Qnity Electronics Q · USD

SEGMENTS AND GEOGRAPHIC REGIONSThe Company's segments are aligned with the market verticals they serve, while maintaining integration and innovation strengths within strategic value chains. The Company's Chief Executive Officer is its CODM. Effective in the first quarter of 2025, in anticipation of the Separation, DuPont and Qnity realigned their segment structure. As a result of this realignment, Qnity consists of two operating and reportable segments: Semiconductor Technologies (“Semi”) and Interconnect Solutions (“ICS”). All periods presented have been adjusted to conform to the current segment reporting structure. This realignment is consistent with how the CODM now assesses performance. Major products by segment include: Semi (which includes chemical mechanical planarization (“CMP”) pads and slurries, photoresists, functional sub-layers, advanced overcoats, post-CMP cleaners, post-Etch residue removers and emerging cleans) and ICS (which includes copper pillar plating, copper redistribution layer, solder bump plating, under bump metallization, photoresists, packaging dielectrics, gap fillers, phase change, specialty thermal interface materials, thermally conductive insulators, copper plating solutions, dry film photoresists, laminates and polyimide films). The Company operates globally in substantially all of its product lines. Transfers of products between operating segments are generally valued at cost, to the extent such transfers are applicable.The Company's measure of profit/loss for segment reporting purposes is Adjusted Operating EBITDA as this is the manner in which the CODM assesses performance and allocates resources. The CODM utilizes Adjusted Operating EBITDA to assess financial performance and allocate resources by comparing actual results to historical and previously forecasted results. Beginning with this reporting period, the Company refers to the previously disclosed “Operating EBITDA” metric as “Adjusted Operating EBITDA". This represents a change in name only. The Company defines Adjusted Operating EBITDA as earnings (i.e., “Income (loss) before income taxes”) before interest, depreciation, amortization, non-operating pension and other post-employment benefits / charges, and foreign exchange gains / losses, indirect legacy costs, and adjusted for significant items. Reconciliations of these measures are provided on the following pages.Long-lived assets are attributed to geographic regions based on asset location.

REVENUERevenue RecognitionProductsSubstantially all of Qnity's revenue is derived from product sales. Product sales consist of sales of Qnity's products to supply manufacturers and distributors. Qnity considers purchase orders, which in some cases are governed by master supply agreements, to be a contract with a customer. Contracts with customers are considered to be short-term when the time between order confirmation and satisfaction of the performance obligations is equal to or less than one year. Revenue from product sales is recognized when the customer obtains control of the Company’s product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 30 to 60 days after invoicing depending on business and geographic region. The Company elected the practical expedient to not adjust the amount of consideration for the effects of a significant financing component for all instances in which the period between payment and transfer of the goods will be one year or less. When the Company performs shipping and handling activities after the transfer of control to the customer (e.g., when control transfers prior to shipment), these are considered fulfillment activities, and accordingly, the costs are accrued when the related revenue is recognized. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues. The Company elected to use the practical expedient to expense cash and non-cash sales incentives as the amortization period for the costs to obtain the contract would have been one year or less. The transaction price includes estimates for reductions in revenue from customer rebates and rights of return on product sales. These amounts are estimated based upon the most likely amount of consideration to which the customer will be entitled. All estimates are based on historical experience, anticipated performance, and the Company’s best judgment at the time to the extent it is probable, that a significant reversal of revenue recognized will not occur. All estimates for variable consideration are reassessed periodically. Net sales to Samsung Electronics Co., Ltd accounted for 11%, 12%, and 12% of total net sales for each of the years ended December 31, 2025, 2024 and 2023, respectively.

COMMITMENTS AND CONTINGENT LIABILITIESLitigation MattersIn the normal course of business, the Company is involved from time to time in various arbitrations, lawsuits, claims and other actions with respect to patent infringement claims, employment claims, including alleged wage and hour violations, and commercial claims.The Company accrues for such matters where losses are deemed probable and reasonably estimable. There are other matters involving the Company for which a loss is deemed remote or reasonably possible, and, as a result, associated accruals have not been established. It is reasonably possible that some of these matters could result in future payments or costs in excess of the amounts accrued at December 31, 2025, but such excess amounts cannot be reasonably estimated. It is the opinion of the Company’s management that the possibility is remote that the aggregate of all such claims and lawsuits will have a material adverse impact on the results of operations, financial condition and cash flows of the Company.Certain Indemnification Obligations to DuPontIn connection with the Separation, Qnity has been contractually allocated, and directly pays or indemnifies DuPont for, the Applicable Qnity Percentage of certain liabilities, including current or future funding obligations of DuPont under the Memorandum of Understanding ("MOU"), legacy PFAS liabilities and liabilities related to businesses and operations of DuPont that were previously discontinued or divested. On December 2, 2025, Qnity and DuPont determined and agreed, pursuant to the Separation and Distribution Agreement, that the Applicable Qnity Percentage is 44%. Indemnification liabilities have been determined and recorded based on this Applicable Qnity Percentage and in accordance with the applicable provisions in the Separation and Distribution Agreement and the and the Legacy Liabilities Assignment Agreement (including adjustments therein related to estimated income tax benefits arising from the liabilities allocated to us). These liabilities were recorded as a reduction to "Additional paid-in capital" in the Consolidated Balance Sheets as of the Separation and Distribution Date. As of December 31, 2025, the Company has recorded indemnification liabilities related to the legacy liabilities detailed above of $80 million within “Accrued and other current liabilities” and $110 million within “Other noncurrent obligations” within the Consolidated Balance Sheets.

INCOME TAXESThe Company operated as part of DuPont until completion of the spin off on November 1, 2025. Therefore, prior to that date, Qnity did not file separate tax returns in the U.S. federal, certain state and local, and certain foreign tax jurisdictions, as Qnity was included in the tax grouping of DuPont and its affiliate entities within the respective jurisdictions. The Company will file a separate tax return in these jurisdictions for the remainder of fiscal year 2025. The Company expects to file income tax returns on a standalone basis in most other foreign jurisdictions in which it operates for the full fiscal year 2025. Provision for income taxes included in these Consolidated Financial Statements have been calculated using the separate return basis, as if Qnity filed separate tax returns for the entirety of each of the periods presented. Prior to the spin off, the Company’s operations were calculated on a carve-out basis. Qnity’s Provision for income taxes as presented in the Consolidated Financial Statements may not be indicative of the income taxes that Qnity will generate in the future.Geographic Allocation of Income (Loss) and Provision for Income Taxes 202520242023(In millions) For the years ended December 31,Income (loss) before income taxesDomestic$(222)$(161)$(171)Foreign1,184 1,062 803 Income before income taxes$962 $901 $632 Current tax expense Federal$12 $14 $6 State and local4 4 2 Foreign 296 240 170 Total current tax expense$312 $258 $178 Deferred tax benefitFederal $(61)$(58)$(55)State and local(8)(5)(6)Foreign (10)(18)(18)Total deferred tax benefit$(79)$(81)$(79)Provision for income taxes233 177 99 Net income $729 $724 $533 Reconciliation to U.S. Statutory Rate2025(In millions) For the year ended December 31, AmountRateU.S. Federal Statutory Tax Rate$202 21.0 %State and Local Income Taxes, Net of Federal Income Tax Effect1(4)(0.4)Foreign Tax EffectsChinaStatutory tax rate difference between China and United States11 1.1 Investment based benefits(13)(1.3)Withholding tax17 1.7 Other(1)(0.1)JapanStatutory tax rate difference between Japan and United States12 1.2 Other(1)(0.1)SingaporeStatutory tax rate difference between Singapore and United States(15)(1.5)Investment based benefits(49)(5.0)Qualified domestic minimum top up tax41 4.2 Other1 0.1 Other Foreign Jurisdictions3 0.3 Effects of Cross-Border Tax Laws(3)(0.3)Tax Credits(8)(0.8)Changes in Valuation Allowances3 0.3 Nontaxable or Nondeductible Items8 0.

STOCK-BASED COMPENSATIONThe Company adopted the Qnity Electronics, Inc. Equity and Incentive Plan ("EIP") in connection with the Separation. Under the EIP, the Company may grant options, stock appreciation rights ("SARs"), restricted shares, restricted stock units ("RSUs"), share bonuses, other share-based awards, cash awards, conversion awards, each as defined within the EIP, or any combination of the foregoing. Under the EIP, a maximum of 16 million shares of common stock are available for award as December 31, 2025. Outstanding DuPont-denominated equity awards at the time of Separation were converted using the conversion ratio that was determined in accordance with the Employee Matters Agreement. The awards have the same terms and conditions under the applicable plans and award agreements prior to the Separation transactions. The conversion of equity awards resulted in incremental modification expense of less than $1 million. The Company recognized share-based compensation expense of $20 million for the year ended December 31, 2025 and $13 million for each of the years ended December 31, 2024 and 2023. The income tax benefits related to stock-based compensation arrangements was $4 million for the year ended December 31, 2025 and $3 million for each of the years ended December 31, 2024 and 2023.Total unrecognized pretax compensation cost related to nonvested stock option awards of $21 million at December 31, 2025, is expected to be recognized over a weighted-average period of 2.9 years. Total unrecognized pretax compensation cost related to RSUs and performance based stock units ("PSUs") of $58 million at December 31, 2025, is expected to be recognized over a weighted average period of 2.3 years. The total fair value of RSUs and PSUs under the EIP vested in the year ended December 31, 2025 was $1 million. The weighted average grant-date fair value of RSUs and PSUs granted under the EIP during 2025 was $97.98.Qnity Electronics, Inc. Equity and Incentive PlanEIP Stock OptionsThe exercise price of shares subject to option is equal to the market price of the Company's stock on the date of grant. Stock option awards generally vest over a three-year period and expire 10 years after the grant date. The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards and the assumptions set forth in the table below.

LEASES The Company has operating leases for real estate, fleet, and certain machinery and equipment. The Company’s leases have remaining lease terms of approximately 1 year to 19 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise that option. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial ROU asset or lease liability. The components of lease cost for operating leases for the years ended December 31, 2025, 2024 and 2023 were as follows: In millions202520242023Operating lease cost$44 $44 $41 Variable lease cost 16 3 4 Less: Sublease income 22 — — Total lease cost$48 $47 $45 1.Variable lease cost excludes costs that have been capitalized into inventory of approximately $15 million in each year presented. 2.Reflects income associated with subleases, not inclusive of all lessor arrangements disclosed below. Operating cash flows from operating leases were $42 million, $40 million, and $38 million for the year ended December 31, 2025, 2024 and 2023, respectively. New operating lease assets and liabilities entered into during the year ended December 31, 2025, 2024 and 2023 were $410 million, $11 million and $83 million, respectively. Of the operating leases entered into during the year ended December 31, 2025, approximately $347 million relate to facilities leased from DuPont following the Separation. Supplemental balance sheet information related to leases was as follows: In millionsDecember 31, 2025December 31, 2024Operating Leases Operating lease right-of-use assets 1$493 $127 Current operating lease liabilities 243 30 Noncurrent operating lease liabilities 3455 100 Total operating lease liabilities$498 $130 1.Included in "Deferred charges and other assets" in the Consolidated Balance Sheets.2.Included in "Accrued and other current liabilities" in the Consolidated Balance Sheets.3.Included in "Other noncurrent obligations" in the Consolidated Balance Sheets.Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

Cybersecurity oversight resides with our Board’s Audit Committee, which receives periodic reports from senior leadership. Cybersecurity updates are also provided to the full Board as needed. The CISO reports to the Chief Information Officer (CIO). Updates include information related to threat trends, incident metrics, and third-party risk management activities. Our Board periodically reviews its composition to ensure appropriate cybersecurity expertise.Incident Response and MonitoringOur cybersecurity risk assessment and management processes are implemented and maintained by certain members of our management team, including our CISO and our CIO. Our CISO has over twenty years of experience in information security leadership, including serving as CISO of two other multinational companies, holds master’s degrees in computer science and mechanical engineering, and is CISSP certified. Our CIO has over five years of experience in senior executive roles that involve oversight of cybersecurity matters and holds a master’s degree in information and knowledge strategy. We maintain a formal Cybersecurity Incident Response Plan that classifies incidents into severity levels and defines escalation paths. Material incidents trigger immediate notification to senior management and the Board. Supported by internal teams and external partners, our 24/7 monitoring supports timely detection and response. Post-incident reviews drive continuous improvement.Employee TrainingAll employees are required to complete mandatory annual cybersecurity training covering phishing awareness, data protection, mobile security, and insider threat prevention. We also conduct periodic phishing simulations and targeted refreshers for high-risk roles.

SUBSEQUENT EVENTSShare Repurchase AuthorizationOn February 20, 2026, the Company's Board of Directors approved a share repurchase authorization of up to $500 million of common stock (the "$500M Authorization"). Under the $500M Authorization, repurchases of common stock may be effected from time to time, either on the open market (including pre-set trading plans), in privately negotiated transactions, or other transactions in accordance with applicable securities laws. The $500M Authorization has no expiration date and will terminate once the authorized amount of shares have been repurchased and retired or when terminated by the Board of Directors.