Universal Display Corp \pa\: Form 10-K for the period ended Dec 31, 2024

Our Company

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

Our primary business strategy is to (1) develop new OLED materials and sell existing and new materials to product manufacturers for display applications, such as mobile phones, televisions, monitors, wearables, tablets, portable media devices, notebook computers, personal computers and automotive applications, and specialty lighting products; and (2) further develop and either license or otherwise commercialize our proprietary OLED material, device design and manufacturing technologies to those manufacturers. We have established a significant portfolio of proprietary OLED technologies and materials, primarily through our internal research and development efforts and acquisitions of patents and patent applications, as well as maintaining long-standing, and establishing new relationships with world-class universities, research institutions and strategic manufacturing partnerships. We currently own, exclusively license or have the sole right to sublicense more than 6,500 patents issued and pending worldwide.

We manufacture and sell our proprietary OLED materials to customers for evaluation and use in commercial OLED products. We also enter into agreements with manufacturers of OLED display and lighting products under which we grant them licenses to practice under our patents and to use our proprietary know-how. At the same time, we work with these and other companies that are evaluating our OLED material, device design and manufacturing technologies for possible use in commercial OLED display and lighting products.

Market Overview

The Display Panel Market

Thin, energy-efficient display panels that can be manufactured on glass or flexible substrates are essential for a wide variety of portable consumer electronics products, such as mobile phones, AR/VR headsets, digital cameras, wearables, tablets and notebook computers. Due to their narrow profile and light weight, flat panel displays are the display of choice for larger product applications, such as computer monitors and televisions.

Liquid crystal displays, or LCDs, continue to dominate the flat panel display market. However, we believe that OLED displays are an attractive alternative to LCDs, and OLED displays are gaining market share, because they offer a number of potential advantages, including:

• higher power efficiencies, thereby reducing energy consumption;
• a thinner profile and lighter weight;
• higher contrast ratios, leading to sharper picture images and graphics;
• wider viewing angles;
• deposition on non-rigid substrates which enable conformable and flexible displays;
• faster response times for video and gaming; and
• lower cost manufacturing methods and materials.

Based on these characteristics, product manufacturers have adopted small-area OLED displays for use in a wide variety of electronic devices, such as smartphones, wearables, notebook computers and tablets. Manufacturers are increasingly commercializing large-area OLED displays for use in televisions and monitors. We believe that if these efforts are successful, they could result in sizeable markets for OLED displays.

Organic materials make technically possible the development of flexible displays for use in an entirely new array of product applications. Such applications include display devices that fold in use, or conform to various shapes for wearable, rollable, industrial and ruggedized applications. In addition, due to the inherent transparency of the organic materials and transparent electrode technologies, OLEDs eventually may enable the production of transparent displays for use in products such as automotive windshields and windows with embedded displays.

The Solid-State Lighting Market

Solid-state lighting relies on the direct conversion of electricity to visible light using semiconductor materials. By avoiding the heat and plasma-producing processes of traditional incandescent bulbs and fluorescent lamps, respectively, solid-state lighting products can have substantially higher energy conversion efficiencies and have been widely adopted in many countries around the world as the use of non-efficient light sources has been curtailed through the adoption of regulatory standards for lighting products.

There are currently two basic types of solid-state lighting devices: inorganic light emitting diodes, or LEDs, and OLEDs. Current commercial LED offerings are gnerally characterized by high operating temperatures and intense brightness which may make them less desirable for many lighting applications.

OLEDs, on the other hand, can be designed to provide improved lighting characteristics because they can be larger in size and can be viewed directly, without using diffusers that are required to temper the intense brightness of traditional LEDs. OLEDs can be fabricated onto any suitable surface, including glass, plastic or metal foil, and could be cost-effective to manufacture in high volume. Given these characteristics, product manufacturers are working on and have introduced limited product applications of OLEDs for diffuse specialty lighting applications and ultimately general illumination. If these efforts are successful, we believe that OLED lighting products could begin to be used for applications currently addressed by other existing lighting technologies, as well as for new applications that take advantage of the OLED form factor. In particular, the ability of OLED technology to produce uniform illumination over arbitrary shapes is making OLED lighting very attractive to the automobile industry as well as the digital signage industry.

Our Competitive Strengths

We believe that we currently are one of the leading technology developers in the OLED industry because we were the first company to develop and commercialize PHOLED emitter technology. Our experienced management and research teams have built an extensive intellectual property portfolio around our OLED technologies and materials, particularly with regard to PHOLED emitter materials, which we continually seek to enhance and grow. We work diligently, through the delivery of high-quality commercial products, superior technical support and customer service, to enable our industry-leading customers, which primarily are large display manufacturers, to adopt our OLED technologies and materials through implementation of long-term commercial material supply and patent and know-how license agreements. Our key competitive strengths include:

Technology Leadership

We are a recognized technology leader in the OLED industry. We, along with world-class academic partners, pioneered the development of our UniversalPHOLED® phosphorescent OLED technologies, which can be used to produce OLEDs that are up to four times more efficient than fluorescent OLEDs and significantly more efficient than current LCDs, which are illuminated using backlights. We believe that our PHOLED technologies and materials will continue to be well-suited for industry usage in the commercial production of OLED displays and lighting products.

Through our internal, innovative research, which has produced the majority of our most critical commercial technologies, our relationships with supplier companies, such as PPG Industries, Inc. (PPG), and our existing and new academic partners, we believe that we can continue to advance the technology we have already developed and commercialized, and that we will continue to discover and develop other important OLED technologies, as well as novel OLED materials, that will facilitate further adoption of our various OLED technologies by product manufacturers. To this end, we operate two state-of-the-art laboratories, or Application Centers, near our larger customers in the Asia-Pacific region. These Application Centers have provided us and our customers with the ability to more quickly evaluate, develop and bring to market our newest OLED materials and technologies.

Broad Portfolio of Intellectual Property

Generally, each of our commercial offerings is protected by multiple patents which can help us either to prevent or combat the introduction of counterfeit and/or knock-off products that could potentially impact the market demand for our OLED materials and technologies. Our strong patent and non-patented know-how portfolios in the areas of PHOLED emitter materials, complementary PHOLED materials, OLED device designs, and OLED manufacturing technologies are reflective of our continued commitment to innovate and invest. We believe that our extensive portfolio of patents and non-patented know-how provides us with a competitive advantage in the OLED industry.

Through our internal development efforts, acquisitions, and long-standing relationships with academic partners, research institutions and product manufacturers, we own, exclusively license or have the sole right to sublicense more than 6,500 patents issued and pending worldwide. We continue to enhance and grow our OLED technology and materials patent portfolio organically through internal research and development, partnering with third parties, and by acquisition. We also continue to accumulate valuable non-patented technical know-how relating to our OLED technologies and materials.

Leading Supplier of UniversalPHOLED® Emitter Materials and Related Technology Licensing

We are the leading supplier of PHOLED emitter materials to OLED device manufacturers. The emitter material, which is designed to efficiently convert electrical energy to a desired wavelength of light, is the key component in an OLED device. Our manufacturing partner of over 20 years, PPG, continues to manufacture our materials for us, using proprietary manufacturing processes and know-how, which materials we then qualify to our exacting product specifications and resell on a just-in-time basis to OLED device manufacturers. We record revenues based on our sales of these materials to OLED device manufacturers. Our commercial supply agreements typically require our customers to purchase minimum quantities of our materials, which purchases can be in the form of annual minimum purchase undertakings or as a minimum percentage of their purchase requirements, or a combination of both.

Our commercial supply arrangements allow us to maintain close technical and business relationships with these OLED device manufacturers purchasing our proprietary materials, and thereby further supports our technology licensing business. We do not directly manufacture or sell OLED display or lighting products. Instead, we enter into non-exclusive licensing arrangements with OLED device manufacturers, many of which also purchase our materials, that pay us fixed license fees and/or running royalties based on their sales of licensed commercial products using our proprietary technology and patents. We believe this business model allows us to concentrate on our core strengths of technology development and innovation, while at the same time provides significant operating leverage.

Long-Standing Customer Relationships

We have long-standing customer relationships with OLED device manufacturers that are using, or are evaluating for use, our OLED materials in commercial OLED products. We have more than 20 years of experience in working closely with OLED device manufacturers and have provided support to them in their commercialization of OLED technology by delivering customer-specific solutions for red, green, and yellow emitter materials, or dopants.

We have a proven track record of delivering consistent, high-quality OLED material to our customers. We provide just-in-time supply to our customers and serve as a sole source to them for many of our critical proprietary PHOLED dopant materials. We believe that our unparalleled manufacturing partners, namely PPG, our well-established supply chain, our multi-tier quality testing, and our product assurance protocols make us a preferred partner for our customers and for any large-scale OLED display manufacturer that wants to deliver to high-quality international end-customers.

In 2024, our largest customers for our PHOLED materials included Samsung Display Co., Ltd. (SDC), LG Display Co., Ltd. (LG Display), BOE Technology Group Co., Ltd. (BOE), Tianma Micro-electronics Co., Ltd. (Tianma), Visionox Technology, Inc. (Visionox), Wuhan China Star Optoelectronics Semiconductor Display Technology Co., Ltd. (CSOT), and Japan Display, Inc. Other licensed customers of our technology in 2024 included Sharp Corporation, AU Optronics Corporation (AU Optronics), Kaneka Corporation, Pioneer Corporation, and OLEDWorks L.L.C.

Complementary UniversalPHOLED® Host Material Business

In addition to our proprietary UniversalPHOLED® emitter materials, we continue to develop, supply and offer for sale certain of our proprietary phosphorescent host materials to OLED device manufacturers. In addition, we have entered into a number of host material strategic partnerships through development agreements with OLED material partners that are focused on combining our proprietary PHOLED emitters with hosts and other OLED materials of these companies in order to optimize the performance of our emitters in our customers’ newest product designs. We do not believe that revenue from our host development and third-party collaboration agreements will be significant compared with our emitter business. However, we believe that development and collaborative relationships such as these are important for ensuring the continued success of the OLED industry and the broader adoption of our PHOLED and other OLED technologies in the marketplace.

Experienced Management and Scientific Advisory Team

Our management team has significant experience in developing business models focused on licensing disruptive technologies in high growth industries. The team has strong relationships with, and deep understandings of, our customers and their needs, the commercial marketplace and the OLED industry on the whole. We believe our management team’s experience and long-standing relationships are important to maintaining good and accommodating working relationships with our customers, particularly when we are confronted with challenging technical, regulatory and trade issues given our international reach. In addition, we employ and contract with some of the leading researchers in the industry, and we maintain a long-standing Scientific Advisory Board that includes industry pioneers, namely Professor Stephen R. Forrest of the University of Michigan (Michigan) and Professor Mark E. Thompson of the University of Southern California (USC).

Our Business Strategy

Our current business strategy is to continue to promote and expand our portfolio of OLED technologies and materials for widespread use in OLED displays and lighting products. We generate revenues primarily by selling our proprietary OLED materials and licensing our OLED technologies to display and lighting product manufacturers. We are presently focused on the following steps to implement our business strategy:

Expand Our Collaborative Relationships with Leading Product Manufacturers and Developers

We collaborate and partner with leading manufacturers of displays and lighting products who are commercial licensees of our OLED technologies and purchasers of our OLED materials. We also supply our proprietary OLED materials to manufacturers and developers of OLED displays and lighting products for evaluation and for use in product development and for pre-commercial activities, and we provide technical assistance and support to these manufacturers and developers to foster ongoing relationships and new commercial agreements. We concentrate on working closely with OLED device manufacturers and developers because we believe that the successful incorporation of our technologies and materials into commercial products is critical to their widespread adoption.

Enhance Our Existing Portfolio of PHOLED Technologies and Materials

We believe that a strong portfolio of proprietary OLED technologies and materials for both displays and lighting products is critical to our continued success, particularly as the utilization of PHOLED technologies and materials expands in the marketplace. Consequently, we are continually seeking to expand this portfolio through our internal development efforts, our collaborative relationships with existing and new academic and other research partners, and other strategic opportunities, such as funding early-stage startup companies whose technology may be synergistic to ours. Since the acquisition of the early fundamental research developed by our initial academic partners in the late 1990’s, one of our primary goals has been and continues to be the development of new and improved PHOLED technologies and materials with increased efficiencies, enhanced color gamut and extended lifetimes, which are compatible with different manufacturing methods, so that they can be used by various manufacturers in a broad array of OLED display and lighting products.

Develop Next-Generation Organic Technologies

We continue to conduct research and development activities relating to next-generation OLED technologies for both displays and lighting products, including next generation emissive layer technologies and dry printing technologies such as organic vapor jet printing (OVJP), which we discuss in more detail below. We also are funding research by existing and new academic partners and research institutions on the use of OLED and other related technologies in other applications. Our focus on next-generation technologies is designed to enable us to maintain our position as a leading provider of OLED and other organic electronics technologies and materials as new markets emerge.

Business and Geographic Markets

We derive revenue 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 synthesis research, development and commercialization for non-OLED applications.

Most manufacturers of displays and lighting products who are or might potentially be interested in our OLED technologies and materials are currently located outside of the United States, particularly in the Asia-Pacific region. To provide on-the-ground support to these manufacturers, we have established wholly-owned subsidiaries in Ireland, Korea, Japan, China and Hong Kong, as well as a representative office in Taiwan. We have Application Centers in Hong Kong and Pangyo, South Korea, which allow our Asia-based display manufacturers to evaluate our technology more quickly and incorporate the technology into their commercial designs. Our wholly-owned subsidiary formed under the laws of the Republic of Ireland, UDC Ireland Ltd. (UDC Ireland), is responsible for all material sales worldwide (excluding the United States) and for licensing and managing intellectual property and undertaking certain other business transactions in all non-U.S. territories.

In 2024, we received a majority of our revenue from three customers domiciled in the Asia-Pacific region, BOE, LG Display and SDC, from each of which we had revenue in excess of 10% of our consolidated revenue. Our business is heavily dependent on our relationships with these customers. Substantially all revenue derived from our customers is denominated in U.S. dollars.

We generally enter into long-term agreements with our customers, which may include (1) a commercial supply agreement for the purchase of specific OLED materials, and (2) patent and know-how license agreements that relate to the manufacture of display and lighting devices. Generally, our commercial material supply agreements provide for multi-year purchase commitments, typically on a price per gram basis, which entitle our customers to certain discounts, technical support on the use of our OLED materials in mass production facilities, and access to certain future OLED materials. In order to secure preferential pricing and technology access, a customer typically agrees to certain minimum purchase obligations which can be in the form of annual minimum purchase undertakings or a percentage of their purchase requirements, or a combination of both. If a customer does not meet its minimum purchase obligations, generally we would have the right to review pricing for future material sales and impose other financial penalties.

Our patent and know-how license agreements generally are made available to our customers for the manufacture of OLED devices. In addition, we also may license to certain material company partners the right to manufacture certain OLED materials that are complementary to our phosphorescent emitter materials. These licenses have included licenses to make host products and certain other non-phosphorescent materials. We believe it is in our, and our customers’ best interests to facilitate the development of materials that are complementary to our offerings and which assist our customers to produce more efficient and manufacturable devices with our materials. These collaboration efforts are likely to generate additional licensing fees for us under our license agreements. Although our customers generally pay us fixed license fees and/or running royalties for OLED licensed products that they manufacture, our material partner licensees generally pay us a portion of their sales for materials that are developed under material collaboration agreements and subsequently commercialized. To date, these material collaboration arrangements have not generated significant revenues for us.

For more information on our revenues, costs and expenses associated with our business, as well as a breakdown of revenues from North America and foreign sources, please see our Consolidated Financial Statements and the notes thereto, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this report.

Our Technology and its Relation to OLED Technology and Structure

OLED devices are solid-state semiconductor devices made from thin films of organic material that emit light of various wavelengths when electricity is selectively applied to the emissive layer of the device. OLED devices are typically referred to as incorporating an “OLED stack.” OLED stacks vary in specific structure but those commonly used today may include a cathode, an electron injection layer, an electron transport layer, an emissive layer, a hole transport layer, a hole injection layer and an anode, all of which are placed on a substrate which may be made of a number of different materials, including glass, plastic and metal.

Our technology and materials are most commonly utilized in the emissive layer; the materials in the emissive layer are the light-generating component of the OLED stack. Many of our key technologies relate primarily to phosphorescent materials that efficiently harvest energy for the direct and indirect emission of light, which we believe enable more energy efficient utilization of energy conversion to light relative to the use of fluorescent emitter materials that can also be used to generate light within the emissive layer of the OLED device without the assistance of a phosphorescent material. We began selling phosphorescent emitter materials commercially in 2003. A manufacturer will use a small amount of such material for each device through a process called “doping” into a host material. The emitter material(s) and the host material(s) together form an emissive layer system. Depending on the nature of the OLED device, the emissive materials and emissive layer system may be designed to emit different colors. We have commercially produced and sold phosphorescent emitter materials that can produce red, yellow, green and light-blue light, which are combined in various ways for the display and lighting markets.

Our current materials business, conducted outside the United States by UDC Ireland, is focused primarily on the delivery of such energy efficient emissive enabling materials. We have also developed host materials for the emissive layer and began selling them commercially in 2011. In addition to our materials, which are generally protected by patents covering various molecular structures, we also have system and process patents that cover various fundamentally important aspects of the OLED device, device architectures, use of materials in devices and OLED manufacturing processes. These patents are important to our licensing business because they enable us to provide our business partners important OLED related technologies.

Our PHOLED Technologies

PHOLED technologies utilize specialized materials and device structures that enable OLEDs to achieve reduced power consumption thereby providing an energy efficient product. Phosphorescent material can be utilized to enable energy efficient display and lighting performance in multiple ways. The OLED device can be designed so that the energy is harvested, and the light is emitted by the phosphorescent material which is typically referred to as a PHOLED, as is common in current OLED designs. There are OLED design structures that propose combining phosphorescent and fluorescent materials in a common stack, such as device structures that utilize phosphorescent material to harvest energy and then transfer the energy to another material to emit the light, such as thorough a system referred to as phosphorescent sensitized fluorescence (“PSF”). We believe that without the use of a phosphorescent material, traditional fluorescent OLEDs emit light through an inherently less efficient process. The use of a phosphorescent material to harvest energy for the efficient emission of light, whether directly or indirectly, substantially reduces the power requirements of an OLED and is useful in displays for hand-held devices, such as smartphones, where battery power is often a limiting factor. The efficient emission of light through the use of phosphorescence technology is also important for large-area displays such as televisions, where higher device efficiency and lower heat generation may enable longer product lifetimes and increased energy efficiency.

We have a strong intellectual property portfolio surrounding our existing PHOLED technologies and materials for both displays and lighting products which we market under the UniversalPHOLED® brand. We devote a substantial portion of our efforts to developing new and improved proprietary PHOLED materials and device architectures for red, green, yellow, blue and white OLED devices. In 2024, we continued our commercial supply relationships with companies such as BOE, CSOT, LG Display, SDC, Tianma, and Visionox to use our PHOLED materials to manufacture OLED displays. In addition, we have worked and continue to work closely with customers evaluating and qualifying our proprietary PHOLED materials for commercial usage in both displays and lighting products, and with other material suppliers to combine our PHOLED emitters with their phosphorescent hosts and other OLED materials.

Our Additional Proprietary OLED Technologies

Our intellectual property, research, development and commercialization efforts also encompass a number of other OLED device and manufacturing technologies, including, but not limited to, the following:

FOLED ™ Flexible OLEDs

We are working on a number of technologies required for the fabrication of OLEDs on flexible substrates. Most other flat panel displays are built on rigid glass substrates. In contrast, FOLEDs are OLEDs built on non-rigid substrates such as plastic or metal foil. This has the potential to enhance durability and enable conformation to certain shapes or repeated bending or flexing. Many OLED smartphone displays are built on plastic substrates including those produced by many of our customers. Several of our customers demonstrated different foldable and rollable FOLED displays at recent Consumer Electronics Shows in Las Vegas, NV. The commercial introduction of such FOLED product offerings demonstrates the viability of new display product applications, such as portable, roll-up communications televisions, tablets, notebook computers and smartphones, as well as enhances the usefulness of such devices in ruggedized, industrial and wearable computing systems. Manufacturers also may be able to produce FOLEDs using more efficient continuous, or roll-to-roll, processing methods in the future. Our internal research and development efforts are expected to enhance and promote the future adoption of consumer and industrial FOLED devices.

OVJP® Organic Vapor Jet Printing

OLEDs could be manufactured using other processes as well, including OVJP. As a direct printing technique, OVJP technology has the potential to offer high deposition rates for large-area OLEDs. In addition, OVJP technology reduces OLED material waste associated with use of a shadow mask (i.e., the waste of material that deposits on the shadow mask itself when fabricating an OLED). By comparison to inkjet printing, an OVJP process does not use liquid solvents and therefore the OLED materials utilized are not limited by their viscosity or solvent solubility. OVJP also avoids generation of solvent wastes and eliminates the additional step of removing residual solvent from the OLED device. In 2019, we installed a red-green-blue OVJP pilot tool at our Ewing, New Jersey facility, and we continue to collaborate on OVJP technology development with Professor Forrest of Michigan. In June 2020, we formed a wholly-owned subsidiary, OVJP Corporation (OVJP Corp) in California, as a Delaware corporation, which was founded to advance the commercialization of our proprietary OVJP technology. In December 2024, we announced that the OVJP Corp facility in California would be closing and OVJP operations would be relocated to our newly formed subsidiary, Universal Vapor Jet Corporation Pte. Ltd. (UVJC) in Singapore, as well as continued operations in our Tech and Innovation Center in New Jersey. While we continue to focus on the long-term opportunity in the large-area display market for OVJP, the industry’s current focus is on the growing demand for IT capacity. Our UVJC subsidiary plans to assess additional market opportunities where this technology may be transformative. We believe the successful implementation of OVJP technology has the potential to grow the market for our proprietary PHOLED materials and technologies.

Our Strategic Relationships with Product Manufacturers

We have established early-stage evaluation programs, development and pre-commercial programs, and commercial arrangements with a substantial number of manufacturers or potential manufacturers of OLED display and lighting products. Many of these relationships are directed towards tailoring our proprietary OLED technologies and materials for use by individual manufacturers. Our ultimate objective is to license our OLED technologies and sell our OLED materials to these manufacturers for their commercial production of OLED products.

Relationships with OLED Display Manufacturers

We license our OLED technologies and patents to display manufacturers for use in commercial products and supply our proprietary OLED materials to these manufacturers for both commercial use and evaluative purposes. We have been collaborating with some of these display manufacturers for over 20 years.

We have been working with SDC and providing our PHOLED materials to SDC for evaluation since 2001. Under the terms of a patent license agreement, we license our patents and technologies to SDC for its manufacture and sale of AMOLED (active-matrix organic light-emitting diode) display products. Under the terms of a supplemental purchase agreement, we supply our proprietary PHOLED materials to SDC for its use in manufacturing licensed products. We also continue to supply SDC with our proprietary UniversalPHOLED materials for use in its development efforts under a 2001 joint development agreement.

On December 2, 2022, we entered into new patent license and supplemental purchase agreements with SDC, both with an effective date of January 1, 2023. These agreements, which cover the manufacture and sale of specified OLED display materials, last through the end of 2027 with an additional two-year extension option for SDC. Under these agreements, we are being paid a license fee, which includes quarterly and annual payments over the agreement term. These agreements convey 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. The supplemental purchase agreement provides for minimum annual purchase obligations of red and green phosphorescent emitter material from us for use in the manufacture of licensed products. The 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. SDC is currently the largest manufacturer of AMOLED displays for smartphones and other personal electronic devices and produces displays for a number of different smartphone and electronic device manufacturers.

We have been working with LG Display and its affiliates for over 15 years. In 2015, we entered into an OLED patent license agreement and an OLED commercial supply agreement with LG Display. The terms of these agreements have been extended through the end of 2025. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under our patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The OLED commercial supply agreement provides for the sales of materials for use by LG Display, which may include phosphorescent emitters and host materials. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue. LG Display is currently the largest manufacturer of AMOLED displays for large-area televisions and produces display panels for a number of different television manufacturers.

In 2023, we entered into new long-term, multi-year agreements with 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 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 2016, we entered into long-term, multi-year OLED patent license and material purchase agreements with Tianma. Under the license agreement, we have granted Tianma non-exclusive license rights under various patents owned or controlled by us to manufacture and sell OLED display products. The license agreement calls for license fees and running royalties on Tianma’s sales of licensed products. Additionally, we supply phosphorescent OLED materials to Tianma for use in its licensed products. In 2021, we mutually agreed to extend the terms of both the patent license and material purchase agreements for an additional multi-year term.

We have been collaborating with AU Optronics since 2001, and we continue to provide our proprietary PHOLED materials to AU Optronics under a 2016 commercial supply agreement through which AU Optronics also has certain license rights.

We also continue to support numerous display manufacturers in their evaluation of our technologies and proprietary OLED materials, through evaluation arrangements in which we provide our proprietary OLED materials to such manufacturers for limited scale commercial production, evaluation and for purposes of development, manufacturing qualification and product testing. Many of these strategic relationships have been in place for longer than a decade, and we continue to establish new relationships.

Relationships with OLED Lighting Manufacturers

We license our OLED technologies and patents to lighting manufacturers for use in commercial products and supply our proprietary OLED materials to these manufacturers for both commercial use and evaluative purposes. Some of these strategic relationships have also been in place for longer than a decade.

We continue to license our OLED patents, and to provide our OLED materials, to OLEDWorks for use in OLED lighting products under patent license and commercial supply agreements signed in 2015. We have also extended the rights under these agreements to OLEDWorks GmbH, the German company and facility that OLEDWorks acquired in 2015 from Philips Technologie GmbH.

We also have strategic relationships with Kaneka, Konica Minolta and Sumitomo, and continue to license our OLED patents and technologies to these customers.

Similar to our arrangements with display manufacturers, we continue to support numerous lighting manufacturers in their evaluation of our technologies and proprietary OLED materials, typically through evaluation agreements under which we provide our proprietary OLED materials to such manufacturers for evaluation and potential commercial application.

Relationships with Manufacturers for Other Commercial Products

In addition to our relationships with lighting and display manufacturers, we have agreements and arrangements with manufacturers or potential manufacturers to use our proprietary OLED technologies and materials in other commercial products, such as in automotive interiors and exteriors.

Our OLED Materials Manufacturing Business

We supply our proprietary UniversalPHOLED® materials to display manufacturers, lighting manufacturers and others. These materials are produced in batch quantities by PPG to our exacting product specifications using our manufacturing process and know-how. We qualify each batch of emitters at our device qualification facilities to ensure that they meet required specifications, and we store qualified product inventory for delivery to our customers. We believe that our inventory-carrying practices, along with the terms under which we sell our OLED materials (including payment terms), are typical for the markets in which we operate. In 2024, we completed successful Recertification Audits on our ISO 9001:2015 Quality Management Systems, our ISO 14001:2015 Environmental Management Systems, and our ISO 45001:2018 Occupational Health and Safety Management Systems.

PPG

We have maintained a close working relationship with PPG since 2000. In 2011, we entered into an agreement with PPG, the term of which, by amendment in February 2021, continues through December 31, 2025, and thereafter is automatically renewed for additional one-year terms, unless terminated by us with prior notice of one year or terminated by PPG with prior notice of two years. Under that agreement, PPG is responsible, under our direction, for manufacturing scale-up of our proprietary OLED materials, and for supplying us with those materials. We use these materials for our own research and development as well as for resale to our customers, both for their evaluation and for use in commercial OLED products. Through our collaboration with PPG, key raw materials are sourced from multiple suppliers to ensure that we are able to meet the needs of our customers on a timely basis. We have not had any issues with obtaining access to adequate amounts of any key raw materials.

In February 2021, we entered into an amendment to the PPG agreement extending the term of the agreement and specifying operation and maintenance services that will be provided by PPG affiliate, PPG SCM Ireland Limited (PPG SCM), to UDC Ireland at our manufacturing site in Shannon, Ireland, which we began leasing at such time for the production of our OLED materials. We purchased the site in September 2023 and amended and restated the February 2021 amendment to the PPG agreement to reflect our ownership and PPG SCM’s updated operation and maintenance services after such purchase. When fully operational, the facility is expected to double our production capacity and allow for the diversification of our manufacturing base for phosphorescent emitters. The first phase of facility improvements has been completed and operations commenced in June 2022. As with our initial agreement with PPG, under our amended and restated 2021 amendment we compensate PPG on a cost-plus basis for the services provided at the Shannon manufacturing facility.

Collaborations with Other OLED Material Manufacturers

We continued our non-exclusive collaborative relationships with OLED material manufacturing customers during 2024. Most of these relationships are focused on combining our proprietary PHOLED emitting dopants with hosts and other OLED materials of these companies in an effort to optimize our PHOLED emitting dopant products and deliver a high-performance system to the end customer. Our product manufacturing customers are not required to purchase host materials from us. As a result, we do not believe these collaboration efforts will generate significant revenue for us as compared to our dopant and licensing businesses. We believe, however, that collaborative relationships such as these are important for ensuring success of the OLED industry and broader adoption of our PHOLED and other OLED technologies.

Research and Development

Our research and development activities are focused on the advancement of our OLED technologies and materials for displays, lighting and other applications. We conduct this research and development primarily internally and also through various relationships with commercial business partners, academic partners, and research institutions. Our venture capital company, UDC Ventures LLC, continues to seek to invest in companies that we believe are developing synergistic or complementary technologies to ours.

Internal Development Efforts

Ewing, New Jersey Facility

We conduct a substantial portion of our OLED development activities at our state-of-the-art development and testing facility in Ewing, New Jersey. At this expanded facility, which now exceeds 50,000 square feet, we perform technology development, including device and process optimization, prototype fabrication, manufacturing scale-up studies, process and product testing, characterization and reliability studies, and technology transfer with our business partners.

Our Ewing facility houses multiple OLED deposition systems, including numerous display fabrication tools. In addition, the facility contains equipment for substrate patterning, organic material deposition, display packaging, module assembly and extensive testing in Class 100 and 100,000 clean rooms and opto-electronic test laboratories. Our facility also includes state-of-the-art synthetic and analytical chemistry laboratories in which we conduct OLED materials research and make small quantities of new materials that we then test in OLED devices.

Application Centers

In addition to our laboratory facilities in Ewing, New Jersey, we have Application Centers in Hong Kong and Pangyo, South Korea. These centers, which include state-of-the-art OLED laboratories, better assist our Asia-based customers in their timely evaluation and adoption of our proprietary PHOLED materials, know-how and technologies in their respective PHOLED designs. We purchased the real estate housing our Application Center in Pangyo, South Korea in May 2023.

Our Contract Development and Manufacturing Organization: Adesis, Inc.

In 2016, we acquired Adesis, Inc. (Adesis), a contract development and manufacturing organization (CDMO) that provides support services to the OLED, pharma, biotech, catalysis and other industries. Adesis currently operates in its headquarters facility, which it purchased in 2017 and consists of over 47,500 square feet in New Castle, Delaware, and in another, leased, over 40,000 square foot facility in Wilmington, Delaware. As of December 31, 2024, Adesis employed a team of 139 research scientists, chemists, engineers and laboratory technicians.

Although we expect to continue to utilize the majority of its technology research capacity for the benefit of our OLED technology development, Adesis is expected to continue operating as a CDMO in the above-mentioned industries.

University-Sponsored Research

Original Academic Partners

We have long-standing relationships with Princeton University (Princeton) and USC for the conduct of research relating to our OLED and other organic thin-film technologies and materials for applications such as displays and lighting. This research, subject to an agreement entered into by the parties (as amended, the 1997 Amended License Agreement) had been performed at Princeton under the direction of Professor Forrest and at USC under the direction of Professor Thompson. In 2006, Professor Forrest transferred to Michigan, where we continue to fund his research.

Since 2006, in connection with Dr. Forrest’s transfer, we entered into a new sponsored research agreement with USC under which we are funding organic electronics research being conducted by Drs. Forrest and Thompson (the 2006 Research Agreement). Work by Professor Forrest is being funded through a subcontract between USC and Michigan.

The 2006 Research Agreement currently extends through April 2025, at which time the parties expect to extend the agreement. We make payments under the 2006 Research Agreement to USC on a quarterly basis as actual expenses are incurred. As of December 31, 2024, we were obligated to pay USC up to $1.7 million for work to be performed during the remaining extended term.

Other Academic Relationships

Over the years, we have also entered into research agreements with various universities and research institutions that have been able to provide tailored research capabilities and insights relating to our PHOLED technology. As the utilization of PHOLED technology continues to expand, we intend to further engage key researchers at other universities and research institutions to help identify additional fundamental technologies that could benefit PHOLED technology implementation.

Intellectual Property

Along with our personnel, our primary and most fundamental assets are patents and other intellectual property. This includes more than 6,500 U.S. and foreign patents and patent applications that we own, exclusively license or have the sole right to sublicense. It also includes a substantial body of non-patented technical know-how that we have accumulated over time.

Our Patents

Our research and development activities, conducted both internally and through collaborative programs with third parties, have resulted in our filing of a substantial number of patent applications relating to our OLED technologies and materials. These patents that we own represent, among other things, innovations beyond the original fundamental PHOLED conceptual patents that we license from our university research partners, described below. Although many of these licensed fundamental conceptual patents have expired, our internal research efforts include essential innovations that have generated commercially viable implementations of the original PHOLED concepts and patents.

As of December 31, 2024, we owned more than 6,500 unexpired issued patents and pending patent applications around the world in addition to the hundreds of patents and patent applications we exclusively license from our research partners, as discussed below.

Patents We License from Research Partners

We exclusively license patent rights from a number of university research partners. Generally, we sponsor scientific researchers at universities to undertake pre-defined research programs, and in exchange we receive license rights to patents that may be developed under the programs. As part of these programs, we may provide compensation in the form of support for research program-related activities, reimbursement for patent related costs, as well as providing for some forms of licensing and/or sublicensing fees for licensed technology that is commercialized by us or our customers. We have expanded our sponsored research programs over the past 10 years to include additional scientific researchers at a number of different institutions that we believe can provide breakthroughs in promising new fields of research that may benefit the OLED marketplace. As of December 31, 2024, the patent rights we exclusively license from all our university research partners included more than 600 issued patents and pending patent applications in jurisdictions around the world. Under our university patent license agreements, we are generally free to sublicense to third parties all or any portion of the licensed patent rights for the life of the licensed patents, though our rights are subject to termination for an uncured material breach or default by us, or if we become bankrupt or insolvent.

As part of our university license agreements, we may be required to compensate the universities to the extent we, or our sublicensees, utilize the licensed technology in commercial products. Under the 1997 Amended License Agreement we are required to pay Princeton royalties for licensed products sold by us or our sublicensees. These royalties amount to 3% of the net sales price for licensed products sold by us and 3% of the revenues we receive for licensed patents used by our sublicensees. We owed royalties under the 1997 Amended License Agreement of $2.0 million for the year ended December 31, 2024.

Acquired Patents and Other Intellectual Property

From time to time we acquire patents and other intellectual property that we believe provide strategic business opportunities, such as the patent and technology portfolio we acquired from Motorola Solutions, Inc. (f/k/a Motorola, Inc.) (Motorola) in 2011, Fujifilm Corporation in 2012 and the following portfolios from BASF, and Merck KGaA:

Patents We Acquired from BASF

In 2016, UDC Ireland entered into an IP Transfer Agreement (the BASF Agreement) with BASF. Under the BASF Agreement, BASF sold us more than 500 OLED-related patents and patent applications for a total cost of $96.0 million. The transactions contemplated by the BASF Agreement were consummated on June 28, 2016.

Patents We Acquired from Merck KGaA

In 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. The transactions contemplated by the Merck KGaA Agreement were consummated on April 28, 2023.

Non-patented Technical Know-How

We have accumulated, and continue to accumulate, a substantial amount of non-patented technical know-how relating to OLED technologies and materials. Where practicable, we share portions of this information with display manufacturers and other business partners on a confidential basis. We also employ various methods to protect this information from unauthorized use or disclosure, although no such methods can afford complete protection. Moreover, because we derive some of this information and know-how from academic institutions, there is an increased potential for public disclosure. We also cannot prevent the actual independent development of the same or similar information and know-how by third parties.

Competition

The industry in which we operate is highly competitive. We compete against alternative display technologies, in particular LCDs, as well as other OLED technologies. We also compete in the lighting market against incumbent technologies, such as incandescent and fluorescent bulbs, and inorganic LEDs, and against emerging technologies, such as other OLED technologies.

Display Panel Industry Competitors

Numerous domestic and foreign companies have developed or are developing and improving LCD, which includes quantum dot LCDs (which are sometimes referred to as QLEDs), and other early-stage display technologies, including microLED technologies, that are attempting to compete with our OLED display technologies. OLED display technologies compete with LCDs, QLEDs and other display technologies for many product applications on the basis of lower power consumption, better contrast ratios, faster video rates, form factor and lower manufacturing cost. However, other companies may succeed in continuing to improve these competing display technologies, or in developing new display technologies, that are superior to OLED display technologies in various respects. We cannot predict the timing or extent to which such improvements or developments may occur.

Lighting Industry Competitors

Although there has been a movement to phase out traditional incandescent bulbs throughout many countries, traditional incandescent bulbs and fluorescent lamps remain entrenched products in the lighting industry. In addition, compact fluorescent lamps and solid-state LEDs have been introduced into the market and would compete with OLED lighting products. LEDs have realized significant market adoption in the general lighting market. Having attributes different from fluorescent lamps and LEDs, OLEDs may compete directly with these products for certain lighting applications. However, manufacturers of LEDs and compact fluorescent lamps may succeed in more broadly adapting their products to various lighting applications, or others may develop competing solid-state lighting technologies that are superior to OLEDs. Again, we cannot predict whether or when this might occur.

OLED Technologies and Materials Competitors

Eastman Kodak Company (Kodak) developed and patented the original fluorescent OLED technology in 1987. Cambridge Display Technology, Ltd. (CDT), which was acquired by Sumitomo Chemical Company in 2007, developed and patented polymer OLED technology in 1989. Display and lighting manufacturers, including customers of ours, are engaged in their own OLED research, development and commercialization activities, and have developed and may continue to develop proprietary OLED technologies and materials that are necessary or useful for commercial OLED devices. In addition, other material manufacturers, such as Sumitomo, Idemitsu Kosan Co., Ltd. (Idemitsu Kosan), Merck KGaA, Kyulux Inc., Summer Sprout Technology, UIV OLED, Aglaia Tech, Jilin OLED Photoelectric Materials Co., Ltd., and Nanjing Topto Semiconductor Materials Co., Ltd. are selling or sampling competing OLED materials to customers, including companies to which we sell our proprietary PHOLED materials.

Our licensing business is based on our control of a broad portfolio of OLED-related device patents and technologies. We believe this portfolio includes fundamental patents in the field of phosphorescent OLED materials and devices, as well as certain additional complementary OLED technologies. As discussed above, alternative technologies, such as fluorescent OLED emitter materials, exist and could be competitive to our phosphorescent OLED material solutions. However, fluorescent materials have characteristics that we believe many market participants consider less desirable than those of phosphorescent materials. Suppliers of fluorescent emitter materials include Solus Advanced Materials Co., Ltd., Dow Chemical (previously Gracel Display), Idemitsu Kosan and SFC Co. Ltd. Fluorescent materials may also be viewed as complementary in that they can be used in the same OLED stack as phosphorescent materials, and within the same emissive layer as phosphorescent materials to provide unique performance characteristics.

The competitive landscape with respect to our host materials business is characterized by a larger number of established chemical material suppliers who have long-term relationships with many of our existing customers and licensees. We have elected to partner with certain of these companies to manufacture and deliver host solutions to our customers, as well as selling our host materials directly to device manufacturers. We believe our competitive advantage stems, in part, from our deep knowledge of our phosphorescent emitter materials, which are complementary with the host solutions. We believe that our understanding of phosphorescent emitter materials enables us to create host material solutions that are especially well suited for use with a certain class of emitter materials that are implemented commercially today. However, we note that many of our technology partners have their own host solutions and the competitive landscape includes many well-established companies such as Solus Advanced Materials Co., Ltd., Dow Chemical, Duksan Neolux Co., Ltd., Idemitsu Kosan, Merck KGaA, NSCC, Beijing Sineva Technology Co., Ltd., China Ray, Lumilan, Eternal Material Technology (EMT) and Samsung SDI Co. Ltd. These companies have significant resources, and some may aggressively pursue such business in the future.

Our existing business relationships with SDC and other product manufacturers suggest that our OLED technologies and materials, particularly our PHOLED technologies and materials, may achieve a significant level of market penetration in the display and lighting industries. However, others, such as those working to develop thermally activated delayed fluorescence (TADF) and phosphorescent sensitized fluorescence, may succeed in developing new OLED technologies, materials and alternative solutions that may supplement or be utilized in place of ours. We cannot be sure of the extent to which product manufacturers will adopt and continue to utilize our OLED technologies and materials for the production of commercial displays and lighting products.

Our Venture Capital Business: UDC Ventures LLC

Our wholly-owned subsidiary, UDC Ventures LLC, is a corporate venture capital entity that funds companies we believe are developing innovative products and technologies that may be synergistic or complementary to our business and/or business strategies or which may otherwise provide favorable investment opportunities.

Human Capital

As of December 31, 2024, we had 468 active employees, none of whom are unionized. Of these employees, 345 are research scientists, engineers and laboratory technicians at our domestic and international facilities. This team includes chemists, physicists, engineers and technicians with physics, electrical engineering, mechanical engineering and organic/inorganic chemistry backgrounds, and highly-trained theoreticians and experimentalists. We believe that relations with our employees are good.

Guided by our values, we are committed to creating a company where everyone is included and respected, and where we support each other in reaching our full potential. We are committed to diverse representation across all levels of our workforce to reflect the vibrant and thriving diversity of the communities in which we live and work. Women represent 40% of our executive management team, 16% of our leadership (Director level and above) and 22% of our total workforce, as well as 40% of our Board of Directors. We have employees from over 25 countries in our workforce, and we believe that a diverse workforce made up of people with different ideas, strengths, interests and cultural backgrounds drives employee and business success. In 2024 our voluntary turnover rate was 6%, and we had an overall employee growth rate of 3%. Additional data, including historical turnover and diversity information, as well as our corporate policies relating to our employee engagement and human capital, are updated on our website www.oled.com (http://www.oled.com), and included in our annual Corporate Responsibility Report.

Our Company History

Our corporation was organized under the laws of the Commonwealth of Pennsylvania in 1985. Our business commenced in 1994 through the operations of a company then known as Universal Display Corporation, which had been incorporated under the laws of the State of New Jersey. In 1995, a wholly-owned subsidiary of ours merged into this New Jersey corporation. The surviving corporation in this merger became a wholly-owned subsidiary of ours and changed its name to UDC, Inc. Simultaneously with the consummation of this merger, we changed our name to Universal Display Corporation. UDC, Inc. functions as an operating subsidiary of ours and has certain overlapping officers and directors. We have also formed or acquired other wholly-owned subsidiaries, including Universal Display Corporation Hong Kong, Limited (2008), Universal Display Corporation Korea, Y.H. (2010), Universal Display Corporation Japan GK (2011), UDC Ireland Limited (2012), Universal Display Corporation China, Ltd. (2016), Adesis, Inc. (2016), UDC Ventures LLC (2019), OLED Material Manufacturing Limited (2020), OVJP Corporation (2020), and Universal Vapor Jet Corporation Pte. Ltd. (2024), and we established a representative office in Taiwan (2011).

Our Compliance with Environmental Protection Laws

We are not aware of any material effects that compliance with Federal, state or local environmental protection laws or regulations will have on our business. We have not incurred substantial costs to comply with any environmental protection laws or regulations, and we do not anticipate having to do so in the foreseeable future.

Our Internet Site

Our Internet address is www.oled.com (http://www.oled.com). We make available through our Internet website, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we file such material with the U.S. Securities and Exchange Commission (the SEC). The SEC maintains a website that contains these reports as well as proxy statements and information regarding issuers who file electronically, with the address www.sec.gov (http://www.sec.gov). In addition, we have made available on our Internet website under the heading “Corporate Governance” the charter for the Audit Committee of our Board of Directors, the charter for the Human Capital Committee of our Board of Directors, the charter for the Nominating & Corporate Governance Committee of our Board of Directors, our Code of Ethics & Business Conduct for Employees, our Code of Conduct for Directors, and our Corporate Governance Guidelines. We intend to make available on our Internet website any future amendments or waivers to our Code of Ethics & Business Conduct for Employees and our Code of Conduct for Directors. The information on our Internet website is not part of this report.

INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following table sets forth certain information with respect to our executive officers as of February 20, 2025:

Our Board of Directors has appointed these executive officers to hold office until their successors are duly appointed.

Steven V. Abramson is our President and Chief Executive Officer, and has been a member of our Board of Directors since May 1996. Mr. Abramson served as our President and Chief Operating Officer from May 1996 through December 2007. From March 1992 to May 1996, Mr. Abramson was Vice President, General Counsel, Secretary and Treasurer of Roy F. Weston, Inc., a worldwide environmental consulting and engineering firm. From December 1982 to December 1991, Mr. Abramson held various positions at InterDigital, Inc., including General Counsel, Executive Vice President and General Manager of the Technology Licensing Division.

Julia J. Brown, Ph.D. became our Executive Vice President in April 2021, prior to which she served as a Senior Vice President since June 2008. She has been our Chief Technical Officer since June 2002 and joined us in June 1998 as our Vice President of Technology Development. From 1991 to 1998, Dr. Brown was a Research Department Manager at Hughes Research Laboratories where she directed the pilot line production of high-speed Indium Phosphide-based integrated circuits for insertion into advanced airborne radar and satellite communication systems. Dr. Brown received an M.S. and Ph.D. in Electrical Engineering/Electrophysics at USC and a B.S.E.E. from Cornell University. Dr. Brown holds a number of distinguished elected awards including Fellow of the Institute of Electrical and Electronics Engineers (IEEE), Fellow of the Society of Information Display (SID), and the National Academy of Engineers (NAE).

Janice K. Mahon became our Senior Vice President, Technology Commercialization and General Manager, Commercial Sales Business in April 2021, and previously served as our Vice President of Technology Commercialization since January 1997, and General Manager of our PHOLED Material Sales Business since January 2007. From 1992 to 1996, Ms. Mahon was Vice President of SAGE Electrochromics, Inc., a thin-film electrochromic technology company, where she oversaw a variety of business development, marketing, finance and administrative activities. From 1984 to 1989, Ms. Mahon was a Vice President and General Manager for Chronar Corporation, a leading developer and manufacturer of amorphous silicon photovoltaic (PV) panels. Prior to that, Ms. Mahon worked as Senior Engineer for the Industrial Chemicals Division of FMC Corporation. Ms. Mahon received her B.S. in Chemical Engineering from Rensselaer Polytechnic Institute in 1979, and an M.B.A. from Harvard University in 1984. Ms. Mahon was a member of the Technical Council of the FlexTech Alliance from 1997 through 2010, and a member of its Governing Board from 2008 through 2010. Ms. Mahon was a member of the Board of Directors and Marketing Committee Chairperson of the OLED Association from 2009-2014.

Brian Millard is our Vice President, Chief Financial Officer and Treasurer. Mr. Millard joined us in September 2022 with more than 15 years of financial, operational and strategic experience across several industries. Prior to joining us, Mr. Millard served as Senior Vice President, Finance and Corporate Controller at Emergent BioSolutions from January 2020 to September 2022 and as Vice President, Corporate Controller from October 2017 to January 2020. Previously, Mr. Millard served as Vice President, Corporate Controller at Hertz Global Holdings, Inc., from August 2015 to October 2017 and Assistant Corporate Controller from March 2014 to August 2015. Mr. Millard also served in financial reporting leadership roles at Hilton Worldwide Holdings, Inc. Mr. Millard began his career at Deloitte & Touche LLP. He received his M.S. and B.B.A. degrees in accounting from James Madison University and is a licensed certified public accountant.

Mauro Premutico has served as our Secretary since September 2022, and our Senior Vice President, Planning, and Chief Legal Officer since April 2021. He previously served as our Vice President of Legal and General Manager of Patents and Licensing since April 2012. Prior to joining us, Mr. Premutico was the Managing Vice President and Chief Patent Counsel for The Walt Disney Company from 2009 to 2012, and Vice President of Intellectual Property and Associate General Counsel for Lenovo Group Ltd. from 2005 to 2009. Mr. Premutico received a J.D. from Boston University School of Law, an M.B.A. from Yale University, and a B.S.E.E. from Worcester Polytechnic Institute.

You should carefully consider the following risks and uncertainties when reading this Annual Report on Form 10-K. The following factors, as well as other factors affecting our operating results and financial condition, could cause our actual future results and financial condition to differ materially from those projected.

Risks Related to Our Intellectual Property

If we cannot obtain and maintain appropriate patent and other intellectual property protection for our OLED technologies and materials, our business will suffer.

The value of our OLED technologies and materials is dependent on our ability to secure and maintain appropriate patent and other intellectual property rights protection. Although we own or license many patents respecting our OLED technologies and materials that have already been issued, there can be no assurance that additional patents applied for will be obtained, or that any of these patents, once issued, will afford commercially significant protection for our OLED technologies and materials, or will be found valid if challenged. Also, there is no assurance that we will be successful in defending the validity of our current or future patents in pending and future patent oppositions, invalidation trials, interferences, reexaminations, reissues, or other administrative or court proceedings. Moreover, we have not obtained patent protection for some of our OLED technologies and materials in all foreign countries in which OLED products or materials might be manufactured or sold.

We believe that the strength of our current intellectual property position results primarily from the essential nature of our fundamental patents covering phosphorescent OLED devices and certain materials utilized in these devices. Certain of our existing fundamental phosphorescent OLED patents expired in the United States in 2017 and 2019; and expired in other countries of the world in 2018 and 2020. While we hold a wide range of additional patents and patent applications relating to our commercial OLED materials and technologies whose expiration dates extend (and in the case of patent applications, will extend) beyond 2024, many of which are also of importance in the OLED industry, none may be of an equally essential nature as our original fundamental patents, and therefore our competitive position may be less certain as a result of the expiration of these patents.

We have more than 6,500 issued and pending patents relating to our OLED technologies. There is no assurance that these patents and applications will not be challenged prior to their respective expirations in any of the jurisdictions in which they are utilized, or that if challenged, we will be able to secure sufficient breadth of protection, and monetary and injunctive relief for the violation of our rights to make up for the business harm resulting from such activities. Moreover, there can be no assurance that competitors will not develop or produce competing PHOLED material designs that may be outside of our existing patents. There may also be fundamental new advancements in the field of OLED technology that could enable the commercial use of older and unpatented PHOLED materials or the adoption of new OLED materials that do not require the utilization of our proprietary PHOLED materials to achieve superior performance characteristics.

We may become engaged in litigation to protect or enforce our patent and other intellectual property rights, or in International Trade Commission proceedings to abate the importation of goods that would compete unfairly with those of our licensees. In addition, we are participating in or have participated in, and in the future will likely have to participate in, interference, reissue, or reexamination proceedings before the U.S. Patent and Trademark Office, and opposition, nullity or other proceedings before foreign patent offices, with respect to some of our patents or patent applications. All of these actions place our patents and other intellectual property rights at risk and may result in substantial costs to us as well as a diversion of management attention from our business and operations. Moreover, if successful, these actions could result in the loss of patent or other intellectual property rights protection for the key OLED technologies and materials on which our business depends.

We rely, in part, on several non-patented proprietary technologies to operate our business. Others may independently develop the same or similar technologies or otherwise obtain access to our unpatented technologies. Furthermore, these parties may obtain patent protection for such technology, inhibiting or preventing us from practicing the technology. To protect our trade secrets, know-how and other non-patented proprietary information, we require employees, consultants, financial advisors and strategic partners to enter into confidentiality agreements. These agreements may not ultimately provide meaningful protection for our trade secrets, know-how or other non-patented proprietary information. In particular, we may not be able to fully or adequately protect our proprietary information as we conduct discussions with potential strategic partners.

Additionally, although we take many measures and implement safeguards to prevent unauthorized use, including by theft and misuse, of our intellectual property and proprietary information, third parties may attempt to obtain, copy, reverse-engineer, use or disclose, illegally or otherwise, such intellectual property and proprietary information. We also may face attempts by others to gain unauthorized access through the Internet to our information technology systems or to our intellectual property, which might be the result of industrial or other espionage or actions by hackers seeking to harm our company or its products. If we are unable to protect the proprietary nature of our intellectual property and proprietary information, it will harm our business.

We or our customers may incur substantial costs or lose important rights as a result of litigation or other proceedings relating to our patent and other intellectual property rights or with respect to our OLED materials business.

There are a number of other companies and organizations that have been issued patents and are filing patent applications relating to OLED technologies and materials, including, without limitation, Kodak (substantially all of whose OLED assets were sold to a group of LG companies in 2009), CDT (acquired by Sumitomo in 2007), Canon, Inc., Semiconductor Energy Laboratories Co., Idemitsu Kosan and Mitsubishi Chemical Corporation. In addition, some of our customers such as SDC and LG Display have been issued patents and are filing patent applications relating to OLED technologies and materials. As a result, there may be issued patents or pending patent applications of third parties that would be infringed by the use of our OLED technologies or materials, thus subjecting our customers to possible suits for patent infringement in the future. Such lawsuits could result in our customers being liable for damages or require our customers to obtain additional licenses that could increase the cost of their products. This, in turn, could have an adverse effect on our customers’ sales and thus our royalties or material sales revenues, or cause our customers to seek to renegotiate our royalty rates or pricing. In addition, we have agreed to indemnify customers purchasing our OLED materials for commercial usage against certain claims of patent infringement by third parties, as a result of which we may incur substantial legal costs in connection with defending these customers from such claims.

Our licensees may also seek to avoid paying future royalties by attempting to have our patents declared invalid and unenforceable by a court. Our licensees may be more likely to file such declaratory actions in light of the U.S. Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc. (2007), in which the Court found that a licensee need not refuse to pay royalties and commit material breach of the license agreement before bringing an action to declare a licensed U. S. patent invalid and unenforceable.

In addition, we may be required, from time-to-time, to assert our intellectual property rights by instituting legal proceedings against others. We cannot be assured that we will be successful in enforcing our patents in any lawsuits we may commence. Defendants in any litigation we may commence to enforce our patents may attempt to establish that our patents are invalid or are unenforceable. Thus, any patent litigation we commence could lead to a determination that one or more of our patents are invalid or unenforceable. If a third party succeeds in invalidating one or more of our patents, that party and others could compete more effectively against us. Our ability to derive licensing revenues from products or technologies covered by these patents would also be adversely affected.

Whether our customers are defending the assertion of third-party intellectual property rights against their businesses arising as a result of the use of our technology, or we are asserting our own intellectual property rights against others, such litigation can be complex, costly, protracted and highly disruptive to our or our customers’ business operations by diverting the attention and energies of management and key technical personnel. As a result, the pendency or adverse outcome of any intellectual property litigation to which we or our customers are subject could disrupt business operations, require the incurrence of substantial costs and subject us or our customers to significant liabilities, each of which could severely harm our business. Costs associated with these actions are likely to increase as AMOLED products using our PHOLED and other OLED technologies and materials continue to enter the consumer marketplace.

Plaintiffs in intellectual property cases often seek injunctive relief in addition to money damages. Any intellectual property litigation commenced against our customers may force them to take actions that could be harmful to their businesses and thus to revenues, including the halting of sales of products that incorporate or otherwise use our technology or materials.

Furthermore, the measure of damages in intellectual property litigation can be complex and is often subjective or uncertain. If our customers were to be found liable for infringement of proprietary rights of a third party, the amount of damages they might have to pay could be substantial and is difficult to predict. Decreased sales of our customers’ products incorporating our technology or materials would have an adverse effect on our royalty revenues under existing licenses and material sales under our existing sales agreements. Were this to occur, it would likely harm our ability to (i) obtain new licensees which would have an adverse effect on the terms of the royalty arrangements we could enter into with any new licensees, and (ii) sell our UniversalPHOLED® materials to existing and new customers. Moreover, to the extent any third party claims are directed specifically to materials supplied by us to our customers, we may be required to incur significant costs associated with the defense of such claims and potential damages associated with such claims that may be awarded against our customers.

As is commonplace in technology companies, we employ individuals who were previously employed at other technology companies. To the extent our employees are involved in research areas that are similar to those areas in which they were involved at their former employers, we may be subject to claims that such employees or we have, inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of the former employers. Litigation may be necessary to defend against such claims. The costs associated with these actions or the loss of rights critical to our or our customers’ businesses could negatively impact our revenues or cause our business to fail.

Recent court decisions in various patent cases may make it more difficult for us to obtain future patents, enforce our patents against third parties or obtain favorable judgments in cases where the patents are enforced.

Recent and continuously evolving changes in law in the various jurisdictions in which we operate may make it more difficult for patent holders to secure future patents and/or enforce existing patents. As a result of the less rigid approach to assessing obviousness, defending the validity of or obtaining patents may be more difficult.

Recent court decisions and changes in regulations may also impact the enforcement of our patents. For example, we may not be able to enjoin certain third party uses of products or methods covered by our patents following the initial authorized sale, even where those uses are expressly proscribed in an agreement with the buyer. Also, we may face increased difficulty enjoining infringement of our patents. Some jurisdictions have held that an injunction should not automatically issue based on a finding of patent infringement, but should be determined based on a test balancing considerations of the patentee’s interest, the infringer’s interest, and the public’s interest. Obtaining enhanced damages for willful infringement of our patents may also be more difficult even in those cases where we successfully prove a third party has infringed our patents, as a recent case set a more stringent standard for proving willful infringement.

Therefore, as a result of such rulings and principles, it may be more difficult for us to defend our currently issued patents, obtain additional patents in the future or achieve the desired competitive effect even when our patents are enforced. If we are unable to so defend our currently issued patents, or to obtain new patents for any reason, our business would suffer.

Risks Related to Our Business and Operations

If we cannot form and maintain lasting business relationships with OLED product manufacturers, our business strategy will fail.

Our business strategy ultimately depends upon our development and maintenance of commercial licensing and material supply relationships with high-volume manufacturers of OLED products. We have entered into a limited number of such relationships from which most of our material sales and licensing revenue are generated. Our other relationships with product manufacturers currently are limited to technology development and the evaluation of our OLED technologies and materials for possible use in commercial products. Some or all of these relationships may not succeed or, even if they are successful, may not result in the product manufacturers entering into commercial licensing and material supply relationships with us.

Many of our agreements with product manufacturers last for only limited periods of time, such that our relationships with these manufacturers will expire unless they are renewed. These product manufacturers may not agree to renew their relationships with us on a continuing basis or may agree to do so on terms that are less favorable to us. In addition, we regularly continue working with product manufacturers after our existing agreements with them have expired while we are attempting to negotiate contract extensions or new agreements with them. Should our relationships with the various product manufacturers not continue or be renewed on less favorable terms, or if we are not able to identify other product manufacturers and enter into contracts with them, our business may materially suffer.

Our ability to enter into additional commercial licensing and material supply relationships, or to maintain our existing relationships, may depend on our ability to make certain financial or other commitments. We might not be able, for financial or other reasons, to enter into or continue these relationships on commercially acceptable terms, or at all. Failure to do so may cause our business strategy to fail.

If we fail to continue to make advances in our OLED research and development activities, we might not succeed in continuing to commercialize our OLED technologies and materials.

Further advances in our OLED technologies and materials depend, in part, on the success of the research and development work we conduct, both alone and with our research partners. We cannot be certain that this work will yield additional advances in the research and development of these technologies and materials.

Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including, without limitation, unanticipated technical or other problems and the possible insufficiency of funds for completing development of these products. Technical problems may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete research and development of our OLED technologies and materials successfully, or if we experience delays in completing research and development of our OLED technologies and materials for use in potential commercial applications, particularly after incurring significant expenditures, our business may fail.

Conflicts or other problems may arise with our customers or joint development partners, resulting in renegotiation, breach or termination of, or litigation related to, our agreements with them. This would adversely affect our revenues.

Conflicts or other problems could arise between us and our customers or joint development partners, some of which we have made strategic investments in, as to royalty rates, milestone payments or other commercial terms. Similarly, we may disagree with our customers or joint development partners as to which party owns or has the right to commercialize intellectual property that is developed during the course of the relationship or as to other non-commercial terms. If such a conflict were to arise, a customer or joint development partner might attempt to compel renegotiation of certain terms of their agreement or terminate their agreement entirely, and we might lose the royalty revenues, material sales revenues and other benefits of the agreement. Either we or the customer or joint development partner might initiate litigation to determine commercial obligations, establish intellectual property rights or resolve other disputes under the agreement. Such litigation could be costly to us and require substantial attention of management. If we were unsuccessful in such litigation, we could lose the commercial benefits of the agreement, be liable for financial damages and suffer losses of intellectual property or other rights that are the subject of dispute.

If our OLED technologies and materials are not feasible for broad-based product applications, we may not be able to continue to generate revenues sufficient to support ongoing operations.

Our main business strategy is to sell our OLED materials and license our OLED technologies to manufacturers for incorporation into the display and lighting products that they sell. Consequently, our success depends on the ability and willingness of manufacturers to continue to develop, manufacture and sell commercial products integrating our technologies and materials.

Before product manufacturers will agree to expand the use of our OLED technologies and materials for wider scale commercial production, they will likely require us to demonstrate to their satisfaction that our OLED technologies and materials are feasible for broad-based product applications beyond current commercial application, such as smartphones, wearables and television displays. This, in turn, may require additional advances in our technologies and materials, as well as those of others, for applications in a number of areas, including, without limitation, advances with respect to the development of:

• OLED materials with improved lifetimes, efficiencies and color coordinates for larger area full-color OLED displays and general lighting products;
• more robust OLED materials for use in more demanding large-scale manufacturing environments; and
• scalable and cost-effective methods and technologies for the fabrication of large volume OLED materials and products.

We cannot be certain that these advances will occur, and hence our OLED technologies and materials may not be feasible for additional broad-based product applications and expansion.

Even if our OLED materials and technologies are technically feasible, they may not be further adopted by product manufacturers for broad-based product applications.

The potential size, timing and viability of market opportunities targeted by us remain uncertain. Market acceptance of our OLED materials and technologies beyond current product offerings and sales volumes will depend, in part, upon these materials and technologies providing benefits comparable or superior to competing display and lighting technologies at an advantageous cost to manufacturers, and the adoption of products incorporating these technologies by consumers. Many current and potential customers for our OLED technologies utilize and have invested significant resources in competing technologies, and may, therefore, be reluctant to redesign their products or manufacturing processes to incorporate our OLED technologies.

During the entire product development process for a new product, we face the risk that our materials or technologies will fail to meet the manufacturer’s technical, performance or cost requirements or will be replaced by a competing product or alternative technology. Even if we offer materials and technologies that are satisfactory to a product manufacturer, the manufacturer may choose to delay or terminate its product development efforts for reasons unrelated to our materials or technologies. In addition, our agreements with our customers do not require them to purchase our host materials to utilize our phosphorescent emitter materials, and those customers may elect not to purchase our host materials.

Mass production of new mass market OLED products will require the availability of suitable manufacturing equipment, components and materials, many of which are available only from a limited number of suppliers. In addition, there may be a number of other technologies that manufacturers need to utilize in conjunction with our OLED technologies in order to bring these new OLED products to the market. Thus, even if our OLED technologies are a viable alternative to competing approaches, if product manufacturers are unable to obtain access to this equipment and these components, materials and other technologies, they may not utilize our OLED technologies.

There are numerous potential alternatives to OLEDs, which may limit our ability to commercialize our OLED technologies and materials.

The display market remains dominated by displays based on LCD technology. Numerous companies are making substantial investments in, and conducting research to improve characteristics of, LCDs; additionally, other competing display technologies have been, or are being, developed, like microLED. A similar situation exists in the solid-state lighting market, which is currently dominated by LED products. Advances in any of these various technologies may overcome their current limitations and permit them to become the leading technologies in their field, either of which could limit the potential market for products utilizing our OLED technologies and materials. This, in turn, would cause product manufacturers to avoid entering into commercial relationships with us, or to terminate or not renew their existing relationships with us.

Other OLED technologies may be more successful or cost-effective than ours, which may limit the commercial adoption of our OLED technologies and materials.

Our competitors have developed and continue to develop OLED technologies that differ from, compete with or reduce the requirements for our OLED technologies. In particular, competing and complementary fluorescent and thermally activated delayed fluorescence OLED technology may become a viable alternative or supplement to our phosphorescent OLED technology. Moreover, our competitors may succeed in developing new OLED technologies that may become more cost-effective or have fewer limitations than our OLED technologies. If our OLED technologies, and particularly our phosphorescent OLED technology, are unable to continue to capture a substantial portion of the OLED product market, our business strategy may fail.

The consumer electronics industry experiences significant downturns from time to time, any of which may adversely affect the demand for and pricing of our OLED technologies and materials.

Our success depends upon the ability and continuing willingness of our customers to manufacture and sell products utilizing our technologies and materials, specifically our phosphorescent emitters and host materials, and the widespread acceptance of our customers’ products in the consumer marketplace. Any slowdown in the demand for our customers’ products or a decrease in our customers’ use of or demand for our materials would adversely affect our material sales and royalty revenues and thus our business. Our customers’ decrease in the use of or demand for our materials may depend on several factors, including pricing, availability, continued technical improvements and competitive product offerings. The markets for flat panel displays and lighting products are highly competitive. Success in the market for end-user products that may integrate our OLED technologies and materials also depends on factors beyond the control of our customers and us, including the cyclical and seasonal nature of the end-user markets that our customers serve, as well as industry and general economic conditions.

The markets that we hope to penetrate have experienced significant periodic downturns, often in connection with, or in anticipation of, declines in general economic conditions. These downturns have been characterized by lower product demand, production overcapacity and erosion of average selling prices. Our business strategy is dependent on manufacturers building and selling products that incorporate our OLED technologies and materials. Industry-wide fluctuations and downturns in the demand for displays and solid-state lighting products could cause significant harm to our business.

Our customers may develop new or more efficient manufacturing processes, which may adversely affect demand for our OLED materials.

By developing enhanced material processing methods and more efficient manufacturing techniques, our customers who purchase our phosphorescent emitter and host materials could become more efficient in the utilization of our materials by developing designs that require less materials on a per square meter basis, or by modifying their manufacturing process to make more efficient use of our materials, which could limit or reduce the amount of materials they purchase from us. Thus, demand for our materials may not expand in proportion to the number of OLED related products manufactured by our customers, and may result in reduced demand for our materials and technologies relative to our customers' manufacture and sale of products made with such materials.

Epidemics, pandemics, disease outbreaks and other public health crises could have a material adverse effect on our operations and business.

Epidemics and pandemics could negatively impact the global economy, disrupt consumer spending and global supply chains, and create significant volatility and disruption of financial markets, which in turn could have a material adverse effect on our business, financial condition and results of operations. The extent of such impact would depend on factors such as the duration and severity of the event, which would likely be difficult to predict.

Any downturn in U.S. or global economic conditions may have a significant adverse effect on our business.

There have been significant and sustained economic downturns in the U.S. and globally in the past. These downturns have placed pressure on consumer demand, and the resulting impact on consumer spending has had a material adverse effect on the demand for consumer electronic products. Similar downturns in the future may have a significant adverse effect on one or more of our licensees as an enterprise, which could result in those licensees reducing their efforts to commercialize products that incorporate our OLED technologies and materials. Consumer demand and the condition of the display and lighting industries may also be impacted by other external factors such as war, terrorism, geopolitical uncertainties, trade wars, epidemics and other business interruptions. The impact of these external factors is difficult to predict, and one or more of these factors could adversely impact the demand for our customers’ products, and thus our business.

Heightened levels of inflation and the potential worsening of macro-economic conditions, including slower growth or recession, changes to fiscal and monetary policy, tighter credit, higher interest rates and currency fluctuations, present a risk for us, our suppliers and the display and lighting industries in general. If inflation remains at current levels for an extended period, or increases, and we are unable to successfully mitigate the impact, our costs are likely to increase, resulting in pressure on our profits, margins and cash flows, particularly for existing fixed-price contracts. In addition, our business could be adversely impacted if our customers experience budget, inflationary or other pressures, such as increases in the cost of borrowing from rising interest rates.

Many of our competitors have greater resources and are based in the same Asia-Pacific countries where our significant customers are located, which may make it difficult for us to compete successfully against them.

The display and solid-state lighting industries are characterized by increasingly intense competition. Many of our competitors have better name recognition and greater financial, technical, marketing, personnel and research capabilities than we do. Also, many of them are based in the same Asia-Pacific countries where our customers’ operations are located, and as such they may receive preference from such countries and/or not be subject to the same laws, regulations and requirements as we are. Because of these differences, we may never be able to compete successfully in these markets or maintain any competitive advantages we are able to achieve over time.

If we cannot keep our key employees or hire other talented persons as we grow, our business might not succeed.

Our performance is substantially dependent on the continued services of our executive officers and other key technical and managerial personnel, and on our ability to offer competitive salaries and benefits to these and our other employees. We do not have employment agreements with any of our executive officers or other key technical or managerial personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. Additionally, competition for highly skilled technical and managerial personnel is intense. We might not be able to attract, hire, train, retain and motivate the highly skilled employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, our business will suffer and might fail.

We rely solely on PPG to manufacture the OLED materials we use and sell to product manufacturers.

Our business prospects depend significantly on our ability to obtain proprietary OLED materials for our own use and for sale to product manufacturers. Our agreement with PPG provides us with a source for these materials for development, evaluation and commercial purposes. Our agreement with PPG currently runs through the end of 2025 and shall be automatically renewed for additional one-year terms, unless terminated by us with prior notice of one year or terminated by PPG with prior notice of two years. Our inability to continue obtaining these OLED materials from PPG or another source at cost-competitive prices and to continue obtaining these OLED materials in sufficient quantities to meet our product manufacturers' current and future demands and timetables would have a material adverse effect on our revenues and cost of goods sold relating to sales of these materials to OLED product manufacturers, as well as on our ability to perform future development work.

Additionally, PPG manufactures our materials at facilities based in the United States and Ireland, which materials we then predominantly export to our customers that have manufacturing locations in countries in the Asia-Pacific region. As a result, such materials may be subject to tariffs, export restrictions or other barriers from or to these countries and/or customers.

Inflationary pressures and persistently high prices and uncertain availability of raw materials or other inputs used by us and our suppliers, or instability in logistics and related costs, could negatively impact our profitability.

Increases in prices, including as a result of inflation and rising interest rates, for raw materials or other inputs that we and our suppliers use in manufacturing our OLED materials, or increases in logistics and related costs, have led and may continue to lead to higher production costs for our materials. In addition, any increase in the cost or reduced availability of critical materials for our OLED materials could lead to higher production costs. Further, uncertain supply of such materials could disrupt our or our suppliers’ ability to obtain such materials in a timely manner and/or could lead to increased costs. Geopolitical risks and crises, fluctuations in supply and demand, fluctuations in interest rates, any weakening of the U.S. dollar, and other economic and political factors have created and may continue to create pricing pressure for raw materials and other inputs. These inflationary pressures could, in turn, negatively impact our profitability because we may not be able to pass these costs on to our customers or require our suppliers to absorb such costs.

We strive to maintain sufficient levels of inventory to accommodate our manufacturing customers. Inventory management relating to our material sales is complex, and excess inventory may harm our business and cause it to suffer.

Inventory management remains an area of focus as we balance the need to maintain strategic inventory levels of our OLED materials to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. As a just-in-time supplier to our customers, we carry sufficient inventory to accommodate their capacity requirements, sometimes without firm purchase commitments. Our dependence on third-party manufacturers to provide our materials to us exposes us to longer lead times than if we were a direct manufacturer, increasing our risk of inventory obsolescence comparatively. Our customers may increase orders during periods of product shortages, cancel orders if their inventory is too high, or delay orders in anticipation of new products. They also may adjust their orders in response to the supply and demand of their products by end-users, or the supply and demand of our products and the products of our competitors that are available to them.

Inventory management risks are heightened when our largest customers launch new products and retire existing products. At such times, these customers tend to change product designs and may introduce some of our new materials into new designs. The production of these materials requires us to purchase essential raw material and commence manufacturing well in advance of receiving firm customer orders for such materials. Accordingly, we are subject to the risk of unanticipated changes in our customers’ manufacturing plans and designs. Unanticipated product cessation and product introduction delays or cancellation may cause us to order or produce excess or insufficient inventory. Excess inventory of our OLED materials is subject to the risk of inventory obsolescence. In the event that a substantial portion of our inventory becomes obsolete, it could have a material adverse effect on earnings due to the resulting costs associated with the inventory impairment charges and inventory write-downs.

We are the sole source supplier for certain critical components used in OLED technologies, which subjects customers to risk if we are unable to meet the demand for such components.

Our customers depend on us as the sole source for certain proprietary PHOLED materials used in manufacturing OLED products, which makes them susceptible to supply shortages if we are unable to meet their demand for such components. A potential customer could be hesitant to adopt OLED technology given the risks inherent in depending on a sole source for critical components and the inability to establish alternate supply relationships. If we are unable to supply the components needed by our existing customers in a timely manner, or if potential customers do not utilize OLED technology because of concerns about our ability to meet supply demands, our business may materially suffer.

Because the vast majority of OLED product manufacturers are located in the Asia-Pacific region, we are subject to international operational, financial, legal and political risks which may negatively impact our operations.

Many of our customers and prospective customers have a majority of their operations in countries other than the United States, particularly in the Asia-Pacific region, and revenue outside the United States represents a majority of our total net revenue. We also have offices in various countries located outside of the United States. Risks associated with our doing business outside of the United States include, without limitation:

• compliance with a wide variety of U.S. and foreign laws and regulations, including foreign anti-corruption and export laws, and certain registration and licensing requirements for the OLED materials we sell;
• legal uncertainties on doing business in certain countries or with certain parties regarding taxes, tariffs, quotas, export controls, export licenses and other trade barriers;
• economic instability in the countries of our customers, causing delays or reductions in orders for their products and therefore our royalties;
• political instability in the countries in which we and/or our customers operate, particularly in South Korea with respect to South Korea's disputes with and proximity to North Korea, in Hong Kong relating to anti-government protests and in Taiwan relating to its disputes with China;
• third party theft or compromise of our products, technology, data or intellectual property, including by means of counterfeiting or reverse-engineering;
• difficulties in collecting accounts receivable and longer accounts receivable payment cycles;
• fluctuations in foreign currency exchange rates for any revenues or expenses not denominated in U.S. dollars;
• potentially adverse tax and tariff consequences
• potential mandatory regulatory requirements in some jurisdictions that domestic manufacturers source at least a portion of their critical OLED materials from domestic manufacturers; and
• trade conflicts between and among various geopolitical factions that could result in trade restrictions being placed on our business and sale of OLED materials.

Any of these factors could impair our ability to license our OLED technologies and sell our OLED materials, thereby harming our business. Compliance with changing laws and regulations may involve significant costs or require changes in business practice that could result in reduced profitability.

We rely on information technology systems to operate various elements of our business and a cyber-attack or other breach of our systems, or those of third parties on whom we may rely, could subject us to liability or interrupt the operation of our business.

We are dependent on information technology systems to operate various elements of our business. A breakdown, invasion, corruption, destruction or interruption of critical information technology systems by employees, others with authorized access to our systems or unauthorized persons could negatively impact operations. In the ordinary course of business, we collect, store and transmit important data and it is critical that we do so in a secure manner to maintain the confidentiality and integrity of such information. Additionally, we outsource certain elements of our information technology systems to third parties. As a result of this outsourcing, our third-party vendors may or could have access to our confidential information making such systems vulnerable. Data breaches of our information technology systems, or those of our third-party vendors, may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While we believe that we have taken appropriate security measures to protect our data and information technology systems, and have been informed by our third-party vendors that they have as well, there can be no assurance that our efforts will prevent breakdowns or breaches in our systems, or those of our third-party vendors, that could adversely affect our business.

Natural disasters or other unforeseen catastrophic events could unfavorably affect our business.

Natural disasters, such as hurricanes, tsunamis, or earthquakes, particularly in Asia-Pacific region, where many of our customers are located, or the occurrence of other unforeseen catastrophic events, such a fire or flood, could unfavorably affect our business and financial performance. Such events could unfavorably affect our customers in many ways, such as causing physical damage to one or more of their properties, the temporary or permanent closure of one or more plants, the disruption or cessation of manufacturing of product lines, and the temporary or long-term disruption in the supply or demand for their products. A resulting by-product of such natural disasters or other unforeseen catastrophic events could be a temporary or long-term disruption in the supply of or demand for our products.

Risks Related to Legal, Regulatory and Tax Matters

We may be subject to environmental and export laws and regulations, including without limitation those associated with the effects of climate change, that impose additional compliance costs and that could negatively impact our business.

Changes in environmental and export laws or regulations of our products could result in higher operating and compliance expenses and limit the markets in which we can manufacture and to which markets and customers we can export and sell our products. Changes in environmental and export laws or regulations, including laws relating to manufacturing operations and export restrictions, also could lead to new or additional investment in product designs and an increase in raw materials costs, and could increase our environmental and export compliance expenditures. Some of these laws and regulations may be changed or augmented as governments and regulatory bodies seek to address the effects of climate change and export compliance. If environmental and/or export laws or regulations are either changed or adopted and impose additional operational restrictions and compliance requirements upon us or our products, they could negatively impact our business, capital expenditures, results of operations and financial condition.

Our effective tax rate may increase or decrease.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to audit by tax authorities where we do business. Although we believe that our tax estimates and tax positions are reasonable, they could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations, and related interpretations, our global mix of earnings and the realizability of deferred tax assets. An increase or decrease in our effective tax rate could have a material adverse impact on our financial condition and results of operations.

In addition, at any time, U.S. federal tax laws or the administrative interpretations of those laws may be changed. We also cannot predict whether, when or to what extent other new U.S. federal tax laws, regulations, interpretations or rulings will be issued. As a result, changes in U.S. federal tax laws could negatively impact our operating results, financial condition and business operations, and adversely impact our shareholders.

Occasionally, changes in state and local tax laws or regulations are enacted that may result in an increase in our tax liability. Shortfalls in tax revenues for states and municipalities in recent years may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income.

The Organization for Economic Development’s Base Erosion Profit Shifting Pillar 2.0 (BEPS Pillar 2.0) initiative provides a minimum global tax rate of 15% for multinational organizations with a global turnover of €750 million or more. The Company is not expected to reach this threshold in the coming year. Rules and regulations surrounding the BEPS Pillar 2.0 initiative are continually evolving. At the current time, the impact and timing of BEPS Pillar II cannot be estimated.

Risks Related to Our Stock and Capitalization

We may require additional funding in the future in order to continue our business.

Our capital requirements have been and will continue to be significant. We may require additional funding in the future for the research, development and commercialization of our OLED technologies and materials, to obtain and maintain patents and other intellectual property rights in these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. Our cash on hand may not be sufficient to meet all our future needs. When we need additional funds, such funds may not be available on commercially reasonable terms or at all. If we cannot obtain more money when needed, our business might fail. Additionally, if we attempt to raise money in an offering of shares of our common stock, preferred stock, warrants or depositary shares, or if we engage in acquisitions involving the issuance of such securities, the issuance of these shares will dilute our then-existing shareholders.

The market price of our common stock may be highly volatile.

The market price of our common stock may be highly volatile, as has been the case with our common stock in the past as well as the securities of many companies, particularly other emerging-growth companies in the technology industry. Factors such as the following may have a significant impact on the market price of our common stock in the future:

• our revenues, expenses and operating results;
• announcements by us, by our licensors, customers, or our competitors of technological developments, new product applications or contractual arrangements;
• announcements relating to dividends and share repurchases; and
• other factors affecting the display and solid-state lighting industries in general.

Our operating results may have significant period-to-period fluctuations, which would make it difficult to predict our future performance.

Due to the current stage of commercialization of our OLED technologies and materials, current geopolitical risks, the limited number of commercially successful consumer products utilizing our OLED technologies that customers have introduced in the marketplace, the relatively short product lifetimes of these consumer products, and the significant development and manufacturing objectives that we and our customers must achieve for the widespread inclusion of our OLED technologies in consumer products such as mobile phones, tablets, television displays and lighting products, our quarterly operating results are difficult to predict and may vary significantly from quarter to quarter.

We believe that period-to-period comparisons of our operating results are not a reliable indicator of our future performance at this time. Among other factors affecting our period-to-period results, our license and technology development fees often consist of large one-time, annual, semi-annual or quarterly payments, which may result in significant fluctuations in our revenues. In addition, our reliance on a relatively small number of licensees with large volumes of consumer product sales makes our quarterly operating results subject to our licensees’ specific plans and the success of their specific product offerings.

With respect to material sales, our sales are primarily dependent on purchases made by a relatively small number of customers. In addition to the other factors described above relating to our customers’ sales opportunities, our quarter-to-quarter sales may be materially impacted by our customers’ inventory management plans, which may vary substantially based on financial management considerations, changes in their product mix plans, modified material processing techniques and manufacturing line modifications.

If, in some future period, our operating results or business outlook fall below the expectations of securities analysts or investors, our stock price would be likely to decline and investors in our common stock may not be able to resell their shares at or above their purchase price. Broad market, industry and global economic factors may also materially reduce the market price of our common stock, regardless of our operating performance.

We can issue shares of preferred stock that may adversely affect the rights of shareholders of our common stock.

Our Articles of Incorporation authorize us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our Board of Directors. Accordingly, our 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 our common stock. For example, an issuance of shares of preferred stock could:

• adversely affect the voting power of the shareholders of our common stock;
• make it more difficult for a third party to gain control of us;
• discourage bids for our common stock at a premium; or
• otherwise adversely affect the market price of our common stock.

As of February 20, 2025, we have issued and outstanding 200,000 shares of Series A Nonconvertible Preferred Stock, all of which are held by an entity controlled by members of the family of Sherwin I. Seligsohn, our late founder and former Chairman of the Board of Directors. Our Board of Directors has authorized and issued other shares of preferred stock in the past, none of which are currently outstanding, and may do so again at any time in the future.

Any decisions to reduce or discontinue paying cash dividends to our shareholders could cause the market price for our common stock to decline.

In 2017, our Board of Directors began declaring quarterly cash dividends on our common stock, which we have consistently paid since then and we intend to continue to pay in the future. However, payment of future cash dividends will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by our Board of Directors. As such, we may modify, suspend or cancel our cash dividend policy in any manner and at any time. Any reduction or discontinuance by us of the payment of quarterly cash dividends could cause the market price of our common stock to decline. Moreover, in the event our payment of quarterly cash dividends are reduced or discontinued, our failure or inability to resume paying cash dividends at historical levels could cause the market price of our common stock to decline. There is no guarantee that our common stock will appreciate in value or even maintain the price at which current shareholders purchased their shares.

Recognizing the importance of assessing, identifying, and managing material risks from cybersecurity threats, we maintain a cybersecurity program that is led by our management team and overseen by the Audit Committee of our Board of Directors. Material risks from cybersecurity threats to our company may include, among other things, operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of data privacy or security laws.

To identify and manage the risks from cybersecurity threats, our cybersecurity program includes various preventative, detection and responsive measures, including without limitation the following: use of monitoring and detection software applications, ongoing employee education and certification about cybersecurity threats, routine security access reviews, and the implementation of physical security measures. As standard practice, we require third-party service providers that may electronically interact with or handle our sensitive information to maintain an effective security management program and to notify us in the event of any known or suspected cyber incident.

Members of our management team, most notably our Chief Financial Officer, who has responsibility for managing our Information Technology and Security functions, are responsible for leading our cybersecurity program. Our management team meets regularly with our information technology leadership personnel, including our Vice President, Head of Global Information Technology, who reports to our Chief Financial Officer, to receive updates and data on cybersecurity management activities, including assessments on emerging technologies and evaluations of recommended practices related to cybersecurity measures. Our Vice President, Head of Global Information Technology, who has decades of information technology leadership experience, and our Chief Financial Officer maintain their expertise through participating in events such as continuing education and training, and information-sharing collaborations. We also retain a third-party Information Security consulting firm to advise on and assess our cybersecurity processes on an ongoing basis.

The Audit Committee of our Board of Directors has oversight responsibility for our cybersecurity program. Our Chief Financial Officer and Information Technology leadership provide periodic updates regarding our cybersecurity risk management strategy and related activities to the Audit Committee, and provide other information as needed or requested to facilitate the committee’s oversight of our cybersecurity risk. The chair of our Audit Committee, who previously founded and for 19 years led an information technology consulting company that specialized in providing software and systems integration, business process and technical consulting to multinational companies, holds a certification in Systemic Cyber Risk Governance for Corporate Directors. Other members of our full Board of Directors, which also receives periodic briefings on cybersecurity matters, also have received professional education and training related to cybersecurity.

Despite our efforts to manage the risk from cybersecurity threats, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. See Item 1A. “Risk Factors” for a further discussion of our cybersecurity risks.

As of December 31, 2024, our principal operating facilities were located at the following locations:

(1) Approximately 88,000 square feet for the expansion of research and development activities, collaboration, manufacturing logistics and other corporate functions.

(2) Leased beginning in 2021 for production by PPG of our PHOLED materials and purchased in September 2023.

(3) Leased beginning in 2017 and purchased in May 2023.

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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the section entitled “Selected Financial Data” in this report and our Consolidated Financial Statements and related notes to this report. This discussion and analysis contains forward-looking statements based on our current expectations, assumptions, estimates and projections. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those indicated in these forward-looking statements as a result of certain factors, as more fully discussed in Item 1A of this report, entitled “Risk Factors.”

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 and automotive applications, as well as specialty and general lighting products. Since 1994, we have been engaged and expect to continue to be primarily engaged, in funding and performing research and development activities relating to OLED technologies and materials, and commercializing these technologies and materials. We derive our revenue primarily from the following:

• 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). The terms of these agreements have been extended through the end of 2025. The patent license agreement provides LG Display a non-exclusive, royalty bearing portfolio license to make and sell OLED displays under our patent portfolio. The patent license calls for license fees, prepaid royalties and running royalties on licensed products. The OLED commercial supply agreement provides for the sales of materials for use by LG Display, which may include phosphorescent emitters and host materials. The agreements provide for certain other minimum obligations relating to the volume of material sales anticipated over the life of the agreements as well as minimum royalty revenue.

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

In 2016, we acquired Adesis, Inc. (Adesis) which has operations in New Castle and Wilmington, Delaware. Adesis is a contract development and manufacturing organization (CDMO) that provides support services on a contractual basis to third-party customers in the OLED, pharma, biotech, catalysis and other industries. As of December 31, 2024, Adesis employed a team of 139 research scientists, chemists, engineers and laboratory technicians. Prior to our acquisition of Adesis, we utilized more than 50% of Adesis’ technology service and production output. We continue to utilize a significant portion of its technology research capacity for the benefit of our OLED technology development, and Adesis uses the remaining capacity to operate as a CDMO by providing contract research services for non-OLED applications to third-party customers in the above-mentioned industries. Contract research services revenue is earned by providing chemical materials synthesis research, development and commercialization for non-OLED applications on a contractual basis for those third-party customers.

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

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

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.

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 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 and income taxes, as described below, are our “critical accounting policies” as contemplated by the SEC. These policies, which have been reviewed with our Audit Committee, are discussed in greater detail below.

Revenue Recognition and Deferred Revenue

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

The vast majority of revenue attributed to material sales is determined through technology license agreements and material supply agreements the terms of which are jointly agreed upon with our customers. The remaining revenue recognized is in the form of contract research services revenue earned by our subsidiary, Adesis, Inc., and our occasional material sales to smaller customers. None of the revenue recognized during the years ended December 31, 2024, 2023 or 2022 resulted solely from royalty or license fee arrangements as to which there were not associated material sales.

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

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

Accounting for Income Taxes

We are subject to income taxes in both the U.S. and foreign jurisdictions. Significant judgments and estimates are required in evaluating our tax positions for future realization and determining our provision for income taxes. Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated future taxes to be paid.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on our 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 our assessment, we consider the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and tax planning strategies.

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

RESULTS OF OPERATIONS

For a discussion of our results of operations comparison for the years ended December 31, 2023 and 2022, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed on February 22, 2024.

Comparison of the Years Ended December 31, 2024 and 2023

Revenue

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

• Green emitter sales for the year ended December 31, 2024, which include our yellow-green emitters, were $272.4 million as compared to $243.2 million for the year ended December 31, 2023, with unit material volumes increasing by 12%.
• Red emitter sales for the year ended December 31, 2024 were $88.5 million as compared to $73.2 million for the year ended December 31, 2023, with unit material volumes increasing by 25%.

Revenue from royalty and license fees was $266.8 million for the year ended December 31, 2024 as compared to $238.4 million for the year ended December 31, 2023, an increase of 12%. The increase in royalty and license fees was primarily the result of higher unit material volume and changes in customer mix.

The cumulative catch-up adjustment recorded to revenue arising from changes in estimates of transaction price, net was $10.8 million for the year ended December 31, 2024 as compared to $10.6 million for the year ended December 31, 2023. For the years ended December 31, 2024 and 2023, the adjustment resulted from an increase in the average price per gram that was primarily due to the decrease in anticipated demand by several of our customers over the remaining lives of their contracts.

Contract research services revenue was $15.4 million for the year ended December 31, 2024 as compared to $16.0 million for the year ended December 31, 2023, a decrease of 4%. The decrease in contract research services revenue was primarily due to the timing of completion of several contract research projects by our subsidiary, Adesis, during the year ended December 31, 2023. Revenue from contract research services consists of revenue earned by Adesis, which provides support services on a contractual basis to third-party customers in the pharma, biotech, catalysis and other industries.

Cost of Sales

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

Research and development

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

Selling, general and administrative

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

Amortization of acquired technology and other intangible assets

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

Patent costs

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

Royalty and license expense

Royalty and license expense increased to $2.0 million for the year ended December 31, 2024, as compared to $647,000 for the year ended December 31, 2023. This increase was due to a one-time expense of $1.5 million in connection with an amendment to our existing amended license agreement, effective as of October 9, 1997, with Princeton University and the University of Southern California.

Interest and other loss, net

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

Income tax expense

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

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents and short-term investments. As of December 31, 2024, we had cash and cash equivalents of $99.0 million, short-term investments of $393.7 million, and long-term U.S. Government bond investments of $435.5 million for a total of $928.2 million. This compares to cash and cash equivalents of $92.0 million, short-term investments of $422.1 million, and long-term U.S. Government bond investments of $285.5 million for a total of $799.6 million as of December 31, 2023.

Cash provided by operating activities for the year ended December 31, 2024 was $253.7 million resulting from $222.1 million of net income and an increase of $56.9 million due to non-cash items including stock-based compensation, depreciation, and amortization of intangibles, partially offset by a $25.3 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in other assets of $26.2 million, a decrease in deferred revenue of $26.1 million, an increase in inventory of $7.2 million and a decrease in other liabilities of $2.4 million, partially offset by a decrease in accounts receivable of $26.2 million and an increase in accounts payable and accrued expenses of $10.4 million.

Cash provided by operating activities for the year ended December 31, 2023 was $154.8 million resulting from $203.0 million of net income and an increase of $55.3 million due to non-cash items including depreciation, stock-based compensation, and amortization of intangibles, partially offset by a $103.5 million reduction due to changes in our operating assets and liabilities. Changes in our operating assets and liabilities related to an increase in accounts receivable of $47.2 million, an increase in other assets of $37.1 million, a decrease in other liabilities of $26.5 million and a decrease in deferred revenue of $4.2 million, partially offset by a decrease in inventory of $7.4 million and an increase in accounts payable and accrued expenses of $4.1 million.

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

Cash used in financing activities was $82.3 million for the year ended December 31, 2024, as compared to $72.9 million for the year ended December 31, 2023. The increase was due to an increase in the cash payment of dividends in the current year of $9.4 million and an increase in the payment of withholding taxes related to stock-based compensation to employees of $180,000, partially offset by an increase in the proceeds from issuance of common stock of $208,000.

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

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

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.

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

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are addressed in Note 2 in the Notes to the Consolidated Financial Statements included herein.

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 included herein. 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.

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 December 31, 2024. 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.

Management’s Report on Internal Control over Financial Reporting and Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting

The report of management on our internal control over financial reporting and the associated attestation report of our independent registered public accounting firm are set forth in Item 8 of this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.