UTAH MEDICAL PRODUCTS INC

Previous wording

Measures of the Company’s liquidity and overall financial condition improved as of the end of 2023 compared to the end of 2022 with year-end working capital up 21% and Stockholders’ Equity up 12% despite $4,282 in dividends paid to stockholders which reduced both cash and Stockholders’ Equity. The improvement was the result of continued strong positive cash flow from normal operations. In comparison, UTMD paid $3,163 in stockholder cash dividends and used another $2,495 cash for share repurchases in 2022. The Company also used $639 in cash in 2023 along with $809 in 2022 to invest in new manufacturing equipment and fixtures, as well as maintaining existing Property, Plant and Equipment (PP&E) in good working order. The two-year capital expenditures exceeded depreciation by $213.

Current wording

Despite $4,260 in stockholder dividends and $19,968 in share repurchases in 2024, which reduced both cash and Stockholders’ Equity, measures of the Company’s liquidity and overall financial condition remained strong as of the end of 2024 compared to the end of 2023. Despite year-end working capital declining $8,985, the Company’s current ratio improved to 25.6 at the end of 2024 from 22.6 at the end of 2023. As a result of continued strong positive cash flow from normal operations, 2024 year-end Stockholders’ Equity declined just $10,886 despite the $24,228 share repurchases and cash dividends. In comparison, UTMD paid $4,282 in stockholder cash dividends and made no share repurchases in 2023. The Company also used $231 in cash in 2024 along with $639 in 2023 to invest in new manufacturing equipment and fixtures, as well as maintaining existing Property, Plant and Equipment (PP&E) in good working order. Two-year net capital expenditures for PP&E were $511 less than depreciation.

Previous wording

Year-end 2023 total consolidated assets were $135,458 comprised of $106,269 in current assets, $10,551 in consolidated net PP&E and $18,637 in net intangible assets. This compares to $123,874 total assets at the end of 2022 comprised of $89,919 in current assets, $10,224 in consolidated net PP&E and $23,731 in net intangible assets. Total asset turns (total consolidated sales divided by average total assets for the year) in 2023 were 39% compared to 44% in 2022, as sales decreased while average assets (primarily cash) increased.

Current wording

Year-end 2024 total consolidated assets were $122,538 comprised of $96,330 in current assets, $9,763 in consolidated net PP&E and $16,445 in net intangible assets. This compares to $135,458 total assets at the end of 2023 comprised of $106,269 in current assets, $10,551 in consolidated net PP&E and $18,637 in net intangible assets. Total asset turns (total consolidated sales divided by average total assets for the year) in 2024 were 32% compared to 39% in 2023, reflecting the large decrease in sales.

Previous wording

Current assets increased $16,350 due to the $17,817 increase in year-end cash and investments and $768 higher inventories, offset by $2,148 lower accounts and other receivables and $87 lower other current assets. Year-end 2023 and 2022 cash and investment balances were $92,869 and $75,052, representing 69% and 61% of total assets, respectively. Net (after allowance for doubtful accounts) year-end trade accounts receivable (A/R) balances were $2,148 lower at the end of 2023 compared to 2022 due to 4Q 2023 sales $1,242 lower than in 4Q 2022, and average days in A/R of 24 days based on 4Q trade sales instead of 37 days at the end of 2022. A/R over 90 days from invoice date declined from 4.2% of total A/R at the end of 2022 to 3.3% at the end of 2023. The Company believes any older A/R will be collected or are within its reserve balances for uncollectible amounts. Inventories net of reserves for obsolescence at 2023 year-end were 9% higher from the end of 2022.

Current wording

Current assets decreased $9,938 due to the $9,892 decrease in year-end cash and investments and $770 lower inventories, offset by $704 higher accounts and other receivables and $20 higher other current assets. Year-end 2024 and 2023 cash and investment balances were $82,976 and $92,869, representing 68% and 69% of total assets, respectively. Net (after allowance for doubtful accounts) year-end trade accounts receivable (A/R) balances were $760 higher at the end of 2024 compared to 2023, despite 4Q 2024 sales $3,176 lower than in 4Q 2023. Ending 2024 average days in A/R were 40 based on 4Q trade sales, instead of 24 days at the end of 2023. A/R over 90 days from invoice date increased from 3.3% of total A/R at the end of 2023 to 6.4% at the end of 2024. The Company believes any older A/R will be collected or are within its reserve balances for uncollectible amounts. Inventories net of reserves for obsolescence at 2024 year-end were 8% lower from the end of 2023.

Previous wording

Working capital (current assets minus current liabilities) at year-end 2023 was 21% higher at $101,559 compared to $83,959 at year-end 2022. Consistent with Federal and State rules, the TCJA repatriation tax current liability at the end of 2023 was $558 compared to $419 at the end of 2022, as the payment percentage ramps up at the end of the payout period. The end of 2023 working capital exceeds UTMD’s needs for normal operations in an uncertain economic environment, funding of future organic growth and timely payment of accrued tax liabilities, in addition to allowing for substantial funding of any future acquisition without diluting stockholder interest, as well as continued payment of stockholder dividends and repurchase of UTMD shares. Despite a negative impact on Return on Stockholders’ Equity of retaining a high cash balance, UTMD believes that in times of high economic uncertainty and change, maintaining substantial cash balances increases its likelihood of being able to take advantage of opportunities that will benefit stockholders in the longer term, and retain key resources that will help ensure UTMD’s continued excellent long-term performance.

Current wording

Working capital (current assets minus current liabilities) at year-end 2024 was 9% lower at $92,574 compared to $101,559 at year-end 2023, primarily due to using $19,968 cash for share repurchases. The end of 2024 working capital exceeds UTMD’s needs for normal operations in an uncertain economic environment, funding of future organic growth and timely payment of accrued tax liabilities. Management believes that, despite the negative impact on Return on Stockholders’ Equity, retaining a high cash balance increases its likelihood of being able to allow for substantial funding of any future accretive acquisition without diluting stockholder interest, as well as repurchase of UTMD shares while paying a consistent dividend, and will leverage stockholder value in the long term.

Previous wording

December 31, 2023 net $10,552 total PP&E includes Utah, Ireland and England manufacturing molds, production tooling and equipment, test equipment, and product development laboratory equipment. In addition, PP&E includes computers and software, warehouse equipment, furniture and fixtures, facilities and real estate for all five locations in Utah, Ireland, UK, Canada and Australia. Manufacturing facilities in Utah, Ireland and the UK are standalone buildings with a combined 220,000 square feet on 15 acres of land. The distribution facilities in Australia and Canada with a combined 8,000 square feet are part of larger industrial condominiums. Management estimates the fair market value of the five owned facilities to be at least $35 million excluding the contents, the fungible value of which increases stockholder enterprise value relative to most of UTMD’s industry peers which lease their facilities.

Current wording

December 31, 2024 net $9,763 total PP&E includes Utah, Ireland and England manufacturing molds, production tooling and equipment, test equipment, and product development laboratory equipment. In addition, PP&E includes computers and software, warehouse equipment, furniture and fixtures, facilities and real estate for all five locations in Utah, Ireland, UK, Canada and Australia. Manufacturing facilities in Utah, Ireland and the UK are standalone buildings with a combined 220,000 square feet on 15 acres of land. The distribution facilities in Australia and Canada with a combined 8,000 square feet are part of larger industrial condominiums. Management estimates the fair market value of the five owned facilities to be at least $35 million excluding the contents, the fungible value of which increases stockholder enterprise value relative to most of UTMD’s industry peers which lease their facilities.

Previous wording

Ending 2023 net consolidated PP&E (depreciated book value of all fixed assets) increased $328 as a result of the combination of capital expenditures of $639, depreciation of $623 and the effect of foreign currency exchange (FX) rates on year-end foreign subsidiary asset balances.

Current wording

Compared to the end of 2023, ending 2024 net consolidated PP&E (depreciated book value of all fixed assets) declined $789 as a result of the combination of capital expenditures of $231, depreciation of $730 and the effect of foreign currency exchange (FX) rates on year-end foreign subsidiary asset balances as OUS fixed assets were depreciated further by a stronger USD.

Previous wording

The year-end 2023 net book value (after accumulated depreciation) of consolidated PP&E was 31% of purchase cost. End-of-year PP&E turns (Net Sales divided by Net PP&E) was 4.8 in 2023 compared to 5.1 in 2022 due to 4% lower 2023 sales and higher USD asset values of foreign subsidiaries, together with investment in new PP&E assets needed for the future which are not in use yet. A future leverage in productivity of fixed assets which will not have to be further increased to support new business activity will be a source of incremental profitability.

Current wording

The year-end 2024 net book value (after accumulated depreciation) of consolidated PP&E was 29% of purchase cost. End-of-year PP&E turns (Net Sales divided by Net PP&E) was 4.2 in 2024 compared to 4.8 in 2023 due to 19% lower 2024 sales together with lower USD asset values of foreign subsidiaries. A future leverage in productivity of fixed assets which will not have to be further increased to support new business activity will be a source of incremental profitability.

Previous wording

Net intangible assets (after accumulated amortization) are comprised of the capitalized costs of obtaining patents and other intellectual property, as well as the value of identifiable intangible assets (IIA) and goodwill resulting from acquisitions. Net intangible assets were $18,637 (14% of total assets) at the end of 2023 compared to $23,731 (19% of total assets) at the end of 2022. Per US GAAP, intangible assets are categorized as either 1) IIA, which are amortized over the estimated useful life of the assets, or 2) goodwill, which is not amortized or expensed until the associated economic value of the acquired asset becomes impaired. Those two categories of Femcare intangibles at year-end 2023 were net IIA of $4,561 and goodwill of $6,500. The accumulated amortization of Femcare IIA as of December 31, 2023 since the March 18, 2011 acquisition was $26,088. The remaining Femcare IIA will be fully amortized in 2 more years. The goodwill portion of intangible assets resulting from the Femcare acquisition, which is not amortized, increased $338 due to a stronger GBP at year-end, i.e. the different FX rate on fixed goodwill in GBP terms. In early 2019, UTMD acquired an additional $21,000 IIA from the purchase of the remaining life of exclusive U.S. distribution rights for the Filshie Clip System from CSI, all of which has now been amortized through 2023. UTMD’s goodwill balance from prior acquisitions including Femcare, Columbia Medical, Gesco and Abcorp was $13,692 at the end of 2023.

Current wording

Net intangible assets (after accumulated amortization) are comprised of the capitalized costs of obtaining patents and other intellectual property, as well as the value of identifiable intangible assets (IIA) and goodwill resulting from acquisitions. Net intangible assets were $16,445 (13% of total assets) at the end of 2024 compared to $18,637 (14% of total assets) at the end of 2023. Per US GAAP, intangible assets are categorized as either 1) IIA, which are amortized over the estimated useful life of the assets, or 2) goodwill, which is not amortized or expensed until the associated economic value of the acquired asset becomes impaired. Those two categories of Femcare intangibles at year-end 2024 were net IIA of $2,415 and goodwill of $6,389. The accumulated amortization of Femcare IIA as of December 31, 2024 since the March 18, 2011 acquisition was $27,632. The remaining Femcare IIA will be fully amortized in March 2026. The goodwill portion of intangible assets resulting from the Femcare acquisition, which is not amortized, decreased $111 due to a weaker GBP at year-end, i.e. the different FX rate on fixed goodwill in GBP terms. In early 2019, UTMD acquired an additional $21,000 IIA from the purchase of the remaining life of exclusive U.S. distribution rights for the Filshie Clip System from CSI, all of which was amortized before the end of 2023. UTMD’s goodwill balance from prior acquisitions including Femcare, Columbia Medical, Gesco and Abcorp was $13,580 at the end of 2024.

Previous wording

Because the products associated with UTMD’s acquisitions of Columbia Medical in 1997, Gesco in 1998, Abcorp in 2004 and Femcare in 2011 continue to be viable parts of UTMD’s overall business, UTMD does not expect the current goodwill value associated with the four acquisitions to become impaired in 2024. Amortization of IIA was $5,692 in 2023 compared to $6,417 in 2022. The difference was mainly due to the CSI IIA becoming fully-amortized in October 2023, resulting in $737 lower 2023 expense. The 2023 non-cash amortization expense of CSI IIA was $3,684 compared to $4,421 in 2022. The Femcare IIA amortization expense was the same in both 2023 and 2022 at £1,589. But because of a difference in FX rates, the 2023 non-cash amortization expense of Femcare IIA was $1,977 compared to $1,965 in 2022. The 2024 non-cash amortization expense (included as part of consolidated G&A operating expenses) of Femcare IIA will also be £1,589, or $2,002 if the USD/GBP average FX rate is 1.26. In other words, UTMD expects the GBP to be stronger against the USD in 2024 than it was in 2023.

Current wording

Because the products associated with UTMD’s acquisitions of Columbia Medical in 1997, Gesco in 1998, Abcorp in 2004 and Femcare in 2011 continue to be viable parts of UTMD’s overall business, UTMD does not expect the current goodwill value associated with the four acquisitions to become impaired in 2025. Amortization of IIA was $2,065 in 2024 compared to $5,692 in 2023. The difference was mainly due to the CSI IIA becoming fully-amortized in October 2023, resulting in $3,684 lower 2024 operating expense. In other words, the 2024 non-cash amortization expense of CSI IIA was zero compared to $3,684 in 2023. The Femcare IIA amortization expense was the same in both 2024 and 2023 at £1,589. But because of a difference in FX rates, the 2024 non-cash amortization expense of Femcare IIA was $2,030 compared to $1,977 in 2023. The 2025 non-cash amortization expense (included as part of consolidated G&A operating expenses) of Femcare IIA will also be £1,589.

Previous wording

As a reminder, payments for the Federal and State repatriation (REPAT) tax liability which resulted from the U.S. TCJA enacted in 2017 were 8% of the respective tax liability per year for the first five years, 15% in the sixth year, and will be 20% in the seventh year and 25% in the eighth year. UTMD’s total REPAT tax liability was $2,792. Calendar year 2024 represents the seventh year, so $558 is the current liability at 20% of the total liability, and $698 is the long-term REPAT tax liability to be paid in 2025, representing the remaining 25%.

Current wording

As a reminder, payments for the Federal and State repatriation (REPAT) tax liability which resulted from the U.S. TCJA enacted in 2017 were 8% of the respective tax liability per year for the first five years, 15% in the sixth year, 20% in the seventh year and will be 25% in the eighth year. UTMD’s total REPAT tax liability was $2,792. Calendar year 2025 represents the eighth year, so $698 is the current liability at 25% of the total liability, the final payment year.

Previous wording

Year-end 2023 current liabilities were $1,250 lower than at the end of 2022. Ending accrued liabilities were $940 lower due primarily to $781 lower customer deposits. Total liabilities were $2,475 lower at the end of 2023 compared to the end of 2022. The resulting 2023 year-end total debt ratio was just 5% compared to 8% at the end of 2022.

Current wording

Year-end 2024 current liabilities were $953 lower than at the end of 2023 despite the $140 higher REPAT tax current liability for the ensuing year. Ending accrued liabilities were $1,020 lower due primarily to a $619 lower consolidated accrued income tax liability, $135 lower accrued employee profit-sharing bonuses, a $146 lower litigation expense reserve and $238 lower customer deposits. Total liabilities were $2,034 lower at the end of 2024 compared to the end of 2023. The resulting 2024 year-end total debt ratio (total liabilities/ total assets) was just 4% compared to 5% at the end of 2023. UTMD has no bank debt.

Previous wording

The year-end 2023 Deferred Tax Liability balance created as a result of the fifteen-year deferred tax consequence of the amortization of Femcare’s IIA was $1,120, down from $1,513 at the end of 2022. The difference in the $393 decline compared to the $494 tax effect of 25% (current UK tax rate) times $1,977 in 2023 amortization of IIA was due to the difference in the GBP FX rate on the remaining DTL balance at the end of 2023 as well as the USD/GBP currency exchange conversion of the IIA amortization during 2023. In addition to liabilities stated on the balance sheet, UTMD has operating lease and purchase obligations described in Note 14 and Note 12, respectively, to the financial statements.

Current wording

The year-end 2024 Deferred Tax Liability balance created as a result of the fifteen-year deferred tax consequence of the amortization of Femcare’s IIA was $604, down from $1,120 at the end of 2023. The difference in the $516 book decline compared to the $508 tax effect of 25% (current UK tax rate) times $2,031 in 2024 amortization of Femcare IIA was due to the difference in the GBP FX rate on the remaining DTL balance at the end of 2024 as well as the USD/GBP currency exchange conversion of the IIA amortization during 2024. In addition to liabilities stated on the balance sheet, UTMD has operating lease and purchase obligations described in Note 14 and Note 12, respectively, to the financial statements.

Previous wording

Terms of sale are established in advance of UTMD’s acceptance of customer orders. In the U.S., Ireland, UK, France, Australia and Canada since the beginning of 2017, UTMD has generally accepted orders directly from and shipped directly to end-user clinical facilities, as well as third party medical/surgical distributors, under UTMD’s Standard Terms and Conditions (T&C) of Sale. About 13% of UTMD’s domestic end-user sales went through third party med/surg distributors which contract separately with clinical facilities to provide purchasing, storage and scheduled delivery functions for the applicable facility. UTMD’s T&C of Sale to end-user medical facilities are substantially the same in the U.S., Canada, Ireland, UK, France, Australia and New Zealand.

Current wording

Terms of sale are established in advance of UTMD’s acceptance of customer orders. In the U.S., Ireland, UK, France, Australia, New Zealand and Canada, UTMD generally accepts orders directly from and ships directly to end-user clinical facilities, as well as third party medical/surgical distributors, under UTMD’s Standard Terms and Conditions (T&C) of Sale. About 14% of UTMD’s 2024 domestic end-user sales went through third party med/surg distributors which contract separately with clinical facilities to provide purchasing, storage and scheduled delivery functions for the applicable facility. UTMD’s T&C of Sale to end-user medical facilities are substantially the same in the U.S., Canada, Ireland, UK, France, Australia and New Zealand.

Previous wording

UTMD’s global consolidated trade sales are comprised of domestic and OUS sales. Domestic sales in 2023 included 1) direct domestic sales, sales of finished devices to end-user facilities and med/surg distributors in the U.S., and 2) domestic OEM sales, sales of components or finished products, which may not be medical devices, to other companies for inclusion in their products. OUS sales are export sales from UTMD in the U.S. to customers outside the U.S. invoiced in USD, and sales from UTMD subsidiaries in Ireland, Canada, Australia and the UK which may be invoiced in EUR, GBP, CAD, AUD, NZD or USD. The term “trade” means sales to customers which are not part of UTMD. Each UTMD manufacturing entity had 2023 intercompany sales of components and/or finished devices to other UTMD entities.

Current wording

UTMD’s global consolidated trade sales are comprised of domestic and OUS sales. Domestic sales in 2024 included 1) direct domestic sales, sales of finished devices to end-user facilities and med/surg distributors in the U.S., and 2) domestic OEM sales, sales of components or finished products, which may not be medical devices, to other companies for inclusion in their products. OUS sales are export sales from UTMD in the

Previous wording

The following table shows the 2023 USD-denominated revenues by sales channel compared to 2022. Because domestic sales in foreign countries were invoiced in native currencies, the comparison in USD terms includes the change in foreign currency translation (FX) rates. In other words, just the FX rate relative to the USD in 2023 compared to 2022 reduced Canada domestic sales by 3.6% and Australia sales by 3.9%. On the other hand, the FX rate difference increased Ireland domestic sales by 3.0%, UK domestic sales by 1.2% and France domestic sales by 2.6%.

Current wording

The following table shows the 2024 USD-denominated revenues by sales channel compared to 2023. Because domestic sales in foreign countries were invoiced in native currencies, the comparison in USD terms includes the change in foreign currency translation (FX) rates. In other words, just the FX rate relative to the USD in 2024 compared to 2023 reduced Canada domestic sales by 1.3% and Australia sales by 0.9%. On the other hand, the FX rate difference increased Ireland domestic sales by 0.4%, UK domestic sales by 2.8% and France domestic sales by 0.1%.

Previous wording

In summary, UTMD total worldwide (WW) consolidated USD sales in 2023 at $50,224 were $2,057 (4%) lower than in 2022 at $52,281. The decline essentially resulted from the fact that 2023 WW shipments by UTMD to its largest OEM customer were $2,925 (25%) lower. Total U.S. domestic sales including OEM were $3,767 (11.8%) lower in 2023 at $28,204 compared to $31,971 in 2022. On the other hand, OUS sales including sales to foreign distributors were up $1,710 (+8.4%) at $22,020 compared to $20,310 in 2022. Constant currency OUS sales were up 7.6%.

Current wording

In summary, UTMD total worldwide (WW) consolidated USD sales in 2024 at $40,903 were $9,321 (18.6%) lower than in 2023 at $50,224. The decline essentially resulted from the fact that 2024 WW shipments by UTMD to its largest OEM customer were $5,938 (68.8%) lower. Total U.S. domestic sales including OEM were $4,759 (16.9%) lower in 2024 at $23,444 compared to $28,204 in 2023. OUS sales including sales to foreign distributors were $4,562 (20.7%) lower at $17,458 compared to $22,020 in 2023. Constant currency OUS sales were 21.2% lower.

Previous wording

Domestic U.S. sales in 2023, which were $3,767 (11.8%) lower than in 2022, were $28,204 (56.2% of total sales) compared to $31,971 (61.2% of total sales) in 2022. All three categories of domestic sales were lower, led by U.S. OEM sales which were $2,438 (22.4%) lower than in 2022. Domestic sales to UTMD’s biopharma OEM customer were $2,581 (28.7%) lower. Aggregate sales to 128 other U.S. OEM customers were $143 higher. Domestic Filshie device sales, representing 17% of total domestic sales, were $470 (9.0%) lower in 2023 compared to 2022.

Current wording

Domestic U.S. sales in 2024, which were $4,759 (16.9%) lower than in 2023, were $23,444 (57.3% of total consolidated sales) compared to $28,204 (56.2% of total sales) in 2023. All three categories of domestic sales were lower, led by U.S. OEM sales which were $3,857 (45.7%) lower than in 2023. Domestic sales to UTMD’s biopharma OEM customer PendoTECH were $4,157 (64.7%) lower. Aggregate sales to 133 other U.S. OEM customers were $300 higher. Domestic Filshie device sales, representing 17.3% of total domestic sales, were $729 (15.3%) lower in 2024 compared to 2023.

Previous wording

Direct device sales other than Filshie, representing 53% of total domestic sales, were $859 (5.4%) lower in 2023 than in 2022. In this category, domestic neonatal device sales alone were $866 lower, predominantly in 2Q 2023 as a result of continued raw materials and sterilization supply chain disruption. The nature of NICU sales is low volume, specialized configuration devices for which hospitals need quick delivery based on their changing patient needs. If preferred devices are unavailable for quick delivery, a hospital NICU must find a substitute to meet immediate needs, and those sales are lost to UTMD. This is what happened especially in early 2023 when UTMD could not obtain medical grade silicone from a validated supplier, and twice in 2023 when its contract sterilizer had to shut down its operations. UTMD expects 2024 domestic direct sales of its well-established devices to increase at a low single-digit percentage rate.

Current wording

Direct device sales other than Filshie, representing 63.2% of total domestic sales, were $173 (1.2%) lower in 2024 than in 2023. UTMD expects 2025 domestic direct sales of its well-established devices to increase at a low single-digit percentage rate.

Previous wording

Filshie sales have not recovered as well as the other domestic sales categories since the COVID-19 pandemic. There appears to be some negative impact on patient choice as a result of attorneys advertising on social media. Nevertheless, UTMD expects U.S. Filshie device sales in 2024 will remain about the same as in 2023 based on surgeons’ understanding of the safety and effectiveness of the device.

Current wording

Filshie 2024 sales in the U.S., which represented 17% of domestic direct sales, declined $729 (15%) compared to 2023. Although a partial change in practice favoring salpingectomies over tubal ligation for permanent sterilization has continued, an article in the “Green Journal” of the American College of Obstetrics and Gynecology lamented to physician members that patients are tending to rely more on social media than on informed input from their own doctors to make clinical choices. Consequently, there appears to be some negative impact on patient choice as a result of attorneys advertising for complainants under false pretenses on social media, which underscores the importance of winning the current product liability lawsuits. Nevertheless, UTMD expects U.S. Filshie device sales in 2025 will not decline as much as happened in 2024, based on the well-established safety and effectiveness of the device.

Previous wording

Domestic OEM sales in 2023 were 30% of total U.S. domestic sales compared to 34% in 2022. UTMD sold components and finished devices to 129 different U.S. companies in 2023 compared to 146 different companies in 2022, for use in their product-market offerings. Sales to UTMD’s largest domestic OEM customer represented 76% of total domestic OEM sales in 2023 compared to 83% of total domestic OEM sales in 2022. UTMD’s largest OEM customer markets biopharmaceutical manufacturing control systems which previously exclusively utilized UTMD’s pressure monitoring sensors and other components. But in 2023, domestic sales to this customer declined $2.6 million domestically. Looking forward to 2024, UTMD expects domestic demand from this customer may decline another $3.7 million as it seeks to vertically integrate manufacturing of its products.

Current wording

Domestic OEM sales in 2024 were $3,857 (45.7%) lower than in 2023, representing 20% of total U.S. domestic sales compared to 30% in 2023. UTMD sold components and finished devices to 134 different U.S. companies in 2024 compared to 129 companies in 2023 for use in their product-market offerings. Sales to 133 OEM customers excluding PendoTECH were $300 (+15%) higher. U.S. sales to PendoTECH were $4,157 (65%) lower. UTMD’s largest OEM customer markets biopharmaceutical manufacturing control systems which previously exclusively utilized UTMD’s pressure monitoring sensors and other components. The good news is that domestic sales to PendoTECH in 2024 were $2,266. The bad news, looking forward to 2025, is that UTMD expects domestic demand from this customer may decline another $2 million as it continues to integrate manufacturing of its own marketed products.

Previous wording

OUS USD-denominated sales in 2023 were $1,710 (+8.4%) higher at $22,020 compared to $20,310 in 2022. OUS sales in all product categories were higher. Sales invoiced in foreign currencies, which were $14,871 when converted to USD, represented 68% of OUS sales and 30% of consolidated total sales. A net slightly weaker USD added $166 in OUS foreign currency sales compared to constant currency terms. FX rates for income statement purposes are transaction-weighted averages. The weighted-average FX rates from the applicable foreign currency to USD during 2023 and 2022 for revenue purposes follow:

Current wording

OUS USD-denominated sales in 2024 were $4,562 (20.7%) lower at $17,458 compared to $22,020 in 2023. Sales invoiced in foreign currencies, which were $12,911 when converted to USD, represented 74% of OUS sales and 32% of consolidated total sales. The stronger GBP and EUR currencies added $113 in net OUS USD-denominated foreign currency sales compared to USD sales using the prior year’s foreign currency exchange (FX) rates (constant currency terms). FX rates for income statement purposes are transaction-weighted averages. The weighted-average FX rates from the applicable foreign currency to USD during 2024 and 2023 for revenue purposes follow:

Previous wording

The combined weighted-average favorable FX impact on 2023 foreign currency OUS sales was 1.1%, increasing reported USD sales by $166 (+0.3% of total consolidated 2023 sales) relative to the same foreign currency sales in 2022. In constant currency terms, OUS sales in 2023 were 7.6% higher than OUS sales in 2022. The portion of OUS sales invoiced in foreign currencies in USD terms was 30% of total consolidated 2023 USD sales compared to 25% in 2022. Including the impact of changed FX rates, OUS 2023 direct to end-user sales in USD terms were 14% higher in Ireland, 15% lower in Canada, 7% higher in France and 21% higher in the UK. Direct to end-user sales in Australia, which included New Zealand, were 17% lower. USD denominated sales to OUS distributors were 11% higher in 2023 than in 2022.

Current wording

The combined weighted-average favorable FX impact on 2024 OUS sales was 0.7% (+0.3% of total consolidated 2024 sales). In constant currency terms, OUS sales in 2024 were 21.2% lower than OUS sales in 2023. The portion of OUS sales invoiced in foreign currencies in USD terms was 32% of total consolidated 2024 USD sales compared to 30% in 2023. Including the impact of changed FX rates, OUS 2024 direct to end-user sales in USD terms were 7% higher in Ireland, 13% lower in Canada, 17% lower in France and 3% higher in the UK. Direct to end-user sales in Australia, which included New Zealand, were 18% lower. USD denominated sales to OUS distributors were $2,359 (18.9%) lower in 2024 than in 2023.

Previous wording

Sixty-eight percent of (USD denominated) 2023 OUS sales were invoiced in foreign currencies compared to 64% in 2022. As a portion of total USD WW consolidated sales, 30% of UTMD’s USD-equivalent sales were invoiced in foreign currencies in 2023 compared to 25% in 2022. The GBP, EUR, AUD and CAD converted sales represented 8%, 18%, 2% and 2% of total 2023 USD sales, respectively. This compares to 6%, 14%, 2% and 3% of total 2022 USD sales.

Current wording

Seventy-four percent of (USD denominated) 2024 OUS sales were invoiced in foreign currencies compared to 68% in 2023. As a portion of total USD WW consolidated sales, 32% of UTMD’s USD-equivalent sales were invoiced in foreign currencies in 2023 compared to 30% in 2023. The GBP, EUR, AUD and CAD converted sales represented 9%, 18%, 2% and 2% of total 2024 consolidated USD sales, respectively. This compares to 8%, 18%, 2% and 2% of total 2023 USD sales.

Previous wording

USD-denominated trade (excludes intercompany) sales of devices to OUS customers (excluding France) by UTMD’s Ireland facility (UTMD Ltd) were $10,686 in 2023 (13% higher) compared to $9,478 in 2022. In addition, UTMD Ltd also sold devices that it had manufactured directly to France in 2023 due to BREXIT, which earlier were sold to Femcare Ltd in the UK on an intercompany basis and then sold by Femcare Ltd directly to French medical facilities. USD-denominated sales to France in 2023 were $1,319 (7% higher) compared to $1,235 in 2022. The total FX rate difference in 2023 relative to 2022 increased Ireland’s USD-denominated sales by $244.

Current wording

USD-denominated trade (excludes intercompany) sales of devices to OUS customers (excluding France) by UTMD’s Ireland facility (UTMD Ltd) were $7,081 in 2024 (34% lower) compared to $10,686 in 2023. Explaining 93% of the decline, Ireland OUS sales to PendoTECH were $1,781 (81%) lower and sales to UTMD’s largest distributor of BPM kits located in China were $1,587 (40%) lower. In addition, UTMD Ltd also sold devices that it had manufactured directly to France in 2024 due to BREXIT, rather than by Femcare in the UK. USD-denominated sales to France in 2024 were $1,092 (17% lower) compared to $1,319 in 2023. The FX rate difference in 2024 relative to 2023 increased Ireland’s USD-denominated sales by $38.

Previous wording

In 2023, UTMD’s UK subsidiary, Femcare Ltd., had $3,347 trade sales of devices to domestic UK and certain international distributor customers, which was 20% higher compared to $2,781 in 2022. The total FX rate change increased the UK’s USD-denominated sales in 2023 by $10.

Current wording

In 2024, UTMD’s UK subsidiary, Femcare Ltd., had $3,470 trade sales of devices to domestic UK and certain international distributor customers, which was 4% higher compared to $3,347 in 2023. The FX rate difference increased the UK’s USD-denominated sales in 2024 by $91.

Previous wording

USD-denominated sales of devices to end-users in Australia and New Zealand by Femcare’s Australia distribution subsidiary (Femcare Australia Pty Ltd) were $1,050 (17% lower) in 2023 compared to $1,267 in 2022. A weaker AUD in 2023 reduced USD-denominated Australia sales by $46.

Current wording

USD-denominated sales of devices to end-users in Australia and New Zealand by Femcare’s Australia distribution subsidiary (Femcare Australia Pty Ltd) were $866 (18% lower) in 2024 compared to $1,050 in 2023. A weaker AUD in 2024 reduced USD-denominated Australia sales by $8.

Previous wording

UTMD’s Canada distribution subsidiary (Utah Medical Products Canada, Inc.) USD-denominated sales of devices to end-users in Canada were $1,102 (15% lower) compared to $1,294 in 2022. A weaker CAD reduced Canada sales by $43.

Current wording

UTMD’s Canada distribution subsidiary (Utah Medical Products Canada, Inc.) USD-denominated sales of devices to end-users in Canada in 2024 were $955 (13% lower) compared to $1,102 in 2023. A weaker CAD reduced Canada sales by $13.

Previous wording

UTMD groups its sales into four general product categories: 1) obstetrics, comprised of labor and delivery management tools for monitoring fetal and maternal well-being, for reducing risk in performing difficult delivery procedures and for improving clinician and patient safety; 2) gynecology/ electrosurgery/ urology, comprised of tools for gynecological procedures associated primarily with cervical/ uterine disease including LETZ, endometrial tissue sampling, transvaginal uterine sonography, diagnostic laparoscopy, surgical contraception and other MIS procedures; specialty excision and incision tools; conservative urinary incontinence therapy devices; and urology surgical procedure devices; 3) neonatal critical care, comprised of devices that provide developmentally-friendly care to the most critically ill babies, including providing vascular access, enteral feeding, administering vital fluids, oxygen therapy while maintaining a neutral thermal environment, providing protection and assisting in specialized applications; and 4) blood pressure monitoring/ accessories/ other, comprised of specialized transducers and components as well as molded parts and assemblies sold on an OEM basis to other companies. In these four categories, UTMD’s primary revenue contributors enjoy significant brand awareness by clinical users.

Current wording

UTMD groups its revenues into four general product categories: 1) obstetrics, comprised of labor and delivery management tools for monitoring fetal and maternal well-being, for reducing risk in performing difficult delivery procedures and for improving clinician and patient safety; 2) gynecology/ electrosurgery/ urology, comprised of tools for gynecological procedures associated primarily with cervical/ uterine disease including LETZ, endometrial tissue sampling, transvaginal uterine sonography, diagnostic laparoscopy, surgical contraception and other MIS procedures; specialty excision and incision tools; conservative urinary incontinence therapy devices; and urology surgical procedure devices; 3) neonatal critical care, comprised of devices that provide developmentally-friendly care to the most critically ill babies, including providing vascular access, enteral feeding, administering vital fluids, oxygen therapy while maintaining a neutral thermal environment, providing protection and assisting in specialized applications; and 4) blood pressure monitoring/ accessories/ other, comprised of specialized transducers and components as well as molded parts and assemblies sold on an OEM basis to other companies. In these four categories, UTMD’s primary revenue contributors enjoy significant brand awareness by clinical users.

Previous wording

UTMD’s 2023 consolidated GP, the surplus after subtracting costs of manufacturing, which includes purchasing and transporting raw materials, forming components, assembling, inspecting, testing, packaging and sterilizing products, from net revenues, was $30,038 (59.8% of sales) compared to $32,196 (61.6% of sales) in 2022. GP in 2023 was $2,158 (6.7%) lower with a 3.9% decrease in revenues.

Current wording

UTMD’s 2024 consolidated GP, the surplus after subtracting costs of manufacturing, which includes purchasing and transporting raw materials, forming components, assembling, inspecting, testing, packaging and sterilizing products, from net revenues, was $24,143 (59.0% of sales) compared to $30,038 (59.8% of sales) in 2023. GP in 2024 was $5,895 (19.6%) lower with an 18.6% decrease in revenues.

Previous wording

The Gross Profit Margin (GPM), which is GP divided by sales, although still very heathy, contracted 1.4 percentage points in 2023 due to the fact manufacturing overhead costs increased while sales decreased. This overhead dilution effect will continue in 2024, as happened during the COVID-19 pandemic in 2020 when sales declined, because management has decided to not reduce important manufacturing overhead resources in the same proportion as the expected decline in sales. Doing so would sacrifice future UTMD capabilities to grow the Company. UTMD generally did not increase prices after February 2023, except on a specific case-by-case basis for custom OEM work. Although supplier costs for raw materials have continued to increase while the Company also implemented further cost-of-living salary adjustments during 2023 for direct labor employees, management expects to be able to control the productivity of variable manufacturing costs in 2024 consistent with the past after severance is paid for some employees. In addition, quality assurance costs included in manufacturing overhead are projected to be substantially higher from implementing required clinical reviews under the new Medical Device Regulation for devices used OUS. The resulting 2024 GPM might be five percentage points lower than in 2023, resulting in a decline in GP in the range of 20-23%.

Current wording

The Gross Profit Margin (GPM), which is GP divided by sales, although still healthy, contracted 0.8 percentage points in 2024 due to the fact that many fixed manufacturing overhead costs increased while sales decreased. While the 2024 GP margin decline was less than projected in UTMD’s 2023 SEC Form 10-K, a further overhead margin dilution effect is expected in 2025 because management has decided to not reduce important manufacturing overhead resources in the same proportion as the expected 2025 decline in sales. Doing so would limit future UTMD capabilities to grow the Company. Although supplier costs for raw materials have continued to increase and the Company implemented further cost-of-living salary adjustments during 2024 for employees, management expects to be able to control the productivity of variable manufacturing costs in 2025 consistent with the past. In addition, quality assurance costs included in manufacturing overhead are projected to be higher from implementing required clinical reviews under the new EU Medical Device Regulation for devices used OUS. Except on a selective basis after experiencing further variable cost increases, UTMD does not intend to increase prices to customers in 2025. The resulting 2025 GPM might be more than another full percentage point lower than in 2024, resulting in a decline in GP in the range of 7-9%.

Previous wording

UTMD’s Ireland subsidiary’s (UTMD Ltd’s) 2023 GP was EUR 8,084 compared to EUR 8,538 in 2022. The associated GPMs were 58.9% in 2023 and 60.0% in 2022. Femcare UK 2023 GP was GBP 1,579 compared to GBP 1,297 in 2022. The 2023 UK GPM was 55.3% compared to 52.0% in 2022. A substantial increase in UK Filshie device sales diluted UK manufacturing overhead expense, as UK manufacturing overhead costs are relatively fixed. Femcare Australia and Femcare Canada are simply distribution facilities for UTMD finished devices in their respective countries. GP is the result of subtracting intercompany purchase prices of devices, plus incoming freight, from revenues. Australia 2023 GP was AUD 841 (53.0% of sales) compared to AUD 940 (51.4% of sales) in 2022. Canada 2023 GP was CAD 874 (58.6% of sales) compared to CAD 870 (51.7% of sales) in 2022. In the U.S., GP was $17,750 in 2023 compared to $20,699 in 2022. The U.S. GPM was 51.2% in 2023 compared to 54.8% in 2022. A summation of the above GP of each subsidiary will not yield UTMD’s consolidated total GP because of elimination of profit in inventory of intercompany sales.

Current wording

UTMD’s Ireland subsidiary’s (UTMD Ltd’s) 2024 GP was EUR 6,283 (22.3% lower) compared to EUR 8,084 in 2023 when total EUR revenues, including direct sales to France and intercompany sales of devices manufactured in Ireland, were 21.6% lower. The associated GPMs were 58.4% in 2024 and 58.9% in 2023. Femcare UK GP was GBP 1,579 in both 2024 and 2023. The 2024 UK GPM was 55.7% compared to 55.3% in 2023 while UK GBP sales including intercompany revenues were 0.7% lower. Femcare Australia and Femcare Canada are simply distribution facilities for UTMD finished devices in their respective countries. GP is the result of subtracting intercompany purchase prices of devices, plus incoming freight, from revenues. Australia 2024 GP was AUD 623 (46.9% of sales) compared to AUD 841 (53.0% of sales) in 2023. Canada 2024 GP was CAD 538 (41.2% of sales) compared to CAD 874 (58.6% of sales) in 2023. The GPMs in both Australia and Canada were diluted not only by higher overhead costs on substantially lower sales, but also higher direct material costs from weaker currencies for devices purchased from the U.S., Ireland and the UK. In the U.S., GP was $13,991 (21.2% lower) in 2024 compared to $17,750 in 2023 when revenues including intercompany sales were 16.7% lower. The U.S. GPM was 48.5% in 2024 compared to 51.2% in 2023. A summation of the above GP of each subsidiary will not yield UTMD’s consolidated total GP because of the elimination of profit in inventory for intercompany sales.

Previous wording

Operating Income results from subtracting Operating Expenses from GP. For the year 2023, Operating Income was $16,777 compared to $19,790 in 2022, a 15.2% decrease. The $3,012 decrease in Operating Income was from a combination of $2,158 lower GP and $854 higher Operating Expenses.

Current wording

Operating Income results from subtracting Operating Expenses from GP. For the year 2024, Operating Income was $13,594 compared to $16,777 in 2023, a 19.0% decrease. The $3,183 decrease in Operating Income was from a combination of $5,895 lower GP and $2,712 lower Operating Expenses.

Previous wording

The UTMD Ltd (Ireland) Operating Income margin in 2023 was 55.9% compared to 57.2% in 2022. Femcare UK’s Operating Income margin per US GAAP, which includes the IIA amortization expense of the 2011 acquisition, was negative in both 2023 and 2022. Femcare Australia’s 2023 Operating Income margin was 32.2% compared to 30.9% in 2022. Femcare Canada’s 2023 Operating Income margin was 41.8% compared to 37.3% in 2022. UTMD’s 2023 Operating Income margin in the U.S. was 23.5% compared to 31.2% in 2022. For clarity, the CSI IIA amortization expense hit the U.S. Operating Income margin, and the Femcare IIA amortization expense hit the Femcare UK Operating Income margin.

Current wording

The UTMD Ltd (Ireland) Operating Income margin in 2024 was 54.4% compared to 55.9% in 2023. Femcare UK’s Operating Income margin per US GAAP, which includes the IIA amortization expense of the 2011 acquisition, was negative in both 2024 and 2023. Femcare Australia’s 2024 Operating Income margin was 23.6% compared to 32.2% in 2023. Femcare Canada’s 2024 Operating Income margin was 22.4% compared to 41.8% in 2023. UTMD’s 2024 Operating Income margin in the U.S. was 33.1% compared to 23.5% in 2023. For clarity, in 2023 the CSI IIA amortization expense (none in 2024) hit the U.S. Operating Income margin, and in both 2024 and 2023 the Femcare IIA amortization expense hit the Femcare UK Operating Income margin.

Previous wording

Operating expenses include sales and marketing (S&M) expenses, product development (R&D) expenses and general and administrative (G&A) expenses. Consolidated WW operating expenses were $13,261 (26.4% of sales) in 2023 compared to $12,407 (23.7% of sales) in 2022. The following table provides a comparison of operating expense categories, as well as further segmentation of G&A expenses:

Current wording

Operating expenses include sales and marketing (S&M) expenses, product development (R&D) expenses and general and administrative (G&A) expenses. Consolidated WW operating expenses were $10,549 (25.8% of sales) in 2024 compared to $13,261 (26.4% of sales) in 2023. The following table provides a comparison of operating expense categories, as well as further segmentation of G&A expenses:

Previous wording

S&M expenses in 2023 were $1,685 (3.4% of sales) compared to $1,507 (2.9% of sales) in 2022. The higher expenses were primarily due to higher salaries from cost-of-living adjustments. Consolidated OUS S&M expenses in 2023 compared to 2022 were not affected by FX rate changes as stronger EUR and GBP currency expenses were offset by weaker CAD and AUD expenses.

Current wording

S&M expenses in 2024 were $1,901 (4.6% of sales) compared to $1,685 (3.4% of sales) in 2023. The higher expenses were due to higher salaries from cost-of-living adjustments to salaries and a $148 increase in U.S. medical benefit claims. Consolidated OUS S&M expenses in 2024 compared to 2023 were increased by a net $3 from FX rate changes due primarily to a stronger GBP.

Previous wording

R&D expenses in 2023 were $560 (1.1% of sales) compared to $493 (0.9% of sales) in 2022. R&D expenses include the costs of investigating clinical needs, developing innovative concepts, testing concepts for viability, validating methods of manufacture, completing any necessary premarketing clinical trials, regulatory documentation and other activities required for design control, responding to customer requests for product enhancements, and assisting manufacturing engineering on an ongoing basis in developing new processes or improving existing processes. Product development (R&D) expenses increased as a result of cost-of-living adjustments. R&D also played a significant role in manufacturing process improvements. No new UTMD devices were launched in 2023. Due to stringent materials validation requirements for the biopharmaceutical manufacturing industry, UTMD projects R&D expenses in 2024 will be more than 40% higher than in 2023 and represent approximately 2% of revenues.

Current wording

R&D expenses in 2024 were $813 (2.0% of sales) compared to $560 (1.1% of sales) in 2023. R&D expenses include the costs of investigating clinical needs, developing innovative concepts, testing concepts for viability, validating methods of manufacture and materials, completing any necessary premarketing clinical trials, regulatory documentation and other activities required for design control, responding to customer requests for product enhancements, and assisting manufacturing engineering on an ongoing basis in developing new processes or improving existing processes. Product development (R&D) expenses increased in 2024 primarily as a result of $222 spent for independent testing and validation of materials used in UTMD’s own biopharma sensors, and from cost-of-living adjustments for employees. R&D also continued to play a significant role in manufacturing process improvements and quality assurance. No new UTMD devices were launched in 2024. UTMD projects R&D expenses in 2025 will be between 1% and 2% of revenues.

Previous wording

G&A expenses in 2023 were $11,016 (21.9% of sales) compared to $10,407 (19.9% of sales) in 2022. G&A expenses include the “front office” functional costs of executive management and outside directors, finance and accounting, corporate information systems, human resources, stockholder relations, corporate risk management, corporate governance, protection of intellectual property, amortization of identifiable intangibles and legal costs. The table above helps identify certain specific categories of G&A expenses which might be of interest to stockholders.

Current wording

G&A expenses in 2024 were $7,835 (19.2% of sales) compared to $11,016 (21.9% of sales) in 2023. G&A expenses include the “front office” functional costs of executive management and outside directors, finance and accounting, corporate information systems, human resources, stockholder relations, corporate risk management, corporate governance, protection of intellectual property, amortization of identifiable intangibles and legal costs. The table above helps identify certain specific categories of G&A expenses which might be of interest to stockholders.

Previous wording

The increase in G&A expenses was due to $990 higher U.S. litigation costs, as well as higher salaries (except the CEO) due to cost-of-living adjustments. Stronger EUR and GBP relative to the USD increased net foreign currency G&A expenses by $30, compared to what they would have been in 2022. This includes an FX rate change unfavorable USD impact of $24 (out of the $30 total) from the amortization of Femcare acquisition IIA, which was £1,589 in both 2023 and 2022.

Current wording

The $3,181 net decrease in G&A expenses was due primarily to the completion in late 2023 of amortizing the $21,000 IIA from the 2019 purchase of the CSI exclusive U.S. distribution rights for the Filshie Clip System. The final CSI IIA amortization expense in 2023 was $3,684, which was zero in 2024. In addition, accrued profit-sharing bonuses were $129 lower in proportion to the 2024 decline in Income Before Income Tax (EBT). The $632 difference between that combined $3,813 reduction in 2024 G&A operating expenses, and the net total $3,181 reduction in G&A expenses was due to essentially to $479 higher litigation expenses, $31 higher (non-cash) stock option expense, $24 higher independent accounting and tax help as well as higher salaries (except the CEO) due to cost-of-living adjustments. A stronger GBP increased net foreign currency G&A expenses by $69, compared to what they would have been in 2023. This includes an FX rate change unfavorable USD impact of $53 (out of the $69 total) from the amortization of the 2011 Femcare acquisition IIA, which was £1,589 in both 2024 and 2023.

Previous wording

As stockholders likely remember, the non-cash IIA amortization expense related to the Filshie Clip System includes IIA from both the 2011 acquisition of Femcare Group Ltd and the 2019 purchase of the CSI exclusive U.S. distribution rights for the Filshie Clip System. The combined IIA amortization expense in 2023 was 11.3% of total WW consolidated sales ($5,661) compared to 12.2% in 2022 ($6,386). The decline in percent of sales was due to the completion of the CSI IIA amortization expense in October 2023.

Current wording

As stockholders likely remember, the non-cash IIA amortization expense related to the Filshie Clip System in 2023 included IIA from both the 2011 acquisition of Femcare Group Ltd and the 2019 purchase of the CSI exclusive U.S. distribution rights for the Filshie Clip System. The combined Filshie IIA amortization expense in 2023 was 11.3% of total WW consolidated sales ($5,661) compared to 5.0% in 2024 ($2,030) with no 2024 CSI IIA amortization expense.

Previous wording

The Femcare IIA amortization expense will continue at the same £397 per calendar quarter rate ending in 1Q 2026 (or until the value of any remaining IIA becomes impaired), subject to changes in the FX rate when converted to USD.

Current wording

The Femcare IIA amortization expense will continue at the same £397 per calendar quarter rate, which ends in 1Q 2026 (or until the value of any remaining IIA becomes impaired), subject to changes in the GBP FX rate when converted to USD.