Good day, and welcome to the Universal Display Corporation Third Quarter 2015 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Darice Liu, Director of Investor Relations. Please go ahead.

Thank you, Emma, 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 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, 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 5, 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 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 the call over to Steve Abramson.

Thanks Darice, and welcome to everyone on today's call. For the third quarter of 2015, I’m pleased to report solid results of $39.4 million in revenue, operating profit of $8.4 million and EPS of $0.15 per share. As we anticipated, the demand environment improved during the third quarter, as customers increased fab utilization rates and new capacity came online. This drove our proprietary phosphorus in the middle sales, sequentially up by over 40% to a new record high. We generated $5.4 million of cash from operation and we’re on our way to generating over a $100 million in operating cash flow for the year, which is double from last year. The past three months have provided a small preview of OLED technologies growing promise in the market place. From the expanding list of consumer electronics makers, evaluating and adopting OLED panel to the number of new OLED products being introduced on a monthly and some times weekly basis. Additionally, there has been an abundance of OLED activity announcements from panels makers, including Samsung. Samsung recently reported strong third quarter results and one of the main sources of operational strength was its OLED division. Samsung’s OLED shipments were up meaningfully as it launched new products, increased their production and expanded its customer base. Samsung also made a significant announcement that has achieved OLED cost competitiveness on maintaining very strong product performance. Looking forward, Samsung expect to maintain its solid OLED earnings in the fourth quarter and forecasted approximately one third of its OLED panel sales will go to emerging customers in 2016. Furthermore, Samsung reaffirmed its commitment to flexible OLED investments and reiterated that it expects flexible OLEDs to be a mid to long-term growth engine. LG Display in mid-August, announced investment plans to spend only 10 trillion won or $8.5…

Thank you Steve and again thank you everyone for joining our call today. We had a great quarter with strong top line and bottom line results. Revenues for the third quarter of 2015 were 39.4 million compared to third quarter f 2014 revenues of $32.9 million. As Steve mentioned, blunt in the quarter came from a record emitter sales. Our total material sales were $34.1 million in the third quarter of which commercial was $30.2 million. The breakdown of commercial material sales by color for the third quarter of 2015, prior quarter, and a comparable year ago quarter are: green emitter sales were $21.4 million in the third quarter, up 53% sequentially from the second quarter’s $14 million and up from the comparable year-over-year’s quarter of $13 million. Red emitter sales were $7.3 million in the third up 22% sequentially from the second quarter $6 million, and up year-over-year from the comparable quarter’s $5.1 million. Green host sales were $1.4 million in the third quarter, down 13% sequentially from the second quarter's $1.6 million, and down year-over-year from the comparable quarter's $5.9 million. Our third quarter 2015 royalty and license fees were $5.2 million, this does not include any Samsung license fee, which is $60 million for 2015, and recognized in two equal installments in the second and fourth quarter of the year. Moving along to material cost, material cost for the third quarter were $7.2 million, down year-over-year from the third quarter 2014’s $7.4 million. Third quarter 2015, material gross margins were approximately 79%, compared to third quarter 2014’s material gross margin of approximately 73%. The margin expansion was due to product mix. Third quarter operating expenses, excluding cost of material were $23.8 million which is essentially flat from last year – last quarter’s $23.5 million and up year-over-year…

Thanks, Sid. The evolution of the OLED market has been remarkable, with the ongoing proliferation of small watches, mobile phones, tablets and TVs, the novel form factors driven by OLED innovation, which is transparent, rollable and flexible plastic-based products which we believe new commercial pass in display and lighting industries. Before you know, the benefits of OLEDs will be everywhere for all to experience and enjoy. Less than five years ago, the majority of the population probably has no idea what OLED was. And then Samsung introduced its Galaxy S1 smartphone. As reported today and OLEDs have captured a tremendous amount of share at the mobile market, which now forecasts a 30% smartphone market will be OLED in 2016. OLED could taken the burdening wearables market by storm. The benefits of OLEDs including thinness, light-weight nature, manufacture ability on plastic and a gorgeous screen, has made the optimal display technology for wearables and leading smartwatch OEMs agree, with OLED TVs being [indiscernible]. LG launched its first 55-inch full HD OLED TV, in April 2013, for $15,000. And now you can find it under $2,000. LG’s 4K OLED TV live has also got more affordable for the premium market and is priced comparable to some high-end LCD models. In just a few years we believe that OLED TVs will be a significant contender in the mainstream market. OLED technology is transforming the consumer electronic landscape. The industry has grown by leaps and bounds, in just a few years for the mobile market and we believe the TV market is just beginning its commercial journey. We are excited for the future, with our vast experience strong focus on execution, expanding product portfolio, new OLED materials and technology, we are and we’ll continue to be well-positioned to take advantage of the great opportunities of this growing industry drive profitable growth and deliver the most energy efficient high performance and cost effective emissive layer solutions in the industry. On that note, operator let’s start the Q&A.

Thank you. [Operator Instructions] We will go first to Brian Lee with Goldman Sachs.

Hey, guys. Thanks for taking the questions. I had several modeling related ones, if I could. First Sid what drove the year-on-year decline in the royalty and licensing revenue line. I would have thought with LG now being in the mix this year ever since the contract was signed early in the year that would have grown year-on-year?

Well, the majority of it this year is from LG. And when you look at last year, this is not all LG. We did recognize milestone payments on certain contract. And we also – again we have a lag quarterly from LG on licenses. So we don’t agree – but we’ve reported the second quarter sales in this license from LG.

Okay, fair enough. And that, that might answer partially in my second question, but the short-term deferred revenue it’s been coming down a few million dollars each quarter here, but you’re still sitting on a $20 million balance given you’ve started the year with 25 wouldn’t imply we’re going to see this get you on down to zero in the next one to two quarters, is that the right read and what’s driving that degree of lumpiness?

No, it is – it is not this – when you do that, it is what you would expect over the next 12 months, so it’s not one to two quarters, it’s over the next 12 months.

Okay. So maybe to just hop on that that $25 million balance sheet started with at the beginning of the year, you are obviously expecting to see that get you on down to zero over the course of 12 months, which would mean end of 2015 calendar, but you’ve added to that balance since and that’s why we’re sitting here at about $20 million. Sid, is that the right interpret?

Yes. You adjusted every quarter, so that it is always a 12-month number that what – that you would draw down. So you take whatever it is that you receive reduce it and then you estimate what it’s going to be and this is only based upon what we received in cash up front.

Okay fair enough. And last one for me and then I will take it offline. The OpEx reduction, first time in a few years that we’ve seen it be below 10% to 15% year-on-year growth. What were the major drivers of that? And is there anything read into it, heading into next year?

It was actually 5% to 10% growth for this. I think I just said 10% in my prepared remarks, but most of it is in R&D. And we do manage our expenses pretty closely. I can’t say for sure what will happen and we’ll give you guidance in February and we’ll talk about it at that time.

Okay, thanks, guys.

Thanks, Brian.

We will go to Austin Fernandez with Cross Research.

HI, thanks for taking my questions. You highlighted in the press release, doing developments in terms of deepening your technology research. And I was just thinking if you just sort of give us any highlights or any updates in terms of the pace of your material pipelines from a new development standpoint. I understand you’re always working on numerous materials. But is there anything you can provide that – any data or any information you could provide as that perhaps lend to what you’re thinking going forward for the next 12 months from a new material…

Well, Austin, we’re constantly developing new materials and expanding our research and development activities both on red green emitters, on host materials, and of course on our project that we’re focusing, a great deal of attention to as well. We don’t provide specific updates or specific milestones except to say we are continually working to improve the efficiency, the life time and to hit the appropriate color points that our customers are interested in.

Got it. And then circling for me. I was just wondering whether you could provide an update in terms of what you’re seeing from a manufacturing standpoint, from a display manufacturing this time in terms of some of the innovations that are taking place there in the OLED technology space and whether you see any new technologies from [indiscernible] universal display or any of your partners that are adding incremental opportunities within the next a month or so?

Within the next 12 months it really looks like LG is focusing on their manufacturing footprint was on the flexible side and on the TV side, and Samsung doing the same. So in the – the other companies in China and Taiwan are continuing to move forward all around the same concept of operations, the evaporation systems – the vacuum deposition system.

So you don’t expect any sort of – any material impact from…

No, we don’t expect that in the next 12 months.

No, everything that has been announced and all the capacity that’s in place and capacity that’s been announced is based upon back in deposition.

Thank you.

And we will go next to Jim Ricchiuti with Needham and Company.

Hi. Thanks, good afternoon.

Good afternoon.

Just looking at the revenues from your two largest customers in the quarter and the materials business looking at that – it appears to be more balanced and I am just wondering is that business becoming any more predictable for you?

Well, clearly we’re getting the second large customer that is by more and percentage of our revenues is growing from our second largest customer. Is it getting more predictable, it is somewhat but we are really a just in time supplier and the rapidly moving consumer electronics ecosystem, each month order flow can have a large impact on our revenues. As we have seen in the past, the short-term shift in the customer production in either directions can impact our financial results, since there were a number variables that are really still in play, this is right now we’re doing the best we can to estimate it and it’s a little better and it’s still not really predictable.

Okay. And just with respect to LG and it installed the positive news, they did reset modestly, their expectations for the – for the TV market, the OLED TV market for this year and next year and I am just wondering I mean does that – did that enter in at all to your narrowing the guidance for the year or had you already been pretty cautious about the expectations for the TV market this year, 2015?

Well, it does, it did impacted because that it did not occur as fast and they have reduced it, so that clearly does have an impact on our business for this year.

Okay thanks a lot.

Thank you.

And we will go next to Robert Stone with Cowen and Company.

Hi, guys.

Hi, Rob.

Guys you said about the tax rates, which was quite a bit lower if I am calculating it correctly than I have been thinking. How do you see that – what drove that in Q3 and how you see the – the tax rate in the fourth quarter and going forward?

Well, the issue with the tax rate on a GAAP basis the fact that our material business is out of environment and the rest of our business is from the U.S. And because of the write down has impacted Ireland and it ends up in the loss position and from that position you can’t include that loss because it’s been a loss combination [ph] since inception. So for GAAP purposes the tax rate is lower, you essentially do the GAAP tax rate on an annual basis and each quarter just falls where it is. On a non-GAAP basis, we expect approximately 30% to 32% for the year. For the fourth quarter, the tax rate actually will be higher because it ends up playing a plug number and for the fourth quarter depending on where the revenue number is it could be around 45%.

Okay, I guess that only make sense to the tax account.

That is correct unfortunately.

Okay, could you focus….

I will get offline if you would like.

Yes, the other question I wanted to ask is a more essential question and maybe a bit of a follow-up to Jim perhaps. Which is what drives the upside and downside scenarios that you can see from here through the end of the year? I mean what volumes seem to be pretty strong. I believe LG Display is trying to make as many as TVs as they can, it’s not market demand, it’s how much they can get out of their capacity that’s being the units. So what factors were you entertaining for the plus or minus 3% scenarios?

Well, the key factors are one Samsung and how their merchant and captive OLED business progresses and its impact on fab utilization rates and the ramp of A3 and its flexible investments. And with LG, it’s mainly ramp up of their OLED TV production lines flexibles and wearable businesses. These are the two variables that impacts our – will impact this quarter. And as we said we’re just in time supplier and the order flow in one quarter impacts the order flow in the subsequent quarter.

Yes, how has been the order flow in the quarter so far?

We can’t talk about the quarter, obviously.

Fair enough. Final thought is on the gross margins were quite good from materials, you said it was mixed, any updated color on pricings?

Well, I mean, we deal with the largest companies in the world and you got Samsung, and LG and others, and there is always pricing pressure. And we do provide volume price breaks, we’re in constant discussions with our customers, we’re working with them, all the time to achieve what we think could be a win-win solution for all of us. And it clearly in this quarter, because the host business was so small, which add much lower margins, that impacted our gross margins and our material business.

Great, thank you.

Thank you.

We will go next to Hendi Susanto with Gabelli and Company.

Good evening, Sid and Steve.

Hi, how are you Hendi?

Good, Sid and Steve, when should we expect the next round of the design win competition for green host materials?

Hendi, it’s really not on calendar base, Hendi it’s really not on a calendar basis, it just happens consistently over the year, and each customer is different.

Okay, got it. And then, may if I that the favorable margin mix in your gross margin is due to primarily higher emitter materials, in other words there’s no, like pricing reset that we have seen in the past?

We stated in the past, we always have volume price discounts. And we’ve also built into our pricing strategy when we – our customers want volume discounts and as our volumes grow we get economies of scale. And as we have been able to do over the years we pass the benefits onto our customers, with price break, but we’ve also have worked and have been able to maintain our gross margins in this – for emitters which we said our 70% to 80% and the host business, when it started was 40% to 50% and it didn’t went down. But we do pass the more and more, we get economies of scale, we do pass more on that’s part of our strategy to give our customers lower pricing, but we’re – we really have attempted to maintain our margins because we’ve spent a lot of money on R&D and we need to have these margins in order to do that.

Hi Sid, what I meant was, in the past like when you have a new version of emitter materials, pricing was reset back to like a starting point, that is higher if you have that in Q4? I assume it wasn’t that case, but I just want to clarify that.

Well, we don’t specifically state when we introduce new, but we do have a pricing structure that we’ve talked about and when there is a new emitter introduced. From our standpoint it’s a volume that are not that high, and it cost us more money to make and our customers understand that and we charge more for those emitters but as the volume continues to grow we’ve pass them on. So it shouldn’t affect our margins whether a new product is introduced or not because we do pass these on to customers.

Got it. Thank you, Sid. Thank you Steve.

Thank you.

And we will go next to Alex Guana with JMP Securities.

Yes, thanks for taking my question. Nice job on the quarter. I was wondering if you could give us a sense with LG having revised or trimmed their outlook on the OLED TV side. Is there any basis to have increased new confidence in the targets meaning anecdotally are they feeling good about the velocity on this number now, or do we still have to wait and see how the holiday seasons progress?

We believe that LG is committed to OLED TV and expanding their own base and their OEM customer base. I think that we believe that the OLED TV market will grow. I don’t think any of us including LG believes that we can predict, but LG is committing significant dollars. I believe that LG is – believes that the OLED TV business is one that will propel them going forward. So, clearly you’ve got to wait for – what sell through is and things like that. But they’ve really done, I believe, the really good job moving forward on OLED TVs.

Okay. And then I know you have always said that don’t think of your revenues is coming from Samsung handset, but Samsung display, can you give us a sense of Samsung display is diversified and moved outside of Samsung internal sales. Maybe what your next exposure there is? Should we be thinking of your Samsung exposure is 75% Samsung internal and 25% external or is there no way for you to tell?

I think Samsung actually stated on their calls that they expect 30% of their sales to be to OEMs, Samsung display that’s in 2016.

And does that carry any mix implications for you or the Samsung flagship phones taking higher and materials than otherwise or not really the case?

I don’t – we don’t know exactly what goes into each one but I believe that they’re selling to customers on one high end phones and I think the one – they’re paying high end and mid range phones, but they’re paying for a play that gives them all the benefits of OLEDs including power efficiencies and a great picture, so I think they do pay for it and I think they expect higher performance.

And certainly you signed the broader OEM base out there, now that LG is in the mix and AUs made progress. Those second sourced alternatives. Is that becoming a factor in the industry at or not really?

I don’t believe that is a factor yet. But you are getting, you do have Samsung and LG that – LG is investing a lot in TVs, but they’ve also talk about expanding the wearables and mobile market. You got – you are doing it. But realistically I think those two guys.

And Steve, any anecdotal signs from what Samsung is doing on their interest in reigniting the OLED TV side of things?

No. Samsung really has been said a lot about the OLED. The OLED TV market, they seem to be focusing at least commercially on the portable electronics business and the wearable business. But they’ve also had kept their R&D efforts up on OELD TV when they stated that.

Okay. Thank you, guys. Good luck.

Thanks.

[Operator Instructions] We will go next to Andrew Abrams with Supply Chain Market Research.

Hi, guys. Couple of questions specific to colors. Have you got any indication that LG is using red and anything in their small panel line, wearables or smartphones or anything along those lines?

Well, we do sell red emitters for LG commercial product. And we’re continue to sample green to LG and we believe that replacing a fluorescent emitter with phosphorescent emitter will result in a much more efficient product. So we believe it’s a only matter of time.

Okay. And you had a pretty big increase in red material, red emitter material sales. Could we look at that as Samsung coming back to where they probably should have been all along or with some of that from other customers or LG – did anybody else make an increment there other than Samsung?

No. We sell red to all of our customers. But it is Samsung, it has grown to our utilization or factory utilization was higher in the quarter than in prior quarters, which they do use our red and green emitters.

Right. And again, we had a pretty big increment in the – on the green side also. If we were to break that out among customers and it sort of blends together because of Korea. Was that also an indication of Samsungs higher utilization or was that a blend between your two top customers?

I think that’s a blend. I mean, yes we sell yellow and green and you can look at customer A and customer B, we get a better feel for it. We know our logo is great but there is the difference between customer A and customer B, okay.

Great, okay, thank you.

Thank you.

That concludes today’s question-and-answer session. I’d like to turn the conference back over to Sid Rosenblatt for any additional or closing remarks.

We would like to thank you all for joining the call today. And we appreciate your interest and support and we look forward to speaking with you again in the next quarter and thank you again and good night.

Thant goes conclude today’s conference. Thank you everyone for your participation.