uls-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission file number 001-42012

UL Solutions Inc.

(Exact name of registrant as specified in its charter)

Delaware

27-0913800

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

333 Pfingsten Rd

Northbrook, Illinois 60062

(Address of Principal Executive Offices and zip code)

(847) 272-8800

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.001 per share	ULS	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The registrant had outstanding 38,873,693 shares of Class A common stock, par value $0.001per share, and 161,130,000 shares of Class B common stock, par value $0.001 per share, as of May 10, 2024.


UL Solutions Inc.

Table of Contents


			Page
PART I. FINANCIAL INFORMATION			2
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)			2
Condensed Consolidated Statements of Operations			2
Condensed Consolidated Statements of Comprehensive Income			3
Condensed Consolidated Balance Sheets			4
Condensed Consolidated Statements of Stockholders’s Equity			5
Condensed Consolidated Statements of Cash Flows			6
Notes to the Condensed Consolidated Financial Statements			7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			31
ITEM 4. Controls and Procedures			32
PART II. OTHER INFORMATION			33
ITEM 1. Legal Proceedings			33
ITEM 1A. Risk Factors			33
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			87
ITEM 6. Exhibits			88
SIGNATURE			89

PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations


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

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements


UL Solutions Inc.

Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

Condensed Consolidated Statements of Comprehensive Income


	Three Months Ended March 31,
(in millions)	2024		2023
Net income	$	60	$	58
Other comprehensive (loss) income, net of tax:
Pension and postretirement benefit plans, net of tax	1		1

Foreign currency translation (loss) gain	(16)		6
Total other comprehensive (loss) income	(15)		7
Comprehensive income	45		65
Less: comprehensive income attributable to non-controlling interests	3		2
Comprehensive income attributable to stockholder of UL Solutions	$	42	$	63

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements


UL Solutions Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

Condensed Consolidated Balance Sheets


(in millions, except per share data)	March 31, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	344	$	315

Accounts receivable, net of allowance of $11 and $9	429		362
Contract assets, net of allowance of $1 and $1	193		179
Other current assets	85		97

Total current assets	1,051		953

Property, plant and equipment, net of accumulated depreciation of $750 and $737	555		555
Goodwill	618		623
Intangible assets, net of accumulated amortization of $232 and $232	66		72
Operating lease right-of-use assets	147		151
Deferred income taxes	112		110
Capitalized software, net of accumulated amortization of $395 and $382	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
Commitments and contingencies (Note 15)
Stockholder’s equity:
Common stock, $0.001 per share, 200 million shares issued and outstanding at March 31, 2024 and December 31, 2023	—		—
Additional paid-in capital	776		776
Retained earnings	55		24
Accumulated other comprehensive loss	(160)		(146)
Total stockholder’s equity before non-controlling interests	671		654
Non-controlling interests	12		24
Total Stockholder’s Equity	683		678
Total Liabilities and Stockholder’s Equity	$	2,819	$	2,736

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements


UL Solutions Inc.
Condensed Consolidated Statements of Stockholder's Equity
(Unaudited)

Condensed Consolidated Statements of Stockholders’s Equity


(in millions, except per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Non-controlling Interests		Total
Balance at December 31, 2023	$	—	$	776	$	24	$	(146)	$	24	$	678
Net income	—		—		56		—		4		60
Dividend to stockholder of UL Solutions ($0.13 per share)	—		—		(25)		—		—		(25)
Dividend to non-controlling interest	—		—		—		—		(15)		(15)
Other comprehensive loss, net of tax	—		—		—		(14)		(1)		(15)
Balance at March 31, 2024	$	—	$	776	$	55	$	(160)	$	12	$	683








Balance at December 31, 2022	$	—	$	1,009	$	211	$	(166)	$	23	$	1,077
Net income	—		—		55		—		3		58
Dividend to stockholder of UL Solutions ($0.10 per share)	—		—		(20)		—		—		(20)

Other comprehensive income, net of tax	—		—		—		7		—		7
Balance at March 31, 2023	$	—	$	1,009	$	246	$	(159)	$	26	$	1,122

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements


UL Solutions Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31,
(in millions)	2024		2023
Operating activities
Net income	$	60	$	58
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	41		36




Loss on foreign exchange transactions	3		—



Deferred income taxes	(3)		11

Other, net	6		(3)
Changes in assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	(78)		(34)
Contract and other assets	(8)		(29)
Accounts payable	(13)		(18)
Accrued expenses	(98)		(61)
Pension and postretirement benefit plans	(1)		4
Contract and other liabilities	232		197
Net cash flows provided by operating activities	141		161
Investing activities
Capital expenditures	(57)		(63)

Sales of investments	—		51
Purchases of investments	—		(66)



Other investing activities, net	—		3
Net cash flows used in investing activities	(57)		(75)
Financing activities

Proceeds from long-term debt	20		30
Repayment of long-term debt	(45)		—



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

Supplemental disclosures of cash flow information
Cash paid during the period for interest	$	10	$	8
Cash paid during the period for income taxes	9		10
Cash paid during the period for stock-based compensation	—		7

Noncash investing and financing activities
Capital expenditures funded by liabilities	$	33	$	21

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements


UL Solutions Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Notes to the Condensed Consolidated Financial Statements

1. Significant Accounting Policies

Description of Business

UL Solutions Inc. (together with its consolidated subsidiaries, “UL Solutions” and the “Company”) is a global safety science leader that provides independent third-party testing, inspection and certification services and related software and advisory offerings. ULSE Inc. (“UL Standards & Engagement”) controls the majority of the voting power of the Company’s common stock. Underwriters Laboratories Inc. (“UL Research Institutes”) is the sole member of UL Standards & Engagement.

Initial Public Offering

On April 16, 2024, after the quarter end, the Company completed its initial public offering of an aggregate of 38,870,000 shares of Class A common stock (the “IPO”) by UL Standards & Engagement at a price to the public of $28.00 per share. The Company did not receive any proceeds from the IPO. Refer to Note 18 for further information.

Basis of Presentation

The condensed consolidated financial statements are unaudited and have been prepared in accordance with applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been omitted. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s final prospectus for its initial public offering filed with the SEC on April 15, 2024. It is management’s opinion that these financial statements include all normal and recurring adjustments necessary for a fair statement of the Company’s results of operations, financial position and cash flows. Results of operations for any interim period are not necessarily indicative of future or annual results. The Company has reclassified certain amounts in prior period financial statements to conform to the current period’s presentation.

On November 20, 2023, the Company effected a 2-for-1 forward split of the Company’s Class A common stock. All share and per share information presented in the accompanying condensed consolidated financial statements and notes thereto has been retrospectively adjusted to reflect the stock split for all periods presented. The authorized shares and the par value of the Class A common stock were not adjusted as a result of the stock split.

Recently Issued Accounting Standards - Not Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments will be applied retrospectively. The ASU will result in additional segment information disclosures within the Company’s financial statements, but is not expected to impact the Company’s financial condition, results of operations or cash flows.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The ASU will result in additional income tax disclosures within the Company’s financial statements, but is not expected to impact the Company’s financial condition, results of operations or cash flows.

2. Earnings Per Share

Basic and diluted earnings per share were calculated as follows:


	Three Months Ended March 31,
(in millions, except per share data)	2024		2023
Net income attributable to stockholder of UL Solutions	$	56	$	55
Basic weighted average common shares outstanding	200		200
Effect of dilutive securities	—		—
Diluted weighted average common shares outstanding	200		200

Basic earnings per share attributable to stockholder of UL Solutions	$	0.28	$	0.28
Diluted earnings per share attributable to stockholder of UL Solutions	$	0.28	$	0.28

3. Revenue

The table below summarizes the major service categories from which the Company derives its revenues:


	Three Months Ended March 31,
(in millions)	2024		2023
Certification Testing	$	176	$	161
Ongoing Certification Services	233		219
Non-certification Testing and Other Services(a)	194		182
Software(a)	67		67
Total	$	670	$	629

__________

(a)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.

Contract Balances

The revenue recognized during the three months ended March 31, 2024, which was included in contract liabilities at December 31, 2023, amounted to $30 million. The revenue recognized during the three months ended March 31, 2023, which was included in contract liabilities at December 31, 2022, amounted to $36 million.

Remaining Performance Obligations

At March 31, 2024, the Company estimates that $152 million in revenue is expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The Company expects to recognize approximately 70% of its unsatisfied (or partially unsatisfied) performance obligations as revenue in the subsequent 12 months, with the remaining balance to be recognized thereafter.

Remaining consideration from contracts with customers is included in the amount presented above and includes contracts with multiple performance obligations and multi-year maintenance agreements, which are typically recognized as the performance obligation is satisfied.

4. Acquisitions and Divestitures

Acquisitions

In August 2023, the Company acquired 100% of the outstanding stock of Certification Entity for Renewable Energies, S.L. (“CERE”) for approximately $14 million in cash consideration (as adjusted for customary post-closing adjustments). CERE is a Spain-based grid code compliance testing, simulation and certification company, focused on renewable energy and electric

vehicle adoption. Goodwill of $11 million, subject to finalization of the purchase price allocation and valuation of intangible assets, includes expected synergies with the Company’s existing business and has been included within the Company’s Industrial segment. Goodwill related to this acquisition is not deductible for income tax purposes.

In July 2023, the Company acquired 100% of the outstanding stock of HBI Compliance Limited (together with its operating subsidiaries, “Healthy Buildings International”) for approximately $6 million in cash consideration (as adjusted for customary post-closing adjustments). Healthy Buildings International is a United Kingdom-based health, safety and compliance company and its results of operations have been included in the Software and Advisory segment since the date of acquisition.

Aggregate acquisition-related costs associated with business combinations are not material for the three months ended March 31, 2024 and 2023, and are included in selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Operations as incurred.

Divestiture

In December 2023, the Company entered an agreement with an affiliate of Gallant Capital Partners, a California-based private equity firm, to sell the assets and liabilities of its payments testing business in the Industrial segment that performs Software and Non-certification Testing and Other Services for a base price of $30 million in cash, subject to customary post-closing adjustments, with the potential for additional cash consideration if certain earn-out provisions are met. In connection with the approval of the sale by the Company’s board of directors, the Company reclassified all assets and liabilities of the business as held for sale. As the expected sale proceeds exceed the carrying amount of the disposal group, no impairment was recognized. At March 31, 2024, the assets and liabilities classified as held for sale included $10 million of other current assets, primarily consisting of accounts receivable, $4 million of other assets and $12 million of other current liabilities, primarily consisting of contract liabilities. At December 31, 2023, the assets and liabilities classified as held for sale included $9 million of other current assets, primarily consisting of accounts receivable, $3 million of other assets and $10 million of other current liabilities, primarily consisting of contract liabilities.

5. Other (Expense) Income, net

The components of other (expense) income, net are as follows:


	Three Months Ended March 31,
(in millions)	2024		2023

Foreign exchange (losses) gains	$	(3)	$	3



Non-operating pension and postretirement benefit expense	(2)		(2)


Other	2		4
Total	$	(3)	$	5

6. Fair Value of Financial Instruments

The carrying amount and fair value of the Company’s debt was as follows:


	March 31, 2024				December 31, 2023
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loans	$	500	$	500	$	500	$	500
Revolving credit facility	85		85		110		110
Senior notes	300		313		300		315
Total	$	885	$	898	$	910	$	925

The fair value of the Company’s term loans and revolving credit facility reflects current market conditions and is primarily determined using broker quotes, which are Level 2 inputs in the fair value hierarchy. The fair value of the Company’s senior notes is estimated based on prevailing interest rates and trading activity, which are Level 2 inputs in the fair value hierarchy.

7. Investments in Equity Securities

The Company holds investments in equity securities of various companies, certain of which comprise less than 10% of the applicable company’s outstanding equity securities and are included within other assets in the Company’s Condensed Consolidated Balance Sheets. The Company accounts for these investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The carrying amount of these investments was $42 million for both periods ended March 31, 2024 and December 31, 2023.

The Company owns 70% of the issued and outstanding equity interests of UL-CCIC Company Limited (“UL-CCIC”), an entity formed under the laws of the People’s Republic of China. The Company determined that it is the primary beneficiary of UL-CCIC and assets of $144 million and $178 million and liabilities of $87 million and $82 million, inclusive of intercompany eliminations, were included in the Company’s Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively.

8. Goodwill

Changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows:


	Testing, Inspection and Certification				Software and Advisory		Total
(in millions)	Industrial		Consumer
Balance at December 31, 2023(a)	$	323	$	230	$	70	$	623



Effect of changes in foreign exchange rates	(1)		(3)		(1)		(5)

Balance at March 31, 2024(a)	$	322	$	227	$	69	$	618

__________

(a)Net of accumulated impairment losses of $166 million.

9. Intangible Assets

The following tables summarize intangible assets:


	March 31, 2024
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	260	$	(205)	$	55
Intellectual property and patents	15		(9)		6

Trademarks	23		(18)		5
Total	$	298	$	(232)	$	66


	December 31, 2023
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	261	$	(204)	$	57
Intellectual property and patents	18		(11)		7

Trademarks	25		(17)		8
Total	$	304	$	(232)	$	72

Intangible asset amortization expense for the three months ended March 31, 2024 and 2023, reported within the Condensed Consolidated Statements of Operations, was $3 million and $4 million, respectively.

10. Pension

The components of net periodic benefit cost for the Company’s U.S. defined benefit pension plan were as follows:


	Three Months Ended March 31,

(in millions)	2024		2023
Components of net periodic benefit cost

Interest cost	4		4
Expected return on plan assets	(3)		(3)


Amortization of net actuarial loss	1		1


Net periodic benefit cost	$	2	$	2

For the three months ended March 31, 2024 and 2023, the Company’s contributions to various defined contribution savings plans were $12 million and $11 million, respectively.

11. Income Taxes

The effective tax rate for the three months ended March 31, 2024 and 2023 was 17.8% and 19.4%, respectively, which differed from the U.S. statutory tax rate of 21% primarily due to earnings subject to lower tax rates in foreign jurisdictions, partially offset by U.S. tax on Global Intangible Low Taxed Income net of related foreign tax credits.

12. Long-Term Debt

The Company’s outstanding debt consisted of the following:


(in millions)	Currency	Maturity Date	March 31, 2024		December 31, 2023
Term loans	USD	January 2027	$	500	$	500
Revolving credit facility	USD	January 2027	85		110
Senior notes	USD	October 2028	300		300
Total debt			885		910
Less: unamortized debt issuance costs			(6)		(6)
Total debt, net of unamortized debt issuance costs			879		904
Less: current portion of long-term debt			(12)		—
Long-term debt			$	867	$	904

In October 2023, the Company issued $300 million in aggregate principal amount of senior notes due 2028 (the “notes”). The notes are senior unsecured obligations of UL Solutions Inc. and are unconditionally guaranteed by UL LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“UL LLC”). Borrowings under the notes bear a fixed interest rate of 6.500% per annum.

In January 2022, the Company entered into a credit agreement with Bank of America, N.A. and certain other lenders, which provides for senior unsecured credit facilities in an aggregate principal amount of $1,250 million (collectively, the “Credit Facility”), consisting of term loans and revolving loan commitments. UL LLC is the named borrower under the Credit Facility and, together with other affiliates, the Company provides a guaranty of the obligations thereunder. As of March 31, 2024, the Company was in compliance with all covenants under the Credit Facility. The interest rate on the term loans was 6.35% as of March 31, 2024 and 6.46% as of December 31, 2023 and the weighted average interest rate on the revolving credit facility was 6.36% as of March 31, 2024 and 6.45% as of December 31, 2023.

13. Accumulated Other Comprehensive Loss

The following tables summarize the changes in accumulated other comprehensive loss.



	Three Months Ended March 31, 2024
(in millions)	Foreign Currency Translation		Pension and Postretirement Plans		Total
Balance at December 31, 2023, net of tax	$	(49)	$	(97)	$	(146)

Amounts before reclassifications	(15)		—		(15)
Amounts reclassified out	—		1		1
Total other comprehensive (loss) income, net of tax	(15)		1		(14)


Balance at March 31, 2024, net of tax	$	(64)	$	(96)	$	(160)



	Three Months Ended March 31, 2023
(in millions)	Foreign Currency Translation		Pension and Postretirement Plans		Total
Balance at December 31, 2022, net of tax	$	(54)	$	(112)	$	(166)





Total other comprehensive income, net of tax	6		1		7
Balance at March 31, 2023, net of tax	$	(48)	$	(111)	$	(159)

14. Stock-based and Other Incentive Compensation

Cash-settled Stock Appreciation Rights (“CSARs”)

CSAR activity during the three months ended March 31, 2024, was as follows:


	Number of CSAR Awards	Weighted Average Grant Price		Weighted Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2023	3,452,120	$	18.77	1.72 years	$	37




Outstanding as of March 31, 2024	3,452,120	$	18.77	1.47 years	$	36
Exercisable as of March 31, 2024	2,423,412	$	14.39	0.59 years	$	36

As of March 31, 2024, there was $2 million of compensation expense that has yet to be recognized related to non-vested CSAR awards. This expense is expected to be recognized over the remaining weighted-average vesting period of 21 months.

The following table summarizes the assumptions used in the Black-Scholes-Merton model, which the Company uses to estimate the fair value of the CSARs:


	March 31, 2024	December 31, 2023
Expected dividend yield	1.73%	1.70%
Risk-free interest rate	4.51% - 5.49%	3.99% - 5.60%
Weighted average volatility	21.76%	22.24%
Expected life (in years)	0.00 - 3.00	0.06 - 3.25
Weighted average grant date fair value per share of rights granted	$4.71	$4.83

Compensation expense (benefit) related to CSAR awards was as follows:


	Three Months Ended March 31,
(in millions)	2024		2023

Selling, general and administrative expenses	(1)		10

Income tax expense (benefit)	—		(2)
CSAR compensation (benefit) expense, net	$	(1)	$	8

The Company had a short-term liability of $36 million and $37 million recorded within accrued compensation and benefits in the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively. The Company had a long-term liability of $2 million and $2 million recorded within other liabilities in the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively.

Performance Cash Awards

Compensation expense related to Performance Cash Awards was as follows:


	Three Months Ended March 31,
(in millions)	2024		2023
Cost of revenue	$	1	$	1
Selling, general and administrative expenses	3		3
Performance Cash compensation expense	4		4
Income tax benefit	(1)		(1)
Performance Cash compensation expense, net	$	3	$	3

The Company had a short-term liability of $1 million and $16 million recorded within accrued compensation and benefits in the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, respectively. The Company had a long-term liability of $17 million and $13 million recorded within other liabilities in the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 respectively.

15. Commitments and Contingencies

The Company is party in the ordinary course of business to certain claims, litigation, audits and investigations. The Company will record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable and that may be incurred in connection with any such currently pending or threatened matter, none of which are material. In the Company’s opinion, the settlement of any such currently pending or threatened matter is not expected to have a material impact on the Company’s financial position, results of operations, or cash flows.

16. Related Party Transactions

In each of the three month periods ended March 31, 2024 and 2023, the Company incurred expenses of $5 million to access the library of standards owned and maintained by UL Standards & Engagement.

In the three months ended March 31, 2024 and 2023, the Company declared and paid cash dividends to UL Standards & Engagement of $25 million and $20 million, respectively.

17. Segment Information

Revenue and operating income of the Company’s segments is as follows:


	Three Months Ended March 31,
(in millions)	2024		2023
Revenue
Industrial	$	295	$	270
Consumer	286		275
Software and Advisory	89		84
Total revenue	$	670	$	629

Operating income (loss)
Industrial	$	75	$	72
Consumer	17		3
Software and Advisory	(1)		—
Total operating income	$	91	$	75

18. Subsequent Events

On April 11, 2024, the Company filed its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware, which, among other things, effected the authorization of 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock, as well as the reclassification of all shares of the Company’s Class A common stock outstanding into shares of Class B common stock. The amended and restated certificate of incorporation, as well as the Company’s amended and restated bylaws, became effective upon such filing.

On April 16, 2024, the Company completed its initial public offering of an aggregate of 38,870,000 shares of Class A common stock by UL Standards & Engagement at a price to the public of $28.00 per share, which includes the exercise in full by the underwriters of their overallotment option to purchase an additional 5,070,000 shares of Class A common stock. The Company did not receive any proceeds from the IPO. Upon completion of the IPO, UL Standards & Engagement beneficially owned 80.6% of UL Solutions’ outstanding capital stock and held 97.6% of the voting power of UL Solutions’ outstanding capital stock. As a result, the Company meets the definition of a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange.

In connection with the IPO, the Company adopted the UL Solutions Inc. 2024 Long-Term Incentive Plan (the “2024 LTIP”) and reserved for issuance 20,000,000 shares of Class A common stock pursuant to equity awards approved under the 2024 LTIP and the UL Solutions Inc. Long-Term Incentive Plan (formerly known as the UL Inc. Long-Term Incentive Plan) (the “Pre-IPO LTIP”). As of March 31, 2024, 3,452,120 CSARs were outstanding. On April 1, 2024, 1,334,640 CSARs reached the end of their contractual term, which will result in cash payments of approximately $18 million in the second quarter of 2024. Upon completion of the IPO on April 16 2024, 1,978,761 CSARs were converted to the same number of stock-settled stock appreciation rights, and will result in a reclassification of approximately $25 million from accrued compensation and benefits to additional paid-in capital on the Company’s Condensed Consolidated Balance Sheet. The CSARs were remeasured to fair value at the conversion date, which will result in additional pre-tax compensation expense of approximately $9 million in the second quarter of 2024, primarily within selling, general and administrative expenses. As equity-settled awards, the fair value of the stock-settled stock appreciation rights was determined on the conversion date and, generally, will not be remeasured unless the awards are modified. Following these maturities and conversions, as well as forfeitures that occurred prior to the IPO, 118,904 CSARs remained outstanding. As cash-settled awards, CSARs are remeasured to fair value at each reporting date.

The Pre-IPO LTIP permits settlement of outstanding Performance Cash awards in shares of the Company’s Class A common stock. As such, upon vesting the Performance Cash awards may be settled in a number of newly issued shares of the Company’s Class A common stock with a fair market value equal to the payout amount approved by the Human Capital and Compensation Committee of the board of directors for the applicable performance period.

As a result of the IPO, the Company is subject to Section 162(m) of the Internal Revenue Code in the U.S., which limits deductions related to compensation expenses of certain executive officers which were previously tax deductible as a private company. Accordingly, the Company’s annual effective tax rate will be impacted by the Section 162(m) limitations. In addition, in the second quarter of 2024 the Company will record a reduction to its previously established deferred tax assets of approximately $5 million, with a corresponding increase to income tax expense as a discrete item.

Under the 2024 LTIP, similar to prior long-term company compensation programs, equity awards are available to be issued to certain directors, officers and employees in order to attract, motivate and retain talent and to maximize their contribution to the long-term success of the Company. On May 1, 2024, the Human Capital and Compensation Committee granted annual equity awards to eligible employees and officers, including named executive officers. These awards include 711,256 restricted stock units with an aggregate value of $25 million and 382,455 performance share units with an aggregate value of $13 million. The restricted stock units represent the right to receive shares of the Company’s Class A common stock and are subject to continued employment through a three-year ratable vesting period. The performance share units represent the right to earn shares of the Company’s Class A common stock based on the achievement of certain performance conditions and are subject to continued employment through a three-year vesting period.

On May 1, 2024, the Company completed the sale of its payments testing business to an affiliate of Gallant Capital Partners for a base price of $30 million in cash, subject to customary post-closing adjustments. The divestiture will result in a pre-tax gain on sale of approximately $25 million, which will be recorded within other (expense) income, net in the second quarter of 2024.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s condensed consolidated financial statements and the related notes as of March 31, 2024 and for the three month periods ended March 31, 2024 and 2023, which are included in this Quarterly Report, as well as the Company’s consolidated financial statements and the related notes included in the Company’s final prospectus for its initial public offering (the “IPO”) filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2024 (the “Prospectus”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties about the Company’s business and operations. The Company’s actual results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those the Company describes under “Risk Factors” in Part II Item 1A of this Quarterly Report. See “Cautionary Note Regarding Forward-Looking Statements.” Additionally, the Company’s historical results are not necessarily indicative of the results that may be expected for any period in the future.

References to “UL Solutions” and the “Company” refer to UL Solutions Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires.

Overview

UL Solutions is a global safety science leader that provides independent third-party testing, inspection and certification (“TIC”) services and related software and advisory (“S&A”) offerings.

UL Solutions manages the company and reports its financial results through the Company’s two businesses, TIC and S&A, and three segments: Industrial, Consumer and Software and Advisory.

Since January 1, 2023, the Company has completed the following acquisitions, which impact the comparability of results between periods:

•In August 2023, the Company acquired 100% of the outstanding stock of Certification Entity for Renewable Energies, S.L. (“CERE”) for approximately $14 million. CERE is a Spain-based grid code compliance testing, simulation and certification company, focused on renewable energy and electric vehicle adoption. The results of operations of CERE are included in the Industrial segment since the date of acquisition.

•In July 2023, the Company acquired 100% of the outstanding stock of HBI Compliance Limited (together with its operating subsidiaries, “Healthy Buildings International”) for approximately $6 million. Healthy Buildings International is a United Kingdom-based health, safety and compliance company. The results of operations of Healthy Buildings International are included in the Software and Advisory segment since the date of acquisition.

Recent Developments

On April 16, 2024, the Company completed its IPO of an aggregate of 38,870,000 shares of Class A common stock by ULSE Inc. (“UL Standards & Engagement”) at a price to the public of $28.00 per share, which includes the exercise in full by the underwriters of their overallotment option to purchase an additional 5,070,000 shares of Class A common stock. The Company did not receive any proceeds from the IPO.

In connection with the IPO, the Human Capital and Compensation Committee granted equity awards with an aggregate value of $17 million to the Company’s executive team, including named executive officers, and other key employees under the UL Solutions Inc. 2024 Long-Term Incentive Plan. These awards consisted of 2,074,299 nonqualified stock options, which are subject to continued employment through a three-year vesting period, and 22,486 restricted stock units, which are subject to continued employment through a three-year ratable vesting period. In addition, similar to prior long-term company compensation programs, on May 1, 2024 the Human Capital and Compensation Committee granted annual equity awards to eligible employees and officers, including named executive officers. These awards include 711,256 restricted stock units with an aggregate value of $25 million, which are subject to continued employment through a three-year ratable vesting period, and 382,455 performance share units with an aggregate value of $13 million, which are subject to continued employment through a three-year vesting period.

Components of the Company’s Results of Operations

Revenue

The Company conducts its operations across four major service categories: (1) Certification Testing of products, components and systems according to standards and regulatory requirements and other design and performance specifications; (2) Ongoing Certification Services to validate the continued compliance of previously certified products, components and systems; (3) Non-certification Testing and Other Services, which includes performance testing for customer or other requirements that may not be required by any regulation and may not result in a certification, as well as other services, including advisory and technical services; and (4) Software, comprising software as a service and license-based software solutions, including implementation and training services related to software.

Components of Revenue Change

The Company uses Organic, Acquisition and FX to explain the change in revenue from period to period. Revenue change is calculated as the percentage change in revenue in one period relative to the prior period’s revenue and is a key financial measure that the Company uses to manage its business. The Company defines these components of revenue as follows:

“Organic” reflects revenue change in a given period excluding Acquisition and FX in that same year, expressed in dollars or as a percentage of revenue in the prior period.

“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.

“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.

Cost of Revenue

Cost of revenue includes personnel related expenses consisting of salaries, incentives, stock-based compensation and fringe benefits for employees directly attributable to revenue generation across each of the Company’s four major service categories. In addition, cost of revenue includes facility related costs for laboratories and other buildings where testing and inspection services are performed, depreciation on equipment used in testing, amortization of capitalized software, customer-related travel costs, expenses related to third party contractors or third party facilities and consumable materials and supplies used in testing and inspection and other costs associated with generating revenue.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include personnel related expenses consisting of salaries, incentives, stock-based compensation and fringe benefits for indirect administrative functions such as executive, finance, legal, human resources and information technology, not included within cost of revenue. Additionally, selling, general and administrative expenses include third party consultancy costs, facility costs, depreciation and amortization, internal research and development costs as well as legal and accounting fees, travel, marketing, bad debt and non-chargeable materials and supplies. The Company expects selling, general and administrative expenses will be impacted by costs associated with being a publicly traded company.

Operating Income

Operating income is calculated as revenue less cost of revenue and selling, general and administrative expenses. Operating income margin is calculated as operating income as a percentage of revenue.

Components of Operating Income Change

The Company uses Organic, Acquisition and FX to explain the change in operating income from period to period. Operating income change is calculated as the percentage change in operating income in one period relative to the prior period’s

operating income and is a key financial measure that the Company uses to manage its business. The Company defines these components of operating income as follows:

“Organic” reflects total operating income change in a given period excluding Acquisition and FX in that same period, expressed in dollars or as a percentage of operating income in the prior period.

“Acquisition” is calculated as operating income 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 operating income in the prior period. Operating income change from an acquisition or disposal is measured as Acquisition for the initial twelve month period following the acquisition or disposal date. Subsequently, operating income impact from the acquired or disposed business is measured as Organic. Acquisition also includes the change in due diligence related costs for merger and acquisition and disposal activities.

“FX” reflects the impact that foreign currency exchange rates have on operating income in a given period expressed in dollars or as a percentage of operating income in the prior period. The Company uses constant currency to calculate the FX impact on operating income in a given period by translating current period operating income at prior period exchange rates, expressed as a percentage of operating income in the prior period.

Interest Expense

Interest expense consists primarily of interest expense on the Company’s debt obligations.

Other (Expense) Income, net

Other (expense) income, net consists primarily of non-operating gains and losses, income and expenses related to the revaluation performed on designated balance sheet accounts, gains and losses on foreign currency transactions, investment income, equity in earnings of non-consolidated affiliates and non-operating pension and postretirement benefit expenses.

Income Before Income Taxes

Income before income taxes is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense and other (expense) income, net.

Income Tax Expense

Income tax expense consists of current and deferred federal and state taxes for the Company’s U.S. and foreign jurisdictions.

Net Income

Net income is calculated as revenue less cost of revenue, selling, general and administrative expenses, interest expense, other (expense) income, net and income tax expense. Net income margin is calculated as net income as a percentage of revenue.

Results of Operations

The following table sets forth the Company’s condensed consolidated results of operations for the periods presented.

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023


	Three Months Ended March 31,								Change
(in millions)	2024		% Revenue		2023		% Revenue
Revenue	$	670	N/A		$	629	N/A		$	41
Cost of revenue	351		52.4	%	335		53.3	%	16
Selling, general and administrative expenses	228		34.0	%	219		34.8	%	9

Operating income	91		13.6	%	75		11.9	%	16
Interest expense	(15)		(2.2)	%	(8)		(1.3)	%	(7)
Other (expense) income, net	(3)		(0.4)	%	5		0.8	%	(8)
Income before income taxes	73		10.9	%	72		11.4	%	1
Income tax expense	13		1.9	%	14		2.2	%	(1)
Net income	$	60	9.0	%	$	58	9.2	%	2

Revenue


	Three Months Ended March 31,
(in millions)	2024		2023		Change		% Change
Industrial	$	295	$	270	$	25	9.3	%
Consumer	286		275		11		4.0	%
Software and Advisory	89		84		5		6.0	%

Total	$	670	$	629	$	41	6.5	%

Revenue increased by $41 million, or 6.5%, for the three months ended March 31, 2024, as compared to the same period in 2023. Revenue increased on an organic basis by $47 million, or 7.5%, due to organic growth across all segments in the first quarter of 2024, led by the Industrial segment in both Certification Testing and Ongoing Certification Services revenue. FX decreased revenue by $7 million, or 1.1%, primarily due to the relative weakness of the Japanese yen and Chinese renminbi.


	Three Months Ended March 31, 2024
(in millions)	Organic		Acquisition		FX		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	%

Cost of Revenue

Cost of revenue increased by $16 million, or 4.8%, for the three months ended March 31, 2024, as compared to the same period in 2023, due to increased compensation expenses of $8 million, primarily due to higher healthcare costs and base salary increases. In addition, depreciation and amortization increased $7 million related to the completion of additional laboratory capacity and software placed in service. Cost of revenue improved to 52.4% of revenue for the three months ended March 31, 2024, compared to 53.3% for the same period in 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $9 million, or 4.1%, for the three months ended March 31, 2024, as compared to the same period in 2023, primarily due to a $7 million increase in professional fees related to ongoing software projects, as well as higher costs related to the IPO, and a $7 million increase in bad debt expenses due to the impact of higher write-offs in 2024 compared to a benefit received in 2023 as a result of favorable historical loss experience. The increases in selling, general, and administrative expenses were partially offset by a decrease in compensation expenses of $6 million, primarily due to the change in estimated fair value of the Company’s outstanding Cash-settled Stock Appreciation Rights (“CSARs”) related to higher discount rates utilized in the discounted cash flow analysis.

During the period ended March 31, 2024, the Company incurred $2 million of expenses related to the IPO. No material expenses were incurred in the period ended March 31, 2023.

Interest Expense

Interest expense increased by $7 million for the three months ended March 31, 2024, as compared to the same period in 2023. The increase is primarily due to interest on the Company’s outstanding senior notes which were not outstanding in the same period in 2023. For additional information refer to “—Liquidity and Capital Resources.”

Other (Expense) Income, net

Other (expense) income, net grew to $3 million expense from $5 million income for the three months ended March 31, 2024, as compared to the same period in 2023. The $8 million increase in expense was primarily driven by $6 million of higher unrealized foreign exchange currency losses on intercompany loans and higher realized losses on transaction settlements.

Income Tax Expense

Several countries in which the Company operates have adopted aspects of Pillar Two rules which impose a 15% corporate minimum tax into their local legislation effective January 1, 2024. In accordance with Financial Accounting Standards Board guidance which states that the Pillar Two minimum tax should be reflected as a period cost in the period the law is effective rather than enacted, the Company has reflected the impact of the Pillar Two rules that are effective January 1, 2024 in its financial results for the three months ended March 31, 2024, and the impact is immaterial. The Company is continuing to evaluate aspects of the legislation that will be effective January 1, 2025 and the potential impact on future periods as such changes could result in an increase in its effective tax rate in 2025 and/or other future periods.

Industrial

The Industrial segment provides TIC services to help ensure customers' industrial products meet or exceed international standards for product safety, performance and sustainability. The Industrial segment provides services that address needs across a number of end markets, including energy, industrial automation, engineered materials (plastics and wire and cable) and built environment, and across a variety of stakeholders, including manufacturers, building owners, end users and regulators.

The following table summarizes the change in Industrial’s revenue and operating income for the periods presented:


	Three Months Ended March 31,
(in millions)	2024			2023
Revenue	$	295		$	270
Revenue change analysis:
Organic	$	27		$	12
Acquisition	1			1
FX	(3)			(7)
Total revenue change	$	25		$	6

Segment operating income	$	75		$	72
Segment operating income change analysis:
Organic	$	7		$	(1)
Acquisition	(3)			—
FX	(1)			(3)
Total segment operating income change	$	3		$	(4)

Segment operating income margin	25.4		%	26.7		%

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue

Revenue increased by $25 million, or 9.3%, for the three months ended March 31, 2024, as compared to the same period in 2023. On an organic basis, revenue increased $27 million or 10.0%, primarily due to growth in Certification Testing revenue of $12 million driven by continued demand for electrical product, renewable energy and component certification testing, as well as returns on new capacity provided by recent laboratory investments. Ongoing Certification Services revenue also had strong growth of $12 million across most industries due to early 2024 price increases. Non-Certification Testing and Other Services revenue grew $4 million due in part to increases in materials and building products.

Segment Operating Income

Segment operating income increased by $3 million, or 4.2%, for the three months ended March 31, 2024, as compared to the same period in 2023 primarily due to the $27 million increase in organic revenue noted above partially offset by a $20 million increase in expenses. Expenses increased primarily due to increased compensation expenses of $8 million due to base salary increases, additional headcount and higher healthcare costs, partially offset by lower expenses associated with the change in estimated fair value of the Company’s outstanding CSARs. Additionally, professional fees increased $4 million primarily related to ongoing software projects.

Consumer

The Consumer segment provides a variety of global product market acceptance and risk mitigation services for customers in the consumer products end market, including consumer electronics, medical devices, information technologies, appliances, HVAC, lighting, retail (softlines and hardlines) and emerging consumer applications, including new mobility, smart products and 5G. The primary services offered by this segment include safety certification testing, ongoing certification, global market access, testing for connectivity, performance and quality and critical systems advisory and training.

The following table summarizes the change in Consumer’s revenue and operating income for the periods presented:


	Three Months Ended March 31,
(in millions)	2024			2023
Revenue	$	286		$	275
Revenue change analysis:
Organic	$	16		$	1
Acquisition	(1)			7
FX	(4)			(9)
Total revenue change	$	11		$	(1)

Segment operating income	$	17		$	3
Segment operating income change analysis:
Organic	$	13		$	(19)
Acquisition	1			(1)
FX	—			(1)

Total segment operating income change	$	14		$	(21)

Segment operating income margin	5.9		%	1.1		%

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue

Revenue increased by $11 million, or 4.0%, for the three months ended March 31, 2024, as compared to the same period in 2023. On an organic basis, revenue increased $16 million, or 5.8%, primarily due to Non-certification Testing and Other Services revenue growth of $4 million in consumer technology driven by higher electromagnetic compatibility testing for automotive and consumer electronics and improved retail demand of $3 million. Certification Testing revenue in consumer technology improved $3 million due to strength in medical. FX decreased revenue by $4 million, or 1.4%, primarily due to the relative weakness of the Japanese yen and Chinese renminbi.

Segment Operating Income

Segment operating income increased by $14 million for the three months ended March 31, 2024, as compared to the same period in 2023 primarily due to the $16 million increase in organic revenue noted above partially offset by a $3 million increase in expenses. Expenses increased primarily due to a $4 million increase in professional fees primarily related to ongoing software projects, and a $3 million increase in bad debt expense, offset by decreased compensation related expenses of $8 million, due to a decrease in expenses associated with the change in estimated fair value of the Company’s outstanding CSARs and headcount reductions in 2023. The increased revenue growth and controlled expenses resulted in a 4.8% increase in operating income margin.

Software and Advisory

The Software and Advisory segment provides complementary software and advisory solutions that extend the value proposition of TIC services the Company offers. The software and technical advisory offerings enable the Company’s customers to manage complex regulatory requirements, deliver supply chain transparency and operationalize sustainability.

The following table summarizes the change in Software and Advisory’s revenue and operating income for the periods presented:


	Three Months Ended March 31,
(in millions)	2024			2023
Revenue	$	89		$	84
Revenue change analysis:
Organic	$	4		$	2
Acquisition	1			—
FX	—			(1)
Total revenue change	$	5		$	1

Segment operating loss	$	(1)		$	—
Segment operating loss change analysis:
Organic	$	—		$	(4)
Acquisition	(1)			—
FX	—			1
Total segment operating loss change	$	(1)		$	(3)

Segment operating loss margin	(1.1)		%	—		%

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenue

Revenue increased by $5 million, or 6.0%, for the three months ended March 31, 2024, as compared to the same period in 2023. On an organic basis, revenue increased $4 million, or 4.8%, primarily due to increased advisory revenue in renewable energy generation.

Segment Operating Loss

Segment operating loss increased by $1 million for the three months ended March 31, 2024, as compared to the same period in 2023 due to offsetting increases in organic revenue and operating expenses. Expenses increased primarily due to increased compensation expenses due to base salary increases and higher healthcare costs, partially offset by a decrease in expenses associated with the change in estimated fair value of the Company’s outstanding CSARs.

Non-GAAP Financial Measures

In addition to financial measures determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the Company considers a variety of financial and operating measures in assessing the performance of the Company’s 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 the Company believes these measures provide 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 these non-GAAP financial measures provide a meaningful measure of business performance and provide a basis for comparing its 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 its 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.

The table below presents these non-GAAP measures with the most directly comparable GAAP measures.


	Three Months Ended March 31,
(in millions, unless otherwise stated)		2024			2023



Net income		$	60		$	58
Net income margin		9.0		%	9.2		%
Adjusted EBITDA		$	131		$	111
Adjusted EBITDA margin		19.6		%	17.6		%
Adjusted Net Income		$	61		$	54
Adjusted Net Income margin		9.1		%	8.6		%

Diluted Earnings per Share		$	0.28		$	0.28
Adjusted Diluted Earnings Per Share		$	0.28		$	0.26

Net Cash provided by Operating Activities		$	141		$	161
Free Cash Flow		$	84		$	98

Adjusted EBITDA

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. Adjusted EBITDA margin is calculated as Adjusted EBITDA as a percentage of revenue.

The table below reconciles net income to Adjusted EBITDA.


	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 EBITDA	$	131		$	111
Revenue	$	670		$	629
Net income margin	9.0		%	9.2		%
Adjusted EBITDA margin	19.6		%	17.6		%

The table below reconciles segment operating income to segment Adjusted EBITDA.


	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 EBITDA	$	86		$	80
Revenue	$	295		$	270
Operating income margin	25.4		%	26.7		%
Adjusted EBITDA margin	29.2		%	29.6		%
Consumer
Segment operating income	$	17		$	3
Depreciation and amortization expense	19			18

Restructuring	(1)			—
Adjusted EBITDA	$	35		$	21
Revenue	$	286		$	275
Operating income margin	5.9		%	1.1		%
Adjusted EBITDA margin	12.2		%	7.6		%
Software and Advisory
Segment operating loss	$	(1)		$	—
Depreciation and amortization expense	11			10


Adjusted EBITDA	$	10		$	10
Revenue	$	89		$	84
Operating loss margin	(1.1)		%	—		%
Adjusted EBITDA margin	11.2		%	11.9		%

Adjusted EBITDA	$	131		$	111

Adjusted Net Income

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. Adjusted Net Income margin is calculated as Adjusted Net Income as a percentage of revenue.

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 adjustments(a)	(1)			1
Adjusted Net Income	$	61		$	54
Revenue	$	670		$	629
Net income margin	9.0		%	9.2		%
Adjusted Net Income margin	9.1		%	8.6		%

__________________

(a)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.

Adjusted Diluted Earnings Per Share

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 table below reconciles diluted earnings per share to Adjusted Diluted Earnings Per Share.


	Three Months Ended March 31,
	2024		2023
Diluted earnings per share(a)	$	0.28	$	0.28
Other expense (income), net	0.02		(0.03)

Restructuring	(0.01)		—
Tax effect of adjustments(b)	(0.01)		0.01
Adjusted Diluted Earnings Per Share(a)	$	0.28	$	0.26

__________

(a)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.

(b)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.

Free Cash Flow

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 table below reconciles net cash provided by operating activities to Free Cash Flow.


	Three Months Ended March 31,
(in millions)	2024		2023
Net cash provided by operating activities	$	141	$	161
Capital expenditures	(57)		(63)
Free Cash Flow	$	84	$	98

Liquidity and Capital Resources

Overview

The Company’s primary sources of liquidity are cash and cash equivalents on hand, cash flows from operating activities and cash borrowed under a credit agreement with Bank of America, N.A. and certain other lenders, which provides for senior unsecured credit facilities in an aggregate principal amount of $1,250 million (collectively, the “Credit Facility”). The Company believes the combination of cash and cash equivalents on hand, the generation of cash from operating activities, funds available under the Credit Facility and the Company’s ability to access the capital markets provide sufficient liquidity to meet the Company’s cash requirements for working capital, capital expenditures, service of indebtedness and to address other needs for the next twelve months and the foreseeable future thereafter, as well as to finance acquisitions, make contributions to the Company’s pension and postretirement plans and pay dividends to stockholders, as the Company’s board of directors deems appropriate.

The Company’s cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those referenced in the section titled “Risk Factors” in Part II Item 1A of this Quarterly Report. In addition, the Company cannot predict whether or when it may enter into acquisitions, joint ventures or dispositions, make contributions to the Company’s pension and postretirement plans, pay dividends, or what impact any such transactions could have on the Company’s financial condition, results of operations or cash flows.

As of March 31, 2024, the Company had $344 million in cash and cash equivalents and $659 million of unused availability under the Credit Facility and access to an accordion feature permitting an increase in the Credit Facility by an aggregate amount of up to $625 million (of which up to $400 million may consist of term loans), subject to the consent of any lenders providing such increase, the absence of any default or event of default and entry into customary documentation with respect to such increase.

Cash Flows

The following table is a summary of the Company’s cash flow activity:


	Three Months Ended March 31,
(in millions)	2024		2023
Net cash provided by operating activities	$	141	$	161
Net cash used in investing activities	$	(57)	$	(75)
Net cash (used in) provided by financing activities	$	(49)	$	10

Cash Flows from Operating Activities

Net cash provided by operating activities was $141 million for the three months ended March 31, 2024, a decrease of $20 million compared to net cash provided by operating activities of $161 million for the same period in 2023. The decrease was primarily driven by higher receivables and the timing of payments related to Performance Cash incentives, which were paid in the first quarter of 2024 compared to the second quarter of 2023, partially offset by increased contract liabilities due to project invoicing and higher prepayments from customers.

Cash Flows from Investing Activities

Net cash used in investing activities was $57 million for the three months ended March 31, 2024, a decrease of $18 million compared to net cash used in investing activities of $75 million for the same period in 2023. The decrease in cash used in investing activities was primarily driven by a $15 million decrease in net purchases of investments and a $6 million decrease in capital expenditures.

Cash Flows from Financing Activities

Net cash used in financing activities was $49 million for the three months ended March 31, 2024, a decrease of $59 million compared to net cash provided by financing activities of $10 million for the same period in 2023. The change was primarily driven by $45 million in repayments of long-term debt during the current period and a $10 million decrease in proceeds from long-term debt compared to the same period in 2023.

Capital Expenditures

The Company makes strategic investments in capital expenditures to enable growth by expanding testing capacity to meet increased demand, to enable new capabilities and product offerings and to increase the efficiency of the Company’s processes. Capital expenditures include the building and refurbishment of laboratories and office space, the replacement and upgrade of existing laboratory equipment at the end of its useful life, and investments in technology for internal-use and sale to customers through product development of new software and enhancements of existing software. Cash paid for capital expenditures decreased $6 million, to $57 million for the three months ended March 31, 2024, compared to $63 million for the same period in 2023.

Long-Term Debt

Senior Notes Offering

In October 2023, the Company issued $300 million in aggregate principal amount of senior notes due 2028. The notes are senior unsecured obligations of UL Solutions Inc. and are unconditionally guaranteed by UL LLC, a wholly owned subsidiary of the Company. Interest on the notes accrues at 6.500% per annum. The Company pays interest on the notes semi-annually in arrears on April 20 and October 20 of each year, beginning on April 20, 2024.

Credit Facility

The Credit Facility provides for senior unsecured credit facilities in an aggregate principal amount of $1,250 million, consisting of term loans and revolving loan commitments. As of March 31, 2024 the Company had $585 million outstanding under the Credit Facility. The maturity date of the Credit Facility is January 2027. Interest rates under the Credit Facility are variable based on the Bloomberg Short-term Bank Yield Index (“BSBY”) rate plus a margin and were 6.35% for the Company’s term loans and the weighted average interest rate on the revolving credit facility was 6.36% as of March 31, 2024. The Credit Facility also includes a financial covenant tested quarterly which requires the Company to maintain a consolidated net leverage ratio of not greater than 3.5 to 1.0. As of March 31, 2024, the Company was in compliance with all covenants under the Credit Facility.

In November 2023, the Bloomberg Index Services Limited announced that the permanent cessation of BSBY and all its tenors will be effective on November 15, 2024. The Credit Facility includes a provision to replace BSBY with the Secured Overnight Financing Rate (“SOFR”) plus certain specified credit spread adjustments in the event that BSBY ceases to be available as a reference rate. Accordingly, the Company expects that the Credit Facility will transition to SOFR-based pricing on or prior to November 15, 2024.

Dividends

In the first quarter of 2024 and 2023, the Company paid a dividend of $25 million and $20 million to UL Standards & Engagement, respectively.

The Company increased the regular quarterly dividend to $12.5 cents per share beginning in the first quarter of 2024 and will periodically assess the size of the regular quarterly dividend based on the Company’s dividend policy and certain factors described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Dividends” in the Prospectus. The Company cannot give any assurance that the Company will continue to declare dividends in any particular amounts, or at all, in the future.

Contractual Obligations

The Company has purchase obligations related to agreements to purchase goods and services that are enforceable and legally binding, and that specify all significant terms, including the goods to be purchased or services to be rendered, the price at which the goods or services are to be rendered, and the timing of the transactions. Purchase obligations exclude liabilities that are included on Company’s Condensed Consolidated Balance Sheet and include commitments for outsourced services, facilities, capital expenditures, cloud service arrangements and various other types of noncancelable contracts.

Refer to the Company’s consolidated financial statements for the year ended December 31, 2023 included in the Prospectus, for information about the Company’s noncancelable purchase obligations.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements recently adopted and not yet adopted, see Note 1 to the condensed consolidated financial statements included elsewhere in this Quarterly Report.

Critical Accounting Policies and Estimates

The Company prepares its condensed consolidated financial statements in accordance with GAAP. While the majority of the Company’s revenue, expenses, assets and liabilities are not based on estimates, there are certain accounting principles that require management to make judgments and estimates regarding matters that are uncertain and susceptible to change. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which could potentially result in materially different results under different assumptions and conditions. Management regularly reviews the estimates and assumptions used in the preparation of the financial statements for reasonableness and adequacy. The Company’s estimates are based on historical experience, current conditions and various other assumptions that the Company believes to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions. To the extent that there are differences between estimates and actual results, the Company’s future financial statement presentation, financial condition, results of operations and cash flows may be affected.

There have been no material changes to the Company’s critical accounting policies and estimates as described in the Prospectus.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report may be forward-looking statements. Statements regarding the Company’s future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the Company’s expected growth and future capital expenditures are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “likely,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “continue” and variations of these terms and similar expressions, or the negative of these terms or similar expressions (although not all forward-looking statement may contain such words). The Company cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•any failure on the Company’s part to protect and maintain its brand and reputation, or the impact on its brand or reputation of third-party events or actions outside of its control;

•risks associated with the Company’s information technology and software, including those relating to any future data breach or other cybersecurity incident;

•the potential disruption of the TIC or S&A industries by technological advances in artificial intelligence;

•the Company’s ability to innovate, adapt to changing customer needs and successfully introduce new products and services in response to changes in the Company’s industries and technological advances;

•the Company’s ability to compete in its industries and the effects of increased competition from its competitors;

•risks associated with conducting business outside the United States, including those relating to fluctuations in foreign currency exchange rates; enhanced trade, import or export restrictions; and global, regional or political instability;

•risks associated with the Company’s operations in China, which subject the Company and UL-CCIC Company Limited, the Company’s joint venture with the China Certification & Inspection (Group) Co., Ltd. (“CCIC”), to China’s complex and rapidly evolving laws, which may be interpreted, applied or enforced inconsistently or in ways inconsistent with its current operations, as well as risks associated with the fact that the Chinese government has the power to exercise significant oversight and discretion over, and intervene in and influence, its business operations in China.

•the relationship between the United States and China and between the Company and CCIC, as well as changes in U.S. and Chinese regulations affecting the Company’s business operations in China;

•any failure on the Company’s part to attract, hire or retain its key employees, including its senior leadership and its skilled and trained engineering, technical and professional personnel;

•the level of the Company’s customers’ satisfaction and any failure on its part to properly and timely perform its services, meet its contractual obligations or fulfil its customers’ needs;

•changes to the relevant regulatory frameworks or private sector requirements, including any requirement that the Company accept third-party test results or certifications of components, end products, processes or systems or any changes that result in a reduction in required inspections, tests or certifications or harmonized international or cross-industry benchmarks and standards;

•the Company’s ability to adequately maintain, protect and enhance its intellectual property, including its registered UL-in-a-circle certification mark and other certification marks;

•the Company’s ability to implement its growth strategies and initiatives successfully;

•the Company’s reliance on third parties, including subcontractors and outside laboratories;

•the Company’s ability to obtain and maintain the requisite licenses, approvals, accreditations and delegations of authority necessary to conduct its business;

•the outcomes of current and future legal proceedings;

•the Company’s level of indebtedness and future cash needs;

•failure to generate sufficient cash to service the Company’s indebtedness;

•a change in the assumptions the Company uses to value its goodwill or intangible assets, or the impairment of its goodwill or intangible assets;

•constraints imposed on the Company’s ability to operate its business or make necessary capital investments due to the Company’s outstanding indebtedness;

•the increased expenses and responsibilities associated with being a public company;

•the significant influence that UL Standards & Engagement has over the Company, including pursuant to its rights under the Company’s amended and restated certificate of incorporation and the Stockholder Agreement with UL Standards & Engagement;

•natural disasters and other catastrophic events, including pandemics and the rapid spread of contagious illnesses, such as new variants of the COVID-19 pandemic;

•the other factors discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the “Risk Factors” in Part II Item 1A of this Quarterly Report.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the section titled “Risk Factors” in Part II Item 1A of this Quarterly Report and the Company’s subsequent filings with the Securities and Exchange Commission (the “SEC”). If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what the Company anticipates. Many of the important factors that will determine these results are beyond the Company’s ability to control or predict. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. If the Company updates one or more forward-looking statements, no inference should be drawn that the Company will make additional updates with respect to those or other forward-looking statements. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to the Company, or others acting on the Company’s behalf, are expressly qualified in their entirety by the cautionary statements above.

In addition, statements that “the Company believes” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based upon information available to the Company as of the date of this Quarterly Report, and while the Company believes such information forms a reasonable basis for such statements, such information

may be limited or incomplete, and the Company’s statements should not be read to indicate that the Company has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report and the documents that the Company references in this Quarterly Report with the understanding that the Company’s actual future results, levels of activity, performance and achievements may be materially different from what the Company expects.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk in the ordinary course of business. Market risk represents the risk of loss that may impact the Company’s financial position due to adverse changes in financial market prices and rates. The Company’s market risk exposure is primarily a result of exposure to potential changes in interest rates or inflation and the resulting impact on investment income and interest expense. The Company does not hold financial instruments for trading purposes.

Interest Rate Risk

The Company’s operating results are subject to risk from interest rate fluctuations on its Credit Facility, which carries variable interest rates. Because the Company’s borrowings bear interest at a variable rate, the Company is exposed to market risks relating to changes in interest rates. The Company is also exposed to interest rate risk associated with its balances of cash and cash equivalents and short-term investments. The Company does not currently use derivative financial instruments in its investment portfolio.

During the first quarter of 2024, the variable interest rates applicable to both benchmark rate loans and base rate loans under the Credit Facility generally fluctuated in line with interest rate changes in the marketplace and are expected to continue fluctuating with any future Federal Reserve Board interest rate changes and future changes to the BSBY Index. In addition, increases in interest expense are considered with other expense increases that may be passed, in whole or in part, along to the Company’s customers; however, the Company does not expect increases in interest expenses to materially impact pricing strategy in the near term. The increased interest payments on the Company’s variable-rate debt are not material to the Company’s overall liquidity position and have not impacted, and are not expected to have an impact on, the Company’s ability to make timely payments under the Credit Facility or its other obligations. Furthermore, while the increased interest rate does impact management’s evaluation of capital expenditure projects, the overall cash flows required to support the Company’s planned investments have not been materially impacted. Thus, increased interest rates have not had a material impact on the Company’s financial condition.

The interest rates for the Company’s term loan and revolving credit facility as of March 31, 2024, were 6.35% and 6.36%, respectively, which are floating rates based on the BSBY Index rate plus an applicable margin. A hypothetical 100 basis point change in interest rates affecting the Credit Facility would result in a change to the annual interest expense of approximately $6 million, based on outstanding borrowings at March 31, 2024. A hypothetical 100 basis point change in interest rates affecting the Company’s cash and cash equivalents or short-term investments would not have a material impact on the Company’s financial statements. Notwithstanding the Company’s efforts to manage interest rate risk, there can be no assurances that the Company will be adequately protected against the risks associated with interest rate fluctuations.

Foreign Currency Risk

With global operations, the Company has foreign currency risk related to its revenues and expenses denominated in currencies other than the U.S. dollar, primarily the euro, Japanese yen, Chinese renminbi, British pound sterling, Singapore dollar, New Taiwan dollar and the Korean won. Foreign currency gains (losses) are recorded in net income as transactions occur. Changes in exchange rates may substantially affect, either positively or negatively, the revenues and expenses, as expressed in U.S. dollars, of the Company’s foreign subsidiaries with functional currencies other than the U.S. dollar. Assuming a hypothetical change of 10% in the average foreign currency exchange rate for the three months ended March 31, 2024, the effect on operating income would not be material. The Company is also subject to foreign currency exchange rate risk associated with the translation of local currencies of its foreign subsidiaries into U.S. dollars.

The Company’s results of operations are exposed to foreign currency exchange risk related to intercompany loan and operating balances between subsidiaries that are denominated in the respective local foreign currency. A transaction made in a currency that differs from the local entity’s functional currency is first remeasured at the entity’s functional currency. Subsequent foreign currency exchange rate changes result in foreign currency gains (losses) that are recognized in net income. If the transaction is already denominated in the entity’s functional currency, only the translation to U.S. dollar

reporting is necessary. The remeasurement process required by GAAP for such intercompany loan and operating balances will give rise to foreign exchange gains (losses), which could materially impact the Company’s results of operations.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that this information is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and the principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

As required by Exchange Act Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures, as of the end of the period covered by this Quarterly Report were effective to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

During the three months ended March 31, 2024, there were no changes in the Company’s internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is party in the ordinary course of business to certain claims, litigation, audits and investigations. Discussion of these and other legal matters is incorporated by reference from Part I, Item 1, Note 15, “Commitments and Contingencies,” of this Quarterly Report and should be considered an integral part of Part II, Item 1, “Legal Proceedings.”

ITEM 1A. Risk Factors

UL Solutions’ business is subject to various risks and uncertainties. The following summary highlights some of the risks the Company is exposed to in the normal course of its business activities. If any of these risks actually occur, the Company’s business, financial condition or results of operations could be materially and adversely affected. This summary is not complete and the risks summarized below are not the only risks the Company faces. You should review and consider carefully the risks and uncertainties described in more detail following this summary in this Item 1A of Part II, which includes a more complete discussion of the risks summarized below, as well as a discussion of other risks related to the Company’s business and an investment in its Class A common stock.

•Because the Company’s success depends substantially on the value of its brand and reputation, any adverse publicity, damage to its brand or loss of reputation could impact the demand for its services, erode its market share or otherwise have a material adverse effect on its business.

•The Company or the third parties that it interacts with face cybersecurity risks and may fail to adequately secure or maintain the confidentiality, integrity or availability of data held as a result of a compromise of systems or data, which could result in a material adverse effect on the Company’s business and operations, and it may incur increasing costs in an effort to mitigate this risk.

•The Company experienced a ransomware attack which resulted in unauthorized access to and disruption of its systems, and may further result in damage to its brand and reputation, lost sales, legal claims, contractual obligations and increased insurance costs.

•Technological advances in artificial intelligence (“AI”) may in the future disrupt the TIC or S&A industries, which could significantly reduce the demand for the Company’s services.

•The Company’s business is highly competitive. If the Company fails to compete successfully, to innovate in response to changing customer needs, new technologies or other market requirements, to develop new proprietary solutions, to increase the functionality of its current solutions or to develop its reputation as a technology leader, its business, financial condition and results of operations could be adversely affected.

•The Company maintains significant international operations and is subject to a variety of risks associated with doing business outside the United States, including difficulties associated with maintaining compliance with numerous laws and regulations, general economic, social and political conditions in countries where it operates and the need to expand into, and compete in, new jurisdictions resulting from shifts in supply chains.

•The Company may be adversely affected by global and regional economic and political instability.

•The Company conducts significant business in China, including through its joint venture with CCIC, and is therefore subject to China’s laws and regulations, which can be complex and evolve rapidly. The Chinese government has the power to exercise significant oversight and discretion over the conduct of the Company’s business in China, and the laws and regulations to which it is subject may change rapidly and with little notice. These laws and regulations may be interpreted, applied or enforced inconsistently by different agencies or authorities and may be inconsistent with or restrictive of the Company’s current operations. Any new or changed regulations and policies could result in a material change in the Company’s operations and could have a material adverse effect on its business. The Chinese government may also intervene in or influence the Company’s business in China at any time, without notice, including placing restrictions on its operations in China.

•Changes in the economic policies of the government of China could have a significant impact on the business the Company may be able to conduct in China and the profitability of its business.

•The Company’s success depends upon its ability to recruit, train and retain key employees, including its senior leadership and its trained and skilled engineering, technical and professional personnel.

•The Company works with dangerous materials and in dangerous environments that could injure its employees, contractors or customers, damage its or its customers’ facilities, disrupt its or its customers’ operations and could otherwise result in significant costs, liabilities and obligations.

•The Company is subject to risks related to sustainability and corporate social responsibility.

•A conflict of interest or perceived conflict of interest between the Company’s testing, inspection or certification services, on the one hand, and its advisory and other services, on the other hand, could adversely impact its accreditation or its reputation or expose it to legal liability.

•Changes to relevant regulatory frameworks resulting in a reduction in required inspections, tests or certifications, any requirement that the Company accept third-party test results or certifications in lieu of collecting its own data and conducting its own tests, and the harmonization of international or cross-industry benchmarks and standards, in each case, could lead to the reduction in demand for, or commoditization of, the Company’s services, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

•The Company’s business depends substantially on the level of its customer satisfaction and specifically on customers maintaining their agreements with the Company and purchasing additional services from the Company, a significant decline in any of which could harm the Company’s business, financial condition and results of operations.

•Part of the Company’s growth strategy is to pursue strategic transactions, including acquisitions, and the Company may not be able to find suitable acquisition targets or achieve its desired acquisition objectives.

•Allegations of the Company’s failure to properly perform its services may expose it to potential product and other liability claims, recalls, penalties and reputational harm or could otherwise cause a material adverse effect on the Company’s business.

•Any failure to obtain, maintain, adequately protect or enforce the Company’s intellectual property and proprietary rights could impair the Company’s ability to protect its proprietary technology, the UL Mark and its brand.

•Any unethical conduct by the Company’s employees, agents, contractors, partners, Underwriters Laboratories Inc. (“UL Research Institutes”) or ULSE Inc. (“UL Standards & Engagement”) could result in financial penalties or affect the Company’s brand, reputation or image, any of which could have a material adverse impact on its business, financial condition and results of operations.

•Changes in, a significant delay in obtaining, failure to obtain or the withdrawal or revocation of the Company’s licenses, approvals, accreditations or other authorizations or delegations of authority would likely have a material adverse effect on the Company’s business, financial condition and results of operations.

•The Company is currently defending certain litigation, and it is likely to be subject to additional litigation in the future, any of which could be costly to defend and may harm the Company’s reputation.

•The substantial ownership of the Company’s common stock by UL Standards & Engagement, together with the dual class structure of the Company’s common stock and UL Standards & Engagement’s governance and consent rights under the Company’s Amended and Restated Certificate of Incorporation and that certain Stockholder Agreement, dated as of April 2, 2024, by and between the Company and UL Standards & Engagement, concentrates voting control with UL Standards & Engagement for the foreseeable future, which will limit the ability of the Company’s other stockholders to influence corporate matters, including the election or removal of directors and the approval or rejection of any change of control transaction.

•The Company may not be able to generate sufficient cash to service all of its indebtedness, and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful.

•As a result of becoming a public company, the Company has incurred, and will continue to incur, significant costs related to being a public company, and management will be required to devote substantial time to compliance with the Company’s public company responsibilities and corporate governance practices.

Risks Related to Our Industry and Business

Because our success depends substantially on the value of our brand and our reputation as a market leader in the TIC services industry, adverse publicity, damage to our brand or a loss of reputation could impact the demand for our services or erode our market share or otherwise have a material adverse effect on our business.

Our reputation and the value of our brand are critical to our business. Adverse publicity concerning the quality or effectiveness of our services, safety or non-compliance issues with products we have tested or certified, whether or not directly relating to or involving the services we performed, and other matters, including adverse publicity about, or events relating to, UL Research Institutes, UL Standards & Engagement or their research or standard-setting activities (which we cannot control), could result in the loss of our existing customer relationships, our inability to attract new customers, legal claims, government or regulatory investigations, increased insurance costs or diminished trust from AHJs, all of which could adversely affect our business and operations. The value of our brand and our reputation could be severely damaged even by isolated incidents, particularly if the incidents receive considerable negative publicity or result in substantial litigation.

Any such incidents, and any resulting adverse publicity, may arise from events that are beyond our control, such as international trade disputes, regulatory changes, market fluctuations, supply chain constraints, actions taken by our customers, employees or other third parties and poor quality control in our customers’ manufacturing processes. For example, part of our businesses involve testing and inspecting products, facilities, processes, components and systems against various legal, regulatory, customer and industry standards and requirements, but we do not serve as an AHJ or other enforcement body in connection with such testing and inspection services. Misunderstandings regarding our role in our customers’ compliance processes or the failure by our customers or other third parties to appropriately and effectively use and act on the findings of our assessments could lead to reputational harm. In addition, from time to time, our customers and others make claims and take legal action against us, UL Research Institutes or UL Standards & Engagement. Whether or not any such claims have merit, they may adversely affect our reputation, our customers’ trust in our brand and the demand for our services. Demand for our services could also diminish significantly if any such incidents or other matters erode general confidence in us or our services, which would likely result in reputational damage or lower sales, either of which could materially and adversely affect our business and results of operations.

The TIC industry is highly competitive and fragmented, and our ability to effectively compete depends heavily on our brand and reputation. Any real or perceived issues delivering our services to our customers or our failure to provide high-quality services to our customers could adversely affect our brand and reputation, and customers may no longer choose us over our competitors. This, in turn, could cause us to lose market share and our market leadership position, which could have a material adverse effect on our financial condition and results of operations.

Technological advances in AI may in the future disrupt the TIC industry, which could significantly reduce the demand for our services.

The success of our TIC business depends on sustained demand for our services, which are carried out by our employees who leverage a broad range of technological advances to perform their work. For example, the majority of our TIC services are performed by skilled technicians, engineers, scientists and regulatory experts at our various facilities or on-site at our customers’ facilities. As AI technology continues to evolve, tasks currently performed by people, including those performed by our employees, may be augmented or replaced by automation, robotics, AI/machine learning and other technological advances. These technological advances also have the potential to enable the development of alternative competitive services or enable our customers to reduce or bypass the use of our services. If any of our customers, competitors or new market entrants develop algorithms or other AI tools capable of replicating or better competing against our services, our services and solutions could, over time, become obsolete or unnecessary, or the demand for our services could be significantly reduced, particularly if any such AI alternative proved to be more accurate, more efficient and/or more cost-effective than our employees. Any widespread automation of our TIC services could have a material adverse effect on our business, financial condition and results of operations. Further, the use of AI by our customers could lead to product designs which incorporate safety standards and requirements so completely that AI-designed products become the more trusted norm versus human-driven design, testing and inspection.

Technological advances in AI may in the future disrupt the S&A industry, which could significantly reduce the demand for our services or otherwise adversely impact our business or reputation if we are unable to successfully keep pace and navigate this evolving environment.

We use machine learning and AI technologies in our business, and we are making investments in expanding AI capabilities in our products, services and tools, including developing new product features using AI technologies. However, AI technologies are complex and rapidly evolving, and we face significant competition from other companies as well as an evolving regulatory landscape. The proliferation of new and emerging AI technologies, such as generative AI, in the S&A industry may require additional investment in the development of proprietary datasets and machine learning models, new approaches and processes to provide attribution or remuneration to creators of training data and appropriate protections and safeguards for handling the use of customer data with AI technologies, which may be costly and could impact our expenses if we decide to expand AI technologies in our S&A product offerings. Ultimately, our failure to incorporate AI technologies in our product offerings in a timely, effective and compliant manner may place us at a competitive disadvantage, reducing demand for our offerings and adversely affecting our business results.

The introduction of AI technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, confidentiality or security risks, ethical concerns, legal liability or other complications that could adversely affect our business, reputation and financial results. For example, AI technologies incorporated into our product offerings may use algorithms, datasets or training methodologies that may be flawed or contain deficiencies that may be difficult to detect which, in turn, may create customer content that is factually inaccurate, biased or otherwise flawed. If our customers or others rely on or use such content to their detriment, it may lead to adverse outcomes, which may expose us to reputational harm, competitive harm or legal liability. Additionally, the use of certain AI technologies, including generative AI, may place our and our customers’ confidential information at risk if adequate security measures are not employed. Further, the intellectual property ownership and license rights, including copyright, surrounding AI technologies has not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of third-party AI technologies into our products and services may result in exposure to claims of copyright infringement or other intellectual property misappropriation.

The legislative, judicial and regulatory landscapes relating to AI are evolving and may impact our ability to use AI, and could limit our ability to operate and expand our business, cause revenue to decline and adversely affect our business. The actual or perceived failure to comply with regulatory requirements and laws relating to AI could result in significant liability or reputational harm.

Uncertainty in the legal regulatory regime relating to AI may require significant resources to modify and maintain business practices to comply with U.S. and non-U.S. laws, the nature of which cannot be determined at this time. Several jurisdictions around the globe, including Europe and certain U.S. states, have already proposed or enacted laws governing AI. For example, in the United States, an Executive Order was issued on the Safe, Secure and Trustworthy Development and Use of AI, emphasizing the need for transparency, accountability and fairness in the development and use of AI. The order seeks to balance fostering innovation with addressing risks associated with artificial intelligence by providing eight guiding principles and priorities, such as ensuring that consumers are protected from fraud, discrimination and privacy risks related to artificial intelligence. The order also calls for future regulations from various agencies, such as the U.S. Federal Trade Commission (to ensure fair competition and reduce consumer harm) and, in alignment with the order, other agencies have published guidance, such as the Cybersecurity and Infrastructure Security Agency. Further, European legislators have politically agreed to a stringent AI regulation, the EU AI Act, with fines in excess of those under the European Union’s General Data Protection Regulation (the “GDPR”), and we expect other jurisdictions will adopt similar laws. The EU AI Act has significant implications for all stakeholders involved in the development, use and provision of AI systems and includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security and accuracy. To ensure compliance with the AI Act, standards are needed to provide guidance and best practices for AI systems, and we are seeking to participate in this process through the European Commission’s Standardization Request. Our failure to effectively participate in this process could adversely impact our ability to utilize AI systems and our ability to serve as a certification body.

Other jurisdictions may decide to adopt similar or more restrictive legislation that may render the use of such technologies challenging. Additionally, certain privacy laws extend rights to individuals (such as the right to delete certain personal data) and regulate automated decision making, which may be incompatible with our AI features or our use of AI. These obligations may lead to regulatory fines or penalties or prevent or limit our use of AI. If we cannot use AI, or that use is restricted, our business may be less efficient, or we may be at a competitive disadvantage. We are implementing various initiatives that are designed to address potential AI risks; however, these initiatives may prove insufficient to mitigate potential risks.

A failure to effectively leverage emerging AI technology in our internal operations and management of our business may adversely impact the efficiency of our operations and our ability to keep pace with our competitors and may expose us to regulatory and other risks.

As machine learning and AI technology continues to evolve, more companies are leveraging these technologies to improve efficiencies and maximize opportunities with respect to the management of their respective businesses. We are currently evaluating the ability to leverage such technologies for our own internal operations, including, among other things, fuzzy searches, data extraction and content summarization. However, if we fail to effectively utilize and implement such technologies, or our utilization of such technologies is restricted as the regulatory environment around AI technologies evolves, our business may become less efficient or exposed to greater regulatory risk and may be at a competitive disadvantage. Further, the introduction of AI technologies into our operations may result in new or enhanced governmental or regulatory scrutiny, confidentiality (including placing our employees’ and our customers’ confidential information at risk) or security risks, ethical concerns, legal liability or other complications that could adversely affect our business, reputation and financial results.

The success of our business depends, in part, on our ability to develop new proprietary technical solutions, increase the functionality of our current solutions and develop our reputation as a technology leader.

Our success depends on our ability to continue to innovate, develop and introduce new software and techniques to support our services in order to continue to meet the requirements of our customers better than our competitors. If we fail to do so, or if a competitor develops equivalent or superior technology, demand for certain of our existing services could decline, we may not be able to take advantage of new market opportunities that may arise and we may be required to make significant unplanned occasional expenditures to develop technological solutions that will allow us to compete more effectively. Furthermore, if our competitors have greater resources and access to funding, they may be able to finance the development of new technologies before we are able to do so, which may allow them to enter new markets before us or provide lower-priced or better-quality services. The occurrence of any of the foregoing events could have a material adverse effect on our business, financial condition and results of operations.

Our business is highly competitive. If we fail to compete successfully, or if we fail to innovate in response to changing customer needs, new technologies or other market requirements, our business, financial condition and results of operations could be adversely affected.

We face competition from other providers of TIC and S&A services, as well as from new competitors such as start-ups and private equity-backed companies. We generally compete with them on the basis of quality, service, reputation, cost, capacity and turn-around time of our services and our reputation with third parties, such as retailers and regulators. If our services, supply, support, distribution, cost structure or reputation do not enable us to continue competing successfully with our current competitors, or to compete in the future with any new market entrants, our business, financial condition and results of operations could be materially adversely affected.

Our future success and competitive advantage also depend on our ability to keep pace with rapid technological changes that could make our services less competitive or obsolete and on our ability to increase customer adoption of our services, including our SaaS offerings. Our customers are continuously innovating their products and technology and generally expect us to keep pace with their innovations. We risk losing market share if we fail to adapt quickly enough to market needs in areas like AI, embedded software, functional safety and other new technologies as they evolve. Our competitors or others might develop technologies or services that are more effective or commercially attractive than our current or future offerings, or that render our technologies or services obsolete. Our competitors may also monetize their data solutions more quickly or effectively than us. If we fail to successfully monetize our data or data-based offerings, invest in the right technologies or innovate as technology and our customers’ needs evolve, or if our competitors introduce superior technologies or services and we cannot make enhancements to our own, our competitive position and, in turn, our business, financial condition and results of operations could be materially and adversely affected. Many of the markets in which we compete, including cybersecurity and connected devices, are also subject to evolving industry and information technology (“IT”) operational standards and regulations, resulting in increasing compliance requirements for us and our customers. To the extent we expand further into highly regulated industries, our services may need to address additional requirements specific to those industries.

In addition, our ability to compete may be affected by increased digital disruption of the TIC industry by evolving technology and new solutions. The TIC industry is subject to increasingly rapid technological changes, including an increased focus on data provisioning and analysis. For example, increased digitization of regulatory or product information, simulation and predictive testing of products, remote inspection or reliance on AI could replace traditional TIC services. Our failure to

innovate and adapt to address these changes, either on a timely basis or at all, could result in our loss of market share or significantly reduce demand for our services.

Finally, remaining competitive in our industry requires us to maintain a favorable geographic dispersion. If our geographic placement and dispersion are, or become, suboptimal, we could lose or miss out on market share. Additionally, we compete with a number of local and regional TIC service providers who may be better suited than us to compete in local and regional markets due to their brand recognition, expertise in local and regional regulations and better access to local and regional markets and customers. If we cannot adapt or meet the needs of our customers in the various regions in which we and our customers are located, we may not be able to continue to compete successfully on a global scale.

We are subject to a variety of risks associated with doing business outside the United States.

We maintain significant international operations, including operations in Greater China (mainland China, Hong Kong and Taiwan), Japan, Germany, the Republic of Korea, Italy and Canada, as well as other countries. We continue to increase our global footprint. For example, since 2022, we have opened additional laboratories in Mexico, the Republic of Korea, Vietnam and Taiwan. In 2023, approximately 58.3% of our revenue was generated from customers outside the United States. As a result, we are subject to a number of risks and complications associated with international sales, services and other operations, as well as risks associated with U.S. foreign policy. These include:

•difficulties associated with compliance with numerous, potentially conflicting and frequently complex and changing laws and regulations in multiple jurisdictions, such as with respect to business licensing and environmental matters, intellectual property, privacy and data protection, corrupt practices, embargoes, trade sanctions, competition, employment and licensing;

•general economic, social and political conditions in countries where we operate, including international and U.S. trade policies, currency exchange rate fluctuations and political instability;

•tax and other laws that reduce our profitability or restrict our ability to use tax credits, offset gains or repatriate funds, as well as changes in local and international tax laws, including transfer pricing regulations and changes in tax treaties, which may restrict our ability to use tax credits, offset gains, repatriate funds or result in adverse tax consequences;

•any adverse changes in the regulatory environments applicable to us, which could negatively impact our business;

•foreign exchange and currency restrictions, transfer pricing regulations and adverse tax consequences, which may affect our ability to transfer capital and profits;

•inflation, deflation and stagflation in any country in which we have operations;

•foreign customers with longer payment cycles than customers in the United States; and

•imposition of or increases in customs duties and other tariffs.

Further, we operate in a number of countries throughout the world, including in countries that lack developed legal systems or do not have as strong a commitment to anti-corruption and ethical behavior as is required by U.S. laws or by our corporate policies. In addition, based on the nature of our services and our structure, we deal with both governments and government-owned business enterprises, such as our 70% joint venture interest in UL-CCIC Company Limited (“UL-CCIC”). Therefore, we are subject to the risk that we, our officers, directors, employees, business partners, joint venture partners or any third party that we engage to do work on our behalf may take action determined to be in violation of anti-corruption laws in the jurisdictions in which we conduct business, including the U.S. Foreign Corrupt Practices Act (the “FCPA”), the UK Bribery Act 2010 (the “Bribery Act”) and the Canadian Corruption of Foreign Public Officials Act (the “CFPOA”), which prohibit corruptly providing, offering, promising or authorizing, directly or indirectly, anything of value to foreign officials, political parties or candidates for political office for the purposes of obtaining or retaining business or securing any improper business advantage. The provisions of the Bribery Act also prohibit non-governmental commercial bribery, soliciting or accepting bribes and “facilitation payments,” or small payments to low-level government officials to expedite routine approvals. The Bribery Act also has an offense applicable to corporate entities and partnerships that carry on part of their business in the United Kingdom that fail to prevent bribery, which can take place anywhere in the world, by persons who perform services for or on behalf of them, subject to a defense of having adequate procedures in place to prevent the bribery from occurring.

The offense could render parties criminally liable for the acts of their agents, joint venture partners or commercial partners, even if done without their knowledge.

Any violation of the FCPA, the CFPOA, the Bribery Act or any similar anti-corruption law or regulation could result in substantial fines, sanctions, disgorgement of profits or civil or criminal penalties, debarment from business dealings with certain governments or government agencies or restrictions on the marketing of our services in certain countries, injunctions or other remedial measures, which could harm our business, financial condition and results of operations. If these anti-corruption laws or our internal policies were to be violated, our reputation and operations could also be substantially harmed. Further, detecting, investigating and resolving actual or alleged violations is expensive and can consume significant time and attention of our senior management.

Compliance with multiple, and potentially conflicting, international laws and regulations, including anti-corruption laws, may be difficult, burdensome or expensive. U.S. public companies are required to maintain records that accurately and fairly represent their transactions and have an adequate system of internal accounting controls. We maintain internal controls, policies and procedures to promote compliance by our directors, officers, employees or business partners and third parties acting on our behalf with the FCPA, the Bribery Act, the CFPOA and other applicable anti-corruption laws. However, we can make no assurance that our controls, policies and procedures, even if enhanced, have been or will be followed at all times or will effectively detect and prevent all violations of the applicable laws. Further, in connection with past and future acquisitions by us, there is a risk of successor liability relating to such laws in connection with prior actions or alleged actions of an acquired company. Such matters or allegations related to such matters could adversely affect our reputation and the burden and cost associated with defending or resolving such matters could adversely affect our business, prospects, financial condition and results of operations.

Although we currently operate in a number of countries throughout the world, a shift in the location of our customers’ product development and manufacturing could result in us needing to expand into, and compete in, new jurisdictions and, as a result, to navigate new regulatory and competitive environments.

We may be adversely affected by global and regional economic and political instability.

We may be adversely affected by global and regional economic and political conditions. The uncertainty or deterioration of the global economic and political environment could adversely affect us. Customers may modify, delay or cancel plans to purchase our services. Any inability of current or potential customers to purchase or pay for our services due to, among other things, declining economic conditions as a result of inflation, rising interest rates, changes in spending patterns and the effects of governmental initiatives to manage economic conditions may have a negative impact on our business, prospects, financial condition and results of operations. Additionally, a potential U.S. federal government shutdown, breach of the federal debt ceiling, the upcoming 2024 U.S. presidential and congressional elections and attendant uncertainties regarding actual and potential shifts in U.S. and foreign, trade, economic and other policies may increase uncertainty and volatility in the global economy and financial markets. Overall demand for our services could be reduced as a result of a global financial crisis, economic recession or political unrest.

For example, the conflicts between Russia and Ukraine and in Israel, Gaza and surrounding areas have created increasingly volatile geopolitical and economic conditions around the world; however, we do not currently expect that either conflict will have a material, direct impact on our business. In March of 2022, we made the decision to stop all work in Russia and Belarus and not take on or pursue any new customer orders related to those countries for the foreseeable future. However, geopolitical instability and adversity arising from such conflicts (including additional conflicts that could arise elsewhere in the world), the imposition of sanctions, taxes or tariffs against Russia and Russia’s response (including retaliatory acts, such as cyber-attacks and sanctions against other countries) and impacts to energy markets and supplies could adversely affect the global economy or specific international, regional and domestic markets we operate in, increase inflationary pressures, or disrupt our customers’ supply chains, which could in turn have a material adverse effect on our business and financial condition.

Additionally, our operating cash flows, combined with access to the credit markets, provide us with significant discretionary funding capacity. However, deterioration in the global credit markets may limit our ability to access credit markets, which could adversely affect our liquidity or increase our cost of borrowing. Increases in our cost of borrowing could adversely affect our liquidity and results of operations.

Enhanced trade tariffs, import restrictions, export restrictions, regulations of mainland China or other trade barriers could materially adversely affect our business.

We are continuing to expand our international operations as part of our growth strategy and have experienced an increasing concentration of sales in certain regions outside the United States. There is currently significant uncertainty about the future relationship between the United States and various other countries, most significantly mainland China, with respect to trade policies, treaties, government regulations and tariffs. Tariffs, trade restrictions or trade barriers that have been, and may in the future be, placed on products we test, inspect and certify by foreign governments, especially mainland China, have raised, and could further raise, amounts paid for some or all of our services, which may result in the loss of customers and our business, and our financial condition and results of operations may be harmed. Further tariffs may be imposed that could cover imports of components and materials used in our customers’ products, or our business may be adversely impacted by retaliatory trade measures taken by mainland China or other countries, including restricted access to components or materials used in our customers’ products or increased amounts that must be paid for their products, which could significantly reduce demand for our services, in turn materially harming our business, financial condition and results of operations. Further, the continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales. Given the relatively fluid regulatory environment in China and the United States and uncertainty regarding how the U.S. or foreign governments will act with respect to tariffs, international trade agreements and policies, there could be additional tax or other regulatory changes in the future. Any such changes could directly and adversely impact our financial results and results of operations. For a discussion of additional risks related to our business in China, see “—Risks Related to Conducting Business in China.”

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.

Our business is subject to U.S. export controls, including the U.S. Export Administration Regulations. Obtaining the necessary export license or other authorization for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, our activities are subject to U.S. economic sanctions laws and regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control that prohibit the sale or supply of most products and services to embargoed jurisdictions or sanctioned parties. Violations of U.S. sanctions or export control regulations can result in significant fines or penalties and possible incarceration for responsible employees and managers. If we fail to obtain appropriate import, export or re-export licenses or permits, we may be adversely affected through reputational harm, as well as other negative consequences, including government investigations and penalties.

Also, various countries, in addition to the United States, regulate the import and export of certain technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our SaaS and other technology solutions in those countries. Future changes in export and import regulations may create delays in the introduction of our technology solutions in international markets. Any change in export or import regulations, economic sanctions or related legislation, increased export and import controls or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers with international operations. Any decreased use of our technology solutions or limitation on our ability to export or sell our technology solutions could adversely affect our business, financial condition and results of operations.

The success of our operations in international markets is highly dependent on the expertise of local management and operating staff, as well as the political, social, legal and economic operating conditions of each country in which we operate.

The success of our business depends on the actions of our employees. In our international locations, we are highly dependent on our local management and operating staff to serve our customers and operate our facilities in these markets in accordance with local law and best practices. If the local management or operating staff were to leave our employment, we would have to expend significant time and resources building up our management or operational expertise in these local markets. Such a transition could adversely affect our reputation in these markets and could materially and adversely affect our business and operating results.

Additionally, the health and safety of our employees or those working on our behalf, and the security of our physical infrastructure, may be affected due to acts of violence or vandalism by anti-social elements. Although we take protective measures to ensure the safety of our employees at our global locations of work and transit, incidents of organized political demonstrations, civil unrest or random acts of rage can affect the safety of our assets and employees, impacting our business and operating results.

We are also subject to other inherent risks attributed to operating in a global economy. As of March 31, 2024, we leased or owned 91 sites with laboratories spread across 28 countries. If the international markets in which we compete are affected by

changes in political, social, legal, economic or other factors—such as deterioration in U.S.-China relations, instability in the North Korean peninsula or South China Sea, the conflict between Russia and Ukraine or the conflict in Israel, Gaza and surrounding areas—our business and operating results may be materially and adversely affected. Uncertainty as a result of such changes may last for years and could also impact our customers’ businesses and operations. Our international operations may subject us to additional risks that differ in each country in which we operate and such risks may negatively affect our results.

Our senior leadership team is critical to our continued success, and the loss of such personnel could have a material adverse effect on our business, financial condition and results of operations.

Our current and future success depend substantially on the continued service and performance of the members of our senior leadership team. These personnel possess business and technical capabilities that are difficult to replace. We have attempted to mitigate this risk by providing market compensation and benefits, as well as appropriate retention incentives, including long-term incentive compensation with multi-year vesting provisions intended to incentivize and retain these key personnel. If we lose key members of our senior management operating team or are unable to effect smooth transitions from one executive to another as part of our succession plan, we may not be able to effectively manage our current operations or meet ongoing and future business challenges, and this could have a material adverse effect on our business, financial condition and results of operations.

Additionally, successfully executing organizational change, including management transitions and succession plans for our senior leadership, is critical to our business success. Although we have implemented disciplined, ongoing succession planning for our senior leadership and other key executives, this process does not guarantee that the services of qualified senior executives will continue to be available to us in the future.

Our success depends upon our ability to recruit, train and retain key employees—in particular, our technical personnel—including through the implementation of diversity, equity and inclusion (“DEI”) initiatives.

Our current and future success depend substantially on our employees, including highly trained and skilled engineering, technical and professional personnel. We depend on the technical and regulatory know-how of our skilled and technical personnel, and competition for their talent is intense among our competitors. Particularly in highly specialized and technical areas, it has become more difficult to retain employees and meet all of our needs for employees in a timely manner, which could affect our growth. Although we intend to continue to devote significant resources to recruiting, training and retaining qualified employees—in particular, our technical talent—we may not be able to attract, effectively train and retain these employees. Any failure to do so could impair our ability to efficiently perform our contractual obligations, timely meet our customers’ needs and ultimately win new business, all of which could adversely affect our business, financial condition and results of operations.

In particular, the success of our TIC business relies on an adequate supply of skilled engineers. Trained and experienced technical personnel are in high demand and may be in short supply in some areas. We cannot guarantee that we will be able to recruit, attract and retain the skilled workforce of engineers necessary to continue offering our existing and future services widely or efficiently, or that labor expenses or employee turnover will not increase as a result of a shortage in the supply of skilled engineers, any of which could have a material adverse effect on our business, financial condition and results of operations.

Additionally, changes in immigration laws and policies, including during the COVID-19 pandemic, have, in certain circumstances, made it more difficult—and may continue to make it more difficult—for us to recruit or relocate highly skilled technical, professional and management personnel to meet our business needs.

We are also working to advance culture change through the implementation of DEI initiatives throughout our organization. For example, in 2019, we launched our DEI strategy to help embed these priorities into the culture of our Company. If we do not (or are perceived not to) successfully implement these initiatives, our ability to recruit, attract and retain talent may be adversely impacted.

Our profitability could suffer if we are not able to timely and effectively utilize our employees or manage our cost structure.

The cost of providing our services, including the degree to which our employees are utilized, affects our profitability. The degree to which we are able to utilize our employees in a timely manner or at all is affected by a number of factors, including:

•our ability to hire, assimilate and deploy new employees;

•our ability to forecast demand for our services and to maintain and deploy headcount that is aligned with demand, including employees with the right mix of skills and experience;

•our employees’ inability to obtain or retain required certifications;

•our ability to manage attrition; and

•our need to devote time and resources to training, business development and other non-chargeable activities.

Our greatest assets are our employees, and it is important that we spend adequate resources on their continued technical and regulatory training. If our employees are under-utilized, our profit margin and profitability could suffer. If our employees are over-utilized, it could have a material adverse effect on employee morale and attrition, which would, in turn, have a material adverse effect on our business, financial condition and results of operations.

Our profitability is also affected by the extent to which we are able to effectively manage our overall cost structure for operating expenses, such as wages and benefits, real estate expenses, overhead and capital, including our test equipment and its maintenance, and other investment-related expenditures. If we are unable to effectively manage our costs and expenses and achieve efficiencies, our competitiveness and profitability may be adversely affected.

We work with dangerous materials and in dangerous environments that could injure our employees, contractors or visiting customers, damage our or our customers’ facilities and disrupt our or our customers’ operations.

Some of our operations involve destructive testing and the handling of hazardous materials that may pose the risk of fire, explosion, human exposure to hazardous substances or the release of hazardous substances into the environment. For example, as part of our process for certifying a number of products, we use flammable materials and conduct fire testing, such as by setting houses on fire in our large scale fire laboratories. We also recently opened battery testing laboratories where we test lithium ion batteries that contain potentially explosive materials, and we are in the process of constructing a new battery testing laboratory in Auburn Hills, Michigan where we plan to test lithium ion batteries. Such events could result from the actions of our employees, operational failures, natural disasters or terrorist attacks, and might cause injury or loss of life to our employees and others, environmental contamination and property damage. Additionally, as discussed elsewhere in this Quarterly Report, much of our work, including the work we complete using dangerous materials or in dangerous environments, requires certain permits and other permissions. There is a risk that we, or any of the third parties who complete work for us or are permitted to use a portion of any of our laboratories, fail to obtain or maintain the requisite permits or permissions, on time or at all. Failure to properly handle, transport or dispose of these materials or otherwise conduct our operations in accordance with EHS or other applicable laws or requirements, or any injury or property damage caused by our employees at our or our customers’ facilities, could expose us to substantial liability for administrative, civil and criminal penalties, cleanup and site restoration costs and liability associated with releases of such materials, damages to natural resources and other damages, as well as potentially impair our ability to conduct our operations. Such liability is commonly on a strict, joint and several liability basis, without regard to fault. Liability may be imposed as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, prior operators or other third parties. Neighboring landowners and other third parties may file claims against us for personal injury or property damage allegedly caused by the release of pollutants into the environment. A disruption of our operations caused by these or other events could have a material adverse effect on our results of operations.

We are subject to risks related to sustainability and corporate social responsibility.

Our business faces increasing scrutiny related to ESG issues, including renewable resources, environmental stewardship, supply chain management and sustainable procurement, climate change, biodiversity and sustainable land use, air quality, safety, diversity and inclusion, energy use and emissions, waste, water use, workplace conduct, human rights, philanthropy and support for local communities. Increased expectations and increased regulations regarding such issues may result in increased costs (including, but not limited to, increased costs related to compliance, stakeholder engagement, contracting and insurance), changes in demand for certain products, enhanced compliance or disclosure obligations or other impacts to our business, financial condition or results of operations.

While we may at times engage in voluntary initiatives (such as voluntary disclosures, certifications or goals, among others) to improve the ESG profile of our Company or to respond to stakeholder expectations, such initiatives may be costly and may not have the desired effect. Expectations around our management of ESG matters continue to evolve rapidly, in many

instances due to factors that are out of our control. For example, we may ultimately be unable to complete certain initiatives or targets, either on the timelines initially announced or at all, due to technological, cost or other constraints that may be out of our control. Moreover, actions or statements that we may take based on expectations, assumptions or third party information that we currently believe to be reasonable may subsequently be determined to be erroneous or be subject to misinterpretation. If we fail, or are perceived to fail, to meet applicable standards or expectations with respect to these issues across all of our services and in all of our operations and activities, including the expectations we set for ourselves, our reputation and brand image could be damaged, we could be subject to negative allegations made by certain stakeholders and/or litigation and our business, financial condition and results of operations could be adversely impacted. For example, as stakeholder perceptions of sustainability continue to evolve, there have been increasing allegations of greenwashing against companies making significant ESG claims due to a variety of perceived deficiencies in performance.

Certain organizations that provide corporate governance and other corporate risk information to investors and stockholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based on ESG or sustainability metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such companies to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. This may require us to incur significant additional costs or negatively impact our share price or access to and cost of capital. Similarly, to the extent ESG matters negatively impact our reputation, it may also impede our ability to compete as effectively to attract and retain employees or customers, which may adversely impact our operations. Certain of our customers also have their own ESG requirements, which are subject to change, and any failure to meet such requirements may adversely impact our ability to do business with them. We may be especially subject to scrutiny on such matters given our efforts to portray our operations and services as a tool to help assess and manage certain ESG risk.

In addition, we expect there will likely be increasing levels of regulation, disclosure-related and otherwise, with respect to ESG matters. For example, various policymakers (including the SEC, the EU and the State of California) have adopted and may, in the future, further adopt rules that would require companies to provide significantly expanded climate- or other ESG-related disclosures, which may require us to incur significant additional costs t