Avery Dennison Corporation

Greetings. Thank you for standing by. Welcome to Avery Jennison's earnings conference call for the third quarter ended on October 1st, 2022. This call is being recorded and will be available for replay from 4 p.m. Eastern Time today through midnight Eastern Time October 29th. To access the replay, please dial 800-633-8284 or plus 1-402-977-9140 for international callers. The conference ID number is 21997967. I'd now like to turn the call over to John Ebley, Avery Jenison's Head of Investor Relations. Please go ahead.

Thank you, Scott. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified, and reconciled from GAAP on Schedules A4 to A10 of the financial statements accompanying today's earnings release. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the Safe Harbor Statement included in today's earnings release. As always, on the call today are Mitch Butier, Chairman and Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. Also joining us for Q&A today is Dion Stander, President and Chief Operating Officer. I'll now turn the call over to Mitch. Thanks, John, and good day, everyone.

We delivered another strong quarter with revenue up 19% and EPS of $2.46, up 26% ex-currency and in line with expectations. We had strong performance across the company. LGM and RBS both delivered impressive top and bottom line growth. Our strong results come amidst a dynamic environment. Inflation continues, we're raising prices accordingly, and now we see signs of softening demand. The higher inventory levels downstream from us that we called out at the start of the year have begun to finally reduce. Despite these challenges and an incremental 10 cent currency headwind, we remain on track to deliver EPS growth of 10% for the year, 18% X currency. Our ability to consistently deliver impressive financial results rests both on the team's deft ability to execute amidst compounding crises and the strategic foundations we have laid. As you know, a key element of our strategy has been our focus on accelerating the adoption of Intelligent Labels. Enterprise-wide, Intelligent Labels revenue is up 20% and, as you heard us mention a quarter ago, momentum in this business is accelerating. We are now targeting more than 20% growth annually in the coming years, with promising developments in logistics, which is expanding from targeted applications such as special package handling to broad-based use cases, in food, where we are seeing promising pilots in grocery and QSRs, and in general retail, where the technology is being expanded beyond apparel. The benefits of our intelligent label technologies and solutions are clear. They increase supply chain and inventory visibility, lower cost and improve speed of operations, reduce waste, and ultimately enhance the experience of end consumers. We believe the current macro environment will serve to further heighten the value of our tech and solutions here. As the global leader in RFID, we have and will continue to strategically invest to not only capture intelligent label opportunities, but create them. Our strategies continue to pay off. Now a quick update on the quarter by business. Label and graphic materials posted strong top-line growth, driven by higher pricing and low single-digit volume growth. The supply chain constraints we discussed last quarter eased in Europe, enabling us to normalize lead times, whereas in North America, material availability challenges remained, particularly in paper. Overall, volumes remained strong across LPM, up 4% annually versus 2019. LGM's profitability remained strong in the quarter with double-digit operating income growth. Retail branding and information solutions delivered another quarter of strong margins and revenue growth. Robust growth in high-value categories, intelligent labels, external embellishments, and VESCOM was partially offset by a low single-digit decline in the base apparel business. Following several strong quarters, apparel volumes moderated as some brands and retailers brought down inventories that were built up previously. While our outlook assumes further reductions will take place in the near term, we are well positioned to continue to drive profitable growth in the base. As for industrial and healthcare materials, the second segment delivers strong sales growth in the quarter and improved margins compared to prior year and sequentially. as we continue to implement pricing actions to cover inflation. Across the company, I'm pleased with the continued progress we are making towards the success of all our stakeholders. Our consistent performance reflects the strength of our markets, our industry-leading positions, the strategic foundations we've laid, and our agile and talented team. We remain confident that the strategies we formulated will continue to enable us to generate superior value creation through a balance of GDP plus growth and top quartile returns over the long run. And once again, I want to thank our entire team for continuing to raise their game to address the unique challenges at hand and deliver value for all of our stakeholders. Over to you, Greg.