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Ralliant Corp (RAL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue of $503.3M declined 5.7% YoY and rose 4% sequentially; adjusted EPS of $0.67 beat S&P Global consensus of $0.564, and revenue was modestly above $501.6M consensus; adjusted EBITDA margin of 19.8% compressed 530 bps YoY on T&M volume deleveraging, standalone public company costs, and tariff headwinds . EPS/revenue estimates from S&P Global marked with asterisks below.*
  • Sensors & Safety Systems (S&SS) grew revenue 1% YoY with 28.4% adj. EBITDA margin (up 90 bps YoY), driven by utilities and defense; Test & Measurement (T&M) revenue fell 15% YoY and margin fell to 9.1% (down 1,290 bps YoY) but improved sequentially and is guided to at least double-digit margin in Q3 .
  • Management launched a cost savings program targeting $9–$11M of annualized savings to address spin-related T&M dis-synergies, sees tariff headwinds of ~$40M in 2025 (about $12M in Q2), and expects to fully offset ongoing tariff impact by year-end (with a ~100 bps gross margin drag thereafter) .
  • Capital returns initiated: up to $200M share repurchase authorization and a $0.05 quarterly dividend; balance sheet started with $199M cash and $1.15B term loan (net leverage 1.9x) .

What Went Well and What Went Wrong

What Went Well

  • Utilities and Defense strength: S&SS revenue up 1% YoY and 6% QoQ; adj. EBITDA margin expanded to 28.4% (+90 bps YoY) on robust utilities grid modernization and defense program demand .
  • Sequential improvement in T&M: T&M revenue +2% QoQ and adj. EBITDA margin +230 bps QoQ as orders stabilized and new products began contributing; management expects at least double-digit T&M adj. EBITDA margin in Q3 .
  • Strong FCF and capital returns: Q2 free cash flow $74M (97.8% conversion), $200M buyback authorization, and $0.05 dividend underscore cash generation and shareholder return framework .
  • Management quote: “We are launching a Cost Savings Program targeted at mitigating spin-related dis-synergies and contributing to adjusted EBITDA margin expansion” .

What Went Wrong

  • T&M cyclicality and exposure: Revenue -15% YoY and adjusted EBITDA margin down 1,290 bps YoY, driven by weaker EV/battery in Western Europe and softness in China; tariffs and standalone costs compounded pressure .
  • Regional softness: Western Europe down 23% YoY on EV/battery weakness; North America down 5% YoY; China modestly down 1% as S&SS growth was offset by T&M demand limits and export controls .
  • Tariff headwinds and higher OpEx: $40M FY25 tariff cost headwind ($12M in Q2) with public company and employee costs lifting adjusted operating expense; Q3 adjusted OpEx expected at ~$170M as the go-forward run-rate ramps .

Financial Results

Headline P&L vs prior periods and consensus

MetricQ2 2024Q1 2025Q2 2025Q2 2025 Consensus
Revenue ($M)$533.7 $481.8 $503.3 $501.6* (Revenue Consensus Mean)
GAAP EPS ($)$0.57 $0.57 $0.42 —
Adjusted EPS ($)—$0.73 $0.67 $0.564* (Primary EPS Consensus Mean)
Adjusted EBITDA ($M)$134.2 $101.7 $99.4 $99.5* (EBITDA Consensus Mean)
Adjusted EBITDA Margin (%)25.1% 21.2% 19.8% —
Net Earnings Margin (%)12.1% 13.3% 9.5% —
  • Q2 beats/misses vs S&P Global consensus: Revenue +$1.7M beat; adjusted EPS +$0.106 beat; EBITDA printed below the S&P “EBITDA” actual of $87.5M vs 99.5M estimate, noting definitions may differ from company’s adjusted EBITDA . Estimates marked with asterisks are from S&P Global (see Estimates Context).*

Segment breakdown

SegmentQ2 2024 Revenue ($M)Q1 2025 Revenue ($M)Q2 2025 Revenue ($M)Q2 2024 Adj. EBITDA MarginQ1 2025 Adj. EBITDA MarginQ2 2025 Adj. EBITDA Margin
Test & Measurement$226.3 $188.5 $192.5 22.0% 6.8% 9.1%
Sensors & Safety Systems$307.4 $293.3 $310.8 27.5% 30.8% 28.4%

KPIs and balance sheet

KPIQ2 2024Q2 2025
Free Cash Flow ($M)$86.4 $74.0
FCF Conversion (%)133.1% 97.8%
Operating Cash Flow ($M)$96.0 $85.6
Capex ($M)$9.6 $11.6
Cash & Equivalents ($M)—$199
Total Debt ($B)—$1.15
Net Leverage (x)—1.9x
Dividend per share ($)—$0.05
Buyback Authorization ($M)—$200

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q3 2025N/A – first quarter post-spin providing quarterly guidance $513–$527 New
Adjusted EBITDA Margin (%)Q3 2025N/A 18%–20% New
Adjusted EPS ($)Q3 2025N/A $0.54–$0.60 New
Interest Expense ($M)Q3 2025N/A $16–$18 New
Adjusted Tax Rate (%)Q3 2025N/A 17%–19% New
Diluted Shares (M)Q3 2025N/A ~113 New
T&M Adjusted EBITDA MarginQ3 2025N/A At least double-digit New
Tariff ImpactFY25—~$40M cost headwind; fully offset by YE with ~100 bps ongoing gross margin drag Update/Color

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Tariffs / supply chainN/A – first standalone public-company call post spin $40M FY25 headwind ($12M in Q2); majority mitigation via pricing and supply chain; aim to fully offset by YE with ~100 bps gross margin drag Improving mitigation into 2H
T&M cycle and marginsN/AStabilizing after multi-quarter declines; +2% QoQ revenue; adj. EBITDA margin 9.1% and guided to at least double-digit in Q3 Gradual recovery
Utilities/DefenseN/AS&SS momentum: utilities double-digit YoY, defense orders outpacing revenue Positive secular tailwinds
Regional performanceN/ANA -5% YoY; China -1%; Western Europe -23%; RoW +5% Mixed; Europe weak
Product innovation/AIN/A8 new products YTD; high-performance 7 Series oscilloscope shipping; AI data center cooling sensors; arc detection with AI software Accelerating launches
OpEx/standalone costsN/AQ3 adjusted OpEx ~ $170M run-rate; standalone costs ~$50–$55M annual Higher go-forward baseline

Management Commentary

  • Strategy pillars: “RBS everywhere… stronghold positions… winning growth vectors… grid modernization, defense technologies and power electronics” .
  • Cost and tariffs: “We expect to fully offset the ongoing tariff impact by year end” ; “Tariff countermeasures… majority pricing… some supply chain actions” .
  • T&M actions: “Activating a cost savings program, initially targeting $9–$11 million of annualized savings… most benefit in cost of sales” .
  • Capital returns: “Board… authorized up to $200 million… and declared a quarterly cash dividend of $0.05 per share” .

Selected quotes:

  • “We are launching a Cost Savings Program… contributing to adjusted EBITDA margin expansion” — CEO Tami Newcombe .
  • “Adjusted EBITDA margin… down 530 bps YoY… driven by lower volumes in T&M… standalone public company costs and tariffs” — CFO Neil Reynolds .
  • “We expect a return to double-digit [T&M] percent levels in the third quarter” — CFO .

Q&A Highlights

  • T&M trajectory: Management expects gradual sequential improvement with seasonality; cautious but optimistic on volume; cost savings and tariff mitigation should lift margins into double-digits in Q3 .
  • Tariff mitigation mechanics: ~$12M Q2 impact; ~$12–14M per quarter through 2H; majority offset via pricing, with supply chain shifts and “in-region for region” manufacturing; expect ~100 bps ongoing gross margin drag post mitigation .
  • Regional/China: China stabilization driven by S&SS growth; T&M limited by export controls; Western Europe remains weak on EV/battery .
  • Auto/EV exposure: Predominantly EV/battery, mostly Europe; stabilizing at a lower level; auto ~5% of total company mix .
  • OpEx and standalone costs: Q3 adjusted OpEx run-rate ~$170M; standalone costs revised to ~$50–55M annual from ~$45M presented pre-spin .

Estimates Context

  • Q2 2025 vs S&P Global consensus: Revenue $503.3M vs $501.6M estimate (beat); Primary EPS $0.67 vs $0.564 estimate (beat); EBITDA $87.5M vs $99.5M estimate (miss). Note: Company highlights adjusted EBITDA of $99.4M; S&P’s “EBITDA” may differ in definition from company’s adjusted metric . Values with asterisks below retrieved from S&P Global.*
  • Q3 2025 outlook vs consensus: Guidance revenue $513–$527M vs $521.1M consensus*; guidance EPS $0.54–$0.60 vs $0.577 consensus*; guidance calls for T&M to at least double-digit margin .
MetricQ2 2025 ActualQ2 2025 Consensus*Q3 2025 GuidanceQ3 2025 Consensus*
Revenue ($M)503.3 501.6*513–527 521.1*
EPS (Primary/Adjusted) ($)0.67 0.564*0.54–0.60 0.577*
EBITDA ($M)87.5 (S&P actual)*/99.4 (Adj.) 99.5*——

Disclaimer: Asterisked values are retrieved from S&P Global.*

Key Takeaways for Investors

  • Mixed print: revenue in line-to-slight beat and adjusted EPS beat, but notable YoY margin compression from T&M deleveraging and tariffs; sequential trajectory improving, especially in T&M .
  • Near-term catalysts: Q3 guide brackets consensus and implies T&M back to double-digit margin; execution on tariff mitigation and cost savings is the swing factor for margins into 2H .
  • Secular exposure: Utilities and Defense momentum supports S&SS margin durability and order growth; continued product cadence should help T&M stabilization/turn .
  • Capital returns and balance sheet: $200M buyback, $0.05 dividend, and 1.9x net leverage provide optionality while funding organic R&D; watch Q3 ~$90M spin-related payments .
  • Estimate implications: Revenue/EPS likely biased up modestly near-term; EBITDA/margin estimates may need finer alignment to company’s adjusted definitions and to tariff mitigation timetable .
  • Risk watch: Western Europe EV/battery exposure, tariff policy volatility, and standalone cost run-rate (~$170M/qtr) temper faster margin reversion .

Notes on sources:

  • Q2 2025 earnings press release (8-K Exhibit 99.1) and reconciliations .
  • Q2 2025 earnings call transcript (prepared remarks and Q&A) –.
  • No additional separate press releases were available in the Q2 window beyond the 8-K exhibit [press-release none found].
  • Prior quarter detail used where provided in the company’s Exhibit 99.1; standalone prior-quarter press releases/transcripts not available pre-spin .