Universal Display Announces 2Q 2012 Financial Results

Universal Display Corporation announced its results for the second quarter of 2012. For the second quarter of 2012, the company reported net income of $11.0 million, or $0.23 per diluted share, on revenues of $30.0 million. For the second quarter of 2011, the company reported net income of $3.3 million, or a loss of $0.03 per diluted share, on revenues of $11.3 million.

In the second quarter of 2012, the company recognized $15.0 million in revenue under a licensing agreement with Samsung Display Corporation (SDC, and formerly Samsung Mobile Display) under which SDC is obligated to make payments to the Company of $15.0 million in each of the second and fourth quarters of this year. Results for the second quarter of 2011 included a $4.5 million, non-cash gain on stock warrant liability.

“We are pleased to report the best quarterly financial results in our company’s history,” said Sidney D. Rosenblatt, executive vice president and CFO of Universal Display. “The significant increase in licensing revenue and a near doubling of material sales in the quarter reflect the growth of our OLED technology. Looking at the first half of the year, we generated over $9.2 million in operating cash flow, while improving operating income by over $15.0 million on a $21.8 million increase in revenues compared to the first half of fiscal 2011. We believe our financial performance illustrates our success in leveraging our proprietary technology and materials and OLED industry leadership to provide attractive returns for our shareholders.”

Revenues for the second quarter of 2012 were $30.0 million, a 166% increase compared to revenues of $11.3 million in the same quarter of 2011. Material sales were $12.8 million in the quarter, up 92% from $6.7 million in the second quarter of 2011, as a result of expanded marketplace adoption of the company’s technology and materials. Royalty and license fees were $15.4 million in the second quarter of 2012, up 479% compared to $2.7 million in the same quarter of 2011. Royalty and license revenue in the second quarter of 2012 included the recognition of a $15.0 million semi-annual license payment from SDC compared to $1.8 million of SDC royalty revenue in last year’s second quarter.

Operating expenses for the second quarter of 2012 were $17.1 million compared to $12.3 million in the same quarter of 2011, primarily due to an increase in cost of materials, employee and research and development expenses. The company reported operating income of $12.9 million for the second quarter of 2012, an improvement of $14.0 million compared to an operating loss of $1.1 million for the second quarter of 2011.

Cash provided by operating activities for the second quarter of 2012 was $11.2 million, compared to $223,000 for the second quarter of 2011. The company’s balance sheet remained strong, with cash and cash equivalents and short-term investments of $350.0 million as of June 30, 2012. Subsequent to the end of the quarter, the company used $4.0 million to fund an investment in Plextronics, and $105.0 million to purchase approximately 1,255 OLED patents and patent applications from Fujifilm Corporation.

Revenues for the first six months of 2012 were $42.6 million, a 104% increase from the first half of 2011. Material sales in the first half of the year were $23.4 million, an increase of 108% compared to material sales of $11.2 million in the first half of 2011. Operating income in the first half of 2012 was $11.4 million, or 27% of revenues. Operating income in the first half of 2012 increased over $15.0 million to $11.4 million compared to the operating loss of $3.8 million in the first half of 2011. For the first half of 2012, Universal Display reported net income of $9.7 million, or $0.21 cents per diluted share, compared to a net loss of $8.6 million, or $0.20 per diluted share, in the same period in 2011. The net loss in the first six months of 2011 included a $4.5 million loss on stock warrant liability.

“We believe that the widespread adoption of OLED technology is creating growth opportunities for our innovative technologies and materials,” Rosenblatt concluded. “We are investing strategically to add new capabilities in our existing, adjacent and developing OLED markets in a manner designed to build effectively on our materials and technologies where we have a leading industry position. We formed a strategic alliance to accelerate the development and commercialization of solution-based OLED material systems incorporating our PHOLED materials with our partners’ hole injection and hole transport materials. And, we most recently purchased approximately 1,255 OLED patents and patent applications. We believe that these actions clearly demonstrate our commitment to enhancing our portfolio of intellectual property and materials to extend our industry leadership and help accelerate the growth of the OLED market.”

The company’s arrangement with SDC provides a substantial amount of visibility into its potential future financial performance. Although the OLED industry is still at a stage where many variables can have a material effect on growth, in an effort to increase our transparency, Universal Display is providing the following financial guidance. Again with the caveat that the OLED industry is still in an early stage, the company believes that its revenues will be in the range of $90 million to $110 million for fiscal 2012.