Q2 2024 Acme United Corp Earnings Call
Operator: Good morning, and welcome to Acme United Corporation's Q2 2024 earnings. At this time, I would like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir.
Good day and welcome to the Acme United Corporation, Q2, 'twenty 'twenty four earnings at this time I would like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead Sir.
Walter C. Johnsen: Good morning. Welcome to the second quarter 2024 earnings 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.
Speaker Change: Good morning, welcome to the second quarter 2024 earnings Conference call for Acme, United Corporation, I Am Walter C Johnsen, Chairman and CEO.
Speaker Change: With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe Harbor statement Paul.
Paul G. Driscoll: 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 and high interest rates.
Paul G. Driscoll: Forward looking statements in this conference call, including without limitation statements related to the company's plans.
Speaker Change: Oh, jeez objectives expectations intentions, and adequacy of capital and other resources.
Paul G. Driscoll: Were made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Speaker Change: 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 character characterized by continued high inflation and high interest rates. In addition, we have experienced supply chain disruptions we may experience. These.
Paul G. Driscoll: 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.
Speaker Change: Disruptions in the future. We are also subject to additional risks and uncertainties.
Speaker Change: Described in our periodic filings with the securities and they.
Speaker Change: And exchange Commission and in our current earnings release.
Walter C. Johnsen: Thank you, Paul. Acme United had a good performance in the second quarter of 2024. Our sales increased 4% to $55.4 million, and our income increased 29% to $4.5 million. Our earnings per share were $1.09 compared to $0.96 in the second quarter of 2023, an increase of 14%. The company's net sales increased 8% in the second quarter without the impact of the hunting and fishing product line.
Walter C. Johnsen: Thank you.
Speaker Change: Thank you Paul Acme, United had good performance in the second quarter of 2024.
Speaker Change: <unk> sales increased 4% to $55 $4 million and they didn't from increased 29% to $4 $5 million.
Speaker Change: Our earnings per share were $1 nine compared to 96 cents in the second quarter of 2023, an increase of 14%.
Speaker Change: The company's net sales increased 8% in the second quarter without the impact of the hunting and fishing product lines.
Walter C. Johnsen: As you may remember, this business had about $12 million in revenues in 2022 and was sold in November 2023 for $19.8 million. We used the proceeds to pay down debt and to position the company for growth and acquisitions in our core business. Our organic growth of 8% in the second quarter of 2024 was due to market share gains and successful new product introductions. In the first aid product segment, we shipped new kits to a large drugstore chain in the United States, broadened our product offerings at a large industrial distributor, and expanded the customer base for our MedNap alcohol wipes and lens cleaner.
Speaker Change: As you May remember this business had about $12 million in the Newton.
Speaker Change: 2022 and was sold in November 2023.
Speaker Change: For $19.8 million, we used the proceeds to pay down debt and to position the company for growth exactly positions in our core businesses.
Speaker Change: Our organic growth was 8% in the second quarter of 2024 was due to market share gains and successful new product introductions.
Speaker Change: In the first aid product segment, we shipped new kids to a large drug store chain in the United States broadened our product offerings at a large industrial distributor.
Speaker Change: And expanded the customer base for our medigap alcohol wipes and lens cleaners.
Walter C. Johnsen: Sales of the Westcott products increased due to shipments of new craft cutting tools to a large mass market retailer, market share gains in the craft channel, and good back-to-school sales. Our DMT product line continued to benefit from a large rollout of kitchen knife sharpeners to a major mass market retailer in the United States.
Speaker Change: Sales of the Westcott products increased due to shipments of new crafts cutting tool to have.
Speaker Change: A large mass market retailer.
Speaker Change: Market share gains in the craft channel and good back to school sales.
Speaker Change: Our D M T product line continued to benefit from a large rollout of kitchen knife sharpness to a major mass market retailer in the United States.
Speaker Change: Yeah.
Walter C. Johnsen: Our first aid central business in Canada has continued to grow through its web activities, cross-selling of multinational distributors and retailers from the U.S., and successful product placement of our Westcott customers in school and office products. The Hawk Tree acquisition that we completed in September 2023 has helped expand the First Aid product line in Canada to address injuries from fires, floods, and earthquakes. And its performance is exceeding our expectations. This quarter, we moved into our new physical footprint in Canada, which is a modern 54,000 square foot facility near Montreal. In late May 2024, we acquired Elite First Aid for $6.1 million. Elite produces first responder kits, which contain items to treat serious bleeding, airway obstructions, and trauma.
Speaker Change: Our first aid central business in Canada has continued to grow through its web activities cross selling of multi national distributors and retailers from the U S and successful product placement of our Westcott.
Speaker Change: Customers in the school and office products.
Speaker Change: The Hawk tree acquisition that we completed in September 2023 has helped expand the first aid product line in Canada to address injuries from fires floods and earthquakes and its performance is exceeding our expectations.
Speaker Change: This quarter, we moved into our new physical footprint in Canada, which is a modern and 54000 square foot facility near Montreal.
Speaker Change: In late May 2024, we acquired elite first aid for $6 $1 million.
Speaker Change: <unk> produces first responder kits, which contain items to treat serious bleeding.
Speaker Change: Instructions and trauma.
Walter C. Johnsen: The product line will be introduced across our entire first aid customer base and represents a further step in our capabilities to save lives. We have continued to invest in new equipment to improve productivity at our operations. We've installed new equipment to automate the filling of some unitized kits for first aid and are now using warehouse management software to reduce the cost to pick and ship products. We plan to install robotics to fill boxes of lens wipes and prep pads at MedNap in the third quarter.
Speaker Change: The product line will be introduced across our entire first aid customer base and represents a further step in our capabilities to save lives.
Speaker Change: We have continued to invest in new equipment to improve productivity at our operations.
Speaker Change: We've installed new equipment to automate filling them. Some unitize kits well first aid and are now using warehouse management software to reduce the cost to pick and ship products, we plan to install robotics to filled boxes, the ones wipes and prep pads at med that in the third quarter.
Walter C. Johnsen: We are currently installing new high-density racking in our 345,000-square-foot facility in Rocky Mountain, North Carolina. When completed, it is expected to increase capacity by about 25% and improve the efficiency of picking orders. This is the first step in further pick-by-wire efficiency. As we look to the remainder of 2024, we see continued organic growth, we are actively evaluating acquisitions, and we are optimistic about the year. I will now turn the call
Speaker Change: We are currently installing new high density racking and now with 345000 square foot facility in Rocky Mount North Carolina.
Speaker Change: When completed it is expected to increase capacity by about 25% and improve the efficiency of picking orders. This is the first step in further picked by wire efficiencies.
Paul G. Driscoll: Acme's net sales for the second quarter were $55.4 million compared to $53.3 million in 2023, an increase of 4%. Excluding the impact of the Camillus and Kuta hunting and fishing product lines sold on November 1st, 2023, sales for the second quarter of 2024 increased 8%. Sales for the six months ended June 30, 2024 were $100.4 million compared to $99.2 million in the same period in 2023, an increase of 1%, although excluding the impact of Camillus Incute as sales increased 5%.
Speaker Change: As we look to the remainder of 2024, we see continued organic growth we are actively evaluating acquisitions.
Speaker Change: And we're optimistic about the year.
Paul G. Driscoll: Net sales excluding Camillus Incute in the U.S. segment increased 10% in the second quarter due to market share gains with First Aid, Westcott Craft Products, and DMT Sharpeners. Excluding Camillus and Cuda, sales increased 6% for the six months ended June 30th. Net sales excluding Camillus and Cuda in Europe increased 9% in local currency for the quarter and 8% for the six months ended June 30th. The sales increase for both periods was mainly due to market share gains in the office channel. Net sales excluding Camillus included in local currency for Canada decreased 4% in the quarter and 2% for the year to date, mainly due to a decline in sales of school and office products.
Speaker Change: I'll now turn the call to Paul.
Speaker Change: Yeah.
Paul G. Driscoll: Net sales for the second quarter were $55.4 million compared to $53.3 million.
Paul G. Driscoll: [laughter] 'twenty 23 and.
Paul G. Driscoll: An increase of 4%, excluding the impact of the Camillus and cuda hunting and fishing product line sold on November 1st 2023 sales for the second quarter of.
Speaker Change: 'twenty 'twenty four increased 8% sales for the six months ended June.
Speaker Change: At June 30th 'twenty, 'twenty, four were $124 million compared to $99.2 million in the same parity in 2023, an increase of 1% excluding.
Speaker Change: Excluding the impact of Camillus and Cuda sales increased 5% net sales, excluding camillus and cuda and the U S segment increased 10% in the second quarter due to market share gains with first aid Westcott craft products N D. M T sharpness.
Speaker Change: Excluding noticing cuda sales increased 6% for the six months ended June 30th net sales, excluding camillus and Cuda in Europe increased 9% in local currencies for the quarter and 8% for the six months ended June 30th.
Speaker Change: Sales increase for both periods was mainly due to market share gains in the office channel.
Speaker Change: Next sales, excluding camillus and cuda in local currency for Canada decreased 4% in the quarter and 2% for the year to date, mainly due to a decline in sales of school and office products.
Paul G. Driscoll: The gross margin was 40.8% in the second quarter of 2024, compared to 37.5% in 2023. The gross margin was 39.9% for the first six months of 2024, compared to 36.6% in 2023. The higher gross margin for both periods was mainly due to productivity improvements in our manufacturing and distribution facilities.
Speaker Change: Gross margin was 48% in the second quarter of 'twenty 'twenty four compared to 37, 5% in 2023. The gross margin was 39, 9% for the first six months of 2024 compared to 36, 6% in 2023.
Speaker Change: Gross margin for both periods was mainly due to productivity improvements in our manufacturing and distribution facilities.
Paul G. Driscoll: SG&A expenses for the second quarter of 2024 were $16.3 million, or 29% of sales, compared with $14.8 million, or 28% of sales for the same period of 2023. SG&A expenses for the first six months of 2024 were $31 million, or 31% of sales, compared with $29 million, or 29% of sales, in 2023. Interest expense for the second quarter of 2024 was $540,000 compared to $830,000 in the second quarter of 2023. The decrease was due to lower average debt of approximately $18 million.
Speaker Change: SG&A expenses for the second quarter of 2024 were $16 $3 million or 29% of sales compared with $14.8 million or 28% of sales for the same period of 2023.
Speaker Change: SG&A expenses for this first six months of 'twenty, 'twenty, four were $31 million or 31% of sales compared with $29 million or 29% of sales in 2023.
Speaker Change: Interest expense for the second quarter of 2024 was $540000 compared to $830000 in the second quarter of 2023. The decrease was due to lower average debt of approximately $18 million.
Paul G. Driscoll: Then, income for the second quarter of 2024 was $4.5 million or $1.09 per diluted share compared to an income of $3.4 million or $0.96 per diluted share for the same period of 2023, an increase of 29% in net income and 14% in earnings per share. Net income for the first six months ended June 30th, 2024 was $6.1 million or $1.47 per diluted share compared to $4.4 million or $1.25 per diluted share in the comparable period last year, an increase of 37% and 18%.
Speaker Change: Net income for the second quarter.
Speaker Change: Of 2024 was $4.5 million or dollar nine per diluted share compared to a net income of $3 $4 million or 96 cents per diluted share for the same period of 2023.
Speaker Change: An increase of 29% of net income and 14% and earnings per share net income for the first six months ended June 30th 2024 was $6 $1 million or $1 47 per diluted share compared to $4.4 million or $1.25 per diluted share in the comparable period last.
Speaker Change: Last year increases of 37% and 18% comp.
Paul G. Driscoll: The company's bank debt less cash on June 30, 2024 was $33 million compared to $48 million on June 30, 2023. During the 12-month period, we purchased the assets of Elite First Aid for $6.1 million, paid $2.1 million in dividends, and generated $8.5 million in free cash flow. Additionally, the $13 million of net proceeds from the sale of the Camillus Included product lines was used to reduce debt.
Speaker Change: The company's bank debt less cash on June 30 of 'twenty 'twenty, four was $33 million compared to $48 million on June 32023.
Speaker Change: The 12 month period, we purchased the assets of elite first aid for $6 $1 million paid to point to $1 million in dividends in January generated $8.5 million and free cash flow.
Speaker Change: Additionally, the $13 million of net proceeds from the sale of the Camillus and Cuda product lines was used to reduce debt.
Operator: I will now open the call to questions.
Paul G. Driscoll: Thank you Paul.
Paul G. Driscoll: Well now open the call to questions.
Paul G. Driscoll: Yeah.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Tim Call with Capital Management Corporation. Please proceed with your question.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Formation Til 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.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you.
Speaker Change: First question comes from the line of Tim call with Capital Management Corporation. Please proceed with your question.
Timothy Colin Call: Congratulations on another good quarter. All the hard work's paying off. Thank you. SG&A is growing a little bit faster than sales; it's up around 9 or 10 percent. Do you think in future years SG&A will grow slower than sales?
Timothy Colin Call: Well congratulations on another good quarter, all the hard work paying off.
Speaker Change: Thank you Tim.
Speaker Change: SG&A is growing a little bit faster than the sales that's up around nine or 10% do you think in future years, our SG&A will grow slower than sales.
Walter C. Johnsen: I don't have a good understanding of why that increased, Tim, maybe because we accrued some bonuses because the team was performing well. But I think, in general, SG&A should be declining with sales. And I think for the year, you'll probably see that. Yeah, you're probably
Speaker Change: Well I don't have the Oh.
Tim: A good understanding of why that increased Tim may have been.
Timothy Colin Call: Hum.
Speaker Change: Cause we accrued some bonuses.
Speaker Change: Because they perform the team's performing well, but I think in general the SG&A should be declining with sales and I think for the year, you'll probably see that.
Walter C. Johnsen: Yeah, you'll probably see it. They're a little bit below 31%. Some of it's just timing differences and cost of living, some investments in IT, but we're not going to grow that much in SG&A relative to sales.
Speaker Change: Yeah, you'll probably see it.
Timothy Colin Call: Little bit below 31% some of it's just a timing differences in our cost.
Timothy Colin Call: Cost of living and some investments in I T.
Timothy Colin Call: But we're not we're not gonna grow that much and SG&A relative to sales.
Walter C. Johnsen: Do you think you'll facilitate some employee stock option cashouts in the years ahead and lower the fully diluted share count? Yes, Tim.
Speaker Change: Do you think you'll facilitate some employee stock option.
Speaker Change: Cash outs in the years ahead, and lower the fully diluted share count.
Walter C. Johnsen: Yes Tim, that's our intent, and I think that because the company has a much stronger balance sheet that it had essentially from the sale of Cruda and Camillus and, of course, the cash flow from the business, we will be buying some of those options when it comes time for them to be...
Tim that's our intent and I think that because the company has.
Tim: A much stronger balance sheet that it had.
Speaker Change: Essentially from the sale of Cuda, and Camillus and and of course, the cash flow from the business.
Speaker Change: We will be.
Speaker Change: Some of those options when it comes time for them to be cashed out.
Walter C. Johnsen: You have a great history of creative acquisitions. Nice tuck-in acquisitions, and the initial cash out for at least first aid of $6.1 million for $4.2 million of annual sales. [inaudible] They deal with life-saving measures. So it was a hole in our product line, and when I said in the conference call that we intend to expand it to our distribution base, we hope that happens. And the reason for that is because those products save lives. It's not for cuts and bruises and scrapes. It's for trauma. It's for serious bleeding. It's for airway obstruction, and Elite First Aid has a very well-established product family and a great reputation.
Speaker Change: You have a great history of.
Speaker Change: Oh.
Speaker Change: Accretive acquisitions nice tuck in acquisitions.
Speaker Change: And.
Speaker Change: The initial cash out for at least first aid is $6 1 million for $4 2 million of annual sales trailing.
Speaker Change: It looks pretty nice.
Speaker Change: Do you think there'll be a lot of cross selling opportunity, where you'll pick up new clients from them and you'll be able to sell their goods to your existing products.
Speaker Change: I think that's a a very perceptive question.
Speaker Change: The.
ALLETE: ALLETE first day.
ALLETE: Trauma kits are high performance can't say the ones that medics would be taken to a a serious accident and.
ALLETE: They deal with life saving measures. So it was a hole in our product line and when I said in the conference call that we intend to expand it through our distribution base, we hope that happens and the reason for that is because those products save lives, it's not four cuts and bruises and scrapes.
ALLETE: It's for trauma, it's the serious bleeding is for airway obstructions.
Speaker Change: ALLETE first date has a very well established product family and a great reputation.
Walter C. Johnsen: So when we acquired it... And it's very similar to many of the acquisitions we do... we try to leverage our distribution channels in this case. We have a hole in the product line, and it really does something, so I'm excited about it. Regarding other similar kinds of deals, I can just tell you that we're constantly looking, and the strategy is pretty simple: buy competitors or buy companies a half step away, and buy companies to vertically integrate making the components, like MedNap and SpillMagic, for use in the components and within our customer base.
Speaker Change: So when we acquired it.
Speaker Change: And it's very similar to many of the acquisitions we do.
Speaker Change: Do we try to leverage our distribution channels and in this case.
Have a hole in the product line and it really does something so I'm excited about it.
Speaker Change: Regarding other similar kinds of deals I can just tell you that we're constantly looking and.
Speaker Change: The strategy is pretty simple by competitors to buy companies, a half step away and buy companies to vertically integrate making the components like med nap and spill magic.
Speaker Change: For use in the components and within our customer base and there are plenty of opportunities for those and we're looking at them.
Walter C. Johnsen: And there are plenty of opportunities for those, and we're looking at them. We have organic sales growth and growth from acquisitions, and you have Profit Margin Expansion, and it sounds like you've set the company up for tremendous long-term growth potential. Congratulations again. Well, that's also, yeah, to be honest, you know; there's always things on the horizon. There's the economy. There's... Container costs go up and they go down, and you know sometimes you have some expenses that you don't expect, but the organic growth that we demonstrated this quarter should start to pick up.
Speaker Change: What do you have an organic.
Speaker Change: Organic sales growth and our.
Speaker Change: Growth from acquisitions and you have.
Speaker Change: Profit margin expansion.
Speaker Change: It sounds like you've set the company up for a tremendous long term growth potential well congrats this altogether.
Speaker Change: To be honest, you know theres always things on the horizon as the economy there is.
Container costs go up and they go down and you know sometimes you have some expenses that you don't expect.
Speaker Change: But.
The organic growth that we demonstrated this quarter.
Speaker Change: It should start to become.
Walter C. Johnsen: We hope for larger and more apparent growth in the coming quarters when we don't have the comparison with KUDA and Camillus. And then, of course, you're getting growth from the acquisitions that it takes time to get the products placed, but when they do, they should be meaningful. It looks like you're in a strong position. I'm looking forward to your..., your future quarters. Congratulations.
Speaker Change: We hope larger and more apparent in the coming quarters. When we don't have the comparison with Cuda and Camillus and then of course, you are getting the the growth from the acquisitions that are it takes time to get the products placed but when they do.
Speaker Change: There there should be meaningful.
Speaker Change: It looks like you're in a strong position I'm looking forward to Europe.
Speaker Change: Your your future quarters congratulations.
Tim: Thank you Tim.
Tim: Thank you.
Operator: Our next question comes from the line of Jeffrey Matthews with Ram Partners. Please proceed with your question.
Speaker Change: Our next question comes from the line of Jeffrey Matthews with Ram Partners. Please proceed with your question.
Jeffrey Matthews: Thanks. I have a few.
Jeffrey Matthews: Number one, from Paul's disclaimer up front, he mentioned continued high inflation and supply chain disruptions. Were those just pro forma things that could happen, or are you still seeing high inflation, and do you still see supply chain disruptions?
Speaker Change: Thanks.
Jeffrey Matthews: I have a few number one from pulse disclaimer upfront. He mentioned continued high inflation and supply chain disruptions were those just pro forma these could happen or are you still seeing high inflation and do you still see supply chain disruptions.
Walter C. Johnsen: Well, with inflation, there clearly is... Salary increases for our team, and that's continuing, with container costs. They have increased since the beginning of the year, and it now appears that they're starting to decrease again, although you can't forecast container prices. But they've gone up a little bit. In general, neither of them are serious issues. But they're in the disclaimer because it happened, and we want it to be complete.
Speaker Change: Well with inflation.
Speaker Change: There clearly is.
Speaker Change: The salary increases for our team and.
Speaker Change: That's continuing.
Speaker Change:
Speaker Change: With container costs they have increased.
Since the beginning of the year and it now appears that Theyre starting to decrease again, although will you can't forecast container prices, but they've gone up a little bit in general neither of them are serious issues, but there isn't the disclaimer because it's happened.
Speaker Change: And we wanted to be complete.
Speaker Change: Sure.
Jeffrey Matthews: How did the elite acquisition come about? I know the Canadian one was more of a Chapter 11 situation, or they were in real trouble. And how did this one come about?
Speaker Change: How did the elite acquisition come about it I know the Canadian one was more of a they were chapter 11 or they are in real trouble, but how did this one come about.
Speaker Change: So we.
Walter C. Johnsen: We regularly contact companies that are interesting to us. And we've been doing this for 15 years.
Speaker Change: <unk> contact companies that are.
Speaker Change: Interesting to us and we've been doing this for 15 years. So there's a pretty large database of companies that we've contacted.
Walter C. Johnsen: So there's a pretty large database of companies that we've contacted, and as you may know, Most of our transactions are self-generated without investment bankers because we are constantly in the market. And in the case of elite, The CEO reminded me that the first time we talked was in 2019, so... I know exactly what happened. They had a price in mind, and they weren't big enough for us to... pay the price. And then they grew, and in our regular contacts and communications, we talked to them again at the end of last year, and it just made a lot of sense for everybody, so we did it.
And as you may know.
Speaker Change: Most of our transactions are self generated without investment bankers because right.
Speaker Change: Constantly.
Speaker Change: Market.
Speaker Change: And in the case of elite.
Speaker Change: The C E O reminded me that the first time, we talked was in 2019.
Speaker Change: So.
Speaker Change: I know exactly what happened we.
Speaker Change: They had a price in mind and they weren't big enough for us to ship.
Speaker Change: Pay the price and then they grew and in our regular contacts and communications, we talked to them again at the end of last year and it just made a lot of sense for everybody. So we did it.
Jeffrey Matthews: And do they stay on, or is this something you have to re-engineer yourself?
Speaker Change: And do they stay on or or is this something you have to re engineer yourself.
Walter C. Johnsen: Yes, the founder is staying on, and his son is going to have a very good role and an important role in our company, and both of them are very, very... terrific people who really know the product lines and the supply base, so it's fun working with them.
Speaker Change: Yes, the the the founder is staying on and his son who's going to have a very good ROE and an important role in our company and both of them are very very.
Speaker Change: Terrific people, who really know the product lines and the supply base. So.
Speaker Change: So it's fun working with them.
Jeffrey Matthews: That's great, great. And then, on the flip side, the Canadian acquisition, which was pretty messy when you bought it, sounds like that's getting up to speed. What have been the main things you've had to do to get it there?
Speaker Change: That's great Great and then on the flip side, the Canadian acquisition, which was pretty messy. When you bought it it sounds like that's getting up to speed.
Speaker Change: What have been the main things you've had to do to to get it there.
Walter C. Johnsen: So, for those that don't know, we purchased Hawktree Solutions in September of 2023. It was in administration, and we bought it, bought $ 1.3 million of inventory for a million dollars. So, we bought it at a discount. And with that came the license for the Canadian Red Cross and the customer base and, of course, the inventory, all the intellectual property. So when you have a situation like that,
Speaker Change: So for those that don't know, we purchased talk tree solutions and.
Speaker Change: September of 2023, it was in the administration.
Speaker Change: And we bought it.
Speaker Change: About a million three of inventory for a million dollars. So we bought it at a discount.
Speaker Change: And with that came the license for the Canadian Red Cross and the customer base and of course, the inventory and.
Speaker Change: All the intellectual property.
Speaker Change: So when you have a situation like that.
Walter C. Johnsen: You have limited downside, but there's a lot of work to get the upside. And the upside first, you've got to get the product out of wherever it is in a warehouse and into your own. You've got to get your product numbers properly aligned. You've got to reassure customers, and for good reason, because the service was not good during the bankruptcy. We have excellent customer service. And then you've got to go out and see the customers, work through the issues with the lack of delivery or flung out product families that, Again, in a bankruptcy, the inventory is not even. So you might have three quarters of a kit put on top of the whole kit because they took the parts that were in one kit and put them into another one to ship them.
Speaker Change: You have limited downside, but there's a lot of work to get upside and the upside first you've got to get the product out of wherever it is in a in a warehouse and into your own you've got to get your product numbers properly aligned they've got to reassure our customers.
Speaker Change: And for good reason because the service was not good in the bankruptcy and.
Speaker Change: Excellent customer service and then you've got to go out and see the customers work through the issues with lack of delivery or filling out our product families that.
Speaker Change: Again in the bankruptcy the inventory is not even so you might have three quarters of a kit, but it's not the whole kit because they took the parts that we were in one kit and put it into another one to ship it and so there was a lot of rework to get it right.
Walter C. Johnsen: And so there was a lot of rework to get it right. Okay, so that's a lot of work, but you bought the company, and you bought the potential at a very good price. Where we are right now is that we have the product family. We have an excellent relationship with the Canadian Red Cross. And we've got a customer base that, in some cases, overlaps with our Canadian business. And in other cases, there are new customers, and we're shipping them and building on them and supporting them with new products from the First Aid Central and Acme United product lines. As we're looking back on it, it was a lot of work in the six months after the acquisition. And right now, we're on the side of momentum, and it's terrific.
Okay. So that's a lot of work, but you bought the company and you bought the potential at a very good price, where we are right. Now is we've got the product family. We've got an excellent relationship with the Canadian Red Cross.
Speaker Change: And we've got a customer base that in some cases overlapped with our Canadian business and in other cases, they were new customers and we're shipping them and building off them and supporting them with new products from the first aid central and Acme United product line. So.
Speaker Change: We're looking back on it it was a lot of work and the six months after the acquisition and right now we're well on the side of momentum and it's terrific.
Speaker Change: Great.
Jeffrey Matthews: And I have three more. The sale of CUDA and Camilla's, now that that's in the rearview mirror, has selling those product lines had any other impact on operating the business, as far as things that are less distracting to your management time?
Speaker Change: And I have three three more.
Speaker Change: The sale of Cuda and Camillus now that that's in the rearview mirror has that.
Speaker Change: Selling those product lines had any other impact on operating the business.
Speaker Change: As far as Oh things are less distracting to your management time.
Walter C. Johnsen: The KUDA and Camilla's business was a really fun business. And when you talk about distracting management time, I like to use the products, and I like to be out there with the people that use them. And we spent probably a disproportionate amount of time working on the product family. But it was fun.
Speaker Change: The Cuda and Camillus business was a really fun business and when you talk about distracting management time, I like to use the product and I like to be out there with the people that use them and we spent probably disproportionate amount of time.
Speaker Change: Working on the product family.
Speaker Change: But it was fun.
Speaker Change: And.
Walter C. Johnsen: I would say that we're now more focused, um..., for sure on the core businesses, and we are. So I think it was an excellent acquisition for them, and yes, it did focus us, although I missed the product family. I remember testing the product on the dock.
Speaker Change: I would say that we're now more focused.
Jeffrey Matthews: Yeah. Two more, Paul I think said something using the number 39 regarding SG&A, and I wasn't sure what that meant. Is that 39 million a year, or was it 39% of something? I didn't hear that. Paul, what was the number that you're...
Speaker Change:
Paul G. Driscoll: I definitely didn't say 39. I said 31.
Speaker Change: For sure on the core businesses.
Speaker Change: And we.
Jeffrey Matthews: Oh, okay. Thirty-one million. Or thirty-one percent, or twenty-nine million and twenty-nine percent. Twenty-nine. Okay. Okay. Yeah, definitely not thirty-nine.
Speaker Change: Put cuda and camillus into hands that we're able to leverage it and we werent able to do that we had a platform of $12 million and we were pretty much flat because we didn't have the distribution base.
Jeffrey Matthews: Okay, and is that an annualized kind of idea?
Walter Johnsen: We had a platform of $12 million, and we were pretty much flat because we didn't have the distribution base in hunting and fishing the way GSM does. I'm really proud because they have taken it, and it's becoming a real force in the hunting and fishing area. So I think it was an excellent acquisition for them, and yes, it did focus us, although I missed the product. I remember testing the product on the dock, Walter, the two more Paul. I think it's something used the number of 39 regarding SG&A, and I wasn't sure what that meant. Is that 39 million a year or 39% of something?
Paul G. Driscoll: No, that's a year-to-date comparison; that's a six-month model.
Speaker Change: Hunting and fishing the way G. S M. It does and I'm really proud because they have taken it and it's becoming a real force in the hunting and fishing area. So.
I think it was an excellent acquisition for them and yes. It did focus us although I missed the product family.
Speaker Change: [laughter] I remember are testing the product on the dock water.
Speaker Change:
Speaker Change: The two more Paul Paul I think says something used the number of 39 regarding SG&A and I wasn't sure what that meant is that $39 million a year or a.
Speaker Change: 39% or something.
Paul Driscoll: I didn't hear that, Paul. What was the number that you said?
Speaker Change: I didn't hear that Paul what was the number that you said.
Speaker Change:
Paul Driscoll: Yeah, I definitely didn't say 39; I said 31 million or 39 million or 29 million and 29%. Okay, definitely not certain.
Paul G. Driscoll: Yeah, I wouldn't have I definitely didn't say 39.
Paul G. Driscoll: I said 31 million Oh, Oh, Okay, sorry, do you want to understand our $29 million and 29% 29, okay.
Paul G. Driscoll: Okay.
Paul Driscoll: Okay, and is that an annualized kind of idea? No, that's a year-to-date, that's a six-month number.
Walter: Okay and is that an annualized kind of idea or no. That's it that's a year to date, that's a six month number got it okay. So what I'm trying to figure out here is gross margin of 40% in the quarter Walter I always remember back in the day. When you were shifting production to China and costs cost of man.
Jeffrey Matthews: Got it okay, so what I'm trying to figure out here is gross margin of 40% in the quarter Walter. I always remember back in the day when you were shifting production to China and the cost of manufacturing was going down. I recall gross margins getting up to 45%. Is that a target, or are we at 40% kind of the plateau toe going out? I would not model us increasing the gross margin, and let us be conservative on that. But as we continue to sell more first aid, the products tend to have higher gross margins, and the refills have substantially higher margins, and that is the fastest-growing part of the business. So there will be a natural tendency to increase the gross margin over time, but I wouldn't model it anywhere near 45.
Walter Johnsen: Okay, so what I'm trying to figure out here is gross margin of 40% in the quarter. Walter, I always remember back in the day when you were shifting production to China and cost of manufacturing was going down. I recall gross margins getting up to 45%. Is that a target, or is 40% kind of the plateau going out, do you think, for gross margins? Well, I wouldn't model us increasing the gross margin, and let's be conservative on that. But as we continue to sell more first aid, the products tend to have higher gross margins, and the refills have substantially higher margins, and that's the professor's growing part of the business, so there will be a natural tendency to increase the gross margin over time, but I wouldn't model anybody to 45%.
Walter: The factoring was going down I recall gross margins getting up to 45%.
Speaker Change: Is that a target or are we is 40% kind of a plateau tow going out.
Speaker Change: Do you think for gross well.
Walter: I I I wouldn't model us increasing the gross margin and let's be conservative on that but as we continue to sell more first aid they turn the products tend to have higher gross margins and the refills.
Substantially higher margins and that's the fastest growing part of the business. So there isn't.
Walter: There'll be a natural tendency to increase the gross margin overtime, but I wouldnt model anybody or 45.
Jeffrey Matthews: Okay, thanks very much. I really appreciate it, the congratulations and best localing for. Thank you, Jeff.
Jeffrey Matthews: Got it. Thanks very much. I really appreciate it. And congratulations and best of luck going forward.
Speaker Change: Got it thanks, very much I really appreciate it and congratulations and best of luck going forward.
Jeff: Thank you Jeff.
Speaker Change: Thank you.
Operator: There are no further questions at this time.
Walter C. Johnsen: There are no further questions at this time. I would like to turn the floor back over to Mr. Johnson for closing comments.
Speaker Change: There are no further questions at this time I would like to turn the floor back over to Mr. Johnson for closing comments.
Operator: I would like to turn the floor back over to Mr. Johnson for closing comments. Thank you very much for joining us.
Walter C. Johnsen: Thank you very much for joining us. If there are no further questions, this call is complete. I look forward to updating you again in the third quarter. Have a good day.
Walter C. Johnsen: Thank you much very much for joining us if there are no further questions. This call is complete I look forward to updating you again in the third quarter I have a good day.
Operator: If there are no further questions, the scholars complete. I look forward to updating you again in the third quarter. I have a good day.
Operator: This concludes today's telecom. You may disconnect your lines at this time. Thank you for your participation.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: ?? ?? ?? ?? ?? ?? ?? ?? ??
Speaker Change: Yeah.
Speaker Change: [music].
Paul Driscoll: Johnsen, Paul; Driscoll, Sam; Johnsen, Paul; Driscoll, Sam; Johnsen, Paul; Driscoll, Sam
Speaker Change: Okay.
Speaker Change: Mhm.
Speaker Change: [music].
Hum.
Speaker Change: [music].