UFP Technologies NASDAQ: UFPT reported first-quarter 2026 results that management said reflected a solid start to the year, led by continued growth in its medical business and progress on strategic capacity and program expansion initiatives.
Quarterly performance driven by medical growth
Chief Executive Officer and Chairman R. Jeffrey Bailly said revenue increased 4.1% year over year, with medical sales up 5.9% and non-medical sales down 15% as the company continues shifting focus toward “best fit, fast-growing segments in the med tech space.” Bailly highlighted growth in several medical sub-markets, including robotic surgery, patient services and support, and interventional and surgical, which grew 7%, 11%, and 15%, respectively.
Those gains were “partially offset by declines in wound care as two major customers slowed temporarily due to excess inventory,” Bailly said. Later in the Q&A, Bailly described the slowdown as tied to inventory issues that customers expected would impact UFP for roughly eight months, adding that he expects “probably…a 3-quarter impact from the slowdown in wound care and then back to normal.”
Earnings impacted by launch costs, AJR inefficiencies, and legal expenses
Bailly said earnings per share grew more slowly than revenue, attributing the difference to several factors:
- Startup costs related to “4 simultaneous program launches,” which are ramping and “expected to make meaningful contributions in the second half of the year.”
- Softer results at AJR compared with the first quarter of 2025, as the operation works through labor inefficiencies tied to turnover following an E-Verify or right-to-work process implemented last year.
- Non-recurring legal expenses related to a cyber attack and the CEO transition.
Chief Financial Officer Ron Lataille reported gross margin increased to 28.8% from 28.5% a year earlier, despite “continued labor inefficiencies at AJR,” which he said are diminishing but still affecting cost of sales. Lataille said a key driver of margin improvement was a more than 200% increase in revenue in Santiago, Dominican Republic, which helped leverage fixed overhead.
SG&A expense rose $2.2 million to $21.0 million. Lataille attributed the increase primarily to about $750,000 in wages and benefits tied to back-office investments made during 2025, approximately $500,000 in non-cash equity compensation, and roughly $500,000 in non-recurring legal costs related to a mid-February cyber breach incident and the CEO transition.
Lataille said adjusted operating margin was 16.7% of sales and adjusted earnings per diluted share were $2.48, up slightly from the prior year.
Program launches and capacity expansion plans
Management emphasized momentum from new program activity. Bailly said that in addition to four “successful program launches,” three of the four customers have already asked UFP to double capacity on those programs. In response to analyst questions, Lataille said three of the programs are brand new and one is a transfer, and described the launches as “very successful.” Bailly added that two of the new programs are in robotic surgery and one is in infection prevention.
Discussing profitability impacts, Bailly explained that startup costs were driven by staffing and training ahead of volume, noting that the hires are in place and trained. As volume increases, he said the company expects to absorb those fixed costs, with revenue rising while fixed costs “won’t go up.” He characterized the ramp as gradual, with more robust contributions expected in the second half of the year.
The company is also expanding facilities to support forecast demand. Bailly said UFP is adding new buildings in both Santiago and La Romana in the Dominican Republic and is “co-investing with our customers,” with possession expected in the second quarter. In the Q&A, Bailly said the La Romana addition will be the company’s sixth building there, adding approximately one-sixth more capacity and focused primarily on robotic surgery. In Santiago, UFP is adding its third building, which he said is predominantly for patient services and support.
Bailly also said the company is in planning stages to add capacity in the APAC region “to meet growing demand in Asia,” and noted that new product development labs in La Romana and Grand Rapids are adding new programs and talent.
Non-medical weakness and AJR operational update
On the non-medical business, Bailly said the largest decline came from automotive and described that reduction as “the new normal” as UFP “literally phase[s] out of this market.” He also cited softness in aerospace and defense, but said he expects that to reverse as activity shifts “from slowing back to growing.” Bailly said he expects advanced components to show “little to no growth over time,” while automotive is expected to be completely phased out.
In response to questions about AJR and operations in Santiago, Bailly outlined progress transferring work from Illinois to the Dominican Republic. He said one major program is “completely transferred and running at rate,” a second is transferred and “about to ramp up,” and a third has not started meaningfully due to required PPAP and protocol steps, which he said may take more than a year to become a meaningful contributor.
On AJR labor inefficiencies and backlog, Bailly said overtime is beginning to subside and expects improvements as more work shifts to Santiago. He said the company reduced the problem by about half between the third and fourth quarters, with about a 25% improvement from the fourth quarter to the first quarter, adding that he expects acceleration as the Santiago ramp continues and the Illinois team becomes “a smaller, more efficient crew.”
Tariffs, input costs, cash flow, and capital structure
Lataille provided an update on tariffs and raw material costs, saying “effective tariffs are net down from our last update,” which he said should be positive for margins. He also said UFP will look for supplier refunds to flow through as vendor credits. At the same time, he noted inflationary pressure from higher oil prices linked to conflict in Iran, describing the impact as difficult to estimate due to volatility. Lataille said the company expects to pass those increases through to customers.
Operationally, Lataille said organic sales growth was “essentially flat” as new programs ramp gradually and the non-medical business softens. He also noted that approximately $1 million in sales shifted into the second quarter due to a cyber event at a key customer. Lataille added that sales to UFP’s two largest customers collectively grew 7.5% in the quarter.
UFP generated approximately $3.2 million in cash from operations during the quarter, which Lataille said was lower than typical due to working capital needs tied to a stronger March sales month. Since March 31, the company has paid down about $4 million in debt. Capital expenditures were $1.7 million, and UFP ended the quarter with a leverage ratio of approximately 1.14 times, according to Lataille.
On mergers and acquisitions, Bailly said the company is reviewing multiple opportunities, though he described the environment as “a little quiet right now.” He said UFP has been outbid on some deals and emphasized discipline on strategic fit, culture, and valuation. Bailly said he still believes acquisition growth could account for about 50% of overall growth over the next multiple years, while noting that timing is difficult.
Bailly also confirmed that the call marked his last as CEO, with Mitch Rock expected to take over in June. Bailly said he will remain as executive chair for the next year to support acquisitions and key strategic hires.
About UFP Technologies NASDAQ: UFPT
UFP Technologies, Inc NASDAQ: UFPT is a global designer and manufacturer of custom-engineered products using plastics, foams and adhesives. The company partners with customers to develop application-specific solutions through a range of in-house processes, including foam fabrication, die cutting, sheet processing, lamination, machining and assembly services. Its components find use in industries requiring precise material properties, such as medical devices, aerospace, defense, electronics and transportation.
Building on its origins as a specialty foam converter, UFP Technologies has expanded its capabilities to include advanced material technologies, such as thermal management and electromagnetic interference (EMI) shielding solutions.
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