iBasis Reports Results For Second Quarter 2002

Company Achieves Record Traffic, Reduces Operating Expenses and Cash Utilization

BURLINGTON, MA - July 25, 2002 - iBasis, Inc. (Nasdaq: IBAS), today announced results for the second quarter ended June 30, 2002. On July 12, 2002 iBasis announced the sale of its Speech Solutions business. As required by Generally Accepted Accounting Principles all financial information related to that business is classified separately in the financial statements as discontinued operations for all periods presented.

Revenue from continuing operations for the second quarter was $41.9 million, a 50.2% increase over second quarter 2001 revenue of $27.9 million. For the second quarter 2002 net loss from continuing operations including bad debt expense of $7.7 million but excluding non-recurring items and other charges was $27.6 million, or a net loss of $0.61 per share based on 45.2 million weighted average shares outstanding. Comparable results for the second quarter 2001, exclusive of non-recurring items and other charges, were a net loss of $21.0 million, or a net loss of $0.48 per share based on 44.0 million weighted average shares outstanding.

Including non-recurring items and other charges, the net loss was $81.2 million, or a net loss of $1.80 per share based on 45.2 million weighted average shares outstanding. Comparable results for the second quarter 2001, inclusive of non-recurring items and other charges were a net loss of $66.8 million, or a net loss of $1.52 per share, based on 44.0 million weighted average shares outstanding. Non-recurring items and other charges included gains on the early retirement of debt, restructuring charges, non-cash stock-based compensation, loss on the sale of the messaging business, and the net loss on discontinued operations.

"The telecommunications industry is in the midst of a very difficult period when even some of the world's largest carriers are failing, and we have chosen to turn away potentially lucrative but increasingly high-risk customers and to increase our bad debt reserves," said Ofer Gneezy, president and CEO of iBasis. "In these turbulent times we have become increasingly focused on our VoIP business, which has continued to achieve traffic, revenue and margin growth.

"The sale of the Speech Solutions business allows us to concentrate our resources exclusively on the VoIP business and to replace a cash-consuming business with a cash influx of $17 million, which we received at the close of the sale subsequent to quarter-end. As the VoIP business continues to scale, and we gain efficiencies from automation projects, we have been able to reduce our workforce to 215 employees, which we believe is the appropriate level to support continued growth and achieve EBITDA profitability. We are now leaner, completely focused on our VoIP business, and better positioned to execute our plan and achieve our financial goals."

Second quarter highlights of the continuing business include:

· Increased VoIP revenue 8% compared to Q1 2002;

· Increased VoIP gross margin dollars 12% compared to Q1 2002;

· Reduced cash used in operating activities to $10.3 million, its lowest in two years; and

· Reduced cash capital expense to $1.4 million, a reduction of 27% compared to Q1 2002.

Key Indicators

Minutes of use in the second quarter increased to 613 million minutes from 313 million minutes carried in the second quarter of 2001, and increased 11% over the 551 million minutes in the first quarter of 2002. Average revenue per minute in the second quarter 2002 was 6.8 cents per minute, compared to 7.1 cents per minute in the first quarter of 2002.

During the quarter, the company increased its network capacity in step with demand by adding Points of Presence (PoPs) to The iBasis NetworkTM, ending the quarter with 655 PoPs and 35,455 total overseas lines.

Operational Highlights

In the second quarter, iBasis continued to strengthen its relationships with its large base of Tier One carrier customers, who generated more than 71% of the revenue and 75% of the voice traffic for the company's VoIP business compared to 62% of revenue and 63% of voice traffic in Q1 2002.

iBasis also continued to benefit from the high 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 2002, overseas-originated calls remained constant compared to first quarter 2002, accounting for 45% of revenue and 35% of traffic.

Although India's international long distance telecommunications market officially opened to competition on April 1, 2002, the anticipated business surge was delayed pending the government's issuance of security clearances for the Indian carriers' new international gateways. Nevertheless, iBasis made significant progress working with important prospective customers in India during the quarter, and this week began exchanging traffic with Data Access, India's second-largest Internet Service Provider, as soon as that carrier's clearance was approved. iBasis continues to believe that the business opportunity in India is very large and that the company is well positioned to capture a significant share of this market.

iBasis announced a number of new customers during the quarter, including Romtelecom, the PTT of Romania; Tiscali France, the second largest ISP in France; and Orbitel, the leading competitive long distance carrier in Colombia.

Presentation of Financial Data

On July 12, 2002, subsequent to the end of the second quarter, iBasis closed the sale of its Speech Solutions business. The sale was accounted for as a discontinued operation in accordance with Statement of Financial Accounting Standards Board, SFAS No. 144, Accounting for the Impairment of Long-Lived Assets. As the sale was pending at the end of the second quarter, iBasis was required to account for the Speech Solutions business as a discontinued operation in the second quarter 2002 and for all prior periods.

Financial Highlights

Gross margins in the company's VoIP business increased 12% to $4.2 million or 10.1% of revenue during the second quarter, compared with $3.8 million or 9.7% of revenue in the first quarter of 2002.

Inclusive of a $7.7 million charge to bad debt expense, the company recorded an EBITDA loss of $14.9 million in the second quarter of 2002 compared to EBITDA losses of $8.5 million and $12.4 million in the first quarter of 2002 and second quarter of 2001, respectively.

Excluding $7.5 million of cash expended for debt repurchases, the decrease in cash during the quarter was $19.4 million. The second quarter's decrease in cash included capital expenditures of $1.4 million, principal payments on capital leases and other long-term debt of $5.5 million, and cash used in operating activities of $10.3 million. The company ended the quarter with $58.3 million in cash, not including the $17 million cash proceeds from the sale of the Speech Solutions business.

Cost Reductions

In addition to divesting its non-core businesses, the company reduced its operating expenses substantially. Excluding bad debt expense, the company reduced its operating expenses from Q1 to Q2 2002 by 15% to $11.4 million. iBasis further reduced its operating expenses by implementing a workforce reduction of approximately 18% on June 28, 2002. The company will begin to realize the financial benefits of the reduction in force in the third quarter of 2002. The company now has 215 employees. In addition, the company improved efficiency by consolidating traffic from its Miami ICO into the New York ICO and closing its facility in Miami.

Restructuring and other Charges

The sale of the Speech Solutions business resulted in a $61.5 million loss from discontinued operations for the second quarter 2002. In addition, the company recorded restructuring charges and other costs of $4.4 million related to a reduction in force and the closing of the Miami ICO, both of which occurred in June, 2002.

Debt Repurchase

During Q2 2002, the company repurchased an additional $20.7 million Face Amount of its Convertible Subordinated Notes on the open market for cash and expenses of $7.8 million resulting in a $12.9 million non-recurring gain on the early retirement of debt. Since beginning debt repurchases in Q4 2001, the company has repurchased $58.0 million Face Amount of its Notes. The remaining face amount on these Notes is $92.0 million, down from its original $150 million.

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 25, 2002, and supersedes all previous guidance.

Subsequent to the sale of its Speech Solutions business iBasis is providing new guidance. iBasis believes that it will achieve positive EBITDA in the first quarter of 2003 and achieve positive cash flow from operations in the second quarter of 2003. With more than $58 million in cash, cash equivalents and marketable securities as of June 30, 2002, and the receipt of $17 million in cash from the sale of the Speech Solutions business in July 2002, iBasis believes that it has sufficient cash for growth through to EBITDA profitability and positive cash flow from operations. The company expects revenue in the range of $180 - $200 million for 2002, excluding all revenues derived from the Speech Solutions business.

About iBasis

Founded in 1996, iBasis (Nasdaq: IBAS) iBasis is one of the 20 largest carriers of international voice traffic in the world. A leading driver of the telecommunications network of the future, the company commands 13% share of all international VoIP traffic¹. iBasis was named the #1 international wholesale carrier in Atlantic-ACM's 2002 International Wholesale Carrier Report Card. iBasis provides international voice services for many of the largest carriers in the world, including AT&T, Cable & Wireless, China Mobile, China Unicom, Concert, Sprint, Telefonica, Telenor, Telstra, and WorldCom. The company's global VoIP infrastructure, The iBasis Network, spans more than 85 on-net countries and is the world's largest international Cisco Powered NetworkTM for Internet Telephony. The company can be reached at its worldwide headquarters in Burlington, Massachusetts, USA at 781-505-7500 or on the Internet at www.ibasis.com.

Assured Quality Routing and iBasis are registered marks, The iBasis Network, Internet Central Office, Internet Branch Office, and AQR 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 services and the timing and amount of revenue generated by these services; (ii) fluctuations in the market for and pricing of these services; (iii) potential inability of the company to maintain its NASDAQ listing; and (iv) the other considerations described as "Risk Factors" in iBasis' Annual Report on Form 10-K for its fiscal year ended December 31, 2001, and the company's other SEC filings. We have no current intention to update any forward-looking statements.

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- Tables to Follow -

iBasis, Inc.

Condensed Consolidated Balance Sheets

		June 30,			December 31,
		2002			2001
Assets
Cash, cash equivalents and marketable securities ($8.1 million as of June 30, 2002 and $8.9 million as of December 31, 2001, restricted as to use)		$	58,321,268		$	118,690,494
Accounts receivable, net		27,232,337			24,449,173
Prepaid expenses and other current assets		6,638,362			7,292,483
Assets held for sale - discontinued operations		22,494,998			84,253,779
Property and equipment, net		64,744,989			84,279,071
Deferred debt financing costs, net		1,762,295			2,859,814
Long term investment in non-marketable security		5,000,000			5,000,000
Other assets		2,041,362			2,000,266
		$	188,235,611		$	328,825,080
Liabilities and Stockholders' Equity
Accounts payable		$	12,822,235		$	10,659,138
Accrued expenses		28,176,852			28,847,080
Liabilities - discontinued operations		3,994,998			4,949,313
Long term debt, current portion		33,819,923			26,309,611
Long term debt, net of current portion		120,844,361			171,343,316
Total liabilities		199,658,369			242,108,458
Stockholders' (deficit) equity:
Common stock		45,626			45,271
Additional paid-in capital		369,186,694			369,692,193
Deferred compensation		(710,334		)	(2,225,074		)
Accumulated deficit		(379,944,744		)	(280,795,768		)
Total stockholders' (deficit) equity		(11,422,758		)	86,716,622
		$	188,235,611		$	328,825,080

iBasis, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

		Three Months Ended June 30,
		2002				2001
Net revenue		$	41,922,786			$	27,900,017
Cost and operating expenses:
Data communications and telecommunications		37,698,117				25,767,191
Research and development		4,039,962				4,775,939
Selling and marketing		3,275,471				5,306,313
General and administrative		11,804,658				4,437,463
Depreciation and amortization		9,319,064				6,798,615
Total cost and operating expenses		66,137,272				47,085,521
Loss from operations		(24,214,486			)	(19,185,504		)
Interest income		330,259				2,286,821
Interest expense		(3,626,724			)	(3,886,472		)
Other expenses, net		(90,450			)	(208,926		)
Net loss from continuing operations before non-recurring items and other charges		(27,601,401			)	(20,994,081)
Non-cash stock-based compensation		(334,267			)	(516,309)
Loss on sale of messaging business		(317,625			)	-
Restructuring and other non-recurring costs		(4,361,697			)	(37,520,000)
Net loss from discontinued operations		(61,531,424			)	(7,764,821		)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		(94,146,414			)	(66,795,211		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		12,960,120				-
Net loss applicable to common stockholders		$	(81,186,294		)	$	(66,795,211	)
Basic and diluted net loss per share:
Net loss from continuing operations before non-recurring items and other charges		$		(0.61	)	$	(0.48	)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		$ (2.08			)	$ (1.52		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		$ 0.28				-
Net loss applicable to common stockholders		$	(1.80		)	$	(1.52	)
Basic and diluted weighted average common shares outstanding		45,225,198				43,973,685

iBasis, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

		Six Months Ended June 30,
		2002			2001
Net revenue		$	83,648,996		$	52,447,047
Cost and operating expenses:
Data communications and telecommunications		73,286,078			48,948,487
Research and development		9,515,657			9,821,677
Selling and marketing		6,864,148			10,966,594
General and administrative		17,338,792			14,476,021
Depreciation and amortization		19,227,038			13,485,012
Total cost and operating expenses		126,231,713			97,697,791
Loss from operations		(42,582,717		)	(45,250,744		)
Interest income		690,830			6,240,725
Interest expense		(7,529,748		)	(7,753,804		)
Other expenses, net		(183,560		)	(407,100		)
Net loss from continuing operations before non-recurring items and other charges		(49,605,195		)	(47,170,923		)
Non-cash stock-based compensation		(668,531		)	(713,269		)
Loss on sale of messaging business		(2,498,165		)	-
Restructuring and other non-recurring costs		(4,361,697		)	(37,520,000		)
Net loss from discontinued operations		(65,369,936		)	(34,537,618		)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		(122,503,524		)	(119,941,810		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		23,354,548			-
Net loss applicable to common stockholders		$	(99,148,976	)	$	(119,941,810	)
Basic and diluted net loss per share:
Net loss from continuing operations before non-recurring items and other charges		$	(1.10	)	$	(1.15	)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		$ (2.71		)	$ (2.93		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		$ 0.52			-
Net loss applicable to common stockholders		$	(2.19	)	$	(2.93	)
Basic and diluted weighted average common shares outstanding		45,203,182			40,908,899

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