Ralliant Q1 Earnings Call Highlights

Key Points

• Ralliant beat Q1 expectations, reporting revenue of $535 million, adjusted EBITDA margin of 18.6% and adjusted EPS of $0.57, all above the high end of guidance. The company also raised its full-year 2026 outlook on stronger demand and improved productivity.
• Defense, Utilities and Test & Measurement were the main growth drivers, with both segments posting 9% organic revenue growth. Defense & Space organic revenue jumped 21%, while Test & Measurement returned to growth with its strongest book-to-bill since 2022.
• Management highlighted stronger cash returns and cost savings, including progress on a productivity program targeting $50 million to $60 million in annualized savings by 2028. Ralliant also boosted its share repurchase authorization to $500 million and plans a $100 million accelerated buyback in Q2.

Ralliant NYSE: RAL reported first-quarter 2026 results above the high end of its guidance and raised its full-year outlook, citing strength in Test & Measurement, continued demand in defense and utilities, and early benefits from productivity initiatives.

President and CEO Tami Newcombe said the company “started 2026 with a solid first quarter performance,” supported by disciplined execution and a portfolio increasingly aligned with higher-growth markets tied to electrification and defense. Revenue for the quarter was $535 million, up 11% year over year on a reported basis and 9% organically. The company reported a book-to-bill ratio above 1.1.

Adjusted EBITDA margin was 18.6%, and adjusted earnings per share were $0.57, both above the high end of the company’s guidance ranges. CFO Neill Reynolds said the performance was driven by faster-than-expected improvement in shorter-cycle businesses and increased productivity savings. On a normalized basis, adjusted EBITDA margin improved 270 basis points from the prior year, while adjusted diluted EPS increased 39%.

Defense, Utilities and Test & Measurement Drive Momentum

Ralliant said both of its segments delivered 9% organic revenue growth in the quarter. Sensors & Safety Systems generated revenue of $324 million, up 11% reported and 9% organically. Within that segment, Defense & Space organic revenue grew 21%, supported by strong shipments and demand tied to critical programs and replenishment in missiles and munitions.

Newcombe said Ralliant’s multi-year defense backlog now exceeds $1 billion, spanning more than 40 programs across legacy and new products supporting ocean, land and air safety systems. In response to an analyst question, she said the backlog should be viewed as covering roughly two to three years and that the company expects double-digit growth in Defense & Space in 2026 and beyond, though she and Reynolds cautioned that defense revenue and margins can be lumpy from quarter to quarter.

Utilities posted record orders in the quarter, though revenue growth was softer because of shipment timing. Newcombe said the company expects that to be “one-quarter lumpiness” and noted that Ralliant’s precision sensors and analytics help utilities monitor and protect grid assets such as transformers, turbines and gas-insulated substations.

Test & Measurement revenue was $210 million, up 12% reported and 9% organically. Reynolds said the segment returned to growth and delivered its highest quarterly book-to-bill since 2022, with book-to-bill between 1.1 and 1.2. Communications grew double digits organically, while diversified electronics also posted double-digit organic growth, driven by improvement across humanoid robotics, energy storage and advanced research. Semiconductor organic revenue declined high single digits due to the comparison with a large customer project last year, but Reynolds said semiconductor revenue grew double digits excluding that headwind.

Regional Trends Show North American Strength

North America, which represents more than 55% of Ralliant’s revenue, delivered 16% organic revenue growth, supported by defense investment and demand tied to AI-driven innovation in data centers, electronics and power grid infrastructure. China, about 15% of revenue, grew 5% organically due to government-funded projects tied to AI and energy infrastructure. Western Europe and the rest of the world, together about 30% of revenue, were slightly down organically amid macroeconomic and geopolitical uncertainty.

Newcombe said AI is accelerating customer innovation cycles, including in data center infrastructure, electronics and the power grid. She said Ralliant’s Test & Measurement instruments support validation of advanced semiconductors and electronic systems, while its industrial sensors provide thermal, pressure and fluid measurements used in cooling and continuous operation.

Productivity Program Targets $50 Million to $60 Million in Savings

Ralliant also announced progress on its Enterprise Productivity Program, which is expected to deliver $50 million to $60 million of run-rate annualized savings by 2028. Newcombe said the program is focused on simplifying the organization after its spin, improving workflows through the Ralliant Business System, and using AI-enhanced processes.

Reynolds said the company has already acted on approximately $20 million of annualized run-rate savings, including an additional roughly $10 million in the first quarter. Ralliant expects $10 million to $12 million of in-year savings in 2026 and expects to exit the year at an annualized run rate of $20 million. The company is targeting completion of remaining program actions by the end of 2027, with savings continuing to ramp into 2028.

The savings are expected to come from cost of sales and general and administrative expenses. Newcombe cited enterprise strategic sourcing, a new group purchasing office, simplification, AI-enhanced workflows and use of lower-cost locations as areas of focus.

Guidance Raised for 2026

For the second quarter, Ralliant expects revenue of $540 million to $556 million, representing 7% to 10% year-over-year organic growth. The company forecast adjusted EBITDA margin of 18.5% to 19.5% and adjusted EPS of $0.58 to $0.64.

For full-year 2026, Ralliant raised its outlook to revenue of $2.185 billion to $2.245 billion, adjusted EBITDA margin of 19.5% to 20.5%, and adjusted EPS of $2.53 to $2.69. Reynolds said the higher outlook reflects the strength of the first quarter and greater confidence in recovery across shorter-cycle businesses.

During the question-and-answer session, Reynolds said typical seasonality would suggest a stronger second half, but the company is being cautious because of macroeconomic uncertainty and potential supply disruptions. Newcombe said Test & Measurement orders and book-to-bill were key drivers of the full-year guidance increase.

Capital Returns Increase

Ralliant ended the quarter with $268 million in cash and cash equivalents. Free cash flow was $10 million in the quarter, down year over year due to timing, but trailing 12-month free cash flow conversion was 105%, above the company’s target of greater than 95%.

The company returned $56 million to shareholders in the quarter through dividends and share repurchases. Reynolds said Ralliant’s board increased its share repurchase authorization to $500 million and that the company now targets repurchases of about 50% of free cash flow going forward. Ralliant also plans to execute a $100 million accelerated share repurchase program in the second quarter and authorized a quarterly cash dividend of $0.05 per share.

Reynolds said organic reinvestment remains Ralliant’s top capital allocation priority, including capacity expansion in defense and utilities, followed by capital returns to shareholders and potential tuck-in acquisitions.

About Ralliant NYSE: RAL

Ralliant, Inc NYSE: RAL is a medical technology company focused on enabling point-of-care cell therapy solutions in the field of regenerative medicine. The company develops and markets systems that isolate, concentrate and store adipose-derived stromal vascular fraction (SVF) cells directly from a patient's own fat tissue, facilitating same-day, autologous treatments without the need for extensive laboratory infrastructure.

The company's core product portfolio includes proprietary device platforms and single-use processing kits engineered to streamline the workflow for clinicians.

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