Universal Display Announces 1Q 2018 Financial Results

Universal Display reported financial results for the first quarter ended March 31, 2018.
 
Total revenue decreased 22% to $43.6 million in the first quarter of 2018, compared with $55.6 million in the first quarter of 2017, driven by lower material sales, partially offset by higher royalty and license fees.
 
The company believes that these results were due to three factors: First, the premium smartphone market declined faster and to a greater extent than anticipated. The company believes that this resulted in weaker-than-expected material sales demand for OLED panels. The second factor was ASC Topic 606. Under ASC Topic 605, total revenue would have been $68.2 million in the first quarter of 2018. And thirdly, the company believes that there were material inventory pre-purchases that occurred in 2017.
 
Revenue from material sales decreased 46% to $25.3 million in the first quarter, compared with $46.6 million in the first quarter of 2017. The company believes that the decline was due to weaker-than-expected material sales demand for OLED panels, resulting from the softness in the premium smartphone market, and the estimated material inventory pre-purchases that occurred in 2017.
Revenue from royalty and license fees increased 126% to $15.9 million in the first quarter, compared with $7.0 million in the first quarter of 2017.
 
Operating income decreased by $7.6 million to $4.5 million in the first quarter, compared with $12.1 million in the first quarter of 2017. Under ASC Topic 605, operating income would have been $29.2 million in the first quarter of 2018.
 
Net income decreased by $4.4 million to $6.0 million or $0.13 per diluted share in the first quarter, compared with $10.4 million or $0.22 per diluted share in the first quarter of 2017. Under ASC Topic 605, net income would have been $25.9 million, or $0.55 per diluted share, in the first quarter of 2018.
 
“We believe that we are on the right path for long-term growth, long-term market leadership, and long-term profitability,” said Sidney D. Rosenblatt, EVP and CFO of Universal Display. “Over the last decade, OLEDs have penetrated an estimated 10%+ of the consumer electronics display market. This, we believe, is just the beginning of the technology’s promising potential as panel makers further improve OLED mobile’s competitiveness, OLED TVs continue to gain market share, and foldable development work accelerates.”
 
Rosenblatt continued, “With respect to the multi-year OLED capex growth cycle we are in, while we are seeing some capacity digestion this year, we also believe there is a significant amount of capacity being built. The first half of the year is being impacted by the soft premium smartphone market, but in the second half, we expect to see a pick-up in OLED panel demand. As new OLED capacity ramps, we continue to expect 2019 to be a meaningful year of growth. Based on current production timelines, we expect the installed capacity base, as measured in square meters, to increase by approximately 50% by the end of 2019, as compared to the end of 2017.”