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EX-99.2 - EX-99.2 - MAKEMUSIC, INC. | c63351exv99w2.htm |
8-K - FORM 8-K - MAKEMUSIC, INC. | c63351e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact:
Karen L. VanDerBosch
Chief Operating Officer & Chief Financial Officer
MakeMusic, Inc.
(952) 906-3690
kvanderbosch@makemusic.com
Karen L. VanDerBosch
Chief Operating Officer & Chief Financial Officer
MakeMusic, Inc.
(952) 906-3690
kvanderbosch@makemusic.com
MAKEMUSIC, INC. REPORTS FOURTH QUARTER AND FISCAL YEAR 2010
RESULTS
Annual SmartMusic Revenue increases 20%, Net Revenue Increases 4%
RESULTS
Annual SmartMusic Revenue increases 20%, Net Revenue Increases 4%
Minneapolis March 2, 2011 MakeMusic, Inc. (NASDAQ: MMUS) today announced financial results
for the period ended December 31, 2010. Net revenues for the three and twelve months ended December
31, 2010 were $4,842,000 and $17,148,000, a 1% and 4% increase, respectively, compared to
$4,781,000 and $16,442,000 for the same respective periods last year. Net income as reported was
$936,000, or $0.19 per basic and diluted share, for the quarter ended December 31, 2010, compared
to net income of $3,111,000, or $0.66 per basic and $0.64 per diluted share, in the fourth quarter
of 2009. For the year ended December 31, 2010, net income was $1,012,000, or $0.21 per basic and
diluted share, compared to net income of $3,453,000, or $0.74 per basic and $0.72 per diluted
share, for the comparable 2009 period. Income tax benefit was $543,000 and $461,000, respectively,
for the three and twelve-month periods ended December 31, 2010 compared to income tax benefit of
$2,499,000 and $2,494,000, respectively, for the three and twelve-month periods ended December 31,
2009.
SmartMusic® subscriptions increased to 162,189 as of December 31, 2010, a 21% increase
over the December 31, 2009 subscription count of 133,782. SmartMusic subscription and accessory
revenue continues to represent an increasing share of the companys revenue and was $1,864,000 for
the three months ended December 31, 2010, a 20% increase over $1,552,000 for the three months ended
December 31, 2009. Subscription and accessory revenue was $6,436,000 for the twelve months ended
December 31, 2010, a 20% increase over $5,382,000 during the same period in 2009. Total SmartMusic
revenue represented 38% of the companys total revenue in each of the three and twelve-month
periods ended December 31, 2010 compared to 32% and 33%, respectively, for the three and
twelve-month periods ended December 31, 2009.
MakeMusic, Inc.
Quarter and Twelve-Month Results as of December 31, 2010
Page 2
The following table illustrates the net new SmartMusic subscription data for the twelve months
ended December 31, 2010:
Net New | ||||||||||||||||||||||||
Subscriptions | ||||||||||||||||||||||||
12 months | ||||||||||||||||||||||||
12/31/2009 | New | Renewed | Renewal | Subscriptions | 12/31/2010 | ended | ||||||||||||||||||
Subscriptions | Subscriptions | Subscriptions | Rate | Ended | Subscriptions | 12/31/2010 | ||||||||||||||||||
133,782 |
61,260 | 105,847 | 76 | % | 138,700 | 162,189 | 28,407 |
Renewed subscriptions are defined as those subscriptions that customers purchase within the
two-month period after their prior subscription ended. Because of changes to the start of school
from year to year as well as fluctuations in the date that music teachers implement their
curriculum, subscribers may have a delay of up to two months in renewing their subscription.
Total SmartMusic educator accounts reached 9,402 as of December 31, 2010, a 1% increase over the
9,269 educator accounts in the prior year. The number of educators that had issued a SmartMusic
assignment increased 10%, from 1,857 as of December 31, 2009 to 2,040 as of December 31, 2010. The
number of SmartMusic Gradebook teachers, defined as teachers who deliver and manage SmartMusic
student assignments to 50 students or more, was 1,019 as of December 31, 2010. As of December 31,
2009, the company reported 886 Gradebook teachers. The number of Gradebook teachers reflects a 15%
annual increase. The number of SmartMusic site agreements increased from 322 as of December 31,
2009 to 485 as of December 31, 2010.
Notation revenue decreased by $251,000, to $2,978,000, during the fourth quarter of 2010, compared
to $3,229,000 for the same period last year, and decreased by $348,000, to $10,712,000, during the
twelve months ended December 31, 2010, compared to $11,060,000 for the same period last year.
Notation revenue for the fourth quarter and for the first twelve months of 2010 decreased compared
to the respective prior year periods due to reductions in our retail channel sales, partially
offset by stronger direct sales of our Finale® products and downloads.
Gross profit for the three-month period ended December 31, 2010 increased to $4,009,000, or 83% of
revenues, a $66,000 increase compared to the three months ended December 31, 2009 and improved by
$471,000, to $14,315,000, or 83% of revenues, for the twelve months ended December 31, 2010,
compared to the same period in 2009. The increase in gross profit dollars resulted from the
increase in SmartMusic revenue which resulted from an increased number of subscribers and
subscription price increases.
MakeMusic, Inc.
Quarter and Twelve-Month Results as of December 31, 2010
Page 3
Operating expenses for the three-month period ended December 31, 2010 increased by $288,000, to
$3,635,000, and increased by $883,000, to $13,839,000, for the twelve months ended December 31,
2010, compared to the same respective periods in 2009. These planned increases primarily related to
increases in selling and marketing expenses, which resulted from the companys aggressive expansion
of its direct sales force and addition of marketing staff, in order to support its strategic
initiatives. In addition, development expenses increased as the company incurred consulting
expenses to support the release of SmartMusic 2011, which included enhanced SmartMusic Gradebook
functionality and for the review of new notation product functionality and future notation product
direction.
Total cash increased by $2,589,000 during 2010, to $11,532,000 as of December 31, 2010. The
increase in cash during the year is primarily due to the increased number of SmartMusic
subscriptions, which increases the companys deferred revenue, which grew from $2,913,000 to
$3,699,000, and cash flow derived from operating activities. Cash of $653,000 was used during 2010
for investing activities relating to development, primarily to expand SmartMusic repertoire. By
comparison, during 2009, $788,000 was used in such investing activities.
While our existing notation products enjoy leading market positions, we engaged an interactive
design and strategic consulting company during the fourth quarter to assist us in evaluating the
potential to expand our reach outside of the market that we have traditionally served, stated
interim CEO Jeff Koch. As a result of this work, we are currently evaluating additional
investments for our notation business.
Commenting on SmartMusic, Koch continued, We believe that our technological investments in
SmartMusic have created a digital pipeline between our growing subscriber base of more than
160,000 and the music publishers who provide SmartMusic content. This growing platform is clearly
a strategic
asset for MakeMusic and we are focused on finding additional ways to monetize it. As a result, we
expect to make additional investments in development in order to leverage the SmartMusic platform
and to increase our business model flexibility.
In addition, we continue to invest in the expansion of our direct sales force as these initiatives
have proven successful in selling additional SmartMusic site subscriptions. We believe that an
expanded sales force, when combined with the relatively low penetration of our target market, will
lead to an increase in our growth rate above what we experienced in 2010.
The company will be hosting a conference call today, March 2, 2011, at 3:30 p.m. CST to discuss
these results. Participants should call 877-840-1316 and reference Conference ID Number 43234188.
A replay of the conference call will be available through March 11, 2011. To access this replay,
please dial 800-642-1687 or 706-645-9291.
About MakeMusic, Inc.
MakeMusic®, Inc., a Minnesota corporation, is a world leader in music technology whose
mission is to develop and market solutions that transform how music is composed, taught, learned
and performed. For more than 20 years, Finale® has been the industry standard in music
notation software. It has transformed the process by which composers, arrangers, musicians,
teachers, students and publishers create, edit, audition, print and publish musical scores.
Additionally, MakeMusic is the creator of SmartMusic®, the complete practice tool for
band, orchestra and voice and the SmartMusic Gradebook, the web-based student grading and records
management system. Further information about the Company can be found at www.makemusic.com.
Cautionary Statements
Certain statements found in this release may constitute forward-looking statements as defined in
the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the
speakers current views with respect to future events and financial performance and include any
statement that does not directly relate to a current or historical fact. Our forward-looking
statements in this release relate to the growth initiatives for our notation and SmartMusic
product lines, our expectations regarding market penetration and can generally otherwise be
identified by the words believe, expect, anticipate or intend or similar words.
Forward-looking statements cannot be guaranteed and actual results may vary materially due to the
uncertainties and risks, known and unknown, associated with such statements. Examples of risks and
uncertainties for MakeMusic include, but are not limited to, the impact of emerging and existing
competitors, the effectiveness of our sales, marketing, development and growth initiatives, our
ability to successfully implement our strategic initiatives, and those factors described from time
to time in our reports to the Securities and Exchange Commission (including our Annual Report on
Form 10-K). Investors should not consider any list of such factors to be an exhaustive statement
of all of the risks, uncertainties or potentially inaccurate assumptions investors should take
into account when making investment decisions. Shareholders and other readers should not place
undue reliance on forward-looking statements, as such statements speak only as of the date of
this release. We do not intend to update publicly or revise any forward-looking statements.
Financial Tables Follow:
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MakeMusic, Inc.
Condensed Statements of Operations
(In thousands of U.S. dollars, except share and per share data)
Condensed Statements of Operations
(In thousands of U.S. dollars, except share and per share data)
3 Months | 12 Months | |||||||||||||||
Ended December 31, | Ended December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Notation revenue |
$ | 2,978 | $ | 3,229 | $ | 10,712 | $ | 11,060 | ||||||||
SmartMusic revenue |
1,864 | 1,552 | 6,436 | 5,382 | ||||||||||||
NET REVENUE |
4,842 | 4,781 | 17,148 | 16,442 | ||||||||||||
COST OF REVENUES |
833 | 838 | 2,833 | 2,598 | ||||||||||||
GROSS PROFIT |
4,009 | 3,943 | 14,315 | 13,844 | ||||||||||||
83 | % | 82 | % | 83 | % | 84 | % | |||||||||
OPERATING EXPENSES: |
||||||||||||||||
Development expenses |
1,464 | 1,353 | 5,524 | 5,081 | ||||||||||||
Selling and marketing expenses |
1,115 | 965 | 4,574 | 4,139 | ||||||||||||
General and administrative
expenses |
1,056 | 1,029 | 3,741 | 3,736 | ||||||||||||
Total operating expenses |
3,635 | 3,347 | 13,839 | 12,956 | ||||||||||||
INCOME FROM OPERATIONS |
374 | 596 | 476 | 888 | ||||||||||||
Other, net |
19 | 16 | 75 | 71 | ||||||||||||
Net income before income tax |
393 | 612 | 551 | 959 | ||||||||||||
Income tax benefit |
(543 | ) | (2,499 | ) | (461 | ) | (2,494 | ) | ||||||||
Net Income |
$ | 936 | $ | 3,111 | $ | 1,012 | $ | 3,453 | ||||||||
Income per common share: |
||||||||||||||||
Basic |
$ | 0.19 | $ | 0.66 | $ | 0.21 | $ | 0.74 | ||||||||
Diluted |
$ | 0.19 | $ | 0.64 | $ | 0.21 | $ | 0.72 | ||||||||
Weighted average common
shares outstanding: |
||||||||||||||||
Basic |
4,886,205 | 4,735,875 | 4,835,478 | 4,685,480 | ||||||||||||
Diluted |
4,964,443 | 4,844,576 | 4,913,887 | 4,771,734 |
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MakeMusic, Inc.
Condensed Balance Sheets
(In thousands of U.S. dollars, except share data)
Condensed Balance Sheets
(In thousands of U.S. dollars, except share data)
December 31, | ||||||||
2010 | 2009 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 11,532 | $ | 8,943 | ||||
Accounts receivable (net of allowance of $20 and $33 in
2010 and 2009, respectively) |
1,238 | 1,277 | ||||||
Inventories |
201 | 386 | ||||||
Deferred income taxes, net |
2,786 | 2,070 | ||||||
Prepaid expenses and other current assets |
252 | 294 | ||||||
Total current assets |
16,009 | 12,970 | ||||||
Property and equipment, net |
342 | 533 | ||||||
Capitalized software products, net |
2,424 | 2,645 | ||||||
Goodwill |
3,630 | 3,630 | ||||||
Long Term deferred income taxes, net |
214 | 494 | ||||||
Other non-current assets |
2 | 6 | ||||||
Total assets |
$ | 22,621 | $ | 20,278 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities: |
||||||||
Current portion of capital lease obligations |
$ | 25 | $ | 61 | ||||
Accounts payable |
489 | 726 | ||||||
Accrued compensation |
1,372 | 1,167 | ||||||
Other accrued liabilities |
307 | 297 | ||||||
Post contract support |
150 | 132 | ||||||
Reserve for product returns |
380 | 414 | ||||||
Current portion of deferred revenue |
3,603 | 2,913 | ||||||
Total current liabilities |
6,326 | 5,710 | ||||||
Capital lease obligations, net of current portion |
4 | 30 | ||||||
Deferred revenue, net of current portion |
96 | 0 | ||||||
Other long term liabilities |
0 | 8 | ||||||
Shareholders equity: |
||||||||
Common stock, $0.01 par value: |
||||||||
Authorized shares 10,000,000
Issued and outstanding shares 4,895,983
and 4,756,891
in 2010 and 2009, respectively |
49 | 48 | ||||||
Additional paid-in capital |
66,632 | 65,980 | ||||||
Accumulated deficit |
(50,486 | ) | (51,498 | ) | ||||
Total shareholders equity |
16,195 | 14,530 | ||||||
Total liabilities and shareholders equity |
$ | 22,621 | $ | 20,278 | ||||
-more-
MakeMusic, Inc.
Condensed Statements of Cash Flows
(In thousands of U.S. dollars)
Condensed Statements of Cash Flows
(In thousands of U.S. dollars)
Year | ||||||||
Ended December 31, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 1,012 | $ | 3,453 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
1,069 | 943 | ||||||
Gain on disposal of assets |
(1 | ) | (7 | ) | ||||
Deferred income taxes, net |
(436 | ) | (2,564 | ) | ||||
Share based compensation |
438 | 300 | ||||||
Net changes in operating assets and liabilities: |
||||||||
Accounts receivable |
39 | 121 | ||||||
Inventories |
185 | 79 | ||||||
Prepaid expenses and other current assets |
42 | (1 | ) | |||||
Accounts payable |
(237 | ) | 353 | |||||
Accrued liabilities and product returns |
231 | (21 | ) | |||||
Deferred revenue |
786 | 577 | ||||||
Net cash provided by operating activities |
3,128 | 3,233 | ||||||
Cash flows from investing activities |
||||||||
Purchases of property and equipment |
(143 | ) | (227 | ) | ||||
Proceeds from disposal of property and equipment |
1 | 9 | ||||||
Capitalized development and other intangibles |
(511 | ) | (570 | ) | ||||
Net cash used in investing activities |
(653 | ) | (788 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from stock options and warrants exercised |
181 | 86 | ||||||
Payments of redemption of stock |
(6 | ) | (121 | ) | ||||
Payments on capital leases |
(61 | ) | (59 | ) | ||||
Net cash provided by (used in) financing activities |
114 | (94 | ) | |||||
Net increase in cash and cash equivalents |
2,589 | 2,351 | ||||||
Cash and cash equivalents, beginning of year |
8,943 | 6,592 | ||||||
Cash and cash equivalents, end of year |
$ | 11,532 | $ | 8,943 | ||||
Supplemental disclosure of cash flow information |
||||||||
Interest paid |
$ | 6 | $ | 10 | ||||
Income taxes paid |
136 | 5 | ||||||
Other non-cash investment and financing activities |
||||||||
Equipment acquired under capital lease |
0 | 18 |
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