Ladies and gentlemen, thank you for standing by. Welcome to Axalta's Q1 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 a replay will be available through May 10th. 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, sir. Thank you. Good morning. This is Chris Evans, VP of Investor Relations. We appreciate your continued interest in Axalta and welcome you to our Q1 2023 financial results conference call. Joining me today are Chris Villavarayan, CEO and President, and Sean Lannon, CFO. Yesterday afternoon, we released our quarterly financial results and posted a slide presentation along with commentary to the Investor Relations section of our website at axalta.com, which we'll 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. 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 the slide presentation also contain various Non-GAAP financial measures. In the appendix to 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. I'd like to welcome everyone to our Q1 2023 earnings call. We'll start by discussing the key highlights on slide 3. I'm very proud of our Q1 performance. Through the commendable efforts of our global teams, we're outpacing growth in most markets we serve, driving incremental pricing, accelerating margin recovery, and improving execution across all our operations. Our Q1 adjusted EBIT was $149 million, with adjusted diluted EPS of $0.35, both of which exceeded the top end of our guidance range. Overall, I remain encouraged with the team's performance this quarter. To that end, I'm pleased to report an impressive 25% year-over-year increase in adjusted EBIT and a 140 basis point year-over-year improvement in adjusted EBIT margins. This is Axalta's second consecutive quarter of margin growth as we begin to rebound from historically high cost inflation and post COVID-19 impacts. Mobility Coatings had the biggest increase in profitability growth with a 530 basis point year-over-year improvement in adjusted EBIT margins. Margin improvement was largely driven by over a 9% year-over-year price mix growth from new and carryover actions. This is our ninth consecutive quarter of price mix growth, which is up more than 18% over 2 years. Volume was another bright spot in the quarter, improving 3% year-over-year despite a nearly 3% headwind from macro-driven volume declines in Industrial and unfavorable impact from the Russia-Ukraine conflict. Volume growth was led by a double-digit gain in light vehicle and commercial vehicle, along with modest growth in r efinish. We believe that most of our end markets are uniquely positioned to grow in the current macroeconomic environment. We have demonstrated this in the last two quarters. Today, we're seeing the benefits from market normalization in auto and truck production, as well as an increase in body shop activity. We believe considerable market upside still exists in the portfolio. I expect us to continue to outpace end market growth in Mobility and certain mefinish markets following the strategic investments we have made in people, technical capabilities, and customer partnerships. For example, in February, we announced that Axalta was the recipient of three prestigious 2023 Edison Awards, making this our fifth consecutive year to be honored with this achievement. We attribute this recognition to our outstanding technical leadership and talent base that is leading the industry in innovative solutions. Our Refinish business is aligned with the needs of a labor-constrained collision repair industry. Large multi-shop operators who are gaining share require incremental capabilities and productivity benefits, which I believe Axalta is uniquely positioned to offer. In light vehicle, we have deepened our relationships with many of the fastest-growing EV automakers and some of the most attractive ICE platforms. In Industrial, our total solution offerings provide a breadth of capabilities to solve deeply technical and diverse challenges, creating market share growth opportunities for us. Please turn to slide four. My main focus since joining Axalta as CEO has been to drive improved execution across the company. We're prioritizing areas with the largest positive impact for shareholders, specifically price cost recovery, productivity initiatives in procurement and operations, and better cash conversion. It is our intent to accelerate the margin recovery currently underway. Let me give you some specifics. First, there is significant opportunity to expand margin in our industrial and light vehicle businesses where variable cost inflation has totaled more than $120 million cumulatively since 2021. I'm confident that carryover pricing contributions and targeted actions will drive steady margin recovery through the year. On cost productivity, we have a lot of activity underway. On an annual basis, Axalta has roughly $1.5 billion in fixed costs net of D&A and another $2.5 billion in variable costs. Given the large scale of spending, we anticipate even small improvements to yield a nice drop-through to earnings. Our goal is to structurally reduce costs independent of market dynamics through productivity programs focused on procurement and operations. To date, we have launched market tests for most of our variable spend and are already seeing positive results. Reduced freight rates and more dependable supply chains are creating a competitive marketplace. We're qualifying new suppliers and in some cases, working with our technology organization to reformulate product formulas and spec in new suppliers to promote increased supply flexibility. We're removing bottlenecks and reinstituting best practices around our production planning process. We expect to drive improvements in labor productivity, expedited freight, and low volume and inefficient production behaviors, which have been persistent issues for us in the recent years. We're doubling down on inventory management with promising early results. Despite 3% volume growth in Q1, we reduced our inventory levels, leading to an atypical seasonal decline in the period. This is a good start to our inventory management for the year and supports our goal to unwind historically high inventory levels in order to drive better cash flow in 2023. I see significant opportunity to reduce fixed and variable costs as well as to improve free cash flow. To expedite our performance, we have enlisted the support of external expertise, which will drive a modest increase in expense mid-year that we have included in our guidance. We expect that returns on these investments will start to be realized in the back half of this year. Like every company, we're mindful of the uncertain economic environment, and we're taking proactive actions to be prepared for whatever outcome may play out. Moving back to the results on slide five, I will now give you more color on first quarter volume performance. Globally, volumes have improved by 3% year-over-year, driven by market recovery in Mobility Coatings and share gains within the portfolio. While the economic climate remains difficult to forecast, the commercial environment across our end markets remains largely consistent. U.S. commercial and residential construction softened, creating a larger headwind for our Industrial business this quarter than we had forecasted. Elsewhere, we see markets as largely favorable given the recovery in auto production, a robust environment for heavy and medium-duty trucks, and the strengthening of body shop activity in key Refinish markets that I've highlighted earlier. Moving to slide six, I will now cover the Refinish business. Refinish is off to another strong start in 2023 as Q1 results were ahead of expectations. Price mix improved by 10% year-over-year with contributions from every region. In the quarter, we executed new pricing actions to offset pockets of incremental inflation. Market activity was largely consistent with the prior period. Parts and labor shortages continue to constrain our premium customer mix, while return to work dynamics are marginally better than we ended up in 2022. Volumes for Refinish were favorable, driven by continued execution of our growth initiatives, which target expansion of our MSO leadership positions. In the quarter, we added 400 new premium body shops and 140 new stock points locations for mainstream and economy customers. Refinish is also growing outside of our core products. Accessory sales in our company-owned stores exceeded budget targets in Q1, while the U-POL brands that we acquired in 2021 are driving growth in adjacent markets like body fillers and aerosols. March was a record month for the U-POL team. We believe that significant opportunity still lies ahead. U-POL brings to Axalta the ability to grow the existing Refinish business. It has also allowed us to pivot towards the highly attractive retail channel with market-leading solutions for the fast-growing automotive DIY consumer market. Exciting new partnerships with AutoZone and O'Reilly position our aerosols and RAPTOR protective coatings in more than 16,000 U.S. retail locations. We believe this puts us on pace to nearly triple our aerosol volumes in 2023 versus 2019. It is really exciting to see the Refinish team execute across multiple horizons to drive growth and expand upon its record 2022 performance. Let's go to slide seven to look at our Industrial performance. Constant currency net sales increased modestly in the quarter as very strong price mix growth of 11% year-over-year more than offset a volume decline of 9%. Price mix improved 3% sequentially as the team prioritized margin recovery. The Industrial team also executed well on cost management, which helped to offset the volume decline. In EMEA, we believe that customer destocking over the past few quarters has slowed. We are now feeling the impacts from weak North American construction activity in our building products business. Until we see a shift in housing starts or building sentiment, we expect volumes will remain somewhat challenged. In the meantime, we're focused on winning new business in attractive areas where our technology leadership is rewarded. Abcite 2060 and our self-priming kitchen cabinet coatings were both recently recognized with Edison Awards that I mentioned earlier. Moving to Mobility Coatings on Slide eight. Mobility Coatings exceeded expectations as pricing, volume, and margins were all slightly better than expected. We're on a good trajectory. I expect to show margin improvement as we continue through the rest of the year. Light vehicle 2023 production forecasts have modestly but steadily improved year-to-date. Industry forecasters now project more than 85 million go-global builds representing nearly 4% growth over 2022. This incremental volume growth is driving improved fixed cost performance in our business. In commercial vehicle, results have been consistent. We believe there is a robust multi-year outlook for the business. For Class 8 OEMs, backlogs remain elevated, especially in North America. I expect pent-up demand and backlogs to help drive another strong year in 2023. Elsewhere, there are mixed 2023 trends with better medium-duty expectations balanced by some softness in rail and the RV market. With that, I'll turn the call over to Sean for a review of our financial performance. Thank you, Chris, and good morning. Net sales in the quarter were $1.3 billion, an increase of 9% year-over-year. Constant currency net sales increased 12%, driven largely by strong pricing and volume growth in three of our four end markets. adjusted EBIT improved to $149 million from $120 million in the prior year and exceeded our guidance targets. The outperformance was driven by better price realization, largely in Performance Coatings and the higher than expected volume growth in Mobility Coatings. Both segments contributed meaningfully to year-over-year adjusted EBIT growth and margin improvement in the quarter. The largest driver of our earnings performance this quarter was favorable price cost. Our 9% year-over-year growth in price mix more than offset variable cost inflation, which was roughly 6%. We hit a nice interim milestone this quarter as we have turned the corner on price cost, which is now positive on a cumulative basis from early 2021. This is an important benchmark in our EBIT recovery journey to normalized margins. However, as Chris detailed earlier, we still have a meaningful $120 million combined gap across two of our end markets, which we remain focused on addressing. Variable cost inflation is moderating from historic levels. Raw material costs were up year-over-year, but were in line with our expectations sequentially. Softness in adjacent markets is loosening supply-demand balances across many commodity inputs and creating a more favorable procurement environment. Positive EBIT contributions from price cost and volume growth were partly offset by higher fixed costs. Operating expenses were driven higher versus the prior year by labor inflation, lower plant production rates, and temporary external spending programs meant to accelerate achievement of our cost productivity goals. In the quarter, we took a roughly $7 million pre-tax charge associated with the anticipated exit from a non-core business within Mobility Coatings, which was not included in our adjusted operating performance metrics. This is a strategic decision meant to prioritize our focus in markets where we can leverage our strengths and generate attractive returns. Turning to Slide 10. Performance Coatings' Q1 net sales increased 4% year-over-year or 7% ex FX, driven by double-digit price mix growth in both end markets and stronger than anticipated volumes in refinish. Performance Coatings' Q1 adjusted EBIT was $109 million versus $95 million in the same period last year. Adjusted EBIT growth was driven by a favorable year-over-year Refinish contribution and stable Industrial earnings. We believe Refinish is starting the year on a good trajectory, and it will deliver another record performance in 2023. In Industrial, the team is driving targeted pricing actions to help reverse inflationary margin pressures. We are actively managing costs to offset weakening construction markets. Segment adjusted EBIT margins improved by 130 basis points to 12.9% in the quarter. Moving to Slide 11. Mobility Coatings' constant currency net sales increased by 24% in the Q1, led by 17% better volumes. New customer wins and above market performance with certain customers enabled us to deliver growth above market again this quarter. Price mix increased by 7%, inclusive of new targeted actions taken in Q1 to accelerate margin recovery. Segment adjusted EBIT improved considerably to $24 million from $1 million in the prior year period. Growth was driven by price and volume, a net favorable price cost benefit being the largest driver of the year-over-year improvement. Offsetting variable cost inflation still represents the most significant opportunity for the mobility team, especially now that global auto production rates are approaching more normal levels. Segment adjusted EBIT margins improved by 530 basis points to 5.4% in the quarter. Turning to our debt and liquidity summary on slide 12. Axalta's balance sheet and liquidity profile remain very healthy. We ended the quarter with slightly over $1 billion in total liquidity, including a cash balance of $512 million. Our net leverage ratio was 3.7 times at the end of the quarter, reflecting an improvement from 3.8 times at December thirty-first. We expect that the strong momentum in our operating performance should drive sequential deleveraging of our balance sheet throughout the year. Cash flow improvement should also begin to aid further deleveraging on both a net and gross basis. We continue to target a long-term net leverage ratio between 2.5 times and 3 times, and expect we will be close to the high end of the target by year-end, absent any meaningful capital allocation decisions outside of organic investments. Our strong quarterly performance gave us the confidence to pay down $75 million in principal on our term loan during the first quarter, and we paid another $25 million of principal in April as we continue to work to offset the impact of higher interest rates. Gross debt reduction will continue to be a priority for our free cash flow in 2023, and will be balanced with the potential for bolt-on M&A with attractive opportunities as they present themselves. On slide 13, we will review our guidance framework and commentary. For Q2, we expect sales growth between 7% and 10% year-over-year, inclusive of an approximate 1% FX headwind. This framework assumes strong pricing in both segments to offset raw material and labor costs, modest overall volume growth led by stronger Mobility Coatings, but partly offset by softness in Performance Coatings given tough prior year comparisons in Refinish and continued macro pressures in Industrial. We expect to generate adjusted EBIT of approximately $150 million-$170 million or $220 million-$240 million in adjusted EBITDA in the Q2. Sequentially, we expect profitability to continue to improve, led by strong pricing, modest raw material deflation, and the typical seasonal step-up in volume, partly offset by increases in operating expenses. For adjusted earnings per share, we anticipate a range of $0.34-$0.40 for the Q2. Note that our second quarter guidance framework includes approximately $15 million of temporary spending associated with our SAP S/4HANA ERP implementation, in addition to certain costs for third-party consultants assisting with the productivity projects that Chris mentioned earlier. We have planned for elevated maintenance to support the business during the ERP transition to ensure there is no impact to operations or our customers. On raws, we are expecting a shift from two years of hyperinflation to stable to lower costs year-over-year, which we size as low double single-digit impact in the Q2. As we move further into 2023, we will be focused on improving working capital as a percentage of sales through the release of historically high inventory balances. This, along with profitability improvement, represents a potential meaningful source of cash in 2023. We currently assume free cash flow for the year to be approximately $350 million, which is inclusive of $190 million of CapEx. I would like to hand the call back over to Chris for closing remarks. Thanks, Sean. Before we conclude our prepared remarks, I want to thank the team for their efforts this Q1. We're getting traction for our actions, which is evident in our financial performance. Axalta has an excellent value proposition. Simply put, we have strong market leadership, many growth channels, and the best talent and technology in the industry. Combined with the various productivity initiatives in play, I believe we have the formula that will yield strong gains well into the future. With that, we're pleased to answer any questions. Operator, please open the lines for Q&A. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that you limit your questions to one and a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from Christopher Parkinson with Mizuho. Please proceed with your question. Great. Thank you so much. Chris, I don't know if it's your favorite question, but I imagine it's Sean's. Could we discuss, just given the health of your volume growth within Mobility, specifically light vehicle, could we just touch in and dig in a little bit more on the cadence of the Mobility margin recovery process in terms of how you're thinking about the Q1 into the Q2, as well as any longer term thoughts of essentially where you want to get back to over the intermediate to long term? Thank you so much. Absolutely, Chris. Good morning. I'd love to start, and then I'll give chance for Sean to cover anything that I've missed. First, as you can see through our cadence, you know, we had a great Q4, and if you look into Q1, we've continued with a majority of the carryover pricing, but we also had incremental pricing on the mobility space. Where do we wanna get to? Obviously, the cadence is that we will continue pricing as I see going through the back end of the year. A lot of the factors that are driving this, you know, yes, we are seeing modest improvements in some of the raw material costs, but some of the baskets have headwinds. As you know, we have headwinds in labor, we have headwinds in energy, we have headwinds in certain TiO2 specialty raws. Certainly something that we are focused on. Going back again to Q4, we had a gap of about $120 million of price cost across these two markets, whether it be Mobility or Industrial. Certainly for us to continue to provide the level of service to our customers, we certainly intend to drive more pricing through the back end of the backend half of the year. That's the focus, and the cadence is that we will continue pricing specific to those areas that I've addressed. Now I'll turn it over to Sean for anything more specific. Yeah. I mean, Chris, we're really happy with the progress. By no means are we declaring victory at this stage. You know, we did $18 million in EBIT in the Q4, which was inclusive of about $5 million of catch up on pricing. You back that out, it's actually pretty impressive as far as margin recovery and absolute EBIT growth from Q4 to the Q1. Just given the volume rebound as well as us outperforming the market, and we expect to continue to outperform the market, you know, for the rest of the year. We do expect sequentially, we'll continue to see margin increases as we move through the year. Great. That's helpful. Just as a quick follow-up, similar question for performance within Refinish. You know, it seems like the markets are slowly but steadily getting back, you know, to 2019 levels. Obviously, the cadence of that is slightly debatable, but you've also been consistently discussing, you know, a lot of pent-up demand, a lot of conversion optionality. There's been some advantageous, let's say, consolidation among some of your best customers in the top 10, U.S. MSOs. Can you speak to how we should think about your volume progression versus the market for 2023, and then just any longer term thought there as well? Once again, that would be helpful. Thank you so much. Sure. Absolutely, Chris. Again, you know, great quality business, you know, that's stable even through, you know, some soft recessions we've seen in our past. You know, what's really driving the business, if you look from, you know, Q4 to Q1, and as we look through the rest of the year, I do believe there's more opportunity here on the growth side. The team did a great job. If you think about Q1, we talked about the fact that they grew 400 body shops on top of the 140 distribution points. Beyond that, I think it's really the additional incremental opportunity when we see adjacencies, you know, with the U-POL acquisition, what we've been able to get into with body fillers and aerosols. The proof is also with what I discussed in the comments, which is really pivoting towards the DIY space and the entry into AutoZone and O'Reilly's and the opportunity to put us on 16,000 retail shelves really gives us an opportunity to see that business growing through the back end. I look forward to talking to you more about that over the next two quarters. The only other add to that, Chris, would be just around market recovery. North America is still down 5%-7% opposite 2019, although we continue to sort a outperform the market, and Europe's still down about 3%-4%. We continue to expect market recovery. We're not calling exactly when it's gonna get back to 2019 levels, but that should be some nice upside as you think about the growth algorithm. Our next question comes from Kevin McCarthy with Vertical Research Partners. Please proceed with your question. Yes. Good morning. When you compare electric vehicles to ICE vehicles, have you observed any meaningful difference in collision rates, or is it the case that collision rates are nearly identical for those two categories? Good morning, Kevin, and thanks for the question. I think it's too early to make a call on that. I think, you know, where the volumes are, and so far what we've seen, through what's coming through the body shops, I think it's a bit too early to make the call. What I am proud of is really how well the mobility teams have been winning on the EV side. As you think about where the technology is going in the future, we've had some great new wins, whether it's in China or also in North America with some of the largest players on the EV space. Very proud of that, and I think in terms of how that market is transitioned at this point, I would call it a bit too early to call. Okay. As a follow-up, if I may, I believe you took a charge to exit a business in Mobility. Can you speak to what you're exiting and why as well as the sales impact from that decision? Absolutely. This is our APC business, which is our automotive plastics components business. It's something that we had acquired in 2016. You know, from our perspective, this is not core. It was something that was small and something that we were not focused on and just did not scale appropriately. In terms of sales, it's between $1 million-$2 million. It's nothing that's meaningful that will impact our business. I do believe this is an opportunity for somebody else to really drive some growth, but it's certainly not an area of focus for us. Kevin, just to add, $1 million-$2 million in year from a sales perspective. It was about $8 million in 2022. This is a small segment within the APC segment. To Chris' point, it wasn't high margin, but clearly, you know, not material and just not strategic for us. Our next question comes from Ghansham Panjabi with Baird. Please proceed with your question. Hey, guys. Good morning. I guess first off, on slide eight, you know, you have a nice chart with the projection of global light vehicle builds with a, you know, nice improvement estimated through 2025. How are you kinda thinking about the risk about a broader macroeconomic slowdown impacting the recovery cadence? You know, I assume that in 2023, there's some sort of inventory replenishment that'll still take hold, but I'm curious as to your thoughts, as we look out to 2024 and beyond. Let me, I'll start off and maybe Sean can jump in. You know, just to give you. Good morning again. Just to give you a perspective on the short-term view, I think, you know, as I think about our approach, we've been a bit conservative looking at 2023. Our forecast is coming in at 83-84 with the markets or the external forecasters being just heading north of 85.5. I do believe there's a bit more of a tailwind on the auto side. To your question more on the long term and as we think about, you know, where we're going through 2025, Ghansham, I think there's more, you know, with where these, the channel is and where inventory levels are through the channel, I would say we are, you know, still at historic lows. That I do believe that there's a, you know, more of an opportunity as this builds out. In terms of recession, you know, as we talked about in our prepared remarks, this is one of the primary drivers why we're ensuring that we have some, you know, we're investing in our operations and looking at our SG&A costs in the possibility of a soft recession so we can provide some cushion. All in all, from everything we're seeing with, you know, how well the auto OEMs are performing, you can see, you know, whether it's GM's results and, you know, also on the heavy side, everything's driving to a strong year. Again, we're also cushioning with the possibility of a soft recession for the back end. Yeah. Ghansham, just to add, I mean, we've always characterized the normal global auto build year of 88 -89 million builds, and given the fact we've essentially been in a recession for the last 3 years, you know, every month that goes by for 2023, we're gaining a little bit more confidence that, you know, this year will certainly be better than 2022 as far as global auto builds. Industry forecasters are expecting, you know, bullish outlook for the next 4-5 years. It's just a matter of the pace, but, you know, we feel pretty good that we're gonna see recovery for the next few years. Okay, perfect. For my second question, you know, on the one-off cost, the ERP, et cetera, of $50 million for the second quarter, will there be any material spillover into the Q3? You know, I'm just asking because your margin progression phase will basically stall out after just two quarters, given the cost implementation for the Q2. Is there any spillover into the back half of the year? Yeah. We're not expecting any meaningful spillover to the third quarter in regards to the ERP implementation. We're actually going live this month. It'll carry over to June, but then it'll be largely wrapped up as far as the support costs. We are really happy with the margin progression, looking at the midpoint of the range, you know, and adding back these $50 million, and we're jumping up from 16.5% from a margin perspective, even a margin up to over 18%, 18% at the midpoint. We are really happy with the progression that we're seeing. Our next question comes from John McNulty with BMO Capital Markets. Please proceed with your question. Yeah. Good morning. Thanks for taking my question. With regard to free cash flow, your $350 million target, I guess how much does that assume in terms of working capital release? 'Cause I guess looking back over the last... basically since you guys went public, I think you've only come in below that $350 maybe once, and I would expect this year to be a big free cash flow kind of yielding year, so from a working capital release. Can you help us to kinda connect the dots on that? Yeah. John, there's a few anomalies this year. CapEx, you know, creeping up to $190 million, which is in our guidance construct. That's after three years of sort of underspending. You know, if you go back to 2020, it was $80 million, jumped up to $120 million, we did $150 million last year. We have a little bit of a catch-up this year, as well as the S/4 implementation, which is driving CapEx up a bit higher than normal years. Interest expense is the other big call-out. We're seeing about $70 million of incremental interest expense. Specific to working capital, the expectation is working capital as a% of net sales is going to come down. Working capital as far as contributions will be fairly minimal from an overall free cash flow perspective. That's, you know, partly due to we're expecting growth for the full year, which you're gonna see, you know, some level of cash outflow on accounts receivable. Got it. Okay. No, that's helpful. On the Refinish business in China, it sounds like it was kind of off to a slow start. Can you give us an update as to how that's progressing? I would think with China opening up a bit, people going back to work, not being locked down, etc, like, you should start to see a recovery there. Have you started? Has that started already, or is that something more on the come for later on this year? Yeah. We're seeing, you know, some growth, some nice growth in China. I would say our, you know, as we start the first month, we're looking in plan to what we're giving as our Q2 guide. Again, remember, you know, China, John, is a small component. You know, it's 10% of our overall revenue. It is something that's meaningful, but you know, something that doesn't impact our overall business, meaning, you know, in a big way. You know, the markets that I am focused on are obviously our largest markets when it comes to Refinish North America and Europe. These two markets are... You know, if I look at Q4 to Q1, we saw, you know, a great jump, then also the incremental sales that we're getting on the adjacencies or in the medium as well as the economy markets are really driving through some good results. That's what's driving the performance you see in Q1 as well as our guide for Q2. Our next question comes from David Begleiter with Deutsche Bank. Please proceed with your question. Thank you. Good morning. Chris, you mentioned the opportunity in procurement and operations. Could you begin to quantify or, you know, talk about the potential opportunity in those two areas? Sure. Maybe, you know, just jumping off where Sean left off, I think we talked about $15 million for the quarter as the one-time cost. A large majority of that is for the S/4 implementation, for which, you know, we have an excellent IS team that's doing a great job preparing us for the launch this month. You know, we have tremendous amount of work here because this is for our North American business, and it never hurts to have some backup. That's where most of the spend is. We are looking at having another team look at the opportunities to accelerate our cost optimization in the plants, whether it's the procurement, supply chain, and the inventory management. Those groups are just starting out right now, and primarily what I'd like to do is take a quarter or so and see, you know, what comes out, what is the outcome from those results. I look forward to giving you a better perspective of that in the next quarter or certainly by two quarter from now. Yeah. John, just qualitatively, we are expecting a quick payback. The investment that we're doing, and the spending in the second quarter, you know, we expect to benefit in the back half of this year. To Chris's point, we'll give some more elements, you know, as we get into the July, early August time period. Understood. Chris, just on the 400 body shop wins, could you provide some context? How many did you win last quarter or even last year? Thank you. I mean, last year was three times that, John, for perspective. This is what's continuing to contribute to our market outperformance. Our next question comes from Aleksey Yefremov with KeyBanc Capital Markets. Please proceed with your question. Thanks, and good morning, everyone. Chris, you know, Axalta has been a standalone company for a long time, long history of productivity focus. Could you just expand on why procurement and operations have a lot of room for improvement? Sure, absolutely. I think Aleksey Yefremov, if I think through not specific to Axalta, but more in the broader space, starting from, you know, the COVID lockdowns as well as, you know, the supply chain disruptions that followed it, as well as, you know, specifically in Europe with the Russia-Ukraine situation. I think from an operational element, there's been an enormous amount of strain and stress in the system. You know, as we said a quarter ago, the absolute focus is on operations. When you take that and you break it down, you know, and where we can really drive the performance in the organization, as I said in my prepared remarks, there are two buckets that have the most significant impact. You know, our variable costs are about $2.5 billion. Our fixed costs are about $1.5 billion. Anything that we do here, even small, drives a meaningful, you know, drop down to our results. These are the two areas I'm very, very focused on. We have strong operational teams here, but again, you know, going through all the issues with, in terms of the supply chain as well as the S/4 launch, there is still opportunity here. I would say, you know, that's. Simply put, in my first 90 days, there is more operational upside than I had originally thought. Here, the effort is to help those strong teams really get enablers by doubling down and putting focus teams to get that in the back end as we. Which I look forward to talking to you more about in a quarter from now. Thanks for this, Chris. Turning to Refinish, you've over the past, you know, several quarters announced several wins in the U.K. and another MSO wins and I think you also talked about potential, potentially more wins. Could you update us on how those won contracts are ramping and how your growth strategy in European Refinish is progressing? Sure. Let me start off with just a perspective. Again, you know, the U-POL acquisition was in Europe as well as on top of that, you know, just the fact that we have our retail stores in Europe is really helping us drive this business. On top of that, you know, in terms of the growth, we are seeing a bit more growth in Europe. I do plan to talk to you more about this in a quarter from now because I do believe there is even more opportunity on the European front. Again, you know, just four months in the seat, and what I'm doing right now is really spending time, you know, going through the three business units and really breaking it down piece by piece and understanding where value is created. To your point, obviously, you know, Axalta does have, you know, an enormous performance opportunity through refinish. This is something that we're looking at how can we really augment this, become a little bit more resilient, a little bit more responsive, and also find opportunities to really grow this business in regions outside our strongest market, obviously being North America. Our next question comes from Vincent Andrews with Morgan Stanley. Please proceed with your question. Thank you, and good morning, everyone. Chris, I'm curious, what's the message you've been giving internally, not just to your leadership team, but to the sort of rank and file, you know, from a cultural perspective in terms of what you're trying to drive here, what buy-in you need from them, and, you know, obviously we already talked about there's gonna be a little bit more restructuring, and all that comes with that. What's the message you've been providing, and have you been pleased with the uptake and the energy level that you're seeing in the organization, and is there anything else that you think you might have to do differently there? Yeah, thank you very much for the question, Vincent. I love it. In the sense, you know, my first quarter, you know, going through the 120 days has reinforced my belief that Axalta has great products that our customers really want. You can see that, you know, even if you take out the price equation, we're continuing to grow through Q1. We have a lot of excellent people doing the right things. What you learn about Axalta very quickly is that we're incredibly customer-centric, which is excellent as long as you're competitive and performing well financially. Here, the focus, whether, you know, actually it started prior to my time with Rakesh, is the focus on execution to ensure we drive that profitability. If you look at Q1, certainly those results have come through, whether it's, you know, just take the one metrics of price mix, and we're up 9%, as Sean pointed out. It's great to see that when we focus the organization and you focus them on execution, they certainly deliver. If I look at the short-term strategy, the short-term strategy is to continue to focus on execution. We're gonna drive the focus on price. We're gonna drive the focus on cost. On the cost side, it's purely execution around operations, around purchasing, around supply chain. We have obviously tailwinds that are helping us, whether it's through our three of our four end markets on volume, and then to most of the questions here, the increasing share, whether it's Mobility and Refinish are helping. If you focus on execution across operations as well as continue to drive the pricing across certainly two of our end markets, we certainly will get back to the normalized profitability that we saw pre-pandemic. That's the message I'm driving. As you can see from the Q1 results, it's certainly being bought up by the team. Just as a follow-up, as we move through the year, Sean, how should we be thinking about incremental margins? You know, is what sort of implied in the 2Q guidance, is that what we should be thinking about over the balance of the year, or should it step up as presumably raws become more favorable in the back half and, you know, obviously different volume scenarios in the back half. How should we be thinking about incrementals? Yeah. I mean, we're clearly not providing full year guidance here, but what I can signal is two things. You know, you should continue to expect margin recovery sequentially as we move through the year in every end market. The other sort of key data point is we are expecting the second half of the year to be stronger than the first half from an overall EBITDA perspective. Our next question comes from Michael Leithead with Barclays. Please proceed with your question. Great. Thanks. Good morning, guys. Just one for me on Mobility, obviously two strong quarters in a row with volume well ahead of the auto growth. When you drill into that internally, is it your specific customer mix? Is there new platform wins? Just help us triangulate from the outside the difference there and just broadly how we should think about your volumes to trend this year relative to, again, however industry build rates shake out? I think I'm gonna start this and then Sean can give a little bit more color on margins. In terms of volumes and growth, as we've, you know, talked about in the prepared remarks, we certainly are seeing volume growth that is outpacing the market. It's really going back to the, you know, the team has done an excellent job starting last year of driving $200 million of incremental growth through 2024. What you're seeing is that volume dropping down into our P&L already in Q1. We expect that growth to continue to hit the run rate target of $200 million in 2024. The team's done a great job there. The wins, where are they? Across the board. We're seeing wins in China, specifically on some great EV platforms, but certainly growth also in Europe as well as North America on some traditional strong ICE platforms. With that. Yeah, just I mean, just to add, you know, we have a lot of things going in our favor on the Mobility side. You have market recovery, you got new share wins, you actually have some of our key customers, their platforms are just clearly outperforming the market. Probably a case in point is China. You know, we were up almost 19%, that market was down about 8%. You know, part of that, a big part of that is just some of the platforms that we're on are outpacing the overall market there in China. On top of that, we have nice pricing tailwinds. All that's yielding to better margin recovery over time. Great. Thank you. Our next question comes from Duffy Fischer with Goldman Sachs. Please proceed with your question. Good morning. First question is just around raw materials. I think you made a comment about single digits in the back half, but I didn't understand if that was your exit rate at the end of the year, or if you expected to actually capture that much in the H2. Yeah. That was specific to the Q2. We're expecting low single digits from a year-over-year perspective. We didn't give any guidance on the second half, but our expectation is, you know, raws will continue to moderate, but we're not actually calling any sort of data points in regards to Q3 and Q4. Okay. Thank you. When you look sequentially Q1 to Q2, if you take out the two COVID-19 years, you over the last 8 years, you've basically averaged about a $0.12 improvement from Q1 to Q2. And only two times has it been below $0.10. Even if you adjust your $15 million for Q2, you know, it's still seasonally, it looks like kind of a weak step up relative to history. Is that because seasonality has changed, or can you kind of walk through and maybe triangulate the historic move from Q1 to Q2 versus what you're looking at this year? Duffy, the two anomalies that are really happening from first quarter to Q2, and when you compare, quite frankly, the prior years, is interest expense is picking up quite a bit, going from $48 million up to $56 million, and then you got taxes jumping. You know, historically, we've run around 22%-23%. You know, we're expecting closer to 25% effective tax rate this year. There are your probably two call-outs for why you're not apples to apples. Okay, great. Thank you, guys. You're welcome. Our next question comes from Steve Byrne with Bank of America. Please proceed with your question. Yes, thank you. It looks like it's been five years since your Mobility segment posted a revenue that you had in this quarter. Back then you had a 10% EBIT margin. Do you think you can get back to a double-digit EBIT margin in Mobility? When do you think you can get there? Well, I certainly believe that we can get to a double digit Mobility margin. If you look at the actions that we're driving, certainly from a pricing standpoint, from a cost standpoint, that is certainly the focus of the team. You know, even in my first 120 days here, you know, Steve, I absolutely believe that that is an opportunity that we will be focused on and will be a go get. In terms of timing, I think this is... that's the big question. I mean, if you look at the volatility in the economy and just figuring out, you know, what will happen with raw material deflation as a bit, how much of the pricing really will stick, and how much more of the pricing that we have targeted will we get, as well as the cost initiatives. A lot of the programs that we've talked about, whether it's on the procurement side, or as well as the lean opportunities that we have in our plans, there has to be a real focus here on productivity, which should be always part of the algorithm. The question is, you know, what is our timing to get that? I hope to give you a better perspective. At this point, I can't give you an exact time of when we'll get there. Chris, this initiative that you have to, you know, bring in some outside help and drill into productivity and operations and so forth, what has led you to this? Is this your experience? Is this looking at comps? Is this a benchmarking analysis? What gives you the conviction that there is a meaningful opportunity here? It's, it's a bit of all of those. I think it's obviously a bit of my experience from the past. It's, more importantly, it's, you know, I don't want there to be a view that, you know, something's broken in Axalta. It's purely the fact that of just going back to the comps that we had pre-pandemic and the performance levels. We have an incredibly strong team that went through some challenging times through COVID and, you know, the supply chain disruptions as many of us did. I do believe that there are opportunities that, you know, just doubling down the efforts here will drive the performance requirements that we need in the back end. That's, that's where I'm getting the conviction that there's a focus here. Steve, the one thing to add, you know, being the old guy around the table here, the teams are welcoming the help, especially on the procurement side. You know, doubling down on resources with analytics and helping drive RFP outcomes. The procurement team's all about driving value realization. Anything we can do to accelerate that is, quite frankly, welcomed by the team. It's been a nice, you know, teaming effort here to drive improvement. Thank you. You're welcome. Our next question comes from Arun Viswanathan with RBC Capital Markets. Please proceed with your question. Great. Thanks for taking my question. I guess, first off, just wanted to clarify, your deleveraging targets for this year. You know, maybe how much gross debt pay down you expect. Is there any kind of opportunities you can take advantage of to refi and maybe bring down your interest expense going forward? Yeah. I mean, over time, we're still targeting 2.5 to 3 times. As I covered in my remarks, you know, we expect to be at the high end, you know, barring we don't do anything sort of significant from a capital allocation perspective. We are actively looking at both the swap markets, as well as looking at the refinancing markets, just things are not open right now. Sort of the expectation is, you know, we'll be, you know, as far as excess free cash flow, the majority, the vast majority will be used to actually pay down gross debt. We are expecting to be closer to 3.0 times by the end of the year. Okay, thanks. Just on the cost optimization side, are these programs that you're implementing similar to some of the prior Axalta Way, you know, programs, you know, out of that, say, $2.5 billion of fixed costs, how much of that structurally do you think you can take out over the next couple of years? Does that depend on volume? Do you have to add back any as volume recovers? From not being here, I'm not sure how it aligns with the Axalta Way. I, from what I've heard and I, you know, also from listening to Sean, I would say it's not very similar. I think our focus, in First of all, you know, the teams are just starting out, so defining exactly what is the opportunity, is I would say a little bit too early to call. All that said, you know, as Sean alluded to in the last question, the teams are really looking forward to, you know, driving some of this opportunity, especially on the purchasing side. If you think about the fact that we took $650 million of, you know, incremental cost or 46% variable cost increase through 2021 to 2022. That is something that is historic and not in the 10 years of Axalta being in existence. Again, that's the first focus of driving to ensure that we can pull some meaningful cost out of there that will drive to the bottom line. Thanks. You're welcome. Our next question comes from Mike Sison with Wells Fargo. Please proceed with your question. Hey, good morning, guys. Nice start to the year. Sean, I just wanted to make sure I heard you right. In terms of the H1 adjusted EBIT, did you say it was gonna be better than the second half? If that's the case, is it really just the demand environment in the H2 is gonna be more difficult than the first? No, Mike, you have it flipped. The second half should be more favorable than the first half. Okay. The drivers for the better H2 would just be price rise and a little bit better demand? That's exactly right. Great. Thank you. You're welcome. We have reached the end of our question and answer session. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.