Apple watches don't move the materials needle for UDC but they aren't chump change on the royalty side. If you assume a $35 panel price UDC will get 0.35 for every percentage point of royalty. I personally believe that the royalty will be closer to 2% than 1%...so a 2% royalty equals $0.70/watch. So if Apple did in fact sell 5 million watches in Q4 (assuming all panels were sold in Q4 as well), then UDC will be booking $3.5 million in royalty. Maybe not of "serious importance" but not chump change either. And of course if the Watch sells 50 million..then UDC may be collecting closer to $35 million in 95% margin revs....serious cash...
This was a very adroit purchase on Dyadic's part. In rough terms, prior to this announcement you had 40 million shares outstanding and cash on the balance sheet of about $1.85/share (perhaps closer to $1.90). Therefore, DYAI was able to buy shares for about 50 cents cheaper per share than the cash/share on the balance sheet or it is like buying a dollar bill for 73 cents. In other words, the share count as been reduced by over 5%...so now we have about 38 million shares outstanding.
Mgt (who own boucoup shares) has committed to a very lean licensing strategy...spending only about $4 million per year, much of which could be reimbursed by partners. The sizzle is that if C1 really works well for the pharma business (and early indications are very positive), then you are essentially buying a free call on that upside with cash providing firm downside protection. (you also get a free call on the potential legal settlement).
As a PLATFORM company, these guys could conceivably get royalty payments on 10's if not 100's of drugs (if they are manufactured using c1). On the downside, if nothing transpires in the next 18 months or so, it is likely that they will sell they remaining pharma rights to someone (DD perhaps?) and then liquidate the company. If they stick to their promises, that liquidation value 18 months from now would still be higher than today's 1.65 stock price.
For all of the hand wringing that occurred after the $33 million write off (released after the market closed on August 6th) we are now over $3/share higher. Since OLED has been a (successful) playtoy of the shorts these past few years, I am sure that part of the reason the stock got down to $33 on October 1st was due to shorting, while at the same time, this recent move upwards has at least been partially fueled by short covering. But as Sid mentioned in today's Q&A, the market opportunity long term for OLED TVs is ginormous. He didn't overtly say that, but he DID mention that of the 235 million TVs projected to be sold in 2015, a mere 400-500 thousand of them will be OLED. That leaves some pretty solid market share opportunities going forward.
While we may back fill a little in the days to come, it is also possible that Brian Lee (GS analyst) decides to reverse course and change his rating....after all, it will look pretty silly if everybody comes away from your OLED meeting thinking positive, and you (as the host) stay negative...
started out with 34.1 million shares outstanding..the '11 convert has a 1.28 strike price which creates 2.220 million shares. The '15 convert is also at 1.28 and creates 1.562 million shares.. the last convert has an exercise price of 1.48 which creates 2.579 million shares...before options and warrants I get 40.505 million shares. The straight debt is about $1.424 million (which will be paid off).
Two things to remember...the value of C1 to the pharma industry could be worth a multiple of the DuPont deal. In addtion, the company is on record stating that they will spend about 3-4 million per year operating their licensing business (and $1 million of that is outsourced R&D which they should get back from prospective licensees. It is highly likely that Sanofi will sign a deal within the next year...$10 million up front and a 2% royalty...if the Sanofi vaccine is a $1 billion/year product, that translates into $20 million/year (NPV of ?) If they can sign 3 or 4 other pharma entities (Teva perhaps) per year (at a license fee of $10 million per) and then hope to see 2% royalties 3-5 years down the road...what is THAT business worth.
And of course there is the lawsuit....my prediction - GT settles for $20-25 million...
some people would posit that the reason UDC reached $55 earlier this year was based on Apple euphoria - and it faded when it became apparent that it was not (yet) in the cards. There are so many investors/traders/Cramers of the world looking for the Apple derivative "play", that if this news could be confirmed, the euphoria would start yesterday...
I am not a close follower of Apple, but I was under the impression that they NEVER had a sole source provider if a key component. Given that LG has been the major LCD supplier (and LG supplies the OLED screen for the watch) it would seem more plausible for Samsung to be another OLED supplier....on the other hand, Sammy's phone panel production has been running at high gear for years now, and LG doesn't even use UDC green...so maybe this is merely a "short term" (ie for the first 3 years) exclusive supply relationship.
...interesting stuff nevertheless...
What is most laughable is that he cut and pasted from the transcript and included the translation errors. Samsung's sales are going to "merchant" customers not "emerging" customers...you can see/hear why the auto transcript service made the mistake, but anyone who actually pays a little attention to the company/industry would correct the wording...
while clearly a writeoff does not directly affect revenues, what DID change (and this was noted after the last EPS call) that at the beginning of the year, UDC expected to sell a fair amount of Host (thus their investment in said inventory). So if you assume that they lost $10 million of estimated host sales from their original estimate (which might actually be fairly conservative), then coming in at $200 million for the year is pretty good performance from emitter and royalty sales.
And with LG growing 80% YoY (and becoming the largest customer, at least for Q3) then we should have confidence in your final statement "Things are accelerating into next year"
(obviously all of the people calling out your mistake wish they owned the stock today...or even worse are having their face ripped off since they are short)
If you go back to the last conference call (when they dropped the bomb that they might only sell one business...and didn't take questions) what got lost in that release was how healthy the Black Diamond (equipment and apparel) business is. So as the stock continues to drop, the difference between cash and market cap gets narrower and narrower....Hopefully we will get more info on the range of options for the sale of Black Diamond/PIEPs brands. In other words, if they were offered 1.5 times sales, but decided to decline, it would show the absurdity of the current price...after all, there is nothing that would prevent them from going back to that prospect and "hitting the bid".
The LG agreement put a nail in the patent expiration short thesis. If LG thought that they could get cheaper emitters starting in 17, they would not have signed the deal they signed. The next deal we get with Samsung will show that as well.
Sentiment: Strong Buy
BDE just released a pro-forma balance sheet post the deal (June 30th numbers adjusted for the sale of POC). My back of the envelope was pretty spot on: the company has $187.5 million in current assets against a mere $16.2 million in current liabilities (ie working capital of $171.3 million). Of that $187.5, $105 is cash and marketable securities and about $21 million in A/R. All of the current liabilities are A/P. Inventories represent about $51 million, and if the company had any concerns about the quality of those inventories they would have addressed that now...but they didnt. On the long term liability side, you have LT Debt of $19.3 million and other LT liabilities of about $2.3 million i.e. total long term liabilities of $21.6.
At $5.38/share the company now has a market cap of about $177 million...only $6 million more than its working capital...and if you remove the LT liabilities, you essentially have an operating business that is selling for $27 million!
(the company still has a share repurchase authorization outstanding (10% of the shares), and will almost certainly be in the market now that they have released this info, or at the latest, after the November 8th conference call.
and if/when we get news of another deal with a huge multi-national (could be any day now...mgt thought it would be by end of Q3) the validity of the technology will be validated (again) and the stock should act accordingly
This technology is worth A LOT more than its $30 million market cap; maybe even 10 times that!
Google "getting the light out umich" and you will read about some interesting and seemingly simple new technology (done at the University of Michigan) for increasing the light coming out of an OLED. As the article notes, the research was funded in part by UDC, and UDC would have the rights to commercialization.
investors selling the shares here are not paying attention to the balance sheet. In simple terms post the deal, including the additional cash received from the POC sale, the company will have positive working capital of about $170 million ($100 of which is cash, with the rest made up of inventory and A/R minus A/P) and long term debt of $20 million...and the market cap is about $180 million...( and of course that gives no credit for the $160 million in NOLs) If the Black Diamond brand stunk, then maybe the market would be correct...but the brand is alove and well, so the market is being emotional....so you can effectively buy the $150 million (and growing) sales business of Black Diamond/PIEPS for about $30 million.
It might not rally at all until we receive more clarity on strategy...but there is an awfully large safety net at these levels!!