SOLS

Greetings, and welcome to the Solstice Advanced Materials first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mike Leithead, Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Solstice's first quarter 2026 earnings call. We released our first quarter 2026 financial results earlier this morning. Today's presentation, including non-GAAP reconciliations and our earnings press release, are available on the Investor Relations portion of Solstice's website at investor.solstice.com. Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. Joining me today are David Sewell, our President and CEO, and Tina Pierce, our CFO. David will open today's call with highlights of our first quarter results. Tina will then review our segment performance and financial outlook before turning the call back to David for closing remarks. We will then be happy to take your questions.

With that, I'll now turn the call over to David.

Thank you, Mike, and thank you everyone for joining us today. During the first quarter, Solstice Advanced Materials delivered strong top and bottom line results, reflecting ongoing robust demand trends across several of our key businesses, including nuclear, electronic materials, and refrigerants. I would like to take a moment to thank our entire Solstice team for this strong outcome in what was our first full standalone quarter as an independent company. This performance demonstrates Solstice's ongoing discipline, execution, and agility, not only through our transition to a standalone company, but also in a dynamic macro environment. At the same time, our top-tier return profile and conservative leverage position allows us to reinvest and grow at a time when many in the industry have needed to pare back.

We continue to invest in compelling growth areas aligned with our strategic pillars, such as our electronic materials, Safety and Defense Solutions, and nuclear businesses, consistent with what we believe are attractive long-term outlooks for demand. This growth investment is not just in CapEx, but also higher spending on our R&D pipeline as we work to advance the next generation of critical molecules for our customers. The first quarter was also a strong cash quarter for Solstice, generating nearly $200 million in operating cash flow. We are able to use this cash to not only fund our growth investments, but also return cash to shareowners, as highlighted by our recently announced quarterly dividend. We will continue to be disciplined in our capital allocation, ensuring that we are prudently balancing shareowner returns with opportunities that we believe will unleash long-term growth.

With this strong start to 2026, today we are reaffirming our full year 2026 guidance that we provided on our last quarterly call. We continue to believe we remain very well positioned for the year. Turning to slide four, I'd like to spend a moment to highlight our ongoing growth investments in advanced computing, which is a key strategic pillar for the company. The semiconductor industry is evolving rapidly, and we believe the ongoing shift to advanced nodes and advanced packaging creates significant growth opportunities for Solstice's core deposition and thermal management platforms. Our electronic materials business had a fantastic quarter, delivering 21% year-on-year revenue growth following 19% year-on-year growth in the fourth quarter of 2025.

We think it's also important to note that thermal management for Solstice extends into our RAS business with accelerating sales of refrigerants into data centers and a pipeline of next-generation molecules under development. Solstice has a rich history of partnering both with semiconductor companies and HVAC solution providers, and we believe this provides us with significant opportunities in this space as the data center ecosystems become increasingly integrated. At a product level, an area we want to highlight this quarter is our sputtering targets offerings for deposition, which we believe are the materials of choice for leading-edge semiconductor nodes used for AI and data center applications.

With robust demand, we are investing $200 million in our Spokane, Washington facility to double our target's capacity, reduce customer lead times, and at the same time, provide sustainability benefits through increased recycling and CO2 emissions reduction. This is a clear example of where we have the opportunity to invest to benefit our customers, share owners, and broader stakeholders. Importantly, as with all projects we evaluate, we analyze opportunities through a strict returns-based approach, and we do expect this project to exceed Solstice's acceptable hurdle rate of a mid-teens percentage IRR, underscoring our commitment to our top-tier return profile. Given the increasing customer demand trends, we are also evaluating opportunities to further accelerate similar organic growth investments as well as strengthen our innovation pipeline in this space.

All in, we are excited about the growth prospects and recent performance of this strategic pillar, and we look forward to building on our strong foundation of innovation with ongoing high return growth investments. Turning to slide five, I'd like to discuss our first quarter 2026 consolidated results. In the first quarter of 2026, Solstice recorded $991 million in net sales, up 10% year-over-year, which exceeded the top end of our guidance we provided for the quarter. In our Refrigerants & Applied Solutions segment, strong demand for refrigerants driven by the ongoing HFO transition, as well as healthy performance in our nuclear business, drove top line growth for the segment. In our Electronic & Specialty Materials segment, net sales growth was driven by robust demand in our electronic materials business for semiconductor applications.

Adjusted EBITDA for the first quarter of 2026 was $249 million, relatively flat year-over-year and exceeding the top end of the guidance we provided for the quarter. Adjusted EBITDA margin was 25.1%, in line with our expectations for the quarter. The decline in margin year-over-year was primarily driven, as expected, by refrigerant mix related to the ongoing HFO transition as well as higher R&D investment as we prioritize next generation innovation and opportunities. As a reminder, this refrigerant dynamic has been previously communicated as we see ongoing strong demand for our LGWP product. Now, approximately four quarters into the R-454B transition, we do expect sequential refrigerant margin improvement from first quarter levels, and we remain optimistic about the opportunity for further margin expansion as the aftermarket develops.

We reported GAAP net income attributable to Solstice of $85 million for the first quarter of 2026. The decrease year-over-year was primarily driven by costs associated with being a standalone public company, such as higher SG&A and interest expense. We would also note that our non-controlling interest was atypically high this quarter at $20 million, with the increase driven by favorable ConverDyn margins and the impact from a consolidated entity associated with our Sinochem JV and does not reflect the expected quarterly run rate going forward. This quarter, we also reported adjusted diluted EPS for our first full quarter as a standalone company, which was $0.63 for the first quarter.

Finally, free cash flow for the first quarter of 2026 was $124 million, which is inclusive of the significant year-over-year increase in growth CapEx as we invest in high return opportunities across the business, including the Spokane expansion that I previously discussed. With that, I'll now turn it over to Tina Pierce, our CFO, to discuss our financial results for the first quarter in more detail.

Thank you, David. Turning to slide six, I'd like to discuss in more detail the key drivers of our year-over-year net sales and adjusted EBITDA performance in the first quarter. Beginning with our net sales of $991 million for the quarter, organic net sales growth was 8%, including 6% from volume growth and 2% due to pricing. This primarily reflects volume growth and favorable pricing in both nuclear and refrigerants, as well as volume growth in electronic materials. Our net sales growth also included a 2.5% increase due to foreign currency translation. Turning to our adjusted EBITDA of $249 million for the quarter, which was fairly comparable to the prior year period.

Year-over-year improvement in ESM as well as prudent corporate cost management was largely matched by a decline in RAS, which is primarily attributable to the shift in refrigerants mix that David just discussed. Turning to slide seven, I'll now discuss the results in each of our two segments in more detail, beginning with Refrigerants & Applied Solutions. Overall, the segment achieved $711 million in net sales for the first quarter of 2026, reflecting 12% growth year-over-year. The growth is composed of 9% organic net sales growth and 3% increase due to foreign currency translation. The segment posted $242 million in adjusted EBITDA for the first quarter of 2026, down 3% year-over-year, and adjusted EBITDA margin of 34.1%, down 522 basis points year-over-year.

As mentioned previously, this decrease was primarily driven by anticipated shifts in refrigerants mix and higher R&D spending, which more than offset volume growth and favorable pricing in the segment. Turning to performance of our sub-segments, refrigerants net sales increased 19% year-over-year to $389 million, driven by both favorable pricing and volume growth across our product offerings. In addition to the strong demand for R-454B that David mentioned, the sub-segment also benefited from accelerating orders for data centers, underscoring how this business sits at the intersection of multiple key secular growth trends. Our nuclear business had $107 million in net sales, up 27% year-over-year, reflecting both favorable pricing and increased volumes.

We remain excited about the future of this differentiated business, which we believe is well-positioned to play a critical role in the advanced nuclear renaissance that we are beginning to see unfold. Building Solutions and Intermediates net sales were $167 million, down 8% year-over-year. Although continued softness in the construction market impacted performance, we remain focused on driving LGWP solutions and on continuing our strong operational execution to ensure we are well-positioned to serve our customers upon a return to more normalized demand in key end markets. Lastly, for healthcare packaging, net sales were $47 million, up 9% year-over-year. The increase was driven by a recovery in customer demand patterns following the destocking we saw in the second half of 2025. Now turning to our Electronic & Specialty Materials segment on Slide eight.

The segment achieved $281 million in net sales for the first quarter of 2026, reflecting 7% growth year-over-year. The growth is composed of 5% organic net sales growth and a 3% increase due to foreign currency translation. The segment posted $58 million in adjusted EBITDA for the first quarter of 2026, up 10% year-over-year, an adjusted EBITDA margin of 20.8%, up 52 basis points year-over-year. The increase was primarily driven by volume growth in electronic materials. Looking at the performance of our sub-segments, electronic materials net sales increased 21% year-over-year to $109 million, driven by volume growth and robust customer demand across semiconductor applications.

As David discussed earlier, we continue to invest in capacity expansion for electronic materials with semiconductor dynamics and secular trends for AI and data centers driving a significant opportunity for Solstice. Safety and Defense Solutions had $50 million in net sales, flat year-over-year. We anticipate strong growth in the second quarter based on order patterns, and we continue to invest in capacity expansion to support long-term market demand for our Spectra line of solutions. Finally, Research and Performance Chemicals net sales remained steady year-over-year at $121 million, with growth in fine chemicals offset by ongoing end market softness and specialty additives. Moving to slide nine to discuss Solstice's balance sheet and capital management. Our strong balance sheet, cash flow generation, and conservative leverage position continue to enable financial flexibility and fuel Solstice's many attractive growth investments.

I'd like to start with cash, with Solstice generating $199 million of operating cash flow in the quarter. In addition to healthy earnings generation, we were able to execute strong working capital management, reducing our dollar inventory and receivables in the quarter despite the healthy increase in revenue and rising input cost. Our capital expenditures for the first quarter were $82 million, a 32% increase compared to the prior year period, due to planned increases in capital spending to drive long-term growth in high return areas of the business. As a reminder, beyond the electronic materials project discussed earlier, we are actively investing in our Spectra ballistic fibers expansion in Virginia, as well as exploring further expansion opportunities in our nuclear conversion business. Turning to our capital structure, we have maintained a conservative leverage profile and strong liquidity position.

As of March 31st, 2026, our long-term debt was $2 billion, and we had cash and cash equivalents of $642 million, resulting in net debt of approximately $1.3 billion and net leverage ratio of approximately 1.4x based on a trailing 12-month adjusted EBITDA. As of March 31st, 2026, we also had $1 billion of availability under our revolving credit facility. Combined with the cash on the balance sheet, this results in approximately $1.6 billion of total liquidity. As David mentioned earlier, we announced last week approval of a quarterly dividend of $0.075 per share, in line with last quarter.

We continue to view returning excess capital to shareholders as a key piece of our overall capital allocation approach. Turning to slide 10, I'd like to discuss our outlook and financial guidance for both the full year and second quarter of 2026. For the full year of 2026, we are reaffirming our guidance announced on our last quarterly call. We expect to deliver net sales between $3.9 billion and $4.1 billion. Adjusted EBITDA between $975 million and $1.025 billion. Adjusted diluted earnings per share between $2.45 and $2.75. Additionally, we continue to expect capital expenditures between $400 million to $425 million. As David mentioned earlier, the strong first quarter results gives us increased confidence in the year.

Today, we are also providing guidance for the second quarter of 2026 as we want to help investors better understand our business and our first year as a public company. Second quarter, we expect to deliver net sales between $1.06 billion and $1.1 billion with an approximately 25%-26% adjusted EBITDA margin. Our outlook for the second quarter assumes continued momentum in refrigerants, nuclear, and electronic materials, and growth in Safety and Defense Solutions based on order patterns. Importantly, it also reflects modest margin expansion as we expect commercial actions to more than fully offset inflation. This 2Q outlook also contemplates $10 million of planned downtime-related expense. Finally, looking ahead, we are pleased to announce that we will be hosting a virtual webinar on June 4th to provide more insight into our nuclear business.

Additional details can be found on the events portion of our investor relations website. We look forward to sharing more during the event in June. I'd now like to pass it back over to David for some closing remarks.

Thank you, Tina. Please turn to slide 11. With strong performance in the first quarter and solid momentum heading into the remainder of the year, we are well-positioned to deliver on our full year 2026 guidance. As we discussed today, we are seeing continued strong demand in our businesses that serve key end markets aligned with secular growth trends, including nuclear, high performance computing, data centers, and defense spending. As a standalone company, Solstice is able to now accelerate our innovation pipeline to stay on the cutting-edge needs of our customers, which is critical to capture this growth opportunity. We're doing this through reinvesting in our businesses, both in terms of expanding our R&D pipeline as well as high return growth CapEx.

As highlighted earlier in the call with advanced computing, these are core strategic areas for Solstice, where we have both a clear right to play and a right to win. Fueling all of this growth investment is our current business performance, which continues to demonstrate specialty characteristics of strong pricing power, durable margins, and high ROIC. We are deploying our strong cash flow in a prudent manner with high growth investments and returning cash to shareholders through our quarterly dividend. We remain excited about the significant opportunities ahead in 2026. We look forward to sharing additional updates throughout the year, and we hope to see you all at our virtual nuclear webinar next month. With that, we are now happy to take your questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Kevin McCarthy with Vertical Research Partners.

Yes, thank you very much, and good morning. David, nice to see the 27% sales growth in nuclear. A few questions on that business. Can you help us understand the relative volume and price contributions that are flowing through there? Also, I think you had a loan that you'll be repaying this year, and so perhaps you can comment on whether that's occurred yet or might be in the future part of the year. Just another question also on long-term expansion potential following on the expansion that you've already done and you know whether that might be in the cards. Thank you.

Morning, Kevin. Thanks for the question. To jump right into nuclear, we saw strong performance in Q1, both price and volume. We don't split it out exactly, but I would tell you that it was a combination of both, and so we feel really good about that business. This dovetails right into your question on expansion. Our de-bottlenecking efforts are going extremely well. We feel very good about, you know, the 25% increase in volume that we're gonna deliver from our 2024 numbers. Then on the future expansion, we are going down two paths right now.

As we mentioned on our last call, we have engaged with an engineering firm to do a study on a variety of options for us to significantly expand our production capabilities, which we see as a need going into the 2030s beyond our current capabilities. The discussions we're having with customers and regulators. Customer discussions have already begun to understand what that new demand is going to be as nuclear continues to grow around the world. Those conversations are going extremely well. Very good engagement for customers to ensure that we are partnered with them for their needs as they continue to expand. Very good discussions with the Department of Energy and U.S. regulators and the NRC on expansion opportunities as well.

It'll certainly come down to a combination of both what those global customer demand needs are going to be with the expansion of nuclear energy, and that build-out continues, especially with the acceleration of SMRs, and then the discussions we're having with the U.S. government. That's going extremely well. We will probably be in a position to share more on the engineering work we're doing later this year. It's pretty extensive, as you can imagine. The last part of your question on the loan, we are doing that loan return, as you mentioned. It's about a $30 million impact for the year. We will not see that in first quarter, probably not much in second quarter, but we'll see that return really in the second half of the year.

Once that is complete, all of our loan returns will be complete, so we'll be moving forward in full capacity for our customers going into 2027.

Very helpful. As a follow-up, if I may, just a broad question about what you're seeing following the war in the Middle East. Maybe you could comment on how you're looking at cost and availability trends and whether or not-

Yeah.

You foresee the need for any incremental price actions or surcharges as you look across the portfolio?

Sure. I'll give a kind of a broader view, and I'll turn it over to Tina to give you a little bit more specifics. We certainly are not immune from some of the inflationary impact from what's happening in the Middle East. We're certainly seeing it in our logistics costs with diesel fuel and shipping costs. It has had an impact on some of our raw materials, such as sulfuric acid. Having said that, we've been able to partner with our customers and offset that inflation with the needed pricing that we've had to do to offset that inflation. Tina, I'll just have you kind of give a little bit more color.

Sure. Yeah. So hi, Kevin. Yeah, in regards to the sulfuric and olefins and from that David just mentioned, that represents less than 10% of our total material spend, so rather insignificant. Then as it relates to sulfur, I would just add that we do have kind of a regional approach to that sourcing, you know, both in Americas and Europe. Really, minimal disruption as a result of the Middle East. Then, we cover price cost in quarter one. We expect to do the same for the remainder of the year. As you know, we mentioned during our investor day, this was a set of muscles that we developed during 2021, 2022. We have very strong analytical tools, so we're extremely well-positioned.

Good to hear. Thank you so much.

Thanks, Kevin.

Our next question is from John McNulty with BMO Capital Markets.

Yeah, good morning. Thanks for taking my question. Maybe to start out, on the refrigerant side, I guess, can you speak to the growth that you're seeing and interest that you're seeing from the data center industry, and in particular, also speaking to kind of the next generation opportunities. I know you kind of provide them with traditional services now, but I also know there's a lot of interest in some of the two-phase direct to chip side. Maybe if you can give us an update as to how those discussions and trials may be progressing.

Good morning, John. Thanks for the question. You know, our data center growth has really been a key part of these secular growth trends that we're seeing. From a refrigerant standpoint, we are definitely seeing double-digit growth in refrigerants in data centers. We don't pinpoint the number exactly. We have a few different products that go into data centers. You know, we're a step removed from that process, but the partnership we have with our customers that are selling into that, we have really good line of sight to a strong double-digit growth in data centers. Your comment on next generation is part of the reason why you're seeing a little bit of that R&D spend.

We have multiple projects co-innovating with customers, both on the chip side and at the data center infrastructure side. You're exactly right. I think as you look at what needs to happen as these leading edge nodes, next generation advanced electronics happen, the heat that's being generated. The ambient cooling that's going on is going to continue to be a need, but it's not going to be enough. We're going to have to get the heat off the chip. That is exactly what we're working on. There's multiple avenues. There's single-phase direct to chip, which is kind of happening now. I think you'll see soon two-phase direct to chip. That is really going to be a key component, which we feel very good about with a lot of the innovation we're doing.

Then as you look a little bit longer term, you know, the next four or five years, you know, we're exploring things like immersion cooling and other types of solutions, 'cause the heat is just going to be greater and greater. I would add we're also working with data centers on what to do with that heat, so not emitting it into the atmosphere outside of the data center. How do we repurpose that heat and use it to heat communities nearby? There's an enormous amount of opportunity, and we just feel we're extremely well positioned not only to work with customers on leading edge nodes, but also the cooling with our RAS business, our thermal interface business in advanced electronics. A lot going on there.

Then, you know, at a tertiary level, we need more energy for data centers. I mean, that is certainly an issue that needs to be addressed. There's an enormous amount of momentum in nuclear energy to help be a solution, which is dovetailing right into our nuclear expansion as well. A lot going on in data centers, and we just feel like we're extremely well positioned, which is driving some of that R&D costs that we're seeing. The co-innovation pull that we're getting from customers is significant.

Great. Thanks very much for the color.

Thanks, John.

Our next question is from John Roberts with Mizuho Securities.

Thank you. Nice clean quarter and guidance. I've just one question. Your growth in electronics was also at the high end of what we've seen with other electronic material businesses. I think you have an expansion underway, but it doesn't start up for a while. Do you expect to get capacity constrained before that startup comes online? Maybe talk a little bit about the growth path there.

John, you're exactly right. We're, for lack of a better word, selling everything we can make in our Spokane facility. We are going through work right now to accelerate the expansion that we're doing, looking at it in a little bit of a modular design just to help meet the customer demand that's happening globally. We are doing an enormous amount of work. We want to expand even faster. The growth, for the forecast that we have, is significant. When you look at the numbers for leading edge nodes going into the 2030s, that growth rate we really believe is gonna continue. We're doing a lot of work on that, on how we're trying to expand our capacity.

We just feel that, you know, our technology in copper manganese is a better technical solution, and it's just getting broader adoption in the marketplace as the preferred technical solution. We feel great about that. I'd also add what we're seeing in our TIMs business is also significant. They're doing a lot of work on expansion there and the growth rates that we're doing. We feel very good about our electronics business moving forward, and the team is working extremely hard to accelerate our capacity in Spokane.

Our next question is from Hassan Ahmed with Alembic Global.

Morning, David and Tina. You know, in Q4, you guys had highlighted you know, a fairly severe destock that you guys saw in healthcare packaging. You know, is that mostly behind us? And if you could just sort of talk about that end market.

Hassan, appreciate that. We were really happy with the recovery in Q1 following that destocking, which we talked about. We are, you know, very cautiously optimistic about the rest of the year with that we are definitely through the destocking piece of it. I would also add the growth that we have with our metered-dose inhaler and the opportunity we have in that marketplace. We're seeing that growth in Aclar. We're also seeing it in our inhaler business. We feel like the destocking is behind us as we move forward into 2027, and it was a nice start to the year.

Very helpful, David. As a follow-up, you know, the $30 million in legacy costs, you know, how are those trending? You know, if you could just give us an update on the TSAs as well.

The TSAs are going extremely well. you know, here at mid-year, we're gonna have the most significant milestones behind us. We spent roughly $15 million in quarter one. you know, essentially, we're on track with, you know, kind of the spend transition.

Hassan, I would just remind you and everybody that we talked about $30 million of TSA costs this year. As we roll those off going into next year, that'll be a good guy as third party spend will come in at a number much lower than that $30 million.

Very helpful. Thank you so much.

Thanks.

Our next question is from Arun Viswanathan with RBC Capital Markets. Arun, is your line on mute?

Let's just go to the next question and we can come back to Arun if he finds us.

Our next question is from Josh Spector with UBS.

Yeah. Hi, good morning. I was wondering if you could unpack some of the moving parts in refrigerants for us a bit. I think, you know, one of your peers reported and talked about some pricing up in some of the legacy refrigerants. They seem to have maybe some different position than you in R-134a. I'm wondering if you're starting to see any benefits there, if that played into the quarter at all in terms of pricing or if your 20%-ish growth was primarily HFO driven adoption.

Josh, I can't speak specifically to our competitor. I haven't seen the specifics there. What I would tell you is our focus has been on HFO transition. We feel very good about market share gains there and our growth there. It's been, you know, really strong double digits. As we entered 2026, we had about a ratio of 60% HFOs, 40% HFCs. As we exit 2026 into 2027, I think we're gonna approach 70/30, which is exactly where we wanna be, which is where the market is going. I think there's always, you know, some opportunistic opportunities with HFCs. You know, where the market's going with, you know, where the caps are, we feel very good about our position.

As we mentioned at Investor Day, we knew we would be at a point where our margins are, you know, year-over-year as we go through this transition and gain share and position ourselves really as a leader in this segment. We'll start to see that sequential growth now moving that full transition is behind us. We're right on track with where we wanna be, and we feel very good about our growth. We feel very good about our position in data centers with HFOs, which is where, you know, we really wanna establish ourselves as a strong leader there. I guess I would phrase it as we're right on track with how we wanna be.

The 19% growth was mostly driven through HFOs, which positions us for long-term growth, and we feel like we're in a great position with data centers as well.

That's very helpful. I just wanted to follow up on the non-controlling interest. You called out that that $20 million was kind of anomalous high. What's the right run rate? What would that be ex the Sinochem kind of impact in 1Q?

Yeah.

What do you expect in your guidance for the rest of the year?

Yeah, Josh, it would be closer to, yeah, we were around $20 million for quarter one, which as you highlighted, we had some favorable mix and pricing in one of our businesses. We also had kind of one item that was a little bit unusual in one of the other JVs. Going forward, we anticipate more like a $10 million, excuse me, per quarter.

Thank you very much.

Thanks, Josh.

Our next question is from Arun Viswanathan with RBC Capital Markets.

Great. Thanks for taking my question. Apologies for that earlier.

No problem.

The first question was just on guidance. I think in the past, you guys had alluded to Q1 being maybe 23%-24% of the year, Q2 being 26%-27%. Looks like, you know, your Q1 was about 25% of your full year guidance and Q2 maybe 27%. You're tracking slightly ahead of those initial expectations that I had. Just wondering if there's an element of conservatism in your guidance. It is obviously very early in the year still, and you guys have a lot going on from a growth perspective. Is that the right way to frame it up? Or do you see actually a slightly lower second half now? How would you kind of frame that up for us?

Thanks.

Yeah. Thanks. Thanks, Arun. I'm actually glad you asked that question. We're really pleased with how we started the year, and we feel very good about the year. The way we think about it is, you know, we have really good momentum heading into Q2. I think we highlighted five planned maintenance outages in Q2. We wanna make sure we get through those very solidly. So far, everything's on track. We feel very good about that. Notwithstanding some announcements last night, you know, there was a tremendous amount of, you know, geopolitical environment that was, you know, wanting to make sure we had the right amount of conservatism knowing what's going on in the world today. I would frame it the exact way you framed it.

We feel very good about the year. We reinforced knowing that, you know, there's definitely some inputs geopolitically that we wanna make sure that we took a conservative stance about. As we come out of Q2, we'll certainly relook at where we're at in the year and if, you know, that geopolitical environment kind of subsides and we continue to have this great momentum in these secular growth trends, which we fully expect, you know, we'll then give an update at that point.

Okay, thanks for that. As a follow-up, maybe I can ask a question on some of your growth projects. You've announced investments in ballistic fibers as well as electronic materials and AES. For most of those, I think you've alluded to or you've cited maybe double-digit returns, and you know, if I'm thinking about it correctly, you know, you have a $220 million or so investment in ballistics, and you know, similar amount in electronic materials. If you look at double-digit returns on those, you know, would that be kind of in the order of $30 million-$40 million EBITDA each? What's kind of the timing of that kind of flowing into the company? Thanks.

Thanks. The way we're thinking, this is kind of, we're looking at accelerating some of these because the demand profile is so strong right now. I guess I would think about it is these were originally multi-year projects. We were sprinkling in that strong return over a multi-year where we'd start to see the full benefit, you know, probably, you know, 2-3 years out. With incremental benefits as we went along. What we're trying to do with electronics, with our defense business especially, is pull in some of these CapEx projects because the demand is so strong. That would give us returns a little bit higher earlier versus the longer profile that we had of 2-3 years out.

I would say on AES, we are well on track to the debottlenecking for 2026, that's going to be a more immediate return. I think generally you're thinking about it exactly the right way. It's just the timing. We do fully expect all these projects to be in that, you know, above teens ROIC.

Yeah. Arun, this is Mike. The only other kind of just clarification I would provide to add on to David is, remember, we talk about things on an IRR basis, so that's after tax. When you're talking about EBITDA, just a reminder, you're gonna have to gross that up, which is probably a little bit higher of a number overall.

Great. Thanks a lot. Appreciate it.

Thank you.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Mike Leithead for any closing comments.

Great. Really appreciate everybody joining us today and look forward to everybody joining us first week in June for our webinar on nuclear. Thank you and have a great day.

This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.

Greetings, and welcome to the Solstice Advanced Materials Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Now my pleasure to turn the call over to your host, Michael Leithead, Vice President of Investor Relations. Michael Leithead, please go ahead.

Thank you, and good morning, everyone. Welcome to Solstice Advanced Materials Inc.'s fourth quarter 2025 earnings call. We released our fourth quarter 2025 financial results earlier this morning. Today's presentation, non-GAAP reconciliations, and our earnings press release are available on the Investor Relations portion of Solstice's website at investor.solstice.com. Our discussion today will include forward-looking statements that are based on our best view of the world and our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. Joining me today are David Sewell, our President and CEO, and Tina Pierce, our CFO. David will open today's call with highlights of our fourth quarter results. Tina will then review our segment performance and financial outlook before turning the call back to David for closing remarks. We will then be happy to take your questions. With that, I'll now turn the call over to David Sewell.

Thank you, Michael Leithead. Thank you, everyone, for joining us today. During the fourth quarter, Solstice Advanced Materials Inc. continued to deliver strong financial and operational results as we transitioned to an independent public company following the completion of our spin-off from Honeywell on October 30. I would like to take a moment to thank our entire Solstice team who continue to deliver for our customers throughout this transition. Across the business, we are seeing increasing momentum driven by secular growth trends in areas such as nuclear energy, AI, and data centers that are well aligned with our differentiated technology platforms. This momentum was evidenced in our fourth quarter results surpassing our expectations. Not only does this reflect continued strong demand for our solutions, but it also speaks to our strong operational execution as we transition to operating as a standalone company and execute our strategy to drive long-term growth. Solstice finished 2025 with a return on invested capital of approximately 19% and net leverage of 1.5 times EBITDA, which we believe reflects the specialty nature of our portfolio and offers us significant financial flexibility. When combined with the key secular growth trends we are seeing in our core offerings, Solstice has the ability to invest in multiple high-return projects. Over the past few months, we've announced our investment to double sputtering target capacity in Spokane, Washington, to meet accelerating AI demand, our investment to expand production for our Spectra defense fibers, and just last night, we announced our ongoing efforts to expand the capacity of our nuclear conversion business to facilitate the ongoing nuclear renaissance. Guiding our capital deployment is our disciplined capital allocation strategy as we look to balance opportunities that will unleash long-term growth and shareholder returns. With that in mind, we are pleased to announce today the initiation of a quarterly dividend of $0.75 per share, marking an important milestone as we begin to return capital to shareholders. As we close out 2025, we are confident that we are well-positioned for the year ahead. Consistent with the framework we laid out at our Investor Day this past October, today we are providing guidance for the full year 2026, representing low single-digit revenue growth and mid-single-digit adjusted EBITDA growth versus the prior year at the midpoint. In addition to the full year, we are also sharing today our outlook for 2026 in an effort to provide additional color on the momentum we are seeing and the shape of the business in our first full quarter as a standalone entity. Turning to Slide four, before we dive into our results for the full year and the quarter, I would like to begin by taking a moment to discuss our nuclear business, which we also call alternative energy services. Solstice is a leading participant in the U.S. nuclear supply chain with our Metropolis Works facility serving as the only UF6 conversion site in the United States and a sixty-plus year history as a reliable and trusted partner to our customers leveraging our proprietary expertise. Solstice is highly committed to the exciting future of the nuclear industry, and we anticipate that we will be increasing our production in 2026 by about 20% over our planned capacity in 2024 to support our customers' needs. We are expecting to achieve greater than 10 kt of production here in 2026 due to the disciplined capital investments we have taken as well as operational improvement to enhance site reliability with higher production backed in part by the U.S. Department of Energy. As the world and particularly the United States continues to invest in nuclear energy, all stages of the value chain will be needed to support fuel production. Even with our expansion to 10 kt annually, our current facility is largely contracted through 2030 today as evidenced by our $2 billion-plus backlog. With robust demand from our customers, Solstice is now actively evaluating further ways to expand our UF6 production to meet this demand. We are having active discussions with customers about ways to remain their trusted supplier long-term. Additionally, we have retained a leading engineering procurement and construction provider to conduct initial engineering analysis, and we will provide an update when further progress is made. It is important for us to reemphasize here that Solstice will maintain its disciplined high ROIC mindset that underpins any of our potential investments. Finally, we wanted to take a moment to touch on the near and medium-term earnings dynamics for this business. When the Metropolis facility was idled in late 2017 during a much different nuclear environment, this business took on a series of product loans to keep its customer commitments. The last of these loan returns has been scheduled to take place in 2026 and limits the amount of product we are able to sell into the open market. This is anticipated to impact 2026 revenues by approximately $30 million. As we move beyond that period, we have very high visibility to double-digit EBITDA growth CAGR through 2030 based on our current backlog and facility production. With that, I'll now turn it over to Tina Pierce, our CFO, to discuss our financial results for the full year and fourth quarter in more detail.

Thank you, David Sewell. Moving to Slide five, I'd like to begin by providing an overview of our full year 2025 consolidated results. For the full year 2025, Solstice recorded $3.9 billion in net sales, up 3% year over year. If we exclude the opportunistic nuclear sales in 2024 that we detailed at our Investor Day, full year net sales would have been up 6%. As David mentioned, our net sales for the full year exceeded the top end of our previously disclosed guidance range. In our Refrigerants and Applied Solutions segment, we saw 16% year-over-year growth in refrigerant sales driven by strong demand as we continue to capitalize on the HFO transition throughout the year and penetrate new growth markets like data centers. In our Electronic and Specialty Materials segment, we achieved strong 7% sales growth in Electronic Materials reflecting robust demand for our differentiated technology platform. Adjusted standalone EBITDA for the full year 2025 was $957 million, reflecting a 4% decrease year over year and an adjusted standalone EBITDA margin of 24.6%, consistent with the approximately 25% margin guidance given at our Investor Day. This year-over-year decline was primarily driven by the ongoing transition to low global warming potential refrigerants, which more than offset favorable pricing. In addition, we delivered a return on invested capital of approximately 19%, demonstrating a disciplined and strategic approach as we accelerate investment in high-growth areas of the business. Finally, we reported net income attributable to Solstice of $237 million for the full year of 2025. The decrease year over year was driven by the impact of higher income tax expense resulting from frictional taxes associated with the spin-off as well as interest costs we began to accrue on our new debt following separation. Turning to Slide six, I'd like to discuss our fourth quarter 2025 consolidated results in more detail. In 2025, Solstice recorded $987 million in net sales, up 8% year over year. In our Refrigerant and Applied Solutions segment, strong performance in our Nuclear business drove top-line growth for the segment as well as continued strong demand for refrigerants due to the HFO transition that I mentioned on the prior slide. In our Electronic and Specialty Materials segment, similar to our full-year performance, we achieved strong top-line growth in Electronic Materials driven by robust demand reflecting continued momentum from the strength in our order book we reported last quarter. Adjusted standalone EBITDA for 2025 was $189 million, reflecting a 20% decrease year over year and an adjusted standalone EBITDA margin of 19.1%. This was largely due to anticipated transitory costs as well as the impact of the previously mentioned HFO transition in refrigerants. Our margin was also negatively impacted by the effects of plant downtime and under absorption as we had anticipated when we discussed our 3Q results. Finally, we reported net income attributable to Solstice of $41 million for 2025. The decrease year over year was in part due to higher net interest expense and non-controlling interest. Turning to Slide seven, I'd like to discuss in more detail the key drivers of our year-over-year net sales and adjusted standalone EBITDA performance in the fourth quarter. Beginning with our net sales of $987 million for the quarter, organic net sales growth was 6%, including approximately 2.5% from volume growth, and 4% due to pricing. This primarily reflects volume growth and favorable pricing in both nuclear and refrigerants as well as volume growth in electronic materials. These increases were partially offset by lower volumes in healthcare packaging, safety and defense solutions, and research and performance chemicals. Our net sales growth also included a 2% increase due to foreign currency translation. Turning to our adjusted standalone EBITDA of $189 million for the quarter, the decrease year over year was driven primarily by previously anticipated factors including transitory costs as well as the contemplated plant downtime and under absorption that we discussed during our third quarter earnings call. Additionally, the shift in refrigerants product mix, including the effect of imported product mix, impacted margin. While this transition results in a year-over-year margin decline, we remain confident in our continued leadership in the space and the long-term trajectory of our refrigerants business. Specifically, we are encouraged by the significant increase in demand for our low global warming potential refrigerants for stationary applications due to the ongoing regulatory transition towards next-generation HFP solutions and expect to see long-term margin tailwinds as the aftermarket grows. As we will discuss shortly in the outlook section, we believe most of these near-term impacts are behind us. And we fully expect to return to an approximately 25% EBITDA margin here in 2026 and beyond. Turning to Slide eight, I'll now discuss the results in each of our two segments in more detail, beginning with refrigerants and applied solutions. Overall, the segment achieved $710 million in net sales for 2025, reflecting 10% growth year over year. This growth is composed of 8% organic net sales growth and a 2% increase due to foreign currency translation. The segment posted $190 million in adjusted EBITDA for 2025, down 25% year over year, and an adjusted EBITDA margin of 26.8%, down 12.25 basis points year over year. As mentioned previously, this decrease was primarily driven by anticipated transitory costs and shifts in stationary refrigerants product mix. Additionally, EBITDA was negatively impacted by plant downtime and under absorption, including in healthcare packaging due to anticipated customer destocking. These impacts more than offset favorable pricing and volume growth in the segment. Looking at performance for our sub-segments, refrigerants net sales increased 20% year over year to $367 million driven by both favorable pricing and volume growth. Our refrigerants business performance is supported by its strong aftermarket presence as well as the diversity of end markets, including data centers, which continues to see accelerating demands. In nuclear, net sales of $111 million represented growth of 39% year over year. This significant year-over-year sales growth was driven by both favorable pricing and increased volumes while our backlog remains robust. Building Solutions and intermediate net sales were $181 million, down 5% year over year. Although continued softness in the construction market impacted performance, we remain focused on driving LGWP solutions and on continuing our strong operational execution to ensure we are well-positioned to serve our customers upon a return to more normalized demand in key end markets. Lastly, healthcare packaging had $52 million in net sales, down 25% year over year. The decline was driven by anticipated customer destocking during the quarter. We are encouraged by recovering order patterns seen so far in 1Q that we believe indicates this destocking is largely behind us. Now turning to our electronic and Specialty Materials segment on Slide nine. The segment achieved $277 million in net sales for 2025, reflecting 4% growth year over year. This growth is composed of 2% organic net sales for 2025, down 11% year over year. The segment posted $51 million in adjusted EBITDA and a 2% increase due to foreign currency translation and an adjusted EBITDA margin of 18.4%, down two ninety-four basis points year over year for 2025, reflecting 4% growth year over year. The decrease was primarily driven by the previously mentioned plant downtime and anticipated transitory costs. Looking at the performance of our sub-segments, Electronic Materials net sales increased 19% year over year to $112 million due to volume growth driven by strong demand. We continue to invest in capacity expansion for electronic materials to ensure we're well-positioned to capture growth from secular trends for semiconductors, AI, and data centers. Safety and Defense Solutions had $43 million in net sales, down 10% year over year. This decrease was due to lower volumes as a result of order timing during the quarter. We continue to anticipate long-term growth in this business, including strong performance in 2026, and we are investing in capacity expansion to support growing market demand for our Spectra line of solutions. Finally, Research and Performance Chemical net sales declined 3% year over year to $121 million. This decline was primarily driven by a softer demand backdrop, particularly in our specialty additives product offerings. Moving to Slide 10 to discuss Solstice's balance sheet and capital management. As David discussed earlier, our strong balance sheet and cash flow generation continue to enable financial flexibility. Our capital expenditures for the full year 2025 were $408 million, a 38% increase compared to the prior year period due to planned increases in capital spending to drive long-term growth. We remain focused on reinvesting in the business to unleash growth in the high-return areas such as our recent announcement in Electronic Materials and Spectra. Adjusted standalone EBITDA less CapEx for the full year 2025 was $549 million, a 21% decrease compared to the prior year driven by higher capital expenditures and the decline in standalone adjusted EBITDA. Cash conversion finished the year at 57%. Turning to our capital structure, we have maintained a conservative leverage profile and strong liquidity position. As of 12/31/2025, our long-term debt was $2 billion, and we had cash and cash equivalents of $534 million, resulting in net debt of approximately $1.4 billion and a net leverage ratio of approximately 1.5 times based on our full year 2025 adjusted standalone EBITDA. As of 12/31/2025, we also had $1 billion of availability under our revolving credit facility. Combined with the cash on our balance sheet, this results in approximately $1.5 billion of total liquidity. Our capital allocation priorities will continue to guide how we deploy capital. As a reminder, these include first investing in high-return organic growth projects, maintaining a strong balance sheet and strong liquidity position, accelerating growth through selective M&A, and returning excess capital to shareholders. As David mentioned earlier today, we were pleased to announce a quarterly dividend of $0.75 per share, delivering on our commitment to initiate a regular dividend at a conservative level. Turning to Slide 11, I'd like to discuss our outlook and financial guidance for both the full year and 2026. For the full year 2026, we expect to deliver net sales between $3.9 billion and $4.1 billion, adjusted EBITDA between $975 million and $1.025 billion, and adjusted diluted earnings per share between $2.45 and $2.75. Additionally, we expect capital expenditures between $400 million and $425 million. Our outlook for the full year assumes a stable macroeconomic environment as well as the estimated $30 million of revenue impact from our final nuclear loan return that David mentioned. Additionally, we expect an approximately $30 million cost impact from TSAs. You can find additional full year 2026 modeling considerations in the appendix to this presentation. For 2026, in order to provide additional insight into our first full quarter as a standalone company, we are also today providing guidance. We expect to deliver net sales between $935 million and $985 million and adjusted EBITDA between $235 million and $245 million, which implies an adjusted EBITDA margin of approximately 25%. Our outlook for the first quarter assumes continued momentum in refrigerants, nuclear, and electronic materials. It also reflects a sequential increase in margin on the roll-off of certain costs. And finally, it assumes a year-over-year margin headwind primarily due to refrigerants mix reflecting a continuation of the dynamics discussed today relating to the HFO transition. Finally, given the robust interest and the exciting growth outlook for our nuclear business, we do plan to host a webinar later this year to talk in greater depth about this business. I'd now like to pass it back over to David Sewell for some closing remarks.

Please turn to Slide 12. With strong performance in 2025 and accelerating momentum throughout the fourth quarter, we are confident that we are well-positioned to deliver on our full year 2026 guidance. As we have transitioned to a standalone company with an independent strategy and refined operating model, we believe we are in the early days of unlocking Solstice's full growth potential. As we discussed today, Solstice is well aligned to strong secular growth trends such as nuclear, advanced computing, data centers, and defense spending. And we are prioritizing investments in these compelling areas as part of our differentiated growth strategy. Given our strong financial position, we are able to invest high-return capital in these businesses to capture this growth while also initiating returns of cash to shareholders. Finally, guiding all of these decisions is our rigorous focus on safety, operational excellence, durable margins, and return on capital. We are incredibly excited about the significant opportunities for growth ahead, and we are confident that our market leadership and differentiated technology will enable us to deliver meaningful value creation in the months and years ahead. We look forward to sharing additional updates throughout 2026. With that, we are now happy to take your questions.

Thank you. We'll now begin the question and answer session. Our first question today is coming from John McNulty from BMO Capital Markets. Your line is now live.

Yes, good morning. Thanks for taking my question and congrats on a great start. Looking forward to more going forward. So I guess I wanted to start out with a question on the nuclear platform. When we look at kind of what's happened over the past few years in terms of demand, you can see pretty steadily both the spot and the contract price have gone up in some of the data that's out there at least. I guess, can you help us to think about how pricing may flow through this business for you looking out over the next few years?

John, thanks for the question and the comments. The nuclear business, obviously, there is a spot pricing market and you can track that spot pricing market. It has gone up substantially since we've restarted the plant in 2023. And if you look at our price at our backlog through 2030, we do lock in contract pricing for that. So as new orders continue to come in, they continue to come in at incrementally higher prices as they align with the market in the tight supply-demand dynamics. Our backlog is, you know, can be anywhere from three to five years, and then we have a spot market where we'll keep a little bit of capacity for the open market, which obviously gets premium pricing. So when you combine all those factors, and you look through 2030, you'll just see incrementally growing pricing as the demand and the spot market continues to increase, which it's shown over the last couple of years. And through our contract pricing through 2030.

I would just add there, the double-digit earnings growth CAGR from '26 to '30, that certainly pricing is a component of that.

Got it. Okay. Fair enough. And then maybe just as the follow-up. I guess, can you give us some at least preliminary thoughts around the comment that came out last night around the potential to expand capacity? I guess can you help us to think about the permitting process and maybe potentially just the scale that you're considering just given kind of what you see in terms of overall demand from your customers. Is it something that could be as big as 50% capacity expansion or even maybe bigger than that? I guess can you help us to frame that a little bit in terms of how you're thinking about it going into the look at the, you know, with your EPC partner?

Sure. Absolutely, John. The way we're looking at it is really first starting with conversations with customers right now. On what that demand profile is gonna be in the future. Obviously, it's an incredibly tight market. You've heard our current administration talk about a 400% increase in nuclear energy output to 2050. And then if you peel back the onion even more, there are currently 75 to 77 new nuclear reactors being constructed. With another 100 plus announced that they will be constructed. So we're trying to take all of that new demand into account. And with our return on invested capital profile that we need, we want to make sure we're aligned with what that customer need is, what that capacity need is gonna be, you know, obviously, especially being the only converter in the United States. So I mean, I don't want to not answer your question. You know, at minimum, we'll continue to debottleneck. But with the engineering work that we're doing, it would entail potentially, you know, brick and mortar, new capacity, that could be significant. But we need to tie in the customer demand, you know, out past 2030 and what that looks like with all this new construction that's happening. And then, obviously, we work closely with the DOE to ensure that's aligned as well. So, you know, as soon as we get, you know, better clarity on what that demand is and what that pre-engineering work looks like, we'll certainly share it. I would tell you though that initial conversations with customers right now are very positive.

Thank you. Our next question today is coming from Kevin McCarthy from Vertical Research Partners. Your line is now live.

Yes. Thank you, and good morning. With regard to your refrigerant sales of $1.5 billion in 2025, can you comment on how your mix of HFOs versus HFCs evolved and what you're expecting along those lines for 2026, please?

Sure. I'll start and I'll certainly have Michael Leithead and Tina Pierce jump in. We have seen over the last couple of years a continued evolution of our product mix from HFCs to HFOs. We are now stronger in HFO sales than HFCs. I believe that number was 60% HFOs. And if you look out over the next couple of years, I would say we expect it to get to approximately an eighty-twenty split of HFOs to HFCs. There will be a continuing need for HFCs, especially in the aftermarket as you can imagine, as well as our blends. But Tina Pierce and Michael Leithead, certainly have you add color.

Yeah. Just to build on what David Sewell said there. If you go back to our Investor Day, we had guided to greater than 60% HFOs, less than 40% HFCs. Obviously, we're seeing, as David Sewell mentioned, significant momentum, particularly as you go into the second half of this year. And as you well know, 454B and the uptake there has driven a lot of that. So, we have that as well as some of the new data center demand, which continues to accelerate. So overall, continuing to see a very nice mix shift there.

Great. And then if I may come back to the UF6 business, maybe a few questions there. How did your backlog trend in the quarter? And I think you made a comment that you anticipate a $30 million sales impact from the loan return. Sounds like that's kind of a one-off event. But perhaps you can just comment on how you would expect your sales volume to trend in 2026, maybe gross and net of that loan return, please?

Yes. So obviously, that loan return goes back to when our plant was idled. We had been on the receivership of loans to keep our customers in production, and now this is the final of the loan payback. If you were to look at 2026, even with the loan payback that occurs of that $30 million, we still anticipate kind of a low to mid-single-digit growth rate in nuclear. So even despite that headwind, we're still going to grow. And then obviously, to your point, it's kind of a one-timer for '26, and beyond that, those loans were all repaid, and then it's full production growth in that double-digit EBITDA CAGR that Tina Pierce referred to.

And I would just add there that our backlog is in excess of $2 billion, and we have a good line of sight through 2030. And as we've mentioned before, about 10% of that would be open for spot sales at a favorable spot pricing right now.

Thank you. Next question today is coming from Joshua Spector from UBS. Your line is now live.

Yes, thanks. Of a similar line of thought here. Just not sure if you can get a little bit more granular on the UF6 pricing in 2026 and 2027, understanding there's backlogs and pricing will take time. But will there be any increase in contract pricing in 2026 versus '25? Or is that all longer-dated? That $30 million of loan repayment, can you size that in terms of EBITDA?

Yes. Joshua, I'll answer it as best I can without, you know, obviously, customer pricing. The orders that we're shipping in '26 are probably orders that have come in in that 2020-2023, 2024 time frame. So if you look at, and a good guide point could be if you just look at spot pricing over the last few years, you've seen incremental step-up in pricing, and that's probably directionally close or reflective of our contract pricing. So every year that our backlog continues to ship, it's going to be incrementally improved pricing from how those contracts were set up when we received those orders. There are inflection points in our pricing that cover inflationary aspects. So we do get increases on top of that. From that regard. But just our backlog, to help maybe give a constructive outlook on it, it gets incrementally better through 2030 on a pricing standpoint as the market continues to increase on its market pricing.

Okay, thanks. And the EBITDA impact of the $30 million loan repayment?

Well, we don't give exact EBITDA on our sub-segments, but we have talked about the margin profile is similar within our RAS segment. So I think it would be fair to estimate around a $10 million impact in EBITDA for 2026.

Thank you. Our next question is coming from Arun Viswanathan from RBC. Your line is now live.

Thanks for taking my question. Hope you guys are well. I guess I just wanted to ask about refrigerants. We've gotten some questions on, I guess, OEM inventory backlog. Maybe you could just address that and I guess how that plays into your outlook for HFO growth in 2026. Are you still kind of catching up to some prior shortages? And or do you see that as a potential headwind as you move through the year? Thanks.

Yes. Thanks for the question. The shortages that occurred earlier in 2025 are by and large well behind us. We feel really confident in our supply chain moving forward. And then with our outlook for 2026, we really feel confident in our growth outlook and everything we're seeing. And as you keep in mind, we have an OEM business. And then almost half of our business is automotive. And then at a macro level, half of our business is aftermarket. And now we're seeing really strong data center growth in refrigerants. So when you couple all that together, we feel really good about the growth aspects of refrigerants. We feel very good about the stability of the supply chain and being able to maintain excellent service for our customers moving forward.

Okay. Thanks for that. And then just on the electronic materials side, it sounds like you have a relatively robust outlook there. Is there a way you can maybe describe what you're seeing, by end market or by maybe product line? Where are you seeing the most strength and potential for upside?

Thanks. So I'll give a higher-level look, and I'll certainly have Tina Pierce maybe provide some additional commentary. As we look at the demand for leading-edge nodes, it's really been remarkable. And our sputtering targets with our copper manganese sputtering targets are just really an excellent and preferred solution as you get down to three nanometers, two nanometers, and really below seven nanometers in general. So we feel great about the demand for our electronics business. We feel really good about memory as well. That demand is very strong as you can imagine. So overall, this is driving the acceleration of our CapEx investment in our Spokane manufacturing site. And that's in effect to ensure we can keep up with the demand profile throughout the rest of the decade. Tina, any other commentary?

Yeah. I think the demand signals that we're seeing absolutely reinforce the decision that we made to expand our Spokane facility. In terms of the other businesses, Safety and Defense Solutions, we made another announcement there. We see a strong growth profile this year for that business. And then for research and performance chemicals, of that business, our specialty additives business is related to construction. And this is where we've taken a more conservative view. We're not expecting a significant improvement in the construction.

Thank you. Our next question today is coming from Hassan Ahmed from Olympic Global. Your line is now live.

Good morning, David Sewell. David, I know there are a lot of moving parts around this, but I'm just trying to reconcile the Q1 guidance range you guys gave with the full year 2026 guidance. I mean, very simplistically, I sort of sit there and take the midpoint of your Q1 range, call it $240 million in EBITDA, I mean, come up with $960 million full year, you know, if I go to the high end, that's $980 million. And the midpoint of your 2026 guidance is $1 billion. So I mean, as I sort of hear your commentary, a lot of sort of growth kicking in, you know, a lot of the one-offs that you guys saw that compressed the margins in Q4 are being reversed in Q1. And I understand the seasonality and other factors as well. But could you talk a bit about, and I know you touched on this a little bit earlier, some of the headwinds and the tailwinds that go into that bridge from, call it, Q1 to full year 2026.

Sure. I'll kick it off, and I'll turn it over to Tina Pierce. One of the two biggest areas that are really more of a 2026 one-time situation is our continued transitory costs from the split with Honeywell, you know, and the TSA agreements we have in addition to the nuclear piece. And, Tina Pierce, why don't you just kind of walk through some of those transitory costs that are kind of negating some of the really exciting growth aspects that we have.

Yes. As we mentioned in terms of the second half of the year, we had some transitory items in 2025. Specifically, it was like an FX hedge that Honeywell had placed. We unwound that in October. And then as we stood up a logistics center from Honeywell, we had additional cost rollover from that. Specifically for the first quarter, if we just look at the year-over-year margin decline, there are really a couple of things. One is the stationary, the fact that there's still more OEM sales. The 454 did not really kick in until the second quarter of last year. So there's still some impact from that. Our corporate expenses have ramped because we really didn't stand the organization up until the second half of last year. And then finally is the TSAs that David Sewell referenced. And we started to incur those in November and December. And if you recall, this is roughly $30 million, and it tends to be a little bit heavier in the first half as we do all the IT transitions versus the second half. And then I'd say just in terms of just some comments around 2026, we do see, as you alluded, strong growth in our nuclear business, electronic materials, refrigerants, defense. We've taken a more conservative stance on construction. We see that we can likely cover price any inflation through price, slight tailwind on FX, and then the transitory items that we spoke about. And then the nuclear loan repayment, we already mentioned that's roughly $30 million of impact. So that's kind of how we're seeing the year shape up.

That's very helpful. And as a follow-up, just around capital allocation, I know you guys just instituted the dividend policy. But broadly speaking, I know you guys are new in the public domain and, you know, maybe a little sort of cautious around M&A and the like. But how are you thinking about M&A, particularly in light of some of the run-up in materials, chemical valuations that we have seen over the last couple of weeks, right? I mean, at times, you know, it may be worthwhile to put aside how new you are as an independent company and maybe take advantage of cheap valuations. Right?

Yeah. I think it's a fair comment. I would say what we're really grateful for is to have such a strong balance sheet. And since our spin, we've really started to develop a robust M&A pipeline, quite frankly. So I think M&A in the future is certainly on the table. We do want to ensure it fits our strategy, it fits our return profile, and the markets we serve. But we do feel like with our balance sheet, we are well-positioned. And to your point, if there's a very attractive, you know, bolt-on asset or that that's available at the right price, I think it would be fair to say, you know, we might move faster than in typical circumstances.

Thank you. Next question today is coming from John Roberts from Mizuho Securities. Your line is now live.

Thank you. Again, it's Evan Rodriguez for John. A quick one on refrigerant. As you continue to transition from HFC to HFOs, like what should we expect the margin hit to be? Essentially, like how should we think of the margin degradation as you continue to transition in that business?

Yes. The way I would think about it is, short term. Because we do get higher margins in the aftermarket. So as we transition to HFOs, you know, those are newer units most typically. So once they're in the market for a couple of years, then the aftermarket kicks in. And then that's where you will start to see the margin neutrality from HFCs. Having said that, you know, as Tina Pierce mentioned, you know, we went through that in '25 and in the beginning of 2026. But our anticipation is we'll start getting those aftermarket sales more robustly in 2026. And then as that flows through, I think margin continuity comparatively to HFCs is very realistic.

Okay. And in terms of timing, like do you expect your transition to be completed by the end of 2026, or does that spill over into 2027? Like when do you expect your transition to be completely done?

Well, we expect the full transition to be done in early 2026. And then the aftermarket should kick in from transitions that happened in the previous few years. And then obviously in Europe, that transition happened several years ago. So they're completely transitioned over to HFOs. And then in early 2026, we should be complete.

Thank you. Next question today is coming from Duffy Fischer from Goldman Sachs. Your line is now live.

Yes, good morning, guys. First question again just around refrigerants. When you look at 2026-2027, is there any additional regulatory help for volumes in those years that would create an opportunity for HFOs to take market share from HFC?

You know, Duffy, I think the legislation is by and large taking place. Europe is fully converted. The U.S. will be mostly converted. The only caveat with that is on commercial refrigeration. That still has not converted yet. So from a regulatory standpoint, if that gets accelerated, that would certainly accelerate the conversions in commercial refrigerations. But we're anticipating that to be over the next couple of years. So that could certainly be a tailwind. The other piece really would be Asia. There is talk that Asia will convert to HFOs, you know, by the end of the decade. We remain cautious that that happens. But if it does happen as anticipated, that could be a huge tailwind for us.

And could you size your data center business is growing rapidly in refrigerants. How big is data center as a percentage of your refrigerants business?

You know, we don't split it out, Duffy. The way I would say it is it's growing rapidly. It's certainly a smaller piece of our business, but it's growing very fast. I think we referenced double-digit growth in our data centers. We are doing what we can mostly split it out, but we don't have it 100% split out just because we're a step removed from the installation. So we haven't given a number yet, but that is something we'll continue to track and provide when ready.

Yeah. And it's Michael Leithead. I'd be remiss not to add we're really excited about data centers because we really attack it from three fronts at Solstice. We get a lot of questions around refrigerants, and obviously, there's a lot going on around next-gen refrigerant and cooling solutions. But you also have to remember on the electronic material side of the house, we're doing on the chip to get the heat off of the chip as well as our nuclear business, sort of where we started the call. A lot of the nuclear energy is going to fuel data center growth. So we're really excited around if a lot of the data center growth comes to fruition, we attack that opportunity from really at least three different angles from an overall Solstice perspective.

Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Michael Leithead for any further or closing comments.

Great. Well, look, we really appreciate everybody joining us today to discuss our fourth quarter results. And please follow up if you have any questions. Thank you and have a good day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.