Monotype Imaging Holdings' (TYPE) CEO Scott Landers On Q1 2016 Results - Earnings Call Transcript

| About: Monotype Imaging (TYPE)

Monotype Imaging Holdings Inc. (NASDAQ:TYPE)

Q1 2016 Earnings Conference Call

April 29, 2016 08:30 AM ET


Chris Brooks - Director of IR

Scott Landers - President and CEO

Joe Hill - CFO, Treasurer and Assistant Secretary


Steven Frankel - Dougherty & Co.

Kevin Liu - B. Riley & Co.

Allen Klee - Sidoti & Company


Good morning. My name is Jessa and I will be your conference operator today. At this time, I’d like to welcome everyone to the Monotype First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Thank you.

Mr. Chris Brooks, you may begin your conference.

Chris Brooks

Thanks, Jessa. Good morning, everyone. I’m Chris Brooks, Head of IR here at Monotype. Thank you for joining us for Monotype’s first quarter 2016 financial conference call. With me this morning are Scott Landers, President and Chief Executive Officer; and Joe Hill, Chief Financial Officer.

Before I begin, I’d like to remind everyone that matters we’re discussing today and the information contained in the press release issued by the Company earlier this morning announcing our first quarter 2016 financial results that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, including predictions, estimates, expectations and other forward-looking statements generally identifiable by the use of the word believes, will, expects, or similar expressions are subject to risks and uncertainties that could cause actual results to differ materially.

Accordingly, participants on today’s call are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s opinions only as of today’s date, April 29, 2016. Information on the potential factors and detailed risks that could affect the Company’s actual results of operations is included in the Company’s filings with the SEC. The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in our first quarter press release or on this morning’s conference call, other than through the filings that will be made with the SEC concerning this reporting period.

In addition, I’d like to remind you that today’s discussion will include references to net adjusted EBITDA and non-GAAP diluted EPS, which are intended to serve as further complement to our results provided in accordance with Generally Accepted Accounting Principles. A reconciliation of these non-GAAP measures can be found in our press release. In addition, a link to today’s call can be found under Events in the Investors section of our Web site at The call will be archived on our Web site for one year.

And now I’d like to turn the call over Scott Landers. Scott?

Scott Landers

Good morning and thanks for joining us today. We started 2016 with solid a Q1, driven by strong growth in Creative Professional, non-printer OEM businesses. Revenue was $49.8 million, an 8% increase year-over-year.

Net adjusted EBITDA was $16.6 million or 33% of revenue. Creative Professional increased 17% to $23.9 million. OEM revenue increased 2% to $25.9 million, driven by a solid quarter in automotive, another embedded displays.

Our printer business decline mid single digits. As a Company, we are capitalizing on the broader trends in the marketplace. Brands are turning to us for holistic solutions that help them reach their customers across the fast expanding digital landscape. Our ability to satisfy these new used cases continues to be a catalyst for growth in our Creative Professional business, especially at the enterprise level.

Brands are looking for new and engaging ways to reach customers in the digital world while maintaining brand fidelity at every touch point. All of this aligns with our vision statement, empower expression and engagement.

Before we dig into the quarter, I want to share how we are executing on our vision today. We've identified three strategic vectors that we believe represent significant growth catalyst for Monotype, both now and into the future. Each opportunity is grounded in a dimension of our current business and then builds to create more value for customers over time.

The first strategic vector is to serve the growing needs of Creative Professional’s by delivering high-quality design assets right at the point of creation. Given our deep collection of fonts IP and flexible licensing models, we believe we’re in a great position to do more for our customers.

Our goal is to go beyond our core strength in fonts and deliver other creative assets through organic development, partnering, or M&A, like we did with the Swyft acquisition. Our recently introduced Monotype library subscription is an early example of how we plan to deliver our offerings that make it easy and affordable for anyone anywhere to work with the world’s best type and design assets.

The second strategic vector is focused on brand engagement. Our goal is to help brands shift one-way conversations into two-way engagements with customers. There has been a seismic shift in the way consumers engage with brands, which includes everything from dynamic and responsive advertising where our web font platform can play an important role to the way branded content like Emoji, GIFs and Chat Bots are becoming an important piece of advertising campaigns. Brand engagement and mobile is in its infancy and we're excited to be out in front of such an important trend shaping the branding and advertising industry.

The third strategic vector is about enabling the brand [indiscernible] and becoming an integral part of the personalization ecosystem allowing consumers to express themselves as they personalize their devices, apps, communications and experiences.

The combination of Monotype’s extensive brand and OEM relationships and the reach of our Swyft media platform put this in a great position to ensure that consumers can express themselves be a beautiful type or other branded assets like digital stickers, videos, and potentially much more.

We think this market has tremendous potential, and we’re not alone. Facebook recently opened up its messenger application to third-party developers to create a presence within the app. TecHCrunch call this the most consequential event in the tech industry since Apple announced the App Store and iPhone SDK in March 2008.

Many believe this marks the beginning of mobile messaging as a key platform that will change the way billions of people will interact with the world around them. Chat Bots or brand accounts as we call them, represent a new avenue for brands to engage consumers in a personalized way. Mike Roberts, the Head of Messaging Services at Kik, recently said in an interview with The Next Web, messengers are the new browser and Bots are the new Web sites.

We're hopeful that this market validation from Facebook will encourage brands to think more strategically about how they can maximize their reach across this fast-growing medium.

These three vectors will serve as our roadmap to build our business. We are and we will continue to be on the leading edge with our customers as they capitalize our new digital opportunities.

Now turning to business highlights. The momentum in Creative Professional continues, specifically within the enterprise, as brands continue to reinvent themselves by refreshing their brand identities, are up leveling their brand investment.

During the quarter, we saw brands like ServiceMaster, one of the largest residential and commercial services company and Thomson Reuters turn to monotype to help ensure brand consistency and clarity across a wide range of devices and customer touch points.

In January, we introduced two new offerings, the Monotype Library Subscription and Monotype Enterprise license, both of which make it easier for customers from freelancers to large enterprises to work with more than 9,000 of the world's most popular fonts without having to navigate some of the complexities often associated with font licensing.

Additionally, Web Fonts, an important asset for empowering branded expression, continue to play an important role in our growth. In Q1, brands like DHL, MGM Hotels, Honda, and Snapchat licensed our Web Fonts to provide richer and more dynamic experiences across the Web.

The next use case for Web Fonts is HTML 5 digital advertising, and we believe the road to deployment is accelerating. We are having more and more conversations with customers about the changes in the industry and how it will impact their needs.

Externally there have been a number of developments HTML 5 and digital advertising. First, Google announced they will no longer accept new Flash ads on their network effective July 1. And as of January 1, 2017, HTML 5 will be the only digital ad format they will deploy. Earlier this month, the IAB released version 2.0 of its digital advertising guidelines.

Monotype was a key contributor to the tech specifications included in these guidelines. The IAB also released the validation tool, which allows for quick and easy testing of digital ad creative against the IAB guidelines. It’s critical for brands to deploy the most effective ads possible.

According to the Sizmek Mobile Index, static banners on mobile devices often have as low as a 0.28% click rate. HTML 5 ads, however, benefiting from a range of interactivity options, tended to outperform flash by 400%. We believe that HTML 5 will be the predominant ad format in the future and the announcement by Google begins to shape when the industry will move.

Turning to Swyft. Market trends tell us that opportunities within mobile messaging continue to expand. We’ve seen industry leaders like Facebook and Kik, open up and expand the functionality of their mobile messaging apps which offers great validation of messaging as a medium.

Swyft is our first entry point into this space and we are pleased with our progress so far. Swyft recently worked with eBay to help them launch a pilot campaign on the popular Kik mobile messaging platform. The pilot was the first pick point offer to drive targeted user traffic to an e-commerce Web site.

According to eBay, it exceeded expectations in terms of how effectively the platform could drive engagement to various eBay pages, driving roughly 3,000 user visits per hour.

In Q1, Swyft also executed new campaigns for brands like Kellogg, Century 21, The Carolina Hurricanes, The Minnesota Timberwolves, and Snuggle [ph]. We remain encouraged by the caliber of brands that are choosing Swyft and the growing interest in the mobile messaging space as a whole.

Turning to OEM, we are pleased with the growth in automotive, where legibility continues to play an important role in the design process of in-car screens. In the quarter, we added Porsche to a long list of auto brands that we're working with.

Finally, printer declined mid single-digits in line with our internal expectations and updated industry forecast. Industry analysts expect improvement in printer shipments in the second half of the year and Joe will touch more on that later.

Now I'd like to provide some high-level thoughts for Q2. We remain confident in the outlook and believe that 2016 will mirror the trends we saw in 2015, in terms of revenue split in the first and second half of the year.

For the second quarter, we expect total revenue in the range of $47 million to $50 million, which represents growth of approximately 5%. We anticipate net adjusted EBITDA to be in the range of $15 million to $17.5 million.

For the full-year, we continue to expect revenue in the range of $202 million to $208 million representing 7% growth. We expect net adjusted EBITDA to be in the range of $72 million to $77 million.

Now, I’d like to turn the call over to Joe to take you through the financial results. Joe?

Joe Hill

Thanks, Scott, and good morning, everybody. Revenue for the quarter was $49.8 million. This is an overall revenue growth of 8% year-over-year and is at the higher end of our guidance range.

Our Creative Professional business continued to perform very well and revenue increased 17% to $23.9 million. This was the 11th consecutive quarter of double-digit year-over-year growth in Creative Professional, as we continue to extend our value into newer markets and begin to reap the reward of the investments we've been making over the past few years.

Growth this quarter came from Web Fonts and our direct sales force selling to enterprise customers. OEM revenue increased 2% from the prior year to $25.9 million. Within OEM, printer units declined as anticipated, well our embedded display business is turning good results in growth categories such as automotive.

Gross profit margin for the quarter was 81% of sales. Operating expenses totaled $31 million inclusive of the $600,000 of acquisition related contingent consideration expense. Operating expenses increased primarily due to an increase in personnel, including our acquisition of Swyft last year. As we've mentioned on previous calls, we've been and will continue to invest in areas that help us drive growth.

GAAP net income for the first quarter was $5.4 million. Earnings per diluted share were $0.13 and non-GAAP earnings per diluted share were $0.24. Earnings per diluted per diluted share were negatively impacted by approximately $0.02, primarily due to non-cash foreign exchange losses. Net adjusted EBITDA was $16.6 million, a 33% margin and 3% growth over prior year.

Now turning to the balance sheet, cash and cash equivalents at the end of Q1 2016 was $95.4 million and cash flow from operations was $11.2 million. The Company paid a quarterly dividend of $0.10 per share in January 2016 for a total of $4 million.

Now before I turn to guidance, I’d like to spend a few minutes providing some color on how we think of our business. As Scott noted earlier, we had a strong start to the year. As CFO, I draw confidence from the diversification we see in our business. We've experienced sustained growth within our CP business and we continue to believe that this is a significant opportunity.

I also draw confidence from our demonstrated ability to execute against new market opportunities. We are capitalizing in a wide range of them across the entire Creative Professional and OEM landscape. This has allowed us to see an overall 8% growth in revenue this quarter despite a cyclical decline in printer. Looking to the future, printer will become an even smaller portion of our total revenue as our expanding markets continue to take shape.

I’d like to add more color on how we will be investing against the strategic vectors Scott outlined earlier. We're looking at this in three ways. Growing the business organically, partnering, and additional M&A. Organically, we believe there are number of opportunities to expand the reach and accessibility of our core IP.

In order to do this, we plan to continue to invest in sales and marketing to identify and reach new markets and customers. Most likely we do with Web Fonts, we plan to continue to invest and innovate in areas that both encourage and improve the use of type across new mediums.

Second, we will continue to partner with industry leaders to expand our market reach and make sure that millions, if not billions of people have access to our IP at their fingertips. We have a great track record of partnering with players in the printer industry, as well as market leaders like Microsoft, Apple, and Google.

As the used cases of our type continue to expand and new mediums come online, we will continue to look to partner with leaders across a spectrum of new categories like ad offering, the Internet of things, and mobile messaging.

Finally, we'll seek to complement our organic efforts through M&A by continuing to evaluate new offerings in technology that will provide our customers with additional value over time, whether its technology that brings us into entirely new markets like Swyft or offerings that round out our existing portfolio of solutions, we remain focused on identifying new growth opportunities for Monotype. We are confident that our strategic vectors will keep us on the path to growth well into the future.

Now turning to guidance. For the second quarter, we expect total revenue of $47 million to $50 million. We expect gross profit margins to be between 81% and 82% and operating expenses to be approximately $31 million, inclusive of $600,000 of acquisition related contingent consideration expense.

We anticipate net adjusted EBITDA to be in the range of $15 million to $17.5 million and non-GAAP diluted EPS of $0.22 to $0.26 and GAAP diluted EPS of $0.11 to $0.15. For 2016, we continue to anticipate revenue of $202 million to $208 million. We expect gross profit margins to approximate 82% and operating expenses to be approximately $123 million, inclusive of $2.3 million of acquisition related contingent consideration expense.

We expect net adjusted EBITDA to be in the range of $72 million to $77 million. Non-GAAP diluted EPS of $1.08 to a $1.16 and GAAP diluted EPS $0.63 to $0.71. In 2016, we expect revenue expenses to follow a similar pattern as 2015. Second half revenue will increase relative to the first half as some annual payments come in, in our direct Creative Professional revenue builds.

Additionally, the latest printer market forecast from IDC anticipates a second half pick up in units, which could benefit us in Q4 and in Q1 2017. EBITDA margin should improve as revenue grows and as operating expenses are typically higher in the first half as compared to the second half of the year. Overall, we're excited about our prospects and look forward to sharing our progress throughout the year.

Now I’d like to turn the call over to the operator to begin the Q&A session. Operator?

Question-and-Answer Session


Thank you. [Operator Instructions] Your first question comes from the line of Steven Frankel from Dougherty. Please go ahead.

Steven Frankel

Good morning, Scott. In terms of the HTML 5, it does sound like you're feeling you’re getting closer to the tipping point. As you begin to engage more closely with customers, what's the revenue opportunity look like?

Scott Landers

Steve, how are you? Yes, so we're excited about this revenue opportunity and I will kind of back go backwards a little bit and remind everybody about what we talked about with Web Fonts for Web sites. When we first laid that out without a doubt that would be a $30 million to $50 million opportunity for us. And as you recall from our year-end call, we were a little over $20 million ending last year. As we’ve laid out HTML 5, we think that’s the second major use case for Web Fonts. We’re really excited that it's getting closer and we think Google's announcement with the July 1 and January 1 dates is kind of answer the when question. But we’ve always talked about that total opportunity for us, being a multiple of what the Web Font opportunity for Web sites would be, if we sketch that out at a very high-level at two times. Now with that said, that number needs to be validated. And what we're excited about is that we’re now having customers come to us, wanting to talk about what this means for them and then to move down the road to engage with the license. So, as we get out and get enough data with actually selling to customers, we will be able to refine what those estimates are, but we think its substantial for the Company. And we’re excited that that the day seems to be finally coming.

Steven Frankel

And can you remind me from a customer perspective, if I'm going to do this, I need an additional license from you? If I’m Web Font customer, I can't simply start deploying that in HTML 5 ads or can I?

Scott Landers

That's correct. You do need for these -- each time there is essentially a new used case for fonts. Our old licenses, if you will, we license them the rights to things we can see today. And this I think maybe even a question on the last call, Doug was great kind of engraining that into us, and our culture. So, yes, -- so HTML 5 for advertising kicks in, that is an incremental licensing opportunity for us. What we're excited about is that it seems like we’re starting to get calls from the enterprise today and hopefully that means we can go right to an enterprise license with them. What happened with Web Fonts for Web sites, they started testing it out with micro sites in over a few years, they ended up taking Web Fonts across their entire enterprise. So, we're excited that we’re hearing directly from the enterprises themselves from the brands.

Steven Frankel

Great. And margins were a little lower than I thought. It sounds like some of this is in investment in the business the gross margins in particular, in Q1, were down year-on-year. Was there anything in particular in Q1 that cause that?

Joe Hill

Yes, there so -- hi, Steve. This is Joe. So our gross margins typically range in the 81% to 82% and Q1 last year they were 81.4%, they’re 81% this year. A lot of the slight fluctuation between the two is a matter of our product mix of how much OEM versus CP we’re selling and then within that how much is third-party product versus our own product, but it’s not a wide variance and this is a typical pattern that we’ve seen last year same as this year.

Steven Frankel

Okay. And then -- sorry, go ahead.

Joe Hill

I was just going to add one other thing to that, we’re making obviously investments in the operating lines. One of the good news for us on the gross profit line is as our markets open-up new doors for our fonts IP, that reinforces those very high gross margin that we have in the business. So, as an example when HTML 5 for ads kicks in, it’s typically the fonts that we own where we’d be generating the most revenue. So, longer-term, that feels like a good number. Where that could differ is, if we end up going into new asset classes like something like Swyft, if that were to become a meaningful piece of the revenue which stretch out a different margin profile for you.

Steven Frankel

And in terms of Swyft, one of your goals was kind of to move from the one-off experiments to more of a longer term customer engagement. Do you have any examples of that this quarter or do you still feel like that’s a goal you can reach this year?

Scott Landers

Yes, so I’d say we’re halfway there. And without talking about specific customers, we’re seeing customers that have done business within -- with us in the past come back. So maybe if we did a movie deal, now they’re coming back and they’re signing up for two or three movie deal type of arrangement. And what’s also nice is that we’re seeing our average cost per engagement go up. So I think we talked last call that we wanted to see repeat customers come back. We wanted to see deal sizes increase, but the third thing is we wanted to try and build what is a recurring revenue model. And there I’d say we’re halfway there. So, we’re seeing customers come back, but its not to the point where they’re subscribing to an annual book of value that they would get from us, now what’s encouraging. So, if you go back to what Facebook talked about opening up their environments, if in fact messaging becomes the new browser and there is now a lot of commerce that’s occurring in that messaging environment, that is really good news because now brands are going to be able to tie a tangible ROI to that spend, that they’re putting behind messaging. So an example would be, as if you had a piece of content that was out there being shared on mobile. If now there was a call to action where if I click something, it takes me into an e-commerce environment and now I actually make a purchase or I register as a further rewards program, that that's a really good sign and we think that our offerings around enabling that to happen is what could move us forward into a recurring model long-term.

Steven Frankel

Great. And one last one, you used a phrase in the press release about aligning your investment. So I wonder if you might tell us kind of what you meant by that?

Scott Landers

Yes. So, we are really excited here Steve. If you think about it, this is the biggest shift that we will see in our lifetime with regards to how people consume content, there are now screens everywhere and therefore how people are creating content and how brands are engaging with consumers. I doubt we will see any shift like we’ve just seen. And so, since Joe’s been here, he’s going to phrase that we’ve got this great annuity business, but it’s helping us fund these new opportunities particularly in the creative space. So, I think as a company we’ve done a really great job over the past five years investing those resources into new areas starting with Web Fonts for Web site going into apps. That wasn’t easy. We had to build that of technology stat [ph] to enable that. We hired new sales people. We had new marketing efforts et cetera, et cetera. As we look forward, I think we see even more opportunity on the horizon. So we’ve got the follow through of Web Fonts for websites, we’ve got HTML advertising, and then we’ve got mobile messaging and who knows where else we can go as far as to help the brand engage with the consumer on mobile. So those investments, and then we talked about using those words in the press release is a laser focus alignment of those investments against those market opportunities.

Steven Frankel

Okay, great. Thank you.


Your next question comes from the line of Kevin Liu from B. Riley & Company. Please go ahead.

Kevin Liu

Hi, good morning. Scott, earlier you mentioned that there were different sorts of content that you wanted to be able to partner with folks on or perhaps even acquire some companies to get into the hands of Creative Professionals. Could you just elaborate on, what sorts of content outside of Type and maybe some of the more icon based content you have currently through Swyft. What sorts of things are you thinking about there?

Scott Landers

Yes, so I won't comment specifically. But maybe I’ll go back and give you some examples on other things we’ve done. So, when we look to add other things we always look to add other font libraries. But starting with printer was a great example. What we look to do is ask our customers where can we do more for you? And then look internally to say, good that makes sense for us to be in that business. And so, as you know we got into the printer driver business years ago, and that was additional value that we could bring to those customers. Kind of in the modern day, we’ve done a couple of things. We bought the Typecast acquisition several years ago which brought us domain expertise around web development. As you remember, they allowed you to work with typewriting the browser in a new way adding more value to the Creative Professional, and then we subsequently bought Swyft which gave us a new asset class, but maybe more importantly a network where we could access over a billion folks within the mobile messaging environment. So, I would say broadly though, Kevin, what we’re focused on is on the brand and on the consumer looking for which assets would they like to create with in this new world, and in what ways would they like to engage with the consumer, and how can we leverage our leadership position either with the brand or with the OEM to help connect those dots. So we’ll continue to remain focused in that general area.

Kevin Liu

Understood. And you mentioned a lot about kind of the different messaging platforms as well as Chat Bots specifically. Could you just kind of outline, how you go about monetizing that, and how you kind of measure the size of those markets as they start to take hold?

Scott Landers

Yes, so I think when it comes to kind of our Swyft offering, I think we’re still learning. But what we’re finding now is, I think the monetization opportunity really is with the brand. It’s the brand now that needs to reach the millennial on Mobile. I think we quote this [indiscernible] report that I think is probably about a year old now, but I talked about a $25 billion GAAP in the U.S. alone in advertising where the moneys were going towards print and television, but the eyeballs were on mobile. And so, it’s the brand now that’s laser focused on, as they move that money over into that mobile environment how did they get the best ROI out of it. So, it is the brand that will monetize. And again going back to what I said from the last question is, we’ll be focused on how do we add enough value to build up a recurring revenue stream to help the brand across multiple touch points?

Kevin Liu

Great. And just lastly, on the expense side R&D seemed to jump up. Obviously you guys are making investments on a number of fronts. So just curious where those investments went in the quarter, and if you plan to continue to scale up R&D from here?

Scott Landers

Yes, so a lot of that related to a re-class. So over the years Kevin, as we’ve acquired businesses or put investments behind our ecommerce properties, those investments have gone into sales and marketing. We recognize that they really should be classified in R&D. That was just a reclassification of cost.

Joe Hill

Right. So as we look at the function that a lot of these people were doing at the time and as they were growing, a lot of their work was sales and marketing focused. And as we’ve been evolving and expanding their work has migrated more and more to be more traditional R&D work. So it’s appropriate at this time to now be classifying them as R&D expenses.

Kevin Liu

Got it. That makes sense. Thanks a lot.


[Operator Instructions] Your next question comes from the line of Allen Klee from Sidoti. Please go ahead.

Allen Klee

Hi, good morning. How much did those printers now represent as a percent of total? And what is the IDC outlook for growth, and what is the factors that they have that are having a pickup in the second half? Thank you.

Joe Hill

Great. Hi, Allen. We’ve kind of sketched our printers about -- being at about a third of our total revenues. As you know printers declined here in the first half of the year and the rest of our business continues to grow rapidly. So I wouldn’t be surprised if it was under 30% by the end of the year. So, IDC did just come out with an updated forecast. What they talk about is that mid single digit year-over-year decline for the first half of the year. They’re talking about a return to growth in the second half of the year. You know for us that we’re on a one quarter lag. So we’re hopeful that maybe in our Q4 reports we get from the printer folks are a little bit better, and then perhaps Q1 of next year. Now you asked the question of what's different, and what's changed. So you recall Allen, from the last couple of years we’ve talked about the printer business getting a nice boost from China. And we know that China represents over 20% of overall printing unit shipments, and that was growing at its height at about 15%. I think it was in the mid teens, and Chris will shake his head here, yes or no if I got that right or wrong. And then last year, as we saw the decline. One the issues was is China’s growth went from mid teens down to mid single digits. And in the most recent forecast from IDC it’s actually calling for I think China to be negative 1% over this year. Now the other thing that IDC did and you can take this for what its worth, but they revved their long-term forecast. They believe their printer longer term over the next five years is 1% grower. We’d be thrilled with that. That’s what we talked about I think over the last six months as we kind of put printer in is that flat business, and we’re laser focused as the last called asked, putting those investments against the high growth markets.

Allen Klee

Okay, great. And then, any updates of just where you stand with autos and internet of things?

Scott Landers

Yes, so we’re really pleased on both fronts. I mean, automotive in particular I think we’re up to now working with 15 auto brands. We just talked about Porsche. It’s a great business for us. It’s [indiscernible] to the things that we’re great at, and we can help the customer across many fronts. One, there is the eligibility concern. Two, there is the global language support, and three, and I think most importantly and what excites us is the extension of the brand onto the screen. And we’re seeing this more broadly across our entire business. Now when we talk to OEMs its not only about the device, but it talks about how the brand looks on that device and how that screen itself is actually adding and accruing to brand, the brands overall value. So we continue to remain optimistic there. We’ve had some nice wins in the internet of things as well particularly in wearables. We’ve got multiple wearables, customers today, and I’ll just step back for a second. As we look at the overall internet of things, I do not believe that there is any one device category that’s going to make or break the company. But we want to be everywhere. And the reason I say that is that, over time there is only going to be more and more of a convergence between the device and the content side. Because each one of these devices is something we’re looking at all the time and how we can use our leadership position by being on that device to capture more and more of the content dollars that are being pushed to that device. So, very pleased there, and just reinforcement of what we thought would happen in our non-printer OEM business.

Allen Klee

Okay, great. And with Web Fonts, would you say that’s continuing to track on the growth rate that it’s been going at?

Scott Landers

Yes, we’re no longer detailing that out specifically. But we talked about that being a $30 million to $50 million opportunity. I think we ended last year at about $21 million, and we continue to remain very optimistic about that.

Allen Klee

Okay. And the last question, just so if you could sort of go through one more time of the key factors that are going to give you the second half outperforming the first half?

Scott Landers

Yes, so from the top line perspective there’s a couple of things, one, is an anomaly. So we have an off a lot of recurring revenue. A lot of our recurring revenue just comes in on a quarterly basis. We have a handful of contracts where we get an annual payment from customers, and there is a few of those that’s back up in the second half of the year which will take the number up. The other thing that we see is these initiatives around Creative Professionals since we’re in growth markets they continue to build, and in particularly with now the enterprise within Creative Professional really driving our growth. A lot of those brands as you get towards the back end of the year and particularly towards yearend is when they flush their budget. So we’re seeing the seasonalization there continue to drive us towards the back half on the enterprise side of the business. Now that’s not new for us. We’ve seen that over the last couple of years, which is why we said 2016 should mirror 2015.

Allen Klee

Thank you so much.


There are no further questions at this time. I’d turn the call back over to the presenters.

Scott Landers

Well, thank you all for joining us today. You should know we continue to remain optimistic about the future of Monotype, and we look forward to talking to all of you again real soon. Take care.


This concludes today's conference call. You may now disconnect.

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