Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Management's Discussion and Analysis of Financial Condition and Results of Operations for the three months ended March 31, 2026 and 2025 should be read in conjunction with the unaudited condensed consolidated financial statements of ACCO Brands Corporation and the accompanying notes contained therein.

Overview of the Company

ACCO Brands is a leading global consumer, technology and business branded products company, providing well-known brands and innovative product solutions used in schools, homes and at work. These brands include At-A-Glance®, Barrilito®, EPOS®, Esselte®, Five Star®, Foroni®, GBC®, Hilroy®, Kensington®, Leitz®, Mead®, PowerA®, Quartet®, Rapid®, Swingline®, Tilibra® and others. Our products are sold primarily in the U.S., Europe, Australia, Canada, Brazil and Mexico.

The Company has two operating segments, Americas and International. Each operating segment designs, markets, sources, manufactures, and sells recognized consumer, technology and business branded products used in schools, homes and at work. Product designs are tailored to end-user preferences in each geographic region, and where possible, leverage common engineering, design, and sourcing.

Our product categories include gaming and computer accessories; storage and organization; notebooks; shredding; laminating and binding machines; stapling; punching; planners; dry erase boards; and do-it-yourself tools, among others. We distribute our products through a wide variety of channels to ensure that our products are readily and conveniently available for purchase by consumers and other end-users, wherever they prefer to shop. These channels include mass retailers, e-tailers, discount, drug/grocery and variety chains, warehouse clubs, hardware and specialty stores, independent office product dealers, office superstores, wholesalers, contract stationers, and specialty technology distributors. We also sell directly through e-commerce sites and our direct sales organization.

On January 30, 2026, we completed the acquisition of EPOS from Demant A/S ("EPOS"), a leading Danish hearing healthcare company. Based in Copenhagen, Denmark, EPOS provides a comprehensive range of premium enterprise wired and wireless headsets, and other audio solutions, that build on over a century of research in psychoacoustics. The EPOS product line is designed to reduce listening fatigue, improve voice clarity and support cognitive performance. EPOS complements our global computer accessories portfolio and expands on our strategy into growing technology peripherals.

Overview of Performance

The first quarter benefited from favorable foreign exchange and the acquisition of EPOS, including a preliminary bargain purchase gain of $37.6 million. The Company continues to be impacted by softer global demand primarily due to lower consumer and office spending, the weak macroeconomic conditions, and geopolitical instability. We expect these collective global trends and the impact of evolving trade policy to continue to impact our results of operations.

During the first quarter, our net sales increased $26.3 million, or 8.3 percent, compared to the prior year's first quarter. The net sales increase reflects favorable foreign exchange and the acquisition of EPOS.

We reported an operating loss of $10.4 million in the first quarter, compared to an operating loss of $6.7 million in the prior year's first quarter. The quarter was impacted by higher restructuring and a litigation settlement, partly offset by the benefit of cost reduction actions.

Our operating cash flow for the first three months was cash provided of $3.5 million compared to cash provided of $5.5 million in the prior year primarily reflecting reductions in working capital. Our operating cash flow continues to be seasonal with a historic pattern of strong inflows during the second half of the year.

Response to Tariffs

In reaction to the evolving tariff landscape, we have taken, and will continue to take, a number of actions:

In February 2026, the U.S. Supreme Court overturned the tariffs imposed in the prior year under the International Emergency Economic Powers Act (" IEEPA"), reducing the impact of U.S. tariffs on imported goods prospectively. The ruling did not address refunds and, as such, there is uncertainty about who may be entitled to refunds. In March 2026, the Court of International Trade ("CIT") directed the U.S. Customs and Border Protection ("CBP") to begin refunding all tariffs imposed under IEEPA and in April 2026, the Trump Administration has developed a refund mechanism and portal but has not waived its right to appeal the CIT order to limit the scope of refunds and may dispute refunds for some claims which may affect our consideration regarding recovery recognition. We have been evaluating our approach towards potential refunds and have not yet taken steps to seek a refund of tariffs we have previously paid. Additionally, we are evaluating other implications attributable to such actions including effects on our contracts with customers and the potential risk of price concessions which may give rise to future obligations and affect future operating results. As of March 31, 2026, the consolidated financial statements do not reflect any impacts attributable to such refunds.

For further information on our risks related to the impact of tariffs and changes in trade policies, see "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2025.

Consolidated Results of Operations for the Three Months Ended March 31, 2026 and 2025

Net Sales

For the three months ended March 31, 2026, net sales increased $26.3 million, or 8.3 percent, including $19.1 million, or 6.0 percent from favorable foreign exchange as well as $15.2 million of sales from EPOS. Comparable net sales decreased 2.5 percent driven by lower volume, which was down $12.6 million, or 4.0 percent, primarily due to lower global demand for consumer and business products, partly offset by price increases.

Gross Profit

For the three months ended March 31, 2026, gross profit increased $7.2 million, or 7.2 percent, primarily due to acquisition of EPOS and savings resulting from our global cost reduction actions.

Selling, General and Administrative Expenses ("SG&A")

For the three months ended March 31, 2026, SG&A increased $6.4 million, or 6.9 percent. The increase was due to unfavorable foreign exchange, the acquisition of EPOS, and a litigation settlement, more than offsetting the positive impact of global cost reductions.

Operating Loss

For the three months ended March 31, 2026, we reported an operating loss of $10.4 million, compared to an operating loss of $6.7 million in the prior year. The current year period was impacted by $6.7 million of restructuring, primarily related to the integration of EPOS and $4.0 million related to a litigation settlement, partly offset by the benefit of cost reduction actions.

Bargain Purchase Gain

For the three months ended March 31, 2026, we recorded a preliminary bargain purchase gain related to our acquisition of EPOS.

For further information, see "Note 3. Acquisitions" to the consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

Income Tax Benefit

For the three months ended March 31, 2026, we recorded an income tax benefit of $4.5 million on income before taxes of $14.9 million. For the three months ended March 31, 2025, we recorded an income tax benefit of $3.3 million on a loss before taxes of $16.5 million.

For further information, see "Note 11. Income Taxes" to the consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

Segment Net Sales and Operating Income for the Three Months Ended March 31, 2026 and 2025

ACCO Brands Americas

For the three months ended March 31, 2026, net sales increased $4.6 million, or 2.6 percent, including $5.1 million, or 2.9 percent, from favorable foreign exchange and $3.5 million from the acquisition of EPOS. Comparable net sales decreased 2.3 percent driven by lower volume, which was down $7.6 million, or 4.4 percent, primarily due to lower demand for consumer and business products, partly offset by growth in Latin America and in computer accessories. Price, net of customer programs increased sales by $3.6 million, or 2.1 percent.

For the three months ended March 31, 2026, operating income increased $2.5 million primarily driven by cost savings and the acquisition of EPOS, partly offset by higher restructuring primarily related to the integration of EPOS.

ACCO Brands International

For the three months ended March 31, 2026, net sales increased $21.7 million or 15.1 percent, including $14.0 million, or 9.8 percent of favorable foreign exchange and $11.7 million from the acquisition of EPOS. Comparable net sales decreased 2.8 percent driven by lower volume, which was down $5.0 million, or 3.5 percent, primarily due to reduced demand for business products, partly offsetting the benefit of price increases of $1.0 million, or 0.7 percent.

For the three months ended March 31, 2026, operating income decreased $2.7 million primarily due to higher restructuring costs of $4.0 million primarily related to the integration of EPOS, partly offset by favorable foreign exchange and cost savings.

Liquidity and Capital Resources

Our primary liquidity needs are to support our working capital requirements, service indebtedness and fund capital expenditures, dividends, acquisitions, and stock repurchases. Our principal sources of liquidity are cash flows from operating activities, cash and cash equivalents held, and seasonal borrowings under our $467.5 million multi-currency revolving credit facility (the "Revolving Facility"). As of March 31, 2026, there was $205.3 million in borrowings outstanding under the Revolving Facility ($17.8 million reported in "Current portion of long-term debt" and $187.5 million reported in "Long-term debt, net"), and the amount available for borrowings was $252.3 million (allowing for $9.9 million of letters of credit outstanding on that date). We had $118.9 million in cash on hand as of March 31, 2026, and our total available liquidity (cash and availability under our credit facilities) was $371.2 million.

.

As of March 31, 2026, our Consolidated Leverage Ratio was approximately 4.14 to 1.00 versus our maximum covenant of 4.75 to 1.00. We have no debt maturities before March 2029. Debt currently outstanding under our Credit Agreement is due on October 30, 2029, with the requirement that we refinance our senior unsecured notes by September 2028.

Our priorities for cash flow use, after funding business operations, include debt reduction, dividends, funding strategic acquisitions, and share repurchases. The continued declaration and payment of dividends is at the discretion of the Board of Directors, and dividends and share repurchases are dependent upon, among other things, market conditions, the Company's financial position, results of operations, cash flow and other factors.

The $326.0 million of debt currently outstanding under our senior secured credit facilities had a weighted average interest rate of 4.94 percent as of March 31, 2026, and the $575.0 million outstanding principal amount of our senior unsecured notes due March 2029 have a fixed interest rate of 4.25 percent.

Because of the seasonality of our business, generally our operating cash flow is generated in the second half of the year, as the cash inflows in the first and second quarters are consumed building working capital and making our annual performance-based compensation payments when earned. Our third and fourth quarter cash flows come from completing the working capital cycle.

Amendment to Credit Agreement

Effective July 29, 2025, we entered into an amendment to the Credit Agreement, which, among other things, increased our maximum Consolidated Leverage Ratio financial covenant to 4.50x for the third and fourth quarters of 2025, to 4.75x for the first and second quarters of 2026 and to 4.25x for the third and fourth quarters of 2026. Thereafter, the maximum Consolidated Leverage Ratio will return to 4.50x for all first and second fiscal quarters and 4.00x for all third and fourth quarters. In addition, it modified certain covenant baskets related to liens, indebtedness and restricted payments through December 31, 2026. The amendment also required that $35.0 million in outstanding principal amount under the term loan facility be repaid on or before September 30, 2025, for which the payment was made as required. Further, the amendment restricts the aggregate amount of dividend payments or share repurchases we can make in 2026 to the greater of $40.0 million or 1 percent of our Consolidated Total Assets.

For further information, see "Note 4. Long-term Debt and Short-term Borrowings" to the consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

Adequacy of Liquidity Sources

We believe that cash flow from operations, our current cash balance and other sources of liquidity, including borrowings available under our Revolving Facility, will be adequate to support our requirements for working capital and restructuring expenditures, and to service indebtedness for the foreseeable future.

Restructuring Activities

The Company may implement restructuring, realignment or cost-reduction plans and activities, including those related to integrating acquired businesses.

During 2024, the Company announced a multi-year restructuring and cost savings program, with currently anticipated annualized pre-tax cost savings of approximately $100.0 million by the end of 2026. The program incorporates initiatives to simplify and delayer the Company's operating structure and reduce costs through headcount reductions, supply chain optimization, global footprint rationalization, and better leveraging the Company's sourcing capabilities. In the first quarter of the current year the Company realized approximately $10.0 million in pre-tariff savings and approximately $70.0 million since inception of the program.

During the first quarter of the current year, we recorded restructuring costs of $6.7 million primarily related to the integration of EPOS.

For additional details, see "Note 10. Restructuring" to the condensed consolidated financial statements contained in "Part I, Item 1. Financial Information" of this Quarterly Report on Form 10-Q.

Cash Flow for the Three Months Ended March 31, 2026 and 2025

During the three months ended March 31, 2026, our cash and cash equivalents increased $54.5 million, as compared to an increase of $60.5 million in the first three months of the prior year. The following table summarizes our cash flows for the periods presented:

Cash Flow from Operating Activities

Cash provided by operating activities during the three months ended March 31, 2026, was driven by cash inflows of $3.5 million (excluding non-cash impacts primarily from amortization of intangibles, depreciation, stock-based compensation expense, and the preliminary bargain purchase gain related to the acquisition of EPOS from our net income). Cash was also provided by trade working capital of $57.7 million, which includes accounts receivable, inventory, and accounts payable. Cash provided by trade working capital was fully offset by a net cash outflow of $57.7 million from other assets and liabilities including cash payments for restructuring, taxes, interest, pensions, and incentives.

Cash provided by operating activities during the three months ended March 31, 2025, was driven by cash inflows of $13.1 million (excluding the non-cash impacts primarily of the amortization of intangibles, depreciation, and stock-based compensation expense that are included in our net loss). Cash was also provided by trade working capital was $72.9 million, which includes account receivable, inventory, and accounts payable. These were partially offset by a net cash outflow of $80.5 million for all other assets and liabilities including cash payments for restructuring, taxes, interest, pensions, and incentives.

Cash Flow from Investing Activities

Cash used by investing activities during the three months ended March 31, 2026, was due to $1.1 million of cash used for the acquisition of EPOS, net of cash acquired as well as capital expenditures.

Cash used by investing activities during the three months ended March 31, 2025, was primarily due to $10.1 million of cash used for the acquisition of Buro Seating as well as capital expenditures.

Cash Flow from Financing Activities

Cash provided by financing activities during the three months ended March 31, 2026, was primarily due to borrowings exceeding debt repayments, partially offset by dividend payments and payments related to tax withholding for stock-based compensation.

Cash provided by financing activities during the three months ended March 31, 2025, was primarily due to borrowings exceeding debt repayments, partially offset by dividend payments and $15.0 million in repurchases of common stock.

Supplemental Non-GAAP Financial Measure

To supplement our condensed consolidated financial statements presented in accordance with generally accepted accounting principles in the U.S. ("GAAP"), we provide investors with certain non-GAAP financial measures, including comparable sales. Comparable sales represent net sales excluding the impact of material acquisitions, if any, and with current-period foreign operation sales translated at prior-year currency rates. We sometimes refer to comparable sales as comparable net sales.

We use comparable sales both to explain our results to stockholders and the investment community and in the internal evaluation and management of our business. We believe comparable sales provide management and investors with a more complete understanding of our underlying operational results and trends, facilitate meaningful period-to-period comparisons and enhance an overall understanding of our past and future financial performance. Comparable sales should not be considered in isolation or as a substitute for, or superior to, GAAP net sales and should be read in connection with the Company's financial statements presented in accordance with GAAP.

The following tables provide a reconciliation of GAAP net sales as reported to non-GAAP comparable sales: