Acme (NYSE American: ACU) Q2 2026 Earnings Call

0:00 Good day, and welcome to the Acme United Second Quarter twenty twenty six Financial Results Conference Call. At this time, I'd like to turn the call over to your host, Walter Johnson, Chairman and CEO. Please go ahead, sir. Good morning. Welcome to the second quarter twenty twenty six 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.

0:31 Paul? 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.

0:55 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

1:27 as described in our periodic filings with the Securities and Exchange Commission and in our current earnings release. Thank you, Paul. Acme United made progress during the second quarter of twenty twenty six. Our net sales increased from $54,000,000 to $63,000,000 an increase of 16%. Net income increased from $4,800,000 to $5,100,000 and earnings per share increased 5% to 1.22 As you may remember, we acquired MyMedic in January 2026. This addition to the Acme United family sells high quality first aid kits designed to save lives.

2:15 It extends the reach of our product line from simple retail kits to advanced ones with chest seals, tourniquets and tools to clear airways. MyMedics today sells mostly directly to consumers and is seasonal. It is high gross margins and also high advertising and marketing costs. Net sales in 2025 were $19,000,000 Mimetic sales in the second quarter were approximately $4,300,000 with breakeven operations as expected. We are working to increase the core direct to consumer business as well as expand the product offering to retail. At the same time, we are addressing the product costs to our strong Asian sourcing team, consolidating freight with other Acme United shipments to reduce costs and eliminating duplicate corporate functions.

3:14 The intention is to have strong profits from MyMedics during all quarters with particular strength in the fourth quarter. This will take time, but we are realizing savings already. Our core businesses performed well in the second quarter. In The United States, net sales of first aid and medical products increased 10% with growth in particular at mass market retailers. Other strong contributors in the quarter were the safety made promotional first aid business, MedNap antiseptic wipes and Spill Magic cleanup products. Also in The United States, the Westcott cutting tools business increased 8% during the second quarter. As you may remember, our retail business last year was hurt by tariffs and cost uncertainty, and many of our customers canceled their seasonal promotions.

4:09 This has recovered, and we are seeing a resumption of growth. Our Canadian business increased 3%, driven by industrial retail and online sales of our first aid business. In Europe, net sales increased 19% with strong growth of our Westcott cutting tools. Gross margins in the quarter increased for the overall business from 41% to 4242.6% due to high margins at MyMedic. Without MyMedic, gross margins in The United States declined approximately 100 basis points due to the costs of high tariffs that were capitalized in our inventory and are now being sold.

4:54 This is an improvement from the first quarter and we anticipate continued gross margin expansion as these products are sold in the coming quarters. When the war with Iran began, we placed orders for approximately 10,000,000 of extra inventory to buffer potential product shortages and cost increases. We continue to maintain this extra level of stock and are positioned to address issues should they arise. As we look to the coming quarters, we see continued growth of the First Aid and Medical business, resumption of promotional retail activity with our Westcott cutting tools, improving profitability at Mai Medic and strengthening of our gross margins as high tariff products are replaced by lower cost ones.

5:45 I will now turn the call to Paul. Acme's net sales for the second quarter were $62,700,000 compared to $54,000,000 in 2025, an increase of 16%. Excluding MYMEDIC, sales increased 8%. Sales for the six months ended 06/30/2026 were $115,000,000 compared to $100,000,000 in the same period in 2025, an increase of 15%.

6:17 Excluding Meimetic, sales increased 7%. Net sales in The U. Segment increased 17% in the quarter, excluding Meimetic, sales increased 8%. Sales increased 15% for the six months ended June 30. Excluding Miemetic, sales increased 6%. The increases for both periods were driven by higher sales across all product lines. Net sales in Europe for both the second quarter and six months of 2026 increased 19%

6:48 in local currency compared to 2025, partly due to the new line of cutting and sharpening tools. The base business also had a good performance with a sales increase of 12%. Net sales in local currency for Canada increased 3% in the quarter and 6% for the year to date, mainly due to higher sales of first aid products. The gross margin was 42.6% in the second quarter of twenty twenty six compared to 41% in 2025. The gross margin was 41.3% for the first six months of twenty twenty six compared to 40.1% in 2025. The gross margin as a percentage of sales increase for both periods was mostly due to the favorable mix from higher margin direct to consumer Miemetic products.

7:42 SG and A expenses for the second quarter of twenty twenty six were $19,900,000 or 32% of sales compared with $15,800,000 or 29% of sales for the same period of 2025. SG and A expenses for the first six months of 2026 were $38,900,000 or 34% of sales compared with $31,300,000 or 31% of sales in 2025. The higher SG and A was primarily due to the addition of the MyMedics business. The higher percentage of sales was due to the higher amount of advertising needed the direct to consumer MyMedics business.

8:27 Net income for the second quarter of twenty twenty six was $5,100,000 or $1.22 per diluted share compared to net income of $4,800,000 or $1.16 per diluted share for the same period of 2025, an increase of 6% in net income

8:47 and 5% in earnings per share. Net income for the first six months ended 06/30/2026 was $6,000,000 or $1.46 per diluted share compared to $6,400,000 or $1.57 per diluted share in the comparable period last year, decreases of 67%. The decline in year to date net income was mostly due to the impact of higher tariffs in the first quarter. The higher tariff spending commenced

9:18 in June 2025. However, the costs were capitalized into inventory and we started to realize the full impact to earnings as the high cost products were sold in the first quarter of twenty twenty six. The impact was lower in the second quarter and we expect the impact to lessen over the next two quarters as the tariff rate declined in November 2025 and again in February 2026. Now to the balance sheet. Net debt increased from $22,800,000 at 06/30/2025 to twenty seven point three million dollars at 06/30/2026. During the twelve month period ended 06/30/2026, we paid $14,000,000 for the acquisition of the assets of MieMedix,

10:11 distributed approximately $2,400,000 in dividends, and purchased the cutting and sharpening line of products in Germany for $1,600,000 Additionally, we generated approximately $15,000,000 in free cash flow. Thank you, Paul. I will now open the call to questions.

10:37 Thank you. At this time, we'll be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd 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 star keys.

11:08 Our first question comes from Timothy Call with Capital Management Corporation. Your line is live. Congratulations on another strong quarter. Thanks, Tim. You've built a long term track record of sales and earnings growth in the current trajectory looks great. You have many other promising growth initiatives other than what you mentioned today, such as Spill Magic capacity expansion and increased throughput at MedNap and

11:43 long term plant certification to expand sales to large new customers like government and hospital systems. Do you think those initiatives? Those are long term initiatives. As people may remember, we bought a plant about a year ago in Tennessee for $6,000,000 It was a 12 acre site and 78,000 square feet, just for Spill Magic growth. And we were constrained in, the site that, we were in, which we were leasing. We've moved into that facility. And

12:24 Paul, what are year to date sales growth at Spill Magic? It's like 40%, 35%? Yes. It's actually like 30%. Right? Yeah. So it's really screaming. And the best part of that is we're putting in automation into that facility that's unlike any of its competitors. And because it's a permanent facility, we can do the proper installation for a long term growth plan. So there's one example. Another which is possible is the MedNap business in Florida, which makes alcohol prep pads and BZK wipes.

13:11 And we've been investing a great deal in that facility and working to upgrade our regulatory compliance to possibly be able to address The U. S. Hospital market. I would say that's, at this stage, a challenge, but the certification work is progressing well, and we should be done with it by year end. And the MiMedic business in general has grown about a third this year. So, that's very exciting. We've also been working for a long time on generation after generation of our smart compliance software, which does automatic replenishment in our first aid kits, our industrial first aid kits. And that next generation, which automatically scans the contents of a first aid box, and then generates replenishment orders, through the Internet, that is now in final stages and is about to be going out to early distributors.

14:27 So it could be a big growth segment, we'll see. And of course, we're looking at acquisitions, and we've got work to be doing at Mai Medic, a lot of work. And the operating leverage that we hope should start to become apparent in the fourth quarter and then into the first. One of the big areas is the retail distribution, which Buy Medic really didn't have, and we are very strong in that. We're making presentations now to large mass market retailers and industrial distributors. I think that's quite promising. So we'll see how that works in the coming quarters. But we're excited about the place we're at now, and we're expecting some pretty good performance going forward.

15:16 Thank you, Tim. Health care tends to grow a little bit faster than cutting tools. Do you have an idea of what percentage of the base health care is now or should be at year end?

15:30 It's about health care is about 70% of the revenues right now. But I have to tell you, the Westcott business is coming back solidly. They're really last year was hard because the promotions were all canceled due to uncertainty from tariffs and pricing. You know, retailers just couldn't bring in new items when they didn't know the cost of the existing ones. But this year is very different. And, we've got a full book of promotional activity from back to school and into the fourth quarter, first quarter. So,

16:08 Westcott has legs again, and we're really pleased with that. Congratulations. Thank you. Our next question comes from Yorgi Bashchenko with Freedom Capital Markets. Your line is live. Thank you. Walter and Paul, good afternoon and congratulations on the excellent quarter. The results were very impressive. So I have two questions on gross margin. The first, gross margin reached a record level this quarter. Could you help us understand the key drivers behind the improvement? Specifically, how much of this expansion was attributable to the MyMedics acquisition? And my second question is on tariffs. You mentioned that tariffs created some headwinds on margins during the quarter. Should we expect the additional gross margin expansion as those headwinds have increased?

17:08 Thank you. Sure. Well, thank you very much. Actually, both questions are quite intertwined. And what you're referring to is our gross margin improvement. And part of that has come, of course, because MyMedica has bigger gross margins than, our regular business, but they spend it on and it shows up in SG and A. They spend it in, advertising. And, so when you dig underneath, as I pointed out in my portion of this call,

17:44 in The United States, margins this quarter were reduced by about 100 basis points due to tariffs. And Paul, what was the number in the first quarter, about two percent? Is that ballpark? It was probably like 150 basis points. Most of the increase in margin gross margin as a percentage of sales is due to the mix of Miemetic. Yes, by far it is. As we're looking forward, the impact of tariffs, because they've been reduced and that inventory is being sold, we're getting expansion.

18:32 And so, if we reduce our normal gross margin by 1%, you can picture that as we go through the rest of the year, we will recover that 1%.

18:47 And relative to other costs, there are certainly other costs. Freight has increased, and you can imagine with both bunker fuel for bringing product across the ocean as well as online freight delivery here in The United States and in Europe, the cost of fuel to run the trucks is up. So there are other costs, the dollar has weakened against the Chinese currency in the past year. And so for the items that we import from China, that's a headwind. But the net of it all is we've got that pretty much, thought through both in the pricing of our products. And as we pointed out, there's about $10,000,000 of inventory that, is either here or is on the way that's been purchased shortly, like, days of the start of the Iran war. So it's got locked in excellent pricing.

19:49 Thank you. This is very helpful. Thank you. Our next question is from Jim Marrone with Singular Research. Your line is now live. Yeah. Good afternoon, gentlemen. Good quarter as I like to say good quarter as well given the backdrop of a tougher you know, And with regards to a tougher environment, I'm trying to get a sense, are you hearing anything about the consumer appetite? Maybe with with regards to the MyMedic, are is the consumer appetite still going to be just as strong as it was in the past quarters or are you going to start to find that the consumers either on the industrial or on the retail end a little bit more discerning.

20:44 You know, we're hearing from even the grocers, you know, that the basket is getting smaller. I guess as a result of rising fuel costs and other inflationary items that consumers are a little more discretionary in their spending. And so, how does that relate to both MyMedic? Are they looking at Jim, that's a very good question. Consumers only have a certain amount to spend. And maybe they get a wage increase each year, but after taxes, that's a small amount. And clearly, for example, in the Northeast where you have to heat your homes, that's an increase in in the fuel cost is expensive.

21:35 And, of course, for cars, it's expensive. And there have been price increases. So you would think that, the consumer would be, more cautious. With regard to Mimetic, so far, those sales are right on plan, and, we're not seeing, weakness. And as demonstrated by the growth of both Westcott and our first aid business, our our customer base is buying. So in the overall, you have to be aware that the individual consumer is being pressed, but we're not seeing it yet. And I, I think we would have seen some, especially, for example, in Europe. Europe just had a record, quarter both in sales and in earnings, and the Europeans are facing every bit of the inflation that The US is, plus their cost of oil has gone even higher, and yet our business is robust there.

22:44 Right. And so are they looking at that more as an essential item rather than a discretionary item? Or do you have a competitive advantage over your competitors that they're choosing your product over over the others? Like, what is the driver behind that? Oh, yeah. Well, there's clear drivers why people buy our products. First in the Westcott area, we were the pioneer in coatings, coatings, nonstick coatings that deliver honestly the best performance in the class, and they have for many years, and it's all utility patents. So when you buy a Westcott item, you're getting and it's a titanium item, for example, it's the best there is.

23:33 And because we're the largest in the world, yeah, we have world class pricing. And so that you've got innovation in the Westcott area, and you've got cost. In, first aid, we've got a strong marketing team building around addressing injuries and saving lives. And that marketing team is coming out with products that frankly totally differentiate from the competitors, many of whom are selling things in old white boxes or in metal cases. We've also got a strong sourcing team for components in Asia, and it's multi office, multi country.

24:28 Our competitors don't have that, and that's why we win at places like Walmart and and and at Grainger and at Fastenal. So there, we've also got, I think, I probably know, the lowest costs in the world. Great. Okay. Thank you. I appreciate that answer. And you also touched upon it, I'm gonna bring it up again, just with regards to the cutting tools. It's, you know, the the retailers are already come out with back to school. There's already been headlines with regards to parents being a little bit more discretionary on back to school budgets. Are you getting any, Are you hearing anything with regards to that and as far as back to school sales?

25:19 Well, we just through June, where we by the time June happens, second quarter, we've shipped a chunk of the back to school, because the retailers are then taking delivery, setting it into the, planograms, or they're putting them up, you know, online. Through June, it's a record for us, just flat out record. And we've got a good backlog in the third quarter, which would be the rest of back to school. So for us, I'm not seeing that. But, again, perhaps they're trading down on some of the items within the basket of what they buy, to buy less expensive items.

26:06 I know that, for example, our dollar store sales have been doing very, very well. But we're also very strong in Walmart and that's doing well. But again, that's delivering value. We seem to be running a little bit counter to what you would think. Yes, I appreciate that, Walter. Thank you for that visibility. And just one last question. With regards to the Canada segment, that just seems to be the one that's really struggling the most with just the 1% increase in revenue and single digits with regards to the bottom line. So is that a result just of a struggling Canadian economy or is it tariff related?

26:55 And what do you see going forward with this renegotiation of Cooseneck? Like, what's the driver behind the Canadian segment? Is the economy? Is it tariffs? What's going on with that one? Well, there's two parts. There's the First Aid Central business, which is doing very, very well. That's our First Aid business. We've just moved into another new facility. That's the third move in four years because we keep growing. And, this is a fabulous new facility outside of Montreal. So the first aid side is strong. The Westcott side is weaker, and there it seems to be hit more by the the economy and also just just it's sort of sluggish in in Canada. So, you know, it's growth, but it's not much.

27:54 Actually, in the third quarter, they seem to have done a little bit better. But it's a small part of the overall company, and we're certainly cheering for our Canadian colleagues. The impact of tariffs in Canada versus The United States probably impacts their shopping selections in total, but relative to our products, we ship in Canada with Canadian items, so there's no tariff impact. Great. Thank you for that answer, Walter. Thank you. Our next question comes from Richard Dearnley with Longport Partners. Your line is now live.

28:49 Thank you. Good morning. MyMedics business being a direct to consumer business, Well, I'm I'm surprised that, you know, emergency response and trauma and so on, that it it's do emergency responding, you know, does the local fire department order direct? Or, I'm I'm surprised it's a DTC business. Well, that's where it started, and it's built a half million social media followers, which is a very big number.

29:36 And we've got videos coming out at least twice a week, new videos with either training or education on how to use things or new product introductions or success stories. And so you've got a following of people that are using the products. You know, long term, there are parts of the country, and I'm not saying this is MiMedx, but in general, where there are less hospitals, there are less clinics, there are less doctors. And this direct to consumer is a way to train, and it's a way to deliver products directly to a consumer because maybe it's in a rural area. Right. We we do sell, some MyMedica items to fire departments and police departments and, you know, ambulances, but, that will probably be a much bigger chunk as our sales force starts to do that. That's the Acme United sales force.

30:41 Right. They're not currently buying it. This is mostly direct to consumer today. And the exciting thing is we know we can get it placed elsewhere, because they've done the hard work, which is just world class products. And that's the challenge. That's what we're working on. And and is their their seasonality strong in the fourth quarter because, you know, the the people have a budget and and, you know, spend it or lose it? No. No. These are individuals. They're it for gifts. You know, you've got, Amazon, Black Friday. You've got Right. Just Oh. Holiday sales, you know, hunting, it's all being rolled into that fourth quarter.

31:39 A bit of an impact of the FSA spending at the end of the year, like to your point, but mostly it's just holiday spending. Walter So is the seasonality such that the fourth quarter is 25%, 30% larger than the other quarters? It's probably like 5% of the sales of the fourth quarter of the year, Yes, I of the year, right. Okay, great. Thank you. Thank you, Dick. Our next question comes from Jake Patterson with Telanta Investment Group. Your line is now live.

32:30 Hey guys, just a quick one. I know you said Westcott was up 8% during the quarter. I was curious if you had any data that could break out pricing versus actual volume. It doesn't have an impression that you guys had close to a double digit price increase. So if you're only 8%, it would imply units down a little bit, but just given kind of what last year looked like versus this year, it hadn't seemed like that would make sense. Most of it was Most of it was volume. Yes. Okay. So I mean, if you pass price last year, I guess, is that I mean, should have been flowing through your numbers, like first quarter being down 2%. I was just curious, that's pretty much all volume in there?

33:17 Yes, it's volume. The price increases can't be applied directly to each product evenly. And for example, if in the back to school items, they may be more price sensitive and so maybe there's not much of a price increase on those and others that are more specialty get bigger price increases. So the second quarter was really huge volume. But again, you can picture the retailers are putting new promotions in place. You're moving more. And that's the really exciting thing that we didn't have at all last year. Yeah, no, that's definitely good to hear. Awesome. Yep, that's it for me. I appreciate it. Thank you. Sure.

34:04 We have reached the end of the question and answer session. I'd now like to turn the call back over to management for any closing remarks. Thank you. If there are no further questions, this call is complete. And I'd like to thank you for joining us. Goodbye. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.