Universal Display Corp \Pa\ Q3 FY2021 Earnings Call

Good day, ladies and gentlemen, and welcome to Universal Display Third Quarter 2021 Earnings Conference Call. My name is Sherry, and I will be your conference moderator for today's call. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Darice Liu, Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display's third quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Sid Rosenblatt, Executive Vice President and Chief Financial Officer. Before Steve begins, let me remind you that today's call is a property of Universal Display. Any redistribution, retransmission, or rebroadcast of any portion of this call in any form without the express written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period on Universal Display's website. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, November 4, 2021. 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 and 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, Darice. And welcome to everyone on today's call. We're pleased to report that revenue in the third quarter of 2021 was $143.6 million. Operating profit was $57.7 million, and net income was $46.1 million, or $0.97 per diluted share. Sid will go with further details on our financials. But first, let me provide an update on our outlook on the OLED industry and the company. As we move to the OLED market, we believe that panel makers and OEMs are preparing for a new wave of investment and product proliferation in the coming years. For display makers, there are three large consumer electronic market opportunities: smartphones, IT (which includes tablets, laptops, and monitors), and TVs. In addition, there are other budding consumer opportunities, including augmented and virtual reality, smartwatches, gaming, automotive, lighting, and signage markets. So where are we today? As we enter 2021, about one-third of the smartphone market was penetrated by OLED, and by year-end, based on market research forecasts, OLED penetration is expected to widen to approximately 45% of the smartphone market. This has been largely driven by OLED adoption broadening beyond the premium segment and into the mid-range, as well as some low-end smartphones. With more panel makers participating in the smartphone OLED market and panel pricing expected to decline, we believe that penetration is poised to expand further. Why do panel makers invest in smartphone OLED capacity? One example is BOE, which has two Gen 6 OLED panel production lines in operation. According to reports, BOE is currently setting up its third Gen 6 OLED fab in Chongqing, with mass production of the first phase to begin in the second half of 2022. When fully ramped, BOE's three OLED fabs will have a combined total capacity of 144,000 Gen 6 substrate starts per month. In addition, BOE has planned to build a fourth OLED panel production line in southeastern China. Augmenting the growth of the OLED smartphone market is the exciting and burgeoning foldable phone market. Foldable smartphones are widely expected to become the fastest-growing phone category, with market research forecasts calling for foldable OLED panel shipments to increase from 10 million units in 2021 to about 67 million units by 2025. Looking forward, what are the additional applications expected to significantly drive growth in the OLED market? Let's start with TVs. OLEDs continue to gain strong traction in the TV market. LG Display noted on its earnings call last week that it expects to ship approximately 8 million OLED TVs in 2021, up from last year's 4.5 million units, and for 2022, LGD believes 10 million OLED TV units is an achievable target as it ramps up an additional 30,000 plates per month of Gen 8.5 OLED capacity in Guangzhou, China. From a market penetration standpoint, OLED TVs are expected to make up about 3% of the addressable TV market at the end of 2021. While 3% is a low single-digit number, it also highlights the incredibly large adoption curve potential for OLED TVs. To give you some context on the TV market potential from a display area perspective, approximately 5% OLED penetration of the TV market is greater than 50% OLED penetration of the smartphone market from a square inch standpoint, which means a lot of substrate area for material players like us. Moving along to the emerging OLED IT market, this opportunity for laptops, tablets and monitors has begun to be a focus for OLED manufacturers. Samsung Display is leading the OLED IT adoption charge, and we are beginning to see the nascent stages of proliferation in IT applications materialize. OLED displays offer more immersive colors, higher contrast ratios, faster response times, and wider viewing angles than LCD panels. Samsung is making good progress in the OLED laptop market, supplying OLED panels to global manufacturers, including Asus, Lenovo, Dell, HP, and Samsung Electronics. How big of an opportunity is the OLED IT market? Based on market research estimates, OLEDs are expected to account for merely 2% of the IT market by year-end, which means it is an enormous opportunity that an increasing number of OLED panel makers are broadening into. We believe that OLEDs are still in the early innings of a long-term secular growth market, as display makers expand their focus from small to medium and large areas. Reports are emerging regarding potential new Gen 6, Gen 8.5, and even Gen 10 OLED capacity plans, new OLED device architectures, and new consumer product roadmaps that include an expanding portfolio of OLED applications. With this next wave of adoption taking shape, we are fortifying our position as an OLED leader and innovator on multiple fronts. We are leveraging our 25 plus years of pioneering research, know-how, and experience into new materials and new technologies. We're also expanding our footprint and building our infrastructure designed to drive an effective cost structure while targeting new opportunities. These initiatives will further enable us to provide continued value to our customers while keeping UDC at the forefront of the growing OLED industry. On the OLED front, the discovery, design, development, and delivery of new and next-generation phosphorescent emissive materials, including new reds, greens, yellows, and hosts, is at the core of our R&D programs. With respect to blue, we continue to make excellent progress in our ongoing development for commercial phosphorescent blue emissive systems. We believe that a commercial phosphorescent blue is a question of when and not if. We plan to deliver an all-phosphorescent RGB stack, further enabling higher energy efficiency and high performance for OLED applications across the consumer landscape. With the largest phosphorescent OLED team in the world, we are driving innovation at the molecular level through new materials and new device architectures. Our extensive and cohesive approach to broadening our full materials portfolio includes our computational, synthetic, mechanistic, and process chemistry expertise, coupled with our physicists, engineers, and technicians. Our development teams work closely with customers as we invent and commercialize next-generation materials to meet panel makers' ever-changing and evolving specifications for color point, efficiency, and lifetime. Our full application centers located in Korea and Hong Kong provide a localized UDC engineering team to work directly with our customers in developing full performance data to support rapid new product cycle times. The consistent and successful execution of meeting multiple product cycles every year is part of UDC's core strength. It is why we are the key OLED material supplier of choice in the industry. We have long-term relationships with all the leading OLED panel makers. We take our customers' ambitious targets, fulfill their objectives, and deliver industry-leading materials that drive the ultimate performance of our customers' growing OLED product portfolio. Our long-term partnership with PPG is a principal factor in our ability to accelerate developmental material to a high-volume commercial material. Through our two decades of cooperation and collaboration, we have cultivated and bolstered our best-in-class manufacturing know-how and expertise. This partnership has enabled us to continuously introduce state-of-the-art phosphorescent emitters to our global customers. Speaking of customers, I would like to share that we have extended our long-term commercial material and license agreements with Tianma Microelectronics. We are pleased to continue our strong partnership with this leading Chinese panel maker as they advance their OLED presence and expand their OLED portfolio plants. Now, moving along to the OLED technology front, one of the primary R&D programs we are working on is plasma unfolded, a groundbreaking device architecture. While still in research, we believe that the potential benefits to customers in the industry are significant. We estimate that plasma unfolded has the potential to increase device lifetime by up to 10 times and double the efficiency, which we believe will pave the path for new OLED applications. On the OLED production front, we are in the midst of retrofitting the first phase of a multiyear project at our new manufacturing site in Shannon, Ireland, with our partner of over 20 years, PPG, for the production of our highly efficient, high-performing universal field materials. This new facility will diversify the manufacturing base for our phosphorescent emitters to meet growing OLED market demand and evolving industry requirements. It is expected to double our production capacity within the next five years. We have been working on OVJP or organic vapor jet printing, a novel manufacturing printing process that allows manufacturers to use a gas vapor stream to dry print red, green, and blue small molecule materials directly onto a substrate without the need for a mask set or solids. In addition to patterning without a mask, OVJP represents a next-generation process platform to enable high-performance device designs with gray and mixed layers. We believe OVJP represents a low-cost, high-performance, high-throughput, highly efficient, large-area pattern OLED manufacturing process platform. Our OVJP team, which consists of approximately 50 people, is continuing the development path for OVJP equipment and advanced process platform. The OVJP technology development team in Ewing, New Jersey, is working in tandem with the OVJP equipment team in Silicon Valley to advance our commercialization roadmap. The teams are currently working on the key subsystems to prove the viability of OVJP for large area manufacturing. Achieving this milestone is critical in the building blocks for alpha system design. While the commercial launch of OVJP is still a few years away, the estimated multibillion dollar revenue opportunity is part of our multidimensional approach to long-term growth. For over 25 years, innovation has been and continues to be a primary driving force at UDC. We believe that these near-term, mid-term, and long-term strategic initiatives will further advance our robust materials and technology leadership while strengthening and supporting our primary focus of enabling our customers' success, and therefore our success. On that note, let me turn the call over to Sid.

Thank you, Steve. And again, thank you everyone for joining our call today. Revenue for the third quarter of 2021 was a record $143.6 million compared to second quarter 2021's $129.7 million and the third quarter 2020's $117.1 million. Our total material sales were $75.6 million in the third quarter of 2021, compared to material sales of $77.4 million in the second quarter of 2021 and $68.7 million in the third quarter of 2020. Green emitter sales in the third quarter of 2021, which include our yellow-green emitters, were $57.8 million, which is sequentially flat from the second quarter of 2021 and compared to $52.9 million in the third quarter of 2020. Red emitter sales in the third quarter of 2021 were $17.7 million. This compares to $19.5 million in the second quarter of 2021 and $15.2 million in the third quarter of 2020. As we have discussed in the past, material buying patterns can vary quarter-to-quarter. Some of the contributing factors include COVID-19, supply chain issues, and consumer product demand cycles, capacity ramp schedules, production loading rates, device recipes, product mix, material ordering patterns, customer inventory levels, and customer production efficiency gains. Since a number of these factors are moving variables for our customers, they are also moving variables for us. Third quarter 2021 royalty and license fees were $63.9 million. This compares to $48.2 million in the second quarter of 2021 and $44.6 million in the third quarter of 2020. Third quarter 2021 Adesis revenues were $4.1 million. This compares to $4 million in the second quarter of 2021 and $3.8 million in the third quarter of 2020. Cost of sales for the third quarter of 2021 were $31.5 million, translating into an overall gross margin of 78%. This compares to $28 million in gross margins of 78% in the second quarter of 2021 and $23.4 million in gross margins of 80% in the third quarter of 2020. Cost of OLED material sales were $28.9 million, translating into material gross margins of 62%. This compares to 67% in the second quarter of 2021 and a comparable year-over-year quarter material gross margin of 70%. For the first nine months of the year, our material gross margin was 68%, and our overall gross margin was 80%. As we have noted in the past, gross margins can vary quarter-to-quarter. We expect our overall gross margins to be approximately 80% for the year. Third quarter 2021 operating expense, excluding cost of sales, was $54.4 million, compared to last quarter's $51.8 million and the year-over-year comparable quarter's operating expense of $45.3 million. We are investing in our research and development, including OVJP Corporation, our infrastructure including our new Shannon site, and in our people to fortify our growth opportunities in the organic electronics landscape. Operating income was $57.7 million in the third quarter of 2021 compared to last quarter's $49.9 million and year-over-year comparable quarters operating income of $48.4 million. Operating margin was 40% in the third quarter of 2021 compared to 38% in the second quarter of 2021 and 41% in the third quarter of 2020. For the first nine months of the year, operating margin was 42%. We believe that we are on track for our operating margin to be in the range of 40% to 45% for the year. Third quarter 2021 income tax rate was 20%. We estimated our full-year tax rate will be approximately 19%, give or take a few basis points. Net income for the third quarter of 2021 was $46.1 million, or $0.97 per diluted share. In comparison, net income for both the second quarter of 2021 and the third quarter of 2020 was $40.5 million or $0.85 per diluted share. We ended the quarter with approximately $789 million in cash and equivalents, or $16.66 of cash per diluted share. Moving along to guidance. While we're seeing impacts to the consumer electronics ecosystem from the pandemic and component shortages, we continue to expect our 2021 revenues to be in the range of $530 million to $560 million, with a ratio of material to royalty licensing revenues expected to be in the ballpark of 1.5 to 1. Lastly, our board of directors approved a $0.20 quarterly dividend, which will be paid on December 30, 2021, to stockholders of record as of the close of business on December 16, 2021. The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders. With that, I will turn the call back to Steve.

Thanks, Sid. As we near the end of 2021, we take a moment to reflect on how the pandemic continues to pose a profound global disruption but also how it has tapped into our resourcefulness, resiliency, and resolve. As a corporation of approximately 400 employees spread across 14 locations around the world and participating in a young dynamic market, this pandemic has been an ongoing journey of adapting to constraints and overcoming obstacles. However, deep within every trove of challenges are the seeds of opportunity. At UDC, we have seized on those opportunities to continue to build up and bolster our leadership position in the OLED ecosystem, emerging even stronger to further enable our customers and the OLED industry. At the heart of the company are our employees, and our steadfast commitment to cultivating and nurturing a global culture that celebrates innovation, collaboration, diversity, and inclusion. Since our founding, we have taken decisive steps to build a culture that empowers our employees and fosters an environment where they can thrive with inventiveness, ingenuity, and problem-solving. I am proud of the progress and hard work of UDC to advance our path forward and build a sustainable and successful future for our company, our customers, our colleagues, and our communities. We would like to take this opportunity to thank each of our employees for their drive, desire, dedication, and heart in elevating and shaping Universal Display's accomplishments and advancements. We're 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. With that, operator, let's start the Q&A.

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

Hi, good afternoon. Thank you for taking the question. I guess I wanted to first ask about what you're seeing from your third-largest customer? It looks like sales there were roughly half of what we expected. So, curious, is there inventory digesting there? When will that start to recover? And was that an impact on the material gross margins? Or per your 10-Q, you highlighted an intro of new red and green emitters. So, I would love to hear some color there please?

Thanks, C.J. In terms of your question on BOE, which is our third-largest customer, customer ordering patterns can be lumpy for various reasons. In the first quarter of 2021, the customer purchased a significant amount of inventory. And even though their sales are sequentially lower, they had a substantial order in Q1 and pretty much for the year, they're in line with our expectations. We don't believe that there's anything different except the normal, lumpy inventory purchasing from them.

Okay, that's helpful. And then I guess I wanted to, as my follow-up, go back to the unbilled receivables. They came down in the last three months, but you disclosed changes in contractual amendments with clients. So, I was hoping you could walk through what exactly is going on there and how we should think about cascading those revenues on a positive side in 2022, and whether there could be any changes that would be a headwind to revenues in '22? Thank you.

Yes, you're welcome. Particularly on unbilled receivables, that is a balance sheet item. It is essentially something that has really no impact on our revenues. We have deferred revenues when we get paid by customers, but that has to do with the billing when we entered into a new agreement with our customer. So, it is really a billing question. It is neither a positive nor a negative in terms of our revenue recognition because under 606, this has nothing to do with it.

Thank you.

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

Great. Thanks for taking my question. My first question is on the third quarter, which will make the ratio of material sales to licensing revenue close to 1.2. Just trying to understand why it is so much lower than the 1.5 we expect for the full year? And how should we think about that ratio going forward in Q4? Thanks. And then I have a follow-up.

Thank you. For the material, the material royalty license ratio can vary quarter-to-quarter because it really depends upon customer mix. We still expect the material royalty licensing revenues to be in the 1.5 to 1 range for the year.

Is there anything particular this quarter that drops it to 1.2?

No, it really is just customer mix to be perfectly honest.

Okay, maybe a follow-up question as the IT market starts adopting OLED display. Can you talk about what the revenue opportunity per panel or per area? Whatever metrics you can use? Are they more like smartphones or TVs on a revenue per area basis? Thanks.

Yes, well, for us, it is the increase in square inches of plates that are processed. The more square inches of glass processed, the more materials we sell. These displays are made similarly to what smartphones are made. So, it is RGB side-by-side. The recipes may be a little different for IT than they are for smartphones, but any increase in factory utilization and any new capacity that comes on is a plus for us.

Great. Thank you.

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

Yes, hi, thanks for taking my question. I told Sid in the past, you said that the component titles do not impact you directly. But, you know, LG Display last week said the area shipments declined in September due to component supply issues. From this, I want to figure out, are you seeing any deliveries impact? Or maybe to ask a long-winded question: Your full-year guidance range of $530 million to $560 million. Do you think you're going to be in the upper end or lower end based on tightness? Because that could imply December quarter could be sequentially up or down in revenue.

Well, thank you for the question. In terms of the guidance for the year, we have stated that there are a number of companies in the similar electronics ecosystem that have discussed pandemic- and component shortages- that affected Q3 and changed their outlook for Q4. When we put our guidance together at the beginning of the year, we tried to consider all possible headwinds. Despite everything that has occurred, we are still comfortable with $530 million to $560 million as a revenue range for the year.

Can you give any color on sequential growth in December or how to think about revenues?

If you look at the fourth quarter, we've reiterated the guidance. As I said, we talked about the first half and second half, and we thought the second half would be up. If you look at the low end of $530 million, it would be up slightly from the first half. At the upper end of our guidance of $560 million, the second half would be up about 12% over the first half.

Got it. And then just a quick follow-up: the increase in inventory in the quarter, is that all primarily due to the purchase of iridium or something else going on?

If you look at our 10-Q, you will see that raw materials have grown, it's really in the raw materials area. As we have talked about in the past, we've clearly tried to manage iridium so that A, we never have an uninterrupted supply and B, trying to average the price that we have, that we pay for it, because during the pandemic, there were real issues in getting it, but we had none.

Thanks, Sid.

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

Thank you, and good afternoon. Just a question on the way that the revenues are tracking among your customers. You mentioned that your third biggest customer, despite the variability quarter-to-quarter, is essentially in line with your expectations. Is that true of your other customers, particularly the two larger customers in Korea? And in general, we are seeing quite a bit of variability from your other customers in China. So I'm trying to get a sense of how much of that is in line with the way you had been thinking about the business earlier in the year or if we’ve seen things change as the market dynamics have changed?

Thanks, Jim. I think when we look at it, the fact that our guidance is exactly what it was in February indicates that overall, things are in line with what we thought they would be. Quarter-to-quarter things do change. Just like we said, one customer in China in the first quarter bought a lot more, which increased their percentage. But overall for the year, I think we are in the ballpark with all the customers.

And there's been some reports, as it relates to some of the component constraints that some chips have moved out of tablets and gone into phones. I know you guys are removed from that, but are you seeing any signs of that with any of your customers in terms of changes in some of the applications for the screens or are you too far removed from in the food chain?

To be honest, we're pretty far removed from it. We do know that, as many companies and our customers have reported, all of them are having issues with chips. But to answer your questions specifically, I don't have clarity on that.

Okay, and one last question, just with respect to your operating expense. Looking at Q4, is there going to be any change in terms of the makeup of the expenses? It sounds like you're continuing to invest fairly heavily in R&D as it relates to some of the newer projects you're working on. But how should we think about R&D expense in Q4?

Yes, for the year, we talked about R&D expenses being up by 25%. We expect all of our expenses to be at 20% to 25% for the year when we gave our guidance. I think we're in that ballpark for the year. There is nothing different in Q4 than what you've seen in Q3.

Our next question is from Shannon Cross with Cross Research. Please proceed.

Thank you very much. I was just wondering about inflationary pressures on materials and just in general, what you're seeing, how you're able to offset it, perhaps what you're doing from an inventory standpoint to stay ahead or at least in line with what's going on? Thank you.

Yes, thanks, Shannon. We always look at ways of improving our supply chain and ensuring that we have an uninterrupted supply, but obviously, we care about costs. We've always looked at having multiple sources for the components that go into it. We've talked about Iridium, which is a commodity whose prices fluctuate. We started buying Iridium years ago, so we have some inventory at a very low price. We have some inventory at a higher price. I think we have done a good job of managing it and I don't expect inflation to significantly impact our cost of goods sold in the future, despite increases all around us.

Okay, thank you. I apologize if this has been discussed. I had another earnings call tonight, but I'm curious; we're starting to see some pretty aggressive pricing moves for OLED TVs and frankly TVs in general, especially with the larger sizes. Can you remind us in the past when prices have come down, or when you've seen growth in the market and sort of how long it takes or when we start to see the benefit in your numbers versus the market, especially given the changes you've had in terms of accounting?

Yes, thank you. LG noted on their call that there is strong demand for OLED TVs. They talked about shipping 8 million OLED TVs and transitioning from 7 million to 8 million initially and are now talking about the high end. For us, when the panels get made, it's probably a question of whether it’s three months or six months when our material goes in. We are within the panel itself, which then gets shipped to either LG or their 18 other customers. So while there's no new capacity, their factory utilization has increased, and they are supposed to add 30,000 substrate starts to meet the growing demand.

Great, thank you.

Our next question comes from an unidentified analyst with Berenberg. Please proceed.

Hi, good evening. Thank you for taking my question. I was just wondering what are the most popular enhancements or capabilities that customers have asked for? Can you develop those organically or would you need to pursue M&A for that? Thank you.

Thank you for the question. Our R&D teams work closely with our customers. They ask for enhanced performance for our materials in terms of lifetime, efficiency, or color. We are the ones that develop the materials and our leadership position for 25 years continues. We will keep leading in the market and we do all of the full lead development work in our facility.

Great, thank you. I appreciate that.

Our final question is from Martin Yang with Oppenheimer. Please proceed.

Hi, thank you for taking my question. So I had an accounting question regarding your VC investments recently, which we saw that Digitalize has raised a new round probably at a higher valuation. How does that impact your financials? Can you give us more details?

Sure, that is a small investment. The total value of our investment in Digitalize is under $10 million. So right now, that's not going to move the needle, to be perfectly honest.

Got it. I have another question. China this quarter — when we isolate LG and BOE, was really strong. What was driving that year-over-year growth?

I didn't hear the last part of your question.

What was driving the year-over-year growth in China? What do you think about customers that are on LG?

I'm sorry, I didn't hear it first. I think if you look at China, BOE and LG are significant players. As we talked about TVs, they're talking about 8 million units at the high end. You're going to see LG facilities in China growing, and BOE is ramping up its two facilities. Additionally, we also have other customers in China, which includes Tianma and Visionox. There is increased activity, and we've discussed for the last couple of years that we will continue to see growth coming out of China. Thank you very much, Martin.

We do have one more question. This is from Nam-Hyung Kim with Arete Research. Please proceed.

All right, thank you for taking my question. There has been a lot of news on Mini LED, especially with one of the big OEMs pushing aggressively Mini LED on their product. Do you see Mini LED being compatible with OLED or is Mini LED just a middle step before OEM, after all, adopts OLED later? So, any thoughts or opinions from your end would be great, thank you.

Thank you, Nam. Customers are working on their recipes, and they ask us to design materials that meet their specifications. I think that Mini LEDs are just backlight technology. Recently, LG's CTO noted that Mini LEDs are just another backlight technology. As such, they have the same limitations as LCD, such as light leakage and flickering. Therefore, OLEDs are superior to Mini LEDs, and OLED displays are the technologies that can realize high quality and affordable prices. We remain very bullish on OLED.

Okay, thank you.

Thank you, Nam.

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

Hey team, good afternoon. Thanks for squeezing me in here. I apologize if some of these have been repeated already. But I guess the first one I had was just on the sales mix this quarter. You had a much higher mix of royalty and licensing versus materials compared to the past couple of quarters. I know you frequently mention customer mix as being the reason you see fluctuations. But your top two customers were basically the same percent of sales mix this quarter versus last, yet that royalty versus material mix did shift. Anything you can speak to there for context?

I think you're correct that the customer mix has the biggest impact on it. Customers A and B were up while customer C was down in the quarter.

Okay, fair enough. That's a fair point. And then on the materials revenue, and I promise this is my last question, I'll pass it on. There hasn't been real seasonality this year. I know this is an interesting environment in many regards across different industries. But for you guys, you're almost always accustomed to seeing a decent amount of seasonality in your materials revenue. This year, there has been almost no seasonality. If you look at the $75 million to high $70 million revenue run rate, you've seen every quarter this year. Is there anything unique; has anything structurally changed in terms of your customers' buying patterns? And does this translate to Q4 as well? What kind of seasonality should we expect on the materials side specifically as we head into the year-end? Thanks.

Yes, thank you, and I apologize for any technical difficulties. It is a difficult question because seasonality isn't something we operate like a consumer business that is going to have significant variations around the holidays. I've heard from other companies in the consumer electronics ecosystem that pandemic and component shortages have impacted output, which will affect everybody in the food chain, including us. Additionally, I believe we will continue to see lumpiness, in addition to normal quarter-to-quarter variations in sales.

Our next question is a follow-up from Krish Sankar. Please proceed.

Yes, thanks for taking the follow-up. Steven, I just wanted to ask; someone asked a question about Mini LED. I want to ask the same question, but your views not on Mini LED, but Micro LED and QD OLED. I'm curious how you perceive these technologies in relation to the OLED opportunity. Thank you.

Yes, Micro LEDs, as you're aware, are in their very early stages. There are many unanswered questions about when they will enter the market and what market they will address. We've heard that Samsung has a Micro LED TV with a price tag of $156,000. There may be opportunities if and when they come to market for very small and very large displays.

Thank you. This does conclude the question-and-answer session. I would like to turn the program back to Sid Rosenblatt for any additional or closing remarks.

We just want to thank you all for your time tonight. If you have any follow-ups, please feel free to contact us. So everyone have a good night. Thank you.

Thank you. This does conclude today's program. You may disconnect your lines at this time.