Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and welcome to Universal Display Corporation's First Quarter 2023 Earnings Conference Call. My name is Paul, and I will be your conference moderator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference call over to Darice Liu, Senior Director of Investor Relations. Please proceed.

Darice Liu

afternoon, good and you, everyone. Thank Display's Welcome Earnings Call. Quarter to Universal Conference First

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 Display. is written of consent express Universal retransmission this let begins, in redistribution, prohibited. he you call form property Any any is of rebroadcast Display or any of strictly today's or call Universal of a portion the Before without

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

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

obligation any to any statements. of disclaims Display Universal these update

I'd Now turn over call Steve to the Abramson. to like

Steven Abramson

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

of near-term profit demand. For $X.XX net on XXXX, revenue first million, share. reported Macro operating diluted per quarter the was $XX $XXX linger to of weigh and of and million or $XX we income million uncertainties continue

to the increasing the year. adoption of confident remain next in of IT the in long-term significant we electronics. segments in addition that path consumer several However, is to is growth cycle activity OLED commence expected OLEDs

or and were Market has leading Asan plant products CapEx Omdia is $X.X XXX billion OLED been a reported displays for new OLED are market. to as nascent this to IT to Research, panel Fueling Samsung in IT OLED planning makers product units and units its IT that X.X other IT Display units invest new were shipments well. XXXX, retrofit OEMs and X% month, reach announced adoption their million will a X.X Last will to leading panels to that a year units. their According Gen last million and broadening to portfolio, it will capacity due forecast OLED million facility OLED. investment by year reach notebook year double next in tablet panel shipped million XX.X only XX.X and this million XX.X Omdia OLED of

entering when from different this another Google, brands DSCC million year-over-year is for growth were and XX XX% first from XX.X of smartphone foldable different with OnePlus excitement. year the smartphone to see models in area forecasts foldable expects brands. This Foldable units. and shipment from shipped X Tecno will foldable XXXX there different models different last least increase XX to an DSCC year the the at increase time. XX foldable is market

another research IDC, reached firm units CAGR XX.X XX.X% million a phone projects as in of market X-year shipments for units XXXX. foldable

Omdia emerged XXXX to the According displays, the consumption, power market rate, units and forecasted gears market terms XXXX. for as shipments industry the key market of automotive display Omdia, Switching in application as has becoming fifth to a of display largest units million in XXXX; design. shipments lightweight in surge automotive slim to response low display's in from OLED X.X rapid to OLED will thanks XXX,XXX automotive.

applications. display a in models. China the XXXX showcased OLED XX-inch with planning Electra OLED XX-inch And next-generation Ferrari is its Samsung develop reportedly developed to to Motors In with electric world's EX for Lucid's a supply upcoming first panel first models. just for car electric Hyundai dashboard signed OLED curved XX-inch display. agreement Display months, displays the past LG X SUV, the an Ferrari's automotive OLED maker Display Buick for rollable

as this of transparent exceeds XX-inch LG We support closely the area their yield hybrid coming maps. introductions large new product the panels, Display panel their developing road out years, for year, to our and that technologies and announced product Display OLED now customers Samsung announcement will they new map with a materials for release OLED product And XX%. and acuity end work OLED we its by OLED are

We have comprehensive and all global high-performing a process energy-efficient, for includes the and This invention team crafted of by synthetic, technicians. and chemistry engineers our mechanistic, our scientists, expertise, phosphorescent machine learning, of approach created materials. analytical driven

to and continuously lifetime and specifications are delivering greens, ever-evolving energy next-generation meet discovering, We hosts ever-changing for color. reds, efficiency, yellows developing operational and and the

leveraging to and a OLED As first-mover experience OLED at the industry. continue we materials advantage forefront X are our of decades the the know-how, be pioneer in and approximately ecosystem with of

With we for in a Blue, system. commercial development our to respect where excellent emissive blue progress ongoing continue phosphorescent to make

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

our be in and XXX more at month. advancements milestones Booth phosphorescent currently programs, we driving to believe are the towards about significant this uniformity. OVJP. Display will with manufacturing we dry process Angeles printing of achieving OVJP that learn and Los OLED achieving path visit commercializing scale OVJP print please printing that We the our platform. layers later our UDC, device are these are SID making groundbreaking including the milestones To FOLED all On in Week front, in Two critical

Additionally, multiyear patent our and pending boost XXX The afternoon, phosphorescent over in will the than more encompasses and issued announced X,XXX this patents XXX and framework complement of acquisition new IT global and agreement. families of KGaA's strong Merck portfolio patents. we emitter portfolio collaboration a

green emitters transport and note, new The me over create to let call Brian. turn stacks. and OLED host use advanced On collaboration certain UDC Merck pertains with KGaA's materials for phosphorescent to the to yellow that

Brian Millard

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

the Results were half. our million half first XXXX. compared year of softer with first line of quarter, million, was a in Looking at revenue $XXX the first expectations to to second the quarter the our compared of $XXX in

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

emitter million. million year's compares prior This were Red sales $XX the to in quarter. $XX

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

First the quarter royalty $XX year million. were period $XX and to million fees compared prior of license

was $X million an of from in comparable First million, quarter revenue period $X XXXX. increase the

material into margins XX% of compares gross in of XXXX. million first XX% the quarter were material XXXX sales This and were in XXXX sales the gross and margins of $XX translates margins million. material XX%. quarter in of OLED to in the to of quarter first first $XX Cost cost of million, quarter quarter of $XX both XXXX This in compared XXXX into First total the of XXXX. first gross translating XX% of

Impacting these million to increase first provision X% new related $X.X million of gross our items $X.X margins quarter total combined our underutilization to in was is Shannon a the margins. and impact of approximately gross The inventory facility.

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

decrease Film of becoming is and year-over-year the in patents July amortized lower fully compensation Fuji year. primarily The stock-based due last expense to

innovation to as our in year-over-year in our invest continue we our global continue X% people, and to XXXX We expect XX% in OpEx infrastructure increase engine. to to

in was XX% first into tax of the income income year compares Operating million operating of the margin The period operating in XX%. XX%. million $XX to was rate $XX quarter XXXX. the translating of and prior This of quarter, margin first

XX%. tax be expect We rate our for year approximately the to

income net quarter $XX share with ended per equivalents XXXX cash comparable to investments. cash, approximately was or or $XX quarter in the XXXX. period First per $XXX diluted million the million and share. This $X.XX compares diluted million We $X.XX in in

lastly, Regarding Board million our that in XXXX paid the record commitment June guidance, to million. reflects dividend, capital we to shareholders. $X.XX will range The a $XXX of XXXX, reaffirming quarterly close are positive $XXX on And revenues the be XX, our return continued cash approved business be will Directors expected June to expectation which our flow as of on stockholders XX, of and generation XXXX. of of dividend our to

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

Steven Abramson

Energy foundational efficiency key sustainability Thanks, are core Brian. competencies. UDC's elements in and

award-winning electronics and portable lighting can enhance real and the technology and consumption providing phosphorescent operation OLED energy materials battery performance products, of and larger displays in universal products. longer less patented displays FOLED power-saving lighting Our in advantages for and

and Corporate in comparable equivalent materials million published found In we per technology smartphones ceilings by this our XXXX that of metric be years. EPA calculator, than saves tree website, dioxide XX year. can XX tons our estimate Social to growing more Using XXX,XXX Responsibility sequester more phosphorescent an is our for carbon recently carbon OLED than Report, which on

market into into power energy red our in our improvements generation-to-generation further materials, expected is continuous introduction increase displays to temperature. blue panel added longer green the to brighter commercial of translate and phosphorescent the addition life, and In lower and battery phosphorescent the savings, efficiency

lastly, portfolio each for for that the growth and and believe UDC initiatives, industry. and broadening and customers' and Universal drive, We new like their enable shaping dedication will would advancements. heart in our and thank desire, sustainability driving employees product elevating designs to I phosphorescent support our accomplishments OLED of applications Display's And our

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

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

Operator

Brian from [Operator Goldman Lee Instructions] question with Sachs. is Our first

Brian Lee

I do quarter if quarter? for to purchasing already blue And jumped how you you so the development you if win purposes? apologies can customers materials and did? Sorry, this. covered did on much many late, this where in sell But the How then

Brian Millard

for Yes. the thanks Brian, question.

have blue development a in thousand customers. a So period, dollars' of sales hundred host number we across sales worth both did emitter and the few materials, of

Brian Lee

a the then on forth OLED LG then market know high the of to Second year and for speak a the sort upside of Maybe you been And and level, see maybe for of can in there's around TV And Okay. on also views internal the implications market? Samsung Great. just deal your back market. given doing TV. that lot press panels question, UDC, you for potential forward? I about to this TV this any go the some

Steven Abramson

great. for and Brian, we TVs LG the customers. can't speak Samsung We it as more great. TV us. better think OLED our the for sell, you And know, OLED is market are is the

Operator

with Our Sankar Cowen. next TD question from is Krish

Unidentified Analyst

behalf on of calling Steven is Krish. This

if one, Brian. I a or for First Steve could,

In terms this posits has And How about on or any the into your orders orders? delays can with current conversations to sentiment linearity to pushouts expectations? you customers of and relative how trended third your relative customer your original to especially in coming in talk quarter. quarter, been

Brian Millard

question. Yes. Stephen,

we I So the said play expectations. the did terms in out in line yes, really with quarter, in it mean, of our as release,

guidance had of those So the that for we're and evidence we reaffirmation of what ordinary in hearing of line the there the for really And wasn't QX. anything and also originally expectations think in what year rest I we seeing from out year saw with planned. customers is the the is that

I certainly that seeing where we as to in second QX were to think the it's a I back really with from And we're We half well. weighted do you're story. everything customers expected be February consistent hearing lighter. But first half think the result. it be is in

Unidentified Analyst

Got Brian, just follow-up, wondering just my inventory it. about days. And as

there in inventory So the down for above looking conceptually, well of But of kind was levels to bit of your came X-month time picture from, been above a the just a months type premium OLED of inventory XXXX just months a things I think, big now. have big terms this I adopt back know number and when of range like days And quarters XX dollar guess quarter. days little step historically, back XX roughly smartphones the last are panels. up to I was in

customers maybe expect change -- to stay to And XX-month going you should the profile so this down demand we your of of inventory type is, is where I back because time is mark days there XX running guess inventory in a the at, months structural expect TVs higher demand forward, we in that range? as XX days IT my from and over guys are recovers? to Or question go should that the towards

Brian Millard

Yes.

inventory, increase two seen you've of in there's on for So really main drivers recent kind periods. there the

where the the The first being increase is of in inventory, has been. our raw which bulk materials

is of materials. We a is have in Iridium, and material key which us for number raw our a included

that's We so And that. the have have of in of of feel the what stockpile increased we strategic but been quantities that dollar the hand, with comfortable we value last seen in iridium a few some building years. on been you've

supplier on goods Also, a the our customers. we're sole finished side, source for

specific we're meet to sure on anything because been demands. necessarily that their we hearing make on you've quantities that need the have that we of to sure have So ahead But demand our hand up that more and planning. the side supply. disciplined and we're we're the seen always But not from increases but being of we far getting build own just there the customers, how too our not making curve

Operator

Sydney is from next question with Ho Bank. Our Deutsche

Sydney Ho

I questions. got a of couple

on and is Does you development, is the patent host what not IT strengthen royalty in already your the of active that walk materials accelerate let's selling say, us by kind business? get that your your you Can X going just does emitters? Or First portfolio? you Merck's more mean of product portfolio. or acquisition through blue forward, that will licensing be covered

Steven Abramson

patent our our emitter is to portfolio. patent and This expand portfolio, really buttress

our it and very our team's broaden to upon patent felt was when build we and develop have it leading at do became industry-leading clearly We position disposal we So a materials next-generation emitter phosphorescent and in post addition available. and reset portfolio our portfolio, will to as continue good tools Merck the in position.

Sydney Ho

fair. That's Okay.

The concerns can revenue, breadth seems which noticed customers, those excess persisting second And that question I talk you OEMs? Chinese of we've like that Can is, that given of the at customers remember. especially for weakness outside do is that from your top X the about lot any the a revenue the of are revenue stream? XX% now have you QX, total hearing highest been inventory there I

Brian Millard

Yes.

of seen we entities top beyond with you continue customers, us over increase So have those know, the to we've we continue and share number X, periods. recent their -- a as

specific. really nothing So

of than think also kind X just a it's a in also others. top that variability customers' in that QX. patterns in in not It's I quarter-to-quarter there's seeing think, our I view. less But periods, bit one-off, of change structural some a to buying the little contributes little maybe you're a our

Operator

Mehdi question next Our from is SIG. with Hosseini

Mehdi Hosseini

this main that objective A as efforts follow-up the the to the to Merck if patient sign then acquisition I from revenue topic. not, drive renewing take are a And Should host? what's here? you

Steven Abramson

so future is on to additional This it not for acquisition, emitter it our broader customers, No, and with for the portfolio accelerate materials -- pathways ecosystem. not that team industry provide efforts house. our and renewing we was develop the materials, we're basically and is the can

Mehdi Hosseini

of have impact patents assuming any financials. you I'm won Fair? Okay. your Got it. the that And acquisition near-term won't on

Brian Millard

price. No, it was a $XX million purchase

that -- we've occurred over XX-year outflow we'll So has and cash a be period. amortizing that

So be going million of roughly there'll $X expense annual forward.

Mehdi Hosseini

more you high-volume semiconductor your retool required encouraging is And sorry, revenue selling that right. are emitter All hear enough Okay. and to to panels? -- that then thousand just customers of -- your to Should have it's or components I'm customers revenue customers' qualify to hundred next for develop couple of year? the quarter Or would to for blue prepare as the revenue. a very you assume a -- and recognizing they emitter actually I manufacturing

Brian Millard

Yes.

it blue, of quantities the is of terms an in So increasing quantity.

in all Dollar-wise It last to increased for in of is pretty sold we what QX. year. what we think similar sold I has QX.

increase get having making closer what I think with quantities we the lines feel commercial the as we're year certainly we're our with and available well somewhat from But XXXX as pace to customers. next will we commercialization. feel those time material as hearing and that with us comfortable the that comfortable

Mehdi Hosseini

shipment understand for better the for to I'm to you take guess customers customer customers is the your is lagging I trying time a their from to what if and between with it effect and project. work volume qualify your would there to

Brian Millard

would of build and comfortable those need playing certainly to do customers, with then conversations with -- our panels, the theirs. performance of be feel there's there think the have out I we kind just sequencing

think So we of panel or that increasing in commercial phosphorescent commercialization be as blue it. material our activity I launch approach there'll a with

Operator

Arete Our Research. next question is from with Nam Kim

Nam Kim

Sorry, enhance IP acquisition, you a will just quick on clarification patent again, said your Merck, emitter you portfolio.

one to layer supply in said also remember, of I also Mark customers. pre-COVID used your for You remarks. And

just business? material other than wonder, HTL any current you OLED layer into in business like other So interested entering I EML are

Steven Abramson

Nam. emitter No, an acquisition. This just is

Brian Millard

the that we providing well layers. can and emitters that collaborating those and Nam, as the we they focused host collaboration on with in our agreement today announced out, use put Merck that's in their development transport collaboration the agreement, Yes, of release so

Nam Kim

Okay.

question. Another

Blue the just none with today, I commercially licensing it's available be of your there on licensing think wonder will not contracts contract signed additional blue ramp Should on customers expect on if have of next I additional Obviously, your material additional and commercial customer. royalty on any revenue top buyer. financial implication on we a you year? income

Brian Millard

Yes.

portfolio our include specifically certain agreement do our contracts, customers, kind Samsung, are them with certain agreements with blue. of our excludes Samsung agreements with customers, our of our So contract that and license Blue license license

just customer-to-customer it there. there's an So basis, opportunity incremental whether a on of kind depends

Operator

quarter Instructions] from Rashidi is with [Operator our next Company. Jim Needham &

Christopher Grenga

Grenga Chris on cadence through And could elaborate we year. we puts Shannon the the should just as the the to inventory be particularly and go charge? respect on of cost actually how thinking is of takes the This of for there, you impact With materials, Jim. facility the about

Brian Millard

Thanks, Chris.

So for. quantities on quarter, take really and inventory a we this just the a on materials quantities we we needed and look were have had the have million charge, excess period, that there did that QX, inventory provide was in at each $X.X and as certain to plan -- of hand. sales our And that provision we record did we to

have do really of a quarter. to every that. that's something composition It's we So

really a Sometimes number. small it's number or no

million. be it happened $X This quarter, to

last there's uptick, we've going year. still the we in with underutilization than less as of that $X to I to should in That's And the a be Shannon, run than in per slight think or higher underutilization. than $X of I of pretty team, had million had more but then slightly more linear of $X.X worked cost what slightly relates disclosed. as year, more million think previously year, terms maybe QX it we And cadence rate And it over this that we million ballpark be month. slightly the

Christopher Grenga

the that to you're you And seeing to acceleration year the are particularly guess, that going that secular investments I just back -- guidance? spoke you what in else see the I'm you an confidence about and gives of seeing the the IT. tailwinds, half achieve you're in

Brian Millard

Yes.

hear terms to you better going is in -- is think the lot customers second the our first a the be it's half the expectation I of year half. what it of from than that of

So echo what an our saying ecosystem, I think for. planning customers expecting forecast our they're a in information of and is lot the informed we're which our teams field others of in get that what we terms of by and and seeing from

has And product of that half launch those to also material to launches. second that which planned quantity of cycles meet some for year, demand the the do additional also are with

that factors our of number of we're a monitoring, kind all guidance range. but of there's So informs reaffirmation the that

Christopher Grenga

Great. one may, And that newly acquired -- Merck. would to? generally? those consumer portfolio electronics size to broadly one that Or I any or relevant Are is emitters be more just relevant the or typology particular on more, there emitters if less of IP

Steven Abramson

working working field time this and lot been smart really people then a Merck's a on in of Well, long it. for

broadly applicable board. would I say it's across So the

Operator

is with Oppenheimer. Our Martin from Yang next question

Martin Yang

I of last dropped for minutes. off the couple

for So ratio between before. you remind sorry this sales has us royalty expected the if remind and been material year? your Can asked

Brian Millard

X.X:X, expecting royalty materials we're license. to X.X so so Martin, Yes. X

Martin Yang

it. Got

flow Can revenue It new with have that you license late seems since that agreement and your you maybe that you also confirm forward? the your agreement comment last Samsung. the eliminated on recognition supply Second purchase agreement going around on entered question and the year. impacts material language how is cash on

Brian Millard

Yes.

to structure requirements change the agreement with of the in respect So the to there's terms from of old the new ones. no minimum contract

completely unchanged. that's So

on So as if nuance change, to it's wording the there's our contracts. a a opposed a just side in

Martin Yang

Got it.

with how flows? recognition, more on clarify the cash revenue track bit maybe a you can So will closely for going

Brian Millard

Yes.

as exactly the estimates and a term. as well both we material on -- the of the as and ship revenues over based that's that full at model contract unit the look recognize same the we in revenue basis on is revenues, have royalty So license per our to purchases material,

is we The payment this contract depths should of feel revenue the calculated. us in the contract just the former. different structure different closely that be payments. makes contract in how and cash structure details quarterly prior opposed and on those slightly had The payment collection are recognition to Obviously, a annual the current has this can't and go there correlated like much quarterly But is both payments, into new as more contract.

Operator

to session. Millard would program to any for turn concludes like the question-and-answer the This Brian closing back comments. I

Brian Millard

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

Operator

This concludes today’s conference call.

disconnect. may You now

Universal Display (OLED) 3 May 232023 Q1 Earnings call transcript