ULS — UL Solutions Inc.

Summary of ULS Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: $816 million, up 5.2% year-over-year, with organic growth of 6.6%.
• Adjusted EBITDA: $219 million, an increase of 11.2%, with an adjusted EBITDA margin of 26.8%, up 140 basis points.
• Adjusted Diluted EPS: $0.59, a 13.5% increase from $0.52 in Q2 2025.
• Operating Income: $150 million, up 7.9%, with a 50 basis point improvement in operating margin.
• Free Cash Flow: $436 million for the trailing 12 months, up 19.8% year-over-year.

2. Strategic Updates and Business Highlights

• Successful execution of the Restructuring Plan, which is expected to be completed by Q1 2027, with minimal remaining charges.
• Launched an AI-powered capability for carbon footprint calculations, enhancing supply chain emissions data reliability.
• Opened a new automotive technology and innovation center in Japan, aimed at supporting the electrification and connectivity of vehicles.
• Continued progress on the pending acquisition of Eurofins Electrical & Electronics business, expected to close in Q4 2026.

3. Forward Guidance and Outlook

• Full-year 2026 organic revenue growth is expected to be in the mid-single-digit range, factoring in a 1% revenue reduction from business exits.
• Anticipated adjusted EBITDA margin improvement to approximately 27% for the full year.
• Capital expenditures projected at about 8.5% of revenue, reflecting ongoing investments in laboratory capacity and capabilities.

4. Bad News, Challenges, or Points of Concern

• Risk & Compliance Segment: Revenue decreased by 17.5% year-over-year due to the divestiture of the EHS Software business, although organic growth was positive at 4.8%.
• Higher SG&A expenses driven by increased performance-based compensation and professional fees, which may pressure margins.
• Potential headwinds in the advisory business, particularly in solar and wind sectors, which could affect growth in the Industrial segment.

5. Notable Q&A Insights

• Management expressed confidence in maintaining margin expansion despite the increase in performance-based compensation costs.
• The Consumer segment is expected to continue benefiting from strong market demand, particularly in AI-related product certifications.
• Concerns were raised about potential delays in new product releases in the consumer electronics sector due to rising memory costs; however, management noted that such challenges often lead to increased retesting, which could benefit their services.
• Future CapEx levels are expected to remain elevated as the company invests in new technologies and laboratory capabilities, with a focus on meeting customer demand in emerging markets.

Overall, ULS demonstrated strong financial performance in Q2 2026, driven by strategic initiatives and favorable market trends, while also highlighting areas of concern that could impact future growth.