Universal Display Corporation (Nasdaq: OLED), enabling
energy-efficient displays and lighting with its UniversalPHOLED®
technology and materials, today reported financial results for the
second quarter ended June 30, 2018.
“In the second quarter, we saw material sales improving off what
we believed to be a first quarter ‘bottom’ for material shipments,”
said Sidney D. Rosenblatt, Executive Vice President and Chief
Financial Officer of Universal Display. “With anticipated new OLED
product launches from leading OEMs around the world, we continue to
expect an additional pick-up in orders and revenues in the second
half of the year. As we look to 2019, we continue to anticipate it
to be a meaningful year of growth.”
Rosenblatt continued, “We believe that 2019 is poised to be a
pivotal year for the OLED industry. With the multi-year OLED capex
growth cycle of new production lines, the landscape of OLED
capacity is expected to significantly widen. This, we believe, will
drive broader adoption of OLEDs across the consumer electronics
market, and fuel substantial growth in the OLED industry.
Additionally, we expect the long-awaited introduction of the
world’s first foldable OLED product next year to pave the
cutting-edge and innovative form factor path. From conformable, to
foldable, to rollable, the disruptive and exciting force of OLEDs
promises to enlarge the industry with new applications and new
markets the imagination has yet to devise.”
Financial Highlights for the Second
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 of 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 decreased 45% to $56.1
million in the second quarter of 2018, compared with $102.5 million
in the second quarter of 2017. Total revenue for the second quarter
of 2018 would have been $73.6 million, or $17.5 million higher
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. In the previous year, a $45.0 million semi-annual license
fee payment was receipted from SDC in the second quarter of 2017
and included in the prior year’s revenue.
- Revenue from material sales decreased
21% to $36.8 million in the second quarter of 2018, compared with
$46.8 million in the second quarter of 2017. The Company believes
that the decline in material sales was due to weak OLED panel
demand resulting from the softness in the premium smartphone
market, and material inventory pre-purchases that occurred in
2017.
- Revenue from royalty and license fees
decreased 71% to $15.5 million in the second quarter of 2018,
compared with $53.7 million in the second quarter of 2017. Revenue
from royalty and license fees for the second quarter of 2018 would
have been $33.9 million, or $18.4 million higher without the impact
of ASC Topic 606.
- Cost of materials decreased 6% to $9.3
million in the second quarter of 2018, compared with $9.9 million
in the second quarter of 2017.
- Operating income decreased by $49.6
million to $10.9 million in the second quarter of 2018, compared
with $60.5 million in the second quarter of 2017.
- Net income decreased by $36.4 million
to $10.8 million or $0.23 per diluted share in the second quarter
of 2018, compared with $47.2 million or $0.99 per diluted share in
the second quarter of 2017.
Revenue
Comparison
($ in thousands) Three Months Ended
June 30, 2018 2017 Material sales $
36,833 $ 46,828 Royalty and license fees 15,523 53,667 Contract
research services 3,793 2,018 Total revenue $ 56,149
$ 102,513
Cost of Materials
Comparison
($ thousands) Three Months Ended
June 30, 2018 2017 Material sales $ 36,833
$ 46,828 Cost of material sales 9,284 9,894 Gross
margin on material sales 27,549 36,934 Gross margin as a % of
material sales 75 % 79 %
Topic 606 versus
605 Adjusted Results
For the three months ended June 30, 2018
(in thousands)
As reported Adjustment
Balances withoutadoption of
Topic606
Revenue $ 56,149 $ 17,470 $ 73,619 Gross margin 44,514 17,470
61,984 Operating income 10,911 17,470 28,381 Net income 10,814
14,290 25,104 Diluted earnings per share $ 0.23 $ 0.31 $ 0.54
Financial Highlights for the First Half
of 2018
- Total revenue decreased 37% to $99.7
million in the first half of 2018, compared with $158.1 million in
the first half of 2017. Total revenue would have been $141.8
million in the 2018 period, or $42.1 million higher, without the
impact of ASC Topic 606.
- Revenue from material sales decreased
34% to $62.1 million in the first half of 2018, compared with $93.5
million in the first half of 2017. The Company believes that the
decline in material sales was due to weak OLED panel demand
resulting from the softness in the premium smartphone market, and
material inventory pre-purchases that occurred in 2017.
- Revenue from royalty and license fees
decreased 48% to $31.4 million in the first half of 2018, compared
with $60.7 million in the first half of 2017. Revenue from royalty
and license fees would have been $71.0 million in the 2018 period,
or $39.6 million higher without the impact of ASC Topic 606.
- Cost of materials decreased 32% to
$15.0 million in the first half of 2018, compared with $22.0
million in the first half of 2017.
- Operating income decreased by $57.2
million to $15.4 million in the first half of 2018, compared with
$72.6 million in the first half of 2017.
- Net income decreased by $40.8 million
to $16.8 million or $0.35 per diluted share in the first half of
2018, compared with $57.6 million or $1.21 per diluted share in the
first half of 2017.
Revenue
Comparison
($ in thousands) Six Months Ended
June 30, 2018 2017 Material sales $
62,083 $ 93,465 Royalty and license fees 31,434 60,692 Contract
research services 6,204 3,922 Total revenue $ 99,721
$ 158,079
Cost of Materials
Comparison
($ thousands) Six Months Ended June 30,
2018 2017 Material sales $ 62,083 $ 93,465
Cost of material sales 14,974 21,993 Gross margin on
material sales 47,109 71,472 Gross margin as a % of material sales
76 % 76 %
Topic 606 versus
605 Adjusted Results
For the six months ended June 30, 2018 (in
thousands)
As reported Adjustment
Balances withoutadoption of
Topic606
Revenue $ 99,721 $ 42,123 $ 141,844 Gross margin 80,628 42,123
122,751 Operating income 15,430 42,123 57,553 Net income 16,773
34,259 51,032 Diluted earnings per share $ 0.35 $ 0.74 $ 1.09
2018 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
continues to expect that its 2018 revenues will be in the range of
$280 million to $310 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 10% to 15% higher than the revenue
guidance range.
Dividend
The Company also announced a third quarter cash dividend of
$0.06 per share on the Company’s common stock. The dividend is
payable on September 28, 2018 to all shareholders of record on
September 15, 2018.
Conference Call
Information
In conjunction with this release, Universal Display will host a
conference call on Thursday, August 9, 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, and reference
conference ID 13681536. 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 4,700 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.
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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share
data)
June 30, 2018 December
31, 2017 ASSETS CURRENT ASSETS: Cash and cash
equivalents $ 103,777 $ 132,840 Short-term investments 353,651
287,446 Accounts receivable 35,583 52,355 Inventory 56,043 36,265
Other current assets 20,311 10,276 Total current
assets 569,365 519,182
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $40,769 and $36,368
62,348 56,450 ACQUIRED TECHNOLOGY, net of accumulated amortization
of $101,611 and $91,312 121,230 131,529 OTHER INTANGIBLE ASSETS,
net of accumulated amortization of $2,687 and $2,000 14,153 14,840
GOODWILL 15,535 15,535 INVESTMENTS — 14,794 DEFERRED INCOME TAXES
10,534 27,022 OTHER ASSETS 40,084 604 TOTAL ASSETS $
833,249 $ 779,956
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES: Accounts payable $ 7,863 $ 13,774 Accrued
expenses 24,405 35,019 Deferred revenue 69,247 14,981 Other current
liabilities 25 50 Total current liabilities 101,540
63,824 DEFERRED REVENUE 28,344 23,902 RETIREMENT PLAN BENEFIT
LIABILITY 34,350 33,176 OTHER LIABILITIES 18,334 —
Total liabilities 182,568 120,902 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, 48,650,696 and 48,476,034 shares
issued, and 47,289,059 and 47,118,171 shares outstanding, at June
30, 2018 and December 31, 2017, respectively
487 485 Additional paid-in capital 608,932 611,063 Retained
earnings 92,346 99,126 Accumulated other comprehensive loss (10,451
) (11,464 )
Treasury stock, at cost (1,361,637 and
1,357,863 shares at June 30, 2018 and December 31, 2017,
respectively)
(40,635 ) (40,158 ) Total shareholders’ equity
650,681 659,054 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $
833,249 $ 779,956
UNIVERSAL DISPLAY CORPORATION
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except share and per share
data)
Three Months Ended June 30,
Six Months Ended June 30, 2018
2017 2018 2017 REVENUE $ 56,149
$ 102,513 $ 99,721 $ 158,079 COST OF SALES 11,635
11,310 19,093 24,297 Gross margin 44,514 91,203
80,628 133,782 OPERATING EXPENSES: Research and development 12,949
10,685 25,306 22,503 Selling, general and administrative 11,562
9,839 22,353 19,916 Amortization of acquired technology and other
intangible assets 5,495 5,495 10,986 10,987 Patent costs 2,029
1,674 3,754 3,221 Royalty and license expense 1,568
2,991 2,799 4,578 Total operating expenses
33,603 30,684 65,198 61,205 OPERATING INCOME
10,911 60,519 15,430 72,577 Interest income, net 1,766 796 3,037
1,467 Other (expense) income, net (12 ) 6 (59
) (13 ) Interest and other (expense) income, net
1,754 802 2,978 1,454 INCOME BEFORE INCOME
TAXES 12,665 61,321 18,408 74,031 INCOME TAX EXPENSE (1,851
) (14,134 ) (1,635 ) (16,479 ) NET INCOME $
10,814 $ 47,187 $ 16,773 $ 57,552 NET INCOME PER COMMON SHARE:
BASIC $ 0.23 $ 0.99 $ 0.35 $ 1.21 DILUTED $ 0.23 $ 0.99 $ 0.35 $
1.21 WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER
COMMON SHARE: BASIC 46,868,999 46,742,746 46,826,314 46,702,376
DILUTED 46,901,098 46,810,238 46,873,109 46,781,120 CASH DIVIDENDS
DECLARED PER COMMON SHARE $ 0.06 $ 0.03 $ 0.12 $ 0.06
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended June 30, 2018
2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net
income $ 16,773 $ 57,552 Adjustments to reconcile net income to net
cash provided by operating activities: Amortization of deferred
revenue and recognition of unbilled receivables (29,266 ) (4,873 )
Depreciation 4,422 2,398 Amortization of intangibles 10,986 10,987
Amortization of premium and discount on investments, net (2,329 )
(1,260 ) Stock-based compensation to employees 6,163 5,404
Stock-based compensation to Board of Directors and Scientific
Advisory Board 2,003 1,328 Earnout liability recorded for Adesis
acquisition — 469 Deferred income tax expense 19,312 7,408
Retirement plan expense 2,252 2,088 Decrease (increase) in assets:
Accounts receivable 16,772 (14,708 ) Inventory (19,778 ) (7,123 )
Other current assets (9,058 ) (799 ) Other assets (37,909 ) (10 )
Increase (decrease) in liabilities: Accounts payable and accrued
expenses (13,123 ) (1,916 ) Other current liabilities (25 ) (821 )
Deferred revenue 64,423 505 Other liabilities 18,334
— Net cash provided by operating activities 49,952
56,629 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property
and equipment (13,420 ) (9,717 ) Purchases of investments (260,711
) (255,224 ) Proceeds from sale of investments 211,847
189,335 Net cash used in investing activities (62,284
) (75,606 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds
from issuance of common stock 436 349 Repurchase of common stock
(477 ) — Proceeds from the exercise of common stock options — 30
Payment of withholding taxes related to
stock-based compensation to employees
(11,031 ) (8,501 ) Cash dividends paid (5,659 )
(2,828 ) Net cash used in financing activities (16,731 )
(10,950 ) DECREASE IN CASH AND CASH EQUIVALENTS (29,063 )
(29,927 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
132,840 139,365 CASH AND CASH EQUIVALENTS, END OF PERIOD $
103,777 $ 109,438 The following non-cash activities occurred:
Unrealized gain on available-for-sale securities $ 219 $ 140
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 3,100 4,169
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180809005755/en/
Universal Display CorporationDarice Liu, 609-671-0980
x570investor@oled.commedia@oled.com
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