Quaker Houghton

Greetings. Welcome to Quaker Houghton's fourth quarter 2025 results conference call. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to John Dollof, Investor Relations. Thank you, Mr. Dollof. You may begin.

Thank you. Good morning. And welcome to Quaker Houghton's fourth quarter and full year 2025 earnings conference call. Joining us on the call today are Joe Berquist, our President and Chief Executive Officer, Tom Kohler, our Executive Vice President and Chief Financial Officer, and Robert Traub, our General Counsel. Our comments relate to the financial information released after the close of the U.S. markets yesterday, February 23, 2026. Our press release and accompanying slides can be found on our investor relations website. Both the prepared commentary and the discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on Quaker Houghton's operating and financial performance. These statements involve uncertainties and risks, which may cause actual results to differ. The company is under no obligation to provide subsequent updates to these forward-looking statements. This presentation also contains certain non-GAAP financial measures, and the company has provided reconciliations to the most directly comparable GAAP financial measures in the appendix of the presentation materials, which are available on our website. For additional information, please refer to our filings with the SEC. Now, it's my pleasure to hand the call over to Joe.

Thank you, John, and good morning, everyone. I'm pleased with our fourth quarter results, which resulted in our second consecutive quarter of year-over-year EBITDA improvement. Adjusted EBITDA was up 11%, and adjusted earnings per share increased 24% compared to the prior year. Our results were driven by new business wins in all regions, highlighted by strong organic volume growth in the Asia Pacific region, where our planned strategic efforts continue to deliver consistently strong results. For the full year, net sales in Asia Pacific grew 13%, while organic volume grew 5% despite persistent soft market conditions, demonstrating how our go-to-market approach and expansion of capabilities in the region are driving growth. Market conditions in the Americas and EMEA remain soft, as uncertainty from tariffs and extended customer outage in North America and seasonal impacts affected us in the fourth quarter. Despite the challenging environment, our total organic volume was down less than 1% versus the prior year, but would have been flat if not for some operational challenges that occurred in our U.S. plants in December. Net share gains of approximately 4% mitigated the soft market and collective headwinds we experienced in the quarter, and we achieved slight organic volume growth for the full year. Gross profit increased by 6% compared to the prior year quarter. Gross margin percentage was flat with some variation in regional mix. Our EMEA region gross margins improved by 280 basis points due to favorable price mix and lower raw material costs. And Asia Pacific had margin growth on an organic basis. This favorability was offset by negative impacts from absorption along with higher maintenance repairs and raw material disposal costs in North America. Sequentially, gross margins were down 150 basis points compared to the third quarter, but our product margins remained steady globally. Raw material costs stabilized in the latter part of the year, and we were able to successfully implement targeted price increases in parts of Asia Pacific in the fourth quarter. The company generated $47 million in operating cash flow in the fourth quarter, down from $63 million in the prior year period due to higher restructuring costs and negative impacts to working capital. For the full year, we generated $136 million in operating cash flow compared to $205 million in 2024. In addition to higher year-over-year restructuring charges of $29 million, the company made temporary increases to inventory in its EMEA segment in the fourth quarter. as we begin to execute network optimization actions in Europe. We recently announced the closure of our German manufacturing facility in Dortmund as part of a broader set of network initiatives. The volume from the Dortmund plant will be absorbed into existing excess capacity in our European network. We anticipate cost savings of approximately $2 million from this action in 2026, with annual ongoing cost savings of approximately $5 million beginning in 2027. The company also booked approximately $7 million of costs related to the assessment of multiple acquisition opportunities in the latter part of the year. We do not anticipate that the acquisition-related work will result in specific transactions at this time. Focusing on the quarter, our performance was in line with expectations, despite a persistently challenging economic environment. Year over year, organic volumes fell less than 1% but outpaced our major end markets, which declined by a low to mid single-digit percentage. Persistent tariff uncertainty continues to disrupt global trade flows and negatively influence our customers' operations. Net share gains, disciplined cost measures, and a positive contribution from recent acquisitions helped offset market weakness. Our acquisition of Dipsol, completed in the second quarter, continues to perform as expected, contributing $21 million to net sales in the fourth quarter. Organic sales volumes in Asia Pacific grew 4% in the quarter. This was the 10th consecutive quarter of year-over-year volume growth in that region. Asia Pacific growth offset organic volume decline in EMEA and the Americas, which was driven by overall market softness and an extended customer outage in North America. Lingering demand impacts from tariffs were compounded by weather-related operational challenges in December. We believe total company organic sales volumes would have been flat to the prior year in Q4 when adjusting for these factors. The company continues to execute cost-savings initiatives, which led to a 4% year-over-year decline on organic SG&A at constant currency. Total SG&A costs increased 4%, primarily due to the impact of acquisitions and foreign exchange. Our previously announced complexity and cost reduction plan generated approximately $25 million of run rate savings for the full year. We will continue to evaluate additional cost savings opportunities and execute in a prudent and disciplined manner toward continuously improving our EBITDA margins over the long term. We made progress reducing complexity and transforming our cost structure in 2025, but there is more work to be done. We have identified specific new initiatives that will streamline and harmonize our global business processes, enhance and further rationalize our global manufacturing network, and finish integration of past acquisitions. These foundational steps are already enabling better efficiency and more effective cross-selling across the portfolio. As we continue to sharpen and refresh our core portfolio of products and services, we have also begun to consolidate and strengthen our product brands across the organization. Our balance sheet is strong. It gives us flexibility to continue to evaluate acquisitions that could expand our offering, increase our total addressable market, enhance innovation, add new capabilities, and provide access to new customers and geographies. We completed three acquisitions in 2025, adding approximately $95 million of annualized revenue. We will continue to evaluate strategic acquisitions in a disciplined manner as M&A remains a core tenant of our capital allocation strategy that prioritizes investments for growth. Quaker Houghton continues to demonstrate operating resilience. Since 2020, we have weathered the COVID-19 pandemic a global supply chain crisis, uncertainty due to tariffs, and ongoing geopolitical instability. Our markets have not returned to pre-COVID operating levels, yet we have delivered profitable growth and are well positioned to sustain that momentum. As our underlying markets stabilize and improve, we will accelerate future growth by unlocking the leverage and strength that is inherent in our companies. The cost actions we have taken over the past few years have positioned the company to strategically invest in our global team of technical experts, driving innovation and new capabilities. Quaker Houghton is poised to build upon our well-known reputation of differentiated customer service as we continue to evolve into an even more responsive, nimble, and efficient company. We are excited about the strong momentum we have created in Asia Pacific, where our intentional focus on high growth markets and key market segments is paying off. Notably, we are winning with new metalworking customers and growing our share in the electric vehicle OEM and component sector. We have taken steps to proportionally scale our organization to achieve sustainable growth in Asia Pacific and will open a new manufacturing facility in China later this year. Our investments in emerging markets like China, India, ASEAN and Africa demonstrates our commitment to serving customers locally while delivering the full capabilities we have built as a leading process fluid and service provider to industrial manufacturing companies in the world. I am optimistic as we head into 2026 and excited about our momentum. In the past year, we have made substantial progress strengthening and stabilizing our customer intimate sales and service capabilities. Our service intensive approach is clearly working. Our sales growth was bolstered by innovative progress achieved in the development of our fluid intelligence capabilities. Fluid intelligence is an evolution and enhancement of Quaker Houghton's service offering, empowered by new and innovative measurement, automation, and digital tools. Our fluid intelligence offering is amplifying the impact of our technical teams and enabling customers to gain insights to optimize how our fluids perform. Looking forward, our external markets are not expected to improve in the near future. We anticipate underlying markets to remain flat in 2026 with the potential for some incremental growth in the second half of the year. We remain confident in our ability to deliver net share gains within our target range of 2% to 4% as we execute our sales pipeline, benefit from the wrap of new business wins gained in 2025, and gain the full year impact of acquisitions, primarily DIFSOL, in our results. Our visibility into the sales pipeline and our recent history give us confidence that we will continue to win new business at rates that exceed underlying market growth. Our business foundation remains strong as we move into 2026. We do not expect operational issues that occurred in the fourth quarter in North America to carry into the first quarter. Raw material costs are expected to remain steady in the first part of the year, and we anticipate gross margin percentage will be within our targeted range of 36 to 37 percent for the full year. We will deliver positive share gains and organic growth in all our segments in 2026. On the cost side, variable compensation and inflation will result in higher SG&A year over year. We plan to partially offset this by continuing to execute transformational initiatives and making improvements to our cost structure to support our long-term goal of sustaining EBITDA margins above 18%. This journey has begun already and we expect modest investment and careful planning will be required to fully reach our profitability margin target in the next few years. We anticipate our third consecutive quarter of year-over-year EBITDA improvement in the first quarter of 2026, which will come from share gains, gross margin improvement, and run rate impact of acquisitions. For the full year, We expect to improve top-line performance, leading to year-over-year adjusted EBITDA growth. I am proud of what we have accomplished and grateful for the contributions our approximately 4,700 global employees deliver to our customers and Quakerhouten's many stakeholders. Our people remain our greatest asset, and their unwavering commitment to serving our customers continues to drive our success. Even in challenging economic times, we stay grounded in our core values and demonstrate our dedication to the communities in which we operate. Reflected in recognition, we received being named one of America's most responsible companies in 2025. We will continue to move forward together and are committed to driving growth and long-term value for our customers and shareholders. With that, I would like to pass it to Tom to discuss the financials in more detail.