PurchasePro blows past estimates; shares climb

First Call consensus expected it to lose a penny a share in the quarter on sales of $33.6 million.

PurchasePro.com shares closed up $1.44 to $15.94 ahead of the earnings report before shooting up to $17.65 in after-hours trading. The company is an application service provider of e-commerce products for small- to medium-sized businesses.

The $33.6 million in sales marks a 1,160 percent surge from the year-ago quarter when it posted a loss of $6 million, or 11 cents a share, on sales of $2.7 million.

On a pro forma basis, it earned 10 cents a share.

PurchasePro shares lost more than 42 percent of their value last week after Barron's questioned the company's business model and valuation and Prudential Securities downgraded the stock from a "strong buy" rating to "accumulate."

Susan LaCerra, an analyst at Jefferies & Co., predicted the business-to-business services provider would earn a penny a share in the quarter on sales of $30 million.

"We're expecting a good quarter," she said ahead of the earnings report. "What's happened lately, to me, looks like a case of a lot of shorts running scared."

During a conference call with analysts, Chief Executive Officer Charles Johnson said he was "extremely proud of these results," noting the company managed to generate more than $10.3 million in positive cash flow in the quarter.

"We're just beginning to realize the potential of this business model," he said.

Johnson told analysts to expect sales of $42 million in its first quarter, more than 20 percent above most analysts' estimates. He said the company will post a profit of 9 cents a share in the first quarter, well above the 2 cents currently forecast by First Call.

Fiscal 2001 sales and earnings are expected to jump to $225 million and 59 cents a share, respectively, considerably higher than current estimates of $165 million and 37 cents a share.

"By all accounts, this was a great quarter for us," Chief Financial Officer James Clough said. "We continue to see strong demand for all of our marketplaces."

In the quarter, network access fees accounted for $10.2 million in sales, or roughly 30 percent of the company's total sales in the quarter. Licensing sales jumped 95 percent from the third quarter to more than $22 million, while advertising sales improved 72 percent sequentially to $1.1 million.

"We believe advertising sales will be an area of rapid growth as this market matures," Clough said.

In the fiscal year, PurchasePro posted a loss, excluding charges, of $12.6 million, or 20 cents a share, on sales of $65 million compared with a loss of $15.2 million, or 44 cents a share, on sales of $6 million in fiscal 1999.

Last quarter, it beat the Street when it posted a loss of $4.7 million, or 7 cents a share, on sales of $17.3 million.

The stock moved as high as $82 in March before collapsing to a low of $9.19 in May.

Eight of the 10 analysts tracking the stock rate it either a "buy" or "strong buy."