Axalta Releases Third Quarter 2024 Results

PHILADELPHIA, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Axalta Coating Systems Ltd. (NYSE:AXTA) ("Axalta”), a leading global coatings company, announced its financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Highlights:

• Record third quarter net sales of $1.32 billion
• Net income increased 40% year over year to $102 million; net income margin of 7.7%
• Record third quarter Adjusted EBITDA of $291 million
• Adjusted EBITDA margin improved 220 basis points year over year to 22.1%
• Diluted EPS increased 39% year over year to $0.46 and Adjusted Diluted EPS increased 31% year over year to $0.59
• Repurchased $50 million of common shares

Third quarter 2024 net sales increased 0.8% year over year to a third quarter company record of $1.32 billion as contribution from the CoverFlexx acquisition and volume growth were partially offset by contractual raw material index impacts and mix headwinds.

Net income increased by 40% year over year to $102 million with net income margins of 7.7%. Adjusted net income improved by $31 million year over year to $129 million driven by lower variable costs and a reduction in operating expenses. Adjusted EBITDA increased by 12% to $291 million compared to $261 million in the prior year period. Adjusted EBITDA margin expanded by 220 basis points to 22.1%. Diluted earnings per share increased by 39% to $0.46 compared to $0.33 in the prior year period. Adjusted diluted earnings per share improved by 31% to $0.59.

Third quarter 2024 cash provided by operating activities was $194 million versus $210 million in the same period last year. This decrease was predominately driven by higher working capital. Cash and cash equivalents at quarter end were $567 million and total liquidity was over $1.2 billion. Axalta's net debt to trailing twelve month ("LTM”) Adjusted EBITDA ratio (total net leverage ratio or net leverage ratio) was 2.7x at quarter end versus 3.2x as of September 30, 2023. In the third quarter, Axalta repurchased over 1.4 million common shares for total consideration of $50 million.

Discussion of Segment Results

Performance Coatings third quarter 2024 net sales were $877 million, up 2% compared to the prior year period. Refinish net sales grew 5% year over year to $554 million as contribution from the CoverFlexx acquisition and net new body shop wins were partially offset by mix headwinds and lower body shop activity. Industrial net sales decreased by 1% year over year to $323 million as positive pricing was more than offset by lower volumes.

Performance Coatings generated third quarter Adjusted EBITDA of $221 million compared to $200 million in the prior year period, with Adjusted EBITDA margins of 25.3% and 23.3%, respectively. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin were driven by lower variable costs and a reduction in operating expenses.

Mobility Coatings third quarter 2024 net sales were $443 million, a decrease of 2% from the prior year period. Light Vehicle net sales were flat year over year as 5% volume growth was offset by contractual raw material pass-through impacts and a modest foreign exchange translation headwind. Commercial Vehicle net sales decreased by 8% year over year to $103 million led by lower volumes due to an expected decline in Class 8 builds in North America and Latin America. As expected, Mobility Coatings price-mix declined by 3% year over year driven by mix and contractual raw material pass-through impacts.

The Mobility Coatings segment generated Adjusted EBITDA of $70 million in the third quarter compared to $61 million in the prior year period, with margins of 15.7% and 13.4%, respectively. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin were driven by lower variable costs, new business wins and lower operating costs.

"Our results in the third quarter were exceptional,” said Chris Villavarayan, CEO and President of Axalta. "I am extremely proud of the commitment and dedication from each of our employees to deliver a record third quarter for the company in net sales and Adjusted EBITDA, despite macroeconomic headwinds in all four end markets. As One Axalta, we are successfully executing on our 2026 A Plan and outperforming against key industry benchmarks as we remain dedicated to unlocking our full earnings potential.”

Full Year 2024 Outlook

Axalta does not provide a reconciliation for non-GAAP estimates for Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow or tax rate, as adjusted, on a forward-looking basis because the information necessary to calculate a meaningful or accurate estimation of reconciling items is not available without unreasonable effort. See "Non-GAAP Financial Measures” for more information.

Conference Call Information

Axalta will hold a conference call to discuss its third quarter 2024 financial results on Wednesday, October 30, 2024, at 8:00 a.m. ET. A live webcast of the conference call will be available online at www.axalta.com/investorcall. A replay of the webcast will be posted shortly after the call and will remain accessible through October 30, 2025. The dial-in phone number for the conference call is 1-800-267-6316 and the conference ID is AXALTA. For those unable to participate, a replay will be available through November 6, 2024. The replay dial-in number is +1-844-512-2921. The replay passcode is 11157263.

Cautionary Statement Concerning Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 regarding Axalta and its subsidiaries including, but not limited to, statements regarding our previously announced three-year 2024-2026 strategy (the "2026 A Plan”), and our outlook and/or guidance, which includes net sales, Adjusted EBITDA, Adjusted Diluted EPS, Free Cash Flow, depreciation and amortization ("D&A”), step-up D&A, tax rate, as adjusted, diluted shares outstanding, interest expense, and capital expenditures. Axalta has identified some of these forward-looking statements with words such as "outlook,” "potential,” and "plan,” and the negative of these words or other comparable or similar terminology. All of these statements are based on management's expectations as well as estimates and assumptions prepared by management that, although they believe to be reasonable, are inherently uncertain. These statements involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of Axalta's control, as well as risks related to the execution of, and assumptions underlying, our previously-announced transformation initiative and the 2026 A Plan, that may cause its business, industry, strategy, financing activities or actual results to differ materially. More information on potential factors that could affect Axalta's financial results is available in "Forward-Looking Statements,” "Risk Factors” and "Management's Discussion and Analysis of Financial Condition and Results of Operations” within Axalta's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, and in other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission. Axalta undertakes no obligation to update or revise any of the forward-looking statements contained herein, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

This release includes financial information that is not presented in accordance with generally accepted accounting principles in the United States ("GAAP”), including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted EPS, adjusted net income, Free Cash Flow, total net leverage ratio, tax rate, as adjusted, and Adjusted EBIT. Management uses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted EPS, adjusted net income, tax rate, as adjusted, and Adjusted EBIT in the analysis of our financial and operating performance because they assist in the evaluation of underlying trends in our business. Management uses Free Cash Flow and total net leverage ratio in the analysis of (1) our liquidity, (2) our ability to incur and service our debt and (3) strategic capital allocation decisions. Adjusted EBITDA, Adjusted Diluted EPS, adjusted net income and Adjusted EBIT consist of EBITDA, Diluted EPS, net income attributable to common shareholders and EBIT, respectively, adjusted for (i) certain non-cash items included within net income, (ii) certain items Axalta does not believe are indicative of ongoing operating performance or (iii) certain nonrecurring, unusual or infrequent items that have not otherwise occurred within the last two years or we believe are not reasonably likely to recur within the next two years. Free cash flow consists of cash provided by (used for) operating activities less purchase of property, plant and equipment plus interest proceeds on swaps designated as net investment hedges. Total net leverage ratio consists of net debt divided by Adjusted EBITDA, with net debt defined as total debt less cash and cash equivalents. We believe that making the foregoing adjustments provides investors meaningful information to understand our operating results and ability to analyze financial and business trends on a period-to-period basis. The non-GAAP financial measures used by Axalta may differ from similarly titled measures reported by other companies. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Diluted EPS, adjusted net income, Free Cash Flow, total net leverage ratio, tax rate, as adjusted and Adjusted EBIT should not be considered as alternatives to net sales, net income (loss), income (loss) from operations or any other financial measures derived in accordance with GAAP. These non-GAAP financial measures have important limitations as analytical tools and should be considered in conjunction with, and not as substitutes for, our results as reported under GAAP. This release includes a reconciliation of certain non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP. Axalta does not provide a reconciliation for Adjusted EBITDA, Adjusted Diluted EPS, tax rate, as adjusted, or Free Cash Flow on a forward-looking basis because the information necessary to calculate a meaningful or accurate estimation of reconciling items is not available without unreasonable effort. For example, such reconciling items include the impact of foreign currency exchange gains or losses, gains or losses that are unusual or nonrecurring in nature, as well as discrete taxable events. These items are uncertain, depend on various factors and may have a substantial and unpredictable impact on our GAAP results.

Segment Financial Measures

The primary measure of segment operating performance is Adjusted EBITDA, which is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts and prior year financial results and that management believes reflects Axalta's core operating performance. As we do not measure segment operating performance based on net income, a reconciliation of this non-GAAP financial measure with the most directly comparable financial measure calculated in accordance with GAAP is not available. Beginning with the fourth quarter of 2023, we replaced Adjusted EBIT with Adjusted EBITDA as the primary measure of segment operating performance. As previously disclosed, we will continue publishing segment Adjusted EBIT through 2024 to allow for historical trend analyses.

About Axalta Coating Systems

Axalta is a global leader in the coatings industry, providing customers with innovative, colorful, beautiful and sustainable coatings solutions. From light vehicles, commercial vehicles and refinish applications to electric motors, building facades and other industrial applications, our coatings are designed to prevent corrosion, increase productivity and enhance durability. With more than 150 years of experience in the coatings industry, the global team at Axalta continues to find ways to serve our more than 100,000 customers in over 140 countries better every day with the finest coatings, application systems and technology. For more information visit axalta.com and follow us @axalta on X.