ACCO - Earnings call transcript Q1 2022

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Operator

Hello, everyone, and a warm welcome to the First Quarter 2022 ACCO Brands Earnings Call. My name is Bethany, and I will be your operator today [Operator Instructions]. I will now hand the call over to Christine Hanneman to begin. Christine, over to you.

Christine Hanneman

Good morning. Senior Investor Hanneman, Christine is Director Relations. of This Quarter Call. to ACCO Conference First Brands Welcome XXXX

the the to related nonrecurring today Schedules and of of Deb on that Officer President most the Speaking call reconciliation Chief accompany financial the of Chief rate. Chairman and reflect and and been ACCO our Executive to change are accompany and measures. this and call results Brands; PowerA in forecasting a section other comparable results in exclude that Due Adjusted fair non-GAAP directly the of value Relations earn-out about restructuring contingent consideration adjusted we posted release amounts, Investor measures forward-looking tax results. Officer. and Financial measures and When speaking an O'Connor, reconcile the have these adjusted Vice our certain integration, and adjusted earnings amortization to items, results, the the accobrands.com. do inherent are slides to we measures in not Executive costs non-GAAP Slides Boris other and difficulty may to call. Elisman, this including refer transaction, GAAP quantifying of

statements concerning at the pandemic time statements made during on information to us impacts assumptions on available the call, the of of the the and Forward-looking are COVID-XX company, beliefs the including on the based are management made. based statements

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

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

will Q&A session. remarks, hold prepared we our Following a

the Boris call turn Elisman. will to I Now over

Boris Elisman

Thank everyone. joining Good morning, for us. you

very O'Connor, review a comments my take we're quarter, Deb new of CFO. April to and Deb then board. Deb me ACCO our questions. for would both with have financial we begin follow welcome will Xth, on I Brands the and on pleased will her to joined I formally like quarter, Before the your

first quarter. our Moving now to

chain year excellent sustainable first quarter, we execute Following towards volume is environment All started supply this quarter's and to constraints. sales by result led our of included $X.XX, International am segments increases segment. The This and per particularly business company sales sales record and I also XXXX, transformation performance XXXX Earnings our comparable price for growth. higher an sales our a our growth have high as inflation strategic a comparable was than growth. in our posted comparable of of posting XX% sales performance EPS. share was we the well pleased total expectations. higher were expectations strong with and both in meaningful with above an continue which

growth Mexico growth. for two the was comparable The segment schools being now Our after reopened sales as past by years. XX% and Brazil International have posted driven mostly closed

Our We Brazil, for back-to-school a of even back-to-school sales of anticipate reflect branded but and those sales in quarter. excellent had doubled operating to its release due income International in markets. season the not seeing stronger Tilibra level pre-COVID yet demand segment an strong have Mexico, shown year The in in prior upcoming notebooks during particularly demand. do this Overall, of segment levels our recovery reserves. the adjusted

had inventory products. product back-to-school North North we are overhang this a more person, important the schools season. pull by expect taking, saw attending categories, We having back-to-school quarter a hand Kensington America well strong leading to note forward brand, accessories in season computer increases business in Star, first children as driven the particular comparable seeking had sales strong Moving most We as This our sales. student inventory on America. customers as in channel of into and are surety Overall, increase is for our for gone. XX% as some segment Five in most in

and school well We positioned in Star growth to to we are Five manage customers. good see expect serve continued our to products supply chain

products, given to is products clear key the which advantage a issues We Asia. for related replenishment chain have domestic supply imported of production back-to-school from

In addition, of the past taken increases and have Canada, the to over increases price in we US seeing that the continue. the we're offset cost year help benefit inflationary

of recovered the raise throughout have as we However, our needed prices and margins. the cost to not we yet all cumulative will protect impact XXXX increases

in the achieving address increase that products one that Creating we organizational comparable Leitz our has lockdowns in needs been business the sales. awards first in year will and am as we quarter Cosy be a to new effective posted Xst, We which on unmet increase a increases. Our some sales of quarters products our April EMEA German countries especially won with key recovery several design very since two for innovative X% see took on declined I not to have range announced in precision for increase price paper a margins Leitz another in the July expect growth for and with yet of and is has EMEA, pricing our growing first goals. of Xst quarter, our progresses. as a up cutters. spike much trimmers pillars comparable inflationary sizable business, cost for margin pleased had strongly In storage so due consumer COVID. operating EMEA growth and caught

a term especially in company face of delivered S. and positioned difficult X growth decline quarter we sales Pro also Infinity the won and IQ comparison a XX% Cosy, accessory three controller for because XXX% XX computer impressive growth as sales posting Series Xbox Award our controller enhanced despite it awards Mark of is Red year. comparable Kensington X on growth, is the prestigious sales. our And Autofeed in wire PowerA PowerA Spectra for and Leitz wire We the the products. PowerA range, received Platinum for Leitz total our for of Fusion and even first over very last Dot long Gold

last impact ongoing consoles continues gaming well sales to the While the in match perform versus the PowerA's year, the didn't market. consoles, shortages showed industry likely half, availability of hurting begin ease still are continued of first and the chip gaming XX% will the The console We're overall shortage girth but to to they impact is over gaming business XXXX accessories growth second quarter first to which that quarter hopeful in despite of availability. and sales.

with ongoing manage chain As supply summary, momentum. inflation. well very and with towards PowerA We're first half. we a sales good we to the X% half track and expect year result, a year softer stronger this growth issues executing In second XX% started a have the as we to

cash strong your to We growth. now America have post season North year sales questions. profit America over back-to-school of Latin expect in it hand and to and will to to and Deb? free and strong another Deb, answer will back I flow expect come record

Deb O'Connor

and everyone. Boris, morning, you, Thank good

reported and net increases, increased strength computer quarter saw $XXX million, XXXX education as largely return first products, taking broad Latin the led America. Our based products. America product sales in accessories to growth We and due business by to in-person North most X% posted lines note our in to of

X%. XXXX. benefit not from and Our EMEA. EPS our Adverse increases comparable price with offset worse we continually pricing income adjusted was $X.XX The was rising X% $X.XX $XX we net versus million of Adjusted inflation particularly sales are fully costs. in This year. because was chasing in million has true compared higher had of as XX% Adjusted sales volume headwind a improved benefited income $XX was we million almost than was expected. foreign last operating X% rose exchange of $XX and

with We necessary have taken our price and to increases throughout in the adjustments year. the continue will to all of marketplace markets react

adjusted and expense as compared sales. sales a result last from XX% quarter inflation. due to SG&A with were as to SG&A percent XXXX, of in of growth First a marketing XX% higher million increased $XX support expenses expenses was million below $XX year's primarily

the for quarter, $X we booked This PowerA earnout. million expense

operating also sales to our $X related We to shipping stopped significantly. and there decline million February to We in expect in million $X Russian business. annual to charge Russia our late booked expenses

increased Comparable well computer accessories The in to Now to was in accessories details and for decline the segment XX% mentioned. let's than turn in products more as million. year. $XXX and our that some Boris higher the offset sales increases increase as volume to North school gaming of net higher as America business results pricing due

demand Gross margin Our brands. even of and pricing and increased in increased volume. with higher are sales reflect in a North our several we result America as sales seeing growth prices share improved of

compared adjusted operating In addition, gross especially sales adjusted margin. North cost operating because year. of income America lower benefited America higher high North and margin logistics from last increased and also costs with

from $XXX unfavorable Now due not Net and let's We've business foreign turn in to million $XXX were products. should to throughout and million July, price higher offset enough XXXX. increases computer large essentially volumes April sales accessories improve to were exchange flat as rose effective which price at sales announced to of and inflation. increases to due X%. Comparable lower our EMEA. previous posted margins EMEA margin additional and income operating price X% increases

open collections to segment bad products cost inflation operating International increased a and to note of by segment debt in-person season sales Net now taking benefit reductions. especially and The improvements the has for driven sales foreign a rebound The The adjusted long volume, International as lower XX% segment. as term offset income and comparable sales, education. higher due are primarily XX%, to margin operating adjusted result exchange. Brazil. and raised improved to improved Moving rose Mexico of prices posted also the higher schools due back-to-school for and in reserves unfavorable Brazil's in were

balance a sheet underpayments. was increasing timing flow mitigate we million. we million in $XXX had did the Let's of In and inventory prior of free to cash from period the first now flow. the supply issues outflow of and and cash operations our to to chain of due move our $XXX This cash than use earlier quarter,

year. generally We this first incentive Due to the use seasonality, cash we half year. also the in had compensation of higher payments

times. we resulted by the expected, be leverage X.X less As that this cash to generate we because bank Nevertheless, in amount increasing of our flow net X ratio times significant expect ratio half, year-end. a to quarter than in second end

We had $XXX facility. $X dividends $XXX million also used paid we quarter At our end, of revolving million million. credit of

chain of normal back-to-school our a buildup We inventory and and have high inflation. combination of due to level supply seasonal a to mitigate disruptions for

Turning to outlook. our

to in last offices our we earnings to a in on physical more XXXX use, noted at we hybrid and schools continue expect in are call, demand improve As mode. as least

outlook. We magnitude the higher the to offset now points continuing approximately our remain challenge XX XX% prices increase and of XXXX margin and for versus is up inflationary are to lower We increases. to expect returning to gross improvement our is cost ongoing the due level. the end an We of of margin to cost catch previous term at longer cumulative this basis But which inflation. gross XXXX, committed

$X.XX. Given first an strength the X.X% guidance of the the negative impact than X.X% now remainder earlier increase of be expect year, sales to EPS. comparable our of on expectations exchange year for in on negative reflects sales of outlook We of quarter foreign this impact comparable we full adjusted anticipated a with $X.XX EPS adjusted headwind and year more our the and and

approximately our EPS the for year, full is to the sales to growth of to of adjusted X%, expected estimated $X.XX Given adjusted year to full range Intangibles amortization these the is be two expected to range adjusted rate factors, tax be EPS. in in remains effective the $X.XX X% for is XX%. for to approximately year of $XX reported $X.XX. outlook which million, full The equates be

continue CapEx free the less $XXX approximately be our of of $XX from million, We to $XXX approximately expect million. flow operations cash million to cash

more capital historically of debt dividends, that includes acquisitions. We expect a shares to balanced reduction, our repurchases to allocation potential opportunistic return and

remaining We have million repurchase stock authorization. on $XXX our

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

Operator

today question Capital. Gomes comes NOBLE at first Joe Our from Instructions] [Operator

Joe Gomes

So I with sales. impressed to increase product just the the in wanted -- business mentioned

think here rest the the do obviously office see is the where of of Some How go in And the from will the year? in think is for positive that of that Do company? business more here for play be product do of still you from sales a coming reopenings? terms much the that you you office reopenings.

Boris Elisman

do. we to yes, is answer short continuing reopen. are Offices The

omicron the you actually world. earlier remember, across of a we the much If prevalence high in had pretty quarter,

be to were we started So return later QX tailwind office, this for delaying are across up world. open will still much pretty continuing. in many and the things businesses their And but positive to think a us

remain the So we board but one and expect QX growth saw of positive across business broad. the in to good year. was and this we in for It products particular much it the pretty category remainder wasn't

Joe Gomes

in more the here dive PowerA, to to bit you that. And on quarter that talking XX% little of bit pretty maybe -- could the know X% of sales which to especially is expected low you're more availability. a and you've Maybe And XX%, if end, on seeing just there and color pretty with range. I what mentioned XX% the PowerA you're go big on terms to little in the a a console back call, fourth in the in into cut. historic you a the side now detail

Boris Elisman

The main now do especially there to year. much have pretty that our has with will remainder information chip wireless the view to chips, of We continue in be for difference for PowerA more availability. with issues, the

and would accessories impact that expect availability overall to PowerA gaming we of So broader and our include accessories. accessories, the that PC

of you result a to to XX% as XX%, X% down taken from, we've our mentioned, forecast as that XX%. So

a half down. the an forecast year difficult and expect of this availability of is the issues comps we But half was second which yes, in lower PowerA, half improvement continued overall, of XXXX. to first pretty took of console a due over second We difficult what and

Joe Gomes

if more. one And in sneak I could

Russia thought you shipping You up. it's going that that you make and and to to be talked about stopped difficult

business those I seeing the of reduction issues or in the market. world think revenues you countries? other and markets usual surrounding in said Are a Ukraine still the at those you you where surrounding having point. seeing $X this in the were that also are somewhat million as But

Boris Elisman

usual. as business seeing We're

of business. we seen not impact business our our in but seen and the social as have as the it. its the humanitarian there the and are Ukraine impact Obviously, borders across war on other haven't impact far still on We issues

Operator

question from next comes McGinnis The from Sidoti Chris & Company.

Chris McGinnis

could off we just if with price start versus the Maybe just volume.

be confirm was it increases of customers? given And price do consolidated you maybe around you sensitivity mentioned growth forward, products going second concerns Deb, I on either of on would guess, just you think, volume then, the basis. part expectation a that? I X% Can the from that any have those additional or price

Deb O'Connor

So X%, Price you X%, too about to in was get right. but XX% to was yes, X% strong so that at you're volume total. about

in volume the rate XX%. we So growth answer I'll adjusted part you had Boris, nice that. and price our And second let of of

Boris Elisman

a degradation significant in of have price as increases. of We price elasticity not seen demand result

and has the been for and increases have consumers see everywhere our this know think that still I our take. of with increase they a customers something the because they broadly that that. is accepting is them around X% price volume And of grown raise that reflection necessary businesses to fact

taking trying is objective on margin. our to again, businesses money make are The understand not it. We're to appropriate And recover consumers extra and increases. increases. to We our seem price

the optimistic continue for we're as that So that, will future well.

Chris McGinnis

Does And chain North that. competitive a in the you better landscape? put back-to-school, America you that are gains, some out position appreciate your the you in just comments, but in I for talk with then, share market especially prepared also supply challenges Boris, about that talked there? Can sourcing. talked about about you

Boris Elisman

in for back-to-school throughout the a primarily through supply we're mix year what our in because we broadly, more think our local and manufacture great of providers, Asia. We in facilities and position what we outsourced get of the

the positioned well own, reads We we're well. papers. chain out manufacture of our Asia. supply anticipate that that company, the about And don't serves coming in for a We're us As school. to XX% China sourced XX% from issues back everybody despite

positioned retailers because well season manufacturing. we're our we our And to closer to for also are then our domestic of supply. support So well positioned back-to-school the

as think that from advantage they've hearing is us do and given we're business. that a So customers more competitive our we

partly for confident the year. again, our feel we of remainder in why So that's the outlook

Operator

from next Barrington Kevin The question comes Steinke at Research.

Kevin Steinke

to So you to X% growth comparable little the outlook X% outlook for lowering X.X% growth PowerA increased for of sales your a despite X.X% from bit.

price is or are growth, what that So and driving more sales overall comparable the improvement the areas volume related? in

Boris Elisman

into three buckets, anticipated, performance that's QX. our did We in better baked improvement we is number. One into The just falls than the Kevin. so

back-to-school in believe America have we both to in we're and stronger Latin North America. second, a seasons, going The

that's to think the part that in optimism. is the big think we with Joe continue that then to part talked we hybrid working will well. as us return And our we that So and mode positive a or see office third about trend of return is in We QX. for that

you to both from those to outlook price factors to to the and think can't we growth to see sales is reason in raising that what be going we're going it three be. as up prices, comparable volume. going of clearly, our to a So together have X% mix going are because I give give volume And X.X% X.X%. is we we price But you exactly think the us well. that but be to part is raise

Kevin Steinke

And quarter? into should forward sales to pulled were was. how you a in mentioned back-to-school Just we wondering sales second the look quarter. we out model about for that that that some as of significant think North forward the first How pull America

Boris Elisman

It was of similar a dollars. on way year about The in is of seasonality you our to it the a percent. I last think million quarterly was basis suggest terms what few business

very falling or similar think pattern percentage cetera. terms QX, takes. of very are year QX there to et similar et it falling a last percentage cetera, And business. different year to Every and certain fairly of think be et regularly pattern. in year's the we pattern year, of But will but the a into cetera, I puts falls I this seasonal pays overall, to have a year's

sales for I and be will and all puts EPS, the both for with it EPS. adjusted think still similar takes,

Operator

Harold from Barclays. at comes question next Holden The

Harold Holde

two I questions. had

was I by you the forward the in make back-to-school inventory and on you that of that at increase as stock felt was through? could just that buys wondering have confident how kind you things quarter, if what end driven had the of so year of was conversation that went out or the it for On the you clearing sure

Deb O'Connor

you So that things I'm there's sure there of in appreciate. a couple can

in First inflation of there. is all,

on kind of things we up. earlier big also yes, that's a So that's would but ticket water. inventory say, number brought still in have we driving I But the

really in-transits those expanded. to times as stay have our continue and lead as are So up well expanded

by that selling down or a any couple but So feel concern it's different we of it parts through getting don't about year-end.

Boris Elisman

And some forward too. we of our early want inventory earlier, a main the the little of reasons back-to-school is bit -- customers the reasons, why bought reason one the inventory

So we're trying to serve their needs.

Harold Holde

And then if you're transport was in particularly of COGS highlight seeing, you terms one your how if or you be sort wondering forward your are? to watching, about think goods, it's should you inflationary pressures I finished on that wanted thinking pressures or where we two of that whether lines or were the

Boris Elisman

affecting it's pretty affecting been has and most Inflation broad. transportation. It's commodities,

So inflation two. obviously, much related, there everything. one but oil also isn't is or pretty is that's everything I up. elevated, It's mean, paper

commodity. So to increases higher it's anticipated we and to than It not we to that's price additional offset a why inflation. have is do single limited

Operator

The next from comes question [Operator Instructions] BWS Hamed Khorsand of Financial.

Hamed Khorsand

this seeing they're or increases buying for first talking really year-end, question price in about of just was Are just retailers you My your customers you season. back-to-school from forward just that given ahead were time? pull the preparing

Boris Elisman

change in pricing. No, school advance, and think back don't I we on to pricing that we well so. Because for agree don't

supply inventory. because date. want The by a don't product want miss the waiting. they of they surety The the And the issues they're certain are forward inventory of season they they it. They chain that to sure for anything season. So experiencing. can't the reason They have is that on the sets and supply risk make bringing

Hamed Khorsand

and years, then able high an Is interest on spot you the the of chain low lockdowns at as being and volume, supply over been as you've that far issues. those off the to get business for it And in advantageous China this given putting year? margin about any

Boris Elisman

Southern not US But back-to-school. carefully. our we're domestically and issues the products from it China seeing Hamed, or of manufactured shipped we're chain affect for back-to-school watching before, Vietnam or mentioned Canada. our supply China, I I most obviously, the are in mean, As

right not So is affected affected the now, area Shanghai we're most region, which that's for back-to-school. really the

points. was, does competitive on question opening us your Now be it more price allow to

decisions. mentioned, chain. the All pretty I of advance they as in are independent length back-to-school much those just supply for of And given the made

to domestically the back-to-school this hoping of win is still be the by QX we to and of are of produce at for some and but customers. So point, our meet early anything, late back-to-school additional affected ability our business going because demands to also not for to

Operator

We hand have remarks. no final for Elisman questions, back I'll Boris to so further any

Boris Elisman

thank you, everyone, and first the Bethany, for for ACCO an in you, momentum have excellent your We Thank quarter. second strong and Brands. interest quarter had

remain for our We product growth about to forward continue business look pivoted oriented XXXX. report to you months faster company shareholders. consumer continue expect and you. is the our of growth as for do in more as returns term we longer Our to performance position we confident higher and financial stronger future to talking couple we second our improvements We a quarter. with Thank in to

Operator

This concludes call. earnings the XXXX joining. quarter Brands for you ACCO Thank first

now disconnect your may You lines.

ACCO Brands (ACCO) 27 Apr 222022 Q1 Earnings call transcript