Universal Display Corporation Q3 FY2025 earnings call

• Steve Abramson discussed Q3 financial results, innovation via AI/ML for material discovery, acquisition of OLED patent assets from Merck KGaA, and progress on FOLED blue. - Brian Millard detailed revenue comparisons, material sales breakdown, gross margins, OpEx, and dividend details. - Steven Abramson highlighted innovation awards, UVJC's new global HQ/R&D center in Singapore, and the 25-year partnership with PPG.

Third quarter revenue was $140 million, with operating profit of $43 million and net income of $44 million or $0.92 per diluted share. Revenue for the first 9 months of the year was $478 million. For the full year, Universal Display expects revenues to be around the lower end of the guidance range of $650 million to $700 million. Total material sales were $83 million in the third quarter of 2025, with green emitter sales at $65 million and red emitter sales at $17 million. Third quarter royalty and licensing fees were $53 million (including an out-of-period adjustment of $9.5 million). Adesis' third quarter revenue was $3.7 million. Third quarter cost of sales was $35 million, resulting in gross margins of 75%. Operating expenses excluding cost of sales were $61 million. The Board approved a $0.45 quarterly dividend.

• Full year revenue is expected at the lower end of the $650 million to $700 million range. - 2025 materials to royalty and licensing revenue ratio is estimated to be around 1.3:1. - Anticipate renewed momentum and growth in the fourth quarter. - New capacity coming online in 2026 (Samsung, BOE, Visionox, TCL China Star) is expected to drive growth in the OLED market.

Q: First, understandably the pull forward from Q3 into Q2 that's showing up in kind of the results from a top line perspective. 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 -- looks like it's going to be a quarterly record for you in terms of revenue. So just curious kind of what -- is there anything that slipped out from Q3 into Q4 timing-wise? And then if not, where is sort of the visibility around Q4 for that revenue kind of strength into year-end? Is that just product cycle-driven? Or are you seeing any new capacity being added in '26 starting to mobilize already in terms of material purchases here at year-end? Just trying to understand the Q4 strength.

A: In terms of the Q4 guide, yes, your math is right that if we hit the low end of the guidance range, that will be a record. I think we posted $172 million of revenues in the second quarter of this year. So it would slightly north of that to hit the $650 million. And we continue to get forecasts from our customers on an ongoing basis. those are indicating that we're going to have growth in a strong Q4.

Q: And then again, at the low point of guidance, $650 million revenue or so you're basically flat year-on-year. 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 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 2 years where you've been kind of flattish into '26, what are some of the puts and takes? And as some of the, I guess, year-end weakness here in '25, is that potentially slipping into '26 here?

A: So there's -- as Steve mentioned in his prepared remarks, there's a number of things in terms of new capacity coming on in line next year that give us a lot of optimism about growth, not just next year but in the coming years across a variety of our customers, we've seen steady set of announcements over the last few years for new Gen 8.6 capacity with China Star as being the most recent. And in terms of the '24, '25 growth, there was a few onetime items in '24 that also made it a little bit of a challenging comp. And looking into next year, we certainly are projecting continued growth.

Q: The LG display contract, I believe, that is up for renewal at end of the year. Any thoughts you can share around how those contract negotiations are faring? And then are there any potential implications for the blue commercialization timeline from those contract negotiations?

A: So we're 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. 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.

Q: First, so we just wanted to know like how much is Universal Display today as a percentage of the BOM cost for tandem display? 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?

A: So 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 somewhere between likely 1.5 to 2x the quantity of material in a tandem structure compared to a single layer. Even if you were to add a 1.5 or so factor on top of that single layer cost were still a very small portion of the overall cost structure of displays, regardless of whether it's smartphone or TV or what have you. On Blue, we certainly believe that phosphorescent blue has a premium price associated with it. We've been very consistent in that view. There's a significant investment we've made over many years of R&D resources and effort to bring it closer to commercialization. So we believe that it will be a premium to our ready green pricing, but still priced very reasonably such that it won't be a hindrance to adoption.

Q: I want to maybe dig into the end markets a bit more. with regards to your guidance, is there any incremental changes by end markets, for example, smartphones, ITs and TVs that gave you a different outlook for the year?

A: Martin, I think as it relates to this year, nothing noteworthy that's come up in terms of the specific end markets. Certainly, as we've previously discussed and as Steve mentioned 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 road maps and their plans over the next few years to adopt more and more OLED displays across their product portfolio. We also, on the smartphone side, see foldables as a big opportunity for our business. certainly, the Square area being larger is compelling. This year, I wouldn't say there's anything abnormal that's come up on the foldable side, other than you continue to hear quarter after quarter more and more OEMs announcing increasing foldable models. And even if you're going the trifold route and previewing some of those tri-fold models. So as we head into the next few years, that's where we really see a lot of the opportunity for our business is the increasing surface areas and new form factors in smartphones as well as generally the IT market having greater adoption.

Q: Next question on new capacity that are coming online in the next 2 years. What will be the helpful metrics to help us understand the capacity or the startup cost, the start of as how the material demand can impact your sales before they enter full commercial production?

A: So I think that there's always a seeding process that goes into turning on a new fab and getting it ready for mass production. We do see that routinely when new capacity comes online. In terms of data points to look for metrics, I mean it will certainly come through in our results when those orders come through. I think also our customers are getting obviously more efficient on an ongoing basis at how much material they need to use in each of those seating processes. But we would certainly expect to see some level of seating once those fabs are in preparation for mass production.