QUAKER HOUGHTON ANNOUNCES THIRD QUARTER 2024 RESULTS
Q3'24 net sales of $462.3 million, net income of $32.3 million and earnings per diluted share of $1.81
Q3'24 non-GAAP net income of $34.0 million and non-GAAP earnings per diluted share of $1.89
Delivered adjusted EBITDA and adjusted EBITDA margins of $78.6 million and 17.0% respectively in Q3'24
Generated $141.5 million of operating cash flow YTD; Net leverage ratio of 1.6x
CONSHOHOCKEN, Pa., Oct. 31, 2024 /PRNewswire/ -- Quaker Houghton ("the Company") (NYSE:KWR), the global leader in industrial process fluids, announced its third quarter 2024 results today.
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
($ in thousands, except per share data)
2024
2023
2024
2023
Net sales
$ 462,274
$ 490,612
$ 1,395,600
$ 1,486,204
Net income attributable to Quaker Chemical Corporation
32,346
33,670
102,458
92,550
Net income attributable to Quaker Chemical Corporation common shareholders, diluted
1.81
1.87
5.70
5.14
Non-GAAP net income *
33,981
36,928
109,886
105,694
Non-GAAP Earnings per diluted share *
1.89
2.05
6.11
5.87
Adjusted EBITDA *
78,562
84,381
246,135
243,414
* Refer to the Non-GAAP Measures and Reconciliations section below for additional information
Third Quarter 2024 Consolidated Results
Net sales in the third quarter of 2024 were $462.3 million, a decline of approximately 6% compared to $490.6 million in the third quarter of 2023. This result was due to a decrease in selling price and product mix of approximately 4%, which is primarily attributable to the impact of index based customer contracts, a decline in sales volumes of approximately 1% primarily reflecting a continuation of soft end market conditions, partially offset by new business wins, and an unfavorable impact from foreign currency translation of 1%.
The Company reported net income in the third quarter of 2024 of $32.3 million, or $1.81 per diluted share, compared to net income of $33.7 million, or $1.87 per diluted share, in the third quarter of 2023. Excluding non-recurring and non-core items in each period, the Company's non-GAAP net income and earnings per diluted share were $34.0 million and $1.89 respectively in the third quarter of 2024 compared to $36.9 million and $2.05 respectively in the prior year. The Company generated adjusted EBITDA of $78.6 million in the third quarter of 2024, a decrease of 7% compared to $84.4 million in the third quarter of 2023, primarily driven by the decline in net sales as mentioned above.
Andy Tometich, Chief Executive Officer and President, commented, "The third quarter once again highlighted the resilience of Quaker Houghton. While end market conditions softened compared to the second quarter of 2024, our volumes remained consistent, driven by new business wins across our portfolio. We continue to perform well on our financial and operational priorities. Our segment operating margins have improved year-to-date, as we simplify our portfolio, and remain disciplined with our costs and investments, balancing our long-term objectives with the near-term market environment.
"Looking ahead, we anticipate the current difficult market conditions will likely persist through the end of the year. Our focus remains on executing on what we can control, driving efficiencies and productivity for our Company and our customers. We are confident in the long-term positive fundamentals of the industry we serve and will further advance our enterprise strategy. Our investments will strengthen our ability to continue to deliver above market growth, especially as end markets recover. Additionally, our balance sheet and cash generation remain strong, providing avenues to accelerate our growth and enhance shareholder value."
Third Quarter 2024 Segment Results
The Company's third quarter 2024 operating performance for each of its three reportable segments: (i) Americas; (ii) EMEA; and (iii) Asia/Pacific, is further described below.
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
2024
2023
Net Sales *
Americas
$ 220,275
$ 245,899
$ 673,546
$ 750,531
EMEA
134,135
139,620
410,558
435,602
Asia/Pacific
107,864
105,093
311,496
300,071
Total net sales
$ 462,274
$ 490,612
$ 1,395,600
$ 1,486,204
Segment operating earnings *
Americas
$ 62,121
$ 69,148
$ 193,027
$ 204,280
EMEA
24,644
27,922
80,867
81,076
Asia/Pacific
30,656
30,963
92,033
86,604
Total segment operating earnings
$ 117,421
$ 128,033
$ 365,927
$ 371,960
* Refer to the Segment Measures and Reconciliations section below for additional information
Net sales in the Asia/Pacific segment increased in the third quarter of 2024 compared to the same period in 2023 due to an increase in sales volumes and a favorable impact of foreign currency translation, partially offset by a decline in selling price and product mix. Net sales in the Americas segment declined in the third quarter of 2024 compared to the same period in 2023 due to a decline in sales volumes and selling price and product mix, and an unfavorable impact of foreign currency translation. Net sales in the EMEA segment declined in the third quarter of 2024 compared to the same period in 2023 due to a decline in selling price and product mix, partially offset by an increase in sales volumes and a favorable impact of foreign currency translation.
The decline in selling price and product mix in the third quarter of 2024 compared to the same period in 2023 primarily reflects the impact of our index-based customer contracts. Sales volumes increased in the Asia/Pacific segment primarily due to continued new business wins and a modest improvement in market conditions. The Americas and EMEA segments continue to be impacted by a continuation of softer end market conditions, for metal and metalworking applications, compared to the prior year, partially offset by new business wins.
Compared to the second quarter of 2024, net sales in the Americas and EMEA segments declined due to lower sales volumes, reflecting continued and broad end market challenges, particularly for automotive and industrial applications. Net sales in the Asia/Pacific segment increased compared to the second quarter of 2024, primarily due to an increase in sales volumes, driven by new business wins, partially offset by a decline in selling price and product mix. The impact of foreign currency translation was favorable to the EMEA and Asia/Pacific segments and unfavorable in the Americas segment, compared to the prior quarter.
Operating earnings decreased in all segments in the third quarter of 2024 compared to the prior year. Segment operating margins increased in the Americas segment and declined in the EMEA and Asia/Pacific segments in the third quarter of 2024 compared to the prior year. Operating earnings and operating margins declined in all segments in the third quarter of 2024 compared to the second quarter of 2024.
Cash Flow and Liquidity Highlights
Net cash provided by operating activities was $141.5 million for the nine months ended September 30, 2024, compared to net cash provided by operating activities of $199.5 million for the same period in 2023. The Company's operating cash flow reflects higher outflows to fund ongoing working capital requirements.
As of September 30, 2024, the Company's total gross debt was $740.6 million and its cash and cash equivalents was $212.1 million, which resulted in net debt of approximately $528.6 million. The Company's net debt divided by its trailing twelve months adjusted EBITDA was approximately 1.6x. In the third quarter of 2024, the Company repurchased 89,088 shares for approximately $14.6 million and 138,000 shares for approximately $22.9 million in the nine months ended September 30, 2024.
Non-GAAP Measures and Reconciliations
The information included in this press release includes non-GAAP (unaudited) financial information that includes EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, taxes on income before equity in net income of associated companies, adjusted, non-GAAP net income and non-GAAP earnings per diluted share. The Company believes these non-GAAP financial measures provide meaningful supplemental information as they enhance a reader's understanding of the Company's financial performance and facilitate a comparison among fiscal periods, as the non-GAAP financial measures exclude items that are not indicative of future operating performance or not considered core to the Company's operations. Non-GAAP results are presented for supplemental informational purposes only and should not be considered a substitute for the financial information presented in accordance with GAAP. In addition, our definitions of EBITDA, adjusted EBITDA, adjusted EBITDA margin, non-GAAP operating income, non-GAAP operating margin, taxes on income before equity in net income of associated companies, adjusted, non-GAAP net income and non-GAAP earnings per diluted share as discussed and reconciled below to the most comparable respective GAAP measures, may not be comparable to similarly named measures reported by other companies.
The Company presents EBITDA which is calculated as net income attributable to the Company before depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies. The Company also presents adjusted EBITDA which is calculated as EBITDA plus or minus certain items that are not indicative of future operating performance or not considered core to the Company's operations. In addition, the Company presents non-GAAP operating income which is calculated as operating income plus or minus certain items that are not considered indicative of future operating performance or not considered core to the Company's operations. Adjusted EBITDA margin and non-GAAP operating margin are calculated as the percentage of adjusted EBITDA and non-GAAP operating income to consolidated net sales, respectively. The Company believes these non-GAAP measures provide transparent and useful information and are widely used by investors, analysts, and peers in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.
Additionally, the Company presents non-GAAP net income and non-GAAP earnings per diluted share as additional performance measures. Non-GAAP net income is calculated as adjusted EBITDA, defined above, less depreciation and amortization, interest expense, net, and taxes on income before equity in net income of associated companies, in each case adjusted, as applicable, for any depreciation, amortization, interest or tax impacts resulting from the non-core items identified in the reconciliation of net income attributable to the Company to adjusted EBITDA. Non-GAAP earnings per diluted share is calculated as non-GAAP net income per diluted share as accounted for under the "two-class share method." The Company believes that non-GAAP net income and non-GAAP earnings per diluted share provide transparent and useful information and are widely used by investors, analysts, and peers in our industry as well as by management in assessing the operating performance of the Company on a consistent basis.
As it relates to future projections for the Company as well as other forward-looking information contained in this press release, the Company has not provided guidance for comparable GAAP measures or a quantitative reconciliation of forward-looking non-GAAP financial measures to the most directly comparable U.S. GAAP measure because it is unable to determine with reasonable certainty the ultimate outcome of certain significant items necessary to calculate such measures without unreasonable effort. These items include, but are not limited to, certain non-recurring or non-core items the Company may record that could materially impact net income. These items are uncertain, depend on various factors, and could have a material impact on the U.S. GAAP reported results for the guidance period.
The Company's reference to trailing twelve months adjusted EBITDA within this press release refers to the twelve month period ended September 30, 2024 adjusted EBITDA of $323.1 million, which consists of (i) the nine months ended September 30, 2024 adjusted EBITDA of $246.1 million, as presented in the non-GAAP reconciliations below, and (ii) the twelve months ended December 31, 2023 adjusted EBITDA of $320.4 million, as presented in the non-GAAP reconciliations included in the Company's fourth quarter and full year 2023 results press release dated February 29, 2024, less (iii) the nine months ended September 30, 2023 adjusted EBITDA of $243.4 million, as presented in the non-GAAP reconciliations below.
Certain of the prior period non-GAAP financial measures presented in the following tables have been adjusted to conform with current period presentation. The following tables reconcile the Company's non-GAAP financial measures (unaudited) to their most directly comparable GAAP (unaudited) financial measures (dollars in thousands unless otherwise noted, except per share amounts):
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
Non-GAAP Operating Income and Margin Reconciliations:
2024
2023
2024
2023
Operating income
$ 51,718
$ 59,518
$ 165,693
$ 166,242
Restructuring and related charges, net
2,610
1,019
4,787
6,034
Strategic planning (credits) expenses
(181)
1,093
(290)
3,759
Customer insolvency costs
—
—
1,522
—
Other charges
43
206
1,535
855
Non-GAAP operating income
$ 54,190
$ 61,836
$ 173,247
$ 176,890
Non-GAAP operating margin (%)
11.7 %
12.6 %
12.4 %
11.9 %
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin andNon-GAAP Net Income Reconciliations:
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
