UL Solutions Inc.

Previous wording

The following discussion and analysis of the Company’s results of operations, financial condition and liquidity and capital resources should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes as of March 31, 2025 and for the three month periods ended March 31, 2025 and 2024, which are included in this Quarterly Report, as well as the Company’s audited consolidated financial statements for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks and uncertainties about the Company’s business and operations. The Company’s actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described under “Risk Factors” in Part I Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. See “Cautionary Note Regarding Forward-Looking Statements.” Additionally, the Company’s historical results are not necessarily indicative of the results that may be expected for any period in the future.

Current wording

The following discussion and analysis of the Company’s results of operations, financial condition and liquidity and capital resources should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes as of June 30, 2025 and for the three and six month periods ended June 30, 2025 and 2024, which are included in this Quarterly Report, as well as the Company’s audited consolidated financial statements for the year ended December 31, 2024 included in the Company’s Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks and uncertainties about the Company’s business and operations. The Company’s actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those described under “Risk Factors” in Part I Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. See “Cautionary Note Regarding Forward-Looking Statements.” Additionally, the Company’s historical results are not necessarily indicative of the results that may be expected for any period in the future.

Previous wording

•In May 2024, the Company completed the sale of its payments testing business to an affiliate of Gallant Capital Partners, for a base price of $29 million. The business performed Software and Non-certification Testing and Other Services and the results of operations were included in the Industrial segment until the date of divestiture. The divestiture resulted in a pre-tax gain on sale of $24 million, which was recorded within other expense, net in the Company’s consolidated results of operations.

Current wording

•In May 2024, the Company completed the sale of its payments testing business to an affiliate of Gallant Capital Partners, for a base price of $29 million. The business performed Software and Non-certification Testing and Other Services and the results of operations were included in the Industrial segment until the date of divestiture. The divestiture resulted in a pre-tax gain on sale of $24 million, which was recorded within other (expense) income, net in the Company’s consolidated results of operations.

Previous wording

Other expense, net consists primarily of non-operating gains and losses, including gains and losses related to foreign exchange transactions and the revaluation performed on designated balance sheet accounts, interest income and non-operating pension and postretirement benefit expenses.

Current wording

Other (expense) income, net consists primarily of non-operating gains and losses, including gains and losses related to foreign exchange transactions and the revaluation performed on designated balance sheet accounts, interest income, non-operating pension and postretirement benefit expenses and gains on divestitures.

Previous wording

Income before income taxes is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense and other expense, net.

Current wording

Income before income taxes is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense and other (expense) income, net.

Previous wording

Net income is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense, other expense, net and income tax expense. Net income margin is calculated as net income as a percentage of revenue.

Current wording

Net income is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense, other (expense) income, net and income tax expense. Net income margin is calculated as net income as a percentage of revenue.

Previous wording

Revenue increased by $35 million, or 5.2%, for the three months ended March 31, 2025, as compared to the same period in 2024. Revenue increased on an organic basis by $51 million, or 7.6%, due to organic growth across all segments in the first quarter of 2025, driven by the Industrial and Consumer segments in Certification Testing, Ongoing Certification Services and Non-certification Testing and Other Services revenue. FX decreased revenue by $9 million, or 1.3%, primarily due to the relative weakness of the euro, the Korean won, the Japanese yen and the Chinese renminbi. Acquisition / Divestiture decreased revenue by $7 million, or 1.0%, primarily due to the sale of the payments testing business in the Industrial segment.

Current wording

Revenue increased by $46 million, or 6.3%, for the three months ended June 30, 2025, as compared to the same period in 2024. Revenue increased on an organic basis by $40 million, or 5.5%, due to organic growth across all segments in the second quarter of 2025, driven by the Industrial and Consumer segments in Non-certification Testing and Other Services, Ongoing Certification Services and Certification Testing revenue. FX increased revenue by $7 million, or 1.0%, primarily due to the relative strength of the euro and the Japanese yen.

Previous wording

Cost of revenue increased by $13 million, or 3.7%, for the three months ended March 31, 2025, as compared to the same period in 2024. On an organic basis, employee compensation increased $9 million, related to headcount and base salary increases. In addition, on an organic basis, professional fees increased $5 million related to outsourced labor associated with higher revenue and occupancy costs increased $4 million related to higher utility costs and rent expense. Depreciation and amortization increased $5 million on an organic basis related to the completion of additional laboratory capacity and software ready for its intended use. FX decreased cost of revenue by $8 million, primarily due to the relative weakness of the euro, the Mexican peso, the Korean won, the Chinese renminbi and the New Taiwan dollar. Acquisition / Divestiture decreased cost of revenue by $3 million, primarily due to the sale of the payments testing business.

Current wording

Cost of revenue increased by $29 million, or 8.0%, for the three months ended June 30, 2025, as compared to the same period in 2024. On an organic basis, employee compensation increased $12 million, related to base salary and headcount increases. In addition, on an organic basis, professional fees increased $3 million related to outsourced labor associated with higher revenue and occupancy costs increased $3 million related to higher utility costs and rent expense. Depreciation and amortization increased $4 million on an organic basis related to the completion of additional laboratory capacity and software ready for its intended use. FX increased cost of revenue by $5 million, primarily due to the relative strength of the euro, the Japanese yen, the British pound sterling and the New Taiwan dollar.

Previous wording

Selling, general and administrative expenses increased by $4 million, or 1.8%, for the three months ended March 31, 2025, as compared to the same period in 2024. On an organic basis, employee compensation increased $11 million, primarily due to higher costs associated with performance-based incentives, including the Company’s long-term incentive awards, and base salary increases. FX decreased selling, general and administrative expenses by $2 million, primarily due to the relative weakness of the euro.

Current wording

Selling, general and administrative expenses increased by $4 million, or 1.7%, for the three months ended June 30, 2025, as compared to the same period in 2024. On an organic basis, base salary increases, resulting in $7 million of increased employee compensation costs in 2025, were offset by lower performance-based incentive costs of $7 million, primarily related to the Company’s Cash-settled Stock Appreciation Rights, which were remeasured to fair value at the initial public offering date upon conversion to Stock-settled Stock Appreciation Rights in 2024. In addition, costs associated with internal software projects increased $5 million on an organic basis. FX increased selling, general and administrative expenses by $2 million, primarily due to the relative strength of the euro.

Previous wording

The effective tax rate for the three months ended March 31, 2025 was 24.5%, which differed from the U.S. federal statutory tax rate of 21% primarily due to foreign tax effects, U.S. tax on Global Intangible Low Taxed Income net of related foreign tax credits, and Section 162(m) limitations on current year compensation deductions of certain executive officers.

Current wording

The effective tax rate for the three months ended June 30, 2025 was 22.4%, which differed from the U.S. federal statutory tax rate of 21%, primarily due to foreign tax effects, U.S. tax on Global Intangible Low Taxed Income net of related foreign tax credits, and Section 162(m) limitations on current year compensation deductions of certain executive officers, partially offset by excess tax benefits associated with stock-based compensation deductions.

Previous wording

Several countries in which the Company operates have enacted aspects of the Organisation for Economic Co-operation and Development’s Pillar Two rules, which impose a 15% corporate minimum tax, into their local legislation effective either January 1, 2024, or January 1, 2025. The effective tax rate for the three months ended March 31, 2025 of 24.5% was higher than the effective tax rate for the three months ended March 31, 2024 of 17.8% primarily due to the impact of the Qualified Domestic Minimum Top-up Tax, a subset of the Pillar Two rules that became effective on January 1, 2025.

Current wording

Several countries in which the Company operates have enacted aspects of the Organisation for Economic Co-operation and Development’s Pillar Two rules, which impose a 15% corporate minimum tax, into their local legislation effective either January 1, 2024, or January 1, 2025. The effective tax rate for the three months ended June 30, 2025 of 22.4% was higher than the effective tax rate for the three months ended June 30, 2024 of 20.9%, primarily due to the impact of the Qualified Domestic Minimum Top-up Tax, a subset of the Pillar Two rules that became effective on January 1, 2025.

Previous wording

The effective tax rate for the three months ended March 31, 2024 was 17.8%, which differed from the U.S. federal statutory tax rate of 21% primarily due to earnings subject to lower tax rates in certain foreign jurisdictions, partially offset by U.S. tax on Global Intangible Low Taxed Income net of related foreign tax credits.

Current wording

The effective tax rate for the three months ended June 30, 2024 was 20.9%, which differed from the U.S. federal statutory tax rate of 21%, primarily due to earnings subject to lower tax rates in foreign jurisdictions and a discrete tax benefit for the release of valuation allowances. This was partially offset by a discrete tax expense for the reduction to previously established deferred tax assets of approximately $5 million due to the Company becoming subject to Section 162(m) of the Internal Revenue Code in the U.S., which limits compensation expenses of certain executive officers that were previously deductible as a private company, as well as Section 162(m) limitations on current year deductions and U.S. tax on Global Intangible Low Taxed Income net of related foreign tax credits.

Previous wording

The following table summarizes the change in Industrial’s revenue and operating income for the periods presented:

Current wording

The following tables summarize the change in Industrial’s revenue and operating income for the periods presented:

Previous wording

Segment operating income increased by $8 million, or 10.7%, for the three months ended March 31, 2025, as compared to the same period in 2024 primarily due to the $24 million increase in organic revenue noted above. This was partially offset by a $14 million organic increase in expenses, primarily due to higher employee compensation of $6 million related to higher costs associated with performance-based incentives and base salary and headcount increases. Depreciation and amortization also increased $3 million primarily related to the completion of additional laboratory capacity.

Current wording

Segment operating income increased by $13 million, or 15.3%, for the three months ended June 30, 2025, as compared to the same period in 2024, primarily due to the $22 million increase in organic revenue noted above. This was partially offset by a $10 million organic increase in expenses, primarily due to higher employee compensation of $4 million related to base salary and headcount increases. Depreciation and amortization also increased $2 million primarily related to the completion of additional laboratory capacity.

Previous wording

Revenue increased by $13 million, or 4.4%, for the three months ended March 31, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $24 million or 8.1%, primarily due to growth in Ongoing Certification Services revenue of $12 million across most industries due in part to price increases and additional volume. Certification Testing revenue increased $11 million, driven by price increases, continued demand for electrical products and components and component certification testing, and returns on new capacity provided by recent laboratory investments. Acquisition / Divestiture decreased revenue by $7 million, or 2.4%, primarily due to the sale of the payments testing business. FX decreased revenue by $4 million, or 1.4%, primarily due to the relative weakness of the euro, the Korean won and the Chinese renminbi.

Current wording

Revenue increased by $37 million, or 6.1%, for the six months ended June 30, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $46 million, or 7.6%, primarily due to growth in Ongoing Certification Services revenue of $21 million across most industries due in part to price increases and additional volume. Certification Testing revenue increased $19 million, driven by price increases, continued demand for energy and automation testing, and new capacity provided by recent laboratory investments. Acquisition / Divestiture decreased revenue by $8 million, or 1.3%, primarily due to the sale of the payments testing business.

Previous wording

The following table summarizes the change in Consumer’s revenue and operating income for the periods presented:

Current wording

The following tables summarize the change in Consumer’s revenue and operating income for the periods presented:

Previous wording

Revenue increased by $18 million, or 6.3%, for the three months ended March 31, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $22 million, or 7.7%, primarily due to Non-certification Testing and Other Services revenue growth of $13 million in consumer technology driven by increased demand for electromagnetic compatibility testing for automotive and consumer electronics and in retail. Certification Testing revenue increased $5 million due to consumer technology growth and strength in HVAC. FX decreased revenue by $4 million, or 1.4%, primarily due to the relative weakness of the Korean won, the euro, the Japanese yen and the Chinese renminbi.

Current wording

Revenue increased by $18 million, or 5.6%, for the three months ended June 30, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $15 million, or 4.7%, primarily due to Non-certification Testing and Other Services revenue growth of $9 million in consumer technology driven by increased demand for electromagnetic compatibility testing for consumer electronics and in retail. FX increased revenue by $3 million, or 0.9%, primarily due to the relative strength of the euro and the Japanese yen.

Previous wording

The following table summarizes the change in Software and Advisory’s revenue and operating loss for the periods presented:

Current wording

The following tables summarize the change in Software and Advisory’s revenue and operating income for the periods presented:

Previous wording

Revenue increased by $4 million, or 4.5%, for the three months ended March 31, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $5 million, or 5.6% driven by demand for software, including retail product compliance.

Current wording

Revenue increased by $4 million, or 4.3%, for the three months ended June 30, 2025, as compared to the same period in 2024. On an organic basis, revenue increased $3 million, or 3.2% driven by demand for software, including retail product compliance.

Previous wording

There are material limitations to using these non-GAAP financial measures. Adjusted EBITDA does not take into account certain significant items, including depreciation and amortization, interest expense, other expense, net, income tax expense, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses which directly affect the Company’s net income, as applicable. Adjusted Net Income and Adjusted Diluted Earnings Per Share do not take into account certain significant items, including other expense, net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses which directly affect the Company’s net income and diluted earnings per share, as applicable. Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by considering the economic effects of the excluded items independently, and by considering these non-GAAP financial measures in conjunction with net income, operating income, diluted earnings per share and net cash provided by operating activities as calculated in accordance with GAAP.

Current wording

There are material limitations to using these non-GAAP financial measures. Adjusted EBITDA does not take into account certain significant items, including depreciation and amortization, interest expense, other expense (income), net, income tax expense, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses which directly affect the Company’s net income, as applicable. Adjusted Net Income and Adjusted Diluted Earnings Per Share do not take into account certain significant items, including other expense (income), net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses which directly affect the Company’s net income and diluted earnings per share, as applicable. Free Cash Flow adjusts for cash items that are ultimately within management’s discretion to direct, and therefore, may imply that there is less or more cash that is available than the most comparable GAAP measure. Free Cash Flow is not intended to represent residual cash flow for discretionary expenditures since debt repayment requirements and other non-discretionary expenditures are not deducted. These limitations are best addressed by considering the economic effects of the excluded items independently, and by considering these non-GAAP financial measures in conjunction with net income, operating income, diluted earnings per share and net cash provided by operating activities as calculated in accordance with GAAP.

Previous wording

The Company defines Adjusted EBITDA as net income adjusted for depreciation and amortization expense, interest expense, other expense, net, income tax expense, as well as stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable. Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of revenue.

Current wording

The Company defines Adjusted EBITDA as net income adjusted for depreciation and amortization expense, interest expense, other expense (income), net, income tax expense, as well as stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable. Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of revenue.

Previous wording

The table below reconciles segment operating income (loss) to segment Adjusted EBITDA.

Current wording

The table below reconciles segment operating income to segment Adjusted EBITDA.

Previous wording

The Company defines Adjusted Net Income as net income adjusted for other expense, net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable, each net of tax. Adjusted Net Income margin is calculated as Adjusted Net Income as a percentage of revenue.

Current wording

The Company defines Adjusted Net Income as net income adjusted for other expense (income), net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable, each net of tax. Adjusted Net Income margin is calculated as Adjusted Net Income as a percentage of revenue.

Previous wording

The Company defines Adjusted Diluted Earnings Per Share as diluted earnings per share attributable to stockholders of UL Solutions adjusted for other expense, net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable.

Current wording

The Company defines Adjusted Diluted Earnings Per Share as diluted earnings per share attributable to stockholders of UL Solutions adjusted for other expense (income), net, stock-based compensation expense for equity-settled awards, material asset impairment charges and restructuring expenses, as applicable.

Previous wording

As of March 31, 2025, the Company had $267 million in cash and cash equivalents and $745 million of unused availability under the Credit Facility and access to an accordion feature permitting an increase in the Credit Facility by an aggregate amount of up to $625 million (of which up to $400 million may consist of term loans), subject to the consent of any lenders providing such increase, the absence of any default or event of default and entry into customary documentation with respect to such increase.

Current wording

As of June 30, 2025, the Company had $272 million in cash and cash equivalents and $745 million of unused availability under the Credit Facility and access to an accordion feature permitting an increase in the Credit Facility by an aggregate amount of up to $625 million (of which up to $400 million may consist of term loans), subject to the consent of any lenders providing such increase, the absence of any default or event of default and entry into customary documentation with respect to such increase.

Previous wording

Net cash provided by operating activities was $154 million for the three months ended March 31, 2025, an increase of $13 million compared to net cash provided by operating activities of $141 million for the same period in 2024. The increase was primarily driven by higher net income due to business performance during the three months ended March 31, 2025 compared to the same period in 2024 and employee contributions to the Company’s employee stock purchase plan which was not in place during the first quarter of 2024.

Current wording

Net cash provided by operating activities was $301 million for the six months ended June 30, 2025, an increase of $57 million compared to net cash provided by operating activities of $244 million for the same period in 2024. The increase was primarily driven by higher net income after non-cash adjustments due to business performance during the six months ended June 30, 2025 compared to the same period in 2024 and employee contributions to the Company’s employee stock purchase plan which was not in place during the same period in 2024.

Previous wording

Net cash used in investing activities was $50 million for the three months ended March 31, 2025, a decrease of $7 million compared to net cash used in investing activities of $57 million for the same period in 2024. The decrease in cash used in investing activities was primarily driven by a $6 million decrease in capital expenditures.

Current wording

Net cash used in investing activities was $107 million for the six months ended June 30, 2025, an increase of $14 million compared to net cash used in investing activities of $93 million for the same period in 2024. The increase in cash used in investing activities was primarily driven by proceeds from the divestiture of the Company’s payments testing business of $30 million for the six months ended June 30, 2024 and a $14 million increase in purchases of investments for the six months ended June 30, 2025 compared to the same period in 2024. The increase was partially offset by a $20 million decrease in capital expenditures compared to the same period in 2024.

Previous wording

Net cash used in financing activities was $135 million for the three months ended March 31, 2025, an increase of $86 million compared to net cash used in financing activities of $49 million for the same period in 2024. The change was primarily driven by a $65 million increase in repayments net of proceeds on the Company’s Credit Facility compared to the same period in 2024 and the timing of a $17 million dividend paid to the non-controlling interest, which was paid in the first quarter of 2025 compared to the second quarter of 2024.

Current wording

Net cash used in financing activities was $221 million for the six months ended June 30, 2025, an increase of $62 million compared to net cash used in financing activities of $159 million for the same period in 2024. The change was primarily driven by a $40 million increase in repayments net of proceeds on the Company’s Credit Facility compared to the same period in 2024 and $13 million in employee taxes paid on settlement of stock-based compensation for the six months ended June 30, 2025 which did not occur for the same period in 2024.

Previous wording

The Company makes strategic investments in capital expenditures to enable growth by expanding testing capacity to meet increased demand, to enable new capabilities and product offerings and to increase the efficiency of the Company’s processes. Capital expenditures include the building and refurbishment of laboratories and office space, the replacement and upgrade of existing laboratory equipment at the end of its useful life, and investments in technology for internal-use and sale to customers through product development of new software and enhancements of existing software. Cash paid for capital expenditures decreased $6 million, to $51 million for the three months ended March 31, 2025, compared to $57 million for the same period in 2024.

Current wording

The Company makes strategic investments in capital expenditures to enable growth by expanding testing capacity to meet increased demand, to enable new capabilities and product offerings and to increase the efficiency of the Company’s processes. Capital expenditures include the building and refurbishment of laboratories and office space, the replacement and upgrade of existing laboratory equipment at the end of its useful life, and investments in technology for internal-use and sale to customers through product development of new software and enhancements of existing software. Cash paid for capital expenditures decreased $20 million, to $93 million for the six months ended June 30, 2025, compared to $113 million for the same period in 2024.

Previous wording

In the three months ended March 31, 2025 and 2024, the Company paid dividends to stockholders of $26 million and $25 million, respectively.

Current wording

In the three and six months ended June 30, 2025, the Company paid dividends to stockholders of $26 million and $52 million, respectively. In the three and six months ended June 30, 2024, the Company paid dividends to stockholders of $25 million and $50 million, respectively.