Quaker Chemical (NYSE:KWR) Q4 2025 Earnings call February 24, 2026 08:00 AM ET Speaker7Reminder, this conference is being recorded. I would now like to turn the call over to John Dolloff, Investor Relations. Thank you, Mr. Dolloff. You may begin.Speaker2Thank you. Good morning, and welcome to Quaker Houghton's fourth quarter and full year 2025 earnings conference call. Joining us on the call today are Joe Bergquist, our President and Chief Executive Officer, Tom Coler, our Executive Vice President and Chief ...

Financial Data and Key Metrics Changes - Fourth quarter revenue was $724 million, representing a 2% year-over-year increase, with a 7% growth in non-respiratory revenue excluding donor screening [7][18] - Full year revenue reached $2.73 billion, achieving the company's financial guidance for 2025, with non-respiratory revenue growing 5% [7][18] - Adjusted EBITDA margin was 22%, reflecting a 240 basis point improvement over the prior year [8][22] - Adjusted diluted EPS was $0.46 in Q4 and $2.12 for the full year, indicating a 15% year-over-year growth [22] Business Line Data and Key Metrics Changes - Labs business reported a strong growth of 7% in Q4 and 6% for the full year, accounting for 55% of total company revenue [7][18] - Immunohematology business grew 3% for the full year, maintaining its leading global market position [18] - Triage business saw a revenue increase of 16% in Q4 and 7% for the full year [18] - Respiratory revenue declined 14% in Q4 and 20% for the full year due to lower COVID testing [18] Market Data and Key Metrics Changes - North America region revenue was up 4% in Q4 but down 2% for the year, excluding donor screening [20] - Europe, Middle East, and Africa showed flat growth for the quarter and 4% growth for the year, with a significant increase in Adjusted EBITDA margins by over 900 basis points [20] - Latin America experienced a 17% increase in Q4 and 18% for the year, while Japan and Asia-Pacific grew 4% in Q4 and 6% for the year [20] - China grew 5% in Q4 and 3% for the full year [21] Company Strategy and Development Direction - The company established three priorities: customer-centric operations, strengthening operational and financial performance, and accelerating product development for long-term growth [6] - The focus is on optimizing the customer experience and driving effective execution across all business dimensions [9] - The company aims to maximize value by delivering superior outcomes for customers and converting that value into attractive returns for shareholders [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain growth, citing strong market positions and high renewal rates [35] - The company anticipates continued growth in the Labs business and is optimistic about new product launches in 2026 [14][25] - Management acknowledged challenges in cash flow conversion but emphasized ongoing efforts to improve cash flow metrics [31][88] Other Important Information - A significant non-cash goodwill impairment charge of $701 million was recorded in Q3, which does not impact cash or operations [8][22] - Joe Busky, CFO, announced his retirement effective June 2026, with a search for his successor already initiated [9][10] Q&A Session Summary Question: Free cash flow guidance and timing issues - Joe Busky explained that Q4 cash flow was lower than expected due to timing issues with accounts receivable and late revenue collection [30][31] Question: Sustainability of lab growth trends - Brian Blaser highlighted strong underlying growth rates across the business and emphasized opportunities in immunoassay and low market penetration [33][35] Question: China market updates - Management provided updates on potential nationalized value-based procurement programs but noted no new developments [40][41] Question: Gross margin performance - Joe Busky discussed factors affecting gross margins, including tariffs and product mix, and projected flat margins for 2026 [67][68] Question: Lex Diagnostics platform timeline - Jonathan Siegrist confirmed that the FDA review process for the Lex platform is progressing as planned, with no current issues [72] Question: R&D pipeline and product launches - Management indicated a focus on expanding the product portfolio and enhancing offerings in both domestic and international markets [76][78]

Core Insights - Simpson Manufacturing reported full-year 2025 net sales of $2.3 billion, reflecting a 4.5% increase from 2024, driven by pricing actions, acquisitions, and foreign exchange benefits, despite a 1% decline in volume due to weaker housing starts [3][4][7] Financial Performance - In Europe, full-year net sales reached $499.6 million, up 4.3% year over year, with volumes outperforming the market [1] - North America saw full-year net sales of $1.8 billion, up 4.5%, benefiting from approximately $60 million in pricing actions, although volumes declined due to lower housing starts [2] - The company generated $458.6 million in operating cash flow for 2025 and ended the year with a net cash position of $9.9 million [5][18] - Fourth-quarter consolidated net sales were $539.3 million, up 4.2%, with North America sales rising 3% and Europe sales increasing 9.1% [13] Margins and Costs - The consolidated gross margin for 2025 was relatively flat at 45.9%, while the operating margin improved to 19.6%, up 30 basis points year over year [12] - The company faced approximately $100 million in tariff-related costs impacting gross margins, but strategic cost-saving initiatives are expected to deliver at least $30 million in savings [6][17] Segment Performance - The OEM business experienced strong growth with double-digit volume increases, while component manufacturing saw low single-digit growth [10] - Commercial volumes were flat, and residential volumes declined modestly, particularly in the western and southern U.S. [10][11] Future Outlook - For 2026, the company targets an operating margin range of 19.5% to 20.5%, with expectations of slightly lower gross margins due to tariffs and increased depreciation costs [21] - The company anticipates U.S. housing starts to remain relatively flat year over year, while Europe is expected to see slight market growth [22] Shareholder Returns - Simpson repurchased $120 million of stock in 2025 and authorized a new $150 million buyback, committing to return at least 35% of free cash flow to shareholders [5][20]

Financial Data and Key Metrics Changes - The loss before income taxes for the first quarter was $1.3 million, significantly improved from a pretax loss of $18.9 million in the previous year quarter, driven by revenue growth and improving margins [8] - Gross margin for the first quarter improved to 36.6%, up 6.7 points from the prior year, primarily due to overhead absorption from higher volumes and price increases [8] - Operating expenses increased by $2.1 million from the prior year, mainly due to increased sales volume-related expenses, partially offset by decreased warranty expenses [8] Business Line Data and Key Metrics Changes - The fishing segment, particularly the Minn Kota and Humminbird brands, showed solid performance with strong demand for new products like the XPLORE Series and MEGA Live 2 fish finders [4] - In the camping and watercraft segment, investments in digital and e-commerce have paid off, with Jetboil and Old Town seeing growth driven by online sales [4][5] - The diving segment experienced increased sales due to improved global market conditions and innovation, particularly with the SCUBAPRO's new HYDROS PRO 2 product [5][6] Market Data and Key Metrics Changes - The overall market showed signs of stabilization, contributing to double-digit growth in the first quarter, which is typically a slower period [3] - Trade dynamics improved, allowing for healthy demand and sell-in during the first quarter, positioning the trade in a good inventory state [17] Company Strategy and Development Direction - The company aims to maintain a strong innovation pipeline, grow digital and e-commerce momentum, and improve product costs and operating efficiency through cost-saving initiatives [7] - The focus on innovation is critical for maintaining market leadership amidst strong competition [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the start of fiscal 2026, noting improvements in profitability and execution of growth plans despite uncertainties in the broader environment [4][6] - The company remains confident in its ability to create long-term value for shareholders, with a debt-free balance sheet and ongoing dividend payments [9] Other Important Information - The inventory balance at the end of the first quarter was $183.9 million, down about $17.7 million from the previous year quarter [9] Q&A Session Summary Question: Pricing versus unit volumes - Management indicated that most of the increase in the quarter was driven by unit volume, although pricing adjustments were made in response to cost increases [12] Question: Contribution of new products to sales - Management confirmed that innovation remains critical, with improvements in new product success contributing to growth [15] Question: E-commerce revenue percentage and future goals - E-commerce is the fastest-growing channel, with plans to continue expanding its contribution to overall revenue [16] Question: Current trade inventory levels - Management noted that trade inventory levels are healthy, allowing for good sell-in during the first quarter [17] Question: Future cost savings initiatives - Management emphasized the importance of ongoing cost-saving initiatives to optimize product costs and improve efficiency [18] Question: Warranty expense impact on operating expenses - Warranty expenses had a minor impact on the operating expense percentage, which decreased in the quarter [19] Question: Future tax rate expectations - Management indicated that the tax rate may fluctuate based on profits in various geographies, particularly due to a valuation allowance in the U.S. [21]

Financial Data and Key Metrics Changes - Organic net sales decreased by 1%, primarily due to a 2% decline in consumption, with retailers building inventory ahead of promotions [6][8] - Adjusted EBIT declined by 11% year-over-year to $383 million, driven by lower adjusted gross profit [27] - Adjusted EPS decreased by 13% to $0.77, impacted by lower adjusted EBIT and a higher adjusted tax rate [29][32] Business Line Data and Key Metrics Changes - Meals and Beverages segment reported a 4% decrease in net sales, with organic net sales down 2% due to declines in U.S. soup and other products [30] - Snacks segment saw a 2% decrease in net sales, with organic net sales down 1%, primarily due to lower sales in Snyder's of Hanover pretzels and Cape Cod potato chips [31][32] - Leadership brands in meals and beverages held or grew share for the ninth consecutive quarter, while snacks leadership brands saw mixed performance [11][12] Market Data and Key Metrics Changes - Total in-market consumption for the company was down 2%, but leadership brands' consumption was only down 1%, maintaining market share [7][11] - Broth consumption grew for the ninth consecutive quarter, driven by increased household penetration and buy rates [13] - The overall soup portfolio lagged the category on share, with cooking varieties performing well while eating soups faced pressure [12][14] Company Strategy and Development Direction - The company is focused on mitigating cost pressures while maintaining marketing support for its brands, emphasizing consumer-led innovation and brand activations [9][10] - A strategic partnership with La Regina was announced to enhance Rao's brand growth and secure high-quality ingredient supply [17][18] - The company aims to reignite growth in its snacks portfolio, particularly focusing on Goldfish, through innovation and targeted marketing [24][26] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a dynamic operating environment and reiterated fiscal 2026 guidance, including expected tariff impacts [9][33] - The company is committed to crafting high-quality food at the right value while investing in omnichannel execution and brand activation [25][26] - Management expressed confidence in the strength of leadership brands and the ability to adapt to evolving consumer preferences [35][49] Other Important Information - The company achieved approximately $15 million in new cost savings, contributing to a total of $160 million towards its fiscal 2028 target of $375 million [28] - The gross impact of tariffs on Q1 adjusted EPS was $0.14, with a net impact of $0.04 [29] - The company has approximately $168 million in cash and cash equivalents and $1.4 billion available under its revolving credit facility [32] Q&A Session Summary Question: Details on the La Regina acquisition - The acquisition supports the growth of Rao's by securing high-quality ingredient supply and enhancing the partnership with the Romano family [36][38] - The first payment of $146 million is expected upon closing, with a second payment of $140 million one year later [39] Question: Stabilization of the snack segment - Management expects stabilization in the second half of the fiscal year, with ongoing focus on evolving consumer preferences [41][42] - The company is addressing performance issues in specific snack categories, particularly with Goldfish [44][60] Question: Impact of mega trends on salty snacks - Management is focused on consumer value and evolving preferences, particularly in premiumization and health and wellness [46][48] - The company is adapting its portfolio to align with these trends while maintaining competitive pricing [49] Question: Soup business pricing and value - Management is aware of the need to balance pricing actions with providing value, particularly in the eating soup category [50][53] - Selective pricing actions are being taken to remain competitive during the soup season [52][53] Question: Initial perspectives on opportunities for improvement - The new CFO sees potential in streamlining analysis and focusing on the right investments to drive growth and profitability [57][58] Question: Goldfish brand performance and marketing focus - Household penetration for Goldfish remains stable, but buy rates have declined, prompting a focus on innovation and clear messaging [60][61] - The company is prioritizing value and execution in the marketplace to support Goldfish's growth [62]

Core Viewpoint - McCormick & Company reported third-quarter earnings that exceeded analyst expectations, but shares fell due to concerns over rising costs and a reduced earnings outlook [1][7]. Financial Performance - Adjusted earnings per share for the third quarter were 85 cents, surpassing the consensus estimate of 81 cents [1]. - Quarterly sales reached $1.724 billion, exceeding the expected $1.713 billion [2]. - Net sales increased by 3% in the third quarter, aided by a 1% favorable currency impact [3]. - Consumer segment net sales rose by 4% year-over-year to $973 million, also benefiting from a 1% currency tailwind [3]. - Organic sales grew by 3%, driven by volume and product mix [4]. - Adjusted gross profit decreased by 0.6% year-over-year to $646.1 million, with adjusted gross margin falling by 120 basis points to 37.5% due to higher commodity costs and tariffs [5]. - Adjusted operating income rose to $294 million from $288 million, while adjusted operating margin decreased by 20 basis points to 17% [5]. - The company ended the quarter with cash and equivalents of $94.9 million, and operating cash flow for the nine months ending August 31, 2025, was $420.2 million, down from $463.2 million in the previous year [6]. Outlook - McCormick & Company revised its full-year 2025 adjusted EPS outlook to a range of $3.00–$3.05, down from $3.03–$3.08, compared to the consensus estimate of $3.04 [7]. - The company maintained its guidance for constant-currency net sales growth of 1%–3% [7]. - The CEO emphasized ongoing investments in growth plans and cost-saving initiatives to enhance resilience amid rising inflation from commodity costs and tariffs [7].

Fiscal 2026 Outlook Update - The company updated its fiscal year 2026 outlook, projecting organic net sales to decline by 6% to 4% for the enterprise and 4% to 2% for the beer business [11] - The company anticipates a reported operating income growth of 666% to 686%, but a comparable operating income decline of 11% to 9% [11] - Corporate expense is expected to be $225 million [11] - The company forecasts reported EPS of $10.77 to $11.07 and comparable EPS of $11.30 to $11.60 [11] - Operating cash flow is projected to be $2.5 billion to $2.6 billion, with free cash flow estimated at $1.3 billion to $1.4 billion [11] Market and Consumer Trends - Ongoing U S consumer demand headwinds are impacting the business, with employment in 4,000+ calorie jobs remaining pressured [12] - Consumer sentiment remains volatile and depressed [12, 13] - High-end beer buy rates are declining due to ongoing consumer headwinds [14, 15] - The company's beer brands have higher levels of exposure to the Hispanic consumer, who are showing elevated concern about personal finances and the socioeconomic environment [17, 18, 19, 20] - Hispanic consumer high-end beer buy rates are down more than the total consumer [21, 22] Business Execution - The company is gaining distribution, shelf space, and volume share across the country, with mid-single-digit percentage growth in points of distribution and approximately 30,000 Shopper First Shelf resets [24] - The company has achieved approximately $445 million in beer cost savings from fiscal year 2024 through Q1 fiscal year 2026 [25]

Financial Data and Key Metrics Changes - For Q4 2025, total revenue was $110.5 million, down from $126.6 million in Q4 2024, primarily due to decreased demand from two large customers [5] - Full fiscal year 2025 revenue was $467.9 million, compared to $566.9 million in fiscal year 2024, reflecting a significant decline [5] - Gross margin for Q4 2025 was 6.2%, and operating margin was negative 2.1%, compared to 7.2% and 1.0% respectively in Q4 2024 [5] - The net loss for Q4 2025 was $3.9 million or $0.36 per share, compared to a net loss of $2.0 million or $0.18 per share in Q4 2024 [8] - For the full fiscal year 2025, the net loss was $8.3 million or $0.77 per share, compared to a net loss of $2.8 million or $0.26 per share in fiscal year 2024 [8] Business Line Data and Key Metrics Changes - The company cut approximately 300 jobs in 2025, totaling an 800 headcount reduction for the fiscal year, to align costs with current demand [6] - Despite revenue reduction, gross margins increased year over year due to operational efficiencies and cost-saving initiatives [6] Market Data and Key Metrics Changes - The company reduced inventory by approximately $8 million or 7% year over year, reflecting strategic initiatives to align inventory with current revenue [10] - Total liabilities were reduced by $32.7 million or 14% from the previous year [10] Company Strategy and Development Direction - The company is focusing on expanding its manufacturing footprint in the U.S. and Vietnam, with plans to invest over $28 million in a new facility in Arkansas [17] - The strategy includes enhancing production capabilities and mitigating tariff impacts by diversifying manufacturing locations [19] - The company anticipates that by the end of fiscal 2026, approximately half of its manufacturing will occur in the U.S. and Vietnam [19] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a challenging year due to reduced demand and tariff uncertainties but expressed optimism about future growth driven by new programs and operational efficiencies [13][26] - The company is not providing forward-looking guidance due to uncertainties in product ramp-up timing [13] Other Important Information - Cash flow from operations was $18.9 million for fiscal year 2025, up from $13.8 million in fiscal year 2024, indicating two consecutive years of positive cash flow [11] - The company is investing selectively in production equipment and automation to prepare for growth [12] Q&A Session Summary Question: What is the range of sizes for the new wins in the quarter? - The new wins were predominantly around $5 million, with potential for a data processing contract to exceed $20 million [29] Question: How is the Vietnam medical device manufacturing capability being developed? - The company is certified to build medical products in Vietnam and expects to start a program in fiscal 2026, anticipating additional opportunities [32] Question: What is driving the increase in new program bids? - Cost reductions and improved global footprint have opened up opportunities, alongside pent-up demand for U.S. manufacturing [36][37] Question: Can you explain the reduction in accounts receivable? - The reduction was primarily due to decreased revenue and improved collection efforts, with no factoring involved [41][42] Question: What is the potential size of the manufacturing services contract with the data processor OEM? - The contract is expected to generate $20 million in revenue, which is significant due to its potential margin improvement [48][49] Question: How do you see Mexico operations growing in fiscal 2026? - Recent program wins are expected to drive growth in Mexico, leveraging the USMCA agreement for tariff mitigation [56] Question: What are the expectations for gross margin in fiscal 2026? - The company aims to improve gross margins and expects incremental gross margins of 15% to 20% as revenue increases [59][61]

Financial Data and Key Metrics Changes - The company reported record high net sales, gross profit, and operating income for fiscal year 2025, with consolidated net sales growing 5% to $475.4 million in the fourth quarter [6][10] - Gross profit increased by 8.7% to $106.1 million, with gross margin expanding by 70 basis points [12][14] - Fourth quarter diluted earnings per share decreased by 6.3% to $1.18, impacted by restructuring and impairment charges [14][15] Business Line Data and Key Metrics Changes - In the retail segment, net sales increased by 3.1% to $241.6 million, driven by growth from licensing and own brands [6][7] - The frozen dinner roll category saw a combined growth of 52.4% for Sister Schubert's and Texas Roadhouse brands, increasing market share to 63.8% [8] - In the food service segment, net sales improved by 1.4%, although sales volume declined by 1.7% [9] Market Data and Key Metrics Changes - Circana scanner data indicated a 5.5% increase in sales dollars and volume for branded products [8] - The frozen garlic bread category saw New York Bakery brand sales grow by 10%, leading to a market share increase to 43.3% [8] - Chick-fil-A sauce sales grew by 17.2%, with market share up 30 basis points [8] Company Strategy and Development Direction - The company aims to accelerate core business growth, simplify the supply chain, and expand through focused M&A and strategic licensing [20] - New product launches are planned for the upcoming year, including Texas Roadhouse dinner rolls shipping nationally [21] - The company is focused on integrating the newly acquired Atlanta facility into its manufacturing network [22] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding consumer behavior, anticipating modest tailwinds if inflation remains in check [56] - The food service segment is expected to improve sequentially, while retail growth is anticipated from new product introductions [58][60] - Input costs are expected to see modest inflation, which the company plans to offset through pricing and cost savings programs [22] Other Important Information - The company reported a 6% increase in quarterly cash dividends, maintaining a strong financial position with a debt-free balance sheet and $161.5 million in cash [17] - Restructuring and impairment charges totaled $5.1 million, primarily related to the closure of a sauce and dressing facility [13][66] Q&A Session Summary Question: Expectations around food service industry traffic and innovation - Management noted that the food service industry is seeing modest improvement, with casual dining focusing on value and QSRs beginning to stabilize [25][26] Question: Visibility into soybean oil pricing and its impact - Management acknowledged soybean oil's significance in their commodity basket, indicating that current market conditions do not pose a near-term headwind [31][35] Question: G&A spending and its components - The increase in G&A spending was attributed to marketing investments, Atlanta facility integration costs, and legal expenses, with expectations to grow in line with inflation [41][44] Question: Cost savings outlook for fiscal year 2026 - Management highlighted successful cost-saving initiatives in fiscal year 2025 and anticipated further savings from the network reset due to facility closures [48][49] Question: Impact of consumer environment on retail and food service businesses - Management expressed optimism about potential consumer spending increases if inflation remains controlled, with expectations for low single-digit growth in retail and a flat profile in food service [56][60]

Financial Data and Key Metrics Changes - For the first quarter, sales were $131.8 million, down 1.9% from $134.4 million last year, or down 1% on a constant currency basis [5][16] - Adjusted operating income decreased to $870,000 from $2.1 million last year [5][20] - Adjusted earnings per share were $0.08, down slightly from $0.09 last year [6][20] - Cash at the end of the quarter was $203.1 million, compared to $225.4 million at the same period last year [21] Business Line Data and Key Metrics Changes - U.S. sales decreased by 1.6%, while international sales decreased by 2.2%, or 0.7% on a constant currency basis [7][17] - Licensed brands saw strong growth with sales improving by high single digits [9] - The Movado brand refresh is progressing, with new collections receiving strong consumer responses [7] Market Data and Key Metrics Changes - The retail environment remains uncertain, impacting consumer behavior, particularly in the U.S. and Europe [25][27] - The company is experiencing pockets of growth in certain markets while facing challenges in others [25] Company Strategy and Development Direction - The company is focused on product innovation and delivering value to consumers despite a challenging retail environment [6][12] - There is an emphasis on managing costs and rationalizing expense infrastructure to improve financial performance [28] - The company is monitoring the tariff landscape and plans to implement selective price increases to mitigate cost increases [22] Management Comments on Operating Environment and Future Outlook - Management acknowledges the impact of macroeconomic uncertainties and tariff-related challenges on consumer spending [12][31] - The company is not providing a fiscal 2026 outlook due to ongoing uncertainties [22] - There is a focus on delivering quality and value, with positive signs in women's watch collections and men's jewelry offerings [13] Other Important Information - The company has a strong balance sheet with no debt and a cash position that allows for continued dividend payments [6][30] - Unrealized losses due to currency fluctuations were noted, with management indicating that these will only be realized when paid [32][33] Q&A Session Summary Question: Sales momentum and trends - Management noted that sales vary by market and brand, with some growth and some challenges, but they are satisfied with current sales levels [25] Question: Impact of tariffs on consumer behavior - Management indicated that the journey to improve sales is a long-term strategy, with renewed interest from younger consumers in new products [26][27] Question: Alignment of earnings per share and cash dividend - Management expressed confidence in improving operating cash flow and strengthening the balance sheet in the second half of the year [30] Question: Unrealized loss in foreign exchange - Management clarified that the unrealized loss was due to a decline in the U.S. Dollar and will only be realized when paid [32][33]