Youbet.com reports results

WOODLAND HILLS, California -- (PRESS RELEASE) -- Youbet.com, Inc. (NASDAQ:UBET) announced second quarter 2007 results of a loss of $0.01 per share. Total handle for the three months ended June 30, 2007, declined 13% to $188.5 million. Total revenues for the quarter, however, only declined $2.3 million, or 6%, from the second quarter 2006 as a result of an improved handle at Youbet Express, our online ADW platform. Handle for the three-month period ended June 30, 2007 at Youbet Express increased 4% with yield on this handle improving to 6.7% from 6.3% in the comparable prior-year period. For the three months ended June 30, 2007, handle at IRG declined 37% with yield improving to 2.4% from 2.3% in the comparable prior-year period. The decline in total handle was a result of the loss of race track content from TrackNet Media LLC, including the loss of the Kentucky Derby content to Youbet Express and loss of the first two legs of the Triple Crown content to IRG, which resulted in no wagering at IRG on the Triple Crown in United Tote declined by $0.7 million to $7.0 million from $7.7 million in the comparable prior-year period, with contract revenues declining $0.3 million to $7.1 million and equipment sales declining to $0.4 million from $0.8 million in the prior-year period.

For the three months ended June 30, 2007, the cost of revenues declined in line with the decrease in revenues, or 6%, as compared to the prior-year period. Total cost of revenues declined to $25.2 million from $26.8 million. For the three months ended June 30, 2007, track fees, licensing fees and network operations declined 8%, 9% and 9%, respectively, versus the prior-year period. The decline in these expense items is due to the lower handle and sales volume. For the three months ended June 30, 2007, contract costs increased to $4.4 million from $3.9 million in the comparable prior-year period due to increased data communication and supply costs. Gross profit for the three months ended June 30, 2007 declined 5% to $12.1 million versus $12.8 million in the comparable prior-year period.

(in thousands, except per share        For the three    For the six
 figures)                               months ended    months ended
                                          June 30,         June 30,
----------------------------------------------------------------------
                                        2007    2006     2007   2006
----------------------------------------------------------------------
Total Revenue                         $ 37,301 $39,590 $72,284 $67,346
----------------------------------------------------------------------
Gross Profit                          $ 12,114 $12,814 $24,422 $22,581
----------------------------------------------------------------------
Net Income (Loss)                       ($357) $ 2,195 $ 1,229 $ 3,545
----------------------------------------------------------------------
Diluted EPS                            ($0.01) $  0.06 $  0.03 $  0.09
----------------------------------------------------------------------

Gross profit is total revenues less track fees, licensing fees,
 contract costs, equipment costs and network operations, as presented
 on Youbet's condensed consolidated statements of operations appearing
 at the end of this release.

Youbet CEO Chuck Champion commented: "The second quarter was very challenging for our company, and the industry in general, but our strategy remains in place. We are steadfast in our commitment to providing our customers with the broadest offering of content under commercially reasonable terms on the most advanced and feature-rich platform. We continue to grow our online account base, contain costs and manage our yields despite the disruptive nature of the TrackNet strategy. Our cost reductions, which were underway when the TrackNet content issue unexpectedly erupted, are designed to create greater efficiency in our account acquisition and retention, providing greater leverage for our growth."

Operating expenses for the three months ended June 30, 2007 increased to $12.1 million from $10.7 million in the prior-year period. Most of the increase in the quarter came from a $1.4 million increase in sales and marketing and business development programs, including expanded print and television advertising and race track promotional expenses, primarily an effort to reduce the impact of the loss of the TrackNet content. Depreciation and amortization increased $0.7 million, or 40%, in the second quarter of 2007 due primarily to higher depreciation expense and intangible amortization expense at IRG and United Tote, subsequent to the final purchase price allocation adjustments for United Tote. General and administrative expense decreased $0.7 million in the second quarter of 2007 compared to the second quarter of 2006 primarily due to lower legal costs. Total general and administrative expenses as a percentage of total revenues declined to 13.1% in the second quarter 2007, as compared to 14.1% in the second quarter of 2006.

Cost Containment Programs and Outlook

As stated in our July 20 release, management has implemented cost cutting and revenue enhancement initiatives with an expected benefit of approximately $5 million for the second half of 2007, to offset lower revenue expectations. The benefit from these cost initiatives is approximately $4.5 million, as the company plans to reduce overall general and administrative, sales and marketing, network operations and R&D expenses by approximately $2.8 million. Reductions in cost of goods sold at United Tote is expected to lower expenses by approximately $0.8 million; and lower sales and marketing expense at KingContest.com should save approximately $0.9 million. An additional $0.5 million in anticipated savings is associated with lower player promotions expected for the second half of 2007. Full year 2007 EPS guidance, which was revised to $0.13 to $0.16 per share in the company's July 20, 2007 press release, remains unchanged.

Six Month Operating Results

Total revenues for the six months ended June 30, 2007 improved 7% to $72.3 million from $67.3 million in the year ago period. Total handle for the six months ended June 30, 2007 increased 7% to $390.1 million. Handle for the six-month period ended June 30, 2007 at Youbet Express increased 7%, with yield on this handle improving to 7.3% from 6.9% in the prior-year period. For the six months ended June 30, 2007, the handle at IRG improved 8%, with yield remaining flat at 2.4% as compared to the prior-year period.

For the six months ended June 30, 2007, totalizator service revenues increased by $1.3 million at United Tote from the comparable prior-year period, largely due to including results for a full six months, as United Tote was acquired in mid-February 2006.

For the six months ended June 30, 2007, the cost of revenues increased by 7% compared to the prior-year period. For the six months ended June 30, 2007, track fees, licensing fees and network operations recorded year-over-year percentage changes of 7%, (9%) and (4%), respectively, versus the prior-year period. For the six months ended June 30, 2007, contract costs increased to $8.2 million from $5.8 million in the year ago period, with most of the increase due to a full six months' results for United Tote (acquired in mid February 2006) in 2007. Gross profit for the six months ended June 30, 2007 increased 8% to $24.4 million versus $22.6 million in the year ago period.