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Universal Display Crushes Expectations, Raises Guidance

Steve Symington, The Motley Fool

Universal Display (NASDAQ: OLED) announced first-quarter 2019 results on Thursday after the market closed, detailing revitalized growth thanks to a combination of new OLED product launches, additional manufacturing capacity from OEMs, and the continued proliferation of its flagship OLED technology around the world.

The OLED specialist also raised its full-year guidance, leading shares to soar as much as 21% early this morning before settling to trade up around 9% Friday afternoon.

Let's look at how Universal Display started the year, and what investors should be watching in the coming quarters.

A concept transparent OLED book light from Universal Display

A transparent OLED reading lamp. Image source: Universal Display.

Universal Display's results: The raw numbers

Metric Q1 2019 Q1 2018 Year-Over-Year Growth

GAAP revenue

$87.8 million

$43.6 million

101.4%

GAAP net income 

$31.5 million

$6.0 million

425%

GAAP earnings per share

$0.66

$0.13

407.7%

Data source: Universal Display. 

What happened with Universal Display this quarter?

  • Universal Display adopted new ASC 606 accounting standards at the start of last year that changed the way it recognizes license fee revenue. Under the old ASC 605 standard, revenue would have increased 49% to $101.6 million, and net income would have been $42.5 million, or $0.90 per diluted share, up from $0.55 per share in the same year-ago period.
  • OLED material sales revenue climbed 115.4% to $54.5 million as reported, and would have climbed 99.7% on an ASC 605 basis to $57.3 million.
  • Royalty and license fee revenue soared 90.6% to $30.3 million, and would have climbed 11.3% under ASC 605 to $41.3 million.
  • Contract research services revenue grew 24.4% to $3 million.
  • Universal Display held its quarterly dividend steady at $0.10 per share.
  • The company ended the quarter with cash, cash equivalents, and short-term investments of $526.6 million.

What management had to say

CFO Sidney Rosenblatt called the quarter "solid," adding:

Looking to the year, we continue to see strong momentum in the industry. As seen by leading OEM product launches, OLEDs are the display technology of choice for premium smartphones and TVs. Additionally, one of the major themes emerging in the consumer electronics market is form factor. Driven by a robust pipeline of activity, from both panel makers and end users, we believe that the flexible, foldable display path will lead to a myriad of new products, designs, and applications.

Looking forward

Given its strong start to the year, Universal Display increased its 2019 guidance to call for revenue in the range of $345 million to $365 million, good for 43.5% growth at the midpoint and up from its old outlook for a range of $325 million to $350 million. Under ASC 605, this guidance would have been closer to a range of $405 million to $425 million.

Put simply, this quarter outstripped the acceleration in growth Universal Display management foretold earlier this year. Demand is strong for its flagship OLED materials and unrivaled OLED IP portfolio, and it seems that demand will prove sustainable as more innovative OLED devices and products hit the market. As a result, Universal Display stock is flirting with its all-time highs today.

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Steve Symington owns shares of Universal Display. The Motley Fool owns shares of and recommends Universal Display. The Motley Fool has a disclosure policy.