MakeMusic Reports Third Quarter 2012 Results

MakeMusic, Inc. (NASDAQ: MMUS), a world leader in music technology, announced financial results for the quarter ended September 30, 2012.

Chairman of the Board Robert Morrison commented, “The MakeMusic team executed well in the third quarter, achieving a sizable increase in net revenues and making solid headway with the company’s key growth initiatives.

We believe the commitment we made to invest in product development, sales and marketing capabilities and personnel is positioning MakeMusic to leverage the many changes in our markets and enhance our standing as a pre-eminent provider of cutting-edge, interactive music software products.”

COO and CFO Karen VanDerBosch added, “Net revenues rose 27% compared to the third quarter of 2011 and 17% on a year-to-date basis, reflecting the expansion of MakeMusic’s product lines and continued SmartMusic® growth. We ended the quarter with 201,838 SmartMusic subscriptions, a 14% increase over September 2011. Both our rebranding and our technology initiatives have been moving forward smoothly and we are on track to complete important modernizations to our software platform and unveil our new version of Finale® in mid-2013. It will offer many innovative features and a common file format to provide a platform for future development.”

Financial Results for the Quarter Ended September 30, 2012 Compared to the Quarter Ended September 30, 2011

• Net revenues were $4.8 million, compared to $3.8 million.
  • Notation revenue was $2.4 million compared to $1.6 million. Included in 2012 Notation revenue was $216,000 relating to Garritan product sales.
  • SmartMusic revenue was $2.4 million compared to $2.2 million.
• Gross profit was $4.0 million, or 82% of revenue, compared to $3.0 million, or 79% of revenue.
• Operating expenses were $4.9 million, compared to $3.3 million, due to previously-announced investments in our technology architecture and sales and marketing initiatives, as well as legal and financial advisory expenses associated with responding to the proposal received from LaunchEquity Partners, LLC in July 2012.
• Net loss was $620,000, or $0.13 per basic and diluted share, compared to net loss of $205,000, or $.04 per basic and diluted share.

Financial Results for the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

• Net revenues were $13.0 million, compared to $11.1 million.
  • Notation revenue was $6.8 million compared to $5.7 million. Included in 2012 Notation revenue was $699,000 relating to Garritan product sales.
  • SmartMusic revenue was $6.3 million compared to $5.5 million.
• Gross profit was $11.0 million, or 84% of revenue, compared to $9.2 million, or 83% of revenue.
• Operating expenses were $14.7 million, compared to $10.1 million, due to previously-announced investments in our technology architecture and sales and marketing initiatives, as well as legal and financial advisory expenses associated with responding to the proposal received from LaunchEquity Partners, LLC in July 2012 and legal and severance expenses associated with the June 2012 departure of the company’s former CEO.
• Net loss was $2.4 million, or $0.49 per basic and diluted share, compared to net loss of $690,000, or $0.14 per basic and diluted share.

Cash and cash equivalents were $5.9 million compared to $9.3 million as of December 31, 2011. The decrease is attributable primarily to our technology and marketing investments, as well as our strategic alternatives review process.

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