10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-33612

MONOTYPE IMAGING HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	20-3289482
(State of incorporation)	(I.R.S. Employer Identification No.)
500 Unicorn Park Drive Woburn, Massachusetts	01801
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (781) 970-6000

(Former Name, Former Address and Former Fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares outstanding of the registrant’s common stock as of July 22, 2013 was 38,783,502.

MONOTYPE IMAGING HOLDINGS INC.

INDEX

		Page
Part I. Financial Information			2
Item 1.	Consolidated Financial Statements (Unaudited)		2
	•       Condensed Consolidated Balance Sheets as of  June 30, 2013 and December 31, 2012		2
	•        Condensed Consolidated Statements of Income for the three and six months ended June 30, 2013 and 2012		3
	•        Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 and 2012		4
	•        Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012		5
	•       Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.	Controls and Procedures		27
Part II. Other Information			28
Item 1.	Legal Proceedings		28
Item 1A.	Risk Factors		28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		28
Item 3.	Defaults Upon Senior Securities		28
Item 4.	Mine Safety Disclosures		28
Item 5.	Other Information		28
Item 6.	Exhibits		28
Signatures			29
Exhibit Index			30

1

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	June 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	51,669		$	39,340
Accounts receivable, net of allowance for doubtful accounts of $154 at June 30, 2013 and $129 at December 31, 2012		7,697			6,996
Income tax refunds receivable		3,845			2,209
Deferred income taxes		2,210			2,218
Prepaid expenses and other current assets		2,301			2,454
Total current assets		67,722			53,217
Property and equipment, net		2,422			2,587
Goodwill		173,668			174,294
Intangible assets, net		81,173			86,736
Other assets		3,093			3,232
Total assets	$	328,078		$	320,066
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,153		$	1,038
Accrued expenses and other current liabilities		16,244			17,319
Accrued income taxes		—			2,191
Deferred revenue		10,170			8,725
Current portion of long-term debt		—			10,000
Total current liabilities		27,567			39,273
Long-term debt, less current portion		—			12,321
Other long-term liabilities		702			613
Deferred income taxes		29,797			26,832
Reserve for income taxes, net of current portion		1,022			963
Accrued pension benefits		5,008			4,958
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.001 par value, Authorized shares: 10,000,000; Issued and outstanding: none		—			—
Common stock, $0.001 par value, Authorized shares: 250,000,000; Issued: 38,738,074 at June 30, 2013 and 37,331,796 at December 31, 2012		39			37
Additional paid-in capital		196,921			178,681
Treasury stock, at cost, 129,158 shares at June 30, 2013 and 116,101 shares at December 31, 2012		(86	)		(86	)
Retained earnings		68,283			56,980
Accumulated other comprehensive loss		(1,175	)		(506	)
Total stockholders’ equity		263,982			235,106
Total liabilities and stockholders’ equity	$	328,078		$	320,066

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

	Three Months Ended June  30,						Six Months Ended June  30,
	2013			2012			2013			2012
Revenue	$	41,085		$	38,496		$	83,124		$	72,845
Cost of revenue		6,016			6,080			12,025			9,738
Cost of revenue—amortization of acquired technology		1,139			1,085			2,277			1,880
Total cost of revenue		7,155			7,165			14,302			11,618
Gross profit		33,930			31,331			68,822			61,227
Operating expenses:
Marketing and selling		10,392			8,720			20,311			17,991
Research and development		4,891			4,588			9,863			8,932
General and administrative		4,980			4,698			9,685			9,625
Amortization of other intangible assets		1,487			1,431			2,977			2,652
Total operating expenses		21,750			19,437			42,836			39,200
Income from operations		12,180			11,894			25,986			22,027
Other (income) expense:
Interest expense		313			553			731			1,004
Interest income		(5	)		(9	)		(5	)		(16	)
Loss on foreign exchange		263			10			840			277
Gain on derivatives		—			(205	)		—			(79	)
Other income, net		(1	)		(3	)		(37	)		(14	)
Total other expense		570			346			1,529			1,172
Income before provision for income taxes		11,610			11,548			24,457			20,855
Provision for income taxes		4,299			4,133			8,530			7,720
Net income	$	7,311		$	7,415		$	15,927		$	13,135
Net income available to common stockholders—basic	$	7,182		$	7,286		$	15,658		$	12,921
Net income available to common stockholders—diluted	$	7,185		$	7,286		$	15,665		$	12,921
Net income per common share:
Basic	$	0.19		$	0.20		$	0.42		$	0.36
Diluted	$	0.18		$	0.19		$	0.40		$	0.34
Weighted average number of shares:
Basic		37,725,082			36,046,725			37,415,514			36,164,567
Diluted		39,029,653			37,423,532			38,758,807			37,589,957
Dividends declared per common share	$	0.06		$	—		$	0.12		$	—

3

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)

	Three Months Ended June  30,					Six Months Ended June  30,
	2013		2012			2013			2012
Net income	$	7,311	$	7,415		$	15,927		$	13,135
Other comprehensive (loss) income, net of tax:
Unrecognized actuarial gain		11		—			11			—
Foreign currency translation adjustments		363		(1,262	)		(680	)		(712	)
Comprehensive income	$	7,685	$	6,153		$	15,258		$	12,423

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Six Months Ended June  30,
	2013			2012
Cash flows from operating activities
Net income	$	15,927		$	13,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,019			5,147
Loss on retirement of fixed assets		4			—
Amortization of deferred financing costs		151			152
Share based compensation		3,835			3,634
Excess tax benefit on stock options		(4,110	)		(421	)
Provision for doubtful accounts		35			8
Deferred income taxes		3,246			467
Unrealized currency loss (gain) on foreign denominated intercompany transactions		5			(177	)
Unrealized loss on derivatives		—			208
Changes in operating assets and liabilities:
Accounts receivable		(944	)		4
Income tax refunds receivable		—			(447	)
Prepaid expenses and other assets		3			(511	)
Accounts payable		139			(520	)
Accrued income taxes		(55	)		2,402
Accrued expenses and other liabilities		(1,353	)		(2,057	)
Deferred revenue		1,726			1,930
Net cash provided by operating activities		24,628			22,954
Cash flows from investing activities
Purchases of property and equipment		(632	)		(850	)
Purchase of exclusive license and other intangible assets		—			(150	)
Acquisition of business, net of cash acquired		(72	)		(49,082	)
Net cash used in investing activities		(704	)		(50,082	)
Cash flows from financing activities
Payments on line of credit		(22,321	)		(20,000	)
Borrowings under line of credit		—			25,000
Excess tax benefit on stock options		4,110			421
Common stock dividend paid		(3,788	)		—
Proceeds from exercises of common stock options		10,570			814
Net cash (used in) provided by financing activities		(11,429	)		6,235
Effect of exchange rates on cash and cash equivalents		(166	)		(39	)
Increase (decrease) in cash and cash equivalents		12,329			(20,932	)
Cash and cash equivalents at beginning of period		39,340			53,850
Cash and cash equivalents at end of period	$	51,669		$	32,918

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

MONOTYPE IMAGING HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

1. Nature of the Business

Monotype Imaging Holdings Inc. (the “Company” or “we”) is a leading provider of type, technology and expertise for creative applications and consumer electronics, or CE, devices. Our end-user and embedded solutions for print, web and mobile environments enable people to create and consume dynamic content on any and every device. The Company’s technologies and fonts enable the display and printing of high quality digital text. Our technologies and fonts have been widely deployed across, and embedded in, a range of CE devices, including laser printers, digital copiers, mobile phones, e-book readers, tablets, automotive displays, digital cameras, navigation devices, digital televisions, set-top boxes and consumer appliances, as well as in numerous software applications and operating systems. The Company also provides printer drivers, page description language interpreters, printer user interface technology and color imaging solutions to printer manufacturers and OEMs (original equipment manufacturers). We license our fonts and technologies to CE device manufacturers, independent software vendors and creative and business professionals and we are headquartered in Woburn, Massachusetts. We operate in one business segment: the development, marketing and licensing of technologies and fonts. The Company also maintains various offices worldwide for selling and marketing, research and development and administration. We conduct our operations through three domestic operating subsidiaries, Monotype Imaging Inc., Monotype ITC Inc. and MyFonts Inc., formerly Bitstream Inc. (“Bitstream”), and five foreign subsidiaries, Monotype Ltd., Monotype GmbH, formerly Linotype GmbH (“Germany”), Monotype Solutions India Pvt. Ltd., Monotype Hong Kong Ltd. and Monotype KK.

2. Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods.

In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2012 as reported in the Company’s Annual Report on Form 10-K.

3. Acquisition

Design by Front Ltd.

On October 29, 2012, the Company acquired all of the outstanding shares of Design by Front Limited, a privately held web strategy, design and technology studio located in Belfast, Northern Ireland, for approximately $4.6 million. The Company paid $2.6 million in cash upon closing, with the remainder of the purchase price to be paid contingent on attainment of certain criteria through 2014. The contingent consideration payable was recorded at $2.1 million, which represented the net present fair value of the estimated payment. We recognized approximately $2.5 million of intangible assets and approximately $2.5 million of goodwill, associated with the transaction. In connection with this acquisition, 13 Design by Front Limited employees joined the Company. Design by Front Limited’s Typecast^™ browser-based web authoring tool allows easy use of web fonts when designing web sites.

4. Derivative Financial Instruments

On May 24, 2010, we entered into a long term interest rate swap contract to pay a fixed rate of interest of 1.5% in exchange for a floating rate interest payment tied to the one-month London Inter-Bank Offering Rate (“LIBOR”) beginning November 28, 2010 to mitigate our exposure to interest rate fluctuations on our debt obligations for the remainder of the term of the note. The contract had a notional amount of $30.0 million and matured on July 30, 2012. We did not designate the contract as a hedge; as such, associated gains and losses were recorded in gain on derivatives in our condensed consolidated statements of income.

On May 7, 2008, we entered into a long term currency swap contract to purchase 18.3 million Euros in exchange for $28.0 million to mitigate foreign currency exchange rate risk on a Euro denominated intercompany note. We incurred net losses of $0.2 million and $0.1 million on the intercompany note for the three and six months ended June 30, 2012, respectively, which is included in loss on foreign exchange in the accompanying condensed consolidated statements of income. The currency swap matured on December 14, 2012. The contract payment terms approximated the payment terms of this intercompany note.

6

The following table presents the losses and (gains) on our derivative financial instruments which are included in gain on derivatives in our accompanying condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,					Six Months Ended June  30,
	2013		2012			2013		2012
Interest rate swaps	$	—	$	5		$	—	$	26
Currency swap		—		(210	)		—		(105	)
Total	$	—	$	(205	)	$	—	$	(79	)

5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the Financial Accounting Standards Codification established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.

Level 3: Unobservable inputs are used when little or no market data is available and requires the company to develop its own assumptions about how market participants would price the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimizes the use of unobservable inputs to the extent possible as well as considers counterparty and our own credit risk in its assessment of fair value.

The following table presents our financial assets and liabilities that are carried at fair value, classified according to the three categories described above (in thousands):

	Fair Value Measurement at June 30, 2013
	Total		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents—money market funds	$	1,852	$	1,852	$	—	$	—
Cash equivalents—commercial paper		15,047		—		15,047		—
Cash equivalents—corporate bonds		1,602		—		1,602		—
Total assets	$	18,501	$	1,852	$	16,649	$	—
Liabilities:
Contingent acquisition consideration	$	2,200	$	—	$	—	$	2,200
Total liabilities	$	2,200	$	—	$	—	$	2,200

The Company’s recurring fair value measures relate to short-term investments, which are classified as cash equivalents and derivative instruments. The fair value of our cash equivalents are either based on quoted prices for similar assets or other observable inputs such as yield curves at commonly quoted intervals and other market corroborated inputs. The fair value of our derivatives is based on quoted market prices of similar instruments from various banking institutions or an independent third party provider for similar instruments. In determining the fair value, we consider our non-performance risk and that of our counterparties. The Company’s non-financial assets and non-financial liabilities subject to non-recurring measures include goodwill and intangible assets. For the recurring fair value measure, contingent acquisition consideration, the Company estimated the fair value of the liability by judgmentally weighting the range of possible achievement of the criteria upon which the contingent consideration to be paid will be determined. The resulting estimated amount was then adjusted to its estimated net present value based upon a present value factor that was derived by applying a risk adjusted discount rate over the applicable contingency period.

7

6. Intangible Assets

Intangible assets consist of the following (dollar amounts in thousands):

		June 30, 2013							December 31, 2012
	Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships	7-15	$	56,925	$	(39,353	)	$	17,572	$	57,040	$	(36,464	)	$	20,576
Acquired technology	8-15		50,901		(27,371	)		23,530		51,067		(25,108	)		25,959
Non-compete agreements	3-6		11,997		(11,778	)		219		12,016		(11,752	)		264
Trademarks			35,452		—			35,452		35,537		—			35,537
Domain names			4,400		—			4,400		4,400		—			4,400
Total		$	159,675	$	(78,502	)	$	81,173	$	160,060	$	(73,324	)	$	86,736

7. Debt

On July 13, 2011 the Company entered into a credit agreement with Wells Fargo Capital Finance, LLC, or the Credit Facility, which provides the Company with a five-year, $120.0 million secured revolving credit facility. Borrowings under the Credit Facility bear interest at a variable rate based upon, at the Company’s option, either LIBOR or the base rate (which is the highest of (i) the prime rate, (ii) 0.5% plus the overnight federal funds rate, and (iii) 1.0% in excess of the three-month LIBOR rate), plus in each case, an applicable margin. The applicable margin for LIBOR loans, based on the applicable leverage ratio, is either 2.25% or 2.50% per annum, and the applicable margin for base rate loans, based on the applicable leverage ratio, is either 1.25% or 1.50% per annum. At June 30, 2013 our rate, inclusive of applicable margins, was 4.5% for prime. At June 30, 2013, the Company had no outstanding debt under the Credit Facility. The Company is required to pay an unused line fee equal to 0.375% per annum on the undrawn portion available under the revolving credit facility and variable per annum fees in respect of outstanding letters of credit, if any. Such fees are included in interest expense in the accompanying condensed consolidated statements of income. The Credit Facility contains financial covenants which include (i) a maximum ratio of consolidated total debt to consolidated adjusted EBITDA of 3.00:1.00, and (ii) a minimum consolidated fixed charge coverage ratio of 1.25:1.00. Adjusted EBITDA, under the Credit Facility, is defined as consolidated net earnings (or loss), plus net interest expense, income taxes, depreciation and amortization and share based compensation expense, plus acquisition expenses not to exceed $2.0 million, plus restructuring, issuance costs, cash non-operating costs and other expenses or losses minus cash non-operating gains and other non-cash gains; provided however that the aggregate of all cash non-operating expense shall not exceed $250 thousand and all such fees, costs and expenses shall not exceed $1.5 million on a trailing twelve months basis. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Credit Facility to declare all amounts borrowed under the Credit Facility, together with accrued interest and fees, to be immediately due and payable. In addition, the Credit Facility is secured by substantially all of our assets and places limits on the Company’s and its subsidiaries’ ability to incur debt or liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates and alter its business. We were in compliance with all covenants under our Credit Facility as of June 30, 2013.

8. Defined Benefit Pension Plan

Our German subsidiary maintains an unfunded defined benefit pension plan which covers substantially all employees who joined the company prior to the plan’s closure to new participants in 2006. Participants are entitled to benefits in the form of retirement, disability and surviving dependent pensions. Benefits generally depend on years of service and the salary of the employees.

The components of net periodic benefit cost included in the accompanying condensed consolidated statements of income were as follows (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Service cost	$	30	$	20	$	59	$	41
Interest cost		40		43		79		88
Net periodic benefit cost	$	70	$	63	$	138	$	129

8

9. Income Taxes

A reconciliation of income taxes computed at federal statutory rates to income tax expense is as follows (dollar amounts in thousands):

	Three Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	4,063		35.0	%	$	4,042		35.0	%
State and local income taxes, net of federal tax benefit		178		1.5	%		159		1.4	%
Stock compensation		70		0.6	%		72		0.6	%
Research credits		(51	)	(0.4	)%		—		—
Disqualifying dispositions of incentive stock options		(32	)	(0.3	)%		(46	)	(0.4	)%
Other, net		71		0.6	%		(94	)	(0.8	)%
Reported income tax provision	$	4,299		37.0	%	$	4,133		35.8	%

	Six Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	8,560		35.0	%	$	7,299		35.0	%
State and local income taxes, net of federal tax benefit		369		1.5	%		287		1.4	%
Stock compensation		140		0.6	%		134		0.6	%
Research credits		(376	)	(1.5	)%		—		—
Disqualifying dispositions of incentive stock options		(181	)	(0.8	)%		(79	)	(0.4	)%
Effect of rate changes on deferred taxes		—		—			128		0.6	%
Other, net		18		0.1	%		(49	)	(0.2	)%
Reported income tax provision	$	8,530		34.9	%	$	7,720		37.0	%

At June 30, 2013, the reserve for uncertain tax positions was approximately $4.7 million. Of this amount, $3.7 million is recorded as a reduction of deferred tax assets and $1.0 million is classified as long term liabilities. At December 31, 2012, the reserve for uncertain tax positions was approximately $4.7 million, which is classified as long term liabilities.

10. Net Income Per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. The two-class method determines earnings per share for each class of common stock and participating security according to their respective participation rights in undistributed earnings. Unvested restricted stock awards granted to employees are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. In accordance with ASC Topic No. 260, diluted net income per share is calculated using the more dilutive of the following two approaches:

1. Assume exercise of stock options and vesting of restricted stock using the treasury stock method.

2. Assume exercise of stock options using the treasury stock method, but assume participating securities (unvested restricted stock) are not vested and allocate earnings to common shares and participating securities using the two-class method.

9

For the three and six months ended June 30, 2013, the two-class method was used in the computation of diluted net income per share as this approach was more dilutive. For the three and six months ended June 30, 2012, the treasury stock method was used in the computation of diluted net income per share, as both approaches resulted in the same diluted net income per share. The following presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands, except share and per share data):

	Three Months Ended June  30,						Six Months Ended June  30,
	2013			2012			2013			2012
Numerator:
Net income, as reported	$	7,311		$	7,415		$	15,927		$	13,135
Less: net income attributable to participating securities		(129	)		(129	)		(269	)		(214	)
Net income available to common shareholders—basic	$	7,182		$	7,286		$	15,658		$	12,921
Denominator:
Basic:
Weighted-average shares of common stock outstanding		38,420,617			36,689,475			38,070,822			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(642,750	)		(655,308	)		(600,044	)
Weighted-average number of common shares used in computing basic net income per common share		37,725,082			36,046,725			37,415,514			36,164,567
Net income per share applicable to common shareholders—basic	$	0.19		$	0.20		$	0.42		$	0.36

	Three Months Ended June  30,			Six Months Ended June  30,
	2013			2013
Numerator:
Net income available to common shareholders—basic	$	7,182		$	15,658
Add-back: undistributed earnings allocated to unvested shareholders		91			195
Less: undistributed earnings reallocated to unvested shareholders		(88	)		(188	)
Net income available to common shareholders—diluted	$	7,185		$	15,665
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		38,420,617			38,070,822
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(655,308	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,304,571			1,343,293
Weighted-average number of common shares used in computing diluted net income per common share		39,029,653			38,758,807
Net income per share applicable to common shareholders—diluted	$	0.18		$	0.40

10

	Three Months Ended June  30,			Six Months Ended June  30,
	2012			2012
Numerator:
Net income, as reported	$	7,415		$	13,135
Less: net income attributable to participating securities		(129	)		(214	)
Net income available to common shareholders—diluted	$	7,286		$	12,921
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		36,689,475			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(642,750	)		(600,044	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,263,738			1,294,178
Weighted-average number of restricted stock, based on the treasury stock method		113,069			131,212
Weighted-average number of common shares used in computing diluted net income per common share		37,423,532			37,589,957
Net income per share applicable to common shareholders—diluted	$	0.19		$	0.34

The following common share equivalents have been excluded from the computation of diluted weighted-average shares outstanding, as their effect would have been anti-dilutive:

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Options		441,924		1,941,448		316,393		1,758,482
Unvested restricted stock		89		3,521		33,752		2,792

The Company excludes options with combined exercise prices, and unvested restricted stock with unamortized fair values that are greater than the average market price for the Company’s common stock from the calculation of diluted net income per share because their effect is anti-dilutive.

11. Share Based Compensation

We account for share based compensation in accordance with ASC Topic No. 718, Compensation – Stock Compensation, which requires the measurement of compensation costs at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. The following presents the impact of share based compensation expense on our condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Marketing and selling	$	973	$	770	$	1,750	$	1,601
Research and development		488		384		904		825
General and administrative		625		557		1,181		1,208
Total share based compensation	$	2,086	$	1,711	$	3,835	$	3,634

As of June 30, 2013, the Company had $17.9 million of unrecognized compensation expense related to employees and directors unvested stock option awards and restricted stock awards that are expected to be recognized over a weighted average period of 2.3 years.

12. Segment Reporting

We view our operations and manage our business as one segment: the development, marketing and licensing of technologies and fonts. Factors used to identify our single segment include the financial information available for evaluation by our chief operating decision maker in making decisions about how to allocate resources and assess performance. While our technologies and services are

11

sold into two principal markets, Creative Professional and OEM, expenses and assets are not formally allocated to these market segments, and operating results are assessed on an aggregate basis to make decisions about the allocation of resources. The following table presents revenue for these two major markets (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Creative Professional	$	14,654	$	13,547	$	29,986	$	23,252
OEM		26,431		24,949		53,138		49,593
Total	$	41,085	$	38,496	$	83,124	$	72,845

Geographic segment information

The Company attributes revenues to geographic areas based on the location of our subsidiary receiving such revenue. For example, licenses may be sold to large international companies which may be headquartered in Korea, but the sales are received and recorded by our subsidiary located in the United States. In this example, the revenue would be reflected in the United States totals in the table below. We market our products and services through offices in the U.S., United Kingdom, Germany, Hong Kong, Korea and Japan. The following summarizes revenue by location:

	Three Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	23,359		56.8	%	$	21,251		55.2	%
Asia		11,664		28.4			11,755		30.5
United Kingdom		1,562		3.8			1,196		3.1
Germany		4,500		11.0			4,294		11.2
Total	$	41,085		100.0	%	$	38,496		100.0	%

	Six Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	47,506		57.2	%	$	37,918		52.1	%
Asia		24,553		29.5			22,471		30.8
United Kingdom		2,945		3.5			2,674		3.7
Germany		8,120		9.8			9,782		13.4
Total	$	83,124		100.0	%	$	72,845		100.0	%

Long-lived assets, which include property, plant and equipment, goodwill and intangible assets, but exclude other assets, long-term investments and deferred tax assets, are attributed to geographic areas in which Company assets reside and is shown below (in thousands):

	June 30, 2013		December 31, 2012
Long-lived assets:
United States	$	196,063	$	200,804
Asia		3,388		3,438
United Kingdom		4,634		5,130
Germany		53,178		54,245
Total	$	257,263	$	263,617

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13. Commitments and Contingencies

Operating Leases

We conduct operations in facilities under operating leases expiring through 2018. In accordance with the lease terms, we pay real estate taxes and other operating costs. Our leases in California, Massachusetts, Germany, India and Japan contain renewal options. The Company’s future minimum payments under non-cancelable operating leases as of June 30, 2013, are approximately as follows (in thousands):

Years ending June 30:
2014	$	2,570
2015		2,192
2016		1,247
2017		567
2018		270
Thereafter		18
Total	$	6,864

Legal Proceedings

From time to time, we may be a party to various claims, suits and complaints. We are not currently a party to any legal proceedings that, if determined adversely to us, would have a material adverse effect on our business, results of operations or financial condition.

Licensing Warranty

Under our standard license agreement with our OEM customers, we warrant that the licensed technologies are free of infringement claims of intellectual property rights and will meet the specifications as defined in the licensing agreement for a specified period, typically one year. Under the licensing agreements, liability for such indemnity obligations is limited generally to the total arrangement fee; however, exceptions have been made on a case-by-case basis, increasing the maximum potential liability to agreed upon amounts at the time the contract is entered into. We have never incurred costs payable to a customer or business partner to defend lawsuits or settle claims related to these warranties, and as a result, management believes the estimated fair value of these warranties is minimal. Accordingly, there are no liabilities recorded for these warranties as of June 30, 2013 and December 31, 2012.

14. Subsequent Event

On July 25, 2013 the Company’s Board of Directors approved a $0.06 per share, quarterly cash dividend on our outstanding common stock. The record date is set for October 1, 2013 and the dividend is payable to shareholders of record on October 21, 2013. Dividends are declared at the discretion of the Company’s Board of Directors and depend on actual cash from operations, the Company’s financial condition and capital requirements and any other factors the Company’s Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by the Company’s Board of Directors on a quarterly basis.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements and Projections

This Quarterly Report on Form 10-Q contains forward looking statements. Forward looking statements relate to future events or our future financial performance. We generally identify forward looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward looking statements is subject to risks, uncertainties and other factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Accordingly, you should not rely upon forward looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward looking statements. The forward looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

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Overview

We are a leading provider of type, technology and expertise for creative applications and consumer electronics, or CE, devices. Our software technologies have been widely deployed across, and embedded in a range of CE devices, including laser printers, digital copiers, mobile phones, e-book readers, tablets, automotive displays, digital cameras, navigation devices, digital televisions, set-top boxes and consumer appliances, as well as in numerous software applications and operating systems. In the laser printer market, we have worked together with industry leaders for over 20 years to provide critical components embedded in printing standards. The Company also provides printer drivers, page description language interpreters, printer user interface technology and color imaging solutions to printer manufacturers and OEMs (original equipment manufacturers). Our scaling, compression, text layout, printer driver and color technologies solve critical text imaging issues for CE device manufacturers by rendering high quality text on low resolution and memory constrained CE devices. We offer more than 18,000 typeface designs, and include some of the world’s most widely used designs, such as the Times New Roman^®, Helvetica^®, ITC Franklin Gothic™ and Droid™ typefaces, and support more than 200 Latin and non-Latin languages. Our e-commerce websites, including myfonts.com, fonts.com and linotype.com, which attracted more than 68 million visits in 2012 from over 200 countries and territories, offer thousands of high-quality font products, in some cases more than 150,000, including our own fonts from the Monotype Libraries as well as fonts from third parties.

Sources of Revenue

We derive revenue from two principal sources: licensing our fonts to creative and business professionals, which we refer to as our Creative Professional revenue, and licensing our text imaging solutions to CE device manufacturers and independent software vendors, which we refer to as our OEM revenue. We derive our Creative Professional revenue primarily from multinational corporations, graphic designers, media organizations, advertisers, printers and publishers. We derive our OEM revenue primarily from CE device manufacturers. Some of our revenue streams, particularly custom revenue, have historically been and we expect them to continue to be in the future, susceptible to weakening economic conditions.

Geographic revenue, which is based on the location of our subsidiary receiving such revenue, is in the table below:

	Three Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	23,359		56.8	%	$	21,251		55.2	%
Asia		11,664		28.4			11,755		30.5
United Kingdom		1,562		3.8			1,196		3.1
Germany		4,500		11.0			4,294		11.2
Total	$	41,085		100.0	%	$	38,496		100.0	%

	Six Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	47,506		57.2	%	$	37,918		52.1	%
Asia		24,553		29.5			22,471		30.8
United Kingdom		2,945		3.5			2,674		3.7
Germany		8,120		9.8			9,782		13.4
Total	$	83,124		100.0	%	$	72,845		100.0	%

For the three months ended June 30, 2013 and 2012, sales by our subsidiaries located outside the United States comprised 43.2% and 44.8%, respectively, of our total revenue. For the six months ended June 30, 2013 and 2012, sales by our subsidiaries located outside the United States comprised 42.8% and 47.9%, respectively, of our total revenue. In the six months ended June 30, 2013, U.S. revenue, as a percent of total revenue, increased due to the addition of revenue from our Bitstream acquisition, which was acquired on March 19, 2012. We expect that sales by our international subsidiaries will continue to represent a substantial portion of our revenue for the foreseeable future. Future international revenue will depend on the continued use and expansion of our text imaging solutions worldwide.

We derive a significant portion of our OEM revenue from a limited number of customers, in particular manufacturers of laser printers and consumer electronics. For the three months ended June 30, 2013 and 2012, our top ten licensees by revenue, all of which are with OEM customers, accounted for approximately 39.7% and 42.7% of our total revenue, respectively. For the six months ended June 30, 2013 and 2012, our top ten licensees by revenue, all of which are with OEM customers, accounted for approximately 39.2% and 43.8% of our total revenue, respectively. Although no one customer accounted for more than 10% of our total revenue for the three or six months ended June 30, 2013 or 2012, if we are unable to maintain relationships with major customers or establish relationships with new customers, our licensing revenue will be adversely affected.

14

Creative Professional Revenue

Our Creative Professional revenue is derived from font licenses, font related services and from custom font design services. We license fonts directly to end-users through our e-commerce websites, via telephone, email and indirectly through third-party resellers. Font related services refer to our web font services and the web design tools from our latest acquisition, Design by Front. We also license fonts and provide custom font design services to graphic designers, advertising agencies, media organizations and corporations. We refer to direct, indirect and custom revenue, as non-web revenue, and refer to revenue that is derived from our websites, as web revenue.

Revenue from font licenses to our e-commerce customers is recognized upon payment by the customer and electronic shipment of the software embodying the font. Revenue from font licenses to other customers is recognized upon shipment of the software embodying the font and when all other revenue recognition criteria have been met. Revenue from resellers is recognized upon notification from the reseller that our font product has been licensed and when all other revenue recognition criteria have been met. Custom font design services revenue is generally recognized upon delivery. Font related service revenue is mainly subscription based and, from time to time, it may contain software as a service. The subscription revenue is recognized ratably over the subscription period. Web server and commercial rights to online fonts is recurring revenue and is recognized upon invoicing and proof of font delivery. Contract accounting is used where services are deemed essential to the software.

OEM Revenue

Our OEM revenue is derived substantially from per-unit royalties received for printer imaging and printer driver, or printer products, and display imaging products. Under our licensing arrangements we typically receive a royalty for each product unit incorporating our text imaging solutions that is shipped by our OEM customers. We also receive OEM revenue from fixed fee licenses with certain of our OEM customers. Fixed fee licensing arrangements are not based on units the customer ships, but instead, customers pay us on a periodic basis for use of our typefaces and technology. Although significantly less than royalties from per-unit shipments and fixed fees from OEM customers, we also receive revenue from software application and operating systems vendors, who include our typefaces and technology in their products, and for font development. Many of our per-unit royalty licenses continue for the duration that our OEM customers ship products that include our technology, unless terminated for breach. Other licenses have terms that typically range from three to five years, and usually provide for automatic or optional renewals. We recognize revenue from per-unit royalties in the period during which we receive a royalty report from a customer, typically one quarter after royalty-bearing units are shipped, as we do not have the ability to estimate the number of units shipped by our customers. Revenue from fixed fee licenses is generally recognized when it is billed to the customer, so long as the product has been delivered, the license fee is fixed and non-refundable and collection is probable.

Cost of Revenue

Our cost of revenue consists of font license fees that we pay on certain fonts that are owned by third parties, allocated internal engineering expense and overhead costs directly related to custom design services. License fees that we pay to third parties are typically based on a percentage of our Creative Professional and OEM revenue and do not involve minimum fees. Our cost of OEM revenue is typically lower than our cost of Creative Professional revenue because we own a higher percentage of the fonts licensed to our OEM customers, provide value-added technology and have negotiated lower royalty rates on the fonts we license from third parties because of volume. The cost of our custom design service revenue is substantially higher than the cost of our other revenue and, as a result, our gross margin varies from period-to-period depending on the level of custom design revenue recorded.

Cost of revenue also includes amortization of acquired technology, which we amortize over 8 to 15 years. For purposes of amortizing acquired technology we estimate the remaining useful life of the technology based upon various considerations, including our knowledge of the technology and the way our customers use it. We use the straight-line method to amortize our acquired technology. There is no reliable evidence to suggest that we should expect any other pattern of amortization than an even pattern, and we believe this best reflects the expected pattern of economic usage.

Gross Profit

Our gross profit percentage is influenced by a number of factors including product mix, pricing and volume at any particular time. However, our cost of OEM revenue is typically lower than our cost of Creative Professional revenue because we own a higher percentage of the fonts licensed to our OEM customers, provide value-added technology and have negotiated lower royalty rates on the fonts we license from third parties because of volume. Within our Creative Professional business, the cost of our custom design service revenue is substantially higher than the cost of our other revenue. As a result, our gross profit varies from period-to-period depending on the mix between, and within, Creative Professional and OEM revenue.

15

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP and our discussion and analysis of our financial condition and results of operations requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

There has been no material change in our critical accounting policies since December 31, 2012. Information about our critical accounting policies may be found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies,” of our Annual Report on Form 10-K for the year ended December 31, 2012.

16

Results of Operations for the Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012

The following table sets forth items in the condensed consolidated quarterly statement of income as a percentage of sales for the periods indicated:

	Three Months Ended June 30,
	2013			2012
Revenue:
OEM		64.3	%		64.8	%
Creative Professional		35.7			35.2
Total revenue		100.0			100.0
Cost of revenue		14.6			15.8
Cost of revenue—amortization of acquired technology		2.8			2.8
Total cost of revenue		17.4			18.6
Gross profit		82.6			81.4
Marketing and selling		25.3			22.7
Research and development		11.9			11.9
General and administrative		12.1			12.2
Amortization of other intangible assets		3.7			3.7
Total operating expenses		53.0			50.5
Income from operations		29.6			30.9
Interest expense, net		0.8			1.4
Loss on foreign exchange		0.6			—
Other income, net		—			(0.5	)
Total other expense		1.4			0.9
Income before provision for income taxes		28.2			30.0
Provision for income taxes		10.4			10.7
Net income		17.8	%		19.3	%

The following discussion compares the three months ended June 30, 2013 with the three months ended June 30, 2012.

Sales by Segment. We view our operations and manage our business as one segment: the development, marketing and licensing of technologies and fonts. Factors used to identify our single segment include the financial information available for evaluation by our chief operating decision maker in making decisions about how to allocate resources and assess performance. While our technologies and services are sold to customers in two principal markets (Creative Professional and CE device manufacturers and independent software vendors, together OEM), expenses and assets are not formally allocated to these markets, and operating results are assessed on an aggregate basis to make decisions about the allocation of resources.

The following table presents revenue for these two principal markets (in thousands):

	Three Months Ended June 30,				Increase
	2013		2012
Creative Professional	$	14,654	$	13,547	$	1,107
OEM		26,431		24,949		1,482
Total revenue	$	41,085	$	38,496	$	2,589

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Revenue

Revenue was $41.1 million and $38.5 million for the three months ended June 30, 2013 and 2012, respectively, an increase of $2.6 million, or 6.7%.

Creative Professional revenue increased $1.2 million, or 8.2%, to $14.7 million for the three months ended June 30, 2013, as compared to $13.5 million for the three months ended June 30, 2012, primarily due to an increase in web revenue. Web revenue increased primarily due to the volume of sales on our websites, coupled with increased sales of our web font services. In addition, direct revenue increased, mainly the result of increased sales of our web font services to enterprise customers. These increases were partially offset by a decrease in custom revenue, due to the timing of custom work, in the three months ended June 30, 2013, as compared to the same period in 2012.

OEM revenue was $26.4 million and $24.9 million for the three months ended June 30, 2013 and 2012, respectively, an increase of $1.5 million, or 5.9%, mainly due to an increase in display imaging revenue. Display imaging revenue increased primarily due to increased royalty and service revenue from our independent software vendor customers.

Cost of Revenue and Gross Profit

Cost of revenue, excluding amortization of acquired technology, was $6.0 million and $6.1 million for the three months ended June 30, 2013 and 2012, respectively, a decrease of $0.1 million, or 1.1%. As a percentage of total revenue, cost of revenue, excluding amortization of acquired technology, was 14.6% and 15.8% in the three months ended June 30, 2013 and 2012, respectively. The decrease in cost of revenue, excluding amortization of acquired technology, was mainly due to variations in product mix. In the three months ended June 30, 2013, as compared to the same period in 2012, we had an increase in revenue from licenses of our intellectual property and a reduction in custom revenue, which has a higher associated cost.

The portion of cost of revenue consisting of amortization of acquired technology was unchanged at $1.1 million for the three months ended June 30, 2013 and 2012, respectively.

Gross profit increased 1.2% to 82.6% of sales in the three months ended June 30, 2013, as compared to 81.4% in the three months ended June 30, 2012, due to product mix. In the three months ended June 30, 2013, there was a lower percentage of custom revenue, which generally has a higher associated cost, as compared to the same period in 2012. In the three months ended June 30, 2013, as compared to the same period in 2012, there was a higher percentage of sales containing our fonts, rather than third party fonts which carry a higher associated cost.

Operating Expenses

Marketing and Selling. Marketing and selling expense increased $1.7 million, or 19.2%, to $10.4 million in the three months ended June 30, 2013, as compared to $8.7 million in the three months ended June 30, 2012. Discretionary spending on targeted advertising, branding related expenses and website design work increased $0.7 million in the three months ended June 30, 2013, as compared to the same period in 2012. Personnel expenses increased $0.5 million in the three months ended June 30, 2013, as compared to the same period in 2012, a result of increased stock based compensation expense and annual salary increases. Other increases totaling $0.3 million resulted from increased sales volume, such as credit card processing fees and other charges on web sales.

Research and Development. Research and development expense increased $0.3 million, or 6.6%, to $4.9 million in the three months ended June 30, 2013, as compared to $4.6 million in the same period in 2012, mainly due to an increase in outside service expense. Outside services increased $0.2 million in the three months ended June 30, 2013, as compared to the same period in 2012, due to an increase in outsourced product development work.

General and Administrative. General and administrative expense was $5.0 million and $4.7 million in the three months ended June 30, 2013 and 2012, respectively, an increase of $0.3 million, or 6.0%. Personnel and personnel related expenses increased $0.2 million in the three months ended June 30, 2013, as compared to the same period in 2012, mainly due to increases in stock based compensation, payroll and related taxes.

Amortization of Other Intangible Assets. Amortization of other intangible assets was $1.5 million and $1.4 million in the three months ended June 30, 2013 and 2012, respectively.

18

Interest Expense, Net

Interest expense, net of interest income decreased $0.3 million, or 43.4%, to $0.3 million for the three months ended June 30, 2013, as compared to $0.6 million for the three months ended June 30, 2012. The decrease is the result of lower total debt outstanding in the second quarter of 2013, as compared to the same period in 2012. The average debt balance in the three months ended June 30, 2013 was $1.4 million, as compared to $45.7 million in the three months ended June 30, 2012. Borrowings under our credit facility were repaid in full in May 2013.

Loss on Foreign Exchange

Loss on foreign exchange was $0.3 million and $10 thousand in the three months ended June 30, 2013 and 2012, respectively, an increase of approximately $0.3 million, primarily due to currency losses on liabilities associated with the acquisition of Design by Front.

Gain on Derivatives

Gain on derivatives was $0.2 million in the three months ended June 30, 2012, primarily due to our currency swap instrument. The currency swap contract matured in December 2012. There was no similar item in the three months ended June 30, 2013, as there were no outstanding derivative contracts.

Provision for Income Taxes

For the three months ended June 30, 2013 and 2012, our effective tax rate was 37.0% and 35.8%, respectively. During the second quarter of 2013, our effective tax rate increased 1.0% as compared to the same period in 2012, primarily due to a decrease in the benefit from the Section 199 manufacturing deduction. This increase was partially offset by a 0.5% benefit from research credits. The federal research tax credit expired as of December 31, 2011, and as of June 30, 2012, the legislation extending the credit had not been passed. Therefore, the research credit was not available in the three months ended June 30, 2012. The research credit was subsequently extended in January 2013.

Results of Operations for the Six Months Ended June 30, 2013 Compared to Six Months Ended June 30, 2012

The following table sets forth items in the condensed consolidated year-to-date statement of income as a percentage of sales for the periods indicated:

	Six Months Ended June 30,
	2013			2012
Revenue:
Creative Professional		36.1	%		31.9	%
OEM		63.9			68.1
Total revenue		100.0			100.0
Cost of revenue		14.5			13.3
Cost of revenue—amortization of acquired technology		2.7			2.6
Total cost of revenue		17.2			15.9
Gross profit		82.8			84.1
Marketing and selling		24.4			24.7
Research and development		11.9			12.3
General and administrative		11.7			13.2
Amortization of other intangible assets		3.5			3.7
Total operating expenses		51.5			53.9
Income from operations		31.3			30.2
Interest expense, net		0.9			1.4
Loss on foreign exchange		1.0			0.3
Other income, net		—			(0.1	)
Total other expense		1.9			1.6
Income before provision for income taxes		29.4			28.6
Provision for income taxes		10.2			10.6
Net income		19.2	%		18.0	%

19

The following discussion compares the six months ended June 30, 2013 with the six months ended June 30, 2012.

Sales by Segment. The following table presents revenue for these two principal markets (in thousands):

	Six Months Ended June 30,				Increase
	2013		2012
Creative Professional	$	29,986	$	23,252	$	6,734
OEM		53,138		49,593		3,545
Total revenue	$	83,124	$	72,845	$	10,279

Revenue

Revenue was $83.1 million and $72.8 million for the six months ended June 30, 2013 and 2012, respectively, an increase of $10.3 million, or 14.1%.

Creative Professional revenue increased $6.7 million, or 29.0%, to $30.0 million for the six months ended June 30, 2013, as compared to $23.3 million for the six months ended June 30, 2012, primarily due to an increase in web revenue. Web revenue increased primarily due to our acquisition of Bitstream, together with increased sales of our web font services. Direct revenue also increased mainly the result of increased sales of our web font services to enterprise customers. The increases were partially offset by a decrease in custom revenue, due to the timing of custom work in the six months ended June 30, 2013, as compared to the same period in 2012.

OEM revenue increased $3.5 million, or 7.2%, to $53.1 million for the six months ended June 30, 2013, as compared to $49.6 million for the six months ended June 30, 2012, mainly due to increased revenue from per unit royalty arrangements with our printer and display imaging based consumer electronic OEM customers.

Cost of Revenue and Gross Profit

Cost of revenue excluding amortization of acquired technology was $12.0 million and $9.7 million for the six months ended June 30, 2013 and 2012, respectively, an increase of $2.3 million, or 23.5%. As a percentage of total revenue, cost of revenue excluding amortization was 14.5% and 13.3% in the six months ended June 30, 2013 and 2012, respectively. The increase in cost of revenue, excluding amortization of acquired technology, was mainly due to variations in product mix. Bitstream’s web business sells a higher proportion of third party fonts, which carry a higher cost of revenue. In the six months June 30, 2013, there was a full six months of Bitstream’s web revenue, as compared to the same period in 2012, which included less than four months of Bitstream revenue.

Amortization of acquired technology was $2.3 million and $1.9 million for the six months ended June 30, 2013 and 2012, respectively. The increase is mainly due to our acquisitions of Bitstream and Design by Front.

Gross profit decreased 1.3% of sales to 82.8% in the six months ended June 30, 2013, as compared to 84.1% in the six months ended June 30, 2012, primarily due to our acquisition of Bitstream.

Operating Expenses

Marketing and Selling. Marketing and selling expense increased $2.3 million, or 12.9%, to $20.3 million in the six months ended June 30, 2013, as compared to $18.0 million in the six months ended June 30, 2012. Personnel expenses increased $0.8 million, mainly the result of a full six months of Bitstream personnel and annual salary increases in the six months ended June 30, 2013, as compared to the same period in 2012. Various expenses, mainly related to the increased volume of sales, such as processing fees and other charges on web sales, contributed $0.7 million to the increase period over period. Increased discretionary spending, such as website design work, targeted advertising and branding related expenses, together contributed $0.6 million to the increase in the first half of 2013, as compared to the same period in 2012.

Research and Development. Research and development expense increased $1.0 million, or 10.4%, to $9.9 million in the six months ended June 30, 2013, as compared to $8.9 million in the six months ended June 30, 2012. Personnel related expenses increased $0.6 million in the first half of 2013, as compared to the same period in 2012, mainly a result of a full six months of Bitstream personnel. Increased discretionary spending in other areas, such as product development, provided $0.2 million to the increase.

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General and Administrative. General and administrative expense was $9.7 million and $9.6 million for the six months ended June 30, 2013 and 2012, respectively, an increase of $0.1 million, or 0.6% partially due to an increase in personnel and various discretionary expenses, offset by a reduction in legal spending resulting from our 2012 acquisition of Bitstream.

Amortization of Other Intangible Assets. Amortization of other intangible assets was $3.0 million and $2.7 million in the six months ended June 30, 2013 and 2012, respectively, an increase of $0.3 million, mainly due to our acquisitions of Bitstream and Design by Front.

Interest Expense, Net

Interest expense, net of interest income was $0.7 million for the six months ended June 30, 2013, as compared to $1.0 million for the six months ended June 30, 2012, a decrease of $0.3 million, or 26.5%. The decrease is the result of lower total debt outstanding in the first half of 2013, as compared to the same period in 2012. The average debt balance in the six months ended June 30, 2013 was $9.2 million, as compared to $42.3 million in the six months ended June 30, 2012.

Loss on Foreign Exchange

Loss on foreign exchange was $0.8 million and $0.3 million for the six months ended June 30, 2013 and 2012, respectively, an increase of $0.5 million. The increase was due primarily to the currency losses on liabilities associated with the acquisition of Design by Front.

Gain on Derivatives

Gain on derivatives was $79 thousand in the six months ended June 30, 2012, primarily due to our currency swap instrument, which matured in December 2012. There was no similar item in the six months ended June 30, 2013, as there were no outstanding derivative contracts.

Provision for Income Taxes

For the six months ended June 30, 2013 and 2012, our effective tax rate was 34.9% and 37.0%, respectively. During the first half of 2013, our effective tax rate included a 1.5% benefit from research credits. The federal research tax credit expired as of December 31, 2011, and as of June 30, 2012, the legislation extending the credit had not been passed. Therefore, the research credit was not available in the first half of 2012. The research credit was subsequently extended in January 2013. In addition, during the six months ended June 30, 2012, the effective tax rate included 0.6% due to an increase in deferred state taxes related to our acquisition of Bitstream. There was no similar item in the same period in 2013.

Liquidity and Capital Resources

Cash Flows for the Six Months Ended June 30, 2013 and 2012

Since our inception, we have financed our operations primarily through cash from operations, private and public stock sales and long-term debt arrangements, as described below. We believe our existing cash and cash equivalents, our cash flow from operating activities and available bank borrowings will be sufficient to meet our anticipated cash needs for at least the next twelve months. At June 30, 2013, our principal sources of liquidity were cash and cash equivalents totaling $51.7 million and a $120.0 million revolving credit facility, of which there were no outstanding borrowings at June 30, 2013. Our future working capital requirements will depend on many factors, including the operations of our existing business, our potential strategic expansion and future acquisitions we might undertake. To the extent that our cash and cash equivalents, our current debt arrangements and our cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements or public or private equity or debt financings.

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The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in thousands):

	Six Months Ended June 30,
	2013			2012
Net cash provided by operating activities	$	24,628		$	22,954
Net cash used in investing activities		(704	)		(50,082	)
Net cash (used in) provided by financing activities		(11,429	)		6,235
Effect of exchange rates on cash and cash equivalents		(166	)		(39	)
Total increase (decrease) in cash and cash equivalents	$	12,329		$	(20,932	)

Operating Activities

Significant variations in operating cash flows may occur because, from time-to-time, our customers make prepayments against future royalties. Prepayments may be required under the terms of our license agreements and are occasionally made on an elective basis and often cause large fluctuations in accounts receivable and deferred revenue. The timing and extent of such prepayments significantly impacts our cash balances.

We generated $24.6 million in cash from operations during the six months ended June 30, 2013. Net income after adjusting for depreciation and amortization, amortization of deferred financing costs, share based compensation, excess tax benefit on stock options, provision for doubtful accounts, deferred income taxes and unrealized currency loss on foreign denominated intercompany transactions generated $25.1 million in cash. Deferred revenue generated $1.7 million in cash, due to royalty prepayments received. A decrease in accrued expenses and other liabilities used $1.4 million, primarily a result of the payment of 2012 accrued variable compensation amounts. Increases in accounts receivable and accounts payable combined with decreases in prepaid expenses, other assets and accrued income taxes, used $0.9 million in cash, which is mainly due to timing of payments.

We generated $23.0 million in cash from operations during the six months ended June 30, 2012. Net income, after adjusting for depreciation and amortization, amortization of deferred financing costs, share based compensation, excess tax benefit on stock options, provision for doubtful accounts, deferred income taxes, unrealized currency gain on foreign denominated intercompany transactions, and unrealized loss on derivatives generated $22.2 million in cash. Deferred revenue generated $1.9 million in cash, mainly the result of the receipt of a large royalty prepayment. Increases in accrued income taxes, net of increased prepaid income taxes, generated $2.0 million in cash. Increases in prepaid expenses and other assets and decreases in accounts payable, net of a decrease in accounts receivable, used $1.0 million in cash. Decreases in accrued expenses and other liabilities used $2.1 million in cash, primarily as a result of the payment of variable compensation accrued in the previous period.

Investing Activities

During the six months ended June 30, 2013 we used $0.7 million mainly for the purchase of property and equipment. During the six months ended June 30, 2012, we used $50.1 million in cash for investing activities, mainly as a result of our acquisition of Bitstream, which used a total of $49.1 million, net of cash acquired. We used $1.0 million in cash for the purchase of property and equipment, exclusive license and other intangible assets during the six months ended June 30, 2012.

Financing Activities

Cash used in financing activities for the six months ended June 30, 2013 was $11.4 million. All outstanding debt was repaid resulting in a $22.3 million use of cash and we paid cash dividends of $3.8 million. There was a significant amount of employee stock option exercises during the six months ended June 30, 2013, which resulted in $14.7 million in proceeds from the exercise of common stock options and excess tax benefit on stock options.

Cash provided by financing activities for the six months ended June 30, 2012, was $6.2 million. Borrowings against our revolving Credit Facility amounted to $25.0 million to partially fund our acquisition of Bitstream, which was offset partially by $20.0 million in repayments during the six months ended June 30, 2012. We received cash from exercises of stock options of $0.8 million and excess tax benefit on stock options provided $0.4 million.

Dividends

On April 29, 2013 our Board of Directors approved a $0.06 per share or $2.3 million, quarterly cash dividend on our outstanding common stock. The record date was July 1, 2013 and the dividend was paid to shareholders of record on July 19, 2013. We anticipate this to be a recurring quarterly dividend with future payments and record dates, subject to board approval. On July 25, 2013 the Company’s Board of Directors approved a $0.06 per share, quarterly cash dividend on our outstanding common stock. The record date is set for October 1, 2013 and the dividend is payable to shareholders of record on October 21, 2013.

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Credit Facility

On July 13, 2011 we entered into a five-year $120.0 million revolving credit facility (the “Credit Facility”). Borrowings under the Credit Facility bear interest based on the leverage ratio at either (i) the prime rate plus 1.25%, as defined in the credit agreement, or (ii) LIBOR plus 2.25%. The Company is required to pay an unused line fee equal to 0.375% per annum on the undrawn portion available under the revolving credit facility and variable per annum fees in respect of outstanding letters of credit. At June 30, 2013 our rate, inclusive of applicable margins, was 4.5% for prime and we had no outstanding debt under the Credit Facility. There are no required repayments. The Company, in accordance with the Credit Facility, is permitted to request that the Lenders, at their election, increase the secured credit facility to a maximum of $140.0 million.

In addition, the Credit Facility provides that we not exceed a maximum leverage ratio. The leverage ratio is defined as the ratio of aggregate outstanding indebtedness to trailing twelve months Adjusted EBITDA. Adjusted EBITDA is defined as consolidated net earnings (or loss), plus net interest expense, income taxes, depreciation and amortization and share based compensation expense, plus restructuring, issuance costs, cash non-operating costs and other expenses or losses minus cash non-operating gains and other non-cash gains; provided however that the aggregate of all cash non-operating expense shall not exceed $250 thousand and all such fees, costs and expenses shall not exceed $1.5 million on a trailing twelve months basis.

Additional limits are imposed on acquisition related expenses. We also must maintain a minimum fixed charge ratio. As of June 30, 2013, the maximum leverage ratio permitted was 3.00:1.00 and our leverage ratio was 0.00:1.00 and the minimum fixed charge coverage ratio was 1.25:1.00 and our fixed charge ratio was 4.17:1.00. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Credit Facility to declare all amounts borrowed under the Credit Facility, together with accrued interest and fees, to be immediately due and payable. In addition, the Credit Facility is secured by substantially all of our assets and places limits on the Company’s and its subsidiaries’ ability to incur debt or liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates and alter its business.

The following table presents a reconciliation from net income, which is the most directly comparable GAAP operating performance measure, to EBITDA and from EBITDA to Adjusted EBITDA as defined in our credit facilities (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2013		2012			2013		2012
Net income	$	7,311	$	7,415		$	15,927	$	13,135
Provision for income taxes		4,299		4,133			8,530		7,720
Interest expense, net		308		544			726		988
Depreciation and amortization		3,022		2,814			6,019		5,147
EBITDA	$	14,940	$	14,906		$	31,202	$	26,990
Share based compensation		2,086		1,711			3,835		3,634
Non-cash add backs		—		170			—		299
Restructuring, issuance and cash non-operating costs(2)		76		(113	)		170		(187	)
Acquisition expenses		—		23			—		476
Adjusted EBITDA(1)	$	17,102	$	16,697		$	35,207	$	31,212

(1) Adjusted EBITDA is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as income (loss) from operations and net income (loss). Adjusted EBITDA as an operating performance measure has material limitations since it excludes the statement of income impact of depreciation and amortization expense, interest expense, net, the provision (benefit) for income taxes and share based compensation and therefore does not represent an accurate measure of profitability, particularly in situations where a company is highly leveraged or has a disadvantageous tax structure. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion from Adjusted EBITDA is a material limitation. We have had a significant amount of debt, and interest expense is a necessary element of our costs and therefore its exclusion from Adjusted EBITDA is a material limitation. We generally incur significant U.S. federal, state and foreign income taxes each year and the provision for income taxes is a necessary element of our costs and therefore its exclusion from Adjusted EBITDA is a material limitation. We have share based compensation and the associated expense has a meaningful impact on our financial statements and therefore its exclusion from Adjusted EBITDA is a material limitation. Non-cash expenses, restructuring, issuance and cash non-operating expenses have a meaningful impact on our financial statements. Therefore, their exclusion from Adjusted EBITDA is a material

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limitation. As a result, Adjusted EBITDA should be evaluated in conjunction with net income for complete analysis of our profitability, as net income includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to Adjusted EBITDA. As Adjusted EBITDA is not defined by GAAP, our definition of Adjusted EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that Adjusted EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

(2) Permits an add-back of up to $250 thousand of cash non-operating expense, which is not to exceed $1.5 million when combined together with restructuring and issuance costs.

The Credit Facility also contains provisions for an increased interest rate during periods of default. We do not believe that these covenants will affect our ability to operate our business, and we were in compliance with all covenants under our Credit Facility as of June 30, 2013.

Non-GAAP Measures

In addition to Adjusted EBITDA as discussed above, we rely internally on certain measures that are not calculated according to GAAP. This non-GAAP measure is net adjusted EBITDA, which is defined as income (loss) from operations before depreciation, amortization of acquired intangible assets and stock-based compensation expenses. We use net adjusted EBITDA as a principal indicator of the operating performance of our business. We use net adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining bonus compensation for our employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that net adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period-to-period without direct correlation to underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our net adjusted EBITDA may be valuable indicators of our operating performance.

The following table presents a reconciliation from income from operations, which is the most directly comparable GAAP operating financial measure, to net adjusted EBITDA as used by management (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Income from operations	$	12,180	$	11,894	$	25,986	$	22,027
Depreciation and amortization		3,022		2,814		6,019		5,147
Share based compensation		2,086		1,711		3,835		3,634
Net adjusted EBITDA(1)	$	17,288	$	16,419	$	35,840	$	30,808

(1) Net adjusted EBITDA is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as income (loss) from operations and net income (loss). Net adjusted EBITDA as an operating performance measure has material limitations since it excludes the statement of income impact of depreciation and amortization expense and share based compensation and therefore does not represent an accurate measure of profitability. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion from net adjusted EBITDA is a material limitation. Share based compensation and the associated expense has a meaningful impact on our financial statements and therefore its exclusion from net adjusted EBITDA is a material limitation. As a result, net adjusted EBITDA should be evaluated in conjunction with income (loss) from operations for complete analysis of our profitability, as income (loss) from operations includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to net adjusted EBITDA. As net adjusted EBITDA is not defined by GAAP, our definition of net adjusted EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that net adjusted EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

In our quarterly earnings press releases and conference calls, in addition to Adjusted EBITDA and net adjusted EBITDA as discussed above, we discuss a key measure that is not calculated according to GAAP. This non-GAAP measure is non-GAAP earnings per diluted share, which is defined as earnings per diluted share before amortization of acquired intangible assets and stock-based compensation expenses. We use non-GAAP earnings per diluted share as one of our principal indicators of the operating performance of our business. We use non-GAAP earnings per diluted shares in internal forecasts, supplementing the financial results and forecasts

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reported to our board of directors and evaluating short-term and long-term operating trends in our operations. We believe that non-GAAP earnings per diluted share permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary from period-to-period without direct correlation to underlying operating performance. We believe that these non-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our non-GAAP earnings per diluted share may be valuable indicators of our operating performance.

The following table presents a reconciliation from earnings per diluted share, which is the most directly comparable GAAP measure, to non-GAAP earnings per diluted share as used by management:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
GAAP earnings per diluted share	$	0.18	$	0.19	$	0.40	$	0.34
Amortization, net of tax		0.04		0.05		0.09		0.09
Share-based compensation, net of tax		0.04		0.03		0.07		0.06
Non-GAAP earnings per diluted share(1)	$	0.26	$	0.27	$	0.56	$	0.49

(1) Non-GAAP earnings per diluted share is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as earnings per share and earnings per diluted share. Non-GAAP earnings per diluted share as an operating performance measure has material limitations since it excludes the statement of income impact of amortization expense and share based compensation, and therefore, does not represent an accurate measure of profitability. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion from non-GAAP earnings per diluted share is a material limitation. Share based compensation and the associated expense has a meaningful impact on our financial statements and therefore its exclusion from non-GAAP diluted earnings per share is a material limitation. As a result, non-GAAP earnings per diluted share should be evaluated in conjunction with earnings per diluted share for complete analysis of our profitability, as earnings per diluted share includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to non-GAAP earnings per diluted share. As non-GAAP earnings per diluted share is not defined by GAAP, our definition of non-GAAP earnings per diluted share may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that non-GAAP earnings per share has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

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Other Liquidity Matters

Contractual Obligations

The table below summarizes our operating lease contractual obligations at June 30, 2013 and the effects of such obligations on liquidity and cash flow in future years (in thousands). There is no change in our other contractual obligations from those disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2012.

Contractual Obligations	Total		July 2013 - June 2014		July 2014 - June 2016		July 2016 - June 2018		Thereafter
Operating leases	$	6,864	$	2,570	$	3,439	$	837	$	18

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to financial market risk, including interest rate risk and foreign currency exchange risk.

Concentration of Revenue and Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Cash equivalents consist primarily of bank deposits and certain investments, such as commercial paper, corporate securities and municipal securities, with maturities less than 90 days or containing seven day guaranteed put features to the issuer. Deposits of cash held outside the United States totaled approximately $3.3 million and $3.1 million at June 30, 2013 and December 31, 2012, respectively.

We grant credit to customers in the ordinary course of business. Credit evaluations are performed on an ongoing basis to reduce credit risk, and no collateral is required from our customers. An allowance for uncollectible accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and credit evaluation. As of June 30, 2013, none of our customers individually accounted for 10% or more of our gross accounts receivable. As of December 31, 2012, one customer individually accounted for 10% of our gross accounts receivable. Due to the nature of our quarterly revenue streams derived from royalty revenue, it is not unusual for our accounts receivable balances to include a few customers with large balances. Historically, we have not recorded material losses due to customers’ nonpayment.

For the three and six months ended June 30, 2013 and 2012, no customer accounted for more than 10% of our revenue.

Derivative Financial Instruments and Interest Rate Risk

We use interest rate derivative instruments to hedge our exposure to interest rate volatility resulting from our variable rate debt. ASC Topic No.815, Derivatives and Hedging, or ASC 815, requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for designation and effectiveness of hedging relationships, including a requirement that all designations must be made at the inception of each instrument. As we did not make such initial designations, ASC 815 requires changes in the fair value of the derivative instrument to be recognized as current period income or expense.

The fair value of derivative instruments is estimated based on the amount that we would receive or pay to terminate the agreements at the reporting date. Our exposure to market risk associated with changes in interest rates relates primarily to our long term debt. The interest rate on our Credit Facility fluctuates with either the prime rate or the LIBOR interest rate. At June 30, 2013, the Company had no outstanding debt. Historically, we have purchased interest rate swap instruments to hedge our exposure to interest rate fluctuations on our debt obligations. On May 24, 2010, we entered into a long term interest rate swap contract to pay a fixed rate of interest of 1.5% in exchange for a floating rate interest payment tied to the one-month LIBOR beginning January 2011. The contract matured on July 30, 2012, accordingly, in the three and six months ended June 30, 2013, there was no gain or loss on the interest rate swap. In the three and six months ended June 30, 2012, we recognized nominal losses on the interest rate swap, which were included in gain on derivatives in the accompanying condensed consolidated statements of income.

Foreign Currency Exchange Rate Risk

In accordance with ASC Topic No. 830, Foreign Currency Matters, or ASC 830, all assets and liabilities of our foreign subsidiaries whose functional currency is a currency other than U.S. dollars are translated into U.S. dollars at an exchange rate as of the balance sheet date. Revenue and expenses of these subsidiaries are translated at the average monthly exchange rates. The resulting translation adjustments as calculated from the translation of our foreign subsidiaries to U.S. dollars are recorded as a separate component of stockholders’ equity.

We incurred foreign currency exchange rate gains and losses on an intercompany note with one of our foreign subsidiaries that was denominated in Euros, which matured on December 14, 2012. During the three and six months ended June 30, 2012, we incurred

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net losses of $0.2 million and $0.1 million, respectively, on the intercompany note, which was included in loss on foreign exchange in our accompanying consolidated statement of income. On May 7, 2008, we entered into a long term currency swap contract to purchase 18.3 million Euros in exchange for $28.0 million to mitigate our exposure to currency fluctuation risk on this note. The contract payment terms approximated the payment terms of this intercompany note and the notional amount was amortized down over time as payments were made. The contract matured on December 14, 2012. For the three and six months ended June 30, 2012, we recognized gains of $0.2 million and $0.1 million, respectively, which is included in gain on derivatives in the accompanying condensed consolidated statements of income.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2013, our principal executive officer and principal financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be a party to various claims, suits and complaints. We are not currently a party to any legal proceedings that, if determined adversely to us, would have a material adverse effect on our business, results of operations or financial condition.

Item 1A. Risk Factors

There are no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Unregistered Sales of Equity Securities

None.

(b) Use of proceeds

Not applicable.

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about purchases by the Company during the quarter ended June 30, 2013 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

Monotype Imaging Holdings Inc. Purchases of Equity Securities

Period	Total Number  of Shares Purchased		Average Price Paid per Share		Total Number of  Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
April 1, 2013 to April 30, 2013(1)		10,800	$	0.00		—	$	—
May 1, 2013 to May 31, 2013		—		—		—		—
June 1, 2013 to June 30, 2013(1)		2,007		0.00		—		—
Total		12,807	$	0.00		—	$	—

(1) The Company repurchased unvested restricted stock in accordance with the 2007 Stock Option and Incentive Plan. The price paid by the Company was determined pursuant to the terms of the 2007 Stock Option and Incentive Plan and related restricted stock agreement.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Quarterly Report on Form 10-Q and such Exhibit Index is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	MONOTYPE IMAGING HOLDINGS INC.
Date: July 26, 2013	By:	/S/    DOUGLAS J. SHAW
		Douglas J. Shaw President, Chief Executive Officer and Director (Principal Executive Officer)
Date: July 26, 2013	By:	/S/    SCOTT E. LANDERS
		Scott E. Landers Senior Vice President, Chief Financial Officer, Treasurer and Assistant Secretary (Principal Financial Officer)

29

EXHIBIT INDEX

Listed and indexed below are all exhibits filed as part of this report.

Exhibit No.	Description
10.1	Executive Employment Agreement by and between Steven R. Martin and Monotype Imaging Inc., effective as of May 21, 2013.(1)
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.*
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.*
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer and Chief Financial Officer.***
101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed on May 24, 2013.

* Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

*** Furnished herewith.

30

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Douglas J. Shaw, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Monotype Imaging Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2013

/S/    DOUGLAS J. SHAW        

Douglas J. Shaw

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Scott E. Landers, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Monotype Imaging Holdings Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 26, 2013

/S/    SCOTT E. LANDERS        

Scott E. Landers

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Monotype Imaging Holdings Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Douglas J. Shaw, Chief Executive Officer of the Company, and Scott E. Landers, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to our knowledge, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 26, 2013

/S/    DOUGLAS J. SHAW        

Douglas J. Shaw

Chief Executive Officer

/S/    SCOTT E. LANDERS        

Scott E. Landers

Chief Financial Officer

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Share Based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share Based Compensation

11. Share Based Compensation

We account for share based compensation in accordance with ASC Topic No. 718, Compensation – Stock Compensation, which requires the measurement of compensation costs at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. The following presents the impact of share based compensation expense on our condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Marketing and selling	$	973	$	770	$	1,750	$	1,601
Research and development		488		384		904		825
General and administrative		625		557		1,181		1,208
Total share based compensation	$	2,086	$	1,711	$	3,835	$	3,634

As of June 30, 2013, the Company had $17.9 million of unrecognized compensation expense related to employees and directors unvested stock option awards and restricted stock awards that are expected to be recognized over a weighted average period of 2.3 years.

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Statement [Abstract]
Revenue	$ 41,085	$ 38,496	$ 83,124	$ 72,845
Cost of revenue	6,016	6,080	12,025	9,738
Cost of revenue-amortization of acquired technology	1,139	1,085	2,277	1,880
Total cost of revenue	7,155	7,165	14,302	11,618
Gross profit	33,930	31,331	68,822	61,227
Operating expenses:
Marketing and selling	10,392	8,720	20,311	17,991
Research and development	4,891	4,588	9,863	8,932
General and administrative	4,980	4,698	9,685	9,625
Amortization of other intangible assets	1,487	1,431	2,977	2,652
Total operating expenses	21,750	19,437	42,836	39,200
Income from operations	12,180	11,894	25,986	22,027
Other (income) expense:
Interest expense	313	553	731	1,004
Interest income	(5)	(9)	(5)	(16)
Loss on foreign exchange	263	10	840	277
Gain on derivatives		(205)		(79)
Other income, net	(1)	(3)	(37)	(14)
Total other expense	570	346	1,529	1,172
Income before provision for income taxes	11,610	11,548	24,457	20,855
Provision for income taxes	4,299	4,133	8,530	7,720
Net income	7,311	7,415	15,927	13,135
Net income available to common stockholders-basic	7,182	7,286	15,658	12,921
Net income available to common stockholders-diluted	$ 7,185	$ 7,286	$ 15,665	$ 12,921
Net income per common share:
Basic	$ 0.19	$ 0.20	$ 0.42	$ 0.36
Diluted	$ 0.18	$ 0.19	$ 0.40	$ 0.34
Weighted average number of shares:
Basic	37,725,082	36,046,725	37,415,514	36,164,567
Diluted	39,029,653	37,423,532	38,758,807	37,589,957
Dividends declared per common share	$ 0.06		$ 0.12

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Derivative Financial Instruments

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

4. Derivative Financial Instruments

On May 24, 2010, we entered into a long term interest rate swap contract to pay a fixed rate of interest of 1.5% in exchange for a floating rate interest payment tied to the one-month London Inter-Bank Offering Rate (“LIBOR”) beginning November 28, 2010 to mitigate our exposure to interest rate fluctuations on our debt obligations for the remainder of the term of the note. The contract had a notional amount of $30.0 million and matured on July 30, 2012. We did not designate the contract as a hedge; as such, associated gains and losses were recorded in gain on derivatives in our condensed consolidated statements of income.

On May 7, 2008, we entered into a long term currency swap contract to purchase 18.3 million Euros in exchange for $28.0 million to mitigate foreign currency exchange rate risk on a Euro denominated intercompany note. We incurred net losses of $0.2 million and $0.1 million on the intercompany note for the three and six months ended June 30, 2012, respectively, which is included in loss on foreign exchange in the accompanying condensed consolidated statements of income. The currency swap matured on December 14, 2012. The contract payment terms approximated the payment terms of this intercompany note.

The following table presents the losses and (gains) on our derivative financial instruments which are included in gain on derivatives in our accompanying condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,					Six Months Ended June  30,
	2013		2012			2013		2012
Interest rate swaps	$	—	$	5		$	—	$	26
Currency swap		—		(210	)		—		(105	)
Total	$	—	$	(205	)	$	—	$	(79	)

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Defined Benefit Pension Plan (Tables)

6 Months Ended

Jun. 30, 2013

Compensation And Retirement Disclosure [Abstract]

Components of Net Periodic Benefit Cost

The components of net periodic benefit cost included in the accompanying condensed consolidated statements of income were as follows (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Service cost	$	30	$	20	$	59	$	41
Interest cost		40		43		79		88
Net periodic benefit cost	$	70	$	63	$	138	$	129

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Segment Reporting

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Reporting

12. Segment Reporting

We view our operations and manage our business as one segment: the development, marketing and licensing of technologies and fonts. Factors used to identify our single segment include the financial information available for evaluation by our chief operating decision maker in making decisions about how to allocate resources and assess performance. While our technologies and services are sold into two principal markets, Creative Professional and OEM, expenses and assets are not formally allocated to these market segments, and operating results are assessed on an aggregate basis to make decisions about the allocation of resources. The following table presents revenue for these two major markets (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Creative Professional	$	14,654	$	13,547	$	29,986	$	23,252
OEM		26,431		24,949		53,138		49,593
Total	$	41,085	$	38,496	$	83,124	$	72,845

Geographic segment information

The Company attributes revenues to geographic areas based on the location of our subsidiary receiving such revenue. For example, licenses may be sold to large international companies which may be headquartered in Korea, but the sales are received and recorded by our subsidiary located in the United States. In this example, the revenue would be reflected in the United States totals in the table below. We market our products and services through offices in the U.S., United Kingdom, Germany, Hong Kong, Korea and Japan. The following summarizes revenue by location:

	Three Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	23,359		56.8	%	$	21,251		55.2	%
Asia		11,664		28.4			11,755		30.5
United Kingdom		1,562		3.8			1,196		3.1
Germany		4,500		11.0			4,294		11.2
Total	$	41,085		100.0	%	$	38,496		100.0	%

	Six Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	47,506		57.2	%	$	37,918		52.1	%
Asia		24,553		29.5			22,471		30.8
United Kingdom		2,945		3.5			2,674		3.7
Germany		8,120		9.8			9,782		13.4
Total	$	83,124		100.0	%	$	72,845		100.0	%

Long-lived assets, which include property, plant and equipment, goodwill and intangible assets, but exclude other assets, long-term investments and deferred tax assets, are attributed to geographic areas in which Company assets reside and is shown below (in thousands):

	June 30, 2013		December 31, 2012
Long-lived assets:
United States	$	196,063	$	200,804
Asia		3,388		3,438
United Kingdom		4,634		5,130
Germany		53,178		54,245
Total	$	257,263	$	263,617

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Commitments and Contingencies - Future Minimum Payments Under Non-concealable Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Commitments And Contingencies Disclosure [Abstract]
2014	$ 2,570
2015	2,192
2016	1,247
2017	567
2018	270
Thereafter	18
Total	$ 6,864

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Income Taxes - Income Tax Reconciliation Computed at Federal Statutory Rates to Income Tax Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Provision for income taxes at statutory rate	$ 4,063	$ 4,042	$ 8,560	$ 7,299
State and local income taxes, net of federal tax benefit	178	159	369	287
Stock compensation	70	72	140	134
Research credits	(51)		(376)
Disqualifying dispositions on incentive stock options	(32)	(46)	(181)	(79)
Effect of rate changes on deferred taxes				128
Other, net	71	(94)	18	(49)
Reported income tax provision	$ 4,299	$ 4,133	$ 8,530	$ 7,720
Provision for income taxes at statutory rate, tax rate	35.00%	35.00%	35.00%	35.00%
State and local income taxes, net of federal tax benefit, tax rate	1.50%	1.40%	1.50%	1.40%
Stock compensation, tax rate	0.60%	0.60%	0.60%	0.60%
Research credits, tax rate	(0.40%)		(1.50%)
Disqualifying dispositions of incentive stock options, tax rate	(0.30%)	(0.40%)	(0.80%)	(0.40%)
Effect of rate changes on deferred taxes, tax rate				0.60%
Other, net, tax rate	0.60%	(0.80%)	0.10%	(0.20%)
Reported income tax provision, tax rate	37.00%	35.80%	34.90%	37.00%

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Share Based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Share Based Compensation Expense

compensation expense over the service period for awards expected to vest. The following presents the impact of share based compensation expense on our condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Marketing and selling	$	973	$	770	$	1,750	$	1,601
Research and development		488		384		904		825
General and administrative		625		557		1,181		1,208
Total share based compensation	$	2,086	$	1,711	$	3,835	$	3,634

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Net Income Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands, except share and per share data):

	Three Months Ended June  30,						Six Months Ended June  30,
	2013			2012			2013			2012
Numerator:
Net income, as reported	$	7,311		$	7,415		$	15,927		$	13,135
Less: net income attributable to participating securities		(129	)		(129	)		(269	)		(214	)
Net income available to common shareholders—basic	$	7,182		$	7,286		$	15,658		$	12,921
Denominator:
Basic:
Weighted-average shares of common stock outstanding		38,420,617			36,689,475			38,070,822			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(642,750	)		(655,308	)		(600,044	)
Weighted-average number of common shares used in computing basic net income per common share		37,725,082			36,046,725			37,415,514			36,164,567
Net income per share applicable to common shareholders—basic	$	0.19		$	0.20		$	0.42		$	0.36

	Three Months Ended June  30,			Six Months Ended June  30,
	2013			2013
Numerator:
Net income available to common shareholders—basic	$	7,182		$	15,658
Add-back: undistributed earnings allocated to unvested shareholders		91			195
Less: undistributed earnings reallocated to unvested shareholders		(88	)		(188	)
Net income available to common shareholders—diluted	$	7,185		$	15,665
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		38,420,617			38,070,822
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(655,308	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,304,571			1,343,293
Weighted-average number of common shares used in computing diluted net income per common share		39,029,653			38,758,807
Net income per share applicable to common shareholders—diluted	$	0.18		$	0.40

	Three Months Ended June  30,			Six Months Ended June  30,
	2012			2012
Numerator:
Net income, as reported	$	7,415		$	13,135
Less: net income attributable to participating securities		(129	)		(214	)
Net income available to common shareholders—diluted	$	7,286		$	12,921
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		36,689,475			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(642,750	)		(600,044	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,263,738			1,294,178
Weighted-average number of restricted stock, based on the treasury stock method		113,069			131,212
Weighted-average number of common shares used in computing diluted net income per common share		37,423,532			37,589,957
Net income per share applicable to common shareholders—diluted	$	0.19		$	0.34

Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share

The following common share equivalents have been excluded from the computation of diluted weighted-average shares outstanding, as their effect would have been anti-dilutive:

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Options		441,924		1,941,448		316,393		1,758,482
Unvested restricted stock		89		3,521		33,752		2,792

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Segment Reporting - Schedule of Revenue by Geographic Segments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting Information [Line Items]
Total	$ 41,085	$ 38,496	$ 83,124	$ 72,845
% of Total	100.00%	100.00%	100.00%	100.00%
United States [Member]
Segment Reporting Information [Line Items]
Total	23,359	21,251	47,506	37,918
% of Total	56.80%	55.20%	57.20%	52.10%
Asia [Member]
Segment Reporting Information [Line Items]
Total	11,664	11,755	24,553	22,471
% of Total	28.40%	30.50%	29.50%	30.80%
United Kingdom [Member]
Segment Reporting Information [Line Items]
Total	1,562	1,196	2,945	2,674
% of Total	3.80%	3.10%	3.50%	3.70%
Germany [Member]
Segment Reporting Information [Line Items]
Total	$ 4,500	$ 4,294	$ 8,120	$ 9,782
% of Total	11.00%	11.20%	9.80%	13.40%

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Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Assets:
Total assets	$ 18,501
Liabilities:
Contingent acquisition consideration	2,200
Total liabilities	2,200
Money Market Funds [Member]
Assets:
Cash equivalents	1,852
Commercial Paper [Member]
Assets:
Cash equivalents	15,047
Corporate Bonds [Member]
Assets:
Cash equivalents	1,602
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Assets:
Total assets	1,852
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money Market Funds [Member]
Assets:
Cash equivalents	1,852
Significant Other Observable Inputs (Level 2) [Member]
Assets:
Total assets	16,649
Significant Other Observable Inputs (Level 2) [Member] | Commercial Paper [Member]
Assets:
Cash equivalents	15,047
Significant Other Observable Inputs (Level 2) [Member] | Corporate Bonds [Member]
Assets:
Cash equivalents	1,602
Significant Unobservable Inputs (Level 3) [Member]
Liabilities:
Contingent acquisition consideration	2,200
Total liabilities	$ 2,200

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Net Income Per Share - Schedule of Earnings Per Share, Basic and Diluted (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Numerator:
Net income, as reported	$ 7,311	$ 7,415	$ 15,927	$ 13,135
Less: net income attributable to participating securities	(129)	(129)	(269)	(214)
Net income available to common shareholders-basic	7,182	7,286	15,658	12,921
Add-back: undistributed earnings allocated to unvested shareholders	91		195
Less: undistributed earnings reallocated to unvested shareholders	(88)		(188)
Net income available to common shareholders-diluted	$ 7,185	$ 7,286	$ 15,665	$ 12,921
Diluted:
Weighted-average shares of common stock outstanding	38,420,617	36,689,475	38,070,822	36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding	(695,535)	(642,750)	(655,308)	(600,044)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method	1,304,571	1,263,738	1,343,293	1,294,178
Weighted-average number of restricted stock, based on the treasury stock method		113,069		131,212
Weighted-average number of common shares used in computing diluted net income per common share	39,029,653	37,423,532	38,758,807	37,589,957
Net income per share applicable to common shareholders-diluted	$ 0.18	$ 0.19	$ 0.40	$ 0.34
Basic:
Weighted-average shares of common stock outstanding	38,420,617	36,689,475	38,070,822	36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding	(695,535)	(642,750)	(655,308)	(600,044)
Weighted-average number of common shares used in computing basic net income per common share	37,725,082	36,046,725	37,415,514	36,164,567
Net income per share applicable to common shareholders-basic	$ 0.19	$ 0.20	$ 0.42	$ 0.36

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Commitments and Contingencies - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Commitments And Contingencies Disclosure [Abstract]
Period of licensing agreement term	1 year
Warranty liabilities	$ 0	$ 0

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Acquisition - Additional Information (Detail) (USD $)			1 Months Ended		6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Oct. 29, 2012 IRELAND [Member] Employees	Oct. 29, 2012 Design by Front Limited [Member]	Jun. 30, 2013 Design by Front Limited [Member]
Business Acquisition [Line Items]
Business acquisition, total purchase price				$ 4,600,000
Business acquisition				2,600,000
Contingent consideration payable				2,100,000
Date of acquisition					Oct. 29, 2012
Intangible asset balances increased due to acquisition				2,500,000
Goodwill associated with acquisition	$ 173,668,000	$ 174,294,000		$ 2,500,000
Number of employees joined in connection with the acquisition			13

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Share Based Compensation - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Unrecognized compensation expense	$ 17.9
Weighted average period, years	2 years 3 months 18 days

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Tax Reconciliation Computed at Federal Statutory Rates to Income Tax Expense

A reconciliation of income taxes computed at federal statutory rates to income tax expense is as follows (dollar amounts in thousands):

	Three Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	4,063		35.0	%	$	4,042		35.0	%
State and local income taxes, net of federal tax benefit		178		1.5	%		159		1.4	%
Stock compensation		70		0.6	%		72		0.6	%
Research credits		(51	)	(0.4	)%		—		—
Disqualifying dispositions of incentive stock options		(32	)	(0.3	)%		(46	)	(0.4	)%
Other, net		71		0.6	%		(94	)	(0.8	)%
Reported income tax provision	$	4,299		37.0	%	$	4,133		35.8	%

	Six Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	8,560		35.0	%	$	7,299		35.0	%
State and local income taxes, net of federal tax benefit		369		1.5	%		287		1.4	%
Stock compensation		140		0.6	%		134		0.6	%
Research credits		(376	)	(1.5	)%		—		—
Disqualifying dispositions of incentive stock options		(181	)	(0.8	)%		(79	)	(0.4	)%
Effect of rate changes on deferred taxes		—		—			128		0.6	%
Other, net		18		0.1	%		(49	)	(0.2	)%
Reported income tax provision	$	8,530		34.9	%	$	7,720		37.0	%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities
Net income	$ 15,927	$ 13,135
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	6,019	5,147
Loss on retirement of fixed assets	4
Amortization of deferred financing costs	151	152
Share based compensation	3,835	3,634
Excess tax benefit on stock options	(4,110)	(421)
Provision for doubtful accounts	35	8
Deferred income taxes	3,246	467
Unrealized currency loss (gain) on foreign denominated intercompany transactions	5	(177)
Unrealized loss on derivatives		208
Changes in operating assets and liabilities:
Accounts receivable	(944)	4
Income tax refunds receivable		(447)
Prepaid expenses and other assets	3	(511)
Accounts payable	139	(520)
Accrued income taxes	(55)	2,402
Accrued expenses and other liabilities	(1,353)	(2,057)
Deferred revenue	1,726	1,930
Net cash provided by operating activities	24,628	22,954
Cash flows from investing activities
Purchases of property and equipment	(632)	(850)
Purchase of exclusive license and other intangible assets		(150)
Acquisition of business, net of cash acquired	(72)	(49,082)
Net cash used in investing activities	(704)	(50,082)
Cash flows from financing activities
Payments on line of credit	(22,321)	(20,000)
Borrowings under line of credit		25,000
Excess tax benefit on stock options	4,110	421
Common stock dividend paid	(3,788)
Proceeds from exercises of common stock options	10,570	814
Net cash (used in) provided by financing activities	(11,429)	6,235
Effect of exchange rates on cash and cash equivalents	(166)	(39)
Increase (decrease) in cash and cash equivalents	12,329	(20,932)
Cash and cash equivalents at beginning of period	39,340	53,850
Cash and cash equivalents at end of period	$ 51,669	$ 32,918

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Basis of Presentation

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation

2. Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods.

In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2012 as reported in the Company’s Annual Report on Form 10-K.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

5. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, the Financial Accounting Standards Codification established a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets and liabilities or market corroborated inputs.

Level 3: Unobservable inputs are used when little or no market data is available and requires the company to develop its own assumptions about how market participants would price the assets or liabilities. The fair value hierarchy gives the lowest priority to Level 3 inputs.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimizes the use of unobservable inputs to the extent possible as well as considers counterparty and our own credit risk in its assessment of fair value.

The following table presents our financial assets and liabilities that are carried at fair value, classified according to the three categories described above (in thousands):

	Fair Value Measurement at June 30, 2013
	Total		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents—money market funds	$	1,852	$	1,852	$	—	$	—
Cash equivalents—commercial paper		15,047		—		15,047		—
Cash equivalents—corporate bonds		1,602		—		1,602		—
Total assets	$	18,501	$	1,852	$	16,649	$	—
Liabilities:
Contingent acquisition consideration	$	2,200	$	—	$	—	$	2,200
Total liabilities	$	2,200	$	—	$	—	$	2,200

The Company’s recurring fair value measures relate to short-term investments, which are classified as cash equivalents and derivative instruments. The fair value of our cash equivalents are either based on quoted prices for similar assets or other observable inputs such as yield curves at commonly quoted intervals and other market corroborated inputs. The fair value of our derivatives is based on quoted market prices of similar instruments from various banking institutions or an independent third party provider for similar instruments. In determining the fair value, we consider our non-performance risk and that of our counterparties. The Company’s non-financial assets and non-financial liabilities subject to non-recurring measures include goodwill and intangible assets. For the recurring fair value measure, contingent acquisition consideration, the Company estimated the fair value of the liability by judgmentally weighting the range of possible achievement of the criteria upon which the contingent consideration to be paid will be determined. The resulting estimated amount was then adjusted to its estimated net present value based upon a present value factor that was derived by applying a risk adjusted discount rate over the applicable contingency period.

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Acquisition

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Acquisition

3. Acquisition

Design by Front Ltd.

On October 29, 2012, the Company acquired all of the outstanding shares of Design by Front Limited, a privately held web strategy, design and technology studio located in Belfast, Northern Ireland, for approximately $4.6 million. The Company paid $2.6 million in cash upon closing, with the remainder of the purchase price to be paid contingent on attainment of certain criteria through 2014. The contingent consideration payable was recorded at $2.1 million, which represented the net present fair value of the estimated payment. We recognized approximately $2.5 million of intangible assets and approximately $2.5 million of goodwill, associated with the transaction. In connection with this acquisition, 13 Design by Front Limited employees joined the Company. Design by Front Limited’s Typecast^™ browser-based web authoring tool allows easy use of web fonts when designing web sites.

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Net Income Per Share - Schedule of Anti-Dilutive Securities Excluded from Computation of Earnings Per Share (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	441,924	1,941,448	316,393	1,758,482
Unvested restricted stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities excluded from computation of earnings per share	89	3,521	33,752	2,792

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Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Schedule of Revenue for Major Markets

resources. The following table presents revenue for these two major markets (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Creative Professional	$	14,654	$	13,547	$	29,986	$	23,252
OEM		26,431		24,949		53,138		49,593
Total	$	41,085	$	38,496	$	83,124	$	72,845

Schedule of Revenue by Geographic Segments

Kingdom, Germany, Hong Kong, Korea and Japan. The following summarizes revenue by location:

	Three Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	23,359		56.8	%	$	21,251		55.2	%
Asia		11,664		28.4			11,755		30.5
United Kingdom		1,562		3.8			1,196		3.1
Germany		4,500		11.0			4,294		11.2
Total	$	41,085		100.0	%	$	38,496		100.0	%

	Six Months Ended June 30,
	2013					2012
	Sales		% of Total			Sales		% of Total
	(In thousands, except percentages)
United States	$	47,506		57.2	%	$	37,918		52.1	%
Asia		24,553		29.5			22,471		30.8
United Kingdom		2,945		3.5			2,674		3.7
Germany		8,120		9.8			9,782		13.4
Total	$	83,124		100.0	%	$	72,845		100.0	%

Schedule of Assets by Geographic Segments

Long-lived assets, which include property, plant and equipment, goodwill and intangible assets, but exclude other assets, long-term investments and deferred tax assets, are attributed to geographic areas in which Company assets reside and is shown below (in thousands):

	June 30, 2013		December 31, 2012
Long-lived assets:
United States	$	196,063	$	200,804
Asia		3,388		3,438
United Kingdom		4,634		5,130
Germany		53,178		54,245
Total	$	257,263	$	263,617

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Derivative Financial Instruments - Additional Information (Detail) In Millions, unless otherwise specified	0 Months Ended		1 Months Ended	3 Months Ended	6 Months Ended
	May 07, 2008 USD ($)	May 07, 2008 EUR (€)	May 31, 2010	Jun. 30, 2012 USD ($)	Jun. 30, 2013	Jun. 30, 2012 USD ($)	May 24, 2010 USD ($)
Derivative Instruments And Hedging Activities Disclosure [Abstract]
Fixed interest rate							1.50%
Floating interest rate term, months			1 month
Notional amount of contract	$ 28.0	€ 18.3					$ 30.0
Contract maturity date	Dec. 14, 2012	Dec. 14, 2012			Jul. 30, 2012
Floating interest rate for debt obligation					One-month London Inter-Bank Offering Rate ("LIBOR")
Net loss incurred on intercompany note				$ 0.2		$ 0.1

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Defined Benefit Pension Plan - Components of Net Periodic Benefit Cost (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Compensation And Retirement Disclosure [Abstract]
Service cost	$ 30	$ 20	$ 59	$ 41
Interest cost	40	43	79	88
Net periodic benefit cost	$ 70	$ 63	$ 138	$ 129

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Subsequent Event - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Jul. 25, 2013 Subsequent Event [Member]
Subsequent Event [Line Items]
Dividend approved, amount per share		$ 0.06
Dividend payable, date of record	Oct. 01, 2013
Dividend payable, date to be paid	Oct. 21, 2013

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Segment Reporting - Schedule of Revenue for Major Markets (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting Information [Line Items]
Total	$ 41,085	$ 38,496	$ 83,124	$ 72,845
Creative Professional [Member]
Segment Reporting Information [Line Items]
Total	14,654	13,547	29,986	23,252
OEM [Member]
Segment Reporting Information [Line Items]
Total	$ 26,431	$ 24,949	$ 53,138	$ 49,593

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 154	$ 129
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	250,000,000	250,000,000
Common stock, shares issued	38,738,074	37,331,796
Treasury stock, shares	129,158	116,101

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Defined Benefit Pension Plan

6 Months Ended

Jun. 30, 2013

Compensation And Retirement Disclosure [Abstract]

Defined Benefit Pension Plan

8. Defined Benefit Pension Plan

Our German subsidiary maintains an unfunded defined benefit pension plan which covers substantially all employees who joined the company prior to the plan’s closure to new participants in 2006. Participants are entitled to benefits in the form of retirement, disability and surviving dependent pensions. Benefits generally depend on years of service and the salary of the employees.

The components of net periodic benefit cost included in the accompanying condensed consolidated statements of income were as follows (in thousands):

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Service cost	$	30	$	20	$	59	$	41
Interest cost		40		43		79		88
Net periodic benefit cost	$	70	$	63	$	138	$	129

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 7,311	$ 7,415	$ 15,927	$ 13,135
Other comprehensive (loss) income, net of tax:
Unrecognized actuarial gain	11		11
Foreign currency translation adjustments	363	(1,262)	(680)	(712)
Comprehensive income	$ 7,685	$ 6,153	$ 15,258	$ 12,423

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 51,669	$ 39,340
Accounts receivable, net of allowance for doubtful accounts of $154 at June 30, 2013 and $129 at December 31, 2012	7,697	6,996
Income tax refunds receivable	3,845	2,209
Deferred income taxes	2,210	2,218
Prepaid expenses and other current assets	2,301	2,454
Total current assets	67,722	53,217
Property and equipment, net	2,422	2,587
Goodwill	173,668	174,294
Intangible assets, net	81,173	86,736
Other assets	3,093	3,232
Total assets	328,078	320,066
Current liabilities:
Accounts payable	1,153	1,038
Accrued expenses and other current liabilities	16,244	17,319
Accrued income taxes		2,191
Deferred revenue	10,170	8,725
Current portion of long-term debt		10,000
Total current liabilities	27,567	39,273
Long-term debt, less current portion		12,321
Other long-term liabilities	702	613
Deferred income taxes	29,797	26,832
Reserve for income taxes, net of current portion	1,022	963
Accrued pension benefits	5,008	4,958
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.001 par value, Authorized shares: 10,000,000; Issued and outstanding: none
Common stock, $0.001 par value, Authorized shares: 250,000,000; Issued: 38,738,074 at June 30, 2013 and 37,331,796 at December 31, 2012	39	37
Additional paid-in capital	196,921	178,681
Treasury stock, at cost, 129,158 shares at June 30, 2013 and 116,101 shares at December 31, 2012	(86)	(86)
Retained earnings	68,283	56,980
Accumulated other comprehensive loss	(1,175)	(506)
Total stockholders' equity	263,982	235,106
Total liabilities and stockholders' equity	$ 328,078	$ 320,066

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Future Minimum Payments Under Non-cancelable Operating Leases

Years ending June 30:
2014	$	2,570
2015		2,192
2016		1,247
2017		567
2018		270
Thereafter		18
Total	$	6,864

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

Intangible assets consist of the following (dollar amounts in thousands):

		June 30, 2013							December 31, 2012
	Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships	7-15	$	56,925	$	(39,353	)	$	17,572	$	57,040	$	(36,464	)	$	20,576
Acquired technology	8-15		50,901		(27,371	)		23,530		51,067		(25,108	)		25,959
Non-compete agreements	3-6		11,997		(11,778	)		219		12,016		(11,752	)		264
Trademarks			35,452		—			35,452		35,537		—			35,537
Domain names			4,400		—			4,400		4,400		—			4,400
Total		$	159,675	$	(78,502	)	$	81,173	$	160,060	$	(73,324	)	$	86,736

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Segment Reporting - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013 Markets
Segment Reporting [Abstract]
Number of major markets, segment reporting	2

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Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Reserve for uncertain tax positions	$ 4.7	$ 4.7
Uncertain tax position reduction in deferred tax assets	3.7
Uncertain tax positions long term liabilities	$ 1.0

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Intangible Assets - Intangible Assets (Detail) (USD $) In Thousands, unless otherwise specified					6 Months Ended				6 Months Ended				6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Customer Relationships [Member]	Dec. 31, 2012 Customer Relationships [Member]	Jun. 30, 2013 Customer Relationships [Member] Minimum [Member]	Jun. 30, 2013 Customer Relationships [Member] Maximum [Member]	Jun. 30, 2013 Acquired Technology [Member]	Dec. 31, 2012 Acquired Technology [Member]	Jun. 30, 2013 Acquired Technology [Member] Minimum [Member]	Jun. 30, 2013 Acquired Technology [Member] Maximum [Member]	Jun. 30, 2013 Non-compete Agreements [Member]	Dec. 31, 2012 Non-compete Agreements [Member]	Jun. 30, 2013 Non-compete Agreements [Member] Minimum [Member]	Jun. 30, 2013 Non-compete Agreements [Member] Maximum [Member]	Jun. 30, 2013 Trademarks [Member]	Dec. 31, 2012 Trademarks [Member]	Jun. 30, 2013 Domain Names [Member]	Dec. 31, 2012 Domain Names [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets useful life					7 years	15 years			8 years	15 years			3 years	6 years
Customer relationships, Gross Carrying Amount			$ 56,925	$ 57,040
Acquired technology, Gross Carrying Amount							50,901	51,067
Non-compete agreements, Gross Carrying Amount											11,997	12,016
Trademarks/Domain names, Gross Carrying Amount															35,452	35,537	4,400	4,400
Gross Carrying Amount	159,675	160,060
Accumulated Amortization	(78,502)	(73,324)	(39,353)	(36,464)			(27,371)	(25,108)			(11,778)	(11,752)
Net Balance, Finite-Lived Intangible Assets			17,572	20,576			23,530	25,959			219	264
Net Balance, Indefinite-Lived Intangible Assets															35,452	35,537	4,400	4,400
Net Balance	$ 81,173	$ 86,736

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Debt - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013
Debt Instrument [Line Items]
New credit agreement entering date	Jul. 13, 2011
Secured revolving credit facility term, years	5 years
Secured revolving credit facility current borrowing capacity	$ 120,000,000
Interest rate on outstanding borrowings	Borrowings under the Credit Facility bear interest at a variable rate based upon, at the Company’s option, either LIBOR or the base rate (which is the highest of (i) the prime rate, (ii) 0.5% plus the overnight federal funds rate, and (iii) 1.0% in excess of the three-month LIBOR rate), plus in each case, an applicable margin. The applicable margin for LIBOR loans, based on the applicable leverage ratio, is either 2.25% or 2.50% per annum, and the applicable margin for base rate loans, based on the applicable leverage ratio, is either 1.25% or 1.50% per annum. At June 30, 2013 our rates, inclusive of applicable margins, was 4.5 for prime. respectively.
Credit facility basis spread on variable rate LIBOR	1.00%
Credit facility reference rate LIBOR	Three-month LIBOR
Percentage of fee payment on unused line of credit facility	0.375%
Outstanding debt	0
Credit facility financial covenants terms	(i) a maximum ratio of consolidated total debt to consolidated adjusted EBITDA of 3.001.00, and (ii) a minimum consolidated fixed charge coverage ratio of 1.251.00
Maximum acquisition expense	2,000,000
Maximum cash non-operating expense	250,000
Maximum amount of various fees, cost and expenses to be taken in adjusted EBITDA	$ 1,500,000
Period of calculating EBITDA (in month)	12 months
Minimum [Member]
Debt Instrument [Line Items]
Applicable margin leverage ratio for LIBOR loans	2.25%
Applicable margin leverage ratio for base rate loan for LIBOR loans	1.25%
Maximum [Member]
Debt Instrument [Line Items]
Applicable margin leverage ratio for LIBOR loans	2.50%
Applicable margin leverage ratio for base rate loan for LIBOR loans	1.50%
Federal Funds Rate [Member]
Debt Instrument [Line Items]
Interest rate on outstanding borrowings	0.5% plus the overnight federal funds rate
Libor Rate [Member]
Debt Instrument [Line Items]
Interest rate on outstanding borrowings	1.0% in excess of the three-month LIBOR rate
Credit facility basis spread on variable rate LIBOR	0.50%
Prime Rate [Member]
Debt Instrument [Line Items]
Variable interest rate	4.50%

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Debt

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Debt

7. Debt

On July 13, 2011 the Company entered into a credit agreement with Wells Fargo Capital Finance, LLC, or the Credit Facility, which provides the Company with a five-year, $120.0 million secured revolving credit facility. Borrowings under the Credit Facility bear interest at a variable rate based upon, at the Company’s option, either LIBOR or the base rate (which is the highest of (i) the prime rate, (ii) 0.5% plus the overnight federal funds rate, and (iii) 1.0% in excess of the three-month LIBOR rate), plus in each case, an applicable margin. The applicable margin for LIBOR loans, based on the applicable leverage ratio, is either 2.25% or 2.50% per annum, and the applicable margin for base rate loans, based on the applicable leverage ratio, is either 1.25% or 1.50% per annum. At June 30, 2013 our rate, inclusive of applicable margins, was 4.5% for prime. At June 30, 2013, the Company had no outstanding debt under the Credit Facility. The Company is required to pay an unused line fee equal to 0.375% per annum on the undrawn portion available under the revolving credit facility and variable per annum fees in respect of outstanding letters of credit, if any. Such fees are included in interest expense in the accompanying condensed consolidated statements of income. The Credit Facility contains financial covenants which include (i) a maximum ratio of consolidated total debt to consolidated adjusted EBITDA of 3.00:1.00, and (ii) a minimum consolidated fixed charge coverage ratio of 1.25:1.00. Adjusted EBITDA, under the Credit Facility, is defined as consolidated net earnings (or loss), plus net interest expense, income taxes, depreciation and amortization and share based compensation expense, plus acquisition expenses not to exceed $2.0 million, plus restructuring, issuance costs, cash non-operating costs and other expenses or losses minus cash non-operating gains and other non-cash gains; provided however that the aggregate of all cash non-operating expense shall not exceed $250 thousand and all such fees, costs and expenses shall not exceed $1.5 million on a trailing twelve months basis. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the Credit Facility to declare all amounts borrowed under the Credit Facility, together with accrued interest and fees, to be immediately due and payable. In addition, the Credit Facility is secured by substantially all of our assets and places limits on the Company’s and its subsidiaries’ ability to incur debt or liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates and alter its business. We were in compliance with all covenants under our Credit Facility as of June 30, 2013.

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Nature of the Business - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013 Subsidiary Segment
Nature Of Business [Abstract]
Number of business segments	1
Number of subsidiaries, domestic	3
Number of subsidiaries, foreign	5

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Share Based Compensation - Schedule of Share Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 2,086	$ 1,711	$ 3,835	$ 3,634
Marketing and selling [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	973	770	1,750	1,601
Research and development [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	488	384	904	825
General and administrative [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total share based compensation	$ 625	$ 557	$ 1,181	$ 1,208

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Net Income Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Net Income Per Share

10. Net Income Per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. The two-class method determines earnings per share for each class of common stock and participating security according to their respective participation rights in undistributed earnings. Unvested restricted stock awards granted to employees are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. In accordance with ASC Topic No. 260, diluted net income per share is calculated using the more dilutive of the following two approaches:

1. Assume exercise of stock options and vesting of restricted stock using the treasury stock method.

2. Assume exercise of stock options using the treasury stock method, but assume participating securities (unvested restricted stock) are not vested and allocate earnings to common shares and participating securities using the two-class method.

For the three and six months ended June 30, 2013, the two-class method was used in the computation of diluted net income per share as this approach was more dilutive. For the three and six months ended June 30, 2012, the treasury stock method was used in the computation of diluted net income per share, as both approaches resulted in the same diluted net income per share. The following presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands, except share and per share data):

	Three Months Ended June  30,						Six Months Ended June  30,
	2013			2012			2013			2012
Numerator:
Net income, as reported	$	7,311		$	7,415		$	15,927		$	13,135
Less: net income attributable to participating securities		(129	)		(129	)		(269	)		(214	)
Net income available to common shareholders—basic	$	7,182		$	7,286		$	15,658		$	12,921
Denominator:
Basic:
Weighted-average shares of common stock outstanding		38,420,617			36,689,475			38,070,822			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(642,750	)		(655,308	)		(600,044	)
Weighted-average number of common shares used in computing basic net income per common share		37,725,082			36,046,725			37,415,514			36,164,567
Net income per share applicable to common shareholders—basic	$	0.19		$	0.20		$	0.42		$	0.36

	Three Months Ended June  30,			Six Months Ended June  30,
	2013			2013
Numerator:
Net income available to common shareholders—basic	$	7,182		$	15,658
Add-back: undistributed earnings allocated to unvested shareholders		91			195
Less: undistributed earnings reallocated to unvested shareholders		(88	)		(188	)
Net income available to common shareholders—diluted	$	7,185		$	15,665
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		38,420,617			38,070,822
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(655,308	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,304,571			1,343,293
Weighted-average number of common shares used in computing diluted net income per common share		39,029,653			38,758,807
Net income per share applicable to common shareholders—diluted	$	0.18		$	0.40

	Three Months Ended June  30,			Six Months Ended June  30,
	2012			2012
Numerator:
Net income, as reported	$	7,415		$	13,135
Less: net income attributable to participating securities		(129	)		(214	)
Net income available to common shareholders—diluted	$	7,286		$	12,921
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		36,689,475			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(642,750	)		(600,044	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,263,738			1,294,178
Weighted-average number of restricted stock, based on the treasury stock method		113,069			131,212
Weighted-average number of common shares used in computing diluted net income per common share		37,423,532			37,589,957
Net income per share applicable to common shareholders—diluted	$	0.19		$	0.34

The following common share equivalents have been excluded from the computation of diluted weighted-average shares outstanding, as their effect would have been anti-dilutive:

	Three Months Ended June  30,				Six Months Ended June  30,
	2013		2012		2013		2012
Options		441,924		1,941,448		316,393		1,758,482
Unvested restricted stock		89		3,521		33,752		2,792

The Company excludes options with combined exercise prices, and unvested restricted stock with unamortized fair values that are greater than the average market price for the Company’s common stock from the calculation of diluted net income per share because their effect is anti-dilutive.

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Intangible Assets

6 Months Ended

Jun. 30, 2013

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets

6. Intangible Assets

Intangible assets consist of the following (dollar amounts in thousands):

		June 30, 2013							December 31, 2012
	Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships	7-15	$	56,925	$	(39,353	)	$	17,572	$	57,040	$	(36,464	)	$	20,576
Acquired technology	8-15		50,901		(27,371	)		23,530		51,067		(25,108	)		25,959
Non-compete agreements	3-6		11,997		(11,778	)		219		12,016		(11,752	)		264
Trademarks			35,452		—			35,452		35,537		—			35,537
Domain names			4,400		—			4,400		4,400		—			4,400
Total		$	159,675	$	(78,502	)	$	81,173	$	160,060	$	(73,324	)	$	86,736

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Nature of the Business

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Nature of the Business

1. Nature of the Business

Monotype Imaging Holdings Inc. (the “Company” or “we”) is a leading provider of type, technology and expertise for creative applications and consumer electronics, or CE, devices. Our end-user and embedded solutions for print, web and mobile environments enable people to create and consume dynamic content on any and every device. The Company’s technologies and fonts enable the display and printing of high quality digital text. Our technologies and fonts have been widely deployed across, and embedded in, a range of CE devices, including laser printers, digital copiers, mobile phones, e-book readers, tablets, automotive displays, digital cameras, navigation devices, digital televisions, set-top boxes and consumer appliances, as well as in numerous software applications and operating systems. The Company also provides printer drivers, page description language interpreters, printer user interface technology and color imaging solutions to printer manufacturers and OEMs (original equipment manufacturers). We license our fonts and technologies to CE device manufacturers, independent software vendors and creative and business professionals and we are headquartered in Woburn, Massachusetts. We operate in one business segment: the development, marketing and licensing of technologies and fonts. The Company also maintains various offices worldwide for selling and marketing, research and development and administration. We conduct our operations through three domestic operating subsidiaries, Monotype Imaging Inc., Monotype ITC Inc. and MyFonts Inc., formerly Bitstream Inc. (“Bitstream”), and five foreign subsidiaries, Monotype Ltd., Monotype GmbH, formerly Linotype GmbH (“Germany”), Monotype Solutions India Pvt. Ltd., Monotype Hong Kong Ltd. and Monotype KK.

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Segment Reporting - Schedule of Assets by Geographic Segments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Long-lived assets:
Total	$ 257,263	$ 263,617
United States [Member]
Long-lived assets:
Total	196,063	200,804
Asia [Member]
Long-lived assets:
Total	3,388	3,438
United Kingdom [Member]
Long-lived assets:
Total	4,634	5,130
Germany [Member]
Long-lived assets:
Total	$ 53,178	$ 54,245

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Derivative Financial Instruments - Losses and (Gains) on Derivative Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Derivative [Line Items]
(Gain) loss on derivatives		$ (205)		$ (79)
Interest rate swaps [Member]
Derivative [Line Items]
(Gain) loss on derivatives		5		26
Currency swap [Member]
Derivative [Line Items]
(Gain) loss on derivatives		$ (210)		$ (105)

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

13. Commitments and Contingencies

Operating Leases

We conduct operations in facilities under operating leases expiring through 2018. In accordance with the lease terms, we pay real estate taxes and other operating costs. Our leases in California, Massachusetts, Germany, India and Japan contain renewal options. The Company’s future minimum payments under non-cancelable operating leases as of June 30, 2013, are approximately as follows (in thousands):

Years ending June 30:
2014	$	2,570
2015		2,192
2016		1,247
2017		567
2018		270
Thereafter		18
Total	$	6,864

Legal Proceedings

From time to time, we may be a party to various claims, suits and complaints. We are not currently a party to any legal proceedings that, if determined adversely to us, would have a material adverse effect on our business, results of operations or financial condition.

Licensing Warranty

Under our standard license agreement with our OEM customers, we warrant that the licensed technologies are free of infringement claims of intellectual property rights and will meet the specifications as defined in the licensing agreement for a specified period, typically one year. Under the licensing agreements, liability for such indemnity obligations is limited generally to the total arrangement fee; however, exceptions have been made on a case-by-case basis, increasing the maximum potential liability to agreed upon amounts at the time the contract is entered into. We have never incurred costs payable to a customer or business partner to defend lawsuits or settle claims related to these warranties, and as a result, management believes the estimated fair value of these warranties is minimal. Accordingly, there are no liabilities recorded for these warranties as of June 30, 2013 and December 31, 2012.

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Income Taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

A reconciliation of income taxes computed at federal statutory rates to income tax expense is as follows (dollar amounts in thousands):

	Three Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	4,063		35.0	%	$	4,042		35.0	%
State and local income taxes, net of federal tax benefit		178		1.5	%		159		1.4	%
Stock compensation		70		0.6	%		72		0.6	%
Research credits		(51	)	(0.4	)%		—		—
Disqualifying dispositions of incentive stock options		(32	)	(0.3	)%		(46	)	(0.4	)%
Other, net		71		0.6	%		(94	)	(0.8	)%
Reported income tax provision	$	4,299		37.0	%	$	4,133		35.8	%

	Six Months Ended June  30,
	2013					2012
Provision for income taxes at statutory rate	$	8,560		35.0	%	$	7,299		35.0	%
State and local income taxes, net of federal tax benefit		369		1.5	%		287		1.4	%
Stock compensation		140		0.6	%		134		0.6	%
Research credits		(376	)	(1.5	)%		—		—
Disqualifying dispositions of incentive stock options		(181	)	(0.8	)%		(79	)	(0.4	)%
Effect of rate changes on deferred taxes		—		—			128		0.6	%
Other, net		18		0.1	%		(49	)	(0.2	)%
Reported income tax provision	$	8,530		34.9	%	$	7,720		37.0	%

At June 30, 2013, the reserve for uncertain tax positions was approximately $4.7 million. Of this amount, $3.7 million is recorded as a reduction of deferred tax assets and $1.0 million is classified as long term liabilities. At December 31, 2012, the reserve for uncertain tax positions was approximately $4.7 million, which is classified as long term liabilities.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Liabilities Measured at Fair Value

The following table presents our financial assets and liabilities that are carried at fair value, classified according to the three categories described above (in thousands):

	Fair Value Measurement at June 30, 2013
	Total		Quoted Prices in Active  Markets for Identical Assets (Level 1)		Significant Other Observable  Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents—money market funds	$	1,852	$	1,852	$	—	$	—
Cash equivalents—commercial paper		15,047		—		15,047		—
Cash equivalents—corporate bonds		1,602		—		1,602		—
Total assets	$	18,501	$	1,852	$	16,649	$	—
Liabilities:
Contingent acquisition consideration	$	2,200	$	—	$	—	$	2,200
Total liabilities	$	2,200	$	—	$	—	$	2,200

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Subsequent Event

6 Months Ended

Jun. 30, 2013

Subsequent Events [Abstract]

Subsequent Event

14. Subsequent Event

On July 25, 2013 the Company’s Board of Directors approved a $0.06 per share, quarterly cash dividend on our outstanding common stock. The record date is set for October 1, 2013 and the dividend is payable to shareholders of record on October 21, 2013. Dividends are declared at the discretion of the Company’s Board of Directors and depend on actual cash from operations, the Company’s financial condition and capital requirements and any other factors the Company’s Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by the Company’s Board of Directors on a quarterly basis.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 22, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	TYPE
Entity Registrant Name	Monotype Imaging Holdings Inc.
Entity Central Index Key	0001385292
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		38,783,502

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Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Losses and (Gains) on Derivative Financial Instruments

The following table presents the losses and (gains) on our derivative financial instruments which are included in gain on derivatives in our accompanying condensed consolidated statements of income (in thousands):

	Three Months Ended June  30,					Six Months Ended June  30,
	2013		2012			2013		2012
Interest rate swaps	$	—	$	5		$	—	$	26
Currency swap		—		(210	)		—		(105	)
Total	$	—	$	(205	)	$	—	$	(79	)