Universal Display Corp (OLED) 2011 Q4 法說會逐字稿

Good day, and welcome to the Universal Display Corporation fourth quarter and 2011 year-end earnings call. Today's conference is being recorded. At this time I'd like to turn the conference over to Joe Hassett.

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

Let me begin today by reminding you that 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, February 28, 2012.

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 obligation to update any of these statements. Now, I would like to turn the call over to Steve Abramson, President and CEO of Universal Display.

Thank you, Joe, and welcome everyone listening on today's call and webcast. We are profitable. After more than a decade and a half of groundbreaking research and development, building a worldwide network of business and research partnerships, and refining an innovative business model that leverages both tangible and intangible assets, we are profitable. Our revenues doubled again for the third consecutive year. It's a great time to be in the OLED industry and a great time to be UDC. Based on our pioneering efforts, we are participating in the extraordinary growth of this exciting industry.

Our business strategy is to sustain our industry leadership through a strong commitment to research and development. This will enable us to continue to provide the industry with new and innovative technologies and materials which we believe will help both the industry and our Company grow. And let there be no mistake, the industry is growing rapidly. According to DisplaySearch, the AMOLED industry grew from $1.2 billion in 2010 to $3.4 billion in 2011, and it is forecasted to grow to $8.2 billion this year and $11.2 billion in 2013.

In the near term, our current results are being driven primarily by the demand for small form factor displays, primarily smartphones. These displays are getting larger. Samsung recently introduced a fabulous new product called the Galaxy Note which features a 5.3-inch AMOLED screen with extraordinary functionality. As the acknowledged OLED industry leader, Samsung has continued to build out its OLED production capacity. They sold over 20 million Galaxy S II smartphones in 10 months and accumulated sales of the Galaxy smartphone line now exceeds 40 million. During the last half of 2011, Samsung even passed Apple as the number one seller of smartphones and there have been reports that about 25% of South Koreans own a Galaxy phone. Smartphone sales should continue to grow rapidly as Samsung builds new portable products containing ever larger, more power efficient AMOLED screens.

Then of course we have OLED television. At January's consumer electronics show, 55-inch OLED TVs stole the show. In an industry anxious to find the next big thing that will reignite television sales, these manufactures are placing their bets on OLED technology. It was estimated there were over 150,000 people at CES this year. I was one of them and it took me an hour just to get a cab from the airport to the hotel. I wanted to see the 55-inch OLED TVs. Judging from the crowd's reaction, I think everyone was there to see them as well. The crowd was so deep at Samsung and LG's booths, that it probably took some people an hour to get a clear view. LG's OLED TV won the Best of Show for CES, while Samsung's OLED TV was equally gorgeous. Both LG and Samsung have announced initial production by the end of this year and we are continuing our strong technical support of both companies to help accelerate the widespread adoption of OLED TVs, because once you've seen an OLED television you're going to want one.

AU Optronics of Taiwan has also announced its plan to mass produce AMOLED panels for mobile phones early this year. In addition, they plan to unveil OLED TV panel samples by the end of this year. AUO demonstrated a beautiful 32-inch OLED TV prototype at a trade show in Japan in November. We've been working closely with AUO for a number of years to support their OLED efforts.

Our strategy is to simultaneously meet current demand for our technology materials, while at the same time developing new technologies and materials to support the growth of the industry. Our red emitter materials are used in all commercial AMOLED products today. Last year our green emitter materials and host materials began appearing in AMOLED products. The OLED industry is relying on us to continue to improve the power efficiency, color and life times of our emissive layer material to support and accelerate industry growth. We are expanding our technology research and development efforts to continue to improve the performance of our proprietary emissive layer materials, both emitters and hosts, as well as to improve our ability to specifically tailor these materials to our customers needs.

In addition, with the introduction of OLED televisions and other large format applications on the horizon, we are also working on additional material systems and technologies that may help improve the technologies and reduce manufacturing costs. We continue to make excellent progress in our P2OLED solution based technology materials. Our proprietary dry printing technology, which uses a carrier gas instead of a solvent which we call organic vapor jet printing, or OVJP, is also showing promise. Flexible or unbreakable displays are another new product with near term commercial potential. Samsung is reportedly putting in production capacity for flexible displays, which don't really flex yet but will be unbreakable. This should enable manufactures to produce phones and other products that are thinner and lighter.

Integral to the development of flexible OLEDs is encapsulation technology. We're making excellent progress introducing our single layer encapsulation technology to customers. I should point out that it has a wide range of applications, not just to OLEDs, but the other organic electronic products as well. We continue to invest in our white OLED lighting technology. We are currently offering a full phosphorescent system for warm white lighting devices, which is comprised of red, green, and light blue material.

In lighting we've also signed a number of OLED technology licensing agreements within the industry leaders. Our most recent announced agreement was with Lumiotec, a Japanese company whose shareholders include Mitsubishi Heavy Industries, Rohm, Toppan Printing and Mitsui. Under this agreement, Lumiotec will integrate our proprietary universal PHOLED phosphorescent and other OLED technologies and materials into OLED lighting products they intend to manufacture our market. Lumiotec joins Pioneer and Panasonic Idemitsu OLED lighting as lighting leaders with whom we have recently signed agreements to use our highly efficient high performance universal PHOLED technology materials and OLED lighting products.

The Department of Energy also recently recognized us for our outstanding achievements in solid state lighting in 2011. This is the fifth consecutive year we have received this award. Our extensive patent portfolio grew last year to over 1,400 issued and pending patents worldwide. With regard to the various legal proceedings relating to our patents, the only new item is that a new opposition was filed in Europe relating to a recently issued PHOLED patent. As we have noted, we believe that these oppositions and other proceedings with respect to our fundamental patents are to be expected in a business that is growing like we are. We will vigorously defend, maintain, and expand our broad and deep worldwide patent portfolio to support and grow our business.

To summarize, we had a strong fourth quarter and full year. We achieved profitability on a full year basis for the first time in the Company's history. We've seen significant advances in our OLED technologies and materials to prepare for future industry growth. I've said it before and I'll say it again. The future looks bright for both OLED and Universal Display. With that, I'll turn the call over to Sid who will take you through the financial results in more detail.

Thank you, Steve, and again, thank you everyone for joining us on our call today. I'll be reviewing the financial results, as well as sharing some insights from the quarter and the full year. After that, we will open the call to take your questions. Revenues for the fourth quarter totaled $18.7 million, a 73% increase over revenues of $10.8 million for the fourth quarter of 2010.

You will note that we have revised the presentation of revenues in our financial statements to better reflect our current primary sources of revenue. Fourth quarter and full year 2010 revenues have been revised to conform with our current classifications. Material sales now include revenue from the sales of OLED chemicals for evaluation, development, and commercial manufacturing which were previously separated into commercial chemical sales and development chemical sales. Royalty and license sales includes revenue recognized from the licensing of our intellectual property and technology which is unchanged from our prior presentation. Technology development and support revenue includes revenue from technology development activities, government contract work, and support provided to third parties for commercialization of their OLED products.

On this basis, material sales were $10.8 million for the quarter, an increase of 47% over material sales of $7.4 million for the fourth quarter of 2010. Compared to fourth quarter a year ago, we sold significantly more material under commercial agreements in the fourth quarter of 2011. We had a gross margin on material sales of 90% for the quarter, compared to 97% for the fourth quarter of 2010. For the fourth quarter, host materials represented 12% of our total material sales, whereas host materials represented 9% of our total material sales for the fourth quarter of 2010.

Royalty and licensing revenue was $5.4 million for the quarter, a 207% increase over royalty and licensing revenue of $1.8 million for the fourth quarter of 2010. We received $10 million in 2010 under our new license agreement with Samsung. In the fourth quarter, we received a $5 million license payment from Samsung under our new license agreement. Please note that our next license fee payment from Samsung is not due until June this year. Based on the accounting treatment of the new agreement, we will not be recording any license fee revenue from Samsung in the first quarter of 2012.

Technology, development and support revenue for the fourth quarter was $2.4 million, up 43% from $1.7 million for the fourth quarter of 2010. The increase is primarily additional revenue received for a collaborative R&D and commercialization support provided to a number of customers. Total operating expenses for the quarter were $15.1 million, up 37% from operating expenses of $11 million for the fourth quarter of 2010. Patent costs for the fourth quarter were almost $2 million, up $500,000 compared to the fourth quarter of 2010. The increase continues to reflect our defense of certain ongoing and new patent challenges, as well as timing of prosecution and maintenance costs associated with a number of issued patents and patent applications. Patent costs for the quarter increased slightly from patent costs for the third quarter of 2011, which is consistent with our earlier comment that patent costs will likely be sustained or increased from quarterly historical levels due to the ongoing defense of our intellectual property.

Selling, general and administrative expenses for the fourth quarter were $5.6 million, up from $3.3 million for the fourth quarter of 2010. However, SG&A expenses were only marginally higher on a sequential basis as compared to $5 million for the third quarter of 2010. The increase over the prior year included a roughly $700,000 increase in personnel and compensation costs, as well as approximately $170,000 to open and ramp up our new Asian offices. Aside from the cost of materials, which will naturally vary with the quantity of materials sold and the potential for any unanticipated increase in patent and legal expenses, we do not expect that we will need to significantly increase operating expenses to support our growth over the next year.

For the fourth quarter we reported operating income of $3.6 million, which translates into an operating margin of 19.1%. Operating income in the quarter was up almost $3.8 million, compared to the same quarter a year ago. There were a couple unusual tax items for the fourth quarter. During the quarter, we recognized a $2.7 million tax benefit in connection with the sale of approximately $45.2 million of our state related income tax net operating losses and a $232,000 of our research and development tax credits under the New Jersey Tax Certification Transfer program. Also in both 2011 and 2010, the withholding tax rates for royalties and license fees paid to us by Samsung was 16.5%. For the fourth quarter, foreign income taxes of $825,000 were withheld in connection with these payments. We anticipate the amount of foreign withholding taxes to increase coincident with increases in future license fees received from Samsung.

For the fourth quarter we reported net income of $5.7 million, or $0.12 per diluted share, compared to a net loss of $5.3 million, or $0.14 per share for the same quarter of 2010. The loss in the fourth quarter of 2010 included a $4.8 million non-cash charge associated with the stock warrant liability. For the fourth quarter, cash provided by operating activities was approximately $8.6 million, compared to cash used in operating activities of over $2 million for the same period in 2010. The year-over-year change was primarily attributable to a substantial improvement in our net loss excluding non-cash items.

Looking at our results for the full year, revenues were $61.3 million, more than double revenues of $30.5 million for 2010. Revenues from outside North America represented 89% of our total revenues for 2011, of which 63% was from South Korea and 25% from Japan, whereas revenues from outside North America represented 82% of our total 2010 revenue with the bulk of these revenues also coming from South Korea and Japan. Full year revenue from the sale of material, which comprised both commercial and development phosphorescent emitter and host materials, was $37.4 million for 2011, compared to $17.3 million for 2010. Phosphorescent emitter sales were approximately 70% of our total material sales in 2011, compared to approximately 88% in 2010 as we saw our host material sales increase to 30% of our total material sales in 2011, compared to 12% of our total material sales in 2010.

Royalty and license fee revenue were $15.3 million for 2011, up from $4.6 million for the previous year. A substantial portion of the increase was due to royalty and license fee payments received under our patent license agreement with Samsung. There was also a small decrease in our technology, development and support revenues for 2011. Operating income for 2011 was $5.7 million, compared to an operating loss of $10.2 million for 2010. This was our first full year of profit, with net income of $3.2 million, or $0.07 per diluted share for 2011, compared to a net loss of $19.9 million, or $0.53 per share for 2010. Results for this year and last year included $4.2 million and $10.1 million, respectively, of non-cash losses on stock warrant liability.

Our balance sheet remains strong with cash, cash equivalents and short-term investments of approximately $346 million as of December 31. For the year, we generated $16.8 million in cash from operations, whereas cash was used to support operations last year. In addition, our liquidity also benefited from proceeds of our $250 million equity offering in March 2011. On this basis, I think it's safe to say that we are in the best financial position in the Company's history.

As the industry grows and now that our new arrangement with Samsung is in place, we have a little more visibility into our potential future financial performance. Of course, the OLED industry is still at a stage where many variables could have a material effect on growth and our future financial performance. With that very important caveat, we would like to provide some revenue guidance in an effort to increase our transparency. With these qualifications, we see our revenues for 2012 as being in the range of $90 million to $110 million. Let me caution that individual quarters could still be very lumpy, particularly in light of the timing of payments under our new arrangement with Samsung. With that, I'd be happy to take your questions. At this time, if the Operator could you please open the floor for questions and answers.

(Operator Instructions) Darice Liu, Brigantine Advisors.

My first question has to do with the forecast for 2012. The $90 million to $110 million, just to clarify from a modeling standpoint, we will not see any Samsung license fees in Q1 and Q3?

That is correct.

From a margin standpoint, because we aren't going to see those license fees, we should expect a dip down in Q1 and Q3 accordingly?

Yes.

Is there any way in the future you think you could possibly smooth that out or is that something we should be modeling going forward beyond 2012?

Well, I think you can model it that way. We will do our best to give as much information about that in the first-quarter conference call as we possibly can without violating any confidential agreements.

Moving along to the green material, both the host and the OVJPs. A few months ago you mentioned that you were -- at least 10 companies were evaluating your green materials. Can you give us an update on where you are with those customers outside of your largest customer, of course. If there have been any additional potential customers evaluating your green?

I could say almost all the customers out there are looking at green materials as well as red materials. On the lighting side, a number of them are looking at light blue materials as well. But as of now the only commercial customer is really the largest customer but the tests are all going well.

Is it just a factor of when you will be able to sign those license agreements for them to convert from evaluation to commercial?

It's really up to them, Darice, when they're going to introduce product, and then once they introduce product, we'll have commercial agreements in place. With some of them we have commercial agreements already, others will just evolve to commercial agreements as they start introducing products. It really depends on each individual customer at what point in the process they want to move from an evaluation agreement to a commercial agreement.

(Operator Instructions) John Bright, Avondale Partners.

Steve, Sid, since you aren't providing any profitability guidance for calendar '12. I think in the prepared text, Sid, you talked about OpEx will not significantly increase over the next year. Can we take OpEx from the fourth quarter and slightly sequentially increase it, maybe think of fourth quarter next year up 10% to 15%? Is that an order of magnitude that we should be thinking about?

I think that's the correct way of looking at it, John.

Second question is breaking down the revenues, how should we think about the make up of the revenues in calendar '12? You talked about Samsung not being in Q1 and Q3 from a license standpoint. I assume that means materials as well. Correct me if I'm wrong there.

I'm sorry I don't mean to interrupt but the material sales to Samsung are based upon, we will record them when we ship them. So, I don't anticipate any change in the trend on material sales. It is only the license piece that will be lumpy on a quarterly basis.

Any way that you want to break it down between licensing, between material sales, royalty. Or maybe talk about what your assumptions are on host revenues for calendar '12. Or maybe talk about what devices that you have baked into your thought process between smartphones or maybe how much in tablet and TVs. You've alluded to those, I think Steve in the prepared text as well, so maybe give some flavor of the make up of that $90 million to $110 million?

Well, it's difficult for us to talk about the specific products since we aren't in the product manufacturing business. The makeup of our guidance is we look at. Obviously, we know what the license fees from Samsung will be and we know what the minimum purchases of material from Samsung will be, and we looked at each of our customers that we expect that we have and expect to have in 2012. We do get forecasts from each of them and we look at that and we look historically at whether or not they meet these forecasts. We also look at everything that's out there about the industry and based upon that, we then put out what we believe is a revenue projection that we're comfortable with.

In order to go product by-product, there's some products get into the marketplace quicker or some customers accelerate their manufacturing that will have a positive impact on us. To some extent if things get drug out a little bit longer, it will have a negative impact. We're comfortable with the guidance that we have given, using all of our historical data and using the data that we've received from customers.

Jim Ricchiuti, Needham & Company.

I'm wondering if we look at your full-year guidance. Can you help us understand if within that range that, that reflects the minimum level of materials revenue? Or what I'm trying to understand is perhaps how much visibility do you have into that part of your revenue stream, in the event that there's upside to it? Can you also talk about that in terms of what you saw in Q4 without, I understand, being specific?

In Q4, if you look at the old method, our commercial materials in Q4 were about $9 million of the $10.8 million and then developmental materials were about $1.6 million. It's difficult for us to really answer your question unfortunately. We do base it upon whatever information we have, but I really don't have specific data that I can point you towards.

Sid, is there any color you can give on that third piece of the revenue stream in terms of how we should think about this new technology development and support revenue component? Do you have some visibility to that?

I think it will be, it is not a significant number and in terms of that. That is something that goes customer by customer. I don't expect much change for the foreseeable future in that number.

Jed Dorsheimer, Canaccord Genuity.

Congratulations for getting into the black here. Sid, on Jim's question. I guess if you end up at $90 million for the year, what has happened to get you there and then what has happened if you end up at the $110 million? That $20 million swing, what is baked into your expectation? Is that a function of the TVs not materializing in '12, or is it a function of smartphones not getting there, or is it a function of the host materials going away? If you could just help us try and gain a little bit more clarity around the thought process in the under and the over there. That might be helpful.

Well as I said, we looked customer by customer based upon what we know in terms of the license fees and the guaranteed minimums and what we think will increase. We looked at when we expect customers to come on line. I think what you're hearing about TVs today is information that was probably not out there a couple of months ago when we actually gave the original guidance. If the market accelerates faster than we thought, we will be at the top end. If it doesn't, we'll be at what we think the conservative approach is. I really can't give you specifics to say if TVs take off from one customer or another, that's where that $20 million swing is. Because we have not given guidance in the past, we really wanted to try to make sure that we gave a range that we were comfortable with based upon all the information that we have in house.

I was just trying to get into -- I'm not trying to put words in your mouth in terms of TVs. I was just trying to get in your mind in terms of what the logic was. It sounds as if it's a bit more if a couple customers don't turn on, that could have a much bigger impact then from an application perspective.

If customers don't turn on, that we expected to turn on or that the market expects to turn on, it will have an impact on us. If the OLED industry does not grow as fast as expectations, it will impact our revenue.

I didn't see any extension associated with LG. I know you can't discuss where you are in terms of that negotiation, but it looks as if they've got some commercial products in the market. So, I assume that's covered under the old development agreement. In the case of Samsung, I know we saw six-month and three-months extensions for the two years that it took to get that inked up and into the longer agreement. With LG, is the lack of extension a function of the difference in negotiations or should we see some type, how should we read into that?

I'm not sure if you can read anything. We're selling them under our development agreement and under our development agreement, customers can actually do small quantities of product, sample products. We are negotiating with them as we have said and other customers at this time, and I don't think you can read one thing into it or another by not seeing an extension of the commercial terms.

Any seasonality in the business at least to Samsung or is it just because the ramp is so strong that there's no seasonality in terms of the end products at this point, specifically going into Q1?

When we gave guidance for the fourth quarter we thought there was some, the fourth quarter was pretty strong. I don't really see a lot of seasonality but as I said, one of the issues that we have is this is a new industry. In the first quarter, you always have Chinese New Year or Lunar New Year which impacts all the manufactures. So, there could be a little bit, but it's not anything that we have enough history of to really say it will or it won't to be honest.

Brian Lee, Goldman Sachs.

I actually had a few mostly related on how to think about the set up for this year. First it seems like the lumpy nature of the Samsung payments are going to turn some investors off, so do you think you can provide at least pro forma revenue on the Samsung licensing in Q1 and Q3 when you aren't getting the actual cash?

We are going to do our best to give pro forma or give information. Once you know what one quarter is you'll know what it is in each quarter. It is an annual amount that is payable in equal installments, one in June and one in December. Once one quarter is disclosed, you will know what all the other quarters are.

You will give us some amount of detail to help us smooth things out? Second question I had was what do you think the percentage split of your revenue from Samsung will be between licensing and materials? Is it 50/50 in 2012 or something materially different from that?

I really can't answer that without talking about how much the license fee would be. So, it isn't anything that I can answer your question of right now.

On 2011, you guys did about, it looks like $30 million in revenue outside of Samsung. What's your expectation for that non-Samsung revenue bucket to grow year-over-year in '12?

We do expect it to grow and I don't have data that is in our projections that says this is how much is Samsung versus this is how much is outside of it. When we did it we obviously did it, but I don't have that information available right now.

Any reason that you think you would be materially different from overall industry growth?

No, I would expect it to grow with the industry growth.

Hendi Susanto, Gabelli & Company.

My first question is could you indicate how much your green emitter field revenue was in Q4 and 2011 and what are their corresponding end products? One item that I want to verify is whether Sony PSP Vita OLED display has your green emitter and host materials as well?

Well, our green emitters that we've sold -- we sold approximately in the fourth quarter about $3 million worth of green, commercial emitter material. We also sold some under the old category of developmental materials. We sold about $10 million of green emitters of which, $6 million of it was on the developmental side under the old categories and about $3.9 million of it was on the commercial side. In terms of which products it's in, there's been rumors about some products that it's in, but we really can't answer that question. That's really a question for Samsung.

Second question is how should we think of the corporate income tax in 2012?

Well, 2012, our NOLs should carry us for everything, however we still will have the withholding tax which is 16.5% of the license fee that we will receive from Samsung. We still will have some income taxes, but they are the withholding taxes. Beyond that, I don't expect to see any additional provision for income taxes.

Andrew Abrams, Avian Securities.

A couple of quick questions on host material. Was all the host material that was sold in 2011, green host material?

Pretty much. That is the material that we have sold. We really have not worked on red host materials and we do actually work on some blue host materials also. But I would say the bulk of our host materials that were sold relate to green phosphorescence.

Of your emitter sales in 2011 and maybe looking out to 2012, other than red and green, would you expect to sell any other color emitter materials in 2012, and did you in 2011?

We've actually sold some light blue emitter materials and some yellow materials in 2011.

Were the yellow materials used for, as far as you know, for white stack or is that for a separate item?

There is, as you're well aware, there is a number of ways to make white. One is using yellow and blue and another is using RGB, so I probably can assume that these were used for white.

Jagadish Iyer, Piper Jaffrey.

Can you tell us how many customers other than Samsung are having acceptable yields on their OLEDs, whether it's bid for smartphones or tablets or TVs? Can you give us some color on that besides Samsung, who else and I have a quick follow-up.

To be honest, yield questions really have to go to the manufacturers. It's not information that we can answer for them, so you would have to talk to the other manufactures.

Maybe I can phrase it this way. How many of them, in your opinion, have production capability that will come on line in 2012, other than Samsung? Volume production.

AUO and LG both announced they will have volume production in 2012.

In your opinion, do you think is that realistic?

We honestly can't make an opinion about a manufacturers ability to manufacture or not. We are a technology and material supplier to them.

The second question is I wanted to find out. Sid, you talked about the last time you would be refiling your patterns on osmium. Can you give us an update where you are with regard to that filing and can you give us anymore color on what are the upcoming, is there any other pending litigations that investors ought to be aware of?

The continuation applications are simply being filed in due course. I don't know the specific status of that right now. On the oppositions, as I mentioned, there's one new opposition filed in Europe on one of our fundamental PHOLED patents, but there's been no other significant activity on the opposition front.

Carter Shoop, KeyBanc.

First question is on the green host. Obviously, we had a little bit of a pre-buy in a third quarter and that dropped down to the fourth quarter, but if you look at the annualized split between host and emitter sales in the second half of 2011 is that a good way to think about for chemical sales in 2012?

Well as we have said in the past, the host material business is one that is just starting to get started. There was a significant amount in the third quarter that was sold. We're going to need a couple more quarters for us to determine specifically what the mix may be going forward. We did sell host materials in the fourth quarter. As we said, approximately $1.3 million worth of them, or about 12% of our material sales, and the third quarter was significantly higher percentage wise. I'm not so sure you can do that an just take those two quarters. I'm not trying to avoid your question. We just don't have an answer for that to be honest, Carter.

Second question is the level of confidence that you have about EDCs, phosphorescent materials being used in LG and Samsung's OLED TVs that are coming out later this year, assuming they come out this year.

We think they are going to be used.

Last question, its been four months since you guys provided your original guidance. Maybe you can talk about a few items that have gone better than originally planned four months ago and maybe some items that have gone a little bit worse?

Well in terms of our guidance, there hasn't been -- just because when we did it, we've spent a lot of time working on it. Announcements and things that occur short-term really don't affect how we look at 2012 because it really is, that's a long year and we're still comfortable and we relooked at it.

There's been a number of announcements recently to talk about some introduction of TVs, which may have not been talked about a few months ago. However, there's a lot of people announce a lot of things and whether or not there's any volume that will move our needle or not is something that we're going to have to wait for.

Darice Liu, Brigantine Advisors.

Guys can you give us an update on what's going on with lighting? There seems to be an increased amount of development activity and your license agreements have increased nicely in that segment. An aside question, can you comment whether or not you are including lighting in your 2012 revenue forecast?

We are seeing an uptick in the number of companies that are involved in lighting, as indicated by some license agreements and other agreements that we've signed with companies. There is some lighting revenue included in our forecast but frankly, it pales in comparison to the display revenue. We think over the next year or two you see a number of companies involved in developing products and manufacturing processes for lighting. Then it would be likely that one or more of them will step out of the gate into a production facility.

When you mentioned it will pale in comparison to display, are we talking about less than 10% to 15% of your forecast is attributed to lighting?

To be honest, we haven't given any breakdowns of what's in the forecast and so I really can't answer your question to be honest. Lighting was for this year, lighting was about 1% to 1.5% of our total material sales.

Brian Lee, Goldman Sachs.

It looks like a little over $1 million in sales in Q4. How many customers did that represent and how are you seeing the trend in that material segment to start 2012?

We've sold it to a number of our customers. You are correct. The number is about $1.3 million for the fourth quarter and we have a number of customers that are sampling our materials and I really can't answer any questions about Q1 at this time.

On Q4, was Samsung subject to any minimum volume requirements on the material side and did they buy that minimum or more than the minimum?

Well they were subject to it because there were minimums in each of the years from 2011 through 2017 and they met their minimums.

They exceeded it or they just met them?

They exceeded their minimum.

Jed Dorsheimer, Canaccord Genuity.

One on the host, Sid. I know the details are limited, but it seems as if my understanding is that you got involved in the host business to try and help your customers solve a problem that they were having. I'm wondering if we should we look at that host business as a function of the customer design? In other words, it's more applicable to a pattern stack of RGB versus a non-patterned issue?

Then also, your comments I think at a recent conference seemed to suggest that you weren't sure if, because that business is a commodity, I think you use the analogy of chocolate and milk with the host being the milk that, that's business that you were going to be in longer term. I'm just wondering if there's any update on that as we look forward.

The hosts are applicable to all of the different designs whether it will be pattern or not, so I guess I'll answer that part of the question.

Yes, it was developed for our green emitter to get the best possible performance from our green emitter. As I said, the host business historically is a commodity business and if in the long run, we have to compete on a commodity basis, it's not a business that we are set up to be in. We do think that the a host business though, if we can continue to develop higher performing materials, it is a business that we want to be in because we can have higher margins with higher performance.

Sorry to beat the horse here but in terms of the guidance and I know you're in a difficult position in terms of what you can say and what you can't say, but if we can stay within sort of orders of magnitude. If we look at Samsung this year, it was roughly $30 million, $35 million, if we look at their capacity increases and take the license out. Is it fair to say that a significant portion of that $90 million to $110 million is really based on non-Samsung customers coming into the market?

I think we probably beat the horse well enough, Jed.

Jagadish Iyre, Piper Jaffrey.

I wanted to find up on '12, how should we think in terms of your chemical sales, the split between the host and the emitter? For '12, percentage wise if -- that should be helpful in our modeling.

I really can't answer that question because we haven't given guidance specific to each separate material and as we've said, the host business is one that is very lumpy because it is new. So, I can't answer your question.

There are no further questions at this time. I'd like to turn the conference back to our speakers for any closing remarks.

We would like to thank you all very much for being on the call. As you are well aware, if you have any specific follow-up questions, I'd be happy to answer them. You can either call me or send me an e-mail and I'd be happy to answer them. Thank you again for your time.

Thank you, everyone. That does conclude today's conference. We thank you for your participation.