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Ralliant (RAL) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· May 12, 2026

Source: earnings call transcript

Executive summary

Ralliant Q1 FY26 — Strong Performance, Raised Full-Year Outlook, and Increased Capital Returns

Ralliant delivered a solid Q1 FY26 performance, exceeding guidance across key metrics, driven by strong execution and recovery in shorter-cycle businesses. The company raised its full-year outlook, citing robust Test & Measurement orders and a growing defense backlog. Management also initiated a significant enterprise productivity program and increased capital returns to shareholders, targeting 50% of free cash flow for repurchases.

Highlights

5

  • Q1 revenue of $535 million, up 11% year-over-year, was above the high end of guidance.

  • Adjusted EBITDA margin of 18.6% and adjusted EPS of $0.57 were both above the high end of guidance ranges.

  • Company-wide book-to-bill was above 1.1x, with Test & Measurement book-to-bill between 1.1 and 1.2.

  • Defense backlog surpassed $1 billion, spanning more than 40 programs.

  • Initiated an enterprise productivity program targeting $50 million to $60 million of run rate annualized savings by 2028, with $20 million already actioned.

Concerns

3

  • Western Europe and the rest of the world were slightly down organically.

  • Utilities revenue growth was softer due to shipment timing.

  • Semiconductor organic revenue declined high single digits due to lapping a large customer project from last year.

Guidance & targets

CategoryTargetConfidence
Q2 FY26 Revenue
$540 million to $556 million
high materiality
High
Q2 FY26 Adjusted EBITDA margin
18.5% and 19.5%
medium materiality
High
Q2 FY26 Adjusted EPS
$0.58 and $0.64
high materiality
High
Q2 FY26 Weighted average diluted shares outstanding
approximately $112 million
low materiality
High
Full Year 2026 Revenue
$2.185 billion to $2.245 billion
high materiality
High
Full Year 2026 Adjusted EBITDA margin
19.5% to 20.5%
high materiality
High
Full Year 2026 Adjusted EPS
$2.53 and to $2.69
high materiality
High
Enterprise productivity program run rate annualized savings
$50 million to $60 million
high materiality
High
Share repurchases as % of free cash flow
approximately 50%
high materiality
High
Share repurchase authorization
$500 million
high materiality
High
Accelerated share repurchase program
$100 million
high materiality
High
Adjusted EBITDA margin
midpoint of our through-cycle range
high materiality
High
Organic growth rate (Defense & Utilities)
5% range
medium materiality
Medium
CapEx as % of revenue
2% to 3%
low materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Sensors & Safety Systems
Adjusted EBITDA margin improved by 70 basis points on a normalized basis, driven by higher operating leverage, partially offset by dilutive mix impact from higher defense and space growth. Utilities revenue growth was softer due to customer shipment timing despite record orders.
Organic revenue growth: 9%Defense & Space organic revenue growth: 21%Industrial, Manufacturing & Other organic revenue growth: mid-single digitsUtilities orders: record quarter
$324 million11% reported—28.4% Adjusted EBITDA margin
Test and Measurement
Returned to growth in the quarter, with adjusted EBITDA margin improving by 700 basis points on a normalized basis, reflecting significant operating leverage and early implementation of productivity actions. Achieved its highest quarterly book-to-bill since 2022.
Organic revenue growth: 9%Book-to-bill: 1.1 to 1.2Communications organic growth: double digitsDiversified Electronics organic growth: double digitsSemiconductor organic revenue decline: high single digits (due to large customer credit last year)Semiconductor organic revenue growth (excluding headwind): double digits
$210 million12% reported—11.9% Adjusted EBITDA margin

RAL operating KPIs by quarter

RAL operating KPIs stated on its earnings calls, by fiscal quarter
KPIThis call Mar 2026 Q1 FY26 Jun 2026 Q2 FY26Change vs prior quarter
Employees
~7,000 As I wrap, a big shout out to our approximately 7,000 employees around the globe for their ownership in grid to win as one team. Source: earnings call transcript
7,000 Finally, I want to thank our 7,000 team members from around the world their commitment, dedication and relentless focus on customers of what makes these results possible. Source: earnings call transcript
—

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Defense & Space backlog over $1 billion Q1 FY26

continues to build

Multiyear backlog, spanning 2 to 3 years, across more than 40 programs.

Company-wide book-to-bill above 1.1x Q1 FY26
Test & Measurement book-to-bill between 1.1 and 1.2 Q1 FY26

highest since 2022

Utilities orders record quarter Q1 FY26

Reinforcing strength and durability of demand.

Capital programs

Defense & Utilities Capacity Expansion underway
Start: ongoing for several years

Benefit:Increased throughput in existing facilities; physical space for future growth

Capacity expansion has been ongoing for several years through productivity initiatives, multiple shifts, and strategic sourcing. Physical capacity expansion will be needed for 2028 and beyond, with investments starting this year.

Risks & headwinds

Macroeconomic and geopolitical uncertainty Q1 FY26

Western Europe and Rest of World slightly down organically

Mitigation:Focus on controlling what can be controlled, spending time with customers, launching new products, and focusing on higher growth opportunities.

Semiconductor large customer project lapping Q1 FY26, next couple of quarters

high single digits organic revenue decline

Mitigation:Underlying strength in semi across a broad set of customers is strong; fully lapped by Q4 FY26.

Potential supply disruptions H2 FY26

not quantified

Mitigation:Being cautious in guidance due to potential for supply disruptions.

Mix impact from Defense growth Ongoing

margins below company average

Mitigation:Balanced by strong growth rates and backlog in defense; overall margin expansion expected for the full year.

What to watch in Q2 FY26

Semiconductor organic revenue growth

Q2/Q3 FY26
Current declined high single digits
Target double-digit growth (excluding comp)

Why it matters

To confirm the underlying strength and recovery in the semiconductor end market as the large customer comp is lapped.

Underlying strength in semi across a broad set of customers. that we're still lapping a large customer deal from last year. We've got another quarter of that, but the underlying strength is strong.

Find out whether RAL delivers this. Inve re-checks your case every morning.

Q&A highlights

Why does the full-year sales guidance embed a slowdown in the back half, and how will the semiconductor business grow after lapping tough comps?

The full-year raise was driven by Test & Measurement orders and book-to-bill, a short-cycle business with 90-120 days visibility. The H2 guidance is prudent due to macro uncertainty. The semiconductor business has underlying strength, but will face one more quarter of lapping a large customer deal.

“But when you step back, there's also a lot of uncertainty in the environment. We're going to control what we can control around spending time with our customers, continuing to launch new products and focusing where the higher growth opportunities are. But I do think it's prudent at this point to think about the second half as we have.”

asked by Julian Mitchell (Barclays) · answered by Tamara Newcombe

2 min read 5 chapters

Detailed narrative

Strong Q1 Performance and Raised Full-Year Outlook

Ralliant commenced 2026 with a solid first quarter, with revenue of $535 million, up 11% year-over-year, exceeding the high end of guidance. Adjusted EBITDA margin of 18.6% and adjusted EPS of $0.57 also surpassed expectations. This strong performance, coupled with robust orders and a book-to-bill above 1.1x, led the company to raise its full-year 2026 outlook across all metrics, anticipating continued strength in Test & Measurement and Defense.

Enterprise Productivity Program for Margin Expansion

The company initiated an enterprise productivity program targeting $50 million to $60 million in run rate annualized savings by 2028. This program, overseen by a dedicated management team, focuses on strategic sourcing in cost of sales and G&A optimization through simplification, AI-enhanced workflows, and leveraging lower-cost locations. Approximately $20 million of annualized savings have already been actioned, with $10 million to $12 million expected in-year savings for 2026.

Capitalizing on Electrification and Defense Growth Vectors

Ralliant is strategically aligned with high-growth secular demand in electrification and defense. In electrification, the company's precision sensors and test & measurement solutions support the global power grid, energy storage, and data center infrastructure, particularly for AI workloads. In defense, Ralliant benefits from multiyear replenishment demand and modernization, supplying mission-critical systems for legacy programs and advanced solutions for R&D labs, with backlog exceeding $1 billion.

Disciplined Capital Allocation and Shareholder Returns

The company maintains a disciplined capital allocation strategy, prioritizing organic reinvestment in areas like capacity expansion for defense and utilities. Following this, Ralliant is committed to returning capital to shareholders, targeting approximately 50% of free cash flow for repurchases. The Board increased the share repurchase authorization to $500 million, and a $100 million accelerated share repurchase program is planned for Q2, alongside a quarterly cash dividend of $0.05 per share.

Regional and End Market Dynamics

North America demonstrated broad-based momentum with 16% organic revenue growth, driven by defense programs and AI-accelerated innovation. China grew 5% organically due to government-funded AI and energy projects. Western Europe and the rest of the world experienced slight organic declines. Defense & Space achieved over 20% organic growth, while Utilities posted record orders despite softer revenue due to shipment timing. Test & Measurement returned to growth, with strong performance in diversified electronics and communications.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.