Good morning, everyone. Welcome to the 26th Oppenheimer Tech Conference. In this session, we have the pleasure to host the CEO of Universal Display, Steve Abramson. UDC just reported their 2Q earnings last week with better-than-expected results, and we're eager to hear more about the company, recent development, and the future outlook in the following fireside chat. Steve, welcome to our session. For investors who have not followed Universal Display in the past three years, how has the story changed, and what's the elevator pitch you would make today? Okay, possibly two different questions. But, I'll, I'll, I'll go step by step. Since the pandemic, you know, the world changed, and nothing changed at the same time. Before the pandemic, three years, three years ago, we were selling red and green to the entire industry, continuing to make progress. The pandemic hit, we saw a lot of bounces up and down in terms of the consumer electronics industry and the like. But during that time, we were able to continue to grow our company. We got new reds and greens. We made significant progress on blue. We formed a subsidiary in California to help commercialize OVJP technology. We recently, you know, announced that we're on track-- recently is now a year or so ago, that we're on track to commercialize blue in 2024. We didn't travel that much, so I don't know if that was a good thing or the bad thing. We learned how to use Zoom and Teams like everybody else. Now that the pandemic is over, even though even though the virus is still with us, business, business has resumed and, you know, we're all traveling, traveling to Asia, traveling to China and the like. We also, during this time, established an additional facility, manufacturing facility in Shannon, Ireland. The elevator pitch is: OLED is a display technology for the present and the future. We have a key technology, which is the materials that light up the display, and we believe that it's a secular growth market for the long term, and ultimately, all displays will use OLED from small watches all the way up through large TVs. in the past, Apologies, there's a slight networking disruption here on my end. No. Can you hear me okay? No problem. The world may be round, and we may have made a lot of improvements in the last three years of the pandemic, but, you know, we still have these issues with the photons and the electrons flying around. Indeed. I think for longer-term investors as well as analysts, historically, you outlined OLED fab capacity growth as the leading indicator of how much more material the world will need in the longer term. If we look at maybe the next three to five years, the capacity, new capacity being added to the world, overall supply is at a lower rate, and we're seeing fewer fabs being built. If you speak to an investor today, trying to guide him on the longer-term growth, you know, is there any other metrics you would point us to? Well, that's a, that's a very good question, Martin. I think, while fab growth is slowing, in part, it's because a lot more people have gotten into the industry, so they have their fabs. Currently, because of the current macro environment, you know, many of these fabs are being underutilized. There's an opportunity for growth even without new fabs. In addition, we're seeing, especially for the IT market, which ranges from tablets all the way through to monitors, we're seeing the growth of larger-sized fabs, Gen 8.5, Gen 8.6, and those can make more, much more cost-effective i- IT products because, because of the larger substrate. What we, what we think we're seeing is kind of a temporary lull, because the, the factories, still have some added, some, some capacity they can utilize. Also seeing the plan for the Gen 8.6 fabs, which will basically be able to make about two times the amount of square meters of a Gen 6, which is, even though it's only a 0.5 or 0.6, which, which is pretty huge, and that can help our, our marketplace positioning as well. Again, continuing- Got it. ... to take market share from, LCD, which is really the, the competition at this point. Understood. Aside from the number of new fabs being built, we're also looking at, you know, rising utilization of current fabs, as well as the difference of new fabs or the size upgrades of the. Those- of the new fabs you built. Sorry, Martin. Yes, those are the, those are the potential abilities to grow the market, and that's what we're- Mm-hmm, got it. ... see moving forward. Mm-hmm. In reference IT applications, I, I assume that's most of the new Gen 8.6 fabs are intended for? IT market is a very large market, but do you see any other end markets as meaningful drivers for OLED demand? Well, that, that's a good question. The OLED started with smartphones. They then went to TVs directly, which, which was an interesting play. That, that worked out really well because everybody who has an OLED TV wants one, just like, you know, and, and, and proselytizes about it, just like everybody that had an OLED smartphone did that. They, they started doing smartwatches, which frankly created a new product category. IT, IT goes from tablets, you know, through, through laptops, through monitors. We're also seeing automotive being a big market, both for interior of, of, of, of the automobiles, basically, because everybody wants better displays. You asked the question about the, the, the elevator pitch. The fundamental elevator pitch on OLEDs in general is: we're visual people. We react to visual stimulus. OLEDs are the best visual stimulus in the world, so people want to use OLEDs. We're seeing more and more products using OLEDs. The automotive industry itself is a difficult industry because they have to last a long time in the car. It shows the elements of some of the OLED displays are very mature, and they can last, last a long time. We're also seeing OLED lighting being used in the taillights of cars. Again, another seed that is being planted because light-emissive products will want to use OLEDs as there are more manufacturers and start focusing on, on, on those areas. You know, you had asked, you had asked earlier about drivers. I think OLEDs, one of the drivers of OLEDs is the more OLEDs you have out there, the more people see the OLEDs, the more they want OLEDs, the more the OEMs will manufacture products based on OLEDs. It starts out, of course, as with many technologies, in the, the high end, and then it moves down into the medium end. It's where I think we're seeing with smartphones and TVs right now, and ultimately, we think all display technologies will be OLED. I can't tell you how long ultimately is, but that's why we're building a sustainable company, to, to help realize that dream. Got it. Yeah, I, I do agree with you on the notion that, you know, when you spread the awareness of OLED display, more people see the benefit, and therefore you will help with adoption. For smartphones, you know, it's very clear that OLED is the only display technology that enables flexible and foldable displays. Maybe for IT applications, automotive, and even lighting, an average investor are not, you know, fully aware of the OLED's differentiation and benefits. Can you maybe walk through, you know, how OLED would differentiate and help the users to see that, you know, some of the functions or features are only enabled through OLED? Sure. We start out by saying that OLED is a self-emissive display. You don't go through a lot of color filters and things to get to the product, so it's a clearer display, and people like clear displays. It's a more energy-efficient display, if you have a smartphone, you can put more applications on, on, on the, on the phone, and you don't have to charge it as often. It's very quick response time, so if it's a TV or a laptop or what have you, video is very good on, on, on an OLED display. The colors are crisp and clear. You have. Some people describe it as an infinite contrast ratio. That gives you a better, crisper, clearer color because you have pure back- blacks. In an OLED display, in order to get black, you basically turn off the pixels. In an LCD, you always have the light on, so you always see a little bit of light leakage in this. As you said, it enables foldables. It basically enables smartwatches. It's going to enable anything on a flexible substrate, which is a lightweight, unbreakable substrate. If you drop your phone, it won't break as much as... You know, my daughters, they used to drop their phones a lot, and you could barely see the screen. They're very happy now that they, too, have, have OLED displays. Got it. Thank you. I want to switch topic a little bit, to your customer relationships. You know, there are very few, maybe, a little more than a handful of panel makers, and your revenue concentration is, remains with, three or four very large panel makers. One common question from investors is regarding your relationship with Samsung. You know, how do investors get comfortable around your relationship with, you know, very large customers like Samsung? You know, Samsung itself have acquired material development companies, in the OLED space, and was reportedly, doing their own material development. Now we are at a critical junction of blue commercial- being commercialized in the near term. You know, how do investors-- should the investor perceive your relationship, and, how do we get comfortable? Mm-hmm. Good, good question. You know, I'll go back even further, people used to say, You guys are a small company in New Jersey. How are you doing business with the largest companies in Asia? The answer is, in part, perseverance and getting to know them. You know, I and many other members of my team have been flying to Asia for a long time. It's one of the things we actually missed in the, you know, when the pandemic was occurring, but we're, we're kind of making it up in a vengeance, with a vengeance. Now we've helped Samsung develop this OLED industry from the beginning, and we've worked very closely together. We've developed a really good working relationship of what materials they need, what specifications they need, they need to have. you know, there are people who are working in material areas. All those material areas run through us. I mean, our, our IP position is very strong. You want to do an OLED, material display, you basically have to go through us. We have a very good collaborative relationship with, with, with Samsung. We have, people on the ground in Korea, we have people on the ground in China, very good account, account representatives. We're a small part of the entire bill of materials. Small, but very important. Because we maintain this, this strong relationship, our materials are cost-effective, our continued growth and progress in our materials, as evidenced by continually to make new and different red and green materials, as well as now the progress on blue, we are a very important partner, have been for a long time with all of our customers. Our shipments are unparalleled, our customer support is unparalleled, and so it works very well as a win-win situation with, with Samsung and our other very large customers. Got it. Thanks. Moving on to more of a near-term market dynamic, especially for smartphones, what we have seen is overall smartphone market under, you know, very significant pressure with year-over-year decline in units. At the same time, we have seen, you know, more capacity of OLED panels coming online and resulting in a pretty severe price competition for OLED smartphone panels. When we see, you know, market research, noting that OLED panels are dropping, very significantly in price, should we expect a similar magnitude of revenue impact for UDC? How should we interpret the smartphone, panel, price dynamic and, and its, and its associated impact on your company? Sure. Good question. From our perspective, the more products that have OLEDs, the better it is, because we-- our, our, our business model has, comprises two pieces. It's the material sales, so the more products that get sold that have OLEDs, the more materials we have sold into those products. Then we have license fees and royalties. The royalties may be affected by the, the price down strategies, but the material supply would actually, would actually end up being positive to, to us because we'd be selling more products. We believe that's the direction OLEDs are going. We, we too, now we're, we're subject to price pressures as well, so we too are trying to, you know, reduce our costs as best we can because we have some cost headwinds, we have cost headwinds as well. In general, the more OLED products that are in the market, the better it is for us. As the smartphones go into the mid-range, that would be good for us because we're a very small part of the bill of materials. Got it. Yep, that makes sense. Next, I want to ask about, blue, and it's one of the, you know, most focused area for investors, since last year. Can you walk us through the key milestones your company will achieve before we see a commercial product with UDC's blue emitters? Sure. Well, I, I will do so. It's, it's. What we're, what we're doing now is we're developing the, the, the materials, both emitters and hosts. We're providing them to our customers for experimentation and development. We then get feedback from there and iterate on, on our materials. In addition, there are other materials in the stack. No one's ever done a phosphorescent blue before. All the materials need to line up, the energies levels need to line up. You know, blue is a very sensitive material, that is why it's one of the reasons why it's been taking so long. They need to make sure we, they, the ecosystem needs to make sure that all these materials will work in the stack, will be able to be manufactured, cost effectively, be able to go through all of the, commercial testing, and then come out the other end. Those are the, the, the, the steps that we're going through. It's iterative with our, with our customers before it gets into a product. Then, of course, the customers need to figure out, well, what product do they want to put it in, and how is that going to work as well? Now, a lot of these. Got it. ... a lot of these milestones, you know, are, are simply, they're internal milestones that we do for every, for every product with every customer. They're not the types of things that, you know, we can announce from time to time. If there are things that we can announce, then, then we will do our best to do so. Mm-hmm. Yeah, I think sometimes, we from outside being overlooks the complexity of how a device gets made and, with new materials. We happen to have two more questions from the audience regarding blue, so I'll just take this opportunity- Mm. to ask them on behalf our audience. The first one is, will we see new blue emitters in a 2024 device? If so, which part of 2024 are we going to see it? All good questions. Right now, we have said that our materials will be commercially available, you know, in 2024. Commercial materials, exactly how our we've avoided talking about how our customers are going to use it, when in 2024 it's gonna be, what products in 2024 it will be, because those are up to the customers, and there's a really customer issue. What we can focus on is having our materials acceptable to the customers. When they wanna do their when they're going to do their product introductions, that is really up to them. I can't answer those questions. I mean, it's, it's, ask. Got it. Ask the customers. In other words, your job is to get the material commercial ready in 2024, but, whether or not we see the end device in 2024 is entirely up to your customers? I didn't wanna go exactly that. It's the customer's decision on when to announce the product and when to introduce the product. It's our job to make sure the materials are commercial ready. That, that is true. I don't wanna overstep, I don't wanna overstep... Mm-hmm ... my bounds. I don't wanna speak for my customers. Understood. next question regarding blue, also coming from the audience, is, different markets require different minimum lifetime for materials. Has your blue emitter and host combination hit the minimum lifetime necessary for phones or TVs markets? What I will, what I will answer that is, we are on the path to meet initial commercial blue specs in a 2024 commercial launch. We are still in the development stage at this point. Got it. Let's move on. Questions regarding your cost structure. You have maintained a pretty steady growth in OpEx, and there's relatively less variability or volatility on the operating structure. Can you maybe talk about, you know, what are the more variable parts of your cost structure, and do you find operating margin at 40% a sustainable level? That's, that's a good question. Well, one of the issues in our OpEx is, on the material side, is the price of some of our raw materials. As we know, raw materials have been going up. The price of iridium, which is the raw materials in, in, in some of our products, have gone from about $1,500 pre-pandemic to about $4,500 now. That's a, it's a cost structure, and we do have volume price agreements with, with, with our customers. At the same time, we are engaging in a, a fairly significant cost down process as, as we do, but we're accelerating that in order to maintain, maintain good margins, and we have a lean operating structure. As revenues start moving up again, we should be able to see additional margin from additional sales. You know, this year we're guiding to 35%-40% margins. We're, we don't have a specific number that's a target that we release externally, but suffice it to say, we do our best to provide the highest, to develop the highest margins possible, consistent with our business, consistent with our growth prospects, consistent with creating a sustainable business well into the future. Got it. The next question is also associated with your cost structure. You know, as we know, you have built up a new Shannon facility, facility to satisfy future demand. How big is Shannon facility, and is that planned capacity a reliable leading indicator of your future revenues? The, the Shannon facility is about 18-20 acres, right outside of Shannon Airport in Ireland. The initial capacity we're looking at, once it's built out, is about, you know, 1 metric ton, and that could increase because there's a lots of opportunities in that place to grow. Is, that 1 metric ton, could you, when you, when you put it into context, you know, how many more metric tons will the facility hold, in the longer term, or do you have planned? That's the first design element, so we're not there yet. It has, it has a high ceiling, let us just say that. It is- Okay. The Shannon facility has a high ceiling in terms of what it can produce. Mm-hmm. How does that compare to your existing capacity? Well, the Shannon facility is a multi-year, multi-phase expansion of that. It's gonna it's larger than our current facilities. When it's fully ramped, it should at least double our existing capacity. Mm-hmm. Also associated with the Shannon, so your production, the actual production of the material is being outsourced to PPG. How would you describe your relationship with PPG, and do you have a plan to have alternative source of supply? PPG is our exclusive manufacturer. We've been working with them for over 20 years. As you can see, we establish long-term relationships with our partners. With the Shannon facility, it's our facility, so we, we, we own it, but PPG is, is the manufacturer in that facility. It's PPG employees that are manufacturing that facility. We intend to have our relationship with PPG for the foreseeable future. It's a very strong relationship. Perfect. We have, we have multiple sites. While we only have one manufacturer, there are multiple sites, which is one of our backups in, in case there's a problem in any one site. Do those multiple sites have different end market focus or customer focus, or they are completely interchangeable? They're not completely interchangeable, but they're pretty interchangeable. They all have similar equipment. We've designed different ones for different things, but they're backups to each other. Got it. You know, also related to manufacturing, I think, it's well understood, and you have a very strong IP moat around the materials. Aside from IP, I think the manufacturing of the material itself is not an easy process to copy. Can you maybe talk about, you know, do you perceive the manufacturing part as a significant moat? If so, why? What are the challenges for new material developers trying to ramp up and serving high-volume materials to customers? Sure. Well, I mean, we basically created the OLED emitter business. We created the business of manufacturing these materials. That gives us 20 years of know-how and trade secrets in how you're manufacturing these materials. Now, these materials are extremely pure. In fact, organic electronic materials need to be purer than the materials that we put in our body. How you make really high purity materials is a very difficult process. How you make high purity materials in high volumes, constantly and consistently, so that you can make money on it, is an even more difficult issue. And we're very proud of not only the IP moat issue, but the way we've been able to make manufactured materials of this purity consistently over time, and it always gets accepted by our customers. It's a skill set of its own. Got it. Previously you mentioned that you own Shannon facility, so there's a potential for you to take over the facility and operate independent of PPG. Is that correct? Well, you know, first of all, right now, I think we're leasing the facility, but, you know, it's a lease with option to purchase. Mm-hmm. We don't. PPG is our partner. You know, PPG is our partner. It works really well, with both par-- companies, so we don't foresee any issues with that moving forward. Got it. In fact, in fact, I think, I think because you have a big Fortune 500 company combined with an entrepreneurial company, we've really been able to take the best of both worlds, and that has been very helpful in developing this, this material market and, and selling into our major customers around the world. Got it. Thank you. I want to move on to OVJP. You know, in the last most recent earnings call, you highlighted yet another milestone for this emerging technology. Can you maybe explain, you know, the milestone a bit more and then, you know, extend to, you know, let us educate us on, you know, what are the real benefits of OVJP once it becomes a commercialized manufacturing process? Sure. The object of OVJP is to be able to, frankly, print TVs cost effectively. You want to get red, green, and blue materials or side by side, so your, your TV is as bright as we were talking about before, as bright and as crisp and as clear as, as, as any display. OVJP will be able to do it more cost effectively because you'll have a smaller footprint, you'll have faster tact time, you'll have less, less steps. You can print more materials in, in one unit, for example, if that's the way, the way one wants to do it. What we have shown recently, in the last few months, is we've been able to print an entire stack, red, green, and blue materials, with the, the host materials, with the electron transporters and the hole transporters all in a stack, and get similar performance to VTE. VTE being vacuum thermal evaporation, the way people are making, products today. We think that was a great milestone, moving forward. You know, right now they're making TVs, which are great TVs. The OLED TVs are great, either white with color filters or blue with quantum dots, if you're LG or Samsung. We believe this is a very strong competitive technology that will be able to move the TV, OLED TV industry forward. Got it. Also I think you highlighted that the, the business model for OVJP will be also IP licensing model. When we think about potential partners or collaborators with you to commercialize this, what are some of the examples of a potential partner for OVJP? Well, we're looking for, you know, the potential partners would be long, large, equipment manufacturers who have the ability to make large area, deposition equipment and have good relationships with the customers who are in Asia. Mm-hmm. We're looking, you know, whether it's IP licensing, whether it's some type of collaborative relationship, there's a number of different ways that the commercial program can move forward. We're looking for someone to really help commercialize the technology. We were really good at developing the technology and taking it to a certain point, and now the question is, you know, having some larger manufacturers helping us commercialize the technology, do the sales, the support, the installation, and the like. There's a lot that goes into, you know, installing new equipment and working with the partners to make sure that it works well in their fab. Mm-hmm. I got it. And then from- It is my understanding. Good. Go ahead. Go ahead. No. Um- We'd like to make some money off of the equipment and basically sell materials into the equipment because that's where we can make even more money. Yeah, makes sense. It's my understanding that there are also other approaches to printed OLED displays, using different materials. You know, how would you assess the commercial viability of alternative printed OLED methods? The initial printing was originally inkjet printing for OLEDs. Mm-hmm. They used polymer materials for inkjet printing. We looked at that 15, 20 years ago and said, "We don't think that's gonna work, because when you dry the solution, you impede inhibit the performance of the materials. You will never get as good performance as you will with vacuum small molecule materials." We undertook a very deep R&D program, including our university partners and the like, to see if we could actually print the same materials we use in VTE with a carrier gas. We were able to do that. That started the whole process of OVJP. The competition is, who started first, is inkjet printing using a solvent. We don't believe that, that that will really be a commercializable, large, large volume program because the materials will not have the same performance as the dry printing will, or frankly, as the blanket deposition that LG and Samsung is doing. Mm-hmm. They've been working on it for a lot longer. Got it. A follow-up on that, we have been tracking, or it's pretty easy to track, the performance of phosphorescent OLED materials based on brightness, lifetime, and so on, you have disclosed in the past for red and green. Is there any evidence of polymer OLED materials showing similar performance improvement over the years? Not really. A lot of the inkjet printing is now moving to small molecule. Mm-hmm. I mean, the polymer small molecule thing was, you know, this was like a 20-year ago thing. We did start seeing if we could use small molecule in solvent, and we can. You know, forgive me, but I'm not quite sure what the current inkjet printing materials are, but it's very difficult to achieve the performance equivalent to vacuum deposition, and very difficult to, to do that over time with, with large, with large products in large areas. Got it. We're seeing one more question from the audience. This is regarding QD-OLED TVs. The question is: Will Samsung's QD-OLED TV use your blue emitters as the backlighting solution? You'll have to talk to Samsung. The only comment I would make in that would be, not necessarily backlighting is the most opposed to emission, but other than that, you have to talk to Samsung. I can't speak for our customers. I think one of the last questions I have is regarding talent acquisition. When you think about, you know, what is keeping UDC in business for the past 20-plus years, can you maybe comment on, you know, how stable is your R&D team? You know, whether or not are you having issues with getting a flow of new new talents to support the ongoing R&D effort? Great question. We have very low turnover rates in our company. I mean, people, most companies say their employees are their most valuable assets, we live it. We truly support our employees across a host of issues. You know, 20 years ago, when we were first trying to get people, they didn't really wanna come to Ewing, New Jersey. Now, you know, they do wanna come because we're an hour and a half away from New York, and you can work with the finest organic electronics team in the world that has proven its sustainability over the last two and a half decades. We're now an attractor to great talent, which is really, really exciting. We get, we get the best and the brightest. Our guys are guys, by the way, covers all, all people. Our guys are really good, they're really sharp, they love working together, and it's shown by the great creativity and advancements that they have. That applies not only to you in New Jersey, 'cause we're hiring people all around the world. We have people in Ireland, we have people in Asia, and it's an attractor to be working for UDC now, and it's a beautiful thing. It makes me very proud that we get to get such fine new employees working for us and making advances in that respect. Thank you. With that, we're about to wrap up this fireside chat. Steve, do you have any closing remarks you would like to make? No, Martin, thank you very much. I think you asked a lot of questions that are really good, really relevant to the investors, and just, you know, I'll end with an elevator pitch, which is, when we started this thing 25 years ago, CRTs were still the technology of choice. Now, OLED is the prime technology. We have been instrumental in driving that, and we intend to continue driving that into the foreseeable future, so thank you for your support. Thank you, Steve. I hope you have a good rest of the day and rest of the conference. Thank you, Martin. That's a wrap. Bye-bye.