Q3 2026 Avery Dennison Earnings Conference Call - AVERY DENNISON CORP

Ladies and gentlemen, welcome to Avery Dennison's earnings conference call for the third quarter ended on September 30th, 2026. During the presentation, all participants will be in a listen-only mode. Afterward, we will conduct a Q&A session. At that time, if you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and enter the queue. queue. As a reminder, this webcast is being recorded and will be available for replay on the Avery Dennison Investor Relations website. I'd now like to turn the call over to William Gilchrist, Avery Denison's Vice President of Investor Relations. Please go ahead, sir. Thank you, Chase, and welcome to Avery Dennison's third quarter 2026 earnings conference call. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAP measures that we use are defined, qualified, and reconciled from GAAP on Schedules A4 to A8 of the financial statements accompanying today's earnings release. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are made subject to the Safe Harbor Statement included in today's earnings release. On the call today are Dion Stander, President and Chief Executive Officer, and Greg Lovins, Senior Vice President and chief financial officer. I'll now turn the call over to Dion. Thanks, Gillian. Good morning, everyone. We delivered strong third quarter results, continuing to demonstrate the underlying strength and resilience of our business. sales grew 4%, adjusted EPS grew 2% compared to prior year, and adjusted free cash flow generation continues to be robust at over $240 million. Considering the impact of customer inventory management, as shown on slide 5, our underlying business performance remains strong with an estimated 6% organic sales growth and an estimated 8% adjusted ETS growth year over year. Product sales growth was balanced across both high-value and base categories, with each up mid-single digits. As we indicated in our recent Investor Showcase event, high- value categories are a key part of our growth algorithm and future margin expansion. Q3 results reinforce the value of this portfolio of solutions, which are being driven by both secular demand growth and our differentiated competitive position. At an enterprise level, our operational priorities remain clear. First, investing in innovation and service-led differentiation to drive share gains and expand opportunities across base and high-value categories. Second, executing with commercial and operational agility, combining targeted pricing actions with relentless productivity to mitigate cost inflation. And third, disciplined capital allocation supported by robust free cash flow as we continue to invest in our business and return cash to shareholders while maintaining our strong balance sheet. Turning to our segment results, materials group delivered organic sales growth of 5% with both high value and base categories growing mid-single digits. We continue to solidify our leadership position through commercialization of innovative solutions that support industry secular trends. Sales in the quarter came in ahead of expectations due to a more gradual pace of customer inventory destocking than anticipated. While this unwind is taking longer to materialize, destocking is ongoing and we continue to expect the vast majority of the first half pre-buy inventory to unwind by the end of the fourth quarter. While segment adjusted EBITDA margins were down versus prior year, our teams continued to execute at a high level during the quarter, successfully managing volatile cost inflation and volume destocking to drive year-over-year growth in segment-adjusted EBITDA. In the solutions group, organic sales increased 1%, with a low single-digit growth in base categories and high-value categories comparable to prior year. Of note, strong growth in embellish continued despite lapping a significant World Cup headwind. From a profitability perspective, our team executed exceptionally well, delivering adjusted EBITDA growth and strong adjusted EBIDDA margin expansion. Shifting to enterprise-wide intelligent labels, sales were up low single digits compared to prior year, reflecting contrasting dynamics across end markets. In apparel and general retail, sales rose approximately 10%, driven by program expansions and general retailer recovery. In food, adoption momentum continues to build with strong growth as we ramp up another large grocery customer, expand pilot activity, and continue to move towards commercialization with the largest U.S. grocery retailer. In logistics, sales declined double digits, reflecting the normalization of outsized share gains in 2025 alongside softer overall demand. We remain actively engaged across logistics providers and continue expanding pilots with new partners. Turning to our full-year 2026 outlook, reflecting our strong year-to-date execution, we are slightly raising the midpoint of our range, representing roughly 7% growth at the mid-point on full- year organic sales growth of 3.5%. Regarding Q4, operationally, our business remains healthy and we anticipate that the remaining pre-buy inventory will largely conclude by year-end. On the leadership front, I'm extremely pleased to welcome Helen Sherbon as our new president of the Solutions Group, effective November the 3rd. Helen brings over two decades of global leadership, most recently serving as Senior Vice President and Chief Operating Officer of Global HP Solutions. Her proven track record in driving growth, transformation, and customer-centric innovation across solutions and her deep operating experience fit exceptionally well with leading the solutions group moving forward. In summary, our third quarter results demonstrate improving underlying growth while reinforcing the durability, differentiation, and competitive motive of our business. We remain focused on driving our long-term strategies while executing with discipline needed to navigate near-term inventory and cost inflation dynamics. by robust free cash flow generation and a strong balance sheet, we maintain the financial flexibility to invest in high-value opportunities while consistently returning capital to shareholders. As always, I want to thank our global teams for their support, their leadership, and their agility in continuing to make possible solutions for our customers and value creation for all of our stakeholders. And with that, over to Greg. Thank you, Dion, and hello, everybody. In the third quarter, we delivered adjusted earnings per share of $2.42, up 2% compared to prior year, coming in above our expectations, largely due to a more gradual pace of customer destocking and materials group, as well as strong operational execution. We estimate that customer inventory destocking unfavorably impacted sales by roughly two 2 points and adjusted EPS by roughly 15 cents or 6 points in the quarter, leading to underlying growth in adjusted EPs of roughly 8%. Reported sales rose 5% year-over-year to $2.3 billion, with organic sales growth of 4%. This was driven by low single-digit price realization to offset raw material cost inflation and a low single-digit impact from volume mix growth. Reported sales growth also benefited by more than a point from the Taylor Adhesives acquisition. Adjusted EBITDA margin was 15.8%, which was down year-over-year, as strong productivity initiatives were more than offset by the dilutive margin percentage effect of passing through raw material-related pricing, planning, the normalization of incentive compensation, and unfavorable mix. Free cash flow generation remained very strong. We generated adjusted free cash flow of $246 million in the quarter, bringing year-to-date adjusted free flow to $716 million, a conversion rate well above 100% of net income. And our balance sheet remains strong with net debt to adjusted EBITDA improving to 2.2 times. Capital allocation remained consistent with our discipline framework. We continue to invest organically in our business with capital spending on a year-to-date basis up versus last year. While we also returned approximately $135 million to shareholders during the quarter through $75 million in dividends and $60 million in share repurchases. This brings year-to-date capital return to shareholders to more than $480 million. In addition, year- to-date, we spent approximately $80 million on venture investments, underscoring our ongoing focus on strengthening our portfolio. Turning to our segment results, materials group sales increased 8.5% to $1.6 billion, with organic sales up 5%. Destocking was an approximate three-point headwind to segment organic growth. As Dion mentioned, while inventory destocking did begin in the third quarter in label materials, it proceeded more gradually than we had anticipated. High value categories grew mid-single digits organically, led by specially and durable labels and performance materials. And base categories also grew mid single digits, supported by in-market growth, share gains, and pricing and labels materials group adjusted EBITDA dollars grew slightly with margins at 16.4 percent which was down roughly a point compared to prior year this was driven by two primary factors the dilutive impact on the margin percentage from pricing actions to offset cost inflation and higher employee related costs together Together these drivers more than offset strong productivity savings. Shifting to Solutions Group, reported sales were $687 million, down 1.8%, with organic sales up 1%, slightly higher than anticipated. Base categories grew low single digits, while high value categories were comparable to prior year. Within high value platforms, Imbellix overcame World Cup headwinds and grew mid single digits. Vescom rose low single digits and intelligent label sales within Solutions Group declined driven by the anticipated share normalization and softer customer demand in logistics. Solutions Group adjusted EBITDA grew year over year with margins expanding 80 basis points to 17.8 percent as our teams continue to drive significant productivity which more than offset higher employee related expenses. Turning to our full-year 2026 outlook, we are narrowing our adjusted EPS guidance range to $10.10 to $$10.24, and slightly raising the midpoint of our guidance. The new midpoint represents roughly 7% growth year-over-year. We anticipate reported sales growth of approximately 5.5% for the year, including organic sales gross growth of approximately 3.5%, approximately 1.5 points from currency translation, roughly 1 point from the Taylor Adhesives acquisition, and approximately 40 basis point headwind from the calendar adjustment. Key earnings drivers supporting our full-year outlook include incremental restructuring savings now exceeding $65 million, a net EPS benefit of approximately 30 cents from favorable currency translation and lower share count partially offset by higher interest expense and adjusted tax rate headwinds from wage inflation and the continued normalization of 2025 temporary savings largely related to incentive compensation and we're forecasting stronger free cash flow targeting conversion of greater than 100 percent for the year with capital expenditures anticipated approximately 240 million dollars Regarding Q4, we expect the vast majority of the remaining balance of customer inventory destocking to conclude by the end of the fourth quarter. On a year-over-year basis, Q4 earnings will also have an approximate 1.5 percent headwind to sales growth and modest headwind to EPS growth from the calendar shift we implemented at the beginning of 2026. In summary, we delivered strong third quarter results with organic sales up 4% and adjusted EPS of $2.42 outperforming our expectations. Considering the impact of customer inventory management, our underlying business performance has improved with an estimated 6% organic sales growth and an estimated 8% adjusted EPS growth year over year. Our free cash flow generation continues to be very robust and our balance sheet remains strong and we've continued to invest organically in the business and through portfolio enhancing investments while returning capital to shareholders through a growing dividend and reducing our share count and we're slightly raising the midpoint of our guidance for the year so with that we'll now open up the call for your questions 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 the star 1 on your telephone keypad. If your question has been answered and you would to withdraw your question please press the star one key again. 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 George Staphos with Bank of America. Please proceed with your question. George Stathos, Bank of American Bank of Canada, Hi, everyone. Good morning. Thanks for the details. My question is on margin trends, if you could unpack a bit of what happened in both segments, Specifically within materials, can you talk about the mix effects with the destocking that would seem to help mix, especially with high-value growing? I think you said mix was a little bit lower. And then within solutions, can talk about productivity benefits and how sturdy those are on a going-forward basis? The performance here was quite good. Thank you, guys. James Jensen, Thanks, George, for your question. overall on materials group when we look at margins from a year-over-year perspective largely in line with our expectations but down about a point from where they were a year ago and again as i said in the prepared remarks the primary driver of that was the pricing impact on the margin percentage calculation as our focus as you know over an inflationary cycle is to really cover their dollars of inflation through both material re-engineering as well well as pricing. And then when we're in the deflationary part of the cycle, margins would improve in that instance if we're passing back inflation as well, and our margin percentage would improve. So throughout a cycle, generally even margins across the cycle of inflation. At the same time, year over year, we did have a bit of an incentive compensation headwind as last year, obviously, as you know, we were forming below our original expectations. And the next This was just a slight impact, I think, in the quarter on a net basis overall. We did have de-stocking, which was more in the base. We also had some share gain in the basis, though, so overall, not a major impact, and our growth in the based was also strong, just like it was in high-value categories within materials group. On solutions group, overall, we're continuing to drive strong productivity. The majority of our restructuring benefits are in the solutions group as well. That team has been driving a significant number of actions to grow and improve their margins. And I think we've said over time, even back to the 2024 Investor Day, that we see continued margin opportunities within solutions, and we're continuing to drive towards that. So overall, we do expect to continue driving those strong margins in the solutions business. Your next question comes from the line of Gansham Punjabi with Baird. Please proceed with your question. Thank you, and good morning, everybody. You know, I understand that, you know, destocking is obviously very tricky, and it can mask a lot of things in terms of the underlying dynamics, in terms growth. But what do you – how would you characterize the end markets for your materials segment overall? You know a lot your peers are calling out incremental consumer weakness, the same is being called out by the consumer staples companies on a multi-region basis. What are you seeing, Dion, in getting at, you now, really the trend line going into 2027? Thank you. Yeah, Gancham, I think, you know, what we see right at the moment hasn't fundamentally changed. If you look at where GDP and retail sales volume, they are, you know, roughly at 2% and 1% respectively, and we don't necessarily see that fundamentally changing as we move forward, unless the material change in the macro. I think if I break it down by our individual customer segments overall, you know, end customers for our materials group being largely CPGs and then some of our industrial customers, I still think there's a degree of caution just given the inflationary environment. We have started to see a little bit of unit volume expansion in CPGs, but it's still very muted, still, you know, below 1%, but at least as seemingly picked up from last year, where it was typically flat. And mostly, really, we're seeing it in both in HPC and food as well. Majority of our converting customers around the world say that they're not necessarily seeing any signs of significant growth from cpgs at the moment that could change as we move forward but most of them are managing with the constraints of where they are at the moment if i turn to and i'll just address this now if i turned to our customers more on the solution side of the business our retailers i think generally retailers overall are still remain cautiously focused on what the consumer is going to do in this next six months given again the higher inflation. I know in our apparel customers, and we've talked to them, they've had as expected back to schools, not too bad, most of it relatively price driven. And the outlook for holiday is also pretty cautious, but they're expecting some growth again, largely on price. What we're hearing is clear signs of bifurcation of consumer behavior. It's not surprising given where the inflationary pressure is at the moment. And of course, we remain vigilant looking at how inflation and price dynamics will play out consistently between this quarter as we go into next year as well. I think the biggest watch out that we're continuing to look at is just how does the broader geopolitical situation unfold, as well as the subsequent impacts on inflationary and including bond yields as well? Your next question comes from the line of John McNulty with BMO Capital Markets. Please proceed with your question. Yeah, thanks for taking my question. Maybe one on intelligent labels. By the sound of the Walmart ramp, et cetera, it looked like 4Q, you should have a decent inflection. I guess as you're looking out a little bit farther to 2027, I guess, can you speak to some of the pros and cons that you're seeing at least at this point, maybe annualizing some ofthe logistics headwinds or at least difficult comps, the ramp in food, and it sounds like you've got some increased pilots and logistics as well as maybe a new grocer on the, you know, in terms of a new expansion or platform. I guess, can you unpack that a little bit for us as well? Thanks very much. Sure, John. Let me actually deal with Walmart right up front because it's a key part of our growth algorithm as we move forward. You know, we remain highly confident in the opportunity around Fresh, and actually strong progress across all of our customer pipeline. Regarding the Walmart Fresh program, our confidence there has always been based in our experience that they have with RFID in driving material change to their business. The ROI for them is very strong. They see that across the categories that they've implemented already, and they continue to believe that's the case when they roll out Fresh overall. I actually recently met with their leadership team where this commitment to the technology was reaffirmed as well. You know, as is typical with sort of large-scale deployments, these timelines can sometimes vary quarter to quarter, and in this case, the start dates for this program have moved past the second half. We're expecting nearly the commercial ramp as we go through 27, and we're continuing to work right now very closely with the deployment team on what are the key commercialization milestones as we look forward. I will say, in addition to that, we're also seeing significant traction, as you highlighted, within the food category. I'm very pleased that we have a third large grocer now in the early stages commercial rollout, and we expect that to accelerate as we go through the fourth quarter into next year as well. And it really, to me, reinforces my conviction in the long-term opportunity of this end market segment. We have more pilots, more trials happening in food overall, largely focused on fresh, largely focus on the benefits that get driven from lower inventory, higher fresh product, less markdowns, greater labor productivity in stores. If I look at the other segments overall, we touched on the fact that we're going through that period where, particularly in logistics, particularly with our largest customer, we're seeing double-digit declines, largely on the share normalization that we talked about earlier during the year. That should, which started somewhat in the big end part of the first quarter, and as we get through the end of it, it will be largely mitigated. We continue to see an increase in pilots logistics overall and again timing of those which are highly independent specifically to each logistics company depending on whether they look at first mile or last mile will will still play a key part in our thinking as we look into next year overall I'd say more generally if I took a step back apparel retail in general merchandise continues to be positive that's largely on new customers that we've driven early in the year some customers also in the later part of this year, and what we should see is the aggregated benefit of those rollouts as we go into next year. You will recall that in our investor day, the event, I did make the point that we're anticipating, you know, sort of double-digit growth over the next couple of years in order to get to our growth algorithm as we laid out. Your next question comes from the line of Josh Spector with UBS. Please proceed with your question. Yeah, hi, good morning. I'd just be curious on the material side, going back to margin, where are you kind of on the price-cost journey? I guess, how much was that a positive or negative in 3Q? What's fake in the fourth quarter? And are we at the point where you're more than covering it, or is there still some catch-up you'd expect that carries into 2027? Thank you. Yeah, I think when we look sequentially from Q2 to Q3, we continue to see a bit of deflation sequentially, particularly in paper. I think that it's probably low single-digit or inflation, I should say, sorry, from Q2 to Q3, largely from paper. And we've had some sequential pricing that impacted Q2-Q3 as well. Ithink overall, when we look at the combination of material cost re-engineering and pricing, we're still largely on a dollar basis covering the impacts of the inflation. Percentage basis is a little bit different, as I talked about earlier, but a dollar basis looking to cover that and we feel good about the progress we've made on that and you know while we expect um relatively stable raw material basket right now from q3 to q4 there's still a lot of uncertainty there so we'll continue to track that and and we'll evolve from a pricing perspective as we see how those markets move as we go through the fourth quarter your next question comes from the line of jeff zakowskis with jp morgan your line is open please proceed with your question. Thanks very much. A two-part question. How fast do you expect your food and logistics intelligent labels business to grow next year? And do you think the growth will be even through the fourth quarter, through the four quarters? That is, it will start strongly in first quarter and continue or is there a different cadence and then for um for greg um cost of goods sold is rising faster than your sales now and propylene values are up you talked about paper costs going up sequentially are your prices also moving up sequentially in the fourth quarter And, you know, do you see more cost inflation and more price inflation? Thank you. Thanks, Jeff. I'll deal with the first and Greg can deal with a second. Just on our IL food growth specifically, we're expecting, you know, robust growth as we go through next year. And given the timing of some of the rollouts, some we're already seeing now, some will start as we get through the beginning part of next year, I'd say generally the phasing and while we'll still We'll confirm this as we get into January when we have our next discussion. The phasing is likely to still be at the general ramp as we go through the year overall. I think the thing that stands out for me in food overall is, you know, you have three large grocers that are actively engaged in this with multiple small pilots and trials happening. And in addition, that's also geographically spread across the world. It's not just in the United States. It's in Europe as well. We're seeing a lot more action and activity. So I feel very good in terms of the opportunity ahead of us. So just a reminder, this is still a 200 billion unit at least market space, and we are just at the start of this adoption curve. And so I think while timing of this can always move around, particularly in the early stages of adoption, I think the secular growth drivers support really a significant growth opportunity as we move forward. You know, the whole concept that freshness drives consumer engagement in store and that the availability of fresher products makes material different to consumers, I think, is a key piece that retailers are increasingly picking up on. Yeah, Jeff, on cost of sales, as I was mentioning a minute ago, we did continue to see inflation sequentially Q2 to Q3. From a year-over-year perspective, we're looking at mid- or mid-to-high single-digit inflation in the third quarter versus where we were a year ago. And we've got, on an overall company basis, you know, a couple points of price to go with that to help offset that inflation, in addition to material cost reengineering that I talked about earlier. So I think overall, from a cost perspective, material cost price perspective, we're managing that very well. As I mentioned a second ago to Josh's question, we are seeing, obviously, incremental merit-based wage inflation year over year. as we talked about a quarter ago as well and we're managing that by driving productivity to help offset that we do have some incentive comp some of that goes into manufacturing expense as well that impacts us year over year also but i think overall our teams are focused on driving gross profits when we look at gross profit percentage year over a year is uh down a bit again largely based on the pricing math that we see in materials group but continuing to make progress on the solution side from a gross margin perspective and Jeff the only thing I'd add on top of that is in terms of how you know the actions the team are taking in terms and matching price and cost overall across the cycle it's also worth noting that since last year we we've generally gained share in our materials business across most regions and I think that's because some of the drivers we're seeing out in the market in terms the secular drivers around sustainability as customers and customers are needing to get to adherence on things like the PPDWR and extended producer responsibility requirements are coming up in the next couple of years. We're seeing a significant drive towards more filmic products where we have an advantage, we're more vertically integrated, and we're also seeing much more emphasis on how we're able to help both our converting customers as well as our end customers over there. I'd also think I called out in the last time, part of our share gain has also come from typically when things get more uncertain and where there is more material pricing inflation that you see out in the markets, we tend to see a natural orientation towards ourselves as the largest player with the most global reach and the most consistent service and quality. And that typically also supports a case for our customers reaching out to us as well. Your next question comes from the line of John Dunnigan with Jefferies. Please proceed with your question. Thank you very much. I appreciate all the details, Dion and Greg, and congrats on the quarter. I want to start off with the destocking. One of your label peers called out very large industry declines quarter over quarter in the European market. It looks like it's given back more than the 2Q gains the market had. Just wondering if this is what you're seeing, how that compares to your portfolio, and maybe if you've seen more destocking there, if it's maybe destocking that you expect in North America to catch up more so here in the fourth quarter? Yeah, thanks for the question, John. So overall, the stocking-destocking cycle that we've seen have largely been in Europe as well as parts of Asia. And when we look at Asia, if we saw some stock building Q2, we think we're mostly through that destocking by the end of the third quarter for the most part. In Europe, we saw stock building in Q2, some of that coming out in the third quarter, not to the same extent as the stocking we saw in Q3, though. And that's where largely we expect the remaining destocking in the fourth quarter to come out of Europe. So I would say that when you look at the chart we included in our slides, you can see that the impact in the second quarter is about double the impact that we saw coming out in the third quarter. So overall, we expect the back half to kind of offset the first half from destocking for the most part. So certainly a bigger impact on stock build in Q2 than we saw destocking happening in the 3rd quarter. And John, just the only thing I'd add to that is, you know, in that 3rd Quarter, what we saw really was the destocking in Europe starting to happen a little bit in August, but really accelerating in September. And we continue to see that in October, giving us, you know, large confidence that most of it will be done by the time we get to the end of the fourth quarter. Our next question comes from the line of Mike Roxland with Truett Securities. Please proceed with your question. Thank you, Deanne, Greg, Gilly, for taking my question. Deanne just wanted to follow up in terms of intelligent labels. One of your chip suppliers mentioned that there could be another leg of growth with the large retailer through beauty personal care and over-the-counter meds right now which have low penetration so realizing realizing that food is still your largest and market with most growth potential would love to get your thoughts around um that potential expansion uh and expanding the collaboration with that particular retailer yeah um mike one of you know we don't often talk about some of the adjacent segments to general retail overall in specific detail because the other segments are so large in terms of logistics, food and apparel and general retail we lumped together. We do have, you know, a number of pilots underway with specific beauty providers as well where we're really focused on trying to understand how we can get to the same outcomes in retail that we typically see in apparel, which is really availability on shelf of items. And there's a separate case that sits behind that for even loss visibility as well. As we continue to see some traction there, we'll continue to provide information on the opportunity. We currently see it as sort of all of a general retail, general merchandise opportunity. And if there are specific retailers that are that way orientated, we're going to continue to work with them to make sure that we can bring some of the solutions that we have clearly seen in apparel and make them available in the beauty segment as well. Our next question comes from the line of Matt Roberts with Raymond James. Please proceed with your question. Matt Roberts, Raman James, Please proceed, Greg, Gilly, good morning. Total apparel was up mid-single digits. How did Intelligent Labels apparel specifically compare to that? How much of the variance, if there was one, was due to new programs versus maybe higher growth or share gains from certain customers given the implied double-digit il growth in 2728 what are your assumptions for apparel markets or what are you seeing given i think you know some caution around holidays so what gives you confidence on the apparel side of that thanks for taking the question sure matt um i think overall our apparel growth in the third quarter was was robust largely on some of the new programs that we've been rolling out and we're going to dissipate seeing that also continuing the fourth quarter and rollover into next year as well there's at least one of the world's largest value retailers involved in one of those programs as well as a couple of other customers that's both on the rollout of RFID and then we continue to see additional traction on some our loss visibility solution that we used historically with somebody like Inditex we've seen more traction with other customers though so overall my view is apparel is going to continue to be a growth driver for us as we go through 27 and we should see continued momentum during that time as well the only thing I would add to that Matt is that when we look at apparel in the third quarter intelligent labels were up roughly double digits extra or embellish was up roughly mid single digits and apparel base was up low single digits. So that's a composition within the overall apparel growth in the quarter. Our next question comes from the line of Anthony Petinari with Citigroup. Please proceed with your question. Good morning. I was wondering, you raised your restructuring savings target to over $65 million, and I think you started out the year at $50. Is there any way we should think about maybe rollover or kind of like further momentum on restructuring savings into 27 or maybe like incremental cash costs as that target has gone higher and just any kind of comments on just sort of the activities that you're undertaking and where you are in that process. Yeah, thanks, Anthony. I think, as you said, we raised that number slightly here for the year. And we've delivered a pretty strong amount of savings already through the third quarter. So most of the cost that goes with that savings that we're talking about will be in this year, of course, or some of that may be at the end of last year with the carryover. But overall, we feel good about the projects that the teams are driving and the progress we're making there. And both groups are continuing to find ways to drive productivity, especially in what's been a pretty uncertain environment as we've gone through this year, and our teams have accelerated the pace their actions when we look at next year certainly there'll be some carryover related to the actions that we're driving this year i would say that carryover is in the 20 or 20 cent or so impact when we looked year over year into 2027. our next question comes from the line of hillary kakanando with deutsche bank securities please proceed with your question Hi. Thanks for taking my question. So at the HBC showcase last month, you had said the food RFID pipeline was up about 40% year over year. So, you know, with the new, you know, third large grocer now moving into the early stages of commercialization, where does the pipeline stand today? And are you continuing to see similar growth as opportunities convert into commercial programs? Thanks for the question, Hilary, yes. In our pipeline measurement mechanism, once somebody moves to commercialization, it comes the dollar denomination for that whole program moves out of the pipeline into rollout. That's the way we measure it, which means that the dollar domination for the rest of the pipeline that is not there yet, clearly if it's a very big one, goes down slightly. But the number of customers that we have in pipeline has actually gone up since that time as well, Hilar. Our next question comes from the line of George Staffos with Bank of America. Please proceed with your question. George Staffo, Bank of American Banking, Hi, everyone. Thanks for taking the follow-on. I just wanted to confirm with Intelligent Labels that the large retail customer that you were piloting, the largest, that the rollout is now, as you put it, is taking maybe a little bit more time and going into 27, but nonetheless, you still feel affirmed that the growth year-on-year in IL will be roughly double digits, and also along the lines of intelligent value-added, high value-added within solutions. Can you talk about how important some of the programs that retailers are trialing in terms of specific individual pricing strategies are to Vescom's growth longer term and what you're seeing in termsof, you know, retailer willingness to pursue these programs or maybe some hesitancy that's been coming out in some of the trade press recently. Thanks, guys, and good luck in the quarter. Thanks, George. Yes, is the short answer to your question on the Walmart account specifically. We've seen timing move just slightly and we're going to see the ramp really starting in the second, sorry, in 2027. And the teams are working very closely on kind of what those commercialization milestones look like, which supported by the additional third growth that we have and the amount of pilots and trials, I feel very confident in what we're going to seek come through from food next year to support that double-digit growth that we talked about as well, George. As it relates to kind of Vescom specifically, I think if you recall at the investor showcase day that we did recently, you know, one of the growth drivers that we're seeing for Veskom at the moment has been the lean forward that we've been able to get out of our new software solution that we have with them. And in that regard, the stalling software, which as if you record, basically takes all sorts the data through a data composition engine and basically puts it out to either an ESL or an analog label overall. And part of that new software as a service role that is actually now commencing with a very significant U.S. grocery retailer as well. So we feel good about that. Typically, the margins that we see in those businesses are at a premium and they're more software related and they're able to resolve significant issues. At the moment, I don't hear, George, that there are retailers considering any programs that are driving automation and efficiency in store to be reduced. What we've seen actually is the opposite of that. We've seen more interest in how some of the solutions that we provide or other solutions in the market are going to be able to be accelerated, just given where the macro environment is at the moment as well. Our next question comes from the line of John Dunnigan with Jefferies. Please proceed with your question. Thank you, guys, appreciate you taking the follow-up. I just wanted to go back to one of your major chip suppliers and some of their comments. They talked about maybe having some shipping constraints and backlogs for some of our customers that have extended into 1Q27. Just wondering if you've seen any kind of bottlenecking issues, and maybe that's what's caused some of the push out in IL. And then if you could just talk briefly on the lowered capex guide, you know, what drove that and if that delta is being pushed into 2027. Thank you. John, I'm not going to comment on an individual, you know, partner supplier's outlook, but what I will say is we're not seeing any bottlenecks ourselves. One of the great strengths that we have as a business being the majority provider in world is that we're able to balance supply and demand in a very effective way. It's the reason why many of these programs have historically started with us as well. And we continue to invest ourselves in our capital efficiency of our assets as well, we're continuing to see more productive output. And part of that is to make sure that when there are surges, not only do we have availability of raw materials, which we have, but also that we are able to meet those shorter-term demands. And we're going to continue to do that because we believe that as leaders in activating these new segments, we have to be prepared should they move at any one point in time. Yeah, John, on your second question, I wouldn't say there's any, you know, one big reason CapEx is a bit lower. I think it's really just largely timing of projects. And when we look at this year, we've had quite a bit of, because of the stocking cycle that happened in the first half, particularly Q2, and destocking that we're seeing now, our teams have been pretty focused on managing those swings in volume. So, when we look at, you know, with the materials group from Q2 to Q3, roughly 10-point swing in volumes from one quarter to the next. So, our team has been focused on management of those swings within the supply chain, and that's likely pushed some of the timing of projects back a little bit. But no major changes in our ongoing views on CapEx and where we're making our investments, and we're going to continue to invest for growth and continue to invest for productivity. Our last question comes from the line of John McNulty with BMO Capital Markets. Please proceed with your question. Yeah, thanks for taking my follow-up. And just wanted to drill down into the free cash generation just maybe a little bit more. It looks like year-to-date, you're actually above last year's total. And I know normally your 4Q tends to be one of, if not the biggest, cash-generating quarters. So I guess anything odd about the cadence this year, the strength that you saw in the 3Q results, or should we just assume that, look, you know, you're executing well, you're tightening things up, and the cash flow should continue to kind of come in at the normal kind of cadence? Yeah, thanks, John. So to your point, I mean, I think we are executing well across the business. We've talked, I think, a few quarters ago about our focus on getting working capital productivity, and our teams have been doing a good job there. Particularly, our inventory turns have improved as we move throughout the year. So we are driving and delivering on that working capital productivity we were targeting, and that's one big driver of it. I would say from a year-to-date perspective, one of the shifts is that I've talked about the headwind we have from a cost perspective on incentive compensation year over year. We also then had less cash payouts in the first quarter of this year from an incentive compensation perspective. So from a cash flow perspective in this year related to last year's incentive comp accrual. So I think that's one timing factor. But otherwise, we would expect to continue to deliver above 100% conversion for 2026. Mr. Gilchrist, there are no further questions at this time. I will now turn the call back to you for any closing remarks. Thank you, Chase. On behalf of everyone at Avery Dennison, I want to thank you for joining today's call and for your continued interest in our company. As always, we're happy to address any follow-up questions you may have. Thank you again, and this concludes today's conference call. Ladies and gentlemen, that does conclude the conference call for today. We thank you your participation and ask that you please disconnect your line. Thank you.