IBasis (IBAS)

Use of Non-GAAP Financial Measures

As a general matter, iBasis provides its financial results in accordance with accounting principles generally accepted in the United States (GAAP).  In addition, the Company uses non-GAAP financial measures in addition to and in conjunction with corresponding GAAP measures to help analyze the performance of its core business, in connection with the preparation of annual budgets, and in measuring performance for some forms of compensation. Providing non-GAAP financial measures is not an alternative to GAAP financial measures and may differ from the non-GAAP financial measures used by other companies, including iBasis’ competitors.  Non-GAAP financial measures reflect an additional way of viewing aspects of iBasis’ operations that, when viewed with the GAAP results and the reconciliations to corresponding GAAP financial measures, provide a more complete understanding of iBasis’ results of operations and the factors and trends affecting iBasis’ business. However, non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP.  In particular, iBasis presents adjusted EBITDA, which is a non-GAAP financial measure.  Adjusted EBITDA is calculated as earnings, adjusted to exclude certain expenses, including goodwill impairment, stock-based compensation, expenses associated with the review of iBasis stock option granting practices, foreign exchange gains and losses, tender offer related expenses, purchase accounting adjustments, certain non-recurring charges and gains, interest, taxes and depreciation and amortization.  Adjusted EBITDA % is calculated by dividing adjusted EBITDA by revenues.  iBasis believes the most directly comparable GAAP financial measure to adjusted EBITDA is net income (loss).

iBasis has not included in this Current Report on Form 8-K a reconciliation of the forward-looking non-GAAP financial measure adjusted EBITDA to the most directly comparable GAAP financial measure net income (loss) because, due to variability and difficulty in making accurate forecasts and projections or certain information not

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Use of Non-GAAP Financial Measures

In this press release, our financial results are provided both in accordance with accounting principles generally accepted in the United States (GAAP) and using certain non-GAAP financial measures which are not an alternative to GAAP and may be different from non-GAAP financial measures used by other companies. In particular, we provide (i) Adjusted EBITDA, and (ii) combined pro forma financial information which in each case results in a non-GAAP financial measure. These results are provided as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help indicate underlying trends in our business and are important in comparing current results with prior period results. Management also uses these non-GAAP financial measures to establish budgets and operational goals that are communicated internally and externally, and to manage our business and to evaluate our performance. We believe the most directly comparable GAAP financial measure to Adjusted EBITDA is net income (loss) and we have provided a reconciliation of GAAP net income (loss) to Non-GAAP Adjusted EBITDA and pro forma combined Adjusted EBITDA in this press release.