OLED Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the first quarter ended March 31, 2023.

“Our first quarter results were in-line with our expectations and we are reaffirming our full year 2023 outlook,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. “While macro uncertainties continue to linger, we believe that recent OLED investment and product announcements pave the path for a new OLED adoption cycle and strong growth in the coming years. Additionally, today we announced the acquisition of Merck KGaA, Darmstadt, Germany’s phosphorescent emitter patent portfolio, which further strengthens our leadership position in the OLED ecosystem and broadens the tools available to our team as we develop new and next-generation phosphorescent materials. We also announced a new multi-year collaboration agreement with Merck KGaA, Darmstadt, Germany.”

Financial Highlights for the First Quarter of 2023

• Total revenue in the first quarter of 2023 was $130.5 million as compared to $150.5 million in the first quarter of 2022. As we have previously noted, the near-term weakness in the overall global market economy continues 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 us recording a positive cumulative catch-up adjustment to total revenue during the first quarter of 2023 of $5.7 million arising from changes in estimates of transaction price.
• Revenue from material sales was $70.2 million in the first quarter of 2023 as compared to $86.7 million in the first quarter of 2022. This decrease was primarily the result of lower unit material volume.
• Revenue from royalty and license fees was $55.2 million in the first quarter of 2023 as compared to $59.8 million in the first quarter of 2022. This decrease was primarily the result of lower unit material volume.
• Cost of material sales was $29.5 million in the first quarter of 2023 as compared to $29.9 million in the first quarter of 2022. Cost of material sales during the quarter decreased due to lower unit material volume, offset by a $3.3 million increase in our inventory provision and $4.7 million in costs related to our Shannon facility, which commenced manufacturing activities in June 2022.
• Total gross margin was 75% in the first three months of 2023 as compared to 78% in the first three months of 2022. Shannon facility costs of $4.7 million and the inventory provision of $3.3 million in 2023 contributed to a 6% decrease in total gross margin between periods.
• Operating income was $45.4 million in the first quarter of 2023 as compared to $62.3 million in the first quarter of 2022.
• Net income was $39.8 million or $0.83 per diluted share in the first quarter of 2023 as compared to $50.0 million or $1.05 per diluted share in the first quarter of 2022.

Revenue Comparison

($ in thousands)

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

70,190

 

 

$

86,691

 

Royalty and license fees

 

 

55,210

 

 

 

59,802

 

Contract research services

 

 

5,067

 

 

 

3,977

 

Total revenue

 

$

130,467

 

 

$

150,470

 

Cost of Materials Comparison

($ in thousands)

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Material sales

 

$

70,190

 

 

$

86,691

 

Cost of material sales

 

 

29,488

 

 

 

29,920

 

Gross margin on material sales

 

 

40,702

 

 

 

56,771

 

Gross margin as a % of material sales

 

 

58

%

 

 

65

%

2023 Guidance

The Company affirms its previous revenue guidance and believes that 2023 revenue will be the range of $550 million to $600 million.

Dividend

The Company also announced a second quarter cash dividend of $0.35 per share on the Company’s common stock. The dividend is payable on June 30, 2023 to all shareholders of record on June 16, 2023.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Wednesday, May 3, 2023 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, 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, 2022. 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)

 

 

March 31, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

158,294

 

 

$

93,430

 

Short-term investments

 

 

487,812

 

 

 

484,345

 

Accounts receivable

 

 

92,677

 

 

 

92,664

 

Inventory

 

 

174,245

 

 

 

183,220

 

Other current assets

 

 

37,193

 

 

 

45,791

 

Total current assets

 

 

950,221

 

 

 

899,450

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $123,388 and $117,118

 

 

145,281

 

 

 

143,445

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $174,820 and $189,671

 

 

35,843

 

 

 

38,382

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $9,341 and $8,989

 

 

7,947

 

 

 

8,247

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

213,369

 

 

 

259,861

 

DEFERRED INCOME TAXES

 

 

63,292

 

 

 

58,161

 

OTHER ASSETS

 

 

104,224

 

 

 

109,739

 

TOTAL ASSETS

 

$

1,535,712

 

 

$

1,532,820

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

9,741

 

 

$

9,519

 

Accrued expenses

 

 

25,346

 

 

 

51,002

 

Deferred revenue

 

 

37,419

 

 

 

45,599

 

Other current liabilities

 

 

42,451

 

 

 

29,577

 

Total current liabilities

 

 

114,957

 

 

 

135,697

 

DEFERRED REVENUE

 

 

17,843

 

 

 

18,279

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

60,248

 

 

 

59,790

 

OTHER LIABILITIES

 

 

43,199

 

 

 

43,685

 

Total liabilities

 

 

236,247

 

 

 

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, 48,697,467 and 49,136,030 shares issued, and 47,331,819 and 47,770,382 shares outstanding, at March 31, 2023 and December 31, 2022, respectively

 

 

487

 

 

 

491

 

Additional paid-in capital

 

 

679,390

 

 

 

681,335

 

Retained earnings

 

 

676,347

 

 

 

653,277

 

Accumulated other comprehensive loss

 

 

(15,477

)

 

 

(18,452

)

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

 

 

(41,284

)

 

 

(41,284

)

Total shareholders’ equity

 

 

1,299,465

 

 

 

1,275,369

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,535,712

 

 

$

1,532,820

 

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

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

REVENUE:

 

 

 

 

 

 

Material sales

 

$

70,190

 

 

$

86,691

 

Royalty and license fees

 

 

55,210

 

 

 

59,802

 

Contract research services

 

 

5,067

 

 

 

3,977

 

Total revenue

 

 

130,467

 

 

 

150,470

 

COST OF SALES

 

 

32,970

 

 

 

33,163

 

Gross margin

 

 

97,497

 

 

 

117,307

 

OPERATING EXPENSES:

 

 

 

 

 

 

Research and development

 

 

31,423

 

 

 

26,545

 

Selling, general and administrative

 

 

15,396

 

 

 

21,062

 

Amortization of acquired technology and other intangible assets

 

 

2,891

 

 

 

5,498

 

Patent costs

 

 

2,255

 

 

 

1,798

 

Royalty and license expense

 

 

164

 

 

 

154

 

Total operating expenses

 

 

52,129

 

 

 

55,057

 

OPERATING INCOME

 

 

45,368

 

 

 

62,250

 

Interest income, net

 

 

6,967

 

 

 

291

 

Other loss, net

 

 

(703

)

 

 

(34

)

Interest and other loss, net

 

 

6,264

 

 

 

257

 

INCOME BEFORE INCOME TAXES

 

 

51,632

 

 

 

62,507

 

INCOME TAX EXPENSE

 

 

(11,793

)

 

 

(12,537

)

NET INCOME

 

$

39,839

 

 

$

49,970

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

BASIC

 

$

0.83

 

 

$

1.05

 

DILUTED

 

$

0.83

 

 

$

1.05

 

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

 

 

 

 

 

 

BASIC

 

 

47,523,593

 

 

 

47,369,764

 

DILUTED

 

 

47,567,007

 

 

 

47,440,281

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.35

 

 

$

0.30

 

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

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

39,839

 

 

$

49,970

 

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

 

 

 

 

 

 

Depreciation

 

 

6,496

 

 

 

5,627

 

Amortization of intangibles

 

 

2,891

 

 

 

5,498

 

Amortization of premium and discount on investments, net

 

 

(3,597

)

 

 

(271

)

Stock-based compensation to employees

 

 

3,992

 

 

 

6,085

 

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

 

 

423

 

 

 

430

 

Deferred income tax benefit

 

 

(5,936

)

 

 

(1,380

)

Retirement plan expense, net of benefit payments

 

 

782

 

 

 

1,359

 

Decrease (increase) in assets:

 

 

 

 

 

 

Accounts receivable

 

 

(13

)

 

 

2,692

 

Inventory

 

 

8,975

 

 

 

(9,080

)

Other current assets

 

 

8,598

 

 

 

(8,172

)

Other assets

 

 

5,515

 

 

 

9,488

 

Increase (decrease) in liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

(24,116

)

 

 

(4,261

)

Other current liabilities

 

 

12,874

 

 

 

5,807

 

Deferred revenue

 

 

(8,616

)

 

 

(13,568

)

Other liabilities

 

 

(486

)

 

 

2,384

 

Net cash provided by operating activities

 

 

47,621

 

 

 

52,608

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(9,098

)

 

 

(10,751

)

Purchases of intangibles

 

 

(51

)

 

 

(12

)

Purchases of investments

 

 

(65,207

)

 

 

(24,915

)

Proceeds from sale and maturity of investments

 

 

115,031

 

 

 

50,240

 

Net cash provided by investing activities

 

 

40,675

 

 

 

14,562

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

518

 

 

 

403

 

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

 

 

(7,181

)

 

 

(7,896

)

Cash dividends paid

 

 

(16,769

)

 

 

(14,246

)

Net cash used in financing activities

 

 

(23,432

)

 

 

(21,739

)

INCREASE IN CASH AND CASH EQUIVALENTS

 

 

64,864

 

 

 

45,431

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

93,430

 

 

 

311,993

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

158,294

 

 

$

357,424

 

The following non-cash activities occurred:

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

$

3,202

 

 

$

(5,031

)

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

 

 

766

 

 

 

2,077

 

 

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