Avery Dennison Corp. Investor update

All right. Good morning, everyone. Welcome to Avery Dennison's 2026 High Value Category Investor Showcase. I think you all know me, but I'm William Gilchrist, Vice President of Investor Relations. It's great to see you here today at our headquarters in Mentor. We're excited to feature our high-value categories and their strategic importance to our financial objectives. Today's presentation materials are available on our website, and the presentation is being recorded, and a replay will be available later this afternoon. Before we dive in, a couple of important reminders for you all. For those joining us in person, you received an Embelex digital activation trigger patch when you checked in. If you tap it with your phone, it'll bring you to an ability to access today's agenda, presentation slides, showcase demonstrations, speaker bios, and more information about the event. A couple other things to note.

Although we do not anticipate any emergencies here today, for those of you in the room with us, in the event there is an emergency, please evacuate the building. You'll see a map here. Go to poles one and two in the parking lot, and that's going to keep you safe. Second thing is, in addition, please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP financial measures that we use are defined and qualified, reconciled from GAAP in the appendix of the presentation. Remind you that we'll be making certain predictive statements that reflect our current views about our future performance and financial results. These forward-looking statements are made subject to the safe harbor statements included here on slide 4. Finally, we have a great agenda here for you today. We're all thrilled about this and very excited.

You'll be hearing from Deon and Greg, and several other leaders on the strategic importance of high-value categories. We'll take you through each of these high-value categories over the next about 90 minutes, and then we'll invite everyone back up on stage for Q&A. After that, we'll have lunch, and then for the people in person, we'll do a demonstration of all the high-value categories at the facility here. With that, I'm going to turn it over to Deon Stander, our President and CEO.

All right. Good morning, everybody, and welcome to Avery Dennison's High Value Category Showcase. So whether you're here in person today or on the webcast, thank you for making the time to spend with us at your day today as well. I'm Deon Stander. I'm the President and CEO of Avery Dennison, and on behalf of the whole Avery Dennison team, we're excited to share a deeper view into our high-value categories, which are the key growth platforms where we consistently deploy capital, both organically and inorganically. Today is all about giving you a clear view of what these platforms actually do, the expanding addressable markets they tap into, the secular tailwinds behind them, our competitive moats, and of course, the specific growth initiatives driving our performance within those.

Before we zoom into the individual platforms, let's just take a step back and really look at the foundational snapshot of Avery Dennison today. As you know, at our core, Avery Dennison is a global leader at the intersection of material science and digital identification, and we operate in over 50 countries with 35,000 employees. We build solutions that address key industry challenges, such as optimizing supply chains, reducing waste, mitigating loss, and driving advancing circularity and connecting brands directly with consumers. Financially, this positioning delivers strong, highly resilient performance. In 2025, we generated $9 billion in net sales balanced across our Materials and Solutions Groups. While the enterprise delivered solid mid-single-digit organic growth in the past five years, our high-value categories outpaced the core baseline with high single-digit growth, now representing nearly $4 billion of our total top line.

Crucially, high-value category margins consistently trend above our enterprise average, proving that as these platforms scale, they systematically lift the profitability of the entire company. Beyond these headline numbers, our momentum is underpinned by the structural resilience of our broader portfolio. As you can see, this structural resilience rests on three key pillars. Firstly, roughly 60% of our sales are tied to essential, less economically sensitive end markets like food, beverage, pharma, and personal care, providing durable demand through any cycle. Second, our global footprint is exceptionally well-balanced. Strong core positions across North America and Europe are complemented by emerging markets that now represent roughly 30% of our revenue, giving us direct exposure to faster-growing economies. Third, as you can see in the chart, our portfolio transformation is accelerating. High-value categories now represent roughly 45% of our total sales, up nearly 10% over the last five years.

This diversification provides a distinct advantage, a resilient foundation that protects earnings through macro volatility, paired with dynamic growth engines that drive outsized profitable revenue growth in time. Expanding these categories to nearly half our revenue isn't happening by chance. It is a direct outcome of how we execute our core enterprise strategies. To be clear, these strategies are proven and have guided us across cycles with high-value category growth remaining a consistent foundational pillar. While high-value category expansion is listed as our first pillar, it directly aligns with our commitments to lead at the intersection of the physical and digital, and environmental and social responsibility, while allocating capital with discipline. At the same time, pillars 2, 4, and 5 emphasize continuing to grow our base business profitably is vital for us.

These market-leading businesses provide reliable foundation to deliver earnings and cash flow and enable investment across our portfolio. Together, these five pillars give us the strategic balance to deliver GDP plus growth and top quartile returns through any cycle, which we believe is a recipe for superior value creation. Now, let's look at how the strategic engine operates within our first reporting segment, the Materials Group. The Materials Group is the undisputed global leader in self-adhesive label materials, roughly 2.5 times the size of our next largest competitor. Generating over $6 billion in sales, approximately 38% of this segment is now in high-value categories. This business is built on durable, competitive moats. Our global scale, serving over 10,000 converting partners, our deep material science expertise, and vertical integration into adhesives, capital-efficient assets that yield strong free cash flow conversion.

The financial impact of our high-value category strategy here is clear. While our core businesses grow steadily, the high-value category platform delivers mid-single-digit organic growth at profit margins that trend consistently above the segment baseline. Materials Group combines a highly productive cash-generative foundation with strong growth, high-value category businesses that drive long-term GDP plus growth. Turning to our Solutions Group, you can see how high-value category scaling creates an even faster growth acceleration. The Solutions Group serves as our high-growth digital and branding engine, generating $2 billion in net sales, with high-value categories now accounting for approximately 60% of the total mix. Backed by vertical integration, extensive application expertise, and over 1,500 patents in Intelligent Labels alone, this group solves critical industry challenges in supply chain visibility, labor efficiency, and brand identity. The financial impact is compelling.

Our high-value category platforms and solutions have grown at low double-digit organic growth while generating premium margins above the segment average. Solutions Group is leveraging these category expansions to power outsized top and bottom-line growth. While each segment addresses different customer needs, all of our high-value category growth engines are linked by common macro tailwinds. As you can see on the slide, whether in materials and solutions, every high-value category in our portfolio is propelled by three powerful secular tailwinds: digitization, sustainability, and personalization. Because our high-value category sits squarely at the intersection of these trends, they enable us to solve the four primary industry challenges we recognize, which are optimizing labor and supply chain efficiency, reducing waste and mitigating loss, advancing circularity and sustainable materials, and connecting brands and consumers more transparently.

Solving these ubiquitous challenges expands our addressable markets, positions us as the partner of choice with customers, and gives us confidence that our high-value categories will continue to outpace GDP across cycles. To bring this all together, my final slide illustrates how this intentional strategy has systematically shaped our financial portfolio over the past decade. Our strategies have proved our long-term financial thesis, and what you see here is the direct relationship between expanding our high-value category exposure, drive organic outgrowth, and expanding overall enterprise margins. In our Materials Group, high-value categories have grown at mid-single-digit rates, outpacing GDP, leading to the high-value category mix expanding to nearly 40% and driving meaningful underlying margin expansion. Meanwhile, for the Solutions Group, the transformation has been even more dramatic. Growing mid-teens has helped us improve the high-value category exposure to 60% of our sales, which has contributed to substantial margin expansion.

The specific strategies and end-market growth drivers for each high-value category that you will hear about later today underpin the strong confidence and conviction we have in continuing to see outsized growth across our portfolio. Over time, these high-value categories will continue to expand as a percentage of our total revenue, serving as one of the key engines for continued margin expansion across cycles. With this foundation set, I am delighted to hand over the stage to Danny Allouche, our newly appointed Materials Group president. Danny brings deep strategic expertise across our businesses, and he will take you through a deeper dive into our materials platform, and the growth drivers within it. Danny, over to you. Thanks, Deon.

Hello, everyone. It's really great to be here to talk about the Materials Group and specifically the opportunity that we have within performance materials. Before I dive into the performance materials, I would like to spend a few minutes on my impressions about the Materials Group over the last 100 days of me in the role. I've spent a considerable amount of time in the Materials Group over the last 16 years. I come to the role with a good understanding of our markets, our strategies, our strengths, and our opportunities. In recent weeks, I've spent an opportunity to visit many of our sites around the globe, and it's given me an even clearer understanding of our strengths, where we can perform better, and our opportunities that will drive profitable growth and create superior long-term value. What I've seen and heard has been inspiring.

Across our regions, our employees and our leadership teams both prioritize, recognize the strength and opportunities, and share strong conviction in our group's long-term potential. They also have clear understanding of the priorities that are required to realize the potential. What are these priorities? They are, first, growing our base business above our markets. Second, accelerating our differentiated growth in high-value categories. Third, leveraging our capabilities and access to converter channel access to lead at the intersection of physical and digital, and drive Intelligent Labels growth. Lastly, continuing to use our proven productivity playbook and disciplined capital allocation to ensure our manufacturing cost advantages enable us to grow profitably and generate strong returns. This is a great time to be part of the Materials Group, a high-performing business with a potential for accelerating profitable growth.