Yahoo Finance Universal Display Corporation (NASDAQ:OLED) Q1 2024 Earnings Call Transcript
Universal Display Corporation (NASDAQ:OLED) Q1 2024 Earnings Call Transcript May 2, 2024
Universal Display Corporation beats earnings expectations. Reported EPS is $1.19, expectations were $1.05. OLED isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen, and welcome to Universal Display Corporation's First Quarter 2024 Earnings Conference Call. My name is Sherry, and I will be your conference moderator for today's call. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Darice Liu, Senior Director of Investor Relations. Please proceed.
Darice Liu: Thank you, and good afternoon, everyone. Welcome to Universal Display's first quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Brian Millard, Vice President and Chief Financial Officer. Before Steve begins, let me remind you, today's call is a 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 being webcast live and will be made available for a period of time in Universal Display's website. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, May 2, 2024.
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 reports 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.
Steven Abramson: Thanks, Darice, and welcome to everyone on today's call. We're pleased to report strong results for our first quarter of 2024. Revenue was $165 million, operating profit was $63 million, and net income was $57 million, or $1.19 per diluted share. With a strong start to the year, and all of momentum continuing to build, we are raising a low-end of our annul guidance range. We now believe that our 2024 revenues will be in the range of $635 million to $675 million. As we look to the industry, OLEDs continue to play a more significant role in shaping the future of displays. One nascent segment that is poised for significant growth is the OLED IT. Since the beginning of the year, several device makers announced new OLED IT products, including Asus, HP, Acer, Dell, Razer Blade, MSI.
And there are a number of expected new product introductions on the horizon. According to Omdia market research, OLED tablets are expected to increase by more than three-fold year-over-year, growing from 3.7 million units in 2023, to 12.1 million units in '24. The market researcher also forecasts that OLED notebook users will grow 50% year-over-year, from 3.4 million units in '23 to 5.1 million units in '24. This translates into total mobile OLED PC units growing from 7.1 million units in '23 to 17.2 million units in 2024, and is expected to reach 72.3 million units by 2028, which represents just 14% of the total mobile PC display market. Supporting this strong growth is new OLED capacity. In early March, Samsung Display held a ceremony for the commencement of construction of the world's first Gen 8.6 OLED IT production line in Asan.
According to reports, Samsung plans to begin equipment installation this year, and start mass production in 2026. The 15,000 plates per month OLED IT line is estimated to be capable of producing the equivalent of 10 million laptop panels per year. Also held in March was BOE's groundbreaking ceremony for its Gen 8.6 OLED IT fab in Chengdu. This greenfield fab is designed for 32,000 plates per month, and is expected to begin production in the fourth quarter of 2026. With reports that other panel makers are preparing for new investments as well, we believe that this is just the beginning of a multiyear OLED CapEx growth cycle. The many benefits of OLEDs continue to fuel the continued penetration in the smartphone market. DSCC market research expects OLED smartphone units to increase by 11% year-over-year in '24, with flexible OLED increasing 9% year-over-year, and rigid OLEDs increasing 17% year-over-year.
The innovative designs, coupled with the versatility and convenience of foldable smartphones and tablets continue to garner significant interest from OEM panel makers and consumers. UBI Research forecasts that foldable OLED shipments will grow 25% year-over-year to 27.4 million units in 2024, and will almost double by 2028, reaching 52.7 million units. The popularity of conformable, foldable, and rollable OLEDs was evident at Mobile World Congress. At the show, fans of foldable technology could see how OLEDs are enabling innovative devices, including displays that could be folded both in and out, rollable panels that can wrap around your wrist, as well as roll out from a smartphone display into a tablet, and foldable and slidable IT products that extend the screen size.
OLED TVs are also expected to grow this year. According to Omdia, OLED TV shipments will increase by more than 30% year-over-year, from 5.3 million units in 2023 to 7.2 million units this year. Another segment of the OLED market that is beginning to take off is aviation. Last month, Panasonic Avionics announced that it shipped the first batch of its Astrova 4K OLED in-flight entertainment monitors. These monitors will be installed in one of Icelandair's forthcoming Airbus aircraft beginning in the fourth quarter of this year. Qantas, United Airlines, Egyptair, Saudi Arabian Airlines, and Qatar Airways are also planning to adopt Panasonic's new 4K OLED screens. According to Panasonic Avionics, the image quality of the 4K OLED is sharper, clearer, and with infinite contrast ratio, it delivers a cinema-perfect black.
Panasonic also noted that it provides a better viewing experience than has ever been available before for the commercial aircraft. We are excited for the extraordinary opportunities in enabling the OLED products of today and in the future. As we look to our company, innovation has been the cornerstone of our ethos. It is the engine that reinforces our leadership position, expands our reach, and propels us forward. Our commitment to innovation is steadfast. Our R&D teams are continuously inventing, designing, developing, and commercializing next-generation reds, greens, yellows, and hosts to meet the ever-changing and ever-evolving customer specifications. Regarding blue, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emissive system.
We continue to believe that we are on track to introduce a phosphorescent blue that meets commercial specifications into the market in 2024. We believe that the expansion of our phosphorescent portfolio that includes red, green, and blue phosphorous-emissive materials will unlock a vast array of opportunities for higher energy efficiency and higher performance across a broad range of OLED applications. Regarding OVJP, we continue to make advancements with our Organic Vapor Jet Printing manufacturing technology for direct printing OLED TVs without the need for masks or solvents. The OVJP team continues to focus on scaling our novel technology platform. This year's SID display week is less than two weeks away. To learn more about UDC, please visit our booth in San Jose.
On that note, let me turn the call over to Brian.
Brian Millard: Thank you, Steve. And again, thank you everyone for joining our call today. Our first quarter results were strong across the board. Revenue was $165 million, up 27% year-over-year from $130 million in the first quarter of 2023. Our total material sales were $93 million in the first quarter, compared to material sales of $70 million in the first quarter of 2023. Green emitter sales, which include our yellow-green emitters, were $71 million. This compares to $54 million in the first quarter of 2023. Red emitter sales were $21 million. This compares to $16 million in the prior year's quarter. As we have discussed in the past, material buying patterns can vary quarter-to-quarter. First quarter royalty and license fees were $68 million compared to the prior year's period of $55 million.
Adesis's first quarter revenue was $3.7 million, compared to $5.1 million in the first quarter of 2023. First quarter cost of sales was $37 million, translating into total gross margins of 78%. This compares to $33 million and total gross margins of 75% in the first quarter of 2023. As you may recall, last year's first quarter gross margins were negatively impacted by a $3.3 million inventory provision. We did not increase our inventory reserve this quarter. First quarter operating expenses, excluding cost of sales, were $65 million. In the first quarter of 2023, it was $52 million. The year-over-year increase was due to increased employee expenses, higher amortization costs and a one-time royalty and license expense. We continue to expect 2024 OpEx to increase 10% to 15% year-over-year as we continue to invest in our people, our global infrastructure, and our innovation engine.
Operating income was $63 million in the first quarter, translating into operating margin of 38%. This compares to the prior year period of $45 million and operating margin of 35%. The income tax rate was 19% in the first quarter of 2024. We expect our effective tax rate for the year to be approximately 20%. First quarter 2024 net income increased by more than 40% year-over-year to $57 million, or $1.19 per diluted share. This compares to $40 million, or $0.83 per diluted share, in the comparable period in 2023. We ended the quarter with approximately $838 million in cash, cash equivalents, and investments. Regarding guidance, as Steve shared, we now believe our 2024 revenues will be in the range of $635 million to $675 million. And lastly, our Board of Directors approved a $0.40 quarterly dividend, which will be paid on June 28, 2024, to stockholders of record as the close of business on June 14, 2024.
The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders. With that, I'll turn the call back to Steve.
Steven Abramson: Thanks, Brian. As we approach UDC's 30th anniversary next month, I am filled with immense pride in what we have achieved together. Our incredible journey has been marked by relentless innovation, exponential growth, and the materialization of products that were once distant dreams. We have developed and fostered a culture where creativity thrives and where every challenge is seen as an opportunity. From the invention of phosphorescent OLED technology to the continuous discovery, development, and delivery of next-generation OLED materials and technologies, we remain at the forefront of driving efficiency, enhancing performance, and enabling the OLED industry. As we cast our gaze forward to the exciting horizon of possibilities that await us in the growing OLED market, we will continue to be trailblazers, collaborative partners, and committed to excellence.
In closing, I would like to thank each of our employees for their drive, desire, dedication, and heart in elevating and shaping Universal Display's 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, and for our shareholders. And with that, operator, let's start the Q&A.
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