Executive Summary / Key Takeaways

• Mission-Critical Services Drive Resilient Growth: UL Solutions, a global leader in safety science, consistently delivers strong organic revenue growth and expanding profitability, underpinned by its essential testing, inspection, and certification (TIC) services that are indispensable across product development cycles and regulatory landscapes.
• Strategic Alignment with Megatrends: The company's focused investments in the global energy transition, electrification, and digitalization, including advanced battery testing, AI safety certification, and industrial metaverse verification, are propelling demand and positioning it at the forefront of high-growth markets.
• Robust Financial Performance and Margin Expansion: UL Solutions reported record Q3 2025 revenues of $783 million (up 7.1% year-over-year, 6.3% organic) and adjusted EBITDA of $217 million (up 18.6%), with adjusted EBITDA margin expanding 270 basis points to 27.7%, the highest since its IPO.
• Technological Edge and Innovation: Proprietary platforms like ULTRUS software and pioneering AI safety certification (UL-3115, AI patent) provide a significant competitive moat, enhancing efficiency for customers and driving recurring software revenue.
• Disciplined Capital Allocation and Outlook: Management is strengthening its full-year 2025 organic revenue growth guidance to 5.5%-6.0% and adjusted EBITDA margin to approximately 25%, supported by a restructuring initiative expected to improve annual operating income by $25-$30 million by Q1 2027, while maintaining a strong balance sheet for strategic investments.

The Enduring Mission: UL Solutions at the Forefront of Safety Science

UL Solutions Inc. (NYSE:ULS) stands as a global beacon in safety science, a legacy forged over 130 years since its founding in 1894. Evolving from its roots as UL Inc., the company has become an indispensable partner in the testing, inspection, and certification (TIC) industry, complemented by a growing suite of software and advisory (SA) offerings. Its core mission—advancing safety science—translates into a resilient business model that thrives on deep, longstanding customer relationships and predictable, recurring revenue streams. This foundational strength is particularly critical in a fragmented yet consolidating industry, where trust and technical expertise are paramount.

The company's strategic vision is sharply focused on capitalizing on several transformative megatrends: the global energy transition, the electrification of everything, and digitalization. These forces are reshaping industries worldwide, creating an ever-increasing demand for independent third-party validation of safety, performance, and sustainability. For instance, the rapid expansion of AI and high-performance computing is projected to dramatically increase data center power consumption, with estimates suggesting a rise from 4.4% of total U.S. electricity demand in 2023 to 12% by 2028. The data center construction market itself is expected to grow at a 12% compound annual growth rate over the next five years. UL Solutions is uniquely positioned to address the complex safety, sustainability, and security concerns inherent in these environments, offering services across approximately 70 applicable standards.

Technological Leadership: The Core of UL Solutions' Moat

At the heart of UL Solutions' competitive advantage lies its differentiated technology and relentless pursuit of innovation. The company's proprietary ULTRUS software platform is a prime example, offering customers a unified digital solution to manage complex regulatory requirements, enhance supply chain transparency, and operationalize sustainability initiatives. Recent releases, such as enhanced PFOS identification, expanded ESG disclosure management for international standards, and AI-powered features, directly address critical customer challenges, strengthening UL Solutions' competitive position and driving annual recurring revenue.

Beyond software, UL Solutions is pioneering safety in emerging technological frontiers. In November 2025, the company launched landmark Artificial Intelligence (AI) safety certification services, guided by UL-3115 and a newly published Outline of Investigation (OOI) for AI safety of AI-based products. This initiative is critical as AI rapidly transforms daily life, from smart devices to industrial systems, while raising serious concerns about safety and ethics. The company has even been granted a patent for machine learning-based AI scoring, underscoring its leadership in this nascent but crucial field. These advancements provide tangible benefits by enabling the responsible adoption of beneficial AI technologies and building public trust, directly contributing to UL Solutions' competitive moat and long-term growth strategy.

The company's commitment to innovation extends to its physical testing infrastructure. Significant R&D initiatives and new technological developments include breaking ground at the Global Fire Science Center of Excellence in Northbrook, Illinois. This multi-building complex will integrate advanced testing capabilities with a dedicated R&D hub for emerging products like PFAS-free foam systems and energy-efficient designs. Furthermore, UL Solutions has strategically invested in advanced battery testing, opening a European Advanced Battery Testing Laboratory in Aachen, Germany, in May 2025, and expanding battery-powered vehicle testing to electric motorcycles, scooters, and industrial vehicles. These investments directly support the electrification megatrend, addressing the critical safety needs of a world increasingly reliant on battery storage.

Competitive Positioning in a Dynamic Landscape

UL Solutions operates within a global TIC industry that is both fragmented and undergoing consolidation. Its primary direct competitors include established players like Intertek Group plc , SGS SA , Bureau Veritas , and Eurofins Scientific . UL Solutions differentiates itself through its unparalleled brand trust in safety science and its deep regulatory expertise, which often translates into greater efficiency in navigating complex compliance landscapes for its clients. This strong heritage and brand recognition, particularly its "UL-in-a-circle" certification mark, foster customer loyalty and contribute to recurring revenue streams, potentially allowing for premium pricing in high-stakes segments.

Compared to Intertek (ITRK), UL Solutions' integrated software and advisory services, particularly through ULTRUS, offer a more holistic approach to compliance and sustainability, potentially providing a unique value proposition. Against SGS (SGSN), UL Solutions' specialized focus on safety science innovation, such as in product certification for high-tech applications, may offer greater efficiency in risk mitigation. While competitors like Bureau Veritas (BVI) emphasize risk management and compliance, UL Solutions' long history and proprietary technology in safety software could position it ahead in innovation speed for emerging areas like ESG requirements. Eurofins , with its focus on analytical testing, offers scientific depth, but UL Solutions' broader portfolio and advisory expertise provide greater flexibility in addressing multifaceted safety needs.

However, UL Solutions is not without vulnerabilities. While its diversified segments offer resilience, potential market concentration risks in specific end-markets could impact revenue stability. The pace of R&D investment, while significant, must continuously match or exceed that of rivals, particularly those with aggressive acquisition strategies like Eurofins (ERF), to avoid innovation gaps. Nevertheless, high barriers to entry in the TIC industry, such as stringent regulatory approvals, the need for established global networks, and specialized expertise, serve to protect UL Solutions' market position and financial stability. The company's strategic partnerships in AI and data centers, coupled with its ECOLOGO® certification for industrial products, further enhance its competitive outlook by aligning with evolving industry demands for sustainability and digital transformation.

Financial Performance: Momentum and Margin Expansion

UL Solutions has demonstrated robust financial performance, reflecting the effectiveness of its strategic initiatives and operational discipline. For the third quarter ended September 30, 2025, the company reported consolidated revenues of $783 million, a 7.1% increase over the prior year quarter. On an organic basis, revenue grew by 6.3%, with balanced contributions across all segments. Profitability saw significant improvement, with adjusted EBITDA growing 18.6% to $217 million, and the adjusted EBITDA margin expanding by 270 basis points to 27.7%. This marks the highest adjusted EBITDA margin achieved since the company became public in April 2024. Net income attributable to stockholders of UL Solutions for the quarter was $100 million, resulting in diluted earnings per share of $0.49.

The Industrial segment continues to be a powerhouse, with revenues rising 8.2% to $343 million in Q3 2025, representing 7.3% organic growth. This was primarily driven by strong demand in certification testing and ongoing certification services, particularly in energy and automation. The segment's adjusted EBITDA increased 16.0% to $123 million, with its margin improving 250 basis points to 35.9%, showcasing strong operating leverage.

The Consumer segment also delivered solid results, with revenues of $340 million, up 5.9% (5.3% organic) in Q3 2025. Growth was fueled by non-certification testing and other services in consumer technology, notably electromagnetic compatibility testing for consumer electronics and retail. Adjusted EBITDA for the segment increased 12.9% to $70 million, with the margin expanding 130 basis points to 20.6%.

The Software and Advisory segment showed impressive acceleration, with revenues of $100 million, an increase of 7.5% (6.5% organic) in Q3 2025. This growth was driven by demand for software, including retail product compliance, and a "particularly strong quarter" for advisory services due to high customer project completion and increased staff utilization. This led to a substantial 60% increase in adjusted EBITDA to $24 million, and a remarkable 790 basis point expansion in adjusted EBITDA margin to 24%.

For the nine months ended September 30, 2025, total revenue reached $2.26 billion, up 6.2% from the prior year, with organic growth of 6.4%. Net income attributable to stockholders of UL Solutions was $258 million, or $1.27 diluted earnings per share.

Liquidity and Capital Resources remain robust. Net cash provided by operating activities for the first nine months of 2025 was $456 million, an increase of $62 million year-over-year. Free cash flow for the same period was $317 million, a 47% increase from the prior year, primarily due to improved profitability. Capital expenditures for the nine months were $139 million, a decrease of $40 million from the prior year, reflecting a timing shift in investments rather than a change in strategic intent. The company maintains a strong balance sheet, underscored by its investment-grade credit ratings. In October 2025, UL Solutions refinanced its debt by entering into a new $1 billion senior unsecured five-year multi-currency revolving credit facility, enhancing financial flexibility.

Strategic Initiatives and Operational Evolution

UL Solutions' operational strategy is deeply intertwined with its focus on megatrends. The company is continuously expanding its global footprint and capabilities to meet evolving customer needs. Recent acquisitions, such as TesTneT Engineering GmbH (July 2024) for hydrogen storage systems testing and BatterieIngenieure GmbH (May 2024) for battery testing, directly bolster its Industrial segment and energy transition focus. The divestiture of its payments testing business in May 2024 for $29 million, yielding a $24 million pre-tax gain, reflects a disciplined approach to portfolio optimization.

The company's commitment to organic investment is evident in its new lab expansions and technological rollouts. The opening of the European Advanced Battery Testing Laboratory in Aachen, Germany, in May 2025, and the significant expansion of its HVAC testing facility in Carugate, Italy, in May 2025, address surging demand in key European markets. Furthermore, the launch of new testing and certification services for immersion cooling fluids in data centers (June 2025) and the opening of its first commercial and service robot testing laboratory in Uiwang, South Korea (August 2025), highlight its agility in addressing emerging safety challenges.

In September 2025, UL Solutions expanded its marketing claim verification services into the high-growth industrial software sector, with Siemens (SIEGY) becoming its first customer for UL verified marks in the emerging industrial metaverse. This strategic move positions the company as a trusted authority in digital transformation across manufacturing environments. The company also announced a restructuring initiative in November 2025 to streamline its operating model and exit certain nonstrategic service lines, representing approximately 1% of its total 2025 revenue. This initiative is expected to incur $42-$47 million in pre-tax expenses, primarily in Q4 2025, and is projected to improve annual operating income by $25-$30 million once substantially completed by Q1 2027. This demonstrates management's ongoing commitment to efficiency and focus on core, high-growth areas.

Outlook and Guidance: Sustained Growth Ahead

UL Solutions is strengthening its full-year 2025 outlook, a testament to its strong year-to-date performance and confidence in its execution. The company now expects 2025 consolidated organic revenue growth to be in the range of 5.5% to 6.0%, an increase from its prior mid-single-digit guidance. This growth is anticipated across all segments, despite facing a challenging comparison in the fourth quarter of 2024, which benefited from a pull-forward of revenue, particularly in the Industrial segment's ongoing certification work.

The company is also raising its adjusted EBITDA margin guidance to approximately 25% for the full year 2025, up from its prior guidance of approximately 24%. This margin expansion is driven by operating leverage from top-line growth, a favorable mix benefit as the Industrial segment continues its strong performance, and ongoing productivity improvements, including the benefits from the recently announced restructuring plan. Capital expenditures for 2025 are now expected to be in the range of 6.5% to 7.0% of revenue, a modest reduction from the previous 7.0% to 8.0% range, primarily due to timing shifts in investments. The effective tax rate for 2025 is projected to be between 25% and 26%, higher than 2024 due to the impact of the OECD's Pillar Two rules, which became effective on January 1, 2025.

Risks and Challenges

Despite a compelling growth narrative, investors should consider several risks. The dynamic geopolitical and macroeconomic environment continues to pose a challenge, potentially causing customers to modify, delay, or cancel service purchases. While UL Solutions has historically demonstrated resilience to tariffs, shifts in global supply chains and manufacturing locations can create short-term volatility. The company is also exposed to foreign currency exchange rate risk, as a significant portion of its revenues and expenses are denominated in non-U.S. dollar currencies, which could materially impact reported results. Furthermore, while the Software and Advisory segment is growing, certain advisory areas, such as Healthy Buildings, continue to face headwinds from the commercial real estate market. The implementation of the restructuring plan, while beneficial long-term, involves pre-tax expenses and execution risks that could impact short-term financial performance.

Conclusion

UL Solutions is a compelling investment opportunity, firmly rooted in its indispensable role as a global safety science leader. Its 130-year history of adapting to market needs, coupled with a strategic focus on megatrends like energy transition, electrification, and digitalization, positions it for sustained growth. The company's technological differentiators, including the ULTRUS software platform and pioneering AI safety certification, provide a robust competitive moat, driving efficiency for customers and fostering recurring revenue.

The strong financial performance in Q3 2025, marked by record revenues, significant adjusted EBITDA growth, and expanding margins, underscores the effectiveness of its strategy and operational execution. With strengthened full-year 2025 guidance, a disciplined approach to capital allocation, and a proactive restructuring initiative, UL Solutions is poised to continue delivering value. While geopolitical uncertainties and foreign exchange fluctuations present ongoing risks, the company's resilient business model, technological leadership, and commitment to safety science provide a strong foundation for long-term shareholder returns, making it a critical enabler in a rapidly evolving world.