UL Solutions Inc.ULS
UL Solutions Inc. Stock Compensation Disclosure
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 December 31, 2025, 19,248,048 shares remain available for issuance under the 2024 LTIP and the Pre-IPO LTIP and 4,725,988 shares remain available for issuance under the 2024 ESPP.
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 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 5 years, 10 years or until termination of service from the board.
The Company has outstanding awards under the Pre-IPO LTIP, the majority of which will be settled in shares of Class A common stock.
Stock-based compensation expense for the years ended December 31 was as follows:
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of revenue | $ | 4 | $ | 4 | $ | 1 | |||||||||||
| Selling, general and administrative expenses | 46 | 29 | 14 | ||||||||||||||
| Stock-based compensation expense | 50 | 33 | 15 | ||||||||||||||
| Income tax benefit | (9) | (4) | (3) | ||||||||||||||
| Stock-based compensation expense, net | $ | 41 | $ | 29 | $ | 12 | |||||||||||
| Stock-based compensation expense by type of award | |||||||||||||||||
| Restricted stock units | $ | 21 | $ | 10 | $ | — | |||||||||||
| Performance share units | 16 | 7 | — | ||||||||||||||
| Stock options | 5 | 4 | — | ||||||||||||||
| Stock-settled stock appreciation rights | 2 | 2 | — | ||||||||||||||
| Employee stock purchase plan | 3 | — | — | ||||||||||||||
Cash-settled awards | 3 | 10 | 15 | ||||||||||||||
| Stock-based compensation expense | $ | 50 | $ | 33 | $ | 15 | |||||||||||
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 year ended December 31, 2025:
| Number of RSUs | Weighted Average Grant Date Fair Value | ||||||||||
| Outstanding as of December 31, 2024 | 802,211 | $ | 35.70 | ||||||||
| Granted | 570,865 | 59.76 | |||||||||
| Vested | (267,475) | 35.75 | |||||||||
| Forfeited | (73,454) | 43.98 | |||||||||
| Outstanding as of December 31, 2025 | 1,032,147 | $ | 48.40 | ||||||||
The weighted average grant date fair value per share of RSU granted was $59.76 and $35.65 for the years ended December 31, 2025 and 2024, respectively. The total fair value of RSUs that vested during the year was $16 million for the year ended December 31, 2025. As of December 31, 2025, total unrecognized compensation expense related to RSUs was $27 million and is expected to be recognized over the remaining weighted-average vesting period of 1.9 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.
The following table summarizes the activity related to the Company’s PSUs during the year ended December 31, 2025:
| Number of PSUs | Weighted Average Grant Date Fair Value | ||||||||||
| Outstanding as of December 31, 2024 | 370,766 | $ | 34.85 | ||||||||
| Granted | 259,174 | 57.62 | |||||||||
| Forfeited | (16,295) | 39.76 | |||||||||
| Outstanding as of December 31, 2025 | 613,645 | $ | 44.34 | ||||||||
The weighted average grant date fair value per share of PSU granted was $57.62 and $34.85 for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, total unrecognized compensation expense related to PSUs was $16 million and is expected to be recognized over the remaining weighted-average vesting period of 1.7 years.
Stock Options
In connection with the IPO, the Company granted nonqualified stock options to the Company’s executive team, including named executive officers, and other key employees under the 2024 LTIP. 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 year ended December 31, 2025:
| Number of Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Term | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||
| Outstanding as of December 31, 2024 | 1,994,580 | $ | 28.00 | 9.3 years | $ | 44 | |||||||||||||||||
| Forfeited | (38,265) | 28.00 | |||||||||||||||||||||
| Outstanding as of December 31, 2025 | 1,956,315 | $ | 28.00 | 8.3 years | $ | 99 | |||||||||||||||||
| Exercisable as of December 31, 2025 | — | ||||||||||||||||||||||
The weighted average grant date fair value per share of stock options granted was $7.84 for the year ended December 31, 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 December 31, 2025, total unrecognized compensation expense related to stock options was $7 million and is expected to be recognized over the remaining weighted-average vesting period of 1.3 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.
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 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. As of December 31, 2025 and 2024, the unrecognized compensation expense related to the Company’s remaining CSARs and SSARs, as well as liabilities related to the Company’s outstanding CSARs, were immaterial.
Performance Cash
The Company has Performance Cash awards outstanding from its Pre-IPO LTIP, 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. During 2025, $16 million of Performance Cash was settled in Class A common stock, resulting in a reclassification from accrued compensation and benefits to additional paid-in capital on the Company’s Consolidated Balance Sheet.
Compensation expense related to Performance Cash awards for the years ended December 31 was as follows:
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Cost of revenue | $ | 1 | $ | 3 | $ | 2 | |||||||||||
| Selling, general and administrative expenses | 14 | 18 | 14 | ||||||||||||||
| Performance Cash compensation expense | 15 | 21 | 16 | ||||||||||||||
| Income tax expense benefit | (3) | (4) | (4) | ||||||||||||||
| Performance Cash compensation expense, net | $ | 12 | $ | 17 | $ | 12 | |||||||||||
The Company had a short-term liability related to its Performance Cash awards of $33 million and $16 million recorded within accrued compensation and benefits in the Consolidated Balance Sheets at December 31, 2025 and 2024, respectively. The Company had a long-term liability of $0 and $18 million recorded within other liabilities in the Consolidated Balance Sheets at December 31, 2025 and 2024, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.