Q

Qnity Electronics, Inc. 10-Q Summary: Period Ended September 30, 2025

Business Context and Reporting Period

This Form 10-Q covers the quarterly and nine-month periods ended September 30, 2025. Qnity Electronics, Inc. ("Qnity") historically operated as the electronics business of DuPont de Nemours, Inc. ("DuPont"). On November 1, 2025, Qnity completed its separation from DuPont and became an independent, publicly traded company. Common stock began trading on the New York Stock Exchange under the ticker symbol "Q" on November 3, 2025. The financial statements presented are combined and unaudited, prepared on a stand-alone basis as if Qnity had been independent during the reporting periods.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 11% in Q3 2025 and 10% for the nine months ended September 30, 2025, compared to the prior year. Growth was driven primarily by volume increases (11% in Q3, 12% in 9M) across both segments, partially offset by unfavorable local price and product mix trends.
• Segment Performance:
  • Semiconductor Technologies: Sales up 8% (Q3) and 8% (9M) due to volume growth from AI-driven applications and advanced node content gains.
  • Interconnect Solutions: Sales up 15% (Q3) and 13% (9M) driven by demand for AI technology ramps and industrial end-markets.
• Debt Structure: Qnity had no long-term debt at December 31, 2024. In August 2025, the company issued $1.0 billion in Secured Notes (5.750%) and $750 million in Unsecured Notes (6.250%). Proceeds were held in escrow and transferred to DuPont upon separation.
• Restructuring: Restructuring and asset-related charges were $1 million in Q3 2025 (down from $4 million in Q3 2024) but increased to $20 million for the nine months of 2025 (up from $7 million in 2024).

Outlook, Risks, and Unusual Items

• Separation Costs: The company incurred approximately $4 million in one-time separation costs in Q3 2025 and $6 million for the nine months, primarily employee-related. Management estimates approximately $180 million in one-time costs over two years to establish stand-alone IT systems and functional capabilities.
• Legacy Liabilities: Qnity has assumed a portion of DuPont's legacy liabilities, including PFAS-related obligations. The company estimates its allocated portion of the New Jersey settlement charge to be approximately $66 million and its share of the NJ Insurance Escrow to be $47 million.
• Dividend: On November 12, 2025, the Board declared a quarterly dividend of $0.06 per share, payable December 15, 2025.
• Risks: Key risks include the ability to realize separation benefits, trade restrictions (particularly regarding China), volatility in input costs, and reliance on key customers (Samsung and TSMC accounted for 11% and 8% of sales, respectively, in Q3 2025).

Investor Verification Checklist

• Debt Covenants: Verify compliance with the new Senior Secured Credit Facilities, specifically the consolidated first lien net leverage ratio not to exceed 4.50:1.00.
• Stand-Alone Cost Run-Rate: Monitor the actual costs incurred to replace DuPont's centralized services (IT, HR, Legal) against the estimated $180 million transition cost.
• Legacy Liability Accruals: Track the finalization of indemnification liabilities related to the New Jersey PFAS settlement and other legacy environmental obligations.
• Customer Concentration: Assess the impact of continued reliance on Samsung and TSMC, which together represent nearly 20% of net sales.
• Working Capital Trends: Review the increase in accounts receivable and inventory levels relative to sales growth to ensure efficient capital management post-separation.