PhotoChannel Releases 1st Quarter Financials

Records Second Consecutive Quarter of EBITDA Positive in Q1

VANCOUVER, BC – February 20, 2007, PhotoChannel Networks Inc. (TSX – V: PN; OTCBB: PNWIF) (“PhotoChannel” or the “Company”), the leading innovator in online media solutions for retailers, reports its financial results for the three month period ending December 31, 2006. The following discussion is qualified in its entirety by reference to the company’s financial statements and accompanying management discussion and analysis for the three months ended December 31, 2006, which are accessible on SEDAR at www.sedar.com.

During the first three months, the Company saw continued marketing efforts by its retail partners for their online photofinishing services.  The Company believes this will continue throughout 2007, as retailers attempt to maintain and increase their market share.  The marketplace, where PhotoChannel provides one of the dominant online solutions for photofinishers, continues to accelerate rapidly.  The unique features of the new PNI Digital Media Platform, such as the up-sell to higher margin items, is providing retailers with opportunities to expand their service capabilities to their consumers.

 “PhotoChannel is pleased to report the strongest quarter in its history, as we continue to experience triple digit transaction revenue growth year over year” states Peter Fitzgerald, Chairman and CEO of PhotoChannel. “During the first quarter the Company invested, both time and money, on the development of the new PNI Digital Media platform, which will soon offer both a best in class photo and music site experience for our retailers and their customers. With this new platform we will continue to be fully committed to our photo offering and customer base, as we recognize that we can now compete with anyone in the world.  We hope with the initial launch of our new music offering that we will further differentiate ourselves from our competition with the ease and ability to offer other forms of digital content.  We are looking forward to the continued growth of revenues from both existing and new retailers.”

Fiscal Highlights for First Quarter 2007

  • Record revenues for the Company’s first quarter of fiscal 2007 (the three months period ended December 31, 2006) of $1,521,262, up 180% or $978,548 over the corresponding first quarter of fiscal 2006.
  • Transaction fees increased by 347% for the three month period ended December 31, 2006 over the corresponding period of fiscal 2006. Professional, installation and membership fees also showed continued growth of 110%, 81%, and 47%, respectively, over the corresponding first quarter of fiscal 2006.
  • Organic transactional growth, from retailers using the PhotoChannel solution during the first quarter of fiscal 2006, grew 148% during the first quarter of fiscal 2007.
  • Second straight quarter of positive EBITDA (earnings before interest, taxes, depreciation, amortization and compensation expense).
  • Recorded a GAAP loss of $37,191, a decrease of 94% from a $615,366 net loss in the corresponding quarter of fiscal 2006.
  • That it signed a Preferred Partner Agreement with Kodak’s Qualex Inc. (“Qualex”) which enables both companies to mutually develop new and existing opportunities in the retail photofinishing marketplace and pursue new customers outside of traditional photofinishing players.
  • That it signed an agreement with Stop & Shop and Giants of Maryland and has deployed the PNI Digital Media Platform to offer online photo printing for through their respective website located at www.stopandshop.com and www.giantfood.com, respectively.

About PhotoChannel- Founded in 1995, PhotoChannel operates PNI Digital Media to provide services for major retailers, wireless carriers and content providers. The PNI Digital Media Platform connects consumer ordered digital content with retailers that have on demand manufacturing capabilities for the production of merchandise. Currently PNI Digital Media generates transactions for retailers and their thousands of locations across North America, including Wal-Mart Canada, CVS/pharmacy, Eckerd Drugs and Costco Canada. For more information please visit www.photochannel.com.

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

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, 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.

 

For Financial Information, Contact:
Robert Chisholm, CFO
(604) 893-8955 ext. 224
rchisholm@photochannel.com
Investor Information:               (800) 261-6796

For Media Inquiries, Contact:
Niti Maini
(604) 893-8955 ext. 313
nmaini@photochannel.com

  
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