MakeMusic, Inc. Reports Fourth Quarter and Fiscal Year 2007 Results

Business Wire,  March 5, 2008  

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SmartMusic and Impact resonate with educators - subscriptions grow 53%

MINNEAPOLIS -- MakeMusic, Inc. (Nasdaq: MMUS) today announced financial results for the period ended December 31, 2007. Net revenues for the three and twelve months ended December 31, 2007, were $4,285,000 and $14,580,000 compared to $3,719,000 and $12,978,000 for the same periods in the prior year, respectively. The company also announced net income of $489,000, or $0.11 per basic share and $0.10 per diluted share, for the quarter ended December 31, 2007, compared to net income of $436,000, or $0.11 per basic and $0.10 per diluted share, in the fourth quarter of 2006. For the year ended December 31, 2007, net income was $650,000, or $0.16 per basic and $0.15 per diluted share, compared to net income of $255,000, or $0.7 per basic and $0.6 per diluted share, for the comparable 2006 period.

SmartMusic([R]) subscriptions increased to 86,901 as of December 31, 2007, a 53% increase over December 31, 2006. 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 $651,000 in the quarter ended December 31, 2007, a 50% increase over subscription revenue of $434,000 in the quarter ended December 31, 2006. For the twelve months ended December 31, 2007, subscription revenue increased 32% to $2,125,000. Total SmartMusic revenue, including accessories, was $2,900,000 for the year ended December 31, 2007, and $2,164,000 for the year ended December 31, 2006.

Commenting on fourth quarter and 2007 results, Ron Raup, co-CEO, stated, "We are excited by how educators are responding to our sales programs and the new SmartMusic solution. Early adopters value the ability to use SmartMusic Impact[TM] as a means to provide individualized instruction, and easily document the achievement of each student. However, we continue to believe that wider adoption will be as a result of developing music titles that align with the titles that music directors are preparing for performance. Therefore, we plan to accelerate our investment in repertoire development and in areas to support our growth. We are also pleased with the steady growth in Finale notation sales, and we will continue efforts to maintain our strong competitive posture."

The increase in notation revenue in 2007 is primarily due to the strong performance of Finale([R]) 2008 which the company began shipping in July 2007. Additionally, sales of Finale Allegro([R]) increased as this product was upgraded in 2007 as part of its biennial upgrade cycle. Finale SongWriter([R]) sales also increased as this product was newly translated in 2007 by international distributors into both Japanese and German.

Gross profit for the three- and twelve-month periods ended December 31, 2007, was $3,601,000, or 84% of sales and $12,352,000, or 85% of sales, respectively, compared to $3,179,000, or 85% of sales, and $11,131,000, or 86% of sales, respectively, in the corresponding periods of 2006.

Operating expenses for the fourth quarter were $3,154,000, a 14% increase over the $2,768,000 reported in the same period last year. Operating expenses for 2007 were $11,827,000, an increase of $851,000 or 8% over 2006. These planned increases, primarily in development, were the result of increased personnel and contract labor costs to achieve numerous product development goals. The company released 608 new SmartMusic large ensemble concert band, jazz ensemble and orchestra titles with pre-authored assignments in 2007 and anticipates releasing more titles every month.

Cash and cash equivalents increased to $6,041,000 at December 31, 2007, from $3,130,000 at the end of 2006. This increase is primarily due to proceeds from the exercise of warrants, the company's net income and the increase in deferred revenue from SmartMusic subscriptions.

About MakeMusic, Inc.

MakeMusic([R]), Inc. is a world leader in music-education technology whose mission is to enhance and transform the experience of making, teaching and learning music. Among its leading products are Finale([R]), a best-selling music notation software, and SmartMusic([R]), the music learning software for band, orchestra and choir. MakeMusic maintains its corporate headquarters in Minneapolis. 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 the anticipated increase in SmartMusic subscriptions. 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 rapid technological changes and obsolescence in our industry, the impact of emerging and existing competitors, fluctuations in general economic conditions, and those risks described from time to time in our reports to the Securities and Exchange Commission (including our Annual Report on Form 10-KSB). 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 undertake no obligation to update publicly or revise any forward-looking statements.