Monotype Imaging Holdings Inc. (TYPE)

Q1 2010 Earnings Call Transcript

May 4, 2010 8:30 am ET

Executives

Staci Mortenson – IR, ICR

Doug Shaw – President and CEO

Scott Landers – SVP and CFO

Analysts

Ralph Schackart – William Blair

Steven Frankel – Brigantine Advisors

Matthew Kempler – Sidoti & Company LLC

Ross MacMillan – Jeffries & Company

Jeff Rath – Canaccord

Saket Kalia – JPMorgan

Presentation

Operator

Welcome to the Monotype Imaging conference call on the 4th of May 2010. Throughout today's presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. (Operator Instructions).

I will now hand the conference over to Staci Mortenson. Please go ahead.

Staci Mortenson

Thank you and good morning everyone. Thank you for joining us for Monotype Imaging's first quarter 2010 financial conference call. With me this morning are Doug Shaw, President and Chief Executive Officer, and Scott Landers, Senior Vice President and Chief Financial Officer.

Before we begin, I would like to remind everyone that matters we are discussing today and the information contained in the press release issued by the company earlier this morning announcing our first quarter financial results that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements, including predictions, estimates, expectations and other forward-looking statements, generally identifiable by the use of the word believes, will, expect or similar expressions, are subject to risks and uncertainties that could cause actual results to differ materially.

Accordingly, participants on today's call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinion only as of today's date, May 4, 2010. Information on the potential factors and detailed risks that could affect the Company's actual results of operations is included in the Company's filings with the SEC.

The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in our first quarter press release or on this morning's conference call other than through the filings that will be made with the SEC concerning this reporting period.

In addition, I would like to remind you that today's discussion will include references to net adjusted EBITDA, which is intended to serve as a further compliment to our results provided in accordance with generally accepted accounting principle.

A reconciliation of this non-GAAP measure can be found in our press release. In addition, a link to today's call can be found under Events & Presentation in the Investor Relations section of our website at www.monotypeimaging.com. This call will be archived on our website for one year.

And now I would like to turn the call over to Doug Shaw. Doug?

Doug Shaw

Hello and thank you for joining us this morning. Monotype Imaging delivered a solid first quarter performance reporting total revenue of $24.5 million in net adjusted EBITDA of $10.2 million both in line with our guidance. We experience revenue growth across both our OEM and Creative Professional businesses.

We were encouraged by the strength in our traditional laser printer business was all in Creative Professional particularly on the web. The business environment is improved and looking forward, we are more positive on our outlook.

During the first quarter, we invested in growth opportunities while generating high levels of profitability in cash flow. Our debt levels decreased while cash on the balance sheet grew. Net debt is currently $45.6 million down from $56.7 million at the end of 2009.

Overall, we are pleased with our results for the first quarter. Now I'd like to provide you with highlights of our financial performance and business activities. Total revenue for the first quarter was $24.5 million, an increase of 4% year-over-year.

Our OEM performance for the first quarter was 17.6 million, an increase of 2% year-over-year. Growth was driven by higher revenue from our printed customers, and ongoing strength and our driver in color technologies.

We are also encouraged by GUI trends for the second quarter, which indicates sustainable demand. In other OEM categories were pleased with the pace of new design wins as well as our increased momentum to capitalize and expanded opportunities, such as e-books and graphically user interface.

Looking ahead, we remain encourage that as we emerge from the recession we will see an increase in deployments and unit shipments, and the other device category portion of our OEM business. Turning to the ISV segment of our business, we experienced some softness of seeing signs of improvement in the second quarter.

During the first quarter, our Creative Professional business reported $6.8 million in revenue, an increase of 8% year-over-year. This was our best Creative Professional result since the fourth quarter of 2008. Our web business experienced double digit revenue growth. This was fueled by the improvement in traditional font sales as well as FontExplorer X, our font management solution that represents a small but growing portion of our web business. We also saw average deal sizes grow to pipelines increase and closure rates improved in our direct business.

Now I would like to discuss some of the business highlights of the first quarter. We continue to focus on device categories to represent new avenues of OEM growth such as e-book readers. We signed a royalty bearing relationship with the leading e-book maker for our iType rendering technologies in addition to Latin and Asian font that are highly compressed, distinctive and style and able to display with superior quality.

Read the rest of this transcript for free on seekingalpha.com

More from Stocks

General Electric Extends Declines After Shares Dropped From the Dow

General Electric Extends Declines After Shares Dropped From the Dow

Stocks Rise, GE Dropped From the Dow, Starbucks, Oracle - 5 Things You Must Know

Stocks Rise, GE Dropped From the Dow, Starbucks, Oracle - 5 Things You Must Know

Why Starbucks Stock Is Being Pounded After Revealing 150 Store Closures

Why Starbucks Stock Is Being Pounded After Revealing 150 Store Closures

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China