Q2 2024 ACCO Brands Corp Earnings Call
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Speaker Change: Hello, everyone and welcome to the I keep brands second quarter 2024, adding scope that's cool.
Nadia: My name is Nadia, and I'll be coordinating the call today. If you would like to ask a question, please press star followed by one on your telephone keypad. I will now hand over to your host, Chris McGinnis, Senior Director of Investor Relations. Again, Chris, please go ahead.
Not Yet: My name is not yet and I'll be coordinating the call today.
Not Yet: If he would like to ask a question. Please press star followed by one on your telephone keypad.
Not Yet: I will now handover to hoist Krista Mckinney senior director of Investor Relations to begin Chris. Please go ahead.
Chris McGinnis: Good morning, and welcome to the ACCO Brands second quarter 2024 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. He will provide an overview of our second quarter results and update you on our 2024 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 update you on our outlook for the full year 2024 and the third quarter. We will then open the line for questions.
Christine McKinney: Good morning, and welcome to the ACCO brands second quarter 2024 conference call.
Chris McGinnis: 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, non-cash goodwill and intangible asset impairment charges, and other non-recurring items and unusual tax items and adjustments to reflect the estimated annual tax rate on quarterly earnings. Schedules of adjusted results and other non-GAAP financial measures and reconciliation of these measures to the most directly comparable GAAP measures are included in the earnings release and slides that accompany this call.
Christine McKinney: This is Chris Mcginnis senior director of Investor Relations.
Christine McKinney: Speaking on the call today is Tom Peppered, President and Chief Executive Officer of ACCO Brands Corporation.
Tom will provide an overview of our second quarter results and update you on our 2024 priorities.
double Connor: Also speaking today is double Connor executive Vice President and Chief Financial Officer, who will provide greater detail on our second quarter results and update you on our outlook for the full year 2024.
Christine McKinney: And the third quarter.
Christine McKinney: We will then open the line for questions.
Christine McKinney: <unk> that accompany this call have been posted to the Investor Relations section of ACCO Brands' dotcom.
Speaker Change: 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 adjustments to reflect the estimated annual tax rate on quarterly earnings.
Speaker Change: 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.
Chris McGinnis: Due to the inherent difficulty of forecasting and quantifying certain amounts, we do not reconcile our forward-looking non-gap measure. 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'll turn the call over to Tom Tedford.
Speaker Change: Due to the inherent difficulty in forecasting and quantifying certain amounts we do not reconcile our forward looking non-GAAP measures.
Speaker Change: 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 those statements are made.
Speaker Change: 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'll turn the call over to Tom set for.
Tom Peppered: Thank you Chris.
Tom Tedford: Good morning, everyone, and welcome to today's call. Last night, we reported second quarter 2024 results with adjusted EPS above our outlook range, improved cash flow, lower inventory balances, gross margin expansion, and a lower leverage ratio versus the prior year. I am pleased with the company's performance as we continue to navigate a challenging business and consumer spending environment. We have good momentum on the cost side of our business, and the decisive actions we have taken are resulting in improved financial performance. We've made substantial progress in our cost reduction efforts and are on track to realize over $20 million in savings this year.
Tom Peppered: Morning, everyone and welcome to today's call.
Tom set: Last night, we reported second quarter 2024 results with adjusted EPS above our outlook range improved cash flow.
Tom set: Lower inventory balances gross margin expansion and a lower leverage ratio versus the prior year.
Tom: I am pleased with the company's performance as we continue to navigate a challenging business and consumer spending environment.
Tom: We have good momentum on the cost side of our business and the decisive actions. We have taken are resulting in improved financial performance.
We've made substantial progress in our cost reduction efforts and are on track to realize over $20 million in savings this year.
Tom Tedford: Our team remains laser-focused on improving profitability, which resulted in gross margins expanding 150 basis points and a reduction in SG&A of 10% for the quarter. We are strategically investing in new product development, strengthening our partnerships across all our sales channels, and implementing targeted initiatives to gain market share. While we are encouraged with the progress we are making on our cost structure and operational footprint, we are actively evaluating additional cost reduction opportunities.
Tom: Our team remains laser focused on improving profitability, which resulted in gross margins expanding 150 basis points and a reduction in SG&A up 10% for the quarter.
Tom: We are strategically investing in new product development.
Tom: Strengthening our partnerships across all our sales channels and implementing targeted initiatives to gain market share.
Tom: While we are encouraged with the progress we are making on our cost structure and operational footprint.
Tom: We are actively evaluating additional cost reduction opportunities.
Tom Tedford: Building upon our financial achievements, I'd like to highlight another area where we've made significant strides, our supply chain. The key focus of our global supply chain team has been inventory management. Through a combination of improved business planning, the use of technology tools, and a focus on strategic SKU rationalization, we've successfully reduced our inventory levels by 17% versus the prior year. The improvement in cash flow and our commitment to debt reduction are contributing to an improved balance sheet. We ended the second quarter with a net debt position 13% lower compared to last year and a consolidated net leverage ratio of 3.7 times, well below last year.
Tom: Building upon our financial achievements I'd like to highlight another area, where we've made significant strides our supply chain.
The key focus of our global supply chain team has been inventory management.
Tom: Through a combination of improved business planning.
Tom: The use of technology tools, and a focus on strategic SKU rationalization, we successfully reduced our inventory levels by 17% versus the prior year.
Tom: The improvement in cash flow and our commitment to debt reduction are contributing to an improved balance sheet.
Tom: We ended the second quarter with a net debt position, 13% lower compared to last year and our consolidated net leverage ratio of three seven times.
Tom: Well below last year.
Tom Tedford: We expect to end 2024 at a leverage ratio of about three times, as we move into our stronger cash generation cycle of the year. This is a level we have not achieved since 2019, and this improvement provides us with more financial flexibility with our capital allocation priorities, which I will expand upon later. Now, let me share a few insights on our second quarter revenue performance. The year-over-year decline in certain categories has been greater than we projected.
Tom: We expect to end 2024 at a leverage ratio of about three times.
Tom: As we move into our stronger cash generation cycle of the year.
Tom: This is a level we have not achieved since 2019 and this improvement provides us more financial flexibility with our capital allocation priorities.
Tom: Which I will expand upon later.
Tom Tedford: Recently, the rate of sales decline is moderating in many categories, and our Kensington-branded computer accessories category returned to growth. The sales decline and gross margin improvement were partially driven by the exit of lower-margin business in North America, which had a significant impact in the quarter as a large portion of the exits related to back-to-school, which falls heavily in the second quarter. We anticipate less of an impact on revenue from these exits in both the third and the fourth quarter. On a segment basis, the Americas segment was down more than the international segment.
Tom: Now, let me share a few insights on our second quarter revenue performance.
Tom: The year over year decline in certain categories has been greater than we projected.
Tom: Recently the rate of sales decline is moderating in many categories and are using 10 branded computer accessories category returned to growth.
Tom: The sales decline and gross margin improvement was partially driven by the exit of lower margin business in North America.
Which had a significant impact in the quarter as a large portion of the exits related to back to school, which falls heavily in the second quarter.
Tom: We anticipate less of an impact to revenue from these exits in both the third and the fourth quarters.
Tom: On a segment basis, the Americas segment was down more than the international segment.
Tom Tedford: However, when backing out the business, trends were similar for both. Globally, demand for our office product categories remains below our expectations. We continue to work closely with our value channel partners to maximize incremental revenue opportunities with our category-leading brands and high-quality products. Our market shares are stable, and our selling teams are actively pursuing incremental revenue opportunities with an improving sales pipeline and better engagement with our key customers. Within our technology accessories categories, gaming accessories were down as the prior year benefited from a stronger lineup of new game releases.
Tom: However, when backing out the business exits trends were similar for both.
Tom: Globally demand for our office product categories remains below our expectations.
Tom: We continue to work closely with our value channel partners to maximize incremental revenue opportunities with our category, leading brands and high quality products.
Tom: Our market shares are stable and our selling teams are actively pursuing incremental revenue opportunities with an improving sales pipeline and better engagement with our key customers.
Tom: Within our technology accessories categories gaming accessories was down as the prior year benefited from a stronger lineup of new game releases.
Tom Tedford: Our computer accessories category, Return to Grow, is driven by new products and improving demand and the environment. We remain positive about the continued recovery in both of these categories in the second half of the year. Touching on back to school for North America, industry experts are still forecasting sales for the season to be down compared to the prior year.
Tom: Our computer accessories category returned to growth driven by new products and improving demand environment.
Tom: We remain positive about the continued recovery in both of these categories in the second half of the year.
Touching on back to school for North America industry experts are still forecasting sales for the season to be down compared to prior year.
Tom Tedford: It is too early to draw conclusions on the 2024 back-to-school season, but we are seeing good sell-through results for both our 5-star and Mead brands. ACCO Brands has a long history of leading our categories with innovative product solutions that help our customers work, learn, and play. Our innovation efforts are pivoting from a strong focus on our traditional core categories as our consumer preferences have changed as work has moved to hybrid environments.
Tom: It is too early to draw conclusions on the 2020 for back to school season.
Tom: But we are seeing good sell through results for both our five star and <unk> brands.
Tom: ACCO brands has a long history of leading our categories with innovative product solutions that help our customers work learn and play.
Tom: Our innovation efforts are pivoting from a strong focus on our traditional core categories as our consumer preferences have changed his work is moved to hybrid environments.
Tom Tedford: We are mining consumer insights for product solutions that solve new consumer pain points. While still early, I am encouraged by the work we are doing to launch new products that meet the needs of our consumers. Recently, our team's good work has been recognized, as the Kensington brand was awarded three prestigious red dot awards for design and innovation.
Tom: We are mining consumer insights for product solutions that solve new consumer pain points.
Tom: While still early I'm encouraged by the work we are doing to launch new products that meet the needs of our consumers.
Tom: Our team's good work has been recently recognized as the Kensington brand was awarded three prestigious Red Dot Awards for design and innovation.
Tom Tedford: I am proud of our commitment to bring innovative new product solutions to market and confident that our work will help improve revenue trends in the near term. Before turning it over to Deb, let me share a few comments on our capital allocation priorities. Over the last two years, our focus has been on supporting our quarterly dividend and reducing debt. This disciplined approach has served us well, allowing us to strengthen our balance sheet significantly.
Tom: I am proud of our commitment to bring innovative new product solutions to market and confident that our work will help improving revenue trends in the near term.
Speaker Change: Before turning it over to Deb, Let me share a few comments on our capital allocation priorities.
Deb: Over the last two years, our focus has been supporting our quarterly dividend and reducing debt.
Deb: This disciplined approach has served us well, allowing us to strengthen our balance sheet significantly.
Tom Tedford: Given this strong foundation, we are now able to contemplate a more balanced capital allocation strategy. We have the ability to opportunistically buy our shares in the market, which will help offset share dilution from our employee equity grant. With our improved balance sheet and consistent cash flow, we will consider M&A as a part of our capital allocation moving forward. We have a strong position in our existing categories and a history of successful M&A integration.
Deb: Given the strong foundation, we are now able to contemplate a more balanced capital allocation strategy.
Deb: We have the ability to opportunistically buy our shares in the market, which will help offset share dilution from our employee equity grants.
Deb: With our improved balance sheet and consistent cash flow, we will consider M&A as a part of our capital allocation moving forward.
Deb: We have a strong position in our existing categories and a history of successful M&A integrations.
Tom Tedford: We will target tuck-in acquisitions that provide a quick return on our investment and have realizable synergies. We will remain committed to keeping a low leverage ratio. In closing, I am confident in the actions we are taking to reset our cost structure and improve future revenue trends. We have a solid foundation with our global portfolio of leading brands and consistent free cash flow generation, as well as an experienced leadership team. Our strong balance sheet with no debt maturities until 2026 and Low Fixed Interest Rates on more than half of our debt put us in a sound financial condition. I will now hand it over to Deb, and we'll come back to answer your questions.
Deb: We will target tuck in acquisitions that provide a quick return on our investment and have realizable synergies.
Deb: We will remain committed to keeping low leverage ratio.
Deb: In closing I am confident in the actions, we are taking to reset our cost structure and improve future revenue trends.
Deb: Have a solid foundation with our global portfolio of leading brands and consistent free cash flow generation as well as an experienced leadership team.
Deb: Our strong balance sheet with no debt maturities until 2026, and low fixed interest rates on more than half of our debt put us in sound financial condition.
Deb: I will now hand, it over to Deb and we'll come back to answer your questions.
Deb: Deb.
Deb O'Connor: Thank you, Pam, and good morning, everyone. When we last spoke in May, we highlighted softer consumer and business demand, especially related to our office product categories. The challenging market conditions we've identified previously persisted throughout the second quarter and were a significant factor contributing to our sales shortfall versus forecast. Offsetting the lower top line, we continue to make progress in improving our operational efficiency. Our growth margin rate expanded by 150 basis points year over year.
Deb: Thank you Pam and good morning, everyone.
Deb: When we last spoke in May we highlighted softer consumer and business demand, especially related to our office product categories.
Deb: The challenging market conditions, we've identified previously persisted throughout the second quarter and were a significant factor contributing to our sales shortfall versus outlook.
Deb: Offsetting the lower top line, we continue to make progress in improving our operational efficiency.
Deb: Our gross margin rate expanded by 150 basis points year over year, and we lowered our SG&A costs by 10% compared to the same period last year.
Deb O'Connor: And we lowered our FD&A cost by 10% compared to the same period last year. These improvements came from a combination of moderating product costs, improved product mix, and cost actions. This allowed us to deliver adjusted EPS above our outlook range, underscoring our ability to drive bottom-line performance even in a challenging sales environment. In the second quarter, we took a non-cash impairment charge of $165 million related to goodwill and intangible assets.
Deb: These improvements came from a combination of moderating product costs.
Deb: <unk> product mix and our cost actions.
Deb: This allowed us to deliver adjusted EPS above our outlook range underscoring our ability to drive bottom line performance, even in a challenging sales environment.
Deb: In the second quarter, we took a noncash impairment charge of $165 million related to goodwill and intangible assets.
Deb O'Connor: The triggering events of the impairment charges included declines in our market capitalization since the start of 2024, as well as reduced volumes in certain product categories. However, overall, we remain confident in our portfolio of leading brands and our ability to generate strong cash flow going forward. Now turning to sales, reported sales in the second quarter of 2024 decreased 11% versus the prior year. Comparable sales, excluding foreign exchange, were down 10%.
Deb: The triggering event for the impairment charges included declines in our market capitalization since the start of 2024 as well as reduced volumes in certain product categories.
Deb: Overall, we remain confident in our portfolio of leading brands and our ability to generate strong cash flow going forward.
Deb: Now turning to sales.
Deb: Reported sales in the second quarter of 2024 decreased 11% versus the prior year.
Deb: Comparable sales, excluding foreign exchange were down 10%.
Deb O'Connor: The planned exit from lower-margin business negatively impacted sales by approximately 4%. We continue to see overall soft global demand for our categories, which is in line with industry trends. Growth profit for the second quarter was $153 million, a decrease of 7% due to lower sales. SG&A expense of $88 million was down 10% versus the prior year due to our cost reduction actions, timing of certain spend, and lower incentive compensation expense in the quarter.
Deb: The planned exit of lower margin business negatively impacted sales by approximately 4%.
Deb: We continue to see overall soft global demand for our categories, which was in line with industry trends.
Deb: Gross profit for the second quarter was $153 million, a decrease of 7% due to the lower sales.
Deb: SG&A expense of $88 million was down 10% versus the prior year due to our cost reduction actions timing of certain spend and lower incentive compensation expense in the quarter.
Deb O'Connor: Adjusted operating income for the second quarter was $65 million, a similar level to last year. The sales decline was offset by 130 basis points of adjusted operating margin improvement. Now, let's turn to our segment results. In the Americas segment, comparable sales declined 13 percent.
Adjusted operating income for the second quarter was $65 million, a similar level to last year.
Deb: The sales decline was offset by a 130 basis points of adjusted operating margin improvement.
Now, let's turn to our segment results.
Deb: In the Americas segment comparable sales declined 13%.
Deb: The exit of lower margin business, primarily related to back to school accounted for a little more than 5% of the decline.
Deb: The remaining decline is attributable to lower business and consumer spending for our traditional office products categories and difficult compares for our gaming accessories.
Deb: This was partially offset by growth in computer accessories.
Deb O'Connor: The exit of lower-margin business, primarily related to back-to-schools, accounted for a little more than 5% of the decline. The remaining decline is attributable to lower business and consumer spending for our traditional office products categories and difficult comparisons for our gaming accessories. This was partially offset by growth in computer access. America's Adjusted Operating Income Margin for the second quarter improved 170 basis points to 21.6% compared to the prior year, with the improvement in the margin rate due to moderating product costs, improved product mix from our planned exits of lower margin business, and our SG&A cost reduction efforts. Now, let's turn to our international segment.
Deb: The Americas adjusted operating income margin for the second quarter improved 170 basis points to 21, 6% compared to the prior year with.
Deb: With the improvement in the margin rate due to moderating product costs improved product mix from our planned exit of lower margin business and.
Deb: And our SG&A cost reduction efforts.
Deb: Now, let's turn to our international segment.
Deb: For the second quarter comparable sales declined 5% due to volume decline as the demand environment remains soft for our traditional categories.
Deb: We saw double digit growth in the computer accessories category, driven by improving demand trends.
Deb O'Connor: For the second quarter, comparable sales declined 5% due to volume declines as the demand environment remained soft for our traditional categories. However, we saw double-digit growth in the computer accessories category driven by improving demand trends. International adjusted operating income margin for the second quarter increased 60 basis points to 8%, with adjusted operating income flat. The improvement in adjusted operating income margin rate was due to moderating product costs and the cumulative effect of our pricing and cost reduction actions.
Deb: International adjusted operating income margin for the second quarter increased 60 basis points to 8% with adjusted operating income flat.
Deb: The improvement in adjusted operating income margin rate was due to moderating product cost and the cumulative effect of our pricing and cost reduction actions.
Deb O'Connor: Switching to cash flow and balance sheet items, historically, due to our seasonality, we generally use cash in the first half of the year and generate significant cash flow in the second half of the year. Through the first six months of 2024, we have improved our free cash flow by $43 million versus the prior year. This reflects the timing of certain customer collections and vendor payments.
Deb: Switching to cash flow and balance sheet items historically due to our seasonality. We generally use cash in the first half of the year and generate significant cash flow in the second half of the year.
Deb: Through the first six months of 2024, we have improved our free cash flow by $43 million versus the prior year.
Deb: This reflects the timing of certain customer collections and vendor payments.
Deb O'Connor: The free cash outflow of $2 million through June 30th positions us well to achieve our free cash flow outlook of approximately $130 million for the year. We ended the quarter with total growth debt of $986 million, $100 million lower than at the same time last year. Our cash balance was $113 million, which is higher than a year ago due to the timing of cash flows in Brazil. At the end of the quarter, we had $501 million of remaining availability on our $600 million revolving credit facility.
Deb: The free cash outflow of $2 million through June 30 positions us well to achieve our free cash flow outlook of approximately $130 million for the year.
Deb: We ended the quarter with total gross debt of $986 million $100 million lower than the same time last year.
Deb: Our cash balance was $113 million, which is higher than a year ago due to timing of cash flows in Brazil.
At the end of the quarter, we had $501 million of remaining availability on our $600 million revolving credit facility.
Deb O'Connor: As shown on our earnings slide, more than half of our debt is at a fixed interest rate of 4.25% and does not mature until 2029. We ended the quarter with a consolidated leverage ratio of 3.7 times, down from the 4.3 times leverage ratio in Q2 of last year and well below our 4.5 times covenant ratio. However, longer term, we are still targeting a ratio of two to two and a half times.
Deb: As shown on our earnings slide more than half of our debt is at a fixed interest rate of 4.25% and does not mature until 2029.
Deb: We ended the quarter with a consolidated leverage ratio of three seven times down from the four three times leverage ratio in Q2 of last year and well below our four and a half times covenant ratio.
Deb: Longer term, we are still targeting a ratio of two to two and a half times.
Deb O'Connor: The company consistently generates strong free cash flow, and as our leverage improves, this will allow us to deploy capital in multiple ways that create value for our shareholders. Our capital allocation priorities are as follows. First, we will continue to invest in our strong brands and product innovation to ensure long-term success. Second, we will support our quarterly dividend program. Third, our focus on debt reduction will remain until we achieve our long-term targeted ratio of two to two and a half times.
Deb: The company consistently generate strong free cash flow and as our leverage improves this will allow us to deploy capital in multiple ways that create value for our shareholders.
Deb: Our capital allocation priorities are as follows.
Deb: First we will continue to invest in our strong brands and product innovation to ensure long term success.
Deb: Second we will support our quarterly dividend program.
Deb: Third our focus on debt reduction will remain until we achieve our long term targeted ratio of two to two five times.
Deb O'Connor: Next, by achieving meaningful debt and leverage reduction over the last two years, we believe our strong cash flow gives us the flexibility to repurchase shares. We will do this opportunistically and to help offset dilution from our Employee Equity Grant. Finally, another potential use of our cash flow will be M&A. ACCO Brands has a long history of successfully integrating acquisitions to expand brand presence, to extend their geographic reach, and to complement our product line.
Deb: Next by achieving meaningful debt and leverage reduction over the last two years, we believe our strong cash flow gives us the flexibility to repurchase shares.
Deb: We will do this opportunistically and to help offset dilution from our employee equity grant.
Deb: Finally, another potential use of our cash flow will be M&A.
Deb: ACCO brands has a long history of successfully integrating acquisitions to expand brand presence.
Deb: To extend our geographic reach and to complement our product lines.
Deb O'Connor: We have been prudent with purchase prices, and we will remain committed to low debt leverage. Now, let's move to the outlook for 2024 and the third quarter. We are updating our full-year outlook, which calls for reported sales to be within a range of down 8 to 9 percent. For the full year, we expect adjusted EPS to be in a range of $1.04 to $1.09 per share. We continue to expect full-year growth margins to be improved compared to 2023.
Deb: We have been prudent with purchase prices and we will remain committed to our low debt leverage.
Deb: Now, let's move to outlook for 2024, and the third quarter.
Deb: We are updating our full year outlook, which called for reported sales to be within a range of down 8% to 9%.
Deb: For the full year, we expect adjusted EPS to be in a range of $1 four to $1 90 per share.
Deb: We continue to expect full year gross margin to be improved compared to 2023.
Deb O'Connor: SG&A costs will be down to the prior year as savings from our cost actions help to offset inflationary pressures related to labor and other costs. The adjusted tax rate is expected to be approximately 30%. Intangible amortization for the full year is estimated to be $45 million, which equates to approximately $0.32 of adjusted EPS. We are updating our pre-cash flow expectations for the full year. We now believe it will be approximately $130 million and expect to end 2024 with a consolidated leverage ratio of approximately 3 to 3.2 times, a level not reached since 2019.
Deb: SG&A costs will be down to the prior year as savings from our cost actions helped to offset inflationary pressures related to labor and other costs.
Deb: The adjusted tax rate is expected to be approximately 30%.
Deb: Intangible amortization for the full year is estimated to be $45 million, which equates to approximately 32 of adjusted EPS.
Deb: We are updating our free cash flow expectation for the full year.
Deb: Now believe it will be approximately $130 million and expect to end 2024 with a consolidated leverage ratio of approximately 3% to three two times.
Deb O'Connor: For the third quarter, we expect reported sales to be down five to seven percent. It is important to note that the impact from the exit of lower margin business will be significantly less in the second half of the year. Our third quarter outlook is for adjusted EPS to be in the range of $0.21 to $0.24 per share. Now, let's move on to Q&A, where Tom and I will be happy to take your questions. Apparator.
Deb: A level not reached in 2019.
Deb: For the third quarter, we expect reported sales to be down 5% to 7%.
Deb: Important to note at the impact from the exit of lower margin business will be significantly less in the second half of the year.
Deb: Our third quarter outlook is for adjusted EPS to be in the range of 21 cents to <unk> 24 per share.
Deb: Now, let's move on to Q&A, where Tom and I will be happy to take your questions.
Operator: Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove your question, please press star followed by 2. When preparing to ask your question, please ensure your phone is unmuted locally. And the first question goes to Greg Burns of Sidoti & Co. Greg, please go ahead.
Deb: Operator.
Speaker Change: Thank you that she would like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: I would like to raise your question. Please press star followed by Chase.
Mr lately: One of the paint ask your question, please ensure fairness and Mr lately.
Speaker Change: And the third question Ishi, Greg Burns of Sidoti NK, Greg. Please go ahead.
Greg Burns: morning. Looking at the technology business, I think last quarter you mentioned maybe some excess channel inventory for some product categories. Where does the channel inventory now stand? With the Windows Update occurrence and AI PCs coming out, you know, how do you view the growth prospects for that business as we go into the back half of this year and into 2025? Thank you.
Greg Burns: Good morning.
Greg Burns: Yeah.
Greg Burns: Looking at the technology business I think last quarter, you had mentioned.
Speaker Change: Some excess.
Greg Burns: Channel inventory for some product categories, where does the channel inventory now stand in.
Greg Burns: With windows the Windows update.
Greg Burns: Occurring in AI Pcs coming out how do you view the.
Greg Burns: The.
Greg Burns: The growth prospects for that business as we go into the back half of this year and into 2025. Thank you.
Tom Tedford: Good morning, Greg. This is Tom.
Tom Tedford: Thanks for your question. Yeah, so let me first address the inventory part of the question. You know, the channel has made significant progress in reducing inventory really across the globe in the category that was most concerning to us, which was universal docking stations. So we feel pretty good about where inventory positions are within the channel. There's still work to do in certain areas of the business, but for the most part, we're in a much better position today than we were even as we turned the calendar year. So we feel good about it.
Greg Burns: Yes. Good morning, Greg This is Tom Thanks for your question.
Tom: Yeah. So let me first address the inventory part of the question.
Tom: The channel has made significant progress.
Tom: In reducing inventory really across the globe.
Tom: In the category that was most concerning to us which was a universal docking stations.
Tom: So we feel pretty good about where inventory positions are within the channel. There's still work to do in certain areas of the business, but for the most part we're in a much better position today than we were even.
Tom Tedford: Second, Kensington has historically been a strong growing brand within our portfolio, and we anticipate that it will return to growth this year. I'm very encouraged by what we're seeing within the business. I'm encouraged by the trends. I was with a customer yesterday, and I'm encouraged by the feedback we're getting from our customers on our engagement. And I think the kind of macro things that you discussed in your comments give us optimism for really good growth in the near term. So we're really pleased with the Kensington business and its performance.
Tom: Even as we turn the calendar year.
Tom: So we feel good about it.
Tom: Kent.
Kent: Kensington has historically been a strong growing brand within our portfolio, we anticipate that it will return to growth. This year I'm very encouraged by what we're seeing within the business I'm encouraged by the trends.
Kent: I was with a customer yesterday encouraged by the feedback we're getting from our customers and owner engagement.
Kent: And I think that the.
Speaker Change: Macro things that you discussed in your in your comments.
Speaker Change: Give us optimism for really good.
Speaker Change: Growth in the near term so we're real pleased with the Kensington business and its performance.
Tom Tedford: Okay, thanks. And then in terms of M&A... Would you be looking to add a new product category like gaming or? Or would you be more apt to do something? You'd buy smaller brands and maybe existing categories like the office market. You know, how should we think about your M&A strategy, maybe particularly, how it might be used to drive growth in the office or some of the more traditional categories?
Speaker Change: Okay. Thanks, and then in terms of M&A.
Speaker Change: Would you be looking to add a new product category like gaming or.
Speaker Change: Or would you be more apt to to do something.
Speaker Change: By smaller brands and maybe existing categories like the office market, how should we think about your M&A strategy, maybe particularly.
Speaker Change: How it might be used to.
Speaker Change: Drive growth to me in the office.
Tom Tedford: Yeah, Greg, so we're going to be very careful with our approach. We're committed to keeping our leverage ratio low.
Speaker Change: Your more traditional categories.
Speaker Change: Yeah, Greg so.
Speaker Change: We're gonna be very careful with our approach we are committed to keeping our leverage ratio low.
Tom Tedford: We're going to look for synergistic opportunities, which likely imply that they will be more closely aligned with our current categories. And, you know, we've established our criteria. We won't deviate from that. We're going to be very disciplined in our approach moving forward as we consider opportunities when they present themselves.
Speaker Change: We're going to look for synergistic opportunities.
Speaker Change: Which likely imply that there will be more near in to our current categories.
Speaker Change: And.
Speaker Change: We've established our criteria, we won't deviate from that we're going to be very disciplined in our approach moving forward as we consider opportunities when they present themselves.
Tom Tedford: Okay, then just lastly, when you look at the market, you know, what's the pipeline of opportunity? How do the valuations look? You know, how? Yeah, maybe we could just start there.
Speaker Change: Okay and then just lastly, when you look at the.
Speaker Change: The market.
Speaker Change: What's the pipeline of opportunity how do the valuations look.
Speaker Change: No.
Tom Tedford: So it's starting to open up a bit. You know, I think we still have some work to do to fill the pipeline, but it's starting to open up a bit. I think there are some interesting opportunities that we're looking at, but you know, that's about as much as we could say at this point. And Greg, I think, you know, historically, we've
Speaker Change: Yes, maybe we could just.
Speaker Change: I'll start there.
Speaker Change: So it's starting to open up a bit.
Speaker Change:
Speaker Change: I think we still have some work to do to fill the pipeline.
Speaker Change: But it's starting to open up a bit.
Speaker Change: I think there's some interesting opportunities that we're looking at but.
Tom Tedford: and Greg, I think you know historically we've been able to fill that pipeline and have a lot of different things to look at, and as Tom said, we're gonna be pretty disciplined in how we approach
Speaker Change: That's about as much as we can say at this point.
Speaker Change: Yeah, and Greg I think.
Greg Burns: Historically we've.
Greg Burns: Been able to fill that pipeline.
And a lot of different things to look at and as Tom said, we're going to.
Pretty disciplined in how we approach it.
Greg Burns: Alright, thank you.
Joe Gomes: Thank you. The next question goes to Joe Gomes of Noble Capital. Joe, please go ahead.
Joe: Thank you. The next question guys, Hey, Joe games of Naval Capital Jay. Please go ahead.
Joe Gomes: Good morning. Thanks for taking my question. I wanted to start off this morning by saying pardon me.
Joe Games: Good morning, Thanks for taking my questions.
Joe Gomes: You know, as you mentioned, the market for the, you know, office and back to school consumer still remains softer than, you know, what you guys were anticipating. I was kind of wondering, maybe you could, you know, maybe highlight a few of the things where internally, you were projecting, you know, X business to grow faster than what it did in the quarter. And, you know, what, what do you, as you're sitting there today, need to happen, you know, on the consumer side or on the office product side in order for those revenue declines to, you know, significantly moderate from where they have been here?
Wanted to start off this morning.
Speaker Change: Pardon me.
Speaker Change: As you mentioned the market for <unk>.
The office and back to school.
Speaker Change: Tumor still remains softer than what you guys were had anticipating.
Speaker Change: Wondering maybe you can.
Speaker Change: Let me highlight a few of those things where internally you are projecting you know X business to grow faster than what it did in the quarter and what what do you as you're sitting here today.
Speaker Change: Needs to happen.
On the consumer side or on the office product side.
Speaker Change: In order for those revenue declines too.
Tom Tedford: Yeah, Joe, that's obviously a difficult one for us to ask in terms of kind of what needs to happen at a macro level. Let me first dive into the question about our expectations. So across most of our categories, particularly within our office product categories, the rate of decline in 2024 has been greater than what was forecast. We use our own trend data. We use external sources, such as Arcana, for example, in the U.S., as we're building out our expectations for any particular year in those categories.
Speaker Change: Significantly moderate from where they have been here.
Speaker Change: Yes, Joe that's an obviously a difficult one for for us to ask in terms of the kind of what needs to happen at a macro level. Let me first dive into the question.
Speaker Change: About our expectations so across most of our categories, particularly within our office product categories. The rate of decline in 2024 has been greater than what was forecasted we use our own trend data we use external <unk>.
Speaker Change: As such <unk> for example in the U S. As we're building out our expectations for any particular year.
Tom Tedford: And as we turn the calendar year and as the sales trend started to kind of moderate versus expectations, it's clear to us that that's a trend that's here for a bit. And that's really the root cause of kind of the miss, predominantly in the office products categories. We had some difficult comparisons in our gaming accessories business in Q2, but we still feel confident that that business will be a grower for the portfolio.
Speaker Change: A year in those categories and as we turned the calendar year and as the as the.
Speaker Change: Sales trends started to.
Speaker Change: Kind of moderate versus expectations. It's.
Speaker Change: It's clear to us that that's a trend that's.
Speaker Change: Here for a bit.
Speaker Change: And that's really the root cause of of kind of the Miss is just the expectations predominantly in the office products categories. We had some difficult compares in gaming accessories business in Q2.
Tom Tedford: And then we're, as we mentioned, Kensington, encouraged. We're seeing some really nice rebound. The return to growth is encouraging, particularly given the steep declines of the previous year. And then within learning and creativity, it's really early in our seasons. In Latin America, or, pardon me, in Brazil, back to school is later in the year. We're just getting into the big season, or the big weeks of the season, here in North America. So it's a bit early to tell.
Speaker Change: But we still long term feel confident that that business will be a grower for the portfolio.
Speaker Change: And then we're as we mentioned Kensington, we're encouraged we're seeing some really nice rebound.
Speaker Change: A return to growth is encouraging, particularly given the steep declines of prior year and then within learning and creative it's really early in our seasons.
In Latin America, or pardon me in Brazil.
Back to school is later in the year, we're just getting into the big season or big weeks of the season here in North America. So it's a bit early to tell so the primary drivers of lower sales versus our expectations or really the soft demand for our office products categories.
Tom Tedford: So the primary drivers of lower sales versus our expectations are really the soft demand in our office products category. Relative to improvement, you know, I just think general consumer and business sentiment is low at the moment, and we all need that to improve, and when that does, I think there'll be a tailwind in the business.
Speaker Change: Relative to improvement I, just think general consumer consumer and business sentiment is as is.
Speaker Change: Is low at the moment and we all need that to improve.
Joe Gomes: Okay, great. Thanks for that.
Speaker Change: That does I think there'll be a tailwind in the business.
Speaker Change: Okay, great. Thanks for that.
Speaker Change: One more you know great job on the gross margins you mentioned that gross margins have improved I think sequentially for six quarters.
Joe Gomes: And one more, you know, great job on the gross margin. As you mentioned, the gross margins have improved, I think, sequentially for six quarters. You know, is this a sustainable number as we go forward here? Or do you think there could need to be even more improvement in gross margin, especially given that you've exited a bunch of low-margin products? Thanks.
Speaker Change: Is this a sustainable number.
Speaker Change: As we go forward here or do you think you're there can you need to be even more.
Speaker Change: And gross margin, especially given that you've exited a bunch of a low margin product.
Tom Tedford: Thanks. Yeah, Joe. Yeah, no, Joe. That's a great question.
Speaker Change: Thanks.
Speaker Change: Yeah, No John that's a great question.
Speaker Change: I will tell you we have a lot of good cost initiative reduction plans.
Speaker Change: As you know we've talked about in the past as far as our footprint rationalization and things like that.
Tom Tedford: You know, I will tell you, we have a lot of good cost initiative reduction plans. As you know, we've talked about them in the past as far as our footprint rationalization and things like that, that will help us as we go forward. You know, I think we'll be strategic as we think about gross margins and where we land, but we're feeling good about the low margin exits. Those are out. They'll stay out. So, I think, all in all, we expect those margins to improve as we have them.
Speaker Change: <unk> will help us as we go forward I think we'll be strategic as we think about the gross margin and where we land, but we're feeling good about the low margin exit those are out they'll stay out.
Speaker Change: So I think all in all we expect gross margin to improve as the end of the year.
Joe Gomes: Great, thanks for taking my question.
Speaker Change: Great. Thanks for taking my questions.
Kevin Steinke: Thank you. The next question goes to Kevin Steinke of Barrington Research. Kevin, please go ahead.
Speaker Change: Thank you.
Speaker Change: Thank you. The next question comes she Kevin Steinke of Barrington Research Kevin. Please go ahead.
Kevin Steinke: Thank you. I wanted to...
Kevin Steinke: start off by asking about deeming access.
Kevin Steinke: Gaming Accessories You had talked about last quarter; you had some growth, and this quarter was down.
Kevin Steinke: Thank you.
Kevin Steinke: I wanted to start off by asking about gay.
Speaker Change: Gaming accessories.
Speaker Change: You had talked about.
Speaker Change: Last quarter.
Speaker Change: Some growth.
Speaker Change: This quarter was down you talked about the tough comparable you noted kind.
Tom Tedford: You talked about the tough comparable, and you noted that you kind of expected that recovery to be choppy. Although I believe you said in the opening remarks that you expect a recovery in game accessories in the second half. Can you just maybe elaborate a little bit more on that? What would you expect would drive that? Yeah, so gaming is just in a cyclical low point, just given the lack of console releases over the last couple of years.
Speaker Change: Unexpected that recovery to be choppy, although I believe you said in.
Speaker Change: The opening remarks that you.
Speaker Change: You expect a recovery in gaming accessories in the second half.
Speaker Change: Can you just maybe elaborate a little bit more on that.
Speaker Change: You would expect would would drive that.
Speaker Change: Yeah. So so gaming is just in a cyclical low point.
Tom Tedford: We also were comping, as we mentioned, some strong new game releases last year and being back in stock with wireless modules. So we had a number of difficult comping issues that we had to work through in Q2. As we look ahead, you know, our international expansion is really what we are excited about. We see opportunities, predominantly in Asia, to continue to penetrate markets like Japan, which is very large and has a very large established game market. It's the third largest in the world.
Speaker Change: Just given the lack of console releases over the last couple of years.
Speaker Change: We also were Comping as we mentioned some strong.
Speaker Change: New game releases last year and being back in stock with wireless modules. So we had a number of difficult compare issues that we had to work through.
Speaker Change: In Q2, as we look ahead.
Speaker Change: International expansion is really what we are excited about and we see opportunities predominantly in Asia.
Speaker Change: To continue to penetrate markets like Japan, which is a very large.
Speaker Change: <unk> has a very large established gaming.
Tom Tedford: And so we see those as really key growth drivers with our initiatives to expand in Asia in the back half of the year. So that's really what gives us confidence in kind of improving the Q2 results in the back half. Okay, that's helpful.
Speaker Change: Market, it's the third largest in the world and so we see those as really key growth drivers with our initiatives to expand in Asia in the back half of the year. So that's really what gives us.
Speaker Change: Confidence.
Speaker Change: And kind of improving the Q2 results in the back half.
Tom Tedford: Thanks. And you continue to talk about product development; sounds like it's, you know, still early there. It looks like you have had a couple of press releases out over the last couple of months about launches in Kensington. And so, does that kind of fit into that? Product development tailored to the changing world of work, and maybe just talk about the overall product development pipeline when we could start to see products start rolling out, or start rolling out in a more meaningful way?
Speaker Change: Okay. That's helpful. Thanks.
Speaker Change: And it is.
Speaker Change: Continue to talk about product development and.
Speaker Change: Wallets.
Speaker Change: It's still early there it looks like you had a.
Speaker Change: Couple of press releases out over the last couple of months about launches in Kensington.
Speaker Change: So does it.
Speaker Change: Do those kind of fit into that.
Speaker Change: No.
Speaker Change: Product development tailored to the changing.
Speaker Change: World of work and maybe just talk about the overall product development pipeline.
Speaker Change: When.
Speaker Change: We could start to see.
Speaker Change: Products start rolling out more start rolling out.
Speaker Change: More.
Tom Tedford: Yeah, so that has been a very discreet area of focus for our leadership team, Kevin, to get better outcomes from our product development work. As you know, we're in a disruptive environment with changing preferences from our consumers, as many of them have moved to a hybrid work environment. And I think our teams are doing a really nice job mining those insights and finding opportunities for product solutions that meet the changing needs of our consumers. Importantly, there are also products that we can sell through our existing channels. And so there's a really nice line of work that our teams are doing, but we are a bit early.
Speaker Change: Meaningful way.
Speaker Change: Yeah, so that has been.
Speaker Change: A.
Speaker Change: Very discrete area of focus.
Speaker Change: For our leadership team, Kevin is getting better outcomes from a product development work.
Speaker Change: As you know we were in a disruptive environment with changing preferences from our consumers as many of them have moved to a hybrid work environment.
Speaker Change: And I think our teams are doing a really nice job mining those insights and finding opportunities for product solutions that meet the changing needs of our consumers.
Speaker Change: Importantly, they are also products that we can sell through our existing channels and so there's a really nice.
Tom Tedford: We've had a reset on some of the work that we've done. The Kensington business has done a really nice job of looking at trends. We're launching a line of sustainable products that we feel very confident will be important for that product portfolio as we move forward. We're seeing some really interesting TAMs that we have either no or low market shares in where we think our brands should be competing. And so there are some exciting developments within the business, but product development does take time.
Speaker Change: Line of work that our teams are doing but we are a bit early we've had a reset in some of the work that we've done.
Speaker Change: The Kensington business has done a really nice job of looking at trends, we're launching a line of sustainable products.
We feel very confident will be.
Speaker Change: <unk> for that product portfolio as we move forward, we're seeing some really interesting times that we have either no or low market shares where we think our brands should be competing in and so theres some exciting developments within the business.
Tom Tedford: And so my hope is that as we get more meaningful revenue from new products in 2025 and certainly by 2026, we should be able to see significant dollars isolated to new product development or attributable to new product development. I'm very excited about it, but we've got some work to do still.
Speaker Change: <unk> product development.
Speaker Change: Take time and so my hope is as we get more meaningful revenue from new products in 2025, and certainly by 2026, we should be able to see.
Speaker Change: Significant dollars isolated to do product development are attributable to new product development. So excited about it but we've got we've got some work to do still.
Kevin Steinke: OK.
Kevin Steinke: Sounds good. I'm, you know, kind of searching through your 10k here, just to find out where you stand with repurchase authorization, but could you update us on what has been authorized there? You know, when you might expect to start buying back stock. Yeah.
Speaker Change: Okay.
Speaker Change: It sounds sounds good.
Speaker Change: Kind of searching through your 10-K here just to.
Speaker Change: <unk>.
Speaker Change: Where you stand with repurchase authorization, but.
Speaker Change: Could you update us on what what has been authorized there.
Tom Tedford: Yeah, so we have authorization, to your point, of $106 million available, still to, and outstanding. You know, we're going to take a good, careful approach. We're sort of reverting back, if you think about how ACCO has been historically, with a balanced allocation of capital. So we're working through some things with, you know, our board now, but we're going to be back in the balanced allocation.
When you might expect to start.
Speaker Change: Buying back stock.
Speaker Change: Yes, so we have authorization to your point of 106 million avere.
Speaker Change: Available sell team still authorized and outstanding.
Speaker Change: We're going to take a good careful approach, we're sort of reverting back if you think about how <unk> has been historically with a balanced.
Speaker Change: The allocation of capital.
Speaker Change: So we're working through some things with.
Speaker Change: Our board now but.
Tom Tedford: Okay, that makes sense. Well, thanks for taking the questions. I'll turn it back over.
We're going to get back into the bandwidth allocation.
Speaker Change: Okay.
Speaker Change: Makes sense.
Operator: Thank you, and as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. And the next question goes to William Reuter of Bank of America. William, please go ahead.
Speaker Change: Thanks for taking the questions I'll turn it back over.
Speaker Change: Right.
Thank you Kevin.
Speaker Change: Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: And the next question goes to William Reuter of Bank of America. William Please go ahead.
William Reuter: My first question is, a lot of the comments about the weakness in office products and back-to-school seem to imply that maybe the category is less recession resistant than I would have expected. How confident are you that the declines are due to weak consumer spending relative to less usage of some of your traditional paper products versus, you know, products that may be moving online in some capacity?
William Reuter: Good morning.
William Reuter: My first question is a lot of the comments about the weakness in the office products and back to school seems to imply that maybe the category is more.
Speaker Change: Last recession resistant than I would've expected.
Speaker Change: Are you how confident would argue that the declines are due to weak consumer spending relative to.
Speaker Change: Less usage of some of your traditional paper products versus products that may be moving online in some capacity.
Tom Tedford: Yeah, Bill, thanks for the question. I think it's a combination of both.
Tom Tedford: Certainly, we've referenced changing consumer preferences and work habits of consumers as they've migrated to hybrids, and that's impacting our business. I think uncertainty and business spending never respond well in certain economic times. And then, as you know, consumers are under pressure. I'm really confident in our back-to-school business. Our brands hold up well in times of economic uncertainty. We proved that last year, and even today, we're performing well in BTS. So I think it's a combination of multiple things. It's not just one factor.
Speaker Change: Yes, Bill Thanks for the question I think it's a combination of both.
Speaker Change: Certainly we've referenced.
The changing consumer preferences and work habits of consumers as they migrated to a hybrid.
Speaker Change: That's impacting our business.
Speaker Change: I think uncertainties business spending.
Speaker Change: Never responds well uncertain economic times, and then as you know consumers are under pressure.
Speaker Change: I'm really confident in our back.
Speaker Change: Back to school business, our brands do hold up well in times of economic uncertainties.
Speaker Change: Move out last year season.
Speaker Change: Season to date, we're performing well.
Tom Tedford: Got it. And then in terms of M&A, in the initial discussion, you kind of talked about M&A broadly, then you used the word tuck-in at least once, maybe twice. Would you consider more transformative M&A, or should we expect that any sort of M&A would be relatively modest in size?
Speaker Change: So I think it's a combination of multiple things, it's not one factor.
Speaker Change: Got it.
Speaker Change: And then in terms of M&A.
Speaker Change: And the initial discussions we've kind of talked about M&A broadly then you use the word tuck in at least once maybe twice would you consider more transformative M&A or should we expect that any sort of M&A would be relatively modest in size.
Tom Tedford: I think in the near term, we have to consider all alternatives that, you know, enhance shareholder value, but realistically, they're going to be smaller, opportunistic, highly synergistic incremental EBITDA that enables us to keep our leverage ratio low, and that's the most likely outcome in the near term.
Speaker Change: I think in the near term.
Speaker Change: We have to consider all alternatives that.
Speaker Change: Enhanced shareowner value.
Speaker Change: Realistically theyre going to be smaller.
Speaker Change: Opportunistic.
Speaker Change: Highly synergistic.
Tom Tedford: Yeah, I think Tom said it right. We work too hard to get our leverage where it's at, and we're going to maintain it at those kinds of levels. You know, we're going to look at things that have a good payback and a short payback period.
Speaker Change: Incremental EBITDA that enables us to keep our leverage ratio low and thats.
Speaker Change: That's the most likely outcome in the near term.
Speaker Change: Yes, I think Tom said it right, we work too hard to get our leverage where it's at and we're going to maintain it at those kinds of levels.
William Reuter: Got it. And then the decision to kind of reallocate capital to a little more balanced approach between share repurchases and debt reduction. While you guys have made great progress, you're clearly still a little ways away from your target of two to two and a half. I guess, why is this the time to kind of change that allocation versus getting leverage down a little more before we do that?
Speaker Change: We're going to look at things that have a good payback and a short payback period.
Speaker Change: Got it and then.
Speaker Change: The decision to kind of reallocate capital to a little more balanced approach between share repurchases and debt reduction.
Speaker Change: While you guys have made great progress, you're clearly still a little ways away from your target of two to two and a half I guess why is this the time to kind of change that allocation versus getting leverage down a little more before we do that.
Tom Tedford: Yeah, no, it's a great question. You know, I think where the stock is today, it's a great value. And I think, you know, investing our money to get a return on our own shares is key today. So we're going to have a very balanced approach. We're still targeting the two to two and a half. But given the dilution from some of our employee grants as well as the stock price where it is, it's just a good value right now.
Speaker Change: Yeah, no. It's a great question.
Speaker Change: Thank where the stack is today, it's a great value and I think.
Speaker Change: Putting our money to get a return on our shares is key today. So we're going to have a very balanced approach, we're still targeting the 2% to two and a half.
Speaker Change: But <unk>.
Speaker Change: Given the dilution from some of our employee grants as well as the stock price where it is.
William Reuter: Got it. That makes sense. All right. Thanks. That's all from me.
Speaker Change: It's a good value right now.
Tom Tedford: Thank you. We have no further questions. I'll hand it back to Tom for any closing comments.
Speaker Change: Got it that makes sense alright, thanks Thats helpful.
Speaker Change: Thank you.
Tom Tedford: Thank you for your interest in ACCO Brands. We look forward to talking to you in a couple of months to report on our third quarter results.
Speaker Change: Thank you we have no further questions I'll hand back to Tom for any closing comments.
Tom: Thank you for your interest in ACCO brands, we look forward to talking to you in a couple of months to report on our third quarter results.
Operator: Thank you, this now concludes today's call. Thank Paul for joining us; you may now disconnect your lines.
Speaker Change: Thank you. This now concludes today's call. Thank you for joining you may now disconnect your lines.