Woo Jin Ho

Woo Jin Ho followed up on the gross margin trend, asking if factors beyond raw material costs were contributing to the decline from the 80s to mid-70s, and if Universal Display could pass through development costs to stabilize margins.

Answer

Brian Millard, Chief Financial Officer and Treasurer, explained that volume pricing, as the industry has grown and matured, has led to a slight decrease in average selling prices (ASPs) and modestly impacted gross margins. He added that the company's cost structure and changes are certainly part of conversations during long-term agreement negotiations with customers.

Woo Jin Ho (Bloomberg Intelligence) followed up on the trend of declining gross margins, asking if factors beyond raw material costs were contributing to the slide from the 80s to mid-70s, and if Universal Display could pass through development work to stabilize margins.

Answer

Brian Millard (CFO, Universal Display) explained that modest gross margin decreases over the past year were also due to volume pricing, as increased industry scale and volumes led to slight decreases in average selling prices (ASPs). He added that cost structure changes are certainly part of discussions during new long-term agreement negotiations with customers.

Woo Jin Ho asked for details on the strong growth dynamics in the EMEA region and inquired about the steps taken to ensure a smoother product rollout for the upcoming 802.11ax cycle, given past issues with the 802.11ac launch.

Answer

Robert J. Pera, Founder, CEO and Chairman, acknowledged that the previous AC product introductions were not executed well and stated that the R&D culture is now more disciplined to perfect platforms before release. He attributed the strong EMEA growth to the network effects and increasing awareness of the UniFi platform's performance and value in Western Europe.

Woo Jin Ho inquired about the sales dynamics behind the second-half guidance, seeking a breakdown between the enterprise and service provider segments to understand why full-year sales were projected towards the lower end of the range.

Answer

Robert J. Pera, Founder, CEO and Chairman, projected a return to growth for the service provider segment, driven by catalysts like airMAX AC Gen 2, the LTU project, and UFiber. For the UniFi enterprise segment, he highlighted upcoming user experience improvements, new hardware, enhanced security features, and a significant overhaul of the UniFi Video platform expected in the latter half of the calendar year.

Woo Jin Ho sought reaffirmation of the full-year revenue guidance, questioned the drivers for the required 19% second-half growth, and asked for clarification on the significant reduction in reported registered users for the Ubiquiti Community board.

Answer

Robert Pera (Chairman and CEO) reaffirmed the $1 billion to $1.15 billion full-year revenue range. He attributed future growth to both continued adoption of UniFi and a strong pipeline of new products. Regarding the user community numbers, he dismissed the change as an IR mix-up between user sessions and total users, asserting that community engagement is stronger than ever.