Universal Display Corporation announced its results for the second quarter of 2013.
For the second quarter of 2013, the company reported net income of $15.4 million, or $0.33 per diluted share, increases of 40% and 43%, respectively, from second quarter 2012 net income of $11.0 million, or $0.23 per diluted share. Revenues in the second quarter of 2013 were $49.4 million, up 65% from revenues of $30.0 million in the second quarter of 2012.
"We are pleased to report strong second quarter growth, leading to record quarterly revenues and earnings," said Sidney D. Rosenblatt, executive vice president and CFO of Universal Display. "Given the rate at which the market is adopting our energy efficient, high-performance UniversalPHOLED materials and technology, we believe the market has achieved a level of sustainable commercial technology adoption that can drive strong top line growth. With our proprietary materials and technology generating attractive margins, and a continued focus on lean and efficient operations, we are leveraging the success we are achieving with our products in the market into strong earnings growth for our shareholders."
Growth in second quarter revenues was led by a 111% increase in material sales, which rose to $27.1 million, up from $12.8 million in the second quarter of 2012, reflecting strong volume growth. Royalty and license fees were $21.2 million in the second quarter of 2013, up 37% compared to $15.4 million in the same quarter of 2012. The company recognizes revenue under its licensing agreement with Samsung Display Corporation (SDC) only in the quarters in which SDC makes payment, which are the second and fourth quarters. In the second quarter of 2013, the company recognized $20.0 million under this agreement compared to $15.0 million in the second quarter of 2012.
Operating expenses for the second quarter of 2013 were $27.6 million compared to $17.1 million in the same quarter of 2012. Within operating expenses for the quarter, cost of materials accounted for $6.7 million of the increase, reflecting an increase in the quantity of material shipped and changes in product mix. The increase in operating expenses also reflects a substantial increase in patent and amortization of acquired technology expenses, primarily due to higher amortization associated with the FUJIFILM Corporation OLED patent portfolio acquired during the third quarter of 2012.
The company reported operating income of $21.7 million for the second quarter of 2013, an improvement of $8.8 million, or 68%, compared to operating income of $12.9 million for the second quarter of 2012.
Operating cash flow for the second quarter of 2013 was a record $26.4 million, an increase of 136% compared to $11.2 million for the second quarter of 2012.
The company's balance sheet remained strong, with cash and cash equivalents and short-term investments of $244.7 million as of June 30, 2013.
Revenues for the first six months of 2013 were $64.3 million, a 51% increase compared to $42.6 million in the first half of 2012. Material sales in the first half of the year were $39.9 million, an increase of 71% compared to material sales of $23.4 million in the first half of 2012. Operating income in the first half of 2013 was $14.6 million, or 23% of revenues. For the first half of 2013, we reported net income of $10.6 million, or $0.23 per diluted share, increases of 9% and 10%, respectively, compared to net income of $9.7 million, or $0.21 per diluted share, in the same period of 2012.
"The OLED market continues to demonstrate significant growth again this year, primarily due to the widely recognized growth in smartphone adoption,” Rosenblatt said. “Over the next few years, we expect to see increased demand for our UniversalPHOLED materials and technologies as we develop new products, attract new customers, and create new materials.
“Beyond the foreseeable opportunities in smartphones and televisions, we believe the energy efficiency and superior performance of OLEDs can open vast new markets, and we continue to invest in our organization and technology to encourage wider market adoption,” Rosenblatt concluded. “In addition to the growth opportunity represented by a rapidly expanding industry, we are expanding our portfolio of products and technologies to capture greater market share, and further accelerate growth. This year we've introduced new commercial materials - including green emitter and host materials - while continuing to advance our flexible, thin-film barrier and new material deposition technologies. As the clear industry leader, we are achieving both exciting near term growth and earnings, while simultaneously laying the foundation to become a more integral part of the large and growing display and lighting markets in the future."
Although the OLED industry is still at a stage where many variables can have a material effect on our growth, the company now has better visibility into its potential future financial performance and expects 2013 revenues to reach the high end of its $110 million to $125 million guidance range.