Shares of Utah Medical Products, Inc. (UTMD Quick QuoteUTMD - Free Report) have gained 0.8% since the company reported its earnings for the quarter ended March 31, 2025, underperforming the broader S&P 500 index, which rose 2.8% during the same period. Over the past month, UTMD shares have declined 3.2%, lagging significantly behind the S&P 500’s 12.3% growth, suggesting muted investor enthusiasm following the latest quarterly results.

For the first quarter of 2025, UTMD reported earnings per share (EPS) of 92 cents, a 16% decline compared to $1.09 in the year-ago quarter. The lower EPS decline relative to net income was due to a reduced share count from repurchases, which offset some of the earnings pressure. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Net sales of $9.7 million represented a 14.4% decline from the $11.3 million posted in the same quarter last year. This decline flowed through the income statement, with gross profit declining 18.1% year over year to $5.5 million. 

Operating income dropped 18.8% to $3.2 million, while net income decreased 23.1% to $3 million. 

Business Metrics Show Mixed Trends

Gross profit margin compressed to 57% from 59.7%, as the company struggled to align fixed manufacturing overhead costs with the volume decline. 

Operating income margin slipped to 32.5% from 34.2%, while the net income margin contracted to 31.3% from 34.9%. Notably, UTMD’s domestic direct sales rose 11.6% year over year, driven by recovering demand for neonatal intensive care unit (NICU) devices, which had previously been affected by supply chain disruptions. However, this growth was outweighed by a steep 61.3% drop in U.S. OEM sales, largely due to a sharp reduction in purchases by PendoTECH.

International sales also declined 19.8% year over year, impacted both by lower volumes and adverse currency effects.

Management Commentary and Performance Drivers

Management attributed the sales shortfall primarily to reduced OEM orders from PendoTECH, which accounted for 91% of the consolidated sales decline. The gross margin erosion was tied to fixed overhead costs that did not fall in proportion to lower revenue. On the expense side, the company managed to trim general and administrative costs, with litigation expenses declining. However, sales and marketing expenses increased due to higher employee costs and trade show activity. R&D spending was down, reflecting the absence of one-time certification expenses incurred in the prior year.

Management also noted a higher effective tax rate of 21.2% in the quarter, up from 17.6% last year, which further pressured net income. This was due to a shift in income mix toward higher-tax jurisdictions and a tax provision related to repatriated earnings.

Outlook and Forward-Looking Guidance

While no specific financial forecasts were issued in the earnings release, management reiterated that the first-quarter performance aligns with its full-year expectations outlined in the 2024 10-K filing. It anticipates that revenue and gross margin levels seen in the first quarter will remain consistent through the remainder of the year. The company targets an adjusted EBITDA of approximately $18 million for 2025, supported by a trailing twelve-month EBITDA of $18.96 million as of March 31, 2025.

Other Developments

During the quarter, UTMD repurchased 54,267 shares at an average price of $59.35, using $3.2 million in cash. This followed a similar repurchase of 43,108 shares in the year-ago quarter. The company also paid $1 million in dividends during the period. Despite these outflows, UTMD maintained a strong financial position, with cash and investments totaling $83.3 million at the end of the quarter, up slightly from $83 million at year-end 2024. Stockholders' equity stood at $117 million, essentially unchanged from the prior quarter, underscoring the company’s financial discipline amid capital return activities.