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Monotype Imaging Announces Second Quarter 2012 Results

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®, Frutiger® and Univers® 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. ©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
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  
 
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  
 
Total assets $ 313,829   $ 283,822  
 
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  
 
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 )
 
Total stockholders’ equity   215,651     198,361  
 
Total liabilities and stockholders’ equity $ 313,829   $ 283,822  

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,
2012 2011 2012 2011
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  
 
Total cost of revenue   7,165     3,759     11,618     6,562  
 
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  
 
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 )    
 
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  
 
Net income $ 7,415   $ 5,598   $ 13,135   $ 11,038  
 

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,
2012 2011 2012 2011
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
 
Net adjusted EBITDA $ 16,419 $ 13,811 $ 30,808 $ 27,201

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

       
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
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
 
Non-GAAP net income $ 10,128 $ 8,116 $ 18,279 $ 15,923

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

       
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
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
 
Non-GAAP earnings per diluted share $ 0.27 $ 0.22 $ 0.49 $ 0.43

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,
2012 2011 2012 2011
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
 
Total share based compensation $ 1,711 $ 1,753 $ 3,634 $ 3,322
MARKET INFORMATION
The following table presents revenue for our two major markets:
       
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
OEM $ 24,949 $ 22,885 $ 49,593 $ 44,783
Creative Professional   13,547   8,181   23,252   16,012
 
Total $ 38,496 $ 31,066 $ 72,845 $ 60,795

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
Q3 2012 Q3 2012
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
 
Non-GAAP net income $ 9,100 $ 9,800
 
 
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
 
Non-GAAP earnings per diluted share $ 0.24 $ 0.26
 
 
Weighted average diluted shares used to compute non-GAAP earnings per share

37,800,000

37,800,000

Assumes 36% effective tax rate.

   
Low End of Guidance High End of Guidance
2012 2012
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
 
Non-GAAP net income   36,900   38,200
 
 
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
 
Non-GAAP earnings per diluted share $ 0.97 $ 1.01
 
Weighted average diluted shares used to compute non-GAAP earnings per share

38,000,000

38,000,000

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
Q3 2012 Q3 2012
GAAP operating income $ 10,500 $ 11,500
Depreciation and amortization 2,800 2,800
Share-based compensation 1,700 1,700
 
Non-GAAP net adjusted EBITDA $ 15,000 $ 16,000
   
Low End of Guidance High End of Guidance
2012 2012
GAAP operating income $ 43,200 $ 45,200
Depreciation and amortization 10,800 10,800
Share-based compensation   7,000   7,000
 
Non-GAAP net adjusted EBITDA $ 61 ,000 $ 63,000




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