Youbet.com Reports Record Second Quarter Net Income of $1.3 Million or $0.04 Per Diluted Share; Total Revenue Rises 40.8% to $23.5 Million on Record Quarterly Handle of $120.5 Million

Business Wire, August 4, 2005

WOODLAND HILLS, Calif. -- Youbet.com, Inc. (NASDAQ: UBET) today reported record net income of $1.3 million, or $0.04 per fully diluted share, for the 2005 second quarter, compared to net income of $39,766, or $0.00 per fully diluted share, in the 2004 second quarter. The 2005 second quarter results include the benefit of one month of operations from International Racing Group (IRG), which the Company acquired on June 1, 2005.

Summary of Second Quarter Results

----------------------------------------------------------------------
                                 For the three months ended
                                          June 30,
                                   (in thousands, except
                                       per share and
                                     percentage figures)
----------------------------------------------------------------------
                                      2005         2004      % change
----------------------------------------------------------------------
Total wagers (handle)             $120,467(1)  $   83,065       45.0%
----------------------------------------------------------------------
Total revenue (commissions from
 handle plus other revenue)       $   23,482   $   16,683       40.8%
----------------------------------------------------------------------
Net revenue (revenues from
 commissions less track and
 licensing fees)                  $    7,222   $    5,536       30.5%
----------------------------------------------------------------------
Yield (2)                               6.0%         6.7%
----------------------------------------------------------------------
EBITDA (3)                        $    1,487   $      743      100.2%
----------------------------------------------------------------------
Net income                        $    1,337   $       40
----------------------------------------------------------------------
Diluted EPS                       $     0.04   $     0.00
----------------------------------------------------------------------

(1) Of total handle, $11.7 million was attributable to IRG and $108.8
    million was attributable to Youbet.

(2) Yield is defined as net revenue (commission revenue less track and
    licensing fees) as a percentage of handle. The decline in yield
    for the three-month period ended June 30, 2005 compared to the
    prior year period is primarily due to a change in track mix and
    the acquisition of IRG, whose operations carry a lower overall
    yield. Youbet's management believes that yield provides useful
    data to evaluate the company's operating results and
    profitability. Yield should not be considered an alternative to
    operating income or net income as indicators of Youbet's financial
    performance, and may not be comparable to similarly titled
    measures used by other companies.

(3) EBITDA is defined as earnings before interest, taxes, depreciation
    and amortization. A reconciliation of EBITDA to net income, the
    most comparable Generally Accepted Accounting Principles ("GAAP")
    financial measure, can be found attached to this release.

"Record total handle and revenue in the second quarter of 2005 clearly illustrate that our Advanced Deposit Wagering (ADW) products continue to gain in popularity with customers," said Chairman, President and Chief Executive Officer Charles F. Champion. "In addition, we were able to leverage our industry leading product offerings into the highest level of total customer deposits for any single quarterly period.

"Youbet's second quarter growth was impressive, yet some expenses in the period disproportionately impacted net income, even though operating expenses as a percentage of revenue declined from the prior year period. During the quarter Youbet incurred a meaningful year-over-year increase in marketing expenses that we believe contributed to record quarterly handle, revenue and total customer deposits. We believe these marketing investments will also benefit future periods. In addition, we incurred higher legal expenses related to certain corporate initiatives, such as the adoption of our new equity incentive plan.

"Management's commitment to long-term profitable growth sometimes calls for the allocation of resources in current periods to benefit future operating results, as was the case in the second quarter. We are confident that Gary Sproule, who reassumed the position of Chief Financial Officer earlier this week, will prove extremely capable in leading our efforts to balance revenue expansion and operating expenses in future periods.

"During the quarter we completed our acquisition of IRG, which was an important step in executing on one of our core growth strategies - the acquisition of other pari-mutuel wagering entities. We are pleased with the initial contributions to our operations from this acquisition, and we expect IRG to continue to benefit our operating results in the second half of 2005.

Mr. Champion concluded, "Overall, Youbet continues to execute on a plan that we believe creates long-term value for shareholders. Our priority is to focus on expansion and top-line growth while managing operating expenses to ensure commensurate bottom line results. With several avenues of growth now being considered -- including additional acquisitions -- the filing of our $50 million shelf registration during the second quarter provides us with a flexible financing option to pursue these opportunities. Reflecting our expectations for further growth, we remain confident in our ability to achieve the current analyst consensus estimate for 2005 fully diluted earnings per share of $0.20, exclusive of the previously disclosed compensation charge expected in the third quarter."