ACCO - Earnings call transcript Q2 2024

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Operator

Hello, everyone, and welcome to the ACCO Brands Second Quarter 2024 Earnings Conference Call. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]

I will now hand over to your host Chris McGinnis, Senior Director of Investor Relations to begin. Chris, please go ahead.

Christopher McGinnis

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

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

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

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

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

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

Now I'll Tom call over Tedford. the turn to

Thomas Tedford

versus improved environment. and second adjusted cash quarter the above our today's night, XXXX welcome range, Thank am morning, and call. and outlook EPS we I balances, consumer pleased margin a prior inventory as you, to a spending to challenging gross Last with leverage year. results Chris. with continue expansion everyone, navigate the ratio flow, performance Good lower we reported company's business lower

the business decisive We have improved of financial momentum $XX are on and realize are side made in efforts over this savings cost the resulting million our taken actions our and on have performance. We've we substantial to progress track good in cost-reduction in year.

on margins XX% laser-focused remains team improving up basis in a XXX points for Our the resulted expanding quarter. and SG&A which gross reduction in profitability,

new sales in partnerships product implementing strengthening development, all initiatives investing strategically gain across are our share. targeted our We to channels market and

The to are our strides where XX% last leverage ratio sheet. inventory like area quarter are year. our net on X.Xx, we've on of combination a consolidated been prior to are the year We encouraged with net cash with to rationalization, I'd levels our structure SKU below we successfully we the tools has another upon by position balance we strategic global team significant improved a and and reduced ended actively our evaluating focus Building of an XX% the last financial operational we key achievements supply management. a use additional reduction contributing While a business improvement planning, chain. A our cost making footprint, opportunities. on and versus year. reduction second of debt debt improved to progress chain focus compared cost are technology inventory commitment highlight flow and of lower the our made supply in well Through

us since move of year. This about achieved have upon flexibility will improvement is XXXX, of into a with we I a Xx, as priorities capital cash which XXXX expand provides end stronger at the allocation later. generation level to financial our We our ratio we more and not expect this leverage cycle

revenue the the decline and Kensington America, in second categories lower-margin let decline Americas exits insights quarter down our the impact of portion gross the on improvement related of which The was these branded the the business to in performance. from heavily in is sales We we North few category year-over-year segment decline Recently, segment partially back-to-school to less of exit quarters. On rate a to falls projected. our a revenue of in anticipate many me fourth than sales been exits driven and computer and International certain segment. share a the returned both moderating growth. basis, the was Now an the quarter had accessories greater categories than in large third margin The significant has second as quarter. which impact a in more by

However, backing for product were office our for below business categories expectations. when Globally, demand out exits, trends the similar both. our remained

incremental to valued our channel products. and high-quality revenue continue opportunities closely our category-leading with maximize We work brands partners to with

shares our key was with market better benefited year from prior of are pursuing and Our technology teams new categories, our accessories pipeline are an incremental with the selling releases. our down opportunities lineup and sales revenue stable actively customers. Within engagement as improving a game accessories stronger gaming

Star the for new half brands. ACCO about our computer to the customers leading our remain these sales of to We growth, long learn work, categories demand recovery history solutions to XXXX early and down innovative Touching Our with positive forecasting for second America. a and are compared on of for both draw is help play. the returned that improving year. products category season by the accessories continued good we has the and too season, still be Industry to year. experts our conclusions back-to-school on back-to-school in product but prior Brands in both seeing North are Mead results It of categories driven X environment. sell-through

to hybrid pivoting as environments. moved focus has our our on strong efforts consumer core as innovation are changed Our have from work traditional preferences a categories

points. insights solve solutions are mining product that We consumer consumer for new pain

doing by meet are that we encouraged While to work still products new needs launch early, the our consumers. of I'm the

and good the Dot innovative Red awards and market team's to Kensington product work for our recently X term. proud new recognized solutions bring near awarded confident improving prestigious as help our trends revenue was work design innovation. I in to Our of that has am commitment been will the brand

turning it Before me allocation over to our on let capital a priorities. few comments Deb, share

Over the served significantly. balance strengthen our been has our to dividend supporting has disciplined sheet last us approach reducing debt. X our well, years, This allowing focus and us quarterly

we the more a now contemplate strategy. balanced allocation able strong Given foundation, to are capital

equity from opportunistically a flow, the and in moving buy our We our shares have offset our will balance which cash sheet grants. With will improved part of consider to employee market forward. M&A our we help consistent the allocation share ability dilution capital as

our in a integrations. and successful We existing have categories history a M&A strong of position

tuck-in We that a synergies. target will quick provide return acquisitions realizable our have on and investment

confident committed a we our I In ratio. future revenue the and am in to keeping taking remain leverage are to reset trends. closing, low will We actions cost structure improve

a team. with portfolio as of flow brands free have foundation an experienced global cash consistent leading and leadership generation, We our solid as well

and back will strong half your come on us fixed sheet sound and condition. put Deb now low until I it hand our than of to to XXXX Our debt Deb? maturities questions. answer we'll in over with debt more interest financial rates balance no

Deborah OConnor

operational categories. last in identified especially product demand, softer challenging consumer Thank spoke and related May, we you, business highlighted Tom, market When and our everyone. we conditions good office The to morning, we've previously our were continue factor shortfall efficiency. progress to sales improving outlook. significant make in lower persisted top contributing quarter we the second Offsetting throughout and to our a the versus line,

cost environment. second by impairment triggering Our adjusted remain gross of us related event above our flow certain as margin portfolio market same intangible in year-over-year, and the expanded ability forward. rate This product our of line we our ability the outlook a range, categories. Overall, charge goodwill strong lowered a volumes we period and compared going cost brands start our the challenging XX% from drive declines to the performance XXX product last These sales deliver in even costs, assets. mix basis came well year. EPS to $XXX a leading improved for to XXXX included In our product since generate capitalization to points took our as to cash combination and in charges in confident by bottom and improvements reduced actions. The SG&A of moderating allowed underscoring million noncash impairment quarter, our we of

exit turning of impacted Reported foreign lower-margin sales. sales quarter planned versus negatively XXXX sales, down Now Comparable XX% decreased to in of business year. the approximately the The XX%. were X%. by sales exchange, second excluding prior

of of $XX demand X% the million, the was expense income categories, timing incentive to our was to Gross with a prior year. operating spends due in margin actions, XX% our second similar was a the to down $XX was second continue for line for overall points the certain offset improvement. decline of for million, see SG&A quarter industry soft in The and sales. lower expense We year reduction by last lower level due trends. the quarter to was basis XXX sales of operating $XXX global profit adjusted decrease versus cost million quarter. Adjusted compensation which

and with XX%. the The decline. In This remaining little the rate our sales moderating primarily points exit prior is business margin business office more for was cost compared improved accessories. comparable year, improved accessories. The to difficult for reduction Now offset lower-margin partially the our lower-margin gaming accounted products SG&A income related adjusted mix segment improvement declined consumer to for product lower efforts. of to than XXX back-to-school our The margin compares to turn our to exit operating category, segment, costs, by second X% for and planned to Americas traditional of XX.X% computer decline of quarter in product in from Americas basis let's attributable results. a and spending our the due the business, growth the

International our to segment. turn let's Now

the The adjusted flat. in cash double-digit environment comparable operating sheet moderating Switching margin rate second effect second reduction the declines improvement certain year. timing months customer year. categories. generate in This in the cumulative quarter, the through and pricing the with saw We income and growth ended the remains of traditional cost collections our cash the significant us for reflects category, free first outlook to XX basis our million driven free flow to for actions. million, and June $XX generally cash items. the same approximately balance we year. margin have and to due the million improving the $XXX improved cash to payments. The adjusted income second by half million outflow $X costs we to trends. International flow positions year, year. quarter time due flow soft our accessories operating of X% X to our as of X% Historically, the flow was of last prior the vendor seasonality, of due Through adjusted We product income well cash first XXXX, use the debt volume points by half operating of and million demand free versus $XXX For for quarter of gross computer the sales XX demand lower with in the cash total increased $XXX achieve declined than of our

which the $XXX million higher Our the our quarter, of ago due availability $XXX flows of At we million, end revolving on a remaining is $XXX cash had cash year timing million to of facility. in balance Brazil. than credit was

value We does on not is leverage down in from of X.Xx shareholders. to generates at we will fixed consistently interest below X shown than more the mature to deploy The us year, X.Xx, of term, multiple half and QX ratio. Longer flow. our debt a well still last of our covenant XXXX. strong company are our and capital of X.Xx. slide, rate that our And improves, ways a of create this a quarter as the until X.Xx with in ratio targeting leverage free consolidated our ratio earnings leverage cash X.XX% allow ended ratio As for

in to Our to product strong capital brands allocation priorities innovation success. invest and will continue long-term ensure we follows: our First, are as

quarterly Second, program. support our will we dividend

remain will targeted until X Third, achieve ratio our our long-term to X.Xx. focus we reduction debt on of

meaningful over X strong reduction achieving leverage cash flow by and last debt us we shares. gives the believe Next, years, repurchase flexibility our the to

help to our and opportunistically grant. equity this do will from employee dilution offset We

Brands of integrating use product presence, long extend cash to M&A. a to Finally, to brand ACCO acquisitions another reach, be and complement flow geographic potential their of history our successfully expand our lines. will has

purchase with remain leverage. to prudent prices, committed have low We we will debt been and a

Now let's outlook for third move and to the quarter. XXXX

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

a in of EPS range For expect share. to year, the to per full adjusted we be $X.XX $X.XX

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

We full XXXX. approximately million We to with are updating not flow be level $XXX cash expectation X.Xx, now XXXX X our year. will it and of approximately ratio to since reached for leverage free end consolidated a the believe expect a

quarter, sales less impact be the exit be the of the half note that to to lower-margin down significantly in third expect the X%. reported the Important will For we second business year. of of X% to

$X.XX $X.XX to in for share. adjusted is per the of to range outlook third Our EPS quarter be

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

Operator

Instructions] [Operator

question Greg & Co. to please of Burns ahead. the Sidoti go And goes first Greg,

Gregory Burns

Looking at the technology business.

quarter, last growth -- XXXX? do coming product and out, Where channel had the that for does Windows as we mentioned for go how AI update with prospects half back categories. and business the some into this into And maybe think occurring view now of inventory you excess year Windows stand? channel I PCs the inventory some you the

Thomas Tedford

this is for Yes. Thanks question. your Greg, Tom.

first inventory docking us, The the the globe across concerning question. address in universal So stations. that part let category me progress made of to significant the channel was inventory most the in was which has really reducing

were about we are within turn do work feel the positions of business. where certain to But channel. good it. part, much inventory than most better position the for the So we areas pretty year the calendar even still good a about we There's feel in in as so we're today we

historically think customer business. we're by term. feedback on that for yesterday I'm this our has you very in growing growth encouraged been will We return our by the kind macro growth your from by year. trends. near the the and seeing give anticipate us of it Kensington was within the the I'm what we're brand really encouraged strong I comments with in a Second, optimism a I to and encouraged portfolio. good customers our getting things that discussed engagement, within

So the business we're pleased with real Kensington and performance. its

Gregory Burns

and like product gaming to a would M&A, you category categories you buy maybe how in to of brands M&A like be the And think categories? would office to something, be we maybe be might or then traditional looking terms of out office add should the the do existing market, like new used growth your or more about strategy, particularly how some more in smaller it drive

Thomas Tedford

Yes, Greg.

consider forward, from present categories. won't We're themselves. current our imply as synergistic leverage our deviate disciplined with will moving our to to likely We're in we're we approach. to careful our approach going that. which opportunities, ratio be We our to We're low. So to in very And keeping when opportunities look for criteria. going committed near be more very that established going they be they we've

Gregory Burns

lastly, what's just just when there. the the the you of then opportunity? we do valuations at look? How market, And pipeline could start Maybe look

Thomas Tedford

So it's up open bit. starting to a

have I work to fill but the it's think a starting we to bit. up pipeline, still to some open do

as some say opportunities could think looking interesting at this much point. at, I that but about that's as we there's we're

Deborah OConnor

we've different and historically, be that said, And things been it. think disciplined able pipeline Yes. Tom to I a at. we're approach And in as lot have we going of Greg, how fill pretty look to to

Operator

Gomes of question goes Capital. next Joe NOBLE The to

Joseph Gomes

start off morning. this I to wanted

still order kind And back-to-school wondering, business were faster declines of what anticipating. side, been they office things from few the remains the can as what -- have than As you significantly revenue for where, the of maybe in you moderate the happen it there a you you're than maybe needs you on what grow product did highlight softer here? side X quarter? to where today those was to the the for in -- office mentioned, you on consumer do sitting I and were if to or consumer internally, guys in the market projecting

Thomas Tedford

Yes, Joe, kind happen to terms for difficult a that's needs ask macro us level. to obviously of what of one a in at

the about dive me expectations. Let into first our question

year. and Latin is or prior creative, America steep in pardon products in categories. grower the that, term, we in Brazil, into had a the will North big within compares that particularly but me, growth the sales So was Kensington, seasons. rate in U.S. categories, most weeks XXXX product big across kind versus of that's our ] that's what declines bit In still to season QX, We're the particular as expectations root to here business external seeing office for the here -- out decline as for those or within really of that our the greater that's it's We It's really of really clear some in mentioned, We're confident in then a is a any as forecasted. such as sources the our and just year cause is of the our building We in has moderate nice to trend return we're then and turn the the given year. And we predominantly particularly year rebound we're season encouraged. our just later in own learning in And expectations early categories. And gaming for us business for mess encouraging, of in categories, the of accessories we getting calendar started than our feel of example, the been long expectations. portfolio. difficult Circana use office the some trends use We data. [ back-to-school trend America. as kind be

tell. it's a bit So early to

in sentiment really demand does, the of office soft general moment, business. our that improve. expectations need that lower and to products versus categories. a I business low are drivers we I in and all improvement, the is tailwind So at be just think the the Relative to think our sales there'll consumer when And primary

Joseph Gomes

gross on And Great. Okay. job more, the margin. one great a

you you in this of low-margin Or X especially As Is we forward product... that could given margins have a either more mentioned, as quarters. for I even go there the number improvement improved, do margin, a here? sustainable gross gross bunch think, be sequentially exited you've the think

Deborah OConnor

will that's reduction I good Joe, lot No, tell plans. cost we a question. great yes. of Yes, a have initiative you,

know, talked us in footprint as past our far and will you the as help that, like about forward. we we've As rationalization that things go as

I exit. be as about strategic gross think feeling land. the we think the low-margin Those they'll we're stay good and we'll But are out, we margins out. where about

So I we those in all year. margins end think expect all, improve as to the we

Operator

next Kevin Research. goes to of The Steinke question Barrington

Kevin Steinke

to I asking about wanted gaming by off accessories. start

You had talked was some about last quarter, quarter And growth. down. this you

had to noted You that the comparable be expected of talked kind choppy. you about tough recovery

gaming can drive elaborate you more Although remarks would in a just the I that? what expect expect little maybe you that? opening that would on second in said a the half believe you bit And you accessories -- recovery in

Thomas Tedford

Yes.

So gaming couple is just of over the the low releases given lack in last a just console cyclical point, years. of

strong being comping, releases also wireless mentioned, we as stock back with We year last new modules. were in and game some

compare number So to issues that had we work through in of QX. difficult had we a

a opportunities to world. -- in third continue has are Japan, markets very international Asia which the the market. a large large in excited about. what see is As gaming ahead, really very We largest to established penetrate It's predominantly we we look expansion is our like

our to back growth in see the initiatives really those Asia of And so in key the we half expand drivers with as year.

in confidence the gives the QX that's half. of what improving kind us So in back results really

Kevin Steinke

development. launches out like while continue That's Kensington. the there. about about had product looks helpful. sounds talk last it It months over you And releases it's it's couple early still of like you couple a And -- to press of in

way? start world development product development to those tailored products out rolling that work that overall when fit more -- we does to meaningful more of about and the the see So a could in pipeline of changing do into maybe talk product just and kind start

Thomas Tedford

Yes.

has for development better our work. from that focus very a leadership So area getting discrete of Kevin, is been our product outcomes team,

insights our As meet as finding really solutions environment preferences changing you job of nice know, them our consumers I teams to environment. of that moved we're many in and from have opportunities think changing And our product work a the with mining hybrid for a are a needs consumers. doing disruptive those

Importantly, there are can through sell our we existing also that products channels.

of line are are And done at The of work that we've some teams we done. We've trends. doing. business in We're really of so there's had the job a really Kensington bit work looking nice our a But a reset a nice early. has that We're some of line launching be feel as know in. confident seeing or that that will we have TAMs interesting sustainable we very should we either competing move shares, market product think a for that products low be really our portfolio important we what brands forward.

so it developments And does exciting business, product within time. but take development, some there's the

by my in significant hope isolated from as And And see XXXX. be attributable we XXXX, new product new more revenue so to development do to product certainly, dollars to is or get development. able meaningful we should products

still. we've So do it, excited to work about got some but

Kevin Steinke

update repurchase been back expect Sounds us good. XX-K to authorized to searching but has start just or you when on stand find with kind you I'm could what through stock? here authorization, you where might your buying of

Deborah OConnor

Yes.

if to We're We're how think of going back point, we your balanced still of capital. been of So outstanding. about have $XXX to you and sort a ACCO with careful authorized reverting take a has million authorization historically approach. available good allocation

So some to we're the our through balanced but Board going on back working be things we're allocation. now, with

Operator

[Operator Instructions]

And to America. of question the Reuter next goes Bank of William

William Reuter

online products some to paper are how that weak usage the Are less in some in I moving recession comments of seem are than imply the declines less have you and be office your that confident maybe products due -- back-to-school the of to of resistant the category that more versus the spending consumer Good expected. a morning. products capacity? about to question may first is My you traditional lot would weakness is relative

Thomas Tedford

question. the for thanks Bill, Yes,

and I changing combination to business. think of as Certainly, we've our preferences both. it's impacting referenced hybrid. a consumers That's of habits consumer work the migrated they've

I back-to-school think I'm pressure. certain business. well never then consumers And as spending uncertainties, really business in confident know, times. are you under responds economic in our

We brands that to In Our we're uncertainties. in BTS. year. up economic last hold season date, well proved do well performing times of in

So I multiple combination one think it's a of not factor. things. It's

William Reuter

terms Got would it. in we And M&A, modest then talked the discussion, kind at any expect more about word that maybe then of in M&A initial you in tuck-in consider M&A the transformative least once, of should M&A? of used broadly, sort you be twice. Would you relatively size? Or

Thomas Tedford

to think smaller ratio in value. keep leverage that that's to term, consider likely I synergistic near our the that incremental enhance alternatives realistically, going low. have most And to outcome EBITDA highly shareowner But term. in the the near they're enables opportunistic we all be us

Deborah OConnor

Yes.

maintain I things those it worked at a and think Tom going We're our a said get it have levels. period. look too of where going it's to at at, good payback short we're that kinds right. We in leverage to to payback hard

William Reuter

you're balanced Got reallocate little made that to still little to kind kind why little time away the before your more X% is getting I a change it. leverage of reduction, from decision down between X.X%. we of to guys versus do debt that? ways share to target this of allocation clearly have great a while then and And capital more a you the repurchases approach progress, guess

Deborah OConnor

Yes. No, question. it's great a

think our stack think shares a money to I And get on is our I a putting key great it's value. is today, the today. return where

is, the good value stock some a a So employee X.X%. grants have we're now. X% right given going balanced it to approach. as of price our We're as to dilution well still But very just from the targeting where it's the

Operator

Thank you.

We any have for back to Tom I'll no further hand questions. closing comments.

Thomas Tedford

for couple forward results. you report We you your talking our to look interest months a of to in on in third to Thank Brands. ACCO quarter

Operator

today's concludes Thank call. now joining. you This you. all Thank for

now You may your disconnect lines.

ACCO Brands (ACCO) 2 Aug 242024 Q2 Earnings call transcript