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.

Thank you, Joe, and good morning, everyone. Fourth quarter net sales were $468 million, a 6% increase from the prior year. Organic volumes declined less than 1%, but were boosted by share gains across all regions. In the fourth quarter, total company share gains were approximately 4%. Acquisitions contributed an additional 6% to sales, primarily related to DIPSOL. Selling price and product mix were 1% lower than the prior year, consisting of impacts from both product, service, and geographic mix, as well as pricing, largely associated with indexes. Gross profit dollars increased year-over-year on a non-GAAP basis, while gross margin was 35.3%, compared to 35.2% in the fourth quarter of 2024. Product margins in the fourth quarter remained healthy in all geographies and increased year-over-year in both EMEA and Asia Pacific. Q4 2025 gross margin was impacted by seasonality and unfavorable manufacturing absorption, as well as higher maintenance, repairs, and raw material disposal costs in North America. On a non-GAAP basis, SG&A increased approximately $4 million, or 4%, in the fourth quarter compared to the prior year, mainly due to acquisitions and the impact of foreign currency. Excluding these items, organic SG&A was approximately 4% lower in the fourth quarter and 2% lower for the full year in 2025 as we effectively executed on our cost savings and optimization plans. We delivered $72 million of adjusted EBITDA in the fourth quarter, an increase of 11% compared to the prior year. Adjusted EBITDA margin of 15.3% improved 75 basis points year over year, but was lower than the prior quarters due to adverse impacts on gross margin in North America in Q4 of 2025. Switching now to our segment results, We continue to see strong positive momentum in our Asia-Pacific segment, which delivered its 10th consecutive quarter of organic volume growth and has now experienced organic net sales growth in nine of the last 10 quarters. New business wins continue to be the primary catalyst for this growth. Asia-Pacific sales in the fourth quarter increased 15% year over year as the impact of our acquisition of Dipsol complemented organic volume growth of 4%, partially offset by unfavorable price and mix. For the full year, sales increased 13% as the impact of our acquisition and a 5% increase in organic sales volume offset unfavorable price and mix. Segment earnings in Asia Pacific increased approximately $3 million, or 11%, in the fourth quarter compared to the prior year. This was driven by higher net sales partially offset by lower operating margin due to unfavorable impacts from product mix and service revenue. Fourth quarter net sales in the EMEA segment increased 7% year over year, despite continued market softness due to an increase in sales from our acquisitions, favorable selling price and product mix, and favorable foreign currency impacts. These items were partially offset by a 2% decline in organic sales volumes, which outpaced underlying market declines due to net share gains. Segment earnings in AMEA increased approximately $3 million, or 17%, in the fourth quarter compared to the prior year. This was the result of higher net sales and improved operating margin due to favorable pricing and product mix and lower raw material costs. Fourth quarter net sales in the Americas segment were flat to the prior year, as an increase in sales from acquisitions and favorable impact from foreign currency were offset by lower organic sales volumes. Net share gains in the region during the quarter were offset by overall market softness and specific factors, including the outage at a major North American metal producer, impacts from tariffs on demand, and several operational disruptions that delayed shipments in Q4. Segment earnings in the Americas were flat in the fourth quarter compared to the prior year, as slightly lower sales volumes were offset by higher operating margin. Turning to non-operating costs, our interest expense was $11 million in the fourth quarter, which was consistent with the prior quarter. Our cost of debt remained approximately 5% in the quarter. Our effective tax rate, excluding non-recurring and non-core items, was approximately 25% in the fourth quarter of 2025, while our full-year effective tax rate was in line with expectations at approximately 28%. The Q4 effective tax rate was lower than the full-year rate due to the timing of certain tax incentives related to our operations in China. In the fourth quarter, our GAAP diluted earnings per share were $1.18. and our non-GAAP diluted earnings per share were $1.65, a 24% increase year over year. For the full year, we had a GAAP diluted loss per share of $0.14, which included an $89 million non-cash goodwill impairment charge and $35 million of restructuring charges related to our cost savings program. Adjusting for these and other non-GAAP items, our full-year non-GAAP diluted earnings per share were $7.02. Cash generated from operations was $47 million in the fourth quarter and $136 million for the full year compared to $205 million for the full year in 2024. The primary drivers of lower cash generation compared to the prior year are higher net outflows from restructuring activities and an increase in working capital. The working capital increase was due to higher inventories related to operational issues in North America and the closure of our manufacturing facility in Dortmund, Germany, along with the timing of supplier payments and accrued liabilities in Q4. Capital expenditures were approximately $22 million in the fourth quarter, consistent with the prior year, and were $56 million for the full year. This represents an increase of approximately $14 million over the prior year, mainly due to the construction of our new facility in China, which is on track to begin operations in the second half of 2026. Capital expenditures are once again expected to be between 2.5% and 3.5% of sales in 2026. This includes continued investment in organic growth initiatives, along with the completion of our China production facility and moving our corporate headquarters and combining our R&D labs in a new location in the Philadelphia area. During the fourth quarter, we paid approximately $9 million in dividends and repurchased approximately $5 million of shares. For the full year, we returned $76 million to shareholders through $42 million of share repurchases and $34 million of dividend payments. which reflects our 16th consecutive year of increasing our annual dividend payout. Our balance sheet and liquidity remained strong. Our net debt at year end was $691 million, and we continued to lower our net leverage ratio following the DPSOL acquisition, steadily reducing it to 2.3 times our trailing 12 months adjusted EBITDA at the end of the year. We had another strong year in 2025. Despite continuing macroeconomic and geopolitical challenges, we continue to gain share and slightly increase organic sales volumes while executing on our cost savings actions. The three acquisitions that we closed during the year complemented our business results and continue to perform in line with expectations. We remain disciplined with our capital allocation strategy and will continue to return cash to shareholders and work towards reducing net leverage following last year's acquisitions. With that, I'll turn it back over to Joe.

Thank you, Tom. We made significant progress toward achieving our strategic objectives in 2025, and we look forward to growing revenues and adjusted EBITDA in 2026. With that, we'd be happy to take your questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from Mike Harrison with Seaport Research Partners. Please proceed.

Hi, good morning. Morning, Mike. Joe, you mentioned the weather-related operational issues that impacted Q4, and it sounds like they're now resolved. I'm curious, can you help quantify that for us? And I guess looking out to Q1, I'm sure you guys have a bunch of snow right now in the Philadelphia area. And I'm just curious, is it possible that we have some additional weather-related impacts to keep in mind as we start thinking about what Q1 looks like?

Yeah, thanks, Mike. Yeah, in the fourth quarter, I think, you know, particularly in December, We had some usual things that you see in plants, frozen pipes, issues with trucks and the like, a boiler, you know, not to get too specific. But, you know, if you think about the impact of that, it did set us back a couple days, I guess, in the month. And as we said in the comments earlier, we think overall the impact of that was somewhere around a percent. on our volume and we would have been essentially flat. That's really been resolved as we headed to the first quarter. Now we had this big snow event yesterday. You know, most of that was on the East Coast and thankfully our manufacturing is really in the center of the country in Ohio and Michigan and Illinois for the most part. So, you know, There is a ripple effect with these things as trucks and raw materials move around the country, and it impacts our customers as well as us. But I don't expect that to be anything real impactful at this point, Mike.

All right. And then you mentioned that you – it sounds like during Q4 you were getting some pricing in Asia done. which is good because I know that price mix number has been under some pressure. But I was curious if you could give us a sense of your expectations for pricing there and maybe also wrap in some commentary on what you're seeing in raw materials. I believe some of these oleochemicals that had been pressuring your margins back kind of in the middle of the year seem to have started to come lower. But maybe just some thoughts on kind of price versus raw material cost dynamics into the next couple quarters.

Sure, Mike. Yeah, from a raw material standpoint, I mean, we're seeing things stabilize quickly. Our outlook into Q1, Q2 at this point is relative stability. I think what you saw in the fourth quarter is timing of some of our contracts there. We had issues throughout the year last year in each specific particularly. Some of those issues just took a while to resolve because we had contracts and we had to negotiate new contracts in the fourth quarter and get some pricing. I am not really looking at pushing pricing right now. I think things have stabilized and overall should be a pretty flat market as far as that goes.

All right.

And then I guess just in terms of your outlook and expecting EBITDA growth in 2026, I You know, it looks like the sell side consensus right now is looking for something close to 10% growth over 2025. And I'm just curious, is that what you're targeting internally? Or would you say that the market outlook at this point probably supports a lower growth rate than that 10% that's baked into consensus?

Yeah, I mean, we don't. We don't give specific guidance on that, but what I can tell you, Mike, is just kind of the algorithm that I think about. The markets that we're in, we're not expected to really grow. So underlying markets, I think, potentially could even be slightly down in the first half of the year, maybe slightly up in the second half of the year, but overall kind of flat. We have been... very happy with how the share game, the new business acquisition has gone over the past several quarters and feel pretty confident as we head into this year that we'll be able to continue that pace. You know, we mentioned in the comments earlier, our target there is sort of two to four percent outgrowth of the market. We've been on the higher end of that. And I would expect that to continue with the visibility that I have to the pipeline and and how things are looking on that end. We made some acquisitions last year. Those really didn't come into play until the second quarter. So we will have an extra quarter of those in our numbers. And so call that a 1% to 2% kind of tailwind. We think there's perhaps a percent favorability overall with FX for the year. some puts and takes there, some higher costs, but also some translation that helps us. I do expect our gross margins to be, to recover from the fourth quarter, to be in that range of 36 to 37%. And then overall, I think we mentioned also, there is a little bit of variable comp rebuild, a little bit of inflation. We have some, Tom mentioned in his comments, the new Radnor facility or the new facility here in Philadelphia. So some depreciation and things like that coming online. But overall, really, the algorithm that we're shooting for is a sort of mid-single-digit volume in revenue growth. If we can do a little bit better than that, great. And then get that leverage, as you said, to the high single digits on EBITDA as we –

you know, kind of scale everything into the business. All right. Very helpful. Thanks very much. Sure, Mike. Thanks.

Our next question is from Lawrence Alexander with Jefferies. Please proceed.

Good morning. Could you characterize the M&A pipeline? And I guess also, can you give us some sense of the regional mix in the pipeline?

Yeah, Lawrence. Good morning. I think we mentioned earlier that we did have some activity in the fourth quarter. Really, it was related to kind of second half of the year, multiple opportunities that we looked at. Those were not really regional opportunities. I would call them multi-regional. Multi-regional or global opportunities, they were larger. And, you know, as I also mentioned, we don't anticipate any of those to lead to a transaction. Nothing's imminent. The overall pipeline itself remains healthy. I would say, Lawrence, there's always a balance for us. We look at things in kind of two different angles, right, where we've had a good track record of doing these bolt-on type of transactions, things that add value help us grow our total addressable market, give us capabilities that we don't have, um, really expanding that, that wallet that we could sell to our customers, uh, you know, transformational things. I think, uh, they come along few and far between when they do come along, you know, we, we like to participate, our balance sheet is strong. We have the ability to, to, uh, to do those types of things, but we're also going to be very disciplined and, uh, and, uh, and not do something that doesn't make sense for our shareholders.

And similarly, just I guess on a regional basis, can you give a sense for are your share gains fairly evenly distributed? Or is it kind of more in one region? Is it tied to particular customer end market mixes and customers with end markets or competitors with certain end market exposure? Just trying to get a sense for whether there's any kind of generational or limiting factor on the share gains that we should be aware of.

I mean, I'd say the share gains themselves have been pretty broad-based. It's been all three regions, so America's EMEA and Asia-Pac. The basis of it, Asia-Pac is definitely higher than EMEA and America's. We call it on almost a 2x basis higher in Asia-Pac versus those other regions. Some of that is just what's happening there, right? You have a lot of growth in markets like India. China is not growing the way it used to in the past, but it's still growing, right? And relative to the Americas and the Maya, that means new lines coming on, even new customers that didn't exist. And we make it, you know, an intentional part of our strategy to be the incumbent when these new plants come online. So that really speaks to... some of the reasons why we're seeing higher conversion rates in Asia-Pac than the other parts of the world. But overall, it's all three regions, and I think the sales engine is working pretty well for us right now.

Thank you.

Our next question is from David Bigletter with Deutsche Bank. Please proceed.

Thank you. Good morning. Joey mentioned you expect some markets to be maybe down slightly in the first half of the year. Which markets are those, and which markets could be up in the first half of the year?

Yeah, I mean, I think I would say the Americas and EMEA both were sluggish toward the end of the fourth quarter, and we've seen that carry into Q1. There may be some weather disruptions here in Q1 for Americas. I don't think that's going to be anything that's material. But we're just not seeing, you know, any kind of broad-based recovery in the manufacturing segment in Americas or EMEA right now. PMIs dip below 50 and are hovering right around that number. So it's just there's not a lot happening, David, in those markets right now. And there's a normal seasonality that you have in Asia Pacific due to the lunar holiday that happens in February. But on balance, I think when you put all that together, we think things are going to be relatively flat, or if they are down, be very, very small and incrementally down. The one area I would say is we have some specific customer issues in Americas that are related to events that took place at their facilities last year. Those will probably carry into the second quarter as far as what we know right now. So that's an additional sort of headwind, I think, on Americas. But again, you know, if I had to put a magnitude around it, I think it's very low single-digit type of headwind.

Got it. And I was going to ask, on that, America's volume being down 4%, can you parse out maybe underlying growth, underlying volumes in that business and what that could be in Q1 and Q2 as well, X the customer adage?

Yeah, underlying growth for America, so the markets that we're in, the composite, I think we had it down about 1%. Metals market being up a couple percent, but auto down. When we talk about the metals market, even though that metals market was up a couple percent, there was the specific customer issue that impacted us in North America. It's also a mix of, you know, the flat-rolled content versus construction, I-beams, and rebar. We tend to participate a lot more on the flat-rolled side. So overall, down about a percent in the fourth quarter and, you know, a mix of different things there. The one other angle I would tell you, David, is, you know, just uncertainty around tariffs I think has impacted – this USMCA region, Mexico particularly, with maybe a little bit lower demand down there just from the tariff impact.

And just to be clear, your Q4 volume in America would have been down roughly 1% X the customer outage. Is that fair?

We think we would have been flat, excluding the customer outage in North America. So You know, there was organic share gain. Markets were down. We had organic share gains, and then we had these operational issues as well as the specific customer outage. So all that on balance, we think we would have been flat.

Perfect. Thank you.

Our next question is from John Tanwantang with CJS Securities. Please proceed.

Hi, thank you for taking my questions. I just wanted to clarify, you mentioned that, you know, you have these M&A expenses for diligence and several opportunities that aren't expected to close any or result in anything anytime soon. Does that mean you're still too early in the process or did they trip up in diligence for one reason or another? And what does that look for your M&A this year following that?

Yeah, I wouldn't, so I'm not going to say anything more specific than that, John, other than we don't anticipate any of those costs carrying into Q1. And there is no imminent transaction, nothing imminent, unfortunately. Okay.

Fair enough. And I might have missed it if you called it out specifically. I think you just talked about the customer plant fire, but I was wondering if you could quantify the gross profit or the EBITDA impact associated with that, the disposals and the weather in the quarter if you kind of have a normalized kind of earnings or profit ability number?

I don't have that number. I think the impact on gross margin, I guess, or operating margin in the Americas was, call it a little over 1% on the gross margin percentage. You know, the revenues, it's hard to quantify that, but I'd say less than $10 million, somewhere between $5 and $10 million in that range.

Okay. And that's for all three issues together?

Yes. Yes, Chad. Okay. Got it. Thank you.

Our next question is from Arun Viswanathan with RBC Capital Markets. Please proceed.

Great. Thanks for taking my question. I hope you guys are well. So I guess I just wanted to understand the outlook for both Q1 and the full year. So I guess for Q1, you mentioned for the first half, maybe you'd be flat to slightly down or you don't really see much change in the underlying markets. I guess you'll continue to see share gains and business wins in Asia Pacific, but you Would that be offset by, you know, weakness in the other regions or softness in the other regions? And then maybe could you see some improvement in growth in the second half? And so you would be up for the year, or is the year-on-year growth mostly from the absence of maybe five to ten one-timers? How should we think about, you know, the opportunity for growth in 26?

Yeah, thanks, Arun. No, I'd say overall, like all three of our segments, so all three regions, we expect to have positive share gains year over year, right? So it's not just Asia Pacific. You know, Asia Pacific share gains are coming in at a higher rate maybe than those other two regions, but we do expect to perform in that 2% to 4% range. And we've been, you know, on a pretty good clip on the higher end of those ranges the past several quarters. As you mentioned, not expecting much help from the markets, but if there was going to be underlying market growth, it would happen in the second half as far as we could tell at this point in time. We do have the benefit now of full year run rate of these acquisitions that we made last year, so that's a 1% to 2% kind of tailwind there. And there's been business that we won last year right that that sort of uh snowball effect as that rolls into uh the new year so you know we're we're targeting to grow our business this year have organic volume growth year over year uh have revenue growth year over year and have even a growth year over year in all three of our our segments and uh you know just other than that just it's not coming from the market it's really coming from from uh our sales development in the pipeline and continue to execute in that area.

Yeah, and Arun, this is Tom. I would just add that, remember, we acquired Dipsol. That deal closed in April last year, so we do have the benefit of one additional quarter of acquisition from Dipsol here in Q1 of 2026.

Okay, and to clarify, what was the... the amount of non-repeating items, I guess, in 25 that shouldn't be a drag for 26.

Yeah, I don't think we specifically provided a number on that, Arun. I think what Joe had mentioned in his remarks is that we believe our volume in Q4 would have been roughly flat had it not been for the weather-related items and the customer outage.

Okay. And then could I just ask on margins as well? It looks like, you know, there were some – again, maybe that was related to some of these extra costs – But I'm sure you're facing, you know, maybe some labor and benefits inflation, tariff uncertainty, and so on. So from a margin perspective, you know, I guess, would you still be on track at some point to get back to 18% EBITDA margins? I think you were down year-on-year in 25 versus 24, but do you expect margin growth in 26? And what would drive that? And do you need volume to... I guess, organic market-based volumes to improve in order to see that margin growth or other things that you can do to drive that. Thanks.

Yeah, thanks, Arun. So, what I would say specifically with respect to gross margin in Q4, I think what you mentioned is correct. There were some specific items that we had mentioned in our prepared remarks with respect to weather and some operational challenges that we had specifically in North America relative to production. I would say underlying that, our product margin remains healthy in all three regions. And so I would characterize some of the margin impact in Q4 of this year as operational in nature as we have transitioned even now through January here in 2026. We see that margin profile has recovered as some of those operational issues have been resolved. And then with respect to our longer-term goals around 18% EBITDA margin growth, I'll let Joe answer that.

Yeah, I mean, that's definitely still the target, Arun. You know, we referenced the plant closure of Dortmund earlier. So that's something, as an example, we're looking at our network around the world. This is particularly in Europe. We have excess capacity and we have, you know, too many nodes. And that's an example of where on the manufacturing cost side, there's opportunity for improvement. It's not just in North America. We think that will come in play in other regions as well. There's a line of sight to specific cost initiatives, mostly in these functional support areas. We're working on things like fixing our master data, streamlining our business processes, and integrating these businesses that we've acquired over the past few years. So there's still opportunities there, I think, to look at combining R&D operations, combining sales offices, looking at combining even the sales organization and getting some benefits there. So really, yeah, I mean, volume will help us get to 18%, but there's still some self-help, I think, in there that we think tangible actions that we could take that will make meaningful movement in the next year or two.

Thanks. There are no further questions at this time. I would like to turn the call back over to Joe for closing remarks.

Okay, thank you. Thanks, everyone, for joining our call today. We appreciate your continued interest in Quaker Houghton. I want to sincerely thank all of our colleagues around the world for their hard work in 2025 and their commitment to success in 2026. Please reach out to John if you have any additional follow-up questions. Thank you.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.