UL Solutions Inc. 2026 Q2 Earnings Call

Thank you. Welcome everyone to our second quarter 2026 earnings call. Joining me today are Jenny Scanlon, 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 UL Solutions' future financial results and estimates, our full year 2026 outlook, the previously announced restructuring plan, and our pending acquisitions and divestitures, including the pending acquisition of Eurofins Electrical & Electronics business, and pending sale of our shares of DQS Holding GmbH, 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 filings with the SEC, including our annual report on Form 10-K for the year ended December 31st, 2025, and our quarterly report on Form 10-Q for the quarter ended June 30th, 2026.

We undertake 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, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted diluted earnings per share, Free cash flow, and Free cash flow margin. Our reconciliation to the most comparable GAAP financial measures can be found in the appendix to the earnings presentation, which is posted on the investor relations section of our website at ul.com. With that, I would now like to turn the call over to Jenny.

Good morning, everyone, and thanks for joining us. We achieved another outstanding quarter with record revenue and continued growth in Adjusted EBITDA. Our team executed exceptionally well across all segments, driving profitable growth, expanding margins, and advancing key strategic priorities. These results were delivered in a dynamic operating environment and reflect the discipline, resilience, and focus that define our organization. Most importantly, this performance is a testament to the dedication and expertise of our approximately 15,000 team members around the world, whose contributions drive our success every day. Our results also reflect the continuing importance of several long-term trends we have discussed, including the energy transition, the electrification of everything, and increasing automation in industrial markets. On the consumer side, we see ongoing product innovation and increasingly interconnected devices.

These durable trends create ongoing demand for safety science expertise, testing capabilities, and certification services that help customers bring increasingly complex products and systems to market. Before Ryan walks through the detailed financial results, I'll cover four areas. First, highlights of our second quarter performance. Second, notable announcements we made in the last few months. Third, a brief update on previously announced portfolio actions. Lastly, some perspective on the geopolitical environment and how our business continues to perform well within it. Let me start with the quarter. Consolidated revenue grew 5.2% to $816 million, including organic revenue growth of 6.6%, led by our industrial and consumer segments. Adjusted EBITDA grew 11.2% to a quarterly record of $219 million, with Adjusted EBITDA margin expanding 140 basis points to 26.8%. Adjusted diluted earnings per share increased 13.5% to $0.59.

These results reflect the combination of operating leverage from organic growth, higher employee productivity, and the continued benefit of the restructuring plan we've been executing since late last year. Notably, we achieved 6.6% organic growth even as we absorbed the planned revenue reductions from the business exits under our restructuring plan. I want to emphasize that our productivity work is not a short-term effort. It is part of how we are building a more focused, scalable, and efficient company. We are continuing to simplify how we operate, focus resources on our strongest growth opportunities, and maintain disciplined investment in the capabilities that matter most to our customers. It was a strong first half and one we are proud of. Let me turn to the notable announcements we made during the second quarter.

We launched an AI-powered capability within ULTRUS UL 360 to help organizations calculate carbon footprints of the products they manufacture and the components they purchase. This improves the quality of supplier emissions data used in Scope 3 reporting. The launch comes as evolving regulations heighten the need for reliable supply chain carbon data, increasing demand for the solutions our software offers. We issued our first hazardous location robotics certification under the new UL 6260 standard, awarded to ExRobotics for their latest inspection robot. The certification evaluates remotely operated robots used for inspection and maintenance in hazardous locations, assessing fire, explosion, electric shock, and mechanical risks. This milestone supports the industry shift toward robotic inspection in high-risk environments, helping move personnel out of harm's way while improving inspection reliability.

We were excited to open our new automotive technology and innovation center in Toyota City, Japan, further strengthening our ability to support customers in one of the world's largest and most innovative automotive markets. As vehicles become increasingly electrified, connected, and software-driven, the need for advanced EMC testing has continued to increase. The facility helps automakers ensure critical systems operate reliably in the presence of electromagnetic interference. One of the few facilities in Japan equipped for high voltage and high-speed rotational testing, this new lab expands our capacity to help customers bring safe, reliable technologies to market. Now I'd like to highlight our progress in capital deployment and portfolio optimization. We continue to expect to close the acquisition of Eurofins Electrical and Electronics business in the fourth quarter of 2026 and look forward to welcoming the team and their customers to UL Solutions.

We are also proceeding as expected on the sale of our position in DQS, with closing still on track for the second half of 2026. Finally, let me offer some perspective on the geopolitical environment, which continues to present important considerations to our customers. Our second quarter results show just how well our business continues to perform in this dynamic environment. We continue to benefit from several durable secular trends, more complex product ecosystems, and faster innovation cycles. Customers are balancing myriad regulations, sustainability expectations, and supply chain transparency requirements. We are also seeing increasing opportunities tied to AI data centers where safety, energy efficiency, and reliability are essential. The need for safety science expertise backed by independent testing and certification is paramount. That dynamic is core to the UL Solutions value proposition.

Our strategy and our portfolio are closely aligned with these trends. That focus continues to show up in our results. Given our strong performance through the first half of the year, we remain confident in our full year 2026 outlook. Now, I'll turn the call over to Ryan for a more detailed review of our second quarter results and more details on our full year 2026 outlook.

Thank you, Jenny, and hello, everyone. I also want to thank our team members around the world for another quarter of strong execution. Let me walk through the quarter in detail. Consolidated revenue of $816 million was up 5.2% over the prior year quarter, including organic revenue growth of 6.6%. Operating income of $150 million increased 7.9% over the prior year, producing a 50 basis point improvement in operating margin. This was mainly driven by cost of revenue as a percentage of revenue improving 190 basis points year-over-year on favorable operating leverage and the continued impact of our restructuring and productivity initiatives. This was partially offset by higher costs associated with performance-based incentive compensation. Selling general and administrative expenses as a percentage of revenue increased 130 basis points, primarily reflecting higher employee compensation tied to performance-based incentives, as well as higher professional fees.

Adjusted EBITDA for the quarter was $219 million, an improvement of 11.2% year over year. Adjusted EBITDA margin was 26.8%, up 140 basis points from the second quarter of 2025, with the expansion led by our consumer segment. Adjusted net income, which excludes the divestiture gain, stock-based compensation expense for equity settled awards, and certain other items, was $129 million, up 17.3% from $110 million in the second quarter of 2025. Adjusted diluted earnings per share was $0.59, up 13.5% from $0.52 in the prior year period. Let me turn to our performance by segment, starting with industrial. Revenues in industrial rose 7.8% to $402 million, or 7.2% organically as compared to the second quarter of 2025. With growth across ongoing certification services and certification testing. Strength in materials and energy and automation led the revenue growth.

Adjusted EBITDA in industrial increased 7.4% to $130 million in the quarter, while adjusted EBITDA margin decreased 10 basis points to 32.3% as the benefit of higher revenue was offset by higher employee compensation costs tied to performance-based incentives. Turning to the consumer segment, revenues were $362 million, up 6.5% from the 2025 quarter, or 6.2% organically, driven by strength in certification testing in consumer technology, non-certification testing and other services in retail, and ongoing certification in appliances and HVAC. As a reminder, the prior year quarter experienced tariff-related uncertainty, and that affected the timing of customers' new product launches. Adjusted EBITDA for consumer was $77 million, an increase of 24.2% versus the second quarter of last year.