Q1 2025 Acme United Corp Earnings Call
Richard Dearnley, Paul Driscoll, Walter Johnsen, Jake Patterson, Jim Marrone, Acme United
Speaker Change: Good game, welcome to the Acme United Corporation's first quarter, 2025 Financial Results Conference Call. At this time I'd like to turn the call over to your host, Mr. Walter Johnson, Chairman and CEO . Please go ahead, sir.
Speaker Change: Good morning. Welcome to the first quarter 2025 earnings conference call for Acme United
I'm Walter C. Johnson, Chairman and CEO No.
Speaker Change: With me as Paul Driscoll, our chief financial officer, will first read a safe harbor statement. Paul, forward-looking statements in this conference call including without
Statements related to the company's plans, strategies, objectives
Speaker Change: 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 at such forward-looking statements.
and Bob Richson uncertainties, including among others, those who are rising.
Speaker Change: 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.
Speaker Change: and existing tariff rates. In addition, we have experienced supply chain disruptions and we may experience these disruptions in the future.
Speaker Change: 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: Thank you, Paul. Acme United had a solid quarter in 2025. Our net sales were $46 million compared to $45 million in the first quarter of 2024.
Speaker Change: Net income for the first quarter of 2025 was $1.7 million, compared to $1.6 million last year. Earnings per share increased 5% from 39 cents to 41 cents.
Speaker Change: Our first aid business in the first quarter of 2025 increased 14% which drove our growth.
Speaker Change: The West Cut cutting tools had a very large initial order of craft products to a major mass marker retailer in the first quarter of last year.
Speaker Change: Sales of these craft items were strong and the product family continues to grow. How DMT sharpness continued to gain placement in major retailers in the kitchen segment and had strong growth in the quarter.
Speaker Change: The European business decreased 7% in the first quarter due to a large promotion.
in 2024 that did not repeat this year.
Speaker Change: We have broadened the first aid in medical product line in Europe and begun new distribution in Switzerland and the Netherlands. We plan to strengthen the first aid sales team in Germany and are preparing for our first sales booth at the Medical Show in Doozledorf in the Fall.
Speaker Change: The Canadian office channel sales were soft, but the first aid business continued to grow. We have new first aid distribution in the mass and industrial markets, and we are also increasing the sales team in Canada.
Speaker Change: Last month, we installed our first robotic system in our Rocky Mountain North Carolina plant.
Speaker Change: The system has four robots that process bulk antiseptic packets for our first aid product line. Orient them for packaging.
Speaker Change: Fold smart compliance boxes and fill them. This custom design machine cost about $650,000. Replace those seven employees and has less than a two-year payback. We have just ordered a second system for our Vancouver, Washington, first aid plan.
Speaker Change: How a spill magic product line has increased substantially since we purchased the company about five years ago.
Speaker Change: It's items include bodily fluid and bloodborne pathogen, clean up kits, as well as general materials from removing fluids from spills. We have outgrown our current facility outside Nashville, Tennessee, and are evaluating a new facility to purchase.
Speaker Change: Our intention is to install automated powder transfer and filling equipment once we own an appropriate site.
Speaker Change: We've generated over 2 million in annual productivity savings from capital projects and our production operations.
Speaker Change: We are uncertain what the tariff levels will be in the coming months, but we are experienced in dealing with past tariffs and high inflation.
Speaker Change: Although the tariff uncertainty is uncomfortable, we also view it as an opportunity to gain market share.
Speaker Change: We have eight plants in the United States that we intend to use to build competitively price products and a broad network of sources in India, Egypt, Thailand and other locations.
The current environment may create new opportunities for acquisitions.
Speaker Change: We believe that our strengths in sourcing and manufacturing and strong financial resources could add significant value to potential acquisitions.
Speaker Change: Oh, now turn the call to Paul. Acme's net sales for the first quarter of 2025 to $46 million compared to $45 million in 2024, a 2% increase net sales.
Speaker Change: in the U.S. segment increased 3% and a quarter mainly due to higher sales of first aid and medical product sales of school and office products decline due to the first time.
Paul Driscoll: Craftsale on the first quarter of 2024. Net sales in Europe for the first quarter of 2025 declined 4% on local currency compared to the first quarter of 2024. You'd be timing. Net sales in Canada.
Paul Driscoll: For the first quarter of 2025 increased 6% and local currency due to higher sales of first aid products.
Paul Driscoll: The gross margin was 39.0% in the first quarter of 2025 versus 38.7% in the first quarter of 2024.
Paul Driscoll: As Gina expenses for the first quarter of 2025 or $15.5 million or 34% of net sales compared with
Paul Driscoll: $14.8 million or 33% of net sales for the same period of 2024. Then income for the first quarter of 2025 was $1.65 million or 41 cents per diluted share compared to net income [inaudible]
Paul Driscoll: $1,000,000, or $39,000 per due-loaded share for the same period of 2024, an increase of 1% in income and 5% in earnings per share.
The Company's
compared to $32 million on March 31.
Speaker Change: in 2024. During a 12 month period, we purchased the assets of elite first aid for $6.1 million, paid $2.2 million in dividends, and generated approximately $12 million in free cash flow. Thank you, Paul. I'll now open the call to questions.
Thank you.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask your question, please press star 1 on your telephone key pass.
Speaker Change: A confirmation to indicate your line is in the question queue.
Speaker Change: You may press start two if you'd like to remove your question from the queue. For a participant using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment please while we pull for questions.
Speaker Change: Our first question comes from Jim Marrone with singular research. Please proceed with your question.
Jim Marone: Yeah, thank you for taking my call quarter. My first question is with regards to acquisition
We'll be with regards to tariffs.
Jim Marone: Within, with regards to the acquisitions you mentioned in your prepared comments that you're looking at making a macrosition.
in the near future.
Jim Marone: I'm just curious whether they're geographic one or with regards to product line and should it be product line, will it be focused on medical kits and cutting tools or would you be
Jim Marone: expanding into other products related to what you couldn't have.
Jim Marone: and then I'll ask a question from Dr. Tarris after your answer to the acquisitions.
and as you can imagine, there are...
Jim Marone: Ways to expand there both with our competitors horizontally, as well as companies that supply components that go into our first aid kits.
Jim Marone: Geographically, we're looking at North America in either of those product lines. Let me go on a little bit about why this is a special time for us.
Jim Marone: But also we have a good pulse of the market globally. Secondly, if these tariffs hold, they will put substantial working capital pressure.
Jim Marone: on our competitors. As they buy inventory at a higher price,
Jim Marone: to replace what they sold, as well as as they replace in receivables.
Jim Marone: with a higher level of receivables because you priced out a higher product.
Jim Marone: some of our competitors don't have balance sheets to sustain that.
and we do.
Jim Marone: So as we're looking at the acquisition area, we can see our competitors having substantially harder margin pressure than perhaps we will.
Jim Marone: and they will have a more difficult time financing their ongoing businesses. So we're looking aggressively in both areas. Jim, you want to ask the second question on tariffs?
Jim Marone: E.I. Campbell, before I do that, just look through the acquisition. So, do you anticipate like the tract evaluations? It offers, like, the data as a result of these headwinds. And it, if so, like, what kind of, you know, E.V. to be the kind of multiples would you be looking
and we'll see you next time.
Speaker Change: and we sold it for 100 times. So, it's not really a formula based on valuation, but clearly we pay fair prices in the market and that would continue.
Speaker Change: Great, thank you for that. With regards to the tariff, so we said there were a lot of tariff and certainty.
Speaker Change: Are you looking at it from the supply side as far as what you're buying product or are you looking at it in terms of your sales?
Speaker Change: and any potential ahead in from that. And also, you know, aside from the tariffs, you're maybe some recessionary headwinds and do anticipate that impacting the business of the law.
Speaker Change: Well, let me just address the tariffs in a broader sense.
Speaker Change: Right now, anything that we look at buying in China has 145% tariff.
Speaker Change: A week ago, the tariff was less, three weeks ago, it was 20%. We don't know what the tariffs will be, three weeks from now, for China. And that's the biggest manufacturer in the world.
for everybody.
So...
You can imagine.
Speaker Change: Many customers and including ourselves are postponing delivery of product until we get clarity on what duty we pay. If we, for example, import product from China today, we pay 145% tariff.
Speaker Change: If the tariff drops to 30%, we're still stuck with 145% we paid right now. Companies, all the major mass market retailers.
Speaker Change: Do a lot of direct important from China, so they're paying the duties
They're doing the same thing we are.
Speaker Change: We're operating on the inventory that we have today by and large and what we're producing in the US and Canada and we're being very cautious about how fast we ship that product because we don't want to get...
Carter.
Paying a high tariff, which perhaps drops. At some point...
Speaker Change: We all have to say pencils down, we're paying the tariff and we bring product in and that would be a more sizable price increase
Speaker Change: So when I talk about uncertainty, what I'm talking about is the price you pay for the product and the ultimate price you pay that you charge the consumer and we're trying to be smart about that to pass the best value we can to that consumer.
Thank you.
Speaker Change: Great. And looking at alternative sources to the source in China, like, you know, there's there are any options with regards to the U.S. States.
Remember?
that we have eight plants in the United States.
We're making a lot of products here and we're getting busier here. That's why we're expanding spill magic in Tennessee. That's why we're increasing our
Speaker Change: Automation in the U.S., both in Rocky Mountain and in Vancouver, Washington. So one major source for us at least is we're a domestic producer.
the 2nd is
Speaker Change: Many of the factories in China are moving production to locations like Vietnam, Thailand, Cambodia.
and we've been participating with that for some time.
in December .
Speaker Change: We began shipping some items out of Thailand that formerly were made in China.
We've shifted other products to India and
We've kind of robust sourcing.
Speaker Change: But you can't move overnight and the tariff regime that has gone in place in two weeks.
means although there's room to expand.
Speaker Change: Over six months, there's not much room to change in two days.
I hope that helps a little bit.
Speaker Change: It does well just thank you for that clarity and again good old things.
Thank you.
Speaker Change: Our next question comes from Jeffrey Matthews with Ram Partners. Please proceed with your question.
Thanks very much. I have three questions, Walter, the first.
Speaker Change: is on guidance. You haven't talked about the year ahead financially.
Speaker Change: and at the LD Micro conference last week, you did talk. I think it was 3 million of inventory that you wife we bought ahead when the current administration was elected.
Thank you.
Speaker Change: Hi, are you assuming you're on life phone? So does that mean if you have to start?
Speaker Change: Ordering stuff from China, you're going to take a big hit in the near term on your cost of goods sold, or is there just no clarity at all right now to make any kind of comment
We're on Fightbow, first of all.
Oh, okay.
Speaker Change: Yeah, and I don't expect a big hit. What we do have...
It was very good to have done.
Speaker Change: You know, you eventually run through you inventory and you do eventually have to buy at a higher price and you have to match your pricing to your costs.
Speaker Change: So we've been modeling that very, very carefully and we've gone through the first two tariff increases that occurred and that's the first 20% and we're now
Speaker Change: Implementing those increases but the big one to 145% for China we haven't and we're trying to be smart with it as far as guidance.
Speaker Change: I think it'd be even Wal-Mart pulled off guidance because you...
Thank you.
Speaker Change: You have to have a stability of your cost base to be able to forecast what your sound's going to be. And I think that will occur, but it hasn't occurred yet. And remember this is the 17th, and I think it was April 2nd when...
Speaker Change: Liberation Day was announced, so it's been two weeks of chaos.
and a lot of modeling.
and what we've done.
Speaker Change: We haven't pushed the price increase, we've kept our head and we've watched as things have unfolded, but we will begin to be announcing the next round of price increases which will probably come pretty much matching the increased costs.
Speaker Change: Got it. Okay. Thanks on that. And then the follow up on the on the acquisition side.
In the past, you've been very opportunistic.
Speaker Change: and I can't think of a company with a track record, frankly.
Speaker Change: Maybe Berkshire Hasseaway, if you exclude precision cast parts, but you've had just a terrific track record on acquisitions.
Speaker Change: Could there be a larger, more transformative deal in this environment for you than you've typically done or do you think it's going to look more like?
Speaker Change: Smaller, tuck in or new product line acquisitions that you've done in the past.
Well, that's an interesting question, because
What we've been dealing opportunistically is...
Speaker Change: when something sits well and the pricing is good, we've acted, and if it was a larger company, we have the wherewithal to do that, and it's scalable. The team certainly knows how to...
executes the due diligence and the implementation of these transactions.
So I
Speaker Change: I certainly got an open mind to a larger deal. And there's a good flow of things. What I'm finding is.
Speaker Change: When we called today for this list of companies that we've had over 15 years, we're getting a pretty favorable response as far as, yeah, let's figure out what might make sense.
Speaker Change: This change here, but as I pointed out, the difficulty is you've got a price right.
Speaker Change: and you've got to buy right in a quickly changing environment. And I can tell you none of us have slept well very well for the last two weeks.
Yep
Speaker Change: and I can appreciate that. And then my certain final question, sort of to follow up on the whole pair of things and what you've been going through the last couple of weeks.
Speaker Change: There's an idea that the Wall Street Journal talked about, which is that the administration
is trying big picture to isolate China.
and they are trying to get other consuming countries.
Speaker Change: to, or, well, anybody out there to work more with the US and less with China as a way of isolating China.
Speaker Change: But given how you've always talked in the past about how efficient their manufacturing basis, how easy it is to source products, how easy it is to develop products there.
It seems to me that's
Speaker Change: That's a very long proposition and I just wonder what your take on that idea is that
Speaker Change: that they could isolate China and sort of win this battle.
Speaker Change: Well, I really don't want to get into philosophy on that. What I can tell you is the Chinese is very efficient. They're very hard working. I happen to enjoy being in China.
Speaker Change: and I'll be there in June meeting with many of our factories and the things that are going on that we read about in the U.S. Press.
Speaker Change: is only half the story and I would just suggest that the administration maybe take a lighter hand and look at the value China brings to the world because it's a lot.
and Therese. Thank you.
Speaker Change: Thanks, Walter, and thanks, Paul, and congratulations and good luck, and as shareholders we appreciate the hard work.
Thank you.
Speaker Change: Our next question comes from Jake Patterson with Tulanta Investment Group. Please proceed with your question.
Jake Patterson: Hey guys, I'm really just curious on the cutting revenue being down and decimate this quarter and you guys mentioned.
Speaker Change: It had a big benefit from last year, but even if I look at the last year's number and adjust out the divestment, that business is only up like two and a half percent, so just trying [inaudible]
Speaker Change: I'd like to compare that to your comments from the last two calls about being pretty excited for what's gotten 25 in the distribution, a big earhead, and kind of curious to see if that is still the case.
Jake gets...
Speaker Change: It's hard to call going into where we are right now. The consumer will be impacted by increased prices.
Speaker Change: Now, you know, scissors are as an example. That's our biggest line in Westcott.
Speaker Change: are not particularly expensive, and what might be an increase in our cost when it gets to retail is a couple of dollars.
You know, so it's not huge.
Speaker Change: but the consumer will be impacted overall because some things will go up a lot and I would suggest things like cars.
refrigerators.
you know, capital goods.
There's also uncertainty because
Speaker Change: The, when you back out and you say, well, Westcock grew two and a half percent last year. Well, that's about right. You know, it grows to four percent, and then the first aid grows at...
8 to 12 percent. The squatter was 14.
Speaker Change: We did have a large promotion last year with a mass market retailer. It was very successful. The products are still in the planning grounds. They're adding to them.
Speaker Change: The craft area continues to be a growth segment for us.
Speaker Change: We had a bankruptcy at the end of the year with Joanne Fabric.
Speaker Change: and so those customers are shopping elsewhere and we're trying to address them, but
the...
The next going forward.
Speaker Change: I would expect West Card to get hit harder than first aid in our medical side just because the consumer is going to be more stressed with the tariffs.
Speaker Change: especially with 145% if that holds for China. Again, it's the biggest manufacturer in the world.
You just don't jump to Vietnam, which...
Speaker Change: doesn't have that many people anyway. I mean, it is impossible.
Speaker Change: I hope that helps a little bit, yeah, definitely, definitely, definitely, um,
Speaker Change: I guess one more quick one I guess of pivoting to the first aid business. I know you guys said you had a lot of trials for the new automatic refill kits.
Speaker Change: and it's not, wasn't in your 25 forecast. I'm assuming that might be impacted a little bit too but just wondering if there's anything you can share on the progress there or where your customers are staying.
Well, our customers, we read a trade show.
Speaker Change: this month, that was very successful and it was one of the items that
Paul Driscoll: For those listening, what Jake is talking about is our smart compliance latest version of first aid. It's an industrial first aid kit with a scanner that...
Paul Driscoll: can tell when the components are either obsolete, missing, or about to need to be reordered, so it's automatic replenishment.
Paul Driscoll: and the latest generation can be hardwired into a customer's.
Paul Driscoll: System and automatically tell the safety manager, it's time to reorder.
Paul Driscoll: I can go to the distributor or us for the customer wants to actually get the replenishment orders.
no
Jake Patterson: We think it's going to have a lot of legs, but it's not in any forecast. So we'll see. As we get things to actually happen, Jake, then I'd love to talk about it, but right now, just be aware of introduced it.
Alright, well that's all from me, appreciate it. Thank you.
Speaker Change: Our next question comes from Richard Dearnley with long pork partners. Please proceed with your question.
Richard Deerly: Good morning. Just to to play off Jeff's question about train of policy
Richard Deerly: the art of the deal, make a deal, be in the press, thump your chest, et cetera. And there was just an announcement that they're close to a deal with the EU one.
and the news, you know.
Very recently
Richard Deerly: It would seem logical to, you know, set China up as the bad guy and then make a deal.
Richard Deerly: I realized that's just a random observation, but you have any thoughts about that?
Richard Deerly: Well, they supply the world and bring a lot of value to the world and are probably not going to go away.
Richard Deerly: from China's really integral to the world. And I think we're looking at this very lopsided. You know, one of the things that...
Richard Deerly: I know being in the business we're in. When COVID happened and the world needed gloves and masks and person protection equipment, China met it all and they they supplied them.
fallously again and again and again and they expanded in a way that
They
Richard Deerly: They do a lot of good things, and I really have not in a position to...
Richard Deerly: Figure out the strategy of the administration. If I did, I'd probably figure out how to price the product.
that we don't know that either.
But yeah, I don't know this strategy.
Speaker Change: Yeah, right. I understand. Then the the uptick in first aid, how much of that
Increased. Do you think it is?
Speaker Change: Longer term organic versus, you know, first aid was pretty flatish through 24 and so has an easy compares.
Speaker Change: Now, you know, so and 14% works good, but it's, you know, against easy numbers.
Ernie Keeling on that.
Speaker Change: I never found numbers to be easy, to be honest.
Richard Deerly: and where we are right now. Honestly, <expletive> , where we are right now to be talking about is it up 14, 13, 12? It could be up 25. And part of it is where we price.
Speaker Change: So much right now in this, the remainder of the year, is what we price off the tariffs.
Speaker Change: and then you have organic growth underneath that, and you know we've been saying for many years, first-aid growth is 8-12% and
Speaker Change: and that's probably what I would stick to. But there's going to be, this year, there will be reviews tariffs for hold, there will be price increases.
Speaker Change: and there will be growth because of that in addition to the underlying organic, and that will be with West thought as well, but again you've got to trade off on some demand slide, and we've modeled that.
internally.
but there's a lot of assumptions.
Good. Thank you.
Speaker Change: The next question comes from Peter Mark with more capital management. Please proceed with your question.
Speaker Change: Hey, Walter. Jake already got my question. I was going to follow up just on the smart compliance and it sounds like things are going well. It'll be interesting to get just kind of that install based any color you guys could give as a year.
Speaker Change: Progressors. I think that'd be good, but maybe is a second question, just...
Speaker Change: The DMT pull through sharpness. First off, we've got both models. We like them at our house. Those things really do work. Are you looking to expand more into the kitchen with DMT or what's going to your thoughts around that product?
Speaker Change: So, for those that don't know, what we did in the past year was take the DMT sharpening
Speaker Change: They're arguably the best in the world with the dispersion of diamonds and the flatness of the stones. And we put them in a...
Speaker Change: a patented sharpener. When you run the knife through it, the bones automatically adjust to the angle of the cutting edge of the blade. And so it's...
accurate, and it really works.
The...
Speaker Change: Product is now being sold in Europe . It's being sold at a number of major mass market retailers in the kitchen area in the U.S. and we're expanding off of that and road of two.
I don't see us going into
Okay.
Speaker Change: also industrial grade. So I think within that arena it's a very fertile area and we're growing nicely in it and gaining market share still small but it's an exciting piecehorse.
Speaker Change: and as you point out, Peter, it really does work.
Speaker Change: Yeah, definitely does so. Well, thank you both and great quarter.
Thank you.
Speaker Change: Our next question comes from Steve Check with Seabus Capital, Seabus Garden Capital. Please proceed with your question.
Speaker Change: Hey, thanks. Walter, if anybody can navigate through this environment, I think it's you guys so.
Speaker Change: The add a question on if on front loading and with some of the the
Speaker Change: Inventory that you bought in advance, I think it shows $3 million. I'm wondering if you're seeing
Speaker Change: Any activity from your customers, thinking along the same lines, maybe as we're coming into Borers, we're in April here. Are you seeing customers trying to buy kind of advances, maybe the cost and purchase now?
well
Speaker Change: As you can imagine, the customers that have placed orders with us, we're going to fill first and so there's a schedule for that.
Speaker Change: There have been examples where some customers have wanted to buy, for example, all of our items in one area and we just can't do that because if we do it, then we're not supplying the customers who worked with a long term and given us advanced orders.
Speaker Change: So, it's a very careful balance. We want to solve everybody's problem but...
We also have...
Customers with the standing orders that have got to have priority.
So.
Fraudling back sales may sound like an unusual situation.
But until we reprise the book, we have to.
Does that make sense to you, Steve?
Yeah, I think so.
We import about 40% from China [inaudible]
Okay.
All right. Okay. Thank you. Good luck. Thanks. Thank you.
Speaker Change: Another invite if you like, has been kept in, please press star one on your telephone keypad. While I'm on, please, what we've followed for questions.
Speaker Change: Sarah note for questions and we've reached the end of the question answer session. I would now like to turn the call back over to Walter Johnsen for closing comments.
Speaker Change: I'd like to thank all of you for joining us. This really is.
a complicated time.
Speaker Change: and we're going to do well with it. I'm confident of that, but it's rocky and I want to thank you for attending this call and we look forward to updating you in the coming quarters as it moves forward. How does it ever unravel?
and just joking. Have a good day. Good night.
Driscoll, Driscoll, Walter Johnsen, Jim Marrone,
Speaker Change: This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.