ACU

**Operator:**  
Good day, and welcome to the Acme United Corporation First Quarter 2026 Financial Results Call. At this time, I would like to turn the call over to Walter Johnsen, Chairman and CEO. Please go ahead, sir.

**Walter Johnsen:**  
Welcome to the first quarter 2026 earnings conference call for Acme United Corporation. With me is Paul Driscoll, our Chief Financial Officer, who will first read a safe harbor statement. Paul?

**Paul Driscoll:**  
Forward-looking statements in this conference call, 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 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 have experienced supply chain disruptions in the past, and 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 and in our current earnings release.

**Walter Johnsen:**  
Thank you, Paul. Acme United Corporation had a difficult 2026. While our net sales increased 14% to $52.3 million, our net income was $985,000 compared to $1.6 million last year, and earnings per share were $0.24 compared to $0.41 last year. As you may remember, we purchased MyMedic for $18.6 million during 2026. The company sells directly to consumers and is cyclical, with most of the profits generated in the fourth quarter of the year. It also generates high gross margins, which it spends on advertising, promotions, new product development, and customer support. Our sales increase of 14% in 2026 includes approximately 8% from MyMedic, which was at breakeven in the P&L. Revenues excluding MyMedic increased 6%. The company's gross margins in 2026 were 39.7% compared to 39% last year. When the impact of the high gross margins at MyMedica are removed, the core gross margins declined due to higher costs and tariffs. We turn our inventory about twice per year, so the costs reflected in the first quarter were from products made and purchased when the tariffs were at their peak. We expect to run through these items during the second quarter with a return to normal levels in the third quarter. Shortly after the war in Iran began, we started purchasing higher-than-normal quantities of raw materials and finished goods inventory. So far, we have purchased approximately $10 million of incremental inventory. While we hope for a quick end to the war, we are planning and acting to be prepared for increasing costs and shortages. Operationally, we are working to increase the revenues of MyMedic by expanding its retail distribution and building a strong core of nonseasonal business. Our teams are integrating product lines, leveraging our purchasing strengths, and reducing duplicate expenses with the goal of generating significant profits throughout the year. The project is well underway. We are completing the move into our new Spill Magic facility in Mount Pleasant, Tennessee. Production has begun there even as additional equipment is being installed. Orders for the business are strong, and we are experiencing record growth. In Europe, sales increased 19% in local currency to €4 million. Our growth there includes the acquisition last November of Schmidaglet, a small direct-to-consumer company, which is exceeding expectations. Our first aid business in Europe had record performance, and we continue to expand its product line and sales team. The Westcott cutting tool business overcame market headwinds and increased 10% in Europe. In Canada, First Aid Central had a strong quarter and the cutting segment also grew. Overall, our Canadian business increased 16% compared to 2025. I will now turn the call to Paul.

**Paul Driscoll:**  
Acme United Corporation's net sales for 2026 were $52.3 million compared to $46 million in 2025, a 14% increase. Excluding Miemetic, sales increased 6%. Net sales in the U.S. segment increased 12% in the quarter, driven by higher sales of first aid and medical products, including MyMedic products. Net sales in Europe for 2026 increased 19% in local currency compared to 2025 due mainly to the new line of cutting and sharpening tools. The base business had a good performance with a sales increase of 12%. Net sales in Canada for 2026 increased 11% in local currency due to higher sales of first aid products. The gross margin was 39.7% in 2026 versus 39% in 2025. The favorable mix from higher-margin direct-to-consumer mimetic products was mostly offset by the impact of increased tariffs. SG&A expenses for 2026 were $19 million or 36% of net sales compared with $15.5 million or 34% of net sales for the same period of 2025. The higher SG&A was primarily due to the addition of the Mimetic business. The higher percentage of sales was due to the higher amount of advertising needed for the direct-to-consumer MyMedix business. Net income for 2026 was $1 million or $0.24 per diluted share compared to net income of $1.7 million or $0.41 per diluted share for the same period of 2025, a decrease of 40% in net income. The decline in net income was primarily due to the higher tariff and MedNav costs we experienced in the first quarter of this year. The higher tariff spending commenced in July 2025; however, the costs were capitalized into inventory and we started to realize the full impact to earnings as the high-cost products were sold in 2026. We expect the tariff impact to gradually lessen over the next three quarters as the tariff rate declined in November 2025 and again in February 2026. Additionally, the incremental cost to enhance the quality assurance protocols at the MedNap facility will not repeat in 2026. Now to the balance sheet. Net debt increased from $27.2 million at 03/31/2025 to $38.6 million at 03/31/2026. During the twelve-month period ended 03/31/2026, we paid $146 million for the acquisition of the assets of MyMedic, distributed approximately $2.4 million in dividends, and purchased the cutting and sharpening line of products in Germany for $1.6 million. Additionally, we generated approximately $14.2 million in free cash flow before the purchase of a new $6 million manufacturing and distribution facility in Tennessee in July 2025 to expand our Spill Magic business.

### Q&A Section

**Walter Johnsen:**  
We will now open the call for questions.

**Operator:**  
Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press 2 if you would like to remove your question from the call. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Richard Dearnley with Long Park Partners. Please proceed with your question.

**Richard Dearnley:**  
Good morning. Could you put a dollar amount, or a rough dollar amount, on what the quality assurance protocols are involving?

**Walter Johnsen:**  
Sure. Some background on that: last March, the FDA inspected our facility in Brooksville, Florida, where we make alcohol prep pads and BZK wipes, and lens wipes. They found a number of deficiencies, mostly in our documentation of good manufacturing practices, or documentation of some of the equipment being qualified. It is a lot of work to get it to the state it needs to be to address the U.S. hospital market, and that is our goal. We hired a consulting firm to work with us to upgrade in response to the FDA audit, which was very helpful, to upgrade the entire facility. Paul, last year it was about $1.2 million?

**Paul Driscoll:**  
It was about $1 million in consulting last year, in addition to some equipment we purchased. In the first quarter of this year, it was about $300,000.

**Walter Johnsen:**  
For example, we have upgraded the microbiology lab that we really did not have before, and we have upgraded the chemical laboratory for testing. In total, it is about $1.25 million to $1.3 million so far. That is all aimed at qualifying the MedNap products for hospital use.

**Paul Driscoll:**  
Well, it is not getting approval per se. We could sell them now, but we wanted to have it done right.

**Walter Johnsen:**  
In fact, our products do get sold into hospitals now. But when we get done with the project, and we are about three-quarters done, we will have a facility that we will be very proud to take major distributors in the United States to visit and do their own audits, and we will have confidence that we have done the best job we can for the quality of the products that will go out. We are three-quarters through. It is all expense, but I view it as an investment.

**Richard Dearnley:**  
That tags along to the comment about investing in automation everywhere. Could you size the other investments? Last year, you were talking about $2 million, and I believe the year before was $2 million. Is that the current run rate? Those investments tend to have large productivity payoffs.

**Walter Johnsen:**  
You are addressing something that is important to us. The automation we have been doing over the past few years has been with robotics. One of the big projects is taking the bulk product—for example, bulk BZK wipes that we produce at MedNap—and putting them automatically in packages that then go into the refills in our first aid kits. As you know, the refill business is an important part of our company, and by automating it, we are reducing cost on a product line that is very consistent and growing. Some of the projects we are doing right now relate to automating, in the Spill Magic facility, the packaging of the Spill Magic powder and putting it into different-sized packages, and that has a pretty big payback. I do not remember the exact number, but maybe it is about $500,000. It is important because we have business that will keep that machine going. Another area is in our Rocky Mount facility. I would not call this automation, but we have reconfigured the entire process flow so that we have fewer people, and we have some small automation that we can put in—for example, drones that are doing daily cycle counts. When we are doing our numbers, we tend to have high confidence that the cycle counts hold, and when we do physical audits at the end of the year, it speeds up the time we are down while we are doing them. There are other things. You may have seen robotics that can vacuum your floor in a home. There are industrial ones like that which scrub the floor in our 340,000 to 370,000 square foot facility in Rocky Mount so that it is a very clean warehouse handling a lot of medical items. It is now done with some robots. There is another robot machine that we are working on in Brooks, Florida. That has all been purchased, and we have some business for lens wipes. The repetitive loading into the boxes can be done with robotics with sight sensors, and that is being worked on and should be online by June. Those are some examples.

**Richard Dearnley:**  
The MyMedix DTC business—does any of their expertise in DTC translate over into either your first aid or Westcott business somehow?

**Walter Johnsen:**  
Our last two acquisitions, the small Schmiedelgla acquisition in Germany and MyMedic, are both direct to consumer. As you may know, that means you are using social media as a selling tool, and you are putting ads in places like Twitter, Facebook, and LinkedIn. Of course, there is Google search. There is a consistent pattern of videos that are delivered onto the site, and the purchases are coming directly off the website. In the case of MyMedic, that is our first step in the United States to do direct to consumer. It lends itself to selling things like craft items because you can demonstrate there is a lot of differentiation in the product. When we do new product introductions, you have a ready platform of potential customers who are following you. The benefit of MyMedic is we are not establishing a social media base; we have a half-million social media followers today, and we put out videos every two days. Sometimes it is how to use first aid kits. Sometimes it is success stories and life-saving stories on what the use of a bleed control kit did and how it saved somebody’s life. In other cases, it is for training or new products. As we get experience with it, I hope that we broaden the amount that we bring of our other product lines, and I think in the Westcott line that would be in the craft area.

**Richard Dearnley:**  
I see. Good. Thank you.

**Walter Johnsen:**  
Thank you.

**Operator:**  
Thank you. Our next question comes from the line of Timothy Call with The Capital Management Corporation. Please proceed with your question.

**Timothy Call:**  
Congratulations on so many accomplishments within just two quarters. You can handle the short-term volatility, and long term you have completed two complementary acquisitions. You have consolidated facilities, expanded capacity, allowed for future capacity expansion, and immediately expensed upgrades in technology and automation. Do you see all of these achievements made within the last six months adding to your long-term sales, margins, and earnings growth over many years?

**Walter Johnsen:**  
Well, Tim, you try so hard to have your accomplishments, and then when you get a setback because of a tariff or changes that you are not priced for, it is frustrating. But you right it the best you can. As I hope we laid out, as we look through the coming quarters, the impact of the tariffs will be less, and we are hedging by buying $10 million of inventory for potential shortages or price increases as a result of the war in Iran. Hopefully, that is just extra inventory and we sell it over due course, but we are preparing in case this is an extended conflict. Yes, we certainly see these achievements contributing to long-term growth. As an example, we spent $6 million to buy the facility in Mount Pleasant, Tennessee, for Spill Magic, and Spill Magic now has room to grow. For those that may need a refresher, the products we sell there are used to clean up oily spills, bodily fluids, and blood. The opportunity to create some new products and hit them in scale and do it in that facility is exciting. We are out of the Smyrna, Tennessee, facility at the end of this month, and Spill Magic will be fully operational—basically there now—in Mount Pleasant. As I mentioned earlier, the automation we are putting in is expensive and heavy, and you want to do it once. Now we have a home to be able to place it properly. I would not say this is a trend, but we have been having very good success with Spill Magic since we purchased the property. It is almost like it has willed itself to say, “We have room to grow, so let’s do it.” This past quarter it was up, I think, over 30%, Paul?

**Paul Driscoll:**  
Yes.

**Walter Johnsen:**  
It was a good quarter and it is making progress.

**Timothy Call:**  
With these two new acquisitions—your past acquisitions have benefited from cross selling and your wider geographic footprint. They are getting new retail channels and distribution networks. How long could it take these two recent acquisitions to experience sales growth from these different avenues?

**Walter Johnsen:**  
I was just on the phone with First Aid Central, our Canadian subsidiary, literally an hour ago. We were talking about MyMedic and its product line. We would produce them in Canada, meeting Health Canada specifications, and we are very excited about launching that way sooner than we expected. The reason is because the name recognition is actually carrying over into Canada, and we had no idea. You have name recognition and a half-million followers, and when we put the products into production in Canada, we are expecting some growth, and that would be happening this year. As an aside, having spoken to our Canadian team literally today, we are about to add another 30% capacity to our operation in Laval, outside of Montreal, because of growth.

**Timothy Call:**  
Well, thank you for all your hard work and success. Looking forward to the long-term growth of the company.

**Walter Johnsen:**  
Thank you very much, Tim.

**Operator:**  
Thank you. Our next question comes from the line of Georgy Vashchenko with Freedom Broker. Please proceed with your question.

**Georgy Vashchenko:**  
My question is about the cutting and sharpening segment. It was under pressure in 2025. What were the revenue trends in Q1? Did they recover?

**Walter Johnsen:**  
The cutting and sharpening area last year was impacted when the tariffs were instituted in April. You may remember it was called Liberation Day, and it was April 2—a day I remember. At that point, the tariffs stopped a lot of things that would have been going forward as promotions because you could not price product when there were costs as high as 145% in tariffs. The retailers could not price, so the promotional activity for things in the summer, the fall, and the winter were basically stalled. That was one of the reasons that Westcott, in particular, had a decline. Paul, what was the decline last year?

**Paul Driscoll:**  
It was about 10% overall on the company line, and Westcott was down about 10%.

**Walter Johnsen:**  
In the first quarter, you are going up against comparables without the tariffs having been put in place. Westcott was down, what, about 8% or 10% this first quarter?

**Paul Driscoll:**  
I think it was fairly small—maybe 2%.

**Walter Johnsen:**  
So it is coming back, but the big part coming back is really second, third, and fourth quarters where last year we had no promotions. This year, unless something happens dramatically with the war, we are expecting good promotional activity, and in fact we are actively quoting. That is a roundabout way of saying I think we have easy comparisons coming in the second, third, and fourth quarter for the cutting and tool measuring area, and we should be showing growth.

**Georgy Vashchenko:**  
Thank you.

**Operator:**  
Once again, our next question comes from the line of Jake Patterson with Helanta Investment Group. Please proceed with your question.

**Jake Patterson:**  
Hey, just a couple quick ones because most of them got answered already. On SG&A, I know you said there was $300,000 of one-time expenses in there. Is $19 million minus that—so about $18.7 million—a fair run rate to look at for the rest of fiscal 2026? I know you said you had some savings you could pull out of MyMedic, but I am just curious.

**Paul Driscoll:**  
As a percentage of revenue, it is probably around 33% for the full year as a target.

**Jake Patterson:**  
Got it. I think the gross margin in the legacy business was down. Is there any way you can give a number for that?

**Paul Driscoll:**  
I would say about 200 basis points, driven primarily by tariffs.

**Jake Patterson:**  
And then CapEx for 2026—you mentioned some automation investments and Canada expansion. Do you have any range for CapEx expectations?

**Paul Driscoll:**  
We are looking at about $7 million.

**Jake Patterson:**  
Okay. Thanks. That is it for me.

**Paul Driscoll:**  
Thank you, Jake.

**Operator:**  
Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I will turn the floor back to Mr. Johnsen for any final comments.

**Walter Johnsen:**  
I would like to thank the audience for asking some very probing questions. Having hopefully given some very thoughtful answers, this call is complete. Thank you for joining us. Goodbye.

**Operator:**  
Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.