Good day, ladies and gentlemen, and welcome to Universal Display's Fourth Quarter and Full Year 2015 Earnings Conference Call. My name is Sara and I will be your conference operator for today's call. As a reminder this conference call is being recorded for replay purposes. And I would now like to turn the call over to Darice Liu, Director of Investor Relations. Please go ahead.

Thank you, Sara, and good afternoon, everyone. Welcome to Universal Display's fourth quarter earnings conference call. Joining me on the call today are Steve Abramson, President and Chief Executive Officer; and Sid Rosenblatt, Executive Vice President and Chief Financial Officer. Before Steve begins, let me remind you that today's call is the property of Universal Display. Any redistribution, retransmission or rebroadcast of any portion of this call in any form without the expressed written consent of Universal Display is strictly prohibited. Further, this call is being webcast live and will be made available for a period of time on Universal Display's Web site. The call contains time sensitive information that is accurate only as of the date of the live webcast of this call, February 25, 2016. 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 application 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. Let's begin with our fourth quarter 2015 results. Revenues were less-than-anticipated, primarily due to year-end inventory management by our customers and product mix weighing more towards our lower priced emitters. As we have noted in the past, while short-term forecasting in this emerging market environment is difficult, it is clear that OLEDs are long-term growth market. We believe that in 2016 panel makers are in a capacity build mode. As these capacity builds come online we see substantial growth momentum for 2017 and beyond. We believe 2017 revenues can grow significantly based on new production capacity growth of at least 50% from 2015. As noted by a number of companies in the ecosystem, from equipment makers to OEMs the OLED design pipeline is growing robustly, and that is driving new capacity for 2017, 2018 and beyond. As a key enabler and partner in the OLED industry, these additional capacity plans bring new revenue opportunities for us, and overall, a positive growth trajectory for years to come. Reflecting on 2015, revenues were flat year-over-year at $191 million. Non-GAAP net income excluding the impact of the second quarter inventory write-down was $44.9 million. Our commercial emitter business grew 16% and our royalty and licensing revenues increased by 23%. We also generated a $114 million of cash from operations. It was a year filled with significant growth milestones. For Universal Display and for the OLED industry, we signed new agreement as activity in our customer pipeline grew. This includes a long-term license agreement with LG Display, OLEDWorks and Sumitomo Chemical. 2015 also marked the number of OLED industry curves. It was a year that the first Gen-6 OLED pad, Samsung’s 83 plan commenced operations, it was also the year that LG Display began to…

Thank you Steve and again thank you everyone for joining our call today. Revenues for 2015 were 191 million flat year-over-year, royalty and license fees were $78 million up 23% from 2014, $63 million. Material sales were $113 million down 11% from $127 million in 2014. This mainly is down from commercial host sales declining by $26 million. Commercial emitter sales were 16% to a new record level of $91 million from 2014 $78 million. The breakdown of commercial material sales by color for 2015 compare to 2014. Red emitter sales in 2015 were $27.3 million, up 50% from 2014 $18.2 million. Re-emitter sale which includes our yellow green in 2015 were $64 million, up 6% from 2014 $60.3 million. Green host sales of 2015 were $8.8 million, down 75% from 2014 $34.6 million. 2015 operating expense excluding cost of materials was $96 million, up 5% from $91 million in 2014. Operating income was $33.3 million excluding the inventory write-down of $33 million. Non-GAAP operating was $65.3 million for 2015, up 11% from $58.6 million in 2014. Net income was $14.7 million or $0.31 per share. Non-GAAP get income was $44.8 million or $0.94 per share compared to $41.9 million or $0.90 per share for 2014 year. For the year, we generated an impressive $114 billion in cash from operations. Moving to the quarter, revenues for the fourth quarter 2015 reached to $62.3 million, compared to fourth quarter 2014 revenues of $56.2 million. Royalty and license fees were $34.4 million which included Samsung's $30 million license fee. The Samsung license fee which was $60 million in 2016 is recognized in the second and fourth quarter of the year. Total material sales were $27.8 in the fourth quarter of which commercial was $23.6. Material costs for the fourth quarter were $8.1…

Thanks Sid. We’re working closely with our customers as they map out their product offerings for the coming years. We are inventing new and next generation [indiscernible] in emitters and hosts to meet new product specs and expand our material business. We’re also developing new OLED technologies to enhance our IP licensing portfolio. These combined efforts are further strengthening our leadership position as a key partner in the OLED ecosystem. All of this is possible due to world class talent within Universal Display. I would like to take a moment to than our employees for their continued commitment, excellence and innovation. I would also like to recognize customers, partners and valued shareholders for their continued support. In summary, the OLED industry gaining extraordinary momentum and so are we. We are excited about the substantial opportunities that lie ahead as widescreen adaption of OLED continues to advance, from phones to TVs, laptops, tablets, monitor smartwatches, virtual reality, the signage and automotive display and lighting applications to product that the imagination has yet to create with flexible rollable and foldable displays. The world of OLED is limitless. And on that note, operator, let's start the Q&A.

Thank you, Mr. Abramson. [Operator Instructions] We do ask that you please limit yourself to one question and follow-up question today. [Operator Instructions] We’ll hear first from Jim Ricchiuti at Needham & Company.

Now China reconciles the, what looks like fairly strong growth in red in meter revenues in Q4 and a decline in the green in Q4 I don’t know if those numbers are right. I mean this is the percentage you’re going through it. But is that in the ballpark that you saw pretty healthy growth in red for Q4 but a decline in green in Q4?

That’s correct Jim. There are a number of variables that impact material consumption and can impact each emitter differently, factors include the recipes whether they are using newer or older emitters, doping percentage, efficiencies in manufacturing and processing, the stack structure composition including the corresponding common layers whether it is full production or pilot production, production requirements and inventory management, changes can occur and they can be gradual and sometimes a step level change in either direction. So there are a lot of moving parts in determining why these things are not growing at the same rate.

With respect to your guidance for 2016, are there any volume price grades we need to be aware of this year as it relates to your two large customers?

Well, as you are aware we’re always seeing -- we’re dealing with two of the largest companies in the world and there is always pricing pressure. We don’t provide information on price breaks and price discounts but there clearly are going to be some. We’re constantly in discussion with our customers and we’re working to get the material they want and try to ensure that we can maintain our profitability. So we look for a win-win.

Our next question will come from Brian Lee with Goldman Sachs.

I had a couple of them, just maybe as a follow up to Jim’s. Sid did pricing discounts whether at Samsung or LG play into the margins this quarter on the material side?

It's more of the mix of products it's a product mix issue in this quarter in Q4.

Well I guess a follow-up to that then would be if I look at the margins they were down about 800 basis points sequentially. If we assume that gross margins were flattish. I know you mentioned the mix. But can you give us a better sense for exactly what happened in terms of mix? I didn’t realized there could be such a wide band of margins from one emitter type to the next?

When we introduced new higher performance emitter they as we scale them up we actually charge more in the beginning with some and we scale them up. But we are intent to try to maintain our gross margins in 2016 similar to what we had in 2015.

Last one from me and I'll pass it on, the inventory adjustment at the customers that you mentioned as being one of the drivers for the shortfall and revenue expectations was that more on the smartphone side or is it more on TVs and then a follow-up to that with just the -- how much of that would give you or say was driven by an actual slowdown in end product demand versus customers maybe having deliberately forward bought materials in Q3?

It is pretty much slower across the board, it wasn't just one customer, and I'm not so sure that we can answer whether it was driven by product and product demand but it's pretty clear that at year end there was a lot of inventory management being done.

Moving next to Jed Dorsheimer of Canaccord Genuity.

I guess first just a follow up to the previous two analysts who were asking questions, Sid Samsung or one of your customers in the hands of other things, is recently switched from their recipe to M7 to the M8 structure and I'm curious with respect to mix, is this a function of a was it a greater function of switching recipe or was it the same recipe and then just the work down or end of light of those consumers?

Listen Jack we really can't comment on exactly what it was I mean that's up to our customers and to be honest it's not something that we get a lot of detail about.

So, I guess the reason, I respect that, but it seems that if it's somewhat important to just try and better understand the dynamics, if there were frankly speaking to be a product change in one of your customers should we then expect at the beginning of the year that that you'll be introducing higher end products thus having higher margins and as the year continues the margin structure would be similar to what we saw this year with this [D8] sort of how we should see the next couple of years from here?

We can't determine, we introduce new high performance materials to our customers all the time, when they adopted is really up to them, but what we feel and what we stated is we expect the margin profile for 2016 to be similar to 2015. So, we don't expect to see big changes in our margins.

And have your customers ever adopted new materials without changing the structure? In other words the high performance products are usually adopted when there is a structure change, at least best of my understanding if you've seen them adopt new materials without changing their recipe in these Midwest [indiscernible] I would think that'd be disastrous from a yield perspective, so I'm just curious?

I mean we really can't answer that I mean that's a question for them.

And then just moving over to the cosmic side of things, it looks like in the 10-K, the European patent I guess the counter party to the 828 it looks like that while you're appealing that the claims went against you where the ruling went against you in that, any further comments on that situation and how we should read into that?

Well Jed in the fourth quarter there was one opposition decision relating to one of our white fostress OLEDs technologies and we did not win at the lower court so we're going to appeal as you know the appeal of court is in Genova decision and they reconsidered from the beginning and the patent is deemed valid during dependency of the appeal, this [indiscernible] one of our white OLED pad.

Our next question will come from Srini Sundar of Summit Research.

Given that you have somewhat of a history of such revenue surprises, would you be putting some controls into place given the nature of your business and the fact the customers frequently either under order or over order?

I'm not sure if we understood a part of the question, I apologize.

Okay yes I think all I'm asking is that in terms of your guidance on such shortfalls sometimes seem common and would we have a better history of smoothing those out?

Well, when we look at our guidance and we look forward I mean as we do the best we can with the information that we have and sometimes things are that are out of our control, it's difficult to predict this market and sometimes there are shortfalls from quarter-to-quarter it's really difficult based upon customer ordering patterns and what we ship in each quarter. I think for the year we're pretty comfortable with where we're and customer shortfall or customer inventory management should have a big impact on us over a 12-month period.

Okay, and could you, can you give me some color on the utilization in your customer fab in Q3 and Q4 of last year of 2015?

We really, I don’t want to avoid your question, but we can't comment on what our customers do in their fabs. I mean, there are reported reports on what capacity levels are at, but the utilization levels are things that they don't report.

One last question, given that oil prices are lower and eventually your organometallics must be coming from petrochemicals, would you have a lower cost basis going forward given the current oil prices?

Well, that will be good, if it happened, our costs are not principally derived from petrochemical industry even though a number our organic materials do come from the petrochemical industry that's not where some of the primary costs are.

And there would be some the metals?

Yes.

We'll move next to James [indiscernible] with Cowen and Company.

So thinking about the tax rate, the 35% tax rate you've guided for next year that seemed a little higher than we had been thinking about, what is the [indiscernible] and how many years would you expect that to pursue?

Our tax rate is one that we do have a business in Ireland and it really over the first two years when we set it up it takes some time to see long-term tax benefits initially. We believe over the long-term we will see significant tax benefits going forward in ’17, ’18 and beyond, we should see lower tax rates than this. It really depends on where our sales grow whether it's material or licensing fees.

So just to press that a little further, could we see them back into mid to high 20s?

In the future?

In coming two to three years.

Yes, yes okay

And then on the yearend inventory management at the customers, I know you have a lot of visibility into that sort of how that inventory is actually being managed, but is there a chance where they may have reduced inventories too not should we get snap back in Q1 the likelihood of something like that?

It's difficult for us to predict. We do know that there at year end and quarter end everybody manages their inventory purchases to try to be as efficient as possible. I think it's more related as demand increases we will see more sales.

And on gross margins they do seem pretty light, I understand that it was a mix issue in terms of maybe older products versus new ones on the emitter side, how is that trending so for in this quarter Q1 here?

For Q1?

Yes.

We really can't comment on Q1.

Well it is usually in a bigger picture kind of a way is are these to do a couple margin rates or do you think the mix will shift back?

Emitter gross margins have historically been in the 70% to 80% range and we've stated that we expect the margin profit to be the same.

And final question for me is on the non-Samsung license fee business, is there any, that's ticking along at a fairly constant level give or take, how should we think about that in the future, I mean, with that some other big customers that may come on board or do we?

Well, as we stated last year while we signed the royalty, the license agreement with LG, we all are going to -- we did not report any fourth quarter sales for 2014, in 2015, so if you listen to what LG has said where most half of their TV sales are going to be Q4 and we will report that in our Q1 results.

[Operator Instructions] We will hear next from Austin Fernandez of Cross Research.

Just to start, could you perhaps provide some color in terms of how you are thinking about how you plan on scaling your margins even if the mix of your sales sort of changes and what are different things about that makes your fourth quarter even the mix [indiscernible] I guess just want to say the -- thinking about [indiscernible] you have certain customers like [indiscernible] expansion in selling more displays into lower end devices going forward [indiscernible] I assume that increased the volume that [indiscernible] on a longer term perspective I mean do you [indiscernible] with margins given the mix of [indiscernible], shifting your mix?

Well, we, as volumes grow, we see efficiencies in our manufacturing process. We also are constantly working to get our cost down and to be honest there some of them through to our customers we have been able to maintain our margin profile over the past four years. And we fully expect to continue to maintain these by manufacturing efficiencies us coming up with manufacturing methods that reduce our cost and as we introduce new and higher performing materials we will then see different pricing and we work through the same process. So that we can pass on efficiencies to our customers but still maintain our margins.

And then in that same lane are you -- could you [indiscernible] whether your facility how prepared your facility is let's say in the next phase that is new coming [indiscernible] in 2017, what would it be [indiscernible]?

As we stated last year that we’re at PPG industries and we’ve built the second facility Barberton, Ohio and that was built with us anticipating significant growth over the next we look out through the five years. And so we believe that we are poised to meet all the needs that we see over the foreseeable future. And as Steve stated in his call in his comments that we do expect to see significant growth in 2017 and significant capacity and we will be ready willing and able to deliver the materials.

So with that acquiring any sort of larger than on the start up costs [indiscernible] at the end of maybe 2016 early ’17?

We constantly are looking at our capacity we’re constantly looking at adding new capacities. As you’ve seen historically though, we are -- our CapEx for are we’re working with PPG is not a number that is a huge number, because we do -- PPG is our exclusive supplier we buy the materials, we don’t have to spend all the money on the facilities.

Our next question is from Hendi Susanto of Gabelli and Company.

Steve and Sid, as we anticipate new capacity build in 2016 and 2017, should we anticipate new capacity to adopt one emitter material initially or they may jump into both red and green emitter material right away?

Hendi it depends on the customer, and it depends on the product, sometimes it may adopt red and green, sometimes it may just be red initially.

And then in terms of the capacity configuration, do you foresee them to make it easy to add the second color right away or the configuration may require them to spend some time if they want to equip?

I would think in general our customers realize that in order to compete you need to have phosphorus and the more phosphorus it colours the better. So I think that as they build capacity they have that in mind.

And then I saw that development in the field sales show some increased load sequentially and year-over-year. Can you share some insight on that?

Development materials are ones that are early scale up materials we send a lot of materials to our customers that they evaluate we work directly with our customers, they give us some new specifications or they tell us they’d like the materials to do this or do that. And we are constantly developing new materials, which ones yet fully commercialized really depends upon if our customer wants them or not. But we really do customize what we do to meet our customer needs.

And then Sid with regards to the lower price materials, are their gross margin comparable, higher or lower?

We’ve been able to maintain our gross margin on emitter over the past as I said four years and within the 70% to 80% range and as materials go down and as volumes will go up and material pricing goes down we do see efficiencies, so we believe we will be able to maintain margin profile for 2016 as we had in 2015.

And then Sid when you stated that margin profile should be comparable in 2016 what is your assumption on host material sales in 2016 because the sales can move the needle one way versus another?

We have very little host materials in our 2016 forecast.

And we'll go back to Jim Ricchiuti.

It looks like looking at the last few years the revenue concentration in the second half of the year has been creeping up and it sounds like you're suggesting again more of a back end weighted here in for the second half what I'm curious about is, if you look into your large licensees the TV market do you see those revenues in Q1, why would we continue to see this scale up in the second half of the year?

Well, it historically has occurred and I think from the TV side they do build their inventory for holidays and that's where the big push comes, so I think that's part of it and then what you'll see is them actually getting their manufacturing process up and running and build into some efficiencies so that they can make more and more product on those lines.

So, if we think about '16 I guess in '15 you posted 53% or so of your revenues came in the back half and I'm not trying to [indiscernible] giving up guidance on that half, first half, second half but I'm just trying to get a sense of [indiscernible] should be a significant shift in that profile in'16?

I don't see a significant shift I mean we can't pretty much probably see a gradual growth over the year.

And we'll go to a follow-up from Jed Dorsheimer.

If I look at the Samsung licensing fee for '16 it looks like it's moving up 15 million versus previously 10 million per year should we think of that in the same way for '17 that it'll go that it would be again likely 15 million increase or how should we think about that?

We only disclose one year at a time Jed, so I obviously can't answer that question.

We'll hear next from Nam Kim of Arete Research.

I have one question on guidance you guided 15% growth and it's about 220 million this year, projecting incremental 15 million from Samsung and then I assume in additional 10 million at least from [indiscernible] now you're expecting only 5 million what's your stated growth it seems too conservative to me, earlier it was guided they are more than doubling their OLED TV kind of production so I'm curious on how you build your growth assumption, any color would be appreciated?

The one thing that you have to look at is in 2015 we had $12.5 million of host material sales, and as we stated we do not really expect to see much host material sales so essentially you really should be starting from a base of 180 million not 191 million because we don't have any host sales or significant small amount in our guidance so there is going to be growth on the emitters and growth in the royalties and in the license fees.

And next we'll hear from Andrew Abrams of Supply Chain Market Research.

Just one question specific to red, the function of new capacity would be pretty typically adding red and your red incremented a fair amount this -- in fourth quarter, was that a function of new capacity being added or was it a function of new red material replacing older red material?

Well I think it’s a little bit of new materials replacing older materials but as we stated there's a number of different efficiencies that can be made and they have been using our green material in 2014 and recipe changes and product mix and all of those other variables do affect it. But you're right there was a significant increase in red this year compared to green.

And also the work down of the LG prepayments, are you still on schedule for where you thought you would be at that point?

Yes the deferred revenue number that's a really good question, our deferred revenue number represents only a portion of the amount of the royalties that we will earn. Well some of it has been drawn down. We do look at this every quarter. So the $10 million in the current deferred revenue only represents a small portion of the royalties that we expect over next 12 months.

And this will conclude our question-and-answer session. I’d like to turn the program back to Sid Rosenblatt for any additional or closing remarks.

Thank you for your time today. We appreciate your interest and support and we look forward to speaking to you all again next quarter. Good night everyone.

This concludes today’s conference call. You may now disconnect.