Executive Summary
Acme United delivered a resilient QQ2 2025 performance despite meaningful tariff headwinds. Net sales declined 3% year over year to $54.0 million, while net income rose to $4.8 million and diluted EPS reached $1.16, marking a quarterly earnings record when excluding legacy onetime items. The gross margin stood at 41.0%, with operating margin at 11.8% and net margin at 8.8%. Management attributes the top-line softness primarily to 145% tariffs on Chinese imports, which disrupted Westcott (cutting tools) and to a lesser extent other segments, prompting customers to delay or cancel orders. Acme responded with price discipline, cost reduction, and accelerated localization of production. The company continues to invest for capacity and efficiency gains, including the Mount Pleasant Spill Magic facility acquisition ( ~$6 million ), expanded Med‑Nap operations in Florida, and automation upgrades across multiple plants. Management remains confident in growth in the second half of 2025, with anticipated sequential growth in Q3 and Q4 driven by recovery of delayed programs and share gains in Westcott and First Aid products. Net debt declined meaningfully to about $30.7 million (vs. ~$33 million a year prior), while free cash flow for the trailing twelve months was around $12 million, supporting an unchanged or increasing dividend and ongoing buy‑back capacity if pursued. The company also signaled ongoing supply‑chain diversification, including shifting production away from China to Malaysia, Thailand, Vietnam, Egypt, and internal facilities, to better navigate tariff risk and strengthen service levels.
Key Performance Indicators
Key Insights
Revenue: $54.0m in Q2 2025, down 2.58% YoY and up 17.49% QoQ per reported metrics; Gross Profit: $21.149m, gross margin 41.02% (YoY margin ~41.0%, 6‑month margin 40%), Operating Income: $6.39m, operating margin 11.83% (QoQ surge driven by cost controls and mix); Net Income: $4.75m, net margin 8.80% (YoY up 6.74%, QoQ up 187.48%); EPS (diluted): $1.16; EPS (GAAP): $1.26; EBITDA: $8.041m; EBITDARatio: 14.89%; SG&A: $15.76m in Q2 (29% of sales); 6‑month SG&A: $31.3m (31% of sales); Bala...
Financial Highlights
Revenue: $54.0m in Q2 2025, down 2.58% YoY and up 17.49% QoQ per reported metrics; Gross Profit: $21.149m, gross margin 41.02% (YoY margin ~41.0%, 6‑month margin 40%), Operating Income: $6.39m, operating margin 11.83% (QoQ surge driven by cost controls and mix); Net Income: $4.75m, net margin 8.80% (YoY up 6.74%, QoQ up 187.48%); EPS (diluted): $1.16; EPS (GAAP): $1.26; EBITDA: $8.041m; EBITDARatio: 14.89%; SG&A: $15.76m in Q2 (29% of sales); 6‑month SG&A: $31.3m (31% of sales); Balance Sheet: Total assets $171.15m; Total debt $34.39m; Net debt $30.75m; Cash & equivalents $3.64m; Equity $113.72m; Liquidity: current ratio 4.32, quick ratio 1.88, cash ratio 0.16; Cash flow snapshot (TTM): free cash flow ~$12m; DSO ~60.3 days, DIO ~162 days, DPO ~28.8 days (CCC ~222 days); Cash flow indicators imply solid operating cash generation and gradual deleveraging. Valuation: P/E ~8.2x, P/B ~1.38x, P/S ~2.90x, dividend yield ~0.39%.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
54.00M |
-2.58% |
17.49% |
| Gross Profit |
22.15M |
-2.11% |
23.62% |
| Operating Income |
6.39M |
0.24% |
163.40% |
| Net Income |
4.75M |
6.74% |
187.48% |
| EPS |
1.26 |
4.13% |
186.36% |
Key Financial Ratios
operatingProfitMargin
11.8%
operatingCashFlowPerShare
$1.68
freeCashFlowPerShare
$1.25
dividendPayoutRatio
12.8%
Management Commentary
Key management themes from the QQ2 2025 earnings call: Tariff headwinds and strategic supply reallocation; 'The market environment was particularly challenging due to tariffs' and 'we are shifting production from China to other locations, including Malaysia, Thailand, Vietnam, Egypt and our own factories.' The company faced a 145% tariff on Chinese imports, prompting customer order cancellations and a pivot to domestic stocking and alternative supply; management notes, 'we stopped importing items to the United States but we continued producing and storing the finished goods at our factories in China' and 'we intend to continue to supply our customers with the best total costs, including tariffs.' Growth opportunities cited include Westcott cutting tools and first aid in retail/industrial channels; 'there will be an opportunity to gain share in the Westcott cutting tools and our first aid business' and 'we anticipate growth in the third and fourth quarters.' On finance and capital allocation, management highlighted robust free cash flow and dividend resilience; 'we just raised our dividend, and we just generated $12 million of free cash flow in the last 12 months which was a record' and 'the debt is down to about $22–23 million' (versus $33m a year earlier). In capacity expansion and automation: 'Last week, we purchased a new facility for Spill Magic in Mount Pleasant, Tennessee for approximately $6 million' with production to begin in 1Q 2026; Med-Nap investments include upgrading equipment and expanding the microbial lab in Florida; management stressed ongoing automation and capacity improvements across Rocky Mount (NC), Vancouver (WA) and First Aid Central (Canada) to drive margins and fulfillment capability.
The market environment was particularly challenging due to tariffs. We shifted production from China to other locations, including Malaysia, Thailand, Vietnam, Egypt and our own factories.
— Walter C. Johnsen, Chairman and CEO
As we look at the rest of the year, we anticipate growth and continued earnings strength. There will be opportunity to gain share in the Westcott cutting tools and our first aid business, particularly in the retail and industrial markets.
— Walter C. Johnsen, Chairman and CEO
Forward Guidance
Based on management commentary and the quarter’s dynamics, Acme United is guiding toward sequential growth in Q3 and Q4 as delayed orders and high tariff intensity normalize and as new capacity comes online. The company aims to capitalize on share gains in Westcott and First Aid, aided by rising internal production and ongoing price management to offset cost inflation. Key catalysts include: (1) ramping Spill Magic production at Mount Pleasant with a larger, more automation-enabled footprint beginning in 1Q2026; (2) Med-Nap expansion and productivity improvements to support hospital and healthcare channels; (3) continued on‑shoring and diversification away from China reducing tariff exposure and improving service levels; (4) potential tailwinds from lower interest rates reducing fixed debt service costs (the company has about $10.3m of fixed-rate debt at 3.8% and would benefit from rate reductions). Risks to the outlook include persistent tariff volatility, slower-than-expected demand recovery in back‑to‑school cycles, and competitive pricing pressure. Investors should monitor: tariff developments, the pace of Westcott and First Aid market share gains, progress of Spill Magic and Med-Nap automation initiatives, and the company’s ability to sustain free cash flow to support the dividend and deleveraging.