Universal Display Corporation

Good day, ladies and gentlemen, and welcome to Universal Display's fourth quarter and full year earnings conference call. My name is Sherry, and I will be your conference moderator for today's call. If anyone should need operator assistance during the conference, please press star 1 on your telephone keypad. As a reminder, this conference call is being recorded for replay purposes. I would like to now turn the call over to Darius Liu, Director of Investor Relations. Please proceed.

Thank you and good afternoon, everyone. Welcome to Universal Display's fourth quarter earnings conference call. Joining me in the call today are Steve Alenson, President and Chief Executive Officer, and Sid Rosenbach, 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 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, February 18th, 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 prematurely. These recent uncertainties are discussed in the company's periodic reports followed 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, Doris, and welcome to everyone on today's call. We are pleased to report our fourth quarter in 2020 results. 2020 revenues were $429 million, operating income was $158 million, and net income was $133 million, or $2.80 per diluted share. Fourth quarter revenues were $142 million, operating income was $66 million, and net income was $54 million, or $1.13 per diluted share. For 2021, we expect to see meaningful growth. Based upon current estimates and expectations of a global health crisis improving, we believe 2021 revenues will be in the range of $530 million to $560 million. Sid will provide further details shortly. Looking back on 2020, it was a year filled with innovation and advancements, flexibility and perseverance, diligence and safety, as well as challenges in this ongoing pandemic. As a company, we moved swiftly to safely adapt to rapidly changing conditions. We implemented measures to safeguard our employees while ensuring the safe and efficient operations of our facilities. We also quickly mobilized our business continuity plans to ensure our ability to continue our R&D programs and the manufacture and shipments of our universal full-edge materials to our customers. As a result of the tremendous and commendable agility and execution focus of everyone, at UDC and our manufacturing partner, PPG, we continue to build upon our first mover advantage in the OLED ecosystem and our position to emerge an even stronger company when this crisis ends. During the year, we announced long-term agreements with China Star Opto Electronics, the second largest panel maker in China, celebrated the 20-year anniversary of our strategic partnership with PPG, Establish OVJP Corporation to advance the commercialization of our groundbreaking OLED TV manufacturing technology. Expanding our community education initiatives with the establishment of the UDC Inc. Full-Ed Scholarship, which aims to support a graduating Ewing student pursuing a degree in the STEM field in our partnership with the Smith Family Foundation, with assists with community programs in Trenton, New Jersey. we were recognized by Fortune as one of the world's 100 fastest growing companies and by Newsweek as one of America's most responsible companies. From an R&D standpoint, we remain at the forefront of innovation. Our team of scientists and engineers are continually discovering, developing, and designing new emissive material systems and technologies and advancing our R&D roadmap with new milestone achievements. On the materials front, our portfolio of energy-efficient, high-performing phosphorescent materials continues to expand with next-generation reds, greens, yellows, and hosts to meet our customers' ever-demanding and ever-evolving specification needs of color point, efficiency, and lifetime. With respect to blue, we continue to make excellent progress in our ongoing development work for a commercial blue phosphorescent system. Regarding OVJT, We are making advancements with our organic vapor jet printing manufacturing technology for maskless, solventless, dry direct printing of large area OLED panels. With the formation of OVJP Corporation this past summer, the OVJP team is focused on scaling our novel technology platform into a commercial equipment system. OVJP Corporation's first milestone is to develop an alpha system, which is anticipated to be ready during 2022. And as we had noted last quarter, Nature published their paper titled Plasmonic Enhancement of Stability and Brightness in Organic Light-Emitting Devices, describing UDC's fundamental groundbreaking device architecture that may extend the lifetime and enhance the efficiency of OLED panels applicable to both displays and lighting applications. This work is part of our long-term R&D roadmap for continuing to enable the OLED ecosystem with leading-edge technologies and best-in-class materials. Looking to the OLED industry, the ecosystem continues to grow with new OLED capacity, new OLED products, and new OLED customers. Samsung Display's portfolio of OLED products continues to grow. SDC expects OLED smartphone adoption to increase in 2021, with the expansion of 5G as well as further penetration into the mid-range market. Also in the small and medium OLED market, Samsung is ramping its efforts in IT. Early last month, Samsung announced its 2021 lineup of OLED laptop displays will include over 10 new models, with sizes ranging from 13.3 to 16 inches. Samsung is also forecasting a 500% increase in annual sales for its OLED IT panels this year. With the increased focus on the IT market, which has an estimated TAM of approximately 450 million units spread across laptops, tablets, and monitors, and only about 1% of the IT market being OLED, there are reports that Samsung is planning to build a new OLED production line for Notebook at its A45 in ASAP. This line is expected to have a production capacity of 30,000 substrates per month. For large area panels, Samsung Display is reportedly making progress with its QD OLED program and is expected to begin production of its QD OLED panels for TVs and possibly monitors in the second half of this year. LG Display continues to ramp up its OLED TV production. For 2021, LGD plans to increase its OLED TV shipments to 7 to 8 million units, up from around 4.5 million units in 2020. OEMs such as LG Electronics, Sony, Vizio, Skyworth, and more than a dozen others are fueling this tremendous growth. Bolstering LGD's shipment target growth is the expansion of its OLED TV portfolio. During CES, LG unveiled its new 42-inch and 83-inch OLED TV panels, augmenting its existing lineup of 48-, 55-, 65-, 77-, and 88-inch models. On the small and medium front, LGD's flexible OLED side ran at full utilization in the second half of 2020, which has been widely attributed to demand for their OLED smartphone panels. Additionally, LGD is focusing on the automotive market with its plastic OLED panels for applications including infotainment systems, dashboards, head-up displays, side mirror displays, and rear seat entertainment displays. LG Display also noted that it plans to roll out 20-inch and 30-inch OLED displays in the future, targeting the premium midsize panel market related to gaming, mobility, and IT. According to reports, BOE will use some of its capital raised for its third OLED fab in Songqing, which has a designed monthly output of 48,000 flexible Gen 6 panels. The first phase of Songqing is expected to commence by the end of this year. BOE is also planning to invest in an OLED micro-display plant in the southwestern Yunnan province for augmented and virtual reality displays. The construction of Tianma's $6.8 billion Gen 6 flexible FAB in Xiamen is reportedly progressing ahead of schedule. When this FAB is completed, it will have the capability of 48,000 substrate starts per month. In addition, Tianma is in the midst of ramping its Wulong capacity with an additional 15,000 substrate starts per month. China Star is expanding its Gen 6 flexible OLED capacity at its Wuhan plant, its first OLED fab that opens at the end of 2019. By the end of this year, China Star's fab is expected to have a monthly installed capacity of 48,000 substrate starts. EnvisionOx recently commemorated its new OLED module line in Guangzhou, with production expected to commence this month. Additionally, Visionox is working on ramping its new Gen 6 flexible OLED fab in Hefei, which will have the ability to manufacture 30,000 plates per month. The benefits of OLEDs continue to drive adoption across the consumer electronics landscape. From the wide color gamut and deep color saturation to the 180-degree viewing angle and true contrast ratio to response rates that are more than 10 times faster than LCDs, as well as form factor. Essentially comprised of film layers, OLEDs are inherently conformable, bendable, and rollable. To date, Samsung, Huawei, Royale, and Motorola have launched foldable smartphones. That list is expected to expand, with reports that OEMs, including Xiaomi, Oppo, Vivo, and Google, will jump on the foldable phone bandwagon this year. And at CES... LG Electronics unveiled the world's first rollable smartphone and announced that the product will launch later this year. Also at CES, TCL showcased a rollable smartphone prototype screen that can stretch from 6.7 inches to 7.8 inches. And during entries and earnings call, Samsung Display noted that it will develop rollable and slidable OLED displays. Another benefit is eye health. As some of you are aware, Blue light from electronics has been linked to problems like blurry vision, eye strain, dry eye, and even sleep disorders when people are excessively exposed to it. Last month, LG Display announced that its OLED display became the industry's first TV panel to win an accreditation from ICES, a U.S.-based eye protection certification agency. LGD's 65-inch OLED TV panel's portion of harmful blue light is only 34%. the lowest among TV panels and about half of that of LCD TV panels. And last year, Samsung Display unveiled an optimized OLED display for 5G smartphones that emits only 6.5% of harmful blue light and earned certification of eye care display from SGS, Societe Generale de Surveillance, a European eye protection certification agency. Samsung Display noted that its OLED products also have about 70% less harmful blue light emissions than most current LCD smartphone displays. On the lighting front, while we are still in the early commercialization stage, we believe that the benefits of OLED lighting, which include high power efficiency, novel and innovative form factors, beautiful natural colors, and cool operating temperatures are all quite compelling. We look forward to enjoying those benefits in our new conference rooms, which will have OLED lighting fixtures. On that note, let me turn the call over to Sid.