Monotype Announces First Quarter 2013 Results

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Monotype Announces First Quarter 2013 Results

Company Reports Record Revenue and Profits

WOBURN, Mass.--(BUSINESS WIRE)-- Monotype Imaging Holdings Inc. (NAS: TYPE) , a leading provider of typefaces, technology and expertise for creative applications and consumer devices, today announced financial results for the first quarter ended March 31, 2013.


First quarter 2013 highlights

  • Revenue for the quarter was a record $42.0 million, a 22 percent increase year-over-year.
  • Operating income was $13.8 million, or 33 percent of revenue.
  • Non-GAAP net adjusted EBITDA was $18.6 million, or 44 percent of revenue.
  • GAAP earnings per diluted share of $0.22 and non-GAAP earnings per diluted share of $0.30 increased 47 percent and 36 percent, respectively, year over year.

"Monotype had a strong first quarter, thanks to continued demand for our type solutions that deliver high-quality experiences in today's multi-screen world," said Doug Shaw, president and chief executive officer. "Record results in both our Creative Professional and OEM businesses were driven by strong e-commerce revenue, continued momentum in our Web font business, and robust sales of consumer electronics devices. Moving forward, we remain focused on providing customers with significant value in all phases of content creation, distribution and consumption."

"Our first quarter was highlighted by record revenues and profits. We are delivering healthy profit and cash flow, even as we diversify our business, allowing us to invest for the future and fund additional return for our shareholders," said Scott Landers, senior vice president and chief financial officer.

First quarter 2013 operating results

Revenue for the quarter was $42.0 million, up 22 percent compared to $34.3 million for the first quarter of 2012. OEM revenue was $26.7 million, increasing eight percent from the first quarter of 2012. Creative Professional revenue was $15.3 million, increasing 58 percent from the same period in 2012.

Net income was $8.6 million, compared to $5.7 million in the first quarter of 2012. Earnings per diluted share were $0.22, compared to $0.15 in the same period in 2012.

Non-GAAP net income, which excludes the amortization of intangible assets and stock-based compensation expense, net of taxes, was $11.6 million, compared to $8.1 million in the first quarter of 2012. Non-GAAP earnings per diluted share were $0.30, compared to $0.22 in the same period in 2012.

Non-GAAP net adjusted EBITDA was $18.6 million, or 44 percent of revenue, compared to $14.4 million or 42 percent of revenue in the first quarter of 2012.

A reconciliation of GAAP measures to non-GAAP measures for the three months ended March 31, 2013 and 2012 is provided in the financial tables that accompany this release.

Cash, cash flow and debt balances

Monotype had cash and cash equivalents of $43.0 million as of March 31, 2013, compared to $39.3 million as of Dec. 31, 2012, and $28.1 million as of March 31, 2012. The company generated $6.7 million of cash from operations in the first quarter of 2013.

Monotype's outstanding debt was $12.3 million as of March 31, 2013, a decrease from $22.3 million as of Dec. 31, 2012, and $52.3 million as of March 31, 2012.

Quarterly dividend

Monotype's most recent dividend payment of $0.06 per share was paid on April 19, 2013, to shareholders of record on April 1, 2013, and represented a 50 percent increase per share from the previous payment. The next dividend payment of $0.06 per share will be paid on July 19, 2013, to shareholders of record as of July 1, 2013.

Financial outlook

For the second quarter of 2013, Monotype expects revenue in the range of $40.5 million to $42.0 million. The company anticipates second quarter 2013 non-GAAP net adjusted EBITDA in the range of $16.5 million to $18.0 million, GAAP earnings per diluted share in the range of $0.18 to $0.21 and non-GAAP earnings per diluted share in the range of $0.27 to $0.30.

Monotype is reiterating its previously issued, full year 2013 guidance. The company expects revenue in the range of $165.0 million to $169.0 million. The company anticipates full year 2013 non-GAAP net adjusted EBITDA in the range of $69.5 million to $72.5 million, GAAP earnings per diluted share in the range of $0.81 to $0.86 and non-GAAP earnings per diluted share in the range of $1.13 to $1.18.

Conference call details

Monotype will host a conference call on Wednesday, May 1, 2013, at 8:30 a.m. EDT to discuss the company's first quarter 2013 results and business outlook for 2013. Individuals who are interested in listening to the audio webcast should log on to the Investor Relations portion of the About Us section of Monotype's website at www.monotype.com. The live call can also be accessed by dialing 877-941-9205 (domestic) or 480-629-9771 (international) using passcode 4612846. If individuals are unable to listen to the live call, the audio webcast will be archived in the Investor Relations portion of the company's website for one year.

Non-GAAP financial measures

This press release contains non-GAAP financial measures under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget and in reporting to lenders. Non-GAAP financial measures are used by Monotype management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, Monotype believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. Monotype management compensates for these limitations by considering the company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Forward-looking statements

This press release may contain forward-looking statements including those related to future revenues and operating results, the growth of the company's Creative Professional business and OEM business, the execution of the company's growth strategy and anticipated business momentum that involve risks and uncertainties that could cause the company's actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: risks associated with changes in the economic climate, including decreased demand for fonts or products that incorporate the company's text imaging solutions; risks associated with the interruption of certain manufacturing chains as a result of natural disasters or political tensions; risks associated with changes in the financial markets, including the availability of credit; risks associated with increased competition, which may result in the company losing customers or force it to reduce prices; risks associated with the development and market acceptance of new products or product features; risks associated with the company's ability to adapt its products to new markets and to anticipate and quickly respond to evolving technologies and customer requirements; and risks associated with the ownership and enforcement of the company's intellectual property. Additional disclosure regarding these and other risks faced by the company is available in the company's public filings with the Securities and Exchange Commission, including the risk factors included in the company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 and subsequent filings. The forward-looking financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts stated in the company's Annual Report on Form 10-K for the year ended Dec. 31, 2012. While Monotype may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so, even if an estimate changes.

About Monotype

Monotype is a leading global provider of typefaces, technology and expertise that enable the best user experience and ensure brand integrity. Based in Woburn, Mass., Monotype provides customers worldwide with typeface solutions for a broad range of creative applications and consumer devices. The company's libraries and e-commerce sites are home to many of the most widely used typefaces - including the Helvetica®, Frutiger® and Univers® families - as well as the next generation of type designs. Further information is available at www.monotype.com.

Monotype, Helvetica and Frutiger are trademarks of Monotype Imaging Inc. registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. Univers is a trademark of Monotype GmbH registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. All other trademarks are the property of their respective owners. ©2013 Monotype Imaging Holdings Inc. All rights reserved.

     
 

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)

 

March 31,
2013

December 31,
2012

Assets
Current assets:
Cash and cash equivalents$42,983$39,340
Accounts receivable, net of allowance for doubtful accounts8,5076,996
Income tax refunds receivable2,9122,209
Deferred income taxes2,2182,218
Prepaid expenses and other current assets 2,808  2,454 
 
Total current assets59,42853,217
Property and equipment, net2,5792,587
Goodwill173,159174,294
Intangible assets, net83,67586,736
Other assets 3,171  3,232 
 
Total assets$322,012 $320,066 
 
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable$813$1,038
Accrued expenses and other current liabilities14,98517,319
Accrued income taxes2,191
Deferred revenue8,2498,725
Current portion of long-term debt 12,321  10,000 
 
Total current liabilities36,36839,273
Long-term debt, less current portion12,321
Other long-term liabilities584613
Deferred income taxes28,26926,832
Reserve for income taxes, net of current portion1,010963
Accrued pension benefits4,8854,958
Stockholders' equity:

Common stock

3837
Additional paid-in capital189,196178,681
Treasury stock, at cost(86)(86)
Retained earnings63,29756,980
Accumulated other comprehensive income (1,549) (506)
 
Total stockholders' equity 250,896  235,106 
Total liabilities and stockholders' equity$322,012 $320,066 
 
 

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and in thousands, except share and per share data)

    
 

Three Months Ended
March 31,

2013 2012
Revenue$42,039$34,349
Cost of revenue6,0093,658
Cost of revenue—amortization of acquired technology 1,138  795 
 
Total cost of revenue 7,147  4,453 
 
Gross profit34,89229,896
Operating expenses:
Marketing and selling9,9199,271
Research and development4,9724,344
General and administrative4,7054,927
Amortization of other intangible assets 1,490  1,221 
Total operating expenses 21,086  19,763 
 
Income from operations13,80610,133
Other (income) expense:
Interest expense418451
Interest income(7)
Loss on foreign exchange577267
Loss on derivatives126
Other (36) (11)
 
Total other expense 959  826 
 
Income before provision for income taxes12,8479,307
Provision for income taxes 4,231  3,587 
Net income$8,616 $5,720 
Net income available to common stockholders—basic$8,478 $5,633 
Net income available to common stockholders—diluted$8,481 $5,636 
Net income per common share:
Basic$0.23$0.16
Diluted$0.22$0.15
Weighted average number of shares:
Basic37,102,50736,282,428
Diluted38,484,52237,607,047
 
 

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

      

RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP NET ADJUSTED EBITDA

 
 
Three Months Ending
March 31,
20132012
Income from operations$13,806$10,133
Depreciation and amortization2,9972,333
Share based compensation 1,749 1,923
 
Net adjusted EBITDA$18,552$14,389
 

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

      
Three Months Ended
March 31,
20132012
GAAP net income$8,616$5,720
Amortization, net of tax1,7631,240
Share based compensation, net of tax 1,174 1,183
 
Non-GAAP net income$11,553$8,143
 

RECONCILIATION OF GAAP EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE

      
Three Months Ended
March 31,
20132012
GAAP earnings per diluted share$0.22$0.15
Amortization, net of tax0.050.04
Share based compensation, net of tax 0.03 0.03
 
Non-GAAP earnings per diluted share$0.30$0.22
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