Utah Medical Products(UTMD) - 2025 Q2 - Quarterly Results

Financial Performance Overview UTMD's 2Q and 1H 2025 results met projections, with revenue and margin declines largely offset by share repurchases, maintaining a strong debt-free balance sheet Second Quarter (2Q) and First Half (1H) 2025 Highlights UTMD's 2Q and 1H 2025 results met projections, with revenue and margin declines driven by PendoTECH sales, but EPS was cushioned by share repurchases, maintaining a strong debt-free balance sheet - The year-over-year revenue decline was dominated by a continued drop in sales to OEM customer PendoTECH, which accounted for 71% of the Q2 2025 revenue decline and 86% of the 1H 2025 decline[4] - Share repurchases during Q2 and 1H 2025 significantly mitigated the decline in EPS relative to the decline in Net Income[6] - The balance sheet as of June 30, 2025, remained strong with no debt; Cash and Investments totaled $82.2 million after paying $2.0 million in dividends and repurchasing $6.7 million of stock during 1H 2025[7][8] Profit Margin Comparison (2025 vs. 2024) | Profit Margin | 2Q 2025 (%) | 2Q 2024 (%) | 1H 2025 (%) | 1H 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | Gross Profit Margin | 56.2% | 60.1% | 56.6% | 59.9% | | Operating Income Margin | 32.1% | 33.1% | 32.3% | 33.7% | | Income B4 Tax Margin | 38.5% | 40.5% | 39.1% | 41.4% | | Net Income Margin | 30.6% | 33.2% | 31.0% | 34.1% | Revenue Analysis This section analyzes UTMD's revenue performance for 2Q and 1H 2025, highlighting the impact of PendoTECH sales and trends in domestic and international markets Second Quarter (2Q) 2025 Revenues Total revenue for Q2 2025 decreased by 4.3% year-over-year, primarily due to a significant drop in sales to PendoTECH, despite domestic sales growth and weaker international direct sales Q2 2025 Revenue Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Consolidated Sales | $9,953k | $10,400k | (4.3%) | | Sales to PendoTECH | $196k | $511k | (61.7%) | | Total Domestic Sales | $5,865k | $5,831k | +0.6% | | Total International (OUS) Sales | $4,088k | $4,569k | (10.5%) | - Domestic sales growth was driven by a 10% increase in direct non-Filshie device sales (to $4,047k) and an 8% increase in Filshie Clip System sales (to $1,107k)[10] - International direct-to-end-user sales were $282k (15.8%) lower than Q2 2024, with declines across all major direct markets including Ireland, Canada, and the UK[11] - Favorable foreign exchange rates (stronger GBP and EUR) increased total consolidated sales by $173k in Q2 2025; In constant currency, foreign currency sales were 21.4% lower than in Q2 2024[14] First Half (1H) 2025 Revenues For 1H 2025, total revenue declined by 9.6% year-over-year, largely driven by a substantial decrease in PendoTECH sales, while domestic sales showed growth excluding PendoTECH, and international sales declined 1H 2025 Revenue Performance (in thousands) | Metric | 1H 2025 | 1H 2024 | Change | | :--- | :--- | :--- | :--- | | Total Consolidated Sales | $19,663k | $21,740k | (9.6%) | | Sales to PendoTECH | $265k | $2,056k | (87.1%) | | Total Domestic Sales | $11,448k | $12,022k | (4.8%) | | Total International (OUS) Sales | $8,215k | $9,718k | (15.5%) | - Excluding sales to PendoTECH, domestic sales in 1H 2025 were $11,184k, a 7.6% increase compared to $10,396k in 1H 2024[17] - International (OUS) sales, excluding PendoTECH sales from the prior year, were 11.6% lower in 1H 2025 compared to 1H 2024[19] - Favorable foreign exchange rates had a net positive impact of $130k on 1H 2025 sales; In constant currency terms, foreign currency sales were 18.0% lower than in 1H 2024[22] Profitability Analysis This section details UTMD's profitability metrics, including Gross Profit, Operating Income, Income Before Tax, and Net Income, for 2Q and 1H 2025, analyzing key drivers of change Gross Profit (GP) Gross Profit Margin contracted in 2Q and 1H 2025, primarily due to challenges in Ireland operations, including unfavorable product mix, reduced fixed cost absorption, and higher raw material costs Gross Profit and Margin Comparison (in thousands, except for margins) | Metric | 2Q 2025 | 2Q 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $5,595k | $6,253k | $11,133k | $13,018k | | Gross Profit Margin | 56.2% | 60.1% | 56.6% | 59.9% | - The lower margins were mainly due to Ireland operations, stemming from an unfavorable product mix, lower sales volume to absorb fixed costs, higher raw material costs, and an increase in intercompany inventory requiring reserved gross profit[25] - In contrast, gross margins in the U.S. operations remained consistent with prior periods in 2024 and Q1 2025, helped by higher direct sales[25] Operating Income (OI) Operating Income decreased in 2Q and 1H 2025 due to lower Gross Profit, but the decline was mitigated by reduced Operating Expenses, notably a significant drop in U.S. litigation costs Operating Income and Margin Comparison (in thousands, except for margins) | Metric | 2Q 2025 | 2Q 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating Income | $3,196k | $3,438k | $6,349k | $7,321k | | Operating Margin | 32.1% | 33.1% | 32.3% | 33.7% | Operating Expenses Breakdown (as % of sales) | OE Category | 2Q 2025 (%) | 2Q 2024 (%) | 1H 2025 (%) | 1H 2024 (%) | | :--- | :--- | :--- | :--- | :--- | | S&M | 5.3% | 5.3% | 5.2% | 4.4% | | G&A | 17.5% | 19.4% | 17.6% | 19.4% | | R&D | 1.3% | 2.4% | 1.5% | 2.4% | | Total OE | 24.1% | 27.1% | 24.3% | 26.2% | - The primary driver for lower G&A expenses was a significant reduction in U.S. litigation costs, which were $355k lower in Q2 2025 and $791k lower in 1H 2025 compared to the same periods in 2024[30] Income Before Tax (EBT) and EBITDA EBT declined in 2Q and 1H 2025, exacerbated by lower non-operating income, yet non-GAAP adjusted EBITDA remained strong, with the company on track for its full-year target EBT and Margin Comparison (in thousands, except for margins) | Metric | 2Q 2025 | 2Q 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Income Before Tax (EBT) | $3,835k | $4,211k | $7,694k | $9,010k | | EBT Margin | 38.5% | 40.5% | 39.1% | 41.4% | - Net non-operating income (NOI) decreased in 1H 2025 by $343k compared to 1H 2024, primarily due to receiving approximately $332k less in interest income because of lower cash balances and interest rates[35][36] - Management's beginning-of-year EBITDA target of $17-$18 million is still considered achievable[38] Non-US GAAP Adjusted EBITDA Reconciliation (1H 2025 vs 1H 2024) (in thousands) | Component | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | EBT | $7,694k | $9,010k | | Depreciation Expense | $405k | $327k | | Femcare IIA Amortization | $1,032k | $1,005k | | Stock Option Expense | $168k | $130k | | Adjusted EBITDA | $9,323k | $10,489k | Net Income (NI) Net Income fell in 2Q and 1H 2025 due to lower operating and non-operating income, further impacted by an increased effective tax rate Net Income and Margin Comparison (in thousands, except for margins) | Metric | 2Q 2025 | 2Q 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $3,048k | $3,453k | $6,089k | $7,409k | | Net Income Margin | 30.6% | 33.2% | 31.0% | 34.1% | - The average consolidated income tax provision rate rose to 20.5% in Q2 2025 (vs. 18.0% in Q2 2024) and 20.9% in 1H 2025 (vs. 17.8% in 1H 2024), amplifying the decline in Net Income[40][41] Shareholder Metrics and Capital Allocation This section examines UTMD's shareholder-focused metrics and capital allocation strategies, including Earnings Per Share, share repurchases, and dividend payments Earnings Per Share (EPS) Diluted EPS experienced a more moderate decline than Net Income in 2Q and 1H 2025, primarily due to the company's active share repurchase program reducing outstanding shares Diluted EPS Comparison | Metric | 2Q 2025 | 2Q 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.939 | $0.978 | $1.858 | $2.070 | | % Change | (4.0%) | | (10.3%) | | - The percentage decreases in EPS were substantially smaller than the decreases in Net Income due to a lower number of diluted shares outstanding[43] - Diluted shares used for EPS calculation decreased to 3,277,936 in 1H 2025 from 3,579,435 in 1H 2024 as a result of share repurchases[44] Share Repurchases and Dividends UTMD actively returned capital to shareholders in 1H 2025 through significant share repurchases and consistent dividend payments, demonstrating a commitment to shareholder value - In 1H 2025, UTMD repurchased 119,255 shares at an average price of $56.26, for a total cost of $6.7 million[45] - The company paid dividends of $0.305 per share in 1H 2025, totaling $2.018 million; This payout represented 33% of Net Income for the period[47] Financial Position This section provides an overview of UTMD's robust financial position, including its balance sheet strength, liquidity, and working capital management as of June 30, 2025 Balance Sheet Analysis As of June 30, 2025, UTMD maintained a strong, debt-free balance sheet with high liquidity, evidenced by a significantly improved current ratio and efficient working capital management - The company's cash and investments balance declined by only $0.8 million to $82.2 million in 1H 2025, despite using $6.7 million for share repurchases and $2.0 million for dividends[49] - The current ratio improved significantly to 41.9 at June 30, 2025, compared to 25.6 at December 31, 2024, as a result of favorable changes in non-cash working capital[49] Key Financial Ratios (as of June 30, 2025) | Ratio | Value | | :--- | :--- | | Current Ratio | 41.9 | | Days in Trade Receivables | 33 | | Average Inventory Turns | 2.1 | | 2025 YTD ROE (before dividends) | 10% | Financial Statements This section presents the detailed consolidated financial statements, including the Income Statement and Balance Sheet, for the specified periods, offering a comprehensive view of the company's financial health Income Statement This section provides the consolidated income statements for 2Q and 1H 2025, detailing key financial performance indicators such as Net Sales, Gross Profit, Operating Income, Net Income, and Earnings Per Share INCOME STATEMENT, Second Quarter (three months ended June 30) (in thousands except EPS) | (in thousands except EPS) | 2Q 2025 | 2Q 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Net Sales | $ 9,953 | $ 10,400 | ( 4.3%) | | Gross Profit | 5,595 | 6,253 | (10.5%) | | Operating Income | 3,196 | 3,438 | ( 7.1%) | | Income Before Tax | 3,835 | 4,211 | ( 8.9%) | | Net Income | 3,048 | 3,453 | (11.7%) | | Earnings Per Share | $ 0.939 | $0.978 | ( 4.0%) | INCOME STATEMENT, First Half (six months ended June 30) (in thousands except EPS) | (in thousands except EPS) | 1H 2025 | 1H 2024 | Percent Change | | :--- | :--- | :--- | :--- | | Net Sales | $ 19,663 | $ 21,740 | ( 9.6%) | | Gross Profit | 11,133 | 13,018 | (14.5%) | | Operating Income | 6,349 | 7,321 | (13.3%) | | Income Before Tax | 7,694 | 9,010 | (14.6%) | | Net Income | 6,089 | 7,409 | (17.8%) | | Earnings Per Share | $ 1.858 | $ 2.070 | (10.3%) | Balance Sheet This section presents the consolidated balance sheet as of June 30, 2025, with comparative data, offering a snapshot of the company's assets, liabilities, and stockholders' equity BALANCE SHEET (in thousands) | | JUN 30, 2025 | DEC 31, 2024 | JUN 30, 2024 | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash & Investments | $82,179 | $82,976 | $89,219 | | Total Current Assets | 94,375 | 96,331 | 102,322 | | Total Assets | $120,802 | $122,538 | $130,032 | | Liabilities & Stockholders' Equity | | | | | Total Current Liabilities | $2,254 | $3,757 | $3,939 | | Stockholders' Equity | 117,533 | 117,427 | 124,052 | | Total Liabilities & Stockholders' Equity | $120,802 | $122,538 | $130,032 |