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    AXTA
    Earnings call· Jun 2026(Q2 FY26)

    Axalta Coating Systems Q2 FY26 earnings call AXTA

    Jul 28, 2026 Source

    Executive summary

    Axalta Q2 FY26 — Record Adjusted EBITDA and EPS, Lowest Net Leverage

    Axalta delivered a record-setting second quarter, driven by strong operational execution, cost discipline, and strategic wins across its portfolio, particularly in Refinish and Commercial Vehicle. The company achieved its highest adjusted EBITDA and EPS, alongside a historic low in net leverage, positioning it strongly for the proposed merger with AkzoNobel. While maintaining full-year guidance due to external uncertainties, management expressed confidence in its ability to convert on higher volumes if market conditions improve.

    Highlights

    5

    • Adjusted EBITDA increased 5% year-over-year to a record $305 million.

    • Adjusted diluted EPS improved 13% year-over-year to a record $0.72.

    • Net leverage ratio reached a historic low of 2.2x.

    • Cash from operations was $152 million, and free cash flow was $107 million, up 7% and 6% respectively year-over-year.

    • Refinish segment secured over 2,700 new body shops year-to-date, including 800 new North American locations in July.

    Concerns

    3

    • Net income decreased by $21 million year-over-year to $89 million, primarily due to $31 million in transaction-related costs for the AkzoNobel merger.

    • North America Industrial segment remains challenged with lower volumes, though management expects recovery.

    • Geopolitical tensions in the Middle East, tariffs, and the situation in Iran continue to create uncertainty for the full-year outlook.

    Guidance & targets

    17
    CategoryTargetConfidence
    Full-year 2026 Net Sales
    Maintained previously issued guidance
    high materiality
    Medium
    Full-year 2026 Adjusted EBITDA
    Maintained previously issued guidance
    high materiality
    Medium
    Full-year 2026 Adjusted Diluted EPS
    Maintained previously issued guidance
    high materiality
    Medium
    Full-year 2026 Free Cash Flow
    Maintained previously issued guidance
    high materiality
    Medium
    Q3 FY26 Net Sales
    increase by low single-digit percent
    medium materiality
    High
    Q3 FY26 Adjusted EBITDA
    $295 million to $305 million
    high materiality
    High
    Q3 FY26 Adjusted Diluted EPS
    approximately $0.70
    high materiality
    High
    Net Leverage Ratio
    below 2x
    high materiality
    High
    AkzoNobel Merger Closing Timeline
    late 2026 or early 2027
    high materiality
    High
    AkzoNobel Merger Annual Run Rate Cost Synergies
    approximately $600 million
    high materiality
    High
    Refinish Volumes
    flat
    medium materiality
    High
    Refinish Volumes
    up
    medium materiality
    High
    Refinish Volumes
    slightly up
    medium materiality
    High
    Raw Materials Cost Impact
    mid-single-digit headwind
    medium materiality
    High
    Mobility Price/Mix
    begin to inflect positive
    medium materiality
    High
    Light Vehicle Volumes
    up slightly
    medium materiality
    High
    Refinish Price/Mix
    positive
    medium materiality
    High

    Segment performance

    6
    SegmentRevenueYoYQoQMargin
    Performance Coatings
    Delivered solid Q2 results with growth driven by acquisitions, positive price/mix, and favorable foreign currency translation. Margin expanded by 130 basis points due to price/mix, cost discipline, and flat Refinish volumes.
    Adjusted EBITDA: $218 millionAdjusted EBITDA growth: 10%
    		—4%9%25.1% adjusted EBITDA margin
    Refinish
    Growth supported by volume growth in 3 out of 4 regions and positive price/mix as channel inventory normalizes in North America. Europe delivered record net sales. Exceeded normal run rate for new body shop wins.
    New net body shops secured H1 2026: >1,900New North American MSO locations secured July: ~800Total new body shops secured YTD July: ~2,700
    		$545 million6%——
    Industrial
    Volume growth in Europe and Asia (Energy Solutions) and positive price/mix offset lower volumes in North America. Achieved best margins in Axalta's history for this segment.
    Adjusted EBITDA margin expansion: 13 consecutive quartersVolume growth Europe: statedVolume growth Asia: statedNet sales growth Asia: 6 consecutive quarters
    		$327 million2%——
    Mobility Coatings
    Delivered record Q2 net sales. Margins improved sequentially due to solid conversion on incremental revenue. Prior year period included $7 million in non-repeating one-time benefits.
    Adjusted EBITDA: $87 millionAdjusted EBITDA margin sequential increase: 90 bps
    		$474 million1%—18.4% adjusted EBITDA margin
    Light Vehicle
    Favorable foreign currency and organic growth in Latin America partially offset lower volumes in other regions, particularly China and North America.
    		—declined slightly——
    Commercial Vehicle
    Supported by volume growth in all 4 regions and favorable foreign currency translation. Benefiting from ramp-up in North America Class 8 production.
    Volume growth: all 4 regionsCommercial Transportation Solutions (CTS) business growth: 5% YoYCTS as % of overall CV business: ~50%
    		—7%——

    Operational metrics

    18
    Adjusted EBITDA
    $305 millionup 5% YoY
    Q2 FY26

    Record adjusted EBITDA and highest second quarter margin in many years.

    Adjusted Diluted EPS
    $0.72up 13% YoY
    Q2 FY26

    Record adjusted diluted EPS, exceeding expectations.

    Adjusted Net Income
    $153 millionup 10% YoY
    Q2 FY26

    Excludes merger and acquisition-related costs. Driven by Performance Coatings earnings and lower interest expense.

    Net Sales Growth
    3%YoY
    Q2 FY26

    Driven by acquisitions, positive price mix, and foreign currency tailwinds, partially offset by lower volumes in Mobility and Industrial.

    Operating Expenses
    lower8th consecutive quarter
    Q2 FY26

    Reflects disciplined cost and productivity initiatives.

    Variable Input Costs
    declined nearly 2%YoY
    Q2 FY26

    Contributed to record adjusted EBITDA and margin.

    Gross Debt Reduction
    $80 million
    Q2 FY26

    Contributed to deleveraging efforts and lower interest expense.

    Interest Expense
    16% lowerYoY
    H1 FY26

    Reflecting benefits of deleveraging efforts.

    Cash Conversion Cycle
    improved about 10%YoY
    Q2 FY26

    Driven by quicker inventory turns.

    Refinish Adjacencies Growth
    $15 million
    Q2 FY26

    Represents growth in economy business, with potential for further expansion through AkzoNobel merger.

    Refinish Premium Space Penetration
    north of 40%
    current

    Axalta is a leader in the premium refinish market, serving 13 of the top 20 MSOs.

    Raw Materials Cost Headwind
    low single digitsYoY
    Q2 FY26

    On a gross basis, before productivity offsets.

    Raw Materials Cost Headwind
    ticks up a little bit more to get to the low end of high single digits
    Q3 FY26

    Expected to be offset by productivity gains.

    Solvents Price Increase
    15-20%
    current

    Driven by oil prices.

    Monomers Price Increase
    high single digits
    current
    China OEM Market Size
    $32 millionflat YoY
    FY26

    Overall global OEM market expected to be $90 million. Local market stable due to new models/technology, but export market is strong.

    China Export Market Growth
    70%YoY
    Q2 FY26

    Driving strong performance from the China team.

    North America Class 8 Production
    300,000 trucks per yearreturning to normal cyclical lows
    H2 FY26

    Picking up and driving improved performance in Commercial Vehicle.

    Industry KPIs

    3
    MetricValueDetails
    Volume vs price split—
    Helium supply demand pricing—
    Productivity cost savings program—

    Deals & partnerships

    2
    AkzoNobelProposed merger of equals to create a stronger global coatings company.

    Shareholders to vote at a Special General Meeting on August 5. Planning work has strengthened confidence in synergy numbers. Axalta enters combination from strongest financial position in its history.

    multipleAcquisition of distributors to expand Refinish business.

    Acquisitions primarily outside North America, especially in Europe and Australia, contributing to Refinish performance.

    Risks & headwinds

    4
    Uncertainty from geopolitical tensions in the Middle East, tariffs, and the situation in Iran.Full-year 2026

    Maintained full-year guidance despite strong Q2, indicating caution.

    Mitigation: Operating effectively and prepared to convert on higher volumes if conditions improve.

    Choppy macro environment and lower volumes in North America Industrial segment.Ongoing, Q2 FY26

    Volumes down, but offset by pricing and cost management to achieve margin expansion.

    Mitigation: Cost structure significantly more efficient; positioned to capitalize on volumes when demand recovers.

    Mid-single-digit decline in North America collision claims and low single-digit decline in Europe.Ongoing, Q2 FY26 and H2 FY26 forecast

    Mid-single-digit decline (North America), low single-digit decline (Europe).

    Mitigation: Offset by new body shop wins, pricing actions, and acquisitions.

    Consumers not putting in insurance claims due to affordability, and increasing total losses due to high repair costs (parts and labor).Ongoing

    Discussed, not quantified as specific impact.

    Mitigation: Focus on optimizing Bodyshop productivity and efficiency for customers.

    What to watch in Q3 FY26

    5

    Refinish Volume Growth

    Q4 FY26
    CurrentFlat in Q3 FY26
    TargetSlightly up in H2 FY26, picking up in Q4 FY26

    Why it matters

    Indicates successful conversion of new body shop wins and sustained market recovery, crucial for the segment's growth trajectory.

    I expect volumes to be pretty much flat for Q3 and then up as I think about Q4. Overall, I would say in the back half, we expect volumes to be slightly up.

    Q&A highlights

    7

    How will easing destocking and new body shop wins impact Refinish volumes in H2, especially the 800 new North American locations?

    Management expects Refinish volumes to be flat in Q3 and slightly up in H2, driven by new body shop wins (2,700 year-to-date, including 800 MSO locations) and easing destocking. Pricing and M&A in Europe/Asia also contribute.

    “So 3 of those elements, you can see in Q2. But really, to your point, as we look forward into Q3 and Q4, the new body shop wins, it's in total, we're at about 2,700 body shops through July. So that's -- on average, we do about 2,500 per year. So we're well ahead there.”

    asked by Matthew DeYoe (Bank of America) · answered by Chrishan Anthon Villavarayan

    2 min read6 chapters

    Detailed Narrative

    01

    Record Performance and Balance Sheet Strength

    Axalta achieved record adjusted EBITDA of $305 million and adjusted diluted EPS of $0.72, exceeding expectations. The company also reached its lowest net leverage ratio in history at 2.2x, demonstrating strong financial health and disciplined capital management. This robust performance provides a strong foundation for the upcoming merger with AkzoNobel.

    02

    Refinish Segment Momentum

    The Refinish business saw net sales increase 6% year-over-year, driven by easing destocking and favorable price mix. The segment secured over 2,700 new net body shops year-to-date, significantly exceeding its normal annual run rate, including 800 new North American locations from leading MSOs in July. This strong customer acquisition is expected to drive volume growth in the second half of the year.

    03

    Industrial Segment Profitability

    Despite a choppy macro environment in North America, the Industrial segment delivered its 13th consecutive quarter of adjusted EBITDA margin expansion, achieving its best margins in Axalta's history. While North American volumes remain challenged, strong volume growth in Europe (driven by E-Coat) and Asia (driven by Energy Solutions) offset some weakness, positioning the business to capitalize on future demand recovery with a more efficient cost structure.

    04

    Mobility Coatings Growth

    Mobility Coatings achieved record net sales of $474 million, with Commercial Vehicle sales increasing 7% year-over-year due to Class 8 production ramp-up in North America and strong performance in Commercial Transportation Solutions (CTS). The CTS business, now representing about 50% of the overall CV business, grew 5% year-over-year, diversifying the segment's revenue streams beyond traditional Class 8.

    05

    Cost Discipline and Cash Generation

    Axalta reported its eighth consecutive quarter of lower operating expenses on a constant currency basis, with variable input costs declining by nearly 2% this quarter. This cost discipline, combined with improved working capital management, led to strong cash generation, with cash from operations up 7% and free cash flow up 6% year-over-year. The company reduced gross debt by $80 million in the quarter and $135 million year-to-date.

    06

    AkzoNobel Merger Progress

    The proposed merger with AkzoNobel is progressing, with a Special General Meeting for shareholder vote scheduled for August 5. Regulatory clearances are ongoing, and the transaction remains on track for closing in late 2026 or early 2027. Management reiterated expectations for approximately $600 million in annual run-rate cost synergies, with 90% captured within the first three years post-close.

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