Universal Display Corporation Announces Fourth Quarter and Full Year 2023 Financial Results

Rhea-AI Summary

Universal Display Corporation (Nasdaq: OLED) reported financial results for Q4 and full year 2023, highlighting revenue figures, gross margins, and future growth opportunities in the OLED market. Despite a decline in revenue compared to the previous year, the company remains optimistic about the potential for growth in various sectors like OLED TV, automotive displays, and foldable OLED mobile applications.

Positive

• Company achieved key milestones and strengthened capabilities in 2023.
• Revenue for Q4 2023 was $158.3 million, with material sales at $82.2 million and royalty and license fees at $72.9 million.
• Total revenue for full year 2023 was $576.4 million, with material sales at $322.0 million and royalty and license fees at $238.4 million.
• Operating income for Q4 2023 was $64.7 million, with net income at $62.0 million.
• Operating income for full year 2023 was $217.2 million, with net income at $203.0 million.
• 2024 revenue guidance is in the range of $625 million to $675 million.
• First quarter cash dividend of $0.40 per share announced.
• Conference call scheduled for February 22, 2024, at 5:00 p.m. Eastern Time.

Negative

• Revenue declined in Q4 and full year 2023 compared to the previous year.
• Cost of material sales increased in Q4 and full year 2023.
• Gross margin decreased from 82% to 77% in Q4 2023 compared to Q4 2022.
• Gross margin decreased from 79% to 77% in full year 2023 compared to full year 2022.
• Net income decreased in Q4 and full year 2023 compared to the previous year.
• Effective income tax rate decreased slightly in Q4 and full year 2023 compared to the previous year.

Insights

Market Research Analyst

The reported results from Universal Display Corporation indicate a contraction in both quarterly and annual revenue, with material sales and royalty and license fees experiencing declines. The decrease in material sales suggests a potential slowdown in the OLED market or increased competition affecting pricing and sales volume. The decline in royalty and license fees could be attributed to changes in customer mix, which may indicate shifts in market share or the entry of new competitors.

Furthermore, the increase in cost of material sales and the associated decrease in gross margin percentage highlight rising costs, potentially from the expansion of manufacturing capabilities or changes in product mix. This could affect the company's profitability if not managed effectively. The projected revenue growth for 2024, however, suggests optimism about the company's ability to capitalize on the expanding OLED market, particularly in IT, TV, automotive and mobile applications.

Financial Analyst

From a financial perspective, the reduction in net income and diluted earnings per share in both the fourth quarter and the full year of 2023 compared to 2022 raises concerns about Universal Display Corporation's near-term profitability. The effective income tax rate's decrease could reflect changes in tax laws or the utilization of tax credits, which has had a mitigating effect on the decline in net income.

The announced dividend suggests confidence in the company's cash flow and commitment to returning value to shareholders. The guidance for 2024 indicates a revenue rebound, which could be a positive signal to investors regarding future performance. However, the caveat regarding the OLED industry's variable nature implies potential volatility and uncertainty, which stakeholders should monitor closely.

Technology Industry Analyst

The emphasis on Universal Display Corporation's R&D roadmap, including novel phosphorescent materials and OVJP manufacturing platform, is significant for the OLED industry. Advancements in these areas could lead to more efficient and cost-effective production methods, potentially improving market competitiveness and driving adoption across various applications.

The mention of an OLED IT adoption cycle and the rise of automotive OLED displays highlights the expanding applications for OLED technology beyond traditional consumer electronics. This diversification could be a strategic move to mitigate risks associated with the volatility in the consumer electronics market. The popularity of foldable OLED mobile applications also points to innovation in product offerings, which is crucial for maintaining a technological edge.

EWING, N.J.--(BUSINESS WIRE)-- 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, 2023.

“In 2023, we achieved key milestones, strengthened our capabilities and infrastructure, and positioned the Company for growth in the years ahead,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. “Looking to 2024 and beyond, we see multiple paths for growth in the coming years. The commencement of an OLED IT adoption cycle, the resumption of OLED TV growth, the rise of automotive OLED displays, and the popularity of foldable OLED mobile applications all create promising opportunities for substantial growth. In addition to the growing OLED market, we are advancing and broadening our R&D roadmap, which includes novel phosphorescent materials and architectures, as well as our OVJP manufacturing platform.”

Financial Highlights for the Fourth Quarter of 2023

• Total revenue in the fourth quarter of 2023 was $158.3 million as compared to $169.0 million in the fourth quarter of 2022.
• Revenue from material sales was $82.2 million in the fourth quarter of 2023 as compared to $88.3 million in the fourth quarter of 2022. The decrease in material sales was primarily the result of a decrease in the cumulative catch-up adjustments between periods, partially offset by higher sales volume of our emitter material.
• Revenue from royalty and license fees was $72.9 million in the fourth quarter of 2023 as compared to $75.6 million in the fourth quarter of 2022. The decrease in royalty and license fees was primarily the result of changes in customer mix.
• Cost of material sales was $33.4 million in the fourth quarter of 2023 as compared to $26.6 million in the fourth quarter of 2022. This was primarily due to an increase in the volume of material sales and increased contract manufacturing support costs.
• Total gross margin was 77% in the fourth quarter of 2023 as compared to 82% in the fourth quarter of 2022.
• Operating income was $64.7 million in the fourth quarter of 2023 as compared to $83.1 million in the fourth quarter of 2022.
• The effective income tax rate was 18.0% and 19.2% for the fourth quarters of 2023 and 2022, respectively.
• Net income was $62.0 million or $1.29 per diluted share in the fourth quarter of 2023 as compared to $65.1 million or $1.36 per diluted share in the fourth quarter of 2022.

Revenue Comparison

($ in thousands)		Three Months Ended December 31,
		2023				2022
Material sales		$	82,240			$	88,339
Royalty and license fees			72,865				75,585
Contract research services			3,215				5,108
Total revenue		$	158,320			$	169,032

Cost of Materials Comparison

($ in thousands)		Three Months Ended December 31,
		2023				2022
Material sales		$	82,240			$	88,339
Cost of material sales			33,379				26,603
Gross margin on material sales			48,861				61,736
Gross margin as a % of material sales			59	%			70	%

Financial Highlights for the Full Year 2023

• Total revenue in the full year 2023 was $576.4 million as compared to $616.6 million in the full year 2022.
• Revenue from material sales was $322.0 million in the full year 2023 as compared to $331.1 million in the full year 2022. The decline in material sales was primarily due to a decrease in the cumulative catch-up adjustments between periods, partially offset by higher blue emitter and host sales.
• Revenue from royalty and license fees was $238.4 million in the full year 2023 as compared to $267.1 million in the full year 2022. The decrease in royalty and license fees was primarily the result of higher estimated future demand for several of our customers over the remaining lives of their contracts, as well as a net $19.7 million reduction in revenue due to the difference in cumulative catch-up adjustments between periods, the majority of which was recorded to royalty and license fees.
• Cost of material sales was $123.1 million in the full year 2023 as compared to $115.6 million in the full year 2022. Cost of material sales increased primarily due to costs associated with our manufacturing facility in Shannon, Ireland which commenced manufacturing in mid-2022, increased inventory reserves and changes in product mix.
• Total gross margin was 77% in the full year 2023 as compared to 79% in the full year 2022. Increases in Shannon facility costs of $5.1 million and inventory reserves of $4.9 million in 2023 contributed to the 2% decrease in total gross margin between periods.
• Operating income was $217.2 million in the full year 2023 as compared to $267.1 million in the full year 2022.
• The effective income tax rate was 17.2% and 21.7% in the full years 2023 and 2022, respectively.
• Net income was $203.0 million or $4.24 per diluted share in the full year 2023 compared to $210.1 million or $4.40 per diluted share in the full year 2022.

Revenue Comparison

($ in thousands)		Year Ended December 31,
		2023				2022
Material sales		$	322,029			$	331,081
Royalty and license fees			238,389				267,115
Contract research services			16,011				18,423
Total revenue		$	576,429			$	616,619

Cost of Materials Comparison

($ in thousands)		Year Ended December 31,
		2023				2022
Material sales		$	322,029			$	331,081
Cost of material sales			123,076				115,602
Gross margin on material sales			198,953				215,479
Gross margin as a % of material sales			62	%			65	%

2024 Guidance

The Company believes that its 2024 revenue will be in the range of $625 million to $675 million. The OLED industry remains at a stage where many variables can have a material impact on results, and the Company thus caveats its financial guidance accordingly.

Dividend

The Company also announced a first quarter cash dividend of $0.40 per share on the Company’s common stock. The dividend is payable on March 29, 2024 to all shareholders of record as of the close of business on March 15, 2024.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, February 22, 2024 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 6,000 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 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, 2023. 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, 2023				December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	91,985			$	93,430
Short-term investments			422,137				484,345
Accounts receivable			139,850				92,664
Inventory			175,795				183,220
Other current assets			87,365				45,791
Total current assets			917,132				899,450
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $143,908 and $117,118			175,150				143,445
ACQUIRED TECHNOLOGY, net of accumulated amortization of $186,850 and $189,671			90,325				38,382
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $10,414 and $8,989			6,874				8,247
GOODWILL			15,535				15,535
INVESTMENTS			299,548				259,861
DEFERRED INCOME TAXES			59,108				58,161
OTHER ASSETS			105,289				109,739
TOTAL ASSETS		$	1,668,961			$	1,532,820
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	10,933			$	9,519
Accrued expenses			52,080				51,002
Deferred revenue			47,713				45,599
Other current liabilities			8,096				29,577
Total current liabilities			118,822				135,697
DEFERRED REVENUE			12,006				18,279
RETIREMENT PLAN BENEFIT LIABILITY			52,249				59,790
OTHER LIABILITIES			38,658				43,685
Total liabilities			221,735				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, 48,731,026 and 49,136,030 shares issued, and 47,365,378 and 47,770,382 shares outstanding at December 31, 2023 and December 31, 2022, respectively			487				491
Additional paid-in capital			699,554				681,335
Retained earnings			789,553				653,277
Accumulated other comprehensive loss			(1,086	)			(18,452	)
Treasury stock, at cost (1,365,648 shares at December 31, 2023 and December 31, 2022)			(41,284	)			(41,284	)
Total shareholders’ equity			1,447,226				1,275,369
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,668,961			$	1,532,820

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,
		2023				2022				2023				2022
REVENUE:		(Unaudited)
Material sales		$	82,240			$	88,339			$	322,029			$	331,081
Royalty and license fees			72,865				75,585				238,389				267,115
Contract research services			3,215				5,108				16,011				18,423
Total revenue			158,320				169,032				576,429				616,619
COST OF SALES			36,019				30,098				135,376				127,896
Gross margin			122,301				138,934				441,053				488,723
OPERATING EXPENSES:
Research and development			33,641				31,906				130,481				117,062
Selling, general and administrative			16,830				18,513				67,387				77,886
Amortization of acquired technology and other intangible assets			4,551				2,897				15,993				17,459
Patent costs			2,300				2,254				9,356				8,329
Royalty and license expense			233				281				647				877
Total operating expenses			57,555				55,851				223,864				221,613
OPERATING INCOME			64,746				83,083				217,189				267,110
Interest income, net			7,865				3,505				28,166				7,811
Other income (loss), net			2,996				(5,942	)			(184	)			(6,691	)
Interest and other income (loss), net			10,861				(2,437	)			27,982				1,120
INCOME BEFORE INCOME TAXES			75,607				80,646				245,171				268,230
INCOME TAX EXPENSE			(13,629	)			(15,512	)			(42,160	)			(58,169	)
NET INCOME		$	61,978			$	65,134			$	203,011			$	210,061
NET INCOME PER COMMON SHARE:
BASIC		$	1.30			$	1.37			$	4.25			$	4.41
DILUTED		$	1.29			$	1.36			$	4.24			$	4.40
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC			47,571,382				47,402,007				47,559,669				47,390,352
DILUTED			47,657,854				47,492,560				47,622,763				47,468,507
CASH DIVIDEND DECLARED PER COMMON SHARE		$	0.35			$	0.30			$	1.40			$	1.20

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
		Year Ended December 31,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	203,011				210,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			27,409				24,815
Amortization of intangibles			15,993				17,459
Amortization of premium and discount on investments, net			(11,603	)			(6,461	)
Impairment of minority investments			—				6,962
Stock-based compensation to employees			22,335				28,380
Stock-based compensation to Board of Directors and Scientific Advisory Board			1,774				1,566
Deferred income tax benefit			(3,766	)			(26,946	)
Retirement plan expense, net of benefit payments			3,129				5,276
Decrease (increase) in assets:
Accounts receivable			(47,186	)			14,975
Inventory			7,425				(49,060	)
Other current assets			(41,574	)			(24,843	)
Other assets			4,450				25,971
Increase (decrease) in liabilities:
Accounts payable and accrued expenses			4,047				3,338
Other current liabilities			(21,481	)			20,917
Deferred revenue			(4,159	)			(93,203	)
Other liabilities			(5,027	)			(32,392	)
Net cash provided by operating activities			154,777				126,815
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(59,792	)			(42,497	)
Purchase of intangibles			(66,563	)			(4,709	)
Purchases of investments			(531,103	)			(701,993	)
Proceeds from sale and maturity of investments			574,165				468,456
Net cash used in investing activities			(83,293	)			(280,743	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock			2,012				1,570
Payment of withholding taxes related to stock-based compensation to employees			(8,206	)			(9,209	)
Cash dividends paid			(66,735	)			(56,996	)
Net cash used in financing activities			(72,929	)			(64,635	)
DECREASE IN CASH AND CASH EQUIVALENTS			(1,445	)			(218,563	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR			93,430				311,993
CASH AND CASH EQUIVALENTS, END OF YEAR		$	91,985			$	93,430
The following non-cash activities occurred:
Unrealized loss on available-for-sale securities		$	(8,938	)		$	(8,100	)
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			678				3,069
Cash paid for income taxes, net of refunds			96,176				72,347

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240222923341/en/

Universal Display Contact:

Darice Liu

investor@oled.com

media@oled.com

+1 609-964-5123

 

Source: Universal Display Corporation

FAQ

What was Universal Display Corporation's ticker symbol mentioned in the press release?

The ticker symbol for Universal Display Corporation is OLED.

What were the total revenues for the fourth quarter of 2023?

Total revenue for the fourth quarter of 2023 was $158.3 million.

What was the net income for the fourth quarter of 2023?

Net income for the fourth quarter of 2023 was $62.0 million.

What is the company's revenue guidance for 2024?

The company's revenue guidance for 2024 is in the range of $625 million to $675 million.

When is the first quarter cash dividend payable?

The first quarter cash dividend of $0.40 per share is payable on March 29, 2024.