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    AXTA
    Earnings call· Mar 2026(Q1 FY26)

    Axalta Coating Systems Q1 FY26 earnings call AXTA

    Apr 30, 2026 Source

    Executive summary

    Axalta Coating Systems Q1 FY26 — Strong Profitability and Cash Generation

    Axalta delivered a strong first quarter, exceeding profitability and cash flow expectations, driven by disciplined execution and cost management. The company is navigating macro uncertainties and raw material inflation through proactive pricing and productivity initiatives, while making significant progress on its proposed merger with AkzoNobel. Management anticipates a stronger second half, fueled by abating destocking, recovering commercial vehicle volumes, and market improvements.

    Highlights

    5

    • Adjusted diluted EPS of $0.56 exceeded expectations by 12%.

    • Cash from operations reached a record $68 million, an increase of $42 million year-over-year.

    • Free cash flow hit a record $21 million, improving by $35 million versus the prior year.

    • Industrial business achieved its 12th consecutive quarter of year-over-year profitability improvement.

    • Mobility Coatings delivered record Q1 net sales of $452 million with an adjusted EBITDA margin of 17.5%.

    Concerns

    5

    • Net sales decreased 1% year-over-year to $1.254 billion, primarily due to lower volumes in Performance Coatings.

    • Performance Coatings net sales declined 2% to $802 million, driven by lower volumes and unfavorable price/mix.

    • Refinish net sales declined 3% to $498 million, reflecting lower claims activity and shifting customer order patterns.

    • Industrial net sales declined 2% year-over-year to $304 million, with volume pressure in North America and Latin America.

    • Raw material inflation is expected to be low single digits in Q2, increasing to potentially high single digits by year-end.

    Guidance & targets

    14
    CategoryTargetConfidence
    Q2 FY26 Net Sales
    roughly flat
    medium materiality
    High
    Q2 FY26 Adjusted EBITDA
    $280 million to $290 million
    high materiality
    High
    Q2 FY26 Adjusted Diluted EPS
    approximately $0.65
    high materiality
    High
    Full Year FY26 Revenue
    Maintaining previous guidance expectations
    high materiality
    Medium
    Full Year FY26 Adjusted EBITDA
    Maintaining previous guidance expectations, tracking closer to the lower end
    high materiality
    Medium
    Full Year FY26 Adjusted Diluted EPS
    Maintaining previous guidance expectations, tracking closer to the lower end
    high materiality
    Medium
    Full Year FY26 Free Cash Flow
    Maintaining previous guidance expectations
    high materiality
    High
    Full Year FY26 Adjusted EBITDA Margin
    approximately 22%
    high materiality
    High
    Full Year FY26 Interest Expense
    approximately $150 million
    medium materiality
    High
    Year-end Net Leverage Ratio
    below 2x
    high materiality
    High
    Global Auto Production
    approximately 91 million builds
    medium materiality
    High
    North America Class 8 Builds
    approximately 274,000 units
    medium materiality
    High
    Refinish Pricing
    mid-single-digit pricing
    medium materiality
    High
    Raw Material Inflation
    low single digits (Q2), high single digits (back half)
    high materiality
    Medium

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Performance Coatings
    Revenue decrease driven by lower volumes, primarily in North America, and unfavorable price/mix. Partially mitigated by favorable foreign currency translation and contributions from acquisitions.
    Adjusted EBITDA Margin: 22.4%
    		$802 million-2%—$180 million (Adjusted EBITDA)
    Refinish
    Sales declined due to lower claims activity and shifting customer order patterns. Stabilized at nearly $500 million in sales, consistent with the last 5 quarters. Net body shop wins increased 10% year-over-year.
    		$498 million-3%——
    Industrial
    Volume pressure in North America and Latin America, partially offset by price mix and foreign exchange. Europe and China delivered volume growth in the first quarter. Achieved 12th consecutive quarter of year-over-year profitability improvement.
    		$304 million-2%——
    Mobility Coatings
    Delivered record first quarter net sales. Adjusted EBITDA increased from $73 million a year ago, reflecting benefits from lower variable costs, favorable foreign currency, and reduced operating expenses.
    Adjusted EBITDA Margin: 17.5%
    		$452 million+3%—$79 million (Adjusted EBITDA)
    Light Vehicle
    Sales increased driven by favorable foreign currency and organic growth in 3 of 4 regions, including continued momentum from new business wins in Brazil. Sales in China declined in line with lower auto production.
    		—+$9 million——
    Commercial Vehicle
    Sales supported by favorable foreign currency impacts, new business wins, positive price mix, and record commercial transportation solution sales, offsetting lower Class A truck production.
    		—+3%——

    Operational metrics

    21
    Adjusted EBITDA
    $259 million
    Q1 FY26

    Company-wide adjusted EBITDA for the quarter.

    Adjusted Diluted EPS
    $0.5612% above expectations
    Q1 FY26

    Company-wide adjusted diluted EPS for the quarter.

    Gross Margin
    33%down slightly from last year
    Q1 FY26

    Driven primarily by unfavorable mix from lower volumes in North America.

    SG&A
    declined 7%YoY
    Q1 FY26

    Reflects aggressive cost structure management.

    Adjusted EBITDA Margin
    exceeded 20%
    last 9 quarters

    Underscores the durability of the operating model even amid top-line pressure.

    Direct Spend Under Contract
    approximately 60%
    current

    Shifted from spot buys, improving visibility and reducing volatility.

    Direct Buy Locally Sourced
    approximately 90%
    current

    Helps with supply chain resilience.

    Variable Costs as % of COGS
    about 60%
    current

    Component of cost of goods sold.

    Inventory Levels
    roughly 115 days
    current

    Helps limit the impact of inflation.

    Net Debt
    $54 million repaid
    Q1 FY26

    Gross debt repaid during the quarter.

    Net Leverage Ratio
    2.3x
    Q1 FY26

    Current net leverage ratio.

    Refinish Net Body Shop Wins
    increased 10%YoY
    Q1 FY26

    A key growth driver for the Refinish business.

    Refinish Market Share (Economy/Mainstream)
    north of 11%up from 9%
    current

    Growth in this segment driven by recent acquisition.

    Refinish Iris Mix Installations
    nearing 1,000
    current

    Progress on a key technology rollout for the Refinish business.

    Industrial Net Sales Growth
    5 consecutive quarters
    current

    Driven by Energy Solutions business.

    Industrial Price/Mix
    positive for 7 straight quarters
    current

    Consistent positive trend in Industrial segment.

    Mobility Price/Mix
    6 consecutive quarters
    current

    Reinforcing ability to offset inflation.

    Commercial Vehicle Market Decline
    down 26%QoQ
    Q1 FY26

    Overall market decline, Axalta's sales were down only 6%.

    Commercial Transportation Solutions Market Size
    $3.5 billion
    current

    Total market size for specialty, off-highway, military, and RVs.

    Commercial Transportation Solutions Market Share
    about 7%
    current

    Indicates significant growth opportunity.

    AkzoNobel Merger Synergies
    $600 million
    annual run rate

    Identified substantial synergy opportunity from the merger.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price splitpositive for 6 consecutive quartersquarters
    Productivity cost savings program12 consecutive quartersquarters

    Product announcements

    3
    ProductTypeDetails
    Echo NextJetlaunch
    Alesta e-Pro FG Blacklaunch
    St. Master AIlaunch

    Deals & partnerships

    2
    AkzoNobelProposed merger of equals

    The transaction continues to progress well, with integration planning underway and dedicated clean teams established to identify and accelerate synergies. Regulatory filings are underway in the U.S. and EU, and shareholder votes are expected by early July.

    Dura and ZARCollaboration on Echo NextJet technology

    Partnership to enable OE manufacturers to provide next-generation personalized exterior finishes at production scale.

    Risks & headwinds

    7
    Macro uncertainty and elevated volatilityongoing, particularly in the back half of the year

    Increased uncertainty across cost and supply availability

    Mitigation: Disciplined execution, focus on controllable levers, proactive pricing, and productivity projects. 90% local sourcing and 115 days inventory on hand.

    Geopolitical developments (Middle East tensions)back half of the year

    Increased uncertainty across global markets, impacting energy prices, inflation, and consumer sentiment. Potential to create additional pressure on demand and cost.

    Mitigation: Closely monitoring developments, proactive pricing actions, and surcharges where appropriate. Strong procurement practices with 60% of direct spend under contract.

    Lower volumes in Performance CoatingsQ1 FY26

    Net sales decreased 2% year-over-year to $802 million for the segment.

    Mitigation: Partially mitigated by favorable foreign currency translation and contributions from acquisitions.

    Lower claims activity and shifting customer order patterns in RefinishQ1 FY26

    Net sales declined 3% to $498 million for the segment.

    Mitigation: Expects mid-single-digit pricing in 2026. Anticipates second half volumes to improve as destocking abates and claims activity improves.

    Volume pressure in North America and Latin America IndustrialQ1 FY26

    Industrial net sales declined 2% year-over-year to $304 million.

    Mitigation: Partially offset by price mix and foreign exchange. Seeing signs of recovery in Europe and Asia. Business positioned for eventual market recovery in North America.

    Raw material inflationQ2 FY26 and H2 FY26

    Low single digits in Q2, potentially high single digits in the back half of the year.

    Mitigation: Plan to move quickly to offset impact with pricing. 50% of Mobility revenue tied to raw material indices. Productivity projects and focused procurement practices.

    Global auto production declineFull Year FY26

    Revised outlook to approximately 91 million builds, down from 92 million units.

    Mitigation: Focus on new business wins and strong performance in Commercial Vehicle (CTS) to offset Light Vehicle headwinds.

    What to watch in Q2 FY26

    5

    Refinish Volume Recovery

    Q2 FY26 and H2 FY26
    CurrentStabilization, Q1 sales declined 3%
    TargetSequential improvement in volumes, positive price/mix inflection

    Why it matters

    Refinish is a key segment, and its recovery from destocking and increased claims activity is crucial for overall revenue and margin growth.

    I would say the market is pretty stable, and we're heading towards a recovery. And if you look at Carl's last slide, if you look at all the indicators, they're all positioning the right way, miles driven up. Insurance costs are starting to abate📎, and we can start seeing that flat line. And also the used car pricing is trending the right way.

    Q&A highlights

    6

    How have raw material spikes affected destocking in auto refinish, what's the timeline for volume recovery, and how does this intersect with broader economic slowdown concerns?

    Management sees stabilization and an increase in Q2 volumes for Refinish, with positive indicators like rising miles driven, moderating insurance costs, and rising used car prices. Destocking is abating, leading to positive price/mix inflection. They expect price actions and recent M&A to further benefit the second half.

    “I would say the market is pretty stable, and we're heading towards a recovery. And if you look at Carl's last slide, if you look at all the indicators, they're all positioning the right way, miles driven up. Insurance costs are starting to abate, and we can start seeing that flat line. And also the used car pricing is trending the right way.”

    asked by Ghansham Panjabi · answered by Chrishan Anthon Villavarayan

    2 min read5 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Exceeding Expectations

    Axalta delivered robust first-quarter results, surpassing expectations across key financial metrics. Net sales reached $1.25 billion, adjusted EBITDA was $259 million, and adjusted diluted EPS hit $0.56, outperforming forecasts by 12%. The company also achieved record cash generation, with cash from operations at $68 million and free cash flow at $21 million, marking significant year-over-year improvements of $42 million and $35 million, respectively.

    02

    Strategic Pricing and Cost Discipline

    The company continues to demonstrate strong pricing discipline and cost management, crucial in a volatile macro environment. Axalta has achieved 12 consecutive quarters of year-over-year improvement in variable costs, with approximately 60% of direct spend now under contract. In Refinish, mid-single-digit pricing is planned for 2026, while over 50% of Mobility revenue is tied to raw material indices, providing a natural hedge against cost volatility. SG&A also declined 7% year-over-year on a constant currency basis.

    03

    Segmental Highlights and Market Dynamics

    Axalta's businesses showed solid execution, with Industrial achieving its 12th consecutive quarter of profitability improvement and Mobility recording its highest-ever first-quarter net sales. Refinish sales stabilized near $500 million, consistent with the past five quarters, and saw a 10% increase in net body shop wins. While North America faces headwinds, Europe and Asia are showing signs of recovery, particularly in Industrial, and Commercial Vehicle is expected to rebound in the second half of the year.

    04

    Innovation and Technology Leadership

    Innovation remains a key differentiator for Axalta, evidenced by multiple industry awards in the quarter. The company received 6 Business Intelligence Group Innovation Awards and 3 Edison Awards. Notable innovations include Echo NextJet, a collaboration enabling personalized exterior finishes, and Alesta e-Pro FG Black, a powder coating for EV battery systems, both recognized with Gold Edison Awards. St. Master AI, an AI-driven solution for color variability in paint manufacturing, received a Bronze Edison Award.

    05

    AkzoNobel Merger Progress and Synergies

    Progress on the proposed merger of equals with AkzoNobel is well on track, with both teams working seamlessly on integration planning. The company remains confident in achieving $600 million in annual run-rate synergies, viewing this as a floor. Regulatory filings are underway in the U.S. and EU, and shareholder votes for both companies are anticipated by early July, aiming for a seamless transition and significant long-term value creation.

    AI-generated summary of the company’s earnings call. Not investment advice.