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Universal Display Corporation Announces Third Quarter 2020 Financial Results

·13-min read

Universal 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, 2020.

"We are pleased to report solid third quarter 2020 results," said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. "Beginning in July, we saw a pick-up in customer orders and UniversalPHOLED shipments and that strength has continued. Looking to the near-term, while ongoing uncertainties related to the COVID-19 pandemic persist, we believe OLED panel momentum will continue in the fourth quarter. Based on our current estimates, we believe 2020 revenues will be approximately in the range of $385 million to $400 million."

Rosenblatt continued, "For 2021, we expect meaningful growth to resume as new OLED production comes online, new OLED consumer electronic models are launched, and customers continue to advance their OLED commercialization plans. The flexibility and versatility of OLEDs continue to broaden the imagination and transform the definition of what a consumer product can be. As the OLED industry continues to gain strong traction across the landscape of small, medium and large displays, we remain focused on expanding and deepening our leadership position and enabling our customers and the OLED ecosystem."

Financial Highlights for the Third Quarter of 2020

  • Total revenue in the third quarter of 2020 was $117.1 million as compared to $97.5 million in the third quarter of 2019. The increase in revenue was due to higher material sales as a result of stronger demand in the OLED display market. The full extent of the impact of the on-going COVID-19 pandemic on our operational performance remains uncertain and will depend on many factors including the timing, extent and duration of the pandemic, the development and availability of effective treatments and vaccines, and the impact on the global economy and demand for OLED consumer products.

  • Revenue from material sales was $68.7 million in the third quarter of 2020 as compared to $51.8 million in the third quarter of 2019.

  • Revenue from royalty and license fees was $44.6 million in the third quarter of 2020 as compared to $43.0 million in the third quarter of 2019.

  • Cost of material sales was $20.8 million in the third quarter of 2020 as compared to $15.2 million in the third quarter of 2019.

  • Operating income was $48.4 million in the third quarter of 2020 as compared to operating income of $40.8 million in the third quarter of 2019.

  • Net income was $40.5 million or $0.85 per diluted share in the third quarter of 2020 as compared to $37.0 million or $0.78 per diluted share in the third quarter of 2019.

Revenue Comparison

($ in thousands)

Three Months Ended September 30,

2020

2019

Material sales

$

68,709

$

51,837

Royalty and license fees

44,550

43,015

Contract research services

3,820

2,663

Total revenue

$

117,079

$

97,515

Cost of Materials Comparison

($ in thousands)

Three Months Ended September 30,

2020

2019

Material sales

$

68,709

$

51,837

Cost of material sales

20,849

15,245

Gross margin on material sales

47,860

36,592

Gross margin as a % of material sales

70

%

71

%

Financial Highlights for the First Nine Months of 2020

  • Total revenue in the first nine months of 2020 was $287.3 million as compared to $303.4 million in the first nine months of 2019. The decrease in revenue was mainly due to the weakened demand for emitter product from our customers during the three-month period ended June 30, 2020 as a result of the COVID-19 pandemic. As discussed above, the ultimate full extent of the impact of the pandemic on our operational performance remains uncertain.

  • Revenue from material sales was $167.2 million in the first nine months of 2020 as compared to $182.7 million in the first nine months of 2019. Revenue from royalty and license fees was $110.0 million in the first nine months of 2020 as compared to $112.2 million in the first nine months of 2019.

  • Cost of material sales was $51.3 million in the first nine months of 2020 as compared to $50.2 million in the first nine months of 2019. Included in the cost of material sales was an inventory reserve charge of $808,000 in the first nine months of 2020 as compared to a charge of $4.2 million in the first nine months of 2019.

  • Operating income was $91.7 million in the first nine months of 2020 as compared to $123.9 million in the first nine months of 2019.

  • Net income was $79.5 million or $1.67 per diluted share in the first nine months of 2020 as compared to $111.9 million or $2.36 per diluted share in the first nine months of 2019.

Revenue Comparison

($ in thousands)

Nine Months Ended September 30,

2020

2019

Material sales

$

167,211

$

182,661

Royalty and license fees

110,008

112,222

Contract research services

10,105

8,565

Total revenue

$

287,324

$

303,448

Cost of Materials Comparison

($ in thousands)

Nine Months Ended September 30,

2020

2019

Material sales

$

167,211

$

182,661

Cost of material sales

51,337

50,201

Gross margin on material sales

115,874

132,460

Gross margin as a % of material sales

69

%

73

%

2020 Guidance

The Company believes that its 2020 revenue will be approximately in the range of $385 million to $400 million. Along with the uncertainties resulting from the COVID-19 pandemic, the OLED industry remains at a stage where many variables can have a material impact on its growth, and the Company thus caveats its financial guidance accordingly.

Dividend

The Company also announced a fourth quarter cash dividend of $0.15 per share on the Company’s common stock. The dividend is payable on December 31, 2020 to all shareholders of record on December 15, 2020.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, October 29, 2020 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 the impact of the COVID-19 pandemic on the Company and otherwise, the Company’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 sections entitled "Risk Factors" in Universal Display Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent Quarterly Reports on Form 10-Q. 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, 2020

December 31, 2019

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

162,620

$

131,627

Short-term investments

510,048

514,461

Accounts receivable

99,350

60,452

Inventory

84,098

63,953

Other current assets

30,038

21,946

Total current assets

886,154

792,439

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $68,423 and $57,276

96,830

87,872

ACQUIRED TECHNOLOGY, net of accumulated amortization of $147,903 and $132,468

75,364

90,774

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $5,807 and $4,768

11,033

12,072

GOODWILL

15,535

15,535

INVESTMENTS

5,000

5,000

DEFERRED INCOME TAXES

31,978

30,375

OTHER ASSETS

103,067

86,090

TOTAL ASSETS

$

1,224,961

$

1,120,157

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

9,626

$

13,296

Accrued expenses

33,692

49,022

Deferred revenue

138,391

97,333

Other current liabilities

1,051

1,857

Total current liabilities

182,760

161,508

DEFERRED REVENUE

51,657

47,529

RETIREMENT PLAN BENEFIT LIABILITY

52,900

51,117

OTHER LIABILITIES

58,008

48,554

Total liabilities

345,325

308,708

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, 49,008,915 and 48,852,193 shares issued, and 47,643,267 and 47,486,545 shares outstanding, at September 30, 2020 and December 31, 2019, respectively

490

489

Additional paid-in capital

628,051

620,236

Retained earnings

307,144

249,003

Accumulated other comprehensive loss

(14,767

)

(16,997

)

Treasury stock, at cost (1,365,648 shares at September 30, 2020 and December 31, 2019)

(41,284

)

(41,284

)

Total shareholders’ equity

879,636

811,449

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,224,961

$

1,120,157

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except share and per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

REVENUE

$

117,079

$

97,515

$

287,324

$

303,448

COST OF SALES

23,378

17,286

58,480

57,172

Gross margin

93,701

80,229

228,844

246,276

OPERATING EXPENSES:

Research and development

20,814

16,787

61,708

51,449

Selling, general and administrative

13,579

12,623

45,129

40,531

Amortization of acquired technology and other intangible assets

5,494

5,493

16,474

16,469

Patent costs

2,095

1,659

5,591

5,145

Royalty and license expense

3,293

2,837

8,195

8,828

Total operating expenses

45,275

39,399

137,097

122,422

OPERATING INCOME

48,426

40,830

91,747

123,854

Interest income, net

1,029

2,748

4,444

8,336

Other income, net

262

53

634

740

Interest and other income, net

1,291

2,801

5,078

9,076

INCOME BEFORE INCOME TAXES

49,717

43,631

96,825

132,930

INCOME TAX EXPENSE

(9,217

)

(6,669

)

(17,355

)

(21,054

)

NET INCOME

$

40,500

$

36,962

$

79,470

$

111,876

NET INCOME PER COMMON SHARE:

BASIC

$

0.85

$

0.78

$

1.67

$

2.36

DILUTED

$

0.85

$

0.78

$

1.67

$

2.36

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

BASIC

47,227,061

46,980,439

47,182,625

46,947,109

DILUTED

47,260,331

47,013,919

47,212,660

46,983,901

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.15

$

0.10

$

0.45

$

0.30

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Nine Months Ended September 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

79,470

$

111,876

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

Amortization of deferred revenue and recognition of unbilled receivables

(112,508

)

(101,079

)

Depreciation

11,147

8,958

Amortization of intangibles

16,474

16,469

Change in excess inventory reserve

808

4,155

Amortization of premium and discount on investments, net

(4,293

)

(4,528

)

Stock-based compensation to employees

19,807

10,697

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

1,133

1,126

Deferred income tax benefit

(2,242

)

(2,633

)

Retirement plan expense

4,242

4,379

Decrease (increase) in assets:

Accounts receivable

(38,898

)

(22,645

)

Inventory

(20,953

)

8,074

Other current assets

(2,854

)

(4,602

)

Other assets

(8,721

)

(10,259

)

Increase (decrease) in liabilities:

Accounts payable and accrued expenses

(19,633

)

(1,827

)

Other current liabilities

(806

)

5,587

Deferred revenue

144,200

113,849

Other liabilities

9,454

149

Net cash provided by operating activities

75,827

137,746

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(19,213

)

(25,317

)

Purchases of intangibles

(25

)

(401

)

Purchases of investments

(604,153

)

(648,006

)

Proceeds from sale of investments

613,310

590,550

Net cash used in investing activities

(10,081

)

(83,174

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

869

658

Repurchase of common stock

(649

)

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

(14,293

)

(15,920

)

Cash dividends paid

(21,329

)

(14,142

)

Net cash used in financing activities

(34,753

)

(30,053

)

INCREASE IN CASH AND CASH EQUIVALENTS

30,993

24,519

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

131,627

211,022

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

162,620

$

235,541

The following non-cash activities occurred:

Unrealized gain on available-for-sale securities

$

451

$

227

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

(892

)

(168

)

View source version on businesswire.com: https://www.businesswire.com/news/home/20201029006244/en/

Contacts

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