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

PNI Digital Media Inc.

August 16, 2011 16:00 ET

PNI Digital Media Announces Fiscal 2011 Third Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 16, 2011) - 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 the third quarter of Fiscal Year 2011. Revenue for the quarter was $5.3 million. If foreign currency exchange rates had remained constant, revenue for the quarter would have been approximately $5.5 million.

Fiscal 2011 Third Quarter Financial and Operational Highlights:

  • Transacted 4.2 million orders over the PNI Digital Media Platform, a 3% increase compared to the third quarter of Fiscal 2010.
  • Revenue of $5.3 million, compared to $5.7 million in third quarter of Fiscal 2010.
  • Transactional revenue of $4.0 million, compared to $4.4 million during the third quarter of Fiscal 2010 Transaction fees represented 75% of total revenue for the quarter, consistent with the same period last year.
  • Non-GAAP adjusted EBITDA1 of $0.6 million, compared to $1.6 million during the same period last year.
  • GAAP net loss after income taxes of $76,000 for the quarter.
  • The Company extended its agreement with Costco US and Costco Canada for an additional five year term through 2016.
  • The Company renewed its agreement with CVS/pharmacy for online photo services.
  • Continued investment into new vertical markets, with total expenditures on software development totaling $2.7 million compared to $2 million in the third quarter of 2010.
  • The Company announced it has entered into an agreement with a leading national retailer to launch its flagship social stationery product.

"We continue to execute on our plan of launching new product offerings to our existing and new retail partners," said Kyle Hall, Chief Executive Officer of PNI Digital Media. "The core business is being readied for the holiday season with many new features to enhance our customers' market penetration."

Conference Call

The Company will host a conference call on Tuesday, August 16th, 2011 at 4:30pm ET (1:30pm PT) to discuss the Company's Fiscal 2011 third quarter financial results. Mr. Kyle Hall, Chief Executive Officer, Mr. Aaron Rallo, President and Chief Operating Officer and Mr. Simon Bodymore, Chief Financial Officer will host the call.

To join the call, please dial (888) 241-0394 (US/Canada) or (647) 427-3413 (International) and quote conference ID no. 84855932. Please call 10 minutes prior to the scheduled start time.

Consolidated Balance Sheets

June 30, 2011 September 30,
2010
Assets
Current assets
Cash and cash equivalents $ 3,020,411 $ 4,690,355
Accounts receivable 4,471,718 5,302,865
Prepaid expenses and other current assets 471,225 541,026
Current portion of future income tax asset 706,340 1,026,651
8,669,694 11,560,897
Property and equipment 5,415,294 5,230,829
Future income tax asset 5,189,370 4,953,934
Intangible assets 679,429 1,115,794
Goodwill 559,187 658,904
$ 20,512,974 $ 23,520,358
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 2,710,935 $ 5,471,878
Current portion of deferred revenue 261,601 613,081
Current portion of capital lease obligations - 107,964
Future income tax liability 68,474 119,081
3,041,010 6,312,004
Deferred revenue 36,158 78,876
3,077,168 6,390,880
Shareholders' Equity
Share capital $ 66,525,300 $ 66,200,215
Contributed surplus 19,129,244 18,933,619
85,654,544 85,133,834
Deficit (65,529,999) (65,684,820)
Accumulated other comprehensive loss (2,688,739) (2,319,536)
(68,218,738) (68,004,356)
17,435,806 17,129,478
$ 20,512,974 $ 23,520,358

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

Three Months Ended Nine Months Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Revenue $ 5,316,242 $ 5,681,221 $ 18,081,310 $ 18,699,156
Expenses
Network delivery 915,156 1,092,965 3,397,609 4,278,918
Software development 2,710,147 2,011,188 8,317,564 5,858,576
General and administration 995,071 957,569 3,074,899 3,047,616
Sales and marketing 208,980 191,706 770,009 647,236
Amortization 750,549 1,400,145 2,132,781 4,095,871
5,579,903 5,653,573 17,692,862 17,928,217
(Loss) earnings from operations before the undernoted (263,661) 27,648
388,448

770,939
Realized foreign exchange (loss) gain (1,435) 8,691 (84,433) (51,884)
Unrealized foreign exchange (loss) gain (40,749) (130,245) 50,159 496,563
Interest income 446 - 494 679
Interest expense – capital lease - (15,817) (5,536) (65,055)
Interest expense - other (464) (37) (479) (1,597)
Loss on disposal of property and equipment (25,698) - (116,411) -
Loss on settlement of asset retirement obligation - - - (4,810)
(67,900) (137,408) (156,206) 373,896
(Loss) earnings before income taxes (331,561) (109,760) 232,242 1,144,835
Current income tax benefit (expense) - - - -
Future income tax benefit (expense) 255,340 - (77,421) (101,158)
Net (loss) earnings (76,221) (109,760) 154,821 1,043,677
Other comprehensive gain (loss):
Unrealized foreign exchange gain (loss) on translation of self sustaining foreign operations 24,492 230,225 (369,203) (741,615)
Comprehensive (loss) gain $ (51,729) $ 120,465 $ (214,382) $ 302,062
(Loss) earnings per share
Basic $ (0.00) $ (0.00) $ 0.00 $ 0.03
Fully diluted $ (0.00) $ (0.00) $ 0.00 $ 0.03

Non-GAAP Financial Measures

Three Months Ended
June 30, 2011 June 30, 2010
Net (loss) in accordance with GAAP $ (76,221) $ (109,760)
Amortization 750,549 1,400,145
Interest expense 464 15,854
Income tax (benefit) expense (255,340) -
Stock based compensation expense 148,028 168,379
Unrealized foreign exchange loss (gain) 40,749 130,245
Adjusted EBITDA $ 608,229 $ 1,604,863
Nine Months Ended
June 30, 2011 June 30, 2010
Net earnings (loss) in accordance with GAAP $ 154,821 $ 1,043,677
Amortization 2,132,781 4,095,871
Interest expense 6,015 66,652
Income tax expense 77,421 101,158
Stock based compensation expense 507,428 535,328
Unrealized foreign exchange (gain) (50,159) (496,563)
Adjusted EBITDA $ 2,828,307 $ 5,346,123

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.

Further information on our company can be found at: www.pnimedia.com

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.

The TSX Venture Exchange has neither approved nor disapproved the information contained in this release. PNI Digital Media relies upon litigation protection for "forward-looking" statements.

PNI Digital Media is a registered trademark of PNI Digital Media Inc. All other trademarks are property of their respective owners.

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

    PNI Digital Media Inc. - Investor Relations and Press
    Simon Cairns
    (866) 544-4881
    ir@pnimedia.com
    Twitter: @pni_media