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Universal Display Corporation Announces Second Quarter 2020 Financial Results

EWING, N.J.--(BUSINESS WIRE)--$OLED #OLED--Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the second quarter ended June 30, 2020.


“While COVID-19 uncertainties will likely continue to weigh on consumer demand in the near-term, we continue to invest and further strengthen our leadership position in the OLED ecosystem and expect to emerge a stronger partner to our customers and the OLED industry,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “The challenges of this pandemic continued to impact us in the second quarter as customer orders and shipments declined. For the second half of the year, while there is cautious optimism in the industry, we believe significant uncertainties still loom over the consumer and macroeconomic environments. Long-term, we believe that the growth path of OLEDs remains robust.”

Rosenblatt continued, “Broadly speaking, despite the pandemic, OLED activity in the market continues to evolve and progress. We remain encouraged and excited about the level of commercial and development activity in the OLED pipeline. The UDC team continues to do an incredible job of supporting and enabling our customers with the discovery, development and delivery of cutting-edge, energy-efficient, high-performing OLED solutions. We are continuing to invest in, build and expand our robust foundation of best-in-class OLED technologies and are strategically increasing our headcount around the world to meet the growing long-term needs of the company and our customers.”

Financial Highlights for the Second Quarter of 2020

  • Total revenue in the second quarter of 2020 was $58.0 million as compared to $118.2 million in the second quarter of 2019. The decrease in revenue was mainly due to the weakened demand for emitter product from our customers as a result of the COVID-19 pandemic, as well as the impact of the advanced purchases that were fulfilled in the prior quarter in anticipation of potential supply disruptions from the pandemic and inventory management efforts by our customers to minimize the effects of potentially heightened trade tensions between the governments of China and the United States. The ultimate full extent of the impact of the 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 $31.9 million in the second quarter of 2020 as compared to $76.3 million in the second quarter of 2019.
  • Revenue from royalty and license fees was $22.4 million in the second quarter of 2020 as compared to $38.9 million in the second quarter of 2019.
  • Cost of material sales was $10.3 million in the second quarter of 2020 as compared to $22.0 million in the second quarter of 2019. Included in cost of material sales for the second quarter of 2019 was an inventory reserve charge of $3.9 million.
  • Operating loss was $1.2 million in the second quarter of 2020 as compared to operating income of $48.7 million in the second quarter of 2019.
  • Net income was $815,000 or $0.02 per diluted share in the second quarter of 2020 as compared to $43.4 million or $0.92 per diluted share in the second quarter of 2019.

Revenue Comparison

($ in thousands)

 

Three Months Ended June 30,

 

 

 

 

2020

 

 

2019

 

 

Material sales

 

$

31,927

 

 

$

76,328

 

 

Royalty and license fees

 

 

22,380

 

 

 

38,938

 

 

Contract research services

 

 

3,661

 

 

 

2,902

 

 

Total revenue

 

$

57,968

 

 

$

118,168

 

 

 

Cost of Materials Comparison

($ thousands)

 

Three Months Ended June 30,

 

 

 

2020

 

 

2019

 

Material sales

 

$

31,927

 

 

$

76,328

 

Cost of material sales

 

 

10,277

 

 

 

21,981

 

Gross margin on material sales

 

 

21,650

 

 

 

54,347

 

Gross margin as a % of material sales

 

 

68

%

 

 

71

%

 

Financial Highlights for the First Half of 2020

  • Total revenue in the first half of 2020 was $170.2 million as compared to $205.9 million in the first half of 2019. The decrease in revenue was mainly due to the weakened demand for emitter product from our customers 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 $98.5 million in the first half of 2020 as compared to $130.8 million in the first half of 2019. Revenue from royalty and license fees was $65.5 million in the first half of 2020 as compared to $69.2 million in the first half of 2019.
  • Cost of material sales was $30.5 million in the first half of 2020 as compared to $35.0 million in the first half of 2019. Included in the cost of material sales was an inventory reserve charge of $611,000 in the first half of 2020 as compared to a charge of $4.2 million in the first half of 2019.
  • Operating income was $43.3 million in the first half of 2020 as compared to $83.0 million in the first half of 2019.
  • Net income was $39.0 million or $0.82 per diluted share in the first half of 2020 as compared to $74.9 million or $1.58 per diluted share in the first half of 2019.

Revenue Comparison

($ in thousands)

 

Six Months Ended June 30,

 

 

 

 

2020

 

 

2019

 

 

Material sales

 

$

98,502

 

 

$

130,824

 

 

Royalty and license fees

 

 

65,458

 

 

 

69,207

 

 

Contract research services

 

 

6,285

 

 

 

5,902

 

 

Total revenue

 

$

170,245

 

 

$

205,933

 

 

 

Cost of Materials Comparison

($ thousands)

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

Material sales

 

$

98,502

 

 

$

130,824

 

Cost of material sales

 

 

30,488

 

 

 

34,957

 

Gross margin on material sales

 

 

68,014

 

 

 

95,867

 

Gross margin as a % of material sales

 

 

69

%

 

 

73

%

2020 Guidance

As a result of the ongoing uncertainties regarding both the scope and duration of the COVID-19 global pandemic, the Company continues to refrain from providing 2020 revenue guidance, which was withdrawn on May 7, 2020.

Dividend

The Company also announced a third quarter cash dividend of $0.15 per share on the Company’s common stock. The dividend is payable on September 30, 2020 to all shareholders of record on September 16, 2020.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, August 6, 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)

 

 

June 30, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

133,566

 

 

$

131,627

 

Short-term investments

 

 

510,455

 

 

 

514,461

 

Accounts receivable

 

 

68,498

 

 

 

60,452

 

Inventory

 

 

84,523

 

 

 

63,953

 

Other current assets

 

 

33,117

 

 

 

21,946

 

Total current assets

 

 

830,159

 

 

 

792,439

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $64,559 and $57,276

 

 

92,003

 

 

 

87,872

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $142,758 and $132,468

 

 

80,509

 

 

 

90,774

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $5,458 and $4,768

 

 

11,382

 

 

 

12,072

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

5,000

 

 

 

5,000

 

DEFERRED INCOME TAXES

 

 

30,075

 

 

 

30,375

 

OTHER ASSETS

 

 

96 394

 

 

 

86,090

 

TOTAL ASSETS

 

$

1,161,057

 

 

$

1,120,157

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,244

 

 

$

13,296

 

Accrued expenses

 

 

31,083

 

 

 

49,022

 

Deferred revenue

 

 

120,150

 

 

 

97,333

 

Other current liabilities

 

 

1,218

 

 

 

1,857

 

Total current liabilities

 

 

162,695

 

 

 

161,508

 

DEFERRED REVENUE

 

 

51,317

 

 

 

47,529

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

52,305

 

 

 

51,117

 

OTHER LIABILITIES

 

 

54,970

 

 

 

48,554

 

Total liabilities

 

 

321,287

 

 

 

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, 48,992,532

and 48,852,193 shares issued, and 47,626,884 and 47,486,545 shares outstanding, at

June 30, 2020 and December 31, 2019, respectively

 

 

490

 

 

 

489

 

Additional paid-in capital

 

 

621,585

 

 

 

620,236

 

Retained earnings

 

 

273,758

 

 

 

249,003

 

Accumulated other comprehensive loss

 

 

(14,781

)

 

 

(16,997

)

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

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

839,770

 

 

 

811,449

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,161,057

 

 

$

1,120,157

 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except share and per share data)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

REVENUE

 

$

57,968

 

 

$

118,168

 

 

$

170,245

 

 

$

205,933

 

COST OF SALES

 

 

12,643

 

 

 

24,072

 

 

 

35,102

 

 

 

39,886

 

Gross margin

 

 

45,325

 

 

 

94,096

 

 

 

135,143

 

 

 

166,047

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

21,397

 

 

 

18,833

 

 

 

40,894

 

 

 

34,662

 

Selling, general and administrative

 

 

16,147

 

 

 

15,939

 

 

 

31,550

 

 

 

27,908

 

Amortization of acquired technology and other intangible assets

 

 

5,490

 

 

 

5,490

 

 

 

10,980

 

 

 

10,976

 

Patent costs

 

 

1,858

 

 

 

1,716

 

 

 

3,496

 

 

 

3,486

 

Royalty and license expense

 

 

1,618

 

 

 

3,454

 

 

 

4,902

 

 

 

5,991

 

Total operating expenses

 

 

46,510

 

 

 

45,432

 

 

 

91,822

 

 

 

83,023

 

OPERATING (LOSS) INCOME

 

 

(1,185

)

 

 

48,664

 

 

 

43,321

 

 

 

83,024

 

Interest income, net

 

 

1,268

 

 

 

2,757

 

 

 

3,415

 

 

 

5,588

 

Other income, net

 

 

170

 

 

 

405

 

 

 

372

 

 

 

687

 

Interest and other income, net

 

 

1,438

 

 

 

3,162

 

 

 

3,787

 

 

 

6,275

 

INCOME BEFORE INCOME TAXES

 

 

253

 

 

 

51,826

 

 

 

47,108

 

 

 

89,299

 

INCOME TAX BENEFIT (EXPENSE)

 

 

562

 

 

 

(8,386

)

 

 

(8,138

)

 

 

(14,385

)

NET INCOME

 

$

815

 

 

$

43,440

 

 

$

38,970

 

 

$

74,914

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.02

 

 

$

0.92

 

 

$

0.82

 

 

$

1.58

 

DILUTED

 

$

0.02

 

 

$

0.92

 

 

$

0.82

 

 

$

1.58

 

WEIGHTED AVERAGE SHARES USED IN COMPUTING

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,227,294

 

 

 

46,967,005

 

 

 

47,160,163

 

 

 

46,930,165

 

DILUTED

 

 

47,243,991

 

 

 

46,996,702

 

 

 

47,190,505

 

 

 

46,966,172

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.15

 

 

$

0.10

 

 

$

0.30

 

 

$

0.20

 

 

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

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net income

 

$

38,970

 

 

$

74,914

 

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

 

 

 

 

 

 

 

 

Amortization of deferred revenue and recognition of unbilled receivables

 

 

(58,644

)

 

 

(63,942

)

Depreciation

 

 

7,283

 

 

 

5,799

 

Amortization of intangibles

 

 

10,980

 

 

 

10,976

 

Change in excess inventory reserve

 

 

611

 

 

 

4,155

 

Amortization of premium and discount on investments, net

 

 

(3,280

)

 

 

(3,150

)

Stock-based compensation to employees

 

 

12,918

 

 

 

7,106

 

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

 

 

708

 

 

 

884

 

Deferred income tax benefit

 

 

(336

)

 

 

(1,218

)

Retirement plan expense

 

 

2,828

 

 

 

2,940

 

Decrease (increase) in assets:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(8,046

)

 

 

(23,823

)

Inventory

 

 

(21,181

)

 

 

5,707

 

Other current assets

 

 

(5,967

)

 

 

(2,816

)

Other assets

 

 

(5,942

)

 

 

(5,846

)

Increase (decrease) in liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

(20,332

)

 

 

(2,099

)

Other current liabilities

 

 

(639

)

 

 

6,736

 

Deferred revenue

 

 

75,683

 

 

 

68,213

 

Other liabilities

 

 

6,416

 

 

 

(657

)

Net cash provided by operating activities

 

 

32,030

 

 

 

83,879

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(11,804

)

 

 

(20,322

)

Purchases of intangibles

 

 

(25

)

 

 

(401

)

Purchases of investments

 

 

(404,232

)

 

 

(363,595

)

Proceeds from sale of investments

 

 

412,760

 

 

 

437,800

 

Net cash (used in) provided by investing activities

 

 

(3,301

)

 

 

53,482

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

590

 

 

 

445

 

Repurchase of common stock

 

 

 

 

 

(649

)

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

 

 

(13,165

)

 

 

(14,472

)

Cash dividends paid

 

 

(14,215

)

 

 

(9,430

)

Net cash used in financing activities

 

 

(26,790

)

 

 

(24,106

)

INCREASE IN CASH AND CASH EQUIVALENTS

 

 

1,939

 

 

 

113,255

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

131,627

 

 

 

211,022

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

133,566

 

 

$

324,277

 

The following non-cash activities occurred:

 

 

 

 

 

 

 

 

Unrealized gain on available-for-sale securities

 

$

1,242

 

 

$

192

 

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

 

 

390

 

 

 

667

 

 


Contacts

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