The company did not repurchase shares during the quarter as we'd hoped, presumably because of discussions related to today's news.

Finally, although the company's net cash position increased to $8.4 million ( $0.19 per share, +$5.7 million Y/Y) from $5.6 million at 6/30/09 and $2.7 million one year ago, free cash generation is running below our reduced expectations of $10-12 million this year.

For the total company, EBITDA from continuing operations was $2.9 million versus $5.5 million in 3Q08.

Online (ADW) segment EBITDA was $2.4 million, down 40% Y/Y.G&A is running higher on 'increased legal fees and other costs related to the investigation of various strategic and business development opportunities.'.The latter is no surprise, but we suspect the former is creeping higher as YB's battles other ADW players to acquire/retain customers (*management cited success: 14% Y/Y increase in new customer acquisitions and a 6% Y/Y 'in the average number of active weekly wagerers on the platform'). Moreover, margins came in lower than we anticipated on 'an increase in player incentives and track fees'. Instead of Y/Y handle growth on the back of new content relationships, handle of $121.3 million was flat Y/Y.

That said, YB's results came up short versus our expectations with the economy and other risk factors somewhat derailing our thesis. As we waited for Youbet's ( UBET) 3Q09 conference call to begin yesterday, a surprise press release crossed the wire: Churchill Downs Incorporated to Acquire, Inc.įor all of the reasons detailed in our prior posts, we didn't expect to see a near-term sale to Churchill Downs ( CHDN).

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