ACCO Brands Corporation (ACCO) Bundle
Understanding ACCO Brands Corporation (ACCO) Revenue Streams
Understanding ACCO Brands Corporation’s Revenue Streams
ACCO Brands Corporation generates revenue through a diversified range of products and services primarily categorized into two segments: Americas and International. The following sections detail the breakdown of these revenue sources, historical growth trends, and significant changes impacting revenue streams.
Breakdown of Primary Revenue Sources
For the three months ended September 30, 2024, net sales were reported at $420.9 million, a decrease of 6.0% from $448.0 million in the same period of 2023. For the nine months ended September 30, 2024, net sales totaled $1,218.1 million, down 9.4% from $1,344.2 million in 2023.
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth has shown a decline, with the following notable figures:
- Three months ended September 30, 2024: Net sales decreased by $27.1 million or 6.0%.
- Nine months ended September 30, 2024: Net sales decreased by $126.1 million or 9.4%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Three Months Ended September 30, 2024 (in millions) | Three Months Ended September 30, 2023 (in millions) | Change ($) | Change (%) |
|---|---|---|---|---|
| Americas | $259.1 | $284.4 | $(25.3) | (8.9)% |
| International | $161.8 | $163.6 | $(1.8) | (1.1)% |
The Americas segment contributed the majority of sales, accounting for approximately 61.5% of total net sales in Q3 2024, while the International segment contributed around 38.5%.
Analysis of Significant Changes in Revenue Streams
The decline in revenue streams is attributed to several factors:
- Lower back-to-school purchases in Latin America and North America.
- Weaker global demand for office-related products.
- Exit from lower-margin business in North America, contributing approximately 3.0% to the sales decline.
Despite these challenges, growth was noted in the technology accessories category, partially offsetting the overall revenue decline.
Historical Trends in Revenue Growth
Historical data reflects a consistent decline in revenue:
- 2022: Total revenue was $1,420 million.
- 2023: Total revenue decreased to $1,344.2 million.
- 2024 (as of September 30): Total revenue stands at $1,218.1 million.
This trend indicates a year-over-year decline, with a compounded annual growth rate (CAGR) showing a negative trajectory.
A Deep Dive into ACCO Brands Corporation (ACCO) Profitability
A Deep Dive into ACCO Brands Corporation's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the company reported a gross profit of $136.9 million, which is a decrease of 5.5% from $144.8 million in the same period of 2023. The gross profit margin for this period was 32.5%, reflecting an increase of 20 basis points year-over-year.
For the nine months ended September 30, 2024, the gross profit amounted to $399.9 million, down 6.6% from $428.3 million in the previous year. The gross profit margin for the nine months was 32.8%, which is up 90 basis points compared to 31.9% from the prior year.
Operating income for the three months ended September 30, 2024, was $26.3 million, down from $32.2 million in the same quarter of 2023. For the nine months, the company reported an operating loss of $79.0 million, compared to an operating income of $97.5 million in the prior year.
Net income for the three months ended September 30, 2024, was $9.3 million, down from $14.9 million in the corresponding quarter of 2023. For the nine-month period, the net loss was $122.2 million, a significant decrease from net income of $37.6 million in 2023.
Trends in Profitability Over Time
The profitability trends indicate a consistent decline in both gross and operating profits over the past year. The gross profit decreased by $28.4 million over the nine-month period, while operating income fell sharply due to non-cash impairment charges and lower sales volume. The net income shift from profit to loss marks a critical concern for investors.
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the gross profit margin of 32.5% compares favorably against the industry average of approximately 30%. However, the operating margin, reflected in a loss of $79.0 million, highlights significant operational challenges compared to a typical industry operating margin of around 10%.
Analysis of Operational Efficiency
The selling, general, and administrative expenses (SG&A) for the three months ended September 30, 2024, were $92.2 million, down 6.7% from $98.8 million in the prior year. SG&A as a percentage of net sales was 21.9%, reflecting a slight improvement from 22.1% in the same quarter last year.
For the nine-month period, SG&A expenses were $274.4 million, a decrease of 6.0% from $291.8 million. The company has implemented cost reduction initiatives that have begun to yield benefits, although these efforts have not fully offset the declines in sales volume.
| Metric | Q3 2024 | Q3 2023 | Change | 9M 2024 | 9M 2023 | Change |
|---|---|---|---|---|---|---|
| Gross Profit | $136.9M | $144.8M | -5.5% | $399.9M | $428.3M | -6.6% |
| Operating Income | $26.3M | $32.2M | -18.3% | ($79.0M) | $97.5M | NM |
| Net Income | $9.3M | $14.9M | -37.6% | ($122.2M) | $37.6M | NM |
| SG&A Expenses | $92.2M | $98.8M | -6.7% | $274.4M | $291.8M | -6.0% |
Debt vs. Equity: How ACCO Brands Corporation (ACCO) Finances Its Growth
Debt vs. Equity: How ACCO Brands Corporation Finances Its Growth
The financial structure of any corporation is critical to its growth and sustainability. In the case of ACCO Brands Corporation, understanding its debt and equity levels provides essential insights for investors.
Overview of the Company's Debt Levels
As of September 30, 2024, the total debt stood at $914.4 million. This includes:
- Senior secured credit facilities: $339.4 million with a weighted average interest rate of 6.72%.
- Senior unsecured notes: $575.0 million with a fixed interest rate of 4.25%.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio is a vital metric for assessing the financial leverage of a company. ACCO Brands Corporation reported a debt-to-equity ratio of approximately 3.50 as of September 30, 2024. This figure is higher than the industry average, indicating a heavier reliance on debt financing compared to equity. The industry standard typically ranges from 1.0 to 2.0 for similar companies in the sector.
Recent Debt Issuances and Credit Ratings
On October 30, 2024, the company amended its credit agreement to extend the maturity of its credit facility to October 30, 2029. Additionally, the company repaid its outstanding USD Senior Secured Term Loan A and part of the outstanding Euro Senior Secured Term Loan A using borrowings under the Revolving Facility. The current Revolving Facility allows for outstanding borrowings not to exceed $467.5 million.
As of the latest reports, the company maintains adequate financing arrangements at market rates, although specific credit ratings have not been disclosed in the recent filings.
How the Company Balances Between Debt Financing and Equity Funding
ACCO Brands Corporation employs a strategic approach to balance its debt and equity financing. The company primarily utilizes cash flows from operations, current cash balances, and available borrowings under its Revolving Facility to meet liquidity needs. As of September 30, 2024, the company reported cash on hand of $102.0 million and available borrowings of $569.0 million under its credit facilities, which provides a cushion for its operational and strategic needs.
| Financial Metric | Value |
|---|---|
| Total Debt | $914.4 million |
| Senior Secured Credit Facilities | $339.4 million |
| Senior Unsecured Notes | $575.0 million |
| Weighted Average Interest Rate (Secured) | 6.72% |
| Fixed Interest Rate (Unsecured) | 4.25% |
| Cash on Hand | $102.0 million |
| Available Borrowings | $569.0 million |
| Debt-to-Equity Ratio | 3.50 |
| Industry Average Debt-to-Equity Ratio | 1.0 - 2.0 |
This structured approach allows the company to manage its capital effectively while navigating the challenges posed by its current debt levels and market conditions.
Assessing ACCO Brands Corporation (ACCO) Liquidity
Assessing ACCO Brands Corporation's Liquidity
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, is 1.87, indicating a solid liquidity position. The quick ratio stands at 1.10, suggesting that the company can cover its short-term liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is reported at $615.5 million, a decrease from $700.7 million in the previous year. This decline is primarily attributed to decreased sales volume and increased restructuring efforts.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, indicates the following trends:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) | Change (in millions) |
|---|---|---|---|
| Operating Activities | $95.5 | $70.7 | $24.8 |
| Investing Activities | ($8.5) | ($7.5) | ($1.0) |
| Financing Activities | ($49.5) | ($53.9) | $4.4 |
| Net Cash Increase | $35.6 | $11.5 | $24.1 |
Cash Flow from Operating Activities
During this period, cash provided by operating activities was driven by a trade working capital contribution of $86.7 million, which accounts for changes in accounts receivable, inventory, and accounts payable.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company reported $102.0 million in cash on hand and $22.5 million in borrowings under its revolving credit facility. The total available for borrowings was $569.0 million, indicating a strong liquidity cushion. However, the company has a consolidated leverage ratio of 3.50 to 1.00, which is below the maximum covenant of 4.00 to 1.00, reflecting a manageable debt level relative to earnings before interest, taxes, depreciation, and amortization (EBITDA).
Is ACCO Brands Corporation (ACCO) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for assessing a company's valuation relative to its earnings. As of September 30, 2024, the company's diluted earnings per share (EPS) was $0.09. The stock price was approximately $3.50, leading to a P/E ratio of:
P/E Ratio = Stock Price / EPS = $3.50 / $0.09 = 38.89.
Price-to-Book (P/B) Ratio
The P/B ratio compares a company's market value to its book value. As of September 30, 2024, the total equity was $615.5 million and the number of shares outstanding was 98.6 million. The book value per share is:
Book Value per Share = Total Equity / Shares Outstanding = $615.5 million / 98.6 million = $6.24.
The P/B ratio is then calculated as:
P/B Ratio = Stock Price / Book Value per Share = $3.50 / $6.24 = 0.56.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the company's total debt was $914.4 million, with cash and cash equivalents totaling $102.0 million. The EBITDA for the last twelve months was approximately $60 million. The enterprise value (EV) is calculated as:
EV = Total Debt - Cash + Market Capitalization = $914.4 million - $102.0 million + (3.50 98.6 million) = $914.4 million - $102.0 million + $345.1 million = $1,157.5 million.
Thus, the EV/EBITDA ratio is:
EV/EBITDA = EV / EBITDA = $1,157.5 million / $60 million = 19.29.
Stock Price Trends
Over the past 12 months, the stock price has shown the following trends:
- 12 months ago: $4.50
- 6 months ago: $3.80
- Current price: $3.50
This represents a decline of approximately 22.22% over the year.
Dividend Yield and Payout Ratios
The company declared a dividend of $0.075 per share in 2024. Based on the current stock price of $3.50, the dividend yield is calculated as:
Dividend Yield = Dividend per Share / Stock Price = $0.075 / $3.50 = 2.14%.
The payout ratio, based on the EPS of $0.09, is:
Payout Ratio = Dividend per Share / EPS = $0.075 / $0.09 = 83.33%.
Analyst Consensus
As of the latest reports, analyst consensus is as follows:
- Buy: 2 analysts
- Hold: 5 analysts
- Sell: 1 analyst
This indicates a mixed outlook, with a majority recommending a hold position.
| Metric | Value |
|---|---|
| P/E Ratio | 38.89 |
| P/B Ratio | 0.56 |
| EV/EBITDA Ratio | 19.29 |
| Stock Price (Current) | $3.50 |
| 12-Month Stock Price Change | -22.22% |
| Dividend Yield | 2.14% |
| Payout Ratio | 83.33% |
| Analyst Buy Recommendations | 2 |
| Analyst Hold Recommendations | 5 |
| Analyst Sell Recommendations | 1 |
Key Risks Facing ACCO Brands Corporation (ACCO)
Key Risks Facing ACCO Brands Corporation
Industry Competition: The competitive landscape is becoming increasingly challenging. For the three months ended September 30, 2024, net sales decreased by $27.1 million, or 6.0%, compared to the same period in the prior year. This decline reflects lower back-to-school purchases in North America and Latin America, alongside weaker global demand for office-related products.
Regulatory Changes: The potential impact of the OECD's Pillar Two initiative, which introduces a 15% global minimum tax effective January 1, 2024, poses regulatory risks. The management is currently assessing the materiality of these changes.
Market Conditions: For the nine months ended September 30, 2024, net sales decreased $126.1 million, or 9.4%, with a notable contribution from adverse foreign exchange effects amounting to $7.4 million, or 0.6%. The primary driver was a volume decline of 8.5% due to reduced global business and consumer demand.
Operational Risks
Operational risks have been highlighted by the recent earnings report. The company reported an operating income of $26.3 million for the third quarter of 2024, down from $32.2 million in the same quarter of the previous year, primarily due to lower sales volume and increased restructuring expenses.
Financial Risks
Financial health is under pressure, as evidenced by a net loss of $122.2 million for the nine months ended September 30, 2024, compared to a net income of $37.6 million in the prior year. This loss was largely attributed to non-cash impairment charges totaling $165.2 million related to goodwill.
The company’s effective tax rate for the nine months ended September 30, 2024, was 2.8%, a significant decrease compared to 37.6%% in the previous year, reflecting the impact of lower pre-tax income.
Strategic Risks
Strategic risks are evident as the company has initiated restructuring activities aimed at cost reduction, which includes integrating acquired businesses. The costs associated with these restructuring efforts were $6.7 million for the third quarter of 2024, representing an increase of 123.3% from the prior year.
Mitigation Strategies
To mitigate these risks, the company has implemented cost reduction actions that have resulted in a 6.0% reduction in selling, general, and administrative expenses for the nine months ended September 30, 2024, amounting to $274.4 million compared to $291.8 million in the previous year.
| Risk Factor | Details |
|---|---|
| Industry Competition | Net sales decreased by $27.1 million, or 6.0%. |
| Regulatory Changes | OECD's 15% global minimum tax effective January 1, 2024. |
| Market Conditions | Net sales decreased $126.1 million, or 9.4%. |
| Operational Risks | Operating income of $26.3 million, down from $32.2 million. |
| Financial Risks | Net loss of $122.2 million for the nine months ended September 30, 2024. |
| Strategic Risks | Restructuring costs of $6.7 million. |
| Mitigation Strategies | SG&A expenses reduced by 6.0% to $274.4 million. |
Future Growth Prospects for ACCO Brands Corporation (ACCO)
Future Growth Prospects for ACCO Brands Corporation
Analysis of Key Growth Drivers
ACCO Brands Corporation is strategically positioned for growth through several key drivers:
- Product Innovations: The company is focusing on expanding its product lines, particularly in technology accessories, which have shown growth despite overall sales declines in traditional office products. For instance, technology accessories contributed positively to sales during recent quarters.
- Market Expansions: ACCO is exploring new geographical markets to mitigate the impact of declining sales in North America and Latin America. This includes leveraging growth opportunities in Asia and Europe, where demand for office products remains steady.
- Acquisitions: The company has a history of strategic acquisitions aimed at enhancing its product portfolio and market reach. Future acquisitions may further diversify its offerings and drive revenue growth.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that ACCO Brands will face challenges in the short term due to a decrease in net sales, which fell by 9.4% for the nine months ended September 30, 2024, compared to the same period in 2023. Specifically, net sales decreased from $1,344.2 million in 2023 to $1,218.1 million in 2024. However, growth in technology accessories may help stabilize revenue in the coming years, with projections suggesting a potential rebound as the company adjusts its product mix.
Strategic Initiatives or Partnerships that May Drive Future Growth
ACCO Brands is actively pursuing partnerships that enhance its operational efficiency and market presence. For instance:
- The company is investing in e-commerce platforms to increase its online sales footprint.
- Collaborations with educational institutions to supply branded products can lead to increased visibility and sales in the back-to-school segment.
Competitive Advantages that Position the Company for Growth
ACCO Brands has several competitive advantages that position it well for future growth:
- Strong Brand Portfolio: The company boasts a diverse range of well-established brands, providing a competitive edge in various market segments.
- Operational Efficiency: Cost reduction initiatives have already shown results, with selling, general, and administrative expenses decreasing by 6.0% in the nine months ended September 30, 2024.
- Robust Supply Chain: ACCO has implemented strategic supply chain enhancements to streamline operations and improve product availability.
| Metric | Q3 2024 | Q3 2023 | Change ($) | Change (%) |
|---|---|---|---|---|
| Net Sales | $420.9 million | $448.0 million | $(27.1) million | (6.0%) |
| Operating Income | $26.3 million | $32.2 million | $(5.9) million | (18.3%) |
| Gross Profit Margin | 32.5% | 32.3% | 0.2 pts | 0.6% |
| SG&A Expenses | $92.2 million | $98.8 million | $(6.6) million | (6.7%) |
As of September 30, 2024, the company reported a consolidated leverage ratio of approximately 3.50 to 1.00, indicating manageable debt levels relative to its earnings before interest, taxes, depreciation, and amortization (EBITDA). This financial health provides a solid foundation for pursuing growth strategies moving forward.
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Article updated on 8 Nov 2024
Resources:
- ACCO Brands Corporation (ACCO) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ACCO Brands Corporation (ACCO)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ACCO Brands Corporation (ACCO)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.