Axalta Coating Systems Ltd. (NYSE:AXTA) (“Axalta”), a leading global coatings company, announced its financial results for the first quarter ended March 31, 2024.

First Quarter 2024 Highlights:

• Net sales increased 0.8% year-over-year to $1.3 billion
• Announced 2024 Transformation Initiative with an estimated annual $75 million run-rate savings expected in 2026
• Net income declined $22 million year-over-year to $39 million primarily due to $55 million of restructuring charges
• Adjusted EBITDA increased $46 million year-over-year to $259 million with Adjusted EBITDA margin improving 340 basis points year-over-year to 20.0%
• Diluted EPS declined by $0.09 year-over-year, or 33% to $0.18 and Adjusted Diluted EPS increased $0.13 year-over-year, or 37%, to $0.48
• Total net leverage ratio of 2.8x and paid down $75 million of principal on term loan
• Board approved $700 million share repurchase authorization in April 2024
• Increased full year 2024 earnings and free cash flow outlook

First Quarter 2024 Consolidated Financial Results

First quarter 2024 net sales increased 0.8% year-over-year to $1.3 billion. Growth within the company’s end-markets was driven by a 4% improvement in both Refinish and Light Vehicle, offset partially by lower net sales in Industrial and Commercial Vehicle.

Net income decreased by $22 million year-over-year to $39 million, mainly as a result of $55 million of pre-tax charges incurred in the first quarter of 2024 as part of the previously announced 2024 Transformation Initiative. Adjusted net income improved by $27 million year-over-year to $106 million with contributions from both segments driven by variable cost deflation that more than offset higher fixed operating expense. Adjusted EBITDA of $259 million was a first quarter record, compared to $213 million in the prior year period. Adjusted EBITDA margin increased by 340 basis points to 20.0%. Diluted earnings per share decreased to $0.18 compared to $0.27 in the prior year period, driven primarily by higher restructuring expense. Adjusted diluted earnings per share improved by 37% to $0.48 following the increase in earnings excluding impacts of restructuring charges, which more than offset modest headwinds from a higher effective tax rate and interest expense.

First quarter 2024 cash provided by operating activities was $34 million versus cash used for operating activities of $52 million in the prior year period with free cash flow totaling $15 million compared to free cash flow cash use of $88 million in the same period last year. The year-over-year increases in cash provided by operating activities and free cash flow were driven primarily by improvements in working capital. Cash and cash equivalents at quarter end were $624 million and total liquidity was over $1.1 billion. Our net debt to trailing twelve month (“LTM”) Adjusted EBITDA ratio (total net leverage ratio) was 2.8x at quarter-end versus 3.7x as of March 31, 2023. The company paid down an additional $75 million of term loan principal in the quarter. In April 2024, the company’s Board of Directors approved a $700 million share repurchase program, which replaces the prior share repurchase program.  

Discussion of Segment Results

Performance Coatings first quarter 2024 net sales were $848 million, flat relative to the prior year period. Refinish net sales grew 4% year-over-year driven by positive price-mix and a strong contribution from the André Koch acquisition that closed in the fourth quarter 2023. Industrial net sales decreased year-over-year due to softer market activity and the prioritization of higher margin business.

Performance Coatings generated a first quarter record Adjusted EBITDA of $196 million in the current period compared to $169 million in the prior year period, with associated margins of 23.1% and 20.0%, respectively. The increases in segment Adjusted EBITDA and Adjusted EBITDA margin were driven by variable cost deflation and Refinish net sales growth.

Mobility Coatings first quarter 2024 net sales were $446 million, up 2% from the prior year period. Light Vehicle net sales improved by 4% year-over-year, driven by strong volume growth in China. Price and product mix was roughly flat in Light Vehicle despite modest headwinds from raw material indexed contracts. Commercial Vehicle net sales decreased by 4% year-over-year driven by lower Class 8 production, which was down 12% across North America and Latin America year-over-year.

The Mobility Coatings segment generated Adjusted EBITDA of $63 million in the first quarter compared to $44 million in the prior year period, with associated margins of 14.2% and 10.1%, respectively. The increases in segment Adjusted EBITDA and Adjusted EBITDA margin were driven by raw material deflation and solid sales growth in Light Vehicle.

“This was another strong quarter for Axalta,” said Chris Villavarayan, Axalta’s CEO and President. “We are executing well and I am confident in our trajectory this year as we target record earnings for the second consecutive year. We also remain focused on driving strategic actions intended to accelerate long-term value creation and unlock earnings power. As a result, we are raising our full year 2024 Adjusted EBITDA, Adjusted EPS, and Free Cash Flow guidance.”

Second Quarter And Full Year 2024 Outlook

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Axalta does not provide a reconciliation for non-GAAP estimates for Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow or tax rate, as adjusted, on a forward-looking basis because the information necessary to calculate a meaningful or accurate estimation of reconciling items is not available without unreasonable effort. See “Non-GAAP Financial Measures” for more information.