iBasis Reports Record Results for Second Quarter 2001

Company Achieves Record Revenue, Expanding Gross Margin and Narrowing EBITDA Loss

BURLINGTON, Mass.- July 26, 2001 - iBasis, Inc. (Nasdaq: IBAS) today announced results for the second quarter ended June 30, 2001. Second quarter revenue was $34.27 million, a 152% increase over second quarter 2000 revenue of $13.61 million. Net loss before acquisition, non-cash compensation and restructuring charges for the second quarter 2001 was $21.67 million, or $0.49 per share based on 43.97 million weighted average shares outstanding. This compares to a second quarter 2000 net loss before non-cash compensation charges of $13.17 million, or $0.39 per basic and diluted share based on 33.96 million weighted average shares outstanding. Including restructuring charges of $37.52 million, non-cash compensation of $0.52 million, and acquisition-related charges of $7.09 million for amortization of intangibles, the company recorded a second quarter 2001 net loss of $66.80 million, or a loss of $1.52 per share based on 43.97 million weighted average shares outstanding.

Highlights of the quarter include the following:

· Revenue increased 12% to $34.27 million compared with pro forma first quarter revenue of $30.6 million (assuming Price Interactive had been purchased on Jan. 1, 2001);

· Overseas origination increased to 32.5% of wholesale Internet telephony revenue compared with 23.5% in the first quarter 2001;

· Tier One generated traffic increased to 53% of wholesale Internet telephony revenue compared with 39% in the first quarter 2001 and 53% of wholesale minutes compared with 37% in Q1;

· Gross margins increased to 16.0% of revenue compared with pro forma 15.0% of revenue in the first quarter;

· EBITDA loss moderated to $12.07 million compared with $19.14 million in the first quarter 2001;

· The company began generating revenue for the first time in its unified communications line of business in late May following completion of the Openwave transaction;

· The company incurred an aggregate restructuring charge of $37.52 million to reflect the write-off of fixed assets and associated contractual obligations related to certain ICOs and data centers as well as severance in connection with the April reduction in force.

"Using Internet Telephony, we have already captured roughly 1% of global international voice traffic and become one of the top 20 carriers of international traffic world wide," said Ofer Gneezy, president and CEO of iBasis. "This is a huge but fragmented industry in which the largest carrier, AT&T, has only approximately 10% market share. Our achievement is even more significant as our revenue growth and margin expansion is in sharp contrast to legacy circuit switched carriers whose voice revenues are in decline and whose margins are contracting.

"We envision a world in which local service providers retail international traffic as one service in a bundle of services they sell to customers while outsourcing the delivery to a handful of specialists, like iBasis, who use internet telephony to interconnect networks across oceans and national boundaries," said Gneezy. "This vision also encompasses enhanced voice services, including both our messaging and speech-enabled services. In late May, we started generating revenue from our VoCore messaging services based on Openwave technology, which we delivered to leading wireless and wireline carriers.

"Our progress, during a time of difficult global economic conditions, continues to demonstrate the fundamental strength of our business model. Despite only modest revenue growth from our Speech Solutions line of business and a temporary negative impact on gross margin caused by a software bug in a new release of our least cost routing software, we were able to achieve continuing revenue growth, expand gross margin and narrow EBITDA loss. However, this strength in the business is masked by two large one-time charges: the acquisition-related charges in the first quarter and the restructuring charge in the second quarter.

"While our business performance continues to improve, we believe that given current market conditions and our focus on improving the overall quality of revenue by focusing on serving Tier One carriers in preference to smaller carriers, it is prudent to adjust our guidance, including pushing out EBITDA crossover into next year. This adjusted timeline more accurately reflects our current perspective on the business."

Key Indicators
Minutes of use in the second quarter rose to 337.6 million minutes, a 182% increase over the 119.4 million minutes carried by The iBasis Network in the second quarter 2000 and a 9.2% sequential increase from pro forma 309.3 million minutes in the first quarter 2001. Revenue per minute increased from pro forma 8.90 cents per minute in Q1 2001 to 9.01 cents per minute in Q2 2001.

The company's total overseas lines were 19,900 at the end of the second quarter of 2001, a 262% increase from 5,500 lines at the end of the second quarter of 2000. Sequentially, overseas lines increased 26.75% compared with the 15,700 overseas lines in service at the end of the first quarter 2001.

The total number of Points of Presence (PoP's) in the iBasis Network rose to 581 compared with 192 at the end of the second quarter 2000, an increase of 202%. Sequentially, PoP's increased 7.6% compared with the 540 PoP's in service at the end of the first quarter 2001.

Operational Milestones
During the second quarter 2001, the company continued to experience significant increases in the percentage of traffic it routes for the world's largest carriers (known in the industry as "Tier One" carriers). Tier One carriers generated 53% of wholesale telecommunications revenue and 53% of all wholesale traffic (40.5% of total revenue) routed over The iBasis Network in the second quarter compared with 39% of telecommunications revenue and 37% of all traffic in the first quarter 2001 (38% of total revenue). The increasing traffic from Tier One carriers reduces collections risk and is an indication of the quality we are able to deliver on our network.

iBasis also 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 second quarter 2001, overseas-originated calls accounted for more than 32.5% of wholesale telecommunications revenue and 25.6% of wholesale traffic, up from 23.5% of wholesale revenue and 18% of wholesale traffic in the first quarter of 2001.

The company continued to expand its geographic reach during the second quarter, ending the quarter with 70 countries on The iBasis Network, up from 65 countries at the end of the first quarter 2001 and up from 33 countries at the end of the second quarter 2000. iBasis finished the quarter with 124 carrier customers, up from 102 at the end of the second quarter of 2000.

iBasis has established a leadership position in enhanced services driven by our success in the Unified Communications and Speech Solutions lines of business. As previously announced, during the middle of the second quarter, the company assumed ownership and management of the Openwave ASP unified messaging service. The transfer of this service to iBasis also included ongoing revenues from the wireless and wireline carrier customers of the Openwave ASP business. The Speech Solutions line of business continues to contribute significantly to gross margin by delivering call center automation solutions that help its Fortune 500 customers enhance productivity and efficiency in their customer interactions. More than 20% of revenue during the quarter was derived from enhanced services.

Restructuring Charge
The company took an aggregate restructuring charge of approximately $37.52 million in the quarter. This charge relates primarily to the impairment and related costs of writing down certain fixed assets in a limited number of network data centers and ICOs, the anticipated costs of termination or negotiated settlement of certain related contractual obligations, and certain severance expenses directly associated with the previously-announced second quarter reduction in force. Specifically, the data center write-down was primarily the result of moving to the Openwave unified messaging platform in the second quarter, which culminated in the write-down of previously-deployed equipment in data centers in New York City and Cambridge, Mass. determined to be no longer required to service this business. In addition, the ICO write-down and associated charges are related to the company's increasing focus within its wholesale VoIP business on serving the largest international, Tier One carriers. Large international carriers tend to maintain greater geographic footprint and ability to connect their networks cost-efficiently to the iBasis Network. As a result, iBasis has benefited by being able to rationalize certain redundant ICO facilities, with the potential to achieve higher overall utilization rates.

Financial Milestones
Gross margins increased to $5.49 million, or 16.0% of revenue during the quarter, up from pro forma 15.0%, or actual 10.6%, in the first quarter 2001.

The company recorded an EBITDA loss, not inclusive of the $37.52 million restructuring charge, of $12.07 million compared to a $19.14 million EBITDA loss in the first quarter of 2001.

Total capital expenditure during the quarter was $19.5 million.

The company's total cash position decreased by approximately $39.7 million during the quarter. This decrease in cash was primarily due to the quarter's EBITDA loss (not including bad debt expense, a non-cash charge), cash capital expenditures of $13.72 million, principal payments on capital leases of $6.8 million, certain acquisition-related charges and fees, as well as changes in working capital. Total non-recurring cash expenditures during the quarter were approximately $7.4 million (not including capital expenditures).

Guidance
The following statements are forward-looking and actual results may differ materially due to factors noted below, among others. The information provided in this financial outlook is as of July 26, 2001, and replaces in its entirety all previous guidance. .

With more than $183.6 million in cash, cash equivalents and marketable securities as of June 30, 2001, iBasis believes that it continues to be fully funded for growth through profitability. iBasis expects to end the year with $115-$125 million in cash, cash equivalents and marketable securities. For the remainder of 2001, iBasis anticipates no more than $25.0 million in additional capital expenditures.

iBasis anticipates achieving total 2001 revenue of $150-160 million, and believes that it will achieve positive EBITDA in 2002. The company's steady-state gross margin target is 25%-35%. iBasis expects the steady-state gross margin target in the core VoIP business to be 20-25%.

The iBasis Network: A Carrier-Class Global Infrastructure For Enhanced Services
The iBasis Network^TM is a robust, global platform for the delivery of IP-based communications services, including wholesale, phone-to-phone VoIP and enhanced services, such as messaging and speech-enabled business solutions. With a carrier-class infrastructure in 70 countries and through its relationships with other communications providers, iBasis can provide voice services virtually anywhere in the world.

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 messaging 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, VoCore^SM messaging 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.com .

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Assured Quality Routing, and iBasis are registered marks, VoCore is a service mark, The iBasis Network, Internet Central Office, Internet Branch Office, IP CallCard, SpeechPort, IPort, AQR 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.
Consolidated Statements of Operations
(Unaudited)
		Three Months Ended June 30,
		2001		2000
Net revenue:
Data communications and telecommunications		$ 32,069,532		$ 13,607,538
Professional services		2,199,932		--
Total net revenue		34,269,464		13,607,538
Operating expenses:
Data communications and telecommunications		27,424,031		13,521,184
Professional services		1,360,875		--
Research and development		5,906,868		4,454,141
Selling and marketing		6,352,718		4,613,256
General and administrative		5,296,080		4,311,579
Depreciation and amortization		7,826,911		2,365,867
Total operating expenses		54,167,483		29,266,027
Loss from operations		(19,898,019)		(15,658,489)
Interest income		2,397,654		6,041,616
Interest expense		(3,955,721)		(3,533,713)
Income taxes		(208,926)		(17,873)
Net loss before acquisition, non-cash compensation and restructuring related charges		(21,665,012)		(13,168,459)
Amortization of goodwill and other acquired intangible assets		(7,093,890)		--
Non-cash compensation		(516,311)		(149,021)
Restructuring costs		(37,520,000)		--
Net loss applicable to common stockholders		$(66,795,213)		$(13,317,480)
Net loss per share before acquisition, non-cash compensation and restructuring related charges:
Net loss per share		$ (0.49)		$ (0.39)
Weighted average common shares outstanding		43,973,685		33,961,212

iBasis, Inc.
Consolidated Statements of Operations
(Unaudited)
		Six Months Ended June 30,
		2001		2000
Net revenue:
Data communications and telecommunications		$ 58,089,852		$ 23,333,030
Professional services		3,232,846		--
Total net revenue		61,322,698		23,333,030
Operating expenses:
Data communications and telecommunications		51,222,194		23,601,687
Professional services		1,754,218		--
Research and development		11,384,391		7,273,150
Selling and marketing		12,435,947		7,901,536
General and administrative (1)		15,732,713		7,924,418
Depreciation and amortization		14,766,386		4,292,139
Total operating expenses		107,295,849		50,992,930
Loss from operations		(45,973,151)		(27,659,900)
Interest income		6,410,655		8,492,908
Interest expense		(7,849,044)		(4,442,978)
Income taxes		(407,100)		(65,614)
Net loss before acquisition, non-cash compensation and restructuring related charges		(47,818,640)		(23,675,584)
Write-off of in-process research and development costs		(24,431,466)		--
Amortization of goodwill and other acquired intangible assets		(9,458,520)		--
Non-cash compensation		(713,276)		(298,043)
Restructuring costs		(37,520,000)		--
Net loss applicable to common stockholders		$(119,941,902)		$(23,973,627)
Net loss per share before acquisition, non-cash compensation and restructuring related charges:
Net loss per share		$ (1.17)		$ (0.72)
(1) Includes an additional one-time charge of $4.0 million of bad debt reserves recorded during the first quarter March 31, 2001.

iBasis, Inc.
Consolidated Balance Sheets
		June 30,		December 31,
		2001		2000
Assets
Cash, cash equivalents and marketable securities		$183,604,634		$300,327,398
Accounts receivable, net		26,469,488		17,343,294
Prepaid expenses and other current assets		9,792,435		5,883,560
Property and equipment, net		101,536,243		99,870,110
Due from PriceInteractive Incorporated		--		10,000,000
Goodwill and other intangible assets, net		75,489,550		--
Long term investment in non-marketable securities		5,000,000		5,000,000
Deferred debt financing costs, net		3,839,283		4,356,708
Other assets		2,181,140		5,036,649
		$407,912,773		$447,817,719
Liabilities and Stockholders' Equity
Accounts payable		$ 6,007,344		$ 9,080,407
Accrued expenses		26,599,462		14,855,026
Deferred revenue		1,917,119		--
Current portion of long term debt		34,224,954		26,105,842
Long term debt, net of current portion		182,878,451		190,880,257
Total liabilities		251,627,330		240,921,532
Stockholders' equity:
Common stock		44,705		34,203
Additional paid-in capital		369,182,640		298,572,842
Deferred stock-based compensation		(2,893,604)		(1,604,462)
Accumulated deficit		(210,048,298)		(90,106,396)
Total stockholders' equity		156,285,443		206,896,187
		$407,912,773		$447,817,719

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