Universal Display Corp (OLED) 2010 Q2 法說會逐字稿

Good day and welcome to the Universal Display Corporation second quarter 2010 earnings conference call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Joe Hassett. Please go ahead, sir.

Thank you and good afternoon, everybody. With us today are Steve Abramson, President and Chief Executive Officer, and Sid Rosenblatt, Chief Financial Officer of Universal Display Corporation.

Let me begin today by reminding you this call is the property of Universal Display. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Universal Display is strictly prohibited. Further, as 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, August 9, 2010.

All statements in this conference that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding Universal Display's beliefs, expectations, hopes or intentions regarding the future. It is important to note that these statements are subject to risks and uncertainties that could cause Universal Display's actual results to differ from those projected. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC. Universal Display disclaims any obligations to update any of these statements.

Now I would like to turn the call over to Steve Abramson, President and CEO of Universal Display. Please go ahead, Steve.

Thank you, Joe and welcome to everyone listening on today's call and webcast. This afternoon I will start with a quick overview of our second quarter financial results. Then I will discuss highlights for the quarter and update everyone on our latest plans and developments to grow our PHOLED technology materials in both the display and lighting markets. Sid then will follow with more details on our financials before we open the call to questions.

I am pleased to report that our revenues for the second quarter of 2010 were $8.4 million compared to $3 million for the same quarter of 2009. Revenues also increased significantly on a sequential basis, nearly doubling from $4.3 million in the first quarter of this year. As a result, we are able to reduce our operating loss for the quarter to just $1.9 million, a significant reduction from both a year ago and the proceeding quarter.

While increased revenue was driven primarily by the growth of our developmental business, commercial revenue was also up both sequentially and compared to the second quarter of last year.

OLED was the most talked about display technologies these last few months and we feel rightly so. Bright, beautiful, energy-efficient OLED displays are increasingly penetrating the mobile display market, especially for high-end smart phones. OLEDs have also became recognized as the leading technology for the next generation of large area televisions and energy-efficient white OLED lighting products are getting closer to commercial reality.

As our Universal PHOLED technology materials are increasingly recognized as our palpable to drive power consumption down, we have become a key component for high-performance OLED displays and essential for energy-efficient white lighting. The most recent example, Samsung Galaxy S has just been launched to outstanding reviews. The full page ads taken out in major newspapers in mid-July, the focus is on the "jaw-dropping 4-inch super AMOLED display".

With its super AMOLED technology Samsung has been able to place touch sensors the display itself, as opposed to on a separate layer. According to the Washington Post, "Super AMOLED is fantastic, you need to see in person. Colors burst out in the display and animations appear lively and smooth." In a recent view of the Samsung Vibrant phone, USA Today marvelled, "The phone has eye-popping 4-inch super AMOLED displays." The reviewer was blown away by the quality of the picture as he watched the movie Avatar on his phone.

This is only the latest of the rave reviews for the increasing number of OLED displays appearing on smart phones and other hand-held devices. These displays provide incredible performance and, with our technology, superior energy efficiency. In fact, demand for OLED displays has reached the point where it's outstripping supply. For instance, Samsung SMD is adding OLED display production capacity, committing $2.2 billion to a new GEN 5.5 OLED plant. Reports indicate that the plant will have monthly capacity of 30 million, 3-inch mobile screens.

It has been reported that AU Optronics is expanding its OLED production capacity and will start volume production of small to medium-sized OLED panels in 2011. In LG Displays new Gen 4, production lines are expected to be in operation by next year. According to published report, this will triple their OLED production capacity for mobile devices. In total, according to display search, at least 20 new AMOLED production lines are expected to come online in the next three years. As stated by Jennifer Cosgrove of Display Search, "This is the future of display technology on smartphones."

Makers of cell phones, smartphones and other personal electronic devices continue to utilize attractive displays as their focal point. Power consumption, thinness and picture quality of the AMOLED screen make them a natural choice for the highly visual products.

Speaking at a display conference earlier this year, Samsung SMD's Chief Technical Officer, Dr. Sang-soo Kim, gave some prospective in just how fast the manufacturing capacity is building out. He said that OLED displays are expected to grow to about 45 million mobile units this year or 8% penetration of the market. He then said this could grow to 60 -- 600 million mobile units in a 53% market penetration by 2015.

On top of that, Dr. Kim predicted that by 2010 OLED will also become the mainstream display technology for TVs. The value of the OLED display market is expected to grow at a cumulate annual growth rate of 32% to nearly 5 billion by 2016 as reported by Display Search.

These are certainly exciting time for our industry. But we're not relying solely on an expanding market to fuel our growth. We remain at the forefront of the industry in expanding our portfolio of OLED technologies and materials. At the SID conference in May, we announced that all-phosphorescent for our AMOLED display architecture uses novel four-color sub-pixel design. The new pixel format adds a light blue sub-pixel to the conventional red-green-blue configuration. The introduction of a light blue sub-pixel can significantly extend the operational lifetime of an OLED display and reduces display's power consumption by as much as 33% as compared to an RGB display using a fluorescent blue sub-pixel.

With our new light blue Universal PHOLED emitter system, we believe we have achieved an important milestone towards the commercialization of an all-phosphorescent OLED solution for high-efficiency OLED displays and white lighting. The new Universal PHOLED emitter system enables full PHOLED material systems for initial niche lighting applications and also enables significant advances for displays through our novel R-G-B1-B2 architecture.

As the SID conference, we also exhibited a variety of new OLED prototypes and product concepts, including a next-generation flexible OLED risk [management] communication device that we developed in collaboration with LG Display and L3 Communications Display System for the US Department of Defense.

Longer-term, the opportunity is to move from small-screen applications to include larger screens, especially television. As OLED production scales, economies can be achieved that will drive the growth of this market. Moreover, according to Peter Lude, the Senior VP of Sony in the US, 3D televisions could become an important market for OLED display manufacturers, as broadcasters seek higher LCD content.

Lude went on to say that OLED offered technical advantages over LCD displays for 3D applications. Dr H K Chung, adviser of Samsung SMD, has said that OLED is the perfect technology for 3D due to its fast response time. In Dr. Chung's opinion, 3D will be a standard feature for OLED televisions, with more than 60% of the market share in five to ten years' time.

Maybe Sony summed it up best when they recently said 3D is a killer app for OLED technology. OLED lighting is in the early stages of commercialization and there have been exciting developments suggesting an inflection point may be close at hand. Recently one of our licensees, Konica Minolta, announced their venture with GE has produced high-performance white OLED lighting devices with a commercially viable lifetime using solution-coding rather than vacuum-coding processes.

Display Search believes the OLED lighting market will reach over 6 billion by 2018. As with OLED displays, we continue to make advances in our technologies and materials for OLED lighting. At SID, we introduced a prototype white OLED lighting system, designed for integration into Armstrong World Industry's Techzone Ceiling System, developed with support from the US Department of Energy.

In addition, we demonstrated a 2.2-inch active-matrix OLED display prototype using our novel four sub-pixel architecture as well as several white PHOLED lighting panel designs, using our new light blue PHOLED emitter. We also showcased a novel desk lamp design to illustrate the ultra-thin form fact of a white OLED lighting panel, in addition to a beautiful art piece called the Transparent Light Origami to highlight the features of transparency and the beauty of OLED emission.

We have been awarded a new small business innovation research stage one program from the US Department of Energy to study the potential to enhance the performance of white OLED lighting devices, in order to meet DOE requirement for general illumination application.

In May, we announced a $4 million award from the DOE for a program titled Creation of a US phosphorescent OLED lighting panel manufacturing facility. We have teamed with Moser Baer Technologies, the US subsidiary of this global technology company, which will design and build the US-based pilot facility.

The purpose of this program is to demonstrate the scalability of our Universal PHOLED technology and materials for the manufacture of white OLED lighting panels that meet commercial lighting targets. This program represents a very important step towards the establishment of high-volume manufacturing of white OLED lighting panels in the US, which can serve as a basis for new manufacturing investment and job growth in the US.

Technology licensing, Universal PHOLED material sales and technology development, transfer and support services, are the core elements of our business model today. As the only company able to provide both OLED technology and PHOLED materials, we're positioned as an industry leader. With an experienced team, over 1,000 patents issued and pending worldwide, and cutting-edge OLED technology and materials, Universal Display is poised to meet this growing demand and enhance shareholder value. That's the simple reality of OLED technology today.

With that, I'll turn the call over to Sid.

Thank you, Steve and again thank you everyone for joining us on the call today. I'll be reviewing the financial results for the second quarter of 2010. I will also share some insights from the quarter after which we'll be happy to take your questions.

Revenue for the second quarter totaled $8.4 million, almost tripling when compared to the revenue of $3 million for the second quarter of 2009, and almost double roughly the $4.3 million of revenue for the first quarter.

Commercial revenue increased almost $2 million for the second quarter compared to commercial revenue of $1.2 million for the second quarter of 2009. The increase was primarily due to a $334,000 increase in royalty revenue, which mainly represented royalties received under our patent license agreement with Samsung SMD and a $202,000 increase in commercial chemical revenue.

Developmental revenue increased to $6.5 million for the second quarter, compared to development revenue of $1.7 million for the second quarter of 2009. The increase was primarily due to an increase of $2.3 million in development chemical sales and an increase of $2.3 million in technology development revenue. The increase in technology development revenue reflects the recognition as revenue of $2.1 million from a non-refundable payment that we previously received from a customer under technology development agreements that have expired several years ago.

Even excluding the revenue from the non-refundable payment, developmental revenue was still more than double the $1.7 million in developmental revenue for the second quarter of 2009, and also up strongly from the $2.4 million in developmental revenue for the first quarter of this year.

Total operating expenses for the second quarter were $10.4 million, up from $9.3 million for the second quarter of 2009. The increase was primarily due to increases in both the cost of chemicals sold and selling, general and administrative expenses, offset in part by a decrease in research and development services.

Cost of chemicals sold increased to $1 million for the second quarter compared to $300,000 for the second quarter of 2009. This increase is consistent with the almost 2.5% -- $2.5 million increase in chemical revenue for the corresponding period.

Research and development expenses for the second quarter were $4.7 million, down slightly compared to research and development expenses of $5.3 million for the same period in 2009. The increase -- the decrease was mainly due to lower costs under our agreements with both PPG industries and our sponsored research partners.

Selling, general and administrative expenses for the quarter were $3.6 million, up from $2.7 million for the same quarter in 2009. The increase was mainly due to increased employee cost, primarily stock compensation and costs associated with the implementation of an unfunded executive officer pension plan.

For the quarter, we reported an operating loss of $1.9 million, a substantial improvement relative to both the $6.3 million operating loss reported for the second quarter of 2009, and the $4.2 million operating loss reported for the first quarter of this year. The improvement illustrates our strong margins and how they can be leveraged in our business through revenue growth.

Due to the distortion in our results caused by some large, non-operational charges that effect our bottom line, we believe that operating performance is a better indicator of our fundamental financial position than the net loss. In particular, at the end of the second quarter, we had an outstanding -- we had outstanding warrants to purchase approximately 744,000 shares of common stock, which contain a down-round provision requiring liability classification. The change in fair value of these warrants during the period resulted in a $2.6 million non-cash loss on our statement of operations for the quarter, compared to a $300,000 non-cash loss for the same period in 2009.

After taking the stock warrant expense into account, our net loss for the second quarter totaled $4.4 million or $0.12 per diluted share, compared to a net loss of $6.4 million or $0.18 per diluted share for the same quarter of 2009.

Cash use in operating activities was $2.8 million for the first six months of the year compared to $8.8 million for the same period in 2009. The decrease in cash used in operating activities was due to a decrease in our net loss of $4.4 million, the receipt of $1.4 million in cash payments for evaluation and license agreements and as advance payments under our government contract, the impact of the timing of certain current liabilities and the impact of the receipt of accounts receivable.

Our balance sheet remains strong with cash, cash equivalents and short-term investments of approximately $66 million as of June 30. This represents an increase of over $2 million since the beginning of the year. At the same time, working capital at the end of the second quarter was $59.4 million, which is up by almost $6 million for the first half of the year.

Quickly looking at results for the first half of the year, our revenues were $12.7 million. This is more than double the revenues of $5.8 million for the first half of 2009. For the first half of this year, we had an operating loss of $6.1 million which is less than half the $12.3 million operating loss for the same period last year.

For the first half of 2010, we reported a net loss of $7.4 million or $0.20 per diluted share, compared to a net loss of $12 million or $0.33 per diluted share for the same period of last year. Again, due to significant impact on the bottom line created by the non-cash loss on stock warrant liability, we believe that the operating results are better indication of our relative performance this year versus last year.

With that, I would like the operator to compile the list and we will start taking your questions.

(Operator Instructions) We'll go first to Yair Reiner with Oppenheimer and Company.

Great, thank you and congrats first of all on the good results. So first question, obviously a huge uptake in the developmental revenues. Sounds like at least part that is one time in nature but even if you take out that one deferred revenue bit looks like the new level is somewhere north of $4 million. Is that a level that you feel comfortable with the street modeling moving forward or, if not, what do you think is kind of the right level?

Well, developmental revenues are pre-commercial sales of -- are pre -- are sales of material pre-commercial production. So this uptake this quarter and last quarter is based upon the fact that the customers who are buying these are for the most part, are in the process of starting to ramp up for production. When they start producing commercial products, this will transfer into commercial chemical sales.

I guess, so near-term, should we expect the same customers to come back at similar levels until commercial begins to ramp up?

It's hard for us to predict. The first quarter had pretty good developmental chemical sales. This quarter was up a little bit from that. These customers -- there's a number of companies as Steve mentioned getting ready to start commercial production. It's difficult for me to say whether the number will be the same or up or down a little bit. It's difficult for us to gauge that at this point.

Okay, very good. In terms of royalties, those were a bit stronger than I expected. Did you see any benefit this quarter from the shortage of OLED displays potentially driving up cost and that flowing through to you on the royalties?

Well the royalties in this quarter are royalties based upon a report we received for the first quarter. So there is a quarter lag and it's the -- we get a royalty report that essentially tells us what the total sales ares that's covered by our technology. If there is a price increase, because of the strong demand, that would be reflected in our results.

And then one more and I'll get back into queue. Can you give us a progress report on green, where those trials are and when you expect to potentially hear back on that? Thank you.

As we have mentioned, we have a number of customers that are evaluating our green materials. We think that our green phosphorescent materials will increase the performance of the display by reducing the power consumption. To try to guess at this point when customers will use it is very difficult.

We are sampling it to a number of different customers at this time, and it has been going on with some customers as we have mentioned for probably a year, other customers are sampling for the first time. So it's difficult for us to predict when we'll start selling commercial green.

Okay, thank you, I'll get back into queue.

Okay, thank you.

We'll go next to Jim Ricchiuti with Needham and Company.

Hi, thank you. Maybe you could just help us out a little bit on that development chemicals line. Can you say if the revenues in that area were concentrated with one or two customers?

I would tell you that a significant piece of it is with a couple of customers.

Okay. And just with respect to the SG&A, was that driven higher as a result of the increase in that area? I'm just wondering how we should think about your SG&A expense going forward. I don't know if you also have got some additional expense that you now are factoring in as the business begins to ramp a bit.

The increase in the SG&A was discussed in the Q. There's a couple. One is stock compensation that was granted to the CEO and myself, with shares that vest over five years, of which we can't sell until five years after the vesting date. So that's one thing that's in this quarter that was not in.

Secondly, we started an unfunded executive pension plan, which will have impact over the next probably 15 years. So they are two areas that increased SG&A in this quarter. The other cost was obviously the increase in cost of sales because we sold so many -- so much more in chemicals, commercial and developmental.

Okay and going forward, anything you can provide in terms of how we should think about that?

I think this -- because of the two increases in this quarter on the compensation and pension plans, I think you could look at the SG&A cost this quarter is probably close to the base that we will have for the rest of the year.

Okay, and then just circling back on the -- what I guess is going to be a transition from developmental chemicals revenue as these customers move into production to commercial. Do you anticipate them becoming more efficient with the way they use the materials? In which case we may not necessarily see a complete shift over to the commercial materials revenue. I think that's been your experience with SMD, isn't that right?

That's correct. That was our experience with SMD early on. We do know that some of our customers are using more efficient manufacturing process. Do I think it may change? Probably, because when you're scaling up a tool to move into production, you probably are using more material than you would when you are running full out 24/7. But I -- to try to quantify it, I don't think I could do.

Okay, fair enough, thank you.

Thanks, Jim.

We'll go next to Darice Liu with Brigantine Advisors.

As you mentioned earlier, GE and Konica Minolta recently announced a white OLED lighting device using solution coating versus vacuum coating. Can you update us on the progress of your solution processable materials?

Darice, it's Sid. We are making progress on the materials.

We're working with the customers, and in terms of specifically updating it, we are getting better and better performance on our solution processable materials, and the customers are asking us to do better. I'm not so sure what else I can say. It has gotten better and better each quarter.

Okay and you mention customer discussions. Are your current customers and potential customers looking for the ability to do solution coating because it is conceivably cheaper and also higher volume?

Well on the lighting side, as you're aware we signed a number of license agreements that are related to solution processing. We think that if, in the long run, solution processable technology is one that will be the winner, we want to ensure that all of our materials are solution processable. Because we still think that the customer is going to need phosphorescent technology no matter what the manufacturing process is.

Are any of the discussions gearing in terms of make or break? Making sure that they do want solution processable or are they still open to either one?

It depends the customer. I don't think there's anybody today that's make or break.

Okay. And then from a competitive landscape, obviously we've seen OLED momentum growing and the marketing opportunity expanding. Are you seeing any new OLED material players on the horizon?

When you say material players, for emitters or for other materials?

For emitters.

Our patents cover phosphorescent, the use of phosphorescent in an OLED display. It's covered by our technology. We do know that there are plenty of companies who are working on it.

We've seen patent filings but we believe that our patents are very strong and valid around the world, and we think that we have a very, very strong position in the mater -- in the use of phosphorescents in an OLED display and we have a number of composition of matter patents. So we're still very comfortable with our position today. You hear stuff all of the time that there's different companies working on different things.

Okay, but I guess switching to the phosphorescent side. For example, we've seen Idemitsu Kosan recently take a stake in LG's OLED Group and it seems to demonstrate continue investments and forth in IP. Are you seeing any activity coming out of LG's (inaudible) group and is there any impact to your working relationship with Idemitsu Kosan?

Well, as you're aware, we have a relationship with Idemitsu Kosan. I can't answer for what LG would be doing. LG -- we have got a short-term licensing agreement. They're using our materials. We have a very good relationship. We think LG will use phosphorescent emitters in all of their devices.

I think there is still work being done on phorescent emitters because the basic IP is public domain so it is technology that can be used without paying Kodak a royalty, but we do believe that the industry will not be able to move forward unless they use power-efficient technology.

Okay. Thank you, guys.

Thanks Darice.

We'll go next to Andrew Abrahams with Avian Securities.

Hi guys, just a quick question. Have you guys got further on the B1-B2 composition with any your customers? Has it been adopted or are you still in the show phase?

It is -- obviously the only customer today that's making OLED displays is SMD. We are working with a number of our customers to use this technology as they move forward, but we have nothing that we can announce at this time about any specific customers using that architecture at this time.

Okay, and just lastly, what's the status of the OLED development line? Has that started? Has funding come through or where are you guys as far as that goes?

It is just that -- you're talking about the DOE program with Moser Baer?

Yes.

It is -- the funding has started. The first part of this is to do the design and build of the facility and set the architecture, and we're working on it today.

Got it. Okay. Thank you.

Thanks, Andy.

We'll go next to Rob Stone with Cowen and Company.

Hi guys. I wonder if you could just review the development and commercial chemical revenue numbers again? I didn't quite catch the total number. And then in terms of the cost of chemicals, any commentary you can provide on a trend there? I guess the developmental chemicals tend to be somewhat higher costs because of smaller batches.

That is correct. On the developmental chemicals because as margins, the developmental chemical costs are higher than a commercial chemical. Because you do some batches that are obviously very small, some are larger, but the cost of developmental chemicals -- real developmental chemicals are much higher than the cost of commercial chemicals that we've scaled up.

We -- as you're aware, we talk about increases and decreases. We don't talk about specifically the breakdown from commercial versus developmental material sales. You almost have to go back to the Q or the K from a year and a half ago, then trace the increases and decreases in each. Since we don't break that out, I really don't have those numbers, nor are they numbers that we would include in the Q.

Okay. A question on -- I think you said use the current quarter as a new baseline for SG&A expense. What about the trend on R&D that's been aided by lower external expenses for a couple of quarters? How should we think about R&D expense going forward?

R&D expenses should get back to the levels. One of the issue is in the R&D cost is some developmental chemical costs and as part of this scale-up process, our cost in -- with PPG are allocated to developmental materials or to research and development. We will continue essentially on this course with PPG on development and scaling up. So I don't see the trend of a reduction in R&D continuing.

More likely a bounce back in the second half to your previous run rate?

Yes, I believe so.

Okay. Can you breakout the EPS impact of the non-cash charge for the warrant?

It's pretty close to the difference. The net income -- the interest income and the other items in the income statement. So I think it's probably on the -- it's close to the probably $0.12. I would think it's close to $0.12. $0.11 or $0.12 on the net income line.

All right. On the deferred revenue that was reclassified this quarter that triggered the release of those funds, what was it that caused the reset now?

We work with customers. We had a technology development agreement that when the customer -- if and when the customer entered into a license agreement, they would get credit for those payments.

This customer informed us they do not intend to move forward in the OLED manufacturing field and due to that, the same thing happened last year with Kyocera, we then took the revenue that we had deferred because there was really no -- the likelihood was remote that they would continue and put it into revenue. When we -- whenever that occurs, we will take the revenue out of deferred or if they enter a license agreement it will be amortized over the life of the license agreement.

Okay, so this is just like the Kyocera situation, great.

Sure.

My last question was we've seen a few comments relative to some smartphone manufacturers deciding to switch to LCD displays, because I guess Samsung is doing a good job selling everything they can make or almost all of it. And there's been some commentary about the relative power consumption of the current OLEDs, which are using only one of your colors versus the Sony LCDs that they were replacing.

Can you comment on what, in fact, is the relative power consumption of those two devices and where would it be if as and when Samsung is able to adopt green?

Well it's -- can tell you what we've read in terms of specifics. We know that HTC has said they're switching because they can't get product from Samsung. I think Samsung has made a determination that, why would you sell your competitor your best display? And are putting it into their own product. So they have said that they expect for the next period, I think it's almost up to 18 months, that all of their capacity will go towards their own products as they're bringing more and more out.

They did respond, I know, to the Apple questions about OLED displays and they said at that time that ,even though the display that Apple uses in their iPhone 4 has 10% or 15% more pixels, they said that it uses 30% more power. I don't know for sure whether -- that's what they said.

We don't really do power consumption tests the same way that they do or in -- we don't have access to a lot of those displays. We do know that by adding our green material and adopting some architecture that we had, that we can have probably a 20% to 30% improvement in power. And just adopting green is probably in the 20% range, not in the 30%, but we do have architecture that we also can offer our customers that would give a significant increase in power efficiency.

Great, thanks very much.

Thanks, Rob.

(Operator Instructions) We'll go next to Jed Dorsheimer with Canaccord.

Hi, this is Josh Baribeau for Jed. Thanks for taking the question. Pretty straight forward. Congratulations on the good results. Most of mine have been answered.

Just maybe more philosophically, if you can update us on how you're approaching either your negotiations with Samsung or LG. Looks like we're seeing more short-term extensions moreso than long-term contracts. Throw at us with just what you're thinking, what your goals would be in negotiating these contracts and maybe just an update on the progress.

I can't really comment on specifics. We believe that we are doing everything we can do to get these long-term arrangements done timely.

As you're well aware, there is quite a bit at stake and we want to ensure that in the end, we get our fair share, but we end up with a win-win contract with all of our customers so that they can have the market grow and we can get a return on our investment. So our philosophy is to do the best we can and if it requires an extension of time that we think is the appropriate way of doing it, then we will do that.

And just to follow-up to that. Do you think the granting of an extension weakens your position at all or do you see it as just more logistics?

It's two-fold. It's logistics. We don't think it weakens our position because as you saw in the Samsung extension, any terms of the agreement will relate back to June 30.

Okay. Great, that's it for me, thanks.

Thank you.

And we'll take a follow-up from Yair Reiner with Oppenheimer and Company.

Thank you. First if I can follow-up on the previous question. Is one of the goals with the Samsung negotiation to get to terms that can be universalized with your other display customers, or is there a possibility that Samsung will get different kind of deal than others?

I can't really answer that question. We think that the arrangement should be what's customary in the industry, and we will continue to negotiate those terms. Customers that have much higher volumes then other customers traditionally get breaks as they go into those higher volumes. So we're looking at everything that we can to try to get this deal done.

Understood. And then just one more if I could. Your commercialization assistance revenue, you had some more this quarter. Do you expect that to continue or is it still kind of touch and go?

It's still touch and go. It's not a significant piece but we're still working with those customers and we expect it to continue.

Thank you.

We'll take a follow-up from Rob Stone with Cowen and Company.

I wanted to follow-up on the OLED lighting area. We have seen a handful of early commercial products introduced and I was just wondering if you are generating revenues related to white lighting in terms of royalties so far or elsewhere? And if not, any sense of when you expect that to happen?

Well, we would expect -- to be honest the lighting business is one that is down the road. We do have license fees from a couple of the companies that we've signed lighting arrangement -- lighting licenses with Konica Minolta and Showa Denka and -- Showa Denko. And any licensees that we receive will be amortized over the life of the license agreement. So we are reporting license fee revenue from a few customers. There is materials that are being sold but it is not a significant piece at this point.

Okay but there is a small amount of material revenue related to white lighting.

That is correct.

Thank you.

Thank you. And with that, we would like to thank you all for participating today. And if you have any additional follow-up questions, please do not hesitate to contact me directly, which a lot of you do. So thank you very much.

And this concludes today's conference. Thank you for your participation.