UFP Technologies Q2 2025 Earnings Report

UFP Technologies EPS Results

• Actual EPS: $2.50
• Consensus EPS: $2.25
• Beat/Miss: Beat by +$0.25
• One Year Ago EPS: $1.86

UFP Technologies Revenue Results

• Actual Revenue: $151.18 million
• Expected Revenue: $151.55 million
• Beat/Miss: Missed by -$378.00 thousand
• YoY Revenue Growth: +37.20%

UFP Technologies Announcement Details

• Quarter: Q2 2025
• Date: 8/4/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:30AM ET

UFP Technologies (NASDAQ:UFPT) designs and manufactures solutions for medical devices, sterile packaging, and other highly engineered custom products. The company offers protective drapes for robotic surgery, single patient use surfaces, advanced wound care, infection prevention, disposables for surgical and endoscopic procedures, packaging for medical devices, orthopedic implants, biopharma drug manufacturing, and coils for catheters; and molded components for applications in acoustic insulation, interior trim, load floors, sunshades, SUV cargo cover handles, driveshaft damping, engine and manifold covers, quarter panels, and wheel liners. It also provides molded composites for commercial aviation and military gear for use in backpack components, knee and elbow pads, eyewear, and helmets; and reusable cases and custom for applications in military ballistics panels, virtual training systems, drones, communications equipment, and rugged portable computers. In addition, the company provides engineered products and components to customers in the automotive, aerospace and defense, and industrial markets for applications in military uniform and gear components, automotive interior trim, air filtration, and protective cases and inserts. It markets and sells its products through a direct sales force. The company was founded in 1963 and is headquartered in Newburyport, Massachusetts.

UFP Technologies Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: UFP delivered 37% Q2 revenue growth (5% organic), a 35% increase in adjusted operating income and 27% higher adjusted EPS, led by a 46% jump in its medical business and >48% gains in key markets.
• Negative Sentiment: An E-Verify audit at the AJR facility triggered significant labor turnover, creating a $1.2 million margin drag in Q2 and an anticipated $2.5 million impact in Q3, with full recovery expected in Q4.
• Positive Sentiment: UFP closed acquisitions of Unipec (thin film components) and Tecnoplastic (injection molded parts), both expected to be year-one accretive and to create synergies across engineering and production.
• Positive Sentiment: Expansion in the Dominican Republic is advancing with new equipment and trained personnel in Santiago and a fifth building in La Romana to add warehouse capacity and a product development center for robotic surgery.
• Positive Sentiment: UFP is manufacturing for seven robotic-assisted surgery customers and developing products for over a dozen more, aiming for meaningful revenue from multiple platforms in the next 1–2 years.

Presentation

[Operator]

Good day and welcome to the UPF Technologies Second Quarter Earnings Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ron Lissai, Chief Financial Officer. Please go ahead.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Thank you, operator. Good morning and thank you for joining us on our second quarter twenty twenty five earnings conference call. With me on today's call is our CEO and Chairman, Jeff Bailey. Today, we will make some forward looking statements within the meaning of The U. S.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward looking statements are based on our estimates and assumptions as of today and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward looking information and the risk factors in our most recent 10 ks and subsequent 10 Q, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non GAAP financial measures, which include organic sales growth, adjusted operating income, SG and A and EPS and EBITDA and adjusted EBITDA.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

A reconciliation of GAAP to non GAAP financial measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website. I'll now turn the call over to Jeff.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Thank you, Ron, and thank you to everyone joining the call. UFP had a strong second quarter. Revenue grew 37% with 5% organic growth. Adjusted operating income increased 35% and adjusted EPS grew 27%. Our medical business grew 46%, our robotic assisted surgery business grew 7%.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

We also saw strong growth across multiple other markets, including patient surfaces and support, interventional and surgical and wound care each of which grew greater than 48%. Revenue from our two largest customers Intuitive Surgical and Stryker grew 10567% respectively. We enjoyed business across multiple platforms and multiple product categories with both customers and have secured multi year contracts that help us protect that business. Our advanced components business, the non medical part of UFP declined approximately 20% as we continue to focus the majority of our resources on our fastest growing medtech opportunities. We do anticipate some improvement particularly in the aerospace and defense sector in the second half of the year.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

We had strong operating results despite navigating through the impact of high labor turnover at our AJR facility. Because the AJR acquisition was a carve out of a parent company, there was a transition period where those team members were leased to us by the seller. When they officially became UFP employees in 2025, we began an eligibility to work audit using The U. S. E Verify system.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

This process yielded significant turnover of our workforce in Illinois. Although that process is complete, it has and will continue to have an impact on labor efficiency and revenue at that location as new legally eligible employees slowly increase their output with additional training and experience. We estimate the margin impact of that labor inefficiency was $1,200,000 in Q2. We believe Q3 will be the low point of that inefficiency with an estimated impact of approximately $2,500,000 Q4's impact should be much smaller. We recently closed on two additional acquisitions, Unipec, a specialty thin film component supplier located in Rockville, Maryland.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

They are a peer of Welch who we acquired in 2024. We anticipate a number of synergies as these two organizations share best practices and engineering resources. In Tecnoplastic Industries, TPI, a specialty manufacturer of injection molded components for the medtech industry located in Inasco, Puerto Rico. TPI enhances our thermoplastic molding capability and is located in proximity to our Dominican Republic facility, which is a significant purchaser of injection molded components. We continue to make progress on a number of other key initiatives including our expansion plans in Santiago and La Romana, Dominican Republic.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

In Santiago equipment is in place and personnel have been hired and are in training to support our upcoming program launches. In La Romana, we have taken possession of a fifth building on that campus, which includes additional warehouse space enabling us to eliminate less efficient off-site warehouse. Facility will also accommodate a new expanded product development center to support our growing robotic assisted surgery business. We are currently manufacturing products for seven different RES customers at this time and have a dozen more in the development stage. We also made progress pulling some of our key open positions, including a new VP GM of AJR and a senior leader in Ireland.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Looking ahead, we will continue to navigate through our labor turnover related inefficiencies at AJR, execute on our new program launches and transfers to Doctor, continue our efforts to evaluate and close strategic acquisitions and increase our value to customers. And as always, maintain our company wide efforts aimed at continuously improving all aspects of our business, increasing our efficiencies and reducing costs. We are pleased with our progress and excited about our future. I'll now hand it over to Ron to provide some additional color on our finances.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Thank you, Jeff. Before discussing our operating results, I'd like to provide a brief update on tariffs. As mentioned in our first quarter call, we do not expect to be directly subject to a material amount of tariffs and that was true in our second quarter when we paid approximately $150,000 in tariffs to the government, of which virtually all was passed through to our customers. More meaningful is the inflationary impact of tariffs on the purchases of raw materials in The U. S.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

We estimate approximately 9,000,000 annually based upon the tariffs in place as of today. Obviously, this is dynamic and could change. Like the direct tariffs, we anticipate passing through the raw material increases to our customers, some of which have already occurred. Switching to operating results, I would like to provide a bit more color. As Jeff mentioned, sales grew organically by 4.9%, slightly stronger than Q1.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

After a soft Q1, sales to our largest robotic surgery customer grew approximately 10% in Q2 and represented 27% of our overall sales. Gross profit as a percentage of sales or gross margin decreased to 28.8% for the 2025, but was up on a sequential basis. Margins were impacted by approximately $1,200,000 in cost at AJR as described by Jeff. The quarter was also impacted by approximately $5,000,000 in backlog orders that were not completed again due to the labor issues at AJR. Also, as Jeff mentioned, we anticipate that this level of manufacturing inefficiency will increase in Q3, again impacting revenue and margins and then begin to gradually improve as the new associates become more experienced.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

For modeling purposes, I would assume a $7,000,000 impact on revenue and a $2,500,000 impact on operating income in Q3. Adjusted operating margin for the second quarter was 18% of sales, comfortably within our target range. Our effective tax rate of 20.6% for the 2025 was slightly lower than anticipated, reflecting higher anticipated income from our Dominican operations, which is taxed at a more favorable rate. Second quarter GAAP and adjusted diluted earnings per share increased 26.326.9% to $2.21 and $2.5 respectively. During our second quarter, we generated $25,300,000 in cash from operations, paid down approximately $19,000,000 in debt and ended the quarter with a leverage ratio well below 1.5 times.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Capital expenditures were $2,900,000 With regard to the acquisitions of Unipec and TPI, you probably saw in the eight ks that we acquired them at attractive multiples. We anticipate they will both be accretive in the first year. With that, I now turn it back to the operator for questions.

[Operator]

We will now begin the question and answer session. Our first question comes from Brett Fishman of KeyBanc Capital Markets. Please go ahead.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

Hey, guys. Thank you very much for taking the questions. Just wanted to start off with one on the broader robotic surgery business, thinking a little bit more broadly than just a single large customer. It sounds like you were talking about a very high number of potential customers that are in development. I think you mentioned a dozen.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

I was curious if you could expand a little bit on how you're viewing the opportunity broadly in robotics, like how you think those customers could eventually progress? And then also maybe related, you could just expand on the two specific new products that you're working on in that segment, and how you think they may impact trends over the next few quarters and into 2026? Thank you.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Sure, Brett. Thanks for the question. So the robotic surgery market is an excellent fit for our skills. And as a result, most of the players in that market are finding their way to us. We have seven that are already in some form of manufacturing phase and a bunch more, I think a dozen plus in the development phase.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

And so all of these will assuming they're successful, will slowly become bigger and bigger customers. It's a long range development program with RIS. But for the major players, sort of the top four or five that are further along, I think that you'll see revenue coming from them in the next year or two that's meaningful, and some of the smaller ones may take longer. But we are an excellent fit and we continue to develop and we continue to get paid for development in this space.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

All right. And then also wanted to ask just about the inorganic revenue trends in the quarter. It sounded like some of the dynamic may have been related to AJR and some of the labor movement. Just noticed that the inorganic trend, 35,000,000 or $36,000,000 was a little bit below what we were modeling and below the $41,000,000 last quarter. So maybe if you could just dive in a little bit to that performance.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

It sounds like most of the sequential decline was maybe AJR related, if that's the right read. And then just how the rest of the acquisitions have performed on a year over year basis?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes, you're exactly correct. The underperformance was related to AJR because the labor inefficiency is causing us to ship less product. We've already kind of hit the low point a few weeks back, and we're growing from there. But it did affect our ability to ship. That's why we pushed forward about $5,000,000 in backlog that we normally would have shipped had we had the personnel trained and ready to go.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

We think that the low point of that is behind us, but the biggest impact will be on Q3. The rest of the acquisitions are all performing at or above expectations, and the integrations are all going smoothly.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

All right. Perfect. And then final question from me. I was just wondering if you could provide an update on kind of where you stand in regards to the AJR product transfer, I believe, to the Dominican facility. I was really just hoping you could discuss the time frame for when the full transition is expected to occur.

[Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets]

And maybe just at a high level, how you're thinking about the cost savings opportunities versus maybe some potential revenue headwinds by saving by sharing those savings Sure.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So it's a fourth quarter transition is when it sort of takes off in earnest. The equipment's in place. We're going through PQ processes and supplying samples to customers, but there won't be any meaningful revenue until the end of the year. And then it will continue to phase in. So it's the fourth quarter into the beginning of next year, I would say, is the transition.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

And I would say most of the pain related to having people employed and being trained and not shipping anything will be in the third quarter. So that's the update on that one.

[Operator]

Our next question comes from Jaeson Schmidt of Lake Street. Please go ahead.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Hey guys, thanks for taking my questions. Just curious if you could comment on what you're seeing from a channel inventory perspective at your customers. Has that mostly cleared? And is that behind you guys?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes. Thank you for that question. So it appears because we had robust growth in a bunch of different markets this year and we believe the inventory destocking issue is behind us. In the case of AGR, channel inventory is getting very low. All our inventory is gone and they're working through theirs quickly.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So we need to restock that channel for them as soon as we get our feet underneath us. But all indications are that the overstocking of inventory issues are behind us and that we can look forward to a nice smooth plus on the revenue side.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Got you. And then I know you noted growing 10% at your large robotics customer. Just curious if you grew sequentially in Q2?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes. So Q1 with our largest customer was actually a slight decline. But they're basically right on track for what they said they would do for the year with us. So it smoothed out between the second and third quarters. So Q1 with our largest customer was a small decline.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Q2 was a fairly nice increase, and it sort of balanced out to what we anticipated.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Got you. And last one for me, I'll jump back in the queue. On the gross margin line, understanding the impact here in Q3, when we think about Q4 and kind of flowing through the dynamics of the tariff impact, would you expect to see a rebound in gross margin in Q4? Or is it relatively going to be muted?

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Yes. Hi, Jason. Ron here. Yes. So we will have some margin pressure in Q3 and I think it will rebound in Q4.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

I really don't think the tariffs by themselves are going to have a material impact on our margins. But the labor issue in Illinois, as Jeff described, will impact Q3 and to a lesser degree Q4.

[Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital]

Okay, great. Thanks a lot guys.

[Operator]

Thank you. The next question comes from Justin Agents of CJS Securities. Please go ahead.

[Justin Ages, Director - Equity Research at CJS Securities]

Hi, good morning all.

[Operator]

Good morning. Hey, Justin.

[Justin Ages, Director - Equity Research at CJS Securities]

Just given some of the recent noise in the market, can you give us any update on any changes to drape production in terms of market share or any color there?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes. I mean, we believe our share is steady at about two thirds. And it will certainly be at that for the remainder of this year because our customer is excellent at forecasting. So we think there's about a $12,000,000 drape supply, and we're about 8,000,000 of it this year. And the other two pieces are split about equally with our customer and one other competitor.

[Justin Ages, Director - Equity Research at CJS Securities]

Got it. That's helpful. And then switching gears a bit. I know you just did the two small acquisitions that positive multiples. But can you give us an update on activity in the M and A funnel?

[Justin Ages, Director - Equity Research at CJS Securities]

What you guys are looking at? What end markets might be hot right now?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes. We're spending quite a bit of time in the injection molded space. It was a key goal of our technology road map. One of those two acquisitions, TPI, got us a bigger foothold. We are already doing injection molding in Ireland, but we're big procurers of injection molded parts, and it's a natural extension to our capabilities.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So a bunch of the deals that we're looking at are in that space. We're super finicky about what we're going to buy. It's got to be a cultural fit. It has to be a strategic fit and it has to make economic sense for our company and our shareholders. So we have already gotten into the process on one and passed along the way.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

We have multiple more that we're looking at. I hope we'll be successful adding to that portfolio, but we won't stop looking until we get a good fit.

[Justin Ages, Director - Equity Research at CJS Securities]

All right. That's great. Thanks, Jeff. Thanks, Ram.

[Operator]

Thank you, Justin. The next question comes from Andrew Cooper of Raymond James. Please go ahead.

[Andrew Cooper, VP - Equity Research at Raymond James Financial]

Hey, everybody. Thanks for the question. Maybe just one more on margins. Obviously, 3Q, you called out the employment headwinds in Illinois. You talked about some of the stand up costs in The Dominican Republic as well.

[Andrew Cooper, VP - Equity Research at Raymond James Financial]

How should we think about the magnitude and the tariff pieces flowing in as well? How should we think about the magnitude of kind of margin movement from the 2Q base as we head into 3Q and then maybe stepping up a little bit into 4Q?

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

Yes. So Andrew, it's Ron here. So you saw in Q2 we were at $28,800,000 despite the $1,200,000 penalty. The penalty will increase in Q3. So I think you could expect something lower than what we hit in Q2.

[Ronald Lataille, SVP, Treasurer & CFO at UFP Technologies]

But I don't think it's going to be material. Like I would think the low-28s is where I'd sort of model.

[Andrew Cooper, VP - Equity Research at Raymond James Financial]

Okay. That's helpful. And then maybe just touching on part of the answer to a prior question on TPI. It sounds like certainly some synergy there maybe on the cost side as you're a buyer of some of those materials. How should we think about that business and kind of what you're going to sell outside versus what's for internal use and how you think about the accretion there for TPI specifically, knowing it's small, but kind of directionally?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

I mean, the internal use component will evolve over time because some of the more sophisticated stuff that the materials, the vendors and everybody expect in, there are some components that we do that are more commodity in nature that we could buy almost immediately that they're for ourselves that we're currently doing in Ireland. But most of them will be longer term. So now when we're in development on the new program that has injection molded parts, we will try to specify our own internal supply base. But we can't just instantly switch from buying from somebody else to our own supplier because of the qualifications required.

[Andrew Cooper, VP - Equity Research at Raymond James Financial]

Okay. That makes sense. And then maybe just lastly, I know a couple of folks have asked on the Stryker dynamics and the transition to Santiago. But when when we think about the inventory piece there, I know, I think, Ron, you said they're getting pretty tight. Is there any kind of drag that the customer might be feeling, knowing you're talking about some $12,000,000 worth of product that they may be a little bit short between 2Q and 3Q and obviously needing to make back up down the road?

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

Yes. So we have a really good relationship with Stryker. And despite the fact that we're letting them down on this supply chain issue right now, they're super appreciative that we went through it. They saw the vulnerability that ICE could have swept in and closed down a factory essentially. They would have had tremendous vulnerability.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

They do have other supply points. It's pain for them to use them. So for example, some of the business that we had been winning over time was from a company in China. So they can switch back over. There's pain to them to doing that.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

But they've sort of even asked our permission, Hey, if we need to buy a small amount of product from our Chinese competitors, is that okay? Like they have to do the right thing for their company, but they do have outlets to survive this so that they don't lose any customers of their own. And the faster that we get our feet underneath us, the faster we can supply more and more of their stuff. So good relationship. They have a safety valve.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

I think that they'll use it for some of that backlog. And then our job will be in the fourth quarter to really start to rebuild their inventory and supply all their needs on our own.

[Andrew Cooper, VP - Equity Research at Raymond James Financial]

Okay, great. I'll stop there. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Mr. Jeffrey Bailey for any closing remarks.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So thank you all for joining the call. I know there was a lot of questions around our two biggest customers. I want to just add one more point. So we do business across multiple sectors of all these customers. So although we have some single customer concentration issues, in the case of Stryker, for example, we're dealing with their orthopedic division, their patient surfaces division, their infection prevention division, their safe patient handling division and their robotic surgery division.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So very diverse. And similarly with Intuitive Surgical, we're supplying multiple components beyond the drape. So we feel like we have excellent relationships with these two customers and that they're actually a huge bonus for us going forward. And we're working hard to do more and more for them and we don't see the concentration as exposure. We see the relationship has opportunity.

[R. Jeffrey Bailly, Chairman & CEO at UFP Technologies]

So thank you for attending the call. We look forward to talking to you again one quarter from now if not before. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Executives

• Ronald Lataille, SVP, Treasurer & CFO
• R. Jeffrey Bailly, Chairman & CEO

Analysts

• Brett Fishbin, VP - Senior Equity Research Analyst at KeyBanc Capital Markets
• Jaeson Schmidt, Director of Research - Senior Research Analyst at Lake Street Capital
• Justin Ages, Director - Equity Research at CJS Securities
• Andrew Cooper, VP - Equity Research at Raymond James Financial