Universal Display Announces 3Q 2014 Financial Results

Universal Display Corporation reported financial results for the third quarter ended Sept. 30, 2014.

For the quarter, the company reported net income of $4.3 million, or $0.09 per diluted share, on revenues of $32.9 million. For the third quarter of 2013, the Company reported net income of $5.5 million, or $0.12 per diluted share, on revenues of $32.8 million. During the quarter, the company incurred income tax expense of $2.0 million, compared to income tax benefit of $1.1 million in the same quarter of 2013. For the quarter, the Company reported operating income of $6.1 million, compared to $4.2 million for the third quarter of 2013.

For the first nine months of 2014, the company reported net income of $28.7 million, or $0.61 per diluted share, representing increases of 77% and 74%, respectively, compared to net income of $16.2 million, or $0.35 per diluted share, in the same period of 2013.

“We are pleased to report another quarter of strong operating profits and earnings. The results reflected the continued diversification in our customer base and strength of our operational model,” said Sidney D. Rosenblatt, executive vice president and CFO of Universal Display. “In a quarter in which revenues were consistent with the same quarter in 2013, we were able to increase our operating income by 43%, which illustrates our commitment to managing our expenses.

“For the first nine months of the year, revenues increased by 39% compared to the same period in 2013 and net income increased by 77% compared to the same period in 2013,” Rosenblatt continued. “This quarter’s sales were softer-than-anticipated due to industry dynamics resulting from weaker-than-expected high-end mobile phone sales and lower host material sales as the result of our host materials not being used in certain new product offerings. We were pleased to see new OLED products introduced during the quarter, which included wearables, tablets, smartphones and TVs. We believe that this growing proliferation of OLED displays is setting the stage for panel makers’ investment plans for 2015 and beyond to increase. Add that to our ongoing advancements with new OLED materials and technologies, we continue to be excited by the robust trajectory projected for the OLED market and our future.”

Revenues for the third quarter of 2014 were $32.9 million, compared to revenues of $32.8 million in the same quarter of 2013. Growth in third quarter revenues was led by a 260% increase in royalties and license fees, which rose to $5.4 million, from $1.5 million in the third quarter of 2013. This growth was offset by a 9% decrease in material sales, which were $27.5 million, down from $30.3 million in the third quarter of 2013. This decline was mainly due to lower sales of host materials.

The company reported operating income of $6.1 million for the three months ended September 30, 2014 compared to $4.2 million in the same period in 2013. During the quarter, the Company incurred income tax expense of $2.0 million compared to income tax benefit of $1.1 million in the same quarter in 2013.

No revenue was recognized under the Samsung Display Co., Ltd (SDC) licensing agreement in the third quarter, as SDC is obligated to make licensing payments in the second and fourth quarters of the year. For 2014, the Company recognized $25 million in SDC licensing revenue in the second quarter and expects to recognize another $25 million in the fourth quarter, for a total of $50 million in SDC licensing revenues for the year.

Operating expenses for the third quarter of 2014 were $26.8 million, compared to $28.6 million in the same quarter of 2013. Cost of materials for the quarter was $7.4 million, compared to $9.8 million in the third quarter of 2013.

The company’s balance sheet remained strong, with cash and cash equivalents and short-term investments of $268.4 million as of September 30, 2014.

On June 2, 2014, the company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase shares of its common stock up to a total purchase price of $50 million over the subsequent 12 months. Since Board approval and through Sept. 30, 2014, the company purchased 714,328 shares at a cost of approximately $22.5 million.

Revenues in the first nine months of 2014 were $134.9 million, a 39% increase compared to $97.2 million for the first nine months of 2013. Material sales in the first nine months of the year were $98.7 million, an increase of 41% compared to material sales of $70.2 million in the first nine months of 2013. Operating income in the first nine months of 2014 was $41.5 million, or 31% of revenues, compared to operating income of $18.8 million, or 19% of revenues, in the first nine months of 2013. For the first nine months of 2014, we reported net income of $28.7 million, or $0.61 per diluted share, representing increases of 77% and 74%, respectively, compared to net income of $16.2 million, or $0.35 per diluted share, in the same period of 2013.

With the OLED industry still in its nascent stage where many variables can have a material impact on its growth, the Company now expects revenues to be in the range of $183 million to $185 million. The revised expectation is based on the assumption that the above noted third quarter customer trends are likely to continue for the remainder of this year.