Q1 2025 Quaker Chemical Corp Earnings Call

Operator: Greetings and welcome to the Quaker Houghton First Quarter 2025 Earnings Conference Call. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone key. Just a reminder, this conference is being recorded.

Greetings and welcome to the Quaker Houghton first quarter 'twenty 25 earnings conference call.

Beef question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

This conference is being recorded.

Jeffrey Schnell: I would now like to turn the call over to Jeffrey Schnell, Vice President, Investor Relations. So, you may be...

I would now like to turn the call over to Jeffrey Schnell, Vice President Investor Relations. Mr. Hill, you may begin.

Jeffrey Schnell: Thank you, good morning, and welcome to our first quarter 2025 earnings conference. On the call today are Joe Berquist, our President and Chief Executive Officer. Tom Coler, our Executive Vice President and Chief Financial Officer, and Robert Traub, our General Counsel.

Speaker Change: Thank you good morning, and welcome to our first quarter 2025 earnings Conference call.

Joe Berquist: On the call today are Joe Berquist, our President and Chief Executive Officer, Tom Koehler, Our executive Vice President and Chief Financial Officer, and Robert trial, Our General Counsel.

Jeffrey Schnell: Our comments relate to the financial information released after the close of the U.S. markets yesterday, May 1st, 2025. Our press release and accompanying slides can be found on our Investor Relations website.

Joe Berquist: Our comments relate to the financial information released after the close of the U S markets yesterday may one 2025.

Joe Berquist: Our press release and accompanying slides can be found on our Investor Relations website.

Jeffrey Schnell: Both the prepared commentary and discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Quaker Houghton's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements.

Joe Berquist: Both the prepared commentary and discussion during this call may contain forward looking statements, reflecting the company's current view of future events and their potential effect on Quaker houghton's operating and financial performance.

Joe Berquist: These statements involve uncertainties and risks, which may cause actual results to differ.

Joe Berquist: The company is under no obligation to provide subsequent updates to these forward looking statements.

Jeffrey Schnell: This presentation also contains certain non-GAAP financial measures, and the company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the appendix of the presentation materials, which are available on our website.

Joe Berquist: This presentation also contains certain non-GAAP financial measures and the company has provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in the appendix of the presentation materials, which are available on our website.

Jeffrey Schnell: For additional information, please refer to our filings with the SEC.

Joe Berquist: For additional information please refer to our filings with the SEC now, it's my pleasure to hand, the call over to Joe.

Joseph Berquist: Now it's my pleasure to hand the call over to Joe. Thank you, Jeff. I'd like to welcome everyone to Quaker Houghton's first quarter 2025 earnings call. First quarter results were directionally in line with our expectations, despite end market demand being softer than we had anticipated. While our volumes declined 1.5%, we estimate our markets were down, in aggregate, a low to mid-single-digit percentage compared to the prior year. due to a continuation of soft industrial activity and uncertainty regarding tariffs. which impacted customer decision making and order pattern. The team performed well, successfully gaining additional market share across all segments.

Jeff: Thank you Jeff.

Speaker Change: Like to welcome everyone to Quaker Houghton's first quarter 2025 earnings call.

Speaker Change: First quarter results were Directionally in line with our expectations, despite end market demand being softer than we had anticipated.

Speaker Change: While our volumes declined one 5% we estimate our markets were down in aggregate a low to mid single digit percentage compared to the prior year.

Speaker Change: Due to a continuation of soft industrial activity and uncertainty regarding tariffs.

Speaker Change: Which impacted customer decision, making and order patterns.

Speaker Change: The team performed well success.

Speaker Change: Successfully gaining additional market share across all segments, despite the challenging global macroeconomic environment.

Joseph Berquist: despite the challenging global macroeconomic environment. Our results once again display the resilience in our business that comes from operating across diverse geographic end markets with a robust and advantaged portfolio. We continue to maintain our focus on delivering the best outcomes for our customers. and affirm a steadfast commitment to managing items within our control.

Speaker Change: Our results once again displayed the resilience in our business that comes from operating across diverse geographic end markets with a robust and advantaged portfolio.

Speaker Change: We continue to maintain our focus on delivering the best outcomes for our customers and.

Speaker Change: And affirm our steadfast commitment to managing items within our control.

Joseph Berquist: We are advancing our previously announced $20 million cost program, which will be substantially complete in the first half of 2025. We also made important strategic investments. including acquiring three companies which further enhance our portfolio and will expand our addressable market while providing more avenues to serve our customers and accelerate our growth. Quaker Houghton is in a strong financial position. While tariffs have caused volatility, we are confident that we are well-situated within our markets due to our local-for-local strategy. in our position to mitigate most of the potential direct impacts to our supply chain. We continue to take steps to minimize impacts to our customers that may arise from tariff.

Speaker Change: We are advancing our previously announced $20 million cost program, which will be substantially complete in the first half of 2025.

Speaker Change: We also made important strategic investments.

Speaker Change: Including acquiring three companies, which further enhance our portfolio and will expand our addressable market.

While providing more avenues to serve our customers and accelerate our growth.

Speaker Change: Quaker Houghton is in a strong financial position.

Speaker Change: While tariffs have caused volatility we are confident that we are well situated within our markets due to our local for local strategy.

Speaker Change: And our position to mitigate most of the potential direct impacts to our supply chain.

Speaker Change: We continued to take steps to minimize impacts to our customers that may arise from tariffs.

Joseph Berquist: as we work together to navigate adverse conditions in the global supply chain.

Speaker Change: As we work together to navigate adverse conditions in the global supply chain.

Joseph Berquist: I will say a few words about the quarter, then provide some comments on the outlook for 2025.

Speaker Change: I will say a few words about the quarter then provide some comments on the outlook for 2025.

Joseph Berquist: Then I will hand the call over to Tom to discuss our financials in more detail. First quarter net sales were $443 million. 6% below the prior year or 3% lower on a constant currency basis. We continue to outperform the aggregate of the end markets in which we operate, which we estimate declined by a low to mid-single-digit percentage compared to the prior year. Our total volumes, inclusive of acquisitions, declined approximately 1.5% compared to the prior year. This was a positive result. As a continuation of growth in the Asia-Pacific segment and new business wins globally, mostly offset softer market conditions, primarily in the Americas and the Maya region.

Tom: Then I will hand, the call over to Tom to discuss our financials in more detail.

Tom: First quarter net sales were $443 million <unk>.

Tom: 6% below the prior year or 3% lower on a constant currency basis.

Tom: We continue to outperform the aggregate of the end markets in which we operate which we estimate declined by a low to mid single digit percentage compared to the prior year.

Tom: Our total volumes inclusive of acquisitions declined approximately one 5% compared to the prior year.

Tom: This was a positive result.

Tom: As a continuation of growth in the Asia Pacific segment, and new business wins globally, mostly offset softer market conditions, primarily in the Americas and EMEA regions.

Joseph Berquist: I am pleased with our ability to gain new business despite the challenging market conditions. This is especially evident in our metals business, which is contributing to the relative outperformance compared to market rates. Our net new business wins are trending at the high end of our targeted annual range of 2-4%. And we are encouraged by a strong pipeline of ongoing trials and business development opportunities. These gains are made possible by our diversified portfolio of products and services. our cross-selling capabilities, and our service model. Gross margins improved 120 basis points to 36.4% compared to the lows in the fourth quarter of 2024.

Tom: I am pleased with our ability to gain new business, despite the challenging market conditions.

Tom: This is especially evident in our metals business, which is contributing to the relative outperformance compared to market rates.

Tom: Our net new business wins are trending at the high end of our targeted annual range of 2% to 4%.

Tom: And we are encouraged by a strong pipeline of ongoing trials and business development opportunities.

Tom: These gains are made possible by our diversified portfolio of products and services.

Tom: Our cross selling capabilities and our service model.

Tom: Yeah.

Tom: Gross margins improved 120 basis points to 36, 4% compared to the lows in the fourth quarter of 2024.

Joseph Berquist: Gross margins are within our long-term range, but are below the prior year due to the timing of raw material cost increases and product and geographic mix. as a result of the team's operational performance. We generated $69 million of adjusted EBITDA in the first quarter. an increase of $4 million sequentially. and adjusted EBITDA margins of 15.6%. reflecting our Discipline Cost Management.

Tom: Gross margins are within our long term range, but are below the prior year due to the timing of raw material cost increases in product and geographic mix.

Tom: As a result of the team's operational performance.

Tom: We generated $69 million of adjusted EBITDA in the first quarter.

Tom: An increase of $4 million sequentially in.

Tom: And adjusted EBITDA margins of 15, 6%.

Tom: Reflecting our disciplined cost management.

Joseph Berquist: Our company's growth strategy is aligned with industries, customers, and businesses that despite near-term challenges have positive long-term growth characteristics. We aim to enhance our customer intimacy model and build on our leadership position in our chosen market. We serve many industries. each with unique, often niche applications and needs, and believe our ability to provide the best value to our customers is one of our key competitive advantages.

Tom: Our company's growth strategy is aligned with industries customers and businesses that despite near term challenges.

Tom: Have positive long term growth characteristics.

Tom: We aim to enhance our customer intimacy model and build on our leadership position in our chosen markets.

Tom: We serve many industries, each with unique orphan niche applications and needs.

Tom: And believe our ability to provide the best value to our customers is one of our key competitive advantages.

Joseph Berquist: Last quarter, I highlighted our top priorities, which are one, returning to growth. 2. Reducing Complexity, and 3. Effectively Deploying Capital. We have a lot of work to do, but we have made progress advancing our strategy. For example, we have taken actions to re-center and strengthen leadership around our portfolio of advanced and operating solutions. We are improving the visibility of these and other technologies throughout our region. to accelerate our cross-selling and globalize the full suite of Quaker Howdin products and services. I recently spent time traveling across our sites and customer operations in Asia. I am confident in the potential and believe we are taking the right steps to continue to build our team's product capabilities and pipelines.

Tom: Last quarter I highlighted our top priorities, which are one returning to growth.

Tom: Two reducing complexity and three effectively deploying capital.

Tom: We have a lot of work to do but we have made progress advancing our strategy for.

Tom: For example, we have taken actions to Recenter and strengthened leadership around our portfolio of advanced and operating solutions.

Tom: We are improving the visibility of these and other technologies throughout our regions.

Tom: To accelerate our cross selling and globalize, the full suite of Quaker Houghton products and services.

Tom: I recently spent time traveling across our sites and customer operations in Asia.

Tom: I am confident in the potential.

Tom: And believe we are taking the right steps to continue to build our teams product capabilities and pipeline.

Joseph Berquist: to capitalize on higher growth geographies like Asia Pacific, where we continue to show volume expansion in a highly competitive region. We have launched several cross-functional commercial, strategic, supply chain, and operations initiatives. These initiatives empower us to capitalize on opportunities to gain share in the white space in our addressable market. We are taking steps to improve customer satisfaction. for instance, through reducing lead times and improving our cost competitive. as we help our customers navigate the market turbulence. These initiatives have stirred a lot of excitement in the organization. Harnessing the energy to leverage our technical expertise, industry knowledge, financial strength, and global scale.

Tom: To capitalize on higher growth geographies like Asia Pacific, where we continued to show volume expansion in a highly competitive region.

Tom: We have launched several cross functional commercial strategic supply chain and operations initiatives.

Tom: These initiatives empower us to capitalize on opportunities to gain share in the white space in our addressable markets.

Tom: We are taking steps to improve customer satisfaction.

For instance, through reducing lead times and improving our cost competitiveness.

As we help our customers navigate the market turbulence.

Tom: These initiatives have started a lot of excitement in the organization.

Tom: Harnessing the energy to leverage our technical expertise and industry knowledge financial strength and global scale.

Joseph Berquist: Our Fluid Intelligence Platform is another way we will provide a step change in automation efficiency for customers. we have reprioritized R&D resources to accelerate. and other development initiatives that have performance advantages compared to current technology. The interest in these efficiency plays and customers' acceptance is strong and growing. The $20 million of cost actions announced is progressive. and we continue to expect this will deliver approximately $15 million of in-year benefit, primarily in SG&A. We are also encouraging our teams to increase their focus on customer needs. streamlining decision-making processes and improving our reaction time.

Tom: Our fluid intelligence platform is another way, we will provide a step change in automation efficiency for customers.

Tom: We have re prioritized R&D resources to accelerate this.

And other development initiatives that are performance advantages compared to current technology.

Tom: The interest in these efficiency plays and customers' acceptance is strong and growing.

Tom: The $20 million of cost actions announced is progressing.

Tom: And we continue to expect this will deliver approximately $15 million of in year benefit primarily in SG&A.

Tom: We are also encouraging our teams to increase their focus on customer needs streamlining decision, making processes and improving our reaction time.

Joseph Berquist: Meanwhile, we are continuing to invest in our future. Our facility in China is under construction and will enable us to supply the region with our full portfolio of solutions and further enhance our ability to be local for local. We have also continued to invest in our multi-channel approach. with the intention of making it easier to do business with Quaker House. We're making investments to improve our overall customer interface through e-commerce, building our inside sales channels, leveraging our distribution network and partnerships, and strengthening our direct sales model. and we are initiating another phase of product simplification programs. harmonizing our business processes and organizing our brands to reduce complexity and raise brand awareness.

Meanwhile, we are continuing to invest in our future.

Tom: Our facility in China is under construction and will enable us to supply the region with our full portfolio of solutions and further enhance our ability to be local for local.

Tom: We are also continuing to invest in our multichannel approach.

Tom: With the intention of making it easier to do business with Quaker Houghton.

Tom: We're making investments to improve our overall customer interface through E. Commerce building, our inside sales channels, leveraging our distribution network and partnerships and strengthening our direct sales model.

Tom: And we are initiating another phase of product simplification program.

Tom: Harmonizing, our business processes, and organizing our brands to reduce complexity and raise brand awareness.

Joseph Berquist: These actions are bringing a sharper focus to our customer intimacy model. They will take time to fully develop, but we are making progress putting more rigor around these processes. which is also informing how we can better develop talent and enhance our customers' operations. Our business model and execution has resulted in our strong financial profile. delivering predictable cash flows. We look to deploy capital in a disciplined and prudent manner based on a long-term framework of value creation, which considers all factors. including organic investments, debt reduction, M&A, and shareholder returns through dividend growth and share repurchase.

Tom: These actions are bringing a sharper focus to our customer intimacy model.

Tom: They will take time to fully develop but we are making progress putting more rigor around these processes.

Tom: Which is also informing how we can better develop talent and enhance our customers' operations.

Tom: Our business model and execution has resulted in our strong financial profile.

Tom: Delivering predictable cash flows.

We look to deploy capital in a disciplined and prudent manner.

Tom: Based on our long term framework of value creation, which considers all factors, including organic investments debt reduction M&A.

Tom: And shareholder returns through dividend growth and share repurchases.

Joseph Berquist: The three strategic acquisitions we made so far this year are the exact definitions of what we look for when deploying capital. for instance, DIFSOL. Dipsol is a leading provider of surface treatment solutions, primarily electroplating to the automotive and other industrial segments. DiffSol has market-leading positions, long-term customer relationships, strong margins, and cash flow. and have consistently demonstrated above market organic growth. Importantly, DiffSol has a strong cultural fit with our company and is a great addition to QuakerHut. This transaction was valued at approximately 10.5 times its trailing 12 months adjusted EBITDA and below 9 times on a post-synergy basis.

Tom: The three strategic acquisitions, we made so far this year are the exact definitions of what we look for when deploying capital.

For instance, dip saw.

Tom: <unk>, a leading provider of surface treatment solutions primary primarily electroplating to the automotive and other industrial segments.

Tom: Default has market leading positions long term customer relationships strong margins and cash flows.

Tom: And they have consistently demonstrated above market organic growth.

Speaker Change: Importantly, <unk> has a strong cultural fit with our company and is a great addition to Quaker Houghton.

Tom: This transaction was valued at approximately 10 five times as trailing 12 months adjusted EBITDA and below nine times on a post synergy basis.

Joseph Berquist: We are pleased to make the attractive acquisition of Dipsol a strong company with solid underlying growth and strong cash flow. Through innovation and acquisitions, our portfolio has become much more diverse. expanding our basket of solutions, we can provide our customers in elevating our ability to be a full solution provider. They also provide opportunities to increase our addressable markets and our accretive to margin.

Tom: We are pleased to make the attractive acquisition of dip saw a strong company with solid underlying growth and strong cash flow.

Tom: Through innovation and acquisitions, our portfolio has become much more diverse.

Tom: Expanding our basket of solutions, we can provide our customers and elevating our ability to be a full solution provider.

Tom: They also provide opportunities to increase our addressable markets and are accretive to margins.

Joseph Berquist: Quaker Houghton has a long tradition of outpacing its end markets by deploying its differentiated customer intimate model. and building trust with customers through our best-in-class products, services, people and expertise. during this period of heightened uncertainty. We believe it is even more critical that we reemphasize our commitment to our customer success. The actions we are taking all support our ability to respond to customer needs and advance our strategy. Turning to our outl...

Tom: Quaker Houghton has a long tradition of outpacing its end markets by deploying is differentiated customer intimate model.

Tom: And building trust with customers through our best in class products services people and expertise.

Tom: During this period of heightened uncertainty.

Tom: We believe it is even more critical that we reemphasize our commitment to our customers' success.

Tom: The actions, we are taking all support our ability to respond to customer needs and advance our strategy.

Tom: Turning to our outlook.

Joseph Berquist: Quaker Houghton is well positioned. We have a pipeline of trials underway to gain new business with customers, which we expect will support our ability to drive above market growth in 2025 in line with our long term annual expectation of two to four percent. Quaker Houghton is a global company.

Tom: Quaker Houghton is well positioned.

Tom: We have a pipeline of trials underway to gain new business with customers, which we expect will support our ability to drive above market growth in 2025 in.

Tom: In line with our long term annual expectation of 2% to 4%.

Tom: Quaker Houghton as a global company.

Joseph Berquist: and the uncertainty around trade and tariffs has impacted the end markets we serve. absent additional information or clarity in taking into account some tariff impact. We now expect our underlying market growth rates will decline a low single digit percentage in 2025 compared to 2024 levels. We are excited by our recent acquisitions, including Diffsol, which should add a few percentage points of growth in 2025. helping to offset the expected countervailing trends in automotive, transportation, and industrial markets. Based on our current visibility and despite the increased uncertainty caused by tariffs and trade dynamics, we expect revenue and earnings will be in line with 2024 levels.

Tom: And the uncertainty around trade and tariffs has impacted the end markets we serve.

Tom: Absent additional information or clarity and taking into account some tariff impacts.

Tom: We now expect our underlying market growth rates will decline a low single digit percentage in 2025 compared to 2024 levels.

Tom: We are excited by our recent acquisitions, including dip saw which should add a few percentage points of growth in 2025.

Tom: Helping to offset the expected countervailing trends in automotive transportation and industrial markets.

Tom: Based on our current visibility and despite the increased uncertainty caused by tariffs and trade dynamics, we expect revenue and earnings will be in line with 2024 levels.

Joseph Berquist: This view considers the current state of uncertainty and reduced sentiment across our end market.

Tom: This view considers the current state of uncertainty and reduced sentiment across our end markets.

Joseph Berquist: Because we operate locally, with sourcing, manufacturing, and our technical expertise close to the customer, And due to the criticality of our products and services to our customers' operations. We believe we can offset most of the direct impact of tariffs on our cost structure. is more difficult to assess the implications of the tariffs on end-market demand. However, we are in close communication with our customers and will remain nimble and use our scale as an advantage. We are also prepared to take additional cost actions should it be warranted.

Tom: Because we operate locally with sourcing manufacturing and our technical expertise close to the customer.

Tom: And due to the criticality of our products and services to our customers operations.

Tom: We believe we can offset most of the direct impact of tariffs on our cost structure.

Tom: It is more difficult to assess the implications of the tariffs on end market demand.

Tom: However, we are in close communication with our customers and will remain nimble and use our scale as an advantage we.

Tom: We are also prepared to take additional cost actions should it be warranted.

Joseph Berquist: The long-term fundamentals of our industry are positive. we are effectively managing what we can control. Improving our capabilities and strengthening our business. We have demonstrated our ability to manage through other periods of volatility. generate cash flow and become stronger.

Tom: The long term fundamentals of our industry are positive.

Tom: We are effectively managing what we can control.

Tom: Improving our capabilities and strengthening our business.

Tom: We have demonstrated our ability to manage through other periods of volatility.

Tom: Generate cash flow and become stronger.

Joseph Berquist: Switching to the second quarter, we expect a modest seasonal improvement in demand across all our segments. and a benefit from recent acquisitions. while potential uncertainty related to tariffs remains.

Tom: Switching to the second quarter.

Tom: We expect a modest seasonal improvement in demand across all our segments.

Tom: And a benefit from recent acquisitions.

Tom: While potential uncertainty related to tariffs remains.

Tom Coler: With that, I'd like to pass it to Tom to discuss the financials in more detail. Thank you, Joe, and good morning, everyone. First quarter net sales were $443 million, a decline of approximately 6% from the prior year, or 3% on a constant currency basis. Sales volumes declined approximately 1.5% as new business wins and a contribution from acquisitions of approximately 1% were more than offset by a continuation of the soft macroeconomic environment, primarily in the Americas and EMEA segments, which persisted throughout 2024 and weakened further in the first quarter of 2025. Selling price and product mix was approximately 1% lower, and foreign exchange was a 3% unfavorable impact to net sales in the quarter.

Tom: With that I'd like to pass it to Tom to discuss the financials in more detail.

Tom: Thank you Joe and good morning, everyone.

Tom: First quarter net sales were $443 million a decline of approximately 6% from the prior year or 3% on a constant currency basis.

Tom: Sales volumes declined approximately one 5% as new business wins and a contribution from acquisitions of approximately 1% were more than offset by a continuation of the soft macroeconomic environment, primarily in the Americas, and EMEA segments, which persisted throughout 2024 and weaken further in the <unk>.

Tom: First quarter of 2025.

Tom: Selling price and product mix was approximately 1% lower and foreign exchange was a 3% unfavorable impact to net sales in the quarter.

Tom Coler: As expected, gross margins improved 120 basis points to 36.4% compared to the lowest experience in the fourth quarter of 2024, driven by positive mix. Gross margins declined year-over-year when compared to the record levels in the first quarter of 2024 due to the timing and impact of higher raw material costs, geographic and product mix, and manufacturing absorption on lower volumes. Excluding one-time items, SG&A declined $7 million, or 6%, compared to the prior year. The decrease primarily reflects our disciplined cost management and reduction action. We are progressing with the actions related to the additional annualized $20 million cost program announced last quarter and expect approximately $15 million of benefit in 2025 compared to the 2024 base.

Tom: As expected gross margins improved 120 basis points to 36, 4% compared to the lows experienced in the fourth quarter of 2024, driven by positive mix.

Tom: Gross margins declined year over year, when compared to the record levels in the first quarter of 2024 due to the timing and impact of higher raw material costs geographic and product mix and manufacturing absorption on lower volumes.

Tom: Excluding one time items, SG&A declined $7 million or 6% compared to the prior year.

Tom: The decrease primarily reflects our disciplined cost management and reduction actions we.

Tom: We are progressing with the actions related to the additional annualized $20 million cost program announced last quarter and expect approximately $15 million of benefit in 2025 compared to the 2024 base.

Tom Coler: We delivered $69 million of adjusted EBITDA in the first quarter, compared to $83 million and $65 million in the first and fourth quarters of 2024. Foreign exchange was a $4 million headwind year over year and a $1 million headwind sequentially. Adjusted EBITDA margins were 15.6%, reflecting the sequential improvement in gross margins and our cost actions taken in the quarter.

Tom: We delivered $69 million of adjusted EBITDA in the first quarter compared to $83 million and $65 million in the first and fourth quarters of 2024.

Tom: Foreign exchange was a $4 million headwind year over year, and a 1 million dollar headwind sequentially.

Tom: Adjusted EBITDA margins were 15, 6%, reflecting the sequential improvement in gross margins and our cost actions taken in the quarter.

Tom Coler: Switching to our segment results. Net sales in our Asia Pacific segment declined 2% compared to the prior year, but we're in line with the prior year on a constant currency basis. Organic volumes increased approximately 1%, and the SuTi acquisition added another 2%. Selling price and product mix was 3% lower. The Asia-Pacific market is highly competitive, but we have continued to outperform, driven by new business wins, especially in our metals business, as the team is successfully cross-selling and winning trials. Selling price and products mix reflected some selective incentives, first fills, and geographic mix. Segment sales decreased on a sequential basis as expected due to the seasonality related to the Lunar New Year.

Tom: Switching to our segment results.

Tom: Net sales in our Asia Pacific segment declined 2% compared to the prior year, but were in line with the prior year on a constant currency basis.

Tom: Organic volumes increased approximately 1% and the <unk> acquisition added another 2% selling price and product mix was 3% lower.

Tom: The Asia Pacific market is highly competitive, but we have continued to outperform driven by new business wins, especially in our metals business. As this is the team has successfully cross selling and winning trials.

Tom: Selling price and product mix reflected some selective incentives first bills and geographic mix.

Tom: Net sales decreased on a sequential basis as expected due to the seasonality related to the lunar new year.

Tom Coler: Segment earnings and margins in Asia-Pacific declined compared to the prior year. This reflects the impact of lower sales, higher raw material costs, and product and geographic mix.

Tom: Segment earnings and margins in Asia Pacific declined compared to the prior year.

Tom: This reflects the impact of lower sales higher raw material costs and product and geographic mix.

Tom Coler: we will begin to implement some targeted pricing actions to improve the profitability of the segment.

Tom: We will begin to implement some targeted pricing actions to improve the profitability of the segment.

Tom Coler: Net sales in the EMEA segment were 7% lower year over year, or 4% on a constant currency basis. Total sales volumes declined 3% and selling price and product mix decreased 1%. Segment sales increased on a sequential basis, driven by higher sales volumes, including acquisitions, and positive selling price and product. Segment earnings in EMEA decreased by approximately $6 million compared to the prior year. This was due to the lower sales and a decline in segment margins. Despite higher raw material costs, EMEA segment earnings and margins improved compared to the fourth quarter as expected.

Tom: Net sales in the EMEA segment were 7% lower year over year or 4% on a constant currency basis.

Tom: Total sales volumes declined 3%.

Tom: And selling price and product mix decreased 1%.

Tom: Segment sales increased on a sequential basis, driven by higher sales volumes, including acquisitions and positive selling price and product mix.

Tom: Segment earnings in EMEA decreased by approximately $6 million compared to the prior year.

Tom: This was due to the lower sales and a decline in segment margins.

Tom: Despite higher raw material costs, EMEA segment earnings and margins improved compared to the fourth quarter as expected.

Tom Coler: Net sales in the Americas declined 7% year over year or 3% on a constant currency basis. volumes declined 3% due to a continuation of soft industrial activity, low steel utilization rates which remain below five-year averages, and soft automotive transportation and heavy machinery production. Selling price and product mix was consistent with the prior year. Our net sales volumes and selling price and product mix increased sequentially as new business wins and mix offset a softer market. Segment earnings in the Americas declined by $8 million compared to the prior year, driven by lower sales and segment margins. As expected, America's segment earnings and margins increased compared to the fourth quarter driven by the higher volumes and mix.

Tom: Net sales in the Americas declined 7% year over year or 3% on a constant currency basis.

Tom: Volumes declined 3% due to a continuation of soft industrial activity low steel utilization rates, which remain below five year averages and soft automotive transportation and heavy machinery production selling price and product mix was consistent with the prior year.

Tom: Our net sales volumes and selling price and product mix increased sequentially as new business wins and mix offset a softer market.

Segment earnings in the Americas declined by $8 million compared to the prior year driven by lower sales and segment margins as expected Americas segment earnings and margins increased compared to the fourth quarter driven by the higher volumes and mix.

Tom Coler: Overall, the team performed well in the first quarter, managing through a very dynamic operating environment with a high degree of uncertainty and volatility.

Tom: Overall, the team performed well in the first quarter managing through a very dynamic operating environment with a high degree of uncertainty and volatility.

Tom Coler: Turning to non-operating costs, our interest expense was $10 million in the first quarter, a decline of $1 million compared to the prior year. This reflects the reduction in our variable cost debt and lower rates, which are currently yielding approximately 5%. Our effective tax rate, excluding non-recurring and non-core items, was approximately 29% in the first quarter, in line with our expectations for our full-year rate. And in the first quarter, our GAAP diluted earnings per share were $0.73. Our non-GAAP diluted earnings per share were $1.58.

Tom: Turning to non operating costs, our interest expense was $10 million in the first quarter, a decline of $1 million compared to the prior year.

Tom: This reflects the reduction in our variable cost debt and lower rates, which are currently yielding approximately 5%.

Tom: Our effective tax rate, excluding nonrecurring and non core items was approximately 29% in the first quarter in line with our expectations for full for our full year rate.

Tom: And in the first quarter, our GAAP diluted earnings per share were <unk> 73.

Our non-GAAP diluted earnings per share were $1.58.

Tom Coler: Cash from operations was a use of $3 million in the first quarter, which is typically our lowest from a cash generation perspective due to incentive payments and working capital investments and the seasonality of our business. We also paid $9 million of cash for our restructuring activities in the quarter.

Tom: Cash from operations was a use of $3 million in the first quarter, which is typically our lowest from a cash generation perspective, due to incentive payments and working capital investments and the seasonality of our business.

We also paid $9 million of cash for our restructuring activities in the quarter.

Tom Coler: We will align our working capital levels with the macro environment while maintaining the flexibility to be responsive to our customers' production needs while delivering another strong year of cash flow in 2025. Capital expenditures in the first quarter were approximately $12 million reflecting the construction of our new facility in China. For 2025, our expectation for capital expenditures remains at two and a half to three and a half percent of sales.

Tom: We will align our working capital levels with the macro environment, while maintaining the flexibility to be responsive to our customers' production needs, while delivering another strong year of cash flow in 2025.

Tom: Capital expenditures in the first quarter were approximately $12 million, reflecting the construction of our new facility in China for.

Tom: For 2025, our expectation for capital expenditures remains at two and a half to three 5% of sales.

Tom Coler: In the first quarter, we closed on our acquisition of Chemical Solutions and Innovations, or CSI, for approximately $4 million.

Tom: In the first quarter, we closed on our acquisition of chemical solutions and innovations or CSI for approximately $4 million.

Tom Coler: Subsequent to the quarter, we acquired Natek for approximately $6 million, and Dipsol Chemicals for approximately $155 million, which was funded through our existing credit facility. Our net debt at quarter end was $551 million, and our net leverage ratio was 1.9 times our trailing 12 months adjusted EBITDA. The interest on our variable rate debt is approximately 5%, and we have no maturities until 2027.

Tom: Subsequent to the quarter, we acquired <unk> for approximately $6 million and dip saw chemicals for approximately $155 million, which was funded through our existing credit facility.

Tom: Our net debt at quarter end was $551 million and our net leverage ratio was one nine times, our trailing 12 months adjusted EBITDA.

Tom: The interest on our variable rate debt is approximately 5% and we have no maturities until 2027.

Tom Coler: As we close on the first quarter, we are well positioned, aligned with end markets that have attractive long-term characteristics and focused on increasing our share. We have more opportunities to drive efficiencies for our company and our customers' operations, and we will continue to manage our costs.

Tom: As we close on the first quarter, we are well positioned aligned with end markets that have attractive long term characteristics and focused on increasing our share we have more opportunities to drive efficiencies for our company and our customers operations and we will continue to manage our costs are.

Tom Coler: Our financial profile, balance sheet, and liquidity are strong and provide opportunities to execute on our disciplined capital allocation strategy to accelerate our growth and create shareholder value.

Tom: Our financial profile balance sheet, and liquidity are strong and provide opportunities to execute on our disciplined capital allocation strategy to accelerate our growth and create shareholder value.

Joseph Berquist: With that, I'll turn it back to Joe. Thank you, Tom. We are making progress, refocusing the organization, streamlining our business processes, and executing on our strategic pillars to drive growth.

Joe Berquist: With that I'll turn it back to Joe.

Joe Berquist: Thank you Tom.

Joe Berquist: We are making progress refocusing the organization streamlining our business processes and executing on our strategic pillars to drive growth.

Joseph Berquist: With that, we'd be happy to take your questions. Thank you.

Joe Berquist: With that we'd be happy to take your questions.

Joe Berquist: Thank you well now be conducting a question and answer session.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Joe Berquist: Like to ask a question. Please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue you.

Joe Berquist: You May press star two if you'd like to move your question from the queue.

Joe Berquist: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: One moment please, we'll be right back.

Joe Berquist: One moment, please we poll for questions.

Michael Harrison: Thank you, and our first question comes from the line of Mike Harrison with Seaport Research Partners. Hi, good morning. Morning, Mike.

Speaker Change: Thank you and our first question comes from the line of Mike Harrison with Seaport Research Partners. Please proceed with your questions.

Mike Harrison: Hi, good morning.

Speaker Change: Good morning, Mike.

Joseph Berquist: I want to congratulate the Browns on all the quarterbacks they collected during the draft, Maybe start out with the tariff situation. Are there some input costs or cross-border finished goods selling concerns that we need to keep in mind for Quaker? Or is the main issue the impact on kind of overall demand and just the uncertainty that's out there as it's impacting your...

Mike Harrison: Want to congratulate the Browns on all of the.

Mike Harrison: All the quarterbacks they collected during the draft Joe.

Mike Harrison:

Mike Harrison: Maybe maybe to start out with the tariff situation.

Mike Harrison: Are there soon.

Mike Harrison: <unk> cost.

Mike Harrison: Our cross border finished good selling concerns that we need to keep in mind for Quaker or is the main issue the impact on kind of overall demand and just the uncertainty that's out there.

Speaker Change: Is it impacting your customers.

Joseph Berquist: Yeah, good question, Mike, I'll hold off commenting on the Browns for another time. But I would say, we look at this in really three buckets, right? Raw material purchases, which which come in, you know, some are single source, some are coming from from China, we buy about 3000 raw materials globally, there are raw materials that go out from the US that would have some impact. But, you know, largely, as we look at this, because we are buying and producing locally, and we have dual sources of supply and ability to sort of qualify as needed. We think that we can largely mitigate those impacts.

Speaker Change: Yes, good question, Mike I'll hold off commenting on the Browns.

Speaker Change: For another time, but.

Speaker Change: I would say.

Speaker Change: We look at this in really three buckets, right raw material purchases, which which come in you know some are single source. Some are coming from from China, We buy about 3000 raw materials globally there are raw.

Speaker Change: Materials that go out from the U S that would have some impact.

Speaker Change: But largely as we look at this <unk>.

Speaker Change: Because we are buying and producing locally.

Speaker Change: And we have dual sources of supply and the ability to sort of qualify it.

Speaker Change: As needed.

Speaker Change: We think that we can largely mitigate those impacts.

Joseph Berquist: There's also some of these raw materials are on index base. So, you know, we have levers in place, I guess, to delay and push some of these things back. But from a raw material purchase standpoint, pretty good shape overall. Finished goods, similarly, I think, you know, in this business, it's hard to put water-based products, you know, on a boat and be competitive shipping them around the world. So, we do manufacture locally, we do buy raw materials locally. And we've got a lot of flexibility in our footprint. For instance, you know, we put a reactor in Thailand last year that gives us more capacity for other Asia and even China.

Speaker Change: There is also some some some of these raw materials are on index base.

Speaker Change: So.

Speaker Change: We have.

Speaker Change: Levers in place I guess to delay and pushed some of these things back but.

Speaker Change: From a raw material purchase standpoint.

Speaker Change: Standpoint pretty good shape overall.

Speaker Change: Finished goods similarly, I think.

Speaker Change: In this business, it's hard to put water based products.

Speaker Change: On a boat and be competitive shipping them around the world. So we we do manufacturer locally we do buy raw materials locally.

Speaker Change: And we've got a lot of flexibility in our footprint for instance, we put a reactor in Thailand last year that gives us more capacity for other Asia, and even China system. Some products that might have been coming from the U S. In the past are now more more locally sourced I think you hit on it the.

Joseph Berquist: So, some products that might have been coming from the U.S. in the past are now more locally sourced. I think you hit on it. The The bigger thing that's harder to assess, I guess, is what's the the impact on demand going to be? We did see some impact in the first quarter. I think people are waiting to see how this unfolds. There's a little bit of uncertainty. You know, as we look into the second quarter, and it's early, you know, I am happy to say, you know, it's sort of normal seasonal pickup that you would see heading from Q1 into Q2, but we're keeping a close eye on it, I think.

Speaker Change: The bigger thing that's harder to assess I guess is what's the impact on demand.

Speaker Change: Going to be we did see some impact in the first quarter.

Speaker Change: I think people are waiting to see how this unfolds there is a little bit of uncertainty.

Speaker Change: We look into the second quarter and it's early.

Speaker Change: I'm happy to say, it's sort of normal seasonal pick up that you would see heading from Q1 into Q2.

Speaker Change: But we're keeping a close eye on it I think.

Joseph Berquist: We all wish we knew where this was going. It's kind of, you know, a lot of uncertainty around will all these tariffs stick or not. But from an overall standpoint on margin and costs and really the impact to our customers, I think we're pretty well mitigated.

Speaker Change: We all wish we knew where this was going.

Speaker Change: Just kind of a lot of uncertainty around will all these tariffs stick or not but.

Speaker Change: From an overall standpoint on margin and costs and really the impact to our customers I think we're pretty well mitigated.

Speaker Change: Okay.

Michael Harrison: All right.

Speaker Change: Alright, then.

Joseph Berquist: And then, Joe, during your prepared remarks there when you were talking about strategy, you mentioned some recentering of leadership. You mentioned the multichannel approach. You mentioned some work you're doing to kind of simplify the portfolio and improve brand awareness. It sounds like there is a lot going on behind the scenes right now to kind of make it easier to do business with Quaker Houghton. Can you maybe pick on a couple of those initiatives and give us a little more detail on the steps that you're taking and what it's going to lead to? Sure, Mike. Yeah, good question.

Speaker Change: Joe during your prepared remarks, there when you were talking about strategy you mentioned.

Speaker Change: Some recent during a leadership you mentioned the multi channel approach you mentioned.

Speaker Change: Some work you're doing to kind of simplify the portfolio and improved brand awareness at.

Speaker Change: It sounds like there is a lot going on behind the scenes right now.

Speaker Change: To kind of make it easier to do business with with Quaker Houghton can you.

Speaker Change: Maybe pick up on a couple of those initiatives and give us a little more detail on the steps that you're taking and what it's going to lead to.

Speaker Change: Sure Mike Yeah. Good question I think as I mentioned on the last call I think.

Joseph Berquist: I think, you know, as I mentioned on the last call, I think one of the things we're trying to drive at is reducing complexity in the company. I looked at how we were organized and there was a good bit of complexity around some of our product lines and not necessarily, you know, strategically aligning with how we go to market. So we have restructured the alignment of our strategy organization and product management with our business segments, sort of metals, metalworking, advanced solutions, operating solutions. The advanced solutions and the operating solutions, those are probably 15-20% of our revenues.

Speaker Change: One of the things we're trying to drive at is reducing complexity in the company.

Speaker Change: I looked at how we're organized.

Speaker Change: There was a good bit of complexity around some of our product lines and not necessarily strip.

Speaker Change: Strategically aligning with that we go to market. So we have restructured.

Speaker Change: The alignment of our strategy organization and product management with our our business segments certain metals metalworking advanced solutions operating solutions.

Speaker Change: The advanced solutions and the operating solutions those those are probably 15% 20% of our revenues, but these are newer technologies, where we've got opportunity to cross sell added at <unk>.

Joseph Berquist: But these are newer technologies where we've got opportunity, you know, to cross sell at an accelerated rate. And, you know, Some of these products are new to our sales force, right? So we're looking at putting business development teams in to really help our regular sales force grow those things more quickly and increase the knowledge of the organization, bring that expertise to the interface with the customer. Brands is something that's ongoing. We have a history of acquisitions. We've got a lot of brands and a lot of products and we're spending time creating some more clarity around that.

At an accelerated rate.

Speaker Change: You know.

Speaker Change: Some of these products are new to our sales force right. So we're looking at putting business development teams in to really help our regular sales force grow those things.

Speaker Change: More quickly and increase and also the organization bring that expertise to the to the interface with the customer.

Speaker Change: Brands is something that is ongoing we have.

Speaker Change: Our history of.

Acquisitions, we've got a lot of brands and a lot of products and we're spending time <unk>.

Speaker Change: Creating some more clarity around that.

Joseph Berquist: We still have legacy Houghton brands, legacy Quaker brands, and many others. We wanna have a Quaker Houghton brand family aligned with good, better, best positioning. And so that work continues and we're making progress there. And I think the other one you hit on, which is really good, is channel. Also, I think just as I look at our business, a lot of complexity around, there's a long tail of small customers, right? And all of our customers are important, but when you think about how we serve all these customers, we want everyone to have a good experience, a customer intimate experience with us.

Speaker Change: We still have legacy Houghton brands legacy Quaker brands, and many others, we want to have a Quaker Houghton brand family.

Speaker Change: Aligned with good better best positioning.

Speaker Change: So that work continues and we're making progress there and I think the other one you hit on which is really good is is channel.

Speaker Change: Also I think just as I look at our business a lot of complexity around there's a long tail of small customers right and all of our customers are important.

Speaker Change: But when you think about how we serve all these customers we want everyone to have.

Speaker Change: Good experience of customer intimate experience with us. So we are using technology, we've created an inside sales channel or even.

Joseph Berquist: So we're using technology. We've created an inside sales channel or even implementing some e-commerce things where people can get on and get information and chat. And that gives us a more scalable approach to service. And then it frees up our people to go after big game, to go hunt the bigger target. So you hit on it. There's a lot going on, there always is, but we feel really good about those things and a lot of energy in the company right now about these changes.

Speaker Change: Implementing some e-commerce things, where people can get on and get information in chat and that gives us a more scalable approach to service and and it frees up our people to go after big game to go Hunt the bigger target so.

Speaker Change: You hit on it there's a lot going on there always is.

Speaker Change: But we feel really good about those things and a lot of energy in the company right now about these changes.

Michael Harrison: All right, and then last question for me, you were pretty clear with the full year sales and earnings outlook. I was hoping that maybe you could give us a little bit more color on the puts and takes as we're thinking about the second quarter EBITDA. It sounds like maybe you're expecting some sequential improvement in volumes, which would be seasonal. Some contribution from DPSL, but maybe just help us understand maybe on the cost side of the equation, how we should be thinking about that sequential growth and how that should contribute to EBITDA growth in the future.

Speaker Change: Alright, and then.

Speaker Change: Last question for me you were pretty clear with the full year sales and earnings outlook I was hoping that maybe you could give us a little bit more color on the puts and takes as we're thinking about that.

Speaker Change: Second quarter EBITDA.

Speaker Change: Sounds like maybe you're expecting some sequential improvement in volumes, which would be seasonal.

Speaker Change: Some contribution from digital.

Speaker Change: But maybe just help us understand maybe on the cost side of the equation, how we should be thinking about that sequential.

Speaker Change: Growth and how that should contribute to EBITDA growth in the second quarter.

Tom Coler: Yeah. Hi, Mike. Good morning. It's Tom. I'll share a little bit on Q2. So, you know, I think, as you mentioned, Joe hit kind of our outlook in the prepared remarks. As we look at Q2, I think net-net, we expect EBITDA to be modestly higher versus Q1. Joe mentioned, you know, directionally, we expect normal seasonality across our regions, and we are seeing that here in the first month in April for Q2. We anticipate that our share gains will continue, which will help to supplement the continued soft market environments that we're seeing. And then, as you think about sGNA, core sGNA, we're anticipating to be around Q1 levels.

Speaker Change: Yeah, Hi, Mike Good morning, it's Tom I'll share a little bit on the on Q2 so.

Speaker Change: I think as you mentioned, Joe hit kind of our outlook in the in the prepared remarks as we as we look at Q2 I think net net we expect EBITDA to be modestly higher versus Q1.

Joe mentioned.

Speaker Change: Directionally, we expect normal seasonality across our regions and we are seeing that here in the first month and in April for Q2.

Speaker Change: We anticipate that our share gains will continue which will help to supplement the <unk>.

Speaker Change: <unk> soft market environments that we're seeing.

Speaker Change: And then as you think about SG&A core SG&A, we're anticipating to be around Q1 levels and then as you mentioned then you add in dips all youre starting in Q2. So I think hopefully that gives you a little bit more more color on how we're thinking about Q2.

Tom Coler: And then, as you mentioned, then you add in dipsol here, starting in Q2. So, I think, hopefully, that gives you a little bit more color in how we're thinking about Q2.

Michael Harrison: Yes, very helpful. Thanks very much.

Speaker Change: Yes, very helpful. Thanks very much.

Lawrence Alexander: Our next questions are from the line of Lawrence Alexander with Jeffreys. Hey, good morning, this is Kevin S. for Lawrence. So you guys mentioned some order volatility, and I was just curious, you know, I guess how much has volatility increased? And maybe where have they increased the most? And like, if there's a regional skew there? And I guess what have customers been saying that, I guess they would need to see to return to more stable order patterns? Yeah, I think I mean, I think that volatility has really been in place for for a few years now, and probably accelerated here in the first quarter because of tariffs, but The areas that have been most impacted, and at least in the first quarter, were really Europe and the Americas.

Speaker Change: Our next questions are from the line of Laurence Alexander with Jefferies. Please proceed with your questions.

Kevin: Hey, Good morning, this is Kevin that stock on for Lauren.

Speaker Change: You guys mentioned some order volatility I was just curious.

Speaker Change: I guess, how much volatility.

Kevin: Volatility increased.

Kevin: And maybe where have they increased the most and like if there's a regional skew there and I guess, what a customer has been saying that they would need to see to return to more stable order patterns.

Kevin: Yeah, I think I mean, I think that volatility has really been in place for a few years now and.

Kevin: Probably accelerated here in the first quarter because of tariffs but.

Kevin: Yeah.

Kevin: The areas that have been most impacted and at least in the first quarter were really Europe and the Americas.

Joseph Berquist: We saw things decline in the second half of last year. They declined further in the first quarter, and that was a little bit unexpected. But also, I think people are managing their inventories down. They got stuck with some higher inventories toward the end of the year. And they're really being prudent about their own operating plans, looking out ahead, right? I can't, you know, I wouldn't put a pin on any particular product line or area. I think it's just around lumpiness in the order pattern. Asia. They had the Lunar Holiday again, and sometimes that's a non-event.

Kevin: We saw.

Kevin: Decline in the second half of last year.

Kevin: The decline further in the first quarter and that was a little bit unexpected, but but also I think people are managing their inventories down they got stuck with some higher inventories toward the end of the year and they're really being prudent about their own operating plans.

Kevin: Looking out ahead right.

Kevin: I can't I wouldn't put a pin on any particular product line or area I think it's it's just around lumpiness in the order pattern.

Kevin: Asia, they had to lunar holiday again.

Kevin: Sometimes thats a non event, sometimes it's a little bit more impactful I think this year it was a little bit more impactful.

Lawrence Alexander: Sometimes it's a little bit more impactful. I think this year it was a little bit more impactful, as again, their markets overall are tepid, but we were able to show some growth there really coming from share gains. Got it. Okay. Thank you.

Kevin: As again.

Their markets overall are tepid, but we were able to show some growth there really coming from from share gains.

Kevin: Got it okay. Thank you.

Lawrence Alexander: And then just my second question. So there's been talk out of the administration on deregulation. And I guess I was just wondering whether, I guess, you saw that there could be any direct impacts on your business from broader deregulation, or if you've heard from any of your US-based customers that you service that basically deregulation could have a material impact. Most people we've been hearing have said that, essentially, the impact would be minor. So I'm just curious what your thoughts are there. Yeah, I think similar thoughts there. It, you know, anything that that stirs business growth, we're supportive of.

Speaker Change: My second question. So there's been talk on the administration on deregulation and I guess I was just wondering whether I guess you started there could be any direct impacts on your business from broader deregulation or if you've heard from any of your U S. Based customers that you service that basically deregulation could have a material impact most most people we've been hearing that.

Kevin: Essentially the impact would be.

Kevin: Minor.

Kevin: So I'm just curious what your thoughts are there.

Kevin: Yes, I think similar thoughts there.

Kevin: It.

Kevin: Net debt service business growth, we're supportive of.

Joseph Berquist: I think, you know, for us, regardless, you know, if regulations are in place, actually, that sometimes requires innovation and in different solutions from us as a supplier to help our customers get through it. So either way, you know, we're not really, we have never really been impacted by regulation and don't expect that will be a material headwind going forward. or Taylor. Thank you. Got it. All right. Thank you. I appreciate it.

Kevin: I think for us regardless if regulations are in place actually.

Kevin: That sometimes requires innovation in <unk>.

Kevin: And different solutions from us as a supplier to help our customers get through it so.

Kevin: Either way.

Kevin: We're not really.

Kevin: We have never really been impacted by regulation and don't expect that will be a material.

Kevin: Wind going forward.

Kevin: <unk> Okay. Thank you.

Kevin: Got it alright, thank you I appreciate it.

Jonathan Tanwanteng: The next question is from the line of Jon Tanwanteng with CGS Security. Hi, good morning, and thank you for taking my questions. The first one is, could you talk about the approximate contribution from acquisitions and the outlook for this year? And maybe beyond that, talk about the growth and synergy potential at Bipsol, especially as, you know, auto markets are likely to be one of the harder hit markets, you know, in the current environment and kind of what the what the expectations are there. Yeah, hi, John. So in terms of contribution from DiffSol, they did approximately $80 million of sales in 2024, approximately $15 million worth of EBITDA in 2024.

Kevin: The next question is from the line of John Kim with hang with CGS Securities. Please proceed with your question.

John Kim: Hi, Good morning, and thank you for taking my questions. The first one is could you talk about the approximate contribution from acquisitions and the outlook for this year and maybe beyond that talk about the growth and synergy potential pitfall, especially with auto market.

Are likely to be one of the hardest hit markets.

John Kim: The current environment and kind of what the what the expectations are there underlying it.

John Kim: Yeah, Hi, John So in terms of.

John Kim: Contribution from dips all they did approximately $80 million of sales in 2020 for approximately $15 million worth of EBITDA in 2024, So as you think about the business.

Jonathan Tanwanteng: So as you think about, you know, the business for us, we acquired them in April. So you get, you know, roughly three quarters of that here in 2025. Yeah, I'll just add, you know, really excited about about TIPSOL. It's a great fit for our business. It brings some new technology. It expands our addressable market. And from a strategic perspective, you know, right down the fairway, it fits similar customer base. So it gives us a, you know, a bigger footprint in Japan and in with some of those customers, which are really important globally. You mentioned automotive, you know, we've kind of baked that into our outlook.

John Kim: For us we acquired them in April so you get roughly three quarters of that here in 2025.

John Kim: Yes, I'll just add.

John Kim: Really excited about about tip saw.

Speaker Change: It's a great fit for our business. It brings some new technology it expands our addressable market and from a strategic perspective right down the fairway.

John Kim: It fits similar customer base so.

Speaker Change: And it gives us a.

Speaker Change: Bigger footprint in Japan and.

Speaker Change: And in with some of those customers that are really important globally, you mentioned automotive.

Speaker Change: We kind of baked that into our outlook there is uncertainty in automotive.

Joseph Berquist: There is uncertainty in automotive. That's probably the area that we've seen most of the impact so far this year. You know, it doesn't really change our overall guide where we expect to come in similar to 2024, very similar to 2024 with all the puts and takes we mentioned but automotive is question mark right now with tariffs.

Speaker Change: That's probably the area that we've seen most of the impact.

Speaker Change: So far this year it doesn't really change.

Speaker Change: Our overall guide, where we expect to come in.

Speaker Change: Similar to 2024 very very similar to 2024 with all the puts and takes we mentioned, but automotive is a question Mark right now with tariffs.

Joseph Berquist: Okay, thank you. And then maybe if I could get just a little bit more color on the underlying tariff assumption that you have. Is that assuming that the full boat, you know, April 2nd plus China tariffs, or are you expecting something less, you know, as you build to that flat year-over-year expectation? Yeah, I mean, our base assumption is as, as of today, what we know today. Yeah, I don't really know. You know, there's this 90 day kind of cliff that everyone's looking at. It would be it would be hard to say what's going to happen.

Speaker Change: Okay. Thank you and then maybe if I could get just a little bit more color on the underlying tariff assumption that you have is that assuming the full boat April 2nd plus China tariffs.

Speaker Change: Or are you expecting something less.

Speaker Change: And as you build to that that's flat year over year expectation.

Speaker Change: Yes, I mean, our base assumption is S.

Speaker Change: As of today, what we know today.

Speaker Change: And.

Speaker Change: Yeah, I don't really know Theres. This 90 day kind of cliff that everyones looking at.

Speaker Change: It would be it would be.

Speaker Change: Hard to say, what's going to happen will that really go through or not go through we've not assumed anything different from kind of current status.

Joseph Berquist: Will that really go through or not go through? We've not assumed anything different from kind of current status. Yeah, and I would I would say that, you know, as we came into the year we were thinking our markets would grow, you know, sort of, you know, one to two percent. Now, as we've observed sort of markets here, Q4 into Q1, you know, our markets are down low single digits percent. So it's hard to predict where the ultimate output or outcome of the tariff discussions go. But what we're observing today is it feels like our markets continue to be soft and have weakened here in Q1.

Speaker Change: Yeah, and I would I would say that as we came into the year.

Speaker Change: We were thinking or markets would grow sort of.

Speaker Change: <unk>.

Speaker Change: 1% to 2% now as we have observed sort of markets your Q4 into Q1.

Speaker Change: Our markets are down low single digits percent, so it's hard to predict where the ultimate output or outcome.

Speaker Change: Of the tariff discussions go but what we're observing today is it feels like our markets continue to be soft and have weekend here in Q1.

Jonathan Tanwanteng: Fair enough.

Speaker Change: Okay fair enough if I could slip one more in there just any thoughts on capital allocation I know you obviously bought these companies.

Jonathan Tanwanteng: If I could slip one more in there, just any thoughts on capital allocation? I know you obviously bought these companies. But your stock is trading a little bit lower than acquisition. And obviously, as you keep an eye on leverage and then kind of how high leverage companies are treated in the market these days, any color they will be. Yeah, yeah, thanks. Good question. So, as we've said in the past, we're going to continue to use all the tools in our toolkit when it comes to capital allocation. First and foremost, we're focused on investing for growth, whether that's M&A or organic growth.

Speaker Change: But your stock is trading a little bit lower than acquisitions.

Speaker Change: And obviously as you keep an eye on leverage and then kind of how high Levered companies are are treated in the market. These days any color there would be helpful. Thank you.

Speaker Change: Yeah, Yeah. Thanks, good question.

Speaker Change: So as we've said in the past we're going to continue to use all the tools in our tool kit when it comes to capital allocation.

Speaker Change: First and foremost we're focused on investing for growth whether that's M&A.

M&A or organic growth I'm really pleased with how the team executed in 2024.

Joseph Berquist: I'm really pleased with how the team executed in 2024. We acquired Sutai and IKB, we're building a plant in China, we paid down debt, we have a longstanding tradition at Quaker Houten of paying a dividend, and then we repurchased shares. As you think about 2025, we've already acquired three strategic and very attractive acquisitions here in 2025, and we're continuing to build out of our plant in China. So I think, you know, options still remain for us. We've got a very healthy balance sheet. We generate a healthy amount of cash flow. So we'll be opportunistic as we think about the levers associated with how we deploy capital, but feel really good about how we're positioned.

Speaker Change: We acquired <unk> tie in ITV.

Speaker Change: We're building a plant in China, we paid down debt.

Speaker Change: We have a long standing tradition of Quaker Houghton of paying a dividend and then we repurchase shares as you think about 2025, we've already acquired.

Speaker Change: Three strategic and very attractive acquisitions here in 2025.

Speaker Change: And we're continuing to build out of our plant in China. So I think.

Speaker Change: Options still remain for us we've got a very healthy balance sheet, we generate a healthy amount of cash flow. So we'll be opportunistic as we think about the levers associated with how we deploy capital, but feel really good about how we're positioned.

Jonathan Tanwanteng: Great, thank you.

Speaker Change: Great. Thank you.

Arun Viswanathan: Our next question is from the line of Arun Viswanathan with RBC. I guess about that. Hope you're well. Thanks for taking my question. Yeah, I guess first off, you know, the volumes, if you look at the volume slide, they actually kind of look a little bit consistent sequentially and even over the last few quarters. But I know that the end market weakness has continued. So, I guess, what are you hearing from your customers? Have they started to, are they pulling back even more? And so we expect kind of a further drop off sequentially in Q2, or is there some seasonal help that should offset that?

Speaker Change: Our next question is from the line of Arun Viswanathan with RBC. Please proceed with your questions.

Speaker Change: I guess about that.

Arun Viswanathan: Hope you're well thanks for taking my question.

Arun Viswanathan: Yeah, I guess first off you know the volumes if you look at the volume slide.

Arun Viswanathan: Kind of look a little bit consistent sequentially and even over the last few quarters, but I know that the end market weakness has continued so I guess what are you hearing from your customers have they started to are they are they are they pulling back even more.

Arun Viswanathan: And so we expect kind of a further drop off sequentially in Q2 or is there some seasonal help that that should offset that.

Joseph Berquist: Yeah, maybe we'll start there. Thanks. Yeah, thanks, Arun. Thanks for your question. Yeah, I mean, there is seasonal help, right? The first quarter, you know, we said this on the Q4 call, we expected the first quarter to be probably our toughest quarter. AsiaPac generally has a stronger second half of the year, their fourth quarter is really strong, and then they have the Lunar Holiday, so that falls off Q1 into Q2. I think, again, just kind of normal seasonal pattern, there should be some help there for the overall business. The other thing is just visibility to our pipeline and our business acquisitions.

Arun Viswanathan: Yeah, well, maybe we'll start there thanks.

Arun Viswanathan: Yeah. Thanks, Arun Thanks for the question yes.

Arun Viswanathan: Yes, I mean, there is seasonal help right.

Arun Viswanathan: The first quarter, we said this on the Q4 call we expected the first quarter to be probably our toughest quarter.

Arun Viswanathan: Asia Pac Asia Pac generally has a stronger second half of the year. The fourth quarter is really strong and then they have the lunar holiday so.

Arun Viswanathan: That falls off Q1 into Q2 I think.

Arun Viswanathan: Again, just kind of normal seasonal pattern there should be some some help there.

Arun Viswanathan: The overall business. The other thing is just visibility to our our.

Pipeline in our business acquisitions, I mentioned, we target too.

Joseph Berquist: I mentioned, you know, we target to acquire net share gains in this kind of 2% to 4% range, and a pretty good first quarter overall, as we looked at new SKUs, new badges coming online into our business, and a full pipeline outlook for the remainder of the year. So, as far as uncertainty or any signals from the customer that we're going to see a differential change or something materially different than today, we're not getting that right now. We're close to the customers, we're in the plants, but it's a dynamic situation, and we'll react to what happens.

Arun Viswanathan: Acquire net share gains in this kind of 2% to 4% range in a pretty good first quarter overall as we looked at the.

Arun Viswanathan: New Skus, new new batches coming online into our business and a full pipeline.

Arun Viswanathan: Outlook for the remainder of the year.

Arun Viswanathan: So as far as uncertainty or any signals from the customer that we're going to see a differential change or something materially different than today, we're not getting that right now we're very close to the customers. We're in the plants, but it's a dynamic situation and we will.

Arun Viswanathan: We'll react to what happens.

Arun Viswanathan: Okay, thanks for that.

Arun Viswanathan: Okay. Thanks for that and then.

Tom Coler: And then, apologies if I missed this, but on the margin side, you know, you're down in the 15-6 range on EBITDA this quarter. Do you still have line of sight to 17, 18% EBITDA margins, or 18? And I know, appreciating that you guys upped your productivity targets, but what's kind of a rough bridge on how we get there? Is it mostly demand recovery, or are there some other things on the price or cost side that we can, that you guys can do to push those margins back up? Thanks. Yeah, thanks. Good question. I think there's multiple things there.

Speaker Change: Apologies if I missed this but on the margin side. You know you were down in the 15 six range on EBITDA this quarter.

Speaker Change: Do you still have a line of sight to 17, 18% EBITDA margins and <unk>.

Speaker Change: They are 18, and I know appreciating that you guys are up to your productivity targets, but.

Speaker Change: What's kind of a rough bridge on how we get there is it is it.

Speaker Change: Is it mostly demand recovery or are there some other things on the price or cost side that we can.

Speaker Change: You guys can do to get to.

Speaker Change: Push those margins back up.

Speaker Change: Yes. Thanks good question.

Speaker Change: Yeah look I think there's multiple things there.

Tom Coler: We do have some select price increases that we'll have to take action on where we're seeing very specific raw material increases. And we've shown the ability to go and do that in the past, and we'll do that as needed. Most of the cost actions that were taken really aren't going to roll in to the business until kind of second quarter. Of course, there's an offset there with regular merit and incentive rebuilds and things like that. But there could be a little bit of favorability on the SG&A side going forward. We are looking at our manufacturing footprint, and we've made some changes.

Speaker Change: We do have some select price increases that we will have to take action on where we are seeing.

Speaker Change: Very specific raw material increases and we've shown the ability to go and do that in the past and we'll do that as needed.

Speaker Change: Most of the cost actions that were taken.

Speaker Change: Really arent going to going to roll in to the business until kind of second quarter of course, there is an offset there with regular merit and incentive rebuilds and things like that but.

Speaker Change: There could be a little bit of favorability on the SG&A side going forward.

Speaker Change: We are looking at our our manufacturing footprint and we've made some changes we closed the plant in the first quarter in the U S. We're looking at optimizing the assets that we have to be more efficient and making reductions.

Tom Coler: We closed the plant in the first quarter in the U.S. We're looking at optimizing the assets that we have to be more efficient and making reductions to where we need to. And I'd say final thing, we feel really good now as kind of five years out from the Houghton combination. You know, we buy a lot of stuff, a lot of raw materials on the market, and we've made some changes in the last year to put in place a global procurement, you know, kind of category management approach where it was more regional in the past, and we're looking at ways, you know, to source things at a better, more cost-effective way than we had in the past.

Speaker Change: To where we need to.

Speaker Change: And I would say final thing.

Speaker Change: We feel really good now is.

Speaker Change: Five years out from the Houghton combination we've got.

Speaker Change: We buy a lot of stuff a lot of raw materials on the market and we've made some changes in the last year to put in place.

Speaker Change: Our global procurement kind of category management approach, where it was more regional in the past.

Speaker Change: We're looking at ways to source things.

Speaker Change: I had a better.

Speaker Change: More cost effective way than we had in the past so many different things there.

Tom Coler: So, many different things there that we're working on, but you're right to focus on kind of this EBITDA margin. I think we get hung up sometimes on gross margins. For us, we are targeting high teens, 18%, 19%. Ultimately, we want to get to EBITDA margins at 20% or above.

Speaker Change: That we're working on but you are right to focus on kind of this EBITDA margin I think we get hung up sometimes on gross margins for US we are targeting high teens 18, 19% ultimately we want to get to EBITDA margins at 20%.

Speaker Change: Or above.

Speaker Change: Okay.

Speaker Change: Thank you.

Joseph Berquist: At this time, there are no further questions, and I would like to turn the floor back to Joe Berquist for closing. Yeah, thank you. We appreciate your continued interest in Quaker Houghton and just want to thank all of our colleagues around the world for their dedication to our customers and our company. If you have any questions, please reach out to Jeff and we'll be happy to talk with you.

Speaker Change: At this time there are no further questions and I would like to turn the floor back to Joe Berquist for closing comments.

Joe Berquist: Yes. Thank you. We appreciate your continued interest in Quaker Houghton and just want to thank all of our colleagues around the world for their dedication to our customers and our company.

Joe Berquist: Have any questions. Please reach out to Jeff and be happy to talk with you. Thanks.

Joseph Berquist: Thanks.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.