UFPT 10-K & 10-Q changes, risk factors and insider trading

The risks factors described below could materially impact our business, including our results of operations and financial results. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial, or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties occurs,occur, our business, financial condition and operating results would likely suffer.

Our manufacturing facilities and warehouses in the Dominican Republic play a crucial role in the production of certain of our medical products. Our manufacturing facilities and warehouses may be damaged or our ability to use or access them may be disrupted as a result of civil unrest or other occurrences in Haiti. Such events may interfere with our manufacturing process, information systems, telecommunication services, and product delivery for sustained periods and may also make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our manufacturing facilities could adversely affect our reputation, our relationships with our largest customers, our leadership team’s ability to administer and supervise our business and cause us to incur substantial additional expenditures to repair or replace damagesdamaged equipment or facilities or commence alternate production locations.

A limited number of customers typically represent a significant percentage of our net sales in any given year. Our top ten customers represented approximately 68.8%, 68.1%, 59.3%, and 47.2%59.3% of our total net sales in 2025, 2024, 2023, and 2022,2023, respectively. Two customers (Intuitive Surgical SARL and Stryker) comprised approximately 28.8%24.3% and 21.5%, respectively, of our net sales for the year ended December 31, 2025; two customers (Intuitive Surgical SARL and Stryker) comprised approximately 29.2% and 15.4%, respectively, of our net sales for the year ended December 31, 2024; one customer comprised approximately 28.1% of our net sales for the year ended December 31, 2023; and one customer comprised approximately 21.5% of our net sales for the year ended December 31, 2022.2023. The loss of a significant portion of our expected future net sales to any of our large customers could have a material adverse effect on our business, financial condition, and results of operations. Likewise, a material adverse change in the financial condition of any of these customers could have a material adverse effect on our ability to collect accounts receivable from any such customer. One customer represented approximately 32.1% of gross accounts receivable for the year ended December 31, 2025, and one customer represented approximately 34.0% of gross accounts receivable for the year ended December 31, 2024, and two customers represented approximately 16.5% and 12.2%, respectively, of gross accounts receivable for the year ended December 31, 2023.2024.

Our business strategy includes the acquisition of businesses and other business combinations that we expect will complement and expand our business. In addition, we may also pursue other strategic relationships or opportunities. We may not be able to successfully identify suitable acquisition or other strategic opportunities or complete any particular acquisition, combination, or other transaction on acceptable terms. Our identification of suitable acquisition candidates and strategic opportunities involves risks inherent in assessing the values, strengths, weaknesses, risks, and profitability of these opportunities including their effects on our business, diversion of our management’s attention and risks associated with unanticipated problems or unforeseen liabilities. Our failure to identify suitable acquisitionacquisitions or other strategic opportunities may restrict our ability to grow. If we are successful in pursuing future acquisitions or strategic opportunities, we may be required to expend significant funds, incur additional debt, or issue additional securities, which may materially and adversely affect our results of operations and be dilutive to our stockholders. If we spend significant funds or incur additional debt, our ability to obtain financing for working capital or other purposes could decline and we may be more vulnerable to economic downturns and competitive pressures. In addition, we cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipated benefits from acquisitions or other strategic opportunities that we complete. When and if we successfully acquire another business, the process of successfully integrating the acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing business. Decreases in customer loyalty or product orders, failure to retain and develop the acquired workforce, failure to integrate financial reporting systems, failure to establish and maintain appropriate controls or unknown or contingent liabilities could adversely affect our ability to realize the anticipated benefits of an acquisition. The integration of an acquired business, whether or not successful, requires significant efforts which may result in additional expenses and divert the attention of our management and technical personnel from other projects. These transactions are inherently risky, and there can be no assurance that any past or future transaction will be successful.

Further, technological innovation by any of our existing competitors, including our customers, or new competitors entering any of the markets in which we do business, could put us at a competitive disadvantage and could cause us to lose market share. Increased competition for the sales of our products could result in price reductions, reduced margins, and loss of market share, which could materially adversely affect our prospects, business, financial condition and results of operations.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, personal information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees in our data centers and on our networks. The secure maintenance and transmission of this information is critical to our operations and business strategy. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission, and storage of confidential information. Computer hackers may attempt to penetrate our computer systems and, if successful, misappropriate personal or confidential business information. In addition, an employee, contractor, or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information and may purposefully or inadvertently cause a breach involving such information. Despite the security measures we have in place and any additional measures we may implement in the future to safeguard our systems and to mitigate potential security risks, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches.breaches, Any such compromise of our data security and access, public disclosure, or loss of personal or confidential business information could result in legal claims or proceedings, liability under laws that protectincluding the privacyCyber ofIncident personal(as information,defined regulatorybelow) penalties,. disruptionIf ofunauthorized ourparties operations,gain damageaccess to our reputation, loss of our customers’ willingness to transact business with us, and subject us to additional costs and liabilities which could materially adversely affect our business. While we maintain insurance for cyber events, our insurance may not be sufficient to cover us against all losses that could potentially result from a breach of our systems or lossdatabases, such as with the Cyber Incident, or those of third parties on which we rely, they could be able to steal, publish, delete, hold ransom or modify our private and sensitive data.information, including payment information, personal information, and confidential and other proprietary business information. The Company, its customers, suppliers and business partners, as well as the Company’s employees, could suffer harm if valuable business data, or employee, customer and other confidential and proprietary information were corrupted, lost, accessed or misappropriated by third parties due to a cyber-attack, a security systems failure, or due to one of our third-party service providers or our employees.

We have recently added and expanded manufacturing facilities in Puerto Rico, the Dominican Republic, Ireland, Costa Rica, and Mexico. We may continue to expand our operations by offering our services and entering new lines of business in other markets outside of the U.S. This expansion increases our exposure to the inherent risks of doing business in international markets. Depending on the market, these risks include those relating to:

We have a policy placing controls around the use of AI in the enterprise. Further, certain of our third-party vendors utilize AI and machine learning technologies in furnishing services to us. As with many technological innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. By policy, we do not allow the upload of any personal or company confidential information to any AI tools.tools except those from which we have obtained commercially reasonable assurances that such information will not be used other than to provide the services to the company (e.g., no training of models), nor will it be shared with any third party.

TheUFP CompanyTechnologies, Inc. is a designercontract development and custommanufacturing manufacturerorganization ofthat comprehensivespecializes solutionsin forsingle-use and single-patient medical devices,devices. sterileWe packaging,are anda other highly engineered custom products. The Company is an importantvital link in the medical device supply chain and a valued outsourceoutsourcing partner to many of the world's top medical device manufacturersmanufacturers. in the world. The Company’sOur 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, surfaces and support, wound care, wearables, orthopedic soft goods, and orthopedic implants.

The Company’sOur current strategy includes further organic growth and growth through strategic acquisitions.

Net sales increased 26.1%19.5% to $504.4$602.8 million for the year ended December 31, 2024,2025, from net sales of $400.1$504.4 million for the same period in 2023.2024. We attribute theThe increase in net sales is primarily due to increased net sales from newly acquired companies of $70.3 million as well as 8.5% increased organic net sales fueled by increases in the robotic surgery and infection prevention markets. Overall net sales to customers in the medical market increasedof 30.2%23.2%. whileThis netincrease includes sales tofrom customersthe incompanies otherwe markets were flat. Medical net sales represented 89.4% and 86.6% of overall Company net salesacquired in 2024 and 2023,2025, respectively.which collectively contributed approximately $168.3 million in sales during the year ended December 31, 2025 compared to $73.1 million in the same period last year.

Gross profit as a percentage of net sales (“Gross Margin”) increaseddecreased to 29.1%28.3% for the year ended December 31, 2024,2025, from 28.1%29.1% in 2023.2024. As a percentage of net sales, material costs decreased 1.8%3.0% while overhead and labor costs collectively increased 0.8%.3.8%. We attributeAbsent the increaseimpact inon grossGross margin primarily to the accretive marginsMargins from the Company’sAJR recentLabor acquisitionsIssue, asgross wellmargins as increased manufacturing efficiencies andfor the containmentyear ofended fixedDecember overhead31, costs.2025 Thewould grosshave marginbeen increases were achieved despite the absorption of approximately $1.1 million in purchase accounting expenses (step-up of inventory to fair value at acquisition date).29.3%.

Selling, General, and Administrative Expenses (“SG&A”) increased approximately 22.3%24.5% to $62.2$77.4 million for the year ended December 31, 2024,2025, from $50.9$62.2 million in 2023,2024. largelyThe dueincrease is primarily attributable to SG&A from the Company’s recent acquisitions as well as increased performance-based compensationheadcount and professionalother fees.back-office As a percentage of net sales, SG&A decreased to 12.3%resources for the year ended December 31, 2024,2025 as compared to the year ended December 31, 2024. SG&A from 12.7%our 2024 and 2025 acquisitions collectively contributed approximately $17.8 million in SG&A during the year ended December 31, 2025, as compared to $7.1 million during the year ended December 31, 2024. As a percentage of sales, SG&A increased to 12.8% for the year ended December 31, 2025, from 12.3% for the same period inlast 2023 reflecting the leverage of the net sales increase over relatively fixed SG&A. The Company plans on investing in back-office resources in response to the significant acquisitions completed during 2024.year.

The CompanyWe incurred approximately $2.5$0.3 million in costs associated with acquisition related activities which were charged to expense for the year ended December 31, 2025, as compared to $2.5 million for the year ended December 31, 2024. These costs were primarily for legal, due diligence and valuation services and are reflected on the face of the consolidated statements of comprehensive income.

In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, thewe Company isare required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The total potential contingent consideration payments for the Welch, Marble and the DAS Medical acquisitions arewere up to $6$6.0 million, $500$0.5 thousandmillion, and $20$20.0 million, respectively.respectively, as of each acquisition date. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $800$0.8 thousand,million, $400$0.4 thousandmillion and $5.2 million for the Welch, Marble and the DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. We paid approximately $5.3 million during the year ended December 31, 2025, related to contingent consideration. The fair value of the liability for the contingent consideration payments recognized at December 31, 20242025 totaled approximately $10.2$5.3 million out of the remaining potential payments of $14.5$7.3 million. The change in fair value of contingent consideration for the Welch, Marble, and DAS Medical acquisitions for the year ended December 31, 2024, resulted in an expense of approximately $0.3 million and $1.0 million, respectively, for the years ended December 31, 2025 and 2024. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.

OtherInterest (Income)expense, Expensenet

OtherNet income was approximately $189 thousand and otherinterest expense was approximately $117$9.8 thousandmillion and $8.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. The changesincrease in othernet income/interest expense arefor the year ended December 31, 2025 was primarily generateddue byto equityhigher methodaverage investmentdebt in 2025 as compared to 2024. Interest income inwas 2024 and foreign currency transaction gains/losses in both 2024 and 2023.immaterial.

The CompanyWe recorded income tax expense, as a percentage of income before income tax expense, of 19.2%17.2% for the year ended December 31, 20242025 compared to 16.7%19.2% for the same period in 2023.2024. The increasedecrease in the effective tax rate for the current period as compared to the prior period is largely due to thea differenceshift in discretemix itemsor duringpre-tax theincome twoto periodsjurisdictions where we are taxed at a favorable rate as well as moreincreased Uniteddiscrete Statestax basedbenefits incomeassociated inwith 2024vested asequity and a resultstate oftax the recent acquisitions.refund.

TheWe Company notesnote the potential for volatility in itsour effective tax rate, as any windfall or shortfall tax benefits related to itsour share-based compensation plans will be recorded directly into income tax expense.

For more information about the Company’s results of operations of 20232024 compared to 2022,2023, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — 20232024 Compared to 20222023” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023,2024, filed with the SEC on FebruaryMarch 29,3, 2024.2025.

The CompanyWe generally fundsfund itsour operating expenses, capital requirements, and growth plan through internally generated cash and bank credit facilities.

Net cash provided by operations for the year ended December 31, 20242025 was approximately $66.6$91.9 million and was primarily a result of net income generated of approximately $59.0$68.3 million, depreciation and amortization of approximately $14.7$19.2 million, and share-based compensation of approximately $6.8$8.9 million,million a change infor the fairyear valueended ofDecember contingent31, consideration of approximately $1.0 million, an increase in net deferred income tax liabilities of approximately $ 1.3 million, a decrease in accounts receivable of approximately $1.2 million due to the collection of an escrow receivable, and a decrease in other assets of approximately $0.6 million.2025.

Net cash used in investing activities for the year ended December 31, 20242025 was approximately $210.2$27.6 million and was primarily the result of the acquisition of Marble Medical, AJR Enterprises, Welch Fluorocarbon, and AQF Medical, and the additions of manufacturing machinery and equipment and various building improvementsimprovements, acrossas well as the Company.acquisitions of AJR Specialty, AJR Custom Foam, TPI, and UNIPEC.

Net cash providedused byin financing activities was approximately $152.4$58.2 million for the year ended December 31, 20242025 and was primarily the result of borrowings under the Company’s Third Amended and Restated Credit Agreement of approximately $284.2 million to recent acquisitions. These borrowings were partially offset by payments on the revolving line of credit of approximately $91.7$110.1 million,million and principal payments of long-term debt of approximately $35.1$12.5 million, andpartially paymentsoffset by proceeds from advances on revolving line of statutory withholding for stock options exercised and restricted stock units vestedcredit of approximately $5.0$68.7 million.

On June 27, 2024, the Company,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 Company’sour 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.

The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to the Companyus of $125 million and a secured revolving credit facility, under which the Companywe may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration and the Companywe could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commence on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions (see Note 2 for more information regarding this acquisition), as well as certain other permitted acquisitions. The Company’sOur obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all assets of theour Company.assets.

The Third Amended and Restated Credit Facilities call for interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at theour discretion of the Company,discretion, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon Company performance. Under the Third Amended and Restated Credit Agreement, thewe Company isare subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.

At December 31, 2024,2025, the Companywe had approximately $189.4$135.5 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 December 31, 2024,2025, the weighted average interest rate was approximately 5.9%5.1% and thewe Company waswere in compliance with all covenants under the Third Amended and Restated Credit Agreement.

TheWe Company requiresrequire cash to pay itsfor operating expenses, purchase capital equipment, and to service its contractual obligations. The Company’sOur principal sources of funds are itsour operations and itsour Second Amended and Restated Credit Agreement. The CompanyWe generated cash of approximately $66.6$91.9 million from operations during the year ended December 31, 2024.2025. The CompanyWe cannot guarantee that itsour operations will generate cash in future periods. The Company’sOur longer-term liquidity is contingent upon future operating performance and the availability of draws on itsour revolving credit facility. Further, the economic uncertainty resulting from events including inflation, bank failures, and other factors beyond theour control of the Company could affect the Company’sour long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

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

The CompanyWe may also require additional capital in the future to fund capital expenditures, acquisitions, or other investments. These capital requirements could be substantial. TheWe Company anticipatesanticipate that any future expansion of itsour business will be financed through existing resources, cash flow from operations, the Company'sour revolving credit facility, or other new financing. The CompanyWe cannot guarantee that it will be able to meet existing financial covenants or obtain other new financing on favorable terms, if at all.

The preparation of consolidated financial statements requires the Companyus to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales, and expenses, and related disclosure of contingent assets and liabilities. TheWe Companyevaluate evaluates itsour estimates, including those listed below, on an ongoing basis. TheWe Companybase bases itsour estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, including current and anticipated worldwide economic conditions, both in general and specifically in relation to the packaging and component product industries, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The Company’sOur significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of this Report. TheWe Companydo believesnot believe that any of the following criticalsignificant accounting policypolicies necessitated thatrequired significant judgmentsjudgment and estimates be used in the preparation of itsour consolidated financial statements.

The Company faces a number of uncertainties and risks that are difficult to predict and many of which are outside of the Company's control. For a detailed discussion of the risks that affect our business, you should consider carefully the risks and uncertainties described in this Quarterly Report on Form 10-Q as well as our other public filings with the SEC including Part I, Item IA,1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2025,2025 withand Quarterly Report on Form 10-Q for the exceptionquarter ofended theMarch additional31, Risk Factors noted below.2026.

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 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 under cybersecurity related regulations or otherwise; 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 anticipated or because, among other things, our largest customers,customer, decidedecides to manufacture the products itself or through one of its affiliates it obtains the products from other listed suppliers specified in our agreement; the risk that we will not achieve expected rebates under the applicable supply agreement; and risks relating to our ability to maintain increased levels of production at profitable levels, if at all; or to continue to increase production rates and risks relating to disruptions and delays in our supply chain or labor force. Accordingly, actual results may differ materially.

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.Report and our filings with the Securities and Exchange Commission. 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.

UFP Technologies is a trusted contract development and manufacturing organization that specializesspecializing in single-usecomprehensive solutions for medical devices, sterile packaging and single-patientother medicalhighly devices.engineered UFPcustom is a vital link in the medical device supply chain and a valued outsourcing partner to many of the world's top medical device manufacturers.products. Our single-use and single-patient devices and components are used inacross a wide range of medical devicesproducts in segments including robotic assisted surgery, patient beds, infection control, cardiovascular, orthopedics and packagingspine for minimally invasive surgery, infection prevention,and wound care, wearables, orthopedic soft goods, and orthopedic implants.care.

Net sales for the threesix months ended MarchJune 31,30, 2026 increased 4.1%9.6% to $154.2$328.2 million from $148.1$299.3 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, Patientour Surfaces and SupportSupport, Cardiovascular, Infection Control, and InterventionalOrthopedics sub-markets. Organic sales growth for the three and Surgicalsix sub-markets.months ended June 30, 2026 was 12.4% and 6.8%, respectively. Net sales from our largest two customers,customers Strykerwere 26.2% and Intuitive Surgical SARL, were 24.8% and 22.1%21.0% of our total net sales induring the three months ended MarchJune 31,30, 2026, respectively, comparedand to 24.0%25.5% and 21.4%21.5% inof our total net sales during the samesix periodmonths lastended year.June 30, 2026, respectively.

In 2025, the United States imposed increased tariffs on foreign imports into the United States,imports, 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. AllSince requeststhen, willthe beU.S. reviewedhas launched tariffs under different authorities. Given that the tariff landscape created by the CBPcurrent administration remains dynamic, we continue to determine validity prioradapt to the issuancechanges ofand refunds.manage Duringnew therequirements. threeWe monthsbelieve endedthis Marchwill 31,remain 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 costsdynamic in the formnear offuture vendorand credits,we fromwill suppliers who have previously passed through tariffscontinue to usmonitor eitherand directly or through price increases.manage.

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 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.

Net sales for the three months ended MarchJune 31,30, 2026 increased approximately 4.1%15.1% to $154.2$174.0 million from sales of $148.1$151.2 million for the same period in 2025. The increase iswas primarilylargely due to increased sales to customers in the medical market of 5.9%, partially offset by a 15% declinegrowth in sales to customers in the non-medical markets. This increase is primarily due to increased sales to customers in the Robotic Surgery, Patientour Surfaces and SupportSupport, Cardiovascular, Infection Control, and Interventional and SurgicalOrthopedics sub-markets. These increases were partially offset by a decline inOrganic sales togrowth customers infor the Wound Care sub-market due to destocking at two customers which is expected to continue until the thirdsecond quarter of 2026.2026 was 12.4%.

Gross marginprofit as a percentage of sales ("Gross Margin") increased slightly to 28.8%29.3% for the three months ended MarchJune 31,30, 2026,2026 from 28.5%28.8% for the same period in 2025, driven primarily by increased operating efficiencies primarilyas inwell theas Roboticleveraging Surgerystrong sub-market.organic sales growth against fixed overhead costs.

Selling, general, and administrative expenses (“SG&A”) increased approximately 12.3%21.8% to $21.0$22.8 million for the three months ended MarchJune 31,30, 2026, from $18.7 million for the same period in 2025. The increase is primarily attributable to increased headcount and other back-office resourcesresources, including variable compensation, of approximately $0.8 million, legal expenses of approximately $0.5$1.9 million most of which will not recur, and an increase in RSU stockshare-based compensation expense of approximately $0.6$1.0 millionmillion, forpartially the three months ended March 31, 2026 as compareddue to theCEO threetransition months ended March 31, 2025.costs. As a percentage of sales, SG&A increased to 13.6%13.1% for the three months ended MarchJune 31,30, 2026, from 12.6%12.4% for the same three months in 2025.

NetInterest interestexpense, expensenet was approximately $1.7 million and $2.8$2.7 million for the three months ended MarchJune 31,30, 2026, and 2025, respectively. The decrease in net interest expense for the three months ended MarchJune 31,30, 2026,2026 was primarily due to lower average debt in the three months ended MarchJune 31,30, 2026 as compared to the same period in 2025. Interest income was immaterial.

Other (Income) Expense

Other income was less than $0.1 million and other expense was less than $0.1 million for the three months ended MarchJune 31,30, 2026 and 2025.2025, respectively. Changes in other (income) expense are primarily generated by equity method investment income and foreign currency transaction gains.gains and losses.

We recorded tax expense of approximately 19.0%21.1% and 15.3%20.6% of income before income tax expense, for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The increase in the effective tax rate for the second quarter of 2026 is largely due to largehigher favorableanticipated discreteincome itemsfrom indomestic the first quarter of 2025 associated with equity compensation and a state tax refund.operations.

Net cash provided by operations for the threesix months ended MarchJune 31,30, 2026 was approximately $3.2$18.8 million and was primarily a result of net income generated of approximately $17.5$38.3 million, depreciation and amortization of approximately $4.9$9.9 million, and share-based compensation of approximately $2.7$6.0 million for the threesix months ended MarchJune 31,30, 2026,2026. This was offset by changes in operating assets and liabilities of approximately $24.5$40.1 million, primarily driven by a $15.7$30.5 million increase in accounts receivables, net due to increased sales volume in Marchthe second quarter of 2026 as compared to Decemberthe fourth quarter of 2025.

Net cash used infor investing activities during the threesix months ended MarchJune 31,30, 2026 was approximately $1.7$2.8 million and was primarily comprised of additions of manufacturing machinery and equipment and various building improvements.

Net cash used for financing activities was approximately $1.6$27.0 million during the threesix months ended MarchJune 31,30, 2026 and was primarily the result of debt 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$18.2 million.

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.

The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to us of $125 million and a secured revolving credit facility, under which we may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration,acceleration and we could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commenced on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions, as well as certain other permitted acquisitions. Our obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all of our assets.

At MarchJune 31,30, 2026, we had approximately $137.6$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 MarchJune 31,30, 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.

Future maturities of long-term debt at MarchJune 31,30, 2026 are as follows (in thousands):

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$18.8 million from operations during the threesix months ended MarchJune 31,30, 2026. We cannot guarantee that itsour operations will generate cash in future periods. Our longer-term liquidity is contingent upon future operating performance and the availability of draws on itsour 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.

We plan to continue to add capacity to enhance operating efficiencies in ourits 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.

There have been no material changes to the our Critical Accounting Estimates, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.