管理層發言
Good day, ladies and gentlemen, and welcome to Universal Display Corporation's Second Quarter 2026 Earnings Conference Call. My name is Sherry, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference call over to Darice Liu, Senior Director of Investor Relations. Please proceed.
Thank you, and good afternoon, everyone. Welcome to Universal Display's second quarter earnings conference call. Joining me on the call today are Steven V. 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 the 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 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, July 30, 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 would like to turn the call over to Steven V. Abramson.
Thanks, Darice, and good afternoon, everyone. As we look across the OLED industry, we continue to see investment, innovation, and expansion throughout the ecosystem. Display manufacturers are investing billions of dollars in new capacity. Brands are broadening adoption across a growing range of products and applications. And next-generation technologies continue to push the boundaries of performance and capability. Those developments reflect the industry's long-term growth trajectory, even as portions of the consumer electronics supply chain face a more challenging near-term environment. Rising memory costs and supply constraints continue to weigh on demand expectations, particularly within the smartphone market, where higher component costs are putting pressure on unit volumes. The near-term headwinds are reflected in our updated outlook, which Brian will discuss in more detail. We believe it is important to separate the current cycle from the longer-term direction of the industry. While demand expectations have softened in the near term, we believe the industry's fundamental growth drivers remain firmly intact. Industry forecasts call for OLED area growth to be relatively flat this year with positive growth expected to resume in 2027. And many of the investments that will support that next phase of growth are already underway today. After years of planning and development, Gen 8.6 OLED manufacturing is becoming a commercial reality. Samsung Display and BOE recently commenced mass production of the Gen 8.6 facilities, while Visionox and TCL China Star continue advancing their greenfield projects. In addition, LG Display and Samsung Display have announced further Gen 6 investment. Most of these investments target end markets where adoption remains in its early stages. While OLED is already well established in smartphones, with approximately 65% market penetration, IT, automotive, and TVs remain at a much earlier stage with shares still in the low single digits. In automotive, recent introductions such as the Genesis GV70, Volvo EX60, and Zeekr 009 demonstrate how OLEDs are driving sophisticated digital cockpits in premium and electric vehicle interiors. Beyond expanding into new applications, one of OLED's key advantages is its ability to enable entirely new form factors. Foldable, tri-fold, and rollable devices are demonstrating how OLED flexibility can unlock new product designs and user experiences. Last week, Samsung unveiled its Galaxy Fold 8 series featuring new flex titanium technology that significantly reduces crease visibility while improving durability. As additional brands enter the market and performance continues to improve, foldables are expected to evolve from a niche category into a more mainstream segment in the years ahead. Collectively, these industry developments highlight the significant runway that remains as OLED expands across new applications, larger display formats, and emerging form factors. As adoption broadens, customers continue to demand higher brightness, lower power consumption, longer lifetime, broader color gamut, and more advanced display architectures. Meeting these needs requires continued advances in materials and device technologies, which is where our expertise and technology leadership matters most. We are continuing to play a central role in advancing the materials and technology that underpin and drive the industry. Our decades of invention, development, and manufacturing know-how, a portfolio of more than 7,000 patents, strong customer relationships, and a global support infrastructure position us well as the industry leader entering this next phase of growth. One of the most important opportunities on our roadmap continues to be phosphorescent blue and the meaningful energy efficiency benefit it is expected to deliver. At SID Display Week in May, we presented additional technical results demonstrating continued progress toward a more robust phosphorescent blue system, including advances in efficiency, color performance, operational lifetime, and manufacturability. While commercialization timing continues to depend on customer road maps, we believe phosphorescent blue is a significant opportunity for both UDC and the broader industry. Beyond blue, we continue advancing and broadening our portfolio of next-generation OLED technologies, including phosphorescent sensitized fluorescence (PSF), tandem architectures, and innovations designed to enhance light extraction, increase power efficiency, and improve the visual appearance of the display. We look forward to sharing additional technical developments at Korea's IMID conference next month. We are also accelerating materials discovery and development through our internal advanced computational tools, artificial intelligence, machine learning, and agentic AI, as well as strategic collaborations, including our role as a founding member of CuspAI's recently launched AI Materials Foundry. On the infrastructure front, we continue to invest alongside the OLED industry. Last month, we celebrated the grand opening of our new OLED Technology and Innovation Center in Chengdu, China. As our third innovation tech center in Asia, following Korea and Hong Kong, it reinforces our commitment to providing on-the-ground local support and fostering collaboration with customers. As we look ahead, we remain confident in the OLED industry's growth trajectory. Continued investment in manufacturing capacity, expanding adoption across new applications and form factors, and advances in materials and device architectures reinforce our belief that the next growth phase is taking shape. Through our investments in innovation and infrastructure, we are helping to build the foundation for that future. And with that, I will turn the call over to Brian.
Thanks, Steven. Revenue for the second quarter of 2026 was $152 million, compared to $172 million in the second quarter of 2025. As a reminder, the prior year period benefited from elevated customer purchases ahead of anticipated tariff increases. Turning to the broader environment, as Steve shared, we continue to see meaningful investment across the OLED ecosystem and encouraging progress in several long-term growth drivers. At the same time, visibility across portions of the consumer electronics supply chain has remained limited. Customer demand forecasts have become more cautious as higher component costs continue to pressure portions of the smartphone market. Given these dynamics, we now expect full-year revenue to track toward the lower end of our previously communicated range of $630 million to $670 million, with second-half revenue still expected to exceed first-half revenue. Our total material sales in the second quarter were $66 million compared to material sales of $89 million in the second quarter of 2025. The decrease in material sales was primarily driven by lower material volumes, customer mix, and changes in cumulative catch-up adjustments. Green emitter sales, which include our yellow-green emitters, were $51 million compared to $64 million in the second quarter of 2025. Red emitter sales were $15 million compared to $24 million in the second quarter of 2025. Revenue from royalty and license fees was $81 million in the second quarter compared to $76 million in the prior year period. The increase was primarily driven by cumulative catch-up adjustments. Across both royalty and license revenue and material sales, cumulative catch-up adjustments totaled approximately $10 million during the second quarter and the first six months of 2026, and had a net favorable impact of approximately $9 million compared to the second quarter of 2025. The ratio of material sales to royalty and license revenue during the second quarter was approximately 0.8 to 1. When you look at the first half of the year, the ratio was approximately 1.1 to 1. Based on our current outlook, we now expect the full-year ratio to average approximately 1.2 to 1. Adhesus generated $4.8 million of revenue during the quarter, compared to $7.5 million in the second quarter of 2025. Cost of sales was $37 million for the quarter. Total gross margin was 76%, compared to 77% in the second quarter of 2025. Operating expenses, excluding cost of sales, were $62 million compared to $64 million in the prior year period. We continue to operate as a lean company, investing in key R&D and growth initiatives while maintaining a disciplined approach to spending. Based on our current outlook, we now expect full-year operating expenses to increase by a low single-digit percentage compared to 2025. Operating income for the quarter was $54 million, representing an operating margin of 35%. This compares to the prior year period of $69 million and an operating margin of 40%. The effective tax rate for the quarter was approximately 19%. Net income was $49 million, or $1.06 per diluted share, compared to net income of $67 million, or $1.41 per diluted share in the second quarter of 2025. Our business continues to generate strong cash flow and maintain significant financial flexibility. During the second quarter, we repurchased approximately 531 thousand shares for approximately $48 million. Over the last 12 months, we returned more than $238 million to shareholders through dividends and share repurchases. Today, we announced that our board of directors declared a third-quarter cash dividend of $0.50 per share. We ended the quarter with approximately $855 million in cash, cash equivalents, and investments, providing substantial flexibility to invest in innovation, pursue growth opportunities, and continue returning capital to shareholders. Our strong balance sheet and cash flow generation position us well to support both our near-term priorities and long-term growth initiatives. With that, I will turn the call back to Steven.
Thanks, Brian. We are excited about the opportunities ahead. OLED continues to expand into new applications, new products, and new form factors. The technology roadmap also continues to advance, creating new opportunities across the ecosystem. As an OLED pioneer, we have helped shape the industry through scientific leadership, intellectual property, and close collaboration with our customers and partners. We believe those strengths, together with our robust R&D pipeline, global infrastructure, and strong balance sheet, position us well for the future. 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. With that, operator, let's start the Q&A session.
分析師問答
Thank you, Mr. Abramson. You may press 2 if you would like to remove your question from the queue. Before pressing the star keys. Our first question comes from Jim Ricchiuti with Needham and Company. Please proceed.
Thank you. Good afternoon. I know there is probably some noise in those materials margins that were in the second quarter. I am wondering, should we anticipate a return to more normalized material margins in the second half?
Yeah, Jim. As you noted, there was a little bit of an anomaly in the second quarter. As we went through our reforecasting process, we assumed there would be a change in some of the materials mix and the product mix. As a result of that, there was roughly a $7 million reduction recorded compared to where we were in Q2 of last year. So it was a negative item hitting the materials line in the second quarter. We do expect in the remainder of the year our materials gross margins to return more toward their historical levels, which have been approximately 60%.
Got it. And are you able to say if you expect your revenues to benefit in any meaningful way from the new capacity that you alluded to in the press release and your introductory comments in the second half? Or is this more likely to be a catalyst for you next year?
There certainly is some benefit we are seeing in 2026 in the second half and even in the first half as those fabs are getting ready for mass production, and that is already encompassed in our guidance for this year. Next year, and in 2027 and beyond, there will be even more benefit as those fabs are fully operational and mass production scales for a full 12 months, and as they become more heavily utilized in the coming years. So 2026 is really setting up the opportunity for growth in the next few years.
Our next question is from Mehdi Hosseini with SIG. Please proceed.
Yes. Thanks for taking my question. I want to go back to Steven. This is obviously a recurring question every quarter, and I am just going to ask you: is there any more detail as to how you are progressing with commercialization of the blue? Has the reliability and the yield and the lifetime improved to the point that we are just waiting for commercial adoption at a larger scale, or are there still milestones that you need to meet before commercialization of the end-market product?
Well, Mehdi, as you know, phosphorescent blue is one of our most important opportunities. We have made meaningful progress in the earlier developmental materials and achieved some key milestones, and work is continuing on those programs. You saw the announcement from LG on the iPad. As the industry has evolved, we have seen multiple pathways emerging for phosphorescent commercial blue OLEDs. We are expanding our efforts across a broader range of next-generation blue materials and architectures. We are accelerating the development, increasing resources behind the program, and leveraging our AI and machine learning to expand the design space and accelerate materials discovery and development. We remain confident in the long-term commercial opportunity for phosphorescent blue. But I cannot give you any specific timelines right now because that is really dependent on our customers' commercial road maps.
And, Mehdi, you know, in 2025 LG at SID Display Week showcased a tablet-sized product that had incorporated phosphorescent blue in a hybrid tandem structure. They re-showcased at this year's SID Display Week a similar prototype they developed. So we are very encouraged by progress that we see LG making and talking about very publicly, as well as progress that other customers have made that have now gotten to the point of being prototypes they can showcase within the industry.
Got it. Thanks for the detail. If I may have a follow-up: could there be a scenario where increased emphasis on power consumption or reduction in power consumption makes phosphorescent blue a more viable solution for the next generation of gaming laptops or even more sophisticated AI notebooks that would come to market next year?
Oh, go ahead.
The more emphasis there is on power efficiency, the more important phosphorescent blue becomes. Regarding the 'next year' timeline, I'm going to reserve comment.
Gotcha. Thank you.
Our next question is from Scott Searle with ROTH Capital Partners. Please proceed.
Hey, good afternoon. Thanks for taking the questions. Steven and Brian, maybe to dive in in terms of guidance for the year: even at the lower end of the range, it still implies a meaningful step-up into the second half of this year — roughly an average of $168 million in revenue per quarter. I am wondering where you are seeing the strength and what level of confidence is in that? Certainly, it sounds like you have some early production going on with some of the new fabs, but I am wondering if you could update us in terms of where you think channel inventories are and what's driving that comfort and outlook into the second half?
Hi, Scott. In the second half, as you are aware, there are a number of products that launch in Q3 as well as early Q4. You typically see a stronger second half in most years in our business, and we expect that trend this year as well. On the visibility we have right now — given product cycles and the details we are receiving from customers in terms of their forecasts — we do expect the second half to be stronger than the first half, which has been our expectation all along this year. Since the beginning of the year, we expected the second half to be stronger, and that continues to be the case today.
Gotcha. Very helpful. Thank you. And if I could just follow up specifically on some of the geographic mix: I think China took a nice tick up in the second quarter. Are we getting back to a more normalized level of China revenues, or is this more pre-buying ahead of a second round of tariffs or just new production coming online for BOE? Any color on that front would be helpful. And just to clarify on the gross margins, Brian, I want to make sure I heard correctly: materials gross margins recovering back to the ~60% level in the second half after some of the anomalies we saw in Q2?
Yes, that is right on the materials gross margins. We do expect the second half to be more normal, closer to our historical trends, which have been around 60% in recent quarters. There were some anomalies in Q2 that drove the materials gross margin being lower. As it relates to China, our China sales have always been very lumpy historically, and that continues to be the case. But we are projecting growth in Chinese customer revenues in the second half. I would say we are seeing customers who are more exposed to the mid- and low-end segments of the smartphone market experiencing a little more pressure this year, but we are projecting growth in the second half.
Thanks so much. I will get back in the queue.
As a reminder, press star 1 on your telephone keypad if you would like to ask a question. Our next question is from Nam Kim with Equity Research. Please proceed.
Hello. Thank you for taking my question. I think the guidance adjustment may be due to a bit slower material growth trend. Is this driven by lower unit volume or ASP pressure or a combination of both? IT OLED demand, especially gaming monitor, seems very strong, but smartphone demand is weak. Could you help me understand the overall unit impact across your end markets? And also, given the rising costs across the industry, are you seeing any price pressure on your OLED material, or has your material pricing remained relatively stable? Thank you.
Hi, Nam. The change in the guidance, expecting us to be toward the low end of the prior range, is really driven by a change in volume expectation. As you are aware, we have long-term, typically five-year deals with our customers, so we have very consistent ASPs over those periods, and we have not seen anything out of the ordinary on the pricing side. So it is really driven by a lower expectation of volume this year.
Our next question is from Martin Yang with Oppenheimer and Company. Please proceed.
Hi. Thank you for taking my question. First, a follow-up on the previous topic on growth in the second half: do you expect growth in the second half across all of your customers?
Yes. We are projecting growth across our customers in the second half. There are product cycles we expect to benefit from in the second half, and we are projecting across-the-board growth in the customer base on a broad basis in the second half.
Got it. Second question on gross margin: looking to maybe a more medium-term perspective, do you think we will see incremental gross margin headwinds in 2027 based on raw material costs? And do you have any potential offsets to those potential headwinds?
On gross margin, it's important to focus on total gross margins as a more useful way of assessing our profitability. Our guidance this year for total gross margins is 74% to 76%, and on a year-to-date basis, we are tracking right in line with that at just north of 75%. In terms of 2027, it's too early to give a guide or expectation there. We do have certain input costs in our manufacturing process; one of the key ones being iridium, which is a key component of many of our products and has fluctuated in price recently. On the other side, as we can put more volume through, the fixed components of our manufacturing plants allow us to achieve greater operating leverage. We will give more color in February about what that means for next year, but we are certainly focused on sourcing, making sure we source our raw materials and inputs in the most efficient and cost-effective way, and working with suppliers to optimize manufacturing processes.
Got it. Last question: sales of blue sample materials have stayed at a very low level in the past few quarters. Can you comment on what we should interpret from the lower level of sample sales versus the past few quarters or the same time last year, and what we should expect for the rest of this year? Thank you.
The blue development sales have been low in the last couple of quarters, but the progress with our customers continues to move positively. In an R&D stage and development cycle that customers are in, a little bit of material can go a long way. We are also, as Steven noted, continuing to focus our resources on inventing new materials and providing those to customers to open more doors for them in blue development. So the revenue number is an interesting anecdote, but it is not necessarily the best way of measuring the progress we are making toward commercialization of blue.
Got it. Thank you, Brian. That is it for me. Thanks.
Thank you. This concludes the question-and-answer session. I would like to turn the program back over to Brian Millard for any additional or closing remarks.
Thanks for joining us today. We are confident in the underlying growth drivers for UDC and the OLED industry. We appreciate your continued support and look forward to speaking with you again next quarter. Thank you.
This concludes today's conference call. You may now disconnect.