EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1
     
For more information contact:
 
Charles Bearchell
Chief Financial Officer
Youbet.com, Inc.
818/668-2100
  Joseph N. Jaffoni
Richard Land
Jaffoni & Collins Incorporated
212/835-8500orubet@jcir.com

FOR IMMEDIATE RELEASE

YOUBET.COM REPORTS THIRD QUARTER PRE-TAX INCOME OF $791,000 COMPARED TO A LOSS OF $618,000 IN PRIOR
YEAR PERIOD

- Net Revenues Rise 22.7% to $5.5 Million and EBITDA Rises 46.0% to $1.0 Million -

Woodland Hills, CA, November 3, 2004 – Youbet.com, 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.

-more-

Youbet.com, Inc., 11/3/04 page 2

“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.

Youbet.com, 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 www.youbet.com (select About Youbet.com). Following its completion, a replay of the call can be accessed for thirty days on the Internet at the above link.

Youbet.com 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 Youbet.com’s website.

-more-

Youbet.com, Inc., 11/3/04 page 3

Youbet.com 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.

Youbet.com is an official online wagering platform of Churchill Downs Incorporated and the Kentucky Derby. Youbet.com operates TotalAccessSM, an Oregon-based hub for the acceptance and placement of wagers. More information on Youbet.com can be found at www.youbet.com.

This press release contains certain forward-looking statements. Statements containing expressions such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” potential,” “continue” or “pursue,” or the negative or other variations thereof or comparable terminology used in Youbet’s press releases and in its reports filed with the Securities and Exchange Commission are intended to identify forward-looking statements. These forward-looking statements, which are included in accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, 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. From time to time, these risks, uncertainties and other factors are discussed in the Company’s filings with the Securities and Exchange Commission. Such factors include, without limitation, the following: the timely development and market acceptance of new products and technologies; our ability to secure financing on terms acceptable to us; our ability to control operating expenses; increased competition in the advance deposit wagering business; a decline in the public acceptance of wagering; wagering ceasing to be approved 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; loss or retirement of key executives; and a decline in the general economy. 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.

-financial tables follow-

# # #

1

Youbet.com, Inc., 11/3/04 page 4

YOUBET.COM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

                                                         
                            September 30,           December 31,        
                            2004           2003        
 
                           (Unaudited)                        
ASSETS:
                                                        
   Current assets:
                                                
      Cash and cash equivalents
           $ 11,744,905             $ 8,273,926          
      Restricted cash, current
             3,084,501               2,924,034          
      Accounts receivable
             544,622               279,057          
      Other receivables
             1,351,037               1,132,359          
      Prepaid expenses
             870,290               884,409          
      Deferred tax asset
             3,250,000               —          
 
                                                        
 
                             20,845,355               13,493,785          
   Property and equipment, net
             2,814,287               2,731,922          
   Restricted cash, long-term
             487,750               593,982          
   Licenses and patents, net of amortization
             41,809               1,407,447          
   Deposits and other
                     151,690               624,981          
 
                           $ 24,340,891             $ 18,852,117          
 
                                                        
LIABILITIES AND STOCKHOLDER’S EQUITY
                                                
   Current liabilities:
                                                
      Current portion of lease liability
           $ 119,934               —          
      Trade payables, TVG
             4,495,723             $ 3,426,076          
      Trade payables, track related
             1,567,449               2,539,534          
      Trade payables, other
             761,271               439,559          
      Accrued expenses and other
             1,067,479               2,281,115          
      Customer deposits
             2,860,631               2,356,004          
      Deferred revenues
             92,475               79,519-          
 
                                                        
 
                             10,964,962               11,121,807          
   Lease liability, net of current portion
             185,553               -          
 
                                                        
 
                             11,150,515               11,121,807          
 
                                                        
   Stockholders’ equity:
                                                
      Preferred stock, $0.001 par value, authorized
     -               -          
 
                   1,000,000 shares, none outstanding                                
      Common stock, $0.001 par value, authorized 100,000,000 shares
                                
 
                   30,676,291 and 28,377,443 shares outstanding as of                                
         September 30, 2004 and December 31, 2003, respectively
     30,676               28,377          
      Additional paid-in capital
             102,739,044               101,377,238          
      Deficit
             (87,750,635 )             (91,846,596 )        
      Treasury stock (623,683 shares at cost)
             (1,828,709 )             (1,828,709 )        
 
                                                        
 
                             13,190,376               7,730,310          
 
                                                        
 
                           $ 24,340,891             $ 18,852,117          
 
                                                        

See notes to condensed consolidated financial statements

2

Youbet.com, Inc., 11/3/04 page 5

YOUBET.COM, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

                                         
            Three months ended September 30,        
            2004           2003        
Revenues
                                        
   Commissions
   $ 16,923,438             $ 14,043,202          
   Subscription and transaction fees
     202,459               178,129          
   Race information
     118,238               83,589          
 
                                        
 
             17,244,135               14,304,920          
Operating expenses
                                        
   Track fees
     7,107,531               6,100,240          
   Licensing fees - TVG
     4,320,794               3,462,710          
   Network operations
     584,542               484,002          
   Research and development
     415,352               379,734          
   Sales and marketing
     940,271               558,651          
   General and administrative
     2,848,690               2,616,101          
   Depreciation and amortization
     208,747               1,212,958          
 
                                        
 
             16,425,928               14,814,396          
 
                                        
Income (loss) from operations
             818,208               (509,476 )        
Other income (expense)
                                        
   Interest income
     34,267               10,285          
   Interest expense
     (3,013 )           (121,364   )
   Other income (expense)
     (58,376 )           2,702        
 
                                        
 
             (27,122 )           (108,377   )
Income (loss) before income taxes
           $ 791,085             $ (617,853     )
Income taxes (benefit)
                                        
Decrease in deferred tax asset valuation allowance net of $750,000
                                
applied to the current period pre-tax income
             (3,250,000 )             —          
Net income (loss)
           $ 4,041,085             $ (617,853 )        
 
                                        
Income (loss) per share – basic
           $ 0.13             $ (0.02 )        
Income (loss) per share – diluted
           $ 0.12             $ (0.02 )        

See notes to condensed consolidated financial statements

3

Youbet.com, Inc., 11/3/04 page 6

YOUBET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

                                         
            Nine months ended September 30,        
            2004           2003        
Revenues
                                        
   Commissions
   $ 47,239,274             $ 38,429,172          
   Subscription and transaction fees
     585,432               420,788          
   Race information
     304,615               243,043          
 
                                        
 
             48,129,321               39,093,003          
Operating expenses
                                        
   Track fees
     21,063,234               18,250,282          
   Licensing fees, TVG
     10,145,866               7,650,562          
   Network operations
     1,644,367               1,300,205          
   Research and development
     1,271,554               1,207,214          
   Sales and marketing
     2,578,383               1,695,812          
   General and administrative
     8,552,394               7,213,935          
   Depreciation and amortization
     2,048,496               4,096,600          
 
                                        
 
             47,304,294               41,414,610          
 
                                        
Income (loss) from operations
             825,027               (2,321,607 )        
Other income (expense)
                                        
   Interest income
     97,631               30,790          
   Interest expense
     (5,519 )           (637,082   )
   Other income (expense)
     (71,178 )           79,821        
 
                                        
 
             20,934               (526,471 )        
Income (loss) before income taxes
             845,962               (2,848,078 )        
Income taxes (benefit)
                                        
Decrease in deferred tax asset valuation allowance net of $750,000
                                
applied to the current period pre-tax income
             (3,250,000 )             —          
Net income (loss)
           $ 4,095,962             $ (2,848,078 )        
 
                                        
Income (loss) per share – basic
           $ 0.14             $ (0.11 )        
Income (loss) per share – diluted
           $ 0.12             $ (0.11 )        

See notes to condensed consolidated financial statements

4

Youbet.com, Inc., 11/3/04 page 7

YOUBET.COM, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                                                 
                    Nine months ended September 30,        
                    2004           2003        
Operating activities
                                                
   Net income (loss)
           $ 4,095,962             $ (2,848,078 )        
Adjustments to reconcile net income (loss) to
                                        
   net cash provided by operating activities
                                        
   Decrease in deferred tax asset valuation allowance net of $750,000 applied to
                                
   the current period pre-tax income
             (3,250,000 )             —          
   Depreciation and amortization
             2,048,496               4,096,601          
   Non-cash interest expense
             —               488,194          
   Stock-based compensation
             (60,001 )             303,410          
   Loss on sale of property and equipment
             7,648               (1,693 )        
Increase in operating (assets) and liabilities
                                        
   Restricted cash
             (314,881 )             (1,017,543 )        
   Accounts receivable
             (265,565 )             251,538          
   Other receivables
             (218,677 )             (352,654 )        
   Prepaid expenses
             14,119               (651,012 )        
   Deposits and other
             473,291               (19,173 )        
   Trade payables, other
             321,712               (108,533 )        
   Trade payables, TVG
             1,069,647               1,418,277          
   Trade payables, track related
             (972,085 )             (2,160,524 )        
   Accrued expenses and other
             (797,754 )             120,561          
   Customer deposits
             504,627               927,156          
   Deferred revenues
             12,956               34,766          
 
                                                
      Net cash provided by operating activities
     2,669,496               481,293          
 
                                                
Investing activities
                                                
   Purchases of property and equipment
             (425,819 )             (422,440 )        
   Proceeds from sale of property and equipment
             243               11,500          
   Investment in licenses and patents
             (41,809 )             —          
   Restricted cash
             260,645               342,116          
      Net cash provided by (used in) investing activities
     (206,739 )             (68,824 )        
 
                                                
Financing activities
                                                
   Proceeds from exercise of stock options and warrants, net
     1,008,224               2,589,438          
   Proceeds from notes payable
             —               2,000,000          
   Repayments of notes payable
             —               (750,000 )        
 
                                                
      Net cash provided by financing activities
     1,008,224               2,689,179          
 
                                                
Increase in cash and cash equivalents
             3,470,980               4,251,907          
Cash and cash equivalents, beginning of period
             8,273,926               4,559,897          
Cash and cash equivalents, end of period
           $ 11,744,906             $ 8,811,804          
 
                                                
Supplemental disclosure of cash flow information
                                        
   Cash paid for interest
           $ 5,519             $ 172,727          
 
                                                
Non-cash investing and financing activities
                                        
   Issuance of warrants for $2 million note
           $ —             $ 518,223          
   Stock issuance for surrender of TVG’s additional warrant
     3,640,000               -          
   Stock issuance for TVG legal expense reimbursement
             415,882                          
   Equipment acquired with capital lease
             305,487               —          

See notes to condensed consolidated financial statements

Youbet.com, Inc., 11/3/04 page 8

Reconciliation of Net Income to EBITDA

                         
    Quarter Ended September 30,
        
 
     2004       2003          
Net income (loss)
   $ 4,041,085     $ (617,853 )        
Depreciation and amortization
   $ 208,747     $ 1,212,958          
Other (income) and expense
   $ 27,122     $ 108,377          
Decrease in deferred tax
asset valuation allowance
net of $750,000 applied to
the current period pre-tax
income
   $ (3,250,000 )   $ -          
 
                        
EBITDA (a)
   $ 1,026,954     $ 703,482          
                 
    9 Months Ended September 30,
 
     2004       2003  
Net Income (Loss)
   $ 4,095,962     $ (2,848,078 )
Depreciation and Amortization
   $ 2,048,496     $ 4,096,600  
Other (income) and expense
   $ (20,934 )   $ 526,471  
Decrease in deferred tax asset
valuation allowance net of
$750,000 applied to the current
period pre-tax income
   $ (3,250,000 )   $ —  
 
                
EBITDA (a)
   $ 2,873,524     $ 1,774,993  

(a) EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a Non-GAAP financial measure as defined by SEC Regulation G. We consider EBITDA an important measure of our financial performance and of our ability to generate cash flows to measure operating performance, fund capital expenditures and fund other corporate investing and financing activities. EBITDA eliminates the non-cash effect of tangible asset depreciation and intangible asset amortization, as well as any non-cash gains or charges. EBITDA should be considered in addition to, rather than as a substitute for, pre-tax income, net income and cash flows from operating activities.

5