Andy Whitman

Andy Whitman inquired about the impact of macro volatility and policy changes in China and Greater China on UL Solutions' customers and business, and the outlook for 2026. He also asked about the significance of project completion in the Software and Advisory segment's strong Q3 performance, specifically regarding fixed-price projects and margin benefits.

Answer

CEO Jennifer Scanlon explained that customers are adapting to a 'new normal' with tariffs, leading to supply chain diversification and shifts in manufacturing to countries like Vietnam, Thailand, and India. CFO Ryan Robinson clarified that the Software and Advisory segment's strong Q3 was driven by the completion of lumpy, project-based advisory work, resulting in high staff utilization, noting this level of performance might not be sustained.

Andy Whitman asked about the impact of macro volatility and policy changes in China/Greater China on UL Solutions' customers and business, and the outlook for 2026. He also inquired about the outperformance of the Software and Advisory business, specifically the significance of project completion and its potential benefit to margins.

Answer

CEO Jennifer Scanlon noted that customers are adapting to a 'new normal' regarding tariffs, leading to supply chain diversification, onshoring/reshoring discussions, and a return to business as usual. CFO Ryan Robinson explained that the Software and Advisory segment's strong performance was driven by the lumpy, project-based nature of the advisory business, with a particularly high level of project completions and staff utilization in Q3, which may moderate in Q4.

Andrew Whitman asked two questions: first, how the water business's top-line performance is affecting its segment's margin, and second, whether the recently mentioned large new pest customer was an entirely new client or a conversion to new technology.

Answer

Christophe Beck, Ecolab's Chairman and CEO, explained that excluding Basic Industries and Paper, the water business would show 4% top-line growth and 15% operating income growth, indicating strong underlying performance. Regarding the pest customer, Beck clarified that it is a new customer, a very large U.S. retailer, attracted by the new Pest Intelligence technology. He emphasized that focusing on major clients helps demonstrate the technology's effectiveness and encourages others to adopt it.

Andrew Whitman asked about the impact of top-line performance on the water segment's margin, requesting a bifurcation of the data. He also inquired whether the recently mentioned large new pest customer was entirely new or a conversion to Ecolab's new technology.

Answer

Christophe Beck, Chairman and CEO of Ecolab, explained that excluding Basic Industries and Paper, the water business would show 4% top-line growth and 15% operating income growth, highlighting the focus on improving the performance of the underperforming segments. Regarding the pest customer, Beck clarified that it is a new customer, a major U.S. retailer, attracted by Ecolab's new Pest Intelligence technology, which is transforming their service model and attracting leading companies.

Andy Whitman asked about the implied Q4 margins given expected revenue declines and sought clarification on the timing of a market recovery, specifically regarding the outlook for 2026 and beyond.

Answer

CFO Iain Humphries expressed confidence in the Q4 guidance range and margin profile, noting Q3 and Q4 are usually comparable with Q4 having an extra day. CEO Bruce Young discussed the recovery outlook, highlighting increased bidding activity, resilient residential markets, accelerating U.S. infrastructure projects, and robust U.K. infrastructure (HS2). He also mentioned strong activity in large commercial projects like data centers and warehouses, while manufacturing remains on hold due to tariff uncertainty, leading to optimism for next year but acknowledging it's still early to predict.