Universal Display Corporation Announces Second Quarter 2022 Financial Results

Rhea-AI Summary

Universal Display Corporation (Nasdaq: OLED) reported Q2 2022 revenue of $136.6 million, up from $129.7 million in Q2 2021. Material sales dipped to $71.9 million from $77.4 million, while royalty fees increased to $60.3 million from $48.2 million. Despite a solid start, order forecasts were reduced, prompting a revised annual revenue guidance of approximately $600 million. The company plans to maintain investment in growth initiatives despite macroeconomic headwinds. A cash dividend of $0.30 per share will be distributed on September 30, 2022.

Positive

• Q2 2022 revenue increased to $136.6 million from $129.7 million in Q2 2021.
• Royalty and license fees rose to $60.3 million from $48.2 million year-over-year.
• Operating income grew to $53.3 million compared to $49.9 million in Q2 2021.
• Net income improved to $41.5 million or $0.87 per diluted share, up from $40.5 million or $0.85 per diluted share.

Negative

• Material sales declined to $71.9 million from $77.4 million year-over-year.
• Revised 2022 revenue forecast lowered to approximately $600 million from previous expectations.

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 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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Universal Display Contact:

Darice Liu

investor@oled.com

media@oled.com

+1 609-964-5123

Source: Universal Display Corporation

FAQ

What were Universal Display's Q2 2022 financial results for OLED?

Universal Display reported Q2 2022 revenue of $136.6 million, up from $129.7 million in Q2 2021.

How much did Universal Display revise its 2022 revenue guidance?

The revised guidance for 2022 revenue is approximately $600 million, plus or minus $10 million.

What is Universal Display's cash dividend for Q3 2022?

Universal Display announced a cash dividend of $0.30 per share, payable on September 30, 2022.

What are the main factors affecting Universal Display's OLED demand?

Macroeconomic uncertainty and reduced order forecasts from customers have negatively impacted OLED demand.

How did revenue from royalty and license fees change in Q2 2022?

Revenue from royalty and license fees increased to $60.3 million in Q2 2022, up from $48.2 million in Q2 2021.