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Obliterating Expectations, Universal Display Hits an All-Time High

By Steve Symington - Nov 3, 2017 at 4:18PM

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The OLED technologist skyrocketed after another great quarter. Here's what investors need to know.

Universal Display Corporation (OLED -0.33%) announced stellar third-quarter 2017 results on Thursday after the market closed, demolishing even the most optimistic growth predictions as adoption of its flagship OLED (organic light-emitting diode) technology continues to gain momentum.

Let's dig deeper to shine a light on what drove Universal Display's business as it kicked off the second half, and what we can expect from the company in the coming quarters.

A prototype transparent reading light from Universal Display

OLED LIGHTING IS BEGINNING TO GAIN TRACTION. IMAGE SOURCE: UNIVERSAL DISPLAY.

Universal Display's results: The raw numbers

Metric

Q3 2017

Q3 2016

Year-Over-Year Growth

Revenue

$61.7 million

$30.2 million

104.3%

Net income (loss)

$13.5 million

($1.5 million)

N/A

Earnings per share

$0.28

($0.03)

N/A

Data source: Universal Display Corporation.

What happened with Universal Display this quarter?

  • Universal Display doesn't provide specific quarterly guidance. For perspective -- though we don't pay close attention to Wall Street's demands -- consensus estimates predicted earnings of $0.12 per share on revenue of $47.1 million.
  • Material sales doubled from the same year-ago period to $47.0 million, driven by higher phosphorescent emitter sales.
  • Royalty and license-fee revenue climbed 131% to $12 million. This does not include licensing payments under Universal Display's agreement with Samsung Display; Samsung's next biannual payment of $45 million will be recognized in the fourth quarter.
  • Contract research services revenue grew 70.7% to $2.6 million, stemming from Universal Display's acquisition of contract research organization Adesis last year.
  • Universal Display ended the quarter with $365.4 million in cash, cash equivalents, and short-term investments.
  • The company announced the completion of a $15 million capacity expansion for manufacturing partner PPG's Barberton, Ohio, facility, which produces UniversalPHOLED emitter materials.
  • It also announced an OLED evaluation agreement with Chinese OLED manufacturer EverDisplay Optronics.

What management had to say

Universal Display CFO Sidney Rosenblatt said:

We are pleased to report another outstanding quarter of solid results. During the quarter, momentum in the OLED industry continued to grow, from the launch of new flagship OLED smartphones, to increasing demand for OLED TVs, to announced launch plans for the world's first foldable OLED display product. It is exciting to see the consumer market's broadening embrace of OLEDs in a myriad of products, including wearables, smartphones, IT, automotive, TVs, as well as the emergence of OLED lighting. We believe that OLEDs are fast becoming a requirement for the best consumer display products around the world. As a leading enabler in the ecosystem, we believe that our proprietary phosphorescent materials and technologies are key to unlocking the performance, value, and power efficiency of OLEDs.

Looking forward

With its usual caveat that the OLED industry is still in its early stages, when "many variables can have a material impact on its growth," Universal Display anticipates 2017 revenue will arrive in the range of $310 million to $320 million. This marks a significant increase from last quarter's guidance for full-year revenue of "at least" $260 million to $280 million.

All things considered, this was an incredible report that highlighted the acceleration of the overall OLED industry, which at its center is supported by Universal Display's material supply agreements and its treasure trove of OLED-centric intellectual property. With that in mind, Universal Display investors should be delighted to see shares of their company hitting a new all-time high today.

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