From a margin perspective, adjusted EBITDA margin was 16.6%, down 40 basis points compared to the prior year. This reflects the impact of higher employee-related costs and some one-time benefits in the prior year fourth quarter, which our team worked diligently to partially offset through the benefits of our ongoing productivity actions. In Solutions Group, sales increased roughly 1.5%. This segment continues to lead our portfolio shift, with high-value categories now representing 60% of the Solutions Group ...

Core Insights - The company reported a solid third quarter with earnings up 2% year over year, driven by productivity and higher volume mix despite ongoing trade policy changes [3][12][21] - The apparel segment showed divergent trends, with high-value category apparel sales growing in the high single digits, while base apparel volumes remained down low single digits due to soft retail demand [4][5][17] - The Solutions Group achieved organic sales growth of 4%, supported by strong performance in high-value categories, particularly VESCOM and Embellix, both exceeding 10% growth [1][16][17] Financial Performance - Adjusted earnings per share reached $2.37, up 2% compared to the prior year, with reported sales increasing by 1.5% [12][21] - The adjusted EBITDA margin was strong at 16.5%, reflecting a 10 basis point increase year over year [12] - The company generated strong adjusted free cash flow of nearly $270 million in the quarter, maintaining a robust balance sheet with a net debt to adjusted EBITDA ratio of 2.2 [13] Segment Performance - The Materials Group experienced a slight revenue decline of 2% on an organic basis, primarily due to low single-digit deflation-related price reductions [14][15] - Specialty durable labels and adhesives continued to show strong growth, partially offsetting declines in graphics and performance tapes [2][15] - Intelligent Labels sales grew approximately 3% year over year, driven by key segments such as apparel, food, logistics, and industrial [4][17] Strategic Developments - The company announced a major partnership with Walmart to leverage RFID innovations in fresh grocery categories, marking a significant industry milestone [5][30] - The strategic focus on high-value categories is evident, with these categories now representing 45% of total business year to date [8][9] - The company is committed to disciplined capital allocation, having repurchased approximately $454 million in stock and grown dividends by 7% [10][13] Outlook - For the fourth quarter, the company anticipates reported sales growth of 5% to 7%, with organic growth expected to be between 0% to 2% [18][19] - The company expects to see high-value categories return to growth in the fourth quarter, despite current trade policy uncertainties [2][7] - The outlook incorporates seasonality and incremental productivity, with adjusted earnings per share projected to be in the range of $2.35 to $2.45 [19][21]

Core Insights - The company reported adjusted earnings per share (EPS) of $2.42 in Q2 2025, reflecting a 5% sequential increase but remaining roughly flat year-over-year [4][28]. - Trade policy uncertainty negatively impacted results, particularly in the apparel and general retail categories, leading to a 6% decline in apparel sales during the quarter [2][20]. - Management expressed dissatisfaction with the current growth trajectory, especially within the Intelligent Labels (IL) platform, and anticipates continued low single-digit declines in apparel volumes for Q3 2025 [3][9]. Financial Performance - Adjusted EBITDA margin was 16.6% in Q2 2025, up 20 basis points compared to the prior year [5][29]. - Adjusted free cash flow reached nearly $190 million in Q2 2025 [5][30]. - The net debt to adjusted EBITDA ratio stood at 2.3 at the end of the quarter [5][29]. Sales and Revenue Trends - Organic sales decreased by 1% in Q2 2025 compared to the previous year, with positive volume mix offset by deflation-related price reductions [5][28]. - The Materials Group experienced a 1% organic sales decline, while high-value categories saw low single-digit growth [6][31]. - Sales in the Graphics and Reflective segment increased by high single digits year-over-year [7][32]. Segment Performance - The Solutions Group's sales were down 1% organically in Q2 2025, but outside of apparel and general retail, sales increased by low double digits [8][33]. - The Vescom segment reported a 10% sales increase due to successful program rollouts at CVS Health [8][33]. - Embellix sales declined in Q2 2025 due to lower sourcing demand and slower orders from U.S. performance brands [8][22]. Regional Performance - North America and Asia Pacific saw organic volume mix increases in the low to mid-single digits, while Europe experienced a decline in the low to mid-single digits [7][31]. - Latin America also reported low single-digit organic volume mix growth [7][31]. Guidance and Outlook - The company expects adjusted EPS for Q3 2025 to be in the range of $2.24 to $2.40, with the midpoint comparable to the prior year [9][34]. - Management anticipates a $50 million restructuring savings target for the year and expects to return to year-over-year adjusted EPS growth in Q4 2025 if macro conditions remain stable [13][36]. - The full-year outlook has been adjusted to reflect a $7 million benefit to operating income from currency translation, compared to a previous headwind projection [10][35]. Strategic Initiatives - The company confirmed its ability to mitigate tariff impacts through strategic sourcing adjustments and targeted pricing surcharges [13][18]. - New product launches in food and logistics have delivered returns on investment exceeding expectations [11][70]. - The company maintains a strong balance sheet with ample capacity for organic investment, M&A, dividends, and share buybacks [15][26]. Market Position and Competitive Landscape - The company remains a market leader in over 80% of its portfolio, with a focus on high-value categories that provide differentiated growth potential [25][72]. - Despite challenges in the apparel sector, the company sees significant growth opportunities in the Intelligent Labels market, which is projected to be an $8 billion opportunity [74]. - The competitive intensity in the industry remains balanced, with the company anticipating a slight increase in market share as it rolls out new technologies and solutions [72][73].

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.42, up 5% sequentially and comparable to the prior year, with strong free cash flow of nearly $190 million in the quarter [17][18] - Adjusted EBITDA margin was strong at 16.6%, up 20 basis points compared to the prior year [18] - Sales were down 1% on an organic basis compared to the prior year, primarily due to deflation-related price reductions [17][18] Business Line Data and Key Metrics Changes - The Materials Group sales were down 1% on an organic basis, with modest volume mix growth offset by low single-digit deflation-related price reductions [19][20] - Solutions Group sales were also down 1% organically, with high-value categories up low single digits, while base solutions were down mid-single digits [22] - VESCOM, a suite of productivity solutions, was up roughly 10% in the quarter due to successful rollouts [10][22] Market Data and Key Metrics Changes - North America saw low to mid-single-digit organic volume mix growth, while Europe was down low to mid-single digits due to a strong prior year [19][20] - Apparel sales were down 6% in the quarter, with overall apparel and general retail categories experiencing reduced orders and inventory levels [8][11] - Food and logistics categories showed strong growth, with food up mid-teens collectively [11][22] Company Strategy and Development Direction - The company is taking a cautious approach to forward expectations, anticipating third-quarter earnings per share to be comparable to the prior year [13][24] - The focus remains on high-value categories and emerging markets, with a strong balance sheet allowing for organic and M&A investments [14][52] - The company is committed to improving network efficiency and expanding innovation, particularly in the Intelligent Labels platform [15][66] Management's Comments on Operating Environment and Future Outlook - Management noted that trade policy uncertainty impacted results, particularly in apparel and general retail categories [17][30] - Despite challenges, management expressed confidence in long-term earnings progression and the ability to navigate dynamic environments [15][24] - The company anticipates a return to earnings growth in the fourth quarter, assuming no significant macro shifts [25][41] Other Important Information - The company announced a 7% increase in the quarterly dividend to $0.94 per share, continuing a decade-long trend of annual growth [19] - The company returned approximately $500 million to shareholders through share repurchases and dividends in the first half of the year [18] Q&A Session Summary Question: Can you speak to whether you see pent-up demand and potential quicker turnarounds in the second half? - Management noted continued retail sales volume softness in Europe and muted customer sentiment, with expectations of low single-digit demand in apparel and general retail overall [30][31] Question: What are the expected volumes for the back half of the year? - Management reiterated that apparel business is expected to be down low single digits in Q3, with growth anticipated in Intelligent Labels in the second half [34][37] Question: What are the exit rates in your materials businesses into the third quarter? - Exit rates for the Materials Group were relatively flat overall, with slight improvements noted in June [98] Question: What is the outlook for Embellix and its reliance on global sporting events? - Management expects growth in Embellix to begin in Q4, with confidence in the long-term growth trajectory despite challenges in the apparel market [84][98] Question: How is the rollout with CVS going for VESCOM? - The rollout with CVS is progressing well, with strong growth anticipated as the company continues to leverage data for shelf-edge labeling solutions [86][87]

Financial Data and Key Metrics Changes - The company reported adjusted earnings per share of $2.42, up 5% sequentially and comparable to the prior year, with strong free cash flow of nearly $190 million in the quarter [15][16] - Adjusted EBITDA margin was strong at 16.6%, up 20 basis points compared to the prior year [16] - Sales were down 1% on an organic basis compared to the prior year, primarily due to deflation-related price reductions [15][16] Business Line Data and Key Metrics Changes - Materials Group sales were down 1% on an organic basis, with high-value categories up low single digits and base business down low single digits [18][19] - Solutions Group sales were down 1% organically, with high-value categories up low single digits and base solutions down mid single digits [21] - The Solutions Group achieved an adjusted EBITDA margin of 17.1%, up 30 basis points compared to the prior year [22] Market Data and Key Metrics Changes - North America saw low to mid single-digit growth in organic volume mix, while Europe was down low to mid single digits [19] - Apparel sales were down 6% in the quarter, with overall apparel and general retail categories experiencing reduced orders and inventory levels [6][10] - Food and logistics categories showed strong growth, with food sales up mid-teens collectively [10][21] Company Strategy and Development Direction - The company is focused on leveraging its global scale, innovation, and go-to-market strategy to maintain competitive advantages in large growing markets [12][13] - There is an emphasis on expanding high-value categories and pursuing new projects in food and logistics [10][12] - The company plans to continue disciplined capital allocation, including share repurchases and dividends, while exploring M&A opportunities to enhance high-value category contributions [52][54] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the third quarter, expecting earnings per share to be comparable to the prior year amid trade policy uncertainties [12][15] - The company anticipates a normalization of growth in apparel and general retail categories over time, despite current softness [10][11] - Management remains confident in the long-term growth trajectory, particularly in high-value categories and emerging markets [13][72] Other Important Information - The company announced a 7% increase in its quarterly dividend to $0.94 per share, continuing a decade-long trend of annual dividend growth [17] - The company is actively managing its global network to reduce inefficiencies and associated costs due to shifts in trade policies [11] Q&A Session Summary Question: Can you speak to whether you see pent-up demand and potential quicker turnarounds in the second half? - Management noted continued retail sales volume softness in Europe and muted customer sentiment, with expectations of low single-digit demand in apparel and general retail overall [29][30] Question: What are your expectations for volumes in the back half of the year? - Management anticipates growth in Intelligent Labels in the third quarter and expects new programs to gain traction in the fourth quarter [38][42] Question: What impact do you expect from the closure of Kroger stores on your deployments? - Management stated that the rollout with Kroger continues as planned, with no significant impact from store closures on their deployments [78] Question: What are the expectations for growth in the Embellix business? - Management expects growth in the Embellix business to begin in the fourth quarter, driven by performance brands and upcoming sporting events [86][100] Question: How is the company managing tariff cost impacts? - Management indicated that they largely offset tariff-related costs in Q2 through strategic pricing and sourcing shifts, with expectations to continue this in Q3 [91][92]