Axalta ting Systems .(AXTA) - 2025 Q1 - Quarterly Results

First Quarter 2025 Financial Highlights Axalta reported a decline in net sales but significant improvements in net income and Adjusted EBITDA, with cash flow impacted by working capital changes Consolidated Financial Results Q1 2025 net sales declined 3% to $1.26 billion, while net income surged 154% to $99 million and Adjusted EBITDA grew 4% to $270 million Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $1.26 billion | $1.29 billion | -3% | | Net Income | $99 million | $39 million | +154% | | Adjusted EBITDA | $270 million | $259 million | +4% | | Adjusted EBITDA Margin | 21.4% | 20.0% | +140 bps | | Diluted EPS | $0.45 | $0.18 | +150% | | Adjusted Diluted EPS | $0.59 | $0.51 | +16% | - The decline in net sales was attributed to volume decreases, primarily in Performance Coatings, and a 3% negative impact from foreign currency translation. These factors were partially offset by contributions from the CoverFlexx acquisition and favorable price-mix[3] - The substantial increase in net income was largely due to the absence of $55 million in expenses related to the 2024 Transformation Initiative, which were recorded in the prior-year period[4] Cash Flow Operating cash flow decreased to $26 million due to working capital increases, resulting in a free cash flow use of $14 million Q1 2025 Cash Flow Summary (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $26 million | $34 million | | Free Cash Flow | ($14 million) | $15 million | - The year-over-year decrease in operating cash flow was primarily driven by increases in working capital, which partially offset higher earnings[5] Segment Performance Performance Coatings saw sales decline but stable EBITDA, while Mobility Coatings experienced sales decrease but strong EBITDA growth driven by cost control Performance Coatings Performance Coatings net sales decreased 3% to $822 million, but Adjusted EBITDA remained stable at $197 million with margin improvement to 24.1% Performance Coatings Q1 2025 Results (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $822 million | $847 million (approx) | -3% | | - Refinish Net Sales | $511 million | $521 million (approx) | -2% | | - Industrial Net Sales | $311 million | $331 million (approx) | -6% | | Adjusted EBITDA | $197 million | $196 million | +0.5% | | Adjusted EBITDA Margin | 24.1% | 23.1% | +100 bps | - Refinish net sales declined 2% YoY, which included a 3% currency headwind. The CoverFlexx acquisition contributed 270 basis points of growth[6] - Industrial net sales decreased 6% YoY as positive price-mix was more than offset by lower volumes and foreign currency headwinds[6] Mobility Coatings Mobility Coatings net sales decreased 1% to $440 million, while Adjusted EBITDA grew 16% to $73 million, expanding margin to 16.5% Mobility Coatings Q1 2025 Results (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $440 million | $444 million (approx) | -1% | | - Light Vehicle Net Sales | $340 million | $343 million (approx) | -1% | | - Commercial Vehicle Net Sales | $100 million | $103 million (approx) | -3% | | Adjusted EBITDA | $73 million | $63 million | +15.9% | | Adjusted EBITDA Margin | 16.5% | 14.2% | +230 bps | - The increase in segment Adjusted EBITDA and margin was driven by positive price-mix, lower variable costs, and lower operating costs[9] - Commercial Vehicle net sales decreased due to lower volumes from Class 8 builds in North America and Latin America[8] Management Commentary and Outlook Management highlighted strong Q1 performance and provided a cautious Q2 outlook, with full-year projections for sales, EBITDA, EPS, and free cash flow Management Commentary CEO Chris Villavarayan highlighted record Q1 Adjusted EBITDA and 16% Adjusted Diluted EPS growth, crediting 'One Axalta' culture and 'A Plan' strategy - CEO Chris Villavarayan stated: 'We achieved a record first quarter Adjusted EBITDA, expanded Adjusted Diluted EPS by 16% and continued accelerating our performance in challenging global economic conditions'[11] - The company's strategic focus is on its 'One Axalta' culture to drive sustained operating improvement and deliver on its 'A Plan' for long-term success[11] Second Quarter and Full Year 2025 Outlook Axalta forecasts a low single-digit net sales decline for Q2 2025, with full-year net sales projected at $5.3-$5.375 billion and Adjusted EBITDA at $1.15-$1.175 billion 2025 Financial Outlook | Item | Q2 2025 Projection | FY 2025 Projection | | :--- | :--- | :--- | | Net Sales (YoY % growth) | Low single digit decline | $5,300 - $5,375 million | | Adjusted EBITDA | $280 - $290 million | $1,150 - $1,175 million | | Adjusted Diluted EPS | $0.60 - $0.63 | $2.50 - $2.60 | | Free Cash Flow | N/A | $475 - $500 million | Financial Statements and Reconciliations Detailed financial statements show Q1 2025 sales decline but improved net income, with balance sheet stability and comprehensive non-GAAP reconciliations Condensed Consolidated Statements of Operations Q1 2025 net sales were $1,262 million, but net income significantly increased to $99 million from $39 million, resulting in $0.45 diluted EPS Q1 2025 Statement of Operations Highlights (in millions) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $1,262 | $1,294 | | Income from operations | $176 | $121 | | Net income | $99 | $39 | | Diluted net income per share | $0.45 | $0.18 | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $7,411 million, with total liabilities stable and shareholders' equity rising to $2,122 million Balance Sheet Highlights (in millions) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $2,821 | $2,723 | | Total assets | $7,411 | $7,249 | | Total current liabilities | $1,330 | $1,354 | | Total liabilities | $5,289 | $5,293 | | Total shareholders' equity | $2,122 | $1,956 | Condensed Consolidated Statements of Cash Flows Q1 2025 operating cash flow was $26 million, down from $34 million, while cash used for investing increased to $44 million, leading to a $26 million cash decrease Q1 Cash Flow Highlights (in millions) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash provided by operating activities | $26 | $34 | | Cash used for investing activities | ($44) | ($19) | | Cash used for financing activities | ($8) | ($82) | | Decrease in cash | ($26) | ($67) | | Cash at end of period | $578 | $627 | Reconciliation of Non-GAAP Measures The report reconciles Q1 2025 Net Income of $99 million to Adjusted EBITDA of $270 million and Adjusted Net Income of $129 million, with Free Cash Flow at a use of $14 million - Q1 2025 Adjusted EBITDA was $270 million, reconciled from a Net Income of $99 million. Key adjustments included depreciation & amortization ($70M), termination benefits ($11M), and stock-based compensation ($5M)[30] - Q1 2025 Adjusted Net Income was $129 million, reconciled from Net Income of $99 million. Major adjustments included amortization of acquired intangibles ($24M), termination benefits ($11M), and related income tax impacts ($10M)[35] - Q1 2025 Free Cash Flow was a use of $14 million, derived from $26 million in cash from operating activities, less $43 million for property, plant, and equipment purchases, plus $3 million in interest proceeds on swaps[40]