OREANDA-NEWS. Monotype Imaging Holdings Inc. (Nasdaq: TYPE), a leading provider of typefaces, technology and expertise for creative applications and consumer devices, today announced financial results for the fourth quarter and full year ended Dec. 31, 2015.

Fourth quarter 2015 highlights

  • Revenue for the quarter was $50.6 million, a nine percent increase year over year.
  • Non-GAAP net adjusted EBITDA was $20.7 million, or 41 percent of revenue.
  • Cash and cash equivalents were $87.5 million.

Full year 2015 highlights

  • Revenue for the year was $192.4 million, an increase of four percent year over year.
  • Non-GAAP net adjusted EBITDA was $71.0 million, or 37 percent of revenue.
  • Cash flow from operations was $53.4 million.

“A record performance in Creative Professional helped push our quarterly results over the $50 million mark for the first time in our history,” said Scott Landers, president and chief executive officer of Monotype. “The strong quarter capped a financially solid and strategically pivotal year, as we continued to align the business with our markets’ evolving needs. We exceeded our Web font revenue target while continuing to help customers establish brand consistency across multiple consumer touchpoints. Moving ahead, we expect to innovate in ways that capitalize on emerging, content-centric opportunities.”

Joe Hill, chief financial officer of Monotype, said, “2015 was a year of steady progress, reflecting the continued strength of our business model. Our acquisition of Swyft Media, and the investments we made to improve infrastructure and broaden our IP, have strengthened our ability to expand into newer markets and fuel future growth. In 2015, we returned $33.7 million to shareholders through dividends and our share repurchase program; used $29.3 million on acquisitions and acquisition-related transactions, and ended the year with $87.5 million in cash.”

Fourth quarter 2015 operating results

Revenue for the quarter increased nine percent to $50.6 million, compared to $46.4 million for the fourth quarter of 2014. Creative Professional revenue was $24.4 million, a 17 percent increase from the fourth quarter of 2014. OEM revenue was $26.2 million, an increase of three percent from the same period in 2014.

Net income was $4.9 million, compared to $9.4 million in the fourth quarter of 2014. Earnings per diluted share were $0.12, compared to $0.23 in the prior year quarter.

Non-GAAP net income, which excludes the amortization of intangible assets, stock-based compensation expense and acquisition-related contingent consideration expense, net of taxes, was $12.0 million, compared to $12.4 million in the fourth quarter of 2014. Non-GAAP earnings per diluted share were $0.30 compared to $0.31 in the prior year period.

Non-GAAP net adjusted EBITDA was $20.7 million, or 41 percent of revenue, compared to $18.1 million in the fourth quarter of 2014.

The company’s GAAP results in the quarter and full year were impacted by $4.2 million of acquisition-related contingent consideration expense, which is not deductible for income tax purposes.

Full year 2015 operating results

Revenue for the year was $192.4 million, an increase of four percent compared to $184.5 million for 2014. Creative Professional revenue was $88.1 million, an increase of 14 percent year over year. OEM revenue was $104.3 million, down three percent year over year.

Net income for 2015 was $26.2 million, compared to net income of $32.5 million for the prior year. Earnings per diluted share were $0.65, compared to earnings per diluted share of $0.81 in 2014.

Non-GAAP net income, which excludes the amortization of intangible assets, stock-based compensation expense, and acquisition-related contingent consideration expense, net of taxes, was $44.1 million, compared to $44.3 million in 2014. Non-GAAP earnings per diluted share were $1.12, compared to $1.12 in 2014.

Non-GAAP net adjusted EBITDA was $71.0 million, or 37 percent of revenue, compared to non-GAAP net adjusted EBITDA of $72.6 million in 2014.

A reconciliation of GAAP measures to non-GAAP measures for the three and 12 months ended Dec. 31, 2015 and 2014 is provided in the financial tables that accompany this release.

Cash and cash flow

Monotype had cash and cash equivalents of $87.5 million as of Dec. 31, 2015, compared to $86.3 million as of Sept. 30, 2015 and $90.3 million as of Dec. 31, 2014. The company generated $13.1 million of cash from operations in the fourth quarter of 2015 and $53.4 million for the full year 2015.

Quarterly dividend and share repurchase program

Monotype’s most recent dividend payment of $0.10 per share was paid on Jan. 22, 2016, to shareholders of record as of Jan. 4, 2016. The next dividend payment of $0.11 per share will be paid on April 20, 2016, to shareholders of record as of the close of business on April 1, 2016.

During fiscal 2015, Monotype completed its two-year $50.0 million share repurchase program announced in October, 2013. In 2015, Monotype repurchased 657,000 shares of common stock on the open market at prevailing market prices for an aggregate of $18.5 million.

Financial outlook

For the first quarter of 2016, Monotype expects revenue in the range of $48.0 million to $51.0 million. The company anticipates first quarter 2016 non-GAAP net adjusted EBITDA in the range of $15.0 million to $17.5 million, GAAP earnings per diluted share in the range of $0.11 to $0.15 and non-GAAP earnings per diluted share in the range of $0.23 to $0.27.

For the full year 2016, Monotype expects revenue in the range of $202.0 million to $208.0 million. Due to renewed softness in its printer business, the company anticipates guidance to trend toward the lower end of Monotype’s preliminary outlook shared during the company’s third quarter 2015 earnings call, which called for revenue growth in the range of seven to 10 percent. Monotype expects full year 2016 non-GAAP net adjusted EBITDA in the range of $72.0 million to $77.0 million, GAAP earnings per diluted share in the range of $0.63 to $0.71 and non-GAAP earnings per diluted share in the range of $1.08 to $1.16.

The company’s operating expense guidance includes $2.3 million of non-cash acquisition-related contingent consideration expense, to be recognized evenly through 2016 in marketing and selling expense.

Conference call details

Monotype will host a conference call on Thursday, Feb. 11, 2016, at 8:30 a.m. EST to discuss the company’s fourth quarter and full year 2015 results and business outlook for 2016. Individuals who are interested in listening to the audio webcast should log on to the Investors portion of the Company section of the Monotype website at www.monotype.com. The live call can also be accessed by dialing 877-201-0168 (domestic) or 647-788-4901 (international) using passcode 39276148. If individuals are unable to listen to the live call, the audio webcast will be archived in the Investors 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 Creative Professional business and OEM 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 solutions; risks associated with the company’s ability to integrate products, services and employees from acquired companies in a timely manner or at all; 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, product features or services; risks associated with the company’s ability to adapt its products or services to new markets and to anticipate and quickly respond to evolving technologies and customer requirements; 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, 2014 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 to be included in the company’s future earnings releases and public filings. 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

Monotype is a leading global provider of typefaces, technology and expertise that enable the best user experience and ensure brand integrity. Headquartered in Woburn, Mass., Monotype provides customers worldwide with typeface solutions for a broad range of creative applications and consumer devices. The company’s libraries 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.monotype.com. Follow Monotype on Twitter, Instagram and LinkedIn.

Monotype, Helvetica and Frutiger are trademarks of Monotype Imaging Inc. registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. Univers is a trademark of Monotype GmbH registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. All other trademarks are the property of their respective owners. ©2016 Monotype Imaging Holdings Inc. All rights reserved.

               

MONOTYPE IMAGING HOLDINGS INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)
               
        December 31,
      2015     2014
ASSETS              
Current assets:              
Cash and cash equivalents       $ 87,520       $ 90,325  
Accounts receivable, net of allowance for doubtful accounts         15,179         9,279  
Income tax refunds receivable         2,558         2,593  
Deferred income taxes         —         2,898  
Prepaid expenses and other current assets         3,846         4,361  
Total current assets         109,103         109,456  
Property and equipment, net         15,204         10,578  
Goodwill         185,735         176,999  
Intangible assets, net         69,264         73,862  
Restricted cash         9,304         —  
Other assets         3,177         3,563  
Total assets       $ 391,787       $ 374,458  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current liabilities:              
Accounts payable       $ 1,385       $ 1,156  
Accrued expenses and other current liabilities         21,422         24,570  
Accrued income taxes payable         2,395         640  
Deferred revenue         10,086         7,107  
Total current liabilities         35,288         33,473  
Other long-term liabilities         6,914         2,596  
Deferred income taxes         35,159         32,960  
Reserve for income taxes         2,316         4,637  
Accrued pension benefits         4,928         5,679  
Stockholders’ equity:              
Common stock         42         39  
Additional paid-in capital         256,215         232,522  
Treasury stock, at cost         (50,455 )       (31,946 )
Retained earnings         108,908         98,672  
Accumulated other comprehensive loss         (7,528 )       (4,174 )
Total stockholders’ equity         307,182         295,113  
Total liabilities and stockholders’ equity       $ 391,787       $ 374,458  
                       
                     

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and in thousands, except share and per share data)
                     

 

    

Three Months Ended
December 31,

    

Year Ended
December 31,
      2015     2014       2015     2014  
Revenue     $ 50,616     $ 46,402       $ 192,419     $ 184,500  
Cost of revenue       7,967       7,526         30,281       28,583  
Cost of revenue—amortization of acquired technology       1,133       1,139         4,448       4,574  
Total cost of revenue       9,100       8,665         34,729       33,157  
Gross profit       41,516       37,737         157,690       151,343  
Operating expenses:                    
Marketing and selling       14,317       13,114         57,297       49,580  
Research and development       5,233       4,794         21,477       20,684  
General and administrative       11,263       5,524         33,343       23,599  
Amortization of other intangible assets       775       948         3,129       5,398  
Total operating expenses       31,588       24,380         115,246       99,261  
                     
Income from operations       9,928       13,357         42,444       52,082  
Other (income) expense:                    
Interest expense       162       370         963       1,202  
Interest income       (18 )     (127 )       (44 )     (168 )
Loss on extinguishment of debt       —       —         112       —  
Other expense, net       326       628         938       1,628  
Total other expense       470       871         1,969       2,662  
Income before provision for income taxes       9,458       12,486         40,475       49,420  
Provision for income taxes       4,561       3,116         14,278       16,875  
Net income     $ 4,897     $ 9,370       $ 26,197     $ 32,545  
Net income available to common shareholders – basic     $ 4,779     $ 9,197       $ 25,575     $ 31,940  
Net income available to common shareholders – diluted     $ 4,780     $ 9,199       $ 25,579     $ 31,950  
Net income per common share:                    
Basic     $ 0.12     $ 0.24       $ 0.66     $ 0.83  
Diluted     $ 0.12     $ 0.23       $ 0.65     $ 0.81  
Weighted average number of shares:                    
Basic       38,934,008       38,630,552         38,840,094       38,565,368  
Diluted       39,381,559       39,395,926         39,382,566       39,466,717  
Dividends declared per common share     $ 0.10     $ 0.08       $ 0.40     $ 0.32  
                                     
               

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP NET ADJUSTED EBITDA
 
        Three Months Ended
December 31,		     Year Ended
December 31,
        2015    

2014 (1)

     2015    

2014 (1)
GAAP operating income       $ 9,928     $ 13,357       $ 42,444     $ 52,082  
Depreciation and amortization         2,913       2,516         10,819       11,663  
Share based compensation         3,742       2,814         13,583       10,649  
Contingent consideration adjustment (2)         4,164       (629 )       4,164       (1,781 )
Non-GAAP net adjusted EBITDA       $ 20,747     $ 18,058       $ 71,010     $ 72,613  
                                       

(1) Non-GAAP net adjusted EBITDA for the three months and year ended December 31, 2014, has been restated
to add back the impact of acquisition-related contingent consideration adjustments in accordance with our
revised definition of non-GAAP net adjusted EBITDA.

  
   

(2) 2015 amounts include $0.4 million of expense associated with the deferred compensation arrangement
resulting from the Amendment to the Swyft Merger Agreement.

  
   

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME
               
        Three Months Ended
December 31,		     Year Ended
December 31,
        2015    

2014 (1) (3)

     2015    

2014 (1)
GAAP net income       $ 4,897     $ 9,370       $ 26,197     $ 32,545  
Amortization, net of tax         988       1,565         4,902       6,562  
Share based compensation, net of tax         1,938       2,111         8,788       7,007  
Contingent consideration adjustment, net of tax (2)         4,164       (629 )       4,164       (1,781 )
Non-GAAP net income       $ 11,987     $ 12,417       $ 44,051     $ 44,333  
                                       

(1) Non-GAAP net income for the three months and year ended December 31, 2014, has been restated to add back
the impact of acquisition-related contingent consideration adjustments, net of tax, in accordance with our
revised definition of non-GAAP net income.
 

(2) 2015 amounts include $0.4 million of expense associated with the deferred compensation arrangement
resulting from the Amendment to the Swyft Merger Agreement.
 

(3) Previously reported amounts have been adjusted to reflect appropriate tax rates.

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

RECONCILIATION OF GAAP EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE
               
        Three Months Ended
December 31,		     Year Ended
December 31,
        2015    

2014 (1) (3)

     2015    

2014 (1)
GAAP earnings per diluted share       $ 0.12     $ 0.23       $ 0.65     $ 0.81  
Amortization, net of tax         0.02       0.04         0.13       0.17  
Share based compensation, net of tax         0.05       0.06         0.23       0.18  
Contingent consideration adjustment, net of tax (2)         0.11       (0.02 )       0.11       (0.04 )
Non-GAAP earnings per diluted share       $ 0.30     $ 0.31       $ 1.12     $ 1.12  
                                       

(1) Non-GAAP earnings per share for the three months and year ended December 31, 2014, has been restated
to add back the impact of acquisition-related contingent consideration adjustments, net of tax, in accordance our
revised definition of non-GAAP earnings per diluted share.

  

(2) 2015 amounts include the impact of $0.4 million of expense associated with the deferred compensation
arrangement resulting from the Amendment to the Swyft Merger Agreement.

  

(3) Previously reported amounts have been adjusted to reflect appropriate tax rates.

  
               

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

OTHER INFORMATION

 

Share based compensation is comprised of the following:
               
        Three Months Ended
December 31,		     Year Ended
December 31,
        2015     2014     2015     2014
Marketing and selling       $ 1,744     $ 1,260     $ 6,312     $ 4,813
Research and development         639       605       2,458       2,352
General and administrative         1,359       949       4,813       3,484
Total expensed       $ 3,742     $ 2,814     $ 13,583     $ 10,649
Property and equipment         —       37       82       139
Total share based compensation       $ 3,742     $ 2,851     $ 13,665     $ 10,788
                                   

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

MARKET INFORMATION

The following table presents revenue for our two major markets:
               
        Three Months Ended
December 31,		     Year Ended
December 31,
        2015     2014     2015     2014
Creative Professional       $ 24,420     $ 20,858     $ 88,074     $ 76,961
OEM         26,196       25,544       104,345       107,539
Total       $ 50,616     $ 46,402     $ 192,419     $ 184,500
                                   

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
        Q1 2016     Q1 2016
GAAP net income       $ 4,400     $ 5,900
Amortization, net of tax         1,200       1,200
Share based compensation, net of tax         2,700       2,700
Contingent consideration adjustment, net of tax         600       600
Non-GAAP net income       $ 8,900     $ 10,400
               
               
GAAP earnings per diluted share       $ 0.11     $ 0.15
Amortization, net of tax, per diluted share         0.03       0.03
Share based compensation, net of tax, per diluted share         0.07       0.07
Contingent consideration adjustment, net of tax, per diluted share        

0.02

      

0.02
Non-GAAP earnings per diluted share       $ 0.23     $ 0.27
               
               
Weighted average diluted shares used to compute earnings per share        

39,200,000

      

39,200,000
                   

Assumes 35% effective tax rate.

                  
                   
 

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
        2016     2016
GAAP net income       $ 25,000     $ 28,200
Amortization, net of tax         4,700       4,700
Share based compensation, net of tax         10,900       10,900
Contingent consideration adjustment, net of tax         2,300       2,300
Non-GAAP net income         42,900       46,100
               
               
GAAP earnings per diluted share       $ 0.63     $ 0.71
Amortization, net of tax, per diluted share         0.12       0.12
Share based compensation, net of tax, per diluted share         0.28       0.28
Contingent consideration adjustment, net of tax, per diluted share        

0.05

      

0.05
Non-GAAP earnings per diluted share       $ 1.08     $ 1.16
Weighted average diluted shares used to compute earnings per share        

39,700,000

      

39,700,000
                   

Assumes 35% 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
        Q1 2016     Q1 2016
GAAP operating income       $ 7,300     $ 9,800
Depreciation and amortization         2,900       2,900
Share based compensation         4,200       4,200
Contingent consideration adjustment         600       600
Non-GAAP net adjusted EBITDA       $ 15,000     $ 17,500
                   

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
        2016     2016
GAAP operating income       $ 41,800     $ 46,800
Depreciation and amortization         11,100       11,100
Share based compensation         16,800       16,800
Contingent consideration adjustment         2,300       2,300
Non-GAAP net adjusted EBITDA       $

72,000

     $ 77,000