Amortization expense related to acquired technology was $5.2 million and $4.2 million for the three months ended March 31, 2026 and 2025, respectively. Amortization expense is included in the amortization of acquired technology and other intangible assets expense line item on the Consolidated Statements of Income and is expected to be $11.5 million for the nine months ending December 31, 2026, $12.2 million in each of the years ending December 31, 2027 and 2028, $12.1 million in each of the years ending December 31, 2029 and 2030, and $41.4 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 was included in other current assets on the Consolidated Balance Sheets as of December 31, 2025. In January 2026 the transaction closed and UDC Ireland recorded the total cash payments of $50.0 million as acquired technology, which is being 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 March 31, 2026, these other intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
|
|
Gross Carrying
Amount |
|
|
Accumulated
Amortization |
|
|
Net Carrying
Amount |
|
Customer relationships |
|
$ |
10,520 |
|
|
$ |
(8,857 |
) |
|
$ |
1,663 |
|
Developed IP, processes and recipes |
|
|
4,820 |
|
|
|
(3,108 |
) |
|
|
1,712 |
|
Trade name/Trademarks |
|
|
1,500 |
|
|
|
(1,455 |
) |
|
|
45 |
|
Other |
|
|
448 |
|
|
|
(202 |
) |
|
|
246 |
|
Total identifiable other intangible assets |
|
$ |
17,288 |
|
|
$ |
(13,622 |
) |
|
$ |
3,666 |
|
At December 31, 2025, these other intangible assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2025 |
|
|
|
Gross Carrying
Amount |
|
|
Accumulated
Amortization |
|
|
Net Carrying
Amount |
|
Customer relationships |
|
$ |
10,520 |
|
|
$ |
(8,632 |
) |
|
$ |
1,888 |
|
Developed IP, processes and recipes |
|
|
4,820 |
|
|
|
(3,028 |
) |
|
|
1,792 |
|
Trade name/Trademarks |
|
|
1,500 |
|
|
|
(1,418 |
) |
|
|
82 |
|
Other |
|
|
448 |
|
|
|
(191 |
) |
|
|
257 |
|
Total identifiable other intangible assets |
|
$ |
17,288 |
|
|
$ |
(13,269 |
) |
|
$ |
4,019 |
|
Amortization expense related to other intangible assets was $353,000 and $352,000 for the three months ended March 31, 2026 and 2025, respectively. Amortization expense is included in the amortization of acquired technology and other intangible assets expense line item on the Consolidated Statements of Income and is expected to be $1.0 million for the nine months 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.
8. OTHER ASSETS:
Other assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
Long-term taxes receivable |
|
$ |
50,795 |
|
|
$ |
53,842 |
|
Long-term unbilled receivables |
|
|
53,856 |
|
|
|
45,600 |
|
Right-of-use assets |
|
|
18,940 |
|
|
|
19,925 |
|
Long-term contract assets |
|
|
2,564 |
|
|
|
3,338 |
|
Other long-term assets |
|
|
3,260 |
|
|
|
6,227 |
|
Other assets |
|
$ |
129,415 |
|
|
$ |
128,932 |
|
See Notes 9, 20 and 21 for further explanation on right-of-use assets, long-term taxes receivable and long-term unbilled receivables, respectively.
9. 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 March 31, 2026, the Company did not have any finance leases and had no additional operating lease that had 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):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2026 |
|
|
2025 |
|
Operating lease cost |
|
$ |
1,166 |
|
|
$ |
916 |
|
Non-cash activity: |
|
|
|
|
|
|
Right-of-use assets obtained in exchange for lease obligations |
|
$ |
— |
|
|
$ |
709 |
|
The following table presents the Company’s operating lease right-of-use assets and liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
Right-of-use assets |
|
$ |
18,940 |
|
|
$ |
19,925 |
|
Short-term lease liabilities |
|
|
4,547 |
|
|
|
4,752 |
|
Long-term lease liabilities |
|
|
17,566 |
|
|
|
19,217 |
|
The following table presents weighted average assumptions used to compute the Company’s right-of-use assets and lease liabilities:
|
|
|
|
|
|
|
March 31, 2026 |
|
Weighted average remaining lease term (in years) |
|
5.0 |
|
Weighted average discount rate |
|
|
3.9 |
% |
As of March 31, 2026, current operating leases had remaining terms between one and six years with options to extend the lease terms.
Undiscounted future minimum lease payments as of March 31, 2026, by year and in the aggregate, having non-cancelable lease terms in excess of one year were as follows (in thousands):
|
|
|
|
|
|
|
Maturities of
Operating Lease Liabilities |
|
2026(1) |
|
$ |
4,249 |
|
2027 |
|
|
5,303 |
|
2028 |
|
|
5,010 |
|
2029 |
|
|
3,629 |
|
2030 |
|
|
3,397 |
|
Thereafter |
|
|
3,314 |
|
Total lease payments |
|
|
24,902 |
|
Less: Imputed interest |
|
|
(1,583 |
) |
Present value of lease payments |
|
$ |
23,319 |
|
(1)Scheduled maturities of lease liabilities represent the period from April 1, 2026 to December 31, 2026.
10. ACCRUED EXPENSES:
Accrued expenses consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
Compensation |
|
$ |
14,491 |
|
|
$ |
29,160 |
|
PPG Industries, Inc. agreement |
|
|
13,389 |
|
|
|
12,104 |
|
Professional fees |
|
|
1,333 |
|
|
|
919 |
|
Consulting |
|
|
1,253 |
|
|
|
1,492 |
|
Research and development agreements |
|
|
848 |
|
|
|
836 |
|
Royalties |
|
|
554 |
|
|
|
504 |
|
Other |
|
|
8,521 |
|
|
|
7,549 |
|
Accrued expenses |
|
$ |
40,389 |
|
|
$ |
52,564 |
|
11. 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 $103,000 and $99,000 for the three months ended March 31, 2026 and 2025, respectively.
The Company also makes payments under the current research agreement with USC on a quarterly basis as actual expenses are incurred. As of March 31, 2026, the Company was obligated to pay USC up to $5.8 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 $460,000 and $452,000 for the three months ended March 31, 2026 and 2025, respectively.
12. OTHER LIABILITIES:
Other liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31, 2026 |
|
|
December 31, 2025 |
|
Long-term lease liabilities |
|
$ |
17,566 |
|
|
$ |
19,217 |
|
Long-term taxes payable |
|
|
15,749 |
|
|
|
15,749 |
|
Other long-term liabilities |
|
|
1,018 |
|
|
|
1,280 |
|
Other liabilities |
|
$ |
34,333 |
|
|
$ |
36,246 |
|
See Notes 9 and 20 for further explanation on long-term lease liabilities and long-term taxes payable, respectively.
13. 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 $3.8 million and $4.6 million for the three months ended March 31, 2026 and 2025, respectively, in relation to the cash portion of the reimbursement of expenses and work performed by PPG, excluding amounts paid for commercial chemicals.
14. 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 March 31, 2026, 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 March 31, 2026, the Company had issued 49,039,974 shares of common stock, of which 46,750,443 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 permitted 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 had no time limit, did not obligate the Company to acquire a specified number of shares and was able to be modified, suspended or discontinued at any time at the Company’s discretion. During the three months ended March 31, 2026, the Company repurchased 632,673 shares of its common stock for $66.4 million. During the three months ended March 31, 2025, the Company repurchased no shares of common stock. During the three months ended March 31, 2026, and inclusive of such purchases in the same period, the Company completed its share repurchase program, through which it repurchased a total of 923,883 shares of its common stock for an aggregate purchase price of $100.0 million.
On April 28, 2026, the Company's Board of Directors authorized management to repurchase up to an additional $400.0 million of the Company's common stock.
Dividends
During the three months ended March 31, 2026, the Company declared cash dividends of $0.50 per common share, or $23.9 million, on the Company's outstanding common stock. The Company paid $23.5 million of cash dividends during the three months ended March 31, 2026.
On April 28, 2026, the Company’s Board of Directors declared a second quarter dividend of $0.50 per share to be paid on June 30, 2026 to all shareholders of record of the Company’s common stock as of the close of business on June 16, 2026. All future dividends will be subject to the approval of the Company’s Board of Directors.
15. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME:
Amounts related to the changes in accumulated other comprehensive (loss) income were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain (Loss) on
Available-for-Sale
Securities |
|
|
Net Unrealized (Loss) Gain on
Retirement Plan (2) |
|
|
Change in Cumulative
Foreign Currency
Translation Adjustment |
|
|
Total |
|
|
Affected Line Items in the
Consolidated Statements of
Income |
Balance December 31, 2025, net of tax |
|
$ |
3,255 |
|
|
$ |
(2,408 |
) |
|
$ |
(66 |
) |
|
$ |
781 |
|
|
|
Other comprehensive loss before reclassification |
|
|
(3,337 |
) |
|
|
— |
|
|
|
(15 |
) |
|
|
(3,352 |
) |
|
|
Reclassification to net income (1) |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
Selling, general and administrative,
research and development and
cost of sales |
Change during period |
|
|
(3,337 |
) |
|
|
4 |
|
|
|
(15 |
) |
|
|
(3,348 |
) |
|
|
Balance March 31, 2026, net of tax |
|
$ |
(82 |
) |
|
$ |
(2,404 |
) |
|
$ |
(81 |
) |
|
$ |
(2,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain (Loss) on
Available-for-Sale
Securities |
|
|
Net Unrealized (Loss) Gain on
Retirement Plan (2) |
|
|
Change in Cumulative
Foreign Currency
Translation Adjustment |
|
|
Total |
|
|
Affected Line Items in the
Consolidated Statements of
Income |
Balance December 31, 2024, net of tax |
|
$ |
1,269 |
|
|
$ |
(2,106 |
) |
|
$ |
(218 |
) |
|
$ |
(1,055 |
) |
|
|
Other comprehensive income
before reclassification |
|
|
1,320 |
|
|
|
— |
|
|
|
25 |
|
|
|
1,345 |
|
|
|
Reclassification to net income (1) |
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
4 |
|
|
Selling, general and administrative,
research and development and
cost of sales |
Change during period |
|
|
1,320 |
|
|
|
4 |
|
|
|
25 |
|
|
|
1,349 |
|
|
|
Balance March 31, 2025, net of tax |
|
$ |
2,589 |
|
|
$ |
(2,102 |
) |
|
$ |
(193 |
) |
|
$ |
294 |
|
|
|
(1)The Company reclassified amortization of prior service cost for its retirement plan from accumulated other comprehensive (loss) income to net income of $4,000 for both the three months ended March 31, 2026 and 2025.
(2)Refer to Note 17: Retirement Plan Benefit Liability.
16. 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 March 31, 2026, there were 770,855 shares available to be granted under the Equity Compensation Plan. The Equity Compensation Plan will terminate on June 15, 2033.
Restricted Stock Awards 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.
During the three months ended March 31, 2026, the Company granted 127,847 shares of restricted stock awards and restricted stock units to employees and non-employees, which had a total fair value of $12.4 million on the respective dates of grant, and will vest over three to five years from the date of grant, provided that the grantee is still an employee of the Company or is still providing services to the Company on the applicable vesting date.
For the three months ended March 31, 2026 and 2025, the Company recorded, as compensation charges related to all restricted stock awards and units granted to employees and non-employees, selling, general and administrative expense of $1.9 million and $1.8 million, respectively, research and development expense of $1.2 million for both periods, and cost of sales of $474,000 and $409,000, respectively.
In connection with the vesting of restricted stock awards and units during the three months ended March 31, 2026 and 2025, 33,465 and 32,711 shares, respectively, with aggregate fair values of $3.6 million and $4.9 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 approximately one 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 three months ended March 31, 2026 and 2025, 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 $507,000 and $516,000, respectively. In connection with the vesting of the restricted stock, the Company issued to non-employee members of the Board of Directors 4,560 and 3,420 shares, respectively, during the three months ended March 31, 2026 and 2025.
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.
During the three months ended March 31, 2026, the Company granted 102,306 performance units, of which 51,156 units are subject to performance-based vesting requirements based on three-year cumulative adjusted EBITDA, 25,575 units are subject to performance-based vesting requirements based on three-year cumulative gross margin and 25,575 units are subject to market-based, TSR vesting requirements. The grant date fair value of the performance unit awards granted was $9.9 million for the three months ended March 31, 2026, as determined by the Company’s common stock on date of grant for the units with performance-based vesting and a Monte Carlo simulation model used for the units with market-based vesting.
For the three months ended March 31, 2026 and 2025, the Company recorded selling, general and administrative expense of $2.0 million and $1.8 million, respectively, research and development expense of $752,000 and $710,000, respectively, and cost of sales expense of $466,000 and $440,000, respectively, related to the performance units.
In connection with the vesting of performance units during the three months ended March 31, 2026 and 2025, 42,440 and 30,875 shares, respectively, with an aggregate fair value of $4.1 million and $4.5 million, respectively, were withheld in satisfaction of tax withholding obligations and are reflected as a financing activity within the Consolidated Statements of Cash Flows.
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.
During the three months ended March 31, 2026 and 2025, the Company issued 7,426 and 4,881 shares, respectively, of its common stock under the ESPP, resulting in proceeds of $578,000 and $579,000, respectively.
For the three months ended March 31, 2026 and 2025, the Company recorded charges of $36,000 and $37,000, respectively, to selling, general and administrative expense, $57,000 and $56,000, respectively, to research and development expense, and $65,000 and $62,000, respectively, to cost of sales 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 three months ended March 31, 2026 and 2025, the Company granted a total of 2,520 and 2,070 shares, respectively, of fully vested common stock to non-employee members of the Scientific Advisory Board for services performed in 2025 and 2024, respectively. The fair value of shares issued to members of the Scientific Advisory Board was $300,000 for both three-month periods.
For the three months ended March 31, 2026 and 2025, the Company recorded as compensation charges related to all restricted stock units granted to non-employee members of the Scientific Advisory Board, whose unvested shares are marked to market each reporting period, research and development expense of $60,000 and $59,000, respectively.
17. RETIREMENT PLAN BENEFIT LIABILITY:
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). The SERP is currently unfunded and includes salary and bonus as part of the plan. The purpose of the SERP 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 March 31, 2026, there were seven participants in the SERP. In December 2022, one of the participants retired and monthly SERP benefit payments commenced in January 2023. The total SERP benefit payments for the three months ended March 31, 2026 were $504,000.
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.
The components of net periodic pension cost were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2026 |
|
|
2025 |
|
Service cost |
|
$ |
243 |
|
|
$ |
225 |
|
Interest cost |
|
|
630 |
|
|
|
696 |
|
Amortization of prior service cost |
|
|
6 |
|
|
|
6 |
|
Total net periodic benefit cost |
|
$ |
879 |
|
|
$ |
927 |
|
18. 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 and nine 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 to two times (in the case of the executive officers) or either one or two 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 March 31, 2026 and December 31, 2025, the Company had contractual purchase commitments for inventory of $37.3 million and $40.7 million, respectively.
Substantially all finished goods were purchased from one supplier. See Note 13.
20. INCOME TAXES:
The Company is subject to income taxes in both 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. The Company recorded income tax expense of $9.4 million and $15.7 million for the three months ended March 31, 2026 and 2025, respectively. The discrepancy between the statutory tax rate and the effective tax rate was primarily due to the benefit of income taxed in foreign jurisdictions and the use of research and development credits. 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. As of March 31, 2026 and December 31, 2025 the Company had $17.9 million and $57.0 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.
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. As of March 31, 2026, there is not sufficient evidence to release the valuation allowance that has been recorded for the New Jersey research and development credits and unrealized loss on investments. 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 March 2026, the judge requested additional information. The next court date is scheduled for July 9, 2026.
The Company has recorded a long-term receivable of $50.8 million and $53.8 million as of March 31, 2026, and December 31, 2025, respectively, for the receipt of the Korean withholding tax. The Company also recorded a foreign exchange loss of $3.0 million and none for the three months ended March 31, 2026 and 2025, 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 March 31, 2026 and December 31, 2025, 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.
21. 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.
22. 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 three months ended March 31, 2026 and 2025 (in thousands, except share and per share data):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2026 |
|
|
2025 |
|
Numerator: |
|
|
|
|
|
|
Net income |
|
$ |
35,896 |
|
|
$ |
64,444 |
|
Adjustment for Basic EPS: |
|
|
|
|
|
|
Earnings allocated to unvested shareholders |
|
|
(7 |
) |
|
|
(79 |
) |
Adjusted net income |
|
$ |
35,889 |
|
|
$ |
64,365 |
|
Denominator: |
|
|
|
|
|
|
Weighted average common shares outstanding – Basic |
|
|
47,078,940 |
|
|
|
47,567,295 |
|
Effect of dilutive shares: |
|
|
|
|
|
|
Common stock equivalents arising from ESPP |
|
|
1,155 |
|
|
|
567 |
|
Restricted stock awards and units and performance units |
|
|
125,857 |
|
|
|
121,795 |
|
Weighted average common shares outstanding – Diluted |
|
|
47,205,952 |
|
|
|
47,689,657 |
|
Net income per common share: |
|
|
|
|
|
|
Basic |
|
$ |
0.76 |
|
|
$ |
1.35 |
|
Diluted |
|
$ |
0.76 |
|
|
$ |
1.35 |
|
For the three months ended March 31, 2026 and 2025, the combined effects of unvested restricted stock awards, restricted stock units and performance unit awards of 255,451 and 81,782, respectively, were excluded from the calculation of diluted EPS as their impact would have been antidilutive.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited Consolidated Financial Statements and related notes above.
CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS
This discussion and analysis contains some “forward-looking statements.” Forward-looking statements concern possible or assumed future results of operations, including descriptions of our business strategies and customer relationships. These statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “seek,” “will,” “may” or similar expressions. These statements are based on assumptions that we have made in light of our experience in the industry, as well as our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate in these circumstances.
As you read and consider this discussion and analysis, you should not place undue reliance on any forward-looking statements. You should understand that these statements involve substantial risk and uncertainty and are not guarantees of future performance or results. They depend on many factors that are discussed further in the sections entitled (Risk Factors) in our Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented by disclosures in Item 1A of Part II below. Changes or developments in any of these areas could affect our financial results or results of operations and could cause actual results to differ materially from those contemplated in the forward-looking statements.
All forward-looking statements speak only as of the date of this report or the documents incorporated by reference, as the case may be. We do not undertake any duty to update any of these forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.
OVERVIEW
We are a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices,notebook computers, personal computers, automotive applications and specialty lighting products. Since 1994, we have been engaged and expect to continue to be primarily engaged, in funding and performing research and development activities relating to OLED technologies and materials, and commercializing these technologies and materials. We derive our revenue primarily from the following:
•sales of OLED materials for evaluation, development and commercial manufacturing;
•intellectual property and technology licensing;
•technology development and support, including third-party collaboration efforts and providing support to third parties for commercialization of their OLED products; and
•contract research services in the areas of chemical materials synthesis research, development and commercialization for non-OLED applications.
Material sales relate to our sale of OLED materials for incorporation into our customers’ commercial OLED products or for their OLED development and evaluation activities. Material sales are 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.
We receive license and royalty payments under certain commercial, development and technology evaluation agreements, some of which are non-refundable advances. These payments may include royalty and license fees made pursuant to license agreements and also license fees included as part of certain commercial supply agreements. These payments are included in the estimate of total contract consideration by customer and recognized as revenue over the contract term based on material units sold at the estimated per unit fee over the life of the contract.
On December 2, 2022, we entered into a commercial patent license agreement with Samsung Display Co., Ltd. (SDC), replacing a previous license agreement that had been in place since 2018. This agreement, which covers the manufacture and sale of specified OLED display materials, was effective as of January 1, 2023 and lasts through the end of 2027 with an additional two-year extension option for SDC. Under this agreement, we are being paid a license fee, which includes quarterly and annual payments over the agreement term. The agreement conveys to SDC the non-exclusive right to use certain of our intellectual property assets for a limited period of time that is less than the estimated life of the assets.
At the same time that we entered into the current commercial license agreement with SDC, we also entered into a 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 material purchase agreement, SDC agrees to purchase from us a minimum amount of red and green phosphorescent emitter materials for use in the manufacture of licensed products. This minimum commitment is subject to SDC’s requirements for phosphorescent emitter materials and our ability to meet these requirements over the term of the supplemental agreement.
In 2015, we entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display Co., Ltd. (LG Display). In 2026, we and LG Display entered into new agreements that extended the terms of these agreements at least through the end of 2030. 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, we entered into new long-term, multi-year agreements with BOE Technology Group Co., Ltd. (BOE). Under these agreements, we have granted BOE non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. We also supply phosphorescent OLED materials to BOE for use in its licensed products.
In 2019, we entered into an evaluation and commercial supply relationship with Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (CSOT). In 2020, we entered into long-term, multi-year agreements with CSOT. Under these agreements, we have granted CSOT non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. We also supply phosphorescent OLED materials to CSOT for use in its licensed products.
In 2024, we entered into new long-term, multi-year agreements with Visionox Technology, Inc. (Visionox). Under these agreements, we have granted Visionox non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. Additionally, we supply phosphorescent OLED materials to Visionox for use in its licensed products.
In 2025, we entered into long-term, multi-year OLED patent license and material purchase agreements with Tianma Microelectronics Co., Ltd. (Tianma). Under the agreements, we have granted Tianma non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. Additionally, we supply phosphorescent OLED materials to Tianma for use in its licensed products.
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.
In June 2020, we formed a wholly-owned subsidiary, OVJP Corporation (OVJP Corp), operating in California, in order to advance the commercialization of our proprietary Organic Vapor Jet Printing (OVJP) technology, which we now refer to as Universal Vapor Jet Printing (UVJP). In December 2024, we announced that the OVJP Corp facility in California would be closing and UVJP operations would be relocated to our newly formed Singapore subsidiary, Universal Vapor Jet Corporation Pte. Ltd. (UVJC), as well as continued operations in our Tech and Innovation Center in New Jersey. While we continue to focus on the long-term opportunity in the large-area display market for UVJP, the industry’s current focus is on the growing demand for IT capacity. Our UVJC subsidiary continues to assess additional market opportunities where this technology may be transformative.
In February 2021, we announced the establishment of a new manufacturing site in Shannon, Ireland and an agreement between UDC Ireland Limited and PPG for the production of our OLED materials. The Shannon manufacturing facility became operational in June 2022 and we purchased the site during September 2023. The Shannon manufacturing facility provides incremental manufacturing capacity to meet our expanding production needs, and allows for the geographical diversification of our manufacturing base for the world-wide distribution of our materials.
We also generate technology development and support revenue earned from development and technology evaluation agreements and commercialization assistance fees.
We anticipate fluctuations in our annual and quarterly results of operations due to uncertainty regarding, among other factors:
•the timing, cost and volume of sales of our OLED materials;
•the timing of our receipt of license fees and royalties, as well as fees for future technology development and evaluation;
•the timing and magnitude of expenditures we may incur in connection with our ongoing research and development and patent-related activities; and
•the timing and financial consequences of our formation of new business relationships and alliances.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended March 31, 2026 and 2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
2026 |
|
|
2025 |
|
|
Increase (Decrease) |
|
REVENUE: |
|
|
|
|
|
|
|
|
|
Material sales |
|
$ |
83,749 |
|
|
$ |
86,155 |
|
|
$ |
(2,406 |
) |
Royalty and license fees |
|
|
54,210 |
|
|
|
73,569 |
|
|
|
(19,359 |
) |
Contract research services |
|
|
4,252 |
|
|
|
6,553 |
|
|
|
(2,301 |
) |
Total revenue |
|
|
142,211 |
|
|
|
166,277 |
|
|
|
(24,066 |
) |
COST OF SALES |
|
|
36,121 |
|
|
|
38,134 |
|
|
|
(2,013 |
) |
Gross margin |
|
|
106,090 |
|
|
|
128,143 |
|
|
|
(22,053 |
) |
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
Research and development |
|
|
35,246 |
|
|
|
34,900 |
|
|
|
346 |
|
Selling, general and administrative |
|
|
20,032 |
|
|
|
17,014 |
|
|
|
3,018 |
|
Amortization of acquired technology and other intangible assets |
|
|
5,588 |
|
|
|
4,545 |
|
|
|
1,043 |
|
Patent costs |
|
|
2,369 |
|
|
|
1,906 |
|
|
|
463 |
|
Royalty and license expense |
|
|
104 |
|
|
|
114 |
|
|
|
(10 |
) |
Total operating expenses |
|
|
63,339 |
|
|
|
58,479 |
|
|
|
4,860 |
|
OPERATING INCOME |
|
|
42,751 |
|
|
|
69,664 |
|
|
|
(26,913 |
) |
Interest income, net |
|
|
8,715 |
|
|
|
10,074 |
|
|
|
(1,359 |
) |
Other (loss) income, net |
|
|
(6,173 |
) |
|
|
378 |
|
|
|
(6,551 |
) |
Interest and other income, net |
|
|
2,542 |
|
|
|
10,452 |
|
|
|
(7,910 |
) |
INCOME BEFORE INCOME TAXES |
|
|
45,293 |
|
|
|
80,116 |
|
|
|
(34,823 |
) |
INCOME TAX EXPENSE |
|
|
(9,397 |
) |
|
|
(15,672 |
) |
|
|
6,275 |
|
NET INCOME |
|
$ |
35,896 |
|
|
$ |
64,444 |
|
|
$ |
(28,548 |
) |
Revenue
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.
•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%.
•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%.
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.
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.
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.
Cost of sales
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%.
Research and development
Research and development expenses increased to $35.2 million for the three months ended March 31, 2026, as compared to $34.9 million for the three months ended March 31, 2025.
Selling, general and administrative
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.
Amortization of acquired technology and other intangible assets
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.
Patent costs
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.
Royalty and license expense
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.
Interest and other income, net
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.
Income tax expense
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.
Liquidity and Capital Resources
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.
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.
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.
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.
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.
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.
We anticipate, based on our internal forecasts and assumptions relating to our operations (including, among others, assumptions regarding our working capital requirements, the progress of our research and development efforts, the availability of sources of funding for our research and development work, and the timing and costs associated with the preparation, filing, prosecution, maintenance, defense and enforcement of our patents and patent applications), that we have sufficient cash, cash equivalents and short-term investments to meet our obligations for at least the next twelve months.
Additional funding may be required in the future for research, development and commercialization of our OLED technologies and materials, to obtain, maintain and enforce patents respecting these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. We believe that potential additional financing sources for us include long-term and short-term borrowings and public and private sales of our equity and debt securities. There can be no assurance that additional funds will be available to us when needed, on commercially reasonable terms or at all, particularly in the current economic environment.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect our reported assets and liabilities, revenues and expenses, and other financial information. Actual results may differ significantly from our estimates under other assumptions and conditions.
We believe that our accounting policies related to revenue recognition and deferred revenue, inventories, and income taxes are our “critical accounting policies” as contemplated by the SEC.
Refer to our Annual Report on Form 10-K for the year ended December 31, 2025, for additional discussion of our critical accounting policies.
Contractual Obligations
Refer to our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of our contractual obligations.
Off-Balance Sheet Arrangements
As of March 31, 2026, we had no off-balance sheet arrangements in the nature of guarantee contracts, retained or contingent interests in assets transferred to unconsolidated entities (or similar arrangements serving as credit, liquidity or market risk support to unconsolidated entities for any such assets), or obligations (including contingent obligations) arising out of variable interests in unconsolidated entities providing financing, liquidity, market risk or credit risk support to us, or that engage in leasing, hedging or research and development services with us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not utilize financial instruments for trading purposes and hold no derivative financial instruments, other financial instruments or derivative commodity instruments that could expose us to significant market risk other than our investments disclosed in “Fair Value Measurements” in Note 4 to the Consolidated Financial Statements. We generally invest in investment grade financial instruments to reduce our exposure related to investments. Our primary market risk exposure with regard to such financial instruments is to changes in interest rates, which would impact interest income earned on investments. However, based upon the conservative nature of our investment portfolio and current experience, we do not believe a decrease in investment yields would have a material negative effect on our interest income.
Substantially all our revenue is derived from outside of North America and primarily denominated in U.S. dollars and therefore we bear no significant foreign exchange risk from routine customer sales transactions. However, due to a withholding tax receivable denominated in Korean Won, we do bear foreign exchange risk from fluctuations in the Korean Won to U.S. dollar exchange rate and resulting remeasurement.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2026. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of the end of the period covered by this report, are effective to provide reasonable assurance that the information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. However, a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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.
We believe 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. We view 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. We believe that as OLED technology becomes more established and its patent portfolio increases in size, so will the number of these proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On April 29, 2025, our Board of Directors approved a share repurchase program, authorizing us to purchase up to $100.0 million of our common stock. The repurchase authorization was effective immediately and permitted shares of our 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 had no time limit, did not obligate us to acquire a specified number of shares and was able to be modified, suspended or discontinued at any time at our discretion. During the three months ended March 31, 2026, and inclusive of such purchases in the same period, we completed the share repurchase program, through which we repurchased a total of 923,883 shares of our common stock for an aggregate purchase price of $100.0 million.
On April 28, 2026, our Board of Directors authorized the repurchase of up to an additional $400.0 million of our common stock.
Share repurchase activity during the three months ended March 31, 2026, was as follows (in thousands, except share and per share data):
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Period |
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Total Number of Shares Purchased |
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Average Price Paid Per Share |
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Total Number of Shares Purchased as Part
of Publicly Announced Plans |
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Approximate Dollar Value of Shares that
May Yet Be Purchased Under the Plan |
|
January 1 - 31, 2026 |
|
|
120,003 |
|
|
$ |
117.44 |
|
|
|
120,003 |
|
|
$ |
51,846 |
|
February 1 - 28, 2026 |
|
|
153,754 |
|
|
|
110.79 |
|
|
|
153,754 |
|
|
|
34,811 |
|
March 1 - 31, 2026 |
|
|
358,916 |
|
|
|
96.99 |
|
|
|
358,916 |
|
|
|
— |
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Total |
|
|
632,673 |
|
|
$ |
104.19 |
|
|
|
632,673 |
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|
$ |
— |
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Arrangements
During the quarter ended March 31, 2026, none of our directors or executive officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
ITEM 6. EXHIBITS
The following is a list of the exhibits filed as part of this report. Where so indicated by footnote, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated parenthetically, together with a reference to the filing indicated by footnote.
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Exhibit Number |
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Description |
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31.1* |
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Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) |
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31.2* |
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Certifications of Brian Millard, Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) |
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32.1** |
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Certifications of Steven V. Abramson, Chief Executive Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
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32.2** |
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Certifications of Brian Millard, Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b), and by 18 U.S.C. Section 1350. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
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101.INS* |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH* |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents. |
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104 |
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The cover page of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 formatted in Inline XBRL (included in Item 101.INS) |
Explanation of footnotes to listing of exhibits:
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* |
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Filed herewith. |
** |
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Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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UNIVERSAL DISPLAY CORPORATION |
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Date: April 30, 2026 |
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By: /s/ Brian Millard |
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Brian Millard |
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Vice President, Chief Financial Officer and Treasurer |
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