Q3 2024 ACCO Brands Corp Earnings Call
Hello, and welcome to the ACCO brands third quarter 2024 earnings Conference call.
My name is Elliot and I'll be coordinating your cold stacked.
If you would like to register a question John stage events. Please press star followed by one on your telephone keypad.
Speaker Change: I would now like to hand over to Chris Mcginnis Senior director of Investor Relations. Please go ahead.
Chris McGinnis: Good morning, and welcome to the ACCO brands third quarter 2024 conference call.
Chris McGinnis: As Chris Mcginnis senior director of Investor Relations.
Speaker Change: Speaking on the call today is Tom <unk>, President and Chief Executive Officer of ACCO Brands Corporation.
Speaker Change: Tom will provide an overview of our third quarter results and update you on our 2024 priorities.
Speaker Change: Also speaking today as Deb Oconnor Executive Vice President and Chief Financial Officer, who will provide greater detail on our third quarter results and update you on our outlook for full year 2024.
Speaker Change: We will then open the line for questions.
Speaker Change: Slides that accompany this call have been posted to the Investor Relations section of ACCO Brands' Dot com.
When speaking about our results we may refer to adjusted results.
Speaker Change: Adjusted results exclude amortization and restructuring costs noncash goodwill and intangible asset impairment charges and.
Speaker Change: And other nonrecurring items, an unusual tax items and include 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.
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.
Speaker Change: Please refer to our earnings release, and SEC filings for an explanation of certain risk factors and assumptions.
Speaker Change: Our forward looking statements are made as of today and we assume no obligation to update them going forward.
Speaker Change: Now I will turn the call over to Tom Tetrick.
Tom Tetrick: Thank you Chris Good morning, everyone and welcome to ACCO brands third quarter 2024 earnings call.
Tom Tetrick: Last night, we reported third quarter results with our revenue and adjusted EPS in line with our outlook.
Tom Tetrick: As expected we are seeing improvement in our revenue trends compared to the first half of the year as the top line impact from the exit of low margin business in North America lessened in the quarter.
Tom Tetrick: Our team continued to make solid progress on our multi year cost reduction program and we are on track to realize over $20 million in savings this year.
Tom Tetrick: This program includes our footprint rationalization and other supply chain initiatives.
Which are a key part of our strategy to enhance operational efficiency and drive long term profitability.
Tom Tetrick: Our focus on operational excellence is yielding tangible results with improved service levels to our customers lower inventories and a smaller operational footprint.
Tom Tetrick: We remain dedicated to optimizing our cost structure as we adjust to the demand realities of our categories further reductions are under consideration.
Tom Tetrick: We are committed to a balanced approach to capital allocation.
Tom Tetrick: In the quarter, we paid our quarterly dividend, which is currently yielding 6% and repurchased more than 2 million shares of ACCO brands' stock.
Tom Tetrick: We reduced debt and have an improving balance sheet. We ended the quarter with a leverage ratio of three five times down from the same period last year.
Tom Tetrick: Im also pleased to announce that we successfully refinanced our credit facilities extending the maturity date from 2026 to 2029.
Tom Tetrick: Providing us with financial flexibility.
Speaker Change: Jeff will provide additional details on the refinancing in her prepared remarks.
Speaker Change: Now I will provide more details regarding our third quarter revenue performance.
Speaker Change: In the Americas segment, the rate of the revenue decline improved in the third quarter, which benefited from the reduced impact of low margin business exits.
Speaker Change: As well as stabilizing trends across several categories.
Speaker Change: The growth in technology accessories was offset by lower demand for back to school categories in Latin America.
In North America, our back to school season was down year over year with the all important student note taking category in line with industry expectations.
Speaker Change: While sell through of our branded note taking products at the retail level is good indicating strong consumer demand, we didn't see the anticipated replenishment orders from our customers.
Speaker Change: Retailers took a more conservative approach than last year to inventory levels.
Speaker Change: They decided to sell through our products and not restock, leading to lower than expected sales for the season.
Speaker Change: However, the solid sell through in five star need enabled us to sustain our position as the branded leader in the category.
Speaker Change: This year's performance sets us up well for next year's important back to school season.
Speaker Change: In Brazil, our next largest back to school market sales to date have been softer than anticipated.
Speaker Change: The back to school selling season, which runs from the fourth quarter and into the first quarter has experienced later customer orders versus the prior year.
Speaker Change: As the season progresses, we are closely monitoring consumer behavior and market trends.
Speaker Change: We still expect our brands to perform well but.
Speaker Change: But our tempering expectations based on the slower start to the season.
Speaker Change: Turning to the international segment the pace of revenue decline also improved.
Speaker Change: Sales were positively impacted by growth in our technology and accessories categories.
Speaker Change: And our office product lines, we have launched several new ergonomic and business machine products that have helped to mitigate sales declines in other categories.
Speaker Change: EMEA and Asia had particularly good quarters, driven by new product introductions and improved customer engagement.
Speaker Change: Our technology accessories categories, including computer and gaming accessories performed well this quarter.
Speaker Change: Both experienced growth in the third quarter across each of our segments.
Speaker Change: This is the second consecutive quarter of growth in computer accessories, which can be attributed to an improving demand environment as well as new product launches.
Speaker Change: And gaming accessories growth was fueled by the successful rollout of new products as well as our international expansion efforts.
Speaker Change: I am optimistic about the continued improvement in revenue trends we.
Speaker Change: We have gained valuable insights from the back to school season in North America, this year, particularly around customers cutting replenishment orders to better control their inventory levels.
Speaker Change: We will be collaborating closely with our customers to ensure initial buy decisions are adequate to capitalize on critical.
Speaker Change: Seasonal sales opportunities.
Speaker Change: Additionally, we experimented with broadening our back to school offerings in non traditional channels. This past year with promising results.
Speaker Change: We plan to increase our presence in these channels, while aiming for further distribution gains across all channels and categories.
Speaker Change: And finally.
Speaker Change: Our robust cash flow and strengthened balance sheet offer us a solid foundation to invest and support our leading brands, while positioning us to evaluate accretive M&A.
Speaker Change: As I conclude I am excited about the opportunities ahead of us at ACCO brands and I'm confident in the actions, we're taking to reset our cost structure and improve future revenue trends.
Speaker Change: Globally, our category shares are strong our brand awareness remains high with the consumer and our brands are valued by our customers are.
Speaker Change: Our experienced leadership team has shown its ability to navigate dynamic operating environments.
Speaker Change: Our strong balance sheet with no debt maturities until 2029, and low fixed interest rates on more than half of our debt put us in a sound financial position as we invest in growth and improve productivity for a brighter future for <unk> brands.
Speaker Change: I will now hand, it over to that and we'll come back to answer your questions.
Speaker Change: Thank you Tom and good morning, everyone.
Speaker Change: I am pleased to report that our third quarter results for both sales and adjusted EPS or in line with our outlook.
Speaker Change: We are encouraged by the sales trend improvement versus the first half of the year as we continue to execute on our strategic initiatives. However.
Speaker Change: However, we remain cautious as the demand environment for both consumers and businesses remains muted and we will continue to prudently manage our cost structure.
Speaker Change: We continue to make progress in improving our operational efficiency, we have consistently improved our gross margin rate over the last two years.
Speaker Change: Year to date, our gross margin has expanded 90 basis points.
Speaker Change: In the quarter, we also lowered our SG&A costs by 7% compared to the same period last year.
Speaker Change: These improvements were led by our cost reduction efforts, especially in the U S.
I'm also pleased to share that earlier this week, we successfully refinanced our credit facility extending the maturity date from 2026 to 2029, while maintaining the same covenant structure and a similar pricing grid.
Speaker Change: We ended the quarter with remaining revolver availability of $569 million a significant amount.
Speaker Change: With the refinancing we have right sized the revolver to be more appropriate for our current liquidity needs.
Speaker Change: Lowering the fees charged on unused revolver capacity.
Speaker Change: Now turning to sales.
Speaker Change: Sales in the third quarter of 2024 came in as we expected and decreased 6% versus the prior year, despite greater foreign currency headwinds.
Speaker Change: Comparable sales, excluding foreign exchange were down 5% versus the prior year.
Speaker Change: This is a solid improvement from the rate of decline in the first half of the year benefiting from the lessening impact of our planned exit of lower margin business.
Speaker Change: And stabilizing trends across certain categories.
Speaker Change: Gross profit for the third quarter was $137 million, a decrease of 6% due to the lower sales.
Speaker Change: SG&A expense of $92 million was down 7% versus the prior year due to our cost reduction actions and lower incentive compensation expense in the quarter.
Speaker Change: Adjusted operating income for the third quarter was $45 million slightly below last year.
Speaker Change: The sales decline was offset by 30 basis points of adjusted operating margin improvement.
Speaker Change: Now, let's turn to our segment results.
Speaker Change: In the Americas segment sales declined 9% with FX, having a larger negative impact than previously expected.
Speaker Change: Comparable sales declined 7%.
Speaker Change: The exit of lower margin business accounted for about 3% of the decline, which is a lower impact than in the first half of the year.
Speaker Change: We also had lower sales for our learning and creative products in Latin America, and weaker back to school replenishment in North America.
Speaker Change: Our business Essentials product category continued to decline.
Speaker Change: These declines were partially offset by solid growth and technology accessories.
Speaker Change: The Americas adjusted operating income margin for the third quarter improved 10 basis points to 14, 2% compared to the prior year due to the improvement in the gross margin rate as well as the cost reduction efforts.
Speaker Change: Now, let's turn to our international segment.
Speaker Change: For the third quarter comparable sales declined 2% as the demand environment remains soft for our office related products.
Speaker Change: This was somewhat offset by growth for technology accessories.
International adjusted operating income margin for the third quarter increased 20 basis points to 10, 6% with adjusted operating income flat.
Speaker Change: The improvement in adjusted operating income margin rate was due to our pricing and cost reduction actions.
Speaker Change: 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.
Speaker Change: Through the first nine months of 2024, we have improved our free cash flow by $26 million versus the prior year.
This reflects strong customer collections and the timing of vendor payments.
Free cash flow was $87 million through September 30th positioning us well to achieve our free cash flow outlook of approximately $130 million for the year.
Speaker Change: We ended the quarter with total net debt of 812 million $83 million lower than the same time last year.
Speaker Change: Our cash balance was $102 million, which is higher than a year ago due to timing of cash flows in Brazil.
Speaker Change: We finished the quarter with a consolidated leverage ratio of three five times.
From the three eight times leverage ratio in Q3 of last year, and well below our <unk> covenant ratio.
Speaker Change: Longer term, we are still targeting a ratio of two to two five times.
Speaker Change: Last quarter, we spoke to you about expanding our capital allocation strategy as we continue to make progress on improving our balance sheet.
Speaker Change: During the third quarter, we returned $13 million to shareholders in the form of share repurchases and $8 million in the form of dividends.
We will continue to use our free cash flow to deploy capital using a balanced approach.
This strategy, whether through debt reduction dividends share repurchases or strategic M&A is designed to drive value accretion to our shareholders.
Speaker Change: Now, let's move to the full year outlooks for 2024.
Speaker Change: We are reiterating our full year outlook, which called for reported sales to be within a range of down eight to down 9% for the full year.
Speaker Change: We expect adjusted EPS to be in the range of $1 four to $1 nine per share.
Speaker Change: We continue to expect full year gross margins to be improved compared to 2023.
Speaker Change: SG&A costs will be down to the prior year as savings from our cost actions are somewhat offset by inflationary pressures related to labor and other costs.
Speaker Change: The adjusted tax rate is expected to be approximately 30% in.
Speaker Change: Intangible amortization for the full year is estimated to be $45 million, which equates to approximately 32 of adjusted EPS.
Speaker Change: We are also maintaining our free cash flow expectations for the full year to be approximately $130 million.
Speaker Change: We now expect to end 2024, with a consolidated leverage ratio of approximately three two times a level that reached in 2019.
Speaker Change: Now, let's move on to Q&A, where Tom and I will be happy to take your questions.
Speaker Change: Operator.
Speaker Change: Yes.
Speaker Change: 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 withdraw your question. Please press star followed by two.
Speaker Change: Wanted to ask a question, please and showing a device is on mute locally.
Speaker Change: Our first question comes from Greg Burns with Sidoti and company. Your line is open.
Speaker Change: Good morning.
Speaker Change: When you look at the dynamics of what's what's happening now in Brazil, and maybe Mexico, If you look back.
Speaker Change: A couple of quarters ago, or maybe a year or so ago that that part of the business was outperforming the U S. But now it seems like.
Speaker Change: Youre seeing a slowdown there is what youre seeing there.
Speaker Change: Macro related or is it.
Speaker Change: Some of the more secular headwinds.
Speaker Change: Your categories catching up to these other geographies.
Speaker Change: Greg It's a good question. Good morning. This is Tom.
Yeah. So obviously.
Speaker Change: We're comping a really good year prior year.
Speaker Change: And that's.
Speaker Change: Part of the challenge that we face.
Speaker Change: I don't know that we see.
Speaker Change: Secular trends accelerating I think this is more of local issues.
In both Brazil and Mexico.
Speaker Change: We're in the midst of the Brazilian back to school season, we're selling and product right now so it's probably a bit premature for us to discuss the full season.
Speaker Change: With you at this moment other than to tell you that we are behind what we were prior year and were keeping a close eye on the situation.
Speaker Change: We're growing a bit concerned.
Speaker Change: We don't anticipate that our brands are going to lose share, we're not losing listings at key customers.
Speaker Change: This is a bit of a timing issue a bit of.
Speaker Change: Issues in the macro environment with the consumer and a bit of conservatism with our retailers in Brazil.
Speaker Change: Just ordering lighter they're ordering smaller quantities.
Speaker Change: Due to the uncertainties in the local economy.
Speaker Change: And then in Mexico.
Speaker Change: There's just a number of things that are also locally driven that we're keeping a close eye on.
Speaker Change: But I think that that business is.
Is showing some signs of positive momentum.
As we get into the fourth quarter. So right now Brazil is one that we're keeping a close eye on.
Speaker Change: What's the what's the.
Speaker Change: Historic split between fourth quarter first quarter and Brazil typically.
Speaker Change: Yes, it's a good question, Greg because it's a different timing this year.
Saw last year paper prices were increasing in Brazil, and so there was a lot more ordering and buying earlier in the season and we're seeing this year.
Speaker Change: So that shift has occurred out of the fourth into the first.
Speaker Change: This year and so we're as Tom said.
<unk> orders come in to understand the ship out dates and the replenishment at the retailers. So it's a little bit different timing this year.
Speaker Change: Out of the current year and into the next year.
Speaker Change: Okay.
Speaker Change: And in terms of the North America.
Speaker Change: You mentioned some of the some of the items I think that you are.
Speaker Change: Some of the things you are putting in place too.
Speaker Change: Offset maybe some of the buying dynamics that youre seeing in the market with retailers, but.
Speaker Change: It's been maybe that now or two years on is this just the new normal of how the channel is going to operate and you got to adjust to it.
Speaker Change: And maybe if you can maybe give us a little bit more color on.
Speaker Change: How you can offset some of those.
New buying patterns.
Speaker Change: Yeah. So I believe that it is Greg I think that.
We're two years into.
Speaker Change: Our retail partners really focusing on coming out of the back to school season clean with minimal amounts of inventory.
Speaker Change: In years prior.
Speaker Change: Plenish meant really was a defining factor of how we would think about the season and if replenishment was strong we would tend to say that the season was strong.
Speaker Change: I think that is a dynamic that is behind us not in front of us and so we have to react to that.
So we have to be really careful about.
Speaker Change: Our build plans and our buy plans for our back to school inventories.
Speaker Change: Which we're building into our thinking as we look ahead and we also have to be a bit more aggressive with our initial sell in strategies, so with our key retailers.
Speaker Change: So these dynamics are real I think they are embedded in how we do business moving forward and our teams are putting in commercial strategies to react to that and optimize the opportunities that we think we see based on what we analyzed late in the season this year.
Speaker Change: With really empty shelves and lost sales opportunities for key partners.
Speaker Change: Okay. Thank you.
Speaker Change: We now turn to choke IMAX with noble capital Your line is open.
Speaker Change: Yes, Joe Thanks.
Speaker Change: Thanks for taking my.
Speaker Change: My question.
Speaker Change: Kind of want to follow up.
Speaker Change: Back on the last question, but maybe on a broader picture outside of just the back to school.
Speaker Change: You noted that the demand environment remains muted and I'm just wondering as you talk to your customers and look at that.
Speaker Change: Data.
Speaker Change: Why what are the kind of the.
Speaker Change: Key points as to why you believe the demand environment is remaining muted.
Speaker Change: Okay.
Speaker Change: Yes, I mean, that's obviously a good question and there's a lot of things that go into the answer were so broadly distributed across many categories and many channels.
Joe I'll try to summarize it is really as quickly as I can so.
Speaker Change: And the traditional office products categories that we compete in.
Our reality now is as people are working in the office two to three days a week and that was a big driver of consumption of our products historically.
Speaker Change: I think many of us, including our customers anticipated that at some point, we would get back to more normalized five days of work.
Speaker Change: In the office I think.
Speaker Change: We collectively are customers and don't see that as being the norm moving forward. So that's a source of.
Continued.
Speaker Change: Demand suppression and our office product categories. Additionally, what we've seen is just an acceleration of digitalization of records and so storage keeping.
Speaker Change: And paper printing is also down probably greater than we anticipated at the beginning of the year and so when you think of office product categories, that's really where the muted demand continues to be a bit of a challenge for us.
Speaker Change: And so we've shifted our efforts and our product development efforts moving forward to focus on categories that are more hybrid in nature, where we meet the consumer where they're doing their work with solutions that help them optimize productivity.
Speaker Change: And become more effective and the work that they're doing so that's kind of a shift in a pivot away from what we've historically seen as it relates to our computer accessories, and our gaming accessories, our technology businesses.
Speaker Change: We're seeing improvements there.
Speaker Change: Noted in our comments that computer accessories is now two consecutive quarters of growth.
Speaker Change: Which is encouraging where in <unk>, we see improving demand trends, we see adoption into our new product categories.
And new product offerings that we've made so were optimistic there and we think gaming is going to continue to be a bit of an up and down until new consoles.
Speaker Change: Launched.
Speaker Change: And so we are.
Speaker Change: Offsetting that impact with new products much of what we've done to drive sales this year above kind of industry trends is through new product introductions.
And then back to school are learning and creative categories. We're in the midst of making that news in Latin America, right now and we've referenced the slow start to the season there.
Speaker Change: And we've referenced already.
Speaker Change: Kind of a new reality of just lower inventory levels for our customers.
Speaker Change: And that category that will have to react to so I don't think demand is really different there. It's just the way that our customers are purchasing is significantly different which is driving lower sales for us.
Speaker Change: The good thing is it's across all of our key categories. Our market shares remained really strong really healthy and in fact, we're gaining share in some key categories that we track so.
Speaker Change: Part of this is just kind of adapting to changes in how the retailers are.
Speaker Change: Buying our product.
Speaker Change: Focused on working capital focused on coming out of seasons clean and part of it is changes in work dynamics that we have to react to as a company and I think our marketing teams are doing a good job of just that.
Speaker Change: Thank you for that and then on the lower margin business exit.
Speaker Change: How much of that is left and how much of that impact in the in the fourth quarter do you think.
Speaker Change: Yes. It has a diminishing return as we've talked about are a diminishing amount.
Fourth quarter would be.
Speaker Change: Little less than what the third quarter was.
Speaker Change: Okay.
Speaker Change: And then one more for me if I may.
Speaker Change: No.
Tom you talked about expansion in the non traditional channels I was wondering if give us a little bit more color on that and how big of an opportunity do you see that in the non traditional channels.
Speaker Change: Yes.
Joe: Joe It's an area that our team, particularly in our mature markets are focused on we referenced specifically North America back to school and which we did some <unk>.
Joe: Small scale tests and value channels this year.
Joe: Some nice success.
Joe: As you know, it's a growing channel with many doors many stores.
Joe: We anticipate that that expands next year, but we also have other initiatives in place in our mature markets to broaden our distribution in all of our categories, that's going to take some time for it to.
Joe: Really start having a material topline impact, but I'm encouraged by our teams you have to start somewhere and our sales teams are doing a good job of opening doors that have historically been challenging for us to get into.
Joe: And we're starting to see some positive results that I think will benefit our customers and ultimately benefit us as well.
Speaker Change: Great great Thanks for that and I'll get back in queue.
Speaker Change: Okay, Joe Thank you.
Speaker Change: Our next question comes from Kevin Spanky with Barrington. Your line is open. Please go ahead.
Kevin Spanky: Hi, good morning.
You discussed the stabilizing trends.
In certain product categories.
Kevin Spanky: Maybe you could just dive a little bit more into the categories.
Speaker Change: Seeing stabilization.
Speaker Change: Yes, Kevin so.
Speaker Change: That feel free to chime in if I Miss anything, but I'll start with computer accessories, we've talked about that.
Speaker Change: Just a few moments ago.
Speaker Change: We are now seeing two consecutive quarters of growth within our continuing product portfolio.
Speaker Change: Globally, which is obviously a great trend that was a significant drag on sales last year as you recall.
Speaker Change: So we're seeing that continue into the quarter and we're optimistic about.
Speaker Change: Now that product portfolio moving forward.
Speaker Change: Our business machines is doing quite well globally.
Speaker Change: Certainly better than we did last year.
Speaker Change: We're also encouraged by I mentioned ergonomics as a category that.
Speaker Change: We see some really interesting opportunities in with new product offerings.
Speaker Change: As well as stabilizing trends so that's a category that's doing well.
And as I mentioned earlier, a lot of the drivers of lower sales, we're really decisions that we made to exit businesses.
Speaker Change: So those those decisions and the impact of them are largely behind us and so we're starting to see stabilization in those categories as well. So that's an example of a few categories.
Speaker Change: We're seeing some positive <unk>.
Speaker Change: Trends in compared to what we've seen over the last 18 months or so.
Speaker Change: Okay. Good.
Speaker Change: And maybe just update us on that.
Speaker Change: The product development pipeline as you.
Speaker Change: Look to adapt to the new world of work.
Speaker Change: I think a big emphasis right now innovation, but maybe if you could just update us on your.
Speaker Change: Efforts there.
Yeah. So.
Speaker Change: We have identified that as an area that we must improve upon so we've put a lot of emphasis on really just assessing how we do the work that we do.
How we are responding to the changing dynamics in which we are operating in.
Speaker Change: And we've engaged a third party to assist us in this work.
Speaker Change: To really evaluate across our brands and across our businesses. The work that we do and the effectiveness of the work that we do to support our brands for our product categories and our customers.
Speaker Change: So that work is concluding it should conclude kind of early next year that will enable us to adapt and <unk>.
Speaker Change: Perhaps pivot some of our investments towards areas that we think have.
Speaker Change: Returns for the company and better returns.
It is important for us to improve the topline revenue as well as profitability.
Speaker Change: So what we've done to date I think is encouraging I'm really encouraged by.
Speaker Change: Some of the work within our Kensington portfolio, we've introduced an EQ lineup of product which is.
Speaker Change: Which launched in September.
Speaker Change: Which we're getting good reviews, our customers are giving us good feedback on consumers are giving us good feedback on.
Speaker Change: That's an example of work that we've done I referenced power.
Speaker Change: That's an area that we've spent a lot of time trying to figure out ways to get beyond gaming controllers.
Speaker Change: And so we've launched a number of products in that space that are adjacent to controllers that have been well received by our customers. So I could go on with other product categories. I mentioned ergonomics earlier, we've got a number of new products that have launched there that have been well received we've launched a new shredder called <unk> in EMEA.
Speaker Change: That's really a transformational product we think in that category. So.
Speaker Change: A lot of work has been done a lot of focus from the executive team.
Speaker Change: On this area.
So much so that we've engaged an outside party to help us kind of think through how to optimize it and drive better performance moving forward. So hopefully that's an.
Speaker Change: The answer to the question I know I went through a number of things there, but we've got a lot going on in this important area of our business.
Speaker Change: Yes, absolutely that was very helpful insight I appreciate that I guess just lastly.
You noted the improved trends or growth in.
Speaker Change: Computer accessories do you think there is some.
Speaker Change: Continuing the momentum or legs.
Speaker Change: Where that growth can continue as we move into the fourth quarter and next year.
Speaker Change: Absolutely.
Speaker Change: Absolutely.
Speaker Change: I think we are we've we're doing a really nice job there and I think we should expect continued growth in the Kensington.
Speaker Change: Business moving forward.
Speaker Change: Okay. Thanks for the.
Speaker Change: Comments I'll turn it back over.
Speaker Change: Thank you.
Speaker Change: We now turn to Hale Holden with Barclays. Your line is open. Please go ahead.
Hale Holden: Hey, good morning, I had.
Hale Holden: Two questions.
Hale Holden: Tom You mentioned in your script the potential for additional cost savings in 'twenty five.
Hale Holden: Was wondering if we should be thinking about it sort of normal course, soco programs or something bigger like you've done in the past.
Speaker Change: Yes, a good question. So we're looking at our 2025 operating plans.
Speaker Change: As we speak certainly we're committed to our ongoing productivity program. So you can absolutely expect that and then we're looking for other areas to potentially optimize our cost structure.
Speaker Change: No decisions have been made but we're certainly evaluating opportunities beyond our normalized productivity program.
Speaker Change: Okay.
Speaker Change: Just as a follow up to Ross' Ashley.
Speaker Change: Outside party, that's working with Kensington somebody also power.
Speaker Change: That's to help you.
Speaker Change: Streamline into new product categories or lean in the product categories that are working or is that potentially to evaluate divesting product categories.
Speaker Change: Yes.
Speaker Change: Let me just spend a moment to clarify they are looking across the entire product portfolio, not just kensington and power.
Speaker Change: They are really looking at how we can improve revenue outcomes from our NPD efforts.
Speaker Change: So bigger opportunities better consumer insights better commercial launch plans.
Speaker Change: Things of that nature, So it's really about improvement on what we do today.
Speaker Change: Thank you I appreciate it.
Speaker Change: Thank you Bill.
Okay.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad now.
Speaker Change: You may now sensitive William Reuter with Bank of America. Your line is open. Please go ahead.
Speaker Change: Good morning.
William Reuter: So you mentioned clearly that back to school inventories at retail are low.
William Reuter: You also said this is two consecutive years of this are inventory levels at retail below where they were last year such that it could contribute to better back to school sell in.
William Reuter: In the early parts of next season.
Speaker Change: Yes, good morning, Bill, Yes inventory levels are in a better position than they were this time last year and we believe we've positioned ourselves well as we look ahead to 2025 back to school in North America.
Speaker Change: That's good to hear and then.
Speaker Change: I think this is maybe the second consecutive quarter that theres been some mention of M&A.
Speaker Change: Yes is there increased interest in doing acquisitions at this point.
Speaker Change: Clearly still above your leverage target and then if so would these be more kind of traditional product categories, where you may be able to purchase things at low multiples.
Speaker Change: Are they kind of faster growing opportunities, where the multiples are going to be higher.
Speaker Change: Yeah. So we've aligned with our board of directors on our strategy related to M&A moving forward and we believe that.
Speaker Change: Our historic approach to M&A is the one that unlocks the most value for our shareowners. So.
So we will look at opportunities that are.
Speaker Change: In or close to.
Categories that are highly synergistic.
Speaker Change: <unk>.
Speaker Change: <unk> strong financial returns for our investors and.
Speaker Change: That's going to be our area of focus.
Speaker Change: And we think that's a formula that we know works for us and we know works for our shareowners, so thats going to be.
Speaker Change: Kind of how we think about M&A opportunities moving forward.
Speaker Change: And as you know M&A is opportunistic.
Speaker Change: When it when it can happen.
But we're going to take that balanced approach overall to our capital allocation.
Speaker Change: Got it so I guess, just as a little follow up to that the fact that you put it in the press release.
Speaker Change: I don't remember that being in the press release before does it indicate that there is a greater interest in M&A then maybe there would have been 12 months ago.
Speaker Change: I think the environment is just better too right now things are opening up interest rates are coming down.
Speaker Change: It was more difficult to even think about it and I think we're in a better position with another year of $130 million of cash flow is paying off debt.
Speaker Change: Were positioned better to be thinking about it now than we were 12 months ago.
Speaker Change: Got it alright, I'll pass to others. Thank you.
Speaker Change: Thank you.
Speaker Change: We have no further questions. So this concludes our Q&A now.
Speaker Change: I'll hand back to Tom <unk> for any.
Final remarks.
Tom Tetrick: Thank you everyone for joining US we were pleased to deliver third quarter results that were in line with our outlook, while also improving our balance sheet supporting our quarterly dividend and repurchasing shares with our strong cash flow.
Proactive actions at the beginning of the year to reset our cost structure are yielding positive results and better positioning us for long term profitable growth. We appreciate your interest in ACCO brands and look forward to talking with you. When we report our fourth quarter results in February.
Speaker Change: Ladies and gentlemen, today's call is now concluded.
Speaker Change: Thank you for your participation you may now disconnect your lines.
Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yeah.
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