<div id="readability-page-1"><p>Ralliant Corporation ((RAL)) has held its Q4 earnings call. Read on for the main highlights of the call.</p><h3>Valentine's Day Sale - 70% Off</h3><ul><li>Unlock  hedge fund-level data  and  powerful investing tools  for smarter, sharper decisions  </li><li> Stay ahead of the market with  the latest news and analysis  and maximize your portfolio's potential</li></ul> <p>Ralliant Corporation’s latest earnings call struck a cautiously balanced tone, mixing steady operational progress with sizable one‑offs and margin headwinds. Management pointed to improving revenue trends, solid cash generation, and a disciplined balance sheet, but the discussion was tempered by a $1.4 billion goodwill impairment, structural cost drag, and lingering softness in parts of Test &amp; Measurement.</p> <h2>Revenue Growth and Sequential Momentum</h2> <p>Ralliant reported Q4 revenue of $555 million, up 1% year over year and 5% sequentially, capping a year in which sales improved every quarter. Management emphasized this steady momentum as evidence that end‑market demand is gradually stabilizing, even as certain segments remain below prior peaks and the broader environment stays uneven.</p> <h2>Adjusted Profitability and Earnings Upside</h2> <p>Adjusted EBITDA margin reached 20.8% in Q4, while adjusted diluted EPS came in at $0.69, up 15% sequentially and at or above the high end of guidance. Executives highlighted this outperformance as proof of ongoing execution and cost discipline, even though year‑over‑year margin comparisons remain pressured by higher operating expenses and mix.</p> <h2>Robust Free Cash Flow and Conversion</h2> <p>The company generated $92 million of free cash flow in the quarter, helping deliver a trailing twelve‑month free cash flow conversion of 117%, well above its long‑term goal of more than 95%. Management framed this cash performance as a critical offset to near‑term margin pressure, providing ample flexibility for investment, deleveraging, and shareholder returns.</p> <h2>Balance Sheet Strength and Leverage Discipline</h2> <p>Ralliant ended the quarter with $319 million in cash and cash equivalents and net leverage of 1.9 times adjusted EBITDA, neatly within its 1.5 to 2.0 times target range. This balance sheet position gives the company room to navigate cyclical end markets and absorb spin‑related cost headwinds while still funding growth projects and potential capital returns.</p> <h2>Sensors and Safety Systems Drive Core Momentum</h2> <p>Sensors and Safety Systems, which account for roughly 60% of revenue, grew 6% year over year and 3% sequentially in Q4, with an adjusted EBITDA margin of 28% despite some compression versus last year. Defense and Space delivered record revenue on missile replenishment, while utility sales rose 6% on grid modernization trends, underscoring the segment’s role as the company’s growth and margin anchor.</p> <h2>Test &amp; Measurement Recovery and Communications Upside</h2> <p>Test &amp; Measurement revenue of $217 million declined 6% year over year but climbed 7% sequentially, signaling early signs of recovery in a still‑soft market. Within the segment, the Communications end market stood out, growing 29% year over year and 36% sequentially on strong data center, defense, and research demand, helped by new high‑performance Tektronix instruments.</p> <h2>Capital Allocation and Shareholder Returns</h2> <p>The board approved a quarterly cash dividend of $0.05 per share and left a $200 million share repurchase authorization fully available, reflecting confidence in cash generation. Management reiterated that organic reinvestment remains the first priority, but signaled that dividend payments and opportunistic buybacks will complement growth spending as long as leverage stays within target.</p> <h2>Cost Savings Program and Productivity Focus</h2> <p>Ralliant launched a cost savings initiative targeting $9 million to $11 million of annual run‑rate savings by 2026 and delivered $1 million in Q4, equivalent to about $4 million annualized. Leaders stressed that the program, supported by the Ralliant Business System and AI‑enabled productivity tools, is still in early innings and should increasingly help offset structural cost pressures over time.</p> <h2>Goodwill Impairment and EV‑Exposed EA Business</h2> <p>A $1.4 billion noncash goodwill impairment tied to the EA business dominated the headline figures, reflecting weaker‑than‑expected electric vehicle demand and revised long‑term forecasts. While excluded from adjusted results, the charge highlighted the risk of policy‑driven auto capital spending and prompted a strategic pivot to redirect EA toward broader energy storage applications beyond EVs.</p> <h2>Persistent Test &amp; Measurement Weakness</h2> <p>Despite sequential improvement, Test &amp; Measurement remains under pressure, with Q4 revenue down 6% year over year and particularly soft results in Diversified Electronics, which slid by about the low teens percentage. Management also cautioned that a large customer project which boosted 2025 performance will not repeat in 2026, keeping semiconductor‑linked demand volatile and limiting near‑term visibility.</p> <h2>Margin Pressure from Costs and Mix</h2> <p>Adjusted EBITDA margins declined versus last year, driven by lower Test &amp; Measurement volumes and higher operating expenses such as standalone public company costs and employee‑related items. Sensors and Safety Systems margins compressed by roughly 280 basis points year over year, and management flagged a roughly 250 basis point structural headwind in 2026 from post‑spin costs that will weigh on reported profitability.</p> <h2>Expected Near‑Term Margin Step‑Down</h2> <p>For Q1 2026, Ralliant guided to an adjusted EBITDA margin of 17% to 18%, implying a sequential decline of about 330 basis points from Q4. The company attributed this step‑down to normal seasonality, higher operating expenses, incentive compensation resets, and the planned ramp‑up of organic growth investments that should support revenue in the back half of the year.</p> <h2>Exposure to EV Slowdown and Market Repositioning</h2> <p>EA’s results underscored the impact of reduced EV adoption forecasts and shifting subsidy regimes, which pressured orders and justified the impairment. In response, Ralliant is repositioning the business toward other energy storage and power applications that are less dependent on EV‑specific policy and may offer a more diversified growth path over time.</p> <h2>China Headwinds and Export Control Risks</h2> <p>While some macro indicators in China appear to be stabilizing, management remains cautious and expects ongoing pressure from export controls and regulatory uncertainty. As a result, Ralliant has tempered its expectations for China‑driven electronics growth in 2026, assuming a more modest contribution from the region when planning capacity and investments.</p> <h2>Slow Build in Cost Savings and Spin‑Related Costs</h2> <p>Progress on the cost savings program has been modest so far, with only $1 million realized in Q4, leaving most of the targeted $9 million to $11 million still ahead. At the same time, separation and stand‑up expenses, along with higher post‑spin operating costs that push quarterly OpEx to around the mid‑$100 million level, are creating a notable near‑term margin drag and complicating comparisons.</p> <h2>Guidance Points to Measured Growth and Margin Rebuild</h2> <p>For Q1 2026, Ralliant expects revenue of $508 million to $522 million, up 5% to 8% year over year including currency tailwinds, with adjusted EPS of $0.46 to $0.52 and margins of 17% to 18%. Full‑year 2026 guidance calls for $2.1 billion to $2.2 billion in revenue, 18% to 20% adjusted EBITDA margins, adjusted EPS of $2.22 to $2.42, strong free cash flow conversion above 95%, and sequential revenue growth each quarter as cost saves ramp and investments begin to pay off.</p> <p>Ralliant’s earnings call painted a picture of a company in transition, balancing solid cash generation, core segment strength, and a sound balance sheet against structural cost inflation and cyclical end‑market pockets. For investors, the coming year looks set to test management’s ability to convert modest top‑line growth into improving margins while digesting spin‑related costs and steering through EV and China uncertainties.</p></div>

<p>Ralliant Corporation's Q4 earnings call highlighted a cautious balance between operational progress and margin pressures. The company reported Q4 revenue of $555 million, a 1% year-over-year increase, with an adjusted EBITDA margin of 20.8%. Despite a $1.4 billion goodwill impairment and ongoing cost challenges, Ralliant generated $92 million in free cash flow. The board approved a $0.05 per share dividend and a $200 million share repurchase authorization. A cost savings initiative aims for $9 million to $11 million in annual savings by 2026, while the Test & Measurement segment remains under pressure.</p>

Ralliant Corporation Balances Cash Strength With Margin Strain