Universal Display Corporation

Good day, ladies and gentlemen, and welcome to Universal Display's first quarter 2022 earnings conference call. My name is Sherry, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Darius 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 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 is 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, May 5, 2022. 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, 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, Darius, and welcome to everyone on today's call. We are pleased to report that revenue in the first quarter of 2022 was $150.5 million, operating profit was $62.3 million, and net income was $50 million, or $1.05 per diluted share. The adoption of OLEDs continues to increase in a myriad of applications, including AR, VR, smartphones, foldables, IT, TVs, and automotives. In addition to increasing proliferation of OLED smartphones in the mid-range and even some low-end models, the landscape of foldable smartphones is also expanding. Vivo launched its first foldable smartphone last month, and Google is expected to launch its first foldable smartphone in the second half of this year. According to Omnia Market Research, foldable smartphone display shipments are forecasted to grow more than 100% year over year, from 9 million units in 2021 to 20 million units in 2022. On the foldable IT front, it has been reported that HP is working on a 17-inch laptop that you can fold into just 11 inches. Samsung is also reportedly looking to commercialize a foldable laptop. Earlier this year, Samsung unveiled the FlexNote concept at CES. foldable laptop that has the portability of a 13-inch laptop when folded and a 17-inch-wide monitor-sized screen when unfolded. What was once just CGI created for movies, foldable and rollable displays are now becoming a reality. The evolution of form factor in consumer electronics is just beginning. All ads are essentially film layers that are inherently conformable, bendable, and rollable. OLEDs can be manufactured on glass, metal foil, and plastic. The versatility and flexibility of OLEDs is energizing the consumer market with new ideas, designs, and products. OLED momentum continues to accelerate in a broad range of consumer electronics, particularly in the IT segment of tablets, notebooks, and monitors. Market research firm DSCC forecasts significant OLED IT growth in the coming years. 45% CAGR for OLED tablet units, 51% CAGR for OLED notebook units, and 104% CAGR for OLED monitor units from 2021 to 2026. With the move to OLED IT, there are reports that leading panel makers are planning to adopt a tandem structure. Tandem structures are expected to increase brightness, lifetime, and efficiency, as well as lower power consumption of OLED panels. The world of OLED TVs remains bright. In addition to Samsung Electronics garnering great reviews for its first hybrid 2G OLED TV, LG Display reaffirmed its plans to increase OLED TV shipments in 2022 to almost 10 million units, up from slightly under 8 million units in 2021. As we look to the OLED market, we believe that panel makers and OEMs are preparing for an extensive new wave of medium and large area capacity investment. Driven by an escalating push from leading OEMs for OLED IT products and meaningful strength in the OLED TV market, there are reports that leading panel makers, including Samsung, LG Display, and BOE, are planning to invest in Gen 8.5, 8.6 capacity for OLED IT. And for the OLED TV market, there are reportedly ongoing investment discussions to expand Gen 8 capacity even further. During last week's conference call, Samsung announced that it expects its display sales to increase as its portfolio of foldable products expands, and from accelerated adoption of OLEDs in new application areas such as IT, where demand has increased in the pandemic, gaming as portable gaming device OEMs are moving to higher picture quality displays, and automotive, where there is increasing demand for premium displays in markets like electric vehicles. In addition, Samsung announced that yields for its recently launched hybrid QD OLED displays have improved faster than projected and reached 75%, and that it plans to grow and expand its QD OLED display lineup. LG Display shared on its recent earnings call the company's positive OLED outlook for the second half of the year. For OLED TVs, LG Display intends to expand its customer base and product portfolio. In small and medium OLEDs, LG Display expects profitability to improve in the second half as new smartphone models with LGD's OLED displays are introduced. Another growth area that the company highlighted was automotive. and that OLEDs make up approximately 30% of LG's premium auto display orders today, and that it expects that percentage to continue to increase. BOE technology recently announced that it shipped approximately 60 million OLED units in 2021. As BOE looks to 2022, it is planning to ship more than 100 million OLED units, or an increase of more than 60% year over year. On the capacity front, BOE recently opened up the first phase of its third Gen 6 OLED fab in Chongqing and is focused on bringing online phases two and three this year. Each phase has a capacity output of 16,000 plates per month, adding up to 48,000 substrate starts per month when the plant is fully ramped. Similar to BOE's two other Gen 6 fabs in Chengdu and Mianyang. At the end of March, Tianma announced that its new Gen 6 Flexible 5 in Xiamen has started trial production and that it expects to enter mass production by the end of the year. This OLED plant, when fully ramped, will have an installed capacity of 48,000 substrate starts per month. Also in March, China Star reaffirmed its plans to ramp its Gen 6 Flexible OLED capacity at its Wuhan plant. China Star's first OLED fab has a monthly installed capacity of 45,000 substrate starts. On the lighting front, while we are still in the early commercialization stage, we believe that the benefits of OLED lighting, which includes high power efficiency, novel and innovative form factors, beautiful natural colors, and cool operating temperatures are all quite compelling. As OLED activity continues to flourish, we remain steadfast in our commitment to advancing our robust OLED materials and technology leadership. On the full-led front, with our deep and broad experience and know-how of more than 25 years of pioneering research, we are innovating, inventing, and introducing new OLED phosphorus and emissive materials, including new reds, greens, yellows, and hosts. With respect to blue, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emissive system. We believe that we are on track to meet preliminary target specs with our phosphorescent blue by year end, which should enable the introduction of our all phosphorescent RGB stack into the commercial market in 2024. We believe that the commercial introduction of our full color emissive stack will unlock a vast array of opportunities higher energy efficiency, and higher performance across a broad range of OLED applications. We also continue to make considerable progress with constructing the key subsystems for our OBJP alpha system design. The completion of these subsystems is a critical step in our commercialization roadmap. While the commercial launch of OBJP is still a few years away, We believe that OVJP represents a groundbreaking platform towards low cost, high performance, high throughput, highly efficient RGB side-by-side OLED TV manufacturing. On that note, let me turn the call over to Sid.