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Monotype Announces Second Quarter 2017 ResultsMonotype Imaging Holdings Inc. (Nasdaq: TYPE) today announced financial results for the second quarter ended June 30, 2017. Second quarter 2017 highlights
"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:
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.
(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.
(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.
(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.
(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.
(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.
(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.
(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 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 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.
(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.
(1) Includes charges to operations for portions of merger consideration accounted for as compensation expense under GAAP.
(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.
(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.
(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.
(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.
(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.
(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.
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.
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.
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.
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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