Morning, everyone. Jeff Elliott with Three Part Advisors. Thanks for joining us. First company of the day we have is UFP Technologies, ticker is UFPT. They're out of Newburyport, Massachusetts. It's our pleasure today to have Mitch Rock, the new CEO as of June 1st. Mitch has been with the company for over 30 years, led the transformation of the company into a Medtech leader in the Medtech space. Also played a huge role in the acquisitions the company has done over the past several years. He's got a good base. We also have Ron Lataille, the CFO, also been with the company for +30 years. They're a client of Three Part Advisors, if anybody would like a meeting, please reach out to us. We're happy to set that up or a follow-up call. With that, I'll just turn it over to Mitch.
Thank you, Jeff. Welcome, everyone. I am Mitch Rock, CEO at UFP, and I am joined by Ron Lataille, my longtime business partner as our CFO. This is a moment, my first investor conference as CEO. I took over last week after 33 years with UFP. After an extraordinary career, Jeff Bailly is now Executive Chairman. Rest assured, same strategy, same playbook, with an expanded team excited about our future. Take a look at this picture. A surgical suite, a patient on the table, a surgeon focused on the procedure, robotic arms draped in sterile barriers. Somewhere in that room, not in the headlines, not on the device label, is UFP.
We made the drape over the robot, we made the foam to prep the surgical incision, we made parts for the wound dressing, and the packaging that kept the implant sterile from our factory to that table. We don't make the devices you've heard of. We help make them work. You all know this slide. Standard forward-looking statements. I'll let you read it on your own time. A few things about UFP. We are a contract development and manufacturing organization, a CDMO, focused on medical devices, sterile packaging, and other highly engineered custom products. 2025 revenue was a little over $600 million. Market cap as of last week was about $1.7 billion. We are in six countries, the U.S., Puerto Rico, Ireland, Mexico, Costa Rica, and the Dominican Republic, with over 5,000 team members. What should you take from those numbers? Scale, but plenty of room to grow.
Geographic reach where our customers need us. Four things that define this business. We're in growing segments. We work with blue-chip customers. The products have long life cycles, 10- 15, 20 years. The switching costs to move away from us are high. Those four together create a compelling opportunity. How should you think about this opportunity, the medical device market, the CDMO sector, and UFP? Start with this. The global medical device market is over half a trillion dollars, and it's growing at 6.3%. That's two or three times GDP. It's made up of +15 segments and about 75 sub-segments. The market's pretty defined. The tailwinds are demographic, aging populations, people living longer, and the human instinct to fix anything that goes wrong with us. There is serial innovation to get better patient outcomes and make us all healthier. Innovation comes with risk.
Layer on regulation, the FDA, a CE mark, parallel quality structures in every one of our customers. This is a risk-averse industry. Even a small change to a device can take forever if it is allowed at all. From an investment perspective, we love this dynamic. Demand is growing, outcomes need to improve, and change is hard. That is where outsourcing comes in. Device companies want to put more of their resources into innovation and commercialization, not making widgets. The outsource spend is estimated to be about $100 billion and growing at 10%, and UFP has less than 1% share. Think of us as picks and shovels for the medical device industries. We do not pick winners and losers at the device level. We sell engineering, materials, and manufacturing to companies trying to win. That gives our investors broad, diversified exposure to med tech without single product risk.
When the industry innovates, we participate. When a segment grows, we grow with it. We believe the space is underappreciated, and we are energized by the opportunity. What do we do specifically? Well, we are a development and manufacturing partner to these device manufacturers, and here is how the business works. We serve three kinds of customers: large global OEMs you have heard of, niche device makers—these are usually single product companies or single category companies—and then well-funded startups. We engage with them across three phases. Early development: we design, prototyping, regulatory strategy, and then we launch, scale, and optimize. This is where we launch the product with some innovative material, and then we take cost out, and at full production, long-term manufacturing revenue with attractive economics.
The key idea here to take away is we get in early, we earn the program, and we ride with it for the life of the device. That is typically a decade or more. All of it is supported by a global manufacturing platform. Six countries on the slide. It is not by accident. Our customers are global. Over the last three or four decades, the global device market has made meaningful investments in these countries, and we sit close to them in the right geographies with the right capabilities. Back to the OR image. This brings us back to the operating room. Look at everything in this picture. Robotic drapes, implants, wound dressings, access ports, patient beds and surfaces, pacemakers. We show six key segments, and UFP has content in all of these.
These are leading companies with leading products, devices that made it through years of design validation and regulatory review. They use our foams, films, fabrics, and other plastics because those materials help their products perform better. We are embedded in the design, qualified into the program, and assuming we do our job, we stay with it for the life of the device. Almost everything you see here is single use. Next time you are in the hospital, look around. Nearly every device is in a sterile barrier, and it gets thrown away after use. Why? Infection risk. This is one of the driving trends in the market. It is estimated that there are about 1.7 million hospital-acquired infections in the U.S. every year and nearly 100,000 deaths. There is lots of innovation through the continuum of care to address this, and UFP is in the right spot.
Differentiation and competitive advantage. There are three things that make us different. One, we design in early. With each one of our technologies, we have a lab model that gives our customers access to engineering, materials, and process expertise at the front end when they're still figuring out what the device should be. That's when influence is the highest, and that's when we earn the program. Two, we scale and optimize. Once a product launches, we commit to taking cost out for our customers year after year. That's the deal, and we honor it. The work we do to get there, process engineering, automation, materials, our global footprint, is what scales the platform. As the platform scales, operating income grows. That's the model. Three, durable relationships. These programs last 10, 15, 20 years, and the switching costs are significant. Qualifications, validations, regulatory filings, supply chain re-qualifications.
Once we're in, we tend to stay in. One thing that often gets missed is our supplier partnerships. We love our customers, but we love our suppliers, too. We bring them into new opportunities, and in return, in certain situations, they give us exclusive materials or favorable pricing or preferred access. It's a win-win that compounds. We'll take you back to the segments. Remember I said there's 15 segments, 75 subsegments. Right now, UFP has six segments where we have meaningful exposure, and this evolves. Historically, we've grown faster in the segment than the segment itself, and this really is a testament to making investments to be more valuable to our customers. In each one, the same pattern. Market-leading clients with market-leading products with UFP's technology embedded to help them make these products work. Just a quick review.
Robotic-assisted surgery, arguably one of the fastest-growing categories in med tech. Patient beds and handling. The thesis here is protecting both the patient and the healthcare worker from injury. The cardiovascular space procedures continue to shift from open to minimally invasive. Infection control, we covered. The hospital-acquired infection problem is not going away. Orthopedics and spines, same demographics, more procedures, more implant, and you've all heard more pickleball. Wound care, and in this case, we're kind of embedded with the market leaders. Underneath this, we have additional exposure. Think of it like the bullpen. Endoscopy, imaging, ophthalmology, renal care, drug delivery, aesthetics, in vitro diagnostics. The breadth matters, and so does the flexibility with the business model.
Our model lets us extend into new customers, new segments, new technologies as the market evolves, and that's how we keep finding the next program, the next customer, and the next company to join our campaign. Strategy to win. The strategy is straightforward, and we've been executing it for years. Organic growth plus customer-centric M&A, targeting a blended annual growth rate of 12%-18%, basically doubling the company every five years. On the organic growth side, we just have to innovate and grow. We keep deploying our materials technologies into faster-growing segments, keep converting early development partnerships into long-term manufacturing programs, keep using our scale to grow with our customers, and take costs out as we go. On the M&A side, we onboard acquired companies into a decentralized operating model. We use M&A to add segments, add customers, add complementary technologies.
We use it to expand geography and add operating talent. The companies on the next slide, DAS Medical, AJR, AQF, Marble Medical, Contech Medical, Dielectrics, Advant Medical, Welch Fluorocarbon, TPI, and UNIPEC, every one of them was customer-centric. None were financial only. Every one of them helped advance the strategy. The track record really speaks for itself. It's kind of this is where we've been over the last five years. Revenue's up 3.4x . Adjusted operating margin, we're proud of this, 10%-17.1% over the same period. Gross margins were 28.6% in 2025. The logos at the bottom, each one of them added something specific. Each one is in the platform today, and now that we've compounded, now what's next? A note on framing this. We don't give guidance. We give three- to five-year targets.
We're going to be consistent with this, you can expect us to maintain them and to stay focused on growing revenue and operating income. The targets are revenue growth of 12%-18%, gross margins of 28%-31%, and adjusted operating margin of 17%-20%, continuing to expand with our long-term target. All of this is supported by disciplined capital allocation. We invest where we have technology and segment advantage. We make acquisitions that fit our playbook. We manage leverage with discipline, and you can expect the same from me and from Ron. This is an exciting slide for me. This team's been together for a while. We've been executing over the last few years. As I mentioned, I took over from Jeff last week. He's now our Executive Chairman. He's still engaged and supportive.
Ron, our CFO, we've been working together for nearly three decades. Ryan Stafford recently joined us as General Counsel and Head of HR, after a great run at another public company. Jason Holt came through ITW and has been with us now eight years. Marcelo, Daniel, and Bart all joined us through acquisitions, AJR, DAS, and Dielectrics, respectively, and they're now important parts of our platform. Jeff Masters has been almost like a consigliere to me, and been with UFP for 16 years and helped shape our Medtech strategy. We have a powerful combination of UFP professionals from the outside making us better and leaders from companies that joined our platform. There's another layer of leaders below that that are doing a great job for us. Why invest now? We call this a platform built to compound for four reasons why.
One, we have a large, growing, fragmented market. $0.5 Billion , but more importantly, $100 billion in outsourced spend that's grown at double digits, we have less than 1% share, there's plenty of runway. Two, differentiated technology embedded with our customers. Once we're in the design, we tend to stay there. Three, better patient outcomes drive durable growth. Those two are not separate. When we help a customer's device work better, we earn the right to be on the next one. Four, we have an experienced team with an operating playbook and capital discipline. Let's go back to that surgical suite. Every device in that room has a story behind it. Engineers, suppliers, a manufacturing partner. UFP is in that story more than people realize. We're getting in earlier, staying longer. That's the company. Thank you. I'm happy to take your questions. Go.
That was a great presentation.
Thank you.
You and the company. Congratulations on your new role. I got a few. Industry growth, I think it was 6% on medical devices, 10% outsourcing. You guys planning to grow 10%- 12%? Is that the top line, or you're just planning to keep your growth versus between-
I'm going to repeat the question. He's asking about industry growth, outsourcing growth, and then what UFPT's growth targets are. Go do your work on the market. Macro, medical device industry is growing at 6-ish%, a little over 6%. Outsource spend is estimated to be growing at 10%, that's $100 billion. Our growth target is 12%-18%, which is a combination of organic and acquisition. Kind of think half and half.
Great. On the acquisition front, what are you looking for in the technologies and the products? What were you looking for?
Our North Star is really adding more value to our clients. We really think we have a broad exposure to clients, so we look for clients that are leading in the space, that have a product that's gone through the regulatory process, and we want to have technology that's embedded into those products. We either have it or we want to acquire it.
Got it. Are you a single-source kind of thing, or do you tend to be more than one brand, kind of like?
He's asking the question about single-sourced or dual-sourced. Broadly, if you look at our whole portfolio, there's a number of things that we're single-sourced on, and then there are some things where we're dual-sourced. Ultimately, the market wants some continuity and risk mitigation. As you get bigger, that tends to be a dynamic that you have to manage, or as a program gets bigger. Go ahead.
Question for your presentation.
Thank you.
Regarding the six segments, excuse me, is there one of those or two segments that we should focus on as investors that you're looking to grow or that have a greater run rate, like orthopedics versus robotics versus patient versus wounds? Are they all equal in your mind?
The question is about prioritizing the segments. We have disclosed that our two largest segments are the first two, robotic surgery and patient beds. Those are large for us with large client exposure. Those have nice growth trajectories. We are probably disproportionately investing in those spaces at the moment, but this does evolve over time. I think that our exposure to the cardiovascular and the orthopedic space is usually overlooked by investors because we're very embedded in those spaces, and those are mid to high single-digit growers for us that we're continuing to be excited about. Any others?
I got a couple more.
Sure, go for it. Yeah. We're here.
Is return on equity, return on invested capital, is that a focus? Is it a driver or is that in your long-term kind of plan type thing?
The answer is yes. There's a new incentive plan that our comp committee put in place this year. We have a three-year plan where return on invested capital is part of that.
It's 50%.
50%.
ROIC is 50%.
Yeah.
What are the other parts that have to do with the overall? Is it the other 50%?
Operating income dollars.
Okay.
Yeah.
Cumulative operating income dollars over a three-year period balanced with ROIC, minimum ROIC.
Yeah.
Okay.
New administration, new comp package, more shareholder-friendly. Sure.
Just a question on the contract design for you. When you sign up for contracts with your customers, are there annual step downs in price similar to what happens in the auto industry, or are there no such?
The question is around contracts and annual step downs. Broadly, the answer is no. It's not like the auto industry. That being said, each situation is different. Okay. Go ahead.
AI is everywhere. How are you guys realizing AI and how it's going to impact your business, whether internally or with your customers?
It's a good question. We get it. The question's about AI. I think we're developing AI literacy across the enterprise and looking for ways where we can get leverage with it. Our industry, the business model, we tend to be a laggard in technology adoption. That being said, we're looking for ways to make a meaningful impact with it.
Is any of your production done overseas?
More than 50%. Really a nearshore platform. We have 5,000 team members. More than half of them are in the Dominican Republic. We have two businesses in the Dominican Republic, DAS Medical and AJR. Those support our two largest segments, which is robotic surgery and patient beds. Tends to be high labor content widgets that are hard to automate.
I'll throw some questions.
Sure.
Are there any different strategies that you're taking to help grow?
I think we've laid it out for you, but you're good first question. This is a question from a high school intern, so we appreciate that. Thank you.