Acme United Corporation.

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Greetings, and welcome to the Acme United Q4 and year-end 2025 Financial Results Conference Calling Webcast. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Walter Johnson, Chairman and CEO. Please go ahead, sir.

Good morning. Welcome to the fourth quarter and year-end 2026 earnings conference call. for Acme United Corporation. I'm Walter C. Johnson, Chairman and CEO. With me is Paul Driscoll, our Chief Financial Officer. We'll first read a Safe Harbor Statement. Paul?

Forward-looking statements in this conference call, including without limitation, statements related to the company's plans, strategies, objectives, expectations, intentions, and adequacy of capital and other resources are made pursuant to the Safe Harbor Commission's provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, among others, those arising as a result of a challenging global macroeconomic environment characterized by continued high inflation, high interest rates, and the imposition of new tariffs or changes in existing tariff rates. In addition, we've experienced supply chain disruptions we may experience these disruptions in the future. We are also subject to additional risks and uncertainties as described in our periodic filings with the Securities and Exchange Commission in our current earnings release.

Thank you, Paul. Acme United delivered record sales and earnings in 2025. It was not easy, but we did better than we ever have. Our net sales were $196.5 million, net income was $10.2 million, and earnings per share were $2.49. When high global tariffs were announced in April 2025, our customers scrambled. They delayed and canceled retail promotions, opted to have no stock rather than import items for losses, and searched for new, lower-cost sources. We had purchased extra inventory at the end of 2024 in anticipation of some increased tariff levels and supplied our regular customers with their planned orders. Our team in the United States and Asia reacted quickly. When the Chinese tariffs for our products were reduced from 145 percent to 30 percent in late April 2025, we put over 50 containers on the water within days. We worked with our suppliers to open new factories in Vietnam, Thailand, and Malaysia. We increased our production in India and Egypt. We negotiated cost reductions from our suppliers, obtained lower freight rates, generated productivity from savings in our domestic plants, and increased prices very modestly. Our team supported our customers, and they delivered. There were many highlights in 2025. Our first aid team introduced a patented automatic replenishment system for refills. This product senses components that were used, lost, or became obsolete in an industrial first aid kit and automatically generates replenishment orders. A typical customer will save 30% to 50%, and sometimes more, over traditional van-based delivery. The Westcott team expanded our market share of cutting tools, particularly in the craft market. We used our patented non-stick technology to develop differentiated products to work with tapes, glues, and sticky substances. We also increased our line of ceramic tools to safely cut and open boxes and increased sales of our industrial cutting tools. We invested in robotics in three sites in the United States to assemble refills, of first aid components. These investments in the recurring portion of our first aid business are generating savings and improving product quality. We installed new software to optimize inventory placement in our large warehouse in Rocky Mount, North Carolina. We then streamlined the process flow of inventory and purchased drones to nightly do inventory reconciliation. Acme United purchased a 78,000-square-foot plant on 12 acres in Mount Pleasant, Tennessee, for approximately $6 million. This facility will expand production of our Spill Magic cleaner products, bodily fluid kits, and blood-borne pathogen kits. We are moving into the facility in the first quarter of 2026, and we have just purchased new automated processing equipment. We continue to purchase advanced production equipment for our MedNap facility in Brooksville, Florida, to produce medical-grade alcohol prep pads, antiseptic wipes, and other items used in our first aid kits. We are building a microbiology lab, expanding our quality assurance team, and preparing our documentation and controls to be a serious domestic supplier to the broader U.S. medical market. In January 2026, we purchased MyMedic, which is the leading direct-to-consumer supplier of advanced first aid and bleed control products in the United States. It has over 500,000 social media followers and a product line that we hope to expand. The company had revenues of approximately $19 million in 2025, and the purchase price was $18.7 million. Our first aid business in Canada grew strongly. We gained share in the industrial and retail sectors and continued expansion of our e-commerce business. And sales of Hawk Tree Solutions, which was acquired out of bankruptcy in late 2023, exceeded our expectations. In Europe, we expanded our market share in cutting despite an overall weak economy. We acquired a direct-to-consumer supplier of cutting and sharpening tools in October 2025. Annual sales were approximately $2 million for this acquisition, and the purchase price was $1.6 million. In our first aid segment in Europe, we expanded the marketing and sales team, improved product sourcing costs, and began to expand aggressively. As we move into 2026, we see growth in our first aid and medical segments and a return to more normal merchandising and promotion in the retail market. We are excited about the investments we have made in domestic production and our expanded international sourcing. And we believe we are very well-possessioned as we enter 2026. I will now turn the call to Paul.

Acme's net sales for the fourth quarter were $47.5 million compared to $45.9 million in 2024, an increase of 3%. Sales for the year ended December 31, 2025, were $196.5 million compared to $194.5 million in 2024, an increase of 1%. Net sales in the U.S. segment in the fourth quarter were constant compared to the fourth quarter of 2024. U.S. sales declined 1% for the year ended December 31. Sales of first aid and medical products were strong, However, sales of school and office products were lower, mainly due to the cancellation of customer orders as a result of tariff uncertainty. Net sales in Europe increased 22% of local currency for the quarter. Sales for the year ended December 31, 2025 increased 4% compared to 2024. The sales increase for both the quarter and the year was mainly due to additional sales from the line of cutting and sharpening tools acquired on October 1, 2025. Net sales in Canada increased 14% in local currency for the quarter. Sales for the year ended December 31, 2025, increased 16% compared to 2024. Sales of first aid products were strong. However, there was a decline in sales of school and office products. The gross margin was 38.2% in the fourth quarter of 2025 compared to 38.7% in 2024. The gross margin for the year was 39.4% compared to 39.3% in 2024. STNA expenses for the fourth quarter of 2025 were $15.2 million or 32% of sales compared with $15.5 million or 34% of sales for the same period of 2024. STNA expenses for the 12 months of 2025 were $62.7 million or 32% of sales compared with $62.2 million, or 32% of sales in 2024. Operating profit in the fourth quarter of 2025 increased 27% compared to the fourth quarter of 2024. Interest expense for the year went from $1.9 million in 2024 to $1.6 million in 2025. The decline in interest expense was due to a combination of lower debt and lower interest rates. Net income for the fourth quarter of 2025 was $1.9 million or 46 cents per diluted share compared to $1.7 million or 41 cents per diluted share in the fourth quarter of 2024. An increase of 10% in net income and 12% in diluted earnings per share. Net income for the year ended December 31, 2025 was $10.2 million or $2.49 per diluted share compared to $10 million or $2.45 per diluted share in 2024, an increase of 2% in both net income and diluted earnings per share. The company's bank debt less cash on December 31, 2025 was $18.5 million compared to $21.5 million on December 31, 2024. During a 12-month period, we paid $2.3 million in dividends, purchased the line of cutting and sharpening products in Germany for $1.6 million, and generated $13 million in free cash flow before the $6 million purchase of our new facility in Tennessee.

Thank you, Paul. I will now open the call to questions.

Thank you. Without conducting a question-and-answer session, If you'd like to be placed into the question queue, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment, please, while we poll for questions. Our first question today is coming from Jim Maroney from Singular Research. Your line is now live. Thank you.

Walter, nice quarter. I have a couple questions. Yeah, you're welcome. A couple questions on the acquisition. So as far as the integration, if you could just kind of share a little bit on how you plan on integrating MyMedic. Is it going to be part of the first aid offering to the same customers or something completely different if you could speak to that and before you answer that just a couple more questions with regards to that acquisition the revenues are approximately 19 million and you purchased it for 19 million do you have an idea of what the multiple is on that as far as maybe an EV or to beat a multiple And was it acquired using all cash or a combination of other things? Thanks.

Okay, so the acquisition of MyMedic, we think, is a pretty meaningful acquisition for the company. It's got a half million social media followers. And to put that in perspective, when we were at the SHOT Show, which is a very, very large military gun company, and hunting show in Las Vegas a week later after we purchased MyMedic, I felt like we had one of the leading brands on the show floor. It was just amazing to see the people that were coming in. One moment I'd be looking at the Israeli military, another a SEAL team, and then hunters and outdoorsmen and police departments and security personnel. So, That acquisition gives us a direct-to-consumer business that we hope to expand. And we intend to do that by differentiating some of the products within First Aid to be able to be going into selected retail. Now, not broad retail, selected retail, where it complements the sale of direct-to-consumer, perhaps with different products. It will all be part of the first aid offering, and we hope to be able to broaden the direct-to-consumer sales of other items that we carry within the ACME first aid and medical area. For example, we have SafetyMaid, which personalizes medical products, including first aid kits. It's a very, very simple step for us to be able to do personalization for the L.A. Police Department, for example. or one of the military units that comes by. And we can do that domestically and quickly. Sales were $19 million, and the EBITDA was somewhere between a million and a million and a half dollars. So you can figure out the EBITDA from that. The purchase price, while it was 18.6 million, it was $1 million, which was an earn-out for hitting some growth objectives during the next two years, and then there was a holdback of about $3 million for various potential contingent liabilities. So the net out-of-pocket was about $4 million, less than the 18.6 purchase price. We're excited about it, and we're careful because the team built something special, and we want to keep it, but we have sourcing capabilities that are, we believe, unsurpassed in the first aid area given our scale and our operations globally. And we have a broad product line that we think we can help them supplement and a direct sales force to retail. So all in all, it's a great platform with wonderful people, and our job is to integrate but carefully.

Right. Great. And just as a follow-up, so when you say select retailers, can we assume that it will be the same retailers that you sell the cutting tools to, or would it be a different distribution?

We sell to almost every retailer in North America. And so we have a pretty broad choice of where we do that, but we want it to be selective. And that list is still being developed. But I hope we're successful and we're able to tell you where that has distribution in the coming quarters.

Right. And as far as looking forward, and you mentioned that there may be further acquisitions down the road, will it continue in first aid and medical? Or could it possibly be in the cutting tools segment? Where do you see the acquisitions going forward?

Well, acquisitions are opportunistic, of course, but we also self-generate most of the deals. And we're looking to expand both our horizontal distribution, in other words, buying competitors and taking a half step away from some of the core current first aid items to be able to expand how we can address pre-hospital emergencies. And that's a very broad market. My belief is we'll probably find an acquisition that either does that in first aid or medical, or it's a supplier of components, for example, like MedNap that made the alcohol prep pads that go into first aid kits. So it might be a vertical acquisition as well. But that's the primary area we're looking.

Thank you for that insight, Walter. Thanks. Thank you.

Thank you. As a reminder, that's star one to be placed into question Q. One moment, please, while we poll for further questions.

We have reached the end of our question and answer session.

I'd like to turn the floor back over for any further or closing comments.

Well, for no further questions, this call is complete. I look forward to delivering good results in the first quarter and the rest of the year, and I look forward also to speaking with you at the end of the first quarter. Thank you for joining us. Goodbye.

Thank you. That does conclude today's teleconference webcast. Let me just connect your line at this time and have a wonderful day. We thank you for your participation today.