Earnings call transcript Q4 2022

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Operator

Good day ladies and gentlemen and welcome to Universal Display Corporation’s Fourth Quarter and Full Year 2022 Earnings Conference Call. My name is Sherry and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]

conference recorded this replay reminder, a is for being purposes. As the now Investor to like would call Relations. to of I Director turn over Senior Darice Liu, Please proceed.

Darice Liu

to earnings Thank Display’s everyone. good you. Welcome And fourth call. conference quarter afternoon Universal

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

in retransmission prohibited. Steve any Display of of Universal property begins, is call a portion expressed the let Before without is any Any form me or redistribution, written today’s this Universal of remind call you that of rebroadcast Display. consent strictly

Further, live on of of of the available Universal XX, made call, is is time this time This the for date February website. that call as contains call being and will this XXXX. only webcast Display’s of live sensitive webcast a period information be accurate

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

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

Steve Abramson

welcome call. And today's Darice. on Thanks, everyone to

was operating for or $XX fourth $XXX million; was and and per quarter was $X.XX income million; the results share. $X.XX diluted full XXXX record net report million income was income share. million; quarter operating $XXX diluted per to $XXX revenue or was revenue net XXXX. pleased was are million; $XXX $XX We million Fourth income year and

in to that a ecosystem look XXXX. future, preparing begin investment and the we for OLED cycle believe to the As new adoption is we

of current be based believe $XXX backdrop expect range and growth. revenues in macro our XXXX will this current further near term on will details million. $XXX hamper we headwinds Brian and Amidst the we provide to million estimates to However, temporary expectations, shortly.

year a progress with customer record our agreements, financials, Looking new high back making ramping excellent phosphorescent to blue milestones to from filled production facility. significant on Shannon was XXXX, on new program and our it to

long-term green our customer more Display, and front, for new materials two announced additional red with decades, the than partner we agreements for an of five years. On Samsung

AR/VR addition, In for an announced with Epson display we agreement Seiko recently evaluation applications.

global the highly which Shannon, our our the ramping in foundry than efficient, of our years site new ISO with manufacturing front, UniversalPHOLED production partner recently of more materials. high-performing Ireland, XX we PPG, manufacturing for Certification achieved On XXXXX began

OLEDs needs. production With expected are increasing the our proliferation of our to customers’ meet to future emitter broaden, we capacity OLED

were Women Board corporate leading were recently EcoVadis, the another XXXX our of company. of the social XXXX. list awarded one included we year for year. third row by of were year We ratings. business Companies for as sustainability was a to recognized Best the We third recognition by of Forbes' were a Newsweek Bloomberg's Companies. a responsibility Champion XX responsible named Silver for Mid-Sized in America's provider of America's were Executive Watch Forum most for of Diversity We We from of And continued the in companies. list in Rating a as recognized

technologies, cost ongoing in respect work system. make greens, yellows, With hosts. our a solutions inventing and From research standpoint, highly and continually engineers commercializing and material scientists blue progress blue, we including innovating, effective development OLED our excellent reds, commercial development phosphorescent are new for team and continue emissive of our and to efficient to and

in XXXX. phosphorescent preliminary month, As last we blue shared we specifications our met target

green across of on for higher efficiency broad are and our in blue that performance into our XXXX. of emissive We RGB energy commercial market the to that to introduction believe will opportunities red, and of unlock all-phosphorescent believe a array a introduce vast we phosphorescent of continue the range applications. higher We track full materials stack suite OLED

On platform. our team OVJP the prove to key alpha are and the subsystems build of our OVJP The out advancing continues groundbreaking system we manufacturing front, design.

system is of OVJP While RGB into market still few years panels commercial TV believe OLED a volume, high we a cost-effective multibillion-dollar away, opportunity. enable will develop manufacturing that side-by-side and

XX-inch according at showcased OLED Display which CES, Hybrid and at one the On both Also display. consumer company, market capabilities is comes future Galaxy foldable laptops. XX-inch SXX portfolio with a it CES, this introduced AMOLED display, to where Display with XXXX all Galaxy are prototype announced equipped smartphones Flex X Book And Samsung that Earlier year. month, QD-OLED its this to into plans Samsung displays. the the and slidable Electronics for front, Samsung the laptop and its expanding panels was new models offer it its series,

device. Samsung Towards was Extended that to presentation, Qualcomm the end Google announced it Unpacking of an develop their working and XR Reality with

displays And planning and will Vietnam shipments targeting in producing XX-inch $XXX XX-inch OLED The facility that surfaced micro-OLED LG-Display’s to their international is the share. its LG-Display and and gaming BOE into panel broaden portable on new increase smartphones. also showcased LGD module or is as company planning into OLED fold also reports, foldable company back can XXXX build since to monitor. Samsung that micro-OLED for SAAR. and to is its fold X-inch, that its that an OLED unfold a applications. XX% reportedly forth. well. it for year-over-year in and focused expanding tablet demoed can OLED by and OLED build a its XX-inch million and XXX-foldable line working transform market half a have BOE to reports start according showcase, display also News announced noting on OLED WOLED to CES portfolio is is

have of reflect We select weigh near-term timing forecast revised expect in XXXX macroeconomic expansion we clouds fill, our of uncertainty capacity on to projects. growth. shifts the Accordingly, and to

end XX% to our square in increase is XXXX. capacity approximately measured our As new of as XX% to year end compares year estimate installed meters a by XXXX result, This over previous to XX%. XX% forecast for OLED to

As be for these a for will short-lived believe be we year that the macro believe and XXXX look we OLED headwinds us. industry pivotal and out, to will continue

an OLED adoption us. multi-year perspective, industry for primarily OLED is significant OLED commence momentum investments. year a and will new, industry capacity of build of drive next new wave a for IT to that believe wave This we fuel significant From capacity growth in the and expected wave and of new

flexible showcased On advances early the lighting lighting front, automotive for stage, of while this company, panel. allow advancement we're and maintaining According Last to communication a for design OLEDWorks of capabilities seeing features OLED automotive are technology. new flexible, while for density the market. key with in and still lighting the OLED highest in OLED the benefits CES, the will commercialization month segments its applications at OLED enhanced in freedom the we

On to that note, call let me Brian. over turn the

Brian Millard

again, you today. our joining And thank Steve. for call everyone you, Thank

XXXX million, XX% our XX% $XXX was And our year-over-year. me guidance $XX were were X% up royalty commenting Material XXXX XX% million, XXXX. sales review Let revenues and before revenue $XXX million, $XXX up year-over-year. year-over-year. for up million, license results were on Adesis year-over-year. up a record revenues

include revenues million. catchup a XXXX $XX Our adjustment of cumulative

margins flat were XXXX. XX%, gross to XXXX compared

of cost sales, operating expense excluding was million, X% XXXX up $XXX year-over-year.

including yellow including manufacturing our number global red, trailblazing a our to emissive in OVJP continuing in next-generation programs strategic our people. invest site our green, of are new infrastructure, platform, and blue OLED materials and We Shannon technologies, and

per year Our year-over-year, year-over-year. was of XXXX into $XXX $XXX XX%. up translates ended per operating and which operating million XXXX with million, share. We income was or million cash, income XX% equivalents up $X.XX XX% the diluted net cash $XX.XX in margins or share, $XXX investments diluted

million on million revenue quarter includes the a XXXX adjustment in high XXXX. in of catch-up XX% Material in the million fourth fourth a moving of fourth compared sales Fourth of our of to $XXX million quarter of results. Revenue $XX $X to million, record were of quarter in $XX XXXX. $XXX Now the from up the compared for quarter quarter QX XXXX XXXX. quarter cumulative fourth to was million $XX

and the were of Red emitter compares million, of our million $XX emitters, XXXX. Green which sales in emitter green include to million quarter quarter $XX fourth the sales, both yellow fourth in XXXX XXXX. were $XX which

vary past, we've patterns As discussed buying can in material the quarter-to-quarter.

of cost quarter $XX million fees of period fourth of Fourth to translating the period for into margins Adesis prior of and revenue margins were fourth quarter XXXX. the $XX of in million. gross total XXXX. compares the This sales year gross quarter XXXX were compared of was XX% quarter in $X million, license and to comparable XX%. $XX from million total Fourth million, the $XX royalty XX% up

Shannon of expenses, amortization was it to XXXX, mid-XXXX. favorable acquisition fourth completion primarily of were for period increased the gross margins offset sales, $XX Fourth The the of which cost quarter of the Fourth operating due In million. site, product decrease the by cost million. mix, excluding Fujifilm's our commenced manufacturing of XX-year in partially quarter is patents. due quarter the to $XX

we Fujifilm became last amortized fully last noted July. As patents quarter,

$XX compares an prior was The million, Operating cumulative XX%. This to of margins operating of due million period primarily the of the was XXXX, catch-up. of to operating in fourth margin XX%. translating the into income increase $XX quarter year margin in

XXXX's an rate the recorded quarter quarter, certain million or $XX to $XX per fourth share. During Fourth XXXX $X.XX or XX%. diluted for tax quarter quarter charge minority share. compares $X.XX million Net investments. fourth fourth impairment the of income $X of the was we million for was per diluted This income

Now turning our to outlook.

year-over-year on term, to relatively As in flat believe the we we uncertainties demand. spending material the will macroeconomic look expect which weigh result volume to that consumer in we XXXX, near

in these not the $XXX XXXX to be in to cumulative addition, we XXXX. In to revenues expect our catch-up recur in XXXX, million adjustments account do into Taking realized of $XX range which million we in we million. factors, $XXX expect

XX%. to first the expected with XX% half expected to that XXXX of to the range and up of the that to estimate XX% ratio margins X% higher in the be by operating to second Operating to to XX%. X.X of XXXX year-over-year, gross the X. SG&A to be expected are by up be by are than overall and to revenues the revenues will XX% estimated year. to are expected increase materials be expenses ballpark be range XX% believe X% XX%. in of to to XX% R&D our licensing of half XXXX be approximately margins in will We We royalty

approximately expect XXXX be tax the to effective rate We XX%. for

business reflects commitment return to of close capital continued the XX, March confidence And as The lastly, quarterly Universal March Board XXXX, to $X.XX of cash dividend the to increase an are be will A share of positive payment we opportunities, the our generation our per dividend. growth of to that robust in approved XXXX. Directors and on expected of on pleased future has paid stockholders dividend in Display's flow record announce increase XX, cash shareholders.

I'll that, the With Steve. to back turn call

Steve Abramson

Thanks, interest, XXXX, leave idea the beach including wireless mark with leaves family Brian. International the the and the real-time multibillion-dollar as spending visionary wireless high Machines, the first led and take Sherwin's I memory of conventional to December. Seligsohn, desire on founder, without portable former would now Sherwin's He get for moment an a to who on his IMM, communication school methods. company our his spark time as drive in and the in display the technology a indelible and stock to and passed to away stock Shore. teaching of eclipsed honor InterDigital. Sherwin life like quotes Born immense data left pursued learning market, Mobile machine industries. Sherwin Jersey in XXXX, known Sherwin early having

green hanging displays still seconds June XXXX were Sherwin ray future the technology for to a He a by to battery stepping back Thompson founded dot organic before diode, next read OLEDs of of and visit tiny tubes. expired. TVs IMM, next-generation and research decide up of observed explore about with it it, From a Universal work light After Display X-volt saw as a a look Forest Princeton began his with Sherwin done novel vision to for when of the Doctors with University. from he light-emitting that groundbreaking There, and in down few being cathode this Chairman Corporation creating organic of venture. green

to friend. to more ecosystem. not from only approach an R&D mentor, long-term our but XX strategic my start-up wonderful miss and with the Sherwin brilliant Fast UDC's and UDC's note, generous are the a company privilege of today remarkable and growth. Display forward guiding OLED vision, as company's Sherwin have its XXth respect, personal working anniversary, I tremendously. outside cultivated principles We box forward and closely to was key for we of DNA also a innovation had humility His my a Universal global than path years. embedded continue He incredible and of on On into evolved and constantly exploration, in of the legacy and leader curiosity, nurtured With been mindset drive courageous success. thinking will conviction the determination. the him to Sherwin's

thank Lastly, our in heart I Display's and employees dedication of shaping would like for Universal desire, accomplishments and each to advancements. elevating drive, their and

to ecosystem, for growth are leader delivering industry, We for committed the and materials in and for a OLED being and achieving technologies long-term superior our the cutting-edge our shareholders. customers

with that, And Q&A. let's start the operator,

Operator

Please you, first Abramson. Mr. Our question Brian Goldman Thank Lee proceed. [Operator Sachs. Instructions] from is with

Brian Lee

versus than with. typically Good out walk you, $XXX It's low the in maybe questions. past by smartphones than I you a $XX And the guidance swing is uncertainties? bit specific on taking of to the past? Maybe product $XX years. wider in $XXX the range just your to category, Or to through little a to this the million, start $XX year guys. afternoon. million TVs? on where high a biggest process million million where for factor us the Thanks year one, Is Hey, start thought for maybe little is bit off is wider had million it geos of versus Brian. – sort end the it

Brian Millard

for thanks Brian, Hi the Yes. question.

terms range, with it I that think it's at in the macroeconomic seeing what market – in more just of factors the reflects I are we're the broadly play. think

specific just this area on really broad there's play or the So in one customer. based not a that outcomes situation any a it's of come range one world, could wider situation to it's that macroeconomic the Necessarily, specific any year.

And that wider determining this us range appropriate year. informed so a that was more for

Brian Lee

of range, this on any revenue a embedding And kind from enough. Fair contribution sampling? even are in blue year then revenue Okay. pretty if the you even nominal

Brian Millard

incorporated, mean year, factor Yes. our and element it's been guidance guidance our of prior is than materially more I but blue. to periods. contributing level not development There's not it the significant it's an of it's a but on it's this element an in

Brian Lee

Okay.

a right provide of disclosing green quarterly in now? we as show up And Would number won't you so separate on necessarily see it that a item line basis just it? or you

Brian Millard

Yes.

it's So – that but certainly material, it will at it, that a now. not we'll and we're right the for disclosure point at separate determine stage

Brian Lee

enough. Okay, fair

Brian Millard

included in separate It would a disclosure. be not would It be green.

Brian Lee

it. Got

I'll one sense. and then on And margin Makes Okay. just gross pass it on.

gross XX% at to level. XX% the said you consolidated So margin

again I guess I'm Just into gross backing this given or quarterly, year? implying minus, what XX% you're plus you're doing margin, for for the materials

Brian Millard

That's correct.

Brian Lee

Thanks Okay, a on. all pass I’ll right. lot guys. it

Brian Millard

Thanks.

Operator

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

Krish Sankar

I that view also how impact then a have Yes. smartphone feel Hi. was hear He true on the the short-term, as is sorry a that about visionary. question Thanks I’m Sherwin. And for will first your How longer-term, taking In Steve, there’s smartphones opportunity. question does growth to do and my follow-up. my China a you? smartphone recover. you And factory? about opportunity unit

Steve Abramson

approximately the to to expect OLED. smartphone lot really of right continue an economy market we XX% because right a that as So issues now. pricing percentage wants the everybody recovers, now. And grow of OLEDs There’s are

looking think that’s for. I So what we’ll be

I think it a the lot depends macro issue. on

to starting for the both high end see Chinese OEMs OLEDs midrange We’re adopt smartphones. the and

Krish Sankar

compare impacting I earnings $XXX $XXX Got year, underutilization? Shannon this you range. look it. it. the How things And and million of for $X.XX at is from be guidance Brian. $XXX much there XXXX, where you. Thank EPS, imply any this the then a Or the going coming like FY revenue the it when I is you that. I had Got at in other revenue you for power earnings to If million clearly, question power? in lower, that’s Thank to is facility around the million that time to mean,

Brian Millard

Yes.

is we’ve month about previously operate carrying that of in that million said So Shannon site. underutilization we’re expense the and a to the $X terms

the and the through carrying as We the XXXX cost we’re facility. expect to still to the into of XXXX, nonetheless site we improve continue utilization of the but go of course

our as we Shannon. as of industry Having is where the of a part strategic is So to But our Shannon growth. long-term site. certainly making we our contribution customers’ support the volumes have critical is that’s it look and the sure network to of plan think I going part

Krish Sankar

Brian. Thanks, it. Got

Brian Millard

Thank you.

Operator

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

Sidney Ho

also a for my had I year question question. Thanks guide. taking the on full

about talked You are your you the market about of absence are TV, And help adjustments. the kind and the content than assumptions guidance in underlying maybe talked that’s a into some have baking us typical Can quantify? But guys. also but IT market, year of full flat maybe now? by half catch-up mature and you of per that unit, I can bit of And for demand some end for of you you little quantify a higher you smartphone, revenue maybe half, maybe more that follow-up. second first terms whatever what maybe

Brian Millard

Sure.

So think terms the not really the markets. across demand of base unit it’s is end guidance and in – customer assumption volume flat the I across

So we’re terms softness It’s board really flat guidance material one put not seeing the in across area. any the out that there. of we particular

is of think in half, second And I first I terms half, taken. your the point well mean,

that dynamic higher been I the than half think the historically part grown second first. also as has we’ve has been, of

there’s this think bit macroeconomic it’s just which year, the little I the near-term. due weighing a are the that factors, to fact in

Sidney Ho

we Any extension? onetime can for you agreement the about start modeling step when the any part on It’s But changes the you at terms. function the done Then my licensing there the license. early good be thinking follow-up about into time. is financial high get Okay. to was meaningful a XXXX? last won’t this that I extension see assume that change to is sensor question whether should we versus level, the talk the of of details

Brian Millard

The the of agreements last prior Yes. we’ve the very had five that the really consistent agreement structure over years. with is

nothing that timing think note the recognition license that more of in the significantly one So do our we this closely correlated to agreement different. thing The collection will and our under be is contract. cash revenue

much impact So on had an as of contracts. we see prior shouldn’t as deferred revenue the we in

Sidney Ho

Great. Okay. Thanks.

Brian Millard

Thanks.

Operator

is Mehdi question next with Please Hosseini SIG. Our from proceed.

Mehdi Hosseini

asked. has your the assumptions sorry, available customers’ the blue to question new what’s customers, or underlying assumption follow-ups. But been your the for I’m customer Two is for already Yes. material? the evaluate when

Steve Abramson

understand I not seeing... the I’m quite are we question. What sure Mehdi,

Mehdi Hosseini

Let me customer’s of to be the that customer OEM your requalification go has supplied steps I’m UDC. by material, new panels if through restate have it. a like This handset three would and understand trying just a would the to the of emitter the from new

Steve Abramson

see customers, with you there Well, customers. efficiency, have I our time, and how we’re with going to our how the Exactly evolve going know. blue over as working our introduction wait in is that’s for and customers occurs. marketplace the interest its to think with And to both to always we’re customers’

Mehdi Hosseini

it. Got

then for And Thank prepare And cash the one as flow. about flow, operating cash how what’s the your item up throughout And trend especially clarification. your you Okay. for you quick for CapEx I How is XXXX? think went XXXX? inventory going the should just think year? I guide to on the it

Brian Millard

Yes.

inventory question. I’ll take first. So good piece the

material been inventory. of building we a think I raw have supply

keep supply of. We have a that certain materials raw strategic we

I at like think now level. a we’re feeling comfortable fairly that’s

few we’ve in seen in of last the So necessarily level the years. we increase shouldn’t XXXX, see

million year based our to to range. to be currently now. going thinking range the in and grow. on we’re we footprint our it’s million based know million to can expected this always it’s and current expand we’re CapEx, $XX what million on at $XX we on global And as $XX roughly of But plans, in $XX be Obviously, where looking that the

Mehdi Hosseini

Got it. you. Thank

Operator

Ricchiuti is Needham question James Please from proceed. Company. next & Our with

James Ricchiuti

Thank Good Hi. you. afternoon.

questions. Just couple of a

your on is the blue looking wondering incorporated capacity some be be talked if anticipate on production when you that to maybe going to to and scale this the might I’m about to better begin First for. as I’d existing? that’s into been because could I’m you anticipating how in revenue this And get how you to next about that’s XXXX, a blue visibility to Just related material when talk material milestones a play OLED out is – would guys blue. in up. some going just of have or should we – that, understanding having to trying like coming get of sense

Steve Abramson

of have in the molecules all we as to Sure. engineering process, And other although opportunity chain will. our XXXX. supply work for further and type give prepare of now, into good of introduction to Jim, insight the we Right doing we’re evolve, things you questions. lot certainly work commercial work, the a

of any unfortunately, for So feel can’t right now. start those types it, once better will guidance specific have I about talking give we you But we a things.

James Ricchiuti

Okay. going more learn to something I as able of be again, And is midyear? go, say, more that would the further. comment as going to you’re to know I Or we’re you But far by, end Steve, understand just this year? the not toward

Steve Abramson

going as mean occurs. it We’re it’s… learn I more to

James Ricchiuti

Okay.

Steve Abramson

got You Thank it. you.

James Ricchiuti

All right. follow-up. ahead. Listen, sorry. another Go I’m

Brian Millard

No. Go ahead, Jim.

James Ricchiuti

the just the sequential several quarter. factors. could I increase mean, ask, obviously the if I factors that materials going was increase main elaborate you wonder to just I gross materials the sequential that gross in contributed in on margins margins, there’s in to

Brian Millard

Yes.

to in that $X was some So favorable QX $X million have product around we million. did mix

alone by So was of the quarter that favorable item, the offset a costs. significant in impact and on was just Shannon pretty the product some that mix

those improvement saw that the were we factors really So that drove the in QX.

James Ricchiuti

been out being of than Okay. guide that last you I’m the first far, wondering the Because QX as has through two just went pointed through and, And characterize the you normal, just would thus months year. how this gave you business of wider question.

Brian Millard

Yes.

in I had think QX than stronger came expected. we little a

we’re I of And first that. half as than little expecting year, were we think plan. and the the that’s lighter a we be So to kind second, said, this with pleased the

now. but going than we saw in to slightly that’s softer be play QX, what as we’re So of QX is right what seeing

James Ricchiuti

lot. a Thanks Okay.

Brian Millard

Thanks.

Operator

[Operator Malik Citi. is next with Instructions] proceed. question Please Atif Our from

Atif Malik

on blue. a my taking for you questions. question I have Thank

reliability and about [ph] Were emissivity specs meeting similar lifetime to target. internal the green on that and on these blue that and have all talked red? targets you You and preliminary

Steve Abramson

upon for and point Yes. development based lifetime, The color target specs efficiency.

the So past, and work, in blue have before. basically to through we the a of rest lot gotten it the engineering felt materials as where point this gone we've was a we've more we talked

we come materials could where commercial in. should the out figure So figure basically could we –

of Now the in necessarily the molecule, not reliabilities full-up reliabilities the device.

Atif Malik

And then XX%, your the outlook Understand. to last you installed have years two and capacity to from lowered XX%. XXXX XXXX XX% over XX%

optimism next pivotal will then And on year so there's any the Because capacity, year optimism is materials lower next green if material of into blue? because seeing to this based capacity be look not fair a purchases on is trying not for that my way on well. extrapolate enough terms shoots enough year that question majority as probably of Is year kind XXXX your being into there basically, new year next or your the on a based you're of blue OLED, is your that new primarily projects? in like to I'm

Steve Abramson

better new blue. of begin. of Well, OLED investments expect see going environment. We're to XXXX, beginning we'll a the see to to The going also macro way are

So beginning see the those put that's wave IT where some you of this together, to of beginning all when including we of products, things start. new

Atif Malik

right... so based tablet tablet X Steve, Book optimism Galaxy being then, that market is – the is the the OLED, based with And on on adopting XXXX optimism OLED display. the X on the Is the Book

Steve Abramson

see take a on might tablet into in to it specifics is market that's the market don't of off starting there. tablets which piece any IT tablet at get be. I But to point market the the or that time. want in there we sorry, I'm do

Atif Malik

Thanks. it. Got

Operator

line with check is Company. Yang Martin Oppenheimer Martin, in see Please please Go ahead. mute. and if your proceed. Our next & question from is

Martin Yang

you for the margin full us of Thank question. taking my assuming capacity? Can Shannon you gets remind first Yes. to impact

Brian Millard

Yes.

cost one. So the of a of million it's little a we a tricky have right now Shannon. think I $X mean bearing roughly that we're bit month on I

business. production Shannon capacity we've across We have that our said effectively our in the to doubled adding network,

larger lot capacity. continue degree, a Shannon we have So And to over as absorbed utilize that number units. a we of we'll to of a overhead see greater

a XXX% set there's we're it's capacity there. necessarily. necessarily But improvement So incremental position target not to from once in a

Martin Yang

a Got as perhaps million to, it cost, follow-up is XX%? or away the $X say, goes capacity it. rise a partially And on does let's XX%, that XX% month that

Brian Millard

Yes.

get units. I it about way yes, those go doesn't into the would It necessarily I absorbed think of the think just cost away. – it

be overhead you having of costs be product absorbed additional cost. So utilized able be cost to and the It actually the make overhead the be additional would wouldn't without product. because would into underutilization

Martin Yang

My structure Understood. for tandem you they that mainstream that products. like on announced is on tandem today, you. Earlier new BOE final flexible to question be adoption developing Thank is do of structure are a on Do smartphones, small going OLED. view you feel devices adoption smartphones?

Steve Abramson

has because providing efficiency display. a of been increase those on and We're really lifetime to while a around it the technologies technology customers. Tandem and for materials and focused our being a material developer manufacturer and can

to to is we so it making. think the business, customer it's can And – decision that our that is think grow the can we extent extent, But it valuable. a

Martin Yang

you. Thank it. Got

Operator

Please Scott proceed. Our with Capital. ROTH final Searle question is from

Scott Searle

ramp that for on Or provide customers estimates or follow that reluctant taking of wondering that us for production? the on with as you're know but adoption in your to up customers questions. up customers terms stack? any do with design should little bit RGB looking are XXXX? if green? cycle terms you of in some you're front, commercial maybe detailed maybe Steve, I think to blue. give the about Thanks cycles into afternoon. of percentage full it of we XXXX we Hey, into you could of I about engaged a perspective think What took Good historical ramping and get How long was how number talk my a to

Steve Abramson

been sets with customer noted how analogy, green, the we So have also the customers Samsung. customers in all to marketplace of only good multiple is going will The evolves. blue. was see we want green blue. noted we one introduce And something that it when working that our introduced we've there back the as that that questions. product We've on Exactly into market, they was are

analogy So interest for more of and to across may our I'm be sure to to information information it. customers, share that closer, may be the the different the ones blue the board not sizes able that all have can apply. displays and we may for But really is is share or as specific And that they're we get applications.

Scott Searle

the into fluid a Gen-XX we've big know XX%-plus seen about these plus? that could Okay. excitement that, you're similar additions could I of how pushed prepared thinking It frame I or beyond. step of there kind to capacity on are the of functions growth a feeling in you're enough. facilities forecast, more are kind up I'm the those you and had XXXX we one those Fair was sure of got entering percentage capacity like In cycles? type historically, online. sounds production if but will. wondering kind you're if out coming typically XXXX not time And if when on around of of lot two-year and if additions. XXXX, and of given capacity go comfortable that lines, you've put you I XXXX

Brian Millard

Yes.

be in we're think terms made one, capacity things: seeing I the investments of to a IT. expect that and we of for number

heading. Gen needed X.X be and market to going Specifically, where capacity that's going the IT meet to that's be to

which broader picking improve fabs will as in well factors factors. up, So economy and macro utilization thing that's the of other as one existing the

Scott Searle

beyond. where start about square acreage like there Is and years? to square several the over Thanks XXXX like see in some one enough. just market follow of Fair I online It large. that too at it smartphones and/or meters are IT the forecasts the IT of capacity time, horizon TVs the to there been adopted if this could sounds ramp rival things into pretty far on the next to Or the to thinking to up going coming on much. time lastly, you. just of so out that's really point And under the a that? or areas with other that's comment. is that, out It's you but point starting of Got be

Brian Millard

Yes.

it's meters. which hard to predict hit exactly meters think smartphone the point I the may square at square

laptops, broad think thing, a IT and very monitors one covering I market other in applications. is tablets,

lot different all smartphone across as IT fact that the larger board size in the those well as there's OLEDs for a applications. the of is broader So cases across the use than landscape display

products. a we as get opportunity So IT various huge there into adopted OLEDs see

Scott Searle

Great. Thank you.

Brian Millard

Thank you.

Operator

Thank you. would Millard any session. This for Brian back concludes to program I the to question-and-answer remarks. turn over closing or like additional the

Brian Millard

today. evening. appreciate Thank and good Have you your time for interest support. your We a

Operator

conference. Thank you. does This conclude today's

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

Universal Display (OLED) 23 Feb 232022 Q4 Earnings call transcript