Avery Dennison Corporation

Ladies and gentlemen, thank you for standing by. During the presentation, our participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. At the time you have a question, please press the 1 by the 4 on your telephone. If at any time in the conference you need to reach an operator, please press the star for a better zero. And welcome to Avery Dennison's earnings conference call for the second quarter ended on July 1st, 2023. This call has been recorded and will be available for replay from 5 p.m. Eastern time today through midnight Eastern time July 28th. To access the replay, please dial 800-633-8284 or 402-977-9140 for international callers. The conference ID number is 220-206-92. Now, I would like to turn it over now to John Eble, Avery Dennison's Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Tommy. 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 A9 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. On the call today are Mitch Boutier, Chairman and Chief Executive Officer, Dion Stander, President and Chief Operating Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Mitch.

Thanks, John, and hello, everyone. We delivered $1.92 of EPS in the second quarter, up sequentially from previous quarters, a trend we expect to continue in coming periods. Volumes in our base business continued to recover from slow market conditions, largely destocking, while our Intelligent Labels platform accelerates adoption in new categories. While it's good to see the continuing sequential improvements in our materials businesses and the building momentum in Intelligent Labels, the pace of our recovery is slower than anticipated. Our results for the quarter were below our expectation due to lower revenue, particularly in June, something the team was able to largely offset through cost reduction actions. Clearly, our intel in April understated the magnitude of the market challenges, particularly inventory builds. That, combined with the fact that the drop-off in volume was steeper in Q4 and Q1, we assumed the duration of the lower volume period would be shorter. We got that part wrong. What we have been clear on and remain confident in is that this period of challenging results will soon pass. While the pace of sequential volume improvement that we assumed mid-year, June and July specifically, did not accelerate as anticipated, volumes continue to recover. Our underlying business is bouncing back as it always does. This, combined with the continued execution of our strategies to drive outsized growth in higher value categories, particularly intelligent labels, positions us well to continue to deliver GDP plus growth and top quartile returns over the long run. Now, as you all know, I've decided to step down as CEO at the end of August, and I'm handing over the reins to Dion, while I'll continue as chairman of the board. It has been a privilege to lead Avery Dennison over much of the past decade, and I am proud of what the team has accomplished during my tenure. We've accelerated our growth, improved margins, achieved world-class employee engagement scores, and significantly advanced our sustainability objectives. And I could not be more confident than I am now in our position and prospects. I've been planning and preparing for this transition for years, and as I've shared with a number of you, there are a few reasons behind my decision to step down as CEO. One of the most important is that I have found a leader in Dion that I'm confident will lead us to success in the next phase of our journey as a company. Dion has been a close partner of mine over the years. Over his 20-year career with the company, he demonstrated strong leadership and has a proven track record, including successfully transforming the Solutions Group and helping lead the acceleration of our Intelligent Labels platform. I am extremely pleased that he will be our next CEO, and I look forward to our future success under his leadership. Now, before handing the call over to Dion and Greg, let me conclude by thanking our team. This is a team sport. and I thank the entire organization for their dedication, focus, and excellence in delivering our continued and collective success. I look forward to continuing to serve our stakeholders and supporting Dion and the leadership team to achieve new heights in my role as executive chairman. Over to you, Dion.