Solstice Advanced Mat Q2 Earnings Call Highlights

Key Points

• Solstice Advanced Materials exceeded Q2 guidance, with sales up 11% year over year to $1.148 billion and adjusted EBITDA rising 2% to $290 million. Growth was driven by refrigerants, nuclear energy, electronic materials and healthcare packaging.
• The company raised its full-year 2026 outlook to $4.125 billion-$4.185 billion in sales and $1.035 billion-$1.055 billion in adjusted EBITDA, while continuing capacity expansions in semiconductors, nuclear conversion and ballistic fibers.
• Solstice expects its pending Element Solutions acquisition to close in the first half of 2027, expanding exposure to electronics, AI infrastructure, semiconductor manufacturing and thermal management; the deal remains subject to shareholder and regulatory approvals.

Solstice Advanced Mat NASDAQ: SOLS reported second-quarter results that exceeded its prior guidance range, supported by demand in refrigerants, nuclear energy, electronic materials and healthcare packaging. The company also raised its full-year outlook as it continues to invest in capacity expansions and pursues its pending acquisition of Element Solutions.

Net sales rose 11% year over year to $1.148 billion in the second quarter, while adjusted EBITDA increased 2% to $290 million. Adjusted EBITDA margin was 25.3%, with margins affected by planned plant turnarounds and the absence of prior-year production incentive credits. GAAP net income attributable to Solstice increased to $119 million, or $0.75 per diluted share, from $97 million a year earlier. Adjusted diluted earnings per share were $0.88.

“Six of our seven businesses grew this quarter, four of them at double-digit rates,” President and CEO David Sewell said, citing demand trends in nuclear energy, electronic materials, refrigerants and healthcare packaging.

Segment Results Reflect Electronics and Nuclear Growth

Refrigerants and Applied Solutions generated $850 million in second-quarter sales, up 12% from a year earlier. Adjusted EBITDA for the segment declined 6% to $280 million, and its 32.9% margin fell 648 basis points. Chief Financial Officer Tina Pierce said the year-over-year decline primarily reflected the timing of plant turnaround activity and production incentive credits recorded in the prior-year period.

• Refrigerant sales rose 13% to $473 million, driven by higher pricing and volumes across product offerings, including R-454B products and data-center cooling applications.
• Nuclear sales increased 27% to $125 million, reflecting increased volumes and favorable pricing. The company also signed new supply agreements with three small modular reactor developers.
• Building solutions and intermediates sales declined 1% to $180 million as construction-market softness continued.
• Healthcare packaging sales rose 24% to $73 million, following a recovery in customer demand after destocking in the second half of 2025 and favorable pricing.

Electronic and Specialty Materials reported sales of $298 million, up 8% year over year, led by volume growth in electronics. Segment adjusted EBITDA increased 24% to $64 million, while adjusted EBITDA margin expanded 280 basis points to 21.6% on higher volumes and productivity improvements.

Electronic materials sales grew 15% to $119 million, which management attributed to demand across semiconductor applications. Sewell said the company is accelerating an expansion in Spokane to increase output of copper manganese sputtering targets, which are used in leading-edge semiconductor nodes. He said customers have increased their multiyear forecasts and that Solstice has begun considering capacity expansion beyond the current Spokane project.

Safety and defense solutions sales rose 7% to $43 million, driven by non-armor applications. Research and performance chemicals sales increased 3% to $135 million, as growth in bind chemicals partly offset softness in specialty additives.

Cash Generation Funds Capital Spending and Dividend

Solstice generated $461 million of operating cash flow during the first half of 2026 and $248 million of free cash flow, including increased investment in growth capital expenditures. First-half capital expenditures rose 32% from a year earlier to $186 million.

The company is expanding electronic materials capacity in Spokane, ballistic fiber capacity in Virginia, and its nuclear conversion operations. Pierce said Solstice is conducting debottlenecking work at its Metropolis facility and is evaluating opportunities to raise capacity beyond 10,000 metric tons.

As of June 30, Solstice had approximately $2 billion of total debt and $750 million of cash, resulting in about $1.25 billion of net debt and net leverage of roughly 1.3 times trailing 12-month adjusted EBITDA. It also had $1 billion available under its revolving credit facility, for total liquidity of about $1.75 billion.

The company declared a quarterly dividend of $0.075 per share, payable Sept. 10 to shareholders of record as of Aug. 27.

Full-Year Outlook Raised; Second-Half Margins Expected to Improve

Solstice raised its full-year 2026 guidance and now expects:

• Net sales of $4.125 billion to $4.185 billion.
• Adjusted EBITDA of $1.035 billion to $1.055 billion.
• Adjusted diluted EPS of $2.75 to $2.95.
• Capital expenditures of $420 million to $440 million.

For the third quarter, Solstice forecast net sales of $990 million to $1.03 billion. Management did not provide a specific EBITDA range, but Pierce said margins have been near 25% during 2026, while Sewell indicated investors could use a low-25% margin range with the company’s revenue outlook. Management expects modest sequential margin improvement through the second half.

In Refrigerants and Applied Solutions, Sewell said Solstice expects adjusted EBITDA margins in the mid-30% range in the second half as major turnaround activity moves behind the company. He said North American aftermarket demand for HFO refrigerants has not yet fully developed, representing potential future upside.

The company expects approximately $30 million of negative revenue in the second half from final returns of nuclear product loans, weighted modestly toward the fourth quarter. Management said continued electronics growth, capacity additions, improving safety and defense volumes, refrigerant demand and share gains support its confidence in the second-half outlook.

Element Solutions Deal Expected to Close in First Half of 2027

Solstice announced its planned acquisition of Element Solutions on July 6. Sewell said the combination is intended to expand the company’s exposure to electronics, artificial intelligence infrastructure, semiconductor manufacturing and thermal-management markets by pairing Solstice’s chemistry capabilities with Element’s formulation expertise.

The deal remains subject to shareholder and regulatory approvals and other customary closing conditions, with closing expected in the first half of 2027. Solstice expects to reduce net debt to less than three times EBITDA within 18 months after the transaction closes. Pierce said the company will be opportunistic in accessing permanent debt markets, identifying potential financing windows in September, October-November and the first half of 2027.

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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