Monotype Imaging Holdings Inc. (TYPE) Q2 2010 Earnings Conference Call July 30, 2010 10:00 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 David Delleo – Canaccord Genuity Saket Kalia – JP Morgan Presentation Operator Welcome to the Monotype Imaging Q2 2010 Conference Call on the 30 th of July 2010. (Operator Instructions). I will now hand the conference over to Staci Mortenson. Please go ahead, madam. Staci Mortenson
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In addition, I’d 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’d 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 second quarter performance reporting top and bottom line growth. Total revenue of $24.4 million, a 10% increase year-over-year despite some negative currency impact. Net adjusted EBITDA grew to $10.4 million or a 43% margin. Our business continues to generate significant cash flow. Through the first of the year, cash flow from operations was $21.9 million an increase of 27% compared to the first half of 2009. Before I provide detail on some of our business activities, I’d like to highlight the financial results of our OEM and Creative Professional businesses, which both experienced year-over-year growth. Starting with OEM, our performance for the second quarter was $18.4 million, a 9% increase year-over-year. Revenue from traditional ways of printers improved sequentially for the third quarter in a row and we continued to outperform market growth rates. We’re encouraged by early trends for the third quarter, which indicates sustainable demand. And other OEM categories, we find new agreements with manufacturers of mobile phones, e-book readers and navigational devices. These are evolving dynamic markets with continual requirements for high quality tech in user experiences. We expect increased deployments as we go forward.
Moving to Creative Professional, we reported $6 million in revenue in the second quarter, a 13% increase year-over-year. We experienced constant currency growth across all sectors of our Creative Professional business with the largest improvement coming from non-web activities. With the growing pipeline of direct business, which is driven by increased bending from our enterprise customers.In our web business, we strong prospects for long-term growth as you prepare for the commercial launch of our Web Font Services offering. Now, I’d like to discuss the progress we’ve made on our growth initiatives. Over the years, even during the economic downturn, we’ve been able to leverage our business model to fund development and invest for growth. Recently, we announced an OEM Printer Solution that supports multiple page description languages or PDLs. This was a long-term development effort that resulted in a new imaging architecture that supports our fonts, our universal font scaling technology, printer drivers, colored technology and embedded PDLs. This combination gives OEMs a complete comprehensive solution that enables highly efficient superior quality end to end printing. Devices can also be engineered to complete tasks that are traditionally handled through host computers such as margin control and watermark printing. OEMs are able to differentiate their products through built-in print management functions and provide additional value to their customers. As outlined in our recent press release, we are working with Adobe to direct OEM printer customers towards genuine postscript in PDF solutions. Conversely, Adobe is able to compliment its own offering with XPF and PCL support for Monotype Imaging in addition to our font color and printer drivers. We expect OEM to benefit with improved flexibility and choice as a result of greater PDL options available to them. Read the rest of this transcript for free on seekingalpha.com