Q1 2024 Earnings Summary
- Strong Progress and Potential Revenue from Blue Phosphorescent OLED Materials: Universal Display is making excellent progress on developing a commercial phosphorescent blue emissive system, and believes they are on track to introduce it into the market in 2024. Customers have significant interest, and adoption over time is expected. Given that blue content inside an OLED phone can be as much as green, and green emitter sales were significant ($245 million last year) , blue emitters could represent a substantial new revenue stream.
- Strong First Quarter Financial Results and Balanced Full-Year Outlook: In Q1 2024, Universal Display reported revenue of $165 million, up 27% year-over-year. The company expects revenues to be balanced between the first and second half of the year, indicating continued strength throughout 2024.
- Increased Sales to Major Customers and Adoption of Tandem OLED Structures: The company experienced increased material sales to its largest customer in Q1, contributing to higher revenues. New products, especially in the IT sector, are adopting tandem OLED structures, which consume more of Universal Display's materials, enhancing future sales potential.
- Increasing operating expenses may pressure profitability, as operating expenses excluding cost of sales rose to $65 million in Q1 2024 from $52 million in Q1 2023, due to increased employee expenses, higher amortization costs, and a one-time royalty and license expense. The company expects 2024 OpEx to increase 10% to 15% year-over-year.
- Uncertainty in the adoption timeline and revenue impact of the blue phosphorescent material, as the company stated that while there's significant interest, "it's really up to our customers... to determine exactly how that plays out and on what time line."
- Change in seasonality may indicate potential slowing growth, with the company expecting revenues to be "pretty balanced between the first and second half of the year", instead of the typical second-half weighting. This could suggest that the strong Q1 performance may not continue throughout the year.
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Seasonality Outlook
Q: Does strong Q1 affect seasonality expectations?
A: Management expects revenues to be balanced between the first and second half of the year based on current forecasts, unlike prior years where the second half was stronger. -
Blue OLED Revenue Potential
Q: Can blue match green in revenue, and ramp expectations?
A: The quantity of blue material in displays is similar to green, but since blue pricing isn't set yet, revenue potential depends on how that evolves. Adoption is expected over time, but timing depends on customers. -
Largest Customer's Contribution
Q: What's driving higher revenue from biggest customer?
A: There were more material sales to that customer in Q1, driving increased revenues. Newer IT products with tandem structures are in place, but specific production details can't be commented on. -
Customer Feedback on Blue OLED
Q: What's customer feedback on blue's benefits?
A: Blue phosphorescent technology offers ~25% energy efficiency improvement over fluorescent. Management is sampling to customers, with $1.9 million in blue development sales in Q1, expecting higher development sales in 2024. -
Increased R&D Expenses
Q: Why did R&D expenses increase?
A: The increase is due to investing in inventing new materials and higher employee-related costs, as well as higher development expenses with outside parties.
Research analysts covering UNIVERSAL DISPLAY CORP \PA\.