What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-31 · 226 added, 293 removed, 86 unchanged (86% of the section changed)

6 unchanged sentences

Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near Philadelphia in the U.S.

Net sales in the third quarter of 2024 were $462.3 million, a decrease of 6% compared to $490.6 million in the third quarter of 2023.

This was primarily driven by a decrease in selling price and product mix of approximately 4%, a decrease in sales volumes of 1%, and an unfavorable impact from foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts.

The decline in sales volumes was primarily a result of a continuation of soft end market conditions compared to the prior year, primarily in the Americas and Europe, Middle East and Africa (“EMEA”) segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued new business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

The Company generated net income in the third quarter of 2024 of $32.3 million, or $1.81 per diluted share, compared to net income of $33.7 million, or $1.87 per diluted share in the third quarter of 2023.

Excluding non-recurring and non-core items in each period, the Company’s third quarter 2024 non-GAAP net income and earnings per diluted share were $34.0 million and $1.89 compared to $36.9 million and $2.05, respectively, in the prior year.

The decrease in current quarter earnings was primarily driven by lower net sales, partially offset by lower selling, general, and administrative expenses (“SG&A”) and lower interest expense.

The Company’s current quarter adjusted EBITDA was $78.6 million compared to $84.4 million in the third quarter of 2023, primarily driven by lower net sales as described above.

See the Non-GAAP Measures section of this Item below, as well as other items discussed in the Company’s Consolidated Operations Review in the Operations section of this Item, below.

The Company’s third quarter 2024 operating performance in each of its three reportable segments:

Net sales in the first quarter of 2025 were $442.9 million, a decrease of 6% compared to $469.8 million in the first quarter of 2024.

This was primarily driven by a decrease in sales volumes of 3%, an unfavorable impact from foreign currency translation of 3%, and a decline in selling price and product mix of approximately 1%, partially offset by a contribution from acquisitions of approximately 1%.

The decline in sales volumes was primarily a result of a continuation of soft end market conditions further impacted by the uncertainty of tariffs, primarily in the Europe, Middle East and Africa (“EMEA”) and Americas segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued new business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services, primarily in Asia/Pacific.

The Company generated net income in the first quarter of 2025 of $12.9 million, or $0.73 per diluted share, compared to net income of $35.2 million, or $1.95 per diluted share in the first quarter of 2024.

Excluding non-recurring and non-core items in each period, the Company’s first quarter 2025 non-GAAP net income and earnings per diluted share were $28.0 million and $1.58 compared to $37.7 million and $2.09, respectively, in the prior year.

The decrease in current quarter earnings was primarily driven by lower net sales, lower gross margins and higher restructuring and related charges, partially offset by lower selling, general, and administrative expenses (“SG&A”).

The Company’s current quarter adjusted EBITDA was $69.0 million compared to $83.3 million in the first quarter of 2024.

The decrease was primarily driven by lower net sales and lower gross margins, partially offset by lower SG&A.

See the Non-GAAP Measures and Consolidated Operations Review sections of this Item below for additional details.

The Company’s first quarter 2025 operating performance in each of its three reportable segments:

(i) Americas;

and (iii) Asia/Pacific, reflects similar drivers to that of the Company’s consolidated performance.

Operating earnings for all three segments decreased compared to the prior year quarter, primarily driven by a decrease in net sales in the Americas and EMEA segments and a slight decline in operating margin in the Asia/Pacific segment.

Additional details of each segment’s operating performance are further discussed in the Company’s Reportable Segments Review, in the Operations section of this Item, below.

Net cash flows provided by operating activities were $141.5 million in the first nine months of 2024 compared to $199.5 million in the first nine months of 2023.

The lower operating cash flow year-over-year reflects an increase in the net cash outflows from working capital in the first nine months of 2024.

Operating earnings for all three segments decreased compared to the prior year quarter, primarily driven by a decrease in net sales and operating margins in each of the reportable segments.

Additional details of segment operating performance are provided in the Reportable Segments Review in the Operations section of this Item below.

Net cash flows used in operating activities were $3.1 million in the first three months of 2025 compared to net cash flows provided by operating activities of $27.2 million in the first three months of 2024.

The lower operating cash flow year-over-year reflects an increase in net cash outflows from working capital and lower operating performance in the first three months of 2025 compared to the first three months of 2024.

The key drivers of the Company’s operating cash flow and working capital are further discussed in the Company’s Liquidity and Capital Resources section of this Item below.

Overall, the Company’s results in the third quarter of 2024 reflects the Company’s continued execution on its financial and operational priorities despite softer end market conditions that have impacted the Company’s customers and end markets.

Overall, the Company’s results in the first quarter of 2025 reflect the Company’s continued execution on its financial, operational, and strategic priorities despite a continuation of soft end market conditions that have impacted the Company’s customers and end markets.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in “Management’s Discussion and Analysis” and “Note 1 – Significant Accounting Policies” to the Consolidated Financial Statements in our 2024 Form 10-K.

There have been no material changes to the critical accounting policies and estimates previously disclosed in its 2023 Form 10-K remain materially consistent.

There have been no material changes to the critical accounting policies and estimates disclosed in the 2024 Form 10-K.

Recently Issued Accounting Standards

See Note 3 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for a discussion regarding recently issued accounting standards.

Liquidity and Capital Resources

As of September 30, 2024, we had cash and cash equivalents of $212.1 million.

Total cash and cash equivalents were $194.5 million as of December 31, 2023.

The approximately $17.5 million increase in cash and cash equivalents was the net result of $141.5 million of cash provided by operating activities, offset by $67.0 million of cash used in financing activities, $55.8 million of cash used in investing activities and an unfavorable impact of foreign currency translation of approximately $1.1 million.

See Note 3, Recently Issued Accounting Standards , to the Condensed Consolidated Financial Statements for a discussion regarding recently adopted accounting standards and recently issued accounting standards not yet adopted.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Net cash flows provided by operating activities were $141.5 million in the first nine months of 2024 compared to $199.5 million in the first nine months of 2023.

The decrease in net operating cash flow year-over-year reflects higher cash outflows from working capital in 2024, driven by an outflow from Inventory due to timing of sales and orders and higher Accounts payable and accrued liabilities outflows due primarily to higher incentive compensation payments in the current year.

Net cash flows used in investing activities were $55.8 million in the first nine months of 2024 compared to $25.8 million in the first nine months of 2023.

The increase in cash used in investing activities year-over-year is primarily the result of payments in the current year related to the acquisitions of the Sutai Group (“Sutai”) and I.K.V.

Tribologie IKVT and its subsidiaries (“IKV”), partially offset by lower capital expenditures.

See Note 2 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information about business acquisitions.

Net cash flows used in financing activities were $67.0 million in the first nine months of 2024 compared to net cash flows used in financing activities of $150.5 million in the first nine months of 2023.

The decrease in net cash outflows was primarily related to $30.5 million of net borrowings on the Company’s revolving credit facility in the first nine months of 2024 compared to $112.8 million of net repayments in the first nine months of 2023.

In addition, during the first nine months of 2024, the Company made payments of approximately $48.6 million to reduce its long-term debt, a $34.5 million, or 71%, increase compared to the prior year period.

Also, the Company made payments of approximately $22.9 million for repurchases of its common stock under its share repurchase program during the first nine months of 2024.

The Company also paid $24.5 million of cash dividends during the first nine months of 2024, a $1.1 million, or 5%, increase compared to the prior year period.

During June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.

Liquidity and Capital Resources

As of March 31, 2025, we had cash and cash equivalents of $186.2 million.

Total cash and cash equivalents were $188.9 million as of December 31, 2024.

Cash held by subsidiaries in foreign countries was approximately $178.8 million and $180.6 million at March 31, 2025 and December 31, 2024, respectively.

The $2.7 million decrease in cash and cash equivalents was the net result of $13.4 million of cash used in investing activities and $3.1 million of cash used in operating activities, partially offset by $11.0 million of cash provided by financing activities and a $2.8 million favorable impact of foreign currency translation.

Net cash flows used in operating activities were $3.1 million in the first three months of 2025 compared to $27.2 million net cash flows provided by operating activities in the first three months of 2024.

The decrease in net operating cash flow year-over-year reflects lower operating performance in the first three months of 2025 compared to 2024 and higher cash outflows from restructuring activities and working capital in 2025.

Working capital cash outflows in the first three months of 2025 were primarily driven by an outflow from accounts receivable due to timing of collections and an outflow related to inventory due to customer order patterns, partially offset by a lower cash outflow from accounts payable and accrued liabilities primarily due to lower incentive compensation.

Net cash flows used in investing activities were $13.4 million in the first three months of 2025 compared to $29.3 million in the first three months of 2024.

The decrease in cash used in investing activities year-over-year is primarily the result of a $24.9 million payment in the previous year related to the acquisition of I.K.V.

Tribologie IKVT and its subsidiaries (“IKV”) and an increase in proceeds from asset dispositions of $2.8 million in the current year, partially offset by payments in the current year related to the acquisition of Chemical Solutions & Innovations (Pty) Ltd.

(“CSI”) and a $7.9 million increase in payments related to capital expenditures.

See Note 2, Business Acquisitions , to the Condensed Consolidated Financial Statements for further information about business acquisitions.

Net cash flows provided by financing activities were $11.0 million in the first three months of 2025 compared $6.6 million in the first three months of 2024.

The increase in financing cash inflows is driven primarily by $30.0 million of net borrowings on the Company’s revolving credit facility in the first three months of 2025, a $9.1 million increase compared to the prior year.

In addition, during the first three months of 2025, the Company made debt payments of approximately $9.3 million compared to payments of $4.7 million in the prior year period.

The Company also paid $8.6 million of cash dividends during the first three months of 2025, a $0.4 million increase compared to the prior year period.

In June 2022, the Company, and its wholly owned subsidiary, Quaker Houghton B.V., as borrowers, Bank of America, N.A., as administrative agent, U.S.

dollar swing line lender and letter of credit issuer, Bank of America Europe Designated Active Company, as Euro Swing Line Lender, certain guarantors and other lenders entered into an amendment to its primary credit facility.

4 unchanged sentences

Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test.

As of September 30, 2024, the Company was in compliance with all of the Credit Facility covenants.

Refer to the description of the Company’s primary Credit Facility in Note 19 of Notes to Consolidated Financial Statements in its 2023 Form 10-K.

As of September 30, 2024 and December 31, 2023 , the Company had Credit Facility borrowings outstanding of $728.1 million and $744.5 million, respectively.

The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $12.6 million as of September 30, 2024 and $11.1 million as of December 31, 2023 .

Total unused capacity under these arrangements, excluding the Credit Facility, as of September 30, 2024 was approximately $35 million .

The Company’s total net debt as of September 30, 2024, which consists of total borrowings of $740.6 million less cash and cash equivalents of $212.1 million, was approximately $528.6 million .

The weighted average variable interest rates incurred on the outstanding borrowings under the Credit Facility during the three and nine months ended September 30, 2024 were approximately 6.1% and 6.2%, respectively.

As of September 30, 2024, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.8%.

As part of the Credit Facility, in addition to paying interest on the outstanding principal, the Company is also required to pay an annual commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio.

The Company had unused capacity under the Revolver of approximately $436 million, which is net of bank letters of credit of approximately $3 million, as of September 30, 2024.

In order to manage the Company’s exposure to variable interest rate risk associated with the Credit Facility, in the first quarter of 2023, the Company entered into $300.0 million notional amounts of three-year interest rate swaps to convert a portion of the Company’s variable rate borrowings into an average fixed rate obligation of 3.64% plus an applicable margin as provided in the Credit Facility based on the Company’s consolidated net leverage ratio.

As of September 30, 2024, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was approximately 4.9%.

See Note 17 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information.

As of March 31, 2025, the Company was in compliance with all of the Credit Facility covenants.

Refer to the description of the Company’s primary Credit Facility in Note 19, Debt , to the Consolidated Financial Statements in its 2024 Form 10-K.

As of March 31, 2025 and December 31, 2024 , the Company had Credit Facility borrowings outstanding of $725.7 million and $696.5 million, respectively.

The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $11.4 million as of March 31, 2025 and $11.8 million as of December 31, 2024 .

Total unused capacity under these arrangements, excluding the Credit Facility, as of March 31, 2025 was approximately $34 million .

The Company’s total net debt as of March 31, 2025, which consists of total borrowings of $737.0 million less cash and cash equivalents of $186.2 million, was approximately $550.8 million .

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three months ended March 31, 2025 was approximately 5.2%.

As of March 31, 2025, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.0%.

As part of the Credit Facility, in addition to paying interest on outstanding principal, the Company is also required to pay an annual commitment fee ranging from 0.150% to 0.275% related to unutilized commitments under the Revolver, depending on the Company’s consolidated net leverage ratio.

The Company had unused capacity under the Revolver of approximately $417 million, which is net of bank letters of credit of approximately $2 million, as of March 31, 2025.

Subsequent to the date of the financials, in April 2025, the Company borrowed $210 million from the Revolver for the primary purpose of funding the purchase price of the Dipsol Chemicals Co., Ltd., (“Dipsol”) acquisition and other corporate purposes.

See Note 2, Business Acquisitions , for more information.

Quaker Chemical Corporation

Management’s Discussion and Analysis

In connection with executing the original credit facility in 2019 and the amended Credit Facility during the second quarter of 2022, the Company capitalized certain third-party and creditor debt issuance costs.

Costs attributed to the Euro Term Loan and U.S.

Term Loan were recorded as a direct offset of Long-term debt on the Condensed Consolidated Balance Sheet.

Costs attributed to the Revolver were recorded within Other assets on the Condensed Consolidated Balance Sheet.

These capitalized costs are collectively being amortized into Interest expense over the five-year term of the Credit Facility.

As of September 30, 2024, the Company had $1.2 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheets and $2.6 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet.

Comparatively, as of December 31, 2023, the Company had $1.5 million of debt issuance costs recorded as an offset of Long-term debt on the Condensed Consolidated Balance Sheets and $3.3 million of debt issuance costs recorded within Other assets on the Condensed Consolidated Balance Sheet in Item 1 of this Report.

The Company uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on certain assets and/or liabilities denominated in certain foreign currencies.

During the first nine months of 2024, the Company entered into and settled forward contracts resulting in other expense of $2.0 million as compared to $2.1 million of other income during the first nine months of 2023 .

See Note 17 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information .

During 2022, the Company’s management initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.

The Company has achieved its initial full run-rate cost savings goal from the global cost and optimization program of approximately $20 million.

The program is expected to be substantially complete by the end of the first quarter of 2025.

The Company recognized Restructuring and related charges of $4.8 million and $6.0 million for the nine months ended September 30, 2024, and 2023, respectively, under this program.

The Company made cash payments related to the settlement of restructuring liabilities under the program during the first nine months of 2024 of approximately $6.4 million compared to $7.9 million in the first nine months of 2023.

As of March 31, 2025, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%.

See Note 17, Hedging Activities , to the Condensed Consolidated Financial Statements for further information.

The Company capitalized third-party and credit debt issuance costs attributed to the Euro Term Loan, U.S.

Term Loan and Revolver during the second quarter of 2022.

Capitalized costs attributed to the Euro Term Loan and U.S.

Term Loan are recorded as a direct offset to Long-term debt on the Condensed Consolidated Balance Sheets.

Capitalized costs attributed to the Revolver are recorded within Other assets on the Condensed Consolidated Balance Sheets.

These capitalized costs will collectively be amortized into Interest expense over the five-year term of the Credit Facility.

As of March 31, 2025 and December 31, 2024, the Company had $1.0 million and $1.1 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $2.1 million and $2.4 million, respectively, of debt issuance costs recorded within Other assets.

The Company uses foreign exchange forward contracts to economically hedge the impact of the variability in exchange rates on certain foreign currency-denominated assets and liabilities .

Additionally, in connection with the Dipsol acquisition, in March 2025, the Company entered into foreign exchange forward contracts with various financial institutions with an aggregate notional amount of $155.3 million to hedge the variability in U.S.

dollar-Japanese yen exchange rates associated with the purchase price.

These contracts were settled on April 1, 2025 in connection with the Dipsol acquisition.

During the three months of 2025, the Company recognized $1.9 million of other expense as compared to $0.9 million of other income during the three months of 2024 relating to changes in fair value of foreign exchange forward contracts.

See Note 17, Hedging Activities , to the Condensed Consolidated Financial Statements for further information.

During 2022, the Company initiated a global cost and optimization program to improve its cost structure and drive a more profitable and productive organization.

The Company has achieved its annualized cost savings goal from this program of at least $20 million.

In the first quarter of 2025, the Company approved additional actions under the program, which are expected to generate an additional $20 million of annualized cost savings.

The program is expected to be substantially complete in the first half of 2025.

The Company recognized restructuring and related charges of $14.6 million and $1.9 million for the three months ended March 31, 2025, and 2024, respectively, under this program and for our facility closure actions.

The Company made cash payments related to the settlement of restructuring liabilities under the program during the first three months of 2025 of approximately $9.0 million compared to $3.7 million in the first three months of 2024.

The Company expects total one-time cash costs of this program to be approximately 1 to 1.5 times annualized savings.

See Note 7 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report for further information.

As of September 30, 2024, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $20.4 million.

The Company cannot determine a reliable estimate of the timing of cash flows by period related to its uncertain tax position liability.

See Note 7, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for further information.

As of March 31, 2025, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $18.6 million.

The Company cannot determine a reliable estimate of the timing of cash flows related to its uncertain tax position liability.

However, should the entire liability be paid, the amount of the payment may be reduced by up to $6.4 million as a result of offsetting benefits in other tax jurisdictions.

As previously disclosed in the Company’s 2023 Form 10-K, on February 28, 2024, the Board of Directors of the Company approved a new share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock and replacing the prior share repurchase program.

The Company previously disclosed in its 2024 Form 10-K that the Board of Directors of the Company approved a share repurchase program (“2024 Share Repurchase Program”), authorizing the Company to repurchase up to an aggregate of $150 million of the Company’s outstanding common stock and replacing the prior share repurchase program.

The 2024 Share Repurchase Program was effective immediately and has no expiration date.

The Company made certain repurchases under the 2024 Repurchase Program during the nine months ended September 30, 2024, as mentioned above.

See Item 2 within Part II of this Report for further information.

The Company previously disclosed in its 2023 Form 10-K that one of its North American production facilities experienced an electrical fire in 2021 that resulted in property damage and the temporary shutdown of production.

The Company and its insurance carrier reviewed the impact of the electrical fire on the production facility’s operations as it relates to a potential business interruption insurance claim.

In July 2024, the Company and its insurance carrier settled this claim for $1.0 million.

The Company did not make repurchases under the 2024 Repurchase Program during the three months ended March 31, 2025.

See Item 2, Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities , within Part II of this Report for further information.

The Company believes that its existing cash, anticipated cash flows from operations and available liquidity will be sufficient to support its operating requirements and fund its business objectives for at least the next twelve months, including but not limited to, payments of dividends to shareholders, share repurchases, capital expenditures, other growth opportunities (including potential acquisitions), pension plan contributions, implementing actions to achieve the Company’s sustainability goals and other potential known or anticipated contingencies.

The Company also believes it has sufficient additional liquidity to support its operating requirements and to fund its business obligations for the period beyond the next twelve months, including the aforementioned items which are expected to recur annually, as well as future principal and interest payments on the Company’s Credit Facility, tax obligations and other long-term liabilities.

The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of the pandemic and other global events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict.

The Company’s liquidity is affected by many factors, some based on normal operations of our business and others related to the impact of global events on our business and on global economic conditions as well as industry uncertainties, which we cannot predict.

We also cannot predict economic conditions and industry downturns or the timing, strength or duration of recoveries.

We may seek, as we believe appropriate, additional debt or equity financing that would provide capital for corporate purposes, working capital funding, additional liquidity needs or to fund future growth opportunities, including possible acquisitions and organic investments.

The timing and amount of potential capital requirements cannot be determined at this time and will depend on a number of factors, including the actual and projected demand for our products, specialty chemical industry conditions, competitive factors, and the condition of financial markets, among others.

The timing and amount of potential additional capital requirements cannot be determined at this

Quaker Chemical Corporation

Management’s Discussion and Analysis

time and will depend on a number of factors, including the actual and projected demand for our products, specialty chemical industry conditions, competitive factors, and the condition of financial markets, among others.

Consolidated Operations Review – Comparison of the First Quarter of 2025 with the First Quarter of 2024

The following table summarizes the sales variances by reportable segment and consolidated operations from the prior year:

Sales volumes Selling price & product mix Foreign currency Acquisition & other Total

Americas (3) % — % (4) % — % (7) %

EMEA (6) % (1) % (3) % 3 % (7) %

Asia/Pacific 1 % (3) % (2) % 2 % (2) %

Consolidated (3) % (1) % (3) % 1 % (6) %

Net sales in the first quarter of 2025 were $442.9 million, a decrease of 6% compared to $469.8 million in the first quarter of 2024.

This was primarily driven by a decrease in sales volumes of approximately 3%, an unfavorable impact from foreign currency translation of approximately 3% and a decline in selling price and product mix of approximately 1%, partially offset by a contribution from acquisitions of approximately 1%.

The decline in sales volumes compared to the prior year was primarily a result of a continuation of soft end market conditions further impacted by the uncertainty of tariffs, primarily in the EMEA and Americas segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued new business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and the mix of products and services, primarily in Asia/Pacific.

Cost of goods sold (“COGS”) was $281.7 million in the first quarter of 2025 compared to $288.2 million in the first quarter of 2024, a decrease of approximately $6.5 million, or 2%.

The decrease in COGS reflects lower spend on the decline in current year sales volumes, partially offset by an increase in raw material costs.

Gross profit was $161.3 million in the first quarter of 2025 compared to $181.6 million in the first quarter of 2024, a decrease of $20.3 million, or 11% primarily due to the decline in sales and the increase in raw materials costs mentioned above.

The Company’s reported gross margin in the first quarter of 2025 was 36.4% compared to 38.7% in the first quarter of 2024.

SG&A expense was $119.0 million in the first quarter of 2025 compared to $124.2 million in the first quarter of 2024, a decrease of approximately $5.2 million, or 4%, driven by lower incentive compensation, offset by an increase in SG&A related to acquisitions.

The Company incurred Restructuring and related charges of $14.6 million and $1.9 million during the first quarter of 2025 and 2024, respectively, related to reductions in headcount and facility closure costs under the Company’s restructuring program.

See the Non-GAAP Measures section above and Note 7, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for additional information.

Operating income in the first quarter of 2025 was $27.6 million compared to $55.5 million in the first quarter of 2024.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item above, the Company’s non-GAAP operating income was $45.8 million in the first quarter of 2025 and $59.2 million in the first quarter of 2024.

The decrease was primarily due to lower sales and an increase in global raw material costs, partially offset by a decrease in SG&A, as described above.

The Company had Other expense, net of $0.7 million in the first quarter of 2025 as compared to Other income, net of $1.1 million in the first quarter of 2024.

Both the first quarter of 2025 and 2024 included foreign exchange transaction losses, which were $3.1 million higher in the current year.

The first quarter of 2025 also included other income from net gain on disposals of property of $2.1 million, whereas the first quarter of 2024 had other income from non-income tax credits of $2.2 million.

Interest expense was $9.5 million in the first quarter of 2025 compared to $10.8 million in the first quarter of 2024, a decrease of approximately $1.3 million, primarily as a result of decreases in interest rates and lower outstanding borrowings.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company’s effective tax rates for the first quarters of 2025 and 2024 were 43.4% and 27.3%, respectively.

The Company’s effective tax rate for the first quarter of 2025 was largely driven by our mix of pre-tax earnings, withholding taxes and return to provision adjustments offset by net favorable reductions in uncertain tax positions.

Comparatively, the effective tax rate for the first quarter of 2024 was largely driven by a mix of earnings and withholding taxes, offset by reductions in uncertain tax positions.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item above, the Company estimates that its effective tax rates for the first quarters of 2025 and 2024 would have been approximately 29% and 27%, respectively.

The Company may experience continued volatility in its effective tax rates due to several factors, including the timing of tax audits, the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of timing and amount of certain incentives in various tax jurisdictions, and the timing and amount of certain share-based compensation-related tax benefits, among other factors.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of factors, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies was $3.1 million in the first quarter of 2025 compared to $2.0 million in the first quarter of 2024, an increase of $1.1 million, primarily due to higher current year income from the Company’s 50% equity interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in the first quarter of 2025 and 2024.

Reportable Segments Review - Comparison of the First Quarter of 2025 with the First Quarter of 2024

The Company’s reportable segments reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the Chief Operating Decision Maker of the Company assesses performance.

The Company has three reportable segments:

(i) Americas;

and (iii) Asia/Pacific.

Segment operating earnings for each of the Company’s reportable segments are comprised of the segment’s net sales less directly related product costs and other operating expenses.

Operating expenses not directly attributable to the net sales of each respective segment, such as certain corporate and administrative costs and restructuring charges, are not included in segment operating earnings.

Other items not specifically identified with the Company’s reportable segments include Interest expense and Other income (expense), net.

Americas represented approximately 48% of the Company’s consolidated net sales in the first quarter of 2025.

This segment’s net sales were $213.7 million, a decrease of $16.0 million, or 7%, compared to the first quarter of 2024.

This was driven by a decrease in sales volumes of approximately 3% and an unfavorable impact from foreign currency translation of 4%.

The current quarter decline in sales volumes compared to the prior year was primarily driven by a continuation of soft end market conditions further impacted by the uncertainty of tariffs, especially for metalworking applications, partially offset by new business win s broadly across the portfolio .

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Mexican peso and Brazilian real.

Segment o perating earnings were $58.5 million, a decrease of $8.3 million, or 12%, compared to the first quarter of 2024, driven by a decline in net sales and lower segment operating margins, primarily driven by lower gross margins for the segment, partially offset by lower SG&A.

EMEA represented approximately 29% of the Company’s consolidated net sales in the first quarter of 2025 .

This segment’s net sales were $129.3 million , a decrease of $9.1 million, or 7%, compared to the first quarter of 2024 .

This was driven by a decline in sales volumes of 6%, an unfavorable impact from foreign currency translation of 3% and lower selling price and product mix of approximately 1%, partially offset by an increase in sales from acquisitions of approximately 3%, relating to the acquisitions of IKV and CSI .

The decrease in sales volumes was primarily driven by a continuation of softer end market conditions further impacted by the uncertainty of tariffs, partially offset by new business wins.

The unfavorable foreign curren cy translation impact was primarily due to the strengthening of the U.S.

dollar against the Euro.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and mix of products and services.

Segment operating earnings were $23.4 million , a decrease of $6.2 million, or 21%, compared to the first quarter of 2024, due to the decline in net sales and lower segment operating margins, primarily due to lower gross margins for the segment, partially offset by lower SG&A.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Asia/Pacific represented approximately 23% of the Company’s consoli dated net sales in the first quarter of 2025.

This segment’s net sales were $99.9 million , a decrease of $1.7 million, or 2%, compared to the first quarter of 2024.

This was driven by an increase in sales volumes of 1% and a contribution from the acquisition of Sutai of 2% , partially offset by a decrease in selling price and product mix of 3% and an unfavorable impact from foreign currency translation of 2%.

The increase in sales volumes was primarily driven by new business wins despite uncertainty related to tariffs.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts and mix of products and services .

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Chinese renminbi.

Segment operating earnings were $25.9 million , a decrease of $4.4 million, or 15%, compared to the first quarter of 2024 due to a decline in net sales and lower segment gross margins, partially offset by lower SG&A.

Non-GAAP Measures

The information in this Form 10-Q includes non-GAAP financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating 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 Company’s financial performance and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not considered indicative of future operating performance or not considered core to the Company’s operations.

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, 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 respective 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, net, 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 are not considered indicative of future operating performance or not 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 are not considered indicative of future operating performance or not considered core to the Company’s operations.

In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating 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.

Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively.

The Company believes these non-GAAP measures provide transparent and useful information and are widely used by investors, analysts, and peers in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.

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, net, 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 investors, analysts, and peers in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.

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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation.

1 unchanged sentence

Non-GAAP Operating Income and Margin Reconciliations Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Operating income $ 27,624 $ 55,526

Restructuring and related charges, net (a) 14,590 1,857

Strategic planning (credits) expenses (b) (181) 1,093 (290) 3,759

Customer insolvency costs (g) — — 1,522 —

Other charges (d) 43 206 1,535 855

Acquisition-related expenses (b) 3,329 283

Customer insolvency costs (f) — 1,522

Other charges (c) 226 54

Non-GAAP operating income $ 45,769 $ 59,242

Non-GAAP operating margin (%) (m) 10.3 % 12.6 %

Quaker Chemical Corporation

Management’s Discussion and Analysis

EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net income attributable to Quaker Chemical Corporation $ 12,922 $ 35,227

Depreciation and amortization (k) 20,830 21,056

Interest expense, net 10,347 12,781 31,925 38,744

Interest expense 9,545 10,824

Taxes on income before equity in net income of associated companies (l) 7,542 12,508

EBITDA 50,839 79,615

Equity income in a captive insurance company (e) (285) (756) (1,266) (748)

Equity income in a captive insurance company (d) (671) (506)

Restructuring and related charges, net (a) 14,590 1,857

Strategic planning (credits) expenses (b) (181) 1,093 (290) 3,759

Customer insolvency costs (g) — — 1,522 —

Facility remediation recoveries (c) — — — (1,014)

Product liability claim costs (h) — — 896 —

Business interruption insurance proceeds (i) (1,000) — (1,000) —

Currency conversion impacts of hyper-inflationary economies (f) 624 1,229 333 2,869

Other charges (d) 511 886 2,410 2,054

Acquisition-related expenses (b) 3,329 283

Customer insolvency costs (f) — 1,522

Product liability claim costs, net (g) — 896

Currency conversion impacts of hyper-inflationary economies (e) 535 (904)

Loss on acquisition-related hedges (h) 1,943 —

Gain on sale of property (i) (2,177) —

Other charges (c) 659 519

Adjusted EBITDA $ 69,047 $ 83,282

2 unchanged sentences

Depreciation and amortization (k) 20,830 21,056

Interest expense, net 10,347 12,781 31,925 38,744

Interest expense 9,545 10,824

Taxes on income before equity in net income of associated companies - adjusted (l) 10,644 13,729

Non-GAAP net income $ 28,028 $ 37,673

Quaker Chemical Corporation

Management’s Discussion and Analysis

Non-GAAP Earnings per Diluted Share Reconciliations Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders $ 0.73 $ 1.95

Equity income in a captive insurance company per diluted share (e) (0.02) (0.04) (0.07) (0.04)

Restructuring and related charges, net per diluted share (a) 0.11 0.04 0.20 0.25

Strategic planning (credits) expenses per diluted share (b) (0.01) 0.04 (0.01) 0.17

Customer insolvency costs per diluted share (g) — — 0.06 —

Facility remediation recoveries per diluted share (c) — — — (0.05)

Product liability claim costs per diluted share (h) — — 0.04 —

Business interruption insurance proceeds per diluted share (i) (0.04) — (0.04) —

Currency conversion impacts of hyper-inflationary economies per diluted share (f) 0.04 0.07 0.02 0.16

Other charges per diluted share (d) 0.02 0.04 0.10 0.08

Impact of certain discrete tax items per diluted share (j) (0.02) 0.03 0.11 0.16

Equity income in a captive insurance company (d) (0.04) (0.03)

Restructuring and related charges, net (a) 0.62 0.08

Acquisition-related expenses, net (b) 0.14 0.01

Customer insolvency costs (f) — 0.06

Product liability claim costs, net (g) — 0.04

Currency conversion impacts of hyper-inflationary economies (e) 0.03 (0.05)

Loss on acquisition-related hedges (h) 0.08 —

Gain on sale of property (i) (0.09) —

Other charges (c) 0.03 0.03

Discrete tax items (j) 0.08 —

Non-GAAP earnings per diluted share (n) $ 1.58 $ 2.09

(a) Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring program.

These costs are not indicative of the future operating performance of the Company.

See Note 7 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report, for additional information.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(b) Strategic planning (credits) expenses include consultant and advisory (credits) costs incurred in connection with long-term strategic planning, as well as planning to further optimize the Company’s footprint, processes and functions.

These credits and costs recorded in SG&A are not indicative of the future operating performance of the Company.

(c) Facility remediation recoveries represent insurance recoveries of costs incurred for remediation and restoration of property damage to certain of the Company’s facilities.

These costs and recoveries recorded in Other income (expense), net, are non-recurring and are not indicative of the future operating performance of the Company.

There were no such gains recognized for the three and nine months ended September 30, 2024.

See Note 10 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(d) Other charges include executive transition costs, charges incurred by an inactive subsidiary of the Company as a result of the termination of restrictions on insurance settlement reserves, net gains recognized for the sale of certain facilities previously classified as held for sale, non-service components of the Company’s pension and postretirement net periodic benefit income and expense, and certain legal, financial, and other advisory and consultant costs and indemnification asset related and earnout adjustments incurred in connection with the Company’s recent acquisitions.

See Notes 2, 9, and 10 of Notes to Condensed Consolidated Financial Statements, which appear in Item 1 of this Report.

(e) Equity income in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd.

(a) Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring program and facility closures.

See Note 7, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for additional information.

(b) Acquisition-related expenses include expenses associated with the Company's recent and potential acquisitions, including legal, financial, consulting and other costs.

(c) Other charges include professional fees incurred in connection with tax audits, the non-service components of pension expense and other items.

See Note 9, Pension and Other Postretirement Benefits , and Note 10, Other income (expense), net, to the Condensed Consolidated Financial Statements for additional information.

(d) Equity income in a captive insurance company represents the after-tax income attributable to the Company’s interest in Primex, Ltd.

(“Primex”), a captive insurance company.

The Company holds a 32% investment in and has significant influence over Primex, and therefore accounts for this interest under the equity method of accounting.

The income attributable to Primex is not indicative of the future operating performance of the Company and is not considered core to the Company’s operations.

(f) Currency conversion impacts of hyper-inflationary economies represents the foreign currency remeasurement impacts associated with the Company’s affiliates in Argentina and Türkiye whose local economies are designated as hyper-inflationary under U.S.

These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for both the three and nine months ended September 30, 2024 and 2023.

The charges incurred relate to the immediate recognition of foreign currency remeasurement in the Condensed Consolidated Statements of Operations and are not indicative of the future operating performance of the Company.

See Note 1 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(g) Customer insolvency costs represent charges associated with a specific reserve for trade accounts receivable within the Company’s EMEA reportable segment related to a specific customer that filed for bankruptcy protection.

These expenses are not indicative of the future operating performance of the Company.

(h) Product liability claim represents expense related to the payments by the Company in connection with a product liability dispute with a customer during the nine months ended September 30, 2024.

See Note 10 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(i) Business interruption insurance proceeds reflects an insurance claim settlement receipt for the three and nine months ended September 30, 2024 related to production losses due to an electrical fire in 2021 that resulted in the temporary shutdown of production at one of the Company’s production facilities.

See Note 18 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(j) The impacts of certain discrete tax items include certain impacts of tax law changes, valuation allowance adjustments, uncertain tax positions and prior year true-ups, and the impact on certain intercompany asset transfers.

The Company does not believe these items are core or indicative of future performance of the Company.

See Note 11 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this Report.

(k) Depreciation and amortization for the three and nine months ended September 30, 2024 and 2023 includes approximately $0.2 million and $0.7 million, respectively, and $0.3 million and $0.8 million, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations, which is attributable to the amortization of the fair value step up for the Company’s 50% interest in a joint venture in Korea as a result of required purchase accounting adjustments.

(l) Taxes on income before equity in net income of associated companies – adjusted presents the impact of any current and deferred income tax expense (benefit), as applicable, of the reconciling items presented in the reconciliation of net income attributable to Quaker Chemical Corporation to adjusted EBITDA and was determined utilizing the applicable rates in the taxing jurisdictions in which the adjustments occurred, subject to deductibility.

(m) The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales.

(e) Currency conversion impacts of hyper-inflationary economies represents the foreign currency remeasurement impacts associated with the Company’s affiliates in Argentina and Türkiye whose local economies are designated as hyper-inflationary under U.S.

These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for both the three months ended March 31, 2025 and 2024.

The charges incurred relate to the immediate recognition of foreign currency remeasurement in the Condensed Consolidated Statements of Operations.

(f) Customer insolvency costs represent charges associated with a specific reserve for trade accounts receivable within the Company’s EMEA reportable segment related to a specific customer that filed for bankruptcy protection.

(g) Product liability claim costs, net represents expense related to the payments by the Company in connection with a product liability dispute with a customer, net of insurance recoveries during the three months ended March 31, 2024.

See Note 10, Other income (expense), net, to the Condensed Consolidated Financial Statements for additional information.

(h) Loss on acquisition-related hedges represents the mark-to-market impact of the foreign exchange forward contracts entered into March 2025 for an aggregate notional amount totaling $155.3 million to hedge the variability of exchange rate impacts between the U.S.

Dollar and Japanese yen in connection with the acquisition of Dipsol.

See Note 2, Business Acquisitions , and Note 17, Hedging Activities , to the Condensed Consolidated Financial Statements for additional information.

(i) Gain on sale of property represents the gain recognized on the sale of certain property previously classified as held for sale as of December 31, 2024.

See Note 7, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for additional information.

(j) Discrete tax items include certain impacts of uncertain tax positions.

See Note 11, Income Taxes , to the Condensed Consolidated Financial Statements for more information.

Quaker Chemical Corporation

Management’s Discussion and Analysis

(n) The Company calculates non-GAAP earnings per diluted share as non-GAAP net income attributable to the Company divided by the weighted average number of diluted shares outstanding using the “two-class share method.”

(k) Depreciation and amortization for the three months ended March 31, 2025 and 2024 includes approximately $0.2 million and $0.3 million, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations, which is attributable to the amortization of the fair value purchase accounting step-up in connection with the acquisition of the Company’s 50% equity interest in Korea Houghton Corporation.

(m) The Company calculates adjusted EBITDA margin and non-GAAP operating margin as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales.

(n) In each given period, the Company calculates non-GAAP earnings per diluted share as non-GAAP net income attributable to the Company per weighted average diluted shares outstanding using the “two-class share method”.

Off-Balance Sheet Arrangements

The Company’s off-balance sheet items outstanding as of September 30, 2024 include approximately $7 million of bank letters of credit and guarantees.

The Company’s off-balance sheet items outstanding as of March 31, 2025 include approximately $7 million of bank letters of credit and guarantees.

The bank letters of credit and guarantees are not significant to the Company’s liquidity or capital resources.

See Note 14 of Notes to Condensed Consolidated Financial Statements in Item 1 of this Report.

Consolidated Operations Review – Comparison of the Third Quarter of 2024 with the Third Quarter of 2023

Net sales were $462.3 million in the third quarter of 2024 compared to $490.6 million in the third quarter of 2023.

The net sales decrease of $28.2 million, or 6%, year-over-year reflects a decrease in selling price and product mix of approximately 4%, a decline in sales volumes of approximately 1%, and an unfavorable impact from foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts.

The decline in sales volumes was primarily the result of a continuation of soft end market conditions, primarily in the Americas and EMEA segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued new business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

Cost of goods sold (“COGS”) was $289.7 million in the third quarter of 2024 compared to $307.3 million in the third quarter of 2023, a decrease of approximately $17.6 million, or 6%.

The decrease in COGS reflects lower spend on the decline in current year sales volumes and a decrease in the Company’s global raw material costs.

Gross profit was $172.5 million in the third quarter of 2024 compared to $183.3 million in the third quarter of 2023, a decrease of $10.8 million, or 6% primarily due to the decline in sales as mentioned above.

The Company’s reported gross margin in the third quarter of 2024 was 37.3% compared to 37.4% in the third quarter of 2023.

SG&A expense was $118.2 million in the third quarter of 2024 compared to $122.8 million in the third quarter of 2023, a decrease of approximately $4.7 million, or 4%, driven by lower incentive compensation and strategic planning costs, offset by an increase in SG&A relating to the IKV and Sutai acquisitions.

The Company incurred Restructuring and related charges of $2.6 million and $1.0 million during the third quarter of 2024 and 2023, respectively, related to reductions in headcount and facility closure costs under the Company’s restructuring program.

See the Non-GAAP Measures section of this Item above and Note 7 of Notes to Condensed Consolidated Financial Statements, which appears in Item 1 of this report, for additional information.

Operating income in the third quarter of 2024 was $51.7 million compared to $59.5 million in the third quarter of 2023.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item, above, the Company’s non-GAAP operating income was $54.2 million in the third quarter of 2024 and $61.8 million in the third quarter of 2023.

The decrease was primarily due to lower sales, partially offset by lower SG&A expenses, as described above.

The Company had Other income, net of $0.8 million in the third quarter of 2024 as compared to Other expense, net of $2.7 million in the third quarter of 2023.

Both the third quarter of 2024 and 2023 included foreign exchange transaction losses, which were higher in the prior year.

The third quarter of 2024 also included a business interruption insurance recovery of $1.0 million, other income from non-income tax credits of $0.7 million and other income of $0.4 million relating to adjustments to the earnout provisions for the Sutai acquisition.

Interest expense, net, was $10.3 million in the third quarter of 2024 compared to $12.8 million in the third quarter of 2023, a decrease of approximately $2.4 million, primarily as a result of decreases in interest rates and lower outstanding borrowings.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company’s effective tax rates for the third quarters of 2024 and 2023 were 28.9% and 30.9%, respectively.

The Company’s effective tax rate for the third quarter of 2024 was largely driven by the mix of pre-tax earnings, withholding taxes, and changes in uncertain tax positions offset by return to provision adjustments.

Comparatively, the effective tax rate for the third quarter of 2023 was largely driven by the mix of pre-tax earnings, changes to the valuation allowance for and the usage of certain foreign tax credits, and return to provision adjustments, withholding taxes, and changes in uncertain tax positions.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item above, the Company estimates that its effective tax rates for the third quarters of 2024 and 2023 would have been approximately 29% and 28%, respectively.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of factors, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies was $2.4 million in the third quarter of 2024 compared to $3.3 million in the third quarter of 2023, a decrease of $0.9 million, primarily due to lower current year income from the Company’s equity interest in Primex and the Company’s 50% equity interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in the third quarter of 2024 and 2023.

Consolidated Operations Review – Comparison of the First Nine Months of 2024 with the First Nine Months of 2023

Net sales were $1,395.6 million in the first nine months of 2024 compared to $1,486.2 million in the first nine months of 2023.

The net sales decrease of $90.6 million, or 6%, year-over-year reflects decreases in selling price and product mix of approximately 5%, a decline in sales volumes of approximately 1%, and an unfavorable impact from foreign currency translation of less than 1%.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts.

The decline in sales volumes was primarily a result of a continuation of soft end market conditions compared to the prior year, primarily in the Americas and EMEA segments, partially offset by an increase in sales volumes in the Asia/Pacific segment, continued new business wins across all segments and a contribution from acquisitions in the EMEA and Asia/Pacific segments.

COGS were $865.8 million in the first nine months of 2024 compared to $951.7 million in the first nine months of 2023.

The decrease in COGS of approximately $86.0 million, or 9%, reflects lower spend on the decline in current year sales volumes and a decline in the Company’s global raw material costs.

Gross profit was $529.8 million in the first nine months of 2024 compared to $534.5 million in the first nine months of 2023, a decrease of approximately $4.6 million, or 1%, primarily as a result of the decline in sales as mentioned above, partially offset by a reduction in the Company’s raw material costs.

The Company’s reported gross margin in the first nine months of 2024 was 38.0% compared to 36.0% in the first nine months of 2023.

SG&A was $359.4 million in the first nine months of 2024 compared to $362.2 million in to the first nine months of 2023, a decrease of $2.9 million, or 1%, primarily driven by foreign currency translation, offset by an increase in SG&A relating to the IKV and Sutai acquisitions.

The Company incurred Restructuring and related charges of $4.8 million and $6.0 million during the first nine months of 2024 and 2023, respectively, related to reductions in headcount and facility closure costs under the Company’s restructuring program.

See the Non-GAAP Measures section of this Item, above.

Operating income in the first nine months of 2024 was $165.7 million compared to $166.2 million in the first nine months of 2023.

Excluding non-recurring and non-core expenses that are not indicative of the future operating performance of the Company described in the Non-GAAP Measures section of this Item, above, the Company’s current year non-GAAP operating income decreased to $173.2 million for the first nine months of 2024 compared to $176.9 million in the prior year’s first nine months primarily due to lower gross profit, partially offset by lower SG&A, as described above.

The Company had Other income, net of $2.3 million in the first nine months of 2024 compared to Other expense, net of $8.6 million in the first nine months of 2023, as the Company had lower foreign exchange losses of $2.1 million in the current year compared to losses of $10.0 million in the prior year period.

The first nine months of 2024 results also included $3.8 million of non-income tax refunds and other related credits, a $1.0 million business interruption insurance recovery, and a $0.9 million gain recognized for the sale of certain facilities previously classified as held for sale, partially offset by a $0.9 million expense associated with a payment related to a customer product liability dispute, whereas the first nine months of 2023 included $1.0 million of insurance reimbursements related to remediation and restoration of property damage to certain of the Company’s facilities.

See the Non-GAAP Measures section of this Item, above.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Interest expense, net, of $31.9 million decreased $6.8 million in the first nine months of 2024 compared to $38.7 million in the first nine months of 2023 primarily as a result of lower outstanding borrowings and decreases in interest rates.

The Company’s effective tax rates for the first nine months of 2024 and 2023 were 29.7% and 31.1%, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2024 was primarily impacted by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, and withholding taxes, offset by changes in uncertain tax positions and return to provision adjustments.

Comparatively, the effective tax rates for the nine months ended September 30, 2023 were largely impacted by the mix of pre-tax earnings, changes to the valuation allowance for and the usage of certain foreign tax credits, return to provision adjustments, and withholding taxes, partially offset by changes in uncertain tax positions and return to provision adjustments.

Excluding the impact of non-core items in each period, described in the Non-GAAP Measures section of this Item, above, the Company estimates that its effective tax rates for the first nine months of 2024 and 2023 would have been approximately 28% in both periods.

The Company expects continued volatility in its effective tax rates due to several factors, including the timing and scope of tax audits and the expiration of applicable statutes of limitations as they relate to uncertain tax positions, the unpredictability of the timing and amount of certain incentives in various tax jurisdictions, the treatment of certain acquisition-related costs and the timing and amount of certain share-based compensation-related tax benefits, among other factors.

In addition, the foreign tax credit valuation allowance, or absence thereof, is based on a number of factors, including forecasted mix of earnings, which may vary.

Equity in net income of associated companies was $6.9 million in the first nine months of 2024 compared to $10.7 million in the first nine months of 2023.

The decrease of $3.7 million was primarily due to lower current year income from the Company’s 50% equity interest in a joint venture in Korea.

Net income attributable to noncontrolling interest was less than $0.1 million in the first nine months of 2024 and 2023.

Reportable Segments Review - Comparison of the Third Quarter of 2024 with the Third Quarter of 2023

The Company’s reportable segments reflect the structure of the Company’s internal organization, the method by which the Company’s resources are allocated and the manner by which the chief operating decision maker of the Company assesses performance.

The Company has three reportable segments:

(i) Americas;

and (iii) Asia/Pacific.

Segment operating earnings for the Company’s reportable segments are comprised of net sales less COGS and SG&A directly related to the respective segment’s net sales.

Operating expenses not directly attributable to the segments, such as certain corporate and administrative costs and Restructuring and related charges, net, are excluded from segment results.

Other items not specifically identified with the Company’s reportable segments include Interest expense, net , and Other income (expense), net .

Americas represented approximately 48% of the Company’s consolidated net sales in the third quarter of 2024.

This segment’s net sales were $220.3 million, a decrease of $25.6 million, or 10%, compared to the third quarter of 2023.

This was driven by a decrease in sales volumes of approximately 6%, lower selling price and product mix of approximately 2%, and an unfavorable impact from foreign currency translation of 2%.

The current quarter decline in sales volumes compared to the prior year was primarily driven by softer end market conditions broadly across the portfolio, partially offset by new business win s.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts.

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Mexican peso and Brazilian real.

Segment o perating earnings were $62.1 million, a decrease of $7.0 million, or 10%, compared to the third quarter of 2023, driven by lo wer sales partially offset by improved segment operating margins, driven primarily by lower raw material costs and lower SG&A expense.

EMEA represented approximately 29% of the Company’s consolidated net sales in the third quarter of 2024 .

This segment’s net sales were $134.1 million, a decrease of $5.5 million, or 4%, compared to the third quarter of 2023 .

This was driven by lower selling price and product mix of approximately 6%, partially offset by an increase in sales volumes of 1% and a favorable impact from foreign currency translation of 1%.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts.

The increase in sales volumes was primarily driven by new business wins and the contribution from the acquisition of IKV which offset softer end market conditions in the region.

The favorable foreign curren cy translation impact was primarily due to the weakening of the U.S.

dollar against the Euro .

Segment operating earnings were $24.6 million, a decrease of $3.3 million, or 12%, compared to the third quarter of 2023, due to the decline in net sales and lower segment operating margins due to higher raw material and other costs.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Asia/Pacific represented approximately 23% of the Company’s consoli dated net sales in the third quarter of 2024.

This segment’s net sales were $107.9 million, an increase of $2.8 million, or 3%, compared to the third quarter of 2023.

This was driven by an increase in sales volumes of 6% and a favorable impact from foreign currency translation of 1%, partially offset by a decrease in selling price and product mix of 4%.

The increase in sales volumes was primarily driven by new business wins coupled with a modest improvement in the end market environment and the contribution from the acquisition of Sutai.

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts .

The favorable foreign exchange impact was primarily due to the weakening of the U.S.

dollar against the Chinese renminbi.

Segment operating earnings were $30.7 million, a decrease of $0.3 million, or 1%, compared to the third quarter of 2023 as the increase in net sales was offset by lower segment operating margins due to higher raw material and other costs.

Reportable Segments Review - Comparison of the First Nine Months of 2024 with the First Nine Months of 2023

Americas represented approximately 48% of the Company’s consolidated net sales in the first nine months of 2024.

This segment’s net sales were $673.5 million , a decrease of $77.0 million, or 10%, compared to the first nine months of 2023 .

This was driven by a decrease in sales volumes of 6%, a decrease in selling price and product mix of 4%, and an unfavorable impact of foreign currency translation of less than 1% .

The decrease in selling price and product mix was primarily attributable to the impact of our index-based customer contracts .

The decline in sales volumes was primarily driven by softer market conditions and customer order patterns and outages, partially offset by new business win s.

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Brazilian real during the first nine months of 2024 compared to 2023.

The Americas segment’s operating earnings were $193.0 million , a decrease of $11.3 million, or 6%, compared to the first nine months of 2023 primarily driven by lower net sales, partially offset by an improvement in segment operating margins.

EMEA represented approximately 29% of the Company’s consolidated net sales in the first nine months of 2024 .

This segment’s net sales were $410.6 million, a decrease of $25.0 million, or 6%, compared to the first nine months of 2023.

This was a result of a decline in selling price and product mix of 4% and a decrease in sales volumes of 2%.

The decrease in selling price and product mix was primarily attributable to the year-over-year impact of our index-based customer contracts.

The decline in sales volumes was primarily driven by softer market conditions, partially offset by new business wins and the contribution from the acquisition of IKV.

The EMEA segment’s operating earnings were $80.9 million, a decrease of $0.2 million, or less than 1 percent , compared to the first nine months of 2023 primarily driven by lower net sales, partially offset by an improvement in segment operating margins.

Asia/Pacific represented approximately 22% of the Company’s consolidated net sales in the first nine months of 2024.

This segment’s net sales were $311.5 million, an increase of $11.4 million, or 4%, compared to the first nine months of 2023 .

This was driven by an increase in sales volumes of 9% , partially offset by lower selling price and product mix of 3% and an unfavorable impact of foreign currency translation of 2%.

The increase in sales volumes was primarily driven by new business wins coupled with a more favorable end market environment and the contribution from the acquisition of Sutai compared to the prior year period.

The decrease in selling price and product mix was primarily attributable to the year-over-year impact of our index-based customer contracts.

The unfavorable foreign exchange impact was primarily due to the strengthening of the U.S.

dollar against the Chinese renminbi.

The Asia/Pacific segment’s operating earnings were $92.0 million , an increase of $5.4 million, or 6%, compared to the first nine months of 2023 which was primarily driven by an improvement in net sales and segment operating margins.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Factors That May Affect Our Future Results

1 unchanged sentence

These statements can be identified by the fact that they do not relate strictly to historical or current facts and can generally be identified by words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “outlook,” “target,” “possible,” “potential,” “plan” or similar expressions, but these terms are not the exclusive means of identifying such statements.

We have based these forward-looking statements on assumptions, projections and expectations about future events that we believe are reasonable based on currently available information, including statements regarding the potential effects of the conflicts in Ukraine and the Middle East, inflation, and global supply chain constraints on the Company’s business, results of operations, and financial condition;

Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources.

We have based these forward-looking statements on assumptions, projections and expectations about future events that we believe are reasonable based on currently available information, including statements regarding the potential effects of economic downturns, tariffs, including retaliatory tariffs, “trade wars” and uncertainty surrounding changes in tariffs, inflation, and global supply chain constraints on the Company’s business, results of operations, and financial condition;

our expectation that we will maintain sufficient liquidity and remain in compliance with the terms of the Company’s credit facility;

2 unchanged sentences

These forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, intentions, financial condition, results of operations, future performance, and business, which may differ materially from expectations, estimates and projections of many factors, including, but not limited to:

• the timing and extent of the projected impacts on our business of acts of war or terrorism, including the conflicts in Ukraine and the Middle East, and actions taken by various governments and governmental organizations in response;

• inflationary pressures, cost increases and the impacts of constraints and disruptions in the global supply chain;

• the potential timing, impacts, benefits and other uncertainties of acquisitions and divestitures, including our ability to realize synergies, integrate acquisitions or separate divested assets and businesses;

• the potential for changes in global and regional economic conditions and for a variety of macroeconomic events, including the possibility of global or regional slowdowns or recessions, a global pandemic, interest rate changes, tariffs, inflation, deflation or stagflation and its impact on our business, raw materials purchases and/or profitability of our business impact the value of our assets;

• the timing and extent of the impacts on our business from acts of war, terrorism and military conflicts, including those in Ukraine and the Middle East, as well as related economic, political and governmental actions taken by various governments and governmental organizations in response;

• inflationary pressures, increases in raw material costs, supply chain constraints and other impacts of economic downturns, as well as high interest rates and their impact on our and our customers’ business operations;

• the potential timing, impacts, benefits and other uncertainties of acquisitions and divestitures, including our ability to realize synergies, integrate acquisitions and acquired businesses or separate divested assets and businesses;

• broader macroeconomic factors, including potential for changes in global and regional economic conditions, the possibility of global or regional slowdowns or recessions, other macroeconomic stresses and uncertainties, including potential impacts related to the recent actions of the federal government and responses thereto, as well as other political and geopolitical events, civil disturbances and endemics/pandemics or extreme weather events and other natural disasters that may adversely affect regional economic conditions and housing market;

political conditions and legislative and regulatory activity (or inactivity), including adoption of (or failure to adopt) new laws, regulations and executive orders, changes in existing laws, regulations and executive orders or the way they are interpreted or applied, and adoption of laws, regulations or executive orders that conflict among jurisdictions in which we operate;

• our future results and plans including our sustainability goals and enterprise strategy.

Such statements include information relating to current and future business activities, operational matters, capital spending, and financing sources.

From time to time, forward-looking statements are also included in the Company’s other periodic reports on Forms 10-K, 10-Q and 8-K, press releases, and other materials released to, or statements made to, the public.

Any or all of the forward-looking statements in this Report, in the Company’s 2023 Form 10-K and in any other public statements we make may turn out to be wrong.

This can occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties.

Many factors discussed in this Report will be important in determining our future performance.

Consequently, actual results may differ materially from those that might be anticipated from our forward-looking statements.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

However, any further disclosures made on related subjects in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings should be consulted.

Quaker Chemical Corporation

Management’s Discussion and Analysis

A major risk is that demand for the Company’s products and services is largely derived from the demand for our customers’ products, which subjects the Company to uncertainties related to downturns in a customer’s business and unanticipated customer production slowdowns and shutdowns.

Other major risks and uncertainties include, but are not limited to, inflationary pressures, including the potential for significant increases in raw material costs;

supply chain disruptions;

customer financial instability;

high interest rates and the possibility of economic recession;

economic and political disruptions particularly in light of numerous elections globally and the possibility of regime changes and including the impacts of the military conflicts between Russia and Ukraine and in the Middle East;

legislative and regulatory developments including changes to existing laws and regulations, or the way they are interpreted, applied or enforced;

tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and Belarus and/or other government organizations;

suspensions of activities in Russia by many multinational companies and the potential expansion of military activity;

Other major risks and uncertainties include, but are not limited to, legislative and regulatory developments including changes to existing laws and regulations, or the way they are interpreted, applied or enforced;

tariffs, trade restrictions and the economic and other sanctions imposed by other nations on Russia and Belarus and/or other governments or government organizations;

suspensions of activities in Russia by many multinational companies;

foreign currency fluctuations;

2 unchanged sentences

the impacts of consolidation in our industry, including loss or consolidation of a major customer;

the effects of climate change, fires or other natural disasters;

and the potential occurrence of cyber-security breaches, cyber-security attacks, and other technology outages and security incidents.

Furthermore, the Company is subject to the same business cycles as those experienced by our customers in the steel, automobile, aircraft, industrial equipment, aluminum, and durable goods industries.

Other factors could also adversely affect us, including those related to acquisitions and the integration of acquired businesses.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Therefore, we caution you not to place undue reliance on our forward-looking statements.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, refer to the Risk Factors section, which appears in Item 1A in our 2023 Form 10-K and in our quarterly and other reports filed from time to time with the SEC.

This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

Furthermore, the Company is subject to the same business cycles as those experienced by our customers in the steel, automotive, aerospace, industrial equipment, aluminum, and durable goods industries.

Any or all of the forward-looking statements in this Report, in the Company’s 2024 Form 10-K and in any other public statements we make may prove to be incorrect due to inaccurate assumptions or unforeseen risks and uncertainties.

In addition to the factors above, our forward-looking statements are qualified with respect to the risks disclosed elsewhere in this Report, including Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

These risks, uncertainties, and possible inaccurate assumptions relevant to our business could materially impact our future performance and cause our actual results to differ materially from expected and historical results.

We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

However, additional disclosures on related subjects can be found in the Company’s subsequent reports on Forms 10-K, 10-Q, 8-K and other related filings.

We caution you not to place undue reliance on our forward-looking statements.

Quaker Houghton on the Internet

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis