Ralliant (NYSE:RAL) executives said the company closed its first full year as a standalone public company by exceeding fourth-quarter revenue guidance, delivering results at or above the high end of its profitability outlook, and generating strong free cash flow, while also recording a large non-cash goodwill impairment tied to an electric-vehicle-related acquisition.
Fourth-quarter and full-year highlights
President and CEO Tami Newcombe said 2025 was “a pivotal year,” marked by the company sharpening its long-term strategy, accelerating innovation across the portfolio, and strengthening its culture following the separation. For the fourth quarter, the company reported revenue of $555 million, up 1% year-over-year, with Newcombe noting sequential improvement each quarter of 2025 and 5% sequential growth in Q4.
CFO Neill Reynolds said Q4 adjusted EBITDA margin was 20.8% and adjusted diluted EPS was $0.69. He attributed the year-over-year margin decline to lower test and measurement volume and higher operating expenses, including standalone public company costs and higher employee costs such as healthcare. Sequentially, he said adjusted EBITDA margin improved by 40 basis points, driven by higher revenue and the company’s cost savings program.
Free cash flow in the quarter was $92 million, which Reynolds said reflected disciplined capital spending and working capital management. The company ended the quarter with $319 million in cash and cash equivalents and maintained 1.9x net leverage to adjusted EBITDA, in line with its target leverage range.
Goodwill impairment tied to Elektro-Automatik
Reynolds addressed a $1.4 billion non-cash goodwill impairment recorded in the fourth quarter as part of the company’s annual impairment testing. The impairment was tied to the EA (Elektro-Automatik) business, acquired in January 2024 as part of Fortive, which he said has faced electric vehicle demand headwinds and is trending below prior expectations.
Reynolds said EA was purchased for EUR 1.6 billion (about $1.7 billion at the time), and that due to foreign exchange movements the carrying value was about $1.8 billion immediately prior to the impairment. He said the company revised long-term revenue and operating profit expectations lower amid slower-than-anticipated progress and reduced industry forecasts for EV adoption. In the Q&A, management cited changes in EV subsidies and write-downs at large auto OEMs as factors that prompted a reassessment of forecasts.
Newcombe added that EA “fits nicely” within the test and measurement business, describing it as “best-in-class” measurement technology with an engineering team and advanced manufacturing facility. Management said the technology is being directed toward other energy storage applications as the automotive EV opportunity has become smaller. Executives also said they did not see similar issues elsewhere in the test and measurement portfolio.
Segment performance: Sensors and Safety Systems vs. Test and Measurement
Reynolds said Q4 organic revenue was flat year-over-year, with pricing actions and healthy demand in Sensors and Safety Systems mostly offset by lower test and measurement volume.
- Sensors and Safety Systems (SSS): Q4 revenue increased 6% year-over-year and 3% sequentially, with mid-single-digit or better growth across the segment’s end markets. Defense and space revenue rose 5% year-over-year on robust demand and higher shipments, while backlog continued to grow. Utilities revenue increased 6%, supported by grid modernization and expansion driven by electrification and data center demand. Industrial manufacturing was also up 6%. SSS adjusted EBITDA margin was 28%, down 280 basis points year-over-year, primarily due to higher employee costs. In response to a question on why SSS margin fell sequentially despite higher revenue, Newcombe cited mix, including strong defense performance at a lower margin profile than the segment average.
- Test and Measurement (TSM): Q4 revenue was $217 million, down 6% year-over-year but up 7% sequentially. Diversified electronics (about half of TSM) declined year-over-year amid cautious customer capital spending, but grew 10% sequentially as revenue stabilized. Communications grew 29% year-over-year and 36% sequentially, with management describing aerospace and defense as the majority of that category and hyperscalers as the remainder. Semiconductor results were affected by the completion of a large customer project production cycle in Q3 2025, which management said is not expected to repeat in 2026, though orders were described as stable to improving over the year. TSM adjusted EBITDA margin improved 200 basis points sequentially but declined 310 basis points year-over-year amid lower volume and higher employee costs.
On order trends, Newcombe said the company was seeing “positive signals” in test and measurement, referencing approximately a 1:1 book-to-bill for the products portion of the business, improving sales funnels, and distributor feedback pointing to higher quote activity and normalized inventory levels.
Strategy, investments, and capital allocation
Newcombe reiterated three pillars of the company’s strategy: operating discipline through the Ralliant Business System (RBS), deepening “stronghold” market positions, and expanding in “winning growth vectors” such as defense, energy, and electronics. She said the company is enhancing its RBS toolkit with AI to “accelerate learning and execution.”
She highlighted customer wins across the portfolio, including record revenue at PacSci EMC in defense technologies and a Qualitrol selection by a large cloud provider as a global standard to improve data center asset reliability. Newcombe said hyperscalers directly building grid infrastructure for data centers represent a newer customer category for Qualitrol beyond utilities and transformer OEMs.
On investment, management said organic reinvestment is its top capital allocation priority, with CapEx expected to be 2%-3% of revenue in 2026, up from about 2% historically. In the Q&A, Reynolds said the 2026 guidance includes roughly 50-100 basis points of reinvestment at the company level, primarily weighted toward Sensors and Safety Systems given perceived stronger tailwinds in utilities and defense.
On shareholder returns, Reynolds said the board authorized the next quarterly cash dividend of $0.05 per share, and the company has a $200 million share repurchase authorization “fully remaining.” Management also said it continues to monitor tuck-in M&A opportunities, emphasizing discipline in capital allocation.
2026 outlook: growth with margin headwinds from costs and investment
For the first quarter of 2026, management guided to revenue of $508 million to $522 million, representing 5% to 8% year-over-year growth, including about two points of foreign exchange favorability. Reynolds said the sequential decline from Q4 reflects typical seasonality, with Q4 generally the highest and Q1 the lowest revenue quarter.
Ralliant expects Q1 adjusted EBITDA margin of 17% to 18% and adjusted EPS of $0.46 to $0.52. Reynolds attributed the sequential margin step-down to seasonality, incentive compensation resets, initiation of organic investments, and inflationary healthcare costs. He also said tariff assumptions are based on policy announcements as of January 30, and that under current policies the company expects to fully offset the cost of known tariffs through the year.
For full-year 2026, the company guided to:
- Revenue: $2.1 billion to $2.2 billion
- Adjusted EBITDA margin: 18% to 20%
- Adjusted EPS: $2.22 to $2.42
Reynolds said the revenue range implies 2% to 6% year-over-year growth, broadly aligned with the company’s long-term organic revenue growth target of about 3%, and he expects sequential quarterly revenue increases through 2026. He said adjusted EBITDA margin reflects a year-over-year decline on a reported basis due in part to structural cost changes following the spin, noting an approximately 250 basis point year-over-year headwind for 2026 because the company will lap lower pre-spin costs in the first half of the year. Excluding that headwind, Reynolds said the company expects 40% to 45% incremental adjusted EBITDA margin in 2026 on a like-for-like basis, supported by operating leverage and the ramp of its cost savings program.
Management said its cost savings program remains on track to reach a $9 million to $11 million run rate of annualized savings by the end of 2026. The company also reiterated expectations for free cash flow conversion to remain above 95% on a trailing 12-month basis throughout 2026, inclusive of increased CapEx.
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.
