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AC

Axalta Coating Systems Ltd. (AXTA)·Q2 2025 Earnings Summary

Executive Summary

  • Record profitability amid softer volumes: Adjusted EBITDA reached $292M (+$1M YoY) with margin expanding 90 bps to 22.4%; adjusted EPS rose 5% to $0.64, while GAAP EPS fell 2% to $0.50 due to restructuring costs .
  • Top line softness: Net sales declined 3% YoY to $1.305B, driven by Performance Coatings volume headwinds; Mobility Coatings grew 1% with strong price-mix and cost discipline .
  • Guidance recalibration: FY 2025 net sales lowered to $5.20–$5.275B (from $5.30–$5.375B), adjusted EBITDA to $1.140–$1.165B (from $1.150–$1.175B), and adjusted EPS to $2.45–$2.55 (from $2.50–$2.60); Q3 2025 guided LSD YoY net sales, adj. EBITDA $290–$300M, adj. EPS $0.63–$0.67 .
  • Estimate context: Q2 adjusted EPS beat consensus ($0.64 vs $0.613*) and revenue missed ($1,305M vs $1,319.6M*); 17 EPS estimates, 14 revenue estimates* (Values retrieved from S&P Global).
  • Potential stock catalysts: Record margins and Mobility execution vs. tempered FY revenue outlook and Refinish destocking pressures; ongoing buybacks ($65M in Q2) and cost savings underpin earnings resilience .

What Went Well and What Went Wrong

  • What Went Well

    • “Record quarter for Adjusted EBITDA and Adjusted Diluted EPS,” underscoring disciplined cost management and operational excellence .
    • Mobility Coatings margin inflected sharply: Adjusted EBITDA up 35% to $92M; margin expanded 500 bps to 19.8% on positive price-mix and cost actions .
    • Cash generation improved: Operating cash flow up 25% YoY to $142M; free cash flow $101M despite higher strategic capex; share repurchases of $65M executed .

  • What Went Wrong

    • Net sales fell 3% YoY to $1.305B; Performance Coatings volumes down, including Refinish North America weakness and distributor inventory corrections .
    • GAAP diluted EPS down 2% to $0.50, with restructuring charges weighing despite lower interest/tax expense .
    • FY revenue outlook reduced to a ~1% decline at midpoint, reflecting slower-than-expected improvement in tariffs/consumer confidence and persistent volume softness in Performance Coatings .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$1,311 $1,262 $1,305
Adjusted EBITDA ($USD Millions)$275 $270 $292
Adjusted EBITDA Margin %21.0% 21.4% 22.4%
Net Income ($USD Millions)$137 $99 $110
Net Income Margin %10.5% 7.8% 8.4%
Diluted EPS (GAAP, $USD)$0.63 $0.45 $0.50
Adjusted Diluted EPS ($USD)$0.60 $0.59 $0.64
Cash from Operations ($USD Millions)$234 $26 $142
Free Cash Flow ($USD Millions)$177 $(14) $101

Segment breakdown

Segment MetricQ4 2024Q1 2025Q2 2025
Performance Coatings Net Sales ($M)$843 $822 $836
Refinish Net Sales ($M)$545 $511 $514
Industrial Net Sales ($M)$298 $311 $322
Performance Coatings Adj. EBITDA ($M)$198 $197 $200
Mobility Coatings Net Sales ($M)$468 $440 $469
Commercial Vehicle Net Sales ($M)$99 $100 $107
Mobility Coatings Adj. EBITDA ($M)$77 $73 $92

KPIs

KPIQ4 2024Q1 2025Q2 2025
Share Repurchases ($M)——$65
Capex ($M, quarterly)$62 $43 $45
Net Debt / LTM Adj. EBITDA (FY ref)2.5x (as of 12/31/24) —2.5x (CFO remarks)

Q2 2025 vs Prior Year and vs Estimates

MetricQ2 2024Q2 2025 ActualYoYConsensusSurprise
Revenue ($M)$1,351 $1,305 -3.4% $1,319.6*Miss (~$14.6M)*
Diluted EPS (GAAP, $)$0.51 $0.50 -2.0% ——
Adjusted Diluted EPS ($)$0.61 $0.64 +4.9% $0.6130*Beat (+$0.027)*
Adjusted EBITDA ($M)$291 $292 +$1 ——

Note: Asterisks indicate values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q1 PR)Current Guidance (Q2 PR/8-K)Change
Net Sales ($B)FY 2025$5.30–$5.375 $5.20–$5.275 Lowered
Adjusted EBITDA ($B)FY 2025$1.150–$1.175 $1.140–$1.165 Slightly Lowered (low end)
Adjusted Diluted EPS ($)FY 2025$2.50–$2.60 $2.45–$2.55 Lowered
Free Cash Flow ($M)FY 2025$475–$500 $475–$500 Maintained
Depreciation & Amortization ($M)FY 2025~$285 ~$290 Raised
Tax Rate (As Adjusted)FY 2025~25% ~25% Maintained
Diluted Shares (mm)FY 2025~219 ~218 Lowered
Interest Expense ($M)FY 2025~$180 ~$180 Maintained
Capex ($M)FY 2025$175–$190 $175–$190 Maintained
Net Sales (YoY for Q3)Q3 2025—Low single-digit decline New
Adjusted EBITDA ($M)Q3 2025—$290–$300 New
Adjusted Diluted EPS ($)Q3 2025—$0.63–$0.67 New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24 and Q1’25)Current Period (Q2’25)Trend
Refinish North America demand and distributor destockingQ4’24: Refinish +2% YoY on acquisitions/price; volumes mixed . Q1’25: Organic Refinish -1% YoY; CoverFlexx +270 bps; FX headwind .Continued volume softness in North America; distributor inventory corrections; stabilization expected into Q3/Q4; winning 1,600 net new shops YTD .Stabilizing; recovery pushed to 2026
Mobility Coatings price-mix and marginsQ4’24: LV +9% YoY; Mobility EBITDA margin 16.4% . Q1’25: Mobility EBITDA margin 16.5% .Margin ~20% with 500 bps expansion; discrete pricing actions and Brazil wins; expect >17% for full year .Improving
Cost transformation and productivityQ4’24: 2024 Transformation savings; EBITDA margin 21.2% FY . Q1’25: Record EBITDA; operating/variable cost declines .Operating expense -6% ex-FX/acq; ~$40M savings; plant closures; productivity ~$20M in 2025/≥$20M in 2026 .Sustained improvement
Capital allocation (buybacks, leverage)Q4’24: Revolver repaid; net leverage 2.5x; liquidity $1.4B . Q1’25: No buyback disclosure.$65M buybacks; net leverage 2.5x; on track to $180M interest expense target one year early .Accretive deployment
AI/digital and product innovationQ4’24: Strategic execution noted . Q1’25: Awards and innovation highlights .NextJet recognized as Automotive News PACE Pilot Innovation to Watch; Nimbus rollout to 40,000 shops in 2026; efficiency gains for customers .Building momentum

Management Commentary

  • “We delivered another excellent quarter, setting new records for Adjusted EBITDA and Adjusted Diluted EPS.” — CEO Chris Villavarayan .
  • “Adjusted EBITDA margin expanded by 90 bps to 22.4%, underscoring our ability to manage costs and drive profitability in a dynamic environment.” — CFO Carl Anderson .
  • “Mobility reported a 35% increase in adjusted EBITDA… nearing 20% margin… driven by disciplined effort and 11 consecutive quarters of margin expansion.” — CFO Carl Anderson .
  • “We have added nearly 1,600 net new body shops year to date… Nimbus connects all Axalta products and services into a cloud-based solution… roll out to 40,000 body shops in 2026.” — CEO Chris Villavarayan .
  • “Our total net leverage ratio remains at 2.5x… flexibility to accelerate capital deployment while maintaining a strong balance sheet.” — CFO Carl Anderson .

Q&A Highlights

  • Refinish outlook and destocking: Management sees stabilization beginning in Q3, with distributor destocking likely to sort through late 2025; North America claims down due to higher insurance/repair costs; structural positioning remains strong with share gains in mainstream/economy .
  • Mobility margin sustainability: Q2 benefited from discrete pricing actions across regions; underlying margins still >18% and >17% for FY even excluding one-time items; Brazil new wins support price-mix .
  • Guidance visibility: Q4 expected step-up as Mobility and Refinish inflect; FY guidance trimmed $10M at low end to reflect demand softness; commitment to deliver reiterated .
  • Production trends: Light vehicle stability outside North America; CV production down ~17% YoY in Q2; Axalta expects to outperform CV market with CTS solutions and geographic expansion .
  • M&A vs buybacks: Pipeline of bolt-on opportunities exists, but near-term focus likely on share repurchases given valuation; new A Plan expected in 6–9 months to outline 2027–2029 strategy .

Estimates Context

MetricQ1 2025 ActualQ1 2025 Consensus*Q2 2025 ActualQ2 2025 Consensus*# of Estimates*
Adjusted EPS ($)$0.59 $0.5461*$0.64 $0.6130*18 (Q1), 17 (Q2)*
Revenue ($M)$1,262 $1,289.5*$1,305 $1,319.6*15 (Q1), 14 (Q2)*
  • Q2 beat on adjusted EPS and missed on revenue; FY guidance cut implies likely downward revisions to revenue estimates, with margin resilience supporting EPS forecasts despite softer volumes .
  • Note: Asterisks indicate values retrieved from S&P Global.

Key Takeaways for Investors

  • Profitability intact: Cost discipline and mix continue to drive margin expansion despite near-term demand softness; Mobility’s structural improvements appear durable .
  • Revenue headwinds: FY net sales cut reflects slower macro/tariff improvement and Refinish destocking; monitor North America Refinish claims/insurance trends into 2026 .
  • EPS support: Lower interest expense, share repurchases, and variable cost controls provide cushion to deliver FY EPS guidance even with softer top line .
  • Execution on innovation: NextJet and upcoming Nimbus rollout could expand share of wallet and efficiency for customers, aiding growth in 2026+ .
  • Segment mix: Mobility margins approaching 20% provide offset to Performance Coatings volume pressure; watch CV cycle and light vehicle production path by region .
  • Capital allocation: With net leverage ~2.5x and buybacks ongoing, expect continued shareholder returns while preserving optionality for bolt-on M&A .
  • Trading setup: Near-term sentiment hinges on evidence of Refinish stabilization and delivery on Q3 margin guide; upside if destocking fades faster and Mobility strength persists .