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 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.

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 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; 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, gross margins, earnings or earnings per share, or its sales, gross margins, 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 or cost of our manufacturing process and supply chain; 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 tariffs, 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 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 under cybersecurity related regulations…

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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 or cost of our manufacturing process and supply chain; 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 tariffs, 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 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, gross margins, 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 under cybersecurity rel…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Net sales for the six months ended June 30, 2026 increased 9.6% to $328.2 million from $299.3 million in the same period last year. The increase was largely due to growth in sales in our Surfaces and Support, Cardiovascular, Infection Control, and Orthopedics sub-markets. Organic sales growth for the three and six months ended June 30, 2026 was 12.4% and 6.8%, respectively. Net sales from our largest two customers were 26.2% and 21.0% of our total net sales during the three months ended June 30, 2026, respectively, and 25.5% and 21.5% of our total net sales during the six months ended June 30, 2026, respectively.

Current wording

Net sales for the nine months ended September 30, 2026 increased 10.3% to $500.6 million from $453.9 million in the same period last year. The increase was largely due to growth in sales in our Patient Beds and Handling, Cardiovascular, Infection Control, and Orthopedics sub-markets. Organic sales growth for the nine months ended September 30, 2026 was 7.9%. Net sales from our largest two customers were 24.8% and 21.6% of our total net sales during the nine months ended September 30, 2026.

Previous wording

On or about February 14, 2026, we detected the Cyber Incident (as defined in Item 1C, Cybersecurity in our Annual Report on Form 10-K for the year ended December 31, 2025). As of the date hereof, the incident has not had a material impact on our financial systems, operations or financial condition. While our investigation and assessment of this incident is ongoing, as of the date of this filing, our IT systems are operational in all material respects and we do not believe the incident is reasonably likely to materially impact our financial condition or results of operations. There can be no assurance that the Cyber Incident or any future cybersecurity incidents will not have a material impact on our future operations, financial systems or financial condition. See Item 1A “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2025 under the headings “Security breaches, including cybersecurity incidents and other disruptions could compromise our information, expose us to liability and harm our reputation and business” and “We experienced a material information technology (“IT”) systems incident in February 2026, which could result in a number of potentially unknown outcomes, including but not limited to, litigation, regulatory investigations or enforcement actions, or reputational harm, any of which could have a material impact on our business operations, financial condition, or results of operations,” and the discussion in Item 1C, Cybersecurity, within our Annual Report on Form 10-K for the year ended December 31, 2025.

Current wording

There can be no assurance that any future cybersecurity incidents will not have a material impact on our future operations, financial systems or financial condition. See Item 1A “Risk Factors” within our Annual Report on Form 10-K for the year ended December 31, 2025 under the headings “Security breaches, including cybersecurity incidents and other disruptions could compromise our information, expose us to liability and harm our reputation and business” and “We experienced a material information technology (“IT”) systems incident in February 2026, which could result in a number of potentially unknown outcomes, including but not limited to, litigation, regulatory investigations or enforcement actions, or reputational harm, any of which could have a material impact on our business operations, financial condition, or results of operations,” and the discussion in Item 1C, Cybersecurity, within our Annual Report on Form 10-K for the year ended December 31, 2025.

Previous wording

Gross profit as a percentage of sales ("Gross Margin") increased to 29.3% for the three months ended June 30, 2026 from 28.8% for the same period in 2025, driven primarily by increased operating efficiencies as well as leveraging strong organic sales growth against fixed overhead costs.

Current wording

Gross profit as a percentage of sales ("Gross Margin") increased to 29.4% for the three months ended September 30, 2026 from 27.7% for the same period in 2025, driven primarily by increased operating efficiencies as well as leveraging strong organic sales growth against fixed overhead costs.

Previous wording

Gross margin increased to 29.0% for the six months ended June 30, 2026, from 28.6% for the same period in 2025, driven primarily by increased operating efficiencies.

Current wording

Gross Margin increased to 29.2% for the nine months ended September 30, 2026, from 28.3% for the same period in 2025, driven primarily by increased operating efficiencies as well as leveraging strong organic sales growth against fixed overhead costs.

Previous wording

Selling, General and Administrative Expenses

Current wording

Selling, General and Administrative Expenses ("SG&A")

Previous wording

SG&A increased approximately 21.8% to $22.8 million for the three months ended June 30, 2026, from $18.7 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resources, including variable compensation, of approximately $1.9 million and an increase in share-based compensation expense of approximately $1.0 million, partially due to CEO transition costs. As a percentage of sales, SG&A increased to 13.1% for the three months ended June 30, 2026, from 12.4% for the same three months in 2025.

Current wording

SG&A increased approximately 21.4% to $23.2 million for the three months ended September 30, 2026, from $19.1 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resources, including variable compensation, of approximately $1.9 million, an increase in share-based compensation expense of approximately $0.8 million, partially due to CEO transition costs, and an increase in legal expenses of $0.6 million. As a percentage of sales, SG&A increased to 13.4% for the three months ended September 30, 2026, from 12.3% for the same three months in 2025.

Previous wording

SG&A increased approximately 17.0% to $43.8 million for the six months ended June 30, 2026, from $37.4 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resources, including variable compensation, of approximately $2.6 million and an increase in share-based compensation expense of approximately $1.6 million, partially due to CEO transition costs. As a percentage of sales, SG&A increased to 13.3% for the six months ended June 30, 2026 from 12.5% for the same six months in 2025.

Current wording

SG&A increased approximately 18.5% to $66.9 million for the nine months ended September 30, 2026, from $56.5 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resources, including variable compensation, of approximately $4.5 million, an increase in share-based compensation expense of approximately $2.5 million, partially due to CEO transition costs, and an increase in legal expenses of $0.8 million. As a percentage of sales, SG&A increased to 13.4% for the nine months ended September 30, 2026 from 12.4% for the same nine months in 2025.

Previous wording

Interest expense, net was approximately $1.7 million and $2.7 million for the three months ended June 30, 2026, and 2025, respectively. The decrease for the three months ended June 30, 2026 was primarily due to lower average debt in the three months ended June 30, 2026 as compared to the same period in 2025. Interest income was immaterial.

Current wording

Interest expense, net was approximately $1.5 million and $2.4 million for the three months ended September 30, 2026 and 2025, respectively. The decrease for the three months ended September 30, 2026 was primarily due to lower average debt in the three months ended September 30, 2026 as compared to the same period in 2025. Interest income was immaterial.

Previous wording

Interest Expense, net was approximately $3.4 million and $5.5 million for the six months ended June 30, 2026, and 2025, respectively. The increase for the six months ended June 30, 2026 was primarily due to lower average debt in the six months ended June 30, 2026 as compared to the same period in 2025. Interest income was immaterial.

Current wording

Interest expense, net was approximately $4.9 million and $7.9 million for the nine months ended September 30, 2026, and 2025, respectively. The decrease for the nine months ended September 30, 2026 was primarily due to lower average debt in the nine months ended September 30, 2026 as compared to the same period in 2025. Interest income was immaterial.

Previous wording

Other income was less than $0.1 million and other expense was less than $0.1 million for the three months ended June 30, 2026 and 2025, respectively. Changes in other (income) expense are primarily generated by equity method investment income and foreign currency transaction gains and losses.

Current wording

Other income was less than $0.1 million and $0.1 million for the three months ended September 30, 2026 and 2025, respectively, and less than $0.1 million for the nine months ended September 30, 2026 and 2025, respectively. Changes in other income are primarily generated by equity method investment income and foreign currency transaction gains and losses.

Previous wording

We recorded tax expense of approximately 21.1% and 20.6% of income before income tax expense, for the three months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate for the second quarter of 2026 is largely due to higher anticipated income from domestic operations.

Current wording

We recorded tax expense of approximately 21.1% and 22.2% of income before income tax expense for the three months ended September 30, 2026 and 2025, respectively. The decrease in the effective tax rate for the third quarter of 2026 is largely due to higher anticipated income from foreign operations.

Previous wording

We recorded tax expense of approximately 20.2% and 18.0% of income before income tax expense, for the six months ended June 30, 2026 and 2025, respectively. The increase in the effective tax rate for the current period as compared to the prior period is largely due to higher anticipated income from domestic operations, along with large favorable discrete items in the first quarter of 2025 associated with equity compensation and a state tax refund.

Current wording

We recorded tax expense of approximately 20.5% and 19.4% of income before income tax expense for the nine months ended September 30, 2026 and 2025, respectively. The increase in the effective tax rate for the current period as compared to the prior period is largely 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 six months ended June 30, 2026 was approximately $18.8 million and was primarily a result of net income generated of approximately $38.3 million, depreciation and amortization of approximately $9.9 million, and share-based compensation of approximately $6.0 million for the six months ended June 30, 2026. This was offset by changes in operating assets and liabilities of approximately $40.1 million, primarily driven by a $30.5 million increase in accounts receivables, net due to increased sales volume in the second quarter of 2026 as compared to the fourth quarter of 2025.

Current wording

Net cash provided by operations for the nine months ended September 30, 2026 was approximately $57.4 million and was primarily a result of net income generated of approximately $59.0 million, depreciation and amortization of approximately $14.9 million, and share-based compensation of approximately $8.7 million for the nine months ended September 30, 2026. This was offset by changes in operating assets and liabilities of approximately $28.9 million, primarily driven by a $13.7 million increase in accounts receivables, net due to increased sales volume in the third quarter of 2026 as compared to the fourth quarter of 2025.

Previous wording

Net cash used for investing activities during the six months ended June 30, 2026 was approximately $2.8 million and was primarily comprised of additions of manufacturing machinery and equipment and various building improvements.

Current wording

Net cash used for investing activities during the nine months ended September 30, 2026 was approximately $13.7 million and was primarily comprised of additions of manufacturing machinery and equipment and various building improvements.

Previous wording

Net cash used for financing activities was approximately $27.0 million during the six months ended June 30, 2026 and was primarily the result of debt payments of approximately $18.2 million.

Current wording

Net cash used for financing activities was approximately $43.0 million during the nine months ended September 30, 2026 and was primarily the result of debt payments of approximately $39.5 million.

Previous wording

At June 30, 2026, we had approximately $117.3 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 June 30, 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.

Current wording

At September 30, 2026, we had approximately $96.0 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, 2026, the weighted average interest rate was approximately 5.2% 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 $18.8 million from operations during the six months ended June 30, 2026. We cannot guarantee that our operations will generate cash in future periods. Our longer-term liquidity is contingent upon future operating performance and the availability of draws on our 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 $57.4 million from operations during the nine months ended September 30, 2026. We cannot guarantee that our operations will generate cash in future periods. Our longer-term liquidity is contingent upon future operating performance and the availability of draws on our 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 or debt markets and obtain necessary capital in order to properly capitalize and continue operations.

Previous wording

We plan to continue to add capacity to enhance operating efficiencies in its manufacturing plants and accommodate anticipated growth in demand. We may consider additional acquisitions of companies, technologies, or products that are complementary to our business. We believe that our existing resources, including our revolving credit facility, together with cash expected to be generated from operations, will be sufficient to fund our cash flow requirements, including expected capital expenditures, through the next twelve months.

Current wording

We plan to continue to add capacity to enhance operating efficiencies in our manufacturing plants and accommodate anticipated growth in demand. We may consider additional acquisitions of companies, technologies, or products that are complementary to our business. We believe that our existing resources, including our revolving credit facility, together with cash expected to be generated from operations, will be sufficient to fund our cash flow requirements, including expected capital expenditures, through the next twelve months.