Ralliant Corp. Q3 FY2025 earnings call

Post-Spin Separation: The team approached the post-spin separation with discipline and focus, delivering results at or above guidance ranges. ### Financial Results: Revenue was above the high end of guidance, with 5% growth Q2 to Q3. Adjusted EBITDA margin was 20.4%, and significant free cash flow was generated with a conversion rate above 95%. ### End Markets: Utilities and Defense end markets showed high growth, while Test & Measurement and Industrial Manufacturing exhibited sequential improvement. ### Product Launches: Tektronix launched two new high-performance precision instruments, including the DPO7000 and MP5000 series. ### Cost Savings: Progressing on a $9M to $11M annualized cost savings program to be completed by the end of 2026.

Sensors & Safety Systems: Q3 revenue grew 11% year-over-year and 5% sequentially. Defense & Space revenue grew 18% YOY, Utilities revenue grew 11% YOY, and Industrial Manufacturing grew 9% YOY. Adjusted EBITDA margin was relatively flat. Test & Measurement: Revenue declined year-over-year but had 6% sequential growth. Adjusted EBITDA margin grew 480 basis points sequentially but declined YOY. Diversified Electronics: Declined year-over-year, particularly in China and Western Europe, but saw sequential improvement in North America. Semiconductors: Revenue grew YOY and sequentially, though customers are deferring R&D spend to focus on AI.

Q4 2025: Expect revenue of $535 million to $550 million, adjusted EBITDA margin of 20% to 21%, and adjusted EPS of $0.62 to $0.68. ### 2026: Anticipate ramping CapEx from approximately 2% currently to between 2% and 3% of revenue. ### Seasonality: Typical sequential revenue step down from Q4 to Q1, with factors like tariffs, spin-related costs, and interest expense impacting comparisons.

Geopolitical Headwinds: Cautious demand in China due to export controls, tariffs, and geopolitical uncertainties. ### Customer Cautiousness: Western Europe saw a 6% revenue decline YOY due to customer caution. ### Tariffs: Small gross margin headwind expected to be ~50 basis points on a run rate basis. ### Seasonality: Sequential revenue step down from Q4 to Q1, affecting EBITDA margin expectations.

Q: How is demand cadence and segment differences in Q4?

A: Tamara Newcombe notes positive signals across the business, with volume driving sequential growth, and Neill Reynolds adds that underlying the sequential revenue improvement is solid volume and shipments.

Q: Market share and new products in Tektronix?

A: Tamara Newcombe states Tektronix is a top 5 player in Test & Measurement, with new products like the DPO7000 in R&D and MP5000 in validation.

Q: Defense business outlook?

A: Tamara Newcombe discusses strong backlog, core defense programs, and growth potential through 2030, with Neill Reynolds adding to the backlog build and investment plans in Defense.