UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
October
30, 2012
Date
of Report (Date of earliest event reported)
MONOTYPE IMAGING HOLDINGS INC.
(Exact
name of registrant as specified in its charter)
Delaware |
001-33612 |
20-3289482 |
(State or Other Jurisdiction of Incorporation) |
(Commission File No.) |
(IRS Employer Identification No.) |
500 Unicorn Park Drive |
(Address of Principal Executive Offices, including Zip Code) |
Registrant’s
telephone number, including area code: (781) 970-6000
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On October 30, 2012, Monotype Imaging Holdings Inc. (the “Company”) announced its financial results for the quarter and nine months ended September 30, 2012. A copy of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information on this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The following exhibit relating to Item 2.02 shall be deemed to be furnished, and not filed:
99.1 Press Release issued by Monotype Imaging Holdings Inc. on October 30, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned thereunto duly authorized.
MONOTYPE IMAGING HOLDINGS INC. |
||
|
||
October 30, 2012 |
By: |
/s/ Scott E. Landers |
Scott E. Landers |
||
Senior Vice President, Chief Financial Officer, |
||
Treasurer and Assistant Secretary |
EXHIBIT INDEX
Exhibit Number |
Description | |
99.1 |
Press Release issued by Monotype Imaging Holdings Inc. on October 30, 2012. |
Exhibit 99.1
Monotype Imaging Announces Third Quarter 2012 Results
Company Reports Record Profits and Increases Annual Guidance
WOBURN, Mass.--(BUSINESS WIRE)--October 30, 2012--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 third quarter ended Sept. 30, 2012.
Third quarter 2012 highlights
“We had a strong third quarter, with continued momentum in our Creative Professional and OEM businesses, highlighted by innovations that support the three fundamental aspects of our business – our typefaces, technology and expertise,” said Doug Shaw, president and chief executive officer. “Our focus is to continue to diversify while adding meaningful value to our solutions. To that end, we’re excited about the acquisition of Design By Front, which brings to Monotype a powerful design tool for creating compelling websites using Web fonts. We gain a talented team that will expand our ability to serve creative markets.”
“Our continued execution generated record profits for the third quarter, reflecting the strength and flexibility of our business model,” said Scott Landers, senior vice president and chief financial officer. “Even as we continue to innovate, integrate and diversify, we are realizing significant expense leverage. Moving forward, we will continue down this path of delivering even more value to our customers and shareholders.”
Third quarter 2012 operating results
Revenue for the quarter was $38.0 million, up 24 percent compared to $30.7 million for the third quarter of 2011. OEM revenue was $24.3 million, increasing five percent from the third quarter of 2011. Creative Professional revenue was $13.7 million, increasing 79 percent from the same period last year.
Net income was $8.0 million, compared to $6.0 million in the third quarter of last year. Earnings per diluted share were $0.21, compared to $0.16 in the same period last year.
Non-GAAP net income, which excludes the amortization of intangible assets and stock-based compensation expense, net of taxes, was $10.8 million, compared to $8.6 million in the third quarter of 2011. Non-GAAP earnings per diluted share were $0.29, compared to $0.23 in the same period last year.
Non-GAAP net adjusted EBITDA was $17.0 million, or 45 percent of revenue, compared to $13.7 million in the third quarter of last year.
A reconciliation of GAAP measures to non-GAAP measures for the three and nine months ended Sept. 30, 2012 and 2011 is provided in the financial tables that accompany this release.
Cash, cash flow and debt balances
Monotype had cash and cash equivalents of $38.0 million as of Sept. 30, 2012, compared to $53.9 million as of Dec. 31, 2011 and $32.9 million as of June 30, 2012. The company generated $13.5 million of cash from operations in the third quarter of 2012, an increase of 25 percent year-over-year.
Outstanding debt was $32.3 million as of Sept. 30, 2012, a decrease compared to $37.3 million as of Dec. 31, 2011, and $42.3 million as of June 30, 2012. On a year-to-date basis, the company has paid down $30.0 million in debt and used $24.6 million of cash on hand for the Bitstream acquisition.
As of Sept. 30, 2012, Monotype had net cash of $5.7 million, compared to net debt of $9.4 million in the prior quarter.
Acquisition of Design By Front
Monotype today announced that it has acquired Design By Front Limited, a privately-held, 14-person firm based in Belfast, Northern Ireland, and developers of the Typecast™ application, a browser-based tool for designing Web pages with Web fonts. In its transaction completed yesterday, Monotype acquired all outstanding shares of Design By Front for up to $5.1 million in cash. Monotype paid $2.6 million in cash upon closing; $100,000 was accrued pending final adjustments, with the remainder to be paid contingent on attainment of certain criteria through 2014.
Quarterly dividend
The initial quarterly cash dividend of $0.04 per share of common stock was paid on Oct. 19, 2012. Monotype's board of directors approved the next quarterly dividend of $0.04 per share which will be paid on Jan. 22, 2013 to shareholders of record as of the close of business on Jan. 2, 2013.
Financial outlook
For the fourth quarter of 2012, Monotype expects revenue in the range of $37.2 million to $38.7 million. The company anticipates fourth quarter 2012 non-GAAP net adjusted EBITDA in the range of $15.7 million to $16.7 million, GAAP earnings per diluted share in the range of $0.19 to $0.21 and non-GAAP earnings per diluted share in the range of $0.26 to $0.28.
For the full year 2012, Monotype is increasing its revenue and profit guidance, and now expects revenue in the range of $148.0 million to $149.5 million. The company anticipates full year 2012 non-GAAP net adjusted EBITDA in the range of $63.5 million to $64.5 million, GAAP earnings per diluted share in the range of $0.74 to $0.76 and non-GAAP earnings per diluted share in the range of $1.02 to $1.04.
Conference call details
Monotype will host a conference call on Tuesday, Oct. 30, 2012, at 8:30 a.m. EDT to discuss the company’s third quarter 2012 results and business outlook for the remainder of 2012. Individuals who are interested in listening to the audio webcast should log on to the Investor Relations portion of the About Us section of Monotype’s website at www.monotypeimaging.com. The live call can also be accessed by dialing 888-549-7750 (domestic) or 480-629-9722 (international) using passcode 4569412. If individuals are unable to listen to the live call, the audio webcast will be archived in the Investor Relations 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 OEM business and Creative Professional 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 text imaging solutions; risks associated with the interruption of certain manufacturing chains as a result of natural disasters; 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 or product features; risks associated with the company’s ability to adapt its products to new markets and to anticipate and quickly respond to evolving technologies and customer requirements; risks associated with the company’s ability to integrate the acquisition of Design By Front Limited including the risk that the company may not be able to successfully bring to market Design By Front’s Typecast product; risks associated with the company’s ability to pay dividends including the risk that the company’s board of directors may not approve future dividends; 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, 2011 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 stated in the company’s Quarterly Report on Form 10-Q for the quarter ended Sept. 30, 2012. 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 Imaging
Monotype Imaging is a leading global 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. Typecast is a trademark of Design By Front Limited. 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) |
||||||||
September 30, |
December 31, 2011 |
|||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 37,988 | $ | 53,850 | ||||
Accounts receivable, net | 6,383 | 6,588 | ||||||
Income tax refunds receivable | 429 | 733 | ||||||
Deferred income taxes | 2,529 | 506 | ||||||
Prepaid expenses and other current assets | 3,249 | 3,228 | ||||||
Total current assets | 50,578 | 64,905 | ||||||
Property and equipment, net | 2,510 | 2,404 | ||||||
Goodwill | 172,090 | 140,807 | ||||||
Intangible assets, net | 86,463 | 71,664 | ||||||
Deferred income taxes | 328 | 396 | ||||||
Other assets | 3,227 | 3,646 | ||||||
Total assets | $ | 315,196 | $ | 283,822 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,148 | $ | 1,123 | ||||
Accrued expenses and other current liabilities | 14,296 | 12,235 | ||||||
Accrued income taxes | 2,438 | 1,280 | ||||||
Deferred revenue | 6,854 | 7,742 | ||||||
Current portion of long-term debt | 10,000 | 10,000 | ||||||
Total current liabilities | 34,736 | 32,380 | ||||||
Long-term debt, less current portion | 22,321 | 27,321 | ||||||
Other long-term liabilities | 511 | 225 | ||||||
Deferred income taxes | 26,804 | 20,596 | ||||||
Reserve for income taxes, net of current portion | 901 | 1,174 | ||||||
Accrued pension benefits | 3,924 | 3,765 | ||||||
Stockholders’ equity: | ||||||||
Common stock | 37 | 36 | ||||||
Additional paid-in capital | 175,723 | 167,448 | ||||||
Treasury stock, at cost | (86 | ) | (86 | ) | ||||
Retained earnings | 50,631 | 30,986 | ||||||
Accumulated other comprehensive income (loss) | (306 | ) | (23 | ) | ||||
Total stockholders’ equity | 225,999 | 198,361 | ||||||
Total liabilities and stockholders’ equity | $ | 315,196 | $ | 283,822 | ||||
MONOTYPE IMAGING HOLDINGS INC. |
||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||||||||||
(Unaudited and in thousands, except share and per share data) |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Revenue | $ | 37,982 | $ | 30,695 | $ | 110,827 | $ | 91,490 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of revenue | 5,426 | 2,503 | 15,164 | 7,490 | ||||||||||||
Cost of revenue—amortization of acquired technology | 1,085 | 798 | 2,965 | 2,373 | ||||||||||||
Total cost of revenue | 6,511 | 3,301 | 18,129 | 9,863 | ||||||||||||
Gross profit | 31,471 | 27,394 | 92,698 | 81,627 | ||||||||||||
Operating expenses: | ||||||||||||||||
Marketing and selling | 8,614 | 8,169 | 26,605 | 24,198 | ||||||||||||
Research and development | 4,617 | 4,116 | 13,549 | 12,176 | ||||||||||||
General and administrative | 4,386 | 4,284 | 14,011 | 12,621 | ||||||||||||
Amortization of other intangible assets | 1,405 | 1,252 | 4,057 | 3,847 | ||||||||||||
Total operating expenses | 19,022 | 17,821 | 58,222 | 52,842 | ||||||||||||
Income from operations | 12,449 | 9,573 | 34,476 | 28,785 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense | 457 | 587 | 1,461 | 2,388 | ||||||||||||
Interest income | (6 | ) | (29 | ) | (22 | ) | (91 | ) | ||||||||
Loss (gain) on foreign exchange | 24 | 215 | 301 | (266 | ) | |||||||||||
Loss (gain) on derivatives | 65 | (536 | ) | (14 | ) | 487 | ||||||||||
Loss on extinguishment of debt | — | 422 | — | 422 | ||||||||||||
Other expense, net | 33 | 2 | 19 | 2 | ||||||||||||
Total other expense | 573 | 661 | 1,745 | 2,942 | ||||||||||||
Income before provision for income taxes | 11,876 | 8,912 | 32,731 | 25,843 | ||||||||||||
Provision for income taxes | 3,886 | 2,920 | 11,606 | 8,813 | ||||||||||||
Net income | $ | 7,990 | $ | 5,992 | $ | 21,125 | $ | 17,030 | ||||||||
Net income available to common shareholders—basic & diluted |
$ | 7,857 | $ | 5,891 | $ | 20,779 | $ | 16,753 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.22 | $ | 0.17 | $ | 0.57 | $ | 0.48 | ||||||||
Diluted | $ | 0.21 | $ | 0.16 | $ | 0.55 | $ | 0.46 | ||||||||
Weighted average number of shares: | ||||||||||||||||
Basic | 36,323,556 | 35,447,484 | 36,217,950 | 35,267,592 | ||||||||||||
Diluted | 37,620,269 | 36,829,518 | 37,600,448 | 36,703,298 | ||||||||||||
Dividends declared per share | $ | 0.04 | $ | — | $ | 0.04 | $ | — | ||||||||
MONOTYPE IMAGING HOLDINGS INC. |
||||||||||||
OTHER INFORMATION |
||||||||||||
(Unaudited and in thousands) |
||||||||||||
RECONCILIATION OF GAAP OPERATING INCOME TO NON-GAAP NET ADJUSTED EBITDA |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Income from operations | $ | 12,449 | $ | 9,573 | $ | 34,476 | $ | 28,785 | ||||
Depreciation and amortization | 2,838 | 2,320 | 7,985 | 6,987 | ||||||||
Share based compensation | 1,666 | 1,806 | 5,300 | 5,128 | ||||||||
Net adjusted EBITDA | $ | 16,953 | $ | 13,699 | $ | 47,761 | $ | 40,900 |
RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
GAAP net income | $ | 7,990 | $ | 5,992 | $ | 21,125 | $ | 17,030 | ||||
Amortization, net of tax | 1,676 | 1,378 | 4,529 | 4,099 | ||||||||
Share based compensation, net of tax | 1,121 | 1,214 | 3,419 | 3,379 | ||||||||
Non-GAAP net income | $ | 10,787 | $ | 8,584 | $ | 29,073 | $ | 24,508 |
RECONCILIATION OF GAAP EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
GAAP earnings per diluted share | $ | 0.21 | $ | 0.16 | $ | 0.55 | $ | 0.46 | ||||
Amortization, net of tax | 0.05 | 0.04 | 0.13 | 0.11 | ||||||||
Share-based compensation, net of tax | 0.03 | 0.03 | 0.09 | 0.09 | ||||||||
Non-GAAP earnings per diluted share | $ | 0.29 | $ | 0.23 | $ | 0.77 | $ | 0.66 | ||||
MONOTYPE IMAGING HOLDINGS INC. |
||||||||||||
OTHER INFORMATION |
||||||||||||
(Unaudited and in thousands) |
||||||||||||
OTHER INFORMATION |
||||||||||||
Share based compensation is comprised of the following: |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
Marketing and selling | $ | 745 | $ | 777 | $ | 2,346 | $ | 2,172 | ||||
Research and development | 390 | 414 | 1,215 | 1,187 | ||||||||
General and administrative | 531 | 615 | 1,739 | 1,769 | ||||||||
Total share based compensation | $ | 1,666 | $ | 1,806 | $ | 5,300 | $ | 5,128 |
MARKET INFORMATION |
||||||||||||
The following table presents revenue for our two major markets: |
||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||
OEM | $ | 24,280 | $ | 23,047 | $ | 73,873 | $ | 67,830 | ||||
Creative Professional | 13,702 | 7,648 | 36,954 | 23,660 | ||||||||
Total | $ | 37,982 | $ | 30,695 | $ | 110,827 | $ | 91,490 | ||||
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 | |||
Q4 2012 | Q4 2012 | |||
GAAP net income | $ 7,000 | $ 7,800 | ||
Amortization, net of tax | 1,600 | 1,600 | ||
Share-based compensation, net of tax | 1,100 | 1,100 | ||
Non-GAAP net income | $ 9,700 | $ 10,500 | ||
GAAP earnings per diluted share | $ 0.19 | $ 0.21 | ||
Amortization, net of tax | 0.04 | 0.04 | ||
Share-based compensation, net of tax | 0.03 | 0.03 | ||
Non-GAAP earnings per diluted share | $ 0.26 | $ 0.28 | ||
Weighted average diluted shares used to compute non-GAAP earnings per share |
37,800,000 |
37,800,000 |
Assumes 35% effective tax rate.
Low End of |
High End of |
|||
2012 | 2012 | |||
GAAP net income | $ 28,100 | $ 28,900 | ||
Amortization, net of tax | 6,100 | 6,100 | ||
Share-based compensation, net of tax | 4,500 | 4,500 | ||
Non-GAAP net income | 38,700 | 39,500 | ||
GAAP earnings per diluted share | $ 0.74 | $ 0.76 | ||
Amortization, net of tax | 0.16 | 0.16 | ||
Share-based compensation, net of tax | 0.12 | 0.12 | ||
Non-GAAP earnings per diluted share | $ 1.02 | $ 1.04 | ||
Weighted average diluted shares used to compute non-GAAP earnings per share |
37,800,000 |
37,800,000 |
||
MONOTYPE IMAGING HOLDINGS INC. |
||||||
RECONCILIATION OF FORECAST GAAP OPERATING INCOME |
||||||
TO FORECAST NON-GAAP NET ADJUSTED EBITDA |
||||||
(Unaudited and in thousands) |
||||||
Low End of |
High End of |
|||||
Q4 2012 | Q4 2012 | |||||
GAAP operating income | $ | 11,200 | $ | 12,200 | ||
Depreciation and amortization | 2,800 | 2,800 | ||||
Share-based compensation | 1,700 | 1,700 | ||||
Non-GAAP net adjusted EBITDA | $ | 15,700 | $ | 16,700 | ||
Low End of |
High End of |
|||||
2012 |
2012 |
|||||
GAAP operating income |
$ |
45,600 |
$ |
46,600 |
||
Depreciation and amortization |
10,900 |
10,900 |
||||
Share-based compensation |
7,000 |
7,000 |
||||
Non-GAAP net adjusted EBITDA |
$ |
63,500 |
$ |
64,500 |
CONTACT:
ICR
Staci Mortenson, 781-970-6120
ir@monotypeimaging.com