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Overall the call was strongly positive: Qnity reported a record quarter with robust top-line and margin expansion, raised full-year guidance across sales, EBITDA, EPS and free cash flow, and showcased durable secular tailwinds (AI, advanced packaging, thermal management) plus strategic partnerships and capacity builds. Notable risks include elevated near-term CapEx and modest Q1 free cash flow, input-cost inflation (~$20M headwind), inventory restocking, and geopolitical/operational uncertainties, but management outlined mitigations (pricing actions, local-for-local model, scenario planning). Highlights materially outweigh the lowlights.
Qnity raised its 2026 guidance after a strong Q1 and now expects full-year net sales of $5.225B–$5.375B (midpoint +5%), adjusted operating EBITDA $1.535B–$1.625B (midpoint +4%), adjusted EPS $3.80–$4.14 (midpoint +6%) and adjusted free cash flow $500M–$600M (midpoint +10%); Q1 results were net sales $1.3B (+18% YoY, +17% organic), adjusted operating EBITDA $411M (+22% YoY) with a 31.3% margin (+125 bps YoY), adjusted EPS $1.08 (+33%) and FCF $28M. For Q2 the company expects overall mid-single-digit sequential net sales growth, Semiconductor roughly flat sequential with mid‑30s margins, ICS high‑single‑digit sequential growth with mid‑to‑high‑20s margins, and MSI wafer-start growth now seen in the mid‑ to high‑single‑digit range. It assumes ~ $20M of raw‑materials/logistics inflation for the rest of 2026 (to be largely offset by pricing), plans elevated CapEx of ~9% of sales this year (longer‑term ~6%), had ~$850M cash, $4B total debt (net leverage 2.2x), repurchased $25M of stock, and noted inventory ~100 days with ~6x turns.
Q1 net sales of $1.3B, up 18% year-over-year and 11% sequentially; organic sales +17% YoY. Adjusted operating EBITDA of $411M, up 22% YoY, with adjusted EBITDA margin 31.3% (expanded >125 bps YoY). Adjusted EPS was $1.08, up 33% YoY. Cash and short-term investments ~ $850M; repurchased $25M of shares.
Management raised FY26 guidance: net sales $5.225B–$5.375B (midpoint +5%), adjusted operating EBITDA $1.535B–$1.625B (midpoint +4%), adjusted EPS $3.80–$4.14 (midpoint +6%), and adjusted free cash flow $500M–$600M (midpoint +10%). Company expects double-digit net sales and EBITDA growth year-over-year and now models MSI wafer start growth in the mid- to high-single-digit range.
ICS net sales $593M with organic growth +22% YoY. Core ICS areas (Advanced Packaging, Interconnects, Thermal Management) grew >50% YoY. ICS adjusted operating EBITDA margin 28.5%, improving ~280 bps sequentially, driven by operating leverage and favorable mix; winning new business with AI PCB fabs, hyperscalers and premium OEMs.
Semiconductor net sales $722M with organic growth +12% YoY, led by advanced logic and HBM. CMP and lithography product lines saw strength as 3nm volumes scale and early 2nm activity appears; segment adjusted operating EBITDA margin 36.4%, up ~130 bps sequentially.
Announced collaboration with NVIDIA on materials R&D and inclusion in Apple's American manufacturing program. Opened a 385,000 sq. ft. Delaware facility; announced a new Taiwan site (to be fully operational early 2027). CapEx elevated to support capacity (FY26 ~9% of sales) with modular investments to enable customer ramps.
Eighth consecutive quarter of profitable organic growth with multiple process-of-record (POR) wins across product lines. R&D focus on advanced nodes (3nm, 2nm and Angstrom-era 16/14/10), CMP consumables, lithography films/EUV sublayers, AI PCBs and thermal management is translating into share gains and visible multi-year demand.
Good morning, and welcome to the Qnity First Quarter 2026 Conference and Webcast Call. [Operator Instructions] I will now turn the call over to [indiscernible] Miller, Vice President of Global Communications. You may begin.
Thank you, and welcome to our first quarter 2026 earnings call. I'm joined by Jon Kemp, Qnity's Chief Executive Officer; and Mike Goss, Qnity's Interim Chief Financial Officer. Earlier today, we issued our earnings release along with the supplemental slide presentation, which can be found on our Investor Relations website. Before we begin, I'd like to remind you that today's discussion will include some forward-looking statements. These statements represent our best view of predictions and expectations for the future, but numerous risks and uncertainties may cause actual results to differ. Please refer to our earnings release and SEC filings for a discussion of these risks. We'll also be discussing certain non-GAAP financial measures, and I encourage you to read our earnings materials information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure. And now it's my pleasure to turn it over to Jon.
Thank you for joining us this morning. Our strong performance this quarter demonstrates how Qnity creates value. First, through a powerful integrated portfolio. Second, a differentiated ability to innovate alongside our customers' road maps. And third, leadership in advanced materials that are foundational to the exponential growth in AI and emerging technologies. For decades, Moore's Law has been the driving...