Solstice Advanced Materials Stock

Greetings, and welcome to the Solstice Advanced Materials Q2 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to Mike Leithead, Vice President, Investor Relations. Mike, please go ahead.

Thank you, and good morning, everyone. Welcome to Solstice's Second Quarter 2026 Earnings Call. We released our second 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 in our businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This includes statements regarding our pending acquisition of Element Solutions, please see the additional disclosure in this morning's materials and our related 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 second 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 second quarter, Solstice Advanced Materials again delivered strong top and bottom line results reflecting ongoing robust demand trends across several of our key businesses, including nuclear energy, electronic materials, refrigerants and health care packaging. In fact, 6 of our 7 businesses grew this quarter, 4 of them at double-digit rates. I want to take a moment to thank our entire Solstice's team whose execution this quarter speaks for itself.

This performance demonstrates the strength of Solstice's portfolio, not only through our transition to a stand-alone company, but also in a dynamic macroeconomic environment. This quarter, that resilience showed up in sound execution through macroeconomic volatility, a heavier slate of planned plant turnarounds and the largely complete exit of our transition service agreements.

Our specialty materials assets and balance sheet strength continue to set us apart in this industry, allowing us to reinvest in growth 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 priorities, such as our electronic materials, safety and Defense Solutions and Nuclear businesses consistent with what we believe are attractive long-term outlook for demand. That investment spans both CapEx and increased R&D spending as we advance the next generation of critical molecules for our customers.

Together with our announced acquisition of Element Solutions, these high-return organic investments marked clear acceleration of our growth strategy. We generated $461 million of operating cash in the first half, supported by disciplined working capital management cash generation that funds our growth investments and supports returning cash to shareholders through our recently declared quarterly dividend.

The strong cash generation of our business is what gives us confidence in the rapid deleveraging of net debt to less than 3x EBITDA that we anticipate within 18 months following the close of the Element Solutions acquisition. With our strong first half performance and continued momentum across the business, we are raising our full year 2026 guidance even against an uncertain macroeconomic backdrop.

Turning to Slide 4, I'd like to briefly update you on our acquisition of Element Solutions, which we announced on July 6. This combination represents a significant acceleration of our strategy to build an industry-leading advanced materials platform with increased exposure to high-growth electronics AI infrastructure and other attractive end markets. The same secular trends powering our results this quarter include artificial intelligence, data centers, semiconductor manufacturing and thermal management are precisely what makes this combination so compelling.

Together, we believe we will be better positioned to serve electronics and AI infrastructure customers from early-stage development through high-volume manufacturing while our refrigerant solutions, including data center cooling and our specialty positions such as nuclear remain core to the combined company. The logic here is grounded in what you are already seeing in our results. The customer expansion, secular demand and technical capability that are foundational to the strength of our business.

Solstice and Element are a natural fit, not only because we support similar customer environments, but because our complementary strengths. When you combine our chemistry expertise with Element's formulation capabilities, you get what we expect to be a leading platform for innovation that will fuel the development of next-generation solutions. With Element, we believe we will also be positioned to collaborate with customers early in their project life cycles to develop solutions, purpose-built to support their objectives.

The synergies we outlined in our investor materials about the transaction built directly on those drivers, which is why we have confidence and the value this creates. The transaction remains subject to shareholder and regulatory approvals and other customary closing conditions, and we expect it to close in the first half of 2027. We are very excited about what our 2 companies can build together.

Turning to Slide 5. I'd like to discuss our second quarter 2026 consolidated results. In the second quarter of 2026, Solstice recorded $1.148 billion in net sales, up 11% year-over-year which exceeded the top end of the guidance we provided for the quarter. In our refrigerants and Applied Solutions segment, strong demand for refrigerants driven by the ongoing HFO transition and accelerating data center orders together with continued strength in nuclear and a recovery in health care packaging drove double-digit top line growth for the segment.

In our Electronics and Specialty Materials segment, net sales growth was driven by robust demand in our Electronic Materials business for semiconductor applications. Adjusted EBITDA for the second quarter of 2026 was $290 million, up 2% year-over-year and exceeding the top end of the guidance we provided for the quarter. Adjusted EBITDA margin was 25.3%, in line with our expectations for the quarter. The decline in margin year-over-year was primarily driven by the timing of certain plant turnaround activity and prior year production incentive credits partially offset by volume growth and favorable pricing.

As a reminder, we continue to see ongoing strong demand for our low global warming potential products. Now over a year into the 454 B transition, we continue to expect our refrigerants and Applied Solutions segment to deliver mid-30% adjusted EBITDA margins in the second half of 2026 as the aftermarket develops.

We reported GAAP net income attributable to Solstice of $119 million for the second quarter of 2026, up from $97 million a year ago. or $0.75 per diluted share. Consistent with what we signaled last quarter, noncontrolling interest declined sequentially to $15 million this quarter from the atypically high $20 million in the first quarter. This quarter, we also reported adjusted diluted EPS to 0.88 for the second quarter.

Finally, free cash flow for the first half of 2026 was $248 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 to meet robust buttering target demand.

And with that, I'll now turn it over to Tina Pierce, our CFO, to discuss our financial results for the second quarter in more detail.

Thank you, David. Turning to Slide 6. I'd like to discuss in more detail the key drivers of our year-over-year net sales and adjusted EBITDA performance in the second quarter. beginning with our net sales of $1.148 billion from the quarter. Organic net sales growth was approximately 11%, reflecting both volume growth and favorable pricing. This primarily reflects volume growth and favorable pricing in both nuclear and refrigerants as well as volume growth in electronic materials.

Foreign currency translation was a modest tailwind of roughly 0.5 point. Turning to our adjusted EBITDA of $290 million for the quarter, up 2% versus the prior year period. Year-over-year improvement in ESM, together with a favorable corporate and stand-alone comparison more than offset a decline in RAS, which is primarily attributable to the timing of certain plant turnaround activity and production incentive credits that David just discussed.

Turning to Slide 7. I'll now discuss the results in each of our 2 segments in more detail, beginning with refrigerants and Applied Solutions. Overall, the segment achieved $850 million in net sales for the second quarter of 2026, reflecting 12% growth year-over-year driven by volume growth and favorable pricing across the business. The segment posted $280 million in adjusted EBITDA for the second quarter of 2026. down 6% year-over-year and adjusted EBITDA margin of 32.9%, down 648 basis points year-over-year.

As mentioned previously, this decrease was primarily driven by the timing of plant turnaround activity and prior year production incentive credits, which more than offset volume growth and favorable pricing in the segment. Turning to the performance of our subsegments. Refrigerant net sales increased 13% year-over-year to $473 million driven by both favorable pricing and volume growth across our product offerings. Beyond the 454 strength that David highlighted, data center orders remain robust again this quarter. underscoring how this business sits at the intersection of several key secular growth trends.

Our nuclear business had $125 million in net sales, up 27% year-over-year. reflecting both favorable pricing and increased volumes. We are seeing positive momentum in this business, reinforced by new supply agreements with 3 small modular reactor developers. For the first time in decades, we are seeing meaningful innovation from entrepreneurs across the nuclear ecosystem. We remain excited about this differentiated business and the critical role we believe that will play in the nuclear renaissance now clearly taking shape.

Building Solutions and intermediate net sales were $180 million, down 1% year-over-year. Continued construction market softness weighed on the subsegment but we remain focused on advancing our LGWP solutions and maintaining disciplined 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 $73 million, up 24% year-over-year. The increase was driven by a recovery in customer demand patterns following the destocking result in the second half of 2025 as well as favorable net pricing. Now turning to our Electronic and Specialty Materials segment on Slide 8. The segment achieved $298 million in net sales for the second quarter of 2026, reflecting 8% growth year-over-year, driven by volume growth in electronic materials. The segment posted $64 million in adjusted EBITDA for the second quarter of 2026, up 24% year-over-year and adjusted EBITDA margin of 21.6%, up 280 basis points year-over-year.

The increase was primarily driven by volume growth in electronic materials and productivity improvements. Looking at the performance of our subsegments. Electronic Materials net sales increased 15% year-over-year to $119 million, driven by volume growth and robust customer demand across semiconductor applications. We were also recently recognized with the top supplier award from SK Hynix, a strong external validation of the strength of our technology and execution.

As David noted, we are expanding electronic materials capacity to meet AI and data center-driven semiconductor demand, which we see as a significant multiyear opportunity for Solstice. Safety & Defense Solutions had $43 million in net sales, up 7% year-over-year. As we anticipated last quarter, the business returned to growth driven by non-ArmOR applications and we continue to invest in capacity expansion to support long-term market demand for our Spectra line of solutions.

Finally, Research and Performance Chemical net sales increased 3% year-over-year to $135 million, with growth in big chemicals, partially offset by ongoing end market softness in specialty additives. Moving to Slide 9 to discuss Solstice balance sheet and capital management. Our strong balance sheet, cash flow generation and conservative leverage position continue to enable financial flexibility and fuel Solstice many attractive growth investments.

I would like to start with cash, with Solstice generating $461 million of operating cash flow in the first half of the year. In addition to healthy earnings generation, we were able to execute strong working capital management, reducing our dollar inventory despite the healthy increase in revenue and rising input costs. Our capital expenditures for the first half were $186 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 expansion in Spokane, we are actively investing in our Spectra ballistic fibers expansion in Virginia as well as advancing further expansion of our nuclear conversion business. As we work through debottlenecking at our Metropolis facility, we are exploring attractive incremental opportunities that we believe can take capacity beyond 10,000 metric tons, and we expect to share more later this year.

Turning to our capital structure. We have maintained a conservative leverage profile and strong liquidity position. As of June 30, 2026, our total debt was approximately $2 billion, and we had cash and cash equivalents of $750 million, resulting in net debt of approximately $1.25 billion and a net leverage ratio of approximately 1.3x based on a trailing 12-month adjusted EBITDA. As of June 30, 2026, we also had $1 billion of availability under our revolving credit facility.

Combined with the cash on our balance sheet, this results in approximately $1.75 billion of total liquidity. As David mentioned earlier, we announced on July 17, approval of a quarterly dividend of $0.075 per share, in line with last quarter, which will be payable on September 10, to share owners of record as of August 27. We continue to view returning excess capital to shareholders as a key piece of our overall capital allocation approach. The same balance sheet strength is what allows us to finance the Element Solutions transaction from a position of discipline.

We have structured the acquisition to preserve our current credit rating profile and our cash generation supports a clear path back to our target leverage in the periods following close. Turning to Slide 10. I'd like to discuss our outlook and financial guidance for both the full year and the third quarter of 2026. Importantly, we did what we said we would do during this quarter. delivering above the range we set and converting that into strong cash generation. This kind of execution is the foundation for the confidence we are expressing today, both in raising our full year outlook and in our continued ability to drive growth.

For the full year 2026, we now expect to deliver net sales between $4.125 billion and $4.185 billion adjusted EBITDA between $1.035 billion and $1.055 billion, and adjusted diluted earnings per share between $2.75 and $2.95. Additionally, we now expect capital expenditures between $420 million and $440 million. Today, we are also providing guidance for the third quarter of 2026 as we want to help investors better understand our business and our first year as a public company. In the third quarter, we expect to deliver net sales between $990 million and $1.30 billion.

Our outlook for the third quarter assumes continued momentum in refrigerants and electronic materials and more modest nuclear performance, reflecting the timing of final product loan returns and order patterns with consistent margin performance. A few additional modeling points for the second half. we expect a negative revenue of approximately $30 million from the final return of nuclear product loans skewed modestly toward the fourth quarter.

I'd now like to pass it back over to David for some closing remarks.

Thank you, Tina, and please turn to Slide 11. With strong performance in the first half 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 artificial intelligence, data centers, semiconductor manufacturing and nuclear energy and thermal management. These are core strategic areas for Solstice where we have both a clear right to play and right to win.

Solstice is a strong growing business today with durable pricing power, high returns on capital and robust free cash flow. We are putting that cash flow to work with discipline, reinvesting in our businesses, both in terms of expanding our R&D pipeline as well as high return growth CapEx and while returning excess capital to shareholders through our quarterly dividend.

Our pending acquisition of Element Solutions builds on that momentum, accelerating a strategy that is already working. We are energized by both delivering on our current business quarter after quarter and bringing these 2 companies together to create even more value. We have work well underway to develop an integration road map to seamlessly bring our businesses together after this transaction closes in order to unlock the compelling opportunities we see ahead for our combined company.

We remain excited about the significant opportunities ahead in 2026 and beyond. We look forward to sharing additional updates throughout the year.

And with that, we are now happy to take your questions.

[Operator Instructions] Our first question today is coming from Kevin McCarthy from Vertical Research Partners.

This is Matt Heyer on for Kevin McCarthy. Congrats on the nice quarter. And in refrigerants, how do you see sales and EBITDA growth unfolding in the back half of the year? And what kind of margin impact do you expect from incremental unit sales given the transition to HFOs.

Thanks, Matt. What we talked about for our refrigerants business is continued sequential margin expansion. I think we talked about mid-30s for the second half of the year, which we feel very confident in. We talked about some of the margin impacts in second quarter. With that behind us, -- we see the margin expansion continuing. We did have sequential margin expansion in refrigerants in Q2 over Q1.

And from a volume standpoint, we feel very confident and continued strong demand for our refrigerants. We're actually seeing a little bit of an acceleration to HFOs from HFCs, which we think is a continued positive -- and for the most part, the aftermarket for HFOs in North America has not kicked in yet. So that's additional upside that we see moving forward.

And then as a follow-up, maybe you could discuss how your development of next-generation non-PFS refrigerant molecules is progressing.

So we're doing a lot of work on next-generation Yu molecule. And we're really excited about the development that we have. We're currently in testing that looks very promising, and we have already begun conversations with customers on this as well. Part of the refrigerants that Tina talked about on the margins, we did increase our R&D spend earlier this year, and a big chunk of that is going to the next-generation iupmolecule as well as next-generation molecules in development for things like 2-phase direct-to-ship immersion cooling.

So we feel really well positioned to continue to innovate in next generation.

Our next question today is coming from Josh Spector from UBS.

I just wanted to ask about the second half guidance. So you gave sales but not EBITDA for 3Q. So I'm not sure why you didn't give that just considering we don't have a ton of history. So -- can you help us either with a specific kind of range for 3Q EBITDA or a way to think about phasing just given the moving parts here?

Josh. Yes. The reason is that our margins have been very consistent throughout 2026. We've got now 1 quarter and second quarter as well as the full year guidance. But I would just say that the way we look at it is our margin rate has been right around that 25% range.

So Josh, you could probably just back into it with low 25% margin range with that revenue.

With the revenue range that we guided.

Yes.

And you expect that consistent 3Q and 4Q then?

We do. We are -- as we've talked about, we do expect to see sequential growth in our margins as we move forward. But we're -- as we come off the and some of the other aspects. We don't anticipate that changing, but I would anticipate small sequential growth in our margin expansion.

Okay. And if I could just ask a follow-up on refrigerants. I mean you noted data center growth. I'm just curious, are you had a point now where you could talk about the exposure there in terms of how much of refrigerant sales are exposed to data centers, what the growth is? And is that outside the data center cooling? Or is this liquid cooling inside that's driving some of the upside there?

So our data center cooling, it's still a smaller piece of our overall refrigerants, which is why we just haven't broken it out. However, saying that, it's the fastest-growing aspect of our refrigerants business. It's growing strong double digits. Most of that is still in standard cooling that we do in data centers, chillers. The work we're doing in things like 2 phase and immersion cooling is really to be coming in the future. but the expansive growth of data centers and the technology we have in our refrigerants and for data centers is really compelling, and that's why we're seeing such tremendous growth.

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

Congrats on some solid results. So I wanted to dig into the RAS margins. Admittedly, they came in a little lighter than we expected in 2Q and yet you're looking for mid-30s in the back half. And that, I think, comes despite that Elenium loan give back. So I guess can you help unpack the 2Q may be coming in a little bit on the lighter side and how you get to those mid-30 margins even with that loan giveback, which I would think is at least a little bit of a drag.

Yes. So John, first off, we did have, as we had signaled in quarter 1, we did have a very heavy plant turnarounds in the quarter. Good news is all sites are back up and operating well. We did have 1 campaign that did shift from second quarter to the second half, and there is an absorption benefit from that shift. And then we also had some production incentive credit timing, as David alluded. So last year, in second quarter, we secured some of these incentives and it was a cumulative impact in second quarter of last year, which made for some difficult comps for this year.

Going forward, that will be more linear as we recognize each of it each quarter. I would say that second quarter was our most significant outage quarter. We tend not to do that much during the summer months when it's extremely warm. We'll have some more minor planned outages in the fall of the year, but not the same scale as what we had in second quarter.

And then as David mentioned, we do anticipate being mid-30s for the second half of this year.

Okay. Fair enough. And then, I guess, maybe just as a follow-up on the nuclear platform. I know the EPC work, you're not expecting to kind of have any major announcements until kind of the late fall, early winter. But I guess, can you help us to understand if you're maybe leaning toward either brownfield versus greenfield and also, any potential updates around either support from the federal government and/or support that you may be seeing from your customers.

Yes, John, good question. And you hit on the key 3 areas which the team is working extremely hard on. So if you take the first question on the engineering work, that's progressing extremely well. And whether it's a brownfield or greenfield, I would also add, and I think Tina alluded to it briefly in her comments, because of the debottlenecking work we're doing this year to get to that 10,000 plus tons. We're really encouraged that there may be the potential to do additional debottlenecking and metropolis.

So I think you'll see more information coming out on additional debottlenecking and then on a brownfield versus greenfield it's -- we're right in the heat of all the analysis and where that's going to come out. One of the things we're also looking at is kind of a modular design, bringing in capacity at certain stages. So I think we'll have more for you in the next few months exactly where that's coming in. But I would tell you -- there's just an enormous amount of work going on. And directionally, I think we'll be able to give you a lot more information when the studies completed over the next few months. But we're very encouraged by everything we've seen.

On Part 2 and 3 of your question, are customer discussions to secure longer-term contracts well into the mid-2030s is going very well. We're really encouraged by the reception we've had from customers because they fully understand the need for us to secure that volume to commit to the build and they want us to do this. They love our experience with a 60-year history of working with them, The confidence that we can start up a new facility quickly. So that's going extremely well. And then the last piece on the government discussions, really encouraged by the feedback we're getting from the Department of Energy and NRC and across the government because you know the passion the current administration has to increase nuclear capacity.

And they are certainly wanting to continue the partnership that we have with them as we move forward with the potential expansion. So when we look at all 3 of the levers we feel great about all of them as we move forward. And I think we'll be able to share more over the next few months.

Our next question is coming from John Roberts from Mizuho Securities.

It looks like the revenue guide for the September quarter and the December quarter are roughly the same, but the nuclear payback is skewed to the fourth quarter. And I think refrigerants is normally seasonally lower. So why would the revenue be similar between the 2 quarters?

Well, yes, in terms of how we're looking at the second half of the year, as you mentioned, quarter 2 does tend to be the largest quarter for refrigerants. Nuclear, there was a little bit of timing of the orders a little bit lighter in the second half due to the loan repayments that we mentioned. Electronics, though, we're seeing continued growth there. And also, we're starting to see some of the capacity unlock in the second half of the year. And then as we mentioned in last quarter's call, our Safety and Defense business, we were flat in quarter 1, and we anticipated that, that would pick up through the remainder of the year. So those are really the thing is there's really no assumed significant improvement in our construction businesses as well.

Okay. And then since you were talking about maintenance downtime in the first half, I assume metropolis was not part of the maintenance downtime, but maybe I'm wrong there. When is the next metropolis plan maintenance downtime? And do you build inventory in advance of that? I don't think we've experienced 1 of those cycles yet. So how do you handle that?

Yes. Actually, metropolis was part of the turnaround in quarter 2. And so that's really an annualized process. we don't anticipate any more for this year. And yes, we do try to build some inventory in anticipation of that turnaround.

Our next question today is coming from Hassan Ahmed from Alembic Global.

Just wanted to sort of revisit the full year guidance again. I mean, from the sounds of it, you guys are obviously expecting a sequential decline in revenues Q2 to Q3. And obviously, then you have the nuclear repayment in Q4. It just seems that the EBITDA seems to be quite skewed for Q4 despite the nuclear element there and the like. So just trying to understand what gives you that confidence. Now I understand that the turnarounds are behind you guys and the like. But why are you expecting a Q4 to be, I guess, materially larger than Q3?

Yes. Hassan. As I mentioned, it's really the growth in our electronics business and some of the capacity unlocked in addition to just the volumes that we're seeing in that business. safety and defense, very light for quarter 1. We knew that it was going to be stronger for the remainder of the year. And we do continue to expect good things from our refrigerants business. We now have lapped a full 12 months in terms of the 454 transition, but we're continuing to see growth. David talked about the data centers. So a lot of positive growth trends in that business as to.

I would also add, we feel pretty good about some of the share gains that the team has executed on, and I think we'll start to see continued volume momentum in that area.

Very helpful. And as a follow-up, I mean, obviously, a lot of macro uncertainty and volatility. How are you guys now thinking about sort of marketing for the permanent debt for the Element Solutions acquisition? Any sort of considerations around the time line?

Yes. Well, we have a few windows. One would be in September and then kind of that October, November time frame, and then, of course, first half. So we're going to be very opportunistic when we go to market.

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

I hope you're doing well. I guess my first question is just on electronics. You did see a strong 15% growth there. Could you just elaborate a little bit on that? And I guess, as a related point, I know you have the expansion going on at Spokane. So I guess maybe if you could provide some more details there, where are you on that? And I think you had previously mentioned that much of that was kind of spoken for. So is there an opportunity to continue to expand that facility? Or what can you offer on that side?

Yes. Thanks, Arun. Appreciate the question. So if you look at our Electronics business, it's really not only our sputtering targets, it's also our Tims and heat spreaders. It's really strong across the board. To the point on our Spokane expansion, the reason for some of that elevated CapEx that we alluded to is because we're pulling in some of that to accelerate the expansion of Spokane because the demand is just so strong. So we will be -- we believe increasing our output in the second half, which also goes why we're more bullish on the second half of the year with our new guidance levels.

So we feel great about that. And just the demand we're seeing in addition to accelerating the CapEx, we're already having initial discussions on, are we going to need to do another expansion even beyond this. So the demand is just that strong for our copper manganese sputtering targets, which has really become the go-to product for leading-edge nodes. And so we are accelerating -- our customers are increasing their forecast multiple times over the last several months and these forecasts go out multiple years. So we feel really good about the investments we're making in Spokane and we'll continue to accelerate and expand capacity as quickly and safely as we possibly can.

Great. And then just as a follow-up, I think the corporate came in a little bit lower than what we were expecting. How are you looking at that now for the full year? And have you guys -- is that a result of some optimization and productivity actions that you're taking? And do you see line of sight to more of those opportunities as well to reduce corporate expense? Or maybe you can just comment on that.

Yes. So for the first half, the team has done as it a terrific job in terms of cost management of our corporate functions. Also, I'd say that we've -- as David mentioned in his opening comments, we've -- we're largely through the TSAs. At this point, second quarter was particularly heavy in Atria, but we have the most significant ones behind us at this point. As we look forward, we've said it's going to be roughly $60 million per quarter. Now with that being said, with the integration with [indiscernible] we will obviously be looking at all of that spend and see if it's better spend and whether we can scale it in a much more significant way. But right now, we're forecasting at $60 million per quarter.

But we're going to be very prudent and our cost in the second half as we were in the first half.

Our next question is coming from Pete Osterland from Truist Securities.

So first, I just wanted to ask about portfolio optimization. Are you actively exploring potential noncore divestitures? And -- are there any businesses in particular that might be noncore but would be difficult to sell due to dis-synergies involved with the separation. I guess broadly, how are you thinking about the portfolio at this stage?

Thanks for the question. We -- when we spun out of Honeywell, we laid out a long-term strategic plan to our Board on the portfolio and being really a leader in these secular go trends with a strong right to win and value proposition. And with that, the first step of that was the Advanced Electronics segment. We just felt so strongly about it and the new infrastructure that's needed around AI literally over the next decade plus. I mean we just see that growth so strong.

And when you tie in our core capabilities around synthetic chemistry and our refrigerants business, our flooring business and electronics, we just think that, along with nuclear, just was such a great care for those secular growth trends.

As we've talked about, we love the businesses we're in. We think it's a little premature to start talking about the portfolio, but we will certainly continue to optimize where we think it's appropriate as moving forward. But if you think about the financial profile of our company, where we want to go and really be a differentiated advanced materials company that's just so powerful in what we can provide our customers.

We think we have a great portfolio that does that, but we'll certainly continue to look at optimizing in the future as any company would as you look forward.

Pete, this is Mike. I would just have the 1 other caveat on top of what David said, -- just as a reminder, as part of our tax-free spin-off from Honeywell late last year, there is some barrels in the very near term around what we can do from a portfolio optimization standpoint. So just keep that in mind as well.

Understood. And then just as a follow-up, you called out some raw material inflation baked into your expectations for the second half -- any specific inputs where inflation is most significant for you right now? And for which businesses are you seeing the greatest need to push through higher pricing in order to maintain your margins?

Well, I would say -- I'll make a comment and certainly turn it over to Tina. We do pass through anything on our precious metals. So that's a straight pass-through. So as we see inflation in that area, we are able to pass that through to customers. Obviously, you see some core inflationary areas in diesel fuel, transportation. But I would say 1 of the biggest areas we're seeing inflation is sulfur and our refrigerants business that has had an impact, but we -- the team has done a great job ensuring they're able to secure price to offset that inflation.

And then yes, that's exactly right. I would say good execution in covering our price cost in second quarter, and we anticipate the same for the remainder of the year.

thank you -- we reached the end of our question-and-answer session. I'd like to turn the floor back over to Mike for any further closing comments.

Great. Well, look, I really appreciate everybody joining us on quite a busy morning. If you need anything else or if you'd like to follow up, please reach out to myself or the Investor Relations at Box and always happy to spend some time to chat through. So appreciate it, and have a good day.

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

Greetings. Welcome to Solstice Advanced Materials' Acquisition of Element Solutions Call.

[Operator Instructions] Please note that this conference is being recorded.

I'll now turn the conference over to Mike Leithead, Vice President, Investor Relations. Thank you. You may begin.

Great. Thank you, Rob, and good morning, everybody. My name is Mike Leithead, Vice President of Investor Relations at Solstice, and thank you for joining us on short notice here this morning. As you may have seen, this morning we announced an agreement for Solstice to acquire Element Solutions. And we're looking forward to walking you through why we're so excited about this transaction.

The slides we'll be using for this webcast are posted to the Investor Relations sections of both companies' websites. Following our prepared remarks, we will open the line for your questions.

Before we begin, please turn to Slide 3. Today's discussion includes forward-looking statements that are subject to risks and uncertainties and our actual results can differ materially from what we describe today. Please review the cautionary language on Slide 3 and in this morning's press release and in both companies' filings with the SEC. We will also reference certain combined and/or non-GAAP financial measures. You will find descriptions in the forward-looking statements and other disclaimer slides. We undertake no obligation to update these statements.

Turning to Slide 2. With me this morning are David Sewell, Solstice's President and Chief Executive Officer; Tina Pierce, Solstice's Chief Financial Officer; and Ben Gliklich, Chief Executive Officer of Element Solutions. David will begin with the strategic rationale and the unique value the combined company will bring to all stakeholders. Ben will provide some prepared remarks from the Element Solutions perspective. Tina will take you through the financial profile and our capital plans. And David will wrap up with some closing remarks.

With that, I'm happy to turn the call over to David.

Thank you, Mike, and good morning, everyone. This is an important day for both companies, and I'm excited to walk you through what we are going to build together.

When we became an independent company last October, we told you Solstice would be a differentiated growth and innovation business with a clear right to win in the markets we serve. Today's announcement is an acceleration in that strategy, and we couldn't be happier to combine with Element Solutions for this next leg of the journey.

I would like to frame the strategic rationale around 5 core areas that will drive value for shareholders. First, scale and leadership. This transaction creates a global advanced materials leader with combined 2025 net sales of approximately $6.8 billion, adjusted EBITDA of $1.7 billion, and leading positions across attractive end markets backed by more than 8,300 patents and pending applications.

Second, we believe this combination creates an unmatched electronic materials platform. The portfolios are highly complementary across semiconductor fabrication, packaging, assembly and thermal management. Together, we will be able to deliver broader solutions, greater performance and deeper co-innovation with customers.

Third, this combination further enhances our exposure to generational secular tailwinds. AI and the build-out of data centers are intensifying and the need for advanced packaging, thermal management and next-generation material solutions. The combined Solstice portfolio will be uniquely positioned to help solve these bottlenecks across the value chain, including electronics, refrigerants and nuclear applications, and bring innovation to market faster, which is what the markets are calling for.

And fourth, we see this as a highly synergistic combination. We have identified more than $180 million of annual run rate synergies, which we expect to realize within 3 years of close. In addition, we see significant revenue opportunities. We will be able to have greater strategic dialogue with our customers, the world's leading foundries on the front end and their leading suppliers on the back end. We will have expanded channels and greater collaboration and ability to co-innovate and increase our value-add across the portfolio.

And fifth, we think this combination will meaningfully accelerate the combined company's financial growth trajectory. This transaction should lead to faster sales and earnings growth as well as enhanced cash generation. Notably, we are improving our growth rate and cash conversion in a transaction that is accretive in year 1. Tina will provide more detail on the financial framework in a few moments.

Underlying all of this are 2 things that really make the combination work: our people and our customers. Both companies have spent decades earning the trust of some of the most demanding customers in the world. Together, we will have the technology, scale and talent to help those customers solve increasingly complex challenges. And when our customers win, we will win with them.

With that strategic overview, let me turn to the transaction itself. Turning to Slide 5. This is a cash and stock acquisition. Element Solutions shareholders will receive $10 in cash plus 0.5 shares of Solstice common stock for each Element Solutions share, which represents a transaction value of approximately $14.5 billion at announcement, including the assumption of net debt. This represents a premium of 15% on Friday's closing price. Upon closing, Element Solutions shareholders will own approximately 44% of the combined company. Because most of the consideration is Solstice stock, both sets of shareholders will participate in the significant value we expect to create together.

On governance and structure, the combined company will operate as Solstice. I am honored and humbled to serve as Chief Executive Officer, and our Board will comprise of 11 directors, including Element Solutions CEO, Ben Gliklich, and 2 other designees from the Element Solutions Board, subject to standard governance procedures.

We have fully committed financing in place and we expect to close in the first half of 2027, subject to the approval of both companies' shareholders, regulatory approvals and customary closing conditions.

At this point, let me turn it over to Ben, Chief Executive Officer of Element Solutions, to say a few words.

Thank you, David. I appreciate your kind words and I echo your excitement about this combination. It's been clear from the outset that this transaction makes great sense for both sides. These are 2 highly complementary organizations across the board. And together, we can deliver better on our commitments to customers, employees and shareholders alike. David and I share a people-oriented, customer-centric philosophy. This mindset will be a key asset. It will be foundational as we bring these companies together.

At Element Solutions, we've been driving each of our businesses towards faster-growing, higher-value customers and markets, adding capabilities and resources to serve them better and enhance our value propositions. We've also been purposeful in strategically curating our portfolio. We divested our graphics business, added high-value electronics capabilities through our Micromax acquisition, established a foothold in specialty gases serving the highest growing sectors of the economy with our EFC acquisition, and added game-changing material science technologies, like Kuprion.

All of this work has positioned our company to catch powerful tailwinds and benefit disproportionately from AI data center build-out, vehicle electrification and advanced packaging market development. And Solstice also has exposure to these tailwinds in complementary ways to our portfolio.

At a high level, Element Solutions generates just over 70% of its revenue from electronics, with the remainder from our specialties businesses. Within electronics, approximately 75% of sales come from B2B markets, meaning enterprise end markets that have more predictable, higher value demand. More than 20% of our sales come from the data center market, and that percentage is growing. Nearly everything we sell is consumable, and our business is highly qualified with high switching costs that insulate us from the volatility of capital cycles.

Our business mix being heavily weighted towards electronics is a strong complement to Solstice, which has less overall exposure to that end market. So this transaction provides the combined company with a strong position in that attractive growth market. And we also bring tremendous expertise in formulation, process chemistry and in applications development, which, when combined with Solstice's expertise in synthesis and engineering, should accelerate time to market for innovations.

We've built a highly efficient operating model that has led to consistent outperformance relative to our end markets and deployed capital prudently to grow per share earnings. Taken together, these actions have delivered strong long-term value creation for our shareholders.

And this transaction is directly in line with that value creation model. This is very much a 'better together' story, one that comes at the right time to meaningfully accelerate all facets of our business. The transaction itself offers a significant and compelling premium, both through the cash portion and the meaningful stock component, which will allow our investors to participate in the synergistic benefits.

And finally, to my Element Solutions team, this announcement is recognition of what we've built and will be an accelerant to what we are on track to deliver in the future. We can be both incredibly proud and excited. This is and will always be a people-based business. Since our inception in 2019, I've told you that all we are is what you've done and will do in the future. And this remains true. You are the source of value in our business and, along with the team at Solstice, will be the key to the success of this combination.

So to that end, we're excited to join forces with the team at Solstice. And we've agreed that Element Solutions management team will be well represented amongst the leadership of Solstice at close to ensure continuity of leadership and a successful integration. Personally, I'm really looking forward to joining Solstice's Board along with 2 of my fellow directors and to working closely with David and our combined capable team to deliver on the promise of this transaction.

And with that, I'll hand it back to David to walk through the strategic rationale and value creation for our shareholders. David?

Thank you, Ben, and very excited to have you continue on our Board.

Turning to Slide 7. When you bring Solstice and Element Solutions together, the result is a materially stronger, more diversified advanced materials platform. You can see the combined metrics on the slide, and I touched on the headline figures a moment ago, so let me focus on what sits behind them.

Importantly, this is not just more scale. It's better scale. We expect the combined portfolio will be better aligned to durable, high-growth end markets, including advanced packaging, copper interconnects, thermal chip management, data center cooling, uranium conversion and related nuclear services. At the same time, we will be diversified across end markets and geographies with balanced exposure across the U.S., EMEA and the rest of the world.

That combination of growth and diversification will give us both upside to powerful secular demand and resilience through cycles. We believe this transaction will create a stronger Solstice, more innovative, more balanced and better positioned to invest for customers and create long-term value for shareholders.

Slide 8 frames the transaction against the 4 strategic pillars we laid out for Solstice at our Investor Day last year. Each pillar is underpinned by a strong and resilient secular trend, and we believe this transaction is centered squarely on the first of them: the acceleration of advanced computing.

The focus is deliberate. Denser, higher-powered chips are driving demand for new materials and next-generation thermal management. And this is one of the most powerful trends in our portfolio. We believe Solstice is already positioned to win here, and Element Solutions will meaningfully accelerate that position, deepening our capabilities in semiconductor materials and thermal management and shortening our time to solution.

This acquisition will also bring established customer partnerships and real innovation potential, with benefits that extend across the wider platform. And it is that advanced computing opportunity and how the demand is developing across the value chain that the next slide details.

So turning to Slide 9. The rapid growth of advanced computing is changing what our customers' need for material science. Chips are running faster, sitting closer together and generating more heat. And each of those durable trends directly drive more demand for our solutions.

Starting on the left with connectivity. AI demand is pulling leading-edge semiconductor growth ahead of the broader industry. And as chips get faster, the performance and reliability of every connection becomes critical.

But performance is no longer won on the chip alone. Designers are packing chips closer together through 2.5D and 3D heterogeneous integration. And everything the industry gains in density, it pays for in heat. With each new GPU generation, power and heat density step up again, pushing data centers from air toward liquid cooling and making system-level thermal management a central component of design.

These demands do not exist in isolation and neither can their solutions. That is the opportunity in front of us and what Solstice will be positioned to provide across the value chain moving forward.

Slide 10 shows where each of our portfolios play across the semiconductor value chain and why, together, we expect to cover it end-to-end. Solstice's strengths sit at the front end, in advanced node chip fabrication. Our chemistries enable deposition, patterning, etching and cleaning, the steps that build the chip itself.

Element Solutions largely picks up where we leave off: in advanced packaging, one of the fastest-growing steps of the chain; and in PCB building through assembly. And at the points where the portfolios meet, such as in deposition and in thermal interface materials, we believe our offerings are complementary rather than overlapping.

That is the real message here. On its own, each company serves a place of the chain. Together, we can follow our customers' devices, from the blank wafer, through packaging, to the finished board, and bring integrated solutions at every step, something very few material companies in the world can offer.

Slide 11 lays that same story out at the product level. You can see how the 2 portfolios fit together. Solstice brings the fab side chemistries; Element Solutions will bring the packaging and assembly materials. And where the portfolios do touch, in areas like deposition and thermal management, each of us is extending a position the other already holds, creating synergy opportunities rather than overlap. The result of our combined company is expected to be a comprehensive, end-to-end offering that neither company could provide to customers on its own.

Turning to Slide 12, where we take a closer look at copper, the material that connects our chips and preserves signal integrity as devices grow smaller and faster. Both of our companies enter this combination with well-established copper capabilities. Solstice deposits the tantalum barrier and the copper seed by physical vapor deposition. Element Solutions provides the electrochemical fill that completes the trench. Together, we deliver end-to-end metallization from the transistor all the way to the interface.

That gives our customers higher yield and reliability. It gives them compatibility assurance because the seed and the fill are qualified together, with tighter purity control across the stack. And it lowers their burden because a single-certified, single-source set cuts match testing and cross-vendor analysis. Just as important, it positions us to lead the next-generation seed-free interconnects, hybrid barriers in advanced packaging. This is a capability that none of us could offer alone.

Slide 13 shows just how complementary our thermal portfolios are. Across the stack, Solstice and Element Solutions will bring offerings that fit together rather than overlap, which we believe gives us end-to-end thermal coverage to better solve our customers' increasingly complex heat challenges. And let me put that in the broader context of the data center.

So turning to Slide 14. As a combined company, we will become a thermal management leader from the die to the data center. At the chip level, our heat spreaders and thermal interface materials, including Element Solutions' Electrolube and Kester brands, and Solstice's direct-to-chip materials, pull heat off increasingly dense, high-powered chips.

At the data center level, we cover both ends of the cooling spectrum: air cooling with low-GWP refrigerants for chillers, heat pumps and computer room cooling; and liquid and immersion cooling where we have a discovery program developing a proprietary 2-phase, direct-to-chip immersion fluid from our existing molecules.

And our reach extends to how these facilities are powered. As data centers increasingly rely on nuclear energy, Solstice remains well positioned to provide uranium conversion services, positioning us to serve this build-out from the chip to the power source. As rack densities and chip power climb, thermal management is becoming a central design constraint in computing and one of our fastest-growing opportunities.

And Slide 15 speaks to something that gets us especially excited, the next-generation innovation this combination unlocks. A great example is Element Solutions' Kuprion product, which they have discussed frequently in recent quarters. Built on its innovative ActiveCopper technology, Kuprion is a nano-copper material that delivers improved advanced packaging yield and throughput. And we agree with Element Solutions' assessment and view this as a game-changing, disruptive technology.

There are additional exciting opportunities in the Solstice portfolio. We've talked at length in recent months about our sputtering targets for advanced node production, but we continue to develop new metal alloys for advanced packaging applications and new deposition solutions. Additionally, we highlight new applications for our thermal interface materials such as for optical, where we continue to solve our customers' greatest challenges. These 3 examples all highlight how the combined innovation pipeline won't only be stronger, but we believe will place Solstice at the forefront of industry innovation.

Slide 16 addresses another reason why we expect this combination to work so well. The 2 companies bring complementary capabilities to every stage of the customer relationship. Solstice brings industry-leading synthetic and fine chemistry, deep application expertise and long-standing spec'd-in relationships with leading electronic customers. Element Solutions brings formulation expertise, roughly 2,600 patents and a technical service model with more than 40% of its people in technical roles working side-by-side with customers on their production lines.

Together, we can take a molecule from synthesis through formation, qualification and on-site technical service from early co-development to high-volume manufacturing. And most importantly, this puts us and the customer at the center. Our innovation is customer-led, co-developed on their lines. And together, we deliver end-to-end solutions that help our customers build a future-ready value chain.

Turning to the next page, on Slide 17, we quantify the cost synergies and highlight where we expect revenue synergies to emerge. We have identified more than $180 million in expected annualized run rate synergies on a net basis, roughly $100 million from operational initiatives and operating model integration, including efficiencies across G&A, sales and marketing and R&D; about $25 million from supply chain improvements, including raw material and procurement scale and recovering copper from our deposition processes; around $20 million from footprint optimization; and about $35 million from other initiatives.

But in addition to the cost synergies identified, we also expect meaningful potential revenue synergies to develop as the integration progresses. This includes cross-selling and deposition by serving both front-end and back-end metallization with complementary copper applications, dielectric to copper co-optimization in advanced packaging, and combining our complementary thermal management portfolios, all across a shared base of blue-chip customers.

And with that, I'll turn the call over to Tina to take you through the financial profile. Tina?

Thank you, David, and good morning, everyone. Please turn to Slide 18.

The headline here is simple. This combination will not just create a larger company, it is expected to create a faster-growing one with a stronger margin and cash generation profile. On a combined basis, including the run rate synergies David described, we expect an adjusted EBITDA margin of approximately 26%, an improvement over both companies on a stand-alone basis, reflecting the higher margin character of the combined electronics platform and the cost synergies.

Upon closing, we expect revenue to grow at a mid to high single-digit rate over the medium term, with adjusted EBITDA growing faster than revenue as those synergies phase in. And the business converts earnings into cash very well with the cash conversion percent of approximately 75%. Finally, we would remind investors that we additionally expect this transaction to be accretive to adjusted EPS in year 1.

Taken all together, that is a higher growth, higher margin and a more cash-generative profile, and it is the financial foundation for everything we want to do for our customers and our shareholders.

Turning to Slide 19 and our capital structure and allocation policy. We are funding the approximately $14.5 billion transaction through a balanced mix of Solstice equity issued to Element Solutions shareholders, new debt and cash on hand. We expect net leverage of approximately 3.5x at close. Given our strong combined free cash flow and the expected synergies, we anticipate we will be well positioned to delever to below 3x leverage within 18 months of closing the transaction, with a longer-term net leverage target of 2 to 3x, in line with our current credit rating profile.

When we look at our capital allocation priorities, first, we will invest in organic growth for our customers because that is where we create the most value. Second, we will deleverage to our target. And third, over time, we will return capital to shareholders, while continuing to grow our dividend. This is a balance sheet and capital plan built to create value through the cycle, with the flexibility to keep investing in the growth ahead of us.

With that, let me turn the call back to David for some closing thoughts.

Thanks, Tina. And let me close on Slide 20. We expect this transaction will create significant value for our shareholders, and we have a clear plan to capture it. We sit at the crossroads of generational tailwinds poised to benefit from secular growth across electronics, data centers and nuclear.

Against those tailwinds, we are building a comprehensive integrated electronics platform with end-to-end offerings for the manufacturing of semiconductors and industry-leading solutions we can bring to a global customer base through established channels.

This transaction also represents an opportunity to add great talent to our company with deep expertise and know-how, which will help us deliver on an incredibly exciting next chapter for both of our businesses.

And on a personal note, together with my team, I have greatly enjoyed getting to know Ben and the entire Element Solutions leadership team and learning about their approach to building such an outstanding business. This company has been one of the great success stories in our industry, and I am excited to welcome this exceptional organization into our company.

We have a highly synergistic business despite negligible direct product overlap. We expect actionable synergies of more than $180 million with additional revenue opportunities on top. And together, they underpin an attractive combined financial profile with enhanced growth, stronger margins and improved free cash flow conversion.

And I'll leave you with the same thought that I opened with. We have a rare opportunity to take 2 companies with complementary technologies, a shared commitment to innovation and decades of trusted customer relationships, and to build the clear leader in electronic materials right as the world needs exactly what we make.

We could not be more confident in the strategy and our combined team and in the value we will create together. And we look forward to working with Element Solutions and their team to bring this combination across the finish line.

And with that, operator, let's open the line for questions.

[Operator Instructions] The first question is from the line of John McNulty, BMO Capital Markets.

Congratulations, David and Ben. It sounds like a really solid combination. I just wanted to ask, I guess, David, maybe the first question for you, what precipitated the move and the timing of it in particular? It seems like you've got a lot of wind in the sails, but you're still a relatively new company. So I guess, can you help us to think about that?

And then also, I guess related to that, do you see this as somewhat of a drop-in type acquisition? Or is there going to be some real heavy lifting in terms of the integration? And how do you think about the team just given your newness as a company and their ability to really execute on that?

John, thanks for the comments as well as the question. I'll take your question first on kind of why now. And I think it's -- with any M&A activity, you never know on the timing when perfect worlds collide, so to speak. And we knew advanced electronics was incredibly strategic to our long-term strategy portfolio. When we presented to our Board shortly after the spin, we wanted to really drive our advanced electronics business, as you saw on that slide, which we shared on Investor Day.

And with just the secular growth trends that's just starting to explode, it was really important because our customers are just pulling on us so much for solutions. And that's on the Element side as well as the Solstice side. And by coming together, it was just so apparent that we can provide something no one else can provide. And more importantly, we could solve those complex challenges that our customers were bringing to us. And so it was just a perfect fit.

And it kind of dovetails into how we'll integrate is we really look at this as -- a drop-in might be a little bit too easy to say, but it's just so complementary. And I think our approach is going to be how do we leverage, and you saw in some of the slides, a more integrated solution? Because that's what's going to improve our customers' yields, their cycle times. It's going to help them meet those challenges with heat and solving that problem. So we just felt that this was a great time to do this transaction. It worked out perfectly for both companies.

We see this as really driving the innovation together in these solutions. As you know, Element has had 2 recent acquisitions that have integrated very successfully. Our team as a recent spin, I think we've had great success separating from Honeywell very quickly. Our project management team is in place. We'll roll that right over. And we're looking at this as a growth story. So it's going to be about innovation. It's going to be about the customer. And we're just going to be able to drive that solution.

And I'll even turn it over to Ben to give his perspective on it.

Yes. Look, I think that the integration here is reasonably straightforward from what we've done in terms of outside-in prework. The synergies are real. The capabilities are complementary. The businesses are better together. And we'll be sure to preserve what makes these businesses special.

And those are different skill sets, sort of the point that David was just making around core innovation and synthesis and large, complex manufacturing on the Solstice side, and then technical service, application development and really deep customer intimacy from our side. They're very complementary skill sets, and we again believe the businesses are better together.

The next questions come from the line of Josh Spector with UBS.

Congrats on the deal. So I just want to follow up on the synergy side of it. I guess if I look at everything you guys went through, I mean, Solstice today has $400 million-ish in sales in electronics. Element has $3 billion plus. I guess this is obviously Solstice acquiring ESI, but when I look at the base where there's really that overlap and the cost potential, outside of the corporate cost side of it, like where do you get the real scale in this to have high confidence in that $180 million in savings?

Yes, Josh. We've done a lot of work on the synergies, and we stand behind this 100%. It's very in-depth, very detailed. We've done a lot of work collaboratively to align on what this is. And I'll answer your question in 2 ways.

There is just -- with the footprint we have around the world, we see opportunities for some optimization in there. We have some great operating models that are going to drive a lot of value creation. Our scale on procurement, there's a nice crossover there, and that's going to drive significant opportunities, as well as supply chain. When we spun from Honeywell, we were able to really drive and take the best of Honeywell and that legacy in a lot of the supply chain and logistics. And I think with the global footprint we have, we'll be able to consolidate our opportunities there.

And then also just the piece that Ben talked about is, on top of that, we're really going to have a growth opportunity here. So it's not just about cost, it's also about growth. And you see that in our forecast with higher revenue, higher EBITDA growth. And that's just because of the solutions that we can provide.

Okay. And if I could just follow up on just broader portfolio, what does this mean for Solstice longer term? Are you thinking that the business is going to be refrigerants, nuclear, electronics, everything else maybe is a lower priority? And obviously, you're getting some other businesses in specialty and other industrial businesses with ESI. So how does that all fit together?

Yes. It's a great question, Josh. And I go back to the strategy we laid out for our Board. And we have a vision of where we wanted to take this company. And it was a 5-year plan. This obviously accelerates that. But this was a key priority to our strategic footprint -- or portfolio that we wanted to be as a new company.

I think because of this acquisition, it does allow us flexibility to tailor our portfolio to the vision we have. But I would also tell you, we really see some strong synergies in areas like EFC gases, even in some of the oil and gas pieces with our hydrogen fluoride. So we are really excited about this.

But in fairness to your question, I do believe this gives us an opportunity to tailor the portfolio to the vision we have to achieve that strong growth profile and, very importantly, the leading-edge margin profile that we have.

The next question is from the line of Chris Parkinson with Wolfe Research.

Ben, perhaps, can you give a little bit more color in terms of the process and how this all came about? I mean it's been -- there have been several new stories over the last several years about exploring various opportunities. So I'd love to hear your perspective about kind of just the history here and why you believe this is ultimately the best of the best opportunity and the financial consideration is fully valued on behalf of Element shareholders?

Sure thing, Chris. So you'll get the whole background to this in the proxy when it comes out in short order. I would say that Element did not put itself up for sale. We were approached by Solstice.

And with regard to value, I would say a few things. The first is that Solstice, it's a really high-quality business. It's got solid, idiosyncratic growth vectors. And as we said before, some real complementary skill sets. It's a better together story. On the electronics side, they've got a rock-solid portfolio. What they have in the front end will open doors for us, and what we have in terms of packaging capabilities will open doors for them.

The synergies are real. As David went through them, these are real, hard cost synergies that we're talking to. And we're not underwriting to substantial revenue synergies, but we believe there will be some. Just anecdotally, as you know, we've got a decentralized model and things like procurement and logistics reside close to the customer in the country. And when you look at what the Solstice team is able to do around purchasing and coordinating logistics, there's tremendous low-hanging fruit savings there. And so we've got high level of confidence that it's not just a sort of corporate cost, public company cost synergy opportunity here. There's real operating cost synergies that we can deliver.

Putting these businesses together, you get the best materials company in the market with leading growth rate, leading margin, substantial cash flows and really substantial scale. And so this is a great offer for our shareholders. We're getting a real upfront premium, we're getting cash upfront, and our shareholders are going to be in a position to benefit from real long-term value creation. And so we think this is a great offer and a great opportunity.

Great. And just as a quick follow-up, you mentioned probably 3 or 4 times even in the prepared remarks, but also in the PowerPoint, about some of the other synergy opportunities across thermal and deposition. Could you just give a little bit more color on what exactly those could be and how you're thinking about them on a preliminary basis?

Thermal management is such an incredible pain point for the electronics supply chain writ large. Solstice brings great capabilities with heat spreaders and other TIMs. And we have great capabilities both in our interconnect business, in our assembly business and in our semi-assembly business.

The soup-to-nuts suite of offerings here is unrivaled in the market, and materials compatibility is an incredible challenge given the range of materials that are being used and the iteration cycles for innovators in this market. And so by combining our portfolios, we think we have a differentiated value proposition in the thermal space, and that will drive market share our way.

Yes. Ben, I couldn't agree with you more. And I loved our example that we walked through on copper to improve the connection and signal strength. When you look at the integration of Element and Solstice and what we bring in that application, you now have a complete, multiproduct provider that could truly innovate where the customer really needs innovation to massively improve yields in this critical area. So we think this single source just provides tremendous opportunity to solve some of the customer challenges that they've really brought forward.

There's no one in the market that has vapor deposition and electrochemical deposition onto silicon. And those materials interface with one another. And so we, just like in thermal management, have a portfolio where we can offer a broader set of solutions than anyone else in the market.

Our next question is from the line of Kevin McCarthy with Vertical Research Partners.

David, it strikes me that through this combination, you're making a substantial bet, obviously, on electronic materials, moving from 11% of the portfolio to, I guess, 35% to 40% on a pro forma basis. So in that context, can you talk a little bit about the degree of cyclicality or lack thereof in what you're acquiring?

And maybe as a follow-up to Josh's question, should we think of the combined company as one that's likely to march toward a pure play in electronics? Is that meant to be kind of the incremental home for capital moving forward?

Yes, Kevin. First, on the latter part of your question, to be a pure play, we want to be a solutions provider. And when we look at our portfolio, we think refrigerants tie so extremely well into our electronics, and nuclear is critical as part of that whole data center infrastructure.

So the answer is we actually think that differentiation is so vital because it's just another step on things we can provide that nobody else can provide. So as we work with hyperscalers, we're talking to them about everything. We're talking to them about power. We're talking to them about cooling. We're talking to them about what do you do with the heat that you're emitting from the chip. And then we're talking to the semiconductor teams that talk about all the solutions we provide there and then how do you get the heat off the chip. So it's all very integrated. And I think that differentiation is core to our strategy.

And that goes right to your question on cyclicality. We are so balanced that, that refrigerants business, as you've seen with the strong IP portfolio we have, that's going to continue to drive tremendous growth. And we have really unique molecules for the data center and refrigerants in air cooling, so that's a tremendous value asset for us. And nuclear, if I could just emphasize, is absolutely critical to our core strength.

And then what we've demonstrated by taking those core technologies and finding new applications, like in medical devices and inhalers with HFOs, that's created a brand-new organic market. That's another way that we're avoiding any type of cyclicality. And then in our safety and defense business, we're doing some really game-changing things in that area that are also now potentially tying into health care and in PCBs.

So it's all interconnected. It gives us great diversity, which is why we're so confident in our growth rates. And we are thinking of ourselves as a complete solutions provider in these very attractive growth markets.

And then second, if I may. Can you comment on the ramp to your target of $180 million of synergies, how much might be achieved in year 1 and year 2, for example?

Yes, Kevin. We've taken a fairly conservative stance on the first year. It's certainly going to be part of the -- half of it is the public company cost and then some of the other savings around procurement. And that will continue to ramp as we go into '28 and '29.

The next question is from the line of John Roberts with Mizuho Securities.

This is Edlain Rodriguez on behalf of John. Again, congratulations on the deal. David, as you think about revenue synergies, like when do you believe you might start achieving some of those opportunities? Like is that further out or is that something that can happen soon?

I think there's 2 areas how we think about revenue synergies. You heard Ben talk about the diversification of our customer base. So we really believe there are customers we have that there is a very, very good pull for Element Solutions that can come in because we know our customers are looking for those solutions and we just don't have the product. And we have great relationships there, and it might be in a different part of the geography.

And the exact same on the Element side. You're talking about an unbelievably diverse field technical sales organization around the world, and they have identified areas where they can bring us in on solutions. And these are areas that we believe we can do quicker qualifications. So I think there's low-hanging fruit there.

Then on the longer-term aspects is creating these new solutions where you have to get specified, you have to get qualified. That could certainly be a 2-year process. But with the low-hanging fruit that we've identified along with some of the longer-term growth aspects, we feel very confident in a balanced approach there.

I would say this, with why we're so confident in revenue synergies is our customers, we have a great history, Element has a great history with our end-use customers. And because of those relationships, and now with our complete portfolio, we feel very confident we are going to be able to work with them because we're going to be able to provide solutions that they desperately want and need. And now we've got credibility with them because of our history, we have the technology, we have the patents. So we see this as a great opportunity.

The only brief thing I would add is that we have recent experience with this from the Micromax acquisition, where we didn't count on any revenue synergies at all. And as soon as that transaction was announced, we had both of our respective sales organizations wanting to sell each other's products and customers calling on both organizations trying to get more products through those channels.

So we have customers that want fewer suppliers, that want the opportunity to buy more and show materials compatibility with multiple different solutions. And so this case will only be that, multiplied.

Sounds great. Another one for me, in terms of capital allocation and CapEx. So clearly, in the near term, deleveraging the balance sheet is a priority. But at the same time, I think ESI was planning to invest in 2 Kuprion facilities and Solstice was contemplating nuclear expansion. Like how does that mesh with deleveraging and then the CapEx that were in place? Like are we going to be able to do both at the same time?

Really, really good question. And that is part of the reason why we structured the transaction the way we did. We have built in the investments for Kuprion, our nuclear expansion investments. That is all built into our model. So it just demonstrates the importance of new innovation as well as those parts of our portfolio. We will be able to do that and deleverage in that 18-month time frame.

So there's no slowing down on our investments for innovation. And as Ben mentioned, with the cash generation that we're going to have as a combined company, it's going to allow us to continue that flexibility to run the business.

Yes. And just to add to what David said, the 2 big growth CapEx programs that we've spoken at length about, the sputtering targets expansion where we're doubling our target facility in Spokane, all of that's built into the model, as well as the next generation of lightweight body armor.

The next questions are from the line of Frank Mitsch with Fermium Research.

Congrats. I was wondering if you could speak to the break fee and where your -- the anticipated regulatory pressure points might be on this transaction and the competitive dynamics there? And then that's for either one of you.

And then, David, on the list of synergies, you listed R&D. And I guess I was a little bit surprised by that. So I was wondering if you could expand upon that.

Sure. Look, we see this transaction as highly complementary. So we don't anticipate any issues there. As far as the break fee, that will all be in the disclosures that we provide here over the next 45 days. So I won't get into some of the details there.

And on the R&D synergies, I see that as growth opportunity R&D. So for example, while Solstice is really strong on the synthetic chemistry side, Element Solutions is extremely strong on the formulation customer line side. So the way now with the 2 companies coming together, our ability to qualify, develop, formulate these products at an accelerated level is going to bring tremendous opportunity.

I would say from a -- we're both so customer-focused in our approach and everything starts with the customer. We really see very, very -- we don't anticipate cost synergies at a customer touch point level. That's not in our model.

Our next question is from the line of Mike Harrison from Seaport Research Partners.

Congratulations on the deal here. I was hoping that you could talk a little bit more about how you're thinking about R&D cross-pollination, kind of just building off the last question here. It sounds like you expect maybe some acceleration of innovation as well as improving speed to market. Maybe just talk a little bit about how you see each organization's strengths around developing new solutions and kind of how you complement each other from an R&D and innovation perspective.

Yes. Sure thing, Mike. So we've talked a lot already this morning about the complementarity of synthesis and formulation between our 2 respective businesses. We are moving a bit more towards synthesis at the Element side with new molecule introductions like Kuprion, and that's a real core competency of Solstice.

There's also the applications development, and I would call it co-development, where we can demonstrate materials compatibility, right? So we're using package attach and die attach materials like Argomax. And they're sitting right next to a heat spreader that Solstice is providing.

And so innovation is not simply coming up with new products, it's building collateral packages to show how different types of products work together to provide a systems-level solution. That's been a big talking point development over the past several years, this idea of systems-level solutions. We're not talking about how a single product works. We're talking about how a collection of products work together to deliver an outcome. And we think that this enhances that on the thermal side and on the deposition side, where you talk about vapor deposition and electrochemical deposition, in a real material way.

So from a new product development standpoint, we get a benefit in terms of R&D collaboration from synthesis and formulation. And then from a new solution, materials compatibility standpoint, we can sell a broader set of products and demonstrate a broader range of performance with this bigger portfolio.

All right. And then my second question is just hoping to kind of -- maybe a more pointed question about potential divestitures. Looking at the combined company, there is an increased focus on electronic materials. Just wondering if you're thinking near term about any divestitures that might further sharpen that focus or potentially accelerate debt paydown given that that seems to be the key capital allocation priority near term.

Yes. I would say, first off, we can -- as Tina walked through, we could deleverage within 18 months very confidently with the cash flow we could generate with the current company. Having said that, it's probably a little premature to be talking about it, other than to say, as I alluded to earlier, we do have a vision for this company and where we want it to be. And this transaction does allow us to tailor our portfolio to that vision at probably a little bit more accelerated rate. And so we'll certainly have more to come on that.

But right now, with the revenue synergies we've identified really across the businesses, we're really excited about that and want to lock all that core competency down as we move forward.

Your next question is from the line of Jon Tanwanteng with CJS Securities.

Congratulations to both of you. You guys spent a lot of time, and probably rightfully so, focusing on the data center opportunity. I was wondering if you could quantify what the combined total data center exposure is, inclusive of nuclear opportunities and cooling and refrigerants. How fast will that be growing versus the run rate at the separate companies, number one? And number two, how much of that is dependent on revenue synergies that are coming together, whether that's cross-selling or new solutions that you're developing together?

Yes. I think from the data center piece of it, obviously, when you just look at the advanced nodes and the hyperscalers and what's going into servers and data centers, that growth is substantial. But where we see really tremendous upside is exactly what Ben has alluded to on thermal management. That's really the biggest challenge, if you think about it, for data centers moving forward, along with energy.

And so speaking from the Solstice side, as we talked about at our last earnings call, in our refrigerants business, data center is the highest growing piece of our refrigerants business, double-digit growth there. If you think about the deposition side of our business and the electronics side of our business, last quarter we had double-digit growth there as well. And then on the nuclear side, double-digit growth there.

So it's a significant portion. We have not fully quantified it because it's quite significant when we think about it as a combined company. And as that comes together, we'll certainly have more clarity on that. But I would tell you, from the Solstice side, data centers is driving double-digit growth for us. And even with the current footprint and the demand with current chip fabrication that's in today, that growth rate is substantial.

Okay. Great. And then just for the revenue growth rate that you target that you have out there, how much of that is dependent on revenue synergies versus just the additive growth rate?

It's a relatively small amount. We have, as David mentioned, a fairly significant upside case. But what's actually built into our model is really more underpinned by the cost synergies.

At this time, I'd like to turn the floor back over to Mr. Leithead for closing comments.

Great. Well, look, I really appreciate everybody joining us here on short notice. If you have any questions, please feel free to reach out and happy to assist. Thank you, and have a good day.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings. Welcome to Solstice Advanced Materials Nuclear Business webinar. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to Mike Leithead, Vice President, Investor Relations. Thank you. You may begin.

Thank you, and good morning. We appreciate everyone joining us today for Solstice Nuclear Business Informational webinar. Since our spin-off from Honeywell in October, our Nuclear Business has garnered significant investor interest and we believe rightfully so with an incredible industry position and a robust growth outlook. Today, we hope to provide a deeper look at why we are so excited about this business. It's enduring competitive advantages and its differentiated financial profile. Today's presentation is 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 Jeff Dormo, our SVP of refrigerants and Applied Solutions; and Malcolm Critchley, President and CEO of ConverDyn, our joint venture with General Atomics.

Jeff has led our Refrigerants and Applied Solutions segment since spin-off from Honeywell in October of last year. Prior to that, he held a range of leadership roles in the Advanced Materials business at Honeywell as well as time earlier in his career at Dow.

Malcolm has been with ConverDyn for more than 18 years and has served as President and CEO for the past 13. He brings a wealth of knowledge with more than 45 years of experience in the nuclear industry, and he also serves as the Co-Chair for the Department of Energy's fuel cycle, Defense Production Act, Consortium conversion committee. Which is actively working to strengthen the U.S. nuclear supply chain.

With that, I'll turn it over to Jeff to provide an overview of the Nuclear Business.

Thank you, Mike. I'm excited to be here today to share more about this business. To start, I'd like to highlight what makes our Nuclear business unique. Solstice is one of the largest global providers of uranium hexafluoride conversion services. In the sole U.S.-based provider. Uranium hexafluoride or UF6 is a crucial component in nuclear fuel production, which positions us as an essential link in enabling nuclear power generation.

We are an established leader in the industry with a long history of operational excellence and reliable delivery. As we will discuss in further detail in a few slides, this reliability is paramount for our customers signing long-term agreements.

Our credibility and leadership role positions Solstice exceptionally well to capture accelerating demand in a world that increasingly needs power generation and energy security. The rapid build-out of AI and data centers, as an example, requires constant high-density power that we believe only nuclear can reliably provide at scale.

The nuclear power buildout will necessitate the need for further UF6 supply, and we stand ready to support our customers. These factors combine to create a compelling financial profile with a robust backlog that goes into the 2030s, high visibility from our firm contract structure.

We have high confidence in the ability of this business to deliver double-digit adjusted EBITDA CAGR through 2030. Finally, when we consider additional levers for future growth, -- we are applying our Solstice model of pursuing a disciplined capital strategy. We're focused on ensuring high returns as we expand balancing supply additions with customer needs.

Turning to Slide 5. Let's take a closer look at our Nuclear business. As a reminder, Nuclear is reported in our Refrigerants and Applied Solutions segment. and currently reflects approximately 10% of our consolidated revenue. Solstice owns and operates Metropolis Works facility, which is currently the only UF6 conversion site in the U.S.

As you might imagine, this industry is heavily regulated, and our facility has a valid nuclear regulatory commission license to operate through 2060. Against the backdrop of rising demand for nuclear power, we have been actively investing in debottlenecking projects at Metropolis Works to expand production capacity and support customer needs.

With the expectation to produce more than 10 kilotons of UF6 in 2026, representing roughly a 20% increase versus planned 2024 output. We go to market in our Nuclear Business through ConverDyn, a 50-50 joint venture with General Atomics. ConverDyn acts as the exclusive purchasing and marketing agent for all UF6 produced at Metropolis Works. As a reminder, both of these entities Metropolis Works and ConverDyn are fully consolidated in our financial results.

While Nuclear represents approximately 10% of Solstice's business today on a net sales basis, we believe it is increasingly becoming an important growth driver with a $2.2 billion backlog and will contribute meaningfully to both future sales and earnings.

Turning to Slide 6. The roots of our Nuclear Business date back to 1957, when we began construction on our Metropolis Works facility in Metropolis, Illinois, just 2 years later, we achieved a major milestone with our first deliveries of UF6 to the U.S. Atomic Energy Commission. From the beginning, our business has evolved in step with the nuclear industry and our customers.

Through our decades of operation, we've developed a proven ability to reliably fulfill our contracts, which has resulted in strong customer relationships. We have blue-chip utility partnerships that date back 50-plus years. This credibility has also allowed us to actively work with regulators and policymakers over decades to discuss key industry dynamics.

Finally, while our facility dates back over 60 years, our maintenance team has not been idle. Investment in Metropolis has only accelerated in recent years with over $100 million invested since 2022 in modernization spend and efficiency projects that have enhanced the facility. Going forward, we expect to continue to invest in Metropolis to better serve our customers and position us for growth alongside the next phase of nuclear energy advancement.

Turning to Slide 7. I'd now like to walk through what we view as the key strategic advantages of our business, which capital investment alone cannot replicate. First, our Nuclear Business is underpinned by the fluorine chemistry expertise of Solstice. UF6 conversion relies on complex hydrofluorination and flourination processes and we maintain a safe and reliable position through deep experience in executing these processes within a highly regulated environment.

We also benefit from Solstice's internal hydrogen fluoride or HF production capabilities. Because HF is a critical input in the uranium conversion process, this integration provides valuable supply chain connectivity and and cost advantages. Additionally, Solstice's R&D team supports a deep bench of chemists working to extend our flooring leadership and are available to solve any challenges we incur. We've also built a reputation as a trusted partner across the industry, developed over 60-plus years of operations.

Certainty of supply is paramount in this industry and failing to meet contractual requirements can inhibit further commercial opportunities. We are proud of our consistent track record of delivery including during the period of Metropolis idling from 2017 to 2023.

Third, we utilize a proprietary UF6 production process backed by extensive operational know-how. This provides technical and quality advantages that we believe are difficult to replicate. Finally, our footprint is a key differentiator. We are the sole domestic provider of UF6 conversion services, operating a modernized, licensed facility with a strong track record of safe and reliable production.

In the current environment, that position has taken on greater strategic importance as attention has shifted to energy security and resilient nuclear fuel supply chains. Overall, we believe the technical complexity of UF6 conversion combined with the significant capital intensity and regulatory requirements creates a strong and durable competitive advantage for our business.

Turning to Slide 8. These strengths provide the foundation for our long-term growth strategy. We believe the renaissance in the nuclear industry, our defensible leadership position and the renewed focus from the Solstice spin-off, in our view, truly enables this business to unlock its full growth potential.

In our core conversion business, we expect to continue to deliver as a trusted supplier of the UF6 to the industry as we execute on delivering on our $2 billion backlog. This execution gives us a strong foundation and makes us a supplier of choice for long-term growth opportunities.

As the nuclear industry continues to grow, we are well positioned to expand our production to match customers' needs.

We are already well on track with our 20% expansion at Metropolis to consistently deliver 10-plus kt annually and are actively evaluating further capacity expansion.

Finally, we intend to grow adjacent revenue opportunities in areas that naturally flow from our conversion business in UF6. Our differentiated position allows us to participate more broadly across the nuclear fuel cycle, including storage and deconversion services that will likely grow as the industry accelerates.

I will now hand it over to Malcolm, who will take you through the nuclear fuel cycle in more detail and highlight the key role that we play within it.

Thanks, Jeff, and hello, everybody. I'd like to start by providing a high-level overview of the nutrofuel cycle, which is the end-to-end process that transforms uranium into usable nuclear fuel for power generation. And the role that Solstice plays within that process. It begins with mining and milling where uranium is extracted and processed into a concentrated product known as U308, which is often referred to as yellow cake.

This material then moves into the conversion stage, where it is chemically processed into UF6. This is a critical intermediate form needed to be used in the subsequent enrichment process. For a 1,000-megawatt reactor customer typically needs about 250 tonnes of uranium per year.

In enrichment, UF6 is separated to increase the concentration of fissile isotope U235 to the levels that are required for reactive fuel. The enriched material is then moved into fuel fabrication, where it is converted into uranium dioxide powder, pressed into pellets and fabricated into fuel assemblies.

Finally, these assemblies are used in power generation were controlled vision of U235 produces heat and ultimately electricity. Within this sequence, the conversion step is where Solstice participates, and it represents a particularly critical and technically complex part of the fuel cycle.

Conversion is the gateway between mined uranium and enrichment ready material requiring specialized chemical processing to safely produce UF6. Additionally, it is important to note that conversion only represents about 5% of the overall fuel cost for a nuclear energy producer.

So it is incredibly high value relative to its cost. When looking at this overall nuclear fuel cycle, it's important to note that this entire value chain is managed and owned by the end nuclear power or utility customer. We are not doing business with the miners or the enrichment companies.

On Slide 10, we will talk in more detail about how these conversion contracts work. We would note these contracts are typically structured very differently from most chemical industry contracts and allow for predictability and accurate forecasting. Starting with the contracting process, conversion contracts are largely bilateral 3- to 5-year agreements signed directly with the utility providers.

The spot market for UF6 exists, but we would stress it is often thinly traded and can be volatile. What is important to note about the 3- to 5-year contracts, is many times they are not for immediate delivery, product delivery often starts 1 to 2 years from execution. Mike will talk later about how that impacts back and fundamentals.

Additionally, it's important to note that 3 to 5 years is a typical contract, but we do have contracts that are longer and shorter than that time period. Commercially, these agreements are usually either fixed price contracts or variable price contracts with a fixed base price and inflation adjusters which provide both stability and forward visibility.

Importantly, contracts tend to come with firm volume commitments with offtake minimums of approximately 90%, which offers demand certainty. This predictability tends to carry through into order patterns as react to demand is often highly scheduled, most reactors refuel on a roughly 18-month cycle, allowing utilities to plumb well in advance.

Smaller utilities may only need 1 delivery per year where larger utilities can require up to 6 deliveries annually. Start-ups are new operators may also contract for somewhat larger initial volumes as they establish inventory and operations.

On the right, you will see an illustrative contract reflective of those characteristics set 2 years in advance with 3-year duration and both fixed and inflation-adjusted pricing.

The important message we want you to come away with here is that conversion is a business with highly predictable buying patterns, structured contracting processes and regular delivery schedules. Creating strong predictability and visibility for both utilities and suppliers.

Let's now look at the uranium conversion landscape. As shown on the map, ConverDyn is the sole U.S.-based provider of UF6 conversion services, while other companies operate facilities located across Canada, France, Russia and China.

Russia and China both have domestic conversion capabilities, but the production is largely focused on domestic needs. Russia is also currently subject to a phased restriction on supply to the U.S. that takes full effect at the end of 2027.

As a result, neither is expected to be a reliable source of conversion services for Western utilities going forward. As Jeff highlighted earlier, we believe this underscores the strategic importance of secure, western-aligned conversion capacity within the nuclear fuel cycle, particularly as utilities and governments place greater emphasis on supply chain reliance. While the majority of Solstice productions for domestic energy needs, the company also supplies international utility customers in Europe and Asia.

Through ConverDyn, Solstice represents approximately 30% of global conversion supply, excluding Russia and China.

Now turning to Slide 12 and the current market conditions. Nuclear conversion markets have tightened considerably in recent years, driven by a combination of limited new supply additions reductions in secondary supply and growing demand.

On the supply side, new production has historically been constrained. Low prices over an extended period failed to generate the returns necessary to incentivize increases in production. At the same time, excess secondary supply following the cold war, weighted heavily on the market for decades, posting prices to abnormally low levels.

The idling of the Metropolis facility between 2017 and 2023 reflected management's disciplined approach to capital and operations during a period of these depressed market conditions. That decision played a meaningful role in accelerating the drawdown of excess supply, helping to rebalance the market.

With supply now tighter, growing demand will now become the defining false shaping price dynamics. Producers require high returns to justify investment and the market is responding accordingly. You can see this effect on the two charts on this slide.

In the top graph, secondary supply is indicated by the gray bars and the height of that bar is meaningfully strong from 2018 to 2025. In the bottom graph, you'll see that pricing increased dramatically in that same time frame. This is an encouraging sign. We believe it reflects a market moving towards healthier, more sustainable conditions that can support the long-term investment the industry needs.

Turning to Slide 13. Across the global energy landscape, nuclear is reemerging as a critical source of reliable, low-carbon power. This is being driven by accelerating demand for electricity to support data centers and industrialization as well as energy security priorities. Increasingly, leading technology companies are investing in and contracting nuclear capacity, including small modular reactors or SMRs, to secure reliable power supply for their operations.

Hyperscale AI data centers can require approximately 500 megawatts of electricity and overall data center electricity consumption is expected to roughly double by 2030. Policy support is also strengthening. With the U.S. Department of Energy targeting an increase in domestic nuclear capacity from approximately 100 gigawatts in 2024 to 400 gigawatts by 2050. We reinforcing a more constructive long-term growth environment for the sector.

On the ground, this momentum is already translating into activity. There are approximately 78 reactors under construction globally alongside continued start-ups and commissioning activity. There are also more than 70 SMRs under development.

Importantly, this is not limited to new builds. We are also seeing a meaningful wave of restarting existing assets in the U.S., recent examples, including Three Mile Island and the Palisades nuclear plant, highlighting the shift in direction.

As nuclear activity expands, it drives incremental demand across the entire fuel cycle, including the key step of uranium conversion. This positions us as a key enabler with a broader structurally growing nuclear fuel ecosystem.

Turning to Slide 14. We wanted to spend an extra moment on the continued technology evolution in the nuclear space with the emergence of SMRs and other advanced nuclear technologies. Whereas traditional nuclear has been defined by large decades-long infrastructure projects.

The next generation of reactors is being designed around a different model. Small modular reactors or SMRs can be deployed faster at a lower cost and closer to where power is needed, which is driving industry adoption. This shift is already being validated by some of the world's leading companies in the technology sector. Amazon, Google, Meta have all announced partnerships of procurement agreements tied to SMRs in recent years. And demand extends well beyond the technology industry.

Industrial companies are also turning to advanced nuclear solutions to meet growing energy needs. For example, Dow and X-energy are partnering to develop the first grid-scale advanced SMR project at a North American industrial site. ConverDyn is also directly participating in the emerging ecosystem.

In April, ConverDyn entered into a uranium conversion agreement with Hadron Energy, which is developing the Halo micro reactor, Federal investment is reinforcing this momentum. The U.S. government has directed more than $3 billion towards accelerating the demonstration and commercialization of advanced nuclear technologies through the U.S. Department of Energy Advanced Reactor Demonstration Program.

Each reactor that is built provides real commercial opportunity. Each reactor that is developed represents a substantial and recurring fuel obligation. For example, SMRs on average will require about 200 metric tons of UF6 for their initial load followed by roughly 100 metric tons every of the year for refueling, creating a durable source of demand across the fuel cycle.

We believe ConverDyn is well positioned to capitalize on this opportunity through both new engagements with these advanced nuclear reactors as well as continuing relationships with traditional reactors, while reactor designs are evolving, uranium conversion and UF6 remain critical to both traditional enrichment processes and the advanced fuel cycles that support many SMRs and micro reactor designs.

I will now hand the floor over to Mike, who will take you through our financials.

Thanks, Malcolm. I'd now like to dive a bit deeper into the strong financial foundation underpinning our Nuclear Business. When you look over the past 3 years, this business has demonstrated exceptional growth. With a 26.2% net sales CAGR between 2022 and 2025. Ongoing year-over-year increases in net sales reflect higher UF6 pricing as well as greater volumes from our recent capacity expansion.

Commercially, we have maintained an approximate 90%, 10% split between long-term contracts, which provide us great visibility and the spot market, which allows us to be more opportunistic.

Looking ahead, we are encouraged by continued momentum in pricing in the conversion business, evidenced in our $2 billion-plus backlog, which allows us to have confidence in expected double-digit adjusted EBITDA CAGR through 2030.

I will talk more about the backlog in a moment. At the same time, we continue to look for further ways to accelerate value creation in our nuclear business, such as actively exploring further capacity expansion and looking at ways to increase non-conversion revenue.

Turning to Slide 16. Let's talk more about our nuclear backlog. As of March 2026, Solstice nuclear backlog stands at approximately $2.2 billion. It represents firm signed contracts with approximately 90% minimum volume commitments and clear pricing mechanisms similar to the contract structures Malcolm described earlier.

Given the robust demand for UF6 conversion, our production capacity is largely contracted through 2030 with a number of agreements extending beyond that. These factors provide us with a stable and predictable foundation from which to operate over the coming years.

As Malcolm discussed earlier, UF6 contract pricing has increased approximately $20 a kg over the past few years, reflecting tightening supply/demand balance. Given the contractual lag in this industry with delivery for most contracts not starting until 1 to 2 years after execution, Much of this price appreciation is yet to be realized in Solstice's P&L.

We expect our realized selling prices to move higher each of the next few years as legacy contracts roll off and are replaced by newer agreements reflecting today's improved market conditions.

Turning to Slide 17. We wanted to also spend a moment to discuss our relationship with ConverDyn, which we know is an area of investor interest. As a reminder, Solstice fully owns and operates the Metropolis Works facility, while ConverDyn-Solstice 50-50 joint venture with General Atomics, is the exclusive purchaser and marketer of 100% of the UF6 conversion services from Metropolis.

We are frequently asked about the profitability split between the two entities, which ultimately gets to the question of internal transfer pricing mechanics, something that we do not intend to disclose consistent with most other companies as it relates to these types of matters.

That said, we would like to emphasize that Solstice is compensated through this arrangement for its production of UF6 including the HF that we produce internally as well as for our administrative efforts and related services. In summary, Solstice profitability from the Nuclear Business is appreciably more than simply the 50% share of ConverDyn's results.

Turning to Slide 18. I would like to talk more about the additional revenue opportunities we have in the Nuclear Business. beyond our core conversion services. Currently, we generate anywhere from $40 million to $80 million annually from adjacent services that naturally flow from being in the conversion business. Examples include uranium storage, essentially holding U308 inventory for customers or swapping product locations with other industry stakeholders.

Now as a stand-alone company with a renewed focus on growth in the Nuclear business and with the nuclear ecosystem continuing to grow rapidly, we think this is an area we can target for growth going forward. When we look outside of simply the Nuclear segment, it is important to note that the broader Solstice enterprise also benefits from the Nuclear business. We just spoke about the use of internal HF to facilitate UF6 production and this consistent product stream improves the operating leverage of our HF facility, improving the overall economics of the site.

On the other hand, metropolis benefits from the full breadth of Solstice's functional support, including engineering, manufacturing and research and development. Further strengthening the facility's long-term competitive advantage.

Turning to Slide 19. Taking together all that we've described so far today. We believe Solstice nuclear business is very well positioned for strong earnings growth in the years ahead. We've discussed the strong demand we continue to experience through our differentiated value proposition to customers which translates directly into a large and growing backlog.

Our backlog is high quality with contracts structured to provide a high degree of visibility into future earnings which gives us confidence in our expected double-digit adjusted EBITDA CAGR from 2026 through 2030. We additionally continue to look for ways to opportunistically further improve our earnings profile such as through spot market sales or expanding our non-conversion business.

To further grow our business, we are actively exploring opportunities to expand capacity beyond current levels. Jeff will talk in a moment about how we are approaching this investment consideration, but we will continue to work actively with our customers to make sure we are well positioned to serve them for the decades to come.

Overall, this business has a strong foundation today, and we believe a clear path to even stronger performance ahead.

With that, I'll pass it back to Jeff.

Thanks, Mike. Turning to Slide 20. As we evaluate adding further conversion capacity, I'd like to share a bit more insight into the key factors that shape Solstice's investment approach, including commercial relationships supply and cost considerations and support from external agencies. Commercially, we are leveraging more than 60 years as a trusted supplier with a proven track record of reliable delivery.

This foundation helps us strengthen existing relationships, develop new partnerships and engage proactively with current and prospective customers to support their needs. As our CEO, David Sewell has discussed on recent earnings calls, these conversations are active and incredibly constructive.

From a supply and cost perspective, we are partnering with a leading EPC firm to conduct an initial engineering analysis aimed at identifying the most viable opportunities if we were to add capacity.

Through this analysis, we will have further clarity on the opportunities available to us and what cost across a range of capacity options, including both new investments and debottlenecking. We plan to provide an update as we make further progress on this front.

Finally, we are actively engaging with federal and state agencies that are focused on expanding U.S. nuclear conversion capacity in the near term, creating potential avenues for investment to advance both National Goals and Solstice's Nuclear Business.

As we have discussed previously, Solstice has received backing from the Department of Energy for an ongoing expansion to over 10 kilotons of projected annual capacity at Metropolis Works. As government agencies express ongoing interest in nuclear conversion and intensified focus on expansion efforts, we believe Solstice remains well positioned to capitalize on future support for potential investment.

Putting these factors all together, as we consider these exciting capacity expansion opportunities. We are committed to maintaining the disciplined attractive ROIC approach that underpins our differentiated growth strategy.

Turning to Slide 21. As we wrap up today, I want to leave you with a clear sense of what makes our Nuclear Business compelling. Solstice represents a differentiated nuclear platform with a durable leadership position in a critical segment of the nuclear fuel cycle. As demand for nuclear energy continues to grow, driven by both existing power needs and emerging applications such as AI and advanced manufacturing, the company is well positioned to benefit from these long-term industry tailwinds.

Underpinning this is a financial profile that reflects both the reliability and momentum of this business. Strong growth, significant contract visibility and a backlog exceeding $2 billion that extends into the 2030s. These attributes provide a high degree of earnings visibility and support our confidence in the company's long-term outlook.

Finally, compelling industry dynamics continue to create opportunities for additional investment that can further strengthen Solstice competitive position and accelerate long-term earnings growth.

Looking ahead, we see significant runway for further investment to capture growing demand for nuclear energy, supported by the technical expertise, operational track record and deep customer relationships that position Solstice to translate this opportunity into sustained growth.

With that, I'm happy to open it up for questions.

[Operator Instructions]. Our first question is from John McNulty with BMO Capital Markets.

Yes, so I guess the first question is, looking at the conversion pricing that you were speaking to and kind of just thinking about the duration of when these things actually hit your P&L. Kind of looking out over the next few years, it looks like pricing should be up kind of in the low to maybe even as high as mid-teens per year or like a compounded annual growth rate.

So if that's the case, I guess, how should we think about how your costs grow over that period, just so we can kind of think about how much may actually fall to the bottom line.

Thanks, John. I appreciate the question. We haven't given direct pricing guidance on any specific business, so I won't go into that. As you did mention, we do have good visibility based on the UXC pricing contract, and I think that's a good indicator of where we see pricing going over the next few years as we come forward.

Beyond that, again, we aren't going into the specific margin profiles or anything like that within the business. But we do have good visibility to line of sight and feel confident about the the earnings profile that we have through 2030 based on the backlog and the customer commitments that we do have here.

Okay. Fair enough. I guess is there a way to think about the the pace of where your cost in terms of how to think about inflation overall, it seems like it's a relatively fixed cost business, but is that the right assumption?

Yes. As I think about the overall earnings growth within the business, we've talked about double-digit EBITDA growth previously, and that's something that we continue to have high confidence in delivering on.

John, the only, this is Mike. The only thing I would add too, when you think about the cost profile, and again, we have broken out our explicit assumptions. But needless to say, as you've seen from us over hopefully the past year or so, we've taken pretty conservative or prudent estimates around potential cost inflation, whether it be from electricity or other input costs et cetera.

So as Jeff mentioned, that revenue visibility and taking some prudence on the cost side is really what helps underpin our confidence in the earnings growth profile.

Got it. Okay. No, that makes sense. Maybe just as the follow-up because it looks like at these price levels, at least based on what we've seen the industry is kind of a decent reinvestment rate economic level. And so I guess with that, can you help us to think about the barriers to entry in the UF6 market for the United States in particular, just because it does seem like there's a heck of a lot of growth out there and you highlighted some of the strengths that you have. But I guess what are -- what do you see as the biggest barriers to entry?

Yes. Thanks, John. Certainly, I love to talk about that and give some insights as we think about things. Look, I think to begin with, I would reference our expertise in fluorine chemistry. We did talk about how this is a complex chemistry, and we are industry leaders within this, obviously, not just in UF6, but it really goes across our entire Refrigerants and Applied Solutions business, deep R&D expertise.

And we do think that, that is something that uniquely positions Solstice to be a leader, a continued leader within this field. A second part that I would really highlight as we think about is the regulatory environment. We currently have an NRC license going through 2060, and that certainly is something that is a challenge as people come in and we have a demonstrated track record of executing on our commitments and delivering results here.

Lastly, and I think something that is important as well is with over 60 years of experience within this industry, we have deep customer relationships and intimacy. Surety of supply is one of the key items within this, and we have demonstrated that over decades. And we do think that, that is something that positions us very well competitively as we're looking at this market.

Our next question is from Josh Spector with UBS.

This is James Cannon on for Josh. Thanks for an informative presentation. I just wanted to ask on like how you guys are approaching some of the potential options for capacity expansions. If I think about options for debottlenecks, larger scale brownfield or a full greenfield site? Like what would the CapEx outlay and time lines be to bring on like illustrative scenarios in that case?

Thanks, James, for the question. Still very early days as we're going through this. David shared earlier after the Q2 -- or excuse me, Q1 earnings release that we have brought on and discussed this morning that we've hired an engineering firm to really begin the process of going through that. That is underway now. And as we get more information, we will be making sure to share that and let the industry know.

At the same time, we are also working with our customers. We're beginning to talk have these discussions about their needs, their demands as we look at the industry and what they will need. And so we're really bringing all of that together to make a prudent financial decision as we look at things. And we talk about the ROIC that we look at within these investments. So as we get the information on the cost and the customer needs, demands and commitments coming in, we'll be able to make a final decision on that.

Okay. And then just as I think about -- you laid out a pretty large backlog for new reactors and SMRs coming on over time. Could you give a finer point on some of the timing of those coming on? Do you see there being a material ramp-up in delivery demand within the next couple of years? Or is that more of a 2030 story?

Yes, certainly. Happy to try and give a little bit more color to that as we're thinking through things. I think as we think about SMRs and the micro reactors, we are excited to see that some of that demand is coming in earlier than I would say, much of the industry expected.

So we are starting to see that. One thing that I would reference is earlier this year, we release that we had signed up with Hadron Energy, which is an MMR, and I think that is indicative that we are starting to see that trend even a bit earlier than what we had talked about. And so -- we think the overall vertical, the growth is attractive and continue to grow and in some cases, even accelerating more than I think some we had thought even a year ago.

Our next question is from Kevin McCarthy with Vertical Research Partners.

I appreciate the presentation this morning. I wanted to ask about Slide #12. Can you elaborate on the secondary supply dynamics that you highlight there? Why has that secondary supply contracted so much in recent years what's driving that? And do you expect it to remain relatively stable at the 13 million-kilogram level that you indicate for 2025? Or might it re-expand and any color there would be helpful?

Certainly, Kevin. I'll go ahead and start and jump in and try and explain a little bit of what we're seeing in the secondary supply market. Let me begin by saying that contraction that came down really is part of what happened over the 2017 through 2023 period with the idling of the Metropolis facility. So maybe just a little bit of history as we think about that.

There is certainly a period of time where it was secondary supply, there was depressed pricing that really made it very challenging economically to have a facility. And so during that idling, what really happened is the secondary supply was used to supply industry. And we now see it at a point where it really has reached a very stable level. One that we do not see the risk of coming back.

We're expanding again and really the applicability of it to the overall conversion market is actually quite small right now as it is different than it was previously. So we feel very confident about the outlook we feel very confident that it is not going to be an impact as we go forward for the overall supply.

Okay. And then second, I did want to revisit the relationship between Solstice and ConverDyn. I think it would be helpful to the investment community if we could understand a little bit better how the economic value accrues to Solstice and ConverDyn as the cycle progresses. In other words, does that happen at similar rate or at different rates?

When I look at Slide 17, it sounds like you're being compensated for production and various services. Which sounds like it's a cost-based paradigm, Jeff, which would lead me to believe if that's true, that maybe ConverDyn grows faster in an up cycle and Solstice would grow faster in a down cycle, so to speak. I don't know if you could shed any light on that and help us understand better the relative dynamics there?

Yes, certainly, and thank you for the question. If I can, I'll turn it over to Mike here, and he'll provide some further commentary on that.

Yes. Great. Thanks, Jeff, and I appreciate the question. Kevin, you're right. So I mean, as you think about the overall entity, so there are two entities, there's the Metropolis, where is the 100% owned and operated. And produces all of the UF6 conversion services.

And then we have ConverDyn, which is the 50-50 joint venture with General Atomics. Again, we're not going to get into our specific contractual relationship with General Atomics. But I think it's fair to say over time that, that pricing for that transfer to General Atomics is not stagnant.

Over time, it does change. And when we talk about -- and I said on the call that we have appreciably more than just a 50% stake in ConverDyn, we do think that the general relationship or the split of earnings should remain relatively consistent going forward. So again, we're not going to get into specific numbers, but I think going forward, it's not to say that, that economic interest or the share of profitability should meaningfully change going forward.

Our next question is from John Roberts with Mizuho Securities.

Urenco has announced a new enrichment plant for New Mexico. You talk about what that means for the industry and whether it means anything specific for Solstice?

Yes. Thank you, John. Happy to comment a little bit on that. You're right. Urenco did recently come out and announced that expansion in the facility. Maybe just some general comments or industry dynamics. The U.S. certainly has been structurally short on conversion. And so as Urenco does this, this does begin to help make sure that there is domestic conversion available within the U.S.

And I think even further beyond that, there will be more needed in order to support the growth that is happening there. In terms of overall, that does increase, I think, supply of the UF6 that would likely be going through domestic avenues, but again, as I think and I want to reinforce, our end customers are really the utilities, and that's who we're working very closely with.

So as we're talking with them, they're really going to help drive the demand for UF6 and indicate and direct where it needs to go for conversion as we go forward.

And then the ancillary services that you talked about in terms of uranium storage, et cetera, is that activity within the ConverDyn JV? Or is it in the Solstice operations outside of the JV?

Yes, John. So those other revenue opportunities, they do occur within the ConverDyn joint venture.

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

Thanks for hosting a very informative webinar here. So I guess I just wanted to frame the opportunity here, the growth opportunity on EBITDA over the next several years. So it sounds like this segment, you've talked about double-digit EBITDA CAGR. Could you kind of frame the EBITDA margins relative to RAS segment margins currently around 35%.

And would nuclear be above or below that? And if it's kind of in that range, that would kind of imply something in the order of $15 million or so EBITDA growth per year. Is that are we kind of thinking about it the right way? Or could you provide any more detail there?

Yes. Thanks, Arun, for the question. I'm going to turn it over to Mike here to comment a little bit.

Yes. Thanks, Jeff, and thanks, Arun. So you're right. So we do not explicitly break out our subsegment business unit profitabilities. What we have said is that all of our subsegments are within a few hundred basis points of segment average. As you correctly noted, if you look at our RAS segment in 2025, it reported an EBITDA margin of approximately 35%.

So if you use the 2025 revenue that we provided in the mid-300s for nuclear and say, a mid-30s percent EBITDA margin, that should get you a good jumping off point for the double-digit EBITDA CAGR going through the end of the decade.

Perfect. And then just as a follow-up, maybe if we can just circle back to pricing. And you've provided some commentary here that the old contracts will roll off. And then it sounds like you have been able to secure new contracts in more representative of current pricing.

When you think about replacement costs, have cost kind of increased to the point in that, has that been the bigger driver of the price appreciation or is it the lack of supply that's been added to the market? And do you see some support for pricing to continue to be above this kind of $50 level for the foreseeable future? And what would support that? Is it kind of cost or supply-demand dynamics?

Thanks, Ron. Let me begin by just saying I think it would probably be imprudent for me to forecast too much into pricing into the future. What I can say is that we do have good line of sight and visibility in the contracts that we do have and how they will trend over the next couple of years, which gives us confidence on that.

Regarding specifically, as you talk about the pricing trends that have continued, that has been more related to the overall industry dynamics and the demand that is coming through versus simply just a cost change that has happened there.

Our next question is from Duffy Fischer with Goldman Sachs.

First question is just how much benefit do you get by being the only U.S. company? You talked about the Russian and the Chinese product that essentially is boxed out of some markets. But where does being American versus, say, being Canadian or versus being French benefit you? Are there some people that only can take U.S. product, do you think, over time? And do you get a premium, do you think, for being U.S. versus, say, French or Canadian?

Great question, and thank you for the question. As we think about the benefits of being U.S. supply, there's been a lot of interest in domesticating the supply chain. And certainly, we have seen that there is significant interest from utilities and so forth and to de-risk and have a local supply chain and something that we've also been working with the administration very closely in terms of how do we make sure that we are able to support growth within the U.S. to support growth within the U.S. for the energy and power demands that are needed.

And so certainly, we are seeing that. We're seeing a significant interest from our utilities and from our customers in trying to make sure that they're working very closely with a U.S. supplier.

Okay. And then there have been a number of announcements recently about folks that want to get into your space. I guess a couple of questions there. Should investors expect announcements where one or two other people will start building plants to compete with you in the U.S.?

And how many players do you think this market would be able to support over time? Can it support two or three different players in this space?

Yes. Great question. I can't really comment on competitors or what decisions they will make and so forth. If I -- if I take a step back and think about some of the things that are going on, I'll start by saying that we've operated like for a number -- for many, many decades with Metropolis, Illinois and ComverDyn being the domestic supplier. So I think we've demonstrated that we have the ability to execute well and to make sure that we are being a reliable supplier to utilities, providing surety of supply.

We are excited about our opportunities for expansion and what we need to do there. And we are working closely with the utilities to understand their demand and work with them in terms of having commitments that will underpin our ability to go forward with expansions. And we think that is something that's important to really back our disciplined ROIC approach to any sort of expansion that we will do here.

Our next question is from Jeffrey Campbell with Seaport Research Partners.

First of all, kudos for the presentation is very well organized and a lot of great information. If I look at slide, you want to sort of approach the pricing in a little bit different way. When we look at 11 and 12, the contraction of the secondary on 12, I assume that's primarily because of Russia getting shut out of the market. I mean there their period of company all sort of in the market was suppressed for quite some time.

And then if we look at 11, it's -- so we have a Western supply market, which is you guys and bearing in mind the cost it only represents about 5% of the total uranium if we think of your pricing level, there's more like a commodity, and it's so utilities negotiated different converters? Or should we think of it that you actually have some pricing power [Technical Difficulty] Very based on specific customer relationship.

Jeffrey, you're breaking up there a little bit on the question, but if I parse through the tea leaves a little bit, I think you're trying to get at pricing power versus supply-demand driving price. So assuming that's the question, Jeff, why don't you take a stab at that and then you can come back afterwards.

Yes. Maybe I'll begin just by commenting, I think there were some questions on secondary supplies that from other areas, specifically Russia or China. And I think the very simple answer is to say is no. That's actually not where it's coming from. So that is not something that's indicative of that. It is other industry dynamics that really happened during that period.

And that's why earlier we commented that we feel very confident about the secondary supply being at the -- an appropriate point and one that is not really going to be a meaningful impact going forward from here.

Regarding the other questions around pricing, we do have the relationships with our customers. I think we have between the relationships, the reliability and so forth, which really is critical. I think that gives us an ability to have meaningful discussions and value-based pricing discussions with our customers as we are delivering value to them in the services and products that we provide there.

Okay. Yes, that's helpful. And I guess my other question is just what is the logic of selling your UF6 through ConverDyn as opposed to just selling it yourself. I mean I'm sure there was some historical thing there. But as we're going forward and the demand is increasing and you're going to invest more and more in on production. Is there any kind of scenario where you would rather have that total control of that marketing yourself versus the current structure?

Sure. Great question. Can give a little bit of context on that. I think you began to get at it in terms of if there is some historical context as to the reason for the joint venture and why it presented there.

ConverDyn is the 100% offtake agreement of the UF6 produced at Metropolis. And so that is the underlying JV agreement that we have and why it is structured that it is going through that joint venture.

Okay. So there's no -- there were no -- there wouldn't be any appetite to eventually assume that marketing yourself. Obviously, you're happy with the structure as it is now?

Yes. We are happy with the structure. And at this point, I really can't comment on the JV with General Atomics. What I can comment on with that is that General Atomics has been very supportive and constructive partners for decades as we have done this, and we continue to be excited about the prospects within this.

There are no further questions at this time. I would like to turn the floor back over to Mr. Leithead for closing comments.

Great. Well, look, I really appreciate everybody joining us for the past hour to spend some time to talk about our nuclear business. If you have any follow-up questions, please feel free to reach out to myself or the broader IR team. Thank you, and have a great day.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings, and welcome to the Solstice Advanced Materials First Quarter 2026 Earnings Call. [Operator Instructions]

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 stand-alone quarter as an independent company.

This performance demonstrates Solstice's ongoing disciplined execution and agility, not only through our transition to a stand-alone 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 in growth 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 & 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 4. 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 ecosystem 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 targets 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, shareowners 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 5. 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 4 quarters into the 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 stand-alone public company, such as higher SG&A and interest expense. We would also note that our noncontrolling 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 stand-alone 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 6. 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 7. I'll now discuss the results in each of our 2 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 subsegments. 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 454B that David mentioned, the subsegment 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 Intermediate 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 8. 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 and 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 subsegments, 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 & 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 & Performance Chemicals net sales remained steady year-over-year at $121 million, with growth in fine chemicals offset by ongoing end market softness in Specialty Additives.

Moving to Slide 9 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 costs. 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 31, 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 31, 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 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 and 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% to 26% adjusted EBITDA margin.

Our outlook for the second quarter assumes continued momentum in Refrigerants, Nuclear and Electronic Materials and growth in Safety & 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 a $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 4 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 stand-alone 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 are 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.

[Operator Instructions] Our first question is from Kevin McCarthy with Vertical Research Partners.

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.

And just another question also on long-term expansion potential following on the expansion that you've already done and whether that might be in the cards?

Kevin, thanks for the question. And to jump right into Nuclear, we saw with the 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. And it dovetails right into your question on expansion. Our debottlenecking efforts are going extremely well. We feel very good about the 25% increase in volume that we're going to deliver from our 2024 numbers.

And then on the future expansion, we are going down 2 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.

And then the discussions we're having with customers and regulators. So customer discussions have already begun to understand what that new demand is going to be as nuclear continues to grow around the world. And 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.

And so it will 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. So 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 expensive, as you can imagine. And then 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. And then 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 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.

And Tina, I'll just have you kind of give a little bit more color.

Yes. Kevin. So yes, in regards to the sulfuric olefins and freight that David just mentioned, that represents less than 10% of our total material spend. So rather insignificant. And then as it relates to sulfur, I would just add that we do have kind of a regional approach from sourcing, both in Americas and Europe. So really minimal disruption as a result of the Middle East.

And then we covered price cost in quarter 1. We expect to do the same for the remainder of the year. And as we mentioned during our Investor Day, this was a set of muscles that we developed during '21, '22. We have very strong analytical tools. So we're extremely well positioned.

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

So 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 2-phase direct chip side. And so maybe if you can give us an update as to how those discussions and trials may be progressing.

John, thanks for the question. 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 and data centers. We don't pinpoint the number exactly. We have a few different products that go into data centers. So -- and 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, multiple projects co-innovating with customers both on the chip side and at the data center infrastructure side. And 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. And 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 2-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. And then as you look a little bit longer term, the next 4, 5 years, we're exploring things like immersion cooling and other types of solutions because 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. So 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 and advanced electronics. So a lot going on there.

And then 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. So 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, but the co-innovation pull that we're getting from customers is significant.

Our next question is from John Roberts with Mizuho Securities.

Nice clean quarter and guidance. I have 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 start-up comes online? And maybe talk a little bit about the growth path there.

John, you're exactly right. We're -- for lack of a better word, we are selling everything we can make in our Spokane facility. And 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. So we are doing an enormous amount of work. We want to expand even faster.

The growth is -- 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 going to continue. So we're doing a lot of work on that, on how we're trying to expand our capacity. We just feel that 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. So we feel great about that.

And I'd also add what we're seeing in our TIMs business is also significant. And so we're doing a lot of work on expansion there and the growth rates that we're doing. So 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.

In Q4, you guys had highlighted a fairly severe destock that you guys saw in health care packaging. So is that mostly behind us? And if you could just sort of talk about that end market.

Hassan, I appreciate that. We were really happy with the recovery in Q1 following that destocking, which we talked about. So we're very cautiously optimistic about the rest of the year 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.

So we're seeing that growth in Aclar. We're also seeing it in our inhaler business. And so 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. And as a follow-up, the $30 million in legacy costs, how are those trending? If you could just give us an update on the TSAs as well.

The TSAs are going extremely well. We'll -- here at midyear, we're going to have the most significant milestones behind us. We spent roughly $15 million in quarter 1. So essentially, we're on track with kind of the spin transition.

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

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

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.

I was wondering if you could unpack some of the moving parts in Refrigerants for us a bit. I think 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 R134a.

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 percent growth was primarily HFO-driven adoption?

Josh, I can't speak specifically to our competitor. I haven't seen the specifics there. But 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 really strong double digits. As we entered 2026, we had about a ratio of 60% HFOs, 40% HFCs. And as we exit 2026 into '27, I think we're going to approach 70-30, which is exactly where we want to be, which is where the market is going.

I think there's always some opportunistic opportunities with HFCs, but where the market is going with 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 year-over-year as we go through this transition and gain share and position ourselves really as a leader in this segment. And then we'll start to see that sequential growth now moving that full transition is behind us.

So we're right on track with where we want to be. We feel very good about our growth. We feel very good about our position in data centers with HFOs, which is where we really want to establish ourselves as a strong leader there. So I guess I would phrase it as we're right on track with how we want to 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 noncontrolling 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? And what do you expect in your guidance for the rest of the year?

So yes, Josh, it would be closer to -- yes, we were around $20 million for quarter 1, which as you highlighted. We had some favorable mix and pricing in one of our businesses. And then we also had kind of one item that was a little bit unusual in one of the other JVs. So going forward, we anticipate more like a $10 million per quarter.

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

Apologies for that earlier. I guess first question was just on the guidance. I think in the past, you guys had alluded to Q1 being maybe 23%, 24% of the year, Q2 being 26%, 27%. So it looks like your Q1 was about 25% of your full year guidance and Q2 maybe 27%. So you're tracking slightly ahead of those initial expectations that I had.

So 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. So 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, 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 we have really good momentum heading into Q2. We have -- I think we highlighted 5 planned maintenance outages in Q2. We want to make sure we get through those very solidly. So far, everything is on track. We feel very good about that.

Notwithstanding some announcements last night, there was a tremendous amount of geopolitical environment that was wanting to make sure we had the right amount of conservatism knowing what's going on in the world today. But I would frame it the exact way you framed it. We feel very good about the year. We reinforced knowing that there's definitely some inputs geopolitically that we want to make sure that we took a conservative stance about.

And then as we come out of Q2, we'll certainly relook at where we're at in the year. And if that geopolitical environment kind of subsides and we continue to have this great momentum in these secular growth trends, which we fully expect, we'll then give an update at that point.

Okay. And as a follow-up, maybe I can ask a question on some of your growth projects. So 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 cited maybe double-digit returns.

And so if I'm thinking about it correctly, you have a $220 million or so investment in ballistics and similar amount in electronic materials. So if you look at double-digit returns on those, would that be kind of in the order of $30 million to $40 million EBITDA each? And what's kind of the timing of that kind of flowing into the company?

Yes. Thanks. The way we're thinking -- and this is kind of going to -- 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 multiyear projects. So we were sprinkling in that strong return over a multiyear where we'd start to see the full benefit probably 2 to 3 years out.

What we're trying to -- 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. So that would give us returns a little bit higher earlier versus the longer profile that we had of 2 to 3 years out.

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

Yes. 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. So when you're talking about EBITDA, just a reminder, you're going to have to gross that up, which is probably a little bit higher of a number overall.

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.

Well, welcome everyone on the last day of our Barclays Industrial Conference. I really appreciate everyone being here. And I'm incredibly excited to host David Sewell and Mike Leithead from Solstice, a new company in our space, and it's a company that has got off to a phenomenal start. So huge congratulations on your latest earnings and obviously, the market reaction.

So thanks so much for being here with us.

Pleasure to be here. Thanks for having us, Derek.

And I'd love to start with just a recap about you did fourth quarter earnings last week, deep just for the audience in case they haven't had a chance. Can you walk through some of the key highlights, what really excited you not only about what you've accomplished, but as you turn the page to '26?

Yes, so we just announced earnings and it was well received 8% top line growth, but really underpinned with some strong secular trends that we're really excited about for the future. Double-digit growth in our nuclear business, double-digit growth on our refrigerants and thermal management business and double-digit growth in our electronics business, which really gives us a really good momentum heading into 2026, where we gave mid-single-digit EBITDA guidance.

So we feel really good about the business, and we feel really good about our position in what we think is the inflection point of these growth markets.

And that clearly seems to be one of the things that's driving is you just seem to have a product portfolio that is perfectly aligned for some of the key secular trends. So if you don't mind, let's walk through each one of them.

So I'd love to talk about nuclear. That is one that I don't think people knew this business had when you're named after your key product, obviously, the refrigerant products. So this is something that I think was underappreciated. Can you talk a little bit about, a, what you do, what the drivers are and what the outlook is?

Sure. So we have the only nuclear conversion site in the United States. And there are basically 4 other locations around the world for nuclear conversion. We make uranium hexafluoride, where we basically take mined uranium ore, which is -- turns in the yellow cake. We add our hydrogen fluoride at our facility in Illinois, and we convert that into UF6. And from there, that goes to enrichment and then from enrichment that goes to fabrication at the utility.

Obviously, we're under huge demand for energy right now, especially with data center growth and everything going on around that around the world. So nuclear energy has become a huge option for clean energy moving forward. The administration has come out and talked about 400% growth in nuclear energy over the next 25 years. You're seeing right now 75 new nuclear reactors under construction, another 100 have been announced for construction, and that doesn't even include the SMRs that are out there as well.

So an enormous demand for energy, and we just feel like we're exceptionally well positioned to capture that growth. And in our earnings, we also announced our expansion exploration for our metropolis site. And we've already announced our 20% debottlenecking for 2026.

So all this, to your point, all the leading indicators for us are there, and our site is basically sold out through 2030.

And it's all that included with the expansions?

Correct.

What's the threat of somebody else coming? I mean, this has to be something you guys have had for a long time. There's got to be a significant moat. Is there a risk that others try to come in and compete or is that -- we probably need it given the growth you're talking about. But what's that risk?

So there's -- obviously, we work very closely with the Department of Energy. Our permitting right now is for 15,000 tons of uranium hexafluoride our expansion gets us to 10. So we still have that permitting. There are -- as I mentioned, there's 3 other locations that can do uranium conversion.

We're actually uniquely positioned because we're vertically integrated with our hydrofluoric acid. We also have a 60-plus year legacy of making uranium hexafluoride and we feel like we have some proprietary manufacturing processes.

So what we're doing though is because of the relationships we have with our customers, as we do this expansion, we're ensuring that we are aligned with customers. So our expansion is going to be aligned to customer growth. So we've already had the beginnings of conversations with utilities for beyond 2030. And those conversations have been very positive. And so I think just because of our history and our expertise in manufacturing this, we feel very good about our position.

It sounds like you're the first call for all these guys because of the history.

Well, and hopefully, that's the case. And we're going to be a reliable supplier because if you were to do a greenfield, it would be you're talking 4 to 5 years to get production.

Understood. Why don't we turn now to the refrigerants, which is -- I think it's fair to say the heart of the company as it sits today. Can you talk through the growth you're seeing, HVAC auto end markets? What are you seeing from those end markets and just the overall refrigerant market and your position in it?

Yes. So vis-a-vis, obviously, your key competitor.

Sure. So our refrigerants business, we just had a terrific quarter, double-digit growth quarter, double-digit year in 2025. And what's happened is regulation has mandated this global warming potential product, which hydrofluorolefins have really become the standard.

Europe converted a couple of years ago. We just finished the conversion in the United States, and we have a very strong IP position. Obviously, we codeveloped that molecule. So the growth has been terrific and about half of our business is in HVAC and commercial and industrial. The other half is in automotive.

So what's happened is this conversion to HFOs has just created tremendous demand, and you've seen that in the results that we've had. As that as those units go into the market, you'll then start to see the aftermarket business start to kick in, which when we do break bulk and packaging, there's actually a little bit higher margin for us.

So we'll start to see that margin expansion now that, that conversion is complete.

And can you elaborate on the impact of the regulatory-driven transitions and how it impacts mix and margin?

Yes. It's a huge part. So we work, obviously, very closely with governments around the world. So they have mandated this conversion to global warming potential products. And what that has done is created the need for new innovation, that's where HFOs has come in. And that has converted and you've seen our HFCs, which was the previous technology come down because there is cannibalization, but we've also seen the growth. And you also see growth in data centers. That's growing.

So we've seen a little bit of margin compression with the conversion to HFOs because our aftermarket hasn't kicked in as much. But now that we've completed that, we do see that margin coming back and the growth rates. As we projected at our Investor Day, we see HFOs in high single-digit growth, cannibalization of HFCs of low single digits, so that mid-single-digit growth outlook.

And in terms of the margin, how do you see that stepping back up? Is that a back half of the year? Is it linear? Do you have a sense on how that will play out?

Yes, we're going to start to see the benefit starting now. So we've converted that in our first quarter guidance, you've seen us get back to our -- and there was also some transitory costs with our split from Honeywell. But I think you'll start to see the aftermarket in the U.S. come in second half of '26, that will start. But we're seeing great data center growth, and our automotive business has been very stable.

Great. You mentioned data centers. You seem to hit like we talked about all the time. And we'll get to electronics which is another exciting end market. What are you doing for data centers? And what are you seeing? Obviously, it's just the cause the [ lab ] right now in the markets. How are you playing in that?

Yes. It's an explosive growth opportunity for Solstice. And we think we're really uniquely positioned because we participate in data centers really in 3 areas. Obviously, our refrigerants, you need to cool the data centers, and that plays a very large role in it.

Our electronics business is really in semiconductors and really our tremendous value proposition is in leading-edge nodes, which is where everything is going.

So we're seeing great demand for our electronics business as well. And then on nuclear, you need to power these, which is a big concern. And so we are uniquely positioned, both from the energy, from the thermal management as well as the semiconductor side of these data centers. And now that all needs to really come together because the heat being generated from these new chips because they're just getting smaller, faster, more stacked just air cooling is not enough.

We're going to have to go direct to chip, then you're going to have to get to immersion cooling. And we just feel like we're really well positioned with next-generation technology because we play a role in the entire ecosystem.

So you really -- the growth we're seeing in data center manifests itself through almost 3 of your different products.

Exactly right. That's exactly right.

Electronic chemicals, the term I use electronic materials, other use has become into more and more focus, I think, helped a lot by the Unity spin, we have element out there. So it's almost becoming its own ecosystem. How do you play in electronic chemicals? And are you seeing a lot of the same drivers? I think you've just touched on it.

Yes, we are. I mean, we play in a couple of areas. So when you think about the wafer chip itself, depositions is our biggest aspect of that segment. We manufacture sputtering targets, copper manganese sputtering targets. Again, uniquely positioned the only manufacturing in the United States for copper manganese sputtering targets. And you really need that high purity material when you talk about leading edge nodes. It's really gives us an advantage for being there. And now you're seeing chip fabrication coming back which helps us position even more.

So I think we had 19% growth in fourth quarter electronics, you've seen, to your point, the other electronics company, all reporting robust growth, it's really all there. And then if you go downstream a little bit on the advanced packaging assembly side, thermal interface, we play a role there. We play a role in some of the other materials in regards to that.

So we're just seeing incredible demand, and we just announced in the fourth quarter, the expansion of our Spokane, we're going to double the manufacturing site of our sputtering targets. We're really running hand-to-mouth right now and the demand from our customers, the outlook is really significant.

Given we've just talked a lot about all these different segments, I think -- and I want to talk about the overall economy, but I think it's the right time. Obviously, you've just spun out you have, as we've just talked about, several different business units within the -- all fortunately, performing exceptionally well. But as you take a step back, how do you think about the portfolio that you were given as the spun out, both near term and potentially long term?

Yes. So as we spend, we really like the portfolio. And -- we love the diversity of it and there is a symmetry to it in 6 of our 7 subsegments of fluorine chemistry, which is really the backbone of our innovation. So we feel very good about it. Having said that, we were blessed on a spend, as you probably see many times, the opposite. We have a very healthy balance sheet, low leverage. We really don't have any major litigations out there as well.

So we feel very good. And the reality, and this is the benefit of the spin is this business has not had an acquisition in 10 years since it's been a stand-alone. So with this balance sheet that gives us flexibility. We have increased the spend in our R&D because we think innovation is so critical, and we want to have those next-generation molecules and solutions. We feel good about that. But when we think about this business and the portfolio, we want to ensure we're driving shareholder value, it fits our strategy.

We like where it is today, but I think it will certainly evolve.

Makes sense. I would love to get your perspective for everyone here and for my advocation, what are you seeing globally? Like you are a global company. It's always interesting at these conferences to get it, especially earlier in the year, not you, but many clients had a tough Q4 and what are we seeing as we enter into '26 in Europe, in China, in Middle East, in the U.S. what's across various end markets. What's your initial feel on the economy as we sit here today?

So we're uniquely positioned because we do touch a lot of these industries and the globalization of our business. The 3 we talked about, electronics, refrigerants and thermal management and nuclear, we see very robust through the cycle here.

We are in building materials as well as health care. And we have seen in 2025, we saw that as a more challenged year. We saw some green shoots in January as we go through that. But the way we forecasted it is just kind of stable. We really aren't expecting a pickup. But if we do see interest rates come down, construction come up and PMI go up, we would get a tailwind there, but we're not projecting on that side of our business, much more than GDP growth.

And you're not seeing it as...

Well, we did see some green shoots, but we were coming off a softer year Mike, I know is talking to analysts every day. I'll certainly have him jump in there. But I would say it's stable.

Yes, I think that's right. I mean, again, if the world gets better, that's great. But as we currently forecast things, as David mentioned, we're seeing growth in some of those secular areas. But not projecting growth in some of those more cyclical areas right now?

You have a great balance sheet. One of the challenges I suspect is given you have so many interesting areas to invest in, how do you think about capital allocation amongst your various constituents, share repurchase, dividend, and investment, both organic and inorganic. You don't have unlimited funds. You have a great balance sheet. How are you prioritizing those various levers?

Yes. So with innovation really being the backbone of what we do, we have a great ROIC profile. Our return on invested capital is over 19%. And when you think about the semiconductor expansion we're doing, we announced next generation for our defense business, which we haven't talked about.

We haven't yet.

But that's another great business. So we've deployed a lot of capital to those when you think about the returns we're expecting the volume growth in those areas. And we also -- when we do these expansions, we're making our plants more efficient, so we have an expectation of margin expansion. That is really our first priority because that drives innovation and our IP portfolio were over 5,700 patents. That is a value driver for our shareholders as well as how we go to market with our customers, and we want to continue that into the future. Because that really helps us not only with what we want is faster than GDP growth. But also that 25%-plus margin profile.

And I just one other thing I would add, just overall capital deployment as we were pleased to announce our first dividend as well. So it is both, it's reinvesting because we see a lot of growth, but also having some excess cash to reward our shareholders as well.

And yes, great point. And then while we want to have a conservative balance sheet, we know we can get a little bit higher than 1.5x levered. But we don't want -- we really don't want to get over-levered past 3x or anything like that.

That would only be in a scenario where you perhaps do like an M&A transaction, and it would be a short-term spike.

Yes, correct.

It sounds like also that when you're -- as you're deploying capital to these organic projects, you're not build it and hope they come. This is done very much in conjunction with not only demand that you're seeing, but conversations with key customers. So you're a lockstep with them.

Exactly right. So we'll really partner with our customers before we do that capital deployment. A great example is with AstraZeneca. So we've expanded our HFO technology to get into propellants for inhalers, which has been a home run in AstraZeneca, partnered with us actually in the capital deployment to ensure that when we build it, we have that. And now we have the capability to bring that to medical devices around the world and other companies and that's why we get that high return and that high degree of confidence. But it also talks about how we co-innovate with our customers.

So whether it's for the next-generation HFO molecules, what we do in nuclear with utilities, we are working in lockstep with our customers to develop those solutions.

Great. Does anybody have any questions? I do want to open it up. I have more I can ask, but I don't want to hog the mic. Okay. You've now been a public company for 3 or 4 months. Any initial findings, learning, anything surprised you coming out of the spin that you didn't expect pleasantly or unpleasantly?

Well, what's so exciting for us is when you're part of a large corporation and it was -- Honeywell was a great corporation for this company. But you're always fighting for capital. So what we've been able to do is deploy capital quickly to capture some of these growth segments. And when you talk to our employees around the world, there are so many growth ideas and so many growth segments that are really at this inflection point that we want to capitalize on. And we're now able to be nimble and respond much faster and deploy capital faster and really double down to ensure in areas that are really projecting strong growth that we play a leading position there. And that's a really nice place to be as a startup company.

Yes. I mean you're in that rare position where the biggest challenge will not be finding growth, which many of my clients and what Mike used to deal with, it was like where is the growth going? It's almost how do you allocate to -- you have so many hot growth areas. It's going to be allocating it. Because we didn't even touch on defense, which is probably as hard as it's been in 30, 40 years.

No, you're exactly correct. I mean, just the defense industry, you've seen every -- around the world, increase our defense spend. And our next-generation Spectra technology will be the leading ballistic protection ultra-lightweight material out there. And so we're already -- as we work with the Department of Defense to ensure that we're on that next-generation specification for the U.S. military, then that translates to militaries around the world and then goes down to law enforcement. And just having that technology, that innovation, that IP and now that -- really also that U.S. manufacturing base really puts us in a good position.

And do you feel like you're for the demand that's likely to come in that as you get spec-ed and then I would imagine if it goes to the U.S. than NATO, it gets preference. Just are you feel like you have the capacity to meet that demand, which is likely...

Well, we didn't. And that's why we're doing this expansion because really, right now, it's similar to our sputtering targets manufacturing, we're really sold out. So we need to expand that, but we're just very deliberate on our capital allocation to ensure the volume is going to be there when we do this expansion and this investment, and now we have that.

This might not be a fair question, but I'm going to ask it anyway. We'll give it to Mike, part of -- I mean, you're going to -- we've talked a lot of the bankers like ourselves, and you see it, like spins are usually very effective. Now they usually aren't as remarkable out of the gate as you guys have been. But one of the reasons is I think there's this -- you touch on a little bit now that you're liberated, you can make your own decisions.

As you think about that, as you've spun out, is there 1 or 2 strategic choices that you now see that you can do that would have never been doable within the Honeywell universe. Not to knock Honeywell.

No, no. I mean we're so blessed with Honeywell provided this company and also how well they positioned us because they would be the first to tell you that, look, we may need to put that money in our aerospace business or our automation business. And I think we've really leaned into nuclear, which maybe wasn't some of our customers haven't seen before.

So the announcement we made on the potential exploration of a significant expansion in nuclear probably would have been difficult because this would be a very significant investment.

Right. And it just wouldn't have been a big part of what overall Honeywell was doing, and it's more meaningful.

And it's not a knock. I mean it's -- you have to make choices. And you just have so many wonderful businesses as Honeywell that -- and the same thing goes for aerospace automation, they may not have gotten every capital project that they wanted the other.

And I think you make a good point that you were -- because we have seen a lot of successful spends. We've also seen a lot of unsuccessful spends, which usually are because too much leverage, too much other things you alluded to, environmental. They really did spend you in a way that positions you for success and gives you the opportunity to be a consolidator or if that's the path you want to go down.

No, you're 100% right. And Honeywell deserve so much credit for that because they also have the other spend coming in behind us. And they were just Vimal and his team were just committed, let's make these successful. Let's learn from past spends, what worked well and what didn't and when you talk about no legacy liabilities, a really clean balance sheet, that really positions you very well.

And I'm going to ask Mike this question. When you spun out of a bigger company, I think a lot of people assume it's going to take a little bit of time to find your shareholder base. How have you found that transition in terms of investors, index investors in that. What's your conversations been like as the spin has occurred and getting people get finding the right home for this business?

Yes. I mean I think it's a great question. I think coming out of the spin, it was a big churn process, I'm sick of saying the word churn. But I mean, I think coming out the analysis that the team did was about 50% of the Honeywell shareholders needed to sell. And those were the clear red lines. That wasn't the gray area ones. So I mean imagine if you're a large-cap aerospace PM that now all of a sudden has a chemical company.

So I think the first couple of months through year-end, you really saw a lot of that turnover. What we saw earlier this week with the first 13F filings as of year-end '25. We finally got a clean look at what our ownership base is. And I think you've seen a pretty diversified ownership group. You have a good number of index investors. You have a good number of folks who are very well educated and smart on these type of opportunities and a lot of really smart people coming out that really, I think, out of the gate, understood the value of these businesses. And then we talked to a lot of traditional materials folks as well as clean energy and tech folks.

So I'd say I've been pleasantly surprised with the breadth of engagement. But yes, I'm very happy to hopefully never say the word churn again after it was all I talked about in November, December.

And what's been remarkable is because when you spend, there is that inherent churn. And candidly, it's not an obvious -- there's a lot to this story, and a lot of it good, but getting that message out and seeing the receptivity to it. It's been impressive and David for...

No, I appreciate it. I think in general, to your point, there's a lot of moving pieces. I think we'll be the first to admit there's not a true one-for-one comp for us out in the market. But I think it was really important for us and David probably touched on it earlier, to sort of have a smooth baton handoff from Honeywell to us. I mean being able to come out in the fourth quarter and really say, yes, everything we said at Investor Day, that's our guidance framework.

That's what we're taking into '26. I think that was received well and kudos to the team for being able to execute that.

Sure. And again, I'll open it up to any questions, but what's really exciting is you just it's hard to find companies in my world that have so many different positive tailwind levers that data centers, nuclear, refrigerants, which also ties into cooling, the defense angle, electronic chemicals, I just -- I can't -- there aren't -- if I have a client with one of those, great to have 5 of them is pretty remarkable.

Look, we're blessed with a great portfolio, and I give great credit to our team and especially our R&D team, the innovations that they developed with the IP. But also what gets us so excited is what we're working on for the future. As a stand-alone now, we just really feel good about the momentum we have.

And what it really does, that R&D is it locks you to the customer. You own the customer because all the work and value added you did to enable them to be successful.

For sure because our philosophy is we'll do everything we can to make our customers successful and what they're trying to accomplish and differentiate and then we'll just be hopefully successful with them as they grow.

Super. Well, we're done Great. Really appreciate it. Thanks.

Thank you, Derek.

Thanks so much, Mike.

Appreciate it.

Greetings, and welcome to the Solstice Advanced Materials Fourth Quarter 2025 Earnings Conference Call and webcast. [Operator Instructions] As a reminder, this conference is being recorded. [Operator Instructions] It's now my pleasure to turn the call over to your host, Mike Leithead, Vice President, Investor Relations. Mike, please go ahead.

Thank you, and good morning, everyone. Welcome to Solstice's Fourth Quarter 2025 Earnings Call. We released our fourth quarter 2025 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 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.

Thank you, Mike, and thank you, everyone, for joining us today. During the fourth quarter, Solstice Advanced Materials 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 stand-alone company and execute our strategy to drive long-term growth. Solstice finished 2025 with return on invested capital of approximately 19% and net leverage of 1.5x 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 have 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 $0.075 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 the first quarter of 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 stand-alone entity.

Turning to Slide 4. 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 60-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 improvements 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, and 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 the second half of 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. Moving to Slide 5. 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 the first half of 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 & 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 & Specialty Materials segment, we achieved strong 7% sales growth in Electronic Materials, reflecting robust demand for our differentiated technology platform. Adjusted stand-alone EBITDA for the full year 2025 was $957 million, reflecting a 4% decrease year-over-year and an adjusted stand-alone 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 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 6. I'd like to discuss our fourth quarter 2025 consolidated results in more detail. In the fourth quarter of 2025, Solstice recorded $987 million in net sales, up 8% year-over-year. In our Refrigerant & 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 & 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 stand-alone EBITDA for the fourth quarter of 2025 was $189 million, reflecting a 20% decrease year-over-year and an adjusted stand-alone 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 what we discussed in our 3Q results. Finally, we reported net income attributable to Solstice of $41 million for the fourth quarter of 2025. The decrease year-over-year was in part due to higher net interest expense and noncontrolling interest.

Turning to Slide 7. I'd like to discuss in more detail the key drivers of our year-over-year net sales and adjusted stand-alone 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 & Defense Solutions and Research & Performance Chemicals.

Our net sales growth also included a 2% increase due to foreign currency translation. Turning to our adjusted stand-alone 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 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 HFO 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 the first quarter of '26 and beyond.

Turning to Slide 8. I'll now discuss the results in each of our 2 segments in more detail, beginning with Refrigerants & Applied Solutions. Overall, the segment achieved $710 million in net sales for the fourth quarter of 2025, reflecting 10% growth year-over-year. This growth is composed of 8% organic net sales growth and 2% increase due to foreign currency translation. The segment posted $190 million in adjusted EBITDA for the fourth quarter of 2025, down 25% year-over-year and adjusted EBITDA margin of 26.8%, down 1,225 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 health care packaging due to anticipated customer destocking. These impacts more than offset favorable pricing and volume growth in the segment. Looking at performance for our subsegments, 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 demand. 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 & 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 will believe indicates this destocking is largely behind us.

Now turning to our Electronic & Specialty Materials segment on Slide 9. The segment achieved $277 million in net sales for the fourth quarter of 2025, reflecting 4% growth year-over-year. This growth is composed of 2% organic net sales and a 2% increase due to foreign currency translation. The segment posted $51 million in adjusted EBITDA for the fourth quarter of 2025, down 11% year-over-year and adjusted EBITDA margin of 18.4%, down 294 basis points year-over-year. The decrease was primarily driven by the previously mentioned plant downtime and anticipated transitory costs. Looking at the performance of our subsegments, 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 & 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 & Performance Chemicals 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' 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 stand-alone 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 stand-alone 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 December 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 1.5x based on our full year 2025 adjusted stand-alone EBITDA. As of December 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 $0.075 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 first quarter of 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. In order to provide additional insight into our first full quarter as a stand-alone company, we are also today providing guidance for the first quarter of 2026.

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 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 stand-alone 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 Instructions] Our first question today is coming from John McNulty from BMO Capital Markets.

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 prices 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, spot -- 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 backlog through 2030, we do lock in contract pricing for that. So as new orders continue to come in, it continues to come in at incrementally higher prices as they align with the market and the tight supply-demand dynamics. Our backlog is -- can be anywhere from 3 to 5 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 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 commentary 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 a 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 -- with your EPC partner?

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 going to be in the future. Obviously, it's an incredibly tight market. You've heard our current administration talk about 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 and what that capacity need is going to be, obviously, especially being the only converter in the United States. So I mean, I don't want to not answer your question. At minimum, we'll continue to debottleneck -- but with the engineering work that we're doing, it would entail potentially brick-and-mortar new capacity that could be significant. But we need to tie in the customer demand 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 as soon as we get 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.

Our next question today is coming from Kevin McCarthy from Vertical Research Partners.

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 Mike and Tina 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 80-20 split of HFOs to HFCs. There will be a continuing need of HFCs, especially in the aftermarket, as you can imagine, as well as our blends. But Tina and Mike will certainly have you add color.

Yes. Just to build on what David 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 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. It 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 are all repaid and then it's full production growth in that double-digit EBITDA CAGR that Tina referred to.

And I would just add there that our backlog is in excess of $2 billion, and we have 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.

Next question today is coming from Josh Spector from UBS.

Kind of a similar line of thought here. Just not sure if you can get a little bit more granular on the US 6 pricing in '26 and '27. -- understanding there's backlogs and pricing will take time. But will there be any increase in contract pricing in '26 versus '25? Or is that all longer dated? And that $30 million of loan repayment, can you size that in terms of EBITDA?

Yes. So Josh, I'm going to -- I'll answer it as best I can without obviously sharing customer pricing. The orders that we're shipping in '26 are probably orders that have come in, in that 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 is 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. And the EBITDA impact of the $30 million loan repayment?

Well, we don't give exact EBITDA in our subsegments, 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.

Our next question is coming from Arun Viswanathan from RBC.

I guess I just wanted to ask about refrigerants. We've gotten some questions on, I guess, the OEM inventory backlog. Maybe you could just address that and I guess how that plays into your outlook for HFO growth in '26. 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?

Yes. Thanks for the question. We -- 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, it's -- 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 supply chain and being able to maintain excellent service for our customers moving forward.

Okay. 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?

So I'll give a higher-level look, and I'll certainly have Tina 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 3 nanometers, 2 nanometers and really below 7 nanometers in general. So we feel great about the demand of 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?

Yes. I think the demand signals that we're seeing absolutely reinforces the decision that we made to expand our Spokane facility. In terms of the other businesses, Safety & Defense Solutions, we made another announcement there. We see a strong growth profile this year for that business. And then for Research & Performance Chemicals, part 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.

Our next question today is coming from Hassan Ahmed from Alembic Global.

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, if I sort of sit there and take the midpoint of your Q1 range, call it, $240 million in EBITDA, I mean, I come up with $960 million full year. 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, a lot of the one-offs that you guys saw that compressed the margins in Q4 are being reversed in Q1. And I understand there's 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. One of the 2 biggest areas that are really more of a '26 onetime situation is our continued transitory costs from the split with Honeywell and the TSA agreements we have in addition to the nuclear piece. And Tina, 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 aspect that we have.

Yes. As we mentioned, in terms of the second half of the year, we had some transitory items the second half of '25. Specifically, it was like an FX hedge that Honeywell had place. 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 first quarter, if we just look at the year-over-year margin decline, there's 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 second quarter of last year. So there's still some impact from that. Our corporate expenses have ramped because we were -- we really didn't stand the organization up until the second half of last year.

And then finally is the TSAs that David 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 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 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, it may be worthwhile to put aside how new you are as an independent company and maybe take advantage of cheap valuations, right?

Yes. 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 bolt-on asset that's available at the right price, I think it would be fair to say we might move faster than in typical circumstances.

Next question today is coming from John Roberts from Mizuho Securities.

It's [indiscernible] Rodriguez for John. A quick one on refrigerants. 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, 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, as Tina mentioned, we went through that in 2025 and in the beginning of '26. But our anticipation is we'll start getting those aftermarket sales more robustly in the second half of '26. And then as that flows through, I think margin continuality comparatively to HFCs is very realistic.

Okay. And in terms of timing, like do you expect like 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 '26. And then it's -- 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.

Our next question today is coming from Duffy Fischer from Goldman Sachs.

First question, again, just around refrigerants. When you look at '26 and '27, is there any additional regulatory help for volumes in those years that would create an opportunity for HFCs to take -- or HFOs to take market share from HFC?

Duffy, I think the legislation is by and large, taken 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 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.

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

We don't split it out, Duffy. It's -- 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 -- 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.

Yes. And it's Mike. I'd be remiss not to add. We're really excited about data centers because we really attack it from 3 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 materials side of the house, what 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 this data center growth comes to fruition, we attack that opportunity from really at least 3 different angles from an overall Solstice perspective.

We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mike 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.

Great. Well, thanks, everybody, for joining us this afternoon. David, thanks for coming up to spend some time with us. The Solstice story, I think, is very interesting. It's a spin out of Honeywell. We'll let David kind of talk about some of the key parts because it's fairly new to the market, new to most investors or at least the ones that I chat with most, there's probably some Honeywell guys that know the assets pretty well.

So I think they've got a really interesting opportunity to kind of introduce the company to the market over the next several months. They've got some really good businesses, some interesting stuff like a lot of spins, hodgepodge, we all got to get to know different businesses. I've had to start going back to my old chemistry lessons on uranium.

But anyway, maybe with that, David, if you would, and again, thanks for spending some time with us, just walk us through the big parts of the company, kind of the big businesses that you think are going to drive the overall growth. And you maybe highlight, look, which ones grow a little bit faster, which ones grow a little bit slower? And just some qualitative around the quality of those businesses as they contribute to the whole.

Yes, yes. Well, first off, thanks for having us, Duffy. It's great to be here. And you're right. I mean we -- there's an education that I think we need to do being part of bigger Honeywell what encompasses Advanced Materials. And what really has us excited right now is we are just a part of some really intriguing secular growth trends that are happening across not only in the United States, but globally.

So if you start with our refrigerants business, which is probably the most well known. Obviously, the transition from HFO to HFC -- sorry, HFCs to HFOs. That's gone extremely well. We have a really strong patent position and coming off a really strong year in growth. And we just continue to see that growing with the continued shift over to HFOs with continued need and data center growth as well as automotive, which plays a part in refrigerants, European legislation has been mandated. North America obviously has been mandated. So we're just in a great position with our patent portfolio. So we feel great about refrigerants.

The other business, you talked a little bit about, nuclear. We feel great about our nuclear business. We are the conversion side of uranium, making uranium hexafluoride, we have the only converting asset in the United States. I think everybody has seen the explosive growth that's been associated with nuclear. The current administration has said they want to see nuclear growth 400% over the next 25 years. Our backlog is sold out through 2030 with a $2.2 billion backlog. So a unique asset, vertically integrated with hydrofluoric acid coming in into our converting sites. So we feel great about that with the need for more energy.

And then the third is our electronics business. I think a lot of people aren't aware of how deep we go into electronics, we just announced actually yesterday a $200 million plant expansion in Washington. It is the only manufacturing site that makes copper manganese for sputtering targets. And as we go into leading-edge nodes, copper manganese is really the preferred material for the purity and quality that's needed as these chips get thinner and thinner. And then obviously, we do thermal interface. We do heat spreaders, we're in etching and we're also in polymers. So we have a great electronic business in that regard. And then another business that's really growing is our Safety and Defense business.

We make a very lightweight protective fiber for ballistic protection and life-saving vests for military and law enforcement as well as helmets. This product also goes into health care for surgical equipment. So you've seen a lot of the investments go around in safety and defense, both in the United States and globally. We're coming off a nice quarter in that growth. So when you think about secular trends, energy, electronics, thermal management, safety and defense. I mean, we just feel like we have leading technology, great patent positions and unique manufacturing capabilities. So we think we're a great growth story, Duffy.

Awesome. And then, is there a way algorithmically to kind of just boil that all the way up, if you think about x percent volume plus x percent price gives us this for sales, we can lever at 1.5x through the P&L, which would give us Y percent EBIT and then that leads to an EPS growth of -- how would you walk on investors for that, like what the algorithm is for EPS growth over a 3-, 4-, 5-year period of time?

Yes. So we've talked about in our -- at our Investor Day recently was we want to be prudent being a new company and make sure we deliver on what we say. So we've been saying about a low to mid-single-digit growth rate. And then if you flow that through the bottom line, then a mid-single-digit EBITDA increase as we move forward. And so that's how I think about it. And then with these CapEx projects that we have, you're seeing an elevated CapEx as we reinvest because of the demand profile that we have, our ROIC is over 20%. So these are great growth projects. We've determined -- demonstrated we can get great returns at it. So we're going to continue to see that margin expansion with that as well.

Okay. I know it's not stuff that you've talked a lot about, but we get a lot of incoming questions. From the EBITDA to EPS, how much noise will there be? And kind of what kind of noise might that be over the next year. Should investors just without using like real numbers, but just coming out of Honeywell, there could be some sloppiness, I think, in that walk. So what is that we should be on the lookout for?

Yes, Duffy. It's a great point. To the extent we haven't even talked to EPS yet because there is a little bit of noise there. we feel really good when we get into '26, we'll have a very clean EPS story. But right now, we're really just talking EBITDA, and I would imagine early in '26, we'll be able to get all of the noise out from the transition to Honeywell and then be able to speak to EPS.

Fair enough. Great. And then let's jump into your biggest business. In one hand, we call it refrigerants, but it's also got propellants and foam in it. I don't know if you think of those collectively or you separate them out. But let's just separate out kind of think HFO refrigerants. So both mobile and stationary. What's the algorithm look like there because we can track a lot of different things from the [indiscernible] to the Paris accord and different step-downs but it gets very convoluted for investors looking at it because all of a sudden now you end up with aftermarket versus OE. But just how should investors think about that algorithm? How much growth is there in HFO over the next several years?

Yes. So it's a great question, and we do get a lot because there's a lot of moving pieces. The way we've kind of laid it out is if you look into the early 2030s, HFO Growth is projected to be high single digits. So we see that going -- and then with that, you're going to see HFC decline as that cannibalizes. The decline is going to be in the low single digits because you're still going to need HFCs have the aftermarket, you're going to need it for blends. So we have kind of projected that mid-single digit in refrigerants.

And the other piece, and I'm sure you've talked about this is you have fewer players because of the patent position. So now you have a market share gain on top of that with what's going on. So that's why we feel so good about refrigerants. And then to answer the other part of your question, if you were to break out our refrigerants business, about 52% stationery, 48% automotive. And then overall, it's about 50% aftermarket, okay.

And the 52%, 48%, the mobile part, unless China decides to go is pretty much done at this point, right? So the stationary is the part where most of the growth is. So again, if we looked out 5 or 7 years, that would probably skew meaningfully differently. Is that fair?

Exactly correct. And then that's where also we'll start getting more aftermarket business which is a higher ASP business as well.

Fair enough. Okay. And then another question we get quite a lot is obviously, it's patent protected. You guys and Chemours share the patent for old Honeywell DuPont work that was done. How confident or how much confidence should investors have in that patent holding up for kind of what period of time before you have to start sharing some of that 50-50 that you have today?

So good point. We did do the joint development with Chemours for the HFO molecule. And what we've done on top of that is we have had a layers of patents on top of that. We have patents on our blends. We have patents on our processing and manufacturing that go well into the 2030s. That very first patent kind of drops off by the end of the decade. But because of our patent position, and we're actually continuing to add to them today, we feel very confident in our position well into the 2030s on our patents.

Fair enough. And then as you grow this, I guess, how should people think about the incremental margins kind of going forward? Again, we don't have a long history of this. So is there a lot of volume leverage uplift, do cost increase, decrease? Do you have to build another plant? How do you handle that? And how does that over, let's say, a 3- or 5-year period impact the P&L?

Yes, so the way we've kind of talked about it as we came to as a public company is, as we exit 2025, we'll be about a 25% margin business. I think that's a good baseline for us to think about. And then from there, we would like to see margin expansion with the CapEx we're doing, the growth that we have in higher-margin businesses. And so I think you'll kind of see that margin growth off of that 25% baseline.

Okay. And then I would assume the aftermarket carries a higher margin. So as the percent of that increases, that naturally drags up the margin. But is it a better return business? Or is it roughly the same? Because obviously, you probably need more SG&A to get involved in selling that, you might need more trucks driving around. When you look at like the OE versus the aftermarket on a total return on capital, to Solstice, how do those -- how differently do those look?

Yes. The aftermarket is a better margin business for us. And so you're basically breaking down the bulk into canisters. So that's why there's a higher price. There is a higher margin business. And then when you think about the return on that, it's very even. So that's another reason why exactly to your point, Duffy, that we feel good about our margin expansion. Because with the conversion in North America, we just haven't seen a huge aftermarket yet, but we'll start to see that, I think, in the second half of '26.

Okay. And then because, again, most people are familiar with Chemour's business on the fluoro side, if you compare and contrast your business to theirs, what do you do differently? What do they do better? What do you do better? How should people think maybe about the business is growing or the margins they kind of move in lockstep over the next 3 years? Or will there be some differentiation?

Yes. Chemours has been a great partner in the development of the Molec-1234YF molecule. But really from the refrigerant standpoint, that's really the only overlap we have. We're very specialized in some of these other markets, and they're very high-growth markets they're noncyclical. So we feel great about that.

In our refrigerants business, there's different blends we both do. There's different geographic kind of footprint we have -- but I mean, the reality is it's -- they're a great competitor on refrigerants, but they're also a partner, and it's a more limited playing field of supply base with the LGWP requirements.

Okay. Fair enough. Okay. And then in -- we talked about this a little bit last night. But I think your view last night was from a cost perspective, most people that will produce HFO will be in the same ballpark that there's not significant differences either in raw material purchasing or in production processes that would lead to a very steep cost curve. Is that fair?

Yes, I think that's fair. I mean, obviously, there's nuances to the manufacturing process, but there's not a wide spread of manufacturing. We've invested over the last 7, 8 years, well over $0.5 billion in our plant. So we feel like it's a world-class asset. But there's a pricing mechanism that's really important to that margin aspect.

Okay. And then -- and it's a question we get quite a lot. There was a lot of noise in the market this year around a product 454B just to kind of clean that up. So it was short in the market, which led to some price increases, some people kind of complaining and some of it was around the 454B, it seems most of it was around the actual way to transport it to smaller users. What really happened there in your mind, did it give an advantage to your competitor? And is there kind of a snapback next year or maybe some of the business that was short this year comes back?

Yes. I think whenever you do a major transition to a new product in an industry, there's going to be a little bit of a timing to get the supply chain right. And I think what happened this year is the demand definitely outpaced the forecast. So everybody that was forecasting what that demand would be, it was well under what the actual was. So that's what created a little bit of a shortage.

What we're really proud about is we were able to leverage manufacturing around the world to ensure we kept our customers going. So you did see margin pressure, but it was more important for us to keep our customers in stock. The good news is we are past that. We have now completely stabilized the supply chain. So with the demand forecast over the next 4, 5 years, we feel really good about our position, and we think we're through that kind of challenge that we had this year with the supply-demand characteristics.

Okay. And then one of the areas of potentially really interesting growth for refrigerant products is around data centers, chip cooling that's gotten quite a lot of press in the last 6 months or so. When you look at that market, one, how are you guys attacking it? There's a couple of different technologies people are looking at. Where are you focusing -- which do you think has the best shot at actually becoming the solution eventually and kind of what's the timing of maybe what that would drive in your portfolio as far as sales go?

Yes. It's really a good question because we think we're really well positioned in data centers, and it's beyond refrigerants. What makes us unique to capitalize on this explosive growth in data centers is, first off, our electronics business, we are in the chip. So with all the products I talked about earlier, then we are with our HVAC customers on the cooling side and the data center.

But now with these next-generation chips with all of these new data centers, there's just more heat that's being generated that the current thermal management process isn't enough. So to your point, the coolant, which is happening today, we're already starting to see some direct to chip coolant, which we're involved in today.

The next piece of that getting that heat off the chip when you start getting down below 2 nanometers and stacks of these chips, that's not going to be enough. So you're going to need something like immersion coolant technology, which is exactly what we're working on today with customers. So we have development on direct-to-ship and immersion.

The one piece on immersion that I would just make sure everyone understands because I know there's a lot of excitement about it is there is a redesign of the data center that's going to need to happen with immersion coolant. And so it's not a straight drop in. So it is probably a few years away. It is -- when you look at the ecosystem of the data center, though, you're going to need all 3. You're going to need the coolant, you're going to direct-to-chip and you're going to need an emergent coolant type technology.

And we think we're really well positioned because we're also working with the chip manufacturer on the work we're doing there, and for the first time really ever, the chip manufacturers working with the data centers saying, how are we going to solve this chip problem. And then the data centers are saying, as we take this heat out in Europe, we can't emit it into the atmosphere. So now how do we repurpose that heat? So now we have technologies so we're working on that.

And then the last piece, which gets us even more excited is we have an energy shortage. So how are you going to power these data centers and that's where nuclear energy, you're seeing the 3-mile Island announcements and these investments, and that's where our conversion business. So we think we're so well positioned in data centers, and we're just spending a lot of R&D resources with it.

And maybe the last one on data centers, but I kind of think of who's going to be the GC of the cooling system. Historically, you guys have kind of just sold a piece into it and a train or a carrier would design the whole thing.

Obviously, now you've got a much bigger customer than you would have is just me as a household owner, so I'm not going to take any part of that. So who ends up kind of being the designer of what the system will look like? Is that something theoretically that you guys could move into and do some more of the structure and kind of get a bigger piece than just the molecule of HFO or how do you see that playing out?

Yes. It's something that's new for this industry because it's never happened before. But it really starts at the chip, until that chip manufacturer determines what is the best way to cool this chip. And then they can align with the data center that says, you need to design the data center, so I can cool the chip this way in the data center. So there -- that's why I say it's kind of a partnership because I don't think it could be one person because nobody is going to tell TSMC or Samsung or Intel, this is how you have to cool your chip.

They're going to say, this is the best way to cool the chip and then work with the data center, saying, this is how I need you to design the data center so we can cool it. So I think it's going to start with that chip manufacturer, but that data center is going to have to play a role.

Fair enough. Okay. So listen, I'd love to spend much more time than we're going to have. Let's jump to nuclear because, again, it's the one that at least myself and the guys I talked to most are probably least familiar with. So basically, what you do is you upgrade U308 -- well, I shouldn't say basically, but what you do is upgrade U3O8 to U6. Why is that important in the system? How does the business model work for that within the uranium upgrade system how are contracts written? So just kind of walk us through why you think that's such a good business? And what does the growth look like for you there?

Yes. So it's basically kind of a 4-step process if we think about the nuclear energy. The first is mining, you need to mine the uranium. And for us, the -- our customers actually procure the uranium. So that mining will happen all over the world, and they'll send that uranium to us. We're step 2 in the process where you convert it, exactly what you say, you take U308 or you take uranium and convert it into uranium hexafluoride. And that's the conversion process that we do. And so we will work with the utility company and the contracts are typically 3 to 5 years, and we'll price that conversion. And that's the HF that we send. We convert that to UF6, as you mentioned. And then from there, we send it off for enrichment.

Then there's an enrichment process, which is a third step that separates the isotopes and then that gets sent to the utility for fabrication for nuclear fuel. So that's kind of the process. We are step 2. And in conversion, there are 4 basically converters globally. We're the only ones in the United States. There is one in Canada, France and Russia. And then China has their own. And so with all of this demand, you have to have that conversion so it can be enriched for fabrication. And that's why we've just seen that our backlog sell out. You've seen, we have debottlenecked our plant. We've increased capacity from 24% to next year, it's going to be a 25% increase. And we're working with the DOE today to continue to look at further expansion to support the growth.

Okay. And is it unfair to say it's -- well, you're just processing for them, you don't ever really own the material. Is that fair? So you're like a toll processor that's an under...

No, no, no. It is -- it's a way to look at it. So we are holding that uranium for them. We take possession of it, then we own it. And we may swap it out with another -- depending on how we're managing the inventory. There is a little bit of a charge for that, and then we'll take that uranium, process it and then sell it. And then the way the pricing works is we price it with the contract with utility. So like a Constellation Energy or Duke Energy, that kind of thing.

And so remind me, your capacity or basically where you're at today and kind of what your increments of growth are capacity-wise.

So if you look at where we were in 2024, we're at 8,000 tonne capacity. With our debottlenecking in '26, will be at 10,000 and we are permitted at that site to go up to 15,000. And so we will continue to manage when we need to debottleneck, when we need to incrementally add to support the need for really the explosive growth forecasted for nuclear. But we're trying to be very prescriptive about it, not to build before the need. And that's why we're working so hard with customers and the government to say, okay, when is all this going to come online, so we can balance that.

Okay. And again, in this one, between you guys, the French, the Canadians, is the cost curve flat for this as well that you can do it about as well as them or they can do it about as well as yours or a big difference in the cost structure for processing?

Yes. I mean the processing is -- it's definitely a multistep process to get to hexafluoride. But I wouldn't say there's a tremendous difference in the cost structure. What I would say is we're vertically integrated because we make hydrofluoric acid that gets in there where others may not. So that vertical integration, I think, gives us a nice position.

Fair enough. And then you talked about having kind of 3- to 5-year contracts or obviously, the price around everything in nuclear has gone up. So how should investors think about maybe like an average -- an ASP today versus even if things didn't get better from here, just kind of anniversarying those contracts over there -- how much upside is there in pricing and is that all margin at the end of the day?

Yes. So the way the contracts work, Duffy, is, we are locked into an agreement. So our backlog through 2030, those contracts are pricing is set. In those contracts, we have inflationary mechanisms to make sure we cover inflation. And then we keep 10% capacity for the spot market. And that's been very opportunistic, but it gives us balance of a surety of our backlog with a little bit of the upside on that.

The thing to keep in mind on the pricing, to your point, that spot market has really gone up over the last year or 2 is as every year, these contracts -- different contracts are rolling off, so the new contracts are coming in at the elevated prices in the market. And -- but what this does is it gives us -- and this is part of what we want to do as a company. We want to be very specialized where you don't see lots of highs and lows. So we have a very stable outlook, a very increase in price and margins that's very stable that will be noncharacteristic of a typical chemical company.

And because again, one thing you can argue is, again, several years ago, this plant wasn't running because there wasn't -- why couldn't you do like 10- or 15- or 20-year contracts when you think about utilities, nuclear plant is going to last for a very long time. Why wouldn't you extend it out in kind of like the industrial gases maybe where you just lock in a decade or a decade plus? Why doesn't that work?

You're exactly right. We restarted the plant in 2023. There has been so much so fast that a lot of these contracts were signed in '23, '24. So that's why today, we have to look at this differently because we have to know what to build to satisfy the capacity. So those are the discussions. And I think it's very fair what you're saying that because if we're going to build this capacity expansion, we want to have the commercial contracts in place versus just hoping they come. And so I do think those contracts will continue to evolve, to your point.

Yes, because I would think, yes, that'd be great for you, if you could just lock in a decade. And they've made that commitment, right? Again, if you were building a nuclear plant, once it's up, it's going to run.

All right. I think that's -- and I'd love to dig deep. We're going to run out of time, and I do want to kind of hit something there. So if we go to the electronics, so one, I guess, who would you kind of think of as comps? Again, we've got a couple of companies. We've got the DuPont spin Qnity, we've got Element Solutions. We've got Entegris that kind of play in that space. Do you think any of those are kind of fair comps? And then how do you see that business developing for you both organically and inorganically over time?

So I would say how we look at this is, so I look at them as comps and all the ones you mentioned, just because we're all in advanced computing. But none of them really do copper-manganese for sputtering targets, but some of them do heat spreaders, some of them do thermal interface. So we do look at them as comps in a way. But I think all of us have a little bit of specialty. Some might be more prevalent on the packaging side, some might be more of on the chip side.

But by and large, I think it's very fair to say to put our electronics business from a comp standpoint in that category because we're capturing that AI growth, just maybe different parts of the chip.

Okay. And when you think about the business quality because like one question I remember when I was talking to Ben, the CEO at -- Element, he talked about they had looked back like 10 years and the number of contracts that had changed between them and competitors for pricing was like less than 1/10 to 1%. Is your business as thick, I mean, like when you look at like when you either lost business or won business, other than like technology advances, is it ever on price or on something that's kind of a competitive angle? Or is it mostly either from service or technology?

It's really -- it's technology, quality, purity first because we're a small piece of the pie. The worst thing that could ever happen is failure of that chip and about little over 40% of our electronics business is specified. So it's ensuring that -- because we're co-creating with our customers what's the technology needed, what's the product needed. So it's quality first. And for us, as you look back, our products actually fit better in leading-edge nodes. So we actually had more pricing pressure 2, 3, 4 years ago when you were at like 10 nanometers and above, because our products are so, the copper manganese is so pure, so high -- such high quality and you didn't need it for that. So we were maybe competing with lower quality materials.

Now when you get into leading-edge nodes, you have to have that purity or it won't work. So it just fits perfectly in our sweet spot, and we're not competing on price anymore, and we're the only manufacturer in the United States.

And again, I wish we have much more time. So we've talked about kind of the key 3 businesses, I think maybe just touch a minute or so kind of on the remaining businesses, how you look at those? Is there anything that you would say kind of doesn't fit the portfolio at this point or doesn't help drive the growth you want, but just touch on the remaining businesses, if you would.

Sure. So despite the diversification that we have, we have 7 kind of segment businesses. Six of the 7 actually have a Fluorine component. So there is a synergistic aspect to it. The seventh that I talked about was our Safety and Defense business, but it's a very specialized product that we develop with our customers. There's really only 2 players in the market, and that is highly specified.

From a portfolio standpoint, Advanced Materials has been within Honeywell as a stand-alone or as a business for about 10 years. And it's had a 4% CAGR, 100% organic. And so that's why we like it because it's been so resilient. But the benefit now that we're a standalone company is to reinvest. We also have a great balance sheet now that Honeywell gave us. So that allows us to maybe look at some bolt-on M&A but with the return on capital projects that we have, with the growth that we're now seeing that maybe wasn't even there, we just think this company is ready to kick off.

Okay. And then you mentioned it was all organic either backward looking, what could have happened or as you go forward, how should we think about the inorganic side? What might that add? Again, it will be lumpy, but over a 5-year period, is that at 1%, 2%, how to think about the inorganic opportunities?

Yes. It's always hard with M&A because you need usually 2 willing parties and timing is everything. But we do want to be a growth company. And when you think about those growth sectors that I mentioned, they're all growing faster than GDP, very attractive margins. So areas where we can add adjacencies to that to have an even stronger solution for our customers are areas that we will pursue.

At the same time, being a new company and Duffy you've covered these kind of really important for us to do what we say we're going to do. So we want to deliver on our commitments, build credibility with the market and then continue to build on M&A from there.

Okay. And then maybe just the last question because we're running out of time. You've obviously talked to a number of investors since the IPO being on the road. As you talk to them and kind of have those conversations, where do you think you see the business maybe differently than they do? Where do they think that maybe it isn't quite as good, where is it better? But just where are the points of pressure, I guess, in the portfolio or in the story?

Yes. I think the thing that I've learned since as we've been out, we've been on the road quite a bit with investors, is telling the story and educating what is Advanced Materials because it's easy to default to a chemical company, and we're not. We are very specialized in very great market segments, with a strong value proposition with the right to win and differentiate it.

And for us, to your point, what's nuclear and how is it? And so making sure people understand the uniqueness of our business and how well positioned we are, but the interest level is really strong. And so I do believe when you look at the sum of the parts of where we're at and the margin profile, the resiliency, we do believe once we demonstrate our ability to deliver, we'll get rewarded for that and at a multiple that we think is conducive to what we're delivering.

Terrific. Well, David, thank you so much. It's -- I mean, very interesting story. I think we're all going to spend a lot of time on it over the next year, but thank you and good luck with the new effort. So this is awesome.

Duffy, thank you, and thanks for all support and for being here today.

Yes. Appreciate it. Thank you.

Thank you.

Greetings, and welcome to the Solstice Advanced Materials Third Quarter 2025 Earnings Call [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mike Leithead, Vice President, Investor Relations. Thank you. You may begin.

Thank you, and good morning, everyone. Welcome to Solstice's Third Quarter 2025 Earnings Call. Solstice completed its spin-off from Honeywell on October 30 and is now listed on the NASDAQ Stock Exchange under the ticker SOLS. We are excited to be with you today for our first earnings call following the spin.

We released our third quarter 2025 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.

Turning to Slide 3. 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 third 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. First, I'd like to recognize this significant milestone for Solstice as we host our first earnings call following our spin-off from Honeywell. Exactly 1 week ago today, we rang the opening bell at the NASDAQ to mark the beginning of our next chapter. The excitement was palpable throughout the day, not only from those participating in the celebration on site, but from all of our employees who cheered us on from their locations around the world.

I can't stress enough how grateful I am to each of our team members who dedicated their time and talents to make that milestone possible and to the entire Solstice team who continue to deliver for our customers. As you'll hear on today's call, even as we were in the final stretches of preparing the business to operate as an independent entity, we continued to deliver strong financial results.

As we discussed at our Investor Day last month, Solstice has a strong track record of peer-leading growth, fueled by our technology platforms and underpinned by strong secular growth trends in the end markets we serve. Our third quarter performance builds on this track record, delivering year-over-year net sales growth of 7%. This growth reflects both strong demand for our products as well as the significant value that our differentiated product platform provides our customers.

During the third quarter, we also maintained our best-in-class margin profile, delivering adjusted stand-alone EBITDA margins of 24.3%. Our strong margin profile is driven by our commitment to operational excellence, capital efficiency and the specialty nature of our portfolio. During our Investor Day last month, we discussed how we are refining our operating model to focus on commercial excellence, drive productivity and optimize return on invested capital.

Following our spin-off, Solstice's pro forma capital structure reflects a prudent net leverage profile estimated at approximately 1.5x, allowing for financial flexibility and the ability to continue reinvesting in high-return growth areas of the business. As we strive to unleash growth, we will be allocating capital with clear priorities and discipline, specifically in areas such as semiconductor materials, nuclear conversion, protective fibers and cooling technologies where we believe Solstice has a clear right to win.

We believe this will enable us to make the key investments needed to accelerate our growth and profitability. Finally, with a strong third quarter, we are well positioned for the remainder of the year and are on track to deliver on our full year 2025 guidance.

Turning to Slide 5. I'd like to discuss in more detail a few key highlights from our third quarter 2025 consolidated results. In the third quarter of 2025, Solstice recorded $969 million in net sales, up 7% year-over-year. Notably, in our Refrigerants & Applied Solutions segment for the quarter, robust demand for refrigerants drove 22% year-over-year net sales growth for that business as we are capitalizing on the HFO transition.

In Electronic & Specialty Materials, we achieved top line growth in both Electronic Materials and Safety & Defense Solutions, which underscores the continued value that we provide our customers with our differentiated offerings across the businesses. Beyond the reported sales figure this quarter, underlying momentum continues to build in the business from key secular trends in the attractive end markets we serve.

In Alternative Energy Services, which is our nuclear conversion business, our backlog grew 12% sequentially, reflecting both favorable order activity and benefits in price. In Electronic Materials, we saw our order book strengthen throughout the quarter and see positive momentum carrying into the fourth quarter, further solidifying our optimism around our position in the growing AI, semiconductor and data center landscape.

Adjusted stand-alone EBITDA for the third quarter of 2025 was $235 million, reflecting a 5% decrease year-over-year and an adjusted stand-alone EBITDA margin of 24.3%. This was largely due to anticipated transitory costs, including certain items related to our spin-off as well as the expected technology transition from HFCs to HFOs. As discussed during our recent Investor Day, this leads to our full year baseline guidance of 25% EBITDA margins, which we are well in line to achieve.

Finally, while we reported a net loss attributed to Solstice of $35 million for the third quarter of 2025, the decrease year-over-year was primarily driven by the impact of higher income tax expense resulting from frictional taxes associated with the spin-off. We estimate these discrete tax items added approximately 80 percentage points to our effective tax rate this quarter. As we complete our transition to operating as a stand-alone public company and move past some of these discrete transitory items related to our spin-off, we are very confident in our opportunity for margin expansion and long-term trajectory for growth to drive improved profitability.

Turning to Slide 6. I'd like to discuss in more detail the puts and takes impacting our year-over-year net sales and adjusted stand-alone EBITDA performance. Beginning with our net sales of $969 million for the quarter. Organic net sales growth was 5%, including 2% from volume growth and 3% due to pricing. This primarily reflects volume growth and favorable pricing in refrigerants, which was partially offset by lower volumes in Healthcare Packaging and Research & Performance Chemicals. Our net sales growth also included a 2% increase due to foreign currency translation.

Turning to our adjusted stand-alone EBITDA of $235 million for the quarter. The decrease year-over-year was driven by approximately $10 million of anticipated transitory costs discussed earlier, which primarily fell in the ESM segment as well as a year-over-year shift in refrigerants product mix, primarily within the stationary end market. This industry shift reflects a significant increase in demand for our low global warming potential refrigerants for stationary applications due to the ongoing regulatory transition towards next-generation HFO solutions.

While this transition translates to a year-over-year margin decline, we foresee much greater longer-term benefits for our business due in part to our industry leadership in this space. As an example, as the installed base of stationary units using HFO blends continues to grow, we would expect to see benefits from an emerging aftermarket, which represents approximately 50% of our refrigerant product mix today. Our adjusted stand-alone EBITDA margin declined by a little less than 3 percentage points year-over-year, remaining healthy at 24.3%, inclusive of an approximate 100 basis point impact from transitory costs that I mentioned earlier.

Offsetting the negative impacts I just described were modest price and cost timing benefits for the quarter. I hope this gives you a clearer idea of the puts and takes impacting our business in the short term. We are pleased with our ability to continue to deliver a healthy and attractive margin profile, and we are on track to deliver against our 2025 revenue and EBITDA guidance. With that, I'll now turn it over to Tina Pierce, our CFO, to discuss our segment results for the quarter in more detail.

Thank you, David. Now let me talk in a bit more detail about the results in each of our 2 segments, beginning with Refrigerants & Applied Solutions on Slide 7. Overall, the segment achieved $687 million in net sales for the third quarter of 2025, reflecting 9% growth year-over-year. The growth is composed of 8% organic net sales growth and 1% increase due to foreign currency translation. The segment posted $243 million in adjusted EBITDA for the third quarter of 2025, down 3% year-over-year and adjusted EBITDA margin of 35.4%, down 431 basis points year-over-year.

As David mentioned previously, this decrease was primarily driven by stationary refrigerants product mix, which more than offset positive flow-through in both -- both in volume and pricing. Transitory cost had a negligible impact in the segment. Looking at performance for our subsegments. Refrigerant net sales increased 22% year-over-year to $400 million, driven by both favorable pricing and volume growth.

As David mentioned, our refrigerants business experienced a significant increase in demand for our low global warming potential refrigerants for stationary applications due to the ongoing regulatory transition towards next-generation HFO solutions. We also saw modest growth in auto during the quarter and continued to strengthen our aftermarket position. Building Solutions & Intermediates net sales were $175 million, down 3% 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. For Healthcare Packaging, net sales were $49 million, down 14% year-over-year. The decline was due to lower volumes resulting from some destocking we saw in the pharmaceutical end market.

Despite this headwind during the quarter, we're confident in our strong market position through our Aclar brand of high-barrier packaging materials. We also remain excited about the long-term growth trajectory for our low global warming potential medical propellant and our ability to leverage our expertise to support the growing need for low GWP inhaler solutions. Lastly, our Alternative Energy Service business had $63 million in net sales, down 2% year-over-year. While the year-over-year sales comparison was impacted by customer timing, underlying business momentum continues to accelerate with our AES backlog up 12% during the quarter to $2.2 billion as of September 30.

Now turning to our Electronic & Specialty Materials segment on Slide 8. The segment achieved $282 million in net sales for the third quarter of 2025, reflecting 2% growth year-over-year, largely attributable to favorable foreign currency translation. Flat organic sales growth consisted of increases in Electronic Materials and Safety & Defense Solutions as well as Research & Performance Chemicals pricing, offset by Research & Performance Chemicals volume declines.

The segment posted $47 million in adjusted EBITDA for the third quarter of 2025, down 15% year-over-year and adjusted EBITDA margin of 16.7%, down 319 basis points year-over-year. The decrease was primarily driven by anticipated transitory cost items that David mentioned earlier.

Looking at the performance of our subsegments. Electronic Materials net sales increased 4% year-over-year to $103 million, driven by volume growth. As David mentioned earlier, we saw improving order patterns throughout the quarter and expect growth momentum to carry into fourth quarter in our key sputtering targets and thermal interface materials offerings. We are investing for growth in this business as we outlined at our recent Investor Day, which should ensure we are well positioned to capitalize on key secular trends for semiconductors, AI and data centers.

Safety & Defense Solutions had $53 million in net sales, up 6% year-over-year, driven by volume growth. This growth was fueled by strong demand for both armor and medical fiber applications during the quarter. We remain encouraged by the growth of this business as we look to invest in furthering our Spectra capabilities. Finally, Research & Performance Chemicals net sales declined 2% year-over-year to $126 million. This decline was primarily driven by lower volumes, partially offset by favorable pricing.

Moving to Slide 9 to discuss Solstice's balance sheet and capital management. Our financial health continues to be bolstered by significant cash flow generation and cash conversion. As outlined in our recent Investor Day, we remain focused on reinvesting in the business, especially in key high-return growth areas. Our capital expenditures were $248 million for the 9 months ended September 30, 2025, a 23% increase compared to the prior year due to planned increases in capital spending to drive long-term growth.

Adjusted stand-alone EBITDA less CapEx for the 9 months ended September 30, 2025, was $520 million, a 7% decrease compared to the prior year period as higher capital expenditures more than offset the increase in stand-alone adjusted EBITDA. Despite the anticipated decrease year-over-year, this still equates to strong cash conversion of 68% for the 9 months to date.

Turning to our capital structure. We have a very strong balance sheet with a conservative leverage profile and ample liquidity. Following the execution of the spin-off on October 30, our total long-term debt was $2 billion, and we had cash and cash equivalents of approximately $450 million, resulting in net debt of approximately $1.6 billion and an estimated net leverage ratio of approximately 1.5x based on our trailing 12-month stand-alone adjusted EBITDA.

Our capital structure reflects the strong outcome from our debt raise earlier this year. Our $2 billion of long-term debt is comprised of $1 billion Term Loan B at SOFR plus 175 basis points and $1 billion of 5.625% senior notes due in 2033. We also had $1 billion of availability under our revolving credit facility, which combined with the cash on our balance sheet results in approximately $1.5 billion of total liquidity.

Moving forward, we will continue to deploy capital in line with the capital allocation priorities we outlined at our Investor Day. These include investing in high-return organic growth projects, maintaining a strong balance sheet and a strong liquidity position, accelerating growth through selective M&A and finally, returning excess capital to shareholders.

Turning to Slide 10. I'd like to discuss our financial guidance, which we previously provided at our Investor Day. Based on our results discussed today and expectations for the fourth quarter, we are on track to deliver our full year 2025 guidance. This includes net sales between $3.75 billion and $3.85 billion, adjusted stand-alone EBITDA margin of approximately 25% and capital expenditures between $365 million to $415 million.

As you will likely note, this implies an adjusted EBITDA and margin decline in the fourth quarter, reflecting remaining transitory cost, refrigerant seasonality and near-term actions to position us for strong growth in 2026. We do not expect fourth quarter results to represent the true trajectory of our business performance going forward, and we are excited about the momentum we are seeing into 2026. I'd now like to pass it back over to David for some closing remarks.

Thank you, Tina. Please turn to Slide 11. As Tina just mentioned, we are on track to deliver on our full year 2025 guidance. Our outlook is based on our belief in Solstice's clear right to win and future prospects that are supported by strong secular trends, a clear path ahead for resilient and long-lasting growth and a refined operating model that enables our strategy to unleash that growth. We are committed to unlocking growth by expanding our leadership positions through investing in our capabilities, expanding our deep customer relationships and enhancing our proven growth engine.

Our third quarter results reflect the burgeoning benefits of our strategy as demonstrated through our strong top line. We will also deploy our refined operating model to continue driving operational excellence. Our model focuses on our innovation and commercialization processes to maximize customer value and drive growth. It steers us to commercial excellence through best-in-class practices around pricing, margin management and customer centricity. It also aligns us towards disciplined capital deployment and optimization, efficient supply chain and logistics management and manufacturing excellence.

We're confident that this operating model will enable us to further our strategy and unleash our growth potential. I'm also confident that our near-term transition positions us well to benefit in the medium and long term. As a stand-alone company, we have the ability to focus our capital spend on the highest return projects with an aim to improve margins and drive organic top line growth. We believe ongoing momentum in areas such as refrigerants, semiconductor materials, protective fibers and nuclear validates our decision to invest in these areas, which are well aligned with our growth strategy.

Looking beyond 2025, we already are finding opportunities and actioning items to improve our cost profile. This should provide a long-term pathway for margin improvement, furthering our financial strength. Finally, we have a strong liquidity position and financial flexibility that is enabling us to invest for high-return growth at a time when many others in the chemical space are pulling back. We apply a disciplined capital allocation strategy that strengthens our ability to serve customers and reflects a focus on investing in growth while maintaining a strong and flexible balance sheet.

We have both the financial flexibility and strategic focus to enable organic and inorganic investments that drive technological innovation, improve customer proximity, bolster our industry leadership and expand that leadership as we pursue our differentiated growth strategy. With over 130 years of innovation at the intersection of chemistry, engineering and material science, our business has built a deeply rooted legacy.

We have demonstrated long-standing leadership across multiple innovation cycles, not just keeping pace with the market, but defining it. I couldn't be more excited as we embark on our future as an independent company. We look forward to sharing additional updates in the months ahead. With that, we are now happy to take your questions.

[Operator Instructions] Our first question comes from the line of John McNulty with BMO Capital Markets.

Congratulations on the split. So I wanted to get into the AES segment a little bit more. Even since your Capital Markets Day, there's been growing enthusiasm kind of around the nuclear markets. And I guess we can see that even today in your backlog expanding. I guess, can you help us to understand a little bit more about what drove that backlog increase? Was it primarily price? Was there more volume coming in? And also how you can capture volume growth going forward? I know you've got the big debottleneck that's coming on, but it seems like you may be close to sold out even post that. So I guess, how do we think about the growth for this business given the enthusiasm and excitement around nuclear right now?

John, thanks for the question. And the backlog increase, we saw a 12% backlog increase, to your point. That was new orders, not pricing. And we are aligned with our capacity expansion with the volume anticipated demand that we see. However, there has been a lot of recent announcements of expansion investments. So we're following that very closely. And if we need to continue to expand manufacturing capabilities, we'll be able to do so to meet the demand. But it's an exciting growth opportunity for us long term, and it's really nice to see all of these announcements and investments that have been made in the marketplace.

Got it. Okay. No, that's helpful. And then just as a follow-up, the refrigerants business, it seems like it's actually -- despite the volume or the top line side, it seems like it's a little bit more of a drag on EBITDA than I guess we were expecting it to be. I guess can you help us to unpack that mix shift like kind of negative headwind? And I guess, how does that set you up as you're looking to 2026? Can we see the refrigerants EBITDA and the margins inflect up at that point?

John, you're exactly right. It's really driven by the short-term transition from HFCs to HFOs and really more specifically from 410A transitioning to 454B. And we did anticipate the margin contraction during the initial transition, which is within the forecast of that 25% year-over-year margin. But what we see moving forward is we'll finish up the transition, pricing has stabilized.

And then as we get into 2026, we'll start to see the aftermarket kick in. And as we've talked about, that's a little bit higher margin business than our OEM business. So we see the opportunity growing in margins. We just need to get through the transition, and this was an expected transition that we had. And I think you'll definitely see it in the fourth quarter and then start really reducing the beginning of the year. And then as -- we'll give a forecast in 2026, but we should be out of the transition as we get in further into '26.

Our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Congratulations on your first public quarter. Exciting stuff. David, I wanted to pick up on your prior thought. At the Capital Markets Day on October 8, you set forth an EBITDA growth trajectory in the mid-single-digit range for the medium term. And I understand you'll probably give more specific guidance next quarter. But as we think about that mid-single-digit glide path, might it apply to 2026 as well? Or do you think there are either transition issues or market issues that you're seeing that would cause it to be below or above that range? How are you thinking about that growth trajectory for the next year or so?

Yes. Thanks for the question, Kevin. We'll certainly, to your point, give 2026 guidance when we report fourth quarter. But the way we think about it and have we -- and again, we're on track for how we see it is exiting the year around that 25% margin and then our growth rate will come from there. So we don't feel like there'll be continued downside. We feel like the 25% is our baseline, and that's where we'll be able to grow from with the growth secular trends that we're seeing that get us pretty excited.

And Kevin, this is Mike. I would just build on that a little bit. As you'll see in the appendix, we included a slide to sort of help people bridge through some of these transitory costs. As David mentioned, most of these will be behind us as we exit the year. So we really do feel comfortable that as we get into '26, a lot of these margin impacts are not expected to carry over.

Very good. And to follow up on that, Mike, I was noticing on Slide 13 in the appendix, it looks like you're baking into the fourth quarter about 300 basis points having to do with plant downtime. So David, can you elaborate on that? Is that having to do with maintenance or inventory management efforts? And maybe you can talk about what's down and what the effects might be on a segment level, please?

Yes. So Kevin, it's a combination of both planned downtime and some unplanned downtime. The planned downtime was mostly in Baton Rouge and Geismar, but that was fully baked into our forecast. We did have some unplanned downtime. It was an issue with the reactor. That was in our ESM business. The good news is we're fully operational. Everything is up and running, but we did incur some costs in that in the third quarter, and we will incur some costs and impact on that in the fourth quarter. But again, good news is fully operational, and we'll have it behind us once we get through the fourth quarter.

Our next question comes from the line of Josh Spector with UBS.

I want to follow up on that last question. Just -- so if you look through your slides and kind of how you guys have talked about the second half, you have $30 million in transitory costs you're calling out from corporate. It seems like you're calling out a lot of this plant and downtime impact as perhaps more temporary at maybe $20 million, $25 million. Are those things that we should be adding back base case to next year? And if that number is wrong, what would you point us to instead?

Yes. Josh, so really, the anchor is the guidance that we provided. And so that's the $950 million of EBITDA for 2025, which is approximately a 25% margin rate. So what we've highlighted here on Page 13 is, yes, the $30 million of transitory cost, those will definitely not reoccur. We had $10 million -- approximately $10 million in quarter 3, and then you can see there's approximately $20 million in Q4. And this involved a hedge, we are part of the broader Honeywell hedging program. That has been discontinued effective at the time of the spin. And then as we stood up our new freight and logistics organization, there were some changes in the estimates associated with that. All of that is behind us now.

And then as David alluded on the plant downtime and absorption, all of the plants are up and operating now. So we don't anticipate that going forward. And then the final factor there is just seasonality, and that's largely our refrigerants business. That business tends to be a little bit heavier in second and third quarter. So that's the third reason for the step down. But overall, we continue to remain confident in the guidance that we provided at our Investor Day.

Okay. And just going back to the RAS segment and some of the moving pieces on margins. I guess one piece I don't understand is that you're seeing a big margin and EBITDA impact in the second half from the transition, but it doesn't really seem like you saw that anywhere to the same degree in the first half.

So I don't know if there's a difference in mix half-on-half that has a bigger impact. And I guess, importantly, when we're thinking about first half '26 and the margins that you reported, is there a headwind that we need to anticipate there that's a negative for EBITDA? Or is that already largely baked in and we can grow off of that?

Yes, Josh, it's a good question. There's a couple of pieces here that I'll walk through on the refrigerants. In 2024, 410 market was really tight, and that pricing has since stabilized. So we are up against that from a year-over-year standpoint. But the other piece that's a factor is we have such strong demand and to ensure we could supply our customers, we did import from overseas to meet that demand and keep our customers running.

And when we did that, there was a little bit of a margin impact for obvious reasons, but we felt it was more important to satisfy the needs of our customers. So we did see some margin contraction with that. The good news about that is we are fully stabilizing our supply chain to meet the demand needs. So we don't anticipate having that as we go into 2026.

Our next question comes from the line of John Roberts with Mizuho Securities.

I don't think we have the 2 quarters of 2025 first half separated yet. That's fair. So maybe to follow on, on that question, will the transitory headwinds be big enough that the March quarter will be down? I don't even know what our March quarter 2025 was to compare against. But will you be able to flip to up? I know you don't want to give guidance for 2026 yet, but just directionally, will those headwinds be big enough that we'll still have a down March 2026 quarter?

No, we should be through the transitory costs through -- by the end of the year. We will have the TSAs that we talked about at our Investor Day that go through most of 2026. So we will have those costs. We'll have a little bit of the transition from HFCs to HFOs leaking into the first quarter, which are anticipated. But by and large, those transitory costs should be behind us.

And when will we get the split for the first half of 2025 results, so we'll have the comparisons?

Yes, John, it's Mike. So yes, we will be able to break that out for you in short order here going forward.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Leithead for his final comments.

Great. Well, look, we really appreciate everybody joining us today for our first earnings call as a public company. If you need anything, please reach out to the IR department and happy to help. So thank you, and have a good day.

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

I think we'll go ahead and get started. Really appreciate everybody joining us here, both in the room and virtually, and welcome to Solstice's inaugural Investor Day. I'm Mike Leithead, Head of Investor Relations for Solstice. We're excited to host here at the NASDAQ market site in New York City. It's great to see so many familiar faces here in the room, and welcome to those of you who joined on the webcast.

Today, you'll get a deep dive into our company, what differentiates us and our growth prospects moving forward. You'll also have the opportunity to ask questions and spend time with our leadership team during the reception. Those of you here in person will have already noticed that we have several exhibits showcasing our technology and key applications, and we have subject matter experts available to discuss and walk them -- walk you through them as we go through the day.

So some of the leadership you will hear from today, David Sewell, our President and CEO; Tina Pierce, our Chief Financial Officer; Jeff Dormo, our SVP of Refrigerants and Applied Solutions; Simon Mawson, SVP, Electronic and Specialty Materials; and Wylie Clark, our Chief Development Officer. So now the fun part of my job. Today's webcast and presentation materials, including non-GAAP reconciliations, will be available on Honeywell's Investor Relations website after today's session.

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. Just a few housekeeping items. Please silence your phone and save your questions for the moderated Q&A session that we'll have at the end. And then just for safety, exits are here in front of you and the security team is on the floor to help us in case of any emergencies. So with that, we'll start with a short video to introduce everybody to Solstice.

[Presentation]

So with that, it's my great pleasure to turn the stage over to our President and CEO, David Sewell.

Good afternoon. Thank you all for being here today and your interest in Solstice. We could not be more excited about the future of this company and everything that comes with it. Ironically, it was 1 year ago today that Honeywell announced the spin of Solstice. And so it's so nice to see it all come to fruition here on the stage at NASDAQ. And I'm confident that as an independent company, this will be a leading specialty materials business in our sector.

We are truly going to be a differentiated company. We have a unique value proposition with a clear right to win. We have 130-year history with solving complex challenges that our customers face every day. What's even more exciting is the industries in which we are associated and sell into are undergoing a very strong secular growth movement. And we have innovations in advanced computing in AI, thermal management, advanced nuclear energy, innovative health care solutions. All of these solutions are exciting for us to go to market with totally differentiated technologies and a strong intellectual property platform.

We also recognize with the history of what we have with Honeywell, we want to embrace everything that comes with it, but recognize as a stand-alone company, we want to have the nimbleness of a start-up that's needed for an innovation company. And we are building an operating model to do just that to ensure that we have the rigor and discipline to be that growth and innovation company that we want to be moving forward. We also go to market with a very strong balance sheet. With leverage of 1.5x, great cash flow and strong financial rigor, we know we are positioned to be flexible and to invest in the growth areas that we want to grow in as a stand-alone company.

And perhaps what underpins all of that is our people. This is the secret sauce to our business. We have a depth of personnel that understands technologies, markets and most importantly, deep customer relationships. This team has been with our customers for many times, decades to help them solve the biggest challenges that they're facing so they can innovate and we partner with them in their success.

A brief overview of Solstice as a stand-alone company. We bring substantial scale with close to $4 billion in sales and 4,000 employees worldwide. We will go to market in two reportable segments: our Refrigerants and Applied Solutions business, which will be our largest as well as our Electronics and Specialty Materials business. It's a very global business. We sell into over 120 countries and territories around the world, and we serve a very diverse end market base, which gives us a great diversity and resiliency in many types of macroeconomic environments.

And just to strengthen the position of our relationships, we align with blue-chip customers that are leaders in their space. And we work on, in many times, multiyear development projects, understanding where that market needs to be in the future and that we can support them with game-changing technologies because when our customers win, we will win with them. If you look at the history of our company, it's been around for 130 years. And in an interesting twist of history, Allied Chemicals, which is a foundation of Solstice was headquartered right across the street here at One Time Square. So it's nice to see it come full circle from where we started to where we now are going to unleash this growth potential as a stand-alone company.

Something else I'd note is Advanced Materials, which is now Solstice, was a company and a division within Honeywell that was a stand-alone since 2016. So this has been a very clean split. It wasn't some smaller businesses being thrown together at the end. This company has been operating as a stand-alone unit. So we have the depth of experience, the crossover of people and a very clean split as we spin into our new company. And we just couldn't be more excited for the future and what this is going to bring with our portfolio of brands. And you can see the growth that we've had since being a stand-alone company.

If you look at our financial background, it's a very strong financial profile with a 4.4% CAGR from that time in 2016, which has basically been all organic growth through some very interesting macroeconomic times such as COVID, it's been resilient. And not only with that resilience of growth, it's had market-leading margins and it's had market-leading returns on the capital in which they invest. This is a company that knows where to invest capital to get the best returns to ensure they're investing in the right programs. So with that growth profile, not margin profile and that return on invested capital, we believe this is a profile of a company that can now go on its own and really accelerate the success of which they've achieved.

As I mentioned, it's a diverse product mix. It's also a very diverse customer base. And what's so interesting about this business as I've continued to talk to customers and employees and our manufacturing sites is the relationships they have to develop these technologies to solve these problems, it opens up tremendous market opportunities in other sectors. So when we solve this problem with a new innovative IP-protected technology, we can take it to another industry to help them solve that problem. And that's where continued growth will continue to come from with these adjacencies there.

As I mentioned, it's very diverse from a global standpoint in the markets in which we serve. Obviously, the largest market being the United States, but still very prevalent around the world. And it's a diverse customer base. Our largest customer is less than 3% of our sales. And then you can see the diversity with over 3,000 customers around the world. And part of that strategy for us is ensuring we're manufacturing where our customers need us to be. They need that assurance of supply. We need to innovate locally where our customers are, where the trends are happening. And we have 24 manufacturing sites around the world. And we also want to make sure that we are well protected should there be any sort of geopolitical environment with tariffs.

In the United States, 90% of our sales are manufactured in the United States. Internationally, 60% of our sales are manufactured in which the countries we operate. What's also really important about that is assurance of supply. Our customers are making critical materials and our ability to service them every time with the highest quality is crucial. And that 96% customer satisfaction score is so important to us, and we want to continue to get better and better and better. We need to partner with our customers so they rely on us as a top-tier supplier for their innovation needs.

And with that is also the importance of safety. That is at the cornerstone of everything we do. We obviously deal with some very dangerous materials, and that safety for our employees and the environments in which we work is always top of mind, and that top quartile performance is always going to be something we want to achieve.

I mentioned our people, and I'm really excited to have several of our leadership team here today to speak to you and tell you about their businesses and the opportunities in front of us. But the entire leadership team is here today, and I'm really excited to have them because of that depth of experience. They know the markets, they know our customers, they know the industries and they know the expertise in which they bring, whether it be manufacturing, supply chain, commercial marketing or R&D.

But what's even more exciting in addition to this is the depth of the entire workforce. Hopefully, you've had a chance to go through some of our product displays. We have many 30-year employees there. They are so excited about the opportunity in front of us. They've been working with our customers for so long. They've been developing these innovations, and they can't wait to get started as a new company as Solstice.

So as we've become a new company, how do we unleash this value? How do we create this growth mentality? And we see this in several manners. The first is we believe we're at the inflection point of several attractive markets with these secular growth trends. I mean these are markets that are growing in and around the world. Not only are they growing, we have an amazing amount of experience within these markets. And we have leadership positions in these markets, and we have leading brands in these markets. So enabling us to develop a strategy as an independent company with an operating model that ensures we have the rigor and discipline to ensure we are investing in the right areas. We are growing at the speed that we want to grow in, developing the next-generation innovations is going to be critical for us to continue to differentiate in the marketplace.

And as a stand-alone company, ensuring that capital deployment at the best possible manner for our customers, for our shareholders and for our growth initiatives is going to be vital. And that operating model that we are developing is going to ensure we have the discipline to continue that strong financial trend. And I just want to go a little bit deeper in some of these secular growth trends that I've talked about. We really look at it in 4 pillars, so to speak. And the first is advanced computing. You've all heard about the advancements of AI, the growth of data centers, and we're going to talk a little bit more in depth today about how we play as a great solution provider in these markets.

And they are growing and they're growing rapidly, and we need to get everything from innovation in the chip to the heat off the chip to the thermal management in the data center to everything that's associated with that, and we believe we're very well positioned to do that. Then you have the environmental and energy evolution that's happening. There is a global trend to continue to reduce and have a more sustainable solution for the environment. We have great technologies like our new hydrofluoroolefins that are doing just that.

But there's also a very challenging energy environment with all of the growth that we talked about. We have the only nuclear converting site for uranium in the United States, and we see this as a tremendous opportunity to continue to help generate energy for the world. Our healthcare business provides really innovative and unique solutions to improve healthcare outcomes, which is another important industry that we're growing in, and we have some exciting technologies to share with you there.

And then personal safety and defense. The world is becoming a place where we're investing around the world and improved energy and law enforcement and having that protection is crucial, and we have great technologies to do just that to continue to be a part of that growth sector. And if you look at what third-party folks are saying about these growth trends, it gets us really excited. So in our Electronics business, as Simon comes up and talks to you about the things we're doing with leading-edge nodes, you'll see a 12% CAGR projection through 2030.

Chips are going to get smaller. They're going to get faster and 7-nanometer will come down to 3-nanometer and 2-nanometer and below. And this team is working on those next-generation solutions so our customers can do just that. In refrigerants, there's an 8% CAGR projection through 2030 for new HFO technology that continues to position us very well in refrigerants. New healthcare technology in inhalers, which reduces the carbon footprint, 99% from the old technology is projected to grow faster than GDP. And as I mentioned, nuclear has become embraced around the world as a potential safe and sustainable solution to the energy demands that are needed through 2050, and that is projected to be a 300% growth rate through that time frame. So these are exciting trends where we have great technologies to capitalize on.

And as we look at growing on our position, it's, again, that compelling profile of growth and margins, but ensuring that we continue to drive that commercial excellence, that pricing excellence that we have to capture not only the organic growth that we have, but adjacent markets that are there. And one of the things that's quite exciting for us is the percentage of sales of new products. As you can see, 45% of our sales are from new products. This is an innovative specialty materials business. We are constantly coming up with the next molecule, the next material that's going to solve the problems that our customers have and many times with IP. So this is going to be part of our growth story as we move forward and why we're so excited to be a part of an independent company.

I mentioned our footprint. With patent -- with 5,700 patents around the world, we have over 300 R&D scientists, and this is an area where we're going to continue to invest. We are increasing our spend in R&D just because we know this team knows how to deliver solutions that are needed. It fuels and drives our growth, and it allows us to be a leading innovative company in our space. We have four R&D centers around the world in addition to our manufacturing footprint. So being a total global company and being able to service and supply our customers in that manner is crucial to our success.

And you can see how we allocate our spend with R&D. We are not only working on today's solutions, but to use a phrase from Wayne Gretzky, we're trying to skate where the puck is going to be in the future and what technology solutions are going to be needed as these industries continue to evolve. And that's a focus of what we're working on and has been a big part of our historical success. The operating model in which I referred to is really comes down to five pillars. So as we evolve, we cannot lose our focus on being an innovation company. So we will continue to ensure we have a process of rigor and discipline to add more products to the market that are needed and that can be commercialized and have a commercial team that recognizes the importance of being able to take those technologies, understand our customers, but also bringing it into new markets as well.

How we deploy our capital is going to be crucial to ensure that we are getting the best returns for where we invest our money. Supply chain logistics and manufacturing have to be core to what we do. We need to be world-class in our manufacturing and supply chain. We need to have the lowest cost, the best service and the quality that's needed in the applications we're in have to be there every single time. And these are the pillars in the operating model that we're going to develop and are developing to ensure that we can do this consistently every day and get better and better in what we do.

And just diving a little bit deeper into our capital allocation. We look at it in four buckets. And the first and most important, where we see the capital best return is investing in ourselves. Investing in organic growth because this team has the pulse of where the markets are going, what the needs of our customers are, the historical results we've had with our return on invested capital, we know this is a great investment, and that will be a priority for us.

The balance sheet that we have and keeping that strong balance sheet is going to be a priority as well. We want to maintain that flexibility, but also recognize we have investment opportunities at the same time. So we will keep a nice balance to ensure that we don't get massively overleveraged, and we want to prove ourselves early and often as we become a new company.

And as I mentioned, since we've been a new company within Honeywell since 2016, we have not really invested in M&A. And this opportunity as a stand-alone gives us the opportunity with some bolt-on acquisitions in adjacency markets and technologies that add to our portfolio to really unleash other opportunities for growth that maybe we haven't capitalized in our past. And fourth, with -- should there be excess capital, we'll always want to make sure we return a dividend to our shareholders, and then we will look at opportunistic share buybacks should that capital be available.

And I just want to highlight some of the investments of capital that this company has made to highlight some of the growth that's happened. You can see multiple Solstice molecules that have been developed in our Refrigerants business that have been unquestionably successful leaders in the industry. In fact, it's been so well regarded, we decided to name the company after this molecule. So Solstice is an investment that has gone a long way for us, both in automotive, in stationery and in building products and now in healthcare and continues to be a leading product for us with a great return on that capital.

We talked about semiconductors. We've invested quite a bit of money in our Spokane, Washington plant to continue to expand our ability to make copper manganese sputtering targets, and yet we are making even more investments to expand capacity as we move forward because of the growth in this industry. So this capital and the strong track record we have will continue to be a focus of the new company. So as we become our own spin and our own company as Solstice, it's important to really articulate why we think this is a compelling investment opportunity.

And it starts with the markets that we're attached with. We are aligned with markets that are growing faster than GDP. And with that, we have technologies and a leadership position within those markets. And we are already working on next-generation solutions to make sure we are always staying ahead and growing faster than even this market is growing. Ensuring we have rigor and discipline in our operating mechanism and our operating process is crucial, and we will follow that discipline throughout as a new company to ensure we don't lose anything in the strong financial results we have, but also as a stand-alone, we unleash that growth in a very methodical way, but also ensuring innovation, creativity and speed.

With that capital allocation that I referenced and making sure that we always are providing returns for both our customers, our company and our shareholders, and that is underpinned by this incredible leadership team that's here today and the 4,000 employees around the world. And so we just cannot wait to get started as our own company. We feel we have a very compelling leadership position in very attractive markets and are really excited for the future as we move forward. So with that, it is my pleasure to welcome a President of our Refrigerants and Applied Solutions business, Jeff Dormo.

All right. Thank you, David. And let me just tell you, starting off how excited I am to be here today. A little bit about myself. I've been at Honeywell now for the last 8 years. 6 of those, I have been running P&Ls across the Advanced Materials business. So it is a real privilege today that I get to come up here and actually talk to you about some of what we do since we didn't get an opportunity to do that very often before. We really think we have a great business and a phenomenal team. So very excited about that.

Before I joined Honeywell, I was at Dow Chemical in the polyurethane space. And prior to that, I was -- I started my career in the Navy, running power plants on nuclear-powered submarines. So we'll talk about nuclear power a little bit later today, but I feel a little bit like a full circle, and I'm coming home getting to do this a little bit more.

So with that, let's jump into the business and talk a little bit about the Refrigerants and Applied Solutions. $2.7 billion business with very attractive margins, a scaled business that has a demonstrated track record of growth. We go to market as we think about this really in four different reportable segments. And we'll go into each of these, and we'll talk about them. I want to give a little bit of color. I know you probably had the chance to look at some of the displays. So hopefully, that gives you a little bit of background of what we did, and we'll try and talk a little bit more about this during the day today.

As we think about these businesses, right, so Refrigerants, Building Solutions and Intermediates, our alternative energy solutions, that is where our Nuclear business resides and then Healthcare Packaging. Before going into them, I thought it would be helpful just to kind of give some overlying thoughts about what underpins these business and some core themes that we can think about. First one is robust and strong IP portfolio. And that really goes across our molecules, our positions that we have there and something that we do think is a differentiator for our company.

Second, attractive and growing end markets, and we'll talk about each of these as we go through them. But I think really it comes down to segmentation, selecting the right markets and making sure that we can go deep there. And third, really around world-scale manufacturing. That is something that we have invested a lot in, and we do think that is a core capability and something that is unique to what we do and our ability to serve the globe, not just different regions, but really serve the globe with our products very effectively and efficiently and make sure we're addressing customer needs.

So with that, we'll go into -- we'll start with our Refrigerants business. This is the largest business that we have. As you can see here, $1.3 billion in sales. I'll talk a little bit about the markets. First one, so automotive, certainly involved in the cooling there, and we'll go into that as we get into things. Stationary business and so as we think about this business, we really think about two subsegments, automotive and stationary, stationary being anything that sits still doesn't move, not the most creative, but we'll go into the segments there. This is really residential and commercial buildings, commercial refrigeration as we think about it, you get into data centers, which we think is a strong growth vertical, and we'll talk about this in the panel and what's happening there.

And then there's always new and emerging different technologies and ways that we're addressing what's happening in the market. From the platform and our technology leadership, this really is where we go to market with the Solstice brand. Core hydrofluoroolefins that David mentioned, three core molecules really form the backbone of this business, our 1234yf, 1234ze and 1233zd are kind of that underlying backbone of core molecules that we have for this market. And then our Genetron brand, which is really around HFCs that we do continue to make.

Diving into some of the markets here -- excuse me, diving into a couple of the markets here as we go. I want to spend a little bit of time talking about each business and what makes them unique. So starting with our Automotive business. The Automotive business has really been one about the transitions from HFCs to HFOs. This is really built up as we think about when this transition started. It's around 2017 is as that started to begin in the U.S. and Europe, and it's still ongoing. We see a long runway as we continue to do these transitions, and we think that's an underlying growth trend that we'll continue to see within this market.

As that continues, I think something that's really exciting with that is that there is now starting to be a growing aftermarket business. So as you think about the transition that started in 2017 time frame, everybody in here has cars. As you think about your car, you probably know when you get to a point that your AC isn't working as well and it starts 7, 8 years, starts happening. So we're really just getting into that point in this business where you're building a larger installed base that gives you that aftermarket. This provides resiliency. Tina will talk about this as something later today, but we really like that part of the business as we think about the aftermarket that we get to serve.

Auto is also interesting in the fact that it's not only a B2B business, but we do have B2C as well. We go direct to retail, and we are out in stores in do-it-yourself applications and things like that. And we think that is a great place to play that we continue to be successful and really focus on and making sure we're doing well there. And the last thing that I would hit it on within automotive is really electrification. Battery electric vehicles are continuing to grow. They're growing faster than your traditional combustion engines. And we see this as an added accelerant to the opportunities within our automotive business.

In an internal combustion engine, obviously, heat is generated, so heating can come from that. You're really just focused then on the cooling applications within an automobile. When you start talking about a battery electric vehicle, now you start to get into heat pumps, still using the same refrigerants and the same applications, but now we have heating and cooling that needs to happen that actually requires a slightly larger charge. And so you have a compounding effect as you talk about growing EVs and a larger charge, which really underpins and gives an opportunity for growth there.

Transitioning a little bit to our stationary business, a tremendous end markets that we play in here, residential and commercial AC. We just went through the transitions. We're going through some of these to HFOs here in the U.S. This continues to be an innovation engine for us, and we think this will continue for quite some time. Commercial refrigeration. I think some of you probably saw the products out there, really about food security, minimizing food waste, really enables supermarkets to control costs and do things efficiently. So we have great solutions that we're doing there.

And then data centers. Data centers really generate a tremendous amount of energy, heat, thermal requirements. And so that is an area where we play today. We are seeing it grow. And we think long term, this will be an area where it continues to really need our solutions to address the challenges that they have. As we think broadly about the Refrigerants business, strong IP portfolio, deep customer relationships like what David talked about, going back decades, many times, growing aftermarket sales and a strong installed base.

The installed base in the stationary business is already established, very strong there with a great aftermarket. And then as we can see at the bottom, really strong HFO growth. So as you think about the market, as the overall market is growing, HFO is growing faster, and we think that really plays very well to our capabilities. I think it's important when we talk about refrigerants, and we talk about -- this will apply more than just the refrigerants also to our Building Solutions business.

But the regulations underpinning this, I do think are important, at least to understand and discuss. It's really -- there's three core sets of regulations that are really driving this. So you have the EU F-Gas regulation, the American Innovation and Manufacturing Act and then Kigali. And so those three together are really helping to drive some of the policy underlying the shift to low global warming potential refrigerants. Many of these EU and U.S. are well underway. EU is actually quite far down the path. A lot of the transition to HFOs has happened, and that's really kind of the leading edge of where things are there.

Within the U.S., we've now gone through the second step down, and that has been also what an accelerant was to some of the transitions that happened this year to HFOs. And this will continue to go on as we go forward. This is part of what's driving that underlying growth within HFOs as you have to step away from the higher global warming potential HFCs and replace that with HFOs. Regarding the growth in terms of what's happening here, and this chart really underlies and kind of demonstrates what I talked about on some of these prior pages.

2022, you can see the mix that we had from HFCs and HFOs about 30% HFOs and the majority in HFCs has really transitioned as we've gone forward now to '25, much higher concentration, more than 60% now in HFOs, less than 40% HFCs. Now during this time, overall, we have continued to grow. And you can kind of see the dynamics that are happening as you look at the right side here. So as some of the quotas, some of the requirements from the different regulations are requiring fewer and lower amounts of HFCs, you have that offsetting with HFOs.

Again, as we think about our portfolio, our innovation, our focus is really on developing the HFOs, those next-generation refrigerants and applications. And so this has been something that has really helped us to establish and continue and accelerate our growth. So with that, wrapping up on the refrigerant side, I would say, hey, just a few things to kind of mentally note here. I think we're very well positioned in some very attractive markets, IP underpinning a lot of what we do here and certainly, a growing aftermarket business across both the automotive and stationary applications that really give us a strong resiliency.

Moving to the second business, our Building Solutions and Intermediates. This is a business that is $738 million, has leading technology platforms that build off our Solstice molecules. You can see the liquid blowing agent, that is our 1233zd and then the gases blowing agent, GBA, that's the 1234ze molecules, really a game changer in insulation performance. And as we think about growing energy needs, requirements and things like this, having efficient and effective buildings becomes more and more important. And that's where this business really plays and has really focused over the last number of years.

If you think very broadly about this business, we really are in every application that requires some sort of insulation. So farm to table, getting food safely from the farm all the way to your table, making sure that it can span the globe, all the transportation, we provide that high-performance insulation that really is critical to what's happening there. Within this business, I think a few things that are differentiating and separate us. First one is technical service. A lot of this business is around formulations, and it's unique formulations that are used in these different applications. We have the deepest bench of technical experts within this business. And we think that is really something that provides us a unique opportunity to really continue to be a leading player within this market.

Second is scale. In a way, you could say that we really were the ones who shepherded in this HFO transition within Building Solutions. And we have global scale manufacturing really across the globe. David pointed out many of the manufacturing sites as we're thinking about. That is a differentiator. We can serve global customers wherever they are, and we have world scale to make sure that we can meet all of those needs across the globe. So exciting business with exciting opportunities as we're thinking about what is happening in this business.

Moving on to the third business, our Healthcare Packaging business. This business is really a combination of two different LOBs. This is our Aclar portfolio and also medical propellants. Medical propellants is a bit newer, and I'll spend some time really talking about this because it really speaks to our focus on customer co-innovation and how do we innovate and solve customer problems together. Starting first with our Aclar business. This is a very unique application that we have. It is a very clear ultra-high moisture barrier polymer that is used in Healthcare Packaging. It is unique in its applications, how it's used. It solves many problems in terms of its clarity and what it's able to do that alternatives just are not able to match.

Also, we have decades of experience with it. We have long-standing customer relationships that go back many, many years in terms of solving the problems, working with the pharma customers to make sure that this is spec-ed in, in their packaging needs as they go forward. The medical propellant business, this is a really neat opportunity, and we'll talk a little bit more about how we think about growth and going into new verticals. But this is an area where a customer, in this case, AstraZeneca really identified that they have a problem, a challenge that they needed to solve. I think Andrew may have pointed out some of these things to some of the inhalers and metered dose inhalers before. But these all use a legacy high global warming potential HFC.

And so as AstraZeneca looked at their footprint, their carbon footprint as they want to go out and address it, they really needed a partner who could bring a solution to them that was innovative and would meet those needs. Based on our technical skill set, our deep technical knowledge and the fact that what was mentioned before, a global scale, we were really able to be the ones who could come and step up and help them address these needs.

Going from converting from a legacy HFC to an HFO in this application allows them to reduce the footprint in their medical inhalers by over 99%. So a real impact to them, some a challenge that they had that they were really looking to work with. We're excited to have partners like that, that we can go deep with in solving these problems. It went beyond us just needing to have a product available, but we also had to figure out how we would manufacture it. And I think this goes back to a little bit of our core capabilities of being able to address a customer problem and then convert it into how do you actually go about the process of scaling and manufacturing something that's going to meet their need.

This is really a process of us bringing cGMP capabilities to our portfolio, something that we did not have before. But this is a unique opportunity and differentiating position for us to really go after and make sure that we can address this market going forward. So we're excited about how we are able to partner with customers, work to solve their problems and then in the balance, open up an opportunity for us as well. And we really think this is a great example of a win-win between our two companies.

Lastly, going on to the fourth business that we'll talk about here, our alternative energy services business. This is our nuclear business. And as David mentioned, a lot of focus right now on energy needs within the U.S., within the globe, and we think this is uniquely positioned to really help address some of those needs going forward.

A little bit about the background. So we own 100% of the Metropolis site, which then serves conversion services to a 50-50 JV, which is ConverDyn. That 50-50 JV is between Solstice and General Atomics. We're very -- one thing on this page that probably jumps out the $2 billion number. So excited to say that we have a backlog or if you look at it a front log, but we have orders out through the remainder of the decade. I'd say these are firm orders. So these are out there. This gives us the confidence to do the things that we need to do to really focus, run our site, debottleneck and make sure that we're bringing more capacity into the market. I think this is a great opportunity for us to help address some of these critical challenges going forward. So we're talking about nuclear energy as an alternative.

I know there's probably not a lot of history or background necessarily in where this fits. So just a little bit on this to give some context as to how we think about this business and where it sits. So you can see Metropolis ConverDyn here in the conversion really making UF6. So the raw material, the uranium that's mined, we get it as that raw material and our process is really converting it into a value-added intermediate that is then brought downstream and really goes into then the fuel fabrication cycle.

Metropolis is the only domestic conversion facility within the United States. This is a unique position on energy security, and we think one that is very helpful for what we're trying to do here in terms of growing. A couple of things on the right-hand side here, just to give some context to what we're talking about. The capital expenditure as we're looking over the next few decades, $4 trillion. This is going to be a growing area to invest in. 3x nuclear growth by 2050. And you can see overall nuclear energy roughly estimated a $10 trillion market. So a lot of opportunity here for growth and for us to participate as we're going forward.

So with that, as I wrap up, and I'll turn it over to my colleague here in a second, really excited to tell you about our business and what we're doing. We think this is a unique business that has wonderful growth potential, great verticals and industries that we have a chance to play in and look forward to the rest of the day to answer any questions as we go forward. So with that, I ask Simon Mawson to come up, and he can tell you a little bit about our Electronics and Specialty Materials business.

Thank you, Jeff. It's great to be here. It's always hard to go after the RES business. It's such a terrific business. But I happen to think that the ESM business is even better. So let me tell you about that. First, a bit about myself. I'm approaching 30 years in the chemical industry, 25 years of that in the specialty chemical space. I've been running P&Ls for the last 15 years, 3 years here with Honeywell.

Prior to that, I spent 8 years at Henkel's Adhesive Technologies business, running various adhesive businesses. And then I spent 4 years, close to 4 years at essentially what Syensqo's NovaCare coatings division today. Earlier in my career, I spent about 10 years in various sales, marketing strategy roles, primarily with Rohm and Haas, towards the end there, a few years with Dow Chemical. And earlier in my career, I started out as a process R&D engineer doing pilot scale-up work for Union Carbide in the JV they had with Exxon Chemical called Univation Technologies. So I've had a lot of different roles in the industry. I've seen a lot of different end markets and super thrilled to be here today.

So let me talk to you about Electronics and Specialty Materials. We're about $1 billion in sales, 19% EBITDA margins, but we have some terrific businesses. I don't know how many people have had a chance to see the exhibits yet, but we have the sputtering targets business. You can see the target out there. We have the ballistics business where we get to shoot armor and provide safety solutions to the military and law enforcement. We have the thermal interface materials business. So we have thermal management business as well. We have fantastic businesses in the specialty chemicals side. So it's just a terrific collection of businesses. We organize this into three segments. So we have our Electronic Materials segment. We have our Safety and Defense Solutions segment, and then we have our Research and Performance Chemicals segment.

So while these platforms are different and this business is different than what Jeff referenced where you sort of have a big asset running serving -- supporting multiple businesses, we have discrete businesses with discrete manufacturing assets. But what's unique about all these businesses, similar to Jeff's business is they're very much built upon a legacy of innovation over many, many years. So we have a right to win in these markets because of that legacy of innovation and because of those deep customer relationships that we've nurtured over many, many decades in these businesses.

So I will go through each of these segments in more detail, starting first with Electronic Materials. So Electronic Materials for us is approaching $400 million in sales. Obviously, this business is a lot of excitement about the Electronic Materials space. I mean, just this morning, there was a very famous CEO in the neighborhood talking about the exponential growth that's happening in AI. So you've got increasing demand of AI, and then you've got increasing compute requirements on top of the increasing demand of AI. So there's just unbelievable tailwinds in this business driving growth. There's other parts of the industry as well that are driving growth. I mean there's a lot of electronic applications in the electric vehicle area as well, which also our portfolio supports.

And so we have a great position here in this market. I'm going to go into some detail to explain that to everybody in a minute. So we've historically sold into the front end and the back end. So we sell our sputtering targets, our etchants and wash solvents and our dielectric materials, essentially, we call them electronic polymers. These are dielectrics, planarization materials, dopants into the front end of the process. And then on the back end, we sell our thermal interface materials and our integrated heat spreaders. So we participate in both parts of the value chain.

We've been in this industry for a long time. So we're not a new entrant to the electronics space. We've been in this business for a really long time. And as a result of that, we have very deep relationships with all the leading IDMs, foundries and a lot of brand OEMs as well that we work with on the spec end side, especially on the thermal management part of our portfolio. So we're deeply, deeply embedded in this industry. So this is not something we've just walked into recently. This is something that we've been in for many, many years.

And because of that, we're able to do a tremendous amount of co-development with our customers, and I'll talk some more about that as well. So what I want to do on the next slide is just walk in more detail on the value chain. I want to talk then a little bit more about how we do co-development with our customers. And then I'm also going to talk about what we're doing or why we think these trends are going to continue and why we're positioned to win. And then I want to just wrap up, at least on the electronics side with an update on what David mentioned, which is the additional investment we're making in our Spokane, Washington facility to support the growth in this market.

So here's a very simplified diagram that speaks to the value chain for the electronics industry. You can see here on the left-hand side, the front-end process for chip fabrication. And as I mentioned, we participate with etchants and wash solvents with anti-reflective coatings, gap fillers, planarization materials, and then we have our PVD targets business. And then on the back end, we have a thermal management offering with integrated heat spreaders and then we supply TIMs 2 materials. Specifically, this is our phase change materials portfolio.

I'm not going to spend a lot of time talking about the back end and our phase change technology and our TIMs position in thermal management because Jeff, Wylie and I will come up after the break. And during the panel discussion, we're going to have a more detailed discussion about thermal management and looking at that business from a growth perspective. So that will be a key part of the panel discussion a little bit later on.

What I do want to do, though, is focus a bit of time talking about the PVD targets business. This is a business for us. We participated in for many years. We supply a lot of different target technologies, titanium, aluminum, copper, tantalum, tungsten. We make various alloys, aluminum, copper. And more recently, we make copper manganese. In 2019, there was a major pivot that happened in the electronics industry, which was the introduction of EUV technology with the first 7-nanometer fab that went into production. And when you make node sizes at 7-nanometer and below, 7-nanometer, 5-nanometer, 3-nanometer, now 2 is about to start up. And in the future, we're working on 1.4 and 1. Essentially, you need to use copper manganese on many of those layers because copper manganese inherently provides excellent diffusion barrier properties, and it helps you with the reducing electroresistivity. So it just improves the overall performance of the chips.

And so if you look at the industry road maps, logic road maps, for example, and you look out and you look at the layers, you see that there's a lot of copper manganese being used and there will be more copper manganese used in the future. So we have a very unique position in this space. We're the largest or really the only producer in the United States that has copper manganese at scale. And we're only 1 of maybe 2 or 3 in the world that can actually do this. So we tend to be in a very, very strong supply situation supplying these copper manganese sputtering targets to leading IDMs and foundries.

So when you're out looking at the exhibit, we actually have a copper manganese target sitting out there. It's beautiful. It's beautiful copper. It's the highest purity copper in the world. It's 6N purity copper. It's just beautiful target. And those are what go into the PVD chamber and those are what deposit the copper layers onto the chip as they build up the layers. So very exciting.

Let me talk about the demand and what's happening in the marketplace. I don't think it's any surprise to everybody about the growth of AI and the reshoring in the United States. I mean these are 2 transformational changes that are impacting the semiconductor industry, the electronics industry. So those are well known, well understood. And we feel confident based on all the announcements we're seeing and all the discussions that are happening that we're still very early in this build-out. I often compare it to -- I think it's an infrastructure play the same way we built out the railroads and the highway system and the Internet. I think we're now building out the backbone for the AI economy going into the future, and I think this is going to play out for quite a while. So we feel very good about the amount of infrastructure spend over the next several years to get all this in place.

But the other thing that's happening that's also a benefit for us is there's new applications emerging because of the new -- the continuing requirements around increasing chip speeds. So you need faster chips in order to make all of this work. So you need to go to smaller and smaller node sizes and you need to go to new architectures with advanced packaging. So all of that is creating new demands for materials. And so if you look at a lot of the industry road maps for logic, so if you go to -- I think if you go back to 7-nanometer chip, it had about 10 layers. And if you look at what's planned for next-generation 1.4 nanometer chips, it's up to 16 layers. So the number of interconnect layers is increasing. Those are all copper manganese. The interconnect density is increasing. So the amount and volume of copper manganese that will be required on the logic side is increasing as we go down in node size.

Similarly, in memory, which never used to be a market for us, with the introduction of high-bandwidth memory, we're now finding a significant amount of demand for copper manganese. So as high-bandwidth memory starts to go down in node size, we're at 13 nanometers today, as you start to go down to 10 and 9 and look at the road map for that business, you start to see more and more copper manganese used as well. So again, high demand for copper manganese in the memory space.

And then advanced packaging applications are also creating opportunity for copper manganese because when you have backside power delivery to a packaging -- advanced packaging design, you have to put the through-silicon Vias and those through-silicon vias are made with copper manganese. So when you look across the industry, whether it's logic, memory or even on the packaging side, there's increasing demand for copper manganese. And again, when you combine that with the U.S. reshoring efforts and what the U.S. is trying to do and the fact that we're the only major producer of this in the U.S. and 1 of 2 or 3 maybe in the world, we feel like we're in a very strong position to continue to win. And these product lines have very, very long spec-in cycles, too. So what's already in motion today started many years ago, and we're working on 1.4 and 1 going into the future. So we're already well down the road on those development projects. So we feel like the demand is going to be there and be very robust for this business.

The other comment I'll make as well on this is that, especially with advanced packaging, there's new opportunities emerging there as well for new materials in other parts of our portfolio. So we're also seeing some of our dielectric spin-off materials finding new applications in the packaging side for planarization or gap fill or even hybrid bonding. So we're also exploring a lot of other adjacency opportunities that we haven't historically participated in, in the past.

So here's a customer case study, just to talk about, anonymous. I wasn't allowed to put the name on here. But enough to say, leading fab producer in the world that we partner with very closely. We have a very broad and deep relationship with this customer. And this is a good proxy for really how we interact with a lot of our customers in this space. It starts with us having local team on the ground supporting the customer, making sure that our products are performing the way they should be performing when they arrive and in their manufacturing facility.

We then have higher-level discussions with the R&D team, the technical team, the fab engineers to look at unmet needs and where we need to continue to innovate. And so we have those regular dialogues as well. We have top-to-top discussions with them to talk about strategic partnership and how we can work together and how we can support each other with investment and key decisions like what we're doing with Spokane. And then we also establish relationships across the QC organization, ISC manufacturing organization, and we bring those resources together when they're required. And as a result of that, we're highly responsive. We're highly trusted. And as a result of that, we get a front seat to future innovation, R&D development. So we're sitting right there at the table with our customers on their next-generation development.

Okay. And just quickly on Spokane. So Spokane, we're putting another $200 million roughly investment into Spokane to continue to expand capacity to keep up with the forecasted demand growth of copper manganese. As part of this project, we're also implementing a series of, I would say, process improvement projects that the R&D organization has worked on for the past couple of years. It's going to drive significant efficiency and productivity into our production process. And at the same time, we're also automating large parts of our production process as well. So this will become a world-class facility supporting this industry going forward when all of the new assets come online.

We'll start to see some of the productivity projects and capacity coming online in '26, and we'll see productivity roll in over the coming years after that until the full expansion project is online in a few years. So this is a very -- this is actually flying out there in a few weeks with the groundbreaking ceremony. So very excited to do that. And thank you, David, for approving the project.

So moving on to the second business, Safety & Defense Solutions. This is our high molecular weight polyethylene fiber business. So this is where we take the fiber and we essentially make ballistic materials out of this that are sold into U.S. military law enforcement type applications. There's some terrific samples outside that you can see. We have a ballistic vest out there that's actually been shot, so you can see where the bullets have gone into the vest. You're not allowed to shoot anybody. We don't have any samples to test.

And then what you'll also see is we have our next-generation -- fiber plate made from our next-generation fiber as well. So we're in the process of scaling up and commercializing this technology. But this will be the next-generation material that will be supplied to the U.S. military to the war fighter. So you'll see the difference in weight and how it feels, and that's part of the U.S. military's requirement to lower the amount of weight that's on the war fighter because the next-generation gun that they're carrying is heavier. And so they need to take off weight somewhere and one of the areas they can take it off is with the ballistic material.

So we're -- this really speaks to our strategic differentiator in that we have historically been the market leader in this space, and we have led with the next generation of innovation to keep in the forefront for U.S. military performance on the ballistic side. Then as a result of that, it all gets pulled into law enforcement and other applications. We have also taken this business into the medical market as well. So we're also supplying into some medical applications for sutures. So we also have a medical business in this space as well. And you can imagine with all of the geopolitical tension in the world, the increase in defense spending in the U.S. budget that's been proposed as well as NATO increasing spend that there is a significant demand for these materials going forward.

Two quick case study examples here. I want to talk about Safariland. Safariland is a customer here in the U.S. who has been -- we've had a long-time partnership with Safariland going back 20-plus years, exclusive supplier to them for many years where we supply them our Spectra Shield and Gold Shield products. And you'll see Safariland vests in many of the police departments, the famous TV show police departments that you see in LAPD, NYPD, I mean, these are the guys making vests for them. And so a lot of those vests are made with our Spectra Shield.

So every year, they have an event called Saves Club, where they invite law enforcement or frontline responders who have been shot in the line of duty to come to the Saves Club event and tell their story about how -- the products made by Safariland with our Spectra Shield material in it save their lives. The families of those folks also attend. So you also hear from the families and how the families have managed this and what this has all meant to them. So it's really -- it's an unbelievable event. But if you look, there's been 55 first responders saved already this year. And over the life of the project, this program, over 2,200 people have been saved with material that we've manufactured in our business. So it's really a very special event. And I think it's a great example that shows the importance of the products that we make in the marketplace.

We also -- our business is not just U.S.-based, it's very global. So we supply into -- I think it's over 100 different military and law enforcement programs around the world. And just in the last 2 years, we've sold enough Spectra fiber to make upwards of 1 million articles, so helmets, plates, vests to EU military and Asian military customers around the world. So this is a global business for us.

Then I'll just quickly finish and wrap up here on Research & Performance Chemicals. So this is the third segment that we are organized by within the Electronics & Specialty Materials business. There's a lot of different businesses in this segment but we primarily -- they primarily have some common themes in that they sell into the construction markets, they sell into the pharma markets. We have quite a bit of business here in some of the automotive space as well. There's a lot of brands in this business. If you look at our research chemicals business, we sell into a lot of research labs around the world. So there's some very well-known brands in this space like Hydranal. So when you're out at the exhibit, you'll see an exhibit with the Hydranal brand, and we can talk about explain to you what Hydranal does as a key reagent that's used in laboratories around the world to measure residual water. So it's a very important product line. It's the most well-known brand in the world in this space. In fact, people actually refer to the category under the brand name, it's that well known.

We also -- this is also the business where we do a lot of our fluorine derivatives chemistry. So we also have fluorine derivatives in our business, like Jeff has fluorine chemistry all over his business. This is where we have a lot of fluorine derivatives business here. We do a lot of salts, fluorine-based salts. So probably you've all used a fluorine-based salt that we make and you've never realized it. But if you are a user of the major branded toothpaste that's out there, the tin fluoride, if you look on the back of the label and it says stannous fluoride, it's highly likely that the stannous fluoride in your toothpaste came from this business.

So we're a leading producer of CGMP salts. This is a tin fluoride salt, tin fluoride that goes into that type of application. So a lot of great businesses in this segment. A lot of opportunity for growth, especially sustainability solutions. So we have a number of innovation projects in this space that are really driving sustainable solutions. So using less material at our customers are looking for ways to reduce waste streams in their processes. So we have a lot of opportunities for innovation and growth in this space.

So with that, I see I'm out of time. I will wrap up. And I believe we are now going to take a 15-minute break. So please enjoy some refreshments and come back after the break, and we'll start our panel discussion. Thank you.

Well, I appreciate everybody joining us for the second half of the session now. The next 30 minutes or so, we're going to host a little bit of a panel discussion here on business synergies and growth strategy. When I left the sell side, they told me I'd be done hosting fireside chats but they pull you back in. So glad to have here Simon Mawson as well as Jeff Dormo, who you just heard from. Also joining us on the stage is Wylie Clark. Wylie is our Chief Development Officer, has spent a number of years in the business working on strategy and a number of other areas. And I would just say on a personal note, having joined Solstice, Honeywell 2.5 months ago, has been a tremendous resource and encyclopedia of knowledge as I've tried to learn about all these businesses that Jeff and Simon just talked eloquently about.

So maybe we'll start with Wylie. Wylie, why don't meet you just give yourself a little bit of an introduction and your background before we dive in here.

Sure. Wylie Clark, Chief Development Officer for Solstice. I've been with Honeywell for over 13 years now in various strategy and M&A roles. And the majority of that time, I've been aligned to the Solstice business. So I'm super excited and privileged to be part of this executive team going forward.

My team here, our job is to do all things strategy, both organic and inorganic. And that means running the strategic planning process, running M&A, being a partner and adviser to David and to Jeff and to Simon and coming up with our growth plans and our long-term strategic priorities. And when you look at Simon and Jeff's businesses, both of their businesses have very deep benches of experts in R&D and innovation, strategic marketing, commercial, sales, all of which are very well positioned to find those -- execute on current opportunities for growth and find the new areas for growth.

What we're focused on at the corporate level is really 2 things. One is prioritization. So where do we put that incremental dollar to maximize the growth for the business. And two, how do we leverage cross-platform capabilities that we see across both businesses and at the corporate level. And that's foundational stuff like synthetic chemistry, which we're excellent at across the board or foundational chemistries like fluorination, which both businesses excel at or just this culture of customer co-innovation. You hear a lot about our ability to get close to the customer and co-innovate with them.

And that's not always just the customer. It could be the end user. So in many cases, we're partnering with an end user, educating them on the capabilities of our materials, helping them understand how they can innovate, which then sets the specification and draws through our products to the value chain. So we're great at that.

We're also looking for the growth initiatives across the business as well, which cover both Jeff and Simon's businesses. And as a corporate, as a corporate entity sort of we're focusing the whole business on, one of which is battery chemicals and materials, which both Jeff and Simon have emerging strategies there as well as thermal management, where we have a great position in data centers.

Maybe we'll start there on data centers. Obviously, as Simon and Jeff talked about in their prepared comments earlier, the pace of AI, high-performance computing, data center growth continues to seem to accelerate and sort of hit this inflection point here over the next year or so. A lot of companies obviously talk about data centers and claim a piece of this growing pie. Maybe we'll start with Simon and then go to Jeff. Just talk about how Solstice attacks this opportunity and why we think we're unique in attacking the data center.

Sure. So for us, the data center starts -- this -- the data center for us starts on the chip manufacturing side, right? As I had mentioned in my presentation, we're supplying copper manganese into all the leading fabs around the world and we'll be supplying into all the new fabs coming online in the next coming years, making leading-edge chips, right? So those chips are instrumental to making GPU processors. Those GPU processors then go into an assembly process. And in the assembly process, that's where we start to then get into the back-end part of our business with our integrated heat spreaders and our thermal management solutions there.

So we have a core business doing heat spreaders and we're well set up on the heat spreader side to make the larger scale, what we call extra-large form factor heat spreaders that are used in the larger chip formats or formats now as you look at putting chipsets together and creating these sort of AI package solutions. So we're well positioned there.

But then we have a really awesome portfolio with our thermal interface materials. So we make a type of product called a phase change material. So when you have the spreader on top of the chip to remove the heat and then you need to put the heat sink or cold plate or whatever it is on top of that, you need to have a perfect bond line between the 2 substrates. So what you don't want to have is air trapped between those 2 substrates. Typically, they've used greases to do that in the past. Greases aren't very good. They tend to flow out. They tend to make a mess. Our material that we make, this phase change material is fantastic because it doesn't pump out and it makes extremely thin bond lines to give you very good heat transfer performance. And so what we're finding is that it's becoming the preferred go-to solution for really thin bond line applications like on GPUs.

So we're working with a number of the major OEMs out there, branded companies that are developing chips, GPU chips, and we're working on essentially specking in our phase change material. So similar to what I said on the copper side, right, these are long qualification cycles. We're working on programs for many years, getting spec-ed in, new programs come along, and we're working on that. So we're an established player both on the chip side with our copper manganese and the fabrication of the chips for the data center and then also on the thermal management side with our heat spreaders and with our phase change materials.

So we get the heat off the chip and then hand it over to Jeff, who then takes the heat transfer from there.

Yes. So it's really a tremendous opportunity to talk about the handoff between where Simon gets the heat to the top of the chip. And then at that point, you really have to think about how do you get the heat that's generated from these chips out of the building. And that's certainly where we specialize in, obviously, with our refrigerants. We are -- we develop that working fluid, right? The working fluid that really does the thermodynamics of getting that heat out of the building.

As you think about a data center, you think about AI and what's happening, so the compute power that Simon has spoken a lot about, it's getting denser and generating more heat. On top of that, when you talk about these supercomputers, you're putting many of these chips now together. And so the thermal load in a space in a rack is continuing to grow. And so as we take a step back and think about where do we play today, most data center cooling is air cooled today. And so that is kind of the core, the bread and the butter of what we do today is really having HFO solutions, blends and so forth that are being used by our customers and being used to do the air cooling that is happening.

We see this continuing to evolve as we go forward. And you see here kind of next on here is direct to chip. So as that heat capacity, as that thermal intensity goes up, new solutions will be needed just because air can't get enough heat off the chip at a fast enough rate.

The next one to come, direct-to-chip, 2-phase cooling. This is really where you're taking some sort of cold plate and you're going directly onto the top of the chip, either from a heat spreader or a TIM 1.5, depending on what it is. And now you can run a refrigerant directly through that cold plate, which generates a much better thermal interface to get the heat off and use that in order to maintain those temperatures. This is an area where in our portfolio today, we have solutions that work tremendously well in things like 2-phase direct-to-chip cooling in an area that we think is probably the next leg in this growth as data centers continue to grow and the thermal intensity goes forward.

And as you look longer out, you look further into the future, that's where you begin to think about, hey, where is that next place where thermal management will need to happen. In a way, all of this comes down to physics, what's the heat flux and what's the best way to get heat out. And that's where you get into solutions like immersion cooling and active programs that are well underway and progressing very well in terms of the immersion cooling and how that will fit into the overall ecosystem.

I think it is important as we think about the data center of the future, likely all 3 of these are still needed. It's not one or the other, one of these will happen. It's there's going to be areas in the future where there will be immersion. There will be areas where there's 2-phase air cooled. And in all of these, at the end of the day, you still will need some sort of working fluids. It's really managing of getting the heat out of the building because there's going to be that generated flux coming up.

I think the -- as we think broader, okay, that's what's happening in the data center and then you start to layer on top of the -- some of the other things that are going on that it will require. The first one that I'd bring up is the idea of waste heat. I didn't talk about it before. But when you think about all the heat that's coming out, now there's opportunities to reuse. And that really lends itself to heat pumps. And so these are refrigerant solutions where you're taking that heat that's generated.

And this is happening right now, real examples in Europe where people are mandating that waste heat is recovered and used. And that is a new market as we go into and really apply some of our verticals there to make sure that we can help solve those solutions. And I think Simon talked about it. I mean, just when you think about the amount of energy that's needed to run these data centers, as we think about our nuclear position, we do think that will be a solution to address some of the energy needs in the future.

Yes. Just to add on that, I think what's super unique about this for us is that 5 years ago, even a few years ago, this was sort of a customer -- 2 different customer problems because there's 2 different customers. There was a chip customer, whether it's a chip designer or a packager or an assembly, they're trying to figure out how to get the heat to the top of the chip. And then there was a data center that's trying to figure out how to keep the place cool. And now that customer problem is coalescing around a common design issue and a common ecosystem of trying to solve that problem. And we're uniquely positioned because we're in the chip and on the chip, bringing the heat up to the top of the chip, and we're in the data center, innovating around the working fluid. So we have a great position to attack the current generation and the next generation of technologies here.

And one of -- a good example of this is we're -- we've stood up a thermal management design center within our Buffalo R&D facility, where we're doing active design and development and innovation within the chip, looking at next-generation TMs as well as innovating around the next working fluids to support future generations of thermal management technologies that will be needed for the data center.

Great. And maybe if we broaden the discussion out a little bit and just sort of talk about growth. David in his earlier presentation talked about our ambitions as a growth company and the inflection point and some of these secular trends over the next few years. Jeff and Simon just laid out a litany of different growth areas that they want to invest in or want to find as attractive. So maybe we can start, Jeff, just how you think about growth? And where do you see Solstice driving that growth over the future?

Yes. And we talked a lot about things along growth before but just to talk a little bit about how we think about growth. I think within our businesses, I mean, the first area that we really talk about and think about is, okay, what is application replication? How do you innovate within the current applications that you have and really then bring that across to other areas -- this is really about core innovation and driving growth within those. And so maybe a good example to kind of demonstrate what we're talking about there is when you look at a place like Europe, Europe has a fairly low penetration of air conditioning in homes.

But it has a very, very high penetration of gas boilers. Well, as Europe has looked at energy independence and what it needs to do, there's really been a push to electrification. This feeds right into heat pumps. And so you think about, all right, well, now we're taking something that we're really good at, right? This is a core capability that we have in terms of designing the right refrigerants for that. You suddenly now open up a whole vertical, a whole market that wasn't there before. And so as we think about growth, we think about it really starts there. How are we innovating within our core to open up new verticals and areas to grow in.

Beyond that, then for us, it's really about what are the long-term innovations. And so we have decades of experience as we really think about how do you go from -- we demonstrate went from HCFCs to HFCs to HFOs, and we continue to look and innovate around what are the next generation of molecules. And so long term, what are those innovative materials, what do they need to look like? How do they continue to push the boundaries of performance. And so this is an area with our R&D team, particularly our discovery team, we are continually looking at how do you invent and develop that next molecule that continues to improve the performance that is needed.

And then maybe the last thing that I would kind of add on there is as you really begin to look at those areas that are closer to our knitting in terms of where we play, it then becomes, hey, what are the adjacencies that give you an opportunity to use some of the capabilities that we're really good at and we can have a right to win. And so an example there is you think about fluorine chemistry kind of runs through a lot of our DNA here in areas like battery chemicals that Wylie mentioned in terms of there's a lot of fluorine that is used there, additives that are needed, different problems that need to be addressed in terms of charge time, fast charging, voltages and so forth that lend themselves to some of the additives that we have the capability to make.

So that's an example of as we're thinking about our core then innovating longer term in our core and then beginning to open up adjacencies to make sure that we have opportunities to grow in the future.

Yes. And for us, it's very similar, right? I mean the starting point for us is making sure in ESM that we have a very strong core that we can grow off of. So we're putting a lot of investment into making sure that our core manufacturing processes are efficient, that we can drive productivity into those processes and that we can serve our customers with quality, reliability and be cost competitive where we need to be as well in the marketplace. So [indiscernible] is a great example of sort of where we're incrementally innovating on an existing platform to bring that next technology to the market to make sure that we're keeping that business in a strong place.

So a lot of innovation tied to that, a lot of work going on in fiber innovation and process innovation with that particular project, and that's going to basically give us a platform to incrementally grow off of for many, many more years as we continually improve that product line and increase that performance to keep up with U.S. military standards. So that's a big part for us is around the process and having the assets in a good place.

The other thing we look at, we also look at a lot of customer-partnered innovation. So where can we work with customers to address unmet needs. We have some interesting projects we're working on in the pharma space where we're looking at how we can address some of the waste issues around acetonitrile. Acetonitrile is a big issue for the pharma industry in the oligonucleotide space when they do a lot of oligonucleotide synthesis. There's a lot of wash steps. There's a lot of acetonitrile that's used. So there's a lot of waste generated as a result of those manufacturing processes. So a lot of our customers are asking what can you do to help us with that.

So we've got some projects that we're working on that's looking at waste stream reduction and how to create circular solutions for some of these businesses. So again, customer unmet need where we are looking at new solutions that we can put in place for our customers. So that's a great example of, I would say, some customer partnered innovation.

We're also looking at adjacent markets. So I had mentioned in the electronics presentation that it's interesting how sort of technology that you think is old, all of a sudden becomes interesting and new again. And we've seen that happen with the emergence of advanced packaging. So with the requirements that are now happening on the advanced packaging side, there's a lot of requirements for planarization chemistries, for gap fill chemistries, hybrid bonding is a big unmet need in the industry. And so we're looking at ways that we can create solutions in these adjacent markets that are emerging with technology that we've had for -- we have got many decades of experience on.

And so it's interesting to see how that is also happening as well, where we're getting to take some of the stuff that we've typically used in the front end, and we're now able to move it into back-end applications because there's all these emerging unmet needs that need to be addressed. And so we have active innovation programs working on these adjacency plays as well.

The other one I'll mention as well is just on our Phase Change materials. I mean we're constantly looking at what we can do to increase that portfolio. So we actually just did a launch of a product there, a new product, we call it 6880, actually has better bleedout. So we got a lot of feedback from our customers that the performance was good and they liked it but there was too much pump out on it. And so we fixed that and improved it. So there's, again, an incremental innovation on existing product that is addressing one of our key customers' unmet needs.

So we have a lot of different approaches to innovation. I would say at the end of the day, what's really key is getting close to our customers and making sure we understand what the customer unmet needs are and then how we can innovate towards solving those problems. And that's really the starting point for us for a lot of this.

And for Wylie now, obviously, Jeff and Simon have a lot of different areas that they're interested in growing. I think one of the areas that you talked about from a corporate level is prioritization within strategy. So how do you think about tying it together and prioritizing where we should grow and invest?

So David in his opening remarks talked about the strategic pillars, which are really tied to secular growth trends, which we're very well positioned to continue to attack. What we'd like to prioritize and continue to prioritize is not only that secular trend, we want to do more than that. I think secular trends are great but we want to grow faster than that. And so we look for opportunities where we can differentiate across the value chain within those secular trends where we can make an outsized contribution to solving that customer problem.

A good example is the metered dose inhaler project that Jeff alluded to. Metered dose inhalers and inhalation therapy in general is a great market, good growth. What we're doing is coming up with a new technology platform that is being adopted by the market, which will allow us to grow much faster than that market in general. And that's what we look for. We'll look for ways to improve adoption of our technologies across good, strong markets. So from a prioritization perspective, that's what we're looking for. But we're also looking to optimize our manufacturing footprint. As a materials company, generally speaking, to sell things, we have to make them first. So we spend a lot of time focusing on the optimized manufacturing footprint. And we have a great base, excellent base.

And as we move forward, we continue to look at what's the most optimal solution. Do we reinvest and expand our base? Do we partner to co-manufacture or do we look for a preferred supplier and develop a very close relationship with them. All 3 options we've used in the past, and we'll continue to look at going forward to make sure we're making that right capital allocation decision in the future.

And then when we think about growth a step further, obviously, David highlighted earlier some of the organic investments that we've historically made as well as planning to going forward. And there's a lot of areas where we already have strong footholds. But the natural question is always around inorganic growth and sort of that balance between organic versus inorganic. So as Chief Development Officer. And looking at that from a strategy perspective, how do you think about balancing organic versus inorganic growth?

I get the question a lot, what's your M&A strategy? And what are your M&A priorities? And I don't like to start there. My firm belief is everything starts with our strategy. And even zooming out further, it's what is our customer strategy? What is their technology road map? Where are they going 3, 5 years down the road? Where is the puck going? And how do we help our customer get there? And what is the problem they have? And we then work our way backwards and say, how do we best get to the preferred solution to support our customer. And it's a build partner buy equation that we always look at when we look at our technology platforms and our growth strategies, and we have all options available to us.

So if it means going out and doing it ourselves, reinvesting in our R&D program, which, as David alluded to, we are doing or it means going out and acquiring somebody, that's a tool we have in our tool belt. That opportunistic bolt-on to help support a technology platform that will solve that customer's problem today and tomorrow and 3 years down the road is definitely something available to us. But it's one tool in a big tool belt here.

I do think we can't invent everything internally, though. So there will be opportunities to bolt-on things to help support our growth plan. Those will likely be aligned to our strategic pillars. It will likely be -- the rationale will likely be aligned to moving faster, moving higher probability of success and being better suited to solve that customer problem.

Great. And maybe last area I want to touch on in the time we have here is the operating system. David talked a lot in his earlier remarks around a refined operating system that's fit for Solstice. Maybe we'll start with Wylie and then Jeff and Simon, you can talk about your business experience. But Wylie, kind of can you talk more about what we're trying to drive at with the Solstice operating model sort of built on the Honeywell legacy here?

So we're inheriting Honeywell Accelerator, which is a best-in-class operating model. It's got the rigor, it's got the processes. It's got the say-do culture that's embedded within Solstice. And not only that, it's a foundation that's been heavily invested in by Honeywell. Data is currency these days. And what we're getting is a tool that's full of digitization, enterprise data warehouse, AI tools, it's a training and technology platform that we're starting with. And as a $4 billion company, that's not something we could have -- or would have been difficult for us to develop ourselves. And that's our starting point, which is we couldn't be in a better position starting out with that.

And what we're looking to do, though, is to refine that and say, okay, this is great. We've got the great foundation. But what are the 4 or 5 things that we need to focus on to be truly successful and continue to be successful as a materials company, advanced materials company. And it's the 5 pillars here, which is we need an innovation engine that's never idle. It's continuing moving. We need a commercial strategy that brings that innovation to market. We need a supply chain that delivers quality and on time and supports our customer and has the right suppliers and supply chain and a manufacturing base that's first focused on safety and then second, delivers efficiency and optimization. And all of that, as we continue to move forward and reinvest in our growth platforms, we're placing the incremental dollar in the right place. Each of those pillars has an executive sponsor within Solstice.

Simon is the sponsor for innovation and Jeff is the sponsor for commercial excellence. So maybe, Simon, you can maybe double-click on what you're doing in that space.

Yes, a lot of good activity in the commercial side, and I'll reiterate what Wylie said. I mean, we're at a really strong starting point with a very rigorous like NPI development process as an example. So we're just looking at ways that we can make that refine that for our operations. So example, we have sort of a one-size-fits-all stage gate process. We recognize that there's a need to probably have some simpler version of that for more simple projects that we need to execute in our business to drive more agility. So we're looking at what we can do there to look at maybe having some different versions of the process, again, to better fit with what we do as a business. So that would be one example.

We are in the process of rolling out some new tools. So we're changing our software that we use for managing our process. We're in the process of rolling that out. We also are looking to make sure that you think about the R&D organization, we just went to become now a smaller company. And so we're also looking at what we can do to make sure that, that organization is well taken care of. We're relaunching the fellows program for our business specific to Solstice. We're looking at sort of the whole career ladder and what we want to do for the innovation organization so people can progress in their career the right way and be happy working here for the long term. So we have a number of activities there.

We're also looking at building on the AI work that's already been done. We're also in the process of looking to roll out an AI operating -- I'd say, a new software platform that allows us to have an AI backbone sort of digital operating model for Solstice going forward. And that ties into our overall AI strategy and how we sort of feed data into our data warehouse. So we're also in the process of doing that as well.

And then the other part that sort of connects with the commercial side and Wylie is also involved with this as well, is we're also going through and looking at sort of our strategic marketing organization and how we're set up in the new company to make sure we have the right capabilities in all the domains and segments that we want to focus on because we all view that, that's a very critical skill set in the organization, and that's a critical part of the organization where new ideas come from, from voice of the customer studies, customer interactions and really understanding the market and where we need to take our long-term innovation projects, so we know where to skate to in the future. So there's a lot happening there.

But again, it's all building on a very strong foundation and just adding to that the things that we think we need to do in order to have the right setup for us going forward. And with that...

Yes. So Simon talked a little bit about strategy and where we're going there. I think that's foundational as we talk about commercial excellence and growth. It's really as we think about it, segmentation and making sure that we have the right segmentation, where are the verticals, where are the areas that we're going to play and being very thoughtful and specific and directional in terms of how we go after what we're doing that. And so that's an area, like Simon said, where we're continuing to build, starting from a phenomenal space and looking to really build on top of that.

From there, as we think about this, you go from, right, market segmentation and vertical segmentation, then you really get into the customer. Customer segmentation and thinking about what does the customer need, how do we serve the customer to really make sure that we're addressing their issues, their problems. And that then allows us to go ahead and really solve for growth as we're thinking about it.

As an example, right, as we segment the customers, it really leads you to a go-to-market strategy. You're going to go direct? Are you going to go through a channel. And this is a great example of where Honeywell, as Wylie was talking about, really built out some phenomenal resources and tools in terms of a channel program, really solve for some other businesses that are heavy, heavy channel users, and we get to inherit that. And so we've gone through the process. We've built out the channel program. We think that really gives us an opportunity to be differentiated in some of the ways that we go to market.

Now, we talked a lot about linkages between our 2 businesses. And as we look at overall growth, I think an area where we really want to continue to grow in is how do we take the really good things that are happening across both of our businesses and get them out across the business to all the salespeople in a very efficient and effective way. And so as we think about really instilling that growth culture, that hunting mentality, account planning, building that within our entire sales organization, something that we really are looking to build on and grow and develop further. And so those are areas that we're really thinking about and leaning into is what will make us an even better company as we're coming out and getting going here.

So this slide, the 5 pillars, really sort of captures what we're focused on. What it doesn't capture is the interconnection points between the pillars. What we're very intentional about is these are not independent pillars that sort of they operate on their own. There's multiple connection points between each of them. For example, innovation and commercial, we are intentional about making sure that commercial team works day-to-day with the innovation team.

So we're pulling that customer intimacy back into the R&D facility, back in the lab to make sure we're innovating to solve that customer problem. And maybe the vice versa is we're forceful, we're purposeful about making sure our commercial teams, our sales teams are spending the right amount of time with our R&D team so they understand where the technology is going. So they have the right tools to go and have the right conversation with the customer. In each of these domains, there's all those multiple interaction points to make sure -- to ensure this entire system operates as one cohesive unit.

Great. And maybe lastly, I think we have a couple of minutes here, but a little bit on a lighter note, all 3 of you gentlemen have been Honeywell employees for a lot longer than I have. What are you most excited about here now being able to spin out and stand on our own 2 feet and operate as is our own company. Maybe we'll start with Wylie.

Sure. I've been with Honeywell for 13 years now and is an exceptional company to be a part of. But you're one of many and you're competing for capital, you're competing for resources. And what's most exciting for me is, as an independent company, we're one of one. And we get this chart our own path here, and we're sort of masters of our own destiny. So we're super excited to really focus on everything that we're meant to be focusing on to continue to be successful as an advanced materials company.

Yes. I think that's really resonates with me as we think about the ability to really own our destiny on where we're going, right, and thinking about where do we need to go to really be successful? What are the capital? What are all the levers that we have within our disposal, right, in terms of M&A, organic investments and so forth. And I think that really allows us to grow and reach the full potential that we have. As you look, you'll see the team out doing the product demonstrations and so forth. And I know the team is very excited about that opportunity, and you'll probably sense it in their excitement, as they're talking about what they're doing on their products.

Yes. And just building on that, I mean, for me, it's all about the team and the people, right? So I'm just thrilled. There's a lot of excitement in the organization, as you can imagine. And I'm just excited to see the lift in this business and this company. And everybody in the organization realizing their full potential. We've also brought on quite a few people as part of the separation process because we have to build back a lot of corporate functions that Honeywell was doing.

So there are several hundred new folks that have joined, really impressive backgrounds, a lot of talented people that have come in the organization and just seeing that existing organization and the new organization gelling and seeing that whole organization just sort of lift itself up. I'm just -- I can't wait to see all of that. I'm super excited for that. So I can't wait.

I guess I'd add as one of those people who joined the organization recently, only 2.5 months. I think getting to learn and understand the growth opportunity here at Solstice the asset quality that we have really made an easy decision for me to leave my seat on the sell side and jump all in here on the Solstice story. So I'll let these gentlemen go. I could ask them questions all day, but I know everybody wants to hear from our CFO and financial guidance and have you guys ask questions. So we'll stop there. Thank you very much.

Okay. Well, thanks, Mike. It's really great to be here this afternoon. Let me share a little bit about myself. My name is Tina Pierce, and I'm the CFO for Solstice Advanced Materials. I've had the privilege to work for Honeywell for over 25 years. The last 8 years, I've served a number of operational roles as CFO for 3 of the reported segments, 3 out of 4 of the reported segments within Honeywell.

During that time, I served as the CFO for Performance Materials and Technologies. This business was 1 of 4 businesses in that portfolio. And that's where I learned that it was really a hidden gem. And so when Vimal announced that he was going to do the spin of this business, I quickly raised my hand and jumped all in. So very excited to be here.

So let's start with -- we're starting with an extremely strong foundation in this business. First is the resilient sales growth that you heard about. Even during COVID, even during the pandemic, our sales were only down 5%. And on the next slide, we'll talk a little bit more about how we're doing that. But this business over the last 7 years has been extremely resilient.

Secondly, the best-in-class margin profile at 26.4%. A lot of that's driven by the innovation. And I think you could sense the passion that you just heard from our panel and all the different growth ideas, and the areas that we're going to be focusing on that have very strong secular demand trends.

Third, we're starting with a very strong balance sheet, only 1.5x net leverage. This is going to give us a lot of optionality as we move forward, a very clean balance sheet. Strong cash conversion. I have to say from the time that I've been CFO for 3 out of 4 segments in Honeywell, cash generation is a real passion of mine. And in fact, we've already started looking for new ideas, fresh perspective, looking at every element of working capital on what we can do to be even better and sharper.

And then finally, David mentioned a little bit about the compelling ROIC at 21.5%, and that is really ingrained in this business. In terms of that very disciplined way that we look at the business. Jeff mentioned the AstraZeneca deal. This is one where we signed a long-term contract and we built the asset. We've got that up and running now, and we can bring it to scale. That's how we tend to approach these type of opportunities.

So let's go a little bit deeper on the resilient sales growth 4.4%, much stronger than our peers. David also mentioned that this is all organic. Over the last 7 years, we have not done any acquisitions. So absolutely, all of this is organic. We have a very desirable footprint, 90% of the U.S. sales are actually manufactured in the U.S. And then 60% for the rest of the world is manufactured in that respective region.

So when we got into tariffs earlier this year, there's a lot of resiliency in this business because of that very favorable footprint. And where we did have some minor tariff impact, we moved very quickly to price that through or change the supply chain to a more favorable footprint for us to mitigate those tariffs.

But really the -- and we'll talk a little bit more on the next page here in terms of the adjusted EBITDA performance that's equally impressive. I would say, if you look on the right-hand side, there's really -- these are really what I call the secret sauce behind the how of how we deliver such strong financials.

First is that customer tenure. And I think you heard it from all of our speakers today in terms of the customer centricity always been part of this business, but even more so going forward. Secondly, in our Refrigerants business, 50% of this business comes from the aftermarket. And Jeff also mentioned that for yf, we're starting to see more of that business turn to the aftermarket, so there's additional opportunity there, 45%. So we're constantly innovating and working. You heard about some of the exciting applications from the previous panel. So we're constantly innovating and reinventing ourselves.

And then 45% for our ESM business is customer specified. And that's obviously a great position to be in, in Jeff's business. It's really driven by the strong patent portfolio that we have.

Now as we transition here from day 1, from the time that this spin was announced, Honeywell provided the guidance that we would be at a 25% margin for this business in '25. And that's exactly where we're at. We'll talk about some of the areas that we have a few headwinds here in terms of the stand-alone cost. We're going to stand up TSA.

Most of the TSA is related to the IT function. There's some minor TSAs for the other functions, and those tend to be a shorter duration. IT is the longest. We're going to obviously work to optimize that footprint. But right now, we're starting with 12 months.

Second, and you may have seen this in the document, we did in 2024, largely in the first half of last year, some opportunistic sales for our metropolis site. So this is where we were linked or pegged to a very favorable spot rate for uranium back to 2019, don't have access to those type of spot deals anymore, over $100 million of revenue associated with that and $42 million of margin. So that was truly a onetime item. And you may -- we have that called out in the appendix. I believe it's Page 66, where you can see what the pro forma adjustment is for that particular item.

And then finally, some really transitory items. In terms of the spin, the approach has been to stand Solstice up as a stand-alone company within Honeywell effective August 1. So we've had the opportunity to run for a couple of months here to make sure that we're truly ready for the spin. As we were doing that and completing the balance sheet carve-out and all of that, there are some transitory items. Those obviously will not be repeating.

Now as we turn our attention to the long-term guidance, one is, as I mentioned, is really optimizing the TSA. We'll be on that for 12 months roughly. But how -- given the scale of Solstice, how can we come up with more of a fit for purpose, a more cost-efficient model? Secondly, the panel discussed our new operating model. We're starting from a position of strength with everything that we've learned from Honeywell, absolutely a fabulous experience there. But how do we hone that in for Solstice? And a lot of focus on the innovation that we spoke about, the customer segmentation, so many different areas that we're going to focus to make the customer number one.

And then finally, and we did provide some examples on this, a lot of focus on where we can debottleneck. These tend to be lower risk projects high return, where we can do these projects very quickly to unleash some capacity. And we provided some examples in the deck for you.

So just to recap here, we're still at the 25% adjusted EBITDA for 2025. We're starting with a very strong balance sheet, 1.5x net leverage. We just finished the debt raise a couple of weeks ago, and it went extremely well. We were oversubscribed. Pricing was very favorable. We have $1 billion on the term loan B, $1 billion on the bond or the senior notes. So overall, very -- we're starting with a great position from a liquidity standpoint.

Now let's change gears here and discuss capital expenditures. So if I could go back in time here during the pandemic, like a lot of companies, there was a scale back on some of the capital spend. And over the last couple of years, you'll see on the lower part of that stacked bar, we have been doing -- spending extra money on the maintenance part of CapEx. So the lower bar is maintenance, the upper part of that stack bar is growth.

By the end of this year, we're expecting to go more back to industry type of averages after we've done that, that catch-up post pandemic. You can see in 2025, this year, that's where some of the CapEx programs we talked about Spokane, what we're working to do in terms of the sputtering targets, AI, that $200 million investment, we've already launched into that particular investment. As we mentioned, we're going to be having the groundbreaking ceremony here very, very soon.

We expect in the near term that we will have as we approach -- we see all these growth opportunities that we will have kind of the similar level of CapEx as what we've seen in '25. By the end of the medium term, we're expecting that to normalize back to mid-single digit, which is what we had prior to 2025.

So let's discuss cash conversion as it relates to our growth investment profile. So starting with, as I mentioned, we're spending a little bit more on growth where we see tremendous opportunities. And there is a slide in the near term here, a slight impact on the cash. And then by the end of the cycle, you'll see that we start to return back to the normal levels of cash conversion.

David shared the -- our capital allocation philosophy. And I think if there's one takeaway from today, it's just really this organization is full of growth ideas. And so our first priority is going to be unleashing all of that potential of the business, and reinvesting in this business, both in terms of the CapEx as well as R&D and some of our manufacturing assets.

Second, we want to maintain a strong balance sheet as a new stand-alone company and improve and have a great track record with our debt holders. Third, we're looking at selective M&A. And -- but right now here in the near term, it's going to be focused on all these growth opportunities that you've just heard out. We are planning on a modest dividend. Of course, that will need to be approved by the new Board. And then we may do selective buybacks depending on if there's the right opportunity.

So what everyone's been waiting for now in terms of the financial guidance. So let's start with 2025. So for sales, we're forecasting $3,750 to $3,850, and if you look at the midpoint of that, that would be essentially low single digit. I also mentioned that we did have in '24 of those $100 million of opportunistic AES sales. So we have some information in the backup in the appendix that will give you more details associated with that.

In terms of the adjusted stand-alone EBITDA, the 25%. As I mentioned, we did have some transitory items this year that we don't expect to reoccur next year in addition to the AES very favorable sale.

And then finally, on CapEx, we're guiding to $365 million to $415 million on that. Now as we look medium term, what we see there for the sales is low to mid-single digit. And the way that we're thinking about this is we've just recently launched into a lot of these new growth vectors that you've heard about today, like Spokane is a perfect example of that.

So here in the -- that's why we're providing that range by the end of the medium term, we're expecting that a lot of those programs are finished, and we're starting to see the payback from them. Mid-single digits on the EBITDA CAGR, return back to the strong sales or the cash conversion that I spoke about. Here in the near term, it will be a little bit impacted because of these growth CapEx programs.

And then finally, maintaining this very disciplined capital deployment. I believe it was Wylie that mentioned the 4 end markets that we're really approaching. And this business, you've seen the 21.5% tremendous track record and we don't want to sacrifice that in any way.

So let me just recap here in terms of that the future for Solstice is really bright. We're starting with a really strong base in this company, really a leading position versus our peers. And we really want to unleash the potential of this business. You heard a lot of those growth ideas. That's going to be the focus. And we're just getting started. So really thank you for coming today.

And now we'd like to turn it over to Mike and for the Q&A section of the agenda.

All right. So now we'll do about 30 minutes of Q&A. There's 2 mic runners here in the room. So the only thing I ask is just please state your name and your firm to introduce yourself. So maybe we'll start with John here. And then again, please raise your hand and the mic runner will come find you.

Great. I think you're good now.

All right. There we go. John McNulty, BMO. So maybe 2 questions. Of the 4.4% growth that you've seen historically, I guess, can you help us to color and how much of that's been price mix versus volume and how we should be thinking about that going forward? And then in terms of your growth targets going forward, can you speak to -- it sounds like a number of your businesses are at least a little bit capacity constrained. I guess can you help us to think about how that growth trajectory may change through your 3-year outlook as some of the new capacity comes on?

Sure. Thanks, John. I'll kick off and certainly have the team give some additional color. If you go back historically and look at -- it's been a combination of volume and price. So if you were to average it out, you could probably some years 60-40, some years 40-60. So it's a pretty even blend of volume and price. As we look forward, we see being at the inflection point of some of these growth trends. So we do see volume in that medium term growing maybe a little faster than historical. But that capacity constraint that you mentioned is really important. And that's why that investment in Spokane is so critical. We made some of the investments in Louisiana and Jeff's business as well and continue to look at the nuclear business with the backlog we have and continue to look at debottlenecking opportunities there. Tina, Jeff, Simon.

Yes. The only thing I would add is a couple of things. One is we had a page on the CapEx programs, some 4 or 5 that we highlighted. A lot of that helped fuel some of the growth that you're seeing right now. This business has a very good track record of covering inflation through price overall. And we're going to continue to look for those opportunities where there's the kind of the high return on the debottleneck projects. And then, of course, the large Spokane project that we spoke about.

And I would add, there's debottlenecks, smaller debottleneck projects happening, especially in the ESM business sort of as we go along. So it's not like all of the class comes online in one big chunk later on, like I mentioned, capacity coming online in '26. We've had capacity come online this year and our Spectra Fiber business, more capacity comes online next year. So we're incrementally bringing the capacity online in addition to some of the bigger projects that we're doing. So we're able to keep up with the growth in the short term as well.

Maybe John back there, then to David.

John Roberts, Mizuho. The R&D slide on Slide 17, you listed 4 major programs. You talked about 3, but you didn't really talk about battery materials very much. You've got a little lip service. It's listed there with the other 3 major areas. Maybe you could talk a little bit about what you're doing.

Yes, John. And that goes a little bit to the EV strategy we have. So Wylie, I don't know if you want to maybe just talk a little bit how we think about it and have Jeff and...

Sure. I'll kick it off. So that's one of our cross-platform strategies. So there's a program within Simon's business. It's a merging program where we feel like we're well placed to serve that market. It's within the battery itself within that it's -- it's a component within the battery. And then on Jeff's side, if you think about what a battery is, it's two electrodes, it's a separator and electrolyte. And within the electrolyte, there's a lot of fluorine floating around. And we feel like there's a tremendous innovation space, still unmet customer challenges there that we're very well positioned to attack. And I don't know, Jeff, do you want to sort of take them there in terms of where you think that innovation program will go.

And John, so over the last number of years, we set up an internal battery lab in Buffalo that is actively working on different formulations, for the industry, in particular, areas we're focusing is on additives for voltage, right, which allow to get to higher voltages. And then also on rapid charging, right? So when we think about the challenges that are out there, those are areas where with the current base of electrolytes that are used today, right, getting to a higher voltage and we're getting faster charger areas that are right for innovation. Those are areas that we're investing in filing IP and doing things like that behind that. So early days in that, but I think it's an exciting opportunity for us to continue to invest in growing and Simon, I think there's more things there along battery as well.

Yes. I mean we have some projects looking at additive technologies into some of the cathode cells and different things like that to improve performance on some of the coatings technology. So we have a number of initiatives like that, that we're also exploring and looking at.

Maybe David next and then go to...

Dave Begleiter, Deutsche Bank. Two questions. Jeff, for you, how do margins vary across your businesses? And for you, David, your returns on capital are very high. So my question is, are they too high, meaning are you passing on a business that is a lower return, but what will be value creating? So how are you thinking about that?

Yes. Great. Jeff, I'll have you start. I'll get back.

And just starting off, we won't comment on the margin rates of subsegments, but I can point towards that our refrigerant business is the highest margin within the portfolio.

The return on invested capital, it's a wonderful number. We have always, as we've built it saying, we need to be above 15% on these -- in these large growth projects. It just so happens, we have a very rigorous process volumes usually have been coming through at a higher level. So we would not pass up if it was a 16%, 17%, 18% on an internal rigors metric, if it's an industry that we know we want to grow, and we know we can focus and we can get margin expansion. But when you get below 15%, we probably shy away from it.

Maybe next to Arun back there, and then I saw Kevin and Josh.

Arun Viswanathan, RBC Capital Markets. So I guess my first question is just on the growth. So this year, it looks like HFOs went from 45% to over 60% penetration. Yet if I look at the slide on your sales growth, you're kind of flattish from '24 to '25 on an LTM basis. Am I reading that wrong? Or maybe you can just comment on is there some catch-up growth that you expect in '26? On that note, I think '26 is a year where you won't see a step down in the quota. So do you still expect to be at a similar growth rate? Or would it be on the lower end of that low to mid-single-digit rate for '26.

Go ahead, Jeff.

Sure. So just thinking a little bit about '24 to '25. So the transition there as you're seeing that growth in HFOs largely driven by U.S. transition to 454 B. So that really was the largest driver that we saw there. As you look at the year-over-year comps, right, remember, it includes all the businesses, and Tina did talk about some of the one-timers that we saw in the prior year. So as we're lapping those and we get back, we see ourselves getting back to kind of the more normalized growth rates.

And I would just maybe add one other thing on just highlighted the aftermarket business as these HFO stationary units get into the market, you'll start to continue to see growth in our aftermarket sales, which is actually a little bit higher sales price and margin.

So just to confirm, it sounds like you don't have the $100 million from the extra uranium sales. But was there also some other offset like lower free on pricing or something like that, that did refrigerants grow at a respectable clip for you guys this year?

Overall, as you look at the refrigerants business, it has been an attractive grower year-over-year. So we are seeing that come through with relatively stable pricing.

And the other question I had was just on immersion cooling. When do you expect some kind of commercial revenue and EBITDA, if at all? Or what's the kind of path in that business?

Go ahead.

Sure. I'll go ahead and start and then I can let Wylie. I think as we look at it, we really look at it as an ecosystem across the whole cooling needs. We see the next commercialized process being out there, really being 2 phase direct chip. I think that's the immediate one that becomes the next innovation.

Look, as we look at this industry, it really -- innovation continues to evolve and things move based on what's happening there. I think a few years ago, we would have thought that things would have been pulled in closer, but as we've developed new cooling technologies, that's pushed out to make sure that we have the right solutions at the right time, and that's really driven by the chip makers and the data center.

So as we look at it, it's probably -- we think it's probably several years away, but we really focus on the next one come to market that we see as some sort of direct to chip.

There's nothing really -- I think when you think about the 2 technologies, the directed chip 2 phase, that's really to solve the chip power issue, as rack power rack density starts to increase, that's where immersion cooling comes in. And as Jeff noted, that seems to be a longer-term challenge. So the more immediate problem to solve is the chip power issue.

Great. Maybe next to Kevin, as I mentioned, then Josh then Vincent.

Kevin McCarthy, Vertical Research Partners. David, I'd be curious to hear your sort of medium- to long-term thoughts on portfolio composition. You're inheriting, it seems to me a portfolio with a river of flooring running through it, right? You have world-scale, world-class flooring expertise, and that's a common threat chemistry-wise that runs through nearly all of your major products, it seems to me.

One of the classic benefits of spinning companies off is more efficient capital allocation, right? So can you speak to that? To what extent do you see Solstice moving into maybe high-growth, high-return adjacencies that might be perceived as a little bit of a step out from history. And how do you think the portfolio might be different in 3 years or 5 years?

Yes. Thanks for the question. As you've heard Jeff and Simon talk about the segment. I mean there are really a lot of the exciting segments, and there are some synergies within those segments. And so with the margin profile we have, with the resiliency of the sales growth, we really like the portfolio. Having said that, I've always had a process of ensuring you're going through a strategic process on the business as well as the portfolio and are we the best owners for that.

So as we start off, we really like the portfolio, but we'll go through that strategy process every year and see where that portfolio evolves. And as you think about the growth and the bolt-on acquisitions, when you look at those growth pillars that we talked about, those will really be the focus of where we want to grow.

Maybe next to Josh? And then to Vincent?

Joshua Spector with UBS. Two questions on EBITDA basis for this year. First, just one of your refrigerants competitors have talked about disruption and maybe that impacting you more than the industry around cylinder supply and manufacturing, maybe availability on the refrigerant side. Can you give your side of that story? Did it impact you materially in 2025? And is that a benefit for 2026 as some of that normalizes?

And then second, in your appendix to get to your stand-alone EBITDA, there's about $95 million to $100 million of stand-alone adjustments, but it sounds like you're saying there's some other onetime costs that maybe reincurred this year. Can you size those? So we have that number as well, please?

Yes. Sure. Well, Jeff, I mean I think it would be good to talk about the -- a little bit of the spike we had in canister and HFOs and then Tina can talk about with the one-timers.

Yes. Certainly, as we look at this year with the rollout as 454B came out, there was a lot of demand, demand did exceed supply across industries. So there was a lot of catch-up that happened there. You reference cylinders really going towards, hey, there is a shortage as we're now at the end of the season, right? So we're sitting in October and looking forward, we're really pleased to say that I think we've worked through that, right? That capacity has come online as it's needed to come online, and looking forward, we feel like we're in a really good position going forward into '26.

So I like -- as we're looking through that and what needs to happen maybe just a few differences that we've kind of seen as we're thinking about this transition. It was a very rapid transition, meaning that 454B effectively on January 1, it was all new units had to be manufactured in that. And there was a lot of need to stock into the channel and so forth. We see as we go through this winter into next spring, really being in a good position to serve customers and so forth. So I don't think there will be an impact similar to what happened this year going forward.

Okay. And then in terms of the onetime items, there's a couple of things that I mentioned. One was the alternative energy sale, $100 million of revenue, roughly $41 million, $42 million of income associated with that. That was largely the first half of 2024. Then as we stood up the business in the second half of the year, there's roughly about $30 million of items that don't expect to recur.

Maybe next to Vincent, and then over to Jeff.

Vincent Andrews from Morgan Stanley. Some of the large HVAC customers last month were speaking about some inventory that's built from them having been sort of a pull forward in HVAC demand over the last year or so, perhaps ahead of the step-down and all the pricing that they were taking. Is that something that's going to impact your volume in the next 2, 3, 4 quarters? Or is that something that's sort of been to smooth out in your supply chain? And then I have a second question.

Okay. Jeff, maybe talk about from a stationary standpoint and then the aftermarket that ties into that?

Yes. So we've seen continued strong demand within the stationary as we think specifically about OEMs and what's happening. As you look year-over-year, it hasn't been dramatically different for participation there. Next year, as we're talking about things. I think it will be relatively stable growth year-over-year as we look at that. But for us, as we think about the aftermarket, that's where we see, hey, 454B units are being installed. You also have the installed base of legacy systems as well that we're still able to serve.

So we see that being a resilient part of our portfolio that allows us to have some stability through kind of the peaks and troughs that are happening there.

If I could just ask, can you give us some sense of what you think the dividend payout ratio is? And is it correct to sort of assume that your goal is to sort of plug the difference between free cash flow and dividend with bolt-ons?

Yes, I'll start and I'll certainly turn it over to Tina. Yes, I think there's a conservative look at how we want to use a percentage of our free cash flow for the dividend, and make sure we have that runway as we want to continue to grow that. And then with what's left over, with the balance sheet that we have that will determine how we think about M&A and bolt-on M&As with that. And then also Tina...

The only thing I would add is we're thinking starting on the lower end of the kind of the peer set.

Maybe over to Jeff and then to...

Jeff Zekauskas from JPMorgan. When you think about the 1234yf industry over time, I think the composition of matter patents have expired, though in particular countries from mobile applications, there's still patent protection. And I think 1234yf is not used in China in their electric vehicles. So I was wondering if you could comment on -- and right now, Solstice and Chemours are the 2 largest players by far. What do you think the industry structure will look like in 2028 or 2030 or 2035. How do you think that, that will change? Do you think China will adopt this technology? Do you think it will go to a Chinese producer or will you capture the business? Can you talk about some of those dynamics longer term?

Do you want to take a stab and I'll just add on.

Yes, happy to. So first off, let's talk a little bit about the IP portfolio. And look, as we think about it, we think of whenever -- it's really an IP strategy, right? And it's really thinking about, all right, how do you layer your IP and then how do you ladder your IP out. So when you talk about composition and matter and things like this, we're very thoughtful of going after applications, composition of matter and a variety of different elements, and we continue to do it even after something comes online.

So there's no single date where there is a patent portfolio will continually be irrelevant. It will continue to go on forward. And there are even certain parts of the 1234yf that go even into the 2040s, right? There's a variety of different patents and so forth on different things that go there.

So as we look at -- you mentioned '28, like we feel very strong about the patent portfolio for 1234yf and how it continues through that time period. As you begin to get beyond the 20 -- well, let me go ahead and stop there and talk a little bit about your question in terms of adoption in China and so forth. So of course, China is the largest market for automobiles, I think 30 million approximately autos each year. Within EVs, we actually -- we're seeing strong adoption of yf in China today. So there is an adoption that's happening and that is beginning to occur, especially in the export market, right?

So you have to think about a lot of the vehicles that are being exported, certainly, we're seeing that adoption. In long term, I think we're very close. We're working with leading carmakers in China around the globe to make sure that we have a solution that is fit for purpose for what they're doing. And so whether it's a neat product or a blend or things like that, we're really working closely with those automakers in region in China to have the right product for them.

So we like -- and I think for us, innovating and being close to the customer is critical to it. So I think we will see continued adoption where we'll participate within that region.

Yes. Maybe just to add, China has been talking about adoption end of the decade, whether that happens, I don't know. But to Jeff's point, the automotive opportunity in China, we are in it today, and we actually have a very good position as we move forward.

And just to go back in terms of the industry structure, do you see it as a 2 sort of large players and then tiny players? Or do you think the structure over a 5- or 10-year period might alter?

Yes. It's a little bit hard to answer precisely. We're spending a lot of time thinking that -- thinking about that and what those actions need to take to end up in a really strong position going forward. This is something Wylie and I we're partnering on and looking forward in terms of how do we make sure we're set up for success there.

Duffy Fischer at Goldman Sachs. So if I can go to your bar chart where you showed that 4.4% CAGR over time, it's pretty stark. You've got 4 years in the beginning that are basically dead flat, then almost all the growth that happens in that 8-year period happens in 2 years right after COVID and then you kind of come back to 4 flat bar charts after that. So what drove so much of that growth in those 2 years?

Obviously, there was some funky stuff coming out of COVID. And then why isn't there more consistent growth kind of in the 4 bar charts in the beginning and the 4 at the end?

Yes, I'll start, and I'll certainly have the team add additional color. You're exactly right on COVID. I mean if anybody tried to buy an HVAC unit, right around that time frame, I mean, it was incredibly difficult to demand, which is so strong with everything coming out of that. I think when you look at that is -- and this is why I get excited about where we're at today is we're at an inflection point in a lot of these businesses.

So when you go back there, nuclear was not a growth opportunity. In fact, as we referenced we actually shuttered that plant. Semiconductors was actually going through, if you were doing COVID through a bit of a downturn before this advent of AI. So we had businesses, and that's the resiliency of our portfolio that we're doing a nice bit of growing, but offsetting some of those businesses that weren't growing and maybe even had some negative growth.

But as we look at where we're at today, we see refrigerants continuing to grow with that nice pattern Jeff showed. We see semiconductors now at a completely different trajectory and we see nuclear at a place where we have never seen before. So I think the resiliency with the portfolio that we have got us through a lot of that macroeconomic time. And now we're at this inflection point where all these businesses are now in a really good spot with the secular trends that are going on today.

I would just add also, we did some of those debottleneck projects. If you look at that CapEx chart that we had in there and the time line, it's exactly the time line that you're referencing. So that was the other lever.

And then maybe I'd like to go back to Jeff's question on the HFO, when should investors expect either in Europe or the U.S. where you've got HFO penetration today for one of the non-dual today that have the HFO technology to be selling products. So not say Arkema that's licensed from you, but somebody who's come in kind of post patent when should investors kind of in the mobile market and the stationary market expect to see in cooling post an article saying this or that company is coming into the market.

Yes. So as we look at it, we feel very good about the patent portfolio through the remainder of the decade. And so that's as we look at things, I think we have great line of sight to there, and we'll continue to enforce and fight and really protect our IP as far as we can. And like I said, it does go out. There's patents that underline go out even further than that, but we'll continue to make sure that we are enforcing those.

Maybe the other point I would just add, while you hand the mic to Patrick, I would just add if you haven't heard us today talk at all about the industrial economy, the macro, and that's intentional. We're not banking on China getting better. We're not banking on the industrial world or auto or any of those inflecting as you guys all know, it's been a very challenging environment the past couple of years. But that's not part of our forecast. We're really driving our own outcomes here, both top line and EBITDA.

Patrick Cunningham with Citi. It seems like you have a pretty unique value proposition on the sputtering targets, specifically so much so that you have pretty high ROIC investment, IRR investment, it seems like a no-brainer. Could you help us understand your market position and the other process chemistries and some of the advanced packaging? Where do you have the right to win today what is maybe more reliant on the development of advanced nodes and you're winning new business.

Yes. Great question. So I think you're very clear on sputtering targets, and we do have a very strong case for growth there. I would say it's very similar as well on our thermal interface materials. You look at our teams on our phase change materials, we have a very strong growth platform there to grow off as well.

When you look at some of these new spaces, some of the new adjacency spaces, I mean, we are moving into new spaces working on new applications, there's qualification period of times, right? So there's more uncertainty about the opportunities in those spaces. Although we're getting some early indications on a couple of projects we're working on that there's favorable feedback in terms of what our product is bringing to the table.

And what we have a good understanding about is the properties that we deliver in terms of planarization performance or gap fill performance. So we have platforms that are clearly meeting the needs of the market. We just need to work through the innovation development cycle because it's still early in that process. So I can't say to you today that we have a new winning platform for advanced packaging. All I can say is we are working on it. We have a number of different projects. We're engaged with a number of different ideas and concepts.

And we're also looking at display. I mean, display is another market where we have some, I think, some opportunities to do some stuff as well. So yes, I think really strong right to win with our copper manganese portfolio, really strong right to win with our thermal management portfolio, and those are the 2 platforms we're really leveraging in the short term while we get these other adjacency plays up and running.

Any last -- john, back to you.

Yes. Maybe just one follow-up on the M&A front. So, you don't have a lot of experience. You haven't made in terms of acquisitions dropped in under Honeywell, you haven't really had a whole lot of experience. So I guess can you speak to the M&A pipeline and how you think about building up where there's an absence of muscle memory as you kind of look forward? And how should we think about how this may phase through over the next 12 to 18 months?

Yes, John, it's a great question. And that's exactly the work we're doing with Wylie right now. And so Wylie, maybe you can just talk about how we're thinking about building that pipeline and how we think about M&A? And then the other part of that, too, is making sure when you do them, you have a really solid integration process for success.

Sure. So when we think about M&A, as I discussed in our panel, we think about it as a tool how to deliver our growth across the strategic pillars. So our M&A, our growth aspirations are organized around those strategic pillars, and anything we see as an M&A enabler, an opportunistic bolt-on will sit within those pillars. So we have an active pipeline discussion across each of those strategic pillars that we're working on.

In terms of muscle memory, I mean we're a Honeywell company and a lot of us came from Honeywell and have actively participated in M&A. So we have that skill set. We're bringing that to the table not only in acquisitions but also joint ventures and joint development agreements. The whole portfolio of inorganic tools are at our disposal to be successful here.

Yes. The only other maybe piece I'd add because this team has such deep customer relationships and history, there's actually customers from our M&A pipeline standpoint, saying, we think this might be a good avenue for you to build upon, so we know we have a confidence level that we -- it's a good adjacent market for us.

Great. Well, I think we'll stop there. Really appreciate everybody's time. The show does go on next store with our product exhibits and a bit of reception. But I think David is just going to say a few words here and...

Well, first, I just really want to thank everybody for coming out this afternoon. Hopefully, you heard the excitement that we all have about this business and an opportunity to unleash that growth pipeline that's there. We just think we're just in terrific markets with terrific technologies, a strong IP position, a passionate group of employees that are truly our secret sauce. And as we like to say now that we've revealed our brand, we all bleed purple and are going to be excited to see what this company can do and looking forward to partnering with all of you on that journey. So thank you.