Q1 2026 Avery Dennison Corp Earnings Call

April 28, 2026

William Gilchrist: Stander, President Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Deon.

Deon Stander: Thanks, Gilly. Hello, everyone. We delivered a strong start to 2026, with first quarter organic sales up 1%, driven by mid-single-digit volume mix growth and adjusted EPS up 7% year-over-year. These results once again demonstrate the benefits of our diversified portfolio and our strong productivity and cost control management. Our performance this quarter was a clear display of our resilience as stronger Materials Group results offset a softer Solutions Group performance and growth in our base label materials business more than compensated for temporary softness in certain high-value categories. As we have seen in past cycles, geopolitical uncertainty has triggered a significant shift in raw material inflation. While we do not know how long this inflationary pressure may last, we are responding proactively, implementing price increases and driving material reengineering where necessary to offset these pressures.

And growth in our base, level materials business, more than compensated, for temporary softness. In certain high value categories.

as we have seen past Cycles, geopolitical uncertainty has triggered a significant shift in raw material inflation,

Deon Stander: Our history of successfully managing through inflation cycles gives us high confidence in our ability to protect our profits. Furthermore, our proven ability to manage security of supply to meet customer demand remains a distinct competitive advantage, helping to ensure we remain the partner of choice for our customers if supply chains were to tighten. We continue to take decisive action to drive both earnings growth and business resiliency by leaning into our proven playbook. Firstly, our focus remains on investing in innovation and service-led differentiation to drive growth through share gains and expand new business opportunities. To this point, we recently signed an agreement to invest an incremental $75 million in Wiliot, a move that deepens our long-standing partnership and strengthens our enterprise-wide Intelligent Labels platform. This investment includes a dedicated joint go-to-market team to accelerate adoption across retail, food, and logistics.

While we do not know how long this inflationary pressure May last, we are responding. Proactively implementing price increases and driving material re-engineering, where necessary to offset these pressures. Our history of successfully managing screenplay and Cycles gives us high confidence in our ability to protect our profits.

Furthermore, our proven ability to manage security of supply to meet customer demand remains a distinct competitive advantage, helping to show we remain the partner of choice for our customers if supply chains were tightened.

We continue to take decisive action to drive both earnings growth and business resiliency by leaning into our proven playbook.

Firstly, our folks remains on investing in Innovation and service. Le differentiation to drive growth through share games and expand new business opportunities.

To this point, we recently, signed an agreement to invest an incremental, 75 million, in widgets, a move that deepens, our long-standing partnership and strengthens our Enterprise wide intelligent labels platform.

Deon Stander: It also positions us as the preferred inlay commercial partner, leveraging our leadership in design and manufacturing to bring commercial scale to Wiliot's complementary technology. Secondly, we are maintaining our commercial and operational agility by taking swift commercial procurement and cost actions to stay ahead of inflationary pressures. Thirdly, we're extending our scenario planning, a strength of ours, and driving great productivity and disciplined cost management to protect our bottom line through a wide range of scenarios. Turning to our segment results. Materials Group delivered reported sales growth of 11% over the prior year. On an organic basis, sales grew approximately 2%, driven by mid-single digit volume mix growth that was partially offset by deflation-related price reductions. The quarter's performance once again highlighted the strength of this business.

This investment includes a dedicated go to market team to accelerate adoption across retail food and Logistics.

It also positions us as preferred inlay commercial partner leveraging. Our leadership design and Manufacturing to bring commercial scale to willias complementary technology.

Secondly, we are managing commercial and operational agility by taking swift commercial procurement and cost actions to stay ahead of population. Repression,

30. We're extending our scenario planning a stress of ours and driving great productivity and discipline cost management. Detect our bottom line, say a wide range of scenarios.

Learning to our second results, they're all group delivered reported set growth of 11% over the prior year. Organic basis, sales grew approximately 2% driven by mid single digit, volume mix growth, that was partly offset by deflation related price. Reductions

Deon Stander: We saw strong growth in our base categories, which grew mid-single digits and provided a critical offset to a quieter quarter for our high-value categories, which were down low single digits. Within our high-value platforms, Graphics and Reflectives declined mid-single digits and Performance Materials were down low single digits, reflecting a combination of difficult year-over-year comparisons, customer order timing, and softer auto end market sales. We anticipate these high-value categories to return to growth as we go through the year. In Label and Graphic Materials, we observed some customer pre-buying during March that has persisted into April. While it's difficult to predict the exact amount and timing of the unwind, we currently expect this volume to largely unwind during the second half of Q2. Our teams remain focused on aligning production levels and cost structures with the shifting demand, utilizing our framework for managing stocking cycles.

The court is performing once again, highlighted the strength of this business.

We saw strong growth in our base categories, which grew midsingle digits, and provided a critical offset to a quieter quarter for our high-value categories, which were down low single digits. Within our high-value platforms, Graphics and Reflective declined mid-single digits, and for Download Synthesis, reflecting a combination of difficult comparisons, custom ordering and software auto, and market sales. We anticipate the high-value categories to return to growth as we go through the year.

He label materials, we observed customer pre buying during markets that have assisted into April.

While it's difficult to predict the amount and timing of the unwind, we currently expect this volume to lower the unwind during the second half of Q2.

Deon Stander: From a profit standpoint, adjusted EBITDA was up low double digits and margin up 10 basis point increase compared to the prior year. This was a direct result of our team's execution. We leveraged our operational rigor as well as contributions from raw material engineering initiatives. These efforts effectively countered the headwinds from a less favorable product mix and high employee related costs, ensuring we grew the bottom line while continuing to serve our customers. In the Solutions Group, reported sales for the quarter decreased 3%, with sales down 1% on an organic basis. The quarter was defined by the steady performance of our high-value categories, which grew low single digits and continue to serve as the long-term growth driver of this segment.

Our teams remain focused on aligning production, levels, and cost structures with the shifting, demand, utilize our framework for managing stock Cycles.

From a profit standpoint, adjusted earnings were at low double digits, and budget up 10 basis points compared to the prior year. This was a direct result of my team's execution. We leveraged our operational rigor, as well as contribution from Royal Engineering initiatives. These efforts effectively countered the headwinds from a less favorable product mix and high employee-related costs, ensuring we grew the bottom line while continuing to serve our customers.

In the solutions group report sales, reported decreased 3% with sales down 1% on an organic basis.

Deon Stander: Within the high-value categories, Vestcom and Embelex both delivered solid mid-single digit growth, which was partially tempered by Intelligent Labels, which was down low single digits. In our base categories, sales were slightly worse than expected, down to mid-single digits. From a profitability perspective, adjusted EBITDA margin for the quarter was 16.4%, down 80 basis points compared to the prior year. We realized clear benefits from operational efficiencies and a net benefit from pricing and raw material costs, these gains were more than offset by high employee related costs, lower base category volumes, and our investments in future growth. We remain committed to these investments as they are critical to ensuring innovation-led differentiation, which translates to strong long-term growth and margin expansion. Turning to our enterprise-wide Intelligent Labels platform.

Screw low single digits, and continued to serve as a long-term growth driver of this segment.

Within the high-value categories, Vescan and Bell both delivered solid mid-single-digit growth, which is partially tempered by Intelligent Labels, which was down low single digits. Now, base category sales were slightly worse than expected, down mid-single digits.

From a profitability perspective, adjusted i-bidder, Marge for the quarter was 16.4% down, 80 base points, compared to the prior year.

While we realized clear benefit from operational efficiencies and a net benefit for pricing and raw material costs, these gains are more than offset by employee-related costs, lower base category volumes, and our investments in future growth. We remain committed to these investments, as they are critical to ensuring innovation legation, which translates to strong long-term growth and margin expansion.

Deon Stander: Sales were down low single digits compared to the prior year, a result that came slightly below our growth expectation. However, this headline number really reflects a tale of two different dynamics across our end markets. In our largest category, apparel and general retail, we saw encouraging performance. Despite the high hurdle of a pre-tariff comparison from the Q1 2025, sales were up low single digits. This growth was fueled by successful program expansions, demonstrating that adoption in apparel continues to expand. Conversely, we saw more pronounced headwind in logistics, where sales were down low double digits. This is largely a reflection of softer logistics customer demand and managing inventory during this customer's transition to an updated chip.

Turning to our Enterprise wide intelligent labels, platform sales are low single digit compared to Prior year a result that came in slightly below our growth expectation. However, this headline number really, really reflects the tale of 2 different Dynamics across our end markets in our largest category apparel and general retail. We saw encouraging performance despite the high hurdle of a pre-term comparison from the first quarter of 2015 sales were up low, single digits.

This growth was fueled by successful program expansions, demonstrating that adoption in apparel continues to expand.

Deon Stander: We remain focused on the long-term adoption curve here. As we navigate these varied market timings, we are continuing to position the platform for the retail and food rollouts we have planned for the H2 of the year. Looking ahead, we continue to expect 2026 growth for our Intelligent Labels platform to outpace 2025, with performance more heavily weighted towards the H2 of the year as major programs scale. In apparel and general retail, we expect to deliver full-year growth, while our food category is set for an inflection as our rollout with the largest US grocery retailer across bakery, meat, and deli ramps up in the H2 of the year. In logistics, we are lapping outsized volume and share in 2025 and proactively managing this by expanding pilots with new partners throughout 2026.

Convert. We saw more pronounced headwind in logistics, where sales were downloadable digits. This is largely a reflection of softer Logistics, customer demand and managing inventory. During this customer's transition to an updated chip.

We remain focused on the longterm adoption curve here. And as we navigate these Market varied Market timings, We are continuing to position the platform for the retail and food, rollouts with plans for the back half of the year.

Looking ahead, we continue to expect 2026 growth for our Enterprise intelligent levels platform to outpace 2025 with performance more heavily weighted towards the second half of the year as major programs scale.

In the apparel General retail. We expect to deliver for your growth while our food categories for inflection as our reliable for the largest US. Grocery retailer across day cream. Eat in Delhi, ramped up in the back half of the year.

Deon Stander: Turning to our outlook for Q2, we anticipate earnings growth at the midpoint of our guidance range with organic sales growth of 0% to 2%. Our performance will once again be driven by the levers within our control, scaling our differentiated solutions in both our high-value category and base businesses, accelerating pricing to offset increased raw material inflation, maintaining a relentless focus on productivity and cost management, and effectively deploying capital to drive earnings. In summary, our Q1 performance, as well as our ability to grow share and earnings, demonstrates our differentiation in a dynamic environment. We are focused on the underlying secular growth drivers that inform our strategy, as well as the business resiliency actions to manage through sector pressures and inflationary shifts with agility.

Finally, in logistics, we are lapping outside, volume, share in 2025 and proactively managing this by expanding Pilots with new partners throughout 2026.

Turning to our outlook for the second quarter, we anticipate earnings growth at the midpoint of our guns range. The organic sales growth of 0 to 2%.

Our performance will, once again, be driven by levers within our control.

scaling, our differentiated Solutions in both our high value category and bass businesses,

Accelerating pricing to offset increased raw material inflation, and maintaining a relentless focus on productivity and cost management.

And effectively Define Capital to drive earnings.

In summary our first quarter, performance, as well. Our ability to grow share and earnings demonstrate our differentiation in a different Dynamic environment.

Deon Stander: The proactive actions we are taking to ensure supply chain resilience and accelerate innovation-led differentiation, evidenced by our deepened partnership with Wiliot, further strengthens our competitive moat. Our proven strategies, market-leading resilient businesses, agile teams, and disciplined capital allocation approach drive confidence to continue to deliver growth in 2026 and beyond. I want to extend my sincere gratitude to our global team for their focus on creating value for all our stakeholders, their agility, their continued dedication to excellence. Over to you, Greg.

We are focused on the underlying secular growth drivers and inform our strategy, as well as business, resiliency action, to manage through session and inflationary shifts with agility.

The proact actions. We are taking to ensure supply chain, resilience and accelerate Innovation lead differentiation evidence by our deep and partnership with iot further strengthens our competitive mode.

Our proven strategies marketed lead, resilient businesses agile, teams and disciplined capitalization bro. Have confidence to continue to deliver growth in 2026 and Beyond

Greg Lovins: Thank you, Deon, and hello everybody. In Q1, we delivered strong adjusted earnings per share of $2.47, up 7% compared to prior year. Earnings growth was driven by higher volume, productivity, and favorable foreign currency translation, partially offset by higher employee-related costs and targeted growth investments. As Deon mentioned, the quarter benefited from customer pre-buys ahead of price increases, particularly in the last few weeks of March, which we estimate was an approximate $0.10 tailwind to earnings in the quarter. Q1 reported sales were up 7% over prior year, with organic sales of 1% as strong volume mix was partially offset by deflation-related price reductions. Reported sales also benefited from approximately 5 points of growth from foreign currency translation and 1 point of growth from the Taylor Adhesives acquisition.

I want to extend sincere gratitude to our Global team for their focus on creating value, for all our stakeholders, their agility, their continued dedication to Excellence over to you, Greg

Thank you dyin. And hello everybody.

In the first quarter, we delivered strong adjusted earnings per share of $2.47, up 7% compared to the prior year.

Growth was driven by higher volume.

Productivity was favorable; foreign currency translation was partly offset by higher employee-related costs and targeted growth investments.

Deon mentioned the quarter benefited from customer pre-buys ahead of price increases, particularly in the last weeks of March.

Which we have made was an approximate percent Tailwind earnings in the quarter.

First quarter, reported sales were up 7% over prior year.

With Organic sales of 1% as strong volume mix with party offset by deflation related price. Reductions

Reported sales also benefited from approximately 5 points of growth from currency translation.

In 1 point of growth from the tailor, adhesives acquisition.

Greg Lovins: Adjusted EBITDA margins were 16.4 in the quarter and comparable to prior year. We generated strong adjusted free cash flow of $104 million in the quarter, primarily driven by an improvement in working capital compared to prior year, as well as continued disciplined CapEx. Our balance sheet remains strong, with quarter-end net debt to adjusted EBITDA ratio of 2.4. Our capital allocation during Q1 remained consistent with our established framework. We returned $133 million to shareholders through a balanced combination of $72 million in dividends and $61 million in share repurchases, with the majority of the repurchases completed in March. These actions underscore our commitment to returning capital while preserving the financial flexibility and balance sheet strength that define our capital allocation approach.

164% in the quarter in comparable to Prior year.

We generated strong adjusted pre-cash flow of $1,004 million in the quarter, primarily driven by improvement in working capital compared to prior years, as well as continued disciplined capital expenditures.

And our balance sheet remains strong, with quarter-end net debt to adjusted EBITDA ratio of 2.4.

Our Capital audition during the first quarter remains consistent. With our established framework. We returned to 133 million star shareholders to a balanced combination of 72 million in dividends and 61 million in share purchases.

With the majority of the repurchases completed in March.

These actions underscore our commitment to return Capital, while preserving the financial flexibility and balance sheet strength to Define, our Capital allocating approach.

Greg Lovins: Turning to the segment results for the quarter, Materials Group organic sales growth came in 2% higher year-over-year, as mid-single-digit volume mix growth was partially offset by low-single-digit deflation-related price reduction. Organically, base categories grew mid-single-digits, more than offsetting high-value categories, which were down low-single-digits. Turning to label materials, we believe we successfully gained share during the quarter while also benefiting from customer purchase timing ahead of price increases. From a regional perspective, volume mix in North America was up mid-single-digits, while Europe delivered approximately 10% in growth.

turning to the segment results for the course,

Sales Group organic sales growth came in 2% higher year-over-year.

As a mid single digit volume. Mix growth was partially set by low single digit, deflation related, price reduction.

Organic base categories, grew missing, digits, more than often high value categories, which were down low single digits.

Turning to label materials, we believe we successfully shared during the quarter, while also building from customer purchase timing that had a price increase.

Greg Lovins: In emerging markets, Asia Pacific also grew approximately 10%, and Latin America grew high single digits. Organic growth in our high-value quarter categories in Materials Group was down low single digits overall, with low single-digit growth, especially in durable labels, which was more than offset by a mid-single-digit decline in Graphics and Reflectives and low single-digit decline in Performance Materials, which includes our Performance Tapes and adhesives businesses. Regarding the Taylor Adhesives acquisition, the business continued to perform in line with our expectations. Materials Group adjusted EBITDA was up 12% compared to prior year, with margins up 10 basis points. The expansion reflects our continued strong execution on leveraging productivity, the net benefit of pricing and raw material cost, inclusive of material re-engineering and strong label volumes, partially offset by employee costs, mix, and investments.

From a regional perspective volume mix in North America was up mid single digits. While Europe delivered approximately 10% growth.

In Emerging Markets, these are Pacific, also grew approximately 10% in Latin America. Grew high single digits.

Organic growth in our high-value, quarter categories, and material groups were down low, single digits overall.

With low single digit growth in specialy durable labels, which was more than offset by mid single digit decline in graphics and reflectives.

And a low single-digit decline in Performance Materials.

Which includes our 416 and adhesives businesses.

Regarding the adhesive acquisition, the business continues to perform in line with our expectations.

Material Group adjusted; dives up 12% compared to prior year, with margins up 10 basis points.

The expansion, reflects our continued, strong execution on leveraging productivity. The net benefit of pricing en raw material cost.

Inclusive of material re-engineering.

And strong label volumes.

Greg Lovins: Regarding raw material costs, we experienced low single-digit year-over-year raw material deflation in Q1. That deflation shifted to inflation as we went through March, and we saw impacts on commodities which are linked to petrochemical prices. Our teams are leveraging our proven playbook to navigate the inflation spike through strategic sourcing adjustments in the implementation of pricing. Overall, we are anticipating high single-digit sequential inflation in Q2. Shifting to Solutions Group, organic sales were down 1%. While high-value categories grew low single digits, base categories declined mid-single digits. This reflects continued softness in apparel demand as we lack a strong pre-tariff baseline in Q1 2025, as well as ongoing inventory management from our customers. Within high-value categories, Vestcom was up mid-single digits, driven by the continued benefit from new program rollouts.

Partially offset by employee cost, mix and Investments.

Regarding raw material costs, we expect low single-digit year-over-year raw material deflation in the first quarter.

A deflation shifted to inflation as we went through March. We saw impacts on Commodities which are linked to petrochemical prices.

Our teams are looking at our proven Playbook to navigate inflation Spike through strategic sourcing adjustments and the implementation of pricing.

Overall, we are interested in high single digits. Sequential inflation in the second quarter.

Shifting the solutions group organic sales are down 1%. While high value categories, grew those single digits based categories declined to Mid single digits.

This reflects continued softness and apparel demand as we lack a strong preacher, Baseline in 1 Q 255.

As well as ongoing, Inventory management from our customers.

Greg Lovins: Embelex was up mid-single digits, driven by both the World Cup and industry growth. Intelligent Labels fell low single digits on lower logistics industry and general retail. Solutions Group adjusted EBITDA margin was 16.4%, which was down 80 basis points year over year. We're continuing to benefit from our productivity focus, net pricing, and raw material costs, but these were more than offset by higher employee-related costs, lower base category volumes, and ongoing growth investments. Turning to our outlook for Q2, we anticipate reported sales growth of 2% to 4%. This sales growth includes organic growth of 0% to 2%, approximately 1% from currency translation, and approximately 1% from the Taylor Adhesives acquisition.

Within high value category, best comp was up. Missing all digits driven by the same benefit from new program rollouts.

And embellishes up amazing old digits, driven by both World Cup and Industry growth.

Intelligent labels fellow single digits on Lower Logistics industry in general retail.

Solutions group adjusted margin was 16.4%.

This was down any basis points here over year.

We're continuing to bit from activity focus at pricing around material costs.

But these are more than offset by higher employee-related costs.

An ongoing growth investment.

According to our outlook for the second quarter, we anticipate reported sales growth of 2% to 4%.

This sales growth includes organic growth of 0 to 2%.

Approximately 1% from currency translation.

Greg Lovins: We expect adjusted earnings per share in the range of $2.43 to $2.53, representing approximately 3% growth year-over-year at the midpoint. This earnings growth is driven by benefits of productivity actions, which more than offset headwinds from wage inflation and growth investments, the anticipation of destocking, which is projected to impact label material volumes in the latter half of Q2, and the normalization of 2025 temporary savings, largely from incentive compensation expense. A net benefit from combined currency, share count, interest, and tax. We've also outlined key contributing factors for our full year 2026, which are largely unchanged from our prior outlook on slide 9 of our supplemental materials.

In approximately 1% from the Taylor Adhesives acquisition.

Back adjusted earnings per share and the range of 2.43 cents to 2 dollars and 53 cents.

representing approximately 3%, growth year-over-year at the midpoint

starting growth is driven by benefits of productivity, actions, which more than off the headwind from wage inflation and growth Investments.

The anticipation of these stocking which is projected to impact able material volumes in the latter half of the second quarter.

In the normalization of 2025, temporary savings, largely from incentive compensation expense.

In a net benefit from combining currency Share account, interest and tax.

Greg Lovins: We continue to expect an approximate $0.25 EPS benefit from the combination of favorable currency, which largely benefited Q1, and a lower share count, partially offset by a higher adjusted tax rate and interest expense. We've increased our expectations for restructuring savings, now anticipating greater than $55 million as we continue to lean into our productivity levers. We remain committed to strong adjusted free cash flow, targeting roughly 100% conversion for the year, with fixed and IT capital spending approximately $260 million. Assuming current economic conditions persist, we anticipate sequential increase in earnings throughout the year, in line with our recent historical seasonal patterns and excluding the impacts of destocking from the pre-buy timing. In summary, we delivered a strong start to the year, achieving adjusted EPS growth of 7% compared to prior year.

We've also outlined key contributing factors for our full year 2026, which are largely unchanged from our prior outlook on slide 9 of our supplemental materials.

We continue to expect an approximate 25% EPS benefit from the combination of favorable currencies which largely benefited q1 and the lower share accounts partially offset by higher adjusted tax rate and enter 69

We've increased our expectations for restructuring tubing, now anticipating greater than $55 million, as we continue to lean into our productivity levers.

We remain committed to strong, adjusted free cash flow, targeting roughly 100% conversion for the year.

With fixed and IT capital spending approximately $260 million.

In assuming current economic conditions. Persist, we anticipate sequential increase in earnings throughout the year in line with our recent historical, seasonal, patterns and excluding the impacts of these stocking from the prebby timing.

Greg Lovins: These results reflect our ability to drive volume and productivity while navigating a dynamic environment. We are well positioned to offset the latest round of significant inflation by leveraging our procurement excellence and proven pricing discipline. We generated $104 million in adjusted free cash flow this quarter and returned $103 million to shareholders. We continue to operate within our disciplined capital allocation framework while maintaining a strong balance sheet. With that, I'll now open up our call for your questions.

In summary, we delivered a strong start to the year, achieving adjusted EPS growth of 7% compared to the prior year.

These results reflect our ability to drive volume and productivity while navigating a dynamic environment.

We are well, positioned to offset the latest round of significant inflation. By leveraging our procurement excellence and proven pricing discipline, we generated 104 million dollars in adjusted free. Cash flow, this quarter, and returned 103 million dollars. To shareholders, we continue to operate within our discipline Capital, allocation framework while maintaining a strong balance sheet.

With that, we will now open up our call for your questions.

Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please raise your hand now using star one on your telephone keypad. If your question has been answered and you would like to withdraw your registration, please press the pound key. To accommodate all participants, we ask that you please limit yourself to one question and then return to the queue if you have additional questions. Please stand by as we compile the Q&A roster. Your first question comes from the line of Ghansham Panjabi from Robert W. Baird. Ghansham, please go ahead.

Ladies and gentlemen, we will now be in the question and answer session. If you would like to ask a question, please raise your hand. Now using star 1 on your telephone keypad. If your question has been answered and you would like to withdraw your registration, please press

The pound key.

To accommodate all participants. We ask that you, please limit yourself to 1 question and then return to the queue. If you have additional questions,

Please stand by as we compile Q&A, Foster?

your first question comes from the line of

Ghansham Panjabi: Yeah. Thank you, operator. Good morning, everybody. On Intelligent Labels, how did that play out relative to your initial expectations for Q1? Has your view on 2026 core sales for this business changed, just given the events over the past couple of months or so?

Gum Punjabi from Robert W. Barrett Pension, please go ahead.

Deon Stander: Hi, Ghansham. Yeah, Q1 played out slightly below than we anticipated, mostly on kind of the logistics volume that we saw, both at the customer level and some changes they were managing through inventory as in preparation for a new chip they were having. While we haven't given an outlook for the rest of the year, I still believe we're gonna see growth through the whole of 2026 relative to 2025 overall, Ghansham. In particular, because we're gonna see the H2 of the year when we're gonna see some of the new programs ramp, particularly in food. We talked about the Walmart ramp for us in the H2 of the year. We also have a number of other apparel programs that were planned in and a couple new ones that are also coming along as well.

Yeah, thank you. Um good morning everybody. So on intelligent labels. Um I have that relative to your initial expectations for you. It also has that view has your view on 2026 sales for this business change, given the events over the past, uh, couple of months or so.

Deon Stander: Overall, while it's difficult to know what the H2 will play out from a macro perspective, I feel good about our ability to drive those new programs and have them roll out. Hence we'll start to see an expansion on growth rates as we go through the year.

Half of the able to play out from macro perspective. Um, I feel good about our ability to drive those new programs and have them roll out and then we'll start to see an expansion our growth through the year.

Operator: Your next co-question comes from George Staphos from Bank of America Securities Incorporated. George, please go ahead.

George Staphos: Thanks very much. Hi, everyone. Good morning. Thanks for the details. I wanted to peer into the revenue bridge for the quarter. Appreciate the detail again. You said sales growth is put at 2% to 4%. Organic is 0% to 2%. We have 1% from FX and 1% from Taylor Adhesives. It suggests there's not a lot of impact, if we're not misreading this, from pricing. Can you talk about how the work you're doing to offset cost pressure will materialize in terms of pricing in Q2 and perhaps more in Q3, given lags? Relatedly, any common denominator in terms of the weakness in volume we saw in the high-value categories and Materials Group? Thank you.

The next question comes from George AOS from Bank of America Securities Incorporated. George, please go ahead.

Greg Lovins: Thank you, George. I'll start with the first question. I think you're talking about the Q2 outlook. We look at the amount of inflation, I think I mentioned in the prepared remarks, that we're seeing single-digit sequential inflation in Q2. We are implementing price increases pretty much across the globe to manage through that. We would expect sequentially from Q1 to Q2, kind of low- to mid-single-digit price impacts to offset that inflationary pressure. Now, from a year-over-year perspective, we still have some carryover deflation, which is part of what drove pricing down as I talked about in Q1, down in low single digits in Q1 versus prior year, really driven by carryover pricing with the deflation that we were seeing last year.

Thanks very much. Hi everyone. Good morning. Thanks for the details. Um, I wanted to peer into the the revenue bridge for the quarter. So uh appreciate the detail again. You said sales growth, is put due to 4% organic is 02. We have 1 from FAQ and 1 from Taylor so it suggests there's not a lot of impact if we're not mistreating this from pricing. Can you talk about how the work you're doing to offset cost pressure? Well, materialize in terms of pricing and to do and perhaps more in 3Q, given legs relatedly, any common denominator in terms of the, uh, weakness in volume, we saw on the high value categories and materials. Thank you.

Yeah, thank you. I'll start with the first question. Um, so I think you're talking about the second quarter look, so we look at the amount of inflation. I think I mentioned in the prepared remarks that we're seeing, I feel digits sequential inflation and you do, and we are remaining price increases pretty much across the globe to manage through that. So we would expect a consequentially from q1 to Q2. It's going to load a big single digit price impacts to offset that inflationary pressure. Now, from a year-over-year,

Greg Lovins: Some of that carryover deflation or carryover price down offsets some of that price increase in Q2, but we would expect a slight overall net price increase in Q2 versus prior year.

Perspective, we still have some carryover deflation, which is part of what drove, uh, pricing down. As I talked about in the first quarter, uh, down low single digits in D1 versus prior year really driven by carryover pricing with the decision that we received last year. So that carryover deflation carryover price down offset some of the price increase in the support but we would expect the slight, overall, net price increase in Q versus prior year.

Operator: Your next question comes from-

Deon Stander: sorry, We have one more.

Greg Lovins: Lucas, one second. Lucas.

Operator: One second.

Deon Stander: George, the only other thing I'd add is that, you know, historically, when we've talked about kind of price and inflation, we've always historically seen, you know, in the past, about a quarter gap. As we've gone through the last few cycles in this, we know now that our ability to manage pricing to offset inflation is really much improved. We don't anticipate any really gap in the timing of how we manage inflation and as well the pricing we put through. In terms of your high-value category question on Materials Group overall, there were some idiosyncratic reasons for it in the first quarter, particularly on Graphics and tapes were down, largely to do with a really strong comp in the first quarter of last year.

Your next question comes from 1 more just 1 second. Look at that.

So George I asked is that, you know, historically when we talked about kind of price and inflation, we always historically seen, you know, historically in the Box about a quarter Gap.

Deon Stander: Some inventory, intra-quarter inventory dynamics with some distributors and some end market sales where we saw some softness in our Graphics Business. Our anticipation is that we're gonna see a return to growth for those categories and overall volume increase as we go through the year.

We were as we've gone through the last few Cycles in this. We know now that our business can manage pricing. We also inflation is is really much improved and we don't necessarily Gap in the time in how we manage inflation and as well, the pricing we push through in terms of your, I value. Category, question on materials group. Overall, there was some reasons for it in the first quarter, particularly on graphics and texts that were down last to do with a strong confidence quarter last year. Some inventory in court in Dynamics, with some Distributors. And, and some end market sales where we saw some softness to reflect that in our Graphics business, but aren't the patients that we go through a year, we're going to see a return to growth for those categories, um, and overall volume increase as we go through the year.

Operator: Your next question comes from Jeff Zekauskas, from JP Morgan. Jeff, please go ahead.

Operator: Your next question comes from Jeff Zekauskas, from JPMorgan. Jeff, please go ahead.

Your next question comes from Jessica.

Jeff Zekauskas: Yeah. Thanks very much. You're estimating flat earnings per share in Q2 relative to Q1. Normally, Q2 is seasonally stronger. I understand there's a little bit of pre-buying, and you called that out as being $0.05. Usually the seasonality is stronger than that. Is what's restraining Q2 earnings growth the timing of the raw material inflation that you'll get back later? In Q3, you're usually seasonally weaker than you are in Q2, but you'll have growth in Intelligent Labels, you'll have a little bit more price. You know, in Q3, are we beginning to go up or flat or down? You know, where do we stand?

From JB Morgan Jeff. Please go ahead. Thanks very much, your estimating. Um, flat burnings for share in the second quarter relative to the first quarter. Normally, the second quarter is seasonally stronger and I understand there's a little bit of free buying and you pull that out as being nickel, but, but usually the seasonality is is stronger than that. So is what restraining? Second quarter earnings growth

Timing of the raw material inflation that you'll get back later.

Greg Lovins: Yeah. Thanks, Jeff. On your first question, as I mentioned, we had about a $0.05 benefit of pre-buying Q1, Which then comes out of Q2, which creates really a $0.10 swing from Q1 to Q2. Historically, we've had somewhere around, you know, $0.10 to $0.15 depending on the year, sequential seasonal benefit, as you mentioned, largely offsetting that. When we look at other factors, I would say we have probably a very slight price inflation lag impact, that largely offset by productivity increases as we're moving through the year as well. Overall, it's really the seasonal benefit offset by the pre-buy impact largely driving that.

And then in the third quarter, you're usually seasonally weaker than you are in second, but you'll have, um, growth in intelligent labels, you'll have a little bit more price. So, you know, in the in the third quarter or or are we beginning to go up or flat or down? You know, where do we have

You mentioned so largely offsetting that. Um, when we look at other factors I would say we have

Greg Lovins: Now when we look at the rest of the year, I think as we mentioned in our remarks, we do expect continued sequential earnings growth as we move through the year. Now pre-buy impacts, as you said, would lower Q2. That should be a benefit from Q2 to Q3. Exactly as you mentioned, we expect continued improvements in things like high-value category growth as we move through the back half of the year, continued earnings impacts from share buybacks as well, and continuing to drive productivity growth. We would expect to continue to see sequential improvements in earnings as we move through Q3 and Q4.

Probably very slight, um, price inflation, lag impact. Um, but that largely offset by productivity increases as we're moving through the year as well, so overall, it's really the seasonal benefit offset by the prior impact, largely driving that.

now, we look at the rest of the year. I think, as we mentioned in our remarks, we do expect continued to sequential earnings growth as we move through the year. Now, by impact, as you said, would lower Q2, that should be a benefit from Q2 to Q3 and exactly. As you mentioned, we expect continued improvements and things like that. The category growth, as we move through the back, half of the year, uh, continued earnings impacts from share BuyBacks as well, and continuing to drive a productivity growth. So we would expect to continue to see, uh, potential improvements in earnings as we move through, uh, Q3 and Q4

Operator: Your next question comes from John McNulty from BMO Capital Markets. John, please go ahead.

Your next question comes from John McNel.

John McNulty: Good morning. Thanks for taking my question. Maybe just dig a little bit more into the IL business. Logistics weak, it sounded like on two things, customer volumes and the chip change. I guess can you, presumably the chip change is a temporary thing and you get that back. I guess, can you help us to think about how much of it was just from general weakness in volumes first, that chip shift? Just as a secondary kind of related question, you know, the investment that you just made in Wiliot, if you can give us some thoughts on how you can leverage that opportunity and how that maybe brings that business potentially more meaningfully to you over time.

From BMO Capital Markets, John, please go ahead.

Yeah, good morning. Thanks for taking my question. Um, maybe just dig a little bit more into the eel business. Um, Logistics week, it sounded like on on 2 things, customer volumes and then, then the chip change, I guess. Can you presumably? The ship change is temporary thing and you get that back, I guess. Can you help us to think about how much of it was just from General?

Deon Stander: Yeah, John. The majority of what we saw in logistics softness was down to end customer demand, volumes, and I think you've seen that publicly announced today as well. I think there was some degree of impact on the chip timing, but it'll largely be resolved by the time we get through Q2 as well. I will say in logistics, you recall, what have we talked about in our call last time, is that we did really drive outsized growth and share in 2025, and this year we're gonna be looking to lap that. That growth and share came because a large number of our competitors weren't necessarily able to service the accounts in the way they anticipated, and we had to step in to sort of provide support in that.

Weakness in volumes first that chip shift. And then just as a secondary kind of related question, you know, the Investments you just made in wiliete. If you can give us some thoughts on how you can leverage that opportunity and how that maybe brings that that business uh, potentially more meaning to you over time.

Yes. Um, the majority of what we saw in logistics software was done to End customer demand, um, volumes. And I think we've seen that publicly announced there as well. Um, I think the there were some degree of impact on the chip timing, but a lot to be resolved by the time we get through the second quarter as well. I will say Logistics. You recall what have we talked about in the in in like all last time? Is that we, we are really, we did really drive out those growth share in 2025. And this year, we're going to be looking to lap that

Deon Stander: Our plan and expectation is that will normalize in time as well. We have yet to see that in the first quarter, but that's our planning and expectation stand at the moment. What we're doing in logistics specifically is to make sure we continue to accelerate what I'm seeing very positive pilots in logistics with our other logistics providers at the moment as well. Turning to Wiliot, I'm really pleased with the investment in this complementary technology. They've been a partner of ours for a long time, and we're deepening that relationship. We're specifically making sure that we're effectively getting joint go-to market and our role in providing support for them as the largest manufacturer and designer from our scale and network, I think will be invaluable to both of us as we move forward.

Deon Stander: You know, Wiliot in itself is a technology that's reliant on Bluetooth, so it's not RFID in the way that you'd think about it, and it's largely applicable, John, when you think about condition monitoring. When items need sensing as it relates to changes in temperature, humidity, and light, this is where the technology really comes to bear. We've always talked about having a portfolio of sensors that are applicable in each business case, really. Think about this being really applicable in sort of food, pharmaceutical, some logistics where at a case and pallet level where you need more of that condition sensing technology to bring to bear. Our view as we move forward is that does two things for us. It opens up the total addressable markets further for Intelligent Labels platform overall.

Growth and share. Can because a large number of our competitors weren't necessarily able to service their accounts in the way and anticipate. And we had to step into of Provide support on that. And our plan and expectation is that we'll normalize and time as well. We have yet to see that in the first quarter. But that's our plan and expectation stands at the moment. And what we're doing in the logistics specifically is to make sure we can tend to accelerate when I'm seeing some very positive pilots in logistics with our Logistics provided moments as well planning to will. It I'm really pleased with the investment uh in in this um complimentary technology. They've been part of the right long time and we deepening that relationship with specifically. Making sure that we're effectively getting joint go to market and um our role in providing support for them as the um as I just manufacturer and designer from our scale and network, I think will be invaluable to both of us.

Deon Stander: We think that condition monitoring is probably another 75 billion units in the long term. At the same time, it gives us a position of strength as we think about our breadth of solutions that we can provide in partnership now to all of our customers moving forward.

Forward, you know, Williams in itself is a technology that's reliant on Bluetooth so it's not RFID in the way that you think about it and it's largely applicable John, when you think about um, commission monitoring, so when items need sensing it relates to changes in temperature light, this is where the technology really comes to Bear. We've always talked about having a portfolio of sensors that are applicable in each business case really. So think about this being really applicable in sort of food, pharmaceutical some Logistics, where the case and pallet level, where you need more of that condition sensing sensing technology to bring to you. As we move forward, is does 2 things for us? It opens up the total addressable Market further. Our intelligent labels platform overall, we think that condition monitoring is probably another 75 billion units in the long term. And at the same time, it gives us a position of strength as we think about our breadth of solutions that we can provide in Partnership.

Operator: Your next question comes from the line of Joshua Spector from UBS. Josh, please go ahead.

Next question comes from the lion John Josh Vector from UBS Josh. Please go ahead.

Joshua Spector: Yeah. Hi, good morning. I wanted to just clarify two things. Just one, on the price cost side, I think, Greg, you talked about it being a slight negative in Q2. I'd be curious just, you know, is all the costs flowing through in Q2, or do you have something else to deal with in Q3 based on what we see today? Just in your answer to Jeff's question earlier, just around your comments about sequential earnings growth through the year, I mean, you have that qualifier about with historical earnings seasonality, but I heard you answer that you think earnings would be up in Q3, and then seasonally you're normally up in Q4. Is that the right way to think about it, or would you characterize it differently? Thank you. Yeah.

Greg Lovins: On the price cost, I think, I mentioned a slight negative headwind I think Q1 to Q2 from price cost, just timing. We are continuing to see inflation increase as we move here into the end of April and early May. You know, we're continuing to do price increases. Some regions are seeing higher inflation than others and are even entering a second round of pricing action. There may be a slight headwind, but overall pretty closely matching price inflation here as we go through Q2. I think there will be some carryover sequential inflation then based on that in Q3.

Comments about sequential earnings growth through the year and you have that qualifier about with historical earnings analogy. But I heard you answer that you think earnings would be up in 3, q, and then seasonally you're normally up and fourth quarter, is that the right way to think about it or would you characterize? Thank you.

Deon Stander: Inflation that we're seeing, somewhat middle of Q2 will flow into Q3 as well, and we'll see a little bit of sequential inflation impact then, as well as sequential price benefit from Q2 to Q3. I think I mean, we're not giving H2 guidance, I won't comment specifically there. Our expectation is that, as I said, we continue to drive significant productivity. We increase our restructuring outlook as we gave in the slides here today. We continue to drive high-value category growth, we're continuing to allocate capital in a way to hopefully continue to increase earnings as well. Our focus is continue to drive sequential improvement as we move through the quarters.

Greg Lovins: Inflation that we're seeing, somewhat middle of Q2 will flow into Q3 as well, and we'll see a little bit of sequential inflation impact then, as well as sequential price benefit from Q2 to Q3. I think I mean, we're not giving H2 guidance, I won't comment specifically there. Our expectation is that, as I said, we continue to drive significant productivity. We increase our restructuring outlook as we gave in the slides here today. We continue to drive high-value category growth, we're continuing to allocate capital in a way to hopefully continue to increase earnings as well. Our focus is continue to drive sequential improvement as we move through the quarters.

Yeah, so on the price cost, I think I mentioned a slight negative headwind. I think you wanted to go from price cost to timing. We are continuing to see inflation increases as we move here into the end of April and early May. So, you know, we're continuing to price — increase in some regions. We are seeing higher inflation than others, and are even entering a second round of pricing action. So there may be a slight win, but overall, pretty closely matching price with inflation here as we go through the second quarter. I think there will be some carryover sequential inflation then, based on that, in Q3. So, the inflation that we're seeing in the middle of the second quarter will flow into the third quarter as well, and we'll see a little bit of sequential inflation impact, as well as sequential price benefit from Q2 to Q3. Um, I think I was talking — I mean, we're not giving second half guidance, won’t comment specifically there, but our expectation is that, as I said, we continue to drive significant productivity. We increased our restructuring outlook that we gave in the slides here today. We continue to drive high-value category growth. Um, and

Or continued delicate capital on a way to help the continuing increase earnings as well. So our focus is continue to drive sequential Improvement as we move to the quarters.

Operator: Your next question comes from the line of John Dunigan from Jefferies. John, please go ahead.

John Dunigan: Thanks for all the details, Deon, Greg. Really appreciate it, congrats on performing well in a pretty tough environment. I wanted to ask on the Intelligent Labels business, you talked about the headwind from the logistics share gains that you had last year, I think you mentioned that you didn't really see any of that give back in Q1. I mean, how much should we pencil in for a headwind year over year here in 2026?

Your next question comes from the line of John. Dunning. From Jeffrey's John, please, go ahead.

Thanks for all the details, Deon, Greg. Really appreciate you, and congrats on performing well and in a pretty tough environment. Um, I wanted to ask on, um, the

Deon Stander: Yeah, John, overall, I, you know, we're not necessarily forecasting what the remainder of the year will look like. My view is that we are anticipating and planning for some of that outsized volume, and share that we gained in 2025. We'll lap against that if things normalize. The way we're thinking about that is we're gonna be working to make sure we're offsetting some of that with an impact of additional pilots we're expanding with some of our other logistics customers. The biggest part of our overall IL program during 2026 is really gonna be our food program as we roll out with Walmart during the H2 of the year.

Intelligent label business. Um, talked about the headwind from the logistics, um, share games that you had last year, but I think you mentioned that you did really see any of that, give back in 1 Q. I mean, how much should we canceling for um, a headwind year over year here in in 2026?

Deon Stander: Just recall what I said about that was we thought it'd be somewhere in the sort of high single-digit to low double-digit equivalent value across a 2-year period on our total 2025 IL revenue. We're still planning to see the start of that significant ramp in H2 of this year. Because of that announcement, we've also seen a lot more inbound from other food retailers and food supply chain players who are interested in understanding how they leverage the technology. I'm quite encouraged by 2 pilots that are running, one in North America and one in Europe, with some large grocery retailers that I think will have a lot of impact, as well as, a supply chain direct to store delivery for one of our retail customers as well, which is a different use case.

Overall I you know um we're not necessarily forecast for the remainder of the year we'll look like my view is that we are anticipating and planning for some of that volume. Um and share that we get into 2025 we're left against that everything is normalized but the way we're thinking about that is we're going to be working to make sure we're all setting some of that with uh with an impact of additional Pilots responding with some of our other logistic customers. The biggest part of our overall Isle program during 2026, really going to be our food program as we roll out with some with Walmart during the second half of the year. And just recall. What I said about that was we thought it would be somewhere in the sort of high single digit. Low double digit, equivalent value, across to your period, on a to 2025 Isle Revenue. Um, we're still

Deon Stander: Overall, from a food perspective, we're expecting that ramp, and then in apparel, we're gonna continue to see new programs roll out. A couple that are already in pilot and two that will start later on in H2. The other piece that I'm really encouraged by is the traction we're seeing with some of our innovation technology that comes to bear in this as well, John. We spoke last year a lot about the rollout that we've done with the Inditex group based on our loss prevention and visibility solution. We actually now have a second customer, another footwear brand that will be starting to use that as we go into H2. Not just new customers, but extending technology to be able to drive new use cases as well.

Planning to see the start of that significant ramping the second half of this year. Um, and because of that announcement, we've also seen a lot more inbound from other food, retailers and food supply chain players, who are interested in understanding. How nature technology, I'm quite encouraged by to Pilots that are running 1 in North America and 1 in Europe. With some large grocery retailers that I think will have a lot of impact as well as, um, supply chain for the direct to store delivery for 1 of our retail customers, as well, which is a different use case. So overall, um, from a food perspective, we're being back rather than an apparel. We're going to continue to see new programs, roll out, a couple that are already invited to that will stop later in in the second part of the year. The other piece, I'm really encouraged by the traction. We're seeing with some of our innovation technology that comes to bear in this as well. And um we spent last year a lot about roll out to be done with the Intex based on the loss prevention and visibility solution. We actually now have a second customer another foot brand that we're starting to use that is going into the second half of the year. So not just new customers, but extending technology to be able to drive new use cases as well.

As well.

Operator: Your next question comes from Michael Roxland from Truist Securities. Mike, please go ahead.

Michael Roxland: Yeah. Thank you, Deon, Greg, Kelly, for taking my questions. Deon, just to follow up on John's question, it sounds like you're expecting or pretty confident in Intelligent Labels ramping in the H2 of the year relative to the H1. To the extent you can comment, you know, how do you think about the cadence of IL over the duration of the year? Certainly to hit your guide for 2026 in terms of growing beyond 2025, it implies some lofty growth, which it seems like it's going to be more H2 weighted than H1 weighted. Secondly, just, you know, relatedly, any update on your key logistics customer and deployment internationally?

Your next question comes from Mike Roxland from Truist Securities. Next, please go ahead.

Deon Stander: Yeah. Mike, you're right. We are gonna be seeing a significant ramp in H2 of the year, and sequentially, our run rate of growth will improve as we go through from here through H2 of the year as well. That gets us to seeing our growth above 2025 by the time we exit the end of the year. As it relates to our logistics customer, we are continuing to work with them on the national expansion piece, and that's going relatively well in courting the plan that we have with them. The secondary piece we're also doing, you probably saw some commentary out in the press on this, is not only are we focused on what's called the last mile fulfillment centers, where we've been very active over the last couple of years then.

You're good guy for 2026 in terms of um going Beyond but uh excuse me for 25. Yeah. 2025 it implies law growth which it seems it's going to be more 28 and then secondly just you know laterally any update on your queue Justice customer and deployment International

Yeah. Um, so my

You're right. Um, we are going to be seeing this.

Deon Stander: As they orientate and also start to think about first mile, so this is the shippers themselves, their own, you know, franchise stores, and other customers, we're involved in providing support in that regard as well. Ultimately, I think in logistics, you get a combination of business models that some people will choose to focus on last mile first, others will focus on first mile, and we're seeing that with two or three other logistics players as we go through some of the pilots as well.

Run rate of growth will improve. We go through from here through the second half of the year as well, and that gets us to see our growth above 2025. By the time we exit the end of the year as relates to our Logistics customer, we are continuing to work with them on the National Expansion piece. And that's going relatively well, included in the plan that we have with them. Secondary piece, we are also doing some commentary out in the press on this. Not only are we focused on what's still the last mile for women centers, where we’ve been very active over the last couple of years, but as they arrive and also start to think about first mile. So this is the shippers themselves. They're in franchise stores, stores, other customers. We're involved in providing support in that regard as well. And ultimately, I think in logistics you get a combination of business models that some people use to focus on last mile first, others will focus on first mile. We're seeing that with two or three other logistics players that go to some of the pilots as well.

Operator: Your next question comes from Matt Roberts, from Raymond James. Go ahead, Matt.

Next question comes from Matt Roberts from Raymond James. Go ahead, Matt.

Matt Roberts: Hey, good morning, everyone. Thank you for the time. Deon, a couple times on the call, you referenced the playbook for cost reduction and specifically for inflationary pre-pressures. I think given you all have a unique window into a wide range of end markets and into how your customers are thinking about pricing going forward, whether that's in food, apparel or other categories.

Matt Roberts: How are your customers looking to offset their own costs via price? What impact do you expect that to have on the volume outlook going forward? You talked about extended scenario planning. Maybe, maybe not. How far are we from reaching a threshold of consumer elasticity, if you will, following years of price increases at retail? Kind of a holistic general question there on inflation and customer elasticity. Thanks for taking the question.

Deon Stander: Sure, Matt. Look, I think let me just start with saying, you know, relative to our assumptions at the start of the year, it's clear that inflation is certainly will be higher than we'd originally planned, and the economic indicators are lower than when we started at the beginning of the year. Now, what's very difficult for us is to estimate the impact, the timing and the consequence of how that may play out as we go through the second half. As you pointed out, we are expanding our scenario plans and widening them to make sure we're really prepared for all eventualities in the volume environment that may or may not play out.

Everyone, uh, thank you for the time. Um, do you have a a couple times, the call reference playbooks, across production and specifically for inflationary prices. So given you all have a unique window. Do a wide range of End Market and and how your customers are thinking about pricing going forward, whether that's in food or Peril or other categories, how are your customers looking to offset their own cost via price? And what impact expect that to have on the volume Outlook going forward? You tried to Extended scenario planning, maybe maybe how far away from reaching a threshold of consumer elasticity. If you will following years of place, increase whatsoever. Thanks for taking the question so much. Um, look, I think let me just stop there saying no relative to our assumption, that the start of the year. It's clear that inflation is certainly will be higher than we'd originally planned and the economic indicators are lower than we started the beginning of the year.

Deon Stander: I think the biggest part, and Greg talked about this earlier on, why I feel confident in our earnings growth trajectory as we go through the year, just to reiterate again, is because we're gonna continue to accelerate some of our productivity. You've seen we've updated our restructuring to $55 million. The largest part of it will play out as we go through H2 of the year. We know our high-value categories will continue to expand as we go through the year, not just because, for example, Materials Group had some idiosyncratic growth was challenged in Q1, that will improve as we go through the year. Also our Intelligent Labels growth will ramp as we go through H2 of the year.

What's very difficult for us, is estimate, the impact of the timing and the consequence of how that may may play out as I guess the second off. But as, as you pointed out, we are expanding our scenario plans widening, where they make sure we're really prepared for all eventualities in the volume environment, that may or may not play out. I think the biggest part is in Greg talked about this earlier on why I feel confident in our earnings growth trajectory as we go through, there is to reiterate. Again is because

Deon Stander: Finally, of course, you know, we are having the impact of share count reduction that will help us, as we go through the H2 as well. I think when I look at our end markets overall, here's what I see currently, and it is varied across end markets, varied within end markets as well. I'd say on our materials business, our labels side, customers have been, depending on where they are by regions where we've seen stronger inflation, they've been more cautious in the way that they've been thinking about the end outcome. Certainly, some of them have been doing some pre-buy. We particularly see that in Europe, some in Asia, a little bit emerging in North America as well. When you talk to customers over there, I think there's twofold.

Deon Stander: I think our end market retailers are really thinking and end market brands are really thinking about consumer confidence in that regard. As you've known for last couple of years, CPG volumes have been really muted. The encouraging thing, at least at the start of this year, we've seen at least a couple of CPGs starting to indicate they're seeing some volume growth. That could be a positive benefit for us, despite what's happening from an inflationary perspective. I think when you look to apparel, certainly apparel sentiment has been pretty soft for quite a long time. It went through the tariff challenges during last year. We're seeing apparel customers thinking of what it may mean from an inflationary perspective on end market demand. It is, after all, a discretionary purchase. That said, apparel imports are still continue to be very low.

We're going to continue to accelerate some of our productivity we've seen. We've updated our restructuring 55 million. The last part, the largest part of the whole Cloud as we go through taken off the year. We know our high value categories will continue to expand as we go through the not just because, for example, materials group has some idiosyncratic growth was challenged in the first quarter to go through the year, but also, our eel growth will Rampage in the second half of the year. And then finally, of course, you know, we are having the impact of share count reduction that will help us as we go through the second half of the year as well. I think, when I look at our end markets overall, here's what I see currently and it's, and it is very the cross n Market. It's very within Market, as well, down on materials business, our label side, customers have been depending on where they are by regions where we've seen strong inflation. They've been more cautious in the way that they've been thinking about the end outcome. Certainly, some of them have been doing some Prebiotic, particularly see that in Europe, some in Asia, a little bit emerging in North America as well. When you talk to customers over there, I think there's 2-fold, I think our end Market to retailers, are really thinking in End Market brands are really thinking about consumer confidence in that regard.

Deon Stander: You know, apparel inventory to sales ratios are at the lowest since they've been 2021. As we go through the year, we may see some upside as things normalize in that regard. We continue to work with customers. We're hearing different things about how they're managing. They're thinking about back to school sourcing and then ultimately into holiday as well. Our assumptions are, if we don't see any further deterioration in the macro environment from where it is now, I would anticipate sequential earnings growth as Greg called out as we go forward through the year.

A discretionary purchase that said apparel Imports are still continue to be very low. Um, you know, in apparel inventory to sales ratios are at the lowest in 21. Um, and as as we go through the year, we we may see some we may see subsidies things normalized in that regard. We seem to work with customers. We're hearing different things about how they're managing, they're thinking about um, like the school sourcing and ultimately into holiday as well. So our assumptions are, if we don't see any further variation in macro environment, from what is now that we're anticipating sequential earnings growth is as as great call out, as we go forward through the

Operator: Your next question comes from Anthony Pettinari from Citi. Please go ahead, Anthony.

Next question comes from Anthony, Peter.

Anthony Pettinari: Good morning. Just following up on Intelligent Labels, you know, understanding the big ramp is in H2 of the year. I am just wondering, was there anything notable in terms of the exit rate in Q1? Was that, you know, stronger or weaker? It seems like comps could get potentially easier in Q2. I am just curious if you saw any acceleration into March or April.

Deon Stander: Nothing that stood out dramatically, Anthony Pettinari. Certainly in Q2, we should see easier comps on our apparel and general merchandise, because if you recall, tariffs really took hold in Q2 of last year when we saw, I think, a negative outcome during Q2 then as well. No leading indicators would suggest there is any difference. I will say that as I look into where we are now, you know, our current run rates as we are seeing in April reflect on both businesses, just a continuity of what we saw during March, really overall. Apparel continues to be solid from what we can see initially.

From City, please go ahead any, uh, good morning. Um, just uh, following up on igent labels. You know, understanding the big ramp is in the second half of the year, but I'm just wondering, is there anything notable in terms of the exit rate in the first quarter? Was that stronger or weaker? It seems like comps could get potentially easier to queue. So I'm just curious. If you saw any acceleration in the in the March or April,

I'm certainly in the second quarter. We should see easier comps on our apparel and General Merchandise, because if you call tariffs 3 took hold in the second quarter of last year when we saw, I think a negative, um, outcome during the second quarter, then, as well. So, no leading indicators would suggest there's any difference. Um, I will say that as I look into where we are now, um, you know, our current run rates as we're seeing in April reflect on both businesses,

Deon Stander: For our materials business, particularly our labels business, we continue to see some of that elevated activity, which as Greg spoke about, we're anticipating unwinding as we get through Q2.

To continue to what we saw during March, really, overall, apparently continues to be solid from what we can see initially. And for our Materials—particularly our Labels business—we continue to see some of that elevated activity, um, which Greg, as Greg talked about, we are anticipating unwinding as we get through the second quarter.

Operator: Your next question comes from Hillary Cacanando from Deutsche Bank Securities. Hillary, please go ahead.

Your next question comes from Hillary kando.

Hillary Cacanando: Hi. Thanks for taking my question. In terms of capital allocation, you know, you bought back 61 million shares this quarter. Given that your leverage is stable at 2.4x leverage, how should we think about the pace of buybacks for the remainder of the year, you know, particularly balancing against your, you know, investment pipeline?

From Deutsche Bank Securities, Hillary. Please go ahead.

Hi. Thanks for taking my question, uh, in terms of cap, allocation, you know, you bought you bought that 61 million shares this quarter, um, given that your leverage table at 2.4 times. Leverage, um, how should you think about the pace of BuyBacks for the remainder of the year? You know, particularly balancing against your, you know, investment pipeline?

Greg Lovins: Yeah. Thank you, Hillary. You know, we continue to follow our playbook that I think we followed for a while on share buybacks, where, you know, typically we take a return-based approach, where we use a grid. In a period where we're seeing share price increase, we may pull back a little bit on the pace of repurchases. In a period like we saw in March, where we saw the share price decelerate, we increased our pace of purchases. The vast majority of our Q1 share buyback actually came in the month of March, and then April kind of continued at a relatively similar pace. You know, it'll somewhat depend, of course, on how that plays out as we go through the year. We'll continue to take a return-based approach on our share buybacks accordingly.

Greg Lovins: Overall, from an allocation perspective, you know, we feel good about the capacity that we have to continue investing in the business organically, of course, with CapEx, with innovation, and related investments. Investments like Wiliot, of course, like, to help increase our future growth rates, as well as looking at opportunities for both M&A and continuing to do share buybacks. We feel good about our capacity across all of those fronts and we'll continue to take the balanced, disciplined approach on all those as well.

Yeah, thank you Hillary. So you know we continue to follow our Playbook that. I think we followed for a while on back where you know particularly we take a return based approach where we use a grid and a in a period where we're seeing uh share price increase. We may pull back a little bit on the pace of repurchases in a period like we saw in March where we saw the share price uh decelerate we increased our base purchases. So the vast majority of our q1 share right back actually came in the month of March and then April kind of continued at a relatively similar pace. So, you know, I feel somewhat depend of course on how that plays out as we go through the year, we'll continue to take a return based approach uh, on our share backs. Accordingly, overall, from allocation perspective, you know, we thought about the capacity that we have to continue investing the business organically, of course, with

With Innovation related Investments Investments, like Willys, of course, like helping increase our, um, our future growth rates as well, as looking at opportunities for both m&a, and continuing to do share right back. So we feel good about our capacity across all of those fronts, and, um, we'll continue to take the, the balance, the disciplined approach on all those as well.

Operator: Your next question comes from George Staphos from Bank of America Securities, Inc. George, please go ahead.

George Staphos: Thanks so much for taking the follow on. Two quickies here. First of all, Dion and Greg, can you elaborate further on how you're expanding the scenario planning? Is it just pulling more levers on the productivity and maybe ramping the buyback as the market has allowed you? Are there any other elements you can share here on the call in terms of how you're expanding the playbook? Secondly, in terms of pre-buys and recognizing at the end of the day, you know, you're in business to serve your customers, what are you doing to prevent, if you will, too much pre-buying that gives you a bit more of a destocking that has to be managed Q2 and perhaps into Q3? Thanks very much and good luck in the quarter.

Your next question comes from George, staf from Bank of America Securities Incorporated George. Please go ahead.

Deon Stander: Thanks, George. Yeah, in terms of expanding our scenarios, you touched on the major drivers of those. We look to understand where there's additional productivity opportunities for us in lower volume scenarios or less if their volume continues to grow. I think the only other thing I'd say is we continue looking at what are we gonna do from an innovation perspective. When we have new products or solutions in the pipeline, can we accelerate them even quicker to get to market? The final element I will say is, you know, our teams have been really focused on thinking through what it takes to continue to win and to drive share with our customers, both new and existing customers as well.

Thanks so much for taking the follow on to quicker. First of all, Dion and Greg can you elaborate further on how you're expanding. The scenario planning is just pulling more levers on productivity and and maybe ramping the buyback as the market has allowed you or there. Any other element you can share here on the call in terms of how you're expanding The Playbook. Secondly, in terms of uh, Prebiotic and it recognizing at the end of the day, you know, you're in business to serve your customers. What are you doing to prevent? If you will too much preying, that gives you a bit more of a ducking that has to be managed due to and perhaps into 3Q. Thanks very much and good luck in the quarter.

Deon Stander: Part of that comes down to our commercial excellence, backed up by the innovation that they are seeing that we're delivering to the market and, of course, supported by our consistent quality and service delivery. Those relationships we have with customers, we see as an opportunity for us to continue to increase our share of wallets with them as well. Final point I'd make is typically what we see in more uncertain environments, particularly inflationary environments and where and if supply chains are more challenged, we normally see a migration from customers back to the market leaders because they trust the security that we can provide. That may represent another upside for us as we think through just in terms of expanding our playbook and scenarios for more share gains as well.

Scenarios and you touched on the the major drivers of those. We we look to understand where there's additional productivity opportunities for us in lower volume scenarios or less if they're volume continues to grow. I think the only other thing I'd say is we're continually looking at what we're going to do from an innovation perspective. And when we have new products or Solutions in the pipeline, can we accelerate them even quicker to get Market? Um, the final element I will say is, you know, teams have been really focused on thinking through what it takes to continue to and to drive share with our customers, both new and existing customers as well. Part of that comes down to our commercial Excellence, backed up by The Innovation that they are seeing that we're delivering for marketers and of course, supported by our consistent policy and Service delivery. So those relationships, we have with customers, we see as an opportunity for us to continue to increase our share of wallets with them as well. Final point, I'd make it. Typically what we see in more uncertain environments, particularly in patient environments and where and if the supply chains are more challenged. We normally see a migration from customers back to the market leaders because they trying to security the work, right. And that may represent another upside for us as we think through just in term of expanding.

Greg Lovins: Yeah, I think some of that addresses the question on pre-buy as well. I mean, there's two primary reasons that customers do pre-buy. One is to ensure certainty of supply in materials, and the other is to manage price increases that they could see coming in the market. I think overall, as Dion said, you know, our global scale is a big competitive advantage for us when it comes to ensuring certainty of supply to our customers. Leveraging our procurement excellence, our sourcing strategy. We learned a lot from the challenges of 2021 and 2022 from that perspective, expanded our supplier and sourcing strategies from there, and really feel good about our ability to ensure certainty of supply for our customers. I think that's one way we help limit the impact of pre-buys getting too large.

Explain our, our Playbook and scenarios and we'll share again as well.

Yeah, I think come with that address is uh, the question we buy as well. I mean, there's, there's 2 primary reasons that customers do pre-b, buy 1 is to ensure certainty of supply and materials. And the other is, um, to measure price increases that they see coming in the market. I think, overall is Diane said, you know, our global scale is a big competitive Advantage for us. When it comes to engineering applied to our customers leveraging, our procurement Excellence, our strategy learned a lot from the

Greg Lovins: I think, you know, what we're seeing here is a much lower scale than what we saw in 2021, 2022, when we saw 3 or 4 quarters of inventory building before the destock happened in late 2022, early 2023. Right now it's a month or so of inventory build. We're gonna continue to manage that very closely, and we'll see how that plays out as we move through the quarter, but we're gonna stay on top of that, of course, as we go.

Challenges of 21 and 22 from that perspective, expanded our, uh, supplier and sourcing strategies from there and really feel good about our ability to, uh, ensure Sergio supply for I think that's 1 way we help limit the impact of preising to large. I think, you know what, we're seeing here is a much lower sale than what we saw in 2122 when we saw 3 or 4 quarters of inventory building before the the stock happened in 2020 late 22 or early 23. Um, so right now it's a, it's a month or so of inventory. Build. We're going to continue to manage that for closely um and we'll see how that plays out as we move through the quarter but we're going to stay on top of that. Of course as we go.

Operator: Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks.

William Gilchrist: Thank you, Lucas. On behalf of everyone at Avery Dennison, I wanna thank everyone for joining today's call and for the continued interest in Avery Dennison. This concludes today's conference call. Thank you.

Mr. Gilchrist, are you there? No further questions at this time. I'll now turn the call back to you for any closing remarks.

Call and for the continued interest in Edison. This concludes today's conference call. Thank you.

Operator: Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you, please disconnect your line.

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