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PhotoChannel Announces Record Revenues
VANCOUVER, BC – February 16, 2005 – PhotoChannel Networks Inc. (TSX – V: PNI; OTCBB: PHCHF) (“PhotoChannel” or the “Company”), one of North America’s leading digital imaging technology providers, today reported its first quarter fiscal 2005 financial statements for the three month period ended December 31, 2004. Record revenues for the quarter of $440,614, up 154% over the corresponding quarter a year ago - this record revenue was driven by an increase in Network Revenue including network transactional revenue and network membership fees, which increased 267% and 522%, respectively, from quarter one of 2004. “PhotoChannel is pleased to report its strongest quarter of revenues in its history” stated Bart Copeland, President and CEO of PhotoChannel. “During the quarter certain of our retailers increased their digital imaging infrastructure and began printing directly in-store, resulting in a significant quarterly increase in PhotoChannel’s network membership fees. The Company is also very encouraged by the exponential growth in the number of digital content orders processed by stores that have adopted the model of printing in-store. Combined, this is leading to strong overall Network Revenue growth.” PhotoChannel is now focusing its sales efforts on the US market. Usage in the Canadian marketplace, where PhotoChannel provides the dominant online solution for photofinishers, continues to accelerate rapidly. During the quarter, the Company also saw certain of its large retail partners continue an aggressive marketing campaign of their online service. The Company believes this will continue as its retail partners work to maintain and increase market share.Business Highlights For Q1-FY05 PhotoChannel reports: Record revenues for the quarter of $440,614, up 154% over the corresponding period of 2003. This record revenue was driven by an increase in Network Revenue including network transactional revenue and network membership fees, which increased 267% and 522%, respectively, from quarter one of 2004. Over 230,000 Digital Content Orders were processed through the network, a 297% increase from the same quarter a year ago and a 48% increase from the prior quarter. Digital Content Orders are defined as a complete transacted order placed by a consumer. In the first quarter the Digital Content Orders transacted through the PhotoChannel Network consisted of over 10,000,000 images. Over 300 locations are now connected for direct-to-store printing. The Company s data shows that when in-store labs are connected directly (as opposed to the order being sent to a central fulfillment site and delivered back to the store), orders increase by as much as 400% over a six month period. Aaron Rallo joined the Company as CTO in November 2004 after years of experience at Microsoft within the Windows Printing and Imaging team and at Fuji E-Systems (formerly AGT). Results of Operations Detailed unaudited financial results for the quarter on the Company will be available on SEDAR at www.sedar.com. Total revenue increased by 154% from quarter one of 2004 to $440,614. The increase was attributable to three factors: organic growth in usage of the network from customers of the Company s photofinishing retailers; the Company s retailers commencing print in-store operations; and the addition of new customers. The two primary increases occurred in transaction commission and membership fees, which increased 267% and 522%, respectively, from quarter one of 2004. The Company s costs of operations for the period were $918,484, up 3% when compared to quarter one of 2004. General and administration costs increased 8.4% in the current quarter compared to the same period last year. This increase of $27,100 was due to an increase in salaries and consulting and rent and was partially offset by a decrease in legal and accounting and office and miscellaneous Sales and marketing costs decreased 34% in the current quarter compared to the same period last year. This decrease of $58,541 was due to a reduction in travel and miscellaneous expenses, offset by printing, advertising and promotion and consulting costs. Network delivery costs increased 69% in the current quarter compared to the same period last year. This increase of 49,436 was primarily due to an increase in telecommunication and customer service costs, both of which increased due to the extreme increase in network usage and the related increase in our first quarter transaction commission fees. Research and development costs decreased 12% in the current quarter compared to the same period last year. This decrease of $37,489 was primarily related to a reduction of staffing and consultants. Consulting expense in the current period would have been lower, except for the retention of the Company s new Chief Technology Officer, who recently joined the Company under a consulting contract. Amortization expense has increased by 78% in the current quarter compared to the same quarter last year, due the acquisition of equipment during late fiscal 2004 and during the current quarter. The Company recorded a three month net loss for the current period of $476,778 or $0.00 per share compared to $696,283 or $0.01 per share in the same period last year. This reduction of 32% was due to an increase in revenues, along with a reduction in sales and marketing and research and development, which has been partially offset by an increase in general and administration, network delivery and amortization Caveat The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties.PhotoChannel’s actual results could differ materially for those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, technological shifts, employee retention, contract delivery, competition, general economic conditions, foreign exchange and other risks detailed in the Company’s annual report and other filings. Notice of no auditor review of interim consolidated financial statements Under National Instrument 51-102, Part 4, subsection 4.3 (3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor. The interim consolidated financial statements of the Company, as at and for the period ended December 31, 2004, have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accounts for a review of interim financial statements by an entity’s auditor. WARNING: The TSX Venture Exchange has neither approved nor disapproved the information contained in this release. The Company relies upon litigation protection for "forward-looking" statements. Additional information related to the Company can be found on SEDAR at www.sedar.com. |
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Copyright © 2006 PhotoChannel
Networks, Inc. All Rights
Reserved. 
