Reports Third Quarter Net Loss

Edited release Inc. reported a loss of $400,000, or 1 cent a share, in its third quarter, down from a net income of $1.8 million, or 5 cents a share, in the year-ago period, the company said Tuesday.

Revenue in the quarter was $37 million, up 42 percent from $26.1 million in the year-ago period. The current quarter results included $6.8 million in revenue from the United Tote Co. that Youbet acquired in February 2006.

The quarter's results include $700,000, or 2 cents per diluted share, in pre-tax legal expenses for arbitration proceedings initiated by TVG, pre-tax expenses of $400,000, or 1 cent a share, related to a consulting firm that is conducting an evaluation of new revenue and pricing models, along with expense reduction opportunities, for United Tote; and $100,000 in non-cash share-based compensation expenses. A final arbitration ruling is expected by the end of November. It also includes year-over-year online handle growth of 9%, which was below its normal level of increase.

For the first nine months of the fiscal year, the company reported $104.4 million in revenue, up from $68.1 million in the year-ago period. Net income was $3.1 million, or 8 cents a share, in the nine month period, down from $4.2 million, or 12 cents a share, in the first nine months of fiscal 2005.

"Our third quarter operating results reflect 9% year-over-year growth in online handle, which was less than we have achieved in recent quarters," said Youbet chairman and CEO Charles Champion. "We believe this decline is related to the recruitment of high-volume U.S. customers by unlicensed bookmaking and sports betting operations that do not operate legally or contribute to the industry. Importantly, we believe Youbet's initiatives to overcome this handle attrition and return to our projected annual handle growth rate of 15%-20% are working. Year-over-year online handle declined slightly for July and has since increased on a monthly sequential basis, including year-over-year growth of approximately 24% in September.

"In addition, while legal expenses for the TVG arbitration again impacted our quarterly results, it is imperative that we protect the rightful long-term interests of Youbet and its shareholders," Champion continued. "A final decision from the arbitrator is expected to be rendered by the end of this month."

Los Angeles-based is a provider of technology and pari-mutuel horse racing through Internet and telephone platforms and is a supplier of totalizator systems, terminals and other pari-mutuel wagering services and systems through its United Tote subsidiary.