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Universal Display Corporation Announces Fourth Quarter and Full Year 2019 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 fourth quarter and full year ended December 31, 2019.

“2019 was a year of record results for our company, during which we continued to build on our leadership position and foundation for growth,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “During the year, we announced new partnership agreements, constructed new state-of-the-art phosphorescent OLED application labs and offices in Korea and Hong Kong, established UDC Ventures and achieved a number of internal R&D milestones. In addition, the OLED industry grew robustly as new OLED capacity was installed, new OLED OEMs and products were introduced and revolutionary form factor products like the Samsung Galaxy Fold, LG’s rollable TV and Lenovo’s foldable PC were announced. We believe that all of this drove the continued proliferation of OLEDs in smartphones, TVs and wearables as well as early commercial headway into the IT and automotive markets.”

Rosenblatt continued, “For 2020, we expect the OLED industry and our revenues to continue to grow. At the same time, after a year of significant new OLED capacity additions, we also expect capacity digestion and the evolving uncertainties related to the novel coronavirus (2019-nCoV) to impact our material orders. Long-term, we believe OLED investment momentum remains strong and we continue to estimate that installed capacity at the end of 2021 will grow by approximately 50% over the installed capacity at the end of 2019, as measured in square meters.”

Financial Highlights for the Fourth Quarter of 2019

Effective January 1, 2018, we adopted ASC Topic 606 using the “modified retrospective” approach, meaning the standard was applied only to the financial results commencing with the first quarter of 2018 with a cumulative adjustment to retained earnings. Under this transition method, we applied the standard only to contracts that were not complete at the initial adoption date.

  • Total revenue in the fourth quarter of 2019 was $101.7 million as compared to $70.1 million in the fourth quarter of 2018. On an ASC Topic 605 basis (the applicable accounting standard prior to the adoption of ASC Topic 605), total revenue in the fourth quarter of 2019 would have been $109.0 million as compared to $92.9 million in the fourth quarter of 2018. Under ASC Topic 606, license fee revenue is recognized on a per gram sales basis, whereas under ASC Topic 605, revenue was recognized for license payments upon receipt or on a straight-line basis over the term of the contract.
  • Revenue from material sales was $60.8 million in the fourth quarter of 2019 as compared to $39.9 million in the fourth quarter of 2018. On an ASC Topic 605 basis, revenue from material sales in the fourth quarter of 2019 would have been $64.1 million as compared to $49.9 million in the fourth quarter of 2018.
  • Revenue from royalty and license fees was $37.8 million in the fourth quarter of 2019 as compared to $25.9 million in the fourth quarter of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees in the fourth quarter of 2019 would have been $41.7 million as compared to $38.6 million in the fourth quarter of 2018.
  • Cost of materials was $16.3 million in the fourth quarter of 2019 as compared to $14.8 million in the fourth quarter of 2018.
  • Operating income was $34.5 million in the fourth quarter of 2019 as compared to $15.3 million in the fourth quarter of 2018. On an ASC Topic 605 basis, operating income in the fourth quarter of 2019 would have been $41.8 million as compared to $38.0 million in the fourth quarter of 2018.
  • Net income was $26.4 million or $0.56 per diluted share in the fourth quarter of 2019 as compared to $19.2 million or $0.40 per diluted share in the fourth quarter of 2018. On an ASC Topic 605 basis, net income in the fourth quarter of 2019 would have been $32.1 million or $0.68 per diluted share as compared to $45.2 million or $0.95 per diluted share in the fourth quarter of 2018.

Revenue Comparison

(in thousands)

Three Months Ended December 31,

2019

2018

Material sales

$

60,752

$

39,879

Royalty and license fees

37,800

25,886

Contract research services

3,177

4,378

Total revenue

$

101,729

$

70,143

Cost of Materials Comparison

(in thousands)

Three Months Ended December 31,

2019

2018

Material sales

$

60,752

$

39,879

Cost of material sales

16,281

14,768

Gross margin on material sales

44,471

25,111

Gross margin as a % of material sales

73

%

63

%

ASC Topic 606 versus 605 Adjusted Results

(in thousands, except per share data)

For the three months ended December 31, 2019

As reported

Adjustment

Balances without
adoption of
ASC Topic 606

Revenue

$

101,729

$

7,296

$

109,025

Gross margin

83,527

7,296

90,823

Operating income

34,489

7,296

41,785

Net income

26,428

5,669

32,097

Diluted earnings per share

$

0.56

$

0.12

$

0.68

 

Financial Highlights for the Full Year of 2019

  • Total revenue in the full year of 2019 was $405.2 million as compared to $247.4 million in the full year of 2018. On an ASC Topic 605 basis, total revenue in the full year of 2019 would have been $428.1 million as compared to $326.3 million in the full year of 2018.
  • Revenue from material sales was $243.4 million for the full year of 2019 as compared to $153.2 million for the full year ended 2018. On an ASC Topic 605 basis, revenue from material sales for the full year of 2019 would have been $258.0 million as compared to $166.2 million for the full year of 2018.
  • Revenue from royalty and license fees was $150.0 million for the full year of 2019 as compared to $80.6 million for the full year of 2018. On an ASC Topic 605 basis, revenue from royalty and license fees would have been $158.3 million for the full year of 2019 as compared to $146.5 million for the full year of 2018.
  • Cost of materials was $66.5 million for the full year of 2019 as compared to $43.6 million for the full year of 2018.
  • Operating income was $158.3 million for the full year of 2019 as compared to $56.7 million for the full year of 2018. On an ASC Topic 605 basis, operating income would have been $181.3 million for the full year of 2019 as compared to $135.6 million for the full year of 2018.
  • Net income was $138.3 million or $2.92 per diluted share for the full year of 2019 as compared to $58.8 million or $1.24 per diluted share for the full year of 2018. On an ASC Topic 605 basis, net income for the full year of 2019 would have been $156.1 million or $3.30 per diluted share as compared to $130.5 million or $2.77 per diluted share for the full year of 2018.

Revenue Comparison

(in thousands)

Full Year Ended December 31,

2019

2018

Material sales

$

243,413

$

153,204

Royalty and license fees

150,022

80,644

Contract research services

11,742

13,566

Total revenue

$

405,177

$

247,414

Cost of Materials Comparison

(in thousands)

Full Year Ended December 31,

2019

2018

Material sales

$

243,413

$

153,204

Cost of material sales

66,482

43,550

Gross margin on material sales

176,931

109,654

Gross margin as a % of material sales

73

%

72

%

ASC Topic 606 versus 605 Adjusted Results

(in thousands, except per share data)

For the full year ended December 31, 2019

As reported

Adjustment

Balances without
adoption of
ASC Topic 606

Revenue

$

405,177

$

22,924

$

428,101

Gross margin

329,803

22,924

352,727

Operating income

158,343

22,924

181,267

Net income

138,304

17,812

156,116

Diluted earnings per share

$

2.92

$

0.38

$

3.30

2020 Guidance

The Company believes that its 2020 revenue will be approximately in the range of $430 million to $470 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 first quarter 2020 cash dividend of $0.15 per share on the Company’s common stock. The dividend is payable on March 31, 2020 to all shareholders of record on March 17, 2020.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, February 20, 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 Universal Display Corporation’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 section entitled “Risk Factors” in Universal Display Corporation’s Annual Report on Form 10-K for the year ended December 31, 2019. 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, 2019

December 31, 2018

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

131,627

$

211,022

Short-term investments

514,461

304,323

Accounts receivable

60,452

43,129

Inventory

63,953

70,000

Other current assets

21,946

6,366

Total current assets

792,439

634,840

PROPERTY AND EQUIPMENT, net of accumulated depreciation of $57,276 and $44,943

87,872

69,739

ACQUIRED TECHNOLOGY, net of accumulated amortization of $132,468 and $111,890

90,774

110,951

OTHER INTANGIBLE ASSETS, net of accumulated amortization of $4,768 and $3,384

12,072

13,456

GOODWILL

15,535

15,535

INVESTMENTS

5,000

DEFERRED INCOME TAXES

30,375

24,377

OTHER ASSETS

86,090

64,526

TOTAL ASSETS

$

1,120,157

$

933,424

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

$

13,296

$

10,532

Accrued expenses

49,022

36,057

Deferred revenue

97,333

80,782

Other current liabilities

1,857

5,811

Total current liabilities

161,508

133,182

DEFERRED REVENUE

47,529

41,785

RETIREMENT PLAN BENEFIT LIABILITY

51,117

44,055

OTHER LIABILITIES

48,554

23,896

Total liabilities

308,708

242,918

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, 48,852,193 and 48,681,524 shares issued, and 47,486,545 and 47,319,887 shares outstanding at December 31, 2019 and December 31, 2018, respectively

489

487

Additional paid-in capital

620,236

617,334

Retained earnings

249,003

129,552

Accumulated other comprehensive loss

(16,997

)

(16,234

)

Treasury stock, at cost (1,365,648 and 1,361,637 shares at December 31, 2019 and December 31, 2018, respectively)

(41,284

)

(40,635

)

Total shareholders’ equity

811,449

690,506

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,120,157

$

933,424

 

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,

2019

 

2018

2019

2018

(Unaudited)

REVENUE

$

101,729

 

$

70,143

$

405,177

$

247,414

COST OF SALES

18,202

 

18,325

75,374

53,541

Gross margin

83,527

 

51,818

329,803

193,873

OPERATING EXPENSES:

 

Research and development

19,827

 

14,795

71,276

53,717

Selling, general and administrative

19,082

 

12,526

59,613

46,999

Amortization of acquired technology and other intangible assets

5,493

 

5,483

21,962

21,962

Patent costs

1,688

 

1,773

6,833

7,464

Royalty and license expense

2,948

 

1,968

11,776

6,996

Total operating expenses

49,038

 

36,545

171,460

137,138

OPERATING INCOME

34,489

 

15,273

158,343

56,735

Interest income, net

2,459

 

2,504

10,795

7,659

Other income (expense), net

27

 

(17

)

767

(83

)

Interest and other income, net

2,486

 

2,487

11,562

7,576

INCOME BEFORE INCOME TAXES

36,975

 

17,760

169,905

64,311

INCOME TAX (EXPENSE) BENEFIT

(10,547

)

 

1,489

(31,601

)

(5,471

)

NET INCOME

$

26,428

 

$

19,249

$

138,304

$

58,840

NET INCOME PER COMMON SHARE:

 

BASIC

$

0.56

 

$

0.40

$

2.92

$

1.24

DILUTED

$

0.56

 

$

0.40

$

2.92

$

1.24

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

 

BASIC

46,997,368

 

46,874,953

46,959,775

46,849,588

DILUTED

47,031,759

 

46,917,838

46,995,462

46,896,766

CASH DIVIDENDS DECLARED PER COMMON SHARE

$

0.10

 

$

0.06

$

0.40

$

0.24

 

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

 

Year Ended December 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES:

 

Net income

$

138,304

 

$

58,840

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

 

Amortization of deferred revenue and recognition of unbilled receivables

(135,368

)

 

(68,905

)

Depreciation

12,456

 

8,612

Amortization of intangibles

21,962

 

21,962

Change in excess inventory reserve

5,938

 

3,630

Amortization of premium and discount on investments, net

(6,643

)

 

(6,131

)

Stock-based compensation to employees

16,148

 

12,432

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

1,548

 

4,364

Deferred income tax benefit

(5,776

)

 

(12,814

)

Retirement plan expense

5,818

 

4,466

Decrease (increase) in assets:

 

Accounts receivable

(17,323

)

 

9,226

Inventory

109

 

(37,365

)

Other current assets

(15,238

)

 

4,860

Deferred income taxes

 

20,682

Other assets

(13,291

)

 

(63,922

)

Increase (decrease) in liabilities:

 

Accounts payable and accrued expenses

15,516

 

1,563

Other current liabilities

(5,183

)

 

5,761

Deferred revenue

157,321

 

130,639

Other liabilities

17,614

 

23,896

Net cash provided by operating activities

193,912

 

121,796

CASH FLOWS FROM INVESTING ACTIVITIES:

 

Purchases of property and equipment

(30,059

)

 

(25,391

)

Purchase of intangibles

(401

)

 

Purchases of investments

(931,854

)

 

(628,789

)

Proceeds from sale of investments

723,600

 

633,179

Net cash used in investing activities

(238,714

)

 

(21,001

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

Proceeds from issuance of common stock

889

 

798

Repurchase of common stock

(649

)

 

(477

)

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

(15,980

)

 

(11,620

)

Cash dividends paid

(18,853

)

 

(11,314

)

Net cash used in financing activities

(34,593

)

 

(22,613

)

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

(79,395

)

 

78,182

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

211,022

 

132,840

CASH AND CASH EQUIVALENTS, END OF YEAR

$

131,627

 

$

211,022

The following non-cash activities occurred:

 

Unrealized gain on available-for-sale securities

$

241

 

$

342

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

(530

)

 

3,490

Cash paid for income tax

46,602

 

17,771

Contacts:

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

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