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Q12001EARNINGS
iBasis Achieves Record First Quarter 2001 Revenue and Minutes
Strong Demand for VoIP Services, Increased Overseas Origination,
Network Utilization Produce $2.86 Million in Positive Gross Margin on Revenues of $27.05 Million
BURLINGTON, MA - April 26, 2001 - iBasis, Inc. (Nasdaq: IBAS) today announced results for the first quarter ended March 31, 2001. These results reflect contributions from the company's acquisition of speech applications service provider PriceInteractive. On an actual basis, with the PriceInteractive transaction closing on Feb. 27, 2001, first quarter revenue was $27.05 million, a 178.2% increase over first quarter 2000 revenue of $9.73 million. Net loss before acquisition-related and non-cash compensation charges for the first quarter 2001, which includes depreciation and amortization expense of $6.94 million as well as a reserve for bad debt of $5.2 million, was $26.15 million, or $0.69 per share based on 37.87 million weighted average shares outstanding. This compares to a first quarter 2000 net loss before non-cash compensation charges of $10.51 million, or $0.33 per share based on 32.21 million weighted average shares outstanding. Including acquisition-related charges of $26.80 million, the company recorded a first quarter 2001 net loss of $53.15 million, or a loss of $1.40 per share based on 37.87 million weighted average shares outstanding. Acquisition-related charges include a write-off of acquired in-process research and development costs of $24.43 million and the amortization of acquired intangible assets of $2.36 million.
On a pro forma basis, assuming the company had completed the acquisition of PriceInteractive as of January 1, 2001, iBasis recorded approximately $30.60 million in revenue for the quarter, 20% of which came from enhanced services. Pro forma loss before acquisition-related and non-cash compensation charges, but including a reserve for bad debt of $5.3 million, was $27.39 million, or a loss before acquisition-related and non-cash compensation charges of $0.63 per share based on 43.68 million weighted average shares outstanding. Inclusive of combined $31.53 million in acquisition-related charges, pro forma net loss was $59.24 million, or a pro forma net loss of $1.36 per share based on 43.68 million weighted average shares outstanding.
"In the first quarter, we continued to demonstrate the superiority of the iBasis Network, our carrier-grade voice over IP infrastructure," said Ofer Gneezy, president and CEO of iBasis. "Contributing to our quarterly performance was increasing demand from tier one carriers for our core international VoIP services, as well as healthy growth in overseas origination. We also completed the acquisition of PriceInteractive, whose speech services accounted for 20% of pro forma first quarter revenue. These new revenues from our enhanced services business played an important role in improving our total gross margin and our margin as a percentage of revenue."
Cost Reduction Measures
"Our business continues to grow rapidly," said Mr. Gneezy. "We believe that being a service provider with relatively light infrastructure, we are less susceptible to weakness in the economy. Nonetheless, we are instituting new cost containment measures across the company, including a 15% workforce reduction. We are also sharpening our focus on near-term revenue opportunities and improving the operational efficiency of our business. We are confident that with this streamlining of our operations and our continuing strong cash position, we are fully-funded and on-track to reach profitability by this time next year."
Key Indicators
Minutes of use in the first quarter rose to 290.5 million minutes, a 241% increase over the 85.2 million minutes carried by The iBasis Network in Q1 2000. Pro forma total minutes of use were 309.3 million minutes for the first quarter.
The company's total overseas lines were 15,700 at the end of the first quarter of 2001, a 313.2% increase from 3,800 lines at the end of the first quarter of 2000. With approximately 82% of iBasis traffic originating in the US and terminating overseas, the company believes that the number of overseas lines remains an indicator of the total capacity of its global network.
The total number of Points of Presence (PoP's) in the iBasis Network rose to 540 compared with 112 at the end of the first quarter 2000, an increase of 382%. Sequentially, PoP's increased 26.7% compared with the 426 PoP's in service at the end of the fourth quarter 2000.
Pro forma average revenue per minute for the quarter rose to 8.9 cents, with actual revenue per minute declining slightly from 8.84 cents per minute in Q4 2000 to 8.52 cents in Q1 2001.
Operational Milestones
During the first quarter 2001, the company continued to increase the percentage of traffic it routes for the world's largest carriers (known in the industry as "tier one" carriers). Tier one carriers generated more than 39% of revenue and 37% of all traffic routed over The iBasis Network in the first quarter compared with 30.7% of revenue and 31.6% of all traffic in the fourth quarter 2000.
iBasis continued to increase the percentage of overseas-originated voice traffic it carries, which improves network utilization and generally produces higher margins than US-originated voice traffic. In the first quarter 2001, overseas-originated calls accounted for more than 23.5% of revenue and 18% of iBasis traffic, up from 17% of revenue and 11.7% of iBasis traffic in the fourth quarter of 2000.
The company continued to expand its geographic reach during the first quarter, ending the quarter with 65 countries on The iBasis Network, up from 26 countries at the end of the first quarter 2000. iBasis finished the quarter with more than 110 carrier customers, up from 72 at the end of the first quarter of 2000.
iBasis experienced its first four million minute day in the first quarter, a new peak volume benchmark for The iBasis Network. Underscoring the increasing scale of iBasis' global VoIP service, the company opened a new Network Operations Center (NOC) in Hong Kong in the first quarter. A mirror site of the first iBasis NOC, located at the company's US headquarters near Boston, the Hong Kong NOC will help iBasis further scale its services and increase overseas origination, which will help improve utilization on The iBasis Network. The Hong Kong NOC will also help iBasis to more efficiently manage its global network operations and reduce its network engineering and staffing costs by transferring more of its traffic management and monitoring tasks to less costly daylight hour shifts. This increased operational efficiency will help enable iBasis to continue to scale its global VoIP capacity and deliver faster, more effective support services to its customers, without regard to time zone, culture or language.
iBasis also made progress in its efforts to establish itself as a leader in speech-enabled services. Late in the first quarter, the company completed its acquisition of PriceInteractive, a leading speech application service provider whose customers include AT&T, ExxonMobil, Gannett, H&R Block, Home Shopping Network, Morgan Stanley, Sabre Group, WorldCom, Sprint, Verizon, and Western Union, for approximately $46 million in cash and approximately 10.23 million shares of iBasis stock. (See iBasis, Inc. Completes Acquisition of Leading Speech Application Service Provider PriceInteractive, Inc.- February 28, 2001). PriceInteractive products and services give enterprises and service providers the ability to speech-enable business-critical, customer-facing solutions, such as e-commerce, call-center, employee self-service, product and sales information, customer care and other interactive applications. The acquisition of PriceInteractive is an important step in iBasis' strategy to enhance the capabilities of its global VoIP infrastructure with new, speech-enabled services that combine the power of the Internet with the convenience, simplicity and ubiquity of the phone.
Financial Milestones
Gross margins increased to 10.6% of revenue during the quarter, up from 4.8% in the fourth quarter 2000. Pro forma gross margins were approximately $4.59 million, or 15% of pro forma revenue of $30.6 million.
The company recorded an EBITDA loss of $19.14 million in the first quarter of 2001. The EBITDA loss includes a charge for bad debt expense of $5.2 million to build reserves that the company believes will be sufficient to cover potential credit risk from non-Tier One carrier customers. The bankruptcy filings of a number of second and third tier international carriers during the quarter were important factors in the company's decision to establish these reserves. We believe that credit risk will be mitigated as we continue to grow our Tier One revenue base as evidenced by the 27% increase in revenue from Tier One carriers experienced during this past quarter.
The company's total cash position (including marketable securities) decreased by approximately $77 million during the quarter. The decrease was primarily due to the following items: purchase of PriceInteractive and related acquisition cash costs, net of acquired cash, $34.7 million; EBITDA loss (net of a $5.2 million reserve for bad debt, a non-cash charge), $13.9 million; cash capital expenditure, $11.3 million, interest payments on bonds, $4.3 million; principal payments on capital leases, $5.2 million; as well as changes in working capital. Total capital expenditure during the quarter was $14.77 million.
Guidance
With more than $223 million in cash, cash equivalents and marketable securities as of March 31, 2001, iBasis believes that it continues to be fully funded for growth through profitability.
iBasis continues to anticipate achieving total 2001 revenue in the range of $150-160 million, and iBasis believes that it will achieve positive EBITDA in the fourth quarter of 2001. In addition, iBasis believes that it will become net income positive in the first quarter of 2002. The company's steady-state gross margin target is 25%-35%. iBasis expects steady-state gross margin target in the core VoIP business to be 20-25%.
In 2001, iBasis anticipates spending in the range of $30-40 million in capital expenditures. It is the company's goal to fund approximately 80% of its capital expenditure budget through outside financing, including vendor financing.
iBasis expects to end the year with more than $160 million in cash, cash equivalents and marketable securities.
The company also anticipates that in the second quarter it will take an aggregate charge of approximately $35 million. This charge includes the write-off of fixed assets and associated contractual obligations relating to certain non-revenue generating ICOs and data centers, as well as severance expense in connection with a reduction in force.
The iBasis Network: A Carrier-Class Global Infrastructure For Enhanced Voice Services
The iBasis Network is a robust, global platform for the delivery of IP-based communications services, including wholesale, phone-to-phone VoIP and enhanced services, such as unified communications and speech-enabled business solutions. The company's global network delivers IP-based voice services using Internet Telephony equipment from Cisco Systems deployed in large, carrier-class switching and application hosting facilities called Internet Central OfficesTM, strategically located in major telecommunications hubs in North America, Europe, Latin America and Asia. The network also comprises numerous smaller points of presence called Internet Branch OfficesTM, which play an important role in connecting providers to iBasis services. With this global infrastructure in 65 countries and through its relationships with other communications providers, iBasis can provide IP-based voice services virtually anywhere in the world. iBasis is the only provider that guarantees service quality by offering the industry's first Service Level Agreement (SLA) for VoIP (Voice-over-Internet-Protocol). The key to maintaining the high level of quality required by the world's largest carriers is the company's proven, proprietary Assured Quality RoutingTM (AQRTM) technology. At the company's 24 x 7 Network Operations Centers (NOC) in Burlington, Mass., USA and Hong Kong, the nerve centers of The iBasis Network, engineers continuously monitor the global circuit-switched (PSTN) and packet-switched (IP) networks to ensure the highest quality of service to customers worldwide.
About iBasis
Founded in 1996, iBasis (Nasdaq: IBAS) is the leader in advanced Internet-based voice communications. iBasis delivers toll quality international voice services and provides the infrastructure for hosted communications solutions, including unified communications and speech-enabled content, e-commerce and customer service applications. The company's customers include many of the largest enterprises and carriers in the world, including AT&T, Cable & Wireless, China Mobile, China Unicom, Concert, ExxonMobil, Gannett, H&R Block, Home Shopping Network, Morgan Stanley, NTT, Telstra, Sabre Group, Sprint, Western Union, WorldCom, and Verizon. iBasis' hosted, enhanced service solutions include SpeechPortTM, a scalable, customizable ASP environment for speech-enabled business solutions, VoCoreSM unified communications and the IP CallCardTM pre- and post-paid calling card platform. 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. 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 http://www.ibasis.net.
Assured Quality Routing and AQR are registered trademarks, VoCore is a service mark and iBasis, The iBasis Network, Internet Central Office, Internet Branch Office, IP CallCard, SpeechPort, IPort, and PriceInteractive are trademarks of iBasis, Inc. or its subsidiaries. Cisco and Cisco Powered Network are registered trademarks of Cisco Systems, Inc. All other trademarks are the property of their respective owners
Except for historical information, all of the expectations, projections and assumptions contained in the foregoing press release, including those 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' Annual Report on Form 10-K for its fiscal year ended December 31, 2000, and the company's other SEC filings.
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iBasis, Inc.
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Consolidated Statements of Operations
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(Unaudited)
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Three Months Ended March 31,
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2001
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2000
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Net revenue:
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Data communications and telecommunications
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$ 26,020,320
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$ 9,725,492
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Professional services
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1,032,914
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--
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Total net revenue
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27,053,234
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9,725,492
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Operating expenses:
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Data communications and telecommunications
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23,798,163
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10,080,503
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Professional services
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393,343
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|
--
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Research and development
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5,477,523
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2,819,009
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Selling and marketing
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|
6,083,229
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3,288,280
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General and administrative
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10,436,638(1)
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3,660,581
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Depreciation and amortization
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6,939,475
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1,926,272
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Non-cash compensation
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196,960
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149,021
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Total operating expenses
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53,325,331
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21,923,666
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Loss from operations
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(26,272,097)
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(12,198,174)
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Interest income
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|
4,013,001
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|
2,451,292
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Interest expense
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(3,893,323)
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(909,265)
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Income taxes
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(198,174)
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--
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Net loss before acquisition related charges
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(26,350,593)
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(10,656,147)
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Acquisition related charges:
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Write-off of acquired in-process research and development costs
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(24,431,466)
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--
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Amortization of goodwill and other acquired intangible assets
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(2,364,630)
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--
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Net loss applicable to common stockholders
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$(53,146,689)
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$(10,656,147)
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Net loss per share before acquisition-related and non-cash compensation charges:
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Net loss per share
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$ (0.69)
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$ (0.33)
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Weighted average common shares outstanding
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37,866,350
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32,205,878
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Net loss per share:
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Net loss per share
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$ (1.40)
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|
$ (0.33)
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Weighted average common shares outstanding
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37,866,350
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|
32,205,878
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iBasis, Inc.
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Pro Forma Consolidated Statements of Operations
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(Unaudited)
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Three Months Ended March 31,
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2001
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2000
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Net revenue:
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Data communications and telecommunications
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$ 28,406,570
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$ 9,725,492
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Professional services
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2,197,461
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--
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Total net revenue
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30,604,031
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9,725,492
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Operating expenses:
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Data communications and telecommunications
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24,827,849
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10,080,503
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Professional services
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1,181,872
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|
--
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Research and development
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6,138,523
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2,819,009
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Selling and marketing
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6,989,761
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3,288,280
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General and administrative
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11,407,121(1)
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3,660,581
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Depreciation and amortization
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7,509,054
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1,926,272
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Non-cash compensation
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|
319,116
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|
149,021
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Total operating expenses
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58,373,296
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21,923,666
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Loss from operations
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(27,769,265)
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(12,198,174)
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Interest income
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|
3,720,854
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|
2,451,292
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Interest expense
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(3,949,275)
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(909,265)
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Income taxes
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283,621
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|
--
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Net loss before acquisition related charges
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(27,714,065)
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(10,656,147)
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Acquisition related charges:
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Write-off of acquired in-process research and development costs
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(24,431,466)
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--
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Amortization of goodwill and other acquired intangible assets
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(7,093,890)
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--
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Net loss applicable to common stockholders
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$(59,239,421)
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$(10,656,147)
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Net loss per share before acquisition-related and non-cash compensation charges:
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Net loss per share
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$ (0.63)
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$ (0.33)
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Weighted average common shares outstanding
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43,680,128
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32,205,878
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Net loss per share:
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Net loss per share
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$ (1.36)
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|
$ (0.33)
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Weighted average common shares outstanding
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43,680,128
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32,205,878
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(1) Includes $5.3 million of bad debt reserves recorded during the first quarter 2001.
The consolidated pro forma statement of operations reflects the consolidated statement of operations as if the acquisition of PriceInteractive, Inc. had occurred on January 1, 2001 as opposed to February 27, 2001.
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iBasis, Inc.
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Consolidated Balance Sheets
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(Unaudited)
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March 31,
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December 31,
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2001
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2000
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Assets
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Cash, cash equivalents and marketable securities
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$223,290,621
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$300,327,398
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Accounts receivable, net
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22,201,910
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17,343,294
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Prepaid expenses and other current assets
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11,224,560
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5,883,560
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Property and equipment, net
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117,488,241
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99,870,110
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Due from PriceInteractive Incorporated
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--
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10,000,000
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Goodwill and other intangible assets, net
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82,762,047
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--
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Long term investment in non-marketable securities
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5,000,000
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5,000,000
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Deferred debt financing costs, net
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4,098,055
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4,356,708
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Other assets
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3,237,883
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5,036,649
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Total Assets
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$469,303,317
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$447,817,719
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Liabilities and stockholders' equity
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Accounts payable
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$ 6,662,669
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$ 9,080,407
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Accrued expenses
|
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18,046,057
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14,855,026
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Deferred revenue
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1,830,573
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|
--
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Current portion of long term debt
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|
31,702,709
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26,105,842
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Long term debt, net of current portion
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188,399,391
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190,880,257
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Total Liabilities
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|
246,641,399
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|
240,921,532
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Stockholders' equity:
|
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Common stock
|
|
44,918
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|
34,203
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Additional paid-in capital
|
|
369,111,765
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|
298,572,842
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Deferred stock-based compensation
|
|
(3,241,680)
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|
(1,604,462)
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Accumulated deficit
|
|
(143,253,085)
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|
(90,106,396)
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Total stockholders' equity
|
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222,661,918
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|
206,896,187
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|
|
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$469,303,317
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$447,817,719
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