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AC

Axalta Coating Systems Ltd. (AXTA)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered record first‑quarter profitability but mixed top line: Adjusted EBITDA rose 4% to $270M with margin up 140 bps to 21.4% as GAAP EPS rose to $0.45 and Adjusted EPS to $0.59; net sales fell 3% to $1.262B on a 3% FX headwind and softer Performance Coatings volumes .
  • Versus S&P Global consensus, AXTA beat on EPS ($0.59 vs $0.55*) but missed on revenue ($1.262B vs $1.290B*), reflecting pricing/Cost execution offset by FX and Performance Coatings volume pressure (Street EPS/Revenue from S&P Global)* .
  • Guidance: Q2 Adjusted EBITDA $280–$290M and EPS $0.60–$0.63; FY25 revenue trimmed to $5.30–$5.375B (from $5.35–$5.40B), while Adjusted EBITDA ($1.150–$1.175B) and EPS ($2.50–$2.60) held; FCF nudged to $475–$500M and interest expense lowered to ~$180M .
  • Tariffs update: Management now frames ~$50M annual gross tariff exposure (≈$25M in 2025) but expects to mitigate largely within 2025 via in‑sourcing, local sourcing, reformulation, inventory actions and pricing .
  • Execution highlights and potential stock catalysts: Mobility margin inflected to 16.5% (highest since Q1’21) on price/mix, China/LatAm strength; ~900 net body shop wins support share gains amid weak refinish volumes; innovation pipeline (Irus/Nimbus/NextJet, awards) reinforces medium‑term growth narrative .

Note: Street estimate values (*) retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Record first‑quarter profitability: Adjusted EBITDA $270M (+4% YoY) with 21.4% margin (+140 bps YoY) on lower operating/variable costs and disciplined SG&A; Adjusted EPS $0.59 (+16% YoY) .
    • Mobility margin expansion: Segment Adjusted EBITDA up to $73M (16.5% margin, +230 bps YoY) on positive price/mix and cost actions; Light Vehicle constant‑currency growth +2% with double‑digit volume gains in China/LatAm .
    • Share gains/Refinish franchise resilience: ~900 net new body shops added in Q1 despite lower industry claims and repair activity; management expects outperformance vs. industry through 2025 .
    • CEO quote: “We achieved a record first quarter Adjusted EBITDA… Our One Axalta culture is driving sustained operating improvement… focused on delivering on our A Plan” .

  • What Went Wrong

    • Top‑line softness: Net sales down 3% to $1.262B with a 3% FX headwind and volume declines in Performance Coatings; Refinish −2% and Industrial −6% YoY .
    • Refinish market headwinds: Collision claims and body shop activity remain pressured; management now expects industry down low‑ to mid‑single digits in 2025; distribution inventory in North America elevated .
    • Cash flow seasonality and capex ramp: Cash from operations declined to $26M; FCF a use of $14M on higher working capital and increased planned capex .

Financial Results

YoY comparison (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Net Sales ($B)$1.294 $1.262
GAAP Diluted EPS ($)$0.18 $0.45
Adjusted Diluted EPS ($)$0.51 $0.59
Net Income Margin (%)3.0% 7.8%
Adjusted EBITDA ($M)$259 $270
Adjusted EBITDA Margin (%)20.0% 21.4%
Cash from Operations ($M)$34 $26
Free Cash Flow ($M)$15 $(14)

Sequential trend

MetricQ3 2024Q4 2024Q1 2025
Net Sales ($B)$1.320 $1.311 $1.262
GAAP Diluted EPS ($)$0.46 $0.63 $0.45
Adjusted Diluted EPS ($)$0.59 $0.60 $0.59
Net Income Margin (%)7.7% 10.5% 7.8%
Adjusted EBITDA ($M)$291 $275 $270
Adjusted EBITDA Margin (%)22.1% 21.0% 21.4%

Q1 2025 vs S&P Global consensus

MetricS&P ConsensusActual
Revenue ($B)$1.290*$1.262
Primary EPS ($)$0.55*$0.59

Note: S&P Global consensus values (*) retrieved from S&P Global.

Segment breakdown – Q1 2025

SegmentNet Sales ($M) and YoYSegment Adj. EBITDA ($M)Margin
Performance Coatings$822 (−3%) $197 24.1%
Refinish (sub‑segment)$511 (−2%) ——
Industrial (sub‑segment)$311 (−6%) ——
Mobility Coatings$440 (−1%) $73 16.5%
Light Vehicle (sub‑segment)$340 (−1%) ——
Commercial Vehicle (sub‑segment)$100 (−3%) ——

KPIs – Q1 2025

KPIValue
Gross Margin34%
Net Leverage2.5x
Body Shop Net Adds~900
Cash from Operations$26M
Capex$43M
Free Cash Flow$(14)M

Guidance Changes

MetricPeriodPrevious Guidance (Feb 4, 2025)Current Guidance (May 7, 2025)Change
Net SalesFY 2025$5.35–$5.40B $5.30–$5.375B Lowered
Adjusted EBITDAFY 2025$1.150–$1.175B $1.150–$1.175B Maintained
Adjusted Diluted EPSFY 2025$2.50–$2.60 $2.50–$2.60 Maintained
Free Cash FlowFY 2025~ $500M $475–$500M Slightly Lower
Depreciation & AmortizationFY 2025~ $285M ~ $285M Maintained
Tax Rate (As Adjusted)FY 2025~ 25% ~ 25% Maintained
Diluted SharesFY 2025~ 219 ~ 219 Maintained
Interest ExpenseFY 2025~ $190M ~ $180M Lowered
CapexFY 2025$175–$190M $175–$190M Maintained
FX Translation (Revenue)FY 2025~$100M headwind (prior view) ~$25M headwind Improved
Net Sales YoYQ2 2025N/ALow single‑digit decline (YoY) New
Adjusted EBITDAQ2 2025N/A$280–$290M New
Adjusted Diluted EPSQ2 2025N/A$0.60–$0.63 New

Earnings Call Themes & Trends

TopicQ3 2024 (10/30)Q4 2024 (2/4)Q1 2025 (5/7)Trend
Cost/operational excellenceRecord Adj. EBITDA; variable cost relief; transformation in progress Achieved 21% margin target early; variable costs −7% FY Tenth straight margin expansion quarter; SG&A down 2% YoY; fixed opex down ~4% Improving
Refinish marketGrowth aided by CoverFlexx; industry softer Expect flattish 2025; share gains via 2,800 body shop wins in 2024 Industry now seen down low‑ to mid‑single digits; ~900 net adds in Q1; plan to outpace Worsening macro, AXTA outperforms
Mobility (China/LatAm)New wins; margin lift Outperformance vs builds; LV +6% volume in Q4; margin 16.4% Margin 16.5% (best since Q1’21); LV +2% cc, double‑digit China/LatAm Improving
Tariffs & FX—Initial 2025 tariff view ~$10M; FX headwind framed Tariff gross ~$50M annual, ~$25M in 2025; FX revenue headwind now ~$25M (better) Headwind, mitigation actions under way
IndustrialModest softening, margin progress ~300 bps margin expansion in 2024; targeting ≥400 bps Macro mixed; planning to exceed 400 bps margin gain target Improving structurally
Innovation/Tech—Irus Mix rollout; awards, digital paint partnerships highlighted Continued awards; Irus/Irus Scan/Nimbus; Dürr partnership on NextJet Increasing focus

Management Commentary

  • Strategic message: “We achieved a record first quarter Adjusted EBITDA… and continued accelerating our performance in challenging global economic conditions… focused on delivering on our A Plan” — Chris Villavarayan, CEO .
  • Cost/price discipline: “SG&A declined 2%… fixed operating expenses down ~4%… variable costs declined by low single digits; raw material costs ~flat for 2025 ex‑tariffs” — Carl Anderson, CFO .
  • Tariffs mitigation: “~90% of products manufactured and sold within the same region… tariffs could cost ~$50M annually (≈$25M in 2025); levers include in‑sourcing, local sourcing, reformulation, strategic inventory and pricing” — CEO/CFO .
  • Mobility outlook: “Mobility margin expanded… we expect Mobility to run north of 16% for the full year” — CFO .
  • Industrial margin goal: “We are likely to exceed our 400 bps Industrial margin improvement target” — CFO .

Q&A Highlights

  • Refinish structure vs. cyclical: Management sees a mix of transitory (insurance premiums, repair cost write‑offs, destocking) and potentially stickier factors; expects stabilization in the back half as comps ease, with AXTA continuing to outgrow via share gains and economy segment expansion .
  • Industrial margin trajectory: Already achieved ~300 bps in 2024, planning to exceed the 400 bps improvement target in 2025 through cost actions, purchasing, and selective pricing .
  • 2025 EBITDA phasing: H1 ≈48% of full‑year EBITDA (similar to 2024); H2 growth driven by Brazil wins ramping and stabilization in Refinish/Industrial .
  • Tariffs recovery timeline: Expect near‑full mitigation within 2025; pricing actions already taken (e.g., ~7% North America and ~4% Europe in Refinish) with additional levers before price .
  • Free cash flow range: Lowered to $475–$500M primarily due to higher restructuring cash outlays; Q1 working capital (bonus, accruals) weighed on CFO .

Estimates Context

  • Q1 2025: EPS beat ($0.59 vs $0.55*), revenue miss ($1.262B vs $1.290B*) reflecting FX and Performance Coatings volume pressure despite cost outperformance .
  • FY 2025 guide vs Street: Revenue guide $5.30–$5.375B sits above current S&P consensus ~$5.12B*, while EPS guide $2.50–$2.60 is at/above consensus ~$2.50* .
  • Q2 2025: Company guide EPS $0.60–$0.63 around S&P consensus ~$0.61*; Adjusted EBITDA $280–$290M broadly aligns with S&P EBITDA consensus ~$284M* .

Note: S&P Global consensus values (*) retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability resilience: Ten consecutive quarters of YoY margin expansion; Q1 record Adjusted EBITDA underscores durable cost/productivity gains amid macro softness .
  • Mixed top line but share gains: Mobility Coatings strength (China/LatAm) and body shop wins offset industry headwinds in Refinish and Industrial; net sales trimmed largely on FX and volumes .
  • Guidance credibility: FY25 EBITDA/EPS held despite lower revenue guide and tariff headwinds, supported by incremental cost actions and productivity, with FX translation headwind now materially smaller ($25M vs $100M prior) .
  • Tariffs manageable: ~$25M 2025 impact guided with a clear multi‑lever mitigation plan; expect recovery across price/mix and operations over the next quarters .
  • Mobility margin inflection: Sustained >16% segment margin targeted for 2025, aided by new wins and mix; outperformance vs global builds continues .
  • Innovation optionality: Accolades (BIG Innovation Award) and NextJet™ digital paint partnership with Dürr enhance medium‑term differentiation with OEMs .
  • Near‑term trading lens: Watch Q2 realization of pricing/tariff mitigation, Refinish activity stabilization, and Brazil LV ramp; Street may lift FY revenue/EPS if execution offsets macro/FX more quickly .

Sources

  • Q1 2025 press release and financial tables .
  • Q1 2025 Form 8‑K 2.02 (press release furnished) .
  • Q1 2025 earnings call transcript (prepared remarks and Q&A) .
  • Prior quarters for trend: Q4 2024 press release and 8‑K ; Q3 2024 press release and 8‑K .
  • Innovation‑related PRs (Q1 2025 timeframe) .

Note: S&P Global consensus values marked with (*) are retrieved from S&P Global.