Qnity Electronics, Inc. Q4 FY2025 earnings call

• Launched as stand-alone public company focusing on semiconductor value chain. • Delivered seventh consecutive quarter of strong organic growth, outperformed market, grew organic sales 10%, pro forma adjusted operating EBITDA up 11% year-over-year. • Innovation engine key to growth, with Emblem CMP pad platform introduced in October. • Segments: Semi customers invest in advanced technologies; ICS advanced packaging core theme; end markets evolving with data centers, automotive, etc. • Transformation plan announced to deliver ~$100 million EBITDA run rate benefit by 2028, focusing on commercial/innovation excellence, productivity/quality, and local-for-local model.

Semiconductor Technologies segment grew organic sales 8% in 2025, driven by strong demand for semi fab consumables, with AI and high-performance computing leading demand in advanced nodes and advanced packaging, and benefit from mature nodes and NAND. Interconnect Solutions segment grew organic sales 12% in 2025, led by advanced packaging, advanced interconnects, and thermal management. Advanced packaging solutions represented approximately 10% of Qnity net sales in 2025.

• Full year 2026 net sales expected in range of $4.97 billion to $5.17 billion. • Adjusted operating EBITDA expected in range of $1.465 billion to $1.575 billion. • Adjusted EPS expected in range of $3.55 to $3.95. • Adjusted free cash flow expected in range of $450 million to $550 million. • First quarter 2026 expected sequential net sales growth high single digits with similar margin profile to fourth quarter.

Q: Semiconductor trends are pretty strong here. As we look at your EBITDA guide, can you provide some thoughts on what you're building into that, maybe perhaps on MSI, PCBs or any of the key metrics that you would like to touch on.

A: Yes. Thanks, Bhavesh. I appreciate that. And when we think about it, we're expecting MSI, as Mike indicated in his prepared remarks, we're expecting MSI to be mid-single digits, not terribly different from what we saw in 2025. And I would say on the printed circuit board side, we believe MSI is the best overall indicator. But if you look at the indicators around PCB, they're kind of in that same ballpark kind of that mid-single-digit range. So there's not a lot of spread between some of the broader macro indicators, which is really kind of why we've anchored our guidance to kind of where the -- right down the fairway towards where the market estimates are plus our outperformance content advantage, which is kind of how we got to the midpoint of the guidance range that we gave today.

Q: And in terms of -- if I caught the tail end of your remarks, correct, for the first quarter, you're expecting high single-digit top line growth sequentially and similar margins to fourth quarter. Could you touch on how you see -- just because it's your first year, could you touch on how your quarterly cadence for the year?

A: Yes. Thanks for the question. At a high level, ever since we came out of the 2023 downturn, we've seen less seasonality in our business. And so as we move into 20 the guide we have for the first quarter, like we said, is high single digits. And we will expect to see consistent steady performance through the year. We do tend to see a peak -- a little bit of a peak in the third quarter. But overall, we do see that steady performance through the year, and that's what reflected in our -- at least in our first quarter guide that we talked about.

Q: The base tax rate in 2026 is low 20%. That's a nice improvement from the initial pro forma rate, but it's still above many of our other companies. Do you have a long-term rate target? And how much further reduction in tax rate do you think you can do?

A: Yes. Thanks, John. It's a good question. At a high level, we've seen nice improvement, obviously, from '25 versus what we're forecasting for '26. Over the medium term, I expect we'll continue to work through that and eventually get into place consistent with our peers in that high-teens percentage.

Q: So I'll keep it simple. Now that it's -- you're a fully independent company and you've gone through the CMD and kind of all the outlooks and we have a pretty good sense of your algo relative to your end market expectations. How should we be thinking about op leverage throughout the year in both semi and ICS, where you've been in the last couple of quarters and where you expect to be and kind of what -- the Street should be monitoring to assess that aspect of your business?

A: Yes. [ John ], I think that overall, I think our -- if you take a look at how we performed in 2025, I think we're pleased with that performance. Given the relative segment mix, that 29.5% overall margin performance, 40 bps of margin expansion year-over-year is a nice outcome, obviously, really strong operating leverage within the ICS segment. Within the semi segment, margins came in kind of in the mid-30s, kind of right in line with our expectations in that business with all of the intense activity around the scaling of advanced nodes we've made some incremental investments in our R&D and engineering organizations to support the scale-up of those advanced nodes. And so -- and within there -- from any quarter-to-quarter, there's always a little bit of fluctuation in product mix, and that's what's really driving that in that segment. When你好，我现在要根据你提供的内容生成符合要求的JSON。首先，我需要仔细解析用户提供的问答部分内容，然后按照Schema的要求准确填充各个字段。不过在这个过程中，我发现你提供的问答部分内容比较长，需要逐句准确提取。但由于你提供的示例中已经有了完整的填充，我现在需要严格按照Schema来构建。首先，title是“Qnity Fourth Quarter and Full Year 2025 Earnings Call Summary”，segment_performance部分需要准确概括半导体技术部门和互连解决方案部门的表现，management_statement_and_operational_highlights要包含公司的启动情况、财务表现、创新引擎、部门情况和转型计划等，guidance要包含2026年的各项财务预期，risks目前没有内容，question_and_answer要包含所有的问答内容。现在开始准确填充：</think>{