Monday October 22, 4:19 pm Eastern Time
Press Release
SOURCE: FreeMarkets
FreeMarkets Reports Record Third Quarter Results
Accelerates Path to Profitability
Company beats consensus estimates for revenues plus fees and earnings; pulls operational profitability forward to Q4 2001
PITTSBURGH--(BUSINESS WIRE)--Oct. 22, 2001-- FreeMarkets, Inc. (Nasdaq:FMKT - news), the leading global provider of e-sourcing software and service solutions, today reported record results for the third quarter ended September 30, 2001.

Revenues plus fees for the third quarter were $40.6 million, an increase of 53% over the same period a year earlier, and an increase of 8% over the second quarter of 2001. Revenues plus fees include fees earned from Visteon. Net loss for the third quarter, excluding non-cash stock-based expense and goodwill charges, was $1.6 million, or $0.04 cents per diluted share, beating the First Call estimate by $0.05 per share, and bettering the $0.17 per diluted share loss reported for the second quarter of 2001. Gross margins increased for the seventh consecutive quarter, rising to 55%, compared to 46% in the third quarter of 2000. The company ended the third quarter with approximately $90 million in cash, and consumed just over $100 thousand during the period. Market volumes grew to $4.2 billion, an increase of 44% over the same period a year earlier.

The company also announced that it expects to achieve operational profitability during the fourth quarter of 2001 - a full quarter ahead of previous guidance.

``We are pleased with the record results we posted for the third quarter,'' said FreeMarkets Executive Vice President and Chief Financial Officer Joan Hooper. ``The visibility provided by our business model, combined with our continued productivity improvements, and prudent cost controls allowed us to reduce our operating expenses and increase our margins, while growing revenues. As a result, we were able to exceed our earnings estimates, and accelerate our path to profitability to the fourth quarter of this year.''

``In a tough economic environment worsened by global crisis, FreeMarkets delivered solid results,'' said FreeMarkets Chairman and CEO Glen Meakem. ``Going forward, we will continue to focus on developing end-to-end software and service solutions that allow our customers to manage the entire enterprise sourcing process and enable us to strengthen our business.''

Delivering Savings and Customer ROI

FreeMarkets maintained its track record of delivering value to customers during the third quarter, helping them to identify savings of over $950 million or 19%. To date, FreeMarkets has identified more than $5.2 billion in savings for its customers around the globe and generated average returns on investments of approximately 22 to 1.

Creating Global Opportunities for Suppliers

Over 2,600 new suppliers bid on contracts through FreeMarkets during the third quarter. Approximately 16,400 suppliers from over 70 countries have actively bid through FreeMarkets since 1995.

Developing and Delivering Industry-Leading Solutions

FreeMarkets articulated its vision for a modular, end-to-end enterprise e-sourcing platform at its annual Analyst Day held in Pittsburgh during the quarter. Code-named Sierra Nevada, the offering will allow FreeMarkets' customers to address and manage the entire enterprise sourcing process, from sourcing data analysis through contract management. Development of several modules is underway, and the Company expects to begin Beta testing with a number of customers in coming months.

Financial Guidance

The Company reaffirms its previous guidance of approximately 5% sequential revenue and fee growth in the fourth quarter of 2001. This would result in fourth quarter revenues and fees of approximately $42.6 million and annual revenues and fees for 2001 of approximately $154 million, or 69% year-over-year growth. The Company remains comfortable with its preliminary view of 2002 revenues and fees of approximately $200 million, which represents 30% year-over-year growth. FreeMarkets has accelerated its operational profitability point to the fourth quarter of 2001, when it expects to earn approximately $0.02 per diluted share. Consistent with guidance previously provided, the Company's preliminary view of 2002 operational EPS is a profit of approximately $0.15 to $0.20 per diluted share. These EPS estimates exclude non-cash stock-based expense and goodwill charges.

About FreeMarkets

FreeMarkets is the leading global provider of e-sourcing software and service solutions, and operates the world's largest sourcing market. Through its unique combination of industry-leading, web-based software, in-depth supply market information, market operations and expert sourcing services, FreeMarkets has helped customers around the world source more than $25 billion in goods and services in more than 190 different supply verticals and identify savings of more than $5.2 billion. FreeMarkets can be found on the Web at www.freemarkets.com. FreeMarkets® and BidWare® are registered trademarks of FreeMarkets, Inc., and FullSource(TM) and QuickSource(TM) are pending trademarks of FreeMarkets, Inc.

Forward-Looking Statements

Statements in this press release that are not historical facts, including those statements that refer to FreeMarkets' plans, prospects, expectations, financial projections, strategies, intentions, and beliefs, are forward-looking statements. These forward-looking statements are based on information available to FreeMarkets today, and FreeMarkets assumes no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual results to differ materially from the forward-looking statements, including, without limitation, market acceptance of FreeMarkets' products and services, the competitive nature of the market for e-commerce products and services, FreeMarkets' ability to predict its revenues and earnings, FreeMarkets' inability to develop competitive new products and services on a timely basis, introduction of new products and services by competitors, declining or uncertain economic and industry conditions, FreeMarkets' ability to attract and retain personnel and other risk factors that are described in more detail in FreeMarkets' most recent Annual Report on Form 10-K/A, and its other filings with the Securities and Exchange Commission.