Ladies and gentlemen, thank you for standing by. During the presentation, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach the operator, please press star zero. Welcome to Avery Dennison's Earnings conference call for the fourth quarter and full year ended on January 1, 2022. This call is being recorded and will be available for replay from noon Pacific Time today through midnight Pacific Time, February 5. To access the replay, please dial 800-633-8284 or 1-402-977-9140 for international callers. The conference ID is 21997964. I'd now like to turn the call over to John M. Eble, Avery Dennison's Head of Investor Relations. Please go ahead. Thank you, Tina. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified, and reconciled with GAAP on Schedules A.4 to A.10 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 Mitchell R. Butier, Chairman, President, and Chief Executive Officer, and Gregory S. Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Mitch. Thanks, John, and good day, everyone. We're pleased to report our 10th consecutive year of strong top and bottom line growth. Our Label and Graphic Materials business delivered strong performance in the year of significant raw material inflation and constrained supply. Retail Branding and Information Solutions posted both strong top-line growth and significant margin expansion. Industrial and Healthcare Materials made solid progress. Importantly, our Intelligent Labels platform continues to deliver significant growth and increasing potential. In addition to great results for the year, 2021 marked an important milestone for the company as a final year of measurement for the five-year financial targets we communicated in early 2017. This is the third long-term performance cycle we've completed since first introducing this discipline back in 2012, and I'm pleased to report that we again achieved our company goals. Our consistent performance over the years reflects the resilience of our industry-leading market positions, the strategic foundations we've laid, and our agile and talented workforce. Our playbook is working extremely well as we continue to focus on five overarching strategic pillars, driving outsized growth in high value categories, growing profitably in our base businesses, focusing relentlessly on productivity, effectively allocating capital, and leading in an environmentally and socially responsible manner. Over the last five years, we achieved, exceeded even, our long-term company-wide goals set in early 2017, including delivering an EPS CAGR of 17% and growing the company to $8.4 billion in revenue. There were many important milestones achieved over this time horizon. One standout, of course, is Intelligent Labels, now a $700 million platform. This business tripled in size over the last five years, growing 20% annually on an organic basis. The strong growth over this time horizon was driven primarily by apparel, as we continued to drive further adoption of the technology and expand programs with major customers in this key end market. While we continue to expect apparel to be the key growth driver in the coming few years, we see even greater opportunity over the long run in other key untapped markets. For example, in the food segment, three quick service restaurants after successful pilots are in the early stages of rolling out RFID to improve supply chain traceability and inventory accuracy. In logistics, we continue to work with shipping and logistics players, seeking further automation to drive speed and productivity. As a leader in ultra-high frequency RFID, we are positioned extremely well to not only capture these new opportunities but to create them. To that end, we are continuing to invest in developing new applications and markets, adding new technologies, both physical and digital, increasing our manufacturing capacity, and expanding our team, the best, most experienced in the space. The momentum in Intelligent Labels, where we continue to expect long-term growth of 15%-20% annually, is a great example of the progress we continue to make. It is only one example of many across the portfolio. Over the last 5 years, we've made solid progress in achieving the objectives in IHM, great progress in LGM, and truly remarkable progress in RBIS. We are focused on creating exceptional value for all of our stakeholders across the entire company. Now, looking specifically at 2021, the year was no different as we made solid progress on our strategic pillars while posting impressive results. We delivered EPS of $8.91 for the year, up 25% from 2020 and 35% from 2019 levels. We grew the top line by roughly 19% on a constant currency basis and 16% organically. All three segments delivered strong results relative to both 2020 and 2019, with solid growth in our base businesses and continued above average volume growth from high value categories. These strong results come at a time of continued increasing challenges. The ramping up of COVID infections in many countries, continued supply chain constraints, and additional inflationary pressures are taxing the industry, our customers, and our teams. The biggest challenges are now in LGM North America and Europe, where we are seeing both increasing constraints on the availability of raw materials and additional inflationary pressure. The team has continued to find ways to manage these compounding challenges and deliver impressive results over the last couple of years, and we are confident we will do so again in 2022. Now a brief summary of the year by segment. Label and Graphic Materials delivered another year of strong margins and exceptionally strong top-line growth, reflecting above average volume growth as well as pricing. Throughout the year, orders remained elevated. This was driven by continued strong demand for consumer packaged goods and e-commerce trends, as well as, to a lesser extent, we believe inventory building downstream from us given the supply chain challenges and significant inflationary pressures. We experienced raw material constraints across many categories throughout the year. Currently, we are seeing some easing of constraints in chemicals and resins, but increasing constraints for paper and transportation. We exited the year with annualized inflation of more than $600 million, a nearly 20% increase in our materials businesses alone as the cost of raw materials and freight continued to rise. Given the magnitude of this inflation and the lag in the timing of our price increases, margins moderated in the back half of the year for this business. While we are experiencing even more inflation as we start this year, particularly in paper, we expect to offset the higher costs over the cycle. We remain confident in our ability to continue driving GDP plus growth in this high return business. Retail Branding and Information Solutions continues to deliver impressive results, with margins expanding to another record on significant revenue growth for the year, driven by strength in both high-value categories as well as the base business. As I mentioned earlier, momentum in our Intelligent Labels platform continues as sales grew roughly 30% on an organic basis compared to 2020 and roughly 40% compared to 2019. Our recent Vestcom acquisition is not only achieving its performance goals, but also showing positive early signs in providing additional channel access to Intelligent Labels. In the Industrial and Healthcare Materials segment, sales rebounded versus prior year, well above 2019 levels, and operating income grew significantly. We've made solid progress in this group of the businesses over the last few years. However, the challenges in some of its end markets, principally automotive, have hindered our ability to achieve our ambitions. Despite these challenges, we are focused on achieving the long-term potential of this group. Now, as for capital allocation, we continue to execute a balanced strategy. We have increased our pace of growth and capability building investments, both organically and through M&A. Over the last couple of years, we've completed several acquisitions, expanded our venture program, and started ramping up the pace of organic investments, which we recently began further accelerating. The overriding focus of our M&A venture program and organic investments is to further increase our presence in high-value categories, increase our pace of innovation, and advance our sustainability initiatives. We intend to continue this path all while maintaining a strong balance sheet and returning cash to shareholders. With these great results in mind, it's important to highlight that our overriding focus is on the long-term success of all of our stakeholders, and we have a clear set of strategic objectives and strategies focused on their mutual success. We're making great progress towards our 2025 and 2030 sustainability goals and are on track to deliver our 2025 financial objectives. As you know, the overarching objective of our long-term financial targets is to deliver GDP plus growth and top quartile returns on capital. This is a recipe for superior value creation over the long term, and we are confident in our ability to continue doing so. After delivering a 20% increase in EPS in 2021 ex-currency, we are again targeting double-digit EPS growth in 2022. While 2022 is already shaping up to be just as challenging as the last couple of years, we are prepared for it commercially, operationally, and financially. Once again, I want to thank our entire team for their tireless efforts to keep one another safe while delivering for all of our stakeholders. This has been a particularly taxing time for our teams, and we are all grateful for their dedication, agility, and focus. Thank you. Now I'll hand the call over to Greg. All right, thanks, Mitch, and hello, everybody. I'll first provide some additional color on our performance against our long-term targets, and then walk you through fourth quarter performance and our outlook for 2022. As Mitch said, 2021 was an important milestone for the company as the final year for the five-year financial targets we communicated in early 2017. As you noted, we again achieved our company-wide targets. The consistent execution of our key strategies enables us to continue delivering against our targets with an overriding focus on delivering GDP plus growth and top quartile returns on capital over the long term. Over the five-year period, sales growth on a constant currency basis was 6.6% annually, with an organic growth of 4.6% annually, both above our target. Our organic growth was roughly two times global GDP for the same period. Operating margin was almost two full points above our target of 11%. Additionally, our EBITDA margin was above 15.6% in 2021, up almost three points compared to 2016. Adjusted EPS grew more than 17% annually over the past five years, significantly surpassing our target of 10%. As always, our focus continues to be the optimal balance of growth, margins, and capital efficiency to drive incremental EVA over the long term. To that point, our return on total capital performance continues to be in the top quartile relative to our capital market peers, coming in at over 18% in 2021, again above our target. Our balance sheet remains strong with our net debt to EBITDA ratio below the low end of our target range, giving us ample capacity to continue executing our strategies. Looking at the segments, both LGM and RBIS met or exceeded their organic growth targets and delivered margins above the high end of their target range. We've made significant progress in IHM, despite being short of our targets there. In March of last year, we also introduced a new set of long-term targets for the company through 2025, designed to continue delivering superior value creation over the long term. One year into this cycle, we are on track to achieve these goals as well. Given the diversity of our end markets, our strong competitive advantages, and resilience as an organization to adjust course when needed, we're confident in our ability to continue delivering through a wide range of business cycles. Now let me provide some color on the fourth quarter. We delivered another strong quarter with adjusted earnings per share of $2.13, slightly above our expectation from a quarter ago, reflecting a tax benefit of a few cents and operational performance right in line with our midpoint. Earnings were down 6% versus last year, given the extra week in the prior year, and up 23% compared to 2019, driven by significant revenue growth and solid margins. As expected, the impact of the extra week and belt-tightening in Q4 of 2020 created tough comps. That, combined with the increased pace of investments and the net headwind from pricing and inflation in 2021, decreased margins in the fourth quarter. Sales were up 19% ex-currency and 13% on an organic basis compared to prior year, driven by higher prices and strong volume. As Mitch mentioned, our input costs have continued to rise and supply chains remain tight. We continue to address the cost increases through a combination of product reengineering and pricing, and have announced additional price increases on most of our businesses and regions around the world. Despite the impact of inflation and supply chain disruptions, we delivered a strong adjusted EBITDA margin of 14.9%, down compared to prior year and up 40 basis points compared to 2019. Turning to cash generation and allocation. For the year, we generated $798 million of free cash flow, up 46% compared to prior year and up 56% compared to 2019. We invested $272 million in fixed capital and information technology as we continued to accelerate investment in our high-value categories, particularly RFID. As mentioned previously, our balance sheet remains strong with a net debt to adjusted EBITDA ratio at year-end of 2.2. Our current leverage position gives us ample capacity to continue investing organically as well as through strategic acquisitions while continuing to return cash to shareholders in a disciplined way. During the year, we deployed $1.5 billion for acquisitions as well as returned $400 million to shareholders through the combination of share repurchases and a growing dividend. Now let me turn to the segment results for the quarter. Label and Graphic Materials sales were up 12% ex-currency and 11% on an organic basis, driven by a high single-digit impact from price and higher volume and mix. Growth remained strong in both the high-value categories and the base business, with both label and packaging materials and Graphics and Reflectives sales up low double digits on an organic basis. Looking at the segment's organic sales growth in the quarter by region, North America sales were up mid-teens and Western Europe sales were up high single digits, despite raw material, labor, and freight availability challenges that have continued to cause extended lead times for both of these regions. Overall, emerging market sales were up roughly 10% in the quarter, with India and China both up double digits. While LGM's profitability remains strong, adjusted EBITDA margin decreased from last year to 14.5%, as the impact of raising prices reduced the margin by roughly 140 basis points. While the remainder of the decline coming from the impact of the extra week last year and the price cost lag mentioned previously. Shifting now to Retail Branding and Information Solutions. RBIS sales were up 39% ex-currency and 20% on an organic basis as growth remained strong in both the high-value categories and the base business. The apparel business saw particular strength in the performance and premium channels and continued double-digit growth in external embellishments. For the quarter, Intelligent Labels sales were up more than 20% organically. Adjusted EBITDA margin for the segment remained strong at 19%, with the positive benefits from acquisitions and higher volume were offset by growth investments, higher employee-related costs, and a headwind from prior year temporary cost reduction actions. Turning to the Industrial and Healthcare Materials segment, sales increased 12% ex-currency and 10% on an organic basis. Adjusted EBITDA margin decreased to 12.9%, which similar to LGM, was driven by the impact of raising prices, the impact of the extra week last year, and by the price cost timing lag. Now, shifting to our outlook for 2022, we anticipate adjusted earnings per share to be in the range of $9.35-$9.75. We've outlined some of the key contributing factors to this guidance on slide 19 of our supplemental presentation materials. We estimate that organic sales growth will be 8%-11%, reflecting mid to high single digits from higher prices and low to mid-single digit volume growth, coming off very strong volume growth across the segments in 2021. Based on current rates, currency translation is a roughly three-point headwind to reported sales growth, with an estimated $35 million headwind to operating income. This is roughly $15 million worse than we would have expected a quarter ago, given recent changes in exchange rates. On inflation, our outlook assumes a low to mid-teens rate for the full year, with the largest impacts coming in the first half. We anticipate spending up to $350 million in fixed capital and IT projects as we continue to increase our pace of investment, adding capabilities and new capacity, particularly in key strategic platforms. We are also investing roughly $35 million in operating expense, principally in Intelligent Labels, digital capabilities, and sustainability. We expect our tax rate will be in the mid-20s% for the full year based on current regulations as well. Lastly, we anticipate earnings growth in 2022 will be back half-weighted due to tough comps in the first part of the year, particularly Q1, including the timing of currency headwinds, the price cost lag, and the increasing pace of investments. In summary, through this dynamic environment, we are pleased with the strategic and financial progress we've made against our long-term goals in 2021. We are confident in our ability to continue to deliver exceptional value through our strategies for long-term profitable growth and disciplined capital allocation. Now we'll open up the call for your questions. Thank you. Ladies and gentlemen, if you would like to register a question, please press one followed by four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press one followed by three. If you're using a speakerphone, please lift your handset before entering your request. To accommodate all participants, we ask that you please limit yourself to one question and one follow-up, and then return to the queue if you have additional questions. Our first question comes from Ghansham Panjabi of Baird. Please go ahead. Thank you. Hi, everybody. Hope everybody's doing well. Doing very well, Ghansham. Great to hear your voice, Mitch. Can you start off by giving us more color on the raw material constraints that you referenced? You know, I think you said it was petrochemicals at one point, and now it's paper and maybe a little bit more on the shipping side. How much do you estimate was the impact on Q4 volumes? What are you embedding for the first quarter of this year? Also if you could break out the volume component, specifically adjusting for the extra week a year ago for the fourth quarter. I'm sorry if I missed that. Yeah. Ghansham, thanks for the question. I'll try to cover all those pieces. First of all, I guess as you said earlier in the year, we had more of a challenge in early mid 2021 from petrochemical supply constraints. I think as we move through the third or the fourth quarter and into the first quarter here in 2022, we've seen more of the constraints coming from the paper side. It's a little bit the same on the inflation perspective as well. We've seen a little bit of easing in petrochemicals in some of the regions, but continue to see some challenges on paper. Particularly in Europe, we've seen more of the constraints, I think, in the fourth quarter on paper. Some constraints in North America, but a little bit more in Europe, even in Q4. We're continuing to manage through that across the businesses, but that's been a little bit of a trend as I look across the last number of quarters. Just to build on that, while the supply chain constraints and related inflation tend to be concentrated in specific regions, I should say. It obviously has a global impact. Just like the Texas storm last March had an impact most on North America, there was a ripple effect across the regions. Right now, the paper inflation we're seeing is broad-based, but principally Europe and that's obviously having ripple effects elsewhere as well, both on availability as well as inflation. Then, Ghansham, I think your other question was on the extra week. The extra week impact is not in our organic sales number that we're quoting. On a reported sales, it was about an 8.5% decline year-over-year from a sales perspective. Okay. On RBIS, if I remember correctly, there was you know, apparel production issues because of lockdowns in Vietnam that impacted perhaps Q3. Did that boost Q4 in any material way? It seems to be quite an acceleration in volumes for that segment after adjusting for the extra week. Thanks. A bit, but if you recall, we were able to offset most of the shortfall in Southeast Asia as far as just the lockdowns that were occurring there by sourcing that volume from elsewhere, principally China. There was a bit of a carryover into Q4, so you should be looking at the second half a little bit more on an averaging basis for that business. Overall, demand is strong in our business and in apparel specifically, and then broadly, you know, Intelligent Labels and external embellishments, which continue to show great potential and performance. Overall, the demand outlook within RBIS is strong. Their issue right now is just replenishing inventories at the end market level. There's a little bit of that, Ghansham, but most of this you should look at as a strong demand environment thus far. Clearly, there's a lot of questions about what things will look like as we go through 2022. A lot of shifting forecasts out there and so forth, but right now what we've experienced is a strong demand environment in RBIS. Okay. Thanks for that, Mitch. Thank you. The next question comes from George Leon Staphos of Bank of America. Please go ahead. Hi, everyone. Good morning, guys. Congratulations on the year, and thanks for all the details. First question is gonna be on LGM. To the extent that you're starting to see more inflation in paper, and you know, it sounds like in particular in Europe, does that change at all your positioning from a competitive standpoint? You know, traditionally, Avery has had my sense, more strength when it came to film-based and also in terms of sourcing feedstocks on the PET side. But on paper, you obviously don't have quite the same advantages. Does that put you at a little bit more of a disadvantage than if it was the inflation coming at the petrochemical side? Why? Why not? Talk about your ability to raise pricing to offset inflation on paper relative to if it was coming from the chemical side. Yeah. I'll talk about the second question first, George. We've been raising prices across all the categories here multiple times and across all the regions. We've been able to pass along the price increase to the extent we need them, to the extent the productivity and product re-engineering can't cover the rising inflation. If we look over past cycles and this cycle, we've been pretty much at that constant kind of few months lag by category by category, region by region. That is very consistent, and our ability to pass through remains intact. As far as the competitiveness, as far as we do have a bit higher share in films in a number of regions and a little bit less in paper. We're still the industry leader overall across all categories. That is something that we look to be able to leverage our size and purchasing capability to continue to be sure that we can maintain supply and so forth. Now, particularly in Europe, there's a few unique dynamics going on there, where there is further constraint around paper supplies, which I think are hindering industry at large and, you know, clearly raise a question about when those constraints release in Europe, when we'll be able to have the normal supply chain, if you will, on paper goods. I don't think that's as much a competitive issue as it is just a reality of the marketplace. I say that, and I think it's important to put it in context. If you look over the last 12 months, the magnitude of supply chain constraints we've had, again, starting with what happened in the U.S. last year with the whole petrochemical industry on the Gulf Coast kind of being shut down and the ripple effects that had through supply chains. The fact that Southeast Asia and parts of South Asia in general were locked down in the third quarter of last year in RBIS. Now this is the challenge of the quarter that we're working through busily to make sure we continue to meet our customers' needs and our end market needs. Mitch, thanks for that. Just a point of clarification on the answer, then my second question. Is the supply chain issue in Europe largely being triggered by some of the strikes that are occurring at the finished paper mills from what you've gathered, or are there other things that are more important? The second question, you know, you talk about investing an incremental $35 million, you know, in Intelligent Labels, digital capabilities, and sustainability. Is that capital cost, will there be some, or is that mostly P&L effect? Independent of where it shows up on your financial statements, beyond sort of the description you have here, what will Avery get in terms of incremental growth and capabilities in this key category for you going forward in 2023 and beyond from that investment? Thank you. Sure. Two very different questions there. I guess I'll start with the second one. $35 million investment, that's essentially all hitting the P&L, George. We lay out CapEx investments and then the P&L investments, and by and large, those are operating expense investments. Those are all around market development, new innovation, sustainability, all the focus we've highlighted. This is a ramp-up of the level of investment we've had. We've been investing in the future growth of the business for a number of years. We stepped it up beginning about three or four years ago. We further accelerated it. Just as we had commented on, a year ago that we would be increasing our pace, throughout 2021, and we're doing so again here in 2022. The returns on this investment are quite clearly, you're seeing the returns of all of our investments in the Intelligent Labels space for the investments we made a few years ago. It's just a sign of confidence on all the increasing interactions we're having with various end markets and see tremendous potential for Intelligent Labels and more. As far as when, these are investments more for the 2023 horizon and beyond. That's where the investments are coming through. Specifically regarding your question about Europe, I mean, there's a lot of factors, but we're not gonna get into any specifics about what might be happening with other companies and so forth. We're we see what you see on that front. Very good. Thank you. Thank you. The next question comes from John McNulty, BMO. Please go ahead. Yeah, good afternoon, and thanks for taking my question. I guess the first one would just be a follow-on to the $35 million operating expense call-out that you had around, you know, the smart or Intelligent Labels and sustainability. I guess you've never really specifically called out a number like that before. I guess the question would be, you know, is it because something's really changed dramatically versus kind of the normal in terms of investment requirements? Or is it more a function of the revenue opportunity that looks like it's coming in over the next couple of years is just that much bigger, so it's worthy of kind of calling out at this point? I guess, how would you articulate that? I think one, it's just the number is larger, and it's been growing, and part of it's commensurate with the opportunities that we see. It's an increased pace from what we had in 2021, which was roughly around $25 million or so. That was an incremental increase of about $10 million from the year before that. It's just seeding all these opportunities that we see in Intelligent Labels, but also around increasing our digital capabilities and so forth. If you look at these incremental investments that we've been making over time, we've been funding them through just running the base business. If you look at our overall level of SG&A and the gearing around that and so forth and funding it through productivity, and this is something that is part of our core strategy. If you look at our five strategic pillars, they're all intertwined. The third pillar is around a relentless focus on productivity, and that's so that we can accelerate our investment in high-value categories and ensure we continue to invest in productivity to make sure the base is profitably growing as well as expanding margins. That's exactly what we're doing. Got it. Maybe just a follow-up. Can you help us to understand the timing on the payback on an investment like this? Is it, you know, is it six months? Is it two years? Is it five years? I guess, is there a way for us to think about it just in terms of the spend and then the timing of the return on that? Yes. It is a wide array of investments here. It's the 18 months to 4.5 years is the right time horizon to be thinking about. Some are seeding completely new markets. Others are basically adding new capabilities in a new region for a program or a space that we know works in one region, we're expanding in another, and we know very much what the commercialization life cycle is there. Thank you. The next question comes from Anthony Pettinari of Citi. Please go ahead. Good morning. Given the price increases that you've announced and the cost inflation environment continuing in 1Q, you know, based on what you're seeing right now, do you have a sense of when you might be fully caught up on costs or price cost neutral? What does that lag sort of look like versus previous cycles, you know, understanding that we're sort of in an unprecedented situation right now on inflation? Yeah, Anthony. I guess starting with the lag, I think we've been talking about for a few quarters since we saw the inflation really start to pick up, you know, early to mid last year. We still expect that lag to be in the quarter to a little more than a quarter time period. I think as we moved through across the last few quarters at the end of Q2, we had hoped at that point we might be able to cover it by the end of or by the end of 2021. We continued to see increasing pace of inflation in Q4, though, as we talked about last quarter, and that came in probably around mid-single digit sequentially Q3 to Q4. We're continuing to see increasing inflation Q4 to Q1, also around the mid-single digit level. Again, a little bit of a shift towards paper now in Q1 versus what it was last year. We've continued to increase prices as we moved across the course of last year. We've continued to announce new increases that took effect late last year or very early this year. As soon as we see inflation start to stabilize, we'd still say it's a quarter or so for us to be able to close that gap fully. Yeah. Just to build on that, I mean, we've, you know, we kept predicting it was a few months out when we would be able to narrow and close that gap. But, you know, the forecast that the indices provide, as well as our own outlooks, you know, consistently there's been more inflation continuing longer than we had anticipated. Whatever your own assumption is around when inflation will abate, assume a few months, a quarter after that is when we would catch up. Okay, that's helpful. You indicated, you know, EPS growth for the year would be back half loaded. You know, is it fair to say that 1Q EPS might be down year-over-year, and then in the second half you accelerate to maybe double digit year-over-year growth? Or is there anything more you can say about the potential cadence of earnings growth as you go through the four quarters of the year? Yeah. Certainly, as you said, Anthony, Q1 has a bit more challenge. You know, last year inflation was really just starting in the first quarter. We just talked about a second ago, we still have a bit of a price inflation gap here in Q1 versus prior year. We also have the biggest currency impact on the year will be in the first quarter. That was the strongest currency rates last year as well. I think we said about $25 million of the currency headwind is in the first half, and the bulk of that is in Q1 also. At the same time as we talked about a minute ago as well, we've been increasing the pace of our investments since the first quarter of last year. When we look at those things, we'll have some volume benefits, of course, year-over-year in Q1 with the continued growth of the business. Get a bit of a price inflation gap still in the first quarter, and then the currency headwind and the continued investment. Those are the kind of big buckets I'd think about in the Q1 bridge versus last year. The next question comes from Joshua Spector of UBS. Please go ahead. Yeah, hi. Thanks for taking my question. Just a similar question along the prior lines around investments that you're making and specifically on CapEx. That's a pretty big step up that you're pointing towards this year. Curious if there's anything in terms of one-time maybe major investments the next couple of years to think about, or if that's a higher level of organic investment we should be considering longer term for Avery. Yeah. The investments are essentially just to fund our growth and invest for the growth. We're, you know, when you keep compounding the level of growth and earnings we've been posting, you're gonna have CapEx growing with that. Now, as far as larger investments, specifically the biggest area of investments or capacity for Intelligent Labels as you would expect. This is, you know, there's some elements that come in large chunky bits such as adding buildings and so forth. Then there's adding the equipment which is more scalable along the way. We're looking at adding to our actual manufacturing footprint in 2022 in a couple of locations. We just added Brazil recently, an operation there, build out, and we're looking to further expand in each region of the world, our physical footprint as well as the equipment capacity. That's the biggest thing that maybe it's a step function in 2022, and we'll bleed into 2023, for this investment horizon. Okay, that's helpful. I'd just be curious if you would comment if you're, you know, if you're seeing any production impacts now within China or if your guidance is assuming any further disruption either within China or the rest of Asia that you're baking into guidance. Kind of along with the CapEx question, are you investing in additional supply sources to deal with, you know, I guess, further impacts or potential disruptions in the future? Yeah. The first question around China. All of our plants are operational. We're not having any lockdowns or experiencing any of those at the moment. No, the things we talked about a quarter ago were largely focused in South Asia, Southeast Asia specifically. Those are behind us. Generally in what we're seeing even in China where there are stricter protocols tends to be more rather than entire industrial zones and so forth. It's kind of company by company or really even plant by plant when they do execute something. We're not getting any collateral impacts, if you will, from other things that may be happening. It's not as I'd say as stringent as what we maybe saw just nine months ago within that country. As far as in our guidance, you know, the way we look at it is even if there's a lockdown for a couple of weeks or something that impacts a plant, that can have an impact on revenue immediately, but it doesn't affect end demand. We still see that any inventory in the system will be used up for a period of time, then we'll go through overtime and extra shifts to catch up and keep the supply chains running. That's not a real big impact overall on our guidance. The next question comes from Jeffrey Zekauskas of JP Morgan. Please go ahead. Thanks. Thanks very much. In the quarter, what was the amount of raw materials that you couldn't recover by price? Was it about $40 million? Is that number getting bigger in the first quarter or is it getting smaller as best as you can tell? Yeah, I don't know. I mean, we didn't quote specifically what the gap was. We still had a gap in Q4 when we look versus prior year. I guess if I look across the last few quarters, as we said, we had about 20% inflation in the fourth quarter. From a pricing perspective, we talked last quarter, we had about five points of price in Q3. As we said here in Q4, we had in LGM at least high single or very high single digit inflation in the fourth quarter. So we're starting to get closer to cover that, but we still do have a gap, year-over-year, and we expect to have a little bit of gap in Q1 as we talked about earlier as well. Is the gap getting bigger or is it getting smaller? For my second question, in your slides for Intelligent Labels, you've got a split now between apparel and non-apparel at 25%-75%. What was that split a year ago? Is the change in that split due to the Vestcom acquisition, whatever the change is? Are the growth rates of the apparel and the non-apparel piece the same? Is one's growing faster than another? What's happening there? Sure. Jeff, just a quick answer to your first question. Thank you. Generally the pace is roughly the same. The pace of inflation is higher, the pace of price increases are the same. As far as the dollar gap, roughly the same. As far as Intelligent Labels, a 75%-25% split. Now that's not from the Vestcom acquisition as far as any shift. We did have a shift. We were a 90%-10% split pre the Smartrac acquisition. Then Smartrac had a bigger presence outside of apparel. That's what moved with the biggest single full step function shift in the mix between those two. Over time, yes, that has, and we expect to continue to have the apparel to be a bit smaller percentage of a much larger pie. That's what we are seeing, and that's what you should expect to see. Now, we're not going to share every single point differential and so forth for strategic reasons. We will show more, the large proportionality of the portfolio. The last part of your question, yes, you would expect Intelligent Labels for food and logistics to be growing faster than what we're seeing for apparel. Apparel, as I said, in dollar terms, will continue to be the majority of the growth for the coming few years. On percentage basis, the other categories will be growing faster. On a dollar basis, we expect that to be the biggest growth driver post the 2025 horizon. That's where we're seeing multiple horizons of growth and opportunity here, seeing a lot of great interest, potential, and performance in apparel, adjacent to apparel, so apparel customers moving into adjacent categories such as home goods and so forth. Obviously in food, as I'd shared the story, and logistics and elsewhere. The next question comes from Adam Josephson, KeyBanc Capital Markets. Please go ahead. Mitch, Greg, and John, good morning. Thanks for taking my questions. Mitch, you described almost this rolling supply chain crisis earlier, first in the U.S. and then in Southeast Asia and now in Europe. Just wondering what exactly is embedded in your guidance as far as when you expect this European situation to resolve itself? I know the strikes are supposed to go on for another month or so, but it's been one thing after another. I'm just wondering how you're thinking about the situation and how much longer lasting you expect it to be and why. Well, we're not gonna predict specifically when any specific matter ends. Even the supply chain constraints around, you know, if you look at what happened with the Texas storm, the limitations and constraints on supply from just that event didn't end until sometime in the fourth quarter. It's just leveraging global supply networks to be able to manage around all of that. If you look specifically at this paper, our range of guidance assumes that this is, we're gonna continue to have constraints in Q1 and a little bit going overall in H1. That's what our range of guidance assumes overall. If you look at our range of guidance from what Greg had shared around volume growth of low- to mid-single digits, and you consider how much Intelligent Labels is adding, basically our volume growth assumption for right now for LGM is low single digits at the moment. We think that part of that is going to be just because of some inventory that is in the system as well as the Q1 just where we are both from a constraints, but also just tough comps situation overall. If you look at the volumes of where we were the past couple of years in Q1, they were quite high. From that perspective, that's built in as well. Still expect LGM to be GDP plus overall. The whole company obviously will be GDP plus, and that's what our expectations are. The biggest questions are really, what are you, what are they expecting around the macro? I appreciate that. Just one on that LGM volume growth, you mentioned low single-digit%. Can you just compare that to what you've seen thus far? Also just give us some flavor of what you're expecting by region along those lines this year. Obviously, China's had its difficulties. Brazil's having its difficulties. Europe's got obviously an energy crisis it's dealing with. Can you just talk about what you're seeing geographically in that, in the context of that low single-digit% expectation for LGM? Yeah. As far as what we're expecting, what we're seeing already, you're asking? Yeah. I mean, the order patterns. The start of the year, the order patterns are not very meaningful because of the timing of Lunar New Year. A big portion of our growth is affected by that. That's something that doesn't make it very meaningful. If you look within what we're seeing in North America and Europe specifically, we basically are seeing high demand, high level of order patterns, and our actual output is roughly within that targeted range that we're talking about here. The next question comes from Paretosh Misra of Berenberg Capital Markets. Please go ahead. Thank you. Thanks for that slide nine, where you provided this engagement pie chart. Can you give us some sense as to how much this number of engagements increased versus, let's say, a year ago? Yeah. We're not quoting the number of engagements anymore, partially just because you've got very large engagements and smaller specialty engagements in there. It's more to show the magnitude of how the pipeline looks relative to our current revenue, and where you can see the increasing activity, great activity within apparel, continued pipeline there, as well as the broader pipeline activity going outside of apparel. Generally, we saw significant growth as we talked about in the pipeline overall, particularly in 2020 throughout the early stage of the pandemic and early 2021. We purposely shifted our focus to not feeding the pipeline as much as far as more so working through the pipeline. We've seen a significant shift of pipeline activity moving from business case into custom programs, moving into pilots and so forth. That is having the expected outcome overall of just things moving through the pipeline, which is why we're expecting the growth on percentage terms to continue to be bigger outside of apparel as compared to what it is in apparel, but still see significant dollar growth from apparel itself in 2022. Thanks for the color, Mitch. Just as a follow-up, sticking with RFID, just curious how you're managing the chip supply issues. Did you see much inflation in chip pricing last year? Yeah. Just as far as the supply chain, I mean, we're completely confident in our ability to hit the 15%-20% growth that we have targeted for long-term for this business in 2022. The high end of that could be specifically that we've secured the supply. From a demand side, we probably could even go a little bit more than that, but we are right now just real-time evaluating what the chip availability is through 2022. If you look at our own assessment and just broader assessments, the dynamics easing a bit, and I think we'll have a lot more insight here in the next three to six months. That is not a constraint to growth of hitting our 15%-20% goal. As far as some of the larger programs we're working on and so forth, those will probably have to be phased a little bit more in 2023, given the situation. Given our industry leadership position, we're working with all the key players throughout the supply chain on chips, and we are working with them to make sure there's ample supply for us as well as the industry at large. That's something that we are working through, and again, confident we'll hit our number this year and continue to see the 15%-20% growth over the long term. As far as pricing, yeah, there has been some inflation on chips as well, and we are also repricing our own RFID inlays outbound accordingly. The next question comes from Christopher Maich of Loop Capital Markets. Please go ahead. Thank you. My question's focused on the LGM business. First, there's been some consolidation in the pressure-sensitive label stock space recently. I'm just curious about your perception of that. Would the consolidation that's gone on there create a competitor that would, I guess, influence an otherwise benign competitive dynamic? The second one is just industry checks have suggested to me that the industry that's pretty tight in terms of meeting customer demand. One might even characterize maybe customers on allocation. Just curious if you would characterize it that way and if it's a dynamic that's only in North America, are you seeing it in other regions? Is it, would you say, if that is an accurate characterization, would you say it's more a function of these logistics and supply chain constraints or more a function of just, you know, kind of robust demand? There's a few in there, but thank you. Sure, Chris. Yeah. As far as the consolidation, I mean, there's been some consolidation over the last few years in a couple different places, whether it's in Europe or North America. We don't see a significant shift in the overall industry dynamics as a result of that, for your first question. As far as your industry checks about maybe some allocations, at the converter level and so forth, I mean, basically, yeah. Demand is high, and we expect demand. I mean, just the increased consumption of consumer packaged goods has increased quite significantly. We expect that to be an increased trend, that increased trend to continue. We've talked about the increase in e-commerce and just variable information labels. We see that as an acceleration of a long-term growth trend that has occurred over the last couple years and see that continue. Demand basically accelerated within a short period of time, and the industry at large is, you know, keeping pace with that. If you then add in the supply constraints, that limits supply a bit, but I think the industry and ourselves as well, I think you're talking about specifically North America, but have been able to manage through a lot of that. Those headlines create concerns, which then have people order more and order more than maybe they even need, which is why I commented that we believe that some of the growth could be from inventory building downstream from us. There seems, just as you know, we've got higher inventories just due to the constraints as well as inflationary pressures. People throughout the value chain tend to buy a little bit early just before a price increase and build some inventories. Then just the, I would say, panic ordering to make sure people are in the queue, 'cause I know that lead times for ourselves, and I've commented on this in previous quarters, as well as other players in the industry, are getting longer. They're placing their orders even longer as well. You see the industry responding in various ways, such as just saying, you know, the order patterns can't differ too much from your previous order patterns and so forth, just to make sure that we are appropriately managing demand. That's helpful. I appreciate it. It sounds like that particular dynamic is one that's concentrated in North America. North America and Europe. Okay. Got it. Thank you. The next question comes from the line of George Leon Staphos, Bank of America. Please go ahead. Thanks. Two quick follow-ons. Thanks for taking them, guys. You know, there have been some announcements recently in the trade press about some of the logistics and trade companies talking even more positively about RFID and its application to their business. I recognize you're probably seeing some benefits here. It's certainly a focus area for you. Can you stack rank aside from apparel the end markets in terms of the uptake, the growth, the pipeline as it's looking, you know, as we go out over the next four to five quarters, are you seeing a material pickup in the implementation in the pipeline in the trial of RFID and smart labels in freight and logistics? I had a quick nit type question on LGM. Yeah, we're actually seeing. I'd say that the momentum and energy is somewhat equal between food and logistics. Answering your question specifically around logistics, we are selling our solutions specifically in areas around hazardous materials, working with you know certain targeted areas for helping get through customs and so forth at the border. We are working with a number of logistics players, including some of the large ones about how to drive further automation and so forth across their network. There's quite a bit of activity. Often what happens, and so when I talked about the pipeline, you know, one of the steps in the pipeline is around custom solutions. That would be like dealing with the hazardous materials. That sounds worse than it is. It's batteries that you have to have certain protocols around. For how you handle batteries, you'll adopt within a specific category initially while piloting on a broader base and then eventually look to see how you adopt broader base. The pilots, I would say, are the whole pipeline at each stage is active, and we're currently working it in multiple geographies, by the way. This is a U.S., Europe, and China pipeline that we are currently working. Mitch, I want to say that I saw a comment from one of these companies suggesting that if they could, if it was possible, they would consider using smart labels and RFID on the majority of their parcels. Is that something that's being talked about? I wouldn't say uniformly, but increasingly, or is that more phantasmic at this stage and we're looking at five, 10 years there? Then just the follow-up question on LGM, kind of a nit question. When I look at the percentage of total that's high value this year for 21 versus last year, it ticked down just a little bit. Is that just the math of it? You know, you saw more pricing on your lower value-added items, hence they moved up to a greater degree, and so therefore, they're a higher percentage of the mix than they were last year. Is there something else going on in your mix of business that you need to correct? Thanks, guys, and good luck on the quarter. Yeah. As far as the logistics opportunity around Intelligent Labels and RFID, this is something that, I mean, if you think about a future, the question is, when does that materialize? It's around the big opportunity once you get past these specific niche programs like HAZMAT I mentioned earlier, is really across the entire network. If you think through, currently, you've got a lot of dissimilar packages, a high degree of in shape and size, obviously high degree of SKU complexity. Right now, they're doing it through scanning, visual scanning of barcodes. Some of that can be automated through conveyor belts, but a lot of it is also through handhelds and so forth and a lot of labor involved. As you look at the overall objectives of supply chains in general and the logistics providers, it's around speed and lower cost, higher volume, faster and lower cost. That's where technology is being looked to. Our technology solutions built around RFID are a key enabler of that. Those are very large unit programs. The question is, how do you ramp up towards that and so forth? We're engaging with, as you would expect, many players in the industry around this. Yeah, George, I think on your other question, I'd, you know, over time, we consistently continue to look at and refine our view of high volume base, and you look at things like specialty labels, products that start out as specialty grow over time, then move to the base. We continue to reevaluate that over time. Obviously, over the last couple of years, we've seen strong growth in kind of the base on consumer packaged goods and e-commerce driven growth as well. I think it's a combination of those things. At this time, I'd like to turn the call back over to Mr. Butier for any closing remarks. Please go ahead. All right. Well, thank you all for joining. Just want to reiterate, we remain confident that the consistent execution of our strategies will enable us to continue to meet our long-term goals and make progress each and every year along the way. I once again want to thank our entire team for their efforts in continuing to focus on the success of all of our stakeholders. Thank you very much. This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you, and have a good day.