Universal Display Corporation Announces Third Quarter 2019 Financial Results

EWING, N.J.–(BUSINESS WIRE)–$OLED #OLEDUniversal 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, 2019.

“We are pleased to report another quarter of solid results,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “During the quarter, OLED activity continued to gain strength on a global scale. As a result, we are raising our 2019 revenue guidance and believe that we are well on track to deliver record revenues and earnings for the year, and expect this strength to continue into 2020.”

Rosenblatt continued, “We believe that the proliferation of OLEDs across the consumer electronics spectrum is fueling a tremendous multi-year capex cycle. As panel makers continue to shift more of their focus to OLEDs as the future of displays, we are seeing a corresponding increase in OLED investment momentum. Based on our current forecasts and industry data, we believe market growth will continue and estimate that the installed capacity base of OLEDs at the end of 2021, as measured in square meters, will increase by approximately 50% over the installed capacity base at the end of 2019.”

Financial Highlights for the Third Quarter of 2019

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. Material sales and cost of material sales referenced below relate solely to OLED activity and exclude activity from contract research services.

  • Total revenue in the third quarter of 2019 was $97.5 million as compared to $77.6 million in the third quarter of 2018. On the basis of ASC Topic 605 (the applicable accounting standard prior to the adoption of ASC Topic 606), total revenue in the third quarter of 2019 would have been $97.7 million, compared to $91.6 million in the third quarter of 2018. Under ASC Topic 606, license fee revenue is recognized on a per gram sales basis, whereas under ASC Topic 605, revenue was recognized for license payments upon receipt or on a straight-line basis over the term of the contract. As we disclosed in last quarter’s earnings release, we believe that during the second quarter of 2019, certain of our customers located in China accelerated emitter purchases to mitigate the impact from potential U.S. and China trade-related issues. We estimated that these pre-purchases increased revenue by $15 million to $20 million in the second quarter, pulled in from the second half of 2019.
  • Revenue from material sales was $51.8 million in the third quarter of 2019 as compared to $51.2 million in the third quarter of 2018. On an ASC Topic 605 basis, revenue from material sales in the third quarter of 2019 would have been $58.3 million, compared to $51.7 million in the third quarter of 2018.
  • Revenue from royalty and license fees was $43.0 million in the third quarter of 2019 as compared to $23.3 million in the third quarter of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees in the third quarter of 2019 would have been $36.7 million as compared to $37.0 million in the third quarter of 2018.
  • Cost of materials was $15.2 million in the third quarter of 2019, compared to $13.8 million in the third quarter of 2018.
  • Operating income was $40.8 million in the third quarter of 2019 compared to $26.0 million in the third quarter of 2018. On an ASC Topic 605 basis, operating income in the third quarter of 2019 would have been $41.0 million, compared to $40.1 million in the third quarter of 2018.
  • Net income was $37.0 million or $0.78 per diluted share in the third quarter of 2019 compared to $22.8 million or $0.48 per diluted share in the third quarter of 2018. On an ASC Topic 605 basis, net income in the third quarter of 2019 would have been $37.1 million or $0.78 per diluted share, compared to $34.2 million or $0.72 per diluted share in the third quarter of 2018.

Revenue Comparison

(in thousands)

 

Three Months Ended September 30,

 

 

2019

 

 

2018

Material sales

 

$

51,837

 

 

$

51,242

Royalty and license fees

 

 

43,015

 

 

 

23,325

Contract research services

 

 

2,663

 

 

 

2,983

Total revenue

 

$

97,515

 

 

$

77,550

Cost of Materials Comparison

(in thousands)

 

Three Months Ended September 30,

 

 

2019

 

 

2018

Material sales

 

$

51,837

 

 

$

51,242

Cost of material sales

 

 

15,245

 

 

 

13,808

Gross margin on material sales

 

 

36,592

 

 

 

37,434

Gross margin as a % of material sales

 

 

71%

 

 

 

73%

Topic 606 versus 605 Adjusted Results

For the three months ended September 30, 2019 (in thousands)

 

As reported

 

 

Adjustment

 

 

Balances without

adoption of Topic

606

Revenue

 

$

97,515

 

 

$

183

 

 

$

97,698

Gross margin

 

 

80,229

 

 

 

183

 

 

 

80,412

Operating income

 

 

40,830

 

 

 

183

 

 

 

41,013

Net income

 

 

36,962

 

 

 

144

 

 

 

37,106

Diluted earnings per share

 

$

0.78

 

 

$

 

 

$

0.78

 

 

 

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 2019

  • Total revenue in the first nine months of 2019 was $303.4 million as compared to $177.3 million in the first nine months of 2018. On the basis of ASC Topic 605 (the applicable accounting standard prior to the adoption of ASC Topic 606), total revenue in the first nine months of 2019 would have been $319.1 million, compared to $233.4 million in the first nine months of 2018. Under ASC Topic 606, license fee revenue is recognized on a per gram sales basis, whereas under ASC Topic 605, revenue was recognized for license payments upon receipt or on a straight-line basis over the term of the contract. As we disclosed in last quarter’s earnings release, we believe that during the second quarter of 2019, certain of our customers located in China accelerated emitter purchases to mitigate the impact from potential U.S. and China trade-related issues. We estimated that these pre-purchases increased revenue by $15 million to $20 million in the second quarter, pulled in from the second half of 2019.
  • Revenue from material sales was $182.7 million in the first nine months of 2019 as compared to $113.3 million in the first nine months of 2018. On an ASC Topic 605 basis, revenue from material sales in the first nine months of 2019 would have been $193.9 million, compared to $116.3 million in the first nine months of 2018.
  • Revenue from royalty and license fees was $112.2 million in the first nine months of 2019 as compared to $54.8 million in the first nine months of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees in the first nine months of 2019 would have been $116.6 million as compared to $108.0 million in the first nine months of 2018.
  • Cost of materials was $50.2 million in the first nine months of 2019, compared to $28.8 million in the first nine months of 2018. Included in the cost of materials was an inventory reserve charge of $4.2 million in the first nine months of 2019, compared to $1.0 million in the first nine months of 2018.
  • Operating income was $123.9 million in the first nine months of 2019, compared to $41.5 million in the first nine months of 2018. On an ASC Topic 605 basis, operating income in the first nine months of 2019 would have been $139.5 million, compared to $97.6 million in the first nine months of 2018.
  • Net income was $111.9 million or $2.36 per diluted share in the first nine months of 2019 compared to $39.6 million or $0.83 per diluted share in the first nine months of 2018. On an ASC Topic 605 basis, net income in the first nine months of 2019 would have been $124.4 million or $2.63 per diluted share, compared to $85.2 million or $1.80 per diluted share in the first nine months of 2018.

Revenue Comparison

(in thousands)

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

Material sales

 

$

182,661

 

 

$

113,325

Royalty and license fees

 

 

112,222

 

 

 

54,758

Contract research services

 

 

8,565

 

 

 

9,188

Total revenue

 

$

303,448

 

 

$

177,271

Cost of Materials Comparison

(in thousands)

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

Material sales

 

$

182,661

 

 

$

113,325

Cost of material sales

 

 

50,201

 

 

 

28,782

Gross margin on material sales

 

 

132,460

 

 

 

84,543

Gross margin as a % of material sales

 

 

73%

 

 

 

75%

Topic 606 versus 605 Adjusted Results

For the nine months ended September 30, 2019 (in thousands)

 

As reported

 

 

Adjustment

 

 

Balances without

adoption of Topic

606

Revenue

 

$

303,448

 

 

$

15,628

 

 

$

319,076

Gross margin

 

 

246,276

 

 

 

15,628

 

 

 

261,904

Operating income

 

 

123,854

 

 

 

15,628

 

 

 

139,482

Net income

 

 

111,876

 

 

 

12,518

 

 

 

124,394

Diluted earnings per share

 

$

2.36

 

 

$

0.27

 

 

$

2.63

 

 

 

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

2019 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 2019 revenue will be approximately in the range of $400 million to $410 million. The guidance was prepared utilizing accounting standard ASC Topic 606; under the prior accounting standard ASC Topic 605, the Company estimates that its 2019 revenues would be approximately $435 million to $440 million.

Dividend

The Company also announced a fourth quarter cash dividend of $0.10 per share on the Company’s common stock. The dividend is payable December 31, 2019 to all shareholders of record on December 13, 2019.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Wednesday, October 30, 2019 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 the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications. Founded in 1994, the Company currently owns, exclusively licenses or has the sole right to sublicense more than 5,000 patents issued and pending 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. 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, 2018. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

September 30, 2019

 

 

December 31, 2018

ASSETS

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

235,541

 

 

$

211,022

Short-term investments

 

 

361,515

 

 

 

304,323

Accounts receivable

 

 

65,774

 

 

 

43,129

Inventory

 

 

57,771

 

 

 

70,000

Other current assets

 

 

10,415

 

 

 

6,366

Total current assets

 

 

731,016

 

 

 

634,840

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $53,900 and $44,943

 

 

86,266

 

 

 

69,739

ACQUIRED TECHNOLOGY, net of accumulated amortization of $127,323 and $111,890

 

 

95,919

 

 

 

110,951

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $4,420 and $3,384

 

 

12,420

 

 

 

13,456

GOODWILL

 

 

15,535

 

 

 

15,535

INVESTMENTS

 

 

5,000

 

 

 

DEFERRED INCOME TAXES

 

 

26,437

 

 

 

24,377

OTHER ASSETS

 

 

89,957

 

 

 

64,526

TOTAL ASSETS

 

$

1,062,550

 

 

$

933,424

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

Accounts payable

 

$

9,217

 

 

$

10,532

Accrued expenses

 

 

35,360

 

 

 

36,057

Deferred revenue

 

 

91,188

 

 

 

80,782

Other current liabilities

 

 

12,627

 

 

 

5,811

Total current liabilities

 

 

148,392

 

 

 

133,182

DEFERRED REVENUE

 

 

50,495

 

 

 

41,785

RETIREMENT PLAN BENEFIT LIABILITY

 

 

46,007

 

 

 

44,055

OTHER LIABILITIES

 

 

31,089

 

 

 

23,896

Total liabilities

 

 

275,983

 

 

 

242,918

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, 48,847,733 and 48,681,524 shares issued, and 47,482,085 and 47,319,887 shares outstanding, at September 30, 2019 and December 31, 2018, respectively

 

 

488

 

 

 

487

Additional paid-in capital

 

 

614,194

 

 

 

617,334

Retained earnings

 

 

227,286

 

 

 

129,552

Accumulated other comprehensive loss

 

 

(14,119)

 

 

 

(16,234)

Treasury stock, at cost (1,365,648 and 1,361,637 shares at September 30, 2019 and December 31, 2018, respectively)

 

 

(41,284)

 

 

 

(40,635)

Total shareholders’ equity

 

 

786,567

 

 

 

690,506

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,062,550

 

 

$

933,424

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

REVENUE

 

$

97,515

 

 

$

77,550

 

 

$

303,448

 

 

$

177,271

COST OF SALES

 

 

17,286

 

 

 

16,123

 

 

 

57,172

 

 

 

35,216

Gross margin

 

 

80,229

 

 

 

61,427

 

 

 

246,276

 

 

 

142,055

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

16,787

 

 

 

13,616

 

 

 

51,449

 

 

 

38,922

Selling, general and administrative

 

 

12,623

 

 

 

12,120

 

 

 

40,531

 

 

 

34,473

Amortization of acquired technology and other intangible assets

 

 

5,493

 

 

 

5,493

 

 

 

16,469

 

 

 

16,479

Patent costs

 

 

1,659

 

 

 

1,937

 

 

 

5,145

 

 

 

5,691

Royalty and license expense

 

 

2,837

 

 

 

2,229

 

 

 

8,828

 

 

 

5,028

Total operating expenses

 

 

39,399

 

 

 

35,395

 

 

 

122,422

 

 

 

100,593

OPERATING INCOME

 

 

40,830

 

 

 

26,032

 

 

 

123,854

 

 

 

41,462

Interest income, net

 

 

2,748

 

 

 

2,118

 

 

 

8,336

 

 

 

5,155

Other income (expense), net

 

 

53

 

 

 

(7)

 

 

 

740

 

 

 

(66)

Interest and other income, net

 

 

2,801

 

 

 

2,111

 

 

 

9,076

 

 

 

5,089

INCOME BEFORE INCOME TAXES

 

 

43,631

 

 

 

28,143

 

 

 

132,930

 

 

 

46,551

INCOME TAX EXPENSE

 

 

(6,669)

 

 

 

(5,325)

 

 

 

(21,054)

 

 

 

(6,960)

NET INCOME

 

$

36,962

 

 

$

22,818

 

 

$

111,876

 

 

$

39,591

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.78

 

 

$

0.48

 

 

$

2.36

 

 

$

0.83

DILUTED

 

$

0.78

 

 

$

0.48

 

 

$

2.36

 

 

$

0.83

WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

46,980,439

 

 

 

46,869,998

 

 

 

46,947,109

 

 

 

46,841,036

DILUTED

 

 

47,013,919

 

 

 

46,914,553

 

 

 

46,983,901

 

 

 

46,893,768

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.10

 

 

$

0.06

 

 

$

0.30

 

 

$

0.18

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

2019

 

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

 

$

111,876

 

 

$

39,591

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Amortization of deferred revenue and recognition of unbilled receivables

 

 

(101,079)

 

 

 

(52,325)

Depreciation

 

 

8,958

 

 

 

6,094

Amortization of intangibles

 

 

16,469

 

 

 

16,479

Change in excess inventory reserve

 

 

4,155

 

 

 

1,045

Amortization of premium and discount on investments, net

 

 

(4,528)

 

 

 

(4,191)

Stock-based compensation to employees

 

 

10,697

 

 

 

9,697

Stock-based compensation to Board of Directors and Scientific Advisory Board

 

 

1,126

 

 

 

3,234

Deferred income tax (benefit) expense

 

 

(2,633)

 

 

 

15,820

Retirement plan expense

 

 

4,379

 

 

 

3,378

Decrease (increase) in assets:

 

 

 

 

 

 

 

Accounts receivable

 

 

(22,645)

 

 

 

9,148

Inventory

 

 

8,074

 

 

 

(33,811)

Other current assets

 

 

(4,602)

 

 

 

(116)

Other assets

 

 

(10,259)

 

 

 

(37,769)

Increase (decrease) in liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

(1,827)

 

 

 

439

Other current liabilities

 

 

5,587

 

 

 

(34)

Deferred revenue

 

 

113,849

 

 

 

99,940

Other liabilities

 

 

149

 

 

 

18,337

Net cash provided by operating activities

 

 

137,746

 

 

 

94,956

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(25,317)

 

 

 

(20,925)

Purchases of intangibles

 

 

(401)

 

 

 

Purchases of investments

 

 

(648,006)

 

 

 

(500,985)

Proceeds from sale of investments

 

 

590,550

 

 

 

415,697

Net cash used in investing activities

 

 

(83,174)

 

 

 

(106,213)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

658

 

 

 

616

Repurchase of common stock

 

 

(649)

 

 

 

(477)

Payment of withholding taxes related to stock-based compensation to employees

 

 

(15,920)

 

 

 

(11,598)

Cash dividends paid

 

 

(14,142)

 

 

 

(8,486)

Net cash used in financing activities

 

 

(30,053)

 

 

 

(19,945)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

24,519

 

 

 

(31,202)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

211,022

 

 

 

132,840

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

235,541

 

 

$

101,638

The following non-cash activities occurred:

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

$

227

 

 

$

274

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

 

 

300

 

 

 

300

Net change in accounts payable and accrued expenses related to purchases of property and equipment

 

 

(168)

 

 

 

3,814

 

Contacts

Universal Display
Darice Liu

investor@oled.com
media@oled.com
+1 609-964-5123

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