Qnity Electronics, Inc.

RESULTS OF OPERATIONS

The following table summarizes sales variances by segment and geographic region from the prior year:

1. Europe, Middle East and Africa ("EMEA").

We reported net sales for the three months ended March 31, 2026 of $1.3 billion, up 18% from $1.1 billion for the three months ended March 31, 2025, due to a 17% increase in volume and a 1% favorable currency impact. The volume increase was attributable to both Interconnect Solutions up 23% and Semiconductor Technologies up 12%. The favorable currency impact was primarily attributable to EMEA up 6%.

Cost of Sales

Cost of sales were $697 million for the three months ended March 31, 2026, up 19% from $587 million for the three months ended March 31, 2025 primarily attributable to a 14% increase in volume in addition to 3% and 2% increases attributable to material costs and currency, respectively.

Cost of sales as a percentage of net sales was flat at 53% for both the three months ended March 31, 2026 and 2025.

Research and Development ("R&D") Expenses

R&D expense was $94 million for the three months ended March 31, 2026, up from $84 million for the three months ended March 31, 2025. R&D expense as a percentage of net sales decreased period over period from 8% for the three months ended March 31, 2025 to 7% for the three months ended March 31, 2026.

Selling, General and Administrative ("SG&A") Expenses

SG&A expenses were $173 million in the first quarter of 2026, up from $140 million in the first quarter of 2025. SG&A expenses as a percentage of net sales remained flat at 13% for both the three months ended March 31, 2026 and 2025.

Amortization of Intangibles

Amortization of intangibles was $52 million in the first quarter of 2026, down from $55 million in the first quarter of 2025. The decrease for the three months ended March 31, 2026 as compared with the same period of the prior year was primarily due to assets becoming fully amortized.

Transformation, Integration and Other Charges

Beginning in fiscal 2026, we present costs incurred in connection with the multi‑year transformation plan described under “―Overview―Recent Developments―Transformation Plan,” designed to strengthen operational productivity, enhance commercial and innovation excellence and optimize our presence in key markets, within a single operating expense line titled “Transformation, integration and other charges” in the Consolidated Statements of Operations.

Consistent with the update above, we combined our historical “Restructuring and other asset related charges” and “Acquisition, integration and separation costs” into the expense caption, “Transformation, integration and other charges” to simplify our presentation and better reflect how management evaluates these activities. Prior period amounts presented in this Quarterly Report on Form 10-Q have been recast to conform to the current period presentation. This change in presentation did not affect total operating expenses, operating income, net income, earnings per share, or cash flows for any period presented.

Transformation, integration and other charges were $28 million in the first quarter of 2026, up from $17 million of charges in the first quarter of 2025. The activity for the three months ended March 31, 2026 primarily consisted of costs incurred to support our information technology independence initiatives of approximately $24 million, costs related to transformation initiatives of approximately $2 million, and other integration‑related costs of approximately $3 million. The activity for the three months ended March 31, 2025 consisted of charges for severance and related benefits. The entirety of these charges related to DuPont-approved restructuring programs that were initiated prior to our separation from DuPont into an independent publicly traded company.

See Note 4 to the unaudited interim Consolidated Financial Statements for additional information.

Equity in Earnings of Nonconsolidated Affiliates

Our share of the earnings of nonconsolidated affiliates was $13 million in the first quarter of 2026, up from $9 million in the first quarter of 2025. The increase for the first quarter of 2026 as compared to the same period of the prior year is due to higher earnings in the underlying nonconsolidated affiliates. See Note 10 to the unaudited interim Consolidated Financial Statements for additional information.

Interest Expense

Interest expense was $61 million for the three months ended March 31, 2026. There was no interest expense for the three months ended March 31, 2025. Interest expense in 2026 was driven by interest associated with the Secured and Unsecured Notes and the Senior Secured Term Loan Facility (each as defined in Note 14 to the Consolidated Financial Statements in the Annual Report). See Note 12 to the unaudited interim Consolidated Financial Statements in this Quarterly Report for additional information.

Other Income (Expense) - Net

Other income (expense) - net includes a variety of income and expense items such as interest income, indirect legacy (costs) and benefits and foreign exchange gains or losses. Other income (expense) - net was $5 million of expense in the three months ended March 31, 2026, as compared to $2 million of income for the three months ended March 31, 2025. See Note 6 to the unaudited interim Consolidated Financial Statements in this Quarterly Report for additional information.

Provision for Income Taxes

Our effective tax rate fluctuates based, among other factors, on where income is earned and the level of income relative to tax attributes. For the three months ended March 31, 2026, the effective tax rate was 25.7%, compared with 19.1% for the three months ended March 31, 2025. The increase in effective tax rate in 2026 relates to a limitation on the deductibility of interest expense and higher tax costs on the remittance of foreign earnings, partially offset by a reduction in foreign tax costs.