First Quarter 2024 (Comparisons to First Quarter
20231)
- Strong revenue growth of 6.5% to $670 million, including 7.5%
organic growth
- Net income of $60 million, or $0.28 per diluted share
- Adjusted Net Income of $61 million increased 13.0%
- Adjusted EBITDA of $131 million increased 18.0%, Adjusted
EBITDA margin of 19.6% expanded 200 basis points
- Net cash provided by operating activities of $141 million and
Free Cash Flow of $84 million
- Completed upsized initial public offering at the higher end of
the price range and listed on April 12th, 2024
UL Solutions Inc. (“UL Solutions” or the “Company”) (NYSE: ULS),
a global safety science leader in independent third-party testing,
inspection and certification services and related software and
advisory offerings, today reported results for the first quarter
ended March 31, 2024.
“UL Solutions is a trusted provider of science-based solutions
that help our customers ensure their products meet important safety
standards worldwide, and our first quarter results reflect
continued strong demand for our market-leading services,” said
President and CEO Jennifer Scanlon. “All three segments across all
regions provided balanced contributions, highlighting how our
strategy and diverse portfolio produce steady and predictable
growth in our business.”
Scanlon continued, “We are continuously investing in our people,
technology and processes to enhance our capabilities in our
constantly evolving markets. The world is complex and demanding,
and as the product testing, inspection and certification industry’s
role continues to grow, we will look to expand our leadership
position.”
Chief Financial Officer Ryan Robinson added, “Technology
advancements and market trends such as energy transition and
connected technologies are driving change across the end markets we
serve, as we achieved organic revenue growth of 7.5%, Adjusted
EBITDA of $131 million and Adjusted Diluted Earnings Per Share of
$0.28 in the first quarter. Our strong balance sheet is supported
by robust cash generation, as demonstrated by net cash provided by
operating activities of $141 million and Free Cash Flow of $84
million for the first three months of the year, positioning us to
execute disciplined capital allocation and deliver accretive growth
to build long-term value for all of our stakeholders.”
First Quarter 2024 Financial Results
Revenue of $670 million compared to $629 million in the first
quarter of 2023, an increase of 6.5%. Organic growth of 7.5% across
all segments, led by Industrial.
Net income of $60 million compared to $58 million in the first
quarter of 2023, an increase of 3.4%. Net income margin of 9.0%
compared to 9.2% in the first quarter of 2023, a decrease of 20
basis points.
Adjusted Net Income of $61 million compared to $54 million in
the first quarter of 2023, an increase of 13.0%. Adjusted Net
Income margin of 9.1% compared to 8.6% in the first quarter of
2023, an increase of 50 basis points, as revenue gains were
partially offset by higher costs from professional fees, interest
expense and increased depreciation and amortization.
Adjusted EBITDA of $131 million compared to $111 million in the
first quarter of 2023, an increase of 18.0%. Adjusted EBITDA margin
of 19.6% compared to 17.6% in the first quarter of 2023, an
increase of 200 basis points. The margin expansion resulted from
lower long-term incentive expenses and headcount reduction actions
taken in 2023, primarily in the Consumer segment.
1This press release includes references to
non-GAAP financial measures. Please refer to “Non-GAAP Financial
Measures” later in this release for the definitions of each
non-GAAP financial measures presented, as well as reconciliations
of these measures to their most directly comparable GAAP
measures.
First Quarter 2024 Segment Performance
Industrial Segment Results
Industrial revenue of $295 million compared to $270 million in
the first quarter of 2023, an increase of 9.3%, or 10.0% on an
organic basis. Operating income of $75 million compared to $72
million in the first quarter of 2023, an increase of 4.2%.
Operating income margin of 25.4% compared to 26.7% in the first
quarter of 2023. Adjusted EBITDA of $86 million compared to $80
million in the first quarter of 2023, an increase of 7.5%. Adjusted
EBITDA margin of 29.2% compared to 29.6% in the first quarter of
2023. Revenue and Adjusted EBITDA gains were driven by strong
demand related to electrical product, renewable energy and
component certification testing, as well as increased laboratory
capacity. The change in margin was primarily driven by increases in
compensation expenses and professional fees.
Consumer Segment Results
Consumer revenue of $286 million compared to $275 million in the
first quarter of 2023, an increase of 4.0%, or 5.8% on an organic
basis. Operating income of $17 million compared to $3 million in
the first quarter of 2023. Operating income margin of 5.9% compared
to 1.1% in the first quarter of 2023. Adjusted EBITDA of $35
million compared to $21 million in the first quarter of 2023, an
increase of 66.7%. Adjusted EBITDA margin of 12.2% compared to 7.6%
in the first quarter of 2023. Revenue and Adjusted EBITDA gains
were driven by electromagnetic compatibility testing and improved
retail demand. Margin improvement was primarily driven by higher
revenue, expense management, severance costs in the first quarter
of 2023, and a reduction in incentive expenses.
Software and Advisory Segment Results
Software and Advisory revenue of $89 million compared to $84
million in the first quarter of 2023, an increase of 6.0%, or 4.8%
on an organic basis. Operating loss of $1 million compared to $0 in
the first quarter of 2023. Operating loss margin of 1.1% compared
to 0.0% in the first quarter of 2023. Adjusted EBITDA remained flat
at $10 million compared to the first quarter of 2023. Adjusted
EBITDA margin of 11.2% compared to 11.9% in the first quarter of
2023. Revenue gains were driven by increased advisory revenue in
renewable energy generation. The change in margin was primarily
driven by increases in compensation expenses.
Liquidity and Capital Resources
For the first three months of 2024, the Company generated $141
million of net cash provided by operating activities, a decrease
from $161 million for the same period in 2023. Net cash provided by
operating activities in the first quarter was impacted by the
timing of Performance Cash incentive payments, which were settled
earlier in 2024 compared to 2023.
The Company continues to make strategic capital investments in
energy transition opportunities to meet increased demand, and for
the first three months of 2024 capital expenditures totaled $57
million, compared to $63 million in 2023. Free Cash Flow for the
first three months was $84 million, compared to $98 million in the
first quarter of 2023, primarily related to the timing of incentive
payments.
As of March 31, 2024, total debt was $885 million, prior to
unamortized debt issuance costs, a decrease from December 31, 2023
due to $25 million of net repayments on the Company's revolving
credit facility.
The Company ended the quarter with cash and cash-equivalents of
$344 million compared to $315 million at December 31, 2023.
In April 2024, the Company completed its upsized initial public
offering of Class A common stock consisting entirely of secondary
shares sold by the selling stockholder. UL Solutions did not sell
any shares in the offering and did not receive any proceeds from
the sale of the shares. At the time of the initial public offering,
the Company had 200,000,000 and 200,022,486 basic and diluted
shares outstanding, respectively.
Full-Year 2024 Outlook
Our key points on 2024 outlook include:
- Mid-single digit steady constant currency, organic revenue
growth is expected to continue
- “Electrification of Everything” along with Digitalization and
Sustainability megatrends are fueling growth in all segments
- Divestiture of Industrial payments testing business will reduce
revenue by approximately $40 million annually
- Adjusted EBITDA margin improvement expected from increased
productivity
- Capital expenditures expected to remain at approximately 7-8%
of revenue
- Tuck-in acquisition opportunities continue to be pursued
The Company’s 2024 outlook is based on a number of assumptions
that are subject to change and many of which are outside the
control of the Company. If actual results vary from these
assumptions, the Company’s expectations may change. There can be no
assurance that the Company will achieve the results expressed by
this outlook.
Conference Call and Webcast
UL Solutions will host a conference call today at 8:30 am ET to
discuss the Company’s financial results. The live webcast of the
conference call and accompanying presentation materials can be
accessed through the UL Solutions Investor Relations website at
ir.ul.com. For those unable to access the webcast, the conference
call can be accessed by dialing 877-269-7751 or 201-389-0908. An
archive of the webcast will be available on the Company’s website
for 30 days.
About UL Solutions
A global leader in applied safety science, UL Solutions Inc.
transforms safety, security and sustainability challenges into
opportunities for customers in more than 100 countries. UL
Solutions Inc. delivers testing, inspection and certification
services, together with software products and advisory offerings,
that support our customers’ product innovation and business growth.
The UL Mark serves as a recognized symbol of trust in our
customers’ products and reflects an unwavering commitment to
advancing our safety mission. We help our customers innovate,
launch new products and services, navigate global markets and
complex supply chains, and grow sustainably and responsibly into
the future. Our science is your advantage.
Investors and others should note that UL Solutions intends to
routinely announce material information to investors and the
marketplace using SEC filings, press releases, public conference
calls, webcasts and the UL Solutions Investor Relations website. We
also intend to use certain social media channels as a means of
disclosing information about us and our products to consumers, our
customers, investors and the public on our X account
(@UL_Solutions) and our LinkedIn account (@ULSolutions). The
information posted on social media channels is not incorporated by
reference in this press release or in any other report or document
we file with the SEC. While not all of the information that the
Company posts to the UL Solutions Investor Relations website or to
social media accounts is of a material nature, some information
could be deemed to be material. Accordingly, the Company encourages
investors, the media, and others interested in UL Solutions to
review the information shared on our Investor Relations website at
ir.ul.com and to regularly follow our social media accounts. Users
can automatically receive email alerts and information about the
Company by subscribing to “Investor Email Alerts” at the bottom of
the UL Solutions Investor Relations website at ir.ul.com.
Forward-Looking Statements
Certain statements in this press release, which are not
historical facts, are forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. These
include statements regarding management’s objectives and the
Company’s plans, strategy, outlook and future financial
performance. In some cases, you can identify forward-looking
statements by the use of words such as “may,” “could,” “seek,”
“guidance,” “predict,” “potential,” “likely,” “believe,” “will,”
“expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast,”
“aim,” “objectives,” “target,” “outlook,” “guidance” and
variations, or the negative, of these terms and similar
expressions. Such forward-looking statements are necessarily based
upon estimates and assumptions that, while management considers
reasonable, are inherently uncertain.
There are many risks, uncertainties and other factors that could
cause actual results to differ materially from those expressed or
implied by the forward-looking statements made in this press
release, including, but not limited to, the following:
falsification of or tampering with our reports or certificates;
increases in self-certification of products in industries in which
we provide services or corresponding decreases in third-party
certifications; any conflict of interest or perceived conflict of
interest between our testing, inspection and certification services
and our enterprise and advisory services; increased competition in
industries in which we participate; ineffectiveness of our
portfolio management techniques and strategies; adverse market
conditions or adverse changes in the political, social or legal
condition in the markets in which we operate; failure to
effectively implement our growth strategies and initiatives;
increased government regulation of industries in which we operate;
adverse government actions in respect of our operations, including
enforcement actions related to environmental, health and safety
matters; failure to retain and increase capacity at our existing
facilities or build new facilities in a timely and cost-effective
manner; failure to comply with applicable laws and regulations in
each jurisdiction in which we operate, including environmental laws
and regulations; fluctuations in foreign currency exchange rates;
imposition of or increases in customs duties and other tariffs;
deterioration of relations between the United States and countries
in which we operate, including China; changes in labor regulations
in jurisdictions in which we operate; changes in labor relations
and unionization efforts by our employees; failure to recruit,
attract and retain key employees, including through the
implementation of diversity, equity and inclusion initiatives, and
the succession of senior management; failure to recruit, attract
and retain sufficient qualified personnel to meet our customers’
needs; past and future acquisitions, joint ventures, investments
and other strategic initiatives; increases in raw material prices,
fuel prices and other operating costs; changes in services we
deliver or products we use; inability to develop new solutions or
the occurrence of defects, failures or delay with new and existing
solutions; increase in uninsured losses; ineffectiveness of
deficiencies in our enterprise risk management program; volatility
in credit markets or changes in our credit rating; actions of our
employees, agents, subcontractors, vendors and other business
partners; failure to maintain relationships with our customers,
vendors and business partners; consolidation of our customers and
vendors; disruptions in our global supply chain; changes in access
to data from external sources; pending and future litigation,
including in respect of our testing, inspection and certification
services; allegations concerning our failure to properly perform
our offered services; changes in the regulatory environment for our
industry or the industries of our customers; delays in obtaining,
failure to obtain or the withdrawal or revocation of our licenses,
approvals or other authorizations; changes in our accreditations,
approvals, permits or delegations of authority; issues with the
integrity of our data or the databases upon which we rely; failure
to manage our SaaS hosting network infrastructure capacity or
disruptions in such infrastructure; cybersecurity incidents and
other technology disruptions; risks associated with intellectual
property, including potential infringement; compliance with
agreements and instruments governing our indebtedness and the
incurrence of new indebtedness; interest rate increases; volatility
in the price of our Class A common stock; actions taken by, and
control exercised by, ULSE Inc., our parent and controlling
stockholder; ineffectiveness in, or failure to maintain, our
internal control over financial reporting; negative publicity or
changes in industry reputation; changes in tax laws and
regulations, resolution of tax disputes or imposition of audit
examinations; failure to generate sufficient cash to service our
indebtedness; constraints imposed on our ability to operate our
business or make necessary capital investments due to our
outstanding indebtedness; natural disasters and other catastrophic
events, including pandemics and the rapid spread of contagious
illnesses; and other risks discussed in our filings with the
Securities and Exchange Commission (the “SEC”), including our
Registration Statement on Form S-1, as amended (File No.
333-275468) and our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2024, as well as other factors described from time
to time in our filings with the SEC.
All forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by
the cautionary statements set forth above. We caution you not to
place undue reliance on any forward-looking statements, which are
made only as of the date of this press release. We do not undertake
or assume any obligation to update publicly any of these
forward-looking statements to reflect actual results, new
information or future events, changes in assumptions or changes in
other factors affecting such forward-looking statements, except to
the extent required by law. If we update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other
forward-looking statements.
Non-GAAP Measures
In addition to financial measures based on accounting principles
generally accepted in the United States of America (“GAAP”), this
presentation includes supplemental non-GAAP financial information,
including the presentation of Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted Net Income, Adjusted Net Income margin, Adjusted
Diluted Earnings Per Share and Free Cash Flow. Management uses
non-GAAP measures in addition to GAAP measures to understand and
compare operating results across periods and for forecasting and
other purposes. Management believes these non-GAAP measures reflect
results in a manner that enables, in some instances, more
meaningful analysis of trends and facilitates comparison of results
across periods. These non-GAAP financial measures have no
standardized meaning presented in U.S. GAAP and may not be
comparable to other similarly titled measures used by other
companies due to potential differences between the companies in
calculations. The use of these non-GAAP measures has limitations,
and they should not be considered as substitutes for measures of
financial performance and financial position as prepared in
accordance with GAAP. See “Non- GAAP Financial Measures” below for
definitions of these non-GAAP measures, and reconciliations to
their most directly comparable GAAP measures.
UL Solutions Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
March 31,
(in millions,
except per share data)
2024
2023
Revenue
$
670
$
629
Cost of revenue
351
335
Selling, general and administrative
expenses
228
219
Operating income
91
75
Interest expense
(15
)
(8
)
Other (expense) income, net
(3
)
5
Income before income taxes
73
72
Income tax expense
13
14
Net income
60
58
Less: net income attributable to
non-controlling interests
4
3
Net income attributable to stockholder
of UL Solutions
$
56
$
55
Earnings per common share:
Basic
$
0.28
$
0.28
Diluted
$
0.28
$
0.28
Weighted average common shares
outstanding:
Basic
200
200
Diluted
200
200
UL Solutions Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(in
millions, except per share data)
March 31, 2024
December 31, 2023
Assets
Current assets:
Cash and cash equivalents
$
344
$
315
Accounts receivable, net
429
362
Contract assets, net
193
179
Other current assets
85
97
Total current assets
1,051
953
Property, plant and equipment, net
555
555
Goodwill
618
623
Intangible assets, net
66
72
Operating lease right-of-use assets
147
151
Deferred income taxes
112
110
Capitalized software, net
136
139
Other assets
134
133
Total Assets
$
2,819
$
2,736
Liabilities and Stockholder’s
Equity
Current liabilities:
Accounts payable
$
156
$
169
Accrued compensation and benefits
170
281
Operating lease liabilities - current
37
39
Contract liabilities
385
162
Other current liabilities
81
58
Total current liabilities
829
709
Long-term debt
867
904
Pension and postretirement benefit
plans
227
232
Operating lease liabilities
116
120
Other liabilities
97
93
Total Liabilities
2,136
2,058
Total Stockholder’s Equity
683
678
Total Liabilities and Stockholder’s
Equity
$
2,819
$
2,736
UL Solutions Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
Three Months Ended March
31,
(in
millions)
2024
2023
Operating activities
Net cash flows provided by operating
activities
$
141
$
161
Investing activities
Capital expenditures
(57
)
(63
)
Other investing activities, net
—
(12
)
Net cash flows used in investing
activities
(57
)
(75
)
Financing activities
(Repayments of) proceeds from long-term
debt, net
(25
)
30
Dividend to stockholder of UL
Solutions
(25
)
(20
)
Other financing activities, net
1
—
Net cash flows (used in) provided by
financing activities
(49
)
10
Effect of exchange rate changes on cash
and cash equivalents
(6
)
—
Net increase in cash and cash
equivalents
29
96
Cash and cash equivalents
Beginning of period
315
322
End of period
$
344
$
418
UL Solutions Inc.
Supplemental Financial
Information
Revenue by Major Service
Category and Revenue Growth Components
(Unaudited)
Revenue by Major Service
Category
Three Months Ended
March 31,
(in
millions)
2024
2023
Certification Testing
$
176
$
161
Ongoing Certification Services
233
219
Non-certification Testing and Other
Services1
194
182
Software1
67
67
Total
$
670
$
629
__________
1.
The Company has reclassified
revenue transactions related to advisory services that were
previously included within the Software and Advisory service
category (now known as Software) to the Non-certification Testing
and Other Services category (previously known as Non-certification
Testing, Inspections and Audit) for the three months ended March
31, 2023 to conform to the current period's presentation.
Revenue Change
Components
Three Months Ended March 31,
2024
(in
millions)
Organic1
Acquisition2
FX3
Total
Organic %
Change
Total %
Change
Revenue change
Industrial
$
27
$
1
$
(3
)
$
25
10.0
%
9.3
%
Consumer
16
(1
)
(4
)
11
5.8
%
4.0
%
Software and Advisory
4
1
—
5
4.8
%
6.0
%
Total
$
47
$
1
$
(7
)
$
41
7.5
%
6.5
%
__________
1.
Organic reflects revenue change
in a given period excluding Acquisition and FX in that same period,
expressed in dollars or as a percentage of revenue in the prior
period.
2.
Acquisition is calculated as
revenue change in a given period related to acquisitions or
disposals of businesses using prior period exchange rates,
expressed in dollars or as a percentage of revenue in the prior
period. Revenues from an acquisition or disposal are measured as
Acquisition for the initial twelve month period following the
acquisition or disposal date. Subsequently, the revenue impact from
the acquired or disposed business is measured as Organic.
3.
FX reflects the impact that
foreign currency exchange rates have on revenue in a given period,
expressed in dollars or as a percentage of revenue in the prior
period. The Company uses constant currency to calculate the FX
impact on revenue in a given period by translating current period
revenues at prior period exchange rates, expressed as a percentage
of revenue in the prior period.
UL Solutions Inc. Supplemental Financial
Information Non-GAAP Measures (Unaudited)
Non-GAAP Financial Measures
In addition to financial measures determined in accordance with
GAAP, the Company considers a variety of financial and operating
measures in assessing the performance of its business. The key
non-GAAP measures the Company uses are Adjusted EBITDA, Adjusted
EBITDA margin, Adjusted Net Income, Adjusted Net Income margin,
Adjusted Diluted Earnings Per Share and Free Cash Flow, which
management believes provide useful information to investors. These
measures are not financial measures calculated in accordance with
GAAP and should not be considered as a substitute for net income,
operating income, diluted earnings per share, net cash provided by
operating activities or any other measure calculated in accordance
with GAAP, and may not be comparable to similarly titled measures
reported by other companies.
The Company uses Adjusted EBITDA, Adjusted EBITDA margin,
Adjusted Net Income, Adjusted Net Income margin and Adjusted
Diluted Earnings Per Share to measure the operational strength and
performance of its business and believes these measures provide
additional information to investors about certain non-cash items
and unusual items that the Company does not expect to continue at
the same level in the future. Further, management believes these
non-GAAP financial measures provide a meaningful measure of
business performance and provide a basis for comparing the
Company’s performance to that of other peer companies using similar
measures. The Company uses Free Cash Flow as an additional
liquidity measure and believes it provides useful information to
investors about the cash generated from the Company’s core
operations that may be available to repay debt, make other
investments and return cash to stockholders.
There are material limitations to using these non-GAAP financial
measures. Adjusted EBITDA does not take into account certain
significant items, including depreciation and amortization,
interest expense, other expense (income), income tax expense,
stock-based compensation expense for equity-settled awards,
material asset impairment charges and restructuring expenses which
directly affect the Company’s net income, as applicable. Adjusted
Net Income and Adjusted Diluted Earnings Per Share do not take into
account certain significant items, including other expense
(income), stock-based compensation expense for equity-settled
awards, material asset impairment charges and restructuring
expenses which directly affect the Company’s net income and diluted
earnings per share, as applicable. Free Cash Flow adjusts for cash
items that are ultimately within management’s discretion to direct
and therefore may imply that there is less or more cash that is
available than the most comparable GAAP measure. Free Cash Flow is
not intended to represent residual cash flow for discretionary
expenditures since debt repayment requirements and other
non-discretionary expenditures are not deducted. These limitations
are best addressed by considering the economic effects of the
excluded items independently, and by considering these non- GAAP
financial measures in conjunction with net income, operating
income, diluted earnings per share and net cash provided by
operating activities as calculated in accordance with GAAP.
See additional information below regarding the definitions of
these non-GAAP financial measures and reconciliations of each
non-GAAP financial measure to its most directly comparable GAAP
measure.
The table below reconciles net income to Adjusted EBITDA for the
periods presented.
Three Months Ended
March 31,
(in millions,
unless otherwise stated)
2024
2023
Net income
$
60
$
58
Depreciation and amortization expense
41
36
Interest expense
15
8
Other expense (income), net
3
(5
)
Income tax expense
13
14
Restructuring
(1
)
—
Adjusted EBITDA1
$
131
$
111
Revenue
$
670
$
629
Net income margin
9.0
%
9.2
%
Adjusted EBITDA margin2
19.6
%
17.6
%
__________
1.
The Company defines Adjusted
EBITDA as net income adjusted for depreciation and amortization
expense, interest expense, other expense (income), income tax
expense, as well as stock-based compensation expense for
equity-settled awards, material asset impairment charges and
restructuring expenses, as applicable. The Company believes that
the presentation of Adjusted EBITDA provides additional information
to investors about certain non-cash items and unusual items that
are not expected to continue at the same level in the future.
Further, the Company believes Adjusted EBITDA provides a meaningful
measure of business performance and provides a basis for comparing
its performance to that of other peer companies using similar
measures. There are material limitations to using Adjusted EBITDA.
Adjusted EBITDA does not take into account certain significant
items, including depreciation and amortization, interest expense,
income tax expense, stock-based compensation expense for
equity-settled awards, material asset impairment charges and
restructuring expenses which directly affects the Company's net
income, as applicable. These limitations are best addressed by
considering the economic effects of the excluded items
independently, and by considering Adjusted EBITDA in conjunction
with net income as calculated in accordance with GAAP.
2.
Adjusted EBITDA margin is
calculated as Adjusted EBITDA as a percentage of revenue
The table below reconciles segment operating income to segment
Adjusted EBITDA for the periods presented.
Three Months Ended
March 31,
(in millions,
unless otherwise stated)
2024
2023
Industrial
Segment operating income
$
75
$
72
Depreciation and amortization expense
11
8
Adjusted EBITDA1
$
86
$
80
Revenue
$
295
$
270
Operating income margin
25.4
%
26.7
%
Adjusted EBITDA margin2
29.2
%
29.6
%
Consumer
Segment operating income
$
17
$
3
Depreciation and amortization expense
19
18
Restructuring
(1
)
—
Adjusted EBITDA1
$
35
$
21
Revenue
$
286
$
275
Operating income margin
5.9
%
1.1
%
Adjusted EBITDA margin2
12.2
%
7.6
%
Software and Advisory
Segment operating loss
$
(1
)
$
—
Depreciation and amortization expense
11
10
Adjusted EBITDA1
$
10
$
10
Revenue
$
89
$
84
Operating loss margin
(1.1
)%
—
%
Adjusted EBITDA margin2
11.2
%
11.9
%
Adjusted EBITDA1
$
131
$
111
__________
1.
See definition on previous
page.
2.
See definition on previous
page.
The table below reconciles net income to Adjusted Net
Income.
Three Months Ended
March 31,
(in millions,
unless otherwise stated)
2024
2023
Net income
$
60
$
58
Other expense (income), net
3
(5
)
Restructuring
(1
)
—
Tax effect of adjustments2
(1
)
1
Adjusted Net Income1
$
61
$
54
Revenue
$
670
$
629
Net income margin
9.0
%
9.2
%
Adjusted Net Income margin3
9.1
%
8.6
%
__________
1.
The Company defines Adjusted Net
Income as net income adjusted for other expense (income),
stock-based compensation expense for equity-settled awards,
material asset impairment charges and restructuring expenses, as
applicable, each net of tax. The Company believes that the
presentation of Adjusted Net Income provides additional information
to investors about certain non-cash items and unusual items that
are expected to continue at the same level in the future. Further,
the Company believes Adjusted Net Income provides a meaningful
measure of business performance and provides a basis for comparing
its performance to that of other peer companies using similar
measures. There are material limitations to using Adjusted Net
Income. Adjusted Net Income does not take into account certain
significant items, including other expense (income), stock-based
compensation expense for equity-settled awards, material asset
impairment charges and restructuring expenses which directly affect
the Company's net income, as applicable. These limitations are best
addressed by considering the economic effects of the excluded items
independently, and by considering Adjusted Net Income in
conjunction with net income as calculated in accordance with
GAAP.
2.
The Company computed the tax
effect of adjustments to net earnings by applying the statutory tax
rate in the relevant jurisdictions to the income or expense items
that are adjusted in the period presented. If a valuation allowance
exists, the rate applied is zero.
3.
Adjusted Net Income margin is
calculated as Adjusted Net Income as a percentage of revenue
The table below reconciles diluted earnings per share to
Adjusted Diluted Earnings Per Share.
Three Months Ended
March 31,
2024
2023
Diluted earnings per share2
$
0.28
$
0.28
Other expense (income), net
0.02
(0.03
)
Restructuring
(0.01
)
—
Tax effect of adjustments3
(0.01
)
0.01
Adjusted Diluted Earnings Per Share1 2
$
0.28
$
0.26
__________
1.
The Company defines Adjusted
Diluted Earnings Per Share as diluted earnings per share
attributable to stockholder of UL Solutions adjusted for other
expense (income), stock-based compensation expense for
equity-settled awards, material asset impairment charges and
restructuring expenses, as applicable. The Company believes that
the presentation of Adjusted Diluted Earnings Per Share provides
additional information to investors about certain non-cash items
and unusual items that are expected to continue at the same level
in the future. Further, the Company believes Adjusted Diluted
Earnings Per Share provides a meaningful measure of business
performance and provides a basis for comparing its performance to
that of other peer companies using similar measures. There are
material limitations to using Adjusted Diluted Earnings Per Share.
Adjusted Diluted Earnings Per Share does not take into account
certain significant items, including other expense (income),
stock-based compensation expense for equity-settled awards,
material asset impairment charges and restructuring expenses which
directly affect the Company's diluted earnings per share, as
applicable. These limitations are best addressed by considering the
economic effects of the excluded items independently, and by
considering Adjusted Diluted Earnings Per Share in conjunction with
diluted earnings per share as calculated in accordance with
GAAP.
2.
Diluted earnings per share and
Adjusted Diluted Earnings Per Share have been adjusted for the
period ended March 31, 2023 to reflect a 2-for-1 forward split of
the Company's Class A common stock effected on November 20,
2023.
3.
See definition on previous
page
The table below reconciles net cash provided by operating
activities to Free Cash Flow for the periods presented.
Three Months Ended
March 31,
(in
millions)
2024
2023
Net cash provided by operating
activities
$
141
$
161
Capital expenditures
(57
)
(63
)
Free Cash Flow1
$
84
$
98
__________
1.
The Company defines Free Cash
Flow as cash from operating activities less cash outlays related to
capital expenditures. The Company defines capital expenditures to
include purchases of property, plant and equipment and capitalized
software. These items are subtracted from cash from operating
activities because they represent long-term investments that are
required for normal business activities. The Company uses Free Cash
Flow as an additional liquidity measure and believes it provides
useful information to investors about the cash generated from its
core operations that may be available to repay debt, make other
investments and return cash to stockholders. There are material
limitations to using Free Cash Flow. Free Cash Flow adjusts for
cash items that are ultimately within management’s discretion to
direct, and therefore, may imply that there is less or more cash
that is available than the most comparable GAAP measure. Free Cash
Flow is not intended to represent residual cash flow for
discretionary expenditures since debt repayment requirements and
other non-discretionary expenditures are not deducted. These
limitations are best addressed by considering the economic effects
of the excluded items independently, and by considering Free Cash
Flow in conjunction with net cash provided by operating activities
as calculated in accordance with GAAP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240520700559/en/
Media: Kathy Fieweger Senior Vice President -
Communications Kathy.Fieweger@ul.com +1 312-852-5156
Investors: Dan Scott / Rodny Nacier, ICR Inc.
IR@ul.com
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