Avery Dennison Corporation

Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the second quarter ended on June 30th, 2026. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a Q&A session. At that time, if you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and enter the queue. As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website. I would now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.

Thank you, Ellen, and welcome to Avery Dennison's second quarter 2026 earnings conference call. 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 A8 of the financial statements accompanying today's earnings release. 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 Deon Stander, President and Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Deon.

Thanks, Gillian. Good morning, everyone. We delivered strong second quarter results across the board. On a year-over-year basis, organic sales growth accelerated to 8%, adjusted EBITDA margins expanded, adjusted EPS grew by 19%, and adjusted free cash flow generation was strong at more than $360 million. While these results benefited from continued customer inventory stocking materials group, excluding this tailwind, we continue to drive a step change in the pace of our sales and earnings growth. Our performance this quarter once again demonstrated the strength and the resilience of our portfolio. Sales growth was balanced across both base and high value categories with high value categories returning to mid single digit growth as we expected. Combining this improved organic growth with our commercial and operational excellence allowed us to expand adjusted EBITDA margins across both segments, even against a volatile and inflationary cost backdrop. Our priorities are clear. We are continuing to drive both earnings growth and business resiliency by leaning into our proven playbook. First, We're investing in innovation service-led differentiation to drive share gains and expand new business opportunities. The strength of this focus was evident in our second quarter performance where organic sales growth accelerated. Second, executing commercial and operational agility including productivity and pricing actions to mitigate inflationary pressures. And third, generating strong free cash flow and maintaining a healthy balance sheet. Our balance sheet strength and Robust Cash Generation supported the increased pace of our share repurchases during the quarter and another increase in our dividend while continuing to invest in our long-term growth priorities. Turning to our segment results, Materials Group delivered organic sales growth of approximately 10% driven by high single-digit volume mixed growth as well as low single-digit pricing realization as we began to pass on cost inflation. During the quarter, the business delivered solid performance across both base and high-value categories. Encouragingly, high-value categories grew mid-single digits year-over-year, led by specialty and durable labels, as well as intelligent labels. Base categories grew low double digits, driven by underlying market growth, continued share gains, and the benefit of customer prebuys. In label materials, customer prebuying persisted longer into the quarter than we initially anticipated. driven by accelerating raw material inflation as well as customer concerns regarding surety of supply, particularly in Europe and parts of Asia. Looking forward, while it is difficult to predict the timing of when the unwind will happen due to continued geopolitical uncertainty, we anticipate the majority of the unwind in the third quarter with a smaller carryover into Q4. From a profitability perspective, Materials Group adjusted EBITDA was strong, growing high teams with margins expanding compared to prior year. In the Solutions Group, organic sales grew 3%. The quarter was characterized by solid low single-digit growth across both our high-value categories and base solutions. Within our high-value platforms, Embellex delivered robust low double-digit growth, driven by core market expansion and strong World Cup demand. Intelligent Labels grew low single digits while Vescon was down slightly as we left a major customer rollout from 2025. In our base solutions, we were pleased to see sales return to low single digit growth. From a profitability perspective, execution on our productivity playbook more than offset higher employee related costs. This allowed us to deliver strong EBITDA margin expansion. Pivoting to our enterprise wide Intelligent Labels platform. Thank you very much. We experienced a headwind in logistics, where sales were down double digits. This was driven by the difficult comparison of lapping outsized share gains from 2025 and softer overall customer demand in the segment. Looking ahead, we continue to expect 2026 growth for our enterprise intelligent labels platform to outpace 2025. In apparel and general retail, we expect to deliver strong full-year growth as adoption continues to deepen. In food, we are positioning the platform for an acceleration in the back half of the year, driven by the beginning of the rollout with the largest U.S. grocer retailer and expanding activity across other customers. Finally, in logistics, we are managing through the normalization of outsized volume share gains from 2025 with our largest partner, while continuing to expand pilots with new logistics customers. As to our outlook, We are returning to providing full-year guidance, reflecting our team's strong execution through a dynamic environment and the challenges of precisely timing the second half customer inventory destocking and materials group. For the full year of 2026, we anticipate $10 to $10.30 in adjusted earnings per share on organic sales growth of 3% to 4%. In summary, our strong second quarter performance Delivering another quarter of accelerating sales and earnings growth highlights the differentiation and underlying strength of our enterprise. We remain focused on the key secular tailwind shaping our long-term strategy while continuing to execute the operational actions required to navigate cyclical dynamics and inflationary shifts with agility. The proactive steps we are taking to accelerate innovation-led differentiation serve our customers and ensure supply chain resilience further strengthens our competitive moat. Our proven strategies, market-leading resilient businesses, agile teams, and disciplined capital allocation approach give us confidence in our ability to deliver sustainable growth in 2026 and beyond. I am proud of the global Avery Dennison team. Their agility and operational execution continue to drive strong results, giving us momentum as we execute across the balance of 2026 and beyond. Now, over to you, Greg. Thanks, Deon, and hello, everybody.