ACCO Brands Corporation Aktie

Hello, everyone. Thank you for joining us, and welcome to ACCO Brands First Quarter 2026 Earnings Call. I will now hand the conference over to Christopher McGinnis, Director of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the ACCO Brands conference call to review our first quarter 2026 results. Speaking on the call today is Tom Tedford, President and Chief Executive Officer of ACCO Brands; and Deb O'Connor, Executive Vice President and Chief Financial Officer. Slides that accompany this call have been posted to the Investor Relations section of accobrands.com.

When speaking about our results, we may refer to adjusted results. Adjusted results exclude amortization and restructuring costs, noncash goodwill and intangible asset impairment charges, bargain purchase gain and other nonrecurring items and unusual tax items and include adjustments to reflect the estimated annual tax rate on quarterly earnings. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call.

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

Now I will turn the call over to Tom Tedford.

Thank you, Chris. Good morning, everyone, and thank you for joining us today for ACCO Brands first quarter earnings call. Last night, we reported first quarter results with sales and adjusted EPS above our outlook. We also reiterated full-year guidance. We are pleased with the strong start to the year, and the results indicate we are executing well on our key operational and strategic initiatives.

First quarter consolidated sales grew 8%, higher than our expectations, driven by favorable comparable sales and better first quarter performance from the EPOS acquisition. Additionally, as expected, foreign exchange had a significant positive impact on revenue in the quarter. In the Americas segment, sales growth was driven by favorable currency translation, computer accessories and the EPOS acquisition. Sales for computer accessories within the segment were strong, reflecting new products and a meaningful end-user pipeline.

In North America, early purchases of back-to-school products were better than anticipated. While it is still early, we are confident in the upcoming back-to-school season due to increased listings and the absence of order cancellations due to tariffs in the prior year. For the season, we are expecting back-to-school sales to be flat to up low single digits. Sales of office products were down across the segment, but the rate of decline improved. In Latin America, sales improved due to a combination of a change in go-to-market strategies and new products.

Turning to the International segment. Sales growth of 15% was driven by favorable currency translation and the EPOS acquisition, which I'll discuss in more detail shortly. The rate of decline improved in the quarter, reflecting the positive impact of price, broad-based improvement in core category demand and favorable mix. Our overall strategy remains focused on expanding our product range in faster-growing categories with an emphasis on technology peripherals. Our target for 2026 is for peripherals to grow to represent 25% of the company's projected revenue. In support of our strategy, our acquisition of EPOS was completed in the first quarter. We are excited about the potential of this addition to ACCO Brands. The integration is on track with expected 2026 sales of approximately $80 million over 11 months of the year and a modest contribution to profit.

As a result of the acquisition, Jeppe Dalberg-Larsen, President of EPOS, will now lead Technology peripherals for ACCO Brands. Jeppe has over 20 years of experience leading technology peripheral businesses and is a strong operator who will drive our growth initiatives. This change in leadership is another step to better position ACCO Brands to execute on our strategy of expanding our global market shares and enhancing our product portfolio and technology peripherals through organic and inorganic initiatives in these large and growing categories.

Pivoting to gaming accessories. The global gaming market faced headwinds in the first quarter from broad industry challenges and softer consumer spending. Our PowerA brand is well positioned to capitalize on 2 significant catalysts that we believe will improve performance throughout the year. The continued adoption of Nintendo Switch 2 consoles by the consumer and the expected fourth quarter release of Grand Theft Auto 6. Additionally, our product pipeline is robust as we are expanding our gaming portfolio to include simulation as well as a revamped audio offering. Our leading product portfolio, the important work we do with OEMs and our strong channel partnerships give us confidence in the back half of the year.

In Computer accessories, the Americas delivered solid sales growth. In the International segment, sales were down versus the prior year as we comped a large government order in the U.K. in 2025. Normalized, computer accessory sales in the segment were up modestly year-over-year. We have an expansive range of new products and an improving pipeline throughout 2026 that will support our growth objectives. Transitioning to our cost optimization work, we continue to execute on our cost reduction and footprint optimization program. We remain on track to achieve the $100 million cost reduction target by the end of the year. Some of our projected savings, however, may be offset by rising costs due to the ongoing conflict in the Middle East.

We anticipate fuel costs and certain raw materials to increase globally with the impact weighted towards the back half of the year. The company is carefully monitoring the situation and has taken appropriate steps to mitigate these potential impacts. We have considered these developments in our guidance, however, recognize this is a dynamic situation that is evolving daily. While consumers and some customers may be more conservative in the near term due to economic uncertainties, our tight cost controls and growth initiatives give us confidence in the year.

In summary, I am pleased with our first quarter results. I am proud of our strong execution against our value-enhancing initiatives and the progress we are making on our strategy to transform ACCO Brands into a more focused, efficient and growth-oriented company.

I will come back to answer your questions. Now let me turn the call over to Deb.

Thank you, Tom, and good morning, everyone. As Tom mentioned, first quarter sales and adjusted EPS were above outlook. Comparable sales improved with a better mix of product sales as well as back-to-school order timing earlier than anticipated. Reported sales in the first quarter increased 8% with comparable sales down less than 3%. Growth in the quarter was driven by FX and the EPOS acquisition. Comparable sales reflect growth in Latin America and computer accessories in the Americas as well as lower declines in several core categories.

Gross profit for the first quarter was $107 million, an increase of 7%, with the margin rate of 31.1%, down 30 basis points. The margin rate decline was attributable to lower priced product mix. Adjusted SG&A expense of $95 million is up modestly to the prior year, with the increase largely due to unfavorable FX and the EPOS acquisition, significantly offset by cost savings. Adjusted operating income for the first quarter was $12 million, up $5 million versus the prior year, reflecting cost savings somewhat mitigated by organic volume declines.

Before turning to segment results, let me provide some detail on the bargain purchase gain related to our acquisition of EPOS. This $38 million gain represents the purchase price of EPOS compared to the preliminary fair market value of the business, which is primarily from working capital. As Tom mentioned, the integration of EPOS is on track, and our outlook includes $80 million of 2026 sales with a slightly higher gross profit rate than our consolidated average and neutral to adjusted EPS. We remain on track to deliver the outlined $15 million in cost synergies in 12 to 18 months. We recorded $7 million in restructuring charges, primarily related to this acquisition, most of which will be paid out in the next year.

Let's turn to our segment results for the first quarter. In the Americas segment, sales were up 3% with comparable sales down 2%. We had good growth in computer accessories and in Latin America, which was offset by our core office products. The early purchase of back-to-school products was comparable to last year, and we expect the full season to be up modestly. The Americas adjusted operating income was $13 million in the first quarter, up approximately $3 million with the margin rate improving 140 basis points to 7.2%. The margin rate improvement was driven by cost savings.

In the International segment for the first quarter, sales were up 15%, with comparable sales down approximately 3%. The improvement in the rate of the decline in comparable sales was driven by new products, and we also saw increased purchases of office products due to the lower year-end buying we highlighted in the fourth quarter. International adjusted operating income was $11 million, with the margin rate at 6.7%, consistent to the prior year. Free cash flow in the quarter was $1.4 million, comparable to last year and in line with our plan. Inventory was up $67 million since the start of the year. $27 million of that increase was related to EPOS, while the remaining increase was attributable to seasonal inventory build and higher tariff costs.

During the quarter, we returned $7 million to shareholders in the form of dividends. At quarter end, we had approximately $252 million available for borrowing under our revolver and finished the quarter with a consolidated leverage ratio of 4.1x.

Now let's move to the outlook. For 2026, we are reiterating our expectation for full year reported sales to be flat to up 3% and adjusted EPS to be within the range of $0.84 to $0.89. This outlook reflects a prudent sales expectation in the back half of the year given the global environment. We also anticipate cost increases in the near term, which we have considered in our guidance. Free cash flow is expected to be within the range of $75 million to $85 million, with approximately $25 million in restructuring payments and $15 million in CapEx.

Lastly, we anticipate a consolidated leverage ratio within a range of 3.7x to 3.9x. For the second quarter, we expect reported sales to be up within a range of 1% to 4% with a lesser benefit from FX. We expect adjusted earnings per share to be within the range of $0.24 to $0.28. While the current environment remains dynamic, we are confident in the future of our company. We have no debt maturities until 2029 and a long history of productivity savings and cost management. Our strategy pivot is an exciting opportunity for ACCO Brands to accelerate growth and potential value creation for our shareowners.

Now let's move on to Q&A, where Tom and I will be happy to answer your questions. Operator?

[Operator Instructions] Your first question comes from the line of Greg Burns from Sidoti.

So with the guidance for the year, given the strong first quarter, why wasn't there more flow-through to the rest of the year? I know you talked about maybe some macro uncertainty, but why aren't we seeing maybe a little bit more of a flow-through for the balance of the year? And then how much FX and acquisition-related growth is baked into that flat to up 3% revenue for the year?

Greg, it's Deb. First of all, the first quarter for us is a pretty small quarter. As you know, we typically had the bulk of our profits come in 2Q through the rest of the year. So it's always a difficult quarter to gauge your full year on. We're pleased with how we ended the first quarter, obviously. But in this environment and with all the global uncertainty with the Mid East and everything else, we just prudently left our -- and reaffirmed our guidance for the full year. And that's where we sit.

And if you look to the full year, we have about 5% still coming from the EPOS acquisition. So very consistently throughout all the quarters next year. Foreign exchange is about 1%. So this first quarter had 6%. Future quarters have anywhere from 1% to kind of flattish. So we end the year with about a 1% impact.

Okay. Great. And then in terms of EPOS could you talk about the opportunities to expand that brand globally, the timing of maybe some of the initiatives you have around that? And also, can you just help us better understand EPOS' position or position within the prior ownership? Like why wasn't the brand more successful in kind of growing into new markets?

Yes. Greg, this is Tom. Let me address the first part of your question initially, and then we can get into the second piece to the extent that we can. We are early in the integration process with EPOS. We're very pleased with what we've learned so far, and we certainly have growth synergies that we have targeted as a part of the acquisition thesis. We believe it's very complementary to our Kensington business. We recognize that it's a different product category. However, it likely goes through the same routes to market globally.

And we think there's opportunities as we look ahead to pair the product along with our robust Kensington portfolio to offer a one-stop solution for enterprise attachments when laptops and desktops are deployed. So we think there's some significant opportunities as we look ahead to drive growth. Clearly, we're focused at the moment on integration and delivering the synergies while maintaining the growth initiatives that we have in both businesses. I don't want to comment on the historical performance of EPOS. It was under different ownership. I don't know if it was a highly strategic element of the Demant business, and I don't want to speculate as to why they struggled.

I just want to reiterate to you that we feel very confident in the business and the products and frankly, the leadership of the team. And that's why we've announced a change in leadership and a change in focus with our organizational structure, and we have Jeppe leading it. So we're optimistic about the future. We're excited about the brand, and we look forward to positive business results from EPOS this year and beyond.

Your next question comes from the line of Joe Gomes from NOBLE Capital.

Congrats on the quarter. So this is a follow up on EPOS. I don't know is there anything that you could point out that drove the segment outperforming expectations? Or did you just kind of go in with low expectations? I don't know if there's anything you can point out there, provide a little more color on that EPOS outperforming.

Yes. That's a good question, Joe. Candidly, we weren't really sure the uncertainty of an acquired business and the potential disruptions in integration. We just found it prudent to be careful with our guidance assumptions for the business. We're learning about it more and more. As I said earlier, we're very optimistic about its contributions to our business this year and beyond. But candidly, it was just our lack of really visibility into their forecast given what we knew, we thought it was a prudent thing to do to be careful with the numbers that we included in our models.

Okay. And then maybe I don't know if you could provide any more color on the early back-to-school. It sounds like it's performing a little bit better than maybe people had initially anticipated. I don't know if you can talk about inventories and what your customers are saying to you, kind of feedback you're getting from them on the whole back-to-school program.

Okay. Yes, it's early, Joe, obviously. We're in the process of shipping early orders, which predominantly are direct import orders from Asia. As we spoke in our prepared remarks, we believe the season is going to be up modestly. We feel good about our brands based on their performance last year in which ACCO Brands' portfolio of brands took market share in the U.S. and in Canada. So we're optimistic about the season. We have good line of sight to the initial orders. They're at or better than our current forecast. So early indications are strong, and we hope that the sell-through isn't impacted by some of the uncertainties and potential inflation based on the conflict in the Middle East. But given what we know today, we feel very good about back-to-school this year.

Your next question comes from the line of Kevin Steinke from Barrington Research.

You mentioned that you saw growth in Latin America. And I know that region was a bit more challenged last year. You talked about consumers trading down, product choices, et cetera. But you mentioned that, I think in your prepared remarks that you shifted your go-to-market strategy. So maybe can you comment on that a little bit more? And did that contribute to the growth you saw in the first quarter?

Yes, Kevin, good question. Latin America was a good performing part of our business in the first quarter this year. And you're right, we managed it well. We implemented changes to meet the consumer where they are. We recognize that it's a constrained environment in both Mexico and Brazil. We've adjusted our product assortment. We've adjusted our go-to-market strategies, our incentive plans for our sales reps, and we've adjusted pricing where it was appropriate. So the combination of the strategies that we deployed in the market at the back half of last year have better positioned our product assortment for growth. And we'll continue to refine it as things continue to change, but we feel really good about where we are today in Latin America.

Okay. Great. And just following up on gaming accessories. You talked about the expectation of a stronger second half of 2026 and the reasons why it makes sense. You did mention some industry challenges currently. Is that just related to softer consumer spending? Or is there anything else that you would mention in terms of just the challenges you mentioned for the industry?

Yes. We believe it's largely related to a softer consumer. In the first quarter, if you think about the sequencing of our annual sales, a lot of it is reliant upon holiday and holiday was relatively weak for gaming in Q4, which left some inventory opportunities for retailers, which presented some challenges for us in Q1. But what I do feel good about is our brand. Our brand has taken share each month in the first 3 months of the quarter. We think we're well positioned as we discussed in our prepared remarks for the balance of the year.

And candidly, we're excited about our new product assortment. So we think a lot of good things are in store for PowerA in 2026.

Okay. Understood. And as you mentioned, you're kind of factoring the potential for a softening in customer demand. Given the macroeconomic uncertainties, which makes sense to be prudent. But have you actually seen any noticeable signs of softening demand yet? Or is that just at this point, just trying to be cautious given the environment?

Yes. We haven't to date. We think if there is a challenge with demand, it won't be felt until later in the year. And as Deb mentioned in her prepared remarks, we have seen some early indications of some cost increases, predominantly driven by fuel. And we are taking the necessary steps internally to protect profitability and to position ourselves to deliver the year based on what we see today. But from a demand perspective, we have not seen pressures on demand yet.

Okay. So have you -- do you have planned price increases in the pipeline currently or just kind of monitoring the situation on the cost front?

Yes, a good question. It's actually both. We do have some planned price increases that we are going to market in different geographies across the globe, and we'll continue to monitor the cost environment, and we'll take actions if necessary.

Your next question comes from the line of William Reuter from Bank of America.

My first one, clearly, you guys had some tariff cash payments last year. Can you share with us the magnitude of those? And in the event that you do get a refund, I guess, have you applied for refunds? And if you do get that, how would you allocate that cash?

Yes. So -- we have talked in the past about our claim and how we have put it forth and that we feel very comfortable with the amount. And we're talking somewhere in kind of the $25 million range. We don't expect anything in 2026, and we'll watch it as it goes.

Okay. And then on that, not expecting anything in '26, is that based upon the status of your claim, whether it was liquidated or not liquidated and the timing of what that may be? Because I think that there are a lot of signs that indicate some refunds may be paid this year. So is it just conservatism on your part or based upon the unique attributes of your claim, you just know it won't be this year?

Yes. It's interesting. I would say maybe a little bit of both. But to be paid this year, there's a lot that has to happen at the government and different places like that. So who knows, to your point. And then we do have some claims that are a little more complicated that we anticipate coming in later.

Got it. That's helpful. And then as you see things now, I know that you manufacture a portion of your products and you also have third parties that manufacture others. Is there any sort of a sense for what the headwind based upon current oil prices may be this year in the back half?

We've built our best thinking into our current guidance. That may be why you don't see us taking guidance up for the full year based on the over delivery in Q1. We've done our best to project what we think the impacts are going to be. But as you know, this has been a dynamic situation. We're optimistic that it ends relatively soon, but we've taken into account a prolonged disruption based on the conflict in the Middle East in our guidance.

Got it. And then just lastly for me. Is there anything -- any commentary about this computer peripherals growing to 25%? I'm not even sure what products you're including in that. But any comments about the competitive dynamics of those categories? It would seem to me you may be going up against some big companies, but I'm certainly not a tech analyst. So anything you could share? That's it.

Yes, happy to. So technology peripherals, let's start there. It consists of our brands, Kensington, PowerA, LucidSound and EPOS. So it's not just computer accessories, it's computer and gaming products that we sell globally. We think those are large TAMs, growing TAMs and TAMs in which we have relatively small shares in. And so we think the dynamics for future growth are very positive. And we're working hard to position our brands to take market share in each market that we compete in globally.

At this time, there are no further questions. I will now turn the call over to Tom Tedford for closing remarks.

Thank you, everyone, for joining us. We are pleased with our first quarter results and expect the combination of the EPOS acquisition, momentum from growth initiatives and positive foreign exchange to drive revenue improvement in 2026. Our commitment to operational excellence through continued cost management and productivity programs position us to deliver improved profits and cash flow. With our optimized operational structure and momentum with leading brands, we have a strong platform to generate consistent free cash flow while strategically repositioning ACCO Brands towards faster-growing technology peripheral categories.

I want to thank our dedicated team and recognize their efforts and congratulate them on a strong first quarter. We appreciate your interest in ACCO Brands. I look forward to talking with you when we report our second quarter results in July.

This concludes today's call. Thank you all for attending. You may now disconnect.

Hello, everyone, and thank you for joining us today to the ACCO Brands Q4 and 2025 Year-end Earnings Conference Call. My name is Sammy and I'll be coordinating your call today. [Operator Instructions]

I'll now hand over to your host, Chris McGinnis, Director of Investor Relations to begin. Please go ahead, Chris.

Thank you. Good morning, and welcome to the ACCO Brands conference call to review our fourth quarter and full year 2025 results. Speaking on the call today is Tom Tedford, President and Chief Executive Officer of ACCO Brands; and Jagannath Bobji, Senior Vice President, Global Financial Planning and Analysis and Treasurer; Deb O'Connor, Executive Vice President and Chief Financial Officer; will not be joined today due to a personal matter, but is expected to return in a few weeks. 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, restructuring costs, noncash goodwill, intangible asset impairment charges and other nonrecurring items and unusual tax items and include adjustments to reflect the estimated annual tax rate on quarterly earnings. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call. Due to the inherent difficulty in forecasting and quantifying certain amounts, we do not reconcile our forward-looking non-GAAP financial measures. Forward-looking statements made during the call are based on the beliefs and assumptions of management based on information available to us at the time the statements are made.

Our forward-looking statements are subject to risks and uncertainties, and our actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain risk factors and assumptions. Our forward-looking statements are made as of today, and we assume no obligation to update them going forward. Now I will turn the call over to Tom Tedford.

Thank you, Chris. Good morning, everyone, and thank you for joining us today for ACCO Brands fourth quarter and full year 2025 earnings call. This morning, we reported full year 2025 sales and adjusted EPS in line with our outlook. I'm pleased with how our team executed while navigating significant disruptions throughout 2025. Despite continued demand challenges globally and tariff-related disruptions in the U.S., ACCO Brands maintained or grew its market position in most categories, demonstrating the resilience and strength of our brand portfolio. We continue to invest in higher growth categories as we reposition the company for improved revenue performance.

We have refined the company's strategy to focus on the growing technology peripherals market. The acquisition of EPOS represents a strategic move and broadens our technology peripherals portfolio, which now represents approximately 25% of the company's projected revenues. The EPOS line of premium audio solutions strengthens our enterprise computer accessories business with key third-party certifications across unified communications platforms. The acquisition aligns well with our strategy of targeting value-enhancing transactions and is complementary to our Kensington business. Our teams have proven their ability to realize cost synergies from acquisitions. We expect to realize $15 million in annual cost synergies from this transaction.

We are pleased with early integration efforts and are excited about adding this growth category to our portfolio. Our expected solid cash flow and improving leverage will allow for a more aggressive inorganic growth approach. An accomplishment I am proud of in 2025 was our team's quick response to U.S. tariffs and trade disruptions. Our proactive China plus 1 strategy prevented significant disruptions to our business. We have a flexible supply chain that enables competitive costs, value-added products and provides category-leading service levels to our customers. We continued the solid implementation of our multiyear cost reduction program, delivering $35 million of savings in 2025 bringing the cumulative total to over $60 million since its inception in early 2024 and are on track to deliver $100 million in savings by the end of 2026.

In the fourth quarter, revenue trends improved sequentially in the Americas segment, led by impressive growth in our technology accessories categories. The PowerA brand performed well during the fourth quarter, with sales strengthened by our leading new product offering supporting the Nintendo Switch 2.0 launch and holiday retail placements. Kensington also had a good quarter in the segment driven by a strong pipeline and new product introductions. The International segment faced challenges from continued weakness in EMEA, which was partially offset by growth in Australia. Results were challenged in Europe due to difficult comparable sales comps to Q4 of 2024 and lower demand of traditional business essentials.

Looking ahead to 2026, we expect the combination of the EPOS acquisition, improved demand in many categories and favorable foreign exchange to drive revenue growth. In Technology accessories, we are excited about our pipeline of new products from Kensington as we expand our breadth of offering to support enterprise-level customers. PowerA is expected to benefit from the recent launch of Nintendo Switch 2.0 and an increase in new gaming titles in the marketplace in 2026, especially Grand Theft Auto 6 which is anticipated to be released late in the year. In Learning and Creative, our solid market share performance in North America during 2025 positions us well for the 2026 back-to-school season with initial orders indicating an improvement year-over-year. Within Latin America, Brazil's 2025 results were lower than expected, resulting from adverse mix and market trade down due to lower-priced products.

We are working to reposition our product offering to Brazilian consumers, reflecting the challenging consumer dynamics. Additionally, we are focused on managing the gross margin impact of the adverse product mix by addressing our cost structure. In our International segment, we expect the rate of decline to moderate in 2026 aided by execution on growth initiatives. We remain optimistic about the Bureau acquisition and are using acquired capabilities to expand into categories like ergonomic gaming chairs. In EMEA, we continue to focus on enhancing our ergonomic product offering, which is driving incremental sales and accretive gross margins. We remain focused on improving revenue performance while maintaining expense discipline. We will closely manage expenses in 2026 and expect to deliver the balance of savings against our $100 million cost reduction program.

Overall, we are expecting a better year on the demand front in 2026 with EPS and cash flow also expected to improve. While external challenges persist, I'm confident in our strategy and our team's ability to execute. We are building a more focused, efficient and growth-oriented company. Our transformation towards technology peripherals combined with our operational excellence and strong financial position creates multiple pathways for value creation. The foundation we have been building positions us well for profitable growth in the years ahead. Before I hand the call over to J.B., I want to thank our employees for their dedication and resilience throughout a challenging year. I am proud of our team and the work we are doing to transform our company. I will come back to answer your questions. J.B.?

Thank you, Tom. Good morning, everyone. As Tom mentioned, fourth quarter sales and adjusted EPS were in line with outlook. Reported sales in the fourth quarter decreased 4% with comparable sales down 8%. While demand continued to be constrained by global macroeconomic factors, trends in the Americas segment improved sequentially led by growth in technology accessories and planning products. Gross profit for the fourth quarter was $144 million, a decrease of 7% with a margin rate of 33.6% down 110 basis points. The margin rate decline was attributable to lower volumes, reduced fixed cost absorption and unfavorable product mix. SG&A expense of $84 million was down $7 million versus the prior year due to cost reduction actions and lower incentive compensation expense.

Adjusted operating income for the fourth quarter was $60 million, with a margin rate of 14%, down 30 basis points. Now let's turn to our segment results for the fourth quarter. In the Americas segment, comparable sales declined 5%. We had good growth in our technology accessories categories and planning products which was more than offset by lower demand for core products as well unfavorable mix of lower priced products in Brazil. The Americas adjusted operating income was $43 million up modestly in the fourth quarter with a margin rate improving 110 basis points to 17.7%. The margin rate improvement was driven by cost savings and lower incentive compensation. In the International segment, for the fourth quarter, comparable sales declined 12%. Sales were impacted by soft demand in Europe and the difficult Q4 2024 comparison due to non-repeats of year-end buying by certain customers.

Backing this out, the comparable sales decline was similar to the third quarter. The decline in Europe was partially offset by growth in Australia. International adjusted operating income was $26 million with the margin rate at 14.1%, both down compared to the prior year. The decreases are due to the lower volumes, which more than offset the benefit of pricing and cost savings. Adjusted free cash flow for the year was $70 million, this includes $19 million in cash proceeds from the sale of 3 owned facilities. Cash flow was lower in 2025 reflecting the EBITDA decline as well as tariff related cash payments, which were approximately $15 million higher than prior year. During the year, we returned $42 million to shareholders in the form of $27 million dividends and $15 million in share repurchases. At year-end, we had approximately $292 million available for borrowing under our revolver and we finished the quarter with a consolidated leverage ratio of 4.1x. Before turning to outlook, let me provide a little more detail on the EPOS acquisition.

EPOS generated sales of approximately $90 million in 2025 with the majority in Europe. We expect to realize $15 million in annual cost synergies as a result of the transaction over the next 12 to 18 months. Additionally, the acquisition will be slightly accretive to the EBITDA in the first year. We have identified synergy savings and are in the early stages of integrating and executing on these initiatives.

We expect to record $7 million in restructuring charges related to these actions in 2026. Moving to the outlook for 2026, we expect full year sales growth as demand across most categories and geographies improve, the EPOS acquisition and the positive foreign currency translation. For the full year, we expect reported sales to be flat to up 3% and adjusted EPS to be within the range of $0.84 to $0.89. Free cash flow is expected to be within the range of $75 million to $85 million. Our free cash flow outlook does not include asset sales. Excluding asset sales from 2025, we expect cash flow to increase by more than 50% at the midpoint of our 2026 outlook. Lastly, we anticipate a consolidated leverage ratio within a range of 3.7 to 3.9x. For the first quarter, we expect reported sales to be within a range of flat to up 3% and an adjusted loss per share within the range of $0.06 to $0.03.

It is important to note that the first quarter of 2025 was positively impacted by higher-margin back-to-school business that was pulled forward due to tariffs in the U.S. and a onetime Kensington order in Europe. While the current environment remains volatile, we are confident in the future of the company, we have no debt maturities until 2029 and a long history of productivity savings and cost management. Our strategy pivot is an exciting opportunity for ACCO Brands to accelerate growth and potential value creation for our shareowners. Now let's move on to Q&A, where Tom and I will be happy to answer your questions. Operator?

[Operator Instructions] Our first question comes from Joe Gomes from NOBLE Capital.

I wanted to start out, maybe get a little more color on the EPOS acquisition, you said it did $90 million of revenue in '25. How does that compare to '24? What kind of is the addressable market here? What kind of margins are we talking about in this business compared to the ACCO overall corporate margins. Any more color on that would be appreciated.

Yes, Joe. So it's an attractive addressable market. We've sized it to about $1.7 billion and we believe that the market shares that EPOS has is around 5%. So there's some significant headroom for growth just from market share gains, but we also believe that the market is growing low single digits. The EPOS asset was for sale for some time. And so the business was a bit disrupted during that process. So its rate of decline was mid- to high single digits over the last year, but we think that, that is in large measure because of the disruptions caused by the process that they were going through. So we anticipate that, that to be a growing business over time and are really excited to add it to our portfolio.

Great. And then if you could talk a little bit on -- I know it's still early days, but kind of the back-to-school market. What do the inventory positions start looking like? Any color you can provide on that would be great.

Yes, that's a good question, Joe. So in our prepared remarks, we discussed some of the timing shifts that we experienced last year as retailers moved orders into Q1 from Q2 to avoid tariff disruptions. We don't anticipate that to happen again this year. So we think we'll get back to a normal ordering pattern from our customers. We also know going into the year that our brands performed well in 2025 as noted in our prepared remarks. And that positions typically very well for the following back-to-school season. Our early order book, which is what we can react to given the data that we have now, it is strong. So we're anticipating a sell-in of our product to be equal to or better than prior year, but the timing of it will be a little bit different because of disruptions that we experienced last year. So overall, we think EPS in North America is going to be solid. Our brands will perform well, and we're excited about the opportunities.

Our next question comes from Greg Burns from Sidoti Company.

Can you just maybe talk a little bit about the -- you mentioned the cost synergies with EPOS, but maybe some of the revenue synergy potential that you see with that business maybe either through geographic expansion or being able to leverage your distribution to amplify that company's growth?

Yes, Greg. Good morning to you. That is really an exciting opportunity. As we said, they have relative market share of about 5% in a very significant and growing market. We believe that the complementary nature of the business with Kensington enables not only cost synergies but gross synergy opportunities. We have as you know, feet on the ground and significantly more markets than the legacy EPOS business has. So we have the opportunity to essentially add to the bag of our selling organization, the EPOS product portfolio. the Kensington business has been in audio for some time, but really at the value and the price spectrum and had very little features, right?

We were really a bid-oriented audio business within Kensington. EPOS has enabled us to expand to the upper price points with value-enhancing solutions. They have over 130 patents in their product portfolio in addition to all the certifications that we referenced in our materials. So it is a great opportunity for us to leverage for growth synergies. We don't have a number identified. We don't typically publish or speak publicly to a number, but we know that there is growth opportunities in the future between the combined Kensington and EPOS portfolios.

Okay. And then for the guidance, revenue guidance for this year, I guess, the implied organic decline, could you just maybe break that down of what you expect from the Americas versus international? And maybe within that, what are the relative rates of growth and maybe some of the growth areas like tech and gaming versus some of your more traditional -- the declines you're seeing in the more traditional office categories.

Sure. So let's talk about Q1 and kind of the componentry of our outlook in Q1. So we expect the Americas segment to be down mid-single digits, and we expect international to be up low double digits in Q1. And as you're looking at the full year, we expect the Americas to be down low single digits, and we expect international to be up mid-single digits. So that's kind of the build, if you will, by segment of our Q1 and full year outlook. There's obviously a lot of things going on in the world right now that could potentially impact demand and we'll monitor those things closely and certainly keep everyone updated on our thinking as the year progresses.

But that's how we are thinking about the sales build for 2026, currently. We think the key highlights of the growth drivers are the better revenue performance drivers within the year, certainly EPOS being one of those. It's a business that we don't have for the full year in our numbers, but we have for the majority of the year. Last year, as we noted, they did roughly $90 million in revenue. So we anticipate that to be obviously a positive. We believe FX will be a positive benefit in 2026 as well, and we expect better performance through our technology peripherals businesses, both PowerA and Kensington have new products that are being introduced and positive macro trends that should enable us to leverage for growth in the year.

We have a good strong pipeline of new products coming out in [ 2025 ]. That also we've incorporated into our thinking. And then we have the Bureau acquisition in Australia as we continue to look to expand that geographically to other markets. So we have a number of different initiatives internally that we're using to build positive revenue momentum and we think 2026 should return to growth.

Our next question comes from Kevin Steinke from Barrington Research. Please go ahead.

Good morning. I want to also ask a little bit more about EPOS. I know you said $90 million of revenue in 2025 and you'll have it for 11 months in 2026. Should we -- how should we think about the seasonality of that business? I'm just trying to think about how much revenue you're incorporating in your 2026 outlook from EPOS? If you think it will grow or if it's more kind of a back half weighted business or any other color you might provide.

Sure, Kevin. Thanks for the question. So we believe in 2026, EPOS will contribute approximately $80 million of revenue. And on a monthly basis, the splits are fairly consistent. So we don't have huge seasonality swings from quarter-to-quarter or month-to-month that we've noted in the business. So it should be pretty consistent from quarter-to-quarter as you're thinking about your modeling.

Okay. Great. That's helpful. And what are you incorporating into the 2026 outlook in terms of like a percentage point benefit from a foreign exchange?

Kevin, this is J.B. We are about -- we're looking at about 1.5% as a benefit from FX for the year. And as you know, that's a dynamic metric, things are changing every day, but that's what we have in the plan.

Sounds good. That's helpful. And to the extent possible, could you maybe give us a sense to what you're thinking about for 2026 in terms of gross margin and also SG&A expense trends, should we see gross margins up a bit? Or how do you think SG&A expenses trend in relation to your cost savings plans, et cetera.

Yes. So let me start with gross margins. We do anticipate in 2026 gross margin expansion. It's due to a number of factors. Operationally, we have been very disciplined in our footprint optimization work. So we should reap benefits of that continued work that we're doing throughout the globe. We've pushed through price increases in certain markets. We have more price increases in the U.S. planned for April of this year to offset the impacts of inflation due to tariffs and other inflationary drivers in the business. So we should see modest expansion of gross margins in 2026. SG&A, we have to hopefully pay out incentives in 2026. So that will increase SG&A modestly in the year, but we continue to be very focused on cost discipline. We certainly don't want to spend ahead of revenue. So we'll monitor those spending initiatives very, very closely throughout the year.

Great. And then you mentioned there price increase related to tariffs. How much -- did you get the full benefit of what you were expecting in the fourth quarter? And can you give us a sense as to the types of increases that will be going into a place initially in 2026?

Yes. So I think we lagged a bit versus our expectations from pricing in 2026 -- or 2025, pardon me, in the U.S. In 2026, we have mid-single-digit price increases announced and expected to be implemented in April. We're hopeful that, that catches us up to kind of pre-tariff gross margins in the U.S. business, we'll monitor the situation. Obviously, that's dependent on mix. And if there's a need to adjust pricing further, we will both up or down. We'll monitor it closely as we have been for the last year.

We currently have no further questions. I'd like to hand back to Tom for some closing remarks.

Thank you, everyone, for joining us. We expect the combination of the EPOS acquisition, stabilizing end markets and positive foreign exchange to drive revenue growth in 2026. Our commitment to operational excellence through continued cost management and productivity programs positions us to deliver improved profits and cash flow. With our optimized operational structure and our momentum with our leading brands, we have a strong platform to generate consistent free cash flow while strategically repositioning ACCO Brands towards faster-growing technology peripheral categories. We appreciate your interest in ACCO Brands. Deb, Chris and I look forward to talking to you when we report our first quarter in April.

This concludes today's call. We thank everyone for joining. You may now disconnect your lines.

Hello, everyone, and welcome to the ACCO Brands Third Quarter 2025 Earnings Conference Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions]

I will now hand over to Chris McGinnis, Director of Investor Relations to begin. Please go ahead.

Good morning, and welcome to ACCO Brands Third Quarter 2025 Conference Call. This is Chris McGinnis, Senior Director of Investor Relations. Speaking on the call today is Tom Tedford, President and Chief Executive Officer of ACCO Brands Corporation. Tom will provide an overview of our third quarter results and provide an update on our 2025 priorities. Also speaking today is Deborah O’Connor, Executive Vice President and Chief Financial Officer, who will provide greater detail on our third quarter results and our outlook for the full year. We will then open the line for questions. Slides that accompany this call have been posted to the Investor Relations section of accobrands.com.

When speaking about our results, we may refer to adjusted results. Adjusted results exclude amortization and restructuring costs, noncash goodwill and intangible asset impairment charges and other nonrecurring items and unusual tax items and include adjustments to reflect the estimated annual tax rate on quarterly earnings. Schedules of adjusted results and other non-GAAP financial measures and a reconciliation of these measures to the most directly comparable GAAP measures are in the earnings release and slides that accompany this call.

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

Now I'll turn the call over to Tom Tedford.

Thank you, Chris. Good morning, everyone, and welcome to ACCO Brands Third Quarter 2025 Earnings Call. Last night, we reported third quarter sales that were slightly below our third quarter outlook. However, our improved operating structure enabled us to meet our adjusted EPS outlook and improve gross margins by 50 basis points.

Sales in the quarter were challenged by softer demand globally and trade down in some of our categories. The slower implementation of tariff-related price increases and the timing of forecasted revenue that moved out of the third quarter give us confidence we will see an improvement in the fourth quarter. We are making excellent progress on our $100 million multiyear cost reduction program, realizing an additional $10 million in savings in the third quarter. That brings the cumulative program total to approximately $50 million. We remain highly focused on managing all global spending to preserve profitability and cash flow.

I am pleased with our team's work to mitigate the impact of incremental U.S. tariffs on our business. We believe we are well positioned to support our customers with our balanced and cost-competitive supply chain. We have implemented most of our price increases. However, the timing of those increases has lagged, impacting our outlook sales in the third quarter. We will see greater benefits from our pricing strategies in the fourth quarter. We closely monitor evolving trade policies and will take appropriate action, if needed, to mitigate the impact on ACCO Brands.

Moving to our third quarter results. In the Americas segment, sales for the back-to-school season in the U.S. and Canada finished in line with our expectations, down mid-single digits. The decline was partially due to purchasing decisions by customers in response to tariffs early in the back-to-school season. Retailers continue to tightly manage inventory, resulting in minimal replenishment for the season. Our leading student notetaking brands, Five Star and Mead, grew market share in the season, highlighting the strength of our brands and the value they offer the consumer.

In Latin America, sales were weaker than expected due to a constrained consumer as trade down was prevalent in the quarter. In Brazil, we began shipping the important stocking orders for their back-to-school season at the end of the third quarter, although softer than expected as customers delayed making purchasing decisions. We remain cautiously optimistic about our expanded product offering and the back-to-school season in Brazil. In Mexico, sales trends improved during the quarter across most categories. In the International segment, demand was mixed with Europe being soft, partially offset by increases in Australia and Asia. In our office categories, while sales declined, we maintained our market position across the segment.

Transitioning to our global technology businesses, Kensington computer accessories sales declined modestly in the quarter, reflecting delayed business spending. In the fourth quarter, we expect a return to growth, driven by new product launches and a more robust end-user pipeline. In gaming accessories, PowerA sales declined in the quarter due to a combination of reduced demand for legacy consoles and timing for a Nintendo Switch 2 accessories. We expect solid growth in the fourth quarter for the gaming accessories category. We are well positioned for the important holiday season as PowerA is the first officially licensed Nintendo Switch 2 wireless controller in the market.

Over the next 12 months, we have an impressive pipeline of innovative new products across multiple categories, many of which will have exclusive IP. Our product road map is strong and will give us momentum as we go into Q4 and next year. Turning to our Office Essentials and Learning & Creative categories. Global demand continues to be challenged. We have good syndication of our product assortment. However, the lower rate of sales is due to reduced demand in our core categories. We continue to refine our new product development approach to enhance our category positions, expand our assortment and enter faster-growing adjacencies like ergonomics and hybrid work offerings. We are optimistic this will improve revenue trends in the future.

Let me highlight some of our new products that have been recently introduced. In EMEA, we are actively broadening our portfolio of lights branded ergonomic and hybrid work solutions. Our innovative offerings have received multiple design awards and represent an area of strong sales growth for our European business. We are now evaluating expansion beyond EMEA and have high expectations for our enhanced ergonomic product portfolio. In the U.S., we have introduced the West Village line by Mead. West Village offers premium products at accessible price points designed to appeal to today's value-conscious consumers. The product portfolio features a selection of notebooks, time management products and more, all of which have been positively received by our retail partners through gain syndication.

Finally, we have successfully integrated the Buro Seating acquisition and are evaluating geographic expansion opportunities beyond Australia and New Zealand. This is an exciting category and serves as a platform to expand into new geographies as well as new product categories, such as gaming seating.

As I conclude my remarks, we continue to monitor the evolving external dynamics that impact demand for our products. We remain committed to pivoting our business to higher growth categories while streamlining operations, optimizing our cost structure and inorganically enhancing our product portfolio. I am confident our team and our strategy will better position ACCO Brands for profitable, sustainable growth.

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

Thank you, Tom, and good morning, everyone. As Tom mentioned, third quarter sales were below the outlook we provided in August, while cost rationalization and strong controls led to adjusted EPS that was in line with outlook.

Reported sales in the third quarter decreased 9% and including favorable foreign exchange impact of almost 2%. Underlying demand continued to be constrained by global macroeconomic factors, including consumer and business spending uncertainty and fluctuating tariff policies. As Tom mentioned, the timing of some forecasted shipments and the slower implementation of price increases in the U.S. also negatively impacted sales versus our outlook for the quarter. Gross profit for the third quarter was $127 million, a decrease of 8%, with the margin rate improving 50 basis points to 33%. While the dollar decline was driven by lower volumes, the improvement in the rate was due to the progress on our multiyear cost reduction program as well as some favorable timing items. SG&A expense of $87 million was down versus the prior year due to cost reduction actions and lower incentive compensation expense. Adjusted operating income for the third quarter was $39 million versus $45 million a year ago. The adjusted operating income ratio to sales has been impacted by the lower volumes deleveraging our SG&A costs.

Now let's turn to our segment results for the third quarter. In the Americas segment, comparable sales declined 12%. The decline is indicative of lower demand as well as weakness in Brazil and timing for Nintendo Switch 2 accessory sales. The Americas adjusted operating income margin for the third quarter was 14.4%, ahead of last year. The margin rate in the quarter was positively impacted by cost savings.

Now let's turn to our International segment. For the third quarter, comparable sales declined 7%. Underlying demand continued to be down in Europe, especially in Germany, U.K. and France, which are our largest markets. International adjusted operating income was down just over $1 million. The adjusted operating margin for the third quarter decreased to 10.2% as the lower volume more than offset the benefit of pricing and cost savings. Let's move to cash flow. As a reminder of the seasonal aspects of our business, we are a user of cash in the first half, while cash flow was positive in the second half of the year. Year-to-date adjusted free cash flow was $42 million. This includes $17 million in cash proceeds from the sale of 2 owned facilities we announced in the second quarter. In addition, we paid down our debt by repatriating cash from Brazil during the quarter.

Cash flow this year is lower, reflecting the EBITDA decline as well as the significant new tariff costs paid upon receipt of goods. Our supply chain teams have done an excellent job reducing inventories, which mitigates the impact of incremental tariffs. During the quarter, we returned $7 million to shareholders in the form of dividends. Though a balanced capital allocation remains important, our primary focus will be paying down debt. At quarter end, we had approximately $271 million available for borrowing under our revolver and finished the quarter with a consolidated leverage ratio of 4.1x.

Now turning to the outlook. We are reaffirming our sales and adjusted EPS guidance for the full year. We do expect sales trends to improve in the fourth quarter, led by positive foreign exchange and growth in the technology accessories categories. However, overall demand trends remain constrained due to the evolving tariff environment and cautious consumer and business spending. As Tom mentioned earlier, we expect to see greater price realization in the fourth quarter to cover the incremental U.S. tariff costs. For the full year, we expect reported sales to be down 7% to 8.5% and adjusted EPS to be within the range of $0.83 to $0.90. We expect adjusted free cash flow to be within a range of approximately $90 million to $100 million, which includes the $17 million from asset sales. We anticipate a net leverage ratio of approximately 3.9x at year-end.

While the current environment poses challenges, we remain confident in the long-term future of our company and our ability to navigate this dynamic period. We have no debt maturities until 2029 and a long history of productivity savings and cost management. Our strategy continues to focus on repositioning the company to grow sales modestly from organic and inorganic initiatives and consistently generate solid cash flow.

Now let's move on to Q&A, where Tom and I will be happy to answer your questions. Operator?

[Operator Instructions] Our first question comes from Joe Gomes with NOBLE Capital.

Thomas, the first question I want to ask here is, you mentioned that you're confident see improvement in the fourth quarter. And just seeing what's going on here, you read the headlines. I just want to know what underpins your confidence for fourth quarter?

Yes, Joe, that's a good question. So there are a number of data points that we've reviewed and are improving confidence is because of those. So let's start with, first, our technology accessories business. It represents roughly 20% of our total portfolio, and it has been modestly down in the quarter in aggregate, and we expect that to return to growth driven by 2 things. First is the holiday season and our support of the Switch 2 launch from Nintendo. We're seeing really good momentum in that business as we transition from Q3 to Q4 and feel confident that it will grow in the quarter.

Secondly, our end user pipeline and our new product development product launches from our Kensington business is far more robust in Q4 than it has been in Q3 and previous quarters this year. So those 2 pieces of business, again, represent roughly 20% of our total, and we feel confident that both will return to growth in the quarter. The second point I'd like to just make sure you understand is our pricing actions took longer to implement than we had anticipated. And so whatever that we thought was going to happen in Q3 has simply just shift from a timing perspective. The quantification of that is a little difficult to nail down, but we do believe that there was a significant shift into Q4 from Q3 from price. And then finally, we had some timing of orders that shifted from Q3 into Q4. Those aren't immaterial. And those 3 things give us confidence that we can improve the rate of decline in the quarter.

Okay. And you mentioned in your opening remarks about trade down in some categories. I wonder if you could give us a little more color on that. Are we seeing a heightened competitive environment, just consumers trading down because of the economy or kind of maybe a little more color there, please.

[Technical Difficulty]

Joe, sorry about the disconnect. I'm not sure what happened, but I just want to make sure that I address your question. You had mentioned that we're seeing trade down and that is a true statement. We are seeing some trade down really across most of the geographies that we compete in. The good thing is, is we are well positioned from a brand portfolio perspective to capitalize sales as the consumer trades down. We have brands that serve the consumer in most of our categories that service each of the price points but it does impact top line sales and has a modest impact on profitability as well.

Okay. Great. And then just one last one here for me, Tom, if you may. So in the press release, you're talking about the new product launches, and also evaluating strategic opportunities that align with the growth objectives. Are we talking additional acquisitions here? I just wonder if you can talk a little bit more about what the strategic opportunities may be.

Yes. So it's another good question. We're always looking for accretive acquisitions, highly synergistic opportunities that present themselves that reposition our product portfolio into faster-growing either categories or channels or markets, right? Those are things that we're constantly evaluating. We also look at other things like licensing agreements with key licensors, expansion of OEM relationships. So each of those are important, and each of those are under review, and we're using all of our tools that we can to accelerate sales.

Our next question comes from Greg Burns with Sidoti.

It sounded like the back-to-school season got off to a slow start in Brazil. Have you seen any pickup there as we move into this quarter?

Yes. So our results are -- it's still early in the season. I would say they're fairly consistent with our expectations. We expected the season to start slow. We expected customers to defer purchases later into the quarter, and that's basically what we're seeing play out.

Okay. And then in terms of the trade down dynamic, I know you have kind of good, better, best pricing price points in the market. But how do you manage that without cannibalizing maybe your higher end product lines? Like are all the products sitting in the same -- on the same shelves next to each other? Like how do you account for that maybe not cannibalizing yourself within the market with some of these new products like the Mead product line you mentioned?

Yes. So it's important to note that when we introduce new products, we do so that are mostly at greater than fleet gross margin averages. Now that's not always the case, but in most instances, that is. And so as we introduce these new product lines, they should be incremental gross margin rates to the company. Cannibalization is a difficult thing to avoid when consumers are trading down and you have such a broad product portfolio. We believe that we offer tremendous value in our price points and in our products. And the consumer choice is obviously dependent on a lot of different things. But we're there, and it's great to have an ACCO Brands presence for that consumer on shelf when they are making their choice.

I think back-to-school in the U.S. is probably indicative of that, where we saw both our Five Star brand, which is our premium brand in the category and our Mead brand, which is our value brand in the category. They both took market share this season. I think that just gives you some illustration of the strength of the brands that we offer in the categories that we compete in. And we feel like that's the appropriate approach for our business.

Okay. And then in terms of -- I think you mentioned syndication, but do you feel like you're in all the right spots from a distribution perspective? Is there -- are there any opportunities to either expand or optimize your distribution network to maybe stimulate some more sales growth?

Yes, Kevin, good question. We do. We think there's opportunities outside our current channels. We actually like certain verticals, and so we're shifting some of our product focus to verticals like health care, for example. Our Kensington business has a good, strong end-user selling organization that we think we can better leverage in the future. But certainly, channel expansion, geographic expansion is an important part of our go-to-market strategy.

Our next question comes from Kevin Steinke with Barrington Research.

Just following up on the North America back-to-school discussion. Obviously, you talked about the cautious buying patterns by retailers and minimal inventory replenishment. I mean, is that also an indication of a softer consumer sell-through or pull-through? And how meaningful was product trade down in the North American back-to-school season?

Sure, Kevin. That's a really good question. So our products sold through at or better than our customer targets. So from that perspective, we had a really strong season. Our supply chain responded incredibly well through all the disruptions of country of origin and tariffs. We supported our customers throughout. So we were in stock on time, and we supported them with modest late season demand as well. So we think we're well positioned as we transition into 2026 because of the strong supply chain management and sell-through of our product this back-to-school.

Okay. That's good to hear. So you mentioned the revenue that got pushed out of the third quarter. I don't know if there's any we characterize how meaningful that is in terms of that shift to the fourth quarter?

Yes, I don't know that that's something that's easily defined for us publicly. I think we have a fairly good understanding of it internally. But there's also other dynamics that could come into play. But we do see the orders. They were sizable enough for us to call them out, obviously. But I think we would refer commenting on the specific size because of the other things that may happen in the quarter.

Yes. And it was one of the factors that really just made us miss the low end of the guidance, if you think about it that way.

Okay. And the slower implementation of the tariff-related price increases, you talked about those benefiting the fourth quarter. Again, any sense as to how meaningful those are either on a percentage basis, perhaps?

So we went to market with roughly mid-single-digit price increases. So each of those get negotiated with our customers, the implementation gets negotiated, et cetera. We want to ensure that our products are fairly priced on shelf that we don't do anything inadvertently to the demand of our products. But the price increases that we took to market and then have been accepted or mid-single-digit increases.

Okay. And then just one last one. You obviously sound optimistic about Kensington and the robust product launches coming in the fourth quarter. Can you just characterize the type of products that you're launching and what gives you enthusiasm that's going to benefit your sales in the fourth quarter?

Yes. Product launches are slow to adapt. That's more of a longer-term benefit. What gives me great enthusiasm is the strength of our pipeline. Our pipeline is large. Our close rate is good. We get a significant amount of our revenue in the Kensington business from end-user deals that our salespeople partner with the trade and channel to develop, and that pipeline is extremely robust. So the new products are being launched in conjunction with a very robust pipeline in Q4.

[Operator Instructions] Our next question comes from William Reuter with Bank of America.

Just a couple for me. The first is, I was curious, you mentioned about opportunity to move into new channels. I guess, are you overexposed to some channels such as pharmacies that are experiencing a lot of closures and kind of have shifting sales mix between different channels been one of the headwinds to revenues in North America?

No. First of all, our business in the channel that you mentioned is relatively small. In fact, it's small on a total percentage basis. But we do see opportunities, as I mentioned, in verticals more so than channels. We think that developing businesses in growing verticals is an important part of our strategy. Developing relationships with the end user is an important part of our strategy.

From a channel perspective, I think we've got the appropriate balance for the business here in North America. We have a keen focus on e-commerce, and that is our largest channel, mass retail and then specialty superstores, kind of follow-up behind that. And then you've got the office independent dealers and wholesale channels. So those are kind of the key channels for us in the North American market that we sell product through. And on the tech side, obviously, we sell through tech distributors. So we think we have a fairly balanced channel approach. Where we see opportunities is, frankly, in value in user deals, and that's where our focus is at the moment.

Got it. And then with regard to your price increases that were related to tariffs, did you generally pass those through on a dollar-for-dollar basis? Your gross margin percentage was up. I know that's probably some of your expense savings initiatives. But I guess, was that the goal with those price increases that pretty much the dollars are passed through?

That was the goal, Bill. I will tell you, though, like we said in the third quarter, we didn't get all the pricing in. So the majority of that improvement in the margin in the quarter really relates to our footprint rationalization and some other cost reductions that we did up in COGS as well. This time, this year, about half of our savings are in COGS and about half are in SG&A. So we're really seeing a benefit from the cost takeout.

Got it. And then just lastly for me, and I know this is difficult and someone kind of already asked it, so there might not be much more to add to it. But I feel like macro conditions in Brazil are pretty challenged, and I feel like a lot of consumer products companies are having difficulty there. I guess what gives you that confidence? Have you seen in the last week that you have seen an acceleration and improvement in trends? I know it's early for back-to-school, but I guess I'm surprised if there's not a little more caution in your tone.

Yes. If that came across, then that's not the case. Obviously, we are closely monitoring the developments in Brazil. We watch our order entry, our order input from the market. It's improved slightly from the third quarter, but it's still early in our back-to-school season, and we're predominantly a back-to-school business there. And so we don't want to draw any conclusions on the season, but we certainly see all the things that everybody else is speaking of and are cautious in terms of our spending there, in terms of our production and inventory there. Our customers are being cautious with their inventory purchases. But we have seen some modest improvements in trend over the last 4 to 5 weeks.

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

Thank you, everyone, for joining us. While the third quarter results were mixed, we executed well against our strategic initiatives and do expect sales trends to improve in the fourth quarter. I remain confident that our proactive actions are better positioning us for long-term growth.

We appreciate your interest in ACCO Brands and look forward to talking with you when we report our fourth quarter and full year results in February.

Thank you very much, Tom, and thank you, everyone, for joining. That concludes today's call. You may now disconnect your lines.

Hello, everyone, and welcome to the ACCO Brands Second Quarter 2025 Conference Call. My name is Ezra, and I will be your coordinator today. [Operator Instructions]

I will now hand over to Chris McGinnis Head of Investor Relations, to begin. Please go ahead.

Good morning, and welcome to the ACCO Brands Second Quarter 2025 Conference Call. This is Chris McGinnis, Senior Director of Investor Relations. Speaking on the call today is Tom Tedford, President and Chief Executive Officer of ACCO Brands Corporation. Tom will provide an overview of our second quarter results and provide an update on our 2025 priorities. Also speaking today is Deb O'Connor, Executive Vice President and Chief Financial Officer, who will provide greater detail on our second quarter results and our outlook for the third quarter and full year. We will then open the line for questions.

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

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

Now I will turn the call over to Tom Tedford.

Thank you, Chris. Good morning, everyone, and welcome to ACCO Brands Second Quarter 2025 Earnings Call. Last night, we reported second quarter sales and adjusted EPS in line with our outlook. Sales in the quarter improved sequentially as customers and consumers digested the evolving global trade environment. We continue to make excellent progress on our $100 million multiyear cost reduction program, realizing additional savings in the second quarter that brought the cumulative program total to over $40 million. We are also making great progress on our tariff mitigation actions.

As a multinational company, approximately 60% of sales are outside the U.S., which are not impacted by U.S. tariffs. For those markets, our current supply chain provides excellent value. As we mentioned last quarter, our proactive China plus one approach in the U.S. has positioned us well to navigate the evolving trade landscape. To date, we have announced 2 strategic price increases while maintaining our competitive position, secured improved terms with third-party manufacturing partners and accelerated production shifts to cost-competitive countries for U.S.-bound products. These efforts are critical to protect profitability and to ensure ACCO Brands has a balanced supply chain optimized for cost, quality and service.

Now turning to our second quarter performance. Consolidated second quarter comparable sales were down 10.5% and within our guidance range. As expected sales in the Americas segment were disrupted due to the tariff announcements in the U.S., particularly early in the quarter as our customers adjusted their purchasing plans and monitor the impact to the consumer. Gaming accessories grew modestly in the segment, driven by our leading third-party accessory product assortment, supporting the release of Nintendo Switch 2 console. Sales for back-to-school products were down in the quarter as U.S. retailers were cautious with their early season orders. We forecast our U.S. and Canada back-to-school season to be down mid- to high single digits, but it is still early in the season and stronger consumer demand could improve the forecasted results.

We have sufficient inventory to support potential upside from replenishment orders and our teams are working closely with customers to support their back-to-school demand. In Latin America, sales were weaker than expected, particularly in Mexico due to a constrained consumer and competition at lower price points. However, we are encouraged by the recent performance with trends improving in June. In Brazil, sales were down modestly in what is a seasonally low sales quarter. Back-to-school sales occurred later in the year in Brazil, and we are closely watching order input and remain positive about our expanded product offering for the upcoming season. We are also paying close attention to an increase in low-priced product entering Latin America from China, and we will react accordingly with price and assortment.

In the International segment, sales declined but at an improved rate compared to the first quarter. Gaming accessories grew mid-single digits, driven by the Nintendo Switch 2 launch and our continued international expansion. While sales of office products remained soft in certain European markets like Germany, the U.K. and France. We maintained or grew share in most categories across the region. Looking at our global technology businesses, Kensington computer accessories sales declined modestly in the quarter. We expect improving trends in the second half of the year led by a stabilized market dynamic, a growing pipeline and revenue from new product introductions.

In gaming accessories, PowerA delivered modest growth across both segments this quarter, highlighted by our role as an Nintendo license third-party manufacturer of accessories for the Switch 2 console which launched globally on June 5. Our comprehensive product assortment at launch included a wide range of controllers, cases and other accessories. Many of these products have exclusive IP related to Nintendo games. While Switch 2 related sales were modest in the second quarter given the timing of the June release, we expect more meaningful sales in the coming quarters as adoption increases and as our product portfolio expands.

Global sales of office products were soft in the quarter. We have good syndication of our product assortment and the lower rate of sales is from our core offerings and due to lower demand. We continue to refine our new product development approach to enhance our category positions and enter faster-growing adjacencies. Now let me highlight the progress we're making on our revenue growth initiatives.

Within computer accessories, we've improved our innovation pipeline with a number of new product introductions set to double in 2025 compared to 2024. One key product I would like to highlight is our new Thunderbolt 5 docking station supporting Apple users. This feature-rich docking station expands our reach into the premium Apple ecosystem. We are focused on strategically expanding our assortment into higher-growth categories through organic and inorganic efforts. The repeat tools product line in Europe has entered the work lights category offering professional-grade solutions for do-it-yourself enthusiasts and small business owners. These products leverage our highly trusted repeat brand while maintaining competitive price points.

Additionally, in Europe, we're expanding our successful ergonomics product portfolio with an innovative new compact Sit Stand desktop series, specifically designed for the hybrid work environment, along with other complementary ergonomic accessories. Our recent acquisition of Buro Seating has been fully integrated, strengthening our position in Australia and New Zealand. Given the success we are evaluating expansion opportunities in additional markets where we see potential for the brand and the product category.

Now let me update you on our multiyear cost reduction program. In the quarter, we realized $8 million in cost savings and since the program's inception have achieved annualized cost savings totaling more than $40 million. Savings have primarily come from optimizing our manufacturing footprint, headcount reductions and delayering the organizational structure. As a part of these planned efforts, we have recently announced changes to our leadership team with key appointments. Jed Peters and Rubens Passos assumed leadership positions for North America and Latin America, respectively, effective in July. And A.J. Spijkervet will lead our International segment beginning in 2026. They bring a vast amount of commercial experience, deep product knowledge and a strong customer relationships that will help accelerate our transformation.

These important initiatives, combined with improving demand trends and favorable FX tailwinds position us for sequential improvement in the third quarter, with sales declines moderating from current levels. The foundational work we're doing today, streamlining our operations, investing in higher growth categories and optimizing our cost structure is building a platform for sustainable, profitable growth. While we remain focused on navigating the current market dynamics with discipline and agility, I'm confident we're making the right strategic decisions to enhance our competitive position and improve our revenue performance.

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

Thank you, Tom, and good morning, everyone. As Tom mentioned, second quarter sales and adjusted EPS were in line with the outlook we provided in May. Reported sales in the second quarter decreased 10% with a slightly favorable FX impact. This decline reflects a quickly changing U.S. marketplace given the tariff announcements.

Initially, there was uncertainty about the environment and the ultimate cost of goods, and many customers cease purchasing until some clarity developed. This uncertainty lessened as the reciprocal tariffs were delayed and as we progressed throughout the quarter.

Overall demand remains soft for our consumer and business products as well as for computer accessories. Gross profit for the second quarter was $130 million, a decrease of 15% with the margin rate contracting about 200 basis points to 32.9%. The decline was driven by the impact of the tariff announcements and a combination of lower volumes and reduced fixed cost absorption. Due to the strength of our first quarter margin rate our year-to-date margin rate is down much less an 80 basis points decline. SG&A expense of $83 million was down versus the prior year due to cost reduction actions and lower incentive compensation expense. Adjusted operating income for the second quarter was $47 million versus $65 million a year ago. The operating income ratio to sales has been impacted by the lower volumes, deleveraging our SG&A costs.

Now let's turn to our segment results for the second quarter. In the Americas segment, comparable sales declined 14%, largely due to the purchasing disruption I mentioned earlier as well as soft demand in most of our categories. The Americas adjusted operating income margin for the second quarter was 17.4% below last year. The margin rate in the quarter was impacted by softer volumes, lower fixed cost absorption and the impact from tariffs, more than offsetting cost savings. Before moving to the International segment, I want to call out that we have successfully settled the long-standing tax assessments in Brazil. Our reserve of $20 million has been completely resolved for $7 million. We are pleased to have this matter behind us.

Now let's turn to our International segment. For the second quarter, comparable sales declined 4%, an improvement from the first quarter. Demand was soft in Europe, especially in Germany, U.K. and France, which are the largest markets in EMEA, due to continuing pressure and business essential products. Australia benefited from the Buro Seating acquisition, and we saw good growth in Asia. International adjusted operating income margin for the second quarter increased to 8.5% due to the benefit of pricing, cost savings and lower incentive compensation expense more than offsetting the volume decline. Year-to-date, adjusted free cash flow was an outflow of $24 million, which was in line with our expectations. This includes $17 million in cash proceeds from the sale of 2 owned facilities.

The second quarter is historically the peak of our borrowing needs to support the seasonal aspects of our business. We began generating positive cash flow late in the third quarter and throughout the rest of the year. During the quarter, we returned $7 million to shareholders in the form of dividends. While we continue to believe a balanced capital allocation is appropriate, in the near term, we will be focused on paying down debt. At quarter end, we had approximately $200 million available for borrowing under our revolver, and we finished the quarter with a consolidated leverage ratio of 4.3x. Given the impact of tariffs on second quarter results and a high level of uncertainty in the markets, we decided to be prudent and get additional cushion in our leverage covenants. We amended our bank credit agreement, increasing our leverage covenant by 50 basis points for the remainder of 2025 and by 25 basis points throughout 2026.

Now turning to the outlook. We are providing an outlook for both the third quarter and the full year. The evolving tariff environment continues to lead to an uncertain demand environment and muted economies, especially for our Americas segment. We expect this uncertainty to continue for the remainder of the year. Our outlook reflects our price increases, which will cover the tariff costs and maintain margin. Pricing was announced in the second quarter and takes effect in the third and fourth quarters. We anticipate our pricing actions will partially mitigate the continued softness in consumer and business spending with the rate of decline improving in the second half of the year.

For the full year, we expect reported sales to be down 7% to 8.5% and adjusted EPS to be within the range of $0.83 to $0.90. We expect adjusted free cash flow to be approximately $100 million, including the proceeds from the sale of assets. We anticipate a leverage ratio of 3.8x to 3.9x at year-end. For the third quarter, we expect reported sales to be down 5% to 8%, with FX having a positive impact from the weakening of the U.S. dollar. We anticipate adjusted EPS to be in the range of $0.21 to $0.24.

Even though the current year poses challenges, we remain confident in the long-term future of our company and our ability to navigate this dynamic period. We have a strong balance sheet with no debt maturities until 2029 and a long history of productivity savings and cost management. We continue to anticipate that in the longer term, we can grow sales modestly from organic and inorganic initiatives with a target gross margin rate of 33% to 34% and consistent cash flow generation.

Now let's move on to Q&A, where Tom and I will be happy to take your questions. Operator?

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

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

Good morning. This is Tom. So first, let me address kind of the decline question. And the decline really is a mix of different things compared to our expectations. So certainly, we mentioned the shifts into the first quarter. We also did see some softness with the orders from our customers, including cancellations. And then we saw some shifts, very modest shifts into the third quarter. So if you compare it to our expectations, those were the 3 primary drivers of the kind of changes in expectations.

As we think about looking ahead, we're early in the season. We're less than 10% through the sell-through season, which really will dictate any demand replenishment that we get later in the season. We've ensured that we have good inventory positions in the event that our customers' demand increases above expectations or above forecast. We're hopeful that, that will be the case. But at this point, it's uncertain, and it'd probably be premature to comment.

Lastly, I will say our customers continue to manage inventory tightly, their replenishment expectations are relatively low in our forecast. But we hope that, that will obviously materialize differently and we'll see, right? Again, it's early in the season, and it's too early to tell exactly what our customers are going to do.

And then in terms of new product development, you highlighted a couple of products that you're going to be bringing on in the second half. How should we think about those products contributing to revenue in the second half? Is it more of a 2026 kind of upside from these products as you see the market? Or will there be a benefit in the second half?

Yes. The benefit will be very modest, Greg. It takes time for us to get syndication of a product, get listings of product. We should see some benefit from the Switch 2 accessories that are entering the market in the second half. But beyond that, it's really 2026 and beyond, where we'll see impact from revenue with the new product introductions that are happening this year.

Our next question comes from Kevin Steinke with Barrington Research.

So just going back to back-to-school, I'm wondering if you can make adjustments with your product assortment in terms of price points, et cetera, given the demand environment, if that's something you think about in light of, again, the current trends?

Yes. So Kevin, it's a good question. We feel consistently that we have a good offering of price choices in our portfolio supported by our meat and Five Star brand here in the U.S. and our Hilroy and Five Star brand in Canada. So we think North America, we have a good offering that touches on each one of the price points. We collaborate with our customers at the beginning of the season to ensure that we're hitting the price targets that they think will move during the season. And we've done a nice job of that this year again. It really will -- our performance will really depend upon consumer demand. And right now, it's kind of wait and see. We're still early in the season, as I mentioned earlier.

As it relates to back-to-school and other markets, which are important such as Brazil, we are going to have to reposition some of our product and make sure that we are competitive and evolving price points as lower-cost competitors from China particularly or entering the market aggressively, and we're doing so right now. So we're adjusting those assortments. We're making sure that we have the features that the consumers need at those price points, and those offerings will be in market this BTS in Brazil.

On that Chinese competition, I mean, is that something that you expect to persist? Or what kind of -- what do you think is driving that? Is it just the environment that's opening the door for lower-cost competitors or -- just wondering about the sustainability of that trend, I guess?

Yes, that's a hard one for us to predict. I mean we certainly see low-cost competitors entering and exiting markets all across the globe consistently. This may be a little different because of the trade dynamics, particularly impacting the U.S. market for Chinese suppliers. We'll just have to wait and see. The key for us is just reacting, making sure that we have the right product, the right price, the right assortment to compete in every market that we sell product in.

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

Yes, I think that's right. I think we're expecting it to modestly improve in the back half gross margin and we have put our pricing initiatives out there so that we are covering the cost of the tariff as well as maintaining our margin. So as we think about the full year, we took a couple of hits here in the first half, but back half, we do expect to come back.

And then just lastly, did you mention the benefit from foreign currency that you baked into the sales outlook for both the third quarter and the full year?

Right. Yes, we did. And if you kind of go back to our slides and stuff, you'll see that out there, but we do expect a favorable benefit from FX, primarily -- or particularly in the fourth quarter, but third as well.

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

Our next question comes from Joe Gomes with Noble Capital.

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

Yes, Joe, great question. We're really pleased with our partnership with Nintendo and our PowerA team. They've done a great job of getting product to market as quickly as possible. So as we noted in our prepared remarks, the launch was on June 5. And so second quarter was really not impacted much by the Switch 2 accessory sales. The big season for us is holiday. And so you'll see Q4 being a strong PowerA quarter for ACCO Brands. We're well positioned to capitalize on the demand. We understand how the demand curve works. As consoles get launched, get into market, first party typically realizes sales early in the maturity cycle and third party then steps in shortly thereafter.

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

And on the $100 million cost reduction program, as you mentioned, you've gotten $40 million since the beginning of the program. What do you think is possible for the second half of this year?

Yes. Well, if you think about the first half, we've got about $16 million in because we had about $8 million in the first and $8 million in the second. So if you just think of that kind of playing out through the rest of the year, Joe, you're probably pretty close, maybe a little bit more just because of the later impact of some of our actions.

And then in the release you talked about an asset sale. Maybe you could just give us a little bit more color on what that was or you're planning on having any more asset sales?

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

Our next question comes from Hale Holden with Barclays.

Just 2 quick ones. Deb, the Brazilian tax release. Is that sort of cash that comes back to you or just an accounting credit?

Actually, we resolved it. If you remember, the reserve was really large a couple of years ago, and we've been dwindling it down with negotiations and with government coming out with new laws. But it ended up being about $20 million of a liability on our books. And we are going to end up paying about $7 million out. So that $13 million that's going through the income statement is just an accounting adjustment, but will have $7 million go out over the next year to the government.

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

Yes. It's hard to say because we've got the China and the non-China product coming in that we're pricing accordingly for. And we're not pricing really every single item because we do have on-hand inventory as well. So we're passing on a good price increase, as I said, to cover the cost and the cover to make sure we maintain our margin.

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

Yes, Hale, this is Tom. That's sometimes difficult to address because there's so many other macro issues that go into modeling elasticity. We do model a modest volume decline as we put through price increases. But to give specific numbers, it's too speculative from my perspective. So the forecast that we've given appropriately balances price elasticity in it particularly here in the U.S.

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

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

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

Yes. That ebbs and flows, Bill, every year. So the decisions to set BTS typically happen before the turn of the calendar year. So those decisions were made well in advance of the Liberation Day tariff announcement. I would say this year, our listings are pretty constant to the prior year. In fact, they're up modestly, what we believe is going to impact our sales a little more is just the conservative nature in which our retailers are approaching inventory with all the uncertainties that they're trying to manage through. And so that's why we think BTS sales will be a little depressed compared to our past performance.

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

Yes. Yes, Bill, it's way too premature to project whether or not we will or we will not. We're well positioned. I can tell you that our brands historically have performed very, very well in back-to-school, particularly Five Star. We're confident in our feature-rich assortment and our price points. We think we hit all the major price points, and we have great relationships with our customers. So the things that we can control, we think we've executed against very well going into this season. Now we just have to see how it plays out.

Got it. And then lastly for me, I'm not sure what you might be willing to provide or not provide, but can you give us any sense for magnitude of the dollar of incremental sales of gaming accessories you might see either in the first quarter of this year or I'm sure in fiscal year '26 based upon all the momentum behind Switch. Just trying to figure out kind of -- is this like a $10 million opportunity, $20? I don't have a sense for context.

Yes. Again, it's a little early on that topic as well. Holiday season is our biggest season in support of the Switch 2 launch. We're starting to get orders in now. We have a demand forecast provided to us. We're excited about that, but I think it would be premature for us to give a specific dollar amount simply because we don't really know yet. But so far, reception has been very strong with our assortment.

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

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

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