Sign in

You're signed outSign in or to get full access.

QC

QUAKER CHEMICAL CORP (KWR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $444.1M, GAAP diluted EPS $0.81, and non-GAAP diluted EPS $1.33; adjusted EBITDA was $64.8M as softer end markets, mix, FX and manufacturing absorption weighed on margins (gross margin 35.2%) .
  • Versus Q3 2024, sales fell ~4% and adjusted EBITDA declined to $64.8M from $78.6M; versus Q4 2023, sales -4.9%, adjusted EBITDA -15.9%, and non-GAAP EPS -25.5% .
  • Management expects FY2025 revenue, adjusted EBITDA and EPS growth; gross margins comparable to 2024; incremental cost actions of $20M run-rate (~$15M in-year) and tax rate ~29%; capex planned at 2.5–3.5% of sales due to China plant and Philadelphia consolidation .
  • Liquidity remains solid: gross debt $708.3M, cash $188.9M, net debt $519.4M, leverage 1.7x; Q4 operating cash flow of ~$63M and FY2024 OCF $204.6M; dividend declared at $0.485/share (April 30, 2025) .
  • Potential stock catalysts: confirmation of sequential margin recovery in Q1 (management expects Q1 to be the lowest quarter with improvement through Q2/Q3), execution on Asia-Pacific share gains and FLUID INTELLIGENCE initiatives, and delivery of cost savings; FX is expected to be a low-single-digit sales headwind .

What Went Well and What Went Wrong

What Went Well

  • Asia/Pacific net sales grew 5% YoY on volume gains and acquisition contribution; segment operating earnings remained resilient with margins consistent vs 2023 despite raw material cost headwinds .
  • New business wins across all regions supported stable volumes despite declines in aggregate end markets; management highlighted targeted 2–4% net new wins globally and early traction in advanced/operating solutions .
  • Strong cash generation and disciplined capital allocation: FY2024 operating cash flow $204.6M; ~$82.4M returned to shareholders via dividends and buybacks with $101M remaining authorization .

What Went Wrong

  • Americas and EMEA saw broad-based production weakness, lower aerospace sales, and unfavorable mix; Americas net sales -8% YoY and segment earnings -$11M YoY; EMEA net sales -7% YoY and segment earnings -$5M YoY .
  • Gross margin compressed to 35.2% in Q4 due to manufacturing absorption, higher raw material costs in APAC/EMEA, and mix (lower service revenues); adjusted EBITDA margin declined to 14.6% vs 16.5% in Q4 2023 .
  • FX was a 2% sales headwind in Q4 and is expected to be a low-single-digit headwind in 2025; selling price/product mix declined ~4% QoQ and YoY due to index-based contracts and mix of products/services .

Financial Results

Core metrics vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$467.1 $462.3 $444.1
GAAP Diluted EPS ($)$1.12 $1.81 $0.81
Non-GAAP Diluted EPS ($)$1.78 $1.89 $1.33
Adjusted EBITDA ($USD Millions)$77.0 $78.6 $64.8
Adjusted EBITDA Margin (%)16.5% 17.0% 14.6%
GAAP Operating Income ($USD Millions)$48.3 $51.7 $29.0
Non-GAAP Operating Margin (%)10.9% 11.7% 9.1%
Gross Margin (%)36.6% —35.2%

Segment breakdown

SegmentQ4 2023 Net Sales ($MM)Q3 2024 Net Sales ($MM)Q4 2024 Net Sales ($MM)Q4 2023 Segment Operating Earnings ($MM)Q3 2024 Segment Operating Earnings ($MM)Q4 2024 Segment Operating Earnings ($MM)
Americas$226.6 $220.3 $208.6 $61.8 $62.1 $50.9
EMEA$135.7 $134.1 $125.9 $23.7 $24.6 $18.6
Asia/Pacific$104.8 $107.9 $109.6 $31.9 $30.7 $30.7
Total$467.1 $462.3 $444.1 $117.3 $117.4 $100.2

KPIs and Liquidity

KPIQ3 2024Q4 2024
Gross Debt ($MM)$740.6 $708.3
Cash and Equivalents ($MM)$212.1 $188.9
Net Debt ($MM)$528.6 $519.4
Net Debt / TTM Adjusted EBITDA (x)1.6x 1.7x
Operating Cash Flow ($MM)$141.5 YTD ~$63 Q4; $204.6 FY
Share Repurchases89,088 shares; $14.6M Q3 YTD 174,909 shares; ~$26.3M Q4; $49.2M FY

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2025None numerical providedExpect growth in FY2025 New
Adjusted EBITDAFY2025None numerical providedExpect growth in FY2025 New
EPS (Diluted)FY2025None numerical providedExpect growth in FY2025 New
Gross Margin (%)FY2025Long-term “zip code” 37–38% target referenced (not formal guidance) Gross margins expected comparable to 2024 Maintained (qualitative)
Tax RateFY20252024 effective tax rate ~29% (context) ~29% expected in 2025 Maintained
CapexFY2025Normalized 1.5–2.5% of sales 2.5–3.5% of sales (China plant build-out; Philadelphia consolidation) Raised (one-year specific)
Cost SavingsFY2025Prior optimizations executed in 2024 $20M run-rate, ~$15M in-year savings; completed by H1 2025 New
FXFY2025Not previously specifiedLow single-digit % sales headwind expected New
DividendCurrentPrior regular dividends$0.485/share payable April 30, 2025 Maintained (rate at $0.485)

Earnings Call Themes & Trends

TopicQ2 2024 Mentions (press release)Q3 2024 Mentions (press release)Q4 2024 Current Period (call/8-K)Trend
End-market softnessContinued soft end markets in Americas/EMEA; APAC volumes improved; focus on resilience Softer vs Q2; volumes consistent; resilience highlighted Weakness intensified in Americas/EMEA; APAC offset with wins; expect sequential demand improvement through 2025 Weak into Q4; improving into 2025
Pricing/Mix & Index contractsPrice/mix -4% YoY; index-based contracts impact Price/mix -4% YoY; index impacts Price/mix -4% YoY; -2% QoQ; index impacts and lower service mix Persistent headwind
Gross margin trajectory8th consecutive YoY improvement; adj EBITDA +5% YoY Adj EBITDA margin 17% GM 35.2% in Q4; management targets 37–38% “zip code” long term; expects comparable margins in 2025 and sequential improvement from Q4 Near-term dip, aiming back to long-term range
Asia-Pacific momentumAPAC net sales +3.4% YoY; segment earnings improved APAC net sales +2.6% YoY; higher volumes APAC net sales +5% YoY; volume +5%; Sutai acquisition helped; expanding in China/India; battery EV wins Strengthening
Cost actions/SG&AOngoing optimization; improved margins Optimization actions continue New $20M run-rate cost actions; SG&A targeted, flat to modestly up in 2025 Accelerating efficiency
FX—Unfavorable in Americas; mixed in APAC/EMEA 2% headwind in Q4; low-single-digit headwind expected in 2025 Headwind persists
Technology/FLUID INTELLIGENCE——Prioritizing digitization and sensor technology; FLUID INTELLIGENCE to revolutionize service offering Strategic focus emerging

Management Commentary

  • “We expect to deliver revenue, adjusted EBITDA and earnings growth in 2025… taking additional steps to reduce complexity which are expected to deliver run-rate cost savings of at least $20 million in 2025.” — Joseph Berquist, CEO .
  • “Gross margins were 35.2% in the fourth quarter… impacted by manufacturing absorption, timing of raw material cost increases and mix… these latter issues have largely resolved themselves in January.” — Joseph Berquist .
  • “Our effective tax rate… was approximately 34% in the fourth quarter or 29% for the full year. We expect… 2025 will be approximately 29%.” — Tom Coler, CFO .
  • “We are aligning our resources with faster growing regions… excited by the momentum in our advanced and operating portfolio… will simplify and refocus the organization on value-enhancing activities.” — Joseph Berquist .

Q&A Highlights

  • Gross margin target: Management reaffirmed long-term gross margin “zip code” of 37–38%; expects Q1 margins to recover toward last year’s range and ultimately drive EBITDA margins toward high-teens to ~20% over time .
  • Regional performance: APAC success driven by share gains in metals and EV supply chain; strategy to translate wins to Americas/EMEA via equipment-supported first-fill and customer intimacy model .
  • 2025 outlook: Markets expected to grow ~1–2% with easier comps after H2’24 trough; FX a low single-digit sales headwind; raw materials stable; sequential improvement through the year .
  • Cost and SG&A: $20M run-rate cost actions with ~$15M in-year savings; SG&A expected flat to modestly up in 2025 amid compensation rebuild and targeted investments; focus on EMEA manufacturing optimization .
  • Capex and capital allocation: Capex 2.5–3.5% of sales for 2025 (China plant, Philadelphia consolidation); priority on M&A to enhance scale in emerging geographies; opportunistic buybacks remain a lever ($101M authorization) .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable due to data access limits during this session; therefore, we cannot provide a beat/miss assessment vs consensus at this time [SPGI retrieval error encountered].
  • Given the absence of consensus figures, investors should anchor on company-reported metrics and management outlook until estimates are refreshed .

Consensus vs Actual (informational)

MetricConsensus (S&P Global)Actual
Revenue ($USD Millions)Unavailable$444.1
Diluted EPS ($)Unavailable$0.81 (GAAP); $1.33 (Non-GAAP)

Key Takeaways for Investors

  • Near-term: Q1 expected to be the lowest quarter, with sequential margin and demand improvement through Q2/Q3; watch for gross margin recovery toward the 37–38% “zip code” and adj EBITDA uptick from Q4 levels .
  • Cost program: $20M run-rate cost actions (~$15M in-year) are a tangible EPS lever for 2025; monitor SG&A trajectory and EMEA network optimization progress .
  • APAC-led growth: Asia/Pacific volume gains and Sutai integration demonstrate share capture; track pipeline conversion in India/SE Asia and spillover to Americas/EMEA via first-fill/service offerings .
  • Mix and price dynamics: Index-linked contracts and lower service revenue pressured Q4 price/mix; stabilization plus higher production rates should support margin normalization in 2025 .
  • FX risk: Low-single-digit sales headwind expected; portfolio/geographic diversification helps, but hedging/price actions will be important if volatility persists .
  • Balance sheet and cash returns: Leverage at 1.7x TTM adj EBITDA with strong OCF; dividend maintained at $0.485/share and remaining buyback authorization of $101M offers flexibility .
  • Strategic narrative: New CEO is refocusing on customer intimacy and FLUID INTELLIGENCE; execution against growth in advanced/operating solutions can be a medium-term multiple driver .

Appendix: Non-GAAP Adjustments (Q4 2024)

  • Key reconciling items included executive transition costs ($6.6M), restructuring ($1.7M), customer insolvency ($1.7M), product liability costs ($1.1M), and currency impacts; non-GAAP operating margin 9.1% and non-GAAP EPS $1.33 .