UNIVERSAL DISPLAY CORP \PA\

Previous wording

We are a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices, notebook computers, personal computers and automotive applications, as well as specialty and general lighting products. Since 1994, we have been engaged and expect to continue to be primarily engaged, in funding and performing research and development activities relating to OLED technologies and materials, and commercializing these technologies and materials. We derive our revenue primarily from the following:

Current wording

We are a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices, notebook computers, personal computers, automotive applications and specialty lighting products. Since 1994, we have been engaged and expect to continue to be primarily engaged, in funding and performing research and development activities relating to OLED technologies and materials, and commercializing these technologies and materials. We derive our revenue primarily from the following:

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). 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.

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). In 2021, we and LG Display entered into new agreements that extended the terms of these agreements at least 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 their patent portfolio. The patent license calls for minimum annual license fees and additional incremental license fees based on LG Display’s volume of sale of licensed products. The OLED commercial supply agreement provides for the sale of dopant and host materials for use by LG Display.

Previous wording

In 2016, we entered into long-term, multi-year OLED patent license and material purchase agreements with Tianma Micro-electronics Co., Ltd. (Tianma). Under the license agreement, we have granted Tianma non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. The license agreement calls for license fees and running royalties on Tianma’s sales of licensed products. Additionally, we supply phosphorescent OLED materials to Tianma for use in its licensed products. In 2021, we mutually agreed to extend the terms of both the patent license and material purchase agreements for an additional multi-year term.

Current wording

In 2025, we entered into long-term, multi-year OLED patent license and material purchase agreements with Tianma Micro-electronics Co., Ltd. (Tianma). Under the agreements, we have granted Tianma non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. Additionally, we supply phosphorescent OLED materials to Tianma for use in its licensed products.

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 December 31, 2024, Adesis employed a team of 139 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 December 31, 2025, 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.

Previous wording

In June 2020, we formed a wholly-owned subsidiary, OVJP Corporation (OVJP Corp) in California, as a Delaware corporation, which was founded to advance the commercialization of our proprietary Organic Vapor Jet Printing (OVJP) technology. In December 2024, we announced that the OVJP Corp facility in California would be closing and OVJP operations would be relocated to our newly formed subsidiary, Universal Vapor Jet Corporation Pte. Ltd. (UVJC) in Singapore, as well as continued operations in our Tech and Innovation Center in New Jersey. While we continue to focus on the long-term opportunity in the large-area display market for OVJP, the industry’s current focus is on the growing demand for IT capacity. Our UVJC subsidiary plans to assess additional market opportunities where this technology may be transformative. As a result of the planned closure of the OVJP Corp location in California, we determined to record $8.9 million of restructuring costs for the year ended December 31, 2024.

Current wording

In June 2020, we formed a wholly-owned subsidiary, OVJP Corporation (OVJP Corp), operating in California, in order to advance the commercialization of our proprietary Organic Vapor Jet Printing (OVJP) technology, which we now refer to as Universal Vapor Jet Printing (UVJP). In December 2024, we announced that the OVJP Corp facility in California would be closing and UVJP operations would be relocated to our newly formed Singapore subsidiary, Universal Vapor Jet Corporation Pte. Ltd. (UVJC), as well as continued operations in our Tech and Innovation Center in New Jersey. While we continue to focus on the long-term opportunity in the large-area display market for UVJP, the industry’s current focus is on the growing demand for IT capacity. Our UVJC subsidiary continues to assess additional market opportunities where this technology may be transformative. As a result of the closure of the OVJP Corp location in California, we recorded $2.2 million and $8.9 million of restructuring costs for the years ended December 31, 2025 and 2024, respectively.

Previous wording

In February 2021, we announced the establishment of a new manufacturing site in Shannon, Ireland and an agreement between UDC Ireland Limited and PPG for the production of our OLED materials. We purchased the site during September 2023. When fully operational, the new facility is expected to double our production capacity and allow for the diversification of our manufacturing base for phosphorescent emitters. The first phase of facility improvements has been completed and operations commenced in June 2022.

Current wording

In February 2021, we announced the establishment of a new manufacturing site in Shannon, Ireland and an agreement between UDC Ireland Limited and PPG for the production of our OLED materials. The Shannon manufacturing facility became operational in June 2022 and we purchased the site during September 2023. The Shannon manufacturing facility provides incremental manufacturing capacity to meet our expanding production needs, and allows for the geographical diversification of our manufacturing base for the world-wide distribution of our materials

Previous wording

During the year ended December 31, 2024, based on our previous earnings history, a current evaluation of expected future taxable income and other evidence, we determined to retain the valuation allowance that relates to New Jersey research and development credits and unrealized loss on investments. In addition, a portion of the investment loss was realized resulting in a capital loss carryforward that is not more likely than not to be used within the carryforward period. As such, we provided a valuation allowance against the capital loss. There are no indicators against the realizability of the remaining net deferred tax assets. Actual results could differ from our assessments if adequate taxable income is generated in future periods. To the extent we establish a new valuation allowance or change a previously established valuation allowance in a future period, income tax expense will be impacted.

Current wording

During the year ended December 31, 2025, based on our previous earnings history, a current evaluation of expected future taxable income and other evidence, we determined to retain the valuation allowance that relates to New Jersey research and development credits. In addition, the Company has an unrealized gain on investments that if sold, could offset the capital loss carryforward within the carryforward period. As such the valuation allowance on the capital loss was reversed. There are no indicators against the realizability of the remaining net-deferred tax assets.

Previous wording

Comparison of the Years Ended December 31, 2024 and 2023

Current wording

Comparison of the Years Ended December 31, 2025 and 2024(in thousands)

Previous wording

Our total material sales were $365.4 million for the year ended December 31, 2024, as compared to $322.0 million for the year ended December 31, 2023, an increase of 13% with an increase in unit material volume of 15%. The increase in material sales was primarily due to strengthened demand for our emitter materials, partially offset by changes in customer mix.

Current wording

Our total material sales were $353.0 million for the year ended December 31, 2025, as compared to $365.4 million for the year ended December 31, 2024, a decrease of 3% with a commensurate decrease in unit material volume of 1%. The decrease in material sales was primarily due to changes in customer mix and lower unit material volume.

Previous wording

Green emitter sales for the year ended December 31, 2024, which include our yellow-green emitters, were $272.4 million as compared to $243.2 million for the year ended December 31, 2023, with unit material volumes increasing by 12%.

Current wording

Green emitter sales for the year ended December 31, 2025, which include our yellow-green emitters, were $265.8 million as compared to $272.4 million for the year ended December 31, 2024, with unit material volumes increasing by less than 1%.

Previous wording

Red emitter sales for the year ended December 31, 2024 were $88.5 million as compared to $73.2 million for the year ended December 31, 2023, with unit material volumes increasing by 25%.

Current wording

Red emitter sales for the year ended December 31, 2025 were $82.9 million as compared to $88.5 million for the year ended December 31, 2024, with unit material volumes decreasing by 4%.

Previous wording

Revenue from royalty and license fees was $266.8 million for the year ended December 31, 2024 as compared to $238.4 million for the year ended December 31, 2023, an increase of 12%. 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 $275.1 million for the year ended December 31, 2025 as compared to $266.8 million for the year ended December 31, 2024, an increase of 3%. The increase in royalty and license fees was primarily the result of changes in customer mix, partially offset by a $7.1 million reduction in revenue due to an out of period adjustment. The out of period adjustment was due to a correction of an error that originated during the third quarter of 2023. We have evaluated the impacts of this error, both quantitatively and qualitatively, and have concluded that the error was not material to the Consolidated Financial Statements for any interim or annual period prior to the three months ended September 30, 2025, nor was it material to the full year ended December 31, 2025.

Previous wording

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was $10.8 million for the year ended December 31, 2024 as compared to $10.6 million for the year ended December 31, 2023. For the years ended December 31, 2024 and 2023, 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 $14.1 million for the year ended December 31, 2025 as compared to $10.8 million for the year ended December 31, 2024. For each of the years ended December 31, 2025 and 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.

Previous wording

Contract research services revenue was $15.4 million for the year ended December 31, 2024 as compared to $16.0 million for the year ended December 31, 2023, a decrease of 4%. The decrease in contract research services revenue was primarily due to the timing of completion of several contract research projects by our subsidiary, Adesis, during the year ended December 31, 2023. 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

Contract research services revenue was $22.5 million for the year ended December 31, 2025 as compared to $15.4 million for the year ended December 31, 2024, an increase of 46%. The increase in contract research services revenue was primarily due to increased specialty manufacturing customer demand at our subsidiary, Adesis, during the year ended December 31, 2025. 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.

Previous wording

Cost of sales for the year ended December 31, 2024 increased by $13.1 million as compared to the year ended December 31, 2023, primarily due to an increase in the level of material sales and product mix, partially offset by a $5.4 million decrease in inventory reserve expense. As a result of the increase in revenue from material sales and royalty and license fees, gross margin for the year ended December 31, 2024 increased by $58.2 million as compared to the year ended December 31, 2023, with gross margin as a percentage of revenue remaining consistent at 77%.

Current wording

Cost of sales for the year ended December 31, 2025 increased by $5.7 million as compared to the year ended December 31, 2024, primarily due to Adesis' cost of sales and changes in product mix. As a result of the decrease in revenue from material sales, partially offset by the increases in revenue from royalty and license fees and contract research, gross margin for the year ended December 31, 2025 decreased by $2.7 million as compared to the year ended December 31, 2024, with gross margin as a percentage of revenue decreasing to 76% from 77%.

Previous wording

Research and development expenses increased to $157.2 million for the year ended December 31, 2024, as compared to $130.5 million for the year ended December 31, 2023. The increase in research and development expenses was primarily due to an increase in PPG development activity, including new product development and commencement of development activities in Shannon, Ireland, and OVJP Corp reorganization expenses. As a result of the planned closure of OVJP Corp's California location, we recorded $8.9 million of restructuring costs for the year ended December 31, 2024.

Current wording

Research and development expenses decreased to $146.1 million for the year ended December 31, 2025, as compared to $157.2 million for the year ended December 31, 2024. The decrease in research and development expenses was primarily due to restructuring costs and closure of the OVJP Corp facility in California during December 2024.

Previous wording

Selling, general and administrative expenses increased to $74.3 million for the year ended December 31, 2024, as compared to $67.4 million for the year ended December 31, 2023. The increase in selling, general and administrative expenses was primarily due to an increase in employee-related expenses, including higher salaries expenses and stock-based compensation.

Current wording

Selling, general and administrative expenses was $74.3 million for each of the years ended December 31, 2025 and 2024.

Previous wording

Amortization of acquired technology and other intangible assets was $18.2 million for the year ended December 31, 2024, as compared to $16.0 million for the year ended December 31, 2023. The increase was due to the commencement of amortization expense associated with the Merck KGaA patent acquisition that was completed in April 2023. See Note 7 in Notes to Consolidated Financial Statements for further discussion.

Current wording

Amortization of acquired technology and other intangible assets was $18.2 million for each of the years ended December 31, 2025 and 2024. See Note 7 in Notes to Consolidated Financial Statements for further discussion.

Previous wording

Patent costs decreased to $8.7 million for the year ended December 31, 2024, as compared to $9.4 million for the year ended December 31, 2023. The results in the current year reflected lower internal prosecution related costs.

Current wording

Patent costs increased to $8.8 million for the year ended December 31, 2025, as compared to $8.7 million for the year ended December 31, 2024.

Previous wording

Royalty and license expense increased to $2.0 million for the year ended December 31, 2024, as compared to $647,000 for the year ended December 31, 2023. This 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 $504,000 for the year ended December 31, 2025, as compared to $2.0 million for the year ended December 31, 2024. This decrease was due to a one-time expense of $1.5 million in the year ended December 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 income, net was $40.7 million for the year ended December 31, 2024, as compared to $28.2 million for the year ended December 31, 2023. The increase in interest income, net was primarily due to an increase in bond yields on available-for-sale investments held during the year ended December 31, 2024 compared to the prior year as well as higher available-for-sale investment balances. Other loss, net primarily consisted of net exchange gains and losses on foreign currency transactions and rental income. We recorded other loss, net of $7.4 million for the year ended December 31, 2024 as compared to $184,000 for the year ended December 31, 2023. The increase in other loss, net during the year ended December 31, 2024 was due to a $7.2 million foreign exchange loss that was caused by the fluctuation in the Korean Won to the U.S. Dollar exchange rate and resulting remeasurement of a Korean Won-denominated withholding tax receivable.

Current wording

Interest income, net was $39.7 million for the year ended December 31, 2025, as compared to $40.7 million for the year ended December 31, 2024. 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 $6.5 million for the year ended December 31, 2025 as compared to other loss, net of $7.4 million for the year ended December 31, 2024. The increase in other income (loss), net during the year ended December 31, 2025 was primarily due to a $3.9 million investment gain, net on our marketable equity securities portfolio and a $935,000 foreign exchange gain during the year ended December 31, 2025 as compared to a $7.2 million foreign exchange loss during the year ended December 31, 2024. Net exchange gains and losses on foreign currency are primarily caused by the fluctuation in the Korean Won to the U.S. Dollar exchange rate and resulting remeasurement of a Korean Won-denominated withholding tax receivable.

Previous wording

We are subject to income taxes in both the United States and foreign jurisdictions. The effective income tax rate was 18.4% and 17.2% for the years ended December 31, 2024 and 2023, respectively, and we recorded income tax expense of $50.0 million and $42.2 million, respectively, for those periods.

Current wording

We are subject to income taxes in both the United States and foreign jurisdictions. The effective income tax rate was 17.9% and 18.4% for the years ended December 31, 2025 and 2024, respectively, and we recorded income tax expense of $52.7 million and $50.0 million, respectively, for those periods.

Previous wording

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of December 31, 2024, we had 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. 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 December 31, 2025, we had cash and cash equivalents of $138.4 million, short-term investments of $464.0 million, and long-term U.S. Government bond investments of $353.0 million for a total of $955.4 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 year ended December 31, 2023 was $154.8 million resulting from $203.0 million of net income and an increase of $55.3 million due to non-cash items including depreciation, stock-based compensation, and amortization of intangibles, partially offset by a $103.5 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 $47.2 million, an increase in other assets of $37.1 million, a decrease in other liabilities of $26.5 million and a decrease in deferred revenue of $4.2 million, partially offset by a decrease in inventory of $7.4 million and an increase in accounts payable and accrued expenses of $4.1 million.

Current wording

Cash provided by operating activities for the year ended December 31, 2025 was $210.8 million resulting from $242.1 million of net income and an increase of $68.3 million due to non-cash items including depreciation, stock-based compensation and amortization of intangibles, partially offset by a $99.6 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in inventory of $58.0 million, an increase in other assets of $27.0 million, a decrease in deferred revenue of $10.7 million and an increase accounts receivable of $6.3 million, partially offset by an increase in accounts payable and accrued expenses of $2.1 million and an increase in other liabilities of $248,000. The increase in inventory during the year ended December 31, 2025 was primarily due to purchases of certain strategic raw materials.

Previous wording

Cash used in investing activities was $164.4 million for the year ended December 31, 2024, as compared to $83.3 million for the year ended December 31, 2023. The increase was due to the timing of maturities and purchases of investments resulting in net purchases of $121.8 million for the year ended December 31, 2024, as compared to net sales and maturities of $43.1 million for the year ended December 31, 2023, partially offset by a decrease in purchases of intangibles and property and equipment of $83.7 million. The increase in property and equipment and intangibles during the year ended December 31, 2023 was primarily due to the Merck KGaA patent acquisition and the purchases of the Shannon facility and the South Korea application center.

Current wording

Cash used in investing activities was $45.5 million for the year ended December 31, 2025, as compared to $164.4 million for the year ended December 31, 2024. The decrease was due to the timing of maturities and purchases of investments resulting in net sales and maturities of $20.9 million for the year ended December 31, 2025, as compared to net purchases of $121.8 million for the year ended December 31, 2024, partially offset by an increase in purchases of intangibles and property and equipment of $23.8 million. The increase in property, plant and equipment purchases during the year ended December 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 $82.3 million for the year ended December 31, 2024, as compared to $72.9 million for the year ended December 31, 2023. The increase was due to an increase in the cash payment of dividends in the current year of $9.4 million and an increase in the payment of withholding taxes related to stock-based compensation to employees of $180,000, partially offset by an increase in the proceeds from issuance of common stock of $208,000.

Current wording

Cash used in financing activities was $126.0 million for the year ended December 31, 2025, as compared to $82.3 million for the year ended December 31, 2024. The increase was due to an increase in repurchases of common stock of $32.9 million, an increase in the cash payment of dividends in the current year of $9.4 million and an increase in the payment of withholding taxes related to stock-based compensation to employees of $1.2 million and a decrease in the proceeds from issuance of common stock of $200,000.

Previous wording

Working capital was $774.4 million as of December 31, 2024, as compared to $798.3 million as of December 31, 2023. The decrease was primarily due to decreases in short-term investments and accounts receivable and an increase in accounts payable.

Current wording

Working capital was $979.0 million as of December 31, 2025, as compared to $774.4 million as of December 31, 2024. The increase was primarily due to increases in short-term investments, inventory, and cash and cash equivalents.

Previous wording

Several significant contractual obligations are anticipated to be incurred in future periods and include payments for retirement benefit plan obligations, lease obligations and PPG inventory commitments. Payments towards the retirement plan obligations commenced during fiscal year 2023 and are expected to total $79.6 million over the remaining life of the plan. Existing lease obligations are $4.3 million for fiscal year 2025, $4.4 million for fiscal year 2026, $4.3 million for fiscal year 2027 and $12.1 million thereafter. Existing PPG inventory commitments are $46.5 million and will fluctuate based on PPG production needs to fulfill our demand for commercial emitter material.

Current wording

Several significant contractual obligations are anticipated to be incurred in future periods and include payments for retirement benefit plan obligations, lease obligations and PPG inventory commitments. Payments towards the retirement plan obligations commenced during fiscal year 2023 and are expected to total $77.2 million over the remaining life of the plan. Existing lease obligations are $5.3 million for both fiscal years 2026 and 2027, $5.0 million for fiscal year 2028 and $10.3 million thereafter. Existing PPG inventory commitments are $40.7 million and will fluctuate based on PPG production needs to fulfill our demand for commercial emitter material.

Previous wording

We believe that potential additional financing sources for us include long-term and short-term borrowings and public and private sales of our equity and debt securities. It should be noted, however, that additional funding may be required in the future for research, development and commercialization of our OLED technologies and materials, to obtain, maintain and enforce patents respecting these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. There can be no assurance that additional funds will be available to us when needed, on commercially reasonable terms or at all, particularly in the current economic environment.

Current wording

Additional funding may be required in the future for research, development and commercialization of our OLED technologies and materials, to obtain, maintain and enforce patents respecting these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. We believe that potential additional financing sources for us include long-term and short-term borrowings and public and private sales of our equity and debt securities. There can be no assurance that additional funds will be available to us when needed, on commercially reasonable terms or at all, particularly in the current economic environment.