Axalta Coating Systems Ltd. Q3 FY2025 Earnings Call

Ladies and gentlemen, thank you for joining us, and welcome to Axalta Coating Systems' Q3 2025 Earnings Call. Today's call is being recorded, and a replay will be available through November 4. Please be aware that the information in the recording will not be updated and may no longer be current for those listening after today's call. I will now hand it over to Colleen Lubic, Vice President of Investor Relations.

Good morning, everyone, and thank you for joining us to discuss Axalta's third quarter 2025 financial results. I'm Colleen Lubic, Vice President of Investor Relations. With me today are Chris Villavarayan, our President and CEO; and Carl Anderson, our Chief Financial Officer. We posted our third quarter 2021 financial results and earnings release this morning. You can find today's presentation and supporting materials on the Investor Relations section of our website at axalta.com, which we will be referring to on this call. Our remarks today and the slide presentation may include forward-looking statements reflecting our current views of future events and the potential impact on Axalta's performance. These statements involve risks and uncertainties and actual results may differ materially. We are under no obligation to update these statements. Our remarks and the slide presentation also contains various non-GAAP financial measures. We 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. I would like to now turn the call over to Chris.

Thanks, Colleen, and good morning, everyone. Let's look at Slide 3. We're pleased to report another strong quarter with record adjusted EBITDA and record adjusted diluted EPS driven by our disciplined execution. Our team's focus on customer service and leadership in technology enabled us to outperform industry trends in many regions as we continue to secure new business across our global end markets. Net sales were approximately $1.3 billion. While the broader macro environment remains challenged, especially in North America, we're successfully navigating these headwinds. Industry trends were more stable in Europe, which represents more than 35% of our net sales. Global auto production was again a bright spot with current forecasts ticking up in October to approximately 91 million builds for the full year 2025, a 2% increase versus 2024. We posted adjusted EBITDA of $294 million with a margin of 22.8%. This marks 12 consecutive quarters of adjusted EBITDA and adjusted EBITDA margin growth year-over-year. The results demonstrate the culture of continuous improvements that we have established across the company. To that point, we expanded the adjusted EBITDA margin in both segments. Performance Coatings adjusted EBITDA increased by 20 basis points from the prior year period to 25.5%, up 170 basis points from the second quarter of 2025. Net sales in Mobility increased 4% to the third quarter record of $460 million due to sustained growth in China and Latin America. The team's focus on new business wins, margin stabilization and operational rigor resulted in an adjusted EBITDA margin of 18% for the segment, an expansion of 230 basis points compared to last year. During Q3, we executed $100 million in share repurchases, reducing our shares outstanding by over 3% since 2023. Adjusted diluted EPS was $0.67, up 6% versus last year. This reflects our robust earnings power and our commitment to returning capital to our shareholders. Lastly, our net leverage was maintained at 2.5x, remaining the lowest level in Axalta's history. Let's turn to Slide 4. Achieving our A Plan target remains a top priority, and the third quarter results show that the strategy is leading to enhanced profitability. This quarter marks the sixth consecutive period with an adjusted EBITDA margin above our A Plan target of 21%. The consistency of our adjusted EBITDA margin performance speaks to the foundational improvements we've made to our business. Our Mobility segment continues to perform well, driving 2% organic net sales growth year-to-date. This top line momentum was driven by roughly $60 million in new business wins and 12 quarters of adjusted EBITDA margin expansion in the segment, driven by strength in China and Latin America. In Refinish, we generated approximately $90 million this year in incremental net sales from the execution of our strategies, which include gaining more than 2,200 net new body shops, expanding into adjacencies, implementing pricing actions and integrating CoverFlexx. We believe that we're well positioned for growth in the business as volumes are expected to stabilize and grow into next year. On the industrial side, profitability remains ahead of schedule despite mid-single-digit declines in net sales; we are exceeding our 2026 A Plan target for profitability expansion one year early. The results show the effectiveness of our strategic product mix and cost management. This has been a great story, and I believe the business is well positioned to capitalize on volume upside once demand rebounds. Additionally, our cost discipline has been outstanding. Interest expense is down 15% year-to-date, bolstering our adjusted diluted EPS performance. Operating expenses declined by 5%, supported by our 2024 Transformation Initiative. This initiative is running well ahead of plan and has delivered approximately $40 million in incremental savings in 2025, further supporting margin expansion. Before turning the call over to Carl to discuss the results, I want to emphasize that we have delivered strong year-to-date results and are on track to achieve record adjusted EBITDA and record adjusted diluted EPS for the full year. Our performance reflects Axalta's dedication to the strength of the A Plan and our commitment to delivering value to our shareholders. In the final quarter of this year, we remain focused on execution, operational excellence and disciplined capital allocation.

Thank you, Chris, and good morning, everyone. In the third quarter, net sales were approximately $1.3 billion, down 2% year-over-year, primarily due to macro headwinds in North America. Positive price-cost actions and disciplined cost management helped to offset mix headwinds, resulting in gross margins holding steady at 35%. Variable costs declined 1% year-over-year, and we expect the raw material environment to remain relatively flat through at least the first half of next year. SG&A expenses declined 7%, reflecting our ongoing focus on efficiency and cost management. Adjusted EBITDA increased $3 million versus last year to $294 million, a quarterly record. Adjusted diluted earnings per share increased 6% to $0.67, another quarterly record, primarily driven by lower interest expense and fewer shares outstanding. Operating cash flow was $137 million and free cash flow totaled $89 million. The decline from last year was driven by higher capital expenditures of $17 million and higher working capital as we have strategically held higher inventory levels this year to manage tariff uncertainty. We anticipate that free cash flow will improve significantly in the fourth quarter as working capital unwinds. Net sales for Performance Coatings, as shown on Slide 6, declined 6% year-over-year to $828 million, driven primarily by trends in North America, impacting both businesses. Refinish net sales came in at $517 million, slightly up on a sequential basis from the second quarter. Lower body shop activity and customer order patterns drove declines versus last year in organic net sales, impacting both volume and price mix. This was partially mitigated by favorable foreign currency translation and growth in Europe and Southeast Asia. Industrial net sales declined 4% year-over-year to $311 million primarily due to volume softness in North America, driven by weakness in industrial production and building and construction. Positive price/mix and favorable foreign currency translation partially mitigated volume headwinds. Performance Coatings delivered adjusted EBITDA of $211 million with a margin of 25.5%, an increase of 20 basis points year-over-year and 170 basis points sequentially. Let's look at Slide 7. Mobility Coatings third quarter 2025 net sales were $460 million, an increase of 4% from the prior year. Light Vehicle net sales increased 7% in the third quarter due to net sales growth in Latin America and China and positive price/mix, which offset volume declines in North America and Europe. Commercial Vehicle net sales declined 7%, primarily due to volume declines from lower Class 8 production, which were partially offset by positive price mix, new business wins and favorable impacts from foreign currency. Adjusted EBITDA for Mobility increased 20% year-over-year to $83 million, with adjusted EBITDA margin expanding to 18%. The team's focus on accretive new business wins and cost control has delivered 12 consecutive quarters of adjusted EBITDA year-over-year margin growth, as Chris mentioned earlier. Capital allocation continues to be a critical part of Axalta's value creation story as shown on Slide 8. Since the third quarter of 2023, diluted earnings per share has increased 55% and adjusted diluted earnings per share has grown more than 40%. We have reduced interest expense by 17% in the third quarter, and our net leverage ratio remained steady at 2.5x aligned with our strategy. Consistent with the A Plan, we have increased capital expenditures by approximately 50% when compared to the third quarter of last year, bringing our year-to-date spend to $138 million. Through the third quarter of this year, we have repurchased $165 million of shares, with $100 million being deployed this quarter. Overall, our share count has decreased by 5 million shares since the beginning of the year or 3% since 2023. In the fourth quarter, we expect to accelerate our share repurchase strategy by repurchasing up to $250 million of our stock. Upon completion, we would have deployed over 90% of our free cash flow to share repurchases this year while still maintaining our leverage target. As we move forward, we expect to continue to generate sustainable earnings growth and strong free cash flow. The strength of our balance sheet gives us the flexibility to effectively allocate capital to drive long-term value for our shareholders. Let's turn to Slide 9 for a look at the full year. We expect to deliver record adjusted diluted earnings per share and adjusted EBITDA on lower revenue expectations. Previously, we anticipated that the external environment in North America and Europe would pick up in the third quarter, which would have generated a sequential benefit to net sales in the fourth quarter. However, this improvement did not materialize as expected, and we are adjusting our forecast for the softer demand. Additionally, we also expect softer Class 8 production levels and lower Light Vehicle builds in some regions, given some of the temporary supply challenges that are impacting the industry. In the fourth quarter, we now expect net sales to decline by mid-single digits compared to last year. Adjusted EBITDA is anticipated to be approximately $284 million and adjusted diluted earnings per share is projected to be around $0.60. For the full year 2025, our updated outlook reflects net sales of more than $5.1 billion, with adjusted EBITDA expected to be about $1.140 billion which is at the low end of our previous EBITDA guidance range. We are expecting a significant increase in free cash flow in the fourth quarter, which should put us around $450 million for the year, consistent with last year, but down slightly from our previous view. Additionally, we are forecasting adjusted diluted earnings per share to be $2.50 for the full year, an increase of 6% versus 2024 and an increase of approximately 50% versus the full year of 2023. I will now turn the call back to Chris.

Thanks, Carl. We're well underway to deliver another record earnings year here in 2025, and we have always operated with the commitments made, commitments delivered mindset, and we're excited about what we can accomplish in 2026. Next year, we are planning for an improved Refinish demand environment in North America as claims stabilize and destocking headwinds abate. We continue to gain new body shops and are excited about our growth opportunities in accessories and the economy segment. Light Vehicle global production outlook is expected to be stable and we expect to have another record year in our mobility business. In North America, expectations for lower interest rates and less trade volatility should provide a positive backdrop for customer demand in our industrial business. Our team is poised and ready to execute on new business wins and manage costs through operational excellence and a strong pipeline of productivity projects. The team remains fully committed to delivering on our $1.2 billion adjusted EBITDA target. We expect to repurchase a significant amount of Axalta stock given my confidence on where we can take the business in the years to come. We're all about creating value for our shareholders, and I'm more excited than ever about what we can accomplish. Thanks for joining us today. Operator, please open the lines for Q&A.

Yes, our first question will come from Ghansham Panjabi with Baird.

I guess first off on 3Q, just as it relates to the auto Refinish component down 7% for the third quarter, at least for the volume component, how would you disaggregate that between just volumes in the industry versus the inventory destocking? And then just related to that, Chris, you talked about 2026. What are the specific strategies that you're pursuing to support an improvement going into next year from a commercial standpoint?

Ghansham, thanks for the question. Well, giving you a view of Q3, the way we look at it is markets are down about mid- to high single digits. I would call it specific to us, destocking is also around that mid-single digits number and our performance. Whether you look at the $90 million that I talked about in terms of the growth that we had in the business or the incremental sales, whether it’s what we did in pricing actions, what we did with new body shop wins of 2,200, which is really a good news story for us because on average, if you look at us, net new body shop wins for us, if you look at the last 3 years, the average is around 2,400. So here we are in Q3, and we're already at 2,200. So it's actually a pretty good year for us. On top of that, whatever we do with adjacency sales as well as the CoverFlexx integration. So I think all of that is driven what's, as you pointed out, let's call it, this mid- to high single-digit drop in sales as you look at Q3. So what gives me confidence as I think about where is the market and do we see stabilization? I can sit here and talk to you about insurance rates and what's happening with claims. But I think it's really important to start looking at our numbers. If you look at our Q1, Q2, Q3 numbers for Refinish, we're running around that $520 million in sales. If you look at Q4, we're essentially saying that's going to drop down by about $20 million, which is what is seasonal and normal for us. You can start seeing the business is starting to stabilize, and that's what gives me confidence as I look at next year coming out. We expect Q1 as always to be a little bit lower. But primarily Q2, we should be lapping where we were with the destocking. Assuming the same win rate that we've had for this year, what we've done on average on our Refinish business of $70 million to $90 million, you can start seeing that Refinish really starts picking up in the back half of next year. So I hope that answers that question for you.

Our next question comes from Chris Parkinson with Wolfe Research.

Chris, ever since you've taken the helm, I mean, costs have been a tremendous focus of your strategy. Can you just kind of give us any context to help us conceptualize where we stand today and how we should be thinking about the ongoing progress as it relates to 2026 in the context of your end market backdrop? Is this something that can continuously improve even when volumes kind of come back? Or is this something where you're going to have to add back costs and you're really operating at a fair rate? I mean just anything to help us triangulate how we should be thinking about that progress over the next 12 to 18 months would be incredibly helpful?

Sure, Chris. I think coming in 2 years ago or 2.5 years ago, there was always this view that what Axalta had done with Axalta Way I, Axalta Way II, how could there be more cost in Axalta. As you can see, if you went back to '22 and what we have accomplished, I'm really proud of the team. We have essentially executed on over 500 basis points, and a lot of that is really what we have driven in cost. Obviously, when we put the A Plan in place, the markets across all our 4 end markets are in a different spot. A lot of the performance is really coming from what we were able to do with our cost actions. I actually use a term that I think Carl uses all the time, which is we're still early in our innings. Why do I feel that? If I look forward, again, take a look at how much we're investing in capital. Look between '23, '24 and '25. Even as we look at this year, under a challenged macro, we're investing more than we ever have in our plans. If you have that return coming through in productivity for next year, you have an element of that. If you look at our Transformation Initiative, we talked about that being about $75 million. To date, we have accomplished about $60 million to $70 million. We still have a flow-through of about probably $20 million into next year. So you got that as well. What we can do with supply chain optimization, what we can do with footprint optimization, I still think, as Carl pointed it out, we're still early in our innings. I think there's still opportunities with costs that we can continue to drive into next year. It will be a portion of our plan while we drive the growth as we think about '26.

Our next question comes from Joshua Spector.

This is Lucas Beaumont for Josh. Most of your outlook comments for 2026 focused on Refinish. Could you share your expectations for the other end markets, particularly industrial and commercial vehicles, which you didn't elaborate on much?

Sure, Lucas. So as I look at it, commercial vehicle, we still expect that to be, let's call it, very muted. Certainly a different perspective than what we expected for the year being this pre-buy year when we started the plan 2 years ago. I think the expectation was '26 was going to be $60. I think this year, we're probably looking at '26 being around that $225 to $250 range at best. The market is certainly down about 30%, but a true credit to the team is what they've really accomplished in pivoting towards commercial transportation solutions. Even if you look at our performance for this year, sales are down about 30% in Class 8. We're down about 7%. It's because the teams have pivoted toward commercial transportation solutions. We started selling to marine, we started selling to military, we started selling to RVs, off-highway. The teams pivoted to smaller customers, but a ton of smaller customers, and we're really able to pivot that. As we look into '26, we believe that we can still continue to grow that business on the CTS side and also grow it globally. We do have opportunities in Latin America and also have opportunities in China. That's a great perspective. As I think about CTS, one of the things that we're primarily focusing on is really adding capacity also for our Commercial Vehicle business because at some point, that's going to return. We're well below replacement volumes. If you think about '27, when that returns, we certainly need to have the capacity. That's one of the things that we're focused on investing. If I look at industrial, our plans for industrial is that the markets remain somewhat muted. There are signs that if interest rates keep coming down, mortgage rates are at the lowest point in '25 at this point. But again, we need further interest rate cuts, and obviously some kind of drive to improve residential and construction into next year. It's not something that we're counting on, but it certainly will provide a tailwind. If we look at it right now, Freddie Mac and Fannie Mae are expecting about 3% to 4% growth into next year. Again, we're not counting on it because that was also a thought process for this year. But certainly, from an industrial dynamic, our perspective is that volumes so that market stays flat to possibly up slightly. Commercial Vehicle, as I pointed out, will be down. Light Vehicle, we're expecting a slight step down. We're at about 91 million builds this year and our thought process is it will be slightly lower, maybe by 200,000 or 300,000 vehicles for next year. Finally, Refinish, we're expecting a stable environment into next year. So volumes down, but stable into next year.

Our next question will come from Matthew DeYoe with Bank of America.

Can you just rehash maybe some of the internal discussion around a dividend and thoughts there? And whether or not the Board is becoming maybe more receptive to this? And I guess, as I think more holistically about capital deployment, I know people generally say that you want to be more acquisitive and reshape the portfolio a little bit, but how does your appetite change? Or does your appetite change for acquisitions considerably given your own valuation here today?

Matt, yes, this is Carl. As I think about capital allocation here in the near term, we do see tremendous value in our stock at this point. That's why you're seeing a pretty significant shift, not only what we did in the third quarter, but also plans to deploy up to $250 million in the fourth quarter to buying back shares. I think as we look at the dividend, obviously, this is a board decision. We've had many discussions regarding that. I think as we launch the next A Plan, that's probably a time that we'll spend even more with the Board on making a final decision on that. We do recognize we're currently an outlier, at least in the chemical space. But I just continue, and we continue to see tremendous value in repurchasing shares at this point. I do think that fits into your M&A question. Again, where our trading multiples are right now, M&A is a little bit more challenging. What we can look to accomplish here in the near term. That's why I got back pivoting back and deploying more into share repurchases here. I think is the appropriate and prudent move. But as we move forward, where we could take this business longer term, M&A will definitely play a part of that. But I think we're a little bit of a timing window at this point.

Just maybe to add a little bit to Carl, especially when we look at where we can get to '26. I think as we're building more confidence around the $1.2 billion for '26, it really puts light to the fact that we should probably be focused on buying back Axalta.

Our next question will come from John Roberts with Mizuho.

Could you dive a little deeper into some of the underlying drivers in the Refinish business – auto accident rates, insurance inflation, overall repair costs – those are the things I think that caused the dip in the business? And what are you seeing from those drivers?

Sure. Absolutely, John. So first, as I look at the accident rate, accidents or collisions, I think nothing's changed. Accidents are still occurring. That's around there's a slight decline. It's about down 1%, but overall accidents are, let's call it, flat to down 1%. If I look at claims, this is the big driver to what's driving the disconnect. In North America, that's down about high single digits. Europe is lower, let's call it, in that mid-single-digit range. The primary driver here is exactly what happened and what we've talked about quarter-over-quarter, which is insurance premiums going up significantly and also consumers pulling back from just a sense of the confidence and the macro. Around this, I think what you can start getting a sense of is we've spent a lot of time because the Refinish business is a very important part of Axalta. This is certainly something that we've watched carefully. The good news is when I look at insurance costs, as we said, if you look back to '24, insurance costs were going up almost double digits. If I look at '25, you can start seeing insurance premiums starting to go flat. Overall, that would mean the other half of the states are going back - going the wrong way. But overall, insurance rates are stable and starting to get flat. From a repair cost perspective, what we're starting to notice is repair costs are also starting to get flat and go down 1%. As volumes and backlog start reducing at the body shops, you can start seeing that folks are starting to drive to balance this out. I would say that's one of the good perspectives that I think is driving a stable environment as I think of how we're preparing into '26. From a perspective of what we're seeing on the premium side, especially with the cost of vehicles going up, as well as what's happening with used car pricing, you can certainly see that work is also starting to drive back. The leading indicators are starting to turn positive. A perfect example of this is if you look at CarMax or Carvana, you can start seeing that their performance is also improving by 20%. That's a great indicator. Those guys are also large customers of ours, and we can start seeing as cars are coming back from lease or being returned, those folks are also having to fix cars before they try to sell them again. The right market environment is starting to switch. Winter is also coming, if I think about early next year, so I believe '26 will be a different pace as we start the year for Refinish.

Our next question will come from Mike Harrison with Seaport Research Partners.

I was hoping that you could talk a little bit about some of the costs that you've been able to take out. I understand that the focus has been on structural cost. But I think, in particular, in Performance Coatings, very surprising to see the margin performance even with volumes and with price/mix lower. So to what extent are some of the cost actions you're taking right now temporary in nature or related to lower discretionary spend that we might need to think about accruing or coming back as we think about next year's cost structure, whether that's incentive comp or other discretionary spend?

Yes, I think as we look at the cost actions we've taken, not only in the third quarter, but really over the last couple of years, the vast majority, if not more, are really structural reductions. We have an ability to operate more efficiently and how we run the business. I would say there are some tactical things that we've done as it relates to more discretionary around T&E as an example. Some of that may come back as we get into next year. As I look forward, maybe the better way to think about it is for every $1 of incremental revenue, our conversion rate on that to EBITDA used to be around 35%; I would expect that should be running closer to about 40%. That just speaks to the overall structural reductions we've made and that we expect to stick as we move forward.

Our next question will come from Patrick Cunningham with Citi.

Just on the Refinish side, it's pretty firmly low single-digit price/mix declines. Is this primarily stemming from mix as you move into more mainstream and economy? How would you characterize your outlook on underlying structural price into 2026?

Patrick, you're absolutely right as we're growing more into our mainstream and economy. Certainly, if you look at our new body shop wins, one of the reasons we're doing so well with body shop wins for this year ahead of what we normally have is our foray into mainstream and economy. The acquisition of CoverFlexx has really enabled us to grow. The last 2 quarters, Q3 and Q2, were some of the highest numbers of mainstream and economy body shops that we won in that segment. We have normally focused on the premium segment. So you are seeing negative mix from that because the margins in mainstream and economy are lower than our premium margins. However, it's still accretive to Performance Coatings margins or overall Axalta margins. Separated from that, when you think about the fact that in this last year, most of our impact from destocking is primarily a North American issue. Whether it's the volume decline that we have seen because of where the market is in North America, plus destocking – North America was one of our highest margin businesses. As we flip into next year and we get past the destocking issue, I think a lot of that will still be mitigated as especially because the mainstream wins will take quite a bit to offset the, let's call it, the step-up from destocking that we expect into next year.

Our next question will come from Aleksey Yefremov with KeyBanc Capital Markets.

Good morning, everyone. I was hoping to get some of your initial thoughts on Refinish pricing strategy for next year. Should we expect '26 to be a typical Refinish year? Are you adjusting your expense based on this current environment?

Our plan is to probably stick to a similar pattern as what we've accomplished for this year. So, Aleksey, that normal 2% is net pricing is what we drive. At this point, that's exactly what we're thinking for next year. Primarily, it's certainly a model that's worked. I don't see us needing anything further than that. As we pivot into more mainstream as well, the pricing dynamic is slightly different there. But overall, what we do for the premium business will be probably in line with what we did this year.

Our next question will come from David Begleiter with Deutsche Bank.

Just on Q4, in terms of 2 things, on production, are you running your plans normally? Or are you drawing down some inventory that could be hit to earnings? And on SG&A, should we think about a similar year-over-year decline in SG&A expenses as you saw in Q3 of roughly 7% year-over-year?

David, yes, SG&A, I would expect that performance in the fourth quarter will be very similar to what we saw in the third quarter as it relates to that reduction. Regarding inventory, we are expecting a drawdown as we think about the working capital unwind. In the third quarter, we did actually run higher inventory levels really due to some tariff uncertainty in North America, but also within Brazil as we were ramping up our new business wins in that market. Overall, the fourth quarter is shaping up to be a very strong free cash flow quarter, but a big part of that will be the inventory reduction.

Our next question will come from John McNulty with BMO Capital Markets.

Can you flesh out a little bit what you saw on the raw material side, what you were seeing kind of in some of the major buckets, how much tariffs impacted you if you think you're pretty much through that tariff headwind at this point at least from an incremental headwind perspective?

We expect the incremental costs related to raw materials and tariffs to be around $20 million, but we have managed these effectively. At this stage, it seems we are largely past those challenges. In the third quarter, we observed the raw material basket decrease by about 1%. Specifically, solvent prices remain low, which has been beneficial for us, as have lower costs for other materials. However, there have been some increases in other categories like monomers and pigments. Overall, the raw materials environment is quite stable right now, and we believe this will continue for at least the next three to four quarters.

Our next question will come from Vincent Andrews with Morgan Stanley.

Chris, the slide indicates that you're expecting Refinish revenue to turn positive in 2Q '26. Do you expect volume to turn positive in 2Q '26? Or is that going to come later in the year or not at all?

No, volumes – Vincent, we're expecting volumes to also turn positive into Q2 as well. I think you'll get 2 benefits. If you think about our body shop wins and the adjacencies, a lot of that will transition. There's a bit of a ramp-up with that as well beyond what we have this year. You will have that tailwind on top of the destocking coming — abating. You will get probably a drive from both of that. From our perspective, we expect volumes to start trending positive in Q2 of next year.

Our next question will come from Jeff Zekauskas with JPMorgan.

You said you might purchase up to $250 million in shares in the fourth quarter. What will determine that? Does that have to do with the price of your shares and how much have you bought so far this quarter?

Jeff, yes, I think for the quarter, we repurchased $100 million of shares in the third quarter. In the second quarter, we repurchased $65 million. So we've done $165 million to date. The $250 million is where the market is today, even if it's up probably 10% plus, we're a buyer of the stock. We have a big belief in where we can continue to take this company as it relates to earnings and revenue and what the future will bring. At these trading multiples, it makes all the sense in the world to deploy almost all of our capital at this point to buying back shares. We will be a big buyer of shares here in the fourth quarter.

Our next question will come from Mike Sison with Wells Fargo.

I'm curious, if the Refinish sector in 2026 doesn't reach normalization, how will your strategy adapt? Is there enough potential for market share growth to drive volume increases in the latter half of next year? With BASF selling their business to private equity, are there beneficial opportunities for the industry? How do you perceive the potential for market share gains?

Mike, so maybe I'll start with the first one. If I think about Refinish, overall, this industry has been very stable. I look at what happened this year as something that is more temporary and certainly, our numbers are coming in. Once you take out destocking, you can get a sense that with the drop that we've seen, there's a sense of stabilization happening. If you start thinking about the fact that Axalta is a leader in the Refinish space, with our market position and as I look at what's happening as we enter the economy space, I think there's an opportunity for us to continue to grow. We will pivot into other areas. So as you look at what we're doing in adjacencies, pushing what we're doing with putties, fillers, aerosols, we can certainly grow that segment. We've been very focused on cost. As I look at next year, we can pivot towards growth, especially with the strength of the underlying business. Regarding BASF, they have been a competitor of ours for a very long time, and they certainly play a very strong role. They are a very strong competitor of ours in most both the Mobility space and the Refinish space. They are a competitor we know well. The drive for margin will probably drive a better competitor. I think it will drive some discipline into the marketplace. The good news is the multiple that BASF was sold for; it shows the valuation that Axalta is undervalued. That's why we're doubling down on buying back 90% of our free cash flow, using that to buy back shares. We will focus on continuing to buy back Axalta because it shows the value that our margins can provide and what we can do with the business long-term.

Our next question will come from Kevin McCarthy with Vertical Research Partners.

Chris, are you still working on a new company-wide strategic plan to follow the A Plan? If so, I was wondering if you could just comment at least qualitatively on what you think the company might need to focus on operationally in the years to come versus the last couple of years? It sounds like you see runway on cost and clearly, a lot of room to accelerate repurchases. Any other color on where you'd like to take the company strategically?

Yes. Thanks for the question, Kevin. If we think about the 5 elements that we defined under the A Plan, under 4 of them, we're certainly in a great position, a year ahead of plan. The primary focus, as I think about, is to drive the growth elements. I think the underlying business is performing exceptionally well. We had 2 areas to focus on. If I go back to the beginning of '23 and in the A Plan, we wanted to make sure we got the underlying business where we needed to, and I think that's a good story for us. Now it's to pivot to growth. What we will define in the A Plan will primarily be a plan that uses Axalta's high margins in the coatings industry. We can use a little bit of that firepower to really focus the team towards what we need to do to drive growth.

Our next question will come from Arun Viswanathan with RBC Capital Markets.

I guess I just wanted to go back to just kind of a structural question on Refinish as well as Industrial. It appears that Refinish claims are down significantly, high single digits this year; Industrial has also been down maybe double digits for a little while now. What's it really going to take to get these markets back going? Is it kind of inflation on the Refinish side and maybe PMIs on the Industrial side? What do you think? Is there anything you guys can do within your own control to spur some demand, such as innovation or maybe adding on the economy side or some other initiatives?

So we normally start on the Refinish side. Arun, thanks for the question. I'm going to start with Industrial. The industrial story, as I said in my prepared remarks, I think has been a great story. Even if you look at this quarter, I'd say the markets have been down, let's call it, high single digits, probably just north of 7%, and we're down about 4%. If I look back and go back to '22, the sales in the industrial market, to your point, has been down about 20% to 25%. Our sales are only down about $100 million. The team has driven some incredible performance in the business. We set a target of 400 basis points of margin improvement. We're north of 500 at this point, and I still think there's more gas in the tank. We took a business that was low single-digit margins to almost above double-digit margins. It's been a great story for us. The essence of the business is to focus on pricing for the value we bring. So it's essential. The markets remain somewhat muted. We're waiting for mortgage rates to adjust and come down to drive improvement in residential and construction into next year. On the Refinish side, I do believe that next year we should see some stability. The destocking issue for us has been specific to us. I've said the market looks stable to me. As I think about what we're doing for our adjacencies, our core businesses remain strong. Our strategy has been very focused, and we've been able to grow through quality wins.

Our next question will come from Laurence Alexander with Jefferies.

Just wanted to come back to 2 brief points. So one on the working capital, how do you see your working capital days evolving when your end markets recover? And secondly, on SG&A, what do you see? Can we annualize the back half of this year as a run rate for next year? Will there be a kind of reset in a healthier environment?

Yes. So SG&A, I think you'll definitely see the same impact in the fourth quarter that you saw in the third quarter. As you flip into the next year, there probably will be a slight increase. I think we will keep our SG&A running at a pretty low level on a percentage of sales basis. As for working capital, we anticipate a big increase from free cash flow as the third quarter came in, indicating a strong free cash flow outlook for this quarter. Overall, the fourth quarter is shaping up to be strong as we maintain a goal of running the right inventory level. Next year, we expect strong free cash flow capability.

Thank you. At this time, there are no further questions. This does conclude today's presentation. We appreciate your participation, and you may disconnect at any time.