Youbet Incurs Fourth-Quarter Losses
The advance deposit wagering company’s losses were augmented by a combined $17.9 million in fourth-quarter write-offs on its defunct rebate shop, International Racing Group, and its United Tote totalizator company, which may be put up for sale by Youbet. The company’s net loss for all of 2007 was $27.4 million, a 13-fold increase over the $2.03 million loss incurred in 2006.
“(Last year) was a challenging year for Youbet,” said interim company chief executive officer Gary W. Sproule in a news release. “However, we have also made progress toward restructuring the company, including shedding non-core assets, streamlining operations, and reorganizing the senior management team.
“We are focusing our efforts and priorities on our Youbet Express platform and fully expect that the impact of our initiatives will be evident in 2008. Additionally, we will continue to focus on improving our yields and operating margins as well as securing new content.”
The company’s financial results will be discussed more fully in an April 1 conference call with analysts.
Youbet closed IRG Feb. 15 following the fall-out from a federal investigation into certain practices of the off-shore telephone wagering entity formerly located on the Netherlands Antilles island of Curacao. Youbet has said it will not be prosecuted by the U.S. Attorney’s Office in Las Vegas after an agreement was reached on March 14, and will not contest the government seizure of $1.5 million in IRG bank accounts last October.
The federal investigation was described by Youbet as “a potentially wide net of activities of certain individuals who may have used telephone rebate wagering services, including those offered by IRG, in an allegedly illegal manner.” The company said current and former employees, officers and directors may seek “indemnification, advancement or reimbursement of expenses from us, including attorneys’ fees, with respect to current or future proceedings related to this matter.”
Goodwill impairments, or write-offs, of $9.9 million and $8 million were recorded in the fourth quarter for IRG and United Tote, a company which Youbet purchased in February 2006 for $46.9 million, a price that included $14.7 million of debt.
“Management is assessing strategic alternatives for United Tote, including a possible sale,” Youbet reported in its release.
Total revenues for 2007 declined 12.3%, as the company last year competed in a fractured ADW industry that saw the advent of the TrackNet Media Group launched by Churchill Downs Inc. and Magna Entertainment Corp. The combined annual handle of Youbet and IRG dropped 6.2% to $716 million, hampered by a 79.3% drop in IRG handle to $13.6 million in year-over-year fourth quarter comparisons. Breakout handle for the Youbet Express platform increased 4.4% to $482.4 million.
Youbet was also notified March 31 that it was out of compliance with NASDAQ standards because its stock price had traded under $1 for 30 straight days as of March 28. Shares must trade at $1 or more for 10 consecutive days before Sept. 29 to come back into compliance. Shares closed March 31 trading at 81 cents, up 12.8%.
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