Monotype Announces First Quarter 2013 Results

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 accounts

8,507

6,996

Income tax refunds receivable

2,912

2,209

Deferred income taxes

2,218

2,218

Prepaid expenses and other current assets

2,808

2,454

Total current assets

59,428

53,217

Property and equipment, net

2,579

2,587

Goodwill

173,159

174,294

Intangible assets, net

83,675

86,736

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 liabilities

14,985

17,319

Accrued income taxes

2,191

Deferred revenue

8,249

8,725

Current portion of long-term debt

12,321

10,000

Total current liabilities

36,368

39,273

Long-term debt, less current portion

12,321

Other long-term liabilities

584

613

Deferred income taxes

28,269

26,832

Reserve for income taxes, net of current portion

1,010

963

Accrued pension benefits

4,885

4,958

Stockholders' equity:

Common stock

38

37

Additional paid-in capital

189,196

178,681

Treasury stock, at cost

(86

)

(86

)

Retained earnings

63,297

56,980

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 revenue

6,009

3,658

Cost of revenue—amortization of acquired technology

1,138

795

Total cost of revenue

7,147

4,453

Gross profit

34,892

29,896

Operating expenses:

Marketing and selling

9,919

9,271

Research and development

4,972

4,344

General and administrative

4,705

4,927

Amortization of other intangible assets

1,490

1,221

Total operating expenses

21,086

19,763

Income from operations

13,806

10,133

Other (income) expense:

Interest expense

418

451

Interest income

(7

)

Loss on foreign exchange

577

267

Loss on derivatives

126

Other

(36

)

(11

)

Total other expense

959

826

Income before provision for income taxes

12,847

9,307

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:

Basic

37,102,507

36,282,428

Diluted

38,484,522

37,607,047

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,

2013

2012

Income from operations

$

13,806

$

10,133

Depreciation and amortization

2,997

2,333

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,

2013

2012

GAAP net income

$

8,616

$

5,720

Amortization, net of tax

1,763

1,240

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,

2013

2012

GAAP earnings per diluted share

$

0.22

$

0.15

Amortization, net of tax

0.05

0.04

Share based compensation, net of tax

0.03

0.03

Non-GAAP earnings per diluted share

$

0.30

$

0.22