Exhibit 99.1
MakeMusic, Inc.
Quarter and Six-Month Results as of June 30, 2009
Page 1
FOR IMMEDIATE RELEASE
Contact:
Karen L. VanDerBosch
Chief Financial Officer
MakeMusic, Inc.
(952) 906-3690
kvanderbosch@makemusic.com
MAKEMUSIC, INC. ANNOUNCES SECOND QUARTER 2009 RESULTS
Second Quarter Release of Finale Upgrade Results in
34% Increase in Total Revenue Compared to Prior Year
Minneapolis — August 5, 2009— MakeMusic, Inc. (NASDAQ: MMUS) today announced financial results for the three months and six months ended June 30, 2009. Net revenues for the three and six months ended June 30, 2009 were $3,474,000 and $7,315,000, a 34% and 18% increase, respectively, compared to $2,601,000 and $6,223,000 for the same respective periods last year. The company also announced for the three and six months ended June 30, 2009 a net loss of $91,000 and $236,000, or $0.02 and $0.05 per basic and diluted share, respectively. These results represent a decrease over the reported net loss of $811,000 and $960,000, or $0.17 and $0.21 per basic and diluted share, respectively, for the same periods last year.
The increase in net revenue during the second quarter and first half of the year was attributable to the release of Finale 2010 in early June 2009. In 2008 and in prior years, the Finale upgrade was released in the third quarter. Notation revenue was $2,293,000 for the three months ended June 30, 2009, a 41% increase over notation revenue of $1,625,000 during the same period in 2008. Notation revenue for the six months ended June 30, 2009 was $4,820,000, a 15% increase over notation revenue of $4,182,000 during the six months ended June 30, 2008.
SmartMusic® subscriptions increased to 111,059 as of June 30, 2009, a 16% increase over the June 30, 2008 subscription count of 95,632. As a result of the increased base of subscriptions, SmartMusic subscription revenue continues to represent an increasing share of the company’s revenue and was $941,000 for the three months ended June 30, 2009, a 26% increase over subscription revenue of $748,000 during the same period in 2008. Subscription revenue was $1,852,000 for the six months ended June 30, 2009, a 28% increase over subscription revenue of $1,449,000 during the same period in 2008.
MakeMusic, Inc.
Quarter and Six-Month Results as of June 30, 2009
Page 2
The following table illustrates the net new SmartMusic subscription data for the six months ended June 30, 2009:
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Net New |
| | | | | | | | | | | | | | | | | | | Subscriptions |
| | | | | | | | | | | | | | | | | | | 6 months |
| 12/31/2008 | | New | | Renewed | | Subscriptions | | 6/30/2009 | | ended |
| Subscriptions | | Subscriptions | | Subscriptions | | Ended | | Subscriptions | | 6/30/2009 |
| 106,584 | | | 15,865 | | | | 23,591 | | | | 34,981 | | | | 111,059 | | | | 4,475 | |
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 subscriptions. The company believes this definition most closely reflects the renewal rate of SmartMusic subscriptions.
Total educators using SmartMusic was 8,616 as of June 30, 2009, a 6% increase over the 8,165 educator accounts as of June 30, 2008. The number of educators that had issued a SmartMusic assignment increased 56% from 1,282 as of June 30, 2008 to 1,994 as of June 30, 2009. The number of SmartMusic Gradebook™ teachers, defined as teachers who deliver and manage SmartMusic student assignments to 50 students or more, was 874 as of June 30, 2009 and the average number of student subscriptions per Gradebook teacher was 37. As of June 30, 2008 the company reported 538 Gradebook teachers and an average number of student subscriptions per teacher of 27. The Gradebook teacher growth reflects a 62% annual increase. The number of SmartMusic site licenses totaled 203 as of June 30, 2009 compared to 97 a year ago. Finally, the company released 177 new SmartMusic large ensemble band, jazz ensemble and orchestra titles with pre-authored assignments in the first quarter of 2009. No new titles were released in the second quarter of 2009 because newly developed repertoire was being held pending the release of SmartMusic 2010.
Gross profit for the three-month period ended June 30, 2009 increased by $840,000 to $2,999,000, compared to the three months ended June 30, 2008 and improved by $1,010,000 to $6,284,000, for the six months ended June 30, 2009, compared to the same period in 2008. The increase in gross profit for the three and six months ended June 30, 2009 is primarily due to the increase in revenues, partially offset by higher software development amortization as a result of the expanded repertoire added to SmartMusic since July 1, 2008.
MakeMusic, Inc.
Quarter and Six-Month Results as of June 30, 2009
Page 3
Operating expenses for the three-month period ended June 30, 2009 increased by $117,000, to $3,108,000, and increased by $286,000, to $6,550,000, for the six months ended June 30, 2009 compared to the same period in 2008. These planned increases, primarily in development, were the result of increased personnel and contract labor costs to achieve numerous product development goals.
Total cash decreased by $496,000 to $6,096,000 during the first six months of 2009. The decrease in cash for the first half of the year is primarily due to the seasonal pattern of the company’s business and the net cash used in investing activities. During the first six months of 2009, cash of $502,000 was used in investing activities primarily to expand SmartMusic repertoire. By comparison, during the first six months of 2008, $1,276,000 was used in investing activities.
CEO Ron Raup commented on second quarter results, “The earlier release of this year’s Finale upgrade had a significant impact on our overall second quarter financial performance compared to previous years. As a result we anticipate lower third quarter Notation sales as compared to the 2008 third quarter. We have been pleased with the positive response from our customers regarding the broad range of enhancements included in Finale 2010.
“During the second quarter, our direct sales force continued to focus on existing SmartMusic teachers who have not yet utilized the Gradebook in their curriculum. During the quarter, the sales team also focused on contacting post-secondary faculty regarding the new Finale release. We implemented a Customer Relationship Management (CRM) system to assist them in managing existing teacher accounts and improving the tracking of sales leads on schools that meet our target profile.
“Finally, SmartMusic 2010 was released on July 28, 2009. We prioritized user feedback in the design process for this product. Information gathered from surveys, focus groups and home visits was leveraged by internal developers and interface design consultants to make the software even more intuitive and easy to use. SmartMusic 2010 also offers greater visibility of available SmartMusic repertoire, which continues to be the most influential factor in the purchase decision, and includes over 300 new band and orchestra titles.”
The company will be hosting a conference call today, August 5, 2009 at 3:30 p.m. CST to discuss these results. Participants should call 877-840-1316 and reference Conference ID Number 20726214. A replay of the conference call will be available through August 14, 2009. To access this replay, please dial 800-642-1687 or 706-645-9291.
MakeMusic, Inc.
Quarter and Six-Month Results as of June 30, 2009
Page 4
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 choir and SmartMusic GradebookTM, 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 speaker’s 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 our expectations for third quarter sales and our investment in repertoire development. 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 success of our product development efforts, the impact of emerging and existing competitors, our ability to hire and retain key personnel and effective sales agents, our ability to successfully implement our marketing and sales strategies, errors in management estimates with respect to the seasonality of our business, fluctuations in general economic conditions including changes in discretionary spending, and those risks 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:
MakeMusic, Inc.
Condensed Statements of Operations
(In thousands of U.S. dollars, except share and per share data)
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | 3 Months | | | 6 Months | |
| | | Ended June 30, | | | Ended June 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Notation revenue | | $ | 2,293 | | | $ | 1,625 | | | $ | 4,820 | | | | 4,182 | |
| SmartMusic revenue | | | 1,051 | | | | 859 | | | | 2,207 | | | | 1,740 | |
| Other revenue | | | 130 | | | | 117 | | | | 288 | | | | 301 | |
| | | | | | | | | | | | | |
| NET REVENUE | | | 3,474 | | | | 2,601 | | | | 7,315 | | | | 6,223 | |
| | | | | | | | | | | | | | | | | |
| COST OF REVENUES | | | 475 | | | | 442 | | | | 1,031 | | | | 949 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 2,999 | | | | 2,159 | | | | 6,284 | | | | 5,274 | |
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| Development expenses | | | 1,229 | | | | 1,171 | | | | 2,508 | | | | 2,284 | |
| Selling and marketing expenses | | | 1,019 | | | | 965 | | | | 2,150 | | | | 2,140 | |
| General and administrative expenses | | | 860 | | | | 855 | | | | 1,892 | | | | 1,840 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Total operating expenses | | | 3,108 | | | | 2,991 | | | | 6,550 | | | | 6,264 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| LOSS FROM OPERATIONS | | | (109 | ) | | | (832 | ) | | | (266 | ) | | | (990 | ) |
| | | | | | | | | | | | | | | | | |
| Other, net | | | 18 | | | | 27 | | | | 32 | | | | 36 | |
| | | | | | | | | | | | | |
| Net loss before income tax | | | (91 | ) | | | (805 | ) | | | (234 | ) | | | (954 | ) |
| | | | | | | | | | | | | | | | | |
| Income tax expense | | | 0 | | | | 6 | | | | 2 | | | | 6 | |
| | | | | | | | | | | | | |
| Net loss | | | ($91 | ) | | | ($811 | ) | | | ($236 | ) | | | ($960 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Loss per common share: | | | | | | | | | | | | | | | | |
| Basic and diluted | | | ($0.02 | ) | | | ($0.17 | ) | | | ($0.05 | ) | | | ($0.21 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic and diluted | | | 4,661,923 | | | | 4,634,529 | | | | 4,653,215 | | | | 4,605,993 | |
MakeMusic, Inc.
Condensed Balance Sheets
(In thousands of U.S. dollars, except share data)
| | | | | | | | | |
| | | June 30, | | | | |
| | | 2009 | | | December 31, | |
| | | (Unaudited) | | | 2008 | |
Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 6,096 | | | $ | 6,592 | |
| Accounts receivable (net of allowance of $26 and $44 in 2009 and 2008, respectively) | | | 1,157 | | | | 1,397 | |
| Inventories | | | 506 | | | | 465 | |
| Prepaid expenses and other current assets | | | 320 | | | | 293 | |
| | | | | | | |
| Total current assets | | | 8,079 | | | | 8,747 | |
| | | | | | | | | |
| Property and equipment, net | | | 643 | | | | 673 | |
| Capitalized software products, net | | | 2,702 | | | | 2,631 | |
| Goodwill | | | 3,630 | | | | 3,630 | |
| Other non-current assets | | | 7 | | | | 10 | |
| | | | | | | |
| Total assets | | $ | 15,061 | | | $ | 15,691 | |
| | | | | | | |
| | | | | | | | | |
Liabilities and Shareholders’ Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Current portion of capital lease obligations | | $ | 58 | | | $ | 56 | |
| Accounts payable | | | 341 | | | | 373 | |
| Accrued compensation | | | 1,225 | | | | 1,170 | |
| Other accrued liabilities | | | 217 | | | | 272 | |
| Post contract support | | | 146 | | | | 146 | |
| Reserve for product returns | | | 396 | | | | 382 | |
| Current portion of deferred rent | | | 31 | | | | 30 | |
| Deferred revenue | | | 1,802 | | | | 2,336 | |
| | | | | | | |
| Total current liabilities | | | 4,216 | | | | 4,765 | |
| | | | | | | | | |
| Capital lease obligations, net of current portion | | | 61 | | | | 76 | |
| Deferred rent, net of current portion | | | 24 | | | | 39 | |
| | | | | | | | | |
| Shareholders’ equity: | | | | | | | | |
| Common stock, $0.01 par value: | | | | | | | | |
| Authorized shares — 10,000,000 | | | | | | | | |
| Issued and outstanding shares — 4,659,645 and 4,635,529 in 2009 and 2008, respectively | | | 47 | | | | 46 | |
| Additional paid-in capital | | | 65,900 | | | | 65,716 | |
| Accumulated deficit | | | (55,187 | ) | | | (54,951 | ) |
| | | | | | | |
| Total shareholders’ equity | | | 10,760 | | | | 10,811 | |
| | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 15,061 | | | $ | 15,691 | |
| | | | | | | |
MakeMusic, Inc.
Condensed Statements of Cash Flows
(In thousands of U.S. dollars)
(Unaudited)
| | | | | | | | | |
| | | 6 Months | |
| | | Ended June 30, | |
| | | 2009 | | | 2008 | |
Cash flows from operating activities | | | | | | | | |
| Net loss | | | ($236 | ) | | | ($960 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | | | | | | | | |
| Depreciation and amortization | | | 464 | | | | 404 | |
| Noncash stock based compensation | | | 185 | | | | 231 | |
| Net changes in assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 240 | | | | 436 | |
| Inventories | | | (41 | ) | | | (119 | ) |
| Prepaid expenses and other current assets | | | (27 | ) | | | (76 | ) |
| Accounts payable | | | (32 | ) | | | (14 | ) |
| Accrued liabilities and product returns | | | 0 | | | | 45 | |
| Deferred revenue | | | (534 | ) | | | (235 | ) |
| | | | | | | |
| Net cash provided by (used in) operating activities | | | 19 | | | | (288 | ) |
| | | | | | | | | |
Cash flows from investing activities | | | | | | | | |
| Purchases of property and equipment | | | (175 | ) | | | (279 | ) |
| Capitalized development and other intangibles | | | (327 | ) | | | (997 | ) |
| | | | | | | |
| Net cash used in investing activities | | | (502 | ) | | | (1,276 | ) |
| | | | | | | | | |
Cash flows from financing activities | | | | | | | | |
| Proceeds from stock options and warrants exercised | | | 0 | | | | 297 | |
| Payments on capital leases | | | (13 | ) | | | (28 | ) |
| | | | | | | |
| Net cash (used in) provided by financing activities | | | (13 | ) | | | 269 | |
| | | | | | | |
| Net decrease in cash and cash equivalents | | | (496 | ) | | | (1,295 | ) |
| Cash and cash equivalents, beginning of period | | | 6,592 | | | | 6,041 | |
| | | | | | | |
| Cash and cash equivalents, end of period | | $ | 6,096 | | | $ | 4,746 | |
| | | | | | | |
| | | | | | | | | |
Supplemental disclosure of cash flow information | | | | | | | | |
| Interest paid | | $ | 5 | | | $ | 7 | |
| Income taxes paid | | | 2 | | | | 6 | |
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