• Revenue: $730 million, up 6% year-over-year, with organic growth of 8.4%.

• Adjusted EBITDA: $173 million, an increase of 11.6% year-over-year.

• Adjusted EBITDA Margin: 23.7%, up 120 basis points from the previous year.

• Adjusted Net Income: $94 million, up 5.6% from the previous year.

• Free Cash Flow: $131 million in the first six months of the year.

• Industrial Segment Revenue: $314 million, with 11.6% organic growth.

• Consumer Segment Revenue: $322 million, with 6.1% organic growth.

• Software and Advisory Segment Revenue: $94 million, with 5.7% organic growth.

• Cash and Cash Equivalents: $295 million at the end of the quarter.

• Net Leverage: 0.9 times net debt to trailing 12-month adjusted EBITDA.

• Dividend: First regular quarterly dividend of $0.125 per share in June.

• Warning! GuruFocus has detected 3 Warning Signs with AMRN.

Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UL Solutions Inc (NYSE:ULS) reported strong organic growth of 8.4% in the second quarter, with revenues reaching $730 million.

• The company achieved an adjusted EBITDA growth of 11.6% and expanded its adjusted EBITDA margin by 120 basis points.

• UL Solutions Inc (NYSE:ULS) completed two strategic acquisitions in the Industrial segment, enhancing its capabilities in battery and hydrogen component testing.

• The company maintained a robust cash flow, generating $131 million of free cash flow in the first six months of the year.

• UL Solutions Inc (NYSE:ULS) declared its first regular quarterly dividend as a public company, demonstrating a commitment to returning capital to shareholders.

Negative Points

• The Industrial segment experienced a slight decline in adjusted EBITDA margin by 30 basis points due to increased compensation costs and M&A expenses.

• The company faced $5 million of additional pretax interest expense, impacting adjusted net income growth.

• UL Solutions Inc (NYSE:ULS) is anticipating more challenging year-over-year comparisons in the second half of the year, potentially affecting growth rates.

• The company incurred a $9 million pretax expense related to the conversion of cash-settled appreciation rights (CSARs) following its IPO.

• Foreign exchange impacts posed a $2 million headwind to operating income and adjusted EBITDA in both the Industrial and Consumer segments.

Q & A Highlights

Q: With organic revenue growth at 8% in the first half, why is the full-year guidance set at mid-single digits? Are you expecting a slowdown? A: We are pleased with the 8% growth in the first half. However, the second half of last year had strong growth, making year-over-year comparisons more challenging. Our guidance reflects realistic expectations based on these factors.

Q: Can you elaborate on the tailwinds in the Industrial segment that led to 11.5% organic growth? A: The Industrial segment benefits from megatrends like the electrification of everything, driving demand in areas such as power and controls, battery labs, and fire suppression. These trends are expected to persist.

Q: The consumer segment saw a 210 basis point increase in EBITDA margins. Is this sustainable, and what efficiency initiatives are in place? A: We have improved our cost structure through expense management actions, including better efficiencies in labs and IT costs. We believe these consumer margins are durable, with further expansion opportunities.

Q: How much of the growth in the Software and Advisory segment is attributed to ULTRUS versus sales force execution? A: The growth is tied to both factors. ULTRUS is enhancing our value proposition, particularly in sustainability software, while our commercial transformation is driving balanced growth in both software and advisory services.

Q: Can you provide an update on your pricing initiatives and any market pushback? A: We are focused on deploying configuration price quote software across our teams. Our Net Promoter Scores indicate strong perceived value from customers, suggesting that our pricing is holding well.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.