Exhibit 99.1
iBasis Reports Record Revenue, Gross Profit,
and Traffic Volume in Second Quarter 2006; Company Expands EBITDA
Margin, Achieves Sixth Consecutive Quarter of Positive Cash Flow
BURLINGTON, Mass.--(BUSINESS WIRE)--July 26, 2006--iBasis, Inc.
(NASDAQ: IBAS), the global VoIP company(TM), today announced results
for the second quarter ended June 30, 2006.
Revenue for the second quarter of 2006 was $127.3 million,
compared to $94.6 million for the second quarter of 2005. Net income
for the second quarter of 2006 was $0.3 million, or $0.01 per share,
compared to net loss for the second quarter of 2005 of $0.8 million,
or $(0.03) per share. Net income for Q2 2006 includes $1.5 million in
current transaction costs related to our pending merger with KPN
Global Carrier Services. Excluding these expenses, net income for the
second quarter of 2006 was $1.9 million, or $0.06 per share.
iBasis achieved $4.0 million in Adjusted EBITDA for the second
quarter of 2006, compared to Adjusted EBITDA of $2.8 million in the
second quarter of 2005. Adjusted EBITDA is a non-GAAP measurement
presented to provide further information about the Company's operating
trends, as explained below.
Highlights of the second quarter include:
-- Adjusted EBITDA growth of 26% over Q1 2006;
-- Sequential growth in revenue of 15% and in gross profit of
14%;
-- Sequential growth in minutes of 15% to 2.7 billion;
-- Sixth consecutive quarter of positive cash flow;
-- Return to the Nasdaq exchange; and
-- Agreement to merge KPN Global Carrier Services into iBasis.
"This was another very strong quarter across the board," said Ofer
Gneezy, president and CEO of iBasis. "We achieved solid growth in
revenue and gross profit over the first quarter of 2006 in both our
Trading and our Retail businesses. We also achieved a significant
sequential increase in minutes carried on The iBasis Network(TM), a
result of continuing strong demand for our international VoIP
services.
"In our Trading business, we added a large number of new
customers, including consumer VoIP providers, which accounted for 10%
of our Trading revenue in the quarter. We ended the second quarter
with more than 40 consumer VoIP provider customers.
"In our Retail business, we continued to introduce new cards in
the market and effectively manage the product lifecycle, resulting in
sequential growth in revenue and gross profit, as well as slight gross
margin expansion.
"In addition to our strong results we had other good news this
quarter. We celebrated our return to the Nasdaq exchange, which
followed a successful reverse stock split. The listing better
positions us to attract additional large institutional investors and
expand the field of major industry analysts that cover iBasis.
"Our most exciting news was our agreement to merge KPN Global
Carrier Services into iBasis, a development that has the potential to
be an industry-changing event. The combination will bring together an
established incumbent carrier with a very strong position in the
European mobile market and a fast-growing VoIP leader. The result will
make iBasis a Tier One player in the international voice market and
one of the top carriers of international traffic worldwide, with
combined annualized traffic approaching 20 billion minutes. We're very
excited, and customers we have spoken to about the merger are
enthusiastic about the enhanced capabilities and offerings of the
expanded iBasis. We expect the transaction to be completed before the
end of this year.
"We're very pleased with our Q2 results, and we are confident that
iBasis is on the right track to achieve its goals."
Second Quarter Results for Trading and Retail Businesses:
($ in millions) Trading Retail Total
- ----------------------------------------------------------------------
Revenue $102.5 $24.8 $127.3
- ----------------------------------------------------------------------
Gross Profit (a) $12.1 $4.2 $16.3
- ----------------------------------------------------------------------
Gross Margin 11.8% 17.1% 12.8%
(a) Net revenue less data communications and telecommunications costs
Operational Milestones
Minutes of use on The iBasis Network(TM) in the second quarter
2006 were 2.7 billion, a 50% increase over the 1.8 billion minutes
carried in the second quarter 2005, and a 15% increase over the 2.3
billion minutes in the first quarter 2006. Average revenue per minute
of 4.7 cents, average cost per minute of 4.1 cents, and average margin
per minute of 0.61 cents for the second quarter were all unchanged
compared to the previous quarter.
iBasis ended the second quarter with 471 Trading customers,
compared to 410 at the end of the first quarter 2006. New customers
announced during the quarter included Yahoo!, a leading global
Internet company, and Digilinea, a leading VoIP service and
infrastructure provider to the US Hispanic and Latin America markets.
iBasis - KPN Global Carrier Services Merger
On June 21, 2006 iBasis and Royal KPN N.V., the national carrier
of the Netherlands, announced a definitive agreement to merge KPN's
international wholesale voice business into iBasis. This combination
will establish iBasis as one of the largest international voice
carriers in the world, with combined 2005 revenues exceeding $1.1
billion and more than 15 billion combined minutes in 2005. iBasis will
acquire KPN subsidiary KPN Global Carrier Services and receive $55
million in cash from KPN in return for the issuance of approximately
40 million shares of iBasis common stock, which represent a 51 percent
ownership interest in iBasis on a diluted basis.
iBasis shareholders of record immediately prior to closing will
receive a cash dividend of $113 million immediately following closing.
In connection with payment of the dividend, outstanding common stock
options will be adjusted to preserve their value. The transaction,
which is subject to customary closing conditions, including regulatory
approvals and the approval of iBasis shareholders, is expected to be
completed before the end of 2006.
In the second quarter of 2006, we incurred approximately $1.5
million in direct expenses related to this transaction, primarily
related to investment banking, legal and accounting fees. We currently
expect additional transaction costs of approximately $0.8 million to
$1.2 million, most of which we anticipate will be incurred in the
third quarter of 2006.
FCC Ruling on Prepaid Calling Cards
On June 30, 2006, the Federal Communications Commission announced
the results of a Notice of Proposed Rulemaking, which would require
providers of prepaid calling cards that utilize Internet Protocol to
contribute to the Universal Service Fund (USF) and pay other
regulatory fees. In connection with its Retail business, the Company
plans to absorb or pass along such fees, which based on current
traffic mix equal approximately 1.8% of revenue. The FCC ruling would
also impose the fees on a retroactive basis, which the Company plans
to contest. As of June 30, the Company estimates that the maximum
potential retroactive charge would be approximately $2.6 million. If
not stayed, the order could become effective during the fourth
quarter.
Guidance
The Company believes that in 2006 on a standalone basis it will:
-- achieve revenue in the range of $500 to $520 million; and
-- achieve non-GAAP EPS (which excludes merger-related expenses
and potential retroactive USF and other regulatory fees) of
$0.25 to $0.30.
Planned expenditures for 2006 include $10 to $12 million in
capital asset investments.
Q2 Results Conference Call
iBasis will host a conference call to discuss the Company's Q2
results, led by Ofer Gneezy, iBasis president & CEO, on Wednesday,
July 26, 2006 at 11:00 a.m. EDT. The public is invited to listen to
the simultaneous webcast by logging in through the iBasis investor
relations website at http://investor.ibasis.com.
Reconciliation of GAAP Net Income to Adjusted EBITDA
In accordance with the requirements of Securities and Exchange
Commission Regulation G, iBasis is presenting the most directly
comparable U.S. Generally Accepted Accounting Principles (GAAP)
financial measure and reconciling the Non-GAAP financial measure to
the comparable GAAP measure.
Three Months Ended June 30,
-----------------------------
(In thousands)
-----------------------------
2006 2005
- -------------------------------------------------------- -------------
Net income (loss) $341 $(767)
Add/(less):
Stock-based compensation and services 815 ---
Depreciation and amortization 1,822 1,726
Interest expense (income), net (355) 862
Foreign exchange (gain) loss (148) 347
Merger related expenses 1,542 ---
Debt conversion premiums --- 661
Income taxes 11 ---
--------------- -------------
Adjusted EBITDA $4,028 $2,829
=============== =============
About iBasis
Founded in 1996, iBasis (NASDAQ: IBAS) is a leading wholesale
carrier of international long distance telephone calls and a provider
of retail prepaid calling services, including the Pingo(R) web-based
offering (www.pingo.com) and disposable calling cards that are sold
through major distributors and available at retail stores throughout
the U.S. iBasis customers include many of the largest
telecommunications carriers, including AT&T, Verizon, China Mobile,
China Unicom, IDT, Qwest, Skype, Telecom Italia, and Telefonica.
iBasis carried 7.8 billion minutes of international voice over IP
(VoIP) traffic in 2005, and is one of the largest carriers of
international voice traffic in the world(1). For four consecutive
years service providers have named iBasis the best international
wholesale carrier in ATLANTIC-ACM's annual International Wholesale
Carrier Report Card(2). 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.
iBasis and Pingo are registered marks, the global VoIP company and
The iBasis Network are trademarks of iBasis, Inc. All other trademarks
are the property of their respective owners.
Except for historical information, all of the expectations, plans
and assumptions contained in the foregoing press release, including
those relating to the Company's anticipated revenue, earnings per
share and capital expenditures, constitute forward-looking statements
under Section 21E of the Securities Exchange Act of 1934 and involve
risks and uncertainties. Statements regarding the proposed transaction
between the Company and Royal KPN, including the expected timetable
for completing the transaction, the expected dividend payment, future
financial and operating results, benefits and synergies of the
transaction, future opportunities for the combined company and
products and any other statements regarding the parties' future
expectations, beliefs, goals or prospects, also constitute
forward-looking statements. Important factors that could cause actual
results to differ materially from such forward-looking statements
include, but are not limited to, (i) the Company's ability to execute
its business plan; (ii) the extent of adoption of the Company's
services and the timing and amount of revenue and gross profit
generated by these services; (iii) fluctuations in the market for and
pricing of these services; (iv) the success of the Company's plans to
contest the FCC ruling on prepaid calling cards; (v) the ability of
the Company and Royal KPN to consummate the proposed transaction due
to regulatory restrictions, the failure to receive shareholder
approval, the ability to successfully integrate their operations and
employees, the ability to realize anticipated synergies, the emergence
of new competitive initiatives resulting from rapid technological
advances or changes in pricing in the market, business conditions and
volatility and uncertainty in the markets that the Company and Royal
KPN serve, and (vi) the other factors described in the Company's
Quarterly Report on Form 10-Q for its most recently completed fiscal
quarter and Annual Report on Form 10-K for its most recently completed
fiscal year and Royal KPN's Annual Report on Form 20-F for its most
recently completed fiscal year all of which are available at
www.sec.gov. Such forward-looking statements are only as of the date
they are made, and we have no current intention to update any
forward-looking statements.
This communication may be deemed to be solicitation material in
respect of the proposed transaction between iBasis and Royal KPN. In
connection with the proposed transaction, iBasis intends to file
relevant materials with the SEC, including a proxy statement on
Schedule 14A. SHAREHOLDERS OF IBASIS ARE URGED TO READ ALL RELEVANT
DOCUMENTS FILED WITH THE SEC, INCLUDING IBASIS'S PROXY STATEMENT,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and security holders will be able to obtain the
documents free of charge at the SEC's web site, http://www.sec.gov,
and iBasis's shareholders will receive information at an appropriate
time on how to obtain transaction-related documents for free from
iBasis. Such documents are not currently available.
Participants in Solicitation
Royal KPN and its directors and executive officers, and iBasis and
its directors and executive officers, may be deemed to be participants
in the solicitation of proxies from the holders of iBasis Common Stock
in respect of the proposed transaction. Information about the
directors and executive officers of Royal KPN is set forth in the
Annual Report on Form 20-F for the year ended 2005, which was filed
with the SEC on March 14, 2006. Information about the directors and
executive officers of iBasis is set forth in iBasis's proxy statement
for its 2006 Annual Meeting of Shareholders, which was filed with the
SEC on March 23, 2006. Investors may obtain additional information
regarding the interest of such participants by reading the proxy
statement regarding the transaction when it becomes available.
Use of Non-GAAP Financial Measures
Adjusted EBITDA Financial Disclosure
iBasis defines Adjusted EBITDA as earnings before stock-based
compensation, foreign exchange gains and losses, debt conversion
premiums, merger related expenses, interest, taxes, and depreciation
and amortization. Investors are cautioned that the Adjusted EBITDA
information contained in this press release is not a financial measure
under United States Generally Accepted Accounting Principles (GAAP).
In addition, it should not be construed as an alternative to any other
measures of performance determined in accordance with GAAP, or as an
indicator of the Company's operating performance, liquidity or cash
flows generated by operating, investing and financing activities, as
there may be significant factors or trends that it fails to address.
Adjusted EBITDA financial information is presented because iBasis
believes that it is helpful to some investors as a measure of the
Company's operating trends. iBasis cautions investors that Non-GAAP
financial information such as Adjusted EBITDA, by its nature, departs
from traditional accounting conventions; accordingly, its use can make
it difficult to compare iBasis' results with the results from other
reporting periods and with the results of other companies.
Other Non-GAAP Financial Data
The Company also provides other financial data in addition to
providing financial results in accordance with GAAP. This data is not
in accordance with, or an alternative to GAAP, and may be different
from Non-GAAP financial data used by other companies. This Non-GAAP
financial data includes average revenue per minute (ARPM), average
cost per minute (ACPM) and average margin per minute (AMPM), which the
Company believes provides useful information, to both its management
and investors about the Company's current performance.
Adjusted revenue for KPN reflects adjustments to market rates on
intra-company revenue transactions with Royal KPN N.V. Investors are
cautioned that the adjusted revenue information contained in this
press release is not a financial measure under GAAP. In addition, it
should not be construed as an alternative to any other measures of
performance determined in accordance with GAAP. This adjusted revenue
measure is presented because iBasis believes that it is helpful to
some investors as a measure of the combined company's potential
operating trends. iBasis cautions investors that Non-GAAP financial
information by its nature, departs from traditional accounting
conventions; accordingly, its use can make it difficult to compare
this information with information provided by other companies.
(1)Telegeography 2005 data compared with iBasis 2004 traffic
volume.
(2)ATLANTIC-ACM International Wholesale Carrier Report Card -
2002, 2003, 2004, & 2005.
iBasis, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2006 2005
------------- -------------
(Unaudited)
Assets
Cash, cash equivalents and short-term
investments $ 49,420 $ 44,414
Accounts receivable, net 56,193 47,641
Prepaid expenses and other current assets 3,173 2,676
Property and equipment, net 13,624 11,754
Other assets 325 323
------------- -------------
Total assets $ 122,735 $106,808
============= =============
Liabilities and Shareholders' Equity
Accounts payable $ 38,621 $ 27,796
Accrued expenses 26,971 24,479
Deferred revenue 11,738 9,517
Current portion of long term debt 1,661 1,598
Long term debt, net of current portion 1,370 2,216
Other long term liabilities 922 916
------------- -------------
Total liabilities 81,283 66,522
Shareholders' equity 41,452 40,286
------------- -------------
Total liabilities and shareholders'
equity $ 122,735 $106,808
============= =============
iBasis, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended
June 30,
2006 2005
(Unaudited)
Net revenue $ 127,324 $ 94,581
Cost and operating expenses:
Data communications and
telecommunications (excluding
depreciation and amortization) 110,981 81,874
Research and development (excluding
stock-based compensation of $134 and
$ 0) 3,405 3,126
Selling and marketing (excluding
stock-based compensation of $109 and
$ 0) 4,151 2,866
General and administrative (excluding
stock-based compensation and services
of $572 and $ 0) 4,716 3,746
Stock-based compensation and services 815 ---
Depreciation and amortization 1,822 1,726
------------ -------------
Total costs and operating expenses 125,890 93,338
------------ -------------
Income from operations 1,434 1,243
Interest income (expense), net 355 ( 862)
Other expenses, net ( 43) ( 140)
Foreign exchange (loss) gain 148 ( 347)
Merger related expenses (1,542) ---
Debt conversion premium --- ( 661)
------------ -------------
Income (loss) before taxes 352 ( 767)
Foreign income tax expense 11 ---
------------ -------------
Net income (loss) $ 341 $ ( 767)
============ =============
Net income per share:
Basic $ 0.01 $ ( 0.03)
Diluted $ 0.01 $ ( 0.03)
Weighted average common shares outstanding:
Basic 33,133 21,998
Diluted 34,948 21,998
iBasis, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Six Months Ended June 30,
2006 2005
(Unaudited)
Net revenue $ 238,103 $ 183,253
Cost and operating expenses:
Data communications and
telecommunications (excluding
depreciation and amortization) 207,443 158,175
Research and development (excluding
stock-based compensation of $221 and
$ 0) 6,558 6,258
Selling and marketing (excluding
stock-based compensation of $186 and
$ 0) 7,664 5,593
General and administrative (excluding
stock-based compensation and services
of $680 and $ 0) 9,129 7,059
Stock-based compensation and services 1,087 ---
Depreciation and amortization 3,388 3,446
------------ ------------
Total costs and operating expenses 235,269 180,531
------------ ------------
Income from operations 2,834 2,722
Interest income (expense), net 673 ( 1,898)
Other expenses, net ( 90) ( 160)
Foreign exchange (loss) gain 131 ( 580)
Merger related expenses (1,542) ---
Debt conversion premium --- ( 661)
------------ ------------
Income before taxes 2,006 ( 577)
Foreign income tax expense 22 ---
------------ ------------
Net income $ 1,984 $ ( 577)
============ ============
Net income per share:
Basic $ 0.06 $ ( 0.03)
Diluted $ 0.06 $ ( 0.03)
Weighted average common shares outstanding:
Basic 33,195 21,829
Diluted 34,642 21,829
CONTACT: iBasis, Inc.
Media:
Chris Ward, 781-505-7557
cward@ibasis.net
or
Investors:
Richard Tennant, 781-505-7409
ir@ibasis.net