iBasis Announces Record Q3 2000 Revenue and Traffic Volume

 Company Achieves 40% Sequential Quarterly Traffic Growth; Q3 Voice and Fax Traffic Exceeds Volume For All of 1999

BURLINGTON, Mass.- October 17, 2000 - iBasis, Inc. (Nasdaq: IBAS) today announced results for the third quarter ended September 30, 2000. Third quarter revenue was $17.21 million, a sequential quarterly increase of 26.5% compared with second quarter 2000 revenue of $13.61 million and a 197.8% increase over third quarter 1999 revenue of $5.78 million.

Net loss for the third quarter 2000 was $17.49 million, or a net loss of $0.51 per basic and diluted share based on 34.10 million weighted average shares outstanding. On a sequential quarterly basis, net loss for the quarter compares to a second quarter 2000 net loss of $13.32 million, or a loss of $0.39 per basic and diluted share based on 33.96 million weighted average shares outstanding. This net loss also compares to a third quarter 1999 net loss of $7.63 million, or a pro forma net loss per basic and diluted share of $0.27 based on 22.92 million pro forma weighted average shares outstanding. Pro forma basic and diluted net loss per share and weighted average shares outstanding were calculated assuming all preferred stock had converted into common stock as of the date of original issuance.

"We achieved another excellent quarter with continued strong execution and growth at a time when legacy telecommunications carriers are facing significant pressures. The continued success of iBasis and of the Internet Telephony sector as a whole is further proof of the inherent superiority of voice over the Internet. We believe that the efforts by legacy carriers to reduce operational costs and deliver new, value-added services directly benefits the Internet Telephony sector and will continue to fuel its rapid growth," said Ofer Gneezy, president and chief executive officer of iBasis. "We grew our volume of voice and fax traffic by more than 40 percent sequentially in the quarter, expanded our network footprint, established relationships with new large carrier customers, extended the eco-system of our VoCore unified communications solution, and strengthened our executive team with proven leaders. We believe this revenue momentum in our business will continue." 

Key Indicators 
Minutes of use rose to 168.0 million minutes in the third quarter, an increase of 40.7% over second quarter 2000 volume of 119.4 million minutes and a 275% increase compared to 44.8 million minutes in the third quarter of 1999.

During the quarter, the company continued to expand The iBasis Network™ footprint at a rapid rate. At the end of the third quarter, the iBasis Network comprised 7,800 overseas lines, a 41.8% increase over the 5,500 lines at the end of the second quarter 2000 and a 225% increase over the 2,400 lines in service at the end of the third quarter of 1999. Overseas lines are the phone lines that connect iBasis Internet Branch Offices overseas to the Public Switched Telephone Network (PSTN), and are one measure of the total capacity of the iBasis Network.

The company continued to execute on its previously announced plan to expand the number of high capacity, carrier-class Internet Central Office (ICO) facilities on The iBasis Network to a total of 20 by year-end. This deployment supports the company's strategic objective, to be a preferred global provider of wholesale VoIP, Internet Telephony Hosting and enhanced voice-based services. In addition, as content distribution and e-commerce services are increasingly voice-enabled, this ICO footprint will support the company's quest to become a leading voice-access network for the Internet. During the quarter, the company installed three new ICOs, in Miami, Sydney, and Tokyo, raising the total number of ICO facilities to 11. iBasis currently has ICOs in New York, Los Angeles, Cambridge (Mass.), Hong Kong, London, Frankfurt, Amsterdam, Vancouver, Miami, Sydney, and Tokyo. Subsequent to the quarter end, the company provided an update on the progress of its European deployment, announcing the seven locations in that region where the company plans to have ICOs by year's end.

During the third quarter, the company expanded the number of countries in which its network has traffic termination and/or origination capability from 33 to 41 countries, a 24% sequential quarterly increase.

iBasis also increased the percentage of revenue received from voice and fax traffic that originated in countries other than the U.S. during the quarter from 11% in Q2 to 15.1% in Q3 of total revenue, with non-U.S. originated traffic volume increasing in that same period from 8.2% to 11.9% of total minutes. Also during the quarter, the company expanded its wholesale customer base, adding more than 10 new carrier customers, including a tier one carrier and several major European providers.

Also during the quarter, the company enhanced its VoCoreSM hosted Unified Communications offering, announcing a strategic relationship with Convergys (NYSE:CVG), a leading provider of customer care solutions. The relationship with Convergys enables iBasis to provide VoCore customers with comprehensive end-user customer care and support options that are tightly integrated with its VoCore solution.

The company also made several executive appointments during the quarter including naming D.J. Long as vice president for Corporate Development, Sean O'Leary as vice president of Internet Telephony, Alan Bugos as vice president of Engineering, Jackie VanderBrug as vice president of Unified Communications, Roger Matus as vice president of New Products and Technologies, and Tim Walsh as vice president of Sales for Europe, the Middle East and Africa.

Outlook 
iBasis continues to benefit from increasing demand for its core international voice and fax services, creating strong overall momentum in its business. The company is on track to deploy a total of 20 Internet Central Offices by year-end 2000. Moving forward, the company expects to expand its network capacity sufficiently to continue to achieve top-line quarterly revenue growth in the 25% range for the next several quarters.

Further, the company believes it can achieve sustainable positive gross margin beginning in the first quarter 2001 and expects to show sequential quarterly improvement thereafter by increasing network utilization, growing the percentage of voice and fax traffic that originates overseas, continuing to drive adoption of Internet Telephony Hosting and developing revenue from enhanced, voice-based Internet services. The company's long-term target gross margin is in the range of 20-25% and 10-15% for EBITDA margin; and the company also expects that as its new, enhanced voice-based services are broadly adopted both gross and EBITDA margins will improve further.

The company's total capital expenditure for 2000 is expected to be approximately $80 million, of which expenditures for the company's wholesale VoIP business are expected to be approximately $40-45 million with another $35-40 million expended on the company's VoCore Unified Communications solution. Capital expenditure for the company's wholesale VoIP business in 2001 is expected to be in the range of $30-40 million. iBasis presently finances approximately 80% of its capital expenditure through capitalized lease obligations that incur interest expense monthly and are depreciated straight line over three years. The company's goal is to continue to finance a significant proportion of future capital expenditures in this manner.

The company has not yet attained revenue from its VoCore Unified Communications business. While the company is presently in contractual negotiations with service providers interested in iBasis' hosted VoCore solution, the initiation of revenue to the company for this UC service entails timing risk.

iBasis believes that it is fully-funded through to profitability. The company expects to achieve positive EBITDA in the third quarter of 2002 and to become profitable in the fourth quarter of 2002. 

About iBasis 
Founded in 1996, iBasis (Nasdaq: IBAS) is the leader in advanced Internet-based communications. iBasis has built the world's first global IP network that delivers toll quality voice and fax service and other advanced hosted communications solutions, including VoCoreSM Unified Communications, to global tier one carriers and other service providers. The iBasis Network is the world's largest international Cisco Powered Network for Internet Telephony and the first to receive the Unified Communications Cisco Powered Network (UC-CPN) designation. More than 100 international service providers are iBasis customers, including 11 of the top 12 U.S. international carriers. iBasis is listed in both the Russell 2000® and Russell 3000® Indexes. The company can be reached at its worldwide headquarters in Burlington, Mass., USA at 781-505-7500 or on the Internet at www.ibasis.net . Except for historical information, all of the expectations, projections and assumptions contained in the foregoing press release, including those set forth under the heading "Outlook" and relating to the company's current expectations regarding revenue growth, sources of revenue, margin improvement and future capital expenditures constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. Important factors that could cause actual results to differ materially from such forward-looking statements include, but are not limited to, (i) the extent of adoption of the company's new voice-based Internet services and the timing and amount of revenue generated by these services; (ii) fluctuations in the market for and pricing of VoIP services; and (iii) the other considerations described as "Risk Factors" in iBasis' prospectuses dated March 9, 2000, and the company's other SEC filings. Assured Quality Routing and AQR are registered servicemarks, VoCore is a servicemark and iBasis and The iBasis Network are trademarks of iBasis, Inc. Cisco and Cisco Powered Network are registered trademarks of Cisco Systems, Inc. Russell 2000® and Russell 3000® are registered trademarks of Frank Russell Company.