UFP Technologies (NASDAQ:UFPT) reported its fourth-quarter and full-year 2025 results, highlighting strong revenue growth, progress on several operational initiatives, and updates on a recent ransomware incident that the company said has had minimal impact on operations so far.
Full-year growth and milestones
Chief Executive Officer and Chairman Jeff Bailly said he was pleased with the company’s 2025 performance and progress on key strategic initiatives. Full-year sales grew 19.5% to $602.8 million, which Bailly described as a significant milestone and nearly triple the company’s revenue since 2021. Over that same four-year period, he said operating income increased 435% and earnings per share rose 419%.
AJR labor inefficiencies and backlog
Management said 2025 EPS grew 15.4% despite $6.3 million in labor inefficiencies at the Illinois AJR facility. Bailly said the AJR E-Verify-related labor inefficiency was $1.2 million in the fourth quarter, down from a $3 million impact in the third quarter, which he said reflected progress in onboarding and training new direct labor employees.
In the Q&A, management provided additional details on the path forward at AJR. Bailly said staffing levels have been restored, with a mix of temporary and permanent workers, and that as workers become skilled and transition from temporary to permanent roles, “the skill goes up, and the cost goes down.” He said the site is currently running overtime to reduce backlog, noting that backlog carried into 2026. Looking ahead, management said first-quarter impacts should continue but be less than the fourth quarter and then diminish as the year progresses.
Later in the Q&A, CFO Ron Lataille said a customer had asked the company not to discuss backlog levels. He clarified that a previously cited $8 million figure referenced a quarter rather than the full amount and said backlog entering 2026 is higher than that, though he did not disclose the number. He said the company expects to work down backlog gradually throughout 2026.
Facility expansion and program launches in the Dominican Republic
UFP also discussed continued capacity expansion in the Dominican Republic. Bailly said in Santiago the company launched a second major program and negotiated a lease for a third building to further expand its safe patient handling business and transfer a third major program. He said completed program transfers can lower customers’ costs and increase UFP’s profit potential.
In La Romana, Bailly said three significant new programs launched and that the company’s fifth building and related equipment, material, and personnel moves are complete. He said the new site includes an expanded product development center, a newly launched external capital program, and a centralized warehouse supporting buildings one through four. He added the company plans to take possession of a sixth building in April to expand robotic surgery capacity to support anticipated growth.
Asked about the sixth building investment and whether customers are contributing, Bailly said major contracts generally involve “co-investment,” with some customers covering “literally all of the capital.” However, he said the company is constrained by customer confidentiality and emphasized that the company’s “primary responsibility” in the contract extension relates to leases and personnel. He said the company expects to take possession of the sixth building in April, complete necessary fit-up such as clean rooms, and begin adding capacity this year.
Contract extensions, markets, and acquisitions
Management said the company expanded and extended its contract with its largest customer, materially increasing volumes on existing programs and adding an additional program. In response to analyst questions about volume expectations for 2026 through 2029, Bailly said customers have directed UFP not to provide commentary that could create competitive disadvantages. He reiterated that the contract includes a “material increase” in existing programs and an added program, but declined to quantify the change or provide guidance for 2026 and 2027 volumes.
Bailly also cited an extension with the company’s largest infection prevention customer through 2030, new business wins in orthopedic sterile packaging, and added capabilities in Ireland.
On growth drivers, management said recent performance has been supported by safe patient handling, infection control, and orthopedic packaging. Lataille said organic sales growth for 2025 was low single digits, attributing that to unusually high 2024 robotic surgery sales and backlog in safe patient handling due to the AJR labor issue. Bailly said he expects robust growth to continue in patient services and noted three recently launched programs—one in infection prevention and two in robotic surgery—while describing other potential future growth areas such as wound care and diagnostics as still in development stages and unlikely to contribute to 2026 revenue.
The company also said integrations of four acquisitions completed in 2024 and three completed in 2025 are progressing well, and that it continues to pursue additional strategic acquisitions while maintaining discipline.
Margins, cash flow, cybersecurity, and CEO transition
On profitability, Lataille said 2025 gross margin declined to 28.3%, primarily due to the $6.3 million in extra labor costs at AJR reflected in cost of sales. Excluding those costs, he said gross margin would have increased to 29.3%. Adjusted operating margin was 17.1% of sales, within the company’s 17% to 20% target range, despite the labor headwinds.
Lataille said the company’s effective tax rate was 17.2% for 2025, down from the prior year, driven by a shift in pre-tax income to the Dominican Republic, where he said the company effectively pays no income taxes.
UFP also highlighted cash generation and leverage reduction. Lataille said the company generated approximately $92 million in cash from operations. Despite $12.9 million in capital expenditures and funding three acquisitions, the company paid down about $53.9 million in debt and ended the year with a leverage ratio of approximately 1.1 times.
Management also addressed a cybersecurity breach disclosed in an 8-K the prior evening. Lataille said the company detected the attack on Saturday morning, February 14, engaged forensic incident response consultants the same day, and had on-site support by Sunday evening. He described it as a “classic ransomware attack” that impacted many, but not all, IT systems, adding that data was taken and then destroyed. He said the company had duplicate backups and a contingency plan that allowed it to operate since the incident, with minimal operational interruption, and that primary systems are expected to be brought back online this week “in all material respects.” He added that UFP has cybersecurity insurance and does not expect a material impact to operations, cash, or liquidity, though the investigation is continuing.
During Q&A, Bailly said manufacturing continued immediately, but the company initially lacked the ability to label and ship normally, which could delay shipments. Lataille said ERP systems are back online and that while February may be soft within the quarter, he expects the company to make up for it in March and does not anticipate a material impact to first-quarter results overall.
Finally, Bailly said CEO transition planning with Mitch Rock is essentially complete, and Rock is prepared to succeed him as CEO in June. Bailly said he will remain for one year as executive chair to support the transition and assist with acquisition opportunities and key strategic hires.
About UFP Technologies (NASDAQ:UFPT)
UFP Technologies, Inc (NASDAQ: UFPT) is a global designer and manufacturer of custom-engineered products using plastics, foams and adhesives. The company partners with customers to develop application-specific solutions through a range of in-house processes, including foam fabrication, die cutting, sheet processing, lamination, machining and assembly services. Its components find use in industries requiring precise material properties, such as medical devices, aerospace, defense, electronics and transportation.
Building on its origins as a specialty foam converter, UFP Technologies has expanded its capabilities to include advanced material technologies, such as thermal management and electromagnetic interference (EMI) shielding solutions.
