Universal Display Corp announced financial results for the first quarter ended March 31, 2018.
Total revenue decreased 22% to US$43.6 million in the first quarter of 2018, compared with US$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
- Second: ASC Topic 606 - under ASC Topic 605, total revenue would have been US$68.2 million in the first quarter of 2018
- Third: The Company believes that there were material inventory pre-purchases that occurred in 2017
Revenue from material sales decreased 46% to US$25.3 million in the first quarter, compared with US$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 US$15.9 million in the first quarter, compared with US$7.0 million in the first quarter of 2017.
Cost of materials decreased 53% to US$5.7 million in the first quarter, compared with US$12.1 million in the first quarter of 2017. Cost of materials was not affected by the adoption of ASC Topic 606.
Operating income decreased by US$7.6 million to US$4.5 million in the first quarter, compared with US$12.1 million in the first quarter of 2017. Under ASC Topic 605, operating income would have been US$29.2 million in the first quarter of 2018.
Net income decreased by US$4.4 million to US$6.0 million or US$0.13 per diluted share in the first quarter, compared with US$10.4 million or US$0.22 per diluted share in the first quarter of 2017. Under ASC Topic 605, net income would have been US$25.9 million, or US$0.55 per diluted share, in the first quarter of 2018.
Note: With effective January 1, 2018, Universal Display adopted ASC Topic 606 using the "modified retrospective" approach, meaning the standard was applied only to the financial results of the first quarter of 2018 with a cumulative adjustment to retained earnings. Under this transition method, we applied the standard only to contracts that were not complete at the initial adoption date.
| Universal Display reports financial results for Q1 2018 (US$ ,000) |
2018 Q1 |
2017 Q1 |
|---|---|---|
| Revenue - Materials | 25,250 | 46,637 |
| Revenue - Royalty and licences | 15,911 | 7,025 |
| Revenue - Contract research services | 2,411 | 1,904 |
| Operating expenses | 31,595 | 30,521 |
| Net (loss) Income | 5,959 | 10,365 |
| Net result per share - basic($) | 0.13 | 0.22 |
2018 Revised Guidance
According to Universal Display - although the OLED industry is still at an early state where many variables can have a material impact on its growth, and the Company thus caveats its financial guidance accordingly, the Company now believes that its revenue will be in the range of $280 million to $310 million for fiscal 2018. Both the initial guidance and this revised guidance were prepared utilising accounting standard ASC Topic 606. Under the prior accounting standard ASC Topic 605, the Company estimates that its 2018 revenues would be approximately 10% to 15% higher.
Dividend
The Company also announced a second quarter cash dividend of $0.06 per share on the Company’s common stock. The dividend is payable on June 29, 2018 to all shareholders of record as of the close of business on June 15, 2018.
“We believe that we are on the right path for long-term growth, long-term market leadership, and long-term profitability,”
“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.”
“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.”
Sidney D. Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display