Ralliant Q2 Earnings Call Highlights

Key Points

• Ralliant exceeded Q2 guidance, with revenue up 13% year over year to $568 million, adjusted EPS up 58% to $0.68, a 19.8% adjusted EBITDA margin and $99 million in free cash flow.
• Growth was broad-based across both segments, led by Test & Measurement revenue growth of 15% and Sensors & Safety Systems growth of 12%. Defense and space demand remained strong, with backlog above $1 billion, while utilities growth was temporarily limited by shipment delays.
• The company raised its 2026 outlook to $2.25 billion-$2.3 billion in revenue, a 20%-21% adjusted EBITDA margin and adjusted EPS of $2.76-$2.90, supported by productivity savings, capacity investments and continued shareholder returns.

Ralliant NYSE: RAL reported second-quarter 2026 results above its guidance ranges and raised its full-year outlook, citing double-digit revenue growth in both operating segments, margin expansion and strong free-cash-flow generation.

Revenue increased 13% year over year, both reported and organically, to $568 million. Adjusted EBITDA margin was 19.8%, while adjusted earnings per share rose 58% to $0.68. The company generated $99 million in free cash flow during the quarter and reported trailing 12-month free-cash-flow conversion of 114%.

President and Chief Executive Officer Tami Newcombe said the company’s strategy was producing growth, margin expansion and cash generation one year after becoming an independent company. She pointed to demand tied to electrification and defense, as well as progress under Ralliant’s enterprise productivity program.

Segment Growth and End-Market Demand

Sensors & Safety Systems revenue totaled $347 million, up 12% reported and 11% organically. Its adjusted EBITDA margin was 29.4%, representing a 350-basis-point improvement on a normalized basis. Chief Financial Officer Neill Reynolds said results benefited from operating leverage, favorable industrial mix and better-than-expected defense margins associated with program mix during the quarter.

Test & Measurement revenue increased 15% reported and 16% organically to $221 million. The segment’s adjusted EBITDA margin reached 14.7%, improving 750 basis points on a normalized basis due to higher revenue and productivity savings.

Newcombe said diversified electronics, which represented 21% of total company revenue, grew 23% in the quarter as customers increased investment in energy storage, electric vehicles, medical devices, consumer electronics and AI-enabled edge devices. She described the category as broad-based electronics innovation, supported by Tektronix instruments used by engineers in research and development labs.

Communication revenue, representing 11% of company sales, grew 9%, while semiconductor revenue, representing 7% of sales, increased 5%. Reynolds said semiconductor results continued to face a year-over-year comparison related to a large customer project in 2025. That headwind was less pronounced in the second quarter but is expected to be more significant in the third quarter before the comparison becomes clean in the fourth quarter.

Defense, Utilities and Capacity Investments

Defense and space represented 17% of Ralliant’s revenue and grew 14% during the quarter. The company’s defense backlog remained above $1 billion. Newcombe said Ralliant is scaling production across certain product lines at roughly two to five times historic levels to support demand for priority munitions programs, including THAAD, PAC-3 and Tomahawk.

Ralliant has doubled production throughput within its existing manufacturing footprint, according to Newcombe. PacSci EMC was awarded $27 million by the Department of War and expanded into an existing Ralliant manufacturing site in Ohio. Newcombe said the company has line of sight on defense capacity needs through 2030 and is working with customers across varying demand-volume and timing scenarios.

Utilities revenue, which represented 14% of company sales, rose 4%. Newcombe said shipment timing delays involving a handful of Middle East customers reduced quarterly growth by approximately 4 percentage points. The company expects low-double-digit utilities growth in the second half as delayed shipments are completed and capacity comes online.

In July, Ralliant broke ground on an expansion of its precision-sensor facility in Upstate New York. The company also added shifts and expanded manufacturing cells to support utility demand.

Productivity Program and Capital Allocation

Ralliant’s enterprise productivity program generated $3 million of savings in the second quarter. Management reiterated expectations for $10 million to $12 million of in-year savings in 2026 and $50 million to $60 million of annualized run-rate savings by 2028, including $20 million already actioned.

Reynolds said the program, along with a strong baseline incremental margin, is expected to support approximately 50% incremental adjusted EBITDA margins through 2028 under an assumed organic revenue growth framework of about 5% in 2027 and 2028. The company did not provide formal guidance for those years.

Ralliant ended the quarter with $271 million in cash and cash equivalents and $1.15 billion of debt, with net leverage of approximately 1.9 times. During the first half, the company returned $161 million to shareholders, mainly through $150 million of share repurchases. That included the completion of a $100 million accelerated share-repurchase program, under which Ralliant repurchased 2.8 million shares at an average price of $54.74.

Reynolds said the company’s capital-allocation priorities remain organic reinvestment, shareholder returns and tuck-in acquisitions. Ralliant targets share repurchases equivalent to about 50% of free cash flow over time and said it has already repurchased approximately half of anticipated 2026 free cash flow.

Raised 2026 Outlook

For the third quarter, Ralliant expects revenue of $570 million to $590 million, adjusted EBITDA margin of 20.5% to 21.5%, and adjusted EPS of $0.72 to $0.78.

For full-year 2026, the company raised its outlook and now expects:

• Revenue of $2.25 billion to $2.3 billion
• Adjusted EBITDA margin of 20% to 21%
• Adjusted EPS of $2.76 to $2.90

Reynolds said the outlook includes a small benefit from tariff refunds received through the second quarter that will be recognized in cost of sales. Corporate and other expenses are now expected to be approximately $20 million to $23 million per quarter during the second half, up about $5 million to $6 million from prior estimates, reflecting productivity-program implementation costs, the transfer of certain support activities from segments to corporate and higher variable compensation tied to improved expected performance.

Newcombe said Test & Measurement remains a short-cycle business with visibility generally limited to 90 to 120 days. While current customer demand and book-to-bill trends remain strong, she said management expects the business’s growth rate to moderate after what it views as a strong first recovery year.

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.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.