Quaker Chemical Corporation (KWR) Q2 2023 Earnings Report, Transcript and Summary

Greetings. Welcome to Quaker Houghton Second 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.

Thank you. Good morning, and welcome to our second quarter 2023 earnings conference call. Joining us today are Andy Tometich, our President and Chief Executive Officer; and 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 U.S. market yesterday, August 1st, 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. This 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 is my pleasure to hand the call over to Andy.

Thank you, Jeff, and good morning, everyone. In the second quarter, we once again executed well, advancing our key strategic and financial objectives and delivering on our stated commitments, despite persistent macroeconomic challenges. We drove another consecutive quarter of double-digit increases in adjusted EBITDA and non-GAAP earnings per share and generated strong operating cash flow. These results underscore our commitment to executing on what we can control while preserving a strict focus of prioritizing value-added services and solutions for our customers. I continue to be pleased with the financial and operational performance over the last several quarters, and I am confident we have the right strategy to capitalize on the momentum we have built. Net sales in the second quarter increased 1% to $495 million. This year-over-year improvement in net sales was primarily driven by executing our value-based pricing initiatives, which were implemented to offset the continued inflationary pressures impacting our cost to serve. Volumes declined compared to the prior year and were similar to the prior quarter. We continue to improve our competitive position with new business wins at higher levels of value, trending at the top of our long-term range and offsetting volumes we've declined due to our margin improvement initiatives. Market conditions, primarily in steel and general industrial, continued to be soft. Our diversified portfolio and emphasis on profitable growth through new business wins has provided resilience in this challenging environment. Taken together, our volumes are tracking directionally in line with the specific customers, end markets and regions we serve. We have made very strong progress on our gross margin journey. Gross margins of 35.9% improved more than 500 basis points, compared to the prior year and more than 100 basis points, compared to the first quarter of 2023. The pace of the recovery in our margins reflects the actions we put in place to manage our portfolio, as well as a modest improvement in our basket of raw materials and positions us well for an eventual recovery in our markets. Despite the persistent and challenging macroeconomic backdrop, we have made significant progress once again improving the profitability of our business, while balancing customer relationships and the long-term growth aspirations of our business. Our focus is clear. Delivering for our customers by investing in innovation, capabilities and tools, while also balancing the cost to deliver that value in our customer intimate model. In the second quarter, we generated adjusted EBITDA of $80 million and $1.93 of non-GAAP diluted earnings per share, a double-digit increase, compared to the prior year. Our financial results are primarily driven by the recovery in our gross margin and the team's execution, managing the business through the ongoing uneven and complex market environment. We generated $78 million of operating cash flow in the second quarter and $116 million in the first-half of 2023. We also remain focused on strengthening our balance sheet. Year-to-date, we have paid down approximately $73 million of debt and announced our 14th consecutive annual increase in our dividend, highlighting the confidence in our cash generation capabilities. These results in the second quarter and first-half of 2023 represent a strong start to the year. Turning to our segments. We delivered improved margin performance in all of our segments on a year-over-year basis. Volumes declined in all segments and were most pronounced in the Asia Pacific and EMEA segments, because of softer end market conditions and our targeted margin improvement initiatives. We continue to strengthen our portfolio, focusing on the products, services and solutions that yield the greatest benefit for our customers. We are confident our approach enhances our ability to grow profitably with our customers, especially as underlying demand recovers from current lower levels. All segments delivered a double-digit increase in earnings, compared to the prior year, driven by an improvement in margins. We expect further progress with our margins both from cost and efficiencies, while balancing initiatives to drive profitable growth. As we look ahead, there is a considerable amount of uncertainty in the second-half demand environment and limited visibility. We anticipate a continuation of the current difficult and uneven market environment in the third quarter with customer and regional differences. We expect adjusted EBITDA in the third quarter will be similar to the second quarter, translating into another quarter of solid year-over-year earnings growth. Additionally, we anticipate gross margins in the third quarter will remain relatively stable, as we balance pricing with the raw material environment and our cost to serve. We also expect another quarter of solid cash generation, further delevering our balance sheet and strengthening our financial position. Switching to the full-year. We are focused on advancing our strategy, contemporizing the organization and enhancing the value we provide to our customers. The current uncertain and uneven backdrop is likely to persist through the end of the year. That said, we have made solid progress on our financial objectives, including delivering a considerable improvement in our margins, translating into expectations for strong earnings growth and cash flow in 2023. We have built momentum in our business, investing in targeted profitable growth initiatives and positioning the company to deliver in any market environment. Quaker Houghton is built on a foundation of earning value through our differentiated customer intimacy model. As a leadership team, we are energizing the organization to enhance our processes to efficiently and effectively drive deeper engagement. This will enable us to better deploy the quality of our broad and leading portfolio and realize even more value for customers. Our growth culture is healthy, and we continue to make progress with our key profitable growth themes, effectively leveraging our global scale, investing to deploy digital tools and analytics across our platform, and leading in sustainability. We are also committed to our long-term enablers for profitable growth, and we will be vigilant in the current and uncertain environment, prioritizing investments and actions to meet the long-term needs of our company and our customers. Moving forward and building on our foundation, we are refining the organization taking advantage of our global scale. This has, for example, helped improve our operating performance in the EMEA segment despite weak end market activity in the region. These actions, including the cost and operational improvement initiatives underway, are heightening our competitiveness and advancing the intimacy of our model. This is essential as we more exactly and efficiently deliver what customers already value and also advance new opportunities by cross-selling and targeting new profitable growth areas. We're also being more thoughtful with data as part of our digitization focus to deepen our relationships with new and existing customers and suppliers. As I highlighted last quarter, we are making progress with our FLUIDTREND software platform, which will help transform how we deliver customer intimacy in the future and further expand our value proposition. In April, we held a global event to advance efforts on energy management as well as reducing waste and water consumption at our sites, reinforcing our drive to lead in sustainability for our company, our customers and our communities. Recently, we invested in solar energy at our site in India, covering 80% of their energy use and eliminating approximately half of that site's greenhouse gas emissions. Additionally, our R&D and commercial teams continue to partner with customers to expand and deploy our portfolio of sustainable solutions, enabling our customers to, in turn, achieve their goals. These important initiatives are driven by our overall strategy and will help us grow with new and existing customers, expand our markets and lead our industry to a more sustainable future. In summary, there is clear positive momentum at Quaker Houghton. We are making progress on our financial and operational priorities. We have a strong market position and are fully committed to this industry, which has attractive long-term growth characteristics. We are supporting our customers as they transition to pursue new opportunities and tackle the secular challenges impacting their businesses, including pursuit of new applications, managing labor and skill shortages, addressing increasing demands on cost and productivity, and delivering on their own sustainability objectives. The quality and breadth of our product, technology and solutions portfolio is unparalleled, and we are uniquely positioned to earn value for and with our customers. We are also prudently investing to advance our growth initiatives, our people and our innovation pipeline. This includes developing our talent, supply chain and digital capabilities to redefine how we most effectively and efficiently deliver customer intimacy for today and for the future. We remain fully committed to unlocking our potential, including the earnings power and the cash flow generation of the enterprise, regardless of the operating environment. I am confident in our strategy, our leadership and our people and have continued conviction that we will execute and achieve our goals. With that, I'd like to pass it over to Shane to discuss the financials.

Thanks, Andy, and good morning, everyone. In the second quarter, we delivered net sales of $495 million, which was a 1% increase, compared to the prior year. This increase was driven by an 11% increase in price and mix, but offset by a 10% decline in volumes. Similar to recent quarters, the primary driver to our net sales was an increase in our selling prices. The decline in our volumes was primarily driven by softer market conditions, the ongoing war in Ukraine and the wind down of previous tolling on volumes we divested as part of the combination. Sequentially, our sales declined slightly at approximately 1%, which was due to a slight decline in both volume and price and mix. Gross margins in the second quarter were 35.9%, which represents an increase of 540 basis points, compared to 30.4% in the prior year and 120 basis points, compared to 34.7% in the first quarter of 2023. This improvement reflects continued execution on our pricing actions, as well as a modest decline in our overall raw material costs, which remain elevated. Looking at our SG&A, excluding one-time items, we had an increase of $8 million, or 8%, compared to the prior-year period and $2 million sequentially. This primarily reflects the year-over-year inflationary impact on our labor costs, the timing and levels of our annual incentive compensation as well as impacts due to foreign exchange. For the full-year 2023, we continue to expect mid to high-single-digit inflation on our labor costs, which is net of the targeted cost actions we are implementing. We remain on track with these targeted cost and operational efficiencies, which we expect will be implemented by the end of 2024. Overall, we delivered $80 million of adjusted EBITDA in the second quarter, which is an increase of 37%, compared to the prior year. Our adjusted EBITDA margins expanded to 16.2%, which was a 430 basis point increase, compared to the prior year and a 40 basis point increase, compared to the prior quarter. These improvements reflect the progress we've made advancing our strategy and balancing our near-term priorities with long-term profitable growth initiatives. Switching to our segments. The Americas delivered year-over-year sales growth, primarily due to a double-digit increase in price and mix, partially offset by a modest decline in volumes, which was generally in line with our underlying markets. Our EMEA net sales declined modestly, compared to the prior year as a double-digit increase in price and mix was more than offset by a decline in volumes due to a continued soft demand environment. Foreign currency was a slight tailwind for the segment. Net sales in Asia Pacific also declined compared to the prior year as increases in price and mix were more than offset by a decline in sales volumes. Also, foreign currency was a mid-single-digit headwind to the Asia Pacific segment. The overall volume drivers for each of our geographic segments were relatively consistent. And market conditions in the second quarter were softer than the prior year. Also, our volumes were impacted by our value-based pricing actions, which were offset by new business wins as well as the expiration of the tolling agreement as part of the combination and the impact of the ongoing war in Ukraine in our EMEA segment. Sequentially, net sales increased in Asia Pacific but at a slower pace than expected. Net sales were consistent with the prior quarter in the Americas, and they declined in EMEA. We delivered double-digit year-over-year increases in operating earnings in all of our segments, primarily due to our margin recovery efforts. Overall, our performance was strong in the first half of 2023, and we are well positioned for future growth. Below the line, our interest expense was higher in the second quarter, compared to prior year and was flat sequentially. Our cost of debt in the second quarter was approximately 6%, which was largely in line with where we exited the prior quarter. Our effective tax rate, excluding non-recurring and non-core items, was approximately 27% in the second quarter, which was consistent with our expectations, as well as our forecast for the full-year 2023. Our second quarter GAAP diluted earnings per share were $1.63 and our non-GAAP diluted earnings per share were $1.93. This represents a 46% year-over-year increase, which was primarily driven by the improvement in our operating earnings. Switching to liquidity. We generated $78 million of cash from operations in the second quarter. We are off to a strong start with cash flow generation and conversion in the first-half of the year, generating $116 million of operating cash flow. This represents a year-over-year improvement of $125 million, due to our strong earnings and an improvement in working capital efficiency. Also, during the second quarter, we invested $11 million in capital expenditures, paid $8 million in dividends and reduced our gross debt by approximately $60 million. Our capital allocation priorities remain consistent: return capital through dividends, further strengthen our balance sheet and invest both organically and inorganically to continue to grow the business. For full-year 2023, our anticipated CapEx spend remains unchanged at approximately 1.5% to 2% of net sales. We are committed to sustainably increasing our dividend. Last week, our Board approved a dividend increase of approximately 5%, which represents our 14th consecutive annual increase, which highlights the conviction in our cash flow generation. Overall, our balance sheet liquidity remains strong. Our net debt at the end of the second quarter was $696 million, and our net leverage ratio improved to 2.3 times adjusted EBITDA, compared to 2.7 times at the end of last quarter. We have ample opportunities to drive both organic and inorganic growth. We will remain prudent with these investments, balancing the macroeconomic environment with our overall short and long-term outlook for the company and shareholder returns. To summarize, we executed well in the first-half of 2023. We delivered strong earnings growth and cash flow in a continued uneven macroeconomic environment. We are well positioned within our various end markets and are focused on driving long-term profitable growth. While we expect the significant uncertainty and tepid demand environment to persist through the end of the year, we are confident in the earnings power of the organization, committed to our strategy and excited by the momentum we have built. With that, I'll turn it back over to Andy.

Thank you, Shane. The positive momentum in our business is evident, and the entire Quaker Houghton team is very focused on executing for our customers and our company. With that, we'd be happy to address your questions.

Thank you. [Operator Instructions] Our first question is from Mike Harrison with Seaport Research. Please proceed.

Hi, good morning.

Good morning, Mike.

Good morning, Mike.

I was hoping that you could talk a little bit about what you're seeing in volumes. It sounds like things were sequentially pretty flattish. But in terms of that 10% year-on-year decline, I'm curious what were you seeing in terms of underlying market performance, how much of the impact was maybe related to destocking, and what was the impact of some of the value-based initiatives where it sounds like maybe you're strategically walking away from some business where you're not getting appropriate margin performance?

Yes. Thanks, Mike. Really good question. You're right. Sequentially, we've actually had some decent stability here now for a couple of quarters. But of course, when you look on a year-over-year basis, there's some components that explain the differential you're seeing there. First, I'd start off with just tough comps. In particular, in China in the second quarter of last year, there were still the rolling lockdowns happening, which was really playing havoc with some of our customer order patterns. In EMEA, really, the impact of the war had not fully developed and we had not made our full decision to exit from Russia. So those components are a little bit different. Our underlying markets, we believe, are down mid-single-digits. It depends a little bit based upon particular market segments. There are some that are improving, some that are kind of soft. And then within our customers themselves, there's been a little bit of unevenness, I would say, to order patterns as they're trying to manage their cash and their inventory. So while we have good visibility to exactly what our customers are needing as they go down their supply chain, they're trying to manage that a little bit better. I'd also highlight that we still had a little bit of lingering tolling business from the combination that was in last year's numbers. To your question, though, we have been using the value-based pricing to really make sure that we're earning the value from our customers and that has created mid-single-digit kind of churn for us, but we're actually offsetting that. And cumulatively, our new business wins at much higher levels of profitability have played through. So we feel like we've got the right strategy there, and we're balancing it appropriately. So net of all of that, we believe we're in line with what's going on in our underlying markets, which, again, are a little bit uneven. Pretty complex environment. And we're not seeing any indication of a significant shift or a fundamental shift going forward.

All right. And then the price mix number came in a little bit higher than I think some of us were looking for. Just curious from this 11% year-on-year level, how do you expect that to trend in the second-half, assuming that raws are still coming down a little bit and maybe putting some pressure on that pricing number.

Sure, Mike. So you're right. In the second quarter, we did see some progression, obviously, in gross margins. As we've talked about, this is a journey and it won't be a linear journey as we move towards our long-term expectations to get back to the pre-pandemic expected levels. We did see some modest raw material easing in the second quarter, although I would highlight still very high levels. We're talking low single-digit adjustments. We held price relatively well. And we did have some mix impacts where we gained some higher margin business and some of the business that churned was lower margin business. So kind of as we anticipated and as we look forward, the journey continues. So we're constantly balancing the value we're providing for our customers and the way we do our pricing and that value and use. We're still driving towards those long-term expectations. We have work to do. And I would highlight that it's not just price. So while we target getting the value for the services we provide, we also have opportunities to improve our efficiencies, to improve our new business wins again at the higher levels and we'll continue to work to get to our long-term goals. But it won't be linear. And in the third quarter, we think, given all the dynamics, it's going to be pretty similar to what we saw in the second quarter.

All right. And then I guess just in terms of thinking about EBITDA for the third and fourth quarter, you said Q3 should be pretty similar. I'm curious what are some key drivers that could take that to be higher or lower sequentially. And then I guess, as we think about the second-half, really trying to understand what your views are and expectations are on gross margin trajectory. You saw the really, really nice step-up in Q1. You saw another sequential step-up here in Q2. Is that something that we should expect to continue as we get into the second-half and drive that EBITDA even higher in Q4 than you expect in Q3? Thanks.

Sure, Mike. So yes, on EBITDA basis, I think if you start off with the beginning, it's still kind of a complex environment with a lot of unevenness. As I indicated, some markets up, some down. And the visibility is a little more clouded than I would even indicate in normal times. So that complexity kind of continues. If we think about our regional segments, China and Asia has been a little slower in the recovery than I think any of us anticipated and we don't see any significant movements, although we're cautiously optimistic that, that could improve as we move forward. In EMEA, we had a little bit of lumpiness between Q1 and Q2. That has now kind of evened out but at very low levels compared to historical rates. And of course, in the third quarter, we have the challenges of some of the August vacation time that occurs in EMEA. In the Americas, we've been fairly resilient. And we think that continues. Again, there will be some segments that are improving and some that are soft. But the net of that is we think our gross margins are going to be stable as we continue. We'll keep working on that journey to improve, but it's not going to be linear. And as I indicated, that will move forward as we go through the year. Net of that is we expect similar earnings in the third quarter and continue to generate strong cash flow. So we see a continuation of some of the pattern we've seen in the second quarter.

Sounds good. Thank you very much.

And -- yes, thanks, Mike.

Our next question is from Jon Tanwanteng with CJS Securities. Please proceed.

Hi, guys. Good morning and thank you for taking my question.

Hi, Jon.

I just wanted to clarify on the gross margins heading in Q3. That's a function of lower seasonal volume, maybe an uncertainty in the macro and not a near-term plateau in your ability to drive value, price and mix. Is that correct?

Well, I would say, the journey going forward is always going to be around balancing the value we're adding against the cost to serve with our customers. We use a value and use approach with our customers on their total cost of ownership. And we'll continue to do that. We still think there's room to go overall to get towards our long-term expected targets. But pricing won't be the only way that we get there. We're going to continue to work on the mix with our new business wins and drive some efficiencies. And as I mentioned before, the key thing is this is not going to be linear. It will be a progression towards our goal. But we're pleased with the fact that we have significantly improved our profitability, and we're going to build our growth off of that.

Got it. Now you've done a great job so far. Shane, a question for you. Just great cash conversion in the quarter. Should we expect more upside going forward? Or is that going to stabilize more to a -- more normalized pace as we look out there?

Yes. Thanks, Jon. I mentioned in the script, the strong conversion was based off of, obviously, good earnings as well as working capital inflow. As Andy just described, we do anticipate similar EBITDA. So therefore, similar earnings in Q3. From a working capital perspective, I do think there is more work to be done on all receivables, payables as well as inventory. That said, we still want to be in a position to provide value to our customers and making sure we have continuity of supply. And so we'll continue to focus on that working capital efficiency and generate cash flow accordingly.

Okay. One more for me. Just given the performance on the cash flow and the reduced leverage, are you gearing up to be more aggressive in capital allocation to your growth prospects, M&A or things that might be out there?

Yes. I'll take that. I mean our capital allocation has not changed. Our strategy remains that find the best value for our shareholders. As we've talked about before, we're a long-term dividend provider, and we've just, in fact, had the Board approve an increase in that dividend going forward. We're working on our debt pay down. We've paid about $70 million year-to-date on that. We continue to invest in the business itself on our growth themes around contemporizing the business and driving our scale and our digitization and sustainability. But then, of course, inorganic growth through M&A is a complement to all of that. And we'll continue to look for those opportunities, in particular, where we've been very successful to take advantage of our model and our service capabilities by adding technology or a channel or a geography play to serve more of our customers in more valuable ways. So we've made significant improvements on the balance sheet and feel like we're in a good position to be able to execute against that capital allocation strategy.

Okay, great. Thanks, Andy. Thanks, Shane.

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

Hi, it’s Dan Rizzo on for Laurence. You guys mentioned you're kind of down with your markets. I was wondering if your usual market share gains are being offset by the volume losses from price hikes and if that's going to kind of continue.

Yes. Thanks for the question. So we've always been balancing that those new business wins. As we've historically indicated, we want to be operating and gaining 2% to 4% over whatever our underlying business is doing. We've actually been pretty successful at staying near the top end of that range. It is being offset, though, here in the short-term with some of the value-based pricing where we've chosen not to continue supporting some business that was at lower margins. But cumulatively, we're still net ahead on that, and we believe that we'll continue to widen that spread as we go forward.

Okay. And then -- you've mentioned that the general softness across the board, but others have kind of pointed to auto for one as having still strength and seeing still some restocking. I was wondering if that particular end market is still performing well or if it's kind of down with the rest?

Yes, thanks. For sure, there are some pockets of softness. And as we indicated, as I indicated in the script, steel and general industrial is still relatively soft for us around the world. We're actually seeing some improvements in automotive and aero. And our Greece business continues to be pretty positive as well. So it's a mixed bag that's part of that complexity and the unevenness that I keep referring to, but we're actually seeing some positives. Now these are still off of some relatively low bases. And we're pretty pleased about the position we have now. As the recovery occurs in these markets, we're going to be in a great position to be able to support our customers.

Thank you very much.

You’re welcome.

[Operator Instructions] Our next question is from Vincent Anderson with Stifel. Please proceed.

Yes, thanks and good morning.

Good morning, Vincent.

Good morning. You've touched on this a little bit already, but maybe just more specifically, in China, has there been anything particularly surprising about the price elasticity that you've seen there? Or is that just something you expect from this market in general or more attributable to something more unique about your customer mix there?

I don't think there's anything significantly unexpected. I think just a little disappointment that things haven't improved more quickly. Again, we saw a pretty -- with all the rolling lockdowns and all the supply chain interruptions, we saw a pretty soft second-half within Asia and particularly in China last year, and that's just really not recovered. And we've been doing a pretty good job, I believe, on balancing the new wins that we're going after at much higher levels of profitability and trading off some volumes. We're constantly trying to strike that right balance. And I think we've done a pretty good job on that. So China has been actually relatively stable now for the last couple of quarters. So we think we've managed that churn pretty well.

Okay. No, that's helpful. Thank you. And then kind of back to the market share conversation. You obviously took a pretty big backseat during the supply chain crisis and you're trying to get back on track with that, but we're in a softer demand environment. So can you just kind of speak about what opportunities you see there, whether to catch up or if it's going to be kind of a slow, steady trend back towards your targeted plus 2%, 4% levels? And then just kind of how do you think about balancing that against any kind of SG&A costs required to bring in new customers?

Sure. So the way I would think about this is we've actually been operating closer to the top end of that range even during this period. It's just been masked by some of the volume losses due to the strategic pricing that we're doing. So we haven't lost that focus. We continue to pick up new business, and it's at higher levels of profitability. We're going to keep the team continuously focused on that. And as things stabilize and the market recovers, I think we're going to be in a great position. We're doing a really nice job of just penetrating our customers. I think we're finding more opportunities to add value as they're dealing with more and more complexity in their business. And that's really allowing us to serve more of their needs and take advantage of the full capabilities of Quaker Houghton. When you think about SG&A, I think we're always going to invest for supporting the value that our customers need. At the same time, we're going to look at how we efficiently take advantage of our capabilities and make sure we deliver that value in the most optimized way. So I think we're balancing those things to really make sure we continue to take advantage of that long-term strategy of outperforming our market.

Excellent. That's good to hear. And then just a quick one on the digital -- I can't do it -- digitalization effort. It's too early. That you're piloting now, if you're willing to talk about them a little bit. Would you characterize the tools that are being piloted currently as ones that would be targeted to your larger, more sophisticated customers? Or are these tools that you believe would be, kind of, readily applicable to smaller operations?

Sure. So as I mentioned, I think in the previous quarter, we've been deploying our FLUIDTREND capability within our own laboratories, as we're developing, as well as with targeted customers. It's a different group. We have multiple segments and multiple applications that we are working with customers. As I indicated, a lot of our focus today is on the monitoring capability with the goal in subsequent phases to start getting more into the control and the optimization of customers' operations and use of our products. But we're going at it in a targeted way, but not in an isolated way. We're looking at different segments and different applications and making some progress in the early days.

Great. Alright, thanks.

Thank you.

There are no further questions at this time. I would like to turn the conference back over to Andy for closing comments.

Yes. Thank you very much, and I appreciate everybody's time. We're very excited about the future and appreciate your continued interest in Quaker Houghton. Please reach out to Jeff if you have any follow-up questions. Thank you.

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