N@N

MARLBOROUGH, Mass.--([ BUSINESS WIRE ])--Marlborough Software Development Holdings Inc. (aMSDHa) (OTCBB: MBGH) today reported that revenue decreased by $494,000 or 22% to $1,768,000 for the three months ended March 31, 2012 as compared to total revenue of $2,262,000 for the three months ended March 31, 2011. The Companyas cash balance at March 31, 2012 totaled $5,558,000, an increase of $5,007,000 from a balance of $551,000 at December 31, 2011.

"the three months ended March 31, 2012 was a transitional period for us, one in which we were separated from Bitstream Inc. (aBitstream"

GAAP Loss

Our loss from operations increased $1,339,000 to $3,142,000 for the three months ended March 31, 2012, as compared to $1,803,000 for the three months ended March 31, 2011. Our net loss increased $1,400,000 to $3,220,000 or $0.30 per share for the three months ended March 31, 2012, as compared to $1,820,000 or $0.17 per share for the three months ended March 31, 2011.

Non-GAAP Loss

Our non-GAAP results exclude stock-based compensation expense, as well as the amortization of intangible assets primarily acquired from Press-Sense Ltd., and include MSDH expenses charged to Bitstream Inc. via our management fee agreement or allocated to Bitstream Inc. via our allocation methodology. Our non-GAAP loss from operations increased $334,000 to $2,441,000 for the three months ended March 31, 2012, as compared to $2,107,000 for the three months ended March 31, 2011. Our non-GAAP net loss increased $395,000 to $2,519,000 or $0.23 per share for the three months ended March 31, 2012, as compared to $2,124,000 or $0.20 per share for the three months ended March 31, 2011. A reconciliation between GAAP and non-GAAP results is provided at the end of this press release.

Commenting on these results, Pinhas Romik, President and Chief Executive Officer, noted that athe three months ended March 31, 2012 was a transitional period for us, one in which we were separated from Bitstream Inc. (aBitstreama or our former aParenta) as the result of the distribution of our common stock to Bitstream shareholders on March 14, 2012, following which Bitstream merged with Monotype Imaging Inc. on March 19, 2012. So we have only recently been a fully independent company. At this point we believe the distraction and disruption to our business caused by the separation is primarily behind us.a

aAs expected, revenue for the first quarter was down from the previous year. We believe that this is due in part to the distraction caused by the separation and merger transactions. In addition, based on previous experience we believe that the lower level of sales activity in the first quarter may be because print shops, currently our primary market, delayed investing in print-related hardware and software until the Drupa exposition, which is takes place during May 2012. Drupa is the largest print industry trade show and is held every four years in Dusseldorf, Germany.a

aThe first quarter of this year has been a time of rebuilding and expansion for Pageflex. We have made significant progress in our efforts to expand the distribution of our products into international markets by opening offices in Brazil and in Eastern Europe. In addition, we have added additional distributors to our international network of distribution partners. Finally, our international efforts have been aided by the globalization of our entire product line, including the localization of our software in ten languages. These new software versions will be released this summer. Together, these efforts will broaden our product distribution to new regions" said Mr. Romik.

Forward Looking Statements Disclosure

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based on managementas current expectations. Forward-looking statements can be identified by the use of the words "may," "will," "should," "could," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "potential," "proposed," or "continue" or the negative of those terms. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including, without limitation, market acceptance of the Companyas products, competition and the timely introduction of new products. Additional information concerning certain risks and uncertainties that would cause actual results to differ materially from those projected or suggested in the forward-looking statements is contained in the Companyas filings with the Securities and Exchange Commission, including MSDHas Annual Report on Form 10-K for the year ended December 31, 2011, as supplemented by MSDHas subsequent quarterly reports on Form 10Q in 2012. We undertake no obligation to update or supplement forward-looking statements that become untrue because of subsequent events, new information or otherwise after the date of this document.

Use of Non-GAAP Financial Information

To supplement the financial measures presented in the Company's press release in accordance with accounting principles generally accepted in the United States ("GAAP"), the Company also presents non-GAAP measures relating to income or loss from operations, net income or loss and net income or loss per diluted share which were adjusted from amounts determined based on GAAP to exclude share-based compensation expenses, as well as expenses from the amortization of intangible assets primarily acquired from Press-sense Ltd. , and include non-transaction related MSDH expenses charged to Bitstream Inc. via our management fee agreement or allocated to Bitstream Inc. via our allocation methodology as discussed further in our Form 10K filed March 30, 2012.

The Company believes these non-GAAP financial measures will enhance the readeras overall understanding of MSDHas current financial performance and the Company's prospects for the future by providing a higher degree of transparency for certain financial measures and providing a level of disclosure that helps investors understand how the Company plans and measures its own business.

These financial measures are not in accordance with GAAP, should not be considered an alternative for measures prepared in accordance with GAAP, and may have limitations in that they do not reflect all of MSDHas results of operations as determined in accordance with GAAP.

These non-GAAP measures should only be used to evaluate MSDHas results of operations in conjunction with the corresponding GAAP measures. The presentation of non-GAAP information is not meant to be considered superior to, in isolation from, or as a substitute for results prepared in accordance with GAAP.

About Marlborough Software Development Holdings Inc. (aMSDHa)

MSDHas Pageflex brand enables companies across the globe to communicate their marketing messages more easily and effectively. The award-winning Pageflex product line sets the standard for excellence and innovation in targeted marketing and brand management. Pageflex offers the ability to personalize any form of communication in print, e-mail, or on the Web. Pageflex pioneered the concepts of variable data and web-to-print storefronts, and has expanded to offer software for multi-channel campaign management, dynamic publishing, and back-end production automation. Pageflex solutions use the patented Pageflex variable publishing engine and Adobe InDesign. For more information visit [ www.pageflex.com ].

For the three months ended March 31, 2012 and 2011, net loss per share is based on 10,752,000 weighted average shares outstanding. GAAP and Non-GAAP amounts for the three months ended March 31, 2012 exclude $2,254,000 in Separation, Distribution, and Merger costs which were incurred by MSDH and subsequently charged to Bitstream Inc. via a management fee agreement.