Solstice Advanced Materials Inc.

Operator: 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. Michael Leithead: 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. David Sewell: 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. Tina Pierce: 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. David Sewell: 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: [Operator Instructions] Our first question is from Kevin McCarthy with Vertical Research Partners. Kevin McCarthy: 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? David Sewell: 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. Kevin McCarthy: 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? David Sewell: 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. Tina Pierce: 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. Operator: Our next question is from John McNulty with BMO Capital Markets. John McNulty: 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. David Sewell: 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. Operator: Our next question is from John Roberts with Mizuho Securities. John Ezekiel Roberts: 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. David Sewell: 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. Operator: Our next question is from Hassan Ahmed with Alembic Global. Hassan Ahmed: 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. David Sewell: 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. Hassan Ahmed: 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. Tina Pierce: 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. Michael Leithead: 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. Operator: Our next question is from Arun Viswanathan with RBC Capital Markets. Michael Leithead: Let's just go to the next question and we can come back to Arun if he finds us. Operator: Our next question is from Josh Spector with UBS. Joshua Spector: 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? David Sewell: 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. Joshua Spector: 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? Tina Pierce: 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. Operator: Our next question is from Arun Viswanathan with RBC Capital Markets. Arun Viswanathan: 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? David Sewell: 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. Arun Viswanathan: 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? David Sewell: 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. Michael Leithead: 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. Operator: There are no further questions at this time. I would like to hand the floor back over to Mike Leithead for any closing comments. Michael Leithead: 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. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.