UFP Technologies (UFPT -10.06%), a designer and manufacturer of engineered products for medical devices and other specialty markets, released its earnings results for the second quarter of fiscal 2025 on August 5, 2025. The most significant news was a record quarter for profitability, with non-GAAP earnings per share rising well above analyst estimates. However, revenue (GAAP) narrowly missed consensus forecasts. The company reported EPS (non-GAAP) of $2.50, beating expectations by $0.25 on a non-GAAP basis, though revenue (GAAP) of $151.2 million was just shy of the $151.554 million estimate. Overall, the quarter demonstrated continued momentum in the medical technology segment, strong acquisition contributions, and solid cost controls, tempered by some margin pressure from labor issues.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $2.50 | $2.25 | $1.97 | 27.4% |
| Revenue | $151.2 million | N/A | $110.2 million | 37.2% |
| Adjusted Operating Income | $27.3 million | $20.2 million | 35.1% | |
| Gross Margin | 28.8% | 30.0% | (1.2 pp) | |
| Adjusted EBITDA | $31.8 million | $23.9 million | 33.1% |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Focus
UFP Technologies specializes in manufacturing components and packaging for medical devices, orthopedic products, infection prevention gear, and certain non-medical uses. Its core expertise is in specialty materials and advanced manufacturing, serving medical device makers and other industry clients worldwide. The business supplies single-use and single-patient components for a range of healthcare applications, which makes it a critical partner for infection control, surgical, wound care, and orthopedic solutions.
Recently, the company has sharpened its focus on expanding its MedTech—or medical technology—segment. Its growth strategy centers around acquisitions, capacity investments in key markets, and new product launches for surgical and patient-handling markets. Key success factors include maintaining strict quality certifications, innovating with new materials and designs, and managing customer concentration risks.
Quarter Highlights: Financials, Segment Drivers, and Operational Trends
Adjusted EPS (non-GAAP) of $2.50 topped consensus estimates, with year-over-year adjusted net income growth hitting 27%. Revenue grew 37.2% compared to the same quarter last year, fueled by continued MedTech momentum and recent acquisitions. Medical market sales reached $139.3 million, a 46.0% increase in medical market sales over Q2 2024. In sharp contrast, non-medical (Advanced Components) revenue (GAAP) decreased 19.8% to $11.8 million, reflecting the company’s shift in strategic emphasis.
Acquisitions played a major role in driving results. The recently acquired Universal Plastics & Engineering and Techno Plastics Industries businesses contributed significantly to the sales increase. Organic sales growth—sales excluding acquisitions—was 4.9%. This indicates most of the top-line expansion was delivered by integrating new operations, as stated in management comments: “Sales grew 37.2% in Q2 2025, driven by strong contributions from our 2024 acquisitions combined with 4.9% organic growth.”
Profitability improved, although it faced some challenges. Adjusted operating income increased 34.8% year over year. Adjusted EBITDA, which measures earnings before interest, taxes, depreciation, amortization, and certain other items, increased by 33.2%. The period did see gross margin (GAAP) compress from 30.0% to 28.8%, due in part to $1.2 million in increased labor costs at the company’s AJR facility. Management linked this to labor turnover following new employment eligibility checks. Management stated, “We have successfully recruited legally eligible replacement associates and anticipate that Q3 will be the low point of labor inefficiencies, with gradual improvement beginning in the fourth quarter.”
The segment split further highlighted industry shifts. The MedTech business saw sizable demand in areas such as minimally invasive surgery devices, infection control, patient handling, wound care, and orthopedic products. Recent product launches, especially in robotic-assisted surgery and infection prevention devices, have demonstrated meaningful growth rates and contributed to rising market share, with infection prevention, interventional and surgical, orthopedics, and advanced wound care segments each growing more than 25% in Q1 2025. The company continued to invest in manufacturing footprint, with expansions in the Dominican Republic designed to further increase production capacity for safe patient handling and robotic surgery products. Management also highlighted ongoing customer concentration, with two large customers contributing a combined 44.2% of net sales for the year ended December 31, 2024.—a risk the company is attempting to mitigate by signing new long-term contracts and seeking diverse agreements in both patient handling and surgical technology.
Looking Ahead: Outlook and Risks
Management did not provide updated formal financial guidance for fiscal 2025 in this release. In earlier commentary, company leaders indicated expectations for continued growth in the MedTech market, efforts to resolve current labor inefficiencies, and further activity in mergers or acquisitions. The primary growth areas are expected to remain medical devices, particularly in surgical and patient-handling technology, with two new robotic surgery programs launching in the second half of the year. However, management expects only a modest revenue contribution until 2026, when those programs are fully scaled.
Key risks continue to include heavy customer concentration within the MedTech segment, short-term gross margin pressure as labor costs normalize, and the ongoing decline in non-medical sales, which decreased 19.8% year-over-year and 17.3% for the first six months of 2025 (GAAP), as well as indications that gross margin improvements may begin in the fourth quarter.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
