Press release·03/03/2025 21:21:06

Overview

The Company is a designer and custom manufacturer of comprehensive solutions for medical devices, sterile packaging, and other highly engineered custom products. The Company is an important link in the medical device supply chain and a valued outsource partner to many of the top medical device manufacturers in the world. The Company’s single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, surfaces and support, wound care, wearables, orthopedic soft goods, and orthopedic implants.

The Company’s current strategy includes further organic growth and growth through strategic acquisitions. The Company completed four strategic acquisitions during the year ended December 31, 2024. The acquired operations primarily serve the medical market and contributed to an overall 26.1% increase in net sales for the year. Organic net sales grew 8.5%, fueled by strong sales in the robotic surgery and infection prevention markets. Net sales relating to the Company’s largest customer, Intuitive Surgical SARL, were 28.8% of its net sales for the year ended December 31, 2024. This increase in net sales as well as strong margins and the leverage of relatively fixed SG&A costs, allowed the Company to generate a 40.3% and 31.3% increase in operating income and net income, respectively, for the year ended December 31, 2024.

2024 Compared to 2023

Net Sales

Net sales increased 26.1% to $504.4 million for the year ended December 31, 2024, from net sales of $400.1 million for the same period in 2023. The increase in net sales was primarily due to increased net sales from newly acquired companies of $70.3 million as well as 8.5% increased organic net sales fueled by increases in the robotic surgery and infection prevention markets. Overall net sales to customers in the medical market increased 30.2% while net sales to customers in other markets were flat. Medical net sales represented 89.4% and 86.6% of overall Company net sales in 2024 and 2023, respectively.

Gross Profit

Gross profit as a percentage of net sales (“Gross Margin”) increased to 29.1% for the year ended December 31, 2024, from 28.1% in 2023. The increase in gross margin was primarily due to the accretive margins from the Company’s recent acquisitions as well as increased manufacturing efficiencies and the containment of fixed overhead costs, despite the absorption of approximately $1.1 million in purchase accounting expenses.

Selling, General and Administrative Expenses

Selling, General, and Administrative Expenses (“SG&A”) increased approximately 22.3% to $62.2 million for the year ended December 31, 2024, from $50.9 million in 2023, largely due to SG&A from the Company’s recent acquisitions as well as increased performance-based compensation and professional fees. As a percentage of net sales, SG&A decreased to 12.3% for the year ended December 31, 2024, from 12.7% for the same period in 2023 reflecting the leverage of the net sales increase over relatively fixed SG&A.

Acquisition Costs

The Company incurred approximately $2.5 million in costs associated with acquisition related activities which were charged to expense for the year ended December 31, 2024.

Change in fair value of contingent consideration

The change in fair value of contingent consideration for the acquisitions for the year ended December 31, 2024, resulted in an expense of approximately $1.0 million.

Interest expense, net

The Company had net interest expense of approximately $8.1 million and $3.6 million for the year ended December 31, 2024 and 2023, respectively. The increase in net interest expense was primarily due to higher debt related to 2024 acquisitions.

Income Taxes

The Company recorded income tax expense, as a percentage of income before income tax expense, of 19.2% for the year ended December 31, 2024 compared to 16.7% for the same period in 2023. The increase in the effective tax rate was largely due to the difference in discrete items during the two periods as well as more United States based income in 2024 as a result of the recent acquisitions.

Liquidity and Capital Resources

The Company generally funds its operating expenses, capital requirements, and growth plan through internally generated cash and bank credit facilities. Net cash provided by operations for the year ended December 31, 2024 was approximately $66.6 million. Net cash used in investing activities for the year ended December 31, 2024 was approximately $210.2 million, primarily for the acquisition of several companies. Net cash provided by financing activities was approximately $152.4 million for the year ended December 31, 2024, primarily from borrowings under the Company’s Third Amended and Restated Credit Agreement.

At December 31, 2024, the Company had approximately $189.4 million in outstanding borrowings under the Third Amended and Restated Credit Agreement, and also had approximately $0.7 million in standby letters of credit outstanding. The Company believes that its existing resources, including its revolving credit facility, together with cash expected to be generated from operations, will be sufficient to fund its cash flow requirements, including capital asset acquisitions, through the next twelve months.

Critical Accounting Estimates

The Company’s significant accounting policies include the valuation of intangible assets and contingent consideration liability acquired in business combinations. The fair value of identifiable intangible assets and contingent consideration liability are based on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. The use of alternative valuation assumptions could result in different purchase price allocations and recognized amortization expense and contingent consideration expense or benefit in current and future periods.