Good day, ladies and gentlemen and welcome to Universal Display's First Quarter 2020 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 like now 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 first 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 May 7, 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 hope that you and your family are staying healthy and safe during these difficult times. In these extraordinarily challenging times due to the COVID-19 pandemic, we have been able to keep our employees safe, maintain our business operations and continue our strategic growth programs.

Our primary focus remains on the safety and wellbeing of our employees, customers, partners and community.During the quarter, crisis management and business continuity plans were activated. Under our crisis management plans, we implemented measures to safeguard our employees, which includes modified work arrangements.

And then facilities we are adhering to the recommendations from local and global health authorities to maintain a healthy and safe work environment.Our business continuity plans are mobilized to ensure our ability to continue our R&D programs and manufacture and ship to customers our energy efficient high performing universal solid materials.Our team is analyzing and preparing for various scenarios and fortifying our ability to adapt quickly to evolving and fluid situations.

We are communicating our collaborating closely with our customers, partners and suppliers and are positioning the company for continued execution in these times of high uncertainty.Towards the end of the first quarter, as concerns about the pandemic increased and the environment deteriorated faster than anticipated, we work with our suppliers to strategically build additional inventory of our proprietary materials and engage with our customers about advancing some material purchases.Given extra ordinary efforts of our global team, which includes our Ewing headquarters, our International teams in Asia and Europe our subsidiary Adesis and our foundry partner PPG we have been able to safeguard the continuation of our business operations as a key enabler in the OLED ecosystem.In this rapidly changing environment, it is challenging to me forecast about future results.

While our global supply chain remains solid and we’ve had no issues shipping materials to our customers and our customer continue to manufacture OLED panels, there are concerns about constrains in the consumer electronic supply chain due to the pandemic.From a market standpoint, near term demand visibility is unclear due to the tremendous uncertainties surrounding the consumer environment and the macroeconomic environment.

In light of all of this we believe it is prudent to withdraw our 2020 guidance. When visibility improves, we expect to resume providing annual guidance.As we look ahead and we believe with the long-term growth path of OLED is unchanged and remains strong. The timing of adoption may shift due to the macro economy.

Samsung and LG Display have both announced their plan to exit LCD TV panel manufacturing as they shift more of their business to OLEDs.Is the reported that some Chinese panel manufacturers will no longer invest in new LCD manufacturing tabs and also shifting more of their focus to OLED for their future.

In the consumer space, OEM interest in OLEDs continues grow.

New adoptees and new OLED products are materializing in the IT and TV segments and the smartphone market we are seeing a bigger push to move OLEDs beyond the premium segment.During this time we will continue to invest in our leadership position in the OLED ecosystem and expect to emerge even stronger to further enable our customers and the industry.

With a robust balance sheet of approximately $640 million in cash, a lean operating model and no debt, we are continuing our R&D initiatives to help drive innovation and to capitalize on the opportunities in the market.We are also strategically increasing our headcount around the world, to meet the growing long-term needs of the company and our customers.

As we shared last year, we expanded our footprint in Asia with new offices and filling application centers in Hong Kong and Korea.Hong Kong has been open for several months now, while the labs in Korea are currently in their initial phase of qualification.

Our R&D teams continue to discover, develop and design new immersive materials and technologies including new reds, greens, yellows and hosts.On the blue front, we continue to make excellent progress in our ongoing development work for a commercial phosphorescent blue emissive system.

We also continue to advance our work in Organic Vapor Jet Printing our novel manufacturing process to OLED TVs.

As we and our customers continue to invest in the future of OLED, we're also seeing the proliferation of OLEDs continued in the consumer electronics landscape.In the smartphone market, we believe 5G will help star in placement cycle and the premium smartphone market the segment were OLED display is dominate.

Moving beyond the premium market, recent OLED smartphone launches such as the Honor 30 for $425 and the Samsung Galaxy M21 for under $200 is indicative in our opinion of the move of OLED's to the mid-range and even the low end of the smartphone market.As more OLED capacity is built and ramped, we believe the proliferation of OLED's into the mid-range and low end will accelerate.

In TVs while we recently launched its first OLED TV. Last year there were about 15 OLED TV makers in the world using LG Display panels.

This year and additional four new OEMs Huawei, Xiaomi, Vizio and Sharp will launch OLED TV models, further broadening the landscape of OLED TV players and products.From a capacity standpoint, new OLED investments continue.

It's been recently reported that China Star will invest in a second flexible OLED fab T5, which is expected to be larger than its first all OLED fab T4.

Its first OLED fab is currently in expansion mode, as expected to produce 45,000 Gen-6 panels per month when fully ramped.Regarding China Star, we are pleased to announce that we signed long-term agreements with Wuhan China Star Optoelectronics, a subsidiary of TCL.

Similar to our other long-term customer agreements, these are multiyear agreements that included commercial material supply agreement, and end license agreement.I would like to thank the outstanding teams of both companies that worked diligently on these agreements while managing the challenges presented by current events.

With respect to OLED lighting, we continue to believe that its benefits including energy efficiency, novel and innovative form factors, beautiful natural light that best replicates sunlight, no glare and cool operating temperatures are all quite compelling for the commercial, residential and niche markets including automotive.On that note, let me turn the call over to Sid..

Thank you, Steve. And again, thank you everyone for joining our call today. Revenues for the first quarter of 2020 were $112.3 million sequentially up from fourth quarter 2019 $101.7 million. In Q1 2019, $87.8 million.

Included in this quarter's revenue were recognition of $24 million from the Chinese customers, who purchased safety stock in Q4, due to a trade related concern, of which we estimated portion was used during the March quarter.As we discussed on last quarter's conference call. This safety stock had a return window that closed in March.

Since our customers did not return any material, we recognize the full $24 million in report no big difference from the $25 million we discussed last quarter is due to revenue recognition rule under ASC 606.Also in the quarter, there's an estimated $20 million of revenue that were customer advanced purchases through COVID-19 uncertainty.

As Steve mentioned earlier, we discussed with our customer potential safeguard measures and suggested that some inventory building maybe proved.Our total material sales of $66.6 million in the first quarter, compared to material sales at $60.8 million in the fourth quarter of 2019 and $54.5 million in the first quarter of 2019.

Green emitter sales in the first quarter of 2020, which include our yellow green emitter were $52.6 million.This compares to $47.5 million in the fourth quarter of 2019 and $41.6 million in the first quarter 2019. Red emitter sales in the first quarter of 2020 was $13.9 million.

This compares to $13 million in the fourth quarter of 2019 and $12.8 million in the first quarter of 2019.As we have discussed in the past, material buying patterns can vary quarter to quarter.

Some of the contributing factors include the COVID-19 issues that we've been discussing, as well as consumer product demand cycle, capacity, ramp schedules, production loading rate, device recipe, product mix, material ordering pattern, customer inventory levels, and customer production efficiency expense.Since a number of these factors are moving variables for our customers.

They are also moving variables for us. First Quarter 2020 royalty license fees were $43.1 million. This compares to $37.8 million fourth quarter of 2019 and $30.3 million in the first quarter of 2019.First Quarter 2020 Adesis revenues were $2.6 million.

This compares to $3.2 million in the fourth quarter of 2019 and $3 million in the first quarter of 2019.

Cost of sales for the first quarter of 2020 were $22.5 million this compares to $18.2 million in the fourth quarter of 2019 and $15.8 million in the first quarter of 2019.Cost of OLED material sales were $20.2 million translating into material gross margins of 69.6%.

This compares to 73.2% in the fourth quarter of 2019 and the comparable year-over-year quarter material gross margin of 76.2%.As we have noted in the past, material gross margin can vary quarter to quarter.

First quarter of 2020 operating expense excluding cost of sales was $45.3 million down from last quarter's $49 million dollars and up year-over-year from the comparable quarter's $37.6 million.Operating income was $44.5 million for the first quarter of 2020 compared to last quarter's of $34.5 million the year-over-year comparable quarter $34.4 million.

First quarter of 2020 income tax rate was 18.6% without ASC 2016-09, our first quarter of 2020 tax rate would have been approximately 19.5%.Net income for the first quarter of 2020 was $38.2 million or $0.80 per diluted share.

This compares to last quarter's $26.4 million or $0.56 per diluted share and the comparable year-over-year quarter a $31.5 million or $0.66.We ended the quarter with approximately $640 million in cash and equivalent or over $13.50 of cash per diluted share.

As Steve mentioned, due to the highly uncertain times related to the pandemic, we believe it is prudent to withdraw our 2020 annual guidance.As visibility clears, we expect to resume providing annual costs.

And lastly, regarding our dividend program, with a robust balance sheet and strong positioning in the long term OLED growth markets, we intend to continue returning capital to our shareholders through our dividend program.Our board of directors approved a $0.15 quarterly dividend, which will be paid on June 30, 2020 to stockholders of record as of the close of business on June 15, 2020.

The dividend reflects our expected continued positive cash flow generation and commitment to return capital to our shareholders.With that, I will turn the call back to Steve..

Thanks Sid. While these are difficult times, UDC has established a business culture that demonstrates our ability to overcome challenges.

Our journey from an R&D startup with less than a handful of people to a leading growth company has been filled with obstacles, breakthroughs, challenges and unending persistence and vision.As for almost 25 years in that drive and ability to adapt to changing environments, and the dedication to hard work has evolved Universal Display into a successful international growth company that continues to broaden its technological and commercial horizons.Notwithstanding the short term uncertainties caused by this unprecedented pandemic.

We remain confident in the long-term growth path of OLED.

We are working closely with our customers as they map out their new product introductions for the coming years and we are developing new OLED architectures and materials to support them.With our extensive strengths and innovation, collaboration and achievement, we are well positioned to continue to play a critical role in the OLED revolution.

We'd like to take this opportunity to thank each of our employees for their drive, desire, dedication, and heart in building and shaping Universal Display's accomplishments and advancement.

We are committed to being a leader in OLED ecosystem achieving superior long term growth and delivering cutting edge technologies and materials for the industry for our customers and for our shareholders.Let me close with this. The human spirit is resilient.

We have been inspired by the strength, resolve and compassion that has materialized in the communities around the world. United we will forge through these difficult times and emerge stronger to a bright future.And with that operator let's start the Q&A..

[Operator Instructions] Our first question is from Krish Sankar with Cowen and Company. Please proceed..

Yeah. Hi. Thanks for taking my question. I have two of them. First one as Steve said I understand you're not giving guidance.

Can you give some qualitative statement on how you have seen the demand profile in your customer base, especially in China and South Korea?.

Thank you, Krish. Before I answer your question, let me reiterate Steve's introductions and hoping that everyone is staying safe and healthy during these unprecedented times. I also want to mention that Steve, Darice and I are also social distancing on this earnings call from our respective homes.

So pardon any of our technical glitches that may occur.Now, in these uncertain times, we know it's difficult for all of you to try to forecast our near term financials.

We are all monitoring and assessing the various issues including how long this pandemic will last, how much of an impact it will have on consumer demand and our macroeconomic environment, and how long the recovery process will be and the shape that the recovery will be.However, looking beyond the near term impact of this global health crisis.

We believe that the underlying long-term fundamentals of OLED industry have remained robust. Panel makers are looking to the future of display technology and are investing in OLED.From our perspective, we will continue to execute on all fronts, operational, R&D and commercial during this period.

And we expect to emerge stronger to further enable our customers and the OLED industry.

And regarding the specific questions, I mean, we are in the utilization in the factories that we're seeing is obviously coming down.And we think that the consumer demand impact on our business and on the OLED industry itself, it's really difficult to forecast the magnitude and how long it's going to last. But it is going to impact us.

And to be perfectly honest, the reason that we withdrew guidance is due to the uncertainties..

Got it. That's helpful. And then as a follow up, the commerce department rule that came out last week, be interested to hear your thoughts on how do you think it impacts your business and would it have any impact on non-China customer value, will it be a positive for them? Any kind of color on that would be helpful and the sense of fluid situation.

And also glad to know that you and everyone in the OLED family is safe and happy..

Thank you very much. And our Commerce Department issues that were issued last week, we do not think it will have any impact on us. At this time we have seen no impact..

Thank you..

Thank you..

Our next question is from a [Indiscernible] with Citibank. Please proceed..

Thanks for taking my questions. And good job in a tough environment the March quarter.

Sid you talked about the two components for the inventory building that’s been happening in the new supply chain starting last year with the safety stock which was towards the trade tensions and then advanced purchases in the March quarter because of the COVID-19 disruptions.

Are you still seeing these two components advanced purchases and in the current quarter?.

The question is obviously, two issues one is the safety stock was purchased in Q4 and the advanced purchases that we actually talked to our customers.

So, right now the safety stock that was purchased last quarter, we believe that a portion of it was used during the quarter, it's probably less than half was used during the quarter.In addition, what we believe of approximately $20 million that was advance purchases by other customers are stockpiling. We think that is prudent for them to do it.

And if you look at what it really was in terms of the fact that last year, we sold about our revenues about $400 million, and this represents about 5% or maybe three weeks' worth of material that was sold in the quarter. I think that our customers are very prudent in because no one knows what could possibly happen.

So we contacted them and we had some advance purchases. So, we're very comfortable where we are today..

Very helpful. And my follow up in your press release, you call for the company anticipates material disruption to industries that utilize OLED as part of your recent withdraw for the full year guidance.

I'm just trying to understand, this is like a rip statement or what do you exactly mean by material disruption?.

I'm sorry, the question is material -.

You call for a material disruption to industries that utilize OLED this year in the press release?.

Okay. This is - I think you're - we talking about just COVID-19 and what impact it will have on the macroeconomic environment and impacting the demand side and then impacting our customers and in turn impacting us. So I think you're talking about this general risk factor..

Got it. Thank you..

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

Good afternoon. Glad to hear both of you are well. I guess first question, as your visibility improves through 5G builds. And you talked about not only high end, but moving to mid-level smartphones. Curious, if you're seeing any interesting changes in OLED material recipes.

And as part of that, how are you thinking about the impact that might have on long-term pricing assumptions within your contracts for material pricing?.

Material pricing is something that we build into our contracts. And we have over the life of the agreement. And in terms of what we are seeing, each of the products may have different recipes that go into them.

But I think, it is something that we're always on top of, because we're always providing new material to our customers and there's always new recipes.But Steve may want to just add a little bit to just talking about what new products and where they fit into our future..

We work very closely with customers on their new product introductions.

Obviously, it's not specifically that anyone, customer but we have multiple projects working with the customers, and they have various recipes of work for each model that they use.So it's continuing to move in that direction, but continues to pour products out there and therefore you end up with more and different types of this..

Okay. Thank you. I guess as my follow up question, OpEx came in a little higher than I would have thought. Curious if there's any onetime items related to COVID. And as part of that, how should we think about OpEx trajectory through the rest of the calendar year? Thank you..

Thank you, CJ. Yeah. Yeah it is a little higher. However, as a leader in the OLED ecosystem, we will continue to invest in the long term growth of OLEDs and in our position as a key enabler to our customers and industry.Our OpEx guidance excluding amortization is 10% to 15% year over year.

There are no layoffs and we're strategically increasing our global headcount to meet any of the needs. We really believe that quarter to quarter, sometimes these numbers go up and down. But overall, we're still comfortable with our estimate for the year of 10% to 15%..

Thank you..

And our next question is from Brian Lee with Goldman Sachs. Please proceed..

Hey everyone. Thanks for taking the questions. Hope you're all doing well and staying safe. Had a couple here. Just on the China Star contract.

Is that a portfolio license? And is it similar to the other agreements you have in China or would you say it's more like your fixed agreement with Samsung? And then in terms of duration five, six year your timeframe as the other contracts you've announced in the past?.

Well, we're very excited to further our relationship with China Star. It is a subsidiary of TCL and they are the second largest LCD manufacturer. The structure of all of our long term agreements are similar, and as our other agreements.

This is a multiyear agreement, which includes a commercial supply agreement and a license agreement and financial terms we don't disclose..

Okay, fair enough. And then just on the advanced purchases here, you guys experienced this last year. So it's probably becoming your sort of old hat. Is this all from China? Is it a pull forward from the second half like it was last year? I know the $20 million it seems like it's smaller.

So would you consider that to be more of a quarter versus last year? I think it was spread out over a couple quarters..

Yeah, I think this advanced purchase of $20 million is a little different than in the past. I think this $20 million is from multiple customers. And we believe this is COVID-19 related. We actually, are in contact with our customers.And just to ensure just in case there were some disruptions in the supply chain, that everybody had what they needed.

The $20 million, as I said a little bit earlier, based upon last year's revenue is only about three weeks' worth of material. And this is different than the $25 million of BOE purchases, which were fourth quarter of last year..

Okay, great. And then just maybe last one from me. I'll pass it on. With respect to Samsung and TVs. And I think there's been a growing optimism around them getting back into OLED.

Seems like there's been some recent chatter about, Samsung debating between quantum nano dot technology and QDOLED for its future TV roadmap.So just wondering if you had any thoughts or feedback just bigger picture and longer term thinking in terms of what you're expecting out there? And then what the implications of QLED versus QDOLED would be for you if Samsung decided to go one route versus another?.

Yeah, obviously, we can't speak for our customers. But to the extent that they use OLED technology, we think it's good for us and good for the overall OLED industry. And we've been working with Samsung for 20 years. So we're very pleased that they're getting back into the TV market..

Okay fair enough. Thanks guys..

Thank you..

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

Hi. Yes, thank you for taking my question. I'm just curious, given social distancing and the fact that you guys are so research intensive. I'm just kind of curious as to how if there's been any impact to your R&D efforts or how you've been able to work around that, and then I have a follow up. Thank you..

Thank you. We have beginning to see in our subsidiary, Adesis and PPG are considered essential businesses. So we are staffed and operational and some of our employees are working on site and some of our employees are working from home.Our top priority is safety and health of our employees.

We have implemented a number of safety protocols for everyone in our facilities included disinfecting and cleaning protocols as well as strict social distancing, which does limit the overall number of people who can be in the lab at any given time.I'm so sorry. Under our business continuity plan that we put in place.

We are continuing to run our R&D programs and ship customers our phosphorescent materials..

Okay, great. And then I was just trying to attempt to come up with like a base level revenue to think about for first quarter. And Sid, is it fair to say that you had 112, you took the 20 out that was pulled ahead and then maybe about half of what was used by the customer that they reported that had pulled ahead in fourth quarter.

That maybe 80 is sort of a base level revenue to think about.

And then look forward or am I just off on how I'm thinking about it?.

Well, I mean you are correct in terms of thinking about it. If you take whatever portion of the 25 to 24 from BOE. And look at taking away the $20 million pushing it out. It's difficult to predict what's going to happen.We know month to month demand really varies significantly from month to month.

And with the initial activities occurred with all the uncertainties it's hard to predict. We do know that April was really weak and how the fourth quarter will shape was really uncertain at this time.So I wish I could help you to try to figure out what the year is going to look like.

But that's the real reason that we withdrew guidance because of all the uncertainties around how quickly things will turn around. We just don't know..

Yeah. That's fair, given everything, you're clearly not alone. Just one last question when I think about how quickly given supply chain challenges or logistics and shipping, I don't know, to your planes in the sky.

How, if you had a demand coming from China or one of your other partners? Is that something you think you could address fairly quickly? If it did seem like hopefully, we come out of this fairly soon and in the world goes back to some semblance of normal?.

Our supply chain - our global supply chain is solid. And we are strategically building inventory to ensure that we can continue to meet all of our customer needs. And really, we are being prepared for whatever demand spikes may occur. We hoped that they go up and soon..

And soon, thank you so much. Appreciate it..

Our next question is from Sidney Ho with Deutsche Bank.

Please proceed?.

Great. Thank you for taking my questions. I got a couple. First one is fully understanding the shutdown and the logistics were issues in China back in February and March. But can you talk about how business run-rate have improved since China went back to work over the past few weeks?I think you've just talked about April being very weak.

Is that in common on China or elsewhere? And to follow up on that, with the withdrawal of the full year guidance.

Is it fair to assume that's mostly demand driven and supply logistics is not really a big factor here?.

Well, I think you are correct. It is demand driven. So when you look at why we withdrew our guidance, we just don't know. In terms of how quickly things will return it clearly is weighing obviously much heavier on the demand side versus the production side. And it's across the board. It's not, one customer, it's not one location.

I think everything is very weak..

Okay, that's helpful. Maybe a follow-up question is looking at the - in the past you look at - you talked about all the OLED capacity growth between 2019 and 2021 to grow 50%. I mean, just based on the headlines, it seems like there are a few projects being delayed.

Are you guys still thinking that 50% is doable and if you can add some color around the geography or whatnot that will be helpful? Thanks..

Well, our OLED capacity model still costs for year-end 2021 installed capacity to increase by approximately 50% from the install capacity at the end of 2019, as measured in square meters. While this forecast is unchanged, I think in this environment of high uncertainty, timing really could be affected.It's really - it's a very fluid situation.

At the same time, we've remained confident that long-term growth [indiscernible] as a strong, with customers shifting more of their focus to OLED including new capacity investment plans. And we continue to believe that we are in a multiyear growth CapEx cycle..

Great. If I can squeeze in one more. Last quarter, you talked about inventory digestion period kind of across the board.

Can you give us an update there as soon as it's gotten worse with the demand falling off, but what areas do you see the most work that needs still needs to be done and maybe by panel size, by geography, whatever metrics you can use will be great? Thank you..

I mean, demand is clearly an issue with everything. With consumers, people aren't going out and buying phones and you're hearing folks like LG say that demand for TVs has being impacted. So, I mean it is - it's across the board therefore I think utilization rates are being impacted.

And I can't, I can't say one area versus another because I do think it is across the board..

[Operator Instructions] Our next question is from Jim Ricchiuti with Needham & Company. Please proceed..

Thank you. Good afternoon.

I'm wondering, if you could say when, during the quarter these advanced purchases were made or whether it was over the course of several weeks print customers and like it was more than two?.

It was across the Board. And it was clearly as the COVID-19 issues became, obviously more and more in the news. And on our February conference call, we talked about what we thought the impact would be in Q1 and Q2 would be about 10% of our revenues.Subsequent to that, things obviously got much worse so that we were then contacting customers.

So I think these purchases were more in the March timeframe. Right after the call things really went to hell in [indiscernible] to be honest..

To say that something, it was also a reflection of this spreading into the U.S.

and all the uncertainty around that?.

Yes. It was - can you shift up stuff and making sure that they had everything that they needed. So we were in constant contact with our customers and trying to make sure that we can do everything we can do from our side to make sure that we met their needs..

In the past I think, you guys have talked about the fact that the folks kind of sites talking to customers fairly regularly. Didn't know what's happened, what's transpired in China and Korea. Is that becoming more challenging to get in front of customers or is it just not that critical, because you - try to understand? Go ahead please..

No. You finish, please, Jim..

What I was going to say is, does it make it harder to sometimes understand inventory levels and customers if you may not have as direct contact or maybe I'm misinterpreting it. And maybe you have the same level of contact that you're having with all these customers to understand where inventory levels are where utilization rates are. Sorry, go ahead..

Yeah. We're all connected via technology. So communicating with our customers, partners and suppliers has really not been disrupted during this pandemic.

Both headquarters and our local teams are engaged with customers on a continuous basis.And with the recently open new offices State of New York [indiscernible] application center in Hong Kong and Korea, we also have a broader breadth of services and solutions available locally for our customers..

Got it. And my last question is just trying to reconcile some of the commentary that you're making about utilization rates and weakness.

We are hearing I think anecdotally of activity picking up in China in March and the semiconductor in parts of the industrial market, some of that strain continuing in April.So what I'm wondering is, like maybe different than what you're seeing? Is this potentially more reflection of some of the larger drivers to the OLED market in the mobile space?.

I think that in China, there were a number of the fabs that were running and there were lots of logistical issues because of travel restrictions that were placed in China. And I think that impacted their ability and their utilization rates.I think now that that's lifted, things will turn around.

But it's, we're hearing things getting better, as you said anecdotally, but having more manpower and the ability for folks to go to work is really what's needed. And that's what's happening now. But we have not seen that in the past..

Okay, can I ask one more quick question?.

Sure..

How are we doing with blue?.

We're making excellent progress..

Thank you, Steve..

As you know, we're really encouraged by continued progress, but until we meet initial commercial specs though we really don't intend to provide to us specifically..

Okay, thank you..

Sure..

Our next caller is from Andrew [Indiscernible] with Berenberg Capital Markets. Please proceed..

Thanks. I just had a quick question. I know the situation is a bit unprecedented. But I was just wondering when we looked at your royalty and licensing revenue. I know you said in the past you were expecting that 1.5 to 2 to 1 ratio versus material sales.

Given what's happening on the material sales side, should we see that ratio continue to be that linear or should diverge from that?.

Well, material to royalty ratio is really dependent on our customer mix. And because of global uncertainties, it's difficult to forecast. However, based upon our history the ratio is typically oscillated between 1.5 and 2 to 1. So I think it's in that ballpark..

And then just to follow up, I mean with the new agreement that should still be the case with the China Star?.

Without talking about it, these agreements that we have are pretty much all material supply agreements and license agreements. So that, disagreement is similar to the other rooms that we have in place..

Got it.

And sort of an accounting question, but has there been any changes in terms of the collections you received from your customers or is that sort of [Technical Difficulty] as usual?.

I'm sorry. You broke up a little bit. I didn’t hear.

What was it from marketing perspective?.

Generally accounts receivable collections, is that sort off - are you seeing an extension of those terms or anything that's been relatively unchanged..

No. They were up obviously, because of the BOE revenues that we took in Q1 that was shipped in Q4. And, I think everybody's a little slower in paying. But I don't think that there are any issues that we see. To be honest their AR in April was down a little bit from March..

Great. Thank you so much..

Thank you..

And our next question is from Nam-Hyung Kim with Arete Research. Please proceed..

Hi, thank you for taking my question. I'm sure you have some project going on in IT panel sign means notebook and monitors. Just wanting to get your thoughts on mid-to long-term growth picture here.

What portion of your revenue would be IT panel related by the end of next year or even in three years?.

This is Steve. We think IT penetration is very low right now. It's about 1% of that total market. So we do think that there's significant room for growth. If you look at the smartphone business being about third of the smartphone market as always. So we think that there's a really nice opportunity for growth in this segment..

Okay, thank you..

Thank you, Nam..

And our next question is from Andrew Abrams with SCMR. Please proceed..

Hi, guys. Just a question about PPG.

Have you seen any issues with PPG? Meaning PPG having difficulties getting basic materials or some of the rare earth materials that you use? And has that been an issue at all for you over the last quarter or so?.

Well, PPG is considered essential as we are. So the production is moving forward. And there are no issues in terms of having materials or sourcing materials either from China or from India or from anywhere else. We've been - we have kept a supply chain that has multiple sources. And in addition, we have inventory of raw materials built up.

So we don't believe that there has not been and we see no issues at all for the foreseeable future in the rare earth materials. And -.

Much better. Thank you. I appreciate it. Thanks a lot..

All right..

And we do have a follow up question from CJ Muse with Evercore. Please proceed. CJ please check and see if your line is muted. CJ we're unable to hear you..

Yeah. Hey, I'm sorry about that. Just a follow up question on the 1.5 to 2.0 relationship. Does that change - you talked about really customer mix driving it. But does not change at all, if a customer is building inventory, the treatment of how you book materials and therefore royalties? Does not change at all..

It does not. Based upon 606, you figure out over the life the agreement, how much you expect to sell. And whenever you sell a gram of material, you report that and you report the corresponding license fee or royalty with that. So it doesn't matter how and what the purpose of the purchase is. It's a formula that you use for every gram that you ship..

Okay, and just one last follow-up there. You in the prior years talked about 605 versus 606. But now we're just not going in that direction.

Should we assume that we'll be just talking under the new accounting treatment and not going over the historical from there?.

Yeah, I think that at this point, it's not meaningful to break it out. Over the last few quarters you've seen that the two are pretty much close to each other. And most companies aren't doing it and most companies actually - SEC requires you to do it for one year. We did it for two years just because our business model.

But we don't think it's meaningful at this point. So we do not intend to give 605 results..

Okay, thank you..

Thank you, CJ..

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..

I'd like to thank you all for joining the call today. And we appreciate your interest as always. And we want all of you to stay healthy and safe. Thank you..

This concludes today's call. You may now disconnect. And have a great night..