Universal Display Corporation Announces Third Quarter 2018 Financial Results

Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the third quarter ended September 30, 2018. “

 
 
 

EWING, N.J.--(BUSINESS WIRE)-- Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the third quarter ended September 30, 2018.

“During the quarter, we saw a pick-up in the smartphone market, driven by a number of new OLED display launches, including mobile products from Apple, Google, Huawei, LG, Samsung and others,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “We believe that these launches are indicative of the increasing demand and value of OLEDs in leading OEM product roadmaps, and reinforces the strong secular OLED growth story. However, the magnitude of the second-half pick-up in our material sales is not shaping up to the degree that we had earlier forecasted.”

Rosenblatt continued, “As we look to 2019, we anticipate it to be a meaningful year of growth. With the continued proliferation of OLEDs across the consumer electronics market, the introduction of new form factors that will pave the way for new ideas and applications, and new production capacity that is expected to expand the panel maker landscape, coupled with billions of dollars committed to advancing the commercialization of OLEDs, we believe that OLEDs are poised to become the dominant display technology in the long-term.”

Financial Highlights for the Third Quarter of 2018

Effective January 1, 2018, we adopted ASC Topic 606 using the “modified retrospective” approach, meaning the standard was applied only to the financial results commencing with the first quarter of 2018 with a cumulative adjustment to retained earnings. Under this transition method, we applied the standard only to contracts that were not complete at the initial adoption date.

  • Total revenue increased 26% to $77.6 million in the third quarter of 2018, compared with $61.7 million in the third quarter of 2017. Total revenue for the third quarter of 2018 would have been $91.6 million without the impact of ASC Topic 606. Under ASC Topic 606, license fee revenue is recognized on a per gram sales basis, whereas under the previous rules, revenue was recognized for license payments upon receipt or on a straight-line basis over the term of the contract.
  • Revenue from material sales increased 9% to $51.2 million in the third quarter of 2018, compared with $47.0 million in the third quarter of 2017. The increase in material sales was due to increasing OLED panel demand.
  • Revenue from royalty and license fees increased 94% to $23.3 million in the third quarter of 2018, compared with $12.0 million in the third quarter of 2017. Revenue from royalty and license fees for the third quarter of 2018 would have been $36.9 million, or $13.6 million higher without the impact of ASC Topic 606.
  • Cost of materials increased 17% to $13.8 million in the third quarter of 2018, compared with $11.8 million in the third quarter of 2017.
  • Operating income increased by $10.2 million to $26.0 million in the third quarter of 2018, compared with $15.8 million in the third quarter of 2017.
  • Net income increased by $9.3 million to $22.8 million or $0.48 per diluted share in the third quarter of 2018, compared with $13.5 million or $0.28 per diluted share in the third quarter of 2017.
       

Revenue Comparison

       
($ in thousands)     Three Months Ended September 30,
      2018     2017
Material sales     $ 51,242     $ 47,041
Royalty and license fees       23,325       12,013
Contract research services       2,983       2,629
Total revenue     $ 77,550     $ 61,683
                 
         

Cost of Materials Comparison

         
($ thousands)     Three Months Ended September 30,  
      2018     2017  
Material sales     $ 51,242     $ 47,041  
Cost of material sales       13,808       11,755  
Gross margin on material sales       37,434       35,286  
Gross margin as a % of material sales       73 %     75 %
                   
                   

Topic 606 versus 605 Adjusted Results

                   

 

 

For the three months ended September 30, 2018 (in thousands)

    As reported     Adjustment    

Balances without
adoption of Topic
606

Revenue     $ 77,550     $ 14,054     $ 91,604
Gross margin       61,427       14,054       75,481
Operating income       26,032       14,054       40,086
Net income       22,818       11,384       34,202
Diluted earnings per share     $ 0.48     $ 0.24     $ 0.72
                         

Financial Highlights for the First Nine Months of 2018

  • Total revenue decreased 19% to $177.3 million in the first nine months of 2018, compared with $219.8 million in the first nine months of 2017. Total revenue would have been $233.4 million in the 2018 period, or $56.1 million higher, without the impact of ASC Topic 606.
  • Revenue from material sales decreased 19% to $113.3 million in the first nine months of 2018, compared with $140.5 million in the first nine months of 2017. The Company believes that the decline in material sales was due to weaker OLED panel demand.
  • Revenue from royalty and license fees decreased 25% to $54.8 million in the first nine months of 2018, compared with $72.7 million in the first nine months of 2017. Revenue from royalty and license fees would have been $108.0 million in the 2018 period, or $53.2 million higher without the impact of ASC Topic 606.
  • Cost of materials decreased 15% to $28.8 million in the first nine months of 2018, compared with $33.7 million in the first nine months of 2017.
  • Operating income decreased by $46.9 million to $41.5 million in the first nine months of 2018, compared with $88.4 million in the first nine months of 2017.
  • Net income decreased by $31.5 million to $39.6 million or $0.83 per diluted share in the first nine months of 2018, compared with $71.1 million or $1.49 per diluted share in the first nine months of 2017.
 

Revenue Comparison

 
($ in thousands)     Nine Months Ended September 30,
      2018     2017
Material sales     $ 113,325     $ 140,506
Royalty and license fees       54,758       72,705
Contract research services       9,188       6,551
Total revenue     $ 177,271     $ 219,762
                 
 

Cost of Materials Comparison

 
($ thousands)     Nine Months Ended September 30,  
      2018     2017  
Material sales     $ 113,325     $ 140,506  
Cost of material sales       28,782       33,748  
Gross margin on material sales       84,543       106,758  
Gross margin as a % of material sales       75 %     76 %
                   
                   

Topic 606 versus 605 Adjusted Results

                   

 

 

For the nine months ended September 30, 2018 (in thousands)

    As reported     Adjustment    

Balances without
adoption of Topic
606

Revenue     $ 177,271     $ 56,177     $ 233,448
Gross margin       142,055       56,177       198,232
Operating income       41,462       56,177       97,639
Net income       39,591       45,643       85,234
Diluted earnings per share     $ 0.83     $ 0.97     $ 1.80
                         

2018 Revised Guidance

Although the OLED industry is still at an early state where many variables can have a material impact on its growth, and the Company thus caveats its financial guidance accordingly, the Company now believes that its 2018 revenue will be approximately in the range of $240 million to $250 million. The guidance was prepared utilizing accounting standard ASC Topic 606; under the prior accounting standard ASC Topic 605, the Company estimates that its 2018 revenues would be approximately $315 million to $325 million.

Dividend

The Company also announced a fourth quarter cash dividend of $0.06 per share on the Company’s common stock. The dividend is payable on December 28, 2018 to all shareholders of record on December 14, 2018.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, November 1, 2018 at 5:00 p.m. Eastern Time. The live webcast of the conference call can be accessed under the events page of the Company's Investor Relations website at ir.oled.com. Those wishing to participate in the live call should dial 1-877-524-8416 (toll-free) or 1-412-902-1028. Please dial in 5-10 minutes prior to the scheduled conference call time. An online archive of the webcast will be available within two hours of the conclusion of the call.

About Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED) is a leader in developing and delivering state-of-the-art, organic light emitting diode (OLED) technologies, materials and services to the display and lighting industries. Founded in 1994, the Company currently owns or has exclusive, co-exclusive or sole license rights with respect to more than 4,800 issued and pending patents worldwide. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED® phosphorescent OLED technology that can enable the development of low power and eco-friendly displays and solid-state lighting. The Company also develops and offers high-quality, state-of-the-art UniversalPHOLED materials that are recognized as key ingredients in the fabrication of OLEDs with peak performance. In addition, Universal Display delivers innovative and customized solutions to its clients and partners through technology transfer, collaborative technology development and on-site training.

Headquartered in Ewing, New Jersey, with international offices in China, Hong Kong, Ireland, Japan, South Korea, and Taiwan, and wholly-owned subsidiary Adesis, Inc. based in New Castle, Delaware, Universal Display works and partners with a network of world-class organizations, including Princeton University, the University of Southern California, the University of Michigan, and PPG Industries, Inc. The Company has also established relationships with companies such as AU Optronics Corporation, BOE Technology, DuPont Displays, Inc., EverDisplay Optronics (Shanghai) Limited, Govisionox Optoelectronics, Innolux Corporation, Japan Display Inc., Kaneka Corporation, Konica Minolta Technology Center, Inc., LG Display Co., Ltd., Lumiotec, Inc., OLEDWorks LLC, OSRAM, Pioneer Corporation, Royole Corporation, Samsung Display Co., Ltd., Sharp Corporation, Sumitomo Chemical Company, Ltd., Tianma Micro-electronics, Tohoku Pioneer Corporation, and Visionox Technology. To learn more about Universal Display Corporation, please visit https://oled.com/.

Universal Display Corporation and the Universal Display Corporation logo are trademarks or registered trademarks of Universal Display Corporation. All other company, brand or product names may be trademarks or registered trademarks.

All statements in this document that are not historical, such as those relating to Universal Display Corporation’s technologies and potential applications of those technologies, the Company’s expected results and future declaration of dividends, as well as the growth of the OLED market and the Company’s opportunities in that market, are forward-looking financial statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation’s current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. These risks and uncertainties are discussed in greater detail in Universal Display Corporation’s periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled “Risk Factors” in Universal Display Corporation’s annual report on Form 10-K for the year ended December 31, 2017. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

Follow Universal Display Corporation

Twitter
Facebook
YouTube

(OLED-C)

 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands, except share and per share data)

 
      September 30, 2018     December 31, 2017  
ASSETS                  
CURRENT ASSETS:                  
Cash and cash equivalents     $ 101,638     $ 132,840  
Short-term investments       391,972       287,446  
Accounts receivable       43,207       52,355  
Inventory       69,031       36,265  
Other current assets       11,943       10,276  
Total current assets       617,791       519,182  

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $42,425 and $36,368

      67,467       56,450  

ACQUIRED TECHNOLOGY, net of accumulated amortization of $106,755 and $91,312

      116,086       131,529  
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $3,036 and $2,000       13,804       14,840  
GOODWILL       15,535       15,535  
INVESTMENTS             14,794  
DEFERRED INCOME TAXES       13,910       27,022  
OTHER ASSETS       39,151       604  
TOTAL ASSETS     $ 883,744     $ 779,956  
LIABILITIES AND SHAREHOLDERS’ EQUITY                  
CURRENT LIABILITIES:                  
Accounts payable     $ 13,330     $ 13,774  
Accrued expenses       31,790       35,019  
Deferred revenue       69,143       14,981  
Other current liabilities       16       50  
Total current liabilities       114,279       63,824  
DEFERRED REVENUE       40,684       23,902  
RETIREMENT PLAN BENEFIT LIABILITY       34,937       33,176  
OTHER LIABILITIES       18,337        
Total liabilities       208,237       120,902  
SHAREHOLDERS’ EQUITY:                  

Preferred Stock, par value $0.01 per share, 5,000,000 shares authorized, 200,000 shares of Series A Nonconvertible Preferred Stock issued and outstanding (liquidation value of $7.50 per share or $1,500)

      2       2  

Common Stock, par value $0.01 per share, 200,000,000 shares authorized, 48,672,538 and 48,476,034 shares issued, and 47,310,901 and 47,118,171 shares outstanding, at September 30, 2018 and December 31, 2017, respectively

      487       485  
Additional paid-in capital       613,310       611,063  
Retained earnings       112,337       99,126  
Accumulated other comprehensive loss       (9,994 )     (11,464 )

Treasury stock, at cost (1,361,637 and 1,357,863 shares at September 30, 2018 and December 31, 2017, respectively)

      (40,635 )     (40,158 )
Total shareholders’ equity       675,507       659,054  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY     $ 883,744     $ 779,956  
                   

 

 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(in thousands, except share and per share data)

 
     

Three Months Ended
September 30,

   

Nine Months Ended
September 30,

 
      2018     2017     2018     2017  
REVENUE     $ 77,550     $ 61,683     $ 177,271     $ 219,762  
COST OF SALES       16,123       13,465       35,216       37,762  
Gross margin       61,427       48,218       142,055       182,000  
OPERATING EXPENSES:                                  
Research and development       13,616       11,596       38,922       34,099  
Selling, general and administrative       12,120       11,695       34,473       31,611  
Amortization of acquired technology and other intangible assets       5,493       5,498       16,479       16,485  
Patent costs       1,937       1,875       5,691       5,096  
Royalty and license expense       2,229       1,764       5,028       6,342  
Total operating expenses       35,395       32,428       100,593       93,633  
OPERATING INCOME       26,032       15,790       41,462       88,367  
Interest income, net       2,118       861       5,155       2,328  
Other (expense) income, net       (7 )     6       (66 )     (7 )
Interest and other (expense) income, net       2,111       867       5,089       2,321  
INCOME BEFORE INCOME TAXES       28,143       16,657       46,551       90,688  
INCOME TAX EXPENSE       (5,325 )     (3,137 )     (6,960 )     (19,616 )
NET INCOME     $ 22,818     $ 13,520     $ 39,591     $ 71,072  
NET INCOME PER COMMON SHARE:                                  
BASIC     $ 0.48     $ 0.28     $ 0.83     $ 1.50  
DILUTED     $ 0.48     $ 0.28     $ 0.83     $ 1.49  
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:                                  
BASIC       46,869,998       46,801,051       46,841,036       46,716,726  
DILUTED       46,914,553       46,871,720       46,893,768       46,793,429  
CASH DIVIDENDS DECLARED PER COMMON SHARE     $ 0.06     $ 0.03     $ 0.18     $ 0.09  
                                   
 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(in thousands)

 
      Nine Months Ended September 30,  
      2018     2017  
CASH FLOWS FROM OPERATING ACTIVITIES:                  
Net income     $ 39,591     $ 71,072  
Adjustments to reconcile net income to net cash provided by operating activities:                  
Amortization of deferred revenue and recognition of unbilled receivables       (52,325 )     (7,206 )
Depreciation       6,094       3,638  
Amortization of intangibles       16,479       16,485  
Inventory write-down       1,045        
Amortization of premium and discount on investments, net       (4,191 )     (2,055 )
Stock-based compensation to employees       9,697       8,467  
Stock-based compensation to Board of Directors and Scientific Advisory Board       3,234       1,890  
Earnout liability recorded for Adesis acquisition             509  
Deferred income tax expense       15,820       6,804  
Retirement plan expense       3,378       3,214  
Decrease (increase) in assets:                  
Accounts receivable       9,148       (18,262 )
Inventory       (33,811 )     (15,419 )
Other current assets       (116 )     (2,835 )
Other assets       (37,769 )     (40 )
Increase (decrease) in liabilities:                  
Accounts payable and accrued expenses       439       3,904  
Other current liabilities       (34 )     (768 )
Deferred revenue       99,940       1,863  
Other liabilities       18,337        
Net cash provided by operating activities       94,956       71,261  
CASH FLOWS FROM INVESTING ACTIVITIES:                  
Purchases of property and equipment       (20,925 )     (23,221 )
Purchases of investments       (500,985 )     (456,264 )
Proceeds from sale of investments       415,697       351,024  
Net cash used in investing activities       (106,213 )     (128,461 )
CASH FLOWS FROM FINANCING ACTIVITIES:                  
Proceeds from issuance of common stock       616       529  
Repurchase of common stock       (477 )      
Proceeds from the exercise of common stock options             29  
Payment of withholding taxes related to stock-based compensation to employees       (11,598 )     (9,330 )
Cash dividends paid       (8,486 )     (4,240 )
Net cash used in financing activities       (19,945 )     (13,012 )
DECREASE IN CASH AND CASH EQUIVALENTS       (31,202 )     (70,212 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD       132,840       139,365  
CASH AND CASH EQUIVALENTS, END OF PERIOD     $ 101,638     $ 69,153  
The following non-cash activities occurred:                  
Unrealized gain (loss) on available-for-sale securities     $ 274     $ (117 )

Common stock issued to Board of Directors and Scientific Advisory Board that was earned and accrued for in a previous period

      300       300  
Common stock issued to employees that was earned and accrued for in a previous period             174  
Net change in accounts payable and accrued expenses related to purchases of property and equipment       3,814       2,572  
                   

 

Contacts

Universal Display Corporation
Darice Liu, +1 609-964-5123
investor@oled.com
media@oled.com

 
 

Source: Universal Display Corporation

MORE ON THIS TOPIC