Reports Record Fourth-Quarter Results

Edited release from reported Monday that it had record net income for the 2004 fourth quarter period of $535,372, or $0.02 per fully diluted share, compared to a loss of $1.2 million, or ($0.04) per fully diluted share, in the 2003 fourth quarter.

Operating expenses (excluding track and licensing fees) declined approximately 13% to $5.6 million for the quarter ended December 31, 2004 from $6.4 million in the three month period ended December 31, 2003. In a released statement, the company said year-over-year decline is primarily due to reductions of approximately $0.9 million in amortization costs for the 2004 fourth quarter and a reduction of approximately $0.15 million in research and development expenses. In addition, general and administrative costs for the three-month period ended December 31, 2004 declined approximately 2.2%, to $3.3 million, compared to $3.4 million in the prior year period, reported. Fourth quarter 2004 general and administrative expenses included approximately $0.5 million in aggregate costs related to compliance with Sarbanes-Oxley Section 404 and the charge for the AWI acquisition bid noted above. The year-over-year decline in operating expenses (excluding track and licensing fees) was partially offset by a 62% increase in sales and marketing costs, which rose to $1.0 million from $0.6 million in the 2003 fourth quarter due primarily to higher business development expenses related to the Company's efforts to diversify its revenue sources.

"The record fourth quarter operating results reflect the benefits of's infrastructure investments that have enabled the Company to offer its customers a handicapping and wagering platform that is unrivaled," said Charles F. Champion, chairman and CEO of Youbet. "For the 2004 full year, we generated record performance in nearly all relevant measures including total handle, net revenue, number of transactions processed, new customers added, concurrent users and funding records such as deposit transactions and dollar amounts on deposit."

Champion said unveiled several new products in 2004 as the company "continued to advance its position as the industry's leading provider of horse racing content and wagering platform. In addition, we were able to leverage these new products while analyzing customers' wagering preferences and offering programs that together enabled us to maximize our returns and offset the loss in 2004 of the majority of content from Magna Entertainment's (Magna) tracks."

Champion said the company's initiatives resulted in a 35% rise in Youbet's 2004 fourth quarter net revenue on a 25% increase in handle over the prior year period on a 'same track' basis. " We are pleased that in December we were able to reach an agreement with Magna to once again make all of their horse racing content available in 2005 and believe our customers will benefit by having access to this content," Champion said. "In 2005 we continue to focus on two primary goals that we believe will allow us to continue our growth. First, we believe that as the industry's leading ADW provider with the most racing content currently available, we can continue to achieve year-over-year growth in both total handle and net revenue. To this end, we also will continue to explore domestic consolidation opportunities that could leverage the extensive capacity of our current system.

"Second, we continue to make steady progress on our initiatives to diversify our sources of revenue," Champion continued. "To this end, we recently announced our agreement to acquire, in an accretive transaction, International Racing Group, a privately-held, licensed and regulated pari-mutuel wagering company based in Curacao. IRG accepts only telephone wagers, predominantly from high-volume customers. In addition we continue to target domestic and international race tracks where Youbet would provide the 'back-end' off-track wagering system. We also plan to continue to pursue opportunities in the important Nevada market on a stand-alone basis, through an investment or a strategic partnership."