Qnity Electronics, Inc.

Liquidity & Capital Resources

Information related to the Company's liquidity and capital resources can be found in the Annual Report, Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Discussion below provides updates to this information for the six months ended June 30, 2026.

We continually review our sources of liquidity and debt portfolio and may make adjustments to one or both to ensure adequate liquidity and increase our optionality and financing efficiency as it relates to financing cost and balancing terms/maturities. Our primary source of incremental liquidity is cash flows from operating activities. Management expects the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet the Company’s and our subsidiaries' obligations as they come due. However, we are unable to predict the extent of macroeconomic related impacts which depend on uncertain and unpredictable future developments. In light of this uncertainty, we have taken steps to further ensure liquidity and capital resources, as discussed below.

Our cash and cash equivalents at June 30, 2026 and December 31, 2025 were $961 million and $915 million, respectively. Cash and cash equivalents held by subsidiaries in foreign countries were $662 million and $640 million as of June 30, 2026 and December 31, 2025, respectively. For each of its foreign subsidiaries, we make an assertion regarding the amount of earnings intended for permanent reinvestment, with the balance available to be repatriated to the United States. Refer to subsequent paragraphs for drivers of the change in cash and cash equivalents.

Cash flows from operating, investing and financing activities are provided in the tables that follow. Individual amounts in the unaudited interim Consolidated Statements of Cash Flows exclude the effect of exchange rate impacts on cash and cash equivalents, which are presented separately in the cash flows. Thus, the amounts presented in the following operating, investing and financing activities tables reflect changes in balances from period to period adjusted for these effects.

Summary of Cash Flows

Our cash flows from operating, investing and financing activities, as reflected in the unaudited interim Consolidated Statements of Cash Flows, are summarized in the following table.

Cash Flows from Operating Activities

In the first six months of 2026, cash provided by operating activities was $376 million, compared with $480 million in the same period last year. The decrease in cash provided by operating activities is primarily related to payments of interest on our long-term debt, which was not outstanding as of June 30, 2025, and an increase in net cash used for working capital. Changes in working capital were primarily driven by higher trade receivables due to increased sales and higher inventory based on business activity, net of increased accounts payable due to increased production and inventory builds to support sales growth.

Cash Flows from Investing Activities

In the first six months of 2026, cash used for investing activities was $205 million, compared with $153 million in the first six months of 2025. The increase in cash used for investing activities in 2026 is primarily attributable to higher capital expenditures.

Cash Flows from Financing Activities

In the first six months of 2026, cash used for financing activities was $109 million compared with $330 million in the same period last year. Cash used for financing activities decreased primarily due to the absence of net transfers to Parent compared to the prior period, partially offset by current period purchases of common stock, payment of dividends, and repayments on long-term debt.

Material Cash Requirements

In the normal course of business, we enter into contracts and commitments that oblige us to make payments in the future. Information regarding our obligations under lease, debt, commitments and pensions is provided in Note 6, Note 12, Note 13 and Note 15, respectively, in the interim unaudited Consolidated Financial Statements for the three and six months ended June 30, 2026 and 2025 of this Quarterly Report. We expect the generation of cash from operations and the ability to access the debt capital markets and other sources of liquidity will continue to provide sufficient liquidity and financial flexibility to meet our obligations, and those of our subsidiaries, as they come due.

Debt

Total debt at June 30, 2026 and December 31, 2025 was $4,020 million and $4,027 million, respectively. As of June 30, 2026, we were in compliance with all applicable covenants included in the terms of our debt arrangements.

As of June 30, 2026, we are contractually obligated to make future cash payments of $4.1 billion and $1.5 billion associated with principal and interest, respectively, on debt obligations. Related to the principal, $23 million will be due in the next twelve months and the remainder will be due subsequent to June 2027. We may address the principal payment with cash on hand, utilizing existing credit facilities, accessing the debt capital markets or a combination of any of them. Related to interest, $236 million will be due in the next twelve months and the remainder will be due subsequent to June 2027.

We rely on cash from our own operating activities, borrowings available under our Senior Secured Revolving Facility, and access to the capital markets to fund our operations. The servicing of this debt will be supported, in part, by cash flows from our existing operations. The cost and availability of debt financing is influenced by our credit ratings and market conditions.

Dividends

On December 9, 2025 the Board of Directors declared a quarterly dividend of $0.08 per share for each share of issued and outstanding common stock of the Company. The dividend was paid on March 16, 2026 to stockholders of record on February 27, 2026.

On April 15, 2026, we announced that the Board of Directors declared a quarterly dividend of $0.08 per share, which was paid on June 15, 2026, to our stockholders of record on May 29, 2026.

On June 24, 2026, we announced that the Board of Directors declared a quarterly dividend of $0.08 per share payable on September 15, 2026, to our stockholders of record on August 31, 2026.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see Note 2 to the unaudited interim Consolidated Financial Statements in this Quarterly Report.

Critical Accounting Estimates

There have been no material changes in our critical accounting estimates from those disclosed under the heading "Critical Accounting Estimates" within Part II, Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.