Youbet.com is on solid footing, according to the California online horse racing and wagering service's top executive. Chief executive officer David Marshall said he expects substantial increases in revenue and to secure additional capital within the next three months.
His said the company's performance is not accurately reflected in a 10QSB statement recently filed that states Youbet.com needs additional capital and that without it may be forced to "consider a formal or informal restructuring or reorganization, severely curtail, or cease operations."
"As we have negative working capital, there is a legal requirement by our accountants to put in that language," Marshall said during a Thursday evening conference call. "It does not indicate from our perspective where the company is headed and the performance that we have."
Marshall noted that the language has been included in at least half the company's quarterly and annual statements since Youbet.com began.
In the SEC filing, Youbet.com reported it had negative net working capital of $1,845,661 as of June 30, compared with net working capital of $805,542 as of Dec. 31, 2001.
Marshall said the company's efforts to reduce costs and operate more efficiently, combined with the opening of a wagering hub in Oregon in September 2001 and obtaining licensing in California earlier this year has improved cash flow.
Youbet.com reported that betting handle increased during the second quarter of fiscal 2002 to a record $39.6 million, up 39% from $28.4 million in the second quarter of 2001 and, sequentially, up 46% from $27.1 million from the first quarter of 2002. Handle increased month over month throughout the second quarter of the year, and has continued to increase since then, according to the report. In the six weeks following June 30, 2002 handle has averaged $3.6 million a week, up from a weekly average of $3.1 million a week in the second quarter.
Revenue for the second quarter of 2002 increased 250% to $6,010,885, attributable mainly to an increase in the amount of wagers placed through the Oregon wagering hub.
The company's net loss for the second quarter was $2.58 million, or $.13 a diluted share, down 21% from a loss of $3.25 million, or $0.17 a diluted share, in the second quarter of 2001. Youbet also saw sequential improvement, with the net loss dropping 11% from the prior quarter. The company's operating loss of $2.44 million was down 27% from the second quarter of 2001 and, sequentially, down 16% from the first quarter of 2002. The loss on earnings before interest, taxes, depreciation and amortization (EBITDA) for the second quarter improved $1.46 million, or 60%, from the second quarter 2001. Losses in EBITDA shrank monthly beginning at $525,000 in March and lowering to $412,000 in April, $350,000 in May, and finally $193,000 in June.
"In the second quarter of 2002, the first full quarter with Youbet.com's new management team in place, our focus was on improving fundamental operations and taking the necessary steps to drive towards break-even," Marshall said. "We made substantial progress toward those goals, as can be seen in the growth in handle and reduction of general and administrative costs, and other expenses. We have also improved our customer service, expanded our track menu and entered into key marketing relationships. As a result of these initiatives, our burn rate is down 30% from the first quarter, 2002 and down 60% from the second quarter, 2001."