Universal Display Corporation Announces Third Quarter 2022 Financial Results

Nov 3, 2022

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 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® 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

)

 

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

Source: Universal Display Corporation