Ralliant Corporation

Hello, my name is Donna and I will be your conference facilitator this morning. At this time, I would like to welcome everybody to Reliant Corporation's second quarter 2026 earnings results conference call. All lines have been placed on mute to prevent background noise. After the speaker's remarks, we will open the call for questions. If you would like to ask a question, please press star then one on your telephone keypad. If you would like to withdraw your question, please press star two. I would like to turn the call over to Mr. Nathan McCurren, Vice President of Investor Relations. Mr. McCurren, you may begin your conference.

Thank you, Donna. Good morning, everyone, and thank you for joining Ralliant's second quarter 2026 earnings call. I'm Nathan McCurren, Vice President of Investor Relations. Today, we'll walk through our results, highlight key operational progress, and provide our outlook for the third quarter and full year 2026. I'm joined today by Tammy Newcombe, our President and Chief Executive Officer, and Neill Reynolds, our Chief Financial Officer. Our earnings release issued this morning 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. A reconciliation of these measures 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 2026 results 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 31, 2025, filed with the SEC on February 26, 2026, and in our Form 10-Q, filed with the SEC on May 12, 2026, and to be filed after market today. With that, I'd like to turn the call over to Tammy.

Welcome, everyone, and thank you for joining us for our Q2 2026 earnings call. One year into our journey as an independent company, we're demonstrating that our strategy is working, and I'm incredibly proud of what our team has accomplished. Our progress is translating into growth, margin expansion, and strong cash generation. Today, I'll start with results on the quarter and strategic execution. Neill will then walk through the financial results before we open up the call for your questions. Let's start on slide four with a business and outlook update. First, our Q2 results exceeded the high end of our guidance ranges and we are raising our full year 2026 outlook as both segments delivered double-digit revenue growth and significant adjusted EBITDA margin expansion. Second, we're continuing to capitalize on favorable secular trends in electrification and defense. Our disciplined execution drove Q2 orders growth, resulting in a book-to-bill above 1.1 in both segments and Defense Backlog remaining over $1 billion. Third, our RBS-led enterprise productivity program is gaining traction. We are moving from foundation building to execution and results, reinforcing our confidence in delivering $10 to $12 million of in-year savings and $50 to $60 million of annualized run rate savings by 2028. Fourth, We continue to generate strong free cash flow, enabling us to execute our capital allocation priorities. We're investing in manufacturing capacity to support growing demand and returned $161 million to shareholders in the first half of 2026, including the completion of our $100 million accelerated share repurchase program in Q2. Next, I'll summarize our Q2 financial results on slide five. In the second quarter, revenue was $568 million, up 13% year-over-year on both a reported and organic basis. Both segments delivered double-digit organic revenue growth, with sensors and safety systems up 11% and tests and measurements up 16%. Adjusted EBITDA margin of 19.8% and adjusted EPS of 68 cents were both above the high end of our guidance ranges, reflecting strong operating leverage on higher volume, disciplined execution, and early benefits from productivity actions already underway. We generated $99 million of free cash flow in the quarter, contributing to a trailing 12-month free cash flow conversion of 114%. Now turning to slide six. Our profitable growth strategy is intentionally balanced and designed to perform through the cycle. Our winning growth factors 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 recurring revenue. Enabling our strategy is the AI-infused Ralliant Business System, or RBS, which brings discipline, consistency, and enterprise scale to how we operate and execute. The outcome is sustained growth and long-term value creation for our shareholders. Turning to slide seven, I'll share how we are capitalizing on winning growth factors. Electrification is a compelling growth opportunity where we are well positioned to win. From keeping the lights on to enabling the next generation of intelligent products, we are aligned with the technologies powering an increasingly AI-enabled world. We help utilities operate a more reliable grid through predictive monitoring of critical infrastructure, while our precision test and measurement instruments enable the electronics breakthroughs behind tomorrow's innovations. As AI accelerates demand for power, compute, connectivity, and intelligent devices, our solutions are becoming increasingly important. Defense is another compelling growth opportunity where we are well positioned to win. Our safety-critical systems are embedded in many of today's legacy missile and munitions programs. While our precision test and measurement instruments enable the advanced electronics behind next-generation communications, Compute storage and space applications. As defense modernization accelerates, we build on our positions in trusted legacy platforms by also supporting the technology shaping the future of national security, such as autonomous or unmanned air vehicles. Across both secular trends, we support customers from early stage innovation through full-scale production and deployment, giving us a unique position at the intersection of infrastructure, electronics, and innovation. Turning to slides eight and nine, my regional and end-market commentary will begin with the percentage of year-to-date total company revenue shown on the right side of the page, followed by the year-over-year organic revenue growth for Q2. North America represents 54% of revenue and delivered 13% growth driven by continued momentum in test and measurement utilities and defense. Looking forward, we expect elevated demand in North America from ongoing investments in the electric grid, legacy defense programs, and technology innovation driven by AI. Western Europe represents 13% of revenue and delivered 16% growth as we executed well against pockets of opportunity in defense, industrial manufacturing, and advanced research. Still, the macro environment in Europe remains selective with lower growth expected going forward. China represents 16% of revenue and delivered 7% growth with increasing investments in AI data center and energy infrastructure. We saw an acceleration of activity in the first half, and we expect that to translate into increasing revenue growth in the second half of the year. The rest of world region represents 17% of revenue and delivered 14% growth driven by test and measurement and industrial customers. Transitioning to our end markets, I'll start with the sensors and safety system segment. Together, the industrial manufacturing and other end markets represent approximately 30% of revenue and both deliver double-digit growth in the quarter with a broadening recovery across most geographies and particular strength in applications within the AI data center. For example, our precision sensors are embedded within data center liquid cooling systems where customers are accelerating production volumes. This is where RBS provides a competitive advantage. Most recently, the team doubled production throughput on humidity and temperature sensors, leveraging the same resources, achieving a 65% cycle time reduction. Defense in Space represents 17% of revenue and delivered 14% growth. Our defense backlog remains over $1 billion with continued multi-year demand on legacy missile programs where we are a trusted supplier. Over the past quarter, our defense customers have progressed from framework agreements to undefinitized contract actions, or UCAS, under the Department of War's Acquisition Transformation Strategy. This represents the first full-scale transition toward contract execution and provides increased confidence in elevated multi-year demand. As a key supplier to the Pentagon's priority munitions programs, including FAD, PAC-3, and Tomahawk, We are scaling production across product lines at roughly two to five times historic levels and making targeted investments in manufacturing capacity to support reliable execution. Utilities represents 14% of revenue and delivered 4% growth. Q2 is another record quarter for orders and revenue, although revenue growth was below expectations due to shipment timing primarily related to delays into the Middle East. Shipman delays were approximately a four percentage point headwind to growth in the quarter. In the second half, we expect utilities growth of low double digits as first half orders significantly outpaced revenue and we are further progressing our capacity expansion initiatives. Test and measurement growth broadened across all end markets. Diversified electronics represents 21% of revenue and delivered 23% growth as customers increased innovation for electronics in energy storage systems, electric vehicles, medical devices, consumer electronics, and emerging AI-enabled edge devices. The convergence of higher compute requirements, greater energy efficiency needs, and longer battery life expectations is driving a new wave of innovation across these applications. Energy storage systems exemplify the innovation driving growth in diversified electronics. Customers are rapidly increasing system power levels and developing new ways to connect energy storage to the grid and critical infrastructure, including data center backup. Tektronix, DC power supplies, and customized power racks help validate these next generation architectures. In Q2, we secured a production win with a leading energy storage provider, creating an opportunity to scale alongside the customer's future capacity expansion. Communication represents 11% of revenue and delivered 9% growth, reflecting continued technology innovation in advanced communications for AI infrastructure, aerospace and defense, and research laboratories. In the quarter, we had a customer win where engineers are using our test and measurement instruments to measure electrical signals with pinpoint accuracy to validate that optical laser chips are working precisely. This supports the build-out of optical infrastructure, which is a technology that underpins data-hungry AI, cloud computing, and high-speed connectivity. Semiconductor represents 7% of revenue and delivered 5% growth. Our high-precision instruments are at the forefront of enabling engineers to develop and validate the next generation of semiconductors that enable communication networks, intelligent devices, and advanced electronic systems. During the quarter, we saw broad-based acceleration as semiconductor technologies enable new product innovation across industrial, energy, data center, and defense markets. Across our test and measurement end markets, customer demand remains robust and our pipeline continues to support confidence in elevated activity levels through the second half. While the business remains inherently short cycle and visibility beyond 90 days is limited, we are encouraged by current demand trends and we're actively managing supply availability and capacity to support customer requirements. Next on slide 10, We leverage RVS across the enterprise for both growth and productivity. As I shared earlier, the RVS-led Enterprise Productivity Program is on track to achieve $10 to $12 million of in-year savings and $50 to $60 million of annualized run rate savings by 2028. In defense and space, our multi-year RVS-led productivity initiatives have double production output within our existing manufacturing footprints. To further increase production going forward, Taxi EMC was awarded $27 million by the Department of War and has expanded into one of our existing manufacturing sites in Ohio. In utilities, we continue to see robust demand supported by multi-year grid modernization and resiliency initiatives. In July, we broke ground on expanding our precision sensor facility in upstate New York to support the historic orders growth. Next, Neill will review our financial results and provide additional perspective on our guidance.