Q2 2019 Earnings Call
Good day, ladies and gentlemen, and welcome to Universal displays second quarter 2019 earnings Conference call.
My name is Doug 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 call over to Darice Lu Director Investor Relations. Please proceed.
Thank you and good afternoon, everyone welcome to Universal displays second quarter earnings Conference call. Joining me on the call today are Stevenson, President and Chief Executive Officer, and sick Rosenblatt Executive Vice President and Chief Financial Officer before Steve begins let me remind you taste call is property of universal display any redistribution retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of universal display is strictly prohibited. Further this call is seen webcast live and will be made available for a period of time, a universal displays website. This call contains time sensitive information that is accurate only as of the date of the live webcast of this call August Onest 2019.
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 report 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.
Now I'd like to turn the call over to Steve Abramson.
Thanks, Darice and welcome to everyone on today's call.
We are pleased to report second quarter 2019 revenues under NSC six six of $118.2 million operating profit of $48.7 million and net income of $43.4 million or 92 cents per share.
Andreas see six so five the prior accounting standard our second quarter 2019 revenues would have been about the same at $119.8 million operating income of $50.3 million and net income of $44.8 million or 95 cents per diluted share.
Included in these results is approximately $15 million to $20 million of orders. We estimate were pulled in from the second half of the year from our Chinese customers due to what we believe were trade related reasons.
With all of them as some continuing to grow we are raising our 2019 revenue guidance, our new 2019 revenue forecast under assay six six is in the range of $370 million to $390 million under assay. Six a 520 19 revenues are expected to be in the range of $425 million to $435 million.
Since we will provide further detail shortly.
In the past three months all of that activity has continued to increase across the consumer landscape as a display of choice for premium smartphones premium Tvs and Smartwatches all those have been gaining strong traction in the consumer electronics market and emerging new segment is the IP market from Samsung displays announcement in May it was expanding its able a commercial focus to the IP market to laptop makers showcasing old products at Taiwan's Computex trade show in June , including the Gigabyte area 15, Alienware, M. 15, Hey, Suzanne book Pro duo Razor Blade 15 studio edition and the Dell Xps Fiftyth, what's driving this interested olin as I take a Samsung noted in their announcement Ambela displays are no not only for their outstanding color reproduction, but also for properties that enable low power consumption ultra slim bezels and fit in light designs.
They also noted that ammo UHD panels deliver the best displays specifications for notebooks by enhancing the mobility and seamless streaming capabilities for high resolution gaming and graphics content.
Simpson further highlighted that ammo and display solutions have been optimized for cloud and streaming services that speed up the commercialization of Fiveg technology.
They believe that their latest am all displays will allow users to have the most visually stunning expiries in the fiveg here with its rapid response rate and exceptionally high frame rate, while delivering unbelievably rich display HDR true black colorization.
Additionally, Samsung announced last week that it expects to begin shipping the galaxy folded in September .
And on Tuesday, Samsung reported that Q2, OLED panel sales grew quarter over quarter and made up a significant percentage of the display revenues in the high 70% range looking forward Samson forecasted oil growth with shipments and utilization rates to increase in the second half of the year over the first half of the year.
Sure. Its recent earnings call LG display laid out its total overload solutions strategy spanning from small sized ultra large size on the mobile side LG node as plastic OLED plant and positive will commence operations in the second half of this year.
Additionally, augmenting its small and medium portfolio LG will also launch its first plastic OLED display for the automotive market in the coming months on large size from LG. The second OLED TV fab in Guangzhou, China will reportedly be completed at the end of this month.
This new Gen 8.5 factory is expected to have an initial install capacity of 60000 substrates per month, nearly doubling LG is total output to 130000 substrates per month.
Last week LG display announced a new 2.6 billion dollar investment Ford's Gen 10.5, OLED TV plant and positive which will commence production in the first half of 2022 with 30000 substrates starts per month and an additional 15000 substrates starts per month in the first half of 2023.
According to reports there are currently 10 older facilities expected to be built in China over the next three years leaning China's OLED investments is be early last month, we announced the opening of its second OLED fab EMEA and Yang similar to his first fab in Chengdu as well as their announced third and fourth OLED fab and showing Singh added fujio, respectively being Yang is a gen. Six flexible OLED fab slated to have 48000 substrates starts per month.
According to reports vision boxes accelerate its expansion all at smartphones wearable devices vehicle mounted systems and intelligent hubs. The company is expected to commence commercial production as heavy Gould fab at the end of this year.
This 30000 plates per month that began pilot production last year vision Oxy is building a second OLED production line FX, which will also produce 30000 plates per month.
And lighting.
All that works announced the collaboration with Alley, two this OLED lighting technology and automotive applications. Additionally, Olin works announced an exclusive arrangement with acuity brands North Americas largest lighting company to work on an expanded old product portfolio acuity brands using old works technology intends to develop a series of affordable and innovative old luminaires for architectural lighting applications.
The old Revolution is just getting started in this multi year old capex growth cycle.
We continue to estimate that year end 2019 installed base of old square meter capacity will have increased by approximately 50% over year end 2017.
On the R&D front, we're developing new OLED technologies and next generation materials to stay ahead of the curve and continue to leverage our first mover leadership position.
Let me walk you through some of our initiatives.
JP organic vapor jet printing is our novel manufacturing process for mask was solvent list dri direct printing of large area OLED panels.
As I said these display we could may we showcased for the very first time printed titles from our Auvi JP power system.
At the display trade show you were able to view of close the essentially perfect lines, we printed in our pilot line tool and we have already been able to achieve lifetimes of over 50000 hours LT 95 at 1000 nits for Greening folate.
This is very encouraging for very early data.
And just last month, we received a third and last chamber of our pilot system, which will enable us to make full color RGB test panels. We are excited about the continued progress we are making and for the commercialization path of Auvi JP.
With multiple customers with numerous product roadmaps for a myriad of end users the discovery development and delivery of new phosphorescent emissive materials, including New Reds Green Yellows and blues continues to be our highest priority.
Specifically on the Blue front, we continue to make excellent progress in our ongoing development work for commercial phosphorescent Blue Emissive system.
As a number of end user specs continues to rapidly evolve with the adoption of oleds across a broad array of consumer products, including our VR smartwatches smartphones tablets laptops automotive and Tvs.
Corresponding new old recipes need to be designed to meet those ever changing an ever demanding specs.
To help enable our customers and accelerate the design pace weve been establishing a network of OLED material partnerships. These partnerships will center on our proprietary phosphorescent emitters, which are at the heart of essentially every commercial OLED stack to ensure high performing highly efficient and cost effective OLED solutions.
We expect to be able to announce some of these partnerships in the coming months.
We have been working on developing new host materials side by side with our folate emitters. We've also been working on a new host commercialization roadmap.
What are the partnership frameworks that we have been establishing over the past few years is with local material companies to commercialize hosts that are complementary to our proprietary phosphorescent emitters.
These local partners will be volume manufacturers of these complimentary hosts for direct sales to specific customers, creating a win win situation for us our partners and our customers.
And lastly, we announced in May the establishment of UGC ventures, our corporate venture our UGC venture seeks to partner with entrepreneurs disruptive startups and innovative emerging companies and fields related to our strategic focus area, we seek to be impactful strategic investors with companies that could be at any stage ranging from pre commercial stage research and development early prototypes through late stage established companies.
We believe that these and our other strategic initiatives will strengthen and support our primary focus of enabling our customer success and therefore, our success on that note, let me turn the call over to sit.
Thank you, Steve and again, thank you everyone for joining our call today revenues for the second quarter of 2019 under assay six or six were $118.2 million sequentially up from first quarter 2019, $87.8 million and Q2 2018 $56.1 million.
As Steve mentioned included in this quarter's results is an estimated $15 million to $20 million of sales to Chinese panel manufacturers.
Which we believe were pulled in from the second half of 2019 due to trade related concerns.
Under assay six so five our second quarter revenues would have been $119.8 million. This compares to first quarter of 2019 revenues of $101.6 million.
In Q2 2018 $73.6 million.
As you can see as revenues increase the closer assay six so six an FC six so five become.
And when we hit the inflection point, then assay six so five or general would be lower than AMC six so six.
Our total material sales were $76.3 million in the second quarter compared to material sales of $54.5 million in the first quarter of 2019 and $36.8 million in the second quarter of 2018.
Green emitter sales in the second quarter of 2019, which include our yellow Green emitters were $60.2 million. This compares to $41.6 million in the first quarter of 2019 and $25.9 million in the second quarter of 2018.
Red emitter sales in the second quarter of 2019 or $16 million. This compares to $12.8 million in the first quarter of 2019 and $10.9 million in the second quarter of 2018.
As we have discussed in the past material buying patterns can vary quarter to quarter.
Some of the contributing factors to this can include consumer product demand cycles capacity ramp schedules production loading rates device recipes product mix material ordering patterns customer inventory levels and customer production efficiency gains.
Since a number of these factors are moving variables for our customers.
They are also moving variables for us.
Before we discuss Q2 royalty and license revenues, we want to remind you that under AMC six so six irrespective of one billings occur we will recognize royalty and license revenues in proportion to corresponding OLED material shipments.
Second quarter, 2019 royalty and license fees were $38.9 million. This compares to $30.3 million in the first quarter of 2019 and $15.5 million in the second quarter of 2018.
Second quarter 2019, Dcs revenues were $2.9 million. This compares to $3 million in the first quarter of 2019 and $3.8 million in the second quarter of 2018.
Cost of sales, which included thesis costs of sales for the second quarter of 2019 or $24.1 million. This compares to $15.8 million in the first quarter of 2019 and $11.6 million in the second quarter of 2018.
Cost of the cereal sales, which only relate to OLED materials and does not include a thesis cost of sales were $22 million translating into material gross margins of 71.2%.
This compares to 76.2% in the first quarter of 2019, and the comparable year over year quarter material gross margin of 74.8%.
This quarter included an inventory reserve of $3.9 million impacting material gross margins by 5%.
For this year, we now expect our overall 2019 material gross margins to be in the 70% to 75% range.
Consistent with the last few years as we have noted in the past material gross margins can vary quarter to quarter.
Second quarter 2019 operating expenses, excluding cost of sales was $45.4 million up from last quarter's $37.6 million and up year over year from the comparable quarter $33.6 million.
Operating income under assay six so six was $48.7 million for the second quarter of 2019.
Compared to last quarter's $34.4 million and year over year comparable quarter $10.9 million.
Under assay six so five second quarter operating income would have been $50.3 million. This compares to last quarter's $48.2 million and year over year comparable quarter $28.4 million.
Second quarter 2019 income tax rate was 16.2%.
Without a asked you 2016 dash nine our second quarter 2019 tax rate would have been approximately 19%.
For the year absent the effect of Ashu 2016 dash own nine we continue to expect our tax rate to be approximately 18% plus or minus a few percentage points.
Under assay six so six net income for the second quarter, 2019 was $43.4 million or 92 cents per diluted share.
This compares to last quarter's $31.5 million or 66 cents per diluted share and the comparable year over years quarter of $10.8 million or 23 cents per diluted share.
Under assay six so far our second quarter net income would have been $44.8 million or 95 cents per diluted share.
This compares to last quarter's $42.5 million or 90 cents per diluted share and the comparable year over years quarter of $25.1 million or 54 cents per diluted share.
We ended the quarter with approximately $553 million of cash cash equivalents and short term investments or approximately $11.75 of cash per diluted share.
Additionally, we achieved a new financial milestones with assets totaling over $1 billion for the first time.
Moving along to guidance based on customer discussions current operating levels product mix as well as other major variables our expectations for 2019 have increased and we are raising our full year guidance. We now expect our 2019 revenue under assay six or six to be in the range of $370 million to $390 million under assay six to 520 19 revenues are expected to be in the range of $425 million to $435 million.
As I mentioned earlier the higher the revenue is the spread between assay six so five and six of six diminishes and when we hit the inflection point assay six so five will generally be lower than assay six so six.
And lastly, the board of directors approved a 10 cents quarterly dividend, which will be paid on September thirtyth 2019 to stockholders of record as of the close of business on September 16th 2019.
The dividend reflects our expected continue positive cash flow generation and commitment to return capital to our shareholders.
And with that I will turn the call back to Steve.
Thanks says.
Oh Leds are not only inherently simple beautiful and versatile they are redefining, how we design feel and use consumer products. The broadening of the OLED display product portfolio from an ever expanding array of wearables smartphones tablets laptops and Tvs as well as the continued progress in the form factor roadmap leveraging flexible oleds. All this illustrates the immense growth potential of the OLED display market, even in the nascent stage of adoption.
How much are has been and continues to be vision innovation and reality the exceptional value of our proprietary OLED technologies and phosphorescent materials has resulted in universal display corporation being an integral partner and the commercialization of Oleds into the marketplace. We are proud of the leadership position we have created.
With our extensive experience steadfast focus on innovation and execution and expanding product portfolio of new materials and technologies, we are well positioned to enable our customers and the OLED industry with the most energy efficient high performance and cost effective emissive layer solutions.
I would like to take this opportunity to thank each of our employees for their drive desire dedication and heart and elevating and shaping universal displays 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 for our shareholders.
And with that operator, let's start the acuity.
Thank you.
We will now be conducting a question and answer session.
If youd like to ask a question you May press star one on your telephone keypad, a confirmation tano indicate your line is in the question queue.
You May press star two if you'd like to remove your question from the Q.
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Our first question comes from the line of Jim Ricchiuti with Needham and company. Please proceed with your question.
Hi, Thanks, good afternoon.
Question on the on the pre buy when did you notice the pre buying activities.
In the quarter.
Thanks for the question Jim It.
Kind of happened throughout the quarter. It was we did we did talk to our customer and we understand what they were doing we think there were trade related issues.
Yes. So can you say I mean, I'm looking at GGR, Q and customer B there is a significant increase.
And.
In revenues from customer B is that is that was the bulk of that pre buying with that customer.
Yes customer B is a leading Chinese panel panel maker and.
It is.
Not just one customer but.
It is across the board for our Chinese customers.
Okay did you guys see any of this in Q1 or is this mainly.
You noticed in Q2.
It's pretty much just Q2.
Okay.
Got it and.
Just.
Moving if I could just quickly on opex.
Any change in how we should be thinking about operating expense in the second half.
No I think as we said.
In the past, we expect R&D to be up.
Higher than 20% to 25% year over year.
This year and DNA is probably in the 10% to 15% range I think as we said in the past.
So theres no change.
There is no change.
Thanks, a lot.
Thank you.
Our next question comes from the line of Brian Lee with Goldman Sachs. Please proceed with your question.
Hey, guys. Thanks for thanks for taking the questions.
Maybe just to follow up on that the.
The $15 million to $20 million pull in.
From China can you give us.
Some sense of how how you're sizing that what what sort of visibility or.
I guess data you're working off of to give you confidence that that amount versus something higher or lower.
And I guess the reason I ask that is if I take the full 20 million out of China.
This quarter. The so called normalized revenue would have been more like $35 million, which is.
Still up 70% sequentially, so pretty big number for that region.
Just trying to parse I guess, how how comfortable you are with the 15 to 20 million and then if it is that sort of $35 million run rate.
That would have been the one you would have sort of normalized off of to build for the second half.
Yes, it's great question. Thanks, Brian .
In conjunction with our internal analysis.
We look at things, we also get input from our customers and we think that pre purchases. This time.
Are a little different than we've had in the past. So we've got more Intel from our customers. This time around and this is different than the last time, which they were contract related.
Pre purchases.
Okay, and I guess, if we do look at the customer ABDC customer B from China.
They actually represented it looked like a little over 50% of all China revenues. So it doesn't it doesn't seem like it's all concentrated in one customer so would you say.
The general trend across the Chinese customer base.
It's pretty consistent in terms of how there.
Pulling in.
The material purchases and then I guess related to that it seems like.
The diversification of revenue, that's that's going to hold pretty steady through the back half in China.
Specifically.
Well the the Chinese customers.
Our.
It's.
Across all of our Chinese customers are up however, sales to a to China include our Korean based customer.
Okay.
Yes. So included in the China sales our sales so it's not all Chinese panel manufacturers we determined.
Where it is going based upon where we ship the material.
Got it Okay fair enough.
That that that makes sense given the.
JV out there okay.
And.
Maybe on that point materials inventory, that's always something that.
Has been kind of a challenging thing for you guys to get a handle on I know you are calling out the China pulling on the Korea side, just given order run rates and visibility you have into key customers in that region.
Are you seeing normal buying patterns anything there on the inventory side that you think could.
Impact or what would be normal seasonality into the second half year.
No we actually saw a growth across the board from all of our customers in the quarter, even without the inventory without the pull in of inventory.
And.
So it was it was strong across the board.
Okay. Thanks, a lot guys I'll take the rest offline.
Okay. Thank you.
Our next question comes from the line of Sidney Ho with Deutsche Bank. Please proceed with your question.
Oh, Thanks for taking my questions. So I have a couple.
The first one is going back to the same pulleyn question.
You mentioned that did pull in what's coming from the second half of the year.
Do you expect that to mostly unwind by the end of this year seeking you raised the full year guidance is that is that just a moving from first half to second half of your actual raises $25 million at the midpoint.
Well, we do believe that it is a pull in from the second half to the first half.
And we do see obviously, we've raised our guidance. So we do expect.
Compared to last year to this year strong growth for this year.
So most of that pull in will be used by the by the end of the year is what you expect in your full year guidance.
Yes that is correct.
Okay, Great. Maybe if you just look at the full year guidance range by again $25 million waste, where is the most upside coming from versus your prior guidance either by region or by application.
It's really across the board it isn't just one region or one customer it sounds like Q2 was stronger than we expected even with out the inventory excess inventory purchases so were seeing strength across the board.
Got it and then in terms of the China revenue if you back out the pull in if you back out the Korean customer it seems like it's relatively flat from Q1 to Q2 do you expect that to be.
Kind of in that range as well in the second half given there's a lot of preproduction material sales in the in the first half.
Yes, we do expect some growth I mean, if you if you if you pull.
For China, I think for the second half based upon what occurred to second half we will not be a strongest first half if you turn if you.
Would put the inventory pre purchases in the second half where they should have been than we would have seen growth in the second half of this year in China, but the costs onboard occurred we will not see growth in the second half.
Great.
My last question is on the Japan Korea trade restriction on certain chemicals.
Have your customer indicated when it that explored Rhys restriction will impact the OLED panel production and have you seen any changes in the ordering patterns just falling to the restriction.
So far we have not seen any impact on our business.
Great. Thank you.
Great. Thank you.
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Our next question comes from the line of Mehdi Hosseini with ESI Ji. Please proceed with your question.
Yes, thanks for taking my question.
Thanks for all the detailed color.
And perhaps discussions for both Stevens said when you look at the 50% is going the square foot per square inch growth from 17 through 19, how does your assumption change when you look when we look into the <unk>.
The next two years do you expect the same intensity in capacity add to sustain or is there a change in the growth rate and I have a follow up.
Well we.
We do see you know as we said earlier that.
We do it we did see installed base grow 50%, we still see growth. We're in the midst of a multiyear capex cycle, but any specifics going from 2020 to 2021 at this point, we're really are not ready to make any projections show.
I asked this question because you have been pretty much on target for 2019, and these targets were put together in 17.
And and perhaps has visibility changed or do we need to wait for the second phase of investment in China too.
To to materialize.
Well, there's a there's a number of reported Oh starts of Fabs and production facilities that are going to be built as Steve said, we are going to be 10 in China, but you know probably the beginning of next year, we will do a deeper dive and see where we think it is because.
You know we use market data, we use internal data and as you said, we have been pretty accurate and we will take a look at it but.
Everything that we and all the indications that we see is growth in the OLED industry will continue to be strong for the foreseeable future.
Great. Thank you and then follow up quick fun of.
How should we think about the commercialization of blue.
And the incremental update.
We don't really have any incremental update we're continuing to make excellent progress on blue and when we.
When we.
Oh, we're making excellent progress that we have nothing to announce.
Is there any lifetime metric.
That we could use to better help us.
Any progress.
And at this at this point I don't think its a metric that's key because as you know there are the three points, there's a color efficiency and lifetime and the customers are looking at at the appropriate combination for their business and many as we said you know we're in we're not going to be making.
Project, you know discussions about incremental improvements that we make because we make them all the time and we make them as Steve says across the board, whether its colour lifetime or efficiency, but when we have something that we believe is meets initial commercial specs. That's when we'll start sharing information.
Okay. Thank you.
Thank you.
Our next question comes from the line of Matthew Prisco with Evercore. Please proceed with your question.
Hi, guys as we think about your second largest Korean customer turning on capacity going down in the second half how should we think about revenue growth.
Into the back half, particularly considering cookie was a record level for the company.
We said we know it it really depends on when the Fabs really start to ramp up we know that they have and it's installed and the question is what their schedule and what a utilization rates are what they've stated is that it's you know everything is completed and they you know they should start.
Running the fab at least some initial phases. The end of this month into next month.
Okay. That's helpful. And then on the margin side can you kind of review what drove the material gross margins lower in the quarter and it seems like you picked up your from your Guy I think last quarter. You guys are saying average around 70 970, 75, so what drove that increase outlook. Thanks.
Well the increase you know we we initially had talked about the lower end approximately 70 and now we're saying 70 to 75. It obviously, we expect revenues to be higher.
ER and customer mix and product mix all impact our margins. So when we look at our forecast for the year.
We saw that the margins will continue to go well be above the 70% range and this quarter approximately 5% was an impact from the inventory reserve that we had.
Thanks.
Our next question comes from the line of Andrew can you guess Barry with Burke. Please proceed with your question.
Thanks.
Just as a follow up that's Matthew's question in terms of the inventory reserve quickly what was that related to.
Yes, they do as they just in time supplier, we have to keep inventory. So that we can provide all of our customers with the materials that they need when they need it. So we always will overbuild our inventory.
So that we can meet all of our customer needs and at times based upon our.
Accounting.
Standards that we use if it's anything that we estimate has is not going to be sold over the next 12 month period, We will reserve it that doesn't mean that it is not saleable and does it mean that we may not sell it but based upon customer estimates that we get so we will always be reserving some inventory and it may shift from time to time different products that we have because we have so many new products because we have so many customers today.
Got it and then.
Just quickly on the order activity in can you discuss maybe how July shaped up and.
I'm, just saying with regards to the tariffs I mean, I know just news today on potential increase in September .
Are you concerned at all that that could potentially impact your guidance for the year or do you think at this point.
It's not going to affect the ordering process the order patterns.
Well I believe the tariffs that were announced or tweet. It today are you.
Mid stuff coming into the U.S. as opposed as opposed to shipments into China.
So.
You know will they impact us if there are additional tariffs that are placed on material going in it may impact us but.
We are enabling the industry, we have strong relationships with our customers and none of this has impacted our relationships with our customers.
Got it and lastly, the material sales to licensing ratio do you expect that to be consistent with what you've seen in the first quarter going into the second half.
We expect it to be closer to two to one for the year.
Great. Thank you very much.
Thank you.
As a reminder, it is star one to ask your question. Our next question comes from the line of Andrew Abrams with SC Amar. Please proceed with your question.
Hi, guys and congratulations regardless of the.
Thank you.
[noise] question more.
[noise] you were.
[laughter] Park.
[laughter].
Andy you are breaking up we can't hear you.
Oh.
All right.
Hey, you were talking a little bit about partnerships with local material.
Suppliers for host material.
Can you give us a little bit of of how you see this.
HM.
Being sold to your customers is it going to be.
A license that you give your.
Mm hmm material suppliers and they sell directly or will this go through you guys in one way or another.
Oh the way we're looking at right now Andy is that we'll work with our host partners to commercialize hosts that are complementary to our proprietary phosphorescent emitters local partners will then volume manufacture those hosts and sell the house directly to specific customers.
Got it thank you I appreciate it.
Okay. Thank you.
Our next question comes from the line of Hendi Susanto with Gabelli and company. Please proceed with your question.
Good evening I'm, sorry, if I missed this what is the main reason of customers pulling in Theres case in China, considering that your shipment time is relatively short and you have plenty of production capacity.
I think these are trade related issues, whether that you know tariffs that were there in other trade related issues that may have come up so that's really what our customers told us.
Okay, and then can you talk just strengths in China, I will definitely to consideration opex spending your production capacity in collaboration with PPG.
We are always looking at where we are for our production capacity. This is you know the industry is a.
In a multi year capex growth cycle, we expect our business to grow essentially as the OLED industry grows.
And we will always ensure that we have excess manufacturing capacity to meet any shifts in customer demand. So once we finished one expansion we are already looking out the next one.
Okay, and then one more question can you characterize the differences and similarities of customer support casing behaviour and inventory management practice between customers in China and customers in Korea.
This our customers know that we are a just in time supplier is that we are a reliable supplier and we have great relationships with them with our management team and our technical team and our sales guys and customer support cost that we have around the world and they work with everybody and so you know there may be a little bit of differences, but overall our customers are you know.
Professional manufacturers and worked very well with us and we work very well with them.
Thank you said.
Thank you.
Our next question comes from the line of Shannon Cross with Cross Research. Please proceed with your question.
Thank you given your cash balance and clearly you know improving margins and strong revenue.
Any thoughts on acquisitions anywhere that you think you might be able to.
Maybe accelerate or is it pretty much you are happy with the indefinitely idling you haven't any assets you you've got right now.
Yeah, we're always open to any M&A and you know we're focusing on leveraging in our IP. So that we can increase our growth and looking at any opportunity that we think will help grow our business or help grow the ecosystem of all led so oh it isn't that anything would be accelerated if something pops up where we have always been ready to move if we can.
Okay, and then I'm just curious given all the capacity that's coming on what are your thoughts about what you expect pricing to do next year I mean, I would assume at some point with all these T.D. showing up.
We would start to see more aggressive price cuts, but I'm just curious it started he talked to people in the industry.
You have any insight.
I mean, we on you know.
Consider typical consumer trends Oh apply with OLED Tvs as there's more capacity as volume grows then you should see pricing come down for the end user I mean, that's just the way. It is we don't have any specific insights because you know we're not we're not the seller of the TV.
Right Okay. Thanks.
Great. Thanks Shannon.
This does conclude our Q and a session for today I'd like to hand, the call back to Mr. rosenblatt for any additional or closing remarks.
Thank you all for your time today, we appreciate your interest and support and hope you all have a good night. Thanks.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
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