iBasis Achieves Record First Quarter 2001 Revenue and Minutes
-April 26, 2001-
Strong Demand for VoIP Services, Increased Overseas Origination, Network Utilization Produce $2.86 Million in Positive Gross Margin on Revenues of $27.05 Million
iBasis, Inc. today announced results for the first quarter ended March 31, 2001. These results reflect contributions from the company's acquisition of speech applications service provider PriceInteractive. On an actual basis, with the PriceInteractive transaction closing on Feb. 27, 2001, first quarter revenue was $27.05 million, a 178.2% increase over first quarter 2000 revenue of $9.73 million. Net loss before acquisition-related and non-cash compensation charges for the first quarter 2001, which includes depreciation and amortization expense of $6.94 million as well as a reserve for bad debt of $5.2 million, was $26.15 million, or $0.69 per share based on 37.87 million weighted average shares outstanding. This compares to a first quarter 2000 net loss before non-cash compensation charges of $10.51 million, or $0.33 per share based on 32.21 million weighted average shares outstanding. Including acquisition-related charges of $26.80 million, the company recorded a first quarter 2001 net loss of $53.15 million, or a loss of $1.40 per share based on 37.87 million weighted average shares outstanding. Acquisition-related charges include a write-off of acquired in-process research and development costs of $24.43 million and the amortization of acquired intangible assets of $2.36 million.
On a pro forma basis, assuming the company had completed the acquisition of PriceInteractive as of January 1, 2001, iBasis recorded approximately $30.60 million in revenue for the quarter, 20% of which came from enhanced services. Pro forma loss before acquisition-related and non-cash compensation charges, but including a reserve for bad debt of $5.3 million, was $27.39 million, or a loss before acquisition-related and non-cash compensation charges of $0.63 per share based on 43.68 million weighted average shares outstanding. Inclusive of combined $31.53 million in acquisition-related charges, pro forma net loss was $59.24 million, or a pro forma net loss of $1.36 per share based on 43.68 million weighted average shares outstanding.
"In the first quarter, we continued to demonstrate the superiority of the iBasis Network, our carrier-grade voice over IP infrastructure," said Ofer Gneezy, president and CEO of iBasis. "Contributing to our quarterly performance was increasing demand from tier one carriers for our core international VoIP services, as well as healthy growth in overseas origination. We also completed the acquisition of PriceInteractive, whose speech services accounted for 20% of pro forma first quarter revenue. These new revenues from our enhanced services business played an important role in improving our total gross margin and our margin as a percentage of revenue."
Cost Reduction Measures
"Our business continues to grow rapidly," said Mr. Gneezy. "We believe that being a service provider with relatively light infrastructure, we are less susceptible to weakness in the economy. Nonetheless, we are instituting new cost containment measures across the company, including a 15% workforce reduction. We are also sharpening our focus on near-term revenue opportunities and improving the operational efficiency of our business. We are confident that with this streamlining of our operations and our continuing strong cash position, we are fully-funded and on-track to reach profitability by this time next year."
Key Indicators
Minutes of use in the first quarter rose to 290.5 million minutes, a 241% increase over the 85.2 million minutes carried by The iBasis Network in Q1 2000. Pro forma total minutes of use were 309.3 million minutes for the first quarter.
The company's total overseas lines were 15,700 at the end of the first quarter of 2001, a 313.2% increase from 3,800 lines at the end of the first quarter of 2000. With approximately 82% of iBasis traffic originating in the US and terminating overseas, the company believes that the number of overseas lines remains an indicator of the total capacity of its global network.
The total number of Points of Presence (PoP's) in the iBasis Network rose to 540 compared with 112 at the end of the first quarter 2000, an increase of 382%. Sequentially, PoP's increased 26.7% compared with the 426 PoP's in service at the end of the fourth quarter 2000.
Pro forma average revenue per minute for the quarter rose to 8.9 cents, with actual revenue per minute declining slightly from 8.84 cents per minute in Q4 2000 to 8.52 cents in Q1 2001.
Operational Milestones
During the first quarter 2001, the company continued to increase the percentage of traffic it routes for the world's largest carriers (known in the industry as "tier one" carriers). Tier one carriers generated more than 39% of revenue and 37% of all traffic routed over The iBasis Network in the first quarter compared with 30.7% of revenue and 31.6% of all traffic in the fourth quarter 2000. iBasis 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 first quarter 2001, overseas-originated calls accounted for more than 23.5% of revenue and 18% of iBasis traffic, up from 17% of revenue and 11.7% of iBasis traffic in the fourth quarter 2000. The company continued to expand its geographic reach during the first quarter, ending the quarter with 65 countries on The iBasis Network, up from 26 countries at the end of the first quarter 2000. iBasis finished the quarter with more than 110 carrier customers, up from 72 at the end of the first quarter of 2000.
iBasis experienced its first four million minute day in the first quarter, a new peak volume benchmark for The iBasis Network. Underscoring the increasing scale of iBasis' global VoIP service, the company opened a new Network Operations Center (NOC) in Hong Kong in the first quarter. A mirror site of the first iBasis NOC, located at the company's US headquarters near Boston, the Hong Kong NOC will help iBasis further scale its services and increase overseas origination, which will help improve utilization on The iBasis Network. The Hong Kong NOC will also help iBasis to more efficiently manage its global network operations and reduce its network engineering and staffing costs by transferring more of its traffic management and monitoring tasks to less costly daylight hour shifts. This increased operational efficiency will help enable iBasis to continue to scale its global VoIP capacity and deliver faster, more effective support services to its customers, without regard to time zone, culture or language.
iBasis also made progress in its efforts to establish itself as a leader in speech-enabled services. Late in the first quarter, the company completed its acquisition of PriceInteractive, a leading speech application service provider whose customers include AT&T, ExxonMobil, Gannett, H&R Block, Home Shopping Network, Morgan Stanley, Sabre Group, WorldCom, Sprint, Verizon, and Western Union, for approximately $46 million in cash and approximately 10.23 million shares of iBasis stock.
PriceInteractive products and services give enterprises and service providers the ability to speech-enable business-critical, customer-facing solutions, such as e-commerce, call-center, employee self-service, product and sales information, customer care and other interactive applications. The acquisition of PriceInteractive is an important step in iBasis' strategy to enhance the capabilities of its global VoIP infrastructure with new, speech-enabled services that combine the power of the Internet with the convenience, simplicity and ubiquity of the phone.
Financial Milestones
Gross margins increased to 10.6% of revenue during the quarter, up from 4.8% in the fourth quarter 2000. Pro forma gross margins were approximately $4.59 million, or 15% of pro forma revenue of $30.6 million. The company recorded an EBITDA loss of $19.14 million in the first quarter of 2001. The EBITDA loss includes a charge for bad debt expense of $5.2 million to build reserves that the company believes will be sufficient to cover potential credit risk from non-Tier One carrier customers. The bankruptcy filings of a number of second and third tier international carriers during the quarter were important factors in the company's decision to establish these reserves. We believe that credit risk will be mitigated as we continue to grow our Tier One revenue base as evidenced by the 27% increase in revenue from Tier One carriers experienced during this past quarter. |
