Universal Display Announces 2Q 2015 Financial Results

Universal Display reported financial results for the second quarter ended June 30, 2015.
 
For the second quarter of 2015, the Company reported a net loss of $11.8 million, or $0.25 per diluted share, on revenues of $58.1 million, compared to net income of $20.4 million, or $0.44 per diluted share, on revenues of $64.1 million for the second quarter of 2014. The 2015 net loss reflected a $33.0 million write-down of inventory, primarily of an existing host material and associated work-in-process, resulting from a customer’s faster-than-expected reduction in demand for this material. Excluding this item and its associated $1.9 million reduction of income tax expense, non-GAAP net income was $19.4 million, or $0.41 per diluted share.
 
“The consumer electronics and lighting markets are moving more and more in the direction of OLEDs,” said Sidney D. Rosenblatt, EVP and CFO of Universal Display. “During the first half of this year, we saw new 4K OLED TVs from LG, new flagship smartphones from Samsung, including the curved Galaxy S6 edge, and multiple new smartwatches. The accelerating number of new OEMs adopting OLED technology, new OLED products being introduced and new OLED proofs of concepts being showcased illustrates the growing proliferation of OLEDs on a global level. We believe that these activities not only bolster the OLED industry’s momentum, but are driving increasing investments in OLED capacity.
 
“During the quarter, dynamic shifts in market strategies resulted in numerous new product introductions that utilized our new red and green emitters,” Rosenblatt continued. “At the same time, these shifts also negatively impacted demand for established products that used our existing host material, which led a customer to significantly reduce its forecast for this host material. As a result, we have written-down relevant excess finished goods and work-in-process inventory. Looking forward, we anticipate a stronger second half of the year.”
 
Revenues for the second quarter of 2015 were $58.1 million, compared to revenues of $64.1 million for the same quarter of 2014. Material sales were $24.3 million, down 9% sequentially and down 32% compared to the second quarter of 2014, primarily due to an $11.7 million decline in host material sales. Royalty and license fees were $33.7 million, up from $28.1 million in the second quarter of 2014. The company recognized $30 million in Samsung Display Co., Ltd. (SDC) licensing revenue in the second quarter of 2015, up from $25 million in the same quarter of 2014.
 
The company reported an operating loss of $4.5 million in the second quarter of 2015, compared to operating income of $28.8 million for the second quarter of 2014. Excluding the inventory write-down of $33.0 million, non-GAAP operating income was $28.5 million.
 
The company’s balance sheet remained strong, with cash and cash equivalents and short-term investments of $356.2 million as of June 30, 2015. During the second quarter, the company generated $28.2 million in operating cash flow.
 
Revenues for the first six months of 2015 were $89.3 million, compared to $102.0 million for the first half of 2014. Material sales were $51.1 million, down 28% compared to the first half of 2014, primarily due to a $19.1 million decline in host sales. Royalty and license fees were $38.1 million, up 28% from $29.8 million in the first half of 2014.
 
The company reported an operating loss of $2.7 million in the first half of 2015, compared to operating income of $35.5 million for the first half of 2014. Excluding the inventory write down of $33.0 million, non-GAAP operating income was $30.3 million. For the first half of 2015, the company reported a net loss of $10.5 million, or $0.23 per diluted share, compared to net income of $24.4 million, or $0.52 per diluted share, for the same period of 2014. Excluding the inventory write down and its associated $1.9 million reduction of income tax expense, non-GAAP net income was $20.7 million, or $0.45 per diluted share for the first half of 2015.
 
Operating cash flow for the first half of 2015 was $75.2 million, an increase of 200% compared to $25.0 million for the first half of 2014.
 
The company’s 2015 guidance remains unchanged. With the OLED industry still at a stage where many variables can have a material impact on its growth, Universal Display continues to expect its 2015 revenues to be approximately $200 million, with a downside range of approximately 5% and an upside potential of approximately 15%.