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ACME UNITED CORP (ACU)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record net income despite tariff-driven sales pressure: revenue $54.0M (-3% y/y) and diluted EPS $1.16 (+6% y/y); gross margin expanded to 41.0% (+20 bps y/y) .
  • Versus Wall Street consensus, ACU posted a major EPS beat and a revenue miss: EPS $1.16 vs $0.50*, revenue $54.0M vs $58.35M* (Street had only 1 estimate)*; margin execution and cost controls drove the EPS outperformance while tariffs delayed/cancelled orders, especially in Westcott back-to-school .
  • Management highlighted diversified sourcing, domestic manufacturing, and inventory planning as key drivers enabling service continuity and profitability during tariff disruption; confirmed expectations for sales growth in Q3/Q4 (qualitative) but did not issue formal guidance .
  • Capital allocation remained supportive: Board increased quarterly dividend to $0.16 per share (paid 7/24/2025), and trailing-12-month free cash flow was ~$12M, with bank debt less cash reduced to $22.8M .
  • Strategic capacity expansion: $6M purchase of a new Spill Magic facility in Mount Pleasant, TN to enable automation and growth; viewed by management as a multi-year productivity and capacity catalyst .

What Went Well and What Went Wrong

What Went Well

  • “Most profitable quarter in our history” amid extreme tariff uncertainty; proactive inventory build and supply-chain diversification enabled strong fulfillment and profitability .
  • Gross margin improved to 41.0% (vs 40.8% y/y) on productivity, supplier cost actions, and disciplined pricing; SG&A held to $15.8M (29% of sales) via reduced discretionary spend .
  • First Aid strength: Canada net sales +28% y/y (driven by first-aid products), Med-Nap and U.S. first-aid plants running multiple shifts; hospital market opportunity supported by automation and documentation investments .

What Went Wrong

  • Tariffs triggered cancellations and delays—Westcott back-to-school programs were especially impacted; U.S. segment net sales fell 5–6% y/y in the quarter .
  • Europe -3% y/y in USD (-6% local) with shipments delayed to Q3; revenue timing and tariff uncertainty cloud near-term visibility .
  • Revenue missed consensus amid customer indecision and delayed promotions; management refrained from quantitative guidance due to volatile tariff backdrop .

Financial Results

Consolidated Performance vs Prior Quarters

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$45.943 $45.958 $53.996
Diluted EPS ($USD)$0.41 $0.41 $1.16
Gross Margin (%)38.7% 39.0% 41.0%
Operating Income ($USD Millions)$2.282 $2.426 $6.390

Year-over-Year (Q2 2025 vs Q2 2024)

MetricQ2 2024Q2 2025YoY Change
Revenue ($USD Millions)$55.425 $53.996 -3%
Diluted EPS ($USD)$1.09 $1.16 +6%
Net Income ($USD Millions)$4.452 $4.752 +7%
Gross Margin (%)40.8% 41.0% +20 bps

Actual vs Consensus (Q2 2025)

MetricConsensus*Actual
Revenue ($USD Millions)$58.35*$53.996
Primary EPS ($USD)$0.50*$1.16
# of EstimatesRevenue: 1*, EPS: 1*—

Values with asterisk (*) retrieved from S&P Global.

Segment/Geography Performance (Q2 2025)

RegionQ2 YoY ChangeDrivers
U.S.-5% Back-to-school order cancellations due to exceptionally high tariffs in April–May; non-repeat of a large 2024 kitchen sharpener order
Europe-3% USD / -6% local Timing of customer shipments delayed into Q3
Canada+28% (USD and local) Strong first-aid product sales

KPIs

KPIQ2 2025Notes
Bank debt less cash ($USD Millions)$22.8 Down from $33.1M in Q2’24
Trailing-12M Free Cash Flow ($USD Millions)~$12.0 Cash generation supporting debt reduction and investments
Dividends Distributed (TTM, $USD Millions)~$2.2 Shareholder returns maintained
SG&A ($USD Millions)$15.759 29% of sales (CFO)
Inventory ($USD Millions)$57.309 Pre-built safety stock supported fulfillment
Cash & Equivalents ($USD Millions)$3.641 Liquidity

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueH2 2025 (Q3–Q4)NoneManagement “looking for growth” in Q3/Q4; no numeric guidance Initiated qualitative outlook
EPSFY 2025NoneNo formal guidance issued Maintained “no formal guidance”
Gross MarginFY 2025NoneNo formal guidance; execution focus Maintained
Dividend per ShareQ3 2025 payable 7/24/2025Not disclosed$0.16/share declared 6/18/2025 Raised
Capex/Capacity2025–2026N/A$6M Spill Magic facility purchase; production to start Q1 2026 Expanded capacity plan

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs/MacroPrepared for tariff challenges; diversified sourcing (Thailand, Egypt, India, Philippines); pricing power in leading categories Extreme tariff uncertainty; customers delayed/cancelled imports; ACU supplied from domestic inventory; continued shift of production to Malaysia/Thailand/Vietnam/Egypt Intensifying disruption; ACU execution resilient
Supply Chain & InventorySafety stock and dual-sourcing; FIFO confirmed; modeling price increases to match costs Extra inventory enabled service continuity; managing supply to regular customers; avoided large unplanned orders Proactive planning paid off
Automation/Capacity$2M annual productivity savings; new warehouse racking (+30% capacity) Med-Nap running two shifts; added automation/documentation; new Spill Magic TN site for material flow and packaging automation Scaling domestic productivity
Segment MixWestcott grew ~2–4% long-term; First Aid +8–12% typical; Canada distribution expansion Westcott hit harder by back-to-school cancellations; First Aid more resilient; Canada +28% Mix tilt to First Aid
M&A StrategyElite First Aid integrated; opportunistic tuck-ins; strong liquidity Open to larger deals; competitors under margin pressure may create opportunities Opportunity-rich backdrop
Financial PolicySG&A 31–32% of sales expectation SG&A held at ~29% in Q2; dividend increased Cost discipline continues

Management Commentary

  • “Acme United has just completed the most profitable quarter in our history...We supported our customer base with our extra inventory...and managed the supply chain as well as possible.” — Walter C. Johnsen, Chairman & CEO .
  • “When tariffs on goods imported from China were raised to 145%, our customers...canceled their orders...We too stopped importing items to the United States, but continued producing and storing finished goods at our factories in China.” — Walter C. Johnsen .
  • “We’re thrilled to be growing the Spill Magic business...We plan to invest in capital improvements focused on automation...positioning this site to become one of our most advanced and efficient operations.” — Walter C. Johnsen (Spill Magic TN facility) .
  • “SG&A expenses...were $15.8 million or 29% of sales...due to cost savings and reduced discretionary spending.” — Paul Driscoll, CFO .
  • “We anticipate growth and continued earnings strength...opportunity to gain share in Westcott cutting tools and our first aid business.” — Walter C. Johnsen .

Q&A Highlights

  • Guidance: Management expects sales growth in Q3/Q4 but provided no quantitative guidance due to tariff volatility; demand risk acknowledged but not observed materially to date .
  • Dividend: No plans to cut; reaffirmed confidence with $12M TTM free cash flow and lower net debt ($23M) .
  • Interest rates: Fixed mortgages (~$10.3M) at ~3.8%; floating debt would benefit if rates decline .
  • Capacity/Automation: Spill Magic TN site to enable permanent installations and automation; Med-Nap ramping with two shifts, equipment upgrades, and documentation for hospital market .
  • Segment impact: Westcott more affected by cancellations; First Aid more insulated due to domestic/Canadian production base; recovery expected as retailer stocks normalize .

Estimates Context

  • Q2 2025 EPS $1.16 vs consensus $0.50* (Street coverage limited to one estimate); Q2 revenue $54.0M vs consensus $58.35M .
  • Implication: Expect upward estimate revisions to EPS given margin execution and cost discipline; revenue cadence may shift into H2 as delayed programs land and retailers reorder, but tariff path remains the swing factor .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • EPS outperformance amid revenue pressure underscores pricing power, productivity, and diversified sourcing; margin resilience is a near-term support for the stock narrative .
  • Tariff path is the primary uncertainty driver; ACU’s inventory positioning and domestic manufacturing footprint mitigate risk relative to import-dependent peers .
  • Expect H2 sales recovery as delayed programs roll forward; monitor back-to-school normalization for Westcott and sustained strength in First Aid (Canada, hospital opportunities) .
  • Capital discipline: dividend increased to $0.16/share, debt down, and ~$12M TTM FCF provide flexibility for automation and potential M&A .
  • Strategic capacity expansion (Spill Magic TN) should enhance throughput and margins in 2026; watch for incremental automation deployments across plants .
  • Street coverage is thin (1 estimate); post-beat recalibration likely focuses on EPS/margins more than near-term revenue given tariff timing noise.
  • Maintain focus on gross margin trajectory (41.0% in Q2), SG&A discipline (~29% of sales in Q2), and inventory turns as indicators of execution through tariff volatility .