Universal Display Corp 2026 Q3 Earnings Call

Please go ahead. Thank you, and good afternoon, everyone.

Welcome to Universal Display's third quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer, and Brian Millard, Chief Financial Officer and Treasurer. 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 express 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 on 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, October 28, 2026. 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.

Thanks, Doris, and good afternoon, everyone. The OLED industry continues to build towards its next phase of growth. The past few months have highlighted both the expanding reach of OLED and the industry's continued investment in innovation and adoption. We saw continued momentum in foldables, new OLED capacity announcements, growing efforts to expand OLED TV share, and important advancements in several key areas of our technology roadmap. We also introduced our groundbreaking OLEDX platform and reached a major commercialization milestone through the launch of NovaJet by Universal Vapor Jet Corporation, or UVJC. Together, these developments reinforce our confidence in OLED's long-term trajectory and UDC's leadership role in helping shape that future. Let me begin with foldables, where we are seeing meaningful innovation, investment, and adoption across the industry. Foldables reached an important milestone with Apple's launch of the iPhone Duo, their first foldable smartphone.

Initial production allocations sold out within minutes of pre-orders opening, with delivery estimates now extending into 2027 due to strong demand and limited early supply. Foldables are not just an Apple story. The race to establish leadership in foldables is accelerating. Ahead of the iPhone Duo launch, Samsung released its Galaxy Z Fold8 series, Xiaomi introduced its new 18 Fold, and Huawei unveiled its third generation tri-fold, the Mate XT2. These launches, together with broader industry activity, underscore the growing importance of foldables as a strategic category for leading smartphone makers. Foldable smartphones are becoming one of the industry's most compelling growth stories. While the broader smartphone market continues to face macroeconomic uncertainty, premium devices have remained relatively resilient, and foldables are emerging as one of the fastest-growing segments. Omdia forecasts foldable smartphone shipments will reach 45 million units by 2030, up approximately 150% from 18 million units in 2025.

Foldables deliver big-screen versatility in a pocket-sized device, combining the convenience and portability of a smartphone with the immersive experience and added functionality of a much larger display. With nearly 2 to 3 times the square inches of a traditional smartphone, foldables showcase what OLEDs do uniquely well, enabling thin, lightweight, flexible, and power-efficient displays that conventional technologies simply cannot match. Another major area of expansion is IT, where OLED adoption is accelerating across notebooks, tablets, and monitors. As new capacity comes online, Omdia expects OLED IT shipments to reach 89 million units in 2030, more than tripling from 27 million units in 2025. Industry investment continues to support that growth outlook. Panel makers have collectively committed approximately $20 billion toward Gen 8.6 OLED capacity, including investments by Samsung Display, BOE, Visionox, and TCL China Star.

Most recently, Samsung Display announced plans to restart construction of a new greenfield OLED facility focused on foldables and IT applications, while LG Display is expanding Gen 6 capacity and evaluating future Gen 8 investments. We are also seeing encouraging developments in TVs. New OLED TV models from LG, Sony, and Panasonic are using LG Display's lower-cost SE architecture, helping broaden OLED's addressable market while preserving its premium picture quality. Beyond consumer electronics, we continue to see attractive prospects in the automotive market. OLED's design flexibility, image quality, and ability to support immersive digital interiors position the technology well for next-generation vehicle platforms. OLED's impact on automotive also extends beyond the cockpit. This month marks 10 years of OLED lighting in Audi production vehicles, highlighting how OLED technology continues to expand its role in automotive design, functionality, and communication.

Foldables, IT, TVs, and automotive each address different markets, and together they are expanding OLED's reach across a broader set of products, applications, and customers. As OLED continues to evolve, so does the opportunity to push the boundaries of performance, efficiency, and visual experience. That is where UDC's technology leadership matters. At IMID, a major Korean display conference in August, we introduced OLEDX, a proprietary technology platform designed to extract more light out of an OLED display and deliver it to the user. Our phosphorescent technologies revolutionize OLED efficiency by maximizing light generation. But currently, not all of that light reaches the user. OLEDX is designed to dramatically increase the amount of light that reaches the user. Put simply, phosphorescence creates the photons, and OLEDX helps make every photon count.

Together, these complementary technologies can unlock the next level of OLED performance, enabling higher efficiency, enhanced image fidelity, and greater control over the viewing experience. Phosphorescent blue remains a central element of our innovation roadmap, and we continue to make advancements across key performance metrics, including efficiency, color, lifetime, and manufacturability. We are also expanding our work into a broader range of materials and device architectures to accelerate commercialization. While commercialization timing remains depending on customer roadmaps, we believe phosphorescent blue represents a significant opportunity for both UDC and the OLED industry. Our materials portfolio is also expanding through next generation red and green emitters designed to support broader color gamuts and emerging architectures such as PSF, or phosphorescent-sensitized fluorescence OLEDs. To further accelerate progress, we are leveraging artificial intelligence, machine learning, and advanced computational tools through our innovation pipeline.

Our AI-enabled discovery platform has generated a virtual library of more than one billion molecular designs and evaluated approximately 50 million candidates using proprietary models, enabling us to explore a broader molecular design space more quickly and efficiently. From that effort, we have already identified hundreds of promising innovative molecular cores, synthesized new candidates, and generated leads to advance our commercial blue program. These capabilities are accelerating progress of phosphorescent blue and enhancing our ability to discover and optimize next generation OLED materials across our broader portfolio. Beyond our core business, our equipment subsidiary, UVJC, recently launched NovaJet, the first commercial system and a significant milestone for a technology platform UDC has spent years developing. With the potential applications spanning multiple large end markets, including semiconductors, photovoltaics, solid state batteries, organic electronics, and life sciences, we believe UVJC can create new long-term avenues for value creation.

As the industry continues to navigate macroeconomic uncertainty and elevated component costs, particularly memory pricing, display makers and brands continue to invest in OLED capacity, technology, and new products. We believe those investments reinforce the industry's long-term growth outlook. With that, Brian, I'll turn the call over to you.

Thanks, Steve. Revenue for the third quarter of 2026 was $160 million, compared to $140 million last year. We continue to expect full-year revenue to track toward the lower end of our prior guidance range of $630 million to $670 million. Total material sales in the third quarter were $80 million, compared to $83 million in the third quarter of 2025. The decrease in material sales primarily reflected customer mix and a $4.8 million unfavorable year-over-year change in cumulative catch-up adjustments related to estimated product mix, partially offset by higher unit material volume. Green emitter sales, which include our yellow-green emitters, were $61 million, compared to $65 million in the third quarter of last year. Red emitter sales were $19 million, compared to $17 million in the third quarter of 2025.

Revenue from royalty and license fees was $75 million in the third quarter, compared to $53 million in the prior year period. The increase was primarily due to higher unit material volume, customer mix, and the absence of the $9.5 million out-of-period adjustment that reduced royalty and license revenue in the third quarter of 2025. The ratio of material sales to royalty and license revenue was approximately 1.1 to one in both the third quarter and the first nine months of this year, which is now our full year ratio expectation as a result of customer and product mix changes. Adesis, our contract development and manufacturing subsidiary, generated $5.2 million of revenue during the quarter, compared to $3.7 million in the third quarter of 2025. Cost of sales was $43 million for the quarter. Total gross margin was 73%, compared to 75% in the prior year period.