Q1 2020 Earnings Call

Thursday

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Thursday Thursday

Good day, ladies and gentlemen and welcome to Universal displays first quarter 2020 earnings conference call. My name is Sherry and I will be your conference moderator for today's call at this time. It's are in a listen-only mode a question-and-answer session will follow the formal presentation. If anyone's you require operator assistance during the conference, please press star zero on your telephone keypad wage. As a reminder. This conference is being recorded for replay purposes. I would like to now turn the conference over to Theraflu director of investor relations. Please proceed with thank you and good afternoon everyone. Welcome to Universal display's first quarter earnings conference call joining the on the call today or Stevenson President Chief Executive Officer and said rosenblatt executive chef President Chief Financial Officer before see if we can let me remind you that today's college property of Universal Display any redistribution or retransmission or rebroadcast, if any person this call in any form

Without the express written consent of universe.

The display is strictly prohibited further. This call is being webcast live and will be made available for a period of time and Universal display's website. This call contains time sensitive information that is accurate only a couple of the live webcast of this call May seventh two thousand twenty during this call. We may make forward-looking statements based on the 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 comfort of Securities Universal Display disclaim any obligation to update any of these statements now, I'd like to turn the call over to Steve Abramson and welcome to chefs on today's call. We hope that you and your family are staying healthy and safe during these difficult times in these extraordinary really challenging times due to the covid-19 pandemic wage.

We've been able to keep our employees safe maintain our business operations and continue our strategic growth programs a primary focus remains on the safety and well-being of our employees customer partners and Community during the quarter a crisis management and business continuity plans reactivated under our crisis management plans. We implemented measures to safeguard our employees wage which includes modified work arrangements and then our facilities. We are adhering to the recommendations from local and Global Health authorities to maintain a healthy and safe work environment our business continuity plans or mobilized to ensure our ability to continue our R&D programs and manufacture and ship to customers are energy-efficient high-performing Universal Foley materials.

Our team is analyzing and preparing for various scenarios and fortifying our ability to adapt quickly to evolving and fluid situations. We are communicating and collaborating closely with customers partners and suppliers and our positioning the company for continued execution in these times of high on certainty towards the end of the first quarter has concerns about the pandemic increased in the environment deteriorated faster than anticipated. We work with our suppliers to strategically build additional inventory of our proprietary materials and engage with our customers. Material purchases through the extraordinary efforts of our Global team, which includes arguing headquarters International Teams in Asian, Ireland our subsidiary and our founding of our PPG. We have been able to safeguard the continuation of our business operations as a key enabler in the old ecosystem in this rapidly changing environment is challenging

To make forecasts about future results while I Global Supply Chain remains solid and we have had no issues shipping materials to our customers and our customers continue to manufacture all that panels off concerns about constraints in the consumer electronics supply chain due to the pandemic from a marketing standpoint near-term demand visibility is unclear due to the tremendous uncertainties surrounding environment and the macroeconomic environment in light of all of this you believe it's prudent to withdraw our 2020 guidance and visibility improves. We expect to resume providing a guidance as we look ahead. We believe that the long-term growth path always is unchanged at remains strong the timing and adoption they shifted to the macroeconomy.

Samsung LG

Display a booth announced that they are planning to exit LCD TV panel manufacturing has a shift more of their business to always has been reported that some Chinese panel manufacturers will no longer invest new LCD manufacturing jobs and are also shifting more of their focus too old for their future in the consumer space only. I'm interested in all which continues to grow new adopting a new products or materializing in the it and TV segments and the smartphone market. We are seeing a bigger push to move. Oh, let's be on the premium segment during this time. We will continue to invest in our leadership position and you already go system and expect to emerge even stronger to further enable our customers and the industry with a robust balance sheet of approximately $640 million dollars in cash a lean operating model and no debt We are continuing our R&D initiatives to help drive, you know vision and to capitalize on the opportunities in the market.

We're also strategically increasing our headcount around the world to meet the growing long-term needs of the company and our customers as we shared last year. We expanded our footprint age with new offices at full application centers in Hong Kong and Korea Hong Kong has been open for several months. Now while the labs in Korea are currently in their initial phase of qualification or indeed teams continue to discover develop and design new emissive materials and Technologies, including the Reds greens yellows and hosts on the bluefront wage. We continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue or missile system. We also continue to advance our work in organic Vapor Jet pretty novel manufacturing process for OLED TVs.

As we end our customers continue to invest in the future of fluids. We're also seeing the proliferation of oh, let's continue in the Consumer Electronics landscape and the spark phone number We Believe 5G will help spur replacement cycle and the premium smartphone market the segment where all the displays dominate moving beyond the premium Market recent choice of food launches such as the honor 34 $425 and the Samsung Galaxy M20 one for under $200 is indicative in our opinion of the move of old age no age, even the low end of the smartphone market as more older capacity is built and ramped we believe the proliferation of os into the mid-range and low-end will accelerate both TVs while we recently launched its first TV last year. There were about fifteen TV makers in the world using LG display panels this year an additional phone number.

New OEM wall way Sean a Vizio and sharp will launch TV models further broadening the landscape of DVD players and products from the Quebec. She standpoint new Investments continue. It's been recently reported that China Star will invest in a second flexible OLED Fab t v which is expected to be larger than the first all live TV for its first oil with Fab is currently an expansion mode as expected to produce $45,000 per month when fully ramped regarding trying to store. We are pleased to announce that we saw in long-term agreements with Wuhan China Star optoelectronics a subsidiary of TCL similar to our other long-term customer. These are multi-year agreements that include a commercial material supply agreement and a license agreement. I would like to thank the outstanding teams of both companies that work diligently on Thursday.

disagreements well-managed

The challenges presented by current events with respect to all the lighting we continue to believe that its benefits including Energy Efficiency novel and Innovative form factors, beautiful natural light the best replicate sunlight no glare and cool. Operating temperatures are all quite compelling for the commercial residential and Niche markets including Automotive on that note. I'll return the call over to say thank you Steve. And again, thank you everyone for joining our call today off from fourth quarter 2019 hundred one point seven million dollars and two hundred twenty nineteen eighty seven point eight million dollars included in the Palm quarters Revenue were the recognition of twenty four million dollars from a Chinese customer who purchased Safety stock in Q4 do trade related concerns of wage.

Estimating portion was used during the march quarter as we discussed on last quarter's conference call this Safety stock had a return window that closed in Martinsburg. This our customers did not return any material and recognize the full $24 million dollars in the court note that it's different from the $25 million dollars. We discussed last quarter Revenue recognition or under ASC 606

Also in the quarter is an estimated twenty million dollars of Revenue that were customer Advance purchase of the studio covid-19 Unser as Steve mentioned earlier discussed with our customer potential State guard measures and suggested that some inventory building maybe proof.

Our total material sales were sixty six point six million dollars in the first quarter compared to material sales of 60.8 million dollars in the fourth quarter of 2019 with 54.5 million dollars in the first quarter of 2019 premium it or sales in the first quarter of 2020 which include are yellow green emitter where fifty two point six million dollars this compares to 47.5 million dollars in the fourth quarter of 2019 and forty one point six million dollars in the first quarter $0.29 a month.

Red emitter sales in the first quarter of 2024 13.9 million dollars this compares to thirteen million dollars in the fourth quarter of 2019 and 12.8 million dollars in the first quarter of 2019.

As we have discussed in the past material buying patterns can vary quarter-to-quarter some of the contributing factors include the covid-19 issues that we've been discussing well as consumer products and and cycle capacity ramp schedule production loading right device recipe product mix material order and battery dead customer inventory levels and customer production efficiency is a number of these factors are moving variables for our customer. They are also moving variables for us first quarter 2020 royalty and licensees of 43.1 million. This compares to thirty seven point eight million dollars fourth quarter of 2019 and thirty point five million dollars in the first quarter of 2019.

first

20/20 a thesis revenues were two point six million dollars this compares to 3.2 million dollars in the fourth quarter of 2019 and $3000000 in the first quarter of 2019. Cost of sales for the first quarter of 2020 with 22.5 million dollars. This compares to eighteen point two million dollars in fourth quarter of 2019 and 15.8 million dollars in the first quarter of 2017.

Cost of all, the material sales for twenty point two million dollar translating into material gross margins of 69.6% This compares to 73.2% in the fourth quarter of 2019 and the comparable year-over-year quarter material gross margin of 76.2% as we have noted in the past material gross. Margin can vary quarter-to-quarter.

First quarter 2020 operating expenses excluding cost of sales was 45.3 Million down from last quarter's $49 and up with your over here from the comparable quarter 37.6 million dollars.

Operating income was 44.5 million dollars for the first quarter of 2020 compared to last quarter of 34.5 million in Euro over a year, Provost quarter. $34.

First quarter 2020 income tax rate was 18.6% without a s u r first quarter 2028 tax rate would have been approximately 19.5%

their income for the first quarter of 2020 was 38.2 million dollars or eighty cents per diluted share this compares to last quarter twenty six point four million dollars or $0.56 per diluted share and they're comparable year-over-year supporter of thirty one point five million dollars or $0.66 per diluted share. We ended the quarter with approximately 605 million dollars in cash and equipment or over $13.50 of cash per diluted share as Steve mentioned due to the highly uncertain times related to defend em, we believe it is prudent to withdraw our 2020 annual guide as visibility clears. We expect the resume providing anger problems.

And lastly regarding our dividend program with a robust balance sheet and strong positioning in the long-term growth Market. We intend to continue returning Capital shareholder to our dividend program.

My board of directors approved a $0.15 quarterly dividend which will be paid on June 30th 2022 stockholders of record as of the close of business on June 15th, 2018. The dividend reflects are expected continued positive cash flow generation and commitment to return Capital to our shareholders with that. I will turn the call back to see

Thanks.

Well, these are difficult times you'd be c as established a business culture that demonstrates our ability to overcome challenges our journey from an R&D start out with less than a handful of people to a leading Growth Company has been filled with obstacles breakthroughs challenges and unending persistence and vision has fallen almost twenty-five years in that drive is going to adapt to changing environments and dedication to hard work has evolved Universal Display into a successful International Growth Company that continues to broaden this technological a commercial Horizons notwithstanding the short-term uncertainties caused by this unprecedented pandemic. We remain confident in the long-term growth path of olin's we are working closely with our customers as they map out their new product introductions for the coming years and we are developing new architectures and materials to support them with our extensive strengths and Innovation Club.

Operation of achievement we're well-positioned to continue to play a critical role in the old Revolution would like to take this opportunity to thank each of our employees for their drive home tired dedication and heart and elevating and shaping Universal displays accomplishments and advancements. We are committed to being a leader in the old ecosystem achieving Superior long-term wage and delivering cutting-edge Technologies and materials, but the industry for our customers and for our shareholders.

Let me close with this. The human spirit is resilient. We have been inspired by the strength and compassion that has materialized in the communities Around the World Unite these difficult times and emerge stronger to a bright future. And 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 to indicate your line is in the question queue. You may press two. If you would like to remove your question from the queue and for participants using speaker equipment and maybe necessary to pick up your handset before pressing the start to use. Our first question is from San cart with Cowen and Company, please proceed.

Yeah. Hi. Thanks for taking my question. I had two of them. First one is it still said I understand you're not giving guidance. Can you give some qualitative statements on how you're seeing the dead profile in your customer base, especially in China and South Korea?

Thank you, Chris before I answer your question. Let me reiterate Steve introduction and hoping that everyone is staying safe and healthy during these unprecedented times. I also want to mention that Steve Doris and I are also social distancing on this earnings call from our respective homes. So, any of our technical glitches that may occur. So now you know in these uncertain times we know it's difficult for all of you to try to forecast our near-term financials. We are all monitoring and assessing the various issues including how long this pandemic will last how much of an impact it would have on consumer demand that'll macro-economic environment that they macroeconomic environment and how long the recovery process will be in the shape that the recovery will be dead.

However, looking to be on the near-term impact.

Just Global Health crisis. We believe that the underlying long-term fundamentals of all that industry have remained robust panel makers are looking to the future of display technology in a investing in Old it from our perspective. We will continue to execute on all fronts operational R&D and Commercial during this.

And we expect to emerge stronger to further enable our customers and the OLED industry and regarding the specific questions. I mean, we we are off the utilization in the factories that were seeing is obviously coming down and we think that the consumer demand wage impact on our business and on the OLED industry itself. It's really difficult to forecast a magnitude and how long it's going to suck ass, but it is it is going to impact us and and to be perfectly honest. The reason that we withdrew guidance is due to the uncertainties.

Got it. Got it. That's helpful. And then that's a follow-up. You know, the the Commerce Department ruled that come out came out last week would be interested to hear your thoughts on how do you think it impacts your business? And would it have any impact on your non China customers? I would be a positive for them any kind of color on that would be helpful. I understand the fluid situation. And also I'm glad to know that you and every one of the oldest families face unhappy.

Thank you very much. And the thing the Commerce Department issues that there were issued this week. We do not think it will have any impact on us at this time. We have seen no impact.

Thank you. Thank you.

Our next question is from Malik with Citibank. Please proceed.

All right. Thanks for taking my question and good job the top environment the March quarter you talked about the two components for the inventory build-up has been happening in in the in the supply chain starting last year with the the Safety stock which uh was towards the the trade tensions and then Advanced purchases in the March, because of the covid-19 disruption. Are you still seeing these two components or Advanced purchases in the current quarter?

Yeah, the question is obviously, you know, the the two issues one is the Safety stock was purchased in Q4 and the advanced purchases that we actually talk to our customers. So right now the Safety stock that was purchased last quarter. We believe that

A portion of it was used during the quarter. It's probably less than half was used during the quarter in addition the what we woke up approximately $20 that was Advanced purchases by other customers are stockpiling. You know, it's we think that's prudent for them to do it. And you know, if you look at what it really was in terms of if you look back that last year we sold about our revenues about five hundred million and this represents about 5% or maybe three weeks worth of material that was sold in the quarter. I think that offer our customers would are very prudent in because no one knows what could possibly happen. So we were we we contacted them and you know, we did we had dead.

So Advanced purchases, so we're very comfortable where we are today.

Very helpful as my follow-up in your press release you call for the company anticipates material disruption to industries that utilize OLED as part of your life reason to withdraw the full year guidance. I'm just understanding this is like a a risk statement or and what what do you exactly mean by material disruption?

Bye, I'm sorry to the question is material you can yeah, you called for a material disruption to industries that utilize OLED this year in in the press release.

Oh, okay. Yeah my work. I think you're you're talking about, you know, just covid-19 and what impact it will have on the macroeconomic environment and you know, impacting the demand side and then impacting our customers and intern impacting us. So I think you're talking about is General risk factor.

Got it. Thank you.

Thank you.

And our next question is from CJ. Please proceed good afternoon, and all three of you are well, I guess first crack, you know as your visibility, you know improves to 5G builds and you talked about not only high end but moving to a mid-level smartphones curious if you're seeing any interesting changes in in OLED material recipes and as part of that, how are you thinking about the impact that might have on long-term pricing assumptions within your contracts prefer material pricing?

it was

and material pricing is something that we built into our contracts and we have all over the life of the agreement and in terms of

What we're seeing, you know, we each of each of the products may have different recipes that go into them, but I think you know, it is something that we're always on edge because they're always providing new materials to our customers and there's always new recipes, but you know, Steve may want to just add a little bit. I'm just talking about what new products and where they fit into our future with our

Well, we we we work with we work very closely with the customers on the new product introductions and obviously can't talk specifically about anyone customer but God but we have multiple projects working with the customers and a at various recipes of work for each model that that they use so it wouldn't in Ewing to move in that in that direction continuously for products out there and therefore you end up with more and different recipes.

Okay, thank you. I guess there's my follow-up question, you know affects came in a little higher than I would have thought curious if there's any one-time items related to Thursday, and as part of that how should we think about objects trajectory through the rest of the calendar year. Thank you.

Thank you CJ. Yeah, it is a little higher. However, you know, as a leader in the ecosystem. We will continue to invest in the long-term growth of All Leads and walk in our position as a key enabler to our customers and the industry or ethics guidance excluding amortization is 10 to 15% Year-over-year. There are no layoffs and we are sung directly increasing or Global head count to meet any of the needs. We we really believe that you know, quarter-to-quarter. Sometimes these numbers go up and down, but overall we're still comfortable with our estimate for the year of ten to fifteen percent.

Thank you. And our next question is from Brian Lee with Goldman Sachs. Please proceed.

Hey everyone. Thanks for taking the questions. Hope hope you're all doing well and staying safe. I had a couple here I guess just on the the China Star contract wage. Is that a portfolio license? And is it similar to the other agreements you have in China or would you say it's more like your fixed agreement with Samsung and then in terms of duration of you know, kind of similar five six year time frame as as the other contracts you've announced in the past.

well

Very excited to further our relationship with China Star is who you know is a subsidiary of TCL and they are the second largest LCD manufacturer the structure of all of our warranties long-term Agreements are similar in as our other agreements. This is a multi-year agreement which includes a commercial Supply agreement and a license agreement and financial terms. We don't disclose.

Okay fair enough and then just on the the advanced purchases here you guys experienced this last year. So it's probably be coming. You're you're sort of old. I didn't know is this all from China? Is it is it a pulse forward from the second half like it was last year. I know the twenty million. It seems like it's smaller. So it would would you consider that to be more of a quarter versus last year? I think it was spread out over a couple of quarters. Yeah. I think this this Advance purchase of twenty million dollars is a little different but then in the past, I think this this twenty million dollars is from multiple customers and we believe this is covid-19 related. We actually, you know our wage tax with our customers and just to ensure just in case there were some disruptions in the supply chain that everybody had what they needed the twenty million dollars as I said a little bitterly are based upon last year's.

Revenue is only about three weeks worth of material. So and this is different than the $25 million dollars of BOE purchases, which were fourth quarter of last year.

Okay. Okay, great. And then just maybe last one from me I'll pass it on with respect to you know Samsung and and and I think there's been a growing optimism around them getting back into Ed's seems like there's been some recent chatter about you know, Samsung debating between Quantum nanotechnology and and for a dead road map. So just wondering if you had any thoughts or or feedback just bigger picture and longer-term thinking in terms of what what you're expecting out there. And then what what the implications of life would be for you if Samsung decided to go one route versus another

Yeah, obviously, we can't speak for our customers but to the extent that they use OLED technology. We think it's good for us and good for the overall industry month and we've been working with Samsung for twenty years. So we're we're very pleased that they're getting back into the TV Market.

Okay, fair enough exercise. Thank you. Our next question is from Shannon Kraus with crust research. Please proceed. Hi. Yes. I am speaking my question. I'm just curious given social distancing and the the fact that you guys are so research-intensive. I'm just kind of curious as to how if there's been any impact to your R&D efforts or by you've been able to work around that and then I have a follow-up. Thank you.

Thank you, you know we have you know, you say in our subsidiary adhesives and PBT are considered essential businesses. So we are staffed and operational and some of our employees are working on site somewhere employees are working from home are our top priority is safety and health of our employees. We have implemented a number of safety protocols for everyone in our facilities included disinfecting and cleaning protocol as well as strict social distance and which you know, it does limit the overall number of people who can be in the lab at any given time.

Okay over here under our business continuity plan that we put in place. We are continuing to run our programs and ship customers are fog materials.

Okay, great. And then I was just trying to attempt to come up with like a base level Revenue to think about four first-quarter and so is it fair to say that you suck, you know hundred twelve who said 20 out that was pulled ahead and then maybe about half of what was used by the the customer that the reported you know, that that had pulled the head in fourth quarter of that. Maybe eighty is sort of a base level Revenue to think about and then look forward or am I just off on how I'm thinking about it?

well, I mean, I mean you are you are correct in terms of thinking about it if you take whatever portion of the 25 or 24 from Boe off and

Look at taking away the twenty million pushing it out, you know, it's it's difficult to predict what's going to happen. You know, we know, you know, once a month of man really varies significantly from month to month and with the initial activities and occurred with all the uncertainties. It's it's hard to predict we do note that April was really weak and the how the full quarter will shape is really uncertain at this time so long, it's I would I wish I could help you to try to figure out what the year is going to look like, but that's the real reason that we withdrew guidance because of all the uncertainties around with how quickly things will turn around. We just don't know.

Yeah, I know. It's it's very given everything. I mean if you're you're clearly not alone. Just just one last question when I think about how quickly given supply chain challenges or you know, Logistics and shipping. I don't know who are planes in the sky house. If you had a demand coming from China or one of your other partners wage, is that something that you think you could address fairly quickly if it did seem like, you know, hopefully we come out of this fairly soon and in the world goes back to some semblance of normal.

Fly chain or Global Supply Chain is solid and we are strategically building inventory to ensure that we can continue to meet all of our customer needs. And really we're we are being prepared for whatever demand spikes may occur. We hope that they go up and so I do thank you so much. I appreciate it. Thank you.

Our next question is from Sydney, Ohio with Alicia blade. Please proceed great. Thank you for taking my questions. I got a couple the first one is fully understanding the shutdown and the logistics were issues in China back in February and March, but can you talk about how business run-rate have improved since China went back to work over the past few weeks. I think you just talked about April being very wage. Is that a comment on China or elsewhere and to follow up on that with the withdrawal of the for your guidance? Is it is it fair to assume that's mostly demand-driven and Supply Logistics is not really a big factor here.

Well, I I think you are correct. It is demand-driven. So when you look at you know why we withdrew our guidance, we just don't know in terms of how quickly things will return and you know, it clearly is weighing obviously much heavier on the demand side versus the production side off and it's across the board. It's not you know, it's not one customer. It's not one location. I think everything is very weak.

Okay, that's that's helpful. Maybe a follow-up question is looking at the in the past you look at you talked about OLED capacity grows between 2019 and 2021 birth control 50% it I mean just based on the the headlines. It seems like there are a few projects being delayed. Are you guys still thinking that 50% is doable and if you can add some color around the geography off or whatnot that we helpful. Thanks.

Yeah, well our oil capacity model still calls for urine 20-21 installed capacity to increase by approximately 50% from the installed capacity g at the end of 2019 as measured in square meters while this forecast is unchanged. I think in this environment of high uncertainty timing really could not affected. It's really it's a very fluid situation at the same time. We remain confident that long-term growth piss have always is strong with customers shifting more of a focus to always including new capacity investment plans, and we continue to believe that we are in a multi-year growth capex cycle.

Great if I can squeeze in one more last quarter you talked about inventory the digestion. Kind of across-the-board. Can you give us an update there as soon as it's gotten worse with what the demand falling off, but what areas do you see the most work that needs still needs to be done and maybe by panel size by geography whatever metrics you can use would be great. Thank you.

I made

Demand is clearly an issue with everything with consumers, you know, people aren't going out and buying phones and you're you're hearing folks like LG's say the demand for life is is being impacted. So I mean it is it's across the board. Therefore I think utilization rates are being impacted and I can't I can't say one area versus another cuz I do think it is just across the board.

Either as a reminder to star one on your telephone keypad. If you would like to ask a question. Our next question is from Jim with Nita a company, please proceed.

Thank you. Good afternoon. Wondering if you could say when during the quarter these these Advanced purchases were made or or whether it was you know over the course of several weeks from customers like it was more than two.

Yeah, it was it was across the board and it was clearly, you know as the covid-19 issues became obviously more and more in the news and you know on our on our February conference call we talked about what we thought the impact would be in q1 and Q2 would be about 10% of our revenues subsequent to that things obviously got much worse and with so that we were then contacting customers. So I think these purchases were were more in the month of March time frame cuz right after the call things really went to hell in a handbasket to be honest. Yeah, it should see the same thing. That was also a reflection of this spread to the US and all the uncertainty around that

Yep. Okay. Yeah. Yeah, it was, you know, can you ship that stuff and making sure that they had everything that they needed so we were we were we were in constant contact with customers and trying to make sure that we can do everything we can do from our side to make sure that we met their needs.

The past I think I think you you guys have talked about the fact that folks sites talking to customers fairly regularly given what else what's happened? What transpired in in China? And Korea? Is that becoming more challenging to get in front of it? Just not that critical because you can cause it's trying to I'm sorry, go ahead and get you finished please Jim.

I I

I was going to say is does it make it harder to sometimes understand inventory levels customers if you may not have as direct contact, or maybe maybe I'm misinterpreting it. Maybe you have the same level of contact that you're having with all of these customers to understand. You know, we're inventory levels are we're utilization rates are sorry. Go ahead.

Yes, yeah, we're all connected via technology. So communicating with our customers partners and suppliers is really not been disrupted during this pandemic both headquarters and off our local teams are engaged with customers on a continuous basis and you know with the recently-opened new offices the state-of-the-art full-blood application center in Hong Kong and Korea Thursday. We have also have a broader breadth of services and solutions available locally for our customers.

Got it. And my last question is just trying to reconcile some of the commentary you're making about utilization rates and weakness. We we are offering I think anecdotally of activity picking up in China in March and Semiconductor in parts of the industrial Market some of that wage continuing in April. So I'm wondering is you know, like maybe different than what you're seeing is this, you know, potentially more reflection of you know, some of the larger drivers to the OLED Market in the mobile space.

No, I think that you know China and in China, there were a number of the Fabs that were running and there were lots of logistical issues because I travel restrictions that were placed in China and I think that impacted their ability and their utilization rates, you know, I think that that's lifted things will turn around but it's you know, we were hearing things getting better as you said anecdotally but having more manpower and the ability for folks to go to work is really what's needed and that's what's happening now, but we have not seen it in the past.

Okay. Can I ask one quick question?

How we doing with blue?

We make it excellent progress.

Who's you know really encouraged by a continued progress? But until we meet initial commercial specs though. We we really don't intend to provide specifically. Okay? I'm not sure.

Our next caller is from Andrew with berenberg capital markets. Please proceed. Thanks. I just had a quick question. I know the situation is a bit unprecedented, but I was just wondering when we looked at your royalty and Licensing Revenue. I know you said in the past or expect I wanted to have to to the one ratio vs. Material sales given what's happening on the material sales side. Should we see that continue to be that linear or should they should come back? Well material to royalty ratio is really dependent on our customer mix and it's because of global uncertainties. It's difficult Birth cast. However, you know based upon our history. The ratio is typically oscillated between 1.5 and 2 to 1. So, I think it's in that ballpark.

And just a follow-up. I mean with the new agreement that should still be the case right with trying to start.

Without talking about it these agreements that we have are pretty much all material supply agreements and license agreements so that you know disagreement is similar to the the other room is that we have in place.

Got it and put have an account in question. But has it been any change in terms of the collections you received from your customers or is that usual?

I'm sorry, it broke up a little bit. I didn't hear what was it from our collections is that sort of an extension of those terms or any delays? I've been relatively unchanged there were obviously because of a the Boe Revenue that we took into one that was shipped in Q4 month. And you know, I think everybody is a little slower and paying but I don't think that there are any issues that we see to be honest there in April was down a little bit from March month.

Great. Thank you so much. Thank you.

And our next question is from 9 p.m. With a research please proceed.

Hi, thank you for taking my question. I'm sure you have some project going on in it panel side means notebook and monitors. Just wanted to get your door and took a long-term growth picture here. What what portion of the revenue would be I tend to relate to you by the end of next year or even in you know, three years.

Ma'am, we got this TV. We stay at I keep going to Trish is very low right now. It's about 1% of that total market. So we do think that there's significant fact if you look at the smartphone business being about a third of the one phone market is always so we think that there's a really nice opportunity for growth in this segment. I'm okay. Thank you.

Thank you now and our next question is from Andrew Abrams with scmr. Please proceed. Hi guys. Just a question about my PPG. Have you seen any issues with PPG meaning PPG having difficulties getting basic materials or some of the rare earth materials that you use and has that been an issue at all for you over the last quarter or so?

PPG is considered essential as we are so the production is moving forward and we there are no issues in terms of having material sourcing materials either from China or from India or from anywhere else. We've been we have kept a supply chain that has multiple sources and an addition we have inventory of raw materials built up. So we don't believe that there will there has not been if we see no issues at all for the foreseeable future in the railroads materials, and how's your help much better? Thank you. I appreciate it. Thanks a lot.

All right.

And we do have a follow-up question from CJ Muse with evercore. Please proceed.

TJ, please check and see if your line is muted.

TJ, we're unable to hear you. I'm sorry about that. Just a follow-up question on the 1.5 the 2.0 relationship. Does that change it? All you talked about really customer mix driving it but does that change at all? If a customer is building inventory the treatment of of how you book wage and therefore royalties. Does that change at all? It does not based upon 606 you you figure out you know, the life over the life of the agreement how much you expect to sell off and whenever you sell a gram of material you report that and you report the corresponding license fee or royalty with that so it doesn't matter how it off what the purpose of the the purchase is. It's it's a formula that you use for every gram that you ship.

Okay, and just one last follow-up there you the prior Year's talked about 6 or 5 or 6:06, but now we're we're just not going in that direction. Should we assume that will be just talking underneath the new accounting treatment and not going over the historical from you. I think that that at this point that it's mean it's not meaningful to break it out over the last few quarters. You've seen that the two are pretty much close to each other and most companies aren't doing it and you know most companies actually SEC requires you to do it for one year. We did two years just because our business model and we but we don't think it's meaningful at this point. So we do not intend to give 6:05 results.

Okay. Thank you. Thank you CJ.

Thank you. This concludes the question-and-answer session. I would like to turn the program back over to sit Frozen for any additional or closing remarks.

I'd like to thank you all for joining the call today, and we appreciate your interest as always and we want all of you to stay healthy and safe. Thank you.

This concludes today's call you may now disconnect and have a great name.

Sherry we're all set.

What?