UNIVERSAL DISPLAY CORP \PA\

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 March 31, 2026, Adesis employed a team of 137 research scientists, chemists, engineers and laboratory technicians. Prior to our acquisition of Adesis, we utilized more than 50% of Adesis’ technology service and production output. We continue to utilize a significant portion of its technology research capacity for the benefit of our OLED technology development, and Adesis uses the remaining capacity to operate as a CDMO by providing contract research services for non-OLED applications to third-party customers in the above-mentioned industries. Contract research services revenue is earned by providing chemical materials synthesis research, development and commercialization for non-OLED applications on a contractual basis for those third-party customers.

Current wording

In 2016, we acquired Adesis, Inc. (Adesis) which has operations in New Castle and Wilmington, Delaware. Adesis is a contract development and manufacturing organization (CDMO) that provides support services on a contractual basis to third-party customers in the OLED, pharma, biotech, catalysis and other industries. As of June 30, 2026, Adesis employed a team of 134 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

Green emitter sales for the three months ended March 31, 2026, which include our yellow-green emitters, were $64.0 million as compared to $63.5 million for the three months ended March 31, 2025, with unit material volumes decreasing by 2%.

Current wording

Green emitter sales for the three months ended June 30, 2026, which include our yellow-green emitters, were $50.9 million as compared to $63.6 million for the three months ended June 30, 2025, with unit material volumes decreasing by 5%.

Previous wording

Red emitter sales for the three months ended March 31, 2026 were $19.7 million as compared to $21.5 million for the three months ended March 31, 2025, with unit material volumes decreasing by 9%.

Current wording

Red emitter sales for the three months ended June 30, 2026 were $15.1 million as compared to $23.9 million for the three months ended June 30, 2025, with unit material volumes decreasing by 21%.

Previous wording

Contract research services revenue was $4.3 million for the three months ended March 31, 2026 as compared to $6.6 million for the three months ended March 31, 2025, a decrease of 35%. The decrease in contract research services revenue was primarily due to decreased specialty manufacturing customer demand at our subsidiary, Adesis, during the three months ended March 31, 2026. Revenue from contract research services consists of revenue earned by Adesis, which provides support services on a contractual basis to third-party customers in the pharma, biotech, catalysis and other industries.

Current wording

Revenue from contract research services consists of revenue earned by Adesis, which provides support services on a contractual basis to third-party customers in the pharma, biotech, catalysis and other industries. Contract research services revenue was $4.8 million for the three months ended June 30, 2026 as compared to $7.5 million for the three months ended June 30, 2025, a decrease of 36%. The decrease in contract research services revenue was primarily due to decreased specialty manufacturing customer demand at Adesis during the three months ended June 30, 2026.

Previous wording

Cost of sales for the three months ended March 31, 2026 decreased by $2.0 million as compared to the three months ended March 31, 2025, primarily due to Adesis' cost of sales and lower sales volume, partially offset by product mix. As a result of the decrease in revenue from royalty and license fees, gross margin for the three months ended March 31, 2026 decreased by $22.1 million as compared to the three months ended March 31, 2025, with gross margin as a percentage of revenue decreasing to 75% from 77%.

Current wording

Cost of sales for the three months ended June 30, 2026 decreased by $2.4 million as compared to the three months ended June 30, 2025, primarily due to lower sales volume and Adesis' cost of sales, partially offset by product mix. As a result of the decrease in revenue from material sales, partially offset by the increase in revenue from royalty and license fees, gross margin for the three months ended June 30, 2026 decreased by $17.2 million as compared to the three months ended June 30, 2025, with gross margin as a percentage of revenue decreasing to 76% from 77%.

Previous wording

Selling, general and administrative expenses increased to $20.0 million for the three months ended March 31, 2026, as compared to $17.0 million for the three months ended March 31, 2025. The increase in selling, general and administrative expenses was primarily due to an increase in employee-related expenses.

Current wording

Selling, general and administrative expenses decreased to $18.6 million for the three months ended June 30, 2026, as compared to $20.4 million for the three months ended June 30, 2025. The decrease in selling, general and administrative expenses was primarily due to a decrease in stock-based compensation, partially offset by an increase in consulting expenses.

Previous wording

Amortization of acquired technology and other intangible assets increased to $5.6 million for the three months ended March 31, 2026 as compared to $4.5 million for the three months ended March 31, 2025. The increase in amortization of acquired technology and other intangible assets was primarily due to the acquisition of the Merck KGaA patent portfolio in January 2026. See Note 7 in Notes to Consolidated Financial Statements for further discussion.

Current wording

Amortization of acquired technology and other intangible assets increased to $5.7 million for the three months ended June 30, 2026 as compared to $4.5 million for the three months ended June 30, 2025. The increase in amortization of acquired technology and other intangible assets was primarily due to the acquisition of the Merck KGaA patent portfolio in January 2026. See Note 7 in Notes to Consolidated Financial Statements for further discussion.

Previous wording

Patent costs increased to $2.4 million for the three months ended March 31, 2026, as compared to $1.9 million for the three months ended March 31, 2025.

Current wording

Patent costs decreased to $2.4 million for the three months ended June 30, 2026, as compared to $2.6 million for the three months ended June 30, 2025.

Previous wording

Royalty and license expense decreased to $104,000 for the three months ended March 31, 2026, as compared to $114,000 for the three months ended March 31, 2025.

Current wording

Royalty and license expense decreased to $105,000 for the three months ended June 30, 2026, as compared to $117,000 for the three months ended June 30, 2025.

Previous wording

We are subject to income taxes in the United States and foreign jurisdictions. The effective income tax rate was 20.7% and 19.6% for the three months ended March 31, 2026 and 2025, respectively, and we recorded income tax expense of $9.4 million and $15.7 million, respectively, for those periods. The increase in the effective tax rate during the three months ended March 31, 2026 was primarily due to a decrease in research and development tax credits.

Current wording

We are subject to income taxes in the United States and foreign jurisdictions. The effective income tax rate was 19.0% and 19.8% for the three months ended June 30, 2026 and 2025, respectively, and we recorded income tax expense of $11.6 million and $16.6 million, respectively, for those periods.

Previous wording

Our total material sales were $83.7 million for the three months ended March 31, 2026, as compared to $86.2 million for the three months ended March 31, 2025, a decrease of 3% with a commensurate decrease in unit material volume of 4%. The decrease in material sales was primarily due to changes in customer mix and lower unit material volume.

Current wording

Our total material sales were $149.9 million for the six months ended June 30, 2026, as compared to $174.8 million for the six months ended June 30, 2025, a decrease of 14% with a decrease in unit material volume of 7%. The decrease in material sales was primarily due to lower unit material volume and changes in customer mix.

Previous wording

Revenue from royalty and license fees was $54.2 million for the three months ended March 31, 2026 as compared to $73.6 million for the three months ended March 31, 2025, a decrease of 26%. The decrease in royalty and license fees for the three months ended March 31, 2026 was primarily the result of changes in customer mix and lower unit material volume. While customer mix can vary quarter to quarter, we expect the customer mix in subsequent periods of 2026 to have a more favorable impact on royalty and license fees as compared to the first quarter of the year.

Current wording

Revenue from royalty and license fees was $135.4 million for the six months ended June 30, 2026 as compared to $149.2 million for the six months ended June 30, 2025, a decrease of 9%. The decrease in royalty and license fees for the six months ended June 30, 2026 was primarily the result of lower unit material volume and changes in customer mix, partially offset by the impact of a $7.4 million favorable period-over-period change in the cumulative catch-up adjustment, which was primarily attributable to royalty and license fees, as described below.

Previous wording

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was a reduction of $12,000 for the three months ended March 31, 2026 as compared to a net increase of $2.0 million for the three months ended March 31, 2025. For the three months ended March 31, 2025, the adjustment resulted from an increase in the average price per gram that was primarily due to the decrease in anticipated demand by several of our customers over the remaining lives of their contracts.

Current wording

The total cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was an increase of $10.0 million for the six months ended June 30, 2026 as compared to a net increase of $2.6 million for the six months ended June 30, 2025. For the six months ended June 30, 2026 and 2025, the adjustment resulted from an increase in the average price per gram, primarily due to lower anticipated demand from certain customers over the respective remaining lives of their contracts.

Previous wording

Interest income, net was $8.7 million for the three months ended March 31, 2026, as compared to $10.1 million for the three months ended March 31, 2025. The decrease in interest income, net was primarily due to a decrease in bond yields on available-for-sale investments held in the current quarter over bond yields on available-for-sale investments held in the comparable quarter in 2025. Other (loss) income, net primarily consisted of net exchange gains and losses on foreign currency transactions, net investment gains and losses, and rental income. We recorded other loss, net of $6.2 million for the three months ended March 31, 2026 as compared to other income, net of $378,000 for the three months ended March 31, 2025. The decrease in other (loss) income, net was primarily due to a $3.0 million foreign exchange loss, a $2.7 million investment loss on our marketable equity securities portfolio and a $415,000 impairment loss on our minority equity investment portfolio during the three months ended March 31, 2026 as compared to a $14,000 investment loss on our marketable equity securities portfolio and no foreign exchange loss during the three months ended March 31, 2025. 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.

Current wording

Interest income, net was $17.2 million for the six months ended June 30, 2026, as compared to $19.8 million for the six months ended June 30, 2025. The decrease in interest income, net was primarily attributable to lower bond yields and reduced average investment balances on available-for-sale investments compared with the same period in 2025. Other (loss) income, net primarily consisted of net exchange gains and losses on foreign currency transactions, net investment gains and losses, and rental income. We recorded other loss, net of $7.3 million for the six months ended June 30, 2026 as compared to other income, net of $6.0 million for the six months ended June 30, 2025. The decrease in other (loss) income, net was primarily due to a $3.5 million foreign exchange loss, a $3.4 million investment loss on our marketable equity securities portfolio and a $415,000 impairment loss on our minority equity investment portfolio during the six months ended June 30, 2026 as compared to a $4.5 million foreign exchange gain during the six months ended June 30, 2025. 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

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of March 31, 2026, we had cash and cash equivalents of $159.4 million, short-term investments of $357.1 million, and long-term U.S. Government bonds investments of $395.0 million for a total of $911.5 million. This compares to 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 as of December 31, 2025.

Current wording

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of June 30, 2026, we had cash and cash equivalents of $120.6 million, short-term investments of $350.7 million, and long-term U.S. Government bonds investments of $383.2 million for a total of $854.5 million. This compares to 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 as of December 31, 2025.

Previous wording

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

Current wording

Cash provided by operating activities for the six months ended June 30, 2026 was $133.9 million resulting from $85.3 million of net income, $42.5 million from non-cash items including depreciation, stock-based compensation and amortization of intangibles, and a $6.1 million increase due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in deferred revenue of $19.9 million and a decrease in other assets of $17.8 million, partially offset by a decrease in accounts payable and accrued expenses of $14.0 million, an increase in inventory of $8.7 million, an increase in accounts receivable of $6.3 million and a decrease in other liabilities of $2.6 million.

Previous wording

Cash provided by operating activities for the three months ended March 31, 2026 was $108.9 million resulting from $35.9 million of net income, $23.6 million from non-cash items including depreciation, stock-based compensation and amortization of intangibles and a $49.4 million increase due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to a decrease in other assets of $39.3 million, a decrease in accounts receivable of $26.3 million, an increase in other liabilities of $6.6 million, partially offset by a decrease in accounts payable and accrued expenses of $15.3 million, an increase in inventory of $7.3 million and a decrease in deferred revenue of $188,000. The decrease in other current assets during the three months ended March 31, 2026 was primarily due a receipt of $39.0 million of taxes receivable from the United States Treasury during January 2026. The decrease in accounts receivable during the three months ended March 31, 2026 was primarily due to the timing of material shipments as well as license fee payments from certain customers.

Current wording

Cash provided by operating activities for the six months ended June 30, 2025 was $82.5 million resulting from $131.7 million of net income and $32.7 million from non-cash items including stock-based compensation, depreciation and amortization of intangibles, partially offset by a $81.9 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in accounts receivable of $33.4 million, an increase in other assets of $28.0 million, an increase in inventory of $25.3 million and a decrease in other liabilities of $4.4 million, partially offset by an increase in accounts payable and accrued expenses of $4.6 million and an increase in deferred revenue of $4.6 million. The increase in accounts receivable during the six months ended June 30, 2025 was primarily due to the timing of material shipments as well as license fee billings for certain customers. The increase in inventory during the six months ended June 30, 2025 was primarily due to purchases of certain strategic raw materials.

Previous wording

Cash provided by investing activities was $9.9 million for the three months ended March 31, 2026, as compared to $58.2 million for the three months ended March 31, 2025. The decrease in cash provided by investing activities was due to timing of maturities and purchases of investments resulting in net sales and maturities of $58.5 million for the three months ended March 31, 2026, as compared to $71.2 million for the three months ended March 31, 2025, partially offset by an increase in purchases of intangibles and property and equipment of $35.6 million. The increase in the purchases of intangibles during the three months ended March 31, 2026 was primarily due to the acquisition of the Merck KGaA patent portfolio in January 2026.

Current wording

Cash provided by investing activities was $17.0 million for the six months ended June 30, 2026, as compared to cash used in investing activities of $34.5 million for the six months ended June 30, 2025. The increase in cash provided by investing activities was due to timing of maturities and purchases of investments resulting in net sales and maturities of $70.2 million for the six months ended June 30, 2026, as compared to net purchases of $7.0 million for the six months ended June 30, 2025, partially offset by an increase in purchases of intangibles and property and equipment of $25.7 million. The increase in the purchases of intangibles during the six months ended June 30, 2026 was primarily due to the acquisition of the Merck KGaA patent portfolio in January 2026.

Previous wording

Cash used in financing activities was $97.7 million for the three months ended March 31, 2026, as compared to $30.2 million for the three months ended March 31, 2025. The increase was due to an increase in the repurchases of common stock of $67.1 million, an increase in the cash payment of dividends in the current year of $2.0 million and a decrease in the proceeds from issuance of common stock of $1,000, partially offset by a decrease in the payment of withholding taxes related to stock-based compensation to employees of $1.6 million.

Current wording

Cash used in financing activities was $168.6 million for the six months ended June 30, 2026, as compared to $51.2 million for the six months ended June 30, 2025. The increase was due to an increase in the repurchases of common stock, inclusive of excise tax, of $115.2 million, an increase in the cash payment of dividends in the current year of $3.8 million and a decrease in the proceeds from issuance of common stock of $33,000, partially offset by a decrease in the payment of withholding taxes related to stock-based compensation to employees of $1.6 million.

Previous wording

Working capital was $834.5 million as of March 31, 2026, as compared to $979.0 million as of December 31, 2025. The decrease was primarily due to decreases in short-term investments, other current assets, and accounts receivable, partially offset by an increase in cash and cash equivalents.

Current wording

Working capital was $830.9 million as of June 30, 2026, as compared to $979.0 million as of December 31, 2025. The decrease was primarily due to decreases in short-term investments and other current assets.