OLED 10-Q

Universal Display Corp \Pa\ (OLED)

10-Q 2022-05-05 For: 2022-03-31

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Added on April 10, 2026

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Pennsylvania		23-2372688
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

250 Phillips Boulevard, Ewing, New Jersey		08618
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	OLED	The Nasdaq Stock Market LLC


Large accelerated filer	☒	Accelerated filer	☐	Emerging growth company	☐
Non-accelerated filer	☐	Smaller reporting company	☐


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets – March 31, 2022 and December 31, 2021		1
Consolidated Statements of Income – Three months ended March 31, 2022 and 2021		2
Consolidated Statements of Comprehensive Income – Three months ended March 31, 2022 and 2021		3
Consolidated Statements of Shareholders’ Equity – Three months ended March 31, 2022 and 2021		4
Consolidated Statements of Cash Flows – Three months ended March 31, 2022 and 2021		5
Notes to Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		32
Item 4. Controls and Procedures		32

PART II – OTHER INFORMATION

Item 1. Legal Proceedings		32
Item 1A. Risk Factors		33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3. Defaults Upon Senior Securities		33
Item 4. Mine Safety Disclosures		33
Item 5. Other Information		33
Item 6. Exhibits		34


	March 31, 2022			December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	357,424		$	311,993
Short-term investments		325,055			351,194
Accounts receivable		104,947			107,639
Inventory		143,240			134,160
Other current assets		29,120			20,948
Total current assets		959,786			925,934
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $97,979 and $92,461		131,879			128,832
ACQUIRED TECHNOLOGY, net of accumulated amortization of $178,782 and $173,635		44,521			49,668
OTHER INTANGIBLE ASSETS, net of accumulated amortization of $7,918 and $7,565		9,370			9,711
GOODWILL		15,535			15,535
INVESTMENTS		164,130			168,076
DEFERRED INCOME TAXES		35,788			33,453
OTHER ASSETS		126,222			135,710
TOTAL ASSETS	$	1,487,231		$	1,466,919
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	27,064		$	14,955
Accrued expenses		26,960			45,474
Deferred revenue		111,778			120,864
Other current liabilities		12,452			6,645
Total current liabilities		178,254			187,938
DEFERRED REVENUE		31,735			36,217
RETIREMENT PLAN BENEFIT LIABILITY		67,481			66,773
OTHER LIABILITIES		78,461			76,077
Total liabilities		355,931			367,005
COMMITMENTS AND CONTINGENCIES (Note 18)
SHAREHOLDERS’ EQUITY:
Preferred Stock, par value $0.01 per share, 5,000,000 shares authorized, 200,000 shares of Series A Nonconvertible Preferred Stock issued and outstanding (liquidation value of $7.50 per share or $1,500)		2			2
Common Stock, par value $0.01 per share, 200,000,000 shares authorized, 49,099,830 and 49,065,924 shares issued, and 47,734,182 and 47,700,276 shares outstanding, at March 31, 2022 and December 31, 2021, respectively		491			491
Additional paid-in capital		658,050			658,728
Retained earnings		535,936			500,212
Accumulated other comprehensive loss		(21,895	)		(18,235	)
Treasury stock, at cost (1,365,648 shares at March 31, 2022 and December 31, 2021)		(41,284	)		(41,284	)
Total shareholders’ equity		1,131,300			1,099,914
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,487,231		$	1,466,919


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended March 31,
	2022			2021
REVENUE:
Material sales	$	86,691		$	79,808
Royalty and license fees		59,802			50,886
Contract research services		3,977			3,306
Total revenue		150,470			134,000
COST OF SALES		33,163			23,298
Gross margin		117,307			110,702
OPERATING EXPENSES:
Research and development		26,545			23,305
Selling, general and administrative		21,062			16,404
Amortization of acquired technology and other intangible assets		5,498			5,488
Patent costs		1,798			1,835
Royalty and license expense		154			112
Total operating expenses		55,057			47,144
OPERATING INCOME		62,250			63,558
Interest income, net		291			133
Other (loss) income, net		(34	)		59
Interest and other income, net		257			192
INCOME BEFORE INCOME TAXES		62,507			63,750
INCOME TAX EXPENSE		(12,537	)		(12,063	)
NET INCOME	$	49,970		$	51,687
NET INCOME PER COMMON SHARE:
BASIC	$	1.05		$	1.09
DILUTED	$	1.05		$	1.08
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE:
BASIC		47,369,764			47,267,921
DILUTED		47,440,281			47,329,704
CASH DIVIDENDS DECLARED PER COMMON SHARE	$	0.30		$	0.20


	Three Months Ended March 31, 2022
	Series A Nonconvertible									Additional						Accumulated Other								Total
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Treasury Stock					Shareholders’
	Shares		Amount		Shares			Amount		Capital			Earnings			Loss			Shares		Amount			Equity
BALANCE, DECEMBER 31, 2021		200,000	$	2		49,065,924		$	491	$	658,728		$	500,212		$	(18,235	)		1,365,648	$	(41,284	)	$	1,099,914
Net income		—		—		—			—		—			49,970			—			—		—			49,970
Other comprehensive loss		—		—		—			—		—			—			(3,660	)		—		—			(3,660	)
Cash dividend		—		—		—			—		—			(14,246	)		—			—		—			(14,246	)
Issuance of common stock to employees		—		—		47,748			—		5,979			—			—			—		—			5,979
Shares withheld for employee taxes		—		—		(22,347	)		—		(7,896	)		—			—			—		—			(7,896	)
Issuance of common stock to Board of Directors and Scientific Advisory Board		—		—		5,630			—		730			—			—			—		—			730
Issuance of common stock to employees under an ESPP		—		—		2,875			—		509			—			—			—		—			509
BALANCE, March 31, 2022		200,000	$	2		49,099,830		$	491	$	658,050		$	535,936		$	(21,895	)		1,365,648	$	(41,284	)	$	1,131,300

	Three Months Ended March 31, 2021
	Series A Nonconvertible									Additional						Accumulated Other								Total
	Preferred Stock				Common Stock					Paid-in			Retained			Comprehensive			Treasury Stock					Shareholders’
	Shares		Amount		Shares			Amount		Capital			Earnings			Loss			Shares		Amount			Equity
BALANCE, DECEMBER 31, 2020		200,000	$	2		49,013,476		$	490	$	635,595		$	353,930		$	(36,019	)		1,365,648	$	(41,284	)	$	912,714
Net income		—		—		—			—		—			51,687			—			—		—			51,687
Other comprehensive income		—		—		—			—		—			—			1,010			—		—			1,010
Cash dividend		—		—		—			—		—			(9,487	)		—			—		—			(9,487	)
Issuance of common stock to employees		—		—		53,123			1		5,115			—			—			—		—			5,116
Shares withheld for employee taxes		—		—		(22,048	)		—		(9,634	)		—			—			—		—			(9,634	)
Issuance of common stock to Board of Directors and Scientific Advisory Board		—		—		4,443			—		630			—			—			—		—			630
Issuance of common stock to employees under an ESPP		—		—		1,782			—		432			—			—			—		—			432
BALANCE, MARCH 31, 2021		200,000	$	2		49,050,776		$	491	$	632,138		$	396,130		$	(35,009	)		1,365,648	$	(41,284	)	$	952,468


	Amortized		Unrealized				Aggregate Fair
Cash and Cash Equivalents Classification	Cost		Gains		(Losses)		Market Value
March 31, 2022
Cash accounts in banking institutions	$	277,104	$	—	$	—	$	277,104
Money market accounts		17,335		—		—		17,335
U.S. Government bonds		62,985		—		—		62,985
	$	357,424	$	—	$	—	$	357,424
December 31, 2021
Cash accounts in banking institutions	$	256,878	$	—	$	—	$	256,878
Money market accounts		55,115		—		—		55,115
	$	311,993	$	—	$	—	$	311,993


			Fair Value Measurements, Using
	Total Carrying Value as of March 31, 2022		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	80,320	$	80,320	$	—	$	—
Short-term investments		325,055		325,055		—		—
Long-term U.S. Government bonds investments		155,622		155,622		—		—


			Fair Value Measurements, Using
	Total Carrying Value as of December 31, 2021		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	55,115	$	55,115	$	—	$	—
Short-term investments		351,194		351,194		—		—
Long-term U.S. Government bonds investments		159,568		159,568		—		—


	March 31, 2022		December 31, 2021
Raw materials	$	79,834	$	75,227
Work-in-process		14,974		16,065
Finished goods		48,432		42,868
Inventory	$	143,240	$	134,160


	March 31, 2022			December 31, 2021
Land	$	2,642		$	2,642
Building and improvements		76,213			76,600
Office and lab equipment		109,967			107,168
Furniture, fixtures and computer related assets		16,452			16,221
Construction-in-progress		24,584			18,662
		229,858			221,293
Less: Accumulated depreciation		(97,979	)		(92,461	)
Property and equipment, net	$	131,879		$	128,832


	March 31, 2022			December 31, 2021
PD-LD, Inc.	$	1,481		$	1,481
Motorola		15,909			15,909
BASF		95,989			95,989
Fujifilm		109,462			109,462
Other		462			462
		223,303			223,303
Less: Accumulated amortization		(178,782	)		(173,635	)
Acquired technology, net	$	44,521		$	49,668


	Three Months Ended March 31,
	2022			2021
NET INCOME	$	49,970		$	51,687
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX:
Unrealized loss on available-for-sale securities, net of tax of $1,097 and $17, respectively		(3,935	)		(58	)
Amortization of prior service cost and actuarial loss for retirement plan included in net periodic pension costs, net of tax of $143 and $335, respectively		509			1,174
Change in cumulative foreign currency translation adjustment		(234	)		(106	)
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME		(3,660	)		1,010
COMPREHENSIVE INCOME	$	46,310		$	52,697


	Three Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	49,970		$	51,687
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred revenue and recognition of unbilled receivables, net		(64,106	)		(57,648	)
Depreciation		5,627			4,263
Amortization of intangibles		5,498			5,488
Change in excess inventory reserve		84			667
Amortization of premium and discount on investments, net		(271	)		(70	)
Stock-based compensation to employees		6,085			5,200
Stock-based compensation to Board of Directors and Scientific Advisory Board		430			330
Deferred income tax (benefit) expense		(1,380	)		515
Retirement plan expense		1,359			2,228
Decrease (increase) in assets:
Accounts receivable		2,692			(9,066	)
Inventory		(9,164	)		(10,498	)
Other current assets		(3,525	)		5,400
Other assets		9,488			(7,133	)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses		(4,261	)		(21,136	)
Other current liabilities		5,807			(666	)
Deferred revenue		45,891			53,000
Other liabilities		2,384			6,935
Net cash provided by operating activities		52,608			29,496
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(10,751	)		(9,938	)
Purchases of intangibles		(12	)		(298	)
Purchases of investments		(24,915	)		(4,220	)
Proceeds from sale and maturity of investments		50,240			100,000
Net cash provided by investing activities		14,562			85,544
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock		403			348
Payment of withholding taxes related to stock-based compensation to employees		(7,896	)		(9,634	)
Cash dividends paid		(14,246	)		(9,487	)
Net cash used in financing activities		(21,739	)		(18,773	)
INCREASE IN CASH AND CASH EQUIVALENTS		45,431			96,267
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		311,993			630,012
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	357,424		$	726,279


	March 31, 2022
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	10,520	$	(5,199	)	$	5,321
Developed IP, processes and recipes		4,820		(1,828	)		2,992
Trade name/Trademarks		1,500		(855	)		645
Other		448		(36	)		412
Total identifiable other intangible assets	$	17,288	$	(7,918	)	$	9,370


	March 31, 2022
Weighted average remaining lease term (in years)		8.3
Weighted average discount rate		2.8	%


	March 31, 2022		December 31, 2021
Long-term taxes receivable	$	93,293	$	103,260
Right-of-use assets		29,645		30,614
Other long-term assets		3,284		1,836
Other Assets	$	126,222	$	135,710


	Maturities of Operating Lease Liabilities
2022 (1)	$	3,054
2023		4,009
2024		3,957
2025		3,999
2026		4,012
Thereafter		14,115
Total lease payments		33,146
Less: Imputed interest		(3,501	)
Present value of lease payments	$	29,645


	March 31, 2022		December 31, 2021
Compensation	$	12,997	$	27,686
PPG agreements		6,705		8,853
Research and development agreements		1,746		1,469
Professional fees		1,432		1,000
Consulting		645		1,314
Royalties		154		691
Other		3,281		4,461
Accrued expenses	$	26,960	$	45,474


	March 31, 2022		December 31, 2021
Long-term taxes payable	$	51,060	$	47,791
Long-term lease liabilities		26,312		27,263
Other long-term liabilities		1,089		1,023
Other Liabilities	$	78,461	$	76,077


	Unrealized Gain (Loss) on Available-for-Sale Securities			Net Unrealized Gain (Loss) on Retirement Plan (2)			Change in Cumulative Foreign Currency Translation Adjustment			Total			Affected Line Items in the Consolidated Statements of Income
Balance December 31, 2021, net of tax	$	(142	)	$	(18,019	)	$	(74	)	$	(18,235	)
Other comprehensive loss before reclassification		(3,935	)		—			(234	)		(4,169	)
Reclassification to net income (1)		—			509			—			509		Selling, general and administrative, research and development and cost of sales
Change during period		(3,935	)		509			(234	)		(3,660	)
Balance March 31, 2022, net of tax	$	(4,077	)	$	(17,510	)	$	(308	)	$	(21,895	)


	% of Total Revenue for the Three Months Ended March 31,		Accounts Receivable as of
Customer	2022	2021	March 31, 2022
A	40%	36%	$	8,216
B	27%	23%	$	42,813
C	15%	20%	$	20,622
D	7%	12%	$	6,870


	Three Months Ended March 31,
Country	2022		2021
South Korea	$	89,687	$	67,975
China		55,400		60,504
Japan		1,053		1,315
Other non-U.S. locations		300		825
Total non-U.S. locations		146,440		130,619
United States		4,030		3,381
Total revenue	$	150,470	$	134,000


	As of March 31, 2022
Accounts receivable	$	104,947
Short-term unbilled receivables		12,774
Long-term unbilled receivables		—
Short-term deferred revenue		111,778
Long-term deferred revenue		31,735


	Three Months Ended March 31, 2022
	Unbilled Receivables		Deferred Revenue
Balance at December 31, 2021	$	8,127	$	(157,081	)
Revenue recognized that was previously included in deferred revenue, net		—		57,594
Increases due to cash received		—		(45,891	)
Cumulative catch-up adjustment arising from changes in estimates of transaction price, net		—		1,865
Unbilled receivables recorded, net		4,647		—
Net change		4,647		13,568
Balance at March 31, 2022	$	12,774	$	(143,513	)


	March 31,
	2022			2021
Numerator:
Net income	$	49,970		$	51,687
Adjustment for Basic EPS:
Earnings allocated to unvested shareholders		(325	)		(358	)
Adjusted net income	$	49,645		$	51,329
Denominator:
Weighted average common shares outstanding – Basic		47,369,764			47,267,921
Effect of dilutive shares:
Common stock equivalents arising from stock options and ESPP		191			165
Restricted stock awards and units and performance units		70,326			61,618
Weighted average common shares outstanding – Diluted		47,440,281			47,329,704
Net income per common share:
Basic	$	1.05		$	1.09
Diluted	$	1.05		$	1.08


Exhibit Number		Description

31.1*		Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

31.2*		Certifications of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a)

32.1**		Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2**		Certifications of Sidney D. Rosenblatt, Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

101.INS*		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		The cover page of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 formatted in Inline XBRL (included in Item 101.INS)


		UNIVERSAL DISPLAY CORPORATION

Date: May 5, 2022		By: /s/ Sidney D. Rosenblatt
		Sidney D. Rosenblatt
		Executive Vice President, Chief Financial Officer,
		Treasurer and Secretary