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 Ralliant Corporation's first quarter 2026 earnings results conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, we'll open the call for questions. If you would like to ask a question, please press star then one on your telephone keypad. If you'd 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 Rallion's first quarter of 2026 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 second 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 this morning and today's presentation can be accessed on the investor section of our website at rallyant.com. Please note that we'll be discussing certain non-GAAP financial measures on today's calls. 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 are comparing our first quarter of 2026 results to the same period in 2025. 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 annual report on Form 10-K for the year ended December 31st, 2025, filed with the SEC on February 26th, 2026, and updated in our Form 10-Q to be filed after market today. With that, I'd like to turn the call over to Tammy.

Good morning, everyone. And thank you for joining us for our Q1 2026 earnings call. We started 2026 with a solid first quarter performance, reflecting the delivery of our strategy supported by disciplined execution across the teams. For today's call, I'll begin with an overview of our financial performance, followed by an update on the progression of our profitable growth strategy. Then I'll invite Neil to walk through additional details and leave time for your questions at the end. Let's start on slide four with a business and outlook update. First, our Q1 results were above the high end of our guidance, and we are raising the full year 2026 outlook as we expect test and measurement growth to remain elevated, and our defense backlog has now surpassed $1 billion. Second, we are capitalizing on higher growth secular demand across electrification and defense, with a clear focus on executing our profitable growth strategy. Third, we initiated an enterprise productivity program expected to deliver 50 to $60 million of run rate annualized savings by 2028. Last, we are increasing capital returns to shareholders. We began to execute share repurchases during the first quarter, and we are now targeting share repurchases of approximately 50% of free cash flow going forward. Our board has increased our share repurchase authorization to $500 million, and we plan to execute $100 million accelerated share repurchase program in Q2. Our Q1 financial results are on slide five. In the first quarter, revenue was $535 million, up 11% year over year, with a book to bill above 1.1. The results were balanced across the segments with both achieving 9% organic revenue growth. This performance reflects the disciplined execution of our teams and a portfolio that is increasingly aligned to higher growth markets driven by electrification and defense. Sensors and safety systems had robust demand across all end markets. Test and measurement returned to growth following three consecutive quarters of sequential improvement. Adjusted EBITDA margins of 18.6% and adjusted EPS of 57 cents were both above the high end of our guidance ranges, reflecting strong operating leverage on higher volume and early benefits from productivity actions already underway. Our trailing 12-month free cash flow conversion was 105%. Next, I'll provide regional and end market trends on slides six and seven. North America is our largest region with over 55% of revenue and where we see broad-based momentum with 16% organic revenue growth supported by ongoing investment in defense programs. Plus, AI is accelerating our customers' innovation cycles from data center infrastructure to advanced electronics and the global power grid. Western Europe and the rest of the world together represent approximately 30% of our revenue, and both were slightly down organically as pockets of recovery were overshadowed by ongoing macroeconomic and geopolitical uncertainty. China is approximately 15% of our revenue and grew 5% organically this quarter due to government-funded projects tied to AI and energy-related infrastructure investments. Within our end markets, defense and space delivered more than 20% organic growth. Multi-year backlog now exceeds $1 billion, spanning more than 40 programs across legacy and new products supporting ocean, land, and air safety systems. Utilities posted record orders this quarter, reinforcing the strength and durability of demand in this end market. While revenue growth was softer due to shipment timing, the order strength enhances our visibility going forward. Our industrial manufacturing and other end markets showed early signs of short cycle recovery across most geographies, as customers are increasing investments in automation, semiconductor equipment, life sciences, HVAC, and data center cooling. Test and measurement delivered a meaningful step up this quarter, building on the sequential momentum established in 2025. Improved customer sentiment drove orders, resulting in mid- to low-teens organic growth across diversified electronics and communications. Despite broad-based strength across most semiconductor customers, overall revenue declined due to the completion of a large customer project last year. Now turning to slide eight. Our profitable growth strategy is intentionally balanced and designed to perform through the cycle. Our winning growth vectors align with market tailwinds in electrification and defense, where longstanding customer positions and differentiated capabilities position us for elevated growth. Complementing this, our stronghold positions are anchored in a broad customer base with more modest growth profiles where precision technologies deliver durable demand, attractive margins, and reoccurring revenue. Enabling our strategy is the AI-infused rallying business system, or RBS, which brings discipline, consistency, and enterprise scale to how we operate and execute. Turning to slide nine. We are capitalizing on long-term investment cycles in electrification and defense where our test and measurement insights, precision sensors, and safety-critical systems play an essential role. The power grid is a strategic imperative. Rising AI workloads and increasing global energy consumption are driving the need for a grid that is more reliable and intelligent. We play a critical role in the global power grid Our precision sensors and predictive analytics monitor and protect essential assets such as transformers, turbines, and gas-insulated substations, helping utilities prevent outages and extend asset life. In addition, we support new energy infrastructure through test and measurement solutions used to validate grid-scale energy storage and advanced power systems for both legacy and emerging applications like nuclear fusion. Power and thermal challenges extend into the data center. Our test and measurement instruments support the validation of advanced semiconductors and electronic systems, while our industrial sensors provide thermal, pressure, and fluid measurements that enable reliable cooling and continuous operation. As AI becomes physical, power design and battery performance are key constraints. This is where our precision power test and measurement solutions are essential for R&D engineers developing the next generation of AI-enabled electronics. In defense, we are benefiting from multi-year replenishment demands and modernization. In legacy defense programs, we're a trusted supplier of mission-critical ground, flight, and launch safety systems where precision and reliability are non-negotiable. In parallel, defense modernization is increasing activity across R&D labs, where our test and measurement solutions enable the development and validation of advanced communications and power storage systems. Across the portfolio, we participate in the product realization lifecycle from early concept and validation to field deployment and long-term operation. Test and measurement provides early visibility into the customer R&D, while sensors and safety systems support a large installed base for production through ongoing field monitoring. Next on slide 10, we leverage RBS Everywhere as both an enterprise growth enabler and to drive productivity improvements. We continue funding the highest return opportunities in advanced manufacturing, commercial, and innovation to enable higher organic growth. In defense and space, we are a key supplier to the majority of the Pentagon's priority munitions programs. Several, including THAAD, PAC-3, and Tomahawk, are scaling production at roughly two to five times historic levels. And we are making targeted investments to expand manufacturing capacity and support reliable execution. In utilities, we continue to see robust demand, supported by multi-year grid modernization and resiliency initiatives. Later this year, we plan to expand our precision sensor facility in upstate New York to support further growth. Now on slide 11. We are committed to expanding adjusted EBITDA margins and to help drive this we have initiated an enterprise productivity program. The program management team reports directly to me with a multi-year target to deliver $50 to $60 million of run rate annualized savings by 2028. Post-spin, we are simplifying our organization and how work gets done. RBS is how we make workflows visible to identify productivity improvements and even more importantly, ensure sustainment. To date, the team has acted on approximately $20 million of run rate annualized savings. The drivers of the savings are identified in cost of sales and G&A. For cost of sales, the focus is enterprise strategic sourcing and a new group purchasing office to identify and act on synergies across materials, maintenance, and facilities. Within G&A, we've identified ways to increase productivity through simplification, AI-enhanced workflows, and leveraging lower-cost locations to optimize labor. Recently, more than 500 employees participated in our first company-wide CEO Kaizen, focused on over 40 growth and productivity charters. This deep-rooted culture of continuous improvement aligns well with our new enterprise productivity program. Slide 12 is a reminder of our value creation framework we laid out at our investor day last June. Together, revenue growth, margin expansion, strong free cash flow, and disciplined capital allocation position us well to deliver long-term value for our customers, employees, and shareholders. Next, I'll invite Neil to review our financial results, go deeper on our productivity program, and provide an update on our guidance.