iBasis Reports Second Quarter 2008 Results

Company Resumes Growth in Minutes, Revenue and Gross Profit
BURLINGTON, Mass.--(Business Wire)--
iBasis, Inc. (NASDAQ: IBAS), a KPN affiliate, today announced
results for the second quarter ended June 30, 2008.

On October 1, 2007, iBasis acquired KPN Global Carrier Services.
As this transaction has been treated as a reverse acquisition of
iBasis by KPN Global Carrier Services under the purchase method of
accounting, the financial results of KPN Global Carrier Services have
become the historical financial results of the combined company and
replace the historical financial results of iBasis as a standalone
company for periods prior to the closing of the acquisition. Thus, the
GAAP financial results for Q2 2007 include only the results of KPN
Global Carrier Services. Historical GAAP results for KPN Global
Carrier Services as a wholly-owned subsidiary of Royal KPN are not
necessarily indicative of results that would have been achieved on a
standalone basis.

To make comparisons to prior periods more useful, we are providing
supplemental pro forma data which include the consolidated historical
results of both iBasis and KPN Global Carrier Services.

Revenue for the second quarter of 2008 was $360.8 million, and net
income was at breakeven. For the second quarter of 2007, pro forma
revenue was $347.7 million, and pro forma net income was $3.7 million.

Adjusted EBITDA for the second quarter of 2008 was $12.7 million,
compared to pro forma Adjusted EBITDA of $14.5 million in the second
quarter of 2007. Adjusted EBITDA is a non-GAAP measurement presented
to provide further information about the Company's operating trends.

Comments on the Second Quarter

"We're very pleased to have returned to growth in Q2 with minutes,
revenue and gross profit increasing both sequentially and compared to
pro forma Q2 2007," said Ofer Gneezy, president and CEO of iBasis.
"The sequential growth was significant in both our Trading and our
Outsourcing businesses, and is partially attributable to the addition
this quarter of the business we acquired from TDC, underscoring the
success of our consolidation strategy. Also, according to industry
sources, the international wholesale market overall resumed growth in
Q2.

"We achieved good lift in our Trading business with significant
sequential growth in revenue and gross profit and a slight expansion
in gross margin. We are particularly encouraged by our growth in the
voice over broadband segment of the market, which includes emerging
consumer VoIP providers and cable operators.

"In our Outsourcing business both minutes and revenue grew over
35% sequentially. Gross profit grew significantly but at the slower
pace of 8% sequentially as the growth was predominantly from KPN's
mobile entities, as well as the inclusion of traffic received from
TDC, both of which are at a lower margin.

"Our Retail business, which has been under pressure from softness
in the economy, started stabilizing in Q2 with growth in minutes, flat
revenue and decline in gross profit all driven by the introduction of
new calling card products in the market. We expect our Retail business
to show modest growth in the second half of the year.

"In keeping with the terms of the outsourcing agreement, the
TDC-related contribution to iBasis gross profit was limited during the
quarter. However, we expect it to grow beginning in Q3 as we have
exited the transition period and as we migrate the traffic to our
network. The business we acquired from TDC comprises third party
carrier traffic which is now included in our Trading business and
TDC's own originated traffic which is now included in our Outsourcing
business following the same approach we took after the transaction
with KPN. The overall contribution to revenue from the TDC transaction
is in line with our expectations.

Sources of Revenue - Q2 '08

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Wholesale
($ in millions) Trading Outsourcing Retail Total
----------------------------------------------------------------------
Minutes (in billions) 4.9 0.7 0.5 6.2
----------------------------------------------------------------------
Revenue $272.2 $67.8 $20.9 $360.8
----------------------------------------------------------------------
Gross Profit(a) $23.6 $11.0 $2.8 $37.5
----------------------------------------------------------------------
Gross Margin 8.7% 16.3% 13.4% 10.4%
*T

(a) Revenue less data communications and telecommunications costs

Comments on Synergies from the KPN Transaction

"By the end of Q2 we had achieved annualized run rate savings of
more than $7 million of the previously estimated $10 million
forecasted in annual operational synergies. The remaining operational
synergies will be achieved through further migration of traffic to our
more efficient IP network, further reduction in costs related to
transmission and other transition services we purchase from KPN, and
the replacement of legacy systems with new enterprise resource
planning and integrated data warehouse systems.

"The strategic synergies from unified least cost routing also
continued to grow and are expected to reach $10 million on an
annualized basis. We are very pleased with the progress in the
integration of the two businesses which we expect to complete by the
second quarter of 2009. The combined operational and strategic
synergies are expected to reach $20 million annually.

Stock Repurchase Program

Pursuant to the $15 million stock repurchase program authorized by
our board of directors in April 2008, iBasis repurchased an aggregate
of 1.4 million shares of iBasis common stock through the second
quarter at a cost of $4.8 million.

Operational Milestones

Minutes of use on The iBasis Network(TM) in Q2 2008 was 6.2
billion, up 6% compared to pro forma traffic of 5.9 billion minutes in
Q2 2007 and 5.8 billion minutes in Q1 2008. Average revenue per minute
was 5.84 cents, compared to pro forma 5.94 cents in Q2 2007 and 5.59
cents in Q1 2008. Average margin per minute remained stable at 0.61
cents, the same as in Q1 2008, and compared to pro forma 0.63 cents in
Q2 2007.

Guidance

The Company believes that in 2008 Adjusted EBITDA will be $55 to
$60 million and capital asset expenditures will be $20 to $25 million.

Q2 Results Conference Call

iBasis will host a conference call to discuss the Company's
selected Q2 results, led by Ofer Gneezy, iBasis president & CEO on
July 22, 2008 at 5:00 p.m. EST. The public is invited to listen to the
simultaneous webcast by logging in through the iBasis investor
relations website at http://investor.ibasis.com.

About iBasis

Founded in 1996, iBasis (NASDAQ: IBAS) is a leading wholesale
carrier of international long distance telephone calls and a provider
of retail prepaid calling services and enhanced services for mobile
operators. iBasis customers include KPN, KPN Mobile, E-Plus, BASE,
TDC, and many other large telecommunications carriers such as Verizon,
Vodafone, China Mobile, China Unicom, IDT, Qwest, Skype, Telecom
Italia, Telefonica, and Yahoo. In October 2007, iBasis acquired KPN
Global Carrier Services to create one of the three largest carriers of
international voice traffic in the world(1), and KPN became a majority
stockholder of iBasis. On a pro forma basis, the combined company
carried approximately 24 billion minutes of international voice
traffic in 2007. The Company can be reached at its worldwide
headquarters in Burlington, Mass., USA at +1 781-505-7500 or on the
Internet at www.ibasis.com.

(1) Telegeography 2008 and iBasis pro forma 2007 traffic.

iBasis and Pingo are registered marks, and The iBasis Network is a
trademark of iBasis, Inc. All other trademarks are the property of
their respective owners.

Except for historical information, all of the expectations, plans
and assumptions contained in the foregoing press release constitute
forward-looking statements under Section 21E of the Securities
Exchange Act of 1934 and involve risks and uncertainties. Examples of
forward-looking statements include, but are not limited to, any
forward statements implied by our pro forma results, as well as
forward-looking statements regarding: (i) our belief that recent
declines in the wholesale telecommunications market generally are
temporary, that we will resume ongoing growth overall and in
particular from the addition of traffic resulting from our transaction
with TDC; (ii) the amount and timing of the synergies from the KPN
transaction that we expect to realize; (iii) the expected growth from
cross-selling and more transparent pricing in our Retail business;
(iv) our expectation that we will be able to take advantage of the
consolidation trends in the international voice industry; (v) the
expected increase in gross profit as we migrate the TDC traffic; and
(vi) our expected 2008 Adjusted EBITDA and capital asset expenditures.
Important factors that could cause actual results to differ materially
from such forward-looking statements include, but are not limited
to,(i) our ability of the to successfully integrate the operations and
employees of KPN Global Carrier Services,(ii) our ability to realize
anticipated synergies,(iii) our ability to successfully migrate the
TDC traffic; (iv) the emergence of new competitive initiatives
resulting from rapid technological advances, (v) changes in business
conditions and volatility and uncertainty in the markets that we
serve; (vi) the Company's ability to execute its business plan;(vii)
the extent of adoption of our services and the timing and amount of
revenue and gross profit generated by these services; (viii)
fluctuations in the market for and pricing of these services; and (ix)
the other factors described in our most recent Annual Report on Form
10-K and other periodic and current reports, all of which are
available at www.sec.gov. Such forward-looking statements are only as
of the date they are made, and we have no current intention to update
any forward-looking statements.

Use of Non-GAAP Financial Measures

In this press release, our financial results are provided both in
accordance with accounting principles generally accepted in the United
States (GAAP) and using certain non-GAAP financial measures which are
not an alternative to GAAP and may be different from non-GAAP
financial measures used by other companies. In particular, we provide
(i) Adjusted EBITDA, and (ii) combined pro forma financial information
which in each case results in a non-GAAP financial measure. These
results are provided as a complement to results provided in accordance
with GAAP because management believes these non-GAAP financial
measures help indicate underlying trends in our business and are
important in comparing current results with prior period results.
Management also uses these non-GAAP financial measures to establish
budgets and operational goals that are communicated internally and
externally, and to manage our business and to evaluate our
performance. We believe the most directly comparable GAAP financial
measure to Adjusted EBITDA is net income (loss) and we have provided a
reconciliation of GAAP net income (loss) to Non-GAAP Adjusted EBITDA
and pro forma combined Adjusted EBITDA in this press release.

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iBasis, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(In thousands)

June 30, December 31,
2008 2007
---------- -------------
Assets

Cash, cash equivalents and short-term
investments $ 62,504 $ 65,734
Accounts receivable, net 229,119 204,883
Prepaid expenses and other current assets 6,534 4,687
Property and equipment, net 37,024 34,966
Intangible assets 95,781 93,800
Goodwill 248,795 248,795
Other assets 1,975 7,008
---------- -------------

Total assets $ 681,732 $ 659,873
========== =============

Liabilities and Stockholders' Equity

Accounts payable $ 125,128 $ 146,899
Accrued expenses 180,224 136,903
Deferred revenue 10,848 11,503
Current portion of long term debt 744 755
Long term debt, net of current portion 30,593 25,000
Other long term liabilities 3,722 4,323
---------- -------------

Total liabilities 351,259 325,383
Stockholders' equity 330,473 334,490
---------- -------------

Total liabilities and stockholders'
equity $ 681,732 $659,873
========== =============
*T

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iBasis, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)

Three Months Ended
June 30,
-------------------
2008 2007
--------- ---------
Total net revenue $360,840 $193,684

Costs and operating expenses:
Data communications and telecommunications
costs (excluding depreciation and
amortization) 323,364 173,422
Engineering and network operations expenses 6,028 2,344
Selling, general and administrative expenses 19,430 5,175
Merger related expenses --- 357
Depreciation and amortization 8,488 1,210

--------- ---------
Total costs and operating expenses 357,310 182,508
--------- ---------

Income from operations 3,530 11,176

Interest income (expense), net ( 30) 220
Foreign exchange loss ( 541) ( 166)

--------- ---------
Income before income taxes 2,959 11,230

Income tax expense 2,946 2,873
--------- ---------

Net income $ 13 $ 8,357
========= =========

Net income per share:
Basic $ 0.00 $ 0.21
Diluted $ 0.00 $ 0.21

Weighted average common shares outstanding:
Basic 74,517 40,121
Diluted 75,072 40,121
*T

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iBasis, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)

Six Months Ended
June 30,
-------------------
2008 2007
--------- ---------
Total net revenue $685,743 $372,234

Costs and operating expenses:
Data communications and telecommunications
costs (excluding depreciation and
amortization) 612,862 336,214
Engineering and network operations expenses 12,656 4,124
Selling, general and administrative expenses 39,251 8,958
Merger related expenses --- 1,678
Depreciation and amortization 15,719 2,401

--------- ---------
Total costs and operating expenses 680,488 353,375
--------- ---------

Income from operations 5,255 18,859

Interest income (expense), net ( 473) 94
Foreign exchange loss ( 792) ( 128)

--------- ---------
Income before income taxes 3,990 18,825

Income tax expense 6,049 4,829
--------- ---------

Net income (loss) $ (2,059) $ 13,996
========= =========

Net income (loss) per share:
Basic $ ( 0.03) $ 0.35
Diluted $ ( 0.03) $ 0.35

Weighted average common shares outstanding:
Basic 74,734 40,121
Diluted 74,734 40,121
*T

Operating Results

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Pro Forma Actual Actual
($ in millions) Q2 '07(a) Q1 '08 Q2 '08
----------------------------------------------------------------------
Revenue $347.7 $324.9 $360.8
----------------------------------------------------------------------
Gross Profit(b) $ 36.9 $ 35.4 $ 37.5
----------------------------------------------------------------------
Gross Margin 10.6% 10.9% 10.4%
----------------------------------------------------------------------
Operating Expenses $ 23.8 $ 26.5 $ 25.5
----------------------------------------------------------------------
Depreciation & Amortization $ 7.0 $ 7.2 $ 8.5
----------------------------------------------------------------------
Income from Operations $ 6.1 $ 1.7 $ 3.5
----------------------------------------------------------------------
Net income (loss) $ 3.7 $ (2.1) $ 0.0
----------------------------------------------------------------------
Adjusted EBITDA $ 14.5 $ 11.2 $ 12.7
----------------------------------------------------------------------
Minutes 5.9B 5.8B 6.2B
*T

(a) Unaudited combined Pro Forma iBasis with KPN Global Carrier
Services

(b) Revenue less data communications and telecommunications costs

Reconciliation of GAAP Net Income (Loss) to Adjusted EBITDA

Adjusted EBITDA is defined as earnings before stock-based
compensation, expenses associated with the review of our stock option
granting practices, foreign exchange gains and losses, merger related
expenses, purchase accounting adjustments, certain non-recurring
charges, interest, taxes, and depreciation and amortization.

In accordance with the requirements of Securities and Exchange
Commission Regulation G, iBasis is presenting the most directly
comparable U.S. Generally Accepted Accounting Principles (GAAP)
financial measure and reconciling the Non-GAAP financial measure to
the comparable GAAP measure.

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In Millions
Q2 07(a) Q1 08 Q2 08
------------ ----------- --------
Net income (loss) $ 8.3 $ (2.1) $ 0.0
Pro Forma adjustments:
iBasis historical net income
(loss) 0.1
Depreciation and amortization (3.6)
Other (1.1)
------------
Pro forma net income (loss) 3.7

Add/(less):
Stock-based compensation 0.5 0.6 0.7
Depreciation and amortization 7.0 7.2 8.5
Interest expense (income),
net (0.7) 0.4 ---
Foreign exchange loss 0.2 0.3 0.6
Merger related expenses 0.4 --- ---
Option analysis expense 0.6 0.1 ---
Acquisition activity related
expenses --- 1.0 ---
Purchase accounting
adjustments --- 0.6 ---
Income tax expense 2.8 3.1 2.9
---------------------------------
Pro forma Adjusted EBITDA $ 14.5 $ 11.2 $12.7
=================================
*T

(a) Unaudited combined Pro Forma iBasis with KPN Global Carrier
Services

iBasis, Inc.
Media:
Chris Ward, 781-505-7557
cward@ibasis.net
or
Investors:
Richard Tennant, 781-505-7409
ir@ibasis.net

Copyright Business Wire 2008