Good day, and welcome to the Universal Display Corporation First Quarter 2013 Earnings Call. Today's call is being recorded. At this time I would like to turn the conference over to Joe Hassett. Please go ahead sir.

Thank you, Anne, and good afternoon, everyone. With us today are Steve Abramson, President and Chief Executive Officer; and Sid Rosenblatt, Executive Vice President and Chief Financial Officer of Universal Display Corporation. Let me begin today by reminding you that this 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, May 9, 2013. 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 and should be referenced by anyone considering making any investments in the company securities. Universal Display disclaims any obligation to update any of these statements. Now I'd like to turn the call over to Steve Abramson, President and CEO of Universal Display. Steve?

Thank you, Joe and welcome to everyone listening today. The first quarter was a great start to what we believe will be another record year for Universal Display Corporation. For the first quarter we reported revenues of 15 million and a net loss of 4.8 million or $0.10 per diluted share. Material revenues were 21% in the quarter fueled by increase in the sale of commercial r green phosphorescent emitter and host material. The sale of the second commercial color material is a clear sign that our materials are being more widely adopted in the market. As such we have achieved another milestone along our strategic growth path, further encouraging broader and wider adoption of OLED technology material throughout the display and lighting markets. Since our success continues to be closely associated with the growth in the OLED market we are certainly encouraged by recent industry reports from industry analyst firm DisplaySearch, which expects the AMOLED market to grow 60% in 2013 to 11.3 billion. As they note AMOLED's revenue growth is expected to primarily come from mobile phone, especially the latest Samsung Galaxy S4, which is a high range 1920 by 1080, 440 PPI AMOLED panel. They forecast that over 52 million 5 inch AMOLED smartphone panels will be shipped in 2013. In an April 25 article on OLED-Info.com, Samsung says that orders for the Galaxy S4 have been so explosive they cannot meet demand. And that's not surprising because an in-depth mobile display technology shoot out with the iPhone 5, conducted by the scientists at DisplayMate, the S4 was judged comparable to what's generally been previously recognized as the best LCD display in the market. They were impressed that the S4 has the same pixel resolution as your 50 inch living room HD TV which they term the…

Thank you, Steve. And again thank you everyone for joining our call today. Let me read you our results for the first quarter of 2013 in more detail before looking for broadly at our prospects for the full year. Revenues for the first quarter of 2013 were $15 million, up 19% compared to the first quarter of 2012, which had revenues of $12.6 million. The major driver of the year-over-year first quarter 2013 revenue increase was 21% increase in material revenues compared to the first quarter of 2012. Sequentially material sales were also up more than 25% from the fourth quarter of last year. More indicative of the increase in demand for materials in the first quarter sales of commercial material was up nearly 40% compared to a year ago. In the first quarter phosphorescent emitter revenues increased by over 500,000, primarily due to an increase in the sale of commercial green emitter material. Commercial green emitter sales increased by $3.1 million due to the expanded use of our green emitter in customer products. Commercial red emitter sale decreased by approximately $1.9 million mainly due to the operation of cumulative volumes discount and improved utilizations by our customers. Commercial host material sales increased 1.8 million in the first quarter. Host material sales were primarily due to increased sales of green host material which are used in conjunction with our emitter material to optimize our OLED performance. Host material revenue was 29% of our total material revenue, up from 19% of total material revenue in the first quarter of 2012. Total operating expenses which include cost of goods sold for the quarter were 22.1 million up 56% compared to 14.2 million from a year ago. Without taking into account the Fujifilm amortization expense in 2013 and removing the cost of sales…

(Operator Instructions). We will take our first question from Brian Lee with Goldman Sachs.

Hey, guys thanks for taking the question. First one I had was Sid, can you quantify you guys spent a good amount of time being in the call talking about the Galaxy S4. Can you quantify your revenue opportunity for that device in dollar terms and how it compares to other Galaxy devices? Sidney D. Rosenblatt It's really difficult for us to do that at this time because it's really in the very early stages of its production. So to be honest I mean we saw in March the increase in green, we don't really know how many units were produced. We don't how many units were actually shipped. So it's really difficult for us to predict. And since we don't really get that information from the customer, all we can do is over some period of time take a look at what we've sold in terms of material dollars versus what they produced that is reported either by DisplaySearch or others and come up with an estimate, but at this time it's really too early to do that.

Okay, and I guess this year when you think about thus far for the green materials, both on emitter and hosts and how they compare to -- you talked about some year-over-year trends and I think you specifically called out commercial material sales as opposed to last year having a good amount of still development driven sales. Is it reasonable to assume that that's tied to some of these new Samsung devices, that are making their way into the market that may be weren't using the green material last year.

I think that's reasonable to assume.

Okay, and just want to drill down on few modeling things, you mentioned the cost and material had one raw material cost which seems to be up I think and you said 30% for a particular input on green emitters. Can you elaborate on what drove the higher cost and if you expect that to persist in future quarters?

It's iridium chloride that goes into all of our emitters. And in the quarter one it up we are actually seeing a decrease now. It does fluctuate we did an increase this year over last year. But we have actually seen a decline in the last month of production. So that's really a component that we are seeing the increase in.

Okay, and last one for me and I will jump back in the queue. The royalty and licensing revenue line saw little bit of bump here. And this obviously is not Samsung licensing quarter. Can you talk about whether that was driven by customers in the display market or if there was in the lighting market, and then any kind of geographical commentary around where that customer exposure may have been. Thank you.

It is in customers that when we sell we include a license fee into the material price, so it not be related to Samsung but will be related to most of our other customers.

And would it be display or general lighting?

It's mostly display, the lighting material sales that we sell are really very small portion of our material sale. We sell to a number of different customers but the quantities are very small. They are really very small R&D quantities for the all the lighting companies.

We'll take our next question from Jim Ricchiuti from Needham & Company. Jim Ricchiuti - Needham & Company: Hi. Thank you good afternoon.

Hi, Jim. Jim Ricchiuti - Needham & Company: Sid I wondered if you could comment a little bit more about the decline in red emitter sales in the quarter. You cited some I guess some volume-based discounts and also just better utilization by the customers. Can you elaborate a little bit more about on that case?

Well we do know that our customers over time are more efficient with the design of source cells and they are more efficient with the material utilization. And we've talked about this in red material few years ago was the quantity that was buying significantly higher. And as they continue to tweak their manufacturing process they are always looking for reduction. In addition to the utilization efficiencies the contract that we have has cumulative volume breaks in price and their volumes have increased. Therefore they are going into the next price break level from last year to this year. So there is a reduction in the cost of what we sell, our sell price per gram and they are being much more efficient in the way that they used their inventory. We also expect the utilization of our green materials over the next year the utilization could be -- to go down. So it's difficult to predict what the remainder of the year will look like just based upon the one month that we have. Jim Ricchiuti - Needham & Company: Okay but just in terms of this decline was utilization the bigger factor or was the contract arrangement the bigger factor of the decline.

Pricing was probably more than utilization. Jim Ricchiuti - Needham & Company: Okay and just one final question from me. It looks like your saw a pretty strong growth in Japan I wonder if you could talk a little bit about what you are seeing from some of your, customers you working with there?

I'm sorry the sales to Japan are our host material. We actually sell our host material to NSEC they then blend it with one of their materials, and then sell it to the customers in Korea. So we report the sell because we sell it to NSEC. It all ends up as host material with that goes with our green emitter material. But we do sell it to our customer in Japan that's why you see that increase.

We'll take our next question from Rob Stone from Cowen and Company.

Hi guys. I wanted to ask about the new red, you have been this for a long time what's the expected benefit?

Well it tends to give the entire efficiency a longer life time.

Okay. And a question on you talked about the ramp of materials that were previously not commercial and moving some cost from R&D to COGS. Other than the fluctuation in raw material costs are there expectations that just like your customer is getting price breaks on higher volumes that you will want the input size to be able to the income efficiency as volumes go up?

We do expect to gain some efficiencies as volume go up and particularly as we make larger and larger batches. Because of our margin profile our material cost is still fairly low. So the incremental amount that we get in terms of efficiencies may not be as dramatic as they are because our costs are so low.

So pricing I guess is really the bigger driver and that was my final question. You mentioned that there is a cumulative volume price break. Is that strictly on hitting some volume threshold or is that something that happens once the year? Is it calendar stage or unit schedule I guess is what I am asking?

It is cumulative volume schedule not on a calendar year.

And we'll go next to John Bright from Avondale Partners.

Thank you Steve in your prepared text you cited LED CapEx for capacity. Do you expect a switch from a short term contract at present to a long term contract in '13?

Well John we have been talking to them about a long term strategic partnership for a long time. And we have a long term strategic partnership with them for a long time, and we are continuing to work with them to discuss the future. But I can't predict the future but I can't really predict when something like that may occur

Okay and Sid couple of financial questions. One, in your prepared text you talked about 15% OpEx, 413, if my numbers are correct that's going to be sequentially down in the back half from what we are seeing, is that right?

If I look at the numbers it's pretty much if I take the expenses R&D, G&A and the others they are pretty much in line with what we expect in the other three quarters for the year. So if I look at what my total expenses were for 2012 and say there is going to be 15% increase this year, this year there will be something there will be some things that's go up, some things that down but I don't see dramatic increases in any of the category.

Two final questions, one, do you think that level of increase might taper off as we look forward just if you will?

I think clearly it will take off in terms of Q2 versus Q2 of 2012, Q1, 2012 was a little bit low when you look at all the quarters. So there are things in the first quarter and in the fourth quarter of the year that are always either accounting adjustment or year-end things that effect those two quarters. So they tend to be a little bit more volatile than our Q2 and Q3 and in terms of the expenses.

And we will go next to Hendi Susanto from Gabelli & Company Hendi Susanto - Gabelli & Company: Good evening, thank you Steve, thank you Sid for taking my questions. First question, how should we think of the ratio between green emitter and green host consumption or sale going forward?

Well we have seen an increase on -- it's hard to tell specifically how much one versus the other because the pricing is very different per gram and then the volumes are very different.

And it's new, I mean you did see like a almost a 3.1 million increase in emitters but only 1.9 million increase in host over the prior quarter.

So we will probably be able to give better color on that in the next quarter. That's (inaudible) call we have more experience of the markets we are in in terms of volume. Hendi Susanto - Gabelli & Company: Okay and the second question. I would like to clarify your previous statement that the lower pricing was driven by cumulative volume. Is it reasonable to assume that cumulative volume span across multi-years?

That's correct Hendi Susanto from Gabelli & Company: And then last question for book keeping purpose. I would like to check my numbers for green emitter and green host material in Q1, 2013. Could share those numbers, Sid?

Total? Hendi Susanto from Gabelli & Company: Green emitter sales and then green host material sales in Q1?

In Q1 the green emitter sales 4.6 million and host was 3.1 million. Hendi Susanto - Gabelli & Company: Okay, got it. Thank you.

We will go next to Vishal Shah from Deutsche Bank

Yeah thanks for taking my question. Sid just wanted to understand the utilization comments you made on red, are we getting close to that point with green as well I mean in terms of utilization rate, I am assuming it's pretty high. Where do you think -- how do you think the utilization tends for green consumption as the year progresses. And then I am assuming that the guidance at the time that you provided guidance you had a view on S4 sales but since then I think the outlook has improved quite a bit, yet your revenue guidance is pretty much unchanged for the year. So I am just wondering if it's conservatism or if there is something else that's going on. Thank you.

In terms of revenue guidance it's very early. We have only four months behind this. And we just started Vishal shipping green and green host in commercial quantity. So it's really difficult for us to project it. There is a lot of uncertainty and so we will continually monitor this but it is way too early in the year for us to make any real prediction of what the year is going to look like. And regarding the utilization we know that over time they have redesigned source cells. They continually tweak the recipe in terms of layer thicknesses and (Inaudible) concentrations and lots of different things that they do in order to be more efficient and I think they will continue to do that. We believe that they're very efficient in terms of the red materials today. And they probably have ways to go on the green but we're not in the factory and to give you an answer for this we do expect to see some efficiency though as we move forward.

We'll take our next question from Craig Erwin from Wedbush.

Good evening, gentlemen. Congratulations on the ramping in green. Most of my questions have been asked already but the one thing that I'd really like learn more about this, what you doing on blue now what's the update there and then the other layers that you are potentially looking to exploit commercial opportunities with the Fuji patent portfolio. Where that stands and what we can potentially look at over the course of the next year or so?

Probably with blue we will continue our investigation. It has a stabilized module at the appropriate wavelength. We've made some very good progress on a scientific level but we've not yet gone to a phase where it is commercially viable. And one of the things that we're looking at is the whole emissive layer system and how that will affect the performance of the (bulb). So we're, we have the emissive layer system and a corresponding other material layers in the state with positive performance of the (bulb). And certainly that has been very helpful some of the patents that we acquired for 3G that would be very helpful in that technology exploration.

Great then I guess the next question I wanted to ask was around the price thresholds for new pricing tiers for your major customer. Can we expect that there would be additional pricing tiers that they could hit during the course of the agreement and would they be structured with similar volume milestones or will the milestones mass tenants for volume probably be structure a little bit differently than that total volume delivered today.

Well we would expect that there are still some thresholds that we would have to meet in a cumulative front at the beginning through the contract. So they're not going to be restructured I mean they are built into the contract today.

The volume that was necessary for them to reach the new pricing threshold that they met in the first quarter. Are we looking at some similar volume increase before the next pricing threshold or it is structured differently than that?

If you look at that in terms of the break points are they equal?

Yes.

Honestly I don't know specifically the answer I know that they are built in and based upon when we negotiated the contract. I believe that they are fairly close to equal but I couldn't answer that question specifically for you.

Great. Thank you for taking my question.

Thank you.

We'll take our next question from Andrew Abrams from SCR.

Hi guys. A little clarification on the royalty and license. The increase there could you attribute this to what you would have called develop mental chemicals in the old days and if so would this convert into commercial chemical sometime in second or third quarter according to you that you expect?

Well this is, these are materials that are being sold that where they could be commercial materials. It depend on how whether or not they've signed a long term license agreement or not.

Okay and…

There could be either development and/or commercial.

Got you. Okay so they wouldn't fall into the old only development they could be both.

Yeah that's correct.

Okay the inventory levels that are down in this quarter your overall inventory is most of that coming out of the NSEC green host material or have those stayed roughly the same

I think it's come out little bit of green emitter and green host, that's come out.

Got it and lastly just on Samsung's minimum I know it's very early in the year, according to what you had expected in terms of those minimums for the full year 2013, are we close, I am assuming we are close but I just if you could confirm that.

We expect them to meet their minimum for 2013.

Got it, terrific, thanks for very much, appreciate it.

Welcome

We will go next to Alex Gauna from JMP Securities.

Yeah, thanks so much for taking my question. I was wondering if you could give us some color around how your customers are doing with yield and specifically the newer product lines and newer back (plan) both at Samsung and beyond. And I am wondering as those yields improve, you do see more benefit from those companies getting the price point and getting volume up then you do for may be hitting efficiency improvement that would actually decrease your material demand, thank you?

The yields at our customers are something that they keep very, very secret. So they don't share with them us but generally speaking to your questions, the larger the market so the higher yield so lower that you can get their product the better that will be for us and the industry

So it's fair to say you are not expecting any near term gap down in your material sales because of the internal improving

That is correct

And then you went on quite a bit about the success Samsung has seen and expect to continue seeing this year but I am wondering if you could give as an update on the productization beyond Samsung. I know you talked about AU Optronics and LG but really where are they in terms of letting you know they are ready for prime time volume ramp up.

Well AU announced a smartphone display for this summer. I think their volumes will be much more smaller than Samsung. LG is talking about a flexible display in the fourth quarter again compared to Samsung the volume could be very small. And you have the two TV, LG and Samsung again starting up small so I think the major driver from a commercial revenue standpoint is going to be Samsung and smartphones.

(Operator Instructions). We will go next to Jagadish Iyer from Piper Jaffray.

Yeah, thanks for taking my question Sid and Steve. Two questions. First, how should we be thinking about this ASP declines that we are seeing in the first quarter as we progress through the year, is there going to be like nominal what kind of magnitude should we be thinking about ASP decline and then I have follow up please?

We don't disclose the pricing of our materials. We've seen some declines obviously as we said on volume grade. We do expect in terms of the overall increase we expect material sales to increase as we have said with our guidance, that green and green host materials should go up. So I don't expect the impact to be that significant on the ASP reduction that we had.

Is there a qualitative perspective that you could give? Whether it is a single digit or a double digit decline?

I really don't want to talk; we don't really disclose our prices

Okay, fair enough. And I just want to understand on you talked about optimization of the emitter material. So I was just wondering is that a similar scenario that is likely to play out on the host side as well. Thank you.

In terms of the emitters it's really doping concentration and layer technique which will impact, which has some impact on light. I don't really believe that the host layer have the same efficiencies associated with it in terms of utilization. The host layer is a much thicker layer. So I don't really see that. I don't think -- I think they are apples and oranges.

Okay, is there a milestone like what you talk about in terms of volumes and ASP on the host?

There is not, the host material business is essentially a price and performance business. And there is no long term contracts involved in our host business.

We'll take our next question from Jim Ricchiuti from Needham & Company. Jim Ricchiuti - Needham & Company: Have you seen as you introduced new red materials, the new red emitter has than changed the arrangement at all with your largest customer in terms of pricing if there is a significant improvement?

The short answer yes but we really can't get into what's in it I mean there are different things in a contract that allow us to do certain things but I really can't get into all the detail. Jim Ricchiuti - Needham & Company: Okay fair enough. And Sid can you remind us as we look at your guidance for the full year at the upper end of the guidance would you remind us what you're assuming if anything in terms of the TV market?

The TV market we have looked at. We always expected TV not to be a significant part of our business we've always anticipated TV to take a longer, there is some TV in our projections for the year. But we expect really the most of our business to be mobile devices this year. Jim Ricchiuti - Needham & Company: Okay and is it potentially a greater mix of mobile, just given what we're hearing from Samsung? Versus what you were seeing in -- versus your earlier expectations albeit very small for TV. Just trying to get a sense if there's been any kind of a mix shift in your assumptions?

There is not Jim not in our assumption.

(Operator Instructions) We'll go to Brian Lee from Goldman Sachs.

Hey guys just one follow-up one for me if I take your comments at the beginning of the call Steve you mentioned Samsung is expected to double their OLED smartphones based on analyst reports around 200 million this year they did a 100 last. And based on the same analyst reports they are talking about 100 million potential units for the S4. So if we just use that math the 100 million units of S4 and the same 100 million, non S4 Galaxy devices that were shipped last year basically staying flat, knowing what you know about the content of the various devices how should we think about at least directionally what your material revenue mix would look like? I'm not looking for a number per se but is it fair to assume that in that sort of a context green host is the biggest and then green emitter second and red emitter would actually be the smallest revenue number this year, or can you give us any sense of how those three would rank in that context?

It's hard to specifically go through as long as we do actually some projections I mean just to give you an idea in this quarter green emitter was the largest portion of our material sales. And then it was on the commercial side and then it was host and then red. So I mean does that help? It's really too early to try to really diagram exactly what the results are going to be.

Okay fair enough. Thanks guys.

Thanks.

We'll go next to Hendi Susanto from Gabelli & Company. Hendi Susanto - Gabelli & Company: Steve I would like to follow up on, is it reasonable to assume that the gross margin between green emitter materials and red emitter materials are comparable?

The margins for emitters are normally are comparable. However as you introduce new products, there are different pricing schemes the new products and different volume, so right now there's probably more margin in green then in red but it's still very early the host margins are the ones that are significantly lower than the emitter margin. Hendi Susanto from Gabelli & Company: On the cost side for green host materials are there anything in pace that may change the margins going forward?

It is still early in that scale up process so our costs are as you scale up each batch depending on how large the batches are, some are little bit less costly than others some are more. There is still this scale up of our host is still in very stages so we are seeing costs that, like I are really not stable at this time. We expect them to be (inaudible) as the volume grows. So right now they are not. Hendi Susanto from Gabelli & Company: Thank you Sid.

And we will take our final question from Josh Baribeau from Canaccord.

Hi, guys it's Josh for Jed. Just wanted to clarify some of the comments you made earlier. Sid I think you had mentioned that gross margins going forward on the material side were 70%-75%; A, wanted to make sure I heard that correct. And B, I wanted to see if that was just for a new term perspective, or if that's more of a long term outlook.

Gross margin on total material sales, we expect to be in the 705 to 75%. That would be for 2013.

Okay, and then so if I am looking more historically they were probably averaged around 90% so that extra 15%, can you help us out with how much of that comes out of the R&D versus how much was the pricing effect? Sidney D. Rosenblatt Well, there is on green, there is, last year a lot of the green costs were in R&D, not in last year even, in the prior quarter. So our green costs per gram last year were significantly lower than cost per gram this year because it is full commercial production and the other thing that would impact margin as we said is the percentage of host this quarter versus last year, our host margins are lower than they are on the mid-range. So those two things impact our margins in this quarter and would have some impact as we move forward

Okay, great. Thank you.

And with no further questions in the queue this does conclude our question-and-answer session as well as our call for today. We thank you for your participation.