Universal Display Corporation (OLED) Q2 2020 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Universal Display's Second Quarter 2020 Earnings Conference Call. My name is Brock, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Darice Liu, Director of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Welcome to Universal Display's second 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 Web site. This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, August 6, 2020. 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 concerning 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. We hope that you are all continuing to stay safe and healthy. During this pandemic, our focus continues to be on the safety and wellbeing of our employees, customers, partners and community, safeguarding our business operations and advancing our strategic growth programs. Second quarter results were $58 million in revenues, operating loss of $1.2 million and net income was $800,000 or $0.02 per diluted share. The challenges of this pandemic continues to impact us in the second quarter as customer orders and shipments declined. While COVID-19 uncertainties will likely weigh on consumer demand in the near term, we continue to invest and further strengthen our leadership position in the OLED ecosystem and expect to emerge a stronger partner to our customers and to the OLED industry. Long term, we believe the growth path of OLED is unchanged and remains robust. For the second half of the year, customers have expressed cautious optimism. And frankly, we have seen a pickup in demand as customer orders increased in the month of July. At the same time, we believe significant uncertainties still loom over the consumer and macroeconomic environments and that near term demand visibility remains unclear. As a result of these ongoing uncertainties related to the COVID-19 pandemic, we believe it is prudent to continue to refrain from providing 2020 guidance. When visibility improves, we expect to resume providing annual guidance. Looking to the OLED industry, despite some near term macroeconomic uncertainties, we are pleased to see activity broadening with new OLED fabs and new OLED products. Yesterday, Samsung hosted its first ever virtual Galaxy unpacking event, and unveiled the Galaxy Note 20 and the Galaxy Note 20 Ultra 5G, both with OLED screens and for the first time in the Note series, the Galaxy Note 20 Ultra offers a vivid and bright dynamic AMOLED 2x display and 120 hertz refresh rates, which Samsung calls their best screen yet. The Galaxy Tab S7 Plus, which has an extra large 12.4 inch super AMOLED display with 120 hertz refresh rate. So you can take full advantage of the cloud based gaming and high definition streaming that 5G enables. The Galaxy Watch 3, a premium OLED smartwatch that has advanced health features and the Galaxy Z Fold 2, the next generation foldable OLED smartphone with enhanced refinements. The cover screen is 6.2 inches and the main screen is 7.6 inches, making them both larger than the first Galaxy phone. Samsung also announced during its earnings conference call last week that it was planning to expand its OLED presence beyond mobile phones in areas such as foldable and IT devices to prepare for the anticipated resurgence in market demand. LG Display held a ceremony two weeks ago to announce that mass production at second gen 8.4 OLED TV fab in Guangzhou, China has commenced. LG Display’s first OLED TV plant in Paju, Korea, can produce 70,000 sheets per month. And now at Guangzhou LG Display’s production capabilities almost doubled to 130,000 substrate starts per month. On the OLED TV OEM front, Vizio announced at the end of June that its first OLED TVs, 55-inch and 65-inch 4k models, will be available in the fall. Less than a week later, Xiaomi debute its first OLED TV in China, a 65-inch MASTER Series model for approximately $1,850. Moving to small medium sized panels. It has been reported that Mercedes Benz new S Class Luxury sedan, which is expected to be unveiled in September, will have for the first time an OLED infotainment system to be supplied by LG. And following up to the 2021 Escalade, it’s been reported that the upcoming Cadillac Lyriq electric crossover is expected to be equipped with a curved 33-inch widescreen OLED display. In China, BOE Technology completed construction of its third Gen-6 flexible OLED fab in Chongqing early last month. With an investment of $6.6 billion, this production facility is expected to have an installed capacity of 48,000 substrate starts per month and is slated open next year. BOE continues to broaden its portfolio of OLED applications and recently showcased a 49-inch ultrawide curved OLED display and our foldable OLED smartphone display and a 14-inch OLED notebook display with a narrow bezel at the 2020 Display Innovation China Forum and Exhibition. In mid-May, Tianma held a groundbreaking ceremony for its new Gen-6 flexible OLED fab in Xiamen. This $6.8 billion OLED fab is also expected to produce 48,000 substrate starts per month and slated to open next year. On the lightning front, at the end of June, Audi unveiled that its SQ5 SUV models will feature optional OLED tail lights. According to Audi, in addition to perfect contrast, the benefits of digital OLED are a higher level of homogeneity and minimal gap between the segments. Looking to the future, OLED is a perfect technology for executing personalized light design with a high degree of precision and extensive variability. This technology offers all sorts of opportunities for further development. On the UDC research and development front, we continue to strengthen our core competencies to further expand our market opportunities. As product specs of color, gamut, efficiency and lifetime continue to broaden, our brilliant R&D teams are continually innovating and inventing new emissive materials and technologies, including new reds, greens, yellows and hosts, to meet new customer, new applications and new product roadmap needs. On the blue front, we continue to make excellent progress and our ongoing development work for commercial phosphorescent blue emissive system. Last month, we issued an exciting announcement about the formation of OVJP Corporation to advance the commercialization of OVJP, our novel manufacturing process for maskless, solventless, dry direct printing of large area OLED panels. This wholly owned subsidiary will be based in Silicon Valley and led by Jeff Hawthorne, former CEO of Photon Dynamics. Jeff and his team will focus on the commercialization of OVJP with the initial focus on equipment scale up. OVJP R&D will continue in Ewing, New Jersey where we are currently working on printing a full color phosphorescence 4K OLED panel. During the quarter, we celebrated our 20 year partnership with PPG, our exclusive manufacturer of our proprietary universal PHOLED phosphorescent emitters. Through these two decades as OLEDs evolved from an idea to a now mainstream player in the consumer electronics market, UDC and PPG have built a successful relationship of close collaboration, as well as a wealth of manufacturing expertise and knowhow. We believe that our extraordinary partnership will continue to drive growth, incredible value for our customers and innovative solutions for the marketplace. And this week in SID Display Week, which is being held virtually this year, Dr. Julie Brown, Senior Vice President and Chief Technical Officer, was awarded the prestigious 2020 Karl Ferdinand Braun Prize by the Society of Information Display and Dr. Mike Weaver, Vice President PHOLED R&D was named a 2020 SID Fellow. The Karl Ferdinand Braun Prize was awarded to Dr. Brown for her outstanding technical achievements and contributions to the development and commercialization of phosphorescent OLED material and display technology. Dr. Mike Weaver has been named SID Fellow for his significant contributions to phosphorescent OLED technology and successful transfer to commercial practice. We congratulate Julie and Mike on the well-deserved recognition and awards for their exceptional contribution to the display industry. Also at Display Week, Samsung Display presented a paper titled, realizing deep blue emission and blue phosphorescent organic light emitting diodes, which acknowledged that the experimental blue work was performed using a phosphorescent material provided by Universal Display Corporation. On that note, let me turn the call over to Sid.

Thank you, Steve. And again, thank you everyone for joining our call today. With respect to our second quarter results, in addition to the COVID-19 related pre-purchases in the first quarter that would have likely occurred in Q2, soft consumer electronics spending impacted OLED demand and factory utilization rates, which resulted in sluggish customer orders, inline with the softness we indicated on our May conference call. Revenues for the second quarter of 2020 were $58 million, sequentially down from first quarter 2020's $112 million and second quarter 2019's $118 million. Our first quarter of 2020 revenues included the recognition of $24 million from a Chinese customer who purchased safety stock in Q4 2019 due to trade related concerns and an estimated $20 million of revenue that were customer advanced purchases due to COVID-19 uncertainties. Looking at six months, our first half 2020 revenues were $170 million compared to revenues of $206 million in the first half of 2019. Our total material sales were $31.9 million in the second quarter compared to material sales of $66.6 million in the first quarter of 2020 and $76.3 million in the second quarter of 2019. Green emitter sales in the second quarter of 2020, which include our yellow green emitter, were $24.2 million. This compares to $52.6 million in the first quarter of 2020 and $60.2 million in the second quarter of 2019. Red emitter sales in the second quarter of 2020 were $7.5 million. This compares to $13.9 million in the first quarter of 2020 and $16 million in the second quarter of 2019. As we have discussed in the past, material buying patterns can vary quarter to quarter. Some of the contributing factors include the COVID-19 issues that we've been discussing, as well as consumer product demand cycles, capacity ramp schedules, production loading rates, device recipes, product mix, material ordering patterns, customer inventory levels and customer production efficiency gains. Since a number of these factors are moving variables for our customers, they are also moving variables for us. Second quarter 2020 royalty and license fees were $22.4 million. This compares to $43.1 million in the first quarter of 2020 and $38.9 million in the second quarter of 2019. Second quarter 2020 Adesis revenues were $3.7 million. This compares to $2.6 million in the first quarter of 2020 and $2.9 million in the second quarter of 2019. Cost of sales for the second quarter of 2020 were $12.6 million. This compares to $22.5 million in the first quarter of 2020 and $24.1 million in the second quarter of 2019. Cost of OLED material sales were $10.3 million, translating into material gross margins of 67.8%. This compares to 69.6% in the first quarter of 2020 and a comparable year-over-year’s quarter material gross margins of 71.2%. As we have noted in the past, material gross margins can vary quarter to quarter. Second quarter 2020 operating expense, excluding cost of sales, was $46.5 million compared to last quarter’s $45.3 million and a comparable year-over-year’s quarter $45.4 million. Operating loss was $1.2 million in the second quarter of 2020 compared to last quarter's operating income of $44.5 million and a year-over-year’s comparable quarter’s operating income of $48.7 million. Our first half of 2020 operating income was $43.3 million compared to first half of 2019 operating income of $83 million. In the second quarter of 2020, we had a tax benefit of $600,000. Net income for the second quarter of 2020 was $800,000 or $0.02 per diluted share. This compares to last quarter’s $38.2 million or $0.80 per diluted share and a comparable year-over-year’s quarter $43.4 million or $0.92 per diluted share. Our first half 2020 net income was $39 million or $0.82 per diluted share compared to first half’s 2019’s net income of $74.9 million or $1.58 per diluted share. We ended the quarter with $644 million of cash and equivalents or over $13.50 of cash per diluted share. And lastly, our Board of Directors approved a $0.15 quarterly dividend, which will be paid on September 30, 2020 to stockholders of record as of the close of business on September 16, 2020. The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders. With that, I will turn the call back to Steve.

Thanks Sid. Broadly speaking, despite the pandemic OLED activity in the market continues to evolve and progress. We remain encouraged and excited about the level of commercial and development activity in the OLED pipeline. Our history shows that we have successfully navigated through challenging times and emerged stronger and better positioned. With a robust balance sheet and lean operating model and no debt, we're continuing to build and expand our robust foundations of best-in-class OLED technologies to help drive innovation and to capitalize on the opportunities in the market. We're also strategically increasing our headcount around the world to meet the growing long-term needs of the company and our customers. The UDC team continues to do an incredible job of supporting and enabling our customers with the discovery, development and delivery of cutting edge, energy efficient, high performing OLED solutions. Bottom-line, we are investing in the long term opportunities ahead of us and fortifying our position for growth well into the future. In closing, I would like to take this opportunity to thank each of our employees for their drive, desire, dedication in heart in elevating and shaping Universal Display’s accomplishments and advancements. We are committed to being a leader in the old 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.

Thank you, Mr. Abramson. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] The first question today comes from Sidney Ho of Deutsche Bank. Please proceed with your question.

My first question is regarding the advanced purchases you discussed last quarter about $20 million, sounds like it's something you and your customers have discussed and agreed to. But given your constant dialog with them, do you a have view whether those customers already used up at least a portion of those purchases? Or are they trying to keep inventory at elevated level until the supply chain kind of uncertainties subside? In other words, will there be any kind of headwinds that we should be thinking about going forward?

It really depends on demand that we did have $20 million that we thought were pre-purchases and obviously this quarter was soft. So, it really would depend on whether the demand picks up and we believe that in Q3, it should pick up and we believe that it will flush out the inventory.

Maybe on a follow-up question, I know you don't guide revenue by quarter or even for this calendar year. But if you look at Q3 with some of the advanced purchases hopefully being used up, the start of a ramp up for the new flagship phones with U.S. OEM and your large panel display customer starting production in China, and the China fab that is. Is there a reason why you won't get back or even exceed the normalized level of revenue, which I know last quarter I think you talked about being close to $80 million range if you strip out all the one-time events.

Well, I think that what we have seen so far in July has been a significant pickup in orders and shipments. The real question is whether it is sustainable and whether or not there are any additional possible interruptions that may occur due to market uncertainties. We have seen the first part of Q3 have a significant pickup from Q2.

Maybe one last one, if I may. With revenue from your largest customers dropping off pretty sharply in Q2, I would have expected the ratio between the materials and licensing to increase, but it actually went up in second quarter. Can you walk us through that dynamic a little bit? And related to that, how should we think about that ratio in Q3?

The material to royalty ratio is dependent on customer mix. Because of global uncertainties, it's difficult for us to forecast. But based upon our history, we think that the ratio has historically oscillated between 1.5 and 2:1. So, it really does depend on customers and how we account for the license fees and royalties based upon 606 accounting.

The next question comes from Krish Sankar of Cowen & Company. Please proceed with your question.

So just follow up on the earlier question from Sidney. If the month of July is looking strong, is there a way you can just pose it with how you spend in the month of April and the month of January, i.e. the first month of Q1 and Q2 and how do you characterize this today versus those two? And based on that, is it fair to assume sequentially September has to be up versus June quarter from a revenue standpoint?

Well, in terms of talking about quarters, obviously, as we said, we don't give guidance. However, on our last call, we knew that it was soft and we stated that the first month of Q2 was soft. And what we're stating today is we are seeing a difference and we are seeing a significant pickup in our orders in Q3 and the question is how sustainable is it, as I stated. But, yes, right now, everything is on the upside.

And then as a follow-up, can you just help us understand kind of like the time lag between, let's just say hypothetically, as the flagship phone going to be launched in Q4. At what point do you start seeing your material sales pick up and how would that basically translate into next year?

Well, we are a just in time supplier. So since we don't deal directly with the actual sellers of the phones, we really will see it pick up when we start seeing pick orders from the factory. And that really is depending upon their production schedules. So when they place orders, we're adjusting time supplier we shift within 24 hours. So whenever a customer wants additional materials, we are there to give it to them.

And then for last one if I can squeeze. Does it matter for you from your material revenue standpoint if the substrate is either flexible or rigid?

No, for us essentially the recipes are the same whether it's glass, plastic or any other substrate.

The next question is from Shannon Cross of Cross Research. Please proceed with your question.

I guess my first one is, can you talk a bit about your thoughts on OVJP. How we should think about it in relation to your core company and how you're going to work together in that? Thank you, and I have a follow up.

The OVJP was formed to commercialize our OVJP technology. And the OVJP R&D will continue in Ewing, New Jersey, and OVJP process and equipment scale up will take place in OVJP headquarters, which will be in Silicon Valley. We believe that OVJP will pave an alternative manufacturing test for new levels of OLED TV performance with RGB side by side pixel structure architecture, very similar to small and medium sized displays today. And we believe that this technology will further expand OLED TV’s future market potential.

And I just assume since it’s a wholly owned sub, everything is still rolling through, and you know some finance perspective modeling?

Yes, it's a wholly owned sub and essentially, they're going to do what they do out there. And we actually will support them in everything that's behind the scenes out of our headquarters.

And then I'll just start us out because nobody's asked about blue yet, and Steve, you did discussed it a bit on the call. Just any more thoughts, any incremental thoughts on blue or how we should think about development there beyond what you said on the call?

Well, in terms of blue, Steve said we're making excellent progress and he did mentioned that there was a paper presented at SID regarding R&D by Samsung on using blue phosphorescent emitters. So we're excited about the progress that we've made and we're excited about the paper that was presented at SID.

And then just last question. As we think about the potential for the large customer in the U.S. that’s going to be launching more OLED based phones, and then with what's going on in terms of China. Are there any breakpoints that we should be aware of or concerned about as volumes ramp, hopefully, second half and in 2021 that might cause some volatility.

When you say [Multiple Speakers] under 606 accounting, it's an average price. So, the average price is built into the accounting under 606. So any discounts, or resets, or price all are taken into effect and when you come up with your average price per gram or per kilogram.

The next question is from C.J. Muse of Evercore. Please proceed with your question.

I guess first question, considering that you didn't guide for the quarter. We'd love to hear your thoughts on how things progressed versus your initial thoughts coming into the quarter, particularly as it relates to demand out of Korea? And as you think through that, any surprises in terms of inventory coming in, improvements in yield or lower than expected utilization rates?

Obviously, everything was difficult just because of the disruption in demand and a disruption in the ability to manufacturer because of COVID-19. So, yes, this quarter was very weak as we anticipated when we, on our call and to be perfectly honest, it never really picked up.

And I guess second question, deferred revenues, if I go December to March, actually started to decelerate. But it now have raccelerated here in the June quarter and it makes sense considering the fall off in materials to your largest customer. But I guess the question is, when do you think that starts to truly cease growing and start moving in the other direction?

Obviously, this quarter is a material supply. The material business sales were down and we still get paid fees from our customers. So because the material sales were so weak, you saw the deferred revenue go up on the current and long-term portion both. So, we expect that to start turn around as material sales start to pick up in the second half of the year.

And considering everyone's asking three, I'll ask a third one as well, the OVJP investment. How should we think about the implications to OpEx through the remainder of the year?

We don't really see any change in OpEx. We have been looking at doing this for quite some time and the question was really timing. We still expect OpEx to go up by 10% to 15%, excluding amortization for the year we're actually continuing to hire folks. And so we are really staying on our plan to continue the build for the future, because we know that this is just a short term blip. So, it should not impact our OpEx as intended.

The next question is from Brian Lee of Goldman Sachs.

Just if I look at the revenue per customer this quarter, it looks like Samsung was down a lot more than BOE and LG, and also China in aggregate. So, is it fair to assume, I know last quarter you said it was spread out across multiple customers. But is it fair to assume based on the quarter-over-quarter trends that Samsung had the most inventory of the pre-buys from last quarter? And then related to that, since BOE we did buy more this quarter. Are they through the buffer stock from Q1 based on on your read there?

Well, we don't talk customer-by-customer in terms of pre-purchases and who did it. But you are correct in that, the customer A is not Samsung in this Q. And we believe that as demand picks up that they should work their way through the pre-purchases that were related to economic situation and trade related issues and the pre-purchases, based upon when we talk to our customers, whether or not the COVID-19 issues in terms of logistics, or shipping, and receiving and getting through customs would have an impact and so we have been shipping. And so we believe that particularly as their production picks up and they're able to turn their factories up, even though they've never really shut down but their factory utilization rates are very low that they should use up this inventory.

And then in this, the early Q3 pick up you're referencing, I know Q2 was soft across the board. Are you seeing the pickup more related to smartphone orders, or is it also in TVs just based on the customer visibility out there?

Well, I mean if you look at customer A, B and C, you can figure out who they are in customer A and which is a customer B, so is it that customer does manufacture TVs.

Yes, I guess I was just, maybe I'll rephrase it. But specific to Q3, not reported results in Q2 but Q3, it sounds like you’ve seen some pick up in orders. Are you seeing that any differently in smartphone related pockets of your business versus the TV?

Without going into specifics, I think it's across the board.

The next question is from Mehdi Hosseini of SIG. Please proceed with your question.

I want to go back to commentary regarding deep blue. At the same Display Week, there were also a number of papers and presentations on the micro LED and Samsung has publicly talked about diversifying their strategy as it relates to TV. So how can I reconcile the paper that was presented with everything else that they're doing? I'm just trying to better understand if they're pursuing multiple different technologies, or if there is something that I’m missing? Thank you, and I have a follow-up.

Well, the SID, obviously, is a research conference and we know that everybody, to be honest, looks at lots of different things. But micro LEDs have been and still are an R&D program and there's still a lot of unanswered questions about it. But folks look at lots of different things but across the board everybody and we believe that OLEDs are the future of displays and will continue to grow. And there's always things that pop up, they're still making Kindles with E-Ink technology. So, it's a huge industry as you're well aware.

And then I want to go back to in the past, you've talked about significant capacity growth for 2021 versus 2019. And it seems like there is continued investment in China for RGB OLEDs. And I'm just wondering if you can help us understand with the diversification of end market, there has in the past, or talk on expanding the market into tablets and notebooks, and I'm wondering if there's any additional comments that you can share with us?

Well, in terms of the capacity, as we stated on the last call, we talked about the end of '19 through the end of '21 of approximate 50% increase in installed capacity and we still see that. We haven't seen anything that we believe will change that. And it is in China you know that BOE has multiple fabs that they're building and other Chinese customers are building new fabs. LG has its Guangzhou -- LG has a TV facility. And so, I think it's not just one area but we are still very confident that what we can see unless things really change in terms of the pandemic, it still looks like we're still talking about approximately 50% growth.

[Operator Instructions] Our next question comes from Andrew DeGasperi of Berenberg. Please proceed with your question.

Just had a quick one on China. Just trying to maybe you can give us an update in terms of what's been going on there for last six months beyond the pandemic. I mean, have you seen any improvement on the technical aspects of their fabs in terms of production capacity and -- or things cause since February?

Well, we obviously can't talk about their production capacity and their utilization rates, because that's their proprietary data. But, we have seen, our Chinese customers, BOE is a major player. And we support all of our customers and we believe that they will all be very successful in the OLED business. And it's just -- there's some learning curves that they have to go through but I think that they will all be very successful in this business.

And then, in terms of the 120 hertz refresh, dynamic refresh technology that Samsung rolled out. Would you say that's a meaningful improvement in terms of the product? And could that potentially spur additional adoption of the OLED technology and other film and IT models?

Well, we think that the display is major part of what sells all of these products, because we're visual people. And you're seeing screens get larger and larger, because everybody's using them more and more for display, the power efficiency and using our phosphorescent material is so important is that they're using their screens more and more, which then drains your battery and having a larger screen drains your battery. So, we think any improvements in the picture quality and refresh rates is great for the industry and is great for us.

And then just one last one on OVJP, I know you've already made some comments on it just generally that this was all planned in terms of the initiative. I was just wondering, did you reach a technical milestone and this is sort of the next step that to bring into commercial production? Or was this sort of just planned along independent of that technology maturing enough for you to partner with someone else?

We think that -- we've made a lot of progress on the technology ourselves. In our facility, we're scaling up our system, which is a 16 substrate so that we can make red, green and blue full color displays. We've got great results, early results in lifetime. You can see we talked about green lifetime. So, what we intend to do and let Jeff do is look at all the options and come up with the best path to get this technology commercialized in the most efficient manner.

The next question is from Jim Ricchiuti of Needham and Company. Please proceed with your question.

I'm wondering if you could at least might be able to tell us whether this recovery and the pickup that you're seeing or have seen in July has been coming from both regions, both countries, China and Korea? Or has the pickup been more pronounced in China, which was feeling the effects of COVID early? Can you give us any color on that?

I think it's across the board, Jim. We’ve seen it from both.

And then just regarding the paper that Samsung gave at the SID conference. And typically when these papers are given, I would assume and this is probably not the first that you guys have some input in papers like this. Is that fair to say?

Well, this is a Samsung paper and what they were doing is looking at phosphorescent in blue and essentially, literally talking about that you need a deep blue phosphorescent emitter to get the best display and the most power efficient display. And it's an R&D project and we don't talk specifically about R&D projects with our customers. But this is the first time that anybody has really presented anything like this and acknowledge the fact that it used our blue emissive material.

But I would guess that it's not a complete surprise, I’d assume you knew the paper was coming?

Yes.

Can you say when you knew it was coming?

The paper, SID keeps the papers quiet until they actually publish them. And I believe it was two days ago that, I believe it was on the fourth or the third that these papers were then becoming public through the SID Web site. So you have to go there and purchase access to the content. And I think it's a couple of days ago that this came out.

The next question is from Martin Yang of Oppenheimer. Please proceed with your question.

Can you maybe talk about your view on the capacity ramp up in China, and how that compares to three months ago? Do you think that this year's capacity addition is tracking ahead, or below -- or slower than expected?

Well, to be honest, because of COVID-19 I think everything is slower than we would have anticipated a year ago. And in terms of the actual opening of the fabs and also getting factory utilization rates up and production schedules, because of the fact that they could not get employees and all of the other issues that are associated with running the factory during this pandemic. So, do I think it's slower? Yes. But do we think that there's a long term impact? We don't think so. We think long-term, the OLED industry and all of this is just all positive. This is obviously something that no one anticipated and it's going to cause some slow down.

I think in past you have stated some capacity, the magnitude of capacity addition in '21 over 2019. Would the delays in '21 change your estimates or forecasts for that capacity addition, meaning more capacity additions being moved into next year?

Well, we really do ended the year, the end of the year '19, the end of '21 and we don't see any real difference. There's been no announcements that things are not happening. Everything that we built into that number is happening. Could there be slippage quarter wise or six months wise? Yes. But right now, we do not see anything that makes us think that it's not going to be approximately 50% in square meters of glass increasing capacity.

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

Thank you all for joining the call today. And we wish you all a safe and good night. Thank you.

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