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ACCO BRANDS Corp (ACCO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered net sales of $317.4M (-11.6% YoY) with gross margin expanding 60 bps to 31.4%; adjusted EPS of ($0.02) beat prior outlook and Wall Street consensus, while revenue was modestly below consensus .
  • Demand remained soft across office-related products and gaming accessories; computer accessories grew, aided by a one-time B2B sale in International, and Brazil returned to growth in notebooks .
  • Management withdrew full-year guidance due to tariff-driven uncertainty and gave Q2 guidance for reported sales down 8–12% and adjusted EPS of $0.28–$0.32; pricing actions and supply-chain relocations (China+1) are underway to protect margins .
  • Capital allocation remained active: $15M in share repurchases (3.2M shares) and $6.8M dividends paid; consolidated leverage ratio ended at 3.65x, below the 4.5x covenant .
  • Stock narrative catalysts: tariff mitigation (sourcing shift, pricing), back-to-school demand timing shifts, and Nintendo Switch 2-linked PowerA product launches in June .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded by 60 bps to 31.4% on favorable mix and cost savings, despite lower volumes; adjusted operating income of $6.9M reflects disciplined execution in a seasonally small quarter .
  • International computer and gaming accessories grew mid-single digits, driven by a large B2B computer accessory sale; Brazil returned to volume growth in premium notebooks and licensed products .
  • Cost program momentum: $7M incremental savings in Q1, tracking toward ~$40M in 2025 under the multi-year $100M program; leverage ratio at 3.65x provides balance sheet flexibility .

Management quotes:

  • “A combination of favorable sales mix and our proactive approach to managing costs enables us to expand our gross margin by 60 basis points.”
  • “We have had a China Plus 1 approach that today enables us to react quickly to the changing tariff landscape.”
  • “We are confident in our long-term strategy to improve revenue trends and optimize our cost structure…”

What Went Wrong

  • Reported net sales fell 11.6% YoY to $317.4M on softer global demand for office-related products and gaming accessories; Americas and International segments both declined double-digit percentages .
  • GAAP operating swung to a loss of ($6.7)M vs. $5.9M a year ago; adjusted operating income fell to $6.9M from $16.2M on volume deleveraging .
  • Cash generation softened given Brazil timing: operating cash flow $5.5M vs. $28.2M prior year; free cash flow $3.3M vs. $25.9M prior year .

Financial Results

Consolidated Metrics: Trend vs Prior Quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$420.9 $448.1 $317.4
Gross Margin %32.5% 34.7% 31.4%
GAAP Operating Income (Loss) ($M)$26.3 $42.0 ($6.7)
Adjusted Operating Income ($M)$44.7 $64.2 $6.9
GAAP EPS ($)$0.09 $0.21 ($0.14)
Adjusted EPS ($)$0.23 $0.39 ($0.02)

Q1 2025 vs S&P Global Consensus

MetricConsensusActual
Primary EPS ($)($0.043)*($0.02)*
Revenue ($USD Millions)$318.8*$317.4*
EBITDA ($USD Millions)$15.9*$13.1*

Values retrieved from S&P Global.

Segment Breakdown: Q1 2025 vs Q1 2024

SegmentNet Sales ($M) Q1’24Net Sales ($M) Q1’25Adjusted Op Income ($M) Q1’24Adjusted Op Income ($M) Q1’25Adjusted Op Margin Q1’24Adjusted Op Margin Q1’25
Americas$197.2 $173.9 $12.3 $10.0 6.2% 5.8%
International$161.7 $143.5 $16.9 $9.6 10.5% 6.7%
Total$358.9 $317.4 $16.2 $6.9 4.5% 2.2%

KPIs and Balance Sheet Highlights

KPIQ1 2025
Operating Cash Flow ($M)$5.5
Free Cash Flow ($M)$3.3
Cash & Equivalents ($M)$134.6
Net Debt ($M)$801.9
Consolidated Leverage Ratio (x)3.65x
Share Repurchases ($M)$15.0
Dividends Paid ($M)$6.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Reported Sales YoYQ2 2025N/ADown 8% to 12% New
Adjusted EPS ($)Q2 2025N/A$0.28 to $0.32 New
Comparable Sales YoYQ1 2025Down 5% to 8% Actual: Down 8.3% In-line to lower end
Adjusted EPS ($)Q1 2025($0.03) to ($0.05) Actual: ($0.02) Raised vs prior outlook (beat)
Full-year Comparable SalesFY 2025Down 1% to 5% Withdrawn Withdrawn
Full-year Adjusted EPS ($)FY 2025$1.00 to $1.05 Withdrawn Withdrawn
Full-year Free Cash Flow ($M)FY 2025$105 to $115 Withdrawn Withdrawn
Leverage Ratio (x)FY 20253.0x to 3.3x Not updatedMaintained prior directional target

Earnings Call Themes & Trends

TopicQ3 2024 (two quarters prior)Q4 2024 (prior quarter)Q1 2025 (current)Trend
Tariffs/macroNo major tariff focus; FX and softer demand cited Broader uncertainty flagged for 2025 outlook ranges Withdrew FY guidance; pricing actions; China+1 acceleration; 90-day pause to pre-buy inventory Elevated uncertainty; active mitigation
Supply chain (China+1)Refinancing to 2029; general cost actions Cost savings increased to $100M cumulative target Move most U.S.-supporting purchases out of China within months; shift to Vietnam/Malaysia/Americas Rapid relocation underway
Product performanceTech accessories growth noted; gaming weak; Brazil timing Tech accessories growth; mixed back-to-school Brazil International tech & gaming up mid-single digits; one-time B2B sale; PowerA down until Switch 2 launch Mixed; gaming rebound expected H2
Regional trendsLATAM/North America back-to-school softer Americas down; International resilient with pricing EMEA slow start; Germany category softness; Brazil growth Europe soft; Brazil improving
PricingTypical actions to offset cost 2025 broad ranges; margin stability U.S. single-digit initial increase; reciprocal up to 20% depending outcome; ~2% Intl price increase Aggressive pricing in U.S.
Cost program>$20M 2024 savings; program $60M 2024 savings ~$25M; program expanded to $100M $7M Q1 savings; target ~$40M in 2025 Accelerating savings

Management Commentary

  • Strategy and margins: “We are confident in our long-term strategy to improve revenue trends and optimize our cost structure…” .
  • Tariff mitigation: “We have had a China Plus 1 approach… enables us to react quickly to the changing tariff landscape.” .
  • Pricing: “We have communicated 2 increases to customers… will adjust the price as appropriate.” .
  • Back-to-school timing: Pull-forward into Q1 may reduce Q2 sales; inventory adequate for replenishment .
  • Longer-term margin target: 33–34% vs prior 32–33% as cost structure is optimized .

Q&A Highlights

  • Kensington one-time B2B: No incremental impact beyond Q1; without it, Kensington would have been roughly flat .
  • Pricing cadence: U.S. first round in single digits; reciprocal tariffs may drive up to ~20% increases; ~2% International price increase already implemented .
  • Acquisition detail: Small ANZ ergonomic seating acquisition broadens portfolio; near-term focus on integration, longer-term global expansion optionality .
  • International softness: EMEA slow start from rebate-driven pull-ins and Germany category softness; expected modest improvement vs Q1 .
  • Cost savings: $7M realized in Q1; on track for ~$40M in 2025 .

Estimates Context

  • Q1 2025 EPS beat: ($0.02) vs consensus ($0.043); revenue slight miss: $317.4M vs $318.8M; EBITDA miss: $13.1M vs $15.9M*; 3 estimates for EPS and revenue*.
  • Company-reported adjusted EBITDA was $20.9M, reflecting non-GAAP addbacks; reconcile the differing definitions vs SPGI’s EBITDA actual .
  • Forward estimate implications: With FY guidance withdrawn and Q2 outlook down 8–12% on sales, near-term estimate risk skews lower on revenue and EBITDA while pricing and sourcing offsets support gross margin resiliency .

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Margin defense credible: Gross margin expansion (+60 bps) amid volume declines demonstrates mix and cost actions; pricing plus supply-chain relocation should further protect margins against tariffs .
  • Near-term top-line risk: Pulled-forward back-to-school demand and cautious retailer ordering, plus gaming accessories softness until Switch 2, point to continued sales pressure in Q2 .
  • FY visibility limited: Withdrawal of full-year guidance increases uncertainty; monitor tariff developments and demand elasticity to gauge estimate revisions .
  • Cash discipline vs returns: Q1 repurchases ($15M) and dividends ($6.8M) alongside modest FCF ($3.3M) signal balanced capital allocation but an emphasis on debt paydown near term .
  • Segment watch: International margins compressed on volume/FX; Americas margin down 40 bps; track EMEA normalization and U.S. pricing throughput .
  • Trading lens: Expect sensitivity to tariff headlines, pricing acceptance, and Q2 execution; upside catalysts include faster sourcing shifts and better-than-feared back-to-school; downside risks include demand elasticity and prolonged retailer caution .
  • Medium-term thesis: Cost program ($100M cumulative) and long-term GM target 33–34% underpin earnings resiliency; product innovation (Kensington, ergonomics) and gaming cycle may re-accelerate H2 .