Universal Display Corporation Announces Fourth Quarter and Full Year 2023 Financial Results

Feb 22, 2024

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, 2023.

“In 2023, we achieved key milestones, strengthened our capabilities and infrastructure, and positioned the Company for growth in the years ahead,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. “Looking to 2024 and beyond, we see multiple paths for growth in the coming years. The commencement of an OLED IT adoption cycle, the resumption of OLED TV growth, the rise of automotive OLED displays, and the popularity of foldable OLED mobile applications all create promising opportunities for substantial growth. In addition to the growing OLED market, we are advancing and broadening our R&D roadmap, which includes novel phosphorescent materials and architectures, as well as our OVJP manufacturing platform.”

Financial Highlights for the Fourth Quarter of 2023

  • Total revenue in the fourth quarter of 2023 was $158.3 million as compared to $169.0 million in the fourth quarter of 2022.
  • Revenue from material sales was $82.2 million in the fourth quarter of 2023 as compared to $88.3 million in the fourth quarter of 2022. The decrease in material sales was primarily the result of a decrease in the cumulative catch-up adjustments between periods, partially offset by higher sales volume of our emitter material.
  • Revenue from royalty and license fees was $72.9 million in the fourth quarter of 2023 as compared to $75.6 million in the fourth quarter of 2022. The decrease in royalty and license fees was primarily the result of changes in customer mix.
  • Cost of material sales was $33.4 million in the fourth quarter of 2023 as compared to $26.6 million in the fourth quarter of 2022. This was primarily due to an increase in the volume of material sales and increased contract manufacturing support costs.
  • Total gross margin was 77% in the fourth quarter of 2023 as compared to 82% in the fourth quarter of 2022.
  • Operating income was $64.7 million in the fourth quarter of 2023 as compared to $83.1 million in the fourth quarter of 2022.
  • The effective income tax rate was 18.0% and 19.2% for the fourth quarters of 2023 and 2022, respectively.
  • Net income was $62.0 million or $1.29 per diluted share in the fourth quarter of 2023 as compared to $65.1 million or $1.36 per diluted share in the fourth quarter of 2022.

Revenue Comparison

($ in thousands)

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

82,240

 

 

$

88,339

 

Royalty and license fees

 

 

72,865

 

 

 

75,585

 

Contract research services

 

 

3,215

 

 

 

5,108

 

Total revenue

 

$

158,320

 

 

$

169,032

 

Cost of Materials Comparison

($ in thousands)

 

Three Months Ended December 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

82,240

 

 

$

88,339

 

Cost of material sales

 

 

33,379

 

 

 

26,603

 

Gross margin on material sales

 

 

48,861

 

 

 

61,736

 

Gross margin as a % of material sales

 

 

59

%

 

 

70

%

Financial Highlights for the Full Year 2023

  • Total revenue in the full year 2023 was $576.4 million as compared to $616.6 million in the full year 2022.
  • Revenue from material sales was $322.0 million in the full year 2023 as compared to $331.1 million in the full year 2022. The decline in material sales was primarily due to a decrease in the cumulative catch-up adjustments between periods, partially offset by higher blue emitter and host sales.
  • Revenue from royalty and license fees was $238.4 million in the full year 2023 as compared to $267.1 million in the full year 2022. The decrease in royalty and license fees was primarily the result of higher estimated future demand for several of our customers over the remaining lives of their contracts, as well as a net $19.7 million reduction in revenue due to the difference in cumulative catch-up adjustments between periods, the majority of which was recorded to royalty and license fees.
  • Cost of material sales was $123.1 million in the full year 2023 as compared to $115.6 million in the full year 2022. Cost of material sales increased primarily due to costs associated with our manufacturing facility in Shannon, Ireland which commenced manufacturing in mid-2022, increased inventory reserves and changes in product mix.
  • Total gross margin was 77% in the full year 2023 as compared to 79% in the full year 2022. Increases in Shannon facility costs of $5.1 million and inventory reserves of $4.9 million in 2023 contributed to the 2% decrease in total gross margin between periods.
  • Operating income was $217.2 million in the full year 2023 as compared to $267.1 million in the full year 2022.
  • The effective income tax rate was 17.2% and 21.7% in the full years 2023 and 2022, respectively.
  • Net income was $203.0 million or $4.24 per diluted share in the full year 2023 compared to $210.1 million or $4.40 per diluted share in the full year 2022.

Revenue Comparison

($ in thousands)

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

322,029

 

 

$

331,081

 

Royalty and license fees

 

 

238,389

 

 

 

267,115

 

Contract research services

 

 

16,011

 

 

 

18,423

 

Total revenue

 

$

576,429

 

 

$

616,619

 

Cost of Materials Comparison

($ in thousands)

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

322,029

 

 

$

331,081

 

Cost of material sales

 

 

123,076

 

 

 

115,602

 

Gross margin on material sales

 

 

198,953

 

 

 

215,479

 

Gross margin as a % of material sales

 

 

62

%

 

 

65

%

2024 Guidance

The Company believes that its 2024 revenue will be in the range of $625 million to $675 million. The OLED industry remains at a stage where many variables can have a material impact on results, and the Company thus caveats its financial guidance accordingly.

Dividend

The Company also announced a first quarter cash dividend of $0.40 per share on the Company’s common stock. The dividend is payable on March 29, 2024 to all shareholders of record as of the close of business on March 15, 2024.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, February 22, 2024 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 6,000 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 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, 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, 2023. 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, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

91,985

 

 

$

93,430

 

Short-term investments

 

 

422,137

 

 

 

484,345

 

Accounts receivable

 

 

139,850

 

 

 

92,664

 

Inventory

 

 

175,795

 

 

 

183,220

 

Other current assets

 

 

87,365

 

 

 

45,791

 

Total current assets

 

 

917,132

 

 

 

899,450

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $143,908 and $117,118

 

 

175,150

 

 

 

143,445

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $186,850 and $189,671

 

 

90,325

 

 

 

38,382

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $10,414 and $8,989

 

 

6,874

 

 

 

8,247

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

299,548

 

 

 

259,861

 

DEFERRED INCOME TAXES

 

 

59,108

 

 

 

58,161

 

OTHER ASSETS

 

 

105,289

 

 

 

109,739

 

TOTAL ASSETS

 

$

1,668,961

 

 

$

1,532,820

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

10,933

 

 

$

9,519

 

Accrued expenses

 

 

52,080

 

 

 

51,002

 

Deferred revenue

 

 

47,713

 

 

 

45,599

 

Other current liabilities

 

 

8,096

 

 

 

29,577

 

Total current liabilities

 

 

118,822

 

 

 

135,697

 

DEFERRED REVENUE

 

 

12,006

 

 

 

18,279

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

52,249

 

 

 

59,790

 

OTHER LIABILITIES

 

 

38,658

 

 

 

43,685

 

Total liabilities

 

 

221,735

 

 

 

257,451

 

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, 48,731,026 and 49,136,030 shares issued, and 47,365,378 and 47,770,382 shares outstanding at December 31, 2023 and December 31, 2022, respectively

 

 

487

 

 

 

491

 

Additional paid-in capital

 

 

699,554

 

 

 

681,335

 

Retained earnings

 

 

789,553

 

 

 

653,277

 

Accumulated other comprehensive loss

 

 

(1,086

)

 

 

(18,452

)

Treasury stock, at cost (1,365,648 shares at December 31, 2023 and December 31, 2022)

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

1,447,226

 

 

 

1,275,369

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,668,961

 

 

$

1,532,820

 

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,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

REVENUE:

 

(Unaudited)

 

 

 

 

 

 

 

Material sales

 

$

82,240

 

 

$

88,339

 

 

$

322,029

 

 

$

331,081

 

Royalty and license fees

 

 

72,865

 

 

 

75,585

 

 

 

238,389

 

 

 

267,115

 

Contract research services

 

 

3,215

 

 

 

5,108

 

 

 

16,011

 

 

 

18,423

 

Total revenue

 

 

158,320

 

 

 

169,032

 

 

 

576,429

 

 

 

616,619

 

COST OF SALES

 

 

36,019

 

 

 

30,098

 

 

 

135,376

 

 

 

127,896

 

Gross margin

 

 

122,301

 

 

 

138,934

 

 

 

441,053

 

 

 

488,723

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

33,641

 

 

 

31,906

 

 

 

130,481

 

 

 

117,062

 

Selling, general and administrative

 

 

16,830

 

 

 

18,513

 

 

 

67,387

 

 

 

77,886

 

Amortization of acquired technology and other intangible assets

 

 

4,551

 

 

 

2,897

 

 

 

15,993

 

 

 

17,459

 

Patent costs

 

 

2,300

 

 

 

2,254

 

 

 

9,356

 

 

 

8,329

 

Royalty and license expense

 

 

233

 

 

 

281

 

 

 

647

 

 

 

877

 

Total operating expenses

 

 

57,555

 

 

 

55,851

 

 

 

223,864

 

 

 

221,613

 

OPERATING INCOME

 

 

64,746

 

 

 

83,083

 

 

 

217,189

 

 

 

267,110

 

Interest income, net

 

 

7,865

 

 

 

3,505

 

 

 

28,166

 

 

 

7,811

 

Other income (loss), net

 

 

2,996

 

 

 

(5,942

)

 

 

(184

)

 

 

(6,691

)

Interest and other income (loss), net

 

 

10,861

 

 

 

(2,437

)

 

 

27,982

 

 

 

1,120

 

INCOME BEFORE INCOME TAXES

 

 

75,607

 

 

 

80,646

 

 

 

245,171

 

 

 

268,230

 

INCOME TAX EXPENSE

 

 

(13,629

)

 

 

(15,512

)

 

 

(42,160

)

 

 

(58,169

)

NET INCOME

 

$

61,978

 

 

$

65,134

 

 

$

203,011

 

 

$

210,061

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

1.30

 

 

$

1.37

 

 

$

4.25

 

 

$

4.41

 

DILUTED

 

$

1.29

 

 

$

1.36

 

 

$

4.24

 

 

$

4.40

 

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

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,571,382

 

 

 

47,402,007

 

 

 

47,559,669

 

 

 

47,390,352

 

DILUTED

 

 

47,657,854

 

 

 

47,492,560

 

 

 

47,622,763

 

 

 

47,468,507

 

CASH DIVIDEND DECLARED PER COMMON SHARE

 

$

0.35

 

 

$

0.30

 

 

$

1.40

 

 

$

1.20

 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

203,011

 

 

 

210,061

 

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

 

 

 

 

 

 

Depreciation

 

 

27,409

 

 

 

24,815

 

Amortization of intangibles

 

 

15,993

 

 

 

17,459

 

Amortization of premium and discount on investments, net

 

 

(11,603

)

 

 

(6,461

)

Impairment of minority investments

 

 

 

 

 

6,962

 

Stock-based compensation to employees

 

 

22,335

 

 

 

28,380

 

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

 

 

1,774

 

 

 

1,566

 

Deferred income tax benefit

 

 

(3,766

)

 

 

(26,946

)

Retirement plan expense, net of benefit payments

 

 

3,129

 

 

 

5,276

 

Decrease (increase) in assets:

 

 

 

 

 

 

Accounts receivable

 

 

(47,186

)

 

 

14,975

 

Inventory

 

 

7,425

 

 

 

(49,060

)

Other current assets

 

 

(41,574

)

 

 

(24,843

)

Other assets

 

 

4,450

 

 

 

25,971

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

4,047

 

 

 

3,338

 

Other current liabilities

 

 

(21,481

)

 

 

20,917

 

Deferred revenue

 

 

(4,159

)

 

 

(93,203

)

Other liabilities

 

 

(5,027

)

 

 

(32,392

)

Net cash provided by operating activities

 

 

154,777

 

 

 

126,815

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(59,792

)

 

 

(42,497

)

Purchase of intangibles

 

 

(66,563

)

 

 

(4,709

)

Purchases of investments

 

 

(531,103

)

 

 

(701,993

)

Proceeds from sale and maturity of investments

 

 

574,165

 

 

 

468,456

 

Net cash used in investing activities

 

 

(83,293

)

 

 

(280,743

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

2,012

 

 

 

1,570

 

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

 

 

(8,206

)

 

 

(9,209

)

Cash dividends paid

 

 

(66,735

)

 

 

(56,996

)

Net cash used in financing activities

 

 

(72,929

)

 

 

(64,635

)

DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(1,445

)

 

 

(218,563

)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

 

 

93,430

 

 

 

311,993

 

CASH AND CASH EQUIVALENTS, END OF YEAR

 

$

91,985

 

 

$

93,430

 

The following non-cash activities occurred:

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

$

(8,938

)

 

$

(8,100

)

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

 

 

678

 

 

 

3,069

 

Cash paid for income taxes, net of refunds

 

 

96,176

 

 

 

72,347

 

 

Universal Display Contact:

Darice Liu

investor@oled.com

media@oled.com

+1 609-964-5123

 

Source: Universal Display Corporation