Good day, ladies and gentlemen, and welcome to Universal Display Corporation's third quarter 2022 earnings 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 anybody should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call 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 third 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 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, November 3rd, 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 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. Let me first introduce Brian Millard and welcome him to his first Universal Display earnings call. Brian joined our company in early September as our Chief Financial Officer. With his deep financial, operational, and strategic acumen, I am confident that Brian will enhance our executive team and help our company continue to grow and prosper. Now to our results. Third quarter 2022 revenue reached a record high of $161 million. Operating profit was $68 million, and net income was $53 million or $1.12 per diluted share. As we look ahead, we believe the long-term growth path of the OLED industry remains strong, though near-term OLED demand may fluctuate due to uncertainties in the macro economy. We continue to believe that 2024 will be a pivotal year for the OLED industry and for us. We believe that a number of panel makers are planning Gen 6 and Gen 8 OLED investments, setting the stage for a significant multi-year CapEx growth cycle. Manufacturers and OEMs are slated to advance the OLED adoption curve to medium and large area displays, with OLED IT being a key near-term focus. As an integral enabler and partner in the OLED ecosystem, these new capacity plans translate into new revenue opportunities for us and a positive growth trajectory for years to come. According to market research firm UBI, OLED shipments for IT products such as tablets, notebooks, and monitors are expected to grow more than 400% in the next five years, with unit shipments increasing to 48.8 million units in 2027, up from 9.5 million units in 2022. UBI also noted that Korean and Chinese panel makers are expected to invest in IT OLED lines, with leaders Samsung Display, LG Display, and BOE already planning to invest in new Gen 8.7 production. At the end of August, during the IMID conference in Korea, Samsung Display announced it will invest in Gen 8 OLED capacity and estimated that this new capacity will be in operation by 2024. SDC also forecasted that the OLED market will reach approximately $100 billion by 2030, more than doubling from today's OLED market, which is estimated to reach about $45 billion by the end of 2022. AR/VR, augmented reality and virtual reality, is also gaining buzz in the OLED industry. In early September, at the Metaverse conference, LG Display announced that it believed OLED on silicon will be the main display used in future Metaverse devices. It has been reported that LG Display and SK hynix are forming a partnership to produce Micro OLED displays. It has also been reported that BOE recently established an AR/VR department that includes its Kunming Micro OLED division. As a company, we are continuing to reinforce and expand our leadership position in the OLED ecosystem. With our deep and broad experience and know-how of more than 25 years of pioneering research, we are continuing to innovate, invent, and introduce new OLED phosphorescent 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 continue to 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 for higher energy efficiency and higher performance across a broad range of OLED applications. On the OVJP front, we are pleased to report that we achieved a key performance milestone. We are now able to print two layers, the red, green, and blue phosphorescent emissive layer and the priming layer or electron blocking layer. Additionally, these OVJP printed RGB OLED devices have comparable performance as OLED devices fabricated using traditional vacuum thermal evaporation. This represents a significant milestone in our OVJP roadmap of printing all the organic layers in an OLED device. On that note, let me turn the call over to Brian. Thank you, Steve. Again, thank you everyone for joining our call today. I'm excited to have joined Universal Display Corporation, an extraordinary pioneer in the OLED industry for more than 25 years. With our brilliant team, cutting-edge initiatives, lean operating model, and strong balance sheet, the company is well poised for continued advancement in the growing OLED market. I look forward to working with the entire UDC team to continue to build upon our strong culture of inventiveness, integrity, inclusion, and imagination, and deliver on the company's mission of being a critical enabler in the OLED ecosystem. Now to our third quarter 2022 results. As Steve mentioned, we had a record quarterly revenue of $161 million compared to the prior year period of $144 million. Our total material sales were $84 million in the third quarter compared to material sales of $76 million in the third quarter of 2021. Green emitter sales, which include our yellow-green emitters, were $64 million. This compares to $58 million in the third quarter of 2021. Red emitter sales were $20 million. This compares to $18 million in the third quarter of 2021. As it has been discussed in the past, material buying patterns can vary quarter to quarter. Third quarter royalty and license fees were $71 million compared to the prior year period of $64 million. Adesis revenues for the third quarter of 2022 were $5 million. In the comparable period in 2021, it was $4 million. Third quarter cost of sales were $37 million, translating into total gross margins of 77%. This compares to $31 million and total gross margins of 78% in the third quarter of 2021. Cost of OLED material sales in the third quarter of 2022 were $34 million, translating into material gross margins of 60%. This compares to $29 million in material gross margins of 62% in the third quarter of 2021. In addition to the inflationary pressures that were noted last quarter, we recently brought online an initial phase of our new Shannon manufacturing site. This additional capacity is critical for the anticipated growth in the years ahead, but it is currently underutilized. This underutilization impacted COGS by approximately $1 million per month and is expected to move our near-term material gross margins to the low 60% range this year and our total gross margins for the year to be approximately 78%. As an industry leader and sole source to all of our customers, we are planning for the future. We are also preparing for the OLED industry's next significant wave of new capacity and for our expanding portfolio of phosphorescent materials. The Shannon facility is slated to meet our customers' increasing needs as well as diversify our global manufacturing footprint. Third quarter operating expenses, excluding cost of sales, were $55 million. In the third quarter of 2021, it was $54 million. For the year, we now estimate that our operating expenses of SG&A, R&D, and patent costs in the aggregate will increase in the range of 5%-10% year-over-year. Operating income was $68 million in the third quarter, translating into operating margin of 43%. This compares to the prior year period of $58 million and operating margin of 40%. The income tax rate was 24% for the third quarter of 2022, and for the year, we believe our tax rate will be approximately 23%. Net income for the third quarter was $53 million or $1.12 per diluted share. This compares to the third quarter of 2021's $46 million or $0.97 per diluted share. We ended the quarter with approximately $844 million in cash equivalents, and investments, or $17.77 per diluted share. Moving along to guidance, we are reaffirming our belief that 2022 revenues will be approximately $600 million ±$10 million. We believe that the ratio of materials to royalty and licensing revenues will be in the ballpark of 1.3 to one. Our board of directors approved a $0.30 quarterly dividend, which will be paid on December 30th, 2022 to stockholders of record as of the close of business on December 16, 2022. The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders. While it's only been two months since I joined UDC, my level of excitement for this fast-moving, forward-thinking company as well as the OLED industry has only increased. With our strong operating profit base, we have the ability to support our customers' increasing needs, shape our future, and broaden into new opportunities. With that, I'll turn the call back to Steve. Thanks, Brian. It's great to have you on the team. Universal Display's history illustrates our long-term strategic planning and execution for growth and success. Our ability to overcome challenges and our steadfast commitment to enabling our customers with groundbreaking solutions as well as supporting their evolving needs. The road from discovery to delivery can be long and winding, and also tremendously rewarding. It was 2003 when our red phosphorescent emitters and technology were commercially adopted in an OLED sub-display for a clamshell phone. Over the course of a decade, in addition to developing an array of next generation reds, we worked on commercializing our green phosphorescent materials, and in 2013 our green OLED was adopted in Samsung's Galaxy S4. Our sights are now set on delivering commercial red, green, and blue phosphorescent materials to the market, enabling our customers with a comprehensive portfolio of energy efficient, high-performing materials and helping the OLED industry to further grow. With a robust balance sheet of nearly $850 million in cash and investments, a lean operating model and no debt, we have the flexibility to continue to invest for our strong future. While uncertainties may continue to weigh on the near-term macroeconomy, we are continuing to invest in our R&D initiatives, in our people, and in our infrastructure. This multifaceted strategic approach enables us to continue to support our customers, expand our market opportunities, and amplify our value proposition in the OLED ecosystem, further solidifying and broadening our leadership position to not only grow with the OLED market, but to grow faster than the market. 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. With that, operator, let's start the Q&A. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from CJ Muse with Evercore ISI. Please proceed. Good afternoon. Thank you for taking the question. I guess first question, you know, trying to think through the moving parts for calendar 2023 for you. You know, should we be thinking, you know, smartphone units for OLED and plus a certain percentage of your ending deferred revenues, I think down to $94 million. You know, what percentage of that should we be thinking about? Then what about other kind of new markets that can start to kind of move the needle like IT, et cetera? Would love to hear your thoughts there. Hi, CJ This is Steve. Thanks for your question. You know, we're gonna provide 2023 guidance on the February conference call. We're looking at 2023, frankly, the big issue being the macro environment. Just like we're seeing some headwinds now, it's really gonna be the macro environment. If the demand environment improves, then we expect to benefit. You know, you may see some additional some new IT in 2023, but we think it's gonna be more of a 2024 type of ramp on the IT. CJ, it's Brian. One thing to add on the deferred revenue question. I mean, I think as you know, we recognize all of our deferred revenue by the end of each of our customer contracts. If you look at our balance sheet, we have, as of the end of September, $67 million in current deferred revenue. That's the amount that we would currently expect to recognize over the next 12 months. Can you walk through how that could change if you were to sign a new agreement with your largest customer? Would those revenues get pushed to the next contract, or they would stay within the next twelve-month window? I think we're not in a position yet to talk about, you know, any contract renegotiations or new contracts. When they come to pass, you know, we'll certainly provide an update at that point. Okay. Maybe just a quick follow-up. On the gross margin side, you talked about underutilization for China. How should we think about the progression there in calendar 2023? Yeah. I think Shannon, first of all, is a key capability and, you know, adding this additional capacity to our manufacturing network was really critical as we plan for the future of the industry and where we know that we'll go along with the industry. You know, as we said in the prepared comments, you know, we're a sole source provider for our customers, so we need to make sure that we have the capacity available to meet their needs. As you look into next year, I mean, we're gonna have Shannon as a key capability. As I said, it will be part of our network, and we expect to continue to utilize it, you know, to a greater degree, you know, as volumes increase in the years ahead. Thank you very much. Our next question is from Krish Sankar with Cowen and Company. Please proceed. Hi. This is Steven calling on behalf of Krish. Thanks so much for taking my questions. I have two. First one is just on September quarter as well as December quarter material revenues. Can you talk a little bit about how the linearity of material sales were during September quarter? And also just given the guidance or at least the reiteration of the full year revenue target, you know, the implied sequential decline in Q4 revenues, is materials driving the majority of that decline, or is there also a dynamic within royalty and licensing where the directionality might also be down for the season? Thanks for the question, Steven. I mean, I think if you look at, you're correct in your observation that, you know, we would expect Q4 to be sequentially down based on the midpoint of guidance and where we're at year to date. That's certainly correct. As we've commented also, you know, material rebuying patterns for our customers do just generally vary quarter to quarter, so there can be a little bit of lumpiness as a result of that that can, you know, result in Q4 being less than Q3 in this example here. What was the other part of your question? Sorry, I forget the second piece there. I guess, for Q3 in particular, you know, just given the lumpiness of some of the materials purchases, I guess, from your perspective, was some of that, you know, last-minute purchasing for inventory build up ahead of the holiday sales, or was there? Yeah some other things at play there for Q3? We're not seeing any abnormal ordering patterns in the business, and your question was earlier on, you know, material versus royalty and licensing. Based on our revenue recognition model, they tend to follow one another because we recognize both revenue streams as we sell units and material. Thanks, Brian. Maybe one question for Steve. I wonder if you could talk a bit about the dynamics in your major end markets, you know, like mobile, large display TVs and also IT. I think the mobile weakness has been well understood for a while now, but I guess, you know, as you've seen demand play out so far in the second half of the year, are you seeing large displays also show weakness along with IT, or are those two markets, you know, potentially bucking the trend just because of, you know, new products coming out for customers? That'd be helpful. Thank you. Steve, good question. We're generally seeing softness across the board. You know, it does seem as though the high-end cell phone market seems to be holding up reasonably well. We're seeing activity growing for IT, especially as we look forward into 2024. Great. Thank you very much. Thank you. Our next question is from Brian Lee with Goldman Sachs. Please proceed. Hey, guys. Good afternoon. Thanks for taking the questions. I got on the call a little bit late, so I apologize if you covered some of this. You know, Brian, nice to speak with you. Does the catch-up revenue you're referring to stem from your largest customer? It seems like the revenue contribution from them, you know, hit a record quarterly high here. It also is close to being back to 50% of your sales mix. Wondering if that's what it was related to, and then how this would impact 4Q and going forward as well. Yeah. We're not in a position to talk about, you know, individual customers, but it was a number of customers that resulted in the cumulative catch-up that you saw come through. You know, we have seen, you know, quarter-over-quarter sequential growth in revenues of our largest customer. Okay. Fair enough. I know you can't give us guidance on 2023, but this gross margin issue with Samsung clearly is gonna have a multi-quarter impact. It doesn't sound like, just based on your answer to an earlier question, it's gonna be reverting right back to kind of full utilization at the beginning of 2023. How should we be thinking about the path to sort of normalized or historical gross margins if this is gonna be an issue that you know extends beyond 4Q, if I hear you correctly? Yeah. I mean, I think as it relates to Shannon, you know, clearly, as I said earlier, it's a key capability that we, you know, see as very critical to our manufacturing network. You know, as we expect increased volumes, material volumes in future periods, we would expect to be able to, you know, absorb the overhead related to that facility over, you know, over that incremental volume. I think there is a path to get, you know, the margins back up to, you know, closer to where they were previously. We just, you know, in the near-term, given the softness in the market that we've, you know, referenced, which is echoing, you know, what we're seeing and hearing from peers, it is gonna be, you know, for the short bit of time here in the near-term, a drag on gross margin. Okay. Thanks a lot. I'll pass it on. Our next question is from Sidney Ho with Deutsche Bank. Please proceed. Great. Thanks for taking my questions, and welcome, Brian. I want to follow up with the last question on the cumulative adjustments. Last quarter, you also have a similar adjustment, but at that time, you did lower guidance for the full year for calendar 2022. This time, you're not changing the full year guidance. Can you help us understand how we should think about revenue perhaps in the out year that is kind of tied to this revenue adjustments with this quarter? Yeah. I mean, just kind of explaining it in higher level terms, right? We recognize all the deferred revenue over. Well, I guess as it relates to the cumulative catch-up, you know, we assess our forecast on a quarterly basis, and what we saw this time when we went through the process were due to some of the uncertainties in the macro economy, you know, we did have to revise our forward-looking estimates across a number of customers, and that was what resulted in the cumulative catch-up this period. Just maybe just to clarify, that is a, the adjustments is tied to primarily the royalty and license fees and not the, material sales, right? It's the totality. We recognize both our material revenues as well as our royalty and licensing revenues based on the units that we expect to sell to each customer. Both revenue streams, you know, move in the same direction with each other based on that pattern. It's both revenue streams, so we look at them on a combined basis in our revenue model. Okay, got it. Maybe a follow-up question. Given your strong balance sheet with close to $850 million of cash and where your share price is, how is the team and the board of directors think about potentially buying back shares in the open market? I know you want to hold on to some certain cash balance for various reasons, but is buyback something the company would consider? Thank you. Yeah, sorry, was there another part to that? No, that's it. Yeah. Our board and the management team are certainly regularly reviewing the capital structure and ways that we can return capital to shareholders. We evaluate all options. You know, at present, we continue to believe that the dividend program that we have in place is the best method for us to do that. Okay, thank you. Thanks. As a reminder, it is star one on your telephone keypad if you would like to ask a question. Our next question comes from James Ricchiuti with Needham & Company. Please proceed. Hi, good afternoon. This is actually Chris Grenga on for Jim. Thanks for taking the questions. You had mentioned that the investment in the IT panel lines and SDC's Gen 8 line. Of the fab capacity expansions and retooling that you're keeping track of, are you seeing any indications that those investments are being pushed out or trimmed back? You know, not really. I mean, other than the general thrust of the macro economy and the things that we're seeing, we're not seeing any push outs on these types of things. We're not looking for it because we try to look at that. You know, it seems as though it looks like it may be the next big move up for OLEDs, and people wanna get on the ride. Everybody looks at this as if There is short-term macro uncertainty out there, but the OLED industry is a long-term secular growth market, and people wanna be there and be ready when it turns up again. Got it. Thanks. How should we think about R&D expense going forward as blue nears commercialization? Do you expect new product development initiatives such as OVJP and perhaps others to ramp investment to backfill when the intensity of blue kind of subsides? Yeah. I think, you know, as a growth company, we're, you know, always gonna be making sure we're making the right investments in the business and in our R&D pipeline. You know, whether it's programs that we already have underway and have talked about or other things that we may have that we're working on. You know, we're not in a position today to give any guidance on forward-looking R&D expense, but I'll just say we're gonna continue to invest and grow the business. Great. One more, if I may. Any sense of timing or updates on Samsung exercising the two-year extension it has under the in-place agreement? We can't talk about anything right now. When there's something to announce, we will talk about it. Perfect. Thank you very much. Thanks. You're welcome. Our final question is from Martin Yang with Oppenheimer & Co. Please proceed. Yeah. Hi, thank you for taking my question. So given a tougher setup for smartphones and TVs into next year, can you maybe give us a historical perspective on when demand slows down and there's massive pricing on panels, were there any customer demand for you to lower prices? Looking into next year, do you feel that it's comfortable to hold your ASP assumptions stable into next six months or next twelve months? We have long-term contracts with our customers, and we're constantly talking to them. We're pretty confident, comfortable in our current pricing strategies. Got it. I also have follow-up on regarding Shannon facility. Is that once it's turned on, do you feel the need to maybe put it offline if you want to maybe optimize your margin structure, or do you intend to keep it running once it's started? Yeah. It's a good question. I mean, I think if you think about it, you know, it's not the type of thing you can easily turn on and turn off and turn on when you need it and don't. We have a core group of folks that are working there, with our partner PPG, and, you know, our expectation is that we need to have that group, you know, ready and able to continue to grow and develop the facility. Got it. Thank you, Brian. Welcome to the company. Bye-bye. Thank you. Thank you. This does conclude our question and answer session. I would like to turn the program back over to Brian Millard for any closing or additional remarks. Thank you all for your time today. We appreciate your interest and support. Thank you. This does conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.