{ "docId": "019dd923-622b-71dc-a6d9-d59895b3d260", "docSlug": "df183221e5e7", "documentTitle": "Monotype Imaging Holdings Inc. (TYPE)", "authorId": "03_Starboard_Value", "authorName": "Jeffrey C. Smith and Clifford Press", "documentKindSlug": "shareholder-letter", "documentKindLabel": "Shareholder letter", "sourceTypeSlug": "activist_investor", "sourceTypeLabel": "Activist investor", "presentationDate": "2018-02-13 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 5, "pageCount": 11, "prevPage": 4, "nextPage": 6, "slideType": "expose_contradiction", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 0, "notes": "The slide uses a quote from Scott Landers to highlight the discrepancy between management's initial expectations and the reality of the Olapic business model.", "elementsJson": [ "paragraph", "quote_block", "footnote" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622b-71dc-a6d9-d59895b3d260/5", "deckHref": "/decks/019dd923-622b-71dc-a6d9-d59895b3d260", "deckJsonHref": "/decks/019dd923-622b-71dc-a6d9-d59895b3d260.json", "deckAnchorHref": "/decks/019dd923-622b-71dc-a6d9-d59895b3d260#slide-5", "components": [ { "bbox": null, "kind": "callout", "text": "We cannot understand how this issue could have been a surprise to the Company. Even basic accounting due diligence would have detailed Olapic’s contract structure, its revenue recognition policy, and any changes to revenue recognition that would be required post acquisition.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-5370-75b3-9c67-ffc125c87a3c", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.04, "w": 0.78, "x": 0.11, "y": 0.09 }, "kind": "paragraph", "text": "announced it would restructure its Olapic business and change its go to market strategy in light of the year's severe losses.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1db14481-7c49-4ef2-b8cf-c204cee56c49", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.78, "x": 0.11, "y": 0.14 }, "kind": "paragraph", "text": "A key concern is that many of Olapic's issues were entirely foreseeable. For example, on the Company's second quarter 2017 earnings conference call held on July 28, 2017, in one of several revenue guidance revisions, you said that Olapic's revenue ramp would be delayed due to a contract structure which required that revenue be recognized only when the technology is deployed on a customer's e-commerce site, rather than upon signing a contract, as Monotype had expected.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "4a99fe75-2aea-45da-a3da-ee02d61fe430", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.11, "w": 0.78, "x": 0.11, "y": 0.46 }, "kind": "paragraph", "text": "We cannot understand how this issue could have been a surprise to the Company. Even basic accounting due diligence would have detailed Olapic's contract structure, its revenue recognition policy, and any changes to revenue recognition that would be required post acquisition. Shareholders expect the Audit Committee to be fully aware of these considerations and to review them in detail with management and the Company's accounting advisors well in advance of deciding to make a binding offer to acquire a business, let alone 11 months after the deal closed.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "6044af10-9f39-497c-9c19-34375432f587", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.21, "w": 0.78, "x": 0.11, "y": 0.58 }, "kind": "paragraph", "text": "Moreover, as we have discussed, a major challenge with the Olapic acquisition was your inability to foresee the difficulty in cross selling Olapic's services to traditional Monotype customers. You had expected that many of the same large, branded companies that license fonts from Monotype would be interested in retaining Olapic to source user-generated content for their advertising campaigns. However, you subsequently found that licensing fonts and acquiring content for advertising campaigns are handled by different people within the same company, and the decision to use Monotype's fonts is generally independent of any decision to retain Olapic. Not only do Olapic and Monotype serve different customers within the same organization, you have also found, after spending substantial sales and marketing dollars, that entire sectors of some companies that employ Monotype's core IP have no interest in, or use for, Olapic's user generated content. In the Company's Investor Day call held on November 30, 2016, you stated, \"We just made the biggest", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "644589a2-7d37-451c-b6d5-40e4cd12287b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.26, "x": 0.62, "y": 0.42 }, "kind": "paragraph", "text": "- Scott Landers (July 28th, 2017)", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "8c55181d-3f85-47c5-996c-e71dd5c46c22", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.16, "w": 0.76, "x": 0.12, "y": 0.26 }, "kind": "quote", "text": "On the Olapic side, we are adjusting our expectations downward to account for the delay in revenue recognition from project deployments that was not previously considered in our guidance...So as a purchaser of SaaS technologies, when you deal with the sales forces as in a work days, once you sign, they are getting their revenue right away, even though as you are putting your development resources against integrating that product. If you look at the Olapic business, and with them being in startup mode, their contracts currently do not have the clause in there where their revenue starts clicking right away, so you're basically deferred up until when the client actually deploys usually on their e-commerce site and that can take 120 days.", "attrs": null, "subkind": "pull-quote", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "cd2a87be-21e0-422c-ba36-36da1b074831", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "“On the Olapic side, we are adjusting our expectations downward to account for the delay in revenue recognition from project deployments that was not previously considered in our guidance...So as a purchaser of SaaS technologies, when you deal with the sales forces as in a work days, once you sign, they are getting their revenue right away, even though as you are putting your development resources against integrating that product. If you look at the Olapic business, and with them being in startup mode, their contracts currently do not have the clause in there where their revenue starts clicking right away, so you're basically deferred up until when the client actually deploys usually on their e-commerce site and that can take 120 days.” — Scott Landers (July 28th, 2017)", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-5370-75b3-9c68-019514368c43", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.06, "w": 0.78, "x": 0.11, "y": 0.84 }, "kind": "source-note", "text": "5 Monotype Q2 2017 Earnings Call. 6 “As we blanketed the market going after 20 verticals, over a 6 to 9-month period we found that 7 of those verticals were really the ones that were ready to digest the Olapic offering.” – Scott Landers, Monotype Q3 2017 Earnings Call.", "attrs": null, "subkind": null, "toolName": null, "toolSlug": null, "confidence": null, "componentId": "b16123b8-5950-42dc-9b67-0d550cd1c343", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [], "arcBeats": [ { "to": 7, "from": 4, "beatId": "da383a16-bf95-480e-80f6-d6790fde545a", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Villain Critique", "beatSlug": null, "evidence": "The document critiques the incumbent board and management's actions.", "position": 1, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null }, { "to": 5, "from": 2, "beatId": "8548afa6-923a-4b2b-a562-09a17691209f", "arcName": "Problem-Agitate-Solution", "arcSlug": "problem-agitate-solution", "beatName": "Expose Contradiction", "beatSlug": null, "evidence": "The document exposes contradictions in the incumbent board's actions and statements.", "position": 2, "confidence": 0.8, "parentBeatName": null, "parentBeatSlug": null } ], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }