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8-K

Universal Display Corp \Pa\ (OLED)

8-K 2023-05-03 For: 2023-05-03
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 3, 2023

UNIVERSAL DISPLAY CORPORATION

(Exact name of Registrant as Specified in Its Charter)

Pennsylvania 1-12031 23-2372688
(State or Other Jurisdiction<br><br>of Incorporation) (Commission File Number) (IRS Employer<br><br>Identification No.)
250 Phillips Boulevard,<br><br>Ewing, NJ 08618
(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (609) 671-0980

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value OLED The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On May 3, 2023, the Registrant issued a press release regarding its financial results for the quarter ended March 31, 2023. A copy of the press release is furnished as Exhibit 99.1 to this report.

The information set forth under this “Item 2.02. Results of Operations and Financial Condition” (including the exhibit) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any filing made by the Registrant pursuant to the Securities Act of 1933, as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto.

Item 7.01 Regulation FD Disclosure.

On April 28, 2023, the Registrant’s wholly-owned subsidiary, UDC Ireland Limited, acquired from Merck KGaA, Darmstadt, Germany (Merck KGaA), all of Merck KGaA’s rights, title and interest to certain of its owned and licensed OLED-related patents and patent applications in exchange for a cash payment of $66.0 million. A copy of the press release issued on May 3, 2023 announcing the transaction is furnished as Exhibit 99.2 to this report.

The information set forth under this “Item 7.01. Regulation FD Disclosure” (including the exhibit) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any filing made by the Registrant pursuant to the Securities Act of 1933, as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit<br><br>Number Description
99.1 Press Release by the Registrant, dated May 3, 2023, furnished pursuant to Item 2.02 of Form 8-K.
99.2 Press Release by the Registrant, dated May 3, 2023, furnished pursuant to Item 7.01 of Form 8-K.
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNIVERSAL DISPLAY CORPORATION
Date: May 3, 2023 By: /s/ Brian Millard
Brian Millard
Vice President, Chief Financial Officer and Treasurer

EX-99

Exhibit 99.1

Press Release
Universal Display Contact:
---
Darice Liu
investor@oled.com
media@oled.com
+1 609-964-5123

Universal Display Corporation Announces First Quarter 2023 Financial Results

EWING, N.J. – May 3, 2023 – Universal Display Corporation (Nasdaq: OLED), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, today reported financial results for the first quarter ended March 31, 2023.

“Our first quarter results were in-line with our expectations and we are reaffirming our full year 2023 outlook,” said Brian Millard, Vice President and Chief Financial Officer of Universal Display Corporation. “While macro uncertainties continue to linger, we believe that recent OLED investment and product announcements pave the path for a new OLED adoption cycle and strong growth in the coming years. Additionally, today we announced the acquisition of Merck KGaA, Darmstadt, Germany’s phosphorescent emitter patent portfolio, which further strengthens our leadership position in the OLED ecosystem and broadens the tools available to our team as we develop new and next-generation phosphorescent materials. We also announced a new multi-year collaboration agreement with Merck KGaA, Darmstadt, Germany.”

Financial Highlights for the First Quarter of 2023

• Total revenue in the first quarter of 2023 was $130.5 million as compared to $150.5 million in the first quarter of 2022. As we have previously noted, the near-term weakness in the overall global market economy continues to have an impact on forecasted demand for OLED products utilizing our emitter material over the remaining life of several customers’ contracts compared to prior estimates, resulting in us recording a positive cumulative catch-up adjustment to total revenue during the first quarter of 2023 of $5.7 million arising from changes in estimates of transaction price.

• Revenue from material sales was $70.2 million in the first quarter of 2023 as compared to $86.7 million in the first quarter of 2022. This decrease was primarily the result of lower unit material volume.

• Revenue from royalty and license fees was $55.2 million in the first quarter of 2023 as compared to $59.8 million in the first quarter of 2022. This decrease was primarily the result of lower unit material volume.

• Cost of material sales was $29.5 million in the first quarter of 2023 as compared to $29.9 million in the first quarter of 2022. Cost of material sales during the quarter decreased due to lower unit material volume, offset by a $3.3 million increase in our inventory provision and $4.7 million in costs related to our Shannon facility, which commenced manufacturing activities in June 2022.

• Total gross margin was 75% in the first three months of 2023 as compared to 78% in the first three months of 2022. Shannon facility costs of $4.7 million and the inventory provision of $3.3 million in 2023 contributed to a 6% decrease in total gross margin between periods.

• Operating income was $45.4 million in the first quarter of 2023 as compared to $62.3 million in the first quarter of 2022.

• Net income was $39.8 million or $0.83 per diluted share in the first quarter of 2023 as compared to $50.0 million or $1.05 per diluted share in the first quarter of 2022.

Revenue Comparison

($ in thousands) Three Months Ended March 31,
2023 2022
Material sales $ 70,190 $ 86,691
Royalty and license fees 55,210 59,802
Contract research services 5,067 3,977
Total revenue $ 130,467 $ 150,470

Cost of Materials Comparison

($ in thousands) Three Months Ended March 31,
2023 2022
Material sales $ 70,190 $ 86,691
Cost of material sales 29,488 29,920
Gross margin on material sales 40,702 56,771
Gross margin as a % of material sales 58 % 65 %

2023 Guidance

The Company affirms its previous revenue guidance and believes that 2023 revenue will be the range of $550 million to $600 million.

Dividend

The Company also announced a second quarter cash dividend of $0.35 per share on the Company’s common stock. The dividend is payable on June 30, 2023 to all shareholders of record on June 16, 2023.

Conference Call Information

In conjunction with this release, Universal Display will host a conference call on Wednesday, May 3, 2023 at 5:00 p.m. Eastern Time. The live webcast of the conference call can be accessed under the events page of the Company's Investor Relations website at ir.oled.com. Those wishing to participate in the live call should dial 1-877-524-8416 (toll-free) or 1-412-902-1028. Please dial in 5-10 minutes prior to the scheduled conference call time. An online archive of the webcast will be available within two hours of the conclusion of the call.

About Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED) is a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications. Founded in 1994 and with subsidiaries and offices around the world, the Company currently owns, exclusively licenses or has the sole right to sublicense more than 5,500 patents issued and pending worldwide. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED® phosphorescent OLED technology that can enable the development of energy-efficient and eco-friendly displays and solid-state lighting. The Company also develops and offers high-quality, state-of-the-art UniversalPHOLED materials that are recognized as key ingredients in the fabrication of OLEDs with peak performance. In addition, Universal Display delivers innovative and customized solutions to its clients and partners through technology transfer, collaborative technology development and on-site training. To learn more about Universal Display Corporation, please visit https://oled.com/.

Universal Display Corporation and the Universal Display Corporation logo are trademarks or registered trademarks of Universal Display Corporation. All other company, brand or product names may be trademarks or registered trademarks.

#

All statements in this document that are not historical, such as those relating to the projected adoption, development and advancement of the Company’s technologies, and the Company’s expected results, as well as the growth of the OLED market and the Company’s opportunities in that market, are forward-looking financial statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation’s current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. These risks and uncertainties are discussed in greater detail in Universal Display Corporation’s periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled “Risk Factors” in Universal Display Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

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UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

December 31, 2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 158,294 $ 93,430
Short-term investments 487,812 484,345
Accounts receivable 92,677 92,664
Inventory 174,245 183,220
Other current assets 37,193 45,791
Total current assets 950,221 899,450
PROPERTY AND EQUIPMENT, net of accumulated depreciation of 123,388 and 117,118 145,281 143,445
ACQUIRED TECHNOLOGY, net of accumulated amortization of 174,820 and 189,671 35,843 38,382
OTHER INTANGIBLE ASSETS, net of accumulated amortization of 9,341 and 8,989 7,947 8,247
GOODWILL 15,535 15,535
INVESTMENTS 213,369 259,861
DEFERRED INCOME TAXES 63,292 58,161
OTHER ASSETS 104,224 109,739
TOTAL ASSETS 1,535,712 $ 1,532,820
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable 9,741 $ 9,519
Accrued expenses 25,346 51,002
Deferred revenue 37,419 45,599
Other current liabilities 42,451 29,577
Total current liabilities 114,957 135,697
DEFERRED REVENUE 17,843 18,279
RETIREMENT PLAN BENEFIT LIABILITY 60,248 59,790
OTHER LIABILITIES 43,199 43,685
Total liabilities 236,247 257,451
SHAREHOLDERS’ EQUITY:
Preferred Stock, par value 0.01 per share, 5,000,000 shares authorized, 200,000    shares of Series A Nonconvertible Preferred Stock issued and outstanding    (liquidation value of 7.50 per share or 1,500) 2 2
Common Stock, par value 0.01 per share, 200,000,000 shares authorized, 48,697,467   and 49,136,030 shares issued, and 47,331,819 and 47,770,382 shares outstanding, at    March 31, 2023 and December 31, 2022, respectively 487 491
Additional paid-in capital 679,390 681,335
Retained earnings 676,347 653,277
Accumulated other comprehensive loss (15,477 ) (18,452 )
Treasury stock, at cost (1,365,648 shares at March 31, 2023 and December 31, 2022) (41,284 ) (41,284 )
Total shareholders’ equity 1,299,465 1,275,369
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 1,535,712 $ 1,532,820

All values are in US Dollars.

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except share and per share data)

Three Months Ended March 31,
2023 2022
REVENUE:
Material sales $ 70,190 $ 86,691
Royalty and license fees 55,210 59,802
Contract research services 5,067 3,977
Total revenue 130,467 150,470
COST OF SALES 32,970 33,163
Gross margin 97,497 117,307
OPERATING EXPENSES:
Research and development 31,423 26,545
Selling, general and administrative 15,396 21,062
Amortization of acquired technology and other intangible assets 2,891 5,498
Patent costs 2,255 1,798
Royalty and license expense 164 154
Total operating expenses 52,129 55,057
OPERATING INCOME 45,368 62,250
Interest income, net 6,967 291
Other loss, net (703 ) (34 )
Interest and other loss, net 6,264 257
INCOME BEFORE INCOME TAXES 51,632 62,507
INCOME TAX EXPENSE (11,793 ) (12,537 )
NET INCOME $ 39,839 $ 49,970
NET INCOME PER COMMON SHARE:
BASIC $ 0.83 $ 1.05
DILUTED $ 0.83 $ 1.05
WEIGHTED AVERAGE SHARES USED IN COMPUTING NET <br>   INCOME PER COMMON SHARE:
BASIC 47,523,593 47,369,764
DILUTED 47,567,007 47,440,281
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.35 $ 0.30

UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

Three Months Ended March 31,
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 39,839 $ 49,970
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 6,496 5,627
Amortization of intangibles 2,891 5,498
Amortization of premium and discount on investments, net (3,597 ) (271 )
Stock-based compensation to employees 3,992 6,085
Stock-based compensation to Board of Directors and Scientific Advisory Board 423 430
Deferred income tax benefit (5,936 ) (1,380 )
Retirement plan expense, net of benefit payments 782 1,359
Decrease (increase) in assets:
Accounts receivable (13 ) 2,692
Inventory 8,975 (9,080 )
Other current assets 8,598 (8,172 )
Other assets 5,515 9,488
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (24,116 ) (4,261 )
Other current liabilities 12,874 5,807
Deferred revenue (8,616 ) (13,568 )
Other liabilities (486 ) 2,384
Net cash provided by operating activities 47,621 52,608
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (9,098 ) (10,751 )
Purchases of intangibles (51 ) (12 )
Purchases of investments (65,207 ) (24,915 )
Proceeds from sale and maturity of investments 115,031 50,240
Net cash provided by investing activities 40,675 14,562
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 518 403
Payment of withholding taxes related to stock-based compensation to employees (7,181 ) (7,896 )
Cash dividends paid (16,769 ) (14,246 )
Net cash used in financing activities (23,432 ) (21,739 )
INCREASE IN CASH AND CASH EQUIVALENTS 64,864 45,431
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 93,430 311,993
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 158,294 $ 357,424
The following non-cash activities occurred:
Unrealized gain (loss) on available-for-sale securities $ 3,202 $ (5,031 )
Common stock issued to Board of Directors and Scientific Advisory Board that was <br>   earned and accrued for in a previous period 300 300
Net change in accounts payable and accrued expenses related to purchases of property <br>   and equipment 766 2,077

EX-99

Exhibit 99.2

Press Release
Universal Display Contact:
---
Darice Liu
investor@oled.com
media@oled.com
+1 609-964-5123

Universal Display Corporation Acquires Merck KGaA, Darmstadt, Germany’s Phosphorescent OLED Emitter Intellectual Property Assets and Enters into Multi-Year Collaboration Agreement

Ewing, New Jersey – May 3, 2023 - Universal Display Corporation (Nasdaq: OLED) (UDC), enabling energy-efficient displays and lighting with its UniversalPHOLED® technology and materials, announced today that through its wholly-owned subsidiary UDC Ireland Limited, UDC has acquired the Phosphorescent OLED Emitter Intellectual Property (IP) assets of Merck KGaA, Darmstadt, Germany, a leading science and technology company. Representing more than 15 years of research and development, this portfolio has an average lifetime of 10 years and includes over 550 issued and pending patents around the world in 172 patent families. In addition, Universal Display Corporation and Merck KGaA, Darmstadt, Germany, entered into a new multi-year collaboration agreement that pertains to UDC’s leading-edge green and yellow phosphorescent emitters and Merck KGaA, Darmstadt, Germany’s state-of-the-art transport and host materials to create advanced PHOLED stacks.

“We are pleased to complement and boost our vast global IP framework with Merck KGaA, Darmstadt, Germany’s phosphorescent emitter patents and announce the extension and expansion of our OLED materials partnership,” said Steven V. Abramson, President and Chief Executive Officer of Universal Display. “This strategic acquisition enhances our robust position in the OLED ecosystem. As the pioneer and leader in phosphorescent OLED technologies and materials, we are well situated to leverage Merck KGaA, Darmstadt, Germany’s discoveries into our extensive research and intellectual property portfolios.”

“This portfolio represents the culmination of years of research by distinguished scientists and we are pleased that UDC will incorporate our inventions into their worldwide patent portfolio and competencies,” said Dr. Gottfried Wastlbauer, Head of Global Marketing of Display Solutions at the Electronics business of Merck KGaA, Darmstadt, Germany. “We believe that our triplet emitter IP and know-how seamlessly fits into UDC’s comprehensive intellectual property library and that these assets will be well maximized in their research and development programs. The new partnership with UDC is a strategic move towards accelerating the growth of our OLED business. As a leading OLED material company, having access to UDC’s leading-edge emitters will benefit our development of transport materials and most importantly boost our capabilities to develop new host materials.”

About Merck KGaA, Darmstadt, Germany

Merck KGaA, Darmstadt, Germany, a leading science and technology company, operates across life science, healthcare and electronics. More than 64,000 employees work to make a positive difference to millions of people’s lives every day by creating more joyful and sustainable ways to live. From providing products and services that accelerate drug development and manufacturing as well as discovering unique ways to treat the most challenging diseases to enabling the intelligence of devices – the company is everywhere. In 2022, Merck KGaA, Darmstadt, Germany, generated sales of € 22.2 billion in 66 countries.

The company holds the global rights to the name and trademark “Merck” internationally. The only exceptions are the United States and Canada, where the business sectors of Merck KGaA, Darmstadt, Germany, operate as MilliporeSigma in life science, EMD Serono in healthcare and EMD Electronics in electronics. Since its founding in 1668, scientific exploration and responsible entrepreneurship have been key to the company’s technological and scientific advances. To this day, the founding family remains the majority owner of the publicly listed company. For more information about Merck KGaA, Darmstadt, Germany, visit www.emdgroup.com.

All Merck KGaA, Darmstadt, Germany, press releases are distributed by e-mail at the same time they become available on the EMD Group Website. In case you are a resident of the USA or Canada please go to www.emdgroup.com/subscribe to register for your online subscription of this service as our geo-targeting requires new links in the email. You may later change your selection or discontinue this service.

About Universal Display Corporation

Universal Display Corporation (Nasdaq: OLED) is a leader in the research, development and commercialization of organic light emitting diode (OLED) technologies and materials for use in display and solid-state lighting applications. Founded in 1994 and with subsidiaries and offices around the world, the Company currently owns, exclusively licenses or has the sole right to sublicense more than 5,500 patents issued and pending worldwide. Universal Display licenses its proprietary technologies, including its breakthrough high-efficiency UniversalPHOLED® phosphorescent OLED technology that can enable the development of energy-efficient and eco-friendly displays and solid-state lighting. The Company also develops and offers high-quality, state-of-the-art UniversalPHOLED materials that are recognized as key ingredients in the fabrication of OLEDs with peak performance. In addition, Universal Display delivers innovative and customized solutions to its clients and partners through technology transfer, collaborative

technology development and on-site training. To learn more about Universal Display Corporation, please visit https://oled.com/.

Universal Display Corporation and the Universal Display Corporation logo are trademarks or registered trademarks of Universal Display Corporation. All other company, brand or product names may be trademarks or registered trademarks.

#

All statements in this document that are not historical, such as those relating to the projected adoption, development and advancement of the Company’s technologies, and the Company’s expected results and future declaration of dividends, as well as the growth of the OLED market and the Company’s opportunities in that market, are forward-looking financial statements within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation’s current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. These risks and uncertainties are discussed in greater detail in Universal Display Corporation’s periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled “Risk Factors” in Universal Display Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022. Universal Display Corporation disclaims any obligation to update any forward-looking statement contained in this document.

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(OLED-C)