Core Viewpoint - Axalta Coating Systems Ltd. reported record earnings for 2025, showcasing business resilience and successful execution of its 2026 A Plan despite a challenging macroeconomic environment [2][3]. Fourth Quarter 2025 Highlights - Fourth quarter net sales decreased by 4% year over year to $1,262 million, primarily due to lower volumes, partially offset by favorable foreign currency translation and positive price-mix in Mobility Coatings [5]. - Net income for the fourth quarter was $60 million, with a net income margin of 4.8%, down from $137 million in the prior year, mainly due to higher income tax expenses and increased merger and acquisition-related costs [6]. - Adjusted net income was $128 million, with Adjusted EBITDA of $272 million and an Adjusted EBITDA margin of 21.5%, reflecting a 50 basis point increase year over year [7]. - Record cash provided by operating activities reached $344 million, an increase of $110 million compared to the same period last year, and free cash flow also set a record at $290 million, up $113 million year over year [8]. Fiscal Year 2025 Highlights - For the full year, net sales totaled $5,117 million, a decrease of 3% compared to the previous year, with volume declines primarily in North America [15]. - Net income for the year was $379 million, a decrease of $12 million from 2024, maintaining a net income margin of 7.4% [16]. - Adjusted EBITDA reached a record $1,128 million, with an Adjusted EBITDA margin of 22.0%, driven by operational excellence and strong cost management [17]. - Diluted EPS for the year was $1.74, while Adjusted Diluted EPS improved by 6% to a record $2.49 [17]. Capital Allocation - Axalta ended 2025 with a net debt to trailing twelve-month Adjusted EBITDA ratio of 2.3x, the lowest in company history, and prioritized gross debt reduction by paying down $204 million against its term loan [18]. - Cash and cash equivalents at year-end were $657 million, with total liquidity exceeding $1.4 billion [18]. - The company returned $165 million to shareholders through share repurchases and paid down $230 million in gross debt [19]. Merger Announcement - In November 2025, Axalta announced a merger of equals with AkzoNobel, aimed at creating a premier global coatings company, enhancing global scale and profitability, and realizing substantial long-term value creation [20][21]. Financial Guidance - For Q1 2026, Axalta projects net sales growth in the mid-single digits and Adjusted EBITDA between $240 million and $250 million, with an Adjusted Diluted EPS of approximately $0.50 [22].

Financial Performance - The company reported operating net income of $27.6 million, up 6% linked quarter and up 32% year over year [5][6] - Earnings per share remained flat at $0.60 compared to the previous quarter but increased by 22% year over year [5] - Operating expenses were approximately $68 million, down 4% linked quarter and down 6% year over year, indicating effective expense optimization [6][18] - The operating ROTCE was 9.66%, down 27 basis points linked quarter but up 93 basis points year over year [6] Business Lines and Key Metrics - Net interest income increased by 3% linked quarter and 2% year over year, with a net interest margin of 3.24%, up 10 basis points linked quarter [12][16] - Average loans rose by $118 million or 1% linked quarter and $348 million or 4% year over year [13] - Average deposits increased by $188 million or 2% linked quarter but remained flat year over year [14] Market Data and Key Metrics - The loan to deposit ratio was at 5%, down 1% linked quarter, indicating solid liquidity [9] - Total delinquencies and nonperforming loans were at 42 basis points of loans, the lowest level in about twenty years [8][19] Company Strategy and Industry Competition - The company is focused on deposit relationships across business lines and has launched a digital deposit initiative that generated approximately $75 million in new deposits [10][53] - The merger with Brookline Bancorp is expected to enhance profitability and create a preeminent Northeast franchise, with an estimated 23% accretion to Berkshire's 2026 consensus estimates [11][27] Management Comments on Operating Environment and Future Outlook - Management noted a mixed demand environment with some clients increasing inventories while others adopt a wait-and-watch approach [36] - The company remains prepared to adapt to economic uncertainties and is optimistic about the merger's potential benefits [27][28] Other Important Information - The company sold the remaining $7 million of upstart loans, significantly derisking its balance sheet [21] - The tangible book value per share was $25.50, with a CET1 ratio of 13.3% and a TCE ratio of 9.9% [24] Q&A Session Summary Question: Update on loan demand and growth outlook - Management indicated a slowing demand in the pipeline, with a current annualized loan growth of about 5% expected to continue [36][37] Question: Expense base growth expectations - Management expressed confidence in maintaining stable expense momentum moving forward [39] Question: Clarification on spot NIM - The spot NIM in March was confirmed to be 3.31% [48][49] Question: Employee retention strategies ahead of merger - Key producers have been identified, and retention grants are being discussed to ensure stability during the transition [51] Question: Plans for aligning product offerings ahead of merger - The company is enhancing digital functionalities but does not plan to launch new products immediately [54][55] Question: TCE ratio and CRE concentration levels - The CRE concentration ratio remains below 300%, with a current level of approximately 290% [57]