10-K: UL Solutions Reports Strong 2025 Growth, Strategic Divestiture

UL Solutions Inc. announced a 6.4% revenue increase to $3.053 billion in 2025, driven by organic growth across all segments, alongside a strategic divestiture and a new executive deferred compensation plan.

Summary

• Revenue increased by $183 million, or 6.4%, to $3.053 billion for the year ended December 31, 2025, compared to $2.870 billion in 2024.
• Organic revenue growth contributed $179 million, or 6.2%, driven by all segments, particularly Industrial and Consumer in Certification Testing, Non-certification Testing, and Ongoing Certification Services.
• Operating income increased by $60 million, or 13.0%, to $522 million in 2025 from $462 million in 2024.
• Net income remained flat at $345 million in 2025, compared to $345 million in 2024, primarily due to a higher income tax expense.
• Adjusted EBITDA increased to $792 million (25.9% margin) in 2025 from $656 million (22.9% margin) in 2024.
• Free Cash Flow significantly increased to $403 million (13.2% margin) in 2025 from $287 million (10.0% margin) in 2024.
• Restructuring charges of $35 million were incurred in 2025, primarily related to employee separation expenses, with an additional $5-10 million expected in the first half of 2026.
• The effective income tax rate increased to 26.6% in 2025 from 16.9% in 2024, mainly due to the impact of the Qualified Domestic Minimum Top-up Tax (Pillar Two rules).
• The company signed a definitive agreement in February 2026 to sell its Employee Health and Safety software business for $210 million in cash, expected to close in Q2 2026.
• A new UL Solutions U.S. Executive Deferred Compensation Plan was adopted, effective January 1, 2026.
• The UL Non-Qualified Deferred Compensation Plan was amended to freeze all employer contributions effective December 31, 2025.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong performance, with significant organic revenue growth, improved operating income and cash flow, and strategic acquisitions. The dividend increase signals confidence. However, the flat net income due to a higher effective tax rate, ongoing restructuring costs, and the inherent risks associated with geopolitical tensions and AI disruption are noted but do not overshadow the overall positive operational and financial trajectory.

Positives

• Revenue increased by 6.4% to $3.053 billion in 2025, demonstrating strong top-line growth.
• Organic revenue growth of 6.2% across all segments indicates healthy underlying business performance.
• Operating income grew by 13.0% to $522 million, reflecting improved operational efficiency.
• Adjusted EBITDA margin expanded to 25.9% in 2025 from 22.9% in 2024, signaling enhanced profitability.
• Free Cash Flow saw a substantial increase to $403 million in 2025 from $287 million in 2024, strengthening liquidity.
• Successful divestiture of the payments testing business in May 2024 generated a pre-tax gain of $24 million.
• Strategic acquisitions of TesTneT Engineering GmbH and Batterielngenieure GmbH in 2024 expanded capabilities in emerging areas like hydrogen storage and battery testing.
• The company declared an increased regular cash dividend of $0.145 per share in February 2026, up from $0.13 per share.
• Maintained a strong liquidity position with $295 million in cash and cash equivalents and $803 million of unused availability under the 2025 Credit Facility.
• Launched ULTRUS™, a brand uniting flagship software solutions, in January 2024, enhancing software offerings.

Negatives

• Net income remained flat at $345 million in 2025, despite revenue and operating income growth, primarily due to a significant increase in income tax expense.
• The effective income tax rate rose sharply to 26.6% in 2025 from 16.9% in 2024, largely due to the implementation of OECD Pillar Two rules.
• Incurred $35 million in restructuring charges in 2025, with an additional $5-10 million expected in the first half of 2026, indicating ongoing costs associated with operational changes.
• A $37 million pre-tax goodwill impairment charge was recorded in the Consumer segment in 2023 due to lower-than-expected demand in the mobility industry.
• Foreign exchange losses of $10 million were recorded in 2025.
• Employer contributions under the UL Non-Qualified Deferred Compensation Plan were frozen effective December 31, 2025.

Risks

• Adverse publicity or damage to brand and reputation could impact demand for services and market share.
• Cybersecurity risks, including data breaches and system compromises, could result in significant liability and reputational harm.
• Technological advances in artificial intelligence (AI) may disrupt industries, reduce demand for services, or impact reputation if the company fails to adapt.
• Evolving regulatory landscapes relating to AI may limit the company's ability to use and expand AI, leading to liability or reputational harm.
• The highly competitive and fragmented industry poses a risk if the company fails to innovate or compete successfully.
• International operations are subject to risks from foreign currency fluctuations, tariffs, trade restrictions, and geopolitical instability.
• Significant business in China is subject to complex, rapidly evolving laws and regulations, and potential government intervention.
• Dependence on recruiting, training, and retaining key employees, especially skilled technical personnel, could be challenging.
• Working with dangerous materials and environments (e.g., fire testing, battery testing) carries risks of injury, facility damage, or liabilities.
• Sustainability-related scrutiny and evolving regulations could increase costs, change demand, or lead to reputational damage.
• Potential conflicts of interest between testing/certification services and advisory services could impact accreditations or reputation.
• Changes to regulatory frameworks, such as increased acceptance of self-declaration of conformity, could reduce demand for TIC services.
• Inability to increase capacity at existing facilities or build new ones in a timely and cost-effective manner could delay revenue growth.
• Failure to meet contractual schedule requirements or performance standards could result in damages and reputational harm.
• Long selling cycles for certain services require significant resource commitments before revenue generation.
• Risks associated with strategic transactions, including acquisitions, such as integration challenges and failure to achieve synergies.
• Allegations of failure to properly perform services could lead to product liability claims, recalls, penalties, and reputational harm.
• Failure to obtain, protect, or enforce intellectual property rights, including the UL Mark, could harm the business.
• Unethical conduct by employees, agents, contractors, or partners could result in financial penalties or reputational damage.
• Changes in, delays in obtaining, or revocation of licenses, approvals, accreditations, or delegations of authority could materially affect the business.
• Ongoing and future litigation could be costly to defend and harm the company's reputation.
• Substantial ownership and voting control by UL Standards & Engagement limits the ability of other stockholders to influence corporate matters.
• Inability to generate sufficient cash to service indebtedness or refinance debt could lead to liquidity problems.
• An increase in interest rates would increase interest costs on variable rate debt.
• Covenants in credit facilities and senior notes contain restrictions and limitations on business operations.
• Rating agency downgrades may increase the cost of capital.
• The Class A common stock price may be volatile or decline regardless of operating performance.
• The dual class structure of common stock may adversely affect the trading market for Class A common stock.
• Post-termination trading restrictions apply to individuals in possession of material nonpublic information.
• Prohibited transactions include short sales, options, hedging, margin purchases, and pledging company securities.
• Changes in tax laws or adverse outcomes from tax examinations could have a material adverse effect on financial results.
• Insurance may not provide adequate levels of coverage against all claims.
• The enterprise risk management program may not sufficiently identify, anticipate, and mitigate all risks.
• Impairment charges on goodwill and other intangible assets could negatively impact financial results.
• Changes in estimates for revenue recognition could adversely affect future reported financial condition and results of operations.
• Changes with respect to the funded status of pension and postretirement benefit plans could materially increase liabilities.
• Unionization efforts and labor regulations in certain countries could materially increase costs or limit flexibility.
• Inability to renew facility leases at the end of their terms could require relocation or closure.
• Fluctuations in foreign currency exchange rates could adversely impact business, financial condition, and results of operations.

Future Outlook

The company anticipates the Restructuring Plan will be substantially completed by the end of the first quarter of 2027, with remaining charges of $5-10 million primarily expected in the first half of 2026. The sale of the Employee Health and Safety software business is expected to close in the second quarter of 2026. The company expects variable interest rates on its 2025 Credit Facility to fluctuate with future Federal Reserve Board interest rate changes and SOFR, but does not expect increases in interest expenses to materially impact its pricing strategy in the near term. It will continue to monitor the impacts of Pillar Two rules and intends to continue paying a regular cash dividend, periodically assessing its size.

Management Comments

• "We work for a safer world. Our mission drives our actions, inspires our employees and is the key to our success. We strive to be our customers most trusted science-based safety, security and sustainability partner."
• "As the global economy continues to evolve and becomes more digital and inter-connected, our customers continue to seek ways to bridge traditional TIC needs with next generation cloud-based software and services to better mitigate risk and enhance their business performance."
• "Our talent management strategy is to attract, grow and retain a global and inclusive workforce where individuals can achieve their highest potential, regardless of background, through rewarding high performance and offering development programs."
• "Our scalable, efficient and high-quality information technology capabilities enable us to enhance both the customer experience and our internal operational efficiencies."
• "We believe our main risk exposure arising from unethical conduct to be the corruption of our employees or contractors during an audit or inspection carried out at a customers premises, or at the premises of one of the customers suppliers on behalf of the customer, and we have in the past received reports of our employees and contractors being offered bribes."

Industry Context

StockSavvy.ai notes that UL Solutions operates in a highly competitive and fragmented global Testing, Inspection, and Certification (TIC) industry. The company's focus on expanding its Software and Advisory (S&A) offerings aligns with the broader industry trend of digitization and the increasing demand for integrated cloud-based solutions to manage regulatory compliance, supply chain transparency, and sustainability. The company's strategic acquisitions in hydrogen storage and battery testing reflect a proactive approach to emerging growth verticals driven by global energy demand and AI data centers, positioning it to capitalize on evolving safety and security needs. The increase in the effective tax rate due to OECD Pillar Two rules is a global trend impacting multinational enterprises, indicating a tightening international tax landscape.

Comparison to Industry Standards

• UL Solutions is the largest TIC services provider headquartered in North America by revenue.
• The company maintains a leadership position across additional global markets, including Europe and Asia.
• Competes with a broad range of players, including large and global public and private firms, smaller companies, and new entrants in the TIC industry.
• In the Software and Advisory segment, the company competes against a diverse group of point solution providers.
• Primary competitive differentiators include capabilities, global reach, large installed base of laboratories and equipment, reputation, operational track record, integrity of work, and technical expertise.

Corporate Governance

Legal Proceedings

• A putative class action complaint was filed on February 11, 2026, against Underwriters Laboratories Inc., UL LLC, UL Solutions Inc., UL Standards and Engagement, and UL Research Institutes (John Martucci v. Underwriters Laboratories Inc., et al., Case No. 1:26-cv-01561). The complaint alleges defects in certain combination-listed single databus burglar and fire alarm system control units and misrepresentation of compliance with UL and National Fire Protection Association 72 standards. The company believes the claims are without merit and intends to vigorously defend against this action.
• The company is party to other ordinary course claims, litigation, audits, and investigations, none of which are currently considered material.

Related Party Transactions

• Incurred expenses of $22 million in 2025 (and $22 million in 2024, $21 million in 2023) to UL Standards & Engagement for access to its library of standards.
• Paid dividends to UL Standards & Engagement of $72 million in 2025 (and $83 million in 2024, $680 million in 2023).
• UL Standards & Engagement is the sole holder of the company's Class B common stock, beneficially owning 61.6% and controlling 94.1% of the voting power as of December 31, 2025.
• UL Research Institutes is the sole member of UL Standards & Engagement.
• The company owns 70% of UL-CCIC Company Limited, with the remaining 30% owned by China Certification & Inspection (Group) Co., Ltd. (CCIC), a Chinese state-owned enterprise.
• A separate contract exists with CCIC for ongoing certification inspections in China, with CCIC responsible for approximately 36% of global ongoing certification inspections in 2025.
• Certain directors of UL Solutions Inc. also hold management or board positions with UL Standards & Engagement or UL Research Institutes.

Stakeholder Impact

• Shareholders: Benefited from strong financial performance (revenue, operating income, FCF growth) and an increased dividend, but net income was flat due to higher taxes. Voting control remains concentrated with UL Standards & Engagement.
• Employees: Affected by the Restructuring Plan involving employee separations, but the company emphasizes talent management and introduced a new U.S. Executive Deferred Compensation Plan. Employer contributions to the non-qualified deferred compensation plan were frozen.
• Customers: Benefit from continued expansion of TIC services and Software & Advisory offerings, including strategic acquisitions to enhance capabilities. Potential for geopolitical instability to impact customer demand.
• Suppliers/Partners: Reliance on third-party suppliers (e.g., for UL Mark labels) and subcontractors, with risks if performance is not met. The relationship with CCIC for inspections is critical.
• Creditors: The company maintains a strong liquidity position, entered into a new $1.0 billion credit facility, and reduced total debt outstanding, indicating sound financial management and compliance with debt covenants.

Next Steps

• Substantial completion of the Restructuring Plan by the end of Q1 2027, with remaining charges of $5-10 million primarily expected in H1 2026.
• Expected close of the sale of the Employee Health and Safety software business in Q2 2026.
• Reorganization of segments effective Q1 2026, with the Advisory business moving to the Industrial segment and the Software and Advisory segment being renamed Risk & Compliance Software.
• Periodic assessment of the size of the regular quarterly dividend based on the company's dividend policy and other factors.
• Monitoring the impacts of Pillar Two rules as they continue to be refined by the OECD and implemented by various national governments.
• Jennifer Scanlon's Rule 10b5-1 trading arrangement is scheduled to commence on April 1, 2026, and terminate on the earlier of April 1, 2027, or when all shares under the plan are sold.

Key Dates

Recommendation

UL Solutions demonstrates solid organic growth and strong free cash flow generation, indicating operational efficiency and market demand for its core services. The dividend increase signals confidence. However, the flat net income due to a higher effective tax rate, ongoing restructuring costs, and the inherent risks associated with geopolitical tensions and AI disruption warrant a cautious 'Hold' stance. The significant control by UL Standards & Engagement also limits the influence of other shareholders, which can be a factor for some investors.

Keywords

Safety Science, Testing, Inspection, Certification, TIC, Software, Advisory, UL Mark, Product Safety, Cybersecurity, AI, ESG, Sustainability, Regulatory Compliance, Industrial, Consumer Electronics, Medical Devices, Financial Reporting, 10-K, UL Solutions