Q2 2021 Universal Display Corp Earnings Call
Yeah.
Samsung is slated to launch its galaxy Z code free and Galaxy Z flip 3 next week and.
As reported and re targeting shipment levels of 6 to 7 million units, which and up from the $2.5 million Foldable smartphones the company shipped last year.
And there has also been reported that Foldable OLED panel production for Google Vivo and Xiaomi will begin in the fourth quarter of this year.
Bolstered by increasing new models Foldable smartphone shipments are expected to exceed over 10 million units and 2022.
And the IP landscape Samsung display continues to lead OLED adoption with over 10, New Samsung OLED notebook panel model expected this year compared with $5 and 2020, Oems, including Lenovo and Dell and Xiaomi are unveiling new notebooks with OLED displays.
Samsung display is the largest customer for OLED notebook panels is reportedly Taiwan's aces.
As a leader and a gaming notebook market OLED strength, including wider color gamut High contrast ratio and fast response times are appealing to <unk> customer base.
According to reports Samsung display recently increased its 2021 shipment target for notebook OLED panels by approximately 45% from 4 million units to the range of 5.5% to 6 billion units.
We are also seeing other panel makers enter the nascent OLED market LG display is currently offering 13.4 inch OLED panels to Lenovo and now reports the BOE technology and others may begin shipping OLED notebook panels and 2022.
This is in addition to a myriad of reports on increasing OLED tablet activity from leading Oems.
We believe that the ongoing transition to OLED and the small and medium markets is prompting the need for new OLED capacity very recently it was reported that Samsung display glass and spent $2.6 billion and OLED that plant capacity and <unk>.
LG display plans to spend approximately $4 billion for additional gen 6 OLED capacity.
Additionally.
And is expected to begin ramping OLED capacity and its third Gen..6 fab B 12, and Sean Quinn and the fourth quarter of this year.
On the TV front.
LG electronics releases any 3 inch OLED TV models during the quarter.
This is the latest addition to Lg's OLED TV lineup, which currently consists of 48.50, 565, 77% and 88 inches.
LG commented that as people spend more time at home. These days demand for ultra large Tvs to new streaming content and play games is on the rise.
The global market for OLED Tvs and is expected to nearly double this year.
And last week LG display and the answer with additional capacity and squash zone plant and is targeting 10 million OLED TV units and 2022 on from this year's target of $7 million to $8 million.
And according to reports Samsung is now expected to once Theyre hybrid QD OLED Tvs next year.
Our company is reportedly developing 55 inch and 65 inch QD OLED Tvs for a market launch and the first half of 2022 and so.
Larger 70 inch model to be offered on a later date.
The report also suggests that Samsung may showcase its first Judy OLED Tvs and CES in January 2022.
And gaming Samsung display announced in mid May that's OLED panels received the gaming performance certification from SGS.
According to Ses's test results Samsung displays new OLED offers 1.5 times better bloor length, and conventional LCD, which can be attributed to OLED very wide range of contrast, and fast response rates.
This is important and gaming as long blur lines can be great image quality and fast pace video game on.
Also in OLED gaming news, Nintendo confirm last month and <unk>.
And that OLED for the first time and it's new switch.
And OLED lighting and interesting study was published in nature Dot Coms scientific reports by researchers from the University of <unk> in Japan that compare the effects of Leds and OLED on physiological changes that occur during sleep.
The researchers measured energy expenditure core body temperature fat oxidation and mill a total levels during sleep.
When comparing LCD to OLED light exposure they found the OLED lighting and May benefit your sleep and possibly even have 1 lose weight.
Extend and exposure to LCD lighting for sleep seat and negatively affected and.
The researchers pointed out that the reason maybe blue light.
1 of the many benefits of OLED is that OLED devices, and net less harmful blue light compared to LCD devices.
We believe that the runway of growth for the OLED market and therefore for US is long and debt as a result, we are investing and our people, our infrastructure and and and our innovation to advance our first mover advantage and to further enable our customers and the OLED ecosystem.
The manufacturing of OLED TV panels.
JP Corporation's first major milestone will be and alpha system build in 2022.
And that note, let me turn the call over to sales.
Thank you, Steve and again, thank you everyone for joining our call today.
Revenues for the second quarter of 2021 were $129.7 million compared.
Compared to first quarter, 2020, $134 million and second quarter, 2000, Twenty's $58 million.
Our total material sales were $77.4 million and the second quarter of 2021.
Compared to material sales of $79.8 million and the first quarter of 2021, and $31.9 million and the second quarter of 2020.
Green emitter sales and the second quarter of 2021, which include our yellow Green emitters were $57.8 million.
This compares to $65 million and the first quarter of 2021, and $24.2 million and the second quarter of 2020.
Red emitter sales and the second quarter of 2021 were $19.5 million. This compares to $19.1 million and the first quarter of 2021, and $7.5 million and the second quarter of 2020.
As we have discussed in the past material buying patterns can vary quarter to quarter. Some of the contributing factors include COVID-19 issues as well as consumer product demand cycles capacity ramp schedules production loading rates device recipes product.
<unk> material ordering patterns and customer inventory levels and customer production efficiency gains.
Since a number of these factors are moving variables for our customers day are also moving variables for us.
Second quarter, 2021 royalty and license fees were $48.2 million.
This compares to $50.9 million and the first quarter of 2021, and $22.4 million and the second quarter of 2020.
Second quarter 2021, a thesis revenues were $4 million. This.
This compares to $3.3 million and the first quarter of 2021, and $3.7 million and the second quarter of 2020.
Cost of sales for the second quarter of 2021 were $28 million. This.
And this compares to $23.3 million and and the first quarter of 2021, and $12.6 million and the second quarter of 2020.
Cost of material sales were $25.3 million.
Translating into material gross margins of 67%.
This compares to 74% and the first quarter of 2021, and the comparable year over year's quarter material gross margins of 68% and.
As we have noted in the past material gross margins can vary quarter to quarter.
Second quarter 2021 operating expense, excluding cost of sales was $51.8 million compared to last quarter's $47.1 million and a year over year comparable quarters $46.5 million.
We are investing and our research and development.
Clothing, <unk> JP Corp.
Our infrastructure, including our new Shannon site and in our people to fortify our growth opportunities and the organic electronics landscape.
Operating income was $49.9 million and the second quarter of 2021 compared to last quarter $63.6 million.
And year over year as comparable quarter's operating loss of $1.2 million.
Operating margin was 38% for the second quarter of 2021, and 47% and the first quarter of 2021 for the first half of 2021 operating margin was 43% and.
And we believe that we're on track for our operating margins to be in the range of 40% to 45% for the year.
Second quarter 2021 income tax rate was 19, 2%.
Net income for the second quarter, 2021 was $40.5 million or <unk> 85 per diluted share. This.
This compares to last quarter's $51.7 million or $1.8 per diluted share and the comparable year over year's quarter on $800000 on <unk> per diluted share.
We ended the quarter with approximately $733 million and cash and equivalents.
$15.49 of cash per diluted share.
Moving along to guidance, we continue to expect 2021 revenues to be and the range of $530 million to $560 million or revenue growth of approximately 30% with the ratio of materials to royalty slash license revenue is expected to.
And the ballpark of 1.5 to 1.
And lastly.
Our board of directors approved a <unk> <unk> quarterly dividend, which will be paid on September 32021 to stockholders of record as of the close of business on September 16th 2021.
The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders.
With that I will turn the call back to Steve.
Thanks, Ed.
And as OLED momentum continues to grow in 2021 and beyond we are incredibly excited and confident about our leadership position and the OLED ecosystem.
And advancing our mission to enable and energy efficient eco friendly consumer world.
Energy efficiency and sustainability are key cornerstones of our universal forward technology and materials.
From old Pals for smartphones notebooks, and Smartwatches decreased by 239 gigawatt hours, which is about 30% of the power consumption and 2017, while maintaining an average annual output of 400 million units.
According to Samsung power consumption of electronic devices, especially mobile devices. The very important issue not only in terms of user convenience, but also in terms of global warming.
And finally, I would like to take this opportunity to say each of our employees for their drive desire dedication and heart and.
Elevating and shaping universal display the accomplishments and advancements.
Are committed to be a leader and the ol ecosystem, achieving superior long term growth delivery cutting edge technologies and materials for the industry for our customers and for our shareholders.
And with that operator, let's start the Q&A.
Thank you and a favorite cent and if you would like to ask a question. Please press star 1 on your telephone keypad and confirmation tele indicate your life is and the question kill you May price Dark Hill, if you would like to remove your question from the kill and for a participant choosing speaker equipment and may be necessary to pick up your handset before.
Pressing the 30th.
Our first question is from Chris send car with Cal and and company. Please proceed.
Dakota.
Just kind of curious how much did any of those inflationary costs from the raw materials play a part of this quarter.
The customer and mix and.
Do you still expect pull your gross margin from materials will be the 65% to 70% drink, but on a follow up.
Yeah. The first part of your question was cut off a little bit but.
<unk> U S was about the mix with what was and in terms of cost vs customer mix and is that correct.
That's right yeah.
<unk>.
And we don't really break it out between the 2 but clearly day or some other things that impact our gross margin and is is this customer of mixed product mix and costs.
And you got it and.
The second part of the first question materials those modules to fix.
670% for this year.
Yes, yeah for the year, we continue to believe that are 2021, and the 2 are gross margins will be $65 and 70%.
And then just as a quick follow ups and I know and the past you mentioned that the component diagnose do not impacted directly and I'm guessing free cause it's not a big deal given shipment quantities are very small and I'm just kind of cute at all the last 2 quarters have you started feeling any dedicated and died from day.
Neither of the component diagnosed with your customer and go straight cost and back to your business and I used to live too detached from it at this point.
And you know, we we've previously mentioned iridium pricing and increase in the total amount of material and.
Extra gross margins.
So and in terms of supply chain, we haven't seen any and material issues with our supply chain.
Got tangled up too.
Thank you.
Our next question is from C. J B is that the Evercore ISI. Please proceed.
Yeah. Good afternoon, and thank you for taking the question I guess first question.
And I was hoping you could help me with your annual revenue Guide you know it it all on there and the press release and on the call you reiterated the up 24% to 31%, but at the same blocks you you referenced up 30%. So are you are you tightening the guide to 30 per cent growth is the rain still appropriate and and what kind of visibility do you have.
And the calendar and queue for sitting here Tonight.
Okay and me, we do expect solid double digit growth over and year over year revenue and we did say and approximately 30% and 2021, where we are comfortable with our current guidance.
And at the same time there are some uncertainties.
That are related to chip shortage independent debit.
That we're keeping an island to see whether it's going to impact it.
Okay, but I.
I guess on my I E.
2 different numbers and.
I'm sorry, the 30% is really just a moot point.
Okay, Alright, and I guess, the the second question would be on the I T side of things.
Obviously, you sound pretty bold up about that opportunity I'm wondering if you're seeing that translate.
And 2 capacity and dishes, particularly would love to hear your thoughts on the potential for for Jamie and may have to share of that market.
And and if so what what's the timing there and and when would you be able to update us on kind of a new growth password for capacity. Thank you.
Well I'm in terms of the gross transfer capacity at the end of the year. We we've talked about 50 per cent growth. Your you know for a 2 year period and.
And we intend and at the end of the year and a call to give you what we think next year would be like.
But you know the increase and the capacity there's been a lot of chatter about and particularly I think that he talks about you and 8.5.
And we are seeing.
Increases and our customers are all talking about increasing.
Increasing and the I T market and and I think the <unk> 5 reference you talked about was.
Related to someone that talks about building that for I T purposes. So I think it is something that you know right now.
Market is barely 1% and.
Oh, you know it bowlers are barely 1% of the I T market.
And you know that's about.
450 million units. So there is a lot of runway for growth on the side.
Thank you.
Thanks C J.
Our next question as friends, Sydney and how it.
And have bank. Please proceed.
Thanks for taking my question and my first question is on.
And the revenue from your largest customer and second quarter that seems to be a little stronger than how day described cause. It's just on their earnings call. I guess the question is how should we reconcile debt is is just a tiny thing and then 1 day, maybe buying the materials ahead of and I've got ran or are there other inventories dynamics and they should be thinking about.
I don't think there's any meal and and.
Tori dynamics in terms of safety stock repurchases that but as you're well aware or material for purchases I've been lumpish from time to time by our customers and.
And your first and you know if you're talking about you know where our customers on in terms of what day. So you know we are we are on the input side. So you know as they build inventory and maybe buying more from US that you may see and then you will see that and the subsequent quarter.
But I don't I don't see anything in terms of you know any different this quarter than other quarters in terms of Lumpiness.
And you talked about.
The adoption of a form factors like tablets and for OLED as you mentioned and Samsung Lenovo and Apple has announced a iPad pro this year using many early D and.
And there's also talk about we need them using OLED next year, So I'm curious on how.
How should we think about the inflection of OLED and <unk>.
Cabot's versus a competing many LCD technology.
We think the.
And you mentioned earlier and we think the reviews and has great promise and too.
Tablet markets, its and exercise up.
From a from the smartphones and <unk>.
And we're gonna see a significant increase.
Tablets and the next few years.
As always and the.
Great. Thank you.
Okay.
Our next question and from Shannon Cross with Cross Research. Please proceed.
Thanks, I was curious about how you're thinking about TD demands on.
And yeah, the share and next I know corny and when I talk to them or are pretty positive on the opportunity for a larger screen sizes and it seems as if you know the pricing for larger screen size and I'll, let it come down so wondering how you're sort of gauging things. Thanks.
Yeah.
And as you're aware and LG.
And this year and talking about an increase from.
Last year's number and then theyre talking about going from.
And then OLED Tvs next year.
And then.
It is something that obviously, there is more and more Oems that are branding them.
Harry and chatter about Samsung and others.
And the market. So we are very bullish on the TV market.
As is consistent with and stated that the OLED Tvs are and the best season ever.
Okay, and then maybe just from a.
Margin perspective.
I'm curious how much of the incremental cost do you think are sort of transitory versus inflationary and how are you are you planning ahead I know you've increased your capacity with TPG, but just in general how are you sort of balancing that as you look forward.
Forward to the next year or so.
Yes.
And secondly, the cold on iridium over here and put it.
And that's gone up.
That does have an impact on and also the impact on product mix and we're only.
Looking to.
And more efficient in terms of our manufacturing process.
Our gross margins to vary quarter to quarter number.
The impact on from 1 quarter to the other.
And we fully expect from year to be and the 65% to 70% range for material gross margin and.
40% to 45% range for operating margin.
Thanks.
Thanks Shannon.
As a reminder, this star 1 on your telephone keypad, if he would like to ask a question. Our next question is from Brian Lee with Goldman Sachs. Please proceed.
Okay.
Hey, everyone. Good afternoon, and thanks for taking the questions.
And I might've missed it I had to jump on a little bit late here, but.
Said you are maintaining the revenue outlook for 2021, it does imply and more flattish seasonal trajectory and the back half versus what you've historically seen in prior years. So.
Is that based on order and ordering patterns, you're seeing right now or is there anything unique about the second half of this year.
To drive kind of that view versus what you historically been experiencing.
Yeah.
And as a business.
And.
And our assumptions.
The weighted chip shortages zone.
And then in tissues and.
Based upon.
And you can see.
And we're still comfortable with that.
Okay.
Yeah.
Okay fair enough.
You mentioned, the chip shortages and and I think it's widely.
Known that there is different areas or different supply chain.
Are you seeing.
That impact.
Your your customer buying patterns at all I know, it's not easy to gauge.
Necessarily what's flowing through the manufacturing line versus what might be getting built and stock but in the past you've had some handle on it and I think you said, especially with some of your customers like the Chinese.
You have a better handle but do you think there is buffers being built at all or are we seeing sort of a true reflection of demand in terms of your.
Shipments and ordering patterns at the moment.
And you mentioned that went on there.
Industry and I've talked about it.
And our customers on their conference call and also referred to the chip shortage and what it may or may not do so.
And anything specific that we can point to that has done that.
And just based upon bookings and obviously to our customers and internal forecast.
This is where right now we're very comfortable with where we are.
Okay Fair enough and then maybe last 1 from me I'll pass it on.
The 50% industry capacity expansion view you maintained I don't think you mentioned and on the call and assuming it's still intact for the end of 'twenty, 1 for that 50% growth.
And then more chatter and it feels like about the potential for 8 and a half G capacity being built across the industry focused on products.
Products like notebooks and tablets and others is there any of that day.
Act interiors and 50% capacity view and can you just speak at a high level around any kind of medium term visibility you might have for those types of Nu X.
Expansions that could obviously.
And improve the medium term growth outlook for you guys. Thank you.
Okay.
And we're going to mainly talking about 16% from benefit.
And to the end of 'twenty 1 guidance.
And the installed capacity.
Return on whether it is universal.
And there is.
A lot of chatter about 10 and from a product line.
And hoping.
To the purpose and behind us.
New and.
And why.
And we both benefit from.
And up 19.
Whether or not.
And I was very small somewhat and so and I don't think thats going to be and.
Impacting I don't believe its going to impact this number for 2019 and 21 and what it may be in on a mix forecast when we talk about it and.
And with Canada and component shortages may have some impact on this 50% number and when we get and ended the year catastrophe quarter revenue wise.
Okay. Thanks, a lot I appreciate it guys.
Thanks Glenn.
Thank you. This concludes the question and answer session I would like to turn the program back to Sid Rosenblatt for any additional closing remarks.
And we would like to thank you all for joining the call today and we wish you all a good evening. Thank you.
Yeah.
Thank you. This does conclude today's conference call you may now disconnect.