iBasis Reports Results For Third Quarter 2002

Record Minutes, Gross Margin Growth and Reduction in Operating Expenses

Drive EBITDA and EPS Improvements On Lower Revenues

BURLINGTON, Mass. - October 24, 2002 - iBasis, Inc. (NASDAQ: IBAS), today announced results for the third quarter ended September 30, 2002. As required by Generally Accepted Accounting Principles, all financial information related to the iBasis Speech Solutions business, which the company sold on July 12, 2002, is classified separately in the financial statements as discontinued operations for all periods presented.

Third quarter revenue from continuing operations was $38.4 million, an increase of 48% compared to third quarter 2001 revenue from continuing operations of $26.0 million.

Net loss from continuing operations for the third quarter 2002, excluding non-recurring items and other charges, was $14.0 million or a net loss of $0.31 per share on 45.8 million weighted average shares outstanding. Comparable results from continuing operations for the third quarter 2001, exclusive of non-recurring items and other charges, were a net loss of $29.5 million, or a net loss of $0.67 per share based on 44.2 million weighted average shares outstanding.

Including non-recurring items and other charges, the third quarter 2002 net loss from operations was $11.7 million, or a net loss of $0.26 per share based on 45.8 million weighted average shares outstanding. Comparable results for the third quarter 2001, inclusive of non-recurring items and other charges were a net loss of $37.1 million, or a net loss of $0.84 per share, based on 44.2 million weighted average shares outstanding. Non-recurring items and other charges include gains on the early retirement of debt, restructuring charges, non-cash stock-based compensation, gain on disposal of assets, and the net loss from discontinued operations.

"We are very encouraged by our ability to achieve substantial growth in gross margin and improvement in EBITDA and EPS during the third quarter, despite lower revenue than last quarter," said Ofer Gneezy, president and CEO of iBasis. "By reducing our operating expenses and fixed costs we were able to offset the decline in revenue that resulted from our aggressive management of credit risk and the decline in average revenue per minute. Our ability to take advantage of the current IP bandwidth glut to reduce circuit costs is another strong example of the fundamental advantage iBasis has over traditional telecom carriers. It is one of the strengths of the internet telephony business model.

"Not unlike the third quarter last year, we experienced some softness in traffic in the middle of the third quarter 2002. However, we finished the quarter with strong upward momentum and consecutive weekends of record volume, including our first 10 million-minute day and our first 20 million-minute weekend. Subsequent to the close of the quarter we achieved our first 11 million-minute day and carried our 4 billion^th minute of VoIP traffic."

Highlights of the business in Q3 2002 compared to Q2 2002 include:

· Increased gross margin dollars by 16%

· Increased gross margin to 12.8% of revenue compared to 10.1% in Q2 2002

· Reduced total operating expense, excluding bad debt expense, by 15% (including bad debt expense operating expenses were reduced by 46%)

· Improved EBITDA loss to $5.4 million and EPS loss to $0.26 per share

Key Indicators

Minutes of use in the third quarter were 670 million minutes, an increase of 103% from 330 million minutes carried in the third quarter of 2001, and 8% over the 620 million minutes in the second quarter of 2002. Average revenue per minute (ARPM) in the third quarter 2002 declined to 5.7 cents per minute, compared to 6.8 cents per minute in the second quarter of 2002.

The decline in ARPM was due in large part to unfavorable mix, as well as to declining ARPM in a few specific destinations. In addition, while the company achieved significant uplift in India traffic, it was not enough to improve the mix sufficiently to offset the decline in ARPM. However, the decline in ARPM was more than offset by a greater decline in fixed costs and termination costs, thereby enabling the company to achieve increased gross margin.

During the quarter, the company increased its network footprint and capacity in step with demand by adding 57 Points of Presence (PoPs) to The iBasis NetworkTM, ending the quarter with 712 PoPs and 38,827 total overseas lines in 92 countries.

Operational Highlights

iBasis continued its strong relationships with Tier One carrier customers, who generated approximately 73% of revenue in the third quarter 2002, up from 71% of revenue in Q2 2002. Overseas-originated calls accounted for 41% of revenue in the third quarter 2002, compared to 45% of revenue in Q2 2002.

The company effectively managed credit risk during the quarter, particularly in regard to its relationship with Worldcom. iBasis was able to maintain a high volume of traffic from Worldcom while minimizing its exposure by timely collection of outstanding receivables.

During the quarter the company announced the deployment of our switchless network architecture and the launch of our ConnectPoint Global AccessTM product. The new network technology has already had a positive impact on call completion rates and quality, particularly on calls that originate from smaller iBasis points of presence called Internet Branch Offices rather than from our major carrier-grade facilities, or Internet Central Offices. The new architecture takes advantage of iBasis' patent pending Assured Quality Routing^® and PathEngineTM technology to make route selection based on real-time quality monitoring data. By eliminating costly switches and increasing network capacity, the new architecture enables iBasis to continue to expand the network footprint at a lower capital expenditure level.

The patent-pending ConnectPoint Global Access product gives providers of enhanced services such as audio conferencing and pre-paid calling cards a cost-effective alternative to traditional PSTN backhaul using local phone numbers and The iBasis NetworkTM. It has been in field trials and in commercial use with customers for several months.

Also during the quarter, iBasis was recognized by the Deloitte & Touche Fast 500 program as the fastest growing technology company in New England and the eighth-fastest growing technology company in North America based on revenue growth from 1997 through 2001.

Presentation of Financial Data

On July 12, 2002, 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. iBasis is required to account for the Speech Solutions business as a discontinued operation beginning with the second quarter 2002 and for all prior periods.

Financial Highlights

Third quarter revenue from continuing operations was $38.4 million, a decrease of 8.4% from $41.9 million in Q2, 2002.

Gross margin increased 16% to $4.9 million or 12.8% of revenue during the third quarter, compared with $4.2 million or 10.1% of revenue in the second quarter of 2002.

EBITDA loss was $5.4 million in the third quarter of 2002 compared to EBITDA loss of $14.9 million in the second quarter of 2002 and $17.4 million in the third quarter of 2001.

During the quarter the Company received $17 million in payment from Convergys Corporation for its purchase of the iBasis Speech Solutions business.

Also during the quarter, the company extinguished $63.8 million in existing capital lease debt and related future interest obligations and other fees with its primary equipment vendor in exchange for $28.5 million in cash. The transaction resulted in savings of $35.3 million, or 55% of its expected cash outflow associated with the vendor debt.

Total decrease in cash during the quarter was $26.1 million, including the aforementioned one-time $28.5 million payment for reduction in capital lease obligations and the $17 million cash proceeds from the sale of the Speech Solutions business. Excluding these non-recurring items, the third quarter's decrease in cash was $14.6 million, which included capital expenditures of $0.6 million, principal payments on capital leases and other long-term debt of $1.8 million, $1.0 million for debt repurchase, and cash used in operating activities of $10.5 million. The company ended the third quarter with $32.2 million in cash.

Cost Reductions

The company reduced its operating expenses, inclusive of bad debt expense, to $10.3 million, down 46% from $19.1 million in Q2 2002. Excluding bad debt expense, the company reduced operation expenses to $9.7 million, down 15% from $11.4 million in Q2. The company began realizing the financial benefits of the 18% reduction in force that took place at the end of the second quarter 2002. The company had 212 employees at the end of Q3 2002.

Debt Repurchase

During Q3 2002, the company repurchased an additional $3.5 million face amount of its 5.75% Convertible Subordinated Notes due in 2005 on the open market for cash and expenses of $1.1 million resulting in a $2.4 million non-recurring gain on the early retirement of debt. Since beginning debt repurchases in Q4 2001, the company has repurchased $61.5 million face amount of its Notes. The remaining face amount on these Notes due in March 2005 is $88.5 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 October 24, 2002, and supersedes all previous guidance.

Reflecting progress towards profitability in Q3 2002 despite lower revenues, iBasis is reaffirming previous guidance on profitability milestones even as it lowers revenue expectations for 2002. 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. iBasis believes that it has sufficient cash to sustain growth to EBITDA profitability and positive cash flow from operations. The company expects revenue from continuing operations of $160 to $170 million for 2002.

About iBasis

Founded in 1996, iBasis (NASDAQ: IBAS) is a leading provider of wholesale international telecommunications services to large carriers and other service providers worldwide. Named by service providers as the #1 international wholesale carrier in Atlantic-ACM's 2002 International Wholesale Carrier Report Card, iBasis is a preferred provider of 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 90 on-net countries and is the world's largest international Cisco Powered NetworkTM for Internet Telephony. Based on its revenue growth from 1997 through 2001, iBasis was named the #8 fastest-growing technology company in North America and the #1 fastest-growing technology company in New England in the Technology Fast 500 national program sponsored by Deloitte & Touche. 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' most recent Forms 10-K and 10-Q, and the company's other SEC filings. We have no current intention to update any forward-looking statements.

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iBasis, Inc.

Condensed Consolidated Balance Sheets

		September 30,			December 31,
		2002			2001
Assets:
Cash and cash equivalents ($7.7 million as of September 30, 2002 and $8.9 million as of December 31, 2001, restricted as to use)		$	32,171,288		$	118,690,494
Accounts receivable, net		22,434,118			24,449,173
Prepaid expenses and other current assets		6,795,437			7,292,483
Assets held for sale - discontinued operations		-			84,253,779
Property and equipment, net		38,166,060			84,279,071
Deferred debt financing costs, net		1,538,371			2,859,814
Long term investment in non-marketable security		5,000,000			5,000,000
Other assets		2,252,485			2,000,266
		$	108,357,759		$	328,825,080
Liabilities and Stockholders' (Deficit) Equity:
Accounts payable		$	9,292,519		$	10,659,138
Accrued expenses		21,477,968			28,847,080
Liabilities - discontinued operations		-			4,949,313
Long term debt, current portion		7,457,668			26,309,611
Long term debt, net of current portion		93,061,818			171,343,316
Total liabilities		131,289,973			242,108,458
Stockholders' (deficit) equity:
Common stock		45,785			45,271
Additional paid-in capital		369,253,703			369,692,193
Deferred compensation		(561,313		)	(2,225,074		)
Accumulated deficit		(391,670,389		)	(280,795,768		)
Total stockholders' (deficit) equity		(22,932,214		)	86,716,622
		$	108,357,759		$	328,825,080

iBasis, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

		Three Months Ended September 30,
		2002				2001
Net revenue		$	38,358,442			$	26,022,997
Cost and operating expenses:
Data communications and telecommunications		33,442,350				25,167,848
Research and development		4,372,799				7,816,901
Selling and marketing		2,280,133				5,302,305
General and administrative		3,648,205				5,173,434
Depreciation and amortization		6,897,090				9,434,472
Total cost and operating expenses		50,640,577				52,894,960
Loss from operations		(12,282,135			)	(26,871,963		)
Interest income		167,610				1,507,761
Interest expense		(1,792,973			)	(4,016,045		)
Other expenses, net		(101,279			)	(71,927		)
Net loss from continuing operations before non-recurring items and other charges		(14,008,777			)	(29,452,174)
Non-cash stock-based compensation		(149,021			)	(334,265)
Gain on sale of messaging business		135,196				-
Restructuring and other non-recurring costs		393,143				-
Net loss from discontinued operations		(531,664			)	(7,317,193		)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		(14,161,123			)	(37,103,632		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		2,435,478				-
Net loss applicable to common stockholders		$	(11,725,645		)	$	(37,103,632	)
Basic and diluted net loss per share:
Net loss from continuing operations before non-recurring items and other charges		$		(0.31	)	$	(0.67	)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		$ (0.31			)	$ (0.84		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		0.05				-
Net loss applicable to common stockholders		$	(0.26		)	$	(0.84	)
Basic and diluted weighted average common shares outstanding		45,781,276				44,231,926

iBasis, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

		Nine Months Ended September 30,
		2002			2001
Net revenue		$	122,007,438		$	78,470,044
Cost and operating expenses:
Data communications and telecommunications		106,728,428			74,116,335
Research and development		13,888,456			17,638,578
Selling and marketing		9,144,281			16,268,899
General and administrative		20,986,997			19,649,455
Depreciation and amortization		26,124,128			22,919,574
Total cost and operating expenses		176,872,290			150,592,841
Loss from operations		(54,864,852		)	(72,122,797		)
Interest income		858,440			7,748,486
Interest expense		(9,322,721		)	(11,769,849		)
Other expenses, net		(284,839		)	(479,027		)
Net loss from continuing operations before non-recurring items and other charges		(63,613,972		)	(76,623,187		)
Non-cash stock-based compensation		(817,552		)	(1,047,534		)
Loss on sale of messaging business		(2,362,969		)	-
Restructuring and other non-recurring costs		(3,968,554		)	(37,520,000		)
Net loss from discontinued operations		(65,901,600		)	(41,854,811		)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		(136,664,647		)	(157,045,532		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		25,790,029			-
Net loss applicable to common stockholders		$	(110,874,618	)	$	(157,045,532	)
Basic and diluted net loss per share:
Net loss from continuing operations before non-recurring items and other charges		$	(1.39	)	$	(1.82	)
Net loss before extraordinary gain on repurchase of Convertible Subordinated Notes		$ (3.00		)	$ (3.74		)
Extraordinary gain on repurchase of Convertible Subordinated Notes		0.57			-
Net loss applicable to common stockholders		$	(2.43	)	$	(3.74	)
Basic and diluted weighted average common shares outstanding		45,635,987			42,031,840

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