MakeMusic, Inc. (NASDAQ: MMUS) announced financial results for
the three months and nine months ended September 30, 2011.
“SmartMusic® revenue grew 18% compared to the third quarter of
2010, while notation revenue was impacted by the shift in timing of
the Finale® 2012 release from summer to early fall,” said Karen van
Lith, MakeMusic CEO. “Finale 2012 launched successfully on October
7th and initial response to the new release has been very
positive.”
Van Lith continued: “We continue to make progress on several
initiatives related to modernizing our applications and leveraging
our library of repertoire content. Our balance sheet continues to
be strong, and we have the resources to execute on corporate
initiatives to drive growth.”
Financial Results for the Three Months
Ended September 30, 2011, Compared to September 30,
2010
- Net revenues were $3.8 million,
compared to $4.5 million.
- Notation revenue was $1.6 million,
compared to $2.7 million. The decrease was related to the delay in
the release of Finale 2012.
- SmartMusic revenue was $2.2 million
compared to $1.8 million.
- Gross Profit was $3.0 million, or 79 %
of revenue, compared to $3.8 million, or 83% of revenue.
- Operating expenses were $3.3 million in
both periods.
- Net loss was $205,000, or $0.04 per
basic and diluted share, compared to net income of $241,000, or
$0.05 per basic and diluted share.
- At September 30, 2011, cash and cash
equivalents was $9.9 million, compared to $9.8 million as of
September 30, 2010
Financial Results for the Nine Months
Ended September 30, 2011, Compared to September 30,
2010
- Net revenues were $11.1 million,
compared to $12.3 million.
- Notation revenue was $ 5.7 million,
compared to $7.7million.
- SmartMusic revenue was $ 5.5 million
compared to $4.6 million.
- Gross Profit was $9.2 million, or 83%
of revenue, compared to $10.3 million, or 84% of revenue.
- Operating expenses were $10.1 million
compared to $10.2 million.
- Net loss was $690,000, or $0. 14 per
basic and diluted share, compared to net income of $76,000, or
$0.02 per basic and diluted share.
SmartMusic® Subscriptions Report Update
“As of September 2011, we discontinued the issuance of our
monthly SmartMusic report as we believe it’s more appropriate to
evaluate subscriptions sold as an indicator of growth of the
business,” said van Lith. “Unless renewals of bulk subscriptions
are exactly timed by the educator to be every 12 months, an ‘active
subscription’ measure as previously reported will have either
overlaps or gaps that are not indicative of gains or losses.”
Conference Call
Information
The company will hold a conference call to review operating
results for the third quarter of 2011, today, Wednesday, November
2, 2011 at 3:30 p.m. CDT. To access the call, participants should
call 877-840-1316 and reference Conference ID Number 14395006. Two
hours after the completion of the conference call, a digital
recording will be available for replay by calling 855-859-2056 or
404-537-3406 through November 14, 2011.
Slides to Accompany Conference
Call
Slides to accompany management’s presentation on the call will
be available on the company's website just prior to the call in the
investor relations portion of the company’s website or
www.makemusic.com/investor_relations.aspx.
About MakeMusic, Inc.
MakeMusic®, Inc. 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,
enabling composers, arrangers, musicians, teachers, students and
publishers to create, edit, audition, print and publish musical
scores. MakeMusic is also the creator of SmartMusic® interactive
software that is transforming the way students practice. With
SmartMusic, students and teachers have access to thousands of band,
orchestra and vocal pieces allowing students to practice with
background accompaniment and get immediate feedback on their
performance. SmartMusic allows teachers to individualize
instruction and document the progress of every student. The
SmartMusic® Inbox™, an Android™ and Apple® mobile application,
provides additional access for teachers to review, grade, and
comment on student assignments. Additional information about this
Minnesota 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 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 regarding:
(i) response to the Finale 2012 launch and future revenue
associated with the release; (ii) modernizing our applications and
leveraging our library of repertoire content; (iii) the
availability of resources to execute on corporate initiatives to
drive growth; and (iv) the evaluation of subscriptions sold as an
indicator of growth. 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: (i) the ability of our management
team to successfully implement growth initiatives for SmartMusic;
(ii) market acceptance of our products; (iii) the impact of
changing technology on our product upgrades; (iv) delays in
finalizing and implementing product initiatives; and (v) 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.
MakeMusic, Inc.
Condensed Balance Sheets
(In thousands of U.S. dollars, except
share data)
September 30, December 31,
Assets
2011 2010
(Unaudited) Current assets: Cash and
cash equivalents
$ 9,881 $ 11,532 Accounts receivable
(net of allowance of $8 and $20 in 2011 and 2010, respectively)
1,743 1,238 Inventories
335 201 Deferred income
taxes, net
2,786 2,786 Prepaid expenses and other current
assets
328 252 Total current
assets
15,073 16,009 Property and equipment, net
389 342 Capitalized software products, net
2,245
2,424 Goodwill
3,630 3,630 Long term deferred income taxes,
net
422 214 Other non-current assets
1
2 Total assets
$ 21,760 $ 22,621
Liabilities and Shareholders’ Equity Current
liabilities: Current portion of capital lease obligations
$
6 $ 25 Accounts payable
398 489 Accrued compensation
647 1,372 Other accrued expenses
303 307 Post
contract support
150 150 Reserve for product returns
369 380 Current portion of deferred revenue
4,090 3,603 Total current liabilities
5,963 6,326 Capital lease obligations, net of current
portion
0 4 Deferred revenue, net of current portion
140 96 Shareholders’ equity: Common stock, $0.01 par
value: Authorized shares – 10,000,000 Issued and outstanding shares
– 4,927,868 and 4,895,983 in 2011 and 2010, respectively
49
49 Additional paid-in capital
66,784 66,632 Accumulated
deficit
(51,176 ) (50,486 ) Total
shareholders’ equity
15,657 16,195
Total liabilities and shareholders’ equity
$
21,760 $ 22,621
MakeMusic, Inc.
Condensed Statements of
Operations
(In thousands of U.S. dollars, except
share and per share data)
(Unaudited)
3 Months 9 Months Ended
September 30, Ended September 30, 2011
2010
2011 2010 Notation revenue
$ 1,647
$ 2,704
$ 5,653 $ 7,734 SmartMusic revenue
2,158 1,825
5,459
4,572 NET REVENUE
3,805 4,529
11,112
12,306 COST OF REVENUES
783 778
1,911 2,000 GROSS
PROFIT
3,022 3,751
9,201 10,306 79 % 83 % 83 % 84 %
OPERATING EXPENSES: Development expenses
971 1,336
3,271 4,060 Selling and marketing expenses
1,384
1,225
3,632 3,459 General and administrative expenses
907 769
3,004 2,685 Patent litigation expense
0 0
225 0
Total operating expenses
3,262
3,330
10,132 10,204
INCOME (LOSS) FROM OPERATIONS
(240 )
421
(931 ) 102 Other, net
38
16
91 56
Net income (loss) before income tax
(202 ) 437
(840 ) 158 Income tax expense (benefit)
3 196
(150 )
82 Net income (loss)
($205 ) $
241
($690 ) $ 76 Income
(Loss) per common share: Basic
($0.04 ) $ 0.05
($0.14 ) $ 0.02 Diluted
($0.04 ) $ 0.05
($0.14 ) $ 0.02 Weighted average common shares
outstanding: Basic
4,908,829 4,867,663
4,884,755
4,818,383 Diluted
4,908,829 4,974,772
4,884,755
4,923,507
MakeMusic, Inc.
Condensed Statements of Cash
Flows
(In thousands of U.S. dollars)
(Unaudited)
9 Months Ended September 30, 2011
2010
Cash flows from operating activities Net income
(loss)
($690 ) $ 76 Adjustments to reconcile net
income (loss) to net cash used in operating activities:
Depreciation and amortization
826 758 Gain on disposal of
assets
0 (1 ) Deferred income taxes, net
(208
) 79 Share based compensation
356 325 Net changes in
operating assets and liabilities: Accounts receivable
(505
) (184 ) Inventories
(134 ) 38 Prepaid
expenses and other current assets
(76 ) (69 )
Accounts payable
(91 ) (90 ) Accrued expenses and
product returns
(722 ) (202 ) Deferred revenue
531 477 Net cash (used in) provided by
operating activities
(713 ) 1,207
Cash
flows from investing activities Purchases of property and
equipment
(239 ) (93 ) Proceeds from disposal of
property and equipment
0 1 Capitalized development and other
intangibles
(453 ) (367 ) Net cash used
in investing activities
(692 ) (459 )
Cash
flows from financing activities Proceeds from stock options
exercised
87 167 Payments on redemption of stock options
(18 ) 0 Repurchase of common stock
(291
) 0 Principal payments on capital leases
(24
) (45 ) Net cash (used in) provided by financing
activities
(246 ) 122 Net increase
(decrease) in cash and cash equivalents
(1,651 ) 870
Cash and cash equivalents, beginning of period
11,532
8,943 Cash and cash equivalents, end of period
$ 9,881 $ 9,813
Supplemental
disclosure of cash flow information Interest paid
$
1 $ 4 Income taxes paid
124 99
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