Good day, ladies and gentlemen and welcome to Universal Display's Fourth Quarter and Full Year 2019 Earnings Conference Call. My name is Sherry, and I will be your conference moderator for today's call. At this time, all participants are in a listen-only mode and 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 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 website.

This call contains time-sensitive information that is accurate only as of the date of the live webcast of this call, February 20, 2020.During this call, we may make forward-looking statements based on the 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 are pleased to report our fourth quarter and 2019 results. Our solid financial results reflect our and the OLED industry's strong growth momentum. 2019 revenues were $405 million. Operating income was $158 million and net income was $138 million or $2.92 per diluted share.

Fourth quarter revenue were $102 million, operating income was $34 million, and net income was $26 million or $0.56 per diluted share.The continued proliferation of OLEDs in smartphones, TVs and wearables, as well early commercial headway into the IT and automotive markets is fueling OLED capacity investments and installs, which in turn helped us to achieve record results across the board in 2019.

As we look to 2020, after a year of significant capacity additions, we expect to see some capacity digestion.In addition, there are evolving uncertainties related to the novel coronavirus. Based on current estimates we believe 2020 revenues will be in the range of $430 million to $470 million. Sid will provide further details shortly.

As we look to 2021 and beyond, as new OLED capacity comes on line, new OLED products are launched, and progress continues with our customers' commercialization plans, we expect meaningful growth.Now looking back to 2019, we continue to build on our leadership position and foundation for growth.

We announced new partnership agreements, constructed new state-of-the-art phosphorescent OLED application labs and offices in Korea and Hong Kong, established UDC Ventures, our corporate venture arm, and achieved a number of internal R&D milestones, including completing the installation of our three-chamber OVJP pilot system.In addition, the OLED industry grew more robust as new OLED capacity was installed, new OLED OEMs and products were introduced, and revolutionary form factor products like the Samsung Galaxy Fold, LG’s rollable TV and Lenovo’s foldable PC were announced.

All of this drove the continued adoption of OLED displays in the consumer electronics market.During the year we announced new customer agreements with Seeya Technology and China Star Optoelectronics. We also announced a technical collaboration with Merck KGaA.

And as we shared in August we are establishing a network of OLED material partnerships to help enable our customers and accelerate their design pace. We have a partnership frameworks is collaborating with local material companies to commercialize hosts that are complementary to our proprietary phosphorescent emitters.

We announced hosted partnership agreements with EMT in China and LG Chem in Korea in 2019.In research and development, we continue to build on our core competencies and pioneering work in phosphorescent materials and OLED technologies.

We are investing in a number of strategic OLED material and technology programs for new and next generation reds, greens, yellows and hosts.

With respect to blue, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emitter system.We have also made significant progress with our Organic Vapor Jet Printing, OVJP technology for the manufacture of large area OLED TVs.

At SID DisplayWeek last night we showcased our green PHOLED printed panels from our pilot system with early lifetime data measures at over 50,000 hours at LT95 and 1,000 nits.As we noted on last quarter's conference call, we are expanding our footprint in Asia to meet our customers' growing needs with increased local technical support, including new corporate and laboratory facilities in Korea and Hong Kong with state-of-the-art PHOLED application centers for device testing and fabrication.In the consumer electronics landscape, the adoption of bright, beautiful, brilliant OLED technology continues to grow.

The introduction of foldables was undoubtedly a highly anticipated and game changing event for the small and medium display markets in 2019.

From the Samsung Galaxy Fold to the Huawei Mate X or Royole FlexPai and Motorola Razr, these foldable phones we believe are just a previous of what's to come in this new landscape of consumer products.The hot topic of foldables continued at last month's CES in Las Vegas with IT makers, who are now going to launch a thin pack excellent fold which is expected to be the first commercial foldable IT product and that is slated to be available in the middle of this year.

The 13.3 inch OLED display can bend and fold into different configurations of a tablet, laptop, or as a mini desktop.

Dell showcased the flexible laptop with its Ori concept and Intel showcased the foldable PC concept called the Horseshoe Bend which can alternate between a 12 inch laptop and a 17.3 inch tablet.On the large TV front, LG showcased a bendable OLED TV prototype in addition to their rollable TVs.

The number of OEMs adopting OLEDs and the number of OLED products are increasing. With its end market growth, panel makers have and continue to invest in new OLED capacity to support their growing OEM customer base.

This demand momentum is fueling a multiyear OLED CapEx cycle.From 2017 to 2019 install capacity grew significantly, primarily driven by new investments in China, including BOE's new Gen-6 flexible lines in Chengdu and Mianyang and LG Displays second OLED TV facility in Guangzhou.

As we look to the next three years we estimate that install capacity at the end of 2021 will grow by approximately 50% over the install capacity at the end of 2019 as measured in square meters.

With new OLED OEMs, new OLED products, new OLED applications, and new OLED investments, the OLED industry has a long runway of growth.Let's take a look at OLED penetration in 2019.

Based on market research figures, in the smartphone market approximately 485 million units out of a TAM or total available market of 1.4 billion units were OLED were about one-third of the market.

In IT approximately 4 million units out of a TAM of 410 million units were OLED or only about 1% of the market and then TVs approximately 3.3 million units out of a TAM of 240 million units were OLED are only about 1.4% of the market.

This is in addition to OLED adoption in the AR/VR wearables and automotive markets as well as the introduction of new consumer applications that are being designed utilizing the conformable, bendable and rollable benefits of OLEDs.In November, Samsung Display hosted an OLED Forum in Taiwan for IT applications.

Samsung presented its midsized OLED display technology to an audience of approximately 350, including laptop makers HP, Dell, Lenovo, and other major ODMs such as Compal [ph], Quanta and Wistron, highlighting that laptops and OLED displays are thinner, lighter and more flexible in design with higher contrast ratios and more accurate colors.In mid-2019, Samsung began mass production of 13.3 inch and 15.6 inch OLED panels for laptops.

Since then, over a dozen laptop models have been commercially launched. This year Samsung plans to add 13.3-inch full HD model and expand its product lineup into the midrange IT market.

And last week Samsung unveiled the Galaxy Z Flip, its second foldable phone and its Galaxy S20 Series each with an OLED HDR Plus display and supports 120 Hz refresh rate.At CES, LG announced 14 new OLED TVs including a 48-inch model, adding to LG Display's TV momentum, Vizio, Sharp and Xiaomi are all expected to enter the OLED TV market this year.

It is estimated that LGD will ship around 5.5 million to 6 million OLED TVs in 2020, up from approximately 3.3 million units in 2019.And in China, BOE Technology opened its second Gen-6 OLED plant in Mianyang in July. When fully ramped this flexible OLED fab will have 48,000 substrate starts per month.

Earlier this month, BOE reaffirmed its 2020 OLED shipment target of 40 million units up from last year's 20 million units.Tianma also held a call earlier this month announcing its target to ship over 20 million OLED displays this year, and China Star began ramping the first phase of its first Gen-6 flexible OLED fab at the end of last year and plans to continue ramping capacity this year.On the lighting front, while we are still in the early commercialization stage, we believe that the benefits of OLED lighting, which include high power efficiency, novel and innovative form factors, beautiful natural colors and cool operating temperatures are all quite compelling.On that note, let me turn the call over to Sid..

Thank you, Steve and again thank you everyone for joining our call today. Let me review our 2019 results before commenting on our 2020 guidance. 2019 was a year of record results.

Revenues were $405 million up 64% year-over-year, material sales were $243 million up 59% year-over-year, and royalty and license revenues were $150 million up 86% year-over-year.Under ASC 605, 2019 revenues would have been $428 million. 2019 operating expense excluding cost of materials was $171 million up 25% from $137 million in 2018.

Operating income was $158 million compared to operating income of $57 million in 2018 up 179% year-over-year as a result of our strong operating leverage.

Net income was $138 million or $2.92 per diluted share compared to net income of $59 million or $1.24 per diluted share in 2018 up 135% year-over-year.Under ASC 605, operating income would have been $181 million and net income would have been $156 million or $3.30 per diluted share.

We ended the year with $646 million in cash, cash equivalents and short-term investments or $13.74 of cash per diluted share.Now, moving on to fourth quarter results, revenues for the fourth quarter of 2019 increased 45% year-over-year to $102 million from fourth quarter 2018 revenues of $70 million and up from last quarter's $97.5 million.

Under ASC 605, fourth quarter revenues would have been $109 million.

Our total material sales were $61 million in the fourth quarter up 52% from the comparable year-over-year's quarter of $40 million and up 17% sequentially from last quarter's $52 million.Green emitter sales, which include our yellow-green emitters, were $47.5 million up 18% sequentially from third quarter's $40.2 million and up 70% from the comparable year-over-year's quarter of $27.9 million.

Red emitter sales were $13 million in the fourth quarter up 14% from the third quarter's $11.4 million and up 10% from the comparable year-over-year's quarter of $11.8 million.As we have discussed in the past, material buying patterns can vary quarter to quarter.

Some of the contributing factors to this can include, 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.Before we discuss Q4 loyalty and license revenues, we want to remind you that under ASC 606, irrespective of when billings occur, we will recognize royalty and license revenues in proportion to corresponding OLED material shipments.

Fourth quarter 2019 loyalty and license fees were $38 million up 46% from the comparable year-over-year's quarter of $26 million but down from last quarter's $43 million.Fourth quarter 2019 Adesis revenues were $3.2 million. This compares to $2.7 million in the third quarter of 2019 and $4.4 million in the fourth quarter of 2018.

Cost of sales for the fourth quarter of 2019 were $18.2 million. This compares to $17.3 million in the third quarter of 2019 and $18.3 million in the fourth quarter of 2018.Cost of OLED material sales were $16.3 million translating into material gross margins of 73.2%.

This compares to 70.6% in the third quarter of 2019 and the comparable year-over-year's quarter material gross margins of 63%.

For the year, our material gross margins were 72.7% in line with our guidance range of 70% to 75%.Fourth quarter, operating [ph] expense, excluding costs of sales was $49 million, up from last quarter's $39.4 million, and from the comparable year-over-year's quarter of $36.5 million. Operating income was $34.5 million for the fourth quarter of 2019.

This compares to last quarter’s $40.8 million and the year-over-year comparables quarter's $15.3 million. Under ASC 605, fourth quarter operating income would have been $41.8 million.Net income for the fourth quarter 2019 was $26.4 million or $0.56 per diluted share.

This compares to last quarter’s $37 million or $0.78 per diluted share, and the comparable year-over-year's quarter of $19.2 million or $0.40 per diluted share.

Under ASC 605, our fourth quarter net income would have been $32.1 million or $0.68 per diluted share.Now to our outlook, we expect 2020 revenues to be in the range of $430 million to $470 million.

We believe our 2020 revenues will be impacted by capacity digestion, as some of our customers transition their material purchasing patterns from pre-production rates to more normalized run rates. As we saw in 2017, and in 2019 when new capacity comes online, we believe more materials are purchased proceeding.

And as mass production ramps and customers get more efficient, and loading rates become more normalized, we then believe material purchasing patterns will more closely match to running utilization rates.Additionally, we believe that the novel coronavirus will impact the OLED ecosystem and the consumer electronics industry and in turn impact customer purchases of our OLED materials.

Based on what we know today, we believe there could be up to an estimated $40 million to $50 million impact to our revenues this year.In addition, due to trade related concerns in the fourth quarter of 2019, one of our Chinese customers requested a shipment of emitters as additional safety stock for 2020, which includes a rate of return that expires in the first quarter of 2020.

To the extent such rate of return is not exercised we will recognize up to $25 million of these shipments as revenues in the first quarter of 2020.Moving along to gross margins, while quarterly material gross margins can vary quarter-to-quarter, we expect our overall 2020 material gross margins to be in the 70% to 75% range, which is consistent with the past few years.Operating expenses of SG&A, R&D and patent costs are expected to increase in the aggregate in a range of 10% to 15% year-over-year, driven primarily by R&D.

We expect the effective tax rate to be approximately 19% give or take a few basis points.As Steve mentioned earlier, we expect the installed base of OLED square meter capacity to increase by approximately 50% over the next two years.

As a key enabler and partner in the OLED ecosystem, these capacity plans mean new revenue opportunities for us, and overall, a positive growth trajectory for the years to come.And lastly, we are pleased to announce that the Board of Directors has approved an increase in Universal Display's cash dividends.

A dividend payment of $0.15 per share will be paid on March 31, 2020 to stockholders of record as of the close of business on March 17, 2020.

The dividend increase reflects the confidence in our robust future growth opportunities, 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. The growing and dynamic OLED market is bright and as a key OLED innovations partner we believe we continue to be well positioned to participate in the many exciting opportunities that lie ahead.

We are expanding our global team and broadening our core competencies to fuel our strategic initiatives and increase our first mover competitive edge.We are working closely with our customers as they map out their new product introductions for the coming years and are building on the breadth of our 25 years of experience in knowhow and continually innovating and developing enabling materials and technologies to support our partners and the industry.With the ongoing proliferation of OLED displays across our broad array of small, medium and large consumer products, and the move to advance OLEDs into the midrange market, we see an environment that offers extraordinary and expanding opportunities.

This includes novel applications based on conformable, foldable, and rollable plastic form factors which are poised to transform the consumer electronics industry.In closing, 2019 was a year of growth for us and another year of strong investment and diversification in the infrastructure of the OLED industry's robust long-term growth path.

We are creating and adding value for our customers and strengthening our leadership position in the industry through innovative products, services, and solutions.At the core of our company strength is a global team here at UDC.

I would like to take this opportunity to thank each of our employees for their drive, desire, dedication, and heart, in elevating and shaping Universal Displays accomplishments and advancements.We are committed to being a leader in the OLED 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. [Operator Instructions] Our first question is from Sidney Ho with Deutsche Bank. Please proceed with your question..

Great, thank you very much. My first question is, you talked about coronavirus outbreak could have a revenue impact of up to $40 million to $50 million this year.

So is that correct that you take both the top-end and the bottom-end of your guidance down by that amount? That's my first part.But just to follow up on that, how would you characterize this impact? Is it more a supply issue, meaning you have problems shipping to the China or it is more about the supply chain or is it more demand driven, and if it is demand driven do you see that coming back later in the year or next year, or is it mostly gone and will not come back?.

Thanks Sidney, that's a lot of questions. So, let me first regarding the coronavirus, our thoughts are with all the people that are being affected directly and indirectly by the coronavirus and we will be support and we are supporting our employees, partners, customers during this very difficult time.

And we have been closely monitoring the situation including current potential delays in production, the supply chain and consumer purchases. In addition, we've had ongoing customer discussions, feedback from the field teams in Asia, and industry peers. And as of today, we estimate it could be potentially up to 10% impact of our business in 2020..

Great and just to repeat the second part of the question, is that more a supply issue or a demand issue and this demand issue, do you think that will come back later this year or maybe next year?.

What we think Sidney is supply chain and demand. So it's all of those issues, and we're going to have to see how it works out. Ultimately, we think it's highly unlikely that demand will work its way back through the supply chain. But we can't predict the timing of that..

But we've had no issue shipping material to China Sydney..

Okay, great. My following question is looking at the 5G Smartphone ramp this year, there is a pretty good expectation that the 5G phones will ship somewhere around between 200 million and 300 million.

Based on the customers you're working with so far, can you share with us what you've seen in terms of OLED adoption? I'm particularly interested in your comments whether that OLED adoption has accelerated in the mid-range segment as well? Thanks..

Thank you, that Sidney, that's a difficult question for us to answer since we really are not in the phone business, but we work with the panel makers, and we've worked closely with them to ensure that we can provide them with everything they need. So but I really, I don't have an answer for you.

I think everybody anticipates 5G adoption at the premium price, but will also help the overall smart market this year. But I don't know whether any of these other issues are going to impact that..

Okay, great. Thank you..

Thank you..

Our next question is from C.J. Muse with Evercore ISI. Please proceed..

Yes, good afternoon. Thank you for taking the question. I guess just to follow up on the first question around the coronavirus.

You talked about 10% impact, I am just curious how you derive that number? Is that bottoms up based on kind of discussing with customers and what you're seeing and projecting for utilization rates or is there something else that kind of sets into that estimate?.

Well, CJ, as I said, we've been closely monitoring the situation and looking at potential delays from production and supply chain. We try to get as much information as we can from our field team and from our customers and from published information.

So our estimates that we have today, the best we can estimate it, will have about a 10% impact on our business for the year..

Okay, thank you..

I'm sorry.

Yes?.

Great. And I guess as my second question, as you think about the 605, 606, I guess to two parts there, you know, one what does the guide suggest on a 605 basis for 2020 and then were there any major changes in your assumptions as part of forecasting to derive the forecasts that you've given us for 2020? Thank you..

There have been no major assumption changes. I mean, we've been actually constantly monitoring. But for 605 guidance, we no longer believe that's meaningful, the breakout 605. As you've seen in the past few quarters, the delta between 605 and 606 has minimized. And so based upon that, we think that just giving GAAP guidance makes the most sense..

Okay, thank you..

Thank you..

Our next question is from Jim Ricchiuti from Needham & Company. Please proceed..

Hi, thanks good afternoon. Again, a question about the guidance. If I look at the delta that you're providing for 2020, it looks wider than we've seen in prior years going back to 2017.

So I'm just wondering, is that wider range also reflecting some of the items you've already alluded to including the virus in China or are there some other factors that play in the wider range?.

No, I think that there are so many uncertainties involving the virus, it's difficult to forecast the full potential impact of it's going to have on us in 2020. You know, based upon what we know today, we think that is the best forecast that we can come up with. And there is multiple factors that impact that..

Okay. And then if you could maybe walk us through the increase in SG&A, was there anything unusual there? Because I thought the expectations were for an increase of 10% or so in SG&A in Q4, and obviously a much bigger increase.

I'm just wondering, what drove that?.

Yes, in Q4, there were some higher than anticipated compensation accruals. However, if you just look - take a step back and look at 2018 and 2019, and you look at the average OpEx growth that is within our historical guide of 10% to 15%. But sometimes for R&D things get pushed back or things get pulled in.

So it is in our range, but clearly Q4 was probably higher than anyone anticipated..

Okay, and again, looking out over into 2020, the increase is - I think you alluded to, is that true of SG&A that type of 10%, 15% increase?.

Yes, we think it's 10% to 15%. We think that R&D will be the larger increase and it'll be weighted towards that. But yes, it should be in the range..

Okay, thanks a lot..

Thank you..

Our next question is from Mehdi Hosseini with Susquehanna. Please proceed..

Yes, thanks for taking my question. I want to go back to your comment about the $25 million revenue comment related to the trade concern.

If the customer were to exercise is that $25 million already embedded in the 2020 revenue guide or without the additional?.

Yes, regarding that $25 million that is at a customer that has a rate of return, that we would recognize up to $25 million, that 25 million is in our guidance for 2020..

Okay, all right. And you're assuming that the coronavirus will not have an impact.

So if the customer were to exercise they will be consuming this material?.

Well, it would be - we believe that this material is our assumption that it will be consumed during 2020..

Okay, and then just, I apologize for coming back to this.

If they do not exercise the option,then are we supposed to take 25 million as of the year in guide?.

If they exercise the option and return it, then we would reduce it, but we honestly believe that even if they returned it that during the year they would probably buy enough of it to make up for it during the year because we do believe that the customer will need this material for 2020..

Guys got it. Thanks for all the detail. And I have one follow up on the 50% capacity or installed capacity increase from 2019 to 2021.

Can you please help us understand how that capacity growth is going to play out by geography like Korea versus China and how is that different than the 2017 through 2019 period?.

The 2017 to 2019 period was actually in excess I believe of the 50%. And for this case, it is between Korea and China. And I mean, to some extent, I can't really break it down for you because we got information directly from customers that I can't disclose.

But you look at published information and hope, you know, is that who is doing stuff, but we think it is primarily going to be driven by China and Korea, and it will be back-end loaded. It's probably mostly in next year versus this year..

Thank you so much..

Our next question is from Krish Sankar with Cowen & Company. Please proceed..

Yes, hi, thanks for taking my question. I have two of them, Steve, last year, you had mentioned that because of the China trade war issues, one of your customers actually built up inventory.

I'm kind of curious, now with the whole virus situation, do you think there could be a situation where many of your customers out of the supply chain tends to build up inventory because they have kind of gone through this lesson and did not want to go through it again? And then I have a follow up..

I think they are two separate issues. First, we're not seeing any buildup of inventory other than the $25 million that were had described, which is from the trade issues. I think right now people are focusing on the coronavirus and how to get back to normal at this point, but I don't think that's an inventory related build issue..

Got it, and then as a follow either for Steve you said, I think you guys have spoken about OLED adoption in the past and I think you have spoken about probably like 600 million units this year, smartphone units.

I'm kind of curious, how is that progressing? Has that view changed for the overall smartphone market with the virus and given that a large part of it was going to come from one of your large China customer?.

Yes, I mean, those numbers are from IHS, and I think a lot of these numbers going from 485, I think the 600 million for this year. I mean, it is - right now particularly with the dynamic environment that is going on, I am not so sure that those numbers will be met.

And these numbers were put up before all of the issues that relate to coronavirus and production slowdowns in China. So, I think you've heard from a number of smartphone OEMs that they're seeing a soft first and second quarter..

All right. Thank you very much..

Thank you.

[Operator Instructions] Our next question is from Brian Lee with Goldman Sachs. Please proceed..

Hey, guys, thanks for taking the questions. Sorry. I hopped in late, so I may be repeating some questions here, apologies in advance.

But the $40 million give or take impact 10% that you're assuming for the virus, is that net of the 25 you're getting, which was, I guess a pull forward, if you will, from that customer who was concerned about the virus impact? So, said another way, if the virus situation wasn't something you had to navigate in your guidance, in setting guidance, would your guidance have been $40 million higher versus what you're reporting today or would it have been 40 net of the 25?.

Yes, Brian there are two separate items obviously, and the $25 million is in our guidance for this year. This was a customer, as we stated, that wanted to buy safety stock for trade issues.

And the coronavirus is where we think that - and then there is some digestion in capacity coming online, but that potential is up to $40 million to $50 million is our best estimate today of what the impact it will have, but they are two separate items..

Got you. Okay. Okay, fair enough. And then just on the quarter itself, if I look at the results, I'm not sure if you walk through this dynamic a little bit, but the materials revenue was up almost 20% sequentially in the quarter, but royalty and licensing was down sequentially about 10%.

Can you, I know a lot of this has to do with customer mix, but can you kind of walk us through the dynamics there why those diverging trends?.

Yes, I mean, as we talked about the licenses and royalties is anywhere from 1.5 to 2 depending on customer mix. So in this case, but I can't tell you – I can't give you a lot more information. But you are correct. It is based upon customer mix in the fourth quarter..

Okay. Fair enough. Thanks a lot guys..

Thank you.Our next question is from Shannon Cross with Cross Research. Please proceed..

Thank you very much for taking my question. I'm curious, what level of communication are you getting from your partners? Because I know I've talked to Apple and others and I'm like, there's a lot of questions out there as regards to what's going on over in China right now. So I'm just curious as to how often you speak with them.

And then also, just I think you've addressed it, but I just want to clarify, going into the coronavirus situation net of the Chinese company that bought extra.

Where do you think your partner inventory levels were at? Where they in sort of normalized levels or did anybody else have more than you would have anticipated at the end of the year? Thank you,.

Shannon, so we were talking to our customers, our field team on a daily basis. So we're getting updates or communications on a daily basis. As you would imagine, it's a dynamic and evolving situation. But we're doing our best to try to get real time updates and see what's happening in the various aspects in China.

Regarding the second questions, we believe that material volumes were within the norm in the fourth quarter..

Thank you very much..

Thank you..

And our final question is from Andrew Abramson [ph] with SCMR. Please proceed..

Hi, guys, thanks for taking the questions. First on the capacity digestion issue.

I was wondering if you could give us a little focus on whether that's more TV oriented or small panel oriented? And also, if you could give an update on your progress with your host partners, has material been developed under that relationship and is it being sold by your partners currently?.

Yes, we saw it across the board. We saw it both from small, medium and large OLED production, some capacity, which is going through a digestion period. So I don't think it's related one item specifically, though we've seen it across the board, that any time there's new capacity comes online new facilities, we know how that works.

Regarding your second question with hosts, we have been working with a number of host companies. We are continuing to work with them. But as of this time, we have no design wins..

Okay, and just so I make sure I understand how that relationship works, there is no sales that will work through you, these are relationships with your host producers?.

That is correct. We work with them, and they will actually make and sell it when they get a design win. We will not be part of that process..

Got you. Thanks very much..

Thank you..

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

Thank you everyone for joining the call today. Enjoy your evening Thank you..

Thank you. This concludes today's conference call. You may disconnect your lines.