Q2 2024 UL Solutions Inc Earnings Call

July 31, 2024

♪♪ ♪♪ ♪♪ ♪♪ ♪♪

Operator: Greetings. Welcome to the UL Solutions second quarter 2024 earnings call. At this time, all participants are in a listen-only mode.

Operator: Welcome to the UL Solutions second quarter of 2024 earnings call. At this time, I'll participate in a listen-only mode.

Speaker Change: Greetings. Welcome to the UL Solutions second quarter 2024 earnings call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation.

Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host, Mitchell Gee, Senior Vice President of Corporate Finance. You may begin. Thank you.

Mitchell Ji: I will now turn the conference over to your host, Mitchell Ji, Senior Vice President of Corporate Finance. You may begin.

Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone key. I will now turn the conference over to your host, Mitchell Gee, Senior Vice President of Corporate Finance. You may begin. Thank you. Welcome everyone to our second quarter 2024 earnings call. Joining me today are Jenny Scanlon, our Chief Executive Officer, and Ryan Robinson, our Chief Financial Officer. During the discussion today, we will be referring to our earnings presentation, which is available in the Investor Relations section of our website at ul.com.

Mitchell Ji: Thank you.

Operator: Our earnings release is also available in the IR section of our website. I would like to remind everyone that on today's call, we may discuss forward-looking statements within the meaning of the Safe Harbor Provision of the Private Security Litigation Reform Act of 1995.

Mitchell Ji: Welcome everyone to our second quarter of 2024 earnings call. Joining me today are Jenny Scanlon, our Chief Executive Officer, and Ryan Robinson, our Chief Financial Officer. During the discussion today, we will be referring to our earnings presentation, which is available on the investor-relations section of our website at ul.com. Our earnings really is also available on the higher section of our website.

Mitchell Gee: Thank you. Welcome, everyone, to our second quarter 2024 earnings call. Joining me today are Jenny Scanlon, our Chief Executive Officer, and Ryan Robinson, our Chief Financial Officer.

Speaker Change: During the discussion today, we will be referring to our earnings presentation, which is available on the Investor Relations section of our website at ul.com. Our earnings release is also available on the IR section of our website.

Mitchell Ji: I would like to remind everyone that on today's call, we made us go forward-looking statements within the meeting of the State Harbor provisions of the Private Security Litigation Reform Act of 1995. These forward-looking statements may include, among other things, statements about UL Solutions' results of operations and estimates and prospects that involve substantial risks, uncertainties, and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward-looking statements. Please see the disclosure statement on slide two of the earnings presentation, as well as the disclaimers in our earnings release concerning forward-looking statements and the risk factors that are described in our quarterly report on Form 10-Q for the period ending March 31, 2024.

Mitchell Gee: These forward-looking statements may include, among other things, statements about UL Solutions' results of operations and estimates and prospects that involve substantial risks, uncertainties, and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward-looking statement. Please see the disclosure statement on slide 2 of the earnings presentation, as well as the disclaimers in our earnings release concerning forward-looking statements and the risk factors that are described in our quarterly report on Form 10-Q for the period ending March 31, 2024. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date hereof, except as required by law.

Speaker Change: I would like to remind everyone that on today's call, we may discuss forward-looking statements within the meaning of the Safe Harbor Provision of the Private Security Litigation Reform Act of 1995.

Speaker Change: uncertainties, and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward-looking statements.

Speaker Change: Please see the disclosure statement on slide 2 of the earnings presentation, as well as the disclaimers in our earnings release concerning forward-looking statements and the risk factors that are described in our quarterly report on Form 10-Q for the period ending March 31, 2024.

Mitchell Ji: We assume no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof, except as required by law.

Mitchell Ji: Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measure can be found in the appendix to the earnings presentation.

Mitchell Gee: Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measure can be found in the appendix to the earnings presentation. With that, I will now turn the call over to Jenny.

Speaker Change: Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measure can be found in the appendix to the earnings presentation.

Jennifer Scanlon: With that, I will now turn the call over to Jenny. Good morning, everyone, and thanks for joining us. This is our second quarterly report as a public company, and I'm really pleased to say we have another strong quarter. We reported meaningful growth across all of our segments and geographies, improved margins, and generated solid cash flow that has been a hallmark of our business. These results reflect outstanding execution and a keen focus on our core business. Safety science underpins important mega trends that we expect will continue to drive demand for our industry-leading services for years to come.

Jenny Scanlon: Good morning, everyone, and thanks for joining us. This is our second quarterly report as a public company, and I'm really pleased to say we have another strong quarter. We reported meaningful growth across all of our segments and geographies, improved margins, and generated solid cash flow that has been a hallmark of our business. These results reflect outstanding execution and a keen focus on our core business. Safety science underpins important megatrends that we expect will continue to drive demand for our industry-leading services for years to come. Innovation without safety results in failure.

Speaker Change: With that, I will now turn the call over to Jenny.

Jenny Scanlon: These results reflect outstanding execution and a keen focus on our core business.

Jennifer Scanlon: Innovation without safety results and failure. I have three key topics I'll cover on today's call. First, I'll highlight key elements contributing to our strong second quarter performance. Second, I'll highlight some key growth achievements and customer activities from the quarter. Finally, I'll touch on our strong financial position and capital allocation actions. Let me start by sharing my thoughts on our strong second quarter results. I like to say that while we are newly public, we are not newly for profit, and this mantra is echoed in our ability to once again deliver profitable growth. We could not have achieved these results without focused execution led by our experienced and technically accomplished team, for whom I am truly grateful.

Jenny Scanlon: I have three key topics I'll cover on today's call. First, I'll highlight the key elements contributing to our strong second quarter performance. Second, I'll highlight some key growth achievements and customer activities from the quarter. Finally, I'll touch on our strong financial position and capital allocation actions. Let me start by sharing my thoughts on our strong second-quarter results. I like to say that while we are newly public, we are not newly for-profit, and this mantra is echoed in our ability to once again deliver profitable growth. We could not have achieved these results without focused execution, led by our experienced and technically accomplished team, for whom I am truly grateful.

Jenny Scanlon: I have three key topics I'll cover on today's call. First, I'll highlight key elements contributing to our strong second quarter performance.

Jenny Scanlon: Second, I'll highlight some key growth achievements and customer activities from the quarter. Finally, I'll touch on our strong financial position and capital allocation action.

Jenny Scanlon: Our employees' relentless emphasis on safety, science, and customer centricity shapes our culture and enhances our business. In the second quarter, our team achieved organic growth of 8.4%, resulting in $730 million in revenue. We continue to experience strength in our industrial segment, we benefited from improving trends in our consumer segment, and we posted a solid quarter for software and advisory. Importantly, our results were well-balanced, with growth in all three segments across all geographic regions and service lines. Adjusted EBITDA grew 11.6%, and the adjusted EBITDA margin expanded by 120 basis points. Adjusted net income increased by 5.6%, and in the first six months of the year, we delivered $131 million of free cash flow.

Jenny Scanlon: Let me start by sharing my thoughts on our strong second quarter results.

Jenny Scanlon: I like to say that while we are newly public, we are not newly for profit. And this mantra is echoed in our ability to once again deliver profitable growth.

Jenny Scanlon: We could not have achieved these results without focused execution, led by our experienced and technically accomplished team, for whom I am truly grateful.

Jennifer Scanlon: Our employees' relentless emphasis on safety, science, and customer centricity shapes our culture and enhances our business. In the second quarter, our team achieved organic growth of 8.4%, resulting in $730 million of revenue. We continue to experience stamina in our industrial segment. We've benefited from improving trends in our consumer segment, and we posted a solid quarter for software and advisory. Importantly, our results were well balanced with growth in all three segments across all geographic regions and service lines. Adjusted EBITDA grew 11.6%, and adjusted EBITDA margin expanded by 120 basis points. Adjusted net income increased by 5.6%, and in the first six months of the year, we delivered 131 million of free cash flow.

Jenny Scanlon: Our employees' relentless emphasis on safety, science, and customer centricity shapes our culture and enhances our business.

Jenny Scanlon: We continue to experience stamina in our industrial segment, we benefited from improving trends in our consumer segment, and we posted a solid quarter for software and advisory.

Jenny Scanlon: Importantly, our results were well balanced with growth in all three segments across all geographic regions and service lines. Adjusted EBITDA grew 11.6% and adjusted EBITDA margin expanded by 120 basis points.

Jennifer Scanlon: Now let me highlight a few key achievements from the quarter. In our industrial segment, our Korean advanced battery lab that came fully online last quarter is experiencing a rapid ramp-up in activity, serving Korean automotive customers with the latest large battery safety technology. Construction of our Auburn Hills North American battery lab is progressing on schedule, and we expect to open in August with a strong backlog of work ready to go.

Jenny Scanlon: Now let me highlight a few key achievements from the quarter. In our industrial segment, our Korean Advanced Battery Lab, which came fully online last quarter, is experiencing a rapid ramp-up of activity, serving Korean automotive customers with the latest large battery safety technology. Construction of our Auburn Hills North American Battery Lab is progressing on schedule, and we expect to open in August with a strong backlog of work ready to go. And I want to emphasize the key point: battery testing at UL Solutions is so much more than EV and hybrid automotive batteries. The electrification of everything spans a broad spectrum of energy transfer and storage needs, from small consumer to large-scale industrial batteries used to power heavy equipment.

Jenny Scanlon: Now let me highlight a few key achievements from the quarter.

Jenny Scanlon: In our industrial segment, our Korean Advanced Battery Lab that came fully online last quarter is experiencing a rapid ramp up in activity, serving Korean automotive customers with the latest large battery safety technology.

Jenny Scanlon: Construction of our Auburn Hills North American Battery Lab is progressing on schedule, and we expect to open in August with a strong backlog of work ready to go.

Jennifer Scanlon: And I want to emphasize the key point. Battery testing at UL Solutions is so much more than EV and hybrid automotive batteries. The electrification of everything spans a broad spectrum of energy transfer and storage needs from small consumer to large-scale industrial batteries used to power heavy equipment. These two new facilities expand our already impressive suite of offerings across the full set of industrial and automotive battery testing. We were active on the M&A front in the industrial segment with two acquisitions: one in the quarter and one subsequent. In May, we acquired German battery testing and simulation company Battery Engineer, who has expertise in specialized cell, small modules, and battery system performance testing.

Jenny Scanlon: And I want to emphasize a key point, battery testing at UL Solutions is so much more than EV and hybrid automotive batteries.

Jenny Scanlon: The electrification of everything spans a broad spectrum of energy transfer and storage needs from small consumer to large scale industrial batteries used to power heavy equipment.

Jenny Scanlon: These two new facilities expand our already impressive suite of offerings across the full set of industrial and automotive battery testing. We were active on the M&A front in the industrial segment with two acquisitions, one in the quarter and one subsequent. In May, we acquired a German battery testing and simulation company, Battery Ingenieur, which has expertise in specialized cell, small modules, and battery system performance testing.

Speaker Change: We were active on the M&A front in the industrial segment with two acquisitions, one in the quarter and one subsequent.

Jenny Scanlon: This acquisition expanded our global battery testing footprint, adding opportunities in the European market to our already impressive portfolio. And in July, we acquired another company based in Germany called Testnet Engineering, a leader in hydrogen component and system testing. This acquisition deepens our expertise in clean energy testing and enhances our ability to impact global decarbonization efforts. We believe hydrogen technology will play a significant role in the transition to lower global emissions from transportation and energy systems.

Jennifer Scanlon: This acquisition expanded our global battery testing footprint, adding opportunities in the European market to our already impressive portfolio. And in July we acquired another company based in Germany called Test Connect Engineering, a leader in hydrogen component and system testing. This acquisition deepens our expertise in clean energy testing and enhances our ability to impact global decarbonization efforts. We believe hydrogen technology will play a significant role in the transition to lower global emissions from transportation and energy systems. We are excited to expand our capabilities in this important area. In our consumer segment, as the HVAC industry continues to drive towards sustainable solutions through the transition to more environmentally friendly refrigerants, we have focused on strategic initiatives and capital investments to support our customers' needs.

Speaker Change: This acquisition expanded our global battery testing footprint, adding opportunities in the European market to our already impressive portfolio.

Speaker Change: And in July , we acquired another company based in Germany called Testnet Engineering, a leader in hydrogen component and system testing.

Speaker Change: This acquisition deepens our expertise in clean energy testing and enhances our ability to impact global decarbonization efforts.

Speaker Change: We believe hydrogen technology will play a significant role in the transition to lower global emissions from transportation and energy systems. We are excited to expand our capabilities in this important area.

Jenny Scanlon: We are excited to expand our capabilities in this important area. In our consumer segment, as the HVAC industry continues to drive towards sustainable solutions through the transition to more environmentally friendly refrigerants, we have focused on strategic initiatives and capital investments to support our customers' needs. Our foundational research for the safe transition to the next generation of refrigerants helped solidify our thought leadership position in the future of HVAC safety and performance. We planned for an expected surge in demand for our services, and we completed a capacity expansion of our HVAC Performance Center of Excellence in Plano, Texas, in the second half of last year. Customer reception to the new chambers has been overwhelmingly positive, and we are seeing strong and durable demand.

Speaker Change: In our consumer segment, as the HVAC industry continues to drive towards sustainable solutions through the transition to more environmentally friendly refrigerants.

Speaker Change: We have focused on strategic initiatives and capital investments to support our customers' needs.

Jennifer Scanlon: Our foundational research for the safe transition to the next generation of refrigerants helped solidify our thought leadership position in the future of HVAC safety and performance. We planned for an expected surge in demand for our services, and we completed a capacity expansion of our HVAC performance center of excellence in Plano, Texas, in the second overwhelming positive, and we are seeing strong and durable demand. In our software advisory segment, we are making good progress with balanced growth. Sustainability continues to be a key driver of demand, while the energy transition was also a contributor.

Speaker Change: Our foundational research for the safe transition to the next generation of refrigerants helped solidify our thought leadership position in the future of HVAC safety and performance.

Speaker Change: We planned for an expected surge in demand for our services, and we completed a capacity expansion of our HVAC Performance Center of Excellence in Plano, Texas in the second half of last year.

Speaker Change: Customer reception to the new chambers has been overwhelmingly positive and we are seeing strong and durable demand.

Jenny Scanlon: In our software and advisory segment, we are making good progress with balanced growth. Sustainability continues to be a key driver of demand, while the energy transition is also contributing. Finally, let me comment on our capital allocation activities. Our hard work and focused business model have put us in an enviable position with regard to our investment-grade balance sheet, robust cash flow generation, and disciplined approach to capital allocation. During the quarter and subsequent to its end, we were active on multiple fronts.

Speaker Change: In our software and advisory segment we are making good progress with balanced growth. Sustainability continues to be a key driver of demand while the energy transition was also a contributor.

Jennifer Scanlon: Finally, let me comment on our capital allocation activities. Our hard work and focus business model put us in an enviable position with regard to our investment-grade balance sheet, robust cash flow generation, and disciplined approach to capital allocation. During the quarter and subsequent to its end, we were active on multiple fronts. First, we completed a divestiture as well as the two acquisitions I just mentioned. Second, organically, we announced plans to construct an advanced automotive and battery testing center in Korea to further serve the automotive industry. The new lab, when complete, will expand our current battery testing capacity in the region and add EV charger testing and other capabilities to our suite of offerings.

Speaker Change: Finally, let me comment on our capital allocation activities. Our hard work and focused business model put us in an enviable position with regard to our investment-grade balance sheet, robust cash flow generation, and disciplined approach to capital allocation.

Speaker Change: During the quarter, and subsequent to its end, we were active on multiple fronts. First, we completed a divestiture, as well as the two acquisitions I just mentioned.

Jenny Scanlon: First, we completed a divestiture, as well as the two acquisitions I just mentioned. Second, organically, we announced plans to construct an advanced automotive and battery testing center in Korea to further serve the automotive industry. The new lab, when complete, will expand our current battery testing capacity in the region and add EV charger testing and other capabilities to our suite of offerings. It leverages the technology used in our Korea Advanced Battery Lab, which we opened last year. This new lab is expected to open in the second half of 2025.

Speaker Change: Second, organically, we announced plans to construct an advanced automotive and battery testing center in Korea to further serve the automotive industry.

Speaker Change: The new lab, when complete, will expand our current battery testing capacity in the region and add EV charger testing and other capabilities to our suite of offerings.

Jennifer Scanlon: It leverages the technology used in our Korea Advanced Battery Lab, which we opened last year. This new lab is expected to open in the second half of 2025. Third, we returned cash to shareholders in the form of our first regular quarterly dividend as a public company of 12.5 cents per share in June. We are committed to maintaining a strong balance sheet with conservative leverage and investment-grade ratings. We expect to continue to return excess capital to shareholders.

Speaker Change: It leverages the technology used in our Korea Advanced Battery Lab, which we opened last year. This new lab is expected to open in the second half of 2025.

Jenny Scanlon: Third, we return cash to shareholders in the form of our first regular quarterly dividend as a public company of $0.125 per share in June. We are committed to maintaining a strong balance sheet with conservative leverage and investment-grade ratings. We expect to continue to return excess capital to shareholders. Now, I'm going to turn the call over to Ryan, who will provide greater detail on our results and our outlook. Thank you, Jenny, and hello everyone.

Speaker Change: Third, we return cash to shareholders in the form of our first regular quarterly dividend as a public company of twelve and a half cents per share in June .

Speaker Change: We are committed to maintaining a strong balance sheet with conservative leverage and investment grade ratings. We expect to continue to return excess capital to shareholders.

Ryan Robinson: Now I'm going to turn the call over to Ryan, who will provide greater detail on our result and our outlook. Thank you, Jenny, and hello everyone. I also want to thank all of our team members for delivering another strong quarter.

Speaker Change: Now, I'm going to turn the call over to Ryan, who will provide greater detail on our results and our outlook.

Ryan Robinson: I also want to thank all of our team members for delivering another strong quarter. I'll first provide more detail on our financial results, then discuss our segment's performance before closing with some comments on our full year outlook. We are proud to report in our second earnings release a continuation of strong top-line growth, adjusted EBITDA margin expansion, and solid cash generation. As Jenny mentioned, it's encouraging to see that organic growth once again occurred across all of our segments, geographies, and service lines. Now, let me dive into the details of the quarter.

Ryan Robinson: Thank you, Jenny. And hello, everyone. I also want to thank all of our team members for delivering another strong quarter. I'll first provide more detail on our financial results, then discuss our segment's performance before closing with some comments on our full year outlook.

Ryan Robinson: I'll first provide more detail on our financial results, then discuss our segments' performance before closing with some comments on our full year outlook. We are proud to report in our second earnings release a continuation of strong top line growth, adjusted EBITDA margin expansion, and solid cash generation. As Jenny mentioned, it's encouraging to see that organic growth once again occurred across all of our segments, geographies, and service lines. Now let me dive into the details of the quarter. Consolidated revenues of $730 million were up 6% over the prior year quarter, including organic growth of 8.4%. The increased reflected particular strength in the industrial segment, which delivered 11.6% organic growth.

Ryan Robinson: As Jenny mentioned, it's encouraging to see that organic growth once again occurred across all of our segments, geographies, and service lines.

Ryan Robinson: Consolidated revenues of $730 million were up 6% over the prior year quarter, including organic growth of 8.4%. The increase reflected particular strength in the industrial segment, which delivered 11.6% organic growth. Adjusted EBITDA for the quarter was $173 million, an improvement of 11.6% year-over-year on strength across all three segments. Adjusted EBITDA margin was 23.7%, up 120 basis points, from the same period a year ago on strength in both consumer and the software and advisory segment.

Ryan Robinson: Now, let me dive into the details of the quarter. Consolidated revenues of $730 million were up 6% over the prior year quarter, including organic growth of 8.4%.

Ryan Robinson: The increase reflected particular strength in the industrial segment, which delivered 11.6% organic growth.

Ryan Robinson: Adjusted EBITDA for the quarter was $173 million and improvement of 11.6% year over year on strength across all three segments. Adjusted EBITDA margin was 23.7%, up 120 basis points. from the same period a year ago on strength in both consumer and the software and advisory segments. Adjusted net income for the second quarter was $94 million or $44 cents per adjusted diluted share, a 5.6% increase from $89 million or $42 cents per adjusted diluted share in the second quarter of 2023. Despite $5 million of additional pretext interest expense. As a reminder, our IPO occurred in the second quarter and then affected two income statement items in particular.

Ryan Robinson: Adjusted EBITDA for the quarter was $173 million, an improvement of 11.6% year-over-year on strength across all three segments. Adjusted EBITDA margin was 23.7%, up 120 basis points.

Ryan Robinson: Adjusted net income for the second quarter was $94 million, or $0.44 per adjusted diluted share, up 5.6% from $89 million, or $0.42 per adjusted diluted share in the second quarter of 2023, despite $5 million of additional pre-tax interest expense. As a reminder, our IPO occurred in the second quarter, and that affected two income statement items in particular. These items are not adjusted for in our non-GAAP financial measures.

Ryan Robinson: Adjusted net income for the second quarter was $94 million, or $0.44 per adjusted diluted share, up 5.6 percent from $89 million, or $0.42 per adjusted diluted share in the second quarter of 2023.

Ryan Robinson: Despite $5 million of additional pre-tax interest expense.

Ryan Robinson: As a reminder, our IPO occurred in the second quarter and then affected two income statement items in particular. These items are not adjusted for in our non-GAAP financials.

Ryan Robinson: These items are not adjusted for in our non-GAAP financials. First, virtually all our cash settled appreciation rights or CSARS have either matured or were converted to stock settled appreciation rights. As a result of the value with the IPO closing, we recorded a $9 million pretext expense in Q224, which reduced adjusted EBITDA by $9 million. These awards have historically created market-to-market expense volatility, which will no longer occur as the value of these converted awards was established upon the closing of the IPO; they will no longer have market-to-market volatility. Second, since public companies have a limitation on the tax deductibility of executive compensation, we reduced the value of some deferred tax assets post-IPO, which resulted in an increase in the Q2 provision for income taxes of $5 million.

Ryan Robinson: First, virtually all our Cash Settled Appreciation Rights, or CSARs, have either matured or were converted to Stock Settled Appreciation. As a result of the value at the IPO closing, we recorded a $9 million pre-tax expense in Q2'24, which reduced adjusted EBITDA by $9 million. These awards have historically created mark-to-market expense volatility, which will no longer occur. As the value of these converted awards was established upon the closing of the IPO, they will no longer have mark-to-market volatility.

Ryan Robinson: First, virtually all our Cash Settled Appreciation Rights, or CSARs, have either matured or were converted to Stock Settled Appreciation Rights.

Ryan Robinson: As a result of the value at the IPO closing, we recorded a $9 million pre-tax expense in Q2'24, which reduced Adjusted EBITDA by $9 million.

Ryan Robinson: These awards have historically created mark-to-market expense volatility, which will no longer occur. As the value of these converted awards was established upon the closing of the IPO, they will no longer have mark-to-market volatility.

Ryan Robinson: Second, since public companies have a limitation on the tax deductibility of executive compensation, we reduced the value of some deferred tax assets post-IPO, which resulted in an increase in the Q2 provision for income taxes of $5 million.

Ryan Robinson: Second, since public companies have a limitation on the tax deductibility of executive compensation, we reduced the value of some deferred tax assets post IPO, which resulted in an increase in the Q2 provision for income taxes of $5 million.

Ryan Robinson: Now let me turn to our performance by segment, starting with industrial. The mega trends of energy transition and the electrification of everything are driving tremendous innovation and demand for our services, while the Internet of Things is spreading across the industrial infrastructure. These factors help the industrial segment deliver the strongest growth of the three segments for the quarter. Revenues in the segment rose 7.5% to $314 million, or 11.6% on an organic basis, as compared to the second quarter of 2023. Those impressive gains were driven by robust demand for ongoing certification services and certification testing for engineered materials, energy and automation, and building products.

Ryan Robinson: Now, let me turn to our performance by segment, starting with industrial. The megatrends of energy transition and the electrification of everything are driving tremendous innovation and demand for our services, while the Internet of Things is spreading across industrial infrastructure. These factors helped the industrial segment deliver the strongest growth of the three segments for the quarter.

Speaker Change: Now, let me turn to our performance by segment, starting with industrial.

Speaker Change: The megatrends of energy transition and the electrification of everything are driving tremendous innovation and demand for our services, while the Internet of Things is spreading across the industrial infrastructure.

Ryan Robinson: These factors help the industrial segment deliver the strongest growth of the three segments for the quarter.

Ryan Robinson: Revenues in this segment rose 7.5% to $314 million, or 11.6% on an organic basis as compared to the second quarter of 2023. Those impressive gains were driven by robust demand for ongoing certification services and certification testing for engineered materials, energy, and automation, and building products. This was partially offset by the sale of our payments testing business, which closed May 1, as well as some other effects. Adjusted EBITDA for the industrial segment increased 6.6% to $97 million in the quarter, while adjusted EBITDA margin declined 30 basis points to 30.9%, driven by increases in compensation costs, including $4 million of the IPO CSAR conversion expense, as well as higher M&A diligence expenses.

Ryan Robinson: Revenues in this segment rose 7.5% to $314 million, or 11.6% on an organic basis as compared to the second quarter of 2023.

Ryan Robinson: Those impressive gains were driven by robust demand for ongoing certification services and certification testing for engineered materials, energy and automation, and building products.

Ryan Robinson: This was partially offset by the sale of our payments testing business, which closed May 1st, as well as some effects impacts. Adjusted EBITDA for the industrial segment increased 6.6% to $97 million in the quarter, while adjusted EBITDA margin declined 30 basis points to 30.9%, driven by increases in compensation costs, including $4 million of the IPO CSR conversion expense, as well as higher M&A diligence expenses.

Ryan Robinson: This was partially offset by the sale of our payments testing business, which closed May 1st, as well as some FX impacts.

Ryan Robinson: Adjusted EBITDA for the industrial segment increased 6.6 percent.

Ryan Robinson: to $97 million in the quarter.

Ryan Robinson: While adjusted EBITDA margin declined 30 basis points.

Ryan Robinson: to 30.9% driven by increases in compensation costs, including $4 million of the IPO CSAR conversion expense, as well as higher M&A diligence expenses.

Ryan Robinson: Now turning to the consumer segment. Revenues in consumer were $322 million, up 4.2% from the 2023 quarter, or 6.1% on an organic basis. The improvement was driven by strong demand for non-certification testing and other services for consumer technology, particularly higher electromagnetic compatibility or EMC testing for automotive and connected devices, as well as improved retail products demand. In addition, strength in HVAC led to improvements in certification tests. Funding. Adjusted EBITDA for the quarter and consumer was $61 million, an increase of 17.3% versus the second quarter of last year. Adjusted EBITDA margin for the quarter was 18.9%, an increase of 210 basis points year over year, driven by higher revenues and expense management actions taken in 2023 to improve our cost structure.

Ryan Robinson: Now turning to the consumer segment. Revenues and consumer were three hundred and twenty two million dollars, up 4.2% from the 2023 quarter or 6.1% on an organic basis. The improvement was driven by strong demand for non-certification testing and other services for consumer technology, particularly higher electromagnetic compatibility, or EMC testing, for automotive and connected devices, as well as improved retail product demand. In addition, strength in HVAC led to improvements in certification testing.

Ryan Robinson: Now turning to the consumer segment.

Ryan Robinson: Revenues and Consumer were $322 million.

Ryan Robinson: Up 4.2% from the 2023 quarter or 6.1% on an organic basis.

Ryan Robinson: The improvement was driven by strong demand for non-certification testing and other services for consumer technology.

Ryan Robinson: particularly higher electromagnetic compatibility or EMC testing for automotive and connected devices, as well as improved retail products demand. In addition, strength in HVAC led to improvements in certification testing.

Ryan Robinson: Adjusted EBITDA for the quarter in consumer was $61 million, an increase of 17.3% versus the second quarter of last year. Adjusted EBITDA margin for the quarter was 18.9%, an increase of 210 basis points year-over-year, driven by higher revenues and expense management actions taken in 2023 to improve our cost structure. As we detailed on the last call, Consumer completed several cost structure improvements in the past year, including relocating two large laboratories into larger, more cost-efficient locations, which contributed to the improvements in margin. This more than offset $4 million of the CSAR conversion costs within Consumer.

Ryan Robinson: Adjusted EBITDA for the quarter in consumer was 61 million dollars, an increase of 17.3% versus the second quarter of last year.

Ryan Robinson: Adjusted EBITDA margin for the quarter was 18.9%, an increase of 210 basis points year-over-year, driven by higher revenues and expense management actions taken in 2023 to improve our cost structure.

Ryan Robinson: As we detailed on the last call, consumer completed several cost structure improvements in the past year, including relocating two large laboratories into larger, more cost-efficient locations, which contributed to the improvements in margin. This more than offset $4 million of the CSR conversion cost within consumer.

Ryan Robinson: As we detailed on the last call, consumer completed several cost structure improvements in the past year, including relocating two large laboratories into larger, more cost efficient locations, which contributed to the improvements in margin.

Ryan Robinson: This more than offset $4 million of the CSAR conversion costs within consumer.

Ryan Robinson: Our third segment is software and advisory. Revenues for that segment were $94 million, an increase year-over-year of 6.8%, including a 5.7% increase on organic. The improvement was driven by higher demand for both software and advisory services. Adjusted EBITDA for the quarter for software and advisory was $15 million, an improvement of 25% as compared to the second quarter of last year.

Ryan Robinson: Our third segment is Software and Advisory. Revenues for that segment were $94 million in increased year over year of 6.8%, including a 5.7% increase on an organic basis. The improvement was driven by higher demand for both software and advisory services. Adjusted EBITDA for the quarter for software and advisory was $15 million, an improvement of 25% as compared to the second quarter of last year. Adjusted EBITDA margin for the quarter was 16%, an increase of 240 basis points year over year, driven by higher revenues and cost structure improvement actions.

Ryan Robinson: Our third segment is Software and Advisory. Revenues for that segment were $94 million, an increase year-over-year of 6.8%, including a 5.7% increase on an organic basis.

Ryan Robinson: The improvement was driven by higher demand for both software and advisory services.

Ryan Robinson: Adjusted EBITDA for the quarter for software and advisory was $15 million, an improvement of 25% as compared to the second quarter of last year.

Ryan Robinson: Adjusted EBITDA margin for the quarter was 16%, an increase of 240 basis points year-over-year, driven by higher revenues and cost-structure improvement actions. Turning to our cash generation in the first six months, We delivered $244 million of cash generated from operating activities compared to $220 million in the first half of 2023. Capital expenditures were $113 million in each of the first half of this year and last year and were primarily geared towards higher-return gross investments in both periods.

Ryan Robinson: Adjusted EBITDA margin for the quarter was 16 percent, an increase of 240 basis points year-over-year, driven by higher revenues and cost structure improvement actions.

Ryan Robinson: Turning to our cash generation in the first six months, we delivered $244 million of cash generated from operating activities compared to $220 million in the first half of 2023. Capital expenditures were $113 million in each of the first half of this year and last year, and were primarily geared towards higher return gross investments in both periods. We continue to make important investments in energy transition opportunities a focus area for UL Solutions. Free cash flow was $131 million compared to $107 million in the first half of 2023, in part reflecting lower cash incentive payments. We finished the quarter with $295 million of cash and cash equivalents on the balance sheet and net leverage of 0.9 times net debt to trailing 12 month adjusted EBITDA.

Ryan Robinson: Turning to our cash generation for in the first six months.

Ryan Robinson: We deliver $244 million of cash generated from operating activities.

Ryan Robinson: compared to $220 million in the first half of 2023. Capital expenditures were $113 million in each of the first half of this year and last year, and were primarily geared towards higher-return gross investments in both periods.

Ryan Robinson: We continue to make important investments in energy transition opportunities, a focus area for UL Solutions. Free cash flow was $131 million, compared to $107 million in the first half of 2023, in part reflecting lower cash incentives.

Ryan Robinson: We continue to make important investments in energy transition opportunities, a focus area for UL Solutions.

Ryan Robinson: Free cash flow was $131 million compared to $107 million in the first half of 2023, in part reflecting lower cash incentive payments.

Ryan Robinson: We finished the quarter with $295 million of cash and cash equivalents on the balance sheet and net leverage of 0.9 times net debt to trailing 12-month adjusted EBITDA. The strength of our balance sheet is reflected in our investment grade rating. We believe a robust balance sheet and cash flow generation give us great flexibility to invest in organic initiatives, accretive acquisitions, and to pursue a number of value-enhancing ways to produce best-in-class shareholder returns. Now, turning to our full year outlook. On a constant currency basis, we continue to expect organic growth to be in the mid-single-digit range.

Ryan Robinson: The strength of our balance sheet is reflected in our investment grade ratings. We believe a robust balance sheet and cash flow generation give us great flexibility to invest in organic initiatives, accretive acquisitions, and to pursue a number of value-enhancing ways to produce best-in-class shareholder returns.

Ryan Robinson: We believe a robust balance sheet and cash flow generation give us great flexibility to invest in organic initiatives, accretive acquisitions, and to pursue a number of value-enhancing ways to produce best-in-class shareholder returns.

Ryan Robinson: Now turning to our full year outlook. On a constant currency basis, we continue to expect organic growth to be in the mid single-digit range. We expect organic growth in the second half to also be in the mid single-digit range. This is driven by continuing strong tailwinds from the electrification of everything, along with digitalization and sustainability mega trends. In addition, for modeling purposes, we expect the revenue impact of the two acquisitions Jenny discussed, DI and Test Net, to be less than $10 million in 2024. In addition to this incremental revenue, these two companies give us expanded capabilities and a broader footprint around battery and alternative fuel technology.

Ryan Robinson: We expect organic growth in the second half to also be in the mid-single digit range. This is driven by continuing strong tailwinds from the electrification of everything, along with digitalization and sustainability megatrends. In addition, for modeling purposes, we expect the revenue impact of the two acquisitions Jenny discussed, DI and TestNet, to be less than $10 million in 2024.

Ryan Robinson: Now turning to our full-year outlook.

Ryan Robinson: On a constant currency basis, we continue to expect organic growth to be in the mid-single-digit range.

Ryan Robinson: We expect organic growth in the second half to also be in the mid-single-digit range. This is driven by continuing strong tailwinds from the electrification of everything, along with digitalization and sustainability megatrends.

Ryan Robinson: In addition, for modeling purposes, we expect the revenue impact of the two acquisitions Jenny discussed, BI and TestNet, to be less than $10 million in 2024.

Ryan Robinson: In addition to this incremental revenue, these two companies give us expanded capabilities and a broader footprint around battery and alternative fuel technology. We expect to drive full-year adjusted EBITDA margin improvement in 2024 and beyond through a combination of key focus areas for the company. The first is delivering top-line organic growth where we look for the product tick market to grow in mid-single digits and expect our market share to expand as our investments take scale and the business grows.

Jenny Scanlon: In addition to this incremental revenue, these two companies give us expanded capabilities and a broader footprint around battery and alternative fuel technologies.

Ryan Robinson: We expect to drive full-year adjusted EBITDA margin improvement in 2024 and beyond through a combination of key focus areas for the company. First is delivering top-line organic growth, where we look for the product-tick market to grow mid-single digits and expect our market share to expand as our investments take scale and the business grows. Second, we are driving increased productivity to the automation and digitalization of work through higher utilization of our people and our facilities, and by streamlining and standardizing our processes and our metrics. Finally, as we look at M&A, we will continue on strategic areas of focus with an eye towards margin and earnings accretion.

Jenny Scanlon: We expect to drive full year adjusted EBITDA margin improvement in 2024 and beyond through a combination of key focus areas for the company.

Ryan Robinson: First is delivering top-line organic growth, where we look for the product tick market to grow mid-single digits and expect our market share to expand as our investments take scale.

Ryan Robinson: Second, we are driving increased productivity through the automation and digitalization of work through higher utilization of our people and our facilities and by streamlining and standardizing our processes and our metrics. Finally, as we look at M&A, we will continue to invest in strategic areas of focus with an eye towards margin and earnings accretion. We will continue to evaluate our pipeline of acquisition opportunities. We now expect capital expenditures to be in the range of 7.5% to 8.5% of revenue in 2024.

Ryan Robinson: and the business grows. Second, we are driving increased productivity through the automation and digitalization of work through higher utilization of our people and our facilities and by streamlining and standardizing our processes and our metrics.

Ryan Robinson: Finally, as we look at M&A, we will continue on in strategic areas of focus with an eye towards margin and earnings accretion. We will continue to evaluate our pipeline of acquisition opportunities.

Ryan Robinson: We will continue to evaluate our pipeline of acquisition opportunities. We now expect capital expenditures to be in the range of seven and a half to eight and a half percent of revenue in 2024. This is up slightly, reflecting CAPEX in the two acquisitions we have closed and our plan to continue to pursue high-return growth investment opportunities.

Ryan Robinson: We now expect capital expenditures to be in the range of 7.5 to 8.5 percent of revenue in 2024. This is up slightly, reflecting CapEx in the two acquisitions we have closed and our plan to continue to pursue high return growth investment opportunities.

Ryan Robinson: This is up slightly, reflecting CapEx in the two acquisitions we have closed and our plan to continue to pursue high-return growth investment opportunities. In summary, I'm proud of the strong results we delivered in the second quarter and in the first half of 2024, which positions us as well to deliver on our goals for the full year. We believe we are growing our business faster than the market, gaining share while improving profitability and enhancing our already strong cash-generating profile.

Ryan Robinson: In summary, I'm proud of the strong results we delivered in the second quarter and in the first half of 2024, which position us well to deliver on our goals for the full year and beyond. We believe we are growing our business faster than the market, gaining share while improving profitability and enhancing our already strong cash-generating profile. This positions us to be active yet selective in our deployment of capital.

Ryan Robinson: We believe we are growing our business faster than the market.

Ryan Robinson: Gaining share while improving profitability and enhancing our already strong cash generating profile.

Ryan Robinson: This positions us to be active yet selective in our deployment of capital. We are creating and delivering shareholder value on our path to being our customers' most trusted science-based safety, security, and sustainability partner. Now, let me turn the call back to Jenny for her closing remarks. Thanks, Ryan.

Ryan Robinson: This positions us to be active, yet selective in our deployment of capital. We are creating and delivering shareholder value on our path to being our customers' most trusted, science-based safety, security, and sustainability partner.

Ryan Robinson: We are creating and delivering shareholder value on our path to being our customers' most trusted, science-based, safety, security, and sustainability partner.

Jennifer Scanlon: Now let me turn the call back to Jenny for her closing remarks. Thanks, Ryan. In summary, we are proud of how our team performed in the second quarter, delivering strong top-line growth and solid margin improvement, which we believe sets us up to deliver impressive full-year results in our first year as a public company and beyond. We are a leader in a highly fragmented industry focused on product markets that we believe will be driven by long-term mega trends that favor our unique suite of offering. Our focused execution and targeted M&A strategy position us to gain share and help accelerate our ability to ensure safety, compliance, and sustainability.

Ryan Robinson: Now, let me turn the call back to Jenny for her closing remarks. Thanks, Ryan.

Jenny Scanlon: In summary, we are proud of how our team performed in the second quarter, delivering strong top-line growth and solid margin improvement, which we believe sets us up to deliver impressive full-year results in our first year as a public company and beyond. We are a leader in a highly fragmented industry focused on product markets that we believe will be driven by long-term megatrends that favor our unique suite of offerings. Our focused execution and targeted M&A strategy position us to gain share and help accelerate our ability to ensure safety, compliance, and sustainability.

Speaker Change: We are a leader in a highly fragmented industry, focused on product markets that we believe will be driven by long-term megatrends that favor our unique suite of offerings.

Speaker Change: Our focused execution and targeted M&A strategy position us to gain share and help accelerate our ability to ensure safety, compliance, and sustainability.

Jennifer Scanlon: We believe we have the strong investment-grade balance sheet and robust cash flow profile to deliver out-size long-term returns for all shareholders.

Jenny Scanlon: We believe we have the strong investment-grade balance sheet and robust cash flow profile to deliver outsized long-term returns for all shareholders. As we continue on this journey of being a public company, occasionally, I will highlight for you some important awards or notable events because it helps bring to life some of the amazing work and technical expertise we have in so many areas of safety science. So today, I'm going to talk about the environmental impact of refrigerants, those used in everything from drinking fountains to industrial chillers.

Speaker Change: We believe we have the strong investment-grade balance sheet and robust cash flow profile to deliver outsized long-term returns for all shareholders.

Jennifer Scanlon: As we continue on this journey of being a public company, occasionally I will highlight for you some important awards or notable events because it helps bring to life some of the amazing work and technical expertise we have in so many areas of safety, science. So today, I'm going to talk about the environmental impact of refrigerants. Those used in everything from drinking fountains to industrial chillers. This has been a growing concern for decades. As major transformations for refrigerants within the industry emerge, facing down outdated and climate-damaging refrigerants will be a continuous challenge in years to come.

Speaker Change: As we continue on this journey of being a public company, occasionally I will highlight for you some important awards or notable events, because it helps bring to life some of the amazing work and technical expertise we have in so many areas of safety science.

Speaker Change: So, today I'm going to talk about the environmental impact of refrigerants, those used in everything from drinking fountains to industrial chillers.

Operator: This has been a growing concern for decades. As major transformations for refrigerants within the industry emerge, phasing out outdated and climate-damaging refrigerants will be a continuous challenge in years to come. In March, Brian Rogers, UL Solutions Principal Engineer for HVAC, was invited to the White House to discuss this important safety concern. UL Solutions has been working hard on this issue since the late 1980s, and the knowledge that we can offer to solve these safety challenges is extremely valuable.

Speaker Change: This has been a growing concern for decades. As major transformations for refrigerants within the industry emerge, phasing down outdated and climate damaging refrigerants will be a continuous challenge in years to come.

Jennifer Scanlon: In March, Brian Rogers, UL Solutions' principal engineer for HVAC, was invited to the White House to discuss this important safety concern. UL Solutions has been working hard on this issue since the late 1980s, and the knowledge that we can offer to solve these safety challenges is extremely steep. This is just one of many examples in which our experts are invited to meetings at the highest levels to help shape the needed safety outcomes for consumers and indeed for our entire society.

Brian Rogers: In March, Brian Rogers, UL Solutions Principal Engineer for HVAC, was invited to the White House to discuss this important safety concern.

Speaker Change: UL Solutions has been working hard on this issue since the late 1980s and the knowledge that we can offer to solve these safety challenges are extremely deep.

Operator: This is just one of many examples of our experts being invited to meetings at the highest levels to help shape the needed safety outcomes for consumers and indeed for our entire society. With that, I will wrap up by saying we are thrilled to be building on the momentum we had leading up to our April IPO, and I'm excited for what the future holds for UL Solutions. Operator, let's please open the call for questions.

Speaker Change: This is just one of many examples in which our experts are invited to meetings at the highest levels to help shape the needed safety outcomes for consumers. And indeed for our entire society.

Jennifer Scanlon: With that, I will wrap up by saying we are thrilled to be building on the momentum we have leading up to our April IPO, and I'm excited for what the future holds for UL Solutions.

Speaker Change: With that, I will wrap up by saying we are thrilled to be building on the momentum we had leading up to our April IPO, and I'm excited for what the future holds for UL Solutions.

Operator: Operator, let's please open the call for questions. Thank you. At this time, we will be conducting a question and answer session.

Speaker Change: Operator, let's please open the call for questions.

Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker Change: Thank you. At this time, we will be conducting a question and answer session.

Operator: If you would like to ask a question, please press star one on your telephone keypad. A confirmation phone will indicate your line is in the question key. You may press star two if you would like to remove your question from the key. For participants, use this speaker equipment, and it may be necessary to pick up your answer before pressing start keys.

Speaker Change: If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing star 2. Our first question comes from Stephanie Yee with JPMorgan. Please proceed with your question. Hi, good morning.

Stephanie Yee: Our first question comes from the line of Stephanie Yee with JP Morgan.

Stephanie Yee: Please proceed with your question. Hi, good morning. Congrats on a strong quarter.

Speaker Change: Our first question comes from the line of Stephanie Yi with JPMorgan. Please proceed with your question.

Stephanie Yee: Congratulations on a strong quarter. Thanks, Stephanie. So, when I look at organic revenue growth in the first half, it was 8%, which I would consider to be high single digits. You maintained your four-year guide at mid-single digit growth. Could you, you know, is that for conservative reasons?

Stephanie Yi: Hi, good morning. Congrats on a strong quarter.

Jennifer Scanlon: Thanks, Stephanie. So when I would get organic revenue growth in the first half, it was 8%, which I would consider to be high single digits. You maintained your full year guide at mid single digits growth.

Speaker Change: Thanks, Stephanie.

Speaker Change: So, when I look at organic revenue growth in the first half, it was 8%, which I would consider to be high single digits. You maintained your four-year guide at mid-single digits growth.

Jennifer Scanlon: Did you, you know, is that more conservative reasons? Are you expecting some deceleration and growth in the back half because the back half is expected to be in the single digits? Or is there like a tough year for your comparison issue in any particular segment that you can kind of highlight?

Speaker Change: Could you, you know, is that for conservative reasons? Are you expecting some deceleration and growth in the back half because the back half is expected to be mid-single digits? Or is there like a tough year-over-year comparison issue in any particular segment that you can kind of highlight?

Jennifer Scanlon: Well, absolutely. Stephanie, as you highlighted, we are pleased with the eight percent first half growth organically.

Jenny Scanlon: Are you expecting some deceleration in growth in the back half because the back half is expected to be mid-single digits? Or is there a tough year-over-year comparison issue in any particular segment that you can, Absolutely. Stephanie, as you highlighted, we are pleased with the eight percent first half growth organically. And if you look at the back half of last year, our second half comps are a bit more challenging because we saw some growth drivers begin to accelerate in the second half of last year. Our organic growth in Q3 last year was seven and a half percent, and in Q4, it was eight point three percent. So we're comfortable giving realistic guidance that we expect to deliver. Okay, that's helpful.

Speaker Change: Well, absolutely, Stephanie. As you highlighted, we are pleased with the 8% first half growth organically. And if you look at the back half of last year, our second half comps are a bit more challenging because we saw some growth drivers begin to accelerate in the second half of last year.

Jennifer Scanlon: And if you look at the back half of last year, our second half comps ter a bit more challenging because we saw some growth drivers begin to accelerate in the second half of last year. Our organic growth in Q3 last year was seven and a half percent, and Q4 was 8.3 percent. So we're comfortable giving realistic guidance that we expect to deliver. Okay, that's helpful. And you mentioned some improving trends within consumer, especially retail. It seems like EMC trends are still strong.

Speaker Change: Our organic growth in Q3 last year was 7.5% and Q4 was 8.3%. So, we're comfortable giving realistic guidance that we expect to deliver.

Jenny Scanlon: And you mentioned some improving trends within the consumer, especially retail. It seems like EMC trends are still strong. Do you expect those improving trends to continue in the back half of the year? You know, we are seeing some confidence among consumers, in our customers reinvesting in R&D and innovation. And we, you know, as I mentioned, those global warming potential type of tests that we talked about in the HVAC business continue to be that type of driver for the consumer business. So, you know, we think that our customers see confidence in the consumer space and that they're making investments in R&D and innovation. Okay, great.

Speaker Change: Okay, that's helpful. And you mentioned some improving trends within consumer, especially retail. It seems like EMC trends are still strong. Do you expect those improving trends to continue in the back half of the year?

Jennifer Scanlon: Do you expect those improving trends to continue in the back half of the year? You know, we are seeing some confidence in consumer in our customers reinvesting in R&D and innovation. And, as I mentioned, the global warming potential type of test that we talked about in the HVAC business continues to be that type of driver for the consumer business. So we think that our customers see confidence in the consumer space and that they're making investments in R&D and innovation. Okay, great.

Speaker Change: You know we we are seeing some confidence in consumer, in our customers reinvesting in R&D and innovation and we you know as I mentioned those global warming potential type of tests that we talked about in the HVAC business.

Speaker Change: continues to be that type of driver for the consumer business. So, you know, we think that our customers see confidence in the consumer space and that they're making investments in R&D and innovation.

Speaker Change: Okay, great. Thank you.

George Tong: Our next question comes from Alina, George Tong. We're going to exact. Please proceed with your question. Hi, thanks.

Stephanie Yee: Thank you. Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Please proceed with your question. Hi, thanks. Good morning.

Speaker Change: Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Please proceed with your question.

George Tong: Organic revenue growth in the industrial segment accelerated to around 11.5% in the quarter, despite the comps in the prior year period becoming considerably more difficult. Can you elaborate on some of the tailwinds you're seeing on the industrial side and the extent to which they should persist into the second half of the year? Absolutely, George, and there is tremendous stamina in the industrial sector.

George Tong: Good morning. Organic revenue growth in the industrial segment accelerated to around 11.5% in the quarter, despite the pumps in the prior year period becoming considerably more difficult.

George Tong: Hi, thanks. Good morning.

George Tong: Organic revenue growth in the industrial segment accelerated to around eleven and a half percent in the quarter despite the comps in the prior year period becoming considerably more difficult. Can you elaborate on some of the tailwinds you're seeing on the industrial side and the extent to which they should persist into the second half of the year?

Jennifer Scanlon: Can you elaborate on some of the tailwinds you're seeing on the industrial side and the extent to which they should persist into the second half of the year? Absolutely, George. And there is tremendous stamina in industrial. It's driven by those mega trends that we talk about: the electrification of everything. We see great demand and power and controls. I mentioned the Korea battery lab that came online, and we've seen great market demand from that. In the built environment, we're seeing an increase in demand around things like warehouse solutions and fire suppression and fire resistive and containment products.

Speaker Change: Absolutely, George, and there is tremendous stamina in industrial.

Jenny Scanlon: It's driven by those megatrends that we talk about, the electrification of everything, you know; we see great demand for power and controls. I mentioned the Korea battery lab that came online, and we've seen great market demand for that in the built environment. We're seeing an increase in demand for things like warehouse solutions and fire suppression and fire resistive and containment products. So there's a lot of different pieces in industrial that really flow through this demand that is reflected by the electrification of everything and those trends that are those megatrends that are out there.

Speaker Change: It's driven by those megatrends that we talked about the electrification of everything, you know, we see great demand and power and controls

Speaker Change: I mentioned the Korea Battery Lab that came online, and we've seen great market demand from that.

Speaker Change: In the built environment, we're seeing an increase in demand around things like warehouse solutions and fire suppression and.

Jennifer Scanlon: So there's a lot of different pieces in industrial that really flow through this demand that is reflected by the electrification of everything and those mega trends that are out there. And George, just talk about that. You're right. We are laughing in a period where we had double-digit organic growth in the second quarter of last year. So five consecutive quarters of double-digit organic growth for industrial.

Speaker Change: fire-resistive and containment products, so there's, you know, a lot of different pieces in industrial that really flow through this demand that is reflected by the electrification of everything and those trends that are, those megatrends that are out there.

Jenny Scanlon: And, George, just to build on that, you're right. We are lapping a period where we had double-digit organic growth in the second quarter of last year, so five consecutive quarters of double-digit organic growth for the industry. Great, that's helpful.

Speaker Change: And George, just to build on that, you're right. We are lapping a period where we had double-digit organic growth in the second quarter of last year, so five consecutive quarters of double-digit organic growth for industrial.

George Tong: Great, that's helpful.

George Tong: And then turning to the consumer business, the margins, EBITDA margins expanded 210 bps on a year-over-year basis. Can you talk about whether that pace of margin expansion is sustainable and some of the efficiency initiatives that you're undertaking to continue to unlock margin expansion going forward? You know, indeed, we are seeing an improved cost structure in the segment. We had a number of expense management actions in 2023. And, you know, when you look across occupancy, new labs, better efficiencies, IT costs, we continue to believe that there are, you know, consumer margins are durable, and there are additional margin expansion opportunities.

Ryan Robinson: And then turning to the consumer business, the margins, even though margins expanded 210 bits on a year-over-year basis, can you talk about whether that pace of margin expansion is sustainable and some of the efficiency initiatives that you're undertaking to continue to unlock margin expansion going forward? Indeed, we are seeing improve the cost structure and the segments. We had a number of expense management actions in 2023. And when you look across occupancy, new labs, better efficiencies, IT costs, we continue to believe that the consumer margins are durable and there's additional margin expansion opportunities.

Speaker Change: Great, that's helpful. And then turning to the consumer business, the margins, EBITDA margins expanded 210 bps on a year-over-year basis.

Jenny Scanlon: Very helpful. Thank you. Thank you, George.

Speaker Change: Can you talk about whether that pace of margin expansion is sustainable and some of the efficiency initiatives that you're undertaking?

Speaker Change: to continue to unlock margin expansion going forward.

Speaker Change: You know, indeed, we are seeing, you know, improve cross the cost structure in the segment. We had a number of expense management actions in 2023.

Speaker Change: And, you know, when you look across occupancy, new labs, better efficiencies, IT costs, you know, we continue to believe that there are, you know, the consumer margins are durable and there's additional margin expansion opportunities.

Ryan Robinson: Got it.

Ryan Robinson: Very helpful.

Ryan Robinson: Thank you. Thank you, George.

Speaker Change: Got it. Very helpful. Thank you.

Andrew Nicholas: Thank you. Our next question comes in a line of Andrew Nicholas. Please proceed with your question. Thank you.

Operator: Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Please proceed with your, Hi, good morning.

George Tong: Thank you, George.

Speaker Change: Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Please proceed with your questions.

Andrew Nicholas: Thank you for taking my question. I wanted to ask first about software and advisory. We talked last quarter and again this quarter about some of the momentum with Altruist in particular. I'm just curious how much of the improved growth in that segment would you attribute to that product versus Salesforce Execution or any other strategic shifts that you've made over the past several quarters. Well, I think the Salesforce execution is tied to the growth in software and advisory services.

Andrew Nicholas: Good morning. Thank you for taking my question. I wanted to ask first on software and advisory. We talked last quarter and again this quarter about some of the momentum with altruists in particular. I'm just curious how much of the improved growth in that segment would you attribute to that product versus sales force execution or any other strategic shifts that you've made over the past several quarters? Well, I think the Salesforce execution is tied to the growth in software and advisory. We had mentioned in the past that we're undergoing a commercial transformation there. And we did see equally balanced growth this quarter between both the software and the advisory side of the business.

Andrew Nicholas: Hi, good morning. Thank you for taking my question. I wanted to ask first on software and advisory.

Speaker Change: We talked last quarter and again this quarter about...

Andrew Nicholas: We've mentioned in the past that we're undergoing a commercial transformation there, and we did see equally balanced growth this quarter between both the software and the advisory side of the business. But Ultras, we believe, is really helping propel what we're seeing in the pipeline.

Jennifer Scanlon: But Altress, we believe, is really helping propel what we're seeing in the pipeline. You know, two-thirds of our top 500 customers purchase both tick and software and advisory. And we've been very focused in using Altress to help extend the value proposition of those modules that are within that Altress umbrella. We've had a number of additional releases within Altress, particularly in the sustainability software. And we continue to see favorable results, or favorable indications, I should say, from the marketplace about the value of those products.

Jenny Scanlon: You know, two-thirds of our top 500 customers purchase both TIC and software and advisory services, and we've been very focused on using Ultras to help extend the value proposition of those modules that are within that Ultras umbrella. We've had a number of additional releases within Ultras, particularly in the sustainability software. And, you know, we continue to see favorable results or, I should say, favorable indications from the marketplace about the value of those products. Great, thank you.

Andrew Nicholas: Great. Thank you.

Andrew Nicholas: And then, for my follow-up, maybe on a different topic, throughout your prepared remarks, you talked about new labs, whether it's the HVAC Center in Texas or the Advanced Battery Lab in Korea, experiencing a pretty quick ramp-up in activity, and I'm just wondering if that is consistent with what you have historically seen with new labs and if it affects your willingness to invest in similar initiatives going forward. It just feels like the uptick is more immediate than I would have otherwise expected, so any context there would be great.

Andrew Nicholas: And then, for my follow-up, maybe on a different topic. Throughout your prepared remarks, you talked about maybe new labs, whether it's the HVAC center in Texas, or the Advanced Battery Lab in Korea, experiencing pretty quick ramp-up in activity. And I'm just wondering if that is consistent with what you have historically seen with new labs. And if it affects your kind of willingness to invest in similar initiatives going forward, it just feels like the uptick is more immediate than maybe I would have otherwise expected. So any context there would be great.

Andrew Nicholas: Thank you.

Jennifer Scanlon: Andrew, I really appreciate you calling that out because it reflects a philosophy that we have around capital investment: is that we really want to see potential demand before we even start breaking ground on a lab. And so many of these, our customers come to us and we'll ask us if we're willing to extend our footprint or our capacity to accommodate their growth. And we saw that in a number of cases. So like the Korea lab that we talked about that came online last year, I think it was pretty close to capacity within that first quarter.

Andrew Nicholas: Thank you. Andrew, I really appreciate you calling that out because it reflects a philosophy that we have around capital investment that we really want to see. Potential demand before we even start breaking ground on a lab and so many more. Our customers come to us and will ask us if we're willing to extend our footprint or our capacity to accommodate their growth. And we saw that in a number of cases.

Speaker Change: Potential demand before we even start breaking ground on a lab and so many of these are.

Speaker Change: Our customers come to us and will ask us if we're willing to extend our footprint our capacity to accommodate their growth and we saw that in a number of cases, so like the Korea lab that we talked about that came online last year I think it was pretty close to capacity within that first quarter. We're excited about that.

Jenny Scanlon: So like the Korea lab that we talked about that came online last year, I think it was pretty close to capacity within that first quarter. We're excited about the backlog that we're seeing for the North American Battery Lab that will come online in August. So, it is reflective of our philosophy and the ways in which we deploy capital. So, when we talk about growth capital, we are grounding that growth capital in market-based research and facts based on our customer conversations.

Jennifer Scanlon: We're excited about the backlog that we're seeing for the North American Battery Lab that will come online in August. So it is reflective of our philosophy and the ways in which we deploy capital. So when we talk about that growth capital, we are grounding that growth capital in market-based research and facts based on our customer conversations. Yeah, and I would just build on that, in particular related to batteries, which large capacity batteries are relatively new technology. And we've made investments in China, in Korea, in North America. And then the surrounding technologies in many other locations for things like charging and the plastics and casings that are used in batteries.

Speaker Change: Backlog that we're seeing for the North American battery labs that will.

Speaker Change: We will come online in August.

Speaker Change: So it is reflective of our philosophy and the ways in which we deploy capital. So when we talk about that growth capital. We are grounding that growth capital in market based research and facts based on our customer conversations.

Jenny Scanlon: Yeah, and I would just build on that in particular related to batteries, which large capacity batteries are a relatively new technology. And we've made investments in China, in Korea, in North America, and then the surrounding technologies in many other locations for things like charging and the plastics and casings that are used in them.

Speaker Change: Yeah, and I would just build on that in particular related to batteries, which are large capacity batteries are a relatively new technology.

Speaker Change: And we've made investments in China in Korea in North America, and then the surrounding technologies and many other locations for for things like charging in the plastics and casings that are used in in.

Ryan Robinson: In batteries, so the revenue growth we saw in customer demand, particularly in Korea, gave us the confidence to make that additional investment. It's definitely early days in North America, and we don't have that battery open yet, but we'll continue to evaluate that lab open yet, but we'll continue to evaluate. [inaudible] Thank you. Our next question comes from the line of Heather Valsky with Bank of America. Please proceed with your order. Hi, this is Emily Margo on behalf of Heather Belsky. Good morning. This morning,

Speaker Change: In batteries.

Jennifer Scanlon: So the revenue growth we saw in the customer demand, particularly in Korea, gave us the confidence to make that additional investment. It's definitely early days in North America.

Speaker Change: So the revenue growth we saw in the customer demand, particularly in Korea gave us the confidence to make that that additional investment. It's definitely early days in North America, and we don't have that battery opened yet, but we will continue that lab opened yet, but we'll continue to evaluate.

Jennifer Scanlon: We don't have that battery open yet, but we'll continue to evaluate.

Speaker Change: Thank you.

Emily Marzo: Our next question comes from the line of Heather Valski with Bank of America. Please proceed with your question.

Heather <unk>: Our next question comes from the line of Heather <unk> with Bank of America. Please proceed with your question.

Emily Marzo: Hi, this is Emily Marzo on for Heather Valski. Good morning. Good morning, Emily.

Speaker Change: Hi, This is Emily Marshall on for Heather Belsky good morning.

Emily Marshall: Good morning.

Emily Marzo: Good morning.

Heather Valsky: I'm wondering if you could give us an update on your pricing initiative, what you're seeing in the market, and if you're getting any pushback on pricing. We continue to be focused on the configuration price quote software that we've implemented and deploying that across our entire set of commercial teams, and our pipeline remains strong. The evidence that we look to is really our net promoter scores, which we keep a close eye on, conduct that quarterly, and our response rates, you know, continue to be strong, and we continue to trend upward.

Jennifer Scanlon: I'm wondering if you could give us an update on your price initiative, what you're seeing in the market, and if you're getting any pushback on pricing. We continue to be focused on the configuration price quotes, software that we've implemented and deploying that across our entire set of commercial teams, and our pipeline remains strong.

Speaker Change: Good morning, I'm wondering if you could give us an update on your pricing initiatives.

Speaker Change: We're seeing in the market, if youre getting any pushback on pricing.

Speaker Change: Yes.

Speaker Change: We continue to be focused on the configuration price quote software that we've implemented and deploying that across our entire set of commercial teams and our pipeline remains strong.

Jennifer Scanlon: The evidence that we look to is really our net promoter scores, which we keep a close eye on, conduct that quarterly. And our response rates continue to be strong, and we continue to trend upward. And the data point that I look most closely at is perceived value, and our customers continue to express that they perceive value from the services that we offer. So that leads me to continue to believe that pricing is holding in a really strong way.

Speaker Change: The evidence that we look to is really our net promoter scores, which we keep a close eye on conduct that quarterly and our response rates continued to be strong and we continue to trend upward and the data point that I look most closely at is perceived value.

Heather Valsky: And the data point that I look most closely at is perceived value, and our customers continue to express that they perceive value from the services that we offer. So that leads me to continue to believe that pricing is holding in a really strong way. Okay, thank you. And I guess the next question: you had two.

Speaker Change: And our customers continue to express that they perceive value from the services that we offer so that leads me to continue to believe that pricing is holding in a in a really strong way.

Speaker Change: Yeah.

Emily Marzo: Okay, thank you. And I guess the next question: you had two German acquisitions in the quarter.

Speaker Change: Okay. Thank you and.

Speaker Change: The next question you.

Speaker Change: You had to.

Jenny Scanlon: German acquisitions in the quarter. Could you talk to us a little bit about your M&A opportunities? What are you seeing?

Speaker Change: German acquisitions.

Jennifer Scanlon: Could you talk to us a little bit about your M&A opportunities? What you're seeing, is it a geographic approach, is it a capacity or capabilities approach, like what are you seeing in the market? It's a great question because we are active in M&A globally. We've got a number of prospects and a number of opportunities that we evaluate all over the world. So it's a bit coincidental that we closed to and Germany this quarter. That said, our M&A philosophy is to be the acquirer of choice. We've been in business 130 years. So many of these entrepreneurs and founders know us.

Speaker Change: Quarter could you talk to us a little bit about your M&A opportunities, what you're saying is that.

Heather Valsky: Is it a geographic approach? Or is it a capacity or capability approach? Like, what are you seeing in the market? It's a great question because we are active in M&A globally. We've got a number of prospects and a number of opportunities that we evaluate all over the world. So it's a bit coincidental that we closed two in Germany this quarter. That said, our M&A philosophy is to be the acquirer of choice. We've been in business for 130 years. So many of these entrepreneurs and founders know us. Some of them even started as UL employees and then launched their own businesses, and it's a great opportunity for them to return.

Speaker Change: Geographic approach is that our capacity or capabilities approach like what are you seeing in the market.

Speaker Change: It's a great question because we are active in M&A globally, we've got a number of prospects in a number of opportunities that we evaluate all over the world. So it's a bit coincidental that we closed two in Germany this quarter.

Speaker Change: That said, our M&A philosophy is to be the acquirer of choice we've been in business for 130 years. So many of these entrepreneurs and founders no us some of them even started as you all employees and then launched their own business and it's a great opportunity for them to return so our M&A philosophy.

Jennifer Scanlon: Some of them even started as you well employees and then launch their own business, and it's a great opportunity for them to return. So our M&A philosophy is where we can gain intellectual property that we otherwise don't have or where we can gain access to a set of customers or a set of capabilities that would be harder for us to build organically. We prioritize each of our businesses, and we seek to establish and maintain leadership in all of our businesses. And sometimes we have portfolio components that don't fit those objectives, and in the last roughly a year, we've divested two businesses.

Jenny Scanlon: So our M&A philosophy is that where we can gain intellectual property that we otherwise don't have, or where we can gain access to a set of customers or a set of capabilities that would be harder for us to build organically, we pursue them. We prioritize each of our businesses, and we seek to establish and maintain leadership in all of our businesses, and sometimes we have portfolio components that don't fit those objectives, and in the last year, we've divested two businesses, so it goes both ways. Thank you. Thank you. Our next question comes in the line of Stephanie Moore with Jeffries.

Speaker Change: Is where we can gain intellectual property that we otherwise don't have or where we can gain access to a set of customers or a set of capabilities.

Speaker Change: That would be harder for us to build organically we pursue it.

Speaker Change: We prioritize each of each of our businesses.

Speaker Change: And we seek to establish and maintain leadership in all of our businesses and sometimes.

Speaker Change: We have portfolio of components that don't fit those objectives and in the last couple of year, we've divested two businesses. So it goes both ways.

Jennifer Scanlon: So it goes both ways.

Speaker Change: Thank you.

Speaker Change: Thank you all.

Stephanie Moore: Our next question comes in a line of Stephanie Moore with Jeffries. Please, we'll see you with your questions. Hi, good morning. Thank you.

Speaker Change: Our next question comes from the line of Stephen Moore with Jefferies. Please proceed with your question.

Operator: Please proceed with your question. Hi, good morning. Thank you. Good morning, Stephanie.

Stephen Moore: Hi, good morning, Thank you.

Stephanie Moore: Good morning, Stephanie. I wanted to take up maybe a high level question here. Obviously, it's an election year, and there's a potential we could see a new president who might take out a harder stance on tariffs for the current administration. I mean, what we've seen in the last couple of years.

Stephen Moore: Good morning, Stephanie.

Stephanie Moore: You know, I wanted to take maybe a high-level question here. Obviously, it's an election year, and there's a possibility we could see a new president who might take a harder stance on tariffs versus the current administration and what we've seen the last couple of years. So, with this potential change, you know, I'd love to get your thoughts on what your customers are saying in terms of contingency plans, preparation, you know, potentially maybe moving manufacturing to different locations, how this could potentially impact you guys if you think it has neutral, positive, or negative implications. So, any color there.

Stephen Moore:

Stephen Moore: Wanted to take out maybe a high level question here, obviously, it's an election year and there is a potential we could see a new president who might take a harder stance on tariffs first the current administration.

Speaker Change: See in the last couple of years, but with this potential change you know I'd love to get your thoughts on what your customers are saying in terms of contingency plans preparation you know potentially many moving manufacturing to a different location. How this could potentially impact you guys. If you think it's neutral positive or negative implications any color there. Thanks.

Jennifer Scanlon: So, with this potential change, you know, I'd love to get your thoughts on what your customers are saying in terms of contingency plans preparation, you know, potentially maybe moving manufacturing to different locations. How this could potentially impact you guys if you think it's neutral, positive, or negative implications, any color there. Thanks. It's a great question, and it's something we monitor closely because our field engineers all over the world are typically visiting our customers' manufacturing locations roughly four times a year, and we track how those site visits, what the trajectory of, you know, increases decreases by country is.

Jenny Scanlon: It's a great question and it's something we monitor closely because our field engineers all over the world are typically visiting our customers' manufacturing locations roughly four times a year, and we track how those site visits are going, what the trajectory of, you know, increases, decreases by country is. China is the third largest manufacturing country in the world, and that number of site visits continues to trend upward off a very high base but at a low slope.

Speaker Change: The great question, and it's something we monitor closely because our field engineers all over the world are typically visiting our customers manufacturing locations roughly four times a year.

Speaker Change: And we track how those site visits are what the trajectory of increases decreases by country is.

Jennifer Scanlon: China is a third of the world's manufacturing. That number of site visits continues to trend upward off a very high base, but at a low, at a low slope. What we're seeing is increases Vietnam, Mexico, India at a much higher slope but off a much lower base. So what this means is when you really think about customers' supply chains, many of them have components coming from China, and then they can decide where they put the assembly, and that assembly can be moved all over the world. That's, I would say, in some cases, what we're seeing, but China continues to grow, as do these second locations.

Speaker Change: China is a third of the world's manufacturing that number of site visits continues to trend upward off a very high base, but at a low.

Speaker Change: At a low slope, what we're seeing is increases Vietnam, Mexico, India at a much higher slope, but off a much lower base.

Jenny Scanlon: What we're seeing is an increase, Vietnam, Mexico, India, at a much higher rate but off a much lower base. So what this means is when you really think about customer supply chains, you know, many of them have components coming from China, and then they can decide where they put the assembly, and that assembly can be moved all over the world.

Speaker Change: So what this means is when you really think about customer supply chains and many of them have components coming from China and then they can decide where they put the assembly and that assembly can be moved all over the world.

Stephanie Moore: That's, I would say, in some cases, what we're seeing. But China continues to grow, as do these second locations. For us, it just continues to demonstrate the value that we offer our customers to be close to where they are and ready to expand labs like we did in Vietnam two years ago and Mexico to serve their needs. Great. No, that's helpful.

Speaker Change: That's I would say in some cases, what we're seeing but China continues to grow as do these second locations for US. It just continues to demonstrate the value that we offer our customers to be close to where they are and are ready to expand labs like we did in Vietnam.

Jennifer Scanlon: For us, it just continues to demonstrate the value that we offer our customers to be close to where they are and ready to expand labs, like we did in Vietnam two years ago, in Mexico to serve their needs.

Speaker Change: Two years ago in Mexico to serve their needs.

Jennifer Scanlon: Great. No, that's helpful. Appreciate it.

Speaker Change: Great No. That's helpful. I appreciate it and then just as a follow up touching on the consumer segment, you talked about or re highlighted investments that you've made in HVAC and particularly Nextgen refrigerants.

Jennifer Scanlon: And then just as a follow-up, touching on the consumer segment, you talked about our re-highlighted investments that you've made in HVAC and particularly Dexion refrigerants and, you know, a new site that is up and running in Plano, Texas, that you're seeing good growth from. I'd love to hear thoughts first, other opportunities for further expansions, maybe additional testing sites in HVAC over the course of the next, you know, maybe 12 months or so. And then secondly, you know, I'd love for you to maybe give us a little bit of color on maybe other areas within consumer, similar to HVAC, where you view, you know, could be a next, you know, a really nice next growth avenue within that segment.

Jenny Scanlon: And then, just as a follow-up, touching on the consumer segment, you talked about or re-highlighted investments that you've made in HVAC and particularly next-gen refrigerants and, you know, a new site that is up and running in Plano, Texas, that you're seeing good growth from. I'd love to hear your thoughts first.

Speaker Change: Our new site that was up and running in Plano, Texas that Youre seeing good growth from I'd love to hear your thoughts first other opportunities for further expansion, maybe additional testing sites and HVAC over the course of the next maybe 12 months or so and then secondly.

Ryan Robinson: Are there opportunities for further expansions, maybe additional testing sites in HVAC over the course of the next, you know, maybe 12 months or so? And then secondly, I'd love for you to maybe give us a little bit of color on maybe other areas within consumer electronics similar to HVAC where you view, you know, could be a next, you know, a really nice next growth avenue within that segment. Thanks so much.

Speaker Change: I'd Love for you to maybe give us a little bit of color on maybe other areas within consumer similar to H back where you view could be next and that's a really nice next growth Avenue within that segment. Thanks, So much.

Jennifer Scanlon: Thanks so much. I would say, particularly in HVAC, it's a global concern about refrigerants and changing energy efficiency. So in Europe, they're changing our literary demands that there's been discussion in U.S. about the role of natural gas cooking that leads to product innovation. So we're not prepared to announce any additional specific capacity changes, but I would say that there's overall growth and innovation, which leads to business growth for us over time. I'd say other things that are in earlier days, we have a large business and consumer technology for things like high-tech equipment, laptops, and other things.

Jenny Scanlon: I would say, particularly in HVAC, there is a global concern about refrigerants and changing energy efficiency. So in Europe, they're changing regulatory demands. There's been discussion in the U.S. about the role of natural gas cooking that leads to product innovation. So we're not prepared to announce any additional specific capacity changes, but I would say there's overall growth in innovation, which leads to business growth for us over time. I'd say other things that are relatively early. We have a large business in consumer technology for things like high-tech equipment, laptops, and other things. The design of those products, as being influenced by AI chips, is leading to different performance and testing requirements, but those are relatively early.

Speaker Change: I would say, particularly in HVAC.

Speaker Change: A global concern about refrigerators and changing energy efficiency.

Speaker Change: So in Europe are changing regulatory demand.

Speaker Change: Demands if there has been discussion in the U S about the role of natural gas cooking that leads to product innovation.

Speaker Change: So we're not prepared to announce any additional specific.

Speaker Change: Capacity changes, but I would say there is overall growth and innovation, which leads the business growth for us over time, let's say other things that are in earlier days.

Speaker Change: We have a large business in consumer technology for things like high Tech equipment.

Speaker Change: Laptops and other things the design of those products as being in flu influenced by AI chips.

Jennifer Scanlon: The design of those products as being influenced by AI chips is leading to different performance and testing requirements, but those are relatively really days at this point. Yeah, I'll add to that. You know, we are seeing, as I mentioned, a return in confidence and consumer innovation and R&D, and that was reflected in some strength that we're seeing in that type of consumer tech testing across. Japan and Korea, in particular, were also, as Ryan mentioned, you know, AI, there's a broader AI ecosystem and there's consumer products that we would consider like AI embedded PCs or AI servers; those link more broadly to AI data centers that need a tremendous amount of energy.

Speaker Change: Is leading to different performance and testing requirements, but those are relatively early days at this point I'll add to that we are.

Ryan Robinson: Yeah, I'll add to that. You know, we are seeing, as I mentioned, a return of confidence in consumer innovation and R&D, and that is reflected in some strength that we're seeing in that type of consumer tech testing across Japan and Korea, in particular. We're also, as Ryan mentioned, part of the broader AI ecosystem, and there are consumer products that we would consider like AI-embedded PCs or AI servers. Those link more broadly to AI data centers that need a tremendous amount of energy.

Speaker Change: We are seeing as I mentioned the return in confidence in consumer innovation and R&D and that was reflected in some strength that we're seeing in that type of a consumer tech testing across Japan and Korea. In particular, we're also as Ryan mentioned.

Speaker Change: AI Theres, a broader AI ecosystem and there's consumer products that we would consider like AI embedded Pcs, our AI servers, those link more broadly to AI data centers that need a tremendous amount of energy I. Just read recently, you know up to a 100 kilowatts for a single.

Jenny Scanlon: I just read recently, you know, up to 100 kilowatts for a single AI data center, and that affects our industrial side in both, you know, our wiring and cabling type of businesses as well as back to our energy and industrial automation and the power that's needed. So, all these pieces fit together in a great way, but we are seeing some really great trends that are anchored in the consumer side. Thank you so much.

Jennifer Scanlon: I just read recently, you know, up to 100 kilowatts for a single AI data center, and that effect also our industrial side in both, you know, our wiring and cabling type of businesses as well as back to our energy and industrial automation and the power that's needed. So all these pieces fit together in a great way, but we are seeing some really great trends that are anchored in the consumer side.

Speaker Change: AI data center and that effects are also our industrial side in both you know, our our wiring and cabling type of businesses as well as back to our energy and industrial automation and power that's needed.

Speaker Change: So all of these pieces fit together and are in a great way, but we are seeing some really great trends that are anchored in the consumer side.

Jennifer Scanlon: Thank you so much. Thank you.

Speaker Change: Thank you so much.

Speaker Change: Thank you.

Shlomo Rosenbaum: Our next question comes from the line of Shlomo Rosenbaum with Steve. Please proceed with your question. Hi, good morning. Thank you for taking my questions. I wanted to focus a little bit on the industrial first, just a really strong organic growth. And there was a call out there. I was mentioned beforehand about some of the value-based pricing initiatives.

Operator: Thank you. All right, next question comes from the line of... Hi, good morning. Thank you for taking my questions. I want to focus a little bit on the industrial first, just, you know, really strong organic growth.

Speaker Change: Our next question comes from the line of Shlomo Rosenbaum with Stifel. Please proceed with your question.

Shlomo Rosenbaum: Hi, good morning, and thank you for taking my questions.

Shlomo Rosenbaum: I wanted to focus a little bit on the industrial first just really strong organic growth and.

Shloma: And there was a call out there, and it was mentioned beforehand about some of the, you know, value-based pricing initiatives. Is there a way you can parse for us, if not quantitatively, but maybe qualitatively, how much of the growth do you think might be coming from just really good demand for volumes and how much is, you know, coming from those initiatives that you're talking about? So, within industrial, that business is disproportionately our service lines around certification testing and ongoing certification services, and we saw good growth, roughly 8% growth across both those service lines, and I would say it was fairly evenly balanced between price and volume.

Speaker Change: There was a call out there was mentioned beforehand about some of the.

Speaker Change: The value based pricing initiatives is there where you can parse for us if not.

Ryan Robinson: Is there a way you can parse for us, if not quantitatively, but maybe qualitatively, how much of the growth you think might be coming from just really good demand for volumes and how much is coming from those initiatives that you're talking about? Yeah, so within industrial, that business is disproportionately our service lines around certification testing, ongoing certification services. And you saw good growth, roughly 8% growth across both those service lines. And I would say it was fairly evenly balanced between price and volume. We don't break out with more specific metrics by segment, but as Jenny mentioned, the general trends we're seeing in relation with pricing don't give us concern about particular resistance to the value-based pricing initiatives we've taken.

Speaker Change: Quantitatively, but maybe qualitatively how much of the growth do you think it might be coming from just really good demand for volumes and how much is.

Speaker Change: Coming from from those initiatives that you were talking about.

Speaker Change: Okay. So in within industrial that businesses is disproportionately our service lines around certification testing ongoing certification services.

Speaker Change: And we saw good growth roughly 8% growth across both of those service lines.

Speaker Change: And I would say it was fairly <unk>.

Speaker Change: Even though the balance between price and volume.

Speaker Change: <unk>.

Shloma: We don't break out with more specific metrics by segment, but as Jenny mentioned, the general trends we're seeing in relation to pricing don't give us cause for concern about particular resistance to the value-based pricing initiative. Okay, great. That's great. And then, Jenny, maybe this is a bigger picture question.

Speaker Change: We don't break out with more specific metrics by segment, but as Jenny mentioned, the general trends, we're seeing in in relation with pricing don't give us concerned about.

Jenny Scanlon: <unk> resistance to the value based pricing initiatives with sugar.

Jenny Scanlon: There's been very solid growth for the last five quarters. You're looking at seven and a half percent or higher. There tends to be ebbs and flows in the industry. If you look back at the company's historic growth, it seems to, companies seem to always eke out growth even in bad times, but it goes up and down. Would you have some perspective in terms of like when you're in an upswing, like what it seems like now? What's a typical cycle that we would look at for, you know, really strong growth, you know, followed by, you know, more of a normalization? Thanks, Shloma.

Ryan Robinson: Okay, great.

Jenny Scanlon: Okay, Great that's great and then Jenny maybe this is a bigger picture question Theres been a very solid growth for the last five quarters Youre looking at seven 5% or higher.

Shlomo Rosenbaum: That's great.

Jennifer Scanlon: And then, Jenny, maybe this is a bigger picture question. There's been very solid growth for the last five quarters. You're looking at seven-and-a-half percent or higher. There tends to be ebbs and flows in the industry. If you look back at the company's historic growth, it seems to always eat out growth even in bad times, but it goes up and down. Would you have some perspective in terms of when you're an upswing like what it seems like now? What's a typical cycle that we would look at for really strong growth followed by more of a normalization?

Speaker Change: There tends to be ebbs and flows in the industry. If you look back at the company's historic growth It seems too.

Speaker Change: The company seems to always eke out grow growth, even in bad times, but it goes up and down.

Speaker Change: And would you have some perspective in terms of like when you're in an upswing like what it seems like now whats. The typical cycle that we would look at for you know really strong growth followed by.

Speaker Change #106: More of a normalization.

Jennifer Scanlon: Thanks, Shloma. What's great about UL is we serve over 35 industries. So a cycle in any particular industry doesn't have a disproportionate effect on us. So I think when you look back at that compounded annual growth rate of almost seven percent that we've seen for over a decade, that feels like kind of the normal. You know, there might be a mild fine wave up and down that upward slope, but that's the way we think about it. And again, we've got good visibility, in particular to the trends in industrial because so many of those projects last for multiple quarters; you know, even can cross years.

Shloma: What's great about UL is we serve over 35 industries, so a cycle in any particular industry doesn't have a disproportionate effect on us. So I think when you look back at that compounded annual growth rate of almost 7% that we've seen for over a decade, That feels like the kind of normal, you know, there might be a mild fine wave up and down that upward slope. But that's the way we think about it.

Speaker Change: Thanks, Shlomo what's great about UL is we serve over 35 industries.

Shlomo Rosenbaum: So our cycle and in any particular industry.

Shlomo Rosenbaum: It doesn't have a disproportionate effect on us.

Shlomo Rosenbaum: So I think when you look back at that compounded annual growth rate of almost 7% that we've seen for over a decade.

Speaker Change: That feels like a you know kind of the normal.

Speaker Change: There might be a mild sine wave up and down that upward slope, but that's the way we think about it and again, we've got good visibility in particular to the trends in industrial because so many of those projects last for multiple quarters, you know even can cross years and that then.

Jenny Scanlon: And again, you know, we've got good visibility, in particular of the trends in industrial because so many of those projects last for multiple quarters, you know, can even cross years. And that then is linked to the 42% of our revenue that's the ongoing certification services and recurring software revenue. Really, who wants the effect of any cyclicality in any industry? Great. And can I sneak in just one housekeeping thing?

Jennifer Scanlon: And that then linked to the 42 percent of our revenue that's the ongoing certification services and recurring software revenue really launched the effect of any cyclicality in any industry.

Speaker Change: Linked to the 42% of our revenue that's the ongoing certification services and recurring software revenue.

Lance: Lance the effect of any cyclicality in any industry.

Ryan Robinson: Great. And Keisney can just one housekeeping thing. What was the 21 million in other income that got excluded? Maybe it ran? You could just tell us what that was. Yeah, that was a gain on sale related to our payments testing business, which closed May 1st. So we announced that, and then the neck gain was about $25 million, and then it was offset with a few other things. We also had some small investment gains, smaller investment gains in the second quarter of last year. So you can see it's up in both periods. It was just that that was the big driver in the second quarter this year.

Speaker Change: Great and can I sneak in just one.

Speaker Change: Housekeeping thing what was the $21 million in other income that got excluded maybe Ron you could just tell us what that was.

Shloma: What was the $21 million in other income that got excluded? Maybe, Ron, you could just tell us what that was. Yeah, that was a gain on sale related to our payments testing business, which closed on May 1st. So we announced that, and then the net gain was about $25 million, and then it was offset with a few other things. We also had some small investment gains, smaller investment gains, in the second quarter of last year, so you can see it's up in both periods. It was just that that was the big driver in the second quarter.

Speaker Change: Okay.

Ron: A gain on sale related to our payments testing business, which closed may 1st So we announced that in the net gain was about $25 million and then it was offset with a few other things. We also had some small investment gains smaller investment gains in the second quarter of last year. So you can see it's up in both periods.

Ron: Just that was the big driver in the second quarter of this year.

Ryan Robinson: Got it.

Speaker Change: Got it thank you.

Ryan Robinson: Got it, thank you. Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Please proceed with your, Hey, good morning, and thanks for my questions. In response to an earlier question, I heard you say that software and advisory services had strong growth across both software and advisory services, but when we look at this standalone software category, it looks like it was flat. Is the implication there that the software that's recorded in the other segments was down? And if so, could you just talk through what drove that and what could drive further growth in software from here? Yeah, Jason, good question.

Jason <unk>: Thank you. Our next question comes from the line of Jason <unk> with Wells Fargo. Please proceed with your question.

Jason Haas: Our next question comes from the line of Jason Haas with Wells Fargo. Please go see with your questions. Hey, good morning, and thanks for thinking of my questions. I think in response to an earlier question, I heard you say that software and advisory have strong growth across both software and advisory. But when we look at this standalone software category, it looks like it was flat. Is the implication there that the software that recorded in the other segments was down, and if so, could you just talk through what drove that and what could try further growth and software from here.

Jason <unk>: Hey, good morning, and thanks for taking my questions.

Jason <unk>: A response to an earlier question I heard you say that software and advisory had strong growth across both software and advisory, but when we look at the Standalone software category. It looks like it was flat is the implication there that the software that.

Speaker Change: We recorded in the other segments was down and if so could you just talk through what drove that and what could drive.

Speaker Change: Further growth in software from here.

Jason Haas: I would say the primary driver was we sold a payments testing business that had software revenue streams. That table of revenue by service line is on a total basis, and we don't break out the acquisition or FX or organic components of that, but that was the big thing that offset the software revenue. That's really helpful.

Ryan Robinson: Jason, good question. I would say the primary driver was we sold a payment payments testing business that had software revenue streams. Those that table of revenue by service line is on a total basis and we don't break out the acquisition or effects or organic components of that. But that was the big thing that offset the software revenue. That's a helpful that makes sense.

Jason: Yes, Jason Good question I would say the primary driver was.

Jason: We sold a payment a payments testing business that had software revenue streams those.

Speaker Change: That table of revenue by service line is on a total basis and we don't break out the.

Speaker Change: The acquisition of FX organic components of that.

Speaker Change: But that was the big thing that offset the software revenue.

Jenny Scanlon: That makes sense. And then I was curious if you'd put any thought to what the recent Chevron ruling could mean for the certification industry that could potentially change any regulation that could potentially be positive or negative for the industry overall. The Chevron ruling is an interesting one that we're paying close attention to, but truly, the regulations that drive our business are global, and they're across every level of, I'm going to say, both industry and government types of regulations. You know, you could be local, state, federal, around the world.

Speaker Change #112: Got it that's very helpful that makes sense and then I was curious if you had to put any thought to what the recent chevron ruling could mean for the certification industry that could potentially change any regulation that could potentially be a positive or negative for the industry overall.

Jennifer Scanlon: And then I was curious that you had put any thought to what the recent Chevron ruling could mean for the certification industry that could potentially change any regulations that could potentially be a positive or negative for the industry overall. The Chevron ruling is an interesting one that we're paying close attention to, but truly the regulations that drive our business are global and they're across every level of I'm going to say both industry and government types of regulations; you know, you could be local, state, federal around the world. So we continue to see safety, security, and sustainability as being important market drivers, and manufacturers appreciate regulation around those because it helps them have the confidence and the types of capital investments that they need to make to have their products reflect their ability to access the global market.

Speaker Change #103: The Chevron ruling is an interesting one that we're paying close attention to but truly the regulations that drive our business or our global.

Speaker Change: And they're across every level of I'm going to say, both the industry and governments are types of regulations. You know you can be local state federal are around.

Speaker Change: Around the world.

Jason Haas: So we continue to see safety, security, and sustainability as important market drivers, and manufacturers appreciate regulation around those because it helps them have the confidence and the types of capital investments that they need to make to have their products reflect their ability to access a global market. So, you know, the way we see it is through Chevron's interesting. It may have some effects, you know, on society, but we don't see it having any effects on us.

Speaker Change: So we continue to see safety security and sustainability as being important market drivers and manufacturers appreciate regulation around those because it helps them have the confidence and the types of capital investments that they need to make to have their products reflect there.

Speaker Change: <unk> to access the global market.

Jennifer Scanlon: So, you know, the way we see it is Chevron's interesting.

Speaker Change: So.

Speaker Change #114: The way we see it is chevron's interesting it may have some effects.

Jennifer Scanlon: It may have some effects of, you know, on society, but we don't see it having any effects on us.

Speaker Change: On society, but we don't see it having any effect on us.

Speaker Change: Got it thank you.

Jenny Scanlon: Got it. Thank you. Thank you. Our next question comes from the line of Arthur Truislove with Citi. Please proceed with your question. Good morning, everyone.

Arthur <unk>: Thank you. Our next question comes from the line of Arthur <unk> with Citi. Please proceed with your question.

Arthur Truislove: Thank you very much for taking my questions. The first question I had was just about the margin bridges in both the consumer and the industrial divisions. So within the consumer division, you mentioned, I think there was 4 million in CSAR adjustments that were slightly offset by other employee expenses. And I guess if you could just say what the margin increase was, stripping out the impact of these one-off IPO related points. The second question is kind of the same but for the industrial division.

Arthur <unk>: Good morning, everyone. Thank you very much for taking my question.

Ryan Robinson: The first question I had was just around the margin bridges in both the consumer and the industrial divisions. So, within the consumer division, you mentioned, I think there was four million of CSAR adjustments that were slightly offset by other employee expenses. And I guess if you could just say, you know, what the margin increase was, stripping out the impact of these one-off IPO related points. Second question is kind of the same, but for the industrial division. I mean, clearly margin there fell from 31.2 to 30.9. I just wanted if you could help me to understand what actually happened there on underlying basis, once you strip out the impacts of these ad hoc staff cost related matters.

Arthur <unk>: The first question I had was just around the margin riches in both the consumer and the industrial divisions.

Speaker Change: Within the consumer Division you mentioned I think that was formerly of <unk>.

Speaker Change #111: CSI, all adjustments, but were slightly offset by other.

Speaker Change #105: Employee expenses.

Speaker Change: If you could just say what the mall.

Speaker Change #120: Margin increase was stripping out the impact of these one off RPI related pointless.

Speaker Change #115: Second question is kind of the same but for the industrial Division I mean, clearly margin fell from 31 point.

Arthur Truislove: I mean, clearly, margin there fell from 31.2 to 30.9. I just wondered if you could help me to understand what actually happened there on an underlying basis once you strip out the impacts of these ad hoc staff cost-related matters.

Speaker Change: To your point no.

Speaker Change #123: I was just wondering if you could help me to understand.

Speaker Change #113: What actually happened on underlying basis once you strip out the impacts of these.

Speaker Change #124: Staff costs related to my closing and then third question.

Ryan Robinson: And then third question. Are you able to, you mentioned that you expect the Germans subsidiaries to deliver about 10 million of revenue in the full year. Is it right, therefore, to think that the annual revenue run rate is about 20 million for those?

Ryan Robinson: And then third question, you mentioned that you expect the German subsidiaries to deliver about 10 million in revenue in the full year. Is it right, therefore, to think that the annual revenue run rate is about 20 million for those? Thank you. Yes. Thank you very much for the questions, Arthur, and I'll take those in reverse order.

Speaker Change: <unk> you mentioned that you expect the German subsidiaries to deliver about $10 million of revenue in the full year is it right. Therefore thing.

Speaker Change #108: The annual revenue run rate is about $20 million for those.

Ryan Robinson: Thank you. Is a reasonable estimate in regard to the industrial margin. This applies for both operating income margin, and I'll make some comments on adjusted EBITDA margin, but you're right; the strong revenue growth did offset core operating expense growth. And when you adjust for two items in particular, we saw margin improvement, which we expect to continue to the primary drivers. Of the decline of 30 basis points on adjusted EBITDA margin, $4 million related to the share of the CSR expense. $5 million related to acquisition impact, and we break that out on the table. The majority of which was non-recurring transaction expenses.

Speaker Change #107: Thank you.

Speaker Change #100: Yes. Thank you very much for the questions Arthur and I'll I'll take those.

Speaker Change #100: In reverse order so so yes.

Arthur Truislove: So, yes, in regard to the acquisitions, roughly $20 million on a full-year run rate is a reasonable estimate. In regard to the industrial margin, this applies to both the operating income margin, and I'll make some comments on the adjusted EBITDA margin, but you're right. The strong revenue growth did offset core operating expense growth, and when you adjust for two items in particular, we saw margin improvement, which we expect to continue. So, the primary drivers of the decline of 30 basis points on adjusted EBITDA margin were $4 million related to the share of the CSAR expense and $5 million related to acquisition impact, and we break that out in the table, the majority of which was non-recurring transaction expenses.

Speaker Change #102: Regards to the acquisitions.

Speaker Change #102: Roughly $20 million on a full year run rate.

Speaker Change: As a reasonable Ah.

Speaker Change: Estimate.

Speaker Change: In regard to the industrial margin.

Speaker Change: This applies for both operating income margin and then I'll make some comments on adjusted EBITDA margin.

Speaker Change: You are right. The strong revenue growth did offset core operating expense growth and when you adjust for two items in particular.

Speaker Change: We saw margin improvement, which we expect to continue so the primary drivers.

Speaker Change: Of the decline of 30.

Speaker Change: 30 basis points on an adjusted EBITDA margin.

Speaker Change: Were $4 million related to the share of the CSR expense $5 million related to acquisition impact and we break that out in the table.

Speaker Change: The majority of which was nonrecurring transaction expenses industrial has recently completed two acquisitions and one divestiture all within the last several months to better position the portfolio for energy transition and if you exclude the <unk> sorry.

Ryan Robinson: Industrial is recently completed two acquisitions and one divestiture, all within the last several months, to better position the portfolio for energy transition. And if you exclude the CSR incremental impact, which is now fixed, and the acquisition impact. And we isolate those in the earnings release; operating income would have been $9 million higher. And that would have been an increase of roughly 80 basis points on a comparable basis. Now, at the adjusted EBITDA level, there's also another adjustment. Now that we are a public company, we are adding back stock-based compensation. So if you adjust for those things that I said, but also back out the adjustment for stock-based compensation, do not give credit for that.

Arthur Truislove: Industrial has recently completed two acquisitions and one divestiture, all within the last several months to better position the portfolio for the energy transition, and if you exclude the CSAR incremental impact, which is now fixed, and the acquisition impact, and we isolate those in the earnings release, operating income would have been $9 million higher, and that would have been an increase of roughly 80 basis points on a comparable basis. Now, at the Adjusted EBITDA level, there's also another adjustment.

Speaker Change: Incremental impact.

Speaker Change: Which is now.

Speaker Change: It's fixed and the acquisition impact.

Speaker Change: And we isolate those in the earnings release operating income would have been $9 million higher.

Speaker Change: And that would have been an increase of roughly 80 basis points on a comparable basis.

Speaker Change: Now with the adjusted EBITDA level.

Speaker Change: There's also another adjustment now that we're a public company we are.

Arthur Truislove: Now that we are a public company, we are adding back stock-based compensation. So if you adjust for those things that I said but also back out the adjustment for stock-based compensation, do not give credit for that. Also, it's about 80 basis points. But the measures are slightly... And then, in regard to the consumer.

Speaker Change: Adding back stock based compensation.

Speaker Change: So if you adjust for those things that I said, but also back out the adjustment for stock based compensation and do not give credit for that.

Ryan Robinson: Also, it's about 80 basis points, but the measures are slightly different. And then in regard to consumer, the primary drivers were leveraging salaries, occupancy, and IT costs that more than offset those incentive increases. So consumer also bore $4 million of that $9 million CSR expense on an adjusted EBITDA basis that was mostly offset by an addback of the $3 million of stock-based compensation. Both of those segments, I should mention, also had $2 million of effects had wins to operating income in adjusted EBITDA. And the 80 basis points that I mentioned doesn't include that effects impact.

Speaker Change #104: Also it's about 80 basis points, but the measures are slightly different.

Speaker Change #104: And then in regard to consumer.

Speaker Change #104:

Ryan Robinson: The primary drivers were leveraging salaries, occupancy, and IT costs that more than offset those incentive increases. So Consumer also bore $4 million of that $9 million CSAR expense on an adjusted EBITDA basis that was mostly offset by an add-back of the $3 million of stock-based compensation. Both of those segments, I should mention, also had $2 million of FX headwinds to operating income and adjusted EBITDA, and the 80 basis points that I mentioned don't include that FX impact.

Speaker Change #104: The primary drivers were leveraging salaries occupancy.

Speaker Change: Cause.

Speaker Change: But more than offset those incentive increases so.

Speaker Change: Consumer also more $4 million of that $9 million <unk> expense.

Speaker Change: On an adjusted EBITDA basis that was mostly offset by an add back of the $3 million of stock based compensation.

Speaker Change: Both of those segments.

Speaker Change #121: He had mentioned also had $2 million of FX headwinds to operating income and adjusted EBITDA.

Speaker Change #133: And the 80 basis points that I mentioned it doesn't it doesn't include that FX impact.

Ryan Robinson: So essentially the key takeaway would be that on underlying basis, the industrial or just an EBITDA margin would be after 80 bits, if you strip out the issues with the extent that that's the key conclusion that that's driven by leverage and pricing and all the rest of it.

Ryan Robinson: So essentially, the key takeaway would be that on an underlying basis, the industrial adjusted EBITDA margin would be up about 80 bps if you stripped out the issues with the expenses. That's the key conclusion, and that's driven by leverage and pricing and all the rest of it. That's correct. That's correct. And the two primary items are the share of the CSAR expense and the $5 million of action.

Speaker Change: So essentially I think the.

Speaker Change: The key takeaway would be that our underlying basis. The industrial adjusted EBITA margin would be up about 80 bps, if you strip out.

Speaker Change: The issues with the B.

Speaker Change: Expenses are stocks, that's the correct conclusion, and that's driven by leverage and pricing and all the rest of it.

Ryan Robinson: That's correct. And the two primary items are the share of the CSR expense and the 5 million of acquisition.

Speaker Change #110: That's correct, that's correct and the two primary items of the share of the CSR expense and $5 million of acquisition impact.

Ryan Robinson: Thank you very much. Thanks, Erwin.

Arthur Truislove: Thank you very much. Thanks, Arthur. Thank you. Our next question comes from the line of Josh Chan with UVS.

Speaker Change #118: Thank you very much.

Speaker Change #109: Thanks, Okay.

Joshua Chan: Thank you. Our next question comes from the line of Josh Chan with you. Yes, please proceed with your question.

Speaker Change #119: Thank you. Our next question comes from the line of Josh Chan with UBS. Please proceed with your question.

Operator: Please proceed with your Hi, good morning, Jenny and Ryan. Congratulations on a strong quarter. Thank you. Hi, yes.

Jennifer Scanlon: Hi, good morning, Jenny and Ryan. Congrats on the strong quarter. Thank you. Some of the labs that you're building now are larger than prior. And is there any reason to think that once they're fully utilized, that the larger labs could potentially be more profitable than your other labs? Yeah, I would say some of the large lab investments we do have high economic flow; through some of this is the large battery technology, as I mentioned. Those are relatively new. So we're seeing good capacity utilization over time; the pricing dynamics in that market will contribute to the total economic flow through.

Josh Chan: Hi, Good morning, gentlemen, Ron Congrats on a strong quarter.

Speaker Change #131: Thank you.

Josh Chan: Some of the labs that you're building now are larger than before, and is there any reason to think that once they're fully utilized, the larger labs could potentially be more profitable than your other labs? Yeah, I would say some of the large lab investments, we do have high economic flow through some of this is the large battery technology, as I mentioned, those are relatively new. So, we're seeing good capacity utilization over time.

Speaker Change #130: Hi, yes some.

Josh Chan: Some of the labs that you're building now are larger than prior and is there any reason to think that once they're fully utilized that the larger labs could potentially be more profitable than your other labs.

Speaker Change: Yes.

Speaker Change #116: I would say some of the large lab investments, we do have high economic flow through.

Speaker Change #116: Some of this is is the large battery technology as I mentioned those are relatively.

Speaker Change:

Speaker Change: No.

Speaker Change: So we're seeing good capacity utilization over time.

Speaker Change: Pricing dynamics in that market will will contribute to the total economic flow through.

Josh Chan: The pricing dynamics in that market will contribute to the total economic flow through, but we think there's the opportunity for that. They're definitely more capital investment intensive than some of our businesses, but we seek to be rewarded for that capital in the way that we underwrite. Okay, that makes sense.

Jennifer Scanlon: But we think there's the opportunity for that. They're definitely more capital investment and intensive than some of our businesses, but we seek to be rewarded for that capital and the way that we underwrite the investments. Okay, that makes sense.

Speaker Change: But we think theres the opportunity for that they are definitely more capital investment intensive than some of our.

Speaker Change: Businesses, but we seek to be rewarded for that for that capital and the way that we underwrite investments.

Ryan Robinson: Thank you. And then for my follow up, I will stick with margins. So your margins were up nicely in the first half of the year, and you're guiding to Margin Improvement for the Full Year. Yeah, I appreciate the comment. Yes, at this point through six months, we're up 150 basis points year over year on adjusted EBITDA margins. We're not in a position to provide more specific guidance. We do expect adjusted EBITDA improvement on a full-year basis, but we are not in a position to provide more guidance by segment or in total.

Speaker Change #129: Okay that makes sense. Thank you and then my for my follow up sticking with margins.

Ryan Robinson: Thank you. And then my for my follow up sticking with margins. So your margins were up nicely in the first half of the year, and you're guiding to margin improvement in the full year. I guess there is any way to quantify that margin improvement because there could be a wide range of outcomes that still fit that characterization in the second half. I just wanted to see if there's any way to ballpark the expectations for the second half. Thank you.

Speaker Change #127: Margins were up nicely in the first half of the year and you're guiding to.

Speaker Change #126: Margin improvement in the full year.

Speaker Change #134: Is there any way to quantify that margin improvement because there could be a wide range of <unk>.

Speaker Change #134: Outcomes that still fits that characterization in the second half just wanted to see if there's any way to ballpark the expectation for the second half. Thank you.

Ryan Robinson: Yeah, I appreciate the comment. Yes, at this point through six months, we're up 150 basis points year over year on adjusted, but the margins. And we're not in a position to provide more specific guidance. We do expect adjusted, but improvement on a full year basis, but not in a position to provide more guidance by segment or tool. And just as we've commented in the past, we don't expect that there's any singular events that has a dramatic step change in margin. But we are very focused on ongoing continuous improvements, lean six sigma, getting value from technology, and implementations that we've completed in recent years.

Speaker Change #136: Yes, I appreciate the comment yes at this point through six months, we're up 150 basis points year over year on adjusted EBITDA margins.

Speaker Change #128: We're not in a position to provide more specific guidance.

Speaker Change: Do expect adjusted EBITDA improvement on a full year basis.

Speaker Change: But not in a position to provide more guidance by segment or a tool and Josh as we've commented in the past. We don't expect that there is any singular event that has a dramatic step change in margin, but we are very focused on ongoing continuous improvement lean six sigma getting value from technology.

Ryan Robinson: And Josh, as we've commented in the past, we don't expect that there's any singular event that has a dramatic step change in margin, but we are very focused on ongoing continuous improvements, Lean Six Sigma, getting value from the technology implementations that we've completed in recent years. So I would continue to just expect a, you know, steady trend of margin expansion in every business as these various initiatives come to fruition.

Speaker Change: Plantations that we've completed in recent years.

Ryan Robinson: So I would continue to just expect a steady trend of margin expansion and every business as these various initiatives come to fruition. Perfect.

Speaker Change: So I would continue to expect a.

Speaker Change: Steady trend of margin expansion in every business as these various initiatives come to fruition.

Ryan Robinson: Perfect. Thank you for that, Kyla, and congrats again. Thanks. Thank you. And we have reached the end of the question and answer session, and I'll now turn the call over to Jamie Scanlon for closing remarks. Well, thank you everyone for joining us today. We really appreciate your support, and we look forward to updating you on our progress next quarter. Thank you all. And this concludes today's conference, and you may disconnect at this time. Thank you for your participation. Transcribed by https://otter.ai

Speaker Change #125: Perfect. Thank you for that color and congrats again.

Ryan Robinson: Thank you for that color, and congrats again.

Ryan Robinson: Thanks.

Speaker Change #122: Thanks, Thank you.

Operator: Thank you.

Speaker Change #122: Thank you.

James Ganon: And we have reached the end of the questioning as a session, and I'll now turn the call over to James Ganon for close remarks. Well, thank you everyone for joining us today. We really appreciate your support, and we look forward to updating you on our progress next quarter. Thank you all.

James <unk>: We have reached the end of the question and answer session and I'll now turn the call over to James <unk> for closing remarks.

James <unk>: Well. Thank you everyone for joining us today, we really appreciate your support and we look forward to updating you on our progress next quarter.

Speaker Change #138: Thank you all.

Speaker Change: Yeah.

Operator: And this includes today's conference, and you may disconnect. Thank you for your participation. Association.

Speaker Change #137: And this concludes today's conference and you may disconnect at this time.

Speaker Change: Thank you for your participation.

Speaker Change #135: [noise] [music].

Q2 2024 UL Solutions Inc Earnings Call

Request a DemoDemo

ULS

UL Solutions

Earnings