Utah Medical's Q2 Earnings Down Y/Y Due to Customer Losses

Shares of Utah Medical Products, Inc. UTMD have gained 2.6% since the company reported its earnings for the quarter ended June 30, 2026. This compares to the S&P 500 index’s 1.4% decline over the same time frame. Over the past month, the stock has gained 2.8% against the S&P 500’s 1.8% decrease.

Utah Medical reported second-quarter 2026 diluted earnings per share (EPS) of 84.4 cents, which decreased 10.1% from 93.9 cents recorded in the prior-year quarter.

Revenues of $8.5 million indicated a 14.3% decline from $10 million in the year-ago quarter. The decline was primarily due to the loss of sales from two previously largest customers, including PendoTECH and a China-based distributor, which contributed $1.1 million in combined sales in the prior-year quarter. 

Net income declined 11.9% year over year to $2.7 million.

Utah Medical Products, Inc. Price, Consensus and EPS Surprise

Utah Medical Products, Inc. price-consensus-eps-surprise-chart | Utah Medical Products, Inc. Quote

Sales Headwinds Continue From Customer Losses

UTMD’s second-quarter sales pressure was largely driven by the absence of revenue from two former major customers. Sales of biopharma pressure monitoring devices and accessories to PendoTECH were zero in the quarter compared with $0.2 million in the prior-year period, while sales of blood pressure monitoring kits to the company’s former China distributor also fell to zero from $0.9 million. The combined loss represented about three-fourths of the quarterly revenue decline.

Domestic sales declined 11.9% year over year to $5.2 million, impacted by lower direct sales of other devices, particularly neonatal products, and weaker Filshie Clip System sales following an unusually strong first quarter. However, non-PendoTECH domestic OEM sales improved by $0.2 million, supported partly by higher sales to new domestic biopharma customers. Overseas sales declined 17.7% to $3.4 million, although excluding the lost China distributor business, international sales increased modestly.

Margins Remain Resilient Despite Lower Revenue

UTMD maintained solid profitability despite lower sales volumes. Gross profit declined 15% year over year to $4.8 million, while gross margin contracted slightly to 55.8% from 56.2%. Management attributed the margin pressure to lower-than-expected sales without a proportional reduction in manufacturing overhead costs.

Operating income decreased 17.1% to $2.6 million, with operating margin remaining strong at 31.1%. The decline reflected higher litigation expenses, which increased by $0.2 million compared with the prior-year quarter. The company noted that litigation costs were elevated due to expert witness fees and other legal activities but expects these expenses to decline in the second half of 2026.

Net income benefited from a lower estimated average income tax provision rate, which helped reduce the magnitude of the earnings decline. The tax rate fell to 18.3% from 20.5% in the prior-year quarter.

Strong Balance Sheet Supports Operations

UTMD continued to maintain a strong financial position, ending June 30, 2026, with no debt and cash and investments of $87.5 million compared with $85.8 million at the end of 2025. The company generated this improvement after paying dividends, repurchasing shares and investing in capital expenditures.
Its current ratio remained robust at 48.6, while inventory increased as UTMD intentionally built work-in-process and finished goods inventory to maintain productivity during a period of weaker sales. Shares outstanding declined following limited repurchases during the first half of 2026.

Management Updates Revenue Outlook

Management indicated that the previously expected recovery in lost revenue from new product sales, particularly from other biopharma OEM customers, has progressed more slowly than anticipated. New sales to other biopharma customers totaled only $0.2 million during the first half of 2026, below expectations. As a result, the company now expects full-year 2026 revenue to decline 10-13% compared with 2025, although management highlighted continued uncertainty around the outlook.

UTMD continues to focus on developing new products and expanding customer relationships to offset lost revenue streams. Management expects litigation expenses for 2026 to remain below $1.6 million, though higher than its earlier estimate.

Other Developments

During the quarter, UTMD continued its capital allocation efforts through dividends and share repurchases. The company paid $1 million in dividends during the second quarter and repurchased a limited number of shares. It also highlighted ongoing efforts to recover prior revenue losses through new product sales and expanded relationships with biopharma OEM customers.

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