UNIVERSAL DISPLAY CORP \PA\

BUSINESS:

Universal Display Corporation and its subsidiaries (the Company) is a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications. OLEDs are thin, lightweight and power-efficient solid-state devices that emit light and can be manufactured on both flexible and rigid substrates, making them highly suitable for use in full-color displays and as lighting products. OLED displays are capturing a growing share of the display market, especially in the mobile phone, television, monitor, wearable, tablet, notebook and personal computer, augmented reality (AR), virtual reality (VR) and automotive markets. The Company believes this is because OLEDs offer potential advantages over competing display technologies with respect to power efficiency, contrast ratio, viewing angle, video response time, form factor and manufacturing cost. The Company also believes that OLED lighting products have the potential to replace many existing light sources in the future because of their high-power efficiency, excellent color rendering index, low operating temperature and novel form factor. The Company’s technology leadership, intellectual property position, and more than 20 years of experience working closely with leading OLED display manufacturers are some of the competitive advantages that should enable the Company to continue to share in the revenues from OLED displays and lighting products as they continue to gain wider adoption.

The Company’s primary business strategy is to (1) develop new OLED materials and sell existing and new materials to product manufacturers of products for display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices, notebook computers, personal computers, automotive applications, and specialty lighting products; and (2) further develop and either license or otherwise commercialize the Company’s proprietary OLED material, device design and manufacturing technologies to those manufacturers. The Company has established a significant portfolio of proprietary OLED technologies and materials, primarily through internal research and development efforts and acquisitions of patents and patent applications, as well as maintaining long-standing, and establishing new relationships with world-class universities, research institutions and strategic manufacturing partnerships. The Company currently owns, exclusively licenses or has the sole right to sublicense more than 7,000 patents issued and pending worldwide.

The Company manufactures and sells its proprietary OLED materials to customers for evaluation and use in commercial OLED products. The Company also enters into agreements with manufacturers of OLED display and lighting products under which it grants them licenses to practice under the Company’s patents and to use the Company's proprietary know-how. At the same time, the Company works with these and other companies that are evaluating the Company's OLED material, device design and manufacturing technologies for possible use in commercial OLED display and lighting products.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Universal Display Corporation and its wholly owned subsidiaries, UDC, Inc., UDC Ireland Limited (UDC Ireland), Universal Display Corporation Hong Kong, Limited, Universal Display Corporation Korea, Y.H. (UDC Korea), Universal Display Corporation Japan GK, Universal Display Corporation China, Ltd., Adesis, Inc. (Adesis), UDC Ventures LLC, OVJP Corporation (OVJP Corp), OLED Material Manufacturing Limited (OMM), Universal Vapor Jet Corporation Pte. Ltd. (UVJC) and UDC Chengdu OLED Technology, Ltd. (UDC Chengdu). All intercompany transactions and accounts have been eliminated.

Segment Information

The Company hasone reportable business segment, namely OLED technologies and materials. The Company also performs contract development and manufacturing support services through its subsidiary, Adesis. However, the Company’s Chief Operating Decision Maker (CODM) reviews financial operating results for the Company on a combined basis only, with the exception of revenue, for the purposes of resource allocation decisions. Combined entity-level results are deemed sufficient for the assessment of the Company’s operating performance. As a result, Adesis is not considered a reportable business segment and its operations are contained in the OLED technologies and materials segment. Factors that went into this determination included examining the nature and significance of the various business activities the Company engages in, and the availability of discrete data for those business activities.

The Company’s CODM is its President and Chief Executive Officer. The President and Chief Executive Officer is the highest level of management responsible for the allocation of the Company’s resources and acts as the “assessor of the financial performance” of the Company. In a review of the financial decision making process, it was determined that the CODM primarily utilizes information consistent with that already incorporated in the existing consolidated financial statements. These measures include revenue, operating expenses, net income and assets. As such, the Consolidated Financial Statements presentation is consistent with how the Company's CODM evaluates the results of operations and formulates strategic decisions about the business.

Management’s Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates made are principally in the areas of revenue recognition including estimates of material unit sales and royalties, the useful life of acquired intangibles, lease liabilities, right-of-use assets, the use and recoverability of inventories, intangibles, investments and income taxes including realization of deferred tax assets, stock-based compensation and retirement benefit plan liabilities. Actual results could differ from those estimates.

Cash, Cash Equivalents and Investments

The Company considers all highly liquid debt instruments purchased with an original maturity (maturity at the purchase date) ofthree months or less to be cash equivalents. The Company classifies its remaining investments as available-for-sale. These securities (excluding minority equity investments) are carried at fair value, with unrealized gains and losses reported in shareholders’ equity. Gains or losses on securities sold are based on the specific identification method.

Trade Accounts Receivable

Trade accounts receivable are stated at the amount the Company expects to collect and do not bear interest. The Company considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. The Company’s accounts receivable balance is a result of chemical sales, royalties and license fees. These receivables have historically been paid timely. Due to the nature of the accounts receivable balance, the Company believes there is no significant collection risk. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances for credit losses would be required. When evaluating whether a credit loss has occurred, the Company assumes that the financial condition of its customers as of the balance sheet date remains unchanged throughout the remaining life of current accounts receivable and current contract assets. As of December 31, 2025 and 2024, the allowance for credit losses was $179,000 and $175,000, respectively.

Inventories

Inventories consist of raw materials, work-in-process and finished goods, and are stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value. Inventory valuation and firm committed purchase order assessments are performed on a quarterly basis and those items that are identified to be obsolete or in excess of forecasted usage are written down to their estimated realizable value. Estimates of realizable value are based upon management’s analyses and assumptions, including, but not limited to, forecasted sales levels by product, expected product lifecycle, product development plans and future demand requirements. A 12-month rolling forecast based on factors, including, but not limited to, production cycles, anticipated product orders, marketing forecasts, backlog, and shipment activities is used in the inventory analysis. If market conditions are less favorable than forecasts or actual demand from customers is lower than estimates, additional inventory write-downs may be required. If demand is higher than expected, inventories that had previously been written down may be sold.

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful life of 30 years for buildings,15 years for building improvements, andthree toseven years for office and lab equipment and furniture and fixtures. Repair and maintenance costs are charged to expense as incurred. Additions and betterments are capitalized.

Major renewals and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to current operations as incurred. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets and any gain or loss is reflected in other operating expenses.

Certain costs of computer software obtained for internal use are capitalized and amortized on a straight-line basis over three years. Costs for maintenance and training, as well as the cost of software that does not add functionality to an existing system, are expensed as incurred.

Impairment of Long-Lived Assets

Company management continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate.

As a result of the closure of OVJP Corp's location in California and related restructuring, the Company recorded a $1.6 million right-of-use asset impairment for the year ended December 31, 2025 and a $7.5 million impairment of property and equipment and right-of-use asset for the year ended December 31, 2024. As of December 31, 2025, Company management believed that no additional revision to the remaining useful lives or write-down of the Company’s long-lived assets was required, and similarly, no such revisions were required for the year ended December 31, 2023.

Goodwill and Purchased Intangible Assets

Goodwill is tested for impairment in the fourth fiscal quarter and, when specific circumstances dictate, between annual tests. If after assessing the totality of events or circumstances as those described in the qualitative assessment, it is determined that it is more likely than not the fair value of a reporting unit is less than its carrying amount, then a quantitative goodwill impairment test will be performed. Under the quantitative test, the fair value of the reporting unit is compared to its carrying amount including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit would be considered not impaired. However, if the carrying amount of the reporting unit exceeds its fair value, an impairment loss would be recognized in the amount equal to the excess, limited to the total amount of goodwill allocated to that reporting unit. The Company performed its annual impairment assessment as of December 31, 2025 utilizing a qualitative assessment and concluded that it was more likely than not that the fair value of Adesis is greater than its carrying value. Future impairment tests will continue to be performed annually in the fiscal fourth quarter, or sooner if a triggering event occurs. As of December 31, 2025, no indications of impairment existed.

Purchased intangible assets with finite lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets.

Fair Value of Financial Instruments

The carrying values of accounts receivable, other current assets, accounts payable and other current liabilities approximate fair value in the accompanying Consolidated Financial Statements due to the short-term nature of those instruments. The Company’s other financial instruments, which include cash equivalents and investments (excluding minority equity investments) are carried at fair value.

Fair Value Measurements

Fair value is defined as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants based on the highest and best use of the asset or liability. The Company uses valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability and are based on market data obtained from sources independent of the Company. Unobservable inputs reflect assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

Minority Equity Investments

The Company accounts for minority equity investments in companies that are not accounted for under the equity method as equity securities without readily determinable fair values. The value of these securities is based on original cost less impairments, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment in the same issuer. Under this method, the share of income or loss of such companies is not included in the Consolidated Statements of Income. The carrying value of these investments is included in investments on the Consolidated Balance Sheets.

The Company’s policy is to recognize an impairment in the value of its minority equity investments when evidence of an impairment exists. Factors considered in the assessment include a significant adverse change in the regulatory, economic, or technological environment, the completion of new equity financing that may indicate a decrease in value, the failure to complete new equity financing arrangements after seeking to raise additional funds, or the commencement of proceedings under which the assets of the business may be placed in receivership or liquidated to satisfy the claims of debt and equity stakeholders. The impairment in the value of minority equity investments is included in the other income (loss), net line item on the Consolidated Statements of Income.

Leases

The Company is a lessee in operating leases primarily incurred to facilitate manufacturing, research and development, and selling, general and administrative activities. At contract inception, the Company determines if an arrangement is or contains a lease, and if so recognizes a right-of-use asset and lease liability at the lease commencement date. For operating leases, the lease liability is measured at the present value of the unpaid lease payments at the lease commencement date, whereas for finance leases, the lease liability is initially measured at the present value of the unpaid lease payments and subsequently measured at amortized cost using the interest method. Operating lease right-of-use assets are included in other assets on the Consolidated Balance Sheets. The short-term portion of operating lease liabilities is included in other current liabilities on the Consolidated Balance Sheets and the long-term portion is included in other liabilities on the Consolidated Balance Sheets. As of December 31, 2025, the Company had no leases that qualified as financing arrangements.

Key estimates and judgments include how the Company determines the discount rate used to discount the unpaid lease payments to present value and the lease term. The Company monitors for events or changes in circumstances that could potentially require recognizing an impairment loss.

Revenue Recognition and Deferred Revenue

Material sales relate to the Company’s sale of its OLED materials for incorporation into its customers’ commercial OLED products or for their OLED development and evaluation activities. Revenue associated with material sales is generally recognized at the time title passes, which is typically at the time of shipment or at the time of delivery, depending upon the contractual agreement between the parties. Revenue may be recognized after control of the material passes in the event the transaction price includes variable consideration. For example, a customer may be provided an extended opportunity to stock materials prior to use in mass production and given a general right of return not conditioned on breaches of warranties associated with the specific product. In such circumstances, revenue will be recognized at the earlier of the expiration of the customer’s general right of return or once it becomes unlikely that the customer will exercise its right of return.

The vast majority of revenue attributed to material sales is determined through technology license agreements and material supply agreements the terms of which are jointly agreed upon with the Company’s customers. The remaining revenue recognized is in the form of contract research services revenue earned by the Company’s subsidiary, Adesis, and the Company’s occasional material sales to smaller customers. None of the revenue recognized during the years ended December 31, 2025, 2024 or 2023 resulted solely from royalty or license fee arrangements as to which there were not associated material sales.

The rights and benefits to the Company’s OLED technologies are conveyed to the customer through technology license agreements and material supply agreements. The Company believes that the licenses and materials sold under these combined agreements are not distinct from each other for financial reporting purposes and as such, they are accounted for as a single performance obligation. Accordingly, total contract consideration is estimated and recognized over the contract term based on material units sold at the estimated per unit fee over the life of the contract. Total contract consideration is allocated to material sales and royalty and licensing fees on the Consolidated Statements of Income based on contract pricing.

Various estimates are relied upon to recognize revenue. The Company estimates total material units to be purchased by its customers over the contract term based on historical trends, industry estimates and its forecast process. Management uses the expected value method to estimate the material per unit fee. Additionally, management estimates the sales-based portion of royalty revenue based on the estimated net sales revenue of its customers over the contract term.

Contract research services revenue is revenue earned by Adesis by providing chemical materials synthesis research, development and commercialization for non-OLED applications on a contractual basis. These services range from intermediates for structure-activity relationship studies, reference agents and building blocks for combinatorial synthesis, re-synthesis of key intermediates, specialty organic chemistry needs, and selective toll manufacturing. These services are provided to third-party pharmaceutical and life sciences firms and other technology firms at fixed costs or predetermined rates on a contract basis. Revenue is recognized as services are performed with billing schedules and payment terms negotiated on a contract-by-contract basis. Payments received in excess of revenue recognized are recorded as deferred revenue. In other cases, services may be provided and revenue is recognized before the customer is invoiced. In these cases, revenue recognized will exceed amounts billed and the difference, representing amounts which are currently unbillable to the customer pursuant to contractual terms, is recorded as an unbilled receivable.

Technology development and support revenue is revenue earned from development and technology evaluation agreements and commercialization assistance fees. Technology development and support revenue is included in contract research services on the Consolidated Statements of Income.

On December 2, 2022, the Company 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, the Company is 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 the Company's intellectual property assets for a limited period of time that is less than the estimated life of the assets.

At the same time the Company entered into the current commercial license agreement with SDC, the Company also entered into a new supplemental material purchase agreement with SDC, which lasts for the same term as the license agreement and is subject to the same extension option. This new material purchase agreement replaced a previous purchase agreement that had been in place since 2018. Under the supplemental material purchase agreement, SDC agrees to purchase red and green phosphorescent emitter materials from the Company for use in the manufacture of licensed products. This amount purchased is subject to SDC’s requirements for phosphorescent emitter materials and the Company’s ability to meet these requirements over the term of the supplemental agreement.

In 2015, the Company entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display). In 2021, the Company 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.

In 2023, the Company entered into new long-term, multi-year agreements with BOE Technology Group Co., Ltd. (BOE). Under these agreements, the Company has granted BOE non-exclusive license rights under various patents owned or controlled by the Company to manufacture and sell OLED display products. The Company supplies phosphorescent OLED materials to BOE for use in its licensed products.

In 2019, the Company entered into an evaluation and commercial supply relationship with Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (CSOT). In 2020, the Company entered into long-term, multi-year agreements with CSOT. Under these agreements, the Company has granted CSOT non-exclusive license rights under various patents owned or controlled by the Company to manufacture and sell OLED display products. The Company also supplies phosphorescent OLED materials to CSOT for use in its licensed products.

In 2024, the Company entered into new long-term, multi-year agreements with Visionox Technology, Inc. (Visionox). Under these agreements, the Company has granted Visionox non-exclusive license rights under various patents owned or controlled by the Company to manufacture and sell OLED display products. Additionally, the Company supplies phosphorescent OLED materials to Visionox for use in its licensed products.

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

All material sales transactions that are not variable consideration transactions are generally billed and due within 90 days and substantially all are transacted in U.S. dollars.

Cost of Sales

Cost of sales consists of labor and material costs associated with the production of materials processed at the facilities of the Company's manufacturing partner, PPG Industries, Inc. (PPG) and at the Company's internal facilities. The Company’s portion of cost of sales also includes depreciation of manufacturing equipment, as well as manufacturing overhead costs and inventory adjustments for excess and obsolete inventory.

Research and Development

Expenditures for research and development are charged to expense as incurred.

Restructuring

The Company has participated in restructuring initiatives in the past and it is possible that the Company may engage in future restructuring activities. Identifying and calculating the cost to exit operations requires certain assumptions to be made, the most significant of which are anticipated future liabilities, including leases and other contractual obligations, and the adjustment of property and equipment to net realizable value. Significant judgment is required, and estimates and assumptions may change as additional information becomes available and facts or circumstances change.

In June 2020, the Company formed a wholly-owned subsidiary, OVJP Corp in California, as a Delaware corporation, which was founded to advance the commercialization of the Company's proprietary OVJP technology, which the Company now refers to as Universal Vapor Jet Printing (UVJP). In December 2024, the Company announced that the OVJP Corp facility in California would be closing and UVJP operations would be relocated to the Company's newly formed subsidiary, UVJC in Singapore, as well as continued operations in the Company's Tech and Innovation Center in New Jersey. As a result of the closure of OVJP Corp's location in California, the Company determined to record $2.2 million and $8.9 million of restructuring costs for the years ended December 31, 2025 and 2024, respectively. The OVJP Corp restructuring costs are included in the research and development expense line item on the Consolidated Statements of Income.

Patent Costs

Costs associated with patent applications, patent prosecution, patent defense and the maintenance of patents are charged to expense as incurred. Costs to successfully defend a challenge to a patent are capitalized to the extent of an evident increase in the value of the patent. Costs that relate to an unsuccessful outcome are charged to expense.

Amortization of Acquired Technology

Amortization costs primarily relate to technology acquired from Merck KGaA, Darmstadt, Germany (Merck KGaA) and BASF SE (BASF). The Merck KGaA acquisition was completed on April 28, 2023 and the BASF acquisition was completed during the year ended December 31, 2016. Acquisition costs are being amortized over a period of 10 years for the Merck KGaA and BASF patents.

Amortization of Other Intangible Assets

Other intangible assets from the Adesis acquisition are being amortized over a period of 10 to 15 years. See Note 7 for further discussion.

Translation of Foreign Currency Financial Statements and Foreign Currency Transactions

The Company’s reporting currency is the U.S. dollar. The functional currency for the UDC Ireland, UDC Korea and UDC Chengdu subsidiaries are also the U.S. dollar and the functional currency for the OMM subsidiary and each of the Company's other Asia-Pacific foreign subsidiaries is its respective local currency. The Company translates the amounts included in the Consolidated Statements of Income from OMM and its other Asia-Pacific foreign subsidiaries into U.S. dollars at weighted-average exchange rates, which the Company believes are representative of the actual exchange rates on the dates of the transactions. The Company's OMM subsidiary and each of the Company's other Asia-Pacific foreign subsidiaries' assets and liabilities are translated into U.S. dollars from the local currency at the actual exchange rates as of the end of each reporting date, and the Company records the resulting foreign exchange translation adjustments in the Consolidated Balance Sheets as a component of accumulated other comprehensive income (loss). With the exception of the Korean withholding tax receivable denominated in Korean Won (see Note 20), the overall effect of the translation of foreign currency and foreign currency transactions to date has been insignificant.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount of which the likelihood of realization is greater than 50%. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties, if any, related to unrecognized tax benefits as a component of tax expense.

On July 4, 2025, the U.S. enacted H.R. 1 "A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14." The bill includes several changes to federal tax law that generally allow for more favorable treatment of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures. H.R.1 also includes certain changes to the international tax framework and permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act. During the year ended December 31, 2025, the Company evaluated H.R 1 and estimated its impact on the Consolidated Financial Statements to be immaterial. The Company will continue to evaluate the full impact of the legislative changes as additional guidance becomes available.

Share-Based Payment Awards

The Company recognizes in the Consolidated Statements of Income the grant-date fair value of equity-based awards such as shares issued under employee stock purchase plans, restricted stock awards, restricted stock units and performance unit awards issued to employees and directors.

The grant-date fair value of stock awards is based on the closing price of the stock on the date of grant. The fair value of share-based awards is recognized as compensation expense on a straight-line basis over the requisite service period, net of forfeitures. The Company issues new shares upon the respective grant, exercise or vesting of the share-based payment awards, as applicable.

Performance unit awards are subject to either a performance-based or market-based vesting requirement. For performance-based vesting, the grant-date fair value of the award, based on fair value of the Company's common stock, is recognized over the service period based on an assessment of the likelihood that the applicable performance goals will be achieved, and compensation expense is periodically adjusted based on actual and expected performance. Compensation expense for performance unit awards with market-based vesting is calculated based on the estimated fair value as of the grant date utilizing a Monte Carlo simulation model and is recognized over the service period on a straight-line basis.

Recent Accounting Pronouncements

Adoption of New Accounting Standards

In March 2024, the FASB issued ASU No. 2024-01, Compensation - Stock Compensation (Topic 718). The standard provides guidance to reduce complexity and diversity in practice in determining whether a profits interest award is accounted for as a share-based payment. Early adoption is permitted. This guidance can be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest or similar awards granted or modified on or after the effective date for our application of this guidance. The adoption of ASU 2024-01, beginning on January 1, 2025, did not have an impact on the Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The standard enhances the annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity's worldwide operations. The adoption of ASU 2023-09, during the annual period ended December 31, 2025, resulted in enhanced income tax disclosures included in Note 20.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The standard reduces the cost and complexity of applying Topic 326 (credit losses) to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606 (revenue from contracts with customers). The Company chose to early adopt ASU 2025-05 during the annual period ended December 31, 2025, and elected the practical expedient. This practical expedient permits the Company to assume the current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current contract assets. The adoption of ASU 2025-05, during the annual period ended December 31, 2025, did not have an impact on the Consolidated Financial Statements and related disclosures.

Accounting Standards Issued But Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE). The standard requires new financial statement disclosures disaggregating information about prescribed categories underlying any relevant income statement expense caption. ASU 2024-03 becomes effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is evaluating the potential impact of this standard on the Consolidated Financial Statements and related disclosures.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The standard updates the accounting for internal-use software by eliminating the concept of development stages. Under this updated guidance, software costs are capitalized once management has authorized and committed funding to the project, and it is probable the project will be completed and the software used as intended. ASU 2025-06 becomes effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. The Company is evaluating the potential impact of this standard on the Consolidated Financial Statements and related disclosures.

CASH, CASH EQUIVALENTS AND INVESTMENTS:

The Company’s portfolio of marketable fixed income securities consists of U.S. Government bonds. The Company considers all highly liquid debt instruments purchased with an original maturity (maturity at the purchase date) of three months or less to be cash equivalents. The Company classifies its remaining debt security investments as available-for-sale. These debt securities are carried at fair value, with unrealized gains and losses reported in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Gains or losses on securities sold are based on the specific identification method.

Cash and Cash Equivalents

The following table provides details regarding the Company’s portfolio of cash and cash equivalents (in thousands):

Short-term Investments

The following table provides details regarding the Company’s portfolio of short-term investments (in thousands):

(1)

Changes in aggregate fair value recorded inother income (loss), net on the Consolidated Statements of Income.

Long-term U.S. Government Bond Investments

The following table provides details regarding the Company’s portfolio of long-term investments (in thousands):

As of December 31, 2025,100% of the Company's long-term U.S. Government bonds had maturities betweenoneand three years.

Minority Equity Investments and Convertible Notes

The Company’s portfolio of minority equity investments and convertible notes consists of investments in privately held early-stage companies primarily motivated for the Company to gain early access to new technology and are passive in nature in that the Company typically does not seek to obtain representation on the boards of directors of the companies in which it invests. Minority equity investments and convertible notes are included in investments on the Consolidated Balance Sheets. As of both December 31, 2025 and 2024, the Company had minority equity investments in six entities, with a total carrying value of $22.0 million and $18.6 million, respectively, accounted for as equity securities without readily determinable fair values. As of both December 31, 2025 and 2024, the Company hadtwo convertible note investments, with a total fair value of $2.0 million and $3.5 million, respectively, accounted for as available-for-sale debt securities without readily determinable fair values. During the years ended December 31, 2025 and 2024, the Company did not recognize an impairment in the value of its minority equity investments.

FAIR VALUE MEASUREMENTS:

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2025 (in thousands):

The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2024 (in thousands):

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset’s or liability’s classification is determined based on the lowest level input that is significant to the fair value measurement.

Changes in fair value of the debt investments are recorded as unrealized gains and losses in accumulated other comprehensive income (loss) on the Consolidated Balance Sheets and any credit losses on debt investments are recorded as an allowance for credit losses with an offset recognized in other income (loss), net on the Consolidated Statements of Income. There wereno credit losses on debt investments as of December 31, 2025 or 2024.

INVENTORY:

Inventory consisted of the following (in thousands):

The increase in inventory during the year ended December 31, 2025 was primarily due to purchases of certain strategic raw materials. The Company recorded an increase in its inventory reserves of $376,000, $3.1 million and $8.5 million for the years ended December 31, 2025, 2024 and 2023, respectively, due to excess inventory levels in certain products.

PROPERTY AND EQUIPMENT:

Property and equipment, net consist of the following (in thousands):

Depreciation expense was $28.4 million, $25.9 million and $27.4 million for the years ended December 31, 2025, 2024 and 2023, respectively. During the year ended December 31, 2025, the Company disposed of $7.0 million in property and equipment with no net book value. These assets were previously impaired as of December 31, 2024, in connection with the closure of the OVJP Corp facility in California.

GOODWILL AND INTANGIBLE ASSETS:

The Company monitors the recoverability of goodwill annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Purchased intangible assets subject to amortization consist of acquired technology and other intangible assets that include trade names, customer relationships and developed intellectual property (IP) processes.

Acquired Technology

Acquired technology primarily consists of acquired license rights for patents and know-how obtained from Merck KGaA, BASF and Fujifilm. These intangible assets consist of the following (in thousands):

Amortization expense related to acquired technology was $16.8 million, $16.8 million and $14.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. Amortization expense is included in amortization of acquired technology and other intangible assets expense line item on the Consolidated Statements of Income and is expected to be $12.0 million in the year ending December 31, 2026, $7.2 million in each of the years ending December 31, 2027 and 2028, $7.1 million in each of the years ending December 31, 2029 and 2030, and $16.2 million in total thereafter.

Merck KGaA Patent Acquisitions

In April 2023, UDC Ireland entered into a Patent Sale and License Agreement with Merck KGaA. Under this agreement, Merck KGaA sold to UDC Ireland all of its rights, title and interest to over 550 of its owned and licensed OLED-related patents and patent applications in exchange for a cash payment of $66.0 million. The Patent Sale and License Agreement contains customary representations, warranties and covenants of the parties. UDC Ireland recorded the payment of $66.0 million as acquired technology, which is being amortized over a period of 10 years.

In October 2025, UDC Ireland entered into an Intellectual Property Sales Agreement with Merck KGaA. Under this agreement, UDC Ireland agreed to acquire from Merck KGaA all of its rights, title and interest to more than 300 of its OLED-related patents and patent applications in exchange for cash payments totaling $50.0 million. The Intellectual Property Sale Agreement contains customary representations, warranties and covenants of the parties. In November 2025, an initial payment of $10.0 million was made toward the purchase price and is included in other current assets on the Consolidated Balance Sheets as of December 31, 2025. The transaction closed during January 2026 and the acquired assets will be amortized over a period of 10 years.

BASF Patent Acquisition

On June 28, 2016, UDC Ireland entered into and consummated an IP Transfer Agreement with BASF. Under the IP Transfer Agreement, BASF sold to UDC Ireland all of its rights, title and interest to certain of its owned and co-owned intellectual property rights relating to the composition, development, manufacture and use of OLED materials, including OLED lighting and display stack technology, as well as certain tangible assets. The intellectual property includes knowhow and more than 500 issued and pending patents in the area of phosphorescent materials and technologies. These assets were acquired in exchange for a cash payment of €86.8 million ($95.8 million). In addition, UDC Ireland also took on certain rights and obligations under three joint research and development agreements to which BASF was a party. The IP Transfer Agreement also contains customary representations, warranties and covenants of the parties. UDC Ireland recorded the payment of €86.8 million ($95.8 million) and acquisition costs incurred of $217,000 as acquired technology, which is being amortized over a period of 10 years.

Other Intangible Assets

As a result of the Adesis acquisition in June 2016, the Company recorded $16.8 million of other intangible assets, including $10.5 million assigned to customer relationships with a weighted average life of 11.5 years, $4.8 million to internally developed IP, processes and recipes with a weighted average life of 15 years, and $1.5 million to trade name and trademarks with a weighted average life of 10 years.

At December 31, 2025, these other intangible assets consist of the following (in thousands):

Amortization expense related to other intangible assets was $1.4 million for each of the years ended December 31, 2025, 2024, and 2023. Amortization expense is included in amortization of acquired technology and other intangible assets expense line item on the Consolidated Statements of Income and is expected to be $1.4 million for the year ending December 31, 2026, $1.3 million for the year ending December 31, 2027, $426,000 for the year ending December 31, 2028, $366,000 for each of the years ending December 31, 2029 and 2030, and $219,000 in total thereafter.

Goodwill

As a result of the Adesis acquisition, the Company recorded $15.5 million of goodwill. The Company performs its annual assessment of goodwill during the fourth quarter of the fiscal year unless events suggest an impairment may have been incurred in an interim period using Adesis’ standalone financial operating performance information. Application of the goodwill impairment test requires the exercise of judgment, including the determination of the fair value of each reporting unit, as Adesis is the reporting unit. As part of the annual assessment of goodwill completed during the fourth quarter ended December 31, 2025, there were no significant indicators to conclude that an impairment of the goodwill associated with the acquisition of Adesis had occurred.

OTHER ASSETS:

Other assets consist of the following (in thousands):

See Notes 9 and 20 for further explanation on right-of-use assets and long-term taxes receivable, respectively.

LEASES:

The Company has entered into operating leases to facilitate the expansion of its manufacturing, research and development, and selling, general and administrative activities. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when those events are reasonably certain to occur. The interest rate implicit in lease contracts is typically not readily determinable and as such the Company uses the appropriate incremental borrowing rate based on information available at the lease commencement date in determining the present value of the lease payments. Current lease agreements do not contain any residual value guarantees or material restrictive covenants. As of December 31, 2025, the Company did not have any finance leases and no additional operating leases that have not yet commenced.

The following table presents the Company’s operating lease cost and supplemental cash flow information related to the Company’s operating leases (in thousands):

The following table presents the Company’s operating lease right-of-use assets and liabilities (in thousands):

For the years ended December 31, 2025 and 2024, the Company determined to record a right-of-use impairment of $1.6 million and $1.4 million, respectively, due to the closure of OVJP Corp's California location and related restructuring.

The following table presents weighted average assumptions used to compute the Company’s right-of-use assets and lease liabilities:

As of December 31, 2025, current operating leases had remaining terms betweenone andsix years with options to extend the lease terms.

Undiscounted future minimum lease payments as of December 31, 2025, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows (in thousands):

ACCRUED EXPENSES:

Accrued expenses consist of the following (in thousands):

RESEARCH AND LICENSE AGREEMENTS WITH ACADEMIC PARTNERS:

The Company has long-standing relationships with a number of academic institutions that undertake funded research projects, including Princeton University (Princeton) and the University of Southern California (USC).

Under the current license agreement among the Company, Princeton and USC, the universities have granted the Company worldwide, exclusive license rights, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on patent applications and issued patents arising out of research performed by the universities for the Company. The Company recorded royalty expense in connection with this agreement of $450,000, $2.0 million and $575,000 for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company also makes payments under the current research agreement with USC on a quarterly basis as actual expenses are incurred. As of December 31, 2025, the Company was obligated to pay USC up to $6.3 million for work to be performed during the remaining term. The Company recorded research and development expense in connection with work performed under the agreement of $1.6 million, $1.6 million and $1.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.

OTHER LIABILITIES:

Other liabilities consist of the following (in thousands):

See Notes 9 and 20 for further explanation on long-term lease liabilities and long-term taxes payable, respectively.

EQUITY AND CASH COMPENSATION UNDER THE PPG AGREEMENTS:

On September 22, 2011, the Company entered into an Amended and Restated OLED Materials Supply and Service Agreement with PPG (the New OLED Materials Agreement), which, effective as of October 1, 2011, replaced the original OLED Materials Agreement with PPG. The term of the New OLED Materials Agreement, as amended in February 2021 (the February 2021 amendment), runs through December 31, 2026, and thereafter is automatically renewed for additional one-year terms, unless terminated by the Company by providing prior notice of one year or terminated by PPG by providing prior notice of two years. The New OLED Materials Agreement contains provisions that are substantially similar to those of the original OLED Materials Agreement. Under the New OLED Materials Agreement, PPG continues to assist the Company in developing its proprietary OLED materials and supplying the Company with those materials for evaluation purposes and for resale to its customers.

Under the New OLED Materials Agreement, the Company compensates PPG on a cost-plus basis for the services provided during each calendar quarter. The Company is required to pay for some of these services in all cash. Up to 50% of the remaining services are payable, at the Company’s sole discretion, in cash or shares of the Company’s common stock, with the balance payable in cash. The actual number of shares of common stock issuable to PPG is determined based on the average closing price for the Company’s common stock during a specified number of days prior to the end of each calendar half-year period ending on March 31 and September 30. If, however, this average closing price is less than $20.00, the Company is required to compensate PPG in cash. No shares have been issued for services rendered by PPG since the inception of the contract.

The Company is also required to reimburse PPG for raw materials used for research and development. The Company records the purchases of these raw materials as a current asset until such materials are used for research and development efforts.

The February 2021 amendment extended the term of the agreement and specified operation and maintenance services to be provided by PPG affiliate, PPG SCM Ireland Limited (PPG SCM), to UDC Ireland, at the Company’s manufacturing site in Shannon, Ireland that UDC Ireland’s wholly-owned subsidiary, OLED Material Manufacturing Limited (OMM), began leasing at such time for the production of OLED materials. OMM purchased the site in September 2023 and the Company amended and restated the February 2021 amendment to reflect OMM’s ownership and PPG SCM’s updated operation and maintenance services after such purchase. Facility improvements have been completed and operations commenced in June 2022. As with the initial New OLED Materials Agreement, the Company compensates PPG on a cost-plus basis for the services provided at the Shannon manufacturing facility.

The Company recorded research and development expense of $17.5 million, $19.3 million and $9.1 million for the years ended December 31, 2025, 2024 and 2023, respectively, in relation to the cash portion of the reimbursement of expenses and work performed by PPG, excluding amounts paid for commercial chemicals.

SHAREHOLDERS' EQUITY:

Preferred Stock

The Company’s Amended and Restated Articles of Incorporation authorize it to issue up to 5,000,000 shares of $0.01 par value preferred stock with designations, rights and preferences determined from time-to-time by the Company’s Board of Directors. Accordingly, the Company’s Board of Directors is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of shareholders of the Company’s common stock.

In 1995, the Company issued 200,000 shares of Series A Nonconvertible Preferred Stock (Series A) to American Biomimetics Corporation (ABC) pursuant to a certain Technology Transfer Agreement between the Company and ABC. The Series A shares have a liquidation value of $7.50 per share. Series A shareholders, as a single class, have the right to elect two members of the Company’s Board of Directors. This right has never been exercised. Holders of the Series A shares are entitled to one vote per share on matters which shareholders are generally entitled to vote. The Series A shareholders are not entitled to any dividends. As of December 31, 2025, the Company had issued 200,000 shares of preferred stock (consisting of the 200,000 shares of Series A), all of which were outstanding.

Common Stock

The Company’s Amended and Restated Articles of Incorporation authorize it to issue up to 200,000,000 shares of $0.01 par value common stock. Each share of the Company’s common stock entitles the holder to one vote on all matters to be voted upon by the shareholders. As of December 31, 2025, the Company had issued 48,916,606 shares of common stock, of which 47,259,748 were outstanding.

On April 29, 2025, the Company’s Board of Directors approved a share repurchase program, authorizing the Company to purchase up to $100.0 million of its common stock. The repurchase authorization was effective immediately and permits shares of the Company’s common stock to be repurchased from time to time at management's discretion, through a variety of methods, including a 10b5-1 trading plan, open market purchases, privately negotiated transactions, or transactions otherwise in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The repurchase program has no time limit, does not obligate the Company to acquire a specified number of shares and may be modified, suspended or discontinued at any time at the Company’s discretion. During the year ended December 31, 2025, the Company repurchased 291,210 shares of its common stock for $34.1 million. During the year ended December 31, 2024, the Company repurchasedno shares of its common stock.

Dividends

During the year ended December 31, 2025, the Company declared cash dividends of $1.80 per common share, or $86.3 million, on the Company’s outstanding common stock. The Company paid $85.5 million of cash dividends during the year ended December 31, 2025.

On February 17, 2026, the Company’s Board of Directors declared a first quarter cash dividend of $0.50 per share to be paid on March 31, 2026 to all shareholders of record of the Company's common stock as of the close of business on March 17, 2026. All future dividends will be subject to the approval of the Company’s Board of Directors.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):

Amounts related to the changes inaccumulated other comprehensive income (loss) were as follows (in thousands):

(1)

The Company reclassified amortization of prior service cost, actuarial loss, curtailment charge and plan amendment cost for its retirement plan from accumulated other comprehensive income (loss) to net income of $18,000, $261,000 and $1.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.

(2)

Refer to Note 17: Employee Retirement Plans

STOCK-BASED COMPENSATION:

Equity Compensation Plan

On June 15, 2023, the shareholders of the Company voted to approve the Universal Display Corporation 2023 Equity Compensation Plan (the “Equity Compensation Plan”), which replaced the Universal Display Corporation 2014 Equity Compensation Plan. The Equity Compensation Plan provides for the granting of incentive and nonqualified stock options, shares of common stock, stock appreciation rights and performance units to employees, directors and consultants of the Company. Stock options are exercisable over periods determined by the Company’s Human Capital Committee, but for no longer than 10 years from the grant date. The total number of shares that may be subject to awards under the Equity Compensation Plan is equal to the shares that were available for issuance and not subject to an award under the 2014 Equity Compensation Plan at the time it was replaced by the Equity Compensation Plan, subject to adjustment with respect to shares underlying any outstanding award granted under the Equity Compensation Plan or the 2014 Equity Compensation Plan that may expire, or be terminated, surrendered or forfeited for any reason, without issuance of such shares. As of December 31, 2025, there were 1,094,479 shares available to be granted under the Equity Compensation Plan. The Equity Compensation Plan will terminate on June 15, 2033.

Restricted Stock Award and Units

The Company has issued restricted stock awards and units to employees and non-employees with vesting terms of one to five years. The fair value is equal to the market price of the Company’s common stock on the date of grant for awards granted to employees. Consistent with the accounting for equity-classified awards issued to employees, our equity-classified non-employee share-based awards are measured at the grant date fair value. Expense for restricted stock awards and units is amortized ratably over the vesting period for the awards issued to employees and using a graded vesting method for the awards issued to non-employees.

The following table summarizes the activity related to restricted stock unit (RSU) share based payment awards:

The weighted average grant-date fair value per unit of RSU awards granted was $140.87, $177.65 and $136.22 during the years ended December 31, 2025, 2024 and 2023, respectively. The grant date fair value of RSUs that vested during the year was $16.0 million for the year ended December 31, 2025, $17.5 million for the year ended December 31, 2024 and $21.6 million for the year ended December 31, 2023. The fair value of RSUs as of their respective vesting dates was $15.4 million for the year ended December 31, 2025, $19.4 million for the year ended December 31, 2024 and $18.6 million for the year ended December 31, 2023.

The following table summarizes the activity related to restricted stock award (RSA) share based payment awards:

The weighted average grant-date fair value per award of RSA awards granted was $145.02, $185.82 and $126.87 during the years ended December 31, 2025, 2024 and 2023, respectively. The grant date fair value of RSAs that vested during the year was $300,000 for the year ended December 31, 2025, $1.3 million for the year ended December 31, 2024 and $3.3 million for the year ended December 31, 2023. The fair value of RSAs as of their respective vesting dates was $300,000 for the year ended December 31, 2025, $1.6 million for the year ended December 31, 2024 and $2.6 million for the year ended December 31, 2023.

For the years ended December 31, 2025, 2024 and 2023, the Company recorded, as compensation charges related to restricted stock awards and units issued to employees and non-employees, selling, general and administrative expense of $7.4 million, $14.8 million and $9.5 million, respectively, cost of sales of $1.7 million, $1.7 million and $1.9 million, respectively, and research and development expense of $4.8 million, $5.3 million and $5.8 million, respectively.

In connection with the vesting of restricted stock awards and units during the years ended December 31, 2025, 2024 and 2023,34,073,38,728 and 53,162 shares, respectively, with aggregate fair values of $5.1 million, $7.0 million and $7.4 million, respectively, were withheld in satisfaction of tax withholding obligations and are reflected as a financing activity within the Consolidated Statements of Cash Flows.

The Company has granted restricted stock units to non-employee members of the Board of Directors with quarterly vesting over a period of approximatelyone year. The fair value is equal to the market price of the Company's common stock on the date of grant. The restricted stock units are issued and expense is recognized ratably over the vesting period. For the years ended December 31, 2025, 2024 and 2023, the Company recorded compensation charges for services performed, related to all restricted stock units granted to non-employee members of the Board of Directors, selling, general and administrative expense of $2.2 million, $1.9 million and $1.5 million, respectively. In connection with the vesting of the restricted stock, the Company issued to non-employee members of the Board of Directors 13,660,10,870 and 13,016 shares during the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025, the total unrecognized expense related to all restricted stock awards and units was $18.9 million, which the Company expects to recognize over a weighted average period of 1.69 years.

Performance Unit Awards

Each performance unit award is subject to both a performance-vesting requirement (either performance-based or market-based) and a service-vesting requirement. The performance-based vesting requirement is tied to EBITDA and cash flow achievement, as measured over a specific performance period. The market-based vesting requirement is tied to the Company's total shareholder return (TSR) relative to the TSR of companies comprising the Nasdaq US Benchmark Components Index, as measured over a three-year performance period. The maximum number of performance units that may vest based on performance is three times the shares granted. Further, if the Company's performance falls below certain thresholds, the performance units will not vest at all.

The following table summarizes the activity related to performance unit awards (PSU) share based payment awards:

During the years ended December 31, 2025, 2024 and 2023, the Company granted 83,073,69,600 and 84,448 performance units, respectively, of which 62,304,52,199 and 63,335 units, respectively, are subject to performance-based vesting requirements and 20,769,17,401 and 21,113 units, respectively, are subject to market-based vesting requirements, and which will vest over the terms described above. During the years ended December 31, 2025, 2024 and 2023, there were no incremental performance-based shares. The weighted average grant date fair value per unit of the performance unit awards granted was $161.84, $191.21 and $165.72 during the years ended December 31, 2025, 2024 and 2023, respectively, as determined by the Company’s common stock on date of grant for the units with performance-based vesting and a Monte-Carlo simulation for the units with market-based vesting. The grant date fair value of PSUs that vested during the year was $17.9 million for the year ended December 31, 2025, $4.1 million for the year ended December 31, 2024 and $1.9 million for the year ended December 31, 2023. The fair value of PSUs as of their respective vesting dates was $10.1 million for the year ended December 31, 2025, $3.3 million for the year ended December 31, 2024 and $1.7 million for the year ended December 31, 2023.

For the years ended December 31, 2025, 2024 and 2023, the Company recorded, as compensation charges related to all performance stock units, selling, general and administrative expense of $7.0 million, $7.4 million and $2.6 million, respectively, cost of sales of $1.7 million, $2.0 million and $770,000, respectively, and research and development expense of $2.7 million, $3.2 million and $1.2 million, respectively.

In connection with the vesting of performance units during the years ended December 31, 2025, 2024 and 2023,30,875,8,160 and 5,350 shares, respectively, with aggregate fair values of $4.5 million, $1.4 million and $775,000, respectively, were withheld in satisfaction of tax withholding obligations and are reflected as a financing activity within the Consolidated Statements of Cash Flows.

As of December 31, 2025, the total unrecognized compensation expense related to performance unit awards was $11.5 million, which the Company expects to recognize over a weighted average period of 1.76 years.

Employee Stock Purchase Plan

On April 7, 2009, the Board of Directors of the Company adopted an Employee Stock Purchase Plan (ESPP). The ESPP was approved by the Company’s shareholders and became effective on June 25, 2009. The Company has reserved 1,000,000 shares of common stock for issuance under the ESPP. Unless terminated by the Board of Directors, the ESPP will expire when all reserved shares have been issued.

Eligible employees may elect to contribute to the ESPP through payroll deductions during consecutive three-month purchase periods, the first of which began on July 1, 2009. Each employee who elects to participate will be deemed to have been granted an option to purchase shares of the Company’s common stock on the first day of the purchase period. Unless the employee opts out during the purchase period, the option will automatically be exercised on the last day of the period, which is the purchase date, based on the employee’s accumulated contributions to the ESPP. The purchase price will equal 85% of the lesser of the closing price per share of common stock on the first day of the period or the last business day of the period.

Employees may allocate up to 10% of their base compensation to purchase shares of common stock under the ESPP; however, each employee may purchase no more than 12,500 shares on a given purchase date, and no employee may purchase more than $25,000 of common stock under the ESPP during a given calendar year.

For the years ended December 31, 2025, 2024 and 2023, the Company issued 17,583,15,230 and 17,513 shares, respectively, of its common stock under the ESPP, resulting in proceeds of $2.0 million, $2.2 million and $2.0 million, respectively. For the years ended December 31, 2025, 2024 and 2023, the Company recorded charges of $136,000, $130,000 and $136,000, respectively, to selling, general and administrative expense, $246,000, $210,000, $167,000, respectively, to cost of sales and $191,000, $259,000 and $240,000, respectively, to research and development expense, related to the ESPP equal to the amount of the discount and the value of the look-back feature.

Scientific Advisory Board Awards

During the years ended December 31, 2025 and 2024, the Company granted a total of 2,070 and 1,616 shares, respectively, of fully vested common stock to non-employee members of the Scientific Advisory Board for services performed in 2024 and 2023, respectively. The fair value of the shares issued to members of the Scientific Advisory Board was $300,000 for both years ended December 31, 2025 and 2024.

For the years ended December 31, 2025, 2024 and 2023, the Company recorded as compensation charges related to all restricted stock units awarded to non-employee members of the Scientific Advisory Board, whose unvested shares are marked-to-market each reporting period, research and development expense of $239,000, $242,000 and $248,000, respectively.

EMPLOYEE RETIREMENT PLANS:

Defined Contribution Plan

The Company maintains the Universal Display Corporation 401(k) Plan (the Plan) in accordance with the provisions of Section 401(k) of the Internal Revenue Code (the Code). The Plan covers substantially all full-time employees of the Company. Participants may contribute up to 90% of their total compensation to the Plan, not to exceed the limit as defined in the Code. Once an employee is eligible to participate in the Plan, the Company will make a non-elective contribution equal to 3% of the employee’s total compensation. For the years ended December 31, 2025, 2024 and 2023, the Company contributed $1.5 million, $1.7 million and $1.5 million, respectively, to the Plan.

Defined Benefit Plan

On March 18, 2010, the Human Capital Committee and the Board of Directors of the Company approved and adopted the Universal Display Corporation Supplemental Executive Retirement Plan (SERP), effective as of April 1, 2010. On March 3, 2015, the Human Capital Committee and the Board of Directors amended the SERP to include salary and bonus as part of the plan. Prior to this amendment, the SERP benefit did not take into account any bonuses. The purpose of the SERP, which is unfunded, is to provide certain of the Company’s key employees with supplemental pension benefits following a cessation of their employment and to encourage their continued employment with the Company. As of December 31, 2025 there were seven participants in the SERP.

The SERP benefit is based on a percentage of the participant’s annual base salary and in certain cases, the participant's average annual bonus for the most recent three fiscal years ending prior to the participant's date of termination of employment with the Company for the life of the participant. For this purpose, annual base salary means 12 times the average monthly base salary paid or payable to the participant during the 24-month period immediately preceding the participant’s date of termination of employment, or, if required, the date of a change in control of the Company.

Under the SERP, if a participant resigns or is terminated without cause at or after age 65 and with at least 20 years of service, he or she will be eligible to receive a SERP benefit. The benefit is based on a percentage of the participant’s annual base salary and bonus for the life of the participant. This percentage is 50%,25% or 15%, depending on the participant’s benefit class.

If a participant resigns at or after age 65 and with at least 15 years of service, he or she will be eligible to receive a prorated SERP benefit. If a participant is terminated without cause or on account of a disability after at least 15 years of service, he or she will be eligible to receive a prorated SERP benefit regardless of age. The prorated benefit in either case would be based on the participant’s number of years of service (up to 20), divided by 20. In the event a participant is terminated for cause, his or her SERP benefit and any future benefit payments are subject to immediate forfeiture.

The SERP benefit is payable in installments over 10 years, beginning at the later of age 65 or the date of the participant’s separation from service. Payments are based on a present value calculation of the benefit amount for the actuarial remaining life expectancy of the participant. This calculation is made as of the date benefit payments are to begin (later of age 65 or separation from service). If the participant dies after reaching age 65, any future or remaining benefit payments are made to the participant’s beneficiary or estate. If the participant dies before reaching age 65, the benefit is forfeited.

In the event of a change in control of the Company, each participant will become immediately vested in his or her SERP benefit. Unless the participant’s benefit has already fully vested, if the participant has less than 20 years of service at the time of the change in control, he or she will receive a prorated benefit based on his or her number of years of service (up to 20), divided by 20. If the change in control qualifies as a “change in control event” for purposes of Section 409A of the Internal Revenue Code, then each participant (including former employees who are entitled to SERP benefits) will receive a lump sum cash payment equal to the present value of the benefit immediately upon the change in control.

Certain of the Company’s executive officers are designated as special participants under the SERP. If these participants resign or are terminated without cause after 20 years of service, or at or after age 65 and with at least 15 years of service, they will be eligible to receive a SERP benefit. If they are terminated without cause or on account of a disability, they will be eligible to receive a prorated SERP benefit regardless of age. The prorated benefit would be based on the participant’s number of years of service (up to 20), divided by 20.

The SERP benefit for special participants is based on 50% of their annual base salary and bonus for their life and the life of their surviving spouse, if any. Payments are based on a present value calculation of the benefit amount for the actuarial remaining life expectancies of the participant and their surviving spouse, if any. If they die before reaching age 65, the benefit is not forfeited if the surviving spouse, if any, lives until the participant would have reached age 65. If their spouse also dies before the participant would have reached age 65, the benefit is forfeited.

The Company records amounts relating to the SERP based on calculations that incorporate various actuarial and other assumptions, including discount rates, rate of compensation increases, retirement dates, and life expectancies. The net periodic costs are recognized as employees render the services necessary to earn the SERP benefits.

In connection with the initiation and subsequent amendments of the SERP, the Company recorded cost related to prior service of $2.7 million asaccumulated other comprehensive income (loss) as of December 31, 2025. The prior service cost is being amortized as a component of net periodic pension cost over the average of the remaining service period of the employees expected to receive benefits under the plan. The prior service cost expected to be amortized for the year ending December 31, 2026 is $23,000. In December 2022, one of the participants retired and monthly SERP benefit payments commenced in January 2023. The total SERP benefit payments for the year ended December 31, 2025 were $2.0 million.

Information relating to the Company’s plan is as follows (in thousands):

The accumulated benefit obligation for the plan was $57.5 million and $54.9 million as of December 31, 2025 and 2024, respectively.

The components of net periodic pension cost were as follows (in thousands):

The measurement date is the Company’s fiscal year end. The net periodic pension cost is based on assumptions determined at the prior year end measurement date.

Assumptions used to determine the year end benefit obligation were as follows:

Assumptions used to determine the net periodic pension cost were as follows:

Actuarial gains and losses are amortized from accumulated other comprehensive income (loss) into net periodic pension cost over future years based upon the average remaining service period of active plan participants, when the accumulation of such gains or losses exceeds 10% of the year end benefit obligation. The cost or benefit of plan changes that increase or decrease benefits for prior employee service (prior service cost or credit) is included in the Company’s results of income on a straight-line basis over the average remaining service period of active plan participants.

The estimated amounts to be amortized from accumulated other comprehensive income (loss) into the net periodic pension cost in 2026 are as follows (in thousands):

Benefit payments, which reflect estimated future service, are currently expected to be paid as follows (in thousands):

COMMITMENTS AND CONTINGENCIES:

Commitments

Under the current research agreement with USC, the Company is obligated to make certain payments to USC based on work performed by it under that agreement, and by the University of Michigan (Michigan) under a subcontractor agreement that Michigan has with USC.

Under the terms of the current license agreement among the Company, Princeton and USC, the Company makes royalty payments to Princeton. See Note 11 for further explanation.

The Company has agreements with five executive officers andnine senior level employees which provide for certain cash and other benefits upon termination of employment of the officer or employee in connection with a change in control of the Company. If a covered person’s employment is terminated in connection with the change in control, the person is entitled to a lump-sum cash payment equal totwo times (in the case of the executive officers) or eitherone ortwo times (in the case of the senior level employees) the sum of the average annual base salary and bonus of the person and immediate vesting of all stock options and other equity awards that may be outstanding at the date of the change in control, among other items.

In order to manage manufacturing lead times and help ensure adequate material supply, the Company entered into the New OLED Materials Agreement (see Note 13) that allows PPG to procure and produce inventory based upon criteria as defined by the Company. These purchase commitments consist of firm, noncancelable and unconditional commitments. In certain instances, this agreement allows the Company the option to reschedule and adjust the Company’s requirements based on its business needs prior to firm orders being placed. As of December 31, 2025, 2024 and 2023, the Company had purchase commitments for inventory of $40.7 million, $46.5 million and $29.8 million, respectively.

Patent Related Challenges and Oppositions

Each major jurisdiction in the world that issues patents provides both third parties and applicants an opportunity to seek a further review of an issued patent. The process for requesting and considering such reviews is specific to the jurisdiction that issued the patent in question, and generally does not provide for claims of monetary damages or a review of specific claims of infringement. The conclusions made by the reviewing administrative bodies tend to be appealable and generally are limited in scope and applicability to the specific claims and jurisdiction in question.

The Company believes that opposition proceedings are frequently commenced in the ordinary course of business by third parties who may believe that one or more claims in a patent do not comply with the technical or legal requirements of the specific jurisdiction in which the patent was issued. The Company views these proceedings as reflective of its goal of obtaining the broadest legally permissible patent coverage permitted in each jurisdiction. Once a proceeding is initiated, as a general matter, the issued patent continues to be presumed valid until the jurisdiction’s applicable administrative body issues a final non-appealable decision. Depending on the jurisdiction, the outcome of these proceedings could include affirmation, denial or modification of some or all of the originally issued claims. The Company believes that as OLED technology becomes more established and its patent portfolio increases in size, so will the number of these proceedings.

CONCENTRATION OF RISK:

Revenues and accounts receivable from the Company's largest customers for the years ended December 31, 2025, 2024 and 2023 were as follows (in thousands):

Revenues from outside of North America represented approximately 96%,98%, and 98% of consolidated revenue for the years ended December 31, 2025, 2024 and 2023, respectively. Revenues by geographic area are as follows (in thousands):

The Company attributes revenue to different geographic areas on the basis of the location of the customer.

Property and equipment, net by geographic area are as follows (in thousands):

Substantially all finished goods were purchased fromone supplier. See Note 13.

INCOME TAXES:

During the year ended December 31, 2025, the Company adopted ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The standard enhances the annual income tax disclosures to address investor requests for more information about the tax risks and opportunities present in an entity's worldwide operations.

The components of income before income taxes are as follows (in thousands):

The components of income tax expense are as follows (in thousands):

A reconciliation of the U.S. federal statutory income tax rate to the Company's effective tax rate is as follows (in thousands, except percentages):

As of December 31, 2025 and 2024 the Company had $57.0 million and $40.7 million, respectively, of taxes receivable included in other current assets on the Consolidated Balance Sheets. In January 2026, the Company received $39.0 million of the taxes receivable from the United States Treasury.

The following table summarizes the Company's cash paid for income taxes, net of refunds received by jurisdiction (in thousands):

The following table summarizes the Company's tax credit carry forwards for tax return purposes as of December 31, 2025 (in thousands):

Significant components of the Company's net deferred tax assets and liabilities are as follows (in thousands):

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. 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. As of December 31, 2025, there is not sufficient evidence to release the valuation allowance that has been recorded for New Jersey research and development credits. Additionally, the Company recognized a gain on available-for-sale securities during the year that, if sold, would offset the capital loss, and, as a result, the valuation allowance on the capital loss was reversed. There are no indicators against the realizability of the remaining net deferred tax asset.

On December 27, 2018, the Korean Supreme Court, citing prior cases, held that only royalties paid with respect to Korean registered patents are considered Korean source income and subject to Korean withholding tax under the applicable law and interpretation of the Korea-U.S. Tax Treaty. The Company has incurred Korean withholding tax of $14.9 million for each of the years ended December 31, 2018, through December 31, 2022. Based on the Korean Supreme Court decision, a tax refund request on behalf of the Company was filed with the Korean National Tax Service (KNTS) for the period from January 1, 2018, to December 31, 2022. The Company received a formal rejection from the KNTS; and in May 2022 filed an appeal with the Korean Tax Tribunal. On December 18, 2023, the Company received a formal rejection from the Tax Tribunal. Anticipating the rejection of the appeal, in September 2023 the Company filed a petition to the District Court.

On September 18, 2025, the Korean Supreme Court issued a decision, changing its long-standing position on the taxation of royalties for patents not registered in Korea. The court held that royalties paid for licensing of a patent constitute Korean source income if the patented technology is actually used in the territory of the Republic of Korea. Based on discussions with a prominent Korean law firm, the Company has been advised that there is still a more likely-than-not chance of success, as the manufacturing and sales process occurs within and without the Republic of Korea. During the latest court appearance in November 2025, the judge requested additional information from the Korean Tax Authority regarding what amount of royalties would be considered Korean use. The next court date is scheduled for March 2026.

As a result, the Company has recorded a long-term receivable of $53.8 million and $52.9 million as of December 31, 2025 and 2024, respectively, for the receipt of the Korean withholding tax. The Company also recorded foreign exchange gain of $935,000, foreign exchange loss of $7.2 million and foreign exchange loss of $732,000 forthe years ended December 31, 2025, 2024 and 2023, respectively, due to the fluctuation of the Korean Won to the U.S. Dollar and resulting remeasurement of this Won-denominated receivable. The Company will amend U.S. federal tax returns for the 2018 to 2022 years when the anticipated refund from KNTS is received to offset the additional tax liability. The Company has recorded a long-term payable of $15.7 million as of December 31, 2025 and 2024, for the estimated amounts due to the U.S. federal government based on the amendment of the Company's U.S. tax returns, indicating that lower withholding amounts were required.

The Company is not subject to examinations by the federal tax authority for the years prior to 2022. The Company is presently undergoing a federal tax audit for the 2023 tax year and a state of California tax audit for the 2021 and 2022 tax years. Both audits are currently in the information-gathering phase.

The above estimates may change in the future and upon settlement.

REVENUE RECOGNITION:

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (Topic 606). The standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows from a contract with a customer.

For the years ended December 31, 2025, 2024 and 2023, the Company recorded 97%,98% and 97%, respectively, of its revenue from OLED related sales and 3%,2% and 3%, respectively, from the providing of services through Adesis.

Contract Balances

The following table provides information about assets and liabilities associated with the Company's contracts from customers (in thousands):

Short-term and long-term unbilled receivables and contract assets are classified as other current assets and other assets, respectively, on the Consolidated Balance Sheets. Contract assets represent consideration related to the renewal of customer contracts which is recognized over the contract term based on material units sold. The deferred revenue balance as of December 31, 2025 will be recognized as materials are shipped to customers over the remaining contract periods. As of December 31, 2025, the Company had $14.6 million of backlog associated with committed purchase orders from its customers for phosphorescent emitter material. These orders are anticipated to be fulfilled within the next 90 days.

Significant changes in unbilled receivables, contract assets and deferred revenue balances associated with the Company's contracts from customers for the years ended December 31, 2025 and 2024, are as follows (in thousands):

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was an increase $14.1 million for the year ended December 31, 2025 as compared to an increase of $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 the Company's customers over the remaining lives of their contracts.

NET INCOME PER COMMON SHARE:

The Company computes earnings per share in accordance with ASC Topic 260, Earnings per Share, which requires earnings per share (EPS) for each class of stock to be calculated using the two-class method. The two-class method is an allocation of income between the holders of common stock and the Company's participating security holders. Under the two-class method, income for the reporting period is allocated between common shareholders and other security holders based on their respective participation rights in undistributed income. Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in computing earnings per share pursuant to the two-class method.

Basic net income per common share is computed by dividing net income allocated to common shareholders by the weighted-average number of shares of common stock outstanding for the period excluding unvested restricted stock units and performance units. Net income allocated to the holders of the Company's unvested restricted stock awards is calculated based on the shareholders proportionate share of weighted average shares of common stock outstanding on an if-converted basis.

For purposes of determining diluted net income per common share, basic net income per share is further adjusted to include the effect of potential dilutive common shares outstanding, including restricted stock units, performance units and the impact of shares to be issued under the Company's Employee Stock Purchase Plan.

The following table is a reconciliation of net income and the shares used in calculating basic and diluted net income per common share for the years ended December 31, 2025, 2024 and 2023 (in thousands, except share and per share data):

For the years ended December 31, 2025, 2024 and 2023, the combined effects of unvested restricted stock awards, restricted stock units and performance unit awards of 63,999,18,015 and 36,345, respectively, were excluded from the calculation of diluted EPS as their impact would have been antidilutive.