Q1 2024 Axalta Coating Systems Ltd Earnings Call

Speaker Change: Ladies and gentlemen, thank you for standing by.

Operator: Christopher is standing by. Welcome to Axalta Coating Systems' first quarter 2024 earnings call. All participants will be in the listen-only mode. A question and answer session will follow the presentation by management. Today's call is being recorded, and a replay will be available through May 8th. Those listening after today's call should please note that the information provided in the recording will not be updated and, therefore, may no longer be current. I will now turn the call over to Chris Evans. Please go ahead, sir.

Welcome to exalt, a coding systems first quarter 'twenty 'twenty four earnings call all participants will be in a listen only mode.

A question and answer session will follow the presentation by management.

Today's call is being recorded and a replay will be available through may eight.

Those listening after today's call should please note that the information provided in the recording will be will not be updated and therefore may no longer be current.

Christopher Mark Evans: This is Chris Evans, VP of Investor Relations. We appreciate your continued interest in Axalta and welcome you to our first quarter financial results conference call. Joining me today are Chris Villavarayan, CEO and President, and Carl Anderson, CFO.

I will now turn the call over to Chris Evans. Please go ahead Sir.

Christopher Mark Evans: Thank you and good morning this.

This is Chris <unk> VP of Investor Relations.

Christopher Mark Evans: We appreciate your continued interest in <unk> and welcome you to our first quarter financial results Conference call.

Christopher Mark Evans: Joining me today are Chris Bayle of Orion, CEO, and President and Carl Anderson CFO.

Christopher Mark Evans: We released our quarterly financial results this morning and posted a slide presentation to the investor relations section of our website at Axalta.com, which we will be referencing during this call. Our prepared remarks, slide presentation, and our discussion today may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Exalted's operating and financial performance. These statements involve uncertainties and risks, and actual results may differ materially from those expressed in those forward-looking statements.

Christopher Mark Evans: We released our quarterly financial results. This morning, and posted a slide presentation to the Investor Relations section of our website at <unk> Dot com, which we'll be referencing during this call.

Christopher Mark Evans: Our prepared remarks slide presentation, and our discussion today may contain forward looking statements, reflecting the company's current view of future events and their potential effect on exalt is operating and financial performance.

These statements involve uncertainties and risks and actual results may differ materially from those forward looking statements.

Christopher Mark Evans: Please note that the company is under no obligation to provide updates to these forward-looking statements. Our remarks and this slide presentation also contain various non-GAAP financial measures. In the appendix of the slide presentation, we've included reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I will now turn the call over to Chris.

Christopher Mark Evans: Please note that the company is under no obligation to provide updates to these forward looking statements.

Christopher Mark Evans: Our remarks and a slide presentation also contains various non-GAAP financial measures.

Christopher Mark Evans: In the appendix of the slide presentation. We've included a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures.

Christopher Mark Evans: For additional information regarding forward looking statements and non-GAAP financial measures. Please refer to our filings with the SEC.

Christopher Mark Evans: I will now turn the call over to Chris.

Chrishan Anthon Sebastian Villavarayan: Thank you, Chris, and good morning, everyone. I'm proud to report an excellent quarter at Axalta. Overall, net sales were primarily flat, while adjusted EBITDA was a record for any first quarter in Axalta's history. Margins are significantly improved, and we believe we have more room to grow. Our balance sheet has continued to improve, with our net leverage ratio declining for seven consecutive quarters. I'm very confident with our trajectory this year, which has led us to raise fiscal year guidance for adjusted EBITDA, adjusted diluted EPS, and pre-cash flow.

Christopher Mark Evans: Thank you, Chris and good morning, everyone I'm proud to report an excellent quarter at exalt that overall net sales were primarily flat while adjusted EBITDA was a record for any first quarter in <unk> history margins are significantly improved and we believe we have more room to grow.

Chris: Our balance sheet has continued to improve with our net leverage ratio declining for seven consecutive quarters I'm very confident with our trajectory. This year, which has led us to raise fiscal year guidance for adjusted EBITDA.

Chris: Adjusted diluted EPS and free cash flow Yeah. I believe we're just getting started transforming the company and unlocking the tremendous potential of our product technology and organizational capability.

Chrishan Anthon Sebastian Villavarayan: Yet, I believe we're just getting started transforming the company and unlocking the tremendous potential of our products, technology, and organizational capabilities. For the first quarter, net sales increased 1% year over year to $1.3 billion with a positive price mix. We remain committed to realizing the full value of our products and services. Therefore, we continue to evaluate targeted pricing in select areas of the portfolio. Volume was approximately flat year over year, with growth in light vehicle and refinish offset by declines in industrial and commercial vehicles, given their softer macro environment.

Chris: For the first quarter net sales increased 1% year over year to $1 3 billion with positive price mix.

Chris: We remain committed to realizing the full value of our products and services. Therefore, we continue to evaluate targeted pricing in select areas of the portfolio.

Chris: Volume was approximately flat year over year with growth in light vehicle and refinish offset by decline in industrial and commercial vehicle given their softer macro environment.

Chrishan Anthon Sebastian Villavarayan: Adjusted EBITDA increased 22% year-over-year to $259 million, representing a record first quarter. This quarter ran ahead of guidance due to outstanding execution from the entire global team. Specifically, our commercial teams did a great job of winning new customers by focusing on accretive areas that will support a more profitable product mix and pricing for value. Meanwhile, our operations teams focused on reducing backlogs and beginning the Axalta performance system journey, which is gaining traction. Procurement over-delivered again, driving 11% better unit variable costs.

Chris: Adjusted EBITDA increased 22% year over year to 259 million, representing a record first quarter.

Chris: This quarter ran ahead of guidance due to outstanding execution from the entire global team specifically, our commercial team did a great job of winning new customers by focusing on accretive areas that will support a more profitable product mix and pricing for value.

Chris: Our operations teams focused on reducing backlogs and beginning the adult type performance.

Chris: Journey, which is gaining traction.

Chris: Procurement over delivered again, driving 11% better unit variable cost.

Chris: Cost optimization has been the central focus since I joined the company.

Chrishan Anthon Sebastian Villavarayan: Cost optimization has been the central focus since I joined the company and will remain a high priority moving forward. Adjusted EBITDA margins improved by 340 basis points to 20%, reflecting significant progress towards the return to historic margins in the 20 to 21% range. Profitability increased substantially across both segments. The largest margin contributions came from light vehicle and industrial end markets, with profitability improvement in the latter stemming partly from our strategic shift toward higher margin products.

Remain a high priority moving forward.

Chris: Adjusted EBITDA margins improved by 340 basis points to 20%, reflecting significant progress towards a return to historic margin in the 20% or 21% range.

Chris: Profitability increased substantially across both segments.

Our largest margin contributions came from light vehicle and industrial end market with profitability improvement in the ladder stemming partly from our strategic shift towards higher margin product.

Chrishan Anthon Sebastian Villavarayan: Let's move to slide four for details on our business segment. Refinish had another strong quarter with net sales 4% higher year over year. This represents the 13th straight quarter of better top line performance with a balanced contribution from price mix, volume, and effect. However, market growth was roughly flat versus the prior year period across North America and EMEA.

Chris: Let's move to slide four for details on our business segment.

Chris: Refinish had another strong quarter with net sales, 4% higher year over year. This represents the 13th straight quarter of better topline performance with a balanced contribution from price mix volume and that fast.

Chrishan Anthon Sebastian Villavarayan: However, we are seeing above-market performance, given our 600 net body shop win and the addition of 100 new points of distribution. We're also getting traction with our strategic growth initiatives in adjacencies like U-Pole, Aerosol, Raptor bedliners, and accessories sold through our company-owned stores in Europe. Our acquisition of Andre Co. supports these strategic initiatives and has proved to be an excellent transaction for us. I'm very pleased with the pace of integration, which is ahead of our initial plan.

Chris: Market growth was roughly flat versus the prior year period across North America and EMEA. However.

Chris: However, we are seeing above market performance, given our 600 net body shop, when and the addition of 100 new points of distribution.

Chris: We're also getting traction with our strategic growth initiatives and Adjacencies like you all aerosol wrapped in bed liners and accessories sold through our company owned stores in Europe, Our acquisition of Andre Cohen supports these in its strategic initiatives and has proved to be an excellent transaction for us.

Chris: I'm very pleased with the pace of integration, which is ahead of our initial plan.

Chrishan Anthon Sebastian Villavarayan: I believe that differentiated technology is the foundation of Axalta's competitive advantage and a key reason we continue to outpace market growth. I'm happy to announce that we were recognized with several prestigious R&D awards this quarter, all centered around efficient and sustainable innovation. There is no better example than IrisMix, a fast, efficient, fully automated, and completely hands-free mixing machine for the refinish industry.

Chris: I believe that differentiated technology is the foundation of Exalt is a competitive advantage and a key reason, we continue to outpace market growth.

Chris: I'm happy to announce that we were recognized with several prestigious R&D awards. This quarter all centered around efficient and sustainable innovation. There is no better example than Iris smacks, a fast efficient fully automated and completely hands free mixing machine for the refinish end.

Chris: The strength in.

Chrishan Anthon Sebastian Villavarayan: In addition to seeing strong customer demand for launching this product, it also won an Edison Award in the Environmental and Industrial Solutions category. Another bright spot in the quarter was Light Vehicle Growth. Net sales improved by 4% year-over-year, mostly due to strong volume, particularly in China; volume growth in China improved by 20% as compared to 4% auto production growth, again against the prior year quarter. We have partnered with the fastest growing OEM, and this is solid business for us at an attractive return.

Chris: In addition to seeing strong customer demand.

Chris: <unk>. This product. It also won an Edison award in the environmental and industrial solutions category.

Chris: Another bright spot in the quarter was light vehicle growth.

Chris: Net sales improved by 4% year over year, mostly due to strong volume, particularly in China.

Chris: Volume growth in China improved by 20% as compared to 4% auto production growth again against the prior year quarter.

Chris: We have partnered with the fastest growing OEM and this is solid business for us.

Chris: Attractive return.

Chrishan Anthon Sebastian Villavarayan: We win new business and build lasting partnerships in this market with our products, service, and technology, which is exemplified by our recent recognition from General Motors as a supplier of the year. However, commercial vehicle net sales declined by 4% year over year, consistent with the expected slowdown in North America Class 8 production. We believe this market will further soften in the year before ramping back up in 2025 and 2026, ahead of the emission standards going into effect in 2027. Industrial net sales declined 6% year over year, driven by soft construction activity in North America and EMEA, which has offset improvement in new business wins.

Chris: We win new business and build lasting partnerships in this market with our product service and technology, which is exemplified with our recent recognition from general motors as a supplier of the year.

Vehicle net sales declined by 4% year over year consistent with the expected slowdown in North America class eight production.

Chris: We believe this market will further soften into the year before ramping back up in 'twenty five and 26 ahead of the emission standards going into effect in 2027.

Chris: Industrial net sales declined 6% year over year, driven by soft construction activity in North America, and EMEA, which has offset improvement in new business win.

Chrishan Anthon Sebastian Villavarayan: We have strategically deselected low margin categories, which is yielding significantly improved profitability. My main focus since joining Axalta has been to improve efficiency and performance across the company. I'm very proud of our achievements to date. We're starting to see the benefits of the actions we have taken in our financial results, but we believe there is more to come. To further enhance our performance and results, we announced our Transformation Initiative in February to enable us to be more proactive, responsive, and agile.

Chris: We have strategically deselected low margin categories, which is yielding significantly improved profitability.

Speaker Change: My main focus since joining installed town has been to improve the efficiency and performance across the company.

Speaker Change: I'm very proud of our achievements to date, we're starting to see the benefits of our actions we have taken in our financial result.

Speaker Change: But we believe there is more to come.

Speaker Change: To further enhance our performance and results we have announced our transformation initiative in February to enable us to be more proactive responsive and agile. This program includes the global workforce reduction of approximately 5% and a shift in manufacturing capacity and capability.

Chrishan Anthon Sebastian Villavarayan: This program includes a global workforce reduction of approximately 5% and a shift in manufacturing capacity and capability. We expect this program to yield approximately $75 million in annualized run rate savings in 2026. Before passing the call to Carl for a more detailed review of our first quarter financial performance, I want to thank Bob McLaughlin for his 10 years of service on the Axalta board, including as chair of the audit committee. Bob is elected to retire next month after the Annual General Meeting. He has been an incredible thought partner for the board, and we wish him the very, very best.

Speaker Change: We expect this program to yield approximately 75 million in annualized run rate savings in 2026.

Speaker Change: Before passing the call to Carl for a more detailed review of our first quarter financial performance I want to thank Bob Mclaughlin for his 10 years of service on the adult of board, including as chair of the Audit Committee.

Carl D. Anderson: Rob has elected to retire next month after the annual General meeting he has been an incredible partner, but the board and we wish him the very very bad.

Carl D. Anderson: Thank you, Chris, and good morning, everyone. Let's turn to slide 5. First quarter net sales increased by 1% year over year to $1.3 billion, and gross margins improved by 340 basis points to 33% versus the prior year, principally driven by an 11% lower variable cost unit rate. All raw material categories were lower year over year, with isocyanate, epoxy resin, and monomers most favorable. Overall, we are comfortable with the current raw material environment and continue to project a mid-single-digit full-year benefit, strongly weighted to the first half.

Carl D. Anderson: Thank you, Chris and good morning, everyone.

Carl D. Anderson: Let's turn to slide five.

Carl D. Anderson: First quarter net sales increased by 1% year over year to $1 3 billion.

Carl D. Anderson: Gross margins improved by 340 basis points to 33% versus the prior year.

Carl D. Anderson: Really driven by 11% lower variable costs unit rate.

Carl D. Anderson: All raw material categories were lower year over year with isocyanate.

Carl D. Anderson: Oxy resin and monomers most favorable.

Carl D. Anderson: Overall, we are comfortable in the current raw material environment and continued to project a mid single digit full year benefit.

Carl D. Anderson: Strongly weighted to the first half.

Carl D. Anderson: Though there are a few pockets of pressure stemming from temporary supply issues, such as propylene availability in North America and butyl acetate in Europe, we view these as transitory and isolated situations which are fully accounted for in our guidance.

Carl D. Anderson: So there are a few pockets of pressure stemming from temporary supply issues, such as propylene availability in North America and beautiful acetate in Europe. We view these as transitory and isolated situations, which are fully accounted for in our guidance.

Carl D. Anderson: SG&A was flat year over year, demonstrating effective cost management efforts that offset labor inflation in the category. However, income from operations declined $4 million to $121 million, inclusive of a $55 million pre-tax charge related to employee severance and exit costs stemming from the 2024 Transformation Initiative that Chris noted. We expect that the annualized run rate savings from these actions will be $75 million in 2026, with $10 million expected to come in this year.

Carl D. Anderson: SG&A was flat year over year, demonstrating effective cost management effort, which offset labor inflation in the category.

Carl D. Anderson: Income from operations declined $4 million to $121 million.

Carl D. Anderson: <unk> about $55 million pre tax charge related to employee severance and exit costs.

Carl D. Anderson: Stemming from the 2024 transformation initiative that Chris noted.

Carl D. Anderson: We expect that the annualized run rate savings from these actions will be $75 million in 2026 was $10 million is expected to come in this year.

Carl D. Anderson: Adjusted EBIT in the quarter was $259 million, 22% above first quarter 2023, and adjusted diluted earnings per share increased 37% year-over-year to $0.48, despite a $0.05 headwind from higher interest and tax expense. Moving to slide six.

Carl D. Anderson: Adjusted EBITDA in the quarter was 259 million, 22% above first quarter 2023, and adjusted diluted earnings per share increased 37% year over year to 48%. Despite a five cent headwind from higher interest and tax expense.

Carl D. Anderson: Moving to slide six.

Carl D. Anderson: Performance Coatings' first quarter net sales were flat year over year at $848 million. While net sales were flat overall, we were able to drive 4% growth year over year in refinish, which is consistent with our portfolio strategy to accelerate growth in the business. We finished net sales benefited from a strong price mix and a solid contribution from the Andre Co acquisition. We finished market demand in North America and Europe remained stable in the quarter in line with our expectations. Industrial net sales declined by 6%, primarily due to lower volumes as soft global building and construction activity weighed on demand.

Carl D. Anderson: Performance coatings first quarter net sales were flat year over year at $848 million.

Carl D. Anderson: While net sales were flat overall, we were able to drive 4% growth year over year in refinish, which is consistent with our portfolio strategy to accelerate growth in the business.

Carl D. Anderson: Refinished net sales benefited from strong price mix and a solid contribution from the Android co acquisition.

Carl D. Anderson: Refinished market demand in North America, and Europe remained stable in the quarter in line with our expectation.

Industrial net sales declined by 6%, primarily due to lower volume as soft global building and construction activity weighed on demand.

Carl D. Anderson: As Chris highlighted, we are also strategically moving away from lower margin business. We believe this strategy is being well executed by our team and is driving significant margin improvement. Industrial volumes are now approximately 20% below 2022 levels, creating a cyclical upside opportunity when global construction activity reaccelerates.

Carl D. Anderson: As Chris highlighted we are also strategically moving away from lower margin business.

Carl D. Anderson: We believe this strategy is being well executed by our team and is driving significant margin improvement.

Industrial volumes are now approximately 20% below 2022 level.

Creating a cyclical upside opportunity when global construction activity Reaccelerate.

Carl D. Anderson: Performance coatings adjusted EBITDA increased 16% year over year to a first quarter record of $196 million, with both end markets contributing favorably. Adjusted EBITDA margin improved by 310 basis points compared to the prior year. On 5-7, first quarter mobility coatings net sales increased 2% year-over-year to $446 million. 4% better late vehicle net sales partially offset declines in commercial vehicles. Mobility price excluding mixed effects was modestly favorable and more than offset contractual raw material pass-through impacts in the period.

Carl D. Anderson: Performance coatings, adjusted EBITDA increased 16% year over year to a first quarter record of $196 million.

Carl D. Anderson: With both end markets contributing favorably.

Carl D. Anderson: Adjusted EBITDA margin improved by 310 basis points compared to the prior year.

On slide seven first quarter mobility coatings, net sales increased 2% year over year to $446 million.

Carl D. Anderson: 4% better light vehicle net sales, partially offset declines in commercial vehicle.

Carl D. Anderson: Mobility freight excluding mix effect was modestly favorable and more than offset contractual raw material pass through impacts in the period.

Carl D. Anderson: Flight vehicle volumes were again solid in the quarter, exceeding global auto growth rates led primarily by China, and commercial vehicle volumes declined as expected, driven by lower North America Class A truck production. Mobility coatings adjusted EBITDA improved to $63 million, up from $44 million, a 44% increase year over year, and adjusted even the margin improved by 410 basis points to 14.2% with considerable improvement in light vehicles. Turning the slide in.

Carl D. Anderson: Light vehicle volumes were again solid in the quarter.

Carl D. Anderson: Exceeding global auto growth rate led primarily by China.

Carl D. Anderson: And commercial vehicle volumes declined as expected driven by lower North America class eight truck production.

Carl D. Anderson: Mobility coatings, adjusted EBITDA improved to $63 million up from 44, Million% to 44% increase year over year.

Carl D. Anderson: Adjusted EBITDA margin improved by 410 basis points to 14, 2% with considerable improvement in light vehicle.

Carl D. Anderson: Turning to slide eight.

Carl D. Anderson: We ended the first quarter with over $1.1 billion in total liquidity, including a cash balance of approximately $624 million. Free cash flow in the quarter was $15 million, an increase of $103 million year-over-year. The strong seasonal free cash flow is a result of improved working capital performance. During the quarter, we also took action to reduce interest expenses. First, we paid down $75 million of growth debt, building from the $200 million of debt prepayment executed in 2023.

Carl D. Anderson: We ended the first quarter with over $1 1 billion in total liquidity, including a cash balance of approximately $624 million.

Carl D. Anderson: Free cash flow in the quarter was $15 million, an increase of $103 million year over year.

Carl D. Anderson: The strong seasonal free cash flow was a result of improved working capital performance.

Carl D. Anderson: During the quarter, we also took action to reduce interest expense.

Carl D. Anderson: First we paid down $75 million of gross debt.

Carl D. Anderson: Building from the $200 million of debt prepayment executed in 2023.

Carl D. Anderson: Next, we successfully repriced our term loan, lowering our effective rate by 50 basis points. Taken together, we are confident that interest expense will be lower in 2024 versus last year. Our total net leverage ratio at quarter end was 2.8 times, nearly a full turn below the prior year period. Given current trends, we should end the year at the high end of our target net leverage ratio range of 2 to 2.5 times. As our balance sheet continues to strengthen, we are announcing this morning a new $700 million share repurchase program.

Carl D. Anderson: Next we successfully repriced our term loan lowering our effective rate by 50 basis points.

Carl D. Anderson: Taken together, we are confident that interest expense will be lower in 2024 versus last year.

Our total net leverage ratio at quarter end was two eight times nearly a full turn below the prior year period.

Given current trends, we should end the year at the high end of our target net leverage ratio range of two to two five times.

Carl D. Anderson: As our balance sheet continues to strengthen we are announcing this morning, a new $700 million share repurchase program.

Carl D. Anderson: We expect to continue to drive accelerated finance performance in the coming years and believe now is an optimal time to move forward with this program as we focus on driving value creation for our shareholders. I will now turn the call back to Chris for our financial guidance and closing remarks. Thanks, Carl.

Carl D. Anderson: We expect to continue to drive accelerated financial performance in the coming years and believe now is an optimal time to move forward with this program as we focus on driving value creation for our shareholders.

Carl D. Anderson: I will now turn the call back to Chris for our financial guidance and closing remarks.

Chrishan Anthon Sebastian Villavarayan: Net sales in the second quarter are expected to be 3-5% higher year-over-year, driven by strong growth in light vehicle and refinished, stable industrial sales, and market-driven declines in commercial vehicles. Refinish net sales are projected to increase by high single-digit percent year over year in Q2 given share gains, growth in adjacencies, plus contributions from the Andre Co acquisition. We will also benefit from lapping prior year production issues in North America. Lightweight coats should have another strong quarter with robust volume growth and a stable price mix. In industrial, net sales are expected to be flat to lower as margin growth remains our highest priority in the current soft macro environment. And lastly, in commercial vehicles, our view is unchanged.

Chrishan Anthon Sebastian Villavarayan: Thanks Carl. Now, let's turn to slide 9.

Chris: Thanks, Carl let's turn to slide nine net sales in the second quarter are expected to be 3% to 5% higher year over year, driven by strong growth in light vehicle in refinished stable industrial sales and market driven declines in commercial vehicle.

Chris: Refinish net sales are projected to increase by high single digit percent year over year in Q2, given share gain growth in Adjacencies plus contributions from the Andre co acquisition.

Chris: We will also benefit from lapping prior year production issues in North America.

Chris: Lightweight close should have another strong quarter with robust volume growth and stable price mix.

Chrishan Anthon Sebastian Villavarayan: We see North American Class VIII bills flowing through the year before demand ramps back up in 2025 and 2026. Our full-year low single-digit sales growth target remains unchanged. We expect typical seasonal trends to play out this year, leading to a step-up in second quarter net sales versus Q1. Second quarter adjusted EBITDA is projected to be roughly up 21% year-over-year to $275 million. Adjusted diluted earnings per share is estimated to be approximately $0.50, an increase of more than 40% year-over-year.

Chris: In industrial net sales are expected to be flat to lower as margin growth remain our highest priority in the current soft macro environment and lastly in commercial vehicle. Our view is unchanged, we see north American class eight build slowing through the year before demand ramps back up.

Chris: In 25 and 2026.

Chris: Our full year low single digit sales growth target remains unchanged, we expect typical seasonal trends to play out this year, leading to a step up in second quarter net sales in <unk>.

Chris: Since Q1.

Chris: Second quarter adjusted EBITDA is projected to be roughly up 21% year over year to $275 million adjusted diluted earnings per share is estimated to be approximately 50 cents, an increase of more than 40% year over year.

Chrishan Anthon Sebastian Villavarayan: Given the strong start to the year, we have increased our full-year adjusted EBITDA, adjusted diluted EPF, and free cash flow guidance. Full-year 2024 adjusted EBITDA is projected to be between $1.05 and $1.08 billion, a $35 million increase to the midpoint versus our prior guidance. This translates to an adjusted diluted EPS range between $1.90 and $2 per share, an increase of greater than seven cents on the midpoint.

Chris: Given the strong start to the year, we have increased our full year adjusted EBITDA adjusted diluted EPS and free cash flow guidance.

Chris: Full year 2024, adjusted EBITDA is projected to be between one point <unk>, five and 1.08 billion a $35 million increase to the midpoint versus our prior guidance. This translates to an adjusted diluted EPS range between $1 90 and $2 per share.

Chris: An increase of greater than seven to the midpoint.

Chrishan Anthon Sebastian Villavarayan: We have also increased our 2024 free cash flow guidance estimate by $50 million to a new range of $425 million to $475 million. I'm proud of our performance to start the year, and I'm confident in our performance trajectory. We believe we're on pace for another record performance in 2024 and are setting the foundation for long-term value creation. I look forward to sharing our Axalta plan with you on Strategy Day on May 15. For more detail, please contact Chris Evans or refer to our investor website. Thank you for joining us today. This concludes our prepared remarks. Operator, please open the line for Q&A.

Chris: We have also increased our 2020 for free cash flow guidance estimate by $50 million to a new range of 425 million to $475 million.

Speaker Change: I am proud of our performance to start the year and I'm confident in our performance trajectory. We believe we're on pace for another record performance in 2024 and are setting the foundation for long term value creation I look forward to sharing our exalt plan with you on strategy day on May 15.

Speaker Change: For more detail, please contact Chris happened or refer to our investor website.

Speaker Change: Thank you for joining us today. This concludes our prepared remarks.

Speaker Change: <unk>. Please open the line for Q&A.

Speaker Change: Thank you.

Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. Again, for a question, press star 1. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble our roster. Our first question comes from David Begleiter from Deutsche Bank. David, please go ahead.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If you are using a speakerphone. Please pick up your handset before pressing the keys again for a question star one.

Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we'll pause momentarily to assemble our roster.

Speaker Change: Yeah.

Speaker Change: Our first question comes from <unk>.

Deutsche Bank: But the lighter from Deutsche Bank.

Deutsche Bank: Please go ahead.

David Huang: This is David Huang here for Dave. I guess first on guidance, I guess you raised your EBITDA guidance and you left the sales guidance unchanged, changes that reflect basically the restructuring benefit and any additional raw material, I mean deflation.

Hong: This is a type of Hong here for Dave I guess first on guidance you read I guess you raised your EBITDA guidance and you left the sales guidance unchanged does the.

Hong: Charles reflect basically the restructuring benefits and any additional raw material deflation.

Hong: Deflation.

Carl D. Anderson: Yeah, good morning. This is Carl.

Hong: Yes. Good morning. This is Karl thanks for the question yes.

Karl: As far as the guidance, we are expecting about $10 million of benefit related to the restructuring program that we announced in February.

Carl D. Anderson: Thanks for the question. Yeah, as far as guidance is concerned, we are expecting about $10 million of benefits related to the restructuring program that we announced in February. So that is part of it. And as we think about the raw material perspective, we are still planning for the full year that we're about mid-single digit percent lower on a year-over-year basis for our raw materials. But a lot of that, as we mentioned in the prepared remarks, is weighted to the first half of the year.

Karl: That is part of it and as we think about the raw material perspective, we are still planning for the full year that are that were about mid single digits.

Karl: <unk> lower on a year over year basis for our raw materials, but a lot of that is as we as we referenced in the prepared remarks are weighted to the first half of the year.

Speaker Change: Okay, and then second on Refinish can you just talk about your expectation for volume trends and refinish I guess, there's some diversions among your peers no debt some pre buy activity in the prior year, that's crazy a difficult comp for this year I guess occasions talk about underlying demand trend.

Speaker Change: And probably you know your opportunity equal further share gains.

Chrishan Anthon Sebastian Villavarayan: Sure, David. Good morning, and I'll take this one.

David Huang: Okay, and then second on refinish, can you just talk about your expectation for volume trends in refinish? I guess there's some diversions among your peers, and I noted some pre-buying activity in the prior year that's creating a difficult time for this year. I guess, can you just talk about underlying demand trends and, probably, your opportunity for further share gains? Sure, David, good morning, and I'll take it.

Speaker Change: Sure David Good morning, and I'll take this one so I'm.

Speaker Change: I'm not going to talk about what's happening with the rest of our peers I think focused on what we're doing we're focused on four strategies and the four elements of that are really around body shop wins, which we had an exceptional quarter last quarter with 600, new body shop wins and that's building.

Chrishan Anthon Sebastian Villavarayan: So, you know, I'm not going to talk about what's happening with the rest of our peers. I think we're focused on four strategies, and the four elements of that are really around body shop wins, which we had an exceptional quarter last quarter with 600 new body shop wins. And that's building on 2,400 body shops that we won last year. And if you look at the last three, four years, we have gotten over 10,000 body shops.

Speaker Change: On 2400 body shops that we won last year and if you look at the last three or four years, we have gotten over 10000 body shop. So it's certainly the new wins and body shops. That's one element of it the second element of it is really our adjacent space and whether it's through on the aerosols.

Chrishan Anthon Sebastian Villavarayan: So it's certainly the new wins and body shops; that's one element of it. The second element of it is really our adjacent space, and whether it's the aerosols that we sell with our UPOL acquisition or our Raptor bed liners, all of that going through the shelves that we have with AutoZone and O'Reilly's with 15,000 new shelves that we've been able to put our products on. And then on top of that, we also have the retail shops. We have 75 shops in Europe and in South America that we are able to really push our products through. And today, only 30% of our products go through these shops.

Speaker Change: We sell with our <unk> acquisition or our wrapped her bed liners all of that going through the shelves that we have with autozone and O'reilly with 15000, new shelves that we have been able to put our products on and then on top of that we also have the.

Speaker Change: The retail shops, we have 75 shops in Europe and in South America that we are able to really push our products through and today only 30% of our products go through the shops and as we move more from distribution through our retail shops, we see this as an incremental opportunity here is.

Chrishan Anthon Sebastian Villavarayan: And as we move more from distribution through our retail shops, we see this as an incremental opportunity here as well. And then finally, it was the acquisition of Andre Co. With that acquisition, we're proceeding well ahead of plan. As I look at it, all four elements are really building the story. And so that's really why we're winning.

Speaker Change: Well and then finally it was the acquisition of Andre Cope with that acquisition, which we are.

Speaker Change: Proceeding well ahead of plan as I look at it all fourth the elements that we're really building to the story and so that's really why we're winning.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Christopher S. Parkinson: And our next question comes from Christopher Parkinson from Wolfe Capital. Christopher, please go ahead.

Speaker Change: And our next question comes from Christopher Parkinson from Wolfe Capital Christopher Please go ahead.

Michael Joseph Harrison: Great. Thanks for taking my question. This is Harris Fine. I'm for Chris.

Speaker Change: Great. Thanks for taking my question. This is Harris fein on for Chris.

Carl D. Anderson: I think I heard you say before that the procurement team took out 11% at the unit variable cost level. Just curious if you could go into maybe a little bit more detail about what's happening there and how that flows into the raw material expectations for the full year because if you're down mid-single digits for the full year, you know, wondering if that implies that maybe raw materials could be up in the back half of the year. Thanks. Certainly. I'll take it.

Christopher S. Parkinson: I think I heard you say before that the prescript the procurement team took out 11%.

Harris Fein: On a unit variable cost level are just curious if you could go into maybe a little bit more detail about what's happening there and.

Harris Fein: And how that flows into the raw material expectations for the full year, because if you're down mid single digits for the full year.

Harris Fein: Wondering if that implies that maybe raw materials could be up in the back half of the year.

Carl D. Anderson: Certainly, I'll take this. So we are actually, you know, very proud of the team for what they accomplished here. And we started this program actually early last year, and we really saw the net benefits starting in Q3 of last year. And so what we did was the objective of this was really around two elements. And the first element was really to drive the savings which you're seeing come through the P&L. And again, you know, whether it's the last quarter of Q4 or in Q1, I think we've had an incredible performance, industry-leading performance, even double digits in Q4, and then what we saw in Q1 of this year.

Speaker Change: Certainly I'll take this so we actually very proud of the team for what they accomplished here and we started this program actually early last year and we really saw the net benefits starting in Q3 of last year and so what we did with the objective of this was really around two elements and the first element was really to.

Speaker Change: Drive the savings, which youre seeing come through the P&L and again, whether it's last quarter Q4 or in Q1, I think we've had an incredible performance industry, leading performance even double digits in Q4, and then what we saw in Q1 of this year. We also see this benefit continuing into a better.

Carl D. Anderson: We also see this benefit continuing into a bit of Q2 before we start lapping our performance that we saw in Q3. So to your point, we do believe our purchasing team's performance will start being muted as we think about the back half of this year. The second objective of this team was to really get better contracts or more longer-term agreements so that they would help us manage through the cyclicality and a little bit of the volatility we saw in the marketplace.

Speaker Change: Q2, before we start lapping our performance that we saw in Q3, so to your point, we do believe our purchasing teams performance will start being muted as we think about the back half of this year.

Speaker Change: The second half objective of this team was to really get better contracts or are more longer term agreements. So that would help us manage through this cyclicality and a little bit of the volatility we saw in the marketplace. So these aren't long contracts them, but there are six to six months too.

Carl D. Anderson: So these aren't long contracts, but there are six months to a year-long contracts that really enable us to be more responsive and deal with indexing as well as productivity. So both of those two elements have really been driven through about two-thirds of our basket, and that's certainly the benefit that you see through this year and what we expect to get somewhat muted through the back half of the year, but the good thing is we can at least balance our performance in material through the full year.

Speaker Change: A year long contract that really enables us to be more responsive and manage with indexing as well as productivity. So both of those two elements have really been driven through about two thirds of our basket and that's certainly the benefit that you see through this year and what we expect to.

Speaker Change: Get somewhat muted through the back half of the year, but the good thing is we can at least balanced our performance in material through the full year.

Michael Joseph Harrison: Got it. That's helpful. And then I guess the second one, light vehicle pricing, looks like it was up, excluding mix. Uh... maybe you could just go into a little bit more detail about how you were able to drive positive price uh... because you know I believe thirty percent of that business is on RMI's. Yeah, absolutely. I think, you know,

Speaker Change: Got it that's helpful.

Speaker Change: And then I guess, the second one light vehicle pricing it looks like it was up excluding mix.

Speaker Change: Maybe if you could just go into a little bit more detail about how you were able to drive positive price.

Speaker Change: Because you know I believe 30% of that business is on our minds.

Chrishan Anthon Sebastian Villavarayan: Yeah, absolutely. I think, you know, just absolute kudos to that team. And I think there are really three elements here. The first one is, you know, if I went back, I think about a couple of years ago, we put in a great new leadership team that was really driven around listening to the customer and really focusing on getting the right products and the right capacities in place. So if you look at a perfect example, China, the market's up 4%, and we grew by 21%. It kind of speaks to the exceptional focus and the drive of that team. That's the first one.

Speaker Change: Yeah, absolutely I think you know.

Speaker Change: Absolute kudos to that team and I think it's really three elements here. The first one is <unk>.

Chrishan Anthon Sebastian Villavarayan: The second one is really the quality and the reliability of the product. Again, the development of the products led to ensuring that we had the right products for the market. Now, a lot of folks can say this, but I think what makes the difference is you can see it from our customer accolades, whether it's the Daimler Award or the GM Supplier of the Year Award. I think that certainly plays well with our performance here.

Speaker Change: Went back I think about a couple of years ago.

Speaker Change: We put in a great new leadership team that was really driven around listening to the customer and really focusing on getting the right products and the right.

Speaker Change: Capacity in place. So if you look at a perfect example, being China the market's up 4% we grew by 21% it kind of talks to the exceptional focus and the drive of that team. That's the first one the second one is it's really the quality and the reliability of the product.

Speaker Change: Again, the development of the products.

Speaker Change: Led to ensuring that we have the right products for the market now.

Speaker Change: A lot of folks can say this but I think what's the difference as you can see it from our.

Speaker Change: Customer accolades, whether it's the Daimler Award.

Speaker Change: As well as the GM supplier of the year Award I think Thats certainly plays well to our performance here.

Chrishan Anthon Sebastian Villavarayan: And then finally, you know, it really comes to our ability to match color. I think, you know, in my 14 months at Axalta, what I am realizing is that we are really good at matching and developing color. And especially in regions like China, customers are pushing the boundaries of color, and we're certainly there to respond to it.

Speaker Change: And then finally, you know it really comes to our our ability to match color I think in my 14 months that exalt or what I am realizing as we are.

Speaker Change: We are really good at matching and developing color and especially in regions like China customers without pushing the barriers of color and we're certainly there to respond to it.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Aleksey V. Yefremov: Okay, our next question is coming from Aleksey Yefremov from KeyBank Capital. Aleksey, please go ahead.

Speaker Change: Okay. Our next question is coming from Alexei <unk> from off from Keybanc capital.

Aleksey V. Yefremov: Thanks. Good morning, everyone.

Alexei: Like say please go ahead.

Carl D. Anderson: Do you expect to repay more debt before year-end, as you're thinking about your two and a half times leverage? And should we expect most of the pre-cash flow to go towards buyback for the rest of the year if you're not paying any more debt down? Yeah. Thanks, Aleksey.

Alexei: Thanks, Good morning, everyone.

Alexei: Do you expect European more debt before year end are you thinking about your two and a half.

Alexei: Times leverage.

Alexei: And should.

Alexei: Should we expect most of the free cash flow to go towards buybacks for the rest of the year, if you're not paying any more than that.

Carl D. Anderson: Yes, as we look forward for the next nine months, if you just look, we're sitting at about 2.8 leverage today. If you run kind of what our expectations are for free cash flow and the new EBITDA guide we gave you, you can see pretty quickly that we're going to be right below our 2.5 times net leverage at year-end. So as we look forward, we don't really need to pay any more debt down in order to achieve that objective. And we are obviously announcing today the new $700 million share repurchase program. We will be taking a closer look at executing on that as we kind of go forward this year. Thanks a lot. Very helpful.

Alexei: Yes.

Alexei: Yes, as we look forward for really the next nine months.

Alexei: It just looks.

Alexei: It's sitting at about two eight leverage today.

Alexei: If you run kind of what our expectations are in free cash flow and the new EBIT Guide. We gave you you can see pretty quickly we're going to be.

Alexei: <unk> below our two five times net leverage.

Alexei: At year end, so as we look forward, we don't really need to pay any more debt down in order to achieve that objective. So we are obviously announcing today, the new $700 million share repurchase program, we will be taking a closer look at executing on that as.

Alexei: As we kind of go forward this year.

Aleksey V. Yefremov: And then I wanted to ask about index pricing for the rest of this year. It looks like you have some impacts in Q1. Should we expect more pronounced negative price impacts from the indices? And when would you hit sort of the stable point where your prices are equivalent to sort of the cost and

Thanks, a lot very helpful. And then I wanted to ask about index pricing for the rest of this year. It looks like you have some impacts in Q1.

Alexei: We expect a more pronounced.

Alexei: Negative price from the industry yourselves and.

Alexei: Well would you hit sort of a stable point, where your prices are equivalent to sort of the cost synergies.

Carl D. Anderson: Yeah, I think we expect, especially if you get into the second quarter, we are expecting to have a favorable price mix as we think about where the second quarter is being shaped up at this point. And then, as far as really the rest of the year, I would say we would start getting into more equilibrium as it relates to the price mix dynamic coupled with the RMI index agreements we have.

Speaker Change: Yes, I think we expected.

Speaker Change: Especially if you get into the second quarter, we are expecting to have.

Speaker Change: Favorable price mix as we think about where the second quarter is.

Speaker Change: Being shaped up at this point and then as far as really the rest of the year I would say, we would start getting getting into that more equilibrium as it relates to the price mix dynamic coupled with the Rmi.

Speaker Change: <unk> agreements we have in place.

Aleksey V. Yefremov: Thanks a lot. Thank you.

Speaker Change: Thanks, a lot. Thank you.

Ghansham Panjabi: Our next question comes from Ghansham Panjabi from Baird. Ghansham, please go ahead.

Speaker Change: Our next question comes from Ghansham Panjabi from Baird Ghansham. Please go ahead.

Matthew T. Krueger: Hi, good morning, everyone. This is Matt Krieger sitting in for Gonsham today.

Speaker Change: Hi, Good morning, everyone. This is Matt Krieger sitting in for Ghansham today. So I just wanted to kick things off and touch on the industrial business. So.

Matthew T. Krueger: So I just wanted to kick things off and touch on the industrial business. So can you talk a bit about what inning exalt is currently in from a business pruning perspective? And then, you know, more specifically, when should we start to do kind of normalized base comparisons for the industrial segment that already are doing this, you know, ongoing pruning activity?

Matthew T. Krueger: Can you talk a bit about what inning exalt is currently in from a business perspective, and then you know.

Matthew T. Krueger: More specifically when should we start to lap kind of normalized base comparisons for the industrial segment that already are lapping.

Matthew T. Krueger: Improving activity.

Chrishan Anthon Sebastian Villavarayan: Certainly, Matt. Good morning.

Speaker Change: Certainly Matt good morning, So I wouldn't call us probably in the third inning in our industrial.

Chrishan Anthon Sebastian Villavarayan: So I would call us probably in the third inning in our industrial business. Certainly, you know, what our focus here is primarily, you know, managing the portfolio and driving for margin enhancement. That's essentially what we've been very, very focused on and getting the business ready for when the markets return. So, you know, as I think about the three business units, you know, and you can see it on the refinished side and on the mobility side, we've seen certain significant growth.

Speaker Change: Business.

Speaker Change: Certainly whats our focus here is primarily managing the portfolio and driving for margin enhancement. That's essentially what we have been very very focused on and getting the business ready for when the markets return.

Speaker Change: And as I think about the three business units and.

Speaker Change: And you can see it on the refinished side and on the on the mobility side, we've seen certainly a significant growth.

Chrishan Anthon Sebastian Villavarayan: What I would call on our industrial side, you know, we would call it we are shrinking to grow and we're making the right choices to make sure that we're driving margin. In fact, if I look at our Q1 margin improvement by the three business segments, the one that has seen the most significant margin improvement was our industrial business. So we're driving that certainly in the right direction. And then, you know, and what are we doing here?

Speaker Change: What I would call on our industrial side.

Speaker Change: We would call. It we are shrinking to grow and we're making the right choices to make sure that we're driving margin in fact, if I look at our Q1 margin improvement by the three business segments. The one that has seen the most significant margin improvement was our industrial business. So we're driving that certainly in the right direction.

Speaker Change: And then so.

Speaker Change: And what are we doing here, what we're doing here is whether it's making the right choices and customers, whether it's making the right choices in the long tail and making calls on what we have to prune. So that we can make sure that with the rest of the business. We're at the right margin levels to go forward, even as I look at the rest.

Chrishan Anthon Sebastian Villavarayan: What we're doing here is whether it's making the right choices in customers, whether it's making the right choices in the long tail, and making calls on what we have to cut so that we can make sure that, with the rest of the business, we're at the right margin levels to go forward. Even as I look at the rest of the year, we're actually driving far more margin improvement through the balance of the year.

Speaker Change: For the year, we're actually driving a far more margin improvement through the balance of the year and this is with sales being somewhat flat, which is what we're forecasting for the rest of the year I do believe that 25 is certainly a year that we do see volumes certainly picking up.

Chrishan Anthon Sebastian Villavarayan: And this is with sales being somewhat flat, which is what we're forecasting for the rest of the year. But I do believe that, you know, 25 is certainly a year that we will see volume picking up. And specific to the quarter, if I went through the three business segments within industrial, general industrials, and building products, obviously with construction and residential bills, those two are somewhat weak, except for coil. But in our energy solutions business, which sits in industrial, which supports light vehicle and our mobility business in terms of coatings for batteries and motors, we're actually doing quite well with this, especially in China.

Speaker Change: And specific to the quarter, if I went through the three business segments within industrial.

Speaker Change: In general industrial building products, obviously with construction <unk> construction and residential bills. Those two are somewhat weak except in coil, but in our energy solutions business, which sits in industrial which supports light vehicle or our mobility business in terms of coding.

Speaker Change: <unk> for batteries and motors, we're actually doing quite well with this especially in China. So again I do believe it's a question of time, but we're certainly going to make sure. We have the margin profile for when we get there to to see that business grow so I would call. It we're in the third inning.

Chrishan Anthon Sebastian Villavarayan: So again, I do believe it's a question of time, but we're certainly going to make sure we have the margin profile for when we get there to see that business grow. So I would call it we're in the third inning of where we are with industrials.

Speaker Change: Where we are with industrials.

Chrishan Anthon Sebastian Villavarayan: Great, that's very helpful. And then just taking a step back, can you talk a bit about how, you know, a higher for longer interest rate environment would compare to your initial expectations for the year? And can you include, you know, if or where you're seeing any impact from this sort of sentiment across your portfolio? And I'm talking about higher for longer interest rates. Yeah, yeah, if we look at them from a planning perspective.

Speaker Change: Great. That's that's very helpful. And then just taking a step back.

Speaker Change: Can you talk a bit about how you know are higher for longer interest rate environment would compare to your initial expectations for the year and can you include you know yeah for where you are seeing any impact from from this sort of sentiment across your portfolio.

Speaker Change: I'm talking about higher for longer interest rates.

Speaker Change: Yeah Yeah.

Carl D. Anderson: Yes, we look at the, from a planning assumption point of view, when we gave the original guidance back in, I guess it was late January, early February, we were planning for rates to be flat at that period of time. So we were not necessarily planning for a rate reduction in our baseline forecast. So obviously, that's kind of played out as we expected to date.

Speaker Change: As we look at the from a planning assumption when we gave the original guidance back in I guess it was late January early February we were planning for rates to be flat at that period of time. So we were not necessarily planning for a rate reduction.

Speaker Change: In our baseline forecast. So obviously, that's kind of played out.

Carl D. Anderson: You know, if I look at, you know, what our debt is, we have about a 55-45 fixed float percentage from a debt perspective as we operate. So if and when rates ever do begin to reduce, I think we're positioned appropriately as relates to that. And then I think the last point is that we look at just managing overall interest expense. You saw what we did in the first quarter. We did pay down $75 million of our term loan.

Speaker Change: We expect it to date.

Speaker Change: If I look at what our debt as we have about.

Speaker Change: $55 $45 six flow percentage from a debt perspective, and how we operate so if and when if rates ever do begin to reduce I think we're positioned appropriately as it relates to that and then I think the last point as we look at just managing overall interest expense.

Carl D. Anderson: And we also updated our term loan where we kind of got better pricing as well. So we feel pretty good with some of the actions that we've been able to execute and being able to operate in this environment where rates are looking to be higher for a long time.

Speaker Change: What we did in the first quarter, we did pay down $75 million of our term loan.

Speaker Change: And we also Oh.

Speaker Change: Updated our term loan, where we kind of got better pricing as well, so we feel pretty good with <unk>.

Speaker Change: Some of the actions that we've been able to execute.

Speaker Change: And being able to.

Speaker Change: Operate in this environment, where rates are looking to be higher for longer.

Michael Joseph Harrison: Thank you. Our next question comes from Mike Harrison from Seaport Research Partners. Mike, please.

Speaker Change: Thank you. Our next question comes from Mike Harrison from Seaport Research Partners. Mike. Please go ahead.

Michael Joseph Harrison: Hi, good morning. I was wondering if you could provide a little bit more color on where the $75 million of restructuring savings in that 2024 transformation are going to come from. Would you classify this as mostly SG&A, or mostly manufacturing costs? I guess any key actions or buckets that you can provide for us would be helpful. Sure, Mike. Good morning.

Michael Joseph Harrison: Hi, good morning.

Michael Joseph Harrison: I was wondering if you could provide a little bit more color on where the $75 million of restructuring savings in 2024 transformation are going to come from.

Michael Joseph Harrison: Would you classify this as mostly SG&A, mostly manufacturing costs, I guess, Eddie Eddie key actions or buckets that you can provide for us would be helpful.

Chrishan Anthon Sebastian Villavarayan: So I'll start and maybe Carl will pick up right after, just to maybe give you more color on the financials. But overall, coming in about a year and a half ago, what I noticed with Axalta was that it felt like we were a holding company with three individual businesses. And one of the things that we've really driven from a culture standpoint is to drive this One Axalta culture. And what that really meant was, you know, as we look through the organization, I think a few years ago, there was a pivot to go from more of a regional organization to more of a corporate and more functionally driven organization that stopped somewhere in COVID.

Sure Mike Good morning, So I'll start it and maybe Carl will pick up right. After just to maybe give you more color on the financials, but.

Michael Joseph Harrison: Overall, you know coming in about a year and a half ago, what what I noticed with exalt or was it also felt like we were a holding company with three.

Michael Joseph Harrison: Individuals businesses and one of the things that we've really driven from a culture standpoint is to drive this one exalt culture and what that really meant was you know as we look through the organization.

Michael Joseph Harrison: I think a few years ago, there was a pivot to go from more of a regional organization to more of a corporate and more functionally driven organization that stop somewhere and Covid.

Chrishan Anthon Sebastian Villavarayan: And the objective was to re drive it back into this more P&L driven organization that was, I would call it, flatter and also smaller at the top. And a perfect example of this was the drive that we did to put the operations teams under the P&L, as one example, so that we could, for a company of our size, be more nimble, agile, and efficient. We want to get as close to the customer and be as responsive and fast as possible.

Michael Joseph Harrison: And the objective was to re drive it back into the it's more us P&L driven organization that was.

Michael Joseph Harrison: I would call it flatter and also a smaller at the top and a perfect example of this was the drive that we did to put the operations teams under the P&L. As one example, so that we could be for a company of our size be more nimble agile and efficient we wanted to be.

Michael Joseph Harrison: As close to the customer and be as responsive and fast as possible. So I would call out I would call. It two thirds <unk>.

Chrishan Anthon Sebastian Villavarayan: So I would call it two-thirds SG&A, more corporate focused, and then one-third in looking at our capacities as well as our manufacturing in certain aspects of the business, and then making calls on the footprint there. So that's the overall perspective of the project that we have going over the next couple of years. So that, I hope it gives you a good description. One last element of this is, in terms of the structure or what we did with the manufacturing side, it was really looking at areas of the business where we were under-invested in and areas that we really need to over-invest in.

Michael Joseph Harrison: G&A more more corporate focused and then one third and looking at our capacities as well as in our manufacturing in certain aspects of the business and then making calls on footprint. There. So that's the overall perspective of the project debt.

Michael Joseph Harrison: That we have going over the next couple of years, so that I hope. It gives you a good description one last element of this is in terms of the structure or what we did with the.

Michael Joseph Harrison: With the manufacturing side. It was really looking at areas of the business, where we were under invested in in areas that we really need to over invest in and so we're looking at also over the period of time moving some of those assets or that capacity. So that we could essentially drive growth in <unk>.

Chrishan Anthon Sebastian Villavarayan: So we're also looking at, over the period of time, moving some of those assets or that capacity so that we can essentially drive growth in other parts of the business. With that, I'll turn it to Carl.

Michael Joseph Harrison: The parts of the business with that ill turn it to Carl No I think Chris you covered it I think Mike as Chris referenced.

Carl D. Anderson: No, I think, Chris, you covered it. I think, Mike, as Chris referenced, a lot of the savings we expect going forward will be in SG&A as you look at how that will come through the P&L.

Michael Joseph Harrison: A lot of that savings, we expect going forward will be in SG&A as you look at it.

Carl D. Anderson: How that will come through the P&L.

Michael Joseph Harrison: All right, that's very helpful. And then a headline out this morning is saying that the U.S. government is going to try to mandate automatic emergency braking on all vehicles in five years. It's maybe been a little while since we covered this autonomous vehicle or autonomous type of features popping up on more vehicles. Can you talk about how that kind of technology could be impacting how you look at the refinish business over time and might be reducing collision rates over time? Certainly, Mike.

Carl D. Anderson: Alright, that's very helpful. And then a headline this morning, saying that the U S government.

Carl D. Anderson: Try to mandate automatic emergency braking on all vehicles in five years, it's maybe been a little while since we kind of covered this.

Carl D. Anderson: Autonomous vehicle or autonomous type of features a pop up on more vehicles can you talk about how that kind of technology.

Carl D. Anderson: It could be impacting.

Carl D. Anderson: How you look at the refinish business over time and might be reducing collision rates overtime.

Chrishan Anthon Sebastian Villavarayan: Certainly, Mike. As we've watched this over time, I think there's always been this concern of, you know, how ADAS is going to affect collisions going forward until, you know, we get to, you know, let's call it Level 4, Level 5 autonomous, which is, I believe, moving further and further out. You know, if you look at Cruise or Apple, I think you can start seeing those investments tapering off.

Carl D. Anderson: Certainly Mike I think as.

As we have watched this over time I think there's always been this concern of how is the aaas go into effect.

Carl D. Anderson: Collisions going forward until we get to.

Carl D. Anderson: Let's call it level four level five autonomous switches I believe moving further and further out.

Carl D. Anderson: If you look at cruise or Apple I think you can start seeing those investments are tapering out I think in the short term.

Chrishan Anthon Sebastian Villavarayan: I think in the short term, the part about, let's call it, what's being driven with Level 2 or Level 3, what this would lead to is minor collisions, which essentially drive for more work in refinish shops for us. So, I do believe that takes away, let's call it, full car write-offs and gives us an opportunity to actually see more cars in body shops. And, you know, in the last couple of months, I've had a couple of chances to go out to some body shops in the Carolinas and just look at the number of, let's call it, you know, all ensuring that we protect folks, but at the same time, it does provide us with a benefit in our business.

Carl D. Anderson: The part about.

Carl D. Anderson: Let's call it.

Carl D. Anderson: Uh huh.

Carl D. Anderson: What's being driven with.

Carl D. Anderson: Level, two or level three what this would lead to is minor collisions, which essentially drive for more work in refinish shops for us. So I do believe that takes away, let's call. It full car write offs and gives us an opportunity to actually see more cars.

Carl D. Anderson: In body shops and <unk>.

Carl D. Anderson: In the last couple of months have had a couple of few of the many chances to go out to some body shops.

Carl D. Anderson: In the Carolinas and just looking at the number of let's call it.

Uh huh.

Carl D. Anderson: Cars that are electric or that have some level of automation and what you can see is theres a lot of cars in body shops that are looking for work because it's actually minor collision versus the full write offs that you would normally see so I think it's great because it does the right thing for for ensuring.

Carl D. Anderson: We protect folks but at the same time it does provide us a benefit in our business.

Carl D. Anderson: Yeah.

Michael Joseph Harrison: All right. Thanks very much. You're welcome. Our next question comes from Patrick Cunningham from Citi. Patrick.

Speaker Change: Alright, thanks, very much Youre welcome.

Speaker Change: Our next question comes from Patrick Cunningham from Citi.

Patrick David Cunningham: Our next question comes from Patrick Cunningham from Citi. Patrick, go ahead. Hi, good morning. This is Eric Zhang on behalf of Pat.

Patrick David Cunningham: Patrick go ahead.

Patrick David Cunningham: Hi, Good morning. This is Eric Zhang on for Patrick on the targeted price increases across select parts of the portfolio that was mentioned at the beginning of the call can we talk about what products are targeted.

Speaker Change: This activity expected to continue for the remainder of the year.

Eric Zhang: We did, actually, and we're very proud of the team for pure pricing. We did it across the board, all three businesses. [inaudible] For the sake of pricing here, it's really the efficiency and the productivity we drive to our customers. You know, if I look at our Waterborne product, it is 30% more efficient than what was here previously. If I look at what we're doing currently with our base coats, you know, we had a chroma-based technology that we're moving to Chromax XP.

Speaker Change: We did actually we're very proud of the team for.

For the pure pricing, we did it across the board all three businesses essentially drove our pricing our pure pricing was actually up 2% and so we're very proud of the team for accomplishing this in a very deflationary market as someone pointed out but I think very very quickly let me just.

Speaker Change: Point at what differentiates all three businesses, if I think about our our refinish business. Obviously there is the point that this business is stable and we continue to price, but we don't price for.

Speaker Change: For the sake of pricing here, its really the efficiency and the productivity we drive to our customers.

Speaker Change: If I look at our waterborne product it is 30% more efficient than what was here previously if I look at currently what we're doing with our base coats.

Speaker Change: We had chroma based technology that we're moving to chrome Max XP that drives the 10% improvement in efficiency for our refinish customers. So we're pricing for the efficiency and the productivity that we provide our customers there so.

Chrishan Anthon Sebastian Villavarayan: That drives the 10% improvement in efficiency for our refinished customers. So we're pricing for the efficiency and the productivity that we provide our customers there. So that's how I look at the refinished business.

Speaker Change: As I look at the refinish business on the mobility side we.

Chrishan Anthon Sebastian Villavarayan: On the mobility side, we continue to have pockets of the business where we believe that there's more value for the products that we bring to our customers. So in certain pockets, we are pricing, and we also have the impact of labor and certain elements of the basket of raw materials that we continue to price. And then finally, in our industrial business, this is something that, over time, we're making the right choices of getting out of certain segments or getting out of, let's call it, certain customers and a portion of the tail to make sure that we can continue to invest in that business, which drives the right level of profitability. So right now, we're pricing across all three elements of the business, and pure pricing is up 2%.

Speaker Change: Continue to have pockets of the business, which are still.

Speaker Change: Where we believe that there is more value for them.

Speaker Change: For the products that we bring to our customers. So in certain pockets. We are pricing and we also have the impact of labor in certain elements of the basket of raws that we continue to price and then finally in our industrial business. This is something that over time that we're making the right choices of getting out of certain <unk>.

Speaker Change: Segments or getting out of let's call it certain customers and a portion of the tail to make sure that we can continue to invest in that business, which drives the right level of profitability. So right now we're pricing across all three elements of the business and pure pricing is up 2%.

Stephen V. Byrne: And our next question comes from Steve Byrne from Bank of America. Steve, you may proceed.

Speaker Change: And our next question comes from Steve Byrne from Bank of America, Steve You May proceed.

Speaker Change: Okay.

Rock Hoffman: Hi, I'm Rock Hoffman on for Steve Byrne. Um, could you guys, um... I guess inform me if there's been any additional productivity gains that we should expect to come from initiatives launched last summer prior to the 2024 Transformation Initiative?

Speaker Change: Hi, Rob Hoffman on for Steve Byrne.

Rob Hoffman: Could you guys.

Rob Hoffman: I guess inform if theres been any additional productivity gains.

Rob Hoffman: We should expect to come from initiatives.

Rob Hoffman: Launched last summer prior to the 2020 for our transformation initiatives.

Chrishan Anthon Sebastian Villavarayan: Hey, good morning, Rock. Sure. I'm hoping that I could save this for the discussion on May 15. So I probably won't give you too much, too much more color.

Speaker Change: Hey, good morning Rock I sure.

Speaker Change: I'm, hoping that I could save this for the discussion on May 15th So probably won't give you too much more color otherwise you might not show up to the our strategy day, there, but where we have.

Chrishan Anthon Sebastian Villavarayan: Otherwise, you might not show up to our strategy day there. But we're, we have two, two initiatives, obviously, the transformation initiative that we're talking about, and then a couple under the operations umbrella. The first one is productivity that we're going to drive through our facilities as we think about the next couple of years. And then the second element of that will be a network optimization process or program where we're looking for more opportunities.

Speaker Change: Two two initiatives obviously the transformation initiative that we're talking about and then a couple under the operations.

Umbrella. The first one is productivity that we're going to drive through our facilities as we think about the next couple of years.

Speaker Change: And then the second element of that will be a network optimization.

Speaker Change: A process or a program, where we're looking for more opportunities we have grown about 100 warehouses and distribution centers over from the pre pandemic time to now and we do believe with that as well as some of the work that we can do on the transfer of our transportation side Theres still more opportune.

Chrishan Anthon Sebastian Villavarayan: We've grown about 100 warehouses and distribution centers from the pre-pandemic time to now, and we do believe with that, as well as some of the work that we can do on the transfer and transportation side, there's still more opportunities. So those are certainly the elements that we're going to work on going forward.

Speaker Change: So those are the certainly the elements that we're going to work on going forward.

Speaker Change: Yeah.

Rock Hoffman: Thanks. And just to follow up on the light vehicle business, I was wondering if you could either provide similar metrics on light vehicle growth for Xalta versus light vehicle market growth in kind of other non-China regions or just give us an idea of the extent of magnitude there. Sure. So, you know, as

Thanks.

Speaker Change: And just a follow up on the light vehicle business I was wondering if you could either provide similar metrics on our light vehicle growth our results versus light vehicle market growth and kind of other non China regions or just give us an idea of the extent of it.

Speaker Change: <unk> suite there.

Chrishan Anthon Sebastian Villavarayan: Sure. So, you know, as I look at the market, and I'll just go through the light vehicle market and give you a perspective for all three regions, I would call the overall market solid. For us in North America, we see that as stable. We are starting to see inventory as the dealers kind of pick up quarter over quarter by about 10 days. But that said, volumes here seem somewhat stable. So, you know, we've picked up a little bit, but, you know, I wouldn't say anything that's significant here.

Speaker Change: Sure so.

Speaker Change: As I look at the market and I'll just go through the light vehicle market and give you a perspective for all three regions I would call the overall market being solid.

Speaker Change: For us in North America, we see that as stable.

Speaker Change: We are starting to see inventory.

Speaker Change: At the specific dealers kind of pick up quarter over quarter by about 10 days, but that said our volumes here seem somewhat stable so are <unk>.

Speaker Change: Picked up a little bit.

Speaker Change: But.

Speaker Change: I wouldn't say anything thats significantly here in Europe again markets have gone down about 2% to 3% and we've stayed very stable here as well from a market standpoint.

Chrishan Anthon Sebastian Villavarayan: In Europe, again, markets have gone down about two to three percent, and we've stayed very stable here as well from a market standpoint. China's up four percent, and in that marketplace, as you know, we're up 21 percent. So, overall, I would call the light vehicle performance solid, with a little bit of growth in North America and significant growth in China.

Speaker Change: China is up 4% and in that marketplace. As you know we were up 21%. So overall I would call the light vehicle performance solid.

Speaker Change: With.

Speaker Change: A little bit of growth in North America, and significant growth in <unk> in China.

Speaker Change: China.

Speaker Change: Great. Thank you.

Speaker Change:

Speaker Change: Yeah.

Michael Joseph Sison: We have a question from Mike Sison from Wells Fargo. Mike, please go ahead.

Speaker Change: We have a question from Mike <unk> from Wells Fargo.

Michael Joseph Harrison: Mike. Please go ahead.

Michael Joseph Harrison: Okay.

Michael Joseph Sison: Hey, good morning. Nice start to the year. In terms of the rebound for the markets in 2Q, I think you said your growth was flat in the first quarter for North American E&E. You guys had nice growth. Do you expect the markets to be flat again in 2Q? And how do you think it sort of unfolds for the rest of the year?

Michael Joseph Harrison: Hey, good morning, nice start to the year in terms of refinish for the markets in tier two I think you said growth was flat in the first quarter for North American Amy you guys had nice growth U.

Michael Joseph Harrison: Do you expect the markets to be flat again into Q end and how do you think sort of unfold for the rest of the year.

Chrishan Anthon Sebastian Villavarayan: Yeah, I would say it's flat to about just slightly growing. I'd say flat to one percent. We obviously are showing that we're going up high single digits in Q2, and it's really, as I said, you know, the four strategic initiatives that we're working on. On top of that, we also had the operational issues that we had in Q2 of last year, so lapping that performance is driving our growth in Q2. So I do believe we'll have a really good quarter here again in Q2 and in refinishing.

Amy: Yeah, I would say it's.

Amy: Flat to about just slightly growing I'd say flat to 1%.

Amy: We obviously are showing that we're going up high single digits in Q2, and it's really.

Amy: As I said, the four strategic initiatives that we're working on on top of that we also had the operational issue.

Amy: Issues that we had in Q2 of last year. So lapping that performance is driving our growth in Q2.

Amy: So I do believe we'll have a really good quarter here again in Q2 in our refinish business.

Michael Joseph Sison: And more of a longer-term question, which will probably be addressed at the end of the day, but, you know, Axalta has been really focused on cost and productivity for a long time. And, and it does sound like you're maybe heading into more of a growth phase. Is that the way to sort of think about it? And And what do you think the growth is sort of, you know, just maybe on average? What do you, how do you, how do you see that growth unfolding over the next couple of years?

Speaker Change: And more of a longer term question, how much again, probably address at the analyst day, but you know.

Speaker Change: No.

Speaker Change: Exalt is been really focused on cost and productivity for a long time and.

Speaker Change: And it does sound like you're maybe.

Speaker Change: <unk> to more of a growth phase is that the way to start to think about it in.

Speaker Change: And what do you think the growth is sort of just maybe dumb average where what do you. How do you how do you see that growth.

Speaker Change: Holding over the next couple of years, absolutely. So I think we do believe there is.

Chrishan Anthon Sebastian Villavarayan: Absolutely, so I think you know we we do believe there's probably one or two innings left on the on the margin side but certainly a lot more that we can focus on the growth side and and to be honest that is that what we will be covering in significant detail going through our strategy day on the 15th and so what we will be doing is probably providing a view of where we'll be in three years from now across the three business segments by And by yearly targets that we will be providing, so just to give you a perspective and having a measure of where we think we can take the business, with that yeah and Mike I just would add to that if you just

Speaker Change: Probably one or two innings left on the on the margin side, but certainly a lot more that we can focus on the growth side and to be honest that is that what we will be covering in significant detail going through our.

Speaker Change: Strategy day on the 15th and so what we'll be doing is probably.

Speaker Change: Providing a view of where we'll be in three years from now across the three business segments by.

Speaker Change: And by our yearly targets that we will be providing so just to give you a perspective and having a measure of where we think we can take the business.

Speaker Change: With that Yeah, and then Mike I, just would add to that if you just while there has been a lot of focus with Chris coming in as far as how improving operations focus on costs. If you step back and just look at.

Carl D. Anderson: Yeah, and Mike, I just would add to that, while there's been a lot of focus with Chris coming in, as far as improving operations, focusing on costs, if you step back and just look at what the team is planning to accomplish for this year, as we reference, you know, we expect our EBITDA to be up 12% year-on-year, and EPS is going to be up 24%. The implied margin of the business now is running 20%, as far as an EBITDA margin perspective.

Michael Joseph Harrison: What the team is planning to accomplish for this year as we referenced we expect our EBITDA to be up 12% year on year EPS is going to be up 24% the implied margin of.

Carl D. Anderson: So, I think, as Chris said, you know, we like the trajectory of where we're taking the business, and this pivot to growth is what we will be spending a lot of time on in the next couple of weeks when we have our strategy. Thank you. You're welcome. And our next question.

Speaker Change: The business now is running 20% as far as on an EBITDA margin perspective, So I think as Chris said, we like the trajectory of where we're taking the business.

Speaker Change: This pivot to growth is what we will spending a lot of time with in the next couple of weeks when we ever strategy day.

Speaker Change: Thank you.

Speaker Change: Welcome.

John Ezekiel E. Roberts: And our next question comes from John Roberts from Le Souza. John, please go ahead. Thank you. A nice quarter. Could you give us an update on the geographic mix of your autos?

Speaker Change: And our next question comes from John Roberts from Mizuho. John Please go ahead.

John Ezekiel E. Roberts: Thank you and nice quarter.

John Ezekiel E. Roberts: Could you give us an update on the geographic mix of your auto OEM sales I'm guessing that China may be bigger than I was thinking it was.

John Ezekiel E. Roberts: So.

John Ezekiel E. Roberts: So, yeah, let me break it down, so Light Vehicle for North America is about $300 million, sorry, and then if I look at EMEA, we're about $400 million, and then about $100 million in China.

Speaker Change: Yes, let me break it down so.

Speaker Change: Light vehicle for North America is about $300 million.

Speaker Change: Commercial sorry, and then if I look at EMEA, we're about $400 million and then about $100 million in China.

Speaker Change: So China, you called out China in terms of the strength in the quarter's volumes. That's there it didn't seem like it was big enough to actually drive the total.

Chrishan Anthon Sebastian Villavarayan: Yeah, I think, John, as you look at it, you know, just a little bit of perspective, you know, for the quarter, the China business for us was a little bit north of $60 million in revenue, which is now, you know, it is the third largest region for us, from a pure light vehicle perspective. So if I still look at North America, by far and away, it is our largest market, with Europe being second. But, as Chris is referencing, not only in prepared remarks and some of the questions, we continue to see very, very strong performance, specifically in China.

Speaker Change: Yes, I think that as you look at it.

Speaker Change: It's a little bit perspective for the quarter.

Speaker Change: The China business for us with a little bit north of $60 million of revenue, which is now it is the third largest region for us from a pure light vehicle perspective, so if I look at it still North America.

Speaker Change: By far and away is our largest with Europe being a second but as Christmas referencing not only in prepared remarks, and some of the questions. We continue to see very very strong performance specifically in China.

Speaker Change: Alright, thank you.

Speaker Change: You're welcome.

Joshua David Spector: Our next question comes from Joshua Spector from UBS. Joshua, you may proceed.

Speaker Change: Our next question comes from Joshua Spector from UBS Joshua you May proceed.

Lucas Ferman: Good morning, this is Lucas Ferman. I'm for Josh. So I just want to go back to the SG&A cost, if we can. So they were kind of only up modestly in the first quarter. That compares to kind of the high single-digit inflation we're sort of seeing across most of the peers. At the same time, it sounds like you're going to get kind of $50 million in cost savings through the year from your productivity program, which is about sort of 6%. So I guess just net of these factors, are you expecting SG&A growth to kind of be flat or up less?

Joshua David Spector: Hi, Good morning. This is like a spotlight on for Josh So I'm sorry to go back to the U S. G. A I can also take hold.

Joshua David Spector: That was kind of only up modestly in the first quarter.

Joshua David Spector: That compares to kind of the high single digit inflation with sensing across most of our peers.

Speaker Change:

Speaker Change: So I mean, it sounds like youre getting that kind of $50 million in cost savings there for the year from your productivity program, which is about 6%. So I guess, just net of any taxes, and you're expecting SG&A growth to kind of a flat or up low single digits. This year, how should we kind of think about that yeah. As we look at SG&A, we're very.

Carl D. Anderson: Yeah, as we look at SG&A, we're very proud of what we were able to accomplish in the first quarter, as you referenced. We really were flat year-over-year in SG&A, especially in the environment that we're in. As we look forward, we are hoping to be able to manage that SG&A spend to be up probably very, very low single digits on a year-on-year basis. That's how we're looking at it, just based on not only the transformation initiative that we are well underway on, but also just as we look at how best to operate the business going forward. So that is a big focus.

Speaker Change: Proud of.

Speaker Change: What we were able to accomplish in the first quarter as referenced we really were flat year over year in SG&A, especially in the environment that we're in and as.

Speaker Change: We look forward.

Speaker Change: We are hoping to be able to manage that SG&A spend to be up.

Speaker Change: Probably very very low single digits on a year on year basis.

Speaker Change: Now we're looking at that just based on not only the transformation.

Speaker Change: Initiatives that we are well underway on but also just as we look at how best to operate the business kind of going forward. So that that is a big focus for us and.

Speaker Change: At first quarter, we're off to a very good start.

Lucas Ferman: Right, thanks. And then just going back to kind of the industrial exits, are you able to kind of quantify for us how much volumes you're kind of deselecting there each quarter? And I guess if you could kind of give some sort of scale on the timing of how that's going to work?

Speaker Change: Alright, Thanks, and then just going back to kind of the industrial exits.

Speaker Change: I'm going to kind of quantify for us how.

Speaker Change: Much of volumes Youre kind of deselect them there.

Speaker Change: Each quarter end.

Speaker Change: If you could kind of give some sort of scale on the timing on how that is.

Carl D. Anderson: We're not breaking that out. We're not breaking that out. What I can tell you is obviously, as you can see, we're down about 6%. But we're not breaking out how much of that we're pulling out just because of the choices we're making. But just to add to that just a little bit further, I think, you know, as we look forward, especially as we look on a year over year kind of comparison perspective, while we're still going to be, you know, working on the portfolio, we are beginning to see some early signs where, you know, when we kind of compare year on year, we believe we're going to be kind of bottoming out at least as far as having that type of revenue headwind on a quarterly

Speaker Change: We're not we're not breaking that out so we're not breaking that out but what I can tell you is obviously as you can see we're down about 6%.

Speaker Change: But.

Speaker Change: We're not breaking out how much of that we're pulling out just because of the choices, we're making right now.

Speaker Change: But.

Speaker Change: And just to add to that just a little bit further I think.

Speaker Change: As we look forward, especially as we look on a year over year kind of comparison perspective.

Speaker Change: While we are still going to be.

Speaker Change: Working on the portfolio, we are beginning to see some early signs where when we kind of compare year on year. We believe we're going to be kind of bottoming out at least as far as having that type of revenue headwind on a quarterly basis going forward.

Speaker Change: Okay.

Speaker Change: Welcome.

Kevin William McCarthy: Our next question comes from Kevin McCarthy from Vertical Research Partners. Kevin, please go ahead.

Kevin William McCarthy: Our next question comes from Kevin Mccarthy from vertical Research partners. Kevin. Please go ahead.

Kevin William McCarthy: Thank you and good morning everyone. Chris, within your refinish business, you've got a lot of adjacent products, aerosols, bed liners, perhaps others. How big is that basket of what I would call kind of nontraditional refinish products? And how fast do you think you might be able to grow that basket over the medium term? versus, you know, body shop work.

Kevin William McCarthy: Thank you and good morning, everyone, Chris within your Refinish business, you've got a lot of adjacent products aerosols headliners, perhaps others.

Kevin William McCarthy: Big is that basket of what I'll call kind of non traditional refinished products and how fast do you think you might be able to grow that basket over the medium term.

Kevin William McCarthy: Versus you know body shop work for example, sure.

Chrishan Anthon Sebastian Villavarayan: Sure, I'd love to. So the business is about $700 million in total, and then I would say $600-700 million in total. And I would call it, now if you think about the overall market, the overall market is about $7 billion, so we do see that opportunity as something where we have a small portion that we play here, so we do see this as an area that we can continue to grow over time.

Chrishan Anthon Sebastian Villavarayan: Sure, I'd love to.

Kevin William McCarthy: To.

Kevin William McCarthy: The business is about $700 million in total.

Kevin William McCarthy: And then I would say $6 million to $700 million in total and I would call. It. If you think about the overall market. It's the overall market is about 7 billion. So so we do see that opportunity is something we have a small portion that we play here. So we do see this as a.

Kevin William McCarthy: An area that we can continue to grow over time.

Kevin William McCarthy: Okay.

Kevin William McCarthy: Okay, we'll stay tuned for May 15th, but I want to ask... Carl, about free cash flow. Maybe a two-part question, I guess. On the micro level, what is the cash cost associated with your new $75 million transformation initiative? And then, more broadly, I think you raised your annual range by $25 million. So is that mainly just the earnings upside flowing through? Or are there other moving parts that you would care to call out there?

Speaker Change: We'll stay tuned for for me, 15th but I wanted to ask.

Kevin William McCarthy: Carl about free cash flow, maybe two part question I guess.

Carl D. Anderson: On the micro level, what is the cash cost associated with your new us $75 million transformation initiatives and then more broadly I think you raised your annual range by $25 million. So is that mainly just the earnings upside flowing through or are there other.

Carl D. Anderson: Moving parts that you would care to call out there.

Carl D. Anderson: Yeah, so maybe a couple things on free cash flow. I think one is that we're off to a very good start for the year, having a positive free cash flow of about $15 million. A really strong performance in working capital that helped drive that, especially when you can kind of compare us on a year-over-year basis. Specific to your question on restructuring, in total, we expect the cash impact to be somewhere between $95 million and $135 million, and that's over a several-year time period.

Speaker Change: So maybe a couple of things on free cash flow I think one.

Speaker Change: We're off to a very good start for the year, having positive free cash flow of about $15 million.

Carl D. Anderson: Really strong performance in working capital and that helped drive that especially when you can kind of comparison on a year over year basis.

Carl D. Anderson: And, you know, the bulk of that really does relate to severance costs, and then there's also some additional costs included there for capital expenditures as well. And so, obviously, you know, that will kind of be, some of that will come in this year, some of that will come in 2025 as well, but the guide we gave you on free cash flow is not only incorporating the higher EBITDA and the raise that we have but also some of these cash costs or all these cash costs that will be coming in related to restructuring this year. That's very helpful; I appreciate it.

Carl D. Anderson: Specific to your question on restructuring.

Carl D. Anderson: In total we expect the cash impact to be somewhere between $95 million to $135 million over that's over a several year type of time period.

Carl D. Anderson: And the bulk of that really does relate to severance costs.

Carl D. Anderson: And then there is also some additional costs, including there for capital expenditures as well and so but obviously that will kind of be what will have some of that will come in this year some of them come in 25 as well, but the guide we gave you on free cash flow is not only incorporating the higher EBITDA and the raise that we have that.

Carl D. Anderson: Also some of these cash costs are all these cash costs that will be coming in related to the restructuring this year as well.

Kevin William McCarthy: That's very helpful. I appreciate it.

Speaker Change: Okay. That's very helpful. I appreciate it.

Carl D. Anderson: Yeah.

Carl D. Anderson: Yeah.

John Patrick McNulty: And our next question comes from John McNulty from BMO. John, please go ahead.

Carl D. Anderson: And our next question comes from John Mcnulty from BMO. John Please go ahead.

Caleb: Hey, good morning. This is Caleb on behalf of John.

Speaker Change: Hey, Good morning. This is <unk> on for John So I saw your Capex was about like $22 million in the quarter, but you maintained your full year guide for about $1 65.

Speaker Change: How are you guys thinking about how that sequences through the rest of the year. Thank you.

Caleb: So I saw your CapEx was about $22 million in the quarter, but you maintained your full year guide for about $165. So how are you guys thinking about how that sequences through the rest of the year? Thank you.

Speaker Change: Yes, it's a good question I think a lot of that is due to timing. So we still are.

Speaker Change: Working very diligently in order to kind of be ramping up.

Speaker Change: Capex here for the next nine months of the year. So I would expect that really to begin increasing quite significantly and as we kind of get into the second quarter and that will kind of carry through for the rest of the year as well.

Carl D. Anderson: Yeah, it's a good question. I think a lot of that is just due to timing. So we are still working very diligently in order to kind of be ramping up, you know, catbacks here for the next nine months of the year. So I would expect that to really begin increasing quite significantly as we kind of get into the second quarter, and that will kind of carry through for the rest of the year as well.

Caleb: Okay, thank you. And then you've talked a lot about the positives going on for you and refinish right now with like the acquisition, you pull, etc. But maybe can you just talk a little bit more about how the IRIS rollout is going and kind of like what weren't in that and then kind of your expectations for that over the next two to three years?

Speaker Change: Okay. Thank you and then you've talked a lot about the positives going on from your in Refinish right now with like the acquisition you Paul et cetera.

Speaker Change: But maybe can you just talk a little bit more about how the iris rollout is going and kind of like what inning. We're in in that and then kind of your expectations for that over the next two to three years, absolutely love. It. So I think if we look here we have about 90000 body shops. There is about 70000 manual machines and most.

Chrishan Anthon Sebastian Villavarayan: Absolutely love it. So, I think you know, if we look here, we have about 90,000 body shops. There are about 70,000 manual machines, and in most of those, we have about 2,000 semi-automatic machines from our past. And right now, we have 100 iris machines installed, and we have orders for 300 more. So as I look at the next couple of years, the objective is to get that up to 2,000-plus, which is what the team is driving right now.

Speaker Change: Those we have about 2000 semi automatic machines from our past.

Speaker Change: And right now we have 100 Iris machines installed we have orders for 300, so as I look at the next couple of years. The objective is to get that up to 2000 plus is what the team is driving right now.

Carl D. Anderson: and maybe if I could just add on to that and you know there's a question that was asked earlier just about the accessory market specifically in refinish that's that is around about a hundred million dollars I guess of an overall opportunity and overall market size in total as Chris referenced previously all of refinish as we look at that all in not only kind of what we do from a coatings perspective but also some of these accessories we're packing the market size of about seven billion

Speaker Change: And maybe if I could just add on to that and there was a question that was asked earlier just about the accessory market specifically in refinish.

Speaker Change: That is around about $100 million I guess of an overall opportunity in overall market size.

Speaker Change: In total as Chris referenced previously all of Refinish as we look at that all in not only in kind of what we do from a coatings perspective, but also some of these accessories were pegging the market size of about $7 billion.

Caleb: Okay, thanks, and congrats on the quarter.

Speaker Change: Okay, Thanks, and congrats on the quarter.

Speaker Change: Thank you.

Speaker Change: Yeah.

Jeffrey John Zekauskas: Our next question comes from Jeff Zekauskas from J.P. Morgan. Jeff, go ahead.

Speaker Change: Our next question comes from Jeff Zekauskas from JP Morgan, Jeff go ahead.

Jeffrey John Zekauskas: Thanks very much. How will you determine whether a share repurchase is a good idea? and Matt. Axalta over a five-year period has, you know, underperformed the market. There's volatility in its share price because of its cyclicality; you get 5% and the Debt Market. Why is it a good idea to... Spend your capital now to repurchase shares, and how will you determine whether it's a good idea to have spent it?

Jeffrey John Zekauskas: Thanks very much.

Jeffrey John Zekauskas: Yeah.

Jeffrey John Zekauskas: How will you determine whether a.

Jeffrey John Zekauskas: Share repurchase is a good idea.

Speaker Change: And that <unk>.

Speaker Change: Salter over a five year period has underperformed.

Speaker Change: Underperformed the market.

Speaker Change: There is volatility in its share price because of its cyclicality.

Speaker Change: You get 5%.

Speaker Change: Debt markets.

Speaker Change: Yeah.

Speaker Change: Why why is it a good idea to.

Speaker Change: And your capital now to repurchase shares and how will you determine whether it's a good idea to have spent it.

Chrishan Anthon Sebastian Villavarayan: Well, I think overall, as we look at our journey to this point, and just as you think about our quarter over quarter performance, I do believe that the underlying value of Axalta is not realized. And, if there's an opportunity for us to create that value, especially for shareholders, we certainly will. So I think that's certainly one of our goals. I, you know, as you look through the four elements of creating value, to your point, there's an opportunity in how we look at debt, there's certainly an opportunity in how we look at M&A, there's certainly an opportunity in how we look at CapEx.

Speaker Change: Well I think overall as we look at our journey to this point there and just as you think about our quarter over quarter performance I do believe that the underlying value of exalt is not realized and and if there is an opportunity for us to create that value, especially.

Speaker Change: For shareholders, we certainly will so I think that's certainly one of our goals.

Speaker Change: As you look through the four elements of creating value to your point there is an opportunity and how we look at the debt is certainly an opportunity and how we look at M&A, There's certainly an opportunity and how we look at Capex and then finally, there's certainly an opportunity and how we look at share buybacks, but again as.

Chrishan Anthon Sebastian Villavarayan: And then finally, there's certainly an opportunity in how we look at share buybacks. But again, as we've played this journey out, we do believe that there is an underlying value in our share value and that that's something that we should provide back to our shareholders. So it's certainly an element that we'll look at. Thanks.

Speaker Change: We've played this journey out we do believe that there is an underlying value in our share our share.

Speaker Change: Share value in that that is something that we should provide back to our shareholders. So it's certainly an element that we'll look at.

Speaker Change: Great. Thanks, so much.

Jeffrey John Zekauskas: Thanks so much. You're welcome.

Speaker Change: Youre welcome.

Operator: And this concludes our question and answer session, as well as the conference. Thank you very much for attending today's presentation.

Speaker Change: And this concludes our question and answer session as well as the conference. Thank you very much for attending today's presentation. You may now disconnect have a great. Thank you.

Operator: You may now disconnect. Have a great day. Thank you.

Speaker Change: Yeah.

Speaker Change: Okay.