UL Solutions Inc. (ULS) Earnings

Management highlights

- Overall Financial Performance * Achieved record Q2 2026 consolidated revenue of $816 million, up 5.2% year-over-year with 6.6% organic growth, even after absorbing planned revenue reductions from restructuring-related business exits * Adjusted EBITDA grew 11.2% to a quarterly record $219 million, with adjusted EBITDA margin expanding 140 basis points to 26.8% * Adjusted diluted earnings per share increased 13.5% to 59 cents year-over-year * Trailing 12-month free cash flow grew 19.8% year-over-year to $436 million, with free cash flow margin improving to 13.9% from 12.3% * Maintains a strong investment-grade balance sheet with $434 million in cash and cash equivalents and $303 million in total debt as of quarter-end - New Capability & Infrastructure Launches * Launched an AI-powered carbon footprint calculation tool within UL360 to improve supplier emissions data quality for Scope 3 reporting, addressing growing regulatory demand for reliable supply chain carbon data * Issued the first hazardous location robotics certification under the new UL 6260 standard, supporting industry adoption of remote robotic inspection in high-risk environments * Opened a new Automotive Technology and Innovation Center in Toyota City, Japan, expanding high-voltage electromagnetic compatibility (EMC) testing capacity for electrified, connected vehicles in one of the world's largest automotive markets - Strategic Portfolio & Capital Updates * The pending acquisition of Eurofin's electrical and electronics business remains on track to close in Q4 2026 * The pending sale of UL's position in DQS remains on track to close in H2 2026 * Continued progress on the 2025 restructuring plan, with the majority of pre-tax charges already incurred; productivity improvement is framed as an ongoing long-term initiative, not a one-time effort * Paid a quarterly dividend of 14.5 cents per share ($29 million), consistent with the increased dividend announced at the start of 2026 * Awarded the 2026 Robert W. Campbell Award from the National Safety Council, recognizing the company's workplace safety leadership and culture - Market Context * Performance is aligned with strong secular tailwinds from the energy transition, widespread electrification, industrial automation, increasing product complexity, and growing demand for independent safety, sustainability, and certification expertise, including from AI data center development

Guidance

- Confirms previous full-year 2026 guidance for mid-single-digit consolidated organic revenue growth, which includes an approximate 1% total revenue drag from restructuring-related business exits * Confirms the raised full-year 2026 adjusted EBITDA margin guidance of approximately 27%, reflecting operating leverage, restructuring benefits, and disciplined cost management, partially offset by higher performance-based compensation and acquisition-related integration expenses * Expects negligible FX impact on full-year 2026 revenue, and maintains a full-year effective tax rate guidance of approximately 26% * Updated full-year 2026 capital expenditure guidance to approximately 8.5% of revenue, up from prior guidance, driven by timing of planned laboratory capacity investments to meet growing customer demand for new testing capabilities * Confirms the restructuring plan will be completed by the end of Q1 2027, with only approximately $3 million in remaining pre-tax charges expected * The 1% restructuring-related revenue drag is concentrated more heavily in H1 2026 and early H2 2026, and will be fully complete by the end of 2026, with no drag entering 2027 * Expects margin cadence to be roughly similar between Q3 and Q4 2026, consistent with the full-year 27% adjusted EBITDA margin target

Segment performance

1. Industrial Segment: Revenue grew 7.8% year-over-year to $402 million (7.2% organic growth), representing 49.3% of total consolidated revenue. Adjusted EBITDA increased 7.4% to $130 million, with an adjusted EBITDA margin of 32.3% (down 10 basis points year-over-year, as higher revenue was offset by increased performance-based employee compensation costs). 2. Consumer Segment: Revenue grew 6.5% year-over-year to $362 million (6.2% organic growth), representing 44.4% of total consolidated revenue. Adjusted EBITDA increased 24.2% to $77 million, with an adjusted EBITDA margin of 21.3% (up 310 basis points year-over-year, driven by operating leverage, higher productivity, favorable mix from exiting lower-margin service lines, and restructuring benefits). 3. Risk and Compliance Segment: Revenue decreased 17.5% year-over-year to $52 million, representing 6.4% of total consolidated revenue. The decline is entirely due to the completed divestiture of the EHS software business; organic growth (excluding the divestiture impact) was 4.8% year-over-year, driven by increased retail supply chain insight demand. Adjusted EBITDA decreased 14.3% to $12 million, but adjusted EBITDA margin improved 90 basis points to 23.1% due to a leaner cost structure on the smaller remaining revenue base.

Risks & headwinds

- Forward-looking statements related to pending acquisitions, divestitures, restructuring, and future financial performance are subject to material risks and uncertainties that could cause actual results to differ materially from projections, as detailed in UL's SEC filings * Geopolitical uncertainty creates a dynamic operating environment for customers, requiring ongoing navigation of shifting regulatory, supply chain, and market conditions * Higher performance-based incentive compensation costs and acquisition-related integration expenses will partially offset margin expansion in H2 2026 * The industrial advisory business, with exposure to U.S. solar and wind projects, is currently facing near-term headwinds that act as a drag on overall industrial segment growth, and this trend is expected to continue into H2 2026 * Ongoing shifts in supply chains and input costs can create product redesign requirements, which while generally a source of new demand for UL's testing services, introduces some near-term uncertainty to demand projections

Analyst Q&A

• Q: After stronger-than-expected first-half margin expansion, what is the expected margin cadence for the second half, and how confident is management in the full-year 27% adjusted EBITDA margin guide?

  A: Management reaffirms the full-year 27% margin guidance after strong first-half results, which included 140 basis points of margin expansion in Q2 and 220 basis points year-to-date. Expected integration expenses from the upcoming Eurofin E&E acquisition closing in Q4, plus higher performance-based compensation costs, offset remaining first-half margin outperformance, leading to the confirmed guidance. Margin cadence is expected to be roughly equal between Q3 and Q4.

• Q: How resilient is UL's demand, and what levels of volatility should investors expect?

  A: UL's business is very resilient thanks to diversification across 35 industries and a business model tied to customer innovation rather than end-product volume. Upward trends in manufacturer R&D investment directly drive demand for UL's services, as more innovation and new SKUs create more need for testing and certification. Market shifts (like past chip shortages) actually drive more product redesign and retesting, supporting rather than hurting demand.

• Q: Why did CapEx intensity increase to 8.5% of revenue this year, and where are these investments being directed? What should be expected for medium-term CapEx levels?

  A: Higher 2026 CapEx is driven by accelerated investments in new lab capacity and modernization to meet growing customer demand from key megatrends. Major projects include the new high-voltage EMC automotive lab in Toyota City, the new large-scale fire testing lab in Northbrook, expanded EMC and energy storage testing capacity globally, and expanded commercial HVAC and consumer appliance testing capacity. Management expects long-term CapEx to remain in the 6-8% of revenue range, with 2026's 8.5% level driven partly by project timing, and maintenance CapEx remains in the low single digits.

• Q: What is driving strong consumer segment growth and margin improvement, and is the current growth rate sustainable for the second half? Have delays in consumer electronics product launches affected demand?

  A: Strong consumer segment results reflect underlying market growth, share gains, and restructuring-driven improvements from exiting lower-margin businesses. Growth is particularly strong in power supplies and other components for AI data centers, as well as in commercial HVAC. Contrary to concerns that product launch delays from input cost increases would hurt demand, input cost increases typically lead to product redesign and reformulation, which creates additional demand for retesting, so no negative impact is expected in the second half.