Axalta Coating Systems Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the Exalta Coding Systems Q1 2025 earnings call. All participants will be in a listen-only mode. A question and answer session will follow the presentation by management. Today's call is being recorded and a replay will be available through May 14th. Those listening after today's call should please note that information provided in the recording will not be updated and therefore may no longer be current. I will now turn the call over to Colleen Lubick, Vice President of Investor Relations.

Good morning, everyone, and thank you for joining us on the call today to discuss our fiscal 2025 first quarter results. This is Colleen Lubick, Vice President of Investor Relations. Joining me today are Chris Villarion, CEO and President, and Carl Anderson, Chief Financial Officer. We posted our first quarter financial results in our earnings release this morning. As a reminder, you can find additional materials, including today's presentation and associated schedules on the investor relations section of our website at exalta.com, which we will be referring to during this call. Our prepared remarks, the slide presentation, and our discussion today may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Exalta's operating and financial performance. These statements involve uncertainties and risks, and actual results may differ materially from those forward-looking statements. Please note that the company is under no obligation to provide updates to these forward-looking statements. Our remarks and this slide presentation also contain various non-GAAP financial measures. We've included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. Refer to our filings with the SEC for more information. We kindly ask that you limit yourself to one question at a time to give others the opportunity to have their questions addressed. I would like to turn the call over to Chris.

Thank you, Colleen. We're pleased to report another strong quarter of financial results for a first quarter record for adjusted EBITDA and adjusted diluted EPS. I want to thank Exalta's employees for rallying together to deliver our A-Plan priorities and maintaining our strong execution and resilient performance. Net sales remained flat to the first quarter of last year on a constant currency basis, with contributions from CoverFlex and a positive price mix mitigating volume declines. Adjusted EBITDA was $270 million, representing a 4% increase year-over-year. Adjusted EBITDA margin grew by 140 basis points year over year, marking the 10th consecutive quarter of adjusted EBITDA margin growth. Driving A-Plan initiatives, improving our operations, and reinvesting in the business remain a top priority for us. Despite wage inflation, operating expenses decreased by 4% from last year due to savings from our transformation initiative introduced in 2024. Capital expenditures have nearly doubled compared to Q1 of 2024, driven by incremental investments designed to enhance productivity in our operations. Our balance sheet remains robust, with total net leverage remaining steady for the year-end at 2.5 times. Adjusted diluted EPS grew by 16% year-over-year to 59 cents. This marks the seventh consecutive quarter of adjusted diluted EPS growth. Innovation is fundamental to enhancing the customer experience. In the first quarter, we are proud to be the recipients of two Edison Awards and a big Innovation Award. This is the seventh consecutive year that Exalta has earned an Edison Award, which honors industry-leading innovations in new products and services. This year, Exalta's Iriscan and Exalta's MyColor were recognized. Iriscan is the first handheld color measurement device for the collision repair industry. It has the ability to capture color sparkle, hue-shifting pigments, and gloss to provide an accurate color match for vehicle repairs. Exalta's MyColor offers an innovative color creation delivery process. This technology streamlines automotive OEM approvals, enabling custom colors to be available in as little as four weeks instead of more than a year. We were presented with a big innovation award by the Business Intelligence Group for our Voltatex product. Voltatex is a wire enamel that improves the reliability and efficiency of electric vehicles and other high-performance electrical systems. These awards underscore our strengths of our product pipeline and our ability to convert investments in R&D and technology into solutions that appeal for our customers and differentiate Exalta's offerings. Let's move to slide four. Three of our four end markets showed macro declines in the quarter. Exalta, however, was able to generate positive organic net sales in both mobility and markets and achieve an organic net sales performance in refinish above industry 10s compared to the same period last year. In refinish, organic net sales decreased by 1% while the industry was down mid-single digits based on industry metrics that we tracked. The external demand pressures experienced in 2024 continue to affect collision claims and body shop repair activity in the first quarter. These factors are driven by insurance premium inflation, increasing repair costs, and waning consumer confidence. Irrespective of industry dynamics, we were able to add approximately 900 net new body shops, grow in adjacencies, and expand further in the economy segment. Organic net sales in light vehicle increased by 2%. Volume for light vehicle aligned with global auto production, which rose by 1%. We also achieved double-digit volume growth year-over-year in both China and Latin America, surpassing auto production growth in both those geographies. Commercial vehicle organic net sales grew by 2%, while Class VIII heavy-duty production in North America dropped by 17%. We mitigated industry pressure from the heavy-duty truck sector by executing on our commercial transportation solution priorities across various applications, including recreational and public safety vehicles. Additionally, we expanded our presence outside the Americas. As a result, together with strong performance in light vehicle and price-cost stability, the mobility segment's margin expanded by 230 basis points to 16.5%, the highest margin since first quarter of 2021. Industrial organic net sales decreased by 4% year-over-year in line with broader trends. Across our end businesses, we continue to see mixed signals. Industrial production in the United States increased slightly year over year in the first quarter, but contracted in March, while most European economies experienced declines. North American housing declined for the fourth consecutive quarter, causing a slow start to the season for our North American building products business. Despite these challenges, the team's focus on portfolio mix and productivity improvements resulted in an adjusted EBITDA margin increase for the eighth consecutive quarter. Let's move to slide five. With the increased trade tensions that emerged during the quarter, we wanted to provide some color on Exalta's global landscape. As shown in the presentation, our business is geographically diverse with 38% of our net sales in North America and 16% in Asia Pacific. Most importantly, approximately 90% of our products are manufactured and sold within the same region, significantly reducing our exposure to international tariffs. Additionally, only about 10% of our total purchases are currently impacted by the new tariffs. The team has already done a fantastic job of maximizing USMCA-compliant products in North America, minimizing tariffs across the regions. Based on our current business model, we estimate tariffs imposed in 2025 could now cost approximately $50 million annually, with about $25 million expected to impact in 2025. Carl will take you through how this impacts the guide later in the discussion. Through various means, including insourcing, sourcing raw materials locally, reformulating products, managing strategic inventory, and pricing, we believe we have avenues for structural improvements if tariffs were to become permanent. I will now turn the call over to Carl to go through our financial results and updated 2025 guidance.