Youbet.com's significant decreases in third quarter revenue and handle is being blamed on the weak economy and the aftermath of the Sept. 11 terrorist attacks in New York and Washington, D.C.
Revenue fell 19% to $1.13 million for the third quarter ending Sept. 30, down from $1.39 million for the same period of 2000. Handle also dropped 16% to $18.8 million, down from $22.4 million a year ago.
The company was able to improve its net loss to $3.7 million, a loss of 19 cents per share, from a loss of $4 million, 20 cents per share, for the third quarter of 2000.
"The events of September 11 wreaked havoc on our industry, which was already beginning to suffer from widespread economic weakness," said co-chief executive officer Phillip Hermann. "Immediately after the attacks, both horse racing and pari-mutuel wagering were shut down for up to a week at some racetracks, and have slowly gained back some momentum. Two months later, signs are now beginning to point to stabilization within the market for horse racing pari-mutuel wagering, and we feel that Youbet.com is positioned well for this recovery with our fully operational hub in Oregon, unparalleled content and technology, and favorable developments in the state of California."
For the nine months ended Sept. 30, 2001, Youbet.com reported revenue of $4.5 million compared with revenue of $4.6 million for the first nine months of 2000. The company reduced its year-to-date net loss by 13% to $9.3 million, or 48 cents per common share, for the nine months ended Sept. 30, compared with a net loss before extraordinary item of $10.7 million, or 55 cents per common share, for the first nine months of 2000.
During the first two quarters of 2000, Youbet.com executed the buyback and retirement of senior convertible notes resulting in an extraordinary gain of $7.3 million, or 37 cents per common share. Including the extraordinary item, the company reported a net loss of $3.4 million, or 18 cents per common share, for the first nine months 2000.
Company executives said they are expecting significantly accelerated revenue and handle at the beginning of next year now that California has approved account wagering.
"Fans in the California market represent the largest single subset of the horse racing industry as a whole," said Ron Luniewski, who shares chief executive officer duties with Hermann. Youbet.com chairman Robert Fell stepped down as CEO this week, but retained the chairmanship.
"Existing and new Youbet members could be brought to active status on January 1, upon approval of the new regulations," Luniewski said.
Youbet.com is currently prohibited from taking wagers from Californians as part of settlement made with Los Angeles law enforcement agencies in January 2000. Los Angeles Police and Sheriff's officers raided the company as part of an investigation as to whether Youbet.com was violating state anti-bookmaking laws. To avoid going to court, the company settled by agreeing not to take wagers from California residents and paying a $1.3 million fine.
Luniewski said the company is addressing the settlement conditions and expects a favorable resolution soon.