Universal Display Corporation Announces First Quarter 2019 Financial Results

May 02, 2019 04:08 pm
EWING, N.J. -- 

Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the first quarter ended March 31, 2019.

“We are pleased to report solid first quarter 2019 results,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “Looking to the year, we continue to see strong momentum in the industry. As seen by leading OEM product launches, OLEDs are the display technology of choice for premium smartphones and TVs. Additionally, one of the major themes emerging in the consumer electronics market is form factor. Driven by a robust pipeline of activity, from both panel makers and end users, we believe that the flexible, foldable display path will lead to a myriad of new products, designs and applications.”

Rosenblatt continued, “2019 marks the 25th anniversary of Universal Display Corporation. In June 1994, we were founded on the mission to develop and commercialize key OLED technologies. Today, we are a leading player enabling the OLED ecosystem, and our proprietary technologies and materials can be found in virtually every consumer OLED product around the world. We believe that the tremendous value of our phosphorescent portfolio has solidified UDC as an integral partner in the commercialization of OLEDs into the marketplace.”

Financial Highlights for the First 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 first quarter of 2019 was $87.8 million as compared to $43.6 million in the first 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 first quarter of 2019 would have been $101.6 million, compared to $68.2 million in the first 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.
  • Revenue from material sales was $54.5 million in the first quarter of 2019 as compared to $25.3 million in the first quarter of 2018. On an ASC Topic 605 basis, revenue from material sales in the first quarter of 2019 would have been $57.3 million, compared to $28.7 million in the first quarter of 2018.
  • Revenue from royalty and license fees was $30.3 million in the first quarter of 2019 as compared to $15.9 million in the first quarter of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees in the first quarter of 2019 would have been $41.3 million as compared to $37.1 million in the first quarter of 2018.
  • Cost of materials was $13.0 million in the first quarter of 2019, compared to $5.7 million in the first quarter of 2018.
  • Operating income was $34.4 million in the first quarter of 2019 compared to $4.5 million in the first quarter of 2018. On an ASC Topic 605 basis, operating income in the first quarter of 2019 would have been $48.2 million, compared to $29.2 million in the first quarter of 2018.
  • Net income was $31.5 million or $0.66 per diluted share in the first quarter of 2019 compared to $6.0 million or $0.13 per diluted share in the first quarter of 2018. On an ASC Topic 605 basis, net income in the first quarter of 2019 would have been $42.5 million or $0.90 per diluted share, compared to $25.9 million or $0.55 per diluted share in the first quarter of 2018.
 

Revenue Comparison

 
($ in thousands) Three Months Ended March 31,
2019     2018
Material sales $ 54,496 $ 25,250
Royalty and license fees 30,269 15,911
Contract research services   3,000   2,411
Total revenue $ 87,765 $ 43,572
 
 

Cost of Materials Comparison

 
($ thousands) Three Months Ended March 31,
2019     2018
Material sales $ 54,496 $ 25,250
Cost of material sales   12,975   5,690
Gross margin on material sales 41,521 19,560
Gross margin as a % of material sales 76% 77%
 
         

ASC Topic 606 versus 605 Adjusted Results1

 

 

For the three months ended March 31, 2019 (in thousands)

As reported Adjustment

Balances without
adoption of
ASC Topic 606

Revenue $ 87,765 $ 13,816 $ 101,581
Gross margin 71,951 13,816 85,767
Operating income 34,360 13,816 48,176
Net income 31,474 11,053 42,527
Diluted earnings per share $ 0.66 $ 0.24 $ 0.90
 
 

 

For the three months ended March 31, 2018 (in thousands)

As reported Adjustment

Balances without
adoption of
ASC Topic 606

Revenue $ 43,572 $ 24,653 $ 68,225
Gross margin 36,114 24,653 60,767
Operating income 4,519 24,653 29,172
Net income 5,959 19,969 25,928
Diluted earnings per share $ 0.13 $ 0.43 $ 0.55
________________
(1)   Amounts shown in the following tables as balances without adoption of ASC Topic 606 are presented in order to provide a basis for comparison against the Company’s operating results for periods prior to 2018, which were calculated and disclosed without adoption of ASC Topic 606.
 

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 $345 million to $365 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 $405 million to $425 million.

Dividend

The Company also announced a second quarter cash dividend of $0.10 per share on the Company’s common stock. The dividend is payable on June 28, 2019 to all shareholders of record on June 14, 2019.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on May 2, 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)

   
March 31, 2019 December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 225,048 $ 211,022
Short-term investments 301,549 304,323
Accounts receivable 52,124 43,129
Inventory 68,041 70,000
Other current assets   5,410   6,366
Total current assets 652,172 634,840

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $47,701 and $44,943

80,615 69,739

ACQUIRED TECHNOLOGY, net of accumulated amortization of $117,034 and $111,890

106,208 110,951

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $3,726 and $3,384

13,114 13,456
GOODWILL 15,535 15,535
DEFERRED INCOME TAXES 24,781 24,377
OTHER ASSETS   75,765   64,526
TOTAL ASSETS $ 968,190 $ 933,424
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,024 $ 10,532
Accrued expenses 27,470 36,057
Deferred revenue 86,296 80,782
Other current liabilities   10,784   5,811
Total current liabilities 131,574 133,182
DEFERRED REVENUE 41,596 41,785
RETIREMENT PLAN BENEFIT LIABILITY 44,747 44,055
OTHER LIABILITIES   34,072   23,896
Total liabilities   251,989   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, 48,760,311 and 48,681,524 shares issued, and 47,394,663 and 47,319,887 shares outstanding, at March 31, 2019 and December 31, 2018, respectively

488 487
Additional paid-in capital 616,206 617,334
Retained earnings 156,309 129,552
Accumulated other comprehensive loss (15,520) (16,234)

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

  (41,284)   (40,635)
Total shareholders’ equity   716,201   690,506
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 968,190 $ 933,424
 
 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(in thousands, except share and per share data)

 
Three Months Ended March 31,
2019   2018
REVENUE $ 87,765 $ 43,572
COST OF SALES   15,814   7,458
Gross margin 71,951 36,114
OPERATING EXPENSES:
Research and development 15,829 12,357
Selling, general and administrative 11,969 10,791
Amortization of acquired technology and other intangible assets 5,486 5,491
Patent costs 1,770 1,725
Royalty and license expense   2,537   1,231
Total operating expenses   37,591   31,595
OPERATING INCOME 34,360 4,519
Interest income, net 2,831 1,271
Other income (expense), net   282   (47)
Interest and other income, net   3,113   1,224
INCOME BEFORE INCOME TAXES 37,473 5,743
INCOME TAX (EXPENSE) BENEFIT   (5,999)   216
NET INCOME $ 31,474 $ 5,959
NET INCOME PER COMMON SHARE:
BASIC $ 0.66 $ 0.13
DILUTED $ 0.66 $ 0.13

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

BASIC 46,892,914 46,783,158
DILUTED 46,931,999 46,848,798
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.10 $ 0.06
 
 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(in thousands)

 
Three Months Ended March 31,
2019   2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,474 $ 5,959
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables (26,976) (12,589)
Depreciation 2,758 2,172
Amortization of intangibles 5,486 5,491
Change in excess inventory reserve 224 —
Amortization of premium and discount on investments, net (1,741) (966)
Stock-based compensation to employees 3,610 2,776
Stock-based compensation to Board of Directors and Scientific Advisory Board 516 897
Deferred income tax (benefit) expense (592) 72
Retirement plan expense 1,501 1,126
Decrease (increase) in assets:
Accounts receivable (8,995) 29,587
Inventory 1,735 (17,373)
Other current assets 177 (4,025)
Other assets (2,966) (177)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (12,117) (4,441)
Other current liabilities 3,744 (25)
Deferred revenue 33,080 30,331
Other liabilities   3,132   —
Net cash provided by operating activities   34,050   38,815
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,283) (8,733)
Purchases of intangibles (401) —
Purchases of investments (165,471) (123,375)
Proceeds from sale of investments   170,050   146,546
Net cash (used in) provided by investing activities   (9,105)   14,438
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 204 201
Repurchase of common stock (649) (477)
Payment of withholding taxes related to stock-based compensation to employees (5,757) (5,832)
Cash dividends paid   (4,717)   (2,831)
Net cash used in financing activities   (10,919)   (8,939)
INCREASE IN CASH AND CASH EQUIVALENTS 14,026 44,314
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD   211,022   132,840
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 225,048 $ 177,154
The following non-cash activities occurred:
Unrealized gain on available-for-sale securities $ 60 $ 69

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 (351) 4,583
 

Universal Display Contact:
Darice Liu
[email protected]
[email protected]
+1 609-964-5123