Financial Data and Key Metrics Changes - Axalta reported net sales of just over $1.3 billion, in line with guidance, with adjusted EBITDA reaching $292 million and margins exceeding 22%, marking the fifth consecutive quarter of adjusted EBITDA margins at or above the 21% target [7][17][28] - Adjusted diluted earnings per share increased by 5% to $0.64, driven by lower interest expenses and reduced shares outstanding due to share repurchases [19][28] - Cash flow from operations increased by 25% year over year, resulting in free cash flow of $101 million [8][19] Business Line Data and Key Metrics Changes - Performance Coatings net sales declined by 6% year over year to $836 million, primarily due to lower volumes and unfavorable price mix in North America [20] - Refinish net sales decreased by 6% to $514 million, with organic sales down in high single digits due to industry softness and distributor inventory corrections [20][21] - Mobility Coatings reported net sales of $469 million, a 1% increase from the prior year, with organic sales contributing approximately 2% growth [23] Market Data and Key Metrics Changes - The Refinish market in North America faced challenges, with collision claims reported through Q1 significantly lower, despite collision frequency remaining stable [9][10] - Inflationary pressures are beginning to moderate, particularly in repair expenses and insurance premiums, which may lead to an improved repair environment [12] - The company continues to gain market share, adding 1,600 net new body shops year to date, building on over 2,800 wins in 2024 [11][32] Company Strategy and Development Direction - Axalta remains focused on its A Plan strategy, emphasizing operational excellence and cost management, which has driven approximately $40 million in cost savings [14][29] - The company is committed to achieving zero incidents in safety, improving its safety record by 55% year over year [14] - Axalta plans to expand its digital platform, Nimbus, to 40,000 body shops by 2026, enhancing customer engagement and operational efficiency [32] Management's Comments on Operating Environment and Future Outlook - Management anticipates that the softer demand environment will persist longer than previously expected, with net sales projected to decline in the low single digits for Q3 [26][28] - The company expects adjusted EBITDA margins to remain around 22% or above for the full year, reflecting disciplined execution and pricing resilience [28] - Management remains optimistic about the long-term growth trajectory, particularly in the Refinish and Mobility segments, despite current market challenges [30][34] Other Important Information - Axalta executed $65 million in share repurchases during the quarter and plans to maintain this pace throughout the year [8][25] - The company has streamlined operations by closing three manufacturing plants in the last year, positioning itself for growth when industry volumes rebound [14][34] Q&A Session Summary Question: Assessment of the Refinish market challenges - Management noted that while accidents are down 1% to 2%, claims are lower due to rising insurance costs and repair expenses, but they expect stabilization in the market by 2026 [39][41][44] Question: Update on cost improvement and margin story - Management expressed optimism about ongoing cost improvements and operational excellence, indicating that there is still significant potential for margin growth [46][49][52] Question: Organic net sales performance relative to industry - Axalta's organic sales were down about 3%, with Mobility performing well, while Refinish faced challenges primarily in North America [56][59] Question: Impact of auto sales pull forward on production - Management indicated that while North America faced some customer shutdowns, growth continued in China and Latin America, with expectations for consistent volumes moving forward [64][66] Question: Incremental revenue from new body shop wins - Management highlighted that they have added 1,600 new body shops year to date, with a strong focus on mainstream and economy segments, which aligns with their growth strategy [70][72] Question: Concerns about Refinish top-line performance - Management reassured that the current performance is temporary, with ongoing wins in Refinish and expectations for market improvement [75][76] Question: Future growth opportunities and portfolio adjustments - Management plans to provide a new A Plan by early next year, outlining growth opportunities and potential portfolio adjustments [84][85]