Q2 2025 UL Solutions Inc Earnings Call
Yijing Bintano: Good day and welcome to UL Solutions Inc.'s second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Yijing Bintano, Vice President, Investor Relations. Please go ahead.
Good day and welcome to UL Solutions. Second quarter 2025 earnings conference call.
Passing the stock key followed by zero. After today's presentation there will be an opportunity to ask questions to ask a question. You may press star then 1 on your touchtone phone to redo your question. Please press star then 2, please note. This event is being recorded. I would now like to turn the conference over to using brentano, vice president investor relations. Please go ahead.
Yijing Bintano: Thank you. Welcome, everyone, to our Q2 2025 earnings call. Joining me today are Jennifer Scanlon, our Chief Executive Officer, and Ryan Robinson, our Chief Financial Officer. During our 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 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 provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, among other things, statements about UL Solutions Inc. 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.
Thank you.
Welcome everyone to our second quarter 2025 earnings call.
joining me today are Jenny scalin our chief executive officer and Ryan Robinson our Chief Financial Officer
During our 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 website.
I would like to remind everyone that on today's call. We may discuss what we're looking statements within the meeting of the Safe Harbor, provisions of the private Securities. Litigation Reform, Act of 1995,
These 4 were looking statements, may include among other things statements, about your Solutions, results of operations, and estimates, and Prospects that involve substantial risks and uncertainties. And other factors that would could cause actual results to differ, in the material, way, from those expressed or implied in the forward-looking statement,
Yijing Bintano: 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 annual report on the Form 10-K for the year ended December 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. Today's presentation also includes references to non-GAAP financial measures. A reconciliation of the most comparable GAAP financial measures can be found in the appendix to the earnings presentation. With that, I would now like to turn the call over to Jenny.
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 annual report on the Forum 10K for the year. Ended December 31st 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.
today's presentation also includes references to non-gaap financial measures,
A Reconciliation of the most comparable gaap Financial measures can be found in the appendix to the earnings presentation.
With that, I would now like to turn the call over to Jenny.
Jennifer Scanlon: Good morning, everyone, and thanks for joining us. I am pleased to say that the momentum we built over our first year as a public company continued in the second quarter of 2025, with growth across all segments and service offerings, despite uncertainties for our customers globally. That is an important statement and, frankly, a theme we have delivered in the last several quarters: positive contributions across segments, service lines, and geographies. That balance reflects the durability of our business model and global scale of our offerings, as well as the benefit of focusing the business on higher growth megatrends, including the global energy transition, the electrification of everything, and digitalization. I will cover three areas, and then I will turn the call over to Ryan. First, our second quarter performance highlights. Second, notable achievements and activities since we last reported.
Good morning, everyone, and thanks for joining us. I'm pleased to say that the momentum we built over our first year, as a public company. Continued, in the second quarter of 2025 with growth, across all segments, and service offerings, despite uncertainties for our customers globally.
That's an important statement. And frankly, a theme, we've delivered in the last several quarters, positive contributions across segments, service, lines and geographies.
That balance reflects the durability of our business model and global scale of our offerings, as well as the benefit of focusing. The business on higher growth, Mega Trends, including the global energy transition, the electrification of everything and digitalization,
I'll cover 3 areas and then I'll turn the call over to Ryan.
First, our second quarter performance, highlights.
Jennifer Scanlon: Finally, some perspectives on market conditions and our resiliency in the current macro environment. Our strong second quarter performance stems from enduring customer demand in our business across a wide range of market conditions. Based on our first half results and our current visibility into customers' ongoing new product development needs, we are affirming our full year 2025 outlook. I want to recognize our exceptional team members, whose expertise and commitment drive our continued success. Their dedication to our mission of advancing safety science and delivering outstanding customer service remains the foundation of our strong performance and represents a true competitive advantage.
Second notable achievements and activities since we last reported.
And finally, some perspectives on market conditions and our resiliency in the current macro environment.
Our strong second quarter performance. Stems from enduring customer demand in our business across a wide range of market conditions.
Based on our first half results, our current visibility into customers, and ongoing new product development needs, we are affirming our full year 2025 outlook.
I want to recognize our exceptional team members, whose expertise and commitment drive our continued success.
Jennifer Scanlon: Ryan will dive into the numbers in a minute, so let me hit the high note of our second quarter 2025 results. I am particularly proud that we delivered record quarterly consolidated revenues that were up 6.3% as compared to the second quarter last year, and up 5.5% on an organic basis. On an organic basis, our industrial segment once again led the way, up 7%, followed by consumer up 4.7%, and software and advisory up 3.2%. These results were achieved against a dynamic geopolitical and regulatory environment that impacted our customers' behavior. Profitability improved year over year, with adjusted EBITDA growing 13.9% and adjusted EBITDA margin expanding by 170 basis points to the highest level since we became public in April of last year. Higher revenue and realized operating leverage were the key drivers.
Their dedication to our mission of advancing, Safety Science and delivering outstanding customer service Remains the foundation of our strong performance and represents a true competitive advantage.
Ryan will dive into the numbers in a minute. So let me hit the high notes of our second quarter 2025 results.
I'm particularly proud that we delivered record quarterly Consolidated revenues that were up 6.3% as compared to the second quarter last year.
And up 5.5% on an organic basis.
On an organic basis, our industrial segment. Once again led the way up 7%. Followed by consumer up, 4.7% and software and advisory up 3.2%
These results were achieved against a dynamic, geopolitical and Regulatory environment that impacted our customers Behavior.
With adjusted EBA dog growing 13.9% and adjusted ebit. Do margin expanding by 170 basis points to the highest level since we became public in April of last year.
Jennifer Scanlon: We generated $208 million of free cash flow through the first half of 2025, and our balance sheet remains robust. Next, let me highlight notable planned, ongoing, and recently completed capacity expansion that addressed growth opportunities and megatrends in our key end markets. During the quarter, we successfully launched our European advanced battery testing laboratory in Aachen, Germany, representing an important expansion of our battery technology testing capabilities and European footprint. This purpose-built facility replaced a smaller facility from the 2024 Batterie Ingenieur acquisition. It positions us strategically close to key European automotive customers and provides access to the region's deep engineering talent pool. This investment demonstrates our commitment to helping the automotive and power sectors safely innovate in a world increasingly reliant on battery storage, while strengthening our global network of specialized testing facilities that spans North America, Europe, and Asia-Pacific.
Higher revenue and realized operating leverage were the key drivers.
We generated 208 million of free cash flow through the first half of 20125, and our balance sheet remains robust
Next, let me highlight notable planned ongoing and recently completed capacity, expansions that address growth opportunities and mega Trends in our key and markets.
During the quarter, we successfully launched our European Advanced Battery testing laboratory. In oen, Germany representing an important expansion of our Battery Technology testing capabilities and European footprint.
This purpose-built facility. Replaced a smaller facility from the 2024 battery engineer acquisition.
It positions us strategically close to key European Automotive customers and provides access to the Region's deep engineering talent pool.
This investment demonstrates, our commitment to helping the automotive and power sector safely. Innovate in a world increasingly reliant on battery storage while strengthening our Global Network of specialized testing facilities that spans North America, Europe and Asia Pacific.
Jennifer Scanlon: We also announced a significant expansion of our HVAC testing facility in Cardigate, Italy, to address rapidly growing European demand for comprehensive heat pump testing, driven by the adoption of environmentally friendly refrigerants and evolving regulations. The expansion adds critical capabilities and positions us as a comprehensive service provider for manufacturers navigating the EU's climate initiatives, all while helping customers reduce testing lead times and accelerate market access. By offering both performance and safety testing at one central European laboratory, we expect to enable faster time to market for products subject to safety and efficiency requirements in the high-growth sustainable technology sector. We launched a new testing and certification service for immersion cooling fluids used in data centers, addressing the critical safety and efficiency needs of data center facilities housing AI and other high-performance computing equipment.
We also announced a significant.
Of our HVAC testing facility in carugate Italy to address rapidly growing European demand for comprehensive heat. Pump testing driven by the adoption of environmentally friendly refrigerants and evolving regulations.
The expansion adds critical capabilities and positions us as a comprehensive service provider for manufacturers, navigating, the eu's climate initiatives. All while helping customers, reduce testing lead times and accelerate Market access
By offering both performance and safety testing at 1 central European laboratory. We expect to enable faster time to market for products subject to safety and efficiency requirements in the high growth. Sustainable technology sector
We launched a new testing and certification service for immersion cooling fluids used in data centers.
Jennifer Scanlon: According to third-party research, power consumption by data centers is expected to increase from 4.4% of total U.S. electricity demand in 2023 to 12% by 2028. Operators urgently need safe and energy-efficient cooling solutions to maximize performance and reliability. Our new engineering evaluation and certification for immersion cooling fluids complements our existing programs for immersion tanks and systems. It is important to note that TIC services for data centers represent an important, large, and growing market for us as technologies continue to advance in computing and AI. The Grandview Research Group expects the data center construction market to grow at a 12% CAGR over the next five years. We believe that we are very well positioned to capitalize on the rapid growth of data centers by helping address the safety, sustainability, and security concerns inherent in these complex environments.
Addressing the critical safety and efficiency needs of data center facilities. Housing, Ai and other high-performance Computing equipment.
According to third-party research power consumption by data centers is expected to increase from 4.4% of total us electricity demand in 2023 to 12% by 2028.
Operators, urgently need safe and energy efficient cooling solutions, to maximize performance and reliability.
Our new engineering evaluation and certification for immersion cooling fluids. Complements our existing programs for immersion tanks and systems.
It's important to note that ticks services for data centers represents an important, large and growing market for us as Technologies. Continue to advance in Computing and AI
The Grand View research group expects, the data center construction Market to grow at a 12% kegger over the next 5 years.
Jennifer Scanlon: In fact, many of our operating units have service offerings in this space. The list is large, as there are approximately 70 applicable standards to which we test, certify, and inspect. Our go-to-market strategy highlights the broad and deep expertise we have in the full lifecycle of data center infrastructure and system needs. Finally, let me provide an updated perspective on the resilience of our business model and how we are positioned to win, even in periods of uncertainty. As a global leader of critical product safety science offerings, we support our customers wherever they research, develop, and manufacture products worldwide. Our existing global footprint and testing capacity position us well to meet customer needs effectively across all locations. Our business model provides initial testing during new product development, followed by ongoing certification throughout a product's lifecycle in the market, creating sustained revenue streams and deep customer relationships.
We believe that we are very well positioned to capitalize on the rapid growth of data centers by helping address the safety, sustainability, and security concerns inherent in these complex environments.
In fact, many of our operating units have service offerings in the space.
The list is large, as there are approximately 70 applicable standards to which we test certify and inspect.
Our go to market strategy, highlights the broad and deep expertise. We have in the full life cycle of data center infrastructure and system needs.
Finally, let me provide an updated perspective on the resilience of our business model and how we are positioned to win even in periods of uncertainty.
As a global leader of critical product, Safety Science offerings, we support our customers wherever they research, develop and manufacture products worldwide.
Our existing Global footprint and testing capacity position us. Well to meet customer needs effectively across all locations.
our business model provides initial testing during new product development, followed by ongoing certification, throughout a product's life cycle in the market,
Jennifer Scanlon: Our customers are still bringing new products to market. We experienced an initial slowdown in customer projects when tariff levels were first announced early in the second quarter, as companies paused to assess the potential impact of the tariffs, as well as other geopolitical issues. This pause was followed by accelerated ordering in June, demonstrating both the essential nature of our services and our customers' commitment to maintaining product development timelines. As a reminder, these dynamics may create incremental opportunities for us, as tariffs drive customers to redesign products or relocate manufacturing, both of which often require recertification. Now, let me turn the call over to Ryan for a detailed review of our second quarter results.
Creating sustained revenue streams and deep customer relationships.
Products to Market.
We experienced an initial slowdown in customer projects when Tara levels were first announced early in the second quarter as companies. Pause to assess the potential impact of the tariffs as well as other geopolitical issues.
This pause was followed by accelerated ordering in June demonstrating. Both, the essential nature of our services and our customers commitment to maintaining product development timelines.
As a reminder, these Dynamics May create incremental opportunities for us as tariffs Drive customers to redesign products or relocate Manufacturing.
Both of which often require re-certification.
Ryan Robinson: Thank you, Jenny, and hello, everyone. I also want to thank all of our team members for delivering another strong quarter and continuing the momentum we have maintained since coming to the public markets in April of last year. We are proud to report in our second quarter, on a consolidated basis, a continuation of healthy growth, margin expansion, and solid cash generation. As Jenny mentioned, revenues for the quarter were an all-time record, and it is encouraging to see that revenue growth once again occurred across all of our segments. Let me dive into the details of the quarter. Consolidated revenue of $776 million was up 6.3% over the prior year quarter. The increase included favorable FX movements, particularly the Euro and the Japanese Yen. On an organic basis, revenue grew 5.5%.
Now, let me turn the call over to Ryan for a detailed review of our second quarter results.
Thank you, Jenny, and hello everyone. I also want to thank all of our team members for delivering another strong quarter, and continuing the me, the momentum we have maintained since coming to the public markets in April of last year, we are proud to report in our second quarter on a Consolidated basis, a continuation of Healthy Growth, margin, expansion, and solid cash generation as Jenny mentioned revenues for the quarter were an all-time record and it's encouraging to see that Revenue growth once again our current all of our segments.
now, let me dive into the details of the quarter Consolidated, revenue of 776 million was up, 6.3% over the prior year, quarter quarter,
Ryan Robinson: Cost of revenue, as a percentage of revenue for the quarter, increased 70 bps to 50.6% due to higher depreciation and negative FX impacts. SG&A expenses, as a percentage of revenue, decreased 150 bps to 31.4%. This was primarily driven by operating leverage as a result of revenue growth partially offset by higher costs associated with internal projects. As a reminder, we recognized $9 million of performance-based incentive costs in the second quarter of 2024 related to cash-settled appreciation rights as we converted them to equity-settled compensation upon the date of our IPO. I would also like to point out that our cost of revenue and our SG&A were negatively impacted by changes in FX, roughly offsetting the benefit on revenues. Adjusted EBITDA for the quarter was $197 million, an improvement of 13.9% year over year.
The increase included, favorable FX movements, particularly the Euro and the Japanese Yen on an organic basis. Revenue grew 5.5%.
Cost of Revenue as a percentage of revenue for the quarter increased 70 basis points to 50.6% due to higher depreciation and negative FX impacts.
Sgna expenses is a percentage of Revenue decreased 150 basis points to 31.4%. This was primarily driven by operating leverage as a result of Revenue growth. Partially offset by higher costs associated with internal projects. As a reminder, we recognize 9 million of performance-based incentive costs in the second quarter of 2024 related to cash settled, appreciation rights as we converted them to equity, settled compensation upon the date of our IPO.
I would also like to point out that our cost of Revenue and our sgna were negatively impacted by changes in FX roughly offsetting the benefit on revenues.
Ryan Robinson: Adjusted EBITDA margin was 25.4%, up 170 bps from last year, primarily on strength in the industrial segment. As Jenny mentioned earlier, this margin is the highest since we became a public company. Adjusted net income for the second quarter was $110 million, up 17% from last year. Adjusted diluted earnings per share was $0.52, up from $0.44 per share in the second quarter of 2024. Let me turn to our performance by segment, starting with industrial. Revenues in industrial rose 7.6% to $338 million, or 7% on an organic basis, primarily driven by growth in ongoing certification services and certification testing. We saw particular strength in energy and automation. Increased lab capacity, including our new North American Advanced Battery Lab in Auburn Hills, Michigan, contributed to the growth. Revenue also benefited by $3 million versus the prior year from favorable changes in foreign exchange.
Adjusted ebit da, for the quarter was 197 million and Improvement of 13.9% year-over-year.
In was 25.4% up, 170 basis points from last year primarily on strength in the industrial segment. As Jenny mentioned earlier, this margin is the highest since we became a public company.
Adjusted net income for the second quarter was 110 million upset 17% from last year, adjusted diluted earnings per. Share was 52 cents up from 44, cents per share in the second quarter of 2024. Now, let me turn to our performance by segments. Starting with Industrial
revenues and Industrial Rose, 7.6% to 338 million or 7% on an organic basis. Primarily driven by growth in on in ongoing certification services and Certification testing. We saw particular strength in energy and automation
Ryan Robinson: Adjusted EBITDA for the industrial segment increased 20.6% to $117 million, while adjusted EBITDA margin improved 370 basis points to 34.6%. The industrial segment demonstrated strong operating leverage in the quarter as the majority of incremental revenue flowed to incremental operating income. Turning to the consumer segment, revenues in consumer were $340 million, up 5.6% on a total basis and 4.7% on an organic basis. The increase was primarily driven by demand improvement in non-certification testing and other services. We saw particular strength across consumer technology, driven by increased demand for electromagnetic compatibility testing for consumer electronics and in retail. As discussed in our last call, we saw some moderation in consumer organic growth in the second quarter after a strong first quarter that likely benefited from, among other things, increased customer activity in the first quarter in anticipation of tariffs.
Increased lab capacity including our new North American Advanced Battery lab in Auburn Hills. Michigan, contributed to the growth Revenue also benefited by $3 million versus the prior Year from favorable changes in foreign exchange.
Adjusted ibida for the industrial segment, increased 20.6% to 117 million while adjusted, EBA margin improved, 370 basis points to 34.6% the industrial, segment, demonstrated strong operating leverage in the quarter as the majority of incremental Revenue flowed to incremental operating income.
magnetic compatibility testing for consumer electronics and in retail
Ryan Robinson: Adjusted EBITDA for the quarter in consumer was $65 million, an increase of 6.6%. Adjusted EBITDA margin for the quarter was 19.1%, an increase of 20 basis points. Organic growth and improved operational efficiency were the main drivers of the year-over-year improvement. In our software and advisory segment, revenues were $98 million, an increase of 4.3% on a total basis and 3.2% on an organic basis. Our software service line within the software and advisory segment grew 6.0% on an organic basis. The improvement was driven by demand for our ULTRUS software portfolio, including retail product compliance. Adjusted EBITDA for the quarter in software and advisory was $15 million, unchanged as compared to the second quarter of last year. Adjusted EBITDA margin for the quarter was 15.3%, a decline of 70 basis points due to unfavorable mix and higher employee compensation expense relative to revenue growth.
As discussed in our last call. We saw some moderation in consumer, organic growth. In the second quarter, after a strong first quarter that likely benefited from among other things. Increased customer activity in the first quarter in anticipation of tariffs.
Adjusted ebaa for the quarter and consumer was 65 million, an increase of 6.6%.
Adjusted, EBA margin for the quarter was 19.1% and increase of 20 basis points, organic growth, and improved operational efficiency, were the main drivers of the year-over-year Improvement.
In our software and advisory segment revenues were 98 million in increase of 4.3%, on a total basis and 3.2% on an organic basis. Our software service line within the software and advisory segment, grew 6.0% on an organic basis. The Improvement was driven by demand for our Ultra software portfolio including retail product compliance.
Ryan Robinson: Turning to our cash generation in the first six months, we delivered $301 million of cash from operating activities, up from $244 million in the year-ago period. Capital expenditures in the first half were $93 million, compared to $113 million in the same period last year. I am very proud of our global team for generating $208 million in free cash flow in the first half, primarily as a result of improved profitability in our core business. This compares to $131 million in the year-ago period, representing a 58.8% increase. In addition, we paid $26 million in dividends in the second quarter and $52 million year to date. We also paid down a net of $45 million of debt in the quarter, bringing our year-to-date debt paydown to $135 million. As of June 30, we held $272 million of cash and cash equivalents.
Adjusted ibida for the quarter in soft. Ground advisory was million dollars unchanged as compared to the second quarter of last year. Adjusted, EBA Dom margin. For the quarter was 15.3%, a decline of 70 basis points due to unfavorable mix and higher employee compensation expense relative to revenue growth.
Turning to our cash generation in the first 6 months, we delivered 301 million of cash from operating activities up from 244 million in the year ago. Period, Capital expenditures in the first half were 93 million compared to 113 million in the same period last year. I'm very proud of our Global team for generating 208 million in free, cash flow in the first half primarily as a result of improved profitability in our Core Business. This compares to 131 million in the year ago, period representing a 58.8% increase.
In addition we paid 26 million in dividends in the second quarter and 52 million year to date. We also paid down a net of 45 million of debt in the quarter, bringing our year to date Debt, Pay down to 135 million.
Ryan Robinson: Our investment-grade credit ratings underscore the strength of our balance sheet. Our robust balance sheet and cash flow generation give us great flexibility to invest in organic initiatives and accretive acquisitions that are intended to help produce best-in-class shareholder returns. Our investments in key capacity additions are intended to continue to align the business with the megatrends driving demand for our services. Turning to our 2025 full-year outlook. While we continue to navigate a dynamic geopolitical and macroeconomic environment, our diversified business model and strong market positioning enable us to capitalize on emerging opportunities while managing potential risks effectively. We actively monitor these dynamics and their inputs on our customers to ensure we remain well-positioned for continued success.
as of June 30th, we held 272 million of cash and cash equivalents, our investment grade credit ratings underscore the strength of our balance sheet,
A robust balance sheet and cash flow generation. Give us great flexibility, to invest in organic initiatives in a creative Acquisitions that are intended to help produce best-in-class shareholder. Returns our investments in key capacity additions are intended to continue to align the business with the mega Trends driving demand for our services.
now, turning to our 2025 full year outlook,
While we continue to navigate a dynamic geopolitical and macroeconomic environment, our diversified business model and strong market positioning enable us to capitalize on emerging opportunities while managing potential risks effectively.
Ryan Robinson: Given our first-half performance, solid visibility into our end markets, and confidence in our strategic execution capabilities, we are pleased to affirm our 2025 full-year outlook, and we remain optimistic about our ability to deliver sustained growth and value creation. As a reminder, we face increasingly challenging comparisons in the second half of 2025 versus the second half of 2024. We continue to expect 2025 consolidated organic revenue growth to be in the mid-single-digit range as compared to our full-year 2024 results. Organic growth is based on constant currency and excludes acquisitions and divestitures. We continue to expect our adjusted EBITDA margin to be approximately 24% for the full year 2025.
We actively monitor these Dynamics and their inputs on our customers to ensure we remain. Well, positioned for continued. Success, given our first half performance solid visibility into our end markets and confidence. In our strategic execution capabilities, we are pleased to airm. Our 2025 full year outlook and we remain optimistic about our ability to deliver sustained growth and value creation.
As a reminder, we faced increasingly challenging comparisons in the second half of 2025 versus the second half of 2024 we continue to expect 2025 Consolidated, organic Revenue growth to be in the mid single digit range as compared to our full year 2024 results. Organic growth is based on constant currency and excludes Acquisitions investors.
Ryan Robinson: Our margin expansion strategy is supported by several key drivers: capturing operational leverage as we scale our top-line growth, capitalizing on our industrial segment's higher growth trajectory relative to the other business units, and maintaining our focus on continuous productivity improvements. Additionally, we remain committed to identifying and executing strategic acquisitions in high-value markets that enhance our profitability profile and our earnings potential, while consistently evaluating opportunities to optimize our overall portfolio mix. Our outlook for capital expenditures in 2025 remains in the range of approximately 7% to 8% of revenue, with investments in new labs and software continuing as we seek to match strong customer demand in all three segments. Our expectations for our effective tax rate in 2025 remain approximately 26%.
We continue to expect our adjusted EBA margin to be approximately 24% for the full year. 2025 our margin expansion strategy is supported by several key drivers.
Capturing operational leverage as we scale our topline growth.
Profile and our earnings potential. While consistently evaluating opportunities to optimize our overall portfolio mix.
Our outlook for Capital expenditures in 2025 remains in the range of approximately 7 to 8% of Revenue with investments in new labs and software. Continuing as we speak as we seek to match strong customer demand in all 3, segments.
Ryan Robinson: This compares to an effective tax rate of 16.9% in 2024, with the anticipated change due primarily to additional implementation of the OECD's Pillar Two requirements, which affects how multinational corporations are taxed. Our Q2 and year-to-date performance demonstrates sustained business momentum with enhanced profitability and robust cash flow generation. The strength of our investment-grade balance sheet enables strategic capital allocation opportunities as we continue executing on our commitment to deliver exceptional returns for our shareholders. Now, let me turn the call back to Jenny Scanlon for her closing remarks.
Our expectations for our effective tax rate in 2025 remains approximately 26%, this compares to an effective tax rate of 16.9% in 2024 with the anticipated change due primarily to additional implementation of the oecd's pillar 2 requirements, which affects how multinational corporations are taxed.
Our Q2 and year to date performance demonstrates sustained business momentum with enhanced profitability and robust cash flow generation.
Jennifer Scanlon: Thanks, Ryan. As I would like to highlight, we always have some very interesting things going on at UL Solutions Inc. Two weeks ago, I had the honor of moderating a panel here in Chicago at the Global Quantum Forum. This was a two-day sold-out event which brought together some of the leading minds from all over the world in this emerging field. Chicago is becoming an epicenter for development of this innovative computing method with the establishment of the Illinois Quantum and Microelectronics Park on the city's south side. As so many of the panelists described, the potential for quantum computing to solve previously intractable problems is real and gaining momentum. Our role at UL Solutions Inc.
The strength of our investment grade balance sheet, enables strategic Capital, allocation opportunities as we continue executing on our commitment to deliver exceptional returns for our shareholders. Now, let me turn the call back to Jenny for her closing remarks.
Thanks Ryan. As I'd like to highlight, we always have some very interesting things going on at UL Solutions.
2 weeks ago, I had the honor of moderating a panel here in Chicago at the global Quantum forum.
This was a 2-day sold out event which brought together some of the leading Minds from all over the world in this emerging field.
Chicago is becoming an epicenter for the development of this innovative computing method with the establishment of the Illinois Quantum and Micro Electronics Park on the city's South Side.
As so many of the panelists described the potential for Quantum Computing to solve previously, intractable problems is real and gaining momentum.
Jennifer Scanlon: in this technology revolution is to work with our customers to solve the safety, security, and sustainability problems that always accompany any leading-edge technology, something we have been doing for more than 130 years. To sum up, our Q2 results demonstrate the continued strength of our business model. The strategic investments we have made and continue to make in key growth areas position us at the forefront of the megatrends driving demand for our services. The quarter also highlighted the essential nature of our safety science offerings as we successfully navigated dynamic market conditions. Our global footprint, our diversified revenue streams, and our deep customer relationships continue to serve us well in an evolving environment. With strong cash flow generation and our investment-grade balance sheet, we remain well-positioned to capitalize on strategic growth opportunities while delivering long-term value to shareholders. With that, we will open the line for questions.
Our role at UL Solutions in this technology Revolution is to work with our customers to solve the safety security and sustainability problems. That always accompany any Leading Edge technology. Something we have been doing for more than 130 years.
To sum up our second quarter results, demonstrate the continued strength of our business model.
The Strategic Investments we have made and continue to make in key growth areas position us at the Forefront of the mega Trends driving demand for our services.
The quarter also highlighted the essential nature of our safety science offerings. As we successfully navigated Dynamic market conditions,
Our Global Footprints are Diversified revenue streams and our deep customer relationships, continue to serve us well in an involving environment.
With strong cash flow generation, and our investment grade balance sheet, we remain well, positioned to capitalize on strategic growth opportunities, while delivering long-term value to shareholders.
With that, we'll open the line for questions.
Yijing Bintano: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speaker phone, please pick up your headset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from the line of Andrew Nicholas, William Blair. Please go ahead.
Thank you.
We will now begin the question and answer session.
to ask a question, you may press star then 1 on your touchtone phone,
If you are using a speaker-phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to return your question. Please press star. Then to at this time we will pause momentarily to assemble our roster.
The first question comes from the line of Andrew. Nicholas William Blair please go ahead.
Andrew Nicholas: Hi. Good morning, guys. This is Dan Maxwell on for Andrew Nicholas today. Maybe to kick things off, get the tariff questions out of the way. Just curious if you guys are seeing any changes on client behavior or other trends worth calling out, including anything specifically related to clients managing their exposure to China.
Hi. Good morning, guys. This is Dan, Maxwell on for Andrew today. Um, maybe to kick things off. Get the Tariff questions out of the way. Um, just curious, uh, if you guys are seeing, uh, any changes on client Behavior or or other Trends worth calling out, uh, including anything specifically related to
Managing their exposure to China.
Jennifer Scanlon: Thanks, Dan. It is an important question. We started seeing this really in Q4 and through Q1. Uncertainty in 2025 has caused some behavior shifts. There has been, we believed, pull forward in Q4 in our industrial business and pull forward in Q1 in our consumer business. There has been, perhaps, some slowdown in new product launches. As greater certainty is entering the market, which is really what we believe we started to see in June, we believe that the typical response that our business has to tariffs will continue, helping our customers shift their supply chains and make decisions around where they want to conduct R&D and manufacturing of their products.
Thanks Dan and it is an important question and and we started seeing this um really in the fourth quarter and through the first quarter.
And manufacturing of their products.
Andrew Nicholas: Great. Thanks. For my follow-up, I appreciated your comments on the lab expansions in Europe. Maybe if you can just give us a broader full business update on where you sit as far as overall lab capacity and then what you think may be the next sort of large areas of investment on that front or otherwise in the business.
Great, thanks. And then
this is for my follow-up.
Um, appreciated your comments on the, uh, the
extensions in Europe.
uh maybe if you can just give us a kind of a broader full business update uh on where you sit as far as overall lab capacity and then what you think, uh maybe the next
Large areas of investment on that front or, or otherwise in the business.
Jennifer Scanlon: Absolutely. We do really enjoy investing in organic growth. We have good return on our invested capital from our history of this. When we look at our lab capacity today, we do not report specific utilization rates, but it is safe to say that recent lab additions, as well as continuous improvement in our existing labs, are contributing to our improved results. As you know, our Auburn Hills lab came online in the second half of last year, and Ryan Robinson highlighted that continued progress. We continue to focus on some key announcements of lab expansion. We have a global fire science center of excellence that we announced, I think, in Q1, and we have been expanding our lab capacity in Mexico and putting improvements here in North Park. We also, last quarter, announced some lab expansions in both Korea and Japan.
Absolutely, and we do, uh, really enjoy investing in organic growth. Uh, we've got good return on our investment capital from our history of this. And when we look at our lab capacity today, um, we, you know, we don't report, uh, specific utilization rates, but it's safe to say that recent lab editions. Um, as well as uh, continuous improvement in our existing Labs, um, our contributing uh, to our improved results. And, you know, as you know, our Auburn Hills lab came online, in the second half of last year and Brian highlighted, um, that continued progress.
Jennifer Scanlon: So we continue to apply capital to where our customers are bringing demand to our attention, and we will continue to do so with a disciplined but also growth mindset.
Um, we continue to focus on some key announcements of um lab expansion. We have a global fire, uh, Science Center of Excellence, uh, that we announced uh, I think in the first quarter and we've been expanding our lab capacity in Mexico and uh, putting improvements here in Northbrook. Um, we've also last quarter announced uh, some lab expansions in both Korea and Japan. So we continue to apply Capital to where our customers uh, are bringing demand to our attention and uh, we'll continue to do so with a, a disciplined, but also, um, you know, growth mindset.
Andrew Nicholas: Great. Thank you.
Great. Thank you.
Yijing Bintano: Thank you. Next question comes from the line of Andrew Nicholas with JPMorgan. Please go ahead.
Thank you. Next question, comes from the line of and to stand a man with JP Morgan. Please go ahead.
Andrew Nicholas: Hi. It's Andrew. Ryan, I heard the way you framed the full-year guide, mid-single-digit organic cost of currency revenue growth with sustained momentum and somewhat tougher comps in the second half. When I look at the tougher comps in the second half, I see them on an organic cost of currency basis as about a point tougher than the second quarter you just reported. What I'm curious about is numerically, in the first half of the year, you were at the very high end of mid-single-digit organic revenue growth. To make mid-single-digit for the full year, are you saying the second half of the year may be somewhat below mid-single-digit organic cost of currency revenue growth to make mid-single-digits for the full year?
Hi. It's Andrew. Um Ryan you know I I heard the way you framed the full year guide, you know, mid single digit, organic consequences, Revenue growth with sustained mentioned, uh, momentum and uh, and somewhat tougher comps in the second half. Like when I look at the tougher comps in the second half, I see them on our organic consequences. Basis is about, uh, a point tougher than the second quarter. You just reported, uh, what I'm curious about is sort of numerically in the first half of the year you were at the very high end of uh mid single digit organic.
Growth. Um, and to make mid-level digit for the full year. Are you saying the second half of the year? Maybe somewhat, uh, below mid single digit, organic constant currency Revenue, growth to make mid single digits for the full year.
Ryan Robinson: Andrew, thank you very much for the question. Yes, we are pleased with our performance year to date, and you are right to point out the steepening comparisons in the second half. As a reminder, in the third quarter of last year, our organic revenue growth was 9.3%, and in the fourth quarter, it was 9.5%. Those just create higher comparisons, but we are confident in how the business is progressing. Our focus has been on our outlook on a full-year basis. As Jenny Scanlon mentioned, I think we are seeing a bit more market clarity and reductions in uncertainty, but it is not without uncertainty. There continue to be announcements about changes that could affect the product development behaviors of our customers. So we remain confident but cautious.
Yeah, Andrew. Thank you very much for the question and and yes, we're pleased with our performance year to date and your right to point out the steepening comparisons in the in the second half as a reminder in the third quarter of last year or our organic Revenue growth was 9.3% and in the fourth quarter it was 9.5%. So those just create um higher comparisons. Um but we're we're confidence in how the business is progressing. Our Focus has been on our outlook on a full year basis. Um, as Danny mentioned, I think we're seeing a bit more market clearity and reductions in uncertainty
But it is.
Andrew Nicholas: Okay. Thank you.
Without uncertainty and there continue to be announcements about changes, that could affect the product development behaviors of our of our customers. So we remain confident, but cautious.
Okay, thank you.
Yijing Bintano: Thank you. Next question comes from the line of George Tong with Goldman Sachs. Please go ahead.
Thank you. Next question, comes from the line of George Tong with Goldman Sachs. Please go ahead.
Andrew Nicholas: Hi. Thanks. Good morning. You mentioned you saw a bit of pull forward activity in both the industrial and consumer businesses ahead of tariffs. Is it possible to quantify the amount of pull forward in both of those segments and how you expect that to impact growth in the coming quarters?
Hi thanks. Good morning. You mentioned you saw a bit of pull forward activity in both the industrial and consumer. Businesses ahead of tariffs. Is it possible to quantify the amount of pull forward in both of those segments and how you expect that to uh impact growth in the coming quarters?
Jennifer Scanlon: Let us isolate the two distinctions, and then Ryan will dig into the numbers. Where we saw pull forward in industrial appeared in the fourth quarter last year, and we talked about our ongoing certification services and, in particular, labels where we believe some of our industrial customers may have been stocking up in advance of tariffs. Then we have seen that now normalize. In consumer, what we saw was perhaps a surge in getting shipments out before tariffs were going to hit, and we believe we saw that in the first quarter. Specifically quantifying, I will look to Ryan.
Uh tariffs were going to hit. And we believe we saw that in the first quarter.
Ryan Robinson: Yeah. As a reminder, in the first quarter, our organic revenue growth for consumer was 7.7%, and what we just reported was 4.7%. Our underlying customer relationships, our ability to win business hasn't changed materially. There's just been some effect in the marketplace, but we view those as relatively short-term. The fundamental drivers of new product innovation, of new technological development, of assortment provided by manufacturers, we don't see fundamental longer-term changes in those, but changes in macroeconomic and government policy matters can affect short-term decisions.
Um, so as a reminder, in the first quarter, our organic Revenue growth for Consumer was 7.7% and what we just reported was 4.7% and our underlying customer relationships our ability to win business. Um, hasn't changed materially there. There's just been some effect in the marketplace, um, but we view those, as relatively short term, the fundamental drivers of new product innovation of new technological development of Assortment provided by manufacturers, we don't see fundamental longer term changes in those, um, but, uh, changes in macroeconomic and
government policy matters can affect short-term decisions.
Andrew Nicholas: Got it. That is helpful. With respect to margins, you saw very significant year-over-year margin expansion in the industrial segment. How much additional runway do you see for margin expansion here and also in your other segments, consumer and software and advisory?
Got it. That's helpful. And then with respect to margins you saw very significant year-over-year margin expansion in the industrial segment. How much additional Runway do you see for margin expansion here and also in your other segments consumer and software and advisory
Ryan Robinson: The way that we phrase that is we see margin opportunity expansion in all three of our segments, and then, of course, on a consolidated basis. We do not give segment-specific guidance, but we have made strong progress in the quarter and through the first half of the year. There were a couple of things in industrial that were relatively minor. We mentioned in the second quarter of last year, we had both some IPO-related incentive recognition expense, and in the second quarter of last year in industrial, we had three M&A transactions, two acquisitions, and one divestiture in a quarter. There were some transaction-related expenses in the second quarter of last year that we are comparing against, but even isolating from those, we had good margin expansion.
Yeah, the way that we phrase that is we see margin opportunity expansion in all, 3 of our segments and then of course on a Consolidated basis, we don't give segments specific guidance. Um, but we've made strong progress in the quarter and through the first half of the year. Um, there there were a couple things in industrial that were relatively minor. We mentioned in the second quarter of last year. Um, we had both some IPO related. Um,
Incentive recognition expense. And in the second quarter of last year and Industrial,
We had uh 3 m transactions 2 Acquisitions. And 1 devest return a quarter. So there were some transaction related expenses in the second quarter of last year that were comparing against but even isolating from those, we had good margin expansion.
Andrew Nicholas: Got it. Thank you.
Got it. Thank you.
Yijing Bintano: Thank you. Next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.
Thank you. Next question, comes from the line of Stephanie Moore with Jeffrey. Please go ahead.
Stephanie Moore: Hi. Good morning. Thank you. Maybe a bigger-picture question for you, Jenny Scanlon. As you think about the growth in data centers and the computing required for these LLM models and the like, can you talk about how you view this megatrend as compared to other megatrends? For example, electrification of everything, digitalization, and the like. If you could just frame what this opportunity could be for your business, that would be helpful. Thank you.
Hi, good morning. Thank you.
Um, you know, I I have a maybe a bigger picture question for you, Jenny. You know, as you think about.
Jennifer Scanlon: Thank you. I love talking about this because my very first job was helping build data centers when I was at IBM 35 years ago. Here is the thing about data centers and that megatrend, it actually reflects the confluence of a few key trends. The electrification of everything is extremely important. NEMA put out a study back in April that talked about 300% projected growth in data center energy consumption over the next 10 years. The sources of where that energy is going to come from is across all elements. It is traditional fossil fuels, as well as renewables, wind, solar, geothermal, hydro, anything that anybody can get their hands on. Nuclear to generate energy to support data centers is extremely important. That trickles through all of our industrial customers as they are thinking about how do they help build equipment that supports different types of energy generation?
The the growth and and and data centers and and and the Computing required for these, you know, Elan models and the likes. Can you maybe talk about how you view this Mega Trend as compared to other Mega Trends? You know for example electrification of everything. Digitalization, the likes. If you could just kind of frame what this opportunity could be for your business, that would be helpful. Thank you.
Thank you. And I love talking about this because my very first job was helping, uh,
uh, build data centers when I was at IBM, 35 years ago. So, um, here's the thing about data centers and that Mega trend is it, it actually reflects the Confluence of a few key trends. So, the electrification of everything is extremely important. Um, Nema, put out a study back in April that talked about 300% projected growth in data center, energy consumption over the next 10 years.
And so the sources of where that energy is going to come from, is across all elements. It's, you know, traditional, uh, you know, traditional fossil fuels, as well as Renewables, wind, solar geothermal Hydro anything that anybody can get their hands on, um, nuclear to generate energy to support data centers is extremely important. So that trickles through, uh, all of our
Jennifer Scanlon: How are they supporting the ways in which energy is transmitted? We have seen in our wire and cable business an increase in high-voltage cable testing. The way that it is stored, the importance of energy storage systems, particularly in the industrial space, is growing. Then the way that it is used, and this is where continued inventions in the actual computing space of how do you reduce the amount of energy that these data centers are going to need? In fact, at the Quantum Forum last week, they talked about how can quantum be used to help solve the problem of the amount of electricity that AI data centers need. I really view this whole digitalization trend as pulling together pieces of our megatrends of electrification of everything, sustainability, and digitalization.
Jennifer Scanlon: It is really exciting to just sit back and think about all the ways in which it is going to change our world.
Friend as pulling together pieces of our Mega trends of electrification of everything sustainability and digitalization. And, uh, it's it's, uh, it's really exciting to just sit back and, and think about all the ways in which is going to change our world.
Stephanie Moore: Maybe just as a follow-up to that question, as you think about this emerging over time, does it suggest that you could see some incremental lab capacity investments, or is it needed to see that in order to capitalize on some of these trends? Then, same question, but if it is not incremental lab capacity investments, are there areas from a capital allocation standpoint that you could maybe move into M&A-wise that could further expand on this trend?
and then maybe this is a follow-up to that question, you know, as you think about this emerging over time, does it suggest that
Source that needed to see that in order to capitalize on some of these Trends. And then you know same, same question but if it's not incremental lab capacity, Investments are there areas from a capital allocation standpoint that you could maybe move into m&a wise? You know that? Could further expand on this trend. Thanks.
Jennifer Scanlon: are absolutely looking at both of those things. I think when you look at the standards that are being applied, like, let us just take cooling technology, there is a number of different UL and IEC cooling standards that are out there. We will continue to think about what are the most cutting-edge ways to test those standards. If it makes sense that we need to add lab capacity, we will. We have labs today that can handle this. As new standards come out, new test methods may be needed, and we will stay ahead of those investments. At the same time, we are also really excited that so many of our global and strategic accounts where we have long-term global relationships are key. They are really key participants. They are key stakeholders in this whole data center ecosystem.
We're absolutely looking at both of those things, you know, I think when you look at the the standards that are being applied like let's just take cooling technology. You know there's a number of different ul and IEC cooling standards that are out there and we'll continue to think about um what are the most Cutting Edge ways to test to those standards? And, you know, if it makes sense that we need to add lab capacity, we will we have Labs today that that can handle this. But as new standards come out, new test methods, may be needed and we'll stay ahead of those Investments.
Jennifer Scanlon: That is giving us visibility and opportunities into thinking about partnerships and other potential investments in the future. We are just excited to be in the center of all this.
At the same time, we're also really excited that so many of our Global and strategic accounts where we have long-term Global relationships are key. The the really key participants, their key stakeholders in this whole data center ecosystem.
So that's giving us visibility and opportunities into thinking about Partnerships and other potential investments in the future. And, um, you know, we just, we're just excited to to be in the center of all this
Yijing Bintano: Ms. Moore, are you done with your questions?
Stephanie Moore: Oh, yes, I am. Thank you. Appreciate it.
Yijing Bintano: Thank you.
Andrew Nicholas: Thank you, Stephanie.
Jennifer Scanlon: Thanks, Stephanie. Always nice to hear from you.
Miss Moore. Are you done with the questions? Oh yes I am. Thank you. Appreciate it. Thank you. Thank you. Stephanie thanks. Stephanie always nice to hear from you.
Yijing Bintano: Thank you. The next question comes from the line of Josh Chan with UBS. Please go ahead.
Thank you. And next question comes from the line of Josh Chan with UBS. Please go ahead.
Andrew Nicholas: Hi. Good morning, Jenny and Ryan. I was wondering if, Jenny, you could elaborate on your June comments about the tariffs. What kind of improvement did you see in the market? Then just as a broader question, do you feel that customers are already having made decisions on post-tariffs? I am kind of surprised by that because the environment is obviously still very fluid. Thank you.
Hi, good morning, Jenny and Ryan. Um, I was wondering, if you, if, if Jenny, you could elaborate on on your June comments about the the tariffs, what what kind of improvement did you see in the market? And then just as the broader question, do, do you feel that, uh, you know, customers are already having made decisions on, you know, post tariffs or I'm kind of surprised by that because you know, the the environment is obviously still very fluid. Thank you.
Jennifer Scanlon: Great question on both fronts. First, let me just talk about the arc of the quarter, then I can talk about what we believe our customers may be deciding. The arc of the quarter, as we said, both in industrial and consumer and software and advisory, there was just softer-than-expected growth, softer-than-expected order volume in April and May. Then we did see a shift, a pickup in June. In industrial, throughout the quarter, we saw some real strength in power and automation and those industrial storage systems and in some of the high-voltage wire and cable. In other areas, we saw things come back in June. In consumer, typically, historically, the second quarter is our strongest revenue quarter, and orders were soft in April and May. Our large retailers, the strength in that space, it continues to be real, and we saw that across the U.S. and in broader Asia.
Yeah, great question on both fronts. So first, let me just talk about the Arc of the quarter and then I can talk about
What we believe our customers may be deciding, um, The Arc of the quarter as we said, uh, both in industrial and consumer and software and advisory, um, that there was just softer than expected growth softer than expected order volume, um, in April, and May. And then, we did see a, a shift, a pickup in June. Um, and uh, we, you know, in industrial throughout the quarter, we saw some rail strength and power and Automation, and those industrial storage systems. And in, uh, some of the high voltage wire and cable, and in other areas, uh, we saw things come back in June, uh, in consumer. You know, typically historically the second quarter is our strongest Revenue quarter and, uh, orders were soft in April and May but
Jennifer Scanlon: In consumer technology, we saw really the pickup come back in June across the U.S., U.K., Asia, greater China. That has been the arc of the quarter. Given that, as we evaluate what our customers believe, what we are seeing is as various decisions are being made across both tariffs and regulations, customers are building confidence in what decisions they need to make. While there still is, Ryan Robinson said, a lot of uncertainty, a lot of things can change, there just seems to be a greater sense that there will be more clarity to what they can rely on in the future. It is that reliance on the future that will allow them to continue to make their capital allocation decisions around new product development and R&D.
Our large retailers, the strength in that space, is it continues to be real. And we saw that, you know, across the US and in broader Asia
And in consumer technology we saw really the pickup come back in June across you know us UK Asia greater China.
So that's been the Arc of the quarter given that, as we evaluate, what are our customers believe. Um, what we're seeing is as various, um, decisions are being made across, uh, both tariffs and regulations.
The customer's are building confidence in what decisions they need to make.
And, you know, while there still is Ryan said, a lot of uncertainty, a lot of things can change. Um, there's just seems to be a greater sense.
That there will be more clarity to what they can rely on in the future and it's that Reliance on.
Continue to make their Capital allocation decisions around new product development and R&D.
Ryan Robinson: To build on that, through a dynamic period, we are pleased that all of our team members around the world have delivered, through the first half, 6.5% organic growth in a relatively uncertain time. The team is performing well.
And then just to build on that through a dynamic period.
We're pleased that that all of our team members around the world have delivered through the first half, 6.5% organic growth, in a relatively uncertain time. So, uh, the team is performing well.
Yijing Bintano: That is great, Carla. Thank you for that. That is really helpful. My follow-up is on that growth. Based on Ryan Robinson's comment about the tougher comps in the second half, one could think that growth would decelerate from Q2 into the second half. Based on this improvement in June, do you think that could offset the tougher comp narrative that was mentioned previously? Thank you.
Ryan Robinson: It is really difficult to isolate whether the shape of the quarter was just redistribution of activity that would otherwise happen in the quarter, or it is a stepping-off point for the second half. It continues to be a less certain environment than last year, but we are pleased with the progress. At this point, we felt affirming guidance was something we were comfortable doing.
That's fairly yeah. Thank you. Thank you for that. That's really helpful. Um, and then I guess my follow-up is on that growth. So, you know, based on Ryan, your comment about the tougher comps in the second half, you know, 1 could think that growth would decelerate, from Q2 into the second half. But based on this Improvement in June, but do you think that could kind of offset the tougher comp narrative that, that, that was mentioned previously. Thank you.
yeah, it's, it's really difficult to isolate, whether the shape of the quarter, um, was just redistribution of activity, that would otherwise happen in the quarter or it's a stepping off point for the
For the second half.
Um, and it and it continues to be a less certain environment than than last year. But we're we're pleased with the with the progress. So at this point,
We we felt affirming guidance. Um,
Uh, was something we were comfortable doing.
Yijing Bintano: Great. Thank you for the cover and congrats on the quarter.
Ryan Robinson: Thank you.
Great, thank you for the cover and congrats on the quarter.
Stephanie Moore: Thank you.
Thank you, Jason.
Yijing Bintano: Thank you. Next question comes from the line of Arthur Truslove with Citi. Please go ahead.
Thank you. Next question, comes from the line of Arthur trusov with City. Please go ahead.
Arthur Truslove: Thank you, and good afternoon. Just a couple from me if I may. The first one was around the pull forward in Q1. I guess, and indeed the sort of stop at the pull within customer activity following Liberation Day. I was just wondering kind of how you became aware of that because I was a bit surprised to hear that today because I don't recall hearing it at Q1. So I just wondered what new information had come out there. My second question is on pricing. How much are you able to give us any idea of how much of the pricing in Q2, so how much of the organic growth in Q2 was pricing? With that in mind, kind of how developed you are in terms of your pricing and how much more sort of commercialization you've got to do there. Thank you.
Thank you, and, um, good afternoon. Um, so I was just a couple from from, from MSA. Um, the first 1 was around, um, the pool forward, um, you know, in in q1, um, you know, I guess.
Ryan Robinson: Yes. Thank you very much for the questions, Arthur Truslove. First on the shaping, in the Q1 call, we did mention that we felt that the consumer business had some pull forward. In particular, we saw some increased activity in some areas of the world that were more tariff-affected, and we saw an increase in relative activity on a sequential basis. We did mention that last quarter. In regard to pricing, we had similar contributions from price and volume in our testing-related businesses, slightly more contribution from price, but pretty similar.
And indeed, the, the sort of, um, stop it, the pause in customer activity, uh, following the breaking day. I was just wondering, um, kind of how you how you became aware of that because I, I was a bit surprised, um, you know, to hear that today because we didn't, I don't recall hearing it at q1. So just wondered. Um, you know what, what new information had come out there, um, and then second question, um, on pricing. So how much are you able to give us any idea of how much of the pricing in, uh, Q2 to how much of the organic growth in Q2 was pricing? Um, and with that in mind, kind of how developed you are in terms of of your pricing. And, you know, how how much more sort of commercialization, you've got to do that. Thank you.
Jennifer Scanlon: Let me just add one more thing on pricing because we have mentioned it before. We have been in the process of implementing our configure price quote, and it is not just a system. It is an entire set of processes. Our teams have been very much moving through the implementation, not just of embedded analytics for their pricing decisions, but also changing our processes and the monitoring that we have on that, as well as creating a pricing center of excellence. We are continuing to focus on how we deliver value-based pricing for our customers.
Yeah, thank you very much for the questions, Arthur. Um, and then just first on the, on the shaping, we in the first quarter call, we did mention that, we, we felt that the consumer business had some pull forward in particular, we saw some increased activity in some areas of the world that were more tariff affected, uh, and we saw a increase in relative activity on a, on a sequential basis. So we, we did mention that, uh, last quarter and then in regard to pricing. Um, we had similar contributions from price in volume in our testing related businesses, slightly more contribution from price, but pretty pretty pretty similar.
And let me just add 1 more thing on pricing, because we've mentioned it before, you know, we've been in process of implementing, um, our configure price quote, and it's not just a system, it's an entire set of processes. And so our teams have been, um, you know, very much, uh, moving through the implementation, not just of, you know, embedded analytics for their pricing decisions. Uh, but also uh, changing our processes and, uh, and the monitoring that we have on that as well as, uh, creating a pricing Center of Excellence. So, you know, we're continue to focus on, uh, how we deliver value based pricing for our customers.
Arthur Truslove: Wonderful. Thank you very much for the invite to clarification on the first bit as well. Thank you.
Ryan Robinson: Thank you, Arthur.
Wonderful, thank you very much, indeed. Thank you for the clarification on the first bit as well. Thank you.
Jennifer Scanlon: Thanks, Arthur.
Yijing Bintano: Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question comes from the line of Jason Hoff with Wells Fargo. Please go ahead.
Thank you. Arthur. Thanks. Arthur.
Thank you. I reminded to all the participants that you may press star and 1 to ask a question.
Next question comes from the line of case in half with Wells Fargo, please go ahead.
Andrew Nicholas: Good morning. This is Jenni on for Jason Hoff. There was a pretty sizable acquisition done by one of your competitors in this space earlier last month in the U.S. Sounds like they had some overlap with you guys. Just wondering if you took a look at that transaction and why you did not pursue it, and if you foresee any competitive pressures. Then more broadly on just how the M&A pipeline looks today for you guys. Thank you.
Thank you.
Jennifer Scanlon: Thanks, Jenny. We remain disciplined and active in the M&A environment, and our goal with any M&A is to fortify our focus on the product TIC business and the strategy that we have there, and to make sure that anything that we add, both services and capabilities, is something that our customers globally will feel is something that deepens our value and our relationship with them. Indeed, we have eyes on many, many, many deals that come into the marketplace. In any deal, there are parts that we can find interesting, and there are parts that may or may not fit with our business strategy. We continue to be disciplined and active in thinking about M&A.
Thanks Jenny.
We remain disciplined and active uh, in the m&a environment. And our goal, with any m&a is to fortify our, our focus on the product tick business and the strategy that we have there and to make sure that anything that we add, uh, both services and capabilities, is something that our customers globally, uh, will feel is uh, something that deepens our value, and our relationship with them.
So indeed, uh, we have eyes on, uh, many, many, many deals, uh, that that come into the marketplace and in any deal, there are parts that we can find interesting. And there are parts that may or may not uh, fit with our business strategy and we continue to be disciplined and active in thinking about um m&a.
Andrew Nicholas: Great. Thank you. As my follow-up, it looks like software and advisory moderated a bit on an organic basis. Just curious if there's anything to call out there and overall trends you're seeing in that segment. Thank you.
Great. Thank you. And as my follow-up, it looks like software and advisory moderated a bit on an organic basis. So just curious if there's anything to call out there and overall Trends you're seeing in that segment. Thank you.
Jennifer Scanlon: The challenge this quarter in software and advisory was really advisory, and I believe we said that last quarter as well. There has just been a weakness in advisory in the United States, and in particular, as wind policies are changing, there is some renewables advisory slowness in that piece. As commercial real estate continues to be under some pressure, there is some pressure in our healthy buildings offerings there. But as Ryan mentioned, the organic growth for our software business was 6%. The changing regulations around CSRD in Europe slowed down some of our ESG software, but we expect that we will see a pickup on that throughout the rest of the year.
Yeah, the challenge this quarter on software and advisory was really advisory. And um, I believe we said that last quarter as well, there's just been a weakness.
Um, in advisory in the United States. And in particular, um, as winds policies are changing, there's some Renewables advisory, um, slowness in that piece and as commercial real estate continues to be, uh, under some pressure, uh, there's some pressure in our healthy buildings, offerings there, um, but
As Ryan mentioned, the organic growth for our software business was 6%. Um and uh the changing regulations around csrd in Europe. Uh, slowed down some of our ESG software but we expect um, that we'll see a pick up on that, uh, throughout the rest of the year.
Andrew Nicholas: Thank you.
Thank you.
Yijing Bintano: Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Jenny Scanlon, CEO, for closing remarks.
Thank you.
Jennifer Scanlon: Thank you, everyone, for joining us today. As always, we appreciate your support, and we look forward to updating you on our progress next quarter.
This concludes our question and answer session, I would like to turn the conference back over to Jenny scandlen. CEO for closing remarks.
Yijing Bintano: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Thank you, everyone, for joining us today. As always, we appreciate your support, and we look forward to updating you on our progress next quarter.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.