UL Solutions Inc. — Call Transcript 2025

I'm Andrew Steineman. Welcome to the Ultimate Services Investor Conference. This is the UL Solutions discussion. To my right is Jenny Scanlon, the CEO, and to her right is Ryan Robinson, CFO. They're in the tech industry, that's testing, inspection, and certification. I’ve really enjoyed learning about your industry over the last couple of years. It really has, I think, for U.S. investors or U.S. analysts, come to be appreciated as one of the best business services subsectors that I cover. I just wanted to say thank you. Here’s a funny question, Jenny. Out of the T and the I and the C, which of those businesses do you like the best and why? I love them all. I'm sure you do. As you know, we have two businesses and three segments. Two of our segments are in the testing, inspection, and certification. Of that, 33% of our revenue is recurring. That really comes from that inspection side, the ongoing certification services. That is a really great ongoing engine for the third of our business that comes from that. I probably like that best from a revenue stream. The most fun thing you can do is watch products being tested. I always say we light things up, we blow them up, we drown them. Keep us safe. I say we have to do inherently unsafe things to keep people safe. It is really satisfying to visit our labs and watch those testing processes. Talk a little bit about industrial tech versus consumer tech and where you've kind of favored the company. Surely industrial tech has experienced higher organic revenue growth than was previously talked about back at the IPO. Yeah. The difference between industrial and consumer, for those of you who don't know us, first of all, we're a mission-driven growth company. Both of those segments grow. Both of those segments fulfill our mission of working for a safer world. The real distinction is in industrial products, which we've segregated our customers into those who are largely in the B2B space, our industrial. Those are big, risky products. If something goes wrong, it's not just reputationally destroying. It's not just a big insurance claim. People can die. As a result, the value of testing to standards and complying with those standards, the value of that to protect our customers is pretty high. Consumer also can be pretty risky. Lithium-ion batteries in hoverboards or e-mobility devices or your laptops, those blowing up have thermal runaway and can cause real damage very quickly. There is also a lot of performance and quality testing that goes on on the consumer side that is still trying to keep our customers' brand reputation safe and their customers safe from unfortunate things happening. Often the risk in the consumer side is less. As a result, there is a different value proposition on pricing. They are also smaller products and they actually require more human intervention to test. Okay. So would you say that industrial product tech is really your top focus? They are connected, but industrial is the core of our core. If you look back 130 years, we were founded around electrical safety on the heels of the World's Fair in Chicago in 1894 when Tesla and Edison were fighting over AC and DC current and GE and Westinghouse. The trick was our founder was brought to make sure that electricity being embedded in products was safe and the way that it was installed was safe. That went to electrical shock as well as fire. That is still the core of our core. That is industrial, the largest part of industrial is in the core of our core. That makes sense. Okay. So industrial tech for you guys have been growing high single digits. I know that is somewhat of an outperformance. Could you just give us a sense, particularly kind of looking back on this year, what's driven that outperformance within industrial? You could imagine my follow-up question is, okay, is high single digits sustainable for the industrial side of your business? I'm going to give Ryan a chance to weigh in. Sounds good. Sure. Thank you for the question, Andrew. Our growth in industrial has been driven by several mega trends that have moved the business forward for several years. 2023 was double-digit revenue growth. 2024 was double-digit revenue growth. We are high single-digit revenue growth in industrial this year. Those mega trends include energy transition, the sources of electrical energy generation, now the quantity of electrical energy generation, the growth and proliferation of devices that connect to the electrical grid, driven by new and innovative uses of electrical energy, including data centers. That leads to more and more products that need testing, innovation, and new types of energy storage, energy transmission devices. I do not think we are through that product cycle. I think that will continue for some time. Right. Did you say is high single-digit growth in the industrial side sustainable? We have not given guidance beyond 2025, nor have we signaled any material change in the trend of the business. Okay. Something that you could tell me if I'm off here, Ryan, but the question I get the most is what % of UL's revenues are tied to data center or renewable energy that's tied back to data center? I don't think I've ever seen a revenue mix chart that kind of neatly answers that question. Yeah. So foremost, it's helpful to ground that UL is a broad and diverse business. We touch many different industries, at least 35 general industrial codes. Data centers are a driver of growth. There are more and more products that are being redesigned for specialty uses like data centers, energy transmission systems, energy storage systems, cooling systems. We have not broken out what portion, but it is affecting many parts of our business, and it depends on the scope. Things like wind energy generation, we test wind turbines, photovoltaic panel arrays for energy generation, energy storage systems, all are being affected by the quantity of electrical energy, even if they're not specifically used within the four walls of a data center. Would it be hard to break down a pie chart like that? I remember your IPO pie chart did not break out data center. Is this a hard thing to do? Let me add to that. What makes it difficult is that, put yourself in the manufacturer's shoes. They may not be making products specifically for data centers. You take a big chiller manufacturer. You have your beautiful new building across the street. They probably put half a dozen chillers on top of that. Every floor? No. They're on the floor. They're on the floors. There you go. Every data center needs well over 100 right now if it's an AI-powered data center. That manufacturer may not necessarily, at least in the onset, be distinguishing that that innovation is going to go into a data center versus not. Maybe they are. When we test, we don't always know what that end use case is because we're testing that it's safe. That's right. That makes it a little more difficult for us to break it out. That said, what I want to emphasize is whether you're data center or in the industrial environment, the need to optimize energy usage to reduce the cost of energy is essential. All of our customers in that energy ecosystem are really focused on the innovation around how do they create products that are using less energy, that are doing a better job of storing energy, that are thinking about being a backup source for energy. I've not seen it, but I have this hypothesis that similar to Moore's law in computing power, we're going to see some type of law in energy usage and rapid proliferation of product innovation, which we're seeing today across our industrial customers. Okay. Ryan, this one's also for you. The margin expansion, the EBITDA margin expansion with industrials has been really impressive. Is this just operating leverage tied back to the strong growth? Or are there things within the company where you're mix-shifting to higher margin testing types? I'm not really sure. I'm just asking, is it all operating leverage? Yeah. There are a number of initiatives that are improving margins and operational efficiency across the business. In industrial? In industrial. Footprint optimization, consolidating where we do the work, broadening our service offerings, including large. When you say footprint, do you mean more labs? Is that what you mean? Yes. Location and the role of the laboratories. Moving them to lower electrical cost locations as well, that can change. Yep. Yep. We've made some progress in our pricing initiatives that contribute to margins and revenue growth. Well said. We've continued to grow internationally. We've grown in a number of new markets outside the United States. All those contribute to operating leverage. Okay. How is utilization in your labs now? That is not just an industrial question. That is an overall tech question. Is there still a lot of room left that you could fill in and have high utilization that will drive margins? Yeah. I would say there is. We measure our laboratory utilization across a number of different service lines. We have some laboratories that are fairly capital intensive. We seek to run them 24/7 to maximize the use of those facilities. We have others that are not utilized to that capability, to that capacity. Over the network, there is more capacity. Yeah. I do want to point out there's a number of different ways to extend utilization and productivity in labs that's different than a typical manufacturing environment. We don't have to add a full line to add capacity. Let's say there's a new test type. You may just need to buy a new piece of equipment and you've already got a technician or an engineer trained on that standard, but there's a different, more productive way of doing it. Okay. Okay. That's cool. Okay. Consumer, I remember going back to second quarter, had a blip. I remember it was tariff-induced or tariff uncertainty. Do we feel like that's all behind us? Like when you look at the consumer product division, is pipeline growing through the summer or now? In other words, have clients totally adjusted to the current tariff situation? I think our customers have adapted to the new normal. I do not think they necessarily know what all of the answers are, but they continue to realize that they have to make decisions that will benefit their long-term profitability. Those decisions may be moving their plant locations. It may be swapping out those raw materials, changing features and functions, or just increasing prices to consumers. They are doing it all. Right. When your clients kind of switch their supply chain or diversify their supply chain, does UL Solutions make more money? Typically, if a product is changing its design, swapping out raw materials, getting a new supplier, we will need to retest some or all of that product. If you're moving a factory location, we will frequently certify that factory location if it's back in the United States to building codes and other ways to help get that plant started up. If you're doing, let's say, a China plus one strategy, now we'll do those ongoing certification services, those inspections. Maybe we'll continue in China because you're still producing there. And we've added another location in Vietnam or Indonesia or somewhere. There are lots of ways that you get a small bump as a result of all of the shifting supply chain. Right. The consumer margins aren't as high as the industrial margins. My guess is it's because industrials is your core of your core. How sustainable are the margins in consumer? Should they go towards industrial margins over time? Yeah. They will never be as high as industrial margins. That said, they've crossed over 20%. I think that it's sustainable for them to continuously improve. The reason why they will never be as high as industrial margins is there is just inherently a lot more human labor involved in testing consumer products. You think about just even the number of samples. To bring a sample in, I'm going to go back to chillers. A truck shows up at one of our labs. There might be two samples on it. You've got a couple of engineers and a couple of technicians who take a little bit of time to make sure that product meets all the features and functions. They start launching the tests. That test series, it could be three months. It could be six months to get through it all. On the consumer side, you may have 1,000 samples coming in a day to a lab. You have to have human beings unwrap those samples, log those samples, get all the metadata about those samples, and then run through those in three days and turn around and get that certification back out the door. It is just much more labor-intensive in our consumer business. Okay. If we could, let's go back to data center and the growth around renewable energy. I know there's data center build-out around the world, but more so in the United States. Out of the global tech companies, you're the one that's based in the U.S. Do you feel like you're getting a disproportionate share of those opportunities in the U.S. related to data center and renewable energy because you're based here and culturally aligned? Yes. I also think there are 70 UL standards right now that we've identified that we're testing to for data centers. It's always helpful for our customers to know that we at UL, even on the solution side, on the commercial side of our enterprise, have been involved in the crafting of those standards and the science behind those in the advocating for what our customers believe that they need to see in that standards process. I think that relationship with our team sitting on standards, technical panels all over the world, not just UL standards, but ISO, IEC, other standards, our investment in that thought leadership gives us a leg up with new innovation in very complex, safety, risky products. Right. Do you think that's enough to say that you'll grow faster than the overall tech industry because you're U.S.-centric, the data center build-out is U.S.-centric? You have these reputations for trust around standards. Is that such a needle mover to say that alone will drive above industry growth? I think historically, if you look at it, we have grown at above industry rates. As Ryan said, we do not see any reason to have changed our feeling about that. I think we will continue to be leaders in this space. Right. You could use the word you want, but I would say you've grown a little faster than the industry. Given the data center build-out, shouldn't this be kind of a more uplifted outperformance relative to the industry? Yeah. I would say it's a different business mix. Some of the other more broadly defined testing, inspection, certification industry participants, they participate in other industries that have their own cycles. There just could be differences in the business. Yeah. Yeah. That's true. That's true. Okay. Okay. Why don't we open it up for questions? Okay. Are you considering opening up new labs? Obviously, when you think about where the business should be done, and you mentioned the cost of electricity, it just makes me feel like maybe that you have to refootprint your labs. We have been. For example, even here on Long Island, we announced a shift from Melville and closing down that lab that had originally been open 40 years ago, plus focused on products being exported to Europe. We have been shifting that footprint, moving out of that space and shifting that down to Mexico, up to Northbrook, out to Research Triangle Park. We continue to do that around the world across the board. We will constantly look for ways in which we can run our labs in a more integrated fashion and have a smarter footprint in what we have been doing. To meet kind of U.S. standards for safety, you do not necessarily have to be in a lab in the U.S. No. In fact, our customers prefer that that testing occurs close to where their R&D is occurring. Makes sense. There are some tests that are witness testing. Sometimes they want to adapt the product while they are there in the lab. We tend to go where our customers go, but we do have a very strong North American, U.S.-based footprint. Yeah. So I know I've been asking a lot of data center questions. Why don't you just tell me other areas that you're excited about heading into 2026 where you feel like your specialty will really bode well for growth? Yeah. One of the areas, back to labs, we announced our new Fire Research Center of Excellence in Northbrook that we had a groundbreaking in August. It will not come online until 2027, but it will continue to extend our research in fire safety, our leadership in fire safety. We are excited about that investment because that is an investment that is, I mean, that is an asset for decades. It is not an asset for a few years. I also think just when you look at our software and advisory space, extending, doubling down in some key areas in software such as our supply chain traceability and that connection into ESG reporting is an area that we expect to see continued uplift. Okay. Right. Ryan, before when I asked you about, it was really about industrial operating leverage and margin expansion. You mentioned higher price realization. My question is, in the past, and maybe we will talk more generally, not just industrial. In the past, when I asked you how much of your organic revenue growth comes from price, how much comes from volume, you said they are similar contributors. Now that we are getting more price, is it fair to say that it is a larger contributor to organic revenue growth? Is it sustainable? Yeah. In the last quarter, we had about 7% revenue growth. We said that there was similar contribution from price and volume in our testing activities, our certification testing, our non-certification testing. We are pleased with that mix. We are always striving to add more value to our customers to be appropriately compensated for the value that we are providing. We are looking for ways to do that. We think that there is still opportunity to serve our customers better and better. Hopefully, we will be compensated for that. Right. In terms of pricing, rational pricing from competitors, has this been a market where you felt like your competitors that also provide tech services have also been increasing price? What we focus on is win rates of projects. We continue to believe that our value proposition that we're offering is very competitive and that our win rates and our net promoter scores continue to go up. Hey, have you disclosed your net promoter score? We have not publicly disclosed it, but it is something we track very closely. We are pleased with the continued progression there. Maybe you'll consider disclosing that. We might. I'll have you know that some companies put it in their annual report. Yep. Is it a third-party measured net promoter score? It is. Yep. Okay. Yeah. I would think about sharing that. Okay. Great. Look again for questions. If not, I'm going to jump into software and advisory business. You can go ahead. Why your industrial segment margin are much much higher than the PMPS that you [audio distortion] Yeah. Rather than compare to any particular company, we can talk about the attributes of that business model. Most importantly, that team, the industrial segment team, serves the manufacturers of higher risk, often mission-critical devices. The failure of those could lead to material safety risks or productivity or uptime consequences. Often, they're more complicated products. They could have a number of mechanical and electrical subsystems that need to be tested. Importantly, many of those manufacturers highly value the UL mark to communicate the quality and regulatory compliance of their products. That's a valuable attribute. The mix of services is different than some other businesses. We're pleased with the profitability of that business. It's been growing pretty materially over the last several years. Okay. Another question. Go ahead. Can you talk about the pace of innovation? Other companies indicate that everybody just [audio distortion] What we saw in particular in consumer in the second quarter, and it was really in the month of May, was a number of customers delaying making decisions, delaying getting samples to us. Maybe they said, "Hey, you've won this quote. You're going to test this product." The samples did not show up. The prototypes were not there. Some of that was because they were regrouping on their product design decisions, how they were going to take cost out, value engineering those products, maybe thinking about moving the assembly locations. It is easier to move assembly in consumer than it is to pick up and move an industrial plant. We are feeling like it is back to a more typical cycle for us, what we are hearing from our customers. Hard to say. We are keeping an eye on it. It feels like they worked through that first set of emotion and now are just trying to make rational decisions given the availability of whatever information they have on any given day about where tariffs are going to land for them. I'm going to go back to one of my earlier questions when I was asking about what % of particularly your industrial business is tied to data center and renewables. I remember you said, "Hey, we're really tied to like 35 different industries." Does that mean that when you look at both the direct and indirect, and I'm Jenny, I hear you that you're like, "Hey, for cooling manufacturers, our customer, we don't know who they're selling to." Do you think, use a word, like a lot of our industrial business is tied directly or indirectly, a medium? Just use some word. I know you're not giving me a %. Is it the majority tied to data center and renewable energy within industrial or just some qualitative word that helps us dimension it, direct and indirect together? You could say pass. Yeah. I am going to say pass only because it would be difficult for us to really parse through that granularity of data. I thought your answer was to begin with. Yeah. If you look back to the key markets within our industrial business, power and automation. Power and automation is being affected by this massive energy transition that's underway. Data centers are propelling that energy transition. The indirect could be the data center that's being built in Indiana is going to suck up the capacity of a medium-sized town there electricity-wise. Now you've got to find other ways to save energy and generate new energy to compensate for the fact that that data center went in. Power and automation, directly, indirectly, it's all around this need for energy, the growth for energy, the energy transition. Built environment, the thermal dynamics, the fire suppression systems needed for data centers. Interesting and substantial, but there's a lot of interesting and substantial needs for the built environment around fire safety. Data centers do not feel disproportionate there. Wire and cable, shift from AC to DC, different size, high voltage, medium voltage. Again, data centers are using that, but so is the industrial environment. Okay. Last question. Where are you in your own internal investment cycle? When we think about 2026, is this going to be a bigger internal investment year? We talked a little bit about opening up labs. But do you think of 2026 as an investment year? Or do you feel like, "Oh, we've been investing all along, not notably different"? Yeah. Over the past several years, we've increased the pace of capital investment back in the business relative to the period before that. That is somewhat in 2025. We said a lot of that is timing. We see a lot of opportunities to continue to invest in growth of the business. I think it'll be in different forms. We have made a lot of progress in the enabling technology infrastructure of the business. We've announced some exciting capacity expansions. A couple of examples. In Japan, we announced a new laboratory of high-voltage electromagnetic compatibility testing to help make sure high RPM, high-voltage electric motors are safe and do not inadvertently interfere with other parts of the automobile ecosystem. We announced a new fire laboratory that Jenny mentioned in Northbrook. The majority of that spending in both those cases is 2026. We've announced that we've started. Right. Just say again, is 2026 more of a capital-intensive year than 2025? Yeah. We haven't given that outlook. We have said some of the reduction in 2025 is timing. That would mean that it would be in 2026. Okay. Great. Time for one last question if someone has it. Okay. Go ahead. Maybe just on software, [audio distortion] Oh, yeah. I wanted to get to that. Yeah. Sorry. Go ahead. It's been a little while since you introduced sort of the Ultras brand around it. How much of the opportunity there is cross-selling to existing customers of other software solutions? Yeah. I think it's definitely both. The cross-selling opportunity, both we've set a significant portion of our global and strategic accounts buy from both tech and software and advisory. Continuing to extend our reach into those customers with new features and functions and new opportunities within the Ultras platform. It's really been benefited by the search engine optimization and other abilities to serve up marketing pieces, try now, buy now types of opportunities once they're within Ultras. We're also just continuing to see new avenues, new customers who better understand the fact that we win different awards for leadership in the governance, risk, compliance, various slices and dices of the software space and are really recognized as a leader in many areas. We're getting new logos there. All right.

Speaker 1: I'm Andrew Steineman. Welcome to the Ultimate Services Investor Conference. This is the UL Solutions discussion. To my right is Jenny Scanlon, the CEO, and to her right is Ryan Robinson, CFO. They're in the tech industry, that's testing, inspection, and certification. I’ve really enjoyed learning about your industry over the last couple of years. It really has, I think, for U.S. investors or U.S. analysts, come to be appreciated as one of the best business services subsectors that I cover. I just wanted to say thank you. Here’s a funny question, Jenny. Out of the T and the I and the C, which of those businesses do you like the best and why? I'm Andrew Steineman. i'm andrew steineman Welcome to the Ultimate Services Investor Conference. welcome to the ultimate services investor conference This is the UL Solutions discussion. this is the ul solutions discussion To my right is Jenny Scanlon, the CEO, and to her right is Ryan Robinson, CFO. to my right is jenny scanlon the ceo and to her right is ryan robinson cfo They're in the tech industry, that's testing, inspection, and certification. they're in the tech industry that's testing inspection and certification I’ve really enjoyed learning about your industry over the last couple of years. i’ve really enjoyed learning about your industry over the last couple of years It really has, I think, for U.S. investors or U.S. analysts, come to be appreciated as one of the best business services subsectors that I cover. it really has i think for u.s investors or u.s analysts come to be appreciated as one of the best business services subsectors that i cover I just wanted to say thank you. i just wanted to say thank you Here’s a funny question, Jenny. here’s a funny question jenny Out of the T and the I and the C, which of those businesses do you like the best and why? out of the t and the i and the c which of those businesses do you like the best and why

Speaker 4: I love them all. I love them all. i love them all

Speaker 1: I'm sure you do. I'm sure you do. i'm sure you do

Speaker 4: As you know, we have two businesses and three segments. Two of our segments are in the testing, inspection, and certification. Of that, 33% of our revenue is recurring. That really comes from that inspection side, the ongoing certification services. That is a really great ongoing engine for the third of our business that comes from that. I probably like that best from a revenue stream. The most fun thing you can do is watch products being tested. I always say we light things up, we blow them up, we drown them. As you know, we have two businesses and three segments. as you know we have two businesses and three segments Two of our segments are in the testing, inspection, and certification. two of our segments are in the testing inspection and certification Of that, 33% of our revenue is recurring. of that 33% of our revenue is recurring That really comes from that inspection side, the ongoing certification services. that really comes from that inspection side the ongoing certification services That is a really great ongoing engine for the third of our business that comes from that. that is a really great ongoing engine for the third of our business that comes from that I probably like that best from a revenue stream. i probably like that best from a revenue stream The most fun thing you can do is watch products being tested. the most fun thing you can do is watch products being tested I always say we light things up, we blow them up, we drown them. i always say we light things up we blow them up we drown them

Speaker 1: Keep us safe. Keep us safe. keep us safe

Speaker 4: I say we have to do inherently unsafe things to keep people safe. It is really satisfying to visit our labs and watch those testing processes. I say we have to do inherently unsafe things to keep people safe. i say we have to do inherently unsafe things to keep people safe It is really satisfying to visit our labs and watch those testing processes. it is really satisfying to visit our labs and watch those testing processes

Speaker 1: Talk a little bit about industrial tech versus consumer tech and where you've kind of favored the company. Surely industrial tech has experienced higher organic revenue growth than was previously talked about back at the IPO. Talk a little bit about industrial tech versus consumer tech and where you've kind of favored the company. talk a little bit about industrial tech versus consumer tech and where you've kind of favored the company Surely industrial tech has experienced higher organic revenue growth than was previously talked about back at the IPO. surely industrial tech has experienced higher organic revenue growth than was previously talked about back at the ipo

Speaker 4: Yeah. The difference between industrial and consumer, for those of you who don't know us, first of all, we're a mission-driven growth company. Both of those segments grow. Both of those segments fulfill our mission of working for a safer world. The real distinction is in industrial products, which we've segregated our customers into those who are largely in the B2B space, our industrial. Those are big, risky products. If something goes wrong, it's not just reputationally destroying. It's not just a big insurance claim. People can die. As a result, the value of testing to standards and complying with those standards, the value of that to protect our customers is pretty high. Consumer also can be pretty risky. Lithium-ion batteries in hoverboards or e-mobility devices or your laptops, those blowing up have thermal runaway and can cause real damage very quickly. Yeah. yeah The difference between industrial and consumer, for those of you who don't know us, first of all, we're a mission-driven growth company. the difference between industrial and consumer for those of you who don't know us first of all we're a mission-driven growth company Both of those segments grow. both of those segments grow Both of those segments fulfill our mission of working for a safer world. both of those segments fulfill our mission of working for a safer world The real distinction is in industrial products, which we've segregated our customers into those who are largely in the B2B space, our industrial. the real distinction is in industrial products which we've segregated our customers into those who are largely in the b2b space our industrial Those are big, risky products. those are big risky products If something goes wrong, it's not just reputationally destroying. if something goes wrong it's not just reputationally destroying It's not just a big insurance claim. it's not just a big insurance claim People can die. people can die As a result, the value of testing to standards and complying with those standards, the value of that to protect our customers is pretty high. as a result the value of testing to standards and complying with those standards the value of that to protect our customers is pretty high Consumer also can be pretty risky. consumer also can be pretty risky Lithium-ion batteries in hoverboards or e-mobility devices or your laptops, those blowing up have thermal runaway and can cause real damage very quickly. lithium-ion batteries in hoverboards or e-mobility devices or your laptops those blowing up have thermal runaway and can cause real damage very quickly There is also a lot of performance and quality testing that goes on on the consumer side that is still trying to keep our customers' brand reputation safe and their customers safe from unfortunate things happening. Often the risk in the consumer side is less. As a result, there is a different value proposition on pricing. They are also smaller products and they actually require more human intervention to test. There is also a lot of performance and quality testing that goes on on the consumer side that is still trying to keep our customers' brand reputation safe and their customers safe from unfortunate things happening. there is also a lot of performance and quality testing that goes on on the consumer side that is still trying to keep our customers' brand reputation safe and their customers safe from unfortunate things happening Often the risk in the consumer side is less. often the risk in the consumer side is less As a result, there is a different value proposition on pricing. as a result there is a different value proposition on pricing They are also smaller products and they actually require more human intervention to test. they are also smaller products and they actually require more human intervention to test

Speaker 1: Okay. So would you say that industrial product tech is really your top focus? Okay. okay So would you say that industrial product tech is really your top focus? so would you say that industrial product tech is really your top focus

Speaker 4: They are connected, but industrial is the core of our core. If you look back 130 years, we were founded around electrical safety on the heels of the World's Fair in Chicago in 1894 when Tesla and Edison were fighting over AC and DC current and GE and Westinghouse. The trick was our founder was brought to make sure that electricity being embedded in products was safe and the way that it was installed was safe. That went to electrical shock as well as fire. That is still the core of our core. That is industrial, the largest part of industrial is in the core of our core. They are connected, but industrial is the core of our core. they are connected but industrial is the core of our core If you look back 130 years, we were founded around electrical safety on the heels of the World's Fair in Chicago in 1894 when Tesla and Edison were fighting over AC and DC current and GE and Westinghouse. if you look back 130 years we were founded around electrical safety on the heels of the world's fair in chicago in 1894 when tesla and edison were fighting over ac and dc current and ge and westinghouse The trick was our founder was brought to make sure that electricity being embedded in products was safe and the way that it was installed was safe. the trick was our founder was brought to make sure that electricity being embedded in products was safe and the way that it was installed was safe That went to electrical shock as well as fire. that went to electrical shock as well as fire That is still the core of our core. that is still the core of our core That is industrial, the largest part of industrial is in the core of our core. that is industrial the largest part of industrial is in the core of our core

Speaker 1: That makes sense. Okay. So industrial tech for you guys have been growing high single digits. I know that is somewhat of an outperformance. Could you just give us a sense, particularly kind of looking back on this year, what's driven that outperformance within industrial? You could imagine my follow-up question is, okay, is high single digits sustainable for the industrial side of your business? That makes sense. that makes sense Okay. okay So industrial tech for you guys have been growing high single digits. so industrial tech for you guys have been growing high single digits I know that is somewhat of an outperformance. i know that is somewhat of an outperformance Could you just give us a sense, particularly kind of looking back on this year, what's driven that outperformance within industrial? could you just give us a sense particularly kind of looking back on this year what's driven that outperformance within industrial You could imagine my follow-up question is, okay, is high single digits sustainable for the industrial side of your business? you could imagine my follow-up question is okay is high single digits sustainable for the industrial side of your business

Speaker 4: I'm going to give Ryan a chance to weigh in. I'm going to give Ryan a chance to weigh in. i'm going to give ryan a chance to weigh in

Speaker 1: Sounds good. Sounds good. sounds good

Speaker 2: Sure. Thank you for the question, Andrew. Our growth in industrial has been driven by several mega trends that have moved the business forward for several years. 2023 was double-digit revenue growth. 2024 was double-digit revenue growth. We are high single-digit revenue growth in industrial this year. Those mega trends include energy transition, the sources of electrical energy generation, now the quantity of electrical energy generation, the growth and proliferation of devices that connect to the electrical grid, driven by new and innovative uses of electrical energy, including data centers. That leads to more and more products that need testing, innovation, and new types of energy storage, energy transmission devices. I do not think we are through that product cycle. I think that will continue for some time. Sure. sure Thank you for the question, Andrew. thank you for the question andrew Our growth in industrial has been driven by several mega trends that have moved the business forward for several years. 2023 was double-digit revenue growth. 2024 was double-digit revenue growth. our growth in industrial has been driven by several mega trends that have moved the business forward for several years 2023 was double-digit revenue growth 2024 was double-digit revenue growth We are high single-digit revenue growth in industrial this year. we are high single-digit revenue growth in industrial this year Those mega trends include energy transition, the sources of electrical energy generation, now the quantity of electrical energy generation, the growth and proliferation of devices that connect to the electrical grid, driven by new and innovative uses of electrical energy, including data centers. those mega trends include energy transition the sources of electrical energy generation now the quantity of electrical energy generation the growth and proliferation of devices that connect to the electrical grid driven by new and innovative uses of electrical energy including data centers That leads to more and more products that need testing, innovation, and new types of energy storage, energy transmission devices. that leads to more and more products that need testing innovation and new types of energy storage energy transmission devices I do not think we are through that product cycle. i do not think we are through that product cycle I think that will continue for some time. i think that will continue for some time

Speaker 1: Right. Did you say is high single-digit growth in the industrial side sustainable? Right. right Did you say is high single-digit growth in the industrial side sustainable? did you say is high single-digit growth in the industrial side sustainable

Speaker 2: We have not given guidance beyond 2025, nor have we signaled any material change in the trend of the business. We have not given guidance beyond 2025, nor have we signaled any material change in the trend of the business. we have not given guidance beyond 2025 nor have we signaled any material change in the trend of the business

Speaker 1: Okay. Something that you could tell me if I'm off here, Ryan, but the question I get the most is what % of UL's revenues are tied to data center or renewable energy that's tied back to data center? I don't think I've ever seen a revenue mix chart that kind of neatly answers that question. Okay. okay Something that you could tell me if I'm off here, Ryan, but the question I get the most is what % of UL's revenues are tied to data center or renewable energy that's tied back to data center? something that you could tell me if i'm off here ryan but the question i get the most is what % of ul's revenues are tied to data center or renewable energy that's tied back to data center I don't think I've ever seen a revenue mix chart that kind of neatly answers that question. i don't think i've ever seen a revenue mix chart that kind of neatly answers that question

Speaker 2: Yeah. So foremost, it's helpful to ground that UL is a broad and diverse business. We touch many different industries, at least 35 general industrial codes. Data centers are a driver of growth. There are more and more products that are being redesigned for specialty uses like data centers, energy transmission systems, energy storage systems, cooling systems. We have not broken out what portion, but it is affecting many parts of our business, and it depends on the scope. Things like wind energy generation, we test wind turbines, photovoltaic panel arrays for energy generation, energy storage systems, all are being affected by the quantity of electrical energy, even if they're not specifically used within the four walls of a data center. Yeah. yeah So foremost, it's helpful to ground that UL is a broad and diverse business. so foremost it's helpful to ground that ul is a broad and diverse business We touch many different industries, at least 35 general industrial codes. we touch many different industries at least 35 general industrial codes Data centers are a driver of growth. data centers are a driver of growth There are more and more products that are being redesigned for specialty uses like data centers, energy transmission systems, energy storage systems, cooling systems. there are more and more products that are being redesigned for specialty uses like data centers energy transmission systems energy storage systems cooling systems We have not broken out what portion, but it is affecting many parts of our business, and it depends on the scope. we have not broken out what portion but it is affecting many parts of our business and it depends on the scope Things like wind energy generation, we test wind turbines, photovoltaic panel arrays for energy generation, energy storage systems, all are being affected by the quantity of electrical energy, even if they're not specifically used within the four walls of a data center. things like wind energy generation we test wind turbines photovoltaic panel arrays for energy generation energy storage systems all are being affected by the quantity of electrical energy even if they're not specifically used within the four walls of a data center

Speaker 1: Would it be hard to break down a pie chart like that? I remember your IPO pie chart did not break out data center. Is this a hard thing to do? Would it be hard to break down a pie chart like that? would it be hard to break down a pie chart like that I remember your IPO pie chart did not break out data center. i remember your ipo pie chart did not break out data center Is this a hard thing to do? is this a hard thing to do

Speaker 4: Let me add to that. What makes it difficult is that, put yourself in the manufacturer's shoes. They may not be making products specifically for data centers. You take a big chiller manufacturer. You have your beautiful new building across the street. They probably put half a dozen chillers on top of that. Let me add to that. let me add to that What makes it difficult is that, put yourself in the manufacturer's shoes. what makes it difficult is that put yourself in the manufacturer's shoes They may not be making products specifically for data centers. they may not be making products specifically for data centers You take a big chiller manufacturer. you take a big chiller manufacturer You have your beautiful new building across the street. you have your beautiful new building across the street They probably put half a dozen chillers on top of that. they probably put half a dozen chillers on top of that

Speaker 1: Every floor? No. They're on the floor. Every floor? every floor No. no They're on the floor. they're on the floor

Speaker 4: They're on the floors. There you go. Every data center needs well over 100 right now if it's an AI-powered data center. That manufacturer may not necessarily, at least in the onset, be distinguishing that that innovation is going to go into a data center versus not. Maybe they are. When we test, we don't always know what that end use case is because we're testing that it's safe. They're on the floors. they're on the floors There you go. there you go Every data center needs well over 100 right now if it's an AI-powered data center. every data center needs well over 100 right now if it's an ai-powered data center That manufacturer may not necessarily, at least in the onset, be distinguishing that that innovation is going to go into a data center versus not. that manufacturer may not necessarily at least in the onset be distinguishing that that innovation is going to go into a data center versus not Maybe they are. maybe they are When we test, we don't always know what that end use case is because we're testing that it's safe. when we test we don't always know what that end use case is because we're testing that it's safe

Speaker 1: That's right. That's right. that's right

Speaker 4: That makes it a little more difficult for us to break it out. That said, what I want to emphasize is whether you're data center or in the industrial environment, the need to optimize energy usage to reduce the cost of energy is essential. All of our customers in that energy ecosystem are really focused on the innovation around how do they create products that are using less energy, that are doing a better job of storing energy, that are thinking about being a backup source for energy. I've not seen it, but I have this hypothesis that similar to Moore's law in computing power, we're going to see some type of law in energy usage and rapid proliferation of product innovation, which we're seeing today across our industrial customers. That makes it a little more difficult for us to break it out. that makes it a little more difficult for us to break it out That said, what I want to emphasize is whether you're data center or in the industrial environment, the need to optimize energy usage to reduce the cost of energy is essential. that said what i want to emphasize is whether you're data center or in the industrial environment the need to optimize energy usage to reduce the cost of energy is essential All of our customers in that energy ecosystem are really focused on the innovation around how do they create products that are using less energy, that are doing a better job of storing energy, that are thinking about being a backup source for energy. all of our customers in that energy ecosystem are really focused on the innovation around how do they create products that are using less energy that are doing a better job of storing energy that are thinking about being a backup source for energy I've not seen it, but I have this hypothesis that similar to Moore's law in computing power, we're going to see some type of law in energy usage and rapid proliferation of product innovation, which we're seeing today across our industrial customers. i've not seen it but i have this hypothesis that similar to moore's law in computing power we're going to see some type of law in energy usage and rapid proliferation of product innovation which we're seeing today across our industrial customers

Speaker 1: Okay. Ryan, this one's also for you. The margin expansion, the EBITDA margin expansion with industrials has been really impressive. Is this just operating leverage tied back to the strong growth? Or are there things within the company where you're mix-shifting to higher margin testing types? I'm not really sure. I'm just asking, is it all operating leverage? Okay. okay Ryan, this one's also for you. ryan this one's also for you The margin expansion, the EBITDA margin expansion with industrials has been really impressive. the margin expansion the ebitda margin expansion with industrials has been really impressive Is this just operating leverage tied back to the strong growth? is this just operating leverage tied back to the strong growth Or are there things within the company where you're mix-shifting to higher margin testing types? or are there things within the company where you're mix-shifting to higher margin testing types I'm not really sure. i'm not really sure I'm just asking, is it all operating leverage? i'm just asking is it all operating leverage

Speaker 2: Yeah. There are a number of initiatives that are improving margins and operational efficiency across the business. Yeah. yeah There are a number of initiatives that are improving margins and operational efficiency across the business. there are a number of initiatives that are improving margins and operational efficiency across the business

Speaker 1: In industrial? In industrial? in industrial

Speaker 2: In industrial. Footprint optimization, consolidating where we do the work, broadening our service offerings, including large. In industrial. in industrial Footprint optimization, consolidating where we do the work, broadening our service offerings, including large. footprint optimization consolidating where we do the work broadening our service offerings including large

Speaker 1: When you say footprint, do you mean more labs? Is that what you mean? When you say footprint, do you mean more labs? when you say footprint do you mean more labs Is that what you mean? is that what you mean

Speaker 2: Yes. Location and the role of the laboratories. Yes. yes Location and the role of the laboratories. location and the role of the laboratories

Speaker 4: Moving them to lower electrical cost locations as well, that can change. Moving them to lower electrical cost locations as well, that can change. moving them to lower electrical cost locations as well that can change

Speaker 2: Yep. Yep. We've made some progress in our pricing initiatives that contribute to margins and revenue growth. Yep. yep Yep. yep We've made some progress in our pricing initiatives that contribute to margins and revenue growth. we've made some progress in our pricing initiatives that contribute to margins and revenue growth

Speaker 1: Well said. Well said. well said

Speaker 2: We've continued to grow internationally. We've grown in a number of new markets outside the United States. All those contribute to operating leverage. We've continued to grow internationally. we've continued to grow internationally We've grown in a number of new markets outside the United States. we've grown in a number of new markets outside the united states All those contribute to operating leverage. all those contribute to operating leverage

Speaker 1: Okay. How is utilization in your labs now? That is not just an industrial question. That is an overall tech question. Is there still a lot of room left that you could fill in and have high utilization that will drive margins? Okay. okay How is utilization in your labs now? That is not just an industrial question. That is an overall tech question. how is utilization in your labs now? that is not just an industrial question. that is an overall tech question Is there still a lot of room left that you could fill in and have high utilization that will drive margins? is there still a lot of room left that you could fill in and have high utilization that will drive margins

Speaker 2: Yeah. I would say there is. We measure our laboratory utilization across a number of different service lines. We have some laboratories that are fairly capital intensive. We seek to run them 24/7 to maximize the use of those facilities. We have others that are not utilized to that capability, to that capacity. Over the network, there is more capacity. Yeah. yeah I would say there is. i would say there is We measure our laboratory utilization across a number of different service lines. we measure our laboratory utilization across a number of different service lines We have some laboratories that are fairly capital intensive. we have some laboratories that are fairly capital intensive We seek to run them 24/7 to maximize the use of those facilities. we seek to run them 24/7 to maximize the use of those facilities We have others that are not utilized to that capability, to that capacity. we have others that are not utilized to that capability to that capacity Over the network, there is more capacity. over the network there is more capacity

Speaker 4: Yeah. I do want to point out there's a number of different ways to extend utilization and productivity in labs that's different than a typical manufacturing environment. We don't have to add a full line to add capacity. Let's say there's a new test type. You may just need to buy a new piece of equipment and you've already got a technician or an engineer trained on that standard, but there's a different, more productive way of doing it. Yeah. yeah I do want to point out there's a number of different ways to extend utilization and productivity in labs that's different than a typical manufacturing environment. i do want to point out there's a number of different ways to extend utilization and productivity in labs that's different than a typical manufacturing environment We don't have to add a full line to add capacity. we don't have to add a full line to add capacity Let's say there's a new test type. let's say there's a new test type You may just need to buy a new piece of equipment and you've already got a technician or an engineer trained on that standard, but there's a different, more productive way of doing it. you may just need to buy a new piece of equipment and you've already got a technician or an engineer trained on that standard but there's a different more productive way of doing it

Speaker 1: Okay. Okay. That's cool. Okay. Consumer, I remember going back to second quarter, had a blip. I remember it was tariff-induced or tariff uncertainty. Do we feel like that's all behind us? Like when you look at the consumer product division, is pipeline growing through the summer or now? In other words, have clients totally adjusted to the current tariff situation? Okay. okay Okay. okay That's cool. that's cool Okay. okay Consumer, I remember going back to second quarter, had a blip. consumer i remember going back to second quarter had a blip I remember it was tariff-induced or tariff uncertainty. i remember it was tariff-induced or tariff uncertainty Do we feel like that's all behind us? do we feel like that's all behind us Like when you look at the consumer product division, is pipeline growing through the summer or now? like when you look at the consumer product division is pipeline growing through the summer or now In other words, have clients totally adjusted to the current tariff situation? in other words have clients totally adjusted to the current tariff situation

Speaker 4: I think our customers have adapted to the new normal. I do not think they necessarily know what all of the answers are, but they continue to realize that they have to make decisions that will benefit their long-term profitability. Those decisions may be moving their plant locations. It may be swapping out those raw materials, changing features and functions, or just increasing prices to consumers. They are doing it all. I think our customers have adapted to the new normal. i think our customers have adapted to the new normal I do not think they necessarily know what all of the answers are, but they continue to realize that they have to make decisions that will benefit their long-term profitability. i do not think they necessarily know what all of the answers are but they continue to realize that they have to make decisions that will benefit their long-term profitability Those decisions may be moving their plant locations. those decisions may be moving their plant locations It may be swapping out those raw materials, changing features and functions, or just increasing prices to consumers. They are doing it all. it may be swapping out those raw materials changing features and functions or just increasing prices to consumers. they are doing it all

Speaker 1: Right. When your clients kind of switch their supply chain or diversify their supply chain, does UL Solutions make more money? Right. right When your clients kind of switch their supply chain or diversify their supply chain, does UL Solutions make more money? when your clients kind of switch their supply chain or diversify their supply chain does ul solutions make more money

Speaker 4: Typically, if a product is changing its design, swapping out raw materials, getting a new supplier, we will need to retest some or all of that product. If you're moving a factory location, we will frequently certify that factory location if it's back in the United States to building codes and other ways to help get that plant started up. If you're doing, let's say, a China plus one strategy, now we'll do those ongoing certification services, those inspections. Maybe we'll continue in China because you're still producing there. And we've added another location in Vietnam or Indonesia or somewhere. There are lots of ways that you get a small bump as a result of all of the shifting supply chain. Typically, if a product is changing its design, swapping out raw materials, getting a new supplier, we will need to retest some or all of that product. typically if a product is changing its design swapping out raw materials getting a new supplier we will need to retest some or all of that product If you're moving a factory location, we will frequently certify that factory location if it's back in the United States to building codes and other ways to help get that plant started up. if you're moving a factory location we will frequently certify that factory location if it's back in the united states to building codes and other ways to help get that plant started up If you're doing, let's say, a China plus one strategy, now we'll do those ongoing certification services, those inspections. if you're doing let's say a china plus one strategy now we'll do those ongoing certification services those inspections Maybe we'll continue in China because you're still producing there. maybe we'll continue in china because you're still producing there And we've added another location in Vietnam or Indonesia or somewhere. and we've added another location in vietnam or indonesia or somewhere There are lots of ways that you get a small bump as a result of all of the shifting supply chain. there are lots of ways that you get a small bump as a result of all of the shifting supply chain

Speaker 1: Right. The consumer margins aren't as high as the industrial margins. My guess is it's because industrials is your core of your core. How sustainable are the margins in consumer? Should they go towards industrial margins over time? Right. right The consumer margins aren't as high as the industrial margins. the consumer margins aren't as high as the industrial margins My guess is it's because industrials is your core of your core. my guess is it's because industrials is your core of your core How sustainable are the margins in consumer? how sustainable are the margins in consumer Should they go towards industrial margins over time? should they go towards industrial margins over time

Speaker 4: Yeah. They will never be as high as industrial margins. That said, they've crossed over 20%. I think that it's sustainable for them to continuously improve. The reason why they will never be as high as industrial margins is there is just inherently a lot more human labor involved in testing consumer products. You think about just even the number of samples. To bring a sample in, I'm going to go back to chillers. A truck shows up at one of our labs. There might be two samples on it. You've got a couple of engineers and a couple of technicians who take a little bit of time to make sure that product meets all the features and functions. They start launching the tests. That test series, it could be three months. It could be six months to get through it all. Yeah. yeah They will never be as high as industrial margins. they will never be as high as industrial margins That said, they've crossed over 20%. that said they've crossed over 20% I think that it's sustainable for them to continuously improve. i think that it's sustainable for them to continuously improve The reason why they will never be as high as industrial margins is there is just inherently a lot more human labor involved in testing consumer products. the reason why they will never be as high as industrial margins is there is just inherently a lot more human labor involved in testing consumer products You think about just even the number of samples. you think about just even the number of samples To bring a sample in, I'm going to go back to chillers. to bring a sample in i'm going to go back to chillers A truck shows up at one of our labs. a truck shows up at one of our labs There might be two samples on it. there might be two samples on it You've got a couple of engineers and a couple of technicians who take a little bit of time to make sure that product meets all the features and functions. you've got a couple of engineers and a couple of technicians who take a little bit of time to make sure that product meets all the features and functions They start launching the tests. they start launching the tests That test series, it could be three months. that test series it could be three months It could be six months to get through it all. it could be six months to get through it all On the consumer side, you may have 1,000 samples coming in a day to a lab. You have to have human beings unwrap those samples, log those samples, get all the metadata about those samples, and then run through those in three days and turn around and get that certification back out the door. It is just much more labor-intensive in our consumer business. On the consumer side, you may have 1,000 samples coming in a day to a lab. on the consumer side you may have 1,000 samples coming in a day to a lab You have to have human beings unwrap those samples, log those samples, get all the metadata about those samples, and then run through those in three days and turn around and get that certification back out the door. you have to have human beings unwrap those samples log those samples get all the metadata about those samples and then run through those in three days and turn around and get that certification back out the door It is just much more labor-intensive in our consumer business. it is just much more labor-intensive in our consumer business

Speaker 1: Okay. If we could, let's go back to data center and the growth around renewable energy. I know there's data center build-out around the world, but more so in the United States. Out of the global tech companies, you're the one that's based in the U.S. Do you feel like you're getting a disproportionate share of those opportunities in the U.S. related to data center and renewable energy because you're based here and culturally aligned? Okay. okay If we could, let's go back to data center and the growth around renewable energy. if we could let's go back to data center and the growth around renewable energy I know there's data center build-out around the world, but more so in the United States. i know there's data center build-out around the world but more so in the united states Out of the global tech companies, you're the one that's based in the U.S. out of the global tech companies you're the one that's based in the u.s Do you feel like you're getting a disproportionate share of those opportunities in the U.S. related to data center and renewable energy because you're based here and culturally aligned? do you feel like you're getting a disproportionate share of those opportunities in the u.s related to data center and renewable energy because you're based here and culturally aligned

Speaker 4: Yes. I also think there are 70 UL standards right now that we've identified that we're testing to for data centers. It's always helpful for our customers to know that we at UL, even on the solution side, on the commercial side of our enterprise, have been involved in the crafting of those standards and the science behind those in the advocating for what our customers believe that they need to see in that standards process. I think that relationship with our team sitting on standards, technical panels all over the world, not just UL standards, but ISO, IEC, other standards, our investment in that thought leadership gives us a leg up with new innovation in very complex, safety, risky products. Yes. yes I also think there are 70 UL standards right now that we've identified that we're testing to for data centers. i also think there are 70 ul standards right now that we've identified that we're testing to for data centers It's always helpful for our customers to know that we at UL, even on the solution side, on the commercial side of our enterprise, have been involved in the crafting of those standards and the science behind those in the advocating for what our customers believe that they need to see in that standards process. it's always helpful for our customers to know that we at ul even on the solution side on the commercial side of our enterprise have been involved in the crafting of those standards and the science behind those in the advocating for what our customers believe that they need to see in that standards process I think that relationship with our team sitting on standards, technical panels all over the world, not just UL standards, but ISO, IEC, other standards, our investment in that thought leadership gives us a leg up with new innovation in very complex, safety, risky products. i think that relationship with our team sitting on standards technical panels all over the world not just ul standards but iso iec other standards our investment in that thought leadership gives us a leg up with new innovation in very complex safety risky products

Speaker 1: Right. Do you think that's enough to say that you'll grow faster than the overall tech industry because you're U.S.-centric, the data center build-out is U.S.-centric? You have these reputations for trust around standards. Is that such a needle mover to say that alone will drive above industry growth? Right. right Do you think that's enough to say that you'll grow faster than the overall tech industry because you're U.S.-centric, the data center build-out is U.S.-centric? do you think that's enough to say that you'll grow faster than the overall tech industry because you're u.s.-centric the data center build-out is u.s.-centric You have these reputations for trust around standards. you have these reputations for trust around standards Is that such a needle mover to say that alone will drive above industry growth? is that such a needle mover to say that alone will drive above industry growth

Speaker 4: I think historically, if you look at it, we have grown at above industry rates. As Ryan said, we do not see any reason to have changed our feeling about that. I think we will continue to be leaders in this space. I think historically, if you look at it, we have grown at above industry rates. i think historically if you look at it we have grown at above industry rates As Ryan said, we do not see any reason to have changed our feeling about that. as ryan said we do not see any reason to have changed our feeling about that I think we will continue to be leaders in this space. i think we will continue to be leaders in this space

Speaker 1: Right. You could use the word you want, but I would say you've grown a little faster than the industry. Given the data center build-out, shouldn't this be kind of a more uplifted outperformance relative to the industry? Right. right You could use the word you want, but I would say you've grown a little faster than the industry. you could use the word you want but i would say you've grown a little faster than the industry Given the data center build-out, shouldn't this be kind of a more uplifted outperformance relative to the industry? given the data center build-out shouldn't this be kind of a more uplifted outperformance relative to the industry

Speaker 2: Yeah. I would say it's a different business mix. Some of the other more broadly defined testing, inspection, certification industry participants, they participate in other industries that have their own cycles. There just could be differences in the business. Yeah. yeah I would say it's a different business mix. i would say it's a different business mix Some of the other more broadly defined testing, inspection, certification industry participants, they participate in other industries that have their own cycles. some of the other more broadly defined testing inspection certification industry participants they participate in other industries that have their own cycles There just could be differences in the business. there just could be differences in the business

Speaker 4: Yeah. Yeah. yeah

Speaker 2: Yeah. That's true. That's true. Yeah. yeah That's true. yeah that's true That's true. that's true

Speaker 1: Okay. Okay. Why don't we open it up for questions? Okay. okay Okay. okay Why don't we open it up for questions? why don't we open it up for questions Okay. Are you considering opening up new labs? Obviously, when you think about where the business should be done, and you mentioned the cost of electricity, it just makes me feel like maybe that you have to refootprint your labs. Okay. okay Are you considering opening up new labs? are you considering opening up new labs Obviously, when you think about where the business should be done, and you mentioned the cost of electricity, it just makes me feel like maybe that you have to refootprint your labs. obviously when you think about where the business should be done and you mentioned the cost of electricity it just makes me feel like maybe that you have to refootprint your labs

Speaker 4: We have been. For example, even here on Long Island, we announced a shift from Melville and closing down that lab that had originally been open 40 years ago, plus focused on products being exported to Europe. We have been shifting that footprint, moving out of that space and shifting that down to Mexico, up to Northbrook, out to Research Triangle Park. We continue to do that around the world across the board. We will constantly look for ways in which we can run our labs in a more integrated fashion and have a smarter footprint in what we have been doing. We have been. we have been For example, even here on Long Island, we announced a shift from Melville and closing down that lab that had originally been open 40 years ago, plus focused on products being exported to Europe. We have been shifting that footprint, moving out of that space and shifting that down to Mexico, up to Northbrook, out to Research Triangle Park. for example even here on long island we announced a shift from melville and closing down that lab that had originally been open 40 years ago plus focused on products being exported to europe. we have been shifting that footprint moving out of that space and shifting that down to mexico up to northbrook out to research triangle park We continue to do that around the world across the board. we continue to do that around the world across the board We will constantly look for ways in which we can run our labs in a more integrated fashion and have a smarter footprint in what we have been doing. we will constantly look for ways in which we can run our labs in a more integrated fashion and have a smarter footprint in what we have been doing

Speaker 1: To meet kind of U.S. standards for safety, you do not necessarily have to be in a lab in the U.S. To meet kind of U.S. standards for safety, you do not necessarily have to be in a lab in the U.S. to meet kind of u.s standards for safety you do not necessarily have to be in a lab in the u.s

Speaker 4: No. In fact, our customers prefer that that testing occurs close to where their R&D is occurring. No. no In fact, our customers prefer that that testing occurs close to where their R&D is occurring. in fact our customers prefer that that testing occurs close to where their r&d is occurring

Speaker 1: Makes sense. Makes sense. makes sense

Speaker 4: There are some tests that are witness testing. Sometimes they want to adapt the product while they are there in the lab. We tend to go where our customers go, but we do have a very strong North American, U.S.-based footprint. There are some tests that are witness testing. there are some tests that are witness testing Sometimes they want to adapt the product while they are there in the lab. sometimes they want to adapt the product while they are there in the lab We tend to go where our customers go, but we do have a very strong North American, U.S.-based footprint. we tend to go where our customers go but we do have a very strong north american u.s.-based footprint

Speaker 1: Yeah. So I know I've been asking a lot of data center questions. Why don't you just tell me other areas that you're excited about heading into 2026 where you feel like your specialty will really bode well for growth? Yeah. yeah So I know I've been asking a lot of data center questions. so i know i've been asking a lot of data center questions Why don't you just tell me other areas that you're excited about heading into 2026 where you feel like your specialty will really bode well for growth? why don't you just tell me other areas that you're excited about heading into 2026 where you feel like your specialty will really bode well for growth

Speaker 4: Yeah. One of the areas, back to labs, we announced our new Fire Research Center of Excellence in Northbrook that we had a groundbreaking in August. It will not come online until 2027, but it will continue to extend our research in fire safety, our leadership in fire safety. We are excited about that investment because that is an investment that is, I mean, that is an asset for decades. It is not an asset for a few years. I also think just when you look at our software and advisory space, extending, doubling down in some key areas in software such as our supply chain traceability and that connection into ESG reporting is an area that we expect to see continued uplift. Yeah. yeah One of the areas, back to labs, we announced our new Fire Research Center of Excellence in Northbrook that we had a groundbreaking in August. one of the areas back to labs we announced our new fire research center of excellence in northbrook that we had a groundbreaking in august It will not come online until 2027, but it will continue to extend our research in fire safety, our leadership in fire safety. it will not come online until 2027 but it will continue to extend our research in fire safety our leadership in fire safety We are excited about that investment because that is an investment that is, I mean, that is an asset for decades. It is not an asset for a few years. we are excited about that investment because that is an investment that is i mean, that is an asset for decades. it is not an asset for a few years I also think just when you look at our software and advisory space, extending, doubling down in some key areas in software such as our supply chain traceability and that connection into ESG reporting is an area that we expect to see continued uplift. i also think just when you look at our software and advisory space extending doubling down in some key areas in software such as our supply chain traceability and that connection into esg reporting is an area that we expect to see continued uplift

Speaker 1: Okay. Right. Ryan, before when I asked you about, it was really about industrial operating leverage and margin expansion. You mentioned higher price realization. My question is, in the past, and maybe we will talk more generally, not just industrial. In the past, when I asked you how much of your organic revenue growth comes from price, how much comes from volume, you said they are similar contributors. Now that we are getting more price, is it fair to say that it is a larger contributor to organic revenue growth? Is it sustainable? Okay. okay Right. right ryan Ryan, before when I asked you about, it was really about industrial operating leverage and margin expansion. ryan before when i asked you about it was really about industrial operating leverage and margin expansion You mentioned higher price realization. you mentioned higher price realization My question is, in the past, and maybe we will talk more generally, not just industrial. my question is in the past and maybe we will talk more generally not just industrial In the past, when I asked you how much of your organic revenue growth comes from price, how much comes from volume, you said they are similar contributors. in the past when i asked you how much of your organic revenue growth comes from price how much comes from volume you said they are similar contributors Now that we are getting more price, is it fair to say that it is a larger contributor to organic revenue growth? now that we are getting more price is it fair to say that it is a larger contributor to organic revenue growth Is it sustainable? is it sustainable

Speaker 2: Yeah. In the last quarter, we had about 7% revenue growth. We said that there was similar contribution from price and volume in our testing activities, our certification testing, our non-certification testing. We are pleased with that mix. We are always striving to add more value to our customers to be appropriately compensated for the value that we are providing. We are looking for ways to do that. We think that there is still opportunity to serve our customers better and better. Hopefully, we will be compensated for that. Yeah. yeah In the last quarter, we had about 7% revenue growth. in the last quarter we had about 7% revenue growth We said that there was similar contribution from price and volume in our testing activities, our certification testing, our non-certification testing. we said that there was similar contribution from price and volume in our testing activities our certification testing our non-certification testing We are pleased with that mix. We are always striving to add more value to our customers to be appropriately compensated for the value that we are providing. we are pleased with that mix. we are always striving to add more value to our customers to be appropriately compensated for the value that we are providing We are looking for ways to do that. we are looking for ways to do that We think that there is still opportunity to serve our customers better and better. we think that there is still opportunity to serve our customers better and better Hopefully, we will be compensated for that. hopefully we will be compensated for that

Speaker 1: Right. In terms of pricing, rational pricing from competitors, has this been a market where you felt like your competitors that also provide tech services have also been increasing price? Right. right In terms of pricing, rational pricing from competitors, has this been a market where you felt like your competitors that also provide tech services have also been increasing price? in terms of pricing rational pricing from competitors has this been a market where you felt like your competitors that also provide tech services have also been increasing price

Speaker 4: What we focus on is win rates of projects. We continue to believe that our value proposition that we're offering is very competitive and that our win rates and our net promoter scores continue to go up. What we focus on is win rates of projects. what we focus on is win rates of projects We continue to believe that our value proposition that we're offering is very competitive and that our win rates and our net promoter scores continue to go up. we continue to believe that our value proposition that we're offering is very competitive and that our win rates and our net promoter scores continue to go up

Speaker 1: Hey, have you disclosed your net promoter score? Hey, have you disclosed your net promoter score? hey have you disclosed your net promoter score

Speaker 4: We have not publicly disclosed it, but it is something we track very closely. We are pleased with the continued progression there. We have not publicly disclosed it, but it is something we track very closely. we have not publicly disclosed it but it is something we track very closely We are pleased with the continued progression there. we are pleased with the continued progression there

Speaker 1: Maybe you'll consider disclosing that. Maybe you'll consider disclosing that. maybe you'll consider disclosing that

Speaker 4: We might. We might. we might

Speaker 1: I'll have you know that some companies put it in their annual report. I'll have you know that some companies put it in their annual report. i'll have you know that some companies put it in their annual report

Speaker 4: Yep. Yep. yep

Speaker 1: Is it a third-party measured net promoter score? Is it a third-party measured net promoter score? is it a third-party measured net promoter score

Speaker 2: It is. It is. it is

Speaker 4: Yep. Yep. yep

Speaker 1: Okay. Yeah. I would think about sharing that. Okay. Great. Look again for questions. If not, I'm going to jump into software and advisory business. You can go ahead. Okay. okay Yeah. yeah I would think about sharing that. i would think about sharing that Okay. okay Great. great Look again for questions. look again for questions If not, I'm going to jump into software and advisory business. if not i'm going to jump into software and advisory business You can go ahead. you can go ahead Why your industrial segment margin are much much higher than the PMPS that you [audio distortion] Why your industrial segment margin are much much higher than the PMPS that you [audio distortion] why your industrial segment margin are much much higher than the pmps that you [audio distortion]

Speaker 2: Yeah. Rather than compare to any particular company, we can talk about the attributes of that business model. Most importantly, that team, the industrial segment team, serves the manufacturers of higher risk, often mission-critical devices. The failure of those could lead to material safety risks or productivity or uptime consequences. Often, they're more complicated products. They could have a number of mechanical and electrical subsystems that need to be tested. Importantly, many of those manufacturers highly value the UL mark to communicate the quality and regulatory compliance of their products. That's a valuable attribute. The mix of services is different than some other businesses. We're pleased with the profitability of that business. It's been growing pretty materially over the last several years. Yeah. yeah Rather than compare to any particular company, we can talk about the attributes of that business model. rather than compare to any particular company we can talk about the attributes of that business model Most importantly, that team, the industrial segment team, serves the manufacturers of higher risk, often mission-critical devices. most importantly that team the industrial segment team serves the manufacturers of higher risk often mission-critical devices The failure of those could lead to material safety risks or productivity or uptime consequences. the failure of those could lead to material safety risks or productivity or uptime consequences Often, they're more complicated products. often they're more complicated products They could have a number of mechanical and electrical subsystems that need to be tested. they could have a number of mechanical and electrical subsystems that need to be tested Importantly, many of those manufacturers highly value the UL mark to communicate the quality and regulatory compliance of their products. importantly many of those manufacturers highly value the ul mark to communicate the quality and regulatory compliance of their products That's a valuable attribute. that's a valuable attribute The mix of services is different than some other businesses. the mix of services is different than some other businesses We're pleased with the profitability of that business. we're pleased with the profitability of that business It's been growing pretty materially over the last several years. it's been growing pretty materially over the last several years

Speaker 1: Okay. Another question. Go ahead. Okay. okay Another question. another question Go ahead. go ahead Can you talk about the pace of innovation? Other companies indicate that everybody just [audio distortion] Can you talk about the pace of innovation? can you talk about the pace of innovation other companies indicate that everybody just [audio distortion] Other companies indicate that everybody just [audio distortion] can you talk about the pace of innovation other companies indicate that everybody just [audio distortion]

Speaker 4: What we saw in particular in consumer in the second quarter, and it was really in the month of May, was a number of customers delaying making decisions, delaying getting samples to us. Maybe they said, "Hey, you've won this quote. You're going to test this product." The samples did not show up. The prototypes were not there. Some of that was because they were regrouping on their product design decisions, how they were going to take cost out, value engineering those products, maybe thinking about moving the assembly locations. It is easier to move assembly in consumer than it is to pick up and move an industrial plant. We are feeling like it is back to a more typical cycle for us, what we are hearing from our customers. Hard to say. We are keeping an eye on it. What we saw in particular in consumer in the second quarter, and it was really in the month of May, was a number of customers delaying making decisions, delaying getting samples to us. what we saw in particular in consumer in the second quarter and it was really in the month of may was a number of customers delaying making decisions delaying getting samples to us Maybe they said, "Hey, you've won this quote. maybe they said "hey you've won this quote You're going to test this product." The samples did not show up. you're going to test this product." the samples did not show up The prototypes were not there. the prototypes were not there Some of that was because they were regrouping on their product design decisions, how they were going to take cost out, value engineering those products, maybe thinking about moving the assembly locations. It is easier to move assembly in consumer than it is to pick up and move an industrial plant. We are feeling like it is back to a more typical cycle for us, what we are hearing from our customers. some of that was because they were regrouping on their product design decisions how they were going to take cost out value engineering those products maybe thinking about moving the assembly locations. it is easier to move assembly in consumer than it is to pick up and move an industrial plant. we are feeling like it is back to a more typical cycle for us what we are hearing from our customers Hard to say. hard to say We are keeping an eye on it. we are keeping an eye on it It feels like they worked through that first set of emotion and now are just trying to make rational decisions given the availability of whatever information they have on any given day about where tariffs are going to land for them. It feels like they worked through that first set of emotion and now are just trying to make rational decisions given the availability of whatever information they have on any given day about where tariffs are going to land for them. it feels like they worked through that first set of emotion and now are just trying to make rational decisions given the availability of whatever information they have on any given day about where tariffs are going to land for them

Speaker 1: I'm going to go back to one of my earlier questions when I was asking about what % of particularly your industrial business is tied to data center and renewables. I remember you said, "Hey, we're really tied to like 35 different industries." Does that mean that when you look at both the direct and indirect, and I'm Jenny, I hear you that you're like, "Hey, for cooling manufacturers, our customer, we don't know who they're selling to." Do you think, use a word, like a lot of our industrial business is tied directly or indirectly, a medium? Just use some word. I know you're not giving me a %. Is it the majority tied to data center and renewable energy within industrial or just some qualitative word that helps us dimension it, direct and indirect together? You could say pass. I'm going to go back to one of my earlier questions when I was asking about what % of particularly your industrial business is tied to data center and renewables. i'm going to go back to one of my earlier questions when i was asking about what % of particularly your industrial business is tied to data center and renewables I remember you said, "Hey, we're really tied to like 35 different industries." Does that mean that when you look at both the direct and indirect, and I'm Jenny, I hear you that you're like, "Hey, for cooling manufacturers, our customer, we don't know who they're selling to." Do you think, use a word, like a lot of our industrial business is tied directly or indirectly, a medium? i remember you said "hey we're really tied to like 35 different industries." does that mean that when you look at both the direct and indirect and i'm jenny i hear you that you're like "hey for cooling manufacturers our customer we don't know who they're selling to." do you think use a word like a lot of our industrial business is tied directly or indirectly a medium Just use some word. just use some word I know you're not giving me a %. i know you're not giving me a % Is it the majority tied to data center and renewable energy within industrial or just some qualitative word that helps us dimension it, direct and indirect together? is it the majority tied to data center and renewable energy within industrial or just some qualitative word that helps us dimension it direct and indirect together You could say pass. you could say pass

Speaker 4: Yeah. I am going to say pass only because it would be difficult for us to really parse through that granularity of data. Yeah. yeah I am going to say pass only because it would be difficult for us to really parse through that granularity of data. i am going to say pass only because it would be difficult for us to really parse through that granularity of data

Speaker 1: I thought your answer was to begin with. I thought your answer was to begin with. i thought your answer was to begin with

Speaker 4: Yeah. If you look back to the key markets within our industrial business, power and automation. Power and automation is being affected by this massive energy transition that's underway. Data centers are propelling that energy transition. The indirect could be the data center that's being built in Indiana is going to suck up the capacity of a medium-sized town there electricity-wise. Now you've got to find other ways to save energy and generate new energy to compensate for the fact that that data center went in. Power and automation, directly, indirectly, it's all around this need for energy, the growth for energy, the energy transition. Built environment, the thermal dynamics, the fire suppression systems needed for data centers. Interesting and substantial, but there's a lot of interesting and substantial needs for the built environment around fire safety. Yeah. yeah If you look back to the key markets within our industrial business, power and automation. if you look back to the key markets within our industrial business power and automation Power and automation is being affected by this massive energy transition that's underway. power and automation is being affected by this massive energy transition that's underway Data centers are propelling that energy transition. data centers are propelling that energy transition The indirect could be the data center that's being built in Indiana is going to suck up the capacity of a medium-sized town there electricity-wise. the indirect could be the data center that's being built in indiana is going to suck up the capacity of a medium-sized town there electricity-wise Now you've got to find other ways to save energy and generate new energy to compensate for the fact that that data center went in. now you've got to find other ways to save energy and generate new energy to compensate for the fact that that data center went in Power and automation, directly, indirectly, it's all around this need for energy, the growth for energy, the energy transition. power and automation directly indirectly it's all around this need for energy the growth for energy the energy transition Built environment, the thermal dynamics, the fire suppression systems needed for data centers. built environment the thermal dynamics the fire suppression systems needed for data centers Interesting and substantial, but there's a lot of interesting and substantial needs for the built environment around fire safety. interesting and substantial but there's a lot of interesting and substantial needs for the built environment around fire safety Data centers do not feel disproportionate there. Wire and cable, shift from AC to DC, different size, high voltage, medium voltage. Again, data centers are using that, but so is the industrial environment. Data centers do not feel disproportionate there. data centers do not feel disproportionate there Wire and cable, shift from AC to DC, different size, high voltage, medium voltage. wire and cable shift from ac to dc different size high voltage medium voltage Again, data centers are using that, but so is the industrial environment. again data centers are using that but so is the industrial environment

Speaker 1: Okay. Last question. Where are you in your own internal investment cycle? When we think about 2026, is this going to be a bigger internal investment year? We talked a little bit about opening up labs. But do you think of 2026 as an investment year? Or do you feel like, "Oh, we've been investing all along, not notably different"? Okay. okay Last question. last question Where are you in your own internal investment cycle? where are you in your own internal investment cycle When we think about 2026, is this going to be a bigger internal investment year? when we think about 2026 is this going to be a bigger internal investment year We talked a little bit about opening up labs. we talked a little bit about opening up labs But do you think of 2026 as an investment year? but do you think of 2026 as an investment year Or do you feel like, "Oh, we've been investing all along, not notably different"? or do you feel like "oh we've been investing all along not notably different"

Speaker 2: Yeah. Over the past several years, we've increased the pace of capital investment back in the business relative to the period before that. That is somewhat in 2025. We said a lot of that is timing. We see a lot of opportunities to continue to invest in growth of the business. I think it'll be in different forms. We have made a lot of progress in the enabling technology infrastructure of the business. We've announced some exciting capacity expansions. A couple of examples. In Japan, we announced a new laboratory of high-voltage electromagnetic compatibility testing to help make sure high RPM, high-voltage electric motors are safe and do not inadvertently interfere with other parts of the automobile ecosystem. We announced a new fire laboratory that Jenny mentioned in Northbrook. The majority of that spending in both those cases is 2026. We've announced that we've started. Yeah. yeah Over the past several years, we've increased the pace of capital investment back in the business relative to the period before that. over the past several years we've increased the pace of capital investment back in the business relative to the period before that That is somewhat in 2025. that is somewhat in 2025 We said a lot of that is timing. we said a lot of that is timing We see a lot of opportunities to continue to invest in growth of the business. we see a lot of opportunities to continue to invest in growth of the business I think it'll be in different forms. i think it'll be in different forms We have made a lot of progress in the enabling technology infrastructure of the business. we have made a lot of progress in the enabling technology infrastructure of the business We've announced some exciting capacity expansions. we've announced some exciting capacity expansions A couple of examples. a couple of examples In Japan, we announced a new laboratory of high-voltage electromagnetic compatibility testing to help make sure high RPM, high-voltage electric motors are safe and do not inadvertently interfere with other parts of the automobile ecosystem. in japan we announced a new laboratory of high-voltage electromagnetic compatibility testing to help make sure high rpm high-voltage electric motors are safe and do not inadvertently interfere with other parts of the automobile ecosystem We announced a new fire laboratory that Jenny mentioned in Northbrook. we announced a new fire laboratory that jenny mentioned in northbrook The majority of that spending in both those cases is 2026. the majority of that spending in both those cases is 2026 We've announced that we've started. we've announced that we've started

Speaker 1: Right. Just say again, is 2026 more of a capital-intensive year than 2025? Right. right Just say again, is 2026 more of a capital-intensive year than 2025? just say again is 2026 more of a capital-intensive year than 2025

Speaker 2: Yeah. We haven't given that outlook. We have said some of the reduction in 2025 is timing. That would mean that it would be in 2026. Yeah. yeah We haven't given that outlook. we haven't given that outlook We have said some of the reduction in 2025 is timing. we have said some of the reduction in 2025 is timing That would mean that it would be in 2026. that would mean that it would be in 2026

Speaker 1: Okay. Great. Time for one last question if someone has it. Okay. Go ahead. Okay. okay Great. great Time for one last question if someone has it. time for one last question if someone has it Okay. okay Go ahead. go ahead Maybe just on software, [audio distortion] Maybe just on software, [audio distortion] maybe just on software [audio distortion] Oh, yeah. I wanted to get to that. Yeah. Sorry. Go ahead. Oh, yeah. oh yeah I wanted to get to that. i wanted to get to that Yeah. yeah Sorry. sorry Go ahead. go ahead It's been a little while since you introduced sort of the Ultras brand around it. How much of the opportunity there is cross-selling to existing customers of other software solutions? It's been a little while since you introduced sort of the Ultras brand around it. it's been a little while since you introduced sort of the ultras brand around it How much of the opportunity there is cross-selling to existing customers of other software solutions? how much of the opportunity there is cross-selling to existing customers of other software solutions

Speaker 4: Yeah. I think it's definitely both. The cross-selling opportunity, both we've set a significant portion of our global and strategic accounts buy from both tech and software and advisory. Continuing to extend our reach into those customers with new features and functions and new opportunities within the Ultras platform. It's really been benefited by the search engine optimization and other abilities to serve up marketing pieces, try now, buy now types of opportunities once they're within Ultras. We're also just continuing to see new avenues, new customers who better understand the fact that we win different awards for leadership in the governance, risk, compliance, various slices and dices of the software space and are really recognized as a leader in many areas. We're getting new logos there. Yeah. yeah I think it's definitely both. i think it's definitely both The cross-selling opportunity, both we've set a significant portion of our global and strategic accounts buy from both tech and software and advisory. the cross-selling opportunity both we've set a significant portion of our global and strategic accounts buy from both tech and software and advisory Continuing to extend our reach into those customers with new features and functions and new opportunities within the Ultras platform. continuing to extend our reach into those customers with new features and functions and new opportunities within the ultras platform It's really been benefited by the search engine optimization and other abilities to serve up marketing pieces, try now, buy now types of opportunities once they're within Ultras. it's really been benefited by the search engine optimization and other abilities to serve up marketing pieces try now buy now types of opportunities once they're within ultras We're also just continuing to see new avenues, new customers who better understand the fact that we win different awards for leadership in the governance, risk, compliance, various slices and dices of the software space and are really recognized as a leader in many areas. we're also just continuing to see new avenues new customers who better understand the fact that we win different awards for leadership in the governance risk compliance various slices and dices of the software space and are really recognized as a leader in many areas We're getting new logos there. we're getting new logos there

Speaker 2: All right. All right. all right