UFP Technologies, Inc.

Good day and welcome to the UPF Technology second quarter earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Ron Letai, Chief Financial Officer. Please go ahead.

Thank you, Operator. Good morning and thank you for joining us on our second quarter 2025 earnings conference call. With me on today's call is our CEO and Chairman, Jeff Bailey. Today, we will make some forward-looking statements within the meeting of the US Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent 10-Q, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures which include organic sales growth, adjusted operating income, SG&A and the EPS and EBITDA and adjusted EBITDA. A reconciliation of GAAP to non-GAAP financial measures discussed in this call is contained in the Associated Press Release and is available in the investor relations section of our website. I'll now turn the call over to Jeff.

Thank you, Ron, and thank you to everyone joining the call. UFP had a strong second quarter, revenue grew 37% with 5% organic growth, adjusted operating income increased 35% and adjusted EPS grew 27%. Our medical business grew 46%, our robotic assisted surgery business grew 7%. We also saw strong growth across multiple other markets, including patient services and support, interventional and surgical and wound care, each of which grew greater than 48%. Revenue from our two largest customers, Intuitive Surgical and Stryker, grew 10% and 567% respectively. We enjoy business across multiple platforms and multiple product categories with both customers and have secured multi-year contracts that help us protect that business. Our advanced components business, the non-medical part of UFP, declined approximately 20% as we continue to focus the majority of our resources on our fastest growing med tech opportunities. We do anticipate some improvement, particularly in the aerospace and defense sector in the second half of the year. We had strong operating results despite navigating through the impact of high labor turnover at our AJR facility. Because the AJR acquisition was a carve out of a parent company, there was a transition period where those team members were leased to us by the seller. When they officially became UFP employees in 2025, we began an eligibility to work audit using the US E-Verify system. This process yielded significant turnover of our workforce in Illinois. Although that process is complete, it has and will continue to have an impact on labor efficiency and revenue at that location as new legally eligible employees slowly increase their output with additional training and experience. We estimate the margin impact of that labor inefficiency was 1.2 million in Q2. We believe Q3 will be the low point of that inefficiency with an estimated impact of approximately 2.5 million. Q4's impact should be much smaller. We recently closed on two additional acquisitions. Unipec, a specialty thin film component supplier located in Rockville, Maryland. They were a peer of Welch who we acquired in 2024. We anticipate a number of synergies as these two organizations share best practices and engineering resources. And Technoplastics Industries, TPI, a specialty manufacturer of injection molded components for the medtech industry located in Inosco, Puerto Rico. TPI enhances our thermoplastic molding capability and is located in proximity to our Dominican Republic facility, which is a significant purchaser of injection molded components. We continue to make progress on a number of other key initiatives, including our expansion plans in Santiago and La Romana, Dominican Republic. In Santiago, equipment is in place and personnel have been hired and are in training to support our upcoming program launches. In La Romana, we have taken possession of a fifth building on that campus, which includes additional warehouse space, enabling us to eliminate a less efficient offsite warehouse. The facility will also accommodate a new expanded product development center to support our growing robotic assisted surgery business. We are currently manufacturing products for seven different RES customers at this time and have a dozen more in the development stage. We also made progress pulling some of our key open positions, including a new VPGM of AJR and a senior leader in Ireland. Looking ahead, we will continue to develop and navigate through our labor turnover related inefficiencies at AJR, execute on our new program launches and transfers to DR, continue our efforts to evaluate and close strategic acquisitions and increase our value to customers. And as always, maintain our company-wide efforts aimed at continuously improving all aspects of our business, increasing our efficiencies and reducing costs. We are pleased with our progress and excited about our future. I'll now hand it over to Ron to provide some additional color on our finances.