Axalta Coating Systems (AXTA) 2 Aug 232023 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Axalta's Second Quarter 2023 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the presentation by the management. Today's call is being recorded, and a replay will be available through August 9. 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.

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

and is good your VP Axalta our and conference you, financial Chris quarter continued you XXXX second morning. in appreciate Thank call. We This Evans, results to Relations. of interest welcome Investor

Yesterday we and Relations today CFO. which posted at be presentation the Chris Investor a of this Sean are our our call. axalta.com, released me CEO and slide we Joining and referencing during quarterly section website President; will Villavarayan, Lannon, afternoon, financial results to

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

measures. various the and of financial remarks Our most we've measures included financial to slide directly these financial slide appendix reconciliations non-GAAP measures. the also contain of the GAAP presentation, comparable non-GAAP In presentation the

with additional measures, please filings non-GAAP information and the financial SEC. regarding our to For refer forward-looking statements

to Chris. will turn call the I now over

Thank second call. everyone I like to you, Chris. quarter to welcome would our XXXX earnings

his begin of me Sean service for by decade Let thanking to Axalta.

to you Sean. his in of the Axalta. entire of my the grateful the As Sean many building his during CEO future. seven that organization. during you're announced well Board, We first months aware, instrumental accomplishments the pursue especially the finance with time as behalf I'm wish for another exceptional opportunity. company thank company recently of you, is an leaving On he partnership had notable and foundation in we has was

as following Senior Carl other and tax, that, during transportation America's recently closely was industrial corporate has I Effective one also new CFO he together August in at company. as President be Prior at Financial experience global Chief to roles Carl sectors. treasury, he Meritor, CFO and providers. the Anderson North largest our Vice freight his leadership most and Officer. served leadership relations where joining Axalta XPO, with Carl automotive will XX, of key than three financial XX the the years decades of in years and strategy finance, for more investor worked

to a mid-August Axalta, As finance invaluable. leading at business organization be be to and and a shareholder us a to will forward few the transformation value Carl's that strategic as to joining we a Sean a appreciate strive seamless true grow leaders through him his track background ensure transition. will partner look We record weeks staying

producer to Axalta since wealth companies in served to delighted XXXX. in PhD experience has Kevin components inorganic global supplier designer, at engineered brings be asset chemistry. Board Group, as record Stein value He aircraft and September leading the a X. and TransDigm Axalta. track and leading a creating of growing true holds industrial a His will businesses we're welcome addition, global the highly effective of Kevin to of CEO In the

Let's X, Slide quarter. move the of will highlights I to where the cover

softer EBIT adjusted impacts North adjusted hyperinflationary in $X.XX. and from guidance exchange ERP-related operational despite our losses Our second and was quarter a were issues Earnings $XXX diluted within EPS America, of range modestly Turkey and market Argentina. million in environment industrial

demonstrated costs improvement investments, profitability earnings we associated have underlying year-over-year the sequentially. our and considerable items with as as well and these Given productivity

Mobility growth Net in end markets driven sales our and by substantial across X%, pricing business. strong Coatings all improved

was Our again focus on X% price-mix this quarter with year-over-year. evident a increase

see returns even to pricing in essential category. market the is raw an us will material start area of prioritize attractive we initial margin result, steady a that benefits Therefore, active more remain to and are deflation. for seeing continue As end It every modest improvement. we as product we

cash Free inventory flow for an year-end right-size productivity balance strengthening down prior is where much and our of improvement an sheet, year. million high historically efforts versus our cash loan. consecutive levels. our principle million the result paid highest we balances second in priorities, $XX from was the This we is good additional wins our area the voluntarily as $XX one improved of in a This are have flow quarter term and of generating early

a provided This in second heading reflects framework. to run improved exceed an earnings full guide half expected and earnings visibility year, puts we of into us half versus levels. Given the the XXXX a second on first rate pre-COVID half have improvement guidance the

My main other focus This the the improved since off significant portfolio a system, past quarter, across foundation which our of us performance launch kicked chain and among attributes. efficiency joining we to businesses. drive Axalta has sets intelligence, the been supply upgrade ERP and to pricing for of

Second, and reduce the derisk to volatility. further acceleration of supply cost the base a cost variable program purchasing address inflation, optimization meant recent

which substantial the We realized start benefits, to will provide in expect quarter. this be fourth to

structure a responsive, Third, improve work quarter. areas us program throughput inventory to we this And we also looking finally, us drive utilization. the our working enable a capital to flow to enabled enhancement resilient where and This profitable. group planning, be more have for chain down optimize increase of at supply to can and and free company the cash

execute give tangible you as programs plans to this our more to later detail benefits We we about begin these and year. begin see will

reflected will second down the programs offset payback are our have last The ERP-related guidance step I than more considerable believe is of cost the we frameworks. year-end dynamic realization with spend, As be like Others, attractive but muted as these quarter. consulting strategic begin QX the will these the quarter, goals. in continue quarter that fixed This through in the our initiatives XXXX the investment. require initial and third in they and benefits. accelerate much indicated to costs investments investments short-term

implementation An for need improving redundancy planned significantly ERP We real-time and we provide years. systems ERP and eliminating our data ERP minimizing on six upgrade doing legacy into inefficient system was turn management. to we for our system. Slide been implementation. more Globally, manual X reduce evolving needed an from have replace complexity Please one, will to has This of this in been to hundreds detail supply and the for believe insights so, pricing chain will costly applications, interventions. and be XX-year-old

XX for scope We operationally large of in some our the ended led commercially. America. with June in in issues, quarter comprehensive strong the a we manufacturing launch the North one a included complexity May Refinish centered operational that very Yet Despite this America sales went month note live history North to launch primarily distribution preparation, and of and was site. on centers. several strongest and plants

record the issues such, As in May, which second now the month to the for resulted the us. believe shortfall operational in operational ability we we working of now had year. the limited Despite June, in sales to fully customer our the half in substantially near quarter. issues normalize the behind deliver demand are backlog on We're elevated

system for remaining global quarterly implementations. of thank processes myriad deliver their our I including management, and new In to the I the for manage to stand the needed begin team magnitude, consider learnings, doing operationalizing effective that up result. the confidence We into tireless gained of the the success. valuable the to a change work gives to tool. we implementation greater insight want me Given launch solid so, and system

X. results Moving on back Slide to the

was volume wins. estimated by weak discussed our our XX% an lower well Let industrial Globally, we and vehicle by related due in of volume by as local issues and me to by Mobility in as light Refinish We performance. X% operational light Coating volumes elaborate X% impact our on Mobility XX% consolidated year-over-year Coatings X% Performance predominantly the the volume launch. offset second and quarter rates impacting had Performance commercial declined encountered and ERP as Performance bright increased negative Coatings declined and vehicle quarter the on the the segment. XX%, production vehicle in markets that improved Coatings. volumes increased economy. as spot volumes, supported was driven by primarily reopening a volume previously growth customer declines Coatings estimate China to to

end was new Slide the operational Let's we premium have customer with saw In adjacent in year-over-year, largely prior of as stable improved shop improved expand underlying the distribution due been X% year-to-date. XX% consistent blend by We move new on North demand. premium over market. detail has net X% growth grow Refinish into In and market body market activity we to points. volumes declined to over and with to Price-mix and was pricing. new delays a largely for mainstream economy, our Refinish carryover and solid America markets. segment, XXX Refinish opportunity strong wins Refinish see XXX by by X share period. very year-over-year, supported quarter. in sales more by

every fast, software. Irus benefit Mix color process. manual frees machine efficient, up time, and hands-free innovation and our paint that an high-speed launched mixing thoughtful spectrophotometers industry. from color fully Irus and XX% customers plastic design a operation, color last being industry-leading and is great of matching that simple while mixing, It and is addition coat for we finally, recycled award-winning which With completely shop quarter, decades to single-visit other This the base built a accurate waste digital and is completely automated Irus need drop painters of management mixed, do delivering refinish on by the eliminates use from productivity every for enhanced to productive body reduces Mix, automated jobs automotive mixing Mix, environmentally AI-based to match paint. utilizes

the in the exceeding incredibly world order commercially Mix book beginning serve Early Irus The launched projections August. first with our Europe, has expect we June, feedback of and is beginning rest encouraging. deliveries to we In XXXX. in been customer

on Mix single-visit predicated productive Refinish. competitive grow innovative expands continue process. we and system, ecosystem. This why remaining our our Our Irus with solution is is customer-centric more and paired success most has industry. our one in deepens to end-to-end in a we will When faster, is Axalta Irus the win differentiation no believe the application provider

signs XXXX. in more largely quarter to cover currency and were the price-mix more by Moving X% decline. market in year-over-year due in growth Yet, encouraging I team stabilization management, cost and executed declines volume EMEA North Industrial the which is off extrusion helped was will which there into architectural The investments first sales historic of offset rate. as to category, In very Pacific, business. second XXXX. Constant than XX% big offset Several appear Asia appear be market they we're seeing products strong was X, beyond markets our anticipate bookings better to half Volumes stronger building the volume lows, net half America, growth but in modestly is on by decline. very than double-digit and modestly than from decreased coil, this price Slide forecasting long-term to now again customers such as the slowdown. a of as construction the industrial improving the bouncing offset well favorable as

X. Slide to Moving

modestly is In customer a business. year-to-date. headwind. driving XX%, We a vehicle, was Growth auto incremental vehicle. performance have cost as global now broad-based fixed the build especially Coatings. in reflecting Price-mix prior This in Mobility global improved which but our steadily forecasters EMEA previously in mix XXXX. light growth Industry volume business versus included XXXX discussed continue momentum truck over more Volume growth China new than production to auto light in X%, XX.X wins. improved as million build, representing well X% X% and but improved strong and production year project contributed step-up forecasts

age to near and elevated global global the medium for the production expect the fleet, sustained Given term. of auto see we

In XXXX. and production the vehicle, outlook for strong remain bullish our commercial customers is

North logs in especially OEMs, Class For X America. elevated, black remain

there signs be monitoring We into could believe but see as we limited are pocket, a soft of XXXX some slowdown. demand a yet forecasters as of

me turn the financial review that, performance. our to over for Sean With let of a call

Thank Chris, morning. good you, and

in $X.X and increased lower quarter. improved was unit $XX the transportation sales addition earnings to billion. million Adjusted ERP-related by and in EBIT price million net better the currency growth to in in rates. $XXX year inclusive associated energy million constant quarter to period, with costs from Second year-over-year driven material, mix $XXX raw the consulting of Underlying prior headwinds X%

XXXX, high This deflationary quarter and we declined have XXXX X% first increase an isocyanates Market incurring variable XX% representing with favorably most year-over-year marks this levels improvement. the the inflation approximate now largest in $XXX historically of the nearly million and quarter over drivers import recognized epoxies year-end. the second Variable benefit of costs are of since period. cost prices categories trending for categories at through from being

which our due launch are we are purchasing we today. optimization of this and We cost early what are success accelerating the program also earlier by procuring in year, our recovery seeing clearly encouraged efforts to now

million losses quarter due in by stock-based in in inflation cost by labor quarter realized incentive The well as compensation variable exchange XXXX. $X higher better profit and the in the was compensation driven as foreign environment compensation, expected expense offset improvements variable expense to the

thoughtfully back time programs. North enhancement also over costs in their We and of programs our as through implementation, the quarter noted in the period, our managing cost expenses American The in these expect million of earlier, with are the impacts spending May. increased ongoing ERP temporary largely to drove second offset productivity guidance provided to productivity related $XX our line and

in customer at and cover contract volume. second now Performance offset by XX. results was a flat Coatings will Performance impacting the XXXX better benefit the net net were restructuring sales million. Coatings price Slide X% from I of sales a quarter absence mix year-over-year on lower second charge of quarter $XXX X%

costs quarter, favorable relatively segment led and in volumes As a in impact in Performance stable drove quarter America, the the period versus a price-cost and the impacted proactive Coatings drove earnings volumes. North lower operational price second was year. but last to shortfall cost of associated sale decline. quarter dynamics as in allocation mostly which EBIT Chris Refinish told million roughly same year-over-year $XX year-over-year the associated in constraints $XXX Improved projects earnings Industrial were disproportionately lower benefit the million and enterprise $XXX cost of to volumes adjusted you, with significant profitability. this offset management the the million

healthy favorable was $XXX volumes to enterprise Mobility results strong the Coatings business improved is on sales $X into of expect I QX despite with the Mobility year-over-year Mobility of in power further adjusted mix by There in of XX. XXXX high-growth to in EBIT second million of allocation projects in Notably, made addition the from to in customers net half us earnings benefit. year-over-year contribution improvement improvement Growth building quarter Momentum to our price-cost increased Moving is costs and and contributions improvement a Coatings year-over-year where growth. segment. million. earnings to of clear million XX% China year, Coatings second underlying at considerable Slide quarter. margin to attractive an $XX a given associated margins. million this show $X the the volume supported the

$XX expect continues on million. prioritize and $X including compared Free strong. of XX. cash the working in second debt improve remains quarter to ended our a cash realized we Slide the totaled with liquidity just and an turning Now This our quarter $XXX of use liquidity flow and continue excellent in We profile billion summary sheet the Axalta's that quarter balance to liquidity, to over improvements. in is balance to cash as million $XX result we profitability XXXX. a capital million of total

voluntary paydowns voluntarily we year-to-date the which consecutive loan, brings paid our $XXX second down to quarter, in the million term For principal now on $XX million.

high call interest to as our the opportunities expiration to interest our and offset the sheet. higher Note are our rates a we markets in loan look on a well remains last expense also recent reduction reduce turn of few penalty other that and strengthen the weeks. positioned impact debt the to given following of capital term favorable soft explore over we Gross balance priority

from basis XX. remainder on drive improvement Our the to the a we reflecting ratio operating And performance both gross expect improvements net a X.Xx of year. slight and deleveraging X.Xx, throughout was leverage at net March meaningful

whom and working has including talented XX being years the pleasure decade. the one the to exceptional for with organization Being last analysts my the wishes extend Before been part had like of a team my to Directors immense concluding, over such and Board you, of an gratitude of part privilege, Axalta of with I go the journey and past I've would our out best this each of to shareholders.

here Axalta. at Your support have my tenure and partnership, greatly appreciated during trust been

update and call back remarks. the Now an I'll Chris on hand for to concluding guidance

of Sean, for Axalta. decade to a again, commitment Thanks

review Slide XXXX to to our QX Moving XX guidance. and

$XXX $XXX EBIT to be in between million adjusted $XXX is adjusted or million $XXX quarter Third to million million expected to EBITDA.

to full corresponding the approximately million, we XX% consulting million over incurred costs EBIT will level expect to EBITDA year million in XXXX midpoint. an an improved EBITDA have which the $XXX adjusted adjusted For in and to reflects QX, seen $XXX XXXX. This amount not million increase to rate the to $XXX inclusive at run earnings we since entering XXXX of million, $XXX be of $XX XXXX,

Our a fairly which but full second backlogs assumes expected contemplate low industrial is softness. mix volume and the view fully recovery flat patterns are year addressing year full exit This single-digit rate in the half offsetting does currently seasonal for mid-single-digit procurement implies framework in favorably. benefit material Typical raw is not price guidance QX. demand a for with mobility the trending elevated year,

realize a mid- and for half elevated year, the mitigate second in benefit to operating a which margins percent of our We help expenses. expect should boost to variable to provide the single-digit costs high

We are I'm shaping to million, increasing expected cash XXXX XXXX how encouraged up. previously we as prioritization. a than $XXX stronger pace was allocation $XXX flow focus on CapEx free on our a full $XXX from capital is lower of forecast working year well as to capital slightly million million following guide as release

levels given and not growth profitability. technology, but Axalta's which, will first drive support of talent the demonstrated and long-term positions, in focused our our have the robust, I of execution I'm well with growth all We they earnings way quarters only believe, potential is half. a platform, their through on are commitment more our and returning unlock team proud come. to to even path global pre-pandemic to to for power market leadership

please Q&A. to will answer the open and your lines pleased be for questions. Operator, Sean I

Securities. Parkinson Instructions] from first Mizuho with [Operator Christopher comes Our question

a and you the of guide FX, trends as implies expectations some Any importantly, just how be ERP. what would what very decent segment Presumably the level on Just kind some the about guide? on fairly be pricing to us XQ that that's hit flows of in in given that's on seeing that color with think marketplace, the everything annual it actually obviously third volumes. can just into going that? given on carryover helpful. just with the And probably help a XQ bridge And quarter, should we your in

Sean. Maybe I'll it's Chris, start here.

from gap. We'll expecting similar certainly some much that guidance and recovery actually gap. far closing around broader think of third to there's more that backlog we expecting to perspective, reason the margin somewhat bringing We're We're that the inventory we’re benefit conservative upside that you're certainly from bit close baking working could relatively Internally, certainly, volume on the higher raw in part not a quarter. and the pricing, seeing through upside we're not certainly as range not we're a slide. the historically the little And perspective, its would a again, balance opposite actually if probably a a of able focused a quarter. bigger just But bit see fourth as close them if have given uptick that's perspective probably volume just any sheet, when there. And quarter. of us provided from capital. of as little on we're of of Again, a we the a quarter cadence [COGS] And the the the similar into to working to able sort backlogs procuring material about in dollar it's gap. a given bit We're be to second worse, not lower then little second that should little the look the third you So get then prioritization as get it the stable the probably to bringing any bit quarter. down. down way start end why again to we're priorities provide

I'll businesses. individual from and up three it of just each break Maybe down Sean, picking into the

standard the with of July, in and shutdowns, shutdowns Mobility obviously, weeks So American North plus in Europe the mobility. July, seasonality two August the the

And provide we bit have with is with time, here QX. little resolved looked Sean obviously, of we're softness flat we any side. into QX. again, baked plant do But So that into forecast. what you we we the improving at do the we being work see as QX, have real on with that had ourselves the impact in backlog And that is do the story Industrial have upside we, does have us the have what by we that our in in and actually Refinish Refinish. giving it that we put, a being

top on in Just look we be versus at and if we into if very, XXs there? is well. are that we quickly to? else would like you volume on the the back-of-envelope presumably, changes going math seems in kind hit the obviously, of seems Irus second your it monitoring mean, anything there it investors do seems anything the very going very Because what else launch very, paying be gaining what Europe. press you anything XXXX It as lot well trend. tail. could release with I like a for the going is quick very should just quarter, refinish the helpful. just publicized dig But just mean, of of be think I in the else attention SMOs, ERP well very I there Is decline and as pretty on there should -- in the think with that you're things everything

perspective Chris. The story LatAm. is associated ERP very, of that volume Sure, at volume that to the low-margin North with is all look impact. exited compared purely launch if portion a specific that it look American our some in a year X%, is you at some of rest last it we business absolutely, -- And and And I'll maybe strong. the from very

but forward. point, business and next And any -- Irus growth that and help us nothing the have over the two in so we do And there that quarters going stable growth your essentially grow to enhance business. will resolution stable shows

exit low-margin from with yes, to the QX ERP of the in some just everything LatAm, decision else exception and our impact in the business is QX So launch.

And add we Europe. profitability expecting the about think underlying on, Chris, Refinish. record for I recovery America North still both XXXX just market as in have a lot as we're tailwinds We mean, as to still well in of

shop well the all-time at see occupancy essentially highs at still WIP at as roughly as America. level You body rates stalled North XX%

So second we're to But bring we over I see this quarter think the time. stability saw around we continue going upside. was in down to what backlog And demand.

So we're really happy move with how that business extremely is performing, as high and the expectations we are forward.

from Our McNulty Capital next with question Markets. comes BMO John

Sean, all years. thanks the for the all help over

if comfortable improvements you're say, terms thinking opportunity, the Just a about upside you of spoke of can call more, XX Chris, I over I the in on how or a it, in you're you're months this thinking cetera. wanted about or -- raws been margin the guess, so? of quarter how XXXX, when bit recovery, maybe how optimization, you six, us for, price et the to or at dig you bit see some now little that productivity, to last coming color chain out guess came you spoke point you've kind supply of kind about to to as help first you that thinking frame you're months to little guess, I next, seven call, there can that giving -- so,

which if this by plant. enterprise all compensation quarter our that catalysts, continues X%. that investments we you this just we in to some about look and pricing last year is talk we us launches again, our you as those more a little to take see impacted track positive elevated Price-cost QX performance good bit And you at that's well. QX, Yes, about earnings out, will head price-mix, if And quarter, ERP our we I be unfavorably comparing muted. primarily QX, do think had programs into as the on guidance was year. obviously question. and great around talk a was mean, X And puts spend improvements if our in despite record levels I up

resolved Industrial million XX% we had of have and through we business, that gap and that the our As of to we year. Mobility started about businesses, the $XXX of price-cost two year, about the across cume solved across expect

And specialty about positive raws. talking catalyst, then additional

like the of TiOX, that raw QX. With about, to continues raws tailwind second into the a Sean exception see specialty do positive talked half being the track and benefit, for material as well we

and puts top there. you performance at And you take guide we take a is will XX-year of take where XXXX the seen, to see if when puts with history the And without QX we've guide, the all of what to of the upside Usually, in think look best the at midpoint take you get Axalta what the built, Axalta backlog us some performance. essentially quarter Refinish at best even had with the down. of get that terms in exception to history the point, -- it QX so end as solving that, in the our we a QX you coming I has actions a obviously And it side, you if the we the of guide, had second XXX. at high

just past that get these underlying to obviously, issues it operational performance do next in exists So talks the once the two have the believe we that solved company, more over we than I quarters. will

helpful a That's it. second then one. just maybe color. Got And

It out really issues in it for. and like area what bit? pretty auto mix was price we set us a and I give mix actually Can sounds just and issue. little were -- little some a solid, mix just a bit is you pricing a on that looking the mentioned the the was OEM lower little guess, bit that of color than, You admittedly

It's It point. I about in that layer happened that but changes John, characterize little bit about anything to you mix nothing headwind wouldn't worried it price from that a far an as has was we lower price-mix. a just more perspective, not sold a think as be issue. X% But a particular on structural Yes, volume as when a it about front.

with Spector Josh UBS. Our comes question from next

to bridge and This filling I wanted guidance your there. sequential to assumptions Lucas back just XQ is for earnings in on the get Josh. the

lower So the consultant and the the the from catching we have rolling ERP got of the help off investments We've impact then up. raw the materials. and the of lost volumes impact

each, of each we've a be million three $XX those overall. sequential about $XX improvement might million got So so buckets

like your of million $XX is step-down, benefit. that's million normally, million to sort $XX million $XX $XX So seasonality a sequential to so a

So guidance million up kind but -- only million. $XX your of $XX is to

other sort offsets just I'm there I'm bridge? in the are the what of So wondering missing of that kind

contemplating third not bringing right now earlier. That's guidance. upside, we on quarter. what Yes. baked are but This the backlog potentially that's not that in is hit our in Lucas, into currently I the

you and think then little but forecasters going a one had about don't it end will across we're the typically bit stability seasonally. fantastic bit all majority to expecting yes, a just quarter. cost. pricing, up to benefit to be third down, essentially the when just industry a a your of go of the step From entirely second from there consulting are a and markets. June, call-out, in more some away volume COGS just a the pullback a then, be Light a the go and industry away. And of expecting And They we'll just little perspective, is see expecting bridge. will point, the that's vehicle see from Europe So is forecast. it's we're quarter and China -- stable you'll

then just Mobility. on And Great.

sort if into kind why just didn't I the So sequentially second improve help understand of was earnings quarter. of could us you wondering here

thinking third margins have benefit been there through quarter? guide? So in are the And from some you implied of in what the raws lower flowing terms quarter in shouldn't

Yes.

-- of cover or consulting the about spending that got we as remarks. underlying far Mobility. there million and enterprise to perspective But a again, $X the headwind tried was an the some from as overview So ERP to allocated of

well So million impacting certainly, we headwinds year-over-year some $XX year-over-year, that a EBIT as incentive becomes from margins And stock-based seeing are $XX in as million. which is compensation, perspective. comp variable

maybe to Mobility Sean's just just a just story we jump Lucas, here. to great a view staying 'XX. as And I and as And I maybe, comments off -- heading want for look this on into bit

at as the million much rate, it tack quarter you If pretty a $XX million, $XXX can good $X you and at we and million $XXX perspective that that million we of puts for look north about you on a annualize have of you for a essentially million you run the the EBIT full of year take at the look and if very $XX XXXX, you year in were look builds. with And 'XX. EBIT

our heavy customers lower. auto strength where So in is the it the for about about the backlog. provides 'XX. builds prolonged see upside also driven going, IHS as potential side, by, not we it, only the $X good a into of call we're seeing but are And as let's forecast, on demand we we from seven market And million head months case

that that business can something the double-digit on job as the certainly well teams see well outpacing you is The a as So peers market great really here. EBITDA here. are track to our doing

KeyBanc Markets. with next Capital is Aleksey from Our question Yefremov

guidance year? benefit? you think was volume about So price-cost next is base EBITDA And as XXXX? quarter we your XXXX? your majority this implied in about do think the for does XQ fourth this opportunity additional there should $XXX a where margin a opportunity include there's million. of also, So And How

and Yes. customers, mean, quarter. price. continue Refinish. million or push you area dynamics, contribution deflationary provide the price-cost would to look inflation it regardless price we'll to of mean, end, that's in Aleksey, innovate about the I the we about imply push an I and $XXX continue where high EBITDA within When we environment, value fourth to through at to think

businesses, other and largely deflation. marginal There could year. of pricing. bigger expected just be It the benefit deflation. we Chris Some a the catching the by to the be is The pace end up depends caught perspective are on of some expect up rate around of as run from mentioned, really

where inventories, low digits. So probably down today, we're double we're procuring

the As the year, the far expecting P&L. back to single the high far as mid- as we're as digits half benefit of in

the as upside we continue XXXX. unwind into potential round will that corner So provide margin to and

able in The And reducing prepare the it P&L as XXXX that, the we QX capital the will drop-through inventory. on ERP one and here, of performance favorably reduced through for increase But consulting, consulting on just to the our expect working there that one inventory, were projects, folks. and our somewhere maybe the we top for year $XX purchasing beyond spend. But is drive one as million material about which -- are to to focused the flow well. inventory the next to and -- specific us the talked Aleksey, we obviously three initiative is project well in support a our have we hit efficiency was after as which impact indexing, have [IS] provided obviously, about a see how better elements of that our guide

$XX Related in you back all $XX consulting right? the XXXX? XXXX perhaps on by to somewhere costs estimate, in ERP year you'd in or spending half. this, compare all-in the second $XX so million I the versus in How my other around costs, these quarter and million quarter million be this do and think per -- guess

and it's essentially something only chain ERP in but our we what $XX have and one. into the $XX be And operational associated intelligence. and launch. the certainly essentially I takes saying, six ERP not we Well, to systems manage legacy it think what to put we if systems that four supply it's And and years need are million a It's ability simply puts that also globally system, was you our This have change. pricing is about have, this Aleksey, needed with able total million. to system XX-year-old obviously making,

XX And was multitude at centers. it distribution this, a had that sites. at but over of project had one we this banner launch folks impact went working X,XXX it, a had plant, plants the and and obviously all employees the through again, So a XXX other impacted on impacted

in little of from very that. obviously, terms payback So

$XX the than of on payback. end on a And However, the million 'XX. year of less back have of ready additional for to ourselves really and this us get these this all two-year was really for expense consulting, prepare

Fisher Goldman Sachs. comes with next Duffy from question Our

what mean, could, done If year. I we both I'm you've just this looking at your margins,

So midpoint QX. EBITDA your XX.X% margin, QX guide QX, and in in XX.X%. is is XX.X% of -- The for this XX.X%

then and up kind you for the when they're XX.X% EBITDA increased trend And as So continue But a with to implied basically, quarter QX we falling margin. QX get per guide you're that almost speak, of wouldn't trending its why stepping with is raw margin? sequentially. QX of throughout from year, materials the down X% improving revenue sequentially

end Duffy, the December. month holiday just our dropping you're fourth of the the in off dynamic seeing some seasonally quarter with with markets in

that on are at the QX. midpoint your $XXX sales to guess up I'd back I But push because million QX from

So But some saying nicely, is things sequentially. falling is be actually company may off. growing X% what the you're still

triangulate. doesn't there in something So

certainly opportunity some Duffy, And end and I'll at $XXX from come from if be you procurement focused EBITDA on there's could as upper the fourth to backlog. the point of fruition, margin million side well closing perspective, aspects quarter if the other certainly there margin a the the providing being to -- potentially upside of upside look as perspective. a

can seems And revenue some getting around be confusion still attack maybe kind build, to just it year-over-year. a bit sequential quite I'm because pinged then the there Okay. Bloomberg, on of and we

excluding think. benefit, a on you're So in price-mix should revenue would price FX. should pretty up be year-over-year still -- QX X% significant And X% your to I still in guide,

may year-over-year X-ish imply QX volumes would that So be percent. down

you with number kind from So that digits where to start then again revenue with help if we in in number QX. QX, it QX And see seems then growing What in like the your kind volume that in that? improves mind? low that's case, could we But of of QX, will one, single it? bigger

as Industrial And So Refinish a we then QX volumes Mobility, the and seeing think guide, are it QX uptick and in to you're this, slight I Mobility you European just a just given are from to bit little as QX. largely QX, to but Industrial QX the it's from recovers seeing QX flat. relates slight covered and it then a seasonally pullback to dynamic. China And

comes next Vincent with Our from question Stanley. Andrews Morgan

with implementation backlog back into issues? second implementation customers you any the with provide to the market? wondering, conservatism in in the the you do any that Just any ERP or ERP anything North in And/or to of terms or for half quarter, make in the are maintain further year the for baking order holes issues have American

Yes.

that, and So I'll morning call, thanks take Vincent. for and good the

on across launch our Refinish what in So X, was are business and -- month it. yes, me May some just business. Again, was having of with And impact plant May did to launched here ERP of terms was our walk in we primary let a cushion. associated And specific through our the Refinish Virginia. we obviously our tough we

the around perspective, we XX years, in had in across the June. from second company Axalta history put a the it rallied And for globe you if years. month best been put perspective, to a just However, over -- we performance. and sales, had XXX EBITDA just into months, XX in has In of the teams Axalta the margin

were just out the of issues foundation accomplish back rally So of to talks teams and able June May. in the month it to coming in what and the our

QX in and QX, Refinish. our as QX so did you pickup as built know, is there for we forecast And a backlog. for we have a Obviously,

down have bring the done not to And in of of is have backlog, but quarters us top forecast over forecast. what our benefit to be provide in So two normalize the that, that -- backlog. that we on able is we our for ability the

aware, our have as well customers. we need. And issue that all that we're are doing we that So reduce as these channel. of obviously can others. making might is have in destocking you the We from at said, sure business. the And have the this don't heard are distributors here terms through we -- What is customers, that Refinish believe done our that what what inventory loss of have they of deliver is customers replenishing we what to levels is as we our the you hold

two exactly that's focused So what quarters. next on the over we're

as out consultant of spending? a the components up should there? million. Can just understand how Is help me of the over that investment just the SG&A the is Is some spending bridge that follow-up. And are? in $XX the year? there? what's of Or sort of balance And you it just play

tracking year, we year. a Last incentive the compensation. payoff. incentive well this the below comps perspective. our tracked around target relates Global XX% budget vast incentive to of of the ranged above majority We're Yes. comp The from increase

the SG&A an from So that's really of the vast majority headwind perspective.

Bank. with from Deutsche next Our comes Begleiter question David

on This is Mercandetti for David. Anthony

we the Just back Can that the this ERP. realize P&L on by QX through in then the and XXXX? expecting how to think flowing you about benefits should quantify you're

Yes.

So we'll XXXX as be providing launch the the guide. the of ERP benefits part with

that and the value cost We it stability our the the limited quickly expect third as quarter. plants. on relates turn absence fourth quarter continued of we But at the other realization. to Right second incurred benefit to we'll then than it's quarter in now, focus

pricing we're a in implementation, ERP We this transactions more business and lot new obviously, in get XXXX we'll of out integrated the guidance we redid planning. our more But XXXX. when I we capital to expect guidance benefit am again, tools. we part And put into As visibility with sure. provide working that

we is saw been I Understood. guess, operational And Or North own hurdles ERP out, their and more similar, this you expect then as process roll other America? already? cost streamlined geographies do that done implementations, it's since in

great Well, that's question. a

a pause going about LatAm for things launched year regions such Asia get take is start a One large would are the to with of region. a then we bit Europe, and launch, and as and that other which doing next the with be of a

consider have well next the the with But obviously, and two over magnitude this learned here for when am lessons implementation. that take three I us. project, probably from again, to said, you as And going big we're we I years. the pleased scale to of So as scope, the

will are shipping in we take on launches. future we apply forward management learned lessons that warehouse And so management there and some go as and

Asia next it. Got time followed that be and does come, large so be by LatAm? would launch Europe to the And clear, when just

Asia No, and be no, launches last. two will LatAm. will Europe no. The next be

from Panjabi comes with question next Ghansham Our Baird.

is This Ghansham. sitting Krueger for Matt actually in

transitioning some by end bit couple Maybe favorable the a years last as well market So given be as of key backdrop highlighting to region stiffer a environment, seeing where more pricing shift now, you what from comparatively facing any or material can perspective? the sourcing major a about raw you gains talk may in over competitive you're competition?

prepared volumes But we company, think X%. in turn stellar Sure. And Maybe have price-mix, I'll And in Sean. this able as and a over as XX%. to job, I'll we X%. the look do going remarks, down with we the as said headwind even in in X% even at with I to the our were done Industrial teams XX% Mobility, did a I Refinish, X% start,

in most in as the specifically of expectation here into the So and end started a We the and both year is stellar It more two today. all sit muted and our and cume back we accomplished And we've get done being negative, the is resolved. -- company, industrial. out as and job continued XXXX, And price resolved driving four that end cost. starting overall, light talk X% with teams about sense. by a in of price-cost markets, shows the half focus vehicle that to becoming this year on $XXX of will more the have let with half, my of it me million than of

material as raw more -- deflation. we become we of also especially start stabilized the benefits the have muted pricing seeing So and loans, will will we --

the obviously some has So the far, but with how pushback of indicates had customers, this performance again, we've business been sticking. well

business first across the seen details destocking so fairly Axalta's business release supply some It you it release at point? unique is quarter? the is impact, Can helpful. this Great. if there why be from That's immune all. I've this that chain during very at an presentation then the impact earnings period. and uniquely wasn't throughout potential And on And in any provide your reference destocking like reporting the doesn't may that

distribution So North Matt, not of that most and I we customers mean, just Refinish, much distribution, keeping in our we actually through are ERP the of just just within as aside, go destocked holding element. don't because America

we marginal America. Where building some So us. that some North destocking really certainly in within was provides upside products for saw

why to was Certainly, Again, issue we're not pervasive out. so an destocking. pullback of products there for as that. calling And was Building Industrial. weakness, it driver core some element and a building us but saw products of XX% market you within the really just it's not

with from John Our Suisse. comes Credit next question Roberts

Sean, sells Best serves I in Carl shipped as in. the coatings that for business? believe welcome, off-line OEM Does what are then parts business? Axalta part and leading that if OEMs. you're parts wishes are Kevin, to OEM for a listening And auto and business seeing of the indicator the painted and you

demand exceeding I Well, very overall, very, initial the forecast. across strong vehicle mean, demand business. John, we're light seeing we're

seven the of had preparing checks strong. And million remain We're the with bit, case. outputs, underbuilding to the the even what we've IHS backlog. with of creating, Again, As underlying I what strong the a record that it mid is that you truck, right all to aged upside we're very can we and And in a the that, shows customers, then done that now. our XX.X doing -- fact builds demand. is months also would auto at four fact call, on bit. are a a on years some customer checks, with short midterm ratcheting seeing heavy almost side backlogs incredibly a sitting for up on is all top the a this, see, initial that of And customers keeps fleet top bit, up --

So both businesses look very do strong.

from we're it a certainly, folks. heavy point. the seeing On not at some concern some this there softness side, of is in possible But 'XX

Partners. McCarthy Research question next Our from Vertical comes with Kevin

and talked to you've an segment, restore Mobility the in your effort In courage commercial about past margins.

we price basis higher have exclusive this think question to raw continue impractical costs your the coming material on in juncture that you would my down customer on mix? experiences? move do So recent some cycle can a does cases, in be of Mobility you become of sharply, at sequential where Or based

right especially, call What -- sitting our you believe, the cume years price-cost business. we And vehicle on I now Mobility, rewind year, it, in would X ago, we're significant, pricing I off X.X the seeing the on slow. most pretty -- side, light started so as negative say clock is the Mobility let's as was

resolve The our sit at cume customers. the half second we muted. I year, And trying the great doing of job a do price-cost more are as look the Mobility. to see that, with that today, becoming gap teams we largest As working sitting have we still in

costs We are cume the essentially that is to starting the level point down, come price-cost to gap get a starting out. also as to

understand overall, muted. in will that significant especially it the terms is for investment, we we more in that the of have on to vehicle invest we keep There ahead light get mobility of that believe our So do product side But need customers. absolutely keep this business. customers to to doing amounts requirements our

come the So been certainly, as down discussion, I it those has forward. long going we're And a starting discussions here, to believe are right prices mute but spot. we in

just XX% of Yes. indexation. add, maybe to roughly are those contracts And on

Still So from The we're is you seeing but deflationary price-cost the see you'll focused. -- at XX margin XX give back, price variable to we're the improvement some gap. of continue should behind still benefits. to see team a as very QX end

region. OEM, by looking team drive. region by to a continuing just the OEM is more So selective, It's lot

do I as recovery. margin there's the continues on continued So opportunity execute team think to

as in financial Okay. Wheel margins, implications to ramp sorts equipment providing and And you on step of Is change? And in competitors' of you should your be are also of thinking or and we those Daisy about more it considerations elsewhere and something example? a up for Europe that's there product your existing the Irus Wheel X.X function terms secondly, how would Daisy product? Moonwalk essentially compare

that question. love absolutely I

game Irus if match-and-mix from that automated as absolute next-level apart X.X system just an at changer. it's technology. It's us look -- our peers. fully I So or sets it is It's X.X, a I believe

in starting I XX% aware, the a in Refinish of uses really stake even extraordinary absolute And than here move our this -- goes space, I on you're that us our which is with product sense, sustainability, payback to give made and from Axalta's here. necessity As plastic year's this special and you existing And of we automated space. in the an work Refinish differentiates data this is play in tons team as customers. landfills. market. a a for less of plastic. I'll because And that advancement them. than business process this within is really year, just a the And it's fully this couple own that our you Obviously, customers, table It's differentiates reduced believe recycled we've if people faster believe our machine from only about anything benefit is from in of this points into terms on XXX this bottles, to that the customers

the team in and Europe, my our this customer just that, see and just how then has time And mentioned, in to seven absolutely just top next business incredibly listening spending first Europe customers, on been In our spending great to of months just we feedback evolution time this with what as this grow launch has feedback year. on been and tremendous. in going next into our you

no further Thank today's teleconference. much you. at for participation. so Thank you this your This are concludes There time. questions

this at lines your disconnect may time. You