Exhibit 99.1
iBasis Reports Selected Third Quarter 2006 Financial Results
Reporting of Full Financial Results Delayed Pending Restatement
Due to Stock Option Grants Investigation
BURLINGTON, Mass.--(BUSINESS WIRE)--Nov. 14, 2006--iBasis, Inc.
(NASDAQ: IBAS), the global VoIP company(TM), today announced selected
results for the third quarter ended September 30, 2006. As announced
on October 20, 2006, the Company had determined that it must restate
certain of its past financial statements as a result of conclusions
reached by a special independent committee of the iBasis Board of
Directors regarding the Company's historical stock option granting
practices. Consequently, today's announcement of the Company's third
quarter results includes selected financial results only. The Company
will report its full financial results for the quarter after a final
determination of the appropriate stock-based compensation expense for
the periods affected.
Revenue for the third quarter of 2006 was $133.5 million, compared
to $94.6 million for the third quarter of 2005. Gross profit for the
third quarter was $15.6 million, compared to $11.5 million in the
third quarter of 2005.
Highlights of the third quarter include:
-- Sequential growth in revenue of 5%, and 41% increase over Q3,
2005
-- Continued minutes growth to 2.9 billion, a 7% sequential
increase and a 47% increase over Q3, 2005
-- Seventh consecutive quarter of positive cash flow
-- Strong cash flow from operations
-- Record Trading revenue and gross profit
"In Q3 our Trading business continued to grow, but our Retail
business declined sequentially," said Ofer Gneezy, president and CEO
of iBasis. "The growth in Trading was strong enough to produce overall
growth in traffic volume and in revenue, but the loss of higher margin
Retail business reduced our overall gross profit for the quarter.
"We're pleased with record revenue and gross profit in our Trading
business, especially after the very strong growth we achieved in the
previous quarter. The gross margin of our Trading business remained
stable at 11.7% compared to 11.8% last quarter and ahead of 11.4% in
Q3 a year ago.
"Also during the quarter we added a significant number of new
Trading customers, reflecting the continuing demand for our high
quality international voice services. Consumer VoIP providers
continued to represent approximately 10% of our growing Trading
business.
"Our Retail business grew over the third quarter of last year but
not sequentially. We experienced a setback from ending the
relationship with one of our largest distributors due to delinquent
payments. We reserved approximately $1.3 million to cover any bad debt
amounts due from this distributor and are in litigation attempting to
collect amounts due to us.
"The revenue from the balance of our prepaid calling card business
continued to grow and as a result, the revenue of our Retail business
declined only slightly. Many of the cards in the rest of the portfolio
are less mature and therefore generating lower profitability at this
stage.
"As we mentioned last quarter, as a result of a new FCC regulation
we started accruing in the third quarter for contributions to the
Universal Service Fund. This increased our Retail costs by about 2% of
Retail revenue. We intend to pass this cost increase to consumers in
the future.
"We believe this set back is temporary. To get back on track, we
made personnel changes in our Retail team, and we are already building
new distributor relationships on the East Coast to re-launch existing
cards, as well as introduce new cards.
"Near the end of the quarter, we launched a card with Telemar, one
of the leading providers of communications services in Brazil
utilizing its well known mobile brand, Oi. We introduced the Oi card
at the Brazilian Day festival in New York City, and we are very
pleased with the early acceptance of this new brand.
"Subsequent to the end of the quarter we launched a significant
upgrade of our Pingo retail service, taking that offering global with
multi-language and multi-currency support, and the ability to process
international credit cards. While Pingo does not yet contribute
revenue or gross profit at a level sufficient to be reported
separately, it is growing and produces our highest margins.
"We remain excited by the tremendous growth opportunity in
international telecom in both our Trading and Retail businesses.
Third Quarter Results for Trading and Retail Businesses:
($ in millions) Trading Retail Total
- ------------------------ ------------- ------------- ---------------
Revenue $109.3 $24.2 $133.5
- ------------------------ ------------- ------------- ---------------
Gross Profit (A) $12.7 $2.9 $15.6
- ------------------------ ------------- ------------- ---------------
Gross Margin 11.7% 11.9% 11.7%
(A) Revenue less data communications and telecommunications costs
Operational Milestones
Minutes of use on The iBasis Network(TM) in the third quarter 2006
were 2.9 billion, a 47% increase over the 2.0 billion minutes carried
in the third quarter 2005, and a 7% increase over the 2.7 billion
minutes in the second quarter 2006. Average revenue per minute was 4.6
cents, compared to 4.7 cents in the previous quarter. Average cost per
minute was 4.1 cents, the same as in the previous quarter, and average
margin per minute was 0.54 cents for the third quarter compared to
0.61 cents for the previous quarter.
iBasis ended the third quarter with 512 Trading customers,
compared to 471 at the end of the second quarter 2006. New customers
announced during the quarter included SunRocket, a leading consumer
VoIP service provider, and Telecom Georgia, a leading service provider
of voice and data services in Georgia.
Subsequent to the end of the quarter, the Company was able to
negotiate an early termination of leased expansion space in its New
York Internet Central Office (ICO). The increasing density of
communications equipment has enabled iBasis to continue to expand its
network capacity in the facility without the need for this additional
floor space. As a result of our decision to terminate this lease, we
wrote-off $1.0 million of undepreciated lease-hold improvements in Q3.
In addition, we will take a charge of approximately $1.0 million in Q4
to cover future monthly payment obligations relating to the early
termination of this lease. By terminating this lease obligation we
will achieve future cash savings of approximately $1.2 million.
iBasis - KPN Global Carrier Services Merger
The Company intends to file the proxy required in order to solicit
shareholder approval and completion of the transaction between Dutch
carrier Royal KPN and iBasis, which was announced on June 21, 2006, as
soon as possible pending the finalization of our third quarter results
and restatement of prior period financial statements.
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.
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 and KPN remain in close communications. Significant
progress has been made during the quarter on integration and synergy
planning and obtaining regulatory approvals.
In the third quarter of 2006, we incurred approximately $1.2
million in expenses related to this transaction, primarily related to
investment banking, legal and accounting fees.
Guidance
The Company believes that in 2006, on a standalone basis, its
revenues will be in the range of $510 to $520 million. Planned
expenditures for 2006 include $10 to $11 million in capital asset
investments.
Nasdaq Notification
On November 13, 2006, the Company received a Staff Determination
letter from NASDAQ indicating that, due to its noncompliance with
NASDAQ's requirements for continued listing for failure to make on a
timely basis all required filings with the SEC, its common stock will
be delisted unless the Company requests a hearing in accordance with
NASDAQ rules. As previously announced, the Company was unable to file
its quarterly report on Form 10-Q for the quarter ended September 30,
2006 by the required filing date of November 9, 2006 pending
completion of its review of the additional non-cash stock-based
compensation charges and tax consequences of the Company's historical
stock option granting practices. The Company intends to request a
hearing before the NASDAQ Listing Qualifications Panel to review the
Staff Determination. Under NASDAQ rules, a request for a hearing stays
the delisting action pending the issuance of a written determination
by the Listing Qualification Panel.
Q3 Results Conference Call
iBasis will host a conference call to discuss the Company's
selected Q3 results, led by Ofer Gneezy, iBasis president & CEO on
November 14, 2006 at 11:00 a.m. ET. The public is invited to listen to
the simultaneous webcast by logging in through the iBasis investor
relations website at http://investor.ibasis.com.
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 and capital
expenditures, as well as its plan to request a hearing before the
NASDAQ Listing Qualifications Panel, 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, (vi) the Company's inability to meet the requirements of
the NASDAQ Stock Market for continued listing of the Company's shares;
and (vii) 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
The Company 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.
(1) Telegeography 2005 data compared with iBasis 2004 traffic
volume.
(2) ATLANTIC-ACM International Wholesale Carrier Report Card -
2002, 2003, 2004, & 2005.
CONTACT: iBasis, Inc.
Media
Chris Ward, 781-505-7557
cward@ibasis.net
or
Investors
Richard Tennant, 781-505-7409
ir@ibasis.net