Acme United (AMEX:ACU) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call.
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Summary
Acme United reported a 14% increase in net sales to $52.3 million, although net income decreased to $985,000 from $1.6 million the previous year.
The acquisition of MiMedic contributed 8% to the sales increase, but the company is focusing on integrating and expanding its retail distribution for future profitability.
Gross margins improved slightly to 39.7%, but core margins declined due to tariffs and higher costs, expected to stabilize by the third quarter.
Operational highlights include strong growth in Europe and Canada and the opening of the new Spill Magic facility in Tennessee.
Management is optimistic about overcoming tariff impacts and leveraging recent acquisitions for long-term growth, despite short-term challenges.
Full Transcript
OPERATOR
Good day and welcome to the Acme United first quarter 2026 financial results call. At this time I'd like to turn the call over to Walter Johnson, Chairman and CEO. Please go ahead, sir.
Paul Driscoll (Chief Financial Officer)
Good morning. Welcome to the first quarter 2026 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. 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. 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 in the past and we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the securities and Exchange Commission and in our current earnings release.
Walter Johnson
Thank you, Paul Acme United had a difficult first quarter of 2026. While our net sales increased 14% to $52.3 million, our net income was $985,000 compared to $1.6 million last year and earnings per share were $0.24 compared to $0.41 last year. As you may remember, we purchased MiMedic for $18.6 million during the first quarter of 2026. The company sells directly to consumers and is cyclical with most of the profits generated in the fourth quarter of the year. It also generates high gross margins which it spends on advertising, promotions, new product development and customer support. Our sales increase of 14% in the first quarter of 2026 includes approximately 8% from MiMedic, which was at break even in P and L. Revenues excluding MiMedic increased 6%. The company's gross margins in the first quarter of 2026 were 39.7% compared to 39% last year. When the impact of the high gross margins at Mimedic are removed, the core gross margins declined due to higher costs and tariffs. We turn our inventory about twice per year, so the costs reflected in the first quarter were from products made and purchased when the tariffs were at their peak. We expect to run through these items during the second quarter with a return to normal levels in the third quarter. Shortly after the war in Iran began, we started purchasing higher than normal quantities of raw materials and finished goods inventory. So far we have purchased approximately $10 million of incremental inventory. While we hope for a quick end to the war, we are planning and acting to be prepared for increasing costs and shortages. Operationally, we're working to increase the revenues of Mimedic by expanding its retail distribution and building a strong core of non seasonal business. Our teams are integrating product lines, leveraging our purchasing strengths and reducing duplicate expenses with the goal of generating significant profits throughout the year. The project is well underway. We are completing the move into our new Spill Magic facility in Mount Pleasant, Tennessee. Production has begun there even as additional equipment is being installed. Orders for the business are strong and we are experiencing record growth. In Europe, sales increased 19% in local currency to 4 million euro. Our growth there includes the acquisition last November of Schmiediglut, a small direct to consumer company which is exceeding expectations. Our first aid business in Europe had record performance and we continue to expand its product line and sales team. The Westcott cutting tool business overcame market headwinds and increased 10% in Europe. In Canada, First Aid Central had a strong quarter and the cutting segment also grew. Overall, our Canadian business increased 16% compared to the first quarter of 2025. I will now turn the call to Paul
Paul Nachme
Acme's net sales for the first quarter of 2026 were $52.3 million compared to $46 million in 2025, a 14% increase excluding mimedic sales increased 6%. Net sales in the US segment increased 12% in the quarter, driven by higher sales of first aid and medical products including Mimedic products. Net sales in Europe for the first quarter of 2026 increased 19% in local currency compared to the first quarter of 2025, due mainly to the new line of cutting and sharpening tools. The base business had a good performance with a sales increase of 12%. Net sales in Canada for the first quarter of 2026 increased 11% in local currency due to higher sales of first aid products. The gross margin was 39.7% in the first quarter of 2026 versus 39% in the first quarter of 2025. The favorable mix from higher margin direct to consumer mimetic products was mostly offset by the impact of increased tariffs. SG&A expenses for the first quarter of 2026 were $19 million or 36% of net sales, compared with $15.5 million or 34% of net sales for the same period of 2025 the higher SG&A was primarily due to the addition of the Mimedic business. The higher percentage of sales was due to the higher amount of advertising needed for the direct to consumer mimedic business. Net income for the first quarter of 2026 was $1 million or $0.24 per diluted share compared to net income of $1.7 million or $0.41 per diluted share for the same period of 2025 of 40% in net income. The decline in net income was primarily due to the higher tariff and Mednap costs we experienced in the first quarter of this year. The higher tariff spending commenced in July of 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 2026. We expect the tariff impact to gradually lessen over the next three quarters as the tariff rate declined in November 2025 and again in February 2026. Additionally, the incremental cost to enhance the quality assurance protocols at the MEDNAP facility will not Repeat in the second quarter of 2026. Now to the balance sheet. Net debt increased from $27.2 million at March 31, 2025 to $38.6 million at March 31, 2026. During the 12 month period ended March 31, 2026, we paid $14.6 million for the acquisition of the assets of MiMedic, distributed approximately $2.4 million in dividends, and purchased a cutting and sharpening line of products in Germany for $1.6 million. Additionally, we generated approximately $14.2 million in free cash flow before the purchase of a new $6 million manufacturing and distribution facility in Tennessee in July 2025 to expand our Spill Magic business.
Walter Johnson
Thank you, Paul. I will now open the call to questions.
OPERATOR
Thank you. If you'd 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 2 if you'd like to remove your question from the call. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the STAR keys. One moment please, while we poll for questions. Thank you. Our first question comes from the line of Richard Dernley with Long Park Partners. Please proceed with your question.
Richard Dernley (Analyst at Long Park Partners)
Good morning. Could you put a dollar amount or a rough dollar amount on what the quality assurance protocols are involving?
Walter Johnson
Sure. So just some background on that. Last March, the FDA inspected our facility in Brooksville, Florida and we make alcohol prep Pads and BZK wipes and lens wipes there. And they found a number of deficiencies in mostly our documentation of good manufacturing practices or documentation of some of the equipment being qualified. And it's a lot of work to get it to be the state it needs to be to address the US Hospital market. And that is our goal. So we hired a consulting firm to work with us to upgrade in response to the FDA audit, which was very helpful, to upgrade the entire facility. So last year, Paul, was it About a million 2? About a million dollars we spent last year in consulting. And that's in addition to some equipment that we purchased. For example, we've upgraded a microbiology lab that we really didn't have before, and we're upgraded the chemical laboratory for testing. But it was about a million dollars in consulting in the first quarter of this year. It was about 250,000. $300,000. About $300,000. So, Dick, it was about 300,000. So far we've done. I think in total, it's about a million two-fifty or a million three. Correct. Right.
Richard Dernley (Analyst at Long Park Partners)
And that's all aimed at qualifying the mednap products for hospital use?
Walter Johnson
Well, it's getting approval, yes. Well, it's not getting approval. We could sell them now. But you wanted to have it done. Right. In fact, our products do get sold into hospitals now. But when we get done with the project, and we're about three quarters done, we'll have a facility that will be very proud to take major distributors in the United States to visit and do their own audits. And we'll have confidence that we've really done the best job we can for the quality of the products that will go out. So we're 3/4 through, and I think it's, you know, it's all expense, but we've been doing it, and I view it as an investment.
Richard Dernley (Analyst at Long Park Partners)
Right, yeah. And your comment that tacks along to the comment about investing in automation in every, you know, everywhere, or whatever the phrase was. Could you size the other investments? Last year you were talking about $2 million, and I believe the year before was $2 million. Is that current run rate? Because those investments tend to have large productivity payoffs.
Walter Johnson
Yeah. You're addressing something that is important to us. The automation that we've been doing over the past few years has been with robotics. And one of the big projects is taking the bulk product, for example, bulk BZK wipes that we produce at mednap and putting them automatically in packages that then go into the refills in our first aid kits. And as you know, the refill business is an important part of our company. And by automating it, we're reducing cost on a product line that is very consistent and growing. Some of the projects we're doing right now relate to automating the in the spill magic facility, automating the packaging of the spill magic powder and putting them into different sized packages. And that has a pretty big payback. Honestly, I don't remember the number that we put in there, but maybe it's a half million dollars. But it's an important one because we've got business that's will keep that machine going. Another area is in a Rocky Mount facility. And I wouldn't call this automation, but we've reconfigured the entire process flow so that we have less people, but we have some small automation that we just put in. For example, there's drones that are doing daily cycle counts. And so you can imagine when we're doing our numbers, we tend to have high confidence that in fact the cycle counts hold. And when we do physical audits at the end of the year, it speeds up the time we're down while we're doing them. So that's some automation that just went in. There's other things. You may have seen robotics that can vacuum your floor in a home. Well, there are industrial ones like that that scrub the floor in our 370,000 or 340,000 square foot facility in Rocky Mount. So that, you know, it is a production site and it's a very clean warehouse handling a lot of medical items. So it's very clean. It's now done with. Those are some examples of them. Dick. There's another robot machine that we're working on in Brooksville, Florida that's all been purchased and we've got some business that is for lens wipes. And there the repetitive loading into the boxes can be done with robotics, with site sensors. And that's being worked on and should be online by June. Those are some examples.
Richard Dernley (Analyst at Long Park Partners)
Yeah, that's good. And the Mimedics DTC business, Does any of their expertise in DTC translate over into either your first aid or Westcott business somehow?
Walter Johnson
So our last two acquisitions, the small Schmiediglut acquisition in Germany and Mimedic are both direct to consumer. And so as you may know, that means you're using social media as a selling tool and you're putting ads in places like Twitter, Facebook, LinkedIn. Of course, there's Google search and there's a consistent pattern of video that are delivered onto the site and the purchases are coming directly off the website. In the case of Mimedic, that's our first step in the United States to do direct to consumer and it lends itself to selling things like craft items. Again because you can demonstrate there's a lot of differentiation in the product. And when we do new product introductions, you have a ready platform of potential customers who are following you. The benefit of MiMedic is we're not establishing a social media base. We have a half million social media followers today and we put out videos every two days. Sometimes it's how to use first aid kits, sometimes it's success stories and life saving stories on what the use of a bleed control kit did and how it saved somebody's life. In other cases it's for training or new products. So the answer is, as we get experience with it, I hope that we do broaden the amount that we bring of our other product lines. And I think in the Westcott line that would be in the craft area.
Richard Dernley (Analyst at Long Park Partners)
Good. Thank you.
Walter Johnson
Thank you.
OPERATOR
Thank you. Our next question comes from line of Tim Call with the Capital Management Corporation. Please proceed with your question.
Tim Call (Analyst at Capital Management Corporation)
Congratulations on so many accomplishments within just two quarters.
Walter Johnson
Well, Tim, you know, you try so hard to have your accomplishments and then when you get a setback because of a tariff or changes that you aren't priced for, it's frustrating but you write it the best you can. And as I hope we laid out as we're looking through the coming quarters, the impact of the tariffs will be less and we're hedging by buying 10 million of inventory for potential shortages or price increases out in the as a result of the war in Iran. Hopefully that is just extra inventory. And we have, we sell it over due course, but we're looking at and preparing ourselves in case this is an extended conflict.
Tim Call (Analyst at Capital Management Corporation)
You can handle the short term volatility and long term. You've completed two complementary acquisitions, you've consolidated facilities, you've expanded capacity, allowed for future capacity expansion and immediately expensed upgrades in technology and automation. Do you see all of these achievements made within the last six months adding to your long term sales margins and earnings growth over many years?
Walter Johnson
Oh, Tim, yeah, we certainly do. You know, as an example, we spent $6 million to buy the facility in Mount Pleasant, Tennessee for spill magic. And SpillMagic now has room to grow. And for those that may need a refresher, the products that we sell there are used to clean up oily spills, bodily fluids and blood. And the opportunity to create some new products and hit them in scale and do it in that facility is exciting. We are out of the Smyrna facility at the end of this month. That's Smyrna, Tennessee. And so SpillMagic will be fully operational. And it's basically there now in Mount Pleasant. As I mentioned earlier, the automation that we're putting in is. It's expensive, it's heavy, and you want to do it once. And now we have a home to be able to place it properly. I wouldn't say this is a trend, but we've been having very, very good success with Spill Magic since we purchased the property. It's almost like it's willed itself to say, hey, we've got room to grow, so let's do it. But it is. And this quarter, this past quarter, it was up, I think over. Was it over 30%, Paul?
Tim Call (Analyst at Capital Management Corporation)
Yes. Yeah. So good quarter. It's making progress with these two new acquisitions. Your past acquisitions have benefited from cross selling and your wider geographic footprint. They're getting new retail channels and distribution networks. How long could it take these two recent acquisitions to experience sales growth from these different avenues?
Walter Johnson
Well, I was just on the phone with First Aid Central, our Canadian subsidiary, literally an hour ago, and we were talking about Mimedic and its product line. We would produce them in Canada, meeting Health Canada specifications. But we're very excited about launching that way sooner than we expected. But the reason is because the name recognition is actually carrying over into Canada and we had no idea. So you've got a name recognition, you've got a half million followers. And when we put the products into production in Canada, we're expecting some growth, and that would be happening this year. As an aside, having spoken to our Canadian team, literally today we're about to add another 30% capacity to our operation in Laval, outside of Montreal, and it's because of growth.
Tim Call (Analyst at Capital Management Corporation)
Well, thank you for all your hard work and success. Looking forward to the long term growth of the company.
Walter Johnson
Thank you very much, Tim.
OPERATOR
Thank you. Our next question comes from line of Georgi Vashchenko with Freedom Broker. Please proceed with your question.
Georgi Vashchenko (Analyst at Freedom Broker)
Thank you. Good afternoon. My question is about cutting and sharpening segment. It was under pressure in 2025. What was the revenue trends in Q1? Did they recover?
Walter Johnson
Yeah. So the cutting and sharpening area last year was impacted when the tariffs were instituted in April. You may remember, it was called Liberation Day. And it was April 2, which is a day I remember. And at that point the tariffs stopped. A lot of things that would have been going forward as promotions because you couldn't price product when they were costs as high as 145% in tariffs, the retailers couldn't price. So the promotional activity for things in the summer, in the fall, the winter were basically stalled. And that was one of the reasons that Westcott in particular was not able to. It had a decline. And Paul, what was the decline last year? Was it about 13%? It was about 13%. It was 10%. 10% for all countries. So I mean Westcott was down about 10% and that was the promotional activity. So in the first quarter you're going up against comparables without the tariffs having been put in place. And Westcott was down what, about 8 or 10% this first quarter? No, I think it was fairly a couple points. Maybe Westcott was down 2%. So you know, it's come back. But the big part coming back is really second, third, fourth quarters where last year we had no promotions of this year. Unless something happens dramatically with the war, we're expecting good promotional activity and in fact we're actively quoting. So that's a roundabout way of saying I think we have easy comparisons coming in in the second, third and fourth quarter for the cutting and measuring area and we should be showing growth.
Georgi Vashchenko (Analyst at Freedom Broker)
Thank you.
Walter Johnson
It was a good question.
OPERATOR
Thank you. Once again, as a reminder, if you'd like to join the question queue, please press star1 on your telephone keypad. Our next question comes from the line of Jake Patterson with Atlanta Investment Group. Please proceed with your question.
Jake Patterson (Analyst at Atlanta Investment Group)
Hey guys, just a couple quick ones because most of them got answered already. But the SGA number, I know you said there was like 300,000 of one time expenses in there, so call it like 18.7. Is that kind of a fair run rate to look at for the rest of fiscal 26? I know you said you had some savings you could pull out of Mimedic, but just curious on that.
Walter Johnson
Referring to a number of 18.7, it's more like 30. Well, that'd be your 19. Yeah, 19 minus your 300,000 of consulting. Well, in terms of percentage, it's probably like 33% for the full year. That's like the target 3% of revenue.
Jake Patterson (Analyst at Atlanta Investment Group)
Yes. Okay, gotcha. And then I know you said the gross margin in the legacy business was down. Is there any way you can give a number for that or is it.
Walter Johnson
Well, I think we can give you a number, probably 2%. I would say it's about 200 basis points. That's really driven by tariffs.
Jake Patterson (Analyst at Atlanta Investment Group)
Okay, and then capex for 26. I know you mentioned some automation investments, Canada expansion. I was kind of curious, you guys had any range for CAPEX expectations?
Walter Johnson
I think we're looking at about six, probably seven million.
Jake Patterson (Analyst at Atlanta Investment Group)
Okay, cool. Thanks. That's it for me.
Walter Johnson
Okay, thank you, Jake.
OPERATOR
Thank you. Ladies and gentlemen. That concludes our question and answer session. I'll turn the floor back to Mr. Johnson for any final comments.
Walter Johnson
I'd like to thank the audience for asking some very probing questions, having hopefully given some very thoughtful answers. This call is complete and I'd like to thank you for joining us. Goodbye.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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