Ralliant Corporation
11/06/2025 | Press release | Distributed by Public on 11/06/2025 16:10
Quarterly Report for Quarter Ending September 26, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Ralliant Corporation ("Ralliant", the "Company", "its", or "their") is a global technology company with businesses that design, develop, manufacture, and service precision instruments and highly engineered products. The Company empowers engineers with precision technologies essential for breakthrough innovation in an electrified and digital world, enabling its customers to bring advanced technologies to market faster and more efficiently. Its strategic segments - Test and Measurement and Sensors and Safety Systems - include well-known brands with prominent positions across a range of attractive end markets. On May 27, 2025, the Board of Directors of Fortive Corporation ("Fortive" or the "Former Parent") approved the separation of Fortive's Precision Technologies ("PT") operating segment through the pro rata distribution of all of the issued and outstanding common stock of Ralliant to Fortive's stockholders (the "Separation"), which was completed on June 28, 2025.
This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of the financial statements with a narrative from the perspective of management. The following discussion should be read in conjunction with the MD&A and combined financial statements included in the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on May 28, 2025. This MD&A is divided into six sections:
•Information Relating to Forward-Looking Statements
•Basis of Presentation
•Overview
•Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
BASIS OF PRESENTATION
The accompanying consolidated and combined condensed financial statements present the historical financial position, results of operations, changes in equity and cash flows of the Company in accordance with accounting principles generally accepted in the United States of America ("GAAP") for the preparation of carved-out combined condensed financial statements.
The Company has historically operated as part of Fortive's Precision Technologies segment and not as a stand-alone company. The financial statements as of June 27, 2025 or earlier have been derived from Fortive's historical accounting records and are presented on a carve-out basis. All revenues and costs, as well as assets and liabilities, directly associated with the business activity of the Company are included as a component of the financial statements. Those historical financial statements also included allocations of certain general, administrative, and sales and marketing expenses from Fortive's corporate office and from other Fortive businesses to the Company. The allocations were determined on a reasonable basis for the applicable periods; however, the amounts were not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of Fortive.
Prior to the Separation, the Company was dependent upon Fortive for all of its working capital and financing requirements as Fortive uses a centralized approach to cash management and financing of its operations. Because the Company was part of Fortive for the three and nine months ended September 27, 2024, only cash, cash equivalents, and borrowings clearly associated with Ralliant and related to the Separation, including the financing transactions described in the "Liquidity and Capital Resources" section, have been included in these Consolidated and Combined Condensed Financial Statements. Other financial transactions relating to the business operations of the Company during the period were accounted for through the Net Former Parent investment account of the Company.
The Company's business consists of two segments: Test and Measurement and Sensors and Safety Systems. For additional details regarding these operations, refer to Note 12 titled "Segment Information" in the Notes to the Consolidated and Combined Condensed Financial Statements.
Segment Realignment and Divestiture
In January 2024, Fortive realigned Invetech from the Advanced Healthcare Solutions segment to the PT segment. In June 2024, Fortive divested and transferred ownership of Invetech, excluding the Dover Motion Business, to Invetech's management team (the "Invetech Divestiture"). As a result of the Invetech Divestiture, in the three months ended September 27, 2024, Ralliant recorded a net realized loss of $25.6 million, which is identified as "Loss from divestiture" in the Consolidated and Combined Condensed Statements of Earnings. The Invetech Divestiture did not represent a strategic shift with a major effect on the Ralliant's operations and financial results, and therefore the divested businesses are not reported as discontinued operations.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Certain statements included in this Quarterly Report on Form 10-Q, are "forward-looking statements" within the meaning of the U.S. federal securities laws. All statements other than historical factual information are forward-looking statements, including, without limitation, statements regarding: future financial performance and results, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, the Company's liquidity position or other financial measures; management's plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, strategic opportunities, securities offerings, stock repurchases, dividends and executive compensation; the effects of the Separation on the Company; growth, declines and other trends in markets the Company sells into, including the expected impact of trade and tariff policies; changes in government contracting requirements, and reductions in federal spending; new or modified laws, regulations and accounting pronouncements; impact of climate-related events or transition activities; outstanding claims, legal proceedings, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; impact of changes to tax laws; general economic and capital markets conditions, including expected impact of inflation or interest rate changes; impact of geopolitical events and other hostilities; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that the Company intends or believes will or may occur in the future. Terminology such as "believe," "anticipate," "will," "should," "could," "intend," "plan," "expect," "estimate," "project," "target," "may," "possible," "potential," "forecast," "outlook," and "positioned" and similar references to future periods are intended to identify forward-looking statements, although not all forward-looking statements are accompanied by such words. Forward-looking statements are based on assumptions and assessments made by management of the Company in light of its experience and perceptions of historical trends, current conditions, expected future developments, and other factors they believe to be appropriate. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the risks and uncertainties set forth under "Cautionary Statement Concerning Forward-Looking Statements," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on May 28, 2025.
Forward-looking statements are not guarantees of future performance and actual results may differ materially from the results, developments and business decisions contemplated by the Company's forward-looking statements. Accordingly, you should not place undue reliance on any such forward-looking statements. Forward-looking statements speak only as of the date of the document or other communication in which they are made (or such earlier date as may be specified in such statement). Ralliant assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise.
See "Risk Factors", "Cautionary Statement Concerning Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on May 28, 2025 and "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q for further discussion regarding reasons that actual results may differ materially from the results, developments, and business decisions contemplated by the forward-looking statements.
OVERVIEW
General
Ralliant is a global technology company with businesses that design, develop, manufacture, and service precision instruments and highly engineered products. The Company empowers engineers with precision technologies essential for breakthrough innovation in an electrified and digital world, enabling its customers to bring advanced technologies to market faster and more efficiently. Its strategic segments - Test and Measurement and Sensors and Safety Systems - include well-known brands with prominent positions across a range of attractive end markets. The Company is headquartered in Raleigh, North Carolina, and has a global team of approximately 7,000 employees with solutions which are used in more than 90 countries by over 90,000 customers.
Ralliant is a multinational business with global operations, of which 47.9% and 49.3% of its sales were derived from customers outside the United States, as of the nine months ended September 26, 2025 and September 27, 2024, respectively.
As a company with global operations, Ralliant's businesses are affected by worldwide, regional, and industry-specific economic and political factors. Its geographic and industry diversity, as well as broad product and service offerings, typically limits the impact of any single industry or the economy of any single country (except for the United States) on its operating results. Given the broad range of its offerings and the geographies served, the Company does not use any indices other than general economic trends to predict the overall outlook for the Company. The Company monitors key competitors and customers, including their sales to the extent possible, to gauge relative performance and the outlook for the markets within which it competes.
Ralliant operates in a highly competitive business environment and its long-term growth and profitability will depend, in particular, on its ability to execute across geographies and end markets, develop innovative and differentiated new product offerings, continue to reduce costs, improve operating efficiency, and attract, retain, and develop an empowered workforce. The Company makes, and expects to continue to make, investments in research and development, customer-facing resources, its workforce and its manufacturing capabilities and capacity to meet the needs of its customers.
In 2025, the U.S. government began imposing tariffs on products from all countries and additional individualized reciprocal tariffs on certain countries. In response, China, in particular, and other countries have announced tariffs against certain imports from the United States. These changes to trade policies, retaliatory measures, and prolonged uncertainty in trade relationships negatively impact operations and financial results, including potential impairment of certain intangible assets, through resulting supply chain disruptions, delayed shipments, and increased operational complexities and costs.
The Company continues to evaluate the evolving impact of these tariffs, as the application and imposition of these tariffs remain unpredictable. The Company continues to deploy the Ralliant Business System ("RBS"), including tools and processes to leverage existing sourcing strategies and optimize production and logistics, to actively manage these challenges and utilize pricing, cost and productivity actions and other countermeasures to offset the aforementioned dynamics.
Non-GAAP Measures
In this Quarterly Report on Form 10-Q, references to sales from existing businesses ("organic revenue") refer to sales from operations calculated according to GAAP but exclude (1) the impact from acquired and divested businesses and (2) the impact of foreign currency translation. The portion of sales attributable to acquisitions or acquired businesses refers to sales from acquisitions or acquired businesses prior to the first anniversary of the acquisition date, less the amount of sales attributable to certain businesses or product lines that, at the time of reporting, have been divested or are pending divestiture, but are not, and will not be, considered discontinued operations, prior to the first anniversary of the divestiture. The portion of sales attributable to the impact of foreign currency translation is calculated as the difference between (a) the period-to-period change in sales (excluding sales impact from acquired businesses) and (b) the period-to-period change in sales (excluding sales impact from acquired businesses) after applying the current period foreign exchange rates to the prior year period. Organic revenue should be considered in addition to, and not as a replacement for or superior to, sales from operations, and may not be comparable to similarly titled measures reported by other companies.
Management believes that reporting the non-GAAP financial measure of organic revenue provides useful information to investors by helping identify underlying growth trends in the Company's business and facilitating comparisons of its sales performance with its performance in prior and future periods and to its peers. The Company excludes the effect of acquisition and divestiture related sales because the nature, size, and number of such transactions can vary dramatically from period to period and between the Company and the Company's peers. The Company excludes the effect of foreign currency translation from organic revenue because the impact of foreign currency translation is not under management's control and is subject to volatility. Management believes the exclusion of the effect of acquisitions and divestitures and foreign currency translation may facilitate the assessment of underlying business trends and may assist in comparisons of long-term performance.
Acquisitions
On January 3, 2024, Ralliant acquired EA Elektro-Automatik Holding GmbH ("EA"), a leading supplier of high-power electronic test solutions for energy storage, mobility, hydrogen, and renewable energy applications. The acquisition of EA bolsters Ralliant's innovative portfolio of products and services for engineers with complementary test and measurement solutions enabling the global energy transition. The total consideration paid was approximately $1.72 billion, net of acquired cash. Fortive, on behalf of Ralliant, funded this transaction with financing activities and available cash. Ralliant recorded approximately $1.18 billion of goodwill within its Test and Measurement segment related to the EA acquisition, which was not tax deductible. The Company anticipates future tax benefits as a result of the transaction.
Divestitures
In June 2024, Fortive completed the Invetech Divestiture. As a result of the Invetech Divestiture, in the nine months ended September 27, 2024, Ralliant recorded a net realized loss of $25.6 million, which is identified as "Loss from divestiture" in the Consolidated and Combined Condensed Statements of Earnings. The Invetech Divestiture did not represent a strategic shift with a major effect on the Ralliant's operations and financial results, and therefore the divested businesses are not reported as discontinued operations.
Business Performance
Business Performance During the Three and Nine Months Ended September 26, 2025
During the three and nine months ended September 26, 2025 (the "quarter" or the "third quarter", and "year-to-date period," respectively), sales decreased by 0.5% and 5.7%, respectively.
The year-over-year decrease in sales in the third quarter was driven by a 1.4% decrease in organic revenue, partially offset by an increase of 0.9% from favorable foreign currency exchange rates. The decrease in organic revenue in the third quarter included volume declines of 5.2%, partially offset by favorable pricing of 3.8%.
The year-over-year decrease in sales in the year-to-date period was driven by 5.4% decrease from organic revenue declines and a 0.7% decrease from the Invetech Divestiture, partially offset by 0.4% increase from favorable foreign currency exchange rates. The decrease in organic revenue in the year-to-date period included volume declines of 8.5%, partially offset by favorable pricing of 3.1%.
Geographically, in the third quarter, revenue was flat year-over-year, driven by 3% growth in North America, offset by 6% decline in Western Europe, 6% decline in China, and 3% decline in the rest of the world. Geographically, in the year-to-date period, revenue decreased 6% year-over-year, driven by 20% decline in Western Europe, 3% decline in North America, 6% decline in China, and flat revenue in the rest of the world.
RESULTS OF OPERATIONS
Selected Financial Data
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Sales | $ | 529.1 | $ | 531.7 | $ | 1,514.3 | $ | 1,606.6 | |||||||||||||||
| Operating profit | $ | 52.0 | $ | 111.2 | $ | 184.8 | $ | 357.5 | |||||||||||||||
| Depreciation | $ | 7.5 | $ | 6.8 | $ | 20.8 | $ | 23.0 | |||||||||||||||
| Amortization | $ | 22.5 | $ | 21.3 | $ | 64.7 | $ | 63.3 | |||||||||||||||
| Operating profit as a % of sales | 9.8 | % | 20.9 | % | 12.2 | % | 22.3 | % | |||||||||||||||
| Depreciation as a % of sales | 1.4 | % | 1.3 | % | 1.4 | % | 1.4 | % | |||||||||||||||
| Amortization as a % of sales | 4.3 | % | 4.0 | % | 4.3 | % | 3.9 | % | |||||||||||||||
Components of Sales Growth
|
Three Months Ended September 26, 2025 vs. Comparable 2024 Period
|
Nine Months Ended September 26, 2025 vs. Comparable 2024 Period
|
||||||||||
| Total revenue growth (GAAP) | (0.5) | % | (5.7) | % | |||||||
| Impact of: | |||||||||||
|
Acquisitions and divestitures
|
- | % | 0.7 | % | |||||||
| Currency exchange rates | (0.9) | % | (0.4) | % | |||||||
| Organic revenue growth (Non-GAAP) | (1.4) | % | (5.4) | % | |||||||
See the Test and Measurement and Sensors and Safety Systems sections below for further discussion of year-over-year sales analysis.
Operating Profit Margins
Operating profit margin was 9.8% for the third quarter, representing a decrease of 1,110 basis points, compared with 20.9% for the comparable period of 2024. The year-over-year changes in operating profit margin primarily comprised the following:
•The third quarter decrease in results primarily driven by -425 basis points from the stock-based compensation modification in the third quarter resulting from the revaluation of the share price as a result of the Separation; -270 basis points from volume reduction; -250 basis points from public company standalone costs; -200 basis points from higher salaries and wages; partially offset by +180 basis points from price increases. The net impact of tariffs was fully offset via countermeasures in the period.
Operating profit margin was 12.2% for the year-to-date period, representing a decrease of 1,010 basis points, compared with 22.3% for the comparable period of 2024. The year-over-year changes in operating profit margin primarily comprised the following:
•The year-over-year decrease in results from existing businesses - unfavorable 580 basis points, primarily driven by:
◦-350 basis points driven by volume reduction; -235 basis points from higher salaries and wages; -130 basis points from standalone public company costs; -35 basis points from the net impact of tariffs; partially offset by 125 basis points from price increases.
◦As a separate public company, Ralliant incurred incremental costs with the establishment of a separate corporate function, primarily related to employee compensation and IT system costs, as well as incremental standalone public company costs such as corporate governance costs, including audit and other professional services fees, consulting, and legal fees, and stock exchange listing fees.
•The year-over-year effect of the gain on sale of land and certain office buildings in 2024 - unfavorable 400 basis points.
•The stock-based compensation modification in the third quarter resulting from the revaluation of the share price as a result of the Separation - unfavorable 150 basis points.
•The year-over-year net effect of acquisition and divestiture related transaction costs incurred in 2024 primarily related to the EA acquisition - favorable 160 basis points.
Business Segments and Geographic Area Results
Sales by business segment and geographic area were as follows:
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Segments | |||||||||||||||||||||||
| Test and Measurement | $ | 203.1 | $ | 236.6 | $ | 584.1 | $ | 707.2 | |||||||||||||||
| Sensors and Safety Systems | 326.0 | 295.1 | 930.2 | 899.4 | |||||||||||||||||||
| Total | $ | 529.1 | $ | 531.7 | $ | 1,514.3 | $ | 1,606.6 | |||||||||||||||
| Geographic area | |||||||||||||||||||||||
| United States | $ | 283.6 | $ | 274.5 | $ | 788.3 | $ | 814.7 | |||||||||||||||
| China | 71.2 | 75.5 | 228.6 | 243.9 | |||||||||||||||||||
|
Western Europe
|
70.2 | 74.8 | 197.4 | 246.3 | |||||||||||||||||||
| All other | 104.1 | 106.9 | 300.0 | 301.7 | |||||||||||||||||||
| Total | $ | 529.1 | $ | 531.7 | $ | 1,514.3 | $ | 1,606.6 | |||||||||||||||
TEST AND MEASUREMENT
The Company's Test and Measurement segment provides precision test and measurement instruments, systems, software, and services. Through its portfolio of industry leading solutions, including oscilloscopes, probes, source measuring units, semiconductor test systems, high-power bi-directional power supplies, and measurement analysis software packages, the Test and Measurement segment empowers scientists, engineers, and technicians to create and realize technological advances with ever greater efficiency, speed, and accuracy.
Test and Measurement Selected Financial Data
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Sales | $ | 203.1 | $ | 236.6 | $ | 584.1 | $ | 707.2 | |||||||||||||||
| Operating (loss) profit | $ | (1.7) | $ | 29.3 | $ | (27.9) | $ | 111.6 | |||||||||||||||
| Depreciation | $ | 4.2 | $ | 3.8 | $ | 11.8 | $ | 13.6 | |||||||||||||||
| Amortization | $ | 22.0 | $ | 20.7 | $ | 63.0 | $ | 61.5 | |||||||||||||||
| Operating (loss) profit as a % of sales | (0.8) | % | 12.4 | % | (4.8) | % | 15.8 | % | |||||||||||||||
| Depreciation as a % of sales | 2.1 | % | 1.6 | % | 2.0 | % | 1.9 | % | |||||||||||||||
| Amortization as a % of sales | 10.8 | % | 8.7 | % | 10.8 | % | 8.7 | % | |||||||||||||||
Components of Sales Growth
|
Three Months Ended September 26, 2025 vs. Comparable 2024 Period
|
Nine Months Ended September 26, 2025 vs. Comparable 2024 Period
|
||||||||||
| Total revenue growth (GAAP) | (14.1) | % | (17.4) | % | |||||||
| Impact of: | |||||||||||
| Currency exchange rates | (1.2) | % | (0.5) | % | |||||||
| Organic revenue growth (Non-GAAP) | (15.3) | % | (17.9) | % | |||||||
The decreases in sales for both the third quarter and year-to-date period were primarily driven by decreases in organic revenue of 15.3% and 17.9%, respectively, partially offset by the favorable impact from foreign currency exchange rates.
The decrease in organic revenue in the third quarter and year-to-date period was primarily attributable to declines in sales volumes of 18.1% and 20.0%, respectively, primarily in product lines for oscilloscopes and related accessories and high-power solutions which were driven by demand weakness across diversified electronics and communications end markets.
Geographically, in the third quarter, revenue decreased 14% year-over-year, driven by 16% decline in North America, 20% decline in China, 15% decline in Western Europe, and 5% decline in the rest of the world. Geographically, in the year-to-date period, revenue decreased 17% year-over-year, driven by 34% decline in Western Europe, 15% decline in North America, 17% decline in China, and 7% decline in the rest of the world.
Operating loss margin was 0.8% for the third quarter, a decrease of 1,320 basis points compared with operating profit margin of 12.4% for the comparable period in 2024, primarily impacted by:
•The year-over-year decrease in results from existing businesses - unfavorable 1,025 basis points, primarily driven by:
◦-800 basis points driven by net volume declines due to demand weakness in diversified electronics and communications end markets, partially offset by price increases; and -170 basis points primarily from higher salaries and wages.
•The year-over-year effect of costs relating to the discrete restructuring plans - unfavorable 150 basis points.
Operating loss margin was 4.8% for the year-to-date period, a decrease of 2,060 basis points compared with operating profit margin of 15.8% for the comparable period in 2024, primarily impacted by:
•The year-over-year decrease in results from existing businesses - unfavorable 1,050 basis points, primarily driven by:
◦-950 basis points driven by volume declines due to demand weakness in all end markets, partially offset by price increases; and -300 basis points primarily from higher salaries and wages.
•The year-over-year effect of the gain on sale of land and certain office buildings in 2024 - unfavorable 900 basis points.
•The year-over-year effect of acquisition-related transaction costs incurred in 2024 related to the EA acquisition - favorable 360 basis points.
SENSORS AND SAFETY SYSTEMS
The Company's Sensors and Safety Systems segment provides leading power grid monitoring solutions, safety systems for mission critical aero, defense, and space applications, and sensing solutions for critical environments where uptime, precision, and reliability are essential. The Sensors and Safety Systems segment provides advanced monitoring, protection, and diagnostic solutions for high-voltage electrical assets in power generation, transmission, and distribution. The segment's energetic materials, ignition safety systems, and precision pyrotechnic devices are used in mission-critical applications such as satellite deployment, rocket propulsion initiation, aerial vehicle safety systems, and military defense systems. The Sensors and Safety Systems segment also provides premium sensing products encompassing liquid level, flow, and pressure sensors; motion sensors and components; and hygienic sensors.
Sensors and Safety Systems Selected Financial Data
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Sales | $ | 326.0 | $ | 295.1 | $ | 930.2 | $ | 899.4 | |||||||||||||||
| Operating profit | $ | 90.1 | $ | 82.0 | $ | 256.7 | $ | 245.9 | |||||||||||||||
| Depreciation | $ | 2.9 | $ | 3.0 | $ | 8.6 | $ | 9.4 | |||||||||||||||
| Amortization | $ | 0.5 | $ | 0.6 | $ | 1.7 | $ | 1.8 | |||||||||||||||
| Operating profit as a % of sales | 27.6 | % | 27.8 | % | 27.6 | % | 27.3 | % | |||||||||||||||
| Depreciation as a % of sales | 0.9 | % | 1.0 | % | 0.9 | % | 1.0 | % | |||||||||||||||
| Amortization as a % of sales | 0.2 | % | 0.2 | % | 0.2 | % | 0.2 | % | |||||||||||||||
Components of Sales Growth
|
Three Months Ended September 26, 2025 vs. Comparable 2024 Period
|
Nine Months Ended September 26, 2025 vs. Comparable 2024 Period
|
||||||||||
| Total revenue growth (GAAP) | 10.5 | % | 3.4 | % | |||||||
| Impact of: | |||||||||||
| Acquisitions and divestitures | - | % | 1.2 | % | |||||||
| Currency exchange rates | (0.7) | % | (0.2) | % | |||||||
| Organic revenue growth (Non-GAAP) | 9.8 | % | 4.4 | % | |||||||
The increase in sales for the third quarter was driven by price and volume increases of 9.8% and favorable impact from foreign currency exchange rates.
The sales result for the year-to-date period was driven by price and volume increases of 4.4%, partially offset by the 1.2% unfavorable impact from the Invetech Divestiture.
Year-over-year price increases in the Sensors and Safety Systems segment contributed 4.6% and 3.9% to sales growth during the third quarter and year-to-date period, respectively, compared with 2024, and is reflected as a component of the change in organic revenue. The net volume increase in the third quarter resulted from increases in the energetic materials product line from aero, defense, and space customers, increases in liquid and air sensors in manufacturing and other end markets, and increases in utility solutions. The net volume increase in the year-to-date period resulted primarily from increases in utility solutions, partially offset by declines in automation and control applications within the industrial manufacturing end market.
Geographically, in the third quarter, revenue increased 11% year-over-year, driven by 12% growth in North America, 23% growth in China, and 4% growth in Western Europe, and flat revenue in the rest of the world. Geographically, in the year-to-date period, revenue increased 3% year-over-year, driven by 15% growth in China, 2% growth in North America, 8% growth in the rest of the world, partially offset by 2% decline in Western Europe.
Operating profit margin was 27.6% for the third quarter, which remained consistent compared with 27.8% for the comparable period in 2024 and operating profit margin was 27.6% for the year-to-date period, which remained consistent compared with 27.3% for the comparable period in 2024.
COST OF SALES AND GROSS PROFIT
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Sales | $ | 529.1 | $ | 531.7 | $ | 1,514.3 | $ | 1,606.6 | |||||||||||||||
| Cost of sales | (260.5) | (251.9) | (753.9) | (776.2) | |||||||||||||||||||
| Gross profit | $ | 268.6 | $ | 279.8 | $ | 760.4 | $ | 830.4 | |||||||||||||||
| Gross profit margin | 50.8 | % | 52.6 | % | 50.2 | % | 51.7 | % | |||||||||||||||
The year-over-year decrease in gross profit during the third quarter was primarily due to net volume declines, partially offset by increases in price.
The year-over-year decrease in gross profit during the year-to-date period was primarily due to net volume declines, higher employee compensation costs, and tariffs, partially offset by year-over-year increases in price.
OPERATING EXPENSES
|
Three Months Ended
|
Nine Months Ended | ||||||||||||||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | September 26, 2025 | September 27, 2024 | |||||||||||||||||||
| Sales | $ | 529.1 | $ | 531.7 | $ | 1,514.3 | $ | 1,606.6 | |||||||||||||||
| Selling, general, and administrative ("SG&A") expenses | $ | 177.8 | $ | 128.7 | $ | 453.5 | $ | 414.6 | |||||||||||||||
| Research and development ("R&D") expenses | $ | 38.8 | $ | 39.9 | $ | 122.1 | $ | 121.4 | |||||||||||||||
| SG&A as a % of sales | 33.6 | % | 24.2 | % | 29.9 | % | 25.8 | % | |||||||||||||||
| R&D as a % of sales | 7.3 | % | 7.5 | % | 8.1 | % | 7.6 | % | |||||||||||||||
The year-over-year increase in SG&A expenses during the third quarter was primarily due to the stock-based compensation modification resulting from the conversion of Fortive equity awards upon the Separation, standalone public company costs, and higher employee compensation.
The year-over-year increase in SG&A expenses during the year-to-date period was primarily due to the stock-based compensation modification resulting from the conversion of Fortive equity awards upon the Separation, higher employee compensation, Ralliant corporate costs incurred to establish a separate corporate function, in addition to Fortive allocated corporate costs that were both incurred in the second quarter, and standalone public company costs, partially offset by lower year-over-year transaction expenses related to the EA acquisition in 2024 and benefits from productivity measures through RBS initiatives.
R&D, consisting principally of internal and contract engineering personnel costs, remained consistent during the third quarter and year-to-date period compared with the comparable periods of 2024.
NON-OPERATING INCOME (EXPENSE), NET
During the three and nine months ended September 26, 2025, the Company recognized interest expense of $16.3 million. During the nine months ended September 27, 2024, the Company recognized a net loss of $25.6 million related to the Invetech Divestiture. For further discussion of this transaction, refer to Note 1 of the consolidated and combined condensed financial statements.
INCOME TAXES
Ralliant's effective tax rates were (13.4)% and 9.6% for the three and nine months ended September 26, 2025, respectively, compared with 18.0% and 17.8% for the three and nine months ended September 27, 2024, respectively. The decrease in the effective tax rate for the three months ended September 26, 2025 compared with the three months ended September 27, 2024 was primarily related to the impact of the repricing of deferred tax balances due to an enacted reduction in the German corporate tax rate and the impact of credits and deductions provided by law, including those associated with state income taxes, and changes in uncertain tax position reserves. The decrease in the effective tax rate for the nine months ended September 26, 2025 compared with the nine months ended September 27, 2024 was attributable to the impact of the repricing of deferred tax balances due to German corporate tax rate change on deferred taxes.
Globally, the Company monitors legislative action and the Organization for Economic Co-operation and Development ("OECD") initiatives related to global taxation. The impact of the OECD framework for a "Pillar Two" global minimum corporate income tax rate of 15% has been included within the provision for income taxes. On June 28, 2025, the OECD released a statement recognizing an agreement between the OECD and the G20 to recognize the U.S. minimum tax rules to exempt U.S. multinationals from certain portions of the Pillar Two framework. However, as of the balance sheet date, no related legislation has been enacted. The Company continues to monitor further guidance and legislative developments related to the Pillar Two framework.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, including, but not limited to, the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business investments. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. As a result of the retroactive treatment for research and experimental expenditures enacted under OBBBA, Ralliant was notified of Fortive's intent to accelerate the amortization of previously capitalized research and experimental expenditures. Accordingly, Ralliant reduced its deferred tax assets by approximately $65 million during the quarter.
COMPREHENSIVE INCOME
Comprehensive income decreased by $142.0 million during the third quarter compared with the comparable period in 2024 due to unfavorable changes in foreign currency translation of $90.9 million, partially offset by a decrease in net income of $51.0 million.
Comprehensive income increased by $102.4 million during the year-to-date period compared with the comparable period in 2024 due to favorable changes in foreign currency translation of $222.6 million, partially offset by a decrease in net income of $120.5 million.
LIQUIDITY AND CAPITAL RESOURCES
Before the Separation, the Company was dependent upon Fortive for all of the Company's working capital and financing requirements as Fortive uses a centralized approach to cash management and financing of its operations. Because the Company was part of Fortive during the six months ended June 27, 2025, only cash, cash equivalents, and borrowings clearly associated with Ralliant prior to June 27, 2025 and related to the Separation, including the financing transactions described below, have been included in the consolidated and combined condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q. Other financial transactions relating to the business operations of the Company through the date of the Separation were accounted for through the Net Former Parent investment account of the Company.
As a result of the Separation, the Company no longer participates in Fortive's cash management and financing operations. Management assesses the Company's liquidity in terms of its ability to generate cash to fund its operating and investing activities. The Company continues to generate substantial cash from operating activities and believes that its operating cash flow and other sources of liquidity, will, after giving effect to any dividend payments and debt servicing obligations, be sufficient to allow the Company to continue funding and investing in its existing businesses, consummate strategic acquisitions, fulfill its contractual obligations, and manage its capital structure on a short- and long-term basis. In connection with the Separation, the Former Parent transferred to the Company certain cash balances and amounts due to banks.
On June 27, 2025, Ralliant borrowed $1.15 billion, drawn pro rata under the eighteen month, $600.0 million senior unsecured delayed-draw term loan facility (the "Eighteen-Month Term Loan"), and the three-year, $700.0 million senior unsecured delayed-draw term loan facility (the "Three-Year Term Loan"). The proceeds were used to pay Fortive on June 27, 2025, as consideration for the contribution of assets to Ralliant by Fortive in connection with the Separation. Refer to Note 5 of the notes to the consolidated and combined condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information related to the Company's long-term indebtedness.
Borrowings under the Credit Agreement are prepayable at the Company's option at any time in whole or in part without premium or penalty. Term Loans may not be reborrowed once repaid. Amounts borrowed under the Revolving Credit Facility may be repaid and reborrowed from time to time prior to the maturity date of the Revolving Credit Facility.
The Credit Agreement requires Ralliant to maintain a Consolidated Net Leverage Ratio, as defined by the Credit Agreement, of 3.50 to 1.00 or less; provided that, not more than two times after the Closing Date of the Credit Agreement, the maximum Consolidated Net Leverage Ratio may be increased to 4.00 to 1.00 in connection with any permitted acquisition by Ralliant occurring after the Closing Date with aggregate consideration (including, without duplication, the assumption or incurrence of indebtedness in connection with such acquisition) equal to or in excess of $100.0 million, which such increase shall be applicable for the fiscal quarter in which such acquisition is consummated and the three consecutive quarters thereafter; provided that, there shall be at least one full fiscal quarter following the cessation of each such increase during which no such increase shall then be in effect. The Consolidated Net Leverage Ratio is calculated at the end of each fiscal quarter commencing with the fiscal quarter ending September 26, 2025.
The Company cannot assure you that its net cash provided by operating activities, cash and equivalents, or cash available under its Credit Facilities will be sufficient to meet its future needs. If the Company is unable to generate sufficient cash flows from operations in the future and if availability under its Credit Facilities is not sufficient, the Company may have to obtain additional financing. If the Company obtains additional capital by issuing equity, the interests of its existing stockholders will be diluted. If the Company incurs additional indebtedness, that indebtedness may contain financial and other covenants that may significantly restrict its operations. The Company cannot assure you that it could obtain refinancing or additional financing on favorable terms or at all.
On June 28, 2025, the Company's Board of Directors approved a share repurchase authorization of up to $200.0 million of the Company's common stock. The timing and amount of share repurchases will be determined by the Company based on its evaluation of market conditions and other factors. The share repurchase authorization has no expiration date, does not obligate the Company to acquire any particular amount of shares, and may be suspended or discontinued at any time. The share repurchase authorization is consistent with the Company's capital allocation strategy to prioritize returning capital to shareholders. No share repurchases have occurred as of September 26, 2025.
On October 30, 2025, the Board declared a quarterly common stock dividend of $0.05 per share, payable on December 23, 2025 to stockholders of record as of the close of business on December 8, 2025.
Overview of Cash Flows and Liquidity
Following is an overview of the Company's cash flows and liquidity:
| Nine Months Ended | |||||||||||
| ($ in millions) | September 26, 2025 | September 27, 2024 | |||||||||
| Net cash provided by operating activities | $ | 296.0 | $ | 293.4 | |||||||
| Purchases of property, plant and equipment | $ | (29.2) | $ | (19.8) | |||||||
| Proceeds from sale of property | 1.5 | 20.2 | |||||||||
| Cash paid for acquisitions, net of cash received | - | (1,718.2) | |||||||||
| Cash infusion into divestiture | - | (14.0) | |||||||||
| Net cash used in investing activities | $ | (27.7) | $ | (1,731.8) | |||||||
| Proceeds from borrowings | $ | 1,146.8 | $ | - | |||||||
|
Consideration paid to Former Parent in connection with Separation
|
(1,150.0) | - | |||||||||
|
Net transfers (to) from Former Parent
|
(10.2) | 1,434.5 | |||||||||
|
Dividends paid
|
(5.6) | - | |||||||||
| All other financing activities | 2.2 | - | |||||||||
|
Net cash (used in) provided by financing activities
|
$ | (16.8) | $ | 1,434.5 | |||||||
Operating Activities
Net cash provided by operating activities can fluctuate significantly from period-to-period as working capital needs and the timing of payments for income taxes, interest, pension funding, and other items impact reported cash flows.
Net cash provided by operating activities was $296.0 million during the year-to-date period, representing an increase of $2.6 million, or 1.9%, compared with the comparable period of 2024. The year-over-year change in net cash provided by operating activities was primarily attributable to the following factors:
•A year-over-year decrease of $55.6 million in net earnings, net of non-cash items (Amortization, Depreciation, Stock-based compensation, Gain on sale of property, net of Loss from divestiture).
•The aggregate changes in Accounts receivable, Inventories, net, and Trade accounts payable used $39.1 million of cash during the year-to-date period compared with generating $26.0 million in the comparable period of 2024. The amount of cash provided by the aggregate of Accounts receivable, Inventories, net, and Trade accounts payable depends upon how effectively the Company managed the cash conversion cycle, which generally represents the number of days that elapse from the day the Company pays for the purchase of raw materials and components to the collection of cash from its customers, and can be significantly impacted by the timing of collections and payments in a period.
•The aggregate changes in Prepaid expenses and other current assets and Accrued expenses and other liabilities generated $52.3 million of cash in the year-to-date period compared with using $71.0 million of cash in the comparable period of 2024. The year-over-year changes were dependent upon how effectively the Company managed the cash conversion cycle and driven by timing differences related to contract assets, contract liabilities, payments of employee compensation, income taxes, and interest.
Investing Activities
Cash used in investing activities decreased by $1,704.1 million during the third quarter compared with the comparable period of 2024, primarily due to less cash used for acquisitions, net of cash acquired.
Capital expenditures are made primarily for increasing production capacity, replacing aged equipment, supporting product development initiatives for product offerings, and improving information technology systems. Capital expenditures totaled $29.2 million for the nine months ended September 26, 2025 and $19.8 million for the nine months ended September 27, 2024.
Financing Activities
Net cash provided by financing activities reflects Proceeds from borrowings, net of issuance costs, of $1,146.8 million, offset by the Consideration paid to Former Parent in connection with the Separation of $1,150.0 million. Other financing activity includes net cash transferred to Former Parent in the third quarter of $57.5 million, primarily related to the cash adjustment paid to Fortive in accordance with the Separation and Distribution agreement and the payments made in the period related to the Tax Matters Agreement.
Cash and Cash Requirements
The Company held $264.2 million of Cash and equivalents as of September 26, 2025. The Company had no cash and equivalents as of December 31, 2024.
The Company requires cash to support working capital needs, capital expenditures and acquisitions, pay interest and service debt, pay taxes and any related interest or penalties, fund its pension plans as required, pay dividends to shareholders, and support other business needs or objectives. With respect to cash requirements, the Company generally intends to use available cash and internally generated funds to meet these cash requirements, but in the event that additional liquidity is required, particularly in connection with acquisitions and repayment of maturing debt, the Company may also borrow under its Credit Facilities or enter into new credit facilities to borrow directly thereunder. It also may access the capital markets, including to take advantage of favorable interest rate environments or other market conditions.
Foreign cumulative earnings remain subject to foreign remittance taxes. The Company has made an election regarding the amount of earnings that it does not intend to repatriate due to local working capital needs, local law restrictions, high foreign remittance costs, previous investments in physical assets and acquisitions, or future growth needs. For most of its foreign operations, the Company makes an assertion regarding the amount of earnings in excess of intended repatriation that are expected to be held for indefinite reinvestment. No provisions for foreign remittance taxes have been made with respect to earnings that are planned to be reinvested indefinitely. The amount of foreign remittance taxes that may be applicable to such earnings is not readily determinable given local law restrictions that may apply to a portion of such earnings, unknown changes in foreign tax law that may occur during the applicable restriction periods caused by applicable local corporate law for cash repatriation, and the various tax planning alternatives it could employ if the Company repatriated these earnings.
Pursuant to the terms of the Tax Matters Agreement, Ralliant will reimburse Fortive or pay taxing authorities directly for an amount contractually agreed with Fortive of approximately $51.0 million. Of the approximately $51.0 million of tax transaction costs, $16.0 million was paid in the third quarter and $35.0 million was accrued as a payable due to Fortive as of September 26, 2025, of which $25.9 million was subsequently paid on September 29, 2025. The total $51.0 million tax transactions costs, were recognized in the third quarter and were recorded as a offset to additional paid-in capital as the items represent a settlement with the Former Parent in accordance with the Tax Matters Agreement.
Borrowings under the Credit Facilities bear interest as described in Note 5 of the notes to the consolidated and combined condensed financial statements. At facility close, Ralliant made an interest election of six-month Secured Overnight Financing Rate ("SOFR"). The first related interest payment of $16.4 million was due on September 29, 2025. The second payment is due on December 29, 2025, at which time a new election will be made.
As of September 26, 2025, the Company believes it had sufficient liquidity to satisfy its cash needs for at least the next 12 months and foreseeable future.
CRITICAL ACCOUNTING ESTIMATES
There were no material changes during the three and nine months ended September 26, 2025 to the items disclosed as critical accounting estimates in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Information Statement filed as an exhibit to the Company's Form 10-12B/A on May 28, 2025.
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