Ralliant Corporation

My name is Donna, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to the Ralliant Corporation's second quarter 2025 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then one on your telephone keypad. If you would like to withdraw your question, please press star, then two. I would now like to turn the call over to Mr. Nathan McCurran, Vice President of Investor Relations. Mr. McCurran, you may begin your conference.

Thank you, Donna. Good morning, everyone, and thank you for joining us for our first earnings call as rally in. I'm Nathan McCurran, VP of Investor Relations. Today, we'll walk through our second quarter 2025 results, highlight key operational progress, and provide an outlook for the third quarter. I'm joined today by Tammy Newcomb, our President and Chief Executive Officer, and Neil Reynolds, our Chief Financial Officer. Our earnings release issued yesterday and today's presentation can be accessed on the investor section of our website at ralliant.com. Please note that we'll be discussing certain non-GAAP financial measures on today's call. A reconciliation of these items to U.S. GAAP can be found in the appendix to our presentation. During today's call, and unless otherwise stated, we're comparing our second quarter 2025 results to the same period in 2024. During the call, we will make forward-looking statements, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, and actual results might differ materially from any forward-looking statements we make today. Information regarding these risks and uncertainties is available in our information statement filed with the SEC on May 28, 2025, and our quarterly report on Form 10-Q for the quarter ended June 27, 2025. With that, I'd like to turn the call over to Tammy.

Glad to have you on the team, Nathan. Welcome to RELIANT's second quarter earnings call. We are joining you from our new headquarters in Raleigh, North Carolina. It's hard to believe that just weeks ago, many of us were together at our investor day. That day marked the beginning of a new chapter for Ralliant, and we're incredibly grateful that you've joined us again as we are taking our first steps forward as a public company. I want to begin by recognizing our team. The energy, focus, and commitment they've shown during this transition has been nothing short of extraordinary. Their belief in our mission and their drive to serve our customers is what gives me confidence in our future. Over the next hour, my goal is to provide you with a high-level overview of our financial performance and share how we are navigating as an independent company. Neil will do a deep dive into our Q2 2025 results and provide our Q3 outlook. Then I'll come back and demonstrate how we are executing our strategy and the exciting growth opportunities ahead. Let's begin on slide four and five with a quick overview of our business. Ralliant provides essential technologies for our electrified and digital world. We design, manufacture, and service precision instruments and engineered products for mission-critical applications. In 2024, we had revenue of $2.2 billion with 26% adjusted EBITDA margin. Over the past five years, we grew revenue by 3.5% and adjusted EBITDA by 9%, generating $2 billion of cumulative free cash flow. We have two strategic reporting segments, sensors and safety systems, and test and measurement. The segments include iconic brands with leading positions in attractive markets. Now shifting to our Q2 results, I'll begin on slide six with key takeaways for the quarter. On June 28th, we emerged as a public company with a legacy of operating rigor and a focused profitable growth strategy. Our Q2 revenue was in line with our expectations as we continued to see secular demand in the utilities and defense markets with test and measurement improving sequentially. More on that shortly. We generated strong free cash flow with a conversion rate of 98% of adjusted net earnings, demonstrating the power of our ralliant business system, or RBS. The profitable growth strategy we shared at our investor day in June capitalizes on secular tailwinds where we are well positioned in high growth vectors, coupled with our stronghold positions in markets where we create enduring customer value. Lastly, Post-spin, we're activating a cost savings program, initially targeting $9 to $11 million of disenergies in test and measurement created by the separation. Moving to slide seven for a brief overview of our Q2 2025 financial performance. Our second quarter results reflect the resilience of our business in a dynamic operating environment. We navigated macroeconomic uncertainty while remaining focused on executing our long-term growth strategy. We balanced short-term pressures with the disciplined capital deployment and a relentless focus on execution underpinned by RBS. The second quarter's revenue was in line with our expectations with sequential revenue growth in both segments. We saw strong demand in the sensors and safety systems segment with continued secular momentum across utility customers and defense programs. Utilities revenue rose significantly both year over year and sequentially, fueled by ongoing capital spend for global energy grid modernization. Our precision sensing and data analytic solutions are essential to ensuring reliable power, and we're optimistic about expanded offerings. In defense and space, the replenishment of existing defense programs endures. Many countries' current defense outlook has a significant budget step-up, prioritizing missile programs, hypersonic, and space. All would benefit Ralliance. Globally, industrial manufacturing has shown some green shoots in critical environments, including new opportunities in the data center, yet demand in Europe remains soft. In the test and measurement segment, consistent with expectations, revenue remained down year over year. Sequentially, we are seeing gradual improvement. Communications had positive mid-single-digit sequential revenue growth, driven by an increase in investment in the research and development labs for the Department of Defense, the Department of Energy, and the technology going to AI data centers. Our diversified electronics and semiconductor end markets were up slightly sequentially in Q2 as we saw each of these markets stabilize after several quarters of revenue decline. In diversified electronics, we're seeing healthy channel positions and some positive trends for industrial, consumer, university research, grid energy storage, and medical. Electric vehicle and battery applications drove our most significant revenue decline year over year in test and measurement. Semiconductor customer spending remains lumpy. We have longstanding relationships with semi-customers. These customers' CapEx investment comes in cycles, but they continuously innovate. We have maintained our investment in field applications engineers and innovation collaboration to be well positioned as each of these customers invest. This quarter, Tektronix will begin shipping an industry-leading high-performance oscilloscope, an innovation already generating strong customer interest and strengthening our order pipeline. This is one of many new products launched this year, demonstrating how our platform engineering is accelerating innovation across our test and measurement segment. Turning to slide eight, I'll share regional insights. In Q2, North America revenue declined 5% year over year. Looking forward, we have great positioning here with exposure to utilities, defense, and new products launching in test and measurement. China was stable with a modest 1% decline as growth in utilities was largely offset by lower demand in test and measurement. Western Europe remained challenged, down 23%, mainly due to the continued weakness year over year I called out across electric vehicles and batteries. Our rest of world region led performance with 5% growth as most markets stabilized, and we saw strong demand in Japan, Latin America, and portions of Eastern Europe. As we move forward, We remain committed to delivering sustainable growth, expanding margins, and creating long-term value for our shareholders. Next, Neil will walk you through the details of our financials.