Universal Display Corp \Pa\ Q1 FY2025 Earnings Call

Good day, ladies and gentlemen, and welcome to Universal Display Corporation’s First Quarter 2025 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, Senior Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display’s first quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Brian Millard, Chief Financial Officer and Treasurer. 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 expressed written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period of time 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, May 01, 2025. 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. 2025 began on a solid note. First quarter 2025 revenue was $166 million, operating profit was $70 million and net income was $64 million, or $1.35 per diluted share. Looking ahead, we continue to see tremendous growth opportunities in the OLED market. At the same time, we’re operating in a global environment that is increasingly dynamic and complex. In April, we saw an uptick in orders, which we believe was largely in response to ongoing tariff developments. That said we are taking a measured approach in assessing how this may evolve over coming quarters. Thus far, our business remains largely unaffected. Uncertainty is not new to us. We built this company to be resilient and have shown time and again that we can navigate through challenging times. Our innovation engines, strong balance sheet, robust supply chain and operational agility position us well to navigate through periods of volatility. In the past years, we have diversified our supply chain, expanded our global manufacturing footprint to now include Shannon, Ireland and optimized our inventory and production mix. This ensures our flexibility to respond, adapt and lead while staying ahead of the curve with the continued invention, development and delivery of state-of-the-art OLED technologies and materials for our customers and the industry. The long-term trajectory of the OLED market is positive and strong, driven by increasingly diverse product roadmaps featuring an expanding range of OLED offerings with IT, automotive, and foldable alongside other applications slated to drive demand in the near-term. As panel makers and OEMs prepare for new Gen-8.6 OLED capacity to start coming online in 2026, recently published Omdia market research forecasts that 2025 OLED growth will be in the mid single digits. Looking into the three largest consumer electronic end markets: OLED smartphones are forecasted to grow by 6% year-over-year to 848 million units, OLED IT units, which encompass tablets, laptops and monitors, are expected to increase by 16% year-over-year to 27 million units; and OLED TVs are expected to grow by 4.5% year-over-year to 7.1 million units. As consumers increase their usage time and products continue to evolve with advanced features such as connectivity and artificial intelligence, the energy efficiency of our materials and technology are ever more essential. Our unyielding focus on advancing OLED technology and empowering our customers remains a cornerstone of our strong leadership position. We are innovators, advancing our portfolio of highly efficient, high performing phosphorescent reds, greens, yellows and forthcoming blues to support the market of today and tomorrow. Since 1998, our team of world-class scientists, engineers and technicians have been driving continuous breakthroughs across critical performance metrics, boosting efficiency, extending lifetime and enhancing color points. Over the years, we’ve achieved an impressive eight-fold improvement in external quantum efficiency, significantly advancing OLED energy efficiency and overall device performance. At the same time, we’ve delivered an extraordinary 60,000-fold increase in material lifetime, setting new industry benchmarks. Our expanding portfolio of OLED technologies and universal foliage materials enables customers to realize greater power savings, extend battery life, reduce device size and support next-generation features like 5G and AI across a range of consumer OLED products. Regarding blue, the journey has been challenging, as all trailblazing breakthroughs are, and our teams continue to work tirelessly. We are excited about the strides we are making and are pleased by the news release this morning from LG Display announcing that they have successfully verified the commercialization level performance of blue phosphorescent OLED panels. We believe that our phosphorescent blue will be a game changer for our customers, the industry, consumers, and for us. And on that note, let me turn the call over to Brian.

Thank you, Steve. And again, thank you everyone for joining our call today. Revenue in the first quarter of 2025 was $166 million compared to $165 million in the first quarter of 2024. While we expect a certain level of ongoing uncertainty for us and our customers due to the factors mentioned by Steve, we continue to believe our revenues will be in the range of $640 million to $700 million. Our total material sales were $86 million in the first quarter compared to material sales of $93 million in the first quarter of 2024. Green emitter sales, which include our yellow-green emitters, were $64 million. This compares to $71 million in the first quarter of 2024. Red emitter sales were $21 million in the first quarter of 2025 and 2024. As we’ve discussed in the past, material buying patterns can vary quarter-to-quarter. First quarter royalty and license fees were $74 million compared to the prior year’s period of $68 million. Adesis first quarter revenue was $6.6 million, compared to $3.7 million in the first quarter of 2024. First quarter cost of sales was $38 million translating into total gross margins of 77%. This compares to $37 million and total gross margins of 78% in the first quarter of 2024. First quarter operating expenses excluding cost of sales were $58 million in the first quarter of 2024, it was $65 million. The year-over-year decrease was primarily due to the reorganization of OVJP Corporation and reduced performance-based stock compensation. We continue to expect 2025 OpEx to be flat year-over-year. Operating income was $70 million in the first quarter translating into operating margin of 42%. This compares to the prior year period of $63 million and operating margin of 38%. The income tax rate was 20% in the first quarter of 2025. We expect our effective tax rate for the year to be approximately 19%. First quarter 2025 net income increased by more than 13% year-over-year to $64 million or $1.35 per diluted share. This compares to $57 million or $1.19 per diluted share in the comparable period in 2024. We ended the quarter with approximately $918 million in cash, cash equivalents and investments. Our Board of Directors approved a $0.45 quarterly dividend which will be paid on June 30, 2025, to stockholders of record as of the close of business on June 16, 2025. Additionally, we announced a $100 million share repurchase authorization. Our capital allocation program reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders. And lastly, I want to mention that this year’s SID Display Week kicks off in San Jose on May 11th. To learn more about UDC, please visit us at booth number 323. With that, I’ll turn the call back to Steve.

Thanks, Brian. Our company is grounded in innovation, strategic execution and operational discipline. The journey to today was fueled by our relentless drive and refined through trials and challenges to shape more than success. It laid the foundation for the corporate culture we live and breathe today, one built on curiosity, creativity, commitment and collaboration. Our culture empowers our teams to solve complex problems, reimagine what’s possible and lead with purpose. 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&A.

Thank you, Mr. Abramson. We will now be conducting a question-and-answer session. Our first question is from Brian Lee with Goldman Sachs. Please proceed.

Hey guys, this is Tyler Bisset on for Brian. Thanks for taking our questions. On the blue update from LG Display, it sounds like your customer has reached commercialization, which was great to see. So how should we think about what that means for a timeline for when blue could show up in a commercial device? And are there certain milestones here for reaching more firm pricing terms? And then is it fair to assume that this is for a mobile device and not TVs?

Yes. Thanks, Tyler. Thanks for the questions. Yes, on blue, we were certainly pleased to see the report today from LG Display highlighting the success that they’ve had utilizing our phosphorescent blue. We previously commented that having a customer indicate success with our material would be a positive step forward. So we’re pleased by the announcement. Any specific plans and timeline of introducing into a product or really for our customers and their customers, the OEMs to speak to. And on pricing, we’re in constant dialogue with our customers on various commercial matters, including blue pricing.

And then with that announcement from LG Display, how should we think about the impact on other customers developing blue? Does this sort of start an acceleration of sorts or potential race towards blue?

Yes. Our customers and we’ve been working with multiple customers on blue for a few years now. So our customers each have their own development programs that they’re working toward on blue.

Hi, thanks. I guess we’ll have to continue on the blue theme. The LG release talks about a hybrid solution and I’m wondering if you can give us some sense as to where you are in terms of working with the industry to see commercial viability of a pure phosphorescent GV solution. How far along are we there? I mean, is that months the way you described previously going back to your original commentary around blue?

Thanks, Jim. Our prior commentary on blue had really been focused on achieving commercial specs of our material. We hadn’t specified which architecture or structure it would be in. I think the key thing is, this is a positive step forward in the use of our material in a commercial application, and we’re supporting all of our customers in their development efforts with blue.

Okay. One thing that I think caught our – it was out in the press release was when LG talked about the stability of blue fluorescence, the legacy material. And I’m wondering, can you help us better understand what that means as it relates to the stability of your materials and maybe what still needs to be achieved?

Sure. Blue fluorescence has been in market for decades now, so it’s an established product. So inherently, just based on the duration of the product being in market, there’s more stability as well as the wavelength of blue just creates a little bit of different characteristics, especially when developing phosphorescent material.

Is this – and I’ll jump back in the queue, but is it your expectation that the advantages you have on the low power side – low power consumption side with phosphorescence, that this is the potentially the – over the near-term going to be even more commercial solution that we see a combination of blue fluorescence and phosphorescence?

I think it’s really going to depend on the customer. I think this is our approach that LG Display has taken that they’ve highlighted in their release today, and we’re pleased to see the progress that they’ve had. But different customers may have different solutions for blue. I think the key thing is the energy efficiency of the phosphorescent material is critical compared to the fluorescent because by replacing the fluorescent with phosphorescent we’re able to increase the energy efficiency as noted in the release today.

Yes, thanks for taking my question. A couple of follow-ups from me, Brian. I think I understand the challenges in forecasting market adoption, but I think also it will be helpful for shareholders of UDC to understand the market development. So if this is LG’s announcement is kind of a hyperfluorescent blue, kind of a tandem junction, would it be fair to think of this as a bridge? It will be limited to high-end premium devices? And when the fluorescent blue is ready for commercialization as a standalone, then it would have a wider adoption? Could we think about this as a sequencing a bridge and then a mass adoption? Is that a fair assessment? And I have a follow-up.

Sure. Hi Mehdi. So I think the key thing is, this is a tandem structure that LG Display highlighted in their release today. So it’s using a layer of fluorescent material and a layer of phosphorescent material from UDC. And from our perspective, this is a positive step in the use of our material in a commercial application. The ultimate product that LG or any of our other customers may choose to introduce our material into is up for them to speak to and the OEMs and very difficult for us to predict at this time because it’s really in their hands to carry it forward from here. Yes. So our guidance for the year for total gross margin is 76% to 77%, and that remains unchanged from what we communicated back in February. The materials gross margin does vary based on customer mix as well as, as we have new contracts, we can also have different mixes of royalty and license to materials. So focusing on the total gross margin of 76% to 77%, we think is the most useful way of assessing the profitability of our contracts.

Hey, guys, thanks for taking the questions. I apologize, I’m going to go back to blue again. I just want to clarify that the LG implementation in terms of universal displays materials you have hit commercial specs, is that correct in terms of their implementation and not using a fluorescent in effect to cover up the shortcomings of your commercial blue? And just in terms of materials then that are used in a tandem architecture here. Is this in the ballpark of what you guys were expecting in terms of materials per device?

Yes, Scott. So in terms of the specs, I mean, we’ve been previously talking about specs being achieved and we previously said that a customer using our material in an application that was deemed commercial would be a positive step forward. So that release today from LG Display, we think demonstrates that our material is performing at commercial levels. And in terms of the ultimate material consumption, per square inch in tandem versus single layer, that’s really just dependent on each customer’s recipe. And it’s really something we can’t comment on directly, the quantity of material at this point.

So in Q1, we did see heightened Chinese sales – sales to Chinese customers as you mentioned. We weren’t hearing anything from our customers in the first quarter that indicated that was tariff related or preparatory for tariffs in April. As Steve mentioned in his remarks, we did see a heightened level of orders in the first few weeks of April, which certainly were in response to tariffs. And as you noted, we do think that’s pull-in from following months and the full year. We still have the same guidance of $640 million to $700 million.

Thank you for taking my question. One more follow-up on blue, for this commercial OLED panel from LG Display news, do they use your blue host material or only dopant material? I know you guys have been preparing for blue host as well. So just curious on this. And then secondly on this press release it seems to be related to an IT device. Most IT devices today already use tandem structures. So in that sense it’s nothing new. However, how should I interpret their work on a single stack structure? Any color you can share with me would be great? Thank you.

Thanks, Nam. So on the host, we’ve been selling blue host and emitter to various customers. We can’t comment specifically on LG’s recipe that they used for the panel they produced and announced today. And on the product, our customers have been evaluating our material for tandem as well as single layer. So it’s really just dependent on the various development projects that each of them have within their organizations.

Hey guys. This is Eddie for Krish. Just a clarification. I know this question was asked several times on this call like, just do you think like from a technical perspective the blue materials can now be used in smartphones for example? I guess I just want to understand like how important the LG announcement is to the mass adoption for blue phosphorescent.

Sure. So Eddie, the note released today from LG Display did reference use in smartphones as well as IT. But I think the key point being across all of our customers we believe there’s applicability for blue in all applications, certainly smartphones and IT and TVs as well. So we believe ultimately there’s interest in it because of the power and energy efficiency benefits that the phosphorescent material brings to the solution. We believe and understand from our customers that there’s interest in multiple applications.

Brian, did you quantify the level of orders that you saw that may have been related to tariffs? I’m just trying to get a sense of how impactful that might be in terms of potentially pulling from the back half of the year into the June quarter?

We did not quantify the amount of orders that we saw in April, but it certainly was a heightened level compared to what we typically see in any given month. And we also need to see exactly how May/June plays out. But the full year we still think is within that $640 million to $700 million range, based on everything we’re hearing at this point.

And then I don’t recall, I may have missed it. Did you say what the blue development revenue was in the quarter?

Yes, great question. The blue development revenues in Q1 were $1.1 million, approximately. And that’s both host and emitter sales to our customers.

And then final question for me is just on OpEx, what are you anticipating OpEx relative to last year for the full year?

We’re still projecting OpEx is going to be flat compared to 2024. We did see a lower level in Q1 due to a number of factors, but the full year we’re still believing is relatively flat compared to last year.

Hey, just a quick question on tandem. Given the announcement from LG today, we started to see some of the design activity from an Apple standpoint in terms of their tablets. Is there more of a shift from a market perspective towards tandem architectures or is it still just kind of one-offs here or there? I’m just trying to get my hands around if there’s any sort of a bigger trend going on here?

Yes, good question, Scott. Tandem has a number of benefits that it’s been used in primarily IT applications to date. And the benefits being really that by having two layers of emissive material, you can have greater lifetime. And a number of the OEMs are after that for products that are on all day long, especially have a lot of white pixels that are on all day long. And so that’s why tandem has been used in a number of IT products. There were a few last year that were announced that had tandem structures. But we think that even in the IT market, there’s going to continue to be a mix of tandem and single layer. Based on what we know at this point. In smartphones, there’s been a very limited number of tandem smartphones, but the vast, vast majority of smartphones are single layer, and we expect that to continue to be the case.

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

Thank you. This concludes today’s conference call. You may now disconnect.