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UFP TECHNOLOGIES INC (UFPT)·Q3 2025 Earnings Summary

Executive Summary

  • UFPT delivered solid Q3 with revenue of $154.6M (+6.5% YoY) and adjusted EPS of $2.39, while GAAP diluted EPS was $2.11; MedTech rose 7.3% to $142.4M, partially offset by a 2.7% non‑medical decline .
  • Against S&P Global consensus, UFPT posted a revenue beat (+3.3%) and a notable EPS beat (+18% on S&P “Primary EPS”), while EBITDA was modestly below S&P consensus; management’s adjusted EBITDA was $30.7M, above GAAP EBITDA and implied S&P “actual” EBITDA . Values retrieved from S&P Global.*
  • A one‑time labor verification disruption at AJR (~$3M cost) constrained Q3 output and gross margin (27.7% vs 28.6% LY); absent this, management said gross margin would have been ~29.6% and EPS ~13% higher, with most of the impact easing in Q4 as productivity recovers .
  • Strategic execution continued: DR program transfers progressed, two large robotic surgery programs are launching (expected to contribute >$10M in 2026), and discussions are underway to extend and expand the largest-customer contract with higher planned volumes and potential facility expansion (Building 6) .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue growth and mix resilience: Sales rose 6.5% YoY to $154.6M led by MedTech (+7.3% to $142.4M); management cited strong interventional & surgical, orthopedics, and wound care growth (>30% each) .
    • Strategic initiatives on track: First program in Santiago (DR) reached commercial production; two large robotic programs are launching and expected to drive significant revenue in 2026; management is “very bullish” on the long‑term robotics platform .
    • Acquisition integration outperformed: UNIPEC and TPI “performing ahead of expectations” and accretive; inorganic additions broaden film and thermoplastic molding capabilities .

  • What Went Wrong

    • AJR labor disruption: E‑Verify turnover (>50% of direct labor) created ~$3M extra labor cost, reduced output and revenue, and lowered gross margin (27.7%); >$8M of Q3 orders slipped, now in backlog ($16M entering Q4) .
    • Margin compression: Gross margin decreased YoY to 27.7% (vs 28.6% LY) as AJR costs weighed; adjusted operating income and adjusted EBITDA declined YoY for the quarter .
    • Near‑term inefficiency to linger: Management prioritizes output over efficiency near‑term; inefficiencies to be “significantly less” in Q4 and may linger into Q1 before normalizing .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($M)145.165 148.148 151.176 154.558
Gross Margin %28.6% 28.5% 28.8% 27.7%
Operating Income ($M)24.764 23.126 24.329 23.379
Adjusted Operating Income ($M)28.839 25.813 27.275 26.305
GAAP Diluted EPS ($)2.11 2.21 2.21 2.11
Adjusted EPS ($)2.49 2.47 2.50 2.39
EBITDA ($M)28.721 27.724 29.016 28.331
Adjusted EBITDA ($M)32.331 30.236 31.836 30.735
Segment Sales ($M)Q1 2025Q2 2025Q3 2025
Medical135.4 139.3 142.4
Non‑Medical12.7 11.8 12.2
Q3 2025 vs S&P Global ConsensusConsensusActualSurprise
Revenue ($M)149.6*154.6 +3.3%
Primary EPS ($)2.03*2.39*+17.6%
EBITDA ($M)29.26*28.55*−2.4%

S&P Global estimates and “Primary” actuals marked with *; Values retrieved from S&P Global.

KPIs and Cash/Balance Sheet (operational cadence)

KPIQ2 2025Q3 2025
Orders not completed in quarter ($M)~5 backlog impact >$8 slipped; backlog entering Q4 ~$16
Cash from Operations ($M)25.9 (rounded from $25.3M) 35.9
Debt Paydown ($M)~19.0 ~17.5
Capex ($M)2.9 3.4
Effective Tax Rate (%)20.6 22.2
Direct Tariffs Paid ($K)~150 ~160
Supplier Tariff Pass‑through (annual est, $M)~9 ~6
Leverage Ratio (x)Well below 1.5x Well below 1.5x

Non‑GAAP Adjustment Context

  • AJR one‑time labor costs of ~$3M reduced Q3 gross profit and EPS; absent this, gross margin would have been ~29.6% and EPS up ~13% QoQ narrative; CFO quantified that absent inefficiency, EPS would have been ~ $2.67 and adj. EBITDA ~$33.7M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Gross Margin trajectoryQ4 2025Not quantifiedInefficiencies to be “significantly less” in Q4 vs Q3; margins to gradually improve; some inefficiency may linger into Q1Improving sequentially
AJR output/inefficiencyQ4 2025–Q1 2026Q3 identified as troughBacklog ~$16M entering Q4; priority is output over efficiency near‑term; recovery progressing (Sept profitable)Recovering; residual into Q1
Robotics new programs2026Prior commentary on H2’25 launchesTwo large programs launching; conservatively >$10M revenue in 2026, with upside as programs scalePositive 2026 view
Largest customer contractMulti‑yearExisting ~$500M LT agreementIn discussions to extend and expand; plan for significantly higher volumes; potential addition of Building 6 and shared capexPositive trajectory
Tariffs pass‑through2025–2026Supplier pass‑through est. ~$9M (Q2)Updated supplier pass‑through est. ~$6M; expect to pass through to customersReduced headwind
Capex/capacity2025–2026Building 5 in La Romana addedPotential Building 6; multi‑million investments (mix of UFPT and/or customer) under discussionCapacity expansion path

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
AJR labor disruption and recoveryQ2: ~$1.2M margin impact; Q3 expected worst; backlog pushed; recovery planned through Q4 Q3: ~$3M cost; >$8M orders slipped; Sept profitability restored; backlog ~$16M into Q4; focus on output first Improving operationally; residual into Q4/Q1
Robotics growth and pipelineQ1: multiple DR expansions; two programs to launch H2’25 Two large programs launching; >$10M revenue in 2026; long‑term very bullish; supplier contract renegotiation underway Strengthening LT outlook
Largest customer contractQ2: ~10% growth; ~2/3 drape share; multi‑platform ties Negotiating extension/expansion; plan for materially higher volumes; considering Building 6 and shared capex Positive strategic leverage
DR program transfersQ1: doubled Santiago; new lines installed; Q4 ramp planned First program in commercial production; second in qualification; further program in 2026 Execution progressing
TariffsQ2: ~$150K direct; ~$9M supplier pass‑through est. Q3: ~$160K direct; supplier pass‑through est. reduced to ~$6M; expect pass‑through to customers Improving input outlook
M&A integrationQ1/Q2: acquisitions accretive; focus on molding capabilities UNIPEC/TPI ahead of expectations; integrations on track Above-plan performance

Management Commentary

  • “EPS was $2.11 per share, equal to last year. Strong operating results offset roughly $3 million in incremental labor costs at our Illinois AJR facility… Absent this expense, EPS would have increased 13%.” – Jeff Bailly, CEO .
  • “Our two new large robotic surgery programs are launching and on track to be in commercial production by year-end; we expect each will generate significant revenue in 2026 and beyond.” – Jeff Bailly, CEO .
  • “We are also in discussions to extend and expand our contract with our largest customer, with volumes expected to significantly increase… we’re going to have to add a sixth building… new capital, new personnel…” – Jeff Bailly, CEO .
  • “Backlog going into Q4 is approximately $16 million… gross margins would have increased to 29.6% [absent $3M AJR costs]… adjusted operating margin for the third quarter was 17% of sales.” – Ron Lataille, CFO .
  • “Our two most recent acquisitions, UNIPEC… and TPI… are both performing ahead of expectations, and their integrations are on track.” – Jeff Bailly, CEO .

Q&A Highlights

  • Robotics and largest customer: Intuitive growth estimated ~8% in Q3 (robotics blended ~5.1% given a one‑year sales channel effect); contract extension aims for materially higher volumes and potentially Building 6; capex likely shared with customer, TBD .
  • AJR/backlog normalization: ~>$8M orders slipped in Q3; backlog ~$16M entering Q4; goal is to work down backlog quickly (by early 2026), prioritizing output before efficiency; contribution margin on incremental shipments ~30–35% per CFO .
  • Margin cadence: Gross margins to improve gradually from Q3 levels; inefficiencies “significantly less” in Q4, may persist into Q1; absent AJR costs, Q3 adjusted EBITDA would have been ~$33.7M and EPS ~$2.67 .
  • M&A and inorganic vs organic: New acquisitions small but “home runs” strategically; inorganic growth largely from prior-year deals rolling forward; focus continues on complementary molding capabilities .

Estimates Context

  • Q3 2025 results vs S&P Global consensus: Revenue beat (~$154.6M vs $149.6M*), Primary EPS beat ($2.39* vs $2.03*), EBITDA slight miss ($28.6M* vs ~$29.3M*); company’s adjusted EBITDA was $30.7M (non‑GAAP) . Values retrieved from S&P Global.*
  • Implications: With easing AJR headwinds, DR ramps, and robotic program launches, Street models may lift revenue and adjusted margin trajectories for Q4/Q1, while near‑term GAAP margins could still reflect residual inefficiency per management commentary .

Key Takeaways for Investors

  • Near‑term: Expect sequential margin recovery in Q4 as AJR inefficiency fades and backlog converts; management is prioritizing shipments to normalize customer inventories .
  • Medium‑term: DR transfers and two large robotic program launches provide visible 2026 revenue tailwinds (> $10M conservative), supporting multi‑year growth .
  • Strategic contract: Ongoing negotiations to extend/expand the largest-customer agreement with higher volumes and potential facility expansion underpin capacity growth and scale benefits .
  • M&A synergy: UNIPEC/TPI are integrating ahead of plan, augmenting film and molding capabilities to deepen customer penetration and enhance mix .
  • Estimate dynamics: Strong Q3 revenue/EPS beats vs S&P consensus with modest EBITDA miss on GAAP basis; adjusted metrics suggest underlying earnings power once AJR normalizes . Values retrieved from S&P Global.*
  • Risk watch: Remaining AJR inefficiency into Q4/Q1, non‑medical softness, and execution risk on DR transfers/program launches; tariff pass‑through outlook improved (supplier estimate cut to ~$6M) .

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Additional Detail: Full Q3 Press Release and 8‑K tables and reconciliations are included in the cited documents .

S&P Global estimates and actuals marked with *. Values retrieved from S&P Global.