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Monotype Imaging Holdings Inc. (TYPE), a leading provider of
typefaces, technology and expertise for creative applications and
consumer devices, today announced financial results for the second
quarter ended June 30, 2012.
Second quarter 2012 and recent highlights
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Revenue for the quarter was a record $38.5 million, a 24 percent
increase year-over-year.
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Operating income was $11.9 million, or 31 percent of revenue.
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Non-GAAP net adjusted EBITDA was $16.4 million, or 43 percent of
revenue.
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Cash flow from operations was $14.9 million, a 43 percent increase
year-over-year.
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Company announces cash dividend program with initial quarterly rate of
$0.04 per share of common stock.
"In the second quarter, we delivered record profitability, driven by
record results in both our OEM and Creative Professional businesses. We
also capitalized on revenue opportunities and realized initial expense
synergies from our Bitstream acquisition, helping the company attain 43
percent net adjusted EBITDA margins," said Doug Shaw, president and
chief executive officer. "Our second quarter results reflect our
continued efforts to enhance our product portfolio, improve
diversification and increase momentum in our growth businesses."
"We’re excited to announce our new cash dividend program," said Scott
Landers, senior vice president and chief financial officer. "Monotype is
a unique company with a business model reinforced by recurring revenue,
strong cash generation and high profit margins. We are confident that
our business model can support long-term growth while providing an
additional source of return for our shareholders through quarterly
dividends."
Second quarter 2012 operating results
Revenue for the quarter was $38.5 million, up 24 percent compared to
$31.1 million for the second quarter of 2011. OEM revenue was $24.9
million, increasing nine percent from the second quarter of 2011.
Creative Professional revenue was $13.5 million, increasing 66 percent
from the same period last year.
Net income was $7.4 million, compared to $5.6 million in the second
quarter of last year. Earnings per diluted share were $0.19, compared to
$0.15 in the same period last year.
Non-GAAP net income, which excludes the amortization of intangible
assets and stock-based compensation expense, net of taxes, was $10.1
million, compared to $8.1 million in the second quarter of 2011.
Non-GAAP earnings per diluted share were $0.27, compared to $0.22 in the
same period last year.
Non-GAAP net adjusted EBITDA was $16.4 million, or 43 percent of
revenue, compared to $13.8 million in the second quarter of last year.
A reconciliation of GAAP measures to non-GAAP measures for the three and
six months ended June 30, 2012 and 2011 is provided in the financial
tables that accompany this release.
Cash, cash flow and debt balances
Outstanding debt was $42.3 million as of June 30, 2012, compared to
$37.3 million as of Dec. 31, 2011, and $57.3 million as of June 30,
2011. Outstanding debt as of June 30, 2012 includes the drawdown of
approximately $25 million on the company’s revolving line of credit to
finance the acquisition of Bitstream completed on March 19, 2012.
Monotype had cash and cash equivalents of $32.9 million as of June 30,
2012, compared to $53.9 million as of Dec. 31, 2011 and $28.1 million as
of March 31, 2012. The company generated $14.9 million of cash from
operations in the second quarter of 2012, an increase of 43 percent
year-over-year.
Quarterly dividend
Monotype’s board of directors approved a quarterly cash dividend
program. The cash dividend will be paid on Oct. 19, 2012 to shareholders
of record as of the close of business on Oct. 1, 2012. The initial
quarterly dividend rate will be $0.04 per share of common stock or $0.16
annually. Monotype intends to increase this payout over time. Future
declarations of dividends and the establishment of future record dates
and payment dates are subject to the final determination of the board of
directors.
"During the past five years, we have generated predictable cash flows
regardless of economic conditions," said Landers. "Since the beginning
of 2007, our operations have funded over $120 million in debt principal
repayments, and we have invested significantly behind our growth
initiatives. We’ve created a more diversified company and are well
positioned to take advantage of expanded market opportunities in
displays and digital publishing. As we look forward, we believe our
disciplined capital allocation strategy, which now includes a cash
dividend program, will support our growth strategies, manage our balance
sheet and provide shareholders with an additional source of equity
return."
Financial outlook
For the third quarter of 2012, Monotype expects revenue in the range of
$36.5 million to $38.0 million. The company anticipates third quarter
2012 non-GAAP net adjusted EBITDA in the range of $15.0 million to $16.0
million, GAAP earnings per diluted share in the range of $0.17 to $0.19
and non-GAAP earnings per diluted share in the range of $0.24 to $0.26.
For the full year 2012, Monotype expects revenue in the range of $146.0
million to $149.0 million. The company anticipates full year 2012
non-GAAP net adjusted EBITDA in the range of $61.0 million to $63.0
million, GAAP earnings per diluted share in the range of $0.69 to $0.73
and non-GAAP earnings per diluted share in the range of $0.97 to $1.01.
Conference call details
Monotype will host a conference call on Friday, July 27, 2012, at 8:30
a.m. EDT to discuss the company’s second quarter 2012 results and
business outlook for 2012. 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.monotypeimaging.com.
The live call can also be accessed by dialing 877-941-0844 (domestic) or
480-629-9835 (international) using passcode 4552176. 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 OEM business and Creative Professional 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; 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; risks associated with
the company’s ability to integrate the acquisition of Bitstream’s font
business; risks associated with the company’s ability to pay dividends
including the risk that the company’s board of directors may not approve
future dividends; 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 Annual Report on Form 10-K for the year ended Dec. 31, 2011
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-Q for the
quarter ended June 30, 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 Imaging
Monotype Imaging is a leading 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 library and e-commerce sites are home to
many of the most widely used typefaces - including the Helvetica(R),
Frutiger(R) and Univers(R) families - as well as the next generation of type
designs. Further information is available at www.monotypeimaging.com.
Monotype is a trademark of Monotype Imaging Inc. registered in the U.S.
Patent and Trademark Office and may be registered in certain
jurisdictions. Helvetica and Frutiger are trademarks of Linotype Corp.
registered in the U.S. Patent and Trademark Office and may be registered
in certain jurisdictions in the name of Linotype Corp. or its licensee
Linotype GmbH. Univers is a trademark of Linotype GmbH registered in the
U.S. Patent and Trademark Office and may be registered in certain other
jurisdictions. All other trademarks are the property of their respective
owners. (C)2012 Monotype Imaging Holdings Inc. All rights reserved.
MONOTYPE IMAGING HOLDINGS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)
June 30, December 31,
2012 2011
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Assets
Current assets:
Cash and cash equivalents $ 32,918 $ 53,850
Accounts receivable, net 6,952 6,588
Income tax refunds receivable 447 733
Deferred income taxes 2,366 506
Prepaid expenses and other current assets 3,515 3,228
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Total current assets 46,198 64,905
Property and equipment, net 2,661 2,404
Goodwill 171,510 140,807
Intangible assets, net 88,814 71,664
Deferred income taxes 1,185 396
Other assets 3,461 3,646
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Total assets $ 313,829 $ 283,822
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Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 602 $ 1,123
Accrued expenses and other current liabilities 11,674 12,235
Accrued income taxes 2,717 1,280
Deferred revenue 9,703 7,742
Current portion of long-term debt 10,000 10,000
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Total current liabilities 34,696 32,380
Long-term debt, less current portion 32,321 27,321
Other long-term liabilities 402 225
Deferred income taxes 25,651 20,596
Reserve for income taxes, net of current portion 1,300 1,174
Accrued pension benefits 3,808 3,765
Stockholders’ equity:
Common stock 37 36
Additional paid-in capital 172,314 167,448
Treasury stock, at cost (86 ) (86 )
Retained earnings 44,121 30,986
Accumulated other comprehensive income (735 ) (23 )
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Total stockholders’ equity 215,651 198,361
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Total liabilities and stockholders’ equity $ 313,829 $ 283,822
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MONOTYPE IMAGING HOLDINGS INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited and in thousands, except share and per share data)
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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Revenue $ 38,496 $ 31,066 $ 72,845 $ 60,795
Costs and expenses:
Cost of revenue 6,080 2,961 9,738 4,987
Cost of revenue--amortization of acquired technology 1,085 798 1,880 1,575
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Total cost of revenue 7,165 3,759 11,618 6,562
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Gross profit 31,331 27,307 61,227 54,233
Operating expenses:
Marketing and selling 8,720 8,231 17,991 16,029
Research and development 4,588 3,933 8,932 8,060
General and administrative 4,698 4,144 9,625 8,337
Amortization of other intangible assets 1,431 1,304 2,652 2,595
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Total operating expenses 19,437 17,612 39,200 35,021
Income from operations 11,894 9,695 22,027 19,212
Other (income) expense:
Interest expense 553 885 1,004 1,801
Interest income (9 ) (25 ) (16 ) (62 )
Loss (gain) on foreign exchange 10 (85 ) 277 (481 )
(Gain) loss on derivatives (205 ) 351 (79 ) 1,023
Other income, net (3 ) -- (14 ) --
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Total other expense 346 1,126 1,172 2,281
Income before provision for income taxes 11,548 8,569 20,855 16,931
Provision for income taxes 4,133 2,971 7,720 5,893
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Net income $ 7,415 $ 5,598 $ 13,135 $ 11,038
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Net income available to common stockholders - basic & diluted $ 7,286 $ 5,502 $ 12,921 $ 10,861
=== ========== === === ============== === === ========== === === ============== ===
Net income per common share:
Basic $ 0.20 $ 0.16 $ 0.36 $ 0.31
Diluted $ 0.19 $ 0.15 $ 0.34 $ 0.30
Weighted average number of shares:
Basic 36,046,725 35,308,941 36,164,567 35,176,156
Diluted 37,423,532 36,772,515 37,589,957 36,638,697
MONOTYPE IMAGING HOLDINGS INC.
OTHER INFORMATION
(Unaudited and in thousands)
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP NET ADJUSTED
EBITDA
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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Income from operations $ 11,894 $ 9,695 $ 22,027 $ 19,212
Depreciation and amortization 2,814 2,363 5,147 4,667
Share based compensation 1,711 1,753 3,634 3,322
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Net adjusted EBITDA $ 16,419 $ 13,811 $ 30,808 $ 27,201
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RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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GAAP net income $ 7,415 $ 5,598 $ 13,135 $ 11,038
Amortization, net of tax 1,615 1,373 2,855 2,719
Share based compensation, net of tax 1,098 1,145 2,289 2,166
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Non-GAAP net income $ 10,128 $ 8,116 $ 18,279 $ 15,923
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RECONCILIATION OF GAAP EARNINGS PER DILUTED SHARE TO NON-GAAP
EARNINGS PER DILUTED SHARE
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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GAAP earnings per diluted share $ 0.19 $ 0.15 $ 0.34 $ 0.30
Amortization, net of tax 0.05 0.04 0.09 0.07
Share-based compensation, net of tax 0.03 0.03 0.06 0.06
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Non-GAAP earnings per diluted share $ 0.27 $ 0.22 $ 0.49 $ 0.43
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MONOTYPE IMAGING HOLDINGS INC.
OTHER INFORMATION
(Unaudited and in thousands)
OTHER INFORMATION
Share based compensation is comprised of the following:
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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Marketing and selling $ 770 $ 728 $ 1,601 $ 1,395
Research and development 384 409 825 773
General and administrative 557 616 1,208 1,154
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Total share based compensation $ 1,711 $ 1,753 $ 3,634 $ 3,322
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MARKET INFORMATION
The following table presents revenue for our two major markets:
Three Months Ended Six Months Ended
June 30, June 30,
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2012 2011 2012 2011
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OEM $ 24,949 $ 22,885 $ 49,593 $ 44,783
Creative Professional 13,547 8,181 23,252 16,012
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Total $ 38,496 $ 31,066 $ 72,845 $ 60,795
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MONOTYPE IMAGING HOLDINGS INC.
OTHER INFORMATION
(Unaudited and in thousands, except share and per share data)
RECONCILIATION OF FORECAST GAAP EARNINGS PER DILUTED SHARE TO
FORECAST NON-GAAP EARNINGS PER
DILUTED SHARE
Low End of Guidance High End of Guidance
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Q3 2012 Q3 2012
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GAAP net income $ 6,400 $ 7,100
Amortization, net of tax 1,600 1,600
Share-based compensation, net of tax 1,100 1,100
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Non-GAAP net income $ 9,100 $ 9,800
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GAAP earnings per diluted share $ 0.17 $ 0.19
Amortization, net of tax, per diluted share 0.04 0.04
Share-based compensation, net of tax, per diluted share 0.03 0.03
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Non-GAAP earnings per diluted share $ 0.24 $ 0.26
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Weighted average diluted shares used to compute non-GAAP earnings 37,800,000 37,800,000
per share
Assumes 36% effective tax rate.
Low End of Guidance High End of Guidance
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2012 2012
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GAAP net income $ 26,300 $ 27,600
Amortization, net of tax 6,100 6,100
Share-based compensation, net of tax 4,500 4,500
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Non-GAAP net income 36,900 38,200
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GAAP earnings per diluted share $ 0.69 $ 0.73
Amortization, net of tax, per diluted share 0.16 0.16
Share-based compensation, net of tax, per diluted share 0.12 0.12
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Non-GAAP earnings per diluted share $ 0.97 $ 1.01
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Weighted average diluted shares used to compute non-GAAP earnings 38,000,000 38,000,000
per share
Assumes 36% effective tax rate.
MONOTYPE IMAGING HOLDINGS INC.
RECONCILIATION OF FORECAST GAAP OPERATING INCOME
TO FORECAST NON-GAAP NET ADJUSTED EBITDA
(Unaudited and in thousands)
Low End of Guidance High End of Guidance
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Q3 2012 Q3 2012
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GAAP operating income $ 10,500 $ 11,500
Depreciation and amortization 2,800 2,800
Share-based compensation 1,700 1,700
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Non-GAAP net adjusted EBITDA $ 15,000 $ 16,000
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Low End of Guidance High End of Guidance
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2012 2012
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GAAP operating income $ 43,200 $ 45,200
Depreciation and amortization 10,800 10,800
Share-based compensation 7,000 7,000
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Non-GAAP net adjusted EBITDA $ 61 ,000 $ 63,000
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SOURCE: Monotype Imaging Holdings Inc.
ICR
Staci Mortenson, 781-970-6120
ir@monotypeimaging.com
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