ACCO (2021 - Q4)

This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.: Christine H

00:06 Good morning. This is Christine Hanneman, Senior Director of Investor Relations. Welcome to ACCO Brands Fourth Quarter and Full Year 2021 Conference Call. Speaking on the call today are Boris Elisman, Chairman and Chief Executive Officer of ACCO Brands Corporation; and Neal Fenwick, Executive Vice President and Chief Financial Officer. 00:27 Slides that accompany this call have been posted to the Investor Relations section of accobrands.com. When speaking about our results, we may refer to adjusted results. Adjusted results exclude transaction, integration, amortization and restructuring costs and other nonrecurring items, including the change in fair value of the contingent consideration related to the PowerA 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. 01:16 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. All forward-looking statements are subject to risks and uncertainties and our 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. 01:57 Now, I will turn the call over to Boris Elisman.

02:01 Good morning, everyone. Thank you for joining us. We had a very strong 2021, highlighted by record sales, growing market shares, expanded operating margins, improved free cash flow and lower leverage at the end of the year. The PowerA acquisition added 15% to last year's sales on top of 5% growth in comparable sales. 02:26 2021 was not an easy year for product companies, with high inflation, supply chain issues, semiconductor shortages and COVID complications. Despite those challenges, our team has delivered an excellent year and deserves a lot of credit for its hard work and resilience. I'm very proud of our results. Our business has pivoted to having more sales from consumer and technology products and now, almost 60% of our sales come from these faster-growing categories. We have good momentum going into 2022 and we expect sales, profit and free cash flow growth to continue. 03:12 Let me review a few highlights from last year, then Neil will take you through all the numbers. I will join him afterwards to take your questions. Our 2021 highlights begin with PowerA. They had a terrific year, growing pro forma sales approximately 22%, including 10% in the fourth quarter and increasing market share in console gaming accessories in the US. The sales growth exceeded our initial expectations. It was even more impressive in a year of gaming console shortages that hurt overall industry sales, especially in the second half. I'm very pleased with PowerA’s results and expect its profitable growth to continue. 04:03 Equally impressive is EMEA with 15% comparable sales growth in 2021. We expanded product and channel portfolios and leveraged our strong brands to grow sales and take market share, especially with at-home products and in online channels. Not only were last year's EMEA sales substantially higher than in 2020, they were also higher than in pre-COVID 2019. North America comparable sales grew 2%, but this headline number has higher underlying growth in the business when you consider a large Kensington deal that benefited the US in 2020 and did not repeat in 2021. Without it, North America 2021 comparable sales grew 7%. 05:00 North America had a great back-to-school performance, they get share with Five Star products and finished the year on a high note with 13% fourth quarter comparable sales growth. Furthermore, including PowerA and with cost reduction initiatives, and price increases North America expanded its adjusted operating margin to 120 basis points during the year. 05:27 On the product side, in addition to strong PowerA sales growth we had double-digit growth in shredding, stapling products, air purifiers, art products and note taking. The 5% comparable sales growth for our total business was higher than our expected long-term sales growth of 2% to 4% due to the economic recovery. On the channel side, we continued our diversification initiatives and investments in growing channels. Our 2021 growth was led by retail and e-tail, helped by PowerA. We also saw good growth in independent dealers and wholesalers. 06:11 Walmart was our largest customer with almost 10% of global sales. Amazon was second, with 9%. I'm very pleased with the work our sales and marketing teams have done in transforming our channel landscape to faster growth and healthy margins. Our company enters 2022 in excellent shape and with strong momentum. We expect to have another year of record sales, strong profit and free cash flow growth and winning marketplace performance. 06:44 Before I hand it over to Neal, I want to make a few comments about our announcement that Neal plans to retire later this year. I want to publicly thank Neal for his 37 years with ACCO Brands, including 17 as our CFO. He has been instrumental in our transformation to a faster growing consumer and technology-oriented company and successfully navigating us through the 2 most recent recession, both of historic proportions. He's been a great CFO for our company and a wise counsel and friend to me. We're going to miss him. Neal will continue in his current role until his successor is named and will help us with the smooth transition afterwards. 07:30 With that, I will now hand the call over to Neal and I'll come back to answer your questions. Neal?

07:37 Thank you, Boris for your kind words. And good morning, everyone. Most of my comments will refer to our full year results. Our 2021 reported net sales increased 22% to $2.03 billion, largely due to the contribution from PowerA, which had sales of $257 million. Our comparable sales rose 5% as we had higher pricing and improved volume in most markets. Foreign exchange added 2%. Full year net income was $102 million or $1.05 per share. Adjusted net income was $137 million and adjusted EPS was $1.41, a $0.46 improvement versus prior year. 08:30 PowerA contributed $0.28, while the comparable business added $0.18. This included a $0.03 adverse impact from a higher tax rate and $0.01 negative impact from our higher share count in 2021. The quarterly cadence of the year was uneven. Our first quarter of 2021 still reflected COVID-19 declined as compared with the first quarter of 2020, which did not. Our business steadily improved in the subsequent quarters with comparison sales growth of 5% for the full year, but 11% for the last 3 quarters. 09:11 Foreign exchange was favorable for the first 3 quarters, but turned adverse in the fourth quarter. Even with the supply chain pressures, we were able to successfully increase our adjusted gross margin by 80 basis points for the year to 13.5%. The increase was largely the result of our focus on cost reductions and also lower inventory charges. The benefit of our sales price increases did not fully offset our cost increases, because we are chasing continually rising costs. 09:45 SG&A expenses was $393 million compared to $336 million in 2020. Results in 2020 benefited from many pandemic related temporary cost reduction efforts that impacted both SG&A and cost of goods sold. 2021 expenses are at a normal level for our company and also reflect the addition of PowerA. SG&A expense as a percentage of sales was 19.4%, below 2020s 20.3% due to higher sales. Reported operating income was $151 million compared to $112 million last year and reported operating margin was almost 8%, 1 percentage point better than 2020 due to the improved gross margin and reduced SG&A margin. 10:41 The PowerA earn-out is payable in 2 equal instalments in March of 2022 and 2023 if certain sales and profit targets on met. Each quarter we recognize any change in the fair value of the earn-out as an expense in our income statement. For 2021 PowerA exceeded its sales target and achieved 100% of the earn-out associated with those criteria. But due to higher costs for products and freight it achieved less than 100% of the earn-out associated with the profit based criteria. Our fourth quarter reflects the true-up of the earn out based on PowerA’s actual performance. 11:26 In 2021 PowerA contributed $50 million to operating income after $19 million related to the earn-out, $15 million of amortization related to the acquisition and $6 million of inventory and transaction costs. For 2022 we expect quarterly charges throughout the remainder of the earn out period for both sales and profit earn out metrics. 11:51 Turning now to taxes. Our GAAP taxes reflected a $15 million benefit from a reversal of a valuation allowance related to our ability to utilize foreign sourced income. This beneficial change reduced both the GAAP and adjusted tax rates. The significantly larger fourth quarter earnings also altered the geographic mix of earnings and specific rates applied to adjusting items, which led to our adjusted tax rate being 29% for the full year. This change in adjusted tax rate accounted for $0.03 of our EPS improvement versus previous guidance for the year. We anticipate that for the full year 2022 we will have a similar adjusted tax rate of approximately 29%. 12:41 Now let's turn to some details of our segment results for the year. Net sales in North America increased 27% to $1.04 billion, largely due to the $200 million contribution from PowerA. Comparable sales rose 2% primarily from higher prices and volume recovery from schools and offices reopening. During the year, we had a solid back-to-school season and saw some recovery in commercial sales starting in the second quarter. Our sales to the technology channel declined as we shipped to very large order in 2020 that did not repeat in 2021. North America adjusted operating income and margin increased because of PowerA, long-term cost reductions and lower inventory charges, particularly offset by higher SG&A costs, reflected normalized expenses and PowerA. 13:39 Now let's turn to EMEA. Net sales rose 27% to $663 million and comparable sales rose 15% to $603 million, which are both above 2019 pre-COVID level. The strong increases were the result of a general economic recovery, as well as market share gains and a benefit of approximately $13 million from the addition of the Franklin product line. We have now seen 6 consecutive quarters of strong business improvement in EMEA. EMEA posted a higher operating profit for the year, but lower gross and operating margins due to the lag in realizing the benefit of price increases. EMEA increased prices last October and has announced additional price increases in 2022 to offset inflation. 14:32 Moving to the International segment, net sales increased 4% due to price increases, PowerA and favorable foreign exchange. Comparable sales decreased 3% primarily because of lower volume related to COVID-19, especially in the first quarter, but which continued throughout the year in Latin America as schools largely remained closed for in-person education for most of the season. 14:59 Mexico and Brazil continue to be impacted the most by COVID-19, although we are seeing improvement as vaccination rates have increased, particularly in Brazil. Mexico essentially did not have a normal back-to-school season in 2021 and Brazil season shifted into the first quarter of 2022 instead of the fourth quarter of 2021. Schools began reopening in Mexico in January and most have now or will reopen in February in both Mexico and Brazil. As a result, we are seeing improved demand in Latin America in the first quarter. 15:34 Our business in Australia posted higher sales from increases in both price and volume. However, sales were impacted by a difficult first quarter comparison and certain out of stocks due to supply chain disruptions. The international segment posted a higher operating profit due to lower reserves for bad debts and inventory, higher sales prices, cost reductions and PowerA. This was partially offset by higher expenses as the prior year benefited from many pandemic related short-term cost reduction measures, which included $4 million in higher government assistance. 16:11 Now let's move on to our balance sheet and cash flow. For the full year, we generated $160 million in net cash from operating activities and had $138 million of free cash flow. We paid dividends of $26 million and CapEx was $21 million. We achieved our free cash flow target. This resulted in a year-end net leverage ratio of 3.3 times, which is lower than it was at the time we acquired PowerA and demonstrates our ability to rapidly delever after acquisition. We were pleased with the 39% increase in our EBITDA to $292 million, which represented 170 basis points improvement in our adjusted EBITDA to sales ratio. 17:00 At year end, we had almost $600 million revolving credit facility available, we reduced debt to $131 million in 2021. We ended 2021 with high levels of both inventory and payables, driven by supply chain disruptions and inflation. A larger amount of goods in transit due to extended shipping times accounted for approximately $40 million of the inventory and payables increase. The remaining inventory increase was due to adding inventory to maintain customer service levels and cost inflation. 17:36 Now let's turn to our outlook. We expect demand to continue to improve in 2022 as more offices and schools are in physical use, at least in hybrid mode and world economies continue to recover from COVID-19. We are continuing to increase pricing to catch up and offset cumulative inflationary cost increases and we will drive additional productivity gains. Therefore we anticipate an additional 50 basis points to 100 basis points gross margin improvement in 2022. We remain committed to returning our longer-term gross margin to $0.33 level, but due to both the increasing cost environment and the magnitude of inflation it will take us more than 1 year to achieve that annual goal. 18:26 We expect foreign exchange to be a headwind in 2022. For the full year our outlook is for sales growth in a range of 1% to 6%, including a 1% negative impact from foreign exchange. Full year adjusted EPS is expected to be in the range of $1.48 to a $1.58, including a $0.02 adverse impact from foreign exchange. The adjusted effective tax rate is expected to be approximately 29%. We will continue to help margins by our continuous productivity programs and expect to again deliver approximately $30 million in full year expense savings. A large part of our annual savings comes from the full-year benefit of projects executed during the preceding year. 19:17 Intangibles amortization for the full year is estimated to be $43 million, which equates to approximately $0.31 of adjusted EPS. We expect our free cash flow to be at least $165 million, cash from operations of at least $190 million and CapEx of $25 million. For 2022, we expect to return to a historically more balanced capital allocation that will include dividends, debt reduction and opportunistic repurchases of our shares. We have $125 million remaining on our stock repurchase authorization. We expect to finish the year with a net leverage ratio of less than 3 times. We maintain significant revolver availability and good relations with our banks to support acquisitions should any rise in 2022. We are returning to an annual guidance and will not be continuing with quarterly guidance. However, for the first quarter, we are providing an outlook as our first quarter is small and we expect significant impact from inflation, foreign exchange and prior-year comparisons. 20:27 You may recall that in the first quarter of 2021 PowerA posted 100% sales growth, and we don't expect that first quarter volume level to repeat. In the first quarter, we expect a sales increase of 2.5%, which includes 2.5% impact of adverse foreign exchange. Adjusted EPS is expected to be between $0.06 and $0.10 with a negligible impact from foreign exchange. 20:56 Now let's move on to Q&A where Boris and I will be happy to take your questions. Operator?

21:05 Thank you. [Operator Instructions] We take our first question from Chris McGinnis from Sidoti. Please go ahead.

21:31 Good morning, Boris, Neal and Christine. Thanks and congratulations on the strong quarter. Neal, also congrats on the retirement and thanks again for all the help and support over the years. Wish you the best in your retirement.

21:46 Thank you, Chris.

21:47 First question just around PowerA results and how much has PowerA been impacted by the chip shortage? And what's your expectation for growth in 2022? Thanks.

21:59 Thanks, Chris. Like others in the industry, certainly PowerA has been impacted by lack of console product availability. Our teams have done a great job securing inventory for our products, but overall demand was hurt by the fact that there weren't enough Xboxes and PlayStations and Nintendo is out there selling, especially in the second half and especially during the strongest time of the year, which is the holiday -- which is the holiday season. Despite that PowerA grew 22% which is much higher than our initial anticipated rate of growth, that included 10% growth in the fourth quarter. So we executed really well, but certainly, sales would have been even better, had there been more consoles out there. 22:55 If we look at next year, we are expecting PowerA to return to trend growth, it's historical – not its historical trend growth, but really the industry historical trend growth. So we are expecting sales in the 10% to 13% range for 2022. Hopefully we'll do better, hopefully there'll be more consoles out there, but that's our initial expectation.

23:19 Great. Thanks for that Boris. And then, it's nice to see that North America rebound in Q4. Can you just talk about the difference between the performance in North America and EMEA? And maybe just outside of restrictions and mandates, are you doing anything different in EMEA that is driving the continued growth from that region? Thanks.

23:44 Thanks, Chris. The businesses are a little bit different between North America and EMEA. North America is much more consumer and school driven. A significantly larger percentage of our sales in North America go to those types of customers. EMEA is more commercially driven and EMEA has additional growth vectors outside of North America, such as DIY tools, which is almost a $60 million business in EMEA, and that has grown nicely over the last few years. So the businesses are slightly different. Outside of that, EMEA has obviously 27 different countries with different puts and takes what drives the business in most countries. North America is a large homogeneous market with fairly concentrated channels. So, the dynamics of the market -- the markets are different. 24:47 Our EMEA team has done a terrific job last year, and actually in the year before as well. Certainly with a 15% comparable sales growth we took significant share and really taking advantage of the fact that we have a lot of feet on the ground in EMEA addressing customer needs. We have a broad product assortment. We have many growth vectors and were very quick in EMEA to pivot to home office and work-from-home environment and really drove sales into that particular environment very well. So we did a tremendous job of 15% sales growth, I think speaks for itself. 25:33 In North America, as I mentioned, is much more consumer and back-to-school driven and as such, its sales in ‘21 were affected by the back to school dynamics. If you remember, there were a lot of inventory that was in the channel from 2020 and that affected our ability to sell in. The sell-out was good. We took share, but certainly due to inventory in the channel, the sales were affected. And you saw North America rebound nicely in Q4 with 13% comparable sales growth as schools were fully in session in North America and more people working in a hybrid mode, more people were returning to the office in ’21, they didn’t in ‘20. 26:21 So the environments are different, but both regions have done a tremendous job and we're really happy with the performance.

26:29 I'm going to jump back in queue, but thanks for taking my questions and good luck in Q1.

26:35 Thanks, Chris.

26:39 The next question comes from Brad Thomas from KeyBanc. Please go ahead.

26:44 Good morning, everyone. This is Jim on for Brad. First I wanted to congratulate Neal and wish him all the best in his upcoming retirement. So to start, I was hoping we could just get a little bit more color on the sales outlook by segment. You noted a 1% to 6% sales increase targeted for 2022. But I was hoping you could give a little bit more color as to what you're thinking about sales in international, North America and EMEA?

27:17 Sure, Jim. So for North America, we're guiding to roughly 3% and 5% sales growth. For EMEA, it'd be 1% to 3% and for international 5% to 10% sales growth for next year. And that's -- when I'm giving you sales growth for that segment it's all in including all products and FX effects everything.

27:50 Great. Thank you. And then -- so you mentioned that you're expecting to take price in EMEA next year. And I was wondering if you have similar plans to do so in North America and international? And then kind of on a similar note, I was wondering if you could provide some color as to any elasticity you're seeing from a demand perspective to those price increases?

28:14 Yeah. As I mentioned in my previous answer, the environments are different in all the different countries. In North America, we took for price increases in 2021. So by the end of the year we're pretty much caught up with inflation, even though for the whole year we didn't in North America, by the end of the year we're pretty much there. So there are minor tweaks we still need to do in North America in ’22, but we're in decent shape there. 28:45 In EMEA, because we are mostly selling to commercial customers who have catalog cycles, we are more limited to when we can take a price increase. So in EMEA, we did a price increase in Q3 and that wasn't enough to offset the impact of the inflation that we are continuing to see. So in EMEA, we're doing another very significant price increase in April of this year, April of 2002. And hopefully that will catch us up. 29:18And then international is also almost like North America. We do -- we get multiple price increases last year in international to position us to offset inflation. So we're in pretty good shape there. In all the regions though we got to do whatever is necessary to make sure that we stay ahead of the inflation. So if we need to do more in all 3 in the remainder of 2022, we're prepared to do that.

29:49 Got it, got it. And then if I could just squeeze in one more quick question. So I imagine you're still targeting a bit of more debt pay down despite leverage being lower than before the PowerA acquisition. But I was wondering if you could provide some color as to your capacity to complete a potential -- another acquisition, both financially and in terms of management's bandwidth to complete an acquisition and integrate it.

30:18 Sure. I'll take that one. We have a significant revolver capacity and we have very, very good relationships with all of our banks. And so, in the event that we needed to either barrow more money that exceeded our revolver capacity, that will be relatively simple task to get. So that is not a barrier to us being able to make acquisitions at all. And from a management bandwidth perspective, PowerA acquisition is pretty much behind us. I mean there is some work that continues, it really focus more on PowerA team. But as far as our overall ability to make additional acquisitions that should not be an issue.

31:04 Great. Thanks and best of luck throughout the rest of the year.

31:10 Thank you, Jim.

31:14 The next question comes from Joe Gomes from NOBLE Capital. Please go ahead.

31:22 Good morning. Let me also add my congratulations to Neal and for the strong quarter.

31:29 Good morning, Joe. Thank you.

31:32 So in the -- quick question here. In the third quarter you had talked about the Delta variant kind of muted demand for some of the commercial products unless back to school, and then we got into the Omicron here in the fourth quarter where you guys really knocked the ball out of the park. I was just wondering, it seems like the Omicron really didn't have any impact or maybe you can kind of give a little color detail if it did things actually should even better that would be appreciated.

32:06 We saw a little bit of an impact in the last 2 weeks of December, but it was kind of too late to affect sales. So from our ability to sell and ship, it didn't really have an effect on our Q4. And at the start of this year, if I looked at January, we had a little bit of an effect just delaying office reopening’s. But also did not really have an impact on our ability to ship, sales were good in January and up versus a year ago. So we've managed it well, I give more credits to our team and our ability to manage it because certainly a lot of community spread there affected our people, but it didn’t really affect the business.

32:52 Okay. Thanks for that. And Boris, you talked about new product pipeline. I was wondering if you might also give us some more details as to what kind of products you're looking to introduce in 2022? And maybe where and what geographies?

33:13 Sure, Joe. So each year we introduced thousands of new SKUs to support our sales and to give our customers reason and consumers reasons to buy our products. 2022 is going to be no exception. We're going to have a whole new collection of products for back-to-school in our North America and international businesses. We're going to be introducing a new line of wellness products, both fortifying our air purifier, our TruSens air purifier line, as well as expanding outside of air purifiers to new products in wellness. We are constantly refreshing our Kensington products and introducing -- introducing new docking stations and new Apple accessories in Kensington. And then PowerA has -- constantly evolving collection of controllers and charging stations. So that we're going to be introducing as well. 34:21 So, I'm excited by the portfolio that we have and it's the fuel that drives our growth and I’m certainly excited that we will have more than enough to drive the sales growth that we forecasted for the year.

34:38 Thanks for that. Boris. I'll get back in queue. Thank you.

34:43 Thanks, Joe.

34:46 Our next question comes from Kevin Steinke from Barrington Research. Please go ahead.

34:52 Good morning. I wanted to ask about the revenue growth guidance for 2022 and the range you've given. Can you maybe touch on some of the factors that you're thinking about that would get you towards the higher end versus lower end of that range?

35:16 It's obviously very early in the year. The guidance we gave is a pretty broad guidance of 1% to 6%. Obviously, if there is additional COVID variance that will impact the demand, if there is some kind of a geopolitical event that impacts demand, if there is interest rates go through the roof that will affect. Anything that impacts broad demand will obviously affect our sales growth to the detriment. And on the other hand, if businesses continue to reopen we have more people going to offices, we don't have major effects from new variants and able to manage increase in interest rates in a smooth manner.

36:11 For the consoles?

36:13 Better semiconductor availability, better console availability, all of that should push us towards the higher end of the range. And clearly as the year goes along, we'll be able to tune our guidance as we see what's happening.

36:30 Okay, great. As a follow-up, you mentioned Amazon up to 9% of your sales, what additional room is there for you in terms of penetration of Amazon and just the e-commerce channel in general?

36:50 It's wide open, Kevin. Amazon is big and growing fast, but there still only 9% of our global sales, we still see tremendous opportunity to grow with Amazon, both in the US, but especially outside of the US, whether they are smaller and there's just more opportunity to grow. But besides Amazon, the e-commerce channel is growing very fast all over the world and we have other customers and other partners, especially in EMEA and international where they are doing terrific job, growing sales and taking share. So overall we think e-commerce represents a huge opportunity to grow for us. That's where the consumer is going and we certainly riding that wave.

37:39 Okay, great. Thank you. And Neal, let me add my best wishes for your upcoming retirement. I certainly enjoyed working with you throughout the years.

37:49 Thank you.

37:53 The next question comes from Oliver Grossmann from Jefferies. Please go ahead.

37:59 Good morning, and thanks for taking the questions. And congratulations to Neal. I just wanted to ask, on the last quarter you said in the back half of 2022 you should start seeing supply chain and commodity cost improvements. Are you still comfortable with that? And are you starting to see lead times come down or are they still elevated?

38:21 Yes. Oliver. That's certainly our expectation at this time. We don't think there'll be much improvement in the first half, but we are expecting to see improvement, both in supply chain and in semiconductor chip availability in the second half. It's not going to be perfect, but certainly should be better than what we saw in 2021 or expecting to see this quarter. 38:47 As far as your second part of the question, we're not seeing improvements yet, things are not getting worse, they are not deteriorating, they are stable, but they're not improving yet from what we saw in Q4.

39:04 Got it. Thanks. And then I think you mentioned 60% now of the portfolio comes from the consumer tech end markets. Should we expect that to come down a little as office and school are more normalized? Do you want to keep it elevated at that 60% range or do you have goals of making it higher, just any more color there would be helpful.

39:28 Sure. No, we think over time that number is going to grow, because those categories are faster-growing categories with more consumer demand and those are the areas also we're focused in to differentiate, add value to invest. We think over time that 60% number will grow regardless of people going back to offices or not.

39:56 Got it. Thanks. And then just if I could squeeze in one more. I appreciate the 3 turns leverage target by year-end, I think is 2 to 2.5 still the long-term range that you guys are looking for?

40:12 Yes that's correct.

40:14 Okay. Thank you very much and congratulations again, Neal.

40:19 Thank you.

40:22 Our next question comes from Hamed Khorsand from BWS Financial. Please go ahead.

40:28 Hey, good morning. First off, I just wanted to ask you on the commentary you provided on PowerA about expecting the trend growth of 10% to 13%, does that include your expectation of expanding sales into Europe in ’22.

40:48 It does not include our expectations of broadening things to the legacy ACCO sales force, that's probably not going to happen until 2023. So it's natural sales growth that we're seeing in Europe overall for PowerA and for controls and charging stations. But without that incremental effort that we're going to launch probably in the middle of 2002, but will have an impact until 2023 which will allow us to leverage our broad footprint in Europe and gross sales incrementally.

41:25 Okay. And my other question was, as you look into 2002 with channel inventory, how comfortable are you that you could actually sell in more or have your customers really push back into how much they want to carry?

41:42 Our channel inventory is at a very good level. If anything, our customers right now want more products due to the supply chain issues, they would like to have more product and buffer stock and they want to have products sooner than they typically do for some of the core selling seasons of the year. So it's actually probably the other way around, it's not that they're pushing back on inventory, they're asking for more inventory to be shipped to them sooner.

42:11 Okay. Thank you and good luck, Neal.

42:14 Thank you very much Hamed.

42:18 [Operator Instructions] We have another question from Chris McGinnis from Sidoti. Please go ahead.

42:34 Thanks again. I just quickly wanted to ask about the competitive landscape given the market share gains you're seeing in EMEA. Just how are they competing given kind of the external environment being pretty difficult to operate in? Thanks.

42:49 I would say It's normal. I want to give our teams a lot of credit for doing a terrific job all over the world and growing as much as we did and taking share. Certainly I would rather be in our position than anybody else, but competition is still out there, they are fighting for share, they're still trying to win business. So we have to beat our best every day. It's great, I'm happy with our 2021, but we still have to fight in our business in 2022.

43:27 Great. Thanks again for taking my next question.

43:31 Thanks, Chris.

43:35 [Operator Instructions] I can confirm we have no further questions, so I'll hand it back to our speaker team for any closing remarks.

43:57 Thanks Katie. And thank you everyone for your interest in ACCO Brands. We had an excellent 2021 with record sales and strong improvement in earnings and free cash flow. Our business has pivoted to faster growing channels and product categories and we expect financial performance improvements to continue in 2022. We remain confident about our long-term future as we continue to position the company to be more consumer product-oriented for higher growth and strong returns for our shareholders. We look forward to talking with you in a couple of months to report on our first quarter. Thank you.

44:32 This now concludes today's call. Thank you all for joining. You may now disconnect your lines.