PNWIF Reports Year End Numbers: Lots To Chew On
At long last- PNWIF reported its year end numbers- pretty timely you say? Already out just one month into the calender year? Not so fast.
PNWIF’s fiscal year ends at the end of Sept- therefore, we are finally seeing the audited numbers from Sept ‘06 to Sept ‘07. If they were a US reporting company, they would have had until the end of December- since their primary domicile is Canada, they follow Canadian Regs, which as a small company gives them an extra 30 days to get their filing in front of investors. I believe this length of time is a weakness of the company- they should get better at reporting in a more timely manner.
On to some major pluses. First and foremost, today’s press release notes PNWIF has landed Sam’s Club as a customer. This is big stuff, and I’ll explain why. Costco was the first, and now Sam’s Club is the second defection from the Hewlett Packard (NYSE: HP) platform, to tiny, unknown PhotoChannel’s platform. The bottom line- little PNWIF has now pirated both Costco and Sam’s Club away from HP- that’s a huge coup, and suggests several positives.
1. I believe we can assume the PNWIF solution simply works better than HP’s- which is really saying something with HP’s huge resources
2. The addition of both of these customers will have a major impact on PNWIF’s future- once implemented, the top line should grow quite dramatically
3. Could other HP customers be far behind? The first two had to be the hardest.
There are a few other highlights very favorable for shareholders in the results. Top line revenues grew very strongly- up 84% over the previous year to $7.5 million- these results only include 2 months post Pixology acquisition.
Secondly, PNWIF migrated transactional revenue- anotherwords the revenues they generate from photofinishing orders- from 41% of revs in 2006 to 64% in 2007- this is a major positive for the cash flow, as transactional revenues have a far higher margin for the company.
The company also booked losses of $6 million. Digging in a little, you can make some adjustments to evaluate the over all health of the business. $1 million was one time acquisition costs- $1.4 million was non cash dep and amort- $1.8 million was absorbed from the dollar loses value against the Canadian dollar- $600k was non cash stock related- Operationally, the company really lost about $1.2 million, which is acceptable considering the level of growth and corporate activity.
Looking out over the coming months- here’s some game changing events which could have a major impact on the stock:
Q1 numbers should be out before the end of February- Q1 is their best quarter of the year as consumers engage in lots of photofinishing.
PNWIF is now in the process of migrating all the data for both Sam’s Club and Costco to their servers. Here’s how it works- say you have a photo album you have uploaded to the web at Costco. In the past, your digital images would have been stored on HP servers- they now have to move over the PNWIF servers- as the consumer, you don’t see it, but it is happening in the background.
Costco and Sam’s Club will start generating revs for PNWIF sometime in the April to June quarters. My guess- jointly, they will generate about $10 million in annual revenues for PNWIF- this will be very high margin business- all transactional. As Online to Retail photofinishing grows (this is where you upload your photos online, order prints, and go into the store to pick them up in 1 hour), that $10 million number will grow as well.
So- look for a strong Q1, followed by a traditionally weak Q2 and some expenses associated with implementing the two new clients, and lots of hoopla around flipping the switch for Costco and Sam’s Club sometime in April or May.
I suspect PNWIF will turn profitable in fiscal 2008 and stay that way on an ongoing basis. I believe the top line numbers will at least double again. As they make the turn into fiscal 2009, they should be able to achieve annual revs in the $20 million range, and be very profitable.
Here’s a chart to show how the stock is behaving:
This is a very similar chart to SPKL- this one is an ascending wedge, which suggests the stock will grind higher to the point in the wedge before breaking out or breaking down. This is a weekly chart going back to early ‘06, and showing where the OTC Journal starting covering this idea at $1.80 in October of 2006.
In this lower volume environment, there are probably a lot of charts that look just like this, particularly if the company is delivering. Investors are reluctant to part with their shares, but new shareholders are a scarce commodity.
This is another one that should have its day once volume returns to these smaller stocks. I would love to see it grind up to $4, as then it would have a real shot at a NASDAQ listing.
Here’s the wild card- there are two horses left in the HP stable- Wal Mart USA and Walgreens. They are now in Sam’s Club- could WalMart- the largest company in the world- be the next to defect? The have WalMart Canada already. NASDAQ listing? A number of strong possibilities could effect the stock price to the positive.
9 Comments
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Editor: No, I hadn’t seen that- thanks very much for the contribution. I had suspected their Q1 numbers would be strong. Does this mean their sites are number 689 in the world?
Comment by Lightbarer — 2/6/2008 @ 12:16 pm
Do you feel that PNWIF is going through the motions of building an empire, or at some point do you feel that PNWIF is a prime aquisition target?
Editor: In 2009 PNWIF definitely becomes an acquisition target. There are only two pure plays in the space- PNWIF and SFLY- all the others have been acquired- Razor Fish being the biggest story- bought out by HP. However, I believe the industry is going to want to see a couple of quarters- particularly the Holiday Season, of operating with services to Costco and Sam’s Club- Costco being the big one. The stock could also appreciate on its own without being bought- the way they are going- $10 is a possible longer term price target.
Comment by Donald Key — 2/6/2008 @ 9:35 am
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comment on q1 results-co states “With the launch of our new customers, we fully expect to be cash flow positive going forward.”-nasdaq should be possibility this weekend
Editor: Unfortunately, I don’t believe that will be the case until we have a $4 number.
Comment by tom — 3/3/2008 @ 9:11 am
Did you know that short interest in this stock is 418,900 shares? It would take 17 days of average volume to cover. If the market ever discovers this stock a short squeeze could send it much higher. Do you agree? Your thoughts please.
Editor: To be honest, I never pay too much attention to those published figures. I don’t find there’s ever much correlation between these published short interests and any price performance down the road. The short interest is massive in CREE, but the darn thing still won’t come down to a level where I want to buy it. What I do pay attention to is charts and fundamentals. PNWIF is building up the energy technically for a big move in the next Bull Market, and the company is definitely going to deliver on the fundamental side with the implementations of service to Costco and Sam’s Club. In short, as soon as this market gets its head out of its hind end, PNWIF should rock.
Comment by Ed C — 2/27/2008 @ 7:56 am
Thanks for your quick responses. I was looking around a bit and found the following:
Snapfish-Costco deal signed: Spring 2005 (3-year contract)
Snapfish-Walgreens deal signed: July 2005
Snapfish-Walmart deal signed: Mar 2006
Fujifilm-Sam’s Club deal signed: Mar 2005 (3-year contract)
Walmart choosing PNI over Snapfish may bode well if a Walmart US RFP comes out late 2008 (assuming a 3-year contract and assuming that Walmart sees greener grass on the other side).
On another note, I read somewhere that the PNI-Costco deal also includes the in-store kiosks. Whatever Costco did in online photo business before, PNI would get that + more because now PNI will get a cut of all the photos processed thru the in-store kiosks also. I wonder if the combination of online + in-store kiosk processing = all or nearly all of Costco’s digital photo processing. Won’t Costco force all digital customers to go thru either the online or kiosk?
I have not yet read if they are rolling out the kiosks for Sam’s Club.
Editor: The kiosk technology was one of the big assets they bought with the Pixology acquisition. I can’t tell you if it’s a component in the Sam’s Club roll out, but I can tell you this will be a much bigger company by the end of 2008. Now, if it could just hold $4 and get on NASDAQ.
Comment by AlanP — 2/14/2008 @ 10:48 am
Thanks Lightbarer for the link. That is an amazing traffic curve! I looked but could not find any historic data. Wish they tracked beyond 3 mos. Would like to compare to last year’s holiday season — it would be a muddled comparison with the pix acq anyways. Guess we’ll find out for sure in a week or 2.
Editor: it would be nice if these guys go their numbers out in a timely manner. That $4 number is so close, and it’s really critical for a NASDAQ SC listing, which would take their profile considerably higher. They really need to focus on that issue. BTW- one of the subscribers brought that link to my attention. That’s why this BLOG is a great tool- we can all share things we find.
Comment by AlanP — 2/12/2008 @ 2:03 pm
The Quantcast web site says, “Find reports for 20,267,977 sites”. So that must mean that pnimedia.com is 689 in 20,267,977!
Editor: Likely the meaning. Whatever it means exactly, the traffic flow on the chart is impressive.
Comment by Lightbarer — 2/8/2008 @ 2:45 pm
If PNWIF becomes a target, who would be a likely buyer? PNI consistently states that an advantage of their model vs SFLY and HP is that they are not competing with their clients in any way. If Kodak or other otherwise-competing suitor is interested, I would think PNI’s clients would be none-to-happy (as I harken back to Costco and Snapfish)
FWIW, personally, I do not want to see PNI bought out.
Editor: How about Kodak- they are behind the curve on the digital photography revolution. They have a development agreement with them already- or perhaps Fuji- they have an agreement with them as well, and are replacing an old Fuji system at Sam’s Club.
Comment by AlanP — 2/8/2008 @ 6:48 am
My take is that pnimedia.com is ranked 689 in the world. Next best guess is that it is 689 among those tracked by Quantcast.
Editor: Either way, the associated chart is impressive.
Comment by Lightbarer — 2/7/2008 @ 9:00 am
Have you seen this? The site visits go almost “off the chart” during the holiday season. Q1 should be great! http://www.quantcast.com/pnimedia.com