Q3 2025 Acme United Corp Earnings Call

Operator: Good day and welcome to the Acme United Corporation Third Quarter 2025 Financial Results Conference call. At this time, I'd like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir.

Walter Johnsen: Good morning. Good morning. Welcome to the Third Quarter 2025 Earnings Conference call for Acme United Corporation. I am Walter C. Johnsen, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe harbor statement. Paul?

Paul Driscoll: Paul.

Walter Johnsen: 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.

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

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 risk and uncertainty.

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.

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

We are also subject to additional risks and uncertainties, as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release.

Thank you, Paul.

Hackman United had net revenues of $49 million in the third quarter of 2025 compared to $48 million in 2024.

Our net income was $1.9 million compared to $2.2 million last year.

Earnings per share were $0.46 compared to $0.54 in 2024.

Our sales in the third quarter increased 2%.

Sales of first aid products, which represent about two-thirds of our corporate revenues, increased by 9%.

We had strong e-commerce sales and consistent demand from our industrial customer base.

And solid recurring revenues of refills of components for our first aid kits.

However,

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

Our sales of our Westside cutting tools continue to be reduced by the cancellation of back-to-school and retail promotions due to the confusion and uncertainty when large tariffs were announced earlier this year. As you can imagine, bars at that time were entirely focused on reducing the impact of the tariff costs.

...and seeking alternative sourcing locations rather than new business.

We are seeing stability in the market today, with an increase in promotional activity, which we expect in the coming quarters.

Our gross margins have also started to stabilize at about 38% to 39%. We increased selling prices modestly to offset tariffs and successfully negotiated cost reductions with our suppliers.

We have been shifting production locations to reduce tariffs and increasing our production in the United States.

This takes time and is a tremendous amount of effort, but we are making progress.

Our operating income grew consistently with revenues during the quarter.

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

As you may remember, we purchased a 78,000-square-foot manufacturing facility on 12 acres with room for expansion in July for $6.1 million. The new plant will produce our Spill Magic cleanup products for bodily fluids, blood, and spills, and comes online in the first quarter of 2026.

We have been investing in our MedApp facility in Brooksville, Florida, to increase production of alcohol prep pads, BZK wipes, triple antibiotic packets, and lens wipes.

Sales of these domestically produced items are increasing.

Concurrently, we have also been expensing the costs of tightening our GMP controls and improving FDA compliance training in preparation for possibly entering the United States hospital and military markets in a larger way.

As we look into the coming quarters, we see consistent growth in our first aid business and a gradual improvement in Wisconsin sales.

We continue to strengthen our balance sheet.

And to increase and to generate and review acquisition opportunities.

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

I will now turn the call to Paul.

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

US sales declined 1% for the 9 months ending September 30th. Net sales in Europe increased 6% in local currency for the quarter, mainly due to higher sales of school and office products into the e-commerce channel. Sales for the 9 months decreased 2%. Meanwhile, sales in local currency for Canada increased 7% in the quarter and 16% for the year-to-date, mainly due to higher sales of first aid products.

The gross margin was 39.1% in the third quarter of 2025, compared to 38.5% in 2024. The gross margin was 39.8% for the first month of 2025, compared to 39.4% in 2024.

SG&A expenses for the third quarter of 2025 were $16.2 million, or 33% of sales, compared to $15.6 million, or 33% of sales, for the same period of 2024. SG&A expenses for the first nine months of 2025 were $47 million, or 32% of sales, compared to $47 million, or 31% of sales, for 2024.

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

Operating profit in the third quarter of 2025 increased 3% compared to the third quarter of 2024. Net income for the third quarter of 2025 was $1.9 million, or 46%—or 46 cents per diluted share—compared to a net income of $2.2 million.

Or 54 cents per diluted share the same period of 2024. I drink a decrease of 14% And then income and 15% in earnings per share.

Despite the increase in operating profit and income in the quarter, there was a decline due to higher tax expenses.

In the third quarter of 2024, we recorded a large tax benefit related to the exercising of stock options.

This resulted in an effective tax rate of 8% last year's third quarter, compared to 22% this year. Then, income for the first 9 months.

As of September 30, 2025, and 2024, net income was $8.3 million, or $2.33 per diluted share.

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

The company's bank debt less cash on September 30, 2025, was $23 million compared to $27 million on September 30, 2024.

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

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

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

Operator: Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your headset before pressing star keys. Our first question comes from the line of Jim Marrone with Singular Research. Please proceed.

Ladies and gentlemen, if you would like to ask a question, please press *1 on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

You may press *2 if you would like to remove your question from the queue.

For participants using the speaker, it is required, and maybe necessary, to pick up your handset before pressing the star keys.

Jim Marrone: Yeah, great. Thank you, gentlemen. It sounds like you had a pretty decent quarter. Again, kind of the same story, just managing your inventory to address these challenges and headwinds. I'm just trying to get a better sense of your underlying business. When you say that the sales of school and office products were lower due to the cancellation of customer orders as a result of tariff uncertainty, are you kind of suggesting a company like, say, Walmart, is canceling your cutting tool products because of the uncertainty of tariffs that their customers are feeling and so they have less disposable cash? I'm just trying to get a better sense of that.

And our first question comes from the line of Jim Moron with Singular Research. Please proceed.

Yeah, great. Uh thank you gentlemen. Um, it sounds like you had a pretty decent quarter again, kind of the same story, just managing your, your inventory to address, uh, you know, these challenges and headwinds. I'm just trying to get a better sense of like just your underlying business. Like when you say that the sales of school and Office Products were lowered due to the cancellation customer orders as a result of tariff and uncertainty. Like, all right,

Paul Driscoll: That's a very insightful question, Jim. Let's be really clear. When customers like Walmart, Home Depot, you can name any one of the large retailers, were faced with 145% tariffs last April, they panicked. They had empty shelves.

Are you, uh, kind of suggesting like a company like, say, Walmart is canceling your cutting tool products because of the uncertainty of tariffs that their customers are feeling? And so they have less disposable cash? Or I'm just trying to get a better sense of that. Uh, that's a very insightful question, Jim. So let's be really clear. When customers like Walmart, Home Depot, you can name any one of the large retailers, were faced with 145% tariffs last April, they panicked.

Jim Marrone: Based on all their general product and the higher costs on their side, they may not have the budget for additional spending. Is that what you're suggesting?

Paul Driscoll: No, no.

They had empty shelves. So based on all their general products and the higher costs on their side, they may not have the budget for additional spending, is that what you're suggesting?

Jim Marrone: Okay. All right.

Paul Driscoll: With 145% tariffs, they stopped buying. It was cheaper not to bring something in.

Jim Marrone: I see. All right. They could already pay for the price point.

Paul Driscoll: What?

Jim Marrone: For the cutting tools.

Paul Driscoll: Yeah. Jim, what they did was they stopped buying anything that they could avoid buying. They canceled every promotion, not just for Acme United Corporation, for retailers across the country. Right. What they did was they scrambled. They modeled and modeled and modeled. The tariff is going to be 54%. The tariff is going to be 82%. The tariff is going to be 30%. Nobody knew where it was because nobody knew. Because of that, those guys weren't worrying about what am I going to put on the shelf in a promotion in November. They were worried about what am I going to do in May. That's what happened, not to Acme United Corporation or cutting tools. It happened to every single retailer in the United States that had imported products. Most of them did.

No, no. Okay. All right. With 145% tariffs, they stopped buying. It was cheaper not to bring something. Oh, I see. All right, all right, the price.

Yes, so, Jim. So what they did.

Buying anything that they could avoid buying, they canceled every promotion, not just for acne, for retailers across the country.

Right? And what they did was they scrambled. They modeled and modeled and modeled: the tariff is going to be 54%. The tariff is going to be 82%. The tariff is going to be 30%. Nobody knew where it was.

Because nobody knew.

And because of that, those kinds were worrying about, "What am I going to do?" Put on the shelf in a promotion in November, they were worried about, "What am I going to do in May?"

Jim Marrone: That's what I was referring to in the spring, is what you're suggesting. Now that's kind of abated. Is that what you're suggesting?

Paul Driscoll: Yeah. When buyers are buying, they don't place an order in a week and expect it to be delivered. They're laying out a program that takes time to be set in the planograms and production to go in, be delivered, and go onto the shelves. Typically, they're looking out six to nine months. When we're looking at second, third quarter, fourth quarter, there's hardly any promotions for a Westcott product. That doesn't mean you don't have things on the shelf, the regularly planned items, the planograms. The mix, when you're doing Christmas promotions, the in and outs in a retailer, which is called merchandising, they stopped doing that. Now, it has stabilized.

And that's what happened, not to hack me or cutting tools. It happened to every single retailer in the United States that had imported products. And most of that, what I was afraid of in the spring, is what you're suggesting. And now, that's kind of a baited question, is that what you're suggesting?

Yeah, so when buyers are buying it, they don't...

Place an order in a week and expect it to be delivered. They're laying out a program that takes time to be set in the planograms and production to go in. Be delivered and go on to the shelves. So, typically they're looking out 6 to 9 months.

And so when we're looking at the second, third, and fourth quarters, you know, there's hardly any promotions for a Westcott product. That doesn't mean you don't have things on the shelf, the regularly planned items, the planograms.

The mix when you're doing Christmas promotions, the ins and outs in a retailer, which is called merchandising. They stopped doing that.

Um, now

Paul Driscoll: When the tariffs went to 30% for China and stayed, we were able to then recover and work on price increases and cost savings and things so that they had product that could be sold at fair prices, which they do have from our products. They had the base to start to look at the new promotions. That is absolutely occurring now for looking out first quarter, second quarter. It feels like the momentum is pretty much normal, but it was certainly not normal when you had 145% tariffs and retail went dry. All they could do is focus on what do we do tomorrow.

It has stabilized. And when the tariffs went to 30% for China,

And stayed.

And then we were able to recover and work on price increases and cost savings, and things so that they had product that could be sold at.

Fair prices, which they do have from our products.

Um, then they had the base to start to look at the new promotions, and that is absolutely occurring now, um, for looking out.

First quarter, second quarter, and it feels like the momentum is pretty much normal.

Um, but it was certainly not normal. When you had 145% tariffs and retail went...

Dry it, just they, they, they all they could do is focus on.

Jim Marrone: Right. You also kind of mitigated that impact through effective inventory management, I remember.

What do we do tomorrow?

Right.

Paul Driscoll: Yes, we did.

Jim Marrone: Do you think that still continues today, or has your inventory run down where you're not able to have that flexibility? What's the state of that today?

Paul Driscoll: That's a good point. For those who may not know, when we had a new president elected last year who had campaigned on tariffs, we increased our inventory by a number of millions of dollars in preparation for some level of tariffs, not expecting the kind that we had. During the last two quarters, we've been working that inventory down. In the meantime, we built up new inventory in preparation for something else that might happen, which we really don't think will happen, but we're prepared in case the current tariff issues continue to be out there with China and the United States.

And so you you also kind of mitigated that impact through the effective Inventory management. I mean, I remember well, I think that's still continues to today or has your inventory run down where you're not able to have that flexibility or or what's the state of to about? Yeah. So that's a that that's a good point for those who may not know. Um, when um, we had a new president elected last year.

Who had campaigned on tariffs? We increased our inventory by a number of millions of dollars in preparation for some level of tariffs.

Uh, not expecting the kind that we had, um, during the uh,

Last.

2 quarters. We've been working that that inventory down. In the meantime, we built up new inventory in preparation for something else that might happen. Uh, which we really don't think will happen, but we're prepared in the case. The current tariff issues, uh, uh, continue to be out there with China and the United States.

Jim Marrone: Okay. Thanks for the clarification, Walter. Thank you.

Paul Driscoll: Sure, you're welcome.

Okay, thanks for the clarification then, Walter. Thank you. Sure, you're welcome.

Operator: The next question comes from the line of Tim Kaul with the Capital Management Corporation. Please proceed.

The next question comes from the line of Tim Call with the Capital Management Corporation. Please proceed.

Tim Kaul: Congratulations on steady margins in the face of tariffs. That's quite a feat.

Paul Driscoll: Thank you, Tim.

Well, congratulations on steady margins in the face of tariffs. That's quite a feat.

Tim Kaul: I was wondering about the other reason why.

Thank you, Tim.

Paul Driscoll: Tim, it actually is because you've got a whole series of things that you really needed to manage. You know, your costs, modest increases, just a changing environment. To hold the margins or slightly increase them is an accomplishment, and we're happy with it.

you know, your costs

modest increases.

Just as a changing environment and to hold the margins slightly increased them, is an accomplishment and we're happy with it.

Tim Kaul: That's great. I was wondering about other expense. It was $146 million versus last year, a gain of $17 million. That's quite a swing. Was there anything recurring in there or unusual?

And that's great. And uh I was wondering about other expense. It's uh, it was 146 million versus uh, last year again of 17 million.

And that's quite a swing.

Paul Driscoll: What was that?

Was there anything, uh, recurring in there or unusual?

Jim Marrone: You meant $146,000 compared to?

Tim Kaul: Sorry.

Jim Marrone: Yeah. No, those are just foreign exchange gains and losses. I mean, you know, sometimes, like for example, you'll bring in products in Europe, and you record it at an exchange rate of 1.17, and then during the quarter, maybe the rate went down to 1.14. It became more expensive when you actually paid for the goods. It's just fluctuation in currencies, and that's really the euro and the Canadian dollar.

Well what was you? You meant 146,000. Compared to sorry um yeah no those those are just uh foreign exchange gain gains and losses. Um I mean you know it did sometimes like for example you you bring in a a products and and Europe um and you recorded it at an at an exchange rate of 117. And then during the quarter, maybe the rate, went down to 1 1/4. So um, it became more expensive when you actually paid for the goods that there's just it's just fluctuation and and currencies. Um, and that's really the, the Euro and the Canadian dollar.

Tim Kaul: Basic and diluted share count rose for the three-month and the nine-month period, but you're financially strong with excess free cash flow and declining debt. Can any action be taken to slow down share creep?

And then, um, basic and diluted share count rows for the 3-month and a 9-month period. But you're.

Financially strong, with excess free cash flow and declining debt. Can any action be taken to slow down share creep?

Paul Driscoll: We have been buying in shares, and every time we, I mean, buying in shares every time someone wants to exercise. That has reduced quite a bit of a share creep, but we haven't been in the market buying actively in the market. We could. We certainly are generating cash. Again, I'm careful about that because as we've gotten bigger, the acquisition sizes that we've looked at tend to have grown, and they take more cash. We could do that, Tim. I think when options are being exercised, where the strike price is below the market, that's a no-brainer for the company. The other, I'm a little bit more cautious about.

Well, we've been buying in shares. Um, every time we, I mean, buying in shares every time someone wants to exercise. Um, so that.

Has reduced quite a bit, um, overshare creep. Um,

But we haven't been in the market buying actively in the market.

Uh, we certainly are generating cash, but again, I'm careful about that because...

As we've gotten bigger, um, the acquisition sizes that we've looked at tend to have grown, and they take more cash.

We could do that, Tim. But I think when options are being exercised, we are there—the strike prices are below the market? That's a no-brainer for the company. The other, I'm a little bit more cautious about.

Tim Kaul: Is there any insight as to the trade's level of inventory? Are you ever able to see whether it's above average or below average? Because one would think it'll be extremely low in retailer warehouses.

And then, is there any insight as to the trade levels of inventory? Are you ever able to see whether, you know, it's above average or below average, or you know,

Paul Driscoll: That's true. Amazon, in particular, has scaled back the inventory that it's holding in first aid by, I think, about two weeks. That generates cash for them, and it's probably a smart thing because our deliveries are excellent. They can't keep doing that. On that end, for sure. On the store side, it's less clear to me because I don't always have the visibility. We do with Amazon, and they have cut back a couple of weeks. That's done, I think.

Because one would think it would be extremely low, uh, in retail or warehouses.

well, you know

That's true. The, um, Amazon in particular has.

Scaled back the inventory that it's holding.

In um, in first aid.

and um,

I think about two weeks, and you know that generates cash for them. There's probably a smart thing because our deliveries are excellent. Um,

But they can't keep doing that. So, on that end,

For sure.

On the, um, the store side.

It's less clear to me because I don't always have the visibility, but we do with Amazon, and they have cut back a couple of weeks, and that's.

Done, I think.

Tim Kaul: You have a history of a nice organic growth from cross-selling and capacity increasing. You increased the capacity at Med-Nap, and now you're doing it at Spill Magic. With Spill Magic, was capacity constrained to the point where you could not fill orders, or you didn't market to new customers, or you excluded Spill Magic from some kits? I'm just trying to get a feel for when that operation was fully running and whether you could get a balance.

you have a history of

A nice organic growth from cross-selling and capacity. Increasing, like, um, you, you, you increase the capacity at...

Paul Driscoll: Yeah. Let's start with that. When we bought Spill Magic, it was about $5 million in revenues, and it's about $15 million now. The facilities that we had when we bought it are bursting. The facility that we bought, I think, was a very, very good value. You never know unless you sell, which we're not going to do, but the Nashville market has heated up immensely for an existing manufacturing site since Trump has taken office and put in these tariffs because a lot of companies, including ourselves, who were looking at places to expand manufacturing, went to places that were favorable to manufacturing. The Nashville area is one of those. We bought Spill Magic for under $80 a square foot, and the market for that that we saw was generally running somewhere between $90 and $110 a foot. I think we bought it well.

Uh, when that operation is fully running that...

When we bought Spill Magic, it was about $5 million in revenues, and it's about $15 million now.

So, the facilities that we had when we bought it,

Are bursting.

Um,

and, um, the, uh, facility that we bought.

I think it was a very, very good value. You know, you never know unless you sell, which we're not going to do, but...

The Nashville Market.

Has heated up.

Immensely since for an existing manufacturing site.

Um, since

Companies, including ourselves, who were looking at places to expand manufacturing.

Went to places that.

were favorable to manufacturing, and the Nashville area is one of those.

So, we bought, uh, Spill Magic for under $80 a square foot, and the market for that.

Paul Driscoll: The real beauty is it's a facility that we can move into, have the space to continue to grow, install the automation equipment, which once installed, you really don't want to move again and again with leases. It'll have a home and begin to move things like powder, transfer equipment, and ducting, which is expensive to install, but once it's in, reduces labor and increases productivity. That site we think is going to be just perfect for Spill Magic because it's on 11 acres, there's room for a 60,000 square foot expansion, which I hope we can use sometime. The first part to your question, we bought a $5 million business that we grew to $15 million, and obviously, we needed space. The second is now that we have it, we can really automate with putting good equipment in a permanent home.

What we saw was generally running somewhere between $90 and $110 a foot. So I think we bought it well, but the real beauty is its a

The facility that we can move into has the space to continue to grow, install the automation equipment, which, once installed, you really don't want to move again and again and again. You know, with leases, it'll have a home and begin to move things like...

Powder transfer equipment and ducting, which is expensive to install, but once it's in, it reduces labor and increases productivity.

That.

That site.

We think this is going to be just perfect for our still magic because it's on 11 acres. There's room for an AC and a 60,000 square foot expansion.

uh, which um

I hope we can use some time for the first part of your question.

We bought a million-dollar business that we grew to $15 million, and obviously, we needed space. Now that we have it, we can really automate by putting good equipment in a permanent home.

Tim Kaul: It's operational in the first quarter. Would production of Spill Magic in general increase through the year next year, or how fast can you get it up to the level that you want to produce?

And in this operational situation in the first quarter, what would the production of Spill Magic in general increase through the year next year, or how fast can you get it up to?

A, uh, the level that you want to produce.

Paul Driscoll: I haven't looked at the budget to really answer that factually. My gut reaction is it's been growing every year, and it probably will continue to. I can't give you an estimate because I just am not prepared for it.

Um, I haven't looked at the budget to really answer that. Um, factually.

My gut reaction is that it's been growing every year, and it probably will continue to.

um,

Tim Kaul: When you said the facility will open in the first quarter, will it be full production or like previous production, will it be up and running completely?

But I can't give you an estimate because I just did not prepare for it.

When you said the facility will open in the first quarter, will it be?

Uh, you know, full production or like previous production of, uh, will it be up and running? Uh,

Paul Driscoll: We will be fully running by the end of March. There is a tenant in the facility right now who will be vacating sometime in December. As soon as that's done, we'll be preparing the site for the move, doing the move, and beginning and completing getting into full production during that first quarter. It will be by the end of March fully operational.

Uh, well completely. So we will be fully running by the end of March.

And there's a tenant in the facility right now who will be vacating.

Sometime in December.

and as soon as that's done,

We'll be preparing the site for the move and doing the move, beginning and completing, you know, getting into full production during that first quarter. So it will be by the end of March.

fully operational.

Tim Kaul: Thank you. Congratulations again on the sales growth and keeping the margins where they are. I think when the other companies that are importing report, they won't be able to say they did the same thing. Great management through this process. As always, it's amazing. Thank you.

Uh, thank you. Congratulations again. I'm, uh,

Uh, the sales growth in the, uh, keeping the margins where they are. Uh, I think when the other...

Companies that are importing.

Report. They won't be able to say they did the same thing. So, uh, great management through this process, uh,

Paul Driscoll: Thank you, Tim.

As always, you, it's amazing. Thank you.

Thank you, Tim.

Operator: The next question comes from the line of Richard Dearnley with Longport Partners. Please proceed.

Richard Dearnley: Good morning. To clarify on Tim's question, are you in the new Spill Magic facility, are you using the same production equipment, or is it new, more productive equipment?

The next question comes from the line of Richard Dearly with Longport Partners. Please proceed.

Good. Good morning. Uh, the to, to, uh, clarify on on, uh, Tim's question are, are you in the news Bill magic facility? Are you using the same equipment, uh, production equipment or? Or is it new? Um,

Paul Driscoll: When did we first move?

you know, more productive equipment.

Richard Dearnley: Yes.

when we first moved,

Paul Driscoll: Yeah. We'll be moving the exact equipment. There's some equipment that's in there right now because they were handling powders that we're going to be buying, and that equipment actually helps us a lot with the automation. The next step, which is robotic placement of items into boxes, robotic filling of the bags, that will be new equipment, and it'll be happening during 2026.

Yes.

Yeah, we'll be moving the exact equipment. There's some equipment that's in there right now because they were handling powders.

um, that

We're going to be buying that equipment.

Actually, it helps us a lot with the automation. Um,

but the

next step, which is

Uh, the bags that will be new equipment, and it'll be happening during 2026.

Richard Dearnley: I see. When you start in March, if to use rough numbers, the capacity of the plant would still be about $15 million, or would it be, you know, $20 million or something like that?

I see. So, when you start in March,

Uh, if we use rough numbers, the capacity of the plant would still be about $15 million, or would it be, you know, $20 million or something like that?

Paul Driscoll: The capacity should be more than 20.

The um,

The capacity should be.

More than 20.

Richard Dearnley: That's at startup, not through the year.

That's at startup, not through the year.

Paul Driscoll: Yeah, now, I'm not saying that we were going to hit those kinds of numbers.

Richard Dearnley: Okay, I'm just getting that, you know, the big picture there. Great.

Paul Driscoll: Yeah. Let me explain a little bit more, Dick, because you've got a good point. In our current site, one of the things that we had a big issue with was storage of raw materials. We had no place for it. Here we've got an 11-acre site. We've got plenty of room outside of the actual physical building to be storing in containers, the raw material. By freeing that up, we're now able to have a full workspace within the current 78,000 square feet. It's also got, I think, a 24-foot ceiling, crane capability to be moving heavy objects. The ability to process faster is big when you have the space and you've got the physical facility. The day we close, because the raw materials will be stored outside in closed containers, we could be looking at $25 million.

Yeah. Now, I'm not saying that we were going to, um, hit those kind of numbers. Yeah, but okay, I I'm, I'm just getting that, you know, the, the, the big picture there. Great let me explain a little bit more dick because you, you, you've got a, a good point.

In our current site, one of the things that we had a big issue with was the storage of raw materials.

We had no place for it.

So here we've got an 11-acre site.

We've got plenty of room outside of the actual physical building to be storing in.

Um, containers, uh, the raw material, so by

Freeing that up, we're now able to have a full workspace within the current 78,000 square feet.

um, it's also got um,

I think the 24-foot ceilings is, uh,

Crane, um, capability to be moving heavy objects, the ability to...

Um, it is big when you have the space and you've got the physical facility. So.

Yeah, the day we closed because the raw materials will be stored outside in closed containers, we could be looking at $25 million.

Richard Dearnley: Right. Great. Back up, you're commenting about online in first aid. The online and the refill business was strong. What does the refill business at the moment % of first aid revenue in round numbers?

Right. Um,

Paul Driscoll: You're probably better at that than me.

Great. Uh, the, um, the backup you're coming about online in the first aid, uh, the online and the refill business was strong. Uh, what, what does the refill, uh, business at the moment? Uh, percent of, uh, first aid Revenue, you know, in round numbers?

Well, you're probably better at that than to make.

Jim Marrone: I'm guessing here, like 25%.

I'm kind of guessing here, like 25%.

Paul Driscoll: All right, yeah, that sounds right.

Richard Dearnley: The automated refill, you know, with the hang tags and so on, where are you on the implementation of that across the base of refill customers?

All right. Yeah, that sounds great.

Uh, and, uh, the automated, uh,

Refill, you know, with the, the Hang tags and so on, uh, is uh, where where are you on the implementation of that across the the base of of, uh, refill customers?

Paul Driscoll: All right. We have one robotic machine in Rocky Mountain. It's operating. It's fast. It's accurate. It's terrific. We've got a second one that is about to be installed. I believe it's delivered to Vancouver, Washington, at the first aid-only site there in November. By year-end, we'll have two of those done. Those are for taking bulk things like alcohol prep pads and BCK wipes and putting them into boxes that then are used to go into the smart compliance refills. It's a very core piece of basically an annuity. There's a third machine that's in Brooksville that we're setting up and should be functional by March. That'll be used for lens wipes that go to customers like Home Depot or maybe Walmart in boxes of 50. There are three machines right now: two are operating, one's about to be installed, and one will be ready, we believe, by March.

All right, so we have one robotic machine in Rocky Mountain. It's operating; it's fast, it's accurate.

That's terrific. Um, we've got a second one that is about to be installed. I believe it's delivered to Vancouver in, uh, Vancouver, Washington, the first and only site there.

In November, by year-end, we'll have two of those done, and those that are taking bulk items, like alcohol prep pads.

and back wipes and putting them into boxes that then are used to go into the, uh, the smart compliance refills. So it's a very core piece of.

Basically, an annuity. Um, there's a third machine that's in Brooksville that, uh, we're...

Setting up and should be functional by March.

Richard Dearnley: Right. All right. Now, the introduction, I'm back to the automatic reorder in first aid when you take the eyewash thing out, and it triggers the new system that automatically, you know, reorders it. How rolled out is that, or is that just getting started in your base?

Believe by March.

Right.

Um, all right now, uh, the uh, the new, the introduction. Uh, I'm back, back to the automatic uh, reorder in first aid. When you take a, you know, the eyewash thing out and it triggers the, the, the new system that automatically...

you know, reorders it

the the um, where

Yeah, how rolled out is that? Or is that just getting started?

In your base.

Paul Driscoll: We introduced a next generation in September of this year. That next generation had a lot of interest. Two major industrial distributors in the United States currently are out there actively training their salesforce with it. We're pretty excited about it. You haven't seen the 9% growth in first aid in the third quarter. I don't want to overemphasize it right now till we start to see what can happen. If we're right with it, it'll be a big deal. Let's just downplay that until it is.

We introduced, um, a, uh, a Next Generation in September of this year.

And that next generation had a lot of interest.

Um,

Two major industrial distributors in the United States.

Currently, we are actively training our sales force with it, so we're pretty excited about it. If you haven't seen it, there's been a 9% growth in first aid in the third quarter.

Um, and I don't want to overemphasize it right now until we start to see what can happen.

Richard Dearnley: Yeah, if it's a big deal, you maybe begin to see the beginnings of that in the first half of 2026, would be a guess?

If we're right with it, it'll be a big deal, but let's just downplay that until it is.

Paul Driscoll: Yeah, that's what I would think, Dick. Let's leave that vector for when it's actually happening and we can be excited about it. Our customers certainly seem to be excited about it.

Yeah, that so that that if if it's a big deal are you will you'll you maybe begin to see that uh the beginnings of that in the first half of 26, would be a guess. Yeah. That's what I would. That's what I would think dick but again

Richard Dearnley: Great. Okay. Thank you very much.

Let's leave that Vector for when it's actually happening, and we can be excited about it. Our customers certainly seem to be excited about it.

Paul Driscoll: Thank you, Dick.

Great. Okay. Thank you very much.

Thank you, dick.

Operator: Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Johnsen for closing remarks.

Paul Driscoll: Thank you for joining us. If there are no further questions, this call is complete. We look forward to speaking to you again after the fourth quarter. Goodbye.

Thank you. There are no further questions at this time. I'd like to turn the call back over to Mr. Johnson for closing remarks.

Well, thank you for joining us. If there are no further questions, this call is complete. We look forward to speaking to you again after the fourth quarter. Goodbye.

Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.

Thank you. This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.