.41 per share in New York later today.

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