EPS of $0.41 decreased by 85.5% from previous year
Gross margin of 38.7%
Net income of 1.71M
""Acme United had a strong year in 2024. We had record net sales of $194.4 million and record EBITDA of $20 million."" - Walter C. Johnsen
Acme United Corporation (ACU) QQ4 2024 Earnings Analysis: Record EBITDA and Margin Expansion Amid Tariff Readiness in a Diversified Safety and First Aid Tools Portfolio
Executive Summary
Acme United reported a solid finish to 2024 with topline growth and margin expansion, underscoring the strength of its diversified portfolio across First Aid, Westcott cutting tools, and DMT sharpening products. For the fourth quarter, revenue rose to $45.9 million (+~10% YoY) and gross margin stood at 38.7%, while full-year revenue reached $194.5 million (+2% YoY, +6% excluding Camillus/Cuda dispositions). Management emphasized productivity initiatives that yielded more than $2 million in annual savings and highlighted the RFID-enabled SmartCompliance first aid cabinets as a core driver of annuity-based revenue and customer stickiness. EBITDA for the year was a record $20 million, and net income rose to $10 million with diluted EPS of $2.45, up from $2.23 in 2023. The company used proceeds from the 2023 sale of the Camillus and CUDA lines to reduce debt and position for growth, resulting in a leaner capital structure and improved operating leverage.
Looking into 2025, Acme stressed tariff-related headwinds but underscored a well-diversified sourcing footprint (domestic manufacturing and multi-country sourcing, including Egypt and Thailand) and ongoing price-mostly-inflation pass-throughs to protect margins. Management signaled readiness to respond to tariff changes through cost reduction, mix optimization, and potential further vertical integration if tariffs intensify. The company also highlighted continued capacity expansion (e.g., Rocky Mount distribution center) and channel expansion (Canada/Europe) as catalysts for controlled growth. Overall, the setup suggests a resilient earnings trajectory with modest revenue growth and continued margin discipline, contingent on tariff dynamics and macro conditions.
Key Performance Indicators
Revenue
45.94M
QoQ: -4.62% | YoY:9.54%
Gross Profit
17.77M
38.67% margin
QoQ: -4.30% | YoY:8.30%
Operating Income
2.28M
QoQ: -22.01% | YoY:9.03%
Net Income
1.71M
QoQ: -23.18% | YoY:-84.74%
EPS
0.45
QoQ: -25.00% | YoY:-85.48%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 revenue: $45.93 million, up ~9.5–10% YoY from $41.93 million in Q4 2023. QoQ change not disclosed in the release, but quarterly data show sequential strength in main segments.
Full-year 2024 revenue: $194.5 million, up 2% year over year. Excluding the Camillus/CUDA dispositions (sold in late 2023), 2024 sales rose ~6%, driven by market share gains in First Aid and Westcott/DMT categories.
Full-year 2024 gross margin: 39.3%, up from 37.7% in 2023, aided by productivity improvements in manufacturing and distribution.
SG&A: Q4 2024 SG&A was $15.5 million (34% of sales), unchanged on a rate basis versus Q4 2023. Full-year SG&A was $62 million (32% of sales) vs $59 million (31% of sales) in 2023, reflecting investments to support growth alongside inflationary pressures.
Financial Highlights
Summary of key quarterly and annual metrics with context:
- Q4 2024 revenue: $45.93 million, up ~9.5–10% YoY from $41.93 million in Q4 2023. QoQ change not disclosed in the release, but quarterly data show sequential strength in main segments.
- Q4 2024 gross margin: 38.7%, slightly below Q4 2023 (39.1%), reflecting ongoing input costs and product mix dynamics while productivity gains buffered margin erosion.
- Full-year 2024 revenue: $194.5 million, up 2% year over year. Excluding the Camillus/CUDA dispositions (sold in late 2023), 2024 sales rose ~6%, driven by market share gains in First Aid and Westcott/DMT categories.
- Full-year 2024 gross margin: 39.3%, up from 37.7% in 2023, aided by productivity improvements in manufacturing and distribution.
- SG&A: Q4 2024 SG&A was $15.5 million (34% of sales), unchanged on a rate basis versus Q4 2023. Full-year SG&A was $62 million (32% of sales) vs $59 million (31% of sales) in 2023, reflecting investments to support growth alongside inflationary pressures.
- Interest expense: 2024 interest expense declined to $1.9 million from $3.0 million in 2023, driven by lower average debt.
- Net income and EPS: Q4 2024 net income was $1.71 million ($0.41 diluted EPS). The year ended December 31, 2024 produced net income of $10.0 million and diluted EPS of $2.45, vs. $8.1 million and $2.23 in 2023.
- Cash flow: Net cash provided by operating activities was $6.37 million; free cash flow was $4.67 million. Cash at period-end was $6.40 million. The company generated meaningful free cash flow despite ongoing capital investments and acquisitions.
- Balance sheet and leverage: Total assets $162.17 million; total debt $32.40 million; net debt around $26.01 million; cash and cash equivalents $6.40 million; current ratio 4.17 and quick ratio 1.71, indicating strong near-term liquidity. The company maintained a robust equity base with total stockholders’ equity of $106.98 million.
- Cash usage and investments: Over the twelve months, Acme acquired the assets of a lease First Aid operation for $6.1 million, paid $2.2 million in dividends, and generated approximately $5 million in free cash flow. Capex was about $1.70 million for the period, with acquisitions contributing to growth.
- Market valuation signals: Price to earnings around 22.8x, price-to-sales ~3.39x, price-to-book ~1.46x, dividend yield ~0.36%. Enterprise value metrics imply a balanced risk-reward profile given the growth drivers and near-term tariff exposure.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
45.94M
9.54%
-4.62%
Gross Profit
17.77M
8.30%
-4.30%
Operating Income
2.28M
9.03%
-22.01%
Net Income
1.71M
-84.74%
-23.18%
EPS
0.45
-85.48%
-25.00%
Key Financial Ratios
currentRatio
4.17
grossProfitMargin
38.7%
operatingProfitMargin
4.97%
netProfitMargin
3.72%
returnOnAssets
1.05%
returnOnEquity
1.6%
debtEquityRatio
0.31
operatingCashFlowPerShare
$1.53
freeCashFlowPerShare
$1.12
dividendPayoutRatio
32.9%
priceToBookRatio
1.46
priceEarningsRatio
22.76
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the February 28, 2025 earnings call:
- Strategy and growth catalysts: Walter Johnsen highlighted the strength of the First Aid business (approximately $120 million in revenues, with $30 million in refills) and the performance of Westcott and DMT (≈$75 million in net revenues, up 10% YoY). He noted the introduction of SmartCompliance RFID-enabled cabinets in 2024, enabling automatic replenishment and expanding the annuity portion of the business.
- Operational excellence and cost discipline: Management underscored productivity initiatives delivering over $2 million in annual savings, including automation of item placement, freight cost rationalization, and warehouse optimization (e.g., Rocky Mount facility upgrade, capacity up 30%).
- Geographic diversification and supply chain resilience: Johnsen described a multi-country sourcing strategy (Egypt, India, Thailand, Philippines) to reduce China reliance and offset tariffs, with some production moving from China to Thailand and the Philippines, and domestic production increasing in the U.S. (Vancouver, WA; Rocky Mount, NC; MedNAP’s Brooksville, FL). He emphasized limited cross-border dependencies for Canada and Europe, and direct sourcing for Europe to reduce tariff exposure.
- Tariff environment and pass-through: On tariffs, Johnsen stated that tariffs tend to impact input costs first and that management has already implemented price adjustments in response to inflation and expected tariff effects. He noted the company aims for margin breakeven after tariff adjustments and emphasized substitutions to maintain customer value rather than simply increasing prices.
- Outlook and management tone: Johnsen expressed optimism for 2025, emphasizing a strong customer base, solid financials, and a robust pipeline of new business, while acknowledging tariff headwinds and the need for continued productivity and strategic pricing.
"Acme United had a strong year in 2024. We had record net sales of $194.4 million and record EBITDA of $20 million."
— Walter C. Johnsen
"As we look into 2025, we are optimistic and confident. We have a strong customer base, excellent financials, and a solid book of new business."
— Walter C. Johnsen
Forward Guidance
Management commentary during the QQ4 2024 call did not publish formal numeric guidance for 2025. However, several qualitative takeaways inform the forward view:
- Tariff headwinds are expected to persist in 2025, but Acme believes it is well-positioned to manage costs and maintain margins through: (i) ongoing productivity programs; (ii) supplier cost-down initiatives; (iii) selective product mix adjustments; and (iv) regular inflation-based price increases. The company also highlighted the potential to substitute lower-margin items with higher-value alternatives where appropriate.
- Growth catalysts include: (i) expansion of the First Aid Central and RFID-enabled replenishment across North America and Europe; (ii) continued growth in Westcott and DMT segments aided by distribution gains and new sharpening tools; (iii) geographic diversification and near-shoring (Egypt, Thailand, India) to reduce China exposure; (iv) capacity expansion (e.g., Rocky Mount) to support growth and service levels.
- The risk factors to monitor include: (i) tariff policy developments and any retaliatory tariffs; (ii) macroeconomic conditions affecting school, office, and industrial channels; (iii) currency fluctuations impacting Canadian and European operations; (iv) incremental capex requirements to sustain growth and supply chain diversification.
- Our assessment: Given a resilient gross margin (~39%), a ~5% net income margin in 2024, and meaningful free cash flow generation, Acme should be able to absorb modest top-line growth in the low-to-mid single digits in 2025 while preserving margins. The key to upside will be continued efficiency gains, successful ramp of RFID-based services, and favorable tariff negotiations or mitigations. Investors should monitor dividend policy stability, working capital movements, and the cadence of capacity expansion investments.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ACU Focus
38.67%
4.97%
1.60%
22.76%
EPC
41.10%
3.94%
0.56%
51.31%
EWCZ
74.30%
25.80%
3.07%
35.94%
BHB
1.00%
99.00%
2.40%
10.61%
AUBN
1.00%
0.00%
1.99%
13.15%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall, Acme United presents a cautiously constructive investment case. The company demonstrated robust 2024 operating performance, margin expansion, and meaningful free cash flow generation, supported by a diversified portfolio and productivity gains. The primary near-term risk is tariff-related cost pressure, which the company has addressed through a diversified sourcing network, domestic production, and pricing actions. The RFID-enabled SmartCompliance initiative and the ongoing expansion of the First Aid Central platform offer sustainable long-term growth drivers. Valuation sits at a mid-to-high range for a small-cap consumer defensive name (P/E ~22.8x, P/S ~3.39x, P/B ~1.46x), reflecting the quality of earnings and the upside from margin discipline and strategic initiatives, but the risk/reward hinges on tariff developments and the success of growth initiatives in First Aid and Westcott/DMT. Investors with a moderate risk tolerance and a focus on durable cash flows and strategic diversification may find ACU attractive, with potential upside if tariff headwinds ease and the company continues to execute on its growth and productivity agenda.
Key Investment Factors
Growth Potential
Diversified revenue base across First Aid (≈$120m revenue) and Westcott/DMT (≈$75m revenue) with RFID-enabled SmartCompliance cabinets driving annuity-like recurring revenue; geographic diversification with domestic US manufacturing, Egypt/India/Thailand footprint, and Europe/Canada expansion providing resilience against tariffs and supply chain disruptions; ongoing productivity initiatives (> $2m annualized savings) and warehouse optimization support margin stability; potential for further selective acquisitions leveraging 8-year track record of growth-driven consolidation.
Profitability Risk
Tariff exposure and policy risk remain the primary near-term headwinds; customer channel volatility in school/office segments; currency and cross-border logistics complexity in Canada/Europe; reliance on a handful of core product lines (First Aid, Westcott, DMT) exposes sensitivity to shifts in demand within these segments; potential need for capex to sustain capacity expansion and IT systems for RFID/automation.
Financial Position
Solid liquidity and balance sheet strength with current ratio of 4.17 and quick ratio of 1.71; total debt $32.4m and net debt around $26.0m; cash position of ~$6.4m; 2024 free cash flow ~$4.7m supports ongoing capital allocation (capex, dividends, debt reduction). 2024 gross margin (~39.3%) and net margin (~5.1%) reflect productivity gains and pricing discipline; the company generated record EBITDA of $20m for the year and paid modest dividends while reducing debt post-2023 asset sales.
SWOT Analysis
Strengths
Leading brand position in North America in first aid, cutting tools (Westcott), and sharpening (DMT) with broad, diversified product lines.
RFID-enabled SmartCompliance cabinets and automatic replenishment creating annuity revenue and higher customer retention.
Productivity initiatives delivering more than $2 million in annual savings; ongoing cost discipline across manufacturing and logistics.
Strategic geographic diversification and domestic production footprint reducing tariff exposure and supply chain risk.
Healthy balance sheet with ample liquidity, moderate leverage, and strong free cash flow generation.
Weaknesses
Revenue growth is modest on an absolute basis, with 2024 YoY growth of 2% (6% excluding Camillus/CUDA) and Q4 2024 YoY growth around 9–10% but with fluctuations by segment.
Tariff exposure remains a near-term macro risk that could compress margins if pass-through strategies are insufficient.
Dependence on several core segments (First Aid, Westcott, DMT) means demand shifts in these channels can disproportionately impact results.
Opportunities
Expansion of First Aid Central and RFID-based replenishment in Canada and Europe to drive recurring revenue and expand installed bases.
Further geographic diversification (Thailand, Philippines, Egypt) to reduce China reliance and potential cost advantages.
Continued capacity expansion (e.g., Rocky Mount) to support growth and improve service levels.
Ongoing acquisitions and integration of bolt-on opportunities to broaden product portfolio and channel reach.
Threats
Tariff fluctuations and changes in trade policy, including potential retaliatory tariffs, facing input costs and cross-border dynamics.
Macro slowdown in school/office channels or industrial distributors could dampen demand growth.
Foreign exchange volatility affecting Canadian and European operations; currency translation risk.
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