Good afternoon. Welcome to the 25th Annual Needham Growth Conference. My name is Jim Ricchiuti, Senior Analyst at Needham in the research department. It 's great to be back to a live event. Thanks for joining us today. I'm pleased to have a fireside conversation this afternoon with Universal Display and delighted to have both the CEO, Steven Abramson, here, as well as CFO Brian Millard. We also have Darice Liu in the audience, who's head of IR and Corporate Communications. Gentlemen, thanks. Thanks for joining us today. Thank you. Let's go right to the news this morning. There was some news on blue. Please take us through some of that, if you will. It would be our pleasure, Jim. It's a pleasure to be back here. It's a pleasure to start to get around after the pandemic, even though the virus is around, the pandemic isn't, and it's just a pleasure. The release we did this morning was we reaffirmed that we're on track for a 2024 launch of our phosphorescent blue materials, and we validated that our 2022 guidance is still intact. Now I'm gonna turn it over to Brian, who can give some more color to that. Sure, yeah. I think as it relates to the blue specs that Steve just referenced, in early 2022, the company had set out a goal of achieving certain improvements in the lifetime efficiency and color point of the blue material that we've been developing. The 2022 year-end goal was really achieving those improvements over the course of 2022. Certainly more work to do in 2023 to work with our team as well as with our customers' teams to continue to improve upon the molecule that we've developed to date to achieve that commercialization in 2024. Feel like we're really well on the way to achieve that, and we see a clear path to have 2024 commercial material in the market. One of the things we've tried to get a sense of, because we look historically at green, is that a good way to think about how blue potentially could scale? Excuse me, Jim. Your microphone's here. It's not gonna do really well to hear my feet, right? We got this going for us. In general, when we hit volume, we're expecting the quantity of blue to be substantially equivalent to the quantity of green in volume. In terms of the ramp, you know, back when we did green, there was one customer and basically one product. There's now multiple customers and multiple products. It's part of the conversations that we're having with our customers of what are the specifications of the specific products that they're looking for? What are they looking for first? How do we scale it up, and things of that nature. One of the challenges we've had as we've thought about blue is to what extent is this a technology advance that will appeal more to the manufacturers of mobile devices, or is it a significant opportunity when we think about large area displays? We think it's a significant area across the board. Okay. Everybody wants blue. I'm gonna turn it over to Brian. Yeah, I mean, I think there's opportunities, really across the board. Certainly the efficiency, the ability to have less power consumption, that's a huge opportunity for smartphone market as well as for IT applications like tablets. Really in television, we also see there being a lot of opportunity as well as in addition to the efficiency, we think that there's a visual benefit to the blue as well that can be realized that would apply across really every application. The other major development was the agreement with Samsung, another. Look, again, I know this is tough to comment on, but give us a sense as to how investors should think about that agreement, maybe the timing of it, as opposed because in prior negotiations, we've seen things drag on. Yep. Yeah, I think the company's had a 20-plus year relationship with Samsung. I think the new contracts from our perspective were certainly kind of an inevitability. We just need to kind of work through the contracting process with the customer. It was signed in early December, which was great. We were happy to sign it before the expiration of the prior contracts. That doesn't always happen. We're happy to get there and feel really great about the contract and the ramp forward for the next five years with Samsung. The contract, if I understand, it did not have a provision for blue? That's right, yeah. We have had red and green agreements with Samsung for a number of years, we kept to that, and we'll have a separate discussion with them on blue. We continue to collaborate really closely with their team on blue. At the right time, we'll make sure the contracts are in place to enable the commercial launch in 2024 that we referenced. For, for the outsiders, do we think about this as not necessarily a negotiation that is, that time critical because of this, when you're gonna be planning to have this in the commercial markets, and so that gives you a little bit more, what, flexibility in terms of this negotiation process? That's right. I mean, I think today, the fact that we don't have a blue contract with Samsung or any of our other customers today is not necessarily, you know, any issue related to the work that we need to do with them to continue to develop the product and get to a place where we're enabling the commercial launch in 2024. At the right time, when we need the contracts in place to be able to sell them commercial material, we'll have them in place. Those are all conversations we're having with Samsung as well as others. Okay. Yeah, the prior agreements, we all know they're built into those agreements are price breaks, volume price breaks. You know, that's been a consideration, I think, as people have looked at your gross margins. I guess the question is, as we start to see the market, OLED market, it's certainly not mature. We're still on a pretty strong growth trajectory. You know, how should we think about, you know, volume price breaks? Yep. Yeah. I think certainly, the industry continues to grow. We would expect, you know, in the years ahead, we're gonna sell significantly more material than we have in the prior years. Along those lines, you would expect ASP, you know, per unit to decrease based on those volume price breaks that you alluded to. That said, we've been able to maintain, you know, really strong, you know, we feel pricing power in our contracts. Feel very comfortable with the pricing structures. On the cost side, we're continuing to identify, you know, ways we can get more efficient and effective as well as achieve more operating leverage in the business as we grow and produce more in the future. I wanted to go back to 2022 when, you know, coming out of Q2, I think you clearly saw signs that the market was softening. Right? So you revised your guidance, as did a lot of companies on the weakness in the consumer electronics market. I'm curious when you reported your Q3 results, and today again, you reiterated your guidance, and it's almost counter to what we've been hearing in the market. I'm just curious, how much visibility have you been getting from customers? Or is this the range you felt comfortable enough? We get our visibility on a regular basis from our customers, from our field team. We also look at some of the macro analyses that you and other people do. We felt comfortable when we lowered our guidance in Q2. Things were still moving on track in Q3 and in Q4, along the lines of what we had seen within those parameters. That felt reasonably comfortable there. LG, one of your big customers, as we all know, has had, you know, the expectations for the TV market have been reset. You know, as we think about that opportunity, because there's still question as to, you know, how big a percentage of the overall market does OLED, do OLEDs get in the TV market. Is there any, you know, takeaway that we should be reading through in terms of the choppier demand that we saw from LG? OLED TVs are maybe 2% to 3% of the market right now. You have LG, most of them, Samsung, coming up. I think your definition of choppy is exactly it. We had the last three years of the pandemic, and China has become very choppy. We had a great consumer electronics move up in the early parts of the pandemic, and that's been slowing down ever since. We think in the long term, OLEDs are the technology of choice for basically all electronic displays. It's just a question of how it evolves. Yeah. Steve, I think you mentioned you were at CES. I was at CES. You know, maybe talk to us a little bit about what your observations were coming out of CES? Well, you know, having been at the OLED industry's inception, and when we were trying to sell little green dots, this is gonna be the future of displays. To go into people's booths and to see everything from 97-inch OLED TVs to Micro-OLED TVs and everything in between, to see foldable laptops, to see foldable phones on all different folds, fold in, fold out, fold up, fold down. To see slidable. To see all these innovations which are made possible really only by OLEDs is just extraordinary. That was really exciting. The show itself wasn't that exciting. I mean, I'm used to having 200,000 people there. There were less than 100,000 people. The OLED piece was great. When you walk into LG's booth on the floor and you see there must be hundreds of OLED TVs with the nature symbols, and you're going through the water, and you're going through the forest. You're going through the universe. It's just extraordinary if you've never done it. We also get the question about Samsung and what their strategy. How do you, from where you sit, obviously a customer of yours, in terms of the direction they're going? We support all of our customers. We love all of our customers equally. We think Samsung is great. We think LG is great. We're supporting all their TVs. We'll support the development projects. I did not mean to exclude the Chinese customers because we think they are great too. It's our job to support our customers and make sure we can deliver them the energy-efficient, long lifetime color point technology that they need to grow their business. Again, the, if we look at the overall share of the market that OLED TVs has gotten, clearly a premium product, you go back so many years on this technology. Has this been your expectation that this is where we would be and that there's going to be another inflection that drives the overall growth? Well, I certainly think on TVs, I certainly think there will be another inflection, if not inflections. I mean, the road to OLED TVs has been filled with lots of bumps and bruises. I mean, first it was price, and then it was brightness. Now we have price and brightness in, and then you hit the pandemic, and it costs, you know, $6 billion to build an OLED TV plant. The fact that Samsung's coming along now is fabulous. In our facilities in Ewing, we have LG TVs, we have Samsung TVs, we have big LG TVs, we have transparent TVs. You can come and see them all. We think this is just the beginning of a long road up. I think we've also seen the price of OLED TVs from a consumer perspective come down pretty significantly in recent years, which is putting it within reach of a lot more customers. I think as people look at, you know, "Okay, my TV just burnt out, I'm ready for a new one. Let's go to Best Buy or any other consumer retailer and see what's out there," I think that, you know, the OLED is much more appealing and within reach option than it was years ago. We also are seeing more introductions on, you know, for IT applications. What are you seeing in that market? Is that some of the news we've even seen in the automotive market? If we combine that, does that have the potential to move the needle? I mean, these are larger displays than mobile devices. If you aggregate these newer applications. Yeah. absolutely, especially, I mean, looking at TVs alone, right? If you can increase penetration from the 2% to 3% today to, you know, let's just say 10%, that's a significant increase in, you know, the square meters that are being used, relative to a, you know, 8% increase in, say, smartphones, just based on display size alone. I think that, you know, we can achieve that. If we can achieve that penetration, that's a huge increase in terms of the size of displays that are using OLEDs and a great benefit for us. Have you guys have a pretty good window on what's happening for, certainly on the IT, on the IT side. You know, what's your sense in terms of the newer you know, how many new OLED monitors we're seeing, whether they're, you know, monitors or, you know, tablets. You know, are we at a stage now where that's becoming an increasingly important, marketing feature? You're starting to see dribs and drabs. Okay. In there now. I mean, the IT market is about 2%, which includes all of that. You're seeing some additional capacity builds. Starting around 2024, we think you're gonna start seeing that move up fairly significantly. Okay. 2024, I mean, if we think about blue and some of these markets, it's. 2024, there's so much more. That's also a segue for what we're hearing at this conference and what we're reading in the papers that, again, clearly there's signs of weakness, some softness in consumer electronics. You know, I don't think some of us, myself included, necessarily appreciated, even the impact of, you know, the lower utilization at the Shannon facility. Walk us through, you know, some of that impact. Sure. Yeah. Certainly. Shannon in Ireland, we in early 2021, secured this site for increased additional manufacturing capacity. It's a 16-acre campus, has a lot of great capability there, and was really key for looking where the industry is going, where we knew our manufacturing footprint needed to grow to meet that demand. Securing the facility was key. We brought on the initial phase of it middle of last year, middle of 2022. With that, you know, it's been underutilized to date just based on where our current demand is, based on the macro factors, as well as us needing to continue to kind of ramp up from there. It's right now about $1 million of overhead costs per month that we're incurring, that's, you know, due to underutilization of that facility. That said, we fully know that we need that facility to secure, you know, our growth plans going forward. Having it as part of our network's a really key capability. We're confident in the years ahead as we you know, produce additional material there and can achieve the, you know, absorb that overhead into a greater number of units that will, be able to increase margins. Is that, is there a way to think about what we need to see in terms of quarterly revenues to see that play out where it's not, you know, it's not a drag or it actually fulfills some of your prior expectations when you guys first made that decision? Yeah. We're not in a position to put an exact revenue target to it, but I think it's just a matter of increasing, you know, volumes of material sales. We are being really disciplined in how we look at bringing additional phases of that manufacturing site online. We brought on an initial phase. We're obviously looking at bringing additional phases on over the years ahead, but we're making sure we're not getting ahead of ourselves and doing that too soon and incurring additional costs greater, you know, sooner than we need to. Were there any considerations with respect to blue as you thought about that? We do. Shannon is a site where we would, you know, expect to be able to produce our blue products, so that is, you know, having that additional capability and capacity is key. Okay. The other side of this equation is, as we think about capacity adds, you know, clearly with the, some of the news we're hearing in terms of demand, there's the risk that some of the capacity that we're anticipating could slide to the right. Again, if we looked at past cycles, how much give and take has there been in initial capacity expectations for some of the display makers, whether in China or additional capacity in Korea? How, you know, how has the macro environment influenced what has happened in the past? You know, is there anything that we can take away in this current environment that might give us some clues to what capacity plans could look like? Yeah. I mean, I think it's reasonable to assume that, you know, everybody's looking at their investment plans, you know, more, more carefully now than they might have, you know, a few years back, just based on the current situation. But we don't think there's gonna be a significant pullback. We still know that 2024, there's gonna be a significant investment needed to achieve the additional, you know, IT market being tablets, laptops, and monitors that we know are gonna adopt OLEDs. We know there's additional manufacturing capacity needed to achieve the growth plans that a lot of the OEMs have for OLEDs and additional adoption of OLEDs. It's just a matter of, you know, is there a slight shift? We'll provide, you know, quarterly updates on that as we go forward through the year. Reasonable to assume that there might be just a little bit of shift, on that basis. Yeah. Correct me if I'm wrong. Normally, is it with your Q4 results that you typically give some sense on that? We generally give some updates on the capacity growth. We'll give some updates in February, and then we usually do them in two-year increments. Okay. As you recall, you know, we do our capacity grows and then some. This has been since the beginning. Some things move forward, some things move back. They'll never backwards, but they move forward more slowly than the other ones. Sometimes they accelerate. That's all dependent on the individual customers, what they're seeing coming down the pike. We'll talk about that, I guess, in February. Okay. Maybe just on the topic, again, of larger area displays. Let's talk about, you know, what's been happening on OVJP. You know, maybe for folks in the audience, just go through what that entails, what it potentially could mean for the company longer term. You wanna try? Sure. Yeah. OVJP is a printing technology that the company developed a number of years ago. We continue to scale up that process and manufacturing. We're currently at Gen 4 substrate size, and our project really involves direct printing onto a substrate as opposed to a deposition method of printing, which would enable large substrate, red, green, and blue side-by-side printing. We've currently done a proof of concept of the Gen 4 size. We're looking at scaling up to Gen 6. Ultimately, we need to, and want to partner with, you know, one or more of our customers, as well as equipment manufacturers to get a pilot line onto a customer floor and continue to, you know, identify additional improvements and enhancements to it from there. The ability or the potential for it is huge, to be able to print red, green, and blue side-by-side for a very large substrate, which has been a challenge for, you know, a number of companies to date. Well, just to give some additional background before Brian joined the company, inkjet printing or printing large area TVs was always the Holy Grail. Remember back then, there were some companies that no longer exist. That was their, that was their shtick. What we said when we looked at the inkjet printing was it was never going to be able to be technically effective because of the solvent. You'd never be able to get the performance. We took our materials, and we said, "Okay, let's see if we can dry print materials." We all remember from high school physics that when you have gas molecules, they bounce around, and you can't figure out how to get them to stick. Our team figured out how to get them to stick. Then we did it on a Gen 6, a 6-inch tool. Then we said, actually, during the pandemic, "Hey, this is doing good. We should accelerate it." We formed a subsidiary in Silicon Valley to move it up. Now we're using Gen 4 substrates. The key is to be able to create a brighter display 'cause you won't need color filters or quantum dots and be side by side, so it could be more cost effective so that you could expand the TV market. Then we would make money from selling more materials into the market, as well as getting some piece of the action from the sale of equipment itself. What kind of interest are you getting from some of the equipment companies? Or is this? Yeah, what's gonna drive this? Is it gonna be the display maker that. I think. Pushes the equipment guys? I'm thinking it's probably gonna be the display makers. They're the ones that wanna make the TVs. Right. TVs are really important. There aren't that many display makers. We're talking to all the people, talking to the major equipment manufacturers as well as the display makers. This is really a way for display makers to get into that TV market in a different way with a cost-effective technology. It is a few years out. I mean, we've been, it's gonna happen in the future company for a long time. Now it's happened for the last 10 years. OVJP is still going to take a few years. Any milestones that we need to look for, that we should be looking for this year? I think One of the next milestones is gonna be some type of partnership, on OVJP. Okay. I'm sorry. No. Partnerships with OVJP and their technical approaches, technical advances. What we announced last fall was that we're able to print not only the emissive layers, but we're able to print a prime layer as well. We're able to print more than one layer. The goal is to print all the organic layers, for example. We're able to print the emissive layers with essentially the same performance that we have in our standard VTE. The technology is moving forward. We're talking to business people, and we'll keep on, keep you abreast as it happens. Okay. This is probably, Brian, a question for you. Just recently joined and assumed the title of CFO. What are your impressions, as, you know, that you could share with us at least in terms of how we might think about, you know, capital deployment? Company has in the past done some M&A, right? you know, how can we, you know, buybacks? What? Sure. What's the range of options and how should, you know, how would you think about it? No, good question. I joined about four months ago. Been very happy over the last four months with the quality of the organization, the people. Clearly we're in a great spot and have great technology and materials and a lot of bright future ahead with blue and some of the other things we just talked about over the last bit of time here. On capital deployment, we certainly, we have a significant cash balance. We're, you know, approaching $850 million. We are always looking at the market for, you know, M&A opportunities and ways to invest and grow the business, whether that's internal R&D, acquiring businesses, patent portfolios, what have you. We also established a few years ago, UDC Ventures- Right. Which is a, you know, small, you know, VC within the company. We have made some investments in early-stage companies, which enables us to participate in kind of the broader ecosystem and see what's out there in some adjacent areas and are of interest to us. We'll continue to identify ways to do that. Then in terms of returning capital to shareholders, we do have a dividend program in place which we've continued to increase, you know, annually, over the last few years. We do think about buybacks. You know, we meet regularly with the board and management and discuss that. To date, and for the foreseeable future, we continue to feel like the dividend program is the best way to return capital. Terrific. I think we're gonna wind it up there and, let you guys, get on to your next few meetings. Sure. Appreciate it. Thank you. Thanks. Thank you, Jim.