Q4 2024 Axalta Coating Systems Ltd Earnings Call

Today's call is being recorded and a replay will be available through February 11th 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 Colleen in Lubec Vice President of Investor Relations. Please go ahead.

Thank you and good morning. This is Colleen Lubick, Vice President of Investor Relations.

We appreciate your continued interest in <unk> and welcome you to our fourth quarter and full year 2024 financial results Conference call. Joining me today are Chris deliver iron CEO, and President and Carl Anderson, Chief Financial Officer.

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

Speaker Change: Please stand by, your program is about to begin. If you need audio assistance during today's program, please press star zero.

Our prepared remarks, the 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.

Speaker Change: Ladies and gentlemen, thank you for standing by. Welcome to Exalta's Coding Systems Q4 2024 earnings call. Please stand by. Your program is about to begin. If you need audio assistance during today's program, please press star zero.

Speaker Change: Today's call is being recorded and a replay will be available through February 11th. 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 Colleen Lubic, Vice President of Vestor Relations. Please go ahead.

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

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

Our remarks and the slide presentation also contains various non-GAAP financial measures.

We've included a reconciliation of these non-GAAP financial measures and the most directly comparable GAAP financial measures.

Refer to our filings with the SEC for more information.

Please note that we did recently update the presentation for certain of our non-GAAP measures as described in a current report on form 8-K that we furnished to the SEC on January 21st.

Chris: I will now turn the call over to Chris.

Chris: Thanks, Colleen and good morning, everyone, let's move to slide three I'm excited to share that we achieved another record fourth quarter of full year net sales and adjusted EBITDA 2024 represented the highest net sales and adjusted EBITDA in our history.

Carl Anderson: which we will be referencing during this call and Carl Anderson, our entire remarks.

Carl Anderson: The slide presentation and our discussion today may contain forward-looking statements reflecting the company's current view of future events and their potential effects on Exelta's operating and financial performance. These statements involve uncertainties and risks, and actual results may differ materially from those forward-looking statements. Please note that the company is under no obligation to provide updates to these forward-looking statements.

Chris: These outstanding results were made possible by the collective efforts of our global team as wanting salto. The culture that we have established with our a plan that has brought our priorities into focus.

Carl Anderson: Our remarks and this slide presentation also contain various non-GAAP financial measure statements. We've included reconciliation of these non-GAAP financial measures in the most directly comparable GAAP financial measures.

Chris: Spike weakness across all our four end markets, we outperformed consistently this year in light vehicle and we finished our two largest end markets I want to express my appreciation to the <unk> team for their dedication throughout the year that has clearly paid off with these great results.

Carl Anderson: Refer to our filings to the SEC for more information. Please note that we did recently update the presentation for certain of our non-GAAP measures as described in the current report on Form 8K that we furnished to the SEC on January 21st. I will now turn the call over to Chris. Please note that we did recently update the presentation for certain of our non-GAAP measures as described in the current report on Form 8K that we furnished to the SEC on January 21st. Thanks, Colleen, and good morning, everyone. Let's move to Slide 3. I'm excited to share that we achieved another record fourth quarter of full-year net sales and adjustments.

Chris: We delivered fourth quarter company record net sales of $1 3 billion contributions from the copper flex acquisition in our refinish economies segment, net new body shop wins and above industry growth in light vehicles more than offset a softer macroeconomic environment and foreign currency.

Chris: Headwinds.

Chris: Adjusted EBITDA increased by 10% year over year to a fourth quarter company record of $275 million.

Carl Anderson: 2024 represented the highest net sales and adjusted EBITDA in our history.

Chris: We delivered this result, despite meaningful foreign currency headwinds in our fourth quarter not anticipated in our prior guidance. This represents the 10th consecutive quarter of year over year adjusted EBITDA growth.

Chris: Adjusted EBITDA margins improved by 170 basis points versus the prior year to 21%, which as you know with the margin objectives set in our 2026 a plan. We're proud to deliver this result, well in advance of our target date margin expansion was driven by favorable.

Chris: Impacts from price mix lower variable cost savings from our transformation initiative and conversion on revenue from light vehicle volume growth.

Chris: As you can see on this chart adjusted diluted EPS was another great story for <unk> growing 30% year over year to <unk> 60 in the quarter. In addition, our balance sheet continued to improve with total net leverage ratio declining for the eighth consecutive quarter or another company.

Speaker Change: at the Eclipse Godcode That Announces the Final Trial, Gladyo and Chris. Transcript of Summer Summit Note Post and Summer Summit 6 May 10, 2015 Page 12 of 12 …to a fourth quarter company record of $275 million. We delivered this result despite meaningful foreign currency headwinds in our 4th Quarter not anticipated in our prior guidance. This represents the 10th consecutive quarter of year-over-year adjusted E-Litter growth.

Chris: A record of two five times.

Chris: The high end of the range that we set in our plan.

Chris: Let's move to slide four.

Chris: Culture is at the foundation of our transformation as demonstrated by the strength of our financial results. We have aligned the organization around the tenants of accountability execution and operational excellence, we are committed to safety in everything that we do and strive towards zero.

Speaker Change: Adjusted EBITDA margins improved by 170 basis points versus the prior year to 21%, which as you know was the margin objective set in our 2026 A plan. We're proud to deliver this result well in advance of our target dates. Margin expansion was driven by favorable impact from price mix, low variable costs, savings from our transformation initiative and conversion on revenue from a light vehicle volume growth.

Chris: Incidents this year, we achieved our key our IR of <unk>, three and reduced our injury rate by approximately 50% compared to two years ago. In addition, we made investments in our operations and engineering streamlined and optimized our organizational structure and brought our corporate.

Speaker Change: As you can see on this chart, Adjusted Diluted EPS was another great story for Exaltas.

Chris: Employees together under one roof at the Navy yard in Philadelphia.

Speaker Change: Growing 30% year-over-year to $0.16 in the quarter. In addition, our balance sheet continues to improve, with total net leverage ratio declining for the eighth consecutive quarter for another company record of $2.55 in the quarter, the high end of the range that we set in our A-Plan. Let's move to slide four. Culture is at the foundation of our transformation, as demonstrated by the strength of our financial

Chris: Specific to operational excellence, we enhanced efficiency reduce cost and improved profitability across our manufacturing sites and supply chain, notably we reduced variable costs by 7% improved delivery times by 10% and began the closure of two manufacturing sites.

Chris: One in North America, and the other in Europe, which will optimize our operations and improve our fixed cost.

Speaker Change: We have aligned the organization around the tenets of accountability, execution, and operational excellence. We are committed to safety in everything that we do and strive towards zero incidents. This year we achieved a KRIR of 4.3 and reduced our injury rate by approximately 50% compared to two years ago.

Chris: Combined efforts across operations procurement and product management reduce complexity in our manufacturing sites. We made good progress in reducing the number of skus, while creating common raw inputs across our portfolio.

Chris: This work is paying off our transformation savings are already ahead of plan, having achieved approximately $20 million in 2024 towards our goal of $75 million as described in the <unk> player.

Chris: Growth is a major pillar of our plan our teams executed strategic plans to win new business and deliver industry outperformance in a year, where all of our end markets were down single digits.

Chris: Due to their efforts, we secured approximately 2800 net new body shop wins in refinish and completed the acquisition of the cover Flex group, which positions us well in the fast growing economy segment.

Speaker Change: and the other in Europe, which will optimize our operations and improve our fixed cost.

Chris: We drove full year light vehicle net sales growth of 5%. Despite a decline in global auto builds and in industrial coatings, we increased our margins and earned accretive new business, which will ramp up to around $40 million at full run rate in 2025.

Chris: At this point I would like to take a moment and think Shelly Bosch for her valuable contributions to <unk> as president of the industrial business over the past few years.

Chris: She is responsible for returning the industrial business to profitability and pivoting towards accretive growth in a challenging macro as you may know, we announced a couple of weeks ago that Shelley stepping down from her role at eggs Alta.

Chris: Kimball's, who most recently was senior Vice President and Chief transformation Officer at <unk> will succeed Shelly Tim has a strong track record of driving margin growth and business transformation.

Speaker Change: He was an excellent choice to take this business forward.

Another key pillar of the plan is sustainable innovation, which is what makes exalt a global leader in coatings, we continue to push the boundaries in all end markets and have been widely recognized for these efforts.

Speaker Change: We have talked about the expected benefits of our game changing exalt the Iris mixed machine we.

Speaker Change: We are progressing well with the adoption of this new technology installing 300 to date, we expect this number to nearly double in 2025.

Speaker Change: This machine combined with exalt of Iris scan and exalted Nimbus delivers a full package of cutting edge tools that measure and mixed color faster and more accurately driving efficiency and effectiveness to our body shop customers.

Speaker Change: In January we announced a strategic partnership with dirt or automotive digital with paint solutions, combining exalt is groundbreaking technology with doors robotic experience.

Speaker Change: Dora will serve as the robotics integrator for Exalt is next jet for light vehicle Oems I believe this agreement is.

He was an excellent choice to take this business forward.

Speaker Change: <unk> step in delivering the vehicle customization customers desire and is driving the future of digital payment technology.

Another key pillar of the plan is sustainable innovation, which is what makes exalt a global leader in coatings.

Speaker Change: During 2024 <unk> was recognized with six prestigious industry awards for technology and innovation, three Edison too Big and one R&D 100.

We continue to push the boundaries in all end markets and have been widely recognized for these efforts.

We have talked about the expected benefits of our game changing exhort to Iris mixed machine we.

Speaker Change: These achievements bring <unk> total to 24 innovation awards over the last five years and demonstrates our commitment to developing smarter and innovative solutions for our customers.

We are progressing well with the adoption of this new technology installing 300 to date, we expect this number to nearly double in 2025.

Speaker Change: Let's turn to slide five.

This machine combined with exalt of Iris scan and exalted Nimbus delivers a full package of cutting edge tools that measure and mixed color faster and more accurately driving efficiency and effectiveness.

Speaker Change: By all measures 2024 was an excellent year. For example, we had the highest fourth quarter and annual net sales in the history of the company.

Speaker Change: We exceeded $1 1 billion in adjusted EBITDA for the first time and expanded our full year adjusted diluted EPS by 40% I am encouraged by the significant performance. We have demonstrated in our financial results. Since me when we released our 2026, a plan which is <unk>.

Our body shop customers.

In January we announced a strategic partnership with dirt or automotive digital paint solutions, combining exalt is groundbreaking technology with doors robotic experience.

Dora will serve as the robotics integrator for Exalt is next jet for light vehicle Oems I believe this agreement is.

Speaker Change: Moving to be a great framework for value creation.

With adjusted EBITDA margins at 21% self help programs in place and working and a strong commercial playbook, we're establishing a strong foundation for long term value creation.

Portland step in delivering the vehicle customization customers desire and is driving the future of digital payment technology.

Speaker Change: I will now turn the call over to Carl to go through our financial results and 2025 guidance.

During 2024 <unk> was recognized with six prestigious industry awards for technology and innovation, three Edison too Big and one R&D 100.

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

Carl Anderson: Before I comment on our performance I wanted to know changes to certain of our non-GAAP financial measures that we announced in an 8-K on January 21.

Speaker Change: These achievements bring <unk> total to 24 innovation awards over the last five years and demonstrates our commitment to developing smarter and innovative solutions for our customers.

Carl Anderson: In order to align more closely with our peers and market practice as well as following the resolution of an FCC comment letter, we are seeking to adjust for step up depreciation and amortization from the acquisition of Dupont performance coatings in the calculation of adjusted EBIT and adjusted net income beginning.

Speaker Change: Let's turn to slide five.

Speaker Change: By all measures 2024 was an excellent year. For example, we had the highest fourth quarter and annual net sales in the history of the company.

Speaker Change: We exceeded $1 1 billion in adjusted EBITDA for the first time and expanded our full year adjusted diluted EPS by 40% I'm encouraged by the significant performance we have demonstrated in our financial results. Since me when we released our 2026, a plan which is <unk>.

Carl Anderson: With the fourth quarter of 2024.

Carl Anderson: Concurrently we are beginning to adjust for the amortization of all acquired intangibles and the computation of those same metrics.

Carl Anderson: These changes will also impact the calculation of return on invested capital and adjusted diluted earnings per share.

Speaker Change: Proving to be a great framework for value creation.

Carl Anderson: The metrics reported today reflect these changes and comparable historical information is available at <unk> com.

Speaker Change: With adjusted EBITDA margins at 21% self help programs in place and working and a strong commercial playbook, we're establishing a strong foundation for long term value creation.

Carl Anderson: For the full year 2024 step up depreciation and amortization from the acquisition of Dupont performance coatings was $48 million in.

Speaker Change: I will now turn the call over to Carl to go through our financial results and 2025 guidance.

Carl Anderson: And the amortization of all acquired intangibles was $92 million.

Carl Anderson: Please turn to slide six for a review of our fourth quarter results.

Speaker Change: Thank you, Chris and good morning, everyone.

Speaker Change: Before I comment on our performance I wanted to know changes to certain of our non-GAAP financial measures that we announced in an 8-K on January 21.

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

Carl Anderson: Primarily driven by a 2% price mix impact and the acquisition of cover flex, partially offset by foreign currency translation and lower volumes.

Speaker Change: In order to align more closely with our peers and market practice as well as following the resolution of an FCC comment letter, we are seeking to adjust for step up depreciation and amortization from the acquisition of Dupont performance coatings in the calculation of adjusted EBIT and adjusted net income beginning.

Carl Anderson: Gross margins were 34% in the quarter, an increase of 150 basis points from the prior year period, while income from operations increased $25 million.

Speaker Change: With the fourth quarter of 2024.

Improvement was driven prior price mix contributions and lower variable costs.

Speaker Change: Concurrently we are beginning to adjust for the amortization of all acquired intangibles and the computation of those same metrics.

Carl Anderson: We experienced some additional benefit from lower raw material energy and freight expenses when compared to last year in the fourth quarter.

Speaker Change: These changes will also impact the calculation of return on invested capital and adjusted diluted earnings per share.

Carl Anderson: For the full year variable cost declined 7%.

Speaker Change: The metrics reported today reflect these changes and comparable historical information is available in adult about com.

Carl Anderson: Currently we see inflation in certain areas, but overall excess supply in many sectors continues to be our primary factor in prices.

For the full year 2024 step up depreciation and amortization from the acquisition of Dupont performance coatings was $48 million and.

Carl Anderson: In 2025, we anticipate minimal raw material inflation in the first quarter and project that we will experience low single digit inflation raw materials for the full year 2025, which we expect to offset with our productivity programs.

Carl Anderson: And the amortization of all acquired intangibles was $92 million.

Carl Anderson: Please turn to slide six for a review of our fourth quarter results.

Carl Anderson: We remained disciplined in managing our fixed operating expenses in the quarter.

Fourth quarter net sales increased by 1% year over year to $1 3 billion.

Carl Anderson: SG&A was roughly flat compared to last year as the benefits from productivity programs and the transformation initiatives came in ahead of plan, which minimized the impact of higher labor costs.

Carl Anderson: Primarily driven by a 2% price mix impact and the acquisition of cover plaques, partially offset by foreign currency translation and lower volumes.

Carl Anderson: Adjusted EBITDA in the quarter was $275 million, 10% better than last year, marking a fourth quarter record.

Carl Anderson: Gross margins were 34% in the quarter, an increase of 150 basis points from the prior year period, while income from operations increased $25 million.

Carl Anderson: Adjusted diluted earnings per share increased 30% to <unk> 60 per share exceeding our expectations, primarily driven by lower tax and interest expense.

Carl Anderson: <unk> was driven by price mix contributions and lower variable costs.

Carl Anderson: We experienced some additional benefit from lower raw material energy and freight expenses when compared to last year in the fourth quarter.

Carl Anderson: Fourth quarter 2024 cash provided by operating activities was $234 million and free cash flow totaled $177 million.

Carl Anderson: For the full year variable cost declined 7%.

Carl Anderson: The year over year decrease was driven primarily by increased planned capital expenditures as we continue to focus on scaling up our investments into our business.

Carl Anderson: Currently we see inflation in certain areas, but overall excess supply in many sectors continues to be our primary factor in prices.

Carl Anderson: Additionally, higher than anticipated working capital was driven primarily by account receivable timing and lower payables, resulting from inventory reductions.

Carl Anderson: In 2025, we anticipate minimal raw material inflation in the first quarter and project that we will experience low single digit inflation for raw materials for the full year 2025, which we expect to offset with our productivity programs.

Carl Anderson: Moving to slide seven.

Carl Anderson: Performance coatings fourth quarter, net sales declined 1% year over year to $843 million.

Carl Anderson: We remained disciplined in managing our fixed operating expenses in the quarter.

Carl Anderson: Because of lower volumes and unfavorable foreign currency translation.

SG&A was roughly flat compared to last year as the benefits from productivity programs and the transformation initiatives came in ahead of plan, which minimized the impact of higher labor costs.

Carl Anderson: These headwinds were partially offset by contributions from the cover flex acquisition and positive price mix in both end markets.

Carl Anderson: Refinish net sales increased 2% to $545 million in the quarter.

Carl Anderson: Adjusted EBITDA in the quarter was $275 million, 10% better than last year, marking a fourth quarter record.

Carl Anderson: Incremental contributions from acquisitions and net body shop wins help mitigate foreign currency headwinds and volume declines from industry trends.

Carl Anderson: Adjusted diluted earnings per share increased 30% to <unk> 60 per share exceeding our expectations, primarily driven by lower tax and interest expense.

Carl Anderson: Industrial net sales declined 5% year over year to $298 million due to volume declines predominantly driven by demand weakness in North America compared to the prior year period.

Speaker Change: Fourth quarter 2024 cash provided by operating activities was $234 million and free cash flow totaled $177 million.

Carl Anderson: Industry conditions remain soft in the fourth quarter and we expect this to continue through the first quarter of 2025.

Speaker Change: The year over year decrease was driven primarily by increased planned capital expenditures as we continue to focus on scaling up our investments into our business.

Carl Anderson: Despite the macro conditions, we expanded adjusted EBITDA margins by approximately 300 basis points. This year and are on track to exceed the 400 basis point margin improvement objective set in the plan.

Speaker Change: Additionally, higher than anticipated working capital was driven primarily by account receivable timing and lower payables, resulting from inventory reductions.

Carl Anderson: Fourth quarter performance coatings, adjusted EBITDA increased 4% year over year to $198 million.

Speaker Change: Moving to slide seven.

Speaker Change: Performance coatings fourth quarter, net sales declined 1% year over year to $843 million.

Carl Anderson: Adjusted EBIT margin increased by 90 basis points to 23, 5%, primarily driven by lower variable costs favorable price mix and contributions from cover flex.

Speaker Change: Primarily because of lower volumes and unfavorable foreign currency translation.

Speaker Change: These headwinds were partially offset by contributions from the cover flex acquisition and positive price mix in both end markets.

Carl Anderson: Let's move to mobility coatings results on slide eight.

Carl Anderson: Mobility coatings fourth quarter 2024, net sales were $468 million, an increase of 4% from the prior year period.

Speaker Change: Refinish net sales increased 2% to $545 million in the quarter.

Speaker Change: Incremental contributions from acquisitions and net body shop wins help mitigate foreign currency headwinds and volume declines from industry trends.

Carl Anderson: Light vehicle net sales grew 9% in the fourth quarter.

Carl Anderson: Volumes increased 6% year over year, even as global auto production was down 5%.

Speaker Change: Industrial net sales declined 5% year over year to $298 million due to volume declines predominantly driven by demand weakness in North America compared to the prior year period.

Carl Anderson: The volume growth was primarily driven by China, and Latin America, which more than offset anticipated declines in North America and Europe.

Carl Anderson: Price mix was a mid single digit tailwind in the quarter driven by the timing of pricing benefits when compared to the fourth quarter of last year.

Speaker Change: Industry conditions remain soft in the fourth quarter and we expect this to continue through the first quarter of 2025.

Speaker Change: Despite the macro conditions, we expanded adjusted EBITDA margins by approximately 300 basis points. This year and are on track to exceed the 400 basis point margin improvement objectives set and the <unk> plant.

Carl Anderson: Commercial vehicle net sales declined 10% year over year predominantly driven by a 13% drop in class eight production in North America, and Latin America, which was consistent with the prior guidance framework.

Carl Anderson: Mobility coatings adjusted EBIT in the quarter improved to $77 million from 59, million% to 29% increase year over year.

Speaker Change: Fourth quarter performance coatings, adjusted EBITDA increased 4% year over year to $198 million.

Speaker Change: Adjusted EBIT margin increased by 90 basis points to 23, 5%, primarily driven by lower variable costs favorable price mix and contributions from cover flex.

Carl Anderson: Adjusted EBITDA margin improved by 320 basis points versus the fourth quarter of last year coming in at 16, 4%.

Carl Anderson: In addition, the full year adjusted EBIT margins of our mobility business ended the year at 15, 3%.

Speaker Change: Let's move to mobility coatings results on slide eight.

Speaker Change: Mobility coatings fourth quarter 2024, net sales were $468 million, an increase of 4% from the prior year period.

Carl Anderson: Through commercial courage in operational excellence, we have more than doubled the mobility coatings adjusted EBIT margin in two years.

Speaker Change: Light vehicle net sales grew 9% in the fourth quarter.

Carl Anderson: Turning to slide nine for a review of our full year results.

Speaker Change: Volumes increased 6% year over year, even as global auto production was down 5%.

Carl Anderson: Net sales grew 2% year over year to $5 3 billion, a new company record.

Speaker Change: The volume growth was primarily driven by China, and Latin America, which more than offset anticipated declines in North America and Europe.

Carl Anderson: The improvement was driven by light vehicle volume growth and contributions from acquisitions, partially offset by foreign currency translation headwinds largely impacting the fourth quarter.

Speaker Change: Price mix was a mid single digit tailwind in the quarter driven by the timing of pricing benefits when compared to the fourth quarter of last year.

Carl Anderson: Volumes were up modestly on a full year basis as growth in mobility coatings was offset by a low single digit decline in performance coatings.

Speaker Change: Commercial vehicle net sales declined 10% year over year predominantly driven by a 13% drop in class eight production in North America, and Latin America, which was consistent with our prior guidance framework.

Carl Anderson: We also achieved a record full year adjusted EBITDA of $1 billion $116 million predominantly driven by lower variable cost positive price mix and an approximately $20 million benefit from our transformation initiatives announced early in 2024.

Speaker Change: Mobility coatings adjusted EBITDA in the quarter improved to $77 million from $59 million, a 29% increase year over year.

Carl Anderson: Adjusted EBITDA margin improved by 280 basis points to 21, 2% achieving the full year margin targets outlined in the 2026, a plan two years earlier than planned.

Speaker Change: Adjusted EBITDA margin improved by 320 basis points versus the fourth quarter of last year coming in at 16, 4%.

Speaker Change: In addition, the full year adjusted EBIT margins of our mobility business ended the year at 15, 3%.

Carl Anderson: Adjusted diluted earnings per share increased by 40% to $2 35.

Speaker Change: Through commercial occurred in operational excellence, we have more than doubled.

Carl Anderson: We plan to remain disciplined and strategic with capital deployment, which we expect will drive near double digit EPS growth over the next several years.

Speaker Change: <unk> coatings adjusted EBIT margin in two years.

Speaker Change: Turning to slide nine for a review of our full year results.

Carl Anderson: And finally free cash flow of $451 million was roughly flat to the prior year as higher earnings were offset by higher working capital.

Speaker Change: Net sales grew 2% year over year to $5 3 billion, a new company record.

The improvement was driven by light vehicle volume growth and contributions from acquisitions, partially offset by foreign currency translation headwinds largely impacting the fourth quarter.

Carl Anderson: Turning to slide 10, we are excited to announce that we ended the year with a net leverage ratio of two five times, which is almost a half turn better than a year ago and is in line with the top end of our 2026 a planned target.

Speaker Change: Volumes were up modestly on a full year basis as growth in mobility coatings was offset by a low single digit decline in performance coatings.

Carl Anderson: Our balance sheet is now in a much stronger position, which provides greater optionality and how we can deploy capital going forward to create shareholder value.

Speaker Change: We also achieved a record full year adjusted EBITDA of $1 billion $116 million predominantly driven by lower variable cost positive price mix and an approximately $20 million benefit from our transformation initiatives announced early in 2024.

Carl Anderson: In the fourth quarter, we paid off the remaining $105 million of revolver borrowings that was used to help finance the cover flex acquisition.

Carl Anderson: We ended the year with $1 $4 billion in total liquidity, including a cash balance of approximately $600 million.

Speaker Change: Adjusted EBITDA margin improved by 280 basis points to 21, 2% achieving the full year margin targets outlined in the 2026, a plan two years earlier than planned.

Carl Anderson: Capital Outlays in 2024 amounted to approximately $630 million deployed with 300 million for M&A $140 million and capital expenditures approximately $90 million of gross debt reduction and $100 million in share repurchases.

Speaker Change: Adjusted diluted earnings per share increased by 40% to $2 35.

Speaker Change: We plan to remain disciplined and strategic with capital deployment, which we expect will drive near double digit EPS growth over the next several years.

Carl Anderson: In 2025 as outlined in the plan, we intend to increase capex to approximately $175 million to $190 million as we believe there are significant investment opportunities to drive productivity in our operations.

Speaker Change: And finally free cash flow of $451 million was roughly flat to the prior year as higher earnings were offset by higher working capital.

Carl Anderson: We have $600 million remaining in share repurchase authority and a pipeline of accretive M&A opportunities, which we plan to evaluate in 2025.

Speaker Change: Turning to slide 10, we are excited to announce that we ended the year with a net leverage ratio of two five times, which is almost a half turn better than a year ago and is in line with the top end of our 2026 a planned target.

Carl Anderson: And finally, we continue to make excellent progress on our return on invested capital target of 15%.

Carl Anderson: In 2024, we expanded our ROIC by 270 basis points to 14, 6% and have line of sight to potentially achieve our target this year.

Speaker Change: Our balance sheet is now in much stronger position, which provides greater optionality and how we can deploy capital going forward to create shareholder value.

Speaker Change: In the fourth quarter, we paid off the remaining $105 million of revolver borrowings that was used to help finance the cover acquisition.

Carl Anderson: Let's turn to slide 11 for our view on 2025 guidance.

Carl Anderson: The new tariffs put into place by the U S government on Canada, Mexico, and China has the potential to create a challenging global trade environment.

Speaker Change: We ended the year with $1 $4 billion in total liquidity, including a cash balance of approximately $600 million.

Carl Anderson: The duration of these actions and the ultimate impacts of global demand remain uncertain.

Speaker Change: Capital Outlays in 2024 amounted to approximately $630 million deployed with $300 million for M&A $140 million and capital expenditures approximately $90 million of gross debt reduction and $100 million in share repurchases.

Carl Anderson: Specific to <unk>, a majority of our raw materials are bought within the local trade borders where we produce.

Carl Anderson: In addition, less than 10% of the raw materials used in our U S production are imported from China and.

Speaker Change: In 2025 as outlined in the plan, we intend to increase capex to approximately $175 million to $190 million as we believe there are significant investment opportunities to drive productivity in our operation.

Carl Anderson: And we have minimal raw material purchases from Mexico and Canada.

Carl Anderson: We are actively evaluating resourcing some of our direct material buy and we'll explore pricing actions as appropriate.

Carl Anderson: We also believe there is excess capacity in the U S for certain customers to shift some production if required.

Speaker Change: We have $600 million remaining in share repurchase authority and a pipeline of accretive M&A opportunities, which we plan to evaluate in 2025.

Carl Anderson: Understanding that this is obviously a fluid situation we are forecasting a full year adjusted EBITDA impact of $10 million from tariffs, which is included in our guidance.

Speaker Change: And finally, we continue to make excellent progress on our return on invested capital target of 15%.

Speaker Change: In 2024, we expanded our ROIC by 270 basis points to 14, 6% and have line of sight to potentially achieve our target this year.

Carl Anderson: The demand impact is still being assessed through discussions with customers. However, we still believe that net sales in 2025 will grow by low single digits.

Carl Anderson: For the full year, we expect revenue to be in the range of 535 billion to $5 4 billion with positive contributions from both segments.

Speaker Change: Let's turn to slide 11 for our view on 2025 guidance.

Speaker Change: The new tariffs put into place by the U S government on Canada, Mexico, and China have the potential to create a challenging global trade environment.

We expect macro volatility to extend into 2025 and have plans to remain agile and execute against our strategy.

Speaker Change: The duration of these actions and the ultimate impact of global demand remain uncertain.

Carl Anderson: In our refinish business, we're expecting industry volumes to be flat to down low single digit percentages in both North America and EMEA.

Speaker Change: Specific to <unk>, a majority of our raw materials are bought within the local trade borders where we produce.

Carl Anderson: We are expecting to continue to gain share in both regions from body shop gains increased sales from accessories, and do it yourself and retail and we plan to harness the full value of cover flex that should more than offset industry volume decline.

Speaker Change: In addition, less than 10% of the raw materials used in our U S production are imported from China.

Speaker Change: And we have minimal raw material purchases from Mexico and Canada.

Speaker Change: We are actively evaluating resourcing some of our direct material buy and we will explore pricing actions as appropriate.

Carl Anderson: In addition, we plan on driving pricing actions across all regions that will take effect in March.

Speaker Change: We also believe there is excess capacity in the U S for certain customers.

Carl Anderson: Overall, we are planning for another record net sales leaders in our refinish business.

Speaker Change: Some production if required.

Carl Anderson: In industrial we expect global industry volumes to be flat to up low single digit percent versus 2024.

Speaker Change: Understanding that this is obviously a fluid situation.

Speaker Change: We are forecasting a full year adjusted EBITDA impact of $10 million from tariffs, which is included in our guidance.

Carl Anderson: Industry conditions in Europe are still challenge, which we expect to continue at least through the first half of 2025.

Speaker Change: The demand impact is still being assessed through discussions with customers. However, we still believe that net sales in 2025 will grow by low single digits.

Carl Anderson: Industry dynamics aside we will continue to focus on gaining accretive growth customers and margin improvement consistent with <unk> strategy.

Speaker Change: For the full year, we expect revenue to be in the range of 535 billion to $5 4 billion with positive contributions from both segments.

Carl Anderson: Our light vehicle, we assume global auto production will be in line with current industry forecast of approximately 89 million.

Speaker Change: We expect macro volatility to extend into 2025 and have plans to remain agile and execute against our strategy.

Carl Anderson: Our volumes should continue to outpace global trends, primarily due to customer mix and new business wins in China and Latin America.

Speaker Change: In our refinish business, we're expecting industry volumes to be flat to down low single digit percentages.

Carl Anderson: Lastly in commercial vehicle, we assume North America class eight builds will remain below prior year before demand ramps back up in the second half and into 2026.

Speaker Change: Both North America and EMEA.

Speaker Change: We are expecting to continue to gain share in both regions from body shop gain.

Carl Anderson: Overall production is forecasted to be flat compared to 2024.

Speaker Change: Increased sales from accessories, and do it yourself and retail and we plan to harness the full value of cover flat that should more than offset industry volume decline.

Carl Anderson: For the full year, we expect adjusted diluted earnings per share to be between $2 50, and $2 60 per share, which is an increase of approximately 9% above 2024 at the midpoint of the range.

Speaker Change: In addition, we plan on driving pricing actions across all regions that will take effect in March.

Speaker Change: Overall, we are planning for another record net sales leaders and our refinished.

Carl Anderson: Adjusted EBITDA is expected to be between $1 billion $150 million and $1 billion $175 million translating to an adjusted EBITDA margin of greater than 21%.

Speaker Change: In industrial we expect global industry volumes to be flat to up low single digit percent versus 2024.

Carl Anderson: Our guidance includes flat variable costs versus 2024, plus approximately $10 million of direct tariff costs.

Speaker Change: Industry conditions in Europe are still challenge, which we expect to continue at least through the first half of 2025.

Carl Anderson: We also expect that our transformation initiative will drive 30% to $40 million of incremental benefit this year mitigating headwinds from labor inflation.

Speaker Change: Industry dynamics aside we will continue to focus on gaining accretive growth customers and margin improvement consistent with a planned strategy.

Carl Anderson: Full year free cash flow is expected to be approximately $500 million in 2025, which assumes increased capital expenditures, partially offset by reduced cash interest.

Speaker Change: Our light vehicle, we assume global auto production will be in line with current industry forecast of approximately 89 million Bill.

Speaker Change: Our volume should continue to outpace global trends, primarily due to customer mix and new business wins in China and Latin America.

Speaker Change: I will now hand, the call back to Chris to review Slide 12, and provide an update against our planned targets.

Speaker Change: Thanks, Carl we did a tremendous job accelerating performance in 2024, and then have an opportunity to pull forward. Our plan if the macroeconomic environment is more favorable than we anticipated.

Speaker Change: Lastly in commercial vehicles, we assume North America class eight builds will remain below prior year before demand ramps back up in the second half and into 2026.

Speaker Change: Overall production is forecasted to be flat compared to 2024.

Speaker Change: We expect to achieve greater than 21% adjusted EBITDA margins and deliver more than 50% in adjusted diluted EPS growth for next year against 2023 at the midpoint.

Speaker Change: For the full year, we expect adjusted diluted earnings per share to be between $2 50, and $2 60 per share.

Speaker Change: Which is an increase of approximately 9% above 2024 at the midpoint of the range.

Speaker Change: This will be another year to stay focused and execute the key initiatives within our control our team is poised and ready and I believe 2025 will prove to be another powerful story for us. Thank you for joining US today. This concludes our prepared remarks operator, please open the lines for Q&A.

Speaker Change: Adjusted EBITDA is expected to be between $1 billion $150 million and $1 billion $175 million translating to an adjusted EBITDA margin of greater than 21%.

Speaker Change: Our guidance includes flat variable costs versus 2024, plus approximately $10 million in direct tariffs.

Speaker Change: Thank you very much at this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question. We will take our first question from Mike <unk> with Barclays. Please go ahead.

Speaker Change: We also expect that our transformation initiative will drive 30% to $40 million of incremental benefit this year mitigating headwinds from labor inflation.

Speaker Change: Full year free cash flow is expected to be approximately $500 million in 2025, which assumes increased capital expenditures, partially offset by reduced cash interest.

Mike: Great. Thanks, Good morning, guys.

Speaker Change: I will now hand, the call back to Chris to review Slide 12, and provide an update against our <unk> target.

Speaker Change: Two questions.

Mike: Good morning, two questions for me on mobility.

Mike: And light vehicle, 6% volume growth is a big number so is that mostly a dynamic of your customers winning share or are you winning like for like market share as well in the coatings market and then second price mix of 4% of the segment seems also like a big number that mostly mixed dynamic or just help us better understand how you got there.

Chris: Thanks, Carl we did a tremendous job accelerating performance in 2024, and then have an opportunity to pull forward or a plan if the macroeconomic environment is more favorable than we anticipate.

Chris: We expect to achieve greater than 21% adjusted EBITDA margins and deliver more than 50% in adjusted diluted EPS growth for next year against 2023 at the midpoint.

Paul: Paul I'll start with Deb, Good morning, Mike and happy New year, and I'll start with the first one.

Paul: The second one over to Carl specific to the mobility wins, it's actually a combination of both first as you can see over the last nine quarters, we made choices with partnering with the right.

Chris: This will be another year to stay focused and execute the key initiatives within our control our team is poised and ready and I believe 2025 will prove to be another powerful story for us. Thank you for joining US today. This concludes our prepared remarks operator, please open the lines for Q&A.

Paul: Bright local players primarily in China.

Paul: And as well as the new wins that we're seeing in Latam and so we are winning customers.

Paul: Beyond what I would call market.

Paul: We're gaining market share here, and we can significantly see that quarter over quarter.

Thank you very much at this time, if you would like to ask a question. Please press star one on your telephone keypad, you may remove yourself from the queue at any time by pressing star to once again that is star one to ask a question. We will take our first question from Mike <unk> with Barclays. Please go ahead.

Paul: Especially if you look at China, we've had double digit growth through many of the quarters over the last year.

Paul: When you look forward as well the customers that we chose to play with especially in China has worked out to be the China customers that are growing with EV players as well as players that are in the IC market that are really growing market.

Mike: Great. Thanks, Good morning, guys.

Chris: Two questions.

Mike: Good morning, two questions for me on mobility.

Mike: In light vehicle, 6% volume growth that is a big number so is that mostly a dynamic of your customers winning share or are you winning like for like market share as well in the coatings market.

Paul: Market share beyond what we can see that that overall market is growing and this is driven by two areas not only their performance in China, but also their growth in southeast Asia, we're seeing how well they're doing whether it's in Malaysia, Indonesia.

Mike: And then second price mix of 4% of the segment seems also like a big number that mostly mixed dynamic or just help us better understand how you got there.

Paul: Exports into the Sri Lanka, even Australia, New Zealand, it's really playing well and we're partnered with the right players as well as partnered early on.

Speaker Change: Well I'll start with that good morning, Mike and happy New year, and I'll start with the first one the.

Speaker Change: The second one over to Carl specific to the mobility wins, it's actually a combination of both first as you can see over the last nine quarters, we made choices with partnering with the right local players primarily in China, especially and as well as the new wins that we're seeing in Latam and so we're winning cluster.

Paul: With customers that we believe are.

Paul: Our market share is growing beyond.

Paul: And Mike just on your price mix question related part of it is mix.

Paul: <unk>.

Paul: Products and businesses that we came in in the fourth quarter of this year compared to last year the.

Speaker Change: <unk> beyond what I would call them market.

Paul: The other component was a year ago in the fourth quarter of 2023.

Speaker Change: We're gaining market share here, and we can significantly see that quarter over quarter.

Paul: There was the comparison also provides a little bit higher price mix when you compare it to what happened a year ago.

Especially if you look at China, we have had double digit growth through many of the quarters over the last year.

Speaker Change: Great. Thank you guys.

Speaker Change: When you look forward as well the customers that we chose to play with especially in China has worked out to be the China customers that are growing.

Paul: Thank you.

Chris Parkinson: Our next question comes from Chris Parkinson with Wolfe Research. Please go ahead.

Chris Parkinson: First of all on an obligatory go birds.

Speaker Change: Players as well as players that are in the ice market that are really growing.

Speaker Change: Hopefully in the city of Philadelphia solely adopted you guys.

Speaker Change: When we take a step back and look at what's happening in the refinish market and we just look at the claims data over the last year. You are clearly outperforming we know you once a decent sized customers or some very decent customers.

Speaker Change: Market share beyond what jobs, what we can see that then overall market is growing and this is driven by two areas not only their performance in China, but also their growth in southeast Asia, we're seeing how well they're doing whether it's in Malaysia, Indonesia.

Speaker Change: In the U S. You are penetrating iris pretty well in Europe can you just give us some additional color on just how to triangulate how you perceive your relative performance and your two primary geographies over the next 12 months and what the investment community should be monitoring to confirm that outperformance. Thank you so much.

Speaker Change: Exports into the Sri Lanka, even Australia, New Zealand, it's really playing well and we're partnered with the right players as well as partnered early on.

Speaker Change: Customers that we believe are our market share is growing beyond.

Brett: Yeah. Thanks, Brett.

Speaker Change: Yes.

Speaker Change: And Mike just on your price mix question related part of it is mix.

Speaker Change: Certainly looking forward to this weekend.

Speaker Change: But.

Speaker Change: A lot of it is we set out a strategy focused on four pillars.

Speaker Change: Different products and businesses that we came in in the fourth quarter of this year compared to last year.

Speaker Change: Driving continued a body shop wins moving into adjacencies driving into that retail segment as well as M&A, okay with what we did with Cabo flex those were the four pillars that we drove in 'twenty four in what was a low and declining market and when we look at 25 the market is.

Speaker Change: The other component was a year ago in the fourth quarter of 2023.

Speaker Change: There was the comparison also provides a little bit higher price mix when you compare it to what happened a year ago.

Speaker Change: Great. Thank you guys.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Chris Parkinson with Wolfe Research. Please go ahead.

Speaker Change: No different across our two major geographies as you define them.

First of all on an obligatory go birds.

Speaker Change: Europe and North America, so from our perspective, we're going to be focused across those four elements going forward.

Speaker Change: Hopefully in the city of Philadelphia is fully adopted you guys.

Speaker Change: When we take a step back and look at what's happening in the refinish market and we just look at the claims data over the last year, you're clearly outperforming we know you want some decent size customers or some very decent customers.

Speaker Change: Last year was a great story for us.

Speaker Change: Averaged on a 2500 body shop wins is what we've always talked about as you know Chris I know over the last four years, we've done 10000, but last year, we did 28 hundreds and so if you look at next year.

Speaker Change: In the U S. You are penetrating iris pretty well in Europe can you just give us some additional color on just how to triangulate how you perceive your relative performance and your two primary geographies over the next 12 months and what the investment community should be monitoring to confirm that outperformance. Thank you so much.

Speaker Change: Team is very very focused on continuing to drive that body shop women staying well above plan. That's the first thing the second one we're going to continue to look at accretive M&A cover flex where it has been a great story for us our <unk> ago, Andre Cohen and acquisition that allowed us to go into distribution in Europe certainly.

Speaker Change: Yeah. Thanks, Brett.

Speaker Change: Yes.

Speaker Change: Certainly looking forward to this weekend.

Speaker Change: But.

Speaker Change: A lot of it is we set out a strategy focused on four pillars.

Speaker Change: A great card.

Speaker Change: And on top of that through our retail stores, we're going to push more in terms of adjacencies or what can we push in terms of failures and parties and things like that we've got that we got out of our <unk> acquisition. That's certainly another element.

Speaker Change: Driving continued a body shop wins moving into adjacencies driving into the retail segment as well as M&A, Okay with what we did with Cabo Flex those were the four pillars that we drove in 'twenty or in what.

Speaker Change: And the final part of this is really the IRS makes launch that we did 300 last year, our expectation is to double this year, mostly in Europe. So that we can continue to drive that we expect the market to be weaker as we have defined flat to weaker what's different between the two years.

Speaker Change: What was a low and declining market and when we look at 25 the market is no different.

Speaker Change: Our two major geographies as you define that.

Speaker Change: Europe and North America, so from our perspective, we're going to be focused across those four elements going forward.

Speaker Change: I would say weather is a little different I mean destocking.

Speaker Change: Last year was a great story for US we've averaged on a 2500 body shop wins is what we've always talked about as you know Chris and over the last four years, we've done 10000, but last year, we did 28 hundreds and so if you look at next year.

Speaker Change: Consumers, calling out whether it's from IAA insurance rates or essentially pocketing.

Speaker Change: Pocketing the insurance claims that both of the challenges, we're facing but I would say weather is something that has been different obviously when you compare it to 24 in Q1, and what we are seeing and whether with the with the snow storms all the way along the east coast as well as snow all the way down to Florida and the <unk>.

Speaker Change: The team is very very focused on continuing to drive that body shop witness staying well above plan. That's the first thing the second one we're going to continue to look at accretive M&A cover flex, where it's been a great story for us.

Speaker Change: Devastation on the West Coast, we haven't seen it through we are not expecting yet, but Mike if that comes through at the tailwind in Q2 that certainly something we will be watching for.

Speaker Change: <unk> ago.

Speaker Change: Andre Cohen and acquisition that allowed us to go into distribution in Europe, certainly played a great card.

Speaker Change: And on top of that through our retail stores, we're going to push more in terms of adjacencies or what can we push in terms of failures and parties and things like that we've got that we got out of our <unk> acquisition. That's certainly another element.

Speaker Change: That's very helpful and just as a quick follow up at your Analyst Day last year, you spoke a lot about industrial SKU rationalization and.

Speaker Change: Certain things seem to be well ahead of scheduled throughout mid year and it also seems as though you were able to raise price in certain substrates a.

Speaker Change: And the final part of this is really.

Speaker Change: The Iris mixed launch so we did 300 last year, our expectation is to double that this year, mostly in Europe. So that we can continue to drive that we expect the market to be weaker as we have defined flat to <unk>, what's different between the two years I would say weather is a little different I mean destocking.

A little bit better than perhaps you were previously anticipating could you just give us a quick update on how the street should be thinking about those dynamics in the 25. Thank you.

Chris Parkinson: That's a great story for US Chris just purely focused on the margin story, and then I'll get into the sales story from a margin story.

Chris Parkinson: When we release VA plan, just nine months ago in May we had a plan to get 400 basis points of margin improvement.

Speaker Change: Gains in our consumers, calling out whether it's from IAA insurance rates or essentially pocketing.

Speaker Change: Pocketing the insurance claims that those are the challenges, we're facing but I would say weather is something that has been different obviously when you compare it to 24 in Q1, and what we are seeing and whether with the with the snow storms all the way along the east coast as well as snow all the way down to Florida and the <unk>.

Listen to Karl's script.

Chris Parkinson: We have essentially accomplished 300 basis points out of that.

Chris Parkinson: Shelly has done a great job driving that and I believe churn will certainly accomplish the 100 basis points and I do believe there is actually upside on the margin story in industrial So I believe we can get better than what we have defined and the eight plan by just continuing to focus on margin here and that does involve a little bit more.

Speaker Change: Station on the West Coast, we haven't seen it through we are not expecting yet, but Mike if that comes through at the tailwind in Q2, that's certainly something we will be watching for.

Chris Parkinson:

Chris Parkinson: Rationalization of the portfolio, which will be focused on what's interesting is even with all of that drive we were able to get $40 million of new incremental business.

Speaker Change: That's very helpful and just as a quick follow up at your Analyst Day last year, you spoke a lot about industrial SKU rationalization and <unk>.

Chris Parkinson: From a perspective of market. It is actually the only market. We're defining for next year to go up to be flat to up slightly and my expectation is with the administration's focus as one thing towards driving the economy. My expectation is we should expect to see something.

Speaker Change: Certain things seem to be well ahead of scheduled throughout mid year and it also seems as though you were able to raise price in certain substrates.

Speaker Change: A little bit better than perhaps you were previously anticipating can you just give us a quick update on how the street should be thinking about those dynamics in the 25. Thank you.

Speaker Change: That's a great story for Us Chris.

Chris Parkinson: Improve on the back half of the year number one number two the areas, where we play so the building products business that we play in North America. My expectations is that would pick up in the back half as well as energy solutions energy solutions, we are getting old, especially from a customer perspective with all our <unk>.

Speaker Change: Just purely focused on the margin story, and then I'll get into the sales story a bit from a margin story.

Speaker Change: When we released the plan just nine months ago in May we had a plan to get to 400 basis points of margin improvement.

Carlos: Listen to Carlos.

Speaker Change: <unk>.

Speaker Change: We have essentially accomplished 300 basis points out of that.

Chris Parkinson: Work in China towards really entering that market and seeing that that those businesses set inside our industrial business. So battery coatings in what we do for motors coatings for motors, such as Impregnating resins. All sits in our industrial business and my expectation is we would see some more growth there.

Speaker Change: Kelly has done a great job driving that and I believe and we'll certainly accomplish the 100 basis points and I do believe there is actually upside on the margin story in industrial So I believe we can get better than what we have defined and the eight plan by just continuing to focus on margin here and that does involve a little bit more.

Chris Parkinson: Add in the back half of the year.

Chris Parkinson: Thank you so much.

Speaker Change: Rationalization of the portfolio, which will be focused on what's interesting is even with all of that drive we were able to get $40 million of new incremental business.

Chris Parkinson: Youre welcome Chris.

Speaker Change: Our next question comes from John Mcnulty with BMO capital markets. Please go ahead.

John Mcnulty: Yes. Good morning, Thanks for taking my question.

John Mcnulty: So as part of the transformation initiative I think you've got 30% to $40 million of efficiency are expected to come in I guess this year I guess can you help us think about if there are any additional levers to pull especially if the if the macro or tariff issues get a little bit worse than expected do you have do you have different things that you can pull to adjust that to maybe accelerated a little.

Speaker Change: From a perspective of market. It is actually the only market. We're defining for next year to go up to be flat to up slightly and my expectation is with the administration's focus as one thing towards driving the economy. My expectation is we should expect to see something.

John Mcnulty: A bit faster or get get bigger numbers from it as we look through 2025.

Speaker Change: <unk> on the back half of the year number one number two the areas, where we play so the building products business that we play in North America. My expectations is that would pick up in the back half as well as energy solutions energy solutions, we are getting old, especially from a customer perspective with all of our.

John Mcnulty: Yes, good morning, John Yes, I think it's a fair characterization is that we do have additional levers that we would have at our disposal and that we're actively working on so I think as you think about the transformation activities would probably theres, probably a little bit more we can do for that this year potentially but I think some of the other areas for us is whether it's and we've talked about previously.

Speaker Change: Work in China towards really entering that market and seeing that that those businesses set inside our industrial business. So battery coatings in what we do for motors coatings for motors, such as Impregnating resins. All sits in our industrial business and my expectation is we would see some more growth there.

John Mcnulty: Would be on.

John Mcnulty: Freight cost and some of the logistic works at the team is doing.

John Mcnulty: Really significant plans to kind of have that really impact us in 2006, but I would tell you theres a lot of energy in trying to see if we can pull that forward a little bit into 'twenty five as well.

Speaker Change: Add in the back half of the year.

John Mcnulty: Also I think for us as we think about productivity within inside the company within our within our plant network that continues to be a very very big focus for us and you can see it.

Speaker Change: Thank you so much.

Speaker Change: Youre welcome Chris.

Operator: Our next question comes from John Mcnulty with BMO capital markets. Please go ahead.

John Mcnulty: Yes. Good morning, Thanks for taking my question so.

John Mcnulty: We have a pretty significant step up in capital expenditures. This year. So you may not get the full run rate with hopefully some a little bit more upside as we think about some of those levers for this year.

John Mcnulty: So as part of the transformation initiative I think you've got 30% to $40 million of efficiency are expected to come in I guess this year I guess can you help us to think about if there are any additional levers to pull especially if the if the macro or tariff issues get a little bit worse than expected do you have do you have different things that you can pull to adjust that to maybe accelerated a little.

John Mcnulty: Got it okay.

John Mcnulty: That's helpful. And then I guess just the second question just is on the balance sheet. So you.

John Mcnulty: Executed as you as you kind of expected you've got the balance sheet in pretty solid shape. I guess can you speak to what youre seeing in terms of opportunities out there. It sounds like the M&A markets, maybe starting to kind of re open up again and I know you had some success over the last couple of years, even when they were somewhat close but I guess what are you seeing.

John Mcnulty: A bit faster or get get bigger numbers from it as we look through 2025.

John Mcnulty: Good morning, John Yes, I think it's a fair.

John Mcnulty: Our duration is that we do have additional levers that we would have at our disposal and that we're actively working on so I think as you think about the transformation activities, there's probably there's probably a little bit more we can do for that this year potentially but I think some of the other areas for us is whether it's and we've talked about previously.

John Mcnulty: From an M&A pipeline perspective.

John Mcnulty: And should we assume that if it doesn't happen if things don't materialize. It goes primarily towards buybacks.

Speaker Change: Yes. This is certainly something that Carlin I bounce off back and forth here, John but certainly.

John Mcnulty: Freight cost and some of the logistic works at the team is doing.

John Mcnulty: Really significant plans to kind of have that really impact us in 2006, but I would tell you theres a lot of energy in trying to see if we can pull that forward a little bit into 'twenty five as well.

Speaker Change: Arlen the finance team have done an exceptional job getting us down to two five times leverage here at the top end of our <unk>.

John Mcnulty: Also I think for us as we think about productivity within inside the company within our within our plant network that continues to be a very very big focus for us and you can see it.

Speaker Change: Our a plant.

Speaker Change: From my perspective, we're here a year and a half I had a plan and I also look at it.

Speaker Change: Great place from where the marketplaces I think the current volatility in the marketplace is actually creating more opportunities for M&A for us.

John Mcnulty: We have a pretty significant step up in capital expenditures. This year. So you may not get the full run rate with hopefully some a little bit more upside as we think about some of those levers for this year.

Speaker Change: I think the best way I can characterize that you should expect to hear more from us on this front in the next couple of quarters.

John Mcnulty: Got it okay.

Speaker Change: That's helpful. And then I guess just the second question just is on the balance sheet. So.

Speaker Change: We do see the opportunity to do more in M&A and M&A as long as it certainly hits, our ROIC targets of our return targets.

Speaker Change: Executed as you as you kind of expected you've got the balance sheet in pretty solid shape. I guess can you speak to what youre seeing in terms of opportunities out there. It sounds like the M&A markets may be starting to kind of re open up again and I know you had some success over the last couple of years, even when they were somewhat close but I guess what are you seeing.

Speaker Change: Bye.

Speaker Change: With what how the company has performed structurally where we're taking it operationally I certainly see this as an opportunity where we can look at bolt ons that we can continue to create value in the last two certainly have helped us do that and especially in this environment.

Speaker Change: From an M&A pipeline perspective.

Speaker Change: Should we assume that if it doesn't happen if things don't materialize it goes primarily towards buybacks.

Speaker Change: That we can continue to do more here.

Speaker Change: Great. Thanks, very much for the color.

Speaker Change: Yes. This is certainly something that Carlin I bounce off back and forth here, John but certainly.

Speaker Change: Youre welcome.

Speaker Change: Our next question comes from Mike Sison with Wells Fargo. Please go ahead.

Mike Sison: Hey, nice nice ended the year.

Speaker Change: We're arlen the finance team have done an exceptional job getting us down to two.

Mike Sison: I guess the other question on the Refinished market you sort of noted it would be kind of flattish. This year. It really hasnt helped you a lot, although you've been able to grow through through not a lot of growth in the market over the last couple of years, but.

Speaker Change: Two five times leverage here at the top end of our.

Speaker Change: Our a plant from.

Speaker Change: From my perspective, we're here a year and a half I had a plan.

Speaker Change: I also look at it as a.

Speaker Change: Where do you think we are in.

Speaker Change: Great place from where the marketplaces I think the current volatility in the marketplace.

Mike Sison: The refinished market as it is it a market that can grow the next couple of years.

Speaker Change: Creating more opportunities for M&A for us.

Speaker Change: I don't suspect we peaked here.

Speaker Change: I think the best way I can characterize this that you should expect to hear more from us on this front in the next couple of quarters.

Speaker Change: Just give us some of the dynamics that you see that could maybe help grow the market over the next couple of years and on the flip side, what risk do you see in 'twenty five as the macro just seems challenging again.

Speaker Change: We do see the opportunity to do more and more.

Speaker Change: And M&A as long as it certainly hits, our ROIC targets of our return targets.

Speaker Change: Thank you.

Mike Sison: Good question, Mike I think.

Speaker Change: But.

Speaker Change: As you can see what we're forecasting for the market is for it to be flat to down.

Speaker Change: With what how the company has performed structurally where we're taking it operationally I certainly see this as an opportunity where we can look at bolt ons.

Speaker Change: And so what's driving it I think theres a lot of factors. There are factors that I believe are transitory and I think there are factors that I would argue we need to wait and see and watch.

Speaker Change: We can continue to create value in the last two certainly have helped us do that and especially in this environment.

Speaker Change: That we can continue to do more here.

Speaker Change: Which one which are more structural right and so in terms of factors that I would call our transitory insurance rates.

Speaker Change: Great. Thanks, very much for the color.

Speaker Change: Youre welcome. Our next question comes from Mike Sison with Wells Fargo. Please go ahead.

Speaker Change: With where inflation is and where consumers are and folks essentially deciding to Paul.

Mike Sison: Hey, nice nice ended the year.

Mike Sison: I guess I had a question on the refinished market you sort of noted it would it be kind of flattish. This year. It really hasnt helped you a lot, although you've been able to grow through through not a lot of growth for the market over the last couple of years, but.

Speaker Change: Spending on fixing their cars to essentially.

Speaker Change: Buy groceries I think those are elements that.

Speaker Change: Consumer confidence can certainly change that as well as any drop in insurance rates also.

Mike Sison: Where do you think we are in.

Speaker Change: Something that will be a tailwind for US is you got to remember where backlogs were in body shops right.

Mike Sison: The refinish market as it is it a market that can grow the next couple of years.

Speaker Change: You go back to 'twenty, three backlogs, where all the way to up to 8% to six to eight weeks right now we're actually getting back to normalized backlogs I would call. It two to three weeks and you would ask why so I mean, if I had to wait eight weeks to fix my cards I'm, either I'm, just kind of to cash it and just work with the car I have especially.

Mike Sison: I don't suspect we peaked here.

Just give us some of the dynamics that you see that could maybe help grow the market over the next couple of years and on the flip side, what risk do you see in 'twenty five as the macro just seems challenging again.

Mike Sison: Thank you. Thanks, Yes, good question, Mike I think.

Mike Sison: As you can see what we're forecasting for the market is for it to be flat to down.

Speaker Change: But it's a minor collision or you have other conditions, where insurance companies also making calls when youre right on the edge to write off the car. So I do believe there are elements that are transitory.

Mike Sison: And so what's driving it I think theres a lot of factors. There are factors that I believe are transitory and I think there are factors that I would argue we need to wait and see and watch.

Speaker Change: Elements that I would say that.

Speaker Change: We have to wait and see how this plays out is obviously the destocking that we've seen in the marketplace a lot of which we saw in 2004, two very large distributors coming together.

Mike Sison: Which one which are more structural right and so in terms of factors that I would call our transitory insurance rates.

Mike Sison: With where inflation is and where consumers are and folks essentially deciding to Paul.

Speaker Change: And consolidating you would see that they are.

Speaker Change: Probably optimize their inventory platform and so do you see that coming back probably not so those are the things that we're balancing over time.

Mike Sison: Spending on fixing their cars to essentially.

Mike Sison: Buy groceries I think those are elements that.

Speaker Change: My expectation is all the transitory elements when you start taking all that together plus the fact that I do believe if you look at the United States. If you look at what we're driving to a return to work at miles those are all going up. So my expectation is over time this will change, but the way we're forecasting.

Mike Sison: Consumer confidence can can certainly change that as well as any drop in insurance rates also.

Mike Sison: Something that will be a tailwind for US is you got to remember where backlogs were in body shops right.

Mike Sison: You go back to 'twenty, three backlogs, where all the way to up to 8% to six to eight weeks right now we're actually getting back to normalized backlogs I would call. It two to three weeks and you would ask why so I mean, if I had to wait eight weeks to fix my car I mean, either I'm, just kind of to cash it and just work with the car I have especially.

Speaker Change: It just as we did in 2004 is to expect this market to be flat to down so that we over performed so even in this market where even in 'twenty five were putting that into our forecast. So that we keep our teams over performing and anything that comes on top of that will be upside and again as.

Mike Sison: But it's a minor collision or you have other conditions, where insurance companies also making calls when youre right on the edge to write off the car. So I do believe there are elements that are transitory.

Speaker Change: I answered.

Speaker Change: Mike's first question asked is whether which we havent tracked and all of this.

Speaker Change: With the significant weather that we have seen this year and again. This is something that you usually see a quarter later in Q2 or Q3 that could be a tailwind, but again. This is not something that we're counting on that at this point.

Mike Sison: Elements that I would say that.

Mike Sison: We have to wait and see how this plays out is obviously the destocking that we've seen in the marketplace a lot of which we saw in 2004, two very large distributors coming together.

Speaker Change: Alright, thank you.

And consolidating you wouldn't see that they are probably optimize their inventory platform and so do you see that coming back probably not so those are the things that we're balancing over time.

Speaker Change: Youre welcome our next.

Moderator: Our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews: Thank you and good morning, everyone. I'm wondering if you could touch a little bit more on the free cash flow you had raised the free cash flow guidance <unk>.

Mike Sison: My expectation is all of the transitory elements when you start taking all that together plus the fact that I do believe if you look at the United States. If you look at what we're driving to a return to work at miles those are all going up. So my expectation is over time this will change, but the way we are.

Vincent Andrews: So I think about $500 million and I think you wound up coming in below.

Vincent Andrews: The prior guidance. So could you just bridges to what happened between where you thought things were going to be at <unk> and <unk>.

Vincent Andrews: Then.

Vincent Andrews: The shortfall this year how much of it do you think you can make back up next year and so you've got it to $500 million, but that was kind of what you're expecting for this year. So if you could just help us.

Mike Sison: <unk>. It just as we did in 2004 is to expect this market to be flat to down so that we over performed so even in this market where even in 'twenty five.

Vincent Andrews: From <unk> all the way through next year that would be great.

Speaker Change: Yes, good morning, Vincent Yes, I think for free cash flow for US. This is really just working capital and from a timing perspective. So if you if we kind of look at kind of what happened in this on a year over year type of kind of comparison as well.

Speaker Change: That is our forecast so that we keep our teams over performing and anything that comes on top of that will be upside and then again as I answered Mike's first question is if weather, which we havent tracked and all of this.

Speaker Change: We had about a $70 million working capital higher working capital this year than what we kind of did a year ago and so relative to the guide it's really just the timing of some of the receivables and collections as it relates to that.

Speaker Change: The significant weather that we have seen this year and again. This is something that you usually see a quarter later in Q2 or Q3 that could be a tailwind, but again. This is not something that we're counting on that at this point.

Speaker Change: In our account payables.

Speaker Change: If I look at my depots were down probably six to seven days on a.

Speaker Change: Alright, thank you.

Speaker Change: As well in the quarter. So we do think a lot of that will reverse itself and come back into 2025.

Speaker Change: Youre welcome.

Vincent Andrews: Our next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Speaker Change: We did kind of go forward with just the $500 million of free cash flow as a starting point, but.

Vincent Andrews: Thank you and good morning, everyone. I'm wondering if you can touch a little bit more on the free cash flow you had raised the free cash flow guidance <unk>.

Speaker Change: As I look at the business I would expect that should definitely be the floor and we would hopefully drive that up as we go throughout the year, depending on obviously market conditions.

Speaker Change: So I think about $500 million.

Vincent Andrews: You wanted up coming in below.

Vincent Andrews: The prior guidance. So could you just bridges to what happened between where you thought things were going to be at <unk> and <unk>.

Speaker Change: Okay.

Speaker Change: Follow up the wins that you've had in light vehicle I think you cited better than industry.

Vincent Andrews: Then.

Vincent Andrews: The shortfall this year, how much where do you think you can make back up next year and so you've got it to $500 million, but that was kind of what you're expecting for this year. So if you could just help us.

Speaker Change: Performance in the last 10 quarters.

Speaker Change: Those wins been on index based contracts was about six based contracts with no notable trend between the two.

Vincent Andrews: From <unk> all the way through next year that would be great.

Speaker Change: It's a combination of both I would say on as far as.

Yes, good morning, Vincent Yes, I think for free cash flow for US. This is really just working capital and from a timing perspective. So if you if we kind of look at kind of what happened in this on a year over year type of kind of comparison as well.

Speaker Change: On those type of.

Speaker Change: Wins that we've had today and so some are some are index based some are not obviously it depends on the jurisdiction and really the end customer as we think about that Vince and but I do think.

Vincent Andrews: We had about a $70 million working capital higher working capital this year than what we kind of did a year ago and so relative to the guide it's really just the timing of some of the receivables and collections as it relates to that.

Speaker Change: A point on Latin America for US It was a very very strong quarter.

Speaker Change: And that's where we still have pretty significant upside as we kind of go forward. So we did increase the total wins that will beginning to come in this additional wins that will be coming in in 2025. So we're now we're seeing that $60 million to $70 million. Originally I think we kind of gave about 50 million number.

Vincent Andrews: In our account payables.

Vincent Andrews: If I look at my depots were down probably six to seven days on a.

As well in the quarter. So we do think a lot of that will reverse itself and come back into 2025.

Speaker Change: So that business will be rolling on here over the next 18 months. So we're very excited about just.

Vincent Andrews: We did kind of go forward with just the $500 million of free cash flow as a starting point, but as I look at the business I would expect that should definitely be the floor and we would hopefully drive that up as we go throughout the year, depending on obviously market conditions.

Speaker Change: What we're seeing specifically in the Brazil market.

Vincent Andrews: Just maybe I'll get back to that Vincent in terms of jurisdictions. As you know we moved our Rmi index thing from about 30% of our total <unk>.

Vincent Andrews: Okay.

Speaker Change: Follow up the wins that you've had in light vehicle I think you cited better than industry.

Vincent Andrews: Mobility upticks over north of 50% and it depends on the regions for example in Latam.

Vincent Andrews: Performance amount in the last 10 quarters.

Because there's so much volatility we state that we avoid rmi indexing or having something because we the customers are used to having conversations at a much faster pace than if you were in other regions like North America Europe.

Vincent Andrews: Those wins been on index based contracts are within an <unk> based contracts with no notable trend between the two.

Vincent Andrews: It's a combination of both I would say on as far as.

Speaker Change: Okay. Thanks, very much that's helpful.

Vincent Andrews: And those type of.

Vincent Andrews: Wins that we've had today and so some are some are index based some are not obviously depends on the jurisdiction and really the end customer as we think about that Vince and but I do think.

Vincent Andrews: Thank you our.

Speaker Change: Our next question comes from John Roberts with Mizuho. Please go ahead.

John Roberts: Thank you and congrats on a nice quarter and guidance.

Speaker Change: Do you think youll be providing new multiyear targets. Once you hit all of the 2026 a plan.

Vincent Andrews: A point on Latin America for US It was a very very strong quarter.

Vincent Andrews: And that's where we still have pretty significant upside as we kind of go forward. So we did increase the total wins that will beginning to come in this additional wins that will be coming in in 2025. So we're now we're seeing that $60 million to $70 million. Originally I think we kind of gave about 50 million number.

John Roberts: Okay.

Speaker Change: Absolutely Mike.

John Roberts: If you really look at this.

John Roberts: With a little bit of help from a macro.

John Roberts: <unk> casting all our macros to be down with the slight improvement in industrial but.

John Roberts: Just finishing on page 12, and if you really look at the.

Vincent Andrews: So that business will be rolling on here over the next 18 months. So we're very excited about just.

John Roberts: The performance of the.

John Roberts: Where we are against our plan and it is something that we just released in may of last year.

Vincent Andrews: What we're seeing specifically in the Brazil market.

Vincent Andrews: Just maybe I'll get back to that Vincent in terms of jurisdictions. As you know we moved our Rmi index thing from about 30% of our total <unk>.

John Roberts: And even if you look at sales sales would be up a 100 million more.

John Roberts: It wasn't for FX, but my perspective is we can accelerate a ton of desk through 'twenty five and so my hope is that maybe by the end of this euro by it but certainly by the beginning of next year. We release, our next plan and we show you guys, where we can go with this company in the future I'm, absolutely thrilled that of the performance that we have.

Vincent Andrews: Mobility up just over north of 50% and it depends on the regions for example in Latam.

Because there is so much volatility we state, we avoid rmi indexing or having something because the customers are used to having conversations at a much faster pace than if you were in other regions like North America or Europe.

John Roberts: To date with this company and I do believe there is great.

John Roberts: Great upside.

John Roberts: What else, we can do with it.

Speaker Change: Okay. Thanks, very much that's helpful.

John Roberts: And I apologize if I missed this but how are you thinking about FX for both the March quarter.

Speaker Change: Thank you. Our next question comes from John Roberts with Mizuho. Please go ahead.

John Roberts: <unk> cloud.

John Roberts: Thank you and congrats on a nice quarter and guidance.

John Roberts: Sales and EBITDA.

John Roberts: Do you think youll be providing new multiyear targets. Once you hit all of the 2026 a plan targets.

John Roberts: Yes, I think John as we think about full year, we're planning somewhere between 80 million to $100 million of FX headwinds on a year over year basis, So call that one 5% to close to 2% on a year over year comparison in the first quarter, we're seeing pretty close to around say 25, most likely.

Speaker Change: Absolutely Mike.

John Roberts: If you really look at this.

John Roberts: A little bit of help from a macro we're forecasting all our macros to be downward.

Improvement in industrial but.

John Roberts: $30 million of FX headwinds in.

John Roberts: Just finishing on page 12, and if you really look at.

John Roberts: In the first quarter and if you think about the EBITDA impact on that maybe just from a Q1 basis, it's probably in that $5 billion range, which is also similar to actually if you kind of go back even into the fourth quarter.

John Roberts: The performance of the.

John Roberts: Where we are against our plan and.

John Roberts: And it's something that we just released in may of last year.

John Roberts: And even if you look at sales sales would be up a $100 million more if it wasn't for FX, but my perspective is we can accelerate a ton of desk through 'twenty five and so my hope is that maybe by the end of this euro VI, but certainly by the beginning of next year. We release, our next plan and we show you guys, where we can go with this company.

John Roberts: Of last year, when we were put the guide out for the year.

We did have FX kind of really move against us relative to our guide in October and that was probably another $5 million headwind that we had on EBITDA for Q4.

John Roberts: Thank you.

Thank you.

John Roberts: In the future I'm, absolutely thrilled that of the performance that we've had to date with this company and I do believe there is.

Speaker Change: Next go to Duffy Fischer with Goldman Sachs. Please go ahead.

Duffy Fischer: Hey, good morning, guys.

Duffy Fischer: Question, just when you guys talk about like let's say the 2800 wins you had last year in refinish.

Great upside or what else, we can do with it.

Speaker Change: And I apologize if I missed this but how are you thinking about FX for both the March quarter and full 24 hours.

Duffy Fischer: Help us with the economics on that like what would the average sales be on a win and then what do the margins look like initially you come in below average and then grow into it over a couple of years or.

John Roberts: Both sales and EBITDA.

John Roberts: Yes, I think John as we think about full year, we're planning somewhere between 80 million to $100 million of FX headwinds on a year over year basis, So call that one 5% to close to 2% on a year over year comparison in the first quarter, we're seeing pretty close to around say 25, most likely.

Duffy Fischer: How do we take those numbers and roll those through our model.

Duffy Fischer: So we don't break that out to that level of detail, but one thing I would say it would be I mean as you can see in the performance.

Duffy Fischer: The business overall year over year or even if you if you take out a bit for pricing what you can see it's coming at or accretive to the margins.

John Roberts: The $30 million of FX headwinds in.

John Roberts: In the first quarter and if you think about the EBITDA impact on that maybe just from a Q1 basis, it's probably in that $5 million range.

Duffy Fischer: The refinish business. So I think that's the best way to characterize that but we don't break out.

John Roberts: Which is also similar to actually if you kind of go back even into the fourth quarter of last year. When we were put the guide out for the year.

Duffy Fischer: The sales are.

Duffy Fischer: R chop or provide an average in that sense.

John Roberts: We did have FX kind of really move against us relative to our guide in October and that was probably another $5 million headwind that we had on EBITDA for Q4.

Duffy Fischer: <unk>.

Duffy Fischer: Duffy, but one other thing for you is it for you in other way to look at this is we also provide a net number right. So this includes this is inclusive of what losses, we have so.

John Roberts: Thank you.

John Roberts: Thank you.

Duffy Fischer: Every time you look at this number just look at it as always incremental sales for us thats coming into the portfolio and so you take that and you know what we do on average for pricing for the business and you can quickly get a sense that as you can see the improvement in the business year over year that it's coming in at or slight.

John Roberts: We'll next go to Duffy Fischer with Goldman Sachs. Please go ahead.

Duffy Fischer: Yeah, Good morning, guys.

Speaker Change: Question, just when you guys talk about like let's say the 2800 wins you had last year in refinish.

Speaker Change: US with the economics on that like what would the average sales be on a win and then what do the margins look like initially you come in below average and then grow into it over a couple of years or how do we take those numbers and roll those through our model.

Duffy Fischer: Accretive to the overall margin of the business and Duffy if you look at just performance coatings.

Total for the year 2000 and for the margin expansion was 250 basis points, obviously part of that was industrial but with refinish being a larger component of that you could see that even with all of these new wins coming on there is still expansion during the year, which is consistent with how we how we think about when we go to market.

Speaker Change: So we don't break that out to that level of detail, but one thing I would say it would be I mean as you can see in the performance.

Speaker Change: The business overall year over year or even if you if you take out.

Speaker Change: A bit for pricing, what you can see it's coming at or accretive to the margins.

Speaker Change: Thank you and then just the 10 million number that you gave out for tariffs is that incremental just on the tariffs are kind of being talked about you know the Mexico, China, Canada or is that inclusive of things like the anti dumping on their park C. In tier two into Europe. It have kind of already occurred and if it's not.

Speaker Change: In the refinish business. So I think that's the best way to characterize that but we don't break out the <unk>.

Speaker Change: Sales for our shop or provide an average in that sense.

Duffy Fischer: Duffy, but one other thing for us and for you in other way to look at this is we also provide a net number right. So this includes this is inclusive of what losses, we have shows in.

Speaker Change: Inclusive of those roughly how big is that he has been on some of these raw materials that are getting anti dumping.

Duffy Fischer: Yes, So Duffy I think we've looked at obviously as we were preparing yesterday with <unk>.

Duffy Fischer: Every time you look at this number just look at it as always incremental sales for us thats coming into the portfolio and so you take that and you know what we do on average for our pricing.

Duffy Fischer: The fluid situation the $10 million was really attempting to incorporate both.

Duffy Fischer: What we did in the 10% in China as well as what we saw from Mark Canada, Mexico yesterday, obviously.

The business and you can quickly get a sense that as you can see the improvement in the business year over year that.

Duffy Fischer: There's a 30 day reprieve on that so it's probably a little bit less than $10 million as we think about it now just based off what we're seeing from that from Canada and Mexico.

Duffy Fischer: It's coming in at or slightly accretive to the overall margin of the business and Duffy. If you look at just performance coatings in total for the year of 'twenty for the margin expansion was 250 basis points, obviously part of that was industrial but with refinish being the larger component of that you could see that even with all of these new wins coming on.

Duffy Fischer: But as it relates to some of those other anti dumping.

Duffy Fischer: <unk>, that's kind of already fully loaded into our outlook at this point I think the teams have done.

Duffy Fischer: A good job in managing around that as we think about whether thats through alternative sources, whether thats. Some other productivity initiatives that were being that we're executing.

Duffy Fischer: There is still expansion during the year, which is consistent with how we how we think about when we go to market.

Duffy Fischer: Terrific. Thank you guys.

Duffy Fischer: Thank you and then just the 10 million number that you gave out for tariffs is that incremental just on the tariffs are kind of being talked about you know the Mexico, China, Canada or is that inclusive of things like the anti dumping on their park C. In tier two into Europe. It have kind of already occurred and if it's not <unk>.

Duffy Fischer: Just one last thing for you on the $10 million I mean, obviously this is a full year view and as a team it's not like we found out about tariffs in the last week.

Duffy Fischer: On Saturday, we've obviously known tariffs were coming for a couple of months here one of the things that we are working is looking ads at onshoring and also having making sure. Our some of our suppliers have strategic inventories in on cotton and oil in the United States and so certainly so thats our top end of our goal.

Duffy Fischer: Inclusive of those roughly how big is that he has been on some of these raw materials that are getting anti dumping.

Duffy Fischer: Yes, So Duffy I think we've looked at obviously as we were preparing yesterday with.

Duffy Fischer: With the fluid situation the $10 million was really attempting to incorporate both.

Duffy Fischer: At our of our number based on what we thought from just the weekend, but we do there is mitigation activities that we can certainly drive towards that.

Duffy Fischer: What we did in the 10% in China as well as what we saw from a Canada, Mexico yesterday, obviously.

Duffy Fischer: There's a 30 day reprieve on that so it's probably a little bit less than $10 million as we think about it now just based off what we're seeing from that from Canada and Mexico.

Duffy Fischer: Thanks again.

Speaker Change: And we will next go to Ghansham Panjabi with Baird. Please go ahead.

Speaker Change: Hey, guys good morning.

Duffy Fischer: But as it relates to some of those other anti dumping.

Speaker Change: It's obviously a lot of progress on yourself improvement initiatives last year.

Duffy Fischer: Oh two.

Speaker Change: Maybe you can share some specifics in terms of what we should look forward to in 2025 and <unk> and then for my second question Carl in terms of the EBITDA improvement 24 versus 25, let's say $50 million plus or minus.

Duffy Fischer: It's kind of already fully loaded into our outlook at this point I think the teams have done.

Duffy Fischer: A good job in managing around that as we think about whether thats through alternative sources, whether thats. Some other productivity initiatives that were being that we're executing.

Speaker Change: Can you just summarize the bridge items I know you called out cost savings of 30 to 40, and then you know a bit of a tariff impact.

Speaker Change: Perfect. Thank you guys.

John Roberts: Just one last thing for you Duffy on the $10 million I mean, obviously this is a full year view and as a team it's not like we found out about tariffs in the last week or.

Speaker Change: But just what are you what are you embedding sort of base.

Speaker Change: Volume.

Speaker Change: And price on a core basis, excluding cover flex. Thanks.

Speaker Change: Okay.

Speaker Change: So I'm going to start thanks for the question Ghansham and happy new year.

John Roberts: On Saturday with obviously known tariffs were coming for a couple of months here one of the things that we are working is looking ads at onshoring and also having making sure some of our suppliers have strategic inventories in our continent oil in the United States and so certainly so thats our top end of our goal.

Speaker Change: So if I think about the self help and if I broke it up into the three or four initiatives.

Speaker Change: Overall under our transformation initiative.

Speaker Change: One of the first things that we had is to look at our SG&A we had.

Speaker Change: Our plan to reduce 5% of our salaried workforce around 600 folks ads with what you saw in how we announced it last quarter.

John Roberts: At our of our number based on what we thought from just the weekend, but we do there is mitigation activities that we can certainly drive towards that.

Speaker Change: Quarter or for the full year of 'twenty, three we had a target of $10 million for last year, we accomplished $20 million our target for this year, it's about $30 million and conceptually with the with the let's call. It negotiations that we put in place inclusive of the two.

John Roberts: Thanks again.

Speaker Change: And we will next go to Ghansham Panjabi with Baird. Please go ahead.

Speaker Change: Hey, guys good morning.

Speaker Change: Obviously, a lot of progress on yourself improvement initiatives last year.

Speaker Change: <unk> that we had in Europe, and North America to close we are on schedule or there might be a little bit of upside, but our expectation is to still hit that $30 million in terms of what are the other initiatives. The other one was supply chain and again with the current dynamics in terms of volumes and where things are moving this remains.

Speaker Change: Maybe you can share some specifics in terms of what we should look forward to in 2025 and <unk>.

Speaker Change: And then for my second question Carl in terms of the EBITDA improvement 24 versus 25, let's say $50 million plus or minus can you just summarize the bridge items I know you've called out cost savings of 30 to 40 and then.

Speaker Change: A bit of a tariff impact.

Speaker Change: Still a very very strong opportunity and we certainly see this as something that we can continue to drive here overall across this over the three year plan, we had about $25 million and Thats certainly something that we're going to continue to drive.

Speaker Change: But just what are you what are you embedding sort of her base.

Speaker Change: Volume.

Speaker Change: And price on a core basis, excluding cover flex. Thanks.

Speaker Change: Okay.

Speaker Change: I'm going to start thanks for the question Ghansham and happy new year.

Speaker Change: I think to that question in terms of the next one is productivity within our plants and to the question about.

Speaker Change: So if I think about the self help but if I broke it up into the three or four initiatives.

Speaker Change: Our free cash flow impact of our working capital impact one of the elements is.

Speaker Change: Overall under our transformation initiative.

Speaker Change: The first things that we had is to look at our SG&A we had.

Speaker Change: Capital.

In Q4, if you noticed actually doubled from Q3 and what we're doing is really investing in our plants to start driving productivity now that's not going to quite play, but my expectation is we're certainly going to be in a different spot in 'twenty because of the levels of investments that we're putting we.

Speaker Change: Our plan to reduce 5% of our salaried workforce around 600 folks as you know with what you saw in how we announced it last quarter.

Speaker Change: Quarter or for the full year of 'twenty, three we had a target of $10 million last year, we accomplished $20 million our target for this year, it's about $30 million and conceptually with the with the let's call. It negotiations that we put in place inclusive of the two plants that we had in Europe and North America to close we are.

Speaker Change: Need half of that investment was needed because its sustaining.

Speaker Change: Going through Covid, we that was a lot of capital that a lot of investments that we did not make but I would call. It a quarter to another half of it is driven towards productivity initiatives and that certainly will come into fruit and about I would say the back half of this year into 26. So those are the elements that I.

Speaker Change: On schedule or there might be a little bit of upside, but our expectation is to still hit that $30 million in terms of what are the other initiatives. The other one was supply chain and again with the current dynamics in terms of volumes and where things are moving this remains still a very very strong opportunity and we certainly see.

Speaker Change: Believe or what's still left on the self help front that will certainly keep us going in the right path as I look to where the markets are heading for 'twenty or 'twenty five.

Speaker Change: This is something that we can continue to drive here overall across this over the three year plan, we had about $25 million and Thats certainly something that we're going to continue to drive.

Speaker Change: So just the the bridge on EBITDA year over year, its relatively straightforward and simple the way that we're looking at it so I would say on the <unk>.

Speaker Change: Now I think to that question in terms of the next one is productivity within our plants and to the question about.

Speaker Change: Incremental $100 million or so of higher revenue.

Speaker Change: Kind of at the midpoint, you should expect us to convert at data at 35% to 40% so call that 30%, 35% to $40 million, which would kind of get you to the low end of the guide everything else being equal.

Speaker Change: Our free cash flow impact of our working capital impact one of the elements is.

Speaker Change: Capital.

Speaker Change: In Q4, if you noticed actually doubled from Q3 and what we're doing is really investing in our plants to start driving productivity now that's not going to come quickly, but my expectation is we're certainly going to be in a different spot in 'twenty six.

Speaker Change: As it relates to the transformation initiatives at the 34 $30 million to $40 million, we believe that will be somewhat offset with labor inflation that we're expecting this year as well as the potential impact from tariffs.

Speaker Change: The levels of investments that we're putting we needed to half of that investment was needed because its sustaining.

Speaker Change: I think above and beyond that where there could be further opportunity to get to the higher point would be again right. Now we are assuming kind of a flattish a variable cogs are raw material environment on a net basis.

Speaker Change: Going through Covid.

Speaker Change: That was a lot of capital that are a lot of investments that we did not make but I would call. It a quarter to another half of it is driven towards productivity initiatives and that certainly will come into fruit and about I would say the back half of this year into 2006. So those are the elements that I believe are what's still left on the self.

Speaker Change: If there is a little bit of opportunity there that would actually help us get to the to the upper end of the range and as Chris said is productivity I think the productivity again, if we're successful on some of the execution items that can provide a little bit more tailwind as well.

Front that will certainly keep us going in the right path as I love them to where the markets are heading for 2025 and got some just the bridge on EBITDA year over year, its relatively straightforward and simple the way that we're looking at it so I would say on the <unk>.

Speaker Change: Perfect. Thank you.

Speaker Change: Thank you.

We'll next take our question from Alexia <unk> from Keybanc capital markets. Please go ahead.

Speaker Change: Thanks, and good morning, everyone.

Speaker Change: Wanted to come back to the refinish market and ask you about your mainstream versus premium market strategy.

Speaker Change: Incremental 100 million or so of higher revenue.

Speaker Change: Any update there on how this is evolving.

Speaker Change: You know kind of at the midpoint, you should expect us to convert at that 35% to 40%. So call that 30 to $35 million to $40 million, which will kind of get you to the low end of the guide everything else being equal.

Speaker Change: Maybe.

Speaker Change: Use additional M&A to enhance this mainstream market strategy.

Speaker Change: In coming quarters.

Speaker Change: Yeah. So thanks for the question Alexia and again.

Speaker Change: As it relates to the transformation initiatives of the 34 $30 million to $40 million, we believe that will be somewhat offset with labor inflation that we're expecting this year as well as the potential impact from tariffs.

Speaker Change: Thanks.

Speaker Change: Eric to you too and just in terms of the premium segment.

Speaker Change: If you look at the a lot of the body shop wins. These have been very very focused on the premium side.

Speaker Change: I think above and beyond that where there could be further opportunity to get to the higher point would be again right. Now we are assuming kind of a flattish variable cogs are raw material environment on a net basis.

Speaker Change: The entry with cover Flex has really given us an opportunity into the mainstream and economy. So I in terms of how well that's working I would say, we're right largely in line with our deal.

Speaker Change: If theres a little bit of opportunity there that would actually help us get to the to the upper end of the range and as Chris said its productivity I think the productivity again, if we're successful on some of the execution items that could provide a little bit more tailwind as well.

Speaker Change: Dynamics that we established in buying it.

Speaker Change: I would say the market is slightly weaker based on obviously.

Speaker Change: The consumer pressures, whether it's insurance rates are here, it's a lot more aware.

Speaker Change: Perfect. Thank you.

Speaker Change: Tumors are essentially pocketing.

Speaker Change: Thank you.

Speaker Change: We'll next take our question from Alexia <unk> from Keybanc capital markets. Please go ahead.

Speaker Change: The insurance the insurance claim versus investing but are getting their cars fixed but that said the business case has been very strong and where it's really played out well is the fact that we can drive the adjacencies, whether it's fillers.

Speaker Change: Thanks, and good morning, everyone I wanted to come back to the refinish market and ask you about your mainstream versus premium market strategy.

Speaker Change: Fillers, whether it's everything else that <unk> provides.

Speaker Change: Any update there on how this is evolving.

Speaker Change: Parties.

Speaker Change: Maybe.

Speaker Change: And everything that we bring in from third parties with tapes and all of that is really helping us strengthen that market I do believe a legacy that there is far more opportunities in adjacencies here, especially in other regions right. So we have obviously started here with North America, but I do believe that there are <unk>.

Speaker Change: Use additional M&A to enhance those mainstream market strategy.

Speaker Change: In coming quarters.

Speaker Change: Yes, so thanks for the question Alexia and again.

Speaker Change: Thanks.

Speaker Change: And just in terms of the premium segment.

Speaker Change: If you look at the a lot of the body shop wins. These have been very very focused on the premium side.

Speaker Change: More opportunities as we think about Europe and Asia and these are the things that we're gonna be focused here in the next two quarters.

Speaker Change: The entry with cover Flex has really given us an opportunity into the mainstream and economy. So I in terms of how well that's working I would say, we're right largely in line with our deal.

Speaker Change: Great. Thanks, Chris maybe to follow up on Karl's answer on this $100 million of revenue.

Speaker Change: Can you provide any details on volume versus price you already gave us the FX.

Speaker Change: The dynamics that we established in buying it.

Speaker Change: I would say the market is slightly weaker based on obviously the.

Speaker Change: Yes, I mean, I think as we look at it in total we are expecting as I said in the prepared remarks are finished team is going to be executing some pricing actions beginning in March if I look at our price mix for the full year, we do expect it to be positive.

Speaker Change: The consumer pressures, whether it's insurance rates are here, it's a lot more where consumers are essentially pocketing.

Speaker Change: The insurance the insurance claim versus investing but all of them.

Speaker Change: Or getting their cars fixed but that said the business case has been very strong and where it's really played out well is the fact that we can drive the adjacencies, whether it's fillers.

Speaker Change: Probably up in that one to two 2%.

Speaker Change: <unk> kind of being down a little bit.

Speaker Change: With some offsets as we think about kind of new business wins. So if you think about the bridge I mean, we're kind of managing it in total and that's why I think.

Speaker Change: Fillers, whether it's everything else that <unk> provides.

Speaker Change: Parties.

Speaker Change: Obviously tend to book at just the conversion on the incremental revenue into that 30%, 35% to 40% range.

Speaker Change: And everything that we bring in from third parties with tapes and all of that is really helping us strengthen that market I do believe a legacy that there is far more opportunities in adjacencies here, especially in other regions right. So.

Speaker Change: Great. Thanks, a lot.

Speaker Change: Thank you. Thank you.

Speaker Change: We'll next go to Mike Harrison with Seaport Research partners. Please go ahead.

Mike Harrison: Hi, good morning, Congrats on a nice quarter was hoping we could dig in Chris a little bit more on what you guys are seeing in the China light vehicle market. It sounds like you guys are pretty happy with the customers that you're positioned with.

Speaker Change: Obviously, you started here with North America, but I do believe that there are more opportunities as we think about Europe and Asia and these are the things that we're going to be focused here in the next two quarters.

Chris Parkinson: Great. Thanks, Thanks, Chris maybe.

Speaker Change: Maybe to follow up on Karl's answer on the $100 million of revenue.

Speaker Change: But if you look at it.

Speaker Change: Theres more than 100 different car brands, there a lot of them over time could be consolidated.

Speaker Change: Can you provide any details on the volume versus price you already gave us the FX.

Speaker Change: Do you guys view this as.

Speaker Change: Yes, I mean, I think as we look at it in total we are expecting as I said in the prepared remarks.

A threat or as an opportunity maybe just talk a little bit about how you're thinking about your longer term position within the Chinese light vehicle market.

Speaker Change: Finished team is going to be executing some pricing actions all beginning in March if I look at our price mix for the full year, we do expect it to be positive.

Speaker Change: Okay. Thanks for the question Mike.

Speaker Change: I'll break it up into three parts because I will first give you a view.

Speaker Change: Probably up in that 1% to two 2%.

The customer dynamics.

Speaker Change: And then maybe move into a little bit of market dynamics, which is which also enables.

Speaker Change: Volumes kind of being.

Speaker Change: Down a little bit.

Speaker Change: With some offsets as we think about kind of new business wins. So if you think about the bridge I mean, we're kind of managing it in total and that's why I think.

Speaker Change: Growth and why we believe strongly in this marketplace. So from a customer dynamics the folks that we are partnered with.

Speaker Change: Obviously tend to book at just the conversion on that incremental revenue into that 30, 35% to 40% range.

Speaker Change: In China are some of the largest players, especially in the EV space.

Speaker Change: Great. Thanks, a lot.

Speaker Change: And on the ice side as well.

Speaker Change: Thank you. Thank you.

Speaker Change: We'll next go to Mike Harrison with Seaport Research partners. Please go ahead.

Speaker Change: What differentiated us what enabled us to get in here. Our early what's really I think four factors. The first one was we worked we started off early with companies that that would just starting out or.

Mike Harrison: Hi, good morning, Congrats on a nice quarter was hoping we could dig in a little bit more on what you guys are seeing in the China light vehicle market. It sounds like you guys are.

Speaker Change: And we were very very focused on the local market as the as opposed to entrenched players from from.

Mike Harrison: I'm pretty happy with the customers that you're positioned with.

Speaker Change: From the outside and this enabled us to build that partnership over many years. The second one and enabled us to be embedded in their plans. So a lot of our folks work within their plans to provide the quality of the service at that time, the timely delivery and response and that's just.

Mike Harrison: But if you look at it.

Mike Harrison: Theres more than 100 different car brand there a lot of them over time could be consolidated.

Speaker Change: Do you guys view this as a.

Speaker Change: A threat or as an opportunity maybe just talk a little bit about how you're thinking about your longer term position within the Chinese light vehicle market.

Speaker Change: <unk> done just an amazing job in building the relationship and that second element of it is really around the relationships between our teams in <unk> over time in developing the colors, China is just kind of amazing job of breaking boundaries there.

Speaker Change: Okay. Thanks for the question Mike.

Speaker Change: I'll break it up into three parts because I will first give you a view.

Speaker Change: The customer dynamics.

Speaker Change: And then maybe move into a little bit more.

Speaker Change: <unk> dynamics, which is which also enables <unk>.

Speaker Change: The customers' demand for color just breaks boundaries and that's something that we've always been there and the last element of this is as we work through these two we put in capacity I believe before many others and had the capacity they were growing we built a new plant we expanded.

Speaker Change: And why we believe strongly in this marketplace. So from a customer dynamics the folks that we are partnered with.

Speaker Change: In China are some of the largest players, especially in the EV space.

Speaker Change: And on the ice side as well.

Speaker Change: What differentiated us what enabled us to get in here. Our early what's really I think four factors. The first one was we worked we started off early with companies that that would just starting out or.

Speaker Change: At our plant and all of that really enabled us to grow so.

Speaker Change: The strength that we have with the large players to your point. If there is any consolidation my expectation is that the large players would need a lot of the consolidation and we have a good place there. The second part of this is specific to the market dynamics. The stimulus has helped but I think it's been a P.

Speaker Change: And we were very very focused on the local market as the as opposed to entrenched players from.

Speaker Change: From the outside and this enabled us to build that partnership over many years. The second one and enabled us to be embedded in their plans. So a lot of our folks work within their plans to provide.

Speaker Change: Part of their growth story, obviously the capability.

Speaker Change: The new vehicles coming out of China, especially on the EV side, the electronics and the just the interaction with the vehicles have really played a part and just that demand is not only a china specific demand, but we're certainly seeing it in southeast Asia.

Speaker Change: Quality of the service at that time, the timely delivery and response and has just done just an amazing job in building the relationship and that second element of it is really around the relationships between our teams and theirs over time in developing the colors. You know China is just kind of.

Speaker Change: So I think China has become the manufacturing hub for again, as I've said, Malaysia, Indonesia, Australia, and New Zealand.

Speaker Change: Amazing job of breaking boundaries there.

Speaker Change: The customers' demand for color just breaks boundaries and that's something that we've always been there and the last element of this is as we work through these two we put in capacity I believe before many others and had the capacity as they.

Speaker Change: Bangladesh, I mean, and even Sri Lanka and that demand is also pushing demand for us from a refinished standpoint, because we supply the customers. So this relationship has been great on both those two fronts and on my expert in the final expectation.

Speaker Change: Growing we built a new plant, we expanded our plant and all of that really enable us to grow so.

Speaker Change: As I do think China is going to drive to make sure that is specific to this industry that the demand states stopped strong beyond stimulus going forward in all of this will play well for us in 'twenty five.

Speaker Change: <unk> Beach.

Speaker Change: <unk> that we have with the large players to your point. If there is any consolidation my expectation is that the large players would need a lot of the consolidation and we have a good place there. The second part of this is specific to the market dynamics. The stimulus has helped but I think it's been a part of.

Speaker Change: Alright, thank for that and then was hoping that you could also talk a little bit more about this agreement with <unk> on digital pains, maybe talk about how this partnership can help you accelerate the commercialization of the Nexgen product line.

Speaker Change: Their growth story.

Speaker Change: Lee the capability that the new vehicles coming out of China, especially on the EV side, the electronics and the just the interaction with the vehicles have really played a part and just that demand is not only a china specific demand, but we're certainly seeing it in southeast.

Speaker Change: Sure Great. Thanks for the question on this one is certainly something that we are proud of and.

Speaker Change: A true credit to the mobility team.

Speaker Change: Was the precedent there and.

Speaker Change: His team and the great work that they've done driving this dara as a leader I mean, they have over 50% of the robotics and in systems in OE plants and Theyre just.

Speaker Change: Asia.

Speaker Change: So I think China has become the manufacturing hub for again, as I said, Malaysia, Indonesia, Australia, and New Zealand.

Speaker Change: Bangladesh, I mean, and even Sri Lanka and that demand is also pushing demand for us from a refinished standpoint, because we supply the customers. So this relationship has been great on both those two fronts and on my expert in the final expectation.

Speaker Change: Yes.

Speaker Change: Putting two leaders together us from the coding side and putting them together and the ability for us to essentially code.

Speaker Change: Two tone a car so imagine if you had to change the paint.

Speaker Change: Black or call it a black.

Speaker Change: As I do think China is going to drive to make sure that.

Speaker Change: Roof or a hood.

Speaker Change: Specific to this industry that the demand stays stock strong beyond stimulus going forward in all of this will play well for us in 'twenty five.

Speaker Change: The normal process as it goes through a paint process, it's pulled off to an offline process and that that is done and it creates inefficiencies and it creates cost and what we have been able to do is through this process put it through the mainline and <unk>, bringing two strong companies together.

Speaker Change: Alright, thank for that and then was hoping that you could also talk a little bit more about this agreement with your on digital pains, maybe talk about how this partnership can help you accelerate the commercialization of the Nexgen product line.

Speaker Change: And I believe this technology, it's not just to Tony hoods, but whatever you want in terms of <unk>.

Speaker Change: Essentially putting a logo or putting something specific on a car that's something that we're able to do right off the main paint line is it's a great technology and something that we're absolutely proud of the additional feature here.

Speaker Change: Sure Great. Thanks for the question on this one this is certainly something that we are proud of and.

Speaker Change: A true credit to the mobility team.

Speaker Change: He was the president there and his team and the great work that they've done driving this <unk>.

Speaker Change: From a sustainability standpoint is the overspray coming from this is negligible. So the amount that we drive in terms of reducing overspent spray and paint is something that I think will be a great.

Speaker Change: As a leader I mean, they have over 50% of the robotics and in systems and OE plants and Theyre just.

Speaker Change: Putting two leaders together us from the coding side and putting them together and the ability for us to essentially code.

Speaker Change: And when Oes as well in the future.

Speaker Change: Thanks very much.

Speaker Change: Youre welcome.

Speaker Change: We'll next go to Jeff Zekauskas with Jpmorgan. Please go ahead.

Speaker Change: Two tone a car so imagine if you had to change the paint.

Jeff Zekauskas: Thanks, very much two questions.

Speaker Change: Black or a black.

Speaker Change: Roof or a hood.

Jeff Zekauskas: In order to hit your free cash flow target for next year your cash flow from operations have to rise by.

Speaker Change: The normal process as it goes through a paint process, it's pulled off to an offline process and that that is done and it creates inefficiencies and it creates cost and what we have been able to do is through this process put it through the mainline and <unk>, bringing two strong companies together.

Jeff Zekauskas: I don't know 100 or $115 million.

Jeff Zekauskas: So I take it one print.

Jeff Zekauskas: Principal way you would do that as increasing accounts payable.

Jeff Zekauskas: Pat.

Jeff Zekauskas: Big piece of that increase.

Speaker Change: And I believe this technology, it's not just two toning hoods, but whatever you want in terms of <unk>.

Jeff Zekauskas: And secondly go ahead I'm.

Speaker Change: I'm sorry go ahead.

Speaker Change: Yes, just to answer maybe the first question is just perfect.

Speaker Change: Essentially putting a logo or putting something specific on a car that's something that we're able to do right off the main paint line is it's a great technology and something that we're absolutely proud of the additional feature here.

Speaker Change: Specific within working capital I think Theres a couple of different things I think one is as they did reference our depots did dip a lot lower in the fourth quarter kind of I would say more abnormally so that would we would probably normalize that.

Speaker Change: So thats call. It six seven days, so that's going to be definitely a piece of the story and then on account receivables.

Speaker Change: From a sustainability standpoint is the overspray coming from this is negligible. So the amount that we drive in terms of reducing overspent spray and paint is something that I think will be a great.

Speaker Change: I think there continues to be some further opportunities we think about managing managing that as we kind of go forward and of course inventory will continue to be in focus for us.

Speaker Change: When four oes as well in the future.

Speaker Change: I think the teams did a very good job of late in the year, but I think we need to see a consistent performance as we think about 35%.

Speaker Change: Thanks very much.

Speaker Change: Youre welcome.

Speaker Change: Okay.

We'll next go to Jeff Zekauskas with Jpmorgan. Please go ahead.

Speaker Change: <unk>.

Speaker Change: Chris is it.

Speaker Change: It turns out that there really were 25% tariff on Canada, and Mexico. What do you think that would do to the price of a car made in the U S and how do you think it would affect car production.

Thanks, very much two questions.

Speaker Change: In order to hit your free cash flow target for next year your cash flow from operations have to rise by.

Speaker Change: I don't know 100 or $115 million.

Speaker Change: So first maybe in terms of.

Speaker Change: So I take it one.

Speaker Change: I kind of look at it from.

Speaker Change: Principal way you would do that as increasing accounts payable.

Speaker Change: Our perspective first and then maybe ill.

Speaker Change: Pat.

Speaker Change: Big piece of that increase.

Speaker Change: Bring it if I think about X all time, and we certainly since the weekend. We were very very focused in terms of looking at how much of an impact this would have on us and in reality.

Speaker Change: And secondly go ahead I'm sorry go ahead.

Speaker Change: Yes, just to answer maybe the first question is just I think it is.

Speaker Change: Specific within working capital I think Theres a couple of different things I think one is as they did reference our <unk> did dip a lot lower in the fourth quarter kind of I would say more abnormally so that would we would probably normalize that.

Speaker Change: Think about the number of cars that are built in.

Speaker Change: In Mexico, and Canada. This would have to fact about 5% to 6% of our revenue.

Speaker Change: So that's call it six to seven days, so that's going to be definitely a piece of the story and then on account receivables.

Speaker Change: Now in terms of the impact.

Speaker Change: Car. This would have about a 3000 dollar impact per car however, as I said.

Speaker Change: And I think there continues to be some further opportunities we think about managing managing that as we kind of go forward and of course inventory will continue to be in focus for us I think the teams did a very good job of late in the year, but I think we need to see a consistent performance as we think about five.

The attract of tariffs is not something new we've known about this for a couple of months. So we're certainly the mobility teams have.

Speaker Change: We have certainly started working with our Oes.

Speaker Change: Okay and then.

Chris Parkinson: For Chris.

Speaker Change: The Oes have been making plans to look at at least the ones that we have been.

Chris Parkinson: If it turns out that there really were 25% tariff on Canada, and Mexico. What do you think that would do to the price of a car made in the U S and how do you think it would affect car production.

Speaker Change: Associated with to look at moving production looking at what they can do to offset a lot of debt and there are specifics also when you think about what's actually built components that are built in the U S. Then shipped to Mexico as part of an overall at Assembly strategy and then brought back. So there are elements of this.

Chris Parkinson: So first maybe in terms of.

Chris Parkinson: I kind of look at it from.

Chris Parkinson: Our perspective first and then maybe I'll.

Speaker Change: But overall I would say the impact on our car is about 3000, but my expectation is over based on the time, we have an over the time, we have the oes will be driving significantly to find measures around that and that is what we're absolutely focused with our customers to make sure that we help them offset.

Chris Parkinson: Bring in.

Chris Parkinson: Think about its all time and we certainly since the weekend, we were very very focused in terms of looking at how much of an impact. This would have on us and in reality, if I think about the number of cars that are built in.

Chris Parkinson: In Mexico, and Canada. This would have to fact about 5% to 6% of our revenue.

Speaker Change: Okay. Thanks, so much.

Speaker Change: Youre welcome.

Steve Byrne: And our last question comes from Steve Byrne with Bank of America. Please go ahead.

Chris Parkinson: Now in terms of the impact.

Chris Parkinson: Car. This would have about a 3000 dollar impact per car however, as I said.

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

Steve Byrne: Australia to refinish within the <unk>.

Speaker Change: <unk> thousand 800, net body shop wins, what fraction of those are adopting our iris snacks.

Chris Parkinson: The attractive of tariffs is not something new we've known about this for a couple of months. So we're certainly the mobility teams.

Speaker Change: Has your view of the market potential for this technology expanded beyond the high end premium facilities.

Chris Parkinson: Certainly started working with our Oes.

Chris Parkinson: <unk> have been making plans to look at at least the ones that we have been.

Speaker Change: No we're still very focused on the high end.

Chris Parkinson: Associated with to look at moving production looking at what they can do to offset a lot of debt and there are specifics also when you think about what's actually built components that are built in the U S. Then shipped to Mexico as part of an overall at Assembly strategy and then brought back. So there are elements of this.

Speaker Change: Premium facilities I would say that 2800 most of those are just starting.

Speaker Change: Without the Arris mix, we're using the arris makes actually launching it in Europe and a lot of that is with our premium customers in Europe.

Speaker Change: Again next year, we're doubling the number of installations. There is probably a good chance that some of those 2800 might have those but at this time, where we're starting with the customers that have been with us for a long time and making sure that they have the access to the equipment first.

Chris Parkinson: But overall I would say the impact on our car is about 3000, but my expectation is over the based on the time, we have an over the time, we have the oes will be driving significantly to find measures around that and that is what we're absolutely focused with our customers to make sure that we help them offset.

Speaker Change: So I think.

Speaker Change: That's it.

Speaker Change: To close I did want to take a minute and really say I'm really excited about what's happening here at <unk>. It's been two years since I've joined this incredible team and since then we have worked closely together towards a common eight planned goal to optimize all areas of this great company and perform at a higher.

Chris Parkinson: Great. Thanks, so much.

Chris Parkinson: Youre welcome.

Steve Byrne: And our last question comes from Steve Byrne with Bank of America. Please go ahead.

Speaker Change: Hi, This is Rob Hoffman on for Subaru.

Steve Byrne: Australia to refinish within the <unk>.

Steve Byrne: 2800, net body shop wins, what fraction of those are adopting our iris mix.

Speaker Change: Level.

Speaker Change: The improvement that we've made over this period clearly shows that we're onto something.

Steve Byrne: Has your view of the market potential for this technology expanded beyond high end premium facilities.

Speaker Change: In two years, we have increased sales by more than 8% expanded EBITDA margins by 460 basis points.

Steve Byrne: No we're still very focused on the high end.

Speaker Change: EPS by 46% free cash flow by 177%.

Steve Byrne: Premium facilities I would say that 2800 most of those are just starting.

Speaker Change: And improve the leverage from three 8% to two five times.

Steve Byrne: Without the IRS mix, we're using the arris makes actually launching it in Europe and a lot of that is with our premium customers in Europe.

Speaker Change: This would not be possible.

Speaker Change: Without the dedication and company Pride of every single employee here at <unk>.

Steve Byrne: Again next year, we're doubling the number of installations. There is probably a good chance that some of those 2800 might have those but at this time, where we're starting with the customers that have been with us for a long time and making sure that they have the access to the equipment first.

Speaker Change: I am absolutely thankful for that.

Speaker Change: Been an amazing ride and it's exceeded my expectations in every single way and I can't wait to show you what we're going to do in 2025 happy new year, everybody and I look forward to working with you this year.

Steve Byrne: So I think.

Steve Byrne: That's that's it to close.

Speaker Change: Thank you. Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.

Speaker Change: Did want to take a minute and really say I'm really excited about what's happening here at <unk>. It's been two years since I've joined this incredible team and since then we have worked closely together towards a common eight planned goal to optimize all areas of this great company and perform at a higher level.

Speaker Change: Okay.

Speaker Change: The improvement that we've made over this period clearly shows that we're onto something.

Speaker Change: Two years, we have increased sales by more than 8%.

Speaker Change: Expanded EBITDA margins by 460 basis points.

Speaker Change: PFS by 46% free cash flow by 177%.

Speaker Change: And improve the leverage from three 8% to two five times.

Speaker Change: This would not be possible.

Speaker Change: Without the dedication and company pride.

Speaker Change: Every single employee here.

Speaker Change: I am absolutely thankful for that.

Speaker Change: Been an amazing ride and it's exceeded my expectations in every single way and I can't wait to show you what we're going to do in 2025 happy new year, everybody and I look forward to working with you this year.

Speaker Change: Thank you. Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.