QUAKER CHEMICAL CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations . As used in this Report, the terms “Quaker Houghton,” the “Company,” “we” and “our” refer to Quaker Chemical Corporation (doing business as Quaker Houghton), its subsidiaries, and associated companies, unless the context otherwise requires. Executive Summary Quaker Houghton is the global leader in industrial process fluids. With a presence around the world, including operations in over 25 countries, our customers include thousands of the world’s most advanced and specialized steel, aluminum, automotive, aerospace, offshore, container, mining, and metalworking companies. Our high-performing, innovative and sustainable solutions are backed by best-in-class technology, deep process knowledge, and customized services. Quaker Houghton is headquartered in Conshohocken, Pennsylvania, located near Philadelphia in the U.S. Net sales in the first quarter of 2026 were $480.5 million , an increase of 8% co m pared to $442.9 million in the first quarter of 2025. This increase was primarily driven by an increase in organic volumes of approximately 3%, a contribution from acquisitions of approximately 4%, and a favorable impact from foreign currency translation of approximately 4%, partially offset by a decline in selling price and product mix of approximately 3%. 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, particularly in the Americas and EMEA segments, including the uncertainty caused by the macroeconomic environment. 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 net income in the first quarter of 2026 of $19.7 million, or $1.13 earnin gs per diluted share, compared to $12.9 million, or $0.73 earnings per diluted share in the first quarter of 2025. Excluding non-recurring and non-core items in each period, the Company’s first quarter 2026 non-GAAP ne t income and earnings per diluted share were $28.4 million and $1.63 compared to $28.0 million and $1.58, respectively, in the prior year. The increase in current quarter Non-GAAP earnings was primarily driven by an increase in net sales and improved gross margins, partially offset by an increase in selling, general and administrative expenses (“SG&A”). The Company’s current quarter adjusted EBITDA was $72.5 million compared to $69.0 million in the first quarter of 2025, primarily driven by the increase in net sales, partially offset by lower operating margins. See the Non-GAAP Measures and Consolidated Operations Review sections of this Item below for additional details. The Company’s first quarter 2026 operating performance in each of its three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific, reflects similar drivers to that of the Company’s consolidated performance. Operating earnings for the EMEA and Asia/Pacific segments increased compared to the prior year quarter, primarily due to an increase in net sales and an improvement in segment gross margins, partially offset by higher SG&A. Operating earnings for the Americas segment decreased primarily due to lower segment gross margins and higher SG&A. 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 $3.8 million in the first three months of 2026 compared to $3.1 million of net cash flows used in operating activities the first three months of 2025. The higher operating cash inflow year-over-year reflects improved operating performance and lower cash outflows from restructuring activities and working capital in the first three months of 2026 compared to the first three months of 2025. 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 first quarter of 2026 reflect an increase in net sales in all segments, driven by acquisitions and 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. Recent geopolitical developments, including the escalation of the military conflict involving Iran, have increased uncertainty in the Middle East and global markets. While we do not have direct operations in Iran, our business is exposed to the current disruptions to international shipping routes, supply chain delays, and increased raw material and transportation costs. Additionally, volatility in global energy prices resulting from the conflict may impact our operating expenses and margins. In addition, the potential imposition of new or expanded sanctions against Iran or entities doing business in the region could restrict our ability to transact with certain partners and may require us to undertake additional compliance measures, review our contractual arrangements, or incur higher costs to ensure adherence to applicable laws. We are actively monitoring the situation and have implemented contingency plans, including raising our selling prices to cover higher raw material costs and increasing inventory levels where feasible. At this time, the conflict has not had a material impact on our financial results; however, due to the unpredictable nature and scope of the conflict, we cannot guarantee that future developments will not materially affect our business, operations, or financial condition. 24 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. The OBBB includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. Among other things, the legislation restores 100% bonus depreciation for eligible property, reinstates expensing for domestic research and experimental expenditures, imposes new limitations on interest expense deductibility, and expands disallowed deductions for certain employee remuneration. The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions implemented in 2026 and 2027 forward. The provisions effective in 2025 did not have a material impact to our consolidated financial statements, and the provisions effective in 2026 and 2027 are not expected to have a material impact to our consolidated financial statements. 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 2025 Form 10-K. There have been no material changes to the critical accounting policies and estimates disclosed in the 2025 Form 10-K. Recently Issued Accounting Standards 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. Liquidity and Capital Resources We had cash and cash equivalents of $169.7 million and $179.8 million as of March 31, 2026 and December 31, 2025, respectively. Cash held by subsidiaries in foreign countries was approximately $162.5 million and $171.4 million at March 31, 2026 and December 31, 2025, respectively. The $10.1 million decrease in cash and cash equivalents was the net result of $9.5 million of cas h used in investing activities , $3.4 million of cash used in financing activi ties, and a $0.9 million unfavorable impact of foreign currency translation, partially offset b y $3.8 million of cash provided by operating activities. Net cash flows provided by operating activities were $3.8 million in the first three months of 2026 compared to net cash flows used in operating activities of $3.1 million in the first three months of 2025. The increase in net operating cash flow year-over-year reflects improved operating performance, lower outflows from restructuring activities, and lower net cash outflows from working capital. The lower net cash outflows from working capital were primarily due to higher inflows from the timing of payments of accounts payable. This is partially offset by higher net cash outflows from accounts receivable due to an increase in net sales and timing of collections and higher net cash outflows for the purchases of inventory due to higher working capital needs including strategic inventory builds at production sites in advance of planned manufacturing transitions and in response to global supply chain risks in connection with the conflict in the Middle East. Net c ash flows used in investing activities were $9.5 million in the first three months of 2026 compared to $13.4 million in the first three months of 2025. The decrease in cash used in investing activities year-over-year is primarily the result of $4.0 million of payments, net of cash acquired, in the prior year related to the acquisition of Chemical Solutions & Innovations (Pty) Ltd, and a $1.7 million decrease in payments related to capital expenditures. This is partially offset by $2.9 million proceeds from asset dispositions in the prior year. See Note 2, Business Acquisitions , to the Condensed Consolidated Financial Statements for further information about business acquisitions. Net cash flows used in financing activities were $3.4 million in the first three months of 2026 compared to $11.0 million cash provided by financing activities in the first three months of 2025. The decrease in finan cing cash inflows is primarily driven by a $15.9 million decrease of net borrowings on the Company’s revolving credit facility in the first three months of 2026 compared to the prior year. This is partially offset by a $2.4 million increase of borrowings of other debt in the first three months of 2026 compared to the prior year. 25 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis 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. The amended credit facility (the “Credit Facility”) established (A) a $150.0 million Euro equivalent senior secured term loan (the “Euro Term Loan”), (B) a $600.0 million senior secured term loan (the “U.S. Term Loan”), and (C) a $500.0 million senior secured revolving credit facility (the “Revolver”), each maturing in June 2027. The Company has the right to increase the amount of the Credit Facility by an aggregate amount not to exceed the greater of $300.0 million or 100% of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase. The Credit Facility contains affirmative and negative covenants, financial covenants and events of default. Financial covenants contained in the Credit Facility include a consolidated interest coverage ratio test and a consolidated net leverage ratio test. As of March 31, 2026, 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 2025 Form 10-K. Subsequent to the first quarter of 2026, in April 2026, 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 the fourth amendment to its primary credit facility, entered into in August 2019. The amended credit facility (the “Amended Credit Facility”) established (A) a $250.0 million Euro equivalent senior secured term loan (B) a $550.0 million senior secured term loan and (C) a $800.0 million senior secured revolving credit facility, each maturing in April 2031. The Company primarily used the proceeds from the Amended Credit Facility to repay in full all outstanding loans under the existing Credit Facility and to terminate the revolving credit commitments under the existing Credit Facility. The Company has the right to increase the amount of the Amended Credit Facility by an aggregate amount not to exceed (a) the greater of (i) $331.0 million and (ii) 100% of Consolidated EBITDA, subject to certain conditions including the agreement to provide financing by any lender providing such increase. As o f March 31, 2026 and December 31, 2025, the Company had Credit Facility borrowings outstanding of $861.8 million and $859.7 million, respectively. The Company’s other debt obligations are primarily industrial development bonds, bank lines of credit and municipality-related loans, which totaled $13.2 million and $11.5 million as of March 31, 2026 and December 31, 2025. Total unused capacity under these arrangements, excluding the Credit Facility, as of March 31, 2026 was approximately $58 million. The Company’s total net debt as of March 31, 2026, which consists of total borrowings of $875.0 million less cash and cash equivalents of $169.7 million, was approximately $705.3 million. The weighted average variable interest rate incurred on the outstanding borrowings under the Credit Facility during the three months ended March 31, 2026 was approximately 4.8%. As of March 31, 2026, the weighted average variable interest rate on the outstanding borrowings under the Credit Facility was approximately 4.7%. 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. As of March 31, 2026, the Company had unused capacity under the Revolver of approximately $255 million, which is net of bank letters of credit of approximately $2 million. 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. In March 2026, the Company’s interest rate swap contracts expired. In April 2026, the Company entered into $400.0 million notional amounts of four-year interest rate swaps, converting a portion of the Company’s variable rate borrowings into an average fixed rate of 3.58% plus the applicable margin. 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 are amortized into Interest expense over the five-year term of the Credit Facility. As of March 31, 2026 and December 31, 2025, the Company had $0.5 million and $0.7 million, respectively, of debt issuance costs recorded as a reduction of Long-term debt and $1.2 million and $1.4 million, respectively, of debt issuance costs recorded within Other assets. 26 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis 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 . During the three months ended March 31, 2026, the Company entered into and settled forward contracts resulting in other income of $0.4 million as compared to $1.9 million other expense during the three months ended March 31, 2025. 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 settled on April 1, 2025 in connection with the Dipsol acquisition. During the three months ended March 31, 2025, the Company recognized a $1.9 million foreign currency loss in Other expense, net relating to changes in fair value of these instruments as of the settlement date. See Note 17, Hedging Activities , to the Condensed Consolidated Financial Statements for further information. In 2026, the Company initiated a global business transformation program (the “2026 program”), encompassing several strategic transformation and restructuring initiatives. The 2026 program primarily involves simplifying the organizational structure of legal entities, projects associated with information technology infrastructure initiatives, the optimization of specific product portfolios through targeted rationalization efforts, the optimization of certain supply chain activities and related workforce reductions. The 2026 program began in the first quarter of 2026 and is expected to be complete in 2028. The Company expects the program to generate at least $20 million to $30 million of annualized cost savings. The Company recognized restructuring and related charges and cash payments relating to the settlement of restructuring liabilities of $4.4 million and $1.0 million during the three months ended March 31, 2026, respectively, under this program. The Company expects total one-time cash costs of this program to be approximately 1 to 1.5 times annualized savings. During 2022, the Company initiated a global cost and optimization program (the “2022 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. During 2025, the Company approved additional actions under the 2022 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 $3.0 million and $14.6 million for the three months ended March 31, 2026 and 2025, respectively, under this program. The Company made cash payments related to the settlement of restructuring liabilities under the 2022 program during the first three months of 2026 of approximately $2.9 million compared to $9.0 million in the first three months of 2025. 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. A s of March 31, 2026, the Company’s gross liability for uncertain tax positions, including interest and penalties, was $15.7 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 u p to $7.5 million as a result of offsetting benefits in other tax jurisdictions. As previously disclosed, the Board of Directors of the Company has 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 did not make any purchases under the 2024 Share Repurchase Program during the three months ended March 31, 2026. 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 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 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. 27 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis Operations Consolidated Operations Review – Comparison of the First Quarter of 2026 with the First Quarter of 2025 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 (2) % (1) % 1 % 2 % — % EMEA 2 % (4) % 10 % 2 % 10 % Asia/Pacific 10 % (2) % 3 % 14 % 25 % Consolidated 3 % (3) % 4 % 4 % 8 % Net sales in the first quarter of 2026 were $480.5 million , an increase of 8% co m pared to $442.9 million in the first quarter of 2025. This increase was primarily driven by an increase in organic volumes of approximately 3%, a contribution from acquisitions of approximately 4%, and a favorable impact from foreign currency translation of approximately 4%, partially offset by a decline in selling price and product mix of approximately 3%. 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, particularly in the Americas and EMEA segments, including the uncertainty caused by the macroeconomic environment. 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”) w as $303.7 million in the first quarter of 2026 compared to $281.7 million in the first quarter of 2025, an increase of approximately $22.0 million, or 8%. The increase in COGS reflects an increase in spend on the increase in current year sales volumes, partially offset by a slight decrease in global raw material costs. Gross profit wa s $176.7 million in the first quarter of 2026 compared to $161.3 million in the first quarter of 2025, an increase of $15.4 million, or 10% primarily due to an increase in sales and a slight decrease in raw material costs. The Com pany’s reported gross margin in the first quarter of 2026 w as 36.8% compa red to 36.4% in the first quarter of 2025. SG&A expense was $135.8 million in the first quarter of 2026 compared to $119.0 million in the first quarter of 2025, an increase of approximately $16.8 million, or 14%, primarily driven by an increase in SG&A expenses related to acquisitions, an increase in incentive compensation, and unfavorable impacts from foreign currency translation. The Company incurred Restructuring and related charges of $7.4 million and $14.6 million during the first quarter of 2026 and 2025, respectively, primarily related to a lower number of headcount reductions in the first quarter of 2026 compared to the first quarter of 2025 . See the Non-GAAP Measures section below and Note 7, Restructuring and Related Activities , to the Condensed Consolidated Financial Statements for additional information. Operating income in the first quarter of 2026 w as $33.6 million compared to $27.6 million in the first quarter of 2025. 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 $45.3 million in the first quarter of 2026 and $45.8 million in the first quarter of 2025. The slight decrease in non-GAAP operating income was primarily due to higher SG&A, partially offset by an increase in net sales and higher gross margins, as described above. The Company had Other expense, net of less than $0.1 million in the first quarter of 2026 as compared to Other expense, net of $0.7 million in the first quarter of 2025 . Both the first quarter of 2026 and 2025 included foreign exchange transaction losses, which were $2.8 million higher in the prior year. The prior year also included other income from net gain on disposals of property of $2.1 million. Interest expense was $9.9 million in the first quarter of 2026 compared to $9.5 million in the first quarter of 2025, an increase of approximately $0.4 million, primarily as a result of higher outstanding borrowings, partially offset by decreases in interest rates. 28 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis The Company’s effective tax rates for the first quarters of 2026 and 2025 were 30.2% and 43.4%, respectively. The Company’s effective tax rate for the first quarter of 2026 was largely driven b y our mix of pre-tax earnings and withholding taxes. Comparatively, the 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. 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 first quarters of 2026 and 2025 would have been appro ximately 28% and 29%, respe ctively. 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 $3.2 million in the first quarter of 2026 compared to $3.1 million in the first quarter of 2025, an increase of $0.1 million, primarily due to recognizing earnings from SKT, a 30% equity method investment the Company acquired as part of the Dipsol acquisition. Net income attributable to noncontrolling interest was less than $0.1 million in the first quarter of 2026 and 2025. Reportable Segments Review - Comparison of the First Quarter of 2026 with the First Quarter of 2025 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; (ii) EMEA; 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 segment items. 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 expense, net. Americas Americas represented approximately 44% of the Company’s consolidated net sales in the first quarter of 2026. This segment’s net sales were $213.7 million, which was consistent compared to the first quarter of 2025. This was driven by an increase in net sales from the acquisition of Dipsol of approximately 2%, a favorable foreign exchange impact of 1%, partially offset by a decrease in organic sales volumes of approximately 2% and a decrease in selling price and product mix of approximately 1%. The favorable foreign exchange impact was primarily due to the weakening of the U.S. dollar against the Mexican peso and Brazilian real. Sales volumes declined compared to the prior year due to a continuation of soft end market conditions further impacted by the uncertainty of the macroeconomic environment, partially offset by new business wins. 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 $53.9 million, a decrease of $4.5 million, or 8%, compared to the first quarter of 2025, primarily driven by lower segment margins and higher SG&A. EMEA EMEA represented approximate ly 30% of the Company’s consolidated net sales in the first quarter of 2026. This segment’s net sales were $142.1 million, an increase of $12.8 million, or 10%, compared to the first quarter of 2025. This was driven by an increase in organic sales volumes of approximately 2%, an increase in net sales from the acquisitions of Dipsol and Natech of approximately 2%, and a favorable impact from foreign currency translation of approximately 10%, partially offset by a decrease in selling price and product mix of approximately 4%. 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 the macroeconomic environment. 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 $25.6 million, an increase of $2.2 million, or 9%, compared to the first quarter of 2025, primarily due to an increase in net sales and an improvement in segment gross margins, partially offset by higher SG&A. 29 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis Asia/Pacific Asia/Pacific represented approximately 26% of the Company’s consolidated net sales in the first quarter of 2026. This segment’s net sales were $124.7 million, an increase of $24.7 million, or 25%, compared to the first quarter of 2025. This was driven by an increase in net sales from the acquisition of Dipsol of approximately 14%, an increase in organic sales volumes of approximately 10%, and a favorable impact from foreign currency translation of approximately 3%, partially offset by a decrease in selling price and product mix of approximately 2%. 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. Segment operating earnings were $34.3 million, an increase of $8.3 million, or 32%, compared to the first quarter of 2025, primarily due to an increase in net sales and an improvement in segment gross margins, partially offset by higher SG&A. Non-GAAP Measures The information in this Form 10-Q includes non-GAAP (unaudited) 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 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 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. 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 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 analysts, investors, and competitors in our industry as well as by management in assessing the operating performance of the Company on a consistent basis. Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures. Non-GAAP net income is calculated as adjusted EBITDA, defined above, less depreciation and amortization, interest expense, and taxes on income before equity in net income of associated companies, in each case adjusted, as applicable, for any depreciation, amortization, interest or tax impacts resulting from the non-core items identified in the reconciliation of net income attributable to the Company to adjusted EBITDA. Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the “two-class share method.” The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by analysts, investors, and competitors in our industry as well as by management in assessing the performance of the Company on a consistent basis. Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation. The following tables reconcile the Company’s non-GAAP financial measures (unaudited) to their most directly comparable GAAP (unaudited) financial measures (dollars in thousands unless otherwise noted, except per share amounts): 30 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis Non-GAAP Operating Income and Margin Reconciliations Three Months Ended March 31, 2026 2025 Operating income $ 33,589 $ 27,624 Restructuring and related charges, net (a) 7,381 14,590 Acquisition-related expenses (b) 715 3,329 Business transformation costs (c) 1,659 — Acquisition-related depreciation and amortization (k) 1,608 — Other charges (e) 397 226 Non-GAAP operating income $ 45,349 $ 45,769 Non-GAAP operating margin (%) (n) 9.4 % 10.3 % EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin and Non-GAAP Net Income Reconciliations Three Months Ended March 31, 2026 2025 Net income attributable to Quaker Chemical Corporation $ 19,669 $ 12,922 Depreciation and amortization (l) 25,870 20,830 Interest expense 9,879 9,545 Taxes on income before equity in net income of associated companies (m) 7,145 7,542 EBITDA 62,563 50,839 Equity income in a captive insurance company (f) (607) (671) Restructuring and related charges, net (a) 7,381 14,590 Acquisition-related expenses (b) 715 3,329 Business transformation costs (c) 1,659 — Pension and postretirement benefit costs, non-service components (d) 251 433 Currency conversion impacts of hyper-inflationary economies (g) 171 535 Loss on acquisition-related hedges (h) — 1,943 Gain on sale of assets (i) — (2,177) Other charges (e) 397 226 Adjusted EBITDA $ 72,530 $ 69,047 Adjusted EBITDA margin (%) (n) 15.1 % 15.6 % Adjusted EBITDA $ 72,530 $ 69,047 Less: Depreciation and amortization (l) 25,870 20,830 Less: Interest expense 9,879 9,545 Less: Taxes on income before equity in net income of associated companies - adjusted (m) 10,015 10,644 Plus: Acquisition-related depreciation and amortization (k) 1,608 — Non-GAAP net income $ 28,374 $ 28,028 31 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis Non-GAAP Earnings per Diluted Share Reconciliations Three Months Ended March 31, 2026 2025 GAAP earnings per diluted share attributable to Quaker Chemical Corporation common shareholders $ 1.13 $ 0.73 Equity income in a captive insurance company (f) (0.03) (0.04) Restructuring and related charges, net (a) 0.32 0.62 Acquisition-related expenses (b) 0.03 0.14 Business transformation costs (c) 0.07 — Pension and postretirement benefit costs, non-service components (d) 0.01 0.02 Currency conversion impacts of hyper-inflationary economies (g) 0.01 0.03 Loss on acquisition-related hedges (h) — 0.08 Gain on sale of assets (i) — (0.09) Other charges (e) 0.01 0.01 Discrete tax items (j) 0.02 0.08 Acquisition-related depreciation and amortization (k) 0.06 — Non-GAAP earnings per diluted share (o) $ 1.63 $ 1.58 (a) Restructuring and related charges, net represent the costs incurred by the Company associated with the Company’s restructuring programs and facility closure actions. 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) Business transformation costs represent non-recurring expenses associated with the Company’s global business transformation program which was initiated in 2026. These costs generally relate to one-time third-party consulting costs relating to simplifying the organizational structure of legal entities, projects associated with information technology infrastructure initiatives, the optimization of specific product portfolios through targeted rationalization efforts, and the optimization of certain supply chain activities. See Note 7, Restructuring and Related Activities, to the Condensed Consolidated Financial Statements for additional information. (d) 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, net, to the Condensed Consolidated Financial Statements for additional information. (e) Other charges 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. (f) 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. GAAP. These pre-tax foreign currency remeasurement impacts are not deductible for tax purposes for both the three months ended March 31, 2026 and 2025. The charges incurred relate to the immediate recognition of foreign currency remeasurement in the Condensed Consolidated Statements of Operations. (h) 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. (i) Gain on sale of assets represents the gain recognized on the sale of certain property previously classified as held for sale. 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. 32 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis (k) 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. (l) Depreciation and amortization for the three months ended March 31, 2026 and 2025 each includes approximately $0.2 million 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. (m) 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 months ended March 31, 2026 and 2025. (n) 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. (o) 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 March 31, 2026 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. Factors That May Affect Our Future Results Certain information included in this Report and other materials filed or to be filed by us with the SEC, as well as information included in oral statements or other written statements made or to be made by us, contain or may contain forward-looking statements that fall under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and the Securities Act of 1933, as amended. 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. 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; expectations about future demand and raw material costs; and statements regarding the impact of increased raw material costs and pricing initiatives. 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 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 finance any acquisition on commercially reasonable terms or to realize synergies, integrate acquisitions and acquired businesses or separate divested assets and businesses; 33 Table of Contents Quaker Chemical Corporation Management’s Discussion and Analysis • 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; • U.S. 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; and • our future results and plans including our sustainability goals and enterprise strategy. 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, 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; significant changes in applicable tax rates and regulations and the potential impacts therefrom, including those arising from OBBB; 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, automotive, aerospace, industrial equipment, aluminum, and durable goods industries. Any or all of the forward-looking statements in this Report, in the Company’s 2025 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 Financial results, news and other information about Quaker Houghton can be accessed from the Company’s website at https://www.quakerhoughton.com. This site includes important information on the Company’s locations, products and services, financial reports, news releases and career opportunities. The Company’s periodic and current reports on Forms 10-K, 10-Q, 8-K, and other filings, including exhibits and supplemental schedules filed therewith, and amendments to those reports, filed with the SEC are available on the Company’s website, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information contained on, or that may be accessed through, the Company’s website is not incorporated by reference in this Report and, accordingly, you should not consider that information part of this Report. 34 Table of Contents