Earnings call transcript: UL Solutions Q2 2025 beats EPS forecast, stock drops

UL Solutions reported its Q2 2025 earnings with an adjusted earnings per share (EPS) of $0.52, surpassing the forecasted $0.46 by 13.04%. The company achieved a revenue of $776 million, reflecting a 6.3% year-over-year increase, maintaining its impressive 48.71% gross profit margin. Despite these positive results, the company’s stock fell 13.75% in pre-market trading, closing at $63.49, as investors reacted to broader market concerns and potential risks highlighted during the call. According to InvestingPro data, the company currently trades at a P/E ratio of 43.01, suggesting a premium valuation compared to its Fair Value.

Key Takeaways

• UL Solutions’ EPS exceeded expectations by 13.04%.
• Revenue grew by 6.3% year-over-year, reaching $776 million.
• Stock price dropped 13.75% in pre-market trading.
• The company launched new testing facilities and services.
• Affirmed full-year 2025 outlook with mid-single-digit revenue growth.

Company Performance

UL Solutions demonstrated robust performance in Q2 2025, with significant year-over-year growth across its segments. The Industrial segment led with a 7.6% revenue increase, followed by a 5.6% rise in the Consumer segment. The Software and Advisory segment also saw a 4.3% uptick. This growth is underpinned by strategic investments in innovation and expansion, such as the launch of a European Advanced Battery Testing Laboratory and new services for data centers. InvestingPro analysis reveals the company maintains a strong financial health score of 2.96 (GOOD), with 4 analysts recently revising their earnings expectations upward. For deeper insights into UL Solutions’ valuation and growth metrics, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $776 million, up 6.3% year-over-year
• Earnings per share: $0.52, up from $0.44
• Adjusted EBITDA: $197 million, up 13.9%
• Adjusted net income: $110 million, up 17%
• Free cash flow: $288 million, up 58.8%

Earnings vs. Forecast

UL Solutions reported an EPS of $0.52, beating the forecast of $0.46 by 13.04%. This marks a continued trend of outperforming expectations, aligning with the company’s historical performance of steady growth. The revenue of $776 million also surpassed projections, contributing to a positive earnings surprise.

Market Reaction

Despite exceeding earnings expectations, UL Solutions’ stock experienced a significant drop of 13.75% in pre-market trading, reaching $63.49. This decline contrasts with the company’s 52-week high of $74.15, suggesting investor concerns over broader market conditions and potential future challenges. However, the stock has shown remarkable strength with a 47.06% year-to-date return and maintains a market capitalization of $14.64 billion. InvestingPro subscribers can access additional technical indicators and valuation metrics to better understand this price movement in context.

Outlook & Guidance

The company reaffirmed its full-year 2025 outlook, projecting mid-single-digit organic revenue growth and an adjusted EBITDA margin of approximately 24%. Capital expenditures are expected to account for 7-8% of revenue, with an effective tax rate of around 26%. This outlook aligns with the company’s historical revenue CAGR of 4% over the past five years. To access detailed financial forecasts and analyst consensus targets ranging from $59 to $78, visit InvestingPro, where you’ll find exclusive insights and comprehensive valuation analysis.

Executive Commentary

"Our second quarter results demonstrate the continued strength of our business model," stated CEO Jenny Scanlon. CFO Ryan Robinson added, "We’re seeing a bit more market clarity and reductions in uncertainty, but it’s not without uncertainty." These statements reflect confidence in the company’s strategic direction and resilience amid market volatility.

Risks and Challenges

• Geopolitical and macroeconomic uncertainties could impact future performance.
• The dynamic nature of the data center market requires ongoing adaptation.
• Potential tariff impacts and shifts in customer behavior pose risks.
• Supply chain disruptions and market saturation remain concerns.
• Navigating competitive pressures in the product safety science sector.

Q&A

During the earnings call, analysts inquired about the impacts of tariffs and shifts in customer behavior, as well as the company’s strategies for addressing these challenges. Discussions also covered trends in data center construction and potential mergers and acquisitions, highlighting areas of interest and concern for investors.

Full transcript - UL Solutions Inc (ULS) Q2 2025:

Conference Operator: Good day, and welcome to UL Solutions second quarter twenty twenty five earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the conference over to Eugene Bentano, Vice President, Investor Relations. Please go ahead.

Eugene Bentano, Vice President, Investor Relations, UL Solutions: Thank you. Welcome, everyone, to our second quarter twenty twenty five earnings call. Joining me today are Jennings Scalen, our Chief Executive Officer and Ryan Robinson, our Chief Financial Officer. During our discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website at ul.com. Our earnings release is also available on the website.

I would like to remind everyone that on today’s call, we may discuss forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward looking statements may include, among other things, statements about UR Solutions’ results of operations and estimates and prospects that involve substantial risks, uncertainties and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward looking statements. Please see the disclosure statement on Slide two of the earnings presentation as well as the disclaimers in our earnings release concerning forward looking statements and the risk factors that are described in our annual report on the Form 10 ks for the year ended 12/31/2024. We assume no obligation to update any forward looking statements to reflect events or circumstances after the date hereof, except as required by law. Today’s presentation also includes references to non GAAP financial measures.

A reconciliation of the most comparable GAAP financial measures can be found in the appendix to the earnings presentation. With that, I would now like to turn the call over to Jenny.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Good morning, everyone, and thanks for joining us. I’m pleased to say that the momentum we built over our first year as a public company continued in the 2025, with growth across all segments and service offerings despite uncertainties for our customers globally. That’s an important statement and frankly a theme we’ve delivered in the last several quarters, positive contributions across segments, service lines and geographies. That balance reflects the durability of our business model and global scale of our offerings, as well as the benefit of focusing the business on higher growth megatrends, including the global energy transition, the electrification of everything and digitalization. I’ll cover three areas, and then I’ll turn the call over to Ryan.

First, our second quarter performance highlights second, notable achievements and activities since we last reported and finally, some perspectives on market conditions and our resiliency in the current macro environment. Our strong second quarter performance stems from enduring customer demand in our business across a wide range of market conditions. Based on our first half results and our current visibility into customers’ ongoing new product development needs, we are affirming our full year 2025 outlook. I want to recognize our exceptional team members whose expertise and commitment drive our continued success. Their dedication to our mission of advancing safety science and delivering outstanding customer service remains the foundation of our strong performance and represents a true competitive advantage.

Ryan will dive into the numbers in a minute, so let me hit the high notes of our second quarter twenty twenty five results. I’m particularly proud that we delivered record quarterly consolidated revenues that were up 6.3% as compared to the second quarter last year, and up 5.5% on an organic basis. On an organic basis, our Industrial segment once again led the way, up 7%, followed by Consumer, up 4.7%, and Software and Advisory, up 3.2%. These results were achieved against a dynamic geopolitical and regulatory environment that impacted our customers’ behavior. Profitability improved year over year with adjusted EBITDA growing 13.9% and adjusted EBITDA margin expanding by 170 basis points to the highest level since we became public in April.

Higher revenue and realized operating leverage were the key drivers. We generated $2.00 $8,000,000 of free cash flow through the 2025, and our balance sheet remains robust. Next, let me highlight notable planned ongoing and recently completed capacity expansions that address growth opportunities and megatrends in our key end markets. During the quarter, we successfully launched our European Advanced Battery Testing Laboratory in Aachen, Germany, representing an important expansion of our battery technology testing capabilities and European footprint. This purpose built facility replaced a smaller facility from the 2024 Battery Engineer acquisition.

It positions us strategically close to key European automotive customers and provides access to the region’s deep engineering talent pool. This investment demonstrates our commitment to helping the automotive and power sectors safely innovate in a world increasingly reliant on battery storage, while strengthening our global network of specialized testing facilities that spans North America, Europe and Asia Pacific. We also announced a significant expansion of our HVAC testing facility in Cartagate, Italy to address rapidly growing European demand for comprehensive heat pump testing, driven by the adoption of environmentally friendly refrigerants and evolving regulations. The expansion adds critical capabilities and positions us as a comprehensive service provider for manufacturers navigating the EU’s climate initiatives, all while helping customers reduce testing lead times and accelerate market access. By offering both performance and safety testing at one central European laboratory, we expect to enable faster time to market for products subject to safety and efficiency requirements in the high growth sustainable technology sector.

We launched a new testing and certification service for immersion cooling fluids used in data centers, addressing the critical safety and efficiency needs of data center facilities housing AI and other high performance computing equipment. According to third party research, power consumption by data centers is expected to increase from 4.4% of total U. S. Electricity demand in 2023 to 12% by 2028. Operators urgently need safe and energy efficient cooling solutions to maximize performance and reliability.

Our new engineering evaluation and certification for immersion cooling fluids complements our existing programs for immersion tanks and systems. It’s important to note that TIC services for data centers represents an important large and growing market for us as technologies continue to advance in computing and AI. The Grand View Research Group expects the data center construction market to grow at a 12% CAGR over the next five years. We believe that we are very well positioned to capitalize on the rapid growth of data centers by helping address the safety, sustainability and security concerns inherent in these complex environments. In fact, many of our operating units have service offerings in this space.

The list is large as there are approximately 70 applicable standards to which we test, certify and inspect. Our go to market strategy highlights the broad and deep expertise we have in the full life cycle of data center infrastructure and system needs. Finally, let me provide an updated perspective on the resilience of our business model and how we are positioned to win even in periods of uncertainty. As a global leader of critical product safety science offerings, we support our customers wherever they research, develop and manufacture products worldwide. Our existing global footprint and testing capacity position us well to meet customer needs effectively across all locations.

Our business model provides initial testing during new product development, followed by ongoing certification throughout a product’s life cycle in the market, creating sustained revenue streams and deep customer relationships. Our customers are still bringing new products to market. We experienced an initial slowdown in customer projects when tariff levels were first announced early in the second quarter, as companies paused to assess the potential impact of the tariffs as well as other geopolitical issues. This pause was followed by accelerated ordering in June, demonstrating both the essential nature of our services and our customers’ commitment to maintaining product development timelines. As a reminder, these dynamics may create incremental opportunities for us as tariffs drive customers to redesign products or relocate manufacturing, both of which often require recertification.

Now, let me turn the call over to Ryan for a detailed review of our second quarter results.

Ryan Robinson, Chief Financial Officer, UL Solutions: Thank you, Jenny, and hello, everyone. I also want to thank all of our team members for delivering another strong quarter and continuing the momentum we have maintained since coming to the public markets in April. We are proud to report in our second quarter on a consolidated basis a continuation of healthy growth, margin expansion and solid cash generation. As Jenny mentioned, revenues for the quarter were an all time record, and it’s encouraging to see that that revenue growth once again occurred across all of our segments. Now let me dive into the details of the quarter.

Consolidated revenue of $776,000,000 was up 6.3% over the prior year quarter. The increase included favorable FX movements, particularly the euro and the Japanese yen. On an organic basis, revenue grew 5.5%. Cost of revenue as a percentage of revenue for the quarter increased 70 basis points to 50.6% due to higher depreciation and negative FX impacts. SG and A expenses as a percentage of revenue decreased 150 basis points to 31.4%.

This was primarily driven by operating leverage as a result of revenue growth, partially offset by higher costs associated with internal projects. As a reminder, we recognized $9,000,000 of performance based incentive costs in the 2024 related to cash settled depreciation rights as we converted them to equity settled compensation upon the date of our IPO. I would also like to point out that our cost of revenue and our SG and A were negatively impacted by changes in FX, roughly offsetting the benefit on revenues. Adjusted EBITDA for the quarter was $197,000,000 an improvement of 13.9% year over year. Adjusted EBITDA margin was 25.4%, up 170 basis points from last year, primarily on strength in the Industrial segment.

As Jenny mentioned earlier, this margin is the highest since we became a public company. Adjusted net income for the second quarter was $110,000,000 up 17% from last year. Adjusted diluted earnings per share was $0.52 up from $0.44 per share in the 2024. Now let me turn to our performance by segment, starting with Industrial. Revenues in Industrial rose 7.6% to $338,000,000 or 7% on an organic basis, primarily driven by growth in ongoing certification services and certification testing.

We saw particular strength in energy and automation. Increased lab capacity, including our new North American Advanced Battery Lab in Auburn Hills, Michigan contributed to the growth. Revenue also benefited by $3,000,000 versus the prior year from favorable changes in foreign exchange. Adjusted EBITDA for the Industrial segment increased 20.6% to 117,000,000 while adjusted EBITDA margin improved three seventy basis points to 34.6%. The Industrial segment demonstrated strong operating leverage in the quarter as the majority of incremental revenue flowed to incremental operating income.

Now turning to the Consumer segment. Revenues in Consumer were three forty million dollars up 5.6% on a total basis and 4.7% on an organic basis. The increase was primarily driven by demand improvement in non certification testing and other services. We saw particular strength across consumer technology driven by increased demand for electromagnetic compatibility testing for consumer electronics and in retail. As discussed in our last call, we saw some moderation in consumer organic growth in the second quarter after a strong first quarter that likely benefited from, among other things, increased customer activity in the first quarter in anticipation of tariffs.

Adjusted EBITDA for the quarter in Consumer was $65,000,000 an increase of 6.6%. Adjusted EBITDA margin for the quarter was 19.1%, an increase of 20 basis points. Organic growth and improved operational efficiency were the main drivers of the year over year improvement. In our Software and Advisory segment, revenues were $98,000,000 an increase of 4.3% on a total basis and 3.2% on an organic basis. Our software service line within the Software and Advisory segment grew 6% on an organic basis.

The improvement was driven by demand for our Ultra software portfolio, including retail product compliance. Adjusted EBITDA for the quarter in Software and Advisory was $15,000,000 unchanged as compared to the second quarter of last year. Adjusted EBITDA margin for the quarter was 15.3%, a decline of 70 basis points due to unfavorable mix and higher employee compensation expense relative to revenue growth. Turning to our cash generation in the first six months, we delivered $3.00 $1,000,000 of cash from operating activities, up from $244,000,000 in the year ago period. Capital expenditures in the first half were $93,000,000 compared to $113,000,000 in the same period last year.

I’m very proud of our global team for generating $2.00 $8,000,000 in free cash flow in the first half, primarily as a result of improved profitability in our core business. This compares to $131,000,000 in the year ago period, representing a 58.8% increase. In addition, we paid $26,000,000 in dividends in the second quarter and 52,000,000 year to date. We also paid down a net of $45,000,000 of debt in the quarter, bringing our year to date debt pay down to $135,000,000 As of June 30, we held $272,000,000 of cash and cash equivalents. Our investment grade credit ratings underscore the strength of our balance sheet.

Our robust balance sheet and cash flow generation give us great flexibility to invest in organic initiatives and accretive acquisitions that are intended to help produce best in class shareholder returns. Our investments in key capacity additions are intended to continue to align the business with the megatrends driving demand for our services. Now turning to our 2025 full year outlook. While we continue to navigate a dynamic geopolitical and macroeconomic environment, our diversified business model and strong market positioning enable us to capitalize on emerging opportunities while managing potential risks effectively. We actively monitor these dynamics and their inputs on our customers to ensure we remain well positioned for continued success.

Given our first half performance, solid visibility into our end markets and confidence in our strategic execution capabilities, we are pleased to affirm our 2025 full year outlook, and we remain optimistic about our ability to deliver sustained growth and value creation. As a reminder, we face increasingly challenging comparisons in the 2025 versus the 2024. We continue to expect 2025 consolidated organic revenue growth to be in the mid single digit range as compared to our full year 2024 results. Organic growth is based on constant currency and excludes acquisitions and divestitures. We continue to expect our adjusted EBITDA margin to be approximately 24% for the full year 2025.

Our margin expansion strategy is supported by several key drivers capturing operational leverage as we scale our top line growth, capitalizing on our Industrial segment’s higher growth trajectory relative to the other business units and maintaining our focus on continuous productivity improvements. Additionally, we remain committed to identifying and executing strategic acquisitions in high value markets that enhance our profitability profile and our earnings potential, while consistently evaluating opportunities to optimize our overall portfolio mix. Our outlook for capital expenditures in 2025 remains in the range of approximately 7% to 8% of revenue, with investments in new labs and software continuing as we seek to match strong customer demand in all three segments. Our expectations for our effective tax rate in 2025 remains approximately 26%. This compares to an effective tax rate of 16.9% in 2024, with the anticipated change due primarily to additional implementation of the OECD’s Pillar two requirements, which affects how multinational corporations are taxed.

Our Q2 and year to date performance demonstrates sustained business momentum with enhanced profitability and robust cash flow generation. The strength of our investment grade balance sheet enables strategic capital allocation opportunities as we continue executing on our commitment to deliver exceptional returns for our shareholders. Now let me turn the call back to Jenny for her closing remarks.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thanks, Ryan. As I’d like to highlight, we always have some very interesting things going on at UL Solutions. Two weeks ago, I had the honor of moderating a panel here in Chicago at the Global Quantum Forum. This was a two day sold out event, which brought together some of the leading minds from all over the world in this emerging field. Chicago is becoming an epicenter for development of this innovative computing method with the establishment of the Illinois Quantum And Microelectronics Park on the city’s South Side.

As so many of the panelists described, the potential for quantum computing to solve previously intractable problems is real and gaining momentum. Our role at UL Solutions in this technology revolution is to work with our customers to solve the safety, security and sustainability problems that always accompany any leading edge technology, something we have been doing for more than one hundred and thirty years. To sum up, our second quarter results demonstrate the continued strength of our business model. The strategic investments we have made and continue to make in key growth areas position us at the forefront of the megatrends driving demand for our services. The quarter also highlighted the essential nature of our safety science Science offerings as we successfully navigated dynamic market conditions.

Our global footprint, our diversified revenue streams and our deep customer relationships continue to serve us well in an evolving environment. With strong cash flow generation and our investment grade balance sheet, we remain well positioned to capitalize on strategic growth opportunities while delivering long term value to shareholders. With that, we’ll open the line for questions.

Conference Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from the line of Andrew Nicholas, William Blair. Please go ahead.

Dan Maxwell, Analyst, William Blair: Hi. Good morning, guys. This is Dan Maxwell on for Andrew today. Maybe to kick things off, get the tariff questions out of the way. I’m just curious if you guys are seeing any changes on client behavior or other trends worth calling out, including anything specifically related to clients managing their exposure to China?

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thanks, Dan. And it is an important question. And we started seeing this really in the fourth quarter and through the first quarter. Uncertainty in 2025 has caused some behavior shifts. There’s been some, we believe, pull forward in the fourth quarter in our industrial business and pull forward in the first quarter in our consumer business.

And there has been perhaps some slowdown in new product launches. But as greater certainty is entering the market, which is really what we believe we started to see in June, We believe that the typical response that our business has to tariffs will continue, helping our customers shift their supply chains and make decisions around where they want to conduct R and D and manufacturing of their products.

Dan Maxwell, Analyst, William Blair: Great. Thanks. And then for my follow-up, appreciated your comments on the lab expansions in Europe. Maybe if you can just give us kind of a broader full business update on where you sit as far as overall lab capacity and then what you think maybe the next sort of large areas of investment on that front or otherwise in the business?

Jenny Scanlon, Chief Executive Officer, UL Solutions: Absolutely. And we do really enjoy investing in organic growth. We’ve got good return on our invested capital from our history of this. And when we look at our lab capacity today, we don’t report specific utilization rates, but it’s safe to say that recent lab additions, as well as continuous improvement in our existing labs are contributing to our improved results. And as you know, our Auburn Hills Lab came online in the second half of last year and Brian highlighted that continued progress.

We continue to focus on some key announcements of lab expansion. We have a global Fire Science Center of Excellence that we announced, I think, in the first quarter, and we’ve been expanding our lab capacity in Mexico and putting improvements here in Northbrook. We’ve also last quarter announced some lab expansions in both Korea and Japan. So we continue to apply capital to where our customers are bringing demand to our attention and we’ll continue to do so with a disciplined but also growth mindset.

Dan Maxwell, Analyst, William Blair: Great. Thank you.

Conference Operator: Thank you. Next question comes from the line of Andrew Steinerman with JPMorgan. Please go ahead.

Andrew Steinerman, Analyst, JPMorgan: Hi. It’s Andrew. Ryan, I heard the way you framed the full year guide, mid single digit organic constant currency revenue growth with sustained momentum and somewhat tougher comps in the second half. Like when I look at the tougher comps in the second half, I see them on an organic constant currency basis as about a point tougher than the second quarter you just reported. What I’m curious about is sort of numerically in the first half of the year, you were at the very high end of mid single digit organic revenue growth.

And to make mid single digit for the full year, are you saying the second half of the year may be somewhat below mid single digit organic constant currency revenue growth to make mid single digits for the full year?

Ryan Robinson, Chief Financial Officer, UL Solutions: Andrew, thank you very much for the question. And yes, we’re pleased with our performance year to date. And you’re right to point out the steepening comparisons in second half. As a reminder, in the third quarter of last year, or our organic revenue growth was 9.3%, and in the fourth quarter, was 9.5%. So those just create higher comparisons, but we’re confident in how the business is progressing.

Our focus has been on our outlook on a full year basis. As Jenny mentioned, I think we’re seeing a bit more market clarity and reductions in uncertainty, but it’s not without uncertainty. And there continue to be announcements about changes that could affect the product development behaviors of customers. So we remain confident but cautious.

Andrew Steinerman, Analyst, JPMorgan: Okay, thank you.

Conference Operator: Thank you. Next question comes from the line of George Tong with Goldman Sachs. Please go ahead.

George Tong, Analyst, Goldman Sachs: Hi, thanks. Good morning. You mentioned you saw a bit of pull forward activity in both the industrial and consumer businesses ahead of tariffs. Is it possible to quantify the amount of pull forward in both of those segments and how you expect that to impact growth in the coming quarters?

Jenny Scanlon, Chief Executive Officer, UL Solutions: Yes. And let’s isolate the two distinctions and then Ryan will dig into the numbers. Where we saw pull forward in industrial appeared in the fourth quarter last year, and we talked about our ongoing certification services and in particular, labels where we believe some of our industrial customers may have been stocking up in advance of tariffs. And then we’ve seen that now normalize. In consumer, what we saw was perhaps a surge in getting shipments out before tariffs were going to hit, and we believe we saw that in the first quarter.

So specifically quantifying, I’ll look to Ryan.

Ryan Robinson, Chief Financial Officer, UL Solutions: Yes. So as a reminder, in the first quarter, our organic revenue growth for consumer was 7.7%, and what we just reported was 4.7%. And our underlying customer relationships, our ability to win business, hasn’t changed materially. There’s just been some effect in the marketplace. But we view those as relatively short term.

The fundamental drivers of new product innovation, of new technological development, of assortment provided by manufacturers, we don’t see fundamental longer term changes in those. But, changes in macroeconomic and government policy matters can affect short term decisions.

George Tong, Analyst, Goldman Sachs: Got it. That’s helpful. And then with respect to margins, saw very significant year over year margin expansion in the industrial segment. How much additional runway do you see for margin expansion here and also in your other segments, Consumer and Software and Advisory?

Ryan Robinson, Chief Financial Officer, UL Solutions: Yes, the way that we phrase that is we see margin opportunity expansion in all three of our segments and then of course on a consolidated basis. We don’t give segment specific guidance, but we’ve made strong progress in the quarter and through the first half of the year. There were a couple of things in industrial that were relatively minor. Mentioned in the second quarter of last year, we had both some IPO related incentive recognition expense. And in the second quarter of last year in industrial, we had three m and a transactions, two acquisitions and one divestiture in a quarter.

So there were some transaction related expenses in the second quarter of last year that we’re comparing against, but even isolating from those, we had good margin expansion.

Josh Chan, Analyst, UBS: Got it. Thank you. Thank

Conference Operator: you. Next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore, Analyst, Jefferies: Hi. Good morning. Thank you. Maybe a bigger picture question for you, Jenny. As you think about the growth in data centers and the computing required for these LLN models and the like, Can you maybe talk about how you view this megatrend as compared to other megatrends?

For example, electrification of everything, digitalization, the like. If you could just kind of frame what this opportunity could be for your business, that would be helpful. Thank you.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thank you. And I love talking about this because my very first job was helping build data centers when I was at IBM thirty five years ago. So, here’s the thing about data centers and that megatrend is it actually reflects the confluence of a few key trends. So the electrification of everything is extremely important. NEMA put out a study back in April that talked about 300% projected growth in data center energy consumption over the next ten years.

And so the sources of where that energy is going to come from is across all elements. It’s traditional fossil fuels as well as renewables, wind, solar, geothermal, hydro, anything that anybody can get their hands on. Nuclear to generate energy to support data centers is extremely important. So that trickles through all of our industrial customers as they’re thinking about how do they help build equipment that supports different types of energy generation, how are they supporting the ways in which energy is transmitted. And there’s we’ve seen in our wire and cable business, an increase in high voltage cable testing.

The way that it’s stored, the importance of energy storage systems, particularly in the industrial space is growing. And then the way that it’s used and this is where continued inventions in the actual computing space of how do you reduce the amount of energy that these data centers are going to need. In fact, at the Quantum Forum last week, they talked about how can quantum be used to help solve the problem of the amount of electricity that AI data centers need. So it’s I really view this whole digitalization trend as pulling together pieces of our megatrends of electrification of everything, sustainability and digitalization. And it’s really exciting to just sit back and think about all the ways in which it’s going to change our world.

Stephanie Moore, Analyst, Jefferies: And then maybe just as a follow-up to that question, as you think about this emerging over time, does it suggest that you could see some incremental lab capacity investments, or is it needed to see that in order to capitalize on some of these trends? And then, same question, but if it’s not incremental lab capacity investments, are there areas from a capital allocation standpoint that you could maybe move into M and A wise that could further expand on this trend? Thanks.

Jenny Scanlon, Chief Executive Officer, UL Solutions: We’re absolutely looking at both of those things. I think when you look at the standards that are being applied, like let’s just take cooling technology. There’s a number of different UL and IEC cooling standards that are out there. And we’ll continue to think about what are the most cutting edge ways to test to those standards. And if it makes sense that we need to add lab capacity, we will.

We have labs today that can handle this. But as new standards come out, new test methods may be needed and we’ll stay ahead of those investments. At the same time, we’re also really excited so many of our global and strategic accounts where we have long term global relationships are keys they’re really key participants, they’re key stakeholders in this whole data center ecosystem. So that’s giving us visibility and opportunities into thinking about partnerships and other potential investments in the future. And we’re just excited to be in the center of all this.

Conference Operator: Ms. Moore, are you done with your questions?

Stephanie Moore, Analyst, Jefferies: Oh, yes, I am. Thank you. Appreciate it.

Conference Operator: Thank you.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thank you, Stephanie. Thanks, Stephanie. Always nice to hear from you.

Conference Operator: Thank you. And next question comes from the line of Josh Chan with UBS. Please go ahead.

Josh Chan, Analyst, UBS: Hi. Good morning, Jenny and Ryan. I was wondering if, Jenny, you could elaborate on your June comments about the tariffs. What kind of improvement did you see in the market? And then just as a broader question, do you feel that customers are already having made decisions on post tariffs?

Or I’m kind of surprised by that because the environment is obviously still very fluid. Thank you.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Yes, great question on both fronts. So first, let me just talk about the arc of the quarter and then I can talk about what we believe our customers may be deciding. The arc of the quarter, as we said, both in industrial and consumer and software and advisory, that there was just softer than expected growth, softer than expected order volume in April and May. And then we did see a shift, a pickup in June. And we in industrial, throughout the quarter, we saw some real strength in power and automation and those industrial storage systems and in some of the high voltage wire and cable.

And in other areas, we saw things come back in June. In consumer, typically, historically, the second quarter is our strongest revenue quarter and orders

Eugene Bentano, Vice President, Investor Relations, UL Solutions: were soft

Jenny Scanlon, Chief Executive Officer, UL Solutions: in April and May. But our large retailers, the strength in that space is it continues to be real. And we saw that across The U. S. And in broader Asia.

And in consumer technology, we saw really the pickup come back in June across U. S, UK, Asia, Greater China. So that’s been the arc of the quarter. Given that, as we evaluate what do our customers believe, what we’re seeing is as various decisions are being made across both tariffs and regulations, customers are building confidence in what decisions they need to make. And while there’s still, as Ryan said, a lot of uncertainty, a lot of things can change, there just seems to be a greater sense that there will be more clarity to what they can rely on in the future.

And it’s that reliance on the future that will allow them to continue to make their capital allocation decisions around new product development and R and D.

Ryan Robinson, Chief Financial Officer, UL Solutions: And then just to build on that,

Josh Chan, Analyst, UBS: through

Ryan Robinson, Chief Financial Officer, UL Solutions: a dynamic period, we’re pleased that all of our team members around the world have delivered through the first half 6.5% organic growth in a relatively uncertain time. So the team is performing well.

Josh Chan, Analyst, UBS: That’s great color. Yes, thank you for that. That’s really helpful. And then I guess my follow-up is on that growth. So based on, Ryan, your comment about the tougher comps in the second half, one could think that growth would decelerate from Q2 into the second half.

But based on this improvement in June, do you think that could kind of offset the tougher comp narrative that was mentioned previously? Thank you.

Ryan Robinson, Chief Financial Officer, UL Solutions: Yeah. It’s really difficult to isolate whether the shape of the quarter was just redistribution of activity that would otherwise happen in the quarter or it’s a stepping off point for the second half. And continues to be a less certain environment than last year, but we’re pleased with the progress. So at this point, felt affirming guidance was something we were comfortable doing.

Josh Chan, Analyst, UBS: Thank you for the color and congrats on the quarter.

Conference Operator: Thank you. Thank you. Next question comes from the line of Arthur Trusoeff with Citi. Please go ahead.

Arthur Trusoeff, Analyst, Citi: Thank you and good afternoon. So just a couple from me, if I may. The first one was around the pull forward in Q1. I guess and indeed, the sort of stop it, the pause in customer activity following the operation day. I was just wondering kind of how you became aware of that because I was a bit surprised to hear that today.

So I don’t recall hearing it at Q1. So just wondered what new information had come out there. And then second question on pricing. So how much are you able to give us any idea of how much of the pricing in Q2 to how much of the organic growth in Q2 was pricing? And with that in mind, kind of how developed you are in terms of your pricing and how much more sort of commercialization you’ve got to do there?

Thank you.

Ryan Robinson, Chief Financial Officer, UL Solutions: Yes. Thank you very much for the questions, Arthur. And then just first on the shaping. In the first quarter call, we did mention that we felt that the consumer business had some pull forward. In particular, we saw some increased activity in some areas of the world that were more tariff affected, and we saw an increase in relative activity on a sequential basis.

So we did mention that last quarter. And then in regard to pricing, we had similar contributions from price and volume in our testing related businesses, slightly more contribution from price, but pretty similar.

Jenny Scanlon, Chief Executive Officer, UL Solutions: And let me just add one more thing on pricing, because we’ve mentioned it before. We’ve been in process of implementing our configure price quote. And it’s not just a system, it’s an entire set of processes. And so our teams have been very much moving through the implementation, not just of embedded analytics for their pricing decisions, but also changing our processes and the monitoring that we have on that as well as creating a pricing center of excellence. So we’re continuing to focus on how we deliver value based pricing for our customers.

Arthur Trusoeff, Analyst, Citi: Wonderful. Thank you very much indeed. And thanks for the clarification on the first part as well. Thank you.

Ryan Robinson, Chief Financial Officer, UL Solutions: Thank you, Arthur.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thanks, Arthur.

Conference Operator: Thank you. Next question comes from the line of Jason Hof with Wells Fargo. Please go ahead.

Eugene Bentano, Vice President, Investor Relations, UL Solutions0: Good morning. This is Junie on for Jason Hoff. There was a pretty sizable acquisition done by one of your competitors in the space earlier last month in The US. Sounds like they had some overlap with you guys. Just wondering if you took a look at that transaction and why you didn’t pursue it and if you foresee any competitive pressures?

And then more broadly on just how the M and A pipeline looks today for you guys. Thank you.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thanks, Jennie. We remain disciplined and active in the M and A environment. And our goal with any M and A is to fortify our focus on the product tick business and the strategy that we have there and to make sure that anything that we add, both services and capabilities, is something that our customers globally will feel is something that deepens our value and our relationship with them. So indeed, we have eyes on many, many, many deals that come into the marketplace. And in any deal, are parts that we can find interesting and there are parts that may or may not fit with our business strategy.

And we continue to be disciplined and active in thinking about M and A.

Eugene Bentano, Vice President, Investor Relations, UL Solutions0: Great. Thank you. And as my follow-up, it looks like Software and Advisory moderated a bit on an organic basis. So just curious if there’s anything to spell out there in overall trends you’re seeing in that segment. Thank you.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Yes. The challenge this quarter on software and advisory was really advisory. And I believe we said that last quarter as well. There’s just been a weakness in advisory in The United States. And in particular, as wind policies are changing, there’s some renewables advisory slowness in that piece.

And as commercial real estate continues to be under some pressure, there’s some pressure in our healthy buildings offerings there. But as Ryan mentioned, the organic growth for our software business was 6%. And the changing regulations around CSRD in Europe slowed down some of our ESG software, but we expect that we’ll see a pickup on that throughout the rest of the year.

Eugene Bentano, Vice President, Investor Relations, UL Solutions0: Thank you.

Conference Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Jenny Scanlon, CEO, for closing remarks.

Jenny Scanlon, Chief Executive Officer, UL Solutions: Thank you, everyone, for joining us today. As always, we appreciate your support, and we look forward to updating you on our progress next quarter.

Conference Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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