iBasis Reports First Quarter 2008 Results

Business Wire, April 28, 2008

Company Announces $15 Million Stock Repurchase Program

BURLINGTON, Mass. -- iBasis, Inc. (NASDAQ: IBAS), a KPN affiliate, today announced results for the first quarter ended March 31, 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. Thus, the GAAP financial results for Q1 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 first quarter of 2008 was $324.9 million, and net loss was $(2.1) million or $(0.03) per share. For the first quarter of 2007 pro forma revenue was $324.8 million, and pro forma net income was $1.5 million.

Adjusted EBITDA for the first quarter of 2008 was $11.2 million, compared to pro forma Adjusted EBITDA of $13.0 million in the first quarter of 2007. Adjusted EBITDA is a non-GAAP measurement presented to provide further information about the Company's operating trends.

Comments on the First Quarter

"Compared to Q1 2007, traffic increased 5% and gross margin increased by 100 basis points, resulting in a 10% increase in gross profit in the first quarter of 2008," said Ofer Gneezy, iBasis president and CEO. "Gross profit increased in all three revenue streams - Wholesale Trading, Outsourced, and Retail. The gross margin improvement compared to pre-acquisition margin demonstrates the ongoing success of our efforts to capture synergies from the expansion of our base of suppliers, which resulted from the acquisition of KPN Global Carrier Services in October. Operating expenses increased, partly in support of our integration efforts and to support our planned future growth, resulting in a decline in Adjusted EBITDA for the quarter. Synergies we expect to achieve in the future will contribute to reduced operating expenses and expanded EBITDA.

"Coming off of a very strong fourth quarter, these results are weaker than we expected and roughly in line with the industry. According to industry sources, the international wholesale telecommunications market in general has experienced a decline in traffic volume and compression in average revenue per minute (ARPM) over the last six months. We believe this is a temporary interruption in the decade-long trend of traffic growth partially offset by a smaller decline in ARPM. We expect to resume growth overall and in particular from the addition of traffic resulting from our transaction with TDC.

"On April 1 we completed the transaction with TDC, the leading carrier in Denmark and a major provider throughout the Nordic region. For $10 million we acquired TDC's non-Nordic international voice business and secured a long-term outsourcing agreement, which we expect to generate approximately $80 million in annual revenue.

"In our Retail business, we continued to experience pressure resulting from the transition of the industry to more transparent pricing and softness in the economy and other factors affecting the employment of immigrant workers. To address the former, iBasis is taking a leadership position by creating, with other major providers in this space, an independent association with the charter to establish, promote and monitor standards of ethical business practices in the prepaid industry. We believe this trend is very positive for iBasis, as we have a significant advantage in our network and low cost of operations."

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* Revenue less data communications and telecommunications costs

Comments on Integration

"Since completing the KPN transaction in October we have been focused on capturing savings from three areas: Least Cost Routing (LCR), Transmission, and Operating Expenses. We have made tangible progress as demonstrated by the gross margin improvement over pre-acquisition pro forma results that we have already achieved. We expect to capture additional LCR synergies by taking full advantage of our combined scale and expanded base of termination partners to get the best termination rates. We believe we will realize transmission synergies as we move KPN Global Carrier Services' international traffic to our All-IP network. This will enable us to benefit from lower backhaul charges as well as the increased efficiency of IP transmission. As we merge our accounting, billing, routing and traffic management systems we believe we will also be able to save on operating expenses. We expect all of these synergies to exceed $20 million in annual savings, and we expect to fully complete the integration effort in two to three years from the date of the transaction.