ACCO BRANDS Corp Q3 FY2024 earnings call

• The team made solid progress on the multi-year cost reduction program, on track to realize over $20 million in savings this year, including footprint rationalization and supply chain initiatives. - Operational excellence led to improved service levels, lower inventories, and a smaller operational footprint. - Successfully refinanced credit facilities, extending maturity from 2026 to 2029, providing financial flexibility. - Paid quarterly dividend with 6% yield, repurchased over 2 million shares, reduced debt, and ended the quarter with a leverage ratio of 3.5 times. - Americas revenue decline improved with stabilizing trends in some categories, while International revenue decline improved with Technology Accessories growth. - Committed to a balanced approach to capital allocation, focusing on optimizing cost structure and supporting leading brands.

In the Americas segment, sales declined 9% with comparable sales down 7%. The exit of lower-margin business accounted for about 3% of the decline, partially offset by growth in technology accessories. Americas adjusted operating income margin improved 10 basis points to 14.2%. In the International segment, comparable sales declined 2% due to soft office-related products, but was offset by growth in Technology Accessories. International adjusted operating income margin increased 20 basis points to 10.6%.

• Reiterating full year 2024 outlook: reported sales within a range of down 8% to down 9%, adjusted EPS in the range of $1.04 to $1.09 per share. - Full year gross margins expected to be improved compared to 2023. - SG&A costs down but offset by inflationary pressures. - Adjusted tax rate expected to be approximately 30%. - Intangibles amortization estimated at $45 million. - Maintaining free cash flow expectation of approximately $130 million. - Expect to end 2024 with a consolidated leverage ratio of approximately 3.2 times.

• Uncertainty in the demand environment for both consumers and businesses. - Macro-economic factors impacting specific regions like Brazil and Mexico. - Dependence on successful execution of cost reduction and operational efficiency initiatives to sustain improved performance.

Q: Dynamics in Brazil and Mexico, macro vs secular headwinds?

A: Tom Tedford stated it's more local issues, with the Brazilian Back-to-School season behind prior year, and monitoring the situation.

Q: Demand environment muted, reasons?

A: Tom Tedford mentioned shift in work dynamics, retailers buying differently, but strong market shares in key categories.

Q: Lower-margin business exit impact in Q4?

A: Deborah O'Connor said it has a diminishing return, Q4 impact less than Q3.

Q: Non-traditional channels expansion?

A: Tom Tedford said testing in North America Back-to-School with positive results, expanding distribution.

Q: Product development pipeline for new work world?

A: Tom Tedford discussed third-party assessment, new products in Kensington, PowerA, ergonomics, etc.

Q: M&A interest and strategy?

A: Tom Tedford said focus on synergistic, high-return opportunities, balanced capital allocation as per Board strategy.