Time With SOLS Management Details Multiple Avenues of Growth

Research evidence excerpt

Time With SOLS Management Details Multiple Avenues of Growth

...driven by a host of end markets including the aftermarket for autos, eventual growth in the US resi

HVAC aftermarket for 454B, US housing and autos recovery (eventually), growth in data centers (while

management wouldn't speak to the size of the platform we believe it is 4-6% but growing in the

solid DDs), as well as positive price/mix. On the immediate term, despite the cool start to the year,

management did not see any major hiccups relative to its expectations.

Regarding thoughts on patents, management remains committed to the mid-30s margins for the

business. It sees multiple layers of its patents helping to protect it from any major cliff. Additionally, SOLS

continues to work on next-generation products which include next-gen solutions for autos/stationary

HVAC as well as data center solutions--it pointed to this arena specifically as one of the reasons why it

has tamped R&D as a percentage of sales from 2% historically to 3% going forward.

Electronics--Management received a lot of interest on the electronics segment as the business has been

seeing significant growth. Management spoke to the challenges of keeping up with demand, particularly

from those customers servicing the advanced nodes and logic parts of the market (both roughly 70% of

its exposure). Management sees significant demand (and some price) coming over the next few years

and as such is working to keep debottlenecking and ramping up the new capacity faster. As a reminder,

SOLS had a three-year plan to double its Spokane sputtering target capacity with the bulk of the ramp

coming in 2028; that has been accelerated with some capacity hitting in 2026 and the bulk coming in

2027 (a year earlier) to meet customer demand.