Universal Display Corporation Announces First Quarter 2019 Financial Results

EWING, N.J.–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24OLED&src=ctag” target=”_blank”gt;$OLEDlt;/agt; lt;a href=”https://twitter.com/hashtag/OLED?src=hash” target=”_blank”gt;#OLEDlt;/agt;–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
 

Contacts

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

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