Avery Dennison : Q4 2021 Financial Review & Analysis

Fourth Quarter and Full Year 2021 Financial Review and Analysis

(preliminary, unaudited)

February 2, 2022

Supplemental Presentation Materials

Unless otherwise indicated, comparisons are to the same period in the prior year.

Safe Harbor Statement

Certain statements contained in this document are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements, and financial or other business targets, are subject to certain risks and uncertainties. Forward-looking statements also include those related to our acquisition of Vestcom, including its anticipated benefits, financing and effect on our long-term targets and future financial results. We believe that the most significant risk factors that could affect our financial performance in the near-term include: (i) the impacts to underlying demand for our products and/or foreign currency fluctuations from global economic conditions, political uncertainty, changes in environmental standards and governmental regulations, including as a result of COVID-19; (ii) availability of raw materials; (iii) competitors' actions, including pricing, expansion in key markets, and product offerings; (iv) the degree to which higher costs can be offset with productivity measures and/or passed on to customers through price increases, without a significant loss of volume; and (v) the execution and integration of acquisitions, including the acquisition of Vestcom.

Actual results and trends may differ materially from historical or anticipated results depending on a variety of factors, including but are not limited to, risks and uncertainties relating to the following:

• COVID-19
• International Operations - worldwide and local economic and market conditions; changes in political conditions; and fluctuations in foreign currency exchange rates and other risks associated with foreign operations, including in emerging markets
• Our Business - changes in our markets due to competitive conditions, technological developments, environmental standards, laws and regulations, and customer preferences; fluctuations in demand affecting sales to customers; execution and integration of acquisitions, including the acquisition of Vestcom; selling prices; fluctuations in the cost and availability of raw materials and energy; the impact of competitive products and pricing; customer and supplier concentrations or consolidations; financial condition of distributors; outsourced manufacturers; product and service quality; timely development and market acceptance of new products, including sustainable or sustainably-sourced products; investment in development activities and new production facilities; successful implementation of new manufacturing technologies and installation of manufacturing equipment; our ability to generate sustained productivity improvement; our ability to achieve and sustain targeted cost reductions; and collection of receivables from customers
• Our Vestcom Acquisition - risks related to future opportunities and plans for the combined company, including the uncertainty of expected future financial performance and results of the combined company; unknown liabilities; and the possibility that, if we do not achieve the perceived benefits of the acquisition as rapidly or to the extent anticipated by financial analysts or investors, the market price of our common stock could decline
• Income Taxes - fluctuations in tax rates; changes in tax laws and regulations, and uncertainties associated with interpretations of such laws and regulations; retention of tax incentives; outcome of tax audits; and the realization of deferred tax assets
• Information Technology - disruptions in information technology systems, including cyber-attacks or other intrusions to network security; successful installation of new or upgraded information technology systems; and data security breaches
• Human Capital - recruitment and retention of employees; fluctuations in employee benefit costs; and collective labor arrangements
• Our Indebtedness - credit risks; our ability to obtain adequate financing arrangements and maintain access to capital; volatility of financial markets; fluctuations in interest rates; and compliance with our debt covenants
• Ownership of Our Stock - potential significant variability of our stock price and amounts of future dividends and share repurchases
• Legal and Regulatory Matters - protection and infringement of intellectual property and impact of legal and regulatory proceedings, including with respect to environmental, health and safety, anti-corruption and trade compliance
• Other Financial Matters - fluctuations in pension costs and goodwill impairment

For a more detailed discussion of these factors, see "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K, filed with the Securities and Exchange Commission on February 25, 2021, and subsequent quarterly reports on Form 10-Q.

The forward-looking statements included in this document are made only as of the date of this document, and we undertake no obligation to update these statements to reflect subsequent events or circumstances, other than as may be required by law.

February 2, 2022

Fourth Quarter and Full Year 2021 Financial Review and Analysis

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Use of Non-GAAP Financial Measures

This presentation contains certain non-GAAP financial measures as defined by SEC rules. We report our financial results in conformity with accounting principles generally accepted in the United States of America, or GAAP, and also communicate with investors using certain non-GAAP financial measures. These non-GAAP financial measures are not in accordance with, nor are they a substitute for or superior to, the comparable GAAP financial measures. These non-GAAP financial measures are intended to supplement the presentation of our financial results that are prepared in accordance with GAAP. Based on feedback from investors and financial analysts, we believe that the supplemental non-GAAP financial measures we provide are useful to their assessments of our performance and operating trends, as well as liquidity. In accordance with Regulations G and S-K, reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures, including limitations associated with these non-GAAP financial measures, are provided in the appendix to this document and/or financial schedules accompanying the earnings news release for the quarter (see Attachments A-4 through A-10 to news release dated February 2, 2022).

Our non-GAAP financial measures exclude the impact of certain events, activities or strategic decisions. The accounting effects of these events, activities or decisions, which are included in the GAAP financial measures, may make it difficult to assess our underlying performance in a single period. By excluding the accounting effects, positive or negative, of certain items (e.g., restructuring charges, outcomes of certain legal proceedings, certain effects of strategic transactions and related costs, losses from debt extinguishments, gains or losses from curtailment or settlement of pension obligations, gains or losses on sales of certain assets, gains or losses on venture investments, and other items), we believe that we are providing meaningful supplemental information that facilitates an understanding of our core operating results and liquidity measures. While some of the items we exclude from GAAP financial measures recur, they tend to be disparate in amount, frequency, or timing.

We use these non-GAAP financial measures internally to evaluate trends in our underlying performance, as well as to facilitate comparison to the results of competitors for quarters and year-to-date periods, as applicable. We use the non-GAAPfinancial measures described below in this presentation and the accompanying news release.

• Sales change ex. currency refers to the increase or decrease in net sales, excluding the estimated impact of foreign currency translation, and, where applicable, an extra week in our fiscal year and the calendar shift resulting from the extra week in the prior fiscal year and currency adjustment for transitional reporting of highly inflationary economies. The estimated impact of foreign currency translation is calculated on a constant currency basis, with prior period results translated at current period average exchange rates to exclude the effect of currency fluctuations.
• Organic sales change refers to sales change ex. currency, excluding the estimated impact of acquisitions and product line divestitures.

We believe that sales change ex. currency and organic sales change assist investors in evaluating the sales change from the ongoing activities of our businesses and enhance their ability to evaluate our results from period to period.

• Adjusted operating income refers to income before taxes; interest expense; other non-operating expense (income), net; and other expense (income), net.
• Adjusted EBITDA refers to adjusted operating income before depreciation and amortization.
• Adjusted operating margin refers to adjusted operating income as a percentage of net sales.
• Adjusted EBITDA margin refers to adjusted EBITDA as a percentage of net sales.
• Adjusted tax rate refers to the full-year GAAP tax rate, adjusted to exclude certain unusual or infrequent events that are expected to significantly impact that rate, such as effects of certain discrete tax planning actions, impacts related to the enactment of the U.S. Tax Cuts and Jobs Act (TCJA), where applicable, and other items.
• Adjusted net income refers to income before taxes, tax-effected at the adjusted tax rate, and adjusted for tax-effected restructuring charges and other items.
• Adjusted net income per common share, assuming dilution (adjusted EPS) refers to adjusted net income divided by the weighted average number of common shares outstanding, assuming dilution.

We believe that adjusted operating margin, adjusted EBITDA margin, adjusted net income, and adjusted EPS assist investors in understanding our core operating trends and comparing our results with those of our competitors.

• Net debt to adjusted EBITDA ratio refers to total debt (including finance leases) less cash and cash equivalents, divided by adjusted EBITDA for the last twelve months. We believe that the net debt to adjusted EBITDA ratio assists investors in assessing our leverage position.
• Return on total capital incl. acquisition amortization (ROTC) refers to net income excluding the expense and tax benefit of debt financing divided by the average of beginning and ending invested capital. ROTC excl. acquisition amortization refers to ROTC adjusted for the impact of amortization of intangible assets from acquisitions. We believe that ROTC incl. acquisition amortization and ROTC excl. acquisition amortization assist investors in understanding our ability to generate returns from our capital.
• Free cash flow refers to cash flow provided by operating activities, less payments for property, plant and equipment, software and other deferred charges, plus proceeds from sales of property, plant and equipment, plus (minus) net proceeds from insurance and sales (purchases) of investments. Free cash flow is also adjusted for, where applicable, certain acquisition-related transaction costs. We believe that free cash flow assists investors by showing the amount of cash we have available for debt reductions, dividends, share repurchases, and acquisitions.

This document has been furnished (not filed) on Form 8-K with the SEC and may be found on our website at www.investors.averydennison.com.

February 2, 2022

Fourth Quarter and Full Year 2021 Financial Review and Analysis

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Again delivered strong results in 2021; ramping up investments

Delivered significant sales growth and continued margin expansion in 2021 vs. prior year and 2019

• Intelligent Labels achieved revenue of $0.7 bil.; remain confident in delivering 15%-20% growth longer-term
  Grew EPS more than 25% and generated record free cash flow
  Closed three strategic acquisitions, adding new capabilities and expanding our position in high value categories

Delivered strong results, despite challenging macro environment

• Safety and well-being of employees remains our top priority during continuing global health crisis
• Supply chains are tight
• Inflation remains persistent; continue to implement pricing/productivity measures

Exceeded all company-widefive-year targets through 2021

• 7% ex. currency growth CAGR, margins up ~3 pts., 17% adj. EPS growth CAGR, and 18%+ ROTC

Well-positioned for continued GDP+ growth and top-quartile return on capital, on track to achieve 2025 goals

• Targeting strong revenue and earnings growth in 2022

Committed to continuing success of all stakeholders: employees, customers, communities and shareholders

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Full Year 2021 Review

Reported EPS of $8.83, up 34%

Adj. EPS (non-GAAP) of $8.91, up 25% vs. 2020 (up 35% vs. 2019)

Reported sales of $8.4 bil., up 21%

• Sales growth ex. currency (non-GAAP) of 19%; organic sales growth (non-GAAP) of 16%
• Compared to 2019, sales growth ex. currency of 17%; organic sales growth of 12%
• Strong volume growth in addition to impact of higher prices

Reported operating margin of 12.6%, up 100 bps

• Adj. EBITDA margin (non-GAAP) of 15.6%, up 30 bps vs. 2020 (up 140 bps vs. 2019)

Free cash flow (non-GAAP) of $798 mil., up $250+ mil. compared to prior year and 2019 Maintained strong balance sheet, while continuing to deploy capital in disciplined manner

• Year-endnet debt to adj. EBITDA (non-GAAP) ratio of 2.2 (below long-term target)
• Deployed $1.5 bil. for strategic M&A and $400+ mil. for buybacks and increased dividend

Targeting continued advancement toward long-term goals in 2022

• Sales growth ex. currency of 11% to 14%; organic sales growth of 8% to 11%
• Reported EPS of $9.25 to $9.65; adj. EPS of $9.35 to $9.75, up ~10% at midpoint, excl. currency

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