Universal Display Corporation Announces Fourth Quarter and Full Year 2019 Financial Results

Feb 20, 2020

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, 2019.

“2019 was a year of record results for our company, during which we continued to build on our leadership position and foundation for growth,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “During the year, we announced new partnership agreements, constructed new state-of-the-art phosphorescent OLED application labs and offices in Korea and Hong Kong, established UDC Ventures and achieved a number of internal R&D milestones. In addition, the OLED industry grew robustly as new OLED capacity was installed, new OLED OEMs and products were introduced and revolutionary form factor products like the Samsung Galaxy Fold, LG’s rollable TV and Lenovo’s foldable PC were announced. We believe that all of this drove the continued proliferation of OLEDs in smartphones, TVs and wearables as well as early commercial headway into the IT and automotive markets.”

Rosenblatt continued, “For 2020, we expect the OLED industry and our revenues to continue to grow. At the same time, after a year of significant new OLED capacity additions, we also expect capacity digestion and the evolving uncertainties related to the novel coronavirus (2019-nCoV) to impact our material orders. Long-term, we believe OLED investment momentum remains strong and we continue to estimate that installed capacity at the end of 2021 will grow by approximately 50% over the installed capacity at the end of 2019, as measured in square meters.”

Financial Highlights for the Fourth 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.

  • Total revenue in the fourth quarter of 2019 was $101.7 million as compared to $70.1 million in the fourth quarter of 2018. On an ASC Topic 605 basis (the applicable accounting standard prior to the adoption of ASC Topic 605), total revenue in the fourth quarter of 2019 would have been $109.0 million as compared to $92.9 million in the fourth 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 $60.8 million in the fourth quarter of 2019 as compared to $39.9 million in the fourth quarter of 2018. On an ASC Topic 605 basis, revenue from material sales in the fourth quarter of 2019 would have been $64.1 million as compared to $49.9 million in the fourth quarter of 2018.
  • Revenue from royalty and license fees was $37.8 million in the fourth quarter of 2019 as compared to $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 2019 would have been $41.7 million as compared to $38.6 million in the fourth quarter of 2018.
  • Cost of materials was $16.3 million in the fourth quarter of 2019 as compared to $14.8 million in the fourth quarter of 2018.
  • Operating income was $34.5 million in the fourth quarter of 2019 as compared to $15.3 million in the fourth quarter of 2018. On an ASC Topic 605 basis, operating income in the fourth quarter of 2019 would have been $41.8 million as compared to $38.0 million in the fourth quarter of 2018.
  • Net income was $26.4 million or $0.56 per diluted share in the fourth quarter of 2019 as compared to $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 2019 would have been $32.1 million or $0.68 per diluted share as compared to $45.2 million or $0.95 per diluted share in the fourth quarter of 2018.

Revenue Comparison

(in thousands)

 

Three Months Ended December 31,

 

 

 

 

2019

 

 

2018

 

 

Material sales

 

$

60,752

 

 

$

39,879

 

 

Royalty and license fees

 

 

37,800

 

 

 

25,886

 

 

Contract research services

 

 

3,177

 

 

 

4,378

 

 

Total revenue

 

$

101,729

 

 

$

70,143

 

 

Cost of Materials Comparison

(in thousands)

 

Three Months Ended December 31,

 

 

 

2019

 

 

2018

 

Material sales

 

$

60,752

 

 

$

39,879

 

Cost of material sales

 

 

16,281

 

 

 

14,768

 

Gross margin on material sales

 

 

44,471

 

 

 

25,111

 

Gross margin as a % of material sales

 

 

73

%

 

 

63

%

ASC Topic 606 versus 605 Adjusted Results

(in thousands, except per share data)

 

For the three months ended December 31, 2019

 

As reported

 

 

Adjustment

 

 

Balances without
adoption of
ASC Topic 606

 

Revenue

 

$

101,729

 

 

$

7,296

 

 

$

109,025

 

Gross margin

 

 

83,527

 

 

 

7,296

 

 

 

90,823

 

Operating income

 

 

34,489

 

 

 

7,296

 

 

 

41,785

 

Net income

 

 

26,428

 

 

 

5,669

 

 

 

32,097

 

Diluted earnings per share

 

$

0.56

 

 

$

0.12

 

 

$

0.68

 

 

Financial Highlights for the Full Year of 2019

  • Total revenue in the full year of 2019 was $405.2 million as compared to $247.4 million in the full year of 2018. On an ASC Topic 605 basis, total revenue in the full year of 2019 would have been $428.1 million as compared to $326.3 million in the full year of 2018.
  • Revenue from material sales was $243.4 million for the full year of 2019 as compared to $153.2 million for the full year ended 2018. On an ASC Topic 605 basis, revenue from material sales for the full year of 2019 would have been $258.0 million as compared to $166.2 million for the full year of 2018.
  • Revenue from royalty and license fees was $150.0 million for the full year of 2019 as compared to $80.6 million for the full year of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees would have been $158.3 million for the full year of 2019 as compared to $146.5 million for the full year of 2018.
  • Cost of materials was $66.5 million for the full year of 2019 as compared to $43.6 million for the full year of 2018.
  • Operating income was $158.3 million for the full year of 2019 as compared to $56.7 million for the full year of 2018. On an ASC Topic 605 basis, operating income would have been $181.3 million for the full year of 2019 as compared to $135.6 million for the full year of 2018.
  • Net income was $138.3 million or $2.92 per diluted share for the full year of 2019 as compared to $58.8 million or $1.24 per diluted share for the full year of 2018. On an ASC Topic 605 basis, net income for the full year of 2019 would have been $156.1 million or $3.30 per diluted share as compared to $130.5 million or $2.77 per diluted share for the full year of 2018.

Revenue Comparison

(in thousands)

 

Full Year Ended December 31,

 

 

 

2019

 

 

2018

 

Material sales

 

$

243,413

 

 

$

153,204

 

Royalty and license fees

 

 

150,022

 

 

 

80,644

 

Contract research services

 

 

11,742

 

 

 

13,566

 

Total revenue

 

$

405,177

 

 

$

247,414

 

Cost of Materials Comparison

(in thousands)

 

Full Year Ended December 31,

 

 

 

2019

 

 

2018

 

Material sales

 

$

243,413

 

 

$

153,204

 

Cost of material sales

 

 

66,482

 

 

 

43,550

 

Gross margin on material sales

 

 

176,931

 

 

 

109,654

 

Gross margin as a % of material sales

 

 

73

%

 

 

72

%

ASC Topic 606 versus 605 Adjusted Results

(in thousands, except per share data)

For the full year ended December 31, 2019

 

As reported

 

 

Adjustment

 

 

Balances without
adoption of
ASC Topic 606

 

Revenue

 

$

405,177

 

 

$

22,924

 

 

$

428,101

 

Gross margin

 

 

329,803

 

 

 

22,924

 

 

352,727

 

Operating income

 

 

158,343

 

 

 

22,924

 

 

 

181,267

 

Net income

 

 

138,304

 

 

 

17,812

 

 

 

156,116

 

Diluted earnings per share

 

$

2.92

 

 

$

0.38

 

 

$

3.30

 

2020 Guidance

The Company believes that its 2020 revenue will be approximately in the range of $430 million to $470 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 first quarter 2020 cash dividend of $0.15 per share on the Company’s common stock. The dividend is payable on March 31, 2020 to all shareholders of record on March 17, 2020.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, February 20, 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 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, 2019. 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, 2019

 

 

December 31, 2018

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

131,627

 

 

$

211,022

 

Short-term investments

 

 

514,461

 

 

 

304,323

 

Accounts receivable

 

 

60,452

 

 

 

43,129

 

Inventory

 

 

63,953

 

 

 

70,000

 

Other current assets

 

 

21,946

 

 

 

6,366

 

Total current assets

 

 

792,439

 

 

 

634,840

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $57,276 and $44,943

 

 

87,872

 

 

 

69,739

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $132,468 and $111,890

 

 

90,774

 

 

 

110,951

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $4,768 and $3,384

 

 

12,072

 

 

 

13,456

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

5,000

 

 

 

 

DEFERRED INCOME TAXES

 

 

30,375

 

 

 

24,377

 

OTHER ASSETS

 

 

86,090

 

 

 

64,526

 

TOTAL ASSETS

 

$

1,120,157

 

 

$

933,424

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

13,296

 

 

$

10,532

 

Accrued expenses

 

 

49,022

 

 

 

36,057

 

Deferred revenue

 

 

97,333

 

 

 

80,782

 

Other current liabilities

 

 

1,857

 

 

 

5,811

 

Total current liabilities

 

 

161,508

 

 

 

133,182

 

DEFERRED REVENUE

 

 

47,529

 

 

 

41,785

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

51,117

 

 

 

44,055

 

OTHER LIABILITIES

 

 

48,554

 

 

 

23,896

 

Total liabilities

 

 

308,708

 

 

 

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, 48,852,193 and 48,681,524 shares issued, and 47,486,545 and 47,319,887 shares outstanding at December 31, 2019 and December 31, 2018, respectively

 

 

489

 

 

 

487

 

Additional paid-in capital

 

 

620,236

 

 

 

617,334

 

Retained earnings

 

 

249,003

 

 

 

129,552

 

Accumulated other comprehensive loss

 

 

(16,997

)

 

 

(16,234

)

Treasury stock, at cost (1,365,648 and 1,361,637 shares at December 31, 2019 and December 31, 2018, respectively)

 

 

(41,284

)

 

 

(40,635

)

Total shareholders’ equity

 

 

811,449

 

 

 

690,506

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,120,157

 

 

$

933,424

 

 

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,

 

 

2019

 

2018

2019

2018

 

 

(Unaudited)

 

 

 

 

 

 

REVENUE

 

$

101,729

 

$

70,143

 

$

405,177

 

$

247,414

COST OF SALES

 

 

18,202

 

 

18,325

 

 

75,374

 

 

53,541

Gross margin

 

 

83,527

 

 

51,818

 

 

329,803

 

 

193,873

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

19,827

 

 

14,795

 

 

71,276

 

 

53,717

Selling, general and administrative

 

 

19,082

 

 

12,526

 

 

59,613

 

 

46,999

Amortization of acquired technology and other intangible assets

 

 

5,493

 

 

5,483

 

 

21,962

 

 

21,962

Patent costs

 

 

1,688

 

 

1,773

 

 

6,833

 

 

7,464

Royalty and license expense

 

 

2,948

 

 

 

1,968

 

 

11,776

 

 

6,996

Total operating expenses

 

 

49,038

 

 

36,545

 

 

171,460

 

 

137,138

OPERATING INCOME

 

 

34,489

 

 

15,273

 

 

158,343

 

 

56,735

Interest income, net

 

 

2,459

 

 

2,504

 

 

10,795

 

 

7,659

Other income (expense), net

 

 

27

 

 

(17

)

 

 

767

 

 

(83

)

Interest and other income, net

 

 

2,486

 

 

2,487

 

 

11,562

 

 

7,576

INCOME BEFORE INCOME TAXES

 

 

36,975

 

 

17,760

 

 

169,905

 

 

64,311

INCOME TAX (EXPENSE) BENEFIT

 

 

(10,547

)

 

 

1,489

 

 

(31,601

)

 

 

(5,471

)

NET INCOME

 

$

26,428

 

 

$

19,249

 

$

138,304

 

$

58,840

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.56

 

$

0.40

 

$

2.92

 

$

1.24

DILUTED

 

$

0.56

 

$

0.40

 

$

2.92

 

 

$

1.24

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

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

46,997,368

 

 

46,874,953

 

 

46,959,775

 

 

46,849,588

DILUTED

 

 

47,031,759

 

 

46,917,838

 

 

46,995,462

 

 

46,896,766

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.10

 

$

0.06

 

$

0.40

 

$

0.24

 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 

 

 

Year Ended December 31,

 

 

2019

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Net income

 

$

138,304

 

 

 

$

58,840

 

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

 

 

 

 

 

 

 

 

 

Amortization of deferred revenue and recognition of unbilled receivables

 

 

(135,368

)

 

 

 

(68,905

)

Depreciation

 

 

12,456

 

 

 

 

8,612

 

Amortization of intangibles

 

 

21,962

 

 

 

 

21,962

 

Change in excess inventory reserve

 

 

5,938

 

 

 

 

3,630

 

Amortization of premium and discount on investments, net

 

 

(6,643

)

 

 

 

(6,131

)

Stock-based compensation to employees

 

 

16,148

 

 

 

 

12,432

 

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

 

 

1,548

 

 

 

 

4,364

 

Deferred income tax benefit

 

 

(5,776

)

 

 

 

(12,814

)

Retirement plan expense

 

 

5,818

 

 

 

 

4,466

 

Decrease (increase) in assets:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(17,323

)

 

 

 

9,226

 

Inventory

 

 

109

 

 

 

 

(37,365

)

Other current assets

 

 

(15,238

)

 

 

 

4,860

 

Deferred income taxes

 

 

 

 

 

 

20,682

 

Other assets

 

 

(13,291

)

 

 

 

(63,922

)

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

15,516

 

 

 

 

1,563

 

Other current liabilities

 

 

(5,183

)

 

 

 

5,761

 

Deferred revenue

 

 

157,321

 

 

 

 

130,639

 

Other liabilities

 

 

17,614

 

 

 

 

23,896

 

Net cash provided by operating activities

 

 

193,912

 

 

 

 

121,796

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(30,059

)

 

 

 

(25,391

)

Purchase of intangibles

 

 

(401

)

 

 

 

 

Purchases of investments

 

 

(931,854

)

 

 

 

(628,789

)

Proceeds from sale of investments

 

 

723,600

 

 

 

 

633,179

 

Net cash used in investing activities

 

 

(238,714

)

 

 

 

(21,001

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

889

 

 

 

 

798

 

Repurchase of common stock

 

 

(649

)

 

 

 

(477

)

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

 

 

(15,980

)

 

 

 

(11,620

)

Cash dividends paid

 

 

(18,853

)

 

 

 

(11,314

)

Net cash used in financing activities

 

 

(34,593

)

 

 

 

(22,613

)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(79,395

)

 

 

 

78,182

 

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

 

 

211,022

 

 

 

 

132,840

 

CASH AND CASH EQUIVALENTS, END OF YEAR

 

$

131,627

 

 

 

$

211,022

 

The following non-cash activities occurred:

 

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

$

241

 

 

 

$

342

 

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

 

 

(530

)

 

 

 

3,490

 

Cash paid for income tax

 

 

46,602

 

 

 

 

17,771

 

 

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

Source: Universal Display Corporation