Financial Analysis

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 persons 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 consis …

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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 Companys 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 June 30, 2026 , there were 771,509 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- …

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4. FAIR VALUE MEASUREMENTS: The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2026 (in thousands): Fair Value Measurements, Using Total Carrying Value as of June 30, 2026 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Long-term U.S. Government bonds $ 383,229 $ 383,229 $ $ Short-term U.S. Government bonds 345,019 345,019 Cash equivalents 44,134 44,134 Short-term marketable equity securities 1,256 1,256 Convertible notes 2,000 2,000 The following table provides the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2025 (in thousands): Fair Value Measurements, Using Total Carrying Value as of December 31, 2025 Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Long-term U.S. Government bonds $ 352,987 $ 352,987 $ $ Short-term U.S. Government bonds 455,398 455,398 Cash equivalents 27,461 27,461 Short-term marketable equity securities 8,606 8,606 Convertible notes 2,000 2,000 Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term …

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7. GOODWILL AND INTANGIBLE ASSETS: The Company monitors the recoverability of goodwill annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Purchased intangible assets subject to amortization consist of acquired technology and other intangible assets that include trade names, customer relationships and developed intellectual property (IP) processes. Acquired Technology Acquired technology primarily consists of acquired license rights for patents and know-how obtained from Merck KGaA, BASF and Fujifilm. These intangible assets consist of the following (in thousands): June 30, 2026 December 31, 2025 Merck KGaA $ 116,012 $ 66,012 BASF 95,989 95,989 Fujifilm 109,462 109,462 Other 5,712 5,712 327,175 277,175 Less: Accumulated amortization ( 230,990 ) ( 220,392 ) Acquired technology, net $ 96,185 $ 56,783 Amortization expense related to acquired technology was $ 5.4 million and $ 4.2 million for the three months ended June 30, 2026 and 2025 , respectively, and $ 10.6 million and $ 8.4 million for the six months ended June 30, 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 $ 6.1 million for the six 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 an …

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20. INCOME TAXES: The Company is subject to income taxes in both 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 19.7 % for both six months ended June 30, 2026 and 2025. The Company recorded income tax expense of $ 11.6 million and $ 16.6 million for the three months ended June 30, 2026 and 2025, respectively, and $ 21.0 million and $ 32.3 million for the six months ended June 30, 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. As of June 30, 2026 and December 31, 2025 the Company had $ 25.1 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 as of December 31, 2025 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 …

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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 June 30, 2026, the Company did not have any finance leases and had one additional operating lease that had not yet commenced. The following table presents the Companys operating lease cost and supplemental cash flow information related to the Companys operating leases (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Operating lease cost $ 1,187 $ 942 $ 2,366 $ 1,858 Non-cash activity: Right-of-use assets obtained in exchange for lease obligations $ $ $ $ 709 The following table presents the Companys operating lease right-of-use assets and liabilities (in thousands): June 30, 2026 December 31, 2025 Right-of-use assets $ 17,962 $ 19,925 Short-term lease liabilities 4,827 4,752 Long-term lease lia …

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Recent Accounting Pronouncements Accounting Standards Issued But Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (DISE) . The standard requires new financial statement disclosures disaggregating information about prescribed categories underlying any relevant income statement expense caption. ASU 2024-03 becomes effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. The Company is evaluating the potential impact of this standard on the Consolidated Financial Statements and related disclosures. In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software . The standard updates the accounting for internal-use software by eliminating the concept of development stages. Under this updated guidance, software costs are capitalized once management has authorized and committed funding to the project, and it is probable the project will be completed and the software used as intended. ASU 2025-06 becomes effective for annual periods beginning after December 15, 2027, and interim periods within those annual periods. The Company is evaluating the potential impact of this standard on the Consolidated Financial Statements and related disclosures.

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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 Companys key employees with supplemental pension benefits following a cessation of their employment and to encourage their continued employment with the Company. As of June 30, 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 both six months ended June 30, 2026 and 2025 were $ 1.0 million. 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 June 30, Six Months Ended June 30, 2026 2025 2026 2025 Interest cost $ 630 $ 697 $ 1,260 $ 1,393 Service cost 130 225 373 450 Amortization of prior service cost 5 5 11 11 Total net periodic benefit cost $ 765 $ 927 $ 1,644 $ 1,854 …

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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. For the three months ended June 30, 2026 and 2025, the Company recorded 97 % and 96 % , respectively, of its revenue from OLED related sales and 3 % and 4 %, respectively, from the providing of services through Adesis. For the six months ended June 30, 2026 and 2025, the Company recorded 97 % and 96 % , respectively, of its revenue from OLED related sales and 3 % and 4 %, respectively, from the providing of services through Adesis. Contract Balances The following table provides information about assets and liabilities associated with our contracts from customers (in thousands): June 30, 2026 December 31, 2025 Accounts receivable $ 126,204 $ 119,953 Short-term unbilled receivables 23,165 19,338 Long-term unbilled receivables 54,867 45,600 Short-term contract assets 3,051 3,070 Long-term contract assets 1,758 3,338 Short-term deferred revenue 40,823 21,011 Long-term deferred revenue 2,023 1,943 Short-term and long-term unbilled receivables and contract assets are classified as other current assets and other assets, respectively, on the Consolidated Balance Sheets. Contract assets represent consideration r …

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"2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Interim Financial Information In the opinion of management, the accompanying unaudited Consolidated Financial Statements have been prepared in accordance with the requirements of the Securities and Exchange Commission for interim financial reporting and contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Companys financial position as of June 30, 2026, results of operations for the three and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 2026 and 2025. While management believes that the disclosures presented are adequate to make the information not misleading, these unaudited Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the notes thereto in the Companys latest year-end Consolidated Financial Statements, which are included in the Companys Annual Report on Form 10-K for the year ended December 31, 2025 . The results of the Companys operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for the full year. Principles of Consolidation The Consolidated Financial Statements include the accounts of Universal Display Corporation and its wholly owned subsidiaries, UDC, Inc., UDC Ireland Limited (UDC Ireland), Universal Display Corporation Hong Kong, Limited, Universal Display Corporation Korea, Y.H. (U …

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