iBasis Reports Results for Second Quarter 2003
Company Achieves Positive Cash Flow from Operations and Reduces Debt by $6 Million
BURLINGTON, MASS. - August 6, 2003 - iBasis, Inc. (OTCBB: IBAS), the leader in Internet-based voice communications, today announced results for the second quarter ended June 30, 2003. Unless otherwise noted, all financial and other information in this release excludes discontinued operations, which have been reported separately.
Second quarter revenue was $39.1 million, compared to revenue of $41.9 million in the second quarter of 2002. Net loss from continuing operations for the second quarter 2003 was $5.5 million, or $0.12 per share, based on 44.7 million weighted average shares outstanding. This net loss compares to a second quarter 2002 net loss from continuing operations of $19.7 million, or $0.44 per share, based on 45.2 million weighted average shares outstanding.
Highlights of the second quarter include:
· Positive cash flow from operations;
· Quarterly reduction in cash of only $2.9 million;
· Operating expenses of $8.2 million in Q2 2003; consistent with Q1 and down 28% from $11.4 million (excluding bad debt expense) in Q2 2002;
· Reduction of debt by approximately $6.1 million through exchanges of $12.2 million of convertible bond debt for senior secured notes in the amount of $6.1 million
"We are pleased to have achieved positive cash flow from operations this quarter," said Ofer Gneezy, president and CEO of iBasis. "We also managed our working capital and operating expenses well and conserved cash during the quarter.
"The lengthy delay in implementing the restructuring of the China telecommunications industry, which was announced a year ago, was a significant factor in the weakness we experienced in our China business during the quarter. Now that it is finally in place, we believe the restructuring presents excellent new business opportunities for us in China.
"We continued to grow our global footprint, adding more than 10 countries during the quarter, and bringing the total number of points of presence on the iBasis Network to approximately 860. This incremental increase in our footprint, and our new international prepaid calling service position us well for the second half of 2003."
New International Prepaid Calling Card Service
At the end of the quarter iBasis launched an international prepaid calling card service for major calling card distributors. "We have been providing hosted prepaid billing services and wholesale international call completion to calling card service providers for some time," said Gneezy. "We are now delivering consumer services through distribution and participating more directly in the $4 billion U.S. retail prepaid market in which typically margins are higher and cash flow is stronger. The first product of this new service, the Bravo! card, reached retail outlets in major U.S. markets in July."
Key Indicators
Minutes of use on The iBasis NetworkTM in the second quarter rose to 854 million minutes, a 38% increase over the 620 million minutes carried in the second quarter 2002, and an 8% sequential increase over the 792 million minutes in the first quarter 2003. Average revenue per minute was 4.6 cents per minute in the second quarter 2003, compared to 5.3 cents per minute in the first quarter 2003.
Operational Milestones
In the second quarter 2003, overseas-originated calls accounted for 40% of wholesale revenue and 41% of wholesale traffic, compared to 50% of wholesale revenue and 43% of wholesale traffic in the first quarter 2003. Tier One carrier customers generated approximately 61% of revenue in the second quarter 2003, compared to 62% of revenue in the first quarter 2003.
During the quarter, iBasis continued to expand its customer base, with major service providers from every region connecting to The iBasis Network. Customers announced in the second quarter included Rostelecom, the national long distance carrier of Russia; Albacom, the leading competitive carrier in Italy; and 3U Telecom, a leading retail carrier operating in the U.S., Germany, France, Italy, Switzerland, Austria, and the Netherlands. iBasis finished the quarter with 209 customers.
Financial Highlights
Gross margin declined to 14.7% of revenue or $5.7 million during the second quarter 2003, compared with 16.5% or $6.9 million in the first quarter 2003, and 10.1% or $4.2 million in the second quarter of 2002.
The decrease in cash during the quarter was $2.9 million, consisting of $0.4 million of cash generated from operating activities offset primarily by $1.5 million in principal repayments on capital leases, and $1.6 million of capital expenditures. The company ended the second quarter with $21.2 million in cash.
Debt Reduction
During the second quarter, iBasis retired $12.2 million of the company's 5.75% Convertible Subordinated Notes in exchange for a new senior secured debt instrument at 50% of the face value of the retired notes and warrants to purchase shares of iBasis common stock. These transactions resulted in a gain of $3.7 million that is included in results from continuing operations in Q2 2003, in accordance with recent changes in accounting rules.
Since early in Q4 2001, the company has reduced its debt by more than $137 million through repurchases of convertible notes and vendor lease debt and through note exchanges. The outstanding face amount on the company's 5.75% Convertible Subordinated Notes is $38.2 million, down from the original face amount of $150 million. In addition the company has $25 million in senior secured debt.
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 August 6, 2003, and supersedes all previous guidance.
The company is maintaining previous guidance. The company believes it will achieve positive cash flow and net income in mid-2004.
+++++++++++ MAJOR VOIP +++++++++++++++++++++++++++++++
ITXC Reports Second Quarter Results
August 5, 2003 — Princeton, New Jersey — ITXC Corp.® (NASDAQ: ITXC) reported revenues of $84.2 million for the second quarter of 2003, an increase of 27.6% from the same quarter of 2002 and a sequential increase of 3.1% from the first quarter in 2003.
The Company’s net loss for the second quarter of 2003 was $11.9 million. This compared to a net loss for the first quarter of 2003 of $17.7 million and a net loss for the second quarter of 2002 of $5.8 million.
The Company’s net loss per share was $0.28 for the second quarter of 2003, as compared to a net loss per share of $0.41 for the first quarter of 2003 and a $0.12 net loss per share in the second quarter of 2002. The weighted average shares outstanding for the second quarter of 2003 were 42.9 million as compared with 42.6 million for the first quarter of 2003 and 46.1 million for the second quarter of 2002.
The Company reported revenues minus data communications and telecommunications expenses and minus network operations expenses for the second quarter of 2003 of $4.8 million, as compared to $6.6 million in the first quarter of 2003, and as compared to $7.8 million in the second quarter of 2002.
Selling, General & Administrative expenses for the Company during the second quarter include $2.1 million related to lump sum payments to investment banking and executive recruiting firms for previously announced engagements, legal expense in connection with litigation, and severance for positions eliminated during the quarter.
During the second quarter and in the beginning of the third quarter, the Company reduced headcount by approximately 10%. The reductions were possible because of the network simplification and new technology deployed during the quarter as well as the elimination of some unprofitable customers and affiliates. The Company anticipates recording a charge of approximately $350,000 in the third quarter related to that portion of the headcount reductions that took place in the third quarter and a subsequent quarterly savings of approximately $750,000 related to the reductions of the second and third quarter.
The Company ended the quarter with over $60.8 million of cash, cash equivalents and marketable securities and only $1.1 million of long term debt, related to capital leases.
During the quarter the Company purchased no shares under its buyback authorizations.
The Company previously announced that it engaged the investment banking firm of Morgan Stanley & Co., Incorporated as its financial advisor. Since that announcement, several companies have submitted proposals and/or expressions of interest. The Company is currently in discussions about possible strategic transactions. It is by no means a certainty that any such transaction will actually occur in either the short or long term and the Company is prepared to continue with its stand-alone business plan.
Other Recent News
• Minutes of use grew in the second quarter of 2003 to 999 million, up from 778 million minutes in the second quarter a year ago and 884 million minutes in the first quarter of 2003. Revenue per minute decreased from 9.2 cents in the first quarter to 8.4 cents in the second quarter of 2003.
• ITXC announced the opening of a sales office in Moscow and agreements with Russian carriers including Rostelcom, BSH, and BCL.
• ITXC and SMART, the largest mobile carrier in the Philippines announced a bilateral traffic agreement. ITXC estimates that it has approximately a 13% share of all international traffic to that country.
• Traffic at ITXC’s new SuperPoP in Germany continued to show strong growth. In only our second quarter of operation, we had 10 carriers connected and generated more than 32 million minutes of traffic.
• ITXC Traffic from India is growing although revenue and margins from traffic out of India has declined due to price erosion in that market.
• ITXC is seeing increased deployment of Voice over IP in the networks of large multinational carriers and is able to serve this market at wholesale through direct IP connections. This results in lower capital and operating costs for both ITXC and the carriers and is an advantage which ITXC’s nonIP wholesale competitors cannot match.
• Since inception ITXC has delivered over 8 billion minutes of voice service to carrier customers around the world.
Chairman Evslin’s Comments
“Although we more than replaced the revenue lost when we turned down service to Interactive Marketing Technologies, Inc. (“IMT”) last quarter, I am disappointed we did not replace the margin from that customer. We have turned away high-margin traffic which would require us to take unacceptable credit risks, although apparently some carriers are extending credit and accepting this traffic. We have begun offering premium services which provide very high quality at a higher price to some customers. Initial customer interest is good but this has not yet had a material effect on our results.
“Our new technology has allowed us to reduce expense substantially. We have become even more automated than we were. In addition, we are automating customer transactions which formerly had a high processing cost and eliminating some customer and affiliate relationships which do not justify the expense of maintaining them.
“I believe that this is the time for consolidation in our industry as it is in many others. Even though we have achieved organic growth in revenue every quarter that we have been a public company, it may well turn out that the best road to becoming one of the largest and most profitable carriers of the future is through consolidation. We are fortunate in having ample cash to pursue consolidation carefully and seek the best opportunities while we also continue to grow through our own efforts.”
About ITXC:
ITXC Corp. is one of the world's leading carriers based on minutes of international traffic carried. As a carriers' carrier, ITXC serves all major carriers in the US; many incumbent carriers worldwide including China Telecom, PLDT, Telkom South Africa, Telecom Colombia, Telenor, Telia, and VSNL; and emerging and competitive carriers including Intelig in Brazil, Vietel in Vietnam and Data Access in India. ITXC also serves a growing number of mobile carriers including China Mobile, one of the world's largest mobile carriers.
ITXC is the global market share leader in VoIP international calling with approximately 20% of the market, according to TeleGeography 2003. ITXC was also the Fastest Growing Technology Company in North America according to the 2002 Deloitte & Touche Technology Fast 500 ranking. |
