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 June 30, 2024

OR

 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  x    No  o

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 38,876,949 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 July 19, 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’ 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	21
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	39
ITEM 4. Controls and Procedures	40
PART II. OTHER INFORMATION	41
ITEM 1. Legal Proceedings	41
ITEM 1A. Risk Factors	41
ITEM 6. Exhibits	41
SIGNATURE	42

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 June 30,				Six Months Ended June 30,
(in millions, except per share data)	2024		2023		2024		2023
Revenue	$	730	$	689	$	1,400	$	1,318
Cost of revenue	364		352		715		687
Selling, general and administrative expenses	240		220		468		439
Operating income	126		117		217		192
Interest expense	(13)		(8)		(28)		(16)
Other income, net	21		11		18		16
Income before income taxes	134		120		207		192
Income tax expense	28		21		41		35
Net income	106		99		166		157
Less: net income attributable to non-controlling interests	5		5		9		8
Net income attributable to stockholders of UL Solutions	$	101	$	94	$	157	$	149
Earnings per common share:
Basic	$	0.51	$	0.47	$	0.79	$	0.75
Diluted	$	0.50	$	0.47	$	0.78	$	0.75
Weighted average common shares outstanding:
Basic	200		200		200		200
Diluted	201		200		201		200

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

2

UL Solutions Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net income	$	106	$	99	$	166	$	157
Other comprehensive (loss) income, net of tax:
Pension and postretirement benefit plans, net of tax	—		1		1		2
Foreign currency translation loss	(10)		(12)		(26)		(6)
Total other comprehensive loss	(10)		(11)		(25)		(4)
Comprehensive income	96		88		141		153
Less: comprehensive income attributable to non-controlling interests	5		4		8		7
Comprehensive income attributable to stockholders of UL Solutions	$	91	$	84	$	133	$	146

    

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

3

UL Solutions Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

Condensed Consolidated Balance Sheets

(in millions, except per share data)	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	295	$	315
Accounts receivable, net of allowance of $12 and $9	381		362
Contract assets, net of allowance of $1 and $1	206		179
Other current assets	75		97
Total current assets	957		953
Property, plant and equipment, net of accumulated depreciation of $734 and $737	554		555
Goodwill	628		623
Intangible assets, net of accumulated amortization of $235 and $232	63		72
Operating lease right-of-use assets	145		151
Deferred income taxes	118		110
Capitalized software, net of accumulated amortization of $408 and $382	135		139
Other assets	142		133
Total Assets	$	2,742	$	2,736
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	134	$	169
Accrued compensation and benefits	171		281
Operating lease liabilities - current	36		39
Contract liabilities	317		162
Other current liabilities	82		58
Total current liabilities	740		709
Long-term debt	785		904
Pension and postretirement benefit plans	223		232
Operating lease liabilities	117		120
Other liabilities	91		93
Total Liabilities	1,956		2,058
Commitments and contingencies (Note 17)
Stockholders’ equity:
Class A common stock, $0.001 per share, 39 million and 200 million shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Class B common stock, $0.001 per share, 161 million and 0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively	—		—
Additional paid-in capital	808		776
Retained earnings	131		24
Accumulated other comprehensive loss	(170)		(146)
Total stockholders’ equity before non-controlling interests	769		654
Non-controlling interests	17		24
Total Stockholders’ Equity	786		678
Total Liabilities and Stockholders’ Equity	$	2,742	$	2,736

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

4

UL Solutions Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

Condensed Consolidated Statements of Stockholders’ 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 March 31, 2024	$	—	$	776	$	55	$	(160)	$	12	$	683
Net income	—		—		101		—		5		106
Other comprehensive loss, net of tax	—		—		—		(10)		—		(10)
Stock-based compensation	—		32		—		—		—		32
Dividend to stockholders of UL Solutions ($0.125 per share)	—		—		(25)		—		—		(25)
Balance at June 30, 2024	$	—	$	808	$	131	$	(170)	$	17	$	786
Balance at December 31, 2023	$	—	$	776	$	24	$	(146)	$	24	$	678
Net income	—		—		157		—		9		166
Other comprehensive loss, net of tax	—		—		—		(24)		(1)		(25)
Stock-based compensation	—		32		—		—		—		32
Dividends to stockholders of UL Solutions ($0.25 per share)	—		—		(50)		—		—		(50)
Dividend to non-controlling interest	—		—		—		—		(15)		(15)
Balance at June 30, 2024	$	—	$	808	$	131	$	(170)	$	17	$	786
Balance at March 31, 2023	$	—	$	1,009	$	246	$	(159)	$	26	$	1,122
Net income	—		—		94		—		5		99
Other comprehensive loss, net of tax	—		—		—		(10)		(1)		(11)
Dividend to stockholder of UL Solutions ($0.10 per share)	—		—		(20)		—		—		(20)
Dividend to non-controlling interest	—		—		—		—		(15)		(15)
Balance at June 30, 2023	$	—	$	1,009	$	320	$	(169)	$	15	$	1,175
Balance at December 31, 2022	$	—	$	1,009	$	211	$	(166)	$	23	$	1,077
Net income	—		—		149		—		8		157
Other comprehensive loss, net of tax	—		—		—		(3)		(1)		(4)
Dividends to stockholder of UL Solutions ($0.20 per share)	—		—		(40)		—		—		(40)
Dividend to non-controlling interest	—		—		—		—		(15)		(15)
Balance at June 30, 2023	$	—	$	1,009	$	320	$	(169)	$	15	$	1,175

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

5

UL Solutions Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Condensed Consolidated Statements of Cash Flows

	Six Months Ended June 30,
(in millions)	2024		2023
Operating activities
Net income	$	166	$	157
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	82		74
Gains on divestitures	(25)		(2)
Stock-based compensation	6		—
Loss (gain) on foreign exchange transactions	6		(2)
Deferred income taxes	(10)		25
Other, net	12		(4)
Changes in assets and liabilities, excluding the effects of acquisitions and divestitures:
Accounts receivable	(33)		13
Contract and other assets	(26)		(73)
Accounts payable	(20)		(18)
Accrued expenses	(74)		(88)
Pension and postretirement benefit plans	(3)		(1)
Contract and other liabilities	163		139
Net cash flows provided by operating activities	244		220
Investing activities
Capital expenditures	(113)		(113)
Acquisitions, net of cash acquired	(10)		(1)
Proceeds from divestitures	30		4
Sales of investments	—		116
Purchases of investments	—		(95)
Other investing activities, net	—		4
Net cash flows used in investing activities	(93)		(85)
Financing activities
Proceeds from long-term debt	20		30
Repayment of long-term debt	(115)		(30)
Dividends to stockholders of UL Solutions	(50)		(40)
Dividend to non-controlling interest	(15)		—
Other financing activities, net	1		1
Net cash flows used in financing activities	(159)		(39)
Effect of exchange rate changes on cash and cash equivalents	(12)		(5)
Net (decrease) increase in cash and cash equivalents	(20)		91
Cash and cash equivalents
Beginning of period	315		322
End of period	$	295	$	413
Supplemental disclosures of cash flow information
Cash paid during the period for interest	$	29	$	15
Cash paid during the period for income taxes	29		26
Cash paid during the period for stock-based compensation	18		60
Noncash investing and financing activities
Capital expenditures funded by liabilities	$	30	$	19
Conversion of stock-based compensation awards to equity (Note 16)	26		—

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

6

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, 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 14 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.

Stock-based Compensation

The Company maintains long-term incentive plans under which equity awards are available to be issued to certain employees, officers and directors. Stock-based compensation expense, measured as the fair value of an award on the date of grant, is recognized ratably over the requisite service period, which is generally equal to the vesting period of the respective award, however may be impacted by certain factors including the employee’s death, disability or retirement. Compensation expense related to performance share units is adjusted each reporting period based on the probable outcome of the performance conditions applicable to each grant.

The fair value of restricted stock units and performance share units is determined using the closing price of the Company’s stock on the date of grant. The fair value of each stock option is measured on the date of grant using a Black-Scholes-Merton option-pricing model that uses various assumptions including expected stock price volatility, expected dividend yield, the risk-free interest rate, and expected term of the award.

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. The amendments will be applied retrospectively. The ASU will result in additional segment information

7

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. The amendments will be applied prospectively. 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 June 30,				Six Months Ended June 30,
(in millions, except per share data)	2024		2023		2024		2023
Net income attributable to stockholders of UL Solutions	$	101	$	94	$	157	$	149
Basic weighted average common shares outstanding	200		200		200		200
Effect of dilutive securities	1		—		1		—
Diluted weighted average common shares outstanding	201		200		201		200
Basic earnings per share attributable to stockholders of UL Solutions	$	0.51	$	0.47	$	0.79	$	0.75
Diluted earnings per share attributable to stockholders of UL Solutions	$	0.50	$	0.47	$	0.78	$	0.75

3. Revenue

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Certification Testing	$	203	$	188	$	379	$	349
Ongoing Certification Services	234		217		467		436
Non-certification Testing and Other Services	225		216		419		398
Software	68		68		135		135
Total	$	730	$	689	$	1,400	$	1,318

Contract Balances

The revenue recognized during the three and six months ended June 30, 2024, which was included in contract liabilities at December 31, 2023, amounted to $49 million and $79 million, respectively. The revenue recognized during the three and six months ended June 30, 2023, which was included in contract liabilities at December 31, 2022, amounted to $44 million and $80 million.

Remaining Performance Obligations

At June 30, 2024, the Company estimates that $159 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 67% 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.

8

4. Acquisitions and Divestitures

Acquisitions

In May 2024, the Company acquired 100% of the outstanding stock of Batterielngenieure GmbH (together with its subsidiaries, “Batterielngenieure”) for approximately $11 million in cash consideration (subject to customary post-closing adjustments). Batterielngenieure is a Germany-based battery testing company that is in the process of building a laboratory in Aachen, Germany to replace the leased facility it is currently using and add testing and simulation capacity. The Company is still in the process of identifying acquired assets and assumed liabilities, which may also result in adjustment of the provisional amounts recorded. The subsequent adjustments of the provisional amounts are not expected to be material. Batterielngenieure is included in the Industrial segment.

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 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 and six months ended June 30, 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 May 2024, the Company completed the sale of its payments testing business in the Industrial segment to an affiliate of Gallant Capital Partners, a California-based private equity firm, 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. The divestiture resulted in a pre-tax gain on sale of approximately $25 million, which was recorded within other income, net in the Company’s Condensed Consolidated Statements of Operations.

Held for Sale

In May 2024, the Company signed a non-binding letter of intent with a prospective buyer to purchase one of its facilities, but has not entered into a definitive agreement to dispose of the facility. As a result, the Company classified the related assets as held for sale. The facility is a testing laboratory, used in the Company’s Industrial and Consumer segments. At June 30, 2024, the carrying amount of the building and related improvements classified as held for sale was $11 million, which was included within other assets on the Condensed Consolidated Balance Sheet. The sale is expected to be completed before the end of 2024, subject to both parties reaching agreement on the terms of the sale and the satisfaction of any closing conditions set forth in such terms.

9

5. Other Income, net

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Foreign exchange (losses) gains	$	(4)	$	1	$	(6)	$	4
Interest income(a)	1		2		2		3
Unrealized gains on equity investments(a)	—		5		—		5
Non-operating pension and postretirement benefit expense	(2)		(2)		(4)		(4)
Gain on divestitures(a)(b)	25		—		25		2
Other(a)	1		5		1		6
Total	$	21	$	11	$	18	$	16

__________

(a)The Company has reclassified the amounts presented for the three and six months ended June 30, 2023 to conform to the current period’s presentation.

(b)See Note 4.

6. Fair Value of Financial Instruments

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

	June 30, 2024				December 31, 2023
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loans	$	500	$	500	$	500	$	500
Revolving credit facility	15		15		110		110
Senior notes	300		312		300		315
Total	$	815	$	827	$	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. Other Current Assets

The components of other current assets are as follows:

(in millions)	June 30, 2024		December 31, 2023
Income tax receivable	$	23	$	49
Prepaid expenses	48		35
Other	4		13
Total	$	75	$	97

    

8. 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

10

issuer. The carrying amount of these investments was $42 million for both periods ended June 30, 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 $154 million and $178 million and liabilities of $79 million and $82 million, inclusive of intercompany eliminations, were included in the Company’s Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, respectively.

9. Goodwill

Changes in the carrying amount of goodwill for the six months ended June 30, 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
Acquisitions	11		—		—		11
Effect of changes in foreign exchange rates	(2)		(3)		(1)		(6)
Balance at June 30, 2024(a)	$	332	$	227	$	69	$	628

__________

(a)Net of accumulated impairment losses of $137 million as of June 30, 2024 and $166 million as of December 31, 2023.

10. Intangible Assets

The following tables summarize intangible assets:

	June 30, 2024
(in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	$	260	$	(207)	$	53
Intellectual property and patents	15		(10)		5
Trademarks	23		(18)		5
Total	$	298	$	(235)	$	63

	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 and six months ended June 30, 2024, reported within the Condensed Consolidated Statements of Operations, was $3 million and $6 million, respectively. Intangible asset amortization expense for the three and six months ended June 30, 2023, reported within the Condensed Consolidated Statements of Operations, was $4 million and $8 million, respectively.

11

11. Pension

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

	Three Months Ended June 30,
(in millions)	2024		2023
Service cost	$	1	$	1
Interest cost	4		4
Expected return on plan assets	(4)		(4)
Amortization of net actuarial loss	1		1
Net periodic benefit cost	$	2	$	2

	Six Months Ended June 30,
(in millions)	2024		2023
Service cost	$	1	$	1
Interest cost	8		8
Expected return on plan assets	(7)		(7)
Amortization of net actuarial loss	2		2
Net periodic benefit cost	$	4	$	4

For the three and six months ended June 30, 2024, the Company’s contributions to various defined contribution savings plans were $13 million and $25 million, respectively. For the three and six months ended June 30, 2023, the Company’s contributions to various defined contribution savings plans were $12 million and $23 million, respectively.

12. Income Taxes

The effective tax rate for the three and six months ended June 30, 2024 was 20.9% and 19.8%, respectively, which differed from the U.S. statutory rate of 21% primarily due to earnings subject to lower tax rates in foreign jurisdictions and a discrete tax benefit for the release of valuation allowances. This was offset by a discrete tax expense for the reduction to previously established deferred tax assets of approximately $5 million due to the Company becoming subject to Section 162(m) of the Internal Revenue Code in the U.S., which limits compensation expenses of certain executive officers that were previously deductible as a private company, as well as Section 162(m) limitations on current year deductions and U.S. tax on Global Intangible Low Taxed Income (“GILTI”) net of related foreign tax credits.

The effective tax rate for the three and six months ended June 30, 2023 was 17.5% and 18.2%, 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 GILTI net of related foreign tax credits.

12

13. Long-Term Debt

The Company’s outstanding debt consisted of the following:

(in millions)	Currency	Maturity Date	June 30, 2024		December 31, 2023
Term loans	USD	January 2027	$	500	$	500
Revolving credit facility	USD	January 2027	15		110
Senior notes	USD	October 2028	300		300
Total debt			815		910
Less: unamortized debt issuance costs			(5)		(6)
Total debt, net of unamortized debt issuance costs			810		904
Less: current portion of long-term debt			(25)		—
Long-term debt			$	785	$	904

Credit Facility

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. As of June 30, 2024, the Company was in compliance with all covenants under the Credit Facility.

The interest rate on the term loans was 6.52% as of June 30, 2024 and 6.46% as of December 31, 2023 and the interest rate on the revolving credit facility was 6.48% as of June 30, 2024 and 6.45% as of December 31, 2023.

Since entering the agreement in January 2022, borrowings under the Credit Facility bore interest at a rate per annum equal to, at the Company’s option, (a) in the case of U.S. dollar loans, the Bloomberg Short-term Bank Yield (“BSBY”) rate plus a margin, and for all other currencies, a specified benchmark rate for the applicable currency plus, in certain instances, a specified spread adjustment plus a margin (loans with a rate based on this clause (a), “benchmark rate loans”) or (b) for U.S. dollar loans only, the base rate plus a margin (loans with a rate based on this clause (b), “base rate loans”). In addition, the Credit Facility included a provision that replaces 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. In November 2023, the Bloomberg Index Services Limited announced that the permanent cessation of BSBY and all of its tenors will be effective on November 15, 2024. Accordingly, on June 28, 2024, the Company entered into an amendment (the “First Credit Facility Amendment”) to the Credit Facility with Bank of America, N.A. and certain other lenders. The First Credit Facility Amendment provided, among other things, for (i) the replacement of BSBY with Term SOFR plus a SOFR adjustment of 0.10% as a benchmark rate for interest periods commencing subsequent to June 28, 2024; (ii) UL Solutions Inc., which was previously the guarantor of the facility, became the named borrower, and UL LLC, which was previously the named borrower, became the guarantor. The foregoing summary of certain provisions of the First Credit Facility Amendment is qualified in its entirety by reference to the amendment filed as exhibit 10.1 hereto.

Senior Notes

In October 2023, the Company issued $300 million in aggregate principal amount of 6.500% 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.

14. Common Stock

As of June 30, 2024 the Company was authorized to issue 1,000,000,000 shares of Class A common stock, par value $0.001 per share, 500,000,000 shares of Class B common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2023 the Company was authorized to issue 200,000,000 shares of Class A common stock, par value $0.001 per share and 200,000,000 shares of Class B common stock, par value $0.001 per share. Class A and Class B common stock each convey the same rights and privileges to their respective holders, except that Class A common stock entitles its holders to 1 vote per share in respect of matters on which shareholders are entitled to vote and Class B common stock entitles its holders to 10 votes per share.

13

UL Standards & Engagement is the sole holder of UL Solutions’ outstanding Class B common stock, resulting in beneficial ownership of 80.6% and voting power of 97.6% of the Company’s outstanding common stock as of June 30, 2024. As a result, UL Standards & Engagement has the ability to control the outcome of matters submitted to the Company’s stockholders for approval, including the election of directors and the approval of any change of control transaction. The Company meets the definition of a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange.

The following table shows the number of shares of common stock outstanding and changes in each class of share:

	Class A	Class B	Total
Balance at December 31, 2023	200,000,000	—	200,000,000
Reclassification(a)	(200,000,000)	200,000,000	—
Initial public offering(b)	38,870,000	(38,870,000)	—
Shares issued under long-term incentive plans	6,949	—	6,949
Balance at June 30, 2024	38,876,949	161,130,000	200,006,949

__________________

(a)On April 11, 2024, the Company filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware, which, among other things, reclassified 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.

(b)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 included 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 initial public offering.

At June 30, 2024, and December 31, 2023, no shares of preferred stock were outstanding.

15. Accumulated Other Comprehensive Loss

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

	Three Months Ended June 30, 2024
(in millions)	Foreign Currency Translation		Pension and Postretirement Plans		Total
Balance at March 31, 2024, net of tax	$	(64)	$	(96)	$	(160)
Amounts before reclassifications	(10)		(1)		(11)
Amounts reclassified out	—		1		1
Total other comprehensive loss, net of tax	(10)		—		(10)
Balance at June 30, 2024, net of tax	$	(74)	$	(96)	$	(170)

	Three Months Ended June 30, 2023
(in millions)	Foreign Currency Translation		Pension and Postretirement Plans		Total
Balance at March 31, 2023, net of tax	$	(48)	$	(111)	$	(159)
Amounts before reclassifications	(11)		1		(10)
Total other comprehensive (loss) income, net of tax	(11)		1		(10)
Balance at June 30, 2023, net of tax	$	(59)	$	(110)	$	(169)

14

	Six Months Ended June 30, 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	(25)		(1)		(26)
Amounts reclassified out	—		2		2
Total other comprehensive (loss) income, net of tax	(25)		1		(24)
Balance at June 30, 2024, net of tax	$	(74)	$	(96)	$	(170)

	Six Months Ended June 30, 2023
(in millions)	Foreign Currency Translation		Pension and Postretirement Plans		Total
Balance at December 31, 2022, net of tax	$	(54)	$	(112)	$	(166)
Amounts before reclassifications	(5)		2		(3)
Total other comprehensive (loss) income, net of tax	(5)		2		(3)
Balance at June 30, 2023, net of tax	$	(59)	$	(110)	$	(169)

16. Stock-based and Other Incentive Compensation

In April 2024, the UL Solutions Inc. 2024 Long-Term Incentive Plan (the “2024 LTIP”) became effective and the Company reserved for issuance 20,000,000 shares of Class A common stock in connection with the 2024 LTIP and the UL Solutions Inc. Long-Term Incentive Plan (the “Pre-IPO LTIP”), as well as 5,000,000 additional shares of Class A common stock reserved for issuance under the UL Solutions Inc. 2024 Employee Stock Purchase Plan (the “2024 ESPP”). Upon settlement of stock-based compensation awards, shares of Class A common stock are issued in respect of such awards. Equity awards that are granted and subsequently expire, are cancelled, forfeited, or are used to satisfy required withholding taxes are recycled back into the total number of shares available for issuance under the 2024 LTIP and the Pre-IPO LTIP. As of June 30, 2024, 19,993,051 shares remain available for issuance under the 2024 LTIP and the Pre-IPO LTIP and 5,000,000 shares remain available for issuance under the 2024 ESPP.

Annual equity awards are issued to certain employees and officers, including named executive officers, in order to attract, motivate and retain talent and to maximize their contribution to the long-term success of the Company. Equity awards are also used as part of the compensation provided to the board of directors in the form of restricted stock units. Directors may also elect to defer receipt of some or all of their annual cash retainer amounts, which are converted into restricted stock units when and as such cash retainer amounts would have otherwise been paid, for either five years, 10 years or until termination of service from the board.

In May 2024, the Company granted annual equity awards, comprised of restricted stock units and performance share units, to eligible employees, officers and directors. In addition, in connection with the IPO, the Company granted nonqualified stock options and restricted stock units to the Company’s executive team, including named executive officers, and other key employees under the 2024 LTIP.

The Company has outstanding awards under the Pre-IPO LTIP, the majority of which will be settled in shares of Class A common stock.

15

Stock-based compensation expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Cost of revenue	$	2	$	1	$	2	$	1
Selling, general and administrative expenses	14		—		13		10
Stock-based compensation expense	$	16	$	1	$	15	$	11
Income tax benefit	(3)		—		(3)		(2)
Stock-based compensation expense, net	$	13	$	1	$	12	$	9
Stock-based compensation expense by type of award
Restricted stock units	$	3	$	—	$	3	$	—
Performance share units	1		—		1		—
Stock options	1		—		1		—
Stock-settled stock appreciation rights	1		—		1		—
Cash-settled awards	10		1		9		11
Stock-based compensation expense	$	16	$	1	$	15	$	11

Restricted Stock Units

Restricted stock units (“RSUs”) represent the right to receive shares of Class A common stock and are generally subject to continued employment through a three-year ratable vesting period.

The following table summarizes the activity related to the Company’s RSUs during the six months ended June 30, 2024:

	Number of RSUs	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2023	—	$	—
Granted	797,102	34.44
Forfeited	(14,619)	34.85
Outstanding as of June 30, 2024	782,483	$	34.43

As of June 30, 2024, total unrecognized compensation expense related to RSUs was $24 million and is expected to be recognized over the remaining weighted-average vesting period of 2.3 years.

Performance Share Units

Performance share units (“PSUs”) represent the right to receive shares of Class A common stock based on the achievement of certain performance conditions and are generally subject to continued employment through a three-year cliff vesting period. The performance conditions are based on company-wide non-GAAP revenue and operating income metrics and the number of Class A common shares issued may range from 0% to a maximum potential value of 200% of the award’s target value based on the satisfaction of the applicable metrics over a three-year cumulative performance period.

16

The following table summarizes the activity related to the Company’s PSUs during the six months ended June 30, 2024:

	Number of PSUs	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2023	—	$	—
Granted	383,574	34.85
Forfeited	(1,365)	34.85
Outstanding as of June 30, 2024	382,209	$	34.85

As of June 30, 2024, total unrecognized compensation expense related to PSUs was $15 million and is expected to be recognized over the remaining weighted-average vesting period of 2.5 years.

Stock Options

Stock options represent the right to purchase shares of Class A common stock and are generally subject to continued employment through a three-year cliff vesting period. Stock options expire ten years from the grant date.

The following table summarizes the activity related to the Company’s stock options during the six months ended June 30, 2024:

	Number of Stock Options	Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2023	—
Granted	2,074,229	$	28.00
Outstanding as of June 30, 2024	2,074,229	$	28.00	2.8 years	$	29
Exercisable as of June 30, 2024	—

The weighted average grant date fair value per share of stock options granted was $7.48 for the period ended June 30, 2024.

The following table summarizes the assumptions used in the Black-Scholes-Merton option-pricing model that was used to estimate the fair value of the stock options at the grant date:

	April 12, 2024
Expected dividend yield	1.79%
Risk-free interest rate	4.48%
Weighted average volatility	24.50%
Expected life (in years)	6.50

As of June 30, 2024, total unrecognized compensation expense related to stock options was $15 million and is expected to be recognized over the remaining weighted-average vesting period of 2.8 years.

Stock Appreciation Rights

The Company has stock appreciation rights outstanding from its Pre-IPO LTIP, which represent the right to receive an amount based on the appreciation in the fair value of the Company’s Class A common stock from the grant date up to a specified date or dates. Prior to the IPO, all stock appreciation rights were Cash-settled Stock Appreciation Rights (“CSARs”). Upon completion of the IPO, the majority of outstanding CSARs were converted to the same number of Stock-settled Stock Appreciation Rights (“SSARs”), which will be settled in shares of Class A common stock under the pre-IPO LTIP. As equity-settled awards, the fair value of the SSARs was determined on the conversion date of April 16, 2024 and, generally, will not be remeasured unless the awards are modified.

17

The conversion of CSARs to SSARs at the completion of the IPO resulted in a reclassification of $26 million from accrued compensation and benefits and other liabilities 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 resulted in additional pre-tax compensation expense of $9 million in the second quarter of 2024, primarily within selling, general and administrative expenses. The pre-tax compensation expense reduced segment operating income by $4 million, $4 million and $1 million for the Industrial, Consumer and Software & Advisory segments, respectively.

The following table summarizes the activity related to the Company’s CSARs during the six months ended June 30, 2024:

	Number of CSAR Awards	Weighted Average Exercise 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
CSARs converted to SSARs	(1,978,761)	21.12
Exercised	(863,648)	7.46
Cancelled	(470,992)	30.06
Forfeited	(19,815)	29.10
Outstanding as of June 30, 2024	118,904	$	15.47	1.29 years	$	3
Exercisable as of June 30, 2024	104,618	$	13.63	1.00 years	$	3

As of June 30, 2024, total unrecognized compensation expense related to CSARs was immaterial. The weighted average grant date fair value per share of CSARs granted was $5.28 for the period ended June 30, 2024.

The Company had a short-term liability related to its CSARs of $3 million and $37 million recorded within accrued compensation and benefits in the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, respectively. The Company had a long-term liability of $0 and $2 million recorded within other liabilities in the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, respectively.

The following table summarizes the activity related to the Company’s SSARs during the six months ended June 30, 2024:

	Number of SSAR Awards	Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2023	—
SSARs converted from CSARs	1,978,761	$	21.12
Exercised	(15,806)	13.02
Forfeited	(6,932)	29.16
Outstanding as of June 30, 2024	1,956,023	$	21.15	2.20 years	$	27
Exercisable as of June 30, 2024	969,451	$	13.07	1.07 years	$	21

As of June 30, 2024, total unrecognized compensation expense related to SSARs was $4 million and is expected to be recognized over the remaining weighted-average vesting period of 1.5 years. The fair value of the Company’s vested SSAR awards was $21 million at June 30, 2024. The weighted average grant date fair value per share of SSARs granted was $6.15 for the period ended June 30, 2024.

18

The following table summarizes the assumptions used in the Black-Scholes-Merton option-pricing model that was used to estimate the fair value of the stock appreciation rights at the conversion date:

	April 16, 2024
Expected dividend yield	1.44%
Risk-free interest rate	4.78% - 5.41%
Weighted average volatility	22.50%
Expected life (in years)	0.11 - 2.96

Performance Cash

The Company has Performance Cash awards outstanding from its previous compensation programs, which represent the right to receive an amount based on the achievement of certain performance conditions and are generally subject to continued employment through a three-year cliff vesting period. The amount may range from 0% to a maximum potential value of 200% of the award’s target value based on the satisfaction of the performance conditions over a three-year cumulative performance period. Prior to the IPO, all Performance Cash awards were settled in cash. Following the IPO, the majority of the outstanding Performance Cash awards will be settled in shares of Class A common stock under the Pre-IPO LTIP.

Compensation expense related to Performance Cash awards was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Cost of revenue	$	1	$	—	$	2	$	1
Selling, general and administrative expenses	9		4		12		7
Performance Cash compensation expense	10		4		$	14	$	8
Income tax benefit	(2)		(1)		(3)		(2)
Performance Cash compensation expense, net	$	8	$	3	$	11	$	6

The Company had a short-term liability related to its Performance Cash awards of $14 million and $16 million recorded within accrued compensation and benefits in the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, respectively. The Company had a long-term liability of $14 million and $13 million recorded within other liabilities in the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 respectively.

17. 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.

18. Related Party Transactions

In the three and six month periods ended June 30, 2024, the Company incurred expenses of $5 million and $10 million, respectively, to access the library of standards owned and maintained by UL Standards & Engagement. In the three and six month periods ended June 30, 2023, the Company incurred expenses of $5 million and $10 million, respectively, to access the library of standards owned and maintained by UL Standards & Engagement.

In the three and six months ended June 30, 2024, the Company declared and paid regular cash dividends to stockholders, resulting in payments of $20 million and $45 million to UL Standards & Engagement, respectively. In the three and six months ended June 30, 2023, the Company declared and paid regular cash dividends to its then sole stockholder, UL Standards & Engagement, of $20 million and $40 million, respectively.

19

19. Segment Information

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2024		2023		2024		2023
Revenue
Industrial	$	314	$	292	$	609	$	562
Consumer	322		309		608		584
Software and Advisory	94		88		183		172
Total revenue	$	730	$	689	$	1,400	$	1,318
Operating income
Industrial	$	85	$	82	$	160	$	154
Consumer	38		33		55		36
Software and Advisory	3		2		2		2
Total operating income	$	126	$	117	$	217	$	192

20. Subsequent Events

On July 8, 2024, the Company acquired 100% of the outstanding stock of TesTneT Engineering GmbH (together with its subsidiaries,“Testnet”) for approximately $19 million in cash consideration (subject to customary post-closing adjustments). Testnet is a Germany-based company that provides testing services for various hydrogen storage systems, refueling stations and their components.

20

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 June 30, 2024 and for the three and six month periods ended June 30, 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 the Quarterly Report on Form 10-Q for the period ended March 31, 2024. 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 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 and divestitures, which impact the comparability of results between periods:

•In May 2024, the Company acquired 100% of the outstanding stock of Batterielngenieure GmbH (together with its subsidiaries, “Batterielngenieure”) for approximately $11 million. Batterielngenieure is a Germany-based battery testing company that is in the process of building a laboratory in Aachen, Germany to replace the leased facility it is currently using and add testing and simulation capacity. Batterielngenieure is included in the Industrial segment.

•In May 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. The business performed Software and Non-certification Testing and Other Services and the results of operations were included in the Industrial segment until the date of divestiture. The divestiture resulted in a pre-tax gain on sale of approximately $25 million, which was recorded within other income, net in the Company’s consolidated results of operations.

•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 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.

On July 8, 2024, after the quarter end, the Company acquired 100% of the outstanding stock of TesTneT Engineering GmbH (together with its subsidiaries,“Testnet”) for approximately $19 million. Testnet is a Germany-based company that provides testing services for various hydrogen storage systems, refueling stations and their components. The results of operations of Testnet will be included in the Industrial segment in subsequent periods.

21

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 other 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 other 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

22

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 Income, net

Other 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 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 income, net and income tax expense. Net income margin is calculated as net income as a percentage of revenue.

23

Results of Operations

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

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

	Three Months Ended June 30,								Change
(in millions)	2024		% Revenue		2023		% Revenue
Revenue	$	730	N/A		$	689	N/A		$	41
Cost of revenue	364		49.9	%	352		51.1	%	12
Selling, general and administrative expenses	240		32.9	%	220		31.9	%	20
Operating income	126		17.3	%	117		17.0	%	9
Interest expense	(13)		(1.8)	%	(8)		(1.2)	%	(5)
Other income, net	21		2.9	%	11		1.6	%	10
Income before income taxes	134		18.4	%	120		17.4	%	14
Income tax expense	28		3.8	%	21		3.0	%	7
Net income	$	106	14.5	%	$	99	14.4	%	7

Revenue

	Three Months Ended June 30,
(in millions)	2024		2023		Change		% Change
Industrial	$	314	$	292	$	22	7.5	%
Consumer	322		309		13		4.2	%
Software and Advisory	94		88		6		6.8	%
Total	$	730	$	689	$	41	6.0	%

Revenue increased by $41 million, or 6.0%, for the three months ended June 30, 2024, as compared to the same period in 2023. Revenue increased on an organic basis by $58 million, or 8.4%, due to organic growth across all segments in the second quarter of 2024, led by the Industrial segment in both Ongoing Certification Services and Certification Testing revenue. FX decreased revenue by $11 million, or 1.6%, primarily due to the relative weakness of the Japanese yen and Chinese renminbi. Acquisitions and divestitures decreased revenue by $6 million, or 0.9%, primarily due to the sale of the payments testing business in the Industrial segment.

	Three Months Ended June 30, 2024
(in millions)	Organic		Acquisition		FX		Total		Organic % Change		Total % Change
Revenue change
Industrial	$	34	$	(7)	$	(5)	$	22	11.6	%	7.5	%
Consumer	19		—		(6)		13		6.1	%	4.2	%
Software and Advisory	5		1		—		6		5.7	%	6.8	%
Total	$	58	$	(6)	$	(11)	$	41	8.4	%	6.0	%

Cost of R