[Executive Summary & Consolidated Results Overview](index=1&type=section&id=Executive%20Summary%20%26%20Consolidated%20Results%20Overview) This chapter provides an overview of Quaker Houghton's financial performance, highlighting key consolidated results for Q4 and full year 2023, along with strategic highlights [Fourth Quarter 2023 Consolidated Results](index=1&type=section&id=Fourth%20Quarter%202023%20Consolidated%20Results) Q4 2023 saw a 4% net sales decrease, but Quaker Houghton achieved a $20.2 million net income and 13% Adjusted EBITDA growth, reversing a prior year net loss Q4 2023 Consolidated Financial Performance | Metric | Q4 2023 ($ in thousands) | Q4 2022 ($ in thousands) | Change (%) | | :----------------------------------- | :----------------------- | :----------------------- | :--------- | | Net sales | 467,109 | 484,808 | -3.65% | | Net income (loss) attributable to Quaker Chemical Corporation | 20,198 | (75,957) | N/A | | Net income (loss) attributable to Quaker Chemical Corporation common shareholders – diluted | 1.12 | (4.24) | N/A | | Non-GAAP net income | 31,949 | 25,001 | 27.79% | | Non-GAAP earnings per diluted share | 1.78 | 1.39 | 28.06% | | Adjusted EBITDA | 76,964 | 67,923 | 13.31% | * The decrease in Q4 2023 net sales was primarily driven by a **~4% decrease in selling price and product mix** and a **~1% decrease in sales volumes**, partially offset by a **1% favorable foreign currency translation**[4](index=4&type=chunk) * Adjusted EBITDA increased by approximately **13% year-over-year** in Q4 2023, primarily reflecting an improvement in gross margins[5](index=5&type=chunk) [Full Year 2023 Highlights & CEO Commentary](index=1&type=section&id=Full%20Year%202023%20Highlights%20%26%20CEO%20Commentary) For the full year 2023, Quaker Houghton achieved record net sales and earnings, demonstrating significant profitability improvement and generating record operating cash flow FY 2023 Consolidated Financial Performance | Metric | FY 2023 ($ in thousands) | FY 2022 ($ in thousands) | Change (%) | | :----------------------------------- | :----------------------- | :----------------------- | :--------- | | Net sales | 1,953,313 | 1,943,585 | 0.50% | | Net income (loss) attributable to Quaker Chemical Corporation | 112,748 | (15,931) | N/A | | Net income (loss) attributable to Quaker Chemical Corporation common shareholders – diluted | 6.26 | (0.89) | N/A | | Non-GAAP net income | 137,643 | 105,320 | 30.69% | | Non-GAAP earnings per diluted share | 7.65 | 5.87 | 30.32% | | Adjusted EBITDA | 320,379 | 257,150 | 24.59% | | Operating cash flow | 279,000 | N/A | N/A | * Quaker Houghton delivered record full year adjusted EBITDA of **$320.4 million** and operating cash flow of **$279.0 million** in 2023[6](index=6&type=chunk) * The Board of Directors approved a new share repurchase program of up to **$150 million** of its common stock, effective immediately with no expiration date[6](index=6&type=chunk) [Business Outlook & Segment Performance](index=3&type=section&id=Business%20Outlook%20%26%20Segment%20Performance) This chapter outlines the company's forward-looking expectations for market conditions and earnings growth, alongside a detailed analysis of segment-specific financial results for Q4 and full year 2023 [Business Outlook](index=3&type=section&id=Business%20Outlook) The company anticipates current market conditions to persist through the first half of 2024 but expects to achieve another year of earnings growth due to ongoing strategic actions and new business wins * Current market conditions are expected to persist through the first half of 2024[7](index=7&type=chunk) * The Company expects to deliver another year of earnings growth in 2024, benefiting from advancing its enterprise strategy and earning new business[7](index=7&type=chunk) * The balance sheet and cash generation capabilities are strong, with a commitment to capital allocation priorities aimed at enhancing shareholder value[7](index=7&type=chunk) [Fourth Quarter and Full Year 2023 Segment Results](index=3&type=section&id=Fourth%20Quarter%20and%20Full%20Year%202023%20Segment%20Results) In Q4 2023, Americas net sales declined, while EMEA and Asia/Pacific net sales remained consistent; for the full year, all segments saw increased operating earnings due to improved margins * The Company's reportable segments are Americas, EMEA, and Asia/Pacific, following a reorganization effective January 1, 2023[8](index=8&type=chunk)[30](index=30&type=chunk) [Segment Net Sales Analysis](index=3&type=section&id=Segment%20Net%20Sales%20Analysis) Americas segment net sales declined in Q4 2023 due to lower volumes and price/mix, while EMEA and Asia/Pacific maintained consistent net sales, with full year 2023 showing increased selling price and product mix across all segments Segment Net Sales by Region | Segment | Q4 2023 Net Sales ($ in thousands) | Q4 2022 Net Sales ($ in thousands) | FY 2023 Net Sales ($ in thousands) | FY 2022 Net Sales ($ in thousands) | | :---------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Americas | 226,564 | 243,937 | 977,095 | 946,516 | | EMEA | 135,745 | 135,769 | 571,347 | 562,508 | | Asia/Pacific | 104,800 | 105,102 | 404,871 | 434,561 | | Total | 467,109 | 484,808 | 1,953,313 | 1,943,585 | * Americas Q4 2023 net sales declined due to decreased sales volumes and selling price/product mix, partially offset by favorable foreign currency translation[10](index=10&type=chunk)[11](index=11&type=chunk) * EMEA Q4 2023 net sales were consistent year-over-year, as increased sales volumes and favorable foreign currency translation were offset by a decline in selling price and product mix[10](index=10&type=chunk) * Asia/Pacific Q4 2023 net sales were also consistent, with increased sales volumes offsetting declines in selling price/product mix and unfavorable foreign currency translation[10](index=10&type=chunk) * Selling price and product mix increased in all segments for the full year 2023 compared to 2022[11](index=11&type=chunk) [Segment Operating Earnings Analysis](index=3&type=section&id=Segment%20Operating%20Earnings%20Analysis) All three segments experienced an increase in operating earnings for both Q4 and full year 2023, primarily attributed to improved operating margins consistent with ongoing initiatives Segment Operating Earnings by Region | Segment | Q4 2023 Operating Earnings ($ in thousands) | Q4 2022 Operating Earnings ($ in thousands) | FY 2023 Operating Earnings ($ in thousands) | FY 2022 Operating Earnings ($ in thousands) | | :---------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Americas | 61,756 | 59,547 | 266,036 | 223,629 | | EMEA | 23,735 | 17,562 | 104,811 | 76,364 | | Asia/Pacific | 31,854 | 29,696 | 118,458 | 105,842 | | Total | 117,345 | 106,805 | 489,305 | 405,835 | * Operating earnings increased in all three segments in Q4 2023 compared to the prior year, and also for the full year 2023[13](index=13&type=chunk) * The increase in operating earnings was primarily driven by an improvement in operating margins across all segments, consistent with the Company's ongoing margin improvement initiatives[13](index=13&type=chunk) [Financial Position & Strategic Actions](index=3&type=section&id=Financial%20Position%20%26%20Strategic%20Actions) This chapter details Quaker Houghton's improved cash flow and liquidity, along with recent strategic developments including an acquisition and a new share repurchase program [Cash Flow and Liquidity](index=3&type=section&id=Cash%20Flow%20and%20Liquidity) Quaker Houghton significantly improved its net operating cash flow in 2023, reaching a record $279.0 million, while also reducing total gross debt to $755.6 million and net debt to approximately $561.1 million * The Company generated **$279.0 million** in net operating cash flow for the full year 2023, a significant improvement of **$237.2 million** compared to **$41.8 million** in 2022[14](index=14&type=chunk) * Total gross debt decreased to **$755.6 million** at December 31, 2023, from **$933.6 million** at the end of 2022[15](index=15&type=chunk) * Net debt was approximately **$561.1 million** as of December 31, 2023, with a net debt to trailing twelve months adjusted EBITDA ratio of approximately **1.8x**[15](index=15&type=chunk) [Recent Strategic Developments](index=5&type=section&id=Recent%20Strategic%20Developments) In February 2024, Quaker Houghton expanded its EMEA segment through the acquisition of I.K.V. Tribologie (IKVT), and the Board of Directors approved a new $150 million share repurchase program * In February 2024, Quaker Houghton acquired I.K.V. Tribologie (IKVT) and its subsidiaries for approximately **27.0 million EUR** (**$29.1 million**)[17](index=17&type=chunk) * IKVT specializes in high-performance lubricants and greases for automotive, aerospace, electronics, and other industrial markets, and will be part of the Company's EMEA segment[17](index=17&type=chunk) * The Board of Directors approved a new share repurchase program, authorizing the Company to repurchase up to **$150 million** of its common stock, effective immediately[18](index=18&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) This chapter explains Quaker Houghton's use of non-GAAP financial measures, providing reconciliations for operating income, EBITDA, and earnings per diluted share, along with notes on adjustments and segment reporting [Explanation of Non-GAAP Measures](index=5&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Quaker Houghton utilizes non-GAAP financial measures to provide supplemental information, excluding non-recurring or non-core items to offer a clearer understanding of financial performance and facilitate comparisons * Non-GAAP financial measures (EBITDA, adjusted EBITDA, non-GAAP operating income, non-GAAP net income, non-GAAP EPS) are provided as supplemental information to enhance understanding of financial performance, indicate future operating performance, and facilitate comparison among fiscal periods[19](index=19&type=chunk) * These non-GAAP measures exclude items not indicative of future operating performance or not considered core to the Company's operations[19](index=19&type=chunk) * Definitions are provided for EBITDA (net income before D&A, interest, taxes), adjusted EBITDA (EBITDA +/- non-core items), non-GAAP operating income (operating income +/- non-core items), and non-GAAP net income/EPS (adjusted EBITDA less adjusted D&A, interest, and taxes)[20](index=20&type=chunk)[21](index=21&type=chunk) [Non-GAAP Operating Income and Margin Reconciliations](index=6&type=section&id=Non-GAAP%20Operating%20Income%20and%20Margin%20Reconciliations) This section provides a reconciliation of GAAP operating income to non-GAAP operating income and margin for the three and twelve months ended December 31, 2023 and 2022, adjusting for specific items Non-GAAP Operating Income and Margin Reconciliation | Metric | Q4 2023 ($ in thousands) | Q4 2022 ($ in thousands) | FY 2023 ($ in thousands) | FY 2022 ($ in thousands) | | :-------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Operating income (loss) | 48,253 | (53,611) | 214,495 | 52,304 | | Non-GAAP operating income | 50,884 | 48,984 | 227,774 | 177,891 | | Non-GAAP operating margin (%) | 10.9% | 10.1% | 11.7% | 9.2% | [EBITDA, Adjusted EBITDA, and Non-GAAP Net Income Reconciliations](index=6&type=section&id=EBITDA%2C%20Adjusted%20EBITDA%2C%20and%20Non-GAAP%20Net%20Income%20Reconciliations) This section details the reconciliation from GAAP net income to EBITDA, Adjusted EBITDA, and non-GAAP net income for the three and twelve months ended December 31, 2023 and 2022, by adjusting for various non-core items EBITDA, Adjusted EBITDA, and Non-GAAP Net Income Reconciliation | Metric | Q4 2023 ($ in thousands) | Q4 2022 ($ in thousands) | FY 2023 ($ in thousands) | FY 2022 ($ in thousands) | | :-------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Net income (loss) attributable to Quaker Chemical Corporation | 20,198 | (75,957) | 112,748 | (15,931) | | EBITDA | 71,591 | (33,083) | 302,052 | 123,087 | | Adjusted EBITDA | 76,964 | 67,923 | 320,379 | 257,150 | | Adjusted EBITDA margin (%) | 16.5% | 14.0% | 16.4% | 13.2% | | Non-GAAP net income | 31,949 | 25,001 | 137,643 | 105,320 | [Non-GAAP Earnings per Diluted Share Reconciliations](index=8&type=section&id=Non-GAAP%20Earnings%20per%20Diluted%20Share%20Reconciliations) This section provides a reconciliation of GAAP earnings per diluted share to non-GAAP earnings per diluted share for the three and twelve months ended December 31, 2023 and 2022, by adjusting for various non-core items Non-GAAP Earnings per Diluted Share Reconciliation | Metric | Q4 2023 ($) | Q4 2022 ($) | FY 2023 ($) | FY 2022 ($) | | :-------------------------------------------------------------------------------- | :---------- | :---------- | :---------- | :---------- | | GAAP earnings (loss) per diluted share attributable to Quaker Chemical Corporation common shareholders | 1.12 | (4.24) | 6.26 | (0.89) | | Non-GAAP earnings per diluted share | 1.78 | 1.39 | 7.65 | 5.87 | [Notes on Non-GAAP and Segment Measures](index=8&type=section&id=Notes%20on%20Non-GAAP%20and%20Segment%20Measures) This section provides detailed explanations for adjustments made in non-GAAP reconciliations and clarifies the company's segment reporting structure, which was reorganized effective January 1, 2023 * Combination, integration, and other acquisition-related expenses (credits) in 2022 included legal, financial, and advisory costs for integration activities and other acquisitions, as well as income/expenses related to indemnification assets and a gain from the sale of real property assets[28](index=28&type=chunk) * Depreciation and amortization adjustments include amortization expense related to the fair value step-up for a Houghton joint venture in Korea[28](index=28&type=chunk) * Adjusted taxes on income include current and deferred income tax impacts of reconciling items and specific tax charges/benefits not considered core or indicative of future performance, such as tax law changes, valuation allowance adjustments, and withholding taxes for repatriation of non-U.S. earnings[28](index=28&type=chunk) * The Company reorganized its executive management team and business structure into three reportable segments: Americas, EMEA, and Asia/Pacific, effective January 1, 2023, with prior period information recast accordingly[27](index=27&type=chunk)[30](index=30&type=chunk) [Consolidated Financial Statements](index=12&type=section&id=Consolidated%20Financial%20Statements) This chapter presents Quaker Houghton's unaudited consolidated financial statements, including statements of operations, balance sheets, and cash flows for the specified periods [Consolidated Statements of Operations](index=12&type=section&id=Consolidated%20Statements%20of%20Operations) The unaudited consolidated statements of operations present the company's financial performance for the three and twelve months ended December 31, 2023 and 2022, detailing net sales, gross profit, operating expenses, and net income (loss) Consolidated Statements of Operations | Metric | Q4 2023 ($ in thousands) | Q4 2022 ($ in thousands) | FY 2023 ($ in thousands) | FY 2022 ($ in thousands) | | :---------------------------------------------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Net sales | 467,109 | 484,808 | 1,953,313 | 1,943,585 | | Gross profit | 171,156 | 156,270 | 705,644 | 612,654 | | Operating income (loss) | 48,253 | (53,611) | 214,495 | 52,304 | | Income (loss) before taxes and equity in net income of associated companies | 34,184 | (68,049) | 153,124 | 7,118 | | Net income (loss) attributable to Quaker Chemical Corporation | 20,198 | (75,957) | 112,748 | (15,931) | | Diluted EPS | 1.12 | (4.24) | 6.26 | (0.89) | [Consolidated Balance Sheets](index=13&type=section&id=Consolidated%20Balance%20Sheets) The unaudited consolidated balance sheets provide a snapshot of Quaker Houghton's financial position as of December 31, 2023 and 2022, detailing assets, liabilities, and equity Consolidated Balance Sheets | Metric | December 31, 2023 ($ in thousands) | December 31, 2022 ($ in thousands) | | :------------------------------------ | :--------------------------------- | :--------------------------------- | | Total current assets | 927,889 | 994,137 | | Total assets | 2,714,211 | 2,821,622 | | Total current liabilities | 367,510 | 354,786 | | Long-term debt | 730,623 | 933,561 | | Total liabilities | 1,329,289 | 1,543,037 | | Total Quaker shareholders' equity | 1,384,319 | 1,277,918 | | Total equity | 1,384,922 | 1,278,585 | [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The unaudited consolidated statements of cash flows outline the cash generated and used by Quaker Houghton across operating, investing, and financing activities for the years ended December 31, 2023 and 2022 Consolidated Statements of Cash Flows | Metric | FY 2023 ($ in thousands) | FY 2022 ($ in thousands) | | :-------------------------------------- | :----------------------- | :----------------------- | | Net cash provided by operating activities | 279,020 | 41,794 | | Net cash used in investing activities | (27,621) | (40,191) | | Net cash (used in) provided by financing activities | (238,606) | 24,672 | | Net increase in cash, cash equivalents and restricted cash | 13,564 | 15,787 | | Cash, cash equivalents and restricted cash at the end of the period | 194,527 | 180,963 | [Additional Information](index=11&type=section&id=Additional%20Information) This chapter provides important context regarding forward-looking statements, details for the investor conference call, and an overview of Quaker Houghton's global leadership in industrial process fluids [Forward-Looking Statements](index=11&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements based on assumptions and expectations about future events, subject to various risks and uncertainties, with the company disclaiming any obligation to update them * Forward-looking statements are based on assumptions and expectations about future events and are subject to risks and uncertainties[32](index=32&type=chunk) * Major risks include demand for products, raw material costs, supply chain disruptions, customer financial instability, rising interest rates, economic recession, geopolitical disruptions, foreign currency fluctuations, and cyber-security breaches[32](index=32&type=chunk) * The Company disclaims any duty or obligation to update or revise any forward-looking statements[32](index=32&type=chunk) [Conference Call Details](index=11&type=section&id=Conference%20Call%20Details) Quaker Houghton announced details for its investor conference call to discuss fourth quarter and full year 2023 performance, scheduled for March 1, 2024, at 8:30 a.m. ET * An investor conference call to discuss Q4 and full year 2023 performance is scheduled for Friday, March 1, 2024, at **8:30 a.m. ET**[33](index=33&type=chunk) * A live webcast and supplemental information can be accessed through the Company's Investor Relations website or by dialing **877-269-7756**[33](index=33&type=chunk) [About Quaker Houghton](index=11&type=section&id=About%20Quaker%20Houghton) Quaker Houghton is recognized as the global leader in industrial process fluids, operating in over 25 countries and serving a diverse customer base with high-performing, innovative, and sustainable solutions * Quaker Houghton is the global leader in industrial process fluids, with operations in over **25 countries**[34](index=34&type=chunk) * Customers include thousands of advanced and specialized companies in steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking industries[34](index=34&type=chunk) * The company provides high-performing, innovative, and sustainable solutions, supported by approximately **4,400 employees** including chemists, engineers, and industry experts[34](index=34&type=chunk)

Quaker Chemical Corporation (NYSE:KWR) Q3 2023 Earnings Call Transcript November 3, 2023 8:30 AM ET Company Participants Jeffrey Schnell - Vice President, Investor Relations Andy Tometich - President and Chief Executive Officer Shane Hostetter - Executive Vice President and Chief Financial Officer Conference Call Participants Mike Harrison - Seaport Research Partners Vincent Anderson - Stifel Justin Ages - CJS Securities Arun Viswanathan - RBC Capital Markets David Begleiter - Deutsche Bank Operator Greetin ...

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |--------------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------------------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|-------|---- ...

```markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Quaker Chemical Corporation show a slight decrease in net sales for the third quarter of 2023 compared to 2022, but a significant increase in net income and operating income, driven by improved gross margins; for the nine-month period, both net sales and net income increased year-over-year; the balance sheet indicates a decrease in total assets and total liabilities since year-end 2022; cash flow from operations improved substantially in the first nine months of 2023 compared to the same period in 2022, primarily due to higher net income and favorable changes in working capital [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $490.6M | $492.2M | $1.49B | $1.46B | | **Gross profit** | $183.3M | $160.7M | $534.5M | $456.4M | | **Operating income** | $59.5M | $44.6M | $166.2M | $105.9M | | **Net income attributable to Quaker Chemical Corporation** | $33.7M | $25.9M | $92.6M | $60.0M | | **Diluted EPS** | $1.87 | $1.44 | $5.14 | $3.35 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Cash and cash equivalents** | $198.4M | $181.0M | | **Total current assets** | $966.3M | $994.1M | | **Total assets** | $2.73B | $2.82B | | **Long-term debt** | $805.0M | $933.6M | | **Total liabilities** | $1.39B | $1.54B | | **Total Quaker shareholders' equity** | $1.34B | $1.28B | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) - Net cash provided by operating activities significantly improved to **$199.5M** for the nine months ended Sep 30, 2023, compared to a use of **$(26.3M)** in the prior-year period. This was driven by higher net income and favorable changes in working capital, particularly accounts receivable and inventories[19](index=19&type=chunk) | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 | 2022 | | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | $199.5M | $(26.3M) | | **Net cash used in investing activities** | $(25.8M) | $(29.6M) | | **Net cash (used in) provided by financing activities** | $(150.5M) | $46.6M | | **Net increase (decrease) in cash and cash equivalents** | $17.4M | $(26.3M) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - In Q1 2023, the company reorganized its management and business structure, resulting in three reportable segments: Americas, EMEA, and Asia/Pacific. The previous Global Specialty Businesses segment was eliminated, and its operations were reallocated. Prior period information has been recast to align with this new structure[24](index=24&type=chunk) - The company initiated a global cost and optimization program in Q4 2022, targeting a reduction of approximately **100** positions globally to improve its cost structure. The program is expected to continue throughout 2023[48](index=48&type=chunk) - In Q1 2023, the company entered into **$300.0 million** notional amounts of three-year interest rate swaps to convert a portion of its variable-rate debt to a fixed rate, managing exposure to interest rate risk[75](index=75&type=chunk)[88](index=88&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) Management reported strong Q3 2023 results despite a challenging economic environment; net sales were nearly flat year-over-year at **$490.6 million**, as price/mix increases and favorable currency translation offset a **4%** volume decline; gross margin significantly improved to **37.4%** from **32.7%**, driving net income up to **$33.7 million** from **$25.9 million** in Q3 2022; the company generated strong operating cash flow of **$199.5 million** in the first nine months of 2023, a significant improvement from the prior year, due to higher earnings and better working capital management; management remains focused on execution amid macroeconomic uncertainty and expects higher earnings and cash flow for the full year 2023 compared to 2022 [Consolidated Operations Review](index=39&type=section&id=Consolidated%20Operations%20Review) - **Q3 2023 vs. Q3 2022:** - Net sales decreased by less than **1%** to **$490.6 million**, as a **2%** increase in price/mix and **2%** favorable FX impact were offset by a **4%** decline in sales volumes[136](index=136&type=chunk) - Gross margin improved significantly to **37.4%** from **32.7%**, driven by value-based pricing initiatives implemented in 2022[138](index=138&type=chunk) - SG&A increased by **6%** to **$122.8 million** due to higher labor-related and incentive compensation costs[139](index=139&type=chunk) - Operating income rose to **$59.5 million** from **$44.6 million**[142](index=142&type=chunk) - **Nine Months 2023 vs. Nine Months 2022:** - Net sales increased **2%** to **$1.49B**, driven by an **11%** increase in price/mix, which offset a **9%** volume decline[149](index=149&type=chunk) - Gross margin expanded to **36.0%** from **31.3%** due to pricing initiatives and moderating raw material costs[151](index=151&type=chunk) - Operating income grew to **$166.2 million** from **$105.9 million**[156](index=156&type=chunk) [Reportable Segments Review](index=41&type=section&id=Reportable%20Segments%20Review) | Segment (Q3 2023 vs Q3 2022) | Net Sales | % Change | Operating Earnings | % Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | :--- | | **Americas** | $245.9M | -3% | $69.1M | +4% | Sales volumes down 8%, offset by price/mix and FX. Earnings up on improved margins. | | **EMEA** | $139.6M | +4% | $27.9M | +80% | Price/mix and FX gains offset 9% volume decline. Strong earnings growth from higher sales and margins. | | **Asia/Pacific** | $105.1M | +2% | $31.0M | +16% | Sales volumes up 6%, partially offset by unfavorable FX. Earnings up on higher sales and improved margins. | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents increased by **$17.4 million** to **$198.4 million** in the first nine months of 2023. The increase was driven by strong operating cash flow of **$199.5 million**, which was partially offset by **$150.5 million** used in financing activities (primarily debt repayment) and **$25.8 million** in investing activities[106](index=106&type=chunk) - The company's total net debt was **$627.5 million** as of September 30, 2023. The company was in compliance with all credit facility covenants and had approximately **$414 million** of unused capacity under its revolver[111](index=111&type=chunk)[112](index=112&type=chunk) - A global cost and optimization program initiated in late 2022 is expected to generate full run-rate cost savings of approximately **$20 million** by the end of 2024, with total cash costs estimated at **1** to **1.5** times the savings[119](index=119&type=chunk) [Non-GAAP Measures](index=35&type=section&id=Non-GAAP%20Measures) | Metric (Q3) | 2023 | 2022 | | :--- | :--- | :--- | | **Adjusted EBITDA** | $84.4M | $70.3M | | **Adjusted EBITDA Margin** | 17.2% | 14.3% | | **Non-GAAP EPS** | $2.05 | $1.74 | - Non-GAAP adjustments primarily exclude items not considered core to operations, such as restructuring charges, strategic planning expenses, currency impacts from hyper-inflationary economies, and certain acquisition-related expenses[124](index=124&type=chunk)[125](index=125&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk.) The company's primary market risk exposure is to interest rate fluctuations due to its variable-rate credit facility; as of September 30, 2023, outstanding borrowings under the facility were **$814.8 million**; to mitigate this risk, in the first quarter of 2023, the company entered into interest rate swaps with a notional amount of **$300.0 million** to convert a portion of its variable-rate debt to a fixed rate - The company is exposed to interest rate risk from its variable-rate Credit Facility, which had **$814.8 million** in borrowings outstanding as of September 30, 2023[184](index=184&type=chunk) - To manage interest rate risk, the company entered into **$300.0 million** of three-year interest rate swaps in Q1 2023, converting a portion of its variable-rate borrowings to an average fixed rate of **3.64%** plus an applicable margin[185](index=185&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures.) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2023; there were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[186](index=186&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of 2023[187](index=187&type=chunk) [PART II. OTHER INFORMATION](index=47&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings.) The company refers to Note 18 of the Condensed Consolidated Financial Statements for information on legal proceedings; the note indicates no new material litigation and states that adequate accruals of approximately **$6 million** have been made for ongoing matters as of September 30, 2023 - For details on legal proceedings, the report incorporates by reference the information in Note 18 of the financial statements[190](index=190&type=chunk) - As of September 30, 2023, the company has accrued approximately **$6 million** for ongoing environmental and litigation matters, with no significant changes reported during the quarter[93](index=93&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors.) The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors described in the company's 2022 Form 10-K[191](index=191&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) During the third quarter of 2023, the company acquired **2,791** shares of its common stock from employees; these acquisitions were related to the payment of exercise prices for stock options or for tax withholding upon the vesting of restricted stock; no shares were repurchased under the publicly announced 2015 Share Repurchase Program | Period (2023) | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July | 2,661 | $195.06 | | August | 130 | $204.79 | | September | 0 | N/A | | **Total Q3** | **2,791** | **$195.37** | - All shares purchased during the quarter were acquired from employees in connection with equity compensation plans and not as part of the publicly announced share repurchase program[192](index=192&type=chunk) [Other Information](index=47&type=section&id=Item%205.%20Other%20Information.) On August 31, 2023, Jeewat Bijlani, Executive Vice President and Chief Strategy Officer, entered into a Rule 10b5-1 written trading arrangement; the plan covers the potential sale of up to **2,900** shares and the exercise and sale of up to **6,338** shares from stock options, effective from December 1, 2023, to July 31, 2024 - On August 31, 2023, an executive officer, Jeewat Bijlani, entered into a Rule 10b5-1 trading plan for the potential sale of company common stock and shares from stock options, scheduled to run from December 2023 to July 2024[194](index=194&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002, as well as Inline XBRL documents ```

Financial Data and Key Metrics Changes - Net sales in Q2 2023 increased by 1% year-over-year to $495 million, driven by an 11% increase in price and mix, offset by a 10% decline in volumes [19][39] - Adjusted EBITDA for Q2 2023 was $80 million, representing a 37% increase compared to the prior year, with adjusted EBITDA margins expanding to 16.2% [23][44] - Gross margins improved to 35.9%, up 540 basis points year-over-year and 120 basis points sequentially [21][41] - Operating cash flow for Q2 2023 was $78 million, contributing to a total of $116 million for the first half of the year, marking a year-over-year improvement of $125 million [51] Business Line Data and Key Metrics Changes - All segments showed improved margin performance year-over-year, although volumes declined across the board, particularly in Asia Pacific and EMEA due to softer market conditions [25][48] - The Americas segment experienced year-over-year sales growth primarily due to price and mix increases, while EMEA and Asia Pacific saw declines in net sales due to volume reductions [45][46] Market Data and Key Metrics Changes - Market conditions in steel and general industrial remained soft, impacting overall volumes, while automotive and aerospace markets showed some improvement [20][82] - The company noted that underlying market performance was down mid-single-digits, with some segments improving and others remaining soft [66] Company Strategy and Development Direction - The company is focused on advancing its strategy, enhancing customer value, and investing in innovation and sustainability initiatives [29][35] - There is an emphasis on balancing pricing with the cost to serve, aiming for long-term profitability while navigating current market uncertainties [104][106] Management's Comments on Operating Environment and Future Outlook - Management anticipates continued uncertainty in the demand environment for the second half of the year, with expectations for adjusted EBITDA in Q3 to be similar to Q2 [27][78] - The company remains committed to its long-term growth strategy, despite the challenging macroeconomic backdrop, and is optimistic about future cash generation and margin improvements [29][55] Other Important Information - The company has paid down approximately $73 million of debt year-to-date and announced a 5% increase in dividends, marking the 14th consecutive annual increase [24][53] - The net debt at the end of Q2 was $696 million, with a net leverage ratio improving to 2.3 times adjusted EBITDA [54] Q&A Session Summary Question: What is the outlook for volumes and the impact of pricing strategies? - Management noted that while there has been stability in volumes, year-over-year declines are attributed to tough comparisons and strategic pricing initiatives that have led to some churn in lower-margin business [66][68] Question: Will the company be more aggressive in capital allocation given cash flow performance? - Management confirmed that capital allocation strategies remain unchanged, focusing on shareholder value through dividends, debt reduction, and investments in growth initiatives [71][72] Question: How is the company managing market share amidst pricing pressures? - Management indicated that they are successfully gaining new business at higher profitability levels, despite some volume losses due to strategic pricing [80][91] Question: What is the performance outlook in specific markets like automotive? - Management acknowledged mixed performance across markets, with some improvements in automotive and aerospace, while steel and general industrial remain soft [82] Question: How is the digitalization effort progressing? - Management highlighted ongoing efforts with the FLUIDTREND software platform, focusing on monitoring capabilities and targeted customer applications [94][96]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-12019 QUAKER CHEMICAL CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 23-0993790 (State o ...

Quaker Chemical Corporation (NYSE:KWR) Q1 2023 Earnings Conference Call May 5, 2023 8:30 AM ET Company Participants Andy Tometich - President & CEO Shane Hostetter - EVP & CFO Robert Traub - General Counsel Jeffrey Schnell - VP, IR Conference Call Participants Mike Harrison - Seaport Research Partners Dan Rizzo - Jefferies David Begleiter - Deutsche Bank Arun Viswanathan - RBC Capital Markets Jon Tanwanteng - CJS Securities Operator Greetings, and welcome to the Quaker Houghton First Quarter 2023 Earnings C ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-12019 QUAKER CHEMICAL CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 23-0993790 (State ...

Quaker Chemical Corporation (NYSE:KWR) Q4 2022 Earnings Conference Call February 24, 2023 8:30 AM ET Company Participants Jeffrey Schnell - VP, IR Andy Tometich - President & CEO Shane Hostetter - SVP & CFO Robert Traub - General Counsel Conference Call Participants Mike Harrison - Seaport Research Partners David Begleiter - Deutsche Bank Arun Viswanathan - RBC Laurence Alexander - Jefferies Jon Tanwanteng - CJS Securities Operator Greetings, and welcome to the Quaker Houghton Fourth Quarter 2022 Earnings C ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission file number 001-12019 QUAKER CHEMICAL CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 23-0993790 (St ...