Youbet income at $5.7M

Youbet.com, the online horse racing broadcast and wagering company, had net income of $5.7 million on revenue of $88.8 million in 2005, according to financial statements released by the company Thursday.

The $5.7 million in net income included an income tax benefit of $1.9 million that Youbet credited to its fourth quarter, in which the company lost money. In 2004, Youbet had net income of $4.6 million on revenue of $62.8 million. Youbet had an income tax benefit of $3.3 million in 2004.

The 2005 results reflected the second year in a row in which Youbet has posted an annual profit. The company is one of the leading account-wagering companies in the United States, with a hub based in Oregon. According to the financial statements, handle through Youbet's hub was $395.2 million in 2005, up 25.4 percent from 2004.

The 2005 results also include revenue and expenses for six months of operations at International Racing Group, a rebate shop in Curacao that Youbet purchased in mid-2005. Handle through IRG was $77 million for the six months, or $154 million on an annualized basis.

Youbet had $16.7 million in cash at the end of 2005, according to the statements, up from $13.3 million in 2004.

Earlier this week, Youbet reached an agreement to purchase United Tote, a bet-processing company, for $31.9 million in cash and the assumption of $14.7 million in United Tote debt. The acquisition is being financed by $9.7 million in cash, $10.2 million in promissory notes that come due over the next two years, and the issuance of approximately 2.2 million shares of stock.

In the fourth quarter of 2005, Youbet lost $377,000 on revenue of $20.8 million. The company took the $1.9 million tax benefit in the fourth quarter, turning the loss into a $1.5 million profit.

Operating expenses in the fourth quarter were sharply higher than in the fourth quarter of 2004, increasing 35 percent from $15.8 million to $21.4 million. Revenue increased 30 percent in the quarter, from $16.2 million to $20.8 million.

Several categories of expenses increased markedly in the fourth quarter. Network operations expenses increased from $855,000 to $1.32 million, and sales and marketing expenses increased from $957,000 to $1.64 million. Overall in 2005, sales and marketing expenses increased from $3.5 million to $6.4 million, up 82.3 percent.

The company's yield - net revenue as a percentage of handle - fell in 2005 to 5.9 percent from 7 percent in 2004. Company officials have said they expected yield to fall in 2005 because of lower margins at International Racing Group.