Good day ladies and gentlemen, and welcome to Universal Display’s Fourth Quarter 2014 Earnings Conference Call. My name is Katherine, and I will be your operator today. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Darice Liu, Director of Investor Relations. Please proceed.

Thank you, Katherine 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 Sid Rosenblatt, Executive Vice President and Chief Financial Officer. Before Steve begins, let me remind you that today’s call is the property of Universal Display. Any redistribution, retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of Universal Display is strictly prohibited. Further, the call is being webcast live and will be made available for a period of time on Universal Display’s Web site. This call contains time sensitive information that is accurate only as of the date of the live webcast of this call, February 26, 2015. All statements in this conference call that are not historical are forward-looking statements within the meaning of the 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 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 would like to turn the call over to Steve Abramson

Thanks Darice. And welcome to everyone on today’s call. Overall 2014 was a solid year we continued to execute on a high level delivering growth and financial performance in an emerging and evolving industry. We achieved record revenues, record operating profit and record earnings. Revenues grew 30% to $191 million, operating profit was up 53% to $58.6 million and earnings increased 29% to $41.9 million or $0.90 per diluted share year-over-year. We secured growth in a year when the overall OLED market declined about 5%. In fact if you look back over the last three years while the OLED market had a compounded annual growth rate or CAGR of 38%, we saw a revenue growth rate of 46% and operating profit growth rate of a 118%, and earnings growth rate of a 134%. 2014 was also another year of company accomplishments including new customer agreements, the introduction of the new red and green commercial emitters and an impressive set of new granted patents. It was also an exciting year for the OLED industry pretty challenging at times. With the introduction of new OLED wearable mid-end smartphones, tablets and TVs the expanding breadth of OLED products is captivating audiences and driving adoption by new OEMs and consumers. Since inception our innovation strategy has centered on building a robust foundation of best in class technology for superior growth. Beyond our core competency of phosphorescent technology and material we have been investing in manufacturing and process initiatives including encapsulation of OVJP Organic Vapor Jet Printing, Light Out Coupling, Novel device and architecture structures, flexible panel, solid-state lighting and much more. The increasingly exceptional value of OLED technology and phosphorescent material has resulted in the industry's growing consensus that UDC is a critical partner to the commercialization of OLEDs in the marketplace. Supporting this…

Thank you, Steve and again thank you everyone for joining our call today. We're pleased to report another record year of revenues, operating profit and net income. It demonstrates great execution by the UDC team in meeting customer needs and driving operational excellence in a highly dynamic emerging growth industry. It also reflects our position to capture the industry's momentum. Revenues for the year were a $191 million a 30% increase from the $147 million generated in 2013. Material sales for 2014 were a $127 million a 32% increase from $96 million in 2013 of which total commercial material sales were a $115 million up 41% from $81 million in 2013. The breakdown of commercial material sales by color for 2014 compared to 2013 is total red emitter sales were $18.5 million up 59% year-over-year from 2013 $11.6 million. Total green emitter sales for 2014 were $61.3 million up 54% year-over-year from 2013 $39.9 million. Total green host sales in 2014 were $34.8 million up 17% year-over-year from 2013's $29.7 million. 2014 operating expenses excluding cost of materials were $91.1 million up 15% from $79.5 million in 2013 and in line with our outlook of a 10% to 15% year-over-year increase. Operating income was $58.6 million for 2014 up 53% from $38.2 million in 2013 illustrating the strength of the operating leverage in our model. Net income was $41.9 million or $0.90 per share compared to adjusted net income of $32.6 million excluding a one-time net tax benefit or $0.70 per share for 2013. Moving to the quarter, revenues for the fourth quarter of 2014 reached $56.2 million compared to fourth quarter 2013 revenues of $49.5 million. Royalty and license fees were $28 million which included Samsung's $25 million license fee. The Samsung license fee which was $50 million in…

Thanks Sid. At Universal Display our direction and innovations are built around solving our customers' high value problem. As we embark on 2015 we're very excited of the operating from position of strength. We're energized by the great opportunities this year to accelerate our and the OLED industry's momentum. We remain highly focused on execution building on our technology leadership, growing the company and creating value for our shareholders. Even as we advance our existing business initiative we are diligently working to invent the future to materials research, technology development and other innovative activities designed to yield new and noble solutions to help enable the OLED markets group. None of this will be possible without the world class talent within Universal Display. I would like to take a moment to thank our employees for their continued commitment to excellence and innovation. Our solid performance is due to the talent, dedication and hard work of the whole UDC team. In summary the OLED revolution is gaining momentum and so are we. Our trajectory top line and bottom is poised to the exceptional and positive over the long-term. Our strategic initiatives and robust operating model have created a strategic competitive advantage that translates the strong market leadership revenue growth and profitability. We're excited about the opportunities that lie ahead as the evolution of the OLED industry continues to gain traction and result in new capacity, new product and new adaptors. On that note operator please start the Q&A.

Thank you. [Operator Instructions] And we'll take our first question from Rob Stone with Cowen and Company.

I wanted to start with your new approach to the guidance sort of the over and under and see if you could provide a little more color on -- I know you won't break this down by a dollars exactly. But what are the factors you are considering that gets to the potential downside versus upside and specifically if you can how much is in there for host? That’s my first question.

Specifically talking about host, let me get to that in a second. I mean the timing of events is really important, and when things occur while we expect 2015 a year of growth but these things are difficult for us to gauge. And so we do think there is limited downside and we believe or in the upside there clearly is some things that can occur quicker that will help us. Specifically with host we expect our host sales frankly to be down this year from last year.

And with respect to operating expenses, I was a little surprised by the magnitude of the jump in the fourth quarter that wasn't what we took away from the trend year-to-date or your commentary. If we just analyzed the Q4 run rate then we come out in '15 at something like 19% above what you've spent last year. So I am assuming that to get to 10% to 15% it will not be at this level throughout the year. Can you give us any hint on the linearity of expenses through the year?

It should not be at that fourth quarter level. The fourth quarter always has accruals that are catch-up accruals and so that we expect if you look at the full year's expenses compared to the prior year's and particularly when you looked at and we stated in Q3, Q3 was actually the lowest quarterly expense run rate. So there were things that particularly with PPG Industries in this quarter that came in -- that effected Q4 compared to Q3. And year-end stock compensation and other accruals in Q4 always are catch-up on depending on what happens. But on an annual rate we don't expect it to be at 19%, we do believe it will be it will at 10% to 15% run rate going forward.

Should be meaningfully lower in Q1?

From Q4 I would suspect that would be the case.

Thank you. We'll go on to Jim Ricchiuti with Needham & Company.

I just wanted to again maybe tackle that question about the downside, upside. Can you say whether that variability lies more with the portable display market or is it more or so towards larger displays?

I think it is really, one is OLED TV when they really start to ramp I mean there is increased capacity from LG in Q1 but they have talked about increased in Q4, and the second piece has to be how quickly the mobile side recovers. As we have stated or you can see from the first half of 2014 to the second half of 2014 things form the Samsung side went downhill, and it will take some time for that to recover and some of that would have to be how quickly that recovery occurs. So I think that's really where the downside potential could be, because you can look at the first half of the year our revenues were 102 million first half of 2014 and the second half they were 89 million. So you really need to see what the recovery in the second -- in the first half of 2015 looks like because we believe the end of the 2015 will be much better.

And Sid or Steve you both had talked about still pursuing the green host market. Can you update us on where you stand with that, is that still a major focus for you or are you may be looking at some other opportunities where you might allocate some resources?

Well host is still an important market for us we had inherent advantage because we designed the emitters and so we design our hosts to match those emitters for a high performing emission system, and we're also designing a host to be competitively priced. So if we can deliver a good quality host at a good price we believe we're well positioned to participate in that business.

Is there any update on where you stand with some of the new material?

There is no update at this point in time. The design cycles for the products are confidential.

Our next question comes from Brian Lee with Goldman Sachs.

On the outlook just had a question a follow on couple of the other ones here. If I look at your Samsung materials revenue for 2014 it was up about 10% year-on-year or about $5 million given that this amount include a significant amount of green host and you're saying that’s going be down in 2015 wondering if your base case revenue outlook assumes that overall Samsung materials revenue can still grow year-on-year or if it will be flatter down?

And specifically talking about the sales just to Samsung that our host has sold to NSCC. So that goes to Japan, I think overall we expect some growth in the material from Samsung and again that depends on when A3 comes on line and what their utilization rates are in the remaining part of the factory, and the its stated specifically they're out looking to be more of a merchant of displays.

I am assuming as you do break out in your disclosure in [accusing] case that the material sold to you, and as you see our inventory purchased by Samsung. So in that context is there anything you can provide in terms of color around what that total might look on a year-on-year basis?

We clearly don’t break everything up and as we said we expect our host revenues to be down year-over-year.

And then question on Samsung again for 2014. Did they hit their minimum volume requirements on the materials and then can you remind us the catch up mechanism and timing if that wasn’t the case.

They have exceeded their minimum volumes.

Last one from me and then I'll jump back. Last one and then I'll pass it on. Is there any sense that you can give us given the new scope of the LG revenue that you're going to be generating between royalty and materials under the two new agreements heading into '15. Just kind of what percent of royalty versus materials revenue you'll see from that customer?

We'll have to wait to be honest we don’t break it out in our guidance. As the contract unfolds and as we report quarterly results, I think you can then make some projections. But the terms of the contract and the pieces are what we really don’t break out.

We’ll go on to Osten Bernardez with Cross Research.

I guess to start, I wasn’t sure if you mentioned this with respect to materials sales for the fourth quarter. But to what extent new materials sales part of the growth drivers was in fourth quarter?

These new materials were introduced I believe earlier than the fourth quarter.

And so how should be thinking about I guess the material margin trend throughout 2015?

We believe that overall margins will not be impacted in 2015 they should be about the same as they were in 2014.

For fourth quarter it looked like your green host material actually green host material sales into quarter-over-quarter in spite from the challenges that you outlined in the quarter. How much of that was just was the function of sort of either inventory clearing or matter of shipments perhaps into mid tier phones. Would you have any visibility into that?

When the customer buys it we don’t specifically know which product is going to go into. We know it goes into whichever generation product are making. But we don’t know specifically what back plan goes into which product.

[Operator Instructions]. Jade Dorsheimer with Canaccord. Please go ahead.

I guess there have been a lot of questions previously with respect to the upside down side and I just have one more. What I am basically hearing is that in the downside scenario most of the green host is basically been washed out. And there is probably a little bit of expectations based in the TV in terms of the downside but most of the upside is really around the TV application, is that a fair assessment?

I wouldn’t say all of our host has been washed out. We said it will be down year-over-year and we still believe in the host business and we still are going to work to move the host business forward. But the second half of the year the capacity of LG putting their 20,000 substrates on in their Gen-8 facility, will have an impact obviously on the second half of the year. Samsung in their A3 line which is 15,000 substrate starts of Gen-6 size glass.

With respect to host, do you see a greater opportunity with I guess do you see a greater opportunity with non-Samsung or getting back into next-gen products with Samsung specifically on the green host?

Jade as I mentioned, we believe we have a competitive advantage because we match our host to our emitter and we're marketing our host materials to all of our customers as well. So we believe we have a good opportunity on the host business.

Thank you. Our next question comes from Hendi Susanto with Gabelli & Company.

I would like to understand more about the inventory write-down, and then I also a see sequential increase in inventories in the fourth quarter. For the higher inventory are you preparing for certain sales and with regards to the inventory write-down I believe that obsolescence is usually not an issue, so I am wondering whether you have an inside into that?

Frankly we built a lot of inventory in anticipation of expected growth in the market. And looking back over the year we've realized that there was $2 million worth of inventory that required additional processing to make it salable. And we didn't think at this time it was financially prudent to complete that process for that $2 million. In addition because of the pricing coming down, competitive pricing coming down faster than we anticipated we wrote down approximately $2 million, so that our remaining hosts can be sold profitably. So we did an assessment at the end of the year to take a look at it and we will assess it every quarter.

And do you have any expectation on how many materials you will be selling in to wearable's or flexible?

Well for flexibles with the LG line we believe that they are using their existing line that is a mobile size line and we sell LG red material. And with Samsung their A3 line which is designated for wearables and flexibles, we sell Samsung red and green materials.

And not green host?

We sell them green host, we continue to sell them green host, I don't specifically know what the recipe or which [fact] they are using for whatever they are putting into A3.

Thank you. We will continue on to Andrew Abrams with SCMR LLC.

First was there any pricing pressure that you guys saw ex the host business, just on the material business you had mentioned in the previous quarter there was some pricing pressure from Samsung or request for better pricing?

In this industry there is continual pricing pressure.

Other than your normal, maybe just something a little exception?

There is nothing unusual about it other than the normal. And clearly Samsung had a really tough time in the second half of this year.

So there was nothing unusual about or more unusual than it normally is. And as far as the host material for LG, are you in the process or at supplying host material for yellow, green?

I mean we do supply samples of hosts for all of our products and to everyone. But in their commercial products we have stated they're using yellow material.

And would it be -- I would assume it would be a backplane change that could change that or is something different than that?

It would be that plus whatever they -- whenever they modify their recipe or do build different stacks or whatever but in the existing recipe that they have in backplane we sell them our greenish yellow material.

And lastly I know this is a little on the complex side but looking out a quarter or two when LG -- when you started to recognize the royalty from LG. How was the breakout between the material sales and royalty relative to what we are used to on a let's say a like dollar basis -- they buy a million dollars worth of emitter material. How is it going to look relative to the way it looked last year?

It's a very interesting question. It depends on a number of variables that we don't know the answer to yet, because it really depends on their utilization rates and their selling price of their end product. So we're going to have to see how that evolves over time.

And lastly I assume are there material minimums in their contract also their material side contract?

Yes.

[Operator Instruction]. We'll go to Rob Stone with Cowen and Company.

Just a quick follow up on the inventory again. Should I interpret your comments that as you landed up with more inventories than you'd to like to have at the end of the year and we should see that level work back down? Or are you preparing for significantly bigger material demand here higher inventory run rate to be sustained.

A couple of things in the inventory at the end of the year there is raw materials in the inventory this year that were not in the prior year when you're looking to K you'll see that there is raw material in there, and on the host we build a lot of inventory. We would like to work down obviously the host inventory but we still will be building inventory up in our materials to meet what we believe our customers' needs are and we are a self source of commercial thoughts press emitters to the industry and we always want to ensure that we have enough inventory on hand to meet any unexpected needs or increases. And to be honest our cash position is very good and best use for our money is to ensure that we meet all of our customer needs.

So related to the commentary about pricing and continued price pressure as you get to higher volumes are you able to enjoy some offsetting benefits on your supply chain so that you can pass on the better prices to customer without changing your margin profile.

That is really our goal, and over the past few years you can see our margin profile overall has been pretty consistent and there are have been a number of pricing declines, we have pricing declines in the contract with Samsung. So that’s how we've designed our business model so that when we see price breaks coming through when they pass someone to our customers because it's important that everybody benefits in the supply chain.

And our final question will come as a follow up from Hendi Susanto.

Would you provide the breakdown in commercial chemicals, I didn’t catch that.

Total commercial chemicals?

The breakdown like host red emitter, green emitter in Q4?

Total red emitter sales for Q4.

In the commercial category.

We provided by year Hendi.

I think yes we provided -- and if you want we can actually -- I think you have a follow up call scheduled; we can get you whatever details you need.

And with no additional questions in the queue, I'd like to go ahead and turn the conference back over to our speakers for any additional or closing remarks.

We just again like to thank everybody for your time today. We appreciate your interest and your support and all have a good night. Thank you.

Thank you. And again ladies and gentlemen that does conclude today’s conference. Thank you all again for your participation.