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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-31 · 223 added, 211 removed, 227 unchanged (66% of the section changed)

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

Net sales in the second quarter of 2025 were $483.4 million, an increase of 4% compared to $463.6 million in the second quarter of 2024.

This increase was primarily driven by a contribution from acquisitions of approximately 6% and an increase in sales volumes of approximately 2%, partially offset by a decline in selling price and product mix of approximately 4%.

The increase in sales volumes compared to the prior year was primarily a result of continued growth in the Asia/Pacific segment and new business wins across all segments, helping to offset a continuation of soft end market conditions including the uncertainty caused by tariffs, particularly in the Americas and EMEA segments.

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 a contribution from acquisitions of approximately 5%, an increase in organic sales volumes of approximately 3%, and a favorable impact from foreign currency translation of approximately 1%, partially offset by a decline in selling price and product mix of approximately 2%.

The increase in organic sales volumes compared to the prior year was primarily a result of continued growth in the Asia/Pacific segment and new business wins across all segments, helping to offset a continuation of soft end market conditions including the uncertainty caused by tariffs, 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.

The Company reported a net loss in the second quarter of 2025 of $66.6 million, or $3.78 loss per diluted share, compared to net income of $34.9 million, or $1.94 earnings per diluted share in the second quarter of 2024.

The net loss primarily reflects an $88.8 million non-cash impairment charge to write down the remaining value of goodwill associated with the Company’s EMEA reportable segment.

Excluding non-recurring and non-core items in each period, the Company’s second quarter 2025 non-GAAP net income and earnings per diluted share were $30.0 million and $1.71 compared to $38.2 million and $2.13, respectively, in the prior year.

The decrease in current quarter Non-GAAP earnings was primarily driven by lower gross margins and an increase in selling, general and administrative expenses (“SG&A”), partially offset by an increase in net sales.

The Company’s current quarter adjusted EBITDA was $75.5 million compared to $84.3 million in the second quarter of 2024, as the increase in net sales was offset by lower operating margins.

The Company reported net income in the third quarter of 2025 of $30.5 million, or $1.75 earnings per diluted share, compared to $32.3 million, or $1.81 earnings per diluted share in the third quarter of 2024.

Excluding non-recurring and non-core items in each period, the Company’s third quarter 2025 non-GAAP net income and earnings per diluted share were $36.3 million and $2.08 compared to $34.0 million and $1.89, respectively, in the prior year.

The increase in current quarter Non-GAAP earnings was primarily driven by an increase in net sales, partially offset by lower gross margins and an increase in selling, general and administrative expenses (“SG&A”).

The Company’s current quarter adjusted EBITDA was $82.9 million compared to $78.6 million in the third quarter of 2024, primarily driven by the increase in net sales and consistent operating margins.

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

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

The Company’s third 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 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 provided by operating activities were $38.5 million in the first six months of 2025 compared to net cash flows provided by operating activities of $73.5 million in the first six months of 2024.

The lower operating cash flow year-over-year reflects lower operating performance and higher cash outflows from restructuring activities, partially offset by a modest improvement in working capital management in the first six months of 2025 compared to the first six months of 2024.

Operating earnings for the EMEA and Asia/Pacific segments increased compared to the prior year quarter, primarily driven by an increase in net sales and further contribution from acquisitions, partially offset by lower segment operating margins in the Asia/Pacific segment.

Operating earnings for the Americas segment decreased, as an increase in net sales was offset by a decrease in segment operating margins.

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

Net cash flows provided by operating activities were $89.9 million in the first nine months of 2025 compared to $141.5 million in the first nine months of 2024.

The lower operating cash flow year-over-year reflects lower operating performance, higher cash outflows from restructuring activities and higher outflows from working capital in the first nine months of 2025 compared to the first nine 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 second quarter of 2025 reflect a continuation of soft end market conditions, heightened uncertainty in part due to global trade and tariffs which have impacted the Company’s customers and end markets, and the Company’s continued focus on delivering on its long-term financial and strategic initiatives.

Overall, the Company’s results in the third quarter of 2025 reflect an increase in sales volumes in all segments, driven by new business wins, despite a continuation of challenging end market conditions, and the Company’s continued focus on delivering on its long-term financial and strategic initiatives.

On July 4, 2025, H.R.

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ASU 2023-09 Income Taxes (Topic 740) requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the relevant legislation is enacted.

The OBBB was passed subsequent to the date of our financial statements and may affect the Company’s tax assets and liabilities in future periods.

The OBBB may affect the Company’s tax assets and liabilities in future periods.

The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions implemented through 2027.

The Company continues to assess the potential impact of the OBBB on our Condensed Consolidated Financial Statements.

While the Company continues to evaluate the potential impacts of the provisions effective in 2026 and 2027, the Company does not expect the provisions effective in 2025 to have a material impact to our consolidated financial statements.

Quaker Chemical Corporation

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Liquidity and Capital Resources

We had cash and cash equivalents of $201.9 million and $188.9 million as of June 30, 2025 and December 31, 2024, respectively.

Cash held by subsidiaries in foreign countries was approximately $189.4 million and $180.6 million at June 30, 2025 and December 31, 2024, respectively.

The $13.0 million increase in cash and cash equivalents was the net result of $147.5 million of cash provided by financing activities, $38.5 million of cash provided by operating activities, and a $7.7 million favorable impact of foreign currency translation, primarily offset by $180.7 million of cash used in investing activities.

Net cash flows provided by operating activities were $38.5 million in the first six months of 2025 compared to $73.5 million net cash flows provided by operating activities in the first six months of 2024.

The decrease in net operating cash flow year-over-year reflects lower operating performance in the first six months of 2025 compared to 2024 and higher cash outflows from restructuring activities, partially offset by a modest improvement in working capital management in 2025.

The improvement in working capital management in the first six months of 2025 was primarily driven by an increased outflow of tax payments in the prior year, partially offset by slower collections of accounts receivable in the current year.

Net cash flows used in investing activities were $180.7 million in the first six months of 2025 compared to $33.2 million in the first six months of 2024.

We had cash and cash equivalents of $172.0 million and $188.9 million as of September 30, 2025 and December 31, 2024, respectively.

Cash held by subsidiaries in foreign countries was approximately $164.9 million and $180.6 million at September 30, 2025 and December 31, 2024, respectively.

The $16.9 million decrease in cash and cash equivalents was the net result of $193.0 million of cash used in investing activities, partially offset by $79.2 million of cash provided by financing activities, $89.9 million of cash provided by operating activities, and a $7.0 million favorable impact of foreign currency translation.

Net cash flows provided by operating activities were $89.9 million in the first nine months of 2025 compared to $141.5 million in the first nine months of 2024.

The decrease in net operating cash flow year-over-year reflects lower operating performance in the first nine months of 2025 compared to 2024, higher outflows from restructuring activities, and an increase in net cash outflows from working capital, primarily due to lower inflows from the timing of collection of accounts receivable and higher outflows for the purchases of inventories.

Net cash flows used in investing activities were $193.0 million in the first nine months of 2025 compared to $55.8 million in the first nine months of 2024.

The increase in cash used in investing activities year-over-year is primarily the result of $164.2 million of payments, net of cash acquired, in the current year related to the acquisitions of Chemical Solutions & Innovations (Pty) Ltd.

(“CSI”), Dipsol Chemicals Co., Ltd., (“Dipsol”) and Natech, Ltd., (“Natech”) and a $14.3 million increase in payments related to capital expenditures.

The prior year included a $24.9 million payment related to the acquisition of I.K.V.

Tribologie IKVT and its subsidiaries (“IKV”).

The prior year included $39.3 million of payments, net of cash acquired, related to the acquisitions of I.K.V.

Tribologie IKVT and its subsidiaries (“IKV”) and the Sutai Group (“Sutai”).

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 $147.5 million in the first six months of 2025 compared to $39.3 million cash used in financing activities in the first six months of 2024.

The increase in financing cash inflows is primarily driven by $216.0 million of net borrowings on the Company’s revolving credit facility in the first six months of 2025, a $195.5 million increase compared to the prior year, which the Company used for the purpose of funding the purchase price of the Dipsol acquisition as well as for other corporate purposes.

In addition, during the first six months of 2025, the Company made debt payments of approximately $17.3 million, a $17.0 million decrease in payments compared to the prior year.

Net cash flows provided by financing activities were $79.2 million in the first nine months of 2025 compared to $67.0 million cash used in financing activities in the first nine months of 2024.

The increase in financing cash inflows is primarily driven by $168.9 million of net borrowings on the Company’s revolving credit facility in the first nine months of 2025, a $138.4 million increase compared to the prior year, which the Company used for the purpose of funding the purchase price of the Dipsol acquisition as well as for other corporate purposes.

In addition, during the first nine months of 2025, the Company made term loan debt payments of approximately $26.0 million, a $22.6 million decrease in payments compared to the prior year.

This was offset by payments of approximately $36.5 million for repurchases of the Company’s common stock under its share repurchase program in the current year, a $13.6 million increase compared to the prior year.

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

As of June 30, 2025, the Company was in compliance with all of the Credit Facility covenants.

As of September 30, 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 o f June 30, 2025 and December 31, 2024, the Company had Credit Facility borrowings outstanding of $925.3 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 June 30, 2025 and $11.8 million as of December 31, 2024.

Total unused capacity under these arrangements, excluding the Credit Facility, as of June 30, 2025 was approximately $40 million.

The Company’s total net debt as of June 30, 2025, which consists of total borrowings of $936.7 million less cash and cash equivalents of $201.9 million, was approximately $734.8 million.

As o f September 30, 2025 and December 31, 2024, the Company had Credit Facility borrowings outstanding of $863.4 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 $11.8 million as of each of September 30, 2025 and December 31, 2024.

Total unused capacity under these arrangements, excluding the Credit Facility, as of September 30, 2025 was approximately $57 million.

The Company’s total net debt as of September 30, 2025, which consists of total borrowings of $875.2 million less cash and cash equivalents of $172.0 million, was approximately $703.2 million.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three and six months ended June 30, 2025 was approximately 5.2% for both periods.

As of June 30, 2025, the interest rate on the outstanding borrowings under the Credit Facility was approximately 4.9%.

The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three and nine months ended September 30, 2025 was approximately 5.2% for both periods.

As of September 30, 2025, the interest rate on the outstanding borrowings under the Credit Facility was approximately 5.1%.

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 $220 million, which is net of bank letters of credit of approximately $2 million, as of June 30, 2025.

The Company had unused capacity under the Revolver of approximately $273 million, which is net of bank letters of credit of approximately $2 million, as of September 30, 2025.

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 June 30, 2025, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 4.9%.

As of September 30, 2025, the aggregate interest rate on the swaps, including the fixed base rate plus the applicable margin, was 5.0%.

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

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

As of June 30, 2025 and December 31, 2024, the Company had $0.9 million and $1.1 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $1.9 million and $2.4 million, respectively, of debt issuance costs recorded within Other assets.

As of September 30, 2025 and December 31, 2024, the Company had $0.8 million and $1.1 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $1.6 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 .

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

During the first six months of 2025 and 2024, the Company recognized $0.4 million and $0.7 million, respectively, of other expense relating to changes in fair value of foreign exchange forward contracts.

During the first nine months of 2025 and 2024, the Company recognized $0.5 million of other income and $2.0 million of other expense, respectively, 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.

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

In the first half of 2025, the Company approved additional actions under the program, which are expected to generate at least an additional $35.0 million of annualized cost savings.

During the nine months ended September 30, 2025, the Company approved additional actions under the program, which are expected to generate approximately an additional $40.0 million of annualized cost savings.

These actions are expected to be substantially complete by the end of 2026.

The Company recognized restructuring and related charges of $23.4 million and $2.2 million for the six months ended June 30, 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 six months of 2025 of approximately $15.9 million compared to $4.4 million in the first six months of 2024.

The Company recognized restructuring and related charges of $31.1 million and $4.8 million for the nine months ended September 30, 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 nine months of 2025 of approximately $21.7 million compared to $6.4 million in the first nine 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, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for further information.

As of June 30, 2025, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $18.8 million.

As of September 30, 2025, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $17.7 million.

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

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

The Company made certain purchases under the 2024 Share Repurchase Program during the six months ended June 30, 2025.

The Company made certain purchases under the 2024 Share Repurchase Program during the nine months ended September 30, 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.

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The timing and amount of potential additional 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.

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

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

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

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Consolidated 3 % (2) % 1 % 5 % 7 %

Net sales in the second quarter of 2025 were $483.4 million, an increase of 4% compared to $463.6 million in the second quarter of 2024.

This increase was primarily driven by a contribution from acquisitions of approximately 6% and an increase in sales volumes of 2%, partially offset by a decline in selling price and product mix of approximately 4%.

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.

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.

Cost of goods sold (“COGS”) was $311.7 million in the second quarter of 2025 compared to $287.8 million in the second quarter of 2024, an increase of approximately $23.9 million, or 8%.

Cost of goods sold (“COGS”) was $313.0 million in the third quarter of 2025 compared to $289.7 million in the third quarter of 2024, an increase of approximately $23.3 million, or 8%.

The increase in COGS reflects an increase in spend on the increase in current year sales volumes and an increase in raw material costs and manufacturing costs.

Additionally, COGS in the second quarter of 2025 includes $6.0 million amortization of the fair value step-up in Dipsol’s inventories as a result of the acquisition, which is partially offset by a $3.6 million gain related to an out-of-period inventory adjustment.

Gross profit was $171.7 million in the second quarter of 2025 compared to $175.7 million in the second quarter of 2024, a decrease of $4.0 million, or 2% primarily due to an increase in raw materials costs and the amortization of the fair value step-up in Dipsol’s inventories, partially offset by the increase in net sales and gain on inventory adjustment, as mentioned above.

The Company’s reported gross margin in the second quarter of 2025 was 35.5% compared to 37.9% in the second quarter of 2024.

The Company’s non-GAAP gross margin in the second quarter of 2025 was 36.0% compared to 37.9% in the second quarter of 2024.

Additionally, COGS in the third quarter of 2025 includes a $0.7 million loss related to an out-of-period inventory adjustment.

Gross profit was $180.9 million in the third quarter of 2025 compared to $172.5 million in the third quarter of 2024, an increase of $8.4 million, or 5% primarily due to an increase in sales, an increase in raw material and manufacturing costs a nd a loss on an out-of-period inventory adjustment, as mentioned above.

The Company’s reported gross margin in the third quarter of 2025 was 36.6% compared to 37.3% in the third quarter of 2024.

The Company’s non-GAAP gross margin in the third quarter of 2025 was 36.8% compared to 37.3% in the third quarter of 2024.

See the Non-GAAP Measures section of this Item below for additional details.

SG&A expense was $126.6 million in the second quarter of 2025 compared to $116.9 million in the second quarter of 2024, an increase of approximately $9.7 million, or 8%, primarily driven by an increase in SG&A expense related to acquisitions.

The Company incurred Restructuring and related charges of $8.8 million and $0.3 million during the second quarter of 2025 and 2024, respectively, primarily related to additional reductions in headcount and facility closure costs under the Company’s restructuring program.

SG&A expense was $126.5 million in the third quarter of 2025 compared to $118.2 million in the third quarter of 2024, an increase of approximately $8.3 million, or 7%, primarily driven by an increase in SG&A expense related to acquisitions, partially offset by lower incentive compensation.

The Company incurred Restructuring and related charges of $7.7 million and $2.6 million during the third quarter of 2025 and 2024, respectively, primarily related to additional reductions in headcount and facility closure costs under the Company’s restructuring program.

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

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Management’s Discussion and Analysis

During the second quarter of 2025, the Company recorded an $88.8 million non-cash impairment charge to write down the remaining value of goodwill associated with the Company’s EMEA reportable segment.

This non-cash impairment charge is the result of the Company’s conclusion that the negative impacts of the lower than projected financial performance, driven by the continuation of soft end market conditions, as well as an increase in the Company’s cost of capital, driven by uncertainty around the potential negative impacts of tariffs, represented a triggering event for the Company’s EMEA reporting unit and the associated goodwill, as well as the related asset group.

There were no similar impairment charges during the second quarter of 2024.

See Note 13, Goodwill and Other Intangible Assets , to the Condensed Consolidated Financial Statements for additional information.

Operating loss in the second quarter of 2025 was $52.5 million compared to operating income of $58.4 million in the second quarter of 2024.

The operating loss was primarily driven by the $88.8 million non-cash impairment charge described above.

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 below, the Company’s non-GAAP operating income was $50.6 million in the second quarter of 2025 and $59.8 million in the second quarter of 2024.

The decrease was primarily due to lower gross margins and higher SG&A primarily related to acquisitions, partially offset by an increase in net sales, as described above.

The Company had Other expense, net of $0.7 million in the second quarter of 2025 as compared to Other income, net of $0.4 million in the second quarter of 2024.

Both the second quarter of 2025 and 2024 included foreign exchange transaction losses, which were $0.4 million higher in the current year, and income from non-income tax credits, which were $0.7 million higher in the prior year.

The second quarter of 2025 also included $0.8 million of interest income and an acquisition related earnout liability adjustment of $0.3 million.

Interest expense was $12.8 million in the second quarter of 2025 compared to $10.8 million in the second quarter of 2024, an increase of approximately $2.0 million, primarily as a result of higher outstanding borrowings.

The Company’s effective tax rates for the second quarters of 2025 and 2024 were (8.3)% and 32.8%, respectively.

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

Comparatively, the effective tax rate for the second quarter of 2024 was largely driven by the mix of pre-tax earnings, certain one-time charges related to an intercompany intangible asset transfer, and withholding taxes.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item below, the Company estimates that its effective tax rates for the second quarters of 2025 and 2024 would have been approximately 28% in both periods.

Operating income in the third quarter of 2025 was $46.6 million compared to $51.7 million in the third 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 below, the Company’s non-GAAP operating income was $57.9 million in the third quarter of 2025 and $54.2 million in the third quarter of 2024.

The increase was primarily due to an increase in net sales, partially offset by lower gross margins and higher SG&A, primarily related to acquisitions, as described above.

The Company had Other expense, net of $0.3 million in the third quarter of 2025 as compared to Other income, net of $0.8 million in the third quarter of 2024.

Both the third quarter of 2025 and 2024 included foreign exchange transaction losses, which were $1.6 million higher in the current year, and income from non-income tax credits, which were $1.9 million higher in the current year.

The third quarter of 2025 also included $0.6 million of interest income and a $0.9 million multiemployer plan withdrawal charge.

The third quarter of 2024 included a $1.0 million business interruption insurance recovery.

Interest expense was $10.9 million in the third quarter of 2025 compared to $10.3 million in the third quarter of 2024, an increase of approximately $0.6 million, primarily as a result of higher outstanding borrowings, partially offset by decreases in interest rates.

The Company’s effective tax rates for the third quarters of 2025 and 2024 were 26.2% and 28.9%, respectively.

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

Comparatively, the 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.

Excluding the impact of non-core items in each quarter, described in the Non-GAAP Measures section of this Item below, the Company estimates that its effective tax rates for the third quarters of 2025 and 2024 would have been approximately 28% and 29%, 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 $4.9 million in the second quarter of 2025 compared to $2.6 million in the second quarter of 2024, an increase of $2.3 million, primarily due to higher current year income from the Company’s 32% investment in Primex, a captive insurance company.

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

Consolidated Operations Review – Comparison of the First Six Months of 2025 with the First Six Months of 2024

Equity in net income of associated companies was $4.3 million in the third quarter of 2025 compared to $2.4 million in the third quarter of 2024, an increase of $1.9 million, primarily due to higher current year income from the Company’s 32% investment in Primex, a captive insurance company and 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 third quarter of 2025 and 2024.

Consolidated Operations Review – Comparison of the First Nine Months of 2025 with the First Nine Months of 2024

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

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Consolidated 1 % (2) % (1) % 4 % 2 %

Net sales were $926.3 million in the first six months of 2025 compared to $933.3 million in the first six months of 2024.

The net sales decrease of $7.0 million, or 1%, year-over-year reflects decreases in selling price and product mix of approximately 2%, an unfavorable impact from foreign currency translation of approximately 2%, and a decline in sales volumes of approximately 1%, partially offset by a contribution from acquisitions of approximately 4%.

Net sales were $1,420.2 million in the first nine months of 2025 compared to $1,395.6 million in the first nine months of 2024.

The net sales increase of $24.6 million, or 2%, year-over-year reflects contributions from acquisitions of approximately 4% and an increase in organic sales volumes of approximately 1%, partially offset by decreases in selling price and product mix of approximately 2% and unfavorable foreign currency of approximately 1%.

The increase in organic sales volumes, which was led by the Asia/Pacific segment, was primarily a result of continued new business wins across all segments, offsetting a continuation of soft end market conditions including the uncertainty caused by tariffs, 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.

The decline in sales volumes was primarily a result of a continuation of soft end market conditions including the uncertainty caused by tariffs, particularly 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 across all segments.

COGS were $593.3 million in the first six months of 2025 compared to $576.0 million in the first six months of 2024.

The increase in COGS of approximately $17.3 million, or 3%, reflects an increase in global raw material costs and manufacturing costs.

Additionally, COGS in the first six months of 2025 includes $6.0 million amortization of the fair value step-up in Dipsol’s inventories as a result of the acquisition, which is partially offset by a $3.6 million gain related to an out-of-period inventory adjustment.

Gross profit was $333.0 million in the first six months of 2025 compared to $357.3 million in the first six months of 2024, a decrease of approximately $24.3 million, or 7%, primarily as a result of the decline in sales as mentioned above, partially offset by an increase in the Company’s raw material costs and manufacturing costs.

The Company’s reported gross margin in the first six months of 2025 was 35.9% compared to 38.3% in the first six months of 2024.

The Company’s non-GAAP gross margin in the first six months of 2025 was 36.2% compared to 38.3% in the first six months of 2024.

COGS were $906.3 million in the first nine months of 2025 compared to $865.8 million in the first nine months of 2024.

The increase in COGS of approximately $40.5 million, or 5%, reflects an increase in spend on the increase in current year sales volumes and an increase in global raw material costs and manufacturing costs.

Additionally, COGS in the first nine months of 2025 includes $6.0 million amortization of the fair value step-up in Dipsol’s inventories as a result of the Dipsol acquisition, which is partially offset by a $2.9 million gain related to an out-of-period inventory adjustment.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Gross profit was $513.8 million in the first nine months of 2025 compared to $529.8 million in the first nine months of 2024, a decrease of approximately $16.0 million, or 3% , primarily as a result of an increase in the Company’s raw material costs and manufacturing costs, as w el l as the $6.0 million amortization of the fair value step-up in Dipsol’s inventories as a result of the Dipsol acquisition, partially offset by an increase in net sales and a $2.9 million gain related to an out-of-period inventory adjustment.

The Company’s reported gross margin in the first nine months of 2025 was 36.2% compared to 38.0% in the first nine months of 2024.

The Company’s non-GAAP gross margin in the first nine months of 2025 was 36.4% compared to 38.0% in the first nine months of 2024.

See the Non-GAAP Measures section of this Item below for additional details.

SG&A was $245.6 million in the first six months of 2025 compared to $241.1 million in the first six months of 2024, an increase of $4.5 million, or 2%, primarily driven by an increase in SG&A relating to acquisitions, partially offset by lower incentive compensation.

The Company incurred Restructuring and related charges of $23.4 million and $2.2 million during the first six months of 2025 and 2024, respectively, related to additional reductions in headcount and facility closure costs under the Company’s restructuring program.

SG&A was $372.1 million in the first nine months of 2025 compared to $359.4 million in the first nine months of 2024, an increase of $12.7 million, or 4%, primarily driven by an increase in SG&A relating to acquisitions, partially offset by lower incentive compensation.

The Company incurred Restructuring and related charges of $31.1 million and $4.8 million during the first nine months of 2025 and 2024, respectively, related to additional reductions in headcount and facility closure costs under the Company’s restructuring program.

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

During the first six months of 2025, the Company recorded an $88.8 million non-cash impairment charge to write down the remaining value of goodwill associated with the Company’s EMEA reportable segment.

There were no similar impairment charges during the first six months of 2024.

There were no similar impairment charges during the first nine months of 2024.

See Note 13, Goodwill and Other Intangible Assets , to the Condensed Consolidated Financial Statements for additional information.

Operating loss in the first six months of 2025 was $24.9 million compared to operating income of $114.0 million in the first six months of 2024.

The operating loss was primarily driven by the $88.8 million non-cash impairment charge described above.

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, below, the Company’s current year non-GAAP operating income decreased to $96.4 million for the first six months of 2025 compared to $119.1 million in the prior year’s first six months primarily due to lower gross profit and an increase in SG&A.

Quaker Chemical Corporation

Management’s Discussion and Analysis

The Company had Other loss, net of $1.4 million in the first six months of 2025 compared to Other income, net of $1.5 million in the first six months of 2024.

The first six months of 2025 and 2024 both included foreign exchange transaction losses, which were $3.4 million higher in the current year and income from non-income tax credits, which were $2.7 million lower in the current year.

The first six months of 2025 also included a $2.1 million net gain on disposals of property and $1.4 million of interest income, whereas the first six months of 2024 included $0.9 million of expense associated with a payment related to a product liability dispute with one of the Company’s customers.

Operating income in the first nine months of 2025 was $21.8 million compared to $165.7 million in the first nine months of 2024.

The decrease in operating income was primarily driven by the $88.8 million non-cash impairment charge described above.

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, below, the Company’s current year non-GAAP operating income decreased to $154.3 million for the first nine months of 2025 compared to $173.2 million in the prior year’s first nine months primarily due to lower gross profit and an increase in SG&A.

The Company had Other expense, net of $1.6 million in the first nine months of 2025 compared to Other income, net of $2.3 million in the first nine months of 2024.

The first nine months of 2025 and 2024 both included foreign exchange transaction losses, which were $5.0 million higher in the current year and income from non-income tax credits, which were $0.9 million lower in the current year.

The first nine months of 2025 also included a $2.1 million net gain on disposals of property, $2.0 million of interest income and a multiemployer plan withdrawal charge of $0.9 million, whereas the first nine months of 2024 included a $0.9 million expense associated with a payment related to a customer product liability dispute and a $1.0 million business interruption insurance recovery.

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

Interest expense of $22.3 million increased $0.7 million in the first six months of 2025 compared to $21.6 million in the first six months of 2024 primarily as a result of higher outstanding borrowings, partially offset by decreases in interest rates.

The Company’s effective tax rates for the first six months of 2025 and 2024 were (26.8)% and 30.1%, respectively.

The Company’s effective tax rate for the six months ended June 30, 2025 was primarily impacted by the mix of pre-tax earnings, goodwill impairment charges, return to provision adjustments and withholding taxes offset by net favorable reductions in uncertain tax positions.

Comparatively, the effective tax rates for the six months ended June 30, 2024 were 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.

Excluding the impact of non-core items in each period, described in the Non-GAAP Measures section of this Item, below, the Company estimates that its effective tax rates for the first six months of 2025 and 2024 would have been approximately 29% and 28%, respectively.

Interest expense of $33.3 million increased $1.4 million in the first nine months of 2025 compared to $31.9 million in the first nine months of 2024 primarily as a result of higher outstanding borrowings, partially offset by decreases in interest rates.

The Company’s effective tax rates for the first nine months of 2025 and 2024 were (169.5)% and 29.7%, respectively.

The Company’s effective tax rate for the nine months ended September 30, 2025 was largely driven by the mix of pre-tax earnings, goodwill impairment charges, and withholding taxes offset by return to provision adjustments and net favorable reductions in uncertain tax positions.

Comparatively, the effective tax rate for the nine months ended September 30, 2024 were 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.

Excluding the impact of non-core items in each period, described in the Non-GAAP Measures section of this Item, below, the Company estimates that its effective tax rates for the first nine months of 2025 and 2024 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 $7.9 million in the first six months of 2025 compared to $4.6 million in the first six months of 2024.

Equity in net income of associated companies was $12.3 million in the first nine months of 2025 compared to $6.9 million in the first nine months of 2024.

The increase of $5.4 million was primarily due to higher current year income from the Company’s 50% equity interest in a joint venture in Korea and higher current year income from the Company’s 32% investment in Primex, a captive insurance company.

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

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

Reportable Segments Review - Comparison of the Third Quarter of 2025 with the Third 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.

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

Americas represented approximately 46% of the Company’s consolidated net sales in the second quarter of 2025.

This segment’s net sales were $221.1 million, a decrease of $2.5 million, or 1%, compared to the second quarter of 2024.

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

The 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 wins.

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

Americas represented approximately 45% of the Company’s consolidated net sales in the third quarter of 2025.

This segment’s net sales were $222.8 million, an increase of $2.5 million, or 1%, compared to the third quarter of 2024.

This was driven by an increase in sales from the acquisition of Dipsol of approximately 2% and a favorable impact from foreign currency translation of approximately 1%, partially offset by a decrease in selling price and product mix of approximately 2%.

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

dollar against the Mexican peso and Brazilian real.

Segment operating earnings were $59.0 million, a decrease of $5.2 million, or 8%, compared to the second quarter of 2024, driven by a modest decline in net sales and lower segment operating margins, primarily driven by lower gross margins for the segment, due to higher raw material and manufacturing costs.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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

This segment’s net sales were $139.9 million, an increase of $1.9 million, or 1%, compared to the second quarter of 2024.

This was driven by an increase in sales volumes of approximately 1%, a favorable impact from foreign currency translation of approximately 4% and an increase in sales from acquisitions, relating to the acquisitions of Dipsol, Natech and CSI, of approximately 3%, partially offset by lower selling price and product mix of approximately 7%.

The increase in sales volumes was primarily driven by new business wins, which helped offset a continuation of soft end market conditions, which were further impacted by the uncertainty of tariffs.

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

dollar against the Euro.

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.

Segment operating earnings were $25.0 million, a decrease of $1.7 million, or 6%, compared to the second quarter of 2024, as the increase in net sales was offset by lower segment operating margins, primarily due to lower gross margins for the segment, and higher SG&A, primarily related to acquisitions.

Asia/Pacific represented approximately 25% of the Company’s consoli dated net sales in the second quarter of 2025.

This segment’s n et sales were $122.4 million, an increase of $20.4 million, or 20%, compared to the second quarter of 2024.

This was driven by an increase in sales volumes of approximately 8% and an increase in sales from acquisitions of approximately 17%, primarily relating to the acquisitions of Dipsol and Sutai, partially offset by a decrease in selling price and product mix of approximately 5%.

The increase in sales volumes was primarily driven by new business wins and a more favorable end market backdrop despite uncertainty related to tariffs.

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.

The foreign currency translation impact, primarily reflecting the movement between the U.S.

dollar and the Chinese renminbi, was immaterial compared to the prior year.

Segment operating earnings were $28.7 million, a decrease of $2.3 million, or 7%, compared to the second quarter of 2024 despite an increase in net sales, due to lower segment gross margins and higher SG&A, primarily related to acquisitions.

Reportable Segments Review - Comparison of the First Six Months of 2025 with the First Six Months of 2024

Americas represented approximately 47% of the Company’s consolidated net sales in the first six months of 2025.

This segment’s net sales were $434.8 million, a decrease of $18.5 million, or 4% , compared to the first six months of 2024.

This was driven by a decrease in sales volumes of approximately 2% and an unfavorable impact of foreign currency translation of approximately 3%, partially offset by an increase in sales from the acquisition of Dipsol of approximately 1%.

Selling price and product mix remained relatively flat in the first six months of 2025.

The decline in sales volumes was primarily driven by a continuation of soft market conditions and customer order patterns, partially offset by new business wins.

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

dollar against the Brazilian real and Mexican peso during the first six months of 2025 compared to 2024.

The Americas segment’s operating earnings were $117.4 million, a decrease of $13.5 million, or 10%, compared to the first six months of 2024 primarily driven by lower net sales and lower segment operating margins.

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

This segment’s net sales were $269.2 million , a decrease of $7.2 million, or 3% , compared to the first six months of 2024.

This was a result of a decrease in selling price and product mix of approximately 3% and a decrease in sales volumes of approximately 3%, partially offset by an increase in sales from acquisitions of Dipsol, Natech, CSI, and IKV of approximately 2% and a favorable foreign currency translation impact of approximately 1%, primarily due to the weakening of the U.S.

Sales volumes were consistent compared to the prior year and were primarily driven by new business wins despite a continuation of soft end market conditions further impacted by the uncertainty of tariffs, especially for metalworking applications.

Segment operating earnings were $58.9 million, a decrease of $3.2 million, or 5%, compared to the third quarter of 2024, as an increase in net sales was partially offset by lower segment operating margins, primarily driven by lower gross margins for the segment.

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

This segment’s net sales were $143.9 million, an increase of $9.8 million, or 7%, compared to the third quarter of 2024.

This was driven by a favorable impact from foreign currency translation of approximately 3%, an increase in sales from the acquisitions of Dipsol, Natech and CSI of approximately 2%, an increase in organic sales volumes of approximately 1%, and an improvement in selling price and product mix of approximately 1%.

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

dollar against the Euro.

The increase in organic sales volumes was primarily driven by new business wins, which helped offset a continuation of soft end market conditions, which were further impacted by the uncertainty of tariffs.

The increase 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.

Segment operating earnings were $26.5 million, an increase of $1.8 million, or 7%, compared to the third quarter of 2024, primarily due to an increase in net sales.

Asia/Pacific represented approximately 26% of the Company’s consoli dated net s ales in the third quarter of 2025.

This segment’s net sales were $127.2 million, an increase of $19.3 million, or 18%, compared to the third quarter of 2024.

This was driven by an increase in sales from the acquisition of Dipsol of approximately 14%, an increase in organic sales volumes of approximately 8%, and a favorable impact from foreign currency translation of approximately 1%, partially offset by a decrease in selling price and product mix of approximately 5%.

The increase in organic sales volumes was primarily driven by new business wins despite a modest decrease in underlying market conditions.

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

dollar against the Chinese renminbi.

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.

The decline in sales volumes was primarily driven by softer market conditions, partially offset by new business wins.

The EMEA segment’s operating earnings were $48.4 million, a decrease of $7.8 million, or 14%, compared to the first six months of 2024 primarily driven by lower net sales and segment operating margins, reflecting higher raw material and manufacturing costs, and higher SG&A related to acquisitions.

Segment operating earnings were $35.6 million, an increase of $4.9 million, or 16%, compared to the third quarter of 2024, as an increase in net sales was partially offset by lower segment operating margins, primarily due to lower gross margins for the segment and higher SG&A, primarily related to acquisitions.

Quaker Chemical Corporation

Management’s Discussion and Analysis

Asia/Pacific represented approximately 24% of the Company’s consolidated net sales in the first six months of 2025.

This segment’s net sales were $222.3 million , an increase of $18.7 million, or 9% , compared to the first six months of 2024 .

This was driven by an increase in sales volumes of approximately 4% and a further contribution from acquisitions of approximately 10%, partially offset by lower selling price and product mix of approximately 4% and an unfavorable impact of foreign currency translation of approximately 1%.

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

Reportable Segments Review - Comparison of the First Nine Months of 2025 with the First Nine Months of 2024

Americas represented approximately 46% of the Company’s consolidated net sales in the first nine months of 2025.

This segment’s net sales were $657.6 million, a decrease of $16.0 million, or 2% , compared to the first nine months of 2024.

This was driven by an unfavorable impact of foreign currency translation of approximately 2% and a decrease in organic sales volumes of approximately 2%, partially offset by an increase in sales from the acquisition of Dipsol of approximately 2%.

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

dollar against the Brazilian real and Mexican peso during the first nine months of 2025 compared to 2024.

The decline in organic sales volumes was primarily driven by a continuation of soft market conditions and customer order patterns, partially offset by new business wins.

The Americas segment’s operating earnings were $176.4 million, a decrease of $16.7 million, or 9%, compared to the first nine months of 2024 primarily driven by lower net sales and lower segment operating margins, primarily due to lower gross margins for the segment.

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

This segment’s net sales were $413.1 million , an increase of $2.5 million, or 1% , compared to the first nine months of 2024.

This was a result of an increase in sales from acquisitions of Dipsol, Natech, CSI, and IKV of approximately 3% and a favorable foreign currency translation impact of approximately 3%, primarily due to the weakening of the U.S.

dollar against the Euro, partially offset by a decrease in selling price and product mix of approximately 3% and a decrease in organic sales volumes of approximately 2%.

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.

The decline in sales volumes was primarily driven by softer market conditions, partially offset by continued new business wins.

The EMEA segment’s operating earnings were $74.9 million, a decrease of $6.0 million, or 7%, compared to the first nine months of 2024 as an increase in net sales was offset by lower segment operating margins, primarily due to lower gross margins for the segment and higher SG&A, primarily related to acquisitions.

Asia/Pacific represented approximately 25% of the Company’s consolidated net sales in the first nine months of 2025.

This segment’s net sales were $349.5 million, an increase of $38.0 million, or 12%, compared to the first nine months of 2024.

This was driven by contributions from acquisitions of Dipsol and Sutai of approximately 11% and an increase in organic sales volumes of approximately 6%, partially offset by lower selling price and product mix of approximately 4% and an unfavorable impact of foreign currency translation of approximately 1%.

The increase in organic sales volumes was primarily driven by new business wins coupled with a more favorable end market environment compared to the prior year period.

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.

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 $54.6 million, a decrease of $6.7 million, or 11%, compared to the first six months of 2024 as an improvement in net sales was offset by lower segment gross margins and an increase in SG&A, primarily related to acquisitions.

The Asia/Pacific segment’s operating earnings were $90.2 million, a decrease of $1.8 million, or 2%, compared to the first nine months of 2024 as an increase in net sales was offset by lower segment operating margins, primarily due to lower gross margins for the segment and higher SG&A, primarily related to acquisitions.

Non-GAAP Measures

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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.

Quaker Chemical Corporation

Management’s Discussion and Analysis

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.

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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.

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Non-GAAP Gross Profit and Margin Reconciliations Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

1 unchanged sentence

Acquisition-related step-up inventory amortization (a) — — 6,022 —

Gain on inventory and other adjustments (d) (3,604) — (3,604) —

Loss (gain) on inventory and other adjustments (d) 671 — (2,933) —

Non-GAAP gross profit $ 181,536 $ 172,549 $ 516,937 $ 529,830

Non-GAAP gross margin (%) (q) 36.0 % 37.9 % 36.2 % 38.3 %

Non-GAAP gross margin (%) (u) 36.8 % 37.3 % 36.4 % 38.0 %

Non-GAAP Operating Income and Margin Reconciliations Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

Operating (loss) income $ (52,510) $ 58,449 $ (24,886) $ 113,975

Operating income $ 46,641 $ 51,718 $ 21,755 $ 165,693

Acquisition-related step-up inventory amortization (a) — — 6,022 —

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Acquisition-related expenses (c) 642 381 4,775 898

Gain on inventory and other adjustments (d) (3,927) — (3,927) —

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

Impairment charges (l) 88,840 — 88,840 —

Acquisition-related depreciation and amortization (n) 1,681 — 1,681 —

Other charges (e) 939 812 1,165 866

Loss (gain) on inventory and other adjustments (d) 671 — (3,256) —

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

Impairment charges (n) — — 88,840 —

Acquisition-related depreciation and amortization (r) 1,656 — 3,337 —

Other charges (credits) (f) 530 (519) 1,695 347

Non-GAAP operating income $ 57,885 $ 54,190 $ 154,296 $ 173,247

Non-GAAP operating margin (%) (q) 10.5 % 12.9 % 10.4 % 12.8 %

Non-GAAP operating margin (%) (u) 11.7 % 11.7 % 10.9 % 12.4 %

Quaker Chemical Corporation

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

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

Net (loss) income attributable to Quaker Chemical Corporation $ (66,580) $ 34,885 $ (53,658) $ 70,112

Depreciation and amortization (o) 23,921 21,428 44,751 42,484

Net income (loss) attributable to Quaker Chemical Corporation $ 30,469 $ 32,346 $ (23,189) $ 102,458

Depreciation and amortization (s) 24,436 21,423 69,187 63,907

Interest expense 10,941 10,347 33,265 31,925

Taxes on income before equity in net income of associated companies (p) 5,472 15,778 13,014 28,286

Taxes on income before equity in net income of associated companies (t) 9,266 12,167 22,280 40,453

EBITDA 75,112 76,283 101,543 238,743

Equity income in a captive insurance company (f) (2,075) (475) (2,746) (981)

Equity income in a captive insurance company (g) (1,691) (285) (4,437) (1,266)

Acquisition-related step-up inventory amortization (a) — — 6,022 —

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Acquisition-related expenses (c) 642 381 4,775 898

Gain on inventory and other adjustments (d) (3,927) — (3,927) —

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

Impairment charges (l) 88,840 — 88,840 —

Product liability claim costs, net (i) — — — 896

Currency conversion impacts of hyper-inflationary economies (g) 652 613 1,187 (291)

(Gain) loss on acquisition-related hedges (j) (592) — 1,351 —

Gain on sale of assets (k) (357) — (2,534) —

Other charges (e) 1,728 754 2,387 1,273

Loss (gain) on inventory and other adjustments (d) 671 — (3,256) —

Pension and postretirement benefit costs, non-service components (e) 469 469 1,351 1,398

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

Impairment charges (n) — — 88,840 —

Product liability claim costs, net (j) — — — 896

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

Currency conversion impacts of hyper-inflationary economies (h) 886 624 2,073 333

Loss on acquisition-related hedges (l) — — 1,351 —

Gain on sale of assets (m) — — (2,534) —

Multiemployer plan withdrawal charge (o) 923 — 923 —

Brazilian non-income tax credits (p) (1,762) — (1,762) —

Other charges (credits) (f) (144) (520) 1,360 (176)

Adjusted EBITDA $ 82,851 $ 78,562 $ 227,377 $ 246,135

Adjusted EBITDA margin (%) (q) 15.6 % 18.2 % 15.6 % 18.0 %

Adjusted EBITDA margin (%) (u) 16.8 % 17.0 % 16.0 % 17.6 %

Adjusted EBITDA $ 82,851 $ 78,562 $ 227,377 $ 246,135

Depreciation and amortization (o) 23,921 21,428 44,751 42,484

Depreciation and amortization (s) 24,436 21,423 69,187 63,907

Interest expense 10,941 10,347 33,265 31,925

Taxes on income before equity in net income of associated companies - adjusted (p) 10,460 13,877 21,104 27,606

Acquisition-related depreciation and amortization (n) 1,681 — 1,681 —

Taxes on income before equity in net income of associated companies - adjusted (t) 12,860 12,811 33,964 40,417

Acquisition-related depreciation and amortization (r) 1,656 — 3,337 —

Non-GAAP net income $ 36,270 $ 33,981 $ 94,298 $ 109,886

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Non-GAAP Earnings per Diluted Share Reconciliations Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

GAAP (loss) earnings per diluted share attributable to Quaker Chemical Corporation common shareholders $ (3.78) $ 1.94 $ (3.04) $ 3.89

Equity income in a captive insurance company (f) (0.12) (0.02) (0.16) (0.05)

GAAP earnings (loss) per diluted share attributable to Quaker Chemical Corporation common shareholders $ 1.75 $ 1.81 $ (1.32) $ 5.70

Equity income in a captive insurance company (g) (0.10) (0.02) (0.25) (0.07)

Acquisition-related step-up inventory amortization (a) — — 0.25 —

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Acquisition-related expenses (c) 0.02 0.02 0.21 0.04

Gain on inventory and other adjustments (d) (0.16) — (0.16) —

Customer insolvency costs (h) — — — 0.06

Impairment charges (l) 4.91 — 4.91 —

Product liability claim costs, net (i) — — — 0.04

Currency conversion impacts of hyper-inflationary economies (g) 0.04 0.03 0.07 (0.02)

(Gain) loss on acquisition-related hedges (j) (0.02) — 0.06 —

Gain on sale of assets (k) (0.02) — (0.11) —

Other charges (e) 0.06 0.03 0.08 0.06

Discrete tax items (m) 0.05 0.13 0.13 0.13

Acquisition-related depreciation and amortization (n) 0.07 — 0.07 —

Non-GAAP earnings per diluted share (r) $ 1.71 $ 2.13 $ 3.29 $ 4.22

Loss (gain) on inventory and other adjustments (d) 0.02 — (0.14) —

Pension and postretirement benefit costs, non-service components (e) 0.02 0.02 0.06 0.06

Customer insolvency costs (i) — — — 0.06

Impairment charges (n) — — 4.91 —

Product liability claim costs, net (j) — — — 0.04

Business interruption insurance proceeds (k) — (0.04) — (0.04)

Currency conversion impacts of hyper-inflationary economies (h) 0.05 0.04 0.12 0.02

Loss on acquisition-related hedges (l) — — 0.06 —

Gain on sale of assets (m) — — (0.11) —

Multiemployer plan withdrawal charge (o) 0.04 — 0.04 —

Brazilian non-income tax credits (p) (0.08) — (0.08) —

Other charges (credits) (f) 0.02 (0.03) 0.07 (0.01)

Discrete tax items (q) (0.02) (0.02) 0.11 0.11

Acquisition-related depreciation and amortization (r) 0.06 — 0.13 —

Non-GAAP earnings per diluted share (v) $ 2.08 $ 1.89 $ 5.37 $ 6.11

(a) Acquisition-related step-up inventory amortization represents the amortization of the fair value step-up in Dipsol’s inventories as a result of the acquisition which is recorded within Cost of goods sold in the Company’s Condensed Consolidated Statements of Operations.

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

(d) Gain on inventory and other adjustments represents immaterial out-of-period adjustments for inventory and other items and is recorded within Cost of goods sold and SG&A in the Company’s Condensed Consolidated Statements of Operations.

(e) Other charges include professional fees incurred in connection with tax audits, the non-service components of pension expense, certain consultant and advisory expenses for the Company’s long-term strategic planning and other items.

(d) Loss (gain) on inventory and other adjustments represents immaterial out-of-period adjustments for inventory and other items and is recorded within Cost of goods sold and SG&A in the Company’s Condensed Consolidated Statements of Operations.

(e) Pension and postretirement benefit costs, non-service components represents the pre-tax, non-service components of the Company’s pension and postretirement net periodic benefit cost in each period.

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

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

(f) Other charges (credits) include professional fees incurred in connection with tax audits, certain consultant and advisory expenses for the Company’s long-term strategic planning, and other items.

(g) 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.

(g) 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 six months ended June 30, 2025 and 2024.

(h) 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, 2025 and 2024.

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

(h) 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.

(i) 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 six months ended June 30, 2024.

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

Quaker Chemical Corporation

Management’s Discussion and Analysis

(j) (Gain) loss on acquisition-related hedges represents the mark-to-market and settlement 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.

(i) 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.

(j) Product liability claim costs, net represents an expense related to the payment by the Company in connection with a product liability dispute with a customer, net of insurance recoveries.

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

(k) 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, Commitments and Contingencies, to the Condensed Consolidated Financial Statements for additional information.

(l) Loss on acquisition-related hedges represents the mark-to-market and settlement 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.

(k) Gain on sale of assets represents the gain recognized on the sale of certain property previously classified as held for sale and gain on sale of other assets that are not considered core to the Company’s operations.

(m) Gain on sale of assets represents the gain recognized on the sale of certain property previously classified as held for sale and gain on sale of other assets that are not considered core to the Company’s operations.

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

(l) Impairment charges represents the non-cash charge taken to write down the remaining carrying value of goodwill in the EMEA reportable segment.

(n) Impairment charges represents the non-cash charge taken to write down the remaining carrying value of goodwill in the EMEA reportable segment during the second quarter of 2025.

See Note 13, Goodwill and Other Intangible Assets, to the Condensed Consolidated Financial Statements for additional information.

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

(o) Multiemployer plan withdrawal charge represents the expense related to the Company withdrawing from the Cleveland Bakers and Teamsters Pension Fund, a multiemployer defined benefit pension plan, in connection with a site closure under the Company’s restructuring program and facility closure actions.

See Note 7 , Restructuring and Related Activities, and Note 10, Other (expense) income, net , to the Condensed Consolidated Financial Statements for additional information.

(p) Brazilian non-income tax credits represents indirect tax credits and interest related to the Brazil Supreme Court ruling in regard to certain non-income (indirect) taxes that have been previously charged and paid.

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

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

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

(n) Acquisition-related depreciation and amortization represents amortization expense recorded for definite-lived intangible assets in connection with the Dipsol and Natech acquisitions and depreciation expense recorded in connection with the fair value step-up of Dipsol’s property, plant, and equipment.

(r) Acquisition-related depreciation and amortization represents amortization expense recorded for definite-lived intangible assets in connection with the Dipsol and Natech acquisitions and depreciation expense recorded in connection with the fair value step-up of Dipsol’s property, plant, and equipment.

See Note 2, Business Acquisitions , and Note 13, Goodwill and Other Intangible Assets , for more information.

(o) Depreciation and amortization for the three and six months ended June 30, 2025 and 2024 each includes approximately $0.2 million and $0.5 million, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations.

(s) Depreciation and amortization for the three and nine months ended September 30, 2025 and 2024 each includes approximately $0.2 million and $0.7 million, respectively, of amortization expense recorded within equity in net income of associated companies in the Company’s Condensed Consolidated Statements of Operations.

This 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.

(p) 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.

This caption also includes the impact of specific tax charges and benefits for the three and six months ended June 30, 2025 and 2024.

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

(r) 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”.

(t) 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.

This caption also includes the impact of specific tax charges and benefits for the three and nine months ended September 30, 2025 and 2024.

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

(v) 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 June 30, 2025 include approximately $7 million of bank letters of credit and guarantees.

The Company’s off-balance sheet items outstanding as of September 30, 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.

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• 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;

• the potential timing, impacts, benefits and other uncertainties of acquisitions and divestitures, including our ability to finance any acquisition on commercially reasonable terms or 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;

28 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