UL Solutions Inc. Q4 2025 Earnings Call Summary

UL Solutions Inc. Q4 2025 Earnings Call Summary Moby Intelligence Fri, February 20, 2026 at 5:33 AM GMT+8 3 min read In this article:

ULS -2.99%

UL Solutions Inc. Q4 2025 Earnings Call Summary - Moby

Strategic Execution and Market Positioning

• Achieved 6.2% organic revenue growth in 2025 by aligning services with global megatrends including the energy transition, digitalization, and sustainability requirements.

• Expanded adjusted EBITDA margins by 300 basis points to 25.9%, significantly exceeding long-term targets through improved laboratory utilization and technology-enabled employee productivity.

• Navigated geopolitical uncertainties and trade policy shifts by leveraging a diversified global footprint and the essential nature of safety certification services.

• Executed a strategic realignment of the Software & Advisory segment into 'Risk and Compliance Software' to focus on high-quality digital platforms like ULTRUS.

• Divested the non-core employee health and safety (EHS) software business for $210 million to concentrate resources on core TIC-aligned software offerings.

• Integrated technical advisory services into the Industrial segment to better pair specialized expertise with standards-driven testing and certification workflows.

• Invested $197 million in capital expenditures to expand global testing infrastructure, specifically targeting high-growth sectors like EV batteries, HVAC, and automotive EMC.

2026 Outlook and Strategic Priorities

• Projecting 2026 consolidated organic revenue growth in the mid-single-digit range, with the Industrial segment expected to outpace the Consumer segment.

• Targeting adjusted EBITDA margin expansion to a range of 26.5% to 27.0%, driven by continued operating leverage and benefits from the ongoing restructuring program.

• Anticipating capital expenditures of 7% to 8% of revenue to support new laboratory facilities and match sustained customer demand in emerging technology sectors.

• Expecting the restructuring plan to be substantially completed by Q1 2027, with an estimated annual operating income improvement of $25 million to $30 million.

• Forecasting a 2026 effective tax rate of approximately 26%, reflecting the continued implementation of OECD Pillar 2 provisions.

Structural Changes and Risk Factors

• Recorded $37 million in pretax restructuring charges in Q4 2025 as part of a broader plan to exit non-strategic service lines representing approximately 1% of revenue.

• Increased the regular quarterly dividend by 11.5%, reflecting confidence in robust cash flow generation and a commitment to shareholder returns.

• Identified a 50 basis point revenue tailwind from forward FX forecasts for 2026, with the majority of the benefit expected in the first half of the year.

• Noted that Q1 2026 growth may be more modest due to strong prior-year comparisons and the timing of the Lunar New Year holiday in Asia.

Story Continues

Q&A Session Highlights

Drivers of 2026 margin guidance and long-term framework

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• Margin expansion is underpinned by a continuous improvement philosophy focusing on price, volume, and increased utilization of lab capacity and staff.

• Approximately 120 basis points of the Q4 2025 margin improvement was attributed to the absence of non-restructuring severance expenses from the prior year.

Demand drivers within the data center ecosystem

• Digitalization trends are driving double-digit growth in data center services as customers require new standards for complex thermal dynamics and high-voltage DC power.

• Demand spans multiple categories including power automation, renewables, wire and cable, and specialized fire suppression for built environments.

Strategic rationale for shifting advisory services to Industrial

• Management determined advisory services are more tightly coupled with TIC work than software, particularly in energy ecosystems and medical devices.

• The move aims to capture synergies in project identification and team utilization while allowing the software segment to focus on pure digital product roadmaps.

Trends in manufacturing shifts and China exposure

• Management is not seeing a significant shift out of China but rather a 'China Plus One' strategy where customers add capacity in India, Malaysia, and Thailand.

• The China business remains strong and continues to grow, albeit at a lower slope compared to emerging manufacturing hubs.

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