Good day, ladies and gentlemen, and welcome to Universal Display Corporation's first quarter 2023 earnings conference call. My name is Paul, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A brief 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 conference call over to Darice Liu, Senior Director of Investor Relations. Please proceed. Thank you. Good afternoon, everyone. Welcome to Universal Display's first quarter earnings conference call. Joining me in 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 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. 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, May 3rd 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 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. I'd like to turn the call over to Steve Abramson. Thanks, Darice. Welcome to everyone on today's call. For the first quarter of 2023, we reported revenue of $130 million, operating profit of $45 million, and net income was $40 million or $0.83 per diluted share. Macro uncertainties continue to linger and weigh on near term demand. However, we remain confident in the long-term growth path of OLEDs. In addition to the significant IT adoption cycle that is expected to commence next year, OLED activity is increasing in several segments of the consumer electronics landscape. Last month, Samsung Display announced a $3.1 billion investment to retrofit its Asan plant to a Gen -8.6 OLED IT facility, and it has been reported that other leading panel makers are planning to invest in new capacity as well. Fueling this new CapEx is the nascent OLED IT market. According to Omdia Market Research, 470 million displays for IT products were shipped last year, and only 9.1 million units or 2% were OLED. Omdia forecasts that due to leading OEMs broadening their adoption of OLED in their product portfolio, IT OLED panels will reach 12.9 million units this year and will double to 25.4 million units next year. By 2028, OLED tablet and notebook panel shipments will reach 74.3 million units. Foldables is another area of growth and excitement. DSCC forecasts that foldable smartphone shipments will increase 45% year-over-year in 2023 to 18.6 million units. DSCC expects to see at least 37 different foldable models shipped this year from 10 different brands, with Google, OnePlus, and TECNO entering the foldable market for the first time. This is an incre ase from last year when there were 19 different foldable smartphone models from seven different brands. IDC, another market research firm, projects a five-year CAGR of 27.6% for foldable phone shipments as units reach 48.1 million units in 2027. Switching gears to automotive. According to Omdia, the automotive industry has emerged as a key market for displays, becoming the fifth largest display application market in terms of shipments as of 2022. Omdia forecasts that shipments in the automotive OLED display market will surge to 6.9 million units in 2027 from 770,000 units in 2022, thanks to OLED displays rapid response rate, low power consumption, lightweight, and slim design. In just the past three months, Samsung Display signed an agreement with Ferrari to develop OLED displays for Ferrari's next generation models. LG Display is reportedly planning to supply a 30-inch OLED panel for electric car maker Lucid's upcoming models. Buick showcased its first electric SUV, the 2025 Electra E5, in China with a 30-inch curved OLED dashboard display. Hyundai Mobis developed the world's first 30-inch rollable OLED display for automotive applications. For large area OLED panels, LG Display announced it will release a 77-inch transparent OLED product by the end of this year. Samsung Display announced that its hybrid QD-OLED panel yield now exceeds 90%. We work closely with our customers as they map out their new product introductions for the coming years, and we are developing new OLED technologies and materials to support their product roadmaps. We have crafted a comprehensive approach for the invention of energy-efficient, high-performing phosphorescent materials. This includes our machine learning, synthetic, mechanistic, analytical, and process chemistry expertise, all created and driven by our global team of scientists, engineers, and technicians. We are continuously discovering, developing, and delivering next-generation reds, greens, yellows, and hosts to meet the ever-changing and ever-evolving specifications for energy efficiency, operational lifetime, and color gamut. As a pioneer in the OLED ecosystem with approximately three decades of experience and know-how, we are leveraging our first-mover advantage and continue to be at the forefront of the OLED materials industry. With respect to blue, we continue to make excellent progress in our ongoing development work for our commercial phosphorescent blue emissive system. 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 making advancements with our groundbreaking dry printing manufacturing process platform. Two critical milestones that we are currently driving towards are the printing of all layers in the full OLED device and achieving scaled print uniformity. We believe that achieving these milestones will be significant in our path to commercializing OVJP. To learn more about UDC, including our phosphorescent OLED and OVJP programs, please visit booth 828 at SID Display Week in L.A. later this month. This afternoon we announced the acquisition of Merck KGaA's phosphorescent emitter portfolio and a new multi-year collaboration agreement. The portfolio encompasses over 550 patents in 172 patent families and will complement and boost our strong global IP framework of more than 5,500 issued and pending patents. The new collaboration pertains to certain UDC green and yellow phosphorescent emitters for use with Merck KGaA's transport and host materials to create advanced full OLED stacks. On that note, let me turn the call over to Brian. Thank you, Steve. Again, thank you everyone for joining our call today. Looking at the first quarter, our revenue was $130 million compared to $150 million in the first quarter of 2022. Results were in line with our expectations of a softer first half of the year compared to the second half. Our total material sales were $70 million in the first quarter compared to material sales of $87 million in the first quarter of 2022. Green emitter sales, which include our yellow-green emitters, were $54 million. This compares to $66 million in the first quarter of 2022. Red emitter sales were $16 million. This compares to $20 million in the prior year's quarter. As it has been discussed in the past, material buying patterns can vary quarter to quarter. First quarter royalty and license fees were $55 million compared to the prior year period of $60 million. Adesis' first quarter revenue was $5 million, an increase of $1 million from the comparable period in 2022. First quarter cost of sales in 2023 and 2022 were both $33 million. This translates into total gross margins of 75% in the first quarter of 2023 compared to 78% in the first quarter of 2022. Cost of OLED material sales in the first quarter of 2023 were $29 million, translating into material gross margins of 58%. This compares to $30 million and material gross margins of 65% in the first quarter of 2022. Impacting first quarter gross margins was a $3.3 million increase in our inventory provision and $4.7 million related to the underutilization of our new Shannon facility. The combined impact of these items is approximately 6% to total gross margins. First quarter operating expenses, excluding cost of sales, were $52 million. In the first quarter of 2022, it was $55 million. The year-over-year decrease is primarily due to lower stock-based compensation expense and the Fujifilm patents becoming fully amortized in July of last year. We continue to expect 2023 OpEx to increase 5%-10% year-over-year as we continue to invest in our people, in our global infrastructure, and in our innovation engine. Operating income was $45 million in the first quarter, translating into operating margin of 35%. This compares to the prior year period of $62 million and operating margin of 41%. The income tax rate was 23% in the first quarter of 2023. We expect our tax rate for the year to be approximately 22%. First quarter of 2023 net income was $40 million or $0.83 per diluted share. This compares to $50 million or $1.05 per diluted share in the comparable period in 2022. We ended the quarter with approximately $845 million in cash equivalents, and investments. Regarding guidance, we are reaffirming our expectation that 2023 revenues will be in the range of $550 million-$600 million. Lastly, our board of directors approved a $0.35 quarterly dividend, which will be paid on June 30th, 2023 to stockholders of record as of the close of business on June 16, 2023. The dividend reflects our 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. Energy efficiency and sustainability are key foundational elements in UDC's core competencies. Our patented and award-winning phosphorescent OLED technology and universal OLED materials can enhance the performance of displays and lighting products, providing real power saving advantages for longer battery operation in portable electronics and less energy consumption in larger displays and lighting products. In our recently published 2022 Corporate Social Responsibility Report, which can be found on our website, we estimate that our phosphorescent technology and materials in OLED smartphones saves more than 860,000 metric tons of carbon dioxide equivalent per year. Using an EPA calculator, this is comparable to carbon sequestered by more than 14 million tree seedlings grown for 10 years. In addition to the continuous generation-to-generation improvements in our red and green phosphorescent materials, the introduction of our phosphorescent blue into the commercial market is expected to further increase energy efficiency and translate into added power savings, longer battery life, brighter displays, and lower panel temperature. We believe that our broadening phosphorescent portfolio will enable new product designs and applications and support our customers' sustainability initiatives, driving growth for UDC and the OLED industry. 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. With that, operator, let's start the Q&A. Thank you, Mr. Abramson. We will now be conducting a question-and-answer session. 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'd 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. One moment, please, while we poll for questions. Thank you. Our first question is from Brian Lee with Goldman Sachs. Please proceed with your question. Hey, everyone. Thanks for taking the questions. Sorry I jumped on late, so apologies if you already covered this. Did you sell any blue developmental materials in the quarter? How much, if you did, and then how many customers, you know, count lines were there purchasing blue this quarter for sampling purposes? Yeah. Hey, Brian. Thanks for the question. We did have sales of blue materials, both host and emitter, development sales in the period. A few hundred thousand dollars worth, across a number of customers. Okay, great. Second question, just on the TV market. I know there's been a lot of back and forth in the press about LG and Samsung doing a deal on OLED panels for TVs. Maybe high level, can you speak to some of the implications as you see it for the market and then also for UDC, any potential upside maybe to your internal views around the TV market this year, given, you know, if this sort of go forward? Thanks, guys. Brian, as you know, we can't speak for our customers. We think the OLED TV market is great. OLED TVs are great. The more Samsung and LG sell, the better it is for us. All right, fair enough. I'll take the rest offline. Thanks. Thank you. Our next question is from Krish Sankar with TD Cowen. Please proceed with your question. Hi, good afternoon. This is Steven calling behalf of Krish Sankar. Thanks for taking my questions. First one, if I could have Steve Abramson or for Brian Millard. In terms of, you know, linearity in the first quarter, can you talk about how customer orders trended relative to your original expectations? More importantly, coming into this current quarter, how have your conversations with customers been and their sentiment, you know, especially relative to any, you know, delays or pushouts or pauses in orders? Hey, Steven, great question. In terms of the quarter, I mean, like, as we said in the release, it really did play out in line with our expectations. There really wasn't anything out of the ordinary that we saw in Q1. The reaffirmation of guidance for the year, you know, is evidence that I think what we're seeing and hearing from customers for the rest of the year is also in line with those expectations and what we had originally planned. I think it's, you know, certainly expected to be a second half weighted story. We do expect the first half to be lighter. I think you're, you know, seeing that in the Q1 result. Everything we're hearing from the customers is really consistent with where we were back in February as well. Okay, got it. Just as my follow-up, Brian, just wondering about inventory days. I know things like the dollar levels and also inventory days came down a little bit this quarter. Just in terms of, you know, big picture, conceptually, you know, your inventory days have been well above 12 months for a number of quarters now. I guess just kinda looking back historically, the last time there was a big step up from, I think, the roughly nine-month type of range to above 12 months was back in 2017 when Premium smartphone started to adopt OLED panels. I guess my question is, you know, the higher inventory days that you guys are running at, should we expect that to go back down towards the 12-month mark over time as demand recovers? Or is there a structural change in your demand profile from customers because of TVs and IT panels going forward, where we should expect inventory days to maybe stay in this 12 month-16-month type of range? Thanks. Yeah. On, on inventory, there's really kind of two main drivers there for the increase you've seen in recent periods. The first being in our raw materials inventory, which is where the bulk of the increase has been. You know, we have iridium, which is a key raw material for us and is included in a, you know, a number of our materials. We have been building a strategic stockpile of that. We feel comfortable with the quantities of iridium that we have on hand, but that's been some of what you've seen in the increased dollar value in the last few years. Also on the finished goods side, you know, we're a sole source supplier for our customers. We need to make sure that we have the quantities on hand to meet their demands. The increases that you've seen on that side have not been necessarily because of, you know, anything specific we're hearing from the customers, but more just our own planning. We're always making sure that we're being disciplined and not getting, you know, too far ahead of the demand curve there in how we, how we build up our supply. Great. Thank you. Thank you. Our next question is from Sidney Ho with Deutsche Bank. Please proceed with your question. Thank you. I got a couple questions. First one is on the acquisition of Merck's patent portfolio. Can you walk us through what you get that is not already covered by your IP portfolio? Does that accelerate your product development, let's say, the blue emitters? Or does that mean going forward, you will be more active in selling host materials or just kind of strengthen your royalty and licensing business? This is really to expand and buttress our patent portfolio, our emitter patent portfolio. We're we clearly have the leading position in phosphorescent emitters. When Merck's patent portfolio became available, we felt it was a very good addition to our portfolio. It will broaden the tools at our team's disposal as we develop new and next generation phosphorescent materials and continue to build upon our industry-leading position. Okay. That's that's fair. The second question is, if I noticed that for Q1, the revenue outside your two top customers are now 44% of total revenue, which seems like the highest that I can remember. Can you talk about the breadth of that revenue stream? Do you have any concerns that there is a lot of excess inventory at those customers, especially given the persisting weakness we've been hearing from Chinese handset OEMs? Thanks. Yeah. You know, we have a number of customers, as you know, beyond the top two, and, you know, we've seen, you know, those entities continue to increase their, you know, share with us over recent periods. Nothing really specific. I think there's also variability in our customers' buying patterns quarter- to- quarter that also contributes to, you know, some periods, you know, the top 2 may be a little less than in others. It's not a structural change in our view. It's just kind of a, you know, a little bit of a one-off, I think, that you're seeing in Q1. Okay. Thank you. Thanks. Thank you. Our next question is from Mehdi Hosseini with SIG. Please proceed with your question. Yes. Thanks for taking my question. A follow-up to the Merck topic. Should I take this patent acquisition as a sign that you are renewing efforts to drive revenue from the host? If not, what's the main objective here? No, we're not renewing efforts on the host. This is an emitter portfolio acquisition. It was basically to provide our team with additional pathways so that we can develop future materials, broader materials for our customers, for the industry, and accelerate the ecosystem. Okay. Got it. I'm assuming that, Yvonne, the acquisition of patents, won't have any near-term impact on your financials, yeah? No. It was a $66 mi llion purchase price, so, you know, that cash outflow has occurred, and we'll be amortizing that over a 10-year period. There'll be, you know, roughly $6 million of annual expense going forward. Okay. All right. Just, it's very encouraging to hear that you actually are recognizing emitter revenue or, I'm sorry, blue emitter revenue. Should I assume that couple of a hundred thousand dollars a quarter of revenue is enough for your customers to and your customers' customers to develop the required semiconductor components to qualify the panels? Or would you have to sell them more as they retool and prepare for high volume manufacturing next year? Yeah. In terms of the quantities of blue, it is an increasing quantity. I think what we sold in Q1, you know, dollar-wise, is pretty similar to what we sold for all of last year. It has increased in Q1. I think those quantities, you know, certainly will increase somewhat as we get closer to a commercialization. We feel, you know, comfortable with the 2024 us having commercial material available next year and the timelines and feel comfortable with the pace that we're making with that as well as, you know, what we're hearing from our customers. Okay. I guess what I'm trying to better understand is if there is a lag in effect between the volume shipment from you to your customer and the time it would take for your customers to work with their customers to qualify for end product. I mean, I think there certainly, you know, there's, you know, just kind of playing out the sequencing. Our customers we need to build panels, feel comfortable with the performance of those and, you know, then have conversations with theirs. I think that, you know, there'll be increasing activity as we approach commercialization, you know, or commercial launch of a panel with our blue phosphorescent material in it. Okay. Thank you. Thanks. Thank you. Our next question is from Nam Kim with Arete Research. Please proceed with your question. Hi. Thank you for taking my question. Sorry, quick clarification on Merck, your IP acquisition, again. You just said, you will enhance emitter patent portfolio. You also said in prepared remark, and I also remember Merck used to supply HTL layer for one of your customer. I just wonder, you are interested in entering into any other OLED material business like HTL other than current EML layer business? No, Nam, this is just an emitter acquisition. Yeah, the collaboration- Okay. Nam, the collaboration agreement that we announced today as well in the release that we put out, that's focused on collaborating with Merck and, you know, providing our emitters so they can, you know, use those in their development of host and transport layers. Another question. I think none of your customers signed the contract on blue yet. Obviously it's not available commercially today. Should we expect additional royalty and licensing income on top of additional material revenue when you have a commercial ramp on blue next year? I just wonder if there will be any financial implication on additional licensing contract on blue with your customer. Thank you. Our contracts, our license agreements with our customers, you know, certain of them are portfolio license agreements that do include blue and certain customers specifically, you know, our contract with Samsung, our license agreement with Samsung excludes blue. It just kind of depends on a customer to customer basis whether there's an incremental opportunity there. Okay. Makes sense. Thank you. Thanks. As a reminder, 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. Our next question is from Jim Ricchiuti with Needham & Company. Please proceed with your question. Hi, good afternoon. This is actually Christopher Grenga on for Jim. With respect to the cost of materials, could you just elaborate on the puts and takes there, particularly the inventory charge? How should we be thinking about the cadence of that impact of the Shannon facility as we go through the year? Thank you. Thanks, Chris. On the inventory charge, we did record a $3.3 million inventory provision in Q1, that was really, you know, each quarter we have to take a look at our sales plan, and the quantities we have on hand. As we did that this period, there were certain materials that we had excess quantities of and just needed to provide for. That's, that's really composition of that. It's something we have to do every quarter. Sometimes it's a really small number or no number. You know, this quarter it happened to be $3 million. As it relates to Shannon, you know, we had $4.7 million in Q1 of underutilization. That's slightly higher than the run rate that we had last year. I think, you know, as we've, you know, worked with the team, I think there's gonna be, you know, a slight uptick, maybe slightly more than $1 million of underutilization costs this year. Still, you know, more or less in that ballpark of what we previously disclosed. It should be pretty linear in terms of cadence over the year, at, you know, slightly more than $1 million per month. Thank you very much. You spoke about the investments that you're seeing and the secular tailwinds, particularly in IT. I guess, what else are you seeing that gives you confidence that you're going to see an acceleration in the back half of the year to achieve the guidance? Yeah, I think it's, you know, a lot of it is what, you know, what you hear from our customers in terms of, you know, the expectation that the second half of the year is going to be, you know, better than the first half. I think a lot of what we're saying is an echo of others in the ecosystem, which is also informed by, you know, our forecast information that we get from our field teams and our customers in terms of what they're seeing and expecting and planning for. Also some of that has to do with product launch cycles that are, you know, planned for the second half of the year, which, you know, also, you know, demand additional quantities of material to meet those launches. There's a number of factors that we're monitoring, but all that kind of, you know, informs the reaffirmation of our guidance range. Great. Just one more, if I may, on Merck. Are the emitters broadly relevant to consumer electronics generally, or is there any particular typology or size that those emitters, that newly acquired portfolio of IP would be more or less relevant to? Merck's been working in this field for a long time, and they had a lot of really smart people working on it. Yeah, I would say it's broadly applicable across the board. Got it. Thanks very much. Thank you. Thank you. Our next question is from Martin Yang with Oppenheimer. Please proceed with your question. Hi, thank you for taking my question. I dropped off for the last couple minutes, sorry if this has been asked before. Can you remind us your expected ratio between material and royalty sales for the year? Yeah. Hey, Martin. We're expecting one and a half to one, so one and a half materials to one royalty license. Got it. Thank you. Second question is on your license agreement with Samsung, it seems that you have eliminated language around minimum purchase agreement on the new material supply agreement that you entered since late last year. Can you confirm and also maybe comment on how that impacts your revenue recognition and the cash flow going forward? Yeah. There's no change in terms of the structure of the contract with respect to minimum requirements from the old agreement to the new one. That's completely unchanged. If there's a, if there's a wording change, it's just, you know, a nuance on our side as opposed to anything structural in the contracts. Got it. Can you maybe clarify on how going forward the revenue recognition will track a bit more closely with cash flows? The revenue model is exactly the same in that we have to look at, you know, or recognize on a per unit basis as we ship material, both the material revenues as well as the royalty and license revenues, and that's based on estimates of contract purchases over the full term. The payment structure is, you know, slightly different in the new contract as opposed to the former. You know, the prior contract had quarterly payments, and this contract has both quarterly and annual payments. Obviously, we can't go into the depths of the details on how those are calculated, there is just a different payment structure that makes us feel like revenue recognition and cash collection should be much more closely correlated in this current contract. Got it. Thank you. Thanks. Thank you. This concludes the question and answer session. I would like to turn the program back to Brian Millard for any closing comments. Thank you for your time today. We appreciate your interest and support. This concludes today's conference call. You may now disconnect.