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Universal Display Corporation Announces Third Quarter 2022 Financial Results

2022-11-03 16:08 ET - News Release


Company Website: https://oled.com
EWING, N.J. -- (Business Wire)

Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED(TM) technology and materials, today reported financial results for the third quarter ended September 30, 2022.

"We are pleased to report solid third quarter results, which includes record quarterly revenues. As we look ahead, we believe that the long-term growth path of the OLED industry remains strong. We are continuing to execute on our strategic initiatives and are investing in our R&D programs, our people and our global infrastructure," said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. "While macroeconomic factors will likely weigh on near-term demand, we see a bright future for the OLED industry and for us in the years ahead with continued OLED market proliferation, investments in new OLED capacity and a broadening company portfolio of innovative technologies and state-of-the-art OLED materials."

Millard continued, "I am excited to have joined Universal Display Corporation, an extraordinary pioneer in the OLED industry for more than 25 years. With our brilliant team, cutting-edge initiatives, lean operating model and strong balance sheet, the Company is well poised for continued advancement in the growing OLED market. I look forward to working with the entire UDC team to continue to build upon our strong culture of inventiveness, integrity, inclusion and imagination and deliver on the Company's mission of being a critical enabler in the OLED ecosystem."

Financial Highlights for the Third Quarter of 2022

  • Total revenue in the third quarter of 2022 was $160.6 million as compared to $143.6 million in the third quarter of 2021. As with the prior quarter, the near-term weakness in the overall global market economy is expected to have an impact on forecasted demand for OLED products utilizing our emitter material over the remaining life of certain customers' contracts compared to prior estimates, resulting in recording a positive cumulative catch-up adjustment to total revenue of $6.6 million arising from changes in estimates of transaction price.
  • Revenue from material sales was $84.2 million in the third quarter of 2022 as compared to $75.6 million in the third quarter of 2021. This increase was primarily the result of higher unit material volume.
  • Revenue from royalty and license fees was $71.5 million in the third quarter of 2022 as compared to $63.9 million in the third quarter of 2021. This increase was primarily the result of higher unit material volume and customer mix.
  • Cost of material sales was $34.1 million in the third quarter of 2022 as compared to $28.9 million in the third quarter of 2021. Cost of material sales was impacted by underutilization of the new production facility in Shannon, Ireland. We recently commenced bringing this additional capacity online in preparation for anticipated growth in the years ahead.
  • Total gross margin was 77% in the third quarter of 2022 as compared to 78% in the third quarter of 2021. The decrease was in part due to costs associated with the Shannon facility in 2022, which contributed to a 2% decrease in total gross margin between the periods.
  • Operating income was $68.5 million in the third quarter of 2022 as compared to $57.7 million in the third quarter of 2021.
  • Net income was $53.5 million or $1.12 per diluted share in the third quarter of 2022 as compared to $46.1 million or $0.97 per diluted share in the third quarter of 2021.

Revenue Comparison

($ in thousands)

Three Months Ended September 30,

2022

2021

Material sales

$

84,182

$

75,609

Royalty and license fees

71,450

63,939

Contract research services

4,924

4,070

Total revenue

$

160,556

$

143,618

Cost of Materials Comparison

($ in thousands)

Three Months Ended September 30,

2022

2021

Material sales

$

84,182

$

75,609

Cost of material sales

34,057

28,883

Gross margin on material sales

50,125

46,726

Gross margin as a % of material sales

60

%

62

%

Financial Highlights for the First Nine Months of 2022

  • Total revenue in the first nine months of 2022 was $447.6 million as compared to $407.3 million in the first nine months of 2021. As with the prior quarter, the near-term weakness in the overall global market economy is expected to have an impact on forecasted demand for OLED products utilizing our emitter material over the remaining life of several customers' contracts compared to prior estimates, resulting in recording a positive cumulative catch-up adjustment to total revenue of $17.3 million arising from changes in estimates of transaction price.
  • Revenue from material sales was $242.7 million in the first nine months of 2022 as compared to $232.9 million in the first nine months of 2021. This increase was primarily the result of higher unit material volume.
  • Revenue from royalty and license fees was $191.5 million in the first nine months of 2022 as compared to $163.0 million in the first nine months of 2021. This increase was primarily the result of higher unit material volume and customer mix.
  • Cost of material sales was $89.0 million in the first nine months of 2022 as compared to $75.2 million in the first nine months of 2021.
  • Total gross margin was 78% in the first nine months of 2022 as compared to 80% in the first nine months of 2021. Shannon facility costs in 2022 contributed to a 1% decrease in total gross margin between periods.
  • Operating income was $184.0 million in the first nine months of 2022 as compared to $171.2 million in the first nine months of 2021.
  • Net income was $144.9 million or $3.04 per diluted share in the first nine months of 2022 as compared to $138.3 million or $2.90 per diluted share in the first nine months of 2021.

Revenue Comparison

($ in thousands)

Nine Months Ended September 30,

2022

2021

Material sales

$

242,742

$

232,855

Royalty and license fees

191,530

163,037

Contract research services

13,315

11,386

Total revenue

$

447,587

$

407,278

Cost of Materials Comparison

($ in thousands)

Nine Months Ended September 30,

2022

2021

Material sales

$

242,742

$

232,855

Cost of material sales

88,999

75,198

Gross margin on material sales

153,743

157,657

Gross margin as a % of material sales

63

%

68

%

2022 Affirmed Guidance

The Company affirms its previous revenue guidance and believes that 2022 revenue will be approximately $600 million, plus or minus $10 million. 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 $0.30 per share on the Company's common stock. The dividend is payable on December 30, 2022 to all shareholders of record on December 16, 2022.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, November 3, 2022 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 and with subsidiaries and offices around the world, the Company currently owns, exclusively licenses or has the sole right to sublicense more than 5,500 patents issued and pending worldwide. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED(TM) phosphorescent OLED technology that can enable the development of energy-efficient 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. 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 projected adoption, development and advancement of the Company's technologies, and 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, 2021. 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,
2022

December 31,
2021

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

187,750

$

311,993

Short-term investments

501,051

351,194

Accounts receivable

78,193

107,639

Inventory

180,194

134,160

Other current assets

30,005

20,948

Total current assets

977,193

925,934

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $110,334 and $92,461

137,713

128,832

ACQUIRED TECHNOLOGY, net of accumulated amortization of $187,132 and $173,635

40,921

49,668

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $8,631 and $7,565

8,657

9,711

GOODWILL

15,535

15,535

INVESTMENTS

173,871

168,076

DEFERRED INCOME TAXES

43,005

33,453

OTHER ASSETS

133,428

135,710

TOTAL ASSETS

$

1,530,323

$

1,466,919

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

13,357

$

14,955

Accrued expenses

49,975

45,474

Deferred revenue

67,254

120,864

Other current liabilities

7,613

6,645

Total current liabilities

138,199

187,938

DEFERRED REVENUE

26,761

36,217

RETIREMENT PLAN BENEFIT LIABILITY

67,305

66,773

OTHER LIABILITIES

86,233

76,077

Total liabilities

318,498

367,005

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, 49,128,525 and 49,065,924 shares issued, and 47,762,877 and 47,700,276 shares outstanding, at September 30, 2022 and December 31, 2021, respectively

491

491

Additional paid-in capital

674,773

658,728

Retained earnings

602,399

500,212

Accumulated other comprehensive loss

(24,556

)

(18,235

)

Treasury stock, at cost (1,365,648 shares at September 30, 2022 and December 31, 2021)

(41,284

)

(41,284

)

Total shareholders' equity

1,211,825

1,099,914

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,530,323

$

1,466,919

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,

2022

2021

2022

2021

REVENUE:

Material sales

$

84,182

$

75,609

$

242,742

$

232,855

Royalty and license fees

71,450

63,939

191,530

163,037

Contract research services

4,924

4,070

13,315

11,386

Total revenue

160,556

143,618

447,587

407,278

COST OF SALES

37,396

31,481

97,798

82,748

Gross margin

123,160

112,137

349,789

324,530

OPERATING EXPENSES:

Research and development

30,414

25,327

85,156

72,733

Selling, general and administrative

18,442

20,960

59,373

57,603

Amortization of acquired technology and other intangible assets

3,562

5,505

14,562

16,490

Patent costs

2,018

2,359

6,075

6,003

Royalty and license expense

261

258

596

519

Total operating expenses

54,697

54,409

165,762

153,348

OPERATING INCOME

68,463

57,728

184,027

171,182

Interest income, net

2,432

137

4,306

345

Other (loss) income, net

(804

)

(102

)

(749

)

178

Interest and other income, net

1,628

35

3,557

523

INCOME BEFORE INCOME TAXES

70,091

57,763

187,584

171,705

INCOME TAX EXPENSE

(16,636

)

(11,654

)

(42,657

)

(33,368

)

NET INCOME

$

53,455

$

46,109

$

144,927

$

138,337

NET INCOME PER COMMON SHARE:

BASIC

$

1.12

$

0.97

$

3.04

$

2.91

DILUTED

$

1.12

$

0.97

$

3.04

$

2.90

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

BASIC

47,396,495

47,291,192

47,386,426

47,286,927

DILUTED

47,466,934

47,362,575

47,455,893

47,355,583

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.30

$

0.20

$

0.90

$

0.60

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Nine Months Ended September 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

144,927

$

138,337

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

Amortization of deferred revenue and recognition of unbilled receivables, net

(201,529

)

(165,723

)

Depreciation

17,982

14,471

Amortization of intangibles

14,562

16,490

Change in excess inventory reserve

2,368

2,058

Amortization of premium and discount on investments, net

(3,469

)

(229

)

Stock-based compensation to employees

22,528

22,846

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

1,121

1,052

Deferred income tax (benefit) expense

(7,876

)

4,226

Retirement plan expense

3,998

6,676

Decrease (increase) in assets:

Accounts receivable

29,446

(13,974

)

Inventory

(48,402

)

(31,952

)

Other current assets

(3,555

)

(13,626

)

Other assets

2,282

(33,540

)

Increase (decrease) in liabilities:

Accounts payable and accrued expenses

7,217

(3,311

)

Other current liabilities

(543

)

(1,429

)

Deferred revenue

132,961

160,021

Other liabilities

10,156

31,933

Net cash provided by operating activities

124,174

134,326

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(31,119

)

(29,496

)

Purchases of intangibles

(4,761

)

(394

)

Purchases of investments

(464,766

)

(272,340

)

Proceeds from sale and maturity of investments

302,872

115,240

Net cash used in investing activities

(197,774

)

(186,990

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock

1,247

1,136

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

(9,150

)

(14,880

)

Cash dividends paid

(42,740

)

(28,447

)

Net cash used in financing activities

(50,643

)

(42,191

)

DECREASE IN CASH AND CASH EQUIVALENTS

(124,243

)

(94,855

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

311,993

630,012

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

187,750

$

535,157

The following non-cash activities occurred:

Unrealized loss on available-for-sale securities

$

(9,711

)

$

(39

)

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

4,256

(1,849

)

Contacts:

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

Source: Universal Display Corporation

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