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Q3'25 net sales of $493.8 million, an increase of 7% Y/YOrganic sales volumes increased 3% Y/Y driven by new business wins of approximately 5%Q3'25 net income of $30.5 million and earnings per diluted share of $1.75Non-GAAP net income of $36.3 million and non-GAAP earnings per diluted share of $2.08, an increase of 10% Y/YDelivered adjusted EBITDA of $82.9 million, a 5% increase Y/Y, and adjusted EBITDA margins of 16.8%Generated $51.4 million of operating cash flow in Q3'25; Reduced net leverage ratio to 2.4x CONSHOHOCKEN, Pa., Oct. 30, 2025 /PRNewswire/ -- Quaker Houghton ("the Company") (NYSE: KWR), the global leader in industrial process fluids, announced its third quarter 2025 results today. Third Quarter 2025 Consolidated Results Net sales in the third quarter of 2025 were $493.8 million, an increase of 7% compared to $462.3 million in the third quarter of 2024. This increase was primarily driven by an increase in organic sales volumes of 3%, a contribution from acquisitions of 5% and a favorable impact from foreign currency translation of 1%, partially offset by a decline in selling price and product mix of 2%. Organic sales volumes increased in all segments compared to the prior year, led by an 8% increase in the Asia/Pacific segment. This improvement in organic sales volumes was primarily driven by new business wins of approximately 5% globally, more than offsetting a continuation of soft end market conditions, particularly in the Americas and EMEA segments. The decrease in selling price and product mix was primarily attributable to the impact of the mix of products, services and geographies and the impact of our index-based customer contracts. Organic sales volumes increased 1% compared to the second quarter of 2025. The Company reported net income in the third quarter of 2025 of $30.5 million, or $1.75 per diluted share, compared to $32.3 million, or $1.81 per diluted share, in the third quarter of 2024. Excluding non-recurring and non-core items in each period, the Company's non-GAAP net income and non-GAAP earnings per diluted share were $36.3 million and $2.08 respectively in the third quarter of 2025 compared to $34.0 million and $1.89 respectively in the third quarter of 2024. The Company generated adjusted EBITDA of $82.9 million in the third quarter of 2025, an increase of approximately 5% compared to $78.6 million in the third quarter of 2024, driven by the increase in net sales and consistent operating margins. See the Non-GAAP Measures and Reconciliations section below for additional information. Joe Berquist, Chief Executive Officer and President, commented, "Third quarter results were strong, resulting from the team's disciplined execution of our strategy. We achieved a 7% increase in sales on 3% organic volume growth, and a 5% improvement in adjusted EBITDA in the quarter, despite a softer than anticipated end market environment. Our performance was driven by new business wins of approximately 5% globally and amplified by continued momentum in Asia/Pacific. We are advancing our strategic initiatives, leveraging our scale and managing costs to enhance our global competitiveness and improve margins. Solid cash generation enabled us to further strengthen our balance sheet and return cash to shareholders through dividends and share repurchases. "We anticipate the current soft environment will persist at least through year end, with normal seasonality expected. The resilience of our business is evident. We are confident in our ability to convert our sales pipeline and have line of sight to execute our ongoing cost and productivity initiatives. We expect to deliver year-over-year revenue and earnings growth in the fourth quarter, and are building momentum on our enterprise strategy to sustain above market growth in 2026 and beyond." Third Quarter 2025 Segment Results The Company's third quarter and nine months of 2025 operating performance for each of its three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific, is further described below. The following table summarizes the sales variances by reportable segment and consolidated operations in the third quarter of 2025 compared to the third quarter of 2024: Net sales in the Asia/Pacific segment increased 18% in the third quarter of 2025 compared to the same period in 2024, as an increase in organic sales volumes, a further contribution in sales from acquisitions, primarily Dipsol, and a favorable impact of foreign currency translation, was partially offset by a decrease in selling price and product and geographic mix. Net sales in the EMEA segment increased 7% in the third quarter of 2025 compared to the same period in 2024, due to an increase in organic sales volumes, a further increase in sales from acquisitions, an increase in selling price and product mix, and a favorable impact of foreign currency translation. Net sales in the Americas segment increased 1% in the third quarter of 2025 compared to the same period in 2024, due to a contribution in sales from acquisitions and a favorable impact from foreign currency translation, partially offset by a decline in selling price and product mix. Organic sales volumes in the Americas were consistent with the prior year period. New business wins were strong across all segments in the third quarter of 2025 despite softer underlying end market activity compared to prior year levels. The decline in selling price and product mix in the third quarter of 2025 compared to the same period in 2024 reflects changes in the mix of products, services and geographies, and the impact of our index-based customer contracts. Consolidated net sales increased approximately 2% compared to the second quarter of 2025, driven by an increase in organic sales volumes and a favorable impact from foreign currency translation. Selling price and product mix was consistent with the prior quarter. Net sales increased in all segments compared to the second quarter of 2025 driven by new business wins, despite a continuation of soft underlying end market activity. Organic sales volumes increased in the Asia/Pacific and Americas segments but declined in EMEA. Foreign currency translation was favorable to sales across all segments in the third quarter of 2025 compared to the second quarter of 2025. Segment operating earnings increased in the EMEA and Asia/Pacific segments in the third quarter of 2025 compared to the prior year, primarily due to the improvement in net sales. Segment operating earnings decreased in the Americas segment in the third quarter of 2025 compared to the prior year as an increase in net sales was offset by a modest decline in segment operating margins. Segment operating earnings increased in the Asia/Pacific and EMEA segments in the third quarter of 2025 compared to the second quarter of 2025, primarily driven by an increase in net sales, and declined slightly in the Americas segment. Cash Flow and Liquidity Highlights Net cash provided by operating activities was $89.9 million for the nine months ended September 30, 2025, compared to $141.5 million for the same period in 2024. The Company's operating cash flow primarily reflects a lower operating performance, higher cash outflows from restructuring activities, and higher cash outflows for working capital activities, primarily due to lower inflows from the timing of collection of accounts receivable and higher outflows for the purchases of inventories. As of September 30, 2025, the Company's total gross debt was $875.2 million and its cash and cash equivalents was $172.0 million, which resulted in net debt of approximately $703.2 million. The Company's net debt divided by its trailing twelve months adjusted EBITDA was approximately 2.4x. The increase in the company's leverage ratio compared to the prior year primarily reflects the Company's acquisition of Dipsol, which was completed in April 2025, and was funded with borrowings under the Company's existing credit facility. In the third quarter of 2025, the Company reduced outstanding gross debt by approximately $61.5 million compared to the second quarter of 2025, and repurchased 29,791 shares for $3.8 million. Non-GAAP Measures and Reconciliations The information in this press release includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, taxes on income before equity in net income of associated companies – adjusted, non-GAAP net income and non-GAAP earnings per diluted share. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader's understanding of the financial performance of the Company, facilitate a comparison among fiscal periods, and exclude items that management believes are not indicative of future operating performance or considered core to the Company's operations. Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP. In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, non-GAAP gross profit, non-GAAP gross margin, taxes on income before equity in net income of associated companies – adjusted, non-GAAP net income, and non-GAAP earnings per diluted share, as discussed and reconciled below to the most comparable GAAP measures, may not be comparable to similarly named measures reported by other companies. The Company presents EBITDA, which is calculated as net income attributable to the Company before depreciation and amortization, interest expense, and taxes on income before equity in net income of associated companies. The Company also presents adjusted EBITDA, which is calculated as EBITDA plus or minus certain items that management believes are not indicative of future operating performance or considered core to the Company's operations. In addition, the Company presents non-GAAP operating income, which is calculated as operating income plus or minus certain items that management believes are not indicative of future operating performance or considered core to the Company's operations. Additionally, the Company presents non-GAAP gross profit, which is calculated as gross profit plus or minus certain items that management believes are not indicative of future operating performance or considered core to the Company's operations. In addition, the Company presents non-GAAP Adjusted EBITDA margin, non-GAAP operating margin, and non-GAAP gross margin, which are calculated as the percentage of adjusted EBITDA, non-GAAP operating income, and non-GAAP gross profit to consolidated net sales, respectively. The Company believes these non-GAAP measures provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis. Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures. Non-GAAP net income is calculated as adjusted EBITDA, defined above, less depreciation and amortization, interest expense, and taxes on income before equity in net income of associated companies, in each case adjusted, as applicable, for any depreciation, amortization, interest or tax impacts resulting from the non-core items identified in the reconciliation of net income attributable to the Company to adjusted EBITDA. Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the "two-class share method." The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the performance of the Company on a consistent basis. As it relates to future projections for the Company as well as other forward-looking information contained in this press release, the Company has not provided guidance for comparable GAAP measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure because it is unable to determine with reasonable certainty the ultimate outcome of certain significant items necessary to calculate such measures without unreasonable effort. These items include, but are not limited to, certain non-recurring or non-core items the Company may record that could materially impact net income. These items are uncertain, depend on various factors, and could have a material impact on the U.S. GAAP reported results for the guidance period. The Company's reference to trailing twelve months adjusted EBITDA within this press release refers to the twelve month period ended September 30, 2025 adjusted EBITDA of $292.2 million, which consists of (i) the nine months ended September 30, 2025 adjusted EBITDA of $227.4 million, as presented in the non-GAAP reconciliations below, and (ii) the twelve months ended December 31, 2024 adjusted EBITDA of $310.9 million, as presented in the non-GAAP reconciliations included in the Company's fourth quarter and full year 2024 results press release dated February 24, 2025, less (iii) the nine months ended September 30, 2024 adjusted EBITDA of $246.1 million, as presented in the non-GAAP reconciliations below. Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation. The following tables reconcile the Company's non-GAAP financial measures (unaudited) to their most directly comparable GAAP (unaudited) financial measures (dollars in thousands unless otherwise noted, except per share amounts)
