Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Universal Display Corporation first quarter 2008 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Mr. Johnson, you may begin the conference call, sir.

Thank you, and good afternoon, everybody. Thanks for joining us today. With us today are Steve Abramson, President and Chief Executive Officer, and Sid Rosenblatt, Chief Financial Officer of the Universal Display Corporation. Let me start today by reminding you that this call is the property of Universal Display. Any redistribution, retransmission, rebroadcast of this call in any form without the express written consent of Universal Display is strictly prohibited. Further, as this call is being web cast live. It 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 web cast of this call, May 8th, 2008. 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. 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. Universal Display disclaims any obligation to update any of these statements. With that said, I'd like to turn the call over to Steve Abramson, CEO of Universal Display Corporation. Go ahead, Steve.

Thank you, Paul, and welcome, everyone, to our conference call for the first quarter of 2008. I'll give you a brief review of the quarter, as well as discuss some key milestones in the commercial production of AMOLED displays. Sid Rosenblatt will then review the financial results for the first quarter in greater detail. As always, we'll be happy to take your questions following our comments. At the end of the first quarter, the industry trends we saw at the end of 2007 remain accurate. Reports signaled that the AMOLED display industry continues to mature and expand. Research and development of next-generation OLED technologies such as white lighting and flexible displays are also gaining momentum. The technologies are on track for the commercialization similar to what we have seen with glass plate AMOLED displays. As we've highlighted in the past, the AMOLED display market is undergoing significant expansion as the technology continues to gain adoption and manufacturing processes continue to improve. According to Display Search, 2008 will be a breakout year for AMOLED displays. Samsung SDI, LG Display, Sony, and Chi Mei EL are projected to deliver almost 17 million displays, which is up over 380% compared to 2007. These displays will be used in products such as mobile phones, digital cameras, digital photo frames, handheld TVs, and Freestanding TVs. Display Search projects that OLED display manufacturers will commence shipments of displays for notebooks by 2009, and then they will move rapidly into TVs, building on a success of a Sony XEL1 with its vintage and realistic images. The future for OLEDs is bright and promising. The building blocks are being put in place for OLED technology to mature and reach its full potential. Its maturation process is evidenced by Samsung SDI's recent financial report for the first quarter of…

Thank you, Steve. And again, thank you, everyone, for joining us today. I'd like to start off today by drawing your attention to some changes in how we report line items for revenue in our P&L this quarter and going forward. As we have done in the past, all revenues will be addressed in six specific line items, commercial chemical revenue, license fees, royalty revenue, contract revenue, development chemical revenue, and technology development revenue. Going forward, we will continue to break out revenues into these line items. However, we intend to categorize them in one of two revenue categories, commercial revenue and developmental revenue. These categories more closely reflect our business objective and our customers' use of our technologies and materials. This change will have no impact on our work on next-generation OLED applications or our work with partners, governmental agencies, and potential customers. However, the change should allow investors to better understand how each aspect of our business is progressing from a revenue standpoint. With that, let me begin with a review of our revenues for the first quarter of 2008. At the conclusion of my remarks, Steve and I will be happy to take your questions. Revenues for the quarter totaled $2.7 million compared to $3 million for the first quarter of 2007. Total commercial revenue during the quarter was approximately $1.6 million compared to $1.4 million for the first quarter of 2007. Total developmental revenue was approximately $1.2 million versus $1.6 for the first quarter of 2007. Commercial chemical revenues were $986,000 for the three months ended March 31st, 2008, compared to $1.3 million for the same quarter of 2007. In the first quarter of 2008, commercial revenues were from three customers, the majority of which from Samsung SDI. This compares to the first quarter of 2007,…

(Operator Instructions) We'll pause for just a moment to compile the Q-and-A roster. Your first question comes from Darice Liu with Maxim Group.

Hi, Darice Liu with Maxim. Good afternoon, guys. In terms of your molecules, your red has had much pessimist yield. I'm wondering whether or not there has been any progress for design wins with your green molecule?

Well, the first products that were launched include green florescent materials. And, since there's really not a well-defined new product design cycle in place yet in the OLED industry, it's really difficult for us to determine when green PHOLED will be accepted. We have hit some key technology development and milestones to the launch the evaluation of our green PHOLED by manufacturers. But at this time, we really can't say specifically when one or more manufacturer will incorporate our green into the product. We are working with a number of manufacturers to get that done, obviously, as soon as possible.

You had prior test with SDI with your green. And, if I remember correctly, they were successful in terms of hitting their target, but not yet designed in. How much more -- is there more progress that's seen for the molecules?

We continually work with them and we believe that at some point when they change their product design cycle, we will be incorporated in. And there has been, work being done over the last few months with our green material with SDI. But again, we -- it's difficult for us to say exactly when it will be incorporated. We clearly are working as hard as we can to get it done as soon as possible.

Okay. And then on a separate note, you had an alliance with DuPont Display since I think 2002. Yesterday DuPont announced that they would work with [DNS] for developing printed OLED technology. What type of implications does that have with your relationship with them?

Well, Darice, we had a joint-development agreement with DuPont for about three years, which ended, I think in 2005. And DuPont is also a device licensee of our technology for printing, for solution process inkjet printing. So, anything that would increase the acceleration of the phosphorescent and printed OLED market should be good for us.

I guess in turn -- I know you're working with a couple of your own partners for printed material. If they are successful, are you allowed to use that recipe as well, I guess is my question.

We probably can't answer that question at this point in time.

Fair enough. And then my last question is, Steve, you alluded to some announcements during SID in about a week and a half. Can you give us a little bit more color on that?

Well, we're delivering a number of papers at SID during the course of the -- during the course of the week. So we're -- there will be a number of papers, which I think the titles have been announced. And we'll be -- as we usually do, we'll be disclosing various details of those technology devices as well as -- please come and visit our booth because it should be a very interesting booth with a lot of new products that we are incorporating our technology as well.

Okay. Thank you, guys.

Thanks, Darice.

Your next question comes from the line of Jim Ricchiuti with Needham and Company.

Hi. Thank you. Good afternoon.

Hi.

Question on the commercial chemicals portion of the business. As we see more players working on -- in different areas of the materials side of the business, do you see that impacting your sales of commercial chemicals at some point in the near future?

Jim. Jim, unfortunately, you're cutting in and out.

It's hard for us to hear you, Jim. Could you repeat it?

Sure. Is that any better?

That's better.

Yes.

Okay. Thank you. Sorry about that. It's a question regarding your commercial chemicals business. As more players work on the material side of the business, do you see that potentially impacting the growth of this business over the near term?

We, at this point, for the commercial chemicals, our phosphorescent emission -- phosphorescent emitter materials are clearly state-of-the-art. And we expect to be able to continue to have our phosphorescent emitter materials be state-of-the-art and grow that part of the market. As other people come into the market and they develop -- start developing complimentary materials, we think that's good for the entire growth of the OLED market.

But in the near term, you don't see any real change here in the overall competitive landscape?

Not at all in the phosphorescent emitters.

No.

Which is our material sales.

Okay. That's right. One of the things I think folks are trying to reconcile, we've all seen the data that suggests the growth in the market that people are expecting this year and next year and the year after. And I was -- the question is, are you getting any sense from the players that you're working with, what kind of sell-through we're seeing on some of the products that have active matrix OLED displays in them right now?

Jim, I'm sorry. We -- we heard a little bit of it talking about the growth in the market, but then we couldn't hear your specific question.

Again, I apologize. It's regarding what the sell-through might be on some of the products out there that are featuring these displays right now. Are you getting any sense as to how these products are being received in the market?

We read a lot about it. And our understanding at this time is that the products are very well received, and the displays clearly make the products much more attractive than the other ones. I mean, a lot of the products that we have here and have heard about, the displays are so different than any other displays in any of these hand-held devices, that it really is a wow factor.

But nothing specific with some of the handsets that are out there, Sid, where they've said, some of the -- you can point to a particular handset and any specific data on how you're seeing sales with those particularly?

We have not heard those --

Okay.

-- results.

Okay. And then just switching gears a little bit. You completed, I guess, five contracts, and that was one of the factors that led to the decline in contact -- contract research revenue?

That is correct.

You alluded to four new ones. How should we think about that? Should that start to replace some of this, and how soon?

We believe it will replace it. It does take time to gear up these new contracts, and that's one of the reasons for the decreases. Some of them got started early in a quarter, others are just getting started. And in the beginning, we gear up the efforts here and with our subcontractors, so it may have a little lag in it. We kind of expect the year-over-year to be in the -- if you multiply the number for the first quarter times 4, plus or minus a little bit, we should be in that range for the year. That's what we are predicting internally.

Any concerns just on the funding side, just in light of some budgetary concerns that folks have?

No. I think everything that we are looking at in-house is pretty much funded at this time.

Okay. And then just switching back to the commercial business, can you give us any sense of what kind of pipeline you see out there for potential new licensees?

We -- it's hard for us to talk about potential licensees just because it's difficult to predict when things will occur and how quickly they will occur. We are clearly doing all we can do to sign up as many companies as possible to use our technology. And you're hearing a lot more in the industry about folks wanting to get into the marketplace.

Right. And when you hear that, I guess the question that comes up is, why is it -- what seems to be -- what prevent you from perhaps signing these licensees sooner rather than later?

Customers each have their own process of how they do this. Some, such as Samsung SDI, really wanted to sign up and know exactly where they were going to be very early on in the process. Others have a philosophy that they know what our terms have been offered and they can wait almost until they're shipping product before they enter into a license agreement. It really is a philosophical question on our side and their side. Clearly, we will do everything we can do to sign up customers as early as possible. But realistically, the revenue stream doesn't start until they start shipping product anyway.

Thank you.

Thanks, Jim.

Your next question comes from the line of Rob Stone with Cowen and Company.

As the volume production ramps up significantly, you noted the number of units that SDI may be producing or capacity next year versus this year. How much visibility do your customers have to give you in terms of lead time on that ramp to ensure that you can deliver the necessary quantities of material? In other words, do you get a six-month rolling view? Or what kind of forecast do customers provide?

Well, we have a reasonably good feel for the estimated quantities that our customers will need and we make sure that we maintain sufficient inventory to meet their requirements.

And we have the capacity to meet their needs for the foreseeable future.

So just to put it to a specific question, though. Do customers give you some sense six months in advance? Three months in advance? What kind of forward look do you get?

We get -- we get forward looks both short term and longer term. The longer term, the look that we get, obviously, the more hedged it is.

Right. Turning to the LG partnership on the -- combining with the whole transport layer material. Can you put a little more color on that in terms of what benefits you're hoping to achieve by collaborating? And how many other players are there out there offering ancillary materials besides the emitter layers?

Benefits from the collaboration with LG Chem is that you get high-lumen sufficiency for the use of our phosphorescent material and low-voltage in the device through the use of their very efficient transport materials. So, you have even better and lower power consumption. There are a number of companies that are out there offering various ancillary materials, many of whom we're working with, such as Nippon Steel Chemical and Idemitsu Kosan.

So how much -- how much of a difference does it make by working together versus the OEM -- in other words, are you by somehow collaborating adding to the impact of those two layers separately? Or is it just that by specifically targeting that combination, you get the optimal mix out of possible combinations of emitters and chemical layers?

By working together, we're able to match the two material sets better and optimize the device architecture and structures to provide for best possible results from -- for the manufacturer. So it's not just putting the two sets of materials together, but involves a series of optimization steps to provide a solution to manufacturers.

Can you give us a sense of proportionally how much better it can be in that optimization, than before? You've talked about, for instance, you've talked about how much more power efficient a PHOLED display is versus fluorescent material. What kind of gains can we had from this type of optimization?

Rob, unfortunately, I just don't have that data at my fingertips. I think -- I do believe in the press release with LG Chem, we did -- we had included some of that data. And I can get back to you on that.

Okay. Thank you.

Thanks, Rob.

(Operator Instructions) And your next question comes from the line of Bennett Notman with Davenport.

Good afternoon, guys. Could you just talk a little bit about if you look out into the rest of the year and sort of revenue growth from various customers, would you expect to get your biggest incremental growth or your most leverage from SDI and its continued ramp on what it's doing or from new players like LPL or even others sort of getting into the market and starting production? And I'm trying to sort of see how much the future is still levered to SDI versus your expectation for new customers.

SDI still is the majority of our commercial revenues at this time. So the leverage from SDI will have more of an impact than any of the other customers. They are shipping significantly more units than any of the other customers. As the other customers ramp up, it will -- it will have an impact on us, but not as significant as a ramp by SDI.

I guess what I'm trying to get at is, is you get out into the third and the fourth quarter without naming specific names, do you sort of have a visibility on some more significant production runs from some of the guys who are in the early phases now that might start to make a more meaningful contribution?

We hear -- we read in DigiTimes and other places the same information that you've got, is we don't see -- I still see SDI as the major player for this year, even if -- right now they're talking about Chi Mei shipping 150,000 units a month. SDI is going to be up in the million units per month range. So it is still a significant difference between the two, and we don't see that changing very much for 2008.

And then could you just talk about sort of your positioning relative to Sony and what they may be doing with either their current 11-inch production or any plans they might have to expand production? I mean, how inter-global customer could they become?

We believe that working with Sony they've been working with fluorescent materials for a number of years and with us for a number of years. We believe that power efficiency is going to be key as they move forward towards volume production. The Sony XEL product is a very low-volume, essentially handmade product, and that is not where we think that the market is key for us. As they move in, power efficiency, which not only includes heat regulation in a device, but actual plug-in efficiency, is going to be very important. And we believe that our phosphorescent technology will be very important for large-area displays. For the initial products, it kind of doesn't matter. They've been working with fluorescent materials for a long time.

Thank you.

Thanks, Bennett.

Your final question comes from the line of Jim Ricchiuti with Needham and Company.

Thanks. This is a follow-up question. It kind of relates to the previous question. I know you can't name names. But, maybe help us look out to 2009, and would you -- you've got three main licensees right now. Call them licensee number two, licensee number three. Help us think about potentially how these other two licensees might begin to ramp in '09, for you?

For us, it -- we believe both of them will start to grow their businesses and increase their production. I don't have any specific numbers in front of me what -- I do believe that they will move to larger gen fabs over the next 12 to 18 months. And there are estimates that each of them will do that. Specific numbers I don't have in front of me. But we do believe that they will move into larger area displays because we think 2009 will have the same impact as 2008 would to 2007. As growth will be in -- it was -- it's a 380% increase in the number of units from '07 to '08. We think that will continue. And Display Search has a number of projections like that.

And, Sid, so let's assume that's the case. Do you -- is that more of the back half '09 story in terms of its impact on you?

You know what, I don't know at this time because it really depends on how quickly they ramp up and what they ramp up. So it's difficult for us to predict, just like it always is.

Yes, I know. Just one final question regarding your R&D spend. Would you anticipate that it's going to be up versus '07? And any sense as to how much it could be up?

We see that number going up, as it goes up in the 5 to 10% range at the outside.

Okay. I don't know if you've ever really shared this with folks. But is there any way that you could take that R&D spend that you've got right now and maybe break it into two buckets? I don't know if you can give us a sense as to how much is going into display and how much is going into perhaps the lighting market and whether that's changed at all.

I don't have an answer for you. We do, in the 10-K, break out all the components in R&D so you can see what they are. The spend on lighting versus other areas, we do have a number of DOE programs, and the effort that we're putting into lighting has increased. But the bulk of our efforts, 75% of them are still on developing phosphorescent emitters, working with customers to get phosphorescent emitters into products. And flexible technology and lighting technologies are probably 20 to 25% of our effort in terms of the folks' end dollars at this point.

Okay. And these other government development contracts that you alluded to, are those primarily -- are those mostly display related?

They're -- they're really two buckets. Its flexible technology and lighting.

Yes. Alright. Thank you.

Thanks, Jim.

Thanks, Jim.

With that, we'd like to thank you all. We appreciate your time. And, again, if you have any specific questions, you're all welcome to call me directly at any time. Thank you very much.

Thank you.

And that concludes today's conference call. You may disconnect at this time.