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 Universal Display Corporation Announces Fourth Quarter and Full Year 2018 Financial Results
   Thursday, February 21, 2019 4:08:00 PM ET

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 fourth quarter and full year ended December 31, 2018.



“New OLED capacity announcements, a diversifying list of panel manufacturers entering commercial OLED production, and a broadening landscape of consumer OLED end products in 2018 has positioned the OLED industry for what we anticipate will be its next wave of growth,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “Additionally, with new customer agreements, advancement in our R&D programs, new infrastructure plans, and an increase in our critical mass, we made significant progress last year with the Company’s growth roadmap. We expect these efforts to further solidify our leadership position in the OLED ecosystem and buttress our long-term strategy to continue enabling this growing industry.”

Rosenblatt continued, “For 2019, we forecast meaningful growth to resume for us as new OLED capacity comes online, new OLED products are launched, and progress continues with our customers’ OLED commercialization plans. With the ongoing proliferation of OLED applications, we believe that the market is excited for stunningly colorful, thin, and cutting-edge products, including groundbreaking plastic-based form factors that are expected to forge new and extraordinary commercial product roadmaps in the display and lighting industries.”

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 in the fourth quarter of 2018 was $70.1 million. On an ASC Topic 605 basis, total revenue in the fourth quarter of 2018 would have been $92.9 million, compared to $115.9 million in the fourth quarter of 2017. 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 $39.9 million in the fourth quarter of 2018. On an ASC Topic 605 basis, revenue from material sales in the fourth quarter of 2018 would have been $49.9 million, compared to $59.8 million in the fourth quarter of 2017. The Company believes that the decline was due to material inventory pre-purchases that occurred in the fourth quarter of 2017 as well as the impact of ASC Topic 606.
  • Revenue from royalty and license fees was $25.9 million in the fourth quarter of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees in the fourth quarter of 2018 would have been $38.6 million in the fourth quarter of 2018, compared to $53.8 million in the fourth quarter of 2017.
  • Cost of materials was $14.8 million in the fourth quarter of 2018, compared to $15.5 million in the fourth quarter of 2017.
  • Operating income was $15.3 million in the fourth quarter of 2018. On an ASC Topic 605 basis, operating income in the fourth quarter of 2018 would have been $38.0 million, compared to $57.9 million in the fourth quarter of 2017.
  • Net income was $19.2 million or $0.40 per diluted share in the fourth quarter of 2018. On an ASC Topic 605 basis, net income in the fourth quarter of 2018 would have been $45.2 million or $0.95 per diluted share, compared to $32.8 million or $0.69 per diluted share in the fourth quarter of 2017.
 

   
($ in thousands) Three Months Ended December 31,
2018     2017
Material sales $ 39,879 $ 59,753
Royalty and license fees 25,886 53,798
Contract research services   4,378   2,316
Total revenue $ 70,143 $ 115,867
 
 

 
($ thousands)     Three Months Ended December 31,
2018     2017
Material sales $ 39,879 $ 59,753
Cost of material sales   14,768   15,492
Gross margin on material sales 25,111 44,261
Gross margin as a % of material sales 63 % 74 %
 
 

 

 

 

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

    As reported     Adjustment    

Balances without
adoption of
ASC Topic 606

Revenue $ 70,143 $ 22,708 $ 92,851
Gross margin 51,818 22,708 74,526
Operating income 15,273 22,708 37,981
Net income 19,249 25,990 45,239
Diluted earnings per share $ 0.40 $ 0.55 $ 0.95
 

  • Total revenue was $247.4 million for the full year of 2018. On an ASC Topic 605 basis, total revenue for the full year of 2018 would have been $326.3 million, compared to $335.6 million for the full year of 2017.
  • Revenue from material sales was $153.2 million for the full year of 2018. On an ASC Topic 605 basis, revenue from material sales for the full year of 2018 would have been $166.2 million, compared to $200.3 million for the full year of 2017. The Company believes that these results were due to several factors: the soft premium smartphone market in 2018 that resulted in weaker-than-expected material sales demand for OLED panels, material inventory pre-purchases that occurred in the fourth quarter of 2017, and the impact of ASC Topic 606.
  • Revenue from royalty and license fees was $80.6 million for the full year of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees would have been $146.5 million for the 2018 period, compared to $126.5 million for the 2017 period.
  • Cost of materials was $43.6 million for the full year, compared to $49.2 million for the full year of 2017.
  • Operating income was $56.7 million for the full year of 2018. On an ASC Topic 605 basis, operating income would have been $135.6 million for the 2018 period, compared to $146.2 million for the 2017 period.
  • Net income was $58.8 million or $1.24 per diluted share for the full year of 2018. On an ASC 605 basis, net income for the full year of 2018 would have been $130.5 million or $2.77 per diluted share, compared to $103.9 million or $2.18 per diluted share for the full year of 2017.
 

 
($ in thousands)     Full Year Ended December 31,
2018     2017
Material sales $ 153,204 $ 200,259
Royalty and license fees 80,644 126,503
Contract research services   13,566   8,867
Total revenue $ 247,414 $ 335,629
 
 

 
($ thousands)     Full Year Ended December 31,
2018     2017
Material sales $ 153,204 $ 200,259
Cost of material sales   43,550   49,240
Gross margin on material sales 109,654 151,019
Gross margin as a % of material sales 72 % 75 %
 
 

 

 

 

For the full year ended December 31, 2018 (in thousands)

    As reported     Adjustment    

Balances without
adoption of
ASC Topic 606

Revenue $ 247,414 $ 78,885 $ 326,299
Gross margin 193,873 78,885 272,758
Operating income 56,735 78,885 135,620
Net income 58,840 71,633 130,473
Diluted earnings per share $ 1.24 $ 1.53 $ 2.77
 

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 believes that its 2019 revenue will be approximately in the range of $325 million to $350 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 $395 million to $420 million.

The Company also announced a first quarter cash dividend of $0.10 per share on the Company’s common stock. The dividend is payable on March 29, 2019 to all shareholders of record on March 15, 2019.

In conjunction with this release, Universal Display will host a conference call on Thursday, February 21, 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

(in thousands, except share and per share data)

 
    December 31, 2018     December 31, 2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 211,022 $ 132,840
Short-term investments 304,323 287,446
Accounts receivable 43,129 52,355
Inventory 70,000 36,265
Other current assets   6,366   10,276
Total current assets 634,840 519,182

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $44,943 and $36,368

69,739 56,450
ACQUIRED TECHNOLOGY, net of accumulated amortization of $111,890 and $91,312 110,951 131,529
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $3,384 and $2,000 13,456 14,840
GOODWILL 15,535 15,535
INVESTMENTS 14,794
DEFERRED INCOME TAXES 24,377 27,022
OTHER ASSETS   64,526   604
TOTAL ASSETS $ 933,424 $ 779,956
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,532 $ 13,774
Accrued expenses 36,057 35,019
Deferred revenue 80,782 14,981
Other current liabilities   5,811   50
Total current liabilities 133,182 63,824
DEFERRED REVENUE 41,785 23,902
RETIREMENT PLAN BENEFIT LIABILITY 44,055 33,176
OTHER LIABILITIES   23,896  
Total liabilities   242,918   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, 48,681,524 and 48,476,034 shares issued, and 47,319,887 and 47,118,171 shares outstanding at December 31, 2018 and December 31, 2017, respectively 487 485
Additional paid-in capital 617,334 611,063
Retained earnings 129,552 99,126
Accumulated other comprehensive loss (16,234 ) (11,464 )

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

  (40,635 )   (40,158 )
Total shareholders’ equity   690,506   659,054
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 933,424 $ 779,956
 
 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

 
   

Three Months Ended
December 31,

   

Twelve Months Ended
December 31,

2018     2017 2018     2017
(Unaudited)
REVENUE $ 70,143 $ 115,867 $ 247,414 $ 335,629
COST OF SALES   18,325   16,936   53,541   54,698
Gross margin 51,818 98,931 193,873 280,931
OPERATING EXPENSES:
Research and development 14,795 15,045 53,717 49,144
Selling, general and administrative 12,526 15,197 46,999 46,808
Amortization of acquired technology and other intangible assets 5,483 5,498 21,962 21,983
Patent costs 1,773 1,914 7,464 7,010
Royalty and license expense   1,968   3,397   6,996   9,739
Total operating expenses   36,545   41,051   137,138   134,684
OPERATING INCOME 15,273 57,880 56,735 146,247
Interest income, net 2,504 966 7,659 3,294
Other (expense) income, net   (17 )   3   (83 )   (4 )
Interest and other (expense) income, net   2,487   969   7,576   3,290
INCOME BEFORE INCOME TAXES 17,760 58,849 64,311 149,537
INCOME TAX BENEFIT (EXPENSE)   1,489   (26,036 )   (5,471 )   (45,652 )
NET INCOME $ 19,249 $ 32,813 $ 58,840 $ 103,885
NET INCOME PER COMMON SHARE:
BASIC $ 0.40 $ 0.70 $ 1.24 $ 2.19
DILUTED $ 0.40 $ 0.69 $ 1.24 $ 2.18
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC 46,874,953 46,750,711 46,849,588 46,725,289
DILUTED 46,917,838 46,826,412 46,896,766 46,805,194
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.06 $ 0.03 $ 0.24 $ 0.12
 
 
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 
    Year Ended December 31,
2018     2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 58,840 $ 103,885
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables (68,905 ) (11,122 )
Depreciation 8,612 4,919
Amortization of intangibles 21,962 21,983
Inventory write-down 3,630
Amortization of premium and discount on investments, net (6,131 ) (2,871 )
Stock-based compensation to employees 12,432 12,284
Stock-based compensation to Board of Directors and Scientific Advisory Board 4,364 2,609
Change in earnout liability recorded for Adesis acquisition 519
Deferred income tax (benefit) expense (12,814 ) 24,396
Retirement plan benefit expense 4,466 4,351
Decrease (increase) in assets:
Accounts receivable 9,226 (27,361 )
Inventory (37,365 ) (18,951 )
Other current assets 4,860 (3,884 )
Deferred income taxes 20,682
Other assets (63,922 ) (297 )
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 1,563 16,420
Other current liabilities 5,761 (1,917 )
Deferred revenue 130,639 8,402
Other liabilities   23,896  
Net cash provided by operating activities   121,796   133,365
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (25,391 ) (29,803 )
Purchases of investments (628,789 ) (594,283 )
Proceeds from sale of investments   633,179   498,508
Net cash used in investing activities   (21,001 )   (125,578 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 798 734
Repurchase of common stock (477 )
Proceeds from the exercise of common stock options 38
Payment of withholding taxes related to stock-based compensation to employees (11,620 ) (9,432 )
Cash dividends paid   (11,314 )   (5,652 )
Net cash used in financing activities   (22,613 )   (14,312 )
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 78,182 (6,525 )
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR   132,840   139,365
CASH AND CASH EQUIVALENTS, END OF YEAR $ 211,022 $ 132,840
The following non-cash activities occurred:
Unrealized gain (loss) on available-for-sale securities $ 342 $ (19 )

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

3,490 4,363
Cash paid for income tax 17,771 23,248
 

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

Source: Universal Display Corporation



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