Earnings call transcript: Acco Brands Q2 2025 misses EPS forecast, stock rises

Acco Brands Corporation reported its second-quarter 2025 earnings, revealing a slight miss in earnings per share (EPS) against Wall Street expectations. The company posted an EPS of $0.28, below the forecasted $0.29, marking a 3.45% negative surprise. Despite this, the revenue came in at $395 million, surpassing the anticipated $389.8 million. Following the earnings release, Acco Brands’ stock rose by 4% in premarket trading, reflecting investor optimism driven by stronger-than-expected revenue and strategic initiatives discussed during the earnings call. According to InvestingPro data, the company offers an attractive 8% dividend yield and appears undervalued based on comprehensive Fair Value analysis.

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Key Takeaways

• EPS came in slightly below expectations, but revenue exceeded forecasts.
• Stock rose 4% in premarket trading, indicating positive investor sentiment.
• Cost reduction programs and strategic initiatives are underway to improve financial performance.
• The company faces challenges from tariffs and market uncertainties.

Company Performance

Acco Brands experienced a challenging second quarter, with consolidated sales declining by 10.5% compared to the same period last year. The company’s gross profit decreased by 15% to $130 million, and the gross margin contracted by 200 basis points to 32.9%. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 1.76, indicating healthy ability to meet short-term obligations. Despite these setbacks, Acco Brands managed to maintain or grow its market share in most product categories, leveraging its "China plus one" supply chain strategy to mitigate tariff impacts.

Financial Highlights

• Revenue: $395 million, a slight increase over the forecast of $389.8 million.
• Earnings per share: $0.28, a 3.45% miss from the expected $0.29.
• Gross profit: $130 million, down 15% year-over-year.
• Adjusted operating income: $47 million, compared to $65 million last year.
• Free cash flow: -$24 million year-to-date.

Earnings vs. Forecast

Acco Brands’ EPS of $0.28 fell short of the $0.29 forecast, marking a 3.45% miss. However, the revenue beat expectations by 1.33%, coming in at $395 million versus the $389.8 million forecast. This mixed performance reflects ongoing challenges in the market, including tariff-related pressures and economic uncertainties.

Market Reaction

Despite the EPS miss, Acco Brands’ stock reacted positively, with a 4% increase in premarket trading, reaching $3.9. This movement suggests that investors are encouraged by the company’s revenue performance and strategic initiatives to drive future growth. The stock remains within its 52-week range, with a low of $3.32 and a high of $6.435. InvestingPro data reveals the stock has experienced a significant 26% decline over the past six months, though analysts maintain a positive outlook with targets ranging from $6 to $12 per share.

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Outlook & Guidance

For the full year, Acco Brands projects reported sales to decline by 7% to 8.5%, with adjusted EPS expected to range between $0.83 and $0.90. The company aims to generate approximately $100 million in adjusted free cash flow. In the third quarter, sales are anticipated to decline by 5% to 8%, with adjusted EPS forecasted between $0.21 and $0.24.

Executive Commentary

Tom Tedford, CEO, highlighted the company’s ongoing cost reduction efforts, stating, "We are making great progress on our $100 million multiyear cost reduction program." CFO Deb O’Connor expressed confidence in the company’s future, saying, "We remain confident in the long-term future of our company." Tedford also emphasized the strategic groundwork being laid for sustainable growth, noting, "The foundational work we’re doing today is building a platform for sustainable, profitable growth."

Risks and Challenges

• Tariff and trade policy changes continue to pose risks to the company’s cost structure.
• Economic uncertainties and market volatility could impact consumer demand.
• Competitive pressures from low-cost Chinese products, particularly in Latin America.
• Soft demand in key European markets, including Germany, the UK, and France.
• Dependence on the back-to-school season, which is expected to see mid to high single-digit declines.

Q&A

During the earnings call, analysts inquired about the impact of the Nintendo Switch Two launch on gaming accessories sales, with expectations for stronger performance in Q4. Questions also focused on pricing strategies to offset tariff costs and the early performance of the back-to-school season, which is less than 10% through sell-through.

Full transcript - Acco Brands Corp (ACCO) Q2 2025:

Ezra, Call Coordinator: Hello, everyone, and welcome to the Akko Brands Second Quarter twenty twenty five Conference Call. My name is Ezra, and I will be your coordinator today. I will now hand over to Chris McGinnis, Head of Investor Relations to begin. Please go ahead.

Chris McGinnis, Senior Director of Investor Relations, ACCO Brands: Good morning, and welcome to the ACCO Brands second quarter twenty twenty five conference call. This is Chris McGinnis, Senior Director of Investor Relations. Speaking on the call today is Tom Tedford, president and chief executive officer of ACCO Brands Corporation. Tom will provide an overview of our second quarter results and provide an update on our 2025 priorities. Also speaking today is Deb O’Connor, executive vice president and chief financial officer, who will provide greater detail on our second quarter results and our outlook for the third quarter and full year.

We will then open the line for questions. Slides that accompany this call have been posted to the investor relations section of accobrands.com. When speaking about our results, we may refer to adjusted results. Adjusted results exclude amortization and restructuring costs, noncash goodwill and intangible asset impairment charges, and other non recurring items and unusual tax items and include adjustments to reflect the estimated annual tax rate on quarterly earnings. Schedules of adjusted results and other non GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call.

Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our forward looking non GAAP measures. Forward looking statements made during the call are based on the beliefs and assumptions of management based on information available to us at the time the statements are made. Our forward looking statements are subject to risks and uncertainties, and our actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain risk factors and assumptions. Our forward looking statements are made as of today, and we assume no obligation to update them going forward.

Now I will turn the call over to Tom Tedford.

Tom Tedford, President and CEO, ACCO Brands: Thank you, Chris. Good morning, everyone, and welcome to ACCO Brands’ second quarter twenty twenty five earnings call. Last night, we reported second quarter sales and adjusted EPS in line with our outlook. Sales in the quarter improved sequentially as customers and consumers digested the evolving global trade environment. We continue to make excellent progress on our $100,000,000 multiyear cost reduction program, realizing additional savings in the second quarter that brought the cumulative program total to over $40,000,000.

We are also making great progress on our tariff mitigation actions. As a multinational company, approximately 60% of sales are outside The US, which are not impacted by US tariffs. For those markets, our current supply chain provides excellent value. As we mentioned last quarter, our proactive China plus one approach in The US has positioned us well to navigate the evolving trade landscape. To date, we have announced two strategic price increases while maintaining our competitive position, secured improved terms with third party manufacturing partners, and accelerated production shifts to cost competitive countries for US bound products.

These efforts are critical to protect profitability and to ensure ACCO brands has a balanced supply chain optimized for cost, quality, and service. Now turning to our second quarter performance. Consolidated second quarter comparable sales were down 10.5% and within our guidance range. As expected, sales in the Americas segment were disrupted due to the tariff announcements in The US, particularly early in the quarter as our customers adjusted their purchasing plans and monitored the impact to the consumer. Gaming accessories grew modestly in the segment, driven by our leading third party accessory product assortment supporting the release of Nintendo’s Switch two console.

Sales for back to school products were down in the quarter as US retailers were cautious with their early season orders. We forecast our US and Canada back to school season to be down mid to high single digits, but it is still early in the season and stronger consumer demand could improve the forecasted results. We have sufficient inventory to support potential upside from replenishment orders, and our teams are working closely with customers to support their back to school demand. In Latin America, sales were weaker than expected, particularly in Mexico, due to a constrained consumer and competition at lower price points. However, we were encouraged by the recent performance with trends improving in June.

In Brazil, sales were down modestly in what is a seasonally low sales quarter. Back to school sales occur later in the year in Brazil, and we are closely watching order input and remain positive about our expanded product offering for the upcoming season. We are also paying close attention to an increase in low priced product entering Latin America from China, and we will react accordingly with price and assortment. In the international segment, sales declined but at an improved rate compared to the first quarter. Gaming accessories grew mid single digits driven by the Nintendo Switch two launch and our continued international expansion.

While sales of office products remained soft in certain European markets like Germany, The UK, and France, we maintained or grew share in most categories across the region. Looking at our global technology businesses, Kensington computer accessories sales declined modestly in the quarter. We expect improving trends in the second half of the year led by a stabilized market dynamic, a growing pipeline, and revenue from new product introductions. In gaming accessories, Powerade delivered modest growth across both segments this quarter, highlighted by our role as a Nintendo licensed third party manufacturer of accessories for the Switch two console, which launched globally on June 5. Our comprehensive product assortment at launch included a wide range of controllers, cases, and other accessories.

Many of these products have exclusive IP related to Nintendo games. While Switch two related sales were modest in the second quarter given the timing of the June release, we expect more meaningful sales in the coming quarters as adoption increases and as our product portfolio expands. Global sales of office products were soft in the quarter. We have good syndication of our product assortment and the lower rate of sales is from our core offerings and due to lower demand. We continue to refine our new product development approach to enhance our category positions and enter faster growing adjacencies.

Now let me highlight the progress we’re making on our revenue growth initiatives. Within computer accessories, we’ve improved our innovation pipeline with a number of new product introductions set to double in 2025 compared to 2024. One key product I would like to highlight is our new Thunderbolt five docking station supporting Apple users. This feature rich docking station expands our reach into the premium Apple ecosystem. We are focused on strategically expanding our assortment into higher growth categories through organic and inorganic efforts.

The Repeat tools product line in Europe has entered the work lights category, offering professional grade solutions for do it yourself enthusiasts and small business owners. These products leverage our highly trusted Repeat brand while maintaining competitive price points. Additionally, in Europe, we’re expanding our successful ergonomics product portfolio with the innovative new compact sit stand desktop series, specifically designed for the hybrid work environment along with other complementary ergonomic accessories. Our recent acquisition of Bureau Seating has been fully integrated, strengthening our position in Australia and New Zealand. Given the success, we are evaluating expansion opportunities in additional markets where we see potential for the brand in the product category.

Now let me update you on our multiyear cost reduction program. In the quarter, we realized $8,000,000 in cost savings, and since the program’s inception, have achieved annualized cost savings totaling more than $40,000,000. Savings have primarily come from optimizing our manufacturing footprint, headcount reductions, and delayering the organizational structure. As a part of these planned efforts, we have recently announced changes to our leadership team with key appointments. Jed Peters and Rubens Pazos assumed leadership positions for North America and Latin America, respectively, effective in July.

And AJ Spikerbet will lead our international segment beginning in 2026. They bring a vast amount of commercial experience, deep product knowledge, and a strong customer relationships that will help accelerate our transformation. These important initiatives, combined with improving demand trends and favorable FX tailwinds, position us for sequential improvement in the third quarter with sales declines moderating from current levels. The foundational work we’re doing today, streamlining our operations, investing in higher growth categories, and optimizing our cost structure, is building a platform for sustainable, profitable growth. While we remain focused on navigating the current market dynamics with discipline and agility, I’m confident we’re making the right strategic decisions to enhance our competitive position and improve our revenue performance.

Before I hand the call over to Deb, I would like to thank the employees of ACCO Brands for their tireless efforts in support of our strategy. I’m proud of our team and the work we are doing to transform our company. I will come back to answer your questions. Deb?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Thank you, Tom, and good morning, everyone. As Tom mentioned, second quarter sales and adjusted EPS were in line with the outlook we provided in May. Reported sales in the second quarter decreased 10% with a slightly favorable FX impact. This decline reflects a quickly changing US marketplace given the tariff announcements. Initially, there was uncertainty about the environment and the ultimate cost of goods, and many customers ceased purchasing until some clarity developed.

This uncertainty lessened as the reciprocal tariffs were delayed and as we progressed throughout the quarter. Overall demand remained soft for our consumer and business products as well as for computer accessories. Gross profit for the second quarter was a $130,000,000, a decrease of 15% with the margin rate contracting about 200 basis points to 32.9%. The decline was driven by the impact of the tariff announcements and a combination of lower volumes and reduced fixed cost absorption. Due to the strength of our first quarter margin rate, our year to date margin rate is down much less, an 80 basis points decline.

SG and A expense of $83,000,000 was down versus the prior year due to cost reduction actions and lower incentive compensation expense. Adjusted operating income for the second quarter was $47,000,000 versus $65,000,000 a year ago. The operating income ratio of sales has been impacted by the lower volumes deleveraging our SG and A costs. Now let’s turn to our segment results for the second quarter. In the Americas segment, comparable sales declined 14%, largely due to the purchasing disruption I mentioned earlier, as well as soft demand in most of our categories.

The Americas adjusted operating income margin for the second quarter was 17.4% below last year. The margin rate in the quarter was impacted by softer volumes, lower fixed cost absorption, and the impact from tariffs more than offsetting cost savings. Before moving to the international segment, I want to call out that we have successfully settled the long standing tax assessments in Brazil. Our reserve of $20,000,000 has been completely resolved for $7,000,000. We are pleased to have this matter behind us.

Now let’s turn to our international segment. For the second quarter, comparable sales declined 4%, an improvement from the first quarter. Demand was soft in Europe, especially in Germany, UK, and France, which are the largest markets in EMEA due to continuing pressure and business essential products. Australia benefited from the Burrow Seating acquisition, and we saw good growth in Asia. International adjusted operating income margin for the second quarter increased to eight and a half percent due to the benefit of pricing, cost savings, and lower incentive compensation expense more than offsetting the volume decline.

Year to date adjusted free cash flow was an outflow of $24,000,000, which was in line with our expectations. This includes $17,000,000 in cash proceeds from the sale of two owned facilities. The second quarter is historically the peak of our borrowing needs to support the seasonal aspects of our business. We began generating positive cash flow late in the third quarter and throughout the rest of the year. During the quarter, we returned $7,000,000 to shareholders in the form of dividends.

While we continue to believe a balanced capital allocation is appropriate, in the near term, we will be focused on paying down debt. At quarter end, we had approximately $200,000,000 available for borrowing under our revolver, and we finished the quarter with a consolidated leverage ratio of 4.3 times. Given the impact of tariffs on second quarter results and a high level of uncertainty in the markets, we decided to be prudent and get additional cushion in our leverage covenant. We amended our bank credit agreement, increasing our leverage covenant by 50 basis points for the remainder of 2025 and by 25 basis points throughout 2026. Now turning to the outlook.

We are providing an outlook for both the third quarter and the full year. The evolving tariff environment continues to lead to an uncertain demand environment and muted economies, especially for our Americas segment. We expect this uncertainty to continue for the remainder of the year. Our outlook reflects our price increases, which will cover the tariff costs and maintain margin. Pricing was announced in the second quarter and takes effect in the third and fourth quarters.

We anticipate our pricing actions will partially mitigate the continued softness in consumer and business spending with the rate of decline improving in the second half of the year. For the full year, we expect reported sales to be down 7% to 8.5% and adjusted EPS to be within the range of 83% to 90¢. We expect adjusted free cash flow to be approximately a $100,000,000, including the proceeds from the sale of assets. We anticipate a leverage ratio of 3.8, 3.9 times at year end. For the third quarter, we expect reported sales to be down five to 8% with FX having a positive impact from the weakening of the US dollar.

We anticipate adjusted EPS to be in the range of 21 to 24¢. Even though the current year poses challenges, we remain confident in the long term future of our company and our ability to navigate this dynamic period. We have a strong balance sheet with no debt maturities until 2029 and a long history of productivity savings and cost management. We continue to anticipate that in the longer term, we can grow sales modestly from organic and inorganic initiatives with a target gross margin rate of 33 to 34% and consistent cash flow generation. Now let’s move on to Q And A where Tom and I will be happy to take your questions.

Operator?

Ezra, Call Coordinator: Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. Our first question comes from Greg Burns with Sidoti and Co. Greg, your line is now open.

Please go ahead.

Greg Burns, Analyst, Sidoti and Co.: Good morning. When we look at how the back to school season is playing out, could you just quantify how much of the decline you would attribute to I think last quarter you mentioned that maybe there was some pre buying or early buying to the first quarter. And then also the tariff demand dynamic that you mentioned at the beginning of the quarter versus maybe just lower market demand for the product categories that you’re selling? And also when we look at how the full season is going to play out, how are channel inventories at your retailers? And are they such that you think that maybe the back to school season gets spread out maybe more over the second and third quarter versus maybe more localized in the second quarter?

You.

Tom Tedford, President and CEO, ACCO Brands: Okay. Good morning. This is Tom. So first, let me address kind of the the decline question. And decline really is a mix of different things compared to our expectations.

So, certainly, we mentioned the shifts into the first quarter. We also did see some softness with orders from our customers, including cancellations, and then we saw some shifts, very modest shifts into the third quarter. So if you compare it to our expectations, those were the three primary drivers of of the kind of changes in in expectations. As we think about looking ahead, we’re early in the season. We’re we’re less than 10% through the sell through season, which really will dictate any demand replenishment that we get later in the season.

We’ve ensured that we have good inventory positions in the event that our customers’ demand increases above expectations or above forecast. We’re hopeful that that will be the case, but at this point, it’s uncertain, and it’d probably be premature to comment. Lastly, I will say our customers continue to manage inventory tightly. Their their replenishment expectations are relatively low in our forecast, but we hope that that will will obviously materialize differently, and we’ll see. Right?

Again, it’s early in the season, and it’s too early to tell exactly what our customers are going to do.

Greg Burns, Analyst, Sidoti and Co.: Okay. Thanks. And then in terms of new product development, you highlighted a couple of products that you’re going to be bringing out in the second half. How should we think about those products contributing to revenue in the second half? Is it more of a 2026 kind of upside from these products as you see the market, or what will there be benefit in the second half?

Tom Tedford, President and CEO, ACCO Brands: Yeah. The the benefit will be very modest, Greg. It it takes time for us to get syndication of product, get listings of product. You know, we should see some benefit from the switch to accessories that are entering the market in the second half. But beyond that, it’s really 2026 and beyond where we’ll see impact from revenue with the new product introductions that are happening this year.

Kevin Steinke, Analyst, Barrington Research: Okay. Thank you.

Joe Gomez, Analyst, NOBLE Capital: Mhmm.

Ezra, Call Coordinator: Our next question comes from Kevin Steinke with Barrington Research. Kevin, your line is now open. Please go ahead.

Kevin Steinke, Analyst, Barrington Research: Good morning. So just going back to back to school, I’m wondering if you can make adjustments with your product assortment in terms of price points, etcetera, the demand environment, if that’s something you think about in light of, again, the current trends?

Tom Tedford, President and CEO, ACCO Brands: Yeah. So, Kevin, good morning. That’s a good question. You know, we feel consistently that we have a good offering of price choices in our portfolio supported by our Mead and Five Star brand here in in The US and our Hilroy and Five Star brand in Canada. So we think North America, we have a good offering, that touches on each one of the price points.

We collaborate with our customers at the beginning of the season to ensure that we’re hitting the price targets that they think will move during the season, and we’ve done a nice job of that this year again. It really will our performance will really depend upon consumer demand. And, you know, right now, it’s kind of wait and see. We we’re still early in the season, as I mentioned earlier. As it relates to back to school and other markets, are important, such as Brazil, we are gonna have to reposition some of our product and make sure that we are competitive in evolving price points as lower cost competitors from China, particularly, are entering the market aggressively, and we’re doing so right now.

So we’re adjusting those assortments. We’re making sure that we have the features that the consumers need at those price points, and those offerings will be in market, this BTS in Brazil.

Kevin Steinke, Analyst, Barrington Research: Okay. On that that Chinese competition, I mean, is that something that you expect to persist or what kind of what do you think is driving that? Is it just the environment that’s opening the door for lower cost competitors or just just wondering, you know, about the sustainability or of, you know, that trend, I guess.

Tom Tedford, President and CEO, ACCO Brands: Yeah. That’s a hard one for us to predict. I mean, we certainly see low cost competitors entering and exiting markets all across the globe consistently. This may be a little different because of the trade dynamics, particularly impacting The US market for Chinese suppliers. We’ll just have to wait and see.

The key for us is just reacting, making sure that we have the right product, the right price, the right assortment to compete in every market that we sell product in.

Kevin Steinke, Analyst, Barrington Research: Okay. And you mentioned that you expect your price increases to, I think, fully offset tariff costs in the second half of the year. Just kind of thinking about gross margin, you talked about that 33% to 34% target. I know you typically have seasonal strength in the fourth quarter in gross margin, but I guess we should expect some improvement in the second half in gross margin, and I don’t know if we might be trending towards the lower end of that 33, 34% range or, you know, how you’re thinking about that.

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Yeah. I think that’s right. I think, you know, we’re expecting it to modestly improve in the back half gross margin, and we have put our pricing initiatives out there so that we are covering the cost of the tariff as well as maintaining our margin. So as we think about the full year, you know, we took a couple hits here in the first half, but back half, we do expect to come back.

Kevin Steinke, Analyst, Barrington Research: Okay. Thanks. And then just lastly, did you mention the benefit from foreign currency that you baked into the sales outlook for both the the third quarter and the full year?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Right. Yes. We did. And if you you kinda go back to our slides and stuff, you’ll see that out there. But we do expect a favorable benefit from FX primarily particularly in the fourth quarter, but third as well.

Kevin Steinke, Analyst, Barrington Research: Okay. It’s in the slides. Okay. Alright. Alright.

Thanks. That’s all I had. Thank you.

Tom Tedford, President and CEO, ACCO Brands: Thank you, Kevin.

Ezra, Call Coordinator: Thank you very much. Our next question comes from Joe Gomez with NOBLE Capital. Your line is now open. Please go ahead.

Hale Holden, Analyst, Barclays: Good morning. Hi. First question on Hello? Powerade. You know, the Nintendo’s the good morning.

The Nintendo Switch was the fastest selling console in US history when it came out here a month and a half ago or so. Same in Japan. You know, just trying to get it, you know, a better some more color on, you know, how that is impacting your guys’ PowerA subsidiary. Are you seeing that same kind? I know it’s early days, but we’ve had, you know, at least the month of July there, demand for for your products.

Tom Tedford, President and CEO, ACCO Brands: Yeah, Joe. Great question. We’re really pleased with our partnership with Nintendo and our Power a team. They’ve done a great job of getting pry or getting product to market as quickly as possible. So as we noted in our prepared remarks, the launch was on June 5, and so second quarter was really not impacted much by the switch to accessory sales.

The big season for us is holiday, and so you’ll see q four being a strong power a quarter for Akko brands. We’re well positioned to capitalize on the demand. We understand how the demand curve works as consoles get launched, get into market. First party typically realizes sales early in the maturity cycle, and third party then steps in shortly thereafter. So we feel like we’re very well positioned.

We’re excited about the accessories that we’re bringing to market, and we’re we’re in a great position with Nintendo. So, again, really pleased with our team and and and have high expectations for our accessories business supporting the launch.

Hale Holden, Analyst, Barclays: Great. Thanks for that. And then on the the $100,000,000 cost reduction program, you know, as you mentioned, you’ve gotten 40,000,000 since the beginning of the program. You know, what do you think is possible for the second half of this year?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Yeah. Well, if you think about the first half, we’ve got about 16,000,000 in because we had about eight in the first and eight in the second. So if you just think of that kind of playing out through the rest of the year, Joe, you’re probably pretty close, maybe a little bit more, just because of the later impact of some of our actions.

Hale Holden, Analyst, Barclays: Okay. Great. And then in in the the release, you talked about, you know, an asset sale. Maybe you guys give us a little bit more color what that was that you’re planning on on having any more asset sales?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: No. We don’t have any on the horizon. What that really was is the majority of it was our New York location that if you remember, Joe, we took the charge for this year as we were shutting that up as part of our footprint rationalization, as part of the cost savings initiative. So that facility was closed and sold at a nice a nice gain and a nice cash flow profit. That’s primarily what was in there.

Hale Holden, Analyst, Barclays: Okay. Great. Thanks. I’ll get back in queue.

Ezra, Call Coordinator: Our next question comes from Hale Holden with Barclays. Your line is now open. Please go ahead.

William Reuter, Analyst, Bank of America: Just two quick ones. Deb, the Brazilian tax release, is that sort of cash that comes back to you or just an accounting credit?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Actually, you know, we resolved it. If you remember, the reserve was really large a couple years ago, and we’ve been dwindling it down with negotiations and with, government coming out with new laws. But it ended up being about $20,000,000 of a liability on our books, and we are gonna end up paying about 7,000,000 out. So that 13,000,000 that’s going through the income statement is just an accounting adjustment, but we’ll have 7,000,000 go out over the next year, to the to the government.

William Reuter, Analyst, Bank of America: Got it. And then the second question was on on the the blended pricing increases that you’ve taken to offset tariffs. Any sense on a percentage basis, like, the consumer would see on shelf, versus maybe where you were last year or or your enterprise customers?

Deb O’Connor, Executive Vice President and CFO, ACCO Brands: Yeah. You know, it’s hard, it’s hard to say because we’ve got the China and the non China, product coming in that we’re pricing accordingly for. And we’re not pricing really every single item because we do have on hand inventory as well. So, you know, we’re passing on a good price increase, as I said, to cover the cost and to cover you know, to make sure we maintain our margin.

William Reuter, Analyst, Bank of America: Okay. Maybe maybe put another way is, would you guys expect an elasticity hit, or do you think you’re gonna be able to to sort of realize most of it back to you?

Tom Tedford, President and CEO, ACCO Brands: Yeah. Hey. This is Tom. That that that’s sometimes difficult to to to address because there’s so many other macro issues that that go into modeling elasticity. We do we do model a modest volume decline as we put through price increases.

But to give specific numbers, it’s too speculative from my perspective. So the the the forecast that we’ve given appropriately balances price elasticity in it, particularly here in The US.

William Reuter, Analyst, Bank of America: Great. I definitely can respect that. I appreciate it. Thank you.

Tom Tedford, President and CEO, ACCO Brands: Thank you.

Ezra, Call Coordinator: Our next question comes from William Reuter with Bank of America. Your line is now open. Please go ahead.

Joe Gomez, Analyst, NOBLE Capital: Good morning. The first, given the stressed consumer environment, have you seen your US customers allocating, a different amount of shelf space for back to school products or traditional office products to the non branded competition that that that’s out there?

Tom Tedford, President and CEO, ACCO Brands: Yeah. You know, that that ebbs and flows, Bill, every year. So, you know, the decisions to set BTS typically happen, you know, before the turn of the calendar year. So those decisions were made well in advance of the Liberation Day tariff announcements. You know, I would say this year, our listings are pretty constant to the prior year.

In fact, they’re up modestly. What we believe is going to impact our sales a little more is just the conservative nature in which our retailers are approaching inventory with all the uncertainties that they’re trying to manage through. And so that’s why we think BTS sales will be a little depressed compared to our past performance.

Joe Gomez, Analyst, NOBLE Capital: Got it. And then, I I mean, I know you said that only 10% of, sell through has occurred to this point. So this may be difficult question to answer. But do you believe that in The US, you will have gained or or lost market share this season for back to school?

Tom Tedford, President and CEO, ACCO Brands: Yeah. Yeah, Bill. That it it’s way too premature to to project whether or not we will or we will we will not. We’re well positioned. I can tell you that our brands historically have performed very, very well in back to school, particularly Five Star.

We’re confident in our feature rich assortment and our price points. We think we hit all the major price points, and we have great relationships with our customers. So the things that we can control, we think we’ve executed against very well going into this season. Now we just have to see how it plays out.

Joe Gomez, Analyst, NOBLE Capital: Got it. And then lastly for me, I’m not sure what you might be willing to provide or not provide, but can you, give us any sense for magnitude of the dollar of incremental sales of gaming accessories you might see either in the first quarter of this year or I’m sure in the in fiscal year twenty six based upon all of the momentum behind Switch? Just trying to figure out kind of is this like a $10,000,000 opportunity, ’20? I I I don’t have a sense for context.

Tom Tedford, President and CEO, ACCO Brands: Yeah. Again, it’s a little early on that topic as well. Holiday season is our biggest season in support of the switch to launch. We’re starting to get orders in now. We have a demand forecast provided to us.

We’re excited about that, but I think it would be premature for us to give a specific dollar amount simply because we we don’t really know yet. But so far, reception has been very strong with our our assortment.

Joe Gomez, Analyst, NOBLE Capital: Got it. Alright. That’s all for me. Thank you.

Ezra, Call Coordinator: Thank you very much. We currently have no further questions, so I will hand back over to Tom for any closing remarks.

Tom Tedford, President and CEO, ACCO Brands: Thank you everyone for joining us. We are pleased to have delivered second quarter sales and adjusted EPS in line with our outlook. I am confident that our proactive actions are better positioning us for long term profitable growth. We have a strong balance sheet and generate consistent cash flows, which we will use to invest in revenue growth opportunities. We appreciate your interest in ACCO Brands and look forward to talking with you when we report our third quarter results in October.

Ezra, Call Coordinator: Thank you very much, Tom, and thank you, Deb and Chris, for being our speakers on today’s call. We appreciate everyone for joining. You may now disconnect your lines.

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