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Monotype Announces Second Quarter 2017 Results
[July 28, 2017]

Monotype Announces Second Quarter 2017 Results


Monotype Imaging Holdings Inc. (Nasdaq: TYPE) today announced financial results for the second quarter ended June 30, 2017.

Second quarter 2017 highlights

  • Revenue for the quarter was $57.8 million, an increase of 19%, year over year. Pro Forma non-GAAP revenue for the quarter was $58.7 million.
  • Creative Professional revenue was $30.6 million, up 31%, year over year.
  • Net loss was $0.5 million. Non-GAAP net adjusted EBITDA was $11.7 million, or 20% of revenue. Pro Forma non-GAAP net adjusted EBITDA was $12.6 million, or 22% of Pro Forma non-GAAP revenue.
  • Approximately 60% of estimated printer revenue was under fixed fee arrangements at close of quarter.

"Monotype had a solid second quarter, finishing at the high end of our guidance range," said Scott Landers, president and CEO of Monotype. "We're encouraged by the continued momentum of our Creative Professional business - specifically within the Enterprise Sales organization - where we are seeing Global 2000 brands increasingly invest in our design assets, technology and expertise to build authentic, differentiated brands that engage consumers."

Tony Callini, executive vice president and chief financial officer of Monotype, said, "We're pleased to see the conversion of operational investments into positive top-line results. The progress stabilizing our OEM business and continued growth of Creative Professional give us confidence that we are executing in line with market opportunities."

Second quarter 2017 operating results

Revenue for the quarter increased 19% to $57.8 million, compared to $48.7 million for the second quarter of 2016. Creative Professional revenue was $30.6 million, a 31% increase from the second quarter of 2016. OEM revenue was $27.2 million, an increase of 7% from the same period in 2016.

Net loss was $0.5 million, compared to net income of $6.7 million in the second quarter of 2016. Loss per diluted share was $0.01, compared to earnings per diluted share of $0.16 in the prior year. Non-GAAP net income, which excludes the amortization of intangible assets, stock-based compensation expense and acquisition-related compensation expense, net of taxes, was $3.2 million, compared to $10.7 million in the second quarter of 2016. Non-GAAP earnings per diluted share were $0.08 compared to $0.27 in the prior year period.

Non-GAAP net adjusted EBITDA was $11.7 million, or 20% of revenue, compared to $17.1 million in the second quarter of 2016.

Pro Forma operating results

Pro Forma results assume the company had owned Olapic for the full periods presented, and exclude the impact of purchase accounting related adjustments, as well as transaction costs.

Pro Forma non-GAAP revenue in the second quarter was $58.7 million and Pro Forma non-GAAP net adjusted EBITDA was $12.6 million.

Cash and cash flow

Monotype had cash and cash equivalents of $83.7 million as of June 30, 2017, compared to $86.9 million as of March 31, 2017 and $109.5 million as of June 30, 2016. The company generated $6.8 million of cash from operations in the second quarter of 2017. During the second quarter of 2017, the company repaid $3.0 million on its outstanding revolving line of credit.

In the second quarter, Monotype repurchased 81,000 shares of common stock on the open market at prevailing market prices for a total consideration of $1.6 million as part of the stock repurchase program announced in August 2016. Additionally, subsequent to Q2, in July, Monotype repurchased another 200,000 shares for total consideration of $3.6 million.

Quarterly dividend

Monotype's most recent dividend payment of $0.113 per share was paid on July 21, 2017, to shareholders of record as of July 3, 2017. The next dividend payment of $0.113 cents per share will be paid on October 20, 2017, to shareholders of record as of the close of business on October 2, 2017.

Financial outlook

Monotype's third quarter and full-year financial guidance are set forth in the following tables:



                   
(in $ millions, except per share data) Q3 2017 Full Year 2017
Revenue $57.0-$61.0 $229.0-$237.0
Non-GAAP net adjusted EBITDA

$11.2-$14.2

$47.5-$54.1
Operating expenses $45.0-$47.0 $178.0-$182.0
GAAP earnings per diluted share

$(0.01)-$0.03

$0.04-$0.12
Non-GAAP earnings per diluted share

$0.12-$0.16

$0.54-$0.62
      Q3 2017     Full Year 2017
Pro Forma revenue $57.5-$61.5 $232.3-$240.3
Pro Forma non-GAAP net adjusted EBITDA

$11.7-$14.7

$50.8-$57.4
 

Conference call details

Monotype will host a conference call on Friday, July 28, 2017, at 8:30 a.m. EDT to discuss the company's second quarter 2017 results. The audio webcast is available under Events & Presentations on the Investors portion of the Monotype website at www.monotype.com. The live call can also be accessed by dialing 844-229-7594 (domestic) or 314-888-4259 (international) using passcode 53472826. If individuals are unable to listen to the live call, the audio webcast will be archived in the Investors portion of the company's website for one year.

Non-GAAP financial measures

This press release contains non-GAAP financial measures under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget and in reporting to lenders. Non-GAAP financial measures are used by Monotype management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons. Accordingly, Monotype believes it is useful for investors and others to review both GAAP and non-GAAP measures in order to (a) understand and evaluate current operating performance and future prospects in the same manner as management does and (b) compare in a consistent manner the company's current financial results with past financial results. The primary limitations associated with the use of non-GAAP financial measures are that these measures may not be directly comparable to the amounts reported by other companies and they do not include all items of income and expense that affect operations. Monotype management compensates for these limitations by considering the company's financial results and outlook as determined in accordance with GAAP and by providing a detailed reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures in the tables attached to this press release.

Forward-looking statements

This press release may contain forward-looking statements including those related to future revenues and operating results, the financial impact of the Olapic acquisition, the growth of the company's Creative Professional business and OEM business, the execution of the company's product, growth and expansion strategies and anticipated business momentum that involve risks and uncertainties that could cause the company's actual results to differ materially. Factors that might cause or contribute to such differences include, but are not limited to: risks associated with changes in the economic climate including decreased demand for the company's products or products that incorporate the company's solutions; risks associated with the company's ability to adapt its products or services to new markets and to anticipate and quickly respond to evolving technologies and customer requirements; risks associated with the company's development of and the market acceptance of new products, product features or services; risks associated with the company's integration of the Olapic acquisition; risks associated with the company's ability to expand products and services offered through acquired companies; risks associated with increased competition in markets the company serves, including the risks that increased competition may result in the company's inability to gain new customers, retain existing customers or may force the company to reduce prices; risks associated with the ownership and enforcement of the company's intellectual property; and risks associated with geopolitical conditions and changes in the financial markets. Additional disclosure regarding these and other risks faced by the company is available in the company's public filings with the Securities and Exchange Commission, including the risk factors included in the company's Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent filings. The forward-looking financial information set forth in this press release reflects estimates based on information available at this time. These amounts could differ from actual reported amounts to be included in the company's future earnings releases and public filings. While the company may elect to update forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so, even if an estimate changes.

About Monotype

Monotype provides the design assets, technology and expertise that help create beautiful, authentic and impactful brands that customers will engage with and value, wherever they experience the brand, now and in the future. Further information is available at www.monotype.com. Follow Monotype on Twitter, Instagram and LinkedIn.

Monotype, Helvetica and Frutiger are trademarks of Monotype Imaging Inc. registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. Univers is a trademark of Monotype GmbH registered in the U.S. Patent and Trademark Office and may be registered in certain jurisdictions. All other trademarks are the property of their respective owners. ©2017 Monotype Imaging Holdings Inc. All rights reserved.

 

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)

       
June 30,
2017
December 31,
2016
Assets
Current assets:
Cash and cash equivalents $ 83,699 $ 91,434
Accounts receivable, net of allowance for doubtful accounts 25,980 26,549
Income tax refunds receivable 1,310 2,967
Prepaid expenses and other current assets   6,213     4,631  
 
Total current assets 117,202 125,581
Property and equipment, net 15,589 14,166
Goodwill 276,941 273,489
Intangible assets, net 87,949 90,717
Restricted cash 17,932 17,992
Other assets   3,076     3,075  
Total assets $ 518,689   $ 525,020  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,985 $ 2,170
Accrued expenses and other current liabilities 24,648 28,762
Accrued income taxes payable 743 1,473
Deferred revenue   17,226     16,081  
Total current liabilities 44,602 48,486
Revolving line of credit 99,000 105,000
Other long-term liabilities 14,978 11,753
Deferred income taxes 35,556 37,780
Reserve for income taxes 2,792 2,727
Accrued pension benefits 5,824 5,296
Stockholders' equity:
Common stock 44 43
Additional paid-in capital 286,607 274,946
Treasury stock, at cost

(58,992

)

(56,232

)

Retained earnings 94,117 105,718
Accumulated other comprehensive loss  

(5,839

)

 

(10,497

)

Total stockholders' equity   315,937     313,978  
Total liabilities and stockholders' equity $ 518,689   $ 525,020  
 

               

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

 
Three Months Ended
June 30,
Six Months Ended
June 30,
  2017     2016     2017     2016
Revenue $ 57,801 $ 48,733 $ 110,266 $ 98,575
Cost of revenue 10,141 7,588 18,919 15,907
Cost of revenue-amortization of acquired technology   881     1,131     1,759     2,262
Total cost of revenue   11,022     8,719     20,678     18,169
Gross profit 46,779 40,014 89,588 80,406
Operating expenses:
Marketing and selling 22,722 14,648 43,964 28,735
Research and development 9,227 5,991 18,781 13,327
General and administrative 11,814 8,638 22,741 17,487
Amortization of other intangible assets   1,019     742     2,030     1,477
Total operating expenses   44,782     30,019     87,516     61,026
Income from operations 1,997 9,995 2,072 19,380
Other (income) expense:
Interest expense, net 726 90 1,357 198
Other expense (income), net   2,794     (605 )   3,414     207
Total other expense (income)   3,520     (515 )   4,771     405
(Loss) income before (benefit) provision for income taxes (1,523 ) 10,510 (2,699 ) 18,975
(Benefit) provision for income taxes   (1,027 )   3,857     (1,128 )   6,964
Net (loss) income $ (496 ) $ 6,653   $ (1,571 ) $ 12,011
Net (loss) income available to common stockholders-basic $ (496 ) $ 6,447   $ (1,571 ) $ 11,668
Net (loss) income available to common stockholders-diluted $ (496 ) $ 6,447   $ (1,571 ) $ 11,669
Net (loss) income per common share:
Basic $ (0.01 ) $ 0.16   $ (0.04 ) $ 0.30
Diluted $ (0.01 ) $ 0.16   $ (0.04 ) $ 0.29
 
Weighted-average number of shares outstanding:
Basic 39,657,071 39,377,945 39,567,254 39,250,297
Diluted 39,657,071 39,748,905 39,567,254 39,635,262
Dividends declared per common share $ 0.113   $ 0.11   $ 0.226   $ 0.22
 

                         

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

 

RECONCILIATION OF GAAP REVENUE TO PRO FORMA NON-GAAP REVENUE

 
Three Months Ended
June 30, 2017
Monotype     Olapic     Combined
GAAP revenue $ 53,211     $ 4,590     $ 57,801
Pre-acquisition revenue(1) - - -
Deferred revenue impairment   -       914       914

Pro Forma non-GAAP revenue

$ 53,211     $ 5,504     $ 58,715
 

(1) Pro Forma non-GAAP revenue has no pre-acquisition revenue adjustments in the three months ended June 30, 2017. We acquired Olapic on August 9, 2016.

                                 
Six Months Ended

June 30, 2017

Monotype     Olapic     Combined
GAAP revenue $ 102,040     $ 8,226     $ 110,266
Pre-acquisition revenue(1) - - -
Deferred revenue impairment   -       2,288       2,288
 

Pro Forma non-GAAP revenue

$ 102,040     $ 10,514     $ 112,554
 

(1) Pro Forma non-GAAP revenue has no pre-acquisition revenue adjustments in the six months ended June 30, 2017. We acquired Olapic on August 9, 2016.

       

RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET ADJUSTED EBITDA

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2017     2016 2017     2016
Net (loss) income $ (496 ) $ 6,653 $ (1,571 ) $ 12,011
Interest expense, net 726 90 1,357 198
Other expense (income), net 2,794 (605 ) 3,414 207
(Benefit) provision for income taxes   (1,027 )   3,857     (1,128 )   6,964
Income from operations 1,997 9,995 2,072 19,380
Depreciation and amortization 3,122 2,897 6,173 5,771
Share based compensation 5,192 3,621 10,023 7,399

Acquisition-related compensation(1)

  1,407     578     2,814     1,156
Net adjusted EBITDA $ 11,718   $ 17,091   $ 21,082   $ 33,706
 

(1) For the three months ended June 30, 2017, the amount includes $0.9 million of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $0.5 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the three months ended June 30, 2016, the amount includes $0.6 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2017, the amounts include $1.8 million of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $1.0 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2016, the amounts include $1.2 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement.

               

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

 

RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP NET INCOME

 
Three Months Ended
June 30,
Six Months Ended
June 30,
  2017     2016   2017     2016
GAAP net (loss) income available to common stockholders - diluted $ (496 ) $ 6,653 $ (1,571 ) $ 12,011
Amortization, net of tax of $1,281, $687, $1,584 and $1,372, respectively 619 1,186 2,205 2,367
Share based compensation, net of tax of $3,499, $1,329, $4,190 and $2,716, respectively 1,693 2,292 5,833 4,683

Acquisition-related compensation, net of tax of $0, $0, $0 and $0, respectively

  1,407     578   2,814     1,156
Non-GAAP net income(1) $ 3,223   $ 10,709 $ 9,281   $ 20,217
 

(1) For the three months ended June 30, 2017, the amount includes $0.9 million of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $0.5 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the three months ended June 30, 2016, the amount includes $0.6 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2017, the amounts include $1.8 million of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $1.0 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2016, the amounts include $1.2 million of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement.

               

RECONCILIATION OF GAAP (LOSS) EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE

 
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016
GAAP net (loss) income per diluted share $ (0.01 ) $ 0.16 $ (0.04 ) $ 0.29
Amortization, net of tax of $0.03, $0.02, $0.04 and $0.03, respectively 0.02 0.03 0.05 0.06
Share based compensation, net of tax of $0.09, $0.03, $0.11 and $0.07, respectively 0.04 0.07 0.15 0.13

Acquisition-related compensation, net of tax of $0.00, $0.00, $0.00 and $0.00, respectively(1)

  0.03     0.01   0.07     0.03

Non-GAAP earnings per diluted share

$ 0.08   $ 0.27 $ 0.23   $ 0.51
 

(1) For the three months ended June 30, 2017, the amount includes $0.9 million, or $0.02 per share, of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $0.5 million, or $0.01 per share, of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the three months ended June 30, 2016, the amount includes $0.6 million, or $0.01 per share, of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2017, the amount includes $1.8 million, or $0.04 per share, of expense associated with the deferred compensation arrangement with the founders of Olapic in connection with the acquisition and $1.0 million, or $0.03 per share, of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement. For the six months ended June 30, 2016, the amount includes $1.2 million, or $0.03 per share, of expense associated with the deferred compensation arrangement resulting from an amendment to the Swyft Merger Agreement.

   

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

 

RECONCILIATION OF GAAP NET INCOME (LOSS) TO PRO FORMA NON-GAAP NET ADJUSTED EBITDA

 

 

Three Months Ended
June 30, 2017
Monotype     Olapic     Combined
GAAP net income (loss) $ 8,712     $ (9,208 )     $ (496 )
Interest expense, net 726 - 726
Other expense, net 2,533 261 2,794

(Benefit) provision for income taxes

(1,184 )     157         (1,027 )

Income (loss) from operations

10,787 (8,790 ) 1,997

Pre-acquisition net adjusted EBITDA(1)

- - -

Deferred revenue impairment(2)

- 914 914
Depreciation and amortization 2,363 759 3,122
Share based compensation 4,265 927 5,192

Acquisition-related compensation(3)

532 875 1,407

Transaction costs(4)

-       -         -  
Pro Forma non-GAAP net adjusted EBITDA $ 17,947       $ (5,315 )     $ 12,632  
 

(1) Pro Forma non-GAAP net adjusted EBITDA has no pre-acquisition non-GAAP net adjusted EBITDA adjustments in the three months ended June 30, 2017. We acquired Olapic on August 9, 2016.

(2) Pro Forma non-GAAP net adjusted EBITDA includes $0, $0.9 million and $0.9 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(3) Acquisition-related compensation includes $0.5 million, $0.9 million and $1.4 million, respectively, of expense associated with the deferred compensation arrangements resulting from an amendment to the Swyft Merger Agreement and expense associated with the deferred compensation arrangements with the founders of Olapic in connection with the acquisition.

(4) In the three months ended June 30, 2017, the Company did not incur any transaction expenses for the Olapic acquisition. Consequently, there is no adjustment to Pro Forma non-GAAP net adjusted EBITDA for these types of costs.

   

RECONCILIATION OF GAAP NET INCOME (LOSS) TO PRO FORMA NON-GAAP NET ADJUSTED EBITDA

 

 

Six Months Ended
June 30, 2017
Monotype     Olapic     Combined
GAAP net income (loss) $ 15,034     $ (16,605 )     $ (1,571 )
Interest expense, net 1,357 - 1,357
Other expense, net 3,082 332 3,414

Benefit for income taxes

(457 )     (671 )       (1,128 )

Income (loss) from operations

19,016 (16,944 ) 2,072

Pre-acquisition net adjusted EBITDA(1)

- - -

Deferred revenue impairment(2)

- 2,288 2,288
Depreciation and amortization 4,681

1,492

6,173

Share based compensation 8,238 1,785 10,023

Acquisition-related compensation(3)

1,064 1,750 2,814

Transaction costs(4)

-       -         -  
Pro Forma non-GAAP net adjusted EBITDA $ 32,999      

$ (9,629

)     $

23,370

 
 

(1) Pro Forma non-GAAP net adjusted EBITDA has no pre-acquisition non-GAAP net adjusted EBITDA adjustments in the six months ended June 30, 2017. We acquired Olapic on August 9, 2016.

(2) Pro Forma non-GAAP net adjusted EBITDA includes $0, $2.3 million and $2.3 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(3) Acquisition-related compensation includes $1.0 million, $1.8 million and $2.8 million, respectively, of expense associated with the deferred compensation arrangements resulting from an amendment to the Swyft Merger Agreement and expense associated with the deferred compensation arrangements with the founders of Olapic in connection with the acquisition.

(4) In the six months ended June 30, 2017, the Company did not incur any transaction expenses for the Olapic acquisition. Consequently, there is no adjustment to Pro Forma non-GAAP net adjusted EBITDA for these types of costs.

 

MONOTYPE IMAGING HOLDINGS INC.

OTHER INFORMATION

(Unaudited and in thousands)

 

OTHER INFORMATION

Share based compensation is comprised of the following:

  Three Months Ended
June 30,
  Six Months Ended
June 30,
2017   2016 2017   2016
Marketing and selling $ 2,563 $ 1,604 $ 4,893 $ 3,185
Research and development 1,078 876 2,096 1,689
General and administrative   1,551   1,141   3,034   2,525
 
Total expensed $ 5,192 $ 3,621 $ 10,023 $ 7,399
Property and equipment   31   -   53   -
 
Total share based compensation $ 5,223 $ 3,621 $ 10,076 $ 7,399
 
 

MARKET INFORMATION

The following table presents revenue for our two major markets:

                              Three Months Ended
June 30,
  Six Months Ended
June 30,
2017   2016 2017   2016
Creative Professional $ 30,642 $ 23,457 $ 57,713 $ 47,372
OEM   27,159   25,276   52,553   51,203
Total $ 57,801 $ 48,733 $ 110,266 $ 98,575
 

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP REVENUE TO

FORECAST PRO FORMA NON-GAAP REVENUE

(Unaudited and in thousands)

 
        Low End of Guidance
Q3 2017
Monotype   Olapic   Combined
GAAP revenue $ 52,000   $ 5,000   $ 57,000
Deferred revenue impairment  

-

    500     500
 
Pro Forma non-GAAP revenue $ 52,000   $ 5,500   $ 57,500
        High End of Guidance
Q3 2017
Monotype   Olapic   Combined
GAAP revenue $ 55,000   $ 6,000   $ 61,000
Deferred revenue impairment  

-

    500     500
 
Pro Forma non-GAAP revenue $ 55,000   $ 6,500   $ 61,500
  Low End of Guidance
2017
Monotype*   Olapic*   Combined
GAAP revenue $ 209,500   $ 19,500   $ 229,000
Deferred revenue impairment  

-

    3,300     3,300
 

Pro Forma non-GAAP revenue

$ 209,500   $ 22,800   $ 232,300

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

  High End of Guidance
2017
Monotype*   Olapic*   Combined
GAAP revenue $ 214,500   $ 22,500   $ 237,000
Deferred revenue impairment  

-

    3,300     3,300
 
Pro Forma non-GAAP revenue $ 214,500   $ 25,800   $ 240,300

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP NET INCOME (LOSS) TO

FORECAST NON-GAAP NET ADJUSTED EBITDA

(Unaudited and in thousands)

 
  Low End of Guidance

 

Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 4,100   $ (4,200 )   $ (100 )
Interest expense, net 800

-

800
Other (income) expense, net 500

-

500
Provision (benefit) for income taxes   4,300     (4,300 )    

-

 
 
Income (loss) from operations 9,700 (8,500 ) 1,200
Depreciation and amortization 2,300 700 3,000
Share based compensation 4,400 1,200 5,600
Acquisition-related compensation(1)   500     900       1,400  
 
Non-GAAP net adjusted EBITDA $ 16,900   $ (5,700 )   $ 11,200  

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

  High End of Guidance

 

Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 5,100   $ (3,700 )   $ 1,400
Interest expense, net 800

-

800
Other (income) expense, net 500

-

500
Provision (benefit) for income taxes   5,300     (3,800 )     1,500
 
Income (loss) from operations 11,700 (7,500 ) 4,200
Depreciation and amortization 2,300 700 3,000
Share based compensation 4,400 1,200 5,600
Acquisition-related compensation(1)   500     900       1,400
 
Non-GAAP net adjusted EBITDA $ 18,900   $ (4,700 )   $ 14,200

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP NET INCOME TO

FORECAST NON-GAAP NET ADJUSTED EBITDA

(Unaudited and in thousands)

 
  Low End of Guidance

 

2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 17,600   $ (16,200 )   $ 1,400
Interest expense, net 3,000

-

3,000
Other (income) expense, net 1,900

-

1,900
Provision (benefit) for income taxes 18,200   (16,800 )   1,400
 
Income (loss) from operations 40,700 (33,000 ) 7,700
Depreciation and amortization 9,200 2,900 12,100
Share based compensation 17,000 5,100 22,100
Acquisition-related compensation(1) 2,100   3,500     5,600
 
Non-GAAP net adjusted EBITDA $ 69,000   $ (21,500 )   $ 47,500

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

  High End of Guidance

 

2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 19,500   $ (15,000 )   $ 4,500
Interest expense, net 3,000

-

3,000
Other (income) expense, net 1,900

-

1,900
Provision (benefit) for income taxes   20,500     (15,600 )     4,900
 
Income (loss) from operations 44,900 (30,600 ) 14,300
Depreciation and amortization 9,200 2,900 12,100
Share based compensation 17,000 5,100 22,100
Acquisition-related compensation(1)   2,100     3,500       5,600
 
Non-GAAP net adjusted EBITDA $ 73,200   $ (19,100 )   $ 54,100

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP NET INCOME (LOSS) TO

FORECAST PRO FORMA NON-GAAP NET ADJUSTED EBITDA

(Unaudited and in thousands)

 
  Low End of Guidance

 

Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 4,100   $ (4,200 )   $ (100 )
Interest expense, net 800

-

800
Other (income) expense, net 500

-

500
Provision (benefit) for income taxes   4,300     (4,300 )    

-

 
 
Income (loss) from operations 9,700 (8,500 ) 1,200
Deferred revenue impairment(1)

-

500 500
Depreciation and amortization 2,300 700 3,000
Share based compensation 4,400 1,200 5,600
Acquisition-related compensation(2)   500     900       1,400  
 
Pro Forma non-GAAP net adjusted EBITDA $ 16,900   $ (5,200 )   $ 11,700  

(1) Pro Forma non-GAAP net adjusted EBITDA includes $0, $0.5 million and $0.5 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(2) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

 

  High End of Guidance

 

Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 5,100   $ (3,700 )   $ 1,400
Interest expense, net 800

-

800
Other (income) expense, net 500

-

500
Provision (benefit) for income taxes   5,300     (3,800 )     1,500
 
Income (loss) from operations 11,700 (7,500 ) 4,200
Deferred revenue impairment(1)

-

500 500
Depreciation and amortization 2,300 700 3,000
Share based compensation 4,400 1,200 5,600
Acquisition-related compensation(2)   500     900       1,400
 
Pro Forma non-GAAP net adjusted EBITDA $ 18,900   $ (4,200 )   $ 14,700

(1) Pro Forma non-GAAP net adjusted EBITDA includes $0, $0.5 million and $0.5 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(2) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP NET INCOME TO

FORECAST PRO FORMA NON-GAAP NET ADJUSTED EBITDA

(Unaudited and in thousands)

 
  Low End of Guidance

 

2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 17,600   $ (16,200 )   $ 1,400
Interest expense, net 3,000

-

3,000
Other (income) expense, net 1,900

-

1,900
Provision (benefit) for income taxes   18,200     (16,800 )     1,400
 
Income (loss) from operations 40,700 (33,000 ) 7,700
Deferred revenue impairment(1)

-

3,300 3,300
Depreciation and amortization 9,200 2,900 12,100
Share based compensation 17,000 5,100 22,100
Acquisition-related compensation(2)   2,100     3,500       5,600
 
Pro Forma non-GAAP net adjusted EBITDA $ 69,000   $ (18,200 )   $ 50,800

(1) Pro Forma non-GAAP net adjusted EBITDA includes $0, $3.3 million and $3.3 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(2) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

  High End of Guidance

 

2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 19,500   $ (15,000 )   $ 4,500
Interest expense, net 3,000

-

3,000
Other (income) expense, net 1,900

-

1,900
Provision (benefit) for income taxes   20,500     (15,600 )     4,900
 
Income (loss) from operations 44,900 (30,600 ) 14,300
Deferred revenue impairment(1)

-

3,300 3,300
Depreciation and amortization 9,200 2,900 12,100
Share based compensation 17,000 5,100 22,100
Acquisition-related compensation(2)   2,100     3,500       5,600
 
Pro Forma non-GAAP net adjusted EBITDA $ 73,200   $ (15,800 )   $ 57,400

(1) Pro Forma non-GAAP net adjusted EBITDA includes $0, $3.3 million and $3.3 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(2) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP EARNINGS PER DILUTED SHARE TO

FORECAST NON-GAAP EARNINGS PER DILUTED SHARE

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

 
  Low End of Guidance
Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 4,100 $ (4,200 ) $ (100 )
Amortization, net of tax of $600, $300 and $900, respectively 600 300 900
Share based compensation, net of tax of $2,300, $600 and $2,900, respectively

2,100

600

2,700

Acquisition-related compensation, net of tax of $0, $0 and $0, respectively(1)  

500

 

900

   

1,400

 
 
Non-GAAP net income (loss) $ 7,300 $ (2,400 ) $ 4,900  
 
 
GAAP earnings (loss) per diluted share $ 0.10 $ (0.11 ) $ (0.01 )
Amortization, net of tax of $0.02, $0.01 and $0.03, respectively, per diluted share

0.01

0.01

0.02

Share based compensation, net of tax of $0.06, $0.02 and $0.08, respectively, per diluted share

0.05

0.02

0.07

Acquisition-related compensation, net of tax of $0.00, $0.00 and $0.00, respectively, per diluted share(1)  

0.02

 

0.02

   

0.04

 
 
Non-GAAP earnings (loss) per diluted share $ 0.18 $ (0.06 ) $ 0.12  
 
Weighted average diluted shares used to compute earnings per share 39,800 39,800 39,800

Assumes 51% effective tax rate. Please note, we anticipate the potential for increased volatility in the effective tax rate from the continuing impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

 

  High End of Guidance
Q3 2017
Monotype   Olapic   Combined
GAAP net income (loss) $ 5,100 $ (3,700 ) $ 1,400
Amortization, net of tax of $600, $300 and $900, respectively 600 300 900
Share based compensation, net of tax of $2,300, $600 and $2,900, respectively

2,100

600

2,700

Acquisition-related compensation, net of tax of $0, $0 and $0, respectively(1)  

500

 

900

   

1,400

 
Non-GAAP net income (loss) $ 8,300 $ (1,900 ) $ 6,400
 
 
GAAP earnings (loss) per diluted share $ 0.13 $ (0.10 ) $ 0.03
Amortization, net of tax of $0.02, $0.01 and $0.03, respectively, per diluted share

0.01

0.01

0.02

Share based compensation, net of tax of $0.06, $0.02 and $0.08, respectively, per diluted share

0.05

0.02

0.07

Acquisition-related compensation, net of tax of $0.00, $0.00 and $0.00, respectively, per diluted share(1)  

0.02

 

0.02

   

0.04

 
Non-GAAP earnings (loss) per diluted share $ 0.21 $ (0.05 )   0.16
 
Weighted average diluted shares used to compute earnings per share 39,800 39,800 39,800

Assumes 51% effective tax rate. Please note, we anticipate the potential for increased volatility in the effective tax rate from the continuing impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF FORECAST GAAP EARNINGS PER DILUTED SHARE TO

FORECAST NON-GAAP EARNINGS PER DILUTED SHARE

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

 
  Low End of Guidance
2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 17,600 $ (16,200 ) $ 1,400
Amortization, net of tax of $2,500, $1,300 and $3,800, respectively 2,500 1,300 3,800
Share based compensation, net of tax of $8,700, $6,400 and $11,300, respectively

8,400

2,500

10,900

Acquisition-related compensation, net of tax of $0, $0 and $0, respectively(1)  

2,100

 

3,500

   

5,600

 
Non-GAAP net income (loss) $ 30,600 $ (8,900 ) $ 21,700
 
 
GAAP earnings (loss) per diluted share $ 0.44 $ (0.40 ) $ 0.04
Amortization, net of tax of $0.06, $0.03 and $0.08, respectively, per diluted share

0.06

0.03

0.09

Share based compensation, net of tax of $0.22, $0.07 and $0.29, respectively, per diluted share

0.21

0.06

0.27

Acquisition-related compensation, net of tax of $0.00, $0.00 and $0.00, respectively, per diluted share(1)  

0.05

 

0.09

   

0.14

 
Non-GAAP earnings (loss) per diluted share $ 0.76 $ (0.22 ) $ 0.54
 
Weighted average diluted shares used to compute earnings per share 39,900 39,900 39,900

Assumes 51% effective tax rate. Please note, we anticipate the potential for increased volatility in the effective tax rate from the continuing impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.

 

  High End of Guidance
2017
Monotype*   Olapic*   Combined
GAAP net income (loss) $ 19,500 $ (15,000 ) $ 4,500
Amortization, net of tax of $2,500, $1,300 and $3,800, respectively 2,500 1,300 3,800
Share based compensation, net of tax of $8,700, $6,400 and $11,300, respectively

8,400

2,500

10,900

Acquisition-related compensation, net of tax of $0, $0 and $0, respectively(1)

2,100

3,500

 

5,600

 

Non-GAAP net income (loss)

$ 32,500 $ (7,700 ) $ 24,800
 
 
GAAP earnings (loss) per diluted share $ 0.49 $ (0.37 ) $ 0.12
Amortization, net of tax of $0.06, $0.03 and $0.08, respectively, per diluted share

0.06

0.03

0.09

Share based compensation, net of tax of $0.22, $0.07 and $0.29, respectively, per diluted share

0.21

0.06

0.27

Acquisition-related compensation, net of tax of $0.00, $0.00 and $0.00, respectively, per diluted share(1)

0.05

0.09

 

0.14

 
Non-GAAP earnings (loss) per diluted share $ 0.81 $ (0.19 ) $ 0.62
 
Weighted average diluted shares used to compute earnings per share 39,900 39,900 39,900

Assumes 51% effective tax rate. Please note, we anticipate the potential for increased volatility in the effective tax rate from the continuing impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting.

(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.

*Monotype guidance range adjusted to reflect actual year to date results and expected performance for remainder of 2017. Olapic guidance range adjusted to reflect the timing of when booked deferred revenue is reported into revenue.


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