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Universal Display Corporation Announces Second Quarter 2022 Financial Results
[August 04, 2022]

Universal Display Corporation Announces Second Quarter 2022 Financial Results


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, 2022.

"Our second quarter started off solidly, but as we approached the summer, customers lowered their order forecasts. Given the downward trend in forecast revisions and increasing macroeconomic uncertainty and volatility, we are revising our 2022 revenue forecast to approximately $600 million, plus or minus $10 million," said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display Corporation. "While near-term macro headwinds may weigh on demand, as a lean operating company with a strong balance sheet and no debt, we are well positioned to continue investing in our long-term strategic growth initiatives to reinforce our first-mover advantage, expand our materials and technologies portfolio and broaden our support to customers and the OLED industry."

Rosenblatt continued, "Looking to the OLED industry, we believe that 2024 is shaping up to be a pivotal year for the OLED market and for us. As the stage is being set for the next phase of significant OLED growth with a new wave of gen 6 and gen 8.5 OLED capacity plans reportedly in the works, we continue to believe that we are on track to meet preliminary target specs with our phosphorescent blue by year-end, which should enable the introduction of our all-phosphorescent RGB stack into the commercial market in 2024."

Financial Highlights for the Second Quarter of 2022

  • Total revenue in the second quarter of 2022 was $136.6 million as compared to $129.7 million in the second quarter of 2021. The deterioration in the overall global market economy had a negative impact on the demand for OLED products utilizing our emitter material. As a result of this near-term weakness, the forecasted sales volume of emitters anticipated over the remaining lives of our customer's contracts was reduced resulting in recording a positive cumulative catch-up adjustment to total revenue of $8.8 million arising from changes in estimates of transaction price.
  • Revenue from material sales was $71.9 million in the second quarter of 2022 as compared to $77.4 million in the second quarter of 2021.
  • Revenue from royalty and license fees was $60.3 million in the second quarter of 2022 as compared to $48.2 million in the second quarter of 2021. This increase was primarily the result of a reduction in the forecasted sales volume anticipated over the remaining lives of their respective contracts in accordance with ASC 606.
  • Cost of material sales was $25.0 million in the second quarter of 2022 as compared to $25.3 million in the second quarter of 2021.
  • Operating income was $53.3 million in the second quarter of 2022 as compared to $49.9 million in the second quarter of 2021.
  • Net income was $41.5 million or $0.87 per diluted share in the second quarter of 2022 as compared to $40.5 million or $0.85 per diluted share in the second quarter of 2021.

Revenue Comparison





($ in thousands)

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

Material sales

 

$

71,869

 

 

$

77,438

 

Royalty and license fees

 

 

60,278

 

 

 

48,212

 

Contract research services

 

 

4,414

 

 

 

4,010

 

Total revenue

 

$

136,561

 

 

$

129,660

 


Cost of Materials Comparison

($ in thousands)

 

Three Months Ended June 30,

 

 

 

2022

 

 

2021

 

Material sales

 

$

71,869

 

 

$

77,438

 

Cost of material sales

 

 

25,022

 

 

 

25,316

 

Gross margin on material sales

 

 

46,847

 

 

 

52,122

 

Gross margin as a % of material sales

 

 

65

%

 

 

67

%

Financial Highlights for the First Half of 2022

  • Total revenue in the first half of 2022 was $287.0 million as compared to $263.7 million in the first half of 2021.
  • Revenue from material sales was $158.6 million in the first half of 2022 as compared to $157.2 million in the first half of 2021.
  • Revenue from royalty and license fees was $120.1 million in the first half of 2022 as compared to $99.1 million in the first half of 2021.
  • Cost of material sales was $54.9 million in the first half of 2022 as compared to $46.3 million in the first half of 2021.
  • Operating income was $115.6 million in the first half of 2022 as compared to $113.5 million in the first half of 2021.
  • Net income was $91.5 million or $1.92 per diluted share in the first half of 2022 as compared to $92.2 million or $1.94 per diluted share in the first half of 2021.

Revenue Comparison

($ in thousands)

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Material sales

 

$

158,560

 

 

$

157,246

 

Royalty and license fees

 

 

120,080

 

 

 

99,098

 

Contract research services

 

 

8,391

 

 

 

7,316

 

Total revenue

 

$

287,031

 

 

$

263,660

 

Cost of Materials Comparison

($ in thousands)

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Material sales

 

$

158,560

 

 

$

157,246

 

Cost of material sales

 

 

54,942

 

 

 

46,315

 

Gross margin on material sales

 

 

103,618

 

 

 

110,931

 

Gross margin as a % of material sales

 

 

65

%

 

 

71

%

2022 Revised Guidance

The Company now believes that its 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 third quarter cash dividend of $0.30 per share on the Company's common stock. The dividend is payable on September 30, 2022 to all shareholders of record on September 16, 2022.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, August 4, 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)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash and cash equivalents

 

$

213,896

 

 

$

311,993

 

Short-term investments

 

 

439,449

 

 

 

351,194

 

Accounts receivable

 

 

74,933

 

 

 

107,639

 

Inventory

 

 

165,635

 

 

 

134,160

 

Other current assets

 

 

38,244

 

 

 

20,948

 

Total current assets

 

 

932,157

 

 

 

925,934

 

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $103,881 and $92,461

 

 

138,028

 

 

 

128,832

 

ACQUIRED TECHNOLOGY, net of accumulated amortization of $183,928 and $173,635

 

 

39,375

 

 

 

49,668

 

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $8,273 and $7,565

 

 

9,015

 

 

 

9,711

 

GOODWILL

 

 

15,535

 

 

 

15,535

 

INVESTMENTS

 

 

200,142

 

 

 

168,076

 

DEFERRED INCOME TAXES

 

 

36,998

 

 

 

33,453

 

OTHER ASSETS

 

 

128,188

 

 

 

135,710

 

TOTAL ASSETS

 

$

1,499,438

 

 

$

1,466,919

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

Accounts payable

 

$

14,048

 

 

$

14,955

 

Accrued expenses

 

 

38,757

 

 

 

45,474

 

Deferred revenue

 

 

99,106

 

 

 

120,864

 

Other current liabilities

 

 

3,302

 

 

 

6,645

 

Total current liabilities

 

 

155,213

 

 

 

187,938

 

DEFERRED REVENUE

 

 

30,021

 

 

 

36,217

 

RETIREMENT PLAN BENEFIT LIABILITY

 

 

68,188

 

 

 

66,773

 

OTHER LIABILITIES

 

 

80,707

 

 

 

76,077

 

Total liabilities

 

 

334,129

 

 

 

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, 49,115,444 and 49,065,924 shares issued, and 47,749,796 and 47,700,276 shares outstanding, at June 30, 2022 and December 31, 2021, respectively

 

 

491

 

 

 

491

 

Additional paid-in capital

 

 

666,087

 

 

 

658,728

 

Retained earnings

 

 

563,191

 

 

 

500,212

 

Accumulated other comprehensive loss

 

 

(23,178

)

 

 

(18,235

)

Treasury stock, at cost (1,365,648 shares at June 30, 2022 and December 31, 2021)

 

 

(41,284

)

 

 

(41,284

)

Total shareholders' equity

 

 

1,165,309

 

 

 

1,099,914

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

1,499,438

 

 

$

1,466,919

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Material sales

 

$

71,869

 

 

$

77,438

 

 

$

158,560

 

 

$

157,246

 

Royalty and license fees

 

 

60,278

 

 

 

48,212

 

 

 

120,080

 

 

 

99,098

 

Contract research services

 

 

4,414

 

 

 

4,010

 

 

 

8,391

 

 

 

7,316

 

Total revenue

 

 

136,561

 

 

 

129,660

 

 

 

287,031

 

 

 

263,660

 

COST OF SALES

 

 

27,239

 

 

 

27,969

 

 

 

60,402

 

 

 

51,267

 

Gross margin

 

 

109,322

 

 

 

101,691

 

 

 

226,629

 

 

 

212,393

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

28,197

 

 

 

24,101

 

 

 

54,742

 

 

 

47,406

 

Selling, general and administrative

 

 

19,869

 

 

 

20,239

 

 

 

40,931

 

 

 

36,643

 

Amortization of acquired technology and other intangible assets

 

 

5,502

 

 

 

5,497

 

 

 

11,000

 

 

 

10,985

 

Patent costs

 

 

2,259

 

 

 

1,809

 

 

 

4,057

 

 

 

3,644

 

Royalty and license expense

 

 

181

 

 

 

149

 

 

 

335

 

 

 

261

 

Total operating expenses

 

 

56,008

 

 

 

51,795

 

 

 

111,065

 

 

 

98,939

 

OPERATING INCOME

 

 

53,314

 

 

 

49,896

 

 

 

115,564

 

 

 

113,454

 

Interest income, net

 

 

1,583

 

 

 

75

 

 

 

1,874

 

 

 

208

 

Other income, net

 

 

89

 

 

 

221

 

 

 

55

 

 

 

280

 

Interest and other income, net

 

 

1,672

 

 

 

296

 

 

 

1,929

 

 

 

488

 

INCOME BEFORE INCOME TAXES

 

 

54,986

 

 

 

50,192

 

 

 

117,493

 

 

 

113,942

 

INCOME TAX EXPENSE

 

 

(13,484

)

 

 

(9,651

)

 

 

(26,021

)

 

 

(21,714

)

NET INCOME

 

$

41,502

 

 

$

40,541

 

 

$

91,472

 

 

$

92,228

 

NET INCOME PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

$

0.87

 

 

$

0.85

 

 

$

1.92

 

 

$

1.94

 

DILUTED

 

$

0.87

 

 

$

0.85

 

 

$

1.92

 

 

$

1.94

 

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

 

 

 

 

 

 

 

 

 

 

 

 

BASIC

 

 

47,393,830

 

 

 

47,299,627

 

 

 

47,381,864

 

 

 

47,284,773

 

DILUTED

 

 

47,457,892

 

 

 

47,356,864

 

 

 

47,451,354

 

 

 

47,347,596

 

CASH DIVIDENDS DECLARED PER COMMON SHARE

 

$

0.30

 

 

$

0.20

 

 

$

0.60

 

 

$

0.40

 

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income

 

$

91,472

 

 

$

92,228

 

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

 

 

 

 

 

 

Amortization of deferred revenue and recognition of unbilled receivables, net

 

 

(125,196

)

 

 

(110,993

)

Depreciation

 

 

11,529

 

 

 

9,229

 

Amortization of intangibles

 

 

11,000

 

 

 

10,985

 

Change in excess inventory reserve

 

 

688

 

 

 

1,117

 

Amortization of premium and discount on investments, net

 

 

(1,027

)

 

 

(128

)

Stock-based compensation to employees

 

 

14,282

 

 

 

14,624

 

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

 

 

774

 

 

 

704

 

Deferred income tax (benefit) expense

 

 

(2,282

)

 

 

1,458

 

Retirement plan expense

 

 

2,718

 

 

 

4,457

 

Decrease (increase) in assets:

 

 

 

 

 

 

Accounts receivable

 

 

32,706

 

 

 

(17,368

)

Inventory

 

 

(32,163

)

 

 

(14,179

)

Other current assets

 

 

(13,030

)

 

 

(5,712

)

Other assets

 

 

7,522

 

 

 

(15,005

)

Increase (decrease) in liabilities:

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

(7,126

)

 

 

(17,036

)

Other current liabilities

 

 

3,343

 

 

 

(2,536

)

Deferred revenue

 

 

92,976

 

 

 

92,816

 

Other liabilities

 

 

4,630

 

 

 

14,455

 

Net cash provided by operating activities

 

 

86,130

 

 

 

59,116

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(21,336

)

 

 

(20,668

)

Purchases of intangibles

 

 

(12

)

 

 

(394

)

Purchases of investments

 

 

(287,919

)

 

 

(193,951

)

Proceeds from sale and maturity of investments

 

 

161,530

 

 

 

100,000

 

Net cash used in investing activities

 

 

(147,737

)

 

 

(115,013

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

847

 

 

 

787

 

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

 

 

(8,844

)

 

 

(13,018

)

Cash dividends paid

 

 

(28,493

)

 

 

(18,970

)

Net cash used in financing activities

 

 

(36,490

)

 

 

(31,201

)

DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(98,097

)

 

 

(87,098

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

311,993

 

 

 

630,012

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

213,896

 

 

$

542,914

 

The following non-cash activities occurred:

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

$

(7,095

)

 

$

(35

)

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

 

 

611

 

 

 

366

 

 


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