Axalta Coating Systems (AXTA) 8 Feb 242023 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Axalta's Q4 and Full Year 2023 Earnings Call. [Operator Instructions]. A question-and-answer session will follow the presentation by management.

Today's call is being recorded, and a replay will be available through February 15. call recording note and will no be today's provided the therefore after longer the in not current. listening should that please information may Those be updated

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

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

Joining are Carl Villavarayan, Anderson, and CEO and me President; today Chris CFO.

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

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

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

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

turn call now over the will I to Chris.

for strong for great their the Thank that or thank everyone. targets team you, execution. for morning, Chris, want all Axalta. year full our dedication I'm pleased quarter guidance, good global was another This met exceeded and entire to and and we I

lows, led Coatings. represents as we with quarter mobility have the segments. repositioned from portfolio some billion $X.X growth our seventh historic of with have in Volumes successfully automotive and growth Mobility year-over-year contributions This net QX X% fastest-growing X% sales volumes productions improved from year-over-year, OEMs. X% a increased normalized our both consecutive auto of by to positive

effects mix X% year-over-year pricing X% to excluding year-over-year All end markets realization. improvement, contributed better with when and a year-over-year gains. onetime pure was better approximately pricing Price-mix pricing

for ongoing realization. commercial and achievement This our was teams on demonstration pricing great on a a our emphasis

we Going forward, we restore labor will from higher margins disciplined and to historical to remain levels. costs strive face pressure as

year-over-year by basis adjusted million, increased points and to to XXX $XXX margins improved XX% XX.X%. EBITDA EBITDA Adjusted

all would EBITDA. of from positive I billion, in review to past price now XXXX a X% X net reporting key mix tremendous on some with XXXX year XXXX, accomplishments and were sales like Slides which markets the record net $X.X our and better end we was growth. adjusted Axalta, sales for achieved year X. versus

of particularly and Mobility XX.X% China. normalization of Coatings new volumes growth global was in business by supplemented wins, production supported by further auto

We our to site the support have over manufacturing with made several the investments exemplified new OEMs with as local years, opening past growth of Jilin. in substantial Chinese

see as opportunity this We long-term business. region an attractive continue for the to

with our that over new However, industrial Altogether, position. several that Coatings we with for awards strong are market. weakness remains another soft innovations what honored excellent on initiatives team the growth balanced foundation we reinforce growth body X,XXX expanding team was and construction remain we the resilient wins, leading our market, produced Performance within I'm by customers. very attractive end year to of committed focused a can profitable around control The end, was were and that excited for technology XXXX, incredible on Axalta. To Refinish the during yet in that our activity in centered volume delivered Mobility net shop Coatings

Axalta to as New are and growth long-term our NextJet, offerings, support such Irus ambitions. critical

integration promising. strategic auto non-paint acquisition We're Early shop in our in positions have the gets And refinish accessories. see results body the including plan lastly, Koch, lots customers. we growth, Swiss completed Swiss well attractive of to with opportunity us the for and acquisition a Andre and been This aftermarket of closer on us track distributor.

main since the been enterprise. performance to has efficiency across drive and improved joining Axalta focus My

have EBITDA of on the million, incredible We made year. XX% $XXX This and transformational improvement an team journey of I'm report of an year-over-year. adjusted early progress annual both was this excited record the reflection achievement to these for an underway. fronts

lastly, XXXX, progress challenges. with almost All and run achieving versus X below had market both of delivered EBITDA profitability adjusted us sales Commercial being we Coatings performance, and another record after end for XX% Vehicle, second rate, In half XXXX consecutive XXXX with Industrial third improved And versus Mobility solid consistent is made despite years improved volumes now Light earnings well earnings. markets XXXX. earnings setting have XXXX. Refinish up the and levels. incredible several year

is The and entire our Full stated XXX margins growth, on a historic to goal drive improved delivering progress making towards to XX.X%. return enterprise year points EBITDA by we're profitable margins. adjusted basis to

capture productivity the shedding purchasing and in incremental in During believe to that don't growth which the attractive selectively with gains. drove driving our while urgency accelerated our returns, with addition meet we initiatives, and threshold. year, We're of areas deflationary others benefits, we speed margin

adjusted bright flow at improved ended by and diluted year-over-year. the EPS year another cash reduction inventory spot. near from operating benefited and drove increased We earnings. X% of Free record was levels XXXX $X.XX

to than operating forward. We Axalta, below time to our and we significantly year net ended with year ended in profitable the more balance significant the Xx started. For performance demonstrated leverage of and in the sheet the improvements the first strengthen we continue plan history fiscal going

While I is beginning, of transformation just encouraged by am the pace Axalta's progress.

as and Our we're together teams Axalta. one are the focused on objectives, right winning

our XXXX, made of into we're as head being business. a the exit well set up market a investments after transformational and fourth am we across the the solid about I XXXX. trajectory and by excited believe As XXXX quarter core we I encouraged

hand now call results. will off financial review to Carl our I the to

good and Chris, you, everyone. Thank morning,

reflect from to primary plans. the our measure we EBIT performance adjusted well the our closely in like to change to allocate detail, two adjusted aligned metric the segments and EBITDA. Before changed to of design we way highlight reporting results financial of financial as resources have The as reviewing more would our incentive I was long-term made more that our

We have the release. historical the press provided of in appendix reconciliations

turn X. quarter positive Coatings. Let's X% both to net contributions billion, than up Performance sales X% growth Consolidated offset from year-over-year Fourth with were as volumes Mobility segments. to sales more declines increased $X.X in Coatings Slide year-over-year strong

pricing The to Price-mix negative XXX of year higher to improved the comparison was by approximately pure points from offset year, prior compared fourth by XX compared but last mix quarter a was the XXXX. basis partially and challenging points period. basis benefit

in XX% EBITDA Adjusted $XXX XXX was year million to quarter improved period. EBITDA XX.X%. a the Adjusted prior increase in from the million, margin by points $XXX basis

marking categories, the third variable realized consecutive imbalances benefit. a approximately large rate costs of in improvements helped monomers and isocyanates, quarter were Unit deflation. portion lower across nearly year-over-year, Supply/demand with drive epoxy of XX% the all resins

additional pleased We contract driven productivity also initiatives we to which the with negotiating year, flexibility are savings terms. the in last launched us by improve enabled

year-over-year favorable diluted will we our despite the environment significantly first go $X.XX, half comparisons material XXXX, forward. finally, expense. raw we that adjusted as earnings in will cost year. highlighted disciplined with into continue of earlier, XX% structure managing to strongly Chris higher Yet remain as believe share We increased the And interest per benefiting the

mid-single-digit with organic XXth sales year X% we Moving sales fourth with and compared and was the price-mix net to prior year-over-year ended of quarter This Slide by Refinish year-over-year a to improved X. record $XXX positive volume. year improved the growth, million. positive net sales percent by Performance Refinish to earnings. quarter Coatings period the net annual consecutive

was than decision We Industrial America construction organic early weaker volumes, mid-single-digit were year-over-year stabilization. customers. principally offset the activity see more signs strategic as the of by market exit from certain in lower price-mix sales to net percent due positive and to lower North

However, a Despite at parts the be team this muted relatively macroeconomic soft volumes management through industrial pricing the demand time appears improved cost lower margins backdrop, year-over-year XXXX. in amid discipline. reported early considerably and of to

$XXX by year from points, variable XXX favorable solid quarter million Segment prior in which $XXX period, dynamics, industrial volumes by basis markets. lower adjusted the labor end and Coatings costs. led EBITDA than million in Performance EBITDA fourth offset was improved margins more with versus contributions both price-cost adjusted higher

impact on sales in period. Volumes year Mobility in increased Light million net Coatings year-over-year. organic again Coatings X% $XXX above-market quarter. the ultimately sales to UAW once North China. increased Slide quarter by had growth net strike a led results strong, prior X. to the by Fourth Turning were mid-single-digit limited Vehicle to Mobility in very America compared percent primarily The

the fastest-growing the our recovery and light global vehicle the the following this XXXX for past mix Over years. a strong great in team builds favorably expectation job production stable, positioning us has with done sales is diversifying relatively X Our over time, in OEMs. in

benefit declined a we and year-over-year the negative fourth driven by absence price realized the impacts in of quarter of Price-mix mix XXXX. onetime

low Commercial strong fourth America. of the Latin in volume net sales percentage to single versus with growth compared improved XXXX. high the However, single-digit a prior demand year-over-year by pure digits in low-teens pricing The was was quarter year. Vehicle up led improvement America, by sustained organic North

comments by America We backlogs Class positive modestly third-party forecasters. downside less from decline and in our customers XXXX, expect we are as than large North see truck who industry elevated encouraged X demand will

and XX.X% improved Coatings from driven a EBITDA points lower XX% basis increase improved input $XX by costs year-over-year. million million, robust volume adjusted growth. margin EBITDA to $XX to Adjusted variable by Mobility XXX

Turning billion, offset Volumes Coatings of X growth full year-over-year Mobility sales decline driven review contributions by down in company a $X.X to slight our every improvement in were end Performance full Net modestly price-mix a grew market. was results. a Net X% Coatings. basis, on new across a to positive for was by sales year Slide as year record. primarily

labor a offset million, contribution investments as adjusted period. by substantial, versus price nearly million and a from Adjusted to EBITDA material and $XXX EBITDA Mobility was headwinds growth company improvement record, The favorable higher raw improving expenses. trends year prior $XXX million variable Coatings was and increased from the $XXX new productivity

a XX% second in half to year Adjusted improved XXX notable the in first versus the EBITDA to with of the basis half. margin step-up points by XX.X%, XX.X%

increased earnings despite denominated diluted Argentinian a of million $XX from X% by and tax exchange to losses stemming headwind, revaluation in peso the $XX Turkish expense assets share higher principally a million lira. $X.XX, and interest expense modestly per Adjusted in

forward. in going mitigate have taken intended exchange that We recently risk action to is Argentina foreign

to of by compared productivity working cash stemming $XXX XXX% midyear capital led and profit Free higher million by prior year, initiatives. operating from flow targeted reductions the increased

year stronger sheet. of the As a with we operating improved balance result a substantially ended results, the

Turning XX. liquidity, in a $XXX $X.X the ended million. We of total approximately to cash including billion year Slide with balance

of full leverage ratio. year-end X.Xx, in ever in gross our over share Our debt ratio turn net $XXX in amounted best million capital below last million ended repurchases. $XXX year million $XXX a Capital in leverage between total to expenditures, at $XX million reduction, M&A nearly the million, year balanced outlays $XXX and a XXXX and

ERP-related increase further on expect opportunistic net capital internal debt CapEx, on Going significant allocation, forward, in creation improving and we share We capital. including a see value of buybacks decline and for in XXXX, modestly strategic opportunities. spending many with in return accretive an to emphasis avenues investments reduction, invested gross M&A

set quarter, February the During our maturity million 'XX, with new of a XXXX. notes in date to mature January of fourth refinanced $XXX approximately notes we with of XXXX senior

As bond maturity not we another a refinancing, result XXXX. this have of do until

interest flat to reduction, with rate bond the potentially option increase interest to interest refinancing. rates. and expense our loan in Available the plan associated the is term in keep XXXX, derivatives offsets gross favorable at include despite net debt reprice Our

end continue in to Axalta capital and is important balance XXXX intend target one believe allocation. the near be most our and through sheet net deleveraging deleveraging natural achievable for high disciplined leverage to of the our term. creation of value should X.Xx We The strengthen levers of in

financial I back guidance for the call Chris closing remarks. will to XXXX now our turn and

Carl. Thanks,

opportunity year us turn Slide driving earnings for and another of XXXX. I'm to the in executing XX. achieve proud well build fully of performance. record record I team to see expect XXXX financial to and Let's considerable here from

volumes and approximately for be flat modest roughly the be and sales We are to balanced project period. first in year-over-year. quarter to price-mix Net the growth expected

First improvement quarter XX% roughly EBITDA adjusted approximately projected by $XXX year-over-year the to margin million, is growth. with majority of be supported to the

grow is quarter expected with roughly contributions sales positive diluted net single-digit to adjusted year-over-year, low be First segments. a both EPS are from to year Full percent $X.XX. by expected

through not opportunity In upside for we stable end As volumes we shop for and with markets, a the the expect environment, an assume to do continue wins rates yet drive body of we as as Industrial, penetrate at we run upturn. Axalta year refinish see remain nonpaint further current to accessories. signs

strong expect build assume we lastly, of ahead to a the recovery Vehicle, RMI to begin being of by any Light demand global XXXX wins X Price-mix business overperform in Class and 'XX, For implemented assumed back And ramps impacts. mix. to Commercial in driven net be is slow following and expected will slightly XXXX. builds Axalta midyear and North new in production XXXX positive, flat Vehicle, up standards emission we before American in rates

with EBITDA half mid-single-digit is typical tailwind and $X.XX includes adjusted variable We foresee to to between middle between in adjusted strength year. quarterly expected cost year be weighted. seasonal the the diluted $X.XX $X.XX billion is earnings $X.XX. billion, EPS a Full cadence equating a first of that and Guidance deflation

an million $XXX increased onetime benefit after of free in The Full between from expected of working capital significant flow million range expenditures of we assumes XXXX. midpoint and saw be XXXX. less year is cash improvement reductions in capital and a our to $XXX

I commitments like May our to XX, Axalta well on we believe invite to event we everyone earnings. that drive strategy. introduce an to positioned and to to to where we of as deliver sales I'd X-year are intend record these on levels continue new

information, registration in website refer and our IR details QX materials. included and presentation save-the-date more to please For the our

lines concludes open joining for prepared Operator, the you today. for our please Thank This us Q&A. remarks.

from Instructions] Deutsche Begleiter is first [Operator Our Bank. question David with

discuss in Refinish for Chris, XXXX? in expectations can you your pricing

last still year to pricing call we how let's David, see about we're performed we digits -- planning where digits we Yes. think had, and it, low mid-single mid-single 'XX. as to

Very good. also impact seeing portfolio pricing XXXX? just pressure you the that you're can discuss in And might anywhere

question. great a That's

disciplined. far, seeing I quite So as think that is the I see portfolio, we're being the industry

all seen pressures, all and I sure think same value, it's also have facing whether making and a see that in recovery we going labor we the I for pricing think that pricing of we're we're lot forward. uncertainties can the benefit. And

the some for Europe. our the driving say That about on our Industrial we side, I seeing But said, we stay to are think going on we're I would as pressure value customers. in portfolio, for provide focused

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

in that in on some XXXX? be look the mix, how and thing. decent items headway about Seems made we early addition kind raws some and may there continue can efficiency call of out of you've like to should how thinking I type of through bigger you price we guess, improvements the that as

a great That's John. question,

a certainly ago, we our of dividend, in I on talked we some year performance. think QX purchasing XX% at the look performance onboard coming paid if about initiatives had that place. and of that you And material especially

our -- really saw. you and what of price ourselves worth industry actions at, that those of to to being to our let's calling than we Xx it, some our and was I with as we teams really when call it sitting compare down would where better great especially suppliers back it's that. performance deflation, certainly And half size, if a through the see the driving coming take look the I that is purchasing to being with peers And X did call

last As through took incremental know, and cost you a driving that was years, benefit about of we of cost through. X really million $XXX resetting and it bit the that

midyear. Now this call it, started, would I

benefit that And QX. was we we calls, burning it that talked in about through -- certainly saw inventory, and about in so us really as we previous hit

are it, to we're I structuring And be expectations mid-single mid-single-digits let's certainly I is as in see call we're driving, As about the we're through 'XX, fluctuations for going it, how digits that that's see, it's we what would our we we think playing really resilient 'XX. low we more it. could call how so can as agreements, call, -- would I -- deflation in But seeing you as guide, market.

Fair just maybe Got a then enough. it. like And one. small

XXXX? about we side, it a it from away about we Industrial be that I we how of you would sales the look On should some rounding it's should a it? as error? few guess, of Or impact at think walked something kind note How like percent? think where sounds that what is Is business.

to low it call to -- would mid-single digits. I flat low

You flat business as mid-single guide growing look in calling of it digits can would we're terms by up. to digits mid-single volume, -- at the our mostly up, and essentially you overall

we'll to there down Industrial, expect low And be as CV in though Even the is on single certainly on auto. well we China the market the the We'll digits that year. as to as on in But end impact the difference win flat, gain to grow we we at is there. back continue of that continue we grow believe Refinish. side, auto the we will believe

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

you amount fourth cost variable be deflation what and of the XXXX? Chris, in materials Yes. raw for and in would speak costs quarter outlook can variable to the your

start probably Carl. a I'm to cost a low it over said and XX%, we performance in then I So mean, I would as variable the remarks. to hand going double-digit it, saw, I certainly performance, in prepared single-digit -- call

turn as what it we over forward. see I'll to how Carl But -- to going

in the about tougher our QX mid-single-digit get Yes. the for mid-single I about weighted, as about deflation I little front we'll think deflationary in most full probably comps are year. front be expecting Kevin, bit probably But will better QX commodity our half look yes, spend. think that of spend. of do think from we the for And year, XXXX, a going we and expecting benefits a so the will we're as we forward. digits And

a of point? private some kind establish market, prepared in sheet. the your at a made activity, balance seeing in capital of second thoughts potential also common repurchase you've terms are to dividend reinvigorating What progress Very but some question, good. in what then And on the latest that the you're as noted you remarks allocation Carl, your on

well, with we're X.Xx. at sub-X -- first, think I very obviously, having Well, pleased leverage

line think target the of year. do by I the you our we'll guidance be provided, top we if just of in range end at right end this look -- at the

it we and So how provide does flexibility deploy more a capital. optionality in us bit little

-- I we be So as of the will part definitely strategy M&A. share will repurchases think overall as and well

But had deals, just out, pleased where in can the quarter Chris would did in As those to lot the very in will And acquisition we're think of pointed see now I a us refinish, balance we capital flexibility accretive we of look there Switzerland. as more think provide we well. the overall especially sheet going fourth because I types deploy we forward.

is of Byrne Bank next question Our with from Steve America.

Is where the than X% it's EBIT of commercial does build this something meaningful was from this more new your it in back historically, you're other and Is in presenting Mobility some like as it build? XX% to margin EBITDA projecting where the margin, have is this view, a just upside, vehicle -- rates normal? seems auto

doing mobility some margin. drive than you you're would or you're If could highlight EBIT is that more doing structural real a in anything kind just of giving there's internally, change, you that that anything whether optimism X% technology a it's that a change

certainly a I wouldn't question, it Steve. -- great call It's It's normal. the new

has Just just would $X billion on X, back margins. historical of billion looking $X we But back challenge been of last revenue. it under revenue, I have years, grown at say over the Axalta to to convert the X by

the in what regions to other if we as a in business. can in well can believe look you do there's $XX that about million productivity at both this I upside we've investment, talked structurally, what growth So investment, more both as drive I do in initiatives in put we capital increase business, do as,

do we meeting discuss so strat in show we with of to more is what And is you what this business. May plan or our this can part

comment is have levels have industrial can into question or the the loss view of inventory Do channel were exposure that one you you share as in products those a you on then And gain? you distributor on to there levels inventory a of? that your Anything normal are coatings part that. a for visibility now? construction. Do Or whether in

at -- with Consistently, businesses customers say share or what said, have upside we inventories this our here. would decided with as where has we been had the are market much our That we exit, pretty it, distributors there up, is look of North picks we are at only low in if have previously. -- that historically. especially line the are only exception at to from in America, I seen There's I

is news $X last mean, business, the we when being coatings the to that, our I major months of put think here And especially over I all have billion investments to look you announcements seen our about heavily we investing build into months, wood can X customers capacity. plants. X good see about on if

our see So I recovers, wood market all as this especially business. siding here, there's on just

upside well that's You being we're put there's certainly to upturn got this be what place. that prepare the just believe some with is at investment And doing to point. all in is for as

question next Ghansham is Our Panjabi from Baird. with

just us the sense you know it easier little you by? was commented to better Chris, a in on major across can that uptake, about there? going across refinish What give growth XXXX. What's technology? driven of market Is your I auto regions? markets volume major being bit comparisons, your for expecting just conditions a

flat your through forward question. the I'll X% Well, just to you walk and markets, we're it's what predicting I would going to into up about 'XX, is X% say to

is as shops for America get to the always the labor. incredibly strong you've North of, just but heard, ability limited sense body in

that. So that's to consistently to drive has our a the It's shops work body there's the able the story provide done. sitting shops. inventory And that Axalta we to be be body efficiency for great to our for at labor just case getting been because

Europe, Europe think what I If I flat. is call stable would about to

we are whether quarter what wins, the slight as with if grow. acquisition. to it's opportunity where Andre guide at Here, showing with you we new announced or as the the it's here increase, look our that last wins Koch -- really you a and There's BMW

what And China seen. has or we have Asia to is been flat or down weak

our would China part up, of So business. slightly is it I only part overall, flat -- call of the also But a Ghansham. that to small is but

growth that EVs, mean, you on seeing price, et the dynamic Great. will developments, cetera, on over the impact of based way? the in years. on for consumer base then all shift to any in seems in after just terms have what And Okay. narrative cetera, uptake meaningful few terms shifted et and market in the outsized I the EVs the last touch just Can you're of if you trade

Yes, absolutely.

I think, of it's all, -- an Axalta we're overall element ICE. been the think first EV-agnostic. mean, cars, much most don't not or outside of coatings is of overall are of the it's so I we there's on for our I issue. sense, if that EV really In so care

mid-single that The we're is for but And news, the quarter, rate look of and X EV. we though, growing good China. China, growing market, our also if to in if it's the in of primarily in growth our at you at at overall Axalta of Xx because by growth especially us lot by A growth, X%. Mobility last is overall, growing look our digits,

of of are a the into, Southeast that And a it's also Asia. We to you local local great to with are that's EV through that it, know, investing is, the news are that call as -- billion players great $XX the the lot market. growing. X space but over with driving platform next creating incentives in years, let's use China there move

platform. growth a as that see we So

launched line. there or just just And ramp-up plant we is new the waterborne for manufacturing, other whether few that over capability we've there just investment us the that's in last our -- quarter capacity at years, fact Jiading put is in that it's the and the the element with with Jilin, helping we last

it's driving growth So in saw the we really that QX.

with Michael next Fargo. Our Sison from question Wells is

the 'XX. for outlook Nice for year

segments. it bit you'd fourth And be the Mobility. Just positive would for was of color, pricing, little quarter down that for on a both mentioned

of about talked lot a You one-offs there.

are So well, first Or in need think And do for announce pricing? the the do -- actually, quarter already... those then to it price you turns you corner increases?

little remarks, Yes. fourth think Thanks, to Michael. the referenced we the a the of fourth that Mobility than I half really related I as mix had in of impact. that as we comparison at in an a XXXX, prepared quarter, bit being look of more Yes, as rest we think with quarter the from

fast actually first of already being the specifically, launched do pricing. pricing ago we the as business, both and couple executed our forward in segments. So year, And positive of our is full new Refinish and think see about as for quarter the a we for we weeks team

already that. beginning the see we're to benefits So of

Just flat a sales third growth. quarter, year, in quarter, up sort of quarter throughout first better, Just the growth low digits. follow-up. a the how second quarter Sales to is feel of single In better? ramp we the get it trying fourth

Yes.

roughly start you should in second as increases, expectations, thereafter. single-digit would of Our the percentage low kind the of getting next an really increase that kind into kind quarter, you definitely carry which in see of quarters several

seeing the is So flat. But it it's really in up you second just we're guide, start initial step the should that first quarter where, the at holding least quarter.

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

from us sales. to QX thoughts bridge about give your More QX? from you -- flat to often sequentially on some Could and guiding is QX from than QX, you're not, QX flat to EBITDA for QX

factors other some here? So the what of are

Yes.

also at saw we relates EBITDA in look be revenue as impact to we're we as we relates down about it's it's business, have that specifically it the down it really being referenced what $XX our Refinish. to QX As We going to million of have seasonality just slightly. And to conversion -- bridge, within just the that. Obviously, the you QX.

Europe. for for more especially North see based just in here low us be point to of America the first So off quarter that little in the -- tends we what bit Refinish, tends and a

in then there. for Vehicle more business story New sequential basis. a And mix quarter, a an are well -- Light that that us those Year, as it's first the also our Chinese on with too for So China, also implication the specifically has impacts we have

turning And to Industrial.

construction You're you Could about North potential volumes. factors? other maybe discuss nonresidential exposure? infrastructure American Any softer from residential, talking benefit And any spending?

So yes, absolutely.

GI business. between wood call you I or would it our products our nonresidential, business look at residential whether and building a or So our split business

or of terms showing again, comps out. see and -- residential muted we where coming interest forecast In rates building forward, with being we're as where down we

the elections, But play Industrial how year on that said, with this would infrastructure GI spend, question especially out side, the the side, the on back is end. in

that So slightly, for at drive to have just to primarily again. and the flat making and be it's focus this to business on on forecasting cost pick the we're structure the point, up this to building right sure the continue we when foundation down we

Mike with Our is Barclays. next Leithead from question

question Chris. First for

areas meet guess, a don't pruning comment made can bit talk in prepared I a your think you you margin some little that the around threshold. remarks potentially more. I

for a year now, been portfolio Or currently is exploring? there your worth observations portfolio You've stands. any is where bigger your And just pruning? it there about actions

No. Vehicle think getting It's of example we of that out of a is pruning, is announced you where -- plastics portion just and starting look about -- think interiors that have our our a point scale. business, business, year, perfect Light if small the just I we last obviously didn't

in that business even looking be 'XX, some Industrial, X it, and of -- segments That let's the bit of across then in some our look forward said, as sense portfolios, into whether a within there regions we Mobility might in call Refinish are at. all I of our it's our

by through or focus as $X grew I X for we about last it, me of revenue, think you years. X the Again, think billion is if the

million historical base of to the first million opportunity. incremental has alone $XXX to about thing $XXX is The case That just margins. returning

guide not have we get of 'XX, north As back as are what there billion, on $X to can this the we path we heading are there, but for yet. you in see given

this to that. all first seeing more beyond then can portfolio the about back. end for start is we drive And at and there So do any think we'll set mix if me, looking markets thinking I X what is

helpful. a super That's Great. as I a technical Carl. And a apologize, bit then follow-up, of for question

I Axalta this peso took EBIT. included think Argentine charge earlier your a the was that fairly from year, large adjusted in

mentioned mentioned don't it think remarks, an anywhere I in FX in briefly but charge you release. see I the the

from Argentine charge adjusted was results? quarter? take Axalta did And So a excluded included deval it or this from your peso earnings

Yes.

-- specifically Argentina. did So we quarter for the fourth for for it

included our is the is adjusted in in EBIT included reconciliation. EBIT in not -- so it's it So number, but -- EBITDA, which

from is Zekauskas Jeff question with next JPMorgan. Our

an was SG&A Do you R&D it's XX% your than was more for high unadjusted. X% up adjusted I in And up think a XX%. overhead about have about are numbers expectations bit little basis, Those maybe growth costs? by your XXXX. on your relatively

of really you it, being Jeff, of, Yes. quarter about half the expense, type with fourth look variable inflationary look of cost. for that just at SG&A, would the kind even call whether 'XX, more SG&A, half compensation least related full year to labor remaining at if of I or you for that the at impact just for

down into XXXX, drive increase on an so we us, of is we that focus as a And be that basis. rate forward would considerably looking to look area of for where year-over-year

roughly Great. Light percentage your of maybe X Can now Vehicle and ago? what you was business is X or remind us China it where years

revenue Yes. It's It's million quote $XXX about I'll about in of for maybe -- revenue China. basis.

Partners. Mike Our with is Harrison next Seaport question Research from

in inventories is inventory way you guess, delivered any where improvement the there I for want to quantify nice be you And that year? point this you them the levels saw those XXXX. guys at the Are in during impact? to We

fixed were if harder. the slowly. And more you this down some year bit lower impact make last presumably, if year? working your that absorption little a running Presumably, of you're plants quantify you of you're you'll inventory, your running up Can cost plants

I'll Sure, that. take

-- onetime terms we certainly as I in think improvement. about So quantifying a saw the of significant improvement,

less in take flow, half than cash performance. just our of was I you it, driven If improvement that that free call would by

too XXXX, of we there the get obviously better business not are much Looking would that we pockets as that though, forward can than improve. that, into we're signaling

by it Maybe break business. down I'll

is, that's X where looking with perspective especially volumes lower markets, where at forecasting my reduction as look possibly are we an area inventory at the also on especially cost you to absorption. is be If that probably business, In certainly fixed we opportunities. Industrial looking are we're something further end our that well, at

the on is team very focused look extra understanding this needed utilization at we have, there that's the what some So the is -- that with that as volume be the something in facilities obviously forward Industrial terms of -- pick team point. will we of opportunity on

focused that's that on. something certainly So we're

do work terms going we point probably can efficiency. would platform, think the in of of up of that slightly showing a I probably that good we utilization, of because at rest X something we're businesses more is through in the There the will we Across something that be in year the terms are but volume.

Yes. Michael, add that and just to maybe to as well.

our As about EBITDA revenue, our incremental from I on just the was look million. up revenue, at $XXX so $XXX of higher in million the had and the we house of top XXXX, conversion

it's revenue. So incremental conversion a on XX% about the

for expecting if to about look to out as at on XX% we have what to you guide XX%, look incremental And put conversion just we're you XXXX, revenue a perspective.

there's think, like enter do But year. efficiencies And healthy kind more to, you're I seeing as can productivity, of conversion where what are. Chris into there's more get. we we we we and a as think always pretty I So this alluded

there. Refinish quarter comment saw see All right. that business. that from acquisition Koch on And there's that line I curious of an you revenue just the you the don't in was Andre or Can then the in volume quarter in acquisition? in contribution much the how

We million Koch. $XX acquisition Andre of about of that in had fourth revenue the to related the recent Yes. quarter

Our with RBC Viswanathan next question from Markets. Capital is Arun

just on 'XX wanted guess, evolution. Congrats are to perspective you get I progress. where the your I on in your

So times you've but several targets mentioned you're think there. that I margin on this call, not necessarily long-term

Coatings, at the level And you're points Refinish very had to least basis on to in at down appears a little I 'XX, potentially it's it good dragged closer being that normalized up you XX.X%. a XX%. consolidated obviously, least know basis by now So within over bit Industrial, that Performance progress or -- Refinish but XXX

the margin couple referenced So to on to driver on basis million do think the over is the of expect of main kind how approach you front? next kind a that much of of Do more And XX% $XXX you you? back that coming consolidated you that there is years?

answer May. in not Arun. might you show up question, good the that, give you to a If That's I

it but give to bit -- I'll So a more. you. I'll break down it

I XXX points. to we think progress the -- in your if 'XX, up basis you point, jumped

If back up. But guide you questions been to you QX call would a of we're if QX have XX% it's that the QX, need have QX have essentially QX there's points. QX stronger at we that, QX it, that basis close. To somewhat always been and quarters about and hit to QX, for been how as we able lot means would guided. argue, QX, jump work almost QX where we're get cyclical. where to to be look I QX 'XX, your our heading through And and think But point, very you take to XXX coming would to

earnings company, I at that the will still of question, incremental believe sales, more there's do just going the what as to on answered converting that's potential there's we this back you last more opportunity opportunity I believe that Carl If in to look here, May. see here. and

single at, out call that. to what to going a want even see more can it, what we that, digits this top drive to we of year-over-year, accomplish accomplish we low We target look lay with mid-single-digit to we on potential. with are earnings more let's And what growth, X-year do can the or if

out there's I And across can lot growth the drive earnings value certainly we what for and in think and of so you lay that's shareholders, to potential, that a we'll the May.

And question on great. similar cash a just maybe ask a I can That's follow-up free as flow. then

with And said you're up, into probably like over incremental it so flow. you're well. conversion your So free be given on cash what to you've converting as that headed XX% going higher of far margins looks going your EBITDA

couple next expect so, with if you cash is years, the how And flow? maybe couple spend the of under kind level? over approaching leverage X that in free free once next of that to years, your down $XXX-plus million you flow that So now reach of and cash normalized do

Yes.

that I into being as we XXXX view and million flow, we normalized beyond. as especially cash $XXX would get over think

I be from will end we mentioned, year. target want a leverage right be think of -- as the this will we perspective I where at

of optionality And so us. front have we will in

for And so to will will be be -- looking be to evaluate looking accretive I will evaluating the as at that as deploy think share some believe -- opportunities we company. and we as repurchases capital M&A-related we well that of continue

And are the outlined. 'XX kind momentum of be target in where I to areas think So those that and we to definitely into that we -- X we're leverage going range had that 'XX be the focused will getting to the continue looking on. we

Vincent from with question next is Morgan Stanley. Our Andrews

back to a I for for is This guide on Steve the Haynes Vincent. to sec. Maybe come just wanted

you or what your I maybe XX% So of XX% think, do historically, annually. is first quarter

above first So it that something to the full you've bit your we quarter if kind year. where of to were suggests annualize of a guide, the midpoint use guided

in some the are Or back we're half conservative in So maybe year? phasing that's, different a the you something else something being is maybe this I there the that in math bit or there's there? causing of this just guess, missing

seasonality is But the past. provided, what this we've in this full right I if versus had you bit million and similar in divided $X.XX think for end is midpoint. we expect the we the mean, kind No, no, you're $XXX the get I at think at I by the that you which higher mean, that a albeit I simplistically, little of EBITDA way. take X.XX, year billion, right looking it quarter the the about guidance range to

investment. also to Okay. of terms there's elevated in guide, costs some the the And things? XXXX tied in to then further guess, numbers, bridge ERP related assuming XXXX does What of other costs those I and either the

Yes.

we about had initiatives cost So the this well ERP year. related for million we of had productivity to of $XX cost some as as consulting that

would XXXX million. I [ to drop expect look into that $XX at ], down by XXXX we As least (sic)

costs call that new -- run million maybe in $XX million So of type range. be, 'XX to it, rate of million in $XX that would kind of $X

from Our Spector next question UBS. with Josh is

issue I Does earlier as when year, mean, you back Where look backlog. that impacted dollar go really in hundred that the guys Refinish, about the million a still of talked that had production into XXXX? matter now? that exist? we I is If Does you couple

I'll Josh, this Yes. one. take

you So about going S/X won't hear certainly talking us forward.

and rates, preimplementation I run stellar implementation plants done normalized American have West are to our to a back S/X. say bringing we North Virginia I we think of facility job year, in where backlog the in all finished terms back the of our the has pre of what would

-- And upside is don't from, call improvement. about a see there as think going or no benefit you backlog we show it, we don't think as about -- forward, we QX, any let's

are. to back where we are We

so objective We something year. not world. do the more our chunks call meaningful next through, believe is several of half The system, -- get front we from operational the that it, we that should that but there's certainly roll into great the into drive before the system the teams efficiency S/X something over on, IT that are that and let's can working the is in the there years of rest the smaller working efficiency just the get in out to something

And just acquisition. the a follow-up quick on

more out in maybe you Did I make And cited you So so So... that to guess, guess, that report it earlier the why report I it's forward? organic how X% performance. not is separate volume plan volumes? you mean, I M&A or of to clear?

the it next in depending would -- we out particular up end we one, where And break Obviously, have mean, Yes. likely well. relatively on acquisition, that evaluate and small. size for as volumes you. most we reported I is the that of would was it given on

question Our from next John with Roberts Mizuho. is

get some capital Chris, I reinvestment the back Why management now? to right the think to numbers. the and switch the EBITDA to in to XXXX prior have adjusted focused growth allocation and in switched from on earnings back EBITDA organization EBIT

start, Chris. I I'll can turn Yes. Carl. to and this is it

at we manage across just EBITDA -- we our basis. on more on As an look it it's business how is the units, business

of the we that really is be kind will organization using one on capital to going the driving that. of we And invested I think items performance. return be are key

that, investments of now place, operations end is of all front attacking BU and if presidents. in especially of being business, new given you the the opposed that to in be the up on team each to of we the going by As we capital running as process kind would, approve the we're have -- run

achieved focused interest but getting run how capital I before. be will levels, highly invested a would it. very on have our that not we of I kind we'll has to you the keen that's would and on -- candidly, So tell we company return

we really, -- captured of it, the has overall, that the some And Carl is is sake And were past to just that made perspective but change. the something level just I choices growth off. in I of And stepping growth that of we maybe ROIC out those responsible of metric I be it company. the EBITDA And and P&L for more really the one drive teams and into became the where that drove and make. driving we I significant the BU maybe and teams the into we as repivot unit maybe to as have to most have think for have think -- that's run the thought operational as decision first choices it

And And going that how under team, manage forward. are as certainly we'd to through. Refinish performance first we like with our seeing see the we come acquisition can that's

Coatings the Powder coatings were then in down overall segment? up with they And line Or industrial the in volumes quarter? were

the That with line segment in overall itself. roughly was

concludes conference. This today's

may at time. you participation. your for disconnect Thank your You lines this