Solstice Advanced Mat Q1 Earnings Call Highlights

Key Points

• Solstice beat expectations in Q1 with $991 million in net sales (up 10% YoY) and $249 million adjusted EBITDA, while management cited margin pressure from refrigerant mix and higher R&D but expects sequential refrigerant margin improvement.
• Segment strength was led by Refrigerants and Nuclear (refrigerants net sales +19% to $389M; nuclear +27% to $107M), and Electronic & Specialty Materials grew on robust semiconductor demand with a planned $200 million Spokane expansion to double sputtering target capacity.
• Cash flow and balance sheet remained solid with $199 million operating cash flow, $124 million free cash flow, net debt ≈ $1.3 billion (net leverage ~1.4x), a quarterly dividend of $0.075, and management reaffirmed full-year guidance (net sales $3.9–4.1B, adjusted EBITDA $975M–1.025B).

Solstice Advanced Mat NASDAQ: SOLS reported first-quarter 2026 results that management said marked a strong start to its first full standalone quarter as an independent company, citing robust demand across nuclear, electronic materials, and refrigerants.

First-quarter results exceeded guidance ranges

President and CEO David Sewell said the company delivered “strong top and bottom line results,” supported by demand in several key businesses. Solstice posted first-quarter net sales of $991 million, up 10% year-over-year and above the top end of the company’s quarterly guidance, according to Sewell.

Adjusted EBITDA was $249 million, which Sewell said was relatively flat year-over-year and also above the top end of guidance. Adjusted EBITDA margin was 25.1%, in line with expectations. Solstice reported GAAP net income attributable to Solstice of $85 million and adjusted diluted EPS of $0.63 for the quarter.

Sewell attributed year-over-year margin pressure primarily to “refrigerant mix related to the ongoing HFO transition as well as higher R&D investment.” He noted that the company is “approximately four quarters into the R-454B transition” and said Solstice expects sequential refrigerant margin improvement from first-quarter levels, with potential for further margin expansion as the aftermarket develops.

Segment performance: Refrigerants, nuclear strength offset mix headwinds

CFO Tina Pierce said organic net sales growth was 8%, including 6% from volume and 2% from pricing, plus an additional 2.5% benefit from foreign currency translation.

In Refrigerants & Applied Solutions (RAS), first-quarter net sales were $711 million, up 12% year-over-year, including 9% organic growth and a 3% foreign currency benefit. Segment adjusted EBITDA was $242 million, down 3% year-over-year, while adjusted EBITDA margin declined to 34.1%, down 522 basis points. Pierce said the margin decline was driven primarily by anticipated refrigerant mix shifts and higher R&D spending, which more than offset volume growth and favorable pricing.

Within RAS, Pierce highlighted several sub-segment moves:

• Refrigerants net sales rose 19% to $389 million, driven by favorable pricing and volume growth. Pierce also cited “accelerating orders for data centers.”
• Nuclear net sales were $107 million, up 27% year-over-year on favorable pricing and higher volumes.
• Building Solutions and Intermediates net sales declined 8% to $167 million, which Pierce attributed to continued softness in construction markets.
• Healthcare packaging net sales increased 9% to $47 million, with Pierce citing a recovery in demand patterns after destocking in the second half of 2025.

Electronic materials demand, capacity expansion focus

In Electronic & Specialty Materials (ESM), Solstice reported net sales of $281 million, up 7% year-over-year (including 5% organic growth and a 3% foreign currency benefit). Segment adjusted EBITDA was $58 million, up 10%, and margin improved to 20.8%, up 52 basis points. Pierce said the improvement was primarily driven by volume growth in electronic materials.

Electronic materials net sales increased 21% to $109 million, driven by volume growth and “robust customer demand across semiconductor applications,” Pierce said. Sewell highlighted the company’s positioning in advanced nodes and packaging, pointing to deposition and thermal management opportunities tied to AI and data centers.

Sewell said Solstice is investing $200 million at its Spokane, Washington facility to double sputtering targets capacity, reduce customer lead times, and deliver sustainability benefits through increased recycling and CO2 emissions reductions. He said the project is expected to exceed the company’s “acceptable hurdle rate of a mid-teens percentage IRR.”

In the Q&A, Sewell told Mizuho’s John Roberts that the company is “selling everything we can make” at Spokane and is evaluating ways to accelerate expansion using a more modular approach. He also said Solstice is seeing broader adoption of its copper manganese technology and noted expansion work in the company’s thermal interface materials (TIMs) business.

Cash flow, leverage, and shareholder returns

Sewell said the first quarter was a “strong cash quarter,” and Pierce reported $199 million of operating cash flow. Free cash flow was $124 million, which Sewell said includes increased growth capital expenditures.

Capital expenditures were $82 million, up 32% from the prior year period, reflecting planned increases to support growth projects. Pierce also cited ongoing investments in the company’s Spectra ballistic fibers expansion in Virginia and noted the company is exploring further expansion opportunities in its nuclear conversion business.

As of March 31, 2026, Pierce said Solstice had $2.0 billion of long-term debt and $642 million of cash and cash equivalents, resulting in net debt of approximately $1.3 billion and net leverage of approximately 1.4x trailing 12-month adjusted EBITDA. The company had $1.0 billion of availability under its revolving credit facility, for total liquidity of about $1.6 billion, Pierce said.

Solstice’s board approved a quarterly dividend of $0.075 per share, Pierce said, “in line with last quarter.” Sewell said the company plans to remain disciplined in balancing shareholder returns with reinvestment opportunities.

Guidance reaffirmed; second-quarter outlook provided

Management reaffirmed full-year 2026 guidance previously provided, calling out strong first-quarter execution while maintaining a conservative posture amid geopolitical uncertainty. For the full year, Solstice continues to expect:

• Net sales: $3.9 billion to $4.1 billion
• Adjusted EBITDA: $975 million to $1.025 billion
• Adjusted diluted EPS: $2.45 to $2.75
• Capital expenditures: $400 million to $425 million

For the second quarter of 2026, Pierce guided to net sales of $1.06 billion to $1.1 billion and an adjusted EBITDA margin of approximately 25% to 26%. She said the outlook assumes continued momentum in refrigerants, nuclear, and electronic materials, as well as growth in Safety and Defense Solutions “based on order patterns.” The second-quarter outlook also includes $10 million of planned downtime-related expense.

In response to RBC’s Arun Viswanathan, Sewell said the company was “really pleased” with the start to the year but pointed to planned maintenance outages in the second quarter and “geopolitical environment” considerations as reasons for conservatism. He said the company would reassess after the second quarter.

On non-controlling interests, Sewell noted they were “atypically high” in the quarter at $20 million, driven by favorable ConverDyn margins and an impact from a consolidated entity associated with the company’s Sinochem JV. Pierce said the company expects a more typical run-rate of about $10 million per quarter going forward.

Solstice also said it will host a virtual webinar on June 4 to provide more insight into its nuclear business.

About Solstice Advanced Mat NASDAQ: SOLS

Solstice Advanced Materials is a leading global specialty materials company that advances science for smarter outcomes. Solstice offers high-performance solutions that enable critical industries and applications, including refrigerants, semiconductor manufacturing, data center cooling, nuclear power, protective fibers, healthcare packaging and more.

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