ACME UNITED CORP Q2 FY2026 earnings call

• Overall Financial Results

  • Q2 2026 net sales reached $62.7 million, a 16% increase from $54 million in Q2 2025; net income increased 6% to $5.1 million, and diluted EPS increased 5% to $1.22
  • Year-to-date (first half 2026) net sales hit $115 million, a 15% increase year-over-year, though year-to-date net income declined slightly to $6 million from $6.4 million in the prior year period
  • Overall gross margin increased to 42.6% from 41% year-over-year, driven by favorable product mix from high-margin MyMedic
  • SG&A expenses rose to 32% of sales from 29% year-over-year, primarily due to higher advertising costs required for MyMedic's direct-to-consumer model

• MyMedic Acquisition Integration

  • Acquired in January 2026, MyMedic produces advanced first aid kits that extend Acme United's product line into emergency trauma products. Q2 2026 MyMedic sales were approximately $4.3 million, with break-even operations as expected
  • Management is integrating MyMedic: reducing product costs via Acme United's existing Asian sourcing team, consolidating freight to cut expenses, and eliminating duplicate corporate functions. Cost savings are already being realized
  • Current priority is expanding MyMedic from its core direct-to-consumer model into retail and industrial distribution, where Acme United has existing strong relationships

• Core Business Operational Updates

  • Westcott Cutting Tools has recovered from 2025 tariff-related disruptions that canceled seasonal promotions; promotional activity has resumed with strong volume growth
  • Spill Magic sales are up 30% year-to-date, supported by a new dedicated production facility in Tennessee with custom automation to enable long-term growth
  • MedNap antiseptic wipes facility in Florida is undergoing regulatory upgrades to qualify for U.S. hospital market sales, with certification expected to complete by the end of 2026
  • Next-generation smart compliance software for automatic replenishment of industrial first aid kits is in final testing and will soon launch to early distributors
  • Acme United built $10 million in extra inventory to buffer against potential supply chain and cost disruptions stemming from the Iran war, and maintains this elevated buffer

U.S. Segment: Q2 2026 net sales increased 17% year-over-year to $XX million (8% increase excluding MyMedic). First aid and medical products rose 10%, Westcott Cutting Tools rose 8%, with particular growth at mass market retailers. First aid and medical products account for approximately 70% of total company revenue. Europe Segment: Q2 2026 net sales increased 19% year-over-year in local currency, with a 12% increase for the base business. Growth was driven by a new line of cutting and sharpening tools. Canada Segment: Q2 2026 net sales increased 3% year-over-year in local currency (6% increase year-to-date), driven by industrial retail and online sales growth in the first aid business. The Westcott segment in Canada has seen sluggish growth amid broader macroeconomic weakness.

• Management expects continued growth for the first aid and medical product segment, alongside ongoing resumption of promotional retail activity for Westcott Cutting Tools
  • Gross margins are expected to expand gradually as high-tariff inventory is fully sold; the 100 basis point headwind to U.S. gross margins in Q2 2026 is expected to fully recover over the remainder of 2026, following tariff reductions in November 2025 and February 2026
  • Improved profitability for MyMedic is expected to become visible starting in Q4 2026, with the business expected to deliver strong seasonal profitability in the fourth quarter
  • Continued organic growth from long-term initiatives (Spill Magic expansion, MedNap hospital market entry, new smart first aid replenishment software) and active acquisition pipeline are expected to drive performance going forward

• Challenging global macroeconomic conditions, including persistent high inflation and high interest rates, create pressure on consumer discretionary spending
  • Ongoing supply chain disruptions remain a potential risk, and changes to existing tariff rates or imposition of new tariffs could increase input costs
  • Increased freight and fuel costs for ocean shipping and domestic last-mile delivery, as well as a weaker U.S. dollar relative to the Chinese yuan, create cost headwinds for imported products
  • Macroeconomic weakness in Canada has resulted in sluggish growth for the Canadian Westcott business

Q: What progress is being made on the company's long-term growth initiatives (Spill Magic expansion, MedNap hospital certification, MyMedic expansion, new software)? / A: Spill Magic has achieved 30% year-to-date sales growth, supported by a new dedicated automated facility. MedNap regulatory certification for the U.S. hospital market is progressing on track to finish by year-end. MyMedic has grown a third year-to-date, and management is expanding it into retail and industrial distribution where Acme United has existing strong relationships, with improved operating leverage expected by Q4 2026. The next-generation first aid replenishment smart software is in final testing and will launch to early distributors soon.

Q: What drove Q2 2026's record gross margin, and will tariff headwinds continue to ease going forward? / A: Almost all of the gross margin improvement is from favorable product mix, since high-margin MyMedic contributes more to revenue this quarter after acquisition. Excluding MyMedic, U.S. gross margins faced a 100 basis point tariff headwind in Q2, down from a 150 basis point headwind in Q1. As high-tariff inventory is sold out and tariffs were reduced in late 2025 and early 2026, the full 1% margin headwind is expected to recover over the rest of 2026, offset slightly by ongoing freight and currency headwinds.

Q: Is Acme United seeing weaker consumer demand amid broader inflation and rising costs, especially for MyMedic and back-to-school Westcott sales? / A: While consumers face broader cost pressures, Acme United has not yet seen meaningful weakness in sales. MyMedic sales are currently tracking exactly to plan, and Europe achieved a record quarter despite worse inflation than the U.S. Back-to-school Westcott shipments through June were a company record, with a solid backlog for the rest of Q3. Acme United's strong product differentiation, innovation and value pricing have kept demand robust, with particularly strong growth at value-focused channels like dollar stores.

Q: What is driving sluggish growth in the Canada segment, and is it related to tariffs or CUSMA renegotiation? / A: The Canadian first aid business is actually growing strongly and just moved into a larger new facility outside Montreal. Only the Canadian Westcott segment is sluggish, driven by broader macroeconomic weakness in Canada, not tariffs. Canada segment makes up a small share of Acme United's total overall revenue.

Q: Is Westcott's 8% Q2 growth driven by price increases or volume? / A: Almost all of the quarter's growth is from volume, as retailers restarted promotional activity that was canceled in 2025 amid tariff uncertainty. Price increases were unevenly applied across product lines, with more price-sensitive back-to-school items seeing smaller increases, while specialty items received larger increases.