First quarter fiscal 2014 financial highlights:
Revenue for the first quarter of fiscal 2014 was $8.2-million, as compared with $6.6-million in the three months ended Dec. 31, 2012, a 24-per-cent increase. The increase in fees as compared with the prior year is due to higher print revenue, the launch of the HTML5 cards and invitations product line with select major retailers, improved contract terms as all remaining customers on the upload model have been transitioned to the company's preferred transaction revenue share model, and the strengthening of the U.S. dollar relative to the Canadian dollar.
Gross margin was $5.1-million as compared with $3.6-million in the three months ended Dec. 31, 2012, resulting in an increase of gross margin from 55 per cent to 62 per cent. The increase in gross margin as compared with the prior year is due to increased revenues, offset by increased costs of sales resulting from higher licensing costs and intangible asset amortization. However, as a percentage of sales, cost of sales declined, primarily due to greater efficiencies associated with higher transaction volumes and to foreign exchange as a majority of costs of sales are denominated in Canadian dollars.
The company generated a net income for the quarter of $900,000 as compared with a net loss of $300,000 in the first quarter of fiscal 2013.
Non-international financial reporting standards adjusted earnings before interest, taxes, depreciation and amortization were $2.0-million, as compared with non-IFRS adjusted EBITDA of $300,000 in the first quarter of fiscal 2013.
The company ended the quarter with $6.0-million in cash and cash equivalents. In the three months ended Dec. 31, 2013, the company repaid $1.4-million owing on its line of credit.
The company ended the quarter with $9.7-million in working capital, as compared with $1.2-million at Sept. 30, 2013.
The company completed a financing for total gross proceeds of $7.5-million. The company issued 7,119,650 common shares priced at $1.05 per common share.
First quarter fiscal 2014 and subsequent operational highlights:
The dollar value of on-line transactions processed for retail partners over the PNI Digital Media platform increased to $121-million in retailer revenues, a 17-per-cent increase compared with the same quarter last year. This was led by significant double-digit year-over-year growth in all of the major categories, including prints, cards and invitations, canvas, and photobooks, and the strengthening of the U.S. dollar relative to the Canadian dollar. The revenue was generated in two main categories:
Traditional prints revenue processed for the company's partners increased 17 per cent to $45.5-million, representing 38 per cent of total transactions, driven by the growth of mobile orders and the integrations with cloud media sources, including Dropbox, Google drive, Facebook and Instagram. This increase has come despite the overall downward trend in prints.
Non-print revenue from value-added services, such as cards and invitations, canvas, photobooks, and gifts, increased 17 per cent to $75.5-million, representing 62 per cent of total transactions, as a result of the company's investment in HTML5 user experience and increased overall user adoption. This category of revenue is yet to benefit from launch of the new mobile apps, which currently only process prints. The company is planning to launch value-added services in the mobile apps in advance of the 2014 holiday season.
The company processed a record 7.5 million transactions across the PNI Digital Media platform, an 8-per-cent increase from the same period last year.
It completed development for the first phase of the Office Depot launch. The company expects full integration to take 12 months as it deploys across all of Office Depot's 1,500 stores.
Samsung published the Samsung PrinTap app in the Google Play Store, which allows U.S. Android users to send pictures for printing at PNI-connected retailers directly from their phone's gallery. This app is the first stage of the company's partnerships with Samsung and connects to all major U.S. retailers through the PNI order-routing API.
The company transitioned all retailers to contracts based on percentage of the retailer's revenue earned, rather than the number of photos uploaded. With a transaction fee model, PNI is now better positioned to participate in the revenue growth along with retailers.