Universal Display Corporation

Good day, ladies and gentlemen, and welcome to Universal Display Corporation's fourth quarter and full year 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 fourth quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer, and Brian Millard, 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 as 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 23, 2023. 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 FCC 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 record results for the fourth quarter and full year 2022. 2022 revenue was $617 million. Operating income was $267 million, and net income was $210 million, or $4.40 per diluted share. Fourth quarter revenue was $169 million, operating income was $83 million, and net income was $65 million, or $1.36 per diluted share. As we look to the future, we believe that the OLED ecosystem is preparing for a new adoption and investment cycle to begin in 2024. However, we expect current macro headwinds to hamper near-term growth. Amidst this temporary backdrop and based on current estimates and expectations, We believe our 2023 revenues will be in the range of $550 million to $600 million. Brian will provide further details shortly. Looking back on 2022, it was a year filled with significant milestones, from record high financials to new customer agreements to making excellent progress on our phosphorescent blue program and to ramping our new shadow production facility. On the customer front, we announced new long-term agreements for red and green materials with our partner of more than two decades, Samsung Display, for an additional five years. In addition, we recently announced an evaluation agreement with Seiko Epson for AR VR display applications. On the global manufacturing front, with our Foundry partner of more than 20 years, PPG, we began ramping our new manufacturing site in Shannon, Ireland. which recently achieved ISO 14001 certification for the production of our highly efficient, high-performing universal folio materials. With the proliferation of OLEDs expected to broaden, we are increasing our OLED emitter production capacity to meet our customers' future needs. 2022 was another year of continued recognition for our company. We were named the Forged List of America's Best Midsize Companies. We were recognized by Newsweek for the third year in a row as one of America's most responsible companies. We were awarded a silver rating for corporate social responsibility from EcoVenus, a leading provider of business sustainability ratings. We were recognized by the Forum of Executive Women as a champion of board diversity for the third year. And we were recently included in Bloomberg's list of 50 companies to watch in 2023. From a research and development standpoint, our team of scientists and engineers are continually innovating, inventing, and commercializing highly efficient and cost-effective oil and material solutions and technologies, including the 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. As we shared last month, we met our preliminary phosphorescent blue target specifications in 2022. We continue to believe that we are on track to introduce our all-phosphorescent RGB stack into the commercial market in 2024. We believe that the introduction of our full suite of red, green, and blue phosphorescent emissive materials will unlock a vast array of opportunities for higher energy efficiency and higher performance across a broad range of OLED applications. On the OVJP front, we are advancing our groundbreaking manufacturing platform. The OVJP team continues to build and prove out the key subsystems of our alpha system design. While a commercial system is still a few years away, we believe that OVJP will enable high-volume, cost-effective manufacturing of side-by-side RGB OLED TV panels and develop into a multibillion-dollar market opportunity. On the OLED consumer market front, at CES, Samsung Display showcased its Flex Hybrid Display, which combines both foldable and slideable capabilities into one display and, according to the company, it is a prototype for future laptops. Also at CES, Samsung Display announced that it was expanding its QD OLED TV portfolio with plans to offer 49-inch and 77-inch panels this year. Earlier this month, Samsung Electronics introduced its new Galaxy S23 smartphones and 2023 laptop series, the Galaxy Book 3, where all the models are equipped with AM OLED displays. Towards the end of their unpacking presentation, Samsung announced that it was working with Qualcomm and Google to develop an extended reality XR device. News reports have since surfaced noting that Samsung is working on micro OLED displays and the company is planning to build a micro OLED display line in Assam. LG Display's CES showcase center OLEDs as well. LG Display demoed its 17-inch foldable OLED that can fold and unfold in half to transform into a tablet or portable monitor. LGD also showcased an 8-inch, 360-degree foldable OLED that can fold back and forth. the company also announced that it will broaden its OLED portfolio and start producing 27-inch and 45-inch OLED panels for gaming applications. And according to reports, BOE is planning to build a new $250 million OLED module facility in Vietnam for smartphones. BOE is also reportedly targeting to increase its 2023 OLED shipments by 50% year over year, and is focused on expanding its international market share. We expect 2023 macroeconomic clouds of uncertainty to weigh on near-term growth. Accordingly, we have revised our capacity forecast to reflect shifts in timing of a few select expansion projects. As a result, our new forecast for year-end 2023 installed oil capacity as measured in square meters is to increase by approximately 15 to 20% over a year in 2021. This compares to our previous estimate of 20 to 25%. As we look out, we believe these macro headlines will be short lived and continue to believe that 2024 will be a pivotal year for the oil industry and for us. From an industry perspective, We believe that a significant new wave of OLED adoption, primarily for IT, will commence next year and fuel a new multi-year wave of OLED capacity investments. This new wave of capacity builds is expected to drive significant growth and momentum in the OLED industry and for us. On the lighting front, while we are still in the early commercialization stage, we are seeing advances in OLED lighting for the automotive market. Last month at CES, OLED Works showcased its new flexible OLED lighting for automotive applications with the highest density of segments in a flexible OLED panel. According to the company, this advancement will allow for enhanced communication capabilities and design freedom while maintaining the key features and benefits of OLED technology. On that note, let me turn the call over to Brian.

Thank you, Steve. And again, thank you everyone for joining our call today. Let me review our 2022 results before commenting on our guidance for 2023. 2022 revenue was a record $617 million, up 11% year-over-year. Material sales were $331 million, up 4% year-over-year. And royalty and license revenues were $267 million, up 22% year-over-year. Edesis revenues were $18 million, up 16% year-over-year. Our 2022 revenues include a cumulative catch-up adjustment of $30 million. 2022 gross margins were 79 percent, flat compared to 2021. 2022 operating expense, excluding cost of sales, was $222 million, up 5 percent year-over-year. We are continuing to invest in a number of strategic programs, including next generation red, green, yellow, and blue emissive materials and OLED technologies. our trailblazing OVJP manufacturing platform, our global infrastructure, including our new Shannon site, and our people. Our 2022 operating income was $267 million, up 17% year over year, which translates into operating margins of 43%. 2022 net income was $210 million, or $4.40 per diluted share, up 14% year over year. We ended the year with $826 million in cash, cash equivalents, and investments, or $17.38 per diluted share. Now moving on to our fourth quarter results. Revenue for the fourth quarter of 2022 was a record high of $169 million, up 16% from $146 million in the fourth quarter of 2021. Fourth quarter 2022 revenue includes a cumulative catch-up adjustment of $13 million compared to $4 million in Q4 of 2021. Material sales were $88 million in the quarter, compared to $86 million in the fourth quarter of 2021. Green emitter sales, which include our yellow-green emitters, were $67 million in the fourth quarter of both 2022 and 2021. Red emitter sales were $22 million, which compares to $19 million in the fourth quarter of 2021. As we've discussed in the past, material buying patterns can vary quarter to quarter. Fourth quarter royalty and license fees were $76 million compared to the prior year period of $56 million. Adesys revenue for the fourth quarter of 2022 was $5 million, up 14% from the comparable period in 2021. Fourth quarter cost of sales were $30 million, translating into total gross margins of 82%. This compares to $32 million and total gross margins of 78% in the fourth quarter of 2021. Fourth quarter gross margins increased due to favorable product mix, partially offset by the cost of our Shannon site, which commenced manufacturing in mid-2022. Fourth quarter operating expenses, excluding cost of sales, were $56 million. In the fourth quarter of 2021, it was $58 million. The decrease is primarily due to the completion of the 10-year amortization period for the acquisition of Fujifilm's patents. As we noted last quarter, the Fujifilm patents became fully amortized last July. Operating income was $83 million in the fourth quarter of 2022, translating into operating margin of 49%. This compares to the prior year period of $56 million, an operating margin of 39%. The increase in margins was primarily due to the cumulative catch-up. During the fourth quarter, we recorded an impairment charge of $7 million for certain minority investments. Fourth quarter 2022 income tax rate was 19%. Net income for the fourth quarter was $65 million, or $1.36 per diluted share. This compares to the fourth quarter of 2021's $46 million, or 96 cents per diluted share. Now, turning to our outlook. As we look to 2023, we believe that the macroeconomic uncertainties will weigh on consumer spending in the near term, which we expect to result in relatively flat year-over-year material volume demand. In addition, we realized $30 million in cumulative catch-up adjustments in 2022, which we did not expect to occur in 2023. Taking into account these factors, we expect our 2023 revenues to be in the range of $550 million to $600 million. we believe that the second half revenues will be higher than the first half of the year. We estimate that our 2023 ratio of materials to royalty and licensing revenues will be in the ballpark of 1.5 to 1. 2023 overall gross margins are expected to be approximately in the range of 77 to 78 percent. Operating expenses are expected to increase by 5 to 10 percent year over year, with R&D estimated to be up by 10 to 15 percent and SG&A expected to be up by 5% to 10%. 2023 operating margins are expected to be in the range of 35% to 40%. We expect the effective tax rate for 2023 to be approximately 20%. And lastly, we are pleased to announce that the Board of Directors has approved an increase in Universal Display's quarterly cash dividend. A dividend payment of $0.35 per share will be paid on March 31, 2023, to stockholders of record as of the close of business on March 17, 2023. 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.

I would like to take a moment to honor the memory of our visionary and founder, Sherwin Seligson, who passed away in early December. Sherwin leaves an indelible mark on the display and wireless communication industries. Born in 1935, Sherwin's immense drive for learning eclipsed conventional teaching methods. He left high school and pursued his life's interests, including the stock market, technology, and spending time with his family on the Jersey Shore. Sherwin's desire to get real-time stock quotes without having to leave the beach sparked the idea of a portable wireless data machine and led Sherwin to form his first multibillion-dollar company in 1972, International Mobile Machines, IMM, now known as InterDigital. After stepping down as chairman of IMM, Sherwin began to look for his next venture. He read about novel organic research work being done by Drs. Forrest and Thompson and decided to explore this groundbreaking technology with a visit to Princeton University. There, he observed a green dot. with a 9-volt battery hanging from it, light up for a few seconds before it expired. From that tiny, green, organic, light-emitting diode, Sherwin saw the future of OLEDs and founded Universal Display Corporation in June of 1994, with a vision of creating the next generation of displays back when TVs were still cathode-rated. Fast forward to today, and as we approach our 30th anniversary, Universal Display has grown and evolved from an R&D startup to a global leader in the OLED ecosystem. On a personal note, I had the privilege of working closely with Sherwin for more than 40 years. He was not only my brilliant mentor, but also my wonderful and generous friend. With a long-term strategic vision, Sherwin cultivated and nurtured UGC's guiding principles of curiosity, respect, humility, and determination. His mindset of constantly thinking outside the box and courageous conviction have been embedded into the company's DNA and are key to UGC's remarkable success. Sherwin's incredible legacy will continue to drive the company forward on its path of exploration, innovation, and growth. We miss him tremendously. Lastly, 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. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Brian Lee with Goldman Sachs. Please proceed.

Hey guys, good afternoon. Thanks for taking the questions. I had one maybe to start off on just the guidance for you, Brian. It's $550 to $600 million, a little bit of a wider range than you typically start the year out with. Maybe walk us through your thought process on the $50 million low to high end versus maybe $30 to $20 in past years and where's the biggest sort of uncertainties? Is it by product category, smartphones versus TVs, or is it specific geos where the swing factor is a little bit wider this year than in the past?

Yeah. Hi, Brian. Thanks for the question. I think it's, in terms of the range, I think it just reflects what we're seeing in the market more broadly with the macroeconomic factors that are at play. So it's not any one specific area or any one specific customer necessarily. It's really a a broad macroeconomic situation that just based on the situation in the world, there's a wider range of outcomes that could come to play this year. And so that informed us determining that a wider range was more appropriate for this year.

Okay, fair enough. And then on the revenue range, are you embedding any, even if pretty nominal, revenue contribution this year from blue even in kind of sampling?

There's an element of blue. I mean, it's not a significant contributing factor to our guidance this year, but it is, you know, an element of our guidance is incorporated, but it's not, you know, materially more than it's been at the development level in prior periods.

Okay, so we won't necessarily see a separate line item or you disclosing it. Would it just show up in that green number you provide on a quarterly basis as of right now?

Yeah, so it will at the point that it's material and we'll certainly determine, you know, separate disclosure for it, but we're not at that stage right now. Okay, fair enough. It would be separate disclosure. It would not be included in green.

Got it. Okay. Okay. Makes sense. And then just one on gross margins, and I'll pass it on. So you said 77% to 78% gross margin at the consolidated level. Just given, you know, what you're doing quarterly, I guess I'm backing into you're implying 65% gross margin plus or minus for the materials again for this year?

That's correct.

Okay. All right. I'll pass it on. Thanks a lot, guys. Thanks. Thanks.

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

Hi, thanks for taking my question. And I'm sorry to hear about Sherry, but he was a true visionary. Steve, my first question is on the smartphone opportunity. In the short term, there's a view that China smartphones can recover. How does that impact you? And also longer term, how to think about your opportunity as smartphone units grow statually? And then I'll follow up.

So as the economy recovers, OLEDs are approximately 50% of the smartphone market right now. And we expect that percentage to continue to grow because everybody really wants an OLED. There's a lot of pricing issues right now. So that's what I think we'll be looking for. I think it depends a lot on the macro issue. We're starting to see Chinese OEMs adopt OLEDs for both the high-end and the mid-range smartphones.

Got it, got it. Thank you for that. And then a question for Brian. You know, if we look at the guidance inside the implied EPS, you know, when I compare it to FY21, where he had like $553 million in revenue and $387 in EPS, clearly the earnings power this time around is going to be lower. I mean, at the $550 to $600 million revenue range. How much of that is coming from the Shannon secondary under-regulation? or is there any other things that's impacting the earnings forward? Thank you.

Yes, so we've previously said that Shannon and the underutilization is about a million a month in terms of expense that we're carrying to operate the site. We expect the utilization of the site to continue to improve as we go through the course of 2023 and into 2024, but we're nonetheless still carrying the cost of the facility, so that's the contribution of Shannon. But I think, you know, Shannon's a critical site. Having it as part of our network is certainly part of our long-term strategic plan as we look to where the industry is going and making sure we have the volumes to support our customers' growth.

Thanks, Brian.

Thank you.

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

Thanks for taking my question. I also have a question on the four-year guide. You talked about flat maturity demand and maybe absence of some cash and revenue adjustments, but what are some of the underlying assumptions for the market that you are baking into your full year guidance in terms of maybe by end market, smartphone, TV, IT, and maybe content per unit, whatever you can quantify. And maybe you also talked about second half higher than the first half, but that's kind of typical for you guys. Can you maybe help us quantify a little bit more of that and then I'll have to follow up?

Sure. So I think it's not the flat guidance assumption in terms of unit volume demand is really across the customer base and across the end market. So we're really not seeing any particular one area. It's softness across the board in terms of the flat material guidance that we put out there. And in terms of the first half, second half, I mean, I think your point is well taken. I think part of that dynamic historically has also been as we've grown, the second half has been Higher than first, I think this year it's a little bit due to the fact that, you know, there's just the macroeconomic factors which are weighing in the near term.

Okay. Then the follow-up question is on the Samsung license. It's good to see that the extension was done early this time. I assume you won't get into the details of the financial terms, but at a high level, can you talk about whether there's any meaningful changes to the licensing part of the agreements versus the last extension, any one-time step function change that we should be thinking about when we start modeling for 2023?

Yeah, the structure of the agreement is really very consistent with the prior agreements that we've had over the last five years, so nothing significantly different. The one thing to note is that we do think that the timing of our cash collection under the license agreement and our revenue recognition will be more closely correlated in this contract, so we shouldn't see as much of an impact of deferred revenue as we had in the prior contracts.

Okay, great.

Thanks. Thanks.

Our next question is from Mahidi Hussaini with SIG. Please proceed.

Yes, two follow-ups. I'm sorry, the question has already been asked, but when the blue is available for your customers What's the assumption or underlying assumption for your customer's customer to evaluate the new material?

Manny, I'm not quite sure I understand the question.

What we are seeing... Let me rephrase this. This would be a new material, and I'm just trying to understand if your customer's customer, like the Hansard OEM, would have to go through re-qualification of the new panels that has the three steps of the emitter from supplied by UDC?

Well, we're working with our customers, as you know, and there's interest in Blueford's efficiency, both with our customers and with our customers' customers. Exactly how that's going to evolve over time, I think we're going to have to wait and see how the introduction to the marketplace occurs.

Got it. Okay. Thank you for clarification. And, Dan, just one quick item on the cash flow. How should I think about your operating cash flow, especially I think your inventory went up as you prepare for – and how is it going to trend throughout the year, and what's the CapEx guide for 2023?

Yeah, so good question. I'll take the inventory piece first. I think we have been building a supply of raw material inventory. We have certain raw materials that we keep a strategic supply of. I think we're now feeling like that's at a fairly comfortable level, so we shouldn't necessarily see in 2023 the level of increase we've seen in the last few years. And on CapEx, we're currently thinking that it's going to be in roughly the $40 million to $50 million range this year. Based on what we know as of now, obviously we're always looking at our global footprint and where we can expand and grow, but based on our current plans, it's expected to be in the $40 million to $50 million range.

Good. Thank you.

Our next question is from James Ruttiti with Needham & Company.

Please proceed.

Hi. Thank you. Good afternoon. Just a couple of questions. First on blue, I'm wondering if you could talk about the next milestones that we should be looking for and maybe related to that, when would you anticipate having some visibility into when your blue material might be incorporated in some of the OLED production capacity that's going to be coming on or that's existing. Just trying to get a sense as to how this is going to play out because you guys had talked about anticipating revenue in 2024. And I'm just, I'd like to get a better understanding of how this is going to begin to scale up.

Sure. Jim, all good questions. And... As things evolve and when we have the opportunity to give you further insight into the process, we certainly will. Right now, we're doing a lot of engineering work, supply chain work, and other type of work to prepare for the introduction of our commercial molecules in 2024. So unfortunately, I can't give you any specific guidance right now. But once we have a better feel for it, we will start talking about those types of things.

Okay. And as far as that goes, Stephen, again, I understand that you're not going to be able to comment further, but would you know more by, say, mid-year, or is this something that we're just going to learn more toward the end of the year?

We're going to learn more as it occurs. Okay. You got it. Thank you.

All right. Listen, another follow-up. I'm sorry, go ahead.

No, go ahead, Jim.

I was just going to ask... I mean, the sequential increase in materials gross margins, there are several factors. I wonder if you could just elaborate on the main factors that contributed to that sequential increase in the materials gross margins in the quarter.

Yes, so we did have some favorable product mix in Q4 that was around $4 to $5 million. So, you know, pretty significant impact in the quarter alone just on product mix that was the favorable item that was, you know, offset by some of the Shannon costs. So those were really the factors that drove in the improvement that we saw in Q4. Okay.

And just the last question, because of the guide that you gave has been pointed out being wider than normal, I'm just wondering how you would characterize the business as you went through Q4 and thus far through the first two months of this year.

I think Q4 came out a little stronger than we had expected, so we were pleased with that. And I think we're expecting this year, as we said, the first half to be a little lighter than the second, and that's kind of the plan. So Q1 is going to be probably slightly softer than what we saw in Q4, but that's what we're seeing as of right now.

Okay. Thanks a lot. Thanks.

Thanks.

As a reminder, it is star one on your telephone keypad if you would like to ask a question. Our next question is from Atif Malik with Citi. Please proceed.

Thank you for taking my questions. I have a question on blue. You talked about blue meeting preliminary internal targets. Were these targets on reliability and lifetime and emissivity and all that targeted similar to the specs that you have on green and red?

Yes, the target for development specs based upon lifetime, color point, and efficiency. So basically, as we've talked in the past, we've gotten the blue materials to a point where we felt the rest of it was a lot more engineering work and we had gone through this before. So we could figure, we could basically figure out where the commercial material should come in. Now the reliability of the molecule does not necessarily reliability in the full up device.

Understand. And then you have lowered your installed capacity outlook over the last two years, 2021-23, from 20-25% to 15-20%. And so my question is, your optimism on 2024 being a pivotal year for OLED, is that primarily based on new materials like blue, or you're seeing any green shoots in terms of new projects? Because basically I'm trying to I'm trying to extrapolate your lower capacity this year into next year, because if there's not enough capacity, then there's probably not enough material purchased as well. Is that a fair way to look into next year, that the majority of your optimism on next year is based on blue?

Well, 2024, we'll see the beginning of blue. The new wave of investments are going to begin. We're also going to expect to see a better macro environment. So when you put all of those things together, including the beginning of some new IT products. That's where we see the beginning of this wave to start.

And then, Steve, the optimism on 2024 is based on the Galaxy Book 3 tablet with OLED. So the optimism is based on the tablet market adopting OLED displays. Is that

There is, I'm sorry, there is a piece of the tablet market that's in there. I'm not going to, I don't want to get into any specifics on which tablets it might be. But we do see the IT market or the tablet market starting to take off at that point in time.

Go ahead, thanks.

Our next question is from Martin Yang with Oppenheimer and Company. Please proceed. And please check and see if you're lying with me.

Go ahead. Yes. Thank you for taking my question. Can you first remind us of the margin impact, assuming Shannon gets to full capacity?

Yeah, so I think it's a little bit of a tricky one. I mean, we have the roughly million dollars a month of cost. right now that we're bearing on Shannon. We have said that in adding Shannon to our network, we've effectively doubled our capacity for production across the business. So we have a lot of capacity, and as we continue to utilize Shannon to a greater degree, we'll see that overhead absorbed over a larger number of units. So there's incremental improvement from there, but we're not in a position necessarily to set a target once it's at 100% capacity necessarily.

Got it. And a follow-up on that is that that $1 million cost, does it perhaps partially go away as the capacity rises to, let's say, 50%, 70%, or 80%?

Yeah, I think the way of thinking about it is... Yeah, it doesn't necessarily go away. It just would get absorbed into the cost of those units. So you would be able to make additional product without having additional overhead costs because the overhead wouldn't be underutilization cost. It would actually be utilized and be absorbed into the cost of the product.

Understood. Thank you. My final question is on new products. Earlier today, BUE announced that they are developing products tandem structure for smartphones, flexible OLED, do you feel that is going to be a mainstream adoption? Do you have a view on adoption of tandem structure on smaller devices like smartphones?

We are really focused on being a material manufacturer and technology developer and providing those materials and technologies to our customers. Tandem has been around for a while because it can increase the efficiency and lifetime of a display. And so to that extent, we think it can, to the extent it can grow the business, we think it's valuable. But that is a decision our customers make. Thank you.

Our final question is from Scott Searle with Roth Capital. Please proceed.

Hey, good afternoon. Thanks for taking my questions. Hey, Steve, maybe to follow up on Blue, I know you're reluctant to give any detailed estimates on that front, but I was wondering if you could talk a little bit about the adoption cycle or the number of customers that you're engaged with of how we should think about that as we get into 25 and 26. what percentage of your customers do you think are looking for a full RGB stack? Or maybe provide us with some historical perspective in terms of green, how long it took customers to ramp up in terms of design cycles and ramping into commercial production.

So good sets of questions. We've noted that we've been working with multiple customers on Blue. And we have also noted that our customers all want blue. Exactly how they are going to introduce the product into the marketplace is something that we will see as it evolves. The green analogy, back when we introduced green, there was only one customer in the market, and that was Samsung. So I'm not sure the analogy can really apply, but the interest Ford Blue is across the board for all different sizes of displays and applications. And as we get closer, we may be able to share more information or that may be information that is specific to our customers and they're the ones that may have to share it.

Okay, fair enough. And if I could, on the excitement around 24 and capacity additions coming online, I know historically when you're given two-year forecasts, we've typically seen these big step functions up of 50% plus capacity additions. In 24, are we entering one of those similar type cycles? I'm not sure if you're prepared to put a percentage of growth in the capacity on that, but there are a lot of the Gen 10 facilities that kind of got pushed out or had kind of fluid timelines, if you will. It sounds like you're feeling more comfortable that those go into production in 24 and beyond. I was wondering if you could kind of frame how you're thinking about 24 plus.

Yeah, I think we're seeing, you know, a number of things. One, in terms of the capacity and investments that we expect to be made for IT, specifically Gen 8.6 capacity that's going to be needed to meet the IT market and where that's going to be heading. So that's one thing, as well as the macro factors in the broader economy picking up, which will, you know, improve utilization of existing fabs and other factors.

Gotcha. Fair enough. And lastly, if I could, just to follow up on the IT comment, it's one of the areas that's really been under-adopted at this point in time, but the market forecasts out there are pretty large. It sounds like with some of this other capacity coming online that that's going to start to ramp into 24 and beyond. Is there a point where you see the square meters or square acreage of IT starting to rival that of smartphones and or TVs over the next several years, or is it just, you know, Too far out in the time horizon to be thinking about things like that. Thanks so much.

Yeah, I think it's hard to predict exactly at which point, you know, the square meters may hit the smartphone square meters. I think one thing, IT is a very broad market in covering, you know, tablets, laptops, monitors, and other applications. So there's a lot of different use cases for OLEDs in the broader IT landscape as well as the fact that The display size is larger than smartphones across the board, across all those applications. So we see a huge opportunity there as OLEDs get adopted into various IT products.

Great. Thank you.

Thank you.

Thank you. This concludes the question and answer session. I would like to turn the program back over to Brian Miller for any additional or closing remarks.

Thank you for your time today. We appreciate your interest and support. Have a good evening.

Thank you. This does conclude today's conference.

You may disconnect your lines at this time, and thank you for your participation.