Hello, everyone, and welcome to the ACCO Brands Second Quarter 2025 Conference Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions] I will now hand over to Chris McGinnis Head of Investor Relations, to begin. Please go ahead.

Good morning, and welcome to the ACCO Brands Second Quarter 2025 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 nonrecurring 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.

Thank you, Chris. Good morning, everyone, and welcome to ACCO Brands Second Quarter 2025 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 million multiyear cost reduction program, realizing additional savings in the second quarter that brought the cumulative program total to over $40 million. We are also making great progress on our tariff mitigation actions. As a multinational company, approximately 60% of sales are outside the U.S., which are not impacted by U.S. tariffs. For those markets, our current supply chain provides excellent value. As we mentioned last quarter, our proactive China plus one approach in the U.S. has positioned us well to navigate the evolving trade landscape. To date, we have announced 2 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 U.S.-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 U.S., particularly early in the quarter as our customers adjusted their purchasing plans and monitor 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 Switch 2 console. Sales for back-to-school products were down in the quarter as U.S. retailers were cautious with their early season orders. We forecast our U.S. and Canada…

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

When we look at how the back-to-school season is playing out, can you just quantify how much of the decline you would attribute to, I think last quarter, you mentioned that maybe there was some prebuying 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.

Good morning. This is Tom. So first, let me address kind of the decline question. And the 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 the 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 3 primary drivers of the kind of changes in expectations. As we think about looking ahead, we're early in the season. 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 replenishment expectations are relatively low in our forecast. But we hope that, that 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.

And then in terms of new product development, you highlighted a couple of products that you're going to be bringing on 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 will there be a benefit in the second half?

Yes. The benefit will be very modest, Greg. It takes time for us to get syndication of a product, get listings of product. We should see some benefit from the Switch 2 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.

Our next question comes from Kevin Steinke with Barrington Research.

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, et cetera, given the demand environment, if that's something you think about in light of, again, the current trends?

Yes. So Kevin, it's a good question. We feel consistently that we have a good offering of price choices in our portfolio supported by our meat and Five Star brand here in the U.S. 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 right now, it's kind of wait and see. We're still early in the season, as I mentioned earlier. As it relates to back-to-school and other markets, which are important such as Brazil, we are going to have to reposition some of our product and make sure that we are competitive and evolving price points as lower-cost competitors from China particularly or 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.

On 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 wondering about the sustainability of that trend, I guess?

Yes, 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 U.S. 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.

And you mentioned that you expect your price increases to, I think, fully offset tariff costs in the second half of the year. Just 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 you might be trending towards the lower end of that 33%, 34% range or how you're thinking about that? Deborah A. O’Connor: Yes, I think that's right. I think 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, we took a couple of hits here in the first half, but back half, we do expect to come back.

And then just lastly, did you mention the benefit from foreign currency that you baked into the sales outlook for both the third quarter and the full year? Deborah A. O’Connor: Right. Yes, we did. And if you kind of go back to our slides and stuff, you'll see that out there, but we do expect a favorable benefit from FX, primarily -- or particularly in the fourth quarter, but third as well.

Okay. It's in the slides. Okay. All right. All right.

Our next question comes from Joe Gomes with Noble Capital.

First question on the PowerA. The Nintendo Switch was the fastest-selling console in U.S. history when it came out here 1.5 months ago or so. Same in Japan. Just trying to get a better -- some more color on how that is impacting your guy's PowerA subsidiary? Are you seeing that same time? I know it's early days, but we've had at least the month of July there demand for your products?

Yes, Joe, great question. We're really pleased with our partnership with Nintendo and our PowerA team. They've done a great job of 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 2 accessory sales. The big season for us is holiday. And so you'll see Q4 being a strong PowerA quarter for ACCO 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 in a great position with Nintendo. So again, really pleased with our team and have high expectations for our accessories business supporting the launch.

And on the $100 million cost reduction program, as you mentioned, you've gotten $40 million since the beginning of the program. What do you think is possible for the second half of this year? Deborah A. O’Connor: Yes. Well, if you think about the first half, we've got about $16 million in because we had about $8 million in the first and $8 million 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.

And then in the release you talked about an asset sale. Maybe you could just give us a little bit more color on what that was or you're planning on having any more asset sales? Deborah A. O’Connor: 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 a 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 gain and a nice cash flow profit. That's primarily what was in there.

Our next question comes from Hale Holden with Barclays.

Just 2 quick ones. Deb, the Brazilian tax release. Is that sort of cash that comes back to you or just an accounting credit? Deborah A. O’Connor: Actually, we resolved it. If you remember, the reserve was really large a couple of 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 million of a liability on our books. And we are going to end up paying about $7 million out. So that $13 million that's going through the income statement is just an accounting adjustment, but will have $7 million go out over the next year to the government.

Got it. And then the second question was on the blended pricing increases that you've taken to offset tariffs. Any sense on a percentage basis, like what the consumer would see on shelf versus maybe where you were last year or your enterprise customers? Deborah A. O’Connor: Yes. 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 we're passing on a good price increase, as I said, to cover the cost and the cover to make sure we maintain our margin.

Maybe put another way, would you guys expect in elasticity hit? Or do you think you're going to be able to sort of realize most of it back to you?

Yes, Hale, this is Tom. That's sometimes difficult to address because there's so many other macro issues that go into modeling elasticity. 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 forecast that we've given appropriately balances price elasticity in it particularly here in the U.S.

Great. I definitely can respect that. I appreciate it.

Our next question comes from William Reuter with Bank of America.

The first, given the stressed consumer environment, have you seen your U.S. customers allocating a different amount of shelf space for back-to-school products or traditional office products that the non-branded competition that's out there?

Yes. That ebbs and flows, Bill, every year. So the decisions to set BTS typically happen before the turn of the calendar year. So those decisions were made well in advance of the Liberation Day tariff announcement. 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.

Got it. And then I mean I know you said that only 10% of sell-through has occurred to this point. So this may be a difficult question to answer, but do you believe that in the U.S. you will have gained or lost market share this season for back-to-school?

Yes. Yes, Bill, it's way too premature to project whether or not we will or 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.

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 fiscal year '26 based upon all the momentum behind Switch. Just trying to figure out kind of -- is this like a $10 million opportunity, $20? I don't have a sense for context.

Yes. Again, it's a little early on that topic as well. Holiday season is our biggest season in support of the Switch 2 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 don't really know yet. But so far, reception has been very strong with our assortment.

Thank you very much. We currently have no further questions. So I will hand back over to Tom for any closing remarks.

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.

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.