Universal Display (OLED) 4 Nov 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen and welcome to Universal Display Corporation’s Third Quarter 2022 Earnings Call. My name is Sherry and I will be your conference moderator for today’s call. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. I would now like to turn the call over to Darice Liu, Senior Director of Investor Relations. Please proceed.

afternoon, good and you everyone. Thank Display’s Welcome earnings call. quarter to Universal conference third

today on Abramson, Brian Vice Financial me the are Officer; Millard, Officer. Chief and Joining call President and Executive Steve Chief President and

remind me Universal is written be portion consent the of redistribution, of let begins, call Any prohibited. Steve you today’s Further, any a Display. of call rebroadcast or Display expressed in of strictly that this retransmission made this Universal property is any without Before call is form for webcast information being live and will this November Universal of This call of webcast period website. that as call, on the X, contains available time date only live a sensitive of XXXX. the of is Display’s accurate time

discussed by forward-looking and uncertainties, These the in company’s our Display differ the call, company’s to on should subject risks are disclaims in these any may based and are statements considering update may this securities. current and any anyone risks a be These we the Universal statements. number significant obligation uncertainties materially. to with investments make and statements actual results SEC of of making any periodic expectations. reports filed During referenced

would to to I call Steve the over Now like turn Abramson.

welcome and everyone Darice, to call. Thanks, on today’s

welcome help operational prosper. grow financial, confident executive team first September deep our as early acumen, continue in to our Let Financial earnings Brian his With Brian company to joined strategic and his that me company our call. enhance I him our Millard, introduce first and Brian and will Universal Display and Officer. am Chief

results. our to Now

million, or million net reached diluted $X.XX revenue income a was $XXX operating was profit $XX million XXXX and quarter per share. $XX record high Third of

near-term the demand economy. look long-term we in growth The fluctuate OLED the path believe industry the may due remains macro strong. uncertainties that of to OLED we As ahead,

multiyear number Manufacturers of the OLED II adoption XXXX CapEx and OLED to OLED for the that displays key for setting Gen planning near-term We panel growth significant a a a with X OEMs are slated believe being pivotal and makers large focus. industry and a Gen cycle. will medium us. for believe the to area curve and OLED that are to be stage advance continue X We year investments

of LG in Display, Gen units are in and XXXX, makers As a XXXX. into the products Korea, shipments ecosystem, positive already Samsung from an to new capacity and enabler that that OLED integral established more OLED us expected at OLED in to and in in the planning conference In for VR, BOE August, X Korean LG UBI future lines be research than that IMID to OLED new reported the invest It Display SDC Chinese display capacity IT reach SK reality with the market Display up to firm, by are partner the and come. we’ll for forecasted end silicon estimate from will reach At X.X Samsung these are virtual used on AR, by trajectory plans in and gaining such announced announced increasing main million be market recently IT OLED the in revenue displays. $XX billion doubling LG OLED September in Also Gen Hynix production. micro that leaders that OLED OLED and of estimated to growth has in BOE Display Metaverse capacity end unit opportunities believes that conference, devices. that invest includes than X.X panel XXXX. the AR/VR expected Metaverse new in division. it XXXX UBI, will an X and translate more new is been by OLED According $XXX and forming a produce this Kunming to XX.X operation years shipments that the which grow approximately partnership with million to next also department XXXX. OLED early reality notebooks It’s will buzz of is the in micro for to during also noted invest monitors its augmented about reported tablets, industry. also as market, Display XXX% been billion years units today’s

and and of in and reinforce pioneering With experience position the a ecosystem. than innovate, we expand introduce continuing XX of we our new make are in ongoing blue new our OLED emissive including blue, development years research, and phosphorescent to respect broad materials, commercial to invent hoses. OLED we and are company, a system. As for excellent continuing our to work progress yellows phosphorescent deep With know-how leadership to reds, more greens, emissive continue

in that should enable believe we blue RGB with all phosphorescent of to on preliminary year-end, our range higher the market of XXXX. across are by for vast energy which a OLED commercial continue applications. of stack introduction believe the We the We meet commercial of our opportunities color unlock phosphorescent into and target stack track efficiency our emissive introduction a array broad to will that specs performance full higher

a to we achieved milestone. front, are that On performance the pleased key report OVJP we

red, able prime green or emissive layer and and now layer two the print layer. blocking electron the are blue to We layers, phosphorescent

using Brian. over devices road the layers the milestone in all RGB printed note, OVJP significant vacuum a have printing This OLED comparable evaporation. these map an performance in our me represents that device. as to organic turn OLED Additionally, traditional call thermal of OVJP On devices let fabricated

upon Thank today. initiatives, than Universal team, joining in industry OLED our advancement mission joined company’s inclusion company and sheet, a working of strong an build Corporation, call the is I’m on OLED you, to ecosystem. Display I you, XX with our for in and for extraordinary strong culture the have again, to our With model market. integrity, more the pioneer growing imagination lean everyone, brilliant Steve. for deliver critical the forward operating balance of to poised excited years. continued thank And cutting-edge being team inventiveness, well UDC the in continue enabler look OLED entire the and to

third quarter XXXX our to results. Now

As the quarterly $XXX prior to Steve $XXX record of million. we had year period revenue of mentioned, million a compared

Red million. $XX total quarter sales in XXXX. the compared million $XX to material in $XX were in compares XXXX. green Our were to $XX third Green third the which sales sales, the in material sales XXXX. emitter million million of were third our This third $XX quarter of of emitters, to This yellow $XX million compares quarter million. the emitter quarter include of

vary buying As it quarter-to-quarter. has been discussed material can in the past, patterns

comparable and million the period to Adesis XXXX, million. compared year third was prior $XX $X period fees XXXX of $XX in quarter license of the were In $X million. quarter royalty were Third revenues million. it for the

quarter XX% Third $XX total sales cost were quarter $XX of of margins $XX XXXX gross gross $XX XXXX. margins compares This were quarter to material The of the million, compares material of translating of of third gross XX%. XX% million to of This quarter third translating OLED XXXX. Cost and into in sales in million third XX%. million, total into gross in margins margins of material the the of in

approximately XX% per XX%. for for online COGS move of inflationary the but brought years $X to an the to In and This growth new near-term phase noted Shannon approximately recently initial margins This ahead, low our quarter, the pressures anticipated that year last it we be total to is site. currently additional by underutilized. impacted million margins is underutilization this addition manufacturing year month material in our were is critical the our to gross expected the range gross capacity

As our the are sole industry customers, and leader to all future. source an of planning we for

significant preparing also global Shannon new of and well expanding diversify facility phosphorescent materials. are slated as meet customers’ OLED wave capacity increasing our portfolio industry’s for as We for our is to manufacturing of footprint. needs the our next The

excluding quarter were $XX million. sales, of XXXX, cost operating In expenses, third quarter $XX million. it the Third was of

the for third share. in cash, we third the ended quarter to and translating quarter income third rate believe XX% income the for quarter This margin investments year equivalents $XX costs of for approximately tax income to prior Net share. in we $XX was R&D operating and of the X% will million year, the operating of XX%. the and per per $XX of compares approximately or operating And in year, cash to or tax compares million XXXX. range expenses period XX% third aggregate diluted margin be XXXX’s quarter SG&A, million of was the For of that estimate in Operating $XX.XX $X.XX The our million the share. year-over-year. XX%. $XXX now million patent our into quarter, or the $X.XX with rate increase $XX was This XX%. will diluted per the diluted of We

guidance. Moving along to

that be belief to We that $XXX the ratio or $XX approximately million, We revenues to will are plus reaffirming believe licensing X. X.X of minus ballpark royalty the in and will be our of materials revenues XXXX million.

flow XX, Our XX, be of Board commitment and record expected The cash on dividend, to return to business generation a XXXX. December of to Directors of XXXX, close quarterly our on of approved dividend shareholders. which paid stockholders positive $X.XX as will continued our the capital reflects December

to profit only months company strong this support back customers’ our X I With the have shape increased. as I’ll the increasing opportunities. my that, as to call been forward-thinking the joined of level only well we it’s base, Steve. and our since our new ability has fast-moving into industry broaden for operating excitement to While UDC, needs OLED turn future With

our and solutions planning commitment to and and evolving have rewarding. commercially road you our groundbreaking illustrates growth and be Thanks, challenges display phone. great can was their enabling also as some winding customers our supporting to the when for an our It discovery a our Display’s from red Brian. were as phosphorescent to success, and technology strategic team. steadfast execution long-term well long overcome tremendously with emitters OLED history clamshell The to Universal It’s adopted for needs. on ability XXXX and delivery

phosphorescent addition reds, an XXXX, was adopted our our Samsung’s array of SX. of course Over worked green in And a Galaxy to in the we developing in commercializing on next-generation decade, green materials.

investments, and balance continue Our delivering to the high-performing no to comprehensive green cash debt, million blue for a robust with of we $XXX materials commercial phosphorescent and efficient, the to portfolio strong and lean a With energy helping grow. in are the flexibility our sites customers our have set of and a further invest model industry operating now red, nearly on OLED to future. market, sheet enabling materials

multifaceted to uncertainties leadership to expand our our shaping our with of and our the While are infrastructure. enables than the our people our our in the heart in grow not to amplify invest the R&D and continue may broadening and elevating in approach dedication customers, each weigh faster continuing This value and we support position their our thank desire, like continue Universal drive, OLED only and I solidifying but near-term ecosystem. in market macro us employees to Further accomplishments on proposition economy, strategic initiatives, to market. advancements. in for to and Display’s OLED would market, grow opportunities to

We customers And and for achieving a and long-term are and committed let’s Question-and-Answer Q&A. being technologies the industry, operator, in materials for our OLED cutting-edge shareholders. superior that, ecosystem, our leader delivering with the start to the Session growth for

Please Instructions] [Operator first proceed. C.J. from ISI. Muse Evercore you. Our question with Thank is

a What down love for Good afternoon. question, ‘XX units like can revenues, be the needle think we start Should moving to what IT, of OLED we for percentage guess you. $XX to there? and through taking of kind to question. percentage move that ending the kind thinking Would then calendar parts first be to markets new for about? I thinking of plus I the of million. smartphone your other hear deferred Thank for thoughts certain your you And that etcetera? should think, about trying

for Thanks Steve. is this C.J., Hi, question. your

XXXX provide on And XXXX, being to call. the going issue February big macro the we’re frankly, conference looking guidance We’re environment. at the

though environment. the seeing to we’re to like we If demand benefit. environment be some headwinds improves, now, Just the macro expect going it’s really

it’s think the some IT. see IT new of ramp we on XXXX, may – more You to of in a be going XXXX type some additional but

of C.J., question, to contracts. mean, I each I all And by thing customer deferred it’s recognize of deferred One add on revenue think, the Brian. as end the our you revenue we our know, of

we current of at in million our balance the of have, If sheet, September, end as $XX deferred revenue. you look

amount the the that’s to currently recognize expect we over XX that months. So would next

window? walk stay Would they you can would contract sign if XX-month agreement – next of kind change were you could the Can your how new with the within to those get that a or pushed largest through revenues to you next customer?

Yes.

not renegotiations we’re an when about we will new think going point. contracts. not pass, I a update they come certainly in yet position to or be contract So that talk to And talking we’re – any at to provide

Okay. And a just quick follow-up.

side, about we you in ‘XX? the margin there for underutilization On talked calendar the about gross should Shannon. progression How think

Yes.

I of all, know our the to a critical capacity So additional go future will capability we along for was industry think that first is really this with as the we adding Shannon, we plan industry. where manufacturing key and the and network of

prepared As we said source customers. provider our comments, in a the we’re for sole

So to to meet have make we we the need available sure that their needs. capacity

into I Shannon to key going is year, next capability. we’re As mean, you look a

greater expect as to network, As volumes I our said, degree years it to the of be and we part in it to will increase continue a utilize ahead.

you much. Thank very

with from Company. Cowen Krish Please proceed. is question Our next and Sankar

behalf the on you two. have of Thank I Stephen calling for this Hi, question. much Krish. taking very is

least driving quarter is just Can sales materials the dynamic one talk decline also at where majority is linearity within given the revenue season? the that and December in there bit were quarter you might directionality revenues. during target, And on First QX the well be licensing, implied was quarter? a a royalty the about material guidance also year or of the as also little the to sequential revenue, as full down just the September how the decline or of September material

Yes.

sequentially So on look QX in down Stephen. mean, that thanks I the be guidance I would for you based observation – where year-to-date. think midpoint expect you’re the at correct if to and of we at your we’re question,

correct. certainly that’s So

you as commented customers our we material patterns As for – also vary generally just buying quarter-to-quarter. do

that, result can being result in a can of than a in QX there here. be So example QX of little as bit lumpiness this that less

I what The forgot Sorry, second part other was piece your other the question? there. – the of

some particular, given purchasing the from for was Or last-minute guess, some perspective, lumpiness inventory – for, I of your I the the other of is QX, some in How the guess of there QX? sales? of there with material guess just I for play purchases, ahead buildup that holiday

on on in tend of seeing sell business. material. patterns And any they not revenue your We’re was because ordering recognition another question based our and follow versus licensing. we to And material royalty the units abnormal streams revenue recognize earlier those one we model, as

the question one a mobile, talk Brian. if like I major display And and Thanks, dynamics end Steve. could your in was also maybe TVs large markets wondering then for you little about IT.

in while That because has the in out markets are I you you But as your IT year, of up bucking displays two the think demand mobile play far seen products are weakness second been also of new well Thank understood seeing large helpful. I weakness so be just potentially customers? along for those have a half with or now. for – guess the would trend coming show you. the

good Steve, question.

phone holding up the market well. seem cell high-end generally are the to softness though reasonably seems board. We does It seeing across as be

as look into activity forward for are especially XXXX. seeing We IT, we growing

very you Thank Great. much.

Thank you.

is from Brian Please proceed. Goldman question Lee next Sachs. Our with

for back little record customer, Hey of I revenue mix. also got to late, the I to guys. to your Brian, this. XX% speak referring, you quarterly nice the Good revenue – close your taking contribution afternoon. from largest them is a back you referring the on covered bit does stem that it It here. hit a to Thanks of seems some so are like from with being high sales to the apologize catch-up Does you. if questions. call But

and And impact So, it this that’s XQ to? what as wondering going forward if well? would how related then was

Yes.

individual not the that position it customers, a number customers a in was catch-up through. to resulted of talk but about saw we come cumulative you So, that in are

We our have customer. sequential seen largest of quarter-over-quarter growth revenues in

sound beginning based ‘XX. us question, Okay. be going an And I have to this give with at It guidance ‘XX, it’s Fair then full enough. impact. Clearly, but to like answer of right going can’t reverting Shannon. doesn’t know earlier issue the a utilization kind to just of gross on your margin multi-quarter back it’s on you to

we if this an gross about path to should how or is going issue of extends thinking beyond So, hear you I be to normalized historical if XQ, correctly? margins sort be that the

as we clearly, to earlier, relates manufacturing Yes. think that I I key see it’s is I Shannon, mean critical said it capability to our as a very network.

As volumes that to we in be over would expect absorb volume. overhead the that able volumes, material future incremental we to related increased periods, expect to facility

a is We is which drag the is to market a get near-term, be the of gross referenced, we going echoing the time what hearing period in they margins the near-term, closer given it there back think where and to the short I seeing previously. margin. that in So, peers up for the in have are path to just were softness from we here to on

I Okay. Thank all. will you pass on. it

Sidney question from Bank. next Please is with Our proceed. Ho Deutsche

for welcome think year guidance. time, ‘XX. quarter, us cumulative understand question at you for the guidance the did Thanks you – this our we a taking tied have for you about for last on Brian. the follow-up had full the to in questions should this that with how Last is Great. adjustment. of time, also I help want year year calendar out But adjustments. the to quarter? kind lower full not revenue are that and you revenue adjustments But changing a Can this similar

Yes.

higher So, kind level just I it right. mean terms, of in explaining

did over – our forecast this catch-up. relates the quarterly I catch a of when of And number up customers our the we We economy, forward-looking well, and estimates revise what uncertainties in as guess what resulted assess it this period. went have that have some on basis. we to cumulative time saw recognized a was to in deferred due process through cumulative were the across macro We all revenue the the the we to

is just fees And royalty the right? and that and license to just clarify, not to maybe – the adjustment primarily material sales, is tied the

totality. the It’s

we recognized based to well units revenues on our revenues expect have licensing sell our So, both and to customer. as the material that we royalty as each

So, with pattern. other that both in revenue each based direction moved streams the same on

it’s on our we basis revenue at a look streams, combined both them model. revenue So, so in

it. Got a question. I have Okay. follow-up Maybe

want the balance sheet Board cash is shares where about think Given and price million Directors of close team some your – to market. strong How – $XXX of is in balance cash But share to to certain your know various the hold is? open something the Thank I would buying on potentially buyback and you. back build with you for reasons. consider. the company

Yes.

of So Yes. was – sorry, that? another part there

So, is team capital for present, regularly so structure options. to we in continue we evaluate that the Board place are we return can that our At the the that. we have the certainly best do believe ways all program to capital and management reviewing and shareholders, us to dividend that method

you. Thank Okay.

Thanks.

next & Instructions] from question Ricchiuti Please [Operator Our proceed. Jim Company. comes Needham with

Grenga Hi. Jim. Good taking for the Thanks on afternoon. is question. actually for Chris This

the out of Gen But are SDC’s You investments the seeing pushed fab the X that you lines track of, that or are you trimmed line. indications that being back? panel and had and keeping in any are mentioned investment IT those capacity retooling expansions

the push-outs of I on thrust seeing any the that things really. we other are and things. the of these seeing, types Not are macro not No. we economy mean general than

at people are – seems to we may for we are as the there OLED up though it, looks looking not ready a up there, uncertainty is But next short-term and market that. when everybody ride. look at to We moved IT want for be try macro – is like again. the on to be It there it that not secular looks and want be people being it’s because turns get the but it growth long-term and industry OLED out

nears when the Thanks. OVJP And ramp it. to kind R&D product investment expect as of think – perhaps about forward should Got such and development we how you when as blue blue others Do expense going intensity initiatives to blue backfill new of commercialization. subsides?

Yes.

right going our to investments company, or as growth that underway we programs have sure are are that R&D the about may pipeline think be I working and have we we So, we it’s other business already on. always things whether making making and are in we a that talked the

today expense. invest business. and R&D we So, give not a to guidance to to we position say are will the forward-looking But going any grow are on continue in I just

under may. And Any X-year one of on the agreement? exercising Great. has if I timing updates Samsung sense more, the or extension in-place it

now. will there about talk cannot We it. anything When to is talk we announce, about something right

very you Thank much. Okay.

Thanks.

welcome. You’re

And & our Martin Please Oppenheimer from Company. Yang proceed. is question final with

Hi. Thank taking you questions. for my

a historical for into there tougher demand X down pricing given or next smartphones give customer to TVs months demand slows perspective any setup that hold it’s you year, on feel stable maybe lower there you So, ASP prices? panels. for comfortable to next assumptions a is when do us into and can on next next Were year, and you looking your And months? into massive XX

them. We pricing long-term talking constantly to we pretty in comfortable we But our current are our customers. with contracts strategies. And are have

I regarding margin once optimize follow-up keep it offline you started? to once it. a do that have you turned Got running is or to on, the it feel intend it’s structure, put maybe if want facility, do your you it to maybe Shannon need also

Yes.

good about need you off of turn can easily – the you it’s and turn think turn So, it, turn question. it I I if and and type not when don’t. mean thing on you think on

folks have with that the working are grow PPG we of able that and facility. that develop expectation group is and core a group ready continue have we and partner, to So, to our our to there need

Got the it. Welcome Brian. Thank you, to company.

you. Thank

program back End the remarks. or Millard to does any This to would our session. over you. additional of Q&A question-and-answer for I like Thank closing conclude Brian turn

time and interest Thank for your your you appreciate all support. today. We

conference. conclude does today’s This you. Thank

for this You you time may at lines participation. and thank disconnect your your