UL Solutions (ULS) Q2 FY26 earnings call: guidance and Q&A

Asked about the second-half margin cadence given strong first-half expansion and confidence in the full-year guide.

Management affirmed confidence in the full-year adjusted EBITDA margin guide of approximately 27%, noting that the first-half performance allowed them to sharpen the guidance. Ryan Robinson mentioned that the second-half cadence would be similar between Q3 and Q4, with some integration-related expenses for the Eurofins acquisition and higher performance-based compensation offsetting continued operating leverage.

“We're making progress on many near-term items in our portfolio, which include some acquisition costs, and together with other considerations in our business, led us to confirm the outlook.”

asked by Stephanie Benjamin Moore · answered by Ryan Robinson

Inquired about the increase in incentive compensation, distinguishing between stock-based (added back to adjusted EBITDA) and cash-based, and its impact on operating income and adjusted EBITDA, asking for quantification.

Ryan Robinson explained that the increase was due to changes in expected payouts for both the annual all-employee bonus plan (cash-based, reduces operating income/adjusted EBITDA) and performance stock units (stock-based, added back). He quantified the total compensation expense increase at $11 million in Q2, with $10 million of that being stock-based, and noted that overall compensation expense was up only 2.6% in H1 despite revenue growth.

“our compensation expense is up $11 million with these incentives, which drives higher revenue per employee, higher profit per employee.”

asked by Andrew J. Wittmann · answered by Ryan Robinson

Asked for a breakdown of price versus volume contributions to the accelerating organic growth rate.

Ryan Robinson stated that both price and volume were meaningful contributors, with volume having a bit more impact than price. He highlighted that certification testing grew over 10% in the quarter, primarily driven by volume.

“Price and volume were meaningful contributors to our revenue growth with volume a bit more impact than price. Our certification testing, we're very proud of the progress, it grew over 10% again in the quarter. And at that level of growth, that was primarily driven by volume.”

asked by Andrew J. Wittmann · answered by Ryan Robinson

Asked for more details on the strong sequential and year-over-year improvement in the Consumer segment, inquiring about one-time factors and the sustainability of the mid-single-digit growth rate. Also asked about the impact of increasing memory costs on new product releases.

Jennifer Scanlon attributed Consumer's strength to healthy market demand, potential share gains, and strategic focus. She cited demand from data centers (power supplies, AI racks, servers), product certification, and the shedding of less profitable revenue through restructuring. She clarified that increasing factor input costs, like memory, often lead to product redesigns and retesting, which benefits UL Solutions' business.

“when you see factor input costs increase, one of the very first things you do is try to figure out how do you value-engineer that product and redesign it or change your formulations. And that frequently leads to retesting of that product.”

asked by Keegan Antico · answered by Jennifer Scanlon

Asked about the drivers of growth in Industrial, particularly in materials, energy, and automation, and where the increased CapEx is being allocated.

Jennifer Scanlon highlighted strong double-digit growth in data center-related power, automation, and wire and cable components, driven by energy needs for generation, transmission, and storage. She noted CapEx investments in the Toyota City Japan high-voltage EMC lab, the Northbrook Fire 2.0 lab, and global expansions in EMC and energy storage testing, as well as retail centers of excellence and HVAC testing.

“one of the things we're really seeing is strong growth, double-digit growth in data center related power and automation and wire and cable components and products.”

asked by Keen Fai Tong · answered by Jennifer Scanlon

Asked for more detail on the acceleration of CapEx investments and the philosophical approach to balancing employee compensation with margin expansion, especially regarding how incentive compensation will be structured in 2027.

Jennifer Scanlon explained that CapEx acceleration is driven by customer demand and emerging technologies, citing examples like new labs for appliances/HVAC and energy storage systems. Ryan Robinson detailed that annual incentive plans are based on adjusted EBITDA and revenue goals, while performance stock units are based on 3-year cumulative revenue and operating income. He noted that next year's annual incentive pay would likely be lower on a comparative basis, and accruals adjust based on actual performance.

“our teams, I would say there's no shortage of great ideas and great opportunities. We can be the accelerator or the governor on the speed of that, and feel like right now, given the pace of investments that are going into this new compute environment, this new AI infrastructure, as well as the other mega trends around energy transition and the needs for energy storage, we're going to continue to keep up with it in the right way.”

asked by Shlomo Rosenbaum · answered by Jennifer Scanlon