John Dunigan

John Dunigan asked about Avery Dennison's inventory levels, which are elevated compared to pre-pandemic, and the ability to reduce them in 2026 given modest demand. He also inquired about the increased CapEx of $260 million for 2026, asking if it's tied to growth projects, delayed maintenance, or cost savings.

Answer

SVP and CFO Greg Lovins stated that inventory turns have been fairly steady, with upward pressure from faster growth in working capital-intensive high-value categories and emerging markets, offset by productivity. He explained that the increased CapEx for 2026, up from $200 million in 2025 (plus $30 million in cloud tech), is for productivity initiatives and future capacity, having been pulled down in 2025 due to softer volumes.

John Dunigan inquired about the company's ability to lower inventory levels in 2026 given elevated inventory-to-sales ratios, and how the increased CapEx of $260 million for 2026 will be allocated among growth projects, delayed maintenance, and cost savings initiatives.

Answer

Greg Lovins, SVP and CFO, explained that while inventory turns have been steady, faster growth in working capital-intensive high-value categories and emerging markets creates upward pressure on working capital, which is being offset by productivity initiatives. The increased CapEx of $260 million for 2026 (up from $200 million in 2025, or $230 million including cloud technology) is primarily for productivity initiatives and future capacity, following a reduction in 2025 due to softer volumes.

John Dunigan of Jefferies requested more detail on the Embellix business, its growth drivers beyond major sporting events, and an update on the VESTCOM rollout with CVS, including any key learnings from the program.

Answer

President & CEO Deon Stander explained that Embellix's performance was impacted by the broader apparel market but has long-term growth drivers in team sports and brand customization. Regarding VESTCOM, he confirmed its 10% growth was largely driven by the successful CVS rollout. He highlighted VESTCOM's resilience, as its data-driven shelf-edge pricing and media solutions benefit from both price changes and increased promotional activity in a challenging retail environment.

John Dunigan from Jefferies requested more detail on the Embellix business, including its reliance on major sporting events and growth expectations, and also asked for an update on the VESTCOM rollout with CVS Health.

Answer

President & CEO Deon Stander explained that Embellix's first-half performance was impacted by the broader apparel market but that long-term growth will be driven by customization trends and major events like the World Cup. Regarding VESTCOM, he confirmed the CVS rollout was a key driver of its 10% growth in the quarter and highlighted the business's resilience, as it benefits from both pricing and promotional activity at retail.

John Dunigan of Jefferies requested more detail on the Embellix and VESTCOM businesses. He asked about Embellix's reliance on major sporting events for growth and the outlook for VESTCOM, including an update on the CVS program rollout.

Answer

President & CEO Deon Stander explained that Embellix's performance is driven by team sports, large performance brands, and ad hoc events, with recent softness tied to the broader apparel market. He expects growth to resume in Q4. For VESTCOM, he confirmed the CVS rollout was a key driver of its 10% growth and highlighted the business's resilience, as it benefits from both pricing and promotional changes at retail.

John Dunigan questioned why the logistics end market is not considered more cyclical, especially given its exposure to international trade and tariffs, and asked for details on its perceived stability.

Answer

CEO Deon Stander clarified that the Intelligent Labels portion of the logistics business has low variability due to a volume agreement with a significant customer. CFO Gregory Lovins added that the broader materials business serving logistics has historically been very stable, holding or growing margins even through recessionary periods.

John Dunigan asked about Intuit's progress in helping small businesses consolidate multiple applications onto the Intuit platform, and whether the company is reaching its potential in this area for both small businesses and the mid-market.

Answer

Intuit CEO Sasan Goodarzi stated that the ability to consolidate apps is central to Intuit's winning strategy, addressing the issue of businesses spending too much time and money managing disparate applications. He highlighted the platform's power to help customers from 'lead to cash' and 'do everything for customers' through data, AI, and human intelligence. Goodarzi pointed to accelerated growth, particularly in the mid-market (40% online growth), as evidence that more customers, especially larger ones, see the value of an all-in-one platform. He believes Intuit is at the beginning of this cycle, with increasing accountant partnerships further driving client digitization.

John Dunigan inquired about Intuit's progress in helping small businesses consolidate numerous applications and whether the company is reaching its full potential in this area for both small businesses and the mid-market.

Answer

CEO Sasan Goodarzi highlighted that app sprawl is a significant issue for businesses, leading to wasted time and money. He emphasized Intuit's platform strategy to help customers from lead to cash and do everything for them using data, AI, and human intelligence. He noted strong acceleration, particularly in the mid-market (40% growth), as customers recognize the value of an all-in-one solution. He believes Intuit is early in this cycle, with accountant partnerships further driving client digitization.

John Dunigan, on for Phil Ng, questioned the significant projected increase in free cash flow from 2026 to 2027 and asked whether achieving the full $160 million benefit from the Waco project is dependent on volume recovery.

Answer

EVP & CFO Stephen Scherger explained the 2027 free cash flow growth is driven by the company's standard growth algorithm plus the second $80 million tranche of EBITDA from the Waco facility. CEO Michael Doss clarified that while a portion of the Waco benefit is fixed from shutting down higher-cost mills, another portion does rely on the expected volume growth needed to utilize the new, low-cost capacity as it ramps up through 2027-2028.

John Dunigan inquired about the impact of stranded corporate costs from recent divestitures, the nature of the Q2 step-up in interest expense, and the full-year EBITDA outlook for the acquired SMP EMEA (formerly Evosis) business.

Answer

Interim CFO Jerry Cheatham clarified the Q2 interest expense included a one-time $0.03/share fee and guided for H2 interest expense around $50M per quarter. President and CEO Howard Coker affirmed a 'laser focus' on eliminating stranded costs. COO Rodger Fuller confirmed the expectation for SMP EMEA's EBITDA to increase year-over-year, supported by new projects.

John Dunigan, on for Phil Ng, asked if strategic alternatives for the cups business included options beyond a sale, such as further investment. He also questioned if the missed Q3 volume in South America could be recaptured and if the region needs more capacity.

Answer

CFO Howard Yu stated that while no decision is final, the cups business is losing ~$40 million annually, and options include rightsizing, a JV, or a wind-down. CEO Daniel Fisher explicitly ruled out additional capital investment. Regarding South America, Fisher explained the missed Q3 volume is a one-time shoulder season loss but that the company is better prepared for the future. He indicated existing capacity, including from other countries in the region, can be used to meet demand.