Financial review
Acme Hardware Co.
Industrial supplies · Founded 2014
Period covered
Q3 2025
Jul 1 — Sep 30, 2025
Gross margin
62.4%
+1.8 pts vs Q2
Days sales outstanding
52days
+14 vs Q2
Runway
9.4months
−1.2 vs Q2
| Metric | Q3 2025 | Q2 2025 | Change |
|---|---|---|---|
| Gross margin | 62.4% | 60.6% | +1.8 pts |
| Operating margin | 11.7% | 12.3% | −0.6 pts |
| Net margin | 9.1% | 9.5% | −0.5 pts |
| Days sales outstanding (DSO) | 52 days | 38 days | +14 days |
| Days inventory outstanding (DIO) | 31 days | 34 days | −3 days |
| Days payable outstanding (DPO) | 44 days | 42 days | +2 days |
| Cash conversion cycle | 39 days | 30 days | +9 days |
| Current ratio | 2.10 | 2.34 | −0.24 |
| Quick ratio | 1.36 | 1.62 | −0.26 |
| Burn rate (avg, monthly) | $84,847 | $72,210 | +17.5% |
| Runway | 9.4 months | 10.6 months | −1.2 months |
| Line item | Q3 2025 |
|---|---|
| Revenue | $2,418,902 |
| Cost of goods sold | ($909,507) |
| Gross profit | $1,509,395 |
| Operating expenses | |
| Sales & marketing | ($542,847) |
| General & administrative | ($412,330) |
| Research & development | ($271,308) |
| Total operating expenses | ($1,226,485) |
| Operating income | $282,910 |
| Interest expense | ($14,201) |
| Income before tax | $268,709 |
| Tax expense | ($49,591) |
| Net income | $219,118 |
| Line item | Q3 2025 | Prior | Change |
|---|---|---|---|
| Assets | |||
| Current assets | |||
| Cash & equivalents | $1,840,212 | $2,094,855 | −12.2% |
| Accounts receivable | $1,398,475 | $921,103 | +51.8% |
| Inventory | $845,920 | $902,114 | −6.2% |
| Prepaid expenses | $87,310 | $79,425 | +9.9% |
| Total current assets | $4,171,917 | $3,997,497 | +4.4% |
| Non-current assets | |||
| Property, plant & equipment, net | $612,408 | $647,122 | −5.4% |
| Goodwill & intangibles | $148,500 | $148,500 | — |
| Total non-current assets | $760,908 | $795,622 | −4.4% |
| Total assets | $4,932,825 | $4,793,119 | +2.9% |
| Liabilities & equity | |||
| Current liabilities | |||
| Accounts payable | $621,309 | $583,407 | +6.5% |
| Accrued expenses | $284,591 | $268,419 | +6.0% |
| Short-term debt | $94,500 | $94,500 | — |
| Total current liabilities | $1,000,400 | $946,326 | +5.7% |
| Long-term debt | $412,500 | $436,250 | −5.4% |
| Total liabilities | $1,412,900 | $1,382,576 | +2.2% |
| Stockholders' equity | $3,519,925 | $3,410,543 | +3.2% |
| Total liabilities & equity | $4,932,825 | $4,793,119 | +2.9% |
| Line item | Q3 2025 | Prior | Change |
|---|---|---|---|
| Operating activities | |||
| Net income | $219,118 | $211,944 | +3.4% |
| Depreciation & amortization | $34,714 | $32,856 | +5.7% |
| Changes in working capital | |||
| (Increase) in accounts receivable | ($477,372) | ($142,809) | +234.2% |
| Decrease in inventory | $56,194 | ($28,417) | n.m. |
| Increase in accounts payable | $37,902 | $21,038 | +80.2% |
| Increase in accrued expenses | $16,172 | $8,945 | +80.8% |
| Net cash from operating activities | ($113,272) | $103,557 | n.m. |
| Investing activities | |||
| Capital expenditures | ($117,621) | ($61,420) | +91.5% |
| Acquisitions | — | — | — |
| Net cash from investing activities | ($117,621) | ($61,420) | +91.5% |
| Financing activities | |||
| Repayment of long-term debt | ($23,750) | ($23,750) | — |
| Net cash from financing activities | ($23,750) | ($23,750) | — |
| Net change in cash | ($254,643) | $18,387 | n.m. |
| Beginning cash | $2,094,855 | $2,076,468 | +0.9% |
| Ending cash | $1,840,212 | $2,094,855 | −12.2% |
Solid quarter on the income statement, but receivables are the story.
Revenue grew 9% sequentially and gross margin expanded 1.8 points following the May price adjustment. Operating margin softened slightly on the back of two new sales hires — expected, and on plan. Net income tracked operating income at +3.4%.
The number worth a conversation: DSO climbed from 38 to 52 days, a 51.8% increase in receivables balance period-over-period. That is roughly $84,000 of additional cash tied up in customer accounts. Cash on hand fell 12.2% and runway compressed from 10.6 months to 9.4. None of these are alarms on their own, but together they argue for a focused conversation about collections before Q4 close.
The cycle
Cash conversion cycle moved from 30 days to 39 days. Each ratio is interpreted below in dollar terms, not abstract ratios.
Receivables (DSO 38 → 52): the dominant variance. With current quarterly revenue of ~$2.42M, each day of DSO represents roughly $26,000 of cash. Fourteen extra days equals approximately $370,000 of cash sitting in the receivables balance that would otherwise be in your operating account. The balance-sheet entry confirms it: AR grew 51.8% even though revenue only grew 9%.
Inventory (DIO 34 → 31): the good news. Three days of inventory efficiency at current COGS of ~$910k per quarter is roughly $30,000 of cash freed up. Whatever purchasing or sell-through change drove this is worth understanding and protecting.
Payables (DPO 42 → 44):a two-day extension — modest, and a sensible counterweight to the receivables lengthening. Don't push this much further without a vendor conversation.
01
Have the receivables conversation this week
DSO climbed 14 days. That is roughly $84,000 of additional cash tied up in customer accounts. Identify the three largest contributors and re-confirm payment terms before Q4 close — every week of delay compounds.
02
Accept the operating margin compression as on-plan
Two new sales hires landed mid-quarter. Operating margin softened 0.6 points but gross margin expansion (+1.8 pts) more than offsets it. Don't react to the OpEx delta in isolation.
03
Re-forecast runway against the higher burn
Average monthly burn moved from $72k to $85k (+17.5%). At that rate runway is 9.4 months versus 10.6 last quarter. Decide before the next hire whether the runway compression is acceptable for the strategy you're running.
04
Inventory management is working — do more of it
DIO dropped 3 days and inventory balance is down 6.2%. That is real working-capital efficiency. Whatever changed in purchasing or sell-through last quarter is worth understanding so it doesn't accidentally regress.
- Which three customers drove the DSO increase, and what are their stated reasons for the slower payment?
- Are we comfortable extending current payment terms into Q4, or do we negotiate before year-end?
- Does the 1.2-month runway compression change Q4 hiring plans or trigger a fundraising conversation?
- What changed in inventory management last quarter, and how do we make sure it doesn't regress?
- Is the May price adjustment producing the gross-margin expansion we modeled, or is something else driving it?