Axalta Coating Systems Ltd. Q3 FY2025 earnings call

• Strong quarter with record adjusted EBITDA and adjusted diluted EPS driven by disciplined execution. Net sales were approximately $1.3 billion. - Team focused on customer service and technology enabled outperformance in many regions. - Global auto production a bright spot with full year 2025 forecast at ~91 million builds, 2% increase vs 2024. - Adjusted EBITDA was $294 million with a margin of 22.8%, 12 consecutive quarters of growth. - Mobility segment net sales up 4% to $460 million, adjusted EBITDA margin 18% (expansion of 230 basis points). - Refinish generated ~$90 million in incremental net sales from strategies including new body shops and pricing actions. - Industrial segment profitability ahead of schedule despite net sales decline. - Executed $100 million in share repurchases, reducing shares outstanding by over 3% since 2023. - Net leverage maintained at 2.5x, lowest in Axalta's history.

Performance Coatings: Net sales declined 6% year-over-year to $828 million. Adjusted EBITDA was $211 million with a margin of 25.5%, up 20 basis points year-over-year and 170 basis points sequentially. Mobility Coatings: Net sales increased 4% to $460 million. Adjusted EBITDA increased 20% year-over-year to $83 million with a margin of 18%.

• Expect record adjusted diluted earnings per share and adjusted EBITDA on lower revenue expectations. - Q4 net sales expected to decline mid-single digits vs last year. - Adjusted EBITDA anticipated to be ~$284 million and adjusted diluted earnings per share ~$0.60. - Full year 2025 net sales expected >$5.1 billion, adjusted EBITDA ~$1.140 billion (low end of previous guidance range). - Free cash flow expected ~$450 million for the year. - Adjusted diluted earnings per share forecasted to be $2.50 for full year, up 6% vs 2024 and ~50% vs 2023. - Plan to repurchase up to $250 million of stock in Q4.

• Macro environment challenges, especially in North America. - Tariff uncertainties impacting inventory levels. - Potential supply chain disruptions. - Fluctuations in raw material costs.

Q: On 3Q auto Refinish component down 7% for volume, how to disaggregate between industry volumes and inventory destocking, and strategies for 2026?

A: Ghansham, markets down mid- to high single digits, destocking also mid-single digits. Refinish had $90 million growth from strategies, 2,200 net new body shops. Confidence in 2026 due to stabilization in markets, insurance rates, and claims.

Q: Ever since taking helm, context on costs and progress into 2026?

A: Chris says still early in innings, invested more in capital, Transformation Initiative has ~$60-70 million accomplished, ~$20 million flow-through into next year, still opportunities for cost driving.

Q: Outlook for other end markets besides Refinish like Industrial and Commercial Vehicles?

A: Commercial Vehicle expected muted, Industrial markets somewhat muted waiting for mortgage rate cuts and construction drive. Light Vehicle expected slight step down, Refinish expected stable.

Q: Rehash on dividend and capital deployment appetite for acquisitions?

A: Carl says see tremendous value in stock, focusing on share repurchases now, dividend a board decision, M&A considered but see value in repurchasing shares now.

Q: Drivers in Refinish business, accident rates, insurance inflation, repair costs?

A: Accidents flat to down 1%, claims down high single digits in North America, mid-single digits in Europe, insurance premiums flatting, repair costs flatting. Leading indicators turning positive.

Q: Costs taken out, temporary vs structural?

A: Vast majority structural reductions, some tactical T&E may come back, but conversion rate on incremental revenue to EBITDA expected to improve.

Q: Refinish price/mix decline, stemming from mix to mainstream/economy?

A: Mix to mainstream/economy with lower margins, plus North American volume decline and destocking driving negative mix, but expected to mitigate in 2026.

Q: Refinish pricing strategy for 2026?

A: Plan to stick to similar pattern as 2025, net pricing ~2%.

Q: Q4 production and SG&A?

A: SG&A expected similar to Q3, free cash flow strong due to inventory drawdown.

Q: Raw materials and tariffs impact?

A: Tariff impact ~$20 million, raw material basket down 1% in Q3, stable outlook.

Q: Refinish revenue turning positive in 2Q '26, volume?

A: Expect volumes to turn positive in 2Q '26 from destocking abating and body shop wins.

Q: $250 million share repurchase in Q4, determination?

A: Carl says believe in stock value, have bought $165 million to date, will buy $250 million in Q4.

Q: 2026 Refinish not normal, strategy change and BASF sale impact?

A: Refinish has market share gain opportunities, BASF sale drives discipline, Axalta undervalued, will continue share repurchases.

Q: New strategic plan after A Plan, focus?

A: A Plan 4 elements ahead of plan, next plan to focus on growth, with strong underlying business performance.

Q: Refinish and Industrial markets recovery, what's needed?

A: Refinish destocking temporary, Industrial waiting for mortgage rate cuts and construction. Axalta has growth opportunities in Refinish and Industrial.

Q: Working capital and SG&A evolution?

A: SG&A expected similar in Q4, working capital to improve with inventory reduction, free cash flow strong in Q4 and next year.