Universal Display Corporation Announces Second Quarter 2018 Financial Results
EWING, N.J.--(BUSINESS WIRE)--Aug 9, 2018--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, 2018.
“In the second quarter, we saw material sales improving off what we believed to be a first quarter ‘bottom’ for material shipments,” said Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display. “With anticipated new OLED product launches from leading OEMs around the world, we continue to expect an additional pick-up in orders and revenues in the second half of the year. As we look to 2019, we continue to anticipate it to be a meaningful year of growth.”
Rosenblatt continued, “We believe that 2019 is poised to be a pivotal year for the OLED industry. With the multi-year OLED capex growth cycle of new production lines, the landscape of OLED capacity is expected to significantly widen. This, we believe, will drive broader adoption of OLEDs across the consumer electronics market, and fuel substantial growth in the OLED industry. Additionally, we expect the long-awaited introduction of the world’s first foldable OLED product next year to pave the cutting-edge and innovative form factor path. From conformable, to foldable, to rollable, the disruptive and exciting force of OLEDs promises to enlarge the industry with new applications and new markets the imagination has yet to devise.”
Financial Highlights for the Second Quarter of 2018
Effective January 1, 2018, we adopted ASC Topic 606 using the “modified retrospective” approach, meaning the standard was applied only to the financial results of 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 decreased 45% to $56.1 million in the second quarter of 2018, compared with $102.5 million in the second quarter of 2017. Total revenue for the second quarter of 2018 would have been $73.6 million, or $17.5 million higher without the impact of ASC Topic 606. Under ASC Topic 606, license fee revenue is recognized on a per gram sales basis, whereas under the previous rules, revenue was recognized for license payments upon receipt or on a straight-line basis over the term of the contract. In the previous year, a $45.0 million semi-annual license fee payment was receipted from SDC in the second quarter of 2017 and included in the prior year’s revenue. Revenue from material sales decreased 21% to $36.8 million in the second quarter of 2018, compared with $46.8 million in the second quarter of 2017. The Company believes that the decline in material sales was due to weak OLED panel demand resulting from the softness in the premium smartphone market, and material inventory pre-purchases that occurred in 2017. Revenue from royalty and license fees decreased 71% to $15.5 million in the second quarter of 2018, compared with $53.7 million in the second quarter of 2017. Revenue from royalty and license fees for the second quarter of 2018 would have been $33.9 million, or $18.4 million higher without the impact of ASC Topic 606. Cost of materials decreased 6% to $9.3 million in the second quarter of 2018, compared with $9.9 million in the second quarter of 2017. Operating income decreased by $49.6 million to $10.9 million in the second quarter of 2018, compared with $60.5 million in the second quarter of 2017. Net income decreased by $36.4 million to $10.8 million or $0.23 per diluted share in the second quarter of 2018, compared with $47.2 million or $0.99 per diluted share in the second quarter of 2017.
Financial Highlights for the First Half of 2018Total revenue decreased 37% to $99.7 million in the first half of 2018, compared with $158.1 million in the first half of 2017. Total revenue would have been $141.8 million in the 2018 period, or $42.1 million higher, without the impact of ASC Topic 606. Revenue from material sales decreased 34% to $62.1 million in the first half of 2018, compared with $93.5 million in the first half of 2017. The Company believes that the decline in material sales was due to weak OLED panel demand resulting from the softness in the premium smartphone market, and material inventory pre-purchases that occurred in 2017. Revenue from royalty and license fees decreased 48% to $31.4 million in the first half of 2018, compared with $60.7 million in the first half of 2017. Revenue from royalty and license fees would have been $71.0 million in the 2018 period, or $39.6 million higher without the impact of ASC Topic 606. Cost of materials decreased 32% to $15.0 million in the first half of 2018, compared with $22.0 million in the first half of 2017. Operating income decreased by $57.2 million to $15.4 million in the first half of 2018, compared with $72.6 million in the first half of 2017. Net income decreased by $40.8 million to $16.8 million or $0.35 per diluted share in the first half of 2018, compared with $57.6 million or $1.21 per diluted share in the first half of 2017.
Although the OLED industry is still at an early state where many variables can have a material impact on its growth, and the Company thus caveats its financial guidance accordingly, the Company continues to expect that its 2018 revenues will be in the range of $280 million to $310 million. The guidance was prepared utilizing accounting standard ASC Topic 606; under the prior accounting standard ASC Topic 605, the Company estimates that its 2018 revenues would be approximately 10% to 15% higher than the revenue guidance range.
The Company also announced a third quarter cash dividend of $0.06 per share on the Company’s common stock. The dividend is payable on September 28, 2018 to all shareholders of record on September 15, 2018.
Conference Call Information
In conjunction with this release, Universal Display will host a conference call on Thursday, August 9, 2018 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, and reference conference ID 13681536. 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 developing and delivering state-of-the-art, organic light emitting diode (OLED) technologies, materials and services to the display and lighting industries. Founded in 1994, the Company currently owns or has exclusive, co-exclusive or sole license rights with respect to more than 4,700 issued and pending patents 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, including Princeton University, the University of Southern California, the University of Michigan, and PPG Industries, Inc. The Company has also established relationships with companies such as AU Optronics Corporation, BOE Technology, DuPont Displays, Inc., EverDisplay Optronics (Shanghai) Limited, Govisionox Optoelectronics, Innolux Corporation, Japan Display Inc., Kaneka Corporation, Konica Minolta Technology Center, Inc., LG Display Co., Ltd., Lumiotec, Inc., OLEDWorks LLC, OSRAM, Pioneer Corporation, Royole Corporation, Samsung Display Co., Ltd., Sharp Corporation, Sumitomo Chemical Company, Ltd., Tianma Micro-electronics, Tohoku Pioneer Corporation, and Visionox Technology. 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, 2017. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.
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