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UDC Quarterly Results: A Miss on Revenue and Profits and a Lowered Outlook
Last week UDC stock price experienced wild swings as Samsung announced strong Q318 OLED sales and a upbeat Q4 outlook sending the UDC stock up 20% on 11/1 and then UDC released their earnings and the price dropped 27%. Not only were UDC’s Q318 results significantly below expectations as sales were $77.6m, 15% below analyst expectations, before the Samsung announcement the company lowered its full year 2018 outlook from $280 - $310m to $240 - $250m. With the updated guidance ~17% lower (~$50m) the stock dropped precipitously. UDC expressed that while Samsung’s OLED business increased, it did not recover to UDC’s expected level and Q418 doesn’t look better, implying a sequentially lower 4Q, while analysts had expected $108.3m. LG Display was also upbeat on their OLED TV panel sales, which uses UDC’s red and yellow green material. |
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The market implications of UDC’s forecast are:
To further complicate the issue, the adoption of ASC 606 drastically changed the way UDC reports license/royalty sales, making comparisons, and even the mechanics of how quarterly calculations difficult. The next figure shows the royalties paid in 2018 and how they were recognized vs. how they would have been accounted for in Q1=Q318 if ASC 606 was not followed.
Figure 1: UDC Quarterly License/Royalty Revenue
- Given Samsung’s Q318 utilization increase in both rigid and flexible displays, they may have overbought material in Q218.
- Apple’s forecasted lower than expected iPhone XS and XS Max shipments and the release of a more popular XR could reduce OLED display shipments, offset by the recent adoption of OLEDs in China’s premium smartphone
- The Chinese panel makers’ low yields and therefore their production is not yet significant in terms of material sales and royalties.
To further complicate the issue, the adoption of ASC 606 drastically changed the way UDC reports license/royalty sales, making comparisons, and even the mechanics of how quarterly calculations difficult. The next figure shows the royalties paid in 2018 and how they were recognized vs. how they would have been accounted for in Q1=Q318 if ASC 606 was not followed.
Figure 1: UDC Quarterly License/Royalty Revenue
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Barry Young
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