UFP Technologies Announces Q3 2023 Results

Newburyport, Mass., Nov. 01, 2023 — UFP Technologies, Inc. (Nasdaq: UFPT), an innovative designer and custom manufacturer of comprehensive solutions for medical devices, sterile packaging and other highly engineered custom products, today reported that adjusted net income increased 13.8% to $11.9 million in the third quarter of 2023 from $10.4 million in the third quarter of 2022. Sales for the third quarter were $100.8 million compared to 2022 third quarter sales of $97.0 million. Adjusted net income increased 44.4% to $35.8 million for the nine-month period ended September 30, 2023 from $24.8 million in the same period of 2022. Sales for the nine-month period ended September 30, 2023 were $298.6 million compared to sales of $262.6 million in the same period in 2022. Adjusted net income is a non-GAAP term. Please see “Non-GAAP Financial Information” at the end of this news release.

“I am pleased with our Q3 results and progress on our growth initiatives, particularly our expansion plans in our low-cost country facilities,” said R. Jeffrey Bailly, Chairman & CEO. “For example, in the Dominican Republic we are adding 40,000 square feet, including 10,000 square feet of new clean room manufacturing space. We are adding new equipment and hiring additional employees with the goal of increasing our capacity to make robotic drapes by 60% to support both new programs and strong anticipated growth of current programs. While the start-up costs and related inefficiencies have reduced gross margins, we expect improved operating efficiencies when new equipment comes online and new employees are fully trained. We are also adding 15,000 square feet in Costa Rica to meet increasing demand. In Mexico, we completed the qualification process to begin producing catheter and guidewire packaging that was previously manufactured in Ireland and Rhode Island and shipped to Mexico, another cost cutting initiative.”

“After adjusting for the sale of our Molded Fiber unit in Q3 of 2022, organic revenue growth in Q3 was 5.6%, with Medical sales up 6.8%,” Bailly added. “Our growth was impacted by multiple customers delaying releases due to excess inventory in their systems. Due to Covid-related caution, many customers ordered safety stock inventory, which is reaching levels they feel are excessive. We anticipate this softness will be short-term in nature as they work down their inventories, and our growth should accelerate as we enter next year.”

“We are excited about our growth potential in 2024, which should benefit from the significant investments mentioned above,” Bailly said. “We are also continuing our efforts to identify strategic acquisition candidates that will increase our value to customers. High interest rates have slowed deal flow, but have increased our competitiveness against private equity buyers who typically rely on higher leverage than UFP does.”     Financial Highlights for Q3 and YTD 2023

• Sales for the third quarter increased 3.9% to $100.8 million, from $97.0 million in the same period of 2022. Year-to-date sales through September increased 13.7% to $298.6 million, from $262.6 million in the same period of 2022. Organic sales growth for the three- and nine-month periods ended September 30 was 5.6% and 16.9%, respectively.
• Third quarter sales to the medical market increased 6.8% to $87.1 million. Sales to all other markets decreased 11.2% to $13.7 million, largely due to the sale of Molded Fiber in the third quarter of 2022. Year-to-date sales to the medical market increased 23.3% to $257.1 million. Sales to all other markets decreased 23.3% to $41.5 million, largely due to the sale of Molded Fiber in the third quarter of 2022.
• Gross profit as a percentage of sales (“gross margin”) increased to 27.5% for the third quarter, from 26.3% in the same quarter of 2022. Gross margin for the nine-month period ended September 30, 2023 increased to 28.8% from 25.5% in the same period of 2022.
• Selling, general and administrative expenses (“SG&A”) for the third quarter increased to $12.5 million in 2023 compared to $11.8 million in the same quarter of 2022. For the nine-month period ended September 30, 2023, SG&A increased to $37.8 million from $33.9 million in the same period of 2022.
• Adjusted operating income grew 11.5% and 46.1% for the three- and nine-month periods ended September 30, 2023 when compared to the respective periods of 2022. GAAP operating income for the third quarter decreased to $15.0 million, from $26.0 million in the same quarter of 2022. For the nine-month period ended September 30, 2023, operating income increased to $44.9 million, from $44.5 million in the same period of 2022.   Adjusted operating income is a non-GAAP term. Please see “Non-GAAP Financial Information” at the end of this news release.
• Adjusted net income increased 13.8% to $11.9 million in the third quarter of 2023 from $10.4 million in the third quarter of 2022. Adjusted net income increased 44.4% to $35.8 million for the nine months ended September 30, 2023 from $24.8 million in the same period of 2022. GAAP net income decreased to $11.7 million in the third quarter of 2023, from $19.5 million in the same period of 2022. GAAP net income of $33.3 million was consistent for the nine-month periods ended September 30, 2023 and 2022. Adjusted net income is a non-GAAP term. Please see “Non-GAAP Financial Information” at the end of this news release.
• Adjusted EBITDA increased to $19.3 million in the third quarter of 2023 from $17.5 million in the same period of 2022. Adjusted EBITDA increased to $60.2 million for the nine-month period ended September 30, 2023 from $44.9 million in the same period of 2022. See the reconciliation provided in Table 3. EBITDA and Adjusted EBITDA are Non-GAAP Financial Measures. Please see “Non-GAAP Financial Information” at the end of this news release.

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About UFP Technologies, Inc.
UFP Technologies is an innovative designer and custom manufacturer of comprehensive solutions for medical devices, sterile packaging, and other highly engineered custom products. UFP is an important link in the medical device supply chain and a valued outsource partner to many of the top medical device manufacturers in the world. The Company’s single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implants.

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Forward-Looking Statements
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