UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, ~~2018~~2019

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

For the transition period from to

Commission File Number001-33612

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) 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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” inRule 12b-2 of the Exchange Act.

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 company (as defined inRule 12b-2 of the Exchange Act) Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of April ~~23, 2018~~19, 2019 was ~~42,173,562.~~41,373,437.

MONOTYPE IMAGING HOLDINGS INC.

INDEX

Page

Part I. Financial Information

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

• Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

•

~~Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017~~

•

Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018

•

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018

• 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, ~~2018~~2019 and ~~2017~~2018

•

Notes to Condensed Consolidated Financial Statements

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

1820

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

2731

Item 4.

Controls and Procedures

2832

Part II. Other Information

2933

Item 1.

Legal Proceedings

2933

Item 1A.

Risk Factors

2933

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

2933

Item 3.

Defaults Upon Senior Securities

2933

Item 4.

Mine Safety Disclosures

2933

Item 5.

Other Information

2934

Item 6.

Exhibits

3034

Exhibit Index

3135

Signatures

3236

PART I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except share and per share data)


	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	85,351		$	82,822		$	46,354		$	60,106
Restricted cash		10,000			11,987			6,000			6,000
Accounts receivable, net of allowance for doubtful accounts of $699 at March 31, 2018 and $634 at December 31, 2017		34,064			34,461
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		1,920			1,204			5,726			5,122
Prepaid expenses and other current assets		6,455			5,714			7,672			6,473

Total current assets		137,790			136,188			111,835			133,644
Right of use asset								13,432			—
Property and equipment, net		16,454			16,763			12,881			14,105
Goodwill		280,454			279,131			275,466			276,222
Intangible assets, net		83,503			84,856			72,823			74,699
Restricted cash		6,000			6,000
Other assets		4,750			3,112			9,714			8,986

Total assets	$	528,951		$	526,050		$	496,151		$	507,656

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,943		$	1,467		$	2,325		$	1,719
Accrued expenses and other current liabilities		38,127			43,096			30,182			43,840
Accrued income taxes payable		440			522			190			510
Deferred revenue		15,889			15,102			11,941			10,337
Lease liability								3,621			—

Total current liabilities		57,399			60,187			48,259			56,406
Revolving line of credit		90,000			93,000			70,000			75,000
Other long-term liabilities		5,830			6,428			1,649			3,102
Deferred income taxes		27,135			28,004			35,697			35,083
Reserve for income taxes		2,811			2,783			—			2,471
Lease liability								11,229			—
Accrued pension benefits		6,507			6,280			5,829			5,888
Commitments and contingencies(Note 13)
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: 45,587,983 at March 31, 2018 and 44,934,364 at December 31, 2017		44			44
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
Additionalpaid-in capital		305,023			298,113			324,027			319,486
Treasury stock, at cost, 3,419,116 shares at March 31, 2018 and 3,215,644 shares at December 31, 2017		(65,294	)		(64,083	)
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		100,673			97,815			97,458			99,605
Accumulated other comprehensive loss		(1,177	)		(2,521	)		(6,714	)		(5,913	)

Total stockholders’ equity		339,269			329,368			323,488			329,706

Total liabilities and stockholders’ equity	$	528,951		$	526,050		$	496,151		$	507,656

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

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except share and per share data)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
License revenue	$	45,867		$	44,007		$	41,872		$	45,867
Service revenue		10,816			8,458			9,484			10,816

Total revenue		56,683			52,465			51,356			56,683
Cost of revenue—license		9,612			6,804			6,802			9,612
Cost of revenue—service		2,824			1,974			2,801			2,824
Cost of revenue—amortization of acquired technology		864			878			857			864

Total cost of revenue		13,300			9,656			10,460			13,300

Gross profit		43,383			42,809			40,896			43,383
Operating expenses:
Marketing and selling		20,065			21,242			17,130			20,089
Research and development		9,442			9,554			7,441			9,296
General and administrative		15,690			10,927			12,019			15,618
Restructuring								(24	)		194
Amortization of other intangible assets		1,024			1,011			832			1,024

Total operating expenses		46,221			42,734			37,398			46,221

(Loss) income from operations		(2,838	)		75
Income (loss) from operations								3,498			(2,838	)
Other (income) expense:
Interest expense		852			758			908			852
Interest income		(124	)		(127	)		(137	)		(124	)
(Gain) loss on foreign exchange		(34	)		560
Loss (gain) on foreign exchange								66			(34	)
Loss on derivatives		136			54			95			136
Other		(4	)		6			45			(4	)

Total other expense, net		826			1,251			977			826

Loss before benefit from income taxes		(3,664	)		(1,176	)
Income (loss) before benefit from income taxes								2,521			(3,664	)
Benefit from income taxes		(2,465	)		(101	)		(139	)		(2,465	)

Net loss	$	(1,199	)	$	(1,075	)
Net income (loss)							$	2,660		$	(1,199	)

Net loss available to common stockholders—basic and diluted	$	(1,199	)	$	(1,075	)
Net income (loss) available to common stockholders—basic							$	2,514		$	(1,199	)

Net loss per common share—basic and diluted	$	(0.03	)	$	(0.03	)
Net income (loss) available to common stockholders—diluted							$	2,514		$	(1,199	)

Weighted-average number of shares outstanding—basic and diluted		40,005,789			39,476,439
Dividends declared per common share	$	0.116		$	0.113
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 accompanying notes are an integral part of these condensed consolidated financial statements.

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited and in thousands)

   Three Months Ended
March 31,
   2018 2017
Net loss
   $ (1,199 ) $ (1,075 )
Other comprehensive income, net of tax:

Unrecognized actuarial gain, net of tax of $5 and $7, respectively
   19 14
Foreign currency translation adjustments, net of tax of $356 and $466, respectively
   1,325 851


Comprehensive income (loss)
   $ 145 $ (210 )


	Three Months Ended March 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 accompanying notes are an integral part of these condensed consolidated financial statements.

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2019 and 2018

(in thousands, except share and per share data)


	Common Stock				Treasury Stock					Additional Paid-In		Retained			Accumulated Other Comprehensive			Total Stock- 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

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

MONOTYPE IMAGING HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Cash flows from operating activities
Net loss	$	(1,199	)	$	(1,075	)
Adjustments to reconcile net loss to net cash provided by 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		3,249			3,051			3,169			3,249
Loss on extinguishment of debt								34			—
Loss on retirement of assets		9			12			13			9
Amortization of deferred financing costs and accretion of interest		55			55			43			55
Stock based compensation		4,247			4,831			4,219			4,247
Provision for doubtful accounts		191			209			91			191
Deferred income taxes		(4,582	)		(1,955	)		881			(4,582	)
Unrealized currency loss on foreign denominated intercompany transactions		(575	)		293
Unrealized currency gain on foreign denominated intercompany transactions								(265	)		(575	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		7,783			4,445			9,789			7,783
Prepaid expenses and other assets		(1,321	)		(820	)		(1,709	)		(1,321	)
Accounts payable		1,463			(190	)		598			1,463
Income tax refunds receivable								(604	)		(716	)
Accrued income taxes		(690	)		(569	)		(2,842	)		26
Accrued expenses and other liabilities		(4,179	)		(4,334	)		(13,054	)		(4,179	)
Deferred revenue		3,045			1,628			1,072			3,045

Net cash provided by operating activities		7,496			5,581			4,095			7,496

Cash flows from investing activities
Purchases of property and equipment		(1,463	)		(1,969	)		(411	)		(1,463	)
Purchases of intangible assets		(160	)		—			—			(160	)

Net cash used in investing activities		(1,623	)		(1,969	)		(411	)		(1,623	)

Cash flows from financing activities
Payments on revolving line of credit		(3,000	)		(3,000	)
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		(4,712	)		(4,568	)		(4,791	)		(4,712	)
Purchase of treasury stock		—			(658	)		(6,590	)		—
Payments for employee taxes on shares withheld		(1,210	)		(510	)		(1,221	)		(1,210	)
Proceeds from exercises of common stock options		2,648			310			322			2,648

Net cash used in financing activities		(6,274	)		(8,426	)		(17,438	)		(6,274	)
Effect of exchange rates on cash, cash equivalents and restricted cash		943			307			2			943

Increase (decrease) in cash, cash equivalents and restricted cash		542			(4,507	)
(Decrease) increase in cash, cash equivalents and restricted cash								(13,752	)		542
Cash, cash equivalents and restricted cash at beginning of period		100,809			109,427			66,106			100,809

Cash, cash equivalents and restricted cash at end of period	$	101,351		$	104,920		$	52,354		$	101,351

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

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

MONOTYPE IMAGING HOLDINGS INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, ~~2018~~2019

1. Nature of the Business

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 ~~branded or personalized content~~creative assets and technology solutions across multiple devices and mediums. Our solutions, which include type, ~~branded mobile content,~~ 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.

We 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, ~~2018,~~2019, we conduct our operations through ~~five~~four domestic operating subsidiaries, Monotype Imaging Inc., Monotype ITC Inc. (“ITC”), MyFonts Inc. (“MyFonts”)~~, Swyft Media Inc.~~ 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”).

2. Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements as of March 31, ~~2018~~2019 and for the three months ended March 31, ~~2018~~2019 and ~~2017~~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 onForm 10-Q and Article 10 of RegulationS-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.~~presented

We 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 RegulationS-X, Rule8-03(a)(5) and10-01(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, ~~2017,~~2018, as reported in the Company’s Annual Report onForm 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.

Statement of Operations

For the three months ended March 31, 2018, we have changed our presentation of revenue to disclose service revenue and cost of service revenue separately from license revenue and cost of license revenue, as service revenue now exceeds the materiality threshold for an individual line item. Prior year amounts have also been restated to conform to current presentation.

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.

For the 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:


	Three Months Ended March 31, 2018
Marketing and selling	$	(24	)
Research and development		146
General and administrative		72

Total		194

See Note 14 for further details.

3. Recently Issued Accounting Pronouncements

Adopted

~~Revenue Recognition~~Leases

In ~~May 2014,~~February 2016, the ~~Financial~~FASB issued Accounting Standards ~~Board, or~~Update (“ASU”)2016-02,Leases (Topic 842):Amendments to the FASB ~~and the International~~ Accounting Standards ~~Board jointly issued ASU2014-09,~~~~Revenue from Contracts with Customers (Topic 606)~~Codification,(“~~ASC 606”~~ASU2016-02”), which ~~outlines~~replaces the existing guidance for leases. ASU2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a ~~comprehensive five-step revenue recognition model based on principle that replaces virtually all existing revenue recognition rules under U.S. GAAP and which requires revenue to~~twelve-month term, these arrangements must now be recognized ~~in a manner to depict~~as assets and liabilities on the ~~transfer of promised goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. ASU2014-09~~ ~~also provided the guidance in ASC Topic 340,~~~~Other Assets and Deferred Costs~~—~~Contracts with Customers (Subtopic 340-~~

~~40)~~, which includes criteria for the capitalization and amortization of certain contract acquisition and fulfillment costs. The standard requires retrospective application; however, it allows entities to choose either full retrospective adoption, in which the standard is applied to allbalance sheet of the ~~periods presented,~~lessee. Under ASU

2016-02, aright-of-use asset and lease obligation will be recorded for all leases, whether operating or ~~modified retrospective adoption, in which~~financing, while the ~~cumulativecatch-up~~ ~~adjustment to the opening~~income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance ~~of retained earnings is recognized~~sheet amount recorded for existing leases at the date of ~~application, with additional disclosures required to describe these effects.~~

~~We adopted~~adoption of ASU2016-02 must be calculated using the ~~standard on January 1, 2018, and applied the modified retrospective method of adoption and have elected to apply the new standard only to contracts not completed~~applicable incremental borrowing rate at ~~January 1, 2018, which represents contracts for which all (or substantially all) of the revenues have not been recognized under existing guidance as of~~ the date of adoption.

~~The cumulative effect of the adoption on our condensed consolidated balance sheet, by applying the modified retrospective method as of January 1, 2018, is as follows (in thousands):~~

   As Reported       As Adjusted
   December 31, 2017    Cumulative
Adjustments    January 1,
2018
Assets:

Accounts receivable, net⁽¹⁾
   $ 34,461    $ 7,052    $ 41,513
Prepaid expenses and other current assets⁽²⁾
   5,714    427    6,141
Other assets⁽³⁾
   3,112    650    3,762
Liabilities:

Deferred revenue
   15,102    (2,923 )    12,179
Other long-term liabilities⁽⁴⁾
   6,428    (825 )    5,603
Deferred income taxes
   28,004    2,927    30,931
Stockholders’ equity:

Retained earnings
   97,815    8,950    106,765
~~(1)~~ ~~Contract assets, short term are included in the accounts receivables, net of allowance for doubtful accounts in our condensed consolidated balance sheet.~~
~~(2)~~ ~~Capitalized contract costs, short term are included in the prepaid expenses and other current assets in our condensed consolidated balance sheet.~~
~~(3)~~ ~~Capitalized contract costs, long term are included in other assets in our condensed consolidated balance sheet.~~
~~(4)~~ ~~Deferred revenue, long term is included in other long-term liabilities in our condensed consolidated balance sheet.~~
In addition, we recognized additional royalty expenses totaling approximately $2.2 million, or $0.05 per share, upon the adoption of ASC 606, as an indirect effect of a change in accounting principle. These amounts are included in cost of revenue – license in the accompanying condensed consolidated statement of operations for the three months ended March 31, 2018.
The following reflects the Company’s condensed consolidated balance sheet and condensed consolidated statement of operations on an as reported basis and as if we had continued to recognize revenue under the guidance of ASC~~985-605,~~~~Software~~~~Revenue Recognition~~~~, which is also referred to herein as “legacy GAAP” (in thousands):~~

   March 31, 2018
   As Reported    Balances without
adoption of ASC 606    Difference
Assets:

Accounts receivable, net
   $ 34,064    $ 28,335    $ 5,729
Prepaid expenses and other current assets
   6,455    6,347    108
Other assets
   4,750    3,670    1,080
Liabilities:

Accrued expenses and other current liabilities
   38,127    35,966    2,161
Deferred revenue
   15,889    17,549    (1,660 )
Other long-term liabilities
   5,830    6,298    (468 )
Deferred income taxes
   27,135    26,951    184
Stockholders’ equity:

Retained earnings
   100,673    93,973    6,700
   For the three months ended March 31, 2018
   As Reported    Balances without
adoption of ASC 606    Difference
License revenue
   $ 45,867    $ 43,568    $ 2,299
Service revenue
   10,816    10,618    198
Cost of revenue—license
   9,612    7,451    2,161
Marketing and selling
   20,065    20,519    (454 )
Benefit from income taxes
   (2,465 )    (2,649 )    184
Net loss
   (1,199 )    (1,805 )    606
Net loss—basic and diluted
   $ (0.03 )    $ (0.05 )    $ 0.02
~~The following summarizes the significant changes under ASC 606 as compared to legacy GAAP:~~
Under legacy GAAP, revenue related to our term licenses that were bundled with service-related performance obligations when vendor-specific objective evidence (“VSOE”) did not exist was required to be recognized ratably over the term of the agreement. Under ASC 606, the Company allocates revenue to each performance obligation in the contract and each performance obligation is accounted for separately; the license revenue is recognized at the time of delivery and the service revenue is recognized over time based on their relative standalone selling prices. The application of this provision is particularly impactful to our new Mosaic product offering which was launched in the first quarter of 2018. This new offering bundles our traditional font licenses with a SaaS based portal, which under legacy GAAP would have been recognized ratably. This provision also has resulted in some revenue from contracts signed prior to 2018 being accelerated and recorded to retained earnings instead of in our operating results in 2018 and beyond.
We have a limited number of contracts in which we offered extended payment terms for term licenses to our customers, including cases in which the license is delivered in full at the beginning of the contract. Under legacy GAAP, revenue was recognized when the payments became due, based upon the requirement that the fee be fixed or determinable. However, under the new guidance, revenue related to such arrangements is accelerated, with revenue related to the license recognized at the time of delivery, less a financing component (interest income) to be recognized over time based on the payment terms. The application of this provision has resulted in revenue from certain contracts signed prior to 2018 being accelerated and recorded to retained earnings instead of in our operating results in 2018 and beyond. This also impacts new contracts that we sign in 2018.
Under legacy GAAP, we recognized royalty revenue when it was reported to us by the licensee, typically one quarter after royalty-bearing units were shipped, at which time the fee is fixed or determinable. Under ASC 606, we now estimate royalty revenue from our royalty-based licenses in the period that the royalty-bearing event occurs. Thus, revenue from royalties reported to us in the first quarter of 2018 were recorded to retained earnings upon adoption of ASC 606, rather than being recognized as revenue as it would have been under legacy GAAP. This was partially offset by the recognition of revenue in the first quarter of 2018 for estimated royalties that will be reported to us in the second quarter of 2018.
ASC 606 requires certain incremental costs related to contract acquisition, such as sales commissions, and contract fulfillment costs to be capitalized and amortized over the expected period of benefit whereas the Company had previously recognized such expenses as incurred.
~~Please see Note 4 for the Company’s policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.~~
~~Statement of Cash Flows~~
~~In November 2016, the FASB issued ASU2016-18,~~~~Statement of Cash Flows (Topic 230): Restricted Cash~~~~, which requires companies to include amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconcilingbeginning-of-period~~ ~~andend-of-period~~ total amounts shown on the statement of cash flows. This guidance is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. We adopted ASU~~2016-18~~ ~~on January 1, 2018 and reflected restricted cash and restricted cash equivalents in thebeginning-of-period~~ ~~andend-of-period~~ amounts on the cash flows, on a retrospective basis. As of result of this adoption, the beginning-of-period amount on the statement of cash flows increased $18.0 million for the three months ended March 31, 2018 and March 31, 2017, respectively, to include restricted cash and restricted cash equivalent balances. The end-of-period amount on the statement of cash flows increased $16.0 million and $18.0 million for the three months ended March 31, 2018 and 2017, respectively, to include restricted cash and restricted cash equivalent balances.
~~Stock Compensation~~
~~In May 2017, the FASB issued ASU2017-09,~~~~Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.~~~~This guidance clarifies when companies would apply modification accounting to changes to the terms or conditions of a stock based payment award. The guidance narrows the definition of a modification.~~ This guidance is effective for annual and interim periods beginning after December 15, ~~2017.~~ 2018.
We adopted ASU~~2017-09~~2016-02 on January 1, ~~2018~~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 ~~there was no~~lease obligations from the balance sheet for all leases with an initial term of 12 months or less.
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 ASU2016-02), where entities recognize a cumulative effect to retained earnings at the date of adoption without restating prior periods’ balances or disclosures.
The adoption of ASU2016-02 on January 1, 2019, had a material impact on our consolidated ~~financial statements.~~
~~Pension Benefits~~
~~In March 2017, the FASB issued ASUNo. 2017-07,~~ ~~Compensation-Retirement Benefits (Topic 715)-Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ This guidance revises the presentation of the net periodic benefit cost in the income statement. The new standard will be effective for annual and interim periods beginning after December 15, 2017. We adopted ASU~~2017-07~~ ~~on January 1, 2018 and there was no~~balance sheet, but did not have a material impact on our consolidated ~~financial statements.~~
~~Pending~~statements of income or cash flows. The most significant impact of the adoption of ASU2016-02 was the recognition of additionalright-of-use assets and lease liabilities for operating leases. At adoption, the Company recognizedright-of-use assets of approximately $14.4 million and total lease liabilities of $15.9 million.
Derivatives
In August 2017, the FASB issued ASUNo. 2017-12,Derivatives and 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 ASU2017-12 on January 1, 2019 and there was no material impact on our consolidated financial statements.
Comprehensive Income
In February 2018, the FASB issued ASU2018-02,Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AccumulatedOther Comprehensive Income. 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.
Pending
Internal Use Software
In August 2018, the FASB issued ASU2018-15,Intangibles – Goodwill and Other –Internal-Use Software (Topic350-40): Customer’s Accounting for Implementation of Cost Incurred in a Cloud Computing Arrangement that is Considered a Service Contract,(“ASU2018-15”).This update clarifies the accounting for implementation costs related to a cloud computing arrangement that is a service contract previously defined in ASU2015-05. 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~~2017-12;~~2018-15; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.
Defined Benefit Pension Plan
In August 2018, the FASB issued ASU2018-14,Compensation—Retirement Benefits—Defined Benefit Plans—General: Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans,(“ASU2018-14”). 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 ASU2018-14; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

Fair Value Measurement

In August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820):Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU2018-13”). 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 ASU2018-13; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

Goodwill

In January 2017, the FASB issued ASU2017-04,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 for testing dates after January 1, 2017.~~permitted. We are currently evaluating the impact of the adoption of ASU2017-04; however, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

~~Leases~~

~~In February 2016, the FASB issued ASU2016-02,~~~~Leases (Topic 842): Amendments to the FASB Accounting Standards Codification,~~~~which replaces the existing guidance for leases. ASU2016-02~~ 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~~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 leases. The 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. In addition, ASU2016-02~~ requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. This guidance is effective for annual and interim periods beginning after December 15, 2018 and requires retrospective application. There are additional optional practical expedients that may be elected. The Company is currently developing its implementation plan and assessing the impact that adopting ASU~~2016-02~~ ~~will have on its consolidated financial statements and related disclosures.~~

4. Revenue Recognition

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.

We adopted ASC 606 on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under legacy GAAP. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of our products and services and will provide financial statement readers with enhanced disclosures.

Nature of Licenses and Services & Timing of Revenue Recognition

Creative Professional Revenue

Our Creative Professional revenue is primarily derived from rights to use font licenses, ~~from~~ custom font design services, ~~from~~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 toend-users through our direct sales organization,e-commerce websites and indirectly through third-party resellers. ~~Web font and digital ad related services refer to our web font services and web design tools.~~ Our customers include graphic designers, advertising agencies, media organizations and corporations.

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 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 tore-evaluate this conclusion.

OEM Revenue

Our OEM revenue is derived substantially from printer imaging, printer driver and display imaging ~~products. OEM revenue~~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 fromper-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 fromper-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 ourper-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.

Disaggregated Revenue

The following table presents our revenue disaggregated by the timing of revenue recognition as well as by type of product or services offered ~~(See~~(see Note 1213 for further information regarding revenue by major markets and revenue by geography):


	March 31, 2018						March 31, 2019						March 31, 2018
	Creative Professional		OEM		Total		Creative Professional		OEM		Total		Creative Professional		OEM		Total
License Revenue:
License revenue:
License transferred in point in time	$	24,879	$	20,333	$	45,212	$	24,139	$	17,733	$	41,872	$	24,879	$	20,333	$	45,212
License transferred over time		655				655		—		—		—		655		—		655
Service Revenue:
Service revenue:
Service transferred in point in time		470		656		1,126		432		196		628		470		656		1,126
Service transferred over time		8,994		696		9,690		8,192		664		8,856		8,994		696		9,690

Total	$	34,998	$	21,685	$	56,683	$	32,763	$	18,593	$	51,356	$	34,998	$	21,685	$	56,683

Significant Judgments

Our 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.

Judgment 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 the exception 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 aper-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 estimateper-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 ofper-unit royalties was $5.7 million and $4.3 million for the three months ended March 31, ~~2018.~~2019 and 2018, respectively.

As discussed above, 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

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, 2018 is $27.1 million. This amount~~ consists principally of amounts billed for undelivered services that are included in deferred revenue, ~~totaling approximately $17.3 million,~~ 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)~~, totaling approximately $9.8 million. Of these amounts, approximately $20.2 million~~. Substantially all the long-term amount is ~~expected to be recognized as revenue within the next 12 months, with substantially all of the remainder~~ expected to be recognized as revenue within the following 24 month ~~period,~~period. The aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied or are partially satisfied as ~~shown~~of March 31, 2019 and December 31, 2018 are in the table below (in thousands):


							March 31, 2019						December 31, 2018
	Current		Long-term		Total		Current		Long-term		Total		Current		Long-term		Total
Deferred revenue	$	15,889	$	1,372	$	17,261	$	11,941	$	1,018	$	12,959	$	10,337	$	1,552	$	11,889
Unbilled backlog		4,343		5,482		9,825		4,490		1,406		5,896		5,666		1,837		7,503

Total	$	20,232	$	6,854	$	27,086	$	16,431	$	2,424	$	18,855	$	16,003	$	3,389	$	19,392

Contract Balances

Timing 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 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.~~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.~~appropriate at March 31, 2019 and December 31, 2018.

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 ~~period was~~periods were approximately $5.7 million and $6.8 ~~million.~~million, 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.~~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 to Obtain and Fulfill a Contract

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, ~~2018~~2019 was ~~$1.4 million;~~$3.8 million, of which ~~$0.5~~$0.7 million was short-term and has been included in prepaid expenses and other current assets and ~~$0.9~~$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 anopt-out clause or the cancellation of an anticipated renewal was not material and was charged to operating expenses in the first quarter of 2019.

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.

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.

5. Restricted Cash

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, 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.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statements of cash flows (in thousands):

   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




6. Fair Value Measurements
The following table presents our financial assets and liabilities that are carried at fair value ~~classified according to the three categories described above~~ (in thousands):

   Fair Value Measurement at March 31, 2018 Fair Value Measurement at March 31, 2019
   Total    Quoted Prices in
Active Markets for
Identical Assets
(Level 1)    Significant Other
Observable Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3) Total Quoted Prices 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
   $ 3,072    $ 3,072    $ —      $ —   $ 14,038 $ 14,038 $ —   $ —
Cash equivalents—commercial paper
   16,476    —      16,476    —
Cash equivalents—corporate bonds
   1,507    —      1,507    —
Cash equivalents—U.S. government and agency securities
   7,487    7,487    —      —
Restricted cash equivalents—money market fund
   10,000    10,000    —      —   6,000 6,000 —   —








Total current assets
   38,542    20,559    17,983    —   $ 20,038 $ 20,038 $ —   $ —
Restricted cash equivalents—money market fund
   6,000    6,000    —      —








Total long term assets
   6,000    6,000    —      —








Total assets
   $ 44,542    $ 26,559    $ 17,983    $ —   $ 20,038 $ 20,038 $ —   $ —








   Fair Value Measurement at December 31, 2017 Fair Value Measurement at December 31, 2018
   Total    Quoted Prices in
Active Markets for
Identical Assets
(Level 1)    Significant Other
Observable Inputs
(Level 2)    Significant
Unobservable
Inputs
(Level 3) Total Quoted Prices 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
   $ 2,014    $ 2,014    $ —      $ —   $ 28,940 $ 28,940 $ —   $ —
Cash equivalents—commercial paper
   16,477    —      16,477    —
Cash equivalents—corporate bonds
   1,457    —      1,457    —
Cash equivalents—U.S. government and agency securities
   10,488    10,488    —      —
Restricted cash equivalents—money market fund
   3,000    3,000    —      —   6,000 6,000 —   —
Restricted cash equivalents—U.S. government and agency security fund
   8,987    8,987    —      —








Total current assets
   42,423    24,489    17,934    —   $ 34,940 $ 34,940 $ —   $ —
Restricted cash equivalents—money market fund
   6,000    6,000    —      —








Total long term assets
   6,000    6,000    —      —








Total assets
   $ 48,423    $ 30,489    $ 17,934    $ —   $ 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 fromtime-to-time as contingent consideration. The fair value of our cash equivalents are either based on quoted prices 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 ournon-performance risk and that of our counterparties. At March 31, ~~2018,~~2019, we had one30-day forward contract to sell ~~2.4~~2.6 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair ~~value; and at~~value. At December 31, ~~2017,~~2018, we had one30-day forward contract to sell ~~2.5~~2.7 million British pounds sterling and purchase $3.4 million that together, had an immaterial fair value.

The Company’snon-financial assets andnon-financial liabilities subject tonon-recurring measurements include goodwill and intangible assets.

6.7. Intangible Assets

Intangible assets as of March 31, ~~2018~~2019 and December 31, ~~2017~~2018 were as follows (dollar amounts in thousands):


	Weighted- Average Amortization Period (Years)				March 31, 2018												December 31, 2017											Weighted- Average Amortization Period (Years)		March 31, 2019												December 31, 2018
				Gross Carrying Amount				Accumulated Amortization				Net Balance				Gross Carrying Amount				Accumulated Amortization				Net Balance				Weighted- Average Amortization Period (Years)	Gross Carrying Amount				Accumulated Amortization				Net Balance				Gross Carrying Amount				Accumulated Amortization				Net Balance
Customer relationships			10			$	68,479			$	(55,068	)		$	13,411			$	68,296			$	(54,213	)		$	14,083		10		$	64,711			$	(55,797	)		$	8,914			$	64,822			$	(55,288	)		$	9,534
Acquired technology		11				69,443				(50,107	)			19,336				69,200				(48,945	)			20,255		11			68,745				(53,693	)			15,052				68,823				(52,747	)			16,076
Non-compete agreements		4				14,678				(13,661	)			1,017				14,632				(13,470	)			1,162		4			13,611				(13,136	)			475				13,636				(13,073	)			563
Indefinite-lived intangible assets:
Trademarks						45,339				—				45,339				44,956				—				44,956					43,982				—				43,982				44,126				—				44,126
Domain names						4,400				—				4,400				4,400				—				4,400					4,400				—				4,400				4,400				—				4,400

Total					$	202,339			$	(118,836	)		$	83,503			$	201,484			$	(116,628	)		$	84,856				$	195,449			$	(122,626	)		$	72,823			$	195,807			$	(121,108	)		$	74,699

7.8. 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 andnon-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 leaseright-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 to the terms of the lease agreement for the Company’s NY office, the Company obtained a standbyletter-of-credit in the amount of approximately $0.5 million as security on the lease obligation. Theletter-of credit is a reduction of the available borrowings under the Credit facility.

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

   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            —

Supplemental cash flow information related to leases was as follows (in thousands):

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

   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 % —
As of 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.
Maturities of operating lease liabilities were as follows (in thousands):
Twelve months ending March 31:
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


Maturities of lease liabilities as of December 31, 2018 were as follows:
Years ending December 31:
2019
   $ 4,728
2020
   3,131
2021
   2,806
2022
   2,652
2023
   1,256
Thereafter
   2,004


Total
   $ 16,577


9. Debt
On ~~September 15, 2015,~~March 22, 2019, the Company entered into a new credit agreement (the “~~New~~“New Credit ~~Agreement~~”Agreement”) by and among the Company, the Company’s subsidiary, Monotype Imaging Inc., (“the Borrower”), any financial institution that becomes a Lender ~~(as defined therein)~~ and ~~Silicon Valley~~ Bank of America, N.A., as ~~agent which provides for~~administrative agent. Pursuant to the New Credit Agreement the Lenders have agreed to provide the Borrower with a five-year ~~$150.0~~$200.0 million senior secured revolving credit facility (the “~~Credit Facility~~”“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 ~~$200.0~~$300.0 million. The Credit Facility ~~is available~~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 ~~a revolving basis through~~ September 15, 2020. ~~Repayment~~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 ~~any amounts borrowed is not required until maturity of the Credit Facility; however, the Company may repay any amounts borrowed~~credit issued in connection with a facility lease agreement, leaving $74.5 million available for borrowings at ~~any time, without premium or penalty.~~December 31, 2018. At March 31, ~~2018 and December 31, 2017,~~2019, the Company had ~~$90.0 million and $93.0~~$70.0 million outstanding under the Credit Facility. ~~At March 31, 2018 and December 31, 2017, available~~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 ~~$59.5 million and $56.5~~$129.5 million available for ~~borrowing~~borrowings at March 31, ~~2018 and December 31, 2017, respectively.~~2019.

Borrowings under the Credit Facility bear interest through March 21, 2024 at a variable rate ~~not less than zero based upon,~~per annum equal to LIBOR plus between 1.0% and 1.625%, or at the ~~Company’s~~Borrower’s option, ~~either LIBOR or~~ the higher of (i) the prime rate as ~~published in the Wall Street Journal,~~announced by Bank of America and (ii) 0.5% plus the overnight federal funds rate, plus in each case, ~~an applicable margin. The applicable~~between 0.0% and 0.625%, with the exact interest rate margin ~~for LIBOR loans,~~determined based on the ~~applicable~~consolidated leverage ~~ratio,~~ratio. The Company is ~~1.25%, 1.50% or 1.75% per annum, and the applicable margin for base rate loans,~~required to pay a commitment fee, based on the ~~applicable~~consolidated leverage ratio, ~~is either~~equal to 0.175%, 0.20%, 0.225% or 0.25%~~, 0.50%~~ 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 $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, 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 thepro-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, ~~0.75% per annum.~~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, ~~2018,~~2019, our ~~rate, inclusive of applicable margins, was 3.6% for LIBOR, and at December 31, 2017, our rate, inclusive of applicable margins, was 3.1% for LIBOR.~~

~~As of March 31, 2018, the maximum leverage ratio permitted was 3.00:1.00 and our~~consolidated leverage ratio was ~~2.24:1.00~~0.72 to 1.0 and ~~the minimum fixed charge~~our consolidated interest coverage ratio was ~~1.25:1.00~~18.61 to 1.0. The New Credit Agreement also contains customary affirmative and ~~our fixed charge ratio was 3.42:1.00.~~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, cashnon-operating costs and other expenses or losses minus cashnon-operating gains and othernon-cash gains; provided, however that the aggregate of all cashnon-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. ~~In addition,~~The obligations of the Borrower under the Credit ~~Facility is~~Facilities are unconditionally guaranteed by the Company and certain subsidiaries and secured by a lien on substantially all of the ~~Company’s~~present and ~~its domestic subsidiaries’ tangible~~future property and ~~intangible property by a pledge of all~~assets of the ~~equity interests of the Company’s direct~~Company and ~~indirect domestic~~such subsidiaries, ~~and by a pledge by the Company’s domestic subsidiaries of 65% of the equity of their direct foreign subsidiaries,~~in each case, subject to limited ~~exceptions. In addition to other covenants, the New Credit Agreement places limits on the Company~~exceptions and its subsidiaries’ ability to incur debt or liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates and alter its business. The Company was in compliance with the covenants under the Credit Facility as of March 31, 2018.exclusions.

~~8. Defined Benefit Pension Plan~~

Our German subsidiary maintains an unfunded defined benefit pension plan which covers substantially all employees who joined the company prior to the plan’s closure to new participants in 2006. Participants are entitled to benefits in the form of retirement, disability and surviving dependent pensions. Benefits generally depend on years of service and the salary of the employees.

~~The components of net periodic benefit cost included in the accompanying condensed consolidated statements of operations were as follows (in thousands):~~

   Three Months Ended
March 31,
   2018    2017
Service cost
   $ 28    $ 22
Interest cost
   27    25
Amortization
   24    22




Net periodic benefit cost
   $     79    $     69




9.10. Income Taxes
~~Income Taxes~~
A reconciliation of income taxes computed at federal statutory rates to income tax expense (benefit) is as follows (dollar amounts in thousands):

   Three Months Ended March 31,
   2018 2017
Benefit from income taxes at statutory rate
   $ (770 )    21.0 % $ (411 )    35.0 %
State and local income taxes, net of federal tax benefit
   (78 )    2.1 % (20 )    1.7 %
Stock based compensation
   (22 )    0.6 % (20 )    1.7 %
Foreign rate differential
   (1,237 )    33.8 % 45    (3.8 )%
Research credits
   18    (0.5 )% 59    (5.0 )%
Permanentnon-deductible acquisition-related expense
   (301 )    8.2 % (245 )    20.9 %
Net (windfall) shortfall on stock based compensation
   (117 )    3.2 % 471    (40.1 )%
Other, net
   42    (1.1 )% 20    (1.8 )%






Reported income tax benefit
   $ (2,465 )    67.3 % $ (101 )    8.6 %






   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 )% —      —
Permanentnon-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 %






As of March 31, ~~2018,~~2019, the reserve for ~~uncertain~~unrecognized tax ~~positions~~benefits was approximately ~~$6.8 million. Of this amount, $4.6~~$4.0 million, all of which is recorded as a reduction of deferred tax ~~assets and $2.2 million is classified as long-term liabilities.~~assets.
As disclosed in the Company’s 2017 Form 10-K, the Company recorded the tax effects of the 2017 Tax Cuts and Jobs Act (TCJA) in the consolidated financial statements for the year ended December 31, 2017. The new legislation required the Company to pay tax on the unremitted earnings of its foreign subsidiaries through December 31, 2017. Because of the complexities involved in determining the previously unremitted earnings and profits of all our foreign subsidiaries, the Company is still in the process of obtaining, preparing, and analyzing the required information, as permitted in accordance with Staff Accounting Bulletin No. 118. The Company recorded an initial estimate of the tax on unremitted earnings of approximately $0.2 million, however, this amount was offset by available foreign tax credits, and as a result the net estimated amount payable related to the deemed repatriation of foreign earnings was zero. The Company is continuing to update this estimate, but does not expect there to be a material change in the estimate once it is finalized.
~~10.~~11. Net ~~Loss~~Income (Loss) Per Share
For the three months ended March 31, ~~2018~~2019 and ~~2017, earnings was not allocated to participating securities in the calculation of basic and diluted earnings per share as there were net losses. For the three months ended March 31,~~ 2018, ~~and 2017,~~ the net ~~loss~~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, thetwo-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 ~~2017, the~~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 ~~not~~ included in the computation of net ~~loss~~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 ~~loss~~income (loss) per share and a reconciliation of the numerator and denominator used in the calculation of diluted net ~~loss~~income (loss) per share (in thousands, except share and per share data):

   Three Months Ended
March 31,
   2018    2017
Numerator:

Net loss, as reported
   $ (1,199 )    $ (1,075 )
Less: net loss attributable to participating securities
   —      —




Net loss available to common shareholders—basic and diluted
   $ (1,199 )    $ (1,075 )




Denominator:

Weighted-average shares of common stock outstanding
   41,846,619    41,469,616
Less: weighted-average shares of unvested restricted common stock outstanding
   (1,840,830 )    (1,993,177 )




Weighted-average number of common shares used in computing basic and diluted net loss per common share
   40,005,789    39,476,439




Net loss per share applicable to common shareholders—basic and diluted
   $ (0.03 )    $ (0.03 )




   Three Months Ended
March 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 )

   Three Months Ended
March 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 )




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

   Three Months Ended
March 31, Three Months Ended
March 31,
   2018    2017 2019 2018
Options
   620,312    952,422 490,897 620,312
Unvested restricted common stock
   685,719    551,499        912,271        685,719
Unvested restricted stock units
   64,024    59,582 81,854 64,024
~~11.~~ 12. Stockholders’ Equity
Stock purchases
On May 3, 2018, 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.

Stock Based Compensation

We account for stock based compensation in accordance with ASC Topic No. 718,Compensation – Stock Compensation,which requires the measurement of compensation costs at fair value on the date of grant and recognition of compensation expense over the service period for awards expected to vest. The following presents the impact of stock based compensation expense on our condensed consolidated statements of operations (in thousands):


	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Marketing and selling	$	1,734	$	2,330	$	1,770	$	1,734
Research and development		988		1,018		722		988
General and administrative		1,525		1,483		1,727		1,525

Total expensed		4,247		4,831		4,219		4,247
Property and equipment		14		22		—		14

Total stock based compensation	$	4,261	$	4,853	$	4,219	$	4,261

In the first quarter of 2018 and 2017, approximately $14 thousand and $22 thousand, respectively, of stock based compensation was capitalized in connection with internal software projects, and this amount is included in property and equipment, net in our condensed consolidated balance sheets. As of March 31, ~~2018,~~2019, the Company had ~~$37.8~~$30.5 million of unrecognized compensation expense related to employees and ~~directors~~directors’ unvested stock ~~options~~awards and ~~restricted~~ stock ~~awards~~units that are expected to be recognized over a weighted average period of ~~2.6~~2.3 years.

~~12.~~13. Segment Reporting

We view our operations and manage our business as one segment: the development, marketing and licensing of ~~design assets~~technologies and ~~technologies.~~fonts. Factors used to identify our single segment include the financial information available for evaluation by our chief operating decision maker, our president and chief executive officer, in ~~making decisions about~~determining how to allocate resources and assess performance. While our technologies and services are sold into two principal markets, Creative Professional and OEM, ~~expenses~~assets and ~~assets~~expenses are not formally allocated to these market segments, and operating results are assessed on an aggregate basis to make decisions about the allocation of resources. The following table presents revenue for these two major markets (in thousands):


	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Creative Professional	$	34,998	$	27,071	$	32,763	$	34,998
OEM		21,685		25,394		18,593		21,685

Total	$	56,683	$	52,465	$	51,356	$	56,683

Geographic segment information

We market our products and services ~~principally~~ through offices in the United States, United Kingdom, Germany, China, Republic of Korea and Japan. We report revenue based on the geographic location of our customers. For example, licenses may be sold to large international companies, which may be headquartered in the Republic of Korea, ~~but the sales are received and recorded by our subsidiary located~~such revenues would be reported in the ~~United States.~~Republic of Korea and included in the revenue for Rest Of World in the table below.

The following table summarizes revenue by customer location (in thousands of dollars, except percentages):


	Three Months Ended March 31,										Three Months Ended March 31,
	2018					2017					2019					2018
	Revenue		% of Total			Revenue		% of Total			Revenue		% of Total			Revenue		% of Total
United States	$	24,823		43.8	%	$	23,597		45.0	%	$	23,216		45.2	%	$	24,823		43.8	%
Japan		11,652		20.5			14,461		27.6			9,634		18.8			11,652		20.5
Europe, Middle East, and Africa (EMEA)		15,066		26.6			10,860		20.7			13,457		26.2			15,066		26.6
Rest of the World		5,142		9.1			3,547		6.7			5,049		9.8			5,142		9.1

Total	$	56,683		100.0	%	$	52,465		100.0	%	$	51,356		100.0	%	$	56,683		100.0	%

Long-lived assets, which ~~include~~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):


	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Long-lived assets:
United States	$	313,210	$	314,930	$	311,124	$	303,046
United Kingdom		4,104		4,004		4,198		3,484
Germany		59,591		58,319		53,615		54,357
Asia (including Japan)		3,506		3,497		5,665		4,139

Total	$	380,411	$	380,750	$	374,602	$	365,026

~~13.~~14. Restructuring

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.

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 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.

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

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




Total restructuring
   $ (24 )    $ 194




The following presents a roll forward of the restructuring reserves and provision activity (in thousands):
   Personnel
related    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




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

15. Commitments and Contingencies

Legal Proceedings

Fromtime-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.

Licensing Warranty

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 aone-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 acase-by-case basis, increasing the maximum potential liability to ~~agreed upon~~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, ~~2018~~2019 or December 31, ~~2017.~~2018.

~~14.~~16. Subsequent Events

Stock Purchase Program

Subsequent to March 31, 2019, the Company purchased 44,600 shares 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.

Dividend Declaration

On April ~~2, 2018,~~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 ~~2, 2018,~~1, 2019, and the dividend is payable to shareholders of record on July ~~20, 2018.~~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.

~~Item 2.~~

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements and Projections

This Quarterly Report onForm 10-Q contains forward looking statements. Forward looking statements relate to future events or our future financial performance. We generally identify forward looking statements by terminology such as “may,” “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

trends that we believe may affect 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 Form10-K for the year ended December 31, ~~2017,~~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 onForm 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 onForm 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

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 ~~14,000~~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™~~Gothic^™, FF Meta and ~~Droid™~~Droid^™ typefaces, and support more than 250 Latin andnon-Latin languages. Oure-commerce websites, includingmyfonts.com, fonts.com, linotype.com,and fontshop.com, which attracted more than 50 million visitors in ~~2017~~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.

Sources of Revenue

We derive revenue from 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, such as 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.

Some of our revenue streams, 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:


	Three Months Ended March 31,										Three Months Ended March 31,
	2018					2017					2019					2018
	Revenue		% of Total			Revenue		% of Total			Revenue		% of Total			Revenue		% of Total
	(In thousands of dollars, except percentages)										(In thousands of dollars, except percentages)
United States	$	24,823		43.8	%	$	23,597		45.0	%	$	23,216		45.2	%	$	24,823		43.8	%
Japan		11,652		20.5			14,461		27.6			9,634		18.8			11,652		20.5
Europe, Middle East, and Africa (EMEA)		15,066		26.6			10,860		20.7			13,457		26.2			15,066		26.6
Rest of the World		5,142		9.1			3,547		6.7			5,049		9.8			5,142		9.1

Total	$	56,683		100.0	%	$	52,465		100.0	%	$	51,356		100.0	%	$	56,683		100.0	%

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, revenue from customers outside the United States comprised ~~56.2%~~54.8% and ~~55.0%~~56.2%, respectively, of our total revenue. We expect that sales by our international subsidiaries will continue to represent a substantial portion of our revenue for the foreseeable future. Future international revenue will depend on the continued use and expansion of our ~~design assets and technology~~products worldwide.

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, ~~2018~~2019 and ~~2017,~~2018, our top ten licensees by revenue, most of which are OEM customers, accounted for approximately ~~23.0%~~24.6% and ~~31.3%~~23.0% of our total revenue, respectively. No one customer accounted for more than ~~10%~~10.0% of our total revenue for the three months ended March 31, ~~2018~~2019 or ~~2017.~~

~~Creative Professional Revenue~~

~~For a description of our Creative Professional revenue and related accounting policy, see Note 4.~~

~~OEM Revenue~~

~~For a description of our OEM revenue and related accounting policy, see Note 4.~~2018.

Cost of Revenue

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 ~~our~~ SaaS based offerings and cloud-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.

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 straight-line method to amortize ~~our~~ 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.

Gross Profit

Our gross profit percentage is influenced by a number of factors including product mix, pricing and volume at any particular time. However, ~~our~~ cost of OEM revenue is typically lower than ~~our~~ cost of Creative Professional revenue because we own a higher percentage of the fonts licensed to ~~our~~ 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 ~~our~~ custom font design and SaaS based service revenue is substantially higher than the cost of ~~our~~ other revenue. The relative cost of ~~our~~ 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. ~~Our~~ Creative Professional revenue is growing at a faster rate than ~~our~~ OEM revenue. We expect these trends to continue. Our gross profit is subject to variability fromperiod-to-period, depending on the product mix and the level of custom font design and SaaS based service revenue.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with GAAP and our discussion and analysis of our financial condition and results of operations requires us to make judgments, assumptions and estimates that affect the amounts reported in our 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 Form10-K for the year ended December 31, ~~2017, except for the adoption as of January 1, 2018, of guidance in ASC 606 as more fully described in Note 3 to the accompanying unaudited condensed consolidated quarterly statements.~~2018.

Results of Operations for the Three Months Ended March 31, ~~2018~~2019 Compared to Three Months Ended March 31, ~~2017~~2018

We derive revenue from 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, such as font related services, custom font design and post contract support as service revenue. All other revenue is classified as license revenue. Revenue and cost of revenue, bifurcated into license and service, is as follows:


	Three Months Ended March 31,						Three Months Ended March 31,
	2018		2017		Increase		2019		2018		(Decrease)
License revenue	$	45,867	$	44,007	$	1,860	$	41,872	$	45,867	$	(3,995	)
Service revenue		10,816		8,458		2,358		9,484		10,816		(1,332	)
Cost of revenue—license		9,612		6,804		2,808		6,802		9,612		(2,810	)
Cost of revenue—service		2,824		1,974		850		2,801		2,824		(23	)

License revenue ~~increased~~decreased primarily due to the ~~growth~~decline in ~~sales of~~printer revenue from our ~~enterprise~~printer imaging electronic customers ~~including~~and a decline in revenue from our web channels in the ~~launch of our Mosaic product offering, partially offset by decreases~~three months ended March 31, 2019, as compared to the same period in 2018. Service revenue decreased in the three months ended March 31, 2019, as compared to the same period in 2018, mainly due to ~~certain one-time printer revenue recognized~~increased customer churn in the ~~first quarter~~last half of 2017 as a result of conversion of customers to fixed fee contracts from royalty bearing contracts. There was no corresponding item in the current period. Additionally, we recorded lower royalty based revenue as a result of the adoption of ASC 606. We now estimate and accrue our royalty-based revenue in the quarter when the royalty-based units are shipped, as opposed to when those shipments were reported to us by the licensee under legacy GAAP. This change had the effect of shifting traditional holiday seasonality revenue for consumer electronics from the first quarter to the fourth quarter.2018.

~~Service revenue has increased as a percentage of total revenue due primarily to the growth of our SaaS-based product offerings.~~ Gross profit from license revenue, before amortization of acquired technology, ~~decreased~~increased to 83.9% from ~~84.5% to~~ 79.0%~~. These decreases are primarily~~ mainly due to theone-timeadditionalnon-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 ~~76.7%~~73.9% to ~~73.9%.~~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.

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.

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
March 31,
   2018 2017
Revenue:

Creative Professional
   61.7 % 51.6 %
OEM
   38.3 48.4


Total revenue
   100.0 100.0
Cost of revenue
   22.0 16.7
Cost of revenue—amortization of acquired technology
   1.5 1.7


Total cost of revenue
   23.5 18.4


Gross profit
   76.5 81.6
Marketing and selling
   35.4 40.6
Research and development
   16.6 18.2
General and administrative
   27.7 20.8
Amortization of other intangible assets
   1.8 1.9


Total operating expenses
   81.5 81.5


(Loss) income from operations
   (5.0 ) 0.1
Interest expense, net
   1.3 1.2
(Gain) loss on foreign exchange
   (0.1 ) 1.0
Loss on derivatives
   0.2 0.1
Other
   —   —


Total other expenses
   1.4 2.3
Loss before benefit from income taxes
   (6.4 ) (2.2 )
Benefit from income taxes
   (4.3 ) (0.2 )


Net loss
   (2.1 %) (2.0 %)


   Three Months Ended
March 31,
   2019 2018
Revenue:

Creative Professional
   63.8 % 61.7 %
OEM
   36.2 38.3


Total revenue
   100.0 100.0
Cost of revenue
   18.7 22.0
Cost of revenue—amortization of acquired technology
   1.7 1.5


Total cost of revenue
   20.4 23.5


Gross profit
   79.6 76.5
Marketing and selling
   33.3 35.4
Research and development
   14.5 16.6
General and administrative
   23.4 27.7
Amortization of other intangible assets
   1.6 1.8


Total operating expenses
   72.8 81.5


Income (loss) from operations
   6.8 (5.0 )
Interest expense, net
   1.4 1.3
Loss on extinguishment of debt
   0.1 —
Loss (gain) on foreign exchange
   0.1 (0.1 )
Loss on derivatives
   0.2 0.2
Other
   —   —


Total other expenses
   1.8 1.4
Income (loss) before benefit from income taxes
   5.0 (6.4 )
Benefit from income taxes
   (0.2 ) (4.3 )


Net income (loss)
   5.2 % (2.1 %)


The following discussion compares the three months ended March 31, ~~2018~~2019 with the three months ended March 31, ~~2017.~~2018.
Revenue by Market
We view our operations and manage our business as one segment: the development, marketing and licensing of ~~design assets~~technologies and ~~technologies.~~fonts. Factors used to identify our single segment include the financial information available for evaluation by our chief operating decision maker in ~~determining~~making decisions about how to allocate resources and assess performance. While our technologies and services are sold to customers in two principal markets, Creative Professional and consumer device manufacturers and independent software vendors, together OEM, expenses and assets are not formally allocated to these markets, and operating results are assessed on an aggregate basis to make decisions about the allocation of resources. The following table presents revenue for these two principal markets (in thousands):

   Three Months Ended
March 31,       Three Months Ended
March 31,
   2018    2017    Increase/
(Decrease)    2019    2018    (Decrease)
Creative Professional
   $ 34,998    $ 27,071    $ 7,927    $ 32,763    $ 34,998    $ (2,235 )
OEM
   21,685    25,394    (3,709 )    18,593    21,685    (3,092 )












Total revenue
   $ 56,683    $ 52,465    $ 4,218    $ 51,356    $ 56,683    $ (5,327 )












Revenue
Revenue was ~~$56.7~~$51.4 million and ~~$52.5~~$56.7 million for the three months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively, ~~an increase~~a decrease of ~~$4.2~~$5.3 million, or ~~8.0%~~9.4%.

Creative Professional revenue ~~increased $7.9~~was $32.8 million ~~or 29.3%, to~~and $35.0 million for the three months ended March 31, 2019 and 2018, ~~as compared~~respectively, a decrease of $2.2 million, or 6.4%, due to ~~$27.1 million for the three months ended March 31, 2017,~~a decline in certain SAAS-based revenue andweb-based sales mainly due to ~~growth~~increased customer churn in ~~sales~~the last half of ~~revenue from our enterprise customers, including the launch of our Mosaic solution and higher service revenue as SaaS offerings continue to become a larger part of our offering portfolio.~~2018.

OEM revenue decreased ~~$3.7~~$3.1 million, or ~~14.6%~~14.3%, to $18.6 million in the first quarter of 2019, as compared to $21.7 million in the first quarter of 2018, ~~as compared~~mainly due to ~~$25.4 million~~a decline in ~~the first quarter of 2017. Revenue~~printer revenue. The decrease in printer revenue, period over period, is largely due to a decline in revenue from our printer imaging electronic OEM ~~customers decreased period over period largely due to certainone-time~~ printer revenue recognized in the first quarter of 2017 as a result of conversion of customers to fixed fee contracts from royalty bearing contracts. There was no corresponding item in the current period. Additionally, we recorded lower royalty based revenue as a result of the adoption of ASC 606. We now estimate and accrue our royalty-based revenue in the quarter when the royalty-based units are shipped, as opposed to when those shipments were reported to us by the licensee under legacy GAAP. This change had the effect of shifting traditional holiday seasonality revenue for consumer electronics from the first quarter to the fourth quarter.customers.

Cost of Revenue and Gross Profit

Cost of revenue, excluding amortization of acquired technology, ~~was $12.4~~decreased $2.8 million, or 22.8%, to $9.6 million and ~~$8.8~~$12.4 million in the three months ended March 31, 2019 and 2018, ~~and 2017,~~ respectively. ~~The increase in cost of revenue in~~In the first quarter of 2018, ~~is partially a result of the increase in revenue and partially due to~~there was $2.2 million of ~~additional~~non-recurring royalty expense ~~for which there was no corresponding revenue item~~ in connection with the ~~period in accordance with~~adoption of ASC 606. As a percentage of sales, cost of revenue, excluding amortization of acquired technology, was ~~22.0%~~18.7% and ~~16.7%~~22.0% of total revenue in the three months ended March 31, 2019 and 2018, ~~and 2017, respectively.~~respectively, a decline of 3.3%.

The portion of cost of revenue consisting of amortization of acquired technology was unchanged at $0.9 million for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Gross profit ~~decreased 5.1%~~increased 3.1% to 79.6% in the three months ended March 31, 2019, as compared to 76.5% in the three months ended March 31, ~~2018, as compared to 81.6% in the three months ended March 31, 2017.~~2018. The ~~decrease~~increase in gross profit in the three months ended March 31, ~~2018,~~2019, as compared to the same period in ~~2017,~~2018, was primarily due to theone-time additionalnon-recurring royalty expense in the prior period that did not occur in the current period, as described above.

Operating Expenses

Marketing and Selling.Marketing and selling expense ~~was~~decreased $3.0 million, or 14.7%, to $17.1 million in the three months ended March 31, 2019, as compared to $20.1 ~~million and $21.2~~ million in the three months ended March 31, 2018, ~~and 2017, respectively, a decrease of $1.1 million, or 5.5%, mainly~~primarily due to lower personnel expenses. Personnel and personnel related expenses decreased ~~$1.3~~$2.4 million in the first quarter of ~~2018,~~2019, as compared to the same period in ~~2017, partially~~2018, primarily due to ~~the Olapic~~lower headcount from our restructuring actions in the ~~fall~~second and fourth quarters of ~~2017~~2018 and other decreases in headcount ~~which were partially offset by increased~~and lower variable compensation ~~and annual salary increases. A net increase~~as a result of lower revenue. Targeted marketing spending decreased $0.4 million in ~~infrastructure expenses, such~~the three months ended March 31, 2019, as ~~software and facilities, provided a $0.2 million increase~~compared to the same period ~~over period.~~in 2018, due to portfolio decisions around discretionary programs.

Research and Development. Research and development expense ~~was $9.4~~decreased $1.9 million, ~~and $9.5~~or 20.0%, to $7.4 million in the three months ended March 31, 2019, as compared to $9.3 million in the three months ended March 31, 2018, primarily due to lower personnel expenses. Personnel and ~~2017, respectively, a decrease~~personnel related expenses decreased mainly due to lower headcount from restructuring actions in the second and fourth quarters of ~~$0.1 million, or 1.2%.~~2018.

General and Administrative. General and administrative expense ~~increased $4.8~~decreased $3.6 million, or ~~43.6%~~23.0%, to ~~$15.7~~$12.0 million in the three months ended March 31, 2019, as compared to $15.6 million in the three months ended March 31, 2018. Outside consulting and legal expenses decreased $3.2 million in the three months ended March 31, 2019, as compared to the same period in 2018, primarily due to additional expenses incurred in the prior period related to shareholder activities. Personnel and personnel related expenses decreased $0.4 million in the three months ended March 31, 2019, as compared to the same period in 2018, mainly the result of restructuring actions in the fourth quarter of 2018.

Restructuring.Restructuring expense decreased $0.2 million, or 112.4%, due to a credit of $24 thousand in the three months ended March 31, 2019 from $0.2 million in the three months ended March 31, 2018 ~~as compared~~due to ~~$10.9 million~~severance expense and charges associated with the closure of one of our regional offices in the three months ended March 31, 2017. Outside consulting and legal expenses increased $3.2 million in the first quarter of 2018, as compared to the same period in 2017, primarily due to additional expenses incurred related to shareholder activities. Personnel and personnel related expenses increased $1.1 million in the three months ended March 31, 2018, as compared to the same period in 2017, the result of increased headcount mainly from key hiring during the second half of 2017 and annual salary increases. Increased infrastructure expenses, such as software expenses and depreciation, together contributed $0.5 million to the overall increase in general and administrative expenses, period overprior period.

Amortization of Other Intangible Assets. Amortization of other intangible assets was ~~unchanged at~~$0.8 million and $1.0 million for the three months ended March 31, 2019 and 2018, ~~and 2017.~~respectively, a decrease of $0.2 million, or 18.8%, mainly due to the write off intangible assets associated with the Swyft business in the second quarter of 2018.

Interest Expense, Net

Interest expense, net of interest income was ~~$0.7~~$0.8 million and ~~$0.6~~$0.7 million for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, an increase of $0.1 million, or ~~15.4%~~5.9%, mainly due to borrowings under our revolving ~~line~~lines of credit.

Loss (Gain) ~~Loss~~ on Foreign Exchange

~~(Gain) loss~~Loss (gain) on foreign exchange was a loss of $66 thousand and gain of $34 thousand ~~and a loss $0.6 million~~ in the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~gain~~loss and ~~loss~~gain in each of the periods was primarily the result of currency fluctuations on our foreign denominated receivables and payables.

Loss on Derivatives

Loss on derivatives was ~~a loss of~~ $0.1 million ~~in the first quarter of 2018, as compared to a loss of $54 thousand~~and $0.1 million in the three months ended March 31, ~~2017,~~2019 and 2018, respectively, the net result of changes in the market value of our30-day forward currency derivative contracts.

~~Benefit from~~Provision for (Benefit from) Income Taxes

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, our effective tax rate was ~~67.3%~~a benefit of 5.5% and ~~8.6%~~a provision of 67.3%, respectively. Our effective tax ~~rate~~benefit of ~~67.3%~~5.5% for the three months ended March 31, ~~2018~~2019 is significantly ~~higher~~lower than our ~~2017~~ effective tax rate for the same period in 2018, primarily due to the ~~enactment~~increase in forecasted full yearpre-tax income for 2019 as compared to 2018, and the reversal of reserves for unrecognized tax benefits. Following is a more detailed discussion of the decrease in the effective rate:

The impact of foreign earnings increased our effective tax rate by 3.6% in the first quarter of 2019, as compared to 33.8% in the same period in 2018, due to our ability to better utilize foreign tax credits and to limit the amount of income subject to the Global Intangible Low Taxed Income (“GILTI”) provisions. In the prior period, these provisions of the Tax Cuts and Jobs Act (“The Act”) ~~in December 2017. Significant changes resulting primarily from The Act included:~~

~~The statutory tax rate in the three months ended March 31, 2018 is 21.0%, as compared to the U.S. statutory tax rate of 35.0% in the same period in 2017.~~

Foreign rate differential increased our effective rate 33.8% in the three months ended March 31, 2018, as compared to a decrease of 3.8% in the same period in 2017, due to changes in tax treatment of foreign earnings under The Act. These changes include significant new limitations on the ability to utilize foreign tax credits, and the effects of the new Global Intangible Low Taxed Income (GILTI) provisions. These provisions have resulted in a significantly higher effective tax rate on foreign ~~earnings.~~earnings due to limitations on the Company’s ability to utilize foreign tax credits in the first quarter of 2018.

In the three months ended March 31, 2019, we recorded a benefit of 29.1% for the reversal of reserve for unrecognized tax benefits, as compared to a benefit of 0.6% in the prior period, due to the completion of an audit of our 2016 federal tax return.

The Company has reflected a reduction in its valuation allowance for foreign tax credits, resulting in a benefit of 10.2%, related to the amount of foreign tax credit carryforwards that the Company is estimating that it will be able to utilize based on 2019 taxable income.

Non-deductible expenses added ~~8.2%~~2.4% to the effective tax rate for the three months ended March 31, ~~2018,~~2019, as compared to ~~20.9%~~8.2% for the three months ended March 31, ~~2017, primarily due~~2018, a result of the acceleration of the final payment of deferred compensation to ~~changes~~the founders of Swyft in June 2018 and to two of the founders of Olapic in December 2018, both of which lowered the total amount ofnon-deductible compensation in the ~~deductibility of officers compensation under The Act, partially offset by the reduction in the statutory rate and a decrease innon-deductible~~ ~~acquisition-related compensation expense for the~~current period.

In addition, a net windfall on stock based compensation resulted in a 3.2% increase in the effective rate for the first quarter of 2018, as compared to a shortfall rate in the same period in 2017 that resulted in a 40.1% reduction in the effective rate.

Recently Issued Accounting Pronouncements

Information concerning recently issued accounting pronouncements may be found in Note 3 to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form10-Q.

Liquidity and Capital Resources

Cash Flows for the Three Months Ended March 31, ~~2018~~2019 and ~~2017.~~2018.

Since our inception, we have financed our operations primarily through cash from operations, private and public stock sales and long-term debt arrangements, as described below. We believe our existing cash and cash equivalents, our cash flow from operating activities and available bank borrowings will be sufficient to meet our anticipated cash needs for at least one year from the issuance of these financial statements. At March 31, ~~2018,~~2019, our principal sources of liquidity were cash and cash equivalents totaling ~~$85.4~~$46.4 million and a ~~$150.0~~$200.0 million revolving credit facility, of which there was ~~$90.0~~$70.0 million of outstanding borrowings. ~~Our liquidity and cash flows in~~On May 3, 2018, our Board of Directors approved a share repurchase program of up to $25.0 million of our outstanding common stock, which permits purchases through June 7, 2019. For the three months ended March 31, ~~2017, included share purchases made~~2019, we used $6.6 million in cash to purchase shares under ~~a share repurchase program, which ended on December~~the plan. As of March 31, ~~2017.~~2019 the plan has $1.1 million available for future purchases. Our future working capital requirements will depend on many factors, including the operations of our existing business, our potential strategic expansion and future acquisitions we might undertake.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in thousands):


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Net cash provided by operating activities	$	7,496		$	5,581		$	4,095		$	7,496
Net cash used in investing activities		(1,623	)		(1,969	)		(411	)		(1,623	)
Net cash used in financing activities		(6,274	)		(8,426	)		(17,438	)		(6,274	)
Effect of exchange rates on cash, cash equivalents and restricted cash		943			307			2			943

Total increase (decrease) in cash, cash equivalents and restricted cash	$	542		$	(4,507	)
Total (decrease) increase in cash, cash equivalents and restricted cash							$	(13,752	)	$	542

Operating Activities

We generated $4.1 million in cash from operations during the three months ended March 31, 2019. Net income, after adjusting for depreciation and amortization, loss extinguishment of debt, loss on retirement of assets, amortization of deferred financing costs, accreted interest, stock based compensation, provision for doubtful accounts, deferred income taxes, and unrealized currency gain on foreign denominated intercompany transactions generated $10.6 million in cash. Decreased accrued expenses net of increased accounts payable used $12.5 million in cash, primarily a result of the payment of 2018 accrued variable compensation. Increased deferred revenue and decreased accounts receivable generated $10.9 million in cash as a result of customer payments received. Prepaid expenses and other assets used $1.7 million in cash, which includes approximately $0.9 million of capitalized financing costs in connection with the New Credit Facility. Increased tax refunds receivable combined with decreased accrued income taxes used $3.2 million during the quarter ended March 31, 2019.

Variations in operating cash flows occur fromtime-to-time because our enterprise customers make upfront payments on subscription revenue. These payments are required under the terms of our license agreements and can cause large fluctuations in accounts receivable and deferred revenue. The timing and extent of such payments may significantly impact our cash balances.

We generated $7.5 million in cash from operations during the three months ended March 31, 2018. Net loss, after adjusting for depreciation and amortization, loss on retirement of assets, amortization of deferred financing costs, accreted interest, stock based compensation, provision for doubtful accounts, deferred income taxes, and unrealized currency gain on foreign denominated intercompany transactions generated $1.4 million in cash. Decreased accrued expenses offset by increased accounts payable used $2.7 million in cash, primarily a result of the payment of 2017 accrued variable compensation. Increased deferred revenue and decreased accounts receivable generated $10.8 million in cash as a result of customer payments received in Q1, net of an increase in unbilled receivables due to the adoption of ASC 606. Prepaid expenses and other assets used $1.3 million in cash, mainly due to an increase in capitalized contract costs related to the adoption of ASC 606. Accrued income taxes used $0.7 million during the quarter ended March 31, 2018.

~~We generated $5.6 million in cash from operations during~~Investing Activities

During the three months ended March 31, 2017. Net loss, after adjusting for depreciation and amortization, amortization of deferred financing costs, accreted interest, stock based compensation, provision for doubtful accounts, deferred income taxes, and unrealized currency gain on foreign denominated intercompany transactions generated $5.42019, we used $0.4 million in ~~cash. Decreased accrued expenses~~investing activities for the purchase of property and accounts payable used $4.5 million in cash, primarily a result of the payment of 2016 accrued variable compensation. Increased deferred revenue and decreased accounts receivable, offset by increased prepaid expenses generated $5.3 million in cash, mainly due to timing. Accrued income taxes used $0.6 million during the quarter ended March 31, 2017.

~~Investing Activities~~

equipment. During the three months ended March 31, 2018, we used $1.6 million in investing activities for the purchase of $1.4 million of property and equipment and $0.2 million for acquisition of intangible assets. ~~During~~

Financing Activities

Cash used in financing activities in the three months ended March 31, ~~2017, we used $2.0~~2019 was $17.4 million. We received cash from the exercise of stock options of $0.3 million. We paid cash dividends of $4.8 million, and reduced borrowings under our revolving line of credit by $5.2 million. We also purchased $6.6 million in ~~investing activities for~~treasury stock and paid $1.2 million in employee taxes on shares withheld in the ~~purchase of property and equipment.~~

~~Financing Activities~~

three months ended March 31, 2019. Cash used in financing activities for the three months ended March 31, 2018 was $6.3 million. We received cash from exercises of stock options of $2.6 million. We paid a cash dividend of $4.7 million and we paid $3.0 million on our outstanding revolving line of credit. We also used $1.2 million for employee taxes on shares withheld. Cash used in financing activities for the three months ended March 31, 2017 was $8.4 million. We received cash from exercises of stock options of $0.3 million. We paid a cash dividend of $4.6 million and we paid $3.0 million on our outstanding revolving line of credit. We also purchased $0.7 million of treasury stock and paid $0.5 million in employee taxes on shares withheld in the three months ended March 31, 2017.

Dividends

On February ~~14, 2018,~~13, 2019, our Board of Directors approved an $0.116 per share, or ~~$4.9~~$4.8 million, quarterly cash dividend on our outstanding common stock. The record date was April ~~2, 2018~~1, 2019 and the dividend was paid to shareholders on April ~~20, 2018.~~18, 2019. We anticipate this to be a recurring quarterly dividend with future payments and record dates, subject to board approval. On April ~~2, 2018,~~18, 2019, our Board of Directors approved a $0.116 per share quarterly cash dividend on our outstanding common stock. The record date is set for July ~~2, 2018~~1, 2019 and the dividend is payable to shareholders of record on July ~~20, 2018.~~19, 2019.

Credit Facility

On ~~September 15, 2015,~~March 22, 2019, the Company entered into a new credit agreement (the “~~New~~“New Credit ~~Agreement~~”Agreement”) by and among the Company, the Company’s subsidiary, Monotype Imaging Inc., (“the Borrower”), any financial institution that becomes a Lender ~~(as defined therein)~~ and ~~Silicon Valley~~ Bank of America, N.A., as ~~agent which provides for~~administrative agent. Pursuant to the New Credit Agreement the Lenders have agreed to provide the Borrower with a five-year ~~$150.0~~$200.0 million senior secured revolving credit facility (the “~~Credit Facility~~”“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 ~~$200.0~~$300.0 million. The Credit Facility ~~is available~~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 ~~a revolving basis through~~ September 15, 2020. ~~Repayment~~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 ~~any amounts borrowed is not required until maturity 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; however,~~Facility. Available borrowings under the ~~Company may repay any amounts borrowed~~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 ~~any time, without premium or penalty.~~ March 31, 2019.

Borrowings under the Credit Facility bear interest through March 21, 2024 at a variable rate ~~not less than zero based upon,~~per annum equal to LIBOR plus between 1.0% and 1.625%, or at the ~~Company’s~~Borrower’s option, ~~either LIBOR or~~ the higher of (i) the prime rate as ~~published in the Wall Street Journal,~~announced by Bank of America and (ii) 0.5% plus the overnight federal funds rate, plus in each case, ~~an applicable margin. The applicable~~between 0.0% and 0.625%, with the exact interest rate margin ~~for LIBOR loans,~~determined based on the ~~applicable~~consolidated leverage ~~ratio, is 1.25%, 1.50% or 1.75% per annum, and the applicable margin for base rate loans, based on the applicable leverage ratio, is either 0.25%, 0.50% or 0.75%% per annum.~~ratio. At March 31, ~~2018,~~2019, our rate, inclusive of applicable margins, was 3.6% for ~~LIBOR, and at~~LIBOR. At December 31, ~~2017,~~2018, our rate under the Original Credit Agreement, inclusive of applicable margins, was ~~3.1%~~4.3% for LIBOR. The Company ~~had~~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 ~~borrowings~~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 and will be amortized to interest expense over the term of the New Credit Agreement. In addition, $34.0 thousand of unamortized deferred financing costs associated with thepro-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, cashnon-operating costs and other expenses or losses minus cashnon-operating gains and othernon-cash gains; provided, however that the aggregate of ~~$90.0 million at March 31, 2018,~~all cashnon-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 ~~$93.0 million at December 31, 2017. The Credit Facility has $0.5 million reserved for onestand-by~~ ~~letter~~warranty, change of ~~credit in connection with a facility lease agreement, leaving $59.5 million~~control and ~~$56.5 million available for borrowing at March 31, 2018 and December 31, 2017, respectively.~~

As of March 31, 2018, the maximum leverage ratio permitted was 3.00:1.00 and our leverage ratio was 2.24:1.00 and the minimum fixed charge coverage ratio was 1.25:1.00 and our fixed charge ratio was 3.42:1.00.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. ~~In addition,~~The obligations of the Borrower under the Credit ~~Facility is~~Facilities are unconditionally guaranteed by the Company and certain subsidiaries and secured by a lien on substantially all of the ~~Company’s~~present and ~~its domestic subsidiaries’ tangible~~future property and ~~intangible property by a pledge of all~~assets of the ~~equity interests of the Company’s direct~~Company and ~~indirect domestic~~such subsidiaries, ~~and by a pledge by the Company’s domestic subsidiaries of 65% of the equity of their direct foreign subsidiaries,~~in each case, subject to limited ~~exceptions. In addition to other covenants, the New Credit Agreement places limits on the Company~~exceptions and its subsidiaries’ ability to incur debt or liens and engage in sale-leaseback transactions, make loans and investments, incur additional indebtedness, engage in mergers, acquisitions and asset sales, transact with affiliates and alter its business. The Company was in compliance with the covenants under the Credit Facility as of March 31, 2018.exclusions.

The following table presents a reconciliation from net loss, which is the most directly comparable GAAP operating performance measure, to EBITDA and from EBITDA to Adjusted EBITDA as defined in our credit facilities (in thousands):

   Three Months Ended
March 31,
   2018    2017
Net loss
   $ (1,199 )    $ (1,075 )
Benefit from income taxes
   (2,465 )    (101 )
Interest expense, net
   728    631
Depreciation and amortization
   3,249    3,051




EBITDA
   $ 313    $ 2,506
Stock based compensation
   4,247    4,831
Non-cash add backs
   —      —
Restructuring, issuance and cashnon-operating costs
   335    49
Acquisition expenses
   —      —




Adjusted EBITDA⁽¹⁾
   $ 4,895    $ 7,386




~~(1)~~ Adjusted EBITDA is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as income from operations and net income. Adjusted EBITDA as an operating performance measure has material limitations since it excludes the statement of income impact of depreciation and amortization expense, interest expense, net, the provision for income taxes and stock based compensation and therefore does not represent an accurate measure of profitability, particularly in situations where a company is highly leveraged or has a disadvantageous tax structure. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion from Adjusted EBITDA is a material limitation. In the past, we have had a significant amount of debt, and interest expense is a necessary element of our costs and therefore its exclusion from Adjusted EBITDA is a material limitation. We generally incur significant U.S. federal, state and foreign income taxes each year and the provision for income taxes is a necessary element of our costs and therefore its exclusion from Adjusted EBITDA is a material limitation. We have stock based compensation and the associated expense is a meaningful element in our financial statements and therefore its exclusion from Adjusted EBITDA is a material limitation.~~Non-cash~~ ~~expenses, restructuring, issuance and cashnon-operating~~ expenses have a meaningful impact on our financial statements. Therefore, their exclusion from Adjusted EBITDA is a material limitation. As a result, Adjusted EBITDA should be evaluated in conjunction with net income for complete analysis of our profitability, as net income includes the financial statement impact of these items and is the most directly comparable GAAP operating performance measure to Adjusted EBITDA. As Adjusted EBITDA is not defined by GAAP, our definition of Adjusted EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that Adjusted EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.
The Credit Facility also contains provisions for an increased interest rate during periods of default. We do not believe that these covenants will affect our ability to operate our business, and we were in compliance with all covenants under our Credit Facility as of March 31, ~~2018.~~2019.

Non-GAAP Measures

In our quarterly earnings press releases and conference calls, in addition to Adjusted EBITDA as discussed above, we discuss a key measure that is not calculated according to GAAP. Thisnon-GAAP measure is net adjusted EBITDA, which is defined as income (loss) from operations before depreciation, amortization of acquired intangible assets, stock based compensation expense, ~~and~~ acquisition-related ~~compensation.~~compensation andone-timenon-recurring expenses. We use net adjusted EBITDA as a principal indicator of the operating performance of our business. We use net adjusted EBITDA in internal forecasts and models when establishing internal operating budgets, supplementing the financial results and forecasts reported to our board of directors, determining bonus compensation for our employees based on operating performance and evaluating short-term and long-term operating trends in our operations. We believe that net adjusted EBITDA permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary fromperiod-to-period without direct correlation to underlying operating performance. We believe that thesenon-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in our net adjusted EBITDA may be valuable indicators of our operating performance.

In our quarterly earnings press releases and conference calls, in addition to Adjusted EBITDA and net adjusted EBITDA as discussed above, we discuss another key measure that is not calculated according to GAAP. Thisnon-GAAP measure isnon-GAAP earnings per diluted share, which is defined as earnings per diluted share before amortization of acquired intangible assets, stock based compensation expenses, ~~and~~ acquisition-related ~~compensation.~~compensation andone-timenon-recurring expenses. We usenon-GAAP earnings per diluted share as one of our principal indicators of the operating performance of our business. We usenon-GAAP earnings per diluted shares in internal forecasts, supplementing the financial results and forecasts reported to our board of directors and evaluating short-term and long-term operating trends in our operations. We believe thatnon-GAAP earnings per diluted share permits a comparative assessment of our operating performance, relative to our performance based on our GAAP results, while isolating the effects of charges that may vary fromperiod-to-period without direct correlation to underlying operating performance. We believe that thesenon-GAAP financial adjustments are useful to investors because they allow investors to evaluate the effectiveness of the methodology and information used by management in our financial and operational decision-making. We believe that trends in ournon-GAAP earnings per diluted share may be valuable indicators of our operating performance.

~~In March 2018, we revised our definition ofnon-GAAP~~ ~~net adjusted EBITDA andnon-GAAP~~ ~~earnings per share to exclude the impact ofone-timenon-recurring~~ ~~expenses, such as certain advisor fees, royalty expenses and restructuring expenses. This change more accurately reflects management’s view of the Company’s business and financial performance.~~

The following table presents a reconciliation from net loss, which is the most directly comparable GAAP operating financial measure, to net adjusted EBITDA as used by management (in thousands):


	Three Months Ended March 31,						Three Months Ended March 31,
	2018			2017			2019			2018
Net loss	$	(1,199	)	$	(1,075	)
Net income (loss)							$	2,660		$	(1,199	)
Interest expense, net		728			631			771			728
Other expense, net		98			620			206			98
Benefit from income taxes		(2,465	)		(101	)
Provision for (benefit from) income taxes								(139	)		(2,465	)

(Loss) income from operations	$	(2,838	)	$	75
Income (loss) from operations							$	3,498		$	(2,838	)
Depreciation and amortization		3,249			3,051			3,169			3,249
Stock based compensation		4,247			4,831			4,219			4,247
Acquisition-related compensation⁽¹⁾		1,189			1,407			167			1,189
Non-recurring expenses⁽²⁾		5,114			—
Non-recurring expenses (income)⁽²⁾								(24	)		5,114

Net adjusted EBITDA⁽³⁾⁽⁴⁾	$	10,961		$	9,364		$	11,029		$	10,961

The following table presents a reconciliation from earnings (loss) ~~earnings~~ per diluted share, which is the most directly comparable GAAP measure, tonon-GAAP earnings per diluted share as used by management:

   Three Months Ended
March 31,
   2018    2017
GAAP loss per diluted share
   $ (0.03 )    $ (0.03 )
Amortization, net of tax of $0.01 and $0.00, respectively
   0.04    0.04
Stock based compensation, net of tax of $0.02 and $0.01, respectively
   0.09    0.11
Acquisition-related compensation, net of tax of $0.00 and $0.00, respectively⁽¹⁾
   0.03    0.04
Non-recurring expenses, net of tax of $0.03 and $0.00, respectively⁽²⁾
   0.09    —




Non-GAAP earnings per diluted share⁽³⁾
   $ 0.22    $ 0.16




   Three Months Ended
March 31,
   2019    2018
GAAP income (loss) per diluted share
   $ 0.06    $ (0.03 )
Amortization, net of tax of $0.01 and $0.01, respectively
   0.03    0.04
Stock based compensation, net of tax of $0.01 and $0.02, respectively
   0.09    0.09
Acquisition-related compensation, net of tax of $0.00 and $0.00, respectively⁽¹⁾
   0.01    0.03
Non-recurring expenses (income), net of tax of $0.00 and $0.03, respectively⁽³⁾
   —      0.09




Non-GAAP earnings per diluted share⁽⁵⁾
   $ 0.19    $ 0.22




(1)
For the three months ended March 31, 2019, the amount includes $0.2 million, or $0.01 per share, of expense associated with the deferred compensation arrangement resulting from the Olapic acquisition. For the three months ended March 31, 2018, the amount includes $0.9 million, or $0.02 per share, of expense associated with the deferred compensation arrangement resulting from the Olapic acquisition and $0.3 million, or $0.01 per share, of expense associated with the deferred compensation arrangement resulting from the Amendment to the Swyft Merger Agreement.
(2)
For the three months ended March 31, ~~2017,~~2019, the amount includes ~~$0.9 million, or $0.02 per share,~~($24) thousand of expense associated with the deferred compensation arrangement resulting from the Olapic acquisition and $0.5 million, or $0.02 per share, of expense associated with the deferred compensation arrangement resulting from the Amendment to the Swyft Merger Agreement.
~~(2)~~ restructuring expenses. For the three months ended March 31, 2018, the amount includes $2.7 million of certain advisor fees related to shareholder activities, $2.2 million of royalty expenses, recorded in cost of sales, associated with revenue that was not recognized under ASC 606 and $0.2 million of restructuring expenses.
(3)
For the three months ended March 31, 2019, the amount includes ($18) thousand, or $0.00 per share, net of tax, of restructuring expenses. For the three months ended March 31, 2018, the amount includes $2.1 million, or $0.05 per share, net of tax, of certain advisor fees related to shareholder activities, ~~$2.2~~$1.7 million, or $0.04 per share, net of tax, of royalty expenses, recorded in cost of sales, associated with revenue that was not recognized under ASC 606 and ~~$0.2~~$0.1 million, or $0.00 per share, net of tax, of restructuring expenses.
~~(3)~~(4)
Net adjusted EBITDA is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as income (loss) from operations and net income (loss). Net adjusted EBITDA as an operating performance measure has material limitations since it excludes the statement of income impact of depreciation and amortization expense and stock based compensation and therefore does not represent a GAAP measure of profitability. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion from net adjusted EBITDA is a material limitation. Stock based compensation and the associated expense has a meaningful impact on our financial statements and therefore its exclusion from net adjusted EBITDA is a material limitation.Non-recurring expenses, such as certain advisor fees, royalty expenses and restructuring expenses, have a meaningful impact on our financial statements and therefore its exclusion from net adjusted EBITDA is a material limitation. As a result, net adjusted EBITDA should be evaluated in conjunction with net income (loss) for complete analysis of our profitability, as net income (loss) includes the financial statement impact of these items and is the most directly comparable GAAP performance measure to net adjusted EBITDA. As net adjusted EBITDA is not defined by GAAP, our definition of net adjusted EBITDA may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations that net adjusted EBITDA has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.
(5)
Non-GAAP earnings per diluted share is not a measure of operating performance under GAAP and should not be considered as an alternative or substitute for GAAP profitability measures such as earnings per share and earnings per diluted share.Non-GAAP earnings per diluted share as an operating performance measure has material limitations since it excludes the statement of income impact of amortization expense and stock based compensation, and therefore, does not represent ~~an accurate~~a GAAP measure of profitability. We have significant intangible assets and amortization expense is a meaningful element in our financial statements and therefore its exclusion fromnon-GAAP earnings per diluted share is a material limitation. Stock based compensation and the associated expense has a meaningful impact on our financial statements and therefore its exclusion fromnon-GAAP ~~diluted~~ earnings per diluted share is a material limitation. ~~Contingent consideration~~Acquisition-related compensation and its associated income or (expense) has a meaningful impact on our financial statements therefore its exclusion fromnon-GAAP ~~diluted~~ earnings per diluted share is a material limitation.Non-recurring expenses, such as certain advisor fees, royalty expenses and restructuring expenses, have a meaningful impact on our financial statements and therefore its exclusion from ~~net adjusted EBITDA~~non-GAAP earnings per diluted share is a material limitation. As a result,non-GAAP earnings per diluted share should be evaluated in conjunction with earnings per diluted share for complete analysis of our profitability, as earnings per diluted share includes the financial statement impact of these items and

is the most directly comparable GAAP operating performance measure tonon-GAAP earnings per diluted share. Asnon-GAAP earnings per diluted share is not defined by GAAP, our definition ofnon-GAAP earnings per diluted share may differ from and therefore may not be comparable to similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because of the limitations thatnon-GAAP earnings per diluted share has as an analytical tool, investors should not consider it in isolation, or as a substitute for analysis of our operating results as reported under GAAP.

Other Liquidity Matters

Contractual Obligations

The table below summarizes our operating lease contractual obligations at March 31, 2019 and the effects of such obligations on liquidity and cash flow in future years (in thousands). There is no change in our other contractual obligations from those disclosed in Part II, Item 7 of our Annual Report on Form10-K for the year ended December 31, 2018.

Contractual Obligations
   Total    April 2019 -
March 2020    April 2020 -
March 2022    April 2012 -
March 2024    Thereafter
Operating leases
   $ 16,303    $ 4,144    $ 6,646    $ 3,795    $ 1,718
~~Item 3.~~ Item 3.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to financial market risk, including interest rate risk and foreign currency exchange risk.
Concentration of Revenue and Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Cash equivalents consist primarily of bank deposits and certain investments, such as commercial paper, corporate debt and municipal securities, with maturities less than 90 days. Deposits of cash held outside the United States totaled approximately ~~$26.1~~$17.6 million and ~~$24.3~~$21.1 million at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.
We grant credit to customers in the ordinary course of business. Credit evaluations are performed on an ongoing basis to reduce credit risk, and no collateral is required from our customers. An allowance for uncollectible accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and credit evaluation. As of March 31, ~~2018~~2019 and December 31, ~~2017, no customers~~2018, one customer individually accounted for ~~10% or more~~12.8% and 10.8% of our gross accounts ~~receivable.~~receivable, respectively. Due to the nature of our quarterly revenue streams derived from royalty revenue, it is not unusual for our accounts receivable balances to include a few customers with large balances. Historically, we have not recorded material losses due to customers’ nonpayment. Our Creative Professional business consists of a higher volume of lower dollar value transactions. Accordingly, as the percent of Creative Professional revenue increases in relation to total revenue, we expect the average time to collect our accounts receivables, and our overall accounts receivables balances, to increase.
For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, no customer accounted for more than 10% of our revenue.
Interest Rate Risk
Our exposure to market risk associated with changes in interest rates relates primarily to our long-term debt. At March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had borrowings under our revolving Credit Facility of ~~$90.0~~$70.0 million and ~~$93.0~~$75.0 million, respectively. The interest rate on our Credit Facility fluctuates with either the prime rate or the LIBOR interest rate and at March 31, ~~2018,~~2019, our rate, inclusive of applicable margins, was 3.6% for LIBOR. AFor the three months ended March 31, 2019, a 10% increase in the rate would have increased our annual interest expense by ~~$0.9~~$0.2 million.
Foreign Currency Exchange Rate Risk
In accordance with ASC Topic No. 830,Foreign Currency Matters, or ASC 830, all assets and liabilities of our foreign subsidiaries whose functional currency is a currency other than U.S. dollars are translated into U.S. dollars at an exchange rate as of the balance sheet ~~date.~~date or historical rates, as appropriate. Revenue and expenses of these subsidiaries are translated at the average monthly exchange rates. The resulting translation adjustments as calculated from the translation of our foreign subsidiaries to U.S. dollars are recorded as a separate component of ~~stockholders’ equity.~~ comprehensive income.
As discussed in Note 1, our wholly-owned Olapic Argentina S.A. subsidiary employs 99 people whose functions mainly include development, sales support and administration. The Argentinian economy was recently determined to be highly inflationary. Argentina’s inflation rate reached this threshold with the quarterly period ended June 30, 2018. In accordance with this designation,

we were required to apply the guidance in ASC Topic 830,Foreign Currency Matters, (Subtopic ASC 830-10-45-10), and account for a change in functional currency from the Argentine peso to the U.S. dollar effective July 1, 2018. While we conduct our operation in Argentine pesos, effective July 1, 2018, the functional currency was changed to the U.S. dollar. The operation is a service center supporting the company’s products and generates no revenue. Thus, the expenses primarily consist of compensation and related costs, totaling approximately $0.4 million to $0.5 million per month. The change in functional currency to U.S. dollars did not have a material impact on our financial position, operating results or cash flows.

For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, revenue from customers outside the United States, particularly EMEA and Japan, comprised ~~56.2%~~54.8% and ~~55.0%,~~56.2 %, respectively, of our total revenue. An effect of a 10% strengthening of the British pound sterling, the Euro and Japanese yen, ~~and the Argentine peso,~~ relative to the U.S. dollar, would have decreased our revenues by ~~$2.0~~$1.7 million, decreased expenses by ~~$2.4~~$1.7 million and increased operating income by ~~$0.5~~$0.1 million for the three months ended March 31, ~~2018.~~2019. The sensitivity analysis assumes that all currencies move in the same direction at the same time and the ratio ofnon-U.S. dollar denominated revenue and expenses to U.S. dollar denominated revenue and expenses does not change from current levels.

We incur foreign currency exchange gains and losses related to certain customers that are invoiced in U.S. dollars, but who have the option to make an equivalent payment in their own functional currencies at a specified exchange rate as of a specified date. In the period from that date until payment in the customer’s functional currency is received and converted into U.S. dollars, we can incur realized gains and losses. We also incur foreign currency exchange gains and losses on certain intercompany assets and liabilities denominated in foreign currencies. We are currently utilizing30-day forward contracts to mitigate our exposure on these currency fluctuations. Any increase or decrease in the fair value of the forward contracts is offset by the change in the value of the hedged assets of our consolidated foreign affiliate. At March 31, ~~2018,~~2019, we had one30-day forward contract to sell ~~2.4~~2.6 million British pound sterling and to purchase $3.4 million that together, had an immaterial fair ~~value, and at~~value. At December 31, ~~2017,~~2018, we had one30-day forward contract to sell ~~2.5~~2.7 million British pound sterling and to purchase $3.4 million that together, had an immaterial fair value.

~~Item 4.~~

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, ~~2018.~~2019. The term “disclosure controls and procedures,” as defined in Rules13a-15(e) and15d-15(e) under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives.

Based on the evaluation of our disclosure controls and procedures as of March 31, ~~2018,~~2019, our principal executive officer and principal financial officer concluded that, as of such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules13a-15(f) and15d-15(f) under the Exchange Act) that occurred during and as of the fiscal quarter ended March 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to revenue recognition to facilitate its adoption on January 1, 2018. There were no significant changes to our internal control over financial reporting due to the adoption of the new standards.

Part II—OTHER INFORMATION

~~Item 1.~~

Item 1.

Legal Proceedings

From time 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.

~~Item 1A.~~

Item 1A.

Risk Factors

There are no material changes in our risk factors from those disclosed in Part I, Item 1A of our Annual Report onForm 10-K for the year ended December 31, ~~2017.~~2018.

~~Item 2.~~

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Unregistered Sales of Equity Securities

None.

(b)	Use of proceeds

Not applicable.

(c)	Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about purchases by the Company during the quarter ended March 31, ~~2018~~2019 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

Monotype Imaging Holdings Inc. Purchases of Equity Securities

Period
   Total Number of
Shares
Purchased⁽¹⁾    Average Price Paid
per Share    Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs    Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet be Purchased
Under the Plans or
Programs
January 1, 2018 to January 31,
2018 ⁽¹⁾⁽²⁾
   36,838    $ 3.03    —      $ —
February 2, 2018 to February 27, 2018 ⁽¹⁾⁽²⁾
   60,119    $ 4.59    —      $ —
March 3, 2018 to March 30, 2018 ⁽¹⁾⁽²⁾
   106,515    $ 7.72    —      $ —





Total
   203,472    $ 5.95    —      $ —





Period
   Total Number of
Shares
Purchased    Average Price Paid
per Share    Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs    Maximum Number (or
Approximate Dollar
Value) of Shares that
May Yet be Purchased
Under the Plans or
Programs
January 2, 2019 to January 31,
2019 ^(1)(2)(3)
   136,807    $ 14.74    123,500    $ 5,696,486
February 1, 2019 to February 28,
2019 ^(1)(2)(3)
   146,554    $ 17.44    123,500    $ 3,536,730
March 1, 2019 to March 29,
2019 ^(1)(2)(3)
   168,399    $ 19.12    123,500    $ 1,088,429





Total
   451,760    $ 17.29    370,500    $ 1,088,429






(1)
The Company repurchased unvested restricted stock in accordance with either the Third Amended and Restated ~~207~~2007 Stock Option and Incentive Plan, “2007 Award Plan” or the 2010 Inducement Plan. The price paid by the Company was determined pursuant to the terms of either the 2007 Award Plan or the 2010 Inducement Plan and related restricted stock agreements.
(2)
The Company withheld ~~4,469, 11,336~~2,532 shares, 20,403 shares and ~~34,323~~38,965 shares of vested restricted stock ~~for~~to satisfy the payment of taxes associated with the ~~vesting~~awards’ vestings in January, February and March, respectively.
(3)
The Company purchased shares of common stock in accordance with its share repurchase program announced on May 3, 2018. The Company purchased the shares on the open market at prevailing prices.

~~Item 3.~~ Item 3.
Defaults Upon Senior Securities
Not applicable.

~~Item 4.~~ Item 4.
Mine Safety Disclosures
Not applicable.

~~Item 5.~~

Item 5.

Other Information

None.

~~Item 6.~~ Item 6.
Exhibits

The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this Quarterly Report onForm 10-Q and such Exhibit Index is incorporated herein by reference.

EXHIBIT INDEX

Listed and indexed below are all exhibits filed as part of this report.


Exhibit Number		Description

10.1		Credit Agreement by and among Monotype Imaging Holdings Inc., Guarantor, Monotype Imaging Inc., as Borrower, the Lenders (as defined therein) and Bank of America, N.A., as Agent, dated as of March 22, 2019. (1)

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.*

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.*

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer and Chief Financial Officer.**

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

(1)	Incorporated by reference to the Company’s Current Report on Form8-K filed on March 26, 2019.

*	Filed herewith.

**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	MONOTYPE IMAGING HOLDINGS INC.

Date: April ~~30, 2018~~26, 2019	By:	/S/ SCOTT E. LANDERS
		Scott E. Landers
		*President, Chief Executive Officer and Director*
		*(Principal Executive Officer)*

Date: April ~~30, 2018~~26, 2019	By:	/S/ ANTHONY CALLINI
		Anthony Callini
		*Executive Vice President, Chief Financial Officer,* *Treasurer and Assistant Secretary* *(Principal Accounting and Principal* *Financial Officer)*

3236


	As Reported					As Adjusted
	December 31, 2017		Cumulative Adjustments			January 1, 2018
Assets:
Accounts receivable, net⁽¹⁾	$	34,461	$	7,052		$	41,513
Prepaid expenses and other current assets⁽²⁾		5,714		427			6,141
Other assets⁽³⁾		3,112		650			3,762

Liabilities:
Deferred revenue		15,102		(2,923	)		12,179
Other long-term liabilities⁽⁴⁾		6,428		(825	)		5,603
Deferred income taxes		28,004		2,927			30,931

Stockholders’ equity:
Retained earnings		97,815		8,950			106,765


	March 31, 2018
	As Reported			Balances without adoption of ASC 606			Difference
Assets:
Accounts receivable, net	$	34,064		$	28,335		$	5,729
Prepaid expenses and other current assets		6,455			6,347			108
Other assets		4,750			3,670			1,080

Liabilities:
Accrued expenses and other current liabilities		38,127			35,966			2,161
Deferred revenue		15,889			17,549			(1,660	)
Other long-term liabilities		5,830			6,298			(468	)
Deferred income taxes		27,135			26,951			184

Stockholders’ equity:
Retained earnings		100,673			93,973			6,700

	For the three months ended March 31, 2018
	As Reported			Balances without adoption of ASC 606			Difference
License revenue	$	45,867		$	43,568		$	2,299
Service revenue		10,816			10,618			198
Cost of revenue—license		9,612			7,451			2,161
Marketing and selling		20,065			20,519			(454	)
Benefit from income taxes		(2,465	)		(2,649	)		184
Net loss		(1,199	)		(1,805	)		606
Net loss—basic and diluted	$	(0.03	)	$	(0.05	)	$	0.02


	Fair Value Measurement at March 31, 2018								Fair Value Measurement at March 31, 2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices 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	$	3,072	$	3,072	$	—	$	—	$	14,038	$	14,038	$	—	$	—
Cash equivalents—commercial paper		16,476		—		16,476		—
Cash equivalents—corporate bonds		1,507		—		1,507		—
Cash equivalents—U.S. government and agency securities		7,487		7,487		—		—
Restricted cash equivalents—money market fund		10,000		10,000		—		—		6,000		6,000		—		—

Total current assets		38,542		20,559		17,983		—	$	20,038	$	20,038	$	—	$	—
Restricted cash equivalents—money market fund		6,000		6,000		—		—

Total long term assets		6,000		6,000		—		—

Total assets	$	44,542	$	26,559	$	17,983	$	—	$	20,038	$	20,038	$	—	$	—


	Fair Value Measurement at December 31, 2017								Fair Value Measurement at December 31, 2018
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices 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	$	2,014	$	2,014	$	—	$	—	$	28,940	$	28,940	$	—	$	—
Cash equivalents—commercial paper		16,477		—		16,477		—
Cash equivalents—corporate bonds		1,457		—		1,457		—
Cash equivalents—U.S. government and agency securities		10,488		10,488		—		—
Restricted cash equivalents—money market fund		3,000		3,000		—		—		6,000		6,000		—		—
Restricted cash equivalents—U.S. government and agency security fund		8,987		8,987		—		—

Total current assets		42,423		24,489		17,934		—	$	34,940	$	34,940	$	—	$	—
Restricted cash equivalents—money market fund		6,000		6,000		—		—

Total long term assets		6,000		6,000		—		—

Total assets	$	48,423	$	30,489	$	17,934	$	—	$	34,940	$	34,940	$	—	$	—


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


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

Total	$	16,577


	Personnel related			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


Contractual Obligations	Total		April 2019 - March 2020		April 2020 - March 2022		April 2012 - March 2024		Thereafter
Operating leases	$	16,303	$	4,144	$	6,646	$	3,795	$	1,718


Period	Total Number of Shares Purchased⁽¹⁾		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
January 1, 2018 to January 31, 2018 ⁽¹⁾⁽²⁾		36,838	$	3.03		—	$	—
February 2, 2018 to February 27, 2018 ⁽¹⁾⁽²⁾		60,119	$	4.59		—	$	—
March 3, 2018 to March 30, 2018 ⁽¹⁾⁽²⁾		106,515	$	7.72		—	$	—

Total		203,472	$	5.95		—	$	—


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs
January 2, 2019 to January 31, 2019 ^(1)(2)(3)		136,807	$	14.74		123,500	$	5,696,486
February 1, 2019 to February 28, 2019 ^(1)(2)(3)		146,554	$	17.44		123,500	$	3,536,730
March 1, 2019 to March 29, 2019 ^(1)(2)(3)		168,399	$	19.12		123,500	$	1,088,429

Total		451,760	$	17.29		370,500	$	1,088,429

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