ACCO

• Overall Q2 2026 Performance

  • Consolidated reported sales grew 5% year-over-year, with sales and adjusted EPS exceeding management's prior outlook, driven by strong Americas segment performance, the EPOS acquisition contribution, and favorable foreign exchange.
  • Adjusted gross profit was $138 million, up 6% year-over-year, with a gross margin rate of 33.1% up 20 basis points, primarily driven by realized cost savings.
  • Adjusted SG&A expense was $89 million, with all year-over-year growth attributable to the EPOS acquisition; existing cost mitigation efforts have fully offset ongoing cost inflation.
  • Adjusted operating income was $48 million, up year-over-year, with cost savings offsetting fixed cost deleveraging from organic volume declines.

• Acquisition and Integration

  • Integration of the recently acquired EPOS business is progressing on plan, with Q2 2026 sales coming in ahead of management expectations. Full year 2026 sales from EPOS are still projected to hit approximately $80 million, with $15 million in total cost synergies expected within 18 months of the acquisition close.
  • EPOS serves a primarily enterprise-focused customer base for high-quality audio solutions, distinct from ACCO Brands' existing consumer-focused gaming audio lines, creating cross-portfolio expansion opportunities that management is just beginning to evaluate.

• Operational Updates

  • North America back-to-school product placements were strong, with sales and margins recovering from 2025 tariff disruption, and early season sell-through meeting or exceeding plan with market share gains.
  • A planned systems upgrade at ACCO Brands' largest European distribution center, which negatively impacted Q2 sales and deliveries, is now complete, with operational performance improving in June 2026.
  • The multi-year $100 million cost reduction program remains on track to hit its full target in 2026.
  • Inventory is up $14 million year-over-year entirely due to the EPOS acquisition; underlying organic inventory levels have declined.
  • Claims for $20 million in 2026 and an additional $5 million in 2027 tariff refunds have been submitted, but no benefit from these refunds is included in current results or guidance pending assured receipt.
  • $7 million in shareholder dividends was distributed in Q2, with no debt maturities until 2029.

• Full year 2026 guidance has been upwardly revised from prior levels: reported sales are now projected to grow 2% to 5% year-over-year, and adjusted EPS is forecast to land in the range of 87 to 91 cents.
• The full year guidance incorporates a prudent outlook for the second half, including expected weaker demand from ongoing geopolitical and economic uncertainty, and a seasonally driven product mix weighted toward slower-growth traditional office products, which results in lower projected full year gross and operating margins relative to the prior year due to lagging price adjustments vs cost inflation.
• Full year 2026 free cash flow is projected to be between $75 million and $85 million, with $24 million in restructuring payments and $15 million in capital expenditures. The year-end consolidated leverage ratio is expected to be between 3.7x and 3.9x, down from the Q2 2026 level of 4.3x.
• Third quarter 2026 guidance projects reported sales to range between -1% and +2% year-over-year, with adjusted EPS between 17 and 21 cents.

1. Americas segment: Second quarter sales increased 6% year-over-year, with comparable sales up 2%. Growth came from strong learning and creative product performance in North America and Mexico, partially offset by soft demand in Brazil and weaker sales of core office and technology peripheral products. Adjusted operating income for the segment was $56 million, up approximately $13 million year-over-year, with the operating margin rate increasing 380 basis points to 21.2%. This segment contributed 66.4% of total consolidated adjusted operating income in the quarter.

2. International segment: Second quarter sales increased 4% year-over-year, with comparable sales down approximately 9%. Sales growth was driven by the EPOS acquisition and favorable foreign exchange, while soft demand from geopolitical and economic uncertainty in EMEA and Australia, plus temporary supply chain disruption from a distribution center systems upgrade, negatively impacted organic results. Adjusted operating income for the segment was $4 million, down year-over-year, with an operating margin rate of 2.4% that also decreased from the prior year. This segment contributed 4.8% of total consolidated adjusted operating income in the quarter.

• Ongoing geopolitical instability and global economic uncertainty have created purchasing hesitancy among both consumers and enterprise customers, leading to soft demand across multiple markets and product categories, particularly in EMEA, Australia, and Brazil, as well as for technology peripherals.
• Technology peripheral demand is facing additional headwinds from elevated hardware costs, constrained memory chip supply, a soft console gaming market, and enterprise budget shifts toward AI investments that have reduced spending on accessories, with these trends expected to continue through the second half of 2026.
• Input cost inflation has been higher than previously expected in 2026, with persistence tied to ongoing geopolitical conflicts and volatile fuel prices; price increases to offset these costs lag cost changes, particularly in the international segment, pressuring margins.
• While tariff refund claims have been submitted, no benefit from these claims is included in results or guidance because receipt is not yet assured.

Q: What is the current status of back-to-school performance, channel inventory, and retailer strategy for the season? What cross-opportunities exist between EPOS and ACCO's existing PowerA/LucidSound gaming audio business?

A: Early back-to-school sell-in was strong, with early sell-through meeting or exceeding plan and ACCO gaining market share. Channel inventory is healthy, with retailers exiting the 2025 season with clean inventory levels and ACCO's supply chain delivering on time. LucidSound is ACCO's owned, retail-focused consumer gaming audio brand, while EPOS is an enterprise-focused premium audio brand with major unified communications certifications, serving a different customer segment. Initial integration work focused on IT and cost synergies, and the company is just starting to evaluate cross-growth opportunities, with EPOS's early performance exceeding expectations.

Q: What is driving the full year guidance raise despite cautious commentary on the second half? What is your long-term view on technology peripheral demand amid current softness?

A: The guidance increase is purely driven by a stronger than expected first half performance; the second half outlook remains consistent with prior cautious projections. While near-term technology peripheral demand is weak, particularly for enterprise accessories as enterprises postpone purchases and shift budgets to AI, ACCO still views technology peripherals as attractive long-term growth categories. ACCO holds strong brand positions in its target categories, and the existing sales pipeline remains robust despite slower deal close rates that are only temporary.

Q: After completing EPOS integration, what is ACCO's capacity for additional near-term M&A?

A: Management sees attractive M&A opportunities in its target growth categories. EPOS integration is nearly complete, and the team is shifting focus to growth initiatives. ACCO expects to be positioned to pursue another acquisition in the near term, though no specifics on potential deals are provided.

Q: How much higher is current cost inflation relative to beginning-of-year expectations, and will the company need to implement additional broad price increases?

A: Higher-than-expected inflation emerged in Q2, with persistence depending on the length of ongoing geopolitical conflicts and volatile fuel prices. The company has built this uncertainty into its cautious second half outlook, and price increases generally lag cost increases in the international segment. Pricing strategy is tailored by product, category and market; the company is balancing the need to pass through costs while avoiding further harm to soft demand, but additional targeted price increases are expected globally.