Prospectus summary
Prospectus summary This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, especially the risks of investing in our common stock discussed under “Risk Factors” beginning on page 6, and our consolidated financial statements and notes to those consolidated financial statements, before making an investment decision. Unless the context otherwise requires, we use the terms “Monotype Imaging,” “we,” “us” and “our” in this prospectus to refer to Monotype Imaging Holdings Inc. and its subsidiaries.Overview
We are a leading global provider of text imaging solutions. Our technologies and fonts enable the display and printing of high quality digital text. Our software technologies have been widely deployed across, and embedded in, a range of consumer electronics, or CE, devices, including laser printers, digital copiers, mobile phones, digital televisions, set-top boxes and digital cameras, as well as in numerous software applications and operating systems. In the laser printer market, we have worked together with industry leaders for over 16 years to provide critical components embedded in printing standards. Our scaling, compression, text layout, color and printer driver technologies solve critical text imaging issues for CE device manufacturers by rendering high quality text on low resolution and memory constrained CE devices. We combine these proprietary technologies with access to over 10,000 typefaces from a library of some of the most widely used designs in the world, including popular names like Helvetica and Times New Roman. We also license our typefaces to creative and business professionals through custom font design services, direct sales and our e-commerce websites fonts.com, itcfonts.com, linotype.com and faces.co.uk, which attracted more than 25 million visits in 2007 from over 200 countries and territories.
Our customers include:
Our text imaging solutions are embedded in a broad range of CE devices and are compatible with most major operating environments and those developed directly by CE device manufacturers. We partner with operating system and software application vendors Microsoft, Apple, Symbian, QUALCOMM and ACCESS (PalmSource) and have made our patented iType scalable font engine available as a plug-in for open source Linux environments.
Industry overview and market opportunity
CE devices are marketed globally and increasingly require robust multi-media functionality. CE device manufacturers and independent software vendors, together OEMs, must display text from many different sources, provide consistent look and feel across CE devices, support worldwide languages and provide enhanced navigation and personalization.
Font technology has evolved rapidly with the increase in the functionality of CE devices. The latest generation of digital font technology focuses on scalable fonts rather than bitmaps. Bitmaps require the storage of images for each individual character and size, which limits deployment across multiple CE devices. Scalable fonts are more flexible, compressed and memory efficient.
Laser printer manufacturers are utilizing increasingly robust text imaging solutions to enhance functionality and add features. The rapid change in the capabilities and functionality of multimedia enabled CE devices, together with the increased reliance by laser printer manufacturers on enhancing technologies to drive value, favor comprehensive global text solutions.
Competitive strengths
Our text imaging solutions provide critical technologies and fonts for users that require the ability to display or print high quality digital text. Our core strengths include:
Technological and intellectual property leadership. We have become a leading global provider of text imaging solutions for laser printers by combining our proprietary technologies with an extensive font library. We are leveraging our intellectual property and experience in this market to secure a leading position in other high volume CE device categories.
Established relationships with market leaders. We benefit from established relationships with our OEM customers, many of which date back 16 years or more. Because our technologies and fonts are embedded in the hardware of our customers’ CE devices, it would be costly and time-consuming to replace them.
International presence and technologies designed to serve the global market. In 2007, 68.7% of our revenue was derived from sales by our operating subsidiaries located in Asia, the United Kingdom and Germany. Our customers are located in the United States, Asia, Europe and throughout the world. We support all of the world’s major languages and have specifically designed scalable font rendering technologies for displaying rich content in Asian and other non-Latin languages. We enable OEM customers to engineer a common platform supporting multiple languages, reducing their cost and time to market and increasing product flexibility.
Strong web presence and font design services. Our e-commerce websites, including the intuitively-named fonts.com, provide us with a substantial web presence. We also serve creative and business professionals by providing custom font design and branding services.
Attractive business model. We have a large, recurring base of licensing revenue. In addition, we have significant operational leverage, a relatively low cash tax rate and low capital requirements.
Experienced leadership team and employee base. Our senior management has an average of 15 years of experience in the text imaging solutions business. There is significant continuity between our team and our key customers.
Our strategy
Our objective is to extend our position as a leading global provider of text imaging solutions. We intend to:
Risks affecting us
We are subject to a number of risks, which you should be aware of before you buy our common stock. These risks are discussed in “Risk Factors.”
Corporate information
Until November 2004, Agfa Corporation, or Agfa, operated its font and printer driver business through its wholly-owned subsidiary, Agfa Monotype Corporation, or Agfa Monotype. In November 2004, through a series of transactions, all of the common stock of Agfa Monotype was acquired by a newly formed entity, Monotype Imaging Inc., which was wholly owned by TA Associates, Inc., D.B. Zwirn Special Opportunities Fund, and certain of the former officers and employees of Agfa Monotype through a holding company, Imaging Holdings Corp., or IHC. In August 2005, IHC entered into a recapitalization transaction and debt refinancing, which resulted in our Company, Monotype Imaging Holdings Inc., becoming the parent of IHC.
On July 30, 2007, we completed our initial public offering, issuing 6.5 million shares of our common stock at a price of $12.00 per share. After underwriters’ commissions and other costs and expenses, we received net proceeds of approximately $67.2 million and paid the redemption cost of our redeemable preferred stock, which totaled approximately $9.7 million.
We conduct our operations through six operating subsidiaries:
ITC, China Type Design, Monotype Japan and Monotype UK are owned directly by Monotype Imaging Inc. Monotype Imaging Inc. and Linotype are wholly-owned by IHC, our wholly-owned subsidiary.
Our fiscal year ends on December 31. Accordingly, a reference to “2007” in this prospectus refers to the 12-month period that ended on December 31, 2007.
Our principal offices are located at 500 Unicorn Park Drive, Woburn, Massachusetts 01801 and our telephone number is (781) 970-6000. Our corporate website address is www.monotypeimaging.com. The information contained in or that can be accessed through this website or fonts.com, itcfonts.com, linotype.com and faces.co.uk, is not part of this prospectus.
The offering
The number of shares of our common stock to be outstanding following this offering is based on 34,322,119 shares of our common stock outstanding as of March 25, 2008, which excludes:
Unless otherwise indicated, all information in this prospectus assumes that the underwriters do not exercise their over-allotment option to purchase 900,000 shares of common stock from one of the selling stockholders in this offering.
Summary consolidated financial and other data
The tables below summarize our financial data as of the date and for the periods indicated. You should read the following information together with the more detailed information contained in “Selected consolidated financial data,” “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus.