Ladies and gentlemen, thank you for standing by. Welcome to Axalta's Third Quarter 2023 Earnings Conference 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 the replay will be available through November 8. Those listening after today's call should please note that the information provided in the recording will not be updated, and therefore may no longer be current. I will now turn the call over to Chris Evans. Please go ahead.

Thank you, and good morning. This is Chris Evans, VP of Investor Relations. We appreciate your continued interest in Axalta, and welcome you to our third quarter 2023 financial results conference call. Joining me today are Chris Villavarayan, CEO and President; and Carl Anderson, CFO. We released our quarterly financial results this morning and posted a slide presentation to the Investor Relations section of our website at axalta.com, which we will be referencing 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 Axalta's operating and financial performance. These statements involve uncertainties and risks and actual results may differ materially from these forward-looking statements. Please note that the company is under no obligation to provide updates to these forward-looking statements. Our remarks and the slide presentation also contain various non-GAAP financial measures. In the appendix of the slide presentation, we've included reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures. For additional information regarding forward-looking statements and non-GAAP financial measures, please refer to our filings with the SEC. I will now turn the call over to Chris.

Thank you, Chris. Good morning everyone and welcome to our third quarter 2023 earnings call. I'm pleased to report on a great third quarter. I want to thank the entire global team for their tremendous efforts in delivering an exceptional result. I'm proud that Axalta is back on track with the momentum we began earlier this year, both commercially and operationally we have made many notable accomplishments this quarter that I will highlight for you. I'm particularly pleased that the North American ERP implementation issues we experienced last quarter are now resolved and production volumes at our refinish facility in Virginia are ahead of pre-implementation rates. Q3 net sales increased by 6% year-over-year to $1.3 billion, a new company record. The top line improvement was led by a solid quarter from Mobility Coatings, which delivered double-digit organic net sales growth. Price mix increased by 6% year-over-year with strong contributions from every end market. This was a great outcome for the team. We will maintain our pricing discipline going forward as we face pressure from higher labor costs and strive to recover margins to pre-pandemic levels. Adjusted EBIT of $188 million and adjusted EBITDA of $261 million increased by 27% and 24% respectively year-over-year and both were near record levels. Mobility Coatings drove the majority of the improvement in earnings and the segment is now at a quarterly run rate consistent with 2019 levels. The team has done a great job prioritizing margin recovery, while also building an attractive book of business wins in high-growth areas. Company adjusted EBIT margins improved by 240 basis points year-over-year to 14.3%. This improvement largely stems from raw material deflation, cost discipline and continued pricing efforts. Sustained margin improvement remains a key priority for us going forward and will remain an important target heading into 2024. Free cash flow increased by $131 million year-over-year to $182 million. This positive trend is a direct result of our ongoing focus to reduce working capital. We believe that we are well positioned to deliver approximately $400 million of free cash flow for the full year 2023. Given this degree of earnings and cash flow growth, our balance sheet has now strengthened considerably. Axalta's net leverage ratio continues to improve and is significantly lower than Q3 of last year. Given our strong commercial and operational performance, we have increased our full year financial guidance. This updated forecast puts us on pace to deliver record adjusted EBITDA in 2023. The pieces are coming together at Axalta. But before giving you more color on the quarter, I want to briefly discuss leadership updates on Axalta's Board of Directors. Steve Chapman who has been a Director since 2020 has chosen not to seek re-election. We extend our gratitude to Steve for his significant contributions to Axalta. His wealth of experience, specifically his global operational insight has played a pivotal role navigating our journey through the pandemic and post-pandemic dynamics over the last several years. Also, we're delighted to welcome Mary Zappone to our Board, effective October 25. Mary will serve on the audit and the Environment Health Safety and Sustainability Committee. Mary is currently the CEO of Sundyne, a leader in design and manufacturing of mission-critical pumps and compressors for the chemical, industrial and energy markets, a position she has held since 2021. Mary brings a wealth of experience to our team with more than two decades in senior leadership positions, including CEO of BRACE Industrial Group and Service Champ. She has a proven record in industries directly relevant to Axalta. I'm confident that she will make a meaningful contribution to our Board. Let's now go to Slide 5 with the highlights of several notable accomplishments this quarter. In October, we acquired André Koch, a long-term Refinish distribution partner. This acquisition is immediately accretive and aligns nicely with our strategy to diversify and expand our Refinish offerings. It also increases our presence in Switzerland, which is an attractive region for us. We're excited to welcome the André Koch team to Axalta. Next, we were recently named the exclusive supplier for BMW Group's private Inc. label in 15 European countries plus South Africa. This agreement includes BMW's network of 730 franchise dealership repair shops and adds to the existing supplier agreements with BMW Group in other regions. We're thrilled with this expanded relationship. It speaks to the strength of our deep customer relationships and the Refinish team's dedication to the highest standards of quality, efficiency and sustainability. Innovation is critical to the health of our business long-term. This is why I'm excited about our new partnership with Xaar to introduce Axalta's NextJet, an advanced paint application tool that allows for precise paint placement. This emerging technology enables in-line customization of color schemes, including two-toning and striping. NextJet is being tested with customers today and we plan to bring it to limited commercial use in 2024. This is an excellent example of how we are working with our customers to understand their requirements and developing technology to meet those needs. Lastly, I want to highlight the official opening of our new Mobility coatings manufacturing facility in Cheland, China. This site produces waterborne and solventborne coatings for the automotive OEM space adding local capacity enabling Axalta to meet the growing demands for the China market, where we have continued to expand our position and see sustained long-term growth. Let's move to slide 6. My main focus since joining Axalta has been to drive improved efficiency and performance across the portfolio. Our financial performance is beginning to reflect the operational initiatives underway that are driving these improvements across the enterprise, including managing price. We have instituted a more rigorous pricing approach, which is helping margins return to target levels across all end markets. Pockets of opportunity are being pursued as well and we will remain disciplined given the inflationary pressures in labor and select raw materials. Next, we have been focused on cost optimization. We have initially prioritized this opportunity in procurement given the costs we have incurred in the past two years and the favorable buying environment. In the last nine months, we have bid out more than two-thirds of our total $2.5 billion of spend and have driven substantial savings. This is a direct result of the consulting initiative we put in place earlier this year. We have invested in our manufacturing capabilities. As I said earlier, our North American operations have made great strides following our ERP implementation. Production volumes at our Virginia plant are ahead of pre-implementation rates, and we're making good progress at reducing the backlog. And finally, we have improved inventory levels to drive better free cash flow. We have reduced inventory by approximately $80 million year-to-date. This is yet another consulting initiative that we have seen a great return on investment. I'm pleased with our progress, but this will be an ongoing effort with more actions underway. I look forward to sharing our strategic plan for the company at our Capital Markets Day early next year. I could not be more excited for what the future has in store for Axalta and all our stakeholders. I will now turn the call over to Carl for a review of our financial performance.

Thank you, Chris, and good morning, everyone. I am thrilled to have joined Axalta at this opportune moment, as we set out to transform the company and unlock our full potential. There is incredible talent at Axalta, and I look forward to working with the entire team to drive value for our stakeholders. Let's turn to slide 7. In the third quarter, net sales increased 6% year-over-year to $1.3 billion with positive sales contributions from both segments and strong price/mix improvement in every end market. Volumes were 3% lower as growth in Mobility Coatings was offset by declines in Performance Coatings. Adjusted EBIT improved to $188 million from $148 million in the prior year period, a 27% increase. Adjusted EBIT margin improved by 240 basis points to 14.3%, led by a significant step-up in price cost recovery. All end markets are now price/cost positive on a cumulative basis from 2021. Raw material deflation was a benefit for the second consecutive quarter as a consequence of a few factors. First, as Chris mentioned, our teams have done a great job negotiating with suppliers. They have driven significant savings and improved contract terms to help solidify these benefits. Second, softening demand in adjacent markets alongside improved global arbitrage has moved supply-demand balances in favor of Axalta across many of our input categories. On a regional basis, we have seen considerable relief across much of Asia Pacific and expect these markets to be balanced going forward. Trends in EMEA and North America are expected to remain favorable into the fourth quarter. In addition, pricing discipline remains critical as labor inflation persists globally and was again a significant headwind this quarter, offsetting a portion of the raw relief. In the quarter, we also continued to incur costs associated with our productivity investments and ERP implementation, which totaled $15 million in the period. We expect these costs to start trending down in the fourth quarter and will be mostly behind us as we cross into 2024. Adjusted diluted earnings per share increased 15% year-over-year to $0.45, despite an approximate $0.08 headwind from the net change in interest expense and tax rate. Free cash flow in the quarter totaled $182 million compared to $51 million in the third quarter 2022, an increase of 257%. Targeted working capital improvements were the primary driver of this result. Moving to slide 8. Performance Coatings third quarter net sales were $856 million, a 2% improvement year-over-year. Refinish organic net sales improved by low-single-digits year-over-year. This was driven by strong price/mix growth as well as from Irus Mix enrichment given the near-term deprioritization of low-margin product categories such as thinners this quarter. Volumes in our core premium and mainstream customer segments were above expectations, led by strength in EMEA. However, declines in the economy customer segment and non-core areas led to lower reported volumes year-over-year in Refinish. We continue to see a favorable backdrop for our industry-leading products and services. This is exemplified by the BMW win mentioned earlier as well as ongoing market share opportunities in mainstream economy segments and adjacent markets. We remain on pace for record Refinish earnings again in 2023. Industrial organic net sales were down year-over-year as better price/mix was more than offset by softer volumes as challenges persisted in construction-related sectors. We see signs of stabilization but certain areas like our Building Products business are still facing customer destocking headwinds. In the meantime, the teams are doing a great job managing costs and increasing profitability, despite volume decline. Performance Coatings third quarter adjusted EBIT was $135 million versus $122 million in the same period last year. Both end markets contributed to improved segment earnings as better price/cost dynamics more than offset lower volumes and higher labor and cost allocations associated with enterprise productivity project. Let's move to Mobility Coatings results on Slide 9. As Chris told you, this was a solid quarter for Mobility. Third quarter net sales increased by 13% year-over-year to $453 million, driven by a balance of better volumes and price mix. Light vehicle organic net sales increased by 12%. Volumes were very strong in the quarter, led by above-market mid-teens percentage growth in China. In North America, organic sales were up 12%, as we had a very limited impact in the quarter from the UAW strike. Price/mix improved by 7% year-over-year inclusive of a modest mix benefit. The performance was supported by resilient auto builds and continued execution of a multiyear customer strategy to align with the fastest-growing OEM. Our growth in China was noteworthy and should be further enabled by investments we are making in the region. We are closely monitoring the UAW strike in North America and our fourth quarter guidance reflects a modest impact, but it is important to recognize the diversity of our regional and global sales mix which in 2023 has increasingly been driven by growth in other regions. Commercial Vehicle organic net sales increased by 10% versus the prior year period. The year-over-year improvement was driven by strong price/mix in North America and a mid-single-digit improvement in volume. Mobility Coatings adjusted EBIT improved to $40 million from $4 million a year ago driven by higher selling prices and lower variable input costs. This is a significant improvement and represents a run rate consistent with pre-pandemic 2019 levels. Adjusted EBIT margin also increased by 790 basis points to 8.8%. Turning to Slide 10. We ended the quarter with $1.1 billion in total liquidity including a cash balance of $606 million. Note that the acquisition of André Koch mentioned earlier by Chris occurred after the third quarter close, and as a result, the closing date cash outlay of approximately $108 million will be reflected in our fourth quarter cash balances. Our total net leverage ratio is now 3.2 times, reflecting an improvement from 3.6 times last quarter and almost a full turn from a year ago. Additionally, we still expect to finish the year at a three times leverage ratio inclusive of the impact from the acquisition. Continuing to strengthen our balance sheet is among our highest priorities. We are targeting a net leverage ratio of two to 2.5 times and a gross leverage ratio of 2.5 to three times from a combination of natural deleveraging and continued cash generation. This quarter we also repurchased $50 million worth of Axalta shares. We see strong value in our equity today and we'll remain opportunistic as we prioritize capital deployment to drive shareholder value return. This prioritization includes the need for incremental CapEx to support operational objectives. Going forward, we will accelerate internal investments with a modest step-up from a recent annual CapEx ranges as ERP-related spending begins to wind down. We are focused on improving return on invested capital across all areas of investment. I will now turn the call back over to Chris for an update on our fourth quarter and 2023 financial guidance.

Thanks, Carl. In Q4, we expect net sales to be up year-over-year with an improvement in both segments. We project volume growth to be muted in Q4, due to the growth in Mobility Coatings with a slight decline in Performance Coatings. We expect global Mobility sales to remain strong with the exception of the forecasted impact from the UAW strike. Refinish sales are expected to remain stable, with a slight sequential decline in fourth quarter driven by typical seasonal cyclicality. On the cost side, we anticipate that raw material deflation and significant cost initiatives will drive a high single-digit benefit in the fourth quarter, partially offset by higher labor expense. Margins are expected to be greatly improved year-over-year. However, we expect a typical seasonal mix headwind quarter-over-quarter, which is likely to drive a modest margin headwind from Q3 to Q4. Fourth quarter adjusted EBIT is now expected to be approximately $180 million or about $250 million in adjusted EBITDA. Full year adjusted EBIT and adjusted EBITDA are projected to be approximately $670 million and $950 million respectively. We're pleased with the trajectory of our earnings into year-end. At these levels, our full year guidance implies 17% year-over-year growth and a potential record adjusted EBITDA. As we look ahead to 2024, we see opportunity for yet another year of solid growth and margin expansion. We expect a supportive environment in our resilient Refinish end market and we expect to outpace robust demand in light vehicle, which together should offset potentially lower volumes in industrial and heavy truck market. We also see the potential for a weighted benefit in the first half of the year from lower raw material costs, slightly offset by select RMI linked contracts. We are committed to transforming Axalta. The actions that we're implementing are already showing results and this is just the beginning of a strategy that we are confident will bring the positive change we want for the company. This concludes our prepared remarks. Operator, please open the lines for Q&A.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from John McNulty with BMO Capital Markets. Please go ahead.

Thank you for taking my question. My first inquiry is about pricing. You've shown strong pricing performance, which seems to have improved in some areas. Can you discuss the pricing environment going forward and how we should consider it, excluding aspects tied to the index? That seems to be a straightforward pass-through with a slight delay. Regarding the rest of the business, how should we view the pricing dynamics as we move into the fourth quarter and the first half of 2024?

Yes. Thanks, John. I think if you look at the last year, certainly, the team has done an exceptional job at pricing across all three segments. And as I think about Q4, as well as preparing for 2024, again, in our Mobility business, 40% of it to your point is on RMI. But that said, if you look at Axalta as a whole, index RMI indexing represents about 10%. So, as you think about the rest of the basket, we certainly have the opportunity to price. And as I see where labor is going, as well as let's call it some select raw materials, as well as freight, there will be the need to continue pricing. So I do believe that we will continue low single-digit pricing going into 2024 as our base.

Got it. And then just as a follow-up, your gross margins snapped back nicely. I mean, you're back to some really strong levels in 3Q. I guess when you think about the cost dynamic and raws at least looking like they're going to continue to come a little bit lower pricing, it sounds like you may still have some price opportunity ahead. I guess, can you speak to how you're thinking about the gross margin trajectory? And can you get to the 2018-2019 levels where it was 34% or so or better. Can you get there without volumes? Can you get there with the help of some of the cost cuts that you're doing and the productivity initiatives, or do you need the volume really to get you there?

Well, I think it's a question of time. We've certainly seen significant improvement this quarter. And I do believe that there are more structural enhancements that are already underway and that there are more to come. And we certainly are benefiting from the reversal of, let's call it some cyclical factors of nine quarters of hyperinflation that's obviously shifted to some deflation. But as I said in my prepared remarks, if you look at it we are seeing deflation but we certainly also did some structural initiatives. We put $2.5 billion of our purchasing spend under bidding. And so we have seen, I would say single-digit benefits in material performance. And I do believe that will continue into 2024. So I would say let's call it where we're performing in the last two quarters as the base. And I do see that there's more opportunity and I'll probably turn it over to Carl to put some more comments on this one.

Yeah, John, just to add to Chris' commentary. As I look at our plans next year, especially on capital expenditures. We think there's opportunity to drive more productivity in our network and in our plants as well that will actually help accelerate our increased margin profiles as we move forward.

Got it. Thanks very much for the color. Great job guys.

Thank you.

Thanks John.

Thanks and good morning. Your acquisition in Switzerland, I believe it's not the first one for European distribution for the company. Could you discuss how does owning distribution there fit in your strategy? Why is it necessary in Europe and not perhaps in North America or other regions?

Great question, Andre. We're excited to announce André Koch. His story is exceptional for us in many ways. In Switzerland, it adds significant value with a strong margin profile for the business. The business is projected to generate refinish margins of $50 million. Over the last two quarters, we've focused on investing in our strong Refinish business. Last quarter we discussed the Irus Mix, and this quarter's distribution strategy helps us get closer to our customers. We believe we can connect with over 500 customers more effectively in Europe due to the distribution dynamics. That’s one key reason for our decision. Additionally, André Koch has a system that connects insurance providers, body shops, and Axalta as a coatings provider. We see potential to expand this network across Europe, which will contribute positively to our margin profile over time.

And just to clarify, was this distributor unique to Axalta paints, or were there other suppliers who might be affected after the deal?

Yes. There are other suppliers that are also in the profile. They've distributed Axalta for two decades, but they do also cover other paints that provides us an opportunity to obviously grow here.

Hi. Good morning, everyone. This is actually Matt Krueger sitting in for Ghansham. Thanks for taking our questions. Just to kick things off we've talked a lot about some of the investments that have been made and some of the groundwork you've laid in 2023 to allow the company to add additional earnings power in future years. Can you detail some of those projects specifically maybe talk about some of the cash outlays that you've made and then also the specific returns that you expect on these types of investments into 2024 and then on a multiyear basis would be great.

Sure. Absolutely, Matt. So I'm going to kick it off with the investments and the three projects that we kicked off and I'll let Carl walk you through the spend and how we see that going forward into 2024. So the three projects we kicked off first one was on the ERP implementation, which obviously from my prepared remarks is certainly progressing well and we're certainly seeing efficiency gains that have helped us reduce the backlog in Refinish which is one of the primary drivers to our performance as I look at. The second one was on the purchasing initiative. And here again we put out a significant portion of our material spend to bid. And here we're seeing single-digit improvement on top of what I would call is mid-single-digit improvement in deflation, which puts us at high single-digit performance in our material performance for the year which is one of the primary drivers for how I see Q3 and Q4 coming out. And obviously we should see that tailwind feeding into 2024. And on top of that the last initiative that we kicked off was focused on inventory. As I look coming in one of the things that we wanted to work on was reducing the inventory buildup that we had seen over the last two quarters coming out of the pandemic. And here we had an initiative focused on taking down close to $100 million of inventory. And to date we have seen $90 million of improvement here. So certainly a significant driver that's helping us with our free cash flow targets. Now I'll turn it over to Carl to give you specifics on the numbers.

Yes, Matt just to add to it. So if you look at through nine months of this year. In total, we had spent about $34 million as far as related consulting as well as S/4 implementation costs. And as we look forward in the fourth quarter we see that stepping down pretty much kind of by half as you kind of compare it to the third quarter. And as we get into 2024 most of that will be completely behind us going forward. So, as Chris said, it was very strategic. It really allowed the company to add more horsepower and velocity as it relates to a lot of these activities. So, we are setting ourselves up for 2024 as we go forward.

Got it. That's helpful. And just to follow up on profitability. Obviously the improvement in Mobility was very impressive. Should we expect to see double-digit EBIT margins for that business into 4Q or something close to it what level of profitability should we expect on a run rate into 2024? Can we hold the levels that we're at currently? Or is there something unique that that's going on that we would expect to refer?

No. No, I think Matt you characterized it well the team has done a really, really strong job this year as far as on pricing as well as on overall kind of cost discipline for that business. Obviously, the fourth quarter will be a little bit impacted just based off here in North America with the UAW strike, which appears to be moving in a direction to kind of be behind. But again, there will definitely be a smaller impact as we think about what happened in the month of October for us. But as we go forward that is that Mobility margin profile we do expect to continue to be able to grow that especially as we get into 2024.

Okay, great. That’s it for me. Thanks.

Thank you.

Thank you.

Hi, good morning. Just given the magnitude of the guidance raise can you maybe quantify or rank order the biggest changes in expectations from the previous release whether it be backlog normalization price cost or other factors? And is there any additional conservatively baked into the 4Q outlook?

So, certainly an exceptional quarter. I would say whether it's all regions and all the three segments we're hitting on all cylinders, but maybe to break it down for you. First the improvement in our ERP efficiency really enabled Refinish to reduce the sales backlog. And then obviously, the material performance whether it's the tailwind from the material deflation as well as the structural initiatives that we had from our consulting initiative on material. And when you put those together as well as the OE production, which was well ahead of third quarter projections. And this was globally and we had an extremely strong quarter in China. And as I look at Q4 that sentiment and that strength exists in Mobility. And to the earlier questions, we have seen a 300 basis points jump in Mobility year-over-year over 200 basis point jump quarter-over-quarter. So, great performance there. All that said, you put let's call it the pricing initiatives we have been driving as well as the cost initiatives. As to Carl's remarks, we've had just all four end markets be price/cost positive for the first time in nine quarters since 2021.

Got it. And then just on the BMW crude partnership it looks very promising, but can you help us understand the timing of getting penetration into those body shops and then maybe the volume and earnings potential from that partnership?

Yes, it will definitely take place sometime in 2024. We need to convert these shops as we progress each quarter next year. We will focus on converting more of those shops. This reflects positively on the team. Looking at this year, we are on track to gain 2,000 net body shops. Over the past three years, the team has excelled in acquiring 10,000 body shops. Therefore, starting with 730 is a strong beginning for our setup in 2024.

Great. Thank you.

You're welcome.

Good morning. This is Lucas Bowman on for Josh. So I just wanted to get back to Refinish if we could. So could you please comment on the base volume growth there for us by region and just highlight as well what was the impact of a low margin exit in the quarter and kind of how much of that is like left to go now as we sort of roll into 2024?

So if I look at it quarter-over-quarter, let's call it, you know, what we're seeing is, I would call it, a 5% decline in volumes. And a lot of this obviously related to what we went through with our Refinish market. But if I look from this quarter into next quarter, we're essentially flat. And going into next year, I would say from a volume basis, we expect that to remain flat. Just explaining the dynamic quarter-over-quarter, Q2 to Q3, again, primarily driven from our S/4 implementation. We made a large step up, but still there's more opportunity, obviously, with us burning more of the backlog as I think about Q4 and prepping us for next year. But Q3 to Q4, we expect volumes to be overall flat and heading into next year to be flat. If you were to break that region by region, I would say Europe and North America somewhat stable and then South America, sorry, China continuing to be soft on the Refinish side.

Great. Thanks. And then I just sort of wanted to talk about kind of the one-time bridge items going into next year. So just in terms of where we stand now with like what you know. So you highlighted the sort of $35 million in the consultant spending that's not going to sort of occur. But then, we have the other factors like the low margin product exits, change in the availability contract pricing. Just anything else sort of that you'd like to highlight for us that's known at this time if you could kind of walk us through that please?

Yeah. I think just to add what Chris said earlier in some of his comments, if you think about the bridge into 2024, we do expect a little bit more pricing, especially if we think about what we can do and refinish as well as in some of the other verticals as well for us. And we think also VCOGs at least on a year-over-year basis will continue to trend favorably especially at least through the first half of 2024. So those would be the primary areas of the bridge that will help lock you to where we think 2024 will end up.

Thank you.

Thank you. You're welcome.

Yes, good morning. Chris, it sounds like you've made a lot of progress with regards to your purchasing initiatives. Can you provide a little bit more color on the raw material cost outlook heading into 2024 and perhaps where you're seeing the most deflation or the most stickiness in your input costs?

Sure, love to. So I think I would say, as we look at Q4 and also into 2024, I would call it mid-single-digit opportunity on material. This is going to provide us a tailwind. Now in terms of – there is one – a few outlying factors. We are monitoring oil and we – but at this point, we're certainly not seeing any impact on our downstream market. But oil does play a key factor in solvents as well as if we think about freight but again no pressure that we are seeing at this time. But epoxies, isocyanates and resins are all trending favorably. So as I think about 2024 we still – from our planning standpoint, where I would say we see mid-single-digit opportunity in material performance.

Okay. And then – would you comment Chris, on your outlook for auto builds, I think Axalta used to provide some fairly specific numerical guidance. I didn't see that unless I missed it but maybe you can kind of talk through what you're thinking about for the fourth quarter as well as 2024 as it relates to production backdrop?

So, fourth quarter obviously, going around the world, Europe seems to be stable and growing. China is just going with gangbusters, if I look at Q3 and also as we look at our forecast for Q4, the team has just done a stellar job also on top of our wins. If we look back a year ago, we talked about $200 million of new wins running through the P&L at the back end of 2024 and we're certainly seeing our share of not only growth but also the market rebounding in China. So, so far as I look at Q3 and Q4, I would say globally the markets seem to be trending the right way. Specific to North America obviously, the step down in – with the UAW strike. We certainly saw – we saw a minimal impact from the strike in Q3. As you can see from our performance. In Q4, I would say we're guiding to 1% of our revenue being impacted possibly from the strike. But if that gets resolved here based on where the discussions are going that we do see some level of opportunity there in our guide as well. Now looking at 2024, all indications to your point are that markets are going to start building up. So builds – for the global builds, we see that going up to $89 million. So certainly a positive trend there heading back to the numbers we saw let's call it pre-pandemic. The one outlier is on the commercial vehicle side. On the commercial vehicle side, I would say ACT as markets going down to 275,000 bills. Obviously, we're running at well north of 300 right now at 325. So there's a bit of a risk there. But that said, I think the team is doing well with winning new business and also driving price and cost actions that we should see overall margin continuing to improve into 2024.

Perfect. Thank you so much.

You’re welcome.

Thanks. I wanted to drill in a little bit on Refinish. Your low single-digit organic sales in the third quarter seems a little modest, given you have these pricing initiatives, you have the MSO partner keep acquiring, you got your automated mixing technology, would you expect organic sales in Refinish to post higher gains in 2024, perhaps bolstered by these recent acquisitions with the André Koch and the BMW Group, which you're all in 2024?

Yes. Let me respond in two parts. First, from a volume perspective, it's important to note that we have taken a slight step back. This is mainly because we have been concentrating on improving margins. Specifically, in the thinners market and certain sectors in South America, including our architectural business, we made the decision to exit these areas to focus on maintaining margins and allowing capacity for higher-margin products. This choice was made with the intent to grow margins. Regarding sales, we do see opportunities to drive growth into 2024, especially with the recent acquisition we announced. Additionally, the team has performed well in securing net sales, which will contribute to our growth trajectory for 2024. However, when excluding thinners and the previous decisions in South America, our volumes have remained relatively flat, indicating that we are not declining. Instead, there is potential for growth both from the acquisition and the net sales successes as we look toward 2024.

And then perhaps in Mobility, what would you attribute the new business wins that you're talking about? Is this a technology game for you to have better technology that benefits your customer? And how significant is this new technology, this two-tone technology what is it NextJet? How significant of an opportunity is that in your view?

Let me break it down into two parts. Looking back a year ago, the Mobility team's achievements are primarily due to their focus on service and the strong relationships they've built with customers. This isn't limited to just one region; it's a global effort. We've seen successes in North America, significant wins in China, and also in Europe. These accomplishments can be credited to both technology and the team's excellent service and relationship-building efforts. As for the relationship with ZAR or the NexJet announcement we made today, it revolves around technology. For example, with our Mustang product, which features a different colored roof, our technology allows customers to avoid the extra step of removing vehicles from the body shop or paint line to paint the roof separately. Instead, we enable our OE partners to use the paint shop to apply both processes simultaneously. This innovation presents a significant opportunity, moving away from offline processes and potentially increasing productivity for custom cars, which tend to be high-value vehicles. We believe this will create substantial value for our customers in the future.

Thank you.

You're welcome.

Hi. This is Abigail on for Mike. Thanks for taking my question. So I believe this has already touched on a bit, but some of your peers have noticed in the Refinish base share gains and I think mostly in the last quarter, do you have a response to that? Have you, I mean, have you been experiencing any share loss? And then two-fold thinking back to your Refinish Day last December, you mentioned Europe as being a key new market for growth for you. How has that changed in the last year given macroeconomic trends in the region?

Thank you for the question, Abigail. We do gain some customers while losing others. However, I can confirm that we are on track this year to achieve 2000 net body shop wins. Overall, we continue to see growth. Reflecting on the past three years, our team has excelled, gaining 10,000 net body shops. Looking specifically at the Refinish team since I joined the company, it’s notable that they achieved record sales in both 2021 and 2022, and they are on pace to do so again in 2023. This is a remarkable team, and securing the BMW win early in the year positions us well for 2024 with 730 new body shops starting the year. Therefore, I believe the team is well-prepared for continued growth. This aligns with the strategy initiated by Troy and the team at Refinish Day, which coincidentally was my first day at Axalta. Additionally, regarding our growth in Europe, I’m pleased to announce two things today: the BMW announcement, which significantly influences our growth in Europe, and the acquisition of André Koch, which further underscores our commitment to expanding in that market. Overall, I believe the Refinish team is well-positioned for growth in Europe in 2024 and is taking proactive steps ahead of time.

This is Steve Haynes on for Vincent. I just wanted to maybe ask a quick question on the M&A pipeline and how you're thinking about that going forward? And on the flip side of that maybe you've kind of walked away from some business in Refinish, but are there other areas of the portfolio that you'd think about pruning? And just any kind of additional thoughts on that would be great. Thank you.

Yes. This is Carl. So, yes, just on the M&A pipeline, obviously, Chris talked a lot about what we do just accomplished here with André Koch here in October. But as we look forward here at least in the near term from a capital allocation perspective, we are really focused on our net leverage ratio. As you saw in the slide deck, we have an opportunity where we set new targets, especially on net debt leverage to two times to 2.5 times. The company has done a really great job in delevering this year. And we think that we have a lot more that we can do and potentially even achieve maybe the top end of our objective as we finish out 2024 on a net leverage ratio. But having said that, as we look at the overall pipeline and M&A, we will continue to evaluate those opportunities. But at this point, I think the primary focus will be a little bit more inward looking as we continue to delever and also reinvest back in the business.

Hi. Good morning. Congrats on a nice quarter. You noted the opening of the Jilin manufacturing facility in China. Can you give a little bit more detail on how that's going to help you grow in the Mobility business there in China? Maybe what additional capabilities does that facility provide for you?

Certainly. Thank you for the question, Mike. As we consider our growth in China, I want to highlight that a significant portion of our $200 million in net wins is linked to this market. I reviewed some figures recently, and it shows that not only are we outpacing the market on the ICE side, but our growth in the EV segment is 5% above the market rate, which is crucial given the potential of the EV market. We're well-positioned to capitalize on this growth. The facility enables us to produce both waterborne and solvent-based products, enhancing our capacity on the Refinish side. As the market shifts more toward waterborne products, this additional capacity prepares us for anticipated growth in the region. Looking ahead to next year, this facility equips us to maintain our growth trajectory. We officially opened it last week, and it's exciting to see production ramping up through 2024.

All right. And then also curious it sounded like you're going accelerating some of your capital investments into next year. Can you walk through what some of the key projects might be that you're investing in?

Yes. As I mentioned in my prepared remarks, capital expenditures will decrease in 2024, particularly our investments in S4 and the ERP system. However, this will be offset by increased investments in productivity improvements within the network. We see a chance for our facilities to operate more efficiently, and we will carefully evaluate how to allocate those funds to enhance overall productivity improvements across our global network.

All right. Thanks very much.

You're welcome.

Great. Thank you. Good morning, guys. Chris just one higher-level question for me. There's been a number of board refreshments say the past few months in addition to yourself and Carl joining Axalta. Can you maybe just speak to what the new Board joiners bring to the table or any sort of specific attributes or qualities the board is really looking to refresh or enhance going forward?

Sure, Mike. I appreciate the question. Looking at our recent announcements, particularly with Kevin Stein, who is the current CEO of TransDigm, it's clear that we have a strong board that has successfully navigated the company through the challenges of the pandemic. Going forward, our goal is to continue to drive value creation. The new board members bring significant experience, including current CEOs who will provide valuable insights. Mary, for instance, has an impressive track record in both private equity and public companies, demonstrating her capability to drive value through her work at Sundyne, as well as her previous roles at Tyco, Exxon, and Alcoa. Both bring extensive chemical industry experience, with Kevin holding a PhD in chemistry and Mary having a background in chemical engineering. Overall, we have an excellent mix of talent on our board, covering various areas including operations and finance, and the addition of these seasoned executives enhances our capabilities.

Thanks, and good morning. Chris, you've talked a couple of times about backlog. I was wondering, if you could talk about the bottlenecks. Is that on the customer side still? Or is it something on your side and I guess what can you do to some of those? Thank you.

Yes, absolutely. I would say the main bottleneck is within our Refinish business, specifically at our facility in Virginia. We've done a remarkable job of reducing the backlog from the second quarter to the third quarter. As we mentioned in our second quarter guidance, we took a conservative approach, indicating that if we lowered our guidance, we would likely see improved performance, which has indeed been the case in the third quarter. There is still more backlog that we can eliminate, and we will be focused on that. I believe we will return to normalized backlogs in the Refinish business by the first quarter of next year. We will carry some backlog into the fourth quarter, but it is only in our Refinish business. Additionally, there are still opportunities to enhance efficiencies with S/4. Looking ahead to 2024, I genuinely believe we can drive more efficiencies throughout the company, which aligns with the productivity investments Carl mentioned that we plan to implement next year.

Thank you. And if we combine the backlog with the comment on the ERP, the fact that this year wasn't great on volumes, the pruning on products, I mean, is it fair to assume that you should outperform meaningfully volumes compared to your assumption of a stable market for Refinish next year?

Yes, we will provide more insights regarding 2024 in the coming months. For now, our priority is to finish the year strongly and position Axalta for 2024. Overall, we believe there are growth opportunities ahead, particularly not just in Refinish but also in other areas as we move into 2024 and beyond.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation and have a great day.