Youbet Announces Plan to Offset Lower Revenues
Updated: Tuesday, July 24, 2007 11:28 AM
Posted: Tuesday, July 24, 2007 11:12 AM
has implemented self-described cost-cutting and revenue enhancement initiatives of about $5 million in an effort to offset lower revenue expectations from its IRG
and United Tote
subsidiaries, the company recently announced.
Specifics of the financial plans were not outlined in a July 20 news release, but it was suggested that further details would be released during Youbet.com’s upcoming second-quarter earnings call. The conference call has not been scheduled as of July 24.
Here are selected portions of the news release issued by Youbet.com:
“Earnings for the second quarter of 2007 were adversely affected by lower than anticipated revenue at United Tote and lower handle at International Racing Group (IRG) in addition to increased spending on marketing and increased depreciation costs in connection with the finalization of purchase price adjustments for the company's United Tote subsidiary.
“A portion of the increased marketing expense was aimed at mitigating the effects of TrackNet Media's refusal to sell its Magna Entertainment Corp. and Churchill Downs content to Youbet companies. This effort did positively impact the company's online wagering operations in the second quarter of 2007 compared to the same period in 2006. The increase was achieved even though Youbet did not carry the 2007 Kentucky Derby, typically the largest wagering day in the industry. The company intends to give more detail on the positive trends in its online wagering business in its Q2 2007 earnings release and conference call.
“IRG's second quarter handle is expected to decline approximately $33.6 million compared to the same period last year, with net revenue expected to decline to approximately $1.4 million, or approximately 33% from the year ago quarter. The company's IRG subsidiary did not carry any of this year's Triple Crown events and does not currently have access to TrackNet content from Magna and Churchill Downs.
“United Tote net revenue is expected to be approximately 18% lower than in the second quarter of 2006. In addition, depreciation and amortization expenses increased as a result of finalizing purchase price adjustments related to the acquisition of the totalizator subsidiary.
“The company's expense control program is an across-the-board effort involving the corporate office and all of the company's operating units. These efforts include payroll and operating expense reductions, decreased marketing expense for the second half of 2007, service consolidations and revenue enhancements. For the second half of the year, the company plans to reduce overall G&A and sales and marketing expenses, reduce cost of goods sold at United Tote as well as lower spending on non-core development projects combined, these efforts should approach $5 million.
“We are working to grow our account base, contain costs and manage our yields," said Youbet CEO Charles F. Champion. "The cost reductions, which were underway but accelerated when the TrackNet content issue unexpectedly erupted in the middle of the second quarter, are designed to create greater efficiency in our account acquisition and retention with the intent of providing greater earnings leverage in our company going forward."
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