Avery Dennison Corporation

Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the third quarter ended on September 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'd now like to turn the call over to William Gilchrist, Avery Dennison's Vice President of Investor Relations. Please go ahead, sir.

Thank you, Chase, and welcome to Avery Dennison's third 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. 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 four 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 third quarter results, continuing to demonstrate the underlying strength and resilience of our business. Organic sales grew 4%, adjusted EPS grew 2% compared to prior year and adjusted free cash flow generation continues to be robust at over $240 million. Considering the impact of customer inventory management as shown on slide five, our underlying business performance remains strong with an estimated 6% organic sales growth and an estimated 8% adjusted EPS growth year over year. reported sales growth was balanced across both high value and base categories with each up mid single digits. As we indicated in our recent investor showcase event, high value categories are a key part of our growth algorithm and future margin expansion. Q3 results reinforced the value of this portfolio of solutions, which are being driven by both secular demand growth and our differentiated competitive position. At an enterprise level, Our operational priorities remain clear. First, investing in innovation and service-led differentiation to drive share gains and expand opportunities across base and high-value categories. Second, executing with commercial and operational agility, combining targeted pricing actions with relentless productivity to mitigate cost inflation. And third, disciplined capital allocation supported by a robust free cash flow as we continue to invest in our business and return cash to shareholders while maintaining our strong balance sheet. Turning to our segment results, Materials Group delivered organic sales growth of 5% with both high value and base categories growing mid single digits. We continue to solidify our leadership position through commercialization of innovative solutions that support industry secular trends. Sales in the quarter, came in ahead of expectations due to a more gradual pace of customer inventory destocking than anticipated. While this unwind is taking longer to materialize, destocking is ongoing and we continue to expect the vast majority of the first half pre-buy inventory to unwind by the end of the fourth quarter. While segment-adjusted EBITDA margins were down versus prior year, Our teams continued to execute at a high level during the quarter, successfully managing volatile cost inflation and volume destocking to drive year-over-year growth in segment-adjusted EBITDA. In the solutions group, organic sales increased 1% with a low single-digit growth in base categories and high-value categories comparable to prior year. Of note, strong growth in Imbelix continued despite lapping a significant World Cup headwind. From a profitability perspective, our team executed exceptionally well, delivering adjusted EBITDA growth and strong adjusted EBITDA margin expansion. Shifting to enterprise-wide intelligent labels, sales were up low single digits compared to prior year, reflecting contrasting dynamics across end markets. In apparel and general retail, sales rose approximately 10% driven by program expansions and general retail recovery. Adoption momentum continues to build with strong growth as we ramp up another large grocery customer, expand pilot activity, and continue to move towards commercialization with the largest U.S. grocery retailer. In logistics, sales declined double digits, reflecting the normalization of outside share gains in 2025 alongside softer overall customer demand. We remain actively engaged across logistics providers and continue expanding pilots with new partners. Turning to our full year 2026 outlook, reflecting our strong year-to-date execution, we are slightly raising the midpoint of our range, representing roughly 7% growth at the midpoint on full year organic sales growth of 3.5%. Regarding Q4, operationally, our business remains healthy and we anticipate that the remaining pre-buy inventory will largely conclude by year end. On the leadership front, I'm extremely pleased to welcome Helen Sherbon as our new president of the Solutions Group, effective November the 3rd. Helen brings over two decades of global leadership, most recently serving as Senior Vice President and Chief Operating Officer of Global HP Solutions. Her proven track record in driving growth, transformation, and customer-centric innovation across solutions and her deep operating experience fit exceptionally well with leading the solutions group moving forward. In summary, our third quarter results demonstrate improving underlying growth while reinforcing the durability, differentiation, and competitive motive of our business. We remain focused on driving our long-term strategies while executing with discipline needed to navigate near-term inventory and cost inflation dynamics. Supported by robust free cash flow generation and a strong balance sheet, We maintain the financial flexibility to invest in high value opportunities while consistently returning capital to shareholders. As always, I want to thank our global teams for their support, their leadership, and their agility, and in continuing to make possible solutions for our customers and value creation for all of our stakeholders. And with that, over to Greg. Thank you, Deon, and hello, everybody.