Acme United Reports Solid Q3 2025 Performance and Outlook

Acme United Corporation (US: ACU – $39.37) announced its financial results for the third quarter ended September 30, 2025, revealing a 14 percent decrease in net income compared with the same period in 2024. While this figure might suggest a downturn in profitability, the decline was due to a one-time tax benefit recorded in the third quarter of last year, rather than any deterioration in the Company’s operating performance.

In fact, in the third quarter of 2025, Acme United reported net sales of approximately $49.1 million, a 2 percent increase from the $48.2 million achieved in the third quarter of 2024. The Company also saw an improvement in gross margin, which rose from about 38.5% in Q3 last year to 39.1% the past quarter, indicating continued cost discipline and favorable product mix.

The Tax Effect: How a One-Time Benefit Clouds the Comparison

Operating profit increased around 3 percent year over year, demonstrating that Acme’s core business remained strong. However, net income for the quarter declined to $1.9 million, or approximately $0.46 per diluted share, compared with $2.2 million, or $0.54 per diluted share, in the third quarter of 2024. This 14 percent decrease in net income stemmed primarily from the absence of a significant tax benefit that had favorably impacted last year’s results.

During the third quarter of 2024, Acme United recorded a large excess tax benefit related to the exercising of stock options. That one-time event reduced the Company’s effective tax rate to an unusually low level of around 8 percent, substantially boosting reported net income for that period. In contrast, Acme’s effective tax rate for the third quarter of 2025 returned to a more typical 22 percent. As a result, this year’s net income appears lower in comparison, even though underlying operating profits were actually higher.

When the tax effect is excluded, Acme United’s 2025 third-quarter performance demonstrates steady progress. The Company achieved modest revenue growth, maintained stable overhead expenses, and improved gross margins. These trends highlight effective cost management and an ability to navigate challenging market conditions, particularly amid fluctuating tariffs and global supply chain pressures.

Financials & Balance Sheet

Net sales for the nine months ended September 30, 2025 were $149.0 million compared to $148.5 million in the same period in 2024. Net income for each of the nine month periods ended September 30, 2025 and 2024 was $8.3 million, or $2.03 per diluted share, underscoring the overall stability of its financial position.

Selling, general, and administrative expenses were largely stable as a percentage of sales, although slightly higher in absolute terms, reflecting measured investments in marketing and operations.

	Three Months Ended September 30		Nine Months Ended September 30
Amounts in $000’s	2025	2024	2025	2024
Net Sales	49,063	48,166	149,018	148,547
Cost of Goods Sold	29,868	29,602	89,756	89,960
S, G & A Expenses	16,188	15,638	47,438	46,728
Income From Operations	3,007	2,926	11,824	11,859
Interest Expense	422	535	1,222	1,517
Other Income (Expense)	(146)	17	44	90
Pre-Tax Income	2,439	2,408	10,646	10,432
Income Tax Expense (benefit)	536	182	2,338	2,117
Net Income	1,903	2,226	8,308	8,315
Earnings Per Share – Diluted	.46	.54	2.03	2.03
Shares Out. – Diluted	4,168	4,104	4,091	4,087
Selected income statement data for the quarters and nine months ended September 30, 2025 and September 30, 2024. Source: Company Press Release

Gross margin was 39.1% in the three months ended September 30, 2025 versus 38.5% in the same period last year. Gross margin was 39.8% for the nine-month period ended September 30, 2025 compared to 39.0% for the same period in 2024. Gross margin has increased as Acme modestly increased its selling prices to offset tariffs, and successfully negotiated cost reductions with its suppliers.

Acme’s balance sheet also remained healthy. The Company’s bank debt less cash as of September 30, 2025 was $23.1 million compared to $26.7 million as of September 30, 2024. During the twelve-month period ended September 30, 2025, the Company distributed approximately $2.3 million in dividends on its common stock and generated approximately $11.1 million in free cash flow, before the purchase for cash of a new $6 million facility in Tennessee in July 2025 to expand the Company’s Spill Magic business.

Amounts in $000’s	September 30, 2025	September 30, 2024
Cash and Cash Equivalents	5,146	5,702
Accounts Receivable	30,034	31,349
Inventories	60,163	55,990
Total Current Assets	98,706	98,774
Property and Equipment	38,691	30,892
Total Assets	173,042	165,473
Accounts Payable	6,488	7,008
Other Accrued Liabilities	13,722	13,403
Total Current Liabilities	22,087	22,394
Bank Debt	18,255	22,018
Total Liabilities	57,278	59,156
Total Stockholder Equity	115,764	106,317
Selected balance sheet data for the quarters ended September 30, 2025 and September 30, 2024. Source: Company Press Release

Sales Increase In All Segments

Acme United reports financial information on three separate business segments: the United States (including Asia), Canada and Europe.

Exact revenues per segment for the third quarter will be available in the 10-Q, which will be filed mid-November. However, Acme announced for each segment the percentage by which revenues increased or decreased compared with last year’s third quarter. Based on those numbers, we provide the following estimate.

	Three Months Ended September 30
Amounts in $000’s	2025	2024
U.S.	41,375	41,131
Canada	3,447	3,287
Europe	4,241	3,748
Estimated sales per segment for the third quarter ended September 30, 2025 (Source: Smallcaps Investment Research) and actual sales per segment for the third quarter ended September 30, 2024 (Source: Company Filing)

For the three months ended September 30, 2025, net sales in the U.S. segment increased 1% compared to the same period in 2024. 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. For the nine months ended September 30, 2025, net sales in the U.S. segment decreased 1% compared to the same period in 2024.

European net sales for the three months ended September 30, 2025 increased 13% in U.S. dollars and 6% in local currency compared to the same period of 2024, mainly due to higher sales of school and office products into the ecommerce channel. Net sales for the nine months ended September 30, 2025 increased 1% in U.S. dollars and decreased 2% in local currency compared to the same period of 2024.

Net sales in Canada for the three months ended September 30, 2025 increased 5% in U.S. dollars and 7% in local currency compared to the same period in 2024. Net sales for the nine months ended September 30, 2025 increased 14% in U.S. dollars and 16% in local currency compared to the first nine months of 2024. The increases in sales for both periods were due to strong sales of first-aid products.

Conclusion

While investors may initially focus on the reported decline in net income, the underlying story is much more favorable. First of all, the reduction is caused by last year’s extraordinary tax benefit. Moreover, on an operational level, Acme United’s core business is performing solidly, with incremental improvements in sales, profitability, and financial strength.

Chairman and CEO Walter C. Johnsen commented the following on the third quarter results, “We have continued to effectively manage through tariff-related uncertainties. Our first aid revenues increased 9% due to strong online and refill sales. Revenues from our Westcott cutting tools continued to be reduced, however, by the impact of the tariff environment on our customers, which has resulted in our customers’ cancellation of nearly all retail promotions. We are now experiencing increased promotional activity as buyers are again focused on growing sales.

The Company has been shifting production locations to reduce tariff pressure. At the same time, it has been increasing its production capacity in the United States and continues to do so. For example, in July of this year, Acme purchased a 78,000 square foot manufacturing facility on 12 acres with room for expansion for $6.1 million. The new plant will produce the Spill Magic cleanup products for bodily fluids, blood and spills and comes online in the first quarter of 2026.

In addition, Acme has been investing in its Med-Nap facility in Brooksville, Florida to increase production of alcohol prep pads, BZK wipes, triple antibiotic packets and lens wipes, Sales of these domestically produced items are increasing. Concurrently, the Company has been in preparation for entering the United States hospital and military markets in a larger way.

For investors, the challenge is to look past the decline in earnings, understand the tax distortions, and focus on the business fundamentals — which in this case are holding up well. Acme United’s third-quarter results affirm a consistent message: despite accounting fluctuations, the Company remains operationally resilient and strategically well-positioned for the year ahead. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $52.61	Latest Company Report (pdf)
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