UFP TECHNOLOGIES INC Q1 FY2025 earnings call

• UFP had a strong first quarter with revenue up 41%, operating income up 45%, and EPS up 35% to $2.21. • Medical business grew 50% due to strong demand in safe patient handling from the AJR acquisition, now the second largest segment. • Other segments like interventional, surgical infection prevention, orthopedics, and advanced wound care grew >25%. • Recent acquisitions are performing well with integrations on track. • Dominican Republic expansion: new leased facility in Santiago, equipment ordered for safe patient handling, new equipment installed for robotic surgery programs, and building preparations for a fifth facility in La Romana. • Two-pronged growth strategy: expanding best fit growth markets and strategic acquisitions; active in discussions for acquisitions, with a recent small fold-in acquisition in Illinois. • Tariffs: no material direct impact expected, but trade environment is dynamic.

Revenue for the first quarter grew 41% to $148.1 million. The medical business grew 50%, driven by strong demand in the safe patient handling space from the AJR acquisition, now the second largest segment behind robotic surgery. Interventional, surgical infection prevention, orthopedics, and advanced wound care segments all grew by more than 25%. Robotic surgery had a 6% decline in Q1 2025 and is anticipated to have modest growth in 2025. Organic growth was 2.3%, with Medtech up 5.4% and Advanced Components down 16.3%.

• Robotic surgery is anticipated to have modest growth in 2025. • Normalized tax rate for 2025 suggested at 21%-23%. • Medical business, especially safe patient handling, expected to continue growth.

• Tariffs: unknown impact on demand from customers subject to tariffs and potential inflationary impact on raw materials. • Inefficiencies at AJR operations continuing through the second quarter due to onboarding new associates, impacting gross margins.

Q: Jaeson Schmidt asked about robotic surgery growth, specifically if it's the whole business or the largest customer.

A: Ron Lataille said it's both, with the largest customer having a forecast slightly exceeding low single-digit growth and the robotic surgery segment as a whole expected to grow with other platforms.

Q: Jaeson Schmidt inquired about share at the largest customer.

A: Jeff Bailly stated current share is about two-thirds, with UFP gaining share over time and the customer having a two-supplier mandate.

Q: Brett Fishbin asked about segments outside robotics.

A: Jeff Bailly talked about infection prevention growth from new products and base business, interventional and surgical seeing destocking headwinds behind them, and acquisitions contributing to growth.

Q: Brett Fishbin asked about acquisition revenue.

A: Jeff Bailly and Ron Lataille mentioned growth from acquisitions, especially AJR, with AJR revenue in Q1 2025 being $29.2 million vs. trailing 12 run rate of $75 million.

Q: Brett Fishbin asked about new product opportunities in robotic surgery.

A: Jeff Bailly said new programs launching later in the year, with modest revenue this year and meaningful revenue in 2026.

Q: Justin Ages asked about competitors impacted by tariffs.

A: Jeff Bailly talked about UFP's advantage in safe patient handling over Chinese competitors and being well-positioned in the US.

Q: Justin Ages asked about capital allocation.

A: Jeff Bailly said looking at injection molders, with potential large acquisition in early stages.

Q: Andrew Cooper asked about price reductions in safe patient handling and impact on revenue.

A: Jeff Bailly said price savings vary by product, with margins expected to improve despite revenue impact due to rapid market growth.

Q: Andrew Cooper asked about inefficiencies at AJR.

A: Ron Lataille explained temporary inefficiencies in direct labor due to onboarding new associates, lasting through the second quarter.

Q: Andrew Cooper asked about long-term footprint.

A: Jeff Bailly talked about DR expansion and potential Asia Pacific expansion to service customers better.