Utah Medical Products(UTMD) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated condensed financial statements for Utah Medical Products, Inc. and its subsidiaries, including balance sheets, income statements, statements of stockholders' equity, and cash flows, along with explanatory notes for the periods ended March 31, 2025, and December 31, 2024 Consolidated Condensed Balance Sheets Consolidated Condensed Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Cash & Investments | $83,325 | $82,976 | | Total current assets | $96,399 | $96,330 | | Total assets | $122,519 | $122,538 | | Total current liabilities | $4,324 | $3,757 | | Total liabilities | $5,472 | $5,111 | | Total stockholders' equity | $117,047 | $117,427 | Consolidated Condensed Statements of Income Consolidated Condensed Statements of Income (in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sales, net | $9,710 | $11,340 | | Cost of goods sold | $4,172 | $4,574 | | Gross profit | $5,538 | $6,766 | | Total operating expenses | $2,385 | $2,883 | | Operating income | $3,153 | $3,883 | | Income before provision for income taxes | $3,858 | $4,798 | | Net income | $3,041 | $3,956 | | Earnings per common share (basic) | $0.92 | $1.09 | | Earnings per common share (diluted) | $0.92 | $1.09 | Consolidated Condensed Statements of Stockholders' Equity Changes in Stockholders' Equity (in thousands) | Item | Three Months Ended March 31, 2025 | | :-------------------------------- | :-------------------------------- | | Balance at December 31, 2024 | $117,427 | | Stock option compensation expense | $82 | | Common stock purchased and retired | $(3,221) | | Foreign currency translation adjustment | $718 | | Common stock dividends | $(1,001) | | Net income | $3,041 | | Balance at March 31, 2025 | $117,047 | Consolidated Condensed Statements of Cash Flows Consolidated Condensed Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $4,464 | $5,276 | | Net cash provided by/(used in) investing activities | $(184) | $5 | | Net cash used in financing activities | $(4,238) | $(3,983) | | Effect of exchange rate changes on cash | $307 | $(358) | | Net increase in cash and cash equivalents | $349 | $940 | | Cash at end of period | $83,325 | $93,808 | Notes to Consolidated Condensed Financial Statements General Information - The unaudited financial statements are prepared in accordance with Form 10-Q and should be read in conjunction with the annual report on Form 10-K for the year ended December 31, 2024[15] - Currency amounts are in thousands except per-share amounts[15] Recent Accounting Standards - The company is evaluating the impact of ASU 2023-09 (Income Taxes), effective for fiscal years beginning after December 15, 2024[17] - The company is evaluating the impact of ASU 2024-03 (Income Statement Expenses), effective for fiscal years beginning after December 15, 2026[18] Inventories Inventories (in thousands) | Category | March 31, 2025 | December 31, 2024 | | :--------------- | :------------- | :---------------- | | Finished goods | $1,602 | $1,913 | | Work-in-process | $1,544 | $1,414 | | Raw materials | $5,502 | $5,485 | | Total | $8,648 | $8,812 | Stock-Based Compensation - Recognized $82 thousand in stock-based compensation cost in Q1 2025, compared to $79 thousand in Q1 2024[19] Warranty Reserve - No warranty reserve was made at December 31, 2024, or March 31, 2025, as existing warranty obligations were deemed immaterial[19] 1Q 2025 Global Revenues by Product Category 1Q 2025 Global Revenues by Product Category (in thousands) | Product Category | Domestic | Outside US | Total | | :-------------------------------- | :------- | :--------- | :---- | | Obstetrics | $832 | $193 | $1,025 | | Gynecology/Electrosurgery/Urology | $2,329 | $2,567 | $4,896 | | Neonatal | $1,622 | $360 | $1,982 | | Blood Pressure Monitoring and Accessories | $800 | $1,007 | $1,807 | | Total | $5,583 | $4,127 | $9,710 | Earnings Per Share Earnings Per Share Reconciliation (in thousands, except per share) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $3,041 | $3,956 | | Weighted average shares, basic | 3,310 | 3,618 | | Earnings per share, basic | $0.92 | $1.09 | | Earnings per share, diluted | $0.92 | $1.09 | Segment Information - The company operates as one operating segment, with the CEO reviewing consolidated financial information to assess performance and allocate resources[21] Selected Financial Information by Segment (in thousands) | Metric | Quarter Ended March 31, 2025 | Quarter Ended March 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | | Revenues | $9,710 | $11,340 | | Gross Profit Margin | 57.0% | 59.7% | | Operating Income Margin | 32.5% | 34.2% | | Net Income | $3,041 | $3,956 | Subsequent Events - After March 31, 2025, through May 12, 2025, the company repurchased an additional 32,679 shares of its stock for $1,754 thousand at an average price of $53.67 per share[23] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance and condition for the first quarter of 2025, highlighting a significant decline in sales and profitability primarily due to reduced OEM sales to PendoTECH. It also discusses liquidity, capital resources, and future outlook General - Utah Medical Products, Inc. (UTMD) manufactures and markets a range of specialty medical devices[23] - Results for any given three-month period may not be indicative of comparative results for the year as a whole[23] Analysis of Results of Operations Overview 1Q 2025 vs 1Q 2024 Income Statement Results (in thousands) | Metric | 1Q 2025 | 1Q 2024 | Change | | :-------------------- | :------ | :------ | :----- | | Net Sales | $9,710 | $11,340 | (14.4%) | | Gross Profit | $5,538 | $6,766 | (18.1%) | | Operating Income | $3,154 | $3,883 | (18.8%) | | Net Income | $3,041 | $3,956 | (23.1%) | | Earnings per Share (diluted) | $0.919 | $1.093 | (16.0%) | - Consolidated sales in 1Q 2025 were $1,630 thousand lower than in 1Q 2024, with OEM sales to PendoTECH accounting for $1,476 thousand (91%) of the decline[24] - Foreign currency exchange rates had a minor negative impact of 1.4% on reported USD sales, decreasing reported USD sales by $43 thousand[25][26] Revenues - Total consolidated 1Q 2025 sales were $1,630 thousand (14.4%) lower than in 1Q 2024; constant currency sales were $1,588 thousand (14.0%) lower[35] - U.S. domestic sales were 9.8% lower, and OUS sales were 19.8% lower[35] Worldwide Revenues (USD) by Product Category (in thousands) | Product Category | 1Q 2025 | % of Total | 1Q 2024 | % of Total | | :-------------------------------- | :------ | :--------- | :------ | :--------- | | Obstetrics | $1,025 | 11% | $1,025 | 9% | | Gynecology/Electrosurgery/Urology | $4,896 | 50% | $5,461 | 48% | | Neonatal | $1,982 | 20% | $1,642 | 15% | | Blood Pressure Monitoring and Accessories* | $1,807 | 19% | $3,212 | 28% | | Total | $9,710 | 100% | $11,340 | 100% | - Domestic direct sales increased by $406 thousand (11.6%) due to recovery of NICU device sales[39] - U.S. sales to UTMD's largest OEM customer, PendoTECH, were $1,047 thousand lower in 1Q 2025 compared to 1Q 2024[39] Gross Profit - Gross Profit was $1,227 thousand (18.1%) lower in 1Q 2025 than in 1Q 2024[40] - The Gross Profit Margin (GPM) was almost three percentage points lower (57.0% vs 59.7%) due to manufacturing overhead costs not declining proportionally to the 14.4% sales decline[27][40] Operating Income - Operating Income in 1Q 2025 was $3,154 thousand (32.5% of sales) compared to $3,883 thousand (34.2% of sales) in 1Q 2024[28][44] - Operating expenses decreased by $498 thousand, primarily due to $437 thousand lower litigation expenses[28] - R&D expenses decreased by $112 thousand, mainly due to one-time testing and certification in 1Q 2024[28][44] - S&M expenses increased by $88 thousand due to increases in salaries, medical costs, and the timing of trade shows[28][43] Non-operating expense/ Non-operating income - Net Non-operating income in 1Q 2025 was $705 thousand compared to $915 thousand in 1Q 2024[29][47] - The decrease was primarily due to $153 thousand lower interest income and $32 thousand higher excise tax for share repurchases[47] Income Before Income Taxes (EBT) - Consolidated 1Q 2025 EBT was $3,859 thousand (39.7% of sales) compared to $4,798 thousand (42.3% of sales) in 1Q 2024, a 19.6% decline[48] UTMD Non-US GAAP Adjusted Consolidated EBITDA (in thousands) | Metric | 1Q 2025 | 1Q 2024 | | :-------------------------- | :------ | :------ | | EBT | $3,859 | $4,798 | | Depreciation Expense | $200 | $156 | | Femcare IIA Amortization Expense | $501 | $504 | | Other Non-Cash Amortization Expense | $8 | $10 | | Stock Option Compensation Expense | $82 | $78 | | Remeasured Foreign Currency Balances | $2 | $1 | | UTMD non-US GAAP EBITDA: | $4,652 | $5,547 | - Management believes 1Q 2025 operating performance is consistent with achieving its 2025 financial projections, targeting $18 million in adjusted consolidated EBITDA[50] Net Income - Net Income in 1Q 2025 of $3,041 thousand was 23.1% lower than $3,956 thousand in 1Q 2024[52] - The consolidated income tax provision rate was 21.2% in 1Q 2025 compared to 17.6% in 1Q 2024, contributing to the greater net income decline[30][52] Earnings Per Share (EPS) - EPS in 1Q 2025 at $0.919 was 16.0% lower than $1.093 in 1Q 2024[54] - The smaller decline in EPS relative to Net Income was a result of 307,920 fewer diluted shares used to calculate EPS in 1Q 2025 compared to 1Q 2024, due to share repurchases[31][54] - UTMD repurchased 54,267 shares at an average price of $59.35 during 1Q 2025[56] Return on Equity (ROE) - Annualized ROE (before stockholder dividends) in 1Q 2025 was 10%, down from 12% in 1Q 2024[58] - The lower ROE was due to 23% lower Net Income divided by 8% lower average Stockholders' Equity[58] - Management targets a high ROE of 20%[58] Liquidity and Capital Resources Cash flows - Net cash provided by operating activities totaled $4,464 thousand in 1Q 2025, down from $5,276 thousand in 1Q 2024[59] - Capital expenditures for property and equipment were $184 thousand in 1Q 2025, compared to $(5) thousand in 1Q 2024[60] - UTMD spent $3,221 thousand to repurchase 54,267 shares and paid $1,017 thousand in cash dividends in 1Q 2025[61] Assets and Liabilities - UTMD's balance sheet remained strong with no debt; Cash and liquid Investments represented 68% of total consolidated assets at March 31, 2025[66] - The current ratio improved to 22.3 at March 31, 2025, from 19.6 at March 31, 2024[66] - Total debt ratio (total liabilities/total assets) as of March 31, 2025, was 4.5%[67] - Stockholders' Equity declined $10.7 million compared to a year earlier due to $24.4 million in share repurchases and dividends, offset by $13.0 million in Net Income[67] Management's Outlook - 1Q 2025 results are consistent with 2025 projections, primarily due to the anticipated continuing loss of the largest biopharma pressure sensor OEM customer, PendoTECH, which accounted for 91% of the quarterly revenue decline[69] - The company anticipates a possible negative impact in 2025 from geopolitical tariffs, particularly reciprocal tariffs imposed by sovereignties of OUS customers[70] - Key objectives for 2025 include exploiting biopharma market opportunities, leveraging OUS distribution and manufacturing synergies, introducing new products, maintaining financial performance, utilizing cash for dividends and share repurchases, and seeking accretive acquisition opportunities[71][73] Forward-Looking Information - The report contains forward-looking statements subject to risks, uncertainties, and assumptions, and actual results may differ materially[71] - The company assumes no obligation to update or disclose revisions to financial estimates[71] Accounting Policy Changes - No new accounting policy changes were reported[73] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exposed to foreign currency exchange rate fluctuations due to its multinational operations. It manages this risk through operational strategies like local currency invoicing and optimizing global account structures, rather than separate hedging transactions - UTMD has manufacturing and trading operations in the U.S. (USD), Ireland (EUR), England (GBP), Australia (AUD), and Canada (CAD), exposing it to exchange rate fluctuations[72] - Foreign currency risk is managed by invoicing customers in the local currency where costs were incurred, converting currencies as transactions occur, and optimizing global account structures, without separate hedging transactions[74] Item 4. Controls and Procedures The company's management, including the CEO and Principal Financial Officer, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls over financial reporting during the quarter - The company's disclosure controls and procedures were evaluated as effective as of March 31, 2025[75] - No material changes in internal controls over financial reporting occurred during the quarter ended March 31, 2025[76] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings, primarily Filshie clip product liability lawsuits, but does not anticipate these to have a material impact on its consolidated financial results - UTMD is a party to litigation incidental to its business, specifically Filshie clip product liability lawsuits[77] - The company does not expect the outcome of the Filshie clip litigation to be material to consolidated financial results[77] Item 1A. Risk Factors Investors are advised to review the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2024, as additional unforeseen risks could also materially affect the business - Investors should carefully consider the risk factors discussed in Part I, 'Item 1A. Risk Factors' in UTMD's Annual Report on Form 10-K for the year ended December 31, 2024[78] - Additional risks and uncertainties not currently known or deemed immaterial may also materially adversely affect the company's business[78] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company continued its long-standing practice of open market share repurchases in Q1 2025, acquiring 53,340 shares at an average price of $59.41. These repurchases are intended to maximize stockholder value and return on equity, without a publicly announced plan or expiration date Issuer Purchases of Equity Securities (1Q 2025) | Period | Total number of shares purchased | Average price paid per share | | :-------------------- | :----------------------------- | :--------------------------- | | 01/01/25 - 01/31/25 | 13,840 | $60.75 | | 02/01/25 – 02/28/25 | 13,885 | $60.01 | | 03/01/25 – 03/31/25 | 25,615 | $58.36 | | Total | 53,340 | $59.41 | - The company's open market share repurchases are a continuing and long-term pattern since 1992, without an established expiration date or maximum limit[80] - The purpose of ongoing share repurchases is to maximize the value of the company for continuing stockholders and maximize return on stockholder equity[81] Item 6. Exhibits This section lists the exhibits accompanying the Form 10-Q, including certifications from the CEO and Principal Financial Officer as required by the Sarbanes-Oxley Act, and various XBRL documents - Includes certifications of the CEO and Principal Financial Officer pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002[83] - Lists XBRL Instance, Schema, Calculation, Definition, Label, and Presentation files[83] SIGNATURES Signatures The report was officially signed on May 13, 2025, by Kevin L. Cornwell, CEO, and Brian L. Koopman, Principal Financial Officer, on behalf of Utah Medical Products, Inc - The report was signed by Kevin L. Cornwell (CEO) and Brian L. Koopman (Principal Financial Officer) on May 13, 2025[87]