Universal Display Corporation Announces Third Quarter 2022 Financial Results

Rhea-AI Summary

Universal Display Corporation (Nasdaq: OLED) reported record revenues of $160.6 million for Q3 2022, up from $143.6 million in Q3 2021. Key revenue drivers included $84.2 million from material sales and $71.5 million from royalties. Despite a 77% gross margin, a dip from 78% in the previous year was noted, impacted by costs from its new facility in Ireland. The company reaffirmed its 2022 revenue guidance of approximately $600 million and announced a cash dividend of $0.30 per share.

Positive

• Record quarterly revenue of $160.6 million, up from $143.6 million year-over-year.
• Gross margin at 77%, demonstrating operational efficiency.
• Reaffirmed 2022 revenue guidance around $600 million.
• Net income increased to $53.5 million, or $1.12 per diluted share.

Negative

• Gross margin decreased from 78% to 77% due to facility costs.
• Near-term weakness expected in OLED demand due to macroeconomic factors.
• Cost of material sales increased to $34.1 million from $28.9 million.

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 third quarter ended September 30, 2022.

“We are pleased to report solid third quarter results, which includes record quarterly revenues. As we look ahead, we believe that the long-term growth path of the OLED industry remains strong. We are continuing to execute on our strategic initiatives and are investing in our R&D programs, our people and our global infrastructure,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. “While macroeconomic factors will likely weigh on near-term demand, we see a bright future for the OLED industry and for us in the years ahead with continued OLED market proliferation, investments in new OLED capacity and a broadening company portfolio of innovative technologies and state-of-the-art OLED materials.”

Millard continued, “I am excited to have joined Universal Display Corporation, an extraordinary pioneer in the OLED industry for more than 25 years. With our brilliant team, cutting-edge initiatives, lean operating model and strong balance sheet, the Company is well poised for continued advancement in the growing OLED market. I look forward to working with the entire UDC team to continue to build upon our strong culture of inventiveness, integrity, inclusion and imagination and deliver on the Company’s mission of being a critical enabler in the OLED ecosystem.”

Financial Highlights for the Third Quarter of 2022

• Total revenue in the third quarter of 2022 was $160.6 million as compared to $143.6 million in the third quarter of 2021. As with the prior quarter, the near-term weakness in the overall global market economy is expected to have an impact on forecasted demand for OLED products utilizing our emitter material over the remaining life of certain customers’ contracts compared to prior estimates, resulting in recording a positive cumulative catch-up adjustment to total revenue of $6.6 million arising from changes in estimates of transaction price.
• Revenue from material sales was $84.2 million in the third quarter of 2022 as compared to $75.6 million in the third quarter of 2021. This increase was primarily the result of higher unit material volume.
• Revenue from royalty and license fees was $71.5 million in the third quarter of 2022 as compared to $63.9 million in the third quarter of 2021. This increase was primarily the result of higher unit material volume and customer mix.
• Cost of material sales was $34.1 million in the third quarter of 2022 as compared to $28.9 million in the third quarter of 2021. Cost of material sales was impacted by underutilization of the new production facility in Shannon, Ireland. We recently commenced bringing this additional capacity online in preparation for anticipated growth in the years ahead.
• Total gross margin was 77% in the third quarter of 2022 as compared to 78% in the third quarter of 2021. The decrease was in part due to costs associated with the Shannon facility in 2022, which contributed to a 2% decrease in total gross margin between the periods.
• Operating income was $68.5 million in the third quarter of 2022 as compared to $57.7 million in the third quarter of 2021.
• Net income was $53.5 million or $1.12 per diluted share in the third quarter of 2022 as compared to $46.1 million or $0.97 per diluted share in the third quarter of 2021.

Revenue Comparison

($ in thousands)		Three Months Ended September 30,
		2022				2021
Material sales		$	84,182			$	75,609
Royalty and license fees			71,450				63,939
Contract research services			4,924				4,070
Total revenue		$	160,556			$	143,618

Cost of Materials Comparison

($ in thousands)		Three Months Ended September 30,
		2022				2021
Material sales		$	84,182			$	75,609
Cost of material sales			34,057				28,883
Gross margin on material sales			50,125				46,726
Gross margin as a % of material sales			60	%			62	%

Financial Highlights for the First Nine Months of 2022

• Total revenue in the first nine months of 2022 was $447.6 million as compared to $407.3 million in the first nine months of 2021. As with the prior quarter, the near-term weakness in the overall global market economy is expected to have an impact on forecasted demand for OLED products utilizing our emitter material over the remaining life of several customers’ contracts compared to prior estimates, resulting in recording a positive cumulative catch-up adjustment to total revenue of $17.3 million arising from changes in estimates of transaction price.
• Revenue from material sales was $242.7 million in the first nine months of 2022 as compared to $232.9 million in the first nine months of 2021. This increase was primarily the result of higher unit material volume.
• Revenue from royalty and license fees was $191.5 million in the first nine months of 2022 as compared to $163.0 million in the first nine months of 2021. This increase was primarily the result of higher unit material volume and customer mix.
• Cost of material sales was $89.0 million in the first nine months of 2022 as compared to $75.2 million in the first nine months of 2021.
• Total gross margin was 78% in the first nine months of 2022 as compared to 80% in the first nine months of 2021. Shannon facility costs in 2022 contributed to a 1% decrease in total gross margin between periods.
• Operating income was $184.0 million in the first nine months of 2022 as compared to $171.2 million in the first nine months of 2021.
• Net income was $144.9 million or $3.04 per diluted share in the first nine months of 2022 as compared to $138.3 million or $2.90 per diluted share in the first nine months of 2021.

Revenue Comparison

($ in thousands)		Nine Months Ended September 30,
		2022				2021
Material sales		$	242,742			$	232,855
Royalty and license fees			191,530				163,037
Contract research services			13,315				11,386
Total revenue		$	447,587			$	407,278

Cost of Materials Comparison

($ in thousands)		Nine Months Ended September 30,
		2022				2021
Material sales		$	242,742			$	232,855
Cost of material sales			88,999				75,198
Gross margin on material sales			153,743				157,657
Gross margin as a % of material sales			63	%			68	%

2022 Affirmed Guidance

The Company affirms its previous revenue guidance and believes that 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 fourth quarter cash dividend of $0.30 per share on the Company’s common stock. The dividend is payable on December 30, 2022 to all shareholders of record on December 16, 2022.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Thursday, November 3, 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)
		September 30, 2022				December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	187,750			$	311,993
Short-term investments			501,051				351,194
Accounts receivable			78,193				107,639
Inventory			180,194				134,160
Other current assets			30,005				20,948
Total current assets			977,193				925,934
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $110,334 and $92,461			137,713				128,832
ACQUIRED TECHNOLOGY, net of accumulated amortization of $187,132 and $173,635			40,921				49,668
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $8,631 and $7,565			8,657				9,711
GOODWILL			15,535				15,535
INVESTMENTS			173,871				168,076
DEFERRED INCOME TAXES			43,005				33,453
OTHER ASSETS			133,428				135,710
TOTAL ASSETS		$	1,530,323			$	1,466,919
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable		$	13,357			$	14,955
Accrued expenses			49,975				45,474
Deferred revenue			67,254				120,864
Other current liabilities			7,613				6,645
Total current liabilities			138,199				187,938
DEFERRED REVENUE			26,761				36,217
RETIREMENT PLAN BENEFIT LIABILITY			67,305				66,773
OTHER LIABILITIES			86,233				76,077
Total liabilities			318,498				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, 49,128,525 and 49,065,924 shares issued, and 47,762,877 and 47,700,276 shares outstanding, at September 30, 2022 and December 31, 2021, respectively			491				491
Additional paid-in capital			674,773				658,728
Retained earnings			602,399				500,212
Accumulated other comprehensive loss			(24,556	)			(18,235	)
Treasury stock, at cost (1,365,648 shares at September 30, 2022 and December 31, 2021)			(41,284	)			(41,284	)
Total shareholders’ equity			1,211,825				1,099,914
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,530,323			$	1,466,919

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except share and per share data)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
REVENUE:
Material sales		$	84,182			$	75,609			$	242,742			$	232,855
Royalty and license fees			71,450				63,939				191,530				163,037
Contract research services			4,924				4,070				13,315				11,386
Total revenue			160,556				143,618				447,587				407,278
COST OF SALES			37,396				31,481				97,798				82,748
Gross margin			123,160				112,137				349,789				324,530
OPERATING EXPENSES:
Research and development			30,414				25,327				85,156				72,733
Selling, general and administrative			18,442				20,960				59,373				57,603
Amortization of acquired technology and other intangible assets			3,562				5,505				14,562				16,490
Patent costs			2,018				2,359				6,075				6,003
Royalty and license expense			261				258				596				519
Total operating expenses			54,697				54,409				165,762				153,348
OPERATING INCOME			68,463				57,728				184,027				171,182
Interest income, net			2,432				137				4,306				345
Other (loss) income, net			(804	)			(102	)			(749	)			178
Interest and other income, net			1,628				35				3,557				523
INCOME BEFORE INCOME TAXES			70,091				57,763				187,584				171,705
INCOME TAX EXPENSE			(16,636	)			(11,654	)			(42,657	)			(33,368	)
NET INCOME		$	53,455			$	46,109			$	144,927			$	138,337
NET INCOME PER COMMON SHARE:
BASIC		$	1.12			$	0.97			$	3.04			$	2.91
DILUTED		$	1.12			$	0.97			$	3.04			$	2.90
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC			47,396,495				47,291,192				47,386,426				47,286,927
DILUTED			47,466,934				47,362,575				47,455,893				47,355,583
CASH DIVIDENDS DECLARED PER COMMON SHARE		$	0.30			$	0.20			$	0.90			$	0.60

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
		Nine Months Ended September 30,
		2022				2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	144,927			$	138,337
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables, net			(201,529	)			(165,723	)
Depreciation			17,982				14,471
Amortization of intangibles			14,562				16,490
Change in excess inventory reserve			2,368				2,058
Amortization of premium and discount on investments, net			(3,469	)			(229	)
Stock-based compensation to employees			22,528				22,846
Stock-based compensation to Board of Directors and Scientific Advisory Board			1,121				1,052
Deferred income tax (benefit) expense			(7,876	)			4,226
Retirement plan expense			3,998				6,676
Decrease (increase) in assets:
Accounts receivable			29,446				(13,974	)
Inventory			(48,402	)			(31,952	)
Other current assets			(3,555	)			(13,626	)
Other assets			2,282				(33,540	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses			7,217				(3,311	)
Other current liabilities			(543	)			(1,429	)
Deferred revenue			132,961				160,021
Other liabilities			10,156				31,933
Net cash provided by operating activities			124,174				134,326
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(31,119	)			(29,496	)
Purchases of intangibles			(4,761	)			(394	)
Purchases of investments			(464,766	)			(272,340	)
Proceeds from sale and maturity of investments			302,872				115,240
Net cash used in investing activities			(197,774	)			(186,990	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock			1,247				1,136
Payment of withholding taxes related to stock-based compensation to employees			(9,150	)			(14,880	)
Cash dividends paid			(42,740	)			(28,447	)
Net cash used in financing activities			(50,643	)			(42,191	)
DECREASE IN CASH AND CASH EQUIVALENTS			(124,243	)			(94,855	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			311,993				630,012
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	187,750			$	535,157
The following non-cash activities occurred:
Unrealized loss on available-for-sale securities		$	(9,711	)		$	(39	)
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			4,256				(1,849	)

 

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Universal Display

Darice Liu

investor@oled.com

media@oled.com

+1 609-964-5123

Source: Universal Display Corporation

FAQ

What were Universal Display's Q3 2022 earnings results?

Universal Display reported revenues of $160.6 million with a net income of $53.5 million for Q3 2022.

How much is the cash dividend announced by Universal Display?

The cash dividend announced by Universal Display is $0.30 per share.

What is Universal Display's revenue guidance for 2022?

The company reaffirmed its revenue guidance for 2022 at approximately $600 million.

What contributed to the revenue increase in Q3 2022 for OLED?

The increase in revenue was primarily due to higher unit material volume and a favorable customer mix.