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]