Universal Display Corp (OLED) 2017 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Universal Display's Third Quarter 2017 Earnings Conference Call. My name is David, and I will be your conference moderator for today's call. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I'd now like to turn the call over to Darice Liu, Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display's Third Quarter Earnings Conference Call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Sid Rosenblatt, Executive Vice President and Chief Financial Officer.

Before Steve begins, let me remind you that today's call is a property of Universal Display. Any redistribution, retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period of time 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 November 2, 2017.

All statements in this conference call that are not historical are forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, such as those relating to Universal Display Corporation's technologies and potential applications of those technologies, the company's expected results as well as the growth of the OLED market and the company's opportunities in that market.

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 and should be referenced by anyone considering making any investments in the company's securities. Universal Display disclaims any obligation to update any of these statements.

Now I'd like to turn a call over to Steve Abramson.

Thanks, Darice, and welcome to everyone on today's call. We are pleased to report another outstanding quarter of solid results.

Revenues in the third quarter of 2017 were $61.7 million, operating profit was $15.8 million and net income was $13.5 million or $0.28 per share. During the quarter, we continue to see momentum in the OLED industry, including the launch of new flagship OLED smartphones, growing demand for OLED TVs and plans to launch the world's first foldable OLED display product. The adoption of OLEDs continues to expand and is fueling the exciting multiyear OLED CapEx growth cycle in which we are in the early stages. IHS Markit research recently forecasted that OLED panel production capacity is expected to more than quadruple over the next 5 years from approximately 12 million square meters in 2017 to about 50 million square meters in 2022.

With the OLED industry's momentum accelerated faster than expected this year, we are raising our 2017 revenue guidance range to $310 million to $320 million, reflecting approximately 55% to 60% year-over-year growth. Sid will provide further details shortly.

Now let's review some of the industry's recent news and announcements driving this momentum. Samsung introduced the Galaxy Note8. According to DisplayMate, the Note 8 is the most innovative and high performance smartphone display that the diagnostics research firm has ever tested. DisplayMate said the Galaxy Note 8 is notable for its highest peak display brightness, highest screen resolution and lowest screen reflectance. As a result, the Note 8 was awarded DisplayMate's highest ever A+ grade.

On September 12, Samsung announce it is aiming to launch the world's first foldable smartphone in 2018. The innovative benefits of OLEDs include the ability to manufacture these thin film layers on plastic, making OLEDs inherently conformable, foldable and rollable. Samsung introduced conformable OLED displays with curved edges with the Galaxy Edge smartphones and more recently, with its Infinity Displays. Many in the OLED industry believe the foldable bendable is the next milestone in the [forward] factor product road map. Wouldn't it be great if you could just roll up the display and tuck it in your pocket? We believe that OLEDs are not only changing the way we use displays but will continue to broaden the consumer-electronics landscape into applications yet to be imagined.

Also on September 12, LG Display hosted an OLED Partners Day in China. Leading Chinese OEM Skyworth, an early adopter of OLED TVs, attended the forum and stated that OLED TVs, which could offer new value will be a breakthrough in the display industry.

Speaking of OLED TVs, at IFA, the largest consumer electronics tradeshow in Europe, 13 OEMs from around the world showcased bright, beautiful thin OLED TVs, all with panels from LG Display. Some of the TV makers include Skyworth, Sheng Siong, Panasonic, Toshiba, Phillips, Bang & Olufsen and Sony, just to name a handful. And with regards to Sony, it was reported that Sony is enjoying strong demand for its OLED TVs, has planned to double its OLED TV shipments from 300,000 in 2017 to more than 600,000 panels in 2019.

On last week's earnings conference call, LG Display reaffirmed a strong commitment to OLEDs, with $17 billion in OLED CapEx plans for 2020, split 50-50 between mobile and TVs and forecasting that expects to ship about 1.7 million OLED TV panels this year, 2.5 million to 2.8 million panels in 2018 and by 2020, their objective is to exceed 6.5 million panels.

September 12 is a busy day in the OLED world as it also marked the unveiling of Apple's iPhone 10. The flagship product, which Tim Cook noted, will set the path for technology for the next decade. It is the first Apple smartphone designed with an OLED screen dubbed the super retina display. According to Apple, OLED level of quality, responsiveness and efficiency is really quite a breakthrough in mobile displays.

Moving along to China, last week, BOE Technology held its mass production ceremony for its Gen-6 Chengdu plant, china's first Greenfield OLED fab. At the ceremony, BOE delivered its flexible OLED display panels to more than 10 customers, including Huawei, Oppo, Vivo, Xiaomi, ZTE and Nubia. BOE also reconfirmed that second Gen-6 flexible OLED fab in Miangyang will begin ramping in 2019. Everdisplay with whom we announced a customer agreement in August, states that it was progressing with its new $4 billion OLED fab. Everdisplay's Gen-6 fab is expected to produce 30,000 plates per-month and is slated to begin ramping in 2019. Additionally, according to reports, Royole Corporation is constructing a Gen-5.5 flexible OLED production facility in Shenzhen.

In Taiwan, it was reported last month that Innolux is producing small flexible OLED displays primarily for the wearables market.

And in Japan, Japan Display announced it plans to start mass-producing OLED panels for smartphones in 2019.

Switching gears to OLED lighting. Pioneer has developed bendable OLED lighting for cars that are bright, conformable and long-lasting with a life span of 10 years. According to reports, Pioneer's OLED lights can be customized in terms of color, brightness and other factors to meet the design needs of automakers. It is expected that product is ready in 2020.

One of the main benefits of OLED taillights for automakers is form factor and ability to create novel designs. The newest adoptee is Mercedes-Benz, who unveiled its 2018 S-class Coupe and Cabriolet with OLED taillights. This makes Mercedes the third automotive maker to adopt OLED lighting, adding to the list, which includes Audi and BMW.

As all our activity continues to flourish, we remain steadfast in our commitment to advancing a robust OLED materials and technology leadership. On the materials front, we are investing, innovating and commercializing new emissive materials and technologies, including new reds, greens, yellows and hosts. With respect to blue, we believe we are making excellent headway in our ongoing development work for our commercial phosphorus and blue emissive system. We also continued to advance our work in organic vapor jet printing, our novel manufacturing process for maskless, solventless, dry direct printing of large OLED panels.

In addition, we are expanding our customer programs to support our growing base, stepping up research advancements that could generate significant innovations for future growth and building capacities to meet the increasing OLED demand. Earlier this week, we announced the completion of a new OLED materials production line at PPG Barberton, Ohio plant. This $50 million investment is expected to double our phosphorus and emitter production capabilities.

OLEDs are fast becoming a requirement for the best consumer electronic products around the world. As a leading enabler in the ecosystem, our proprietary OLED materials and technologies are key to unlocking the performance, value and power efficiency of OLEDs.

On that note, let me turn the call over to Sid.

Thank you, Steve, and again, thank you, everyone, for joining our call today. Revenues for the third quarter of 2017 were $61.7 million, up 104% year-over-year from third quarter 2016's $30.2 million. Our total material sales were $47 million in the third quarter, doubling year-over-year from third quarter 2016's $23.5 million and sequentially flat from the last quarter. As noted last quarter, we think discussing total material sales, which consists of both development and commercial, provide a better picture of our overall results.

Total material sales by color for the third quarter of 2017 are: total green emitter sales, which include our yellow-green emitters were $32.8 million, up 2% sequentially from the second quarter's $32.1 million, and up 105% from the comparable year-over-year's quarter, $16 million; total red emitter sales were $13.6 million in the third quarter, sequentially flat from the second quarter's $13.7 million and up 92% from the comparable year-over-year quarter's $7.1 million.

As we have discussed in the past, material buying patterns can vary quarter-to-quarter. Some of the contributing factors to this can include: consumer product demand cycles, capacity ramp schedules, production-loading rates, contractual volume pricing reductions, product mix, material ordering patterns and customer production efficiency gains. Since a number of these factors are moving variables for our customers, they are also moving variables for us. As a result, quarter-to-quarter forecasting remains difficult.

Moving to royalty and licensing. Our third quarter 2017 royalty and license fees were $12 million, up 131% from $5.2 million in the third quarter of 2016. Cost of sales, which include Adesis cost of sales for the third quarter 2017 were $13.5 million, up year-over-year from the third quarter 2016, $6.5 million. The increase is due to emitter sales more than doubling year-over-year.

Cost of material sales, which only relates to OLED materials and does not include Adesis cost of sales were $11.8 million, translating into material gross margins of 75% in the quarter compared to third quarter 2016 material gross margins of 76%. We expect our overall material gross margins for 2017 to be at the high end of the 70% to 75% range.

Third quarter operating expenses, excluding cost of sales, were $32.4 million, up year-over-year from the comparable quarters $26.8 million, and up quarter-over-quarter from Q2's $30.7 million. The year-over-year increase is primarily due to incremental operating costs associated with Adesis and increased compensation expense. Due to our accelerated growth rate, we now expect 2017's OpEx, excluding amortization to be up around 22% to 23% year-over-year.

Operating income was $15.8 million for the third quarter of 2017 compared to an operating loss of $3 million for the third quarter of 2016. For the third quarter of 2017, we reported net income of $13.5 million or $0.28 per share compared to a net loss of $1.5 million or a loss of $0.03 per share for the same quarter in 2016.

Third quarter 2017 income tax expense was $3.1 million or a tax rate of approximately 19%. Without ASU 2016-09, our third quarter 2017 tax rate would have been approximately 22%. For the year, absent the effect of ASU 2016-09, we expect our tax rate to be approximately 25% plus or minus a few percentage points.

Shifting to the balance sheet. We ended the September quarter with $380 million in cash, short-term and long-term investments or over $8 of cash per share.

The company also announced today that the Board of Directors approved a cash dividend of $0.03 per share on the company's common stock. The dividend is payable on December 29, 2017, to all shareholders of record as of the close of business on December 15, 2017.

Moving along to guidance. Based on customer discussions, current operating levels, product mix as well as other major variables, our expectations for 2017 have increased, and we are raising our full year's guidance. We now expect our 2017 revenues to be in the range of $310 million to $320 million.

With that, I will turn the call back to Steve.

Thanks, Sid. We are pleased by the consumer markets growing embrace of OLEDs in a myriad of products, including wearables, smartphones, IT, automotive, TVs and products the imagination has yet to conceive. Since our inception in 1994, we have invested over $0.5 billion to advance our company from a startup to a leading player in the global OLED ecosystem, building on our vast experience and know-how, we are continually innovating and creating state-of-the-art OLED emissive systems while also expanding our global IP framework. We are well positioned to leverage our 20-plus years of OLED history and expertise, scale our commercial capabilities and deliver the best emissive materials with the best performers in lifetime.

I would like to take a moment to thank our employees for their exceptional work and continued commitment to excellence and innovation. I would also like to recognize our customers, partners and valued shareholders for your ongoing support.

We believe that we are still in the early stages of the OLED industry's growth story and our growth story. With the proliferation of OLEDs continuing to gain momentum, we believe that the runway of growth is long and robust for the industry and for us.

And with that, operator, let's start the Q&A.

(Operator Instructions) Our first question is from Brian Lee with Goldman Sachs.

Just not to be too nitpicky especially after a pretty consistent string of beats throughout this year. But if I take your full year guidance, your revised guidance and I assume, obviously, we know that Samsung payment is coming in Q4, you just did a double-digit number in x Samsung royalty revenues, and Adesis does a couple of million more bucks. If I x those out, it implies your materials revenue guidance, somewhere in the ballpark of $30 million to $40 million, if I'm trying to bridge to your new guidance. So I guess, first question would be where could my math be wrong or maybe secondarily, is there just that sharp a seasonal drop off that you are anticipating for materials or where could the bridge be?

Well, you're looking at I think the royalty assumption for the non-Samsung license, which is $12 million which kind of distorts this quarter a little bit. But there may be some seasonality that we have historically seen. And when we put the guidance together, our third quarter sales were higher than we had anticipated. And we're just not sure that this run rate for the fourth quarter can be as robust. So this is our best guesstimate for what the year is going to look like.

Okay, fair enough. On the -- maybe good segue way into the royalty and licensing revenues. This is -- it seems like this was the first quarter where LG's revenue contribution from royalty payments was larger than in materials purchases, and we know OLED TVs, they sound like they've been doing better than expected, but were there any drivers in the big $12 million number this quarter, was it mix shift amongst TVs to higher price sets where you get more royalties or were there other customers in the mix that drove particular strength in the quarter outside of LG?

Well, it's difficult to say specifically, which customer it's from. We have historically said the bulk was from LG when it was, but our licensing fees are really growing, and they're coming from multiple customers now. And we are not going to talk about each specific one but there are multiple customers now contributing to our licensing revenue. So it is multiple customers in there just in this quarter.

Okay. And then just on the China revenues again, that you guys keep hitting new milestones, but that was a double-digit million dollar revenue number for the first time for you. Just would be curious to hear your thoughts on whether you think you are nearing a tipping point here with your BOE relationship, which I think is a big driver of that. Just any thoughts on the ramp or on the opportunity and timing on securing another long-term commitment in China.

Well, there's a lot of activity in China, and we are seeing obviously, BOE and a number of other customers building OLED production facilities and becoming larger and larger customers, and we fully expect that to continue to grow.

Our next question is from Jim Ricchiuti with Needham & Company.

Question just a follow-up question to the prior one about China. If we exclude your major customer in China, looks like you're showing good growth across the board from other customers. And I'm just wondering if you can talk a little bit about, is that concentrated with a couple of customers or is it fairly spread out among a number of customers there? And what does the trend look like going forward?

As we said, we do have a number of customers in China. However, BOE is the largest customer that, as Steve said, turns on their flexible OLED fab. So they clearly are the ones that we've been working with the longest and we continue to work with. But we've got a great working relationship with them and we've been working with them for a number of years. But they are the leader in China at this point. There are a number of others but they are smaller.

Sid, can you comment at all about any impact or how would you characterize the pricing environment on materials in terms of anything you could say about volume price breaks that you normally have to extend as a matter, of course. Can you talk a little bit about that?

Yes, we -- as you're aware we -- now, as we stated in the past, we really don't talk about volume price breaks and when they kick in. But it's -- we do provide a number of different variables that impacted. So there are cumulative volume discounts that do kick in and when materials that are adopted continue to go through that cycle, you do see it. But beyond that, we really can't talk much about our pricing.

And OpEx going forward, should we assume these kind of levels and potentially moving higher as you put more emphasis on some of the development projects on the R&D side?

I think, what we will do on our year-end call is we'll give you guidance on the OpEx. I mean, it's -- increase employee expenses and increase expenses we've had a 55% to 60% growth this year. So those cost have gone up this year, but we will give you guidance when we do our year-end call.

Our next question is from Sidney Ho with Deutsche Bank.

If you look at the upside in Q3, where do you think the biggest surprise came from? Is it emitters? Is it royalty revenue? China? Volume pricing discounts? Or kind of all the above?

It's kind of -- [surplus shares] are clearly higher than we anticipated, and I think it is a result of the OLED momentum that just continuing to grow and it's growing year-to-date. There are a number of things that impact it, you got folks that are scaling up, you've got and we talked about BOE, we know that a number of other customers and one of the other analysts that we talked about LG. So you've got a lot of increases in this quarter that impacted our revenues in this quarter.

Okay. As my follow up, I'm not trying to ask for guidance for next year yet, but what are your preliminary thoughts on 2018 in terms of market growth, maybe by end market, do you think ASP will be a headwind next year?

Well, we see we're in a multi-year bull market for OLEDs and it's difficult right now. The slope of the trajectory is still to be determined and for us, we will give full year's guidance in February, and there's a number of factors as you're aware that impact our revenues, which include pricing and efficiencies and a number of other things. So -- and capacity coming online when it comes online, all of those things are things that we take into consideration when we put our guidance together and we will give you more information in our February call.

Great. And then maybe one last question for me. You guys didn't talk too much about the Samsung contract. Understanding you are not still working with them on extension, in the event that there is no agreement by the end of this year, how should we think about the licensing and revenue for you and then call it [the stop] period?

Well, we've been working with Samsung for a long time, and we are working diligently to get an agreement. If negotiations lag as they did in 2010, 2011, we expect to work something out but we've had a 20-year relationship with Samsung.

Our next question is from Jagadish Iyer from Summit Redstone Partners.

So 2 questions. First on, based on the filings that you've had and looking at your customer B in your 10Q. It looks like and if I do the math and correct me if I'm wrong on this one, if I look at the absolute number of the Customer B revenues for this quarter, I understand quarter-to-quarter that could be some slight variations. But it looks like this kind of a flattish, around say $19 million or so, but if you'll imagine that the OLED TV penetration continues to improve at this particular customer, I was wondering why is the total revenue kind of flattish for this customer for the past 3 quarters? Or am I doing something wrong here?

Well, the one you're talking about Customer B, which is Korean customer obviously, and it's not customer A. And on a royalty side, we are a quarter lag so the royalties in that we reported are the Q2 royalties. So there is a quarter lag on when we report the royalties. And their productions I think has -- their production schedule on the ramp has been -- they've been pretty steady this year. So it is probably flattish.

Okay, fair enough. And the next -- the other question is that, your material revenues based on the guidance that you've given for this year, it looks like you might be actually doubling your revenues on the materials front. How much of it do you think is the contribution in a ballpark figure from TVs alone for this year?

Well, there's only one customer that makes TVs. So we don't break it out, but I mean, clearly, LG is the only supplier of OLED TVs. And if there's a reason that the material sales is up significantly, is all the new capacity that's put in place this year. I mean, it's -- we talked about it for a few years but there's been a lot of equipment that's been delivered and fabs have been turned on this year compared to last year.

Our next question is from Mehdi Hosseini with Susquehanna Financial Group.

Couple of follow-ups. It seems to me that you recognized another $600,000 in host material, and if that's correct, should we assume that, that's continuation of your work around blue emitter and these are the early stages of commercialization of your blue product?

No. These are -- just these are host materials. They're very small, and we expect them to continue to be small for the foreseeable future. So these are some existing host materials. I don't think it's $600,000, I thought it was lower than that, but we can double check.

Yes. And then, you made a reference to your customers on aggregate, increasing production capacity by 4 times. But the new capacity coming online at PPG would enable you to increase your output or your achievable output but only 2 times. I know there are details that may not reflect correlation, but if I just take the rate of growth at the consumer side, does that imply that you may have to increase production capacity down the road at PPG?

Yes. Because as Steve said, we -- based upon the market projections by just square meters are going to quadruple through 2022, I believe he said. And we said that at PPG, we're doubling our capacity. We've done this in the past and we analyzed our customer needs literally on a monthly basis. We plan our production for the next 3, 6, 9 months. And as we believe that we need to add new capacity, we will do that and we will do it in advance of when we fully expect to have to utilize it, and as we just did. It was $15 million CapEx. It's not a big number.

Sure, sure so does this doubling of capacity, does that account for any additional requirement if blue material were to become material? And in other words, is blue material baked into those -- into the production capacity forecast?

Without answering when we think we will have blue in the marketplace, we look at everything and we believe that we have enough expansion to meet any demand for our initial blue production built into that.

Does that include the complete a stack of emitting material?

Well, yes, it includes our red, green, yellow all of our emissive material that we make at PPG.

I think I've already asked 3 questions but I have a follow-up. May I squeeze in one more?

Sure.

Okay. Just going back to your China, I understand there's a lot of capacity coming online, how should I think about the initial yield curve -- learning curve versus the material procurement? And did they have to go through the learning process or learning curve? And I'm just trying to understand at what point are they going to be ready to step up and buy material that would enable them with the step up in production, not just capacity?

Well, obviously, we can't speak for our customers and we can't talk about any of their capacity utilization. But anyone who first starts out, they've been -- we've been working for a long time. There's always some start up and there's always a making sure that you can make these and you can yield them and the material but our customers have spent a lot of time and effort to make sure that they are going to be successful, and we're going to do everything we can do to ensure that they are.

Our next question is from Hendi Susanto with Gabelli & Company.

Sid, if I analyze customer A's sales excluding license payment, they were at $29.8 million in Q2 and $26.5 million in Q3, and we know that there's a new flagship smartphone adoption in Q3. So I'm wondering how should we decipher that sequential decline in sales to Samsung. Was there any pricing variable there or we may not have seen any surge -- big surge yet?

Well, it's -- there's always pricing, there's always efficiencies, and I think that they're -- they have been at a fairly steady state for the past couple of quarters in terms of their material. So I don't think there's anything that you can read into the decline because quarter-by-quarter, if you get an order at the end of 1 quarter versus the beginning of another one, it does have some impact going in.

Okay. And then second question, what drove your gross margin outlook to be at the high end of 70% to 75% range, is that partially driven by many early adopters that are still in early fruition of materials and initial pricing?

I think it is really the first 9 months results when we look at it and we look at where we are, you can see that we are at upper end of the range and so, we've been -- we talk about 70% to 80%, I do think that -- I think that the margin profile for Q4 is going to be somewhere to what we've had. So we said that it should be at the upper end of the range.

Okay. And then one more question. You mentioned that multiple customers are contributing to royalty and license. How should we think about seasonal, the end timing going forward?

I mean, it will continue to grow as we get more and more customers that are manufacturing OLED displays. It may -- it also may be lumpy at times, but I do think that you're going to see that line -- that's non-Samsung growth.

Our next question is from Rob Stone with Cowen and Company.

I wanted to ask about progress on OVJP, sort of a 2 part question. In the past, you had talked about proving out efficiency similar to be a predisposition with the existing prototype tool you have. And I believe you were working on getting in some more equipment and further proving out the process around the end of this year or early next. So if you could just update us on sort of what's going on in the lab. And then the second part to that question is, you've also mentioned being in discussions with potential equipment partners, so any commentary about that would be helpful.

Sure, Rob. Well, both of your statements continue to be accurate. We are continuing to make -- making progress in the research tool in the lab, we have designed in the process of building the next level tool which should be in into this year, beginning of next year and then we'll start working off of that. And we're continuing to explore alternatives on how we may want to best commercialize this technology. We believe OVJP has a lot of advantages in making large area OLED television. So we're very excited about this opportunity.

So once you get in that new tool, say you get it in early next year, how long would you need to build some more prototypes and to accelerate a live testing before you're confident about the results?

Well. Rob, there's the whole project, we're looking at a few years. Because you continue to need to scale up to the next generations. So where we've proven in the basic research functions, now we're working on the development and the scale up functions. But it's very difficult at this stage to predict the timing.

I wasn't speaking about time to commercialization per se, I know somebody's got to design and build the full-size machine. What I meant was, when you get that new tool, how long would it take for you to get meaningful test results on let's say lifetime?

Our guys are really excited about it, they're going to work really hard, but with any new tool that you've invented, you have to work through the kinks. So it's a difficult -- that's a difficult process to project.

Okay. And then I wanted to switch over to blue PHOLED's. You mentioned you're continuing to make progress. Any other tidbits you might share on what aspects you're working on or how it's incremental versus the last time?

Well, the object is to get the appropriate efficiencies lifetime and colors in the same molecule. And we have a lot of people working on this project. We continue to make progress and we're continuing to get closer to the initial commercial specs, but we cannot yet provide a timeframe.

Okay. And then, one more housekeeping question for Sid. So contract research for the Adesis continues to grow nicely. Was there anything sort of episodic or one-off in the higher number for Q3?

No. I think it's the way their business is. I mean, their business is -- it's in line with our expectations and they do have during the year things grow, and we're pretty much on target with what we expected for the year. They do a good job down there. They do a really good job down there.

(Operator Instructions) We have a follow-up question from Brian Lee with Goldman Sachs.

Just maybe bigger picture, longer-term question, but just a contractual construct on blue, I know there's still a what if scenario here. But if you do commercialize, what impact would it have to your existing licensing and material supply agreements at the time. Do you amend the minimum purchase requirements to include blue on top of the red and green that are embedded in there now? And then separately, would customers have instant access to the materials IPS part of the licensing agreements they have already in place? Or would amendments be required, just trying to get a sense for -- sort of what sequence of events would ultimately take place once you have a saleable blue in the future.

Sure. Once we get blue, then we'll work on those specific issues with our customers and it will likely be customer-specific, but too early to talk about anything right now. But as we know, all of our customers want phosphorus in blue, they all want a three color phosphorescent systems. So we fully expect to be selling it all the customers.

Our next question is a follow-up from Hendi Susanto with Gabelli & Company.

Sales in Japan has been encouraging. Would you be able to mention major activities that are currently going and how many customers you have in Q3 in Japan?

We don't specifically break them out but as you can see, customer A, B and C are the bulk of our revenues. We do have multiple customers in Japan, but we don't specifically break out the numbers and the names of customers that are down at the bottom of the list, not the bottom of the list but the smaller ones. But we do have multiple customers in Japan.

This concludes the question-and-answer session. I'd like to turn the program back to Sid Rosenblatt for any additional or closing remarks.

Thank you for your time today. We appreciate your interest and your support and everyone, have a good night. Thank you.

Thank you.

This concludes today's conference call. You may now disconnect.