UFP TECHNOLOGIES INC

Previous wording

Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Management and representatives of UFP Technologies, Inc. (the “Company”) also may from time to time make forward-looking statements. These statements are subject to known and unknown risks, uncertainties, and other factors, which may cause our or our industry’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about the Company’s prospects; the demand for its products, the well-being and availability of the Company’s employees, the continuing operation of the Company’s locations, delayed payments by the Company’s customers and the potential for reduced or canceled orders; statements about expectations regarding customer inventory levels; statements about the Company’s acquisition strategies and opportunities and the Company’s growth potential and strategies for growth; expectations regarding customer demand; expectations regarding the Company’s liquidity and capital resources, including the sufficiency of its cash reserves and the availability of borrowing capacity to fund operations and/or potential future acquisitions; anticipated revenues and the timing of such revenues; expectations about shifting the Company’s book of business to higher-margin, longer-run opportunities; anticipated trends and potential advantages in the different markets in which the Company competes, including the medical, aerospace and defense, automotive, consumer, electronics, and industrial markets, and the Company’s plans to expand in certain of its markets; statements regarding anticipated advantages the Company expects to realize from its investments and capital expenditures; statements regarding anticipated advantages to improvements and alterations at the Company’s existing plants; expectations regarding the Company’s manufacturing capacity, operating efficiencies, and new production equipment; statements about new product offerings and program launches; statements about the Company’s participation and growth in multiple markets; statements about the Company’s business opportunities; and any indication that the Company may be able to sustain or increase its sales, earnings or earnings per share, or its sales, earnings or earnings per share growth rates.

Current wording

Some of the statements contained in this Report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Management and representatives of UFP Technologies, Inc. (the “Company”) also may from time to time make forward-looking statements. These statements are subject to known and unknown risks, uncertainties, and other factors, which may cause our or our industry’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about the Company’s prospects; the demand for its products, the well-being and availability of the Company’s employees, the continuing operation of the Company’s locations, delayed payments by the Company’s customers and the potential for reduced or canceled orders; statements about expectations regarding customer inventory levels; statements about the Company’s acquisition strategies and opportunities and the Company’s growth potential and strategies for growth; expectations regarding customer demand; expectations regarding the Company’s liquidity and capital resources, including the sufficiency of its cash reserves and the availability of borrowing capacity to fund operations and/or potential future acquisitions; anticipated revenues and the timing of such revenues; expectations about shifting the Company’s book of business to higher-margin, longer-run opportunities; anticipated trends and potential advantages in the different markets in which the Company competes, including the medical and non-medical, and the Company’s plans to expand in certain of its markets; statements regarding anticipated advantages the Company expects to realize from its investments and capital expenditures; statements regarding anticipated advantages to improvements and alterations at the Company’s existing plants; expectations regarding the Company’s manufacturing capacity, operating efficiencies, and new production equipment; expectations that the Company will receive reimbursement for tariff-related costs in the form of vendor credits from suppliers that previously passed such tariffs through to the Company, whether directly or through price increases; statements about new product offerings and program launches; statements about the Company’s participation and growth in multiple markets; statements about the Company’s business opportunities; and any indication that the Company may be able to sustain or increase its net sales, earnings or earnings per share, or its sales, earnings or earnings per share growth rates.

Previous wording

Investors are cautioned that such forward-looking statements involve risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated by such forward-looking statements, or otherwise, including without limitation: our financial condition and results of operations, including risks relating to substantially decreased demand for the Company’s products; risks relating to the potential closure of any of the Company’s facilities or the unavailability of key personnel or other employees; risks that the Company’s inventory, cash reserves, liquidity or capital resources may be insufficient; risks relating to delayed payments by our customers and the potential for reduced or canceled orders; risks related to customer concentration; risks related to global conflict or civil unrest to the efficacy of our manufacturing process; risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions, the integration of any such acquisition candidates, the value of those acquisitions to our customers and shareholders, and the financing of such acquisitions; risks related to our indebtedness and compliance with covenants contained in our financing arrangements, and whether any available financing may be sufficient to address our needs; risks associated with efforts to shift the Company’s book of business to higher-margin, longer-run opportunities; risks associated with the Company’s entry into and growth in certain markets; risks and uncertainties associated with seeking and implementing manufacturing efficiencies and implementing new production equipment; risks associated with governmental regulations and/or sanctions affecting the import and export of products, including global trade barriers, additional taxes, tariff increases, cash repatriation restrictions, retaliations and boycotts between the U.S. and other countries; risks associated with domestic, regional and global political risks and uncertainties; risks and uncertainties associated with growth of the Company’s business and increases to sales, earnings and earnings per share; risks relating to cybersecurity, including cyber-attacks on the Company’s information technology infrastructure, products, suppliers, customers and partners, and cybersecurity-related regulations; risks associated with our or third-party use of artificial intelligence technologies; risks associated with new product and program launches; risks relating to our performance and the performance of our counterparties under the agreements we have entered into; the risk that our two largest customers, on whom we depend for a substantial portion of our annual revenues, will not purchase the expected volume of goods under the supply agreements we have entered into with them because, among other things, they no longer require the products at all or to the degree they…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Investors are cautioned that such forward-looking statements involve risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated by such forward-looking statements, or otherwise, including without limitation: our financial condition and results of operations, including risks relating to substantially decreased demand for the Company’s products; risks relating to the potential closure of any of the Company’s facilities or the unavailability of key personnel or other employees; risks that the Company’s inventory, cash reserves, liquidity or capital resources may be insufficient; risks relating to delayed payments by our customers and the potential for reduced or canceled orders; risks related to customer concentration; risks related to global conflict or civil unrest to the efficacy of our manufacturing process; risks associated with the identification of suitable acquisition candidates and the successful, efficient execution of acquisition transactions, the integration of any such acquisition candidates, the value of those acquisitions to our customers and shareholders, and the financing of such acquisitions; risks related to our indebtedness and compliance with covenants contained in our financing arrangements, and whether any available financing may be sufficient to address our needs; risks associated with efforts to shift the Company’s book of business to higher-margin, longer-run opportunities; risks associated with the Company’s entry into and growth in certain markets; risks and uncertainties associated with seeking and implementing manufacturing efficiencies and implementing new production equipment; risks associated with governmental regulations and/or sanctions affecting the import and export of products, including global trade barriers, additional taxes, tariff increases or uncertainties, cash repatriation restrictions, retaliations and boycotts between the U.S. and other countries; risks associated with the usage of artificial intelligence technologies; risks associated with domestic, regional and global political risks and uncertainties; risks associated with the U.S. and Iran conflict; risks and uncertainties associated with growth of the Company’s business and increases to sales, earnings and earnings per share; risks relating to cybersecurity, including cyber-attacks on the Company’s information technology infrastructure, products, suppliers, customers and partners, and cybersecurity-related regulations, and the potential consequences of the Cyber Incident (as defined in Item 1C, Cybersecurity in our Annual Report on Form 10-K for the year ended December 31, 2025) could result in data or financial loss, reputational harm, business disruption, damage to our relationships with customers, consumers, employees and third parties on which we rely, litigation, regulatory investigations, enforcement actions or other negative impacts …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, and projections, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions and are only as of the date of this Report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as well as the risks and uncertainties discussed elsewhere in this Report. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.

Current wording

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” and similar expressions intended to identify forward-looking statements. Our actual results could be different from the results described in or anticipated by our forward-looking statements due to the inherent uncertainty of estimates, forecasts, and projections, and may be materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our current beliefs, estimates and assumptions and are only as of the date of this Report. We expressly disclaim any duty to provide updates to forward-looking statements, and the estimates and assumptions associated with them, after the date of this Report, in order to reflect changes in circumstances or expectations, or the occurrence of unanticipated events, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” set forth in Part I Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025, as well as the risks and uncertainties discussed elsewhere in this Report. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.

Previous wording

Net sales for the nine months ended September 30, 2025 increased 26.0% to $453.9 million from $360.4 million in the same period last year. The increase was primarily attributable to 31.1% growth in sales to customers in the medical market, which was largely due to sales from the 2024 and 2025 acquisitions (See Note 2 for further information regarding these acquisitions). These companies collectively contributed approximately $114.9 million in sales through the nine months ended September 30, 2025 compared to $34.6 million in the same period last year. Organic sales growth was 2.2% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. Net sales from our largest two customers, Intuitive Surgical SARL and Stryker Corporation, were 27.1% and 17.1% of our total net sales in the three months ended September 30, 2025, respectively, and 25.3% and 20.4% of our total net sales in the nine months ended September 30, 2025, respectively.

Current wording

Net sales for the three months ended March 31, 2026 increased 4.1% to $154.2 million from $148.1 million in the same period last year. The increase was primarily attributable to 5.9% growth in sales to customers in the medical market, which was largely due to growth in sales to customers in the Robotic Surgery, Patient Surfaces and Support and Interventional and Surgical sub-markets. Net sales from our largest two customers, Stryker and Intuitive Surgical SARL, were 24.8% and 22.1% of our total net sales in the three months ended March 31, 2026, respectively, compared to 24.0% and 21.4% in the same period last year.

Previous wording

In 2025, we executed a post-acquisition review of our AJR labor force’s United States employment eligibility through E-Verify protocols. This review has resulted in significant workforce turnover during the year (the "AJR Labor Issue"). Attention spent by experienced employees training new direct and indirect employees in our standards and polices has decreased productivity and, therefore has created inefficiencies in our AJR operations. To address the AJR Labor Issue, we recruited legally eligible replacement associates. We anticipate that the third quarter of 2025 was the low point of labor inefficiencies, with gradual improvement beginning in the fourth quarter of 2025.

Current wording

In 2025, we executed a post-acquisition review of our AJR Enterprises, LLC (“AJR”) labor force’s United States employment eligibility through E-Verify protocols. This review has resulted in significant workforce turnover during the year (the "AJR Labor Issue"). Attention spent by experienced employees training new direct and indirect employees in our standards and policies has decreased productivity and therefore has created inefficiencies in our AJR operations. To address the AJR Labor Issue, we recruited legally eligible replacement associates.

Previous wording

In 2025, the United States imposed increased tariffs on foreign imports into the United States, including all the countries in which we manufacture goods outside the United States and also the countries in which our customers operate. Although agreements have been made with various countries, the tariff policy environment remains dynamic, and we cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, including retaliatory trade measures taken by other countries in response to existing or future United States tariffs or other measures.

Current wording

In 2025, the United States imposed increased tariffs on foreign imports into the United States, including all the countries in which we manufacture goods outside the United States and also the countries in which our customers operate. Although agreements have been made with various countries, the tariff policy environment remains dynamic, particularly in light of recent Supreme Court decisions. In February 2026, the U.S. Supreme Court ruled that these tariffs levied under the International Emergency Economic Powers Act (“IEEPA”) are unconstitutional. As a result of this ruling, the U.S. Court of International Trade issued an order directing the U.S. Customs and Border Protection (“CBP”) agency to begin formalizing a process for refunds. On April 20, 2026, the CBP launched an online portal that can be used to submit IEEPA tariff refund requests. All requests will be reviewed by the CBP to determine validity prior to the issuance of refunds. During the three months ended March 31, 2026, we have experienced a decreased effect of tariffs on our business as compared to the second half of 2025. In the coming quarters, we expect to receive reimbursement of tariff costs in the form of vendor credits, from suppliers who have previously passed through tariffs to us either directly or through price increases.

Previous wording

Selling, general, and administrative expenses (“SG&A”) increased approximately 20.8% to $19.1 million for the three months ended September 30, 2025, from $15.8 million for the same period in 2024. The increase is primarily attributable to increased headcount and other back-office resources for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. As a percentage of sales, SG&A increased to 12.3% for the three months ended September 30, 2025, from 10.9% for the same three months in 2024.

Current wording

Selling, general, and administrative expenses (“SG&A”) increased approximately 12.3% to $21.0 million for the three months ended March 31, 2026, from $18.7 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resources of approximately $0.8 million, legal expenses of approximately $0.5 million most of which will not recur, and an increase in RSU stock compensation expense of approximately $0.6 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025. As a percentage of sales, SG&A increased to 13.6% for the three months ended March 31, 2026, from 12.6% for the same three months in 2025.

Previous wording

Net interest expense was approximately $2.4 million and $3.5 million for the three months ended September 30, 2025, and 2024, respectively. The decrease in net interest expense for the three months ended September 30, 2025, was primarily due to lower average debt in 2025 as compared to 2024. Interest income was immaterial.

Current wording

Net interest expense was approximately $1.7 million and $2.8 million for the three months ended March 31, 2026, and 2025, respectively. The decrease in net interest expense for the three months ended March 31, 2026, was primarily due to lower average debt in the three months ended March 31, 2026 as compared to the same period in 2025. Interest income was immaterial.

Previous wording

Other income was approximately $78 thousand and other expense was approximately $70 thousand for the three months ended September 30, 2025 and 2024, respectively. The changes in other (income) expense are primarily generated by equity method investment income in 2025 and foreign currency transaction gains in 2025 and 2024.

Current wording

Other expense was less than $0.1 million for the three months ended March 31, 2026 and 2025. Changes in other expense are primarily generated by equity method investment income and foreign currency transaction gains.

Previous wording

We recorded tax expense of approximately 19.4% and 21.0% of income before income tax expense, for each of the nine months ended September 30, 2025 and 2024, respectively. The decrease in the effective tax rate for the current period as compared to the prior period is largely due to changes in the allocation of income generated in various jurisdictions where we operate as well as increased discrete tax benefits associated with vested equity and a state tax refund.

Current wording

We recorded tax expense of approximately 19.0% and 15.3% of income before income tax expense, for the three months ended March 31, 2026 and 2025, respectively. The increase in the effective tax rate is due to large favorable discrete items in the first quarter of 2025 associated with equity compensation and a state tax refund.

Previous wording

Net cash provided by operations for the nine months ended September 30, 2025 was approximately $75.1 million and was primarily a result of net income generated of approximately $50.7 million, depreciation and amortization of approximately $14.2 million, and share-based compensation of approximately $6.5 million for the nine months ended September 30, 2025.

Current wording

Net cash provided by operations for the three months ended March 31, 2026 was approximately $3.2 million and was primarily a result of net income generated of approximately $17.5 million, depreciation and amortization of approximately $4.9 million, and share-based compensation of approximately $2.7 million for the three months ended March 31, 2026, offset by changes in operating assets and liabilities of approximately $24.5 million, primarily driven by a $15.7 million increase in receivables, net due to increased sales volume in March 2026 as compared to December 2025.

Previous wording

Net cash used in investing activities during the nine months ended September 30, 2025 was approximately $23.7 million and was primarily the result of additions of manufacturing machinery and equipment and various building improvements, as well as the acquisitions of AJR Specialty, AJR Custom Foam, TPI, and UNIPEC.

Current wording

Net cash used in investing activities during the three months ended March 31, 2026 was approximately $1.7 million and was comprised of additions of manufacturing machinery and equipment and various building improvements.

Previous wording

Net cash used for financing activities was approximately $47.3 million during the nine months ended September 30, 2025 and was primarily the result of payments on the revolving line of credit of approximately $33.9 million and principal payments of long-term debt of approximately $9.4 million.

Current wording

Net cash used for financing activities was approximately $1.6 million during the three months ended March 31, 2026 and was primarily the result of payments on the revolving line of credit of approximately $28.1 million and principal payments of long-term debt of approximately $3.1 million, partially offset by proceeds from advances on revolving line of credit of $33.4 million.

Previous wording

On June 27, 2024, we, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the our subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Third Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of December 22, 2021.

Current wording

On June 27, 2024, we, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the our subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Third Amended and Restated Credit Agreement amends and restates our prior credit agreement, originally dated as of December 22, 2021.

Previous wording

At September 30, 2025, we had approximately $146.1 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At September 30, 2025, the weighted average interest rate was approximately 5.5% and we were in compliance with all covenants under the Third Amended and Restated Credit Agreement.

Current wording

At March 31, 2026, we had approximately $137.6 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At March 31, 2026, the weighted average interest rate was approximately 5.0% and we were in compliance with all covenants under the Third Amended and Restated Credit Agreement.

Previous wording

We require cash to pay our operating expenses, purchase capital equipment, and to service our contractual obligations. Our principal sources of funds are our operations and our Third Amended and Restated Credit Agreement. We generated cash of approximately $75.1 million from operations during the nine months ended September 30, 2025. We cannot guarantee that its operations will generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating performance and the availability of draws on its revolving credit facility. Further, the economic uncertainty resulting from events including inflation, tariffs, bank failures, and other factors beyond our control could affect our long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

Current wording

We require cash to pay our operating expenses, purchase capital equipment, and to service our contractual obligations. Our principal sources of funds are our operations and our Third Amended and Restated Credit Agreement. We generated cash of approximately $3.2 million from operations during the three months ended March 31, 2026. We cannot guarantee that its operations will generate cash in future periods. Our longer-term liquidity is contingent upon future operating performance and the availability of draws on its revolving credit facility. Further, the economic uncertainty resulting from events including inflation, tariffs, bank failures, and other factors beyond our control could affect our long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.