UL Solutions Inc.

Greetings, and welcome to the UL Solutions first quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Mitchell Gee, Senior Vice President, Corporate Finance at UL Solutions. Thank you. You may begin.

Thank you. Welcome, everyone, to our first quarter 2024 earnings call, our first earnings call as a public company. Joining me today are Jenny Scanlon, our chief executive officer, and Ryan Robinson, our chief financial officer. During our discussion today, we will be referring to our earnings presentation, which is available on the investor relations section of our website at ul.com. Our earnings release is also available on the website. I would like to remind everyone that on today's call, we may discuss forward-looking statements within the meaning of the safe harbor provisions of the Private Security Litigation Reform Act of 1995. These forward-looking statements may include, among other things, statements about UL Solutions' results of operations and estimates and prospects that involve substantial risks. uncertainties, and other factors that could cause actual results to differ in a material way from those expressed or implied in the forward-looking statements. Please see the disclosure statement on slide two of the earnings presentation, as well as the disclaimers in our earnings release concerning forward-looking statements and the risk factors that are described in our quarterly report on Form 10-Q. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the dates you're of except as required by law. Today's presentation also includes references to non-GAAP financial measures. A reconciliation to the most comparable GAAP financial measure can be found in the appendix to the earnings presentation. With that, I would now like to turn the call over to Jenny.

Good morning, everyone, and thanks for joining us. We had a strong start to 2024 driven by outstanding execution from our team. who are leading our ability to anticipate important tailwinds from the megatrends that define our industry today. Our results fuel our mission of working for a safer world while achieving attractive shareholder returns expected by a newly public company. During our IPO process, we presented UL Solutions as a global business services company with a well-established financial profile positioned for long-term growth, expanded profitability, and durable free cash generation. We expect these themes to be consistent and our first quarter results bode well for our future performance. I have four topics for today's call. First, given that this is our first earnings call as a public company, I'll provide a brief overview of UL's solutions. Second, I'll highlight key elements contributing to our strong first quarter performance. Third, I'll highlight some key customer and growth achievements from the quarter. Finally, I'll emphasize our strong financial position and reiterate our capital allocation plans as a public company. While many of you know our story, some don't. So let's start on slide five with an overview of UL Solutions. We are a leading global business services company focused on independent product testing, inspection, and certification employing more than 15,000 talented individuals around the world. On slide six, you can see we have three segments organized across two businesses, which have grown at a 6.9% CAGR since 2011. Our testing inspection and certification business, affectionately called TIC by the industry, is comprised of our two largest segments, industrial and consumer. Our TIC business provides extensive solutions to a wide array of customers, helping them quickly take new products and systems to market with fewer safety, security, and sustainability risks. We focus on product TIC, on our customers' innovation and new product development processes, and the ecosystems required to manufacture and distribute those products safely. Our second business and third segment is software and advisory. which complements and extends the value proposition of the tick business by unleashing the power of our data. Our integrated service portfolio spans four service categories, certification testing, ongoing certification services, non-certification testing and other services, and finally, software services. We at UL Solutions would like you to focus on five key themes, which you can see on slide seven. We are a mission-driven growth company in a large, growing, consolidating, yet still highly fragmented industry. We believe that as of 2022, we had the largest global market share in product tick, 7% by revenue. Second, we are dedicated to safety science and ESG. Customers know that UL Solutions will apply science to help solve their most pressing safety, security, sustainability challenges third our customer relationships run deep our 80,000 plus customers span over 35 industries and even more important is how loyal our customers are amongst our top 500 customers in 2023 we had a retention rate of 99% Our business model and these customer relationships result in 45% of our revenue being generated from ongoing certification services and software, both of which are recurring revenue streams. Fourth, we are a global leader in an industry that has significant entry requirements. We have built a wide and deep competitive moat, and that moat starts with the vast number of accreditations that allow us to attract customers who want to sell their products in over 110 countries. Finally, we are fiscally strong. Backed by our healthy balance sheet and strong free cash flow, we are well positioned to fund our ambitions. We employ a disciplined capital allocation strategy that provides flexibility in how we deploy capital and aim to generate returns for our shareholders. As the global safety science leader, We help our customers manufacture safer products, strengthen product security, and enhance their products and their company's sustainability. We are relentless in that pursuit, investing in our people and processes to enhance our capabilities for the continuously evolving risks in global markets. Now let me present my thoughts on the quarter. Our first quarter performance demonstrated the strength of our business, bolstered by organic, robust organic revenue growth achieved in all segments and all regions. We could not have achieved these results without focused execution led by our experienced team, for whom I am truly grateful. Our employees' relentless emphasis on safety, science, and customer centricity shapes our culture and enhances our business. Our team delivered organic growth of 7.5%, resulting in revenue for the first quarter of 670 million U.S. dollars. We experienced particular strength in our industrial segment and improving trends in our consumer segment. Importantly, we experienced growth in all three segments across all geographic regions, which was partially offset by the reality that as a global company, we experience FX impacts. Adjusted EBITDA grew 18%, and adjusted EBITDA margin expanded by 200 basis points. Our hard work resulted in a 13% increase in adjusted net income and generated 84 million of free cash flow. Next, on slide eight, let me highlight a few achievements this quarter. The megatrends of energy transition propelled growth. Our Korean Advanced Battery Laboratory came fully online this quarter. This new facility provides Korean automotive customers with improved access to the latest large battery safety technology and joins other UL Solutions laboratories in the United States, Europe, and China in unifying our customer-centric industrial and EV battery technology solutions. One of our largest global accounts, Siemens, worked with us to achieve and license our first certification that relies on product simulation and a digital model. This remarkable accomplishment has potentially wide-ranging implications for future product innovation processes that could dramatically improve customers' speed to market. In our consumer segment, our North American Retail Center of Excellence opened in Arkansas. This lab is our largest lab investment in the retail and consumer product sector in our history. The 100,000 square foot space is one of the most advanced retail testing laboratories in the United States and serves the most important retailers in North America. This new lab also provides our team with greater capacity and extended capabilities to serve our retail customers. As part of our ongoing efforts to better align our software offerings with what our customers need and want, we launched Ultras, a new brand that unifies our flagship software to help customers meet regulatory, supply chain, and sustainability challenges. Ultras serves over 10,000 customers around the world and across industries. Since January, we've integrated 70% of our revenue generating software portfolio under this bold new brand. Bringing clarity and awareness to our software offerings and strategy has helped our customers understand how they can eliminate cumbersome individual point solutions. Ultras has already broadened our lead generation and new opportunity funnel. Finally, let me comment on our capital allocation philosophy. We boast a history of having a strong balance sheet, robust cash flow generation, and disciplined approach to capital allocation. Our history and foundation position us to deploy capital in a variety of ways that we expect to generate shareholder returns. As we report in today's segment highlights, we constantly analyze options to invest in the business. We have no shortage of ideas for organic CapEx that supports our customers' innovation, extends our productivity, and augments our revenue growth. We continue to evaluate a focused set of M&A opportunities in a disciplined manner, ensuring our investments will enhance our global capabilities or extend our market-leading footprint. We are committed to maintaining a strong balance sheet with conservative leverage and investment-grade ratings, and we expect to return excess capital to shareholders. Now let me turn the call over to Brian, who will provide greater detail on our results and our plans.