UTAH MEDICAL PRODUCTS INC 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General Utah Medical Products, Inc. (UTMD) manufactures and markets a well-established range of specialty medical devices. The Company’s Form 10-K Annual Report for the year ended December 31, 2024 provides a detailed description of products, technologies, markets, regulatory issues, business initiatives, resources and business risks, among other details, and should be read in conjunction with this report. Because of the relatively short span of time, results for any given three- or six-month period in comparison with a previous three- or six-month period may not be indicative of comparative results for the year as a whole. Currency amounts in the report are in thousands, except per share amounts or where otherwise noted. Currencies in this report are denoted as $ or USD = U.S. Dollars; AUD = Australia Dollars; £ or GBP = UK Pound Sterling; CAD = Canadian Dollars; and € or EUR = Euros. Analysis of Results of Operations a) Overview Income statement results in second calendar quarter (2Q) and first half (1H) 2025 compared to the same periods of 2024 were as follows: 2Q 2025 2Q 2024 change 1H 2025 1H 2024 change Net Sales $9,953 $10,400 ( 4.3%) $19,663 $21,740 ( 9.6%) Gross Profit 5,595 6,253 (10.5%) 11,133 13,018 (14.5%) Operating Income 3,196 3,438 ( 7.1%) 6,349 7,321 (13.3%) Income Before Tax 3,835 4,211 ( 8.9%) 7,694 9,010 (14.6%) Net Income (US GAAP) 3,048 3,453 (11.7%) 6,089 7,409 (17.8%) Earnings per Diluted Share $0.939 $0.978 ( 4.0%) $1.858 $2.070 (10.3%) Consolidated total 2Q 2025 revenues were $447 (4.3%) lower than in 2Q 2024, with 1H 2025 revenues $2,077 (9.6%) lower than in 1H 2024. The lower sales in comparison with the prior year’s periods were dominated by a continued decline in sales to PendoTECH, representing 71% of the 2Q decline and 86% of the 1H decline. UTMD’s profit margins compared to those of the prior year’s same periods follow: 2Q 2025 (Apr – Jun) 2Q 2024 (Apr – Jun) 1H 2025 (Jan – Jun) 1H 2024 (Jan – Jun) Gross Profit Margin (Gross Profit/ sales): 56.2% 60.1% 56.6% 59.9% Operating Income Margin (Operating Income/ sales): 32.1% 33.1% 32.3% 33.7% Income B4 Tax Margin (Income Before Tax/ sales): 38.5% 40.5% 39.1% 41.4% Net Income Margin (Net Income/ sales) : 30.6% 33.2% 31.0% 34.1% The 2Q percentage decline in consolidated revenues was less than for 1H primarily because the period-to-period decline in UTMD sales to its previously major biopharmaceutical OEM customer, PendoTECH, decreased from $511 in 2Q 2024 to $196 in 2Q 2025, and from $2,056 in 1H 2024 to $264 in 1H 2025. Although the negative PendoTECH sales comparisons are bottoming out, looking forward to the rest of the year, UTMD expects 2H of 2025 PendoTECH sales will be about $200 lower than in 2H 2024. This would result in sales to this OEM customer for the 2025 year as a whole to be about $2 million lower compared to year 2024, which is consistent with management’s projection provided at the beginning of 2025. UTMD’s Gross Profit margin contracted more than expected in 2Q 2025 primarily as a result of lower sales than expected and an unfavorable product mix for UTMD’s Ireland operations. Sales of devices from Utah operations maintained Gross Profit margins consistent with the prior 1Q 2025, as well as for year 2024. Operating Income declined less than the Gross Profit decline due to $355 lower 2Q 2025 U.S. litigation costs compared to 2Q 2024, and $791 lower litigation costs than in 1H 2024, which costs are included in Operating Expenses per US GAAP, despite the negative impact of a weaker USD on Operating Expenses in Ireland and the UK. Non-operating Income resulting from 2025 interest rates lower than in 2024 caused the period-to-period Income Before Tax (EBT) decline to be more than the Operating Income decline. Although a higher estimated average income tax provision rate 8 helped to increase the percentage period-to-period declines in Net Income, share repurchases during 2Q 2025 and 1H 2025 helped to significantly mitigate the decline in Earnings Per Share (EPS) relative to Net Income. UTMD’s June 30, 2025 Balance Sheet continued strong, with no debt. Ending Cash and Investments were $82.2 million compared to $83.0 million on December 31, 2024, after paying $2.0 million in cash dividends to stockholders, repurchasing $6.7 million of UTMD common stock, increasing non-cash working capital by $0.3 million (including reducing current liabilities by $1.5 million) and investing $0.2 million in capital expenditures during 1H 2025. Foreign currency exchange (FX) rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of 2Q 2025 compared to the end of calendar year 2024 and the end of 2Q 2024 were 6-30-25 12-31-24 Change 6-30-24 Change GBP 1.37213 1.25209 9.6% 1.26371 8.6% EUR 1.17706 1.03505 13.7% 1.07109 9.9% AUD 0.65722 0.61834 6.3% 0.66742 (1.5%) CAD 0.73422 0.69428 5.8% 0.73068 0.5% b) Revenues Terms of sale are established in advance of UTMD’s acceptance of customer orders. In the U.S., Ireland, UK, France, Canada, Australia and New Zealand, UTMD accepts orders directly from and ships directly to end user medical facilities, as well as third party medical/surgical distributors, under UTMD’s Standard Terms and Conditions (T&C) of Sale. UTMD’s T&C of Sale to end user facilities are substantially the same in the U.S. and OUS. UTMD also has standard T&C of Sale for OEM customers, other medical device and non-medical device customers for components manufactured by UTMD, which are substantially the same, except that prices are generally quoted prior to acceptance of each order. UTMD may have separate discounted pricing agreements with a specific clinical facility, or group of affiliated facilities or large OEM customers based on volume of purchases. Pricing agreements which are documented arrangements with clinical facilities, or groups of affiliated facilities or OEM customers, if applicable, are established in advance of orders accepted or shipments made. For existing customers, past actual shipment volumes typically determine the fixed price by part number for the next agreement period of one year. For new customers, the customer’s best estimate of volume is usually accepted by UTMD for determining the ensuing fixed prices for the agreement period. Prices are not adjusted after an order is accepted. For the sake of clarity, the separate pricing agreements based on volume of purchases disclosure is not inconsistent with UTMD’s disclosure that the selling price is fixed prior to the acceptance of a specific customer order. 2Q 2025 Sales Total consolidated 2Q 2025 UTMD worldwide (WW) sales in USD terms were $9,953 compared to $10,400 in 2Q 2024. Consistent with the projection in UTMD’s SEC 10-K Report at the beginning of the year, sales of biopharma pressure monitoring devices and accessories to UTMD’s previously largest OEM customer, PendoTECH, were $315 (61.7%) lower in 2Q 2025 compared to 2Q 2024. Sales to PendoTECH were $196 in 2Q 2025 compared to $511 in 2Q 2024. Despite the lower 2Q 2025 sales to PendoTECH, which were all domestic, aggregated 2Q 2025 domestic sales were $5,865 compared to $5,831 in 2Q 2024. Domestic sales are invoiced in USD and obviously not subject to foreign currency conversion (FX) rate fluctuations. The components of domestic sales include 1) “direct non-Filshie device sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), 2) “OEM sales” of components and other products manufactured by UTMD for other medical device and non-medical device companies, and 3) “domestic Filshie device sales”. UTMD separates domestic Filshie device sales from other medical device sales direct to medical facilities because UTMD is simply a distributor for Femcare in the U.S. The domestic sales increase was because 2Q 2025 sales of the Filshie Clip System in the U.S. were $1,107 compared to $1,021, 8% higher than in 2Q 2024, and 2Q 2025 direct domestic sales of other devices were $4,047 compared to $3,670, 10% higher than in 2Q 2024. U.S. Filshie direct sales were 19% of total domestic sales compared to 18% in 2Q 2024. Direct non-Filshie device 9 sales represented 69% of total domestic sales compared to 63% in 2Q 2024. In the remaining OEM domestic sales category, which includes PendoTECH, 2Q 2025 sales were $712 compared to $1,140 in 2Q 2024, 38% lower. Domestic OEM sales in 2Q 2025 were 12% of total domestic sales compared to 20% in 2Q 2024. On the other hand, 2Q 2025 international sales to customers outside the U.S. (OUS), were lower than expected. Total OUS sales in 2Q 2025 were $4,088 compared to $4,569 in 2Q 2024. In 2Q 2025, 37% of OUS sales were direct to medical facilities located in Ireland, the UK, France, Canada, Australia and New Zealand, compared to 39% in 2Q 2024. OUS direct to end-user sales are invoiced in foreign currencies. Despite the help from a weaker USD compared to the EUR and GBP in translating shipments invoiced in foreign currencies, 2Q 2025 OUS direct sales by UTMD’s Ireland, UK, Australia and Canada subsidiaries were just $1,503 compared to $1,785 in 2Q 2024. Canadian medical facilities openly put pressure on Canada distributors to not purchase medical devices from the U.S. In USD terms, including the impact of FX rate differences, total direct to end-user sales were $282 (15.8%) lower overall, including 21.5% lower in Ireland, 22.5% lower in Canada, 5.4% lower in the UK, 39.8% lower in Australia/New Zealand and 17.2% lower in France. The remaining $2,585 in OUS sales in 2Q 2025, which were $200 lower than in 2Q 2024, were to distributors in other countries. These sales included export sales from the U.S. to OUS distributors invoiced in USD, and shipments to OUS distributors of products manufactured by UTMD subsidiaries in Ireland and the UK invoiced in EUR and GBP. The timing of shipments to OUS distributors can cause significant fluctuations in quarterly comparisons since distributors tend to order larger quantities each time, in order to minimize transit and other logistical costs. The threat of reciprocal tariffs which have to be paid by distributors to their respective governments may have caused a pause for some. Although exports from Utah to OUS distributors invoiced in USD were $147 (+17.2%) higher, shipments from UTMD’s Ireland and the UK subsidiaries to OUS distributors were $347 (18%) lower. Shipments of blood pressure monitoring (BPM) kits from Ireland to UTMD’s largest BPM medical device distributor located in China were $93 higher, but Ireland shipments to OUS distributors of other devices were $441 lower. The portion of OUS sales invoiced in foreign currencies in USD terms were 31% of total WW consolidated 2Q 2025 sales compared to 35% in 2Q 2024. The average USD FX rates increased 2Q 2025 total consolidated sales $173 for sales invoiced in foreign currencies. Actually, a stronger GBP and EUR together added $180. The CAD and AUD were weaker. FX rates for income statement purposes are transaction-weighted averages. The average FX rates from the applicable foreign currency to USD during 2Q 2025 and 2Q 2024 for revenue purposes follow: 2Q 2025 2Q 2024 Change GBP 1.3368 1.2615 +6.0% EUR 1.1569 1.0752 +7.6% AUD 0.6394 0.6594 ( 3.0%) CAD 0.7227 0.7308 ( 1.1%) The $173 weighted average favorable impact on 2Q 2025 foreign currency OUS sales was 6.0%. In constant currency terms, foreign currency sales in 2Q 2025 were 21.4% lower than in 2Q 2024. “Constant currency” sales means exchanging foreign currency sales into USD-denominated sales at the same FX rate as was in the previous period of time being compared. 1H 2025 Sales Total consolidated 1H 2025 UTMD worldwide (WW) sales in USD terms were $19,663 compared to $21,740 in 1H 2024. Consistent with the projection in UTMD’s SEC 10-K Report at the beginning of the year, sales of biopharma pressure monitoring devices and accessories to UTMD’s previously largest OEM customer, PendoTECH, were $1,791 (87.1%) lower in 1H 2025 compared to 1H 2024. WW sales to PendoTECH were $265 in 1H 2025 (all in the U.S.) compared to $2,056 in 1H 2024 ($1,627 in the U.S. and $429 in Ireland). Aggregated 1H 2025 domestic sales at $11,448 compared to $12,022 in 1H 2024 were $574 lower, despite the 1H $1,362 lower 2025 domestic sales to PendoTECH. In other words, 1H 2025 domestic sales excluding PendoTECH were $11,184 compared to $10,396 in 1H 2024, 7.6% higher. Domestic sales are invoiced in USD and obviously not subject to foreign currency conversion (FX) rate fluctuations. The components of domestic sales include 1) “direct non-Filshie device sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), 2) “OEM sales” of components and other products manufactured by UTMD for other medical device and non-medical device companies, and 3) “domestic Filshie 10 device sales”. UTMD separates domestic Filshie device sales from other medical device sales direct to medical facilities because UTMD is simply a distributor for Femcare in the U.S. The non-PendoTECH domestic sales increase was because 1H 2025 sales of the Filshie Clip System in the U.S. were $2,146 compared to $2,082, 3% higher than in 1H 2024, and 1H 2025 direct domestic sales of other devices were $7,962 compared to $7,180, 11% higher than in 1H 2024. U.S. Filshie direct sales were 19% of total 1H 2025 domestic sales compared to 17% in 1H 2024. Direct non-Filshie device sales represented 70% of total domestic sales compared to 60% in 1H 2024. In the remaining OEM domestic sales category, which includes PendoTECH, 1H 2025 sales were $1,340 compared to $2,760 in 1H 2024, 51% lower. Domestic OEM sales in 1H 2025 were 12% of total domestic sales compared to 23% in 1H 2024. On the other hand, 1H 2025 international sales to customers outside the U.S. (OUS), were lower than expected. Total OUS sales in 1H 2025 were 15.5% lower at $8,215 compared to $9,718 in 1H 2024. Excluding PendoTECH OUS sales which were in 1Q, 1H 2024 sales were $9,289. So, OUS sales excluding PendoTECH in 1H 2025 were 11.6% lower than in 1H 2024. In both 1H 2025 and 1H 2024, 37% of OUS sales were direct to medical facilities located in Ireland, the UK, France, Canada, Australia and New Zealand. OUS direct to end-user sales are invoiced in foreign currencies. Despite the help from a weaker USD compared to the EUR and GBP in translating shipments invoiced in foreign currencies, 1H 2025 OUS direct sales by UTMD’s Ireland, UK, Australia and Canada subsidiaries were $3,079 compared to $3,609 in 1H 2024. In USD terms, including the impact of FX rate differences, total direct to end-user sales were $530 (14.7%) lower overall, including 27.4% lower in Ireland, 22.1% lower in Canada, 6.6% lower in the UK, 20.6% lower in Australia/New Zealand and 21.4% lower in France. The remaining $5,136 in OUS sales in 1H 2025, which were $973 lower than in 1H 2024, were to distributors in other countries. These sales included export sales from the U.S. to OUS distributors invoiced in USD, and shipments to OUS distributors of products manufactured by UTMD subsidiaries in Ireland and the UK invoiced in EUR and GBP. The timing of shipments to OUS distributors can cause significant fluctuations in quarterly comparisons since distributors tend to order larger quantities each time, in order to minimize transit and other logistical costs. Exports from Utah to OUS distributors invoiced in USD were $69 (3.3%) lower. Shipments from UTMD’s Ireland and the UK subsidiaries to OUS distributors were $904 (22.4%) lower. Shipments of blood pressure monitoring (BPM) kits from Ireland to UTMD’s largest BPM medical device distributor located in China were $71 higher, but Ireland shipments to OUS distributors of other devices were $964 lower. The portion of OUS sales invoiced in foreign currencies in USD terms were 31% of total WW consolidated 1H 2025 sales compared to 33% in 1H 2024. The average USD FX rates increased 1H 2025 total consolidated sales $130 for sales invoiced in foreign currencies. Actually, a stronger GBP and EUR together added $160. The CAD and AUD were weaker. FX rates for income statement purposes are transaction-weighted averages. The average FX rates from the applicable foreign currency to USD during 1H 2025 and 1H 2024 for revenue purposes follow: 1H 2025 1H 2024 Change GBP 1.2977 1.2646 +2.6% EUR 1.1155 1.0787 +3.4% AUD 0.6329 0.6586 ( 3.9%) CAD 0.7094 0.7362 ( 3.6%) The $130 weighted average favorable impact on 1H 2025 foreign currency OUS sales was 2.2%. In constant currency terms, foreign currency sales in 1H 2025 were 18.0% lower than in 1H 2024. 11 The following table provides USD-denominated sales amounts divided into general product categories for total revenues and the subset of OUS revenues: Global revenues by product category : 2Q 2025 2Q 2024 1H 2025 1H 2024 Obstetrics $ 1,025 $ 1,019 $ 2,050 $ 2,044 Gynecology/ Electrosurgery/ Urology 4,807 5,452 9,703 10,912 Neonatal 2,102 1,546 4,084 3,188 Blood Pressure Monitoring and Accessories* 2,019 2,383 3,826 5,596 Total: $ 9,953 $10,400 $19,663 $21,740 OUS revenues by product category : 2Q 2025 2Q 2024 1H 2025 1H 2024 Obstetrics $ 207 $ 167 $ 400 $ 388 Gynecology/ Electrosurgery/ Urology 2,385 3,042 4,952 6,150 Neonatal 365 315 726 711 Blood Pressure Monitoring and Accessories* 1,131 1,045 2,137 2,469 Total: $ 4,088 $ 4,569 $ 8,215 $ 9,718 *includes assemblies and molded components sold to OEM customers. Comments on tariffs Tariffs on materials received from OUS suppliers are included in manufacturing costs, i.e. reducing Gross Profit. Although U.S. tariffs paid by UTMD on certain goods purchased from OUS suppliers have been minimal to date, i.e. $16 in 1H 2025 compared to $15 in 1H 2024, UTMD’s raw material suppliers in the U.S. continue to increase prices, in some cases citing “tariffs” that they paid on raw materials as justification. Although UTMD challenges this input, the second-level tariff cost impact hasn’t been quantifiable. Due to regulatory standards, UTMD can’t easily change suppliers as materials typically need to meet substantial validation for use in its medical devices. However, the more significant potential negative impact on UTMD is “reciprocal tariffs” charged by other countries’ governments on goods sold by UTMD OUS. These tariffs are paid by UTMD’s OUS distributors or direct customers, effectively potentially substantially increasing the prices that OUS distributors and customers have to pay for UTMD devices; therefore decreasing sales. Despite the fact that products may be manufactured in Ireland or the UK and not sold by UTMD in the U.S., recent experience is that foreign governments nevertheless consider the sales as from the U.S. subject to tariffs since the manufacturers, although OUS, are subsidiaries of a U.S. corporate entity. There have been some requested delays in shipments by OUS distributors in 2025 as a result of uncertainty about the timing of possible tariffs that they might have to pay, and don’t feel that they can afford it. As stockholders know, as an example, UTMD’s largest distributor of BPM devices manufactured and sold by UTMD Ltd in Ireland is located in China. For the last 15 years, this distributor annually placed an order for the following year which was by agreement non-changeable and non-cancellable. Shipments to-date in 2025 from UTMD Ireland to China have been on plan, as ordered in late 2024, and $71 higher than in 1H 2024. However, the distributor has recently requested possibly delaying the final $800 (at FX 1.12 USD/EUR) shipment in 2025 to 2026 due to “possible tariffs”. If this should occur, UTMD’s projected year-end 2025 revenues of 5% less than in 2024 sales due to lower PendoTECH OEM demand, would be approximately 7% lower than in 2024 assuming that all else remains on plan. In addition, UTMD’s Ireland Gross Profit margin would suffer as the resulting substantially lower 2H 2025 shipments would not allow the expected absorption of fixed manufacturing overhead costs. Of course, this remains a highly uncertain event as a result of fluctuations in the tariff threat. c) Gross Profit Gross Profit results from subtracting the cost of goods sold, comprised of costs of production, manufacturing engineering, depreciation of equipment, maintenance and repairs, quality assurance including regulatory compliance, and purchasing including freight for receiving materials from suppliers, from revenues. The cost of goods sold is divided into three categories: direct labor, raw materials and manufacturing overhead (MOH). Direct labor and raw materials are predominantly variable costs, i.e. vary directly with revenues. MOH contains many fixed costs consistent with the Company’s infrastructure, for example, supervision and engineering personnel. 12 UTMD’s 2Q 2025 Gross Profit was $658 (10.5%) lower than in 2Q 2024. Gross Profit in 1H 2025 was $1,885 (14.5%) lower than in 1H 2024. The consolidated 2Q 2025 Gross Profit margin was 56.2% compared to 60.1% in 2Q 2024. The 1H 2025 Gross Profit margin was 56.6% compared to 59.9% in 1H 2024. The lower Gross Profit margins were primarily due to Ireland operations, as a result of an unfavorable product mix, lower sales which absorbed less fixed MOH costs, higher raw material costs and an increase in intercompany finished goods inventory manufactured in Ireland which required reserved gross profit. With absorption of MOH helped by higher direct sales, the average Gross Profit margin in the U.S. was consistent with past periods in 2024, and in the preceding 1Q 2025. d) Operating Income Operating Income results from subtracting Operating Expenses from Gross Profit. Operating Expenses are comprised of Sales and Marketing (S&M) expenses, General and Administrative (G&A) expenses and Product Development (R&D) expenses. Operating Income in 2Q 2025 of $3,196 was $242 (7.1%) lower compared to 2Q 2024 Operating Income of $3,438. The lower Operating Income was the result of $658 lower Gross Profit offset by $416 lower Operating Expense, as explained below. UTMD’s 2Q 2025 Operating Income margin (Operating Income as a percentage of sales) remained a healthy 32.1%. Operating Income in 1H 2025 was $6,349 compared to $7,321 in 1H 2024, a decrease of $972 (13.3%), with a continuing healthy 1H 2025 Operating Income margin of 32.3%. The lower Operating Income was the result of $1,885 lower Gross Profit offset by $913 lower Operating Expense, as described below. The following table summarizes Operating Expenses in 2Q and 1H 2025 compared to the same periods in 2024 by Operating Expense (OE) category: OE Category 2Q 2025 % of sales 2Q 2024 % of sales 1H 2025 % of sales 1H 2024 % of sales S&M: $ 524 5.3 $ 546 5.3 $ 1,024 5.2 $ 958 4.4 G&A: 1,740 17.5 2,014 19.4 3,470 17.6 4,219 19.4 R&D: 135 1.3 255 2.4 290 1.5 520 2.4 Total OE: 2,399 24.1 2,815 27.1 4,784 24.3 5,697 26.2 Because of lower S&M expenses in 2Q 2025 along with lower sales, S&M expenses as a percentage of sales remained the same. In 1H 2025, higher expenses with lower sales increased S&M expenses as a percentage of sales to 5.2% from 4.4% in 1H 2024. S&M Operating Expenses were $22 lower in 2Q 2025 and $66 higher in 1H 2025 compared to the same periods in 2024 respectively. UTMD in the U.S. is self-insured for its employee health plan. The lower S&M expenses in 2Q 2025 compared to 2Q 2024 can be explained primarily by a lower medical expense accrual. About two-thirds of the higher 1H S&M expenses were in the U.S., with increases spread about evenly among several categories: salaries and consulting fees, trade show expenses, fees paid to national distributors and lower recovered freight costs reimbursed by customers. The remaining third of the higher 1H 2025 S&M expenses was about evenly split between Ireland and Australia: salaries in Australia and recovered freight costs in Ireland. The impact of differences in FX rates on foreign subsidiary S&M expenses added $4 in 2Q 2025 and $2 in 1H 2025 (see below). G&A expenses dominate UTMD’s total Operating Expense, largely because of non-cash expenses from the amortization of Identifiable Intangible Assets (IIA) associated with the Filshie Clip System and the expenses of current litigation in the U.S. A segmentation of USD-denominated G&A expenses follows: G&A Exp Category 2Q 2025 % of sales 2Q 2024 % of sales 1H 2025 % of sales 1H 2024 % of sales IIA Amort- UK: $ 531 5.3 $ 501 4.8 $ 1,032 5.2 $ 1,005 4.6 Other – UK: 189 173 379 360 U.S. Litigation 280 2.8 635 6.1 587 3.0 1,378 6.3 Other – US: 603 6.1 557 5.4 1,197 6.1 1,158 5.3 IRE: 88 92 172 186 AUS: 16 24 34 66 CAN: 33 32 69 66 Total G&A: 1,740 17.5 2,014 19.4 3,470 17.6 4,219 19.4 13 Total consolidated G&A expenses in 2Q 2025 were $274 lower, and in 1H 2025 were $749 lower than in the same periods in 2024. The primary cause was lower U.S. litigation expenses - $355 lower in 2Q 2025 compared to 2Q 2024, and $791 lower in 1H 2025 compared to 1H 2024. Offsetting the significant G&A expense reduction from lower litigation expenses, foreign currency G&A expenses expressed in USD were increased by FX rate differences by $46 in 2Q 2025 and $38 in 1H 2025. In 2Q 2025, $30 of the $46 higher expense FX impact was the non-cash identifiable intangible asset (IIA) amortization–UK expense which resulted from the 2011 acquisition of Femcare. The IIA amortization expense in GBP was the same in both periods. Similarly, in 1H 2025, $27 of the $38 higher expense FX impact was the non-cash identifiable intangible asset (IIA) amortization–UK. As a side note, the Femcare IIA non-cash amortization expense, which has reduced Operating Income approximately $2 million per year since 2011, will be fully amortized in 1Q 2026. Other-US G&A expenses were $46 higher in 2Q 2025 compared to 2Q 2024, and $39 higher in 1H 2025 compared to 1H 2024. The 2Q 2025 $46 increase was due to $34 higher non-cash stock option expense along with increased independent financial auditor fees and other outside services. The 1H 2025 $39 net higher Other-US G&A expenses were essentially due to $37 higher stock option expense, $24 higher accounting and other outside services, and $12 higher outside director fees offset by $32 lower salaries. Other G&A expenses in the aggregate were similar in both 2025 and 2024 periods. The differences in period-to-period R&D expenses were primarily due to the completion of independent validation of material composition of biopharma sensors. Since all R&D in 2025 was carried out in the U.S., there was no FX rate impact. The impact of differing FX rates in 2025 and 2024 on Operating Expenses expressed in USD was minor. The AUD and CAD were slightly weaker, but the EUR and GBP stronger which helped increase foreign currency Operating Expense when converted to USD by a net $50 in 2Q 2025 and $40 in 1H 2025. The following table summarizes “constant currency” Operating Expenses in 2Q and 1H 2025 compared to the same periods in 2024 by OE category: OE Category 2Q 2025 const FX 2Q 2024 1H 2025 const FX 1H 2024 S&M: $ 520 $ 546 $ 1,022 $ 958 G&A: 1,694 2,014 3,432 4,219 R&D: 135 255 290 520 Total OE: 2,349 2,815 4,744 5,697 e) Non-operating expense/ Non-operating income Non-operating expense includes bank fees and expenses from losses, if applicable, from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms. Non-operating income includes 1) income from rent of underutilized property, 2) investment income (interest on cash balances), 3) royalties received from licensing the Company’s technology, and 4) income from gains, if applicable, from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms. Non-operating income or expense can also include gains or losses from the disposition of assets from time to time. Starting in 2024 for UTMD, there was a new excise tax included in Non-operating expenses: a stock repurchase excise tax included in the so-called “Inflation Reduction Act of 2022”. After the U.S. Treasury and IRS announced regulations governing the stock repurchase excise tax in 2Q 2024, UTMD began reporting the stock repurchase excise tax in its 2Q 2024 Non-operating expenses based on $9,393 in share repurchases made during 1H 2024. The excise tax on share repurchases in 2Q 2025 and 1H 2025 was $35 and $67 respectively. Net non-operating income is Non-operating income minus Non-operating expense during a particular time period. Net Non-operating income in 2Q 2025 was $640 compared to $773 in 2Q 2024. Net Non-operating income in 1H 2025 was $1,345 compared to $1,688 in 1H 2024. With higher cash balances and higher interest rates in 2024, UTMD received approximately $332 more in 1H interest income compared to 1H 2025. Remeasured foreign currency balances generated about $8 less in net Non-operating income in 1H 2025 compared to 1H 2024. f) Income Before Income Taxes (EBT) Consolidated EBT results from adding net Non-operating income to Operating Income. Consolidated 2Q 2025 EBT was $3,835 (38.5% of sales) compared to $4,211 (40.5% of sales) in 2Q 2024. Consolidated 1H 2025 EBT was $7,694 (39.1% of sales) compared to $9,010 (41.4% of sales) in 1H 2024. 14 EBITDA is a non-US GAAP metric that measures profitability performance without factoring in effects of financing, accounting decisions regarding non-cash expenses, capital expenditures or tax environments. Management believes that this operating performance metric provides meaningful supplemental information to both management and investors and confirms UTMD’s ongoing excellent financial operating performance, as well as its ability to sustain performance during a challenging time. Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 2Q 2025 consolidated EBT excluding the remeasured bank balance currency gain or loss (“adjusted consolidated EBITDA”) was $4,671 (46.9% of sales) compared to $4,942 (47.5% of sales) in 2Q 2024. Adjusted consolidated EBITDA was $9,323 (47.4% of sales) in 1H 2025 compared to $10,489 (48.3% of sales) in 1H 2024. The lower EBITDA in both 2Q and 1H 2025 was due to lower Gross Profit. Adjusted consolidated trailing twelve months’ (TTM) EBITDA was $18,686 as of June 30, 2025. Management’s beginning of year EBITDA target of $17-$18 million continues to look achievable. UTMD’s non-US GAAP adjusted consolidated EBITDA is the sum of the elements in the following table, each element of which is a US GAAP number: 2Q 2025 2Q 2024 1H 2025 1H 2024 EBT $ 3,835 $ 4,211 $ 7,694 $ 9,010 Depreciation Expense 206 172 405 327 Femcare IIA Amortization Expense 531 501 1,032 1,005 Other Non-Cash Amortization Expense 8 8 17 18 Stock Option Compensation Expense 86 52 168 130 Interest Expense - - - - Remeasured Foreign Currency Balances 5 (2) 7 (1) UTMD non-US GAAP EBITDA: $ 4,671 $ 4,942 $ 9,323 $ 10,489 g) Net Income Net Income is EBT minus a provision for income taxes. Net Income in 2Q 2025 of $3,048 (30.6% of sales) was 11.7% lower than the Net Income of $3,453 (33.2% of sales) in 2Q 2024. The $405 lower 2Q Net Income was due to $243 lower Operating Income combined with $133 lower net Non-operating income, and a higher estimated average income tax provision rate. The average consolidated income tax provision rate (as a % of the same period EBT) in 2Q 2025 was 20.5% compared to 18.0% in 2Q 2024. Net Income in 1H 2025 of $6,089 (31.0% of sales) was 17.8% lower than the Net Income of $7,409 (34.1% of sales) in 1H 2024. The $1,320 lower 1H 2025 Net Income was due to $972 lower Operating Income combined with $343 lower net Non-operating income, and a higher estimated average income tax provision rate. The average consolidated income tax provision rate (as a % of the same period EBT) in 1H 2025 was 20.9% compared to 17.8% in 1H 2024. The consolidated income tax provision rate varies as the mix in taxable income among U.S. and foreign subsidiaries with differing income tax rates differs from period to period. The basic corporate income tax rates in each of the sovereignties were the same as in the prior year. h) Earnings Per Share (EPS) EPS are consolidated Net Income divided by the number of shares of stock outstanding (diluted to take into consideration stock option awards which are “in the money,” i.e., have exercise prices below the applicable period’s weighted average market value). Because the average exercise price of employee and director options was higher than the ending market price of the stock in both 2Q 2025 and 2Q 2024, as well as in 1H 2025 and 1H 2024, the number of shares added as a dilution factor in both years’ 2Q and 1H were zero. Diluted EPS in 2Q 2025 were $0.939 compared to diluted EPS of $0.978 in 2Q 2024, a 4.0% decrease. Diluted EPS in 1H 2025 were $1.858 compared to diluted EPS of $2.070 in 1H 2024, a 10.3% decrease. The percentage decreases comparing 2Q and 1H 2025 EPS with the prior year’s same periods were substantially lower than the decreases in Net Income as a result of fewer diluted shares. 15 Diluted shares were 3,245,979 in 2Q 2025 compared to 3,531,572 in 2Q 2024. Diluted shares were 3,277,936 in 1H 2025 compared to 3,579,435 in 1H 2024. The lower diluted shares in both periods of 2025 were the result of shares repurchased during 1H 2025. Because the average exercise price of employee options was higher than the ending market price of the stock in both 2Q 2025 and 2Q 2024, the number of shares added as a dilution factor in both 2Q 2025 and 2Q 2024 were zero. The same was true for both 1H 2025 and 1H 2024. The number of shares used for calculating EPS in both years was higher than period-ending outstanding shares because of a time-weighted calculation of average outstanding shares. Outstanding shares at the end of 2Q 2025 were 3,215,901 compared to 3,335,156 at the end of calendar year 2024. The difference was due to 119,255 shares repurchased in 1H 2025. Shares repurchased in 2Q 2025 were 64,988 at an average price of $53.67. Shares repurchased in 1H 2025 were 119,255, at an average price of $56.26. The total cost of repurchasing shares in 1H 2025 was $6,709 plus a 1% excise tax. Outstanding shares one year earlier were 3,498,902 at the end of 2Q 2024. Outstanding shares at the end of calendar 2023 were 3,629,525. The total cost of repurchasing 421,216 shares in the six calendar quarters since the end of 2023 was $26,676 plus a 1% federal excise tax. The Company retains the strong desire and financial ability for repurchasing its shares at a price it believes is attractive for remaining stockholders. The total number of outstanding unexercised employee and outside director options at June 30, 2025 was 97,685 at an average exercise price of $73.76, including shares awarded but not yet vested. This compares to 73,497 unexercised option shares at the end of 2Q 2024 at an average exercise price of $77.01/ share, including shares awarded but not vested. No employee options have been awarded in 2025. Non-qualified option awards totaling 24,600 shares were made to 47 employees and one director in November 2024 at an exercise price of $64.09. i) Return on Equity (ROE) ROE is the portion of Net Income retained by UTMD to internally finance its growth, pay dividends and make share repurchases divided by the average accumulated stockholders’ equity for the applicable time period. Annualized ROE in 1H 2025 (before stockholder dividends) was 10% compared to 12% 1H 2024. The lower 2025 ROE was due to the 18% decline in 1H 2025 Net Income. Targeting a high ROE of 20% remains a financial objective for UTMD management. An increase in average stockholders’ equity occurred even after reductions due to paying cash dividends to stockholders and repurchasing shares. UTMD paid $1,001 ($0.305/share) in dividends to stockholders in 2Q 2025 compared to $1,081 ($0.300/ share) paid in 2Q 2024. The dividends paid to stockholders during 2Q 2025 were 33% of NI. UTMD paid $2,018 ($0.305/share) in dividends to stockholders in 1H 2025 compared to $2,170 ($0.300/ share) paid in 1H 2024. The dividends paid to stockholders during 1H 2025 were 33% of NI. UTMD’s closing share price at the end of 2Q 2025 was $56.92 up 1.6% from the closing price of $56.04 at the end of 1Q 2025, and down 7.4% from the closing price of $61.47 at the end of 2024. The closing share price one year ago at the end of 2Q 2024 was $66.81. Liquidity and Capital Resources j) Cash flows Net cash provided by operating activities, including adjustments for depreciation and amortization and other non-cash expenses along with changes in working capital, totaled $7,337 in 1H 2025 compared to $8,038 in 1H 2024. The $701 lower increase in cash provided by operating activities included $1,320 lower Net Income in 1H 2025 along with a $748 increased use of cash to decrease accrued expenses. The lower contributions to or use of cash were offset by $409 cash provided by lower accounts receivable compared to $351 higher accounts receivable in 1H 2024, and a $466 greater decrease in inventories than in the prior year. Capital expenditures for property and equipment (PP&E) were $235 in 1H 2025 compared to $132 in 1H 2024. The amount invested in 1H 2025 was $171 less than depreciation expense. Depreciation of PP&E was $405 in 1H 2025 compared to $327 in 1H 2024, as new equipment was placed in service for biopharma sensor manufacturing. UTMD made cash dividend payments to stockholders of $2,018 in 1H 2025 compared to $2,170 in 1H 2024. The difference was due to 1.7% higher dividends paid per share than in the previous year, offset by 8.5% lower number of shares due to share repurchases. 16 In 1H 2025, there were no employee or director option exercises. In 1H 2024, UTMD received $390 and issued 7,592 shares of its stock upon the exercise of employee stock options. Option exercises in 1H 2024 were at an average price of $51.39 per share. Management believes that current cash balances, income from operations and effective management of working capital will provide the liquidity needed to finance internal growth plans. The Company intends to utilize cash not needed to support normal operations in one or a combination of the following: 1) in general, to continue to invest at an opportune time in ways that will enhance future profitability; 2) to make additional investments in new technology and/or processes; and/or 3) to acquire a product line or company that will augment revenue and EPS growth and better utilize UTMD’s existing infrastructure. If there are no better strategic uses for UTMD’s cash, the Company will continue to return cash to stockholders in the form of dividends and share repurchases when the stock appears undervalued. k) Assets and Liabilities At June 30, 2025, UTMD’s cash and investments decreased $797 to $82,179 from $82,976 at the end of 2024 as a result of using $8,727 in cash repurchasing UTMD stock and paying shareholder dividends, offset by 1H 2025 Net Income of $6,089. The $1,841 higher cash difference resulted primarily from $579 lower inventories and $463 lower accounts receivable. At June 30, 2025, net Intangible Assets were 13.4% of total consolidated assets compared to 13.5% on December 31, 2024 despite Femcare intangible assets in the UK being valued 9.6% higher as a result of a stronger GBP and total assets being 1% lower. UTMD’s strong 41.9 current ratio at June 30, 2025 was higher than the 25.6 current ratio at December 31, 2024 despite 2% lower current assets, as a result of a 36% decline in accrued liabilities and the final elimination of repatriation tax payable under the 2017 TCJA. The average age of trade receivables was 33 days from date of invoice at June 30, 2025 compared to 40 days at December 31, 2024 based on the most recent calendar quarter of sales. Average inventory turns improved to 2.1 in 2Q 2025 compared to 2.0 for the last quarter of 2024 due to a $579 inventory reduction despite lower sales activity. Both inventory turn numbers after extra safety stocks of raw materials acquired during the COVID pandemic are below management targets. June 30, 2025 total consolidated assets were $120,802, a decrease of $1,736 from December 31, 2024. Current assets were $1,956 lower than at December 31, 2024 because of the $797 decrease in cash, $463 decrease in receivables and $579 decrease in inventories. Net fixed assets (property, plant and equipment) in Utah increased $10 as new acquisitions slightly exceeded depreciation. OUS subsidiary net fixed assets increased $485 despite depreciation which exceeded new acquisitions because of higher FX rates for foreign currency-valued assets in Ireland, the UK, Australia and Canada. For clarity, the net book value of consolidated property, plant and equipment increased $495 at June 30, 2025 from the end of 2024 due to the net effect on OUS asset values of period-ending changed FX rates, $235 in new asset purchases minus $405 in depreciation. June 30, 2025 net intangible assets (goodwill plus other intangible assets) declined $275 from the end of 2024 as a result of $1,048 in amortization and a 9.6% stronger GBP/USD FX rate on UK intangible asset balances. At June 30, 2025, net intangible assets including goodwill were 13% of total consolidated assets compared to 13% at year-end 2024 and 13% at June 30, 2024. Working capital (current assets minus current liabilities) was $92,120 at June 30, 2025 compared to $92,574 at December 31, 2024. Cash balances were 89% of the June 30, 2025 working capital. Current assets at June 30, 2025 compared to December 31, 2024 were $1,956 lower as the result of the $797 decrease in cash combined with a $579 decrease in inventories and a $463 decrease in total receivables. Current liabilities were $1,502 lower at June 30, 2025 compared to December 31, 2024 as the result of a $845 decrease in accrued liabilities and elimination of a $698 remaining repatriation tax payable. The $845 lower accrued liabilities resulted mainly from a $405 lower estimated income taxes liability, a $284 lower employee profit-sharing bonus accrual at mid-year 2025 compared to the end-of-year 2024 accrual and a $127 lower excise tax liability for share repurchases at mid-year 2025 compared to the end-of-year 2024. Management believes that UTMD’s working capital remains more than sufficient to meet operating needs, new capital expenditures, projected cash dividend payments to stockholders and continued share repurchases. June 30, 2025 total consolidated liabilities were $3,269, a decline of $1,842 from December 31, 2024. Current liabilities were $1,502 lower than at December 31, 2024. Long term liabilities were $339 lower, including the deferred tax liability balance resulting from non-tax deductible Femcare IIA amortization expense being $215 lower. 17 The deferred tax liability balance for Femcare IIA ($9,084 on the date of the acquisition), was $389 at June 30, 2025 compared to $604 at December 31, 2024 and $860 at June 30, 2024. Reduction of the deferred tax liability occurs as the book/tax difference of amortization is eliminated over the remaining useful life of the Femcare IIA, i.e. as Femcare pays its taxes in the UK without the benefit of a deduction for IIA amortization expense. UTMD’s total debt ratio (total liabilities/ total assets) at June 30, 2025 was 2.7%, at December 31, 2024 was 4.2%, and at June 30, 2024 was 4.6%. l) Management's Outlook As outlined in its December 31, 2024 SEC 10-K report, UTMD’s plan for 2025 remains to 1) exploit its pre-qualified status to market a line of high-pressure process control transducer configurations directly to biopharmaceutical manufacturers; 2) continue to leverage OUS distribution and manufacturing synergies by further integrating capabilities and resources in multinational operations; 3) focus on defending the proven safety and effectiveness of the Filshie Clip System in the U.S.; 4) introduce additional products helpful to clinicians through product development; 5) continue to achieve excellent overall financial operating performance despite a contraction in revenues; 6) utilize positive cash generation to continue providing cash dividends to stockholders and make open market share repurchases if/ when the UTMD share price seems undervalued; and 7) remain vigilant for affordable accretive acquisition opportunities which may be brought about by difficult economic conditions on small, innovative companies. m) Accounting Policy Changes None. Forward-Looking Information. This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by management based on information currently available. When used in this document, the words “anticipate,” “believe,” “project,” “estimate,” “expect,” “intend” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties and assumptions, including the risks and uncertainties stated throughout the document. Although the Company has attempted to identify important factors that could cause the actual results to differ materially, there may be other factors that cause the forward statement not to come true as anticipated, believed, projected, expected or intended. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those described herein as anticipated, believed, projected, estimated, expected or intended. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and the Company assumes no obligation to update or disclose revisions to those estimates. 18