ULS - Earnings call transcript Q4 2024

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Operator

Good morning, and welcome to the UL Solutions Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mitchell Ji, Senior Vice President of Corporate Finance. Please go ahead.

Mitchell Ji

everyone, call. fourth welcome, year and and earnings XXXX you, to quarter our full Thank

today Jenny me Robinson, Joining are our and Executive Chief Ryan Officer; Financial Officer. Scanlon, our Chief

referring During today, is on at Investor our the website earnings section our we be available of discussion Relations ul.com. presentation, to will which our

release is the Our available earnings website. on also

operations Reform the statements I Act implied estimates could about other UL Private in statements within the a forward-looking we may material would like discuss Solutions' results uncertainties forward-looking the in These factors to XXXX. differ things, of prospects remind of risks, meaning of everyone involve forward-looking that statements. safe and way to of other statements that Securities and substantial from among provisions Litigation on or today's call, include, that harbor the expressed results actual cause and those may

year X as release earnings statements, described see on the factors that annual required December on circumstances for the the presentation or the in reflect earnings forward-looking our of in except no are statements our update well ended Form Slide report to as concerning the events assume XX, XXXX. hereof, after date disclaimers risk by obligation statement disclosure and XX-K law. to as We Please any forward-looking the

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

I the over that, call to Jenny. With now like would turn to

Jennifer Scanlon

highlight unique investment. your in were a and for what This to we last our us. time IPO joining up Good and show Solutions time gearing and UL makes thanks morning, everyone, worth year, road for

and we global we testing, and we consolidating talked science investors, fragmented inspection company growth about potential leader As in certification and are the with industry. a how a mission-driven safety met

to allocation and and balance strategy operating extraordinary and a customer streams, leverage, include capital our has recurring deep Against disciplined sheet quarter Solutions mega concluded propelling this that the another relationships of outstanding trends Hallmarks healthy I'm UL a business an of growth. revenue performance. report delighted aligned with long-standing, with global scale year backdrop,

In first generated flows seen offerings an while is What's we've enhanced particularly and cash organic service public growth investment-grade year company, our as the and balanced we've robust regions. balance strong segments, maintaining profitability across delivered sheet. a geographic gratifying all strength

and The key we've mega including industry-leading digitalization, to the the trends strong for services. drive energy everything electrification global identified, transition, our demand of continued

call over I'll cover turning to before X the Ryan. areas

highlights. our year performance First, full

position And achievements activities and XXXX. for and notable across our strategy third, XXXX. Second, financial capital allocation

pivotal XXXX history. UL's marked a XXX-year year in

employees successful our while of culture transition and capabilities drives focus to a results, express our demonstrates on my to whose customer exceptional success. defines safety, scientific to deep our to dedication maintaining company, excellence and appreciation the team. public execution want superior I service delivering Our our

the dive will Ryan quarter into in a minute. numbers fourth

up built X.X% the an high So basis. notes the year, billion, and course on of revenues momentum X.X% our hit delivering year of strong organic versus We the XXXX results. let me across $X.X full XXXX up of

organic Our organic a while basis; Industrial with X.X% segment led full Consumer segment including grew on year X.X%, the XX.X% on our X.X% growth, way an an including basis.

Our X.X% including year Software an line the on & Advisory growth, segment top X% with completed basis. organic

regions. geographic all across growth reflected results Our

free adjusted for full cash increase points. basis by grew XX.X% margin EBITDA Adjusted an flow income We and $XXX XXX the million expanded full XX.X%, of the EBITDA adjusted generated net and year. for in year

well initial of end. in and we public private let achievements as shareholder our long as highlight as September. subsequent follow-on completed a largest as performance quarter Next, offering company, accomplishments our few our its this to of history April shares and drivers a from me major a a successful as well After year proud offering and in this

global testing to acquisitions Industrial related segment transition, energy our battery made company, in testing Batterieingenieure; We X the company, and TesTneT. hydrogen

recent testing the of in lab spending our opening Hills, Our state-of-the-art Michigan. battery Auburn pace resulted in capital accelerated of

capacity at our lab expanded product and in an growing in construct plans and meet demand announced America, also advanced We Mexico to automotive testing center battery to Latin Korea.

Finally, our allocation the approach to let on during me comment capital disciplined activities year.

$XXX addition acquisitions down paying growth drive to included reinvesting to just from Our along model, mentioned flow. I borrowings million capital generate of $XXX sheet, expenditures this paying actions $XXX us resilient the to and credit balance our in business million dividends. organically allowed growth, strong Key robust investment-grade X with million cash an year and revenue in in facility

stronger we our We an even began journey. that when public position enter XXXX we in than company believe

Our while shareholders. to team pursuing maintaining remains conservative our management and investment-grade rating focused returning actively and on opportunities M&A strategic excess capital leverage,

XXXX the turn I'll quarter outlook. Now and for detailed call review Ryan fourth over results a of our to

Ryan Robinson

thank Thank our year, also of our financial quarter delivering to XXXX. another full before some comments with results comments XXXX everyone. quarter excellent I'll outstanding year closing outlook. an our I for of all you, full on job full my segment the members and hello, summarizing and focus and for results want initial fourth did strong year Jenny, and team Jenny on the

cash on to adjusted a margin continuation of strong consolidated proud EBITDA our growth, in solid and expansion quarter are basis, generation. report We fourth a

Jenny segments growth As to our it's mentioned, across of once see geographies. again in all all our encouraging of revenue occurred that

for costs of increased The particular quarter. delivered the of dive Industrial million XX.X% and segment, me the increase the due to depreciation services employee which increased the organic year Consolidated the year to $XXX Cost start-up and as revenue in over of prior let compared up robust revenue by period lab to expansion, Now growth. was related quarter volumes, of X.X% X.X% details strength high growth prior including organic reflected the capacity to related compensation. into X.X%. quarter, and materials

an XX.X% XXXX. year Adjusted quarter strength decreased EBITDA ago, of points, the and the ago for revenue a XXX percentage a the up segments. in improvement as particular same quarter in margin in of Adjusted Industrial XXX period XX.X% was year-over-year. of $XXX both [indiscernible] was expenses QX basis Consumer EBITDA the million, SG&A to on basis XX.X% from XX.X%, points year

the quarter million, fourth income up per XX.X%, share of XXXX. Our a effective was fourth XX.X%. And we for $XXX in benefited the result the was in in quarter year of for of full from the rate tax $X.XX net positions fourth Adjusted $X.XX, from of reduction Adjusted quarter, a as quarter diluted million tax the XXXX. $XX fourth in was limitations. the uncertain earnings up expiration statute of from a

tremendous and of turn segment, mega the highest X with demand the the segments by electrification our Now performance revenue services and our Industrial for segment, the are Industrial. innovation transition, global quarter. me the let energy to digitalization everything again The starting trends driving in for helping growth of it deliver of once

as in Those We ahead ongoing growth. increased XXXX. growth the consecutive growth marked rose of quarter gains to Revenues This believe $XXX of [ million of organic in benefited from X lines. organic of our Industrial service potential all revenue manufacturers compared by XX.X% an services from certification tariffs. ] to activity impressive driven were or on fourth basis XX.X% quarters double-digit

ongoing was demand and in expect certification testing Certification led XXXX. energy by automation, we services and a growth in normalization of

the while points increased segment EBITDA XXX improved partially XX.X%. XX.X% [ ] to quarter, to offset for million organic EBITDA $XXX the adjusted Adjusted services The revenue margin by increases materials. Industrial higher in in was basis and

driven from particularly up in Consumer Now services, testing were Revenues segment. organic across X.X% consumer ongoing and demand by testing an on certification X.X% million, saw improvement non-certification as Consumer retail demand turning was and the as The technology. $XXX We strong well across services. quarter or to XXXX certification other basis.

the quarter margin of versus for EBITDA in an Adjusted was for the million, driven points XX.X%, higher Consumer was EBITDA an increase $XX year-over-year last of quarter basis fourth year. quarter revenues. the XXX XX.X% by increase Adjusted

in revenue the impact XXXX organic contributed in was reduced taken and to increases partially margin by actions compensation. Solid Expense increases employee improvement. the growth of cost offset

to at Consumer and adding how that how work facilities we're our quarter order and continues. last increasing connect increasing demand, mentioned we capacity in meet We improving with customers various footprint testing

year. Advisory segment EBITDA were and Adjusted segment Software were year-over-year The X.X% demand for $XXX the software, for on to is offset last for materials. basis. quarter total & fourth retail that solutions. by as and & flat a services and was the compared revenues million, of by including increase organic -- X.X% year-over-year, both as the was increases Revenues XX.X%, compliance $XX a quarter for product of Our in an third quarter for sustainability Advisory. higher strong EBITDA margin million, up increase improvement Software was driven Adjusted

generation. cash our to Turning

prior $XXX $XXX XXXX, cash in was year for million year Capital of compares The XXXX activities, incentive that the lower full expenditures the For and $XXX from we year. generated cash $XXX XXXX. to million by in full driven million improvement payments. to operating compared were business performance million

Solutions. We global XXXX, energy remains throughout transition which a investments continue opportunities for area to important make in focus UL

of was compared accretive flexibility A balance flow reflected $XXX The We robust of year and great XXXX us in for ratings. growth organic balance level despite our finished a in number to credit acquisitions Free is our flow cash investments. higher shareholder value-enhancing the best-in-class equivalents. ways to $XXX $XXX the strength produce million intended full cash cash returns. initiatives, with sheet and million of year pursue cash and to sheet give investment-grade generation in million of invest to

new labs, demand align better X to with services. in As completed XXXX, trends broke acquisitions others mega we our Jenny ground our for and on said, opened business we driving the

dividends. million million addition, shareholders to on $XXX In $XXX down our returned facilities we credit through our and quarterly paid

XXXX our Now turning to initial year full outlook.

constant organic acquisitions reminder, a and divestitures. currency growth is excludes and As

compared revenue XXXX. the and We as growth expect testament a mid-single-digit our revenue range we're a organic to to strength to that mid-single in believe full the in of growth deliver following our XXXX outstanding XXXX team, and It's execution position offerings revenue we organic consolidated to results. digits diversity growth the our X.X% be by year in

drive last to expansion full of approximately expect our to at further IPO. which pleased April in EBITDA line with the to targets time I'm margin XXXX, improvement say longer-term the XX% We communicated year for the adjusted is

They growth, continued include for company. top on other leverage to As focus a of segments, gains. mix operating the from a margin we growth industrial line outpaces reminder, a a benefit and expansion productivity have as ways number the drive

strategic Additionally, look our in markets and evaluating earnings realignment. accretion, also M&A portfolio at path that we present a opportunities end margin while to

rate capital XXXX continued match of to spend segments. new strong to our X% average. in our customer-facing This percentage expenditures but to above X of expect down roughly We as and demand with we XXXX approximately flat customer revenue investments labs revenue, all seek still a sequentially in as in modestly longer-term software of be X% is continuing from in historical and

our to provisions, which how change effective effective XX.X% taxed. with an additional XXXX tax the corporations This the Pillar XX%. primarily to We to X be approximately compares in estimate in OECD of anticipated rate XXXX are implementation rate of affects multinational due

from We expected that benefit in also not experienced tax in significant 'XX to of reserves is a recur a release XXXX.

the year for additional provide is with you let guidance full color our with seasonality. some regard me XXXX, to While

profitability operations As This the leverage the other UL QX our compared slightly quarter revenue of the as QX quarters. workdays therefore, Year customer our on operating fewer is holiday results less quarters. lowest New dollars impact other and, in reminder, compared Lunar in to a typically to terms in given and

faced in second the addition, half of In XXXX. increasingly comps challenging we

entered and generation. while growing profitability momentum, faster the improving market XXXX strong with cash We than

strategic deliver provides value. sheet superior flexibility for balance shareholder investment-grade to capital we deployment work Our as

turn me call for closing let remarks. to the Now back her Jenny

Jennifer Scanlon

Thanks, Ryan.

some high-profile quarter, last leading expert mentioned I in for do you will As safety important as highlight work we occasionally, science. we a and

establishing Federal we voice-activated UL December, appliances, U.S. products, lead and FCC Commission speakers safety new Solutions named honored late were to program, In will help kitchen label. stakeholders such equip and UL cybersecurity in which Solutions will as the the administrator Communications this or as the announced Trust the details the help will other as of that support technical with Mark receive and U.S. Cyber requirements other grow that the smart We launch qualifying designation program.

standards. make of products bring trustworthy all to Cyber about in program products help our decisions their The cybersecurity team their incentives differentiate Congratulations into consumers voluntary and create for to marketplace hard is Trust the the Mark on they homes, to manufacturers meet program. this designed work informed for

XXXX should strongly To and beyond. for wrap successful XXXX performance on us up, our builds our IPO exceptional and position

history, safety long legacy the many on and we who While the have in results place, of world forward a started. carry We ways, in just scientists achieved we're remarkable our pride. we've better made of getting stand shoulders just with generations that

from transition sheet, positioned We all our cash strategic position. believe direction, we markets, mega well our believe value and exceptional clear the capabilities align energy well global trends our the robust driving to strong stakeholders. with flow With sustainability, long-term balance that deliver to to we're and

for the questions. line open Let's

Operator

And Instructions] from Stephanie question Yee JPMorgan. [Operator our from first comes

Stephanie Yee

I you wondering if comment your XXXX each was outlook your can segments. on of X by

Ryan Robinson

Well, year see of within The opportunity we're in continue. after pleased X the to in growth Industrial continue Sure. the segment path strong of each XXXX, we the primary and segments. a trends

Advisory, Software operations of business. And adding in we're improving progress progress pleased on continue. the Our & side software and with capacity the Consumer, including those with the in some quarter particularly last new

for revenue segments that. consolidated contributing is on our a each but So of I the to basis, growth see said outlook we

Stephanie Yee

could you a And Industrial, to you I the comparison XXXX, forward Industrial side quarter, normalize in strength I mentioned maybe on or with versus noticed certification, comparison that continue? so guess comment particular other you you in could going the there that is expect the XXXX, ongoing in to moderate in fourth that pull 'XX provide? but piece into any is maybe whether

Jennifer Scanlon

proud I'll quarters Industrial Stephanie. are of of XXXX region. by every we we really is X And saw what market, growth. fact in And question, our start that Great end team double-digit saying every just has consecutive the

The megatrends data data data center. global see about And We as to the AI normal in power the transition is comes it about. that talk controls. those uptick centers to it those particularly it power and down in real, energy as we see we need and so in twice market, a much serve which centers,

then the have storage and and And that systems systems digitalization better and to and or grid. change energy storage ways it trend out power more and systems surround you to that to to with ticks be cooling use which that in hardware into efficient, extend then HVAC the

in are testing. testing we're both trends our certification on excited real, customers and So Industrial working non-certification and these with about new

that lines of a across And segments. service all balance of then we also understand of our each X there's our

have we the of look way those across all so demand. And that balance at that services to

Ryan Robinson

services. models They're majority affected by in And and our And Stephanie, to you just know, ongoing of are the number build revenue as about on the the streams question certification on not of the of market volumes. new based your production pace product innovation.

services However, activity. certification by services within some of ongoing our are affected manufacturer

And ongoing which to it's attribute in difficult QX, to precisely experienced certification, in tariff anticipation. we increases directly

However, in revenue. pickup we material a see did

on revenue grew the And about grew ongoing quarters contributed basis an about as so X%. the our about to for first XXXX, it X% increase X QX, of certification And growth consolidated XX%. example, in consolidated a In growth.

in comparison that of may slightly forward in and And that upward XXXX QX an in pulling it's in growth particular. some lower possible demand result

Stephanie Yee

can comment a Okay. Is like had portfolio. kind the third risk the regulatory Can decelerated little certification question growing testing ask certification X%. the very it the on you to the trend on what's there just any It And there? to I strongly under quarter, bit potential in driving it appreciate administration? current one a environment more of through seems that. testing If across fourth been quarter. I

Jennifer Scanlon

is certification a there that testing. believe don't We Yes. threat to

is this of timing. Some

end third just no the have. third had that quarter And Some a really the strong of it fourth in what particularly was customers, you quarter. quarter demand know, quarter, customers is reflection had strong Consumer. our in in third talked on we Consumer it's we as And the

confident on the testing very and non-certification think focused and testing and around I have board, our certification our across both you can't So because demands that, innovation safety. the we're without

Operator

comes The from Tong next from Sachs. Goldman question George

Keen Fai Tong

to double-digit of past You over demand everything, talked long very all be the future? Since X in trends about segment the megatrends seen sustain around quarters you've electrification into should able are the these energy the Industrial transition, foreseeable that driving much standing, growth digitization, Industrial.

Ryan Robinson

Appreciate Yes. the question.

the on continue fundamental guidance against say don't to we opportunities. those would but I those in driving a changes Industrial, each in tailwinds. we see consolidated invest do revenue see opportunity of material have segments. Our is that We'll been things the basis,

are we expectations comparisons realistic Our steeper set to want to that we achieve. and getting expect

Keen Fai Tong

but then touched elaborate the little And earlier, you how positively higher Understood. a across you bit expect you impact negatively to the can on business? this on business, either tariffs or

Jennifer Scanlon

you on cycles. had not development business. Yes, -- but innovation, product our our on Historically, new know, And material revenue largely a is tariffs life dependent George. product as not on have the dependent impact volumes.

this were -- seen goods, across what and tariffs what actually appliances seen seen, other on revenue in was introduced we've we've and increased and Now XXXX. days, XXXX Chinese XXXX, when early the in since we've our XXXX, first items, that

from majority you're when -- that balance you how your about organic. your of And So and do the costs comes manufacturer you're is was situation. a where and facing that out thinking tariffs, as

your supply to change may each value-engineering chain, design. you're overall those change In to may likely retesting. you the raw So most you're your many out products, of shift and swap change where you start manufacturing materials or products cases, components require out just

end regardless us, their good market follow customers business they they their make of mix. as decisions that product tariffs, about make manufacturing So for the cost, we locations, our their

Operator

next The Andrew from Nicholas William from question comes Blair.

Unknown Analyst

on how and high This if levels how off target. that a go? the a and guide from expansion to touch Andy jumping XXXX, is of for kind And as about provide margin can structural you wondering what think Nicholas. into there can was beyond? XX% to thoughts XXXX going on plan margin of I I Tom long-term on the reach margin for kind you wanted Ross so you those

Ryan Robinson

IPO, off greater recorded time coming right. margin. were you're that Tom. Yes. where longer-term XX%. we had We And the And appreciate XXXX, EBITDA of said the of we we XX.X% adjusted the At question, than targets we had

basis increase. approximately this be points We're in XXXX, year. which another that to we're comfortable points and XXX XXX be would So point a improvement pleased XX%, towards would guiding XXX basis increase basis

X So a progress pleased not this but in making. moving update are towards We're We see we're longer-term grow that second year precisely from not those there. teams longer-term public in the We're do to a stop in company. all to with going opportunity to objectives position at our there. as more that our guidance point, segments

Unknown Analyst

testing was wondering certification and the And can you balance then And between also Industrial And and volume pricing there. detail if electrification quarter, then I possible, on some in on the between driving provide if consumer? at segment the level growth

Ryan Robinson

those better grew consolidated comprise the pretty a in volume paid measurable to price those mix to complete are consolidated because themselves about there's and of revenue X and And comparisons basis, quarter revenue roughly was activity. that test, they X% it even a On the categories we lend of our streams XX% revenue, volume. unit quarter. And price between a in

with ability and demand the as price continuing well to getting pleased gradually from increased we're in as that. to volume show increase We're compound time, over customers. And our

Operator

The Baird. next question from comes Andy Wittmann from

Andrew J. Wittmann

I just I EBITDA good way. the expansion. the adjusted obviously, mean, about had little bit talk quarter to wanted -- just I margin in different a guess I margins very

quarter, just the for trying strong obviously than to what for EBITDA a made you, was I'm that ahead. in and more think more wondering, comp about, I issue here? maybe quarter expansion there you so guiding the last Ryan, $XXX the if could million just year just you're so than talk was And

in understand there's to want just I something So there. if

just buildup year's else [indiscernible]. that anything have CSAR you margin might to with about talk the expense the year if I this prior that, do to think it But performance. maybe besides could was there you

Ryan Robinson

the disproportionate say get thing operating an Yes. Thank for basis, leverage. flow X.X%, organic is through. I'd When the on you question. we grow primary we

So growth primary line I organic look growth, at if top the revenue think expense relationship you is the organic explainer. of to

of you The adjusted fourth year. last of not Some stock-based which compensation. of back the look similar. CSARs, EBITDA. did are dollar noise amounts year, if removes And adding reduced margin, that's and that This in basis expense at operating CSAR have stock-based story. points quarter operating the in income XXX expansion. and income We compensation there's But about we're that

you say, you we expense I at had So overall, pace, would get management. businesses good higher this grow through. flow When

Andrew J. Wittmann

other here. makes ones And Appreciate Okay. quickly sense. I That that. then guess, X

was months effect earlier for as always helpful. I SERC here been the tariffs would takes a better test, of to it's than I fourth the up hard lack potential it your I totally stockpile, to to on relates guess, in imagine kind the Just understand forward thought that pull data more being yet, it XX% the deduce. provided ongoing quarter about But few that haven't of a term. I you

first the many downtick there's not the the longer so of a maybe bit the to a that's there? describe here, little than seeing maybe don't second you think a you -- least if you of reprieve why SERCs? reprieve little Are that quarter months far a on a ago in expected couple Or when we've got going benefit quarter at could on ongoing even

Ryan Robinson

Yes. that activity drivers. activity increase say to to about in first And that We're yet. We a the and the But had it's single quantify election tariffs clarity on objectively very talk not isolate factor. an likely right, and And it's we a that in can position on the difficult you're exact an difficult impact did know likely to quarter that. following impact. help have as

Jennifer Scanlon

since would XXXX. customers have tariffs I Andy, And been facing add

they're to now right for pricing. put value-engineering. out around in around those them, how or make out Mexico lot make decisions they're I where I'm how positioning talking putting to their decisions where when So the their inventory like was of around their they're made going They And they They they're decisions they've mix. just product in manage they've many them, made cases, figuring make and a recently, decisions. decisions They factories.

period of over So time. long this plays all out a

we're quarter expecting shift as we're it were XXXX, positioning time over but to little we in as And a the customers fourth expecting themselves balance so -- it out has. of not bit have always a all for reactionary seen

Andrew J. Wittmann

Yes.

where then affect list FX rates are -- What's Ryan. either or headwind as XXXX the Okay. were look at our revenue revenue? to And a -- you punch dollar quick stay terms here, what in they the first, just calibrate one here, to all you the just terms is XXXX now, percentage versus if FX models as the

Ryan Robinson

Yes. There have in the typically, do been in are currency customers. business local movements the of markets some -- markets, in our we currency

they So yen, Based it what on number, current that year X% RMB. the but rates, a euro reported right forward for -- headwind that the on wisdom and And the XXXX. is would will a market market the is now. what basis that's as predicting than under just be full certainly of different have

reminder, those markets, our currencies. a pay in our [indiscernible] expenses we As in those

So -- the revenue an expense items majority is majority the offset those of change. of by headwind the

And was it $XX so we basis, XXXX, in in -- But as $X have -- just a revenue. EBITDA that in currency on to context, about a million put had million had it headwind revenue an impact. we

So with offset of $XX million translation expense the reduction. was

Operator

The from next Josh Chan UBS. comes question from

Joshua Chan

question. picture bigger a Maybe margin

XX% Now visibility ahead and into what the XXXX. EBITDA have did is level that solidly obviously, obviously doing of margins. 'XX pre-IPO, above company you That

low so back, ago? high a versus is And margins guess, you several what to to teens as enabling achieve I years maybe take XX% step XXs you

Jennifer Scanlon

here, year on his business We've global the year our of focus customers each from think industries put have continuous a of on improvement. instances both then overall have start best strong service. that here, productivity second that, improvements in and Josh, sixth and single of technology, to number processes, effects Ryan a third fundamentally order eighth is customer my behalf in on in came I -- changes, we place in really and I'm

We extended really overall of their our our overhead. and needs path of supply on focused a then that and -- and down innovation usage just better positions consolidation our management, location continue global their chains. down us strategic with We've our gives accounts better

overall think attitude improvement entire continuous thing, and one our it's And as of an I team that a so has singular leadership not team executive philosophy. it's

Joshua Chan

us of for on you of I XXXX price terms capacity behind those the give mid-single-digit the drivers organic are increases, versus your of could versus all in much organic of growth, was Congrats Great, Jenny. total that. pieces then And kind wondering growth. color if guidance lab adding how to some volume

Ryan Robinson

would experienced XXXX. Yes. say Thanks I for what in the we continuation of expect question. we

still making still processes acquiring new on progress of and still capacity. pricing our expanding our We're we're wallet. and improving our We're processes. customers So growing go-to-market share

So revenue I anticipate what's in we material driving of say change a don't would growth. the mix

Operator

The next comes Stephanie Jefferies. Moore from question from

Harold Antor

Antor for Moore. This Stephanie is Harold on

you you wanted company is touch to around focus XXXX front. deals? Any specific how So -- is the in know on or to on the XXXX, Would to jlooking I just company at the M&A to just continuing done Anything I guess would great. target? the M&A looking When you're front. interested about few have wanted in be doing platform guys segments be a M&A any on tuck-in larger acquisitions just policy deals or tuck-in thinking

Jennifer Scanlon

in safety. any with being our every makes active world for is And the very strategy in over we're scale sense our in product around segments And X conversations Harold. all Thanks, that size, of strategy. our

Our trends. product by is around strategy those propelled safety mega being

safety, interface the And conversations around we we an find analysis time reflects and timing the our as what and security we're and is, across again business and product time recognized in founders many home years sustainability these attractive we're permanent in because for for as strategic in we tick, supporting go mission. And is through the fit, to see with way as opportunities megatrends overall us. M&A that presented they're it XXX

think it. So about that's how we

Harold Antor

it in it focusing in. a have on. you're you that's been But megatrend as jlooks you though leaned guess, guys Great. And have megatrends -- company is as I global the seems that though several really the HVAC,

increased the in with other you discuss, that you you're to talk, investments respect if leverage trends would any your there? be make trying So And to could demand seeing XXXX?

internal And you're run pricing this. guess on But you I'm any I inflation your running And could if last just to what's -- year off provide increases, I the pushback question, a the in price those to would you getting? expect on company? in sorry piggyback missed XXXX

Jennifer Scanlon

let with and the mega start I'll I'll pricing. then the trends, Ryan answer

global Our that focus transition, continued on it's energy real.

completed So Auburn needs that Michigan and are extensions lab, Hills, Mexico underlying in the electrification of battery battery the energy global our Korea year the also these tied our that last to into trends labs transition we've everything. We've our reflect lab. announced

We on on again, also the of safety. where the our transition in, that investments announced fire this these testing just building making. Center And really last Global and Fire energy Science Excellence that megatrends we're week fits is

battery is thermal degrees of all fire biggest runaway, in and R&D greater about areas. One connectors, And applied this in investing we're is And essential. and the enclosures those testing excited needed world. safety of the building is and other challenges products safety over also so in

So as we're all trajectory to are parts CapEx -- And these developments view of the we of world. down connected. they our what support continuing exciting in

centers, needs As around increased the digitalization way in I around power is consumer changing the earlier, talk growth needs said it's contributing that to storage, and at usage. also technology, data you you needs around in needs and the changing look changing changing the both transmission, the changing energy that when about power the that's generation,

with our both we all megatrends. our love together and So and these Industrial business, Consumer fits it

Ryan Robinson

are offset internal talent. still ago. to market a inflation pace growth. say compared regard would seen slower the in of pricing largest competitive It's with costs initiatives. we a that then for few it's wage our People year X that And last pleased definitely a I We're in last a in expense. we've our years But to years inflation, moderation

and anticipating not cost at wage So we're material this in inflation. point, other headwinds

Operator

comes from from Citi. next The Truslove question Arthur

Arthur Truslove

A I if can. few

clearly, be a reasonably obviously, is you Because your about Obviously, sort me. a touched you or and in peers substantial on. whether margins could just Can was from talk a FX? just there you FX. the talk FX quite tailwind arising XXXX. on Can for question could say of -- wondering a whether headwind lot, you headwind margin this which I arising First about from impact there

division say or Or potential whether whether bit that. pull revenues within ongoing of was of a it you little talked the division? understand Just Consumer certification. both? in it Industrial was a indeed question, to bit Second the able about forward that of you the sort was within Are to about

the And then really third Consumer the guess side. on I question

margins wondering still I talk significant obviously, obviously to a right you headwind. would QX that of think the to QX in how I was contribution so full was the in wanted it what of relate if to staff had mind, but to consensus just or were just bonuses could bit margin the are just little year about not up. performance. any incentives sort So QX below that awarded XXXX, staff accrued confirm any

Ryan Robinson

rates a income. the and little model. forward say imply into I'll bit impact current FX deeper would our see constant to on Yes. and revenue roughly break a business, going the our start on impact the do And -- would our of on business currency X% by operating foreign out impact I basis exchange the of on headwind. we a in historically

and we each expenses, infer can impact the segment. on do also you that So by

historic fair a on of the there's So amount detail relationship.

are We company. profitable a

when impactful expenses. is the revenue, a than reduction more that's So reduction in there in

you -- is it's very does a to say what our expenses. segment but changes. global would and FX the It reduction -- So it's that -- immune offset is it, is mostly of by that by in not segment susceptible I business. cost we're more offset will in to see it Consumer translated

businesses All volatility, global, that business, are of more okay? bit had in particular, has FX our but a

it -- And the my industrial. in sources, of about then context ongoing talked it in we certification comments,

it's an it segment, reasonable by was our revenue that, and it streams in Consumer. are But to Industrial -- revenue impact for Industrial reasonable stream than certification both don't but think on that larger a segment. those is We important Consumer that impact services break out So had ongoing Industrial. revenue a bigger

Jennifer Scanlon

on Incentives Consumers.

Ryan Robinson

Yes.

So recognize were earned which in expenses earned. we over the incentives period they're -- in our

from were, incentives So similar. this dollar last in the and and There incentives geography fourth to stock-based material reported compensations, to there changes incentives which QX very changes year to amount was they're cash-settled of QX what quarter last compared in the year weren't year. in those the related were the but in

Operator

The next Stifel. Shlomo question comes from from Rosenbaum

Shlomo Rosenbaum

is are -- on it of what's then have demand a Better? what I that going And beforehand, Can the a thinking mentioned, of this trending? detail start that you call you you demand on have and plans area? kind might go lot you maybe of, Just you any several more this over and take up. the lot couple years Worse? of lot just next think, you're us it you little on a going new Jenny, of follow-ups. could a building And for the but how you on of labs. building, a in discuss have know is you give I you this that, Can discuss And battery the back way a in to but I touched you don't pre-leasing, fill thought? if little, ones? in

Jennifer Scanlon

Great.

Our as battery opened progression, China did testing well. of -- And Korea building and in American very the Germany the battery XXXX. we then going announced that perspective. you opened acquisition back the in step Changzhou, at we for business announced battery is of the when lab. serves battery lab in a We lab. And the We we North a last European hub Batterieingenieure year, look

commercial global but vehicles, all to testing continue So this agricultural, vehicles needs, autos, and in see just electrification we've across occurring need in everything kind battery of in construction not not -- just you buses, vehicles. coverage of vehicles, equipment, growth got is

times blowing. required, wind not renewables, for a the [indiscernible] as use to or that in the energy sources, But there's needs is more you even before storage sit store requirements or energy energy that more that that's are the that, broadly in systems created are there shift to than opportunity

of just fuel So overall industrial types they're and centers also growth of the the to the as shifting as rapid scale industrial energy. data their the source batteries, in is their for contributing well environment, needs AI adding

pleased will business. battery believe So what's and are going energy labs, on we global continue with that in propel that our to transition we this very

Shlomo Rosenbaum

Do Ryan, the on margin, have mean the wage in the materials? comment and increases Slide Okay. this a XX you are in presentation, Is What services? materials. in have you the does are What on Like And there? services that consultants then, inflation? by the what revenue growth, exactly? offset partially

Ryan Robinson

Yes.

subcontract our services testing of to So we portion sometimes grows, parties. other a volume when

need test we're Sometimes it. -- complicated that that a choose In partners for to and accredited times, test very to portions every of is the we to needs be of other part done. do work for with

the a put revenue category. category, So just labs professional materials, outsourced broad there services XX.X% are we and mostly was are expenses related it's to But to related comment it expenses -- related in and organic volume -- services. with

Jennifer Scanlon

add, let Shlomo. And me

us I understand is is the think for that marketplace in capital. what advance our of philosophy CapEx, demand to we committing want in the

But see service also outside you working demand. sometimes there materials is what with so services supplement we're that to services. therefore, yet, to haven't and with capacity our completed professional and in their out that customers And we we need

Shlomo Rosenbaum

was this Is that so Or on was subcontracting much it what primarily was handle to that volume going quarter? there volume? mainly the

Ryan Robinson

see with change and that say would customers' over needs attractive third-party was services, returns, say we is service some in-house We're may that time. evaluating and time. our bring over we provide that and it may would lines sustained capability If I of both. that both. that I new fits mix ways a demand it's

Operator

comes Fargo. from from next Haas Wells The question Jason

Jason Haas

one the I software large a which could business, beauty was acceleration you remember to see. nice talk about last if retailer. curious the I'm you drivers quarter in of of announced the

drive that curious acceleration? if was I So helped that

Jennifer Scanlon

I really software. a in of doing give to they in of there love to particular, do contribute so I'm growth out software to great little asked business, with Japan of is businesses want our helping And the shout saw we glad our out our our platform, growth that our about I all in regions. there. prospects team, are you way talking the a ULTRUS, and all because job software

to But we retail your in the strength point, product are seeing, particular compliance.

indicated ESG, a the coming in as that as helps and we strength platform in large systems. offering that So retailer processors quarter, last as on well our reporting, the beauty and of compare to really have works we contrast data benchmarks

looking seeing of recurring these we in improvements our our average So And churn contract transformation say I times the software. is in taking annual is would I've things is renewal to revenue, things growth for renewal increases been we are root, quarter organic are sales up, in seeing down, fourth contributed all bookings.

Jason Haas

up X% of X% great to just on And hear. of touch the And for follow to That's being the on other to expectation I to revenue. wanted questions. some CapEx

CapEx. You're clearly getting on ROI really good your

shifts? number deciding waiting of built? plenty would in be on see insight how when still about year. you change have So this you I'm of Are curious how you've it that Just Is a what sort for of conversations you had that think facilities any existing to supply function you helpful. capacity

Jennifer Scanlon

start. I'll

engineers no of customers' in out are They of locations, making visits have teams hundreds every customers to day, talking to Our our all good ideas. safety to are there shortage there account over who our a those and development global factory engineers our strategic insight from talking thousands year, product field and single are scientists are our who customers, our of pipelines, customers managers new global out largest into who getting the with to world.

in. So come that no ideas shortage of

services, on there, what providing are the be is returns. those outcomes for to And are us process we'll evaluate durable, to very really be believe there continue the we invest to then our we is And great of capital to do needs pleased CapEx, our then best with those where way where and continue fundamentally and our really return them.

Operator

over This would turn concludes for our Scanlon conference back I to session. closing question-and-answer like to Jenny any the remarks.

Jennifer Scanlon

everyone, you, joining Thank for us today.

we to forward As our next your in And we progress support. the always, you appreciate quarter. on look updating

Operator

you presentation. concluded. today's has The Thank attending for conference now

may disconnect. You now

UL Solutions (ULS) 20 Feb 252024 Q4 Earnings call transcript