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4 Nov 2004

WOODLAND HILLS, California -- (PRESS RELEASE) --, Inc. (NASDAQ: UBET) a leading online wagering company and the largest provider of horse racing content in the United States, today reported pre-tax income for the 2004 third quarter period of $791,085 compared to a loss of $617,853 in the 2003 third quarter. For the three month period ended September 30, 2004, Youbet reported net income of $4.0 million, or $0.12 per diluted share, which includes a non-cash income tax benefit of $3.3 million, or $0.09 per diluted share, as a result of releasing a portion of the reserve against net deferred tax assets on its balance sheet, compared to a loss of $617,853, or negative $0.02 per basic share, in the prior year period.

Total revenue for the 2004 third quarter rose to $17.2 million, an increase of $2.9 million or 20.5% over the prior year period. Revenues from commissions less track and licensing fees (net revenue) increased by $1.0 million, or 22.7% to $5.5 million. Youbet also reported that EBITDA (earnings before interest, taxes, depreciation and amortization) for the three month period ended September 30, 2004, was $1.0 million, an increase of approximately 46% over the prior year quarter.

"Youbet's record Q3 results, which extended our growth to eleven consecutive quarters, further demonstrate our ability to provide customers with the industry's highest level of content and an online wagering platform that is reliable and is increasingly acknowledged as the industry-preferred platform," said Chairman and Chief Executive Officer Charles F. Champion. "Our targeted marketing and promotion programs continue to be instrumental in our ability to grow our customer base while migrating customers to higher yielding tracks and wagering options. Our industry-leading platform offers tremendous scalability as we grow our customer base as we currently utilize just 25% of our network's capacity and more than 90% of our costs are fixed.

"Over the last several quarters we have made investments in management and infrastructure to support not only our growth in our domestic horse racing advance deposit wagering platform, but in our ability to leverage this platform in new markets and other forms of gaming. As the only company focused 100% on advance deposit wagering opportunities, Youbet is uniquely positioned to pursue domestic ADW consolidation opportunities. In addition, we continue to focus on potential acquisitions of complementary businesses or technologies, both domestically and internationally, which would allow us to grow our content offerings and base of customers."

Mr. Champion concluded, "While we are delighted to report continued improvements in operating results, the future growth prospects of our ADW business, and the many opportunities for growth in new business segments and new markets suggests that we are only in the very early stages of realizing Youbet's long-term earnings potential."

The improved operating results reflect a significant increase in year-over-year total wagers ("handle"), which rose to a record $83.7 million for the period ended September 30, 2004, an increase of $11.2 million or $15.4% from the prior year period. The 2004 third quarter handle also reflected a slight improvement from the reported handle for the 2004 second quarter period which is the Company's historically strongest period. The year-over-year handle growth was generated despite the absence in the third quarter 2004 of content from non-California Magna tracks. Accordingly, same track handle increased 23% year-over-year.

Operating expenses, excluding track and licensing fees, for the third quarter were $4.8 million, an increase of approximately $742,000 or 18.6% from the prior year period and $151,000 lower than reported operating expenses for the 2004 second quarter period. The year-over-year increase is primarily due to significantly higher sales and marketing costs for the 2004 third quarter period, which totaled approximately $382,000. This increase reflects the new targeted marketing campaigns and promotions noted above. Additionally, general and administrative expenses increased approximately 9% year-over-year to $2.8 million in the third quarter of 2004 due to increased staffing, expenses related to compliance with Sarbanes-Oxley regulations, and other administrative expenses., Inc. is hosting a conference call and web cast at 5:00 p.m. EST today, Wednesday, November 3, 2004. The conference call number is 706/679-4652. To access the live call on the Internet, log on to (select About Following its completion, a replay of the call can be accessed for thirty days on the Internet at the above link. is the largest Internet provider of thoroughbred, quarter horse and harness racing content in the United States as measured by handle data published by the Oregon Racing Commission. Members have the ability to watch and, in most states, the ability to wager on the widest variety of horse racing content available via's website. members enjoy features that include commingled track pools, live audio/video, up-to-the-minute track information, real-time wagering information, phone wagering and value-added handicapping products. is an official online wagering platform of Churchill Downs Incorporated and the Kentucky Derby. operates TotalAccess(SM), an Oregon-based hub for the acceptance and placement of wagers. More information on can be found at

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