via NewMediaWire - In the first calendar quarter (1Q) of
2023, Utah Medical Products, Inc. (Nasdaq: UTMD) attained financial
results consistent with achieving its goals previously announced
for calendar year 2023.
Summary of results.
The following is a summary comparison of 1Q 2023
with 1Q 2022 income statement measures:
Revenues
(Sales): |
+
1.6 |
% |
Gross Profit
(GP): |
+
4.1 |
% |
Operating
Income (OI): |
(
1.9 |
%) |
Net Income
(NI): |
+19.2 |
% |
Earnings Per
Share (EPS): |
+20.2 |
% |
Profit margins in 1Q 2023 compared to 1Q 2022
follow:
|
1Q 2023 (JAN –
MAR) |
1Q 2022 (JAN –
MAR) |
Gross Profit
Margin (gross profits/ sales): |
62.6 |
% |
61.1 |
% |
Operating
Income Margin (operating income/ sales): |
35.5 |
% |
36.7 |
% |
EBT Margin
(profits before income taxes/ sales): |
40.9 |
% |
36.8 |
% |
Net Income
Margin (profit after taxes/ sales): |
33.7 |
% |
28.7 |
% |
Currencies in this release are denoted as $ or USD
= U.S. Dollars; AUD = Australia Dollars; £ or GBP = UK Pound
Sterling; C$ or CAD = Canadian Dollars; and € or EUR = Euros.
Currency amounts throughout this report are in thousands, except
per share amounts and where noted.
Domestic sales in 1Q 2023 were 10% lower, but
sales outside the U.S. (OUS) were up 23% in USD terms compared to
1Q 2022. Using the same foreign currency exchange (FX) rates for
sales not invoiced in USD, i.e. in “constant currency” terms, OUS
sales were up 28%. Because 28% of consolidated USD sales were
invoiced in foreign currencies, the change in FX rates for OUS
sales did have an impact on period-to-period relative financial
results. FX rates for income statement purposes are
transaction-weighted averages. The average FX rates from the
applicable foreign currency to USD during 1Q 2023 and 1Q 2022
follow:
1Q
2023 1Q 2022
Change
GBP
1.215
1.339 (9.3%)
EUR
1.078
1.126 (4.2%)
AUD
0.685
0.724 (5.3%)
CAD
0.739
0.789 (6.3%)
The weighted-average negative impact on foreign
currency sales was 5.9%, reducing reported USD sales by $223
relative to the same foreign currency sales in 1Q 2022. In constant
currency terms, total consolidated 1Q 2023 sales were up $420
(+3.4%).
Due mostly to better absorption of manufacturing
overhead costs in Ireland and lower employee healthcare plan costs
in the U.S., UTMD was able to increase its 1Q 2023 Gross Profit
Margin (GPM), gross profits/sales, compared to 1Q 2022.
Consolidated OI in 1Q 2023 at $4,439 (35.5% of
sales) was $84 lower than 1Q 2022 OI of $4,522 (36.7% of sales).
Although UTMD’s 1Q 2023 Operating Income Margin (OIM) benefitted
from higher sales, a higher GPM and a stronger USD which reduced
OUS operating expenses in USD terms by $80, it suffered more from
the $348 (2.8% of sales) higher litigation expenses compared to 1Q
2022. The $1,105 per quarter straight-line amortization of the
$21,000 purchase price that UTMD paid CSI in early 2019 to acquire
the remaining 4.75 years’ exclusive U.S. Filshie distribution
rights was 8.8% of 1Q 2023 sales compared to 9.0% of 1Q 2022 sales.
The purchase price of CSI’s remaining exclusive distribution rights
was recognized as an identifiable intangible asset (IIA) which will
be fully amortized in October 2023. IIA amortization expense in
total, including that remaining from the 2011 Femcare acquisition,
which comprises a significant portion of General &
Administrative (G&A) operating expenses, was 12.7% of 1Q 2023
consolidated sales compared to 13.3% of 1Q 2022 consolidated sales.
In other words, UTMD’s OIM excluding IIA amortization and
litigation expense was 51.4% in 1Q 2023 compared to 50.5% in 1Q
2022.
Income Before Tax (EBT) benefitted from much
higher interest income on UTMD’s cash reserves. Non-operating
income (NOI) in 1Q 2023, in which interest income is captured, was
$681 compared to $8 in 1Q 2022. As a result of $589 higher EBT and
a lower income tax provision rate due to a portion of NOI received
from tax exempt interest, UTMD’s Net Income Margin (NIM) in 1Q 2023
at 33.7% was substantially higher than the 28.7% NIM in 1Q 2022.
UTMD’s consolidated income tax provision rate in 1Q 2023 was 17.7%
of EBT compared to 22.0% in 1Q 2022. The result was that 1Q 2023 NI
was 19.2% higher, and 1Q 2023 Earnings Per Share were 20.2% higher,
than in 1Q 2022.
UTMD’s March 31, 2023 Balance Sheet, in the
absence of debt, remained strong. Ending Cash and Investments were
$80.9 million on March 31, 2023 compared to $75.1 million on
December 31, 2022. Stockholders’ Equity was up $3.8 million in the
first three month calendar period from December 31, 2022. 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 1Q 2023
and the end of 1Q 2022 follow:
3-31-23 3-31-22
Change
GBP
1.237
1.315 (6.0%)
EUR
1.087
1.110 (2.0%)
AUD
0.670
0.750 (10.6%)
CAD
0.739
0.801 (7.7%)
Sales.
Total consolidated 1Q 2023 UTMD sales were $197
(+1.6%) higher than in 1Q 2022. Constant currency sales were $420
(+3.4%) higher. U.S. domestic sales were 10.0% lower and OUS sales
were 22.9% higher despite an average 5.9% stronger USD. Because of
the relatively short span of time, results for any given
three-month period in comparison with a previous three month period
may not be indicative of comparative results for the year as a
whole.
Domestic sales in 1Q 2023 were $7,185 compared to
$7,984 in 1Q 2022. The components of domestic sales include 1)
“direct sales” of UTMD’s medical devices to user facilities (and
med/surg stocking distributors for hospitals), excluding Filshie
device sales, 2) “OEM sales” of components and other products
manufactured by UTMD for other medical device and non-medical
device companies, and 3) “Filshie device sales”, manufactured by
Femcare and distributed in the U.S. by UTMD.
- Direct sales, representing 50% of total domestic sales, were
$372 (9.3%) lower in 1Q 2023 than in 1Q 2022. This was due to
continuing supply chain disruption, in particular independent
sterilizer capacity constraints.
- OEM sales, representing 32% of total domestic sales, were $375
(+14.0%) lower. U.S. sales to UTMD’s largest OEM customer which had
grown rapidly in recent years were $391 lower in 1Q 2023 compared
to 1Q 2022.
- Filshie device sales were $51 (3.9%) lower in 1Q 2023 compared
to 1Q 2022.
OUS sales in 1Q 2023 were $5,335 compared to
$4,339 in 1Q 2022. OUS sales invoiced in GBP, EUR, AUD and CAD
currencies were reduced $223 as a result of changes in FX rates
resulting from an average 5.9% stronger USD. In other words,
constant currency OUS sales were $5,558, which was 28.1% higher
than in 1Q 2022. The foreign currency OUS sales in 1Q 2023 were
$3,558, which was 67% of OUS sales and 28% of total consolidated
sales. Foreign currency OUS sales in 1Q 2022 were $2,906, which was
67% of OUS sales and 24% of total consolidated sales.
Gross Profit (GP).
GP results from subtracting the costs of
manufacturing products, including quality assurance and freight for
receiving raw materials from vendors, from revenues. UTMD’s GP was
$310 (+4.1%) higher in 1Q 2023 than in 1Q 2022. GP increased more
than revenues due primarily to two favorable period-to-period
differences: better absorption of manufacturing overhead costs in
Ireland as a result of production which increased more than
overhead costs increased, and 2) much lower healthcare costs for
U.S. employees compared to 1Q 2022 under UTMD’s self-funded plan.
The Company selectively raised product prices during 1Q 2023 based
on specific input costs from vendors. As another cost-of-living pay
adjustment for employees becomes effective in April 2023, the
Company still expects to maintain its GPM for the year as a whole
consistent with 2022.
Operating Income (OI).
OI results from subtracting Operating Expenses
(OE) from GP. OE is comprised of G&A expenses, sales and
marketing (S&M) expenses and product development (R&D)
expenses. Consolidated OE were $3,404 in 1Q 2023 (27.2% of sales)
compared to $3,010 in 1Q 2022 (24.4% of sales). Ignoring the
portion of OE that were litigation expenses and non-cash IIA
amortization expenses, OE in 1Q 2023 were 11.2% of consolidated
sales compared to 10.6% of sales in 1Q 2022. A stronger USD in 1Q
2023 compared to 1Q 2022 helped OI performance by reducing OUS OE
in USD terms by $80, comprised of reducing IIA amortization expense
by $49 and all other OUS OE by $31.
Consolidated G&A expenses were $2,873 (22.9%
of sales) in 1Q 2023 compared to $2,551 (20.7% of sales) in 1Q
2022. G&A expenses include litigation costs which were $409 in
1Q 2023 compared to $61 in 1Q 2022. The G&A expenses in 1Q 2023
included $483 (3.9% of sales) of non-cash expense from the
amortization of IIA resulting from the 2011 Femcare acquisition,
which were $532 (4.3% of sales) in 1Q 2022. The lower USD IIA
amortization expense was the result of a stronger USD, as the
Femcare amortization expense in GBP in 1Q 2023 was the same as in
1Q 2022. In addition, G&A expenses in both periods included
$1,105 IIA amortization expense resulting from the purchase of the
CSI remaining U.S. exclusive Filshie distribution rights, which
represented 8.8% of 1Q 2023 sales compared to 9.0% of 1Q 2022
sales. Excluding the litigation and non-cash IIA amortization
expenses, G&A expenses were $876 (7.0% of sales) in 1Q 2023
compared to $853 (6.9% of sales) in 1Q 2022. The change in FX rates
reduced 1Q 2023 OUS G&A expenses by $74, comprised of reducing
IIA amortization expense by $49 and all other G&A expenses by
$24.
S&M expenses were $387 (3.1% of sales) in 1Q
2023 compared to $336 (2.7% of sales) in 1Q 2022. The change in FX
rates reduced 1Q 2023 OUS S&M expenses by $6.
R&D expenses in 1Q 2023 were $144 (1.1% of
sales) compared to $123 (1.0% of sales) in 1Q 2022. The change in
FX rates reduced 1Q 2023 OUS R&D expenses by $1.
In summary, OI in 1Q 2023 was $4,439 (35.5% of
sales) compared to $4,522 (36.7% of sales) in 1Q 2022. The lower OI
Margin was due to the $348 higher litigation expenses.
Income Before Tax (EBT).
EBT results from subtracting net non‑operating
expense (NOE) or adding net non-operating income (NOI) from or to,
as applicable, OI. Consolidated 1Q 2023 EBT was $5,119 (40.9% of
sales) compared to $4,530 (36.8% of sales) in 1Q 2022. The $589
(+13.0%) higher 1Q 2023 EBT compared to 1Q 2022 was the result of
$673 higher NOI. NOE/NOI includes the combination of 1) expenses
from loan interest and bank fees; 2) expenses or income from losses
or gains from remeasuring the value of EUR cash bank balances in
the UK, and GBP cash balances in Ireland, in USD terms; and 3)
income from rent of underutilized property, investment income and
royalties received from licensing the Company’s technology. NOI in
1Q 2023 included $646 higher interest income on UTMD’s cash
balances.
The EBT of Utah Medical Products, Inc. in the U.S.
was $2,562 in 1Q 2023 compared to $2,916 in 1Q 2022. The EBT of
Utah Medical Products, Ltd (Ireland) was EUR 1,962 in 1Q 2023
compared to EUR 1,806 in 1Q 2022. The EBT of Femcare Group Ltd
(Femcare Ltd., UK and Femcare Australia Pty Ltd) was GBP 23 in 1Q
2023 compared to GBP (159) in 1Q 2022. The 1Q 2023 EBT of Utah
Medical Products Canada, Inc. was CAD 158 in 1Q 2023 compared to
CAD 154 in 1Q 2022.
Excluding the noncash effects of depreciation,
amortization of intangible assets and stock option expense, 1Q 2023
consolidated EBT excluding the remeasured bank balance currency
gain or loss and interest expense (“adjusted consolidated EBITDA”)
were $6,919 compared to $6,371 in 1Q 2022, an 8.6% increase.
Management believes that the 1Q 2023 operating performance provides
a start that is consistent with achieving its financial objectives
for the calendar year 2023, as previously provided in its 2022 SEC
10-K Report. UTMD’s trailing last twelve-month EBITDA was
$28,439.
Net Income (NI).
NI in 1Q 2023 of $4,214 was 19.2% higher than the
NI of $3,534 in 1Q 2022. UTMD’s NI Margin, NI divided by
consolidated sales, was 33.7% in 1Q 2023 and 28.7% in 1Q 2022. The
average consolidated income tax provision rates (as a % of EBT) in
1Q 2023 was 17.7% and in 1Q 2022 was 22.0%. The lower provision
rate in 1Q 2023 resulted primarily from a portion of interest
income that is tax-exempt.
Earnings per share (EPS).
EPS in 1Q 2023 were 20.2% higher than in 1Q 2022.
UTMD’s increase in NI was leveraged for EPS as a result of 28,629
fewer diluted shares used to calculate EPS in 1Q 2023 compared to
1Q 2022. Diluted shares were 3,636,286 in 1Q 2023 compared to
3,664,915 in 1Q 2022. Outstanding shares were 3,628,067 at the end
of 1Q 2023. The number of shares used for calculating EPS was
higher than ending shares because of a time-weighted calculation of
average outstanding shares plus dilution from unexercised employee
and director options. The total number of outstanding unexercised
employee and outside director options at March 31, 2023 was 66,883
at an average exercise price of $73.64, including shares awarded
but not yet vested. This compares to 67,433 unexercised option
shares at the end of 2022 at an average exercise price of $73.66/
share, including shares awarded but not vested. The difference was
due to 300 employee option exercises and 250 cancellations during
1Q 2023. The number of shares added as a dilution factor in 1Q 2023
was 8,456 compared to 10,125 in 1Q 2022.
Outstanding shares at the end of 1Q 2023 were
3,628,067 compared to 3,627,767 at the end of calendar year 2022.
The difference was due to 300 employee option exercises during 1Q
2023.
There were no stock repurchases in 1Q 2023. During
the last year since the end of 1Q 2022, UTMD repurchased 30,105 of
its shares. No options were awarded in 1Q 2023. During the last
year since the end of 1Q 2022, 20,600 options were awarded to 40
employees at an exercise price of $82.60.
UTMD paid a $1,070 ($0.295/share) cash dividend to
stockholders in 1Q 2023. UTMD did not pay a cash dividend to
stockholders in 1Q 2022 because the special $7,309 ($2.00/share)
dividend, which was declared in 4Q 2021, was paid in December
before the end of the 2021 calendar year instead of in January
2022.
During 1Q 2023 and 1Q 2022, UTMD did not
repurchase its shares. In 2Q 2022, UTMD repurchased 30,105 shares
at $82.88 per share. The Company retains the strong desire and
financial ability for repurchasing its shares at a price it
believes is attractive for remaining stockholders. UTMD’s closing
share price at the end of 1Q 2023 was $94.77, down 6% from the
$100.53 closing price at the end of 2022. The closing share price
at the end of 1Q 2022 was $89.86.
Balance Sheet.
At March 31, 2023 compared to three months earlier
at the end of 2022, UTMD’s cash and investments increased $5.9
million to $80.9 million as a result of profitable operations. At
March 31, 2023, net Intangible Assets declined to 17.5% of total
consolidated assets from 19.2% on December 31, 2022. Primarily as a
result of hedging for supply chain disruption, March 31, 2023
inventories increased another $1.1 million from the end of 2022.
The extra raw material purchases helped reduce average inventory
turns from 2.7 at the end of 1Q 2022 to 2.0 at the end of 1Q 2023.
Because cash and inventories increased substantially while current
liabilities remained about the same, UTMD’s strong current ratio
improved to 15.7 at March 31, 2023 from 13.0 at March 31, 2022.
Consolidated Accounts Receivable (net of allowances) declined $1.9
million at March 31, 2023 compared to March 31, 2022 as a result of
the aging of receivables improving to an average of 27 days on a
rolling sales quarter basis compared to 42 days one year ago.
As of March 31, 2023, Stockholders’ Equity
increased $8.8 million compared to a year earlier at March 31, 2022
despite a reduction in Stockholders’ Equity from the $4.2 million
($1.17/ share) in stockholder cash dividends paid during the last
twelve months. During 1Q 2023, Stockholders’ Equity increased $3.8
million from the end of 2022.
Financial ratios as of March 31, 2023 which may be
of interest to stockholders follow:
1) Current Ratio =
15.7
2) Days in Trade
Receivables (based on 1Q 2023 sales activity) = 27
3) Average Inventory
Turns (based on 1Q 2023 CGS) = 2.0
4) 2023 YTD ROE
(before dividends) = 14.5%
Investors are cautioned that this press release
contains forward looking statements and that actual events may
differ from those projected. Risk factors that could cause results
to differ materially from those projected include global economic
conditions, market acceptance of products, regulatory approvals of
products, regulatory intervention in current operations, government
intervention in healthcare and the economy in general, tax reforms,
the Company’s ability to efficiently manufacture, market and sell
products, cybersecurity and foreign currency exchange rates, among
other factors that have been and will be outlined in UTMD’s public
disclosure filings with the SEC.
Utah Medical Products, Inc., with particular
interest in health care for women and their babies, develops,
manufactures and markets a broad range of disposable and reusable
specialty medical devices recognized by clinicians in over one
hundred countries around the world as the standard for obtaining
optimal long term outcomes for their patients. For more information
about Utah Medical Products, Inc., visit UTMD’s website at
www.utahmed.com.
Utah Medical Products, Inc.
INCOME STATEMENT, First Quarter ended March 31
(in thousands except Earnings Per Share)
|
1Q 2023 |
1Q 2022 |
Percent Change |
Net
Sales |
$ |
12,520 |
$ |
12,323 |
1.6 |
% |
Gross
Profit |
|
7,843 |
|
7,532 |
4.1 |
% |
Operating
Income |
|
4,439 |
|
4,522 |
(1.9 |
%) |
Income
Before Tax |
|
5,119 |
|
4,530 |
13.0 |
% |
Net
Income |
|
4,214 |
|
3,534 |
19.2 |
% |
Earnings Per
Share |
$ |
1.159 |
$ |
0.964 |
20.2 |
% |
Shares
Outstanding (diluted) |
|
3,636 |
|
3,665 |
|
BALANCE SHEET
(in
thousands) |
(unaudited) MAR 31,
2023 |
(audited) DEC 31,
2022 |
(unaudited) MAR 31,
2022 |
Assets |
|
|
|
Cash &
Investments |
$ |
80,912 |
$ |
75,052 |
$ |
65,873 |
Accounts
& Other Receivables, Net |
|
3,818 |
|
5,538 |
|
5,720 |
Inventories |
|
9,940 |
|
8,814 |
|
7,367 |
Other
Current Assets |
|
442 |
|
515 |
|
520 |
Total
Current Assets |
|
95,112 |
|
89,919 |
|
79,480 |
Property
& Equipment, Net |
|
10,241 |
|
10,224 |
|
10,997 |
Intangible
Assets, Net |
|
22,417 |
|
23,731 |
|
29,326 |
Total
Assets |
$ |
127,770 |
$ |
123,874 |
$ |
119,803 |
Liabilities
& Stockholders’ Equity Accounts Payable REPAT Tax Payable Other
Accrued Liabilities |
|
1,027 419 4,628 |
|
1,218 419 4,323 |
|
1,454 220 4,424 |
Total
Current Liabilities |
|
6,074 |
|
5,960 |
|
6,098 |
Deferred Tax
Liability – Intangibles Long Term Lease Liability Long Term REPAT
Tax Payable |
|
1,456 328 1,256 |
|
1,513 341 1,256 |
|
1,946 382 1,675 |
Deferred
Income Taxes |
|
638 |
|
549 |
|
534 |
Stockholders’ Equity |
|
118,018 |
|
114,255 |
|
109,168 |
Total
Liabilities & Stockholders’ Equity |
$ |
127,770 |
$ |
123,874 |
$ |
119,803 |
Contact: Brian Koopman (801) 566-1200
Utah Medical Products (NASDAQ:UTMD)
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