ACCO Brands (ACCO) 1 Nov 242024 Q3 Earnings call transcript

Hello, and welcome to the ACCO Brands Third Quarter 2024 Earnings Conference Call. My name is Elliot, and I'll be coordinating your call today. [Operator Instructions] I would now like to hand over to Chris McGinnis, Senior Director of Investor Relations. Please go ahead.

Good morning, and welcome to the ACCO Brands Third Quarter 2024 Conference Call. Senior Investor McGinnis, Chris is Director Relations. of This

Officer, quarter is President Brands our and on our third Tom the Executive outlook Also today quarter update on our Financial XXXX results full Tedford, O'Connor, today call provide year third greater of President and overview Executive and speaking will ACCO Speaking Vice priorities. detail for XXXX. Chief you Tom Officer provide an and results Deb update will Chief is who on on our Corporation. you of

amortization accompany and and to the We call earnings amounts, estimated Investor and and Due financial goodwill measures. the will unusual adjustments When we reflect Adjusted items then line impairment and open asset of intangible include exclude GAAP to inherent slides section been for rate speaking earnings. Schedules and tax the the a on are measures restructuring directly quarterly annual accompany this certain adjusted questions. Slides that forecasting tax and to to difficulty costs, of we refer the measures other forward-looking that our and nonrecurring results, results. in may quantifying most this noncash posted about do items to charges accobrands.com. other reconcile have not our measures in and comparable the adjusted Relations non-GAAP release reconciliation these call. results of results non-GAAP

call are are the on statements the on time during based at information assumptions made statements us management made. beliefs to Forward-looking based the and available of the

our an of and differ results uncertainties, and SEC certain risk and filings materially. for to actual explanation forward-looking Our subject and statements Please to refer release are could factors assumptions. earnings risks our

and are statements of as forward. to obligation forward-looking Our update them going we assume today, no made

call the Tedford. turn will Tom to over I Now,

line call. with and XXXX quarter you, Chris. in third ACCO adjusted our results our with revenue everyone, we earnings Good and morning, third to night, EPS Last quarter welcome Brands Thank outlook. reported

as we line first expected, from in lessened in exit improvement quarter. trends the to the America top are revenue compared business the our year impact North low-margin the in seeing As the of half of

team on in program are this our of to program, realize progress and track we over reduction a savings footprint and on are efficiency drive Our and profitability. million initiatives, rationalization part includes chain to strategy year. key make to multiyear $XX other our continued solid cost enhance operational our which long-term This supply

as dedicated smaller under tangible customers, are with Our We footprint. focus to remain is our categories. yielding operational levels service on operational to improved realities to and inventories our results optimizing cost reductions excellence a our Further the lower structure demand of adjust consideration. we

repurchased quarter, XXXX to to prepared We successfully Deb the ratio ACCO details provide the is same a credit her of an balance than remarks. facilities, from and us to sheet. refinanced flexibility. improving balanced maturity the that We dividend, stock. We approach financial the last down extending I our Brands are committed more we yielding capital to shares X% the In a paid our leverage which currently quarter debt with million X reduced quarterly allocation. have announce ended refinancing in will XXXX, pleased from am also of X.Xx, we date on year. providing with period and additional

third the from the In in regarding Americas the the student quarter, industry year-over-year with Now Technology line the performance. by in benefited was was Accessories which several category reduced revenue categories. I offset expectations. in impact season our low-margin demand in of back-to-school back-to-school exits as The third revenue growth for improved note-taking lower America. In with North across categories all-important Latin details the will provide decline trends more quarter well of segment, stabilizing business America, down our as rate

products note-taking took orders than the branded to season. demand, from more year at a good, our not customers. Retailers last we anticipated conservative While the level products our and sell the inventory sales sell-through leading replenishment strong lower-than-expected restock, to was for retail didn't our consumer to They decided through approach see indicating of levels.

and to into sell-in season. In the market, This The However, from sell-through enabled season, largest performance year. softer to sales next in Mead up leader the us have next sets position solid year's prior anticipated. and our for quarter back-to-school as the us our experienced the in important Five Star versus branded category. fourth the sustain later has year's which customer well the back-to-school been back-to-school runs than first date orders Brazil, quarter

on We season behavior monitoring tempering the season. to our based the to are brands expectations closely well, the progresses, still consumer slower As trends. we're and perform start expect but market

the other and product in that International have sales technologies engagement. the revenue mitigate and to introductions Asia driven improved. impacted were products helped customer also business product particularly launched our had categories. segment, we our declines office lines, Sales decline categories. pace by In in new and improved several good new positively Turning ergonomic machine of EMEA quarters accessories growth by have

growth Accessories well improvement I can environment attributed launches. In successful demand growth this computer continued is in of gaming was accessories, second fueled by Both trends. gaming improving rollout the segments. quarter third international including categories, in as optimistic our be quarter. the in and am Technology the as as experienced products revenue the across our new each product This computer expansion Our accessories, which about well consecutive an quarter accessories, of as new performed well to growth efforts. of

year, control particularly cutting inventory North We have customers levels. their to gained valuable back-to-school in better insights from around orders replenishment this the season America

to customers buy critical ensure be capitalize on opportunities. will sales to initial our seasonal decisions with closely are collaborating We adequate

back-to-school aiming presence M&A. positioning in with and and support in channels a invest and across our strengthened to plan robust experimented with us our accretive year balance offer broadening foundation finally, this our while categories. And all We past gains leading results. Additionally, our channels flow in further evaluate nontraditional we offerings to brands to distribution while cash sheet for solid these increase channels promising us

we and at improve confident in shares category As our I'm revenue the the opportunities I to future conclude, trends. Globally, and Brands, are of I our excited actions are structure am reset strong. ahead taking cost about ACCO us

brand valued awareness with by our high Our and brands consumer, our customers. remains are the

leadership team its shown experienced Our environments. to ability operating has navigate dynamic

Our in your strong for balance productivity to we'll Deb? low questions. half we debt financial than hand over XXXX until us for debt sound Deb, put it in a maturities and a and and to fixed sheet brighter with rates as improve will ACCO no more invest answer growth position Brands. I now on back future of interest come our

good report to sales third with our results Tom, and morning, everyone. were outlook. Thank and quarter EPS pleased I'm line our you, adjusted in that both for

the improvement as of versus by encouraged we We execute on to trend the half are the initiatives. first continue our sales year strategic

businesses will we the for and both However, manage and to consumers remains cautious we muted, environment demand our prudently cost structure. continue as remain

We make to continue efficiency. progress in operational our improving

our while successfully the our efforts, same similar this by over We to have our basis share rate Year-to-date, X% expanded gross cost by pricing year. $XXX and improved week, reduction a years. significant especially gross SG&A the XX maintaining lowered quarter, were has facilities, revolver last date the led X same compared consistently These earlier We we ended extending remaining quarter U.S. I period credit improvements a points. our amount. also availability last structure costs am that margin million, the the refinanced grid. pleased to maturity we the margin in from our the also with to covenant XXXX, In of XXXX

the With fees the refinancing, to capacity. we more our have on rightsized needs, charged revolver unused for appropriate liquidity the revolver lowering be current

compensation to the the year reduction decrease for despite headwinds. turning SG&A a impact sales. lower prior exchange, of trends million down to the of quarter from sales, last year. improvement Now certain greater in was X% year. basis sales the Adjusted and the benefiting offset below million, decline decline by incentive foreign margin lower-margin currency the the was XXXX cost half the versus quarter. of in due planned due quarter Comparable of lower business This excluding year, Reported and to as $XX slightly foreign from the categories. Gross year The of is the XX the $XXX third improvement. expected was came down $XX actions and rate our operating third for stabilizing solid sales we of operating million, was of income versus lessening points third across adjusted versus prior X% sales. expense quarter prior a X% our of the exits profit were first decreased X% expense in in

business accounted impact expected. decline, X% year. X%. let's the Comparable sales about results. with to of the than declined X% In Now our in half sales a than negative of lower FX turn segment, which exit the lower-margin The of impact first is Americas previously declined having a larger the for segment

for sales Creative lower back-to-school & had also weaker our America Latin North replenishment America. We in and products Learning in

improved Our compared operating year Essentials for adjusted in rate declines income The third cost to margin Technology solid well to These product points due continued as improvement Business basis reduction the gross partially offset XX.X% efforts. the Accessories. Americas prior were margin decline. to XX category growth in the the to by as quarter the

Now let's turn International segment. to our

September versus half million, generate than year. have significant ended million Through collections items. payments. of we our of Free adjusted first cash X million balance flat. was through sheet our use same of time first margin customer flow the the quarter for cash free International we with operating environment offset X% cash seasonality, rate lower and operating $XX for third cash positioning reflects to million improved and adjusted the the flow actions. Switching soft Accessories. to quarter increased generally Historically, the third flow the improvement somewhat by for achieve prior adjusted cost cash our in income pricing for $XXX year net was $XX the vendor income sales operating due declined $XXX the office-related the For XXXX, year. We approximately The million strong timing to second year. comparable the in as of cash months of our due remains This our the XX year. free debt XX.X%, demand This last flow the the outlook points income us to half and well XXth, growth basis margin flow quarter, total was reduction $XX products. to by in Technology with and of

on year due to of Our a from X.Xx ratio ratio in finished flows We leverage of cash than which million, QX in consolidated $XXX higher cash of down with Brazil. the term, quarter spoke was the ago to we balance to quarter, last X.Xx, expanding improving is our timing strategy a targeting leverage our ratio a covenant capital X.Xx. Last well and Xx are progress as sheet. you we to still allocation Longer balance year below we ratio. continue about make Xx of our

the share third to we returned the form form of the in repurchases During and dividends. quarter, million million $XX shareholders in of $X

continue will capital accretion value strategic to reduction, use shareholders. our to whether dividends, a flow deploy M&A to debt is using to balanced approach. designed through cash free drive This repurchases or our We share strategy,

Now for let's full the move outlook XXXX. to year

which for the full We of within are year full range our to to for outlook, down year. sales be a X% calls X% reiterating reported down

to We EPS expect to share. of be in $X.XX the $X.XX range adjusted per

from the approximately costs. to be approximately will million, equates pressures actions to other for as estimated offset be continue to adjusted inflationary somewhat related and are to savings The margins XX%. to is year cost expect labor to the full be $X.XX down tax XXXX. SG&A prior We Intangibles year be to amortization improved EPS. $XX to rate expected gross which year by of compared costs full our adjusted is

expectations consolidated to the We are level not also maintaining be now with approximately We leverage expect since flow ratio approximately to XXXX X.Xx, XXXX. $XXX year reached cash a for of full million. our free a end

and on happy move Tom your will be let's Now to take where questions. I to Operator? Q&A,

[Operator Company. first with question Our & Instructions] from Greg Sidoti Burns comes

categories of the the When quarters year you but U.S., back there. ago, some your seeing maybe you're ago dynamics Brazil what so Is seeing to of look what's a happening Mexico, slowdown other maybe it business you or that the was macro catching like look of couple outperforming a and Or or is if a the face at there these now part now in up secular of more related? headwinds seems geographies? it you're that

is Greg, good This it's Yes. Good morning. question. a Tom.

we comping So good know And part challenge year, of face. year. accelerating. that secular prior see that really obviously, a trends we're that's don't I the we

in Brazil We're I selling local in of this more product think in is season. back-to-school the We're of issues the Brazilian and now. both right midst Mexico.

issues the that us we brands And Mexico, we're some we close think to locally lose lighter. keeping situation. for bit eye and get our are other think a conservatism the that in to were a consumer a we customers. also in in of They're tell are behind probably keeping that going just a there's momentum growing macro key the that Brazil. listings at quarter. issue, local a not bit the the with it's business to of just we environment on and ordering what discuss full ordering anticipate bit quantities economy. And moment is we're a you of retailers We but premature uncertainties smaller due the to this So concerned, in with bit the They're our prior is on. we're year, bit don't showing season you into with fourth things eye We're are that at But driven of timing a a number losing of positive share. as signs close a this than I

right the So is keeping Brazil one close now, eye on. a we're that

quarter, What's Brazil split typically? the first between historic and quarter fourth

Yes. were year. saw in paper this good We year, timing increasing prices It's question, Brazil. a different because it's a Greg, last

was we're there earlier more lot buying and this in than season year. a ordering so And the seeing

that So occurred fourth of into year. the out first has the this shift

orders as we're, the and said, Tom come watching ship-out retailers. to understand so the the And at replenishment in dates

a little current into year out timing So the year. next of different it's the and year this bit

been to that now of you're dynamics you're some of maybe in Is on. some we're place little the color I you channel of of can a operate normal years buying the some that terms things adjust new maybe you North to are the But those buying offset you -- of maybe putting Okay. it? items, the it's you -- us have is this in you And bit think, to maybe with going patterns? some And mentioned X just and in offset of on the how market to give the that how new America, seeing can more retailers. the

Yes.

So it is, that I believe Greg.

minimal coming strong, And we're prior, was partners focusing clean a years years I really if the factor replenishment our really retail how would of think was say inventory. that of with amounts we back-to-school would into defining think season replenishment tend X the out that strong. season. we was of season on In about to the

is that not It's dynamic front that in a us. us. think is behind of I

And so have to we react to that.

and to have look thinking with be we which buy with inventories, retailers. sell-in our more to our initial have careful strategies into really our we bit building So And be also about our plans aggressive as we're plans a key we our build back-to-school our for ahead.

So dynamics are these real.

season we that are year empty moving shelves this I lost how that we key think strategies are what and the business forward, opportunities we think based they opportunities for in really in analyzed and teams partners. commercial we our react see embedded putting to to do sales late optimize in on the and with

to NOBLE turn now Capital. Gomes with We Joe

Gomes. Joe just outside want but follow of to on kind the the broader maybe question, It's on last piggyback I picture back-to-school. a of up

believe noted demand the are of You just look remaining to your why points And muted. your as as the that demand -- remains why I you data, talk you kind wondering, is what customers environment the key and environment was the muted? at to

try a as We're Joe, good it as and into can. to broadly question, that really channels. many across of as I go and mean quickly many Yes. distributed I obviously that's categories summarize lot the a so there's things answer. I'll

our the that X that office days and X people is week, categories of traditional a driver are the in a in, in products we office reality big of to working now consumption So was compete products our historically.

would many customers, more us, anticipated we in office. back days normalized including at think of our of that I point, to work some get X the

norm I being and moving think the us forward. customers we, collectively, don't as see that our

in suppression demand continued of office source categories. product a that's So our

what just of acceleration records. digitalization we've Additionally, of is seen an

at is keeping greater probably storage of down than year. paper so the and printing the we And also beginning anticipated

product you challenge where muted categories, And think a of us. continues that's demand to really the be a so for office bit of when

we've shifted that where efforts categories the consumer our that become focus so development product to that and are doing they're effective with the work we meet efforts them on our solutions doing. more in nature, hybrid help And forward their in moving where optimize and productivity work more they're

what So a that's we've kind historically and pivot of a away from shift seen.

gaming comments our technology accessories that are growth, adoption new see is encouraging. and improving is quarters of product categories in into relates accessories businesses, We noted our now we new offerings product accessories, computer our seeing our computer which our We there. X to improvements trends. see that it we've We consecutive made. demand As and

continue new we're and we be to going of up there. consoles an a bit launched. is gaming think So And optimistic until to down are

in offsetting of of Learning we are product of new in through our new products. new in that midst that referenced so Latin sales that kind introductions. And industry there. making And is above lower we've customers kind America now, & what of our and to inventory levels then a done the we're to category we'll just trends year react season for impact right drive the this we've that categories, Much with the start And we've to. news Creative have referenced to reality back-to-school, already of slow

share think It's of us. The remain that lower our all in some are purchasing driving really is way healthy. we really don't track. significantly the for across demand categories, just customers gaining key in strong, is shares there. which really our different categories I fact, is So sales is market different, our key that we're thing And good

focused of company, we out coming a retailers to how this just that on working capital, is focused adapting the changes buying our to as of seasons I think job changes and in is are So of doing And are our a have react that. dynamics good product, just to part it in clean. part teams of on of work kind marketing

much that think? on of lower-margin exit, impact quarter, then is How how of business the the left? you much And that in fourth do

a Yes. quarter a than quarter the would we've Fourth return, a It or talked about less amount. be third what diminishing was. diminishing has as little

you one more do could the you I on opportunity about an of little channels? that a And talked the may. us And Tom, me, wondering then if that? you Okay. channels. I see give big in how expansion nontraditional more bit if color for nontraditional was in

team, Yes. our Joe, are did area referenced in specifically our North markets some small-scale which value in it's that on. to some an particularly tests focused channels this year in we success. mature nice America We back-to-school

of you channel a initiatives have our it to for that many place year. also As but We by to next in encouraged But material impact, our categories. in growing we mature line doors, stores. our That's in broaden time top start many I'm with really all teams. know, some take to expands it's distribution other a going anticipate that, our markets having

our customers that job doors us to good start think a well. some our historically have of that get to we're starting to and into. see ultimately opening results somewhere benefit benefit have for sales You as And doing positive will teams are and I been us challenging

from with Barrington. comes Kevin question Steinke next Our

the You a more categories. stabilization. certain seeing categories little you're discussed trends could Maybe stabilizing in into you bit just if product where dive

Kevin. Yes,

talked just a miss to I chime about few ago. if computer accessories. that free feel moments Deb, So with I'll But We anything. in start

on portfolio recall. That are of great Kensington significant growth seeing which drag is trend. product within We year, X a obviously you a sales now as consecutive was last our quarters globally,

that that quarter, So about forward. optimistic moving the we're product continue portfolio we're seeing into and

did well mentioned product new we're Our by. interesting that globally, also which as really as in business see as I machines encouraged we quite is better we year, some ergonomics category than certainly a well opportunities last doing offerings stabilizing trends. with

sales the that's category made really mentioned to of earlier, we decisions I a doing that lot that's So were lower a well. And as drivers exit businesses. of

them And decisions impact so largely us. are of behind the those and

And well. in so those categories starting see to we're stabilization as

what that we're XX we've of So few months in seen the positive example or seeing that's trends a over categories some compared an last to so.

But work. us And emphasis update just efforts Good. I you a as I new product maybe right know big the Okay. on just to that's, there. development now, world the on could to pipeline maybe your if And innovation. look of update you adapt us think,

Yes.

we've improve as area must that So we that identified an upon.

the a party lot we engaged how changing do operating on our and across assist assessing categories which our this to really in put third evaluate work we've do are in. And our a we emphasis to are effectiveness and the support how of that we've to that the just the to we do, do customers. work that So we work work really our we brands, dynamics across we support us brands and in the responding our businesses, of product

for So us we returns conclude revenue early and well perhaps the important profitability. and is the of line It concluding. that next year. adapt us returns to better our areas think investments improve have company as enable as That should towards better work is kind top will to of some that pivot for

what which portfolio. we've is we're EQ date, in to -- reviews. is of work line some encouraging. good We've encouraged product, which an launched September. I which think, really of Kensington by introduced the within getting I'm our done So

figure giving of ways that get an us done. we've feedback area good us out I PowerA. Our example lot spent to feedback are of are time good That's customers giving beyond trying on. controllers. Consumers referenced we've gaming to that on. an a work That's

our products that And launched that by number been controllers received adjacent have to a so customers. are in we've that of well space

transformational launched have on really That's category. new a in with well could a that product number think, in launched I that So a received. new categories. got We've We've products shredder product, called other of we mentioned been there OptiMax have ergonomics I go that earlier. EMEA.

this lot drive area, to it kind how outside better help a done. has A performance team moving and of so of we've work think party So forward. us much through an that is lot optimize been focus from to of on engaged the so executive

question. of in but lot our know a the that's an to of there, hopefully, answer So area got through I went important a things we've this I business. number going on

Yes, you I growth in that you or think is trends growth absolutely. some year? where of momentum helpful guess I there move and or the just legs can as into very accessories. the quarter continue noted computer next That was that. appreciate kind insight. lastly, improved we Do continued fourth

Absolutely. Absolutely.

I think job really a we're think doing moving the nice should growth I expect and in forward. business there, Kensington continued we

now Hale We Holden to with turn Barclays.

I had in X of questions. And should be you've we done Tom, course you mentioned ] in bigger cost the about your as or script wondering [ in past? saves the if thinking something was that potential normal like for 'XX. additional I sort programs ACCO

Yes, Hale, question. good a

XXXX our at looking speak. committed to our Certainly, literally plans we're as ongoing we're program. productivity we So operating

expect then other our program. potentially have optimize been areas beyond cost productivity can made, normalized we're looking And No that. our So opportunities structure. for we're you decisions certainly absolutely to but evaluating

it like to follow-up into is the outside answer you then potentially PowerA, are to categories? that's working new Kensington that streamline lean help that's sounds a you product categories the gave, into evaluate product divesting that product and or categories party as And also last with just Okay. working? Or to

how a really And to Kensington clarify. revenue portfolio, moment looking let not they're outcomes can efforts. They and at Hale, looking our NPD entire me are improve Yes, PowerA. from across product just spend the we just

nature. that So commercial bigger plans, insights, of opportunities, better things consumer better launch

improvement about today. what on do we really it's So

of now We Reuter with America. to turn Instructions] [Operator William Bank

clearly that are at inventories mentioned low. retail back-to-school you So

to consecutive retail such year this is next of where they X season? of at Are back-to-school last the contribute below said at years also parts inventory better early could this. You it that were levels sell-in

last position a they Yes, than we've XXXX we in ahead well look North Bill. in And ourselves levels are this to positioned morning, time Good we Yes. believe inventory better were America. as back-to-school year.

are second good And leverage doing there's more think to there your of increased you are above still traditional able multiples would is purchase to multiples? kind be opportunities at higher? been then of mention be so, where of interest clearly in M&A. at maybe that hear. the to faster-growing is acquisitions if be I some product then point? guess, I And You're kind where this consecutive quarter going this the Or target? things categories these low may they That's

Yes.

So for a moving our the our one aligned value M&A M&A Board shareowners. our unlocks approach historic strategy to to the with of that Directors And that related on forward. we we've believe most is

or our at know have works we'll a are focus. categories we to for And going strong in area know us, and our that that that's our highly So synergistic, to we returns think that close formula are of look financial be That's that opportunities shareowners. we works for investors. for

that's of think So kind going to be opportunities moving how forward. we about M&A

as And approach -- it's opportunistic, to balanced when going so But our happen. is M&A know, we're you that capital overall to can take it allocation.

Got it.

that release put that in interest greater months So it M&A press release, there's the XX little there a I press the guess before, been I indicate would maybe it you ago? just remember in that don't have as being a follow-up fact to The in than that. does

Things rates is are the are just better, opening environment think I right now. coming down. up. too, Interest

I even was I thinking We're debt. it. year ago. XX were about another better about a million more paying think $XXX than And with of we're position think better of to think it flows in positioned it off to difficult now months be cash we

We further no have questions.

final for concludes any So back I'll Q&A. Tedford to our now Tom remarks. hand this

dividend you, repurchasing pleased while supporting joining quarterly us. line with quarter deliver with that our results to balance sheet, our our third and our outlook, also everyone, strong shares improving for Thank flow. We were cash in were

actions Brands proactive positioning for better positive when appreciate in of we ACCO results the to report year yielding us long-term look results forward interest your you the in and at profitable Our quarter fourth structure with talking beginning growth. to reset our our February. cost are We and

for participation. today's you gentlemen, concluded. call your and now thank like Ladies to has We'd

may You lines. now your disconnect