Business Overview and History

ACCO Brands Corporation (ACCO) is a leading global consumer, technology, and business branded products company, providing well-known brands and innovative product solutions used in schools, homes, and workplaces. With a rich history dating back to 1925, ACCO Brands has established itself as a trusted name in the office supplies and workspace solutions industry, continuously adapting to changing market demands and evolving consumer preferences.

ACCO Brands was founded in 1925 as the American Clip Company, initially focused on producing paper clips and other fastening devices. Over the decades, the company has undergone significant transformations, expanding its product portfolio and geographic reach through strategic acquisitions and organic growth initiatives. In 2005, the company merged with Acco World Corporation, solidifying its position as a global leader in the office products industry.

In 2012, ACCO Brands made a significant leap forward with the acquisition of the Mead Consumer and Office Products business, which brought renowned brands such as Mead, ACCO, Quartet, and Swingline into its portfolio. This acquisition substantially expanded the company's brand offerings and global presence, although it also presented challenges in terms of integrating the newly acquired businesses and operations.

The company continued its expansion strategy in 2017 with the acquisition of the Esselte business, which strengthened its foothold in the European market by adding brands like Leitz and Rapid. This integration proved to be a crucial milestone, enabling ACCO Brands to leverage its global supply chain and sales infrastructure more effectively.

In response to declining sales in traditional office product categories, ACCO Brands has actively diversified its product portfolio. The company has invested in growth areas such as technology accessories, learning and creative products, and adjacent categories. Additionally, ACCO Brands has implemented multi-year cost reduction programs to optimize its operations and enhance profitability, demonstrating its ability to adapt to a dynamic and competitive market environment.

Today, ACCO Brands operates two main business segments: ACCO Brands Americas, which includes the United States, Canada, Brazil, Mexico, and Chile, and ACCO Brands International, covering EMEA, Australia, New Zealand, and Asia. The company's diversified product portfolio includes a wide range of consumer, technology, and business-focused solutions, such as gaming and computer accessories, storage and organization products, notebooks, shredding and laminating machines, and do-it-yourself tools, among others.

ACCO Brands' success is underpinned by its strong portfolio of well-known brands, including At-A-Glance, Barrilito, Esselte, Five Star, Foroni, GBC, Hilroy, Kensington, Leitz, Mead, PowerA, Quartet, Rapid, Swingline, and Tilibra, to name a few. Approximately 75% of the company's 2024 net sales came from brands that hold the number one or number two position in their respective product categories.

Financial Performance

In 2024, ACCO Brands reported total revenue of $1.67 billion, a decrease of 9.1% compared to the prior year. This decline was primarily driven by softer global demand, particularly in certain office-related product categories, as well as the company's strategic exit from lower-margin business, mainly in North America. Despite the revenue headwinds, ACCO Brands was able to expand its gross profit margin by 70 basis points to 33.3%, reflecting the positive impact of its cost reduction initiatives.

The company's operating performance in 2024 was impacted by non-cash goodwill and intangible asset impairment charges of $165.2 million, leading to a reported operating loss of $37.0 million. On an adjusted basis, excluding these one-time charges, the company reported operating income of $145.0 million, with an adjusted operating margin of 8.7%.

For the full year 2024, ACCO Brands reported annual net income of -$101.6 million, annual operating cash flow of $148.2 million, and annual free cash flow of $132.3 million.

In the fourth quarter of 2024, ACCO Brands reported revenue of $448.1 million, representing an 8.0% year-over-year decline. Net income for the quarter was $20.6 million. The revenue decline was driven by lower volume, primarily due to softer global business and consumer demand for certain office-related product categories, lower back-to-school purchases by customers in the Americas segment, and the exit of lower margin business primarily in North America.

Segment Performance

ACCO Brands Americas Segment: The ACCO Brands Americas segment includes operations in the United States, Canada, Brazil, Mexico, and Chile. This segment designs, markets, sources, manufactures, and sells a variety of consumer, technology, and business branded products used in schools, homes, and at work. The product categories in this segment include note-taking products, computer and gaming accessories, planners, workspace machines, tools and essentials, and dry erase boards and accessories. Key brands in this segment include Five Star, PowerA, Tilibra, AT-A-Glance, Kensington, Quartet, GBC, Mead, Swingline, Barrilito, Foroni, and Hilroy.

In 2024, net sales for the ACCO Brands Americas segment were $999.9 million, a decline of 12% compared to the prior year. This was primarily driven by lower volume of 9.2% due to softer business and consumer demand for back-to-school and office products, as well as the exit of lower margin business in North America. However, this was partially offset by growth in the technology accessories category. Segment operating income was $45.5 million, compared to $43.9 million in the prior year. The decline in operating income was due to the lower sales volume, partially offset by lower selling, general and administrative expenses and restructuring costs.

ACCO Brands International Segment: The ACCO Brands International segment includes operations in EMEA (Europe, Middle East, and Africa), Australia, New Zealand, and Asia. This segment designs, markets, sources, manufactures, and sells a variety of consumer, technology, and business branded products. Key product categories include filing and organization products, workspace machines, tools and essentials, computer and gaming accessories, dry erase boards and accessories, and writing and art products. The leading brands in this segment include Leitz, Rapid, Kensington, Esselte, Rexel, PowerA, GBC, NOBO, Franken, Derwent, Marbig, and Artline.

In 2024, net sales for the ACCO Brands International segment were $666.3 million, a decrease of 4.4% compared to the prior year. This was driven by a 5.7% decline in volume, partially offset by price increases of 1.6%. The volume decline reflected reduced business and consumer demand for office products, which was partially offset by growth in technology accessories. Segment operating income increased 9.1% to $54.1 million, primarily due to the price increases and cost reduction actions, partially offset by the impact of lower volume.

Liquidity

ACCO Brands' balance sheet remains strong, with a focus on maintaining a healthy financial position. As of December 31, 2024, the company reported net debt of $760.5 million, down $94 million from the prior year, and a consolidated leverage ratio of 3.4x, well below its covenant limit of 4.0x. The company's consistent cash flow generation enabled it to reduce debt, while also supporting its quarterly dividend and share repurchase program.

In 2024, ACCO Brands generated free cash flow of $132 million, demonstrating its ability to convert earnings into accessible liquidity. This cash flow strength, combined with the company's recently refinanced credit facilities, provides ample financial flexibility to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders.

As of December 31, 2024, ACCO Brands had a debt-to-equity ratio of 0.23. The company had $74.1 million in cash on hand and $329.6 million available under its $467.5 million revolving credit facility. ACCO Brands' current ratio was 1.49 and quick ratio was 0.94.

Strategic Initiatives and Outlook

ACCO Brands has implemented a multi-year restructuring and cost savings program, with the goal of simplifying its operating structure and reducing costs through headcount reductions, supply chain optimization, global footprint rationalization, and better leveraging of its sourcing capabilities. In 2024, the company realized approximately $25 million in savings from this program and has now expanded the target to $100 million in annualized pre-tax cost savings by the end of 2026.

While the demand environment remains challenging, with potential headwinds from macroeconomic uncertainties, tariffs, and a strong U.S. dollar, ACCO Brands is taking proactive measures to navigate these challenges. The company's focus on innovation, new product development, and expanding into adjacent categories, such as ergonomics, is expected to drive future growth and offset declines in certain traditional office product categories.

For the full year 2025, ACCO Brands expects comparable sales to decline between 1% and 5%, with the sales trend improving throughout the year. The company forecasts adjusted earnings per share in the range of $1.00 to $1.05, reflecting the benefits of its cost savings initiatives and improved gross margins, partially offset by higher interest expenses and a normalized tax rate.

Additional guidance for 2025 includes:

• Full-year gross margins are expected to improve compared to 2024.
• SG&A costs are expected to be comparable to 2024, as savings from cost actions are offset by increases in merit, incentive compensation, and other inflationary pressures.
• The adjusted tax rate is expected to be approximately 30%.
• Free cash flow is projected to be within the range of $105 million to $115 million.
• The company expects to end 2025 with a consolidated leverage ratio of approximately 3 to 3.3 times.

For Q1 2025, ACCO Brands forecasts comparable sales to be down 5% to 8%, with adverse foreign exchange as a significant headwind. They expect a loss per share in the range of $0.03 to $0.05 for the quarter.

Risks and Challenges

ACCO Brands faces several risks and challenges that could impact its future performance. The company's heavy reliance on a limited number of large customers, who account for a significant portion of its net sales, exposes it to potential revenue volatility if these customers were to reduce their business or experience financial difficulties.

The highly competitive nature of the office supplies and workspace solutions industry, with low barriers to entry and the threat of private label products, could also pressure the company's margins and market share. Additionally, ACCO Brands' global operations make it vulnerable to foreign currency fluctuations and geopolitical uncertainties, which can significantly affect its financial results.

The ongoing shift in consumer and business preferences towards digital and technology-based solutions, particularly in the wake of the COVID-19 pandemic, poses a challenge for the company's traditional paper-based and related product categories. ACCO Brands must continue to invest in innovation and adapt its product portfolio to meet evolving customer needs.

Industry Trends

The office products industry has experienced declining demand for traditional paper-based products as technology adoption has increased. However, ACCO Brands has been able to offset some of this decline through growth in technology accessories and expanding into adjacent product categories.

Conclusion

ACCO Brands Corporation's legacy of innovation and its ability to adapt to changing market dynamics have been the keys to its success over the past century. Despite the current challenges faced by the company, its strong brand portfolio, cost optimization initiatives, and strategic focus on growth opportunities in adjacent categories position it well to navigate the evolving office supplies and workspace solutions landscape.

As ACCO Brands continues to optimize its operations, expand its product offerings, and leverage its financial strength, investors will be closely monitoring the company's ability to deliver sustainable growth and shareholder value in the years ahead.