PNI Digital Media Inc.
TSX VENTURE : PN
OTC Bulletin Board : PNDMF

PNI Digital Media Inc.

December 14, 2010 16:01 ET

PNI Digital Media Announces Fiscal 2010 Year-End and Fourth Quarter Financial Results

GAAP Net Income Before Taxes of $2.0 Million, $25.4 Million in Revenue, Adjusted EBITDA of $7.4 Million

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 14, 2010) - PNI Digital Media (TSX VENTURE:PN)(OTCBB:PNDMF) ("PNI" or the "Company"), the leading innovator in digital media solutions for retailers, announced financial results for Fiscal 2010 year-end and fourth quarter financial results. Revenue for the year was $25.4 million, representing an increase of 4% over the same period last year on a reported basis. If foreign currency exchange rates had remained constant, revenue for the year would have been approximately $27.9 million, an increase of 14% over the same period last year.

Fiscal 2010 Full Year Financial and Operational Highlights:

  • GAAP net income before income taxes of $2.0 million, compared to a GAAP loss before income taxes of $1.6 million in Fiscal 2009
  • Revenue of $25.4 million, compared to $24.4 million in Fiscal 2009
  • Non-GAAP adjusted EBITDA1 of $7.4 million, an increase of 20% compared to Fiscal 2009
  • Transactional revenue of $19.3 million, an increase of 6% compared to Fiscal 2009
  • Overall expenses fell 11% to $23.4 million for the year
  • Cash expenses fell 3% for the year to $17.8 million
  • Record adjusted EBITDA margin of 29% for the year
  • Transacted a record 17.1 million orders over the PNI Digital Media Platform, a 17% increase compared to Fiscal 2009
  • Extended the PNI Digital Media Platform to enable retailers to connect with their consumers on iPhone® and Google Android-powered® mobile phones
  • Launched the PNI Express Pick Up Service, enabling consumers to create and order a photo book, photo calendar or personalized greeting card online for pick up in store in about an hour
  • The Company won multiple awards for performance and innovation, including the annual PROFIT 100 ranking in Canada and the Deloitte Fast 500 ranking of North American technology companies

"Our goal for this year was to deliver on profitability and we did with $2.0 million in income from operations," said Kyle Hall, Chief Executive Officer of PNI Digital Media. "Our ability to generate cash and now profits has been proven, even as we continue to invest in software development for our future. Our strategy to leverage the PNI Digital Media Platform is succeeding as showcased by our record EBITDA this year. We are now heavily focused on growing our top line revenue through the invigoration of our current customers' and by broadening our offering into new categories."

Fiscal 2010 Fourth Quarter Financial and Operational Highlights:

  • GAAP net income before income taxes of $0.9 million
  • Revenue for the quarter of $6.7 million vs. $6.8 million in Fiscal 2009
  • Non-GAAP adjusted EBITDA of $2.1 million, vs. $2.1 million in Fiscal 2009
  • Overall expenses of $5.4 million, a decrease of 18% compared to the same period last year
  • Cash expenses of $4.5 million, a decrease of 6% compared to the same period last year
  • Orders transacted via the PNI Digital Media Platform increased 14% to 4.0 million for the quarter

Conference Call

The Company will host a conference call on Tuesday, December 14th at 4:30pm ET (1:30pm PT) to discuss the Company's Fiscal 2010 year-end and fourth quarter financial results. To join the call, please dial (888) 300-8196 (US/Canada) or (647) 427-3426 (International) and quote conference ID no. 23392363. Please call 10 minutes prior to the scheduled start time. PNI Digital Media will also provide a live webcast and slide presentation, available on the Company's website at http://www.pnimedia.com/webcast. The presentation will be available for download for dial-in callers.

Consolidated Balance Sheets

      September 30,       September 30,  
      2010       2009  
                 
Assets                
                 
Current assets                
  Cash and cash equivalents   $  4,690,355     $  4,237,284  
  Accounts receivable     5,302,865       4,855,114  
  Prepaid expenses and other current assets     541,026       312,687  
  Current portion of future income tax asset     1,026,651       -  
                 
      11,560,897       9,405,085  
                 
Property and equipment     5,230,829       6,174,920  
                 
Future income tax asset     4,953,934       -  
                 
Intangible assets     1,115,794       3,892,211  
                 
Goodwill     658,904       1,664,759  
                 
    $  23,520,358     $  21,136,975  
                 
Liabilities                
                 
Current liabilities                
  Accounts payable and accrued liabilities   $  5,471,878     $  7,785,812  
  Purchase consideration payable     -       869,803  
  Current portion of deferred revenue     613,081       410,088  
  Current portion of capital lease obligation     107,964       490,072  
  Loan payable     -       937,548  
  Asset retirement obligation     -       41,503  
  Future income tax liability     119,081       -  
                 
      6,312,004       10,534,826  
                 
Deferred revenue     78,876       195,059  
Long-term portion of capital lease obligations     -       38,500  
Restructuring liability     -       176,056  
      6,390,880       10,944,441  
                 
Shareholders' Equity                
                 
Share capital   $  66,200,215     $  66,017,456  
Contributed surplus     18,933,619       18,521,086  
      85,133,834       84,538,542  
                 
Deficit     (65,684,820 )     (72,536,814 )
                 
Accumulated other comprehensive loss     (2,319,536 )     (1,809,194 )
                 
      (68,004,356 )     (74,346,008 )
                 
      17,129,478       10,192,534  
                 
    $  23,520,358     $  21,136,975  

Consolidated Statements of Earnings (Loss) and Comprehensive Gain (Loss)

      2010       2009       2008  
                         
Revenue   $  25,356,570     $  24,446,569     $  17,049,587  
                         
Expenses                        
  Network delivery     5,376,920       6,672,583       7,409,525  
  Software development     8,162,595       7,566,227       6,914,291  
  General and administration     4,021,971       4,893,640       4,480,258  
  Sales and marketing     896,791       1,202,699       1,140,028  
  Amortization of intangible assets     2,550,452       3,243,359       3,214,908  
  Amortization of property and equipment     2,368,539       2,770,357       2,044,145  
      23,377,268       26,348,865       25,203,155  
                         
                         
Earnings (loss) from operations before the undernoted     1,979,302       (1,902,296 )     (8,153,568 )
                         
Realized foreign exchange (loss) gain     (119,561 )     115,526       53,818  
Unrealized foreign exchange gain     304,331       435,467       407,223  
                         
Interest income     642       8,759       134,848  
Interest expense – capital lease     (75,850 )     (120,696 )     (109,383 )
Interest expense – other     (1,839 )     (99,255 )     (13,809 )
                         
(Loss) on disposal of property and equipment     (40,085 )     (56,171 )     (35,698 )
(Loss) gain on settlement of asset retirement obligation     (4,810 )     -       86,120  
Goodwill impairment     -       -       (1,086,577 )
                         
                         
                         
      62,828       283,630       (563,458 )
                         
Earnings (loss) before income taxes     2,042,130       (1,618,666 )     (8,717,026 )
                         
Current income tax (expense)     (11,892 )     -       -  
Future income tax (expense) benefit     4,821,756       (151,000 )     -  
                         
Net earnings (loss)     6,851,994       (1,769,666 )     (8,717,026 )
                         
Other comprehensive loss:                        
                         
Unrealized foreign exchange loss on translation of self- sustaining foreign operations     (510,342 )     (652,661 )     (346,964 )
                         
Comprehensive gain (loss)   $  6,341,652     $  (2,422,327 )   $  (9,063,990 )
                         
Earnings (loss) per share                        
Basic   $  0.20     $  (0.05 )   $  (0.26 )
Fully diluted   $  0.20     $  (0.05 )   $  (0.26 )

Non-GAAP Financial Measures

      Three Months Ended  
      September 30,       September 30,  
      2010       2009  
                 
Net profit (loss) in accordance with GAAP   $  5,808,317     $  642,806  
Amortization     823,120       1,473,805  
Interest expense     11,036       52,799  
Income taxes     (4,911,022 )     151,000  
Stock based compensation expense     154,692       449,691  
Unrealized foreign exchange (gain)     192,232       (632,708 )
                 
Adjusted EBITDA   $  2,078,375     $  2,137,393  
                 
Adjusted EBITDA per share – Basic   $ 0.06     $  0.06  
Adjusted EBITDA per share – Fully Diluted   $ 0.06     $  0.06  
                 
Weighted average shares outstanding – Basic     33,857,236       33,707,682  
Weighted average shares outstanding – Fully Diluted     33,900,653       33,812,179  
                 
                 
      Twelve Months Ended  
      September 30,       September 30,  
      2010       2009  
                 
Net profit (loss) in accordance with GAAP   $  6,851,994     $  (1,769,666 )
Amortization     4,918,991       6,013,716  
Interest expense     77,689       219,951  
Income taxes     (4,809,864 )     151,000  
Stock based compensation expense     690,020       2,016,015  
Unrealized foreign exchange (gain)     (304,331 )     (435,467 )
                 
Adjusted EBITDA   $  7,424,499     $  6,195,549  
                 
Adjusted EBITDA per share – Basic   $  0.22     $  0.18  
Adjusted EBITDA per share – Fully Diluted   $  0.22     $  0.18  
                 
Weighted average shares outstanding – Basic     33,804,338       33,610,843  
Weighted average shares outstanding – Fully Diluted     33,908,352       33,710,038  

Notes:

1 - Non-GAAP Measures

The Company continues to provide all information required in accordance with GAAP, but believes evaluating its ongoing operating results may not be as useful if an investor is limited to reviewing only GAAP financial measures. Accordingly, the Company uses non-GAAP financial information to evaluate its ongoing operations and for internal planning and forecasting purposes. The primary non-GAAP financial measures utilized by the Company include adjusted EBITDA and adjusted EBITDA per share. Adjusted EBITDA is defined as earnings (loss) before interest expense, taxes, depreciation, amortization, unrealized foreign currency gains and losses and stock-based compensation.

To supplement the Company's financial statements presented on a GAAP basis, we believe that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. These adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results and trends and performance. Management uses these non-GAAP measures to evaluate the Company's financial results, develop budgets, manage expenditures, and determine employee compensation. The presentation of additional information is not meant to be considered in isolation or as a substitute for or superior to net (loss) earnings or net (loss) earnings per share determined in accordance with GAAP.

Currency:

All amounts are expressed in Canadian dollars. This notice is qualified in its entirety by reference to the Company's financial statements and accompanying Management Discussion and Analysis, which are accessible on the SEC'S website at www.sec.gov/edgar.shtml and on SEDAR at www.sedar.com.

About PNI Digital Media - Founded in 1995, PNI Digital Media operates the PNI Digital Media Platform, which provides transaction processing and order routing services for major retailers. The PNI Digital Media Platform connects consumer-ordered digital content, whether from online, in-store kiosks, desktop software or mobile phones, with retailers that have on-demand manufacturing capabilities for the production of personalized products such as photos, photo books and calendars, business cards and stationery. PNI Digital Media successfully generates millions of transactions each year for retailers and their thousands of locations worldwide.

The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties. PNI Digital Media's actual results could differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in technology, employee retention, inability to deliver on contracts, failure of customers to continue marketing the online solution, competition, general economic conditions, foreign exchange and other risks detailed in the Company's annual report and other filings. Additional information related to the Company can be found on SEDAR at www.sedar.com and on the SEC'S website at www.sec.gov/edgar.shtml. The information contained herein is subject to change without notice. PNI Digital Media shall not be liable for technical or editorial errors or omissions contained herein.

PNI Digital Media relies upon litigation protection for "forward-looking" statements.

Google and Android are registered trademarks of Google Inc.

iPhone is a registered trademark of Apple Inc.

The TSX Venture Exchange has neither approved nor disapproved the information contained in this release. Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • PNI Digital Media Inc. - Financial Information
    Simon Bodymore
    CFO
    (604) 893-8955 ext.229
    or
    PNI Digital Media Inc. - Investor Relations and Press
    Simon Cairns
    (866) 544-4881
    ir@pnimedia.com
    www.PNIMEDIA.com