Avery Dennison Corporation

Ladies and gentlemen, thank you for standing by. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a question and answer session. At that time, if you have a question, please press star followed by the number one on your telephone keypad. Welcome to every Denison's Earnings Conference call for the second quarter ended on June 29, 2024. This call is being recorded and will be available for replay after 4 p.m. Eastern Time today and until midnight Eastern Time, July 30, 2024. To access the replay, please dial plus 1-800-770-2030 or plus 1-609-800-9909 for international callers. The conference ID number is 5855706. I'd now like to turn the call over to John Ebel, Avery Dennison's Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Angela. 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 Dion Stander, President and Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Dion.

Thanks, John, and hello, everyone. We delivered another strong quarter with EPS of $2.42 in the second quarter, above our expectations, and are raising our full year guidance. We now expect earning of $9.30 to $9.50 per share for the year, and are targeting roughly 20% earnings growth compared to prior year. Materials Group continued to demonstrate its resilience in the second quarter, again delivering significant volume and margin expansion as we lapped the impact of downstream inventory destocking last year and drive productivity across the business. Label volumes in Europe and Asia were above our expectations while slightly below expectations for North America. Broadly, Retail volumes remain soft relative to long-term trends as consumers continue to deal with the cumulative effects of high inflation, and we are not anticipating this to change in the second half of the year. Solutions Group delivered strong top-line growth in the second quarter, driven by both the base and high-value categories and expanded margins. The retail apparel channel was stronger than we expected. Despite retailers and brands remaining cautious in their near-term sourcing plans, most have now met their targeted inventory levels following more than a year of destocking, and volume has normalized quicker than we anticipated for the upcoming back-to-school season. Year-to-date, enterprise-wide intelligent labels grew mid to high teens. In the second quarter, strong growth in general retail and logistics continued, while apparel was also strong as customers normalized order volumes and new rollouts continued. For the year, we are now targeting to deliver more than 20% volume growth and mid-teen sales growth in our Intelligent Labels platform, driven by a rebound in apparel and adoption in new categories. We anticipate sales growth in the third quarter will be similar to the rate we delivered in the first half. As for the fourth quarter, While likely a record revenue quarter, we expect growth in the quarter will be lower than previously anticipated, primarily due to the timing of customer rollouts. As we have shared in the past, new customer rollouts can be uneven, particularly in new categories, as well as by comparison to initial volume builds for new program adoption in prior years. I have high conviction in the significant long-term growth of our Intelligent Labels platform, as we connect physical items with digital identities. In the near term, we are focused on accelerating adoption in key verticals such as food and logistics. Overall, the ability of our solutions to help address inventory challenges such as labor efficiency, waste, transparency, and consumer connection in very large volume categories like logistics, retail, and food is increasingly resonating with customers. Key pilots and rollouts are delivering significant value and compelling proof points for broader segment adoption. We continue to invest to capture the significant opportunity head as we grow the size of the overall industry, further advancing our leadership position at the intersection of the physical and digital. Stepping back, the underlying fundamentals of our business are strong. We're exposed to diverse and growing markets with clear catalysts for long-term growth. We are industry leaders in our primary businesses, with clear competitive advantages in scale and innovation. We have a clear set of strategies that we continue to evolve over time and are key to our success over the long term and across a wide range of business cycles. Those strategies are to drive outsized growth in high-value categories, grow profitably in our base businesses, lead at the intersection of the physical and digital, effectively allocate capital and focus relentlessly on productivity, and lead in an environmentally and socially responsible manner. We remain confident that our strategies, along with our team's ability to execute in dynamic environments, will enable us to continue to generate superior value creation through a balance of GDP plus growth and top quartile returns over the long term. In summary, we delivered another strong quarter and raised our guidance for the year to deliver nearly 20% earnings growth in 2024. And while we are increasing our outlook for the year, the environment remains uncertain and warrants some degree of caution as we move through the second half. I want to thank our entire team for their continued resilience, focus on excellence, and commitment to addressing the unique challenges at hand. With that, I'll hand the call over to Greg.