Acco Brands Corporation

Hello everyone and a warm welcome to the first quarter 2022 ACCO Brands earning call. My name is Bethany and I will be your operator today. If you would like to ask a question during the question and answer session, please press star 1 on your telephone keypad. I will now hand the call over to Christine Hanneman to begin. Christine, over to you.

Good morning. This is Christine Hanneman, Senior Director of Investor Relations. Welcome to ACCO Brands first quarter 2022 conference call. Speaking on the call today are Boris Ellisman, Chairman and Chief Executive Officer of Echo 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 EchoBrands.com. When speaking about our results, we may refer to adjusted results. Adjusted results exclude transaction, integration, amortization, and restructuring costs, and other non-recurring items, including the change in fair value of the contingent consideration related to the Power A earn-out and reflect an adjusted tax rate. 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, including statements concerning the impacts of the COVID-19 pandemic on the company, 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 their actual results could differ materially. Please refer to our earnings release and SEC filings for an explanation of certain of these risk factors and assumptions. Our forward-looking statements are made as of today, and we assume no obligation to update them going forward. Following our prepared remarks, we will hold a Q&A session. Now I will turn the call over to Boris Ellisman.

Good morning, everyone. Thank you for joining us. Before I begin my comments for the quarter, I would like to formally welcome Deb O'Connor, our new CFO. Deb joined Aquabrands on April 4th, and we're very pleased to have her on board. Deb will follow me with a financial review of the quarter, and then we will both take your questions. Moving now to our first quarter. Following a record sales year in 2021, we have started 2022 with an excellent first quarter, posting strong sales and higher EPS. This performance is a result of the strategic transformation of our company towards sustainable, comparable sales growth. I am particularly pleased with this quarter's performance as we continue to execute well in an environment of high inflation and supply chain constraints. The 11% comparable sales growth for our total business was higher than our expectations and included both price and volume growth. All segments posted meaningful comparable sales increases led by our international segment. Earnings per share were 11 cents. which was also above our expectations. Our international segment posted 23% comparable sales growth. The growth was driven by Brazil and Mexico, as schools have now reopened after being mostly closed for the past two years. Our back-to-school sales have shown recovery in Brazil, particularly for our Talibra-branded notebooks, and in Mexico, but do not yet reflect a pre-COVID level of demand. We anticipate seeing even stronger levels of back-to-school demands during the upcoming season in those markets. The international segment doubled its adjusted operating income due to strong sales and the release of prior year reserves. Overall, this segment had an excellent quarter. Moving to North America, this segment had a 10% increase in comparable sales. We saw strong increases in most product categories in particular for student note-taking driven by our leading brand, Five Star, as well as Kensington computer accessories and most business products. We had some back-to-school sales pull forward into the first quarter as our customers are seeking surety of having inventory on hand for this important season. Overall, we expect a strong back-to-school season in North America as more children are attending schools in person The channel inventory overhang is gone. We expect to see continued good growth in five-star school products, and we are well-positioned to manage supply chain to serve our customers. We have domestic production of key back-to-school products, which is a clear advantage for replenishment given supply chain issues related to products imported from Asia. In addition, in the US and Canada, we're seeing the benefit of price increases we have taken over the past year to help offset the inflationary cost increases that continue. However, we have not yet recovered the cumulative impact of all the cost increases, and we will raise prices as needed throughout 2022 to protect our margins. Our EMEA business, which has been growing strongly for several quarters, posted a 7% increase in comparable sales. I am very pleased with growth in EMEA, especially since some countries had business lockdowns for much of the first quarter due to a spike in COVID. EMEA operating margin declined as our pricing has not yet caught up with inflationary cost increases. We took a sizable price increase on April 1st and have announced another increase that will be effective on July 1st. So we expect to see recovery in margins as the year progresses. Creating innovative new products that address a net consumer needs is one of our key pillars in achieving comparable sales growth goals. In the first quarter, we won two German design awards for our Leitz Ergo Cozy range of storage and organizational products, and for our Leitz precision paper trimmers and cutters. We also won the prestigious Red Dot Award for our Light's Cozy range, our Light's IQ Autofit Shredder range, and three of our Kensington Computer Accessory products. And PowerA received 10 mark on platinum and gold awards for the Fusion Pro 2 Wired Controller and the Spectra Infinity Enhanced Wired Controller for Xbox Series X and S. 11% fellow company comparable sales growth is especially impressive as we delivered it despite a decline in PowerAid sales. PowerAid positioned for long-term growth, even in the face of a very difficult first quarter comparison because of posting over 100% sales growth last year. That PowerAid first quarter sales didn't match last year, the business continued to perform well and showed over 60% growth versus the first quarter of 2020, despite ongoing girth of gaming consoles in the market. The chip shortage continues to impact the availability of gaming consoles, which is hurting overall industry sales. We're hopeful that the shortages will begin to ease in the second half, but they are likely to still impact gaming console and accessories availability. As a result, we expect Poway to track toward 5% to 10% sales growth this year, with a softer first half and a stronger second half. In summary, we have started the year with good momentum. We're executing very well as we manage the ongoing supply chain issues and inflation. We expect to have strong back-to-school seasons in North America and Latin America and expect to post another year of record sales, strong profits, and free cash flow growth. I will now hand it over to Deb, and we'll come back to answer your questions. Deb?