Q2 2024 Earnings Summary
- Universal Display Corporation raised the low end of its 2024 revenue guidance by $10 million, citing improved visibility and stronger-than-expected demand across all markets, indicating robust business momentum.
- The company is confident in its competitive position against Chinese competitors, emphasizing that customers want their full suite of current and next-generation OLED technologies, and all major panel makers are working with them under long-term agreements.
- Significant progress is being made in developing phosphorescent blue materials, with management expressing confidence that commercialization is "not a matter of if but when," and strong customer engagement suggests a potential major future revenue driver.
- Delay in commercialization of phosphorescent blue materials: The company now expects to need more time beyond this year to achieve entry commercial specifications for its phosphorescent blue emissive system, indicating a shift from prior expectations. Brian Millard stated, "We do believe that we're going to need some more time beyond this year to hit entry commercial specs... it is a bit of a change compared to our prior expectations."
- Weaker sales growth and variable demand from Chinese customers: Sales growth from Chinese customers has been lower compared to Korean customers, with ordering patterns described as variable and lumpy. Brian Millard noted, "Korean customers growing really strongly in the first quarter in the first half. Chinese not as much... our ordering patterns and revenues from our Chinese customers have been quite variable and lumpy quarter-to-quarter."
- Potential competition from Chinese OLED material suppliers: While management expressed confidence in their products, increased competition from China could pose a risk. When asked about competitive dynamics in China, Steve Abramson stated, "We don't believe that there are any materials that are competitive with our state-of-the-art materials."
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Delay in Blue Phosphorescent Development
Q: Is the blue phosphorescent product development delayed?
A: Management acknowledged they need more time beyond this year to achieve entry commercial specs for the blue phosphorescent material, pushing the timeline by months, not years, beyond 2024. They remain confident in the progress, noting $1.3 million in Q2 sales of blue emitter and host. -
Updated Guidance Raised
Q: What drove the updated guidance increase?
A: The company raised the low end of its calendar year guidance by $10 million due to greater visibility now that they're more than seven months into the year. The increase is driven across the board based on customer needs, not just smartphones. -
Competition from China
Q: Are there emerging competitors from China?
A: Management does not believe any materials are competitive with their state-of-the-art offerings. They emphasize that customers want their full suite of OLED technologies, and all major panel makers are working with them under long-term agreements. -
Sales Growth: Korea vs. China
Q: Why is sales growth different between Korean and Chinese customers?
A: Chinese customers' ordering patterns have been variable and lumpy quarter-to-quarter, leading to less growth compared to strong growth from Korean customers. There are no specific themes other than variable buying patterns. -
Increase in Deferred Revenue
Q: What caused the increase in deferred revenue?
A: The increase was due to certain billing milestones achieved on a contract during the quarter. Deferred revenue balances change based on timing of cash collection versus revenue recognition; this uptick was normal course and nothing out of the ordinary. -
R&D Spending on Blue
Q: Will R&D expenses increase as blue nears commercialization?
A: No significant increase is expected. The robust blue development program is already underway, and current expenses reflect investments in next-generation materials, including red, green, and blue. Blue itself doesn't drive an uptick in R&D spend. -
Timing of Blue Products
Q: When will blue phosphorescent products be available in market?
A: Timing depends on customers. The company is focused on hitting entry commercial specs; once achieved, customers will determine how to use the material in commercial products. -
Tracking Blue Progress
Q: Can we systematically track blue development progress?
A: While they would prefer an easier way, they need to be mindful of information sharing. They are confident in progress and believe commercialization is a matter of when, not if; it will just take a bit longer than previously thought. -
Customer Engagement on Blue
Q: What's customer feedback about blue and impact on contracts?
A: Interest in phosphorescent blue continues to grow with strong customer engagement. The company is focused on achieving specs and is confident contracts will align when needed. -
Growth in PP&E
Q: What contributed to the growth in PP&E this quarter?
A: Capital expenditures were driven by renovation work on their New Jersey campus and enhancing operational capabilities across the manufacturing network to support anticipated future growth. -
OVJP Partnerships
Q: Any updates on partnerships for OVJP?
A: They continue discussions with customers and equipment industry players about partnerships and remain confident in the promise of OVJP, but have nothing new to share at this time. -
Pricing Strategy in IT Applications
Q: Are you taking a different approach to pricing for IT applications?
A: There isn't a pricing difference based on the use of their emitter; they don't price differently for various applications.
Research analysts covering UNIVERSAL DISPLAY CORP \PA\.