8-K: Axalta Adjusts Non-GAAP Financial Metrics Presentation to Align with Industry Standards

Axalta Coating Systems Ltd. will change its non-GAAP financial metrics presentation, ceasing adjustments for step-up depreciation and amortization from the DuPont acquisition, while starting to adjust for all acquired intangibles amortization.

Summary

• Axalta Coating Systems Ltd. is changing how it presents certain non-GAAP financial metrics to better align with industry peers and market practices.
• The company will stop adjusting for step-up depreciation and amortization related to the DuPont Performance Coatings acquisition when calculating Adjusted EBIT and Adjusted Net Income.
• Concurrently, Axalta will begin adjusting for the amortization of all acquired intangible assets in these calculations.
• These changes will also affect the calculations of Return on Invested Capital (ROIC) and Adjusted Diluted EPS, as they are derived from Adjusted EBIT and Adjusted Net Income.
• The company has provided revised reconciliations for all previously disclosed fiscal quarters in 2023 and 2024 in an attached exhibit.
• Axalta's 2026 financial targets, including a 15% ROIC target and over 60% Adjusted Diluted EPS growth from 2023, remain unchanged.
• The 2023 baseline for Adjusted Diluted EPS growth will be updated to $1.68 per share, implying a 2026 target of approximately $2.69 per share.

Sentiment

Score: 7

Explanation: The document is neutral to slightly positive. The changes are presented as a move towards industry best practices and the company reaffirms its financial targets. There are no indications of negative performance or significant risks.

Positives

• The changes in non-GAAP metrics presentation align Axalta more closely with its industry peers.
• The company's 2026 financial targets remain unchanged despite the metric presentation changes.
• The company is providing updated reconciliations for past periods, enhancing transparency.

Negatives

• The change in calculation methodology makes it more difficult to compare results to previous periods without the provided reconciliations.
• The company is not providing a reconciliation for Adjusted Diluted EPS or ROIC on a forward-looking basis.

Risks

• The company's forward-looking statements are subject to various risks and uncertainties, including economic, competitive, governmental, and technological factors.
• The execution of the 2026 A Plan is subject to risks and assumptions that may cause actual results to differ materially.
• The non-GAAP financial measures used by Axalta may differ from similarly titled measures reported by other companies.

Future Outlook

Axalta anticipates providing an update on its progress against the 2026 A Plan as part of its fourth quarter and full-year 2024 earnings. The company's 2026 targets include a 15% ROIC and over 60% Adjusted Diluted EPS growth from 2023.

Management Comments

• Axalta is changing the presentation of certain non-GAAP financial metrics to align more closely with the company's peers and market practice.
• The company has determined that no changes to the 2026 financial targets are required as a result of these changes.

Industry Context

The change in non-GAAP financial metrics presentation is a move to align with industry standards and practices, potentially making Axalta's financial reporting more comparable to its competitors. This also follows a comment letter from the SEC, indicating a regulatory push for more standardized reporting.

Comparison to Industry Standards

• The document states that the changes are being made to align more closely with the company's peers and market practice, suggesting that other companies in the coatings industry may already be using similar non-GAAP adjustments.
• Specific comparable companies are not named in the document, but the implication is that Axalta is moving towards a more common industry standard for reporting adjusted earnings metrics.
• The document does not provide specific details on how Axalta's ROIC or Adjusted Diluted EPS compare to industry benchmarks, but the 2026 targets of 15% ROIC and over 60% Adjusted Diluted EPS growth suggest a desire to be a leader in the industry.

Stakeholder Impact

• Shareholders will benefit from more transparent and comparable financial reporting.
• Investors will need to understand the changes in non-GAAP metrics to accurately assess the company's performance.

Next Steps

• Axalta will provide an update on its progress against the 2026 A Plan as part of its fourth quarter and full-year 2024 earnings.

Key Dates

Keywords

Non-GAAP Financial Metrics, Adjusted EBIT, Adjusted Net Income, ROIC, Adjusted Diluted EPS, Amortization, DuPont Performance Coatings, Financial Targets, 2026 A Plan