Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UL Solutions Inc (NYSE:ULS) reported strong organic growth of 8.7% for the full year 2024, with revenues reaching $2.9 billion.
• The industrial segment led with 11.9% organic growth, marking seven consecutive quarters of double-digit growth.
• Adjusted EBITDA margin expanded by 190 basis points, reflecting improved profitability.
• The company generated $287 million in free cash flow, demonstrating robust cash generation capabilities.
• UL Solutions Inc (NYSE:ULS) successfully completed its IPO and follow-on offering, strengthening its financial position.

Negative Points

• The company anticipates a potential normalization of demand in ongoing certification services in 2025, which may impact growth.
• There is a projected increase in the effective tax rate to approximately 26% in 2025, up from 16.9% in 2024.
• Foreign exchange headwinds are expected to create a 1% revenue impact in 2025.
• The consumer segment's margins were slightly below consensus expectations, despite being up year-over-year.
• The company faces challenges in maintaining double-digit growth in the industrial segment due to steeper comparisons.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with ALIT.

Q: Can you comment on your 2025 outlook by each of your three segments? A: We see opportunities in each of the three segments. The industrial segment continues to benefit from mega trends, while the consumer segment is improving with added capacity. The software and advisory segment is also progressing well, particularly on the software side. Our outlook for revenue growth is on a consolidated basis, with contributions from all segments. - Ryan Robinson, CFO

Q: Do you expect the industrial segment to sustain double-digit growth given the ongoing mega trends? A: While our revenue guidance is on a consolidated basis, we don't see material changes in the tailwinds driving the industrial segment. However, our comparisons are getting steeper, and we want to set realistic expectations. - Ryan Robinson, CFO

Q: How do you expect higher tariffs to impact the business? A: Historically, tariffs have not had a material impact on our business. Our revenue is largely dependent on product innovation and new product development life cycles rather than volumes. Tariffs may lead manufacturers to change supply chains or product designs, which can require retesting and benefit us. - Jenny Scanlon, CEO

Q: Can you elaborate on the drivers of the acceleration in the software business? A: Our software business is seeing growth across all regions, with particular strength in retail product compliance and ESG data reporting. Our sales transformation is taking root, with improvements in contract renewals, annual recurring revenue, and bookings contributing to organic growth. - Jenny Scanlon, CEO

Q: What are your plans for M&A in 2025? Are you considering larger deals or focusing on tuck-in acquisitions? A: We are active in all segments and open to any size scale that aligns with our strategy around product safety and mega trends. M&A timing reflects opportunities as they arise and their strategic fit with our mission. - Jenny Scanlon, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.