MakeMusic Inc. (MMUS, Financial) filed Quarterly Report for the period ended 2009-09-30.
MakeMusic 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 the world's best-selling music notation software and SmartMusic the complete music practice system that features Intelligent Accompaniment and the world's largest interactive accompaniment library. MakeMusic maintains its corporate headquarters in Minneapolis Minnesota. Makemusic Inc. has a market cap of $18.8 million; its shares were traded at around $4 with a P/E ratio of 15.9 and P/S ratio of 1.3.
Notation revenue decreased by $674,000, to $2,687,000, when comparing the three-month periods ended September 30, 2009 and 2008 and decreased by $35,000 when comparing the nine-month periods ending September 30, 2009 and 2008. Revenue decreased in the three-month period ended September 30, 2009 due to the early release of Finale 2010. Notation revenue has been generally comparable from 2008 due to stronger direct sales offset by reductions in our channel sales due to economic conditions. In addition, the first nine months of 2008 included revenue from a $133,000 Finale site license, whereas there was no comparable sale in 2009. This decline in revenue from reduced channel sales was offset by sales of Finale NotePad®, which we began charging for in October 2008.
subscription revenue of $766,000 during the same period in 2008. Subscription revenue was $2,840,000 for the nine months ended September 30, 2009, a 28% increase over subscription revenue of $2,216,000 during the same period in 2008. These increases are due to increases in the total number of subscriptions as well as a price increase in July 2008 where teacher subscriptions increased from $100 to $130 and student subscriptions increased from $25 to $30. Total unearned SmartMusic subscription revenue (deferred revenue) was $2,476,000 as of September 30, 2009, an increase of $510,000, or 26%, over the balance at September 30, 2008. Deferred SmartMusic revenue represents the future revenue to be recorded on current subscriptions.
Many SmartMusic customers, especially new customers, also purchase accessories (primarily microphones and foot pedals) that are used with the software. Revenue for the sales of accessories, included in the SmartMusic revenue category, for the three months ended September 30, 2009 was $371,000, which was $15,000, or 4%, more than revenue of $356,000 for SmartMusic accessories in the three months ended September 30, 2008. Sales of accessories for the nine months ended September 30, 2009 were $645,000, which was comparable to revenue of $647,000 for SmartMusic accessories in the nine months ended September 30, 2008.
Development expense. Development expenses increased 3%, to $1,220,000 from $1,182,000, when comparing the three months ended September 30, 2009 and 2008 and increased 8%, to $3,728,000 from $3,466,000, when comparing the nine months ended September 30, 2009 and 2008. Development expenses consist primarily of internal payroll, payments to independent contractors and related expenses for the development and maintenance of our Finale notation, SmartMusic and SmartMusic Gradebook products as well as non-capitalized SmartMusic repertoire development, business systems and quality assurance. Personnel and contract labor costs increased from the first nine months of 2009 compared to the same period in 2008 due to staff increases that management believes were necessary in order to achieve numerous product development goals related to the simplification of SmartMusic user interface, enrollment and purchase processes. Additionally, in June 2008 we completed a server co-location
General and administrative expense. General and administrative expenses consist primarily of payroll and related expenses for executive and administrative personnel, professional services, facility costs, amortization of certain intangible assets with finite lives, bad debt and other general corporate expenses. General and administrative expenses increased 21% to $814,000 during the three months ended September 30, 2009, compared to $675,000 for the same period of 2008, and increased 8% to $2,706,000 during the nine months ended September 30, 2009, compared to $2,515,000 for the same period of 2008. General and administrative costs increased primarily as a result of sales tax expense and standard annual increases in health insurance premiums, partially offset by decreases in payroll and personnel expenses. Sales tax expense of $254,000 relates to prior years tax that had not been collected from our customers in certain states. Management is currently evaluating sales tax exposure in other states and the amount of this is not yet estimable.
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MakeMusic 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 the world's best-selling music notation software and SmartMusic the complete music practice system that features Intelligent Accompaniment and the world's largest interactive accompaniment library. MakeMusic maintains its corporate headquarters in Minneapolis Minnesota. Makemusic Inc. has a market cap of $18.8 million; its shares were traded at around $4 with a P/E ratio of 15.9 and P/S ratio of 1.3.
Highlight of Business Operations:
Net revenue. Net revenue decreased 9%, from $4,765,000 to $4,346,000, when comparing the three months ended September 30, 2009 and 2008 and increased 6%, from $10,988,000 to $11,661,000, when comparing the nine months ended September 30, 2009 and 2008. Revenue decreases in the third quarter are due to the earlier release of the Finale 2010 upgrade in June 2009 partially offset by continued sales growth in SmartMusic. In 2008 and prior years, the Finale upgrade had been released in the third fiscal quarter. We anticipate future Finale upgrade releases will occur during the second fiscal quarter. Revenue increases during the nine months ended September 30, 2009 are attributable to the SmartMusic sales growth.Notation revenue decreased by $674,000, to $2,687,000, when comparing the three-month periods ended September 30, 2009 and 2008 and decreased by $35,000 when comparing the nine-month periods ending September 30, 2009 and 2008. Revenue decreased in the three-month period ended September 30, 2009 due to the early release of Finale 2010. Notation revenue has been generally comparable from 2008 due to stronger direct sales offset by reductions in our channel sales due to economic conditions. In addition, the first nine months of 2008 included revenue from a $133,000 Finale site license, whereas there was no comparable sale in 2009. This decline in revenue from reduced channel sales was offset by sales of Finale NotePad®, which we began charging for in October 2008.
subscription revenue of $766,000 during the same period in 2008. Subscription revenue was $2,840,000 for the nine months ended September 30, 2009, a 28% increase over subscription revenue of $2,216,000 during the same period in 2008. These increases are due to increases in the total number of subscriptions as well as a price increase in July 2008 where teacher subscriptions increased from $100 to $130 and student subscriptions increased from $25 to $30. Total unearned SmartMusic subscription revenue (deferred revenue) was $2,476,000 as of September 30, 2009, an increase of $510,000, or 26%, over the balance at September 30, 2008. Deferred SmartMusic revenue represents the future revenue to be recorded on current subscriptions.
Many SmartMusic customers, especially new customers, also purchase accessories (primarily microphones and foot pedals) that are used with the software. Revenue for the sales of accessories, included in the SmartMusic revenue category, for the three months ended September 30, 2009 was $371,000, which was $15,000, or 4%, more than revenue of $356,000 for SmartMusic accessories in the three months ended September 30, 2008. Sales of accessories for the nine months ended September 30, 2009 were $645,000, which was comparable to revenue of $647,000 for SmartMusic accessories in the nine months ended September 30, 2008.
Development expense. Development expenses increased 3%, to $1,220,000 from $1,182,000, when comparing the three months ended September 30, 2009 and 2008 and increased 8%, to $3,728,000 from $3,466,000, when comparing the nine months ended September 30, 2009 and 2008. Development expenses consist primarily of internal payroll, payments to independent contractors and related expenses for the development and maintenance of our Finale notation, SmartMusic and SmartMusic Gradebook products as well as non-capitalized SmartMusic repertoire development, business systems and quality assurance. Personnel and contract labor costs increased from the first nine months of 2009 compared to the same period in 2008 due to staff increases that management believes were necessary in order to achieve numerous product development goals related to the simplification of SmartMusic user interface, enrollment and purchase processes. Additionally, in June 2008 we completed a server co-location
General and administrative expense. General and administrative expenses consist primarily of payroll and related expenses for executive and administrative personnel, professional services, facility costs, amortization of certain intangible assets with finite lives, bad debt and other general corporate expenses. General and administrative expenses increased 21% to $814,000 during the three months ended September 30, 2009, compared to $675,000 for the same period of 2008, and increased 8% to $2,706,000 during the nine months ended September 30, 2009, compared to $2,515,000 for the same period of 2008. General and administrative costs increased primarily as a result of sales tax expense and standard annual increases in health insurance premiums, partially offset by decreases in payroll and personnel expenses. Sales tax expense of $254,000 relates to prior years tax that had not been collected from our customers in certain states. Management is currently evaluating sales tax exposure in other states and the amount of this is not yet estimable.
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