Universal Display Corporation Price & Performance (OLED)

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

Thanks, Darris, and welcome to everyone on today's call. As we look back on 2024, we are pleased to report record revenues and record earnings. 2024 was a solid growth year for us. We cultivated our global partnerships which included new long term multiyear agreements with Visionox, strengthened our leadership position in the OLED ecosystem and made significant advancements in our operational, strategic and R and D roadmaps. Amid the dynamic market landscape, shifting consumer demands and a rapidly evolving global economy, we continue to execute and embrace the opportunities that drive our innovation, growth and industry leading position. Since the inception of our company thirty years ago, have been at the forefront of the OLED industry. Innovation is the foundation of everything we do. It drives us to push the boundaries of what is possible and to continuously explore new and better ways to solve the challenges Our steadfast commitment to innovate and forge new paths has enabled us to stay ahead of the curve and anticipate the needs of the growing OLED market. [indiscernible] repeatedly traverse the complex path from idea to lab lab to fab and fab to high volume commercial production. Leveraging three decades of pioneering know how and trade secrets, our team of scientists, engineers and technicians are continuously inventing, developing and delivering next generation phosphorescent reds, [indiscernible] yellows and hosts to meet the evolving needs of our customers the display industry and the consumer electronics market.

Regarding Blue, believe we are closer than ever and that the commercialization of phosphorescent blue will represent a significant leap forward in OLED technology. We understand the excitement as well as the expectations surrounding it. I want to reassure you that we are on the right path and we are confident in our ability to deliver. The journey has been challenging as all trailblazing breakthroughs are and our teams continue to work tirelessly While not yet at the finish line, we are excited about the strides we are making and continue to believe that the additional time needed to introduce a commercial phosphorescent blue into the market will be measured in months and not years. Once commercialized, we believe that our phosphorescent blue can increase the energy efficiency of an OLED display by up to 25%. As consumer products continue to evolve, with advanced features such as connectivity and artificial intelligence, we believe that panel makers and OEMs can leverage the increased efficiency such as adding more functionality and performance to a device without sacrificing battery life. Frost and Blue is slated to be a game changer for the industry for consumers, and for us. Looking to 2025 and beyond, we are excited about the opportunities ahead.

OLEDs are continuing to proliferate across consumer electronics landscape from smartphones, IT and automotive to TVs and more. According to OMDA research, OLED market growth is expected to rise substantially over the next five years. After reaching more than 50% of the smartphone market in 2024, OLED smartphone displays are expected to grow from seven eighty four million units to nine fifty two million units in 2029. OLED IT displays are expected to nearly quadruple from 20,200,000 units in 2024 to 77,600,000 units in 2029. The OLED monitor market is still in its early stages already counts gamers among its earliest adopters due to OLED's fast response times, high refresh rates, and superior image quality. Units are forecasted to more than double from 2,000,000 units in 2024 to 5,100,000 units in 2029. The automotive market holds immense potential as carmakers are starting to turn to OLEDs for both interior and exterior applications. Driven by demand for enhanced aesthetics, functionality and safety. The flexibility of OLEDs allows for curved thin and lightweight form factors. Additionally, with the shift toward EVs, the adoption of energy efficient OLED panels aligns perfectly with EV's low power consumption needs. OLED automotive displays are expected to approximately quadruple from 2,600,000 units in 2024 to 10,600,000 units in 2029.

And don't forget the exterior where OLEDs are making their way into automotive lighting, including tail lights and turn signals. And on the large panel front, OLED TVs are forecasted to grow from 6,800,000 units in 2024 to 7,900,000 units in We believe that the continued proliferation of OLEDs especially in the nascent medium sized market, is driving a new multiyear CapEx cycle. We continue to estimate that year end 2025 installed OLED capacity 10% over year end 2023. These forecasts include initial equipment installs from Samsung's $3,000,000,000 investment, and the first phase of BOE's $9,000,000,000 investment for the respective new Gen 8.6 fabs. Looking beyond this year, additional investments in new OLED capacity are expected with Phase two of BOE's Jet 8.6 fab, Visionox's new $7,700,000,000 facility and expected projects that are still in the works. As of today, approximately $20,000,000,000 has been committed to building new Gen 8.6 OLED capacity. A new and exciting OLED fab investment cycle has begun and we believe it will fuel the next leg of the growth for the industry and for us. Before I hand the call over to Brian, I would like to go over the next phase for OVJP technology.

In December, we announced the appointment of global technology veteran, John John Mayer, the CEO of our new Singaporean subsidiary Universal Vapor Jet Corporation, which encompasses OVJP, While we continue to believe that OVJP could be a cutting edge technology for large area display manufacturing, OLED investments are expected to center on the medium area IT market for the next few years. As a result, John John and his team are exploring new market verticals where our dry vapor jet printing technology may be an enabling platform. On that note, let me turn the call over to Brian. Thank you, Steve. I'm pleased to report that 2024 was a record breaking year of financial performance. Achieved 12% year over year growth, achieving an all time high of $648,000,000 in revenue. By segment, material sales were $365,000,000 Royalty and license revenues were $267,000,000 and the disease revenues were $15,000,000 Our 2024 revenues included accumulative catch up adjustment of $11,000,000 consistent with 2023. 2024 total gross margins were 77% for the year, flat from 2023. 2024 operating expenses were $260,000,000 compared to $224,000,000 in 2023. The fourth quarter of twenty twenty four included $8,900,000 of restructuring costs related to the planned closure of the OVJP California location in and related reorganization that impacted EPS by $0.15 Our 2024 operating income was $239,000,000 which translates into operating margins of 37%. 2024 net income was $222,000,000 or $4.65 per diluted share.

In 2024, we recorded $7,200,000 foreign currency exchange losses related to a tax receivable denominated in Korean won impacted EPS by $0.12 This Korean FX loss and the OVGP restructuring charges full year 2024 EPS. We ended the year with $928,000,000 in cash cash equivalents and investments. Moving on to our fourth quarter results, revenue for the fourth quarter of twenty twenty four was $162,000,000 up 3% from $158,000,000 the fourth quarter of twenty twenty three.

Fourth quarter twenty twenty four and 2023 revenue included a cumulative catch up adjustment of $5,000,000 Material sales were $93,000,000 in the quarter, compared to $82,000,000 in the fourth quarter of twenty twenty three. Green emitter sales, which include our yellow green emitters, were $67,000,000 in the fourth quarter of twenty twenty four. Which compares to $63,000,000 in the fourth quarter of twenty twenty three. Red emitter sales were $25,000,000 which compares to $18,000,000 in the fourth quarter of twenty twenty three. As we've discussed in the past, Translating into total gross margins of 77%, This compares to $36,000,000 and total gross margins of 77% the fourth quarter of twenty twenty three, Fourth quarter operating expenses, excluding cost of sales, were $72,000,000 This compares to $58,000,000 in the fourth quarter of twenty twenty three. Operating income was $52,000,000 in the fourth quarter of twenty twenty four, translating into operating margin of 32%. This compares to the prior year period of $65,000,000 and operating margin of 41%. Due to the previously mentioned OVJP restructuring costs, fourth quarter twenty twenty four operating margins were negatively impacted by approximately five points. The fourth quarter twenty twenty four income tax rate was 17%. To the fourth quarter of twenty twenty three, dollars 62,000,000 or $1.29 per diluted share.

The OVJP restructuring charges and Korean FX loss resulted in a combined $0.26 reduction to Q4 EPS. Now turning to our 2025 outlook. We expect our 2025 revenues to be in the range of $6,740,000,000 We estimate that our 2025 ratio of materials to royalty and licensing revenues will be in the ballpark of 1.4:one. Total gross margins are expected to be approximately in the range of 76% to 77%. Operating expenses are expected to grow at a low single digit percentage rate year over year with R and D expected to remain flat. While SG and A expenses are expected to increase 10% to 15%. 2025 operating margins are expected to be in the range of 35% to 40%. We expect the effective tax rate for 2025 to be approximately 19%. And lastly, we are pleased to announce that the Board of Directors has approved an increase to our quarterly cash dividend. A dividend payment of $0.45 per share will be paid on March 31, 2025 to stockholders of record as of the close of business on 03/17/2025. The dividend increase reflects the confidence in our robust future growth opportunities expected continued positive cash flow generation and commitment to return capital to our shareholders.

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

Thanks, Brian. At UDC, we pride ourselves on pushing boundaries, exploring new frontiers and delivering solutions that redefine what's possible. As we look forward to 2025 and beyond, the road ahead is filled with immense opportunity. Across the OLED industry, product roadmaps are broadening and leading display makers are investing in new fabs to meet the growing OLED demand, especially in the medium sized panel market. Coming years are poised to bring meaningful new OLED capacity new OLED products and new OLED adoptees. As a pioneer and leader in the ecosystem, we're well positioned to continue supporting our customers and enabling the industry's demand for higher performance and increased functionality in consumer products with our broadening portfolio of energy efficient, high performing phosphorous [indiscernible] I would like to thank each of our employees for their drive, desire, dedication and heart. In elevating and shaping Universal Display's accomplishments and advancements. We are committed to being a leader in the OLED ecosystem, achieving superior long term growth and delivering cutting edge technologies and materials for the industry, for our customers and for our shareholders. And with that operator, let's start the Q and A. Our first question is from Brian Lee with Goldman Sachs.

Please proceed.

Hey, everyone. Good afternoon. Thanks for taking the question. [indiscernible] originally updated the blue timeline in the language months not years, I think on the August call, we're sitting here now in late February, it's still months, not years. I mean, if we kind of dial back to when you first started using that terminology, it would presumably mean months not years is before the end of calendar 2025. Are you willing to commit to that type of finite of timeline or you start here in February months not years where months from here could actually be early twenty six. Yes. Hey, Brian. Yes, so back in August, as you said, when we on our Q2 call did announce that we thought it was going to be months not years, that was months not years of a delay beyond 2024. So we previously said we expected in 2024 to have commercial performance of our blue material. So we're now here in February. So we think this is kind of month two, so to speak, off that timeline. As Steve said in his remarks, we continue to be very pleased with the progress that we're making and continue to believe that we're on the right path.

Just need more time to work internally as well as with our customers to bring into commercialization. [indiscernible] Enough. We'll keep tracking the progress on that. I guess question for you, Brian, maybe just on kind of the modeling for the year. I appreciate all the moving pieces. Always helpful to get get all those line items. Last year was kind of one of the more linear revenue growth years we've seen from you guys. There was not a lot seasonality from first half to second half. Honestly, like all the quarters were somewhat in the same revenue ballpark. As we think about your $640,000,000 to $700,000,000 revenue guidance for the full year 2025, like is seasonality coming back to a more and more cadence in '25 as we think about first half, second half trends, Q1 being kind of low point for the year? Or Are there reasons drivers, product cycles, etcetera that you have visibility into that would suggest '25 looks again like '24?

Yes, it's a good question. As you said, we typically have had second half orientation to our revenues and our plan for this year does does have second half being stronger than first half. At the same time, I think there's just a number of different macro uncertainties this year that may cause that to shift. But based on the plan we have as of now, it does look like second half is stronger.

Okay, great. And then last one and I'll pass it on. I think last quarter you guys had mentioned a little bit of inventory I believe it was related to China. I don't know if that was LG China or just other China manufacturers. Can you kind of update us on what you see out there in terms of inventory status? Is that all clear? Into the early part of twenty twenty five? Are you seeing any drag from that to start the year?

Yes. The comment that we made back on the call about inventory was that we had anticipated that Q4 was going to be not as strong as it ended up being. We thought our customers may bring some of their inventory levels down heading into the end of the year. I think as of now, we've seen fairly normal inventory levels. We haven't seen anything out of the ordinary one direction or another at this point. Thanks Brian. The question is from Scott Searle with ROTH Capital Partners. Please proceed. Hey, good afternoon. Thanks for taking the question.

Nice job to end up here with electric results. Steve, in terms of looking at your customers, I guess following up on Brian's question, it doesn't sound like there's a tremendous amount of inventory that's out there with those customers. I'm wondering if you could elaborate on that a little bit looking through the geographic mix. It doesn't seem like there were any major pre buys or otherwise. Ahead of potential tariffs. So I'm wondering if you could just clarify that sequential progression you would expect from December into March for materials And how the geopolitical situation, particularly from a tire standpoint, is expected to impact you guys in 2025? Yes. So on Aimovitch, as I said, we had expected Q4 was going to be a bit light lighter than it ended up being.

Because we had expected inventory drawdown heading into the end of the year.

As of now, we've seen fairly normal inventory patterns, normal buying patterns from our customers. As I said, there is a lot of uncertainty this year in terms of a macro factors and how that might weigh in tariffs being one of them. And as it relates to tariffs, I mean, we have been in the business for three decades. We have been doing global trade successfully navigate and deal with it. But we're not immune from it either. So it's something that we plan for. Both in terms of how we source materials in our supply chain as well as our own manufacturing footprint. Having Shannon in our footprint is certainly beneficial from a global trade perspective. So it's something that we're planning for and monitoring. But that's about as much as we can share at this point.

Got you. That's helpful. And maybe to follow-up in terms of the 25 guidance. Dollars $640,000,000 to $700,000,000 I'm wondering if you could articulate the swing factors at the low end of the range to the higher end of the range. I know it's only February at this point in time, But also if Bloom is included in that, I think your past policy has not been to include it. In your assumptions. I'm just kind of wondering the current all time zone that's up.

Yes. So on the factors for the range, we certainly have a base case that's within the range and upside and downside opportunities off of that just based on really consumer demand, as well as development work customers and how that might fluctuate both on red, green and blue. As it relates to blue, we do have Blue in our revenue guidance, but it's not projecting significant growth off of this year, because we do anticipate it's really going to be a development quantity this year, which development quantities a little bit can go a long way as it relates to development. It also tends to be fairly variable quarter to quarter in terms of development quantities that our customers need to advance their Bluework.

Okay. Lastly, if I could, just from a capacity addition standpoint, I think you said ten percent by the end of twenty twenty five versus the end of twenty twenty three. But there are quite a large number of fabs that are expected to ramp into production, I think, in the second half of twenty twenty six. I know you probably won't get out ahead of your skis in terms of providing projection to 2026, but At this point in time, would you expect to see a reflection in terms of the growth beyond double digits, it's beyond 10% as we get to 26% from a capacity standpoint? Thanks.

Yes. I think, as you said, we're not in a position right now to give '26 guidance other than to say, certainly these new fabs that are being constructed at Samsung, BOE and Visionox are all positive signs for the years ahead, especially as it relates to the OLED IT market.

Great. Thank you. Thanks, Scott.

Our next question is from Mehdi Hosseini with SIG. Please proceed. Yes, sir. A couple of follow ups for me. On the blue topic, can you help me understand The depth and diversity of the customers that are evaluating, is that just limited to your largest customer or our various customers from different regions are actually [indiscernible] Yes. Hi, Mehdi. So we're working with multiple customers across multiple regions on Blue. So it's about as much as I can share.

Sure, sure. And just to for us to better understand the the Midas nodes and the thought process, when you say you are months away from commercialization not years, Is that across the board or is there any customer that is ahead of others?

Yes, we can't speak to our customers' progress other than to say the months not years is UDC achieving a commercial design win of blue of our blue material with a customer.

Okay. And then on the last one from me on As you know, sticking with the blue topic, was there is there any way you can help me understand the R and D revenue associated with Blue that you're able to generate I'm assuming that you're still able to generate a little bit of revenue from the host. So if I just take your material revenue the rest outside of emitter, How much of R and D Blue is included?

So we had $4,600,000 of blue sales in 2024 and that was a combination of emitter and host revenues, the majority being emitters but we have been selling hosts and development quantity as well.

Got it. Thank you.

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

All right. Thanks.

Don't know if you're going to be in a position to answer this either. But just with respect to to the timeline for BLUE, can you say whether you are [indiscernible] discussions regarding a Blue license agreement with your largest customer, Or do you just anticipate this occurring once you have a commercial design win? To talk about.

Yes, I can't talk about the status of any negotiations other than to we're always talking to our customers about a lot of different things on Blue and other red and green as well.

Okay.

Brian, just with respect to the 25 guidance, is there any unusual variations in pricing for your materials versus twenty twenty four?

Or is this the guide mainly just a function of the uncertain consumer electronics outlook. Or maybe a combination of both.

There's not a significant price pressure. We don't buy customer contracts, we don't really have any new agreement, new significant agreements that are up this year. And we do have so there's not significant ASP [indiscernible] in 2025. It tends to be more the latter being just general demand environment and what that might look like that might drive the higher or the low end.

Thank you. Our next question is from Krish Sankar with TD Cowen. Please proceed. Hi, thanks for This is Steven calling on behalf of Krish. First one, if I could on sort of the smartphone end market. Thanks for some of the prepared remarks about I guess, estimated number of smartphones to use OLED displays in the coming years. Just kind of curious for those targets that you mentioned [indiscernible] Do you anticipate sort of a linear progression in terms of rising penetration rates or might there be might that be a bit more weighted towards the outer later parts of that forecast period given some of the dynamics between mid tier and entry tier handset phones in the market?

Yes.

I think it's hard to predict the exact slope of the curve or linearity of it. Than to say OLED smartphones right now greater than 50% penetrated In our IR deck, we do have a deck that projects some data from Amdia of what they're saying, some of the penetration rates might be over the next few years. So that's a guidepost that we look to. Regularly in terms of the progress. But certainly all the premium smartphone today are OLEDs, many of them mid tier and we're seeing even some of the low end smartphones adopt OLED displays. So there's opportunity across all segments of the smartphone market and we expect OLEDs to continue to gain further adoption in that market.

Got it. Thanks. And quick follow-up on operating expenses. So you mentioned that SG and A will be up this year.

Curious like what are some of the drivers for that? And guess looking a little further out, is that dynamic going to sort of revert back to more normalized like both R and D and growing kind of in tandem going forward after that?

Yes. This is, I think, a little bit of a one time step up, so to speak. I mean, we have a very lean organization. We've always operated that way. We will continue to do that, but there are certain areas that we want to put additional resource behind to make sure we're prepared for the growth in the next few years. As well as, to some degree as well, we're looking at our local support in Asia for our customers and making sure that we're supporting them as much as we can locally. So there's some element of SG and A that's going to that effort.

Got it. If I could squeeze one more in also about sort of operating costs. Just with the OVJP operations restructuring and moving movement of the good portion of the operations to Singapore. I was curious like are you able to quantify what that cost savings is by moving operations to Singapore compared to California? And any thoughts on like timeline to mature revenues from a strategic standpoint for that business?

Yes. So it is a net savings, the move from California to Singapore And that's part of the reason why our R and D expense is projected to be flat in 2025 off of 2024 is because of the fact that there are some savings due to winding up the California location. In terms of revenues for OVJP, and UVJC, which is our Singapore subsidiary, Too early to really put any poster other than say we're very happy to have Chandran and the new leadership on board there. And feel very optimistic about their prospects going forward.

Our next question is from Martin Yang with Oppenheimer and Company. Please proceed.

Hi. Thank you for taking my question. A quick follow-up on the previous speaker regarding OpEx.

Is there any other cuts or incremental savings on R and D other than OBJP for twenty twenty five.

No, OVJP Martin stands out as the significant area that we're just I think it's really just a pivot and kind of realignment of our efforts there. And we're setting up a team in Singapore. It's going to be a smaller team than what we had in California. And And that's really the big area that's have changed in 2025.

Thanks, Brian. My next question is around this year's guidance.

How much of your outlook regarding new installed capacity by the end of twenty twenty five.

How much of that is a factor in your guidance, more specifically in your annual revenue growth?

A relatively small piece of it relates to certain some of these new fabs coming online and some of the material that may be needed for that. I mean, it's not a significant component of the the growth in in 2025 off of 2024.

Got it. Thank you. My last question is just confirm your comment on BLUE.

So when you initially said Blue's delay is in months not years, [indiscernible] Start ticking in your original intention start ticking from the beginning of twenty twenty five or end of twenty twenty four?

That's right. So we went back in August when we said we thought it was going to be a delay of months and not years, that delay was beyond 2024. So kind of a started a month ago, so to speak. So this is it was really as you recall, our prior expectation and communication had been that we thought in 2024, we would have commercial performance. Of Blue. And this now is really months and not years beyond '24.

You, Brian. That's it for me.

Thanks. Our final question is from Atif Malik with Citi.

Please proceed. Hi.

Thank you for taking my questions. Brian, your 14% last year and and you're seeing maybe a 4% type growth this year, so it's a marked deceleration. Can you just help us out, how did the market do last year, the OLED Materials market last year? And what are your expectations for the market this Yes. So we are projecting slower growth in 2025. 2023 was also a down year. So it's a little bit of the reason why the growth rate in 2024 was high as it was, was also coming off of a fairly lower base in 2023. And I think if you look at the industry growth rate and what capacity demand is this year, 5%, 6%, thereabouts is kind of what a lot of the analysts of all the industry are projecting in terms of [indiscernible] And if you look at our business historically, because of customer efficiencies, as well as volume price dynamics, And otherwise, our growth rates have typically been just shy of the overall industry growth. For those reasons. And so we think our guidance range is fairly in line with what the industry is projecting.

Got it.

And on the blue emitter, Is your understanding that you are you guys are going to be sole sourced on that or there is competition that's also competing We believe that all paths to high efficiency, Blue go through our materials, and so that's our position. We don't believe there's anything competitive to us. Great.

And then lastly, China semiconductor market, they're doubling down on materials on the semiconductor side and And the question comes up with investors in terms of what you're seeing in terms of competition from [indiscernible] local China material suppliers on these emitter materials. Can you update us what do you see there?

It is certainly the Chinese market has been one where there are a number of local players on the material side that have come up in the last few years. And it's something we monitor very closely. Many of them are focused on areas of the OLED stack that are not competitive to us.

There are some that are trying to compete in our space. We continue to believe that due to our longstanding customer relationships the quality of our materials, our vast patent portfolio that we will continue to be the leader for the foreseeable future in this space.

Great.

Thanks. Thanks, Sachin. Thank you. This concludes our question and answer session.

Would like to turn the conference back over to Brian Miller for any additional or closing remarks.

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