Youbet.com Reports Results for the Three and Six-Month Periods Ended June 30, 2009

Youbet.com, Inc. (NASDAQ: UBET) today announced results for the three and six-month periods ended June 30, 2009. For the second quarter 2009, diluted earnings per share were $0.03, versus diluted earnings per share of $0.05 in the prior-year period.

Youbet President and Chief Executive Officer David Goldberg commented, “In spite of the economic downturn and industry turmoil, which included reduced racing days at premium tracks, Youbet Express posted impressive gains in several important metrics. Youbet Express saw another quarter of double-digit handle gain and revenue continued to increase in the face of the weak economy and industry. Specifically, during the second quarter, we saw a 13% increase in handle, driven by a 7% increase in unique wagerers on a weekly basis and a 5% increase in the average amount wagered by them over the second quarter of 2008. We continue to explore new and unique marketing initiatives which have resulted in our continued gain of market share and share of customer’s wallet. There is no better time to improve market share than in difficult economic times. The negative external factors took a harder toll on the United Tote business, which is more exposed to overall industry trends, such as year-over-year industry handle drops of 11% in the second quarter, and 17% in June alone, according to Equibase.”

Mr. Goldberg continued, “Overall industry softness may continue in the back half of the year as Equibase has reported a year-over-year decline of 13.4% in industry handle for the month of July. We continue to see weakness across the consumer and gaming sector in particular, which has impacted the horse racing industry. Although the ADW business continues to grow within the industry, we remain diligent in managing expenses, while at the same time pursuing growth opportunities for our Youbet Express platform. Growth initiatives include customer acquisition, adding content – including international expansion and development of simplified wager opportunities to attract new customers to racing – and improving the customer experience through new and innovative products like MyROI, which are aimed at improving our share of a customer’s wagering wallet. In addition, we continue to actively support the process in Washington, D.C. concerning pro-gaming legislation.”

Segment Results

Total revenue at Youbet Express for the three-month period ended June 30, 2009 rose 9% year-over-year to $24.6 million. Gross profit at Youbet Express in the second quarter of 2009 was down 5% from the prior-year period, primarily due to higher track fees, which more than offset increased revenue, and an increase in player incentives. Income from continuing operations before other income (expense) and income tax at Youbet Express was $2.6 million during the second quarter of 2009, down 2% from the second quarter of 2008, as the increase in track fees and player incentives was mostly offset by increased revenue and a $0.4 million decline in operating expense. The decrease in operating expenses was a result of a significant decline in general and administrative expenses in the quarter, partially offset by increases in consulting and marketing expenditures associated with customer retention activities, customer acquisition, including the re-launch of our ‘live racing’ content on CBSSportsline.com and ESPN.com, and new product development and promotion including MyROI, xStreamAV® and Conditional Wagering. EBITDA from continuing operations at Youbet Express in the second quarter of 2009 was $3.1 million, an increase of 2% over the second quarter of 2008,

For the second quarter of 2009, total revenue at United Tote declined 17%, primarily as a result of contract losses and lower handle on existing contracts. The decrease in revenue was somewhat mitigated by a $0.3 million year-over-year decrease in operating expenses. United Tote’s loss from continuing operations before other income (expense) and income tax for the second quarter of 2009 was $0.7 million, compared to being breakeven in the second quarter of 2008. EBITDA from continuing operations at United Tote in the second quarter of 2009 was $0.7 million, a decline of 56% compared to the second quarter of 2008.

Second Quarter 2009 Operating Results

The following table summarizes the key Youbet Express components of revenue in the three-month periods ended June 30, 2009 and 2008.

Total revenue in the second quarter of 2009 was $30.2 million, an increase of 3% from $29.2 million in the prior-year period.

Youbet Express revenue was $24.6 million, up 9% from second quarter 2008 based on handle of $128.4 million, an increase of 13% from the prior-year period. Youbet Express yield in the second quarter of 2009 was 6.9%, a decline of 120 basis points from the prior-year period primarily due to adding content in the quarter from lower-yielding tracks and an increase in player incentives.

The increase in handle was attributable to the return of TrackNet content and the addition of new content, partially offset by a decrease in handle on existing tracks. Youbet Express handle attributable to new content was $24.6 million, while same-track and same-state handle decreased $9.8 million, or 9%, from the second quarter of 2008 due to the overall economy and fewer racing days at several racetracks. Lost track content was $0.2 million and is defined as content offered on the Youbet Express platform during the second quarter of 2008 that did not return in the second quarter of 2009.

For the second quarter of 2009, contract revenue at United Tote of $5.7 million was down 14% from the prior-year period, while equipment sales were down $0.3 million. Contract costs were comparable with the prior-year period at $3.8 million, as decreases in communication, ticket paper and travel-related costs were offset by increases in equipment rental and repairs and maintenance costs. Gross profit for the second quarter of 2009 declined 36% over the prior-year period to $1.9 million, with gross profit margin falling to 32.7% from 42.4% as a result of the reduction in contract revenue.

Total operating expenses associated with continuing operations for the three months ended June 30, 2009 were $8.3 million, a decrease of $0.7 million from the prior-year period. Research and development costs of $0.8 million were down $0.1 million from the same period in 2008. Sales and marketing costs of $1.5 million were up $0.3 million, or 28%, from 2008 levels due to recent initiatives undertaken in relation to new content and customer acquisition activities. General and administrative expense, which includes payroll-related costs, transaction processing fees and professional consulting fees, was $4.3 million in the second quarter of 2009, a decrease of $0.7 million, or 14%, from the second quarter of 2008. Excluding one-time severance costs of approximately $0.8 million in the second quarter of 2008, total general and administrative expenses were comparable with the prior-year period. Depreciation and amortization expense of $1.8 million declined $0.2 million compared to the second quarter of 2008.

EBITDA from continuing operations in the second quarter of 2009 was $3.8 million, down from $4.5 million in the second quarter of 2008.

For the second quarter of 2009, income from continuing operations, which includes Youbet Express and United Tote, was $1.5 million, or $0.03 per diluted share, compared to $2.2 million, or $0.05 per diluted share, in the prior-year period.

First Half 2009 Operating Results

Total revenue for the six months ended June 30, 2009 increased 9% to $58.6 million from $53.8 million in the prior-year period.

Youbet Express revenue for the six months ended June 30, 2009 increased 16% from the prior-year period to $48.7 million, based on handle of $252.4 million – a 21% rise from the comparable period in 2008. Youbet Express yield for the six months ended June 30, 2009 was 7.1%, a decline of 110 basis points from the prior-year period primarily due to adding content from lower-yielding tracks and an increase in player incentives.

Contract revenue and equipment sales at United Tote for the six months ended June 30, 2009 declined by 17% to $10.4 million from $12.6 million in the prior-year period, largely due to the weak economy.

For the six months ended June 30, 2009, total cost of revenue was $38.7 million, an increase of 19% compared to the prior-year period, due to an increase in track fees associated with new content. Contract costs for the six months ended June 30, 2009 decreased to $7.1 million from $7.4 million in the prior-year period. Gross profit for the six months ended June 30, 2009 declined to $19.9 million compared to $21.3 million in the prior year.

Total operating expenses associated with continuing operations for the six months ended June 30, 2009 decreased $0.5 million to $16.7 million, a 3% decline from the prior-year period. Research and development costs of $1.7 million were down $0.1 million from the same period in 2008. Sales and marketing costs of $2.9 million were up $0.5 million, or 20%, from 2008 levels from an increase in sales and marketing personnel and recent initiatives undertaken in relation to new content and customer acquisition activities. General and administrative expense, which includes payroll-related costs, transaction processing fees and professional consulting fees, was $8.4 million in the six months ended June 30, 2009, a decrease of $0.7 million, or 8%, from the prior-year period. Depreciation and amortization expense of $3.6 million declined $0.2 million compared to the six months ended June 30, 2008.

EBITDA from continuing operations for the six months ended June 30, 2009 was $7.1 million, down from $7.8 million in the prior-year period.

For the six months ended June 30, 2009, income from continuing operations, which includes Youbet Express and United Tote, was $2.6 million, or $0.06 per diluted share, compared to $3.4 million, or $0.08 per diluted share, in the prior-year period.

Liquidity and Capital Resources

As of June 30, 2009, the company had net working capital of $2.6 million, compared to negative working capital of $0.8 million at December 31, 2008. As of June 30, 2009, the company had $15.5 million in cash and cash equivalents, $4.8 million in restricted cash and $9.9 million in total debt. Net cash provided by operating activities for the first six months of 2009 was $2.8 million, a $4.7 million decrease from the prior year due to unfavorable working capital fluctuations. Net cash used in investing activities for the first six months of 2009 was $1.1 million, an increase of $0.5 million from the prior year due to increased expenditures on property and equipment. Net cash used in financing activities was $2.7 million and was attributable to repayment of debt.

The company has a loan and security agreement that provides for a $5.0 million revolving credit facility and a $10.0 million term loan. The principal of the term loan is to be repaid in equal quarterly installments of $1.25 million plus interest, and payments commenced on December 31, 2008. Both the revolving credit facility and the term loan mature on November 30, 2010. As of June 30, 2009, Youbet owed $6.3 million under the term loan and no amount was outstanding under the revolving credit facility. Management believes that unrestricted cash on hand and cash generated by operating activities will be sufficient to pay scheduled payments on the term loan and the remaining balance expected to be owed at maturity.

On April 1, Youbet announced that it had modified and extended its stock repurchase program, allowing the company to repurchase up to 10% of its common shares outstanding as of March 31, 2009. As of August 11, 2009, no repurchases have been made under the new program.

Conference Call Information

The company will host a conference call and webcast today at 5:00 p.m. Eastern time. Both the call and webcast are open to the general public.

The conference call number is 888-726-2423. Please call ten minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call on the Internet at http://www.youbet.com (select About Youbet.com). Please log-on 15 minutes in advance to ensure that you are connected prior to the call's initiation. Questions and answers will be reserved for call-in analysts and investors. Following its completion, a replay of the call can be accessed for 30 days on the Internet at the above link.

Reconciliation of Non-GAAP Financial Measures

This release contains disclosure regarding EBITDA from continuing operations, which is a financial measure that is not calculated in accordance with GAAP. “EBITDA” is defined as earnings before interest, income taxes, and depreciation and amortization expense.

Management believes that this non-GAAP financial measure serves as a useful supplemental measure that reflects core business performance. Management uses EBITDA from continuing operations to evaluate the company's operating performance and as a liquidity measure, and it is among the primary measures used by management for planning and forecasting of future periods. In addition, management uses EBITDA from continuing operations to determine compliance with its debt covenants. This measure should not be considered as an alternative to net income or as an indicator of our financial performance and may not be comparable to similarly titled measures used by other companies.

Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

Disclosures necessary to conform to GAAP and SEC Regulation S-X have been omitted

About Youbet.com, Inc.

Youbet.com, Inc. (NASDAQ: UBET) is a leading domestic online horse racing and horse betting site, the exclusive provider of live horse racing footage and racing results to ESPN.com and CBSSports.com and a leading supplier of totalizator systems to the pari-mutuel industry. Youbet’s website enables its customers to securely wager on horse races at over 180 racetracks each year worldwide from the convenience of their homes or other locations. Through its online platform, Youbet offers members real-time wagering, co-mingled track pools, conditional wagering capabilities, high quality live audio/video, up-to-the-minute track information, mobile wagering, race replay library, simultaneous X2 Video multi-race viewing capability and sophisticated ROI-based player analysis tools. In addition, through its United Tote totalizator systems subsidiary, Youbet provides hardware and software to its track partners, allowing them to process pari-mutuel wagers, issue and pay tickets, and calculate payoff odds.

Forward-Looking Statements

This press release contains certain forward-looking statements. These forward-looking statements, which are included in accordance with Section 21E of the Securities Exchange Act of 1934, as amended, may involve known and unknown risks, uncertainties and other factors that may cause Youbet's actual results and performance in future periods to be materially different from any future results or performance suggested by the forward-looking statements in this press release. Although Youbet believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that actual results will not differ materially from these expectations. Important factors that could cause actual results to differ materially from those in the forward looking statements include the timely development and market acceptance of new products and technologies; Youbet's ability to achieve further cost reductions; Youbet's assessment of strategic alternatives for United Tote, including a possible sale, as to which there can be no assurance of success; increased competition in the advance deposit wagering business; a decline in the public acceptance of wagering; wagering ceasing to be legal in jurisdictions where Youbet currently operates; the limitation, conditioning, or suspension of any of Youbet's licenses; increases in or new taxes imposed on wagering revenues; the adoption of future industry standards; the loss or retirement of key executives; Youbet's ability to meet its liquidity requirements and maintain its financing arrangements; and general economic and market conditions; as well as the risks and uncertainties discussed in Youbet's Form 10-K for the year ended December 31, 2008, and in Youbet's other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release. Youbet does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

1 EBITDA from continuing operations is not a measure of financial performance prepared in accordance with GAAP. For a reconciliation of this measure with net income (loss) from continuing operations, the most directly comparable GAAP financial measure, see “Reconciliation of Non-GAAP Financial Measures” at the end of this release.