iBasis Reports Results for Third Quarter 2001

BURLINGTON, MA - October 25, 2001 - iBasis, Inc. (Nasdaq: IBAS) today announced results for the third quarter ended September 30, 2001. Third quarter revenue was $33.32 million, which is a 94% increase over third quarter 2000 revenue of $17.21 million, but down 3% sequentially from the second quarter 2001. Net loss was $37.10 million, which is a loss of $0.84 per basic and diluted share, or a loss of $0.67 per basic and diluted share before acquisition and non-cash compensation related charges, based on 44.23 million weighted average shares outstanding. This third quarter 2001 net loss compares to a third quarter 2000 net loss of $17.49 million, or $0.51 per basic and diluted share, based on 34.10 million weighted average shares outstanding, and a second quarter 2001 net loss of $1.52 per basic and diluted share, based on 43.97 million weighted average shares outstanding.

Separately, iBasis today announced that, as part of a broader, continuing initiative to streamline operations and enhance efficiency through increased automation of network support services, and in response to difficult market conditions, it has completed a workforce reduction of approximately 10%. This action and reductions over the past two quarters have lowered the company's total number of employees from 605 at the end of the first quarter to approximately 460 today. These initiatives are part of a plan to reduce annual operating expenses by approximately $10 million over the next four quarters.

Highlights of the quarter include:

· Revenue increase of 94% over the same period last year;

· Telecommunications minutes growth of more than 114% compared with the same period last year, to more than 360 million minutes for the quarter, producing annualized run rate of more than 1.2 billion minutes of international voice traffic, which would make iBasis one of the world's twenty largest carriers of international traffic¹;

· Overseas call origination, which generally produces higher margins than traffic that originates in the U.S., increased to 34% of wholesale Internet telephony revenue and 28% of wholesale Internet telephony traffic as compared to 33% of revenue and 26% of traffic, respectively, in the second quarter 2001;

· Traffic from Tier One carriers, the world's largest and most demanding providers, remained steady at 54% of wholesale Internet telephony revenue and 55% of wholesale Internet telephony minutes in the third quarter;

· iBasis continued to apply a conservative customer credit policy in its Internet Telephony line of business, which is intended to strengthen the company's balance sheet but in the short-term contributed to a slight sequential decline in revenue;

· Cash used during the quarter, inclusive of cash capital expenditures, was approximately $36.1 million. This total includes $4.3 million in semi-annual interest payments on the company's convertible notes and $3.2 million in non-recurring cash expenditures related to acquisition and restructuring charges, and is down from approximately $39.7 million used in the second quarter.

"While we are disappointed with our performance this quarter, we continue to see strength and excellent growth potential in Internet telephony, our core business. While international voice service is a more than $70 billion business, for most large carriers, international service is not core, generally comprising about 5% of revenues. This is why large carriers continue to outsource increasing amounts of this traffic to VoIP carriers like iBasis," said Ofer Gneezy, president and CEO of iBasis. "Our slight decrease in sequential quarterly revenue was caused in part by our deliberate actions to tighten our credit policy and focus on larger carriers. Nevertheless, revenue and traffic for the quarter were still nearly double our third quarter results last year. Importantly, we have also been able to continue to grow our business with our most reliable and financially robust customer segment, Tier One carriers. In fact, for the first time, the three largest US-based carriers, AT&T, Worldcom and Sprint, were among our top ten customers in the third quarter."

"Moving forward, we are totally committed to achieving profitability by growing margins in our core Internet telephony business and continued operating expense reduction."

Key Indicators
Minutes of use on The iBasis NetworkTM in the third quarter rose to 360.0 million minutes, a 114% increase over the 168.0 million minutes carried in the third quarter 2000, and a 6.6% sequential increase over the 337.6 million minutes in the second quarter 2001. Average revenue per minute decreased from 9.01 cents per minute in Q2 2001 to 7.69 cents per minute in Q3 2001. Much of the decrease in revenue per minute is related to lower rates and, to a lesser degree, by changes in traffic mix.

During the quarter, the company continued to increase network capacity in existing Points of Presence (PoPs) in response to demand, increasing total overseas lines to 24,300 at the end of the third quarter of 2001, a 211.5% increase from the 7,800 overseas lines at the end of the third quarter of 2000, and an increase of 22.1% compared with the 19,900 overseas lines in service at the end of the second quarter 2001.

While line density and utilization of existing PoPs increased, deployment of new facilities slowed, with the company adding 8 PoPs to the third quarter total, resulting in 589 PoPs at quarter's end.

Operational Milestones
During the third quarter 2001, the company continued to carry a large percentage of traffic from the world's Tier One carriers. Tier One carriers generated 54% of wholesale telecommunications revenue and 55% of all wholesale traffic routed over The iBasis Network in the third quarter. Increasing traffic from Tier One carriers, the world's largest, most demanding and most financially secure providers, reduces collections risk and is an indication of iBasis' high service quality.

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 third quarter 2001, overseas-originated calls accounted for 34% of wholesale telecommunications revenue and 28% of wholesale traffic, up from 33% of wholesale revenue and 26% of wholesale traffic in the second quarter of 2001.

The company continued to expand its geographic reach during the third quarter, ending the quarter with 83 countries on The iBasis Network, up from 70 countries at the end of the second quarter 2001 and more than double the 41 countries on the network at the end of the third quarter 2000. iBasis finished the quarter with more than 140 carrier customers, up from 124 at the end of the second quarter 2001 and 113 at the end of the third quarter of 2000. During the quarter, the company completed phone calls to more than 230 countries and territories.

Financial Milestones
Gross margins decreased to 14.9% of revenue, or $4.98 million during the quarter, compared with 16.0% or $5.48 million, in the second quarter.

The company recorded an EBITDA loss of $16.47 million compared to a $12.07 million EBITDA loss in the second quarter of 2001 (not inclusive of the second quarter $37.52 million restructuring charge), and compared to a $19.14 million EBITDA loss in the first quarter of 2001.

Total capital expenditures during the quarter were $15.98 million. Of this amount, $7.52 million was financed through vendor financing while the remaining $8.46 million were cash expenditures.

The company's total cash position decreased by approximately $36.1 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 $8.46 million, principal payments on capital leases of $8.2 million, a $4.3 million semi-annual interest payment on the company's outstanding convertible bonds, and certain acquisition-related charges and fees amounting to approximately $0.6 million, as well as other changes in working capital. Total non-recurring cash expenditures during the quarter were approximately $3.2 million related to acquisition and restructuring charges.

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 October 25, 2001, and replaces in its entirety all previous guidance.

With more than $147 million in cash, cash equivalents and marketable securities as of September 30, 2001, iBasis believes that it continues to be fully funded for growth through profitability. iBasis expects to end the year with $110-$120 million in cash, cash equivalents and marketable securities. For the remainder of 2001, iBasis anticipates no more than $15-20 million in additional capital expenditures.

iBasis anticipates achieving total 2001 revenue of $130-140 million, and believes that it will achieve positive EBITDA crossover in the second half of 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 more than 80 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^TM is the world's largest international Cisco Powered Network for Internet Telephony and the second 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 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.

iBasis, Inc.
Consolidated Statements of Operations
(Unaudited)
		Three Months Ended September 30,
		2001		2000
Net revenue:
Data communications and telecommunications		$ 30,326,865		$ 17,213,066
Professional services		2,996,587		--
Total net revenue		33,323,452		17,213,066
Operating expenses:
Data communications and telecommunications		27,184,647		17,315,095
Professional services		1,162,647		--
Research and development		9,204,542		2,958,311
Selling and marketing		6,402,524		5,376,533
General and administrative		5,840,620		4,896,438
Depreciation and amortization		10,668,052		5,719,155
Total operating expenses		60,463,032		36,265,532
Loss from operations		(27,139,580)		(19,052,466)
Interest income		1,567,550		5,947,293
Interest expense		(4,066,248)		(4,061,832)
Other expenses		(71,927)		(58,511)
Net loss before acquisition and non-cash compensation related charges		(29,710,205)		(17,225,516)
Amortization of goodwill and other acquired intangible assets		(7,059,161)		--
Non-cash compensation		(334,264)		(261,760)
Net loss		$(37,103,630)		$(17,487,276)
Net loss per basic and diluted share before acquisition and non-cash compensation related charges		$ (0.67)		$ (0.51)
Net loss per basic and diluted share		$ (0.84)		$ (0.51)
Weighted average common shares outstanding		44,231,926		34,101,455

iBasis, Inc.
Consolidated Statements of Operations
(Unaudited)
		Nine Months Ended September 30,
		2001		2000
Net revenue:
Data communications and telecommunications		$ 88,416,717		$ 40,546,097
Professional services		6,229,433		--
Total net revenue		94,646,150		40,546,097
Operating expenses:
Data communications and telecommunications		78,406,841		40,916,783
Professional services		2,916,865		--
Research and development		20,588,933		10,231,462
Selling and marketing		18,838,471		13,278,069
General and administrative		21,573,333		12,823,357
Depreciation and amortization		25,434,438		10,011,294
Total operating expenses		167,758,881		87,260,965
Loss from operations		(73,112,731)		(46,714,868)
Interest income		7,978,205		14,440,202
Interest expense		(11,915,292)		(8,504,811)
Other expenses		(479,027)		(121,625)
Net loss before acquisition, non-cash compensation and restructuring related charges		(77,528,845)		(40,901,102)
Write-off of in-process research and development costs		(24,431,466)		--
Amortization of goodwill and other acquired intangible assets		(16,517,681)		--
Non-cash compensation		(1,047,540)		(559,802)
Restructuring costs		(37,520,000)		--
Net loss applicable to common stockholders		$(157,045,532)		$(41,460,904)
Net loss per share before acquisition, non-cash compensation and restructuring related charges		$ (1.84)		$ (1.22)
Net loss per basic and diluted share		$ (3.74)		$ (1.24)
Weighted average common shares outstanding		42,031,840		33,416,437

iBasis, Inc.
Consolidated Balance Sheets
(Unaudited)
		September 30,		December 31,
		2001		2000
Assets
Cash, cash equivalents and marketable securities		$147,572,337		$300,327,398
Accounts receivable, net		26,457,348		17,343,294
Prepaid expenses and other current assets		10,344,827		5,883,560
Property and equipment, net		106,992,761		99,870,110
Due from PriceInteractive Incorporated		--		10,000,000
Goodwill and other intangible assets, net		68,430,390		--
Long term investment in non-marketable security		5,000,000		5,000,000
Deferred debt financing costs, net		3,580,630		4,356,708
Other assets		2,380,878		5,036,649
Total Assets		$370,759,171		$447,817,719
Liabilities and stockholders' equity
Accounts payable		$ 10,684,817		$ 9,080,407
Accrued expenses		25,318,879		14,855,026
Deferred revenue		481,192		--
Current portion of long term debt		32,389,532		26,105,842
Long term debt, net of current portion		181,890,514		190,880,257
Total liabilities		250,764,934		240,921,532
Stockholders' equity:
Common stock		45,226		34,203
Additional paid-in capital		369,660,278		298,572,842
Deferred stock-based compensation		(2,559,339)		(1,604,462)
Accumulated deficit		(247,151,928)		(90,106,396)
Total stockholders' equity		119,994,237		206,896,187
		$370,759,171		$447,817,719

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