Acme United Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jim Marrone - Singular Research - Analyst : My first question is with regards to acquisition and the second will be with regards to tariffs. With regards to the acquisitions, you mentioned in your prepared comments that you're looking at making an acquisition in the near future. I'm just curious whether it would be a geographic one or with regards to product line. And should it be product line, will it be focused on medical kits and cutting tools, or would you be expanding into other products related to what you currently have? And then I'll ask a question with regards to tariffs after you answered the acquisitions.

Question: Jim Marrone - Singular Research - Analyst : Yeah, I can. But before I do that, just with regards to the acquisition. So do you anticipate attractive valuations on the offers that (technical difficulty) as a result of these headwinds? And then if so, what kind of EV to be the kind of multiples would you be looking at?

Question: Jim Marrone - Singular Research - Analyst : Great. Thank you for that. With regards to the tariffs, though, you said there's a lot of tariff uncertainty. Are you looking at it from the supply side as far as what you're buying products at, or are you looking at it in terms of your sales and any potential heading from that? And also, aside from the tariffs, there may be some recessionary headwinds, and do you anticipate that impacting the business at all?

Question: Jim Marrone - Singular Research - Analyst : Great. And are you looking at alternative sources to the sourcing from China? Like, is there any options with regards to US-based supply lines and that adjustment that way?

Question: Jim Marrone - Singular Research - Analyst : It does, Walter. Thank you for that clarity. And again, good order. Thanks.

Question: Jeffrey Matthews - Ram Partners LP - Analyst : I have three questions, Walter. The first is on guidance. You haven't talked about the year ahead financially. And at the LD Micro conference last week, you talk, you did talk -- I think it was $3 million of inventory that you wisely bought ahead when the current administration was elected. I assume you're on LIFO, so does that mean if you have to start ordering stuff from China, you're going to take a big hit in the near term on your cost of goods sold? Or is there just no clarity at all right now to make any kind of comment on that?

Question: Jeffrey Matthews - Ram Partners LP - Analyst : Oh, okay.

Question: Jeffrey Matthews - Ram Partners LP - Analyst : Got it. Okay, thanks on that. And then to follow up on the acquisition side. In the past, you've been very opportunistic. And I can't think of a company with a better track record, frankly, maybe Berkshire Hathaway, if you exclude precision cast parts, but you've had a just a terrific track record on acquisitions. Could there be a larger more transformative deal in this environment for you than you've typically done? Or do you think it's going to look more like the opportunistic, smaller tuck-in or new product line acquisitions that you've done in the past? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 17, 2025 / 4:00PM, ACU.A - Q1 2025 Acme United Corp Earnings Call

Question: Jeffrey Matthews - Ram Partners LP - Analyst : Yeah. I can appreciate that. And then my third and final question, sort of to follow up on the whole tariffs thing and what you've been going through the last couple of weeks. There's an idea that the Wall Street Journal talked about which is that the administration is trying, big picture, to isolate China. And they are trying to get other consuming countries to -- or well, anybody out there to work more with the US and less with China as a way of isolating China. But given how you've always talked in the past about how efficient their manufacturing base is, how easy it is to source products, how easy it is to develop products there, it seems to me that's a very long proposition, and I just wonder what your take on that idea is that they could isolate China and sort of win this battle.

Question: Jeffrey Matthews - Ram Partners LP - Analyst : Interesting. Thanks, Walter, and thanks, Paul. And congratulations and good luck. And as shareholders, we appreciate the hard work.

Question: Jake Patterson - Talanta Investment Group - Analyst : Really just curious on the cutting revenue being down a decent bit this quarter. I know you guys mentioned you had a big benefit from last year, but even if I look at last year's number and adjust out the divestments, that business is only up like 2.5%. So just trying to kind of compare that to your comments from the last two calls about being pretty excited for Westcott in '25, a new distribution, a big year ahead, and I kind of curious to see if that is still the case. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 17, 2025 / 4:00PM, ACU.A - Q1 2025 Acme United Corp Earnings Call

Question: Jake Patterson - Talanta Investment Group - Analyst : Yeah, it definitely does. I guess one more quick one, I guess, so pivoting to the First Aid business. I know you guys said you had a lot of trials for the new automatic refill kit, and wasn't in your '25 forecast. I'm assuming that might be impacted a little bit too, but just wondering if there's anything you can share on the progress there and what your customers are saying.

Question: Richard Dearnley - Longport Partners - Analyst : Good morning. Just to play off Jeff's question about China policy, it looks like the administration wants to --the art of the deal, make a deal, be in the press, thump your chest, et cetera. And there was just an announcement that they're close to a deal with the EU on the news very recently. It would seem logical to set China up as the bad guy, and then make a deal. Yeah, I realized that's just a random observation, but you have any thoughts about that? And as you say, they supply the world and bring a lot of value to the world and are probably not going to go away. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 17, 2025 / 4:00PM, ACU.A - Q1 2025 Acme United Corp Earnings Call

Question: Richard Dearnley - Longport Partners - Analyst : Yeah, right. I understand. Then the uptick in First Aid, how much of that increase is -- do you think is longer term organic versus -- First Aid was pretty flattish through '24. And so has an easy compares now. And 14% looks good, but it's against easy numbers. Any feeling on that?

Question: Peter Mork - Mork Capital Management - Analyst : Hey, Walter. Jake already got my question. I was going to follow up just on the smart compliance, and it sounds like things are going well. It'll be interesting to get just kind of that install base. Any color you guys could give as the year progresses, I think that'd be good. But maybe as a second question, just the DMT pull through sharpeners. First off, we've got both models, we like them at our house where those things really do work. Are you looking to expand more into the kitchen with DMT? Or what's kind of your thoughts around that product?

Question: Peter Mork - Mork Capital Management - Analyst : Yeah, definitely does. So well, thank you both and great quarter.

Question: Steve Chick - Sebis Garden Capital - Analyst : Walter, if anybody can navigate through this environment, I think it's you guys, so. I had a question on front loading and with some of the inventory that you bought in advance, I think it says $3 million. I'm wondering if you're seeing any activity from your customers thinking along the same lines maybe as we're coming into -- or as we're in April here. Are you seeing customers trying to buy kind of advance of maybe the cost increases now?

Question: Steve Chick - Sebis Garden Capital - Analyst : Yeah, I think so. Can you just remind us of your inventory, what roughly is -- what percentage is sourced from China?

Question: Steve Chick - Sebis Garden Capital - Analyst : Okay. All right. Okay, thank you. Good luck. Thanks.