false2019Q20001385292--12-31three yearsMonotype Imaging Holdings Inc. 0001385292 2019-01-01 2019-06-30 0001385292 2018-07-01 2018-09-30 0001385292 2018-12-01 2018-12-31 0001385292 2018-01-01 2018-12-31 0001385292 2018-01-01 2018-06-30 0001385292 2019-04-01 2019-06-30 0001385292 2018-04-01 2018-06-30 0001385292 2019-06-30 0001385292 2018-12-31 0001385292 2018-06-30 0001385292 2019-07-18 0001385292 2019-03-31 0001385292 2018-03-31 0001385292 2017-12-31 0001385292 country:JP 2019-01-01 2019-06-30 0001385292 us-gaap:EMEAMember 2019-01-01 2019-06-30 0001385292 type:OtherCountriesMember 2019-01-01 2019-06-30 0001385292 country:US 2019-01-01 2019-06-30 0001385292 type:SeveranceAndTerminationBenefitsMember 2019-01-01 2019-06-30 0001385292 us-gaap:RetainedEarningsMember 2019-01-01 2019-06-30 0001385292 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-06-30 0001385292 us-gaap:RestrictedStockMember 2019-01-01 2019-06-30 0001385292 us-gaap:RestrictedStockUnitsRSUMember 2019-01-01 2019-06-30 0001385292 us-gaap:ResearchAndDevelopmentExpenseMember 2019-01-01 2019-06-30 0001385292 us-gaap:GeneralAndAdministrativeExpenseMember 2019-01-01 2019-06-30 0001385292 us-gaap:SellingAndMarketingExpenseMember 2019-01-01 2019-06-30 0001385292 type:StockRepurchaseProgramMember 2019-01-01 2019-06-30 0001385292 type:CreativeProfessionalMember 2019-01-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember 2019-01-01 2019-06-30 0001385292 us-gaap:ForwardContractsMember 2019-01-01 2019-06-30 0001385292 us-gaap:TreasuryStockMember 2019-01-01 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember 2019-01-01 2019-06-30 0001385292 us-gaap:LicenseMember 2019-01-01 2019-06-30 0001385292 us-gaap:ServiceMember 2019-01-01 2019-06-30 0001385292 us-gaap:NoncompeteAgreementsMember 2019-01-01 2019-06-30 0001385292 us-gaap:CustomerRelationshipsMember 2019-01-01 2019-06-30 0001385292 type:AcquiredTechnologyMember 2019-01-01 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-01-01 2019-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember type:NewCreditAgreementMember us-gaap:BaseRateMember 2019-01-01 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember type:NewCreditAgreementMember 2019-01-01 2019-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-01-01 2019-06-30 0001385292 us-gaap:CommonStockMember 2019-01-01 2019-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2019-01-01 2019-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2019-01-01 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member 2019-01-01 2019-06-30 0001385292 srt:MinimumMember us-gaap:AccountingStandardsUpdate201409Member 2019-01-01 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member srt:MaximumMember 2019-01-01 2019-06-30 0001385292 us-gaap:TrademarksMember 2019-06-30 0001385292 type:DomainNamesMember 2019-06-30 0001385292 us-gaap:MoneyMarketFundsMember type:CurrentAssetMember 2019-06-30 0001385292 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member type:CurrentAssetMember 2019-06-30 0001385292 type:CurrentAssetMember us-gaap:CertificatesOfDepositMember 2019-06-30 0001385292 us-gaap:FairValueInputsLevel1Member type:CurrentAssetMember us-gaap:CertificatesOfDepositMember 2019-06-30 0001385292 type:ForwardContractToPurchaseMember 2019-06-30 0001385292 type:ForwardContractToSellMember 2019-06-30 0001385292 us-gaap:FairValueInputsLevel1Member type:CurrentAssetMember 2019-06-30 0001385292 type:CurrentAssetMember 2019-06-30 0001385292 us-gaap:FairValueInputsLevel1Member 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember 2019-06-30 0001385292 country:US 2019-06-30 0001385292 country:GB 2019-06-30 0001385292 country:DE 2019-06-30 0001385292 srt:AsiaMember 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember type:NewCreditAgreementMember 2019-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-06-30 0001385292 us-gaap:NoncompeteAgreementsMember 2019-06-30 0001385292 type:AcquiredTechnologyMember 2019-06-30 0001385292 us-gaap:CustomerRelationshipsMember 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201602Member srt:MinimumMember 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201602Member srt:MaximumMember 2019-06-30 0001385292 type:CurrentPeriodMember type:DeferredRevenueMember 2019-06-30 0001385292 type:DeferredRevenueMember 2019-06-30 0001385292 type:CurrentPeriodMember us-gaap:UnbilledRevenuesMember 2019-06-30 0001385292 us-gaap:UnbilledRevenuesMember 2019-06-30 0001385292 type:CurrentPeriodMember 2019-06-30 0001385292 type:LongTermMember type:DeferredRevenueMember 2019-06-30 0001385292 type:LongTermMember us-gaap:UnbilledRevenuesMember 2019-06-30 0001385292 type:LongTermMember 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member 2019-06-30 0001385292 srt:MinimumMember us-gaap:OfficeEquipmentMember 2019-06-30 0001385292 srt:MaximumMember us-gaap:OfficeEquipmentMember 2019-06-30 0001385292 us-gaap:StandbyLettersOfCreditMember 2019-06-30 0001385292 srt:MaximumMember 2019-06-30 0001385292 srt:MinimumMember 2019-06-30 0001385292 us-gaap:TrademarksMember 2018-12-31 0001385292 type:DomainNamesMember 2018-12-31 0001385292 us-gaap:MoneyMarketFundsMember type:CurrentAssetMember 2018-12-31 0001385292 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member type:CurrentAssetMember 2018-12-31 0001385292 type:ForwardContractToPurchaseMember 2018-12-31 0001385292 type:ForwardContractToSellMember 2018-12-31 0001385292 type:CurrentAssetMember 2018-12-31 0001385292 us-gaap:FairValueInputsLevel1Member type:CurrentAssetMember 2018-12-31 0001385292 us-gaap:FairValueInputsLevel1Member 2018-12-31 0001385292 country:US 2018-12-31 0001385292 country:GB 2018-12-31 0001385292 country:DE 2018-12-31 0001385292 srt:AsiaMember 2018-12-31 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember type:NewCreditAgreementMember 2018-12-31 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2018-12-31 0001385292 us-gaap:NoncompeteAgreementsMember 2018-12-31 0001385292 type:AcquiredTechnologyMember 2018-12-31 0001385292 us-gaap:CustomerRelationshipsMember 2018-12-31 0001385292 type:CurrentPeriodMember type:DeferredRevenueMember 2018-12-31 0001385292 type:DeferredRevenueMember 2018-12-31 0001385292 type:CurrentPeriodMember us-gaap:UnbilledRevenuesMember 2018-12-31 0001385292 us-gaap:UnbilledRevenuesMember 2018-12-31 0001385292 type:CurrentPeriodMember 2018-12-31 0001385292 type:LongTermMember type:DeferredRevenueMember 2018-12-31 0001385292 type:LongTermMember us-gaap:UnbilledRevenuesMember 2018-12-31 0001385292 type:LongTermMember 2018-12-31 0001385292 type:SiliconValleyBankMember us-gaap:StandbyLettersOfCreditMember type:NewCreditAgreementMember 2018-12-31 0001385292 country:JP 2018-01-01 2018-06-30 0001385292 us-gaap:EMEAMember 2018-01-01 2018-06-30 0001385292 type:OtherCountriesMember 2018-01-01 2018-06-30 0001385292 country:US 2018-01-01 2018-06-30 0001385292 type:SeveranceAndTerminationBenefitsMember 2018-01-01 2018-06-30 0001385292 type:ReversalOfStockBasedCompensationExpenseMember 2018-01-01 2018-06-30 0001385292 type:AcceleratedDeferredCompensationMember 2018-01-01 2018-06-30 0001385292 type:IntangibleAssetsImpairmentMember 2018-01-01 2018-06-30 0001385292 type:WriteOffOfAllocatedGoodwillMember 2018-01-01 2018-06-30 0001385292 us-gaap:RetainedEarningsMember 2018-01-01 2018-06-30 0001385292 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-06-30 0001385292 us-gaap:RestrictedStockMember 2018-01-01 2018-06-30 0001385292 us-gaap:RestrictedStockUnitsRSUMember 2018-01-01 2018-06-30 0001385292 us-gaap:ResearchAndDevelopmentExpenseMember 2018-01-01 2018-06-30 0001385292 us-gaap:GeneralAndAdministrativeExpenseMember 2018-01-01 2018-06-30 0001385292 us-gaap:SellingAndMarketingExpenseMember 2018-01-01 2018-06-30 0001385292 us-gaap:RestructuringChargesMember 2018-01-01 2018-06-30 0001385292 type:CreativeProfessionalMember 2018-01-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember 2018-01-01 2018-06-30 0001385292 us-gaap:TreasuryStockMember 2018-01-01 2018-06-30 0001385292 us-gaap:LicenseMember 2018-01-01 2018-06-30 0001385292 us-gaap:ServiceMember 2018-01-01 2018-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-01-01 2018-06-30 0001385292 us-gaap:CommonStockMember 2018-01-01 2018-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 us-gaap:TransferredAtPointInTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 us-gaap:TransferredAtPointInTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 type:CreativeProfessionalMember us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 us-gaap:TransferredOverTimeMember type:ServiceRevenueMember 2018-01-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember us-gaap:TransferredOverTimeMember type:LicenseRevenueMember 2018-01-01 2018-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member 2018-01-01 2018-06-30 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember 2019-03-22 0001385292 type:NewCreditAgreementMember us-gaap:RevolvingCreditFacilityMember type:SiliconValleyBankMember 2019-03-22 0001385292 type:StockRepurchaseProgramMember 2018-05-03 0001385292 type:FacilitiesAndAssociatedCostsMember 2018-07-01 2018-09-30 0001385292 us-gaap:SpecialTerminationBenefitsMember 2018-07-01 2018-09-30 0001385292 type:ReversalOfStockBasedCompensationExpenseMember 2018-01-01 2018-12-31 0001385292 type:OlapicBusinessMember 2018-12-01 2018-12-31 0001385292 us-gaap:SpecialTerminationBenefitsMember 2018-12-01 2018-12-31 0001385292 type:DeferredCompensationPaymentMember 2018-12-01 2018-12-31 0001385292 country:US 2019-04-01 2019-06-30 0001385292 country:JP 2019-04-01 2019-06-30 0001385292 us-gaap:EMEAMember 2019-04-01 2019-06-30 0001385292 type:OtherCountriesMember 2019-04-01 2019-06-30 0001385292 type:SeveranceAndTerminationBenefitsMember 2019-04-01 2019-06-30 0001385292 us-gaap:RetainedEarningsMember 2019-04-01 2019-06-30 0001385292 us-gaap:EmployeeStockOptionMember 2019-04-01 2019-06-30 0001385292 us-gaap:RestrictedStockMember 2019-04-01 2019-06-30 0001385292 us-gaap:RestrictedStockUnitsRSUMember 2019-04-01 2019-06-30 0001385292 us-gaap:SellingAndMarketingExpenseMember 2019-04-01 2019-06-30 0001385292 us-gaap:ResearchAndDevelopmentExpenseMember 2019-04-01 2019-06-30 0001385292 us-gaap:GeneralAndAdministrativeExpenseMember 2019-04-01 2019-06-30 0001385292 type:PersonnelRelatedMember 2019-04-01 2019-06-30 0001385292 type:CreativeProfessionalMember 2019-04-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember 2019-04-01 2019-06-30 0001385292 us-gaap:TreasuryStockMember 2019-04-01 2019-06-30 0001385292 us-gaap:LicenseMember 2019-04-01 2019-06-30 0001385292 us-gaap:ServiceMember 2019-04-01 2019-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2019-04-01 2019-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-04-01 2019-06-30 0001385292 us-gaap:CommonStockMember 2019-04-01 2019-06-30 0001385292 type:CreativeProfessionalMember type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:CreativeProfessionalMember type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2019-04-01 2019-06-30 0001385292 type:CreativeProfessionalMember type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2019-04-01 2019-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2019-04-01 2019-06-30 0001385292 type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2019-04-01 2019-06-30 0001385292 us-gaap:RoyaltyMember 2019-04-01 2019-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member 2019-04-01 2019-06-30 0001385292 country:US 2018-04-01 2018-06-30 0001385292 country:JP 2018-04-01 2018-06-30 0001385292 us-gaap:EMEAMember 2018-04-01 2018-06-30 0001385292 type:OtherCountriesMember 2018-04-01 2018-06-30 0001385292 type:SeveranceAndTerminationBenefitsMember 2018-04-01 2018-06-30 0001385292 type:ReversalOfStockBasedCompensationExpenseMember 2018-04-01 2018-06-30 0001385292 type:AcceleratedDeferredCompensationMember 2018-04-01 2018-06-30 0001385292 type:IntangibleAssetsImpairmentMember 2018-04-01 2018-06-30 0001385292 type:WriteOffOfAllocatedGoodwillMember 2018-04-01 2018-06-30 0001385292 us-gaap:RetainedEarningsMember 2018-04-01 2018-06-30 0001385292 us-gaap:EmployeeStockOptionMember 2018-04-01 2018-06-30 0001385292 us-gaap:RestrictedStockMember 2018-04-01 2018-06-30 0001385292 us-gaap:RestrictedStockUnitsRSUMember 2018-04-01 2018-06-30 0001385292 us-gaap:SellingAndMarketingExpenseMember 2018-04-01 2018-06-30 0001385292 us-gaap:ResearchAndDevelopmentExpenseMember 2018-04-01 2018-06-30 0001385292 us-gaap:GeneralAndAdministrativeExpenseMember 2018-04-01 2018-06-30 0001385292 us-gaap:RestructuringChargesMember 2018-04-01 2018-06-30 0001385292 type:CreativeProfessionalMember 2018-04-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember 2018-04-01 2018-06-30 0001385292 us-gaap:TreasuryStockMember 2018-04-01 2018-06-30 0001385292 us-gaap:LicenseMember 2018-04-01 2018-06-30 0001385292 us-gaap:ServiceMember 2018-04-01 2018-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2018-04-01 2018-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-04-01 2018-06-30 0001385292 us-gaap:CommonStockMember 2018-04-01 2018-06-30 0001385292 type:CreativeProfessionalMember type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:LicenseRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:CreativeProfessionalMember type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:ServiceRevenueMember us-gaap:TransferredAtPointInTimeMember 2018-04-01 2018-06-30 0001385292 type:CreativeProfessionalMember type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2018-04-01 2018-06-30 0001385292 type:OriginalEquipmentManufacturersMember type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2018-04-01 2018-06-30 0001385292 type:ServiceRevenueMember us-gaap:TransferredOverTimeMember 2018-04-01 2018-06-30 0001385292 us-gaap:RoyaltyMember 2018-04-01 2018-06-30 0001385292 us-gaap:AccountingStandardsUpdate201409Member 2018-04-01 2018-06-30 0001385292 type:PersonnelRelatedMember 2019-01-01 2019-03-31 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2019-03-01 2019-03-22 0001385292 type:SiliconValleyBankMember us-gaap:RevolvingCreditFacilityMember 2019-03-01 2019-03-22 0001385292 us-gaap:SubsequentEventMember 2019-07-25 0001385292 us-gaap:CommonStockMember 2018-12-31 0001385292 us-gaap:TreasuryStockMember 2018-12-31 0001385292 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0001385292 us-gaap:RetainedEarningsMember 2018-12-31 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-12-31 0001385292 us-gaap:CommonStockMember 2019-06-30 0001385292 us-gaap:TreasuryStockMember 2019-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0001385292 us-gaap:RetainedEarningsMember 2019-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-06-30 0001385292 us-gaap:TreasuryStockMember 2017-12-31 0001385292 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0001385292 us-gaap:RetainedEarningsMember 2017-12-31 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2017-12-31 0001385292 us-gaap:CommonStockMember 2017-12-31 0001385292 us-gaap:CommonStockMember 2018-06-30 0001385292 us-gaap:TreasuryStockMember 2018-06-30 0001385292 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0001385292 us-gaap:RetainedEarningsMember 2018-06-30 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-06-30 0001385292 us-gaap:CommonStockMember 2019-03-31 0001385292 us-gaap:TreasuryStockMember 2019-03-31 0001385292 us-gaap:AdditionalPaidInCapitalMember 2019-03-31 0001385292 us-gaap:RetainedEarningsMember 2019-03-31 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-03-31 0001385292 type:PersonnelRelatedMember 2019-06-30 0001385292 us-gaap:CommonStockMember 2018-03-31 0001385292 us-gaap:TreasuryStockMember 2018-03-31 0001385292 us-gaap:AdditionalPaidInCapitalMember 2018-03-31 0001385292 us-gaap:RetainedEarningsMember 2018-03-31 0001385292 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-03-31 0001385292 type:PersonnelRelatedMember 2018-12-31 0001385292 type:PersonnelRelatedMember 2019-03-31 iso4217:USD xbrli:shares iso4217:GBP xbrli:pure type:Position type:Segment iso4217:USD xbrli:shares type:Contract type:Subsidiary type:Markets

~~UNITED~~Table ~~STATES~~of Contents

~~SECURITIES~~UNITED ~~AND~~STATES ~~EXCHANGE COMMISSION~~

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

~~FORM 10-Q~~Washington, D.C. 20549

FORM

~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~10-Q

~~For~~☒ ~~the~~QUARTERLY ~~quarterly~~REPORT ~~period~~PURSUANT ~~ended~~TO ~~March 31,~~SECTION ~~2019~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

ORFor the quarterly period ended June 30, 2019

~~☐ TRANSITION REPORT PURSUANT TO SECTION 13~~ OR ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~☐ ~~the~~TRANSITION ~~transition~~REPORT ~~period~~PURSUANT ~~from to~~ TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number

~~Commission File Number~~ 001-33612

MONOTYPE IMAGING HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware		20-3289482
(State of incorporation)		(I.R.S. Employer Identification No.)
600 Unicorn Park Drive Woburn, Massachusetts		01801
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (781)

~~Registrant’s telephone number, including area code: (781)~~ 970-6000

(Former Name, Former Address and Former Fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

~~Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non~~S-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes

~~Large accelerated filer~~ ☒ ~~Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a ~~shell~~large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company ~~(as~~or ~~defined~~emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act~~) Yes ☐ No ☒~~ .

~~The~~Large ~~number~~accelerated offiler ~~shares~~☒ ~~outstanding of~~Accelerated ~~the~~filer ~~registrant’s~~☐ ~~common~~Non-accelerated ~~stock~~filer as☐ of(Do ~~April 19,~~not ~~2019~~check ~~was~~if ~~41,373,437.~~a smaller reporting company) Smaller reporting company ☐ Emerging growth company ☐

~~Table~~ ~~of Contents~~☐

~~MONOTYPE~~Indicate ~~IMAGING~~by ~~HOLDINGS~~check ~~INC.~~mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

~~INDEX~~Securities registered pursuant to Section 12(b) of the Act:

			Page
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Part I. Financial Information				2
Common Stock, par value $0.001 per share	TYPE	NASDAQ Global Select Market
Item 1.	Condensed Consolidated Financial Statements (Unaudited)			2
	• Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018			2
	• Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018			3
	• Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2019 and 2018			4
	• Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018			5
	• Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018			6
	• Notes to Condensed Consolidated Financial Statements			7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			31
Item 4.	Controls and Procedures			32
Part II. Other Information				33
Item 1.	Legal Proceedings			33
Item 1A.	Risk Factors			33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			33
Item 3.	Defaults Upon Senior Securities			33
Item 4.	Mine Safety Disclosures			33
Item 5.	Other Information			34
Item 6.	Exhibits			34
Exhibit Index				35
Signatures				36

1The number of shares outstanding of the registrant’s common stock as of July 18, 2019 was 41,288,487.

Table of Contents

~~PART~~MONOTYPE I.IMAGING ~~FINANCIAL~~HOLDINGS ~~INFORMATION~~INC.

~~Item~~INDEX ~~1. Condensed Consolidated Financial Statements~~

MONOTYPE IMAGING HOLDINGS INC.


				Page
Part I. Financial Information					2
Item 1.	Condensed Consolidated Financial Statements (Unaudited)				2

		•	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018		2

		•	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018		3

		•	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018		4

		•	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018		5

		•	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018		7

		•	Notes to Condensed Consolidated Financial Statements		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations				23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk				36

Item 4.	Controls and Procedures				37

Part II. Other Information					37

Item 1.	Legal Proceedings				37

Item 1A.	Risk Factors				37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds				37

Item 3.	Defaults Upon Senior Securities				38

Item 4.	Mine Safety Disclosures				38

Item 5.	Other Information				38

Item 6.	Exhibits				38

Exhibit Index					39

Signatures					40

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~ 1

~~(Unaudited~~Table ~~and~~of ~~in thousands, except share and per share data)~~ Contents

	March 31,2019			December 31,2018
Assets
Current assets:
Cash and cash equivalents	$	46,354		$	60,106
Restricted cash		6,000			6,000
Accounts receivable, net of allowance for doubtful accounts of $455 at March 31, 2019 and $492 at December 31, 2018, respectively		46,083			55,943
Income tax refunds receivable		5,726			5,122
Prepaid expenses and other current assets		7,672			6,473
Total current assets		111,835			133,644
Right of use asset		13,432			—
Property and equipment, net		12,881			14,105
Goodwill		275,466			276,222
Intangible assets, net		72,823			74,699
Other assets		9,714			8,986
Total assets	$	496,151		$	507,656
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,325		$	1,719
Accrued expenses and other current liabilities		30,182			43,840
Accrued income taxes payable		190			510
Deferred revenue		11,941			10,337
Lease liability		3,621			—
Total current liabilities		48,259			56,406
Revolving line of credit		70,000			75,000
Other long-term liabilities		1,649			3,102
Deferred income taxes		35,697			35,083
Reserve for income taxes		—			2,471
Lease liability		11,229			—
Accrued pension benefits		5,829			5,888
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.001 par value, Authorized shares: 10,000,000; Issued and outstanding: none		—			—
Common stock, $0.001 par value, Authorized shares: 250,000,000; Shares issued 46,397,404 at March 31, 2019 and 45,803,288 at December 31, 2018		46			46
Additional paid-in capital		324,027			319,486
Treasury stock, at cost, 4,955,996 shares at March 31, 2019 and 4,504,236 shares at December 31, 2018		(91,329	)		(83,518	)
Retained earnings		97,458			99,605
Accumulated other comprehensive loss		(6,714	)		(5,913	)
Total stockholders’ equity		323,488			329,706
Total liabilities and stockholders’ equity	$	496,151		$	507,656

PART I. FINANCIAL INFORMATION

~~The~~Item 1. ~~accompanying~~Condensed ~~notes~~Consolidated ~~are~~Financial anStatements ~~integral part of these condensed consolidated financial statements.~~

2MONOTYPE IMAGING HOLDINGS INC.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~BALANCE SHEETS

~~MONOTYPE~~(Unaudited ~~IMAGING~~and ~~HOLDINGS~~in ~~INC.~~thousands, except share and per share data)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	47,763		$	60,106
Restricted cash		6,000			6,000
Accounts receivable, net of allowance for doubtful accounts of $555 at June 30, 2019 and $492 at December 31, 2018		47,076			55,943
Income tax refunds receivable		6,904			5,122
Prepaid expenses and other current assets		7,634			6,473

Total current assets		115,377			133,644
Right of use asset		14,320			—
Property and equipment, net		11,850			14,105
Goodwill		275,946			276,222
Intangible assets, net		71,265			74,699
Other assets		15,184			8,986

Total assets	$	503,942		$	507,656

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,748		$	1,719
Accrued expenses and other current liabilities		33,864			43,840
Accrued income taxes payable		180			510
Deferred revenue		10,777			10,337
Lease liability		3,701			—

Total current liabilities		50,270			56,406
Revolving line of credit		65,000			75,000
Other long-term liabilities		1,711			3,102
Deferred income taxes		36,891			35,083
Reserve for income taxes		—			2,471
Lease liability		12,053			—
Accrued pension benefits		5,956			5,888
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $0.001 par value, Authorized shares: 10,000,000; Issued and outstanding: none		—			—
Common stock, $0.001 par value, Authorized shares: 250,000,000; Shares issued: 46,464,430 at June 30, 2019 and 45,803,288 at December 31, 2018		46			46
Additional paid-in capital		327,918			319,486
Treasury stock, at cost, 5,166,895 shares at June 30, 2019 and 4,504,236 shares at December 31, 2018		(92,747	)		(83,518	)
Retained earnings		102,973			99,605
Accumulated other comprehensive loss		(6,129	)		(5,913	)

Total stockholders’ equity		332,061			329,706

Total liabilities and stockholders’ equity	$	503,942		$	507,656

~~(Unaudited~~The ~~and~~accompanying innotes ~~thousands,~~are ~~except~~an ~~share~~integral ~~and~~part ~~per~~of ~~share~~these ~~data)~~condensed consolidated financial statements.

	Three Months EndedMarch 31,
	2019			2018
License revenue	$	41,872		$	45,867
Service revenue		9,484			10,816
Total revenue		51,356			56,683
Cost of revenue—license		6,802			9,612
Cost of revenue—service		2,801			2,824
Cost of revenue—amortization of acquired technology		857			864
Total cost of revenue		10,460			13,300
Gross profit		40,896			43,383
Operating expenses:
Marketing and selling		17,130			20,089
Research and development		7,441			9,296
General and administrative		12,019			15,618
Restructuring		(24	)		194
Amortization of other intangible assets		832			1,024
Total operating expenses		37,398			46,221
Income (loss) from operations		3,498			(2,838	)
Other (income) expense:
Interest expense		908			852
Interest income		(137	)		(124	)
Loss (gain) on foreign exchange		66			(34	)
Loss on derivatives		95			136
Other		45			(4	)
Total other expense, net		977			826
Income (loss) before benefit from income taxes		2,521			(3,664	)
Benefit from income taxes		(139	)		(2,465	)
Net income (loss)	$	2,660		$	(1,199	)
Net income (loss) available to common stockholders—basic	$	2,514		$	(1,199	)
Net income (loss) available to common stockholders—diluted	$	2,514		$	(1,199	)
Net income (loss) per common share:
Basic	$	0.06		$	(0.03	)
Diluted	$	0.06		$	(0.03	)
Weighted-average number of shares outstanding:
Basic		40,004,354			40,005,789
Diluted		40,066,059			40,005,789

~~The~~Table ~~accompanying notes are an integral part~~ of ~~these condensed consolidated financial statements.~~ Contents

3MONOTYPE IMAGING HOLDINGS INC.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF OPERATIONS

~~MONOTYPE~~(Unaudited ~~IMAGING~~and ~~HOLDINGS~~in ~~INC.~~thousands, except share and per share data)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
License revenue	$	54,136		$	48,093		$	96,008		$	93,960
Service revenue		9,100			12,594			18,584			23,410

Total revenue		63,236			60,687			114,592			117,370
Cost of revenue—license		8,231			7,282			15,033			16,894
Cost of revenue—service		2,759			2,674			5,560			5,498
Cost of revenue—amortization of acquired technology		843			860			1,700			1,724

Total cost of revenue		11,833			10,816			22,293			24,116

Gross profit		51,403			49,871			92,299			93,254
Operating expenses:
Marketing and selling		18,570			20,081			35,700			40,170
Research and development		6,764			8,456			14,205			17,752
General and administrative		11,588			11,858			23,607			27,476
Restructuring		32			6,376			8			6,570
Amortization of other intangible assets		829			965			1,661			1,989

Total operating expenses		37,783			47,736			75,181			93,957

Income (loss) from operations		13,620			2,135			17,118			(703	)
Other (income) expense:
Interest expense		781			945			1,689			1,797
Interest income		(83	)		(146	)		(220	)		(270	)
Other		239			(633	)		445			(535	)

Total other expense, net		937			166			1,914			992

Income (loss) before provision (benefit) for income taxes		12,683			1,969			15,204			(1,695	)
Provision for (benefit from) income taxes		2,376			1,274			2,237			(1,191	)

Net income (loss)	$	10,307		$	695		$	12,967		$	(504	)

Net income (loss) available to common stockholders—basic and diluted	$	9,971		$	666		$	12,558		$	(504	)

Net income (loss) per common share—basic and diluted	$	0.25		$	0.02		$	0.31		$	(0.01	)

Weighted-average number of shares outstanding:
Basic		40,026,865			40,418,308			40,015,672			40,436,595
Diluted		40,065,910			40,537,852			40,066,047			40,436,595

~~(Unaudited~~The ~~and~~accompanying innotes ~~thousands)~~are an integral part of these condensed consolidated financial statements.

	Three Months EndedMarch 31,
	2019			2018
Net income (loss)	$	2,660		$	(1,199	)
Other comprehensive income, net of tax:
Unrecognized actuarial gain, net of tax of $5 and $5, respectively		16			19
Foreign currency translation adjustments, net of tax of ($276) and $356, respectively		(817	)		1,325
Comprehensive income	$	1,859		$	145

~~The~~Table ~~accompanying notes are an integral part~~ of ~~these condensed consolidated financial statements.~~ Contents

4MONOTYPE IMAGING HOLDINGS INC.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

~~MONOTYPE~~(Unaudited ~~IMAGING~~and ~~HOLDINGS~~in ~~INC.~~thousands)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019			2018
Net income (loss)	$	10,307	$	695		$	12,967		$	(504	)
Other comprehensive income (loss), net of tax:
Unrecognized actuarial gain, net of tax of $5, $8, $10 and $13, respectively		6		22			22			41
Foreign currency translation adjustments, net of tax of $193, ($834), ($83) and ($478), respectively		579		(3,507	)		(238	)		(2,182	)

Comprehensive income (loss)	$	10,892	$	(2,790	)	$	12,751		$	(2,645	)

~~For~~The ~~the~~accompanying ~~three~~notes ~~months~~are ~~ended~~an ~~March 31,~~integral ~~2019~~part ~~and~~of ~~2018~~these condensed consolidated financial statements.

~~(in thousands, except share and per share data)~~ 4

	Common Stock				Treasury Stock					Additional Paid-In		Retained			Accumulated Other Comprehensive			TotalStock-holders’
	Shares		Amount		Shares		Amount			Capital		Earnings			Income (Loss)			Equity
Balance, December 31, 2018		45,803,288	$	46		4,504,236	$	(83,518	)	$	319,486	$	99,605		$	(5,913	)	$	329,706
Net income													2,660						2,660
Issuance of capital shares
—restricted share grants		483,952		—							—								—
—exercised options		48,486		—							322								322
—restricted units converted		61,678		—							—								—
Repurchase of unvested shares of restricted common stock						19,360		—											—
Purchase of treasury stock						370,500		(6,590	)										(6,590	)
Shares withheld						61,900		(1,221	)										(1,221	)
Stock based compensation											4,219								4,219
Dividends declared ($0.116 per share)													(4,807	)					(4,807	)
Unrecognized actuarial loss, net of tax																16			16
Cumulative translation adjustment, net of tax																(817	)		(817	)
Balance, March 31, 2019		46,397,404	$	46		4,955,996	$	(91,329	)	$	324,027	$	97,458		$	(6,714	)	$	323,488
Balance, December 31, 2017		44,934,364	$	44		3,215,644	$	(64,083	)	$	298,113	$	97,815		$	(2,521	)	$	329,368
Net loss													(1,199	)					(1,199	)
Issuance of capital shares
—restricted share grants		392,352		—							—								—
—exercised options		186,783		—							2,648								2,648
—restricted units converted		74,484		—							—								—
Repurchase of unvested shares of restricted common stock						153,344		—											—
Shares withheld						50,128		(1,211	)										(1,211	)
Stock based compensation											4,262								4,262
Dividends declared ($0.116 per share)													(4,893	)					(4,893	)
Cumulative adjustment, ASC 606 adoption													8,950						8,950
Unrecognized actuarial loss, net of tax																19			19
Cumulative translation adjustment, net of tax																1,325			1,325
Balance, March 31, 2018		45,587,983	$	44		3,419,116	$	(65,294	)	$	305,023	$	100,673		$	(1,177	)	$	339,269

Table of Contents

~~The~~MONOTYPE ~~accompanying~~IMAGING ~~notes~~HOLDINGS ~~are an integral part of these condensed consolidated financial statements~~INC.

5CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

~~Table~~(in ofthousands, ~~Contents~~except share and per share data)

MONOTYPE IMAGING HOLDINGS INC.


	Three Months Ended June 30, 2019
															Accumulated			Total
										Additional					Other			Stock-
	Common Stock				Treasury Stock					Paid-In		Retained			Comprehensive			holders’
	Shares		Amount		Shares		Amount			Capital		Earnings			Income (Loss)			Equity
Balance, March 31, 2019		46,397,404	$	46		4,955,996	$	(91,329	)	$	324,027	$	97,458		$	(6,714	)	$	323,488
Net income													10,307						10,307
Issuance of capital shares
— exercised options		1,157		—							12								12
— restricted share grants		56,706		—							—								—
— restricted units converted		9,163		—							—								—
Repurchase of unvested shares of restricted common stock						135,736		—											—
Purchase of treasury stock						55,428		(1,088	)										(1,088	)
Shares withheld						19,735		(330	)										(330	)
Stock based compensation											3,879								3,879
Dividends declared ($0.116 per share)													(4,792	)					(4,792	)
Unrecognized actuarial income, net of tax																6			6
Cumulative translation adjustment, net of tax																579			579

Balance, June 30, 2019		46,464,430	$	46		5,166,895	$	(92,747	)	$	327,918	$	102,973		$	(6,129	)	$	332,061

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended June 30, 2018
															Accumulated			Total
										Additional					Other			Stock-
	Common Stock				Treasury Stock					Paid-In		Retained			Comprehensive			holders’
	Shares		Amount		Shares		Amount			Capital		Earnings			Income (Loss)			Equity
Balance, March 31, 2018		45,588,021	$	44		3,419,116	$	(65,294	)	$	305,023	$	100,673		$	(1,177	)	$	339,269
Net income													695						695
Issuance of capital shares
—exercised options		55,258		—							734								734
—restricted share grants		84,523		—							—								—
—restricted units converted		10,381		—							—								—
Repurchase of unvested shares of restricted common stock						109,165		—											—
Purchase of treasury stock						44,600		(981	)										(981	)
Shares withheld						13,901		(306	)										(306	)
Stock based compensation											3,195								3,195
Dividends declared ($0.116 per share)													(4,891	)					(4,891	)
Unrecognized actuarial loss, net of tax																22			22
Cumulative translation adjustment, net of tax																(3,507	)		(3,507	)
Balance, June 30, 2018		45,738,183	$	44		3,586,782	$	(66,581	)	$	308,952	$	96,477		$	(4,662	)	$	334,230

~~(Unaudited~~The ~~and~~accompanying innotes ~~thousands)~~are an integral part of these condensed consolidated financial statements.

	Three Months EndedMarch 31,
	2019			2018
Cash flows from operating activities
Net income (loss)	$	2,660		$	(1,199	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		3,169			3,249
Loss on extinguishment of debt		34			—
Loss on retirement of assets		13			9
Amortization of deferred financing costs and accretion of interest		43			55
Stock based compensation		4,219			4,247
Provision for doubtful accounts		91			191
Deferred income taxes		881			(4,582	)
Unrealized currency gain on foreign denominated intercompany transactions		(265	)		(575	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		9,789			7,783
Prepaid expenses and other assets		(1,709	)		(1,321	)
Accounts payable		598			1,463
Income tax refunds receivable		(604	)		(716	)
Accrued income taxes		(2,842	)		26
Accrued expenses and other liabilities		(13,054	)		(4,179	)
Deferred revenue		1,072			3,045
Net cash provided by operating activities		4,095			7,496
Cash flows from investing activities
Purchases of property and equipment		(411	)		(1,463	)
Purchases of intangible assets		—			(160	)
Net cash used in investing activities		(411	)		(1,623	)
Cash flows from financing activities
Net payments on revolving line of credit		(5,200	)		(3,000	)
Proceeds from line of credit, net of issuance costs		42			—
Common stock dividends paid		(4,791	)		(4,712	)
Purchase of treasury stock		(6,590	)		—
Payments for employee taxes on shares withheld		(1,221	)		(1,210	)
Proceeds from exercises of common stock options		322			2,648
Net cash used in financing activities		(17,438	)		(6,274	)
Effect of exchange rates on cash, cash equivalents and restricted cash		2			943
(Decrease) increase in cash, cash equivalents and restricted cash		(13,752	)		542
Cash, cash equivalents and restricted cash at beginning of period		66,106			100,809
Cash, cash equivalents and restricted cash at end of period	$	52,354		$	101,351
Noncash transactions:
Borrowing under revolving line of credit	$	158		$	—

~~The~~Table ~~accompanying notes are an integral part~~ of ~~these condensed consolidated financial statements.~~ Contents

6MONOTYPE IMAGING HOLDINGS INC.

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~STATEMENTS OF STOCKHOLDERS’ EQUITY – (Continued)

~~MONOTYPE~~(in ~~IMAGING~~thousands, ~~HOLDINGS~~except ~~INC.~~share and per share data)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Six Months Ended June 30, 2019
															Accumulated			Total
										Additional					Other			Stock-
	Common Stock				Treasury Stock					Paid-In		Retained			Comprehensive			holders’
	Shares		Amount		Shares		Amount			Capital		Earnings			Income (Loss)			Equity
Balance, December 31, 2018		45,803,288	$	46		4,504,236	$	(83,518	)	$	319,486	$	99,605		$	(5,913	)	$	329,706
Net income													12,967						12,967
Issuance of capital shares
—exercised options		49,643		—							334								334
—restricted share grants		540,658		—							—								—
—restricted units converted		70,841		—							—								—
Repurchase of unvested shares of restricted common stock						155,096		—											—
Purchase of treasury stock						425,928		(7,678	)										(7,678	)
Shares withheld						81,635		(1,551	)										(1,551	)
Stock based compensation											8,098								8,098
Dividends declared ($0.232 per share)													(9,599	)					(9,599	)
Unrecognized actuarial income, net of tax																22			22
Cumulative translation adjustment, net of tax																(238	)		(238	)
Balance, June 30, 2019		46,464,430	$	46		5,166,895	$	(92,747	)	$	327,918	$	102,973		$	(6,129	)	$	332,061

March 31, 2019

	Six Months Ended June 30, 2018
															Accumulated			Total
										Additional					Other			Stock
	Common Stock				Treasury Stock					Paid-In		Retained			Comprehensive			holders’
	Shares		Amount		Shares		Amount			Capital		Earnings			Income (Loss)			Equity
Balance, December 31, 2017		44,934,364	$	44		3,215,644	$	(64,083	)	$	298,113	$	97,815		$	(2,521	)	$	329,368
Net loss													(504	)					(504	)
Issuance of capital shares
—exercised options		242,079		—							3,383								3,383
—restricted share grants		476,875		—							—								—
—restricted units converted		84,865		—							—								—
Repurchase of unvested shares of restricted common stock						262,509		—											—
Purchase of treasury stock						44,600		(981	)										(981	)
Shares withheld						64,029		(1,517	)										(1,517	)
Stock based compensation											7,456								7,456
Dividends declared ($0.232 per share)													(9,784	)					(9,784	)
Cumulative adjustment, ASC 606 adoption													8,950						8,950
Unrecognized actuarial loss, net of tax																41			41
Cumulative translation adjustment, net of tax																(2,182	)		(2,182	)
Balance, June 30, 2018		45,738,183	$	44		3,586,782	$	(66,581	)	$	308,952	$	96,477		$	(4,662	)	$	334,230

1.The ~~Nature~~accompanying notes are an integral part of ~~the Business~~these condensed consolidated financial statements.

Monotype Imaging Holdings Inc. (the “Company” or “we”) is a leading global provider of branded and design assets, technology and expertise for creative professionals and consumer device manufacturers. We provide high-quality creative assets and technology solutions across multiple devices and mediums. Our solutions, which include type, visual content marketing solutions, custom design services, and tools and technologies that enable the creative process are licensed through our direct sales channel, e-commerce platforms and partner platforms. We also provide consumer device manufacturers and independent software vendors, or ISVs, with the right solutions for delivering consistent, compelling user experiences. Our solutions power the visual expression of the leading makers of a wide range of devices, including laser printers, digital copiers and mobile devices, among others, as well as provide a high-quality text experience in numerous software applications and operating systems. We license our design assets and technology to creative professionals, consumer device manufacturers and independent software vendors. 6

WeTable ~~are headquartered in Woburn, Massachusetts and we operate in one business segment: the development, marketing and licensing~~ of design assets and technology. We also maintain various offices worldwide for selling and marketing, research and development and administration. At March 31, 2019, we conduct our operations through four domestic operating subsidiaries, Monotype Imaging Inc., Monotype ITC Inc. (“ITC”), MyFonts Inc. (“MyFonts”) and Olapic, Inc., and six foreign operating subsidiaries, Olapic Argentina S.A., Monotype Ltd. (“Monotype UK”), Monotype GmbH (“Monotype Germany”), Monotype Solutions India Pvt. Ltd. (“Monotype India”), Monotype Hong Kong Ltd. (“Monotype Hong Kong”) and Monotype KK (“Monotype Japan”). Contents

2.MONOTYPE ~~Basis~~IMAGING ofHOLDINGS ~~Presentation~~INC.

~~The~~CONDENSED ~~accompanying~~CONSOLIDATED ~~unaudited~~STATEMENTS ~~condensed~~OF ~~consolidated~~CASH ~~interim~~FLOWS financial statements as of March 31, 2019 and for the three months ended March 31, 2019 and 2018 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented

We(Unaudited ~~have elected to present the analysis of changes in stockholders’ equity quarterly in statement form for the current~~ and ~~comparative~~ ~~year to date interim periods and state the amount of dividends per share~~ in ~~the aggregate for each class of shares in accordance with the provisions in Regulation S-X, Rule 8-03(a~~thousands)~~(5)~~ ~~and 10-01(a)(7).~~

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2018, as reported in the Company’s Annual Report on Form 10-K. The Company’s significant accounting policies and practices are as described in the Annual Report, except for the adoption of the accounting standards described in Note 3 below.


	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities
Net income (loss)	$	12,967		$	(504	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,337			6,447
Loss on extinguishment of debt		34			—
Loss on retirement of assets		21			10
Loss on abandonment of product line		—			3,223
Amortization of deferred financing costs and accreted interest		108			110
Stock based compensation		8,098			7,435
Provision for doubtful accounts		229			659
Deferred income taxes		1,829			(4,603	)
Unrealized currency (gain) on foreign denominated intercompany transactions		(38	)		(207	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		8,677			4,345
Prepaid expenses and other assets		(7,317	)		(3,957	)
Accounts payable		31			(108	)
Income tax refunds receivable		(1,782	)		—
Accrued income taxes		(2,793	)		(1,013	)
Accrued expenses and other liabilities		(9,760	)		(9,801	)
Deferred revenue		460			1,283

Net cash provided by operating activities		17,101			3,319

Cash flows from investing activities
Purchases of property and equipment		(811	)		(2,125	)
Purchases of intangible assets		—			(160	)

Net cash used in investing activities		(811	)		(2,285	)

Cash flows from financing activities
Net payments on revolving line of credit		(10,200	)		(8,000	)
Proceeds from line of credit, net of issuance costs		42			—
Common stock dividends paid		(9,598	)		(9,604	)
Purchase of treasury stock		(7,678	)		(981	)
Payments for employee taxes on shares withheld		(1,551	)		(1,517	)
Proceeds from exercises of common stock options		334			3,382

Net cash used in financing activities		(28,651	)		(16,720	)
Effect of exchange rates on cash, cash equivalents and restricted cash		18			(304	)

Decrease in cash, cash equivalents and restricted cash		(12,343	)		(15,990	)
Cash, cash equivalents and restricted cash at beginning of period		66,106			100,809

Cash, cash equivalents and restricted cash at end of period	$	53,763		$	84,819

Noncash transactions:
Borrowing under revolving line of credit	$	158		$	—

~~Statement~~The accompanying notes are an integral part of ~~Operations~~these condensed consolidated financial statements.

We classify cloud-based subscriptions and other services, such as font related services, custom font design and post contract support as service revenue on our condensed consolidated statements of operations. All other revenue is classified as license revenue. 7

~~For~~Table ~~the~~of quarter ended March 31, 2018, to conform to current year presentation, we reclassified restructuring charges to disclose the expense amount separately from other operating expenses. Previously the expense amounts were included within the following other operating expense line items: Contents

	Three MonthsEndedMarch 31,2018
Marketing and selling	$	(24	)
Research and development		146
General and administrative		72
Total		194

MONOTYPE IMAGING HOLDINGS INC.

~~See~~NOTES ~~Note~~TO 14UNAUDITED ~~for~~CONDENSED ~~further~~CONSOLIDATED ~~details.~~FINANCIAL STATEMENTS

3.June 30, ~~Recently~~2019 ~~Issued Accounting Pronouncements~~

~~Adopted~~1. Nature of the Business

~~Leases~~ e-commerce

platforms and partner platforms. We also provide consumer device manufacturers and independent software vendors, or ISVs, with the right solutions for delivering consistent, compelling user experiences. Our solutions power the visual expression of the leading makers of a wide range of devices, including laser printers, digital copiers and mobile devices, among others, as well as provide a high-quality text experience in numerous software applications and operating systems. We license our design assets and technology to creative professionals, consumer device manufacturers and independent software vendors.

We are headquartered in Woburn, Massachusetts and we operate in

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification, (“ASU 2016-02”) which replaces the existing guidance for leases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU one

business segment: the development, marketing and licensing of design assets and technology. We also maintain various offices worldwide for selling and marketing, research and development and administration. At

June 30,

2019, we conduct our operations through

7 four

domestic operating subsidiaries, Monotype Imaging Inc., Monotype ITC Inc. (“ITC”), MyFonts Inc. (“MyFonts”) and Olapic, Inc., and

~~Table of Contents~~six

foreign operating subsidiaries, Olapic Argentina S.A., Monotype Ltd. (“Monotype UK”), Monotype GmbH (“Monotype Germany”), Monotype Solutions India Pvt. Ltd. (“Monotype India”), Monotype Hong Kong Ltd. (“Monotype Hong Kong”) and Monotype KK (“Monotype Japan”).

2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases2. ~~The~~Basis ~~balance sheet amount recorded for existing leases at the date~~ of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. This guidance is effective for annual and interim periods beginning after December 15, 2018. Presentation

The accompanying unaudited condensed consolidated interim financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018 include the accounts of the Company and its wholly-owned subsidiaries and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Quarterly Reports on

~~We adopted ASU 2016-02 on January~~Form 1, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things allows us to carryforward the historical lease classification. We also elected the practical expedient that allows an accounting policy election to exclude right of use assets and lease obligations from the balance sheet for all leases with an initial term of 12 months or less. 10-Q

and Article 10 of Regulation

As permitted in the standard, the Company is using a modified retrospective approach, where current periods are shown under the new standard, while comparative periods are shown under Accounting Standard Codification No. 840, Leases (prior to the adoption of ASU 2016S-~~02), where entities recognize a cumulative effect to retained earnings at the date of adoption without restating prior periods’ balances or disclosures~~X.

Accordingly, such financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. The results for interim periods are not necessarily indicative of results to be expected for the year or for any future periods. In management’s opinion, these unaudited condensed consolidated interim financial statements contain all adjustments of a normal recurring nature necessary for a fair presentation of the financial statements for the interim periods presented.

~~The~~We ~~adoption~~have ofelected ~~ASU~~to ~~2016-02~~present onthe ~~January 1,~~analysis ~~2019,~~of ~~had~~changes ain ~~material~~stockholders’ ~~impact~~equity onquarterly ~~our~~in ~~consolidated~~statement ~~balance sheet,~~form ~~but~~for ~~did~~the ~~not~~current ~~have~~and acomparative ~~material~~quarter ~~impact~~to ondate ~~our~~and ~~consolidated~~year ~~statements~~to ofdate ~~income~~interim orperiods ~~cash~~and ~~flows.~~state ~~The most significant impact of~~ the ~~adoption~~amount of ~~ASU~~dividends ~~2016-02~~per ~~was~~share in the ~~recognition~~aggregate offor ~~additional~~each ~~right-~~class of~~-use~~ ~~assets~~shares ~~and~~in ~~lease~~accordance ~~liabilities~~with ~~for~~the ~~operating~~provisions ~~leases.~~in ~~At adoption~~Regulation S-X, ~~the~~Rule ~~Company recognized right~~8-~~of-use~~03(a)(5) ~~assets of approximately $14.4 million~~ and ~~total lease liabilities of $15~~10-01(a)(7).~~9 million.~~

~~Derivatives~~ Form 10-K.

The Company’s significant accounting policies and practices are as described in the Annual Report, except for the adoption of the accounting standards described in Note 3 below.

InStatement ~~August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This guidance simplifies the application~~ of ~~the~~Operations hedge accounting guidance in current GAAP and improves the financial reporting of hedging relationships by allowing entities to better align their risk management activities and financial reporting for hedging relationships through changes to both designation and measurement for qualifying hedging relationships and the presentation of hedge results. Further, the new guidance allows more flexibility in the requirements to qualify and maintain hedge accounting. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods. We adopted ASU 2017-12 on January 1, 2019 and there was no material impact on our consolidated financial statements.

~~Comprehensive~~We ~~Income~~classify cloud-based subscriptions and other services, such as font related services, custom font design and post contract support as service revenue on our condensed consolidated statements of operations. All other revenue is classified as license revenue.

~~In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~3. ~~This~~Recent ~~guidance allows~~Accounting aPronouncements reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and Jobs Act (“The Act”). The new standard is effective for annual and interim periods beginning after December 15, 2018. We adopted this pronouncement on January 1, 2019 and elected to not reclassify the stranded federal corporate tax rate effects to retained earnings, which amount to approximately $0.6 million.

~~Pending~~Adopted

~~Internal~~Leases ~~Use Software~~

In February 2016, the FASB issued Accounting Standards Update (“ASU”)

~~In August 2018, the FASB issued ASU 2018~~2016-1502, Intangibles – Goodwill and Other – Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation of Cost Incurred in a Cloud Computing Arrangement that is Considered a Service Contract, (“ASU 2018-15”). This update clarifies the accounting for implementation costs related to a cloud computing arrangement that is a service contract previously defined in ASU 2015-05. This guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2018-15; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~Defined~~Leases ~~Benefit Pension Plan~~ (Topic

In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, (“ASU 2018-14”). This guidance eliminates requirements for certain disclosures and requires certain additional disclosures concerning the company’s defined benefit pension plans and other postretirement plans. This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2018-14; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements. 842):

8Amendments to the FASB Accounting Standards Codification,

(“ASU

~~Table of Contents~~2016-02”)

which replaces the existing guidance for leases. ASU

~~Fair Value Measurement~~ 2016-02

requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”). This guidance is designed to improve the effectiveness of the disclosure. The new standard is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2018-13; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements. 8

~~Goodwill~~Table of Contents

~~In January 2017, the FASB issued ASU 2017~~2016-0402, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminated step 2 from the goodwill impairment test. This guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU 2017-04; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~4. Revenue Recognition~~ right-of-use

asset and lease obligation will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU

We recognize revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects consideration that we expect to be entitled to receive in exchange for these services, and excludes any sales incentives and taxes collected from customers that are subsequently remitted to governmental authorities. 2016-02

must be calculated using the applicable incremental borrowing rate at the date of adoption. This guidance is effective for annual and interim periods beginning after December 15, 2018.

We adopted ASU

~~Nature of Licenses and Services & Timing of Revenue Recognition~~ 2016-02

on January 1, 2019. We elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things allows us to carryforward the historical lease classification. We also elected the practical expedient that allows an accounting policy election to exclude right of use assets and lease obligations from the balance sheet for all leases with an initial term of 12 months or less.

~~Creative Professional Revenue~~ 2016-02),

where entities recognize a cumulative effect to retained earnings at the date of adoption without restating prior periods’ balances or disclosures.

The adoption of ASU

Our Creative Professional revenue is primarily derived from rights to use font licenses, custom font design services, our web font and digital ad related services (which includes our web font services and web design tools), and hosted software as a service, or SaaS, offerings. We license fonts directly to end2016-users through our direct sales organization, e-commerce websites and indirectly through third-party resellers. Our customers include graphic designers, advertising agencies, media organizations and corporations. 02

on January 1, 2019, had a material impact on our consolidated balance sheet, but did not have a material impact on our consolidated statements of operations or cash flows. The most significant impact of the adoption of ASU

Revenue from font licenses is recognized upfront when the font software is delivered or made available to the customer. Custom font design services are generally not a separate distinct performance obligation and are sold with a license for the custom font, in which case revenue is recognized upon completion of the services and when the font is delivered and accepted by the customer. In limited cases, the Company has an enforceable right to payment prior to final delivery and acceptance of custom font design work. In these cases, the Company has determined that the proper treatment is a single over2016-~~time performance obligation using input methods (incurred hours towards completion) to measure progress towards completion to determine the pattern of satisfaction of the performance obligation.~~ 02

was the recognition of additional

~~For our hosted offerings where we provide our customers the~~ right ~~to access our software without taking possession, revenue is recognized over the contract period on a time~~-~~elapsed basis, which is consistent with the transfer~~ of service to the customer. Payment terms and conditions for Creative Professional contracts generally require payment within thirty to sixty days of contract inception. An exception exists for certain contracts for our SaaS offerings or a limited number of multi-year term license agreements which have periodic payment terms, generally quarterly or annually, over the term of the contract. In instances where the timing of revenue recognition differs from the respective payment terms, we have considered whether such contracts include a significant financing component, subject to the applicable practical expedient. The purpose of these payment structures is to align with industry and market standards, not to provide customers with financing. We have determined our contracts generally do not include a significant financing component; however, the Company will continue to assess (1) the length of time between when the goods or services are delivered and expected payment and (2) prevailing interest rates in the market to re-evaluate this conclusion. use

assets and lease liabilities for operating leases. At adoption, the Company recognized

~~OEM Revenue~~ right-of-use

assets of approximately $14.4 million and total lease liabilities of $15.9 million.

~~Our~~Derivatives OEM revenue is derived substantially from printer imaging, printer driver and display imaging products and primarily relates to licenses providing our customers the right to embed our fonts and technology in their products over a certain term. Under our OEM licensing arrangements, we either receive a fixed fee as specified under the license arrangement or a royalty for each product unit incorporating our fonts and technology that is shipped by our OEM customers. Although significantly less than royalties from per-unit shipments and fixed fees from OEM customers, we also receive revenue from software application and operating systems vendors, who include our fonts and technology in their products and for font development. Revenue from per-unit royalty contracts is estimated and recognized in the period that the royalty-bearing event or sale by our OEM customer occurs. Revenue from fixed fee licenses is generally recognized upfront at the point in time when the software embodying the font is shipped or made available to the customer. Certain OEM contracts may include customer support services and unspecified updates for our font technology which is a distinct stand-ready performance obligation and recognized ratably over the service period. Many of our per-unit royalty licenses continue for the duration that our OEM customers ship products that include our technology, unless terminated for breach. Other licenses have terms that typically range from one fiscal quarter to five years, and usually provide for automatic or optional renewals.

In August 2017, the FASB issued ASU

9 No. 2017-12,

~~Table~~Derivatives ofand ~~Contents~~Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.

This guidance simplifies the application of the hedge accounting guidance in current GAAP and improves the financial reporting of hedging relationships by allowing entities to better align their risk management activities and financial reporting for hedging relationships through changes to both designation and measurement for qualifying hedging relationships and the presentation of hedge results. Further, the new guidance allows more flexibility in the requirements to qualify and maintain hedge accounting. The new standard is effective for fiscal years beginning after December 15, 2018 and interim periods. We adopted ASU

~~Disaggregated Revenue~~ 2017-12

on January 1, 2019 and there was no material impact on our consolidated financial statements.

~~The~~Comprehensive ~~following~~Income table presents our revenue disaggregated by the timing of revenue recognition as well as by type of product or services offered (see Note 13 for further information regarding revenue by major markets and revenue by geography):

In February 2018, the FASB issued ASU

	March 31, 2019						March 31, 2018
	CreativeProfessional		OEM		Total		CreativeProfessional		OEM		Total
License revenue:
License transferred in point in time	$	24,139	$	17,733	$	41,872	$	24,879	$	20,333	$	45,212
License transferred over time		—		—		—		655		—		655
Service revenue:
Service transferred in point in time		432		196		628		470		656		1,126
Service transferred over time		8,192		664		8,856		8,994		696		9,690
Total	$	32,763	$	18,593	$	51,356	$	34,998	$	21,685	$	56,683

2018-02,

~~Significant~~Income ~~Judgments~~Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated

~~Our~~Other ~~contracts~~Comprehensive ~~with customers often include promises to transfer multiple products and services to a customer~~Income. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

This guidance allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and Jobs Act (“The Act”). The new standard is effective for annual and interim periods beginning after December 15, 2018. We adopted this pronouncement on January 1, 2019 and elected to not reclassify the stranded federal corporate tax rate effects to retained earnings, which amount to approximately $0.6 million.

~~Judgment~~Pending is required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

~~With~~Internal ~~the~~Use ~~exception~~Software of OEM royalty licenses, our contracts do not generally include a variable component to the transaction price. If royalties are not yet reported to us for the period in which the subsequent sale is expected to occur, we are required to estimate such royalties. When a new contract is signed for the licensing of IP on a per-unit basis, we deliver the licenses and based on ongoing discussions with the customer, will estimate when the distribution will begin and estimate royalties based on distribution forecasts provided by the customer. For ongoing arrangements, we have developed a process to estimate per-unit royalties based on historical data, trends, seasonality, knowledge of changes in contracts/rates, and quarterly discussions with sales personnel to identify significant changes in the customer’s distribution forecast (via seasonality, introduction of new products, discontinuation or products, etc.). Revenue related to the estimation of per-unit royalties was $5.7 million and $4.3 million for the three months ended March 31, 2019 and 2018, respectively.

In August 2018, the FASB issued ASU

~~As discussed above~~2018-15, certain of our Creative Professional contracts have payment terms that differ from the timing of revenue recognition which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient which permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those contracts in which the period exceeds the one year threshold, this assessment, as well as the quantitative estimate of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

~~Transaction Price Allocated to Future Performance Obligations~~ Intangibles

– Goodwill and Other –

The aggregate amount of transaction price allocated to performance obligations consists principally of amounts billed for undelivered services that are included in deferred revenue, as well as unbilled backlog, which is the amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations, for enforceable contracts when there is not a present Internal-Use

Software (Topic

10 350-40):

Customer’s Accounting for Implementation of Cost Incurred in a Cloud Computing Arrangement that is Considered a Service Contract,

(“ASU

~~Table of Contents~~2018-15”)

~~unconditional right to invoice (a receivable)~~. Substantially all the long-term amount is expected to be recognized as revenue within the following 24 month period. The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of March 31, 2019 and December 31, 2018 are in the table below (in thousands):

This update clarifies the accounting for implementation costs related to a cloud computing arrangement that is a service contract previously defined in ASU

	March 31, 2019						December 31, 2018
	Current		Long-term		Total		Current		Long-term		Total
Deferred revenue	$	11,941	$	1,018	$	12,959	$	10,337	$	1,552	$	11,889
Unbilled backlog		4,490		1,406		5,896		5,666		1,837		7,503
Total	$	16,431	$	2,424	$	18,855	$	16,003	$	3,389	$	19,392

2015-05.

This guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU

~~Contract Balances~~ 2018-15;

however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~Timing~~Defined ofBenefit ~~revenue~~Pension ~~recognition~~Plan may differ from the timing of invoicing to customers. We record an unbilled receivable, or contract asset, when revenue is recognized prior to invoicing when we have an enforceable right to payment. When invoicing occurs prior to revenue recognition, we have unearned revenue, or contract liabilities, presented on our condensed consolidated balance sheet as “deferred revenue” within deferred revenue and other long-term liabilities, as appropriate at March 31, 2019 and December 31, 2018. When invoicing occurs after revenue recognition, we have earned revenue, or contract assets, presented on our condensed consolidated balance sheet as “unbilled receivables” within accounts receivable and other assets, as appropriate at March 31, 2019 and December 31, 2018.

In August 2018, the FASB issued ASU

~~Revenue recognized during the three months ended March 31, 2019 and March 31,~~ 2018 ~~from amounts included in deferred revenue at the beginning of the periods were approximately $5.7 million and $6.8 million~~-14, respectively. Revenue recognized during the three month ended March 31, 2019 and March 31, 2018 from performance obligations satisfied or partially satisfied in previous periods, mainly due to changes in the estimate of royalty revenues, is approximately $5.7 million and $4.3 million, respectively. During the three months ended March 31, 2019 and March 31, 2018, the change in contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was not material. The contract modifications entered into during the three months ended March 31, 2019 and March 31, 2018 did not have a significant impact on the Company’s contract assets or deferred revenue.

~~Costs~~Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to ~~Obtain~~the ~~and~~Disclosure ~~Fulfill~~Requirements ~~a Contract~~for Defined Benefit Plans,

(“ASU

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain commissions paid under our sales incentive programs meet the requirements to be capitalized. The amount capitalized for incremental costs to obtain contracts as of March 31, 2019 was $3.8 million, of which $0.7 million was short-term and has been included in prepaid expenses and other current assets and $3.1 million was long term and has been included in other assets in our condensed consolidated balance sheet. The amount capitalized for incremental costs to obtain contracts as of December 31, 2018 ~~was $3.6 million, of which $0.7 million was short~~-term and has been included in prepaid expenses and other current assets and $2.9 million was long term and has been included in other assets in our condensed consolidated balance sheet. Costs to obtain a contract are amortized as sales and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period, which ranges between three and ten years depending on the nature of the performance obligations within the contract. These costs are periodically reviewed for impairment; however, no impairment existed as of March 31, 2019 or as of December 31, 2018. The amount of capitalized costs related to contracts which were terminated on or before March 31, 2019, due to the customer exercising an opt-out clause or the cancellation of an anticipated renewal was not material and was charged to operating expenses in the first quarter of 2019. 14”)

We have elected to apply the practical expedient and recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less.

This guidance eliminates requirements for certain disclosures and requires certain additional disclosures concerning the company’s defined benefit pension plans and other postretirement plans. This guidance is effective for annual and interim reporting periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs primarily relate to font license fees that we pay on certain fonts that are owned by third parties. These fees are related to license revenue that is satisfied at a point in time and payable again upon license renewal, and as a result are incurred immediately upon contract execution. Accordingly, there are no capitalized costs related to costs to fulfill a contract as of March 31, 2019 or as of December 31, 2018. -14;

however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

11 9

Table of Contents

5.Fair ~~Restricted~~Value ~~Cash~~Measurement

In August 2018, the FASB issued ASU

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of contractual agreements are classified on our balance sheet based on relevant restrictions. At March 31, 2019 and December 31, 2018-13, ~~we had $6.0 million and $6.0 million, respectively, of cash held in escrow to be used for payments due in 2019 in connection with the Olapic, Inc. acquisition.~~

Fair Value Measurement (Topic 820):

~~The~~Disclosure ~~following~~Framework—Changes ~~table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet that sum~~ to the ~~total~~Disclosure ofRequirements ~~the~~for ~~same~~Fair ~~such~~Value ~~amounts shown in the consolidated statements of cash flows (in thousands):~~ Measurement,

(“ASU

	Three Months Ended March 31,
	2019		2018
Consolidated balance sheet classification:
Cash and cash equivalents	$	46,354	$	85,351
Restricted cash, short term		6,000		10,000
Restricted cash, long term		—		6,000
Total cash, cash equivalents and restricted cash	$	52,354	$	101,351

2018-13”).

This guidance is designed to improve the effectiveness of the disclosure. The new standard is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU

~~6. Fair Value Measurements~~ 2018-13;

however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~The~~Goodwill ~~following table presents our financial assets and liabilities that are carried at fair value (in thousands):~~

In January 2017, the FASB issued ASU

	Fair Value Measurement at March 31, 2019
	Total		Quoted Prices inActive Markets forIdentical Assets(Level 1)		Significant OtherObservable Inputs(Level 2)		SignificantUnobservableInputs(Level 3)
Assets:
Cash equivalents—money market funds	$	14,038	$	14,038	$	—	$	—
Restricted cash equivalents—money market fund		6,000		6,000		—		—
Total current assets	$	20,038	$	20,038	$	—	$	—
Total assets	$	20,038	$	20,038	$	—	$	—
	Fair Value Measurement at December 31, 2018
	Total		Quoted Prices inActive Markets forIdentical Assets(Level 1)		Significant OtherObservable Inputs(Level 2)		SignificantUnobservableInputs(Level 3)
Assets:
Cash equivalents—money market funds	$	28,940	$	28,940	$	—	$	—
Restricted cash equivalents—money market fund		6,000		6,000		—		—
Total current assets	$	34,940	$	34,940	$	—	$	—
Total assets	$	34,940	$	34,940	$	—	$	—

2017-04,

~~The~~Intangibles ~~Company’s~~– ~~recurring~~Goodwill ~~fair value measures relate to short-term investments, which are classified as cash equivalents, derivative instruments~~ and ~~from~~Other ~~time-to-time~~(Topic as350): ~~contingent~~Simplifying ~~consideration.~~the ~~The~~Test ~~fair value of our cash equivalents are either based on quoted prices~~ for ~~similar~~ ~~assets~~Goodwill or other observable inputs such as yield curves at commonly quoted intervals and other market corroborated inputs. The fair value of our derivatives is based on quoted market prices from various banking institutions or an independent third-party provider for similar instruments. In determining the fair value, we consider our non-performance risk and that of our counterparties. At March 31, 2019, we had one 30-day forward contract to sell 2.6 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair value. At December 31, 2018, we had one 30-day forward contract to sell 2.7 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair value. Impairment

, which eliminated step 2 from the goodwill impairment test. This guidance is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU

12 2017-04;

however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~Table~~Financial ofInstruments ~~Contents~~– Credit Losses

~~The~~In ~~Company’s~~June ~~non-financial~~2016, ~~assets~~the ~~and~~FASB ~~non-financial~~issued ~~liabilities~~ASU ~~subject to non-recurring measurements include goodwill and intangible assets.~~

7.2016-13, ~~Intangible Assets~~

~~Intangible~~Financial ~~assets as~~Instruments of– ~~March 31,~~Credit ~~2019~~Losses ~~and~~(Topic ~~December 31,~~326): ~~2018~~Measurement ~~were~~of asCredit ~~follows~~Losses ~~(dollar~~on ~~amounts~~Financial ~~in thousands):~~ Instruments

	Weighted-AverageAmortizationPeriod(Years)	March 31, 2019							December 31, 2018
		GrossCarryingAmount		AccumulatedAmortization			NetBalance		GrossCarryingAmount		AccumulatedAmortization			NetBalance
Customer relationships	10	$	64,711	$	(55,797	)	$	8,914	$	64,822	$	(55,288	)	$	9,534
Acquired technology	11		68,745		(53,693	)		15,052		68,823		(52,747	)		16,076
Non-compete agreements	4		13,611		(13,136	)		475		13,636		(13,073	)		563
Indefinite-lived intangible assets:
Trademarks			43,982		—			43,982		44,126		—			44,126
Domain names			4,400		—			4,400		4,400		—			4,400
Total		$	195,449	$	(122,626	)	$	72,823	$	195,807	$	(121,108	)	$	74,699

, which requires companies to measure credit losses utilizing a methodology that reflects expected credit losses and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The new standard is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact of the adoption of ASU

~~8. Leases~~ 2016-13;

We ~~have operating leases for corporate offices and certain equipment. Our leases have remaining lease terms of 1 year to 6 years~~however, ~~some~~we ofdo ~~which contain~~not ~~options~~expect ~~to extend~~ the ~~leases~~adoption ~~for~~of upthis tostandard ~~5 years and some which include options~~ to ~~terminate the leases within 1 year. We~~ have ~~lease~~a ~~agreements~~material ~~with~~impact ~~lease~~on ~~and~~our ~~non-lease~~consolidated ~~components,~~financial ~~which are generally accounted for separately~~statements.

~~We determine if an arrangement is a lease at inception~~4. ~~Operating~~Revenue ~~leases~~Recognition are included in the operating lease right-of-use (“ROU”) assets and the short-term and long-term lease liabilities on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

~~Pursuant~~We torecognize ~~the~~revenue ~~terms~~when a customer obtains control of ~~the~~a ~~lease~~promised ~~agreement~~good ~~for~~or ~~the~~service. ~~Company’s~~The NYamount ~~office, the~~of ~~Company~~revenue ~~obtained~~recognized areflects ~~standby~~consideration ~~letter-of-credit~~that inwe ~~the~~expect ~~amount~~to ofbe ~~approximately~~entitled ~~$0.5 million~~to asreceive ~~security~~in onexchange ~~the~~for ~~lease~~these ~~obligation.~~services, ~~The letter-of~~and ~~credit~~excludes isany asales ~~reduction~~incentives ofand ~~the~~taxes ~~available~~collected ~~borrowings~~from ~~under~~customers, ~~the~~that ~~Credit~~are ~~facility~~subsequently remitted to governmental authorities.

~~The components~~Nature of ~~lease~~Licenses ~~expense~~and ~~were~~Services & asTiming ~~follows~~of ~~(in~~Revenue ~~thousands):~~ Recognition

	Three Months Ended March 31,
	2019		2018
Finance lease cost	$	—	$	—
Operating lease cost		1,154		—
Short-term lease cost		—		—
Variable lease cost		52		—
Total lease cost		1,206		—

Creative Professional Revenue

13 end-users

through our direct sales organization,

~~Table of Contents~~e-commerce

websites and indirectly through third-party resellers. Our customers include graphic designers, advertising agencies, media organizations and corporations.

~~Supplemental~~Revenue ~~cash~~from ~~flow~~font ~~information~~licenses ~~related~~is recognized upfront when the font software is delivered or made available to ~~leases~~the ~~was~~customer. asCustom ~~follows~~font (design services are generally not a separate distinct performance obligation and are sold with a license for the custom font, in ~~thousands~~which case revenue is recognized upon completion of the services and when the font is delivered and accepted by the customer. In limited cases, the Company has an enforceable right to payment prior to final delivery and acceptance of custom font design work. In these cases the Company has determined that the proper treatment is a single over-time performance obligation using input methods (incurred hours towards completion): to measure progress towards completion to determine the pattern of satisfaction of the performance obligation.

For our hosted offerings where we provide our customers the right to access our software without taking possession, revenue is recognized over the contract period on a time-elapsed basis, which is consistent with the transfer of service to the customer. Payment terms and conditions for Creative Professional contracts generally require payment within thirty to sixty days of contract inception. An exception exists for certain contracts for our SaaS offerings or a limited number of multi-year term license agreements which have periodic payment terms, generally quarterly or annually, over the term of the contract. In instances where the timing of revenue recognition differs from the respective payment terms, we have considered whether such contracts include a significant financing component, subject to the applicable practical expedient. The purpose of these payment structures is to align with industry and market standards, not to provide customers with financing. We have determined our contracts generally do not include a significant financing component; however, the Company will continue to assess (1) the length of time between when the goods or services are delivered and expected payment, and (2) prevailing interest rates in the market to

	Three Months Ended March 31,
	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,224		—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		—		—

re-evaluate

this conclusion.

~~Supplemental balance sheet information related to leases was as follows (in thousands except remaining lease term and discount rate):~~ 10

	Three Months Ended March 31,
	2019			2018
Weighted average remaining lease term
Operating leases		4.72 years			—
Weighted average discount rate
Operating leases		3.93	%		—

Table of Contents

AsOEM ofRevenue March 31, 2019, we have additional operating leases, primarily for corporate offices, that have not yet commenced of $1.8 million. These operating leases will commence in 2019 with lease terms of 2 to 5 years.

Our OEM revenue is derived substantially from printer imaging, printer driver and display imaging products and primarily relates to licenses providing our customers the right to embed our fonts and technology in their products over a certain term. Under our OEM licensing arrangements, we either receive a fixed fee as specified under the license arrangement or a royalty for each product unit incorporating our fonts and technology that is shipped by our OEM customers. Although significantly less than royalties from per-unit shipments and fixed fees from OEM customers, we also receive revenue from software application and operating systems vendors, who include our fonts and technology in their products and for font development. Revenue from per-unit royalty contracts is estimated and recognized in the period that the royalty-bearing event or sale by our OEM customer occurs. Revenue from fixed fee licenses is generally recognized upfront at the point in time when the software embodying the font is shipped or made available to the

~~Maturities~~customer. ofCertain ~~operating~~OEM ~~lease~~contracts ~~liabilities~~may ~~were~~include ascustomer ~~follows~~support ~~(in~~services ~~thousands):~~and unspecified updates for our font technology which is a distinct stand-ready performance obligation and recognized ratably over the service period. Many of our

~~Twelve months ending March 31:~~per-unit

2019	$	4,144
2020		3,409
2021		3,237
2022		2,650
2023		1,145
Thereafter		1,718
Total future minimum lease payments	$	16,303
Less: amounts representing interest		(1,145	)
Total lease liabilities	$	14,850
Less: current operating lease liability		(3,621	)
Long-term operating lease liability	$	11,229

royalty licenses continue for the duration that our OEM customers ship products that include our technology, unless terminated for breach. Other licenses have terms that typically range from one fiscal quarter to five years, and usually provide for automatic or optional renewals.

~~Maturities~~Disaggregated ofRevenue ~~lease liabilities as of December 31, 2018 were as follows:~~

~~Years~~The ~~ending~~following ~~December~~table 31presents our revenue disaggregated by the timing of revenue recognition as well as by type of product or services offered (see Note 13 for further information regarding revenue by major markets and revenue by geography):

2019	$	4,728
	For the Three Months Ended June 30,
2020		3,131
	2019						2018
2021		2,806
	Creative Professional		OEM		Total		Creative Professional		OEM		Total
2022		2,652
License revenue:
2023		1,256
License transferred at a point in time	$	27,049	$	27,087	$	54,136	$	27,215	$	20,878	$	48,093
Thereafter		2,004
Service revenue:
Total	$	16,577
Service transferred at a point in time		436		409		845		568		720		1,288
Service transferred over time		7,740		515		8,255		10,634		672		11,306
Total	$	35,225	$	28,011	$	63,236	$	38,417	$	22,270	$	60,687

9. Debt


	For the Six Months Ended June 30,
	2019						2018
	Creative Professional		OEM		Total		Creative Professional		OEM		Total
License revenue:
License transferred at a point in time	$	51,188	$	44,820	$	96,008	$	52,749	$	41,211	$	93,960
License transferred over time		—		—		—		—		—		—
Service revenue:
Service transferred at a point in time		868		605		1,473		1,190		1,705		2,895
Service transferred over time		15,932		1,179		17,111		19,476		1,039		20,515

Total	$	67,988	$	46,604	$	114,592	$	73,415	$	43,955	$	117,370

OnSignificant ~~March 22,~~Judgments 2019, the Company entered into a new credit agreement (the “New Credit Agreement”) by and among the Company, the Company’s subsidiary, Monotype Imaging Inc., (“the Borrower”), any financial institution that becomes a Lender and Bank of America, N.A., as administrative agent. Pursuant to the New Credit Agreement the Lenders have agreed to provide the Borrower with a five-year $200.0 million senior secured revolving credit facility (the “Credit Facility”). The Credit Facility permits the Company to request that the Lenders, at their election, increase the secured credit facility to a maximum of $300.0 million. The Credit Facility provides more flexibility in addition to an increased borrowing capacity and extended terms, as defined above. The New Credit Agreement replaced the Company’s existing $150.0 million revolving credit facility (the “Original Credit Agreement”) by and between the Company and Silicon Valley Bank. The Original Credit Agreement was terminated effective March 22, 2019 and was scheduled to expire on September 15, 2020. The Company had $75.0 million outstanding under the Original Credit Agreement at December 31, 2018. Available borrowings under the Original Credit Agreement were reduced by approximately $0.5 million for one standby letter of credit issued in connection with a facility lease agreement, leaving $74.5 million available for borrowings at December 31, 2018. At March 31, 2019, the Company had $70.0 million outstanding under the Credit Facility. Available borrowings under the Credit Facility have been reduced by approximately $0.5 million for one standby letter of credit issued in connection with a facility lease agreement, leaving $129.5 million available for borrowings at March 31, 2019.

14Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Once we determine the performance obligations, the Company determines the transaction price, which includes estimating the amount of variable consideration to be included in the transaction price, if any. We then allocate the transaction price to each performance obligation in the contract based on a relative stand-alone selling price method. The corresponding revenue is recognized as the related performance obligations are satisfied as discussed in the revenue categories above.

~~Table~~Judgment ofis ~~Contents~~required to determine the standalone selling price for each distinct performance obligation. We determine standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

~~Borrowings~~With ~~under~~ the ~~Credit~~exception ~~Facility bear interest through March 21, 2024 at a variable rate per annum equal to LIBOR plus between 1.0% and 1.625%, or at the Borrower’s option, the higher~~ of ~~(i) the~~OEM ~~prime~~royalty ~~rate as announced by Bank of America and (ii) 0.5% plus the overnight federal funds rate~~licenses, ~~plus~~our incontracts ~~each~~do ~~case,~~not ~~between 0.0%~~generally ~~and~~include ~~0.625%,~~a ~~with~~variable ~~the~~component ~~exact~~to ~~interest rate margin determined based on~~ the ~~consolidated~~transaction ~~leverage ratio~~price. ~~The~~If ~~Company~~royalties isare ~~required~~not toyet ~~pay~~reported ~~a commitment fee, based on the consolidated leverage ratio, equal~~ to ~~0.175%,~~us ~~0.20%,~~for ~~0.225% or 0.25% per annum on~~ the ~~undrawn~~period ~~portion available under the revolving credit facility and variable per annum fees~~ in ~~respect of outstanding letters of credit. In connection with the New Credit Agreement, the Company incurred closing and legal fees of approximately $0.9 million,~~ which ~~have been accounted for as deferred financing costs, that, together with approximately $0.3 million of unamortized deferred financing costs associated with loan syndicate lenders who participated in~~ the ~~new~~ ~~facility,~~subsequent ~~will~~sale beis ~~amortized~~expected to ~~interest expense over the term of the New Credit Agreement. In addition~~occur, ~~$34 thousand~~we ofare ~~unamortized~~required ~~deferred financing costs associated with the pro-rata share of prior loan syndicate lenders that did not participate in the new facility were written off and charged~~ to ~~other expense in the first quarter of 2019.~~

The New Credit Agreement includes financial covenants which require the Company to maintain (i) a consolidated leverage ratio of no greater than 3.25 to 1.0 or, upon a qualified acquisition subject to certain conditions, 3.75 to 1.0 and (ii) a minimum consolidated interest coverage ratio of 3.00 to 1.0. At March 31, 2019, our consolidated leverage ratio was 0.72 to 1.0 and our consolidated interest coverage ratio was 18.61 to 1.0. The New Credit Agreement also contains customary affirmative and negative covenants for transactions of this type and other affirmative and negative covenants agreed to by the parties, including, among others, limits on the Company and its subsidiaries’ ability to incur debt or liens, engage in sale-leaseback transactions, make loans, investments and acquisitions, incur additional indebtedness, engage in mergers, enter into asset sales, transact with affiliates and alter its business. Adjusted EBITDA, under the Credit Facility, is defined as consolidated net earnings (or loss), plus net interest expense, income taxes, depreciation and amortization, and share based compensation expense, plus acquisition expenses not to exceed $2.0 million, minus capitalized research and development expense, plus restructuring, issuance costs, cash non-operating costs and other expenses or losses minus cash non-operating gains and other non-cash gains; provided, however that the aggregate of all cash non-operating expense shall not exceed 10% of Consolidated EBITDA. The New Credit Agreement also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control and judgment defaults. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the New Credit Agreement to declare all amounts borrowed under the New Credit Agreement, together with accrued interest and fees, to be immediately due and payable. The obligations of the Borrower under the Credit Facilities are unconditionally guaranteed by the Company and certain subsidiaries and secured by a lien on substantially all of the present and future property and assets of the Company and such subsidiaries, in each case, subject to limited exceptions and exclusions. 11

15Table of Contents

~~Table~~estimate such royalties. When a new contract is signed for the licensing of ~~Contents~~IP on a

~~10. Income Taxes~~ per-unit

A ~~reconciliation~~basis, ofwe ~~income~~deliver ~~taxes~~the ~~computed~~licenses atand ~~federal~~based ~~statutory~~on ~~rates~~ongoing todiscussions ~~income~~with ~~tax~~the ~~expense~~customer, ~~(benefit)~~we iswill asestimate ~~follows~~when ~~(dollar~~the ~~amounts~~distribution ~~in thousands):~~will begin and estimate royalties based on distribution forecasts provided by the customer. For ongoing arrangements, we have developed a process to estimate

	Three Months Ended March 31,
	2019					2018
Provision (benefit) from income taxes at statutory rate	$	529		21.0	%	$	(770	)	21.0	%
State and local income taxes, net of federal tax benefit		53		2.1	%		(78	)	2.1	%
Impact of foreign income (loss)		90		3.6	%		(1,237	)	33.8	%
Foreign tax credit valuation allowance		(258	)	(10.2	)%		—		—
Permanent non-deductible acquisition-related expense		60		2.4	%		(301	)	8.2	%
Net shortfall (windfall) on stock based compensation		108		4.3	%		(117	)	3.2	%
Reversal of reserve for income taxes		(734	)	(29.1	)%		22		(0.6	)%
Other, net		13		0.4	%		16		(0.4	)%
Reported income tax benefit	$	(139	)	(5.5	)%	$	(2,465	)	67.3	%

per-unit

As ofroyalties ~~March 31~~based on historical data, ~~2019~~trends, ~~the~~seasonality, ~~reserve~~knowledge ~~for~~of ~~unrecognized~~changes ~~tax~~in ~~benefits~~contracts/rates, ~~was~~and ~~approximately~~quarterly ~~$4.0 million,~~discussions ~~all of~~with ~~which~~sales ispersonnel ~~recorded~~to asidentify asignificant ~~reduction~~changes in the customer’s distribution forecast (via seasonality, introduction of ~~deferred~~new ~~tax~~products, ~~assets~~discontinuation of products, etc.). Revenue related to the estimation of

~~11. Net Income (Loss) Per Share~~ per-unit

~~For~~ ~~the~~royalties ~~three months ended March 31, 2019 and 2018, the net income (loss) available to common shareholders~~ was divided by the weighted-average number of common shares outstanding during the period to calculate diluted earnings per share. For the three months ended March 31, 2019, the two-class method was used in the computation of diluted net income (loss) per share, as the result was more dilutive. For the three months ended March 31, 2018, earnings was not allocated to participating securities in the calculation of basic and diluted earnings per share as there was a net loss. The assumed exercise of stock options and assumed vesting of restricted stock and restricted stock units were included in the computation of net income per share for the three months ended March 31, 2019, but were excluded in the computation of net (loss) per share for the three months ended March 31, 2018, as their effect would have been anti-dilutive.

The following presents a reconciliation of the numerator and denominator used in the calculation of basic net income (loss) per share and a reconciliation of the numerator and denominator used in the calculation of diluted net income (loss) per share (in thousands, except share and per share data): $

5.5

	Three Months EndedMarch 31,
	2019			2018
Numerator:
Net income (loss), as reported	$	2,660		$	(1,199	)
Less: net income attributable to participating securities		(146	)		—
Net income (loss) available to common shareholders—basic	$	2,514		$	(1,199	)
Denominator:
Basic:
Weighted-average shares of common stock outstanding		41,263,669			41,846,619
Less: weighted-average shares of unvested restricted common stock outstanding		(1,259,315	)		(1,840,830	)
Weighted-average number of common shares used in computing basic and diluted net income (loss) per common share		40,004,354			40,005,789
Net income (loss) per share applicable to common shareholders—basic	$	0.06		$	(0.03	)

million and $

4.6

16 million for the

~~Table of Contents~~three

	Three Months EndedMarch 31,
	2019			2018
Numerator:
Net income (loss) available to common shareholders - basic	$	2,514		$	(1,199	)
Add-back: undistributed earnings allocated to unvested shareholders		—			—
Less: undistributed earnings reallocated to unvested shareholders		—			—
Net income (loss) available to common shareholders—diluted	$	2,514		$	(1,199	)
Denominator:
Diluted:
Weighted-average shares of common stock outstanding		41,263,669			41,846,619
Less: weighted-average shares of unvested restricted common stock outstanding		(1,259,315	)		(1,840,830	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options		61,705			—
Weighted-average number of common shares used in computing diluted net income (loss) per share		40,066,059			40,005,789
Net income (loss) per share applicable to common shareholders—diluted	$	0.06		$	(0.03	)

months ended June 30, 2019 and 2018, respectively.

~~The~~As ~~following~~discussed ~~common~~above, ~~share~~certain ~~equivalents~~of our Creative Professional contracts have ~~been~~payment ~~excluded~~terms that differ from the ~~computation~~timing of ~~diluted~~revenue ~~weighted-average shares~~recognition ~~outstanding~~which requires us to assess whether the transaction price for those contracts include a significant financing component. We have elected the practical expedient which permits an entity to not adjust for the effects of a significant financing component if we expect that at the contract inception, the period between when the entity transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. For those contracts in which the period exceeds the one year threshold, this assessment, as ~~their~~well ~~effect~~as ~~would~~the ~~have~~quantitative ~~been~~estimate ~~anti-dilutive:~~of the financing component and its relative significance, requires judgment. We estimate the significant financing component provided to our customers with extended payment terms by determining the present value of the future payments by applying a discount rate that reflects the customer’s creditworthiness.

	Three Months EndedMarch 31,
	2019		2018
Options		490,897		620,312
Unvested restricted common stock		912,271		685,719
Unvested restricted stock units		81,854		64,024

Transaction Price Allocated to Future Performance Obligations

12The aggregate amount of transaction price allocated to performance obligations consists principally of amounts billed for undelivered services that are included in deferred revenue, as well as unbilled backlog, which is the amount of transaction price allocated to unsatisfied or partially unsatisfied performance obligations, for enforceable contracts when there is not a present unconditional right to invoice (a receivable). ~~Stockholders’~~Substantially ~~Equity~~all the long-term amount is expected to be recognized as revenue within the following 24 month period. The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as of June 30, 2019 and December 31, 2018 are in the table below (in thousands):

Stock purchases


	June 30, 2019						December 31, 2018
	Current		Long-term		Total		Current		Long-term		Total
Deferred revenue	$	10,777	$	1,566	$	12,343	$	10,337	$	1,552	$	11,889
Unbilled backlog		3,389		1,679		5,068		5,666		1,837		7,503

Total	$	14,166	$	3,245	$	17,411	$	16,003	$	3,389	$	19,392

OnContract ~~May 3, 2018,~~Balances the Company’s Board of Directors approved a share purchase program permitting repurchases of up to $25.0 million of the Company’s outstanding shares of common stock through June 7, 2019. During the quarter ended March 31, 2019, the Company purchased a total of 370,500 shares of its common stock for an aggregate purchase price of $6.6 million, including brokers’ fees. To date, 1,261,400 shares have been purchased under the plan for an aggregate purchase price of $23.9 million, including brokers’ fees. Intended to offset shareholder dilution, the Company expects to make repurchases periodically, either on the open market or in privately negotiated transactions, subject to availability, as business and market conditions warrant. The share repurchase program does not obligate the Company to acquire any particular amount of common stock, and the program may be suspended or discontinued at management’s and/or the Company’s Board of Directors’ discretion.

17Timing of revenue recognition may differ from the timing of invoicing to customers. We record an unbilled receivable, or contract asset, when revenue is recognized prior to invoicing and when we have an enforceable right to payment. When invoicing occurs prior to revenue recognition, we have unearned revenue, or contract liabilities, presented on our condensed consolidated balance sheet as “deferred revenue” within deferred revenue and other long-term liabilities, as appropriate at June 30, 2019 and December 31, 2018. When invoicing occurs after revenue recognition, we have earned revenue, or contract assets, presented on our condensed consolidated balance sheet as “unbilled receivables” within accounts receivable and other assets, as appropriate at June 30, 2019 and December 31, 2018.

~~Table~~Revenue recognized during the three months ended June 30, 2019 and 2018 from amounts included in deferred revenue at the beginning of ~~Contents~~the period were approximately $3.7 million and $7.6 million, respectively. Revenue recognized during the six months ended June 30, 2019 and 2018 from amounts included in deferred revenue at the beginning of the period were approximately $9.4 million and $14.4 million, respectively. Revenue recognized during the three and six months ended June 30, 2019 from performance obligations satisfied or partially satisfied in previous periods, mainly due to changes in the estimate of royalty revenues, was $5.5 million. Revenue recognized during the three and six months ended June 30, 2018 from performance obligations satisfied or partially satisfied in previous periods, mainly due to changes in the estimate of royalty revenues, was $4.6 million. During the three and six months ended June 30, 2019 and 2018, the change in contract assets reclassified to receivables as a result of the right to the transaction consideration becoming unconditional was not material. The contract modifications entered into during the six months ended June 30, 2019 and June 30, 2018 did not have a significant impact on the Company’s contract assets or deferred revenue.

~~Stock~~Costs ~~Based~~to ~~Compensation~~Obtain and Fulfill a Contract

We ~~account~~recognize ~~for~~an ~~stock~~asset ~~based~~for ~~compensation~~the inincremental ~~accordance~~costs ~~with~~of ~~ASC~~obtaining ~~Topic~~a ~~No. 718,~~contract ~~Compensation~~with –a ~~Stock~~customer ~~Compensation,~~if ~~which requires~~we expect the ~~measurement~~benefit of ~~compensation~~those costs atto ~~fair~~be ~~value~~longer onthan ~~the~~one ~~date~~year. ofWe ~~grant~~have ~~and~~determined ~~recognition~~that ofcertain ~~compensation~~commissions ~~expense~~paid ~~over~~under ~~the~~our ~~service~~sales ~~period~~incentive ~~for~~programs ~~awards~~meet ~~expected~~the requirements to ~~vest~~be capitalized. The ~~following~~amount ~~presents~~capitalized ~~the~~for ~~impact~~incremental costs to obtain contracts as of ~~stock~~June 30, ~~based~~2019 ~~compensation~~was ~~expense~~$4.2 million, all of on which was long term and has been included in other assets in our condensed consolidated ~~statements~~balance ofsheet. ~~operations~~Costs ~~(in thousands):~~to obtain a contract are

	Three Months EndedMarch 31,
	2019		2018
Marketing and selling	$	1,770	$	1,734
Research and development		722		988
General and administrative		1,727		1,525
Total expensed		4,219		4,247
Property and equipment		—		14
Total stock based compensation	$	4,219	$	4,261

AsTable of March 31, 2019, the Company had $30.5 million of unrecognized compensation expense related to employees and directors’ unvested stock awards and stock units that are expected to be recognized over a weighted average period of 2.3 years. Contents

13amortized as sales and marketing expense over the expected period of benefit in a manner that is consistent with the transfer of the related goods or services to which the asset relates. ~~Segment~~The ~~Reporting~~judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract and the estimate of the amortization period, which ranges between three and ten years depending on the nature of the performance obligations within the contract. These costs are periodically reviewed for impairment; however, no impairment existed as of June 30, 2019 or as of December 31, 2018. The amount of capitalized costs related to contracts which were terminated on or before June 30, 2019, due to the customer exercising an opt-out clause or the cancellation of an anticipated renewal was not material and was charged to operating expenses in the first half of 2019.

We ~~view~~have ~~our operations~~elected ~~and~~to ~~manage~~apply ~~our~~the ~~business~~practical asexpedient ~~one~~and ~~segment:~~recognize the ~~development,~~incremental ~~marketing~~costs ~~and licensing~~ of ~~technologies~~obtaining ~~and~~contracts ~~fonts.~~as ~~Factors~~an ~~used~~expense towhen ~~identify~~incurred ~~our~~if ~~single segment include~~ the ~~financial~~amortization ~~information~~period ~~available~~of ~~for~~the evaluation by our chief operating decision maker, our president and chief executive officer, in determining how to allocate resources and assess performance. While our technologies and services are sold into two principal markets, Creative Professional and OEM, assets ~~and~~that ~~expenses are not formally allocated to these market segments, and operating results are assessed on an aggregate basis to make decisions about~~ the ~~allocation~~Company ofotherwise ~~resources.~~would ~~The~~have ~~following~~recognized ~~table~~is ~~presents~~one ~~revenue~~year ~~for~~or ~~these two major markets (in thousands):~~ less.

	Three Months EndedMarch 31,
	2019		2018
Creative Professional	$	32,763	$	34,998
OEM		18,593		21,685
Total	$	51,356	$	56,683

We capitalize incremental costs incurred to fulfill our contracts that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs primarily relate to font license fees that we pay on certain fonts that are owned by third parties. These fees are related to license revenue that is satisfied at a point in time and payable again upon license renewal, and as a result are incurred immediately upon contract execution. Accordingly, there were no capitalized costs related to costs to fulfill a contract as of June 30, 2019 or as of December 31, 2018.

~~Geographic~~5. ~~segment~~Restricted ~~information~~Cash

WeCash ~~market~~and ~~our~~cash ~~products~~equivalents ~~and~~that ~~services~~are ~~through~~restricted ~~offices~~as into ~~the~~withdrawal ~~United~~or ~~States,~~use ~~United~~under ~~Kingdom,~~the ~~Germany,~~terms ~~China,~~of ~~Republic~~contractual ofagreements ~~Korea~~are ~~and~~classified ~~Japan.~~on ~~We report~~our ~~revenue~~balance sheet based on ~~the~~relevant ~~geographic~~restrictions. ~~location~~At ofJune 30, ~~our~~2019 ~~customers.~~and ~~For~~December 31, ~~example~~2018, ~~licenses~~we ~~may~~had be$6.0 million ~~sold~~and to$6.0 million, ~~large international companies~~respectively, ~~which~~of ~~may~~cash beheld ~~headquartered~~ in ~~the~~escrow ~~Republic~~to ofbe ~~Korea,~~used ~~such~~for ~~revenues~~payments ~~would~~due ~~be reported~~ in ~~the~~2019 ~~Republic of Korea and included~~ in ~~the~~connection ~~revenue~~with ~~for Rest Of World in~~ the ~~table~~Olapic, ~~below~~Inc. acquisition.

The following table ~~summarizes~~provides ~~revenue~~a byreconciliation ~~customer~~of ~~location~~cash, (cash equivalents and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in ~~thousands~~ the consolidated statements of ~~dollars,~~cash ~~except~~flows ~~percentages~~(in thousands):

	Three Months Ended March 31,
	Six Months Ended June 30,
	2019		2018			~~2018~~
	Revenue		% of Total			Revenue		% of Total
Consolidated balance sheet classification:
United States	$	23,216		45.2	%	$	24,823		43.8	%
Cash and cash equivalents	$	47,763	$	75,819
Japan		9,634		18.8			11,652		20.5
Restricted cash, short term		6,000		3,000
Europe, Middle East, and Africa (EMEA)		13,457		26.2			15,066		26.6
Restricted cash, long term		—		6,000
Rest of the World		5,049		9.8			5,142		9.1
Total cash, cash equivalents and restricted cash	$	53,763	$	84,819
Total	$	51,356		100.0	%	$	56,683		100.0	%

186. Fair Value Measurements

~~Table~~The offollowing ~~Contents~~table presents our financial assets and liabilities that are carried at fair value (in thousands):

Long-lived assets, which includes right of use assets, property and equipment, goodwill and intangibles, but exclude other assets, long-term investments and deferred tax assets, are attributed to geographic areas in which Company assets reside and is shown below (in thousands):


	Fair Value Measurement at June 30, 2019
	Total		Quoted Prices (unadjusted) in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents—money market funds	$	14,126	$	14,126	$	—	$	—
Cash equivalents—Certificate of Deposit		578		578		—		—

Restricted cash equivalents—money market fund		6,000		6,000		—		—

Total current assets	$	20,704	$	20,704	$	—	$	—

Total assets	$	20,704	$	20,704	$	—	$	—

	March 31,2019		December 31,2018
Long-lived assets:
United States	$	311,124	$	303,046
United Kingdom		4,198		3,484
Germany		53,615		54,357
Asia (including Japan)		5,665		4,139
Total	$	374,602	$	365,026

~~14.~~Table ~~Restructuring~~of Contents

In December 2017, the Company implemented a restructuring plan to accelerate the integration of the Olapic business into the core of Monotype in an effort to improve operational efficiencies and to align its investment in the Olapic business to better support it over time. The plan provided for the elimination of 89 positions worldwide. As part of this plan, the Company recorded charges of approximately $3.0 million for severance and termination benefits and $0.2 million of facilities and associated costs. This restructuring was completed in the third quarter of 2018.


	Fair Value Measurement at December 31, 2018
	Total		Quoted Prices (unadjusted) in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents—money market funds	$	28,940	$	28,940	$	—	$	—
Restricted cash equivalents—money market fund		6,000		6,000		—		—

Total current assets	$	34,940	$	34,940	$	—	$	—

Total assets	$	34,940	$	34,940	$	—	$	—

The Company’s recurring fair value measures relate to short-term investments, which are classified as cash equivalents, derivative instruments and from

~~On June 6, 2018, the Company implemented a restructuring plan, under which the Company reduced headcount in certain areas of the Company, made the decision~~ time-to cease sales and marketing of the Swyft product and service line and to close a regional office, all in an effort to improve operational efficiencies. The plan provided for the elimination of approximately 50 positions worldwide across a variety of functions, with a concentration within engineering, as well as sales and marketing. The Company recorded net charges totaling $6.8 million related to severance and termination benefits, net of stock based compensation reversal, the write off of goodwill and intangible assets attributable to Swyft, the acceleration of the final deferred compensation payment to the founders of Swyft, and charges associated with the office closure. We reversed $1.4 million of stock based compensation expense as a result of forfeitures of awards by employees included in the restructuring plan. In the three months ended March 31, 2019, the severance and termination accrual was reduced based the completion of certain final termination agreements. This restructuring plan was completed by December 31, 2018, other than the payment of deferred termination benefits to certain terminated employees. The Company continued to refine its cost structure, and in December 2018, implemented a restructuring plan in an effort to improve operational efficiencies. The plan provided for the elimination of 15 positions worldwide, including the positions held by two of the Olapic founders. To date, the Company recorded charges of approximately $1.0 million for severance and termination benefits associated with this plan and $0.9 million of accelerated expense associated with the final deferred compensation payment in connection with the departure of those founders. In addition, $0.9 million was recorded for additional stock based compensation expense associated with the acceleration of the vesting of those departing founders’ equity grants in accordance with the separation agreements. We expect this restructuring plan to be completed by the second quarter of 2019, other than the payment of deferred termination benefits to certain terminated employees. -time

as contingent consideration. The fair value of our cash equivalents are either based on quoted prices (unadjusted) for similar assets or other observable inputs such as yield curves at commonly quoted intervals and other market corroborated inputs. The fair value of our derivatives is based on quoted market prices from various banking institutions or an independent third-party provider for similar instruments. In determining the fair value, we consider our

~~The following presents the details of the restructuring expense line item within our condensed consolidated statements of operations (in thousands):~~ non-performance

risk and that of our counterparties. At June 30, 2019, we had one

	Three Months Ended March 31,
	2019			2018
Severance and termination benefits	$	(24	)	$	194
Total restructuring	$	(24	)	$	194

30-day

forward contract to sell 2.7 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair value. At December 31, 2018, we had one

~~The following presents a roll forward of the restructuring reserves and provision activity (in thousands):~~ 30-day

forward contract to sell 2.7 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair value.

The Company’s

	Personnelrelated			Total
Restructuring reserve at December 31, 2018	$	2,968		$	2,968
Restructuring charges		(24	)		(24	)
Cash payments		(1,595	)		(1,595	)
Foreign currency exchange rate changes		(9	)		(9	)
Restructuring reserve at March 31, 2019		1,340			1,340

non-financial

assets and

~~Future cash expenditures related to the restructuring are expected to be approximately $1.0 million, net of tax savings.~~ non-financial

liabilities subject to non-recurring measurements include goodwill and intangible assets.

197. Intangible Assets

~~Table~~Intangible assets as of ~~Contents~~June 30, 2019 and December 31, 2018 were as follows (dollar amounts in thousands):

15. Commitments and Contingencies


			June 30, 2019							December 31, 2018
	Weighted- Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
Customer relationships		10	$	64,784	$	(56,454	)	$	8,330	$	64,822	$	(55,288	)	$	9,534
Acquired technology		11		68,773		(54,704	)		14,069		68,823		(52,747	)		16,076
Non-compete agreements		4		13,626		(13,239	)		387		13,636		(13,073	)		563
Indefinite-lived intangible assets:
Trademarks				44,079		—			44,079		44,126		—			44,126
Domain names				4,400		—			4,400		4,400		—			4,400

Total			$	195,662	$	(124,397	)	$	71,265	$	195,807	$	(121,108	)	$	74,699

~~Legal~~8. ~~Proceedings~~Leases

We have operating leases for corporate offices and certain equipment. Our leases have remaining lease terms of 1 year to 6 years, some of which contain options to extend the leases for up to 5 years and some which include options to terminate the leases within 1 year. We have lease agreements with lease and

~~From time~~non-to-time, we may be a party to various claims, suits and complaints. We do not believe that there are claims or legal proceedings that, if determined adversely to us, would have a material adverse effect on our business, results of operations or financial condition. lease

components, which are generally accounted for separately.

We determine if an arrangement is a lease at inception. Operating leases are included in the operating lease

~~Licensing Warranty~~ right-of-use

(“ROU”) assets and the short-term and long-term lease liabilities on our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Under our standard license agreement with OEM customers, we warrant that the licensed technologies are free of infringement claims of intellectual property rights and will meet the specifications as defined in the licensing agreement for a one-year period. Under the licensing agreements, liability for such indemnity obligations is limited, generally to the total arrangement fee; however, exceptions have been made on a case-by-case basis, increasing the maximum potential liability to agreed-upon amounts at the time the contract is entered into or unlimited liability. We have never incurred costs payable to a customer or business partner to defend lawsuits or settle claims related to these warranties, and as a result, management believes the estimated fair value of these warranties is minimal. Accordingly, there are no liabilities recorded for these warranties as of March 31, 2019 or December 31, 2018. 14

~~16.~~Table ~~Subsequent~~of ~~Events~~ Contents

Pursuant to the terms of the lease agreement for the Company’s NY office, the Company obtained a standby

~~Stock Purchase Program~~ letter-of-credit

in the amount of approximately $0.5 million as security on the lease obligation. The

~~Subsequent to March 31, 2019, the Company purchased 44,600 shares~~ letter-of common stock for $0.9 million, at an average price per share of $20.19 through April 19, 2019. The Company purchased these shares on the open market at prevailing market prices and in accordance with its previously announced share purchase program. At April 19, 2019, $0.3 million remains for future purchase under the Plan.

credit is a reduction of the available borrowings under the Credit facility.

~~Dividend~~The ~~Declaration~~components of lease expense were as follows (in thousands):

On April 18, 2019, the Company’s Board of Directors declared an $0.116 per share quarterly cash dividend on our outstanding common stock. The record date is set for July 1, 2019, and the dividend is payable to shareholders of record on July 19, 2019. Dividends are declared at the discretion of the Company’s Board of Directors and depend on actual cash from operations, the Company’s financial condition and capital requirements and any other factors the Company’s Board of Directors may consider relevant. Future dividend declarations, as well as the record and payment dates for such dividends, will be determined by the Company’s Board of Directors on a quarterly basis.


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Finance lease cost	$	—	$	—	$	—	$	—
Operating lease cost		1,137		—		2,291		—
Short-term lease cost		10		—		10		—
Variable lease cost		107		—		159		—

Total lease cost	$	1,254	$	—	$	2,460	$	—

~~Item~~Supplemental 2.cash ~~Management’s~~flow ~~Discussion~~information ~~and~~related ~~Analysis~~to ofleases ~~Financial~~was ~~Condition~~as ~~and~~follows ~~Results~~(in ofthousands): ~~Operations~~

Forward Looking Statements and Projections


	Six Months Ended June 30,
	2019		2018
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,215		—
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		1,890		—

~~This~~Supplemental ~~Quarterly~~balance ~~Report~~sheet oninformation ~~Form 10-Q~~related ~~contains forward looking statements. Forward looking statements relate~~ to ~~future~~leases ~~events~~was ~~or our future financial performance. We generally identify forward looking statements by terminology such~~ as ~~“may,”~~follows: “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. These statements are only predictions. We have based these forward looking statements largely on our current expectations and projections about future events and financial


	Six Months Ended June 30,
	2019		2018
Weighted average remaining lease term:
Operating leases		4.75 years		—
Weighted average discount rate:
Operating leases		3.92%		—

As of June 30, 2019, we have additional operating leases, primarily for corporate offices, that have not yet commenced of $2.1 million. These operating leases will commence in 2019 with lease terms of 1 to

~~Table of Contents~~4

years. Maturities of operating lease liabilities were as follows (in thousands):

~~trends~~Twelve ~~that~~months weending ~~believe~~June ~~may affect~~30: our business, results of operations and financial condition. The outcome of the events described in these forward looking statements is subject to risks, uncertainties and other factors described in “Risks Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, as well as those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Accordingly, you should not rely upon forward looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward looking statements will be achieved or occur, and actual results could differ materially from those projected in the forward looking statements. The forward looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

Overview


2020	$	4,250
2021		3,740
2022		3,543
2023		2,451
2024		1,473
Thereafter		1,813

Total future minimum lease payments	$	17,270
Less: amounts representing interest		(1,516	)

Total lease liabilities	$	15,754
Less: current operating lease liability		(3,701	)

Long-term operating lease liability	$	12,053

We are a leading global provider of design assets, technology and expertise that are designed to enable the best user experiences, ensure brand integrity and help companies engage their best customers. We empower expression and engagement for creatives, designers, engineers and marketers at the world’s most revered brands. Monotype is home to some of the world’s most well-known typeface collections. We provide high-quality creative assets and technology solutions to marketers and content creators that empower our customers to achieve global brand fidelity and drive consistent user experiences across a wide variety of devices and online media. Along with our custom type services, our solutions enable consumers and professionals to express their creativity, while our tools and technologies improve creative workflows and maximize efficiency as content is published or distributed. Our solutions provide worldwide language coverage and high-quality text, and our embedded solutions support compelling user interfaces. We offer more than 13,000 typeface designs, and include some of the world’s most widely used designs, such as the Times New Roman®, Helvetica®, Frutiger®, ITC Franklin Gothic™, FF Meta and Droid™ typefaces, and support more than 250 Latin and non-Latin languages. Our e-commerce websites, including myfonts.com, fonts.com, linotype.com, and fontshop.com, which attracted more than 50 million visitors in 2018 from over 200 countries and territories, offer thousands of high-quality font products including our own fonts from the Monotype Libraries, as well as fonts from third parties. 15

~~Sources~~Table of ~~Revenue~~ Contents

WeMaturities ~~derive~~of ~~revenue~~lease ~~from~~liabilities ~~two principal sources: licensing our design assets and technology to brands and creative professionals, which we refer to~~ as our Creative Professional revenue, and licensing our text imaging solutions to consumer device manufacturers and independent software vendors, which we refer to as our OEM revenue. We derive our Creative Professional revenue primarily from brands, agencies, publishers, corporations, enterprises, small businesses and individuals. We derive our OEM revenue primarily from consumer device manufacturers. Our Creative Professional and OEM revenues are both comprised of ~~license and service revenues. We classify cloud-based subscriptions and other services~~December 31, ~~such~~2018 aswere ~~font related services, custom font design and post contract support~~ as service revenue. All other revenue is classified as license revenue. We operate our business based on our two principal markets, Creative Professional and OEM, which is the basis for the following discussion of operating results. follows:

~~Some~~Years ~~of our~~ending ~~revenue~~December ~~streams,~~31: particularly project-related and custom font design service revenue where spending is largely discretionary in nature, have historically been, and we expect them to continue to be in the future, susceptible to weakening economic conditions.

Geographic revenue, which is based on the geographic location of our customers, is in the table below:


2019	$	4,728
2020		3,131
2021		2,806
2022		2,652
2023		1,256
Thereafter		2,004
Total	$	16,577

	Three Months Ended March 31,
	2019					2018
	Revenue		% of Total			Revenue		% of Total
	(In thousands of dollars, except percentages)
United States	$	23,216		45.2	%	$	24,823		43.8	%
Japan		9,634		18.8			11,652		20.5
Europe, Middle East, and Africa (EMEA)		13,457		26.2			15,066		26.6
Rest of the World		5,049		9.8			5,142		9.1
Total	$	51,356		100.0	%	$	56,683		100.0	%

9. Debt

~~For~~On March 22, 2019, the ~~three~~Company ~~months~~entered ~~ended~~into ~~March 31~~a new credit agreement (the “New Credit Agreement”) by and among the Company, ~~2019~~the Company’s subsidiary, Monotype Imaging Inc., (“the Borrower”), any financial institution that becomes a Lender and ~~2018~~Bank of America, ~~revenue~~N.A., ~~from~~as ~~customers~~administrative ~~outside~~agent. Pursuant to the ~~United~~New ~~States comprised~~Credit 54Agreement the Lenders have agreed to provide the Borrower with a five-year $200.8%0 million ~~and~~senior 56secured revolving credit facility (the “Credit Facility”).2% The Credit Facility permits the Company to request that the Lenders, ~~respectively~~at their election, increase the secured credit facility to a maximum of ~~our~~$300.0 million. ~~total~~The ~~revenue~~Credit Facility provides more flexibility in addition to an increased borrowing capacity and extended terms, as defined above. WeThe ~~expect~~New ~~that~~Credit ~~sales~~Agreement replaced the Company’s existing $150.0 million revolving credit facility (the “Original Credit Agreement”) by ~~our~~and ~~international~~between ~~subsidiaries~~the ~~will~~Company ~~continue~~and Silicon Valley Bank. The Original Credit Agreement was terminated effective March 22, 2019 and was scheduled to ~~represent~~expire aon ~~substantial~~September 15, ~~portion~~2020. The Company had $75.0 million outstanding under the Original Credit Agreement at December 31, 2018. Available borrowings under the Original Credit Agreement were reduced by approximately $0.5 million for one standby letter of ~~our~~credit ~~revenue~~issued in connection with a facility lease agreement, leaving $74.5 million available for borrowings at December 31, 2018. At June 30, 2019, the ~~foreseeable~~Company ~~future~~had $65.0 million ~~Future~~outstanding ~~international~~under ~~revenue~~the ~~will depend~~Credit onFacility. Available borrowings under the ~~continued~~Credit ~~use~~Facility ~~and~~have ~~expansion~~been reduced by approximately $0.5 million for one standby letter of ~~our~~credit ~~products~~issued ~~worldwide~~in connection with a facility lease agreement, leaving $134.5 million available for borrowings at June 30, 2019.

Borrowings under the Credit Facility bear interest through March 21, 2024 at a variable rate per annum equal to LIBOR plus between 1.0% and 1.625%, or at the Borrower’s option, the higher of (i) the prime rate as announced by Bank of America and (ii) 0.5% plus the overnight federal funds rate, plus in each case, between 0.0% and 0.625%, with the exact interest rate margin determined based on the consolidated leverage ratio. At June 30, 2019, our rate, inclusive of applicable margins, was 3.3% for LIBOR. At December 31, 2018, our rate under the Original Credit Agreement, inclusive of applicable margins, was 4.3% for LIBOR. The Company is required to pay a commitment fee, based on the consolidated leverage ratio, equal to 0.175%, 0.20%, 0.225% or 0.25% per annum on the undrawn portion available under the revolving credit facility and variable per annum fees in respect of outstanding letters of credit. In connection with the New Credit Agreement, the Company incurred closing and legal fees of approximately $1.0 million, which have been accounted for as deferred financing costs, that, together with approximately $0.3 million of unamortized deferred financing costs associated with loan syndicate lenders who participated in the new facility, will be amortized to interest expense over the term of the New Credit Agreement. In addition, $34 thousand of unamortized deferred financing costs associated with the

21 pro-rata

share of prior loan syndicate lenders that did not participate in the new facility were written off and charged to other expense in the first quarter of 2019.

The New Credit Agreement includes financial covenants which require the Company to maintain

~~Table~~(i) a consolidated leverage ratio of ~~Contents~~no greater than 3.25 to 1.0 or, upon a qualified acquisition subject to certain conditions, 3.75 to 1.0 and (ii) a minimum consolidated interest coverage ratio of 3.00 to 1.0.

At June 30, 2019, our consolidated leverage ratio was 0.59 to 1.0 and our consolidated interest coverage ratio was 21.38 to 1.0. The New Credit Agreement also contains customary affirmative and negative covenants for transactions of this type and other affirmative and negative covenants agreed to by the parties, including, among others, limits on the Company and its subsidiaries’ ability to incur debt or liens, engage in sale-leaseback transactions, make loans, investments and acquisitions, incur additional indebtedness, engage in mergers, enter into asset sales, transact with affiliates and alter its business. Adjusted EBITDA, under the Credit Facility, is defined as consolidated net earnings (or loss), plus net interest expense, income taxes, depreciation and amortization, and share based compensation expense, plus acquisition expenses not to exceed $2.0 million, minus capitalized research and development expense, plus restructuring, issuance costs, cash

We derive a significant portion of our OEM revenue from a limited number of customers, in particular manufacturers of laser printers and consumer electronic devices. For the three months ended March 31, 2019 and 2018, our top ten licensees by revenue, most of which are OEM customers, accounted for approximately 24.6% and 23.0% of our total revenue, respectively. No one customer accounted for more than 10.0% of our total revenue for the three months ended March 31, 2019 or 2018. non-operating

costs and other expenses or losses minus cash

~~Cost of Revenue~~ non-operating

gains and other

Our cost of revenue consists of font license fees that we pay on certain fonts that are owned by third parties, personnel and allocated internal engineering expense and overhead costs related to custom font design services and SaaS based offerings and cloudnon-~~based web service costs. License fees that we pay to third parties are typically based on a percentage of our Creative Professional and OEM revenue and do not involve minimum fees.~~ cash

gains; provided, however that the aggregate of all cash

Cost of revenue also includes amortization of acquired technology, which we amortize over 7 to 15 years. For purposes of amortizing acquired technology, we estimate the remaining useful life of the technology based upon various considerations, including our knowledge of the technology and the way our customers use it. We use the straightnon-line method to amortize acquired technology. There is no reliable evidence to suggest that we should expect any other pattern of amortization than an even pattern, and we believe this best reflects the expected pattern of economic usage. operating

expense shall not exceed 10% of Consolidated EBITDA. The New Credit Agreement also provides for a number of customary events of default, including, among others, payment, bankruptcy, covenant, representation and warranty, change of control and judgment defaults. Failure to comply with these covenants, or the occurrence of an event of default, could permit the Lenders under the New Credit Agreement to declare all amounts borrowed under the New Credit Agreement, together with accrued interest and fees, to be immediately due and payable. The obligations of the Borrower under the Credit Facilities are unconditionally guaranteed by the Company and certain subsidiaries and secured by a lien on substantially all of the present and future property and assets of the Company and such subsidiaries, in each case, subject to limited exceptions and exclusions.

~~Gross Profit~~ 16

~~Our~~Table ~~gross profit percentage is influenced by a number~~ of factors including product mix, pricing and volume at any particular time. However, cost of OEM revenue is typically lower than cost of Creative Professional revenue because we own a higher percentage of the fonts licensed to OEM customers, provide value-added technology and have negotiated lower royalty rates on the fonts we license from third parties because of volume. In addition, within our Creative Professional business, the cost of custom font design and SaaS based service revenue is substantially higher than the cost of other revenue. The relative cost of Creative Professional revenue has decreased in recent periods, as efforts to sell license rights to more fonts that we own have been successful, and because we have recently experienced success in our effort to sell certain license rights that carry lower royalty rates to Creative Professional customers. Creative Professional revenue is growing at a faster rate than OEM revenue. We expect these trends to continue. Our gross profit is subject to variability from period-to-period, depending on the product mix and the level of custom font design and SaaS based service revenue. Contents

~~Critical~~10. ~~Accounting~~Income ~~Policies~~Taxes

~~The~~A ~~preparation~~reconciliation of ~~financial~~income ~~statements~~taxes ~~and~~computed ~~related~~at ~~disclosures~~federal instatutory ~~conformity~~rates ~~with GAAP and our discussion and analysis of our financial condition and results of operations requires us~~ to ~~make~~income ~~judgments,~~tax ~~assumptions~~expense ~~and~~is ~~estimates~~as ~~that~~follows ~~affect~~(dollar ~~the~~ amounts ~~reported~~ in ~~our~~thousands): consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates.

Information about our critical accounting policies may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Critical Accounting Policies,” included in our Annual Report on Form 10-K for the year ended December 31, 2018.


	Three Months Ended June 30,
	2019					2018
Provision for income taxes at statutory rate	$	2,663		21.0	%	$	414		21.0	%
State and local income taxes, net of federal tax benefit		265		2.1	%		26		1.3	%
Foreign tax credit valuation allowance		(1,299	)	(10.2	)%		—		—
Impact of foreign income		415		3.2	%		790		40.1	%
Permanent non-deductible expense		274		2.2	%		60		3.1	%
Net shortfall (windfall) on stock based compensation		111		0.9	%		(39	)	(1.9	)%
Other, net		(53	)	(0.5	)%		23		1.1	%

Reported income tax provision	$	2,376		18.7	%	$	1,274		64.7	%


	Six Months Ended June 30,
	2019					2018
Provision (benefit) for income taxes at statutory rate	$	3,193		21.0	%	$	(356	)	21.0	%
State and local income taxes, net of federal tax benefit		318		2.1	%		(51	)	3.0	%
Foreign tax credit valuation allowance		(1,557	)	(10.2	)%		—		—
Impact of foreign income (loss)		505		3.3	%		(448	)	26.4	%
Permanent non-deductible expense		334		2.2	%		(241	)	14.2	%
Net shortfall (windfall) on stock based compensation		218		1.4	%		(156	)	9.2	%
Reversal of reserve for income taxes		(544	)	(3.6	)%		—		—
Other, net		(230	)	(1.5	)%		61		(3.5	)%

Reported income tax (benefit)	$	2,237		14.7	%	$	(1,191	)	70.3	%

22As of June 30, 2019, the liability for unrecognized tax benefits was approximately $4.0 million, all of which is recorded as a reduction of deferred tax assets.

~~Table~~11. ofNet ~~Contents~~Income (Loss) Per Share

~~Results~~For ofthe ~~Operations~~three ~~for~~months ended June 30, 2019 and 2018 and the ~~Three~~six ~~Months~~months ~~Ended~~ended ~~March~~June 3130, 2019, ~~Compared~~the totwo ~~Three~~class ~~Months~~method ~~Ended March~~was used in the computation as it was the more dilutive of the two approaches. For the six months ended June 3130, 2018, earnings were not allocated to participating securities in the calculation of basic and diluted earnings per share as there were net losses and the net loss available to common shareholders was divided by the weighted-average number of common shares outstanding during the period to calculate diluted earnings per share. For the six months ended June 30, 2019, the assumed exercise of stock options and assumed vesting of restricted stock and restricted stock units were not included in the computation of net income (loss) per share as their effect would have been anti-dilutive.

~~Revenue and cost of revenue, bifurcated into license and service, is as follows:~~ 17

	Three Months EndedMarch 31,
	2019		2018		(Decrease)
License revenue	$	41,872	$	45,867	$	(3,995	)
Service revenue		9,484		10,816		(1,332	)
Cost of revenue—license		6,802		9,612		(2,810	)
Cost of revenue—service		2,801		2,824		(23	)

Table of Contents

~~License~~The ~~revenue~~following ~~decreased~~presents ~~primarily~~a ~~due~~reconciliation toof the ~~decline~~numerator ~~in printer revenue from our printer imaging electronic customers~~ and adenominator ~~decline~~used in ~~revenue~~the ~~from~~calculation ~~our~~of ~~web~~basic ~~channels~~net inincome ~~the~~(loss) ~~three~~per ~~months~~share ~~ended~~and ~~March 31,~~a ~~2019,~~reconciliation asof ~~compared to~~ the ~~same~~numerator ~~period~~and indenominator ~~2018.~~used ~~Service revenue decreased~~ in the ~~three~~calculation ~~months~~of ~~ended~~diluted ~~March 31,~~net ~~2019,~~income as(loss) ~~compared~~per toshare ~~the same period~~ (in ~~2018~~thousands, ~~mainly~~except ~~due~~share toand ~~increased~~per ~~customer~~share ~~churn~~data): ~~in the last half of 2018.~~

Gross profit from license revenue, before amortization of acquired technology, increased to 83.9% from 79.0% mainly due to the one-time additional non-recurring royalty expense in the three months ended March 31, 2018, for which there was no corresponding revenue in the period, in accordance with ASC 606. There was no similar charge in the same period in 2019. Gross profit from service revenue, before amortization of acquired technology, decreased from 73.9% to 70.5%, mainly due to a decline in our service revenue as some of our cost of revenue does not fluctuate with changes in revenue. See further discussion below for additional information regarding our period over period revenue and cost of revenue.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Numerator:
Net income (loss), as reported	$	10,307		$	695		$	12,967		$	(504	)
Less: net income (loss) attributable to participating securities		(336	)		(29	)		(409	)		—

Net income (loss) available to common shareholders—basic	$	9,971		$	666		$	12,558		$	(504	)

Denominator:
Basic:
Weighted-average shares of common stock outstanding		41,377,788			42,188,672			41,321,044			42,252,027
Less: weighted-average shares of unvested restricted common stock outstanding		(1,350,923	)		(1,770,364	)		(1,305,372	)		(1,815,432	)

Weighted-average number of common shares used in computing basic net income (loss) per common share		40,026,865			40,418,308			40,015,672			40,436,595

Net income (loss) per share applicable to common shareholders—basic	$	0.25		$	0.02		$	0.31		$	(0.01	)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Numerator:
Net income (loss) available to common shareholders—basic	$	9,971		$	666		$	12,558		$	(504	)
Add-back: undistributed earnings allocated to unvested shareholders		180			—			107			—
Less: undistributed earnings reallocated to unvested shareholders		(180	)		—			(107	)		—

Net income (loss) available to common shareholders—diluted	$	9,971		$	666		$	12,558		$	(504	)

Denominator:
Diluted:
Weighted-average shares of common stock outstanding		41,377,788			42,188,672			41,321,044			42,252,027
Less: weighted-average shares of unvested restricted common stock outstanding		(1,350,923	)		(1,770,364	)		(1,305,372	)		(1,815,432	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options		39,045			119,544			50,375			—

Weighted-average number of common shares used in computing diluted net income (loss) per common share		40,065,910			40,537,852			40,066,047			40,436,595

Net income (loss) per share applicable to common shareholders—diluted	$	0.25		$	0.02		$	0.31		$	(0.01	)

While revenue from services has grown to a level of significance requiring separate disclosure, we continue to operate our business based on our two principal markets, Creative Professional and OEM, which is the basis for the following discussion of operating results. 18

23Table of Contents

~~Table~~The following common share equivalents have been excluded from the computation of ~~Contents~~diluted weighted-average shares outstanding, as their effect would have been anti-dilutive:

The following table sets forth items in the unaudited condensed consolidated quarterly statements of income as a percentage of sales for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Options		488,867		543,794		489,882		641,825
Unvested restricted stock		1,082,601		643,109		997,436		846,046
Unvested restricted stock units

Filing Compare · Monotype Imaging Holdings Inc.