Universal Display Corp (OLED) 2025 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Universal Display Corporation's fourth quarter and full year 2025 earnings conference call. My name is Sherry, 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 would like to turn the call over to Darice Liu, Senior Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display's fourth-quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Brian Millard, Chief Financial Officer and Treasurer. Before Steve begins, let me remind you today's call is a property of Universal Display. Any redistribution, retransmission or rebroadcast of any portion of this call in any form without the express written consent of Universal Display 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, February 19, 2026. During this call, we may make forward-looking statements based on current expectations. These statements are subject to a number of significant risks and uncertainties, and our actual results may differ materially. These risks and uncertainties are discussed in the company's periodic reports filed with the SEC and should be referenced by anyone considering making any investments in the company's securities.

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

Thanks, Darice, and welcome to everyone on today's call. We are pleased to report record 2025 revenue of $651 million. Operating income was $249 million and net income was $242 million, or $5.08 per diluted share. These results reflect strong execution across the business and the continued expansion of OLED adoption throughout the industry. Brian will share additional financial details shortly.

In 2025, we continue to drive value as OLEDs proliferated across the consumer electronics landscape, including wearables, smartphones, tablets, laptops, monitors and TVs. At the same time, we remain focused on the long term. We expanded our R&D efforts, strengthened our intellectual property framework, broadened our global infrastructure and deepen engagement with customers across the OLED ecosystem.

These investments are designed to support the next phase of growth for both the OLED industry and for us. As we look to 2026 and beyond, it's worth reflecting on how the OLED industry has evolved and how Universal Display has helped shape that evolution. For decades, the industry was largely centered around a single dominant architecture, single-stack OLEDs. Universal Display has played a defining role in this technology's advancement. Our phosphorescent materials unlock higher efficiency, longer lifetime and better performance, helping to enable OLEDs to scale into mass market products, and transform display technology worldwide.

Today, the OLED industry is entering a new phase marked by broader applications, higher performance expectations and a more diverse set of device architectures. We remain at the forefront of this evolution.

Our materials and technologies continue to play a central role in OLED innovation, supporting scale, and helping define the performance benchmarks that will shape the industry's next chapter. While single-stack OLED is the dominant commercial architecture today, the road map is becoming increasingly multidimensional. Performance targets continue to rise and energy efficiency matters more than ever. New applications from foldable devices to automotive and IT displays introduced new requirements. As a result, multiple device architectures are now being explored and deployed across the industry, including tandem OLED structures, phosphor sensitized forces, or PSF based approaches, and other emerging hybrid architectures.

Across all these architectures, one element is foundational, the phosphorescent materials. In PSF and other hybrid architectures, our phosphorescent materials are designed to work alongside forested emitters within the OLED stack. It's designed to help balance efficiency, lifetime, and color performance, while giving manufacturers greater flexibility in meeting application-specific requirements. As all structures grow more complex and efficiency demands intensify, are full-in materials along with our long-term technology leadership and deep know-how become increasingly central to enabling performance, scalability and the next wave of OLED innovation.

That leadership is grounded in decades of deep materials and device level expertise as well as a long history of exploring architectural concepts at the leading edge of technology. Early research included Solid, our stacked OLED concept as well as PSF-based architectures, which expanded our technical foundation. More recently, we completed the acquisition of intellectual property assets for Merck KGaA that included PSF and related OLED technologies.

Collectively, these efforts broaden our technology platform and expand the architectural design space within our portfolio as OLED design continues to evolve. At the core of our company is an R&D platform that has been built, refined and scaled over decades. And today, that platform is more active and more critical than ever. Across red, green, and blue, and missile layer materials, our pipeline is exceptionally robust, reflecting the expanding OLED industry road map as applications proliferate and architecture diversify, the performance envelope continues to be pushed forward. different form factors, different lifetime and efficiency targets all require continuous materials and device innovation.

One of the most important evolutions in our R&D platforms is our increased investment in our in-house materials discovery, device modeling and characterization capabilities anchored by a deeply experienced R&D team. This hands-on foundation remains the engine of our innovation, whether advancing next-generation reds and greens are moving blue on the path to commercialization.

In concert, AI and machine learning tools are emerging as powerful accelerators for our research engine. By combining AI-driven insights with our proprietary data, device expertise, and decades of OLED know-how we can explore broader design spaces more efficiently, shorten development cycles and make better, faster, smarter decisions about where to focus our efforts.

Together, these capabilities strengthen our platform to support multiple architectures, customer road maps and end markets while continuing to push the boundaries of performance. One area where this platform approach is gaining particular traction is blue. With strong growing interest in our phosphorescent blue, we are deeply engaged with multiple customers and collaborating across the industry to support multiple architectural and strategic paths. Our confidence in blue remains unwavering. Breakthroughs of this magnitude are rarely linear.

Once adopted, we believe our phosphate in blue can enable up to a 25% improvement in OLED panel energy efficiency, delivering a meaningful step change benefit for customers, consumers and the industry.

Looking ahead to 2026 and beyond, the opportunities for OLED continue to broaden. The market is evolving from being primarily mobile and TV centric to more diversified landscape with IT applications emerging as one of the strongest drivers of near and midterm growth.

According to Omdia Market Research, global OLED shipments are projected to surpass 1.4 billion units by 2030, driven in part by accelerating adoption across tablets, notebooks and monitors. OLED smartphone shipments are expected to grow from 810 million units in 2025 to 967 million by 2030, while IT shipments are forecasted to more than triple from 27 million to 92 million units over that same period.

In automotive, OLED is emerging as a strategic enabler of both design freedom and brand positioning. Adopters gaining momentum along luxury OEMs and Chinese new energy vehicle manufacturers that displays play a growing role in shaping the in-vehicle experience. Omdia projects automotive OLED shipments will increase from $3 million in 2025 to 14 million units by 2030. At the same time, foldables are poised for renewed momentum as leading OEMs prepare to introduce a new wave of products.

OLED-enabled form factor innovation is becoming a powerful catalyst for differentiation, expanding user experience and driving architectural advancements across multiple product categories. Market forecasts indicate that 2026 marks the beginning of a broader inflection point with foldable OLED unit volumes expected to increase more than 250% from 19 million units in 2025 to 71 million units by 2030.

From a manufacturing perspective, the OLED industry has entered into a new multiyear phase of capacity expansion between year-end 2023 and year-end 2025, installed OLED capacity measured in square meters increased by approximately 10%. Looking ahead, we expect an additional 10% increase in installed capacity between the end of 2025 and the end of 2027, driven primarily by the introduction of Gen 8.6 capacity to support expanding IT and automotive OLED adoption.

Importantly, 2026 marks a significant industry milestone with the world's first Gen 8.6 OLED facilities, Samsung Display in Korea and BOE in China entering mass production. As utilization tightens and new application scale, we anticipate additional OLED fab investment announcements further expanding industry capacity and reinforcing the long-term growth trajectory of OLED.

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

Thank you, Steve. 2025 ended on a strong note with record fourth quarter and annual revenues that were in line with our expectations from November. For the year, our revenue was $651 million. [Material] sales were $353 million. Royalty and license revenues were $275 million, and Adesis revenues were $23 million.

Our 2025 revenues included a cumulative pent-up adjustment of $14 million compared to $11 million in 2024. Total gross margin for 2025 was 76%, compared to 77% in 2024. Operating expenses for 2025 were $248 million compared to $260 million in 2024. Operating income for 2025 was $249 million, translating to an operating margin of 38%. This compares to $239 million, or a 37% operating margin in 2024. Net income for 2025 was $242 million or $5.08 per diluted share compared to $222 million or $4.65 per diluted share in 2024. We ended the year with $955 million in cash, cash equivalents, and investments.

Turning now to our fourth quarter results. Revenue for the fourth quarter of 2025 was $173 million, up 7% from $162 million in the fourth quarter of 2024. Fourth quarter 2025 results included a cumulative catch-up adjustment of $10 million compared to $5 million in the fourth quarter of 2024.

Material sales were $96 million compared to $93 million in the fourth quarter of 2024. Green emitter sales, which include our yellow green emitters, were $74 million, compared to $67 million in the fourth quarter of 2024. Red admitters sales were $21 million compared to $25 million in the fourth quarter of 2024. As we've discussed in the past, material buying patterns can vary quarter to quarter.

Royalty and license fees in the fourth quarter were $73 million compared to $64 million in the prior year period. Adesis revenue for the fourth quarter of 2025 was $4.8 million compared to $4.6 million in the same period in 2024. Cost of sales in the fourth quarter was $41 million, resulting in a gross margin of 76%. This compares to $37 million and a gross margin of 77% in the fourth quarter of 2024.

Operating expenses, excluding cost of sales, were $64 million in the fourth quarter compared to $72 million in the fourth quarter of 2024. Operating income for the fourth quarter of 2025 was $67 million, translating to an operating margin of 39%. This compares to the prior year period of $52 million and an operating margin of 32%. The fourth quarter 2025 income tax rate was 13.5%. Net income for the fourth quarter was $66 million or $1.39 per diluted share. This compares to fourth quarter of 2024 $46 million or $0.96 per diluted share.

Now turning to our 2026 outlook. We expect our 2026 revenues will be in the range of $650 million to $700 million. We estimate that our ratio of materials to royalty and licensing revenues will be in the ballpark of 1.3 to 1. Total gross margins are expected to be approximately in the range of 74% to 76% as a result of higher raw material pricing.

R&D and SG&A expenses are both expected to grow in the mid- to high-single-digit percentage year-over-year, as we continue to invest in our technology and R&D engine. 2026 operating margins are expected to be in the range of 34% to 37%. We expect the effective tax rate for 2026 to be approximately 19%. And lastly, we continue to prioritize returning capital to our shareholders. During the fourth quarter and thus far in Q1, we repurchased approximately 454,000 shares of common stock for $53 million. When combined with our dividends, this represents a total capital return to shareholders of approximately $139 million over the last 12 months.

Additionally, our Board of Directors has approved an increase to our quarterly cash dividend. A dividend payment of $0.50 per share will be paid on March 31, 2026, to shareholders of record as of the close of business on March 17, 2026. The dividend increase reflects the confidence in our robust future growth opportunities. Expect continued positive cash flow generation and commitment to return capital to our shareholders. As we enter the new year, we are highly profitable, operationally agile and well positioned for continued growth. supported by a strong balance sheet that enables ongoing investment in our people, infrastructure and innovation.

With that, I'll turn the call back to Steve.

Thanks, Brian. What lies ahead for OLED is both expensive and compelling. Product road maps are broadening, new capacity is coming online and adoption continues to extend well across the consumer electronics landscape. With decades of leadership in phosphorescent materials and OLED innovation, we are supporting our customers as they bring to market the next generation of OLED products and reinforcing the industry's long-term growth trajectory.

I would like to thank each of our employees for their drive, desire, dedication and heart in elevating and shaping Universal Display's accomplishments and advancements. We are committed to being a leader in the OLED ecosystem, achieving superior long-term growth and delivering cutting-edge technologies and materials for the industry, for our customers and for our shareholders.

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

(Operator Instructions) Brian Lee, Goldman Sachs.

Hello, good afternoon. Thanks for taking the questions. I guess, just bigger picture. This is the outlook quarter. You're giving us the view here for '26. I know you're still quite constructive on the outlook for Blue without quantifying it. But can you kind of give us a sense at the start of the year, where the bottlenecks to Blue are, and then kind of the visibility to updates on progress there moving to 2026?

Sure. Hi, Brian. On Blue, as Steve said in his remarks, I mean, we continue to feel like we're very much on the right path. We've been working with multiple customers now for a while on their development efforts in terms of getting our phosphorus and blue material into a commercial product for consumers. We continue to feel like we're on the right path there. Steve also mentioned the various architectural approaches that our customers are pursuing for Blue, which I think it's even greater evidence of the fact that this material is very beneficial for them and for the industry and getting it designed in in various approaches is very critical for them.

And so in terms of the path forward, we continue to support them. But it's really -- much of the progress here forward is in the customers' hands in terms of getting it into a commercial device for the market. Our work continues in terms of developing and inventing new materials that help open more doors for them as they go through that process of commercializing products with blue. So the work continues, but the path that we're on and the enthusiasm we have for, the product continues to be very strong.

Fair enough. And then I guess, just a follow-up on Blue. I mean, it sounds like visibility is still somewhat limited, even though there's activity across multiple customers. But if we just look at kind of the development of revenues, since you started first breaking them out in 2023. They're kind of down, right?

They've just been hanging around $4 million to $5 million a year, and it was actually down in '25 versus '24. I think at 1 point in time, you kind of directionally and said you expect the revenue to grow. Is there any, I guess, visibility this year as to kind of blue from a sampling and activity perspective where you would expect that number to grow and maybe be a bit of a leading indicator to kind of what might be the commercialization pathway over the next few years?

Yeah. I think certainly, the blue revenue figure that's reported, it was, as you said, $800,000 for Q4 and $4.3 million for the full year of 25%. It's an interesting data point, but I think that there's evidence we can clearly see that a little bit of material can go a very long way in the development efforts. And so I don't think it's necessarily the only or the primary way that progress can be measured. And in terms of what we expect this year for Blue revenues, it's still going to be developmental in nature. So I think modeling kind of around the zone that we've been for the last few years is a reasonable place to go.

Okay. Great. Maybe just a couple of modeling ones and I'll pass it on. Just big picture thoughts on inventory trends across key geos, especially China and maybe seasonality expectations for this year given you had a little bit of lumpiness last year. And then just from a modeling perspective, it did seem like you had the big increase in cumulative catch-up payments in Q4, which you outlined, it was up year on year.

Is there anything to read into that? I mean, it's like the second straight year where you've had double-digit millions of revenue catch up at the end of the year and the reasoning being out your forecast are being taken down. Maybe just what the implications are of demand kind of coming in and how we should expect that to trend going forward?

Yeah. So on your first point on inventory in China specifically, I mean, I think we've -- at this point, we kind of feel like most of that tariff buying has kind of worked its way through as we exit '25. And on seasonality for this year, we are expecting more of a return to our historical pattern, which is the second half being stronger than the first half. As you know, last year, '25 was a bit of an anomaly with the tariff-related buying that happened in the first half by our Chinese customers.

And in terms of the forecast and the cumulative catch-up revenue, we rely on third-party data from market research firms that track the display industry for those out-year estimates that we use in our revenue process.

And recently, over the last quarter or so, there have been some revisions to those forecasts, and that's what drove the cumulative catch-up in the fourth quarter. So we go through that process on a quarterly basis. Sometimes, it's very minimal, sometimes it swings the other direction. But as we closed out '25, there was a cumulative catch-up that did result in additional revenue.

James Ricchiuti, Needham & Company.

Sorry about that. I wanted to ask about the capacity as, particularly the new 8.6 Gen one. What I'm wondering is how soon would you anticipate seeing benefits from the start -- and maybe looking at tax as we think about the second half being -- or weighted. I assume that also has something to do with some of the new product launches. But I wonder if you could just comment on the capacity situation.

Thanks, Jim. On the capacity adds, certainly, these new fabs from both Samsung and BOE coming online this year are adding significant new capacity for the IT market. And Samsung's fab is not expected to come online until sometime in Q2 and BOE is shortly thereafter. So we really aren't going to get a full year of operations from -- out of those two fabs, but they are incorporated in our overall guidance for the year. And to some degree, are waiting -- weighing on that second half range. But there's also, as you know, a heavy product cycle orientation in the second half that also drives the reason for the revenue being more second half weighted.

Okay. What are also the competitive environment in China from local players? And just looking at some of the revenue concentration with your large customers, it looks like revenues -- players -- maybe from a longer-term perspective.

Yes, there certainly has been an increased competitive environment over the last few years, especially in China. China remains a critical market and a growing market for us and for the industry. industry, and we're continuing to support our customers in China and work with them on all their development needs. Also as a company, we are making additional investment in the Chinese market. We've added additional folks to our team there.

We're in the process of putting a new lab in China as well. So making sure that all the local support that we have on the ground is -- with more than 7,000 patents that are very global in nature. We continue to believe that we'll have the dominant position in the OLED materials market going forward.

Maybe one final quick one. Is there any update that you can provide on the contract talks with LG.

Yes. So we've been working with LG, as you know, for more than two decades at this point. Continue to have a very strong relationship with them and their contract did expire at the end of last year. We're working through the details of a new contract with them. So nothing to announce today, but things are progressing as we'd expect there, and we have no concerns about getting a new deal put in place.

Mehdi Hosseini, SFG.

Yes. Just want to go back to your calendar 26 revenue guide, the midpoint implying 4% year-over-year growth I want to better understand the underlying assumption. Are you looking at the smartphone units, notebook and TV and rolling up? Or are you looking at the Gen 8 and just the panel production. And the reason I bring this up is, we're always struggling to figure out how higher cost of component is adversely impacting end market demand. And essentially, I want to know if there is some conservatism from that variable dialed into your guide? And I have a follow-up.

Mehdi, the guidance at the midpoint and overall really is in line with the industry growth that's projected in terms of area. So that mid-single digit, roughly the midpoint of our guidance in the mid-single-digit growth aligns very closely with the Square area growth that's projected for the OLED market this year based on the firms that publish estimates for that.

And to your point, this year -- and to your question on what we're taking into account for taking count everything across smartphones on the potential down side, as you said, there are concerns about memory pricing and availability this year that are factoring in on the downside.

There's also on the upside, the opportunity for stronger IT demand as well as foldable demand that's coming out this year. So those are the various factors that we weighed in coming up with the $650 million to $700 million range. But the midpoint is very closely aligned with the area growth that's projected for the industry this year.

Okay. And then the follow-up has to do with royalty. And how should we model this for '26, as you renegotiate your contract with LG, should we just make some assumption from the past couple of years and use the ratio or would there be a greater variability the impact in the royalties from that particular customer?

We're expecting overall across our total business for the ratio of materials to licensing this year to be around 1.3 to 1. So that's the best way to model it.

(Operator Instructions) Martin Yang, Oppenheimer & Company.

I have a follow-up to catch up cumulative catch figure in 4Q. Is there any more context you can give us on where the adjustment is happening either relating to certain product categories or certain customers. Thank you.

And it's not market -- end market specific, it's more of a total number because the way that we recognize revenue is based on our total business with each of our customers. And we are recognizing an average ASP over those contract terms. So it wasn't specific to any espoused.

And some are down. So it's not directionally in the same direction?

Yes, to a varying degree, yes, each quarter, we typically see some going one way and some going the other as we have to go through that re-estimation process. And the combination of for the next 12 months, we use our own internal forecasting processes.

And then for the later periods, we do rely on that third-party data. So Typically, each quarter, the number we report, which is a net number. Within that, there's certain customers that are moving one direction and certain to another. According to third-party research and the midpoint, do you also incorporate your own view regarding how end market such as smartphone shipments would trend this year? Or is this the aero growth as the sole anchor for the midpoint of the guidance?

Yeah. So the foundation of our guidance is also really our customer forecast, right? So meeting with our customers, understanding what they are hearing from the OEMs in terms of demand for the year across all the various end markets that they supply. And when we -- so we certainly are within our range in terms of the customer forecast and where that rolls up. The midpoint of our guidance also happens to align closely with the data that many of the industry firms are publishing for what they project this year.

And then looking beyond into the next few years, we do expect the growth rate to increase significantly off of what's projected this year, but does have more mid-single-digit growth associated with it based on what we're hearing from our customers as well as what those market research firms are projecting.

Jim Ricchiuti, Needham & Company.

Brian, I just wanted to go back to the comment you made about gross margins. I think you talked about higher enrollment material costs. And I was wondering if you could elaborate on what you're seeing specifically what materials.

Yes. So we have certain raw materials, Iridium then as well as other raw materials as our materials continue to get more complex and increase their performance characteristics -- there's also a different quantity of raw materials required as well as type of raw materials that also can drive an increase in cost. So that's having some impact on us that caused us to revise the gross margins to be 74% to 76% as the guide for this year.

If you were to just quantify that versus what maybe what we saw this past year, how much of a headwind is it -- I'm not sure if it's entirely the increase that you're seeing in some of these -- the material costs or if there's something else.

Yes. On the pricing side, we really aren't expecting any significant adjustments in pricing in 2016, it really is coming down to raw materials being a key driver of the decrease -- slight decrease of where we were in '25.

Woo Jin Ho, Bloomberg Intelligence.

Just another follow-up on the gross margin. Look, if you're able to pass through some of the good development work that you've done to at least stabilize gross margins going forward from here?

Yes. So part of what's caused gross margin over the last year to decrease modestly is volume pricing. So as the industry has grown and matured, our volumes have increased significantly over the last number of years. And therefore, there has been a slight decrease in ASP just as volume and scale has increased in the industry, and therefore, in our business as well.

In terms of costs and conversations about those with customers, certainly, when we sit down with our customers to talk about new long-term agreements, our cost structure and changes in it since we last negotiated a deal are certainly front and center as part of those conversations and factor into the ultimate outcome that we reach with our customers.

We have reached the end of our question-and-answer session. I would like to turn the call back over to Brian Millard for any additional closing remarks.

Thanks very much for your time today. We appreciate your interest and support.

Thank you. This does conclude today's conference call. You may now disconnect.