iBasis Reports Second Quarter 2008 Results

Company Resumes Growth in Minutes, Revenue and Gross Profit

BURLINGTON, Massachusetts – 07/22/2008 – 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

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

* 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 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.


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 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 atwww.ibasis.com.