TYPE Monotype Imaging Holdings Inc

Creative Professional grows 24 percent, now represents more than 50 percent of total revenue

Monotype Imaging Holdings Inc. (Nasdaq: TYPE), a leader in helping to empower expression and engagement through type, technology and expertise, today released results for the third quarter ended September 30, 2016.

Third Quarter 2016 Highlights

• Revenue for the quarter was $52.2 million, an increase of 6 percent, year over year. Non-GAAP pro forma revenue for the quarter, inclusive of unaudited, estimated Olapic revenue prior to the acquisition, was $54.7 million.
• Creative Professional revenue was $27.8 million, up 24 percent, year over year.
• Net income was $2.4 million. Non-GAAP net adjusted EBITDA was $15.5 million, or 30 percent of revenue. Non-GAAP pro forma net adjusted EBITDA was $16.2 million, or 30 percent of pro forma revenue.
• Cash and cash equivalents stood at $97.6 million.

"We hit a major milestone in Q3, growing our Creative Professional business to represent more than 50 percent of revenue for the first time in Monotype’s history," said Scott Landers, president and CEO at Monotype. “We’ve done this by investing out in front of emerging market opportunities and expanding our addressable markets through both our organic offerings and acquisitions like Olapic.”

CFO Transition

Monotype is also announcing that it has appointed Scott Landers, Monotype’s president and CEO, as interim chief financial officer, succeeding Joseph Hill, who has departed from his position as CFO to pursue other interests. “We appreciate Joe’s contributions to Monotype, as well as his help in ensuring a smooth transition. We wish Joe success with his future endeavors,” said Landers.

Third Quarter 2016 Operating Results

Revenue for the quarter increased six percent to $52.2 million, compared to $49.4 million for the third quarter of 2015. Creative Professional revenue was $27.8 million, a 24 percent increase from the third quarter of 2015. OEM revenue was $24.4 million, a decrease of nine percent from the same period in 2015.

GAAP net income was $2.4 million, compared to $8.0 million in the third quarter of 2015. Non-GAAP net income, which excludes the amortization of intangible assets, stock-based compensation expense and acquisition-related contingent consideration expense, net of taxes, was $7.1 million, compared to $12.1 million in the third quarter of 2015. Non-GAAP net adjusted EBITDA was $15.5 million, or 30 percent of revenue, compared to $17.7 million in the third quarter of 2015.

Earnings per diluted share were $0.06, compared to $0.20 in the prior year quarter. Non-GAAP earnings per diluted share were $0.18 compared to $0.31 in the same period in 2015.

A reconciliation of GAAP measures to non-GAAP measures for the three and nine months ended Sept. 30, 2016 and 2015 is provided in the financial tables that accompany this release.

Pro Forma Results for the Third Quarter 2016

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.

Non-GAAP pro forma revenue in the third quarter was $54.7 million and non-GAAP pro forma net adjusted EBITDA was $16.2 million.

Cash and cash flow

Monotype had cash and cash equivalents of $97.6 million as of Sept. 30, 2016, compared to $109.5 million as of June 30, 2016, and $86.3 million as of Sept. 30, 2015. In the quarter, the company used $120.3 milion to acquire Olapic, borrowed $110.0 million from its line of credit, and used $4.5 million of cash related to the company’s quarterly dividend payments.

Quarterly dividend

Monotype’s most recent dividend payment of $0.11 per share was paid on October 21, 2016, to shareholders of record as of October 3, 2016. The next dividend payment of $0.11 per share will be paid on January 20, 2017 to shareholders of record as of the close of business on January 2, 2017.

Financial Outlook for the Fourth Quarter and Full Year 2016

For the fourth quarter of 2016, Monotype expects revenue in the range of $52.7 million to $56.7 million.

For the full year 2016, Monotype now expects revenue in the range of $203.5 million to $207.5 million. This includes a purchase accounting adjustment for deferred revenue impairment of $1.0 million for Q4 and $2.4 million for the full year 2016.

Q4 GAAP net income is expected to be in the range of $1.0 million to $3.5 million. Monotype expects Q4 non-GAAP net adjusted EBITDA to be in the range of $12.1 million to $16.2 million. Full year 2016 GAAP net income is now expected to be in the range of $15.4 million to $18.0 million. Full year 2016 non-GAAP net adjusted EBITDA is now expected to be in the range of $61.2 million to $65.4 million.

The company expects earnings per diluted share to be in the range of $0.03 to $0.09 for Q4. Monotype expects non-GAAP earnings per diluted share for Q4 to be in the range of $0.18 to $0.24.

Full year 2016 GAAP earnings per diluted share is now expected to be in the range of $0.39 to $0.45. Full year 2016 non-GAAP earnings per diluted share is now expected to be in the range of $0.87 to $0.94.

Pro Forma Outlook for the Fourth Quarter and Full Year 2016

On a pro forma basis, Monotype expects non-GAAP pro forma revenue in the fourth quarter of between $53.7 million to $57.7 million, and non-GAAP pro forma net adjusted EBITDA of between $13.5 million to $17.6 million.

For the full year, non-GAAP pro forma revenue is now expected to be between $214.5 million to $218.5 million and non-GAAP pro forma net adjusted EBITDA is now expected to be in the range of between $52.9 million to $57.1 million. These pro forma expectations are based on unaudited pre-acquisition results from Olapic.

A reconciliation of GAAP measures to non-GAAP measures for the fourth quarter and full year 2016 is provided in the financial tables that accompany this release.

Conference Call Details

Monotype will host a conference call on Friday, October 28, at 8:30 a.m. EDT to discuss the company’s third quarter 2016 results. Individuals who are interested in listening to the audio webcast should log on to the “Investors” portion of the “Company” section of Monotype’s website at www.monotype.com. The live call can also be accessed by dialing 877-201-0168 (domestic) or 647-788-4901 (international) using passcode 99549051. 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 the company’s future revenues and operating results; the company’s integration of the acquisition of Olapic and the financial impact of the acquisition; and 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, 2015 and subsequent filings including filings on Form 10-Q and Form 8-K. 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 is a leading global provider of typefaces, technology and expertise that enable the best user experience and ensure brand integrity. Headquartered in Woburn, Mass., Monotype provides customers worldwide with typeface solutions for a broad range of creative applications and consumer devices. The company’s libraries and e-commerce sites are home to many of the most widely used typefaces – including the Helvetica®, Frutiger® and Univers® families – as well as the next generation of type designs. Further information is available at www.monotype.com. Follow Monotype on Twitter®, Instagram® and LinkedIn®.

       

MONOTYPE IMAGING HOLDINGS INC.CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited and in thousands)

 

  September 30,2016 December 31,2015 Assets Current assets: Cash and cash equivalents $ 97,583 $ 87,520 Accounts receivable, net of allowance for doubtful accounts 18,091 15,179 Income tax refunds receivable 2,457 2,558 Prepaid expense and other current assets   7,392     3,846     Total current assets 125,523 109,103 Property and equipment, net 14,551 15,204 Goodwill 275,134 185,735 Intangible assets, net 96,454 69,264 Restricted cash 18,331 9,304 Other assets   2,872     3,177     Total assets $ 532,865   $ 391,787     Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,376 $ 1,385 Accrued expenses and other current liabilities 26,058 21,422 Accrued income taxes payable 2,193 2,395 Deferred revenue   11,083     10,086     Total current liabilities 40,710 35,288 Revolving line of credit 110,000 — Other long-term liabilities 9,655 6,914 Deferred income taxes 41,669 35,159 Reserve for income taxes, net of current portion 2,423 2,316 Accrued pension benefits 5,197 4,928 Stockholders’ equity: Common stock 43 42 Additional paid-in capital 270,664 256,215 Treasury stock, at cost (50,481 ) (50,455 ) Retained earnings 109,810 108,908 Accumulated other comprehensive loss   (6,825 )   (7,528 )   Total stockholders’ equity   323,211     307,182     Total liabilities and stockholders’ equity $ 532,865   $ 391,787    

MONOTYPE IMAGING HOLDINGS INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(Unaudited and in thousands, except share and per share data)

 

                Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016 2015 2016 2015 Revenue $ 52,229 $ 49,352 $ 150,804 $ 141,803 Costs and expenses: Cost of revenue 8,534 7,351 24,441 22,314 Cost of revenue—amortization of acquired technology   1,327   1,048     3,589   3,315   Total cost of revenue   9,861   8,399     28,030   25,629   Gross profit 42,368 40,953 122,774 116,174 Operating expenses: Marketing and selling 16,538 15,472 45,273 42,980 Research and development 7,781 5,155 21,108 16,244 General and administrative 11,353 8,171 28,840 22,080 Amortization of other intangible assets   941   862     2,418   2,354   Total operating expenses   36,613   29,660     97,639   83,658   Income from operations 5,755 11,293 25,135 32,516 Other (income) expense: Interest expense, net 351 237 549 775 Loss on extinguishment of debt — 112 — 112 Other expense (income), net   272   (70 )   479   612   Total other expense   623   279     1,028   1,499   Income before provision for income taxes 5,132 11,014 24,107 31,017 Provision for income taxes   2,707   2,975     9,671   9,717   Net income $ 2,425 $ 8,039   $ 14,436 $ 21,300   Net income available to common shareholders—basic $ 2,341 $ 7,837   $ 13,982 $ 20,799   Net income available to common shareholders—diluted $ 2,340 $ 7,838   $ 13,983 $ 20,802   Net income per common share: Basic $ 0.06 $ 0.20   $ 0.36 $ 0.54   Diluted $ 0.06 $ 0.20   $ 0.35 $ 0.53   Weighted average number of shares: Basic 39,977,120 38,770,626 39,348,437 38,808,446 Diluted 40,261,247 39,230,783 39,699,790 39,382,558 Dividends declared per common share $ 0.11 $ 0.10   $ 0.33 $ 0.30  

MONOTYPE IMAGING HOLDINGS INC.OTHER INFORMATION(Unaudited and in thousands)

 

 

 

RECONCILIATION OF GAAP REVENUE TO NON-GAAP PRO FORMA REVENUE

   

Three Months EndedSeptember 30, 2016

Monotype     Olapic     Combined GAAP revenue $ 50,266     $ 1,963     $ 52,229 Pre-acquisition revenue(1) — 1,750 1,750 Deferred revenue impairment   —       703       703   Non-GAAP pro forma revenue $ 50,266     $ 4,416     $ 54,682

(1) Non-GAAP pro forma revenue includes $0, $1.8 million and $1.8 million, respectively, of Olapic revenue recognized during the period of July 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

   

Nine Months Ended September 30, 2016

Monotype     Olapic     Combined GAAP revenue $ 148,841     $ 1,963     $ 150,804 Pre-acquisition revenue(1) — 9,344 9,344 Deferred revenue impairment   —       703       703   Non-GAAP pro forma revenue $ 148,841     $ 12,010     $ 160,851

(1) Non-GAAP pro forma revenue includes $0, $9.3 million and $9.3 million, respectively, of Olapic revenue recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

 

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET ADJUSTED EBITDA

                Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016(3) 2015(2) 2016(3) 2015(2) GAAP net income $ 2,425 $ 8,039 $ 14,436 $ 21,300 Interest expense, net 351 237 549 775 Other (income) expense, net 272 42 479 724 Provision for income taxes   2,707   2,975   9,671   9,717   Income from operations 5,755 11,293 25,135 32,516 Depreciation and amortization 3,343 2,810 9,114 7,906 Share based compensation 5,306 3,600 12,705 9,841 Acquisition related compensation   1,077   —   2,233   —   Net adjusted EBITDA(1) $ 15,481 $ 17,703 $ 49,187 $ 50,263

(1) In November 2015, we revised our definition of non-GAAP net adjusted EBITDA to exclude the impact of acquisition-related contingent consideration adjustments.

(2) Non-GAAP net adjusted EBITDA for the three and nine months ended September 30, 2015 have been restated to add back the impact of acquisition-related contingent consideration adjustments in accordance with our revised definition of non-GAAP net adjusted EBITDA.

(3) For the three and nine months ended September 30, 2016, the amount includes $1.1 million and $2.2 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.

 

MONOTYPE IMAGING HOLDINGS INC.OTHER INFORMATION(Unaudited and in thousands, except share and per share amounts)

 

 

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME

                Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016(3) 2015(2) 2016(3) 2015(2) GAAP net income available to common stockholders ─ diluted $ 2,425 $ 8,039 $ 14,436 $ 21,300 Amortization, net of tax of $1,195, $516, $2,409 and $1,774, respectively 1,073 1,394 3,598 3,895 Share based compensation, net of tax of $2,796, $972, $5,095 and $3,080, respectively 2,510 2,628 7,610 6,761 Acquisition related compensation, net of tax of $0, $0, $0 and $0, respectively   1,077   —   2,233   —   Non-GAAP net income(1) $ 7,085 $ 12,061 $ 27,877 $ 31,956

(1) In November 2015, we revised our definition of non-GAAP net income to exclude the impact of acquisition-related contingent consideration adjustments.

(2) Non-GAAP net income for the three and nine months ended September 30, 2015, have been restated to add back the impact of acquisition-related contingent consideration adjustments, net of tax, in accordance with our revised definition of non-GAAP net income.

(3) For the three and nine months ended September 30, 2016, the amount includes $1.1 million and $2.2 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.

 

RECONCILIATION OF GAAP EARNINGS PER DILUTED SHARE TO NON-GAAP EARNINGS PER DILUTED SHARE

                Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016(3) 2015(2) 2016(3) 2015(2) GAAP earnings per diluted share $ 0.06 $ 0.20 $ 0.35 $ 0.53 Amortization, net of tax of $0.03, $0.01, $0.06 and $0.05, respectively 0.03 0.04 0.09 0.11 Share based compensation, net of tax of $0.07, $0.02, $0.13 and $0.08, respectively 0.06 0.07 0.20 0.17 Contingent consideration adjustment, net of tax of $0.00, $0.00, $0.00 and $0.00, respectively   0.03   —   0.06   —   Non-GAAP earnings per diluted share(1) $ 0.18 $ 0.31 $ 0.70 $ 0.81

(1) In November 2015, we revised our definition of non-GAAP earnings per diluted share to exclude the impact of acquisition-related contingent consideration adjustments.

(2) Non-GAAP earnings per diluted share for the three and nine months ended September 30, 2015, have been restated to add back the impact of acquisition-related contingent consideration adjustments, net of tax, in accordance with our revised definition of non-GAAP earnings per diluted share.

(3) For the three and nine months ended September 30, 2016, the amount includes $1.1 million and $2.2 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.

 

MONOTYPE IMAGING HOLDINGS INC.OTHER INFORMATION(Unaudited and in thousands)RECONCILIATION OF GAAP NET INCOME TO NON-GAAP PRO FORMA NET ADJUSTED EBITDA

     

 

  Three Months EndedSeptember 30, 2016 Monotype     Olapic     Combined GAAP net income (loss)

$

7,001

   

$

(4,576

)     $ 2,425 Interest expense, net 351 — 351 Other (income) expense, net 283 (11 ) 272 Provision (benefit) for income taxes(1)   2,648       59         2,707     Income (loss) from operations(1) 10,283 (4,528 ) 5,755 Pre-acquisition net adjusted EBITDA(2) — (757 ) (757 ) Deferred revenue impairment(3) — 703 703 Depreciation and amortization 2,905 438 3,343 Share based compensation 4,696 610 5,306 Contingent consideration adjustments(4) 578 499 1,077 Transaction costs(5)  

736

      —        

736

    Non-GAAP pro forma net adjusted EBITDA

$

19,198

   

$

(3,035

)     $

16,163

 

(1) Olapic pro forma provision (benefit) for income taxes and income (loss) from operations includes unaudited estimated pre-acquisition tax impact.

(2) Non-GAAP pro forma net adjusted EBITDA includes $0, ($0.8) million and ($0.8) million, respectively, of estimated Olapic net adjusted EBITDA recognized during the period of July 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

(3) Non-GAAP pro forma net adjusted EBITDA includes $0, $0.7 million and $0.7 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(4) For the three months ended September 30, 2016, the amount includes $0.6 million, $0.5 million and $1.1 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.

(5) Non-GAAP pro forma net adjusted EBITDA excludes $0.7 million, $0 and $0.7 million, respectively, of transaction expenses incurred with the Olapic acquisition.

 

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

   

 

Nine Months Ended September 30, 2016

Monotype     Olapic     Combined GAAP net income (loss) $ 19,012     $ (4,576 )     $ 14,436 Interest expense, net 549 — 549 Other (income) expense, net 490 (11 ) 479 Provision (benefit) for income taxes(1)   9,612       59         9,671     Income (loss) from operations(1) 29,663 (4,528 ) 25,135 Pre-acquisition net adjusted EBITDA(2) — (11,565 ) (11,565 ) Deferred revenue impairment(3) — 703 703 Depreciation and amortization 8,676 438 9,114 Share based compensation 12,095 610 12,705 Contingent consideration adjustments(4) 1,734 499 2,233 Transaction costs(5)   1,125       —         1,125     Non-GAAP pro forma net adjusted EBITDA $ 53,293     $ (13,843 )     $ 39,450  

(1) Olapic pro forma provision (benefit) for income taxes and income (loss) from operations includes unaudited estimated pre-acquisition tax impact.

(2) Non-GAAP pro forma net adjusted EBITDA includes $0, ($11.6) million and ($11.6) million, respectively, of estimated Olapic net adjusted EBITDA recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

(3) Non-GAAP pro forma net adjusted EBITDA includes $0, $0.7 million and $0.7 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(4) For the nine months ended September 30, 2016, the amount includes $1.7 million, $0.5 million and $2.2 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.

(5) Non-GAAP pro forma net adjusted EBITDA excludes $1.1 million, $0 and $1.1 million, respectively, of transaction expenses incurred with the Olapic acquisition.

 

MONOTYPE IMAGING HOLDINGS INC.OTHER INFORMATION(Unaudited and in thousands)

 

 

OTHER INFORMATION

 

                 

Share based compensation is comprised of the following:

  Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016 2015 2016 2015 Marketing and selling $ 2,164 $ 1,693 $ 5,349 $ 4,568 Research and development 1,180 633 2,869 1,819 General and administrative   1,962   1,274   4,487   3,454   Total expensed $ 5,306 $ 3,600 $ 12,705 $ 9,841 Property and equipment   —   —   —   82   Total share based compensation $ 5,306 $ 3,600 $ 12,705 $ 9,923  

MARKET INFORMATIONThe following table presents revenue for our two major markets:

 

                Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2016 2015 2016 2015 Creative Professional $ 27,798 $ 22,472 $ 75,170 $ 63,654 OEM   24,431   26,880   75,634   78,149   Total $ 52,229 $ 49,352 $ 150,804 $ 141,803  

MONOTYPE IMAGING HOLDINGS INC.RECONCILIATION OF FORECAST GAAP REVENUE TOFORECAST NON-GAAP PRO FORMA REVENUE(Unaudited and in thousands)

 

    Low End of Guidance Q4 2016 Monotype     Olapic     Combined GAAP revenue $ 50,200     $ 2,500     $ 52,700 Deferred revenue impairment   —       1,000       1,000   Non-GAAP pro forma revenue $ 50,200     $ 3,500     $ 53,700     High End of Guidance Q4 2016 Monotype     Olapic     Combined GAAP revenue $ 53,200     $ 3,500     $ 56,700 Deferred revenue impairment   —       1,000       1,000   Non-GAAP pro forma revenue $ 53,200     $ 4,500     $ 57,700     Low End of Guidance 2016 Monotype     Olapic     Combined GAAP revenue $ 199,000     $ 4,500     $ 203,500 Pre-acquisition revenue(1) — 8,600 8,600 Deferred revenue impairment   —       2,400       2,400   Non-GAAP pro forma revenue $ 199,000     $ 15,500     $ 214,500

(1) Non-GAAP pro forma revenue includes $0, $8.6 million and $8.6 million, respectively, of estimated Olapic revenue recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

    High End of Guidance 2016 Monotype     Olapic     Combined GAAP revenue $ 202,000     $ 5,500     $ 207,500 Pre-acquisition revenue(1) — 8,600 8,600 Deferred revenue impairment   —       2,400       2,400   Non-GAAP pro forma revenue $ 202,000     $ 16,500     $ 218,500

(1) Non-GAAP pro forma revenue includes $0, $8.6 million and $8.6 million, respectively, of estimated Olapic revenue recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

 

MONOTYPE IMAGING HOLDINGS INC.RECONCILIATION OF FORECAST GAAP NET INCOME TOFORECAST NON-GAAP NET ADJUSTED EBITDA(Unaudited and in thousands)

 

    Low End of Guidance

 

Q4 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 6,600     $ (5,600 )     $ 1,000 Interest expense, net 600 — 600 Other (income) expense, net 200 — 200 Provision (benefit) for income taxes   4,200       (3,600 )       600   Income (loss) from operations 11,600 (9,200 ) 2,400 Depreciation and amortization 2,400 700 3,100 Share based compensation 3,900 1,200 5,100 Contingent consideration adjustment(1)   600       900         1,500   Non-GAAP net adjusted EBITDA $ 18,500     $ (6,400 )     $ 12,100

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

    High End of Guidance

 

Q4 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 8,700     $ (5,200 )     $ 3,500 Interest expense, net 600 — 600 Other (income) expense, net 200 — 200 Provision (benefit) for income taxes   5,500       (3,300 )       2,200   Income (loss) from operations 15,000 (8,500 ) 6,500 Depreciation and amortization 2,400 700 3,100 Share based compensation 3,900 1,200 5,100 Contingent consideration adjustment(1)   600       900         1,500   Non-GAAP net adjusted EBITDA $ 21,900     $ (5,700 )     $ 16,200

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

 

MONOTYPE IMAGING HOLDINGS INC.RECONCILIATION OF FORECAST GAAP NET INCOME TOFORECAST NON-GAAP NET ADJUSTED EBITDA(Unaudited and in thousands)

 

    Low End of Guidance

 

2016 Monotype     Olapic     Combined GAAP net income (loss) $ 23,800     $ (8,400 )     $ 15,400 Interest expense, net 1,200 — 1,200 Other (income) expense, net 700 — 700 Provision (benefit) for income taxes   15,600       (5,300 )       10,300   Income (loss) from operations 41,300 (13,700 ) 27,600 Depreciation and amortization 11,000 1,100 12,100 Share based compensation 16,000 1,800 17,800 Contingent consideration adjustment(1)   2,300       1,400         3,700   Non-GAAP net adjusted EBITDA $ 70,600     $ (9,400 )     $ 61,200

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

   

 

High End of Guidance

 

2016 Monotype     Olapic     Combined GAAP net income (loss) $ 25,900     $ (7,900 )     $

18,000

Interest expense, net 1,200 — 1,200 Other (income) expense, net 700 — 700 Provision (benefit) for income taxes   17,000       (5,100 )      

11,900

  Income (loss) from operations

44,800

(13,000 )

31,800

Depreciation and amortization 11,000 1,100 12,100 Share based compensation 16,000 1,800 17,800 Contingent consideration adjustment(1)   2,300       1,400         3,700   Non-GAAP net adjusted EBITDA $

74,100

    $ (8,700 )     $

65,400

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

 

MONOTYPE IMAGING HOLDINGS INC.RECONCILIATION OF FORECAST GAAP NET INCOME TOFORECAST NON-GAAP PRO FORMA NET ADJUSTED EBITDA(Unaudited and in thousands)

 

    Low End of Guidance

 

Q4 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 6,600     $ (5,600 )     $ 1,000 Interest expense, net 600 — 600 Other (income) expense, net 200 — 200 Provision (benefit) for income taxes   4,200       (3,600 )       600   Income (loss) from operations 11,600 (9,200 ) 2,400 Deferred revenue impairment(1) — 700 700 Depreciation and amortization 2,400 700 3,100 Share based compensation 3,900 1,200 5,100 Contingent consideration adjustment(2) 600 900 1,500 Transaction costs(3)   —       700         700   Non-GAAP pro forma net adjusted EBITDA $ 18,500     $ (5,000 )     $ 13,500

(1) Non-GAAP pro forma net adjusted EBITDA includes $0, $0.7 million and $0.7 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

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

(3) Non-GAAP pro forma net adjusted EBITDA excludes $0, $0.7 million and $0.7 million, respectively, of transaction expenses Monotype expects to incur associated with the Olapic acquisition.

    High End of Guidance

 

Q4 2016

Monotype     Olapic     Combined GAAP net income (loss) $ 8,700     $ (5,200 )     $ 3,500 Interest expense, net 600 — 600 Other (income) expense, net 200 — 200 Provision (benefit) for income taxes   5,500       (3,300 )       2,200   Income (loss) from operations 15,000 (8,500 ) 6,500 Deferred revenue impairment(1) — 700 700 Depreciation and amortization 2,400 700 3,100 Share based compensation 3,900 1,200 5,100 Contingent consideration adjustment(2) 600 900 1,500 Transaction costs(3)   —       700         700   Non-GAAP pro forma net adjusted EBITDA $ 21,900     $ (4,300 )     $ 17,600

(1) Non-GAAP pro forma net adjusted EBITDA includes $0, $0.7 million and $0.7 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

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

(3) Non-GAAP pro forma net adjusted EBITDA excludes $0, $0.7 million and $0.7 million, respectively, of transaction expenses Monotype expects to incur associated with the Olapic acquisition.

 

MONOTYPE IMAGING HOLDINGS INC.RECONCILIATION OF FORECAST GAAP NET INCOME TOFORECAST NON-GAAP PRO FORMA NET ADJUSTED EBITDA(Unaudited and in thousands)

            Low End of Guidance

 

2016 Monotype     Olapic     Combined GAAP net income (loss) $ 23,800 $ (8,400 ) $ 15,400 Interest expense, net 1,200 — 1,200 Other (income) expense, net 700 — 700 Provision (benefit) for income taxes   15,600       (5,300 )       10,300     Income (loss) from operations 41,300 (13,700 ) 27,600 Pre-acquisition net adjusted EBITDA(1) — (11,600 ) (11,600 ) Deferred revenue impairment(2) — 1,500 1,500 Depreciation and amortization 11,000 1,100 12,100 Share based compensation 16,000 1,800 17,800 Contingent consideration adjustment(3) 2,300 1,400 3,700 Transaction costs(4)  

1,100

      700        

1,800

    Non-GAAP pro forma net adjusted EBITDA $

71,700

    $ (18,800 )     $

52,900

 

(1) Non-GAAP pro forma net adjusted EBITDA includes $0, $11.6 million and $11.6 million, respectively, of estimated Olapic net adjusted EBITDA recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

(2) Non-GAAP pro forma net adjusted EBITDA includes $0, $1.5 million and $1.5 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(3) Includes charges to operations for adjustments to estimated contingent consideration and for portions of merger consideration accounted for as compensation expense under GAAP.

(4) Non-GAAP pro forma net adjusted EBITDA excludes $1.1 million, $0.7 million and $1.8 million, respectively, of transaction expenses Monotype expects to incur associated with the Olapic acquisition.

       

 

High End of Guidance

 

2016 Monotype     Olapic     Combined GAAP net income (loss) $ 25,900     $ (7,900 ) $

18,000

Interest expense, net 1,200 — 1,200 Other (income) expense, net 700 — 700 Provision (benefit) for income taxes   17,000       (5,100 )      

11,900

    Income (loss) from operations

44,800

(13,000 )

31,800

Pre-acquisition net adjusted EBITDA(1) — (11,600 ) (11,600 ) Deferred revenue impairment(2) — 1,500 1,500 Depreciation and amortization 11,000 1,100 12,100 Share based compensation 16,000 1,800 17,800 Contingent consideration adjustment(3) 2,300 1,400 3,700 Transaction costs(4)  

1,100

      700        

1,800

    Non-GAAP pro forma net adjusted EBITDA $

75,200

    $ (18,100 )     $

57,100

 

(1) Non-GAAP pro forma net adjusted EBITDA includes $0, $11.6 million and $11.6 million, respectively, of estimated Olapic net adjusted EBITDA recognized during the period of January 1, 2016 to August 8, 2016. We acquired Olapic on August 9, 2016.

(2) Non-GAAP pro forma net adjusted EBITDA includes $0, $1.5 million and $1.5 million, respectively, to add back the estimated purchase accounting adjustment for the impairment of deferred revenue.

(3) Includes charges to operations for adjustments to estimated contingent consideration and for portions of merger consideration accounted for as compensation expense under GAAP.

(4) Non-GAAP pro forma net adjusted EBITDA excludes $1.1 million, $0.7 million and $1.8 million, respectively, of transaction expenses Monotype expects to incur associated with the Olapic acquisition.

           

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 Q4 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 6,600 $ (5,600 ) $ 1,000 Amortization, net of tax of $600, $300 and $900, respectively 800 400 1,200

Share based compensation, net of tax of $1,500, $500 and $2,000,respectively

2,400

700

3,100

Contingent consideration adjustment, net of tax of $0, $0 and $0,respectively(1)

 

600

     

900

       

1,500

  Non-GAAP net income (loss) $ 10,400     $ (3,600 )     $ 6,800     GAAP earnings (loss) per diluted share $ 0.17 $ (0.14 ) $ 0.03

Amortization, net of tax of $0.02, $0.01 and $0.02, respectively,per diluted share

0.02

0.01

0.03

Share based compensation, net of tax of $0.04, $0.01 and $0.05,respectively, per diluted share

0.06

0.02

0.08

Contingent consideration adjustment, 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 $

0.27

    $ (0.09 )     $

0.18

 

Weighted average diluted shares used to compute earnings pershare

40,000,000 40,000,000 40,000,000  

Assumes 39% effective tax rate.

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

           

 

High End of Guidance Q4 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 8,700 $ (5,200 ) $ 3,500

Amortization, net of tax of $600, $300 and $900, respectively

800 400 1,200

Share based compensation, net of tax of $1,500, $500 and $2,000,respectively

2,400

700

3,100

Contingent consideration adjustment, net of tax of $0, $0 and $0,respectively(1)

 

600

     

900

       

1,500

  Non-GAAP net income (loss) $ 12,500     $ (3,200 )     $ 9,300     GAAP earnings (loss) per diluted share $ 0.22 $ (0.13 ) $ 0.09

Amortization, net of tax of $0.02, $0.01 and $0.02, respectively,per diluted share

0.02

0.01

0.03

Share based compensation, net of tax of $0.04, $0.01 and $0.05,respectively, per diluted share

0.06

0.02

0.08

Contingent consideration adjustment, 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 $

0.32

    $ (0.08 )     $

0.24

 

Weighted average diluted shares used to compute earnings pershare

40,000,000 40,000,000 40,000,000  

Assumes 39% effective tax rate.

(1) Includes charges to operations for adjustments to estimated contingent consideration and 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 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 23,800 $ (8,400 ) $ 15,400

Amortization, net of tax of $2,800, $400 and $3,200, respectively

4,200 700 4,900

Share based compensation, net of tax of $6,300, $700 and $7,000,respectively

9,700

1,100

10,800

Contingent consideration adjustment, net of tax of $0, $0 and $0,respectively(1)

 

2,300

 

1,400

   

3,700

  Non-GAAP net income (loss) $ 40,000 $ (5,200 ) $ 34,800     GAAP earnings (loss) per diluted share $ 0.60 $ (0.21 ) $ 0.39

Amortization, net of tax of $0.07, $0.01 and $0.08, respectively,per diluted share

0.11

0.01

0.12

Share based compensation, net of tax of $0.16, $0.02 and $0.18, respectively, per diluted share

0.24

0.03

0.27

Contingent consideration adjustment, net of tax of $0.00, $0.00and $0.00, respectively, per diluted share(1)

 

0.06

 

0.03

   

0.09

  Non-GAAP earnings (loss) per diluted share $ 1.01 $

(0.14

) $ 0.87  

Weighted average diluted shares used to compute earnings pershare

39,800,000 39,800,000 39,800,000  

Assumes 39% effective tax rate.

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

           

 

High End of Guidance 2016 Monotype     Olapic     Combined GAAP net income (loss) $ 25,900 $ (7,900 ) $ 18,000

Amortization, net of tax of $2,800, $400 and $3,200, respectively

4,200 700 4,900

Share based compensation, net of tax of $6,300, $700 and $7,000,respectively

9,700

1,100

10,800

Contingent consideration adjustment, net of tax of $0, $0 and $0,respectively (1)

 

2,300

     

1,400

       

3,700

 

Non-GAAP net income (loss)

$ 42,100     $ (4,700 )     $ 37,400    

GAAP earnings (loss) per diluted share

$ 0.65 $ (0.20 ) $ 0.45

Amortization, net of tax of $0.07, $0.01 and $0.08, respectively,per diluted share

0.11

0.02

0.13

Share based compensation, net of tax of $0.16, $0.02 and $0.18,respectively, per diluted share

0.24

0.03

0.27

Contingent consideration adjustment, net of tax of $0.00, $0.00and $0.00, respectively, per diluted share (1)

 

0.06

     

0.03

       

0.09

  Non-GAAP earnings (loss) per diluted share $ 1.06     $ (0.12 )     $ 0.94  

Weighted average diluted shares used to compute earnings pershare

39,800,000 39,800,000 39,800,000

Assumes 39% effective tax rate.

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

 

MONOTYPE IMAGING HOLDINGS INC.

RECONCILIATION OF HISTORICAL REPORTED REVENUE TO NON-GAAP PRO FORMA REVENUE

(Unaudited and in thousands)

    Historical Pro Forma Results 2015 Monotype     Olapic     Combined Revenue $

192,419

    $ 9,434     $

201,853

 

View source version on businesswire.com: http://www.businesswire.com/news/home/20161028005214/en/

MonotypeChris Brooks, 781-970-6120ir@monotype.com