Monotype Imaging: largest font library in the world gaining from growth in CE devices/mobile

May 17, 2013

Monotype Imaging Holdings (NASDAQ: TYPE, $23.71) was recommended at our recent San Francisco idea forum. TYPE owns the largest font library in the world and gets royalty revenues every time major fonts are used, either in electronic or print formats. Fonts are increasingly crucial as tools to help companies differentiate their brands and message. The company’s major growth opportunities are centered around more screens. Sales of smartphones, tablets and other electronic devices will bring the top-line growth rate to 8-12% with the legacy printer business showing little to no growth. Content creators are increasingly turning to TYPE due to the breadth of its library and the font quality, while the use of the company’s web fonts is accelerating among web and mobile app developers. The recent announcement of a new master subscription service combining various tools in TYPE’s offering in one platform, and the launch of its cloud service are important initiatives designed to strengthen the company’s leading position in the space.

TYPE has a very profitable model with 43% operating margins and high cash flow. The company was bought from AGFA by TA Associates, a private equity firm, in 2004 and was taken public in 2007. Most of the recap debt has been paid down and once it is fully repaid, the company can be positioned for another recap or as a takeover candidate.

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