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MakeMusic Reports Fourth Quarter And Fiscal Year 2012 Results

MakeMusic, Inc. (NASDAQ: MMUS), a world leader in music technology, announced financial results for the period ended December 31, 2012. As previously announced and further explained below, MakeMusic has entered into a definitive agreement with LaunchEquity Partners, LLC pursuant to which MakeMusic expects to be acquired in an all-cash transaction.

Chairman of the Board Robert Morrison commented, “Our SmartMusic ® business performed well during the fourth quarter and we continued our work to launch new and enhanced versions of Finale ® and SmartMusic in mid-2013. We are pleased with the progress we are making towards these goals, as well as with our other product development, sales and marketing initiatives, including our upcoming release of an iPad ® version of SmartMusic. We remain focused on developing and offering fresh and innovative solutions that advance the ways in which music is composed, taught, learned and performed.”

COO and CFO Karen VanDerBosch added, “SmartMusic subscriptions rose to 209,418 as of December 31, 2012, a 17% year-over-year increase and SmartMusic revenue increased by 15% in 2012. This growth was offset by a decline in notation revenue, reflecting year-over-year changes in the timing of a new release of Finale. Our push to modernize our notation software platform is on schedule and we look forward to unveiling the new product mid-year. In addition, we completed our rebranding initiatives to achieve a more consistent look and feel for our products. Just last week we launched a new version of MakeMusic’s website that has our new branding and enhanced e-commerce capabilities.”

Financial Results for the Quarter Ended December 31, 2012 Compared to the Quarter Ended December 31, 2011

  • Net revenues were $4.7 million, compared to $5.9 million.
    • Notation revenue was $2.3 million compared to $3.8 million. Included in 2012 Notation revenue was $320,000 relating to Garritan TM product sales. A new version of Finale was released in October 2011, but not in 2012.
    • SmartMusic revenue was $2.4 million compared to $2.1 million.
  • Gross profit was $3.8 million, or 81% of revenue, compared to $5.0 million, or 86% of revenue. The gross profit percentage decline is due to product mix.
  • Operating expenses were $5.0 million, compared to $4.0 million, due to previously announced investments in our technology architecture, increased expenses due to sales and marketing initiatives and legal and financial advisory expenses associated with responding to the proposal received from LaunchEquity Partners, LLC in July 2012.
  • Net loss was $1.3 million, or $0.26 per basic and diluted share, compared to net income of $694,000, or $0.14 per basic and diluted share.

Financial Results for the Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011

  • Net revenues were $17.7 million, compared to $17.0 million.
    • Notation revenue was $9.1 million compared to $9.5 million. Included in 2012 Notation revenue was $1.0 million relating to Garritan product sales.
    • SmartMusic revenue was $8.7 million compared to $7.5 million.
  • Gross profit was $14.8 million, or 83% of revenue, compared to $14.2 million, or 84% of revenue.
  • Operating expenses were $19.8 million, compared to $14.1 million, due to previously announced investments in our technology architecture, increased expenses due to sales and marketing initiatives and legal and financial advisory expenses associated with responding to the proposal received from LaunchEquity Partners, LLC in July 2012. Additionally, there were increases in legal and severance expenses associated with the June 2012 departure of the company’s former CEO.
  • Net loss was $3.7 million, or $0.74 per basic and diluted share, compared to net income of $4,000, or $0.00 per basic and diluted share.

Cash and cash equivalents were $5.7 million compared to $9.3 million as of December 31, 2011. The decrease is attributable primarily to our technology and sales and marketing investments, as well as our strategic alternatives review process.

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