Q3 2025 Universal Display Corp Earnings Call
Speaker #4: Good day ladies and gentlemen , welcome to Universal Display Corp . S third Quarter 2020 Earnings Conference call . My name is Sherry and I will be your operator for today's call .
Speaker #4: At this time , all participants are in a listen only mode . A 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 .
Speaker #4: As a reminder , this conference is being recorded for replay purposes . I would now like to turn the conference over to Darice Liu Senior Director of Investor Relations .
Speaker #4: Please proceed .
Speaker #5: Thank you and good afternoon , everyone . Welcome to Universal Display Corp third quarter earnings conference call . Joining me on the call today are Steve Abramson , president and chief Executive Officer .
Speaker #5: And Brian , Chief Financial officer and treasurer . Before Steve begins , let me remind you that today's call is a property of Universal Display Corp .
Speaker #5: Any redistribution , retransmission , or rebroadcast of any portion of this any form without the express written consent of Universal Display Corp is strictly prohibited .
Speaker #5: Further , this call is being webcast live and will be made available for a period of time on Universal Display Corp website . This call contains time sensitive information that is accurate only as of the date of the live webcast of this call , November 6th , 2025 .
Speaker #5: During this call , we may make forward looking statements based on current expectations . call on statements are subject to a number of significant risks and uncertainties , and our actual results may differ materially .
Speaker #5: 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 .
Speaker #5: Securities . Universal Display Corp disclaims any obligation to update any of these statements . Now , I'd like to turn the call over to Steve Abramson .
Speaker #6: Thanks , Doris , and welcome to everyone on today's call . Third quarter revenue was $140 million , with operating profit of $43 million and net income of $44 million , or $0.92 per diluted share .
Speaker #6: These results reflect timing , dynamics as customer Poland in the first half of the year were more significant than previously thought . Based on current forecasts , we now expect full year revenues to be around the lower end of our guidance range of 650 to $700 million .
Speaker #6: Our company was built on innovation and leadership , and that remains unwavering from foundational research to high volume commercialization . We continue to push the boundaries of all the technologies and materials .
Speaker #6: Today , our innovation engine is stronger than ever . Over the past decade , we built a powerful artificial intelligence and machine learning platform that has transforming how we discover and develop new materials by harnessing AI ML to accelerate material discovery , where identifying breakthrough compositions faster , reducing development cycles and expanding the frontiers of phosphorescent OLEDs .
Speaker #6: This capability is opening new horizons for our materials pipeline and enabling us to efficiently broaden our portfolio of next generation reds , Greens , yellows , blues and hosts to meet evolving customer needs .
Speaker #6: We are also strengthening our foundation with strategic moves . Today we announce a definitive agreement to acquire OLED patent assets from Merck KGaA , Darmstadt , Germany .
Speaker #6: This acquisition bolsters the building blocks for next generation OLED performance by integrating these assets into our R&D framework . We are accelerating our roadmap for high efficiency devices .
Speaker #6: This transaction , valued at $50 million and expected to close in January 2026 , underscores our commitment to lead the industry into its next era of growth and transformation .
Speaker #6: Blue continues to be a cornerstone of our innovation journey . The timing for the debut of Folate Blue and commercial products will be guided by the OLED market .
Speaker #6: When adopted . We believe our phosphorescent blue will be a game changer , delivering breakthrough efficiency and performance for our customers . Driving progress across the OLED industry , enhancing experiences for consumers , and fueling growth for our company .
Speaker #6: Looking ahead , we expect rising OLED adoption and new old capacity coming online to drive growth in the old market . While macro uncertainties may persist .
Speaker #6: We believe that the old industry is entering a dynamic phase of expansion , primarily fueled by increasing demand for OLED , and it applications where penetration today is only about 5% of the market .
Speaker #6: According to Omdia market research . OLED units from 2024 to 2028 are projected to grow across the consumer landscape , with IT units , which encompasses tablets , laptops and monitors are expected to increase by 170% .
Speaker #6: OLED smartphones are forecasted to grow by 14% . OLED TVs are expected to grow by 11% , and the foldable OLED and emerging automotive markets are both expected to nearly triple by 2028 .
Speaker #6: Next year also marks a pivotal growth stage in medium sized old manufacturing capacity , with the world's first gen 8.6 OLED fabs in Korea and China slated to come online .
Speaker #6: We believe this is the beginning of a multi-year OLED CapEx growth cycle , as leading OEMs expand their adoption across their portfolio of IT products , Samsung's 15,000 plates per month Gen 8.6 OLED , it line is expected to start mass production in the second quarter of 2026 .
Speaker #6: Bowie's 32,000 plates per month . Gen 8.65 is expected to begin production in the fourth quarter of 2026 . Vision 32,000 plates per month .
Speaker #6: Gen 8.6 OLED production fab in Hefei is progressing well , with initial equipment . POS currently being placed and just three weeks ago , TCL China Star broke ground on its first gen 8.6 OLED plant in Guangzhou , China , with a CapEx of approximately $4 billion .
Speaker #6: It will have a design monthly capacity of 22,500 sheets . The digital world is accelerating towards intelligence and interconnectivity , powered by AI , ultrafast networks and seamless experiences , this transformation demands displays that are not only brilliant but highly efficient due to higher power consumption needs .
Speaker #6: That's where Universal Display leads our universal folded technology and materials are , raising the bar for energy performance in next generation devices by delivering superior power savings , we enable longer battery life , cooler operation , and advanced functionality across smartphones and wearables to automotive and it displays and the horizon is even more exciting .
Speaker #6: Our breakthrough Phosphorescent Blue is poised to unlock up to an additional 25% of energy efficiency , paving the way for greater sustainability with performance in displays .
Speaker #6: And on that note , let me turn the call over to Brian .
Speaker #7: Thank you Steve . And again , thank you everyone for joining our call today . Revenue in the third quarter was $140 million , compared to $162 million in the third quarter of 2020 .
Speaker #7: For revenue for the first nine months of the year was $478 million , compared to $485 million in the first nine months of 2024 .
Speaker #7: For the full year , as Steve mentioned , we expect revenues to come in around the lower end of the guidance range of 650 to $700 million amid ongoing macroeconomic uncertainty .
Speaker #7: This guidance reflects our best current assessment . We continue to estimate that our 2025 ratio of materials to royalty and licensing revenues will be in the ballpark of 1.3 to 1 total material sales were $83 million in the third quarter of 2025 .
Speaker #7: Consistent with the prior year green emitter sales , which include our yellow green emitters , were $65 million . This compares to $63 million in the third quarter of 2020 for red emitter .
Speaker #7: Sales were $17 million . This compares to $20 million in the third quarter of 2024 . As we've discussed in the past , material buying patterns can vary quarter to quarter , third quarter royalty and licensing fees were $53 million , compared to $75 million in the prior year .
Speaker #7: This quarter included an out of period adjustment of $9.5 million , which reduced royalty and license fee revenues . Odysseuss third quarter revenue was $3.7 million , compared to $3.6 million in the third quarter of 2024 .
Speaker #7: Third quarter cost of sales was $35 million , translating into total gross margins of 75% . This compares to $36 million in total gross margins of 78% in the third quarter of 2020 .
Speaker #7: For we continue to believe that total gross margins for the full year will be in the range of 76 to 77% . Operating expenses , excluding cost of sales , were $61 million in the third quarter of 2025 , compared to $59 million in the third quarter of 2020 .
Speaker #7: For we continue to expect our 2025 OpEx to decline by a low single digit percentage year over year . Operating income was $43 million in the third quarter , translating into operating margin of 31% .
Speaker #7: This compares to the prior year period of $67 million and operating margin of 41% . Operating income in the first nine months of the year was $181 million , compared to $186 million in the first nine months of 2024 .
Speaker #7: We now expect our full year operating margins to be in the range of 35 to 40% . The income tax rate was 19% in the third quarter of 2025 .
Speaker #7: We expect the full year effective tax rate to remain around 19% . Third quarter 2025 net income was $44 million , or $0.92 per diluted share .
Speaker #7: This compares to $67 million , or $1.40 per diluted share , in the comparable period of 2024 . For the first nine months of the year , net income was $176 million , or $3.68 per diluted share , consistent with the first nine months of 2020 .
Speaker #7: Four is $176 million , or $3.69 per diluted share . We ended the quarter with approximately $1 billion in cash . Cash equivalents and investments .
Speaker #7: Our board of directors approved a 45 cent quarterly dividend , which will be paid on December 31st , 2025 , to shareholders of record as of the close of business on December 17th , 2025 .
Speaker #7: Our capital allocation program reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders . While third quarter results reflect timing shifts , including customer pull ins earlier in the year and an out of period adjustment , we anticipate renewed momentum and growth in the fourth quarter , driven by our technology leadership , strong business model and deep customer relationships .
Speaker #7: We are well positioned to deliver long term value in this growing market . As we look forward , we are focused on accelerating innovation , broadening our solutions and services , and supporting OLED adoption across an ever widening range of applications .
Speaker #7: With that , I'll turn the call back to Steve .
Speaker #6: Thanks , Brian . Looking ahead , we are committed to shaping the future through leadership , innovation and growth . Universal display was founded on the belief that science and imagination can transform industries , and that spirit continues to guide us today .
Speaker #6: Last month , we announced the inaugural winner of the Sherwin . I . Ciloxan Innovation Award , established to honor a late founder's visionary leadership .
Speaker #6: The winning submission explores using organic materials to emulate the human brain's ability to sense, learn, and adapt. Sherwin believed in pushing beyond limits, and this award celebrates that legacy by recognizing bold thinkers who are redefining what's possible.
Speaker #6: That same spirit of exploration extends beyond OLEDs . Last week , our subsidiary Universal Vapor Jet Corporation , UVC , celebrated the grand opening of its new global headquarters and R&D center in Singapore .
Speaker #6: UVC represents an additional chapter for our maskless Solventless dry printing technology . UVC , which is being developed for New frontiers including semiconductors , pharmaceutical batteries and photovoltaics , while also positioning us for future opportunities in OLED TVs .
Speaker #6: This evolution reflects our ability to leverage core expertise into emerging markets that will help shape tomorrow's technologies . Innovation also thrives through collaboration .
Speaker #6: This year marks 25 years of partnership with PPG , a relationship that has been instrumental in scaling our phosphorescent materials and enabling remarkable industry growth .
Speaker #6: From our early days as a pioneering startup to our global operations today , this partnership exemplifies how shared vision and complementary strengths can create lasting impact .
Speaker #6: And we're excited what the next 25 years will bring as we celebrate these milestones , we remain focused on the road ahead , advancing OLED technology , accelerating material discovery , and expanding into new frontiers .
Speaker #6: The digital world is evolving rapidly , and we are committed to leading that evolution with innovation that is bold partnerships that are enduring and a future that is bright .
Speaker #6: 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 .
Speaker #6: We are committed to being a leader in the old ecosystem , achieving superior long term growth and delivering cutting edge technologies and materials for the industry .
Speaker #6: For our customers and for our shareholders . And with that , operator , let's start the Q&A .
Speaker #4: 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 .
Speaker #4: A confirmation tone will indicate your line is in the question queue . You may press star two . If you would like to remove your question from the queue .
Speaker #4: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star key's . Our first question is from Brian Lee .
Speaker #4: Please proceed with your question .
Speaker #8: Hey guys , thanks for taking the questions . I had a couple here I guess first off , you know , understandably , the the pull forward from Q3 into into Q2 , that's that's showing up in kind of the results from a top line perspective .
Speaker #8: But then when I look at full year guide , even at the low point of the guidance range for revenue , as you mentioned , Q4 is going to , you know , looks like it's going to be a quarterly record for you in terms of revenue .
Speaker #8: So just curious kind of what is there anything that slipped out from Q3 into Q4 . Timing wise ? And then if not , you know , where sort of the visibility around Q4 , you know , for that , for that revenue kind of strength into year end , is that just product cycle driven , or are you seeing any .
Speaker #8: New capacity being added in 26 , starting to mobilize already in terms of material purchases here understand the Q4 strength .
Speaker #7: Yeah . Thanks , Brian . In terms of the Q4 guide , you know , yes , your math is right that if if we hit the low end of the guidance range , that will be a record .
Speaker #7: I think we we posted $172 million of revenues in the second quarter of this year . So , you know , would be slightly north of that to to hit the 650 million .
Speaker #7: And we continue to , you know , get forecasts from our customers on an ongoing basis . Those are indicating that we're going to have growth in a strong Q4 .
Speaker #7: So it's you know , that information that's really giving us the confidence to to put out the guide that we have .
Speaker #8: Okay . Fair enough . And then again , at the low point of guidance , 650 million revenue or so , you're basically flat year on year .
Speaker #8: And I know it sounds like Steve was saying at the beginning of the call , you're entering into a pretty encouraging backdrop of growth across all these new product categories .
Speaker #8: And and unit growth assumptions , as well as capacity expansion . So how should we be thinking about sort of the growth trajectory off of the past two years , where you've been kind of flattish into into 26 ?
Speaker #8: What what are some of the puts and takes ? And has some of the , I guess , year end weakness here in 25 is that is that potentially slipping into into 26 here .
Speaker #7: So so there's as Steve mentioned in his prepared remarks , there's a number of things in terms of new capacity coming online next year that give us a lot of optimism about growth , not just next year , but , you know , in the coming years across a variety of our customers , we've seen a steady , you know , set of announcements over the last few years for new gen 8.6 capacity , you know , with China stars being the most recent .
Speaker #7: And in terms of the 24 , 25 growth , you know , there was a few one time items in 24 that also made it a little bit of a challenging comp .
Speaker #7: And looking into next year , we certainly are projecting , you know , continued growth .
Speaker #8: Okay , great . Fair enough . Last one from me and I'll pass it on the LG display contract . I believe that that is up for renewal at the end of the year .
Speaker #8: Any thoughts you can share around how those contract negotiations are faring ? And then are there any potential implications for the the blue commercialization timeline from those contract negotiations ?
Speaker #8: Thank you .
Speaker #7: So we are certainly in a dialogue with LG display about a new contract . We fully expect there will be one . We've been working with them for more than 15 years now .
Speaker #7: They're a long term partner of ours . So we're in the process of finishing up those details in terms of the new contract .
Speaker #4: Our next question is from Mehdi Hosseini with a Susquehanna in international group . Please proceed .
Speaker #9: This is me on for Mehdi Hosseini . I just have two quick questions . First , so we just wanted to know , like how much is universal display today as a percentage of the Bom cost for tandem display .
Speaker #9: And then in regards to phosphorus and blue , when it does reach commercialization and gets adopted in volume , could you walk us through the impact it could have on your content per phone or your overall dollar content opportunity ?
Speaker #7: How Mehwish . So on the on the first point , in terms of our cost of the bill of materials , we are a very small portion of the Bill of materials for displays , even single layer displays and even tandem structures where there's , you know , somewhere between likely one and a half to two times the quantity of material in a tandem structure compared to a single layer .
Speaker #7: Even if you were to add , you know , a one and a half or so factor on top of that single layer cost .
Speaker #7: We're still a very small portion of the overall cost structure of displays , regardless of whether it's smartphone or TV or what have you .
Speaker #7: On blue , we certainly believe that Phosphorus and blue has a premium price associated with it . We've been very consistent in that view .
Speaker #7: There's a significant investment we've made over many years of of R&D resources and effort to to bring it closer to commercialization . So we we believe that it will be a premium to our red and green pricing , but still priced very reasonably , such that , you know , it won't be a hindrance to adoption .
Speaker #9: Got it . Thank you .
Speaker #7: Thanks .
Speaker #4: As a reminder , it is star one on your telephone keypad . If you would like to ask a question , our next question is from Martin Yang with Oppenheimer and Company .
Speaker #4: Please proceed .
Speaker #10: Hi . Thank you for taking my question . I want to maybe dig into the markets a little bit more with regard to your guidance .
Speaker #10: Is there any incremental changes by end markets , for example , smartphones ? It's and TVs that give you a different outlook for the year ?
Speaker #7: High . Martin , I think as it relates to this year , you know , nothing . You know noteworthy that's come up in terms of the specific end markets .
Speaker #7: Certainly as we've previously discussed . And as Steve mentioned on on the call today , the IT market is where we see significant growth in the coming years with the new capacity coming online from our customers as well as OEM product roadmaps and their plans over the next few years to adopt more and more OLED displays across their product portfolio .
Speaker #7: We also on the smartphone side , see foldables as a big opportunity for our business . Certainly , the square area being larger is is compelling this year .
Speaker #7: I wouldn't say there's anything abnormal that's come up on the on the foldable side other than you continue to hear , you know , quarter after quarter , more and more OEMs announcing increasing foldable models and even a few going , you know , the trifold route and previewing some of those trifold models .
Speaker #7: So as we head into the next few years , that's where we really see a lot of opportunity for our business . Is these increasing , you know , surface areas and new form factors in , in smartphones as well as generally the IT market having greater adoption .
Speaker #10: Thanks, Brian. The question on new capacity that is coming online in the next two years: what would be the helpful metrics to help us understand the capacity or the start of cost?
Speaker #10: The start up phase , how the material demand can impact your sales before they enter full commercial production .
Speaker #7: So I think that there's always a seeding process that goes into , you know , turning on a new fab and getting it ready for for mass production .
Speaker #7: We do see , you know , that routinely when when new capacity comes online in terms of data points to look for or metrics .
Speaker #7: I mean , it'll certainly come through in our results when those orders come through . I think also our customers are getting , you know , obviously more efficient on an ongoing basis at how much material they need to use in each of those seating processes .
Speaker #7: But , you know , we would certainly expect to see some level of seating once those fabs are in preparation for mass production .
Speaker #10: Got it . That's for me . Thank you Brian .
Speaker #7: Thanks , Martin .
Speaker #4: Thank you . This concludes the question and answer session . I would like to turn the program back over to Brian Millard for any additional or closing remarks .
Speaker #7: Thank you all for your time today . We appreciate your interest in support . We're excited about the opportunities ahead and look forward to speaking to you next quarter .