UNIVERSAL DISPLAY CORP PA

Previous wording

On December 2, 2022, we entered into a commercial patent license agreement with Samsung Display Co., Ltd. (SDC), replacing a previous license agreement that had been in place since 2018. This agreement, which covers the manufacture and sale of specified OLED display materials, was effective as of January 1, 2023 and lasts through the end of 2027 with an additional two-year extension option for SDC. Under this agreement, we are being paid a license fee, which includes quarterly and annual payments over the agreement term of five years. The agreement conveys to SDC the non-exclusive right to use certain of our intellectual property assets for a limited period of time that is less than the estimated life of the assets.

Current wording

On December 2, 2022, we entered into a commercial patent license agreement with Samsung Display Co., Ltd. (SDC), replacing a previous license agreement that had been in place since 2018. This agreement, which covers the manufacture and sale of specified OLED display materials, was effective as of January 1, 2023 and lasts through the end of 2027 with an additional two-year extension option for SDC. Under this agreement, we are being paid a license fee, which includes quarterly and annual payments over the agreement term. The agreement conveys to SDC the non-exclusive right to use certain of our intellectual property assets for a limited period of time that is less than the estimated life of the assets.

Previous wording

In 2015, we entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display), which were effective as of January 1, 2015. The terms of these agreements were extended by a January 1, 2021 amendment through the end of 2025. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under our patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The OLED commercial supply agreement provides for the sales of materials for use by LG Display, which may include phosphorescent emitters and host materials. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue.

Current wording

In 2015, we entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display). The terms of these agreements have been extended through the end of 2025. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under our patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The OLED commercial supply agreement provides for the sales of materials for use by LG Display, which may include phosphorescent emitters and host materials. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue.

Previous wording

In 2016, we acquired Adesis, Inc. (Adesis) which has operations in New Castle and Wilmington, Delaware. Adesis is a contract development and manufacturing organization (CDMO) that provides support services on a contractual basis to third-party customers in the OLED, pharma, biotech, catalysis and other industries. As of September 30, 2024, Adesis employed a team of 137 research scientists, chemists, engineers and laboratory technicians. Prior to our acquisition of Adesis, we utilized more than 50% of Adesis’ technology service and production output. We continue to utilize a significant portion of its technology research capacity for the benefit of our OLED technology development, and Adesis uses the remaining capacity to operate as a CDMO by providing contract research services for non-OLED applications to third-party customers in the above-mentioned industries. Contract research services revenue is earned by providing chemical materials synthesis research, development and commercialization for non-OLED applications on a contractual basis for those third-party customers.

Current wording

In 2016, we acquired Adesis, Inc. (Adesis) which has operations in New Castle and Wilmington, Delaware. Adesis is a contract development and manufacturing organization (CDMO) that provides support services on a contractual basis to third-party customers in the OLED, pharma, biotech, catalysis and other industries. As of March 31, 2025, Adesis employed a team of 142 research scientists, chemists, engineers and laboratory technicians. Prior to our acquisition of Adesis, we utilized more than 50% of Adesis’ technology service and production output. We continue to utilize a significant portion of its technology research capacity for the benefit of our OLED technology development, and Adesis uses the remaining capacity to operate as a CDMO by providing contract research services for non-OLED applications to third-party customers in the above-mentioned industries. Contract research services revenue is earned by providing chemical materials synthesis research, development and commercialization for non-OLED applications on a contractual basis for those third-party customers.

Previous wording

Our total material sales were $83.4 million for the three months ended September 30, 2024, as compared to $92.5 million for the three months ended September 30, 2023, a decrease of 10% with an increase in unit material volume of 1%. The decrease in material sales was primarily due to customer mix.

Current wording

Our total material sales were $86.2 million for the three months ended March 31, 2025, as compared to $93.3 million for the three months ended March 31, 2024, a decrease of 8% with a commensurate decrease in unit material volume of 8%. The decrease in material sales was primarily due to lower unit material volume for our emitter materials, partially offset by changes in customer mix.

Previous wording

Green emitter sales for the three months ended September 30, 2024, which include our yellow-green emitters, were $62.6 million as compared to $68.9 million for the three months ended September 30, 2023, with unit material volumes decreasing by 1%.

Current wording

Green emitter sales for the three months ended March 31, 2025, which include our yellow-green emitters, were $63.5 million as compared to $70.8 million for the three months ended March 31, 2024, with unit material volumes decreasing by 10%.

Previous wording

Red emitter sales for the three months ended September 30, 2024 were $20.1 million as compared to $22.1 million for the three months ended September 30, 2023, with unit material volumes increasing by 6%.

Current wording

Red emitter sales for the three months ended March 31, 2025 were $21.5 million as compared to $20.6 million for the three months ended March 31, 2024, with unit material volumes decreasing by 1%.

Previous wording

Revenue from royalty and license fees was $202.4 million for the nine months ended September 30, 2024 as compared to $165.5 million for the nine months ended September 30, 2023, an increase of 22%. The increase in royalty and license fees was primarily the result of higher unit material volume and changes in customer mix.

Current wording

Revenue from royalty and license fees was $73.6 million for the three months ended March 31, 2025 as compared to $68.3 million for the three months ended March 31, 2024, an increase of 8%. The increase in royalty and license fees was primarily the result of changes in customer mix, partially offset by lower unit material volume.

Previous wording

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was an increase of $5.3 million for the three months ended September 30, 2024 as compared to a decrease of $1.5 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, the adjustment resulted from an increase in the average price per gram that was primarily due to the decrease in anticipated demand by several of our customers over the remaining lives of their contracts.

Current wording

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was an increase of $2.0 million for the three months ended March 31, 2025 as compared to a net reduction of $502,000 for the three months ended March 31, 2024. For the three months ended March 31, 2025, the adjustment resulted from an increase in the average price per gram that was primarily due to the decrease in anticipated demand by several of the Company's customers over the remaining lives of their contracts.

Previous wording

Contract research services revenue was $3.6 million for the three months ended September 30, 2024 as compared to $2.7 million for the three months ended September 30, 2023, an increase of 35%. The increase in contract research services revenue was primarily due to the timing of completion of several contract research projects by our subsidiary, Adesis, during the three months ended September 30, 2024. Revenue from contract research services consists of revenue earned by Adesis, which provides support services on a contractual basis to third-party customers in the pharma, biotech, catalysis and other industries.

Current wording

Revenue from contract research services consists of revenue earned by Adesis, which provides support services on a contractual basis to third-party customers in the pharma, biotech, catalysis and other industries. Contract research services revenue was $6.6 million for the three months ended March 31, 2025 as compared to $3.7 million for the three months ended March 31, 2024, an increase of 77%. The increase in contract research services revenue was primarily due to increased specialty manufacturing customer demand at our subsidiary, Adesis, during the three months ended March 31, 2025.

Previous wording

Cost of sales for the three months ended September 30, 2024 increased by $1.6 million as compared to the three months ended September 30, 2023, primarily due to product mix and an increase in unit material volume. As a result of the increase in revenue from royalty and license fees, partially offset by a decrease in revenue from material sales, gross margin for the three months ended September 30, 2024 increased by $19.0 million as compared to the three months ended September 30, 2023, with gross margin as a percentage of revenue increasing to 78% from 76%.

Current wording

Cost of sales for the three months ended March 31, 2025 increased by $1.2 million as compared to the three months ended March 31, 2024, primarily due to product mix and Adesis' cost of sales, offset by lower sales volume. As a result of the decrease in revenue from material sales, partially offset by the increase from royalty and licenses fees, gross margin for the three months ended March 31, 2025 decreased by $147,000 as compared to the three months ended March 31, 2024, with gross margin as a percentage of revenue decreasing to 77% from 78%.

Previous wording

Selling, general and administrative expenses decreased to $15.7 million for the three months ended September 30, 2024, as compared to $18.1 million for the three months ended September 30, 2023. The decrease in selling, general and administrative expenses was primarily due to lower employee-related expenses, including incentive and stock-based compensation expenses.

Current wording

Selling, general and administrative expenses decreased to $17.0 million for the three months ended March 31, 2025, as compared to $19.3 million for the three months ended March 31, 2024. The decrease in selling, general and administrative expenses was primarily due to lower performance-based stock compensation expenses.

Previous wording

Amortization of acquired technology and other intangible assets was $4.6 million for both three months ended September 30, 2024 and 2023.

Current wording

Amortization of acquired technology and other intangible assets was $4.5 million for both three months ended March 31, 2025 and 2024.

Previous wording

Patent costs decreased to $2.4 million for the three months ended September 30, 2024, as compared to $2.6 million for the three months ended September 30, 2023.

Current wording

Patent costs decreased to $1.9 million for the three months ended March 31, 2025, as compared to $2.0 million for the three months ended March 31, 2024. The results in the current year reflected lower internal prosecution related costs.

Previous wording

Royalty and license expense increased to $1.9 million for the nine months ended September 30, 2024, as compared to $414,000 for the nine months ended September 30, 2023. The increase was due to a one-time expense of $1.5 million in connection with an amendment to our existing amended license agreement, effective as of October 9, 1997, with Princeton University and the University of Southern California.

Current wording

Royalty and license expense decreased to $114,000 for the three months ended March 31, 2025, as compared to $1.7 million for the three months ended March 31, 2024. The decrease was due to a one-time expense of $1.5 million during the three months ended March 31, 2024 in connection with an amendment to our existing amended license agreement, effective as of October 9, 1997, with Princeton University and the University of Southern California.

Previous wording

Interest and other income, net

Current wording

Interest and other income (loss), net

Previous wording

Interest income, net was $10.6 million for the three months ended September 30, 2024, as compared to $7.1 million for the three months ended September 30, 2023. The increase in interest income, net was primarily due to an increase in bond yields on available-for-sale investments held during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 as well as higher available-for-sale investment balances. Other income (loss), net primarily consisted of net exchange gains and losses on foreign currency transactions, net investment gains and losses, and rental income. We recorded other income, net of $3.8 million for the three months ended September 30, 2024 as compared to other loss, net of $1.7 million for the three months ended September 30, 2023.

Current wording

Interest income, net was $10.1 million for the three months ended March 31, 2025, as compared to $9.6 million for the three months ended March 31, 2024. The increase in interest income, net was primarily due to higher average available-for-sale investment balances held during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. Other income

Previous wording

We are subject to income taxes in the United States and foreign jurisdictions. The effective income tax rate was 18.8% and 16.8% for the nine months ended September 30, 2024 and 2023, respectively, and we recorded income tax expense of $40.8 million and $28.5 million, respectively, for those periods.

Current wording

We are subject to income taxes in the United States and foreign jurisdictions. The effective income tax rate was 19.6% and 19.4% for the three months ended March 31, 2025 and 2024, respectively, and we recorded income tax expense of $15.7 million and $13.6 million, respectively, for those periods.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of September 30, 2024, we had cash and cash equivalents of $79.6 million, short-term investments of $472.0 million, and long-term U.S. Government bonds investments of $378.8 million for a total of $930.4 million. This compares to cash and cash equivalents of $92.0 million, short-term investments of $422.1 million, and long-term U.S. Government bond investments of $285.5 million for a total of $799.6 million as of December 31, 2023.

Current wording

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of March 31, 2025, we had cash and cash equivalents of $157.5 million, short-term investments of $413.8 million, and long-term U.S. Government bonds investments of $346.9 million for a total of $918.2 million. This compares to cash and cash equivalents of $99.0 million, short-term investments of $393.7 million, and long-term U.S. Government bond investments of $435.5 million for a total of $928.2 million as of December 31, 2024.

Previous wording

Cash provided by operating activities for the nine months ended September 30, 2023 was $117.7 million resulting from $141.0 million of net income and $50.7 million from non-cash items including depreciation, stock-based compensation and amortization of intangibles, partially offset by $74.0 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in accounts receivable of $29.5 million, an increase in other assets of $29.4 million, a decrease in other liabilities of $28.7 million and a decrease in accounts payable and accrued expense of $32,000, partially offset by an increase in deferred revenue of $11.8 million and a decrease in inventory of $1.8 million.

Current wording

Cash provided by operating activities for the three months ended March 31, 2025 was $30.6 million resulting from $64.4 million of net income and $14.1 million from non-cash items including stock-based compensation, depreciation and amortization of intangibles, partially offset by a $47.9 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in accounts receivable of $25.9 million, an increase in inventory of $14.4 million, a decrease in accounts payable and accrued expenses of $13.4 million, a decrease in deferred revenue of $8.5 million and an increase in other assets of $2.2 million, partially offset by an increase in other liabilities of $16.5 million.

Previous wording

Cash provided by operating activities for the nine months ended September 30, 2024 was $219.0 million resulting from $176.1 million of net income, $39.5 million from non-cash items including stock-based compensation, depreciation and amortization of intangibles, and $3.4 million due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to a decrease in accounts receivable of $52.2 million and an increase in accounts payable and accrued expenses of $9.4 million, partially offset by an increase in other assets of $43.7 million, a decrease in deferred revenue of $10.0 million, a decrease in other liabilities of $4.3 million and an increase in inventory of $163,000.

Current wording

Cash provided by operating activities for the three months ended March 31, 2024 was $72.2 million resulting from $56.9 million of net income, $14.5 million from non-cash items including stock-based compensation, depreciation and amortization of intangibles, and $807,000 due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to a decrease in accounts receivable of $20.3 million, an increase in other liabilities of $12.1 million, a decrease in inventory of $2.9 million, and a decrease of other assets of $794,000, partially offset by a decrease in deferred revenue of $27.3 million and a decrease in accounts payable and accrued expenses of $8.0 million.

Previous wording

Cash used in investing activities was $167.1 million for the nine months ended September 30, 2024, as compared to $75.4 million for the nine months ended September 30, 2023. The increase was due to timing of maturities and purchases of investments resulting in net purchases of $137.1 million for the nine months ended September 30, 2024, as compared to net sales and maturities of $43.4 million for the nine months ended September 30, 2023, partially offset by a decrease in purchases of intangibles and property, plant and equipment of $88.8 million. The decrease in the purchases of intangibles and property, plant and equipment during the nine months ended September 30, 2024 was primarily due to the Merck KGaA patent acquisition on April 28, 2023.

Current wording

Cash provided by investing activities was $58.2 million for the three months ended March 31, 2025, as compared to cash used in investing activities of $64.2 million for the three months ended March 31, 2024. The increase in cash provided by investing activities was due to timing of maturities and purchases of investments resulting in net proceeds of $71.2 million for the three months ended March 31, 2025, as compared to net purchases of $57.0 million for the three months ended March 31, 2024, partially offset by an increase in purchases of property, plant and equipment of $5.8 million. The increase in property, plant and equipment purchases during the three months ended March 31, 2025 was primarily due to the continued expansion of the manufacturing facility in Shannon, Ireland and improvements to our research and development facility in Ewing, New Jersey.

Previous wording

Cash used in financing activities was $64.3 million for the nine months ended September 30, 2024, as compared to $56.4 million for the nine months ended September 30, 2023. The increase was due to an increase in the cash payment of dividends in the current year of $7.8 million and an increase in the payment of withholding taxes related to stock-based compensation to employees of $356,000, partially offset by an increase in the proceeds from the issuance of common stock of $244,000.

Current wording

Cash used in financing activities was $30.2 million for the three months ended March 31, 2025, as compared to $25.9 million for the three months ended March 31, 2024. The increase was due to an increase in the payment of withholding taxes related to stock-based compensation to employees of $2.4 million and an increase in the cash payment of dividends in the current year of $1.9 million.

Previous wording

Working capital was $810.7 million as of September 30, 2024, as compared to $798.3 million as of December 31, 2023. The increase was primarily due to increases in short-term investments and other current assets, partially offset by a decrease in accounts receivable.

Current wording

Working capital was $905.3 million as of March 31, 2025, as compared to $774.4 million as of December 31, 2024. The increase was primarily due to increases in cash and cash equivalents, accounts receivable and short-term investments.