SOURCE: Salon Media Group, Inc.

February 12, 2007 06:30 ET

Salon Reports Third Quarter Fiscal Year 2007 Results

Records Quarterly Net Profit of $0.2 Million Compared to Net Loss of $0.1 Million in Prior Year Period; Sets Quarter Revenue Record of $2.8 Million; Advertising Revenues Increase 60% to $2.2 Million Compared to $1.4 Million Prior Year Period

SAN FRANCISCO, CA -- (MARKET WIRE) -- February 12, 2007 -- Salon Media Group, Inc. (OTCBB: SALN), an Internet media company, announced today a net profit of $0.2 million for its third quarter ended December 31, 2006, compared to a net loss of $0.1 million for its second quarter the year before.

Total revenues for the quarter ended December 31, 2006 were a company record of $2.8 million compared to $2.1 million a year ago. Salon's previous revenue high was $2.6 million (excluding barter sales transactions) set in the December 1999 quarter, the peak of the Internet bubble. Advertising revenues increased to $2.2 million, compared to $1.4 million a year ago, a 60% increase. Advertising revenues were near the all-time high of $2.4 million (excluding barter transactions) set in the December 1999 quarter. Salon Premium revenues declined $0.1 million to $0.4 million compared to $0.5 million a year ago due to a drop in memberships.

On a non-GAAP pro forma basis, which excludes non-cash and non-recurring items, Salon recorded a $0.5 million net profit for the current quarter compared to a $0.3 million profit a year ago.

"We are very pleased to have achieved record revenues in the December quarter. This was underpinned by a robust online advertising market, and a continued strong rise in unique visitors, which grew 56% quarter over quarter, to an average monthly 3.6 million uniques," said Elizabeth Hambrecht, Salon's CEO and President. "We will continue to introduce new products to drive readership -- in February alone we will be bringing Glenn Greenwald's highly respected political blog under the Salon banner, launching a monthly column by critic Camille Paglia, and rolling out a daily blog by our Editor-in-Chief Joan Walsh." She continued, "While the March quarter will be impacted by the cyclically slower ad market, we are continuing to build a product and a team that should allow for increased traffic and revenue as the year goes on."

A reconciliation of net loss attributable to common stockholders calculated in accordance with generally accepted accounting principles in the United States of America (GAAP) and pro forma net loss attributable to common stockholders is provided immediately following the consolidated statements of operations. These pro forma measures are not in accordance with, or an alternative for, GAAP and may be different from pro forma measures used by other companies. Salon believes that the presentation of pro forma results provides useful information to management and investors regarding underlying trends in its consolidated financial condition and results of operations. Readers of Salon's consolidated financial statements are advised to review and carefully consider the financial information prepared in accordance with GAAP contained in this press release and Salon's periodic filings with the Securities and Exchange Commission.

Future Periods Guidance:

Salon does not believe that the nine months ended December 31, 2006 GAAP and non-GAAP financial results should be considered predictive of future quarter or year results.

For its quarter ending March 31, 2007, Salon forecasts advertising revenues of $0.9 - $1.0 million and total revenues of $1.5 - $1.6 million. If Salon attains total revenues of $1.6 million, it forecasts that it will most likely report a GAAP net loss attributable to common stockholders of approximately $0.9 million. Salon currently has approximately $0.8 million of advertising commitments for its quarter ending March 31, 2007. Revenues during this time period have historically been the lowest for Salon. Salon cannot accurately predict total revenues after March 31, 2007 owing to the relatively short time frame in which advertising orders are secured and when they run on our Website and the lack of significant long-term advertising orders.

About Salon Media Group, Inc.:

Founded in 1995, Salon is an Internet publishing company. Salon's award-winning journalism combines original investigative stories and provocative personal essays along with quick-take commentary and staff-written Weblogs about politics, technology, culture and entertainment. Committed to interactivity, the Website also hosts two online communities, Table Talk and The Well. Features in Salon's Website include the daily music download column Audiofile, Videodog video clips, the Daou Report, an opinionated guide to the blogosphere, and the ability to automatically submit Letters to the Editor.

"Safe Harbor" Statement under the U.S. Private Securities Litigation Reform Act of 1995: This press release contains certain "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are naturally subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein. The forward-looking statements contained herein include statements about future financial and operating results of Salon. Factors that could cause actual results to differ materially from those described herein include: the economic environment of the media industry; the difficulty in securing on-line advertising and subscriptions; uncertain revenue sources and the general economic environment. More detailed information about these factors is set forth in the reports filed by Salon with the Securities and Exchange Commission. Salon is under no obligation to and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. We do not believe that our reported results should be considered predictive of future period or full year results.

Note: Salon is a trademark and a registered trademark of Salon Media Group, Inc. All other company and product names mentioned are trademarks of their respective owners.

                          SALON MEDIA GROUP, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                                (Unaudited)


                                    Three Months Ended  Nine Months Ended
                                        December 31         December 31
                                    ------------------  ------------------
                                      2006      2005      2006      2005
                                    --------  --------  --------  --------

Net revenues                        $  2,765  $  2,069  $  6,194  $  5,353
                                    --------  --------  --------  --------

Operating expenses:
    Production and content             1,317     1,183     3,875     3,276
    Sales and marketing                  560       389     1,296     1,054
    Information technology support       217       146       649       519
    General and administrative           365       257       945       706
                                    --------  --------  --------  --------
       Total operating expenses        2,459     1,975     6,765     5,555
                                    --------  --------  --------  --------

Income (loss) from operations            306        94      (571)     (202)
Other income, net                          -         1         3        21
                                    --------  --------  --------  --------
Net income (loss)                        306        95      (568)     (181)
Preferred deemed dividend               (109)     (227)     (295)     (227)
                                    --------  --------  --------  --------
Net income (loss) attributable to
 common stockholders                $    197  $   (132) $   (863) $   (408)
                                    ========  ========  ========  ========

Basic net income (loss) per share
 attributable to common
 stockholders                       $   0.10  $  (0.16) $  (0.53) $  (0.52)
Diluted net income (loss) per share
 Attributed to common stockholders  $   0.02     (0.16) $  (0.53) $  (0.52)

Weighted average shares used in
 computing basic net income (loss)
 per share attributable to common
 stockholders                          1,888       806     1,616       778
Weighted average shares used in
 computing diluted net income
 (loss) per share attributable to
 common stockholders                  11,243       806     1,616       778


                          SALON MEDIA GROUP, INC.
              PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                                (Unaudited)

                           Three Months Ended         Nine Months Ended
                            December 31, 2006         December 31, 2006
                         -----------------------  ------------------------
                          As (1)            Pro    As (1)            Pro
                         Reported   Adj.   Forma  Reported   Adj.   Forma
                         --------  -----  ------- --------  -----  -------
Net revenues             $  2,765  $   -  $ 2,765 $  6,194  $   -  $ 6,194
                         --------  -----  ------- --------  -----  -------

Operating expenses:
   Production and content   1,317    (35)   1,282    3,875   (102)   3,773
   Sales and marketing        560    (84)     476    1,296   (228)   1,068
   Information technology
    support                   217     (4)     213      649    (14)     635
   General and
    administrative            365    (26)     339      945    (74)     871
                         --------  -----  ------- --------  -----  -------
      Total operating
       expenses             2,459   (149)   2,310    6,765   (418)   6,347
                         --------  -----  ------- --------  -----  -------

Income (loss) from
 operations                   306    149      455     (571)   418     (153)
Other income (expense),
 net                            -      -        -        3      -        3
                         --------  -----  ------- --------  -----  -------
Net income (loss)             306    149      455     (568)   418     (150)
Preferred deemed dividend    (109)   109        -     (295)   295        -
                         --------  -----  ------- --------  -----  -------
Net income (loss)
 attributable to
 common stockholders     $    197  $ 258  $   455 $   (863) $ 713  $  (150)
                         ========  =====  ======= ========  =====  =======

(1) In accordance with accounting principles generally accepted in the
    United States


                          SALON MEDIA GROUP, INC.
              PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                  (in thousands, except per share data)
                                (Unaudited)

                            Three Months Ended        Nine Months Ended
                             December 31, 2005        December 31, 2005
                          -----------------------  ------------------------
                           As (1)            Pro    As (1)            Pro
                          Reported   Adj.   Forma  Reported   Adj.   Forma
                          --------  -----  ------- --------  -----  -------
Net revenues              $  2,069  $   -  $ 2,069 $  5,353  $   -  $ 5,353
                          --------  -----  ------- --------  -----  -------

Operating expenses:
   Production and content    1,183    (81)   1,102    3,276   (171)   3,105
   Sales and marketing         389    (78)     311    1,054   (184)     870
   Information technology
    support                    146     (7)     139      519    (45)     474
   General and
    administrative             257     (1)     256      706     (7)     699
                          --------  -----  ------- --------  -----  -------
      Total operating
       expenses              1,975   (167)   1,808    5,555   (407)   5,148
                          --------  -----  ------- --------  -----  -------

Income (loss) from
 operations                     94    167      261     (202)   407      205
Other income, net                1      -        1       21      -       21
                          --------  -----  ------- --------  -----  -------
Net income (loss)               95    167      262     (181)   407      226
                          --------  -----  ------- --------  -----  -------
Preferred deemed dividend     (227)   227        -     (227)   227        -
                          --------  -----  ------- --------  -----  -------
Net income (loss)
 attributable to common
 stockholders             $   (132) $ 394  $   262 $   (408) $ 634  $   226
                          ========  =====  ======= ========  =====  =======

(1) In accordance with accounting principles generally accepted in the
    United States


                          SALON MEDIA GROUP, INC.
              PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                              (in thousands)
                                (Unaudited)


                                    Three Months Ended  Nine Months Ended
                                       December 31,        December 31,
                                    ------------------- ------------------
                                      2006      2005      2006      2005
                                    --------- --------- --------  --------

Net income (loss) attributable to
 common stockholders                $     197 $   (132) $   (863) $   (408)

Less:
   Utilization prepaid advertising
    rights                                 79       75       185       173
   Depreciation and amortization
    charges                                22       22        64       102
   Stock compensation charges              48       70       169       132
   Preferred deemed dividend
    charges                               109      227       295       227
                                    --------- --------  --------  --------
Pro forma net income (loss)
 attributable to common
 stockholders                       $     455 $    262  $   (150) $    226
                                    ========= ========  ========  ========


                          SALON MEDIA GROUP, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                              (in thousands)

                                                  December 31,  March 31,
                                                     2006         2006
                                                  (Unaudited)
                                                  -----------  -----------
Assets
   Current assets:
      Cash and cash equivalents                   $       543  $       441
      Accounts receivable, net                          2,006          502
      Prepaid expenses, and other current assets           99          184
                                                  -----------  -----------
         Total current assets                           2,648        1,127
   Property and equipment, net                            127          155
   Prepaid advertising rights                           3,533        3,718
   Goodwill                                               200          200
   Other assets                                           106          104
                                                  -----------  -----------
         Total assets                             $     6,614  $     5,304
                                                  ===========  ===========
Liabilities and stockholders' equity
   Current liabilities:
      Accounts payable and accrued liabilities    $       976  $       747
      Deferred revenue                                    663          820
                                                  -----------  -----------
         Total current liabilities                      1,639        1,567
   Other long-term liabilities                             94          120
                                                  -----------  -----------
         Total liabilities                              1,733        1,687
                                                  -----------  -----------

Stockholders’ equity:
   Common stock                                             2            1
   Preferred stock                                          -            -
   Additional paid-in-capital                          96,705       94,619
   Unearned compensation                                    -          (40)
   Accumulated deficit                                (91,826)     (90,963)
                                                  -----------  -----------
      Total stockholders' equity                        4,881        3,617
                                                  -----------  -----------
         Total liabilities and stockholders'
          equity                                  $     6,614  $     5,304
                                                  ===========  ===========

Contact Information

  • Investor Contact:
    Conrad Lowry
    Chief Financial Officer
    (415) 645-9317
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