Q2 2025 Axalta Coating Systems Ltd Earnings Call

Operator: Please stand by. Your program is about to begin. Ladies and gentlemen, thank you for standing by. Welcome to Axalta Coating Systems' Q2 2025 earnings call. All participants will be in a listen-only mode. A question and answer session will follow the presentation by management. Today's call is being recorded, and our replay will be available through August 6th. 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 Investor Relations. Please go ahead.

Please stand by your program is about to begin.

Ladies and gentlemen, thank you for standing by.

Welcome to excela coding systems, Q2, 2025 earnings call.

All participants will be in at least and only mode.

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

Will be available through August 6th.

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.

Colleen Lubic: Good morning, everyone, and thank you for joining us to discuss Axalta's second quarter of 2025 financial results. I'm Colleen Lubic, Vice President of Investor Relations. With me today are Chrishan Villavarayan, our CEO and President, and Carl Anderson, our Chief Financial Officer. We posted our second quarter of 2025 financial results and earnings release this morning. You can find today's presentation and supporting materials on the Investor Relations section of our website at axalta.com, which we will be referring to on this call. Our remarks today in the slide presentation may include forward-looking statements reflecting our current views of future events and their potential impact on Axalta's performance. These statements involve risks and uncertainties, and actual results may differ materially. We are under no obligation to update these statements. Our remarks and the slide presentation also contain various non-GAAP financial measures.

I will now turn the call over to Colleen lubick, vice president of investor relations. Please go ahead.

Good morning everyone and thank you for joining us to discuss exalted, second quarter, 2025 Financial results.

I'm calling lubick vice president of investor relations.

With me today are Chris bill of Ryan, our CEO and president and coral Anderson our Chief Financial Officer.

We posted our second quarter of 2025 financial results and earnings released this morning.

You can find today's presentation in the supporting materials on the Investor Relations section of our website, at Exhaustive Cam, which we will be referring to on this call.

Our remarks today in a slide presentation may include forward-looking statements reflecting our current views of future events and their potential impact on exalted performance.

A statement involves risks and uncertainties; actual results may differ materially.

We under no obligation to update these statements.

Colleen Lubic: We've included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Refer to our filings with the SEC for more information. I would like to now turn the call over to Chris.

Our remarks and the sign presentation. Also, contain not various non-gaap Financial measures.

We've included, reconciliations of these non-gaap Financial measures to the most directly comparable, gaap Financial measures.

Refer to our filings with the SEC for more information.

I would like to now turn the call over to Chris.

Chrishan Villavarayan: Thanks, Colleen, and good morning, everyone. Let's move to slide three. We're proud to announce that we delivered a record quarter for adjusted EBITDA and adjusted diluted earnings per share in a challenging global market. I would like to personally thank our almost 13,000 employees for their dedication and outstanding performance this quarter. By all measures, we've done a tremendous job navigating the current landscape and managing the business. Net sales came in just over $1.3 billion, in line with our guidance. Adjusted EBITDA was $292 million, with margins exceeding 22%. This marks the fifth consecutive quarter that adjusted EBITDA margins have been at or above the 21% target outlined in our A plan. This was a noteworthy achievement given the significant volume pressures underscoring Axalta's disciplined execution and sustained cost management. We remain focused on creating shareholder value and plan to accelerate our capital deployment going forward.

Thanks for calling, and good morning everyone. Let's move to slide 3.

We're proud to announce that. We delivered a record quarter for adjusted Eva and adjusted diluted earnings per share in a challenging Global Market. I would like to personally thank our almost 13,000 employees for their dedication and outstanding performance, this quarter.

By all measures we have done a tremendous job navigating the current landscape and managing the business.

Net sales came in just over 1.3 billion in line with our guidance.

Adjusted EBITDA was $292 million with a margin of 22%.

This marks the fifth consecutive quarter that adjusted ibra margins have been at or above the 21% Target outlined in our a plan.

This was a noteworthy achievement given the significant volume pressures. Underscoring, exalted disciplined execution and sustained cost management.

Chrishan Villavarayan: This quarter, we executed $65 million in share repurchases and expect to continue this pace throughout the remainder of the year. Our mobility segment continues to perform exceptionally well. We delivered 2% organic growth fueled by sustained strength in China and Latin America, in addition to new business wins and favorable price mix. Adjusted EBITDA margins were nearly 20%, a strong validation of the team's strategic and operational prowess and our ability to sustain profitable growth. Cash flow from operations increased 25% year over year, which helped drive free cash flow to $101 million, a great result. With that, let's turn to slide four. We continue to navigate what we believe to be temporary challenges affecting refinish in North America. Claims reported through Q1 remain meaningfully lower in the United States and slightly down in Europe.

We remained focused on creating shareholder value and plan to accelerate our Capital deployment going forward.

This quarter, we executed $65 million, ensuring we made purchases, and expect to continue this pace throughout the remainder of the year.

our Mobility segment continues to perform exceptionally, well,

We deliver 2% organic growth fueled by sustained strength in China and Latin America, in addition to new business wins and a favorable price mix.

Adjusted IBA margins, were nearly 20%, a strong validation of the team, strategic, and operational, prowess, and our ability to sustain profitable growth.

Cash flow from operations, increased 25% year-over-year which helped Drive free cash flow to 101 million. A great result with that. Let's turn to slide 4.

We continue to navigate what we believe to be temporary challenges affecting refinishing in North America.

Chrishan Villavarayan: Although collision statistics are pending for 2024, early insights from various states in the US and independent agencies indicate that collision frequencies declined by only low single digits. This collision statistic is in line with our expectations. We believe that factors such as elevated repair costs, rising insurance premiums, and broader inflationary pressures have discouraged consumers from seeking repairs, resulting in fewer claims, despite steady or just slightly declining collision rates. In the second quarter, refinish volumes were impacted by expected headwinds, including consumer pullback on repairs and elevated North American distributor inventories. Despite these pressures, we continue to gain share, with 1,600 net new body shops year to date, building on the more than 2,800 net wins in 2024. Net sales in the second quarter declined 6% year over year, but we saw nearly 2% growth from adjacencies and retail, supported by strong momentum in DIY channels and accessories.

Claims reported through Q1 remain meaningfully lower in the United States and slightly down in Europe.

Although collision statistics are pending for 2024, early insights from various states in the U.S. and independent agencies indicate that collision frequency declined by only low single digits.

This Collision statistic is in line with our expectations.

We believe that factors such as elevated repair costs, rising insurance premiums, and broader inflationary pressures have discouraged consumers from seeking repairs, resulting in fewer claims.

Despite steady or just slightly declining Collision rates.

Comparisons and elevated North American distributor inventories.

Chrishan Villavarayan: As we examine external data, we see signs of industry stabilization. Inflationary pressures are beginning to moderate, particularly in areas like repair expenses and insurance premiums. Insurance premium inflation in the US appears to be abating, and total repair costs only increased 1% in Q1 year over year. One additional recent data point that is encouraging came from LexisNexis and indicates that nearly half of consumers are actively seeking lower insurance options by switching carriers, many successfully obtaining significant reductions in their premiums. We have been through cycles before and have a strong track record of outperforming industry trends over the long term. We remain confident in our A plan strategy to strengthen our leadership in refinish and expand into adjacencies. We believe that consumer confidence will increase, leading to a more favorable repair environment.

Despite these pressures, we continue to gain share with 1,600 net new body shops year to date, building on the more than 2,800 net wins in 2024. Net sales in the second quarter declined 6% year-over-year, but we saw nearly 2% growth from adjacencies and retails, supported by strong momentum in DIY channels and accessories.

As we examine external data, we see signs of industry stabilization.

Inflationary pressures are beginning to moderate, particularly in areas like repair expenses and insurance premiums.

Insurance premium inflation. In the US appears to be abating and total repair costs. Only increased 1% in q1 year-over-year.

And data points that are encouraging came from LexisNexis and indicate that nearly half of consumers are actively seeking lower insurance options by switching carriers, many successfully obtaining significant reductions in their premiums.

We have been through Cycles before and have a strong track record of outperforming Industry, Trends over the long term, we remain confident in our, a plan strategy, to strengthen our leadership in refinished and expanded to adjacencies.

Chrishan Villavarayan: Our expansion into autonomy and customer-centric innovation, such as the FastCure low-energy system that reduces energy usage and boosts time by 50%, combined with our customer relationships and advanced digital tools, position us to win in today's environment and drive growth in 2026 and beyond. Let's turn to slide five. We remain focused on our A plan with excellent execution in the first six months of the year. Our operational excellence is now a strategic advantage, enabling us to manage with discipline, speed, and agility. In the second quarter, we reinforced our commitment to achieving zero incidents by improving our safety record by an amazing 55% year over year. Our commitment to achieving zero incidents has never been greater, and I'm very proud of the progress we're making towards this goal. Our disciplined focus on cost management drove a 6% year-over-year reduction in operating expenses.

We believe that consumer confidence will increase leading to more favorable repair environment, our expansion into economy and customer Centric. Innovations such as the Fast. Cure low energy system that reduces energy usage and Booth Time by 50%. Combined with our customer relationships and Advanced Digital tools position us to win in today's environments and drive growth in 2026 and Beyond. Let's turn to slide 5.

We remain focused on our 8, plan with excellent execution. In the first 6 months of the year,

Our operational excellence is now a strategic Advantage enabling us to manage with discipline Speed and Agility in the second quarter. We reinforced our commitment to achieving zero incidents by improving our safety records by an amazing 55% year-over-year. Our commitment to achieving zero incidents. Has never been greater and I'm very proud of the progress. We're making towards this goal.

Chrishan Villavarayan: Since announced, our transformation initiative has driven approximately $40 million in cost savings. We've also taken decisive action to optimize our industrial footprint by closing three manufacturing plants in the last year. These actions have streamlined our operations and positioned us to convert on the upside once industry volumes rebound. I believe our results speak for themselves. Our dedication to customer-focused innovation was again acknowledged this quarter. Axalta's NextGen was recognized as a 2025 automotive news pace pilot innovation to watch, and we were honored with Daimler Truck North America's Masters of Quality SPIRE Award. These accolades validate our innovative approach to delivering differentiated customer outcomes. Finally, we're consistently strengthening our financial position by maintaining total net leverage in line with our A plan targets, while also capitalizing on opportunities to repurchase what we believe is undervalued Axalta stock. These actions position us for sustained long-term value creation.

Our discipline focused on cost management drove a 6% year-over-year reduction in operating expenses since announced. Our transformation initiative has driven approximately $40 million in cost savings.

We've also taken decisive action to optimize our industrial footprint by closing three manufacturing plants in the last year.

These actions have streamlined, our operations and positioned us to convert on the upside once industry volumes rebound, I believe our results speak for themselves.

Our dedication to customer focused Innovation was. Again acknowledged this quarter exalts us. Next jet was recognized as a 2025 Automotive, newspace pilot, Innovation to watch and we were honored with Daimler truck, North America's masters of quality supplier Awards. These accolades validate our Innovative approach to delivering differentiated customer outcomes.

Finally, we're consistently stressing our financial position by maintaining total net. Leverage in line with our a plan targets. While also capitalizing on opportunities to repurchase. What we believe is undervalued axalta stock

Chrishan Villavarayan: I will now turn the call over to Carl for a financial update.

These actions position us for sustained long-term, value creation. I will now turn the call over to Carl for a financial update.

Carl Anderson: Thank you, Chris, and good morning, everyone. Let's turn to slide six. In the second quarter, net sales totaled $1.3 billion, down approximately 3% year over year, primarily due to lower volumes and performance coatings. This was partially offset by positive foreign currency translation and contributions from cover flats. Gross margin improved by 100 basis points, 35%, driven by favorable cost dynamics and operational efficiency. While income from operations declined by $12 million, this was largely due to restructuring-related costs, actions all aligned with our long-term strategy. We delivered adjusted EBITDA of $292 million, a company quarterly record, and up slightly versus the prior year. Adjusted EBITDA margins expanded by 90 basis points to 22.4%, underscoring our ability to manage costs and drive profitability in a dynamic environment. Variable costs declined 2% year over year, slightly better than expectations.

Thank you, Chris and good morning, everyone.

Let's turn to cite 6.

In the second quarter, net sales totaled $1.3 billion.

Down approximately 3% year-over-year primarily due to lower volumes and performance codings.

This was partially offset by positive foreign currency translation and contribution from cover Flats.

Gross margin improved by 100 basis points, with 35% driven by favorable cost dynamics and operational efficiency.

While income from operations declined by 12 million. This was largely due to restructure and related costs, actions. All aligned with our long-term strategy.

We delivered adjusted. Evida of 292 million, a company quarterly record and up slightly versus the prior year.

Underscoring, our ability to manage costs and drive profitability in a dynamic environment.

Carl Anderson: For the full year 2025, our raw material cost outlook remains unchanged, and we expect variable costs to remain approximately flat. SG&A expenses declined 2%, and when excluding acquisitions and FX, the reduction year on year was nearly 6%, reflecting our focus on cost discipline. Adjusted diluted earnings per share rose by a percent to $0.64, primarily driven by lower interest expense and lower shares outstanding as a result of our share repurchases during the quarter. Finally, cash provided by operating activities was $142 million, up 25% from a year ago, and free cash flow totaled $101 million, reinforcing our ability to consistently generate meaningful cash flow. Moving to slide seven, net sales for performance coatings declined 6% year over year to $836 million, driven primarily by lower volumes and unfavorable price mix, primarily in North America.

Variable costs decline 2% year-over-year, slightly better than expectations.

For the full year 2025 our raw material cost Outlook remains unchanged and we expect variable costs to remain approximately flat.

CNA expenses, declined 2% and when excluding Acquisitions and FX, the reduction year on year was nearly 6%, reflecting our focus on cost discipline.

Adjusted diluted earnings per share Rose 5% to 64 cents.

primarily driven by lower interest expense and lower shares outstanding as a result of our share repurchases during the quarter.

Finally cash provided by operating activities was 142. Million up 25% from a year ago and free cash flow totaled. 101 million

reinforcing our ability to consistently generate meaningful cash flow.

Moving the slide 7.

Net sales for performance, codings declined 6% year-over-year to 836 million driven primarily by lower volumes and unfavorable price. Mix primarily in North America.

Carl Anderson: These declines were partially offset by contributions from cover flats, and foreign currency translation benefits primarily related to the appreciation of the euro. Refinished net sales decreased 6% to $514 million, with organic sales down high single digits due to volume declines related to industry softness and distributor inventory corrections impacting price mix year over year. The incremental contributions from cover flats and foreign currency translation partially mitigated these declines. Price mix was down mid-single digits in the quarter, as unfavorable mix in North America offset price benefits. Industrial net sales declined 6% year over year to $322 million, primarily due to lower volume resulting from continued macro softness, predominantly in North America. Positive price mix and favorable foreign currency translation partially offset the impact from lower volumes. In the second quarter, performance coatings delivered an adjusted EBITDA of $200 million, yielding a margin of 23.8%.

These declines were partially offset by contributions from Coverlx in foreign currency translation benefits, primarily related to the appreciation of the euro.

We finished net sales decreased 6% to $514 million, with organic sales down high single digits due to volume declines related to industry softness and distributor inventory corrections, impacting price makes year-over-year.

in the incremental contributions from coverlex and foreign currency translation, partially mitigated, these declines.

Price mix was down mid-single digits in the quarter, as unfavorable mix in North America offset price benefits.

Industrial. Net sales declined 6% year-over-year to 322 million primarily due to lower volume resulting from continued macro softness predominantly in North America.

Positive price mix and favorable foreign currency translation. Partially offset. The impact from lower volumes.

Carl Anderson: While results were impacted by lower North America volumes, one of our more profitable regions, cost discipline and operational efficiencies helped mitigate the effect. The team's ability to manage variable and operating costs effectively demonstrates why we expect to see improved earnings conversion when revenue influx positively, which we anticipate to occur in the fourth quarter and into next year. Let's move to slide eight. Mobility coating second quarter net sales were $469 million, an increase of 1% from the prior year, with organic sales contributing approximately two percentage points of growth. Light vehicle net sales were up 2% in the second quarter, driven by organic net sales growth in three out of the four regions, which more than offset anticipated declines in North America due to a decline in auto production and plant shutdowns within the region.

In the second quarter performance, codings delivered adjusted. Evida of 200 million yielding, a margin of 23.8%.

while results were impacted by lower North America volumes, 1 of our more profitable regions,

Cost discipline and operational efficiencies help mitigate the effect.

The team's ability to manage variable and operating costs effectively demonstrates why we expect to see improved earnings conversion when revenue influx positively, which we anticipate to occur in the fourth quarter. And in the next year,

let's move to sighting.

Mobility coding second quarter, net sales for 469 million. An increase of 1% from the prior year with Organic sales, contributing approximately 2 percentage points of growth.

Light vehicle. Net sales are up 2% in the second quarter driven by organic debt sales growth in 3 out of the 4 regions, which more than offset anticipated. Declines in North America due to a decline in Auto production and plant shutdowns within the region.

Carl Anderson: Price mix was a low single-digit tailwind in the quarter, driven by selective pricing and favorable mix, primarily in Latin America. Commercial vehicle net sales declined 4%, primarily due to volume headwinds related to expected declines in Class A production, which were down 17% in the second quarter from a year ago, partially offset by momentum in our commercial transportation solutions. Positive price mix was primarily driven by a favorable product mix and pricing adjustments to offset foreign currency headwinds. During the quarter, mobility coatings reported a 35% increase in adjusted EBITDA year over year, reaching $92 million. Adjusted EBITDA margin expanded by 500 basis points compared to the prior year, nearing 20%.

Price. Mix was a low single digit Tailwind in the quarter driven by selectively pricing and favorable mix primarily in Latin America.

Commercial vehicle, net sales decline 4%, primarily due to volume headwinds related to expected declines in class a production which were down 17% in the second quarter from a year ago.

Partially offset by momentum in our commercial transportation Solutions.

Positive price mix was primarily driven by a favorable product mix and pricing adjustments to offset foreign currency headwinds.

During the quarter, Mobility and Coatings reported a 35% increase in adjusted EBITDA year-over-year, reaching $92 million.

Carl Anderson: While the results had some one-time benefits relating to pricing true ups, this is truly a fantastic result, driven by the disciplined effort of the team, helping to drive 11 consecutive quarters of year-on-year adjusted EBITDA margin expansion. Margin growth across both segments was primarily attributed to positive price mix, lower variable costs, and reduced operating expenses. Turning to slide nine, we continue to execute against our capital allocation priorities with discipline and focus. We generated $142 million in cash from operations in the second quarter. Notably, we repurchased $65 million of our shares and invested $45 million in capital expenditures aimed at boosting productivity and efficiency. Our 2024 debt refinancing initiatives are already paying off. We reduced $5 million off our interest expense this quarter, a 10% improvement year on year.

Adjusted EBITDA margin expanded by 500 basis points compared to the prior year, nearing 20%.

While the results had some 1-time benefits related to pricing true-ups, this is truly a fantastic result driven by the discipline of the team. Helping to drive a 11 consecutive quarters of year-on-year, adjusted IBA margin expansion,

Margin growth across both segments was primarily attributed to positive price mix.

Lower variable costs and reduce operating expenses.

Turning the slide 9.

We continue to execute against our Capital allocation priorities with discipline and focus.

142 million in cash from operations, in the second quarter.

Notably we were purchased 65 million of our shares and invested 45 million in capital expenditures aimed at boosting productivity and efficiency.

Our 2024 debt refinancing initiatives are already paying off.

Carl Anderson: We are also on track to achieve the A plan 2026 interest expense target of $180 million for the full year 2025, one year ahead of plan. Our total net leverage ratio remains at 2.5 times, consistent with our A plan target range, providing us with the flexibility to accelerate capital deployment while maintaining a strong balance sheet. And we also expanded return on invested capital by 110 basis points from last year to 14.3%. Let's turn to slide 10 for our view on the third quarter and 2025 guidance. Based on the latest industry indicators and consumer sentiment data, we now believe that the softer demand environment observed in the first half of the year will persist longer than anticipated. Our prior guidance had assumed a gradual easing of tariff-related uncertainty and a rebound in consumer confidence heading into the back half, particularly in North America.

We reduce 5 million off our interest expense this quarter, a 10% Improvement here on year.

We are also on track to achieve the 8 plan 2026 interest, expense Target of 180 million for the full year. 2025 1 year, I had a plan

Our total net leverage ratio remains at 2.5 times consistent with our a plan target range. Providing us with the flexibility to accelerate Capital deployment while maintaining a strong balance sheet.

And we also expanded return on invested capital by 110 basis points from last year to 14.3%.

Let's turn this by 10 for our view on the third quarter and 2025 guidance.

Based on the latest industry indicators and consumer sentiment data. We now believe that the software demand environment observed in the first half of the year will persist longer than anticipated.

Carl Anderson: However, recent trends suggest that these improvements are not materializing at the pace we had anticipated. For the third quarter, we expect net sales to decline low single digits compared to last year, in line with the second quarter. This outlook reflects positive price mix year over year in three of our foreign markets, which will help offset expected volume softness, largely concentrated in performance coatings. We are assuming a sequential decline in light vehicle and Class A production levels, consistent with third-party forecasts, partially offset by our new business wins in Brazil. Further, Europe will step back similar to past seasonal trends, with slight offset stemming from price mix benefits. We project adjusted EBITDA between $290 and $300 million and adjusted diluted earnings per share in the range of $0.63 to $0.67.

Our prior guidance, that assumes a gradual easing of tariff, related, uncertainty, and rebound. And consumer confidence heading into the back half, particularly in North America.

However, recent Trends suggest that these improvements are not materializing at the pace. We had anticipated.

For the third quarter, we expect net sales to decline, low single digits compared to last year in line with the second quarter.

This outlook reflects positive price and mix year-over-year, with 3 of our 4 end markets expected to help offset anticipated volume softness, which is largely concentrated in performance coatings.

We are assuming a sequential decline in light vehicle and class a production levels consistent with third-party forecasts. Partially offset by our new business wins in Brazil,

Further, Europe will step back similar to past seasonal trends with a slight offset, stemming from prices that make benefits.

Carl Anderson: For the full year, net sales are now expected to be between $5.2 and $5.275 billion, representing an approximately 1% decline at the midpoint versus a year ago. With this updated view, we are revising our full-year earnings expectation. We expect adjusted EBITDA margins to remain around 22% or above, an expansion of approximately 80 basis points year over year at the midpoint. Our full-year adjusted EBITDA is now expected to be in the range of $1.14 billion and $1.165 billion, and adjusted diluted earnings per share will be in a range of $2.45 to $2.55, which is a 6% increase at the midpoint compared to last year. While we believe it's prudent to slightly adjust our guidance, 2025 financial performance to date reflects disciplined execution, pricing resilience, strength of our commercial strategy, and importantly, record results in both adjusted EBITDA and adjusted earnings per share.

We project adjusted ibido between 290 and 300 million and adjusted diluted earnings per share in the range of 63 cents to 67 cents.

For the full year. Net sales are now expected to be between 5.2 and 5.275 billion. Representing an approximately 1% decline at the midpoint versus a year ago.

with this updated view, we are revising our full year earnings expectations,

We expect adjusted even emergence to remain around 22% or above.

an expansion of approximately 80 basis points a year over year at the midpoint

Our full year adjusted EBITDA is now expected to be in the range of $1.14 billion to $1.165 billion, and adjusted diluted earnings per share will be in a range of $2.45 to $2.55, which is a 6% increase at the midpoint compared to last year.

Carl Anderson: We remain fully committed to our A plan objectives and our focus on creating value for our shareholders. I will now turn the call back over to Chris.

While we believe it's prudent to slightly adjust our guidance, 2025 financial performance today reflects disciplined execution, pricing resilience, the strength of our commercial strategy, and importantly, record results in both adjusted EBITDA and adjusted earnings per share.

We remain fully committed to our a plan objectives, and our focus on creating value for our shareholders.

I will now turn the call back over to Chris.

Chrishan Villavarayan: Thanks, Carl. Let's look at slide 11. We have great products, technologies, and strong brands. We're executing our growth strategy by launching products our customers want, expanding in key geographies, and growing our refinish footprint. Our performance over the last two years that extended into this quarter reflects the strength of our diversified portfolio and strategic progress we're making across all end markets. In light and commercial vehicle, we're continuing to gain traction in key growth regions while delivering meaningful innovations for our customers. In 2025, we're set to launch our next-generation waterborne base coat, a breakthrough technology that is designed to enhance efficiency and expand color capabilities, particularly for high chroma finishes that are increasing in demand. Our NextGen digital paint technology, developed in collaboration with best-in-class partners like DuraRensart, is another standout innovation.

Thanks Carl. Let's look at slide 11. We have great products Technologies and strong Brands where executing our growth strategy by launching products. Our customers want expanding in key geographies and growing our we finish footprint.

our performance over the last 2 years that extended into this quarter reflects the strength of our Diversified portfolio, and strategic progress, we're making across all

And markets in light and commercial vehicles. We're continuing to gain Traction in key growth regions, while delivering meaningful Innovation. Or

Our customers in 2025.

We're set to launch our next generation waterborne base, called a breakthrough technology that is designed to enhance efficiency and expand color capabilities, particularly for high chroma finishes that are increasing in demand.

Chrishan Villavarayan: This massless two-tone application system is already being piloted with a top global OEM and is expected to deliver significant benefits to our customers. These are just two examples of how we are creating tailored high-impact solutions that deepen customer partnerships and differentiate Axalta in the marketplace. In commercial vehicle, we remain focused on winning new business with buses and trailers, while also expanding into underrepresented geographies within Asia and Latin America, helping to further diversify and strengthen our mobility segment. In refinish, as I mentioned earlier, we have added nearly 1,600 net new body shops year to date in 2025, building on the momentum of over 2,800 wins in 2024. This growth reflects the strength of our commercial execution and the value of our offerings in the industry. Looking ahead, we're expecting to roll out our Nimbus digital platform to 40,000 body shops in 2026.

These are just two examples of how we are creating tailored, high-impact solutions that deepen customer partnerships and differentiate Axalta in the marketplace.

In commercial vehicle, we remain focused on winning new business, with buses and trailers. While, also expanding into under represented geographies within Asia and Latin America, helping to further diversify and strengthen our Mobility segment.

Chrishan Villavarayan: Nimbus connects all Axalta products and services into a cloud-based solution that empowers customers with data-driven insights designed to improve profitability and performance. And it connects seamlessly with Axalta Iris, allowing it to offer a suite of best-in-class solutions to our MSO customers. We believe in the strength of our refinish business and intend to grow into adjacencies through strategic bolt-on M&A. Outside of collision repair, we're also making meaningful progress in retail and DIY channels, supported by our accessories portfolio and new core business. We believe this will open new avenues for customer engagement and revenue diversification. In 2025, we have seen over 500 basis points of growth from execution of our strategy, and we expect strong growth trajectories in 2026 and beyond. In industrial, we're on track to deliver some of Axalta's highest margins on record, driven by the targeted product and cost actions.

In refinish, as I mentioned earlier, we have added nearly 1600, net new body shops year to date in 2025 building, on the momentum of over 2,800 wins in 2024. This growth reflects the strength of our commercial execution and the value of our offerings in the industry. Looking ahead. We're expecting to roll out our Nimbus digital platform to 40,000 body shops in 2026 Nimbus, connects all axalta products and services into a cloud-based solution that empowers customers with data-driven, insights designed to improve profitability and performance.

And it connects seamlessly with Axalta Iris, allowing it to offer a suite of best-in-class solutions to our MSO customers.

We believe in the strength of our refinished business and intend to grow into adjacencies through strategic Bolton M&A outside of collision repair. We're also making meaningful progress in retail and DIY channels.

Supported by our accessories portfolio, and you pull business.

We believe this will open new avenues for customer engagement and revenue. Diversification in 2025. We have seen over 500 basis points of growth from execution of our strategy, and we expect strong growth to trajectory in 2026 and Beyond.

Chrishan Villavarayan: This performance reflects the strength of the financial foundation we've built, one that aligns with our A plan strategy and gives us flexibility to pursue selective organic growth opportunities as they arise. We believe our broad portfolio and differentiated technologies are well positioned to benefit from the future rebound in industrial activity and the shift towards electrification. We're seeing strong momentum in key platforms such as wire enamels, impregnating resins, and powder coatings for high-efficiency motors, battery enclosures, and energy systems. These solutions position us to deliver organic growth and reinforce Axalta's role as a trusted partner in delivering high-performance coatings across a wide range of industrial applications. Within each of our businesses, we feel our results demonstrate our ability to execute well in any environment and pave the path to growth through excellent technology and long-standing customer relationships. This concludes our prepared remarks. Thank you for joining us today.

In industrial, we're on track to deliver some of Exalted's highest margins on record, driven by the targeted product and cost actions. This performance reflects the strength of the financial foundation we have built that aligns with our Aid Plan strategy and gives us the flexibility to pursue selective organic growth opportunities as they arise. We believe our broad portfolio and differentiated technologies are well positioned to benefit from the future rebound in industrial activity and the shift towards electrification. We're seeing strong momentum in key platforms such as wire, enamels, impregnating resins, and powder coatings for high efficiency.

Motors, battery enclosures, and energy systems.

These solutions position us to deliver organic growth and reinforce our exalted role as a trusted partner in delivering high performance coatings across a wide range of industrial applications.

Within each of our businesses, we feel our results demonstrate our ability to execute well in any environment and pave, the path to growth through excellent technology and long-standing customer relationships.

Chrishan Villavarayan: Operator, please open the line for questions.

Operator: Thank you. And at this time, if you would like to ask a question, please press the star and one on your telephone keypad. You may withdraw your question by pressing star two. Once again, to ask a question, please press the star and one on your telephone keypad. We'll take our first question from Chris Perkinson from Wolf Research. Please go ahead. Your line is open.

This concludes our prepared remarks. Thank you for joining us today. Operator, please open the line for questions.

Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad.

You may withdraw your question by pressing star 2.

Once again, to ask a question, please press the star and 1 on your telephone keypad.

Analyst: Awesome. Good morning, everyone. So the US refinish market has been facing challenges for the last several quarters, and there's a clear divergence between collision claims versus collision rates. Can you just give us kind of your current assessment to the best of your ability in terms of what you're hearing from the MSOs, what you're hearing from the distribution channel, including their own rationalization actions, and just how we should be thinking about the setup for, let's say, into year-end and into 2026, just given we've already been in this scenario for the last three or so quarters? Thank you so much.

We'll take our first question from Chris Parkinson from Wolfe Research. Please go ahead; your line is open.

Awesome. Good morning, everyone. Um, so the refund in the U.S. refinish market has been facing challenges for the last several quarters, and there's a clear divergence between...

Chrishan Villavarayan: Sure. Good morning, Chris. Sure, I'll take this one. So, you know, as I said in my prepared remarks, what we're seeing is accidents are still occurring. So, you know, and from what we did was we did a ton of research. Also, you know, if you listen to our peers as well as our distribution partners, what we can see is accidents are down probably about 1% to 2%, you know, in terms of looking at pretty much all the states. But where you are seeing the disconnect, obviously, is in claims. And this is really coming from, you know, as I said in the remarks, where cost of insurances and certainly where repair costs have gone. And certainly, you know, I think this is something that is, you know, we knew was coming.

Collision claims versus collision rates: can you just give us kind of your current assessment, to the best of your ability, in terms of what you're hearing from the MSOs, what you're hearing from the distribution channel, including their own rationalization actions, and just how we should be thinking about the setup for, let's say, into year end and into 2026? Just given we've already been in this scenario for the last, you know, three or so quarters. Thank you so much.

Chrishan Villavarayan: I would say, you know, if you looked at the last, to your point, three quarters, but beyond that, if I looked at the last two years, we certainly have seen inflation both in insurance rates and certainly in the cost of repairs. The good news is that we are seeing that abate. And I think, you know, as we looked at data as coming into this quarter, as well as if you look forward, even in terms of how we're driving our guide for Q3, you're certainly seeing that what we're seeing is that this is starting to abate or at least stabilize. I'm starting to see insurance rates starting to flatline.

Chrishan Villavarayan: And certainly, because backlogs are also starting to come down from the time in terms of our MSO partners, what you can see is with backlogs starting to come down from the pre-COVID levels, what we see is the opportunity for cost here at the repair shops also to abate. So I do believe that this marketplace will change. I do believe this is probably sometime in '26. So that's the perspective we have. In terms of our distribution partners, they're facing some of the similar challenges we did. So coming into the quarter, as well as I would say coming into the year, they were sitting on excess inventory. And if you look at how we approach the market in the US versus Europe, in Europe, we go to market with retail as well as distribution, and we're certainly seeing less challenges there.

Costs have gone. And certainly, you know, I think this is something that is, you know, we knew was coming. I I would say you know, if you looked at the last to your point 3 quarters, but be beyond that. If I looked at the last 2 years, we certainly have seen inflation both in insurance rates and certainly in the cost of repairs. The good news is that we are seeing that a bay. And I think, you know, it's as we looked at data as coming into this quarter as well as if you look forward, even in terms of how we're driving our guide for Q3, you're certainly seeing that what we're seeing is that this is starting to Abate, or at least stabilize. I'm starting to see insurance rates starting, starting to Flatline and certainly because backlogs are also starting to come down from the time. In terms of our MSO Partners. What you can see is with backlogs starting to come down from the preco levels. What we see is the opportunity for cost here at the repair shops

also to debate. So I do believe that this Marketplace will change. I do believe this is probably sometime in 26. So that's the perspective we have, in terms of our distribution Partners, they're, they're facing some of the similar CH challenges. We did. So coming into the quarter as well as I would say, coming into the year, they were sitting on excess inventory. And if you look at how we approach the market in the US versus Europe in Europe, we go to

Chrishan Villavarayan: In North America, obviously, our distributors are doing the right thing, and they're great partners, and they're essentially adjusting their inventory to reflect the current market conditions. I believe that usually takes a couple of quarters to sort out. So again, I believe that'll also sort out into probably the early part of next year. But at this point, you know, the good news from our perspective is that we look at Q3, we see stabilization. And you can see that in our guide. We're essentially guiding for a record Q3, which essentially states that we believe there's some level of stabilization in the marketplace going forward.

Analyst: Got it. Just as a quick follow-up, you know, Chris, there's always been this undertone of cost improvement, you know, given the Axalta story essentially dating back to the IPO. You seem fairly optimistic, and your execution, in fairness, you know, showed it this quarter, especially mobility. But you seem fairly optimistic that the margin story and the productivity story and the manufacturing rationalizations are still, you know, in the early innings. Can you just give us an update in your own thought process in terms of that cadence and how we should be thinking about that intermediate to long term and whether or not your own presumption about long-term margins is better or worse from when you began to be CEO? Thank you.

Market with retail, as well as distribution. And we're certainly seeing fewer challenges there in North America. Obviously, our distributors are doing the right thing and they're great partners; they're essentially adjusting their inventory to reflect the current market conditions. I believe that usually takes a couple of quarters to sort out, so again, I believe that will also sort out into probably the early part of next year. But at this point, you know, the good news from our perspective is that as we look at Q3, we see stabilization. You can see that in our guide, where we are essentially guiding for a record Q3, which states that we believe there's some level of stabilization in the marketplace going forward.

Chrishan Villavarayan: That's a great question, Chris. I'd love to answer that. So, you know, we, you know, if you think about our A plan, we're just two years into an A plan. So this is not, you know, two sessions of an A plan. You know, we haven't done six years of this. We've done just two years of it. And I just looking at what the team has been able to accomplish in two years, you got to put in perspective that from a cost standpoint, with all that we have driven, it's about $300 million. So it's just an enormous accomplishment. And I look at it as the multitude of buckets, what we've done in operational excellence in terms of footprint and what we've done in productivity, what we've done with material performance across direct and indirect materials, as well as then what we did with the transformation initiative.

Got it just as a quick follow-up, you know, Chris, there's always been this undertone of cost Improvement at, you know, given the exalted story essentially, dating back to the IPO, you seem fairly optimistic and and your execution In fairness, you know, showed that this quarter, especially in Mobility. But you seem fairly optimistic, that the margin story, in the productivity story and the manufacturing actualization are still, you know, in the early Innings can you just give us an update in your your own thought process in terms of that Cadence and how we should be thinking about that intermediate to long-term and whether or not your own uh, presumption about long-term margins. Um, is better or worse from when you began to be CEO? Thank you.

Chrishan Villavarayan: And across all of those, I mean, just true kudos to the team. We're well ahead of plan across all of them. Material performance has been well ahead of plan for now six quarters. I look at transformation, we're ahead of plan. And then finally, I think we're in the early innings of our operational excellence plan because we've just done, you know, some plant optimization, and we're just installing the capital to really get the productivity in place. So I see that as incremental opportunity. That said, Chris, I think, you know, the one thing is Axalta still has $3.5 to $4 billion of cost. We have $1 billion of labor and burden costs, and we have $3 billion between direct and indirect materials. So there's still a large portion of cost that I believe provides an opportunity.

That's a great question. Chris, I'd love to answer that. So, you know, we, you know, if, if you think about our a plan, we're just 2 years into an implant. So this is not, you know, 2 sessions of an a plan. You know, we haven't done 6 years of this, we've done just 2 years of it and I I just looking at what the team has been able to accomplish in 2 years. You, you got to put in perspective that if from a cost standpoint with all that we've driven it's about 300 million. So it's in just an enormous accomplishment and I look at it as the multitude of buckets what we've done in operational excellence in terms of footprint and what we've done in productivity, what we've done with material performance across direct and indirect perform materials as well as then what we did with the transformation initiative and across all of those. I mean just true kudos to the team. We're ahead well ahead of time all of them material performance has been well ahead of plans for now. 6 quarters. I look at trans.

Transformation, where ahead of plan. And then, finally, I think we're in the early Innings of our operational excellence plan, because we've just done, you know, some plant optimization and we're just installing the capital to really get the productivity in place. So I see that as incremental opportunity that said, Chris, I think you know, the 1 thing is axalta, still has 3 and a half to 4 billion dollars of cost. We have a billion dollars of Labor and burden costs.

Chrishan Villavarayan: And why I believe that is in the current marketplace, there's now excess capacity. I also see new capacity coming in from a supply standpoint in Asia. So I do believe that there is still upside on material performance in the future. On top of that, everything that I see with AI and technology, what we can do to provide services will vastly improve. And the simplicity of that is, you know, even the Nimbus tool, how we access our customers in the refinish space. Next year, we're going to put 40,000 Nimbus platforms across our body shops. That'll provide us data on efficiency and productivity across, you know, our MSO customers, as well as give them the ability to order online on our full suite of products. That drives enormous levels of supply chain efficiency and sales efficiency.

Everything that I see with AI and Technology, what we can do to provide services, will vastly improve and then the Simplicity of that is, you know, even the Nimbus tool, how we assess our our customers in the refinished space.

Chrishan Villavarayan: And then I think there's even more we could do with AI on our, let's call it, back office and customer service side. So I do believe there's still a true story, and we're still in the early innings of our, let's call it, our operational performance story or our cost story. And I do believe there is still upside on our margin story. And I look forward to telling you about that in the next A plan.

Next year, we're going to put 40,000 members platforms across our body shops that will provide us data on efficiency and productivity across, you know, RMS so customers as well as give them the ability to order online. On our full Suite of products that drives enormous levels of supply, chain efficiency and sales efficiency. And then I think there's even more we could do with AI on our. Let's call it.

Back office and customer service side. So I do believe there's still a true story and we're still in the early Innings of our, uh, uh, let's call it. Our operational performance story or our cost story. And I do believe there is still upside on our Merchants story and I look forward to telling you about that. And the next day plan,

Colleen Lubic: Thank you for the detail.

thank you for the detail.

Operator: Thank you. Our next question comes from Gansham Punjabi with BERT. Please go ahead. Your line is open.

Third, please.

Analyst: Hey, guys. This is actually Josh Vesley on for Gansham. Thanks for taking the question. You know, I just wanted to go back. You guys gave a good chart in one Q, just focusing on your organic net sales performance relative to, you know, industry volume performance. I wonder if you could, you know, just go through that specific to Q2, just talk about how Axalta performed amongst your business units relative to broader end market performance. Thanks.

Go ahead. Your line is open.

Carl Anderson: Yeah, good morning, Josh. Yeah, so from an organic perspective, you can see top line, we were down about 3%, obviously, from a consolidated basis across all of our markets. If I break it down by business, I would say mobility continues to perform extremely well. So we, you know, we were up in three of the four markets. When I kind of look at just across mobility, which is more of a light vehicle story, I think commercial vehicle, that continues to be really a great story for Axalta. So if you look at Class A, that market was down about 17% in the quarter year on year. And you can see we were down very low single digits in commercial vehicle. And that was really driven by just continued outperformance in our CTS business, as well as outperformance even within commercial trucks.

Hey guys, this is actually, uh, Josh Leon Fagan. Thanks for taking the question. Um, you know, I just wanted to go back to you guys. You gave a good chart in Q1 just focusing on your organic net sales performance relative to, um, you know, industry volume performance. I wonder if you could, you know, just go through that, uh, specifically to Q2. Just talk about how Exalted performed amongst your business units relative to, uh, the broader end market performance. Thanks.

Carl Anderson: So across the board, I think our mobility team continues to execute extremely well. And the industrial business, you know, we were down about 6% on a year-over-year basis. I think we're seeing that kind of in line with the markets that we participate in. And then the last one, if I look at really is what's happening in refinish. Chris kind of articulated what's happening here in North America. But if I look at, you know, we continue to perform and outperform markets in Europe, as well as in the rest of the world as well. So again, I think we're very excited for the performance in the quarter. And just as a continued reminder, this is a record EBITDA and record EPS quarter for Axalta in a pretty tough macro. And I think we're more excited about when revenue does inflect positively, that we will outperform quite dramatically.

Yeah. Good morning Josh. Yeah. So from an organic perspective you could see Top Line we were down about 3% obviously from a Consolidated basis across um all of our markets. I if if I break it down by business, I would say Mobility continues to perform extremely well. So we, you know, we were up in 3 of the 4 markets. Um, and I kind of look at just all across Mobility, which is more of a like vehicle story. I think commercial vehicle that, that continues to be really a great story for ExAlta. So, if you look at Class 8, that market was down about 17% in the quarter year on year and you can see our we were down very low single digits in commercial vehicle and that was really driven by just continued outperformance and our CTS business as well as outperformance even within commercial trucks. So across the board, I think our Mobility team continued continues to execute extremely well and the the industrial business. What we, you know, we were down about 6% on a year-over-year basis I

I think we're seeing that kind of in line with the markets that we participate in. Um, and then the last 1, if I look at really is is what is happening in refinish. Uh, Chris kind of articulated what's happening here in North America. But if I look at, you know, we continue to perform and outperform markets in Europe, uh, as well as uh in the rest of the world as well. So again, I think we're we're very excited for the performance in the quarter. Um and just as I continued reminder, this is a record IBA and record EPS quarter for ExAlta in a pretty tough mackerel. And I think we're more excited about when revenue does infect positively that we will, we will outperform quite dramatically.

Analyst: Okay, great. Thanks. That was super helpful. You know, maybe one more for me, just focusing in on guidance. You know, if I look at, you know, the implied adjusted EBITDA 4Q guidance for the remainder of the year, you know, it implies a pretty healthy step up on a year-over-year basis in 4Q. So just wondering if, you know, for modeling purposes, if there's anything we should keep in mind that's driving that step up or just any puts and takes there.

Carl Anderson: Yeah, no, I mean, again, as we look at overall from a company perspective, we continue to execute. So we have, you know, there's continued opportunities we're seeing in cost actions. We are anticipating that, you know, don't forget in the fourth quarter, mobility revenue will step up from where it's kind of running at in the third quarter. We're also seeing refinish will begin to inflect a little positively as well, which will actually help the overall margin story and the EBITDA story for us. So as you can see in the guide, we did take it down slightly about $10 million for the year at the kind of at the midpoint or at the low end of the range.

Okay, great. Thanks. That was super helpful. Um, you know, maybe 1 more for me just focusing in on guidance. Um, you know, if I look at, you know, the implied uh, just leave it off for queue guidance, for for the remainder of the year, you know implies a pretty healthy step up on a year-over-year basis and um for Q. So just wondering if you know for modeling purposes, if there's any anything we should keep in mind uh, that's driving that step up or just any person takes their

Yeah, no. I mean it is again, as we look at overall from, uh, from a company perspective, we are, uh, we continue to execute. So we have, you know, there's continued opportunities, we're seeing in cost actions. We are anticipating that, you know, don't forget in in the fourth quarter. Um, Mobility Revenue will step up from where it's kind of running at in the third quarter. We're also seeing refinished, um, we'll begin to inflate

Carl Anderson: But I would say given the performance that we just did in the first half of the year, we obviously are very committed to ensuring we deliver the guidance we set forth.

The little positively as well, which will actually help, uh, the overall margin story and the even a story for us. So as you can see, in the guide, we did take it down slightly about 10 million. Um, um, for the year at the, it kind of at the midpoint or at the low end of the range. But I would say given the performance that we just did in the first half of the year. Uh, we obviously are very committed to ensuring we deliver the guidance we set forth.

Analyst: Okay, great. Thank you very much.

Carl Anderson: Thank you.

Okay, great. Thank you very much.

Thank you.

Operator: Thank you. We will move next with John Roberts from Mizuho Securities. Please go ahead. Your line is open.

Analyst: Yeah, thank you. The US had a pull forward in auto sales in April into May, and then sales cooled in June. How is that affecting new car production? And in the non-US MSCA compliant cars, are you seeing any positioning yet in Canada and Mexico in anticipation of kind of the tariff changes?

April into May and then sales. Cool. Cool. In June, how is that affecting new car production and in the non MSC non usmca compliant cars? Are you seeing any uh, positioning yet in Canada and Mexico in anticipation of kind of the Tariff changes?

Chrishan Villavarayan: Actually, for us, John, you know, thanks for the question. You know, when I look at last quarter, the US was actually a bit weaker because some of the customers that we had took some shutdowns. For us, the strength really came as it continues to from China and LATAM. China, the market was somewhat stable, but we continued to grow and outpace the market. And LATAM, obviously, with our new business wins, was just a great, great story for us. Another good story, and you know, Carl hit on this, three out of the four quarters, or sorry, regions were up for us. And Europe was also good in terms of the market was stable, and we also outperformed the market slightly here. So those were three good news stories for us.

Actually, uh, for us, John, you know, thanks for the question. You know, the strength, when I look at last quarter, uh, US was actually a bit weaker because some of the customers that we had took some shutdowns. For us, the strength really came, and continues to come, from China and Latan.

China, the market.

Chrishan Villavarayan: Specific to North America, in terms of pull forwards, we actually saw some of our customers down for a period in North America. So we do expect actually a little bit of a step up beyond just the normal shutdowns that we have in Q3. So our objective is actually to see, you know, probably consistent volumes. And to the point that Carl made, I think, you know, on top of what we're seeing in light vehicle, I would say light vehicle is up, you know, builds are up slightly from 89 to, let's call this, 89.2 to 89.4. We expect, I think, probably about a 1% to 2% increase based on our performance to the back end. A lot of it is coming from China and LATAM.

Was somewhat stable, but we continue to grow and outpace the market and latam obviously with our new business wins. So, it's just a great great story for us, another good story. And, you know, Carl hit on this 3 out of the 4 quarters, or sorry, regions were up for us and Europe, was also good. In terms of the market was stable, and we also outperformed the market slightly here. So those were 3. Good. Good news stories for us.

Specific to North America, in terms of pull forwards. We actually saw some of our customers down for a period in North America. So we do expect actually a little bit of a step up Beyond just the normal shutdowns that we have in Q3. So my object, our objective is actually to see um, you know, probably consistent volumes. Uh, and to the the point that Carl made, I think, you know, on top

Chrishan Villavarayan: On top of that, and I know you didn't ask about this, but the commercial vehicle story, Carl gave you a perspective of Q3. But when we look at the full year, we're expecting the market to be down probably about 25% to 30%, but we will be up probably 1% or 2%. That's really driven by the fact that the team has just done an incredible job of really selling into the commercial transportation space and just taking the down-tracked volume from Class A and being able to quickly pivot and really do a great story selling into the CTS space.

Top of what we're seeing in like vehicle. I would say like vehicle is up. Uh, you know, bills are up slightly to from 89 to, let's call this 892 to 894, we expect, I think, uh, probably about a 1 to 2% increase based on our performance, to the back end. A lot of it is, which is coming from China. And latam on top of that and I, I know you didn't ask about this, but the commercial vehicle story Carl gave you a prospective of Q3. But when we look at the full year, we're expecting the market to be down, probably about 25 to 30%, but we will be up 1 probably 1 or 2%. That's really driven by the fact that the team has just done an incredible.

Job of really selling into the the commercial transportation space and and just taking the the down track volume from class. A and being able to quickly pivot and really do a good great story selling into the CTS space.

Analyst: Great, thank you.

Great. Thank you.

Operator: Thank you. Our next question comes from Duffy Fisher from Goldman Sachs. Please go ahead. Your line is open.

Our next question comes from Duffy Fischer from Goldman Sachs. Please go ahead. Your line is open.

Analyst: Yeah, good morning. I was wondering if you could help size, you know, you talk about 1,600 new body shop wins year to date. How does that compare to last year? What does that mean as far as kind of incremental revenue, you know, for you guys this year? You know, is there a load into that, the anniversaries? And then roughly how long do you think you can keep this pace? It seems like a very big number relative to the number of body shops in the US. So is there a half-life on this where you can do it for another year or two years?

Chrishan Villavarayan: Well, that's a great question. We've actually done 10,000 body shops over the last four years, Duffy. And if you look at it, I mean, we've normally averaged about 2,400 to 2,600 a year, and that was what we had last year. So it's a great news story for, you know, the first half of the year and what we've accomplished to your point. And, you know, the really cool part about that is a significant amount of that. We had a record number of mainstream and economy body shops in that, which was a great story because it aligns with the strategy. We wanted to get into mainstream and economy because it's only about 10% to 11% market share that we have here versus the premium space where we have over 40% market share.

Yeah, good morning. I was wondering if you could help size, you know. So you talk about 1,600 new body shop wins year-to-date. How does that compare to last year? Um, what does that mean as far as kind of incremental revenue, you know, for you guys this year? You know, is there a load into that? That's an anniversary. And then roughly how long do you think you can keep this pace? It seems like a very big number relative to the number of body shops in the U.S. So is there a half-life on this where you can do it for another year or two?

Chrishan Villavarayan: So it's actually been a great story for us because we've been able to pivot and grow into this area, and it aligns with the cover flex acquisition. So it's been good. I truly believe, especially with the market share that we have in mainstream and economy, we have a pretty good runway ahead of us. So, you know, we can continue at this pace as I think about the back half of the year. And certainly, you know, it's a step up from where we have been, but we've consistently delivered about 2,500 net body shops or 10,000 over the last four years.

Well, that that's a great question. We've actually done 10,000 body shops over the last 4 years. Uh, Duffy. And if you, if you look at it I mean we will normally average about 2400 to 2,600 a year and that was what we had last year. So it's it's a great news story for, you know, the first half of the year and what we've accomplished to your point and you know the the the really cool part about that is a significant amount of that. We had a record number of mainstream and economy body shops in that, which was a great story because it aligns with the strategy, we we wanted to get into mainstream and economy because it's only about 10 to 11% market share that we have here versus the premium space where we have over 40% market share. So it's actually been a great story for us because we've been able to Pivot and grow into this, uh, area and it aligns with the coverlex acquisition. So it's, it's

Analyst: Great, thanks. And then just a second one. How can you get investors comfortable? Because obviously your refinish numbers on the top line look a little bit weaker than your two US peers that have given us data. You know, they're down low single digits and you're down high. How can you get people comfortable that there's not something structural happening there, that it is just a customer mix issue and that that should mean revert?

Been good. I truly believe, especially with the market share that we have in, uh, mainstream and economy. We Pro. We have a pretty good Runway ahead of us. So, you know, we can continue at this space as I think about the back half of the year and certainly, you know, it's a step up from where we have been, but we've consistently delivered about 2500 net body shops or 10,000 over the last 4 years.

Can you get people comfortable? That there's not something structural happening there? Um, that it is just a customer mix issue and that, that should mean revert.

Carl Anderson: Yeah, Duffy, as we look at this, the quarter played out exactly as we were planning and what we shared with you and the investment community last quarter. So, Chris, Chris talked, there is destocking going on with one of our large customers. You know, that will continue to play out probably through Q3 and maybe towards the end of the year. But overall, we continue to win in refinish. We are winning in North America, in EMEA, and across the world. We are extremely bullish about our refinish business as we move forward. I think this is temporary. And every measure that we look at, Chris kind of articulated some of the recent trends on costs and repair. You know, one interesting perspective as well is we think about some of the reconditioning companies out there as well. We're seeing pretty significant increases in activity.

yeah, Duffy

Carl Anderson: And I think that usually tends to be a precursor for where the market's going to go in the future. So overall, I mean, this is the number one question we get. I would just keep pointing out that even in the quarter that we just announced, Axalta had its best EBITDA and best earnings per share in the history of the company.

as we look at this, uh, the quarter played out exactly, um, as we were planning. Um, and what we shared with uh, with you and the investor Community last quarter. So uh, Chris Chris talk. There is destocking going on with 1 of our large customers. Um, you know, that will continue to play out probably through the through Q3 and maybe towards the end of the year. But overall, uh, we continue to win in refinish. We are winning in North America in in, in, in in the world. Uh, we are extremely bullish about our refinished business as we move forward. I think this is temporary. Uh, and every measure that we look at Chris kind of articulated, some of the recent Trends on costs and repair. Um you know 1 you know interesting perspective as well as we think about some of the reconditioning uh, companies out there as well. We're seeing pretty significant increases and

Activity. And I think that usually tends to be a precursor for uh where the Market's going to go in the future. So overall I mean that that this is the number 1 question. We get, um, I would just keep pointing out that even in a in the quarter that we just announced

Chrishan Villavarayan: Maybe just adding to what Carl said, you know, and I think we're referring to CarMax and Carvana. And in reality, you know, if you think about lease cars coming off, you know, two years ago, it was about 16%, I think, in 2022. In '24, it's 24% of cars are being leased. And the good news there is when lease cars get traded in, even if, you know, a consumer doesn't want to fix a ding, a dealer wants to fix that ding before that car is sold. And so we do believe that this market will inflect and change here in the future.

Axalta had its best even uh invest earnings per share in the history of the company.

maybe just adding to

Analyst: Terrific. Thank you, guys.

Uh, what Carl said, I, you know, and I think we're referring to CarMax and carvana and in reality, you know, if we think about lease cars, coming off, you know, 2 2 years ago, it was about 16%. I think in 2022 in uh, in 24, it's 24% of cars are being leased and the the good news there is when lease cars get traded in even if you know a consumer doesn't want to fix a, a ding, a dealer wants to fix that thing before. That car is sold. And so I we do believe that this Market will inflate and change here in the future.

Terrific. Thank you, guys.

Operator: Thank you. Our next question comes from Matthew Deyo with Bank of America. Please go ahead. Your line is open.

Thank you.

Thank you.

Our next question comes from Matthew. Do with Bank of America, please go ahead. Your line is open

Analyst: Thanks. Question for you, I guess. So plan A, obviously, gone really well. Earnings are up, margins are up, and markets aren't cooperating. But I think generally people agree the Axalta house looks increasingly in order. I know you kind of answered Parkinson's question a bit on more to do on the cost front. But I'm just thinking about, you know, it's kind of a rare opportunity where one of your larger peers is kind of finally looking inward. And so wondering why right now isn't a better time to make a play and do something a bit more structural with your portfolio here. Yeah, I'll just leave it there.

Uh, thanks. Um

Question for you? I guess so.

Plan a obviously, Gone Gone really well, earnings are up margins are up. Um, and markets aren't cooperating, but I think,

Generally people agree, the exalt the house looks increasingly in order.

uh, I know uh, for you kind of answered Parkinson's, question a bit on on more to do on the cost front, but I'm just thinking about

You know, it's kind of a rare opportunity. Where 1 of your larger peers is is kind of finally looking inward.

And so wondering why right now isn't a better time to make a play and and do something a bit more, structural with your portfolio here. Um,

Yeah, I'll just leave it there.

Chrishan Villavarayan: Yeah, so I think thanks for the question. At first, you know, coming in, one thing that we wanted to do was certainly drive the margins to a point that we, you know, believed that we could get the businesses to. I think the first objective was to, you know, looking in the past two years, we wanted to make sure the foundation was at a strong point. And that was not in terms of one business, but it was across all three businesses. And if I look at, you know, where margins have come, you know, we've done, you know, 1,500 basis points of margin improvement, even if we look at mobility. And certainly, you know, over 1,000 if I look at where we've come in terms of industrial.

Chrishan Villavarayan: And the targets to your point that we set on industrial, we set a target of 400 basis points improvement just less than two years ago. And they're going to be well north of that as we finish the year. But primarily, the objective was to set the foundation at a good place and then to make choices on if there were opportunities. I still think there is still a little bit more to be done on the cost side and the margin side. Even with the current marketplace, I would tell you that, you know, for us, if I looked at the four metrics on the financial metrics that we had, with the exception of obviously where we are with markets and sales, we will hit all the other four A plan metrics a year ahead of plan or by the end of this year.

Yeah, so I I think, uh, thanks for the question first. You know, 1 of the coming in 1 thing that we wanted to do was certainly Drive, uh, the margins to a point that we, you know, believed that we could get the businesses to. I think the first objective was to, you know, looking in the past 2 years, we wanted to make sure the foundation was at a strong point and that was not in terms of 1 business, but it was across all 3 businesses. And if I look at, you know where margins have come, you know we've we've done you know 1500 basis points of margin Improvement even if we look at mobility and certainly you know, over a thousand if I look at where we've come in terms of industrial and the targets to your point that we set on Industrial, we set a target of 400 basis points Improvement, just less than 2 years ago and they're going to be well north of that as we finish the year. But primarily the objective was to set

Chrishan Villavarayan: And one of those other metrics that we have to hit is then $1.2 billion of EBITDA, which comes off, you know, 21% or 22%. And my plan is to make sure that we certainly hit that next year. And even with the current markets, I'm absolutely confident this team will certainly get there. So then to your question, what do we do next? And what we want to do is probably by, you know, February, spring of next year, we'll give a new A plan, which will essentially walk us through where we're going through A 2029 or the next three years. And that'll give you a perspective of what we want to do, maybe, you know, with some of the portfolio as well as where we believe there's opportunities for growth. Because we want to pivot.

Chrishan Villavarayan: Axalta has, you know, one of the strongest margins in the coatings industry, and we believe we can take this platform and build on it and drive growth and also drive a little bit more margin. And I look forward to giving you that perspective in about six to nine months from now.

And what we want to do is probably by, you know, February spring of next year, we'll give a new a plan which will essentially walk us through where we're going through a 2029, or the next 3 years, and that'll give you a prospective of what we want to do. Maybe, you know, with some of the portfolio, as well as where we believe there's opportunities for growth because we want to Pivot axalta has, you know, 1 of the strongest margins in the Coatings industry and we believe we can take this platform and build on it and drive growth and also drive a little bit more margin and I look forward to look, giving you that perspective in about 6 to 9 months from now.

Analyst: Okay. And if I can follow up, price in auto OEM was nicely positive on the quarter, and you'd mentioned kind of the one-time true up. How are you able to do that in a world where, I guess, one of your peers is talking about index pricing lower? And should this carry through the next 12 months, or is this just, I mean, I assume, versus just like a one-quarter thing? Can we flesh this out a little bit?

Okay, and if I can follow up on price and auto OEM.

It was nicely positive on the quarter, and you mentioned kind of the one-time true-up.

Carl Anderson: Yeah, I wouldn't say it's a one-quarter issue or one mat as I look at it. There was, we did call out there were some benefits. We called it one time. But there, if you look a little closer, there's about eight discrete actions that the team executed across every single region. And so, yes, these will not repeat. That's why we kind of referenced, you know, that they're kind of one-time in nature. But this isn't just, you know, one item. This is, again, this was just a part of the execution story that we think as far as that came through in mobility, especially in what we're seeing in light vehicles.

How are you able to do that in a world where I guess when your peers are talking about index pricing lower? And should this carry through the next 12 months, or is this just, I mean, I assume versus just like a one-quarter thing? Can we flesh this out a little bit?

Yeah, I wouldn't say it's a 1 quarter um issue or 1 Matt. As I look at it there was uh we did call out there was some benefits we call them 1 time but they're if you look a little closer, there's about 8 Des actions that the team executed across every single region. Um, and so yes, these will not repeat that's why we kind of referenced. Um, you know, um,

Carl Anderson: So I think as we look forward that the margin profile of the mobility business, even if I was to, you know, strip out, you know, some of this benefit, we still did well over 18% EBITDA margins in the quarter. And as I look forward, you know, from where we did last year, we're going to be well north of 17% for the full year for mobility. So great performance, price mix will be positive for the entire year. And again, it just speaks to, it speaks to what we can do from Axalta, and that's what we can, and we can execute. I think that's been proven every single quarter over the last two years, and that will continue as we move forward.

That that they're kind of 1 time in nature, but this isn't just, you know, 1 item. This is again, this was a just a part of the execution story that we think as far as that came through in in Mobility especially in what we're seeing in like vehicle. So I think as we look forward that the margin profile of the mobility business. Um, even if I was to, you know, strip out, um, you know, some of this benefit we stood still did well over 18%. Um, ibida margins, uh, in the quarter. And as I look forward, you know, from where we did last year, we're going to be well north of 17% for the full year for Mobility. So

Great performance price, mix will will be positive for for the entire year. Um, and again, it just speaks to it speaks to what we can do from axalta. And that's, and that's what we can. And we can execute, I think that's been proven every single quarter of the last 2 years and that will continue as we move forward.

Analyst: All right. Thank you.

Carl Anderson: Thank you.

All right. Thank you.

Thank you.

Operator: Thank you. Our next question comes from Josh Spector with UBS. Please go ahead.

Thank you. Our next question comes from Josh Spectre with UBS. Please go ahead.

Analyst: Yeah, hi. Good morning. I just had two quick follow-ups. First, related to kind of what you just talked about, when you talk about the pricing true up in mobility, it sounds like from your comments, there's a little bit of a one-time nature of that in the quarter. I guess, was there a pointer to a pricing that's unique that maybe helped by 5 million plus in the quarter that doesn't repeat, or is that not correct? And then the other question was more around 4Q. I think, Carl, in your remarks, you talked about performance sales up year over year on fourth quarter. Just given some of the commentary around refinish maybe not improving until 2026, how do you have visibility in that? Thanks.

Yeah. Hi, good morning. Um, I just had 2 quick follow-ups. Um, first related to kind of what you just talked about when you talk about the pricing true up in Mobility. It sounds like from your comments. There's a little bit of a 1 time, nature of that. In the quarter, I guess, was there a pointer to a pricing? That's Unique. That may be helped by 5 million plus, uh, in the quarter that doesn't repeat or is that not correct? And then the other question was more around 4 q I think Carl.

Carl Anderson: Yeah, thanks, Josh. Yeah, relative to the mobility pricing, as I just articulated, we have, as I said, there was a very specific discrete action that are cross-border in every single region that the team executed on. And so I think some of those were one-time in nature, but the rest of what they were able to do is more sustaining. So don't forget, we are ramping up new business in Brazil, which has definitely a positive impact in price mix for light vehicle. We also have had some businesses that have shifted around in other parts of Latin America. That's also positive for price mix that will continue. So that's why I think as you look at that business, you know, we're very confident in our ability to deliver, you know, well north of 17% margins for the full year.

In your remarks, you talked about, um, performance sales up year-over-year in the fourth quarter. Just given some of the commentary around refinish, maybe not improving until 2026. How do you have visibility on that? Thanks.

Carl Anderson: And then as I look at the fourth quarter, again, if you look at just, we sometimes get caught up on the year-on-year comparisons on refinish. But sequentially, if you just look at what refinish has done Q1, Q2, and embedded in our guide for Q3, the revenue has been roughly flat. And to Chris's point, that has been, you know, we're seeing some stability in that business. I think the year-on-year comps don't look as good, but if I look at a sequential basis, we're seeing that stability. And as we look into Q4 and what we're seeing, especially with the channels, with what we're seeing in EMEA, that we do expect that to pick up. And so we have a high degree of confidence that, you know, that will occur and more importantly, that will deliver on our guidance for the year.

Yeah, thanks Josh. Yeah, relative to the um, Mobility pricing as I just articulated. We we have. It said there was a very specific to Street actions that across the board in every single region, um, that the team executed on. And so I think some of those um, were 1 time in nature but the rest of what they were were able to to do what is more sustaining. So, um, don't forget, we are ramping up new business in Brazil, uh, which has definitely a, a positive impact and price mix, uh, for light vehicle. We also have uh, had some businesses that have um, and some that have shifted around and and and other parts of Latin America that's also positive for Price. Mix, that will continue. So that's why I think as you look at that business, you know, we're very confident in our ability to deliver we're in a, well, north of 17% margins for the full year. Um, and then, as I look at, uh, the fourth quarter, I again, if you look at just, we we sometimes get caught up on the year-on-year comparisons on refinish, but sequentially if you just look at what,

Refinish is done, q1, Q2, and our, you know, embedded in our guide. For Q3, the revenue has been roughly flat and to Chris's point that has been, uh, you know, we're seeing some stability in that business. I think that you're on your comps, don't look as good. But if I look at a sequential basis, we're seeing that stability and as as we look into the Q4, um, and what we're seeing, especially with the channels, um, with uh, what we're seeing in AA that we do expect um, that to, to pick up. Um, and we so we have a high degree of confidence that um, you know, that that will occur and more importantly that will deliver on on our guidance for the year.

Thank you.

Operator: Thank you. We will move next with Vincent Andrews with Morgan Stanley. Please go ahead.

Thank you.

Analyst: Thanks, and good morning. I wanted to ask about price and performance coatings, or price mix, I should say, at least versus our forecast. And I think what you said at 1Q, you know, I think it came in a little bit lower than I think we're kind of talking about flattish, maybe around 1Q, and it came in down 2%. So if you could talk about that a little bit, and then I have a follow-up.

For one wolf. Next, with Vincent Andrews, with Morgan Stanley. Please go ahead.

Uh, thanks and good morning. Um, I wanted to ask about price in in performance codings or Price. Mix. I should say um at least versus our forecast. Um and I think what you said at 1 Q um you know I think it came in a little bit lower than I think we're kind of talking about flattish maybe around 1 q and it came in uh down 2%. So if you could talk about that a little bit, then I have a follow-up.

Chrishan Villavarayan: Sure. So I'll take this one. Good morning. So the first thing is, you know, two reasons. The first one is obviously, you know, our strongest margin performance region is North America. So when North America is down as it was in the last quarter, you get a negative mix impact primarily because of the size of North America. It's not something that our performance in Europe, LATAM, and Asia can offset, especially with the scale of the decline year-over-year comp on specific to North America. But the second reason was it's really our strategy. It's our growth story. If you really put it in perspective, where we wanted to grow was mainstream and economy. And as I said, we had a record number of mainstream and economy body shop wins in Q2, with the highest in Axalta's near-term history or as far back as we can look.

Chrishan Villavarayan: And so that was a great story of number of wins, but those are actually going to come in even probably in Q3 and Q4. But our performance to the mainstream and economy segment essentially means the price point is lower. So it actually impacts us from a mixed standpoint as we grow this. For us, obviously, from a, let's call it a refinish margin perspective, the mix is negative. But for overall Axalta or for overall performance coatings margin, it's actually accretive because of the size of the scale of how it impacts us.

Sure. So I'll take this 1 uh good morning. So the first thing is you know, 2 Reasons. The first 1 is obviously you know our strongest margin performance region is North America. So when North America is down as it was in the last quarter, you get a negative mix impact, primarily because of the size of North America. It's not something that our performance in Europe latam and Asia can offset, especially with the scale of the, the decline year-over-year comp on, uh, specific to North America. But the second reason was, it's really our strategy. It's our growth story. If you really put it in perspective, where we wanted to grow was mainstream and economy. And as I said, we had record number of mainstream and economy, uh, Body Shop wins in uh, Q2 with the the highest in in exalt, as you know, New York, New York, German history year as far back as we can look. And so that was a great story of number of wins, but those are actually going to

Even probably in Q3 and Q4, but our performance to the the mainstream. And economy segment essentially means the mix. The price point is lower, so it actually impacts us from a mix standpoint as we grow this for us. Obviously from uh, uh, let's call it a refinished margin perspective.

The mix is negative. But for overall Axalta, or for overall performance, coatings margin, it's actually a driver because of the size of the scale, of how it impacts us.

Analyst: Okay, thanks for that. And if I could just ask, you know, if I think about the sort of value chain of refinish and I think about, you know, three things that we're talking about today. One, obviously, there's less claims coming from the consumer. You also mentioned that body shops still have backlogs, but that your distributor customers are destocking. So I'm just trying to reconcile, you know, that situation because it would seem to me that, you know, the body shops having still having backlogs wouldn't so much be hurting your volume. And it also doesn't, it just seems like there's a little tension between less claims, still having a backlog, and distributors destocking. So if you could help me connect that, I'd appreciate it.

Thanks for that. And if I could just ask, you know, if I think about the sort of value chain of of, of finish, and I think about, you know, 3 things that were talked about. Today, 1, there's less claims coming from the consumer. Uh, you also mentioned that body shops, still have backlogs, but that your distributor customers are desking. So, I'm just trying to reconcile, um, you know, that that situation because it would seem to me that

Chrishan Villavarayan: Sure, sure. What I meant was backlogs are coming down. Backlogs were at a very high peak in front of body shops previously, and that's been coming down. And so with backlogs coming down, it essentially means that, you know, body shops are having to find, are being more cost-competitive because backlogs are starting to come down from where they were, you know, two, three years ago coming out of the pandemic. So the reduction in backlogs, you know, as you could imagine, even if it's in auto or in commercial vehicle, essentially means that, you know, the body shops are becoming more cost-competitive. So that's why we're starting to see more abatement in, let's call it, repair costs.

You know, the body shops having still living backlogs wouldn't so much be hurting your volume. And it also doesn't—it just seems like there's a little tension between less claims still having a backlog and distributors doing well. So, if you could help me connect that, I'd appreciate it.

Chrishan Villavarayan: So all of these three things are actually working in our favor for, let's call it, stabilization in what I believe the future costs will be and why refinish will pick it back up.

Analyst: Okay, that's very helpful. Thanks so much.

Sure, sure, I I what I meant was backlogs are coming down. Backlogs were at a, a very high peak in in front of body shops previously. And that's becoming down. And so, with backlogs coming down and essentially means that, you know, a body shops are having to find are being more cost competitive, uh because backlogs are starting to come down from where they were uh you know, 2 3 years ago, coming out of the pandemic. So the reduction in backlogs you know as as you could imagine, even if it's in Auto or in commercial vehicle, essentially means that, you know, the body shops are becoming more cost competitive. So that's why that we're starting to see more abatement in. Let's call it in repair costs. So all of these 3 things are actually working in our favor for let's call it stabilization in what I believe the future costs will be and why we finish. We'll pick it back up.

Okay. That's very helpful. Thanks so much.

Operator: Thank you. Our next question comes from Michael Sison with Wells Fargo. Please go ahead.

Our next question.

Analyst: Hey, good morning. Just a quick one on, you mentioned total repair costs are stabilizing. I'm just curious, is there sort of an average cost right now, and how does that compare with, let's say, you know, several years ago? And does that number have to get to a certain point where folks can afford, you know, the cost analysis makes sense? And then maybe a follow-up would be, can you talk about the car park? I think it's pretty old. So does that impact, you know, the refinish growth going forward?

Hey, good morning. Um, just a quick one on you mentioned. Total repair costs are stabilizing.

I'm just curious. What is, is there sort of an average cost right now? And, and how, how is that compared with? Let's say you know several years ago and does that number have to get to a certain point where folks can afford, you know, the the cost analysis makes sense and then maybe a, a follow-up would be. Um, can you talk about the car park? I think it's pretty old. So does that impact, you know, the um um, the refinished growth going forward.

Chrishan Villavarayan: Sure. So I think an average would be something around 4,700. I think, you know, it's incredibly varied and all over the place depending on the type of accident. But I would say, you know, in terms of what we use as an average, it's about, you know, 4,700 to $5,000. I think, you know, if you put it in perspective, you know, what we drive on, drive for, if you think through that cost is coatings or what we provide happens to be about 4% of that cost. About 40% of that cost happens to be labor. And that is truly what is Axalta's value proposition for our customers. Everything that we do to save that 40% in a body shop is enormously important and drives, I think, you know, why we've consistently been able to perform even under these challenging conditions.

um, I I think, you know, if you put it in perspective, you know what we drive on drive for, if you think through that cost,

Chrishan Villavarayan: Winning in this marketplace and winning, you know, 1,600 body shops at a higher ratio than what we've done through the last three to four years is primarily because we provide that efficiency and that ability to provide products that essentially, whether it's reducing, you know, time in the body shop by 50% or the amount of coatings by 50% or the labor input by about, you know, 10% to 20% makes a huge difference. So those are what we drive. My expectation is that even though costs will be flatlining, everything that we can do to drive that performance and that efficiency will certainly help the body shop and keep us winning, as I think about 26% and beyond.

Is codings or what? We provide happens to be about 4% of that cost, about 40% of that. Cost happens to be labor and and that is truly what is exalted value proposition for our customers, everything that we do to save that 40% in a body shop is, is enormously important and drives. I think, you know why we've consistently been able to perform even under these challenging conditions winning in this markets place and winning, you know, 1600 body shops at a higher ratio than what we've done through the last 3, to 4 years is primarily, because we provide that efficiency and that ability to provide products that essentially, whether it's reducing, you know, time in the body shop by 50% or the amount of codings by 50%, or the the labor in, uh, uh, input by about, you know, 10 to 20% makes a huge difference. So those

Are are what's, what? We drive my expectation is that even though costs will be flatlining, everything that we can do to drive that performance and that efficiency will certainly help the body shop and keep us winning as I think about 26 and Beyond.

Analyst: Got it. Thank you.

Analyst: You're welcome.

Operator: Thank you. We will move next with John McNulty with BMO Capital Markets. Please go ahead. Your line is open.

Got it. Thank you. You're welcome.

Thank you.

Analyst: Yeah, good morning. Thanks for taking my question. So when you think about the 40,000 body shops that are going to have Nimbus and Iris technologies next year, how much does that add to the growth rate when you think about 26 versus 25?

We will move next with John magnoli with BMO Capital markets. Please go ahead. Your line is open

Yeah, good morning. Thanks for taking my question. Um, so when you think about the 40,000 body shops that are going to have Nimbus and Iris Technologies next year, how much does that add to the growth rate? When you think about 2026 versus 2025.

Chrishan Villavarayan: That's a great question, John, and good morning. Maybe I'll just give it to you in our performance without those tools this year. And, you know, really, if I think about what Nimbus provides, Nimbus gives us access to not only provide the efficiency tool and just, you know, locks those customers with us, but it also gives us the ability to sell adjacent products. And so, you know, it's our ability to sell putties, fillers, everything else that is needed and improve our share of wallet with those customers. And a perfect example is without that tool this year, and with the numbers that you saw in our Q2 results, we've been able to drive about 200 basis points. 2% of our growth came from adjacencies in just this last quarter in this challenging marketplace.

Chrishan Villavarayan: So, you know, whatever we did with our acquisitions, a plus, let's call it, you know, what we're doing with such as U-Pol is certainly helping as I think about this challenging marketplace. And what Nimbus will do is provide us the ability to provide that access faster, you know, as opposed to waiting for sales teams or waiting for a phone call. We can now have access into those body shops and essentially be able to tell when folks are out. We can also help them with efficiency tools and get them products faster. And also start, you know, driving promotions through those tools. So we see that as a great opportunity as I think about next year on the tool.

Great question John uh and good morning. Maybe I'll just give you to you and in our performance with a without those tools this year. And you know, really if I think about what Nimbus provides is Nimbus gives us access to to not only provide the efficiency tools and and just, you know, locks those customers, um, with us. But it also gives us the ability to sell adjacent products. And so, you know, it's our ability to sell potties fillers, everything else that is needed and improve our, our Cheryl wallet with those customers. And a perfect example is without that tool this year. And with the numbers that you saw in, in our Q2 results, we've been able to drive about 200 basis points. 2% of our growth came from adjacencies in just this last quarter uh in this challenging Marketplace. So you know, whatever we did with our Acquisitions. Um, a plus, let's call it, you know what we're doing.

Chrishan Villavarayan: And just, you know, going back and if you think about the four things that we established as refinish fillers was supposed to be M&A, which we did Andre Co and Cover Flex. And Andre Co is being a home run for us. You know, we've gotten 600 body shops in Switzerland, which are premium customers that we've been able to sell, again, accessories on top of all the products, the coatings that we sell. Second one was adjacencies. Adjacencies U-Pol has been great and, you know, bringing that to the US and now partnering it with tools like Iris and Iris Mix helps us also push adjacent products through the digital tools. The third one was really getting into the economy segment, which has worked out just really well in terms of what we've done in terms of body shop wins.

With such as upole is certainly helping as I think about this challenging Marketplace and what Nimbus will do is provide us the ability to provide that access faster. Uh, you know, as opposed to waiting for sales teams or waiting for a phone call, we can now have access into those body shops and essentially be able to tell when folks are out. We can also help them with efficiency tools and get them products faster. Um and and also start, you know, driving promotions through those tools. So we see that as a great opportunity um as as I think about next year on on the tool and just you know if going back and if you think about the the 4 things that we established as refinished pillars was supposed to be m&a which it was, we did Andre Co and cover flex and Andre Co is being a home run for us, you know, we've gotten 600 body shops in in, in Switzerland, which are

Premium customers that we've been able to sell again, accessories on top of all all the products, the Coatings that we sell second 1 was adjacencies adjacencies. Upole. Has been great. And you know bringing that to the US and now partnering it with tools like Iris and Iris mix helps us also push adjacent products through the digital tools. The third 1 was really getting into the economy segment, which is worked out just really well.

Chrishan Villavarayan: A perfect example, again, record quarter for mainstream and economy. And finally, the last one was, you know, what we're doing with pricing, and it certainly also played out just as we wanted.

In terms of what we've done in terms of body shop, wins a perfect example, again, record quarter for mainstream and economy. And finally, the last 1 was, you know, what we're doing with pricing, and it's certainly also played out just as we wanted.

Analyst: Got it. Okay, no, thanks for the caller. And then question, you know, you highlighted on the Building the Future slide about opportunities for M&A in both the refinish and the industrial markets. I guess given the weakness that we've seen in those markets, are you seeing more opportunities coming to the market at this point in terms of a pipeline, or are you seeing, you know, companies maybe holding back saying, look, we're not selling on this level of earnings, we'd rather wait it out? I guess how would you characterize the M&A market and pipeline?

Got it. Okay. No thanks for, uh, thanks for the caller and then.

Chrishan Villavarayan: Well, that's a great question. I probably step back and, you know, take that in two ways. The first one is, you know, part of it with Axalta is, you know, we wanted to make sure that we earned the right to grow. And so from an M&A standpoint, we wanted to make sure, you know, that even when we went through a down cycle, which is obviously something that we're going through now, you know, that the acquisitions that we had made held and the core fundamental business was performing as well as it could. And certainly, our margins reflect that we can. So that was one.

I guess given the weakness that we've seen in those markets. Are you seeing more opportunities coming to the market at this point in terms of a pipeline? Or are you seeing you know, companies maybe holding back saying look, we're not, we're not selling on this level of earnings, we'd rather wait it out. Um, I guess how, how would you characterize the the m&a market in pipeline?

Chrishan Villavarayan: And I would say the reason I'm giving you that is, so I believe we're ready, but one thing is where we're with where we're trading right now, I think, you know, our options right now would be to probably look at more share buybacks. So from our perspective, I think there's an option with, you know, for us to look at internally at, you know, how we view share buybacks. But that said, there are more bolt-on acquisitions or targets out there, even in the current market. I think the current market's actually opened up more avenues for us.

Well, that's that's a great question. I, I, I'd probably step back and, you know, take that into 2 2 ways. The first 1 is, you know, the part of it with axalta is, you know, we want to make sure that we earn the right to grow. And so, from an m&a standpoint, we wanted to make sure, you know that even when we went through a down cycle, which is obviously something that we're going through now, you know that the Acquisitions that we had made held and the core fundamental business was performing as well as as it could and certainly our margins reflect that we can. Uh, so that was 1 and I would say that the reason I was I'm giving you that is, so I believe we're ready. But 1 thing is where we're with where we're trading right now. I think, you know, our options right now would be to probably look at more share BuyBacks. So from our perspective I think there's an option with, you know, for us to look at internally at, you know, how we

Chrishan Villavarayan: but for at this point, as I think about the rest of the year, unless it's something, you know, that's hugely opportunistic that adds, a real growth vector to our core strength, we'll probably be looking more at share buybacks through the rest of the year at the pace we've been doing it.

You share BuyBacks, but that said there are more bolt-on, Acquisitions or targets out there. Uh, even in the current market, I think the current markets actually opened up more avenues for us. Uh, but for at this point, as I think about the rest of the year, unless it's something, you know, that's hugely opportunistic, that adds a real growth Vector to our core strengths will probably be looking more at share BuyBacks through the rest of the year at the pace. We've been doing it.

Analyst: Got it. Thanks very much for the caller.

Got it. Thanks very much for the caller.

Operator: Thank you. And we will take our last question from Alexei Yefremov with KeyBank. Please go ahead. Your line is open.

Thank you.

Take our last question.

Keep Bank. Please go ahead. Your line is open.

Analyst: Thanks. Good morning, everyone. Could you just comment on productivity, Jim? Switching around this year, next year, do you think it's about the same amount, a little higher, a little lower? What's your initial thought on 26th?

Carl Anderson: Yeah, thanks a lot. So yeah, I think from a productivity perspective, we're going to be running around 20 million or so this year of productivity. And if we get into 26, it should be running minimally at that same pace, but we would expect hopefully to do a little bit better than that. So this is the, as Chris referenced earlier, we're in the early innings of driving productivity into our plants that's not only sustainable, that will continue to increase year on year. So we have pretty good visibility at this point, but at a minimum next year, it should be greater than 20 million.

Thanks, uh, good morning everyone. Um, could could you just comment on productivity and social around us here? Uh, next year. Do you think it's about the same amount? A little higher? A little lower. What's your initial thought on on 26th? Yeah, thanks a lot. So yeah, I think for from a productivity perspective, uh, we're we're going to be running around 20 million or so, this year, our productivity and is that if we get into 26, it should be running a, a minimally at that. Same Pace. But we would expect hopefully to do a little bit better than that. So, this is the uh, as Chris referenced earlier. We're in the early Innings of driving productivity in into our plants. Uh, that's not only sustainable that will continue to increase year on year. So,

Uh, we have pretty good visibility at this point, but at a minimum next year, it should be greater than 20 million.

Analyst: Thanks. And on the refinish or early performance segment pricing side, you had a losing-go-visit negative number this quarter. I presume that's all mixed. Could you just confirm that? And when do you think that that number could go break even or positive?

Thanks and on the, uh, rein finish or early performance, segment pricing side. You had, uh, a losing go, visit negative number this quarter. I presume that sold, mix. Can you just confirm that? And when do you think that that number could go?

Carl Anderson: Yeah, so yeah, I think the pricing is still positive for refinish. We're probably running about 2%, you know, increases on average for the year. And, you know, as we kind of look forward, we would expect kind of that price mix in refinish probably will definitely be inflecting positively into next year. And there's a chance that we may even see that a little bit here in the fourth quarter.

Break Even or positive.

Yeah, so I yeah, I think the, the pricing is still positive for a finish. We're probably running about 2%, um, you know, increases on average for the year and uh, you know, as we kind of look forward, we would expect kind of that price, mix. Uh, and refinish probably will definitely be infecting positively into next year. Um, and there's a chance that we may even see that a little bit here in the fourth quarter.

Analyst: Thanks a lot.

Carl Anderson: Thank you.

Thanks a lot.

Chrishan Villavarayan: Thank you. Take care, everyone.

Thank you. Thank you.

Take care, everyone.

Operator: Thank you, ladies and gentlemen. And this concludes our Q&A session as well as our conference call. Thank you for your participation, and you may now disconnect.

Thank you, ladies and gentlemen. And this conclude our Q&A session as well as our conference call, thank you for your participation and you may now disconnect