PurchasePro officials expect to post profit by spring

David Strow

Tuesday, Feb. 12, 2002 | 11:14 a.m.

After a year of heavy losses, the chief executive of PurchasePro told shareholders Monday he expects to see the Las Vegas-based e-commerce company produce a cash flow profit within the next several months.

"We plan to be cash flow positive by springtime," Richard Clemmer said at PurchasePro's annual shareholder meeting. PurchasePro is currently burning cash at the rate of $5.5 million to $6 million per quarter.

Clemmer's bullish comments pushed PurchasePro's stock up 7 cents to 88 cents Monday, a gain of nearly 9 percent. However, PurchasePro gave back all of those gains this morning, as the stock traded down 7 cents at 81 cents.

PurchasePro's stock traded above $80 per share in early 2000, but the stock was badly battered when the Internet stock bubble burst later that year. The stock went into free-fall after the company reported a greater-than-expected loss for the first quarter of 2001, which widened after the company changed its methods for reporting revenue.

The restatement led to the resignation of then-CEO Charles Johnson Jr. and a subsequent flood of lawsuits from shareholders.

"We fully understand your concerns about the price of PurchasePro stock," Clemmer said. "While we are concerned as well, we are much more focused on achieving our primary objective of profitability. We, PurchasePro's management and employees, believe categorically we will succeed."

To meet this goal, Clemmer said the company has to face "a tradeoff between dilution for shareholders and raising capital to meet sales objectives." In December, the company raised $15 million through the sale of stock to a Chicago investment firm, and more fundraising will likely be necessary, PurchasePro officials said.

Over the nine months ended Sept. 30, 2001 -- the last period reported by the company -- PurchasePro posted revenues of $36.4 million, a 16 percent increase over the year-ago period. The company posted a whopping net loss over that same time period of $200.9 million, compared to a loss of $36.1 million in the year-ago period.

Much of the 2001 loss came in the third quarter, when PurchasePro reported a net loss of $106.4 million on revenues of $3.6 million. But when one-time, largely non-cash charges are excluded, the company's loss was $28.2 million. In the year-ago quarter the company lost $8.2 million on revenues of $17.3 million.

Compared to those results, quarter-over-quarter revenue growth and positive cash flow would be a considerable improvement. Clemmer vowed that projection could be believed.

"I have insisted that the data on which we base our forecasts be brutally scrutinized and those providing it be held accountable," Clemmer said.

PurchasePro has "pared its expenses to the bone," Clemmer said, reducing its quarterly cash burn rate from more than $30 million per quarter to $5.5 million to $6 million per quarter. Its employment has been cut from more than 600 to 130 today, he said.

Clemmer also announced that top executives at PurchasePro had taken 50 percent cuts in their cash pay, in exchange for PurchasePro stock. Clemmer had been making $500,000 per year, plus a guaranteed bonus of at least $200,000 per year.

"We have substantial portions of our net worth and future tied to PurchasePro," Clemmer said. "Everyone on the senior management team now owns stock, and our interests are aligned with yours (shareholders')."

As of Dec. 19, Clemmer owned 135,000 shares of PurchasePro stock, with an additional 750,000 shares in the form of stock options -- a 1.1 percent stake in the company. As a group, directors and shareholders held just under 950,000 shares of stock, plus an additional 955,000 options, for a total of 2.4 percent control of the company.