The call in brief

Read the Q3 2025 earnings summary ↗

Acme United's third quarter of 2025 delivered record third-quarter net sales of about $49.1 million, up 2% year over year, driven by a 9% increase in first aid products — now roughly two-thirds of revenue — while Westcott cutting-tool sales remained pressured by retailer cancellation of back-to-school and seasonal promotions in the wake of the large tariffs announced earlier in the year. Gross margin improved to 39.1% from 38.5% as management raised prices modestly, negotiated supplier cost reductions and shifted production to lower-tariff locations, and operating profit rose about 3%. Net income nonetheless fell to $1.9 million ($0.46 per diluted share) from $2.2 million ($0.54) a year earlier, entirely because of a higher effective tax rate of 22% versus just 8% in the prior-year quarter, when Acme booked a large stock-option-related tax benefit. The Company strengthened its balance sheet, cutting net bank debt to $23 million from $27 million, and continued to invest in domestic manufacturing — buying a $6.1 million, 78,000-square-foot Spill Magic plant in Mt. Pleasant, Tennessee (online in Q1 2026) and expanding its Med-Nap facility in Florida while tightening FDA/GMP controls to target U.S. hospital and military markets. Management pointed to stabilizing tariffs, resuming promotional activity, automation of the recurring first aid refill business and a next-generation automatic reorder system as drivers of consistent first aid growth and gradual Westcott recovery into 2026.

What went well
  • Consolidated net sales rose 2% to a third-quarter record of about $49.1 million, led by a 9% increase in first aid products, which represent roughly two-thirds of corporate revenue.
  • Gross margin expanded to 39.1% from 38.5% a year earlier as the Company raised selling prices modestly to offset tariffs, negotiated supplier cost reductions and shifted production locations, with margins stabilizing in the 38%-39% range.
  • First aid demand was broad-based, with strong e-commerce sales, consistent industrial demand and solid recurring revenue from first aid kit refills; Canada grew 7% in local currency in the quarter (16% year-to-date) and Europe grew 6% in local currency.
  • Operating profit grew in line with revenue (up about 3%), and the Company continued to strengthen its balance sheet, cutting net bank debt to $23 million from $27 million a year earlier.
  • The Company purchased a 78,000-square-foot manufacturing facility on 12 acres in Mt. Pleasant, Tennessee for about $6.1 million to expand Spill Magic production (coming online in Q1 2026) and continued investing in its Med-Nap facility in Brooksville, Florida to grow domestic production of alcohol prep pads and wipes.
What went wrong
  • Net income declined to $1.9 million from $2.2 million and diluted EPS fell to $0.46 from $0.54, a 14% drop in net income and 15% in EPS.
  • The earnings decline was driven by a higher effective tax rate of 22% versus only 8% a year earlier, when the Company recorded a large tax benefit related to the exercise of stock options.
  • Westcott cutting-tool sales remained pressured because large retailers cancelled back-to-school and other seasonal promotions amid the confusion created by the large tariffs announced earlier in 2025.
  • U.S. segment sales grew only 1% as strong first aid and medical sales were partly offset by lower school and office product sales tied to cancelled customer orders.
  • Share count crept higher for the three- and nine-month periods because the Company has not been actively repurchasing stock in the open market, preferring to preserve cash for acquisitions.

Management Commentary

Read the Q3 2025 summary ↗
Speaker

Okay. Welcome to the Acme United Corporation third quarter 2025 financial results conference call. At this time, I'd like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir.

Speaker

Good morning.

Speaker

Good morning.

Speaker

Welcome to the third quarter 2025 earnings conference call for Acme United Corporation. I am Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe harbor statement. Paul?

Speaker

Paul?

Speaker

Forward-looking statements in this conference call, including without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions, and adequacy of capital and other resources are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation, high interest rates, and the imposition of new tariffs or changes in existing tariff rates. In addition, we have experienced supply chain disruptions, and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release. Thank you, Paul.

Acme United had net revenues of $49 million in the third quarter of 2025 compared to $48 million in 2024. Our net income was $1.9 million compared to $2.2 million last year. Earnings per share were $0.46 compared to $0.54 in 2024. Our sales in the third quarter increased 2%. Sales of first aid products, which represent about two-thirds of our corporate revenues, increased 9%. We had strong e-commerce sales, consistent demand from our industrial customer base, and solid recurring revenues of refills of components for our first aid kits. However, our sales of our Westcott cutting tools continued to be reduced by the cancellation of back-to-school and retail promotions due to the confusion and uncertainty when large tariffs were announced earlier this year.

As you can imagine, buyers at that time were entirely focused on reducing the impact of the tariff costs and seeking alternative sourcing locations rather than new business. We are seeing stability in the market today with an increase in promotional activity, which we expect in the coming quarters. Our gross margins have also started to stabilize at about 38% to 39%. We increased selling prices modestly to offset tariffs and successfully negotiated cost reductions with our suppliers. We have been shifting production locations to reduce tariffs and increasing our production in the United States. This takes time and is a tremendous amount of effort, but we are making progress. Our operating income grew consistently with revenues during the quarter. As you may remember, we purchased a 78,000-square-foot manufacturing facility on 12 acres with room for expansion in July for $6.1 million.

The new plant will produce our Spill Magic cleanup products for bodily fluids, blood, and spills and comes online in the first quarter of 2026. We have been investing in our MedNap facility in Brooksville, Florida, to increase production of alcohol prep pads, PZK wipes, triple antibiotic packets, and lens wipes. Sales of these domestically produced items are increasing. Concurrently, we have also been expensing the costs of tightening our GMP controls and improving FDA compliance training in preparation for possibly entering the U.S. hospital and military markets in a larger way. As we look into the coming quarters, we see consistent growth in our first aid business and a gradual improvement in Westcott sales. We continue to strengthen our balance sheet and to increase and to generate and review acquisition opportunities. I will now turn the call to Paul.

Speaker

Corporation's net sales for the third quarter were $49.1 million compared to $48.2 million in 2024, an increase of 2%. Sales for the nine months ended September 30, 2025, were $149 million compared to $148.5 million in the same period in 2024. Net sales in the U.S. segment increased 1% in the third quarter. Sales of first aid and medical products were strong. However, sales of school and office products were lower, mainly due to the cancellation of customer orders as a result of tariff uncertainty. U.S. sales declined 1% for the nine months ended September 30. Net sales in Europe increased 6% in local currency for the quarter, mainly due to higher sales of school and office products into the e-commerce channel. Sales for the nine months decreased 2%.

Net sales in local currency for Canada increased 7% in the quarter and 16% for the year to date, mainly due to higher sales of first aid products. The gross margin was 39.1% in the third quarter of 2025 compared to 38.5% in 2024. The gross margin was 39.8% for the first nine months of 2025 compared to 39.4% in 2024. SG&A expenses for the third quarter of 2025 were $16.2 million, or 33% of sales, compared with $15.6 million, or 33% of sales for the same period of 2024. SG&A expenses for the first nine months of 2025 were $47 million, or 32% of sales, compared with $47 million, or 31% of sales in 2024. Operating profit in the third quarter of 2025 increased 3% compared to the third quarter in 2024.

Net income for the third quarter of 2025 was $1.9 million, or $0.46 per diluted share, compared to a net income of $2.2 million, or $0.54 per diluted share for the same period of 2024, a decrease of 14% in net income and 15% in earnings per share. Despite the increase in operating profit, net income in the quarter declined due to higher tax expense. In the third quarter of 2024, we recorded a large tax benefit related to the exercising of stock options. This resulted in an effective tax rate of 8% in last year's third quarter compared to 22% this year. Net income for the first nine months ended September 30, 2025, and 2024 was $8.3 million, or $2.03 per diluted share. The company's bank debt, less cash, on September 30, 2025, was $23 million compared to $27 million on September 30, 2024.

During the 12-month period, we paid $2.3 million in dividends and generated $11 million in free cash flow before the $6 million purchase of our new facility in Tennessee.

Speaker

Thank you, Paul. I will now open the call to questions.

Analyst Q&A

Speaker
Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing star keys. Our first question comes from the line of Jim Marrone with Singular Research. Please proceed.
Speaker
Yeah, great. Thank you, gentlemen. It sounds like you had a pretty decent quarter. Again, kind of the same story, just managing your inventory to address these challenges and headwinds. I'm just trying to get a better sense of your underlying business. When you say that the sales of school and office products were lower due to the cancellation of customer orders as a result of tariff uncertainty, are you suggesting a company like, say, Walmart, is canceling your cutting tool products because of the uncertainty of tariffs that their customers are feeling and so they have less disposable cash? I'm just trying to get a better sense of that.
Speaker
That's a very insightful question, Jim. Let's be really clear. When customers like Walmart, Home Depot, you can name any one of the large retailers, were faced with 145% tariffs last April, they panicked. They had empty shelves.
Speaker
Based on all their general products and the higher costs on their side, they may not have the budget for additional spending. Is that what you're suggesting?
Speaker
Okay. All right. With 145% tariffs, they stopped buying. It was cheaper not to bring something in.
Speaker
Oh, I see. All right. Okay.
Speaker
Take it on themselves.
Speaker
Okay. What?
Speaker
Yeah. Jim, what they did was they stopped buying anything that they could avoid buying. They canceled every promotion, not just for Acme United, for retailers across the country.
Speaker
Right.
Speaker
What they did was they scrambled. They modeled and modeled and modeled. The tariff is going to be 54%. The tariff is going to be 82%. The tariff is going to be 30%. Nobody knew where it was because nobody knew. Because of that, those guys weren't worrying about, "What am I going to put on the shelf in a promotion in November?" They were worried about, "What am I going to do in May?" That is what happened, not to Acme United or cutting tools. It happened to every single retailer in the United States that had imported products. Most of them did.
Speaker
That was occurring in the spring is what you're suggesting, and now that's kind of abated. Is that what you're suggesting?
Speaker
Yeah. When buyers are buying, they don't place an order in a week and expect it to be delivered. They're laying out a program that takes time to be set in the planograms and production to go in, be delivered, and go onto the shelves. Typically, they're looking out six to nine months. When we're looking at second, third quarter, fourth quarter, there's hardly any promotions for a Westcott product. That doesn't mean you don't have things on the shelf, the regularly planned items, the planograms. The mix, when you're doing Christmas promotions, the in and outs in a retailer, which is called merchandising, they stopped doing that. Now, it has stabilized.
When the tariffs went to 30% for China and stayed, we were able to then recover and work on price increases and cost savings and things so that they had product that could be sold at fair prices, which they do have from our products. They had the base to start to look at the new promotions. That is absolutely occurring now, for looking out, first quarter, second quarter. It feels like the momentum is pretty much normal. It was certainly not normal when you had 145% tariffs and retail went dry. All they could do was focus on what do we do tomorrow.
Speaker
Right. You also kind of mitigated that impact through effective inventory management, I remember.
Speaker
Yes, we did.
Speaker
Does that still continue today, or has your inventory run down where you're not able to have that flexibility, or what's the state of that?
Speaker
Yeah, that's a good point. For those who may not know, when we had a new president elected last year who had campaigned on tariffs, we increased our inventory by a number of millions of dollars in preparation for some level of tariffs, not expecting the kind that we had. During the last two quarters, we've been working that inventory down. In the meantime, we built up new inventory in preparation for something else that might happen, which we really don't think will happen, but we're prepared in case the current tariff issues continue to be out there with China and the United States.
Speaker
Okay. Thanks for the clarification then, Walter. Thank you.
Speaker
Sure, you're welcome.
Speaker
The next question comes from the line of Tim Kaul with Capital Management Corporation. Please proceed.
Speaker
Congratulations on steady margins in the face of tariffs. That's quite a feat.
Speaker
Thank you, Tim.
Speaker
I was wondering about the other questions.
Speaker
It actually is because you've got a whole series of things that you really needed to manage. You know, your costs, modest increases, just a changing environment. To hold the margins or slightly increase them is an accomplishment, and we're happy with it.
Speaker
That's great. I was wondering about other expense. It was $146 million versus last year, a gain of $17 million. That's quite a swing. Was there anything recurring in there or unusual?
Speaker
What was that?
Speaker
You meant $146,000 compared to?
Speaker
Sorry. sorry.
Speaker
Yeah. No, those are just foreign exchange gains and losses. I mean, you know, sometimes, like for example, you'll bring in products in Europe, and you record it at an exchange rate of 1.17, and then during the quarter, maybe the rate went down to 1.14. It became more expensive when you actually paid for the goods. It's just fluctuation in currencies, and that's really the euro and the Canadian dollar.
Speaker
The basic and diluted share count rose for the three-month and the nine-month period, but you're financially strong with excess free cash flow and declining debt. Can any action be taken to slow down share creep?
Speaker
We've been buying in shares, and every time we, I mean, buying in shares every time someone wants to exercise. That has reduced quite a bit of share creep, but we haven't been in the market buying actively in the market. We could. We certainly are generating cash. Again, I'm careful about that because as we've gotten bigger, the acquisition sizes that we've looked at tend to have grown, and they take more cash. We could do that, Tim. I think when options are being exercised, where the strike price is below the market, that's a no-brainer for the company. The other, I'm a little bit more cautious about.
Speaker
Is there any insight as to the trade's level of inventory? Are you ever able to see whether it's above average or below average? One would think it'll be extremely low in retailer warehouses.
Speaker
That's true. Amazon, in particular, has scaled back the inventory that it's holding in first aid by, I think, about two weeks. That generates cash for them, and it's probably a smart thing because our deliveries are excellent. They can't keep doing that. On that end, for sure. On the store side, it's less clear to me because I don't always have the visibility. We do with Amazon, and they have cut back for a couple of weeks. That's done, I think.
Speaker
You have a history of nice organic growth from cross-selling and capacity increasing. You increased the capacity at MedNap, and now you're doing it at Spill Magic. With Spill Magic, was capacity constrained to the point where you could not fill orders, or you didn't market to new customers, or you excluded Spill Magic from some kits? I'm just trying to get a feel for when that operation was fully running, whether you could get it back.
Speaker
Yeah. The thing is that when we bought Spill Magic, it was about $5 million in revenues, and it's about $15 million now. The facilities that we had when we bought it are bursting. The facility that we bought, I think, was a very, very good value. You never know unless you sell, which we're not going to do. The Nashville market has heated up immensely for an existing manufacturing site since Trump has taken office and put in these tariffs because a lot of companies, including ourselves, who were looking at places to expand manufacturing, went to places that were favorable to manufacturing. The Nashville area is one of those. We bought Spill Magic for under $80 a square foot. The market for that that we saw was generally running somewhere between $90 and $110 a foot. I think we bought it well.
The real beauty is it's a facility that we can move into, have the space to continue to grow, install the automation equipment, which once installed, you really don't want to move again and again with leases. It'll have a home and begin to move things like powder, transfer equipment, and ducting, which is expensive to install, but once it's in, reduces labor and increases productivity. That site we think is going to be just perfect for Spill Magic because it's on 11 acres, there's room for a 60,000-square-foot expansion, which I hope we can use sometime. The first part to your question, we bought a $5 million business that we grew to $15 million. Obviously, we needed space. The second is now that we have it, we can really automate with putting good equipment in a permanent home.
Speaker
it is operational in the first quarter, would production of Spill Magic in general increase through the year next year, or how fast can you get it up to the level that you want to produce?
Speaker
I haven't looked at the budget to really answer that factually. My gut reaction is it's been growing every year, and it probably will continue to. I can't give you an estimate because I just am not prepared for it.
Speaker
When you said the facility will open in the first quarter, will it be full production or like previous production, will it be up and running completely?
Speaker
We will be fully running by the end of March. There's a tenant in the facility right now who will be vacating sometime in December. As soon as that's done, we'll be preparing the site for the move, doing the move, and beginning and completing getting into full production during that first quarter. It will be by the end of March fully operational.
Speaker
Thank you. Congratulations again on the sales growth and keeping the margins where they are. I think when the other companies that are importing report, they won't be able to say they did the same thing. Great management through this process, as always. It's amazing. Thank you.
Speaker
Thank you, Tim.
Speaker
The next question comes from the line of Richard Dearnley with Longport Partners. Please proceed.
Speaker
Good morning. To clarify on Tim's question, are you in the new Spill Magic facility, are you using the same production equipment, or is it new, more productive equipment?
Speaker
When we first move?
Speaker
Yes.
Speaker
Yeah. We'll be moving the exact equipment. There's some equipment that's in there right now because they were handling powders that we're going to be buying, and that equipment actually helps us a lot with the automation. The next step, which is robotic placement of items into boxes, robotic filling of the bags, that will be new equipment, and it'll be happening during 2026.
Speaker
I see. When you start in March, if, to use rough numbers, the capacity of the plant would still be about $15 million, or would it be, you know, $20 million or something like that?
Speaker
The capacity should be more than 20.
Speaker
That's at startup, not through the year.
Speaker
I'm not saying that we were going to hit those kinds of numbers.
Speaker
Okay, I'm just getting that, you know, the big picture there. Great.
Speaker
Yeah. Let me explain a little bit more, Dick, because you've got a good point. In our current site, one of the things that we had a big issue with was storage of raw materials. We had no place for it. Here we've got an 11-acre site. We've got plenty of room outside of the actual physical building to be storing in containers, the raw material. By freeing that up, we're now able to have a full workspace within the current 78,000 square feet. It's also got, I think, the 24-foot ceilings, craned capability to be moving heavy objects. The ability to process faster is big when you have the space and you've got the physical facility. The day we close, because the raw materials will be stored outside in enclosed containers, we could be looking at $25 million.
Speaker
Right. Great. Back up your comment about online in first aid. The online and the refill business was strong. What does the refill business at the moment, percent of first aid revenue, you know, in round numbers?
Speaker
Paul, you're probably better at that than me.
Speaker
I'm kind of guessing here like 25%.
Speaker
All right, yeah, that sounds right.
Speaker
The automated refill, you know, with the hang tags and so on, is, where are you on the implementation of that across the base of refill customers?
Speaker
All right. We have one robotic machine in Rocky Mount. It's operating. It's fast. It's accurate. It's terrific. We've got a second one that is about to be installed. I believe it's delivered to Vancouver, in Vancouver, Washington, at the First Aid Only site there in November. By year-end, we'll have two of those done. Those are for taking bulk things like alcohol prep pads and PZK wipes and putting them into boxes that then are used to go into the smart compliance refills. It's a very core piece of basically an annuity. There's a third machine that's in Brooksville that we're setting up and should be functional by March. That'll be used for lens cleaners that go to customers like a Home Depot or maybe a Walmart, in boxes of 50.
There are three machines right now: one is operating, one is about to be installed, and one will be ready, we believe, by March.
Speaker
Right. All right. Now, the new introduction, I'm back to the automatic reorder in first aid when you take, you know, the eyewash thing out, and it triggers the new system that automatically, you know, reorders it. Yeah. How rolled out is that, or is that just getting started in your base?
Speaker
We introduced a next generation in September of this year. That next generation had a lot of interest. Two major industrial distributors in the United States currently are out there actively training their sales force with it. We're pretty excited about it. You haven't seen the 9% growth in first aid in the third quarter. I don't want to overemphasize it right now till we start to see what can happen. If we're right with it, it'll be a big deal. Let's just downplay that until it is.
Speaker
Yeah, if it's a big deal, you maybe begin to see the beginnings of that in the first half of 2026, would be a guess?
Speaker
Yeah, that's what I would think, Dick. Let's leave that vector for when it's actually happening, and we can be excited about it. Our customers certainly seem to be excited about it.
Speaker
Great. Okay, thank you very much.
Speaker
Thank you, Dick.
Speaker
Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Johnsen for closing remarks.
Speaker
Thank you for joining us. If there are no further questions, this call is complete. We look forward to speaking to you again after the fourth quarter. Goodbye.
Speaker
Thank you. This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Source: ACME UNITED CORP earnings call transcript (2025-10-21). Management commentary and analyst Q&A are reproduced as delivered; speaker roles as stated on the call.

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