Executive Summary

Q3 2025 delivered steady execution: adjusted EPS $2.37 (+2% YoY), above consensus by ~$0.04, while revenue of $2.22B was roughly in line/slightly below by ~$0.003B; adjusted EBITDA $365M beat by ~$9.6M, with margin +10 bps YoY to 16.5% . EPS consensus $2.325*, revenue $2.218B*, EBITDA $356M* (S&P Global).
Materials Group margins expanded on productivity (adj. EBITDA margin 17.5%, +50 bps YoY), offset by Solutions margin pressure (adj. EBITDA margin 17.0%, -90 bps YoY) amid higher employee costs .
Management initiated Q4 2025 guidance: adjusted EPS $2.35–$2.45 (midpoint ~in line with current consensus $2.411*), with reported sales growth 5–7% including ~2% currency and ~2% extra days; FY levers updated (FX tailwind to OI cut to ~$5M from ~$7M; restructuring savings raised to ~$60M from ~$50M; capex cut to ~$220M from ~$240M) .
Strategic catalysts: announced fresh-food RFID partnership with Walmart (bakery, meat, deli) alongside ongoing Kroger rollout; management frames the initiative as a multi-year growth driver for Intelligent Labels (IL), expecting an HSD-to-LDD contribution to IL revenue over ~two years, with modest Q4 start .

What Went Well and What Went Wrong

What Went Well

Materials Group productivity drove margin expansion: adj. EBITDA margin 17.5% (+50 bps YoY), adj. operating margin 15.2% (+40 bps YoY), despite organic sales -1.9% .
High-value categories momentum within Solutions: Vestcom and Embelex both >10% growth; enterprise IL up ~3% YoY with apparel and food/logistics/industrial up MSD; sequential improvement vs Q2 .
Strong cash generation and disciplined capital allocation: Q3 adjusted FCF ~$269M; YTD $670M returned to shareholders (repurchased 2.5M shares/$454M); net debt/adj. EBITDA 2.2x; €500M notes placed to fund M&A and CP paydown .

Management quotes:

“We delivered a solid third quarter, with earnings above expectations…reflecting the strength and durability of our overall portfolio.” – Deon Stander, CEO .
“We fully mitigated direct [tariff] cost increases through strategic sourcing adjustments and select pricing surcharges.” – CEO, prepared remarks .
“We expect the fourth quarter will deliver an improved rate of year-over-year growth…[and] we remain prepared for a range of scenarios.” – CEO .

What Went Wrong

Solutions Group margins declined: adj. operating margin 10.0% (-130 bps YoY), adj. EBITDA margin 17.0% (-90 bps YoY), as higher employee costs and growth investments offset productivity/volume .
General retail IL weakness persisted (down mid-teens), and tariff uncertainty remained a headwind, constraining growth and creating network inefficiencies and visibility limits .
GAAP earnings down YoY: reported EPS $2.13 (vs $2.25), net income $166M (vs $182M) as higher tax rate (29.2%) and items weighed on GAAP; non-GAAP adjustments totaled ~$0.24/sh in Q3 (restructuring and other items net) .

Financial Results

Headline metrics vs prior periods and consensus

Metric	Q3 2024	Q2 2025	Q3 2025	Q3 2025 Consensus*	YoY Δ (Q3’25 vs Q3’24)	QoQ Δ (vs Q2’25)
Revenue ($USD Billions)	$2.183	$2.221	$2.216	$2.218*	+1.5%	-0.2%
Adjusted EPS ($)	$2.33	$2.42	$2.37	$2.33*	+1.7%	-2.1%
GAAP EPS ($)	$2.25	$2.41	$2.13	—	-5.3%	-11.6%
Adjusted EBITDA ($USD Millions)	$357.8	$367.5	$365.1	$355.5*	+2.0%	-0.7%
Adjusted EBITDA Margin (%)	16.4%	16.6%	16.5%	—	+10 bps	-10 bps
Adjusted Operating Margin (%)	12.8%	12.9%	12.7%	—	-10 bps	-20 bps

Notes: Asterisks denote S&P Global consensus values. Values retrieved from S&P Global.*

Segment breakdown (sales and margins)

Metric	Q3 2024	Q3 2025
Materials Group Sales ($M)	$1,497.7	$1,516.0
Materials Group Adjusted Operating Margin (%)	14.8%	15.2%
Materials Group Adjusted EBITDA Margin (%)	17.0%	17.5%
Solutions Group Sales ($M)	$685.7	$699.5
Solutions Group Adjusted Operating Margin (%)	11.3%	10.0%
Solutions Group Adjusted EBITDA Margin (%)	17.9%	17.0%

KPIs and cash/returns

KPI	Q2 2025	Q3 2025
Adjusted Free Cash Flow ($M)	$188.9	$268.7
Net Debt / Adjusted EBITDA (x, LTM)	2.3x	2.2x
Share Repurchases (YTD, $M)	$360 (H1)	$454 (YTD through Q3)
Cash Returned to Shareholders (YTD, $M)	$503 (H1)	$670 (YTD through Q3)
Enterprise Intelligent Labels YoY	~Flat	Up mid-single digits

Non-GAAP adjustments and tax: Adjusted tax rate 26.5% in Q3 (reported ETR 29.2%); adjustments per share ~$0.24 (restructuring/other items and tax effects) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Reported EPS	Q4 2025	—	$2.15–$2.25	Initiated
Adjusted EPS	Q4 2025	—	$2.35–$2.45	Initiated
Reported Sales Growth	Q4 2025	—	5–7% incl. ~2% FX and ~2% extra days	Initiated
Sales ex-currency	Q4 2025	—	1–3%	Initiated
Organic Sales Growth	Q4 2025	—	0–2%	Initiated
FX tailwind to Operating Income	FY 2025	~$7M prior	~$5M	Lowered
Net Restructuring Savings	FY 2025	~$50M prior	~$60M	Raised
Fixed & IT Capital Spend	FY 2025	~$240M prior	~$220M	Lowered
Interest Expense	FY 2025	Prior not quantified	~$135M (higher vs prior outlook)	Raised
Non-op. Interest Income	FY 2025	—	~$13M	Set
Adjusted Tax Rate	FY 2025	—	~26%	Set
Adjusted FCF Conversion	FY 2025	—	~100%	Set

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 & Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs/macro	Q1: Prepared for multiple scenarios; IL up in apparel/food; logistics down as expected . Q2: Trade-policy lowered apparel/general retail demand; actions safeguarded earnings	Direct tariff costs mitigated via sourcing/surcharges; indirect impacts improving but visibility still limited	Improving but still constraining
Intelligent Labels (IL)	Q1: IL up in apparel & food; Vestcom HSD; Embelex MSD decline . Q2: IL ~flat; Vestcom ~+10%; Embelex -HSD	IL +~3% YoY; apparel & food/logistics/industrial +MSD; Walmart partnership in fresh food announced; Kroger rollout progressing	Accelerating into Q4
Solutions margins	Q1: Adj. op margin +90 bps YoY to 10.2%	Q3: Adj. op margin 10.0% (-130 bps YoY); higher employee costs/growth investments	Deteriorated YoY
Materials costs/deflation	Q2: Net input/price effects modest; productivity offset	Modest deflation (paper/chemicals/films EU/Asia); stable Q4 outlook including tariffs	Modest tailwind/stable
Logistics	Q1: Weaker as expected . Q2: No new 2025 rollouts expected	UPS share expanding; broader pilots continue; assess 2026 rollout prospects in January update	Stabilizing
Calendar shift	—	Shift to Gregorian calendar adds ~2% revenue tailwind in Q4; low-quality days limit flow-through	N/A (one-off)

Management Commentary

Strategic positioning: “Our business is positioned for success with secular growth tailwinds…item-level digitization…These categories now represent 45% of our business YTD” – CEO .
Tariff mitigation: “We fully mitigated direct tariff cost increases through strategic sourcing adjustments and select pricing surcharges” – CEO .
Walmart partnership: “A major partnership with Walmart…in fresh grocery (bakery, meat, deli)…a key industry milestone,” expected to drive HSD-to-LDD IL revenue growth over ~two years, ramping through 2026–2027 .
Capital allocation: Returned ~$670M YTD to shareholders and closed $390M Taylor Adhesives acquisition; net leverage 2.2x .
Outlook: Q4 adj. EPS $2.35–$2.45 with reported sales growth 5–7%; FX tailwind trimmed to ~$5M OI; restructuring savings raised to ~$60M; capex lowered to ~$220M .

Q&A Highlights

Walmart sizing/ramp: Management framed the Walmart fresh food IL rollout as a two-year ramp contributing HSD-to-LDD to total 2025 enterprise IL revenue, with a small Q4 start and acceleration through 2026–2027; innovation in RF/antenna and materials enables performance in cold, dense environments .
IL pipeline/capacity: Pipeline growing in count and dollars across segments; no near-term capacity additions needed due to prior investments (e.g., Querétaro), with modular assets added 12–18 months ahead as needed .
Logistics: UPS share expected to expand; broader logistics pilots ongoing, with 2026 rollout prospects to be discussed in January .
Q4 shape: Sequential seasonality expected to be relatively flat vs historical; inventory absorption headwind as inventories normalize; small positives from buybacks/restructuring; price deflation immaterial sequentially .
Input costs/deflation and pricing: Low single-digit deflation in paper (EU/Asia), some chemicals/films benefit; U.S. tariff-related inflation offset via surcharges; net slight pricing headwind YoY .
Calendar methodology: Transition to Gregorian calendar adds ~4 days in Q4 (~2% sales tailwind) but low flow-through given day mix .

Estimates Context

Q3 2025 vs S&P Global consensus: Adjusted EPS $2.37 vs $2.325*, beat by ~~$0.04; Revenue $2.216B vs $2.218B*, essentially in line/slight miss (~~$3M); Adjusted EBITDA $365M vs $356M*, beat by ~$9.6M. Ten estimates for EPS and revenue [GetEstimates].
Forward: Q4 2025 guidance midpoint ($2.40) is roughly in line with current consensus $2.411*; guidance implies organic growth 0–2% and continued margin protection from productivity .
Potential estimate revisions: Upside skew to IL trajectory (Walmart/Kroger) and restructuring savings may support 2026 IL and EBITDA estimates; Solutions margin pressure and higher interest expense could cap near-term EPS upside .