Good day, and welcome to the UFP Technologies, Inc. Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. These Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as “believe,” “expect,” “anticipate,” “pursue,” “forecast,” and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-Ks and subsequent 10-Qs and 8-Ks, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales growth, adjusted gross margin, adjusted operating income, adjusted SG&A, adjusted EPS, EBITDA, and adjusted EBITDA. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and is available in the Investor Relations section of our website. I will now turn the call over to Jeff.

Thank you, Ron. I am pleased with our 2025 results and our progress on key strategic initiatives. Sales grew 19.5% for the full year, bringing our total revenue to $602.8 million. This is a significant revenue milestone and represents nearly a tripling of revenue since 2021. During that same four-year period, operating income grew 435% and EPS grew 419%. We also made significant progress on several key strategic initiatives related to contract extensions, program launches, facility expansions and related moves, and adding and training of new direct labor talent in St. Charles, Illinois related to our previously disclosed E-Verify attrition issues. 2025 EPS grew 15.4% despite absorbing $6.3 million in labor inefficiencies at our Illinois AJR facility. The AJR E-Verify labor inefficiency was $1.2 million in Q4, less than half of the $3.0 million Q3 impact, demonstrating the progress that is being made in onboarding and training new direct labor team members. We are continuing to make progress expanding our capabilities and capacity in the Dominican Republic. In Santiago, we launched our second major program and have recently negotiated a lease for a third building, which will allow us to further expand our safe patient handling business and transfer a third major program. Each program transfer, when complete, saves our customers money and increases our profit potential. In La Romana, Dominican Republic, three significant new programs launched. Our fifth building and related move of equipment, materials, and personnel is now complete. It houses a new expanded product development center, a newly launched external capital program, and a centralized warehouse to support Buildings One through Four. We plan to take possession of a sixth building in April, which will further expand our robotic surgery capacity to support anticipated growth. We have also expanded and extended our contract with our largest customer,…

Thank you, Jeff. I am also pleased with our fourth quarter and year-end results as we delivered solid numbers despite working through the labor challenge referred to by Jeff. Before I provide more color on our results, I want to spend a few minutes on the cybersecurity breach disclosed in an 8-K last evening. The attack was detected on the morning of Saturday, February 14. By that evening, forensic incident response consultants were engaged, and by Sunday evening, they were on-site in Newport. This was a classic ransomware attack that appears to have impacted many, but not all, of our IT systems. Data was taken and then destroyed. Fortunately, we had credible duplicate backups and a thorough contingency plan that allowed us to operate since the date of the incident. At this point, the incident caused minimal interruptions to our operations, and we believe our primary information systems are being brought back online this week in all material respects. From a financial standpoint, we have cybersecurity insurance and cash or liquidity and do not expect a material impact to our operations, though our investigation is continuing. Moving to operations, overall sales were up nicely, largely fueled by growth in the safe patient handling, infection control, and orthopedic packaging medical submarkets. As anticipated, organic sales growth for the year was low single digits. This is largely due to abnormally high 2024 sales in robotic surgery as well as backlog in our safe patient handling business due to the labor issue at AJR. Gross profit as a percentage of sales, or gross margin, decreased in 2025 to 28.3%, largely due to the $6.3 million in extra labor costs incurred at AJR, which are all reflected in cost of sales. Absent these additional labor costs, gross margins would have increased to 29.3%. As Jeff mentioned, improved efficiency levels in the fourth quarter and we anticipate further ongoing improvement. Adjusted operating margin for the year was 17.1% of sales, within our target range of 17% to 20% despite the extra labor costs. Our effective tax rate of 17.2% for the full year of 2025 was down from a year ago, reflecting a continued shift in pre-tax income to the Dominican Republic, where we effectively pay no income taxes. 2025 was a strong year for cash generation. We had approximately $92.0 million in cash from operations, and despite $12.9 million in capital expenditures and funding three acquisitions, we paid down approximately $53.9 million in debt and ended the year with a leverage ratio of approximately 1.1x. We will now open for questions.

Our first question comes from Brett Adam Fishbin with KeyBanc Capital Markets. Please go ahead.

Hey, this is Will on for Brett. Good news around the contract extension. Could you provide us any directional color on how we should think about volumes with your largest customer in 2026 and 2027? And maybe how we should think about the minimum volumes for 2028 and 2029? I have one more as a follow-up.

Sure. The contract extension is great news for us. We have extended two additional years, which we knew was coming, but it makes the rest of the world settle down, and it was expanded. That additional program and the two programs in place increased materially. Our customers have asked us not to give any information that could allow the outside world to project our business and put us at any competitive disadvantage. We are not able to give any commentary on how significantly it went up, but they agreed to the words “material” because it is a material increase over where we are now. The same applies for giving guidance on 2026 and 2027. You can refer to the previous contract, and you know there are minimums that they have to hit. I think it has to be in the low sevens the last couple of years. They have consistently been higher than those minimums. Under strict instructions from many of our customers, we are not going to be able to give specifics, unfortunately.

Okay. I think that makes sense. And then maybe just going over to AJR. Regarding the headwind, you indicated a $1 million impact in Q4. How are you thinking about this impact in Q1? And maybe any impact in the rest of 2026?

The team is making consistent progress, and there are a couple of different objectives. One was to bring on new people because our team was way down. We have staffed up to the level that we needed. Some are still temps; some are permanent. When they get to a certain level of skill, they switch over, and two things happen: the skill goes up and the cost goes down. We are continuing to transition from temps, but we are not bringing in people in general right now. Those two things are forward progress we will look forward to. We are running overtime now, so we can keep up with our existing team, and we are running overtime to knock down any backlog that exists. We did have backlog carry over into this year, which is good news for the revenue of this year. It is bad news that we have not completely caught up with our customer. When that backlog is worked down, we will get rid of the overtime as well. Everything going forward should be progress. We expect Q1 will have some impact. It will be less than the fourth quarter, and then it will diminish after that. There will be some carry-on, but continued progress is expected in each consecutive quarter.

Our next question comes from Justin Ian Ages with CJS Securities. Please go ahead.

Good morning. Can you give us a little more color on the puts and takes of the flat medtech growth? I know you mentioned infection prevention, but just trying to take a look into 2026 and size what is going to be the main drivers of growth there in medtech. Thank you.

We are expecting continued robust growth in the patient services market. That is expanding on its own, and we are catching up from the prior year, so I think that will be a super strong year. We have also launched three new programs of late, one in infection prevention and two in robotic surgery, which are both positive influences going forward. There are some other markets that are coming along. They represent growth in the future and are in the development stages now. Those are a little more wound care and diagnostics. I think those will hit 2026 revenue, but they hit the list of things we are excited about going forward. That is the update on what we expect to be robust growth next year.

And Justin, let me elaborate. If you are talking about flat medtech growth specifically for Q4, just a reminder that we had some revenue pulled into Q3. Sales in Q3 were higher, if you recall, than we had anticipated. That is part of the reason why sales for the fourth quarter were a bit softer.

That is helpful. Thanks for that. And then second, on the cybersecurity incident, I know you mentioned systems are back online, but is there any disruption in business that will impact growth rates? Operationally, it seems things are back in order. In terms of performing for customers, is there any impact there, or is that still under investigation?

Big picture, it is not good news that somebody was able to get into our system. It was really good news how our team responded and how robust our backup systems were. We were back in action literally day one making parts. We did not have the ability day one to label everything properly and ship everything, so there will be a delay in how things get shipped. I will turn it over to Ron to give you some specifics, but the key is we were able to keep making everything we needed to make. There may be some delays in when some of these things actually ship.

The event happened mid-quarter, and we are back online in all of our ERP systems as we speak. Fortunately, years ago our Senior Vice President of IT, in conjunction with our operations leadership, developed a robust contingency plan to operate without systems for this exact reason. We launched that contingency plan, and albeit inefficiently, we were able to make parts and ship to customers with manual invoicing. I do not think there is going to be a material impact on Q1 in its entirety. It will be soft within the month of February within the quarter, but we will make up for it in March.

That is super helpful. Thanks for taking the questions.

Our next question comes from Maxwell Michaelis with Lake Street Capital Markets. Please go ahead.

A few here around the contract extension, just around the facility. That sixth facility, are you on the hook for that entire investment? Are you getting any help from your largest customer? Also, what is the timeline of completion of that facility?

With all of our major contracts, there is co-investment, really without exception. In some of them, the customers are on the hook for literally all of the capital. Under confidentiality with the customer, we have not been able to give out all those details. I can tell you our primary responsibility in this contract extension relates to leases and personnel. Capacity is ramping up, so capital will be purchased and installed, and we will be starting. I think we take possession of the sixth building in April, and we will begin—first we have to get the building fit for use, which is putting in clean rooms and getting it all set up. It will start this year. We will be adding that capacity, and as I mentioned, our primary responsibility is leases and personnel.

Perfect. And then you called out safe patient handling in the press release as well. Is there any way you can size that opportunity for us? It seems like it is going to be a solid opportunity. Do you expect more growth in 2026? Can you give us an idea of what the market size is there, or any way you can help us?

I think that is a large and growing market. We have partnered with the market leader, and we are experiencing double-digit growth while making up for previous backlog additions. You can look forward to robust growth in that market for multiple years.

Alrighty. Thanks, guys.

You are welcome.

Our next question comes from Andrew Harris Cooper with Raymond James. Please go ahead.

Hey, everybody. Thanks for the questions. Maybe first, I want to clarify some of the commentary around new programs. I think in the release, you mentioned you launched three new programs, and it sounded like referring to the La Romana facility. I know you had talked about two, and then you mentioned one new one in the extended contract. Are those the three, or is there an additional program that is net new that we need to think about for that facility or that line of business?

Two of the programs were the multimillion-dollar programs we referred to in the past that we were launching at the end of the year. They were both robotic surgery related. The third one was not robotic surgery. We had three different plants collaborate and come together with their materials expertise and process expertise to design an infection prevention device, start to finish, that will ship directly to the patients. It will be packaged and ready to go from our facility. That one has launched in La Romana in our new Building Number 5. That is set up and going. Launches are slow, but we are making parts. They will go through a rigorous process of vetting those parts, and they will slowly ramp up. The third program is not robotic surgery.

That is helpful context. I know you are limited in what you are able to say in terms of the contract, but I think the release included noting that you added volume-based pricing matrices and some cost-sharing provisions. I want to clarify: are those net new, and is there anything to read into layering those in and how that maybe portends for the long-term nature and not needing to amend or adjust the contract as much going forward because you have these features in place in the existing language?

The key to the contract for us is when we make a long-term commitment to a customer, we want to make a long-term contract with a vendor at the same time. Part and parcel to this is if we make promises to the customer that relate to cost downs, very often they are being financed by our vendor or together with our vendor. When we come up with cost savings, they are typically shared with our customer. I think the customer wins and we win in this process. I do not think there is any negative to look forward to, other than increased volume. When they hit certain milestones, whatever those are, there are cost-sharing opportunities that are borne between the three of us—or enjoyed between the three, I should say: the vendor, ourselves, and the customer.

I did not mean to imply a negative—sorry if that came across differently—but that is helpful. Lastly, on the AJR business, I think you talked about about $8 million of backlog in the last update. Did that work down all in the quarter? If not, how should we think about the pacing of that starting to happen? And then any updates, knowing you have this third program moving, on completion of and when we should expect the pacing of the shift to start flowing through the P&L more?

Ron, I will let you tackle the backlog, and then I will tackle the second question, which relates to Program Three.

Our customer specifically asked us not to speak of backlog. The $8 million you referred to, Andrew, was the quarter, not the full amount. I can tell you that the backlog going into 2026 is higher than that, but I cannot disclose the number. We expect to work it down gradually throughout 2026.

With respect to Program Number Three, these were all Phase One, then the next and the next. Program One was completely transferred, up and running, and running at rate. Program Two has now been transferred. It is up and running but not running at rate as we go through the process. Program Three is scheduled to transfer when Program Two is complete. We are taking possession of a new building, I believe in April, and we will get that set up. That will be a second-half-of-the-year assignment. The key is that we have full capabilities already in Illinois to do these programs. These are redundant capabilities, and when they move over, our customer enjoys some cost saves, and we enjoy the opportunity to make additional profits when we get to our run-rate levels.

Okay, I will stop there. Thanks, everybody.

You are welcome.

This concludes our question and answer session. I would like to turn the conference back over to R. Jeffrey Bailly for any closing remarks.

Thanks, operator, and thank you all for participating on the call. We are excited about the future. The long-term contract hopefully dispels some of the concerns some people might have had. We have positioned ourselves with our top three or four customers for the next four or five years, really understanding what our growth trajectory is, and we have the vendors aligned right beside us. I think we have done an excellent job in the transition plan for our new CEO. He is fired up. He has been with us for 25-plus years. He was integral in developing the strategy. He has been integral in executing the strategy. He had a development plan that has given him exposure to all different parts of the business, including to some of our investors of late. It has all gone well, and I think that is something for everybody to be excited about. He is well qualified and a very capable leader. We appreciate your interest. We are excited about the future, and I will end it there.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.