Solstice Advanced Materials Inc. (NASDAQ:SOLS) Q4 2025 Earnings Call Transcript

Solstice Advanced Materials Inc. (NASDAQ:SOLS) Q4 2025 Earnings Call Transcript February 11, 2026

Solstice Advanced Materials Inc. misses on earnings expectations. Reported EPS is $0.26 EPS, expectations were $0.61.

Operator: 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.

Michael Leithead: 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.

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.

Tina Pierce: 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.

David Sewell: 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.

Operator: 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.

Q&A Session

John McNulty: 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?

David Sewell: 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.

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

John McNulty: 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?

David Sewell: 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.

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

Kevin McCarthy: 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?

David Sewell: 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.

Michael Leithead: 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.

Kevin McCarthy: 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?

David Sewell: 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.

Tina Pierce: 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.

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

Joshua Spector: 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?

David Sewell: 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.

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

Tina Pierce: 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.

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

Arun Viswanathan: 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.

David Sewell: 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.

Arun Viswanathan: 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?

David Sewell: 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?

Tina Pierce: 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.

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

Hassan Ahmed: 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.

David Sewell: 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.

Tina Pierce: 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.

Hassan Ahmed: 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?

David Sewell: 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.

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

Evan Rodriguez: 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?

David Sewell: 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.

Evan Rodriguez: 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?

David Sewell: 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.

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

Duffy Fischer: 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?

David Sewell: 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.

Duffy Fischer: 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?

David Sewell: 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.

Michael Leithead: 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.

Operator: 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.

Michael Leithead: 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.

Operator: 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.