Company: UFPT
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0001171843-25-003049
Chunk: 41

Company: UFP TECHNOLOGIES INC
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 2
Chunk 41
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2.3%. Organic growth in the medical market was approximately 5.4% and was fueled by strong sales in the interventional and surgical infection prevention and advanced wound care market segments that more than offset the decline in sales to customers in the robot assisted surgery market segment.

Gross Profit

Gross margin decreased slightly to 28.5% for the three-month period ended March 31, 2025, from 28.6% for the same period in 2024. As a percentage of sales, material and labor costs collectively increased 0.1% and overhead costs increased 0.1%. As anticipated, we had some inefficiency in our newly acquired AJR operations related to onboarding many new direct labor associates. We were able to offset most of it by leveraging fixed overhead costs throughout the company. It is anticipated that the inefficiency at AJR will continue through the second quarter as we continue to onboard new associates.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased approximately 34.6% to $18.7 million for the three-month period ended March 31, 2025, from $13.9 million for the same period in 2024, which we primarily attribute to SG&A from the Company’s 2024 acquisitions. As a percentage of sales, SG&A decreased to 12.6% for the three-month period ended March 31, 2025, from 13.2% for the same three-month period in 2024.

Change in fair value of contingent consideration

In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The contingent consideration payments for the Welch, Marble and the DAS Medical acquisitions are up to $6 million, $500 thousand and $20 million, respectively. 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 thousand, $400 thousand 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