Earnings call transcript: Acme United Q2 2025 earnings beat expectations

Acme United Corporation reported its second-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $1.16, significantly above the forecasted $0.73. Despite a revenue shortfall, the company’s stock rose 3.95% in pre-market trading, reflecting investor confidence in its strategic initiatives and cost-saving measures. According to InvestingPro data, the company maintains a "GOOD" financial health score of 2.7, supported by strong liquidity metrics and consistent dividend payments for 22 consecutive years.

Key Takeaways

• Acme United’s EPS of $1.16 exceeded forecasts by 58.9%.
• Revenue of $54 million fell short of the $58.27 million forecast.
• Stock price increased by 3.95% in pre-market trading.
• New production facility planned in Tennessee to boost capacity.
• Shift in production from China to other Asian countries and Egypt.

Company Performance

Acme United demonstrated resilience in Q2 2025, with net income rising by 7% to $4.8 million compared to the same period last year. Despite a 3% decline in net sales to $54 million, the company’s strategic cost management and reduced bank debt contributed to its improved profitability. The company remains less reliant on imports, providing a competitive edge amid high tariffs on Chinese goods.

Financial Highlights

• Revenue: $54 million, down 3% from $55.4 million in Q2 2024.
• Earnings per share: $1.16, up 6% from $1.09 in Q2 2024.
• Gross margin: Stable at 41%.
• SG&A expenses: $15.8 million, representing 29% of sales.
• Bank debt less cash: Reduced to $23 million from $33 million in 2024.

Earnings vs. Forecast

Acme United’s EPS of $1.16 significantly outpaced the forecast of $0.73, marking a 58.9% surprise. However, the company’s revenue of $54 million was 7.35% below expectations. This mixed performance highlights the company’s ability to manage costs effectively, even as sales faced headwinds.

Market Reaction

Following the earnings announcement, Acme United’s stock rose by 3.95% to $41.65 in pre-market trading. This positive movement reflects investor optimism about the company’s strategic shifts and cost-saving measures. The stock remains within its 52-week range, with a high of $50 and a low of $32.85.

Outlook & Guidance

Looking ahead, Acme United anticipates sales growth in the upcoming quarters, driven by new production capabilities and market share gains in its Westcott cutting tools and first aid businesses. The company is also poised to benefit from potential Federal Reserve interest rate cuts, which could enhance its financial flexibility. With a beta of 0.66 and a moderate debt-to-equity ratio of 0.32, InvestingPro’s comprehensive research report reveals how the company’s defensive characteristics and strong financial position support its growth strategy. Access the full analysis and 1,400+ other company reports with an InvestingPro subscription.

Executive Commentary

CEO Walter C. Johnson highlighted the company’s adaptability, stating, "We turned a challenge into an opportunity." He emphasized ongoing efforts to work with customers on recovering delayed programs and generating more cash for reinvestment in automation.

Risks and Challenges

• High tariffs on Chinese goods continue to pressure costs.
• Potential reduced customer spending due to increased prices.
• Supply chain adjustments as production shifts to new regions.
• Market volatility affecting customer order stability.
• Macroeconomic uncertainties impacting consumer demand.

Q&A

During the earnings call, analysts inquired about the company’s guidance for Q3 and Q4, the impact of interest rates, and the effect of tariffs on different segments. CEO Walter C. Johnson assured stakeholders of the company’s proactive strategies to mitigate these challenges and capitalize on growth opportunities.

Full transcript - Acme United Corp (ACU) Q2 2025:

Conference Operator: Day, and welcome to the Acme United Corporation’s Second Quarter twenty twenty five Financial Results Conference Call. At this time, I would like to turn the call over to Walter Johnson, Chairman and CEO. Please go ahead, sir.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Good morning. Welcome to the second quarter twenty twenty May conference call for Acme United Corporation. I am Walter C. Johnson, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read a Safe Harbor statement.

Paul?

Paul Driscoll, Chief Financial Officer, Acme United Corporation: 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.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thank you, Paul. Acme United had an excellent second quarter of twenty twenty five, setting a quarterly record for earnings. This of course excludes the one time gains from the forgiveness of the PPP loan in 2021 and the sale of the CUDA and Camillus businesses in 2023. Our net sales in the quarter were $54,000,000 compared to $55,400,000 in 2025. Net income in the quarter was 4,800,000 compared to $4,500,000 and earnings per share were $1.16 versus $1.9 The market environment was particularly challenging due to tariffs.

As you may remember, our last 10 acquisitions have manufacturers in The United States and Canada. So our reliance on imported items is much less than some of our competitors. When tariffs on goods imported from China were raised to 145%, Our customers who plan to directly import our products canceled their orders that were scheduled to ship. They appear to have determined that using existing stocks, substituting items or even having empty shelves were more attractive than losing money on the products. They canceled and delayed orders, which reduced our sales.

Acme had built extra inventory during late twenty twenty four and early twenty twenty five. We were prepared for the tariffs, but we did not anticipate tariffs as high as 145%. We too stopped importing items to The United States, but we continued producing and storing the finished goods at our factories in China. We supplied our regular Westcott customers from domestic inventory and tried to help when they ran out of private label products. However, we did not accept large unplanned orders, which would have reduced our ability to meet regular customer requirements.

We worked with our suppliers to reduce costs, took advantage of operating efficiencies and increased our selling prices moderately. Our products that we import are currently priced appropriately for the present 30% tariff on Chinese goods. We’re also shifting production from China to other locations, including Malaysia, Thailand, Vietnam, Egypt, and our own factories. We intend to continue to supply our customers with the best total costs including tariffs and to maintain excellent service. Our factories in The United States have benefited from the increased tariffs.

Our MedNap facility in Brooksville, Florida is producing alcohol and BZK wipes, Castile soap, and other first aid items at record levels. Our Vancouver, Washington and Rocky Mount, North Carolina plants that produce first aid kits are running at full speed. Our Spill Magic spill cleanup plants in Santa Ana, California and Smyrna, Tennessee are running multiple shifts. Last week, we purchased a new facility for Spill Magic in Mount Pleasant, Tennessee for approximately $6,000,000 The plant is 77,000 square feet on 12 acres and has room for expansion. We start production there in the first quarter of twenty twenty six.

While the second quarter was very challenging, I would like to thank our team for managing the tariff disruptions, working with our customers to meet their supply requirements and executing well. They turned a challenge into an opportunity. As we look at the rest of the year, we anticipate growth and continued earnings strength. We believe there will be opportunity to gain share in the Westcott cutting tools and our first aid business, particularly in the retail and industrial markets due to our low total costs and supply chain diversification. I will now turn the call to Paul.

Paul Driscoll, Chief Financial Officer, Acme United Corporation: Acme’s net sales for the second quarter were $54,000,000 compared to $55,400,000 in 2024, a decrease of 3%. Sales for the six months ended 06/30/2025, were $100,000,000 compared to $100,400,000 in the same period in 2024. Net sales in The U. S. Segment decreased 6% in the second quarter due to the cancellation of some back to school customer orders as a result of exceptionally high tariffs in April and May.

Additionally, there was a large initial order of new kitchen sharpeners to a major mass market retailer that took place in the second quarter of twenty twenty four. Sales decreased 2% for the six months ended June 30. Net sales in Europe decreased 6% in local currency for the quarter and 6% for the six months ending June 30. The sales decrease for both periods was mainly due to the timing of shipments. We expect growth in the third quarter.

Net sales in local currency for Canada increased 28% in the quarter and 21% for the year to date, mainly due to higher sales of first aid products. The gross margin was 41% in the second quarter of twenty twenty five and twenty twenty four. Gross margin was 40% for the first ’6 months of 2024 and twenty twenty four twenty twenty five and 2024. SG and A expenses for the 2025 were $15,800,000 or 29% of sales compared with $16,300,000 or 29% of sales for the same period of 2024. The lower SG and A in the quarter was due to cost savings and reduced discretionary spending.

SG and A expenses for the first six months of twenty twenty five were $31,300,000 or 31% of sales compared with $31,100,000 or 31% of sales in 2024. Net income for the 2025 was $4,800,000 or 1.16 per diluted share compared to a net income of $4,500,000 or $1.9 per diluted share for the same period of 2024, an increase of 7% in net income and 6% in earnings per share. Net income for the first six months ended 06/30/2025 was $6,400,000 or a dollar 57¢ per diluted share compared to $6,100,000 or a dollar 47¢ per diluted share in the comparable period last year, increases of 57%. The company’s bank debt less cash on 06/30/2025 was $23,000,000 compared to $33,000,000 on 06/30/2024. During the twelve month period, we paid $2,100,000 in dividends and generated approximately $12,000,000 in free cash flow.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thank you, Paul. I will now open the call to questions.

Conference Operator: Thank you. We’ll now be conducting a question and answer session. Our first question is from Jim Marrone with Singular Research.

Jim Marrone, Analyst, Singular Research: Yes, good afternoon gentlemen. And job well done on the supply management and working the inventory in your supply chains. And I would imagine that resulted a small decrease in the top line of 3% and an increase in your net income as a result. But my question then is, if the results were tempered as a result of the inventory management and your other cost strategies, what can you expect going forward for the third and fourth quarter? Now you said that you anticipate growth, but can you could you provide any quantitative guidance?

Do you expect revenue decrease as well as earnings decrease for the third quarter and fourth quarter? I’ll anticipate your answer and then I have a follow-up question after that.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Well, Jim, that’s a very good question. And there were a number of programs that were delayed in the second quarter, because the customers frankly did not want to import them at 145 tariff, and then lose money. So some of them will probably come into the third and fourth quarters as the inventory that’s currently on hand is used up. But it’s a very tricky thing. Because during that period, many retailers and all of the buyers were focused on one thing, get me product, get it cheap, what price and where.

The last thing they were thinking about was what will they sell in October, November, December. It was a scramble for here and now. And you may remember that many customers were shipping to bonded warehouses, shipping to Canada, going to places that you’d never dream of, in order to hold stock. And we did some of that, but it was in many ways chaotic for our customers, particularly because they have planned programs that are slotted. And some of them when they canceled, don’t get repeated.

We also have a concern about demand, not for our products. I mean, I don’t think our prices were particularly aggressively increased, because we had other ways to offset price. But in general, there’s something of a price increase across the board for many items, and it may reduce some customer spending. We don’t know that. But what we do know is that we have adequate stock at good values today.

We’re working with our customers on recovering programs that were delayed. And we’re looking for growth in the third and fourth quarters, not declines, in sales. Again, we can’t forecast what actually happens with demand. But so far, we haven’t seen a big fall off. I hope that helped a little bit.

Jim Marrone, Analyst, Singular Research: Yeah, no, that’s provide some visibility. And are you hearing anything from your competitors, your peers? Like are they faring better? Are they faring worse? And maybe if you can also talk about other strategies is potentially cutting the dividend?

Is that a possibility? I look forward to hearing your answer to that.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Well, we just raised our dividend. And we just generated $12,000,000 of free cash flow in the last twelve months, which was a record. So I mean, the dividend, we’re very comfortable with and frankly, our debt is at $22,000,000 So it’s down 11 or 23,000,000, it’s down 11,000,000 in the past six months. So now the dividend we’re fully expected to continue and the cash flow and the company’s performance supports that. Relative to other competitors, one competitor had a disastrous quarter.

And I don’t know what they were doing or why they were doing it, but it was a complete disaster. We’ll be able to see more in the coming weeks, but I can tell you that we did a good job. And we anticipated the tariffs that we managed our customers, as well as we thought we could do. Others apparently did not.

Jim Marrone, Analyst, Singular Research: Yeah, thank you for your answers, gentlemen.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thanks, Jim.

Conference Operator: Our next question is from Tim call with Capital Management Corporation.

Tim, Analyst, Capital Management Corporation: Congratulations on a strong quarter.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thanks, Tim.

Tim, Analyst, Capital Management Corporation: I know that the free cash flow pays down debt and lowers interest expense over time. But if the Fed Federal Reserve lowers interest rates later this year, Does that also help lower your interest expense?

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Oh, sure. Yeah. About 10, I’m guessing right now, it’s about $10,400,000 of fixed mortgage for that’s on our Vancouver, Washington property and our Rocky Mount, North Carolina property. And Paul, is that at 3.4% fixed?

Paul Driscoll, Chief Financial Officer, Acme United Corporation: It’s 3.8%.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: 3.8%. So the $10,300,000 is fixed. The remaining piece floats, and so that would be a benefit to us if rates were to drop.

Tim, Analyst, Capital Management Corporation: Great. And then with the capacity constraints you’ve had in Spill Magic from growing it, it’s good to hear found a way to expand that capacity a great deal in the near future. Sometimes you have similar issues with certain healthcare lines. Are you experiencing that anywhere in healthcare and are you increasing productivity or expanding capacity in any of those areas?

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Well, in the MedNap facility in Florida, our revenues are up substantially and they clearly are stressed. We’re running two shifts and we’re working on new products and a lot of productivity improvements there. So in the short term, we’re doing things like buying portable trailers to move the office out of an area that we turned into production. We expanded our microbial lab by buying another portable trailer. Eventually, we’d like to get a permanent home that’s larger in Florida for the MedMap business.

MedMap also, because it’s a supplier of alcohol wipes and BZK wipes and alcohol prep pads, is pretty critical in The US medical industry, including the hospital area where we think we have some real growth potential. And so we’ve been buying major new pieces of equipment, including automation, to not only drive our costs down, but get more consistency in the product. We’re also making major investments in documentation in MedNap and training in preparation for what we hope is some business in the future with the hospital market at MedNap. Relative to Spill Magic, this facility that we bought gives it a permanent home. And And there’s a very big difference between a leased manufacturing facility where you never know when you’ll have a big price increase and you’ve gotta move, equipment.

And over time, as you build out a factory, that equipment becomes hopefully bigger and better and unfortunately less mobile. So by buying the facility in Mount Pleasant, and I will be in Mount Pleasant tomorrow working on that project, We’re really laying the groundwork for substantial material flow automation, packaging automation, and we’re excited because we know we can drive productivity when we have our own facility and are able to make permanent installations. In other sites, for example, our Vancouver, Washington facility, we would love to expand, but the real estate values in Vancouver, Washington, which is just across the border from Portland, are very high. And although we’ve looked for a number of years to expand the facility, to date we haven’t found an attractive enough value to allocate assets there as opposed to elsewhere in the company. Our Rocky Mount, North Carolina facility gained capacity in storage when we did the installation of new racking during the first six months of this year.

And that’s increased by about a third. We’ve recently installed automation there for packing bulk items into boxes for the medical business. And I would expect similar kinds of automation in Vancouver, Washington, and perhaps in our facility in Canada, at First Aid Central. As you may know, we doubled the space at First Aid Central during the past twelve months, and the business is growing and filling it very nicely. So, constraints on space, we’re managing I think adequately, perhaps well.

The capital spending program continues to get more exciting because as we’re generating savings,

Paul Driscoll, Chief Financial Officer, Acme United Corporation: we’re generating more cash

Walter C. Johnson, Chairman and CEO, Acme United Corporation: to reinvest in more and stronger automation. So I’m excited about that.

Tim, Analyst, Capital Management Corporation: That sounds good. Congratulations again.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thanks, Tim.

Conference Operator: Our next question is from Georgie Vashenko with Freedom Broker.

Georgie Vashenko, Analyst, Freedom Broker: Good afternoon. Could you please highlight which segment was mostly hurt by the tariff increase, first aid or cutting and sharpening? Thank you.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Well, the first aid business tends to be more regularly ordered by industrial accounts and retail accounts. And the Westcott cutting tool area has some seasons, for example, back to school. So when orders were canceled and programs were canceled in April and May, that directly impacted Westcott because those products that we would have shipped for sale for back to school were no longer going to be available, just canceled. It was the Westcott side that was hit more significantly. Also on price increases, the first aid area, because we’ve got more of a production base in The United States and in Canada, we’re able to be a lot more moderate in our price increases.

And although we’ve got productivity improvements and we did a lot of good things in Westcott, the volumes there were impacted more. And, of course, the recovery will probably be stronger in Westcott because as the stocks run down with the retailers, assuming demand continues, they’ll be buying.

Georgie Vashenko, Analyst, Freedom Broker: Thank you. That’s helpful.

Conference Operator: You. There are no further

Walter C. Johnson, Chairman and CEO, Acme United Corporation: just like to

Conference Operator: turn it over to Walter Johnson.

Walter C. Johnson, Chairman and CEO, Acme United Corporation: Thank you very much. If there are no further questions, this call is complete. I would like to thank you for joining us, and we look forward to delivering the best results we can in the coming quarters. Goodbye.

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