Third quarter 2009 highlights:

Third quarter revenue was $23.0 million, a 16 percent decline year-over-year.

Operating income for the third quarter was $6.5 million, or 28 percent of revenue.

Non-GAAP net adjusted EBITDA for the third quarter was $10.2 million, or 44 percent of revenue.

Cash and cash equivalents balance as of Sept. 30, 2009 was $38.7 million, an increase of $6.8 million compared to Dec. 31, 2008.

"We achieved revenue and profitability that exceeded our expectations, driven by sequential growth in our Creative Professional business and ongoing expense management," said Doug Shaw, president and chief executive officer. "We're encouraged by the early signs of stabilization in our OEM and Creative Professional businesses and believe this, combined with our investments in strategic growth opportunities, positions us well for the long term."

Scott Landers, senior vice president and chief financial officer, said, "Our third quarter results once again reflect the company's focus on managing expenses, generating cash flow and paying down debt in order to strengthen the balance sheet. We're also pleased with our amended credit agreement which we believe gives us increased flexibility to make strategic business decisions."

Third quarter 2009 operating results

Revenue for the third quarter of 2009 was $23.0 million compared to $27.3 million in the third quarter of 2008. OEM revenue for the quarter was $16.3 million, decreasing 17 percent year-over-year. Creative Professional revenue for the quarter was $6.7 million, decreasing 11 percent from the third quarter of 2008.

Net income for the third quarter of 2009 was $3.0 million, compared to $4.4 million in the prior year period. Earnings per diluted share for the third quarter of 2009 were $0.09 compared to $0.12 in the third quarter of 2008.

Non-GAAP net adjusted EBITDA

In the third quarter of 2009, non-GAAP net adjusted EBITDA was $10.2 million or 44 percent of revenue, compared to $12.2 million or 45 percent of revenue in the third quarter of the prior year.

Beginning in the second quarter of 2009, Monotype Imaging changed its definition of non-GAAP net adjusted EBITDA to be calculated as GAAP operating income and adding back share-based compensation, depreciation and amortization expenses.

A reconciliation of GAAP operating income to non-GAAP net adjusted EBITDA for the three and nine months ended Sept. 30, 2009 and 2008 is provided in the financial tables that accompany this release.

Cash and cash flow

Monotype Imaging had cash and cash equivalents of $38.7 million as of Sept. 30, 2009, an increase from $35.9 million at the end of the prior quarter and from $31.9 million as of Dec. 31, 2008. Monotype Imaging generated $5.1 million of cash from operations in the third quarter of 2009. On a year to date basis, cash from operations was $22.3 million.

Debt balances

The company's outstanding debt was $99.2 million as of Sept. 30, 2009, a decrease from $101.7 million at the end of the prior quarter and from $113.6 million on Dec. 31, 2008. Non-GAAP adjusted EBITDA, for purposes of calculating the bank debt covenant, was $9.8 million in the third quarter of 2009, as compared to $11.9 million in the third quarter of 2008. As of Sept. 30, 2009, the company was in compliance with all debt covenants.

A reconciliation of GAAP net income to non-GAAP adjusted EBITDA for the three months and nine months ended Sept. 30, 2009 and 2008 is provided in the financial tables that accompany this release.

Updated credit agreement

Monotype Imaging today announced that on Oct.30, 2009, the company amended the terms of its Amended and Restated Credit Agreement. Among its provisions, the amendment allows the company to use cash on hand to make acquisitions subject to an annual limit of $15 million.The amendment also modifies the definition of adjusted EBITDA to allow the add back of severance and select non-cash or non-operating items.In return, the company agreed to make a non-scheduled principal payment of $5 million and pay a one-time fee of approximately $600,000. The non-scheduled principal payment and the one-time fee were paid by the company on Oct.30, 2009. Monotype Imaging has also agreed to an interest rate increase of 100 basis points and the addition of a liquidity covenant that requires the company to maintain access to $20 million either through the company's line of credit or cash on hand.Full details of the amendment are available under the Form 8-K filed on Nov. 3, 2009, and can be found under the Investor Relations section of Monotype Imaging's Web site at www.monotypeimaging.com or with the Securities and Exchange Commission at www.sec.gov.

Company announces restructuring

As part of the company's commitment to managing costs and gaining operating efficiencies, Monotype Imaging has enacted a small workforce reduction in conjunction with centralizing the Creative Professional business under the leadership of the company's UK subsidiary, which now serves as worldwide headquarters for this business. In connection with this workforce reduction, the company expects to incur severance expense of approximately $800,000 in total with $600,000 being realized in the fourth quarter of 2009.

Conference call details

Monotype Imaging will host a conference call on Tuesday, Nov. 3, 2009, at 8:30 a.m. eastern time, to discuss the company's third quarter 2009 results and business outlook. Individuals who are interested in listening to the audio webcast should log on to the "Investor Relations" portion of the "About Us" section of Monotype Imaging's Web site at www.monotypeimaging.com. The live call can also be accessed by dialing (866) 225-8754 (domestic) or (480) 629-9690 (international) using passcode 4171697. If individuals are unable to listen to the live call, the audio webcast will be archived in the "Investor Relations" portion of the company's Web site for one year.

Non-GAAP financial measures

This press release contains non-GAAP financial measures under the rules of the U.S. Securities and Exchange Commission. This non-GAAP information supplements and is not intended to represent a measure of performance in accordance with disclosures required by generally accepted accounting principles. Non-GAAP financial measures are used internally to manage the business, such as in establishing an annual operating budget and in reporting to lenders. Non-GAAP financial measures are used by Monotype Imaging management in its operating and financial decision-making because management believes these measures reflect ongoing business in a manner that allows meaningful period-to-period comparisons.