Quaker(KWR) - 2025 Q2 - Quarterly Results

Executive Summary Second Quarter 2025 Highlights Quaker Houghton reported a 4% year-over-year increase in net sales to $483.4 million for Q2 2025, driven by a 2% increase in organic sales volumes and a 6% contribution from acquisitions, despite recording a net loss of $66.6 million primarily due to an $88.8 million goodwill impairment charge in the EMEA segment, leading to declines in non-GAAP net income and Adjusted EBITDA compared to the prior year Key Financial Highlights | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change (%) | | :--------------------------------------- | :----------------------- | :----------------------- | :--------- | | Net sales | 483,400 | 463,567 | 4% | | Net (loss) income attributable to Quaker Chemical Corporation | (66,580) | 34,885 | -291% | | Net (loss) income per diluted share | (3.78) | 1.94 | -295% | | Non-GAAP net income | 30,000 | 38,232 | -21.5% | | Non-GAAP Earnings per diluted share | 1.71 | 2.13 | -19.7% | | Adjusted EBITDA | 75,479 | 84,291 | -10.4% | - Net sales increased 4% year-over-year to $483.4 million, driven by a 2% increase in sales volumes (including 5% from new business wins) and a 6% contribution from acquisitions, partially offset by a 4% decline in selling price and product mix[3][5] - The reported net loss of $66.6 million (or $3.78 per diluted share) includes an $88.8 million non-cash goodwill impairment charge related to the EMEA segment[4][5] - The Company repurchased $32.7 million in shares and raised its quarterly cash dividend by approximately 5% in Q2 2025[5][14] CEO Commentary and Outlook CEO Joe Berquist highlighted strong organic volume growth of 2% year-over-year, exceeding market growth due to new business wins, particularly in Asia/Pacific, and despite a challenging macroeconomic environment, especially in the U.S. and Europe, the company is focused on advancing its enterprise strategy and managing costs, with an outlook for H2 2025 anticipating continued tepid economic conditions but expecting stronger performance, aiming for full-year 2025 revenue and earnings to be in the range of 2024, supported by $20 million in additional run-rate cost savings by the end of 2026 - Generated 2% year-over-year organic volume growth in Q2 2025, driven by strong new business wins across all segments, with Asia/Pacific achieving 8% organic volume growth[6] - Anticipates tepid economic conditions in H2 2025 but expects stronger business performance, positioning for full-year 2025 revenue and earnings in the range of 2024[7] - Initiated actions expected to deliver approximately $20 million of additional run-rate cost savings by the end of 2026[7] Consolidated Financial Results Net Sales Performance Consolidated net sales for Q2 2025 increased by 4% year-over-year to $483.4 million, primarily fueled by a 2% increase in sales volumes, including a 5% contribution from new business wins, and a 6% benefit from acquisitions, partially offset by a 4% decline in selling price and product mix, influenced by product/service mix and index-based contracts Net Sales and Variance Drivers | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change (%) | | :-------- | :----------------------- | :----------------------- | :--------- | | Net sales | 483,400 | 463,567 | 4% | | Sales volumes | 2% | - | - | | Acquisitions | 6% | - | - | | Selling price & product mix | -4% | - | - | - Organic sales volumes increased 4% compared to the first quarter of 2025[3] Net Income and Earnings Per Share (GAAP) The company reported a significant GAAP net loss of $66.6 million, or $3.78 per diluted share, in Q2 2025, a substantial decline from net income of $34.9 million, or $1.94 per diluted share, in Q2 2024, predominantly driven by an $88.8 million non-cash goodwill impairment charge related to the EMEA segment GAAP Net Income and EPS | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change (%) | | :--------------------------------------- | :----------------------- | :----------------------- | :--------- | | Net (loss) income attributable to Quaker Chemical Corporation | (66,580) | 34,885 | -291% | | Net (loss) income per diluted share | (3.78) | 1.94 | -295% | - The net loss includes an $88.8 million non-cash goodwill impairment charge associated with the EMEA reportable segment[4] Non-GAAP Financial Performance (Non-GAAP Net Income, Adjusted EBITDA) Excluding non-recurring items, non-GAAP net income for Q2 2025 was $30.0 million ($1.71 per diluted share), down from $38.2 million ($2.13 per diluted share) in Q2 2024, while Adjusted EBITDA decreased by approximately 10% to $75.5 million, with adjusted EBITDA margins at 15.6%, reflecting lower operating margins despite increased net sales Non-GAAP Net Income and Adjusted EBITDA | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | Change (%) | | :--------------------------------------- | :----------------------- | :----------------------- | :--------- | | Non-GAAP net income | 30,000 | 38,232 | -21.5% | | Non-GAAP Earnings per diluted share | 1.71 | 2.13 | -19.7% | | Adjusted EBITDA | 75,479 | 84,291 | -10.4% | | Adjusted EBITDA margin | 15.6% | 18.2% | -2.6 pp | - The decrease in Adjusted EBITDA was due to lower operating margins, despite the increase in net sales[4] Segment Results Overview of Segment Performance In Q2 2025, consolidated organic sales volumes increased 2% year-over-year, driven by strong new business wins across all segments, with Asia/Pacific showing significant growth, while Americas and EMEA faced soft end market conditions and tariff-related uncertainty, leading to decreased operating earnings across all segments year-over-year due to higher raw material, manufacturing, and SG&A costs, but increased quarter-over-quarter driven by higher net sales Net Sales by Segment | Segment | Q2 2025 Net Sales ($ in thousands) | Q2 2024 Net Sales ($ in thousands) | YoY Change (%) | | :---------- | :----------------------- | :----------------------- | :------------- | | Americas | 221,062 | 223,517 | -1% | | EMEA | 139,923 | 138,001 | 1% | | Asia/Pacific | 122,415 | 102,049 | 20% | | Total | 483,400 | 463,567 | 4% | - Underlying end market activity remained below prior year levels in Americas and EMEA, amplified by tariff uncertainty, while Asia/Pacific improved[10] - Operating earnings decreased in all segments year-over-year due to lower operating margins from higher raw material, manufacturing costs, and SG&A expenses[12] - Operating earnings increased in all segments quarter-over-quarter (Q2 2025 vs. Q1 2025) primarily due to increased net sales[12] Americas Segment The Americas segment experienced a 1% decline in net sales in Q2 2025 compared to the prior year, primarily due to decreased sales volumes and unfavorable foreign currency translation, partially offset by a modest increase in selling price and product mix and contributions from acquisitions, with segment operating earnings also decreasing Americas Segment Financials | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :------------------------ | :----------------------- | :----------------------- | :------------- | | Net Sales | 221,062 | 223,517 | -1% | | Segment operating earnings | 58,976 | 64,137 | -8.0% | Americas Segment Sales Variance Drivers | Sales Variance Driver | Americas (Q2 2025 vs Q2 2024) | | :-------------------- | :---------------------------- | | Sales volumes | (2)% | | Selling price & product mix | 1 % | | Foreign currency | (2)% | | Acquisition & other | 2 % | | Total | (1)% | EMEA Segment The EMEA segment saw a slight increase of approximately 1% in net sales in Q2 2025, driven by increased sales volumes, acquisitions, and favorable foreign currency translation, despite a decline in selling price and product mix, though segment operating earnings decreased, and the segment was notably impacted by an $88.8 million goodwill impairment charge EMEA Segment Financials | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :------------------------ | :----------------------- | :----------------------- | :------------- | | Net Sales | 139,923 | 138,001 | 1% | | Segment operating earnings | 24,995 | 26,652 | -6.3% | EMEA Segment Sales Variance Drivers | Sales Variance Driver | EMEA (Q2 2025 vs Q2 2024) | | :-------------------- | :-------------------------- | | Sales volumes | 1 % | | Selling price & product mix | (7)% | | Foreign currency | 4 % | | Acquisition & other | 3 % | | Total | 1 % | - The EMEA segment incurred an $88.8 million goodwill impairment charge in Q2 2025[4][26] Asia/Pacific Segment The Asia/Pacific segment demonstrated strong performance with a 20% increase in net sales in Q2 2025, primarily due to significant increases in sales volumes and contributions from acquisitions (Dipsol and Sutai), partially offset by a decrease in selling price and product mix, despite which segment operating earnings saw a decline Asia/Pacific Segment Financials | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :------------------------ | :----------------------- | :----------------------- | :------------- | | Net Sales | 122,415 | 102,049 | 20% | | Segment operating earnings | 28,715 | 31,000 | -7.4% | Asia/Pacific Segment Sales Variance Drivers | Sales Variance Driver | Asia/Pacific (Q2 2025 vs Q2 2024) | | :-------------------- | :-------------------------------- | | Sales volumes | 8 % | | Selling price & product mix | (5)% | | Foreign currency | — % | | Acquisition & other | 17 % | | Total | 20 % | - Sales from acquisitions, primarily Dipsol and Sutai, significantly contributed to the Asia/Pacific segment's growth[9] Cash Flow and Liquidity Cash Flow and Liquidity Highlights Net cash provided by operating activities for the six months ended June 30, 2025, decreased to $38.5 million from $73.5 million in the prior year, reflecting lower operating performance and higher restructuring outflows, while the company's net debt stood at approximately $734.8 million, with a net debt to trailing twelve months adjusted EBITDA ratio of 2.6x, influenced by the Dipsol acquisition Operating Cash Flow | Metric | Six Months Ended June 30, 2025 ($ in thousands) | Six Months Ended June 30, 2024 ($ in thousands) | YoY Change (%) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------- | | Net cash provided by operating activities | 38,522 | 73,534 | -47.6% | Debt and Liquidity Metrics | Metric | As of June 30, 2025 ($ in thousands) | | :--------------------------------------- | :----------------------------------- | | Total gross debt | 936,700 | | Cash and cash equivalents | 201,900 | | Net debt | 734,800 | | Net debt / Trailing twelve months adjusted EBITDA | 2.6x | - The Dipsol acquisition, completed in April 2025, was funded with borrowings under the Company's existing credit facility, impacting net debt[14] Non-GAAP Measures and Reconciliations Introduction and Definitions This section provides definitions and reconciliations for various non-GAAP financial measures, including EBITDA, Adjusted EBITDA, non-GAAP operating income, non-GAAP gross profit, and their respective margins, as well as non-GAAP net income and EPS, which are presented to offer supplemental information, enhance understanding of financial performance, and facilitate period-over-period comparisons by excluding items not indicative of core operations or future performance - Non-GAAP measures are used to provide meaningful supplemental information, enhance understanding of financial performance, facilitate comparison among fiscal periods, and exclude items not indicative of future operating performance or considered core to the Company's operations[15] - EBITDA is defined as net income attributable to the Company before depreciation and amortization, interest expense, and taxes on income before equity in net income of associated companies[16] - Adjusted EBITDA, non-GAAP operating income, and non-GAAP gross profit are calculated by adjusting their GAAP counterparts for certain items management believes are not indicative of future operating performance or core operations[16] Non-GAAP Gross Profit and Margin Reconciliations The reconciliation shows that non-GAAP gross profit for Q2 2025 was $174.1 million, slightly lower than Q2 2024's $175.7 million, with the non-GAAP gross profit margin decreasing to 36.0% from 37.9% year-over-year, primarily due to acquisition-related inventory amortization and other adjustments Non-GAAP Gross Profit and Margin Reconciliation | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :------------------------------------ | :----------------------- | :----------------------- | :------------- | | Gross profit | 171,723 | 175,718 | -2.3% | | Acquisition-related step-up inventory amortization | 6,022 | — | - | | Gain on inventory and other adjustments | (3,604) | — | - | | Non-GAAP gross profit | 174,141 | 175,718 | -0.9% | | Non-GAAP profit margin (%) | 36.0% | 37.9% | -1.9 pp | Non-GAAP Operating Income and Margin Reconciliations Non-GAAP operating income for Q2 2025 was $50.6 million, down from $59.8 million in Q2 2024, with the non-GAAP operating margin decreasing to 10.5% from 12.9%, as adjustments include significant impairment charges, restructuring costs, and acquisition-related expenses, which transformed a GAAP operating loss into a non-GAAP operating income Non-GAAP Operating Income and Margin Reconciliation | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :------------------------------------ | :----------------------- | :----------------------- | :------------- | | Operating (loss) income | (52,510) | 58,449 | -189.8% | | Impairment charges | 88,840 | — | - | | Restructuring and related charges, net | 8,793 | 320 | 2647.8% | | Non-GAAP operating income | 50,641 | 59,815 | -15.3% | | Non-GAAP operating margin (%) | 10.5% | 12.9% | -2.4 pp | EBITDA, Adjusted EBITDA, and Non-GAAP Net Income Reconciliations EBITDA for Q2 2025 was a loss of $24.4 million, significantly down from $82.8 million in Q2 2024, primarily due to the goodwill impairment, while Adjusted EBITDA decreased by 10.4% to $75.5 million, with a margin of 15.6%, and Non-GAAP net income was $30.0 million, a 21.5% decrease from the prior year, after various adjustments for non-core items EBITDA, Adjusted EBITDA, and Non-GAAP Net Income Reconciliation | Metric | Q2 2025 ($ in thousands) | Q2 2024 ($ in thousands) | YoY Change (%) | | :--------------------------------------- | :----------------------- | :----------------------- | :------------- | | EBITDA | (24,408) | 82,845 | -129.5% | | Adjusted EBITDA | 75,479 | 84,291 | -10.4% | | Adjusted EBITDA margin (%) | 15.6% | 18.2% | -2.6 pp | | Non-GAAP net income | 30,000 | 38,232 | -21.5% | - Key adjustments to reconcile EBITDA to Adjusted EBITDA include an $88.8 million impairment charge and $8.8 million in restructuring charges for Q2 2025[22] Non-GAAP Earnings per Diluted Share Reconciliations Non-GAAP earnings per diluted share for Q2 2025 was $1.71, a decrease from $2.13 in Q2 2024, a figure derived by adjusting the GAAP loss per diluted share of $3.78 for various non-recurring and non-core items, most notably the $4.91 per share impact of impairment charges Non-GAAP Earnings per Diluted Share Reconciliation | Metric | Q2 2025 | Q2 2024 | YoY Change (%) | | :-------------------------------------------------------------------------------- | :------ | :------ | :------------- | | GAAP (loss) earnings per diluted share attributable to Quaker Chemical Corporation common shareholders | (3.78) | 1.94 | -295% | | Impairment charges (per share) | 4.91 | — | - | | Non-GAAP earnings per diluted share | 1.71 | 2.13 | -19.7% | Segment Measures and Reconciliations Notes Segment operating earnings are defined as net sales less directly related product costs and other operating expenses, excluding certain corporate and administrative costs and restructuring charges, with notes clarifying the inclusion of amortization expense within equity in net income of associated companies and the adjustment of taxes on income for reconciling items in non-GAAP calculations - Segment operating earnings exclude corporate and administrative costs and restructuring charges not directly attributable to segment net sales[24] - Depreciation and amortization includes amortization expense related to the acquisition of a 50% equity interest in Korea Houghton Corporation[25] - Adjusted taxes on income account for current and deferred income tax impacts of non-GAAP reconciling items, determined using applicable tax rates[25] Company Information About Quaker Houghton Quaker Houghton is a global leader in industrial process fluids, operating in over 25 countries, providing high-performing, innovative, and sustainable solutions to a diverse customer base across industries like steel, automotive, and aerospace, supported by approximately 4,400 employees - Quaker Houghton is the global leader in industrial process fluids with operations in over 25 countries[28] - Serves thousands of advanced and specialized customers in industries such as steel, aluminum, automotive, aerospace, and metalworking[28] - Employs approximately 4,400 individuals, including chemists, engineers, and industry experts[28] Forward-Looking Statements This section contains forward-looking statements subject to various risks and uncertainties, including economic downturns, tariffs, inflation, supply chain constraints, interest rates, geopolitical conflicts, and regulatory changes, with the company cautioning against undue reliance on these statements, which are based on information available as of the press release date and are not subject to revision - Forward-looking statements are based on assumptions and expectations about future events, including potential effects of economic downturns, tariffs, inflation, and global supply chain constraints[27] - Major risks include demand for products being derived from customer demand, inflationary pressures, supply chain constraints, customer financial instability, high interest rates, and geopolitical conflicts[27] - The company disclaims any duty or obligation to update or revise any forward-looking statements[27] Conference Call Details An investor conference call to discuss Q2 2025 performance was scheduled for Friday, August 1, 2025, at 8:30 a.m. ET, with a live webcast and supplemental information accessible via the company's Investor Relations website - Investor conference call for Q2 2025 performance was scheduled for Friday, August 1, 2025, at 8:30 a.m. ET[27] - Live webcast and supplemental information available on investors.quakerhoughton.com[27] Condensed Consolidated Financial Statements Condensed Consolidated Statements of Operations The Condensed Consolidated Statements of Operations show a net loss attributable to Quaker Chemical Corporation of $66.6 million for Q2 2025, a significant decline from a net income of $34.9 million in Q2 2024, primarily driven by an $88.8 million impairment charge and increased restructuring costs, despite a rise in net sales Condensed Consolidated Statements of Operations | Metric ($ in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Net sales | 483,400 | 463,567 | | Gross profit | 171,723 | 175,718 | | Operating (loss) income | (52,510) | 58,449 | | (Loss) income before taxes and equity in net income of associated companies | (65,942) | 48,117 | | Net (loss) income attributable to Quaker Chemical Corporation | (66,580) | 34,885 | | Net (loss) income per diluted share attributable to Quaker Chemical Corporation common shareholders | (3.78) | 1.94 | - Impairment charges of $88.8 million and restructuring charges of $8.8 million significantly impacted operating income in Q2 2025[30] Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $2.85 billion from $2.61 billion at December 31, 2024, primarily due to increases in property, plant and equipment, and other intangible assets, while total liabilities also rose to $1.50 billion from $1.26 billion, driven by a significant increase in long-term debt, and total equity slightly decreased Condensed Consolidated Balance Sheets | Metric ($ in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------------- | :------------ | :---------------- | | Total current assets | 974,107 | 876,417 | | Total assets | 2,848,810 | 2,610,649 | | Total current liabilities | 380,059 | 379,768 | | Long-term debt | 897,953 | 669,614 | | Total liabilities | 1,503,355 | 1,256,466 | | Total Quaker shareholders' equity | 1,342,245 | 1,353,567 | | Total equity | 1,345,455 | 1,354,183 | - Goodwill decreased from $518.9 million to $502.4 million, reflecting the impairment charge[32] - Long-term debt increased by $228.3 million, contributing to the rise in total liabilities[32] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities significantly decreased to $38.5 million from $73.5 million in the prior year, net cash used in investing activities increased substantially to $180.7 million, primarily due to payments related to acquisitions, and net cash provided by financing activities turned positive at $147.6 million, driven by net borrowings on revolving credit facilities Condensed Consolidated Statements of Cash Flows | Metric ($ in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | 38,522 | 73,534 | | Net cash used in investing activities | (180,720) | (33,225) | | Net cash provided by financing activities | 147,554 | (39,297) | | Net increase (decrease) in cash and cash equivalents | 13,038 | (5,959) | | Cash and cash equivalents at the end of the period | 201,918 | 188,568 | - Payments related to acquisitions, net of cash acquired, totaled $164.1 million for the six months ended June 30, 2025[36] - Borrowings on revolving credit facilities, net, contributed $216.0 million in cash from financing activities[36]