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.