Sign in

You're signed outSign in or to get full access.

US

UL Solutions Inc. (ULS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered 7.6% organic revenue growth on $705 million total revenue, with adjusted diluted EPS of $0.37 and adjusted EBITDA of $161 million; margins expanded YoY (Adj. EBITDA margin +320 bps to 22.8%) .
  • Results modestly beat Wall Street: revenue $705.0M vs $704.2M consensus*, and adjusted EPS $0.37 vs $0.313*; adjusted EBITDA strength vs EBITDA consensus $149.2M* underpins the beat (definitions vary) .
  • Guidance affirmed: mid-single-digit organic revenue growth, adjusted EBITDA margin ~24%, capex 7–8% of revenue, and ~26% effective tax rate for FY25 .
  • Strong free cash flow ($103M) and $90M net debt repayment support a deleveraging narrative and capital flexibility; watch for potential Q2 moderation in Consumer activity tied to tariff timing .

What Went Well and What Went Wrong

What Went Well

  • Broad-based organic growth across segments and geographies; management highlighted “momentum across all segments, service offerings and regions” and “improved profitability and increased cash flow generation” .
  • Margin expansion from operating leverage: adjusted EBITDA up 22.9% with margin +320 bps to 22.8%; Industrial delivered 8.1% organic growth and 330 bps adjusted EBITDA margin improvement to 32.5% .
  • Robust cash generation and balance sheet actions: $154M CFO, $103M FCF, dividend of $0.13/share, and $90M net debt paydown; management emphasized capital allocation aligned with megatrends .

What Went Wrong

  • FX headwinds modestly reduced reported revenue; Consumer’s outsized Q1 organic growth may moderate in Q2 as tariff-related pull-forward normalizes .
  • Higher effective tax rate weighed on net income (Pillar Two implementation), with net income margin 10.1% despite operational strength .
  • Software & Advisory remains lower margin (14.0% adjusted EBITDA), and advisory demand is “lumpier” with some sustainability/regulatory-related headwinds in the U.S. .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$731 $739 $705
Net Income ($USD Millions)$94 $85 $71
Diluted EPS ($USD)$0.44 $0.40 $0.33
Adjusted Diluted EPS ($USD)$0.49 $0.49 $0.37
Adjusted EBITDA ($USD Millions)$183 $169 $161
Adjusted EBITDA Margin (%)25.0% 22.9% 22.8%

Q1 Actuals vs Consensus

MetricQ1 2025 ActualQ1 2025 Consensus*Surprise
Revenue ($USD Millions)$705.0 $704.2*+$0.8M
Primary EPS ($USD)$0.37 $0.313*+$0.057
EBITDA ($USD Millions)Adjusted: $161.0 EBITDA: $149.2*+$11.8M (definitions vary)
EPS - # of Estimates—8*—
Revenue - # of Estimates—9*—

Values retrieved from S&P Global.*

Segment Performance (Q1 2025)

SegmentRevenue ($M)Operating Income ($M)Operating Margin (%)Adjusted EBITDA ($M)Adj. EBITDA Margin (%)
Industrial$308 $83 26.9% $100 32.5%
Consumer$304 $26 8.6% $48 15.8%
Software & Advisory$93 $0 0.0% $13 14.0%

KPIs and Cash Metrics (Q1 2025)

KPIQ1 2025
Certification Testing Revenue ($M)$189
Ongoing Certification Services Revenue ($M)$245
Non-certification Testing & Other Revenue ($M)$203
Software Revenue ($M)$68
Cash from Operations ($M)$154
Capital Expenditures ($M)$51
Free Cash Flow ($M)$103
Dividend ($/share; $M)$0.13; $26
Total Debt ($M)$657
Cash & Equivalents ($M)$267
Net Debt ($M)~$390 (Debt – Cash)

Guidance Changes

MetricPeriodPrevious Guidance (Q4 2024)Current Guidance (Q1 2025)Change
Organic Revenue Growth (cc)FY 2025Mid-single digit Mid-single digit Maintained
Adjusted EBITDA MarginFY 2025~24% ~24% Maintained
Capital ExpendituresFY 20257%–8% of revenue 7%–8% of revenue Maintained
Effective Tax RateFY 2025~26% ~26% Maintained
M&A/PortfolioFY 2025Continue pursuing Continue pursuing Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
AI/data centers & electrificationHighlighted capacity investments; certification testing strength in Industrial/Consumer Data centers serving AI require ~2x power; strong Industrial tailwinds Industrial growth led by energy/automation; increased lab capacity (battery lab) Strengthening
Tariffs & supply chain—Historically resilient; tariffs can spur retesting; minimal direct volume sensitivity No material impact yet; possible Q2 Consumer moderation; retesting opportunities Watchful/neutral
Software initiatives (ULTRUS/AI)—ULTRUS platform momentum; retail compliance & ESG wins 9.3% organic in software; new PFOS module and omnichannel market AI tool Improving
Regional trends—Broad-based growth; investments in Korea/Mexico labs NA Industrial strong; strength across Asia incl. Greater China Stable to strong
Regulatory/tax—FY25 ETR uplift to ~26% from Pillar Two; FY24 reserve release nonrecurring Higher tax expense cited in margin commentary Headwind
R&D execution/capacity addsAuburn Hills EV battery facility opened; Korea testing center announced Continued expansions; strong ROI focus HVAC lab expansions (TX/Italy); Global Fire Science Center; EMC lab in Japan Ongoing build-out

Management Commentary

  • “Strong organic growth, improved profitability and increased cash flow generation reflect our strategic focus on high-growth markets and ongoing operational excellence.” — CEO Jennifer Scanlon .
  • “Our strong first quarter results included 7.6% organic revenue growth, 22.9% Adjusted EBITDA improvement, and Adjusted EBITDA margin expansion of 320 basis points… reinforcing our guidance.” — CFO Ryan Robinson .
  • “We are carefully monitoring the potential impacts… Based on what we know today… we are reaffirming our full year 2025 outlook.” — CFO Ryan Robinson .

Q&A Highlights

  • Tariffs: UL Solutions sees limited direct volume impact; tariffs can trigger redesigns/recertification; Consumer activity may moderate in Q2 following potential Q4/Q1 pull-forward .
  • Margin dynamics: Industrial showed strong operating leverage with high flow-through in Q1; majority of incremental revenue flowed to operating income .
  • Software trajectory: Sales transformation drove bookings and ARR; demand for supply chain transparency, retail compliance, sustainability, and new PFOS/AI tools .
  • Cash flow outlook: FCF strength driven by profitability, working capital, global cash management; capex to remain 7–8% of revenue for FY25 .
  • Geography: NA Industrial remains strong; Asia (incl. Greater China) contributing across segments .

Estimates Context

  • Q1 2025 beats: adjusted EPS $0.37 vs $0.313*; revenue $705.0M vs $704.2M*; adjusted EBITDA $161.0M vs EBITDA consensus $149.2M* (note: consensus uses EBITDA, company reports adjusted EBITDA) .
  • Estimates breadth: EPS based on 8 estimates*; revenue on 9 estimates*; directionally supports upward bias to FY25 EPS/margin trajectories if operational leverage persists.
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • UL Solutions posted a clean beat on adjusted EPS and slight revenue beat, with YoY margin expansion; operating leverage is most evident in Industrial, a key thesis pillar .
  • Guidance maintained (mid-single-digit organic growth, ~24% adjusted EBITDA margin) signals confidence despite macro uncertainty; track Q2 consumer moderation commentary .
  • FCF strength and deleveraging (CFO $154M; FCF $103M; $90M net debt repayment) enhance capital optionality for capacity adds and tuck-in M&A .
  • Strategic capacity expansions (HVAC, fire science, EMC, battery labs) align with electrification and data center power needs; expect sustained Industrial outperformance .
  • Tax rate headwind (~26% FY25) is a partial offset to margin gains; model EPS with higher ETR vs FY24 .
  • FX is a modest revenue headwind but largely offset in expenses; Consumer segment is more susceptible to FX swings—watch mix effects .
  • Near-term trading: emphasize margin resilience and affirmed guide; medium-term thesis: diversified recurring revenues, capacity-led growth, and disciplined capital allocation underpin compounding FCF .