Quaker Chemical Corporation (NYSE:KWR) Q1 2023 Earnings Conference Call May 5, 2023 8:30 AM ET

Company Participants

Andy Tometich - President & CEO

Shane Hostetter - EVP & CFO

Robert Traub - General Counsel

Jeffrey Schnell - VP, IR

Conference Call Participants

Mike Harrison - Seaport Research Partners

Dan Rizzo - Jefferies

David Begleiter - Deutsche Bank

Arun Viswanathan - RBC Capital Markets

Jon Tanwanteng - CJS Securities

Operator

Greetings, and welcome to the Quaker Houghton First Quarter 2023 Earnings Conference Call. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would now like to turn the call over to Jeffrey Schnell, Vice President of Investor Relations. Mr. Schnell, you may begin.

Jeffrey Schnell

Thank you, Melissa. Good morning, and welcome to our first quarter 2023 earnings conference call. Joining us today are Andy Tometich, our President and Chief Executive Officer; Shane Hostetter, 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 US markets yesterday, May 4, 2023. Our press release and accompanying slides can be found on our investor website.

Both the prepared commentary and 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. The presentation also contains certain non-GAAP financial measures, and the company has provided reconciliations of these non-GAAP financial measures 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 turn the call over to Andy.

Andy Tometich

Thank you, Jeff, and good morning, everyone. In the first quarter, we delivered record net sales while continuing to manage through significant uncertainty and persistent macroeconomic challenges. We drove our recovery in margins and double-digit increases in adjusted EBITDA and adjusted earnings per share compared to the prior year quarter. We also generated strong operating cash flow in the quarter, driven by our improved performance and working capital efficiencies, further strengthening our balance sheet. I am very pleased with the financial and operational execution in the first quarter, and excited about the momentum we have built in the organization, delivering results by controlling what we can control. Compared to the prior year, net sales in the first quarter increased 5% to a record $500 million. The year-over-year improvement in net sales was primarily driven by execution on our value-based pricing initiatives, which were implemented across all regions to offset the continued inflationary pressures impacting our cost to serve. Though volumes declined compared to the prior year, they increased sequentially. Volumes continue to be impacted by a continuation of softer end market conditions, primarily in the steel and industrial markets, and were offset by some improvement in auto. We also have declined some incremental volumes in the quarter, consistent with our ongoing margin improvement initiatives. In total, and taking into account our customer mix, we are still trending directionally in line with the specific end markets and regions we serve. We're pleased to see the benefits of the diversification of our portfolio, which continues to drive targeted and valuable new business growth regardless of market trends.