Monotype Imaging Holdings Inc., Bitstream Inc. - M&A Call

Bitstream Inc. (BITS)

March 20, 2012 8:00 am ET

Executives

Staci Mortenson - Senior Vice President

Douglas J. Shaw - Chief Executive Officer, President and Director

Scott Landers - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer and Assistant Secretary

Analysts

Ross MacMillan - Jefferies & Company, Inc., Research Division

Barbara Coffey - Brigantine Advisors

Steven B. Frankel - Dougherty & Company LLC, Research Division

Saket Kalia - JP Morgan Chase & Co, Research Division

Matthew J. Kempler - Sidoti & Company, LLC

Presentation

Operator

Ladies and gentlemen, welcome to the Monotype Imaging Complete Acquisition of the Bitstream's Font Business Conference on the 20th of March, 2012. [Operator Instructions] I will now hand the conference to Staci Mortenson. Please go ahead, Madame.

Staci Mortenson

Thank you, and good morning, everyone. With me this morning are Doug Shaw, President and Chief Executive Officer; and Scott Landers, Senior Vice President and Chief Financial Officer. Today, we will review the acquisition of Bitstream's font business, which we announced following the close of the market yesterday. We'll then open up the call for questions.

Before we begin, I'd like to remind everyone that matters we're discussing today and the information contained in the press release announcing the acquisition of Bitstream's font business 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 words believe, 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, March 20, 2012. Information on potential factors and detailed risks that could affect the company's actual results of operations is included in filings made with the SEC by Monotype Imaging and Bitstream. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements or on this morning's conference call other than through the filings that will be made with the SEC.

In addition, I'd like to remind you that today's discussion will include references to net adjusted EBITDA and non-GAAP diluted EPS, which are intended to serve as further complement to our results provided in accordance with Generally Accepted Accounting Principles. A reconciliation of these non-GAAP measures can be found in our press release issued yesterday.

In addition, a recording of today's call can be found under Events & Presentations in the Investor Relations section of our website at www.monotypeimaging.com. The call will be archived on our website for one year. And now I'd like to turn the call over to Doug Shaw. Doug?

Douglas J. Shaw

Thank you for joining us this morning to discuss our exciting news that Monotype Imaging has completed its acquisition of Bitstream's font business. I'll start with a brief overview of the key strategic reasons behind the transaction and then pass the call over to Scott. He will provide financial details including an update on guidance.

Our mission is to be the first place to turn for typefaces, technology and expertise that enable the best user experience and ensure brand integrity regardless of device, platform or language. We've successfully grown our business organically and through acquisitions, and we believe that acquiring Bitstream's font business will strengthen our ability to deliver on our mission and to better meet customer needs. The transaction includes the popular MyFonts website, Bitstream's typeface library, the company's font rendering and layout technologies, fonts for embedded and mobile environments and 10 patents. We've also gained new customers such as Cox Communications, WebEx and QNX.

Turning to MyFonts. We see significant value in this online store, which features 89,000 fonts from nearly 900 foundries. Through MyFonts, Bitstream has fostered a dynamic creative community. The site offers cutting-edge designs that complement our classic historic fonts used by corporations and brands. In addition, MyFonts features the unique WhatTheFont service, which helps customers to quickly identify typefaces. MyFonts has also made successful inroads within the Web fonts market, where MyFonts' customers are able to use self-contained kits that can be easily uploaded. Customers are therefore able to self-host Web fonts and not be dependent on external services.

Finally, the MyFonts site provides an excellent user experience and allows foundries to easily promote their fonts and access sales reports in real time. It is our intention to put more resources behind MyFonts with an eye towards supporting and extending the best aspects of MyFonts within our e-commerce and cloud-based offerings.

Turning to OEM. Bitstream's OEM business brings to Monotype Imaging a complementary customer base that maps directly into the markets we serve, particularly in display imaging. We expect to expand within Bitstream's accounts by providing additional value while adding depth to our already strong family of OEM products and services.

Further, we're excited to welcome some of the most respected and talented professionals in the type industry. As of today, 13 people have joined us from Bitstream's U.S. operations. We've also gained our first development and R&D center in India, which is staffed by 42 engineers and type designers. Along with a host of talented associates, we're thrilled to welcome industry leaders, including Sampo Kaasila, John Collins and Kevin Woodward. Sampo is an industry veteran who worked at Apple as the lead engineer and inventor of TrueType font technology. John has developed numerous type composition and font rendering systems and has been the key driver behind the MyFonts business. Kevin is the creator of WhatTheFont, as well as the custom font rendering software used in MyFonts. We expect that the addition of Bitstream's expertise will further our ability to provide broad-based development resources to our OEM and Creative Professional businesses.

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