LAS VEGAS, Feb. 11, 2002 (PRIMEZONE) -- PurchasePro (Nasdaq:PPRO) today announced that a quorum of its shareholders were represented at the company's annual meeting this morning appointing Grant Thornton as the company's independent auditor and approving the nominations of Don Bell and Jim Schraith as members of the company's board of directors.
Richard L. Clemmer, chief executive officer, addressed the company's shareholders with the following remarks:
"Thank you for taking the time to attend our annual meeting for the year 2000. We appreciate you taking the time out of your busy schedules to visit with us and hope you will attend our annual meeting for the year 2001, which we anticipate scheduling in June of this year. I assure you, this will be the only year we will have two annual meetings in six months.
I'll take just a few moments here to discuss some issues we believe to be particularly important and that you, our retail shareholders, have raised over the past few months.
Let me first address what most concerns you -- our financial position. We are very confident that PurchasePro will be EBITDA positive by this spring and will generate cash by the fall of this year. Additionally, we are equally confident that PurchasePro will report consistent quarter-to-quarter revenue growth this year. Our level of confidence in achieving these objectives is very high. We are confident because we have placed severe, conservative parameters around all of our forecasting systems.
Our assessments of prospects and our forecast analyses have been improved significantly. We now have a much better perspective of our sales cycle and a sales force that is fully ramped up. We have a clear understanding of our markets and the process required to penetrate them. As CEO of this company, I have insisted that the data on which we base our forecasts be brutally scrutinized and those providing it be held accountable. I have complete confidence in what we have developed, as does our senior management team.
One of the primary reasons for our conviction that we will achieve these objectives is based on what we have accomplished. The ratable pricing model we developed over the last several months has become very attractive to our prospects. This is especially true in this economic environment. We have found that prospective customers are more likely to make an annual commitment for a license when they can pay on a monthly basis. And, of course, our "e-Source by the drink," or "per use," contract allows customers to, in effect, try before they buy.
This was the case with Honeywell, which ran six sourcing events before signing up for a full e-Source license. And, remember, a Honeywell division implemented PurchasePro's e-Procurement product last spring. Clearly, this new contract represents significant recognition by the parent company. By the way, one of our most recent customers, Dal-Tile, a billion dollar New York Stock Exchange company, signed a per use contract just a couple of weeks ago and has already run four sourcing events.
Since the first of this year, PurchasePro has signed five revenue-producing contracts for our strategic sourcing solution with several new customers. Until this morning, I would have said that Bayer was the most recent. However, this morning we announced a two-year license agreement with Fleetguard, a division of Cummins Inc., a New York Stock Exchange company with revenues of more than $5 billion. In fact, based on Fleetguard's due diligence, this agreement has the potential to be expanded across all divisions of Cummins Inc. In the aggregate, the companies that have signed contracts with PurchasePro this year have revenues of more than $60 billion.
With recurring revenues at a base of $2 million to $2.5 million, combined with the contracts we have signed just this year, as well as our expanding professional services revenues, we are already about 40 percent of the way to meeting our internal revenue objectives for this year.
It is also important for you to know that we fully understand your concerns about the price of PurchasePro's stock. While we are concerned as well, we are much more focused on achieving our primary objective of profitability. I'll make this very clear: We, PurchasePro management and employees, believe categorically that we will succeed.
Over the past four months we have shown very clearly that our turnaround strategy is working -- that the business foundation required to establish our financial position for profitability is being built. In addition, you should understand that professional or consulting fees are now typically associated with our contracts. A year ago, even six months ago, we were not capturing these fees. This is an important additional revenue stream that we expect will represent a double digit portion of our total revenues.
The fact of the matter is, since we initiated our turnaround strategy last June, we have signed 25 revenue-producing contracts. In just the fourth quarter of 2001 we announced revenue-producing contracts with Corporate Express, Avantrust, Best Western, Dover Downs Entertainment and GovernmentFirst, which has been renamed eCuity. And, to fully recap our contract action since we initiated the first phase of our turnaround strategy in June, we also signed ArvinMeritor, Unocal, an earlier GovernmentFirst contract for e-Procurement, Accor, Grainger, Arch Coal and seven PurchasePro Stratton Warren licenses. That's 25 revenue-producing contracts since June 2001, approximately three a month. From our perspective, that's real business based on the real value PurchasePro delivers.
Over the past six months, we've clearly outlined our phased turnaround strategy. We have reduced headcount to about 130 from more than 600 this time last year. We have made these cuts very strategically to protect our technology, protect our customer relationships and protect our infrastructure. This is evidenced by our recently announced upgrade to PurchasePro e-Source, version 7.5, developed entirely by internal personnel. This continues to protect the technology leadership we have established in this key area. And in a few weeks we will announce substantial enhancements in functionality to e-Procurement, again, also built internally.
We have pared our expenses to the bone, reducing our quarterly cash expense burn rate, that's our cash expense without the offset from revenue, to between $5.5 million and $6 million per quarter. I understand a year ago this rate was in excess of $30 million.
We acknowledged late last year that it takes six months or so for a sales force to ramp up; to exert sufficient pressure on the pipeline to generate sales. Most of our software sales professionals came on board late last spring or early last summer and we're beginning to see the results. They are producing sales like Honeywell, like Bayer, like Unocal and now Cummins Inc.
What more has occurred in our turnaround effort? Don Bell, chairman of Bell Microproducts and Jim Schraith of Quantum Technology Ventures have joined our board with former Kentucky Governor Martha Layne Collins, who incidentally also sits on the boards of Kodak and R.R. Donnelley, and Todd Bradley, chief operating officer of Palm. Next, Fusion Capital has made a $15 million equity commitment to PurchasePro. Also, Grant Thornton completed its due diligence and replaced Arthur Andersen as our independent auditor.
It is virtually impossible for me to believe that anyone in this room, or listening to the Webcast of this meeting, would think that any of these events would have occurred, or contracts been signed, without appropriate due diligence. Especially multi-billion dollar multinational corporations, which I can personally assure you are very thorough.
Our customers and other constituencies have confidence in PurchasePro's strategy and future. They have confidence in PurchasePro's products. They have confidence in PurchasePro's management and employees.
I have complete confidence in our ability to succeed. In fact, the level of my commitment and belief in our company is such that I have taken a 50 percent reduction in cash compensation in return for equity in PurchasePro. Other members of senior management are also taking reductions.
We, then, are in a position aligned with you, our shareholders. We have substantial portions of our net worth and future tied to PurchasePro. The PurchasePro turnaround effort is consuming and we are absolutely committed to its success, often costing many of us dearly in our personal lives.
Yes, 2001 was a terribly challenging year. But make no mistake about it, we believe in this company and our ability to execute the plan to become profitable. I reiterate that we expect to be EBITDA positive by spring and generate cash by the fall. We are generating revenue and will continue to do so, growing it every quarter. We are building a business for the long term.
Our customers support us heartily, because we provide them with real value. We are now visible on the screens of the financial community. Our products are well received by our prospects. After all, who wouldn't be reassured considering our customer list. Thank you for your continuing loyalty and support. The floor is now open to questions. In terms of order, please state your name prior to your question and I will take one question at a time per person."
About PurchasePro
PurchasePro(r), www.purchasepro.com, is a B2B e-commerce leader with the stated goal of providing software to enable enterprises of all sizes to gain universal access to the world's largest commerce network. The PurchasePro commerce network comprises more than 300,000 businesses, authorized to buy and sell, and powers hundreds of private-label marketplaces. PurchasePro provides the following B2B e-commerce solutions: e-Procurement for enterprise-wide procurement; e-Source for strategic sourcing, v-Distributor for online distributors; and e-MarketMaker for Internet market makers.
This news release may include forward-looking statements, which are subject to the "Safe Harbor" created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve certain risks and uncertainties that can cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements represent only the views of certain members of management and are based on limited information available to us now, which is subject to change. We have no current plan to update these statements. Actual results may differ substantially from what we say today and no one should assume at a later date that the forward-looking statements provided herein are still valid. They speak only as of today. For more information about these risks and uncertainties, see the SEC filings of PurchasePro.com, Inc., including the section titled "Factors That May Affect Results" in its 10-K filing for the period ended December 31, 2000, and its 10-Q for the quarter ended September 30, 2001, which are available from the company on request and on the Internet at the SEC's Website, www.sec.gov. Note: PurchasePro is a service mark of PurchasePro.com Inc. All other trademarks or registered trademarks are the property of their respective owners.