Welcome to Avery Dennison's earnings conference call for the second quarter ended on June 29th, 2024. This call is being recorded and will be available for a replay after 4:00 P.M. Eastern Time today and until midnight Eastern Time, July 30th, 2024. To access the replay, please dial +1 800-770-2030 or +1 609-800-9909 for international callers. The conference ID number is 5855706. I'd now like to turn the call over to John Eble, Avery Dennison's Vice President of Finance and Investor Relations. Please go ahead, sir. Thank you, Angela. 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 from GAAP on schedules A-4 to A-9 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 Deon Stander, President and Chief Executive Officer, and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Deon. Thanks, John, and hello, everyone. We delivered another strong quarter with EPS of $2.42 in the second quarter, above our expectations, and are raising our full-year guidance. We now expect earnings of $9.30-$9.50 per share for the year, and are targeting roughly 20% earnings growth compared to prior year. Materials Group continued to demonstrate its resilience in the second quarter, again delivering significant volume and margin expansion as we lapped the impact of downstream inventory destocking last year and drive productivity across the business. Label volumes in Europe and Asia were above our expectations, while slightly below expectations for North America. Broadly, retail volumes remained soft relative to long-term trends as consumers continue to deal with the cumulative effects of high inflation, and we are not anticipating this to change in the second half of the year. Solutions Group delivered strong top-line growth in the second quarter, driven by both the base and high-value categories and expanded margins. The retail apparel channel was stronger than we expected. Despite retailers and brands remaining cautious in their near-term sourcing plans, most have now met their targeted inventory levels following more than a year of destocking, and volume has normalized quicker than we anticipated for the upcoming back-to-school season. Year-to-date, enterprise-wide Intelligent Labels grew mid to high teens. In the second quarter, strong growth in general retail and logistics continued, while apparel was also strong as customers normalized order volumes and new rollouts continued. For the year, we are now targeting to deliver more than 20% volume growth and mid-teens sales growth in our Intelligent Labels platform, driven by a rebound in apparel and adoption in new categories. We anticipate sales growth in the third quarter will be similar to the rate we delivered in the first half. As for the fourth quarter, while likely a record revenue quarter, we expect growth in the quarter will be lower than previously anticipated, primarily due to the timing of customer rollouts. As we have shared in the past, new customer rollouts can be uneven, particularly in new categories, as well as by comparison to initial volume builds for new program adoption in prior years. I have high conviction in the significant long-term growth of our Intelligent Labels platform as we connect physical items with digital identities. In the near term, we are focused on accelerating adoption in key verticals such as food and logistics. Overall, the ability of our solutions to help address inventory challenges such as labor efficiency, waste, transparency, and consumer connection in very large volume categories like logistics, retail, and food is increasingly resonating with customers. Key pilots and rollouts are delivering significant value and compelling proof points for broader segment adoption. We continue to invest to capture the significant opportunity here as we grow the size of the overall industry, further advancing our leadership position at the intersection of the physical and digital. Stepping back, the underlying fundamentals of our business are strong. We're exposed to diverse end markets with clear catalysts for long-term growth. We are industry leaders in our primary businesses with clear competitive advantages in scale and innovation. We have a clear set of strategies that we continue to evolve over time and are key to our success over the long term and across a wide range of business cycles. Those strategies are to drive outsized growth in high-value categories, grow profitably in our base businesses, lead at the intersection of the physical and digital, effectively allocate capital, and focus relentlessly on productivity and lead in an environmentally and socially responsible manner. We remain confident that our strategies, along with our team's ability to execute in dynamic environments, will enable us to continue to generate superior value creation through a balance of GDP plus growth and top quartile returns over the long term. In summary, we delivered another strong quarter and raised our guidance for the year to deliver nearly 20% earnings growth in 2024. While we are increasing our outlook for the year, the environment remains uncertain and warrants some degree of caution as we move through the second half. I want to thank our entire team for their continued resilience, focus on excellence, and commitment to addressing the unique challenges at hand. With that, I'll hand the call over to Greg. Thanks, Deon, and hello, everybody. In the second quarter, we delivered Adjusted earnings per share of $2.42, up 6% sequentially and up 26% compared to prior year, driven by benefits from higher volume and productivity. Compared to prior year, sales were up 8% ex-currency and 7% on an organic basis, as higher volume was partially offset by deflation-related price reductions. Adjusted EBITDA margin was strong at 16.4% in the quarter, up 170 basis points compared to prior year, with Adjusted EBITDA dollars up 19% compared to prior year and up 5% sequentially. We generated strong Adjusted free cash flow of $201 million in the first half of the year, up $137 million compared to prior year. Our balance sheet is strong with a net debt to Adjusted EBITDA ratio at quarter-end of 2.2. We continue to execute our disciplined capital allocation strategy, including investing in organic growth and acquisitions while continuing to return cash to shareholders. In the first six months of the year, we returned $177 million to shareholders through the combination of share repurchases and dividends. In April, we announced a 9% increase to the company's quarterly dividend to $0.88 per share, a dividend we've now grown 10% annually over the past decade. Turning to the segment results for the quarter, Materials Group sales were up 6% ex-currency and on an organic basis compared to prior year, driven by low double-digit volume growth, including a slight customer pull forward in Europe and Asia, partially offset by deflation-related price reductions. Looking at Label Materials organic volume trends versus prior year in the quarter, mature markets were up significantly as we continued to lap downstream customer inventory destocking that took place last year. As you'll recall, destocking in Europe was a bit more exaggerated than in North America, resulting in a larger rebound this year. Europe was up more than 25% and slightly ahead of our expectations, and North America was up high single digits. Emerging regions delivered strong volume growth above our expectations, with Asia up mid-single digits, with particular strength in India and ASEAN, and Latin America up mid-teens. Compared to prior year, Graphics and Reflectives sales were up low single digits organically. Performance Tapes and Medical was down low single digits organically, as strength in industrial categories was more than offset by a decline in medical and personal care, partially driven by inventory destocking in those categories. Materials Group delivered a strong Adjusted EBITDA margin of 17.9% in the second quarter, up more than 2 points compared to prior year, driven by higher volume and benefits from productivity, partially offset by higher employee-related costs. Regarding raw material costs, globally, we saw low single-digit inflation sequentially in the second quarter. The increase was driven by higher paper prices, primarily in Europe. We have been addressing the cost increases through a combination of product re-engineering and pricing actions as we discussed last quarter. We've continued to see paper prices increase as we move through the second quarter and are expecting modest inflation sequentially in the third quarter. We are monitoring this dynamic closely and will continue to evaluate if further price actions are appropriate as we move through the back half. Given this dynamic and the typical volume seasonality from Q2 to Q3, we expect Materials Group margins will sequentially moderate in the third quarter. Shifting now to Solutions Group, sales were up 11% on an organic basis and 14% ex-currency, with high-value solutions up low double digits and base solutions up mid to high teens as apparel volume normalized ahead of expectations. Year-to-date, enterprise-wide Intelligent Label sales were up mid to high teens, with strong growth in apparel and non-apparel categories, particularly logistics and general retail. Solutions Group Adjusted EBITDA margin of 16.8% was up 100 basis points compared to prior year, driven by benefits from higher volume and productivity, partially offset by higher employee-related costs and continued growth investments. Margin improved 70 basis points sequentially, and we anticipate further sequential margin improvement in the second half, driven largely by productivity initiatives and higher volume. Now, shifting to our outlook for 2024, we have raised our guidance for adjusted earnings per share to be between $9.30 and $9.50, a $0.15 increase to the midpoint of the range, despite a roughly $0.05 headwind from currency translation, which is largely in the second half. At the midpoint, our outlook reflects 19% growth versus prior year. This increase reflects our strong second quarter and a modest increase to our operational outlook for the second half. As you'll recall, our outlook includes four key drivers of earnings growth for 2024, which are all on track: the normalization of label volume early in the year, the normalization of apparel volume mid-year, significant growth in Intelligent Labels, and ongoing productivity actions. We've outlined additional key contributing factors to our guidance on slide 12 of our supplemental presentation materials. In particular, in focusing on the changes from April, we estimate roughly 4.5% organic sales growth, 50 basis points higher than our previous outlook due to a slightly better volume and mix than previously anticipated. We continue to expect high single-digit volume growth, partially offset by deflation-related price reductions. We expect incremental savings from restructuring actions of more than $50 million, up $5 million from our previous outlook. We now anticipate a headwind from currency translation of roughly $10 million in operating income for the year compared to our previous outlook of a roughly $5 million headwind. As you may recall, we've historically seen lower sequential volume seasonally in the third quarter, driven by the August holiday period in Europe and the timing of back-to-school shipments and apparel, which historically has resulted in a mid-single-digit sequential decline of EPS in Q3 from Q2. We anticipate Q3 EPS this year will be consistent with that historical pattern. In summary, we delivered another strong quarter, increased our outlook for earnings growth, and remain confident in our ability to continue to deliver exceptional value through our strategies for long-term profitable growth and disciplined capital allocation. We look forward to sharing more about our long-term objectives and strategies with all of you at our investor day in September and hope to see you there. Now we'll open up the call for your questions. Ladies and gentlemen, if you would like to register a question, press star followed by the number one on your telephone keypad. You will hear confirmation of your request. If your question has been answered and you would like to withdraw your registration, please press the pound key. 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. One moment, please, for the first question. Your first question comes from the line of McNulty, John, with BMO Capital Markets. Please go ahead. Yeah, thanks for taking my question. I guess the question would be on the solutions business and in particular, I guess, tied to the Intelligent Labels side. So obviously, you pulled down, or it looks like the revenue contribution for this year, and it sounds like a lot of it's going to be tied to just the timing of rollout. So does that just mean something got pushed out to the beginning of next year, or are you just not seeing the pilot programs necessarily move to the next step as quickly as you were thinking? So maybe you can give us a little bit of color on that. And then I guess the other question tied to that would just be around the solutions margin. So if we go back to kind of the pre the destocking that we saw in the apparel markets, you were in the 18%-18% and change kind of EBITDA margin range. You're obviously coming in below that right now. Any reason now that it looks like some of that destocking is over to think that you shouldn't be able to get back into that 18%+ range as we kind of look out over the next 12 months? Yeah. Hi, John. This is Deon. Thanks for the question. I'll handle the first part and then I'll ask Greg just to comment on the second. I will just say that our original outlook for the year when we planned the year called for lower revenue growth relative to the volume growth that we planned. And we are now targeting, as I said in my notes, 20% volume growth this year with mid-teens revenue growth. We're anticipating Q3 that we're going to see a similar growth rate for revenue as we've seen in the first half of the year. And now we expect revenue growth in the fourth quarter to be lower than previously anticipated, largely on volume changes as it relates to customer rollout timing. There's a small element, John, also of mix. You'll recall that we have different price points across different segments and products and use cases, but they all typically have the same margin profile, which I'll remind everyone is still above the segment average. And then finally, there will also be some deflation-related pricing impacts. I will say on that point that if you recall during 2022 and 2023, during the supply chain shortages, we did see inflation across the business, including in IL, and which we are now addressing in the last few quarters over here. If I turn to specifically the customer rollout pieces, there are two elements of this. So this is one, ongoing rollouts with existing customers, and then also anticipated rollouts from pilots that have moved slightly in their timing. And this is not unusual. We've spoken in the past about when you have new adoptions in new categories, timing can tend to be uneven, move intra-quarter. On our existing customers, there's two elements where we're seeing some volume impacts now as it relates to our existing customers with existing rollouts. One is the comparison with inventory builds in the launch phase in prior year. It's largely a fourth quarter issue on logistics. And secondly, as our customers move through their adoption journey, taking into account things like new category adoptions, kind of mostly in general retail, and also infrastructure readiness, so they're ready to take on the next elements of their journey. And sometimes that's just a timing issue, and that's mostly in logistics. I will say, John, that with all of our customers, whether they be in pilot, trial, or rollout, they're continuing to see significant value and returns on investment in leveraging this technology. And I would argue, and having spoken to them, that their conviction in the adoption of the technology is even higher. And then additionally, we continue to see real strength in our pipeline across all segments, underpinning, again, my conviction that this long-term growth opportunity in this platform is significant. Yeah, thanks, Deon. And John, to answer your question on margins, I think as we've shown over the last couple of quarters, as the apparel segment or categories are normalizing, we've seen margins improve. We saw about a 70 basis points improvement here in Q2 versus Q1. I think I talked about in my prepared remarks and in our slides even that we expect that to continue improving as we move through the back half. So the short answer is yes. We would expect to get back to those 18% plus that we'd had, like you mentioned, a year or two years ago. And that's an area we'd like to get back to, and we expect to be able to deliver, as we said. Your next question comes from the line of Ghansham Panjabi with Baird. Please go ahead. Hey, guys. Good morning. I guess going back to the second quarter and some of the variances that drove the upside relative to your previous guidance, was it as simple as just Europe and maybe apparel was a little bit better? And on the apparel improvement, how are you sort of disaggregating between some of the shipping challenges and some of the pull forwards that we read about in the headlines in context of just the retailer earnings that have been out recently on the apparel side, just not showing any signs of real improvement? Yeah, Ghansham, let me deal with that. Yes, at the high level, the variances are largely in our labels business from a volume perspective, largely in Europe, and then from apparel where we've seen sooner-than-expected normalization. That still will also continue during the second half of the year. On apparel specifically, I think there's a couple of dynamics at play over here. Certainly, the macro environment still remains very uncertain, and apparel is largely driven by consumer sentiment, which is not robust. It's also true that what we've seen more recently in discussion with our customers there is that their inventory levels are now at where they would need them to be. This is after a year of continuous destocking. And we're starting now to see some degree of uptick in import volumes, and typically our volumes precede those. So our performance in Q2, which is slightly ahead of expectation, would suggest we'd see more uptick in import volumes across the two segments across North America and Europe as we move forward. I think the only other piece I'd call out is that, as always in apparel, you get a vast range of variances in terms of how customers do. Some of them are doing very well. Some of them are not doing so well, and that's probably reflected in some of the earnings releases that you've seen more recently. I think, Ghansham, just to answer the first part of your question, yes, the two big drivers of the beat in Q2 were the better performance in materials Europe as well as the apparel, as Deon just explained. Your next question comes from the line of George Staphos with Bank of America. Please go ahead. Hi, thanks very much. Thanks for taking my question. Good morning, everybody. Good afternoon. Hi, George. So my two-parter, one question on solutions. First of all, just piggybacking on the question that Ghansham teed up, so from what your customers said or are seeing, was there any pull forward ahead of any potential tariff-related issues, or do you think that really was a non-event for you in the quarter? If you could provide any color there. And if you did, just now, I'd missed kind of the nuances there. And then the discussion that we've had and that you've had as well on volume versus revenue growth and the implied sort of reduction in ASPs, how much of that, Deon, is actually coming from just, "Hey, you're coming up learning curve. You're seeing improved manufacturing economics. You're passing that along because that's how you get adoption." Help us parse that versus the other deflation that might be occurring off of the supply chain issues from a year or two ago. Thank you. Sure, George. I assume the second question relates more to IL, so I'll address it that way. Yes, exactly. On the first one, we've not necessarily seen any visible signs of apparel pull forward as a result of tariffs. I think there is clearly a lot of discussion among retailers as to what the likely outcome will be of a more tariff-intensive future if that turns out to be the case. But at the moment, we've not seen anything. You will recall in the second quarter, what we did see was some degree of pull forward from the third quarter as it related more to the Red Sea shipping crisis that was happening with goods having to go around the Cape of Good Hope rather than go through the Suez Canal. There's an element of that. But generally, when we look across it, we don't tend to see anything that suggests there's been some degree of pull forward. There may be in tiny bits as well. I think our observation of where we've been in the second quarter as released is that it's just been slightly more, a slightly quicker normalization of volume in apparel than we'd anticipated. We said it would start from the second half of the year, and we've clearly seen a little bit earlier than that. As it relates to volume and revenue pacing for IL, I think if you look back over the last 5 years, George, I'd characterize that we've always seen that ASPs have declined in the past, typically in that kind of mid-single digits range. And that's not unexpected as the technology curve has ramped up and more volume has come to play. And actually, those declines in time have actually also helped accelerate new segment adoptions and unlock new opportunities. I think as we're moving forward, I believe we'll see some moderation in those type of declines, largely because some of the bigger gains have already been made. We're continuing to lean into where we see our scale and scale advantage, particularly in our innovation process manufacturing and innovation at the product level, which we think has fundamentally underpinned our competitive advantage over this period and we believe will continue to underpin our competitive advantage moving forward. I think at the end of the day, pricing is but one element that has come to bear in the market. I think the bigger element as we move forward is the value creation that customers are seeing, which is a very pertinent discussion that we're having with customers now, is what value are they creating, which is why the ROI is looking so high. The more that we move to enabling a broader solution being that kind of one throat to choke for customers across each node of that ecosystem, the more likely we are to capture more value in that regard. Your next question comes from the line of Mike Roxland, with Truist Securities. Please go ahead. Yes. Thanks, Deon, Greg, and John, for taking my questions and congrats on a good quarter. Thanks, Mike. Thanks, Mike. Just wanted to get more from Deon, more color from you regarding that delay in customer deployment in 4Q. I think you mentioned logistics. Does it involve any other vertical as well, maybe general retail? Just given the various SKUs, the greater amount of SKUs in general retail, maybe that's what's taking a little bit longer to deploy. And can you comment on for those deferrals or delays, when do you expect them to hit in 2025? And lastly, just on the deflation, can you comment on any approaches you're using to reduce material costs, improve productivity, and the like to offset the deflation you're experiencing? Sure, Mike. Let me clarify exactly on logistics. This is not an impact of rollout. The rollout has largely, at least for our large logistics customer, has been done as we went through the back end of last year. The biggest quarter was the fourth quarter in which we both rolled out and deployed, and then we're going through this half this year is basically servicing that, albeit I have to say on lower overall soft demand across the market. As it relates specifically to the question around what happens in the timing, I made the point of saying that we see the greatest variance of timing relative to our expectations, typically in new pilots that are moving to rollouts, and often in these newer segments. We saw the same in apparel, Mike, when we first started. You have an estimate of timing as a number of factors that come into play at that point, not just the returns that the customer's going to see, which so far proved to be very, very good, but also the timing of how they then culturally adopt that, either in the supply chain or in the stores or both. Sometimes that can change according to their own specific dynamics. The typical movements we see are intra-quarter, within a year, and typically on a 12-month basis. So anything that we see that may be slightly delayed in one quarter typically tends to move forward to the second or third quarter thereafterwards. As to your question on deflation, it's been part of our core strength as a company is relentlessly driving productivity. I touched on that earlier in my prepared remarks as well. We've taken that approach significantly in our Intelligent Labels platform. I think there's one unique piece that we are able to bring to bear. If you think about our materials business, it is the world leader in roll-to-roll process manufacturing and the capabilities that go within that. We've been able to leverage that capability to apply to a new segment that has enormous volume growth potential in our IL platform. Being able to apply that capability has given us a significant advantage when it comes to the cost of manufacturing of our items. It's something we're constantly focused on. As we move forward, we continue to leverage our innovation, our materials science innovation, our process innovation, and our solutions innovation to further augment how we're going to create further value or provide a further step change, function change in our competitive differentiation with the rest of the market. Next question comes from the line of Josh Spector with UBS. Please go ahead. Yeah, hi, good morning. I wanted to ask about RFID in a similar vein. Just now we're talking about volume and pricing a little bit more. Has anything changed on the competitive dynamics within RFID to require greater pricing actions, or are we now at a phase of rollout where there's any price downs that we need to consider? So when you talked about historically, or when you raised the bar and said 20% growth in RFID, is that more volume and we need to think about price separate from that, or do you think about that more as organic? Thanks. Thanks, Josh. To your last question, the change is more in volume. As it relates to the competitive dynamics, sorry, and the timing of those customer rollouts as it relates to the volume. As it relates to the competitive dynamics, we clearly see competitive dynamics in the IL market. It's a growth industry. It's always going to attract more capital. Our focus has been on maintaining and expanding our leadership share in this. We do this in a couple of ways, not least on the elements that I touched on, Josh, which is around our innovation at a process level, at a product level, and the solution level, but also in the way that we're helping to activate industries. We've been investing ahead of the curve to ensure that we can activate industries like logistics and like food. You've seen the outcome of that. We are the people leading the logistics segment industry, and we're doing a similar process with some of the pilots that we're looking into food, whether it's in grocery or whether it's in QSR as well. I actually think overall that if I look forward, I have very high conviction that our capability and the way that we play a role somewhat uniquely across each node of the ecosystem of Intelligent Labels, whether it's from inlay manufacturing all the way through to managing data and providing services, gives us a position in which, particularly when new customers come on board, as they think about adopting the technology being a significant decision for their C-suite, they're looking for somebody with credibility, scale, and global reach and experience to be able to do that. And it tends to position us better than anybody else. Our experience has shown over time that we then are the disproportionate leader in our share overall, something that we think even in this year we're going to continue to maintain, if not expand. Your next question comes from the line of Matt Roberts with Raymond James. Please go ahead. Hey, good afternoon, everybody. Thank you for the time. Surprise, surprise. I will ask about RFID. So maybe given the timing issue in 2024, could you now envision with that timing growth of more than 20% in 2025? And if you could provide any examples or timing or magnitude of those initial food or QSR rollouts or how we should think about that a little bit farther, I think that could certainly be helpful. Thank you all. Sure, Mike. Let me just start by saying the reason why I think we have such conviction in the long-term growth potential of this platform. If you think about apparel being, let's say, a 45 billion unit and we're roughly 40% penetrated with IL now through that. Logistics, by contrast, is 65-70 billion units. We have just one customer in the industry that has now started to adopt. And then food, by comparison to that, is over 200 billion units, where they are just at its nascent stage. So the runway for this platform in connecting physical items with digital identities is substantial and over many years to come as well. The way that I think about our ability in each one of those segments is that we are engaged right now with discussions with all logistics providers. In some instances, we're doing trials and pilots. On the food side of things, we are continuing to drive very productive pilots across both quick service, restaurant, and grocery. As to the longer-term volume outlooks, we have an investor day coming up in September where we're going to be focusing on what our strategic plans and our outlooks are for the next five years, and we'll give more color at that point. Your next question comes from the line of Jeffrey Zekauskas with JPMorgan. Please go ahead. Thanks very much. I was hoping you would describe a little bit of what's going on in SG&A expense. That SG&A expense was up $55 million year-over-year or about 17%. If you look at Avery for the past five years, the SG&A expense on a sequential basis in the second quarter goes down every year. So is there something that's unusual in the second quarter? And how did raw materials change year-over-year in the second quarter? Yeah, Jeff. So I mean, the biggest driver versus last year, obviously in 2023, we did not deliver results in line with our initial expectations for the year. So our incentive compensation accruals in 2023 were quite low, down to zero for corporate, for that matter, at the end of the year. This year, of course, as we talked about, we're raising our expectation or raising our outlook above our initial expectations. So incentive comp accruals are a bit higher. So there's a pretty sizable swing on that from a year-over-year perspective. So that would be the main driver versus prior year. And second question, what was it? Deflation, deflation. Oh, inflation versus prior year. Overall, as I said, inflation sequentially was very low single digits versus prior year, high single-digit deflation versus last year. Really about half driven from paper year-over-year and the rest from chemical and film. So a little bit of sequential from paper, largely in Europe, year-over-year, still high single-digit deflation. Jeffrey, the only thing I'd also add to what Greg said is in last year, as you recall, when we were going through that significantly more challenging period, we did what we always do, which is to dramatically improve and strengthen on our cost management, particularly on some of our temporary costs as well. We've seen as volume has recovered and normalized in the second quarter that some of those temporary costs have returned as well. You'll see that contrast factor in addition to the incentive comp basis. Your next question comes from the line of Anthony Pettinari with Citi. Please go ahead. I was wondering if you could talk a little bit about Vestcom. Obviously, not the biggest part of your business, but just how has that business been performing this year in terms of organic growth and maybe what's coming from volume or price? And then we've seen stories of large retailers adopting digital shelf potentially in a big way. Just wondering how kind of Vestcom is set up potentially in a move towards a bigger digital shelf environment? Sure, Anthony. Let me just talk a little bit about Vestcom, and then I'll address your second point afterwards. Our Vestcom business continues to do well overall, and it contributes in a number of different dimensions, not least the fact that it's a high-value segment business with greater than segment average margins, but also the access and the reach that the Vestcom business has into a lot of the food customers that we never really had access to in the past, which has helped us on our food initiatives around Intelligent Labels, but also across drug dollar and so forth. I think this year, particularly in the second quarter, there was a degree of softness more related to the drugstore challenges that you're seeing openly in the market at the moment. But I will also say that as part of a reaffirmation of kind of the value that that business does in both providing productivity solutions, this is kind of shelf edge labeling in sequence, in walk sequence, but also in terms of its media outlet, how you leverage that shelf edge technology to also provide consumer media promotions. We've re-signed a significant U.S. retailer for a multi-year deal again, and we're anticipating by the end of year to get a new large U.S. retail banner as part of our customer portfolio as well. When you think about specifically the shelf edge becoming more digitized, digitization is an inevitable trend that we see moving, and that's actually a tailwind for us as a collective company and in a large part of our solutions business as well. I will note that our Vestcom business, while it currently has an analog, let's call it an analog shelf label, the strength of the business is actually in its data composition engine. Our business takes in huge amounts of data, both point-of-sale data, planogram data, pricing data, and advertising information. Through that data composition, outputs currently to an analog label. We also are currently involved with most of the electronic shelf edge trials as the engine that also outputs that to an electronic shelf label, so either analog or digital. I think that is going to be one of the strengths of this business moving forward is that as electronic shelf labels may start to become an increasingly bigger part of retail, it will not be ubiquitous across all the stores. It will be in certain targeted segments. So you'll still be dealing with a mixed estate. The people best placed to deal with that mixed state, I believe, is our Vestcom business. Your next question comes from the line of George Staphos with Bank of America. Please go ahead. Hi, thanks for taking my follow-on. So in materials, it seemed like, I mean, at least versus our model, margins were 50-100 basis points higher than we would have expected. How did margins fare relative to your initial expectations for the quarter? Again, Deon and Greg, how much was operating leverage? How much was your cost reduction program? How much of it was getting, if anything, some of the effects of your initial round of pricing? Any color there would be helpful as we project out for the rest of the year. Thank you. Yeah, thanks, George, for the question. I think the answer is a little bit of all those buckets that you mentioned. So as we said, Europe is our largest region in the materials business. We can see from the pie charts and the slides. And that business did have a stronger top line quarter than we had anticipated. And that, of course, helped overall from a leverage perspective. We also, as I talked about earlier, raised our expectation for restructuring savings this year. Some of that is coming in our materials business, so that helped a little bit. And that business continues to drive strong ongoing ELS type of productivity as well. So overall, a number of factors there played into the quarter. I think, as I've said, really over the last couple of quarters, when we set our long-term targets through 2025, we talked about targeting around 17% EBITDA for our materials segment. Clearly, over the last four quarters, we've shown that we're on track to deliver that or better. Our expectation is we'll continue delivering at that target or a little bit above that target as we go forward. As you know, we don't just—you've heard us say this a lot, but it's really how we're really focused and drive the business is focusing on the balance of top line growth with margins, with our capital efficiency to drive EVA. We think that's the right recipe ultimately for driving a strong total shareholder return. That's part of why we focus on that. It really is focusing on the balance of growth, margins, and capital. We'll continue to drive all three of those levers. Our final question comes from the line of Jeffrey Zekauskas with JPMorgan. Please go ahead. Thanks very much. If you had to allocate your $50 million in cost savings to cost of goods sold in SG&A, how would you allocate it? For the quarter, if you look at the negative price mix in solutions, was it about half of the negative price mix in materials? Yeah, on your first question, Jeff, I think it's probably. I don't have that off the top of my head. It's probably a relatively even split. We're continuing to drive, or maybe a little bit more, I guess, in cost of sales as we've driven a number of actions we talked about last year, a large initiative in Europe in the materials business, as well as, of course, we took advantage of the lower volumes that we had due to destocking last year to drive some further productivity in the solution side at the same time. So it's a combination, probably a little more heavily weighted in the quarter on the cost of sales side. Price mix. Price mix, I think, as we talked about in materials, we had double-digit volume growth with top line growth of about 6%. So as you asked earlier, we had high single-digit, close to double-digit deflation year-over-year, price down in mid-single digits to go with that in the materials business. On the solution side, price and volume and revenue growth was relatively similar, slightly higher volume growth than revenue growth. That concludes our question and answer session. Mr. Stander, I will now turn the call back over to you for the closing remarks. Thank you all for joining the call today. While the environment remains dynamic, we remain extremely confident in our position and prospects and our ability to deliver GDP plus growth and top quartile returns over the long term. That concludes our call today. Thank you for joining. You may now disconnect.