Monotype. Management Presentation. May 2018

Transcription

1 Monotype Management Presentation May 2018

2 Safe Harbor This presentation contains forward-looking statements that involve significant risks and uncertainties, including those discussed in the Risk Factors section of Monotype Imaging Holdings Inc. s Form 10-K and subsequent filings with the SEC. We are providing this information as of today s date and do not undertake any obligation to update any forwardlooking statements contained in this document as a result of new information, future events or otherwise. No forward-looking statement can be guaranteed and actual results may differ materially from those that are projected. Unless otherwise noted herein, all numeric references made in this presentation, including but not limited to Total Addressable Market (TAM), Compounded Annual Growth Rates (CAGR); addressed or addressable markets, market segments, brands, corporations, firms, users or professionals; transaction sizes; the Global 2000; are Monotype Imaging Holdings Inc. internal estimates or market descriptions, as applicable. 2

3 Compelling Investment Thesis Strategy Extending value proposition to Brands and Creatives Balanced Portfolio Serve mature, accelerating and developing markets Customers & Partners Expanding leadership position with Global 2000 Brands and extending reach to millions of creative professionals Products Designing solutions to solve critical customer pain points Financials Prioritizing expanding profit margins, strong balance sheet and shareholder returns Leadership Experienced and proven team 3

4 Our Vision Empower expression & engagement Our Mission Be the first place to turn for the design assets, technology and expertise that empower brand engagement, self expression and the best user experiences 4

5 Market leading foundation 5

6 07:00 07:30 08:00 You ve probably already interacted with our IP before getting to work today 08:15 08:30 09:00 6

7 Our Value Aa Type ~20K of some of the world s most popular typefaces Distribution of ~100K typefaces More than 250 languages supported Technology Creative tools Screen imaging tech Printer imaging tech 22 patents issued, 24 patents pending Expertise Custom Design (Monotype Studio) Development of tech standards Research (MIT Partnership) Engineering 7

8 Brand at the heart of what we do 8

9 Our Value in Action Design We Empower Brands with Differentiated Design and Marketing Assets Marketing United States France Hong Kong Consistently expressing the brand across all communications channels with beautiful, relevant and impactful content Finding authentic content from best customers and most passionate advocates, and using insights to improve all expressions of the brand 9

10 Our Value Design Define an impactful visual expression of your brand Differentiate through authentic, on-brand content Express your brand consistently across all channels and media Brand Marketing Engage with your best customers with meaningful content Analyze and draw insight from interactions with your customers Calibrate your content and communications using this insight 10

11 2.5 Billion # of Consumer Devices Running Monotype Software 3.5 Million Relationships with Creative Professionals 45 Percent Of Global 2000 Brands Using Monotype IP 11

12 Outside-in, market-driven growth 12

13 Print Consumption Device Consumption Digital Content Brand Engagement Future Invented font scaling tech Font rendering to screens Content creation standards New branded content Built printer business Address complex environments (e-ink devices, Asian languages) Serving broader brand needs New diverse use cases 13

14 Opportunity to do more 14

15 Our Value Aa Type ~20K of some of the world s most popular typefaces Distribution of ~100K typefaces More than 250 languages supported Technology Creative tools Screen imaging tech Printer imaging tech 22 patents issued, 24 patents pending Expertise Custom Design (Monotype Studio) Development of tech standards Research (MIT Partnership) Engineering Assets Branded fonts, UGC photo and video, emoji, themes, frames, filters Technology Creative and imaging tech Olapic platform Swyft platform Analytics Expertise Custom Design Development of tech standards Research Engineering 15

16 Our Value Design Define an impactful visual expression of your brand Differentiate through authentic, on-brand content Express your brand consistently across all channels and media Brand Marketing Engage with your best customers with meaningful content Analyze and draw insight from interactions with your customers Calibrate your content and communications using this insight 16

17 Our Value in Action Design We Empower Brands with Differentiated Design and Marketing Assets Marketing United States France Hong Kong Consistently expressing the brand across all communications channels with beautiful, relevant and impactful content Finding authentic content from best customers and most passionate advocates, and using insights to improve all expressions of the brand 17

18 How our business converts 18

19 Monotype s Markets ~10,000 Firms ($200M-$1B) < 3 Month Sales Cycle 4-5 Figure Accounts 17 Million Professional Creatives e-commerce & Subscriptions 2-4 Figure Transaction Size Forbes Month Sales Cycle 5-6 Figure Accounts Global 2000 Med-to-Large Businesses Agencies & Freelancers ~200 Top Software, Device & Auto Month Sales Cycle 7-8 Figure Accounts 19

20 Long-Term Revenue Growth Expectations OEM Creative Professional Printer Imaging Display Imaging Digital Commerce Enterprise Type & Olapic -5%-0 0-5% 0-5% 15+% 0-3% 10-20% 20

21 Financial Overview 21

22 Managing a Balanced Portfolio Mature Markets Stabilize Revenue Adapt to market dynamics across multiple device categories Convert printers from per-unit royalty to fixed contracts Service new embedded use cases (ex. Auto) Accelerating Markets Seize Opportunity Continued focus on G2K and Creative Pros where valueprop has greatest success Measured investment for growth Build repeatable sales and marketing engine Developing Markets Enhance Markets Manage to available market opportunity Customer driven investment Cross-sell into customer base to accelerate adoption 22 Develop Scalable Infrastructure Then Optimize

23 Our Portfolio Has Shifted Over Time 2014: $184.5M 2018: $247M - $253M CAGR OEM (4%) Creative Professional 19% Total Monotype Growth 8% OEM CP Note: Pie charts are illustrative and not to scale 23

24 Dramatic Mix Shift Driven By Market Dynamics $160 $120 $80 $40 $ G OEM Revenue Creative Professional Revenue OEM Business Model Small number customers requires limited sales support High Over customer the last 5 touch/ years, Management not scalable has returned $135 million to Primarily Royalty-based shareholders through dividends and opportunistic share CP Business Model buybacks Serving thousands of brands and millions of creative professionals Requires scalable infrastructure Primarily term enterprise contracts and e-commerce transactions (28.3%) Secular market declines in printer & changing dynamics in consumer electronics drove need for new revenue streams. As a result, Creative Professional growing at 25% CAGR over last 8 years 24

25 Dramatic Mix Shift Driven By Market Dynamics $160 $120 $80 $40 $ G OEM Revenue Creative Professional Revenue OEM Business Model Small number customers requires limited sales support High Over customer the last touch/ 5 years, Management not scalable has returned $135 million to Primarily Royalty-based shareholders through dividends and opportunistic share CP Business Model buybacks Serving thousands of brands and millions of creative professionals Requires scalable infrastructure Primarily term enterprise contracts and e-commerce transactions (28.3%) Secular market declines in printer & changing dynamics in consumer electronics drove need for new revenue streams. As a result, Creative Professional growing at 25% CAGR over last 8 years 25

26 Dramatic Mix Shift Driven By Market Dynamics $160 $120 $80 $40 $ G OEM Revenue Creative Professional Revenue OEM Business Model Small number customers requires limited sales support High Over customer the last touch/ 5 years, Management not scalable has returned $135 million to Primarily Royalty-based shareholders through dividends and opportunistic share CP Business Model buybacks Serving thousands of brands and millions of creative professionals Requires scalable infrastructure Primarily term enterprise contracts and e-commerce transactions (28.3%) Secular market declines in printer & changing dynamics in consumer electronics drove need for new revenue streams. As a result, Creative Professional growing at 25% CAGR over last 8 years 26

27 Recent Quarterly Results Demonstrate Consistent Execution $70 Revenue YoY PF Growth 20% $49 Operating Expenses* % of Revenue 90% $65 $60 $55 $50 $45 $40 $65.0 $ % $57.8 $ % 12% $52.6 $52.5 9% 3% 1% Q416 Q117 Q217 Q317 Q417 Q118 16% 12% 8% 4% 0% $47 $45 $43 $41 $39 $37 $35 78% 72% 75% 82% 76% $44.8 $45.1 $43.8 $42.7 $43.1 $ % Q416 Q117 Q217 Q317 Q417 Q118 80% 70% 60% $14 $12 $10 $8 $6 $4 $2 $0 $8.5 $5.6 Operating Cash Flow $6.8 $9.1 $12.3 $7.5 34% Impr. Q416 Q117 Q217 Q317 Q417 Q118 $20 $15 $10 $5 $0 24.3% $12.8 $ % naebitda* $ % EBITDA Margin 26.3% $ % $ % Impr. $ % Q416 Q117 Q217 Q317 Q417 Q118 31% 27% 23% 19% 15% 27 * Excludes non-recurring restructuring costs and investor relation advisor fees

28 Trailing Twelve Month Results $260 $240 $220 $200 $180 $160 Revenue YoY Growth 16.5% $235.8 $240.0 $ % $ % $203.4 $ % 5.7% 5.0% Q416 Q117 Q217 Q317 Q417 Q118 20% 15% 10% 5% 0% $200 $150 $100 $50 Operating Expenses* % of Revenue 75.9% $163.4 $164.9 $175.9 $176.5 $136.5 $ % 74.6% 73.5% 71.9% 67.1% Q416 Q117 Q217 Q317 Q417 Q118 80% 75% 70% 65% $60 Operating Cash Flow $65 naebitda* EBITDA Margin 40% $50 $40 $30 $20 $10 $49.4 $43.8 $32.9 $30.0 $33.8 $35.7 $60 $55 $50 $45 $40 $ % $ % $49.9 $ % 22.3% $ % $ % 35% 30% 25% 20% $0 Q416 Q117 Q217 Q317 Q417 Q118 $35 Q416 Q117 Q217 Q317 Q417 Q118 15% 28 * Excludes non-recurring restructuring costs and investor relation advisor fees

29 2017 Year of Inflection 2018 Year of Acceleration Revenue $203.4M $235.8M 11% PF Growth $243 - $251M % Gross Margins 81.5% 82.1% 80-82% naebitda Margin 29.4% 22.0% $ $66.5M Free Cash Flow Realization 64% 50% 29

30 Well Positioned for Growth and Margin Expansion Monotype Longer-Term Model Revenue Gross Margins 78-82% naebitda Margin 28-32% Free Cash Flow Realization >70% Mature and highly profitable legacy OEM business Accelerating growth in Brand Direct Enterprise Sales Leverageable operational model 30

31 Capital Consistently Returned to Shareholders $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 $2.2 $8.5 Dividend Share Buyback % of naebitda $29.7 $11.8 $18.6 $15.1 $5.6 $17.5 $7.0 $ % 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% Over Five Year Period: Dividends increased at 22% CAGR Repurchased ~2.5M shares worth Over the last 5 years, Management an aggregate has returned of $63 $135 million to shareholders through Capital returned has averaged 40% dividends and of naebitda opportunistic share buybacks Committed to achieving the right balance between investing in our business, growing our market share and returning capital to shareholders. Over the last 5 years, Management has returned $135 million to shareholders through dividends and opportunistic share buybacks (28.3%) 31

32 Compelling Investment Thesis Strategy Extending value proposition to Brands and Creatives Balanced Portfolio Serve mature, accelerating and developing markets Customers & Partners Expanding leadership position with Global 2000 Brands and extending reach to millions of creative professionals Products Designing solutions to solve critical customer pain points Financials Prioritizing expanding profit margins, strong balance sheet and shareholder returns Leadership Experienced and proven team 32

33 Monotype Governance Key Elements of Governance Profile: Independent board chair No dual class capital structure No super majority provisions for M&A No poison pill Majority voting 50% of board members female, vs 18.6% peer average Added 5 new directors since 2012, including Scott Landers Average director tenure 6 years CEO pay at or near peer median Double trigger change in control 3x CEO and 5x Director stock ownership guidelines Anti-hedging and pledging policies 33