Ralliant Corporation

Hello, my name is Donna and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Rallion Corporation's fourth quarter and full year 2025 earning 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 the number one on your telephone keypad. If you would like to withdraw your question, 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 Ryan's fourth quarter and full year 2025 earnings call. I'm Nathan McCurran, Vice President of Investor Relations. Today, we'll walk through our results, highlight key operational progress, and provide our outlook for the first quarter and full year 2026. 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 Investors section of our website at ralliant.com. Please note that we'll be discussing certain non-GAAP financial measures on today's call. 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 fourth 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, our quarterly report on Form 10-Q filed with the SEC on November 6, 2025, and our annual report on Form 10-K for the year ended December 31, 2025, to be filed later with the SEC. With that, I'd like to turn the call over to Tammy.

Thank you, Nathan. Good morning, everyone. Thank you for joining us for Ralliant's fourth quarter and full year 2025 earnings call. Before we get into the numbers, I want to take a moment to recognize our team for the incredible work they have done to establish Ralliant as a standalone public company and position us well for the future. That progress sets the stage for today's discussion. I'll start with a high-level overview of our financial performance share how we're building on our momentum, and discuss where we're investing for growth. I'll then turn it over to Neil to walk through the details of our results and outlook before I come back to close and, of course, open it up for questions. Let's turn to the key takeaways from the quarter on slide five. 2025 was a pivotal year. We sharpened our long-term strategy, ramped innovation across the portfolio, and strengthened our culture to inspire growth and execution. In the fourth quarter, we exceeded our revenue guidance with stable to improving trends across most of our end markets. Adjusted EBITDA and adjusted EPS were both at or above the high end of our guidance ranges, another clear demonstration of our operating discipline. We delivered strong free cash flow with a conversion above our long-term targets. As we look ahead to 2026, we are well positioned with secular growth drivers, a healthy balance sheet, and clear strategic priorities guiding where we invest to create long-term value. Drilling down into our Q4 financial results on slide six. Revenue was $555 million, a 1% improvement year over year. Consistent with our expectations to start the year, we showed sequential improvement every quarter with 5% sequential growth in Q4. The sensors and safety systems segment grew year over year across all end markets. A record quarter of revenue in our defense and space end market was driven by replenishment of missile programs. The utilities market continues to benefit from secular tailwinds and multi-year CAPEX cycle focused on energy grid expansion. Industrial manufacturing, while uneven, is improving as customers gain more confidence in their markets. In test and measurement, revenue sequentially improved again this quarter. Improvement was led by communications for data centers, defense, and research. Diversified electronics has shown early signs of broad-based improvement with health signals from our distributor network. and our semiconductor revenue remains variable, dependent on customer-specific exposure. Adjusted EBITDA margin of 20.8% and adjusted EPS of 69 cents reflects revenue slightly above expectations and disciplined operational execution. We also generated robust free cash flow, finishing the year at a 117% conversion rate. We continue to have a healthy balance sheet with net leverage of 1.9 times adjusted EBITDA, in line with our target leverage range. Next, turning to slide seven, the chart shows our revenue growth improvement over the course of the year. Let me discuss that by region. North America has trended positively with improvement across nearly all end markets. Western Europe saw notable improvement, particularly in test and measurement, returning to year-over-year growth in the fourth quarter. China macro leading indicators have shown signs of recovery, but we expect continued pressure from export controls in an uncertain environment. The rest of the world was our best-performing region in the year, with outsized growth in Q4 primarily driven by customer wins in Korea, the Middle East, and Africa. This sequential revenue improvement is fueled by secular tailwinds in several of our core markets. On slide 8, I will outline our 2025 end market mix and revenue growth. The final column reiterates the market growth expectations we shared at our June investor day. I'll start with the sensors and safety systems segment, which is approximately 60% of our overall business. Industrial manufacturing is our largest end market and where millions of precision sensors are embedded in critical customer workflows and solutions. Despite uneven conditions, we saw selective areas of strength during the year led by North America. We expect a gradual global recovery consistent with our investor day expectations. The defense and space market is poised to outperform long-term market growth expectations this year. we are well positioned to win future contracts as a key supplier on critical missile defense programs. The utilities market is supported by durable infrastructure investment in grid monetization and reliability, reinforcing growth above our long-term expectations. Shifting now to test and measurement segment, which is about 40% of our revenue. Our largest end market is diversified electronics, representing approximately half the segment, and it is showing broad-based stabilization. Early indicators include improving quote activity and a healthy distributor inventory levels, which we expect to further develop in 2026. The communications market has continued to improve sequentially as customers increase investment in our new high-performance oscilloscope platform and probing technologies that support research, data center, and aerospace and defense applications. Global semiconductor customer spending, while improving primarily in AI-related applications, remains uneven. In 2025, results benefited from a large customer project that completed its production cycle in the third quarter and is not expected to repeat this year. Excluding that dynamic We are seeing pockets of improvement in the semi-market as we enter the year. To win across these end markets, we are committed to executing our profitable growth strategy, which I will cover on slide nine. There are three pillars to our strategy. First, operating discipline through RBS everywhere. The Ralliant business system is the foundation of how we run the company. It makes work visible, creates shared language, and reinforces accountability. We are enhancing our RBS toolkit with AI to accelerate learning and execution. Second, our stronghold positions. We continue to deepen our leadership positions in target markets where we have an expansive customer install base and longstanding loyalty. Third is winning growth vectors. We are expanding our presence in attractive markets such as defense, energy, and electronics to contribute to higher long-term growth across the portfolio. Slide 10 highlights our competitive differentiation and how we are partnering with our customers across these winning growth sectors. In the defense technologies growth sector, PECSI EMC achieved record revenue in the fourth quarter with continued backlog build, highlighting the strong demand in defense programs where we are an embedded supplier. Using RDS augmented by AI, we are reducing turnaround times on customer proposals, strengthening our supply chain, automating, and expanding our production. In the grid modernization growth vector, Qualitro was selected by one of the world's largest cloud providers as a global standard to make its data center assets more reliable, visible, and resilient. This reflects both the capability of our technology and the growing need for deeper visibility into the health of critical assets. Our condition-based monitoring solutions combine sensors, data aggregators, monitoring software, and analytics into a fully integrated solution that enables customers to detect and manage early warning signals before affecting operations. In the power electronics growth sector, Tektronix has partnered with an AI robotics company that brings humanoids to life. This requires the validation of electronics that turn intelligence into motion, helping AI to move from software algorithms into real-time control of motors, actuators, and sensors. In effect, translating digital intelligence into precise physical action where performance, safety, and reliability are essential. These customer wins demonstrate that our technology innovation and RDS are clear differentiators to expand our presence in our winning growth factors. On slide 11, I'll share our investments that support our profitable growth strategy. As we shared in our last Investor Day and have since reiterated, our top capital allocation priority is organic investment to enhance our long-term growth. We mentioned last quarter that we expect CapEx, to be 2 to 3 percent of revenue in 2026, up from about 2 percent historically as we invest in more growth CapEx. We've also taken growth investment into account in our incremental EBITDA margins that Neil will discuss shortly. This investment is focused on commercial, innovation, and manufacturing. First, I'll begin with commercial execution. Our competitive advantage is rooted in decades of domain expertise with over 90,000 customers. To better serve and reach these customers, we are investing in sales resources and augmenting with AI and a digital platform. Second, we are investing in innovation acceleration to shorten development cycle times, increasing the velocity of new products. We're deploying platform architectures that enable faster product refresh cycles and serve adjacent applications with less engineering investment. We are also innovating with new business models that have the potential to expand customer lifetime value. Third, we're investing in manufacturing agility. Following multi-year outsized growth with our defense and utilities customers, we've begun to selectively expand our footprint to increase capacity while we continue to leverage RBS to drive productivity in our existing footprints. Next, I'll turn it over to Neil to go over our financial results and provide guidance and insights on Q1 and the full year of 2026.