Ralliant Corp 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On May 27, 2025, the Board of Directors of Fortive Corporation (“Fortive” or the “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 Corporation (“Ralliant”, “the Company”, “its”, or “their”) to Fortive's stockholders (the “Separation”), which was completed on June 28, 2025. 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. 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 23 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 business; 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 we intend or believe 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. BASIS OF PRESENTATION The accompanying combined condensed financial statements present the historical financial position, results of operations, changes in Fortive’s 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 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. The financial statements also include 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 have been determined on a reasonable basis; however, the amounts are 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. Related party allocations, including the method for such allocation, are discussed further in Note 13 of the Notes to the Combined Condensed Financial Statements for the three and six months ended June 27, 2025 and June 28, 2024 (the “quarter” or the “second quarter” and “year-to-date period,” respectively). 24 Until 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 six months ended June 27, 2025, 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 Combined Condensed Financial Statements. Other financial transactions relating to the business operations of the Company during the period were accounted for through the Net Parent investment account of the Company. Unaudited Pro Forma Combined Financial Statements for the periods ended March 28, 2025 and December 31, 2024 can be found in the Company’s Information Statement filed as an exhibit to the Company’s Form 10-12B/A on May 28, 2025. There have been no material changes to the Pro Forma adjustments in the second quarter or year-to-date period. 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”. 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 June 28, 2024, Ralliant recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the 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. 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 48.9% of its 2024 sales derived from customers outside the United States, including high-growth markets. The Company defines high-growth markets as developing markets of the world experiencing extended periods of accelerated growth in gross domestic product and infrastructure which include Eastern Europe, the Middle East, Africa, Latin America, and Asia with the exception of Japan and Australia. 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. 25 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 will bolster 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 is 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 six months ended June 28, 2024, Ralliant recorded a net realized loss of $25.6 million, which is identified as “Loss from divestiture” in the 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 Six Months Ended June 27, 2025 During the three and six months ended June 27, 2025, sales decreased by 5.7% and 8.3%, respectively. The year-over-year decrease in sales in the second quarter was driven by a 5.8% decrease in organic revenue and a 1.1% decrease from the Invetech Divestiture, partially offset by an increase of 1.2% from favorable foreign currency exchange rates. The decrease in organic revenue in the second quarter included volume declines of 9.2%, partially offset by favorable pricing of 3.4%. The year-over-year decrease in sales in the year-to-date period was driven by 7.4% decrease from organic revenue declines and a 1.0% decrease from the Invetech Divestiture, partially offset by 0.1% increase from favorable foreign currency exchange rates. The decrease in organic revenue in the year-to-date period included volume declines of 10.0%, partially offset by favorable pricing of 2.6%. Geographically, in the second quarter, organic revenue in developed markets decreased by high single-digits year-over-year, driven by a mid-twenties decline in Western Europe and mid single-digit decline in North America. Organic revenue in high growth markets increased slightly in the second quarter year-over-year, driven by mid-teens growth in Latin America, offset by a low single-digit decline in China. 26 Geographically, in the year-to-date period, organic revenue in developed markets decreased by low double-digits year-over-year, driven by a low-thirties decline in Western Europe and a mid single-digit decline in North America. Organic revenue in high growth markets decreased low single-digits in the year-to-date period year-over-year, driven by a mid single-digit decline in China, partially offset by low-twenties growth in Latin America. RESULTS OF OPERATIONS Selected Financial Data Three Months Ended Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Sales $ 503.3 $ 533.7 $ 985.1 $ 1,074.9 Operating profit $ 58.9 $ 105.2 $ 132.7 $ 246.3 Depreciation $ 6.7 $ 7.9 $ 13.3 $ 16.2 Amortization $ 21.9 $ 20.9 $ 42.2 $ 42.0 Operating profit as a % of sales 11.7 % 19.7 % 13.5 % 22.9 % Depreciation as a % of sales 1.3 % 1.5 % 1.4 % 1.5 % Amortization as a % of sales 4.4 % 3.9 % 4.3 % 3.9 % Components of Sales Growth Three Months Ended June 27, 2025 vs. Comparable 2024 Period Six Months Ended June 27, 2025 vs. Comparable 2024 Period Total revenue growth (GAAP) (5.7) % (8.3) % Impact of: Acquisitions and divestitures 1.1 % 1.0 % Currency exchange rates (1.2) % (0.1) % Organic revenue growth (Non-GAAP) (5.8) % (7.4) % 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 11.7% for the second quarter, representing a decrease of 800 basis points compared with 19.7% for the comparable period of 2024. The year-over-year changes in operating profit margin primarily comprised the following: • The second quarter decrease in results from existing businesses — unfavorable 810 basis points, primarily driven by: ◦ -275 basis points from volume reduction; -250 basis points from higher salaries and wages; -150 basis points from higher corporate costs allocable to its segments; -120 basis points from public company standalone costs; and -110 basis points from the net impact of tariffs, partially offset by +100 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. As further discussed in Note 13 to the financial statements, certain shared corporate costs have been allocated to Ralliant by Fortive, and are reflected as expenses in these financial statements. Operating profit margin was 13.5% for the year-to-date period, representing a decrease of 940 basis points compared with 22.9% 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 660 basis points, primarily driven by: ◦ -225 basis points driven by volume reduction, partially offset by price increases; -200 basis points from higher salaries and wages; -110 basis points from corporate costs allocable to its segments; -75 basis points from standalone public company costs; and -60 basis points from the net impact of tariffs. 27 • The year-over-year effect of the gain on sale of land and certain office buildings in 2024 — unfavorable 585 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 235 basis points • The year-over-year net effect of acquired and divested businesses, including amortization and acquisition-related fair value adjustments — favorable 120 basis points Business Segments and Geographic Area Results Sales by business segment and geographic area were as follows: Three Months Ended Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Segments Test and Measurement $ 192.5 $ 226.4 $ 381.0 $ 470.6 Sensors and Safety Systems 310.8 307.3 604.1 604.3 Total $ 503.3 $ 533.7 $ 985.1 $ 1,074.9 Geographic area United States $ 256.1 $ 271.8 $ 503.1 $ 537.9 China 85.1 86.0 157.4 168.4 Western Europe 61.0 79.5 127.2 171.4 All other 101.1 96.4 197.4 197.2 Total $ 503.3 $ 533.7 $ 985.1 $ 1,074.9 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 Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Sales $ 192.5 $ 226.4 $ 381.0 $ 470.6 Operating (loss) profit $ (14.3) $ 24.6 $ (26.2) $ 82.3 Depreciation $ 3.8 $ 4.7 $ 7.6 $ 9.8 Amortization $ 21.3 $ 20.3 $ 41.0 $ 40.8 Operating (loss) profit as a % of sales (7.4) % 10.9 % (6.9) % 17.5 % Depreciation as a % of sales 2.0 % 2.1 % 2.0 % 2.1 % Amortization as a % of sales 11.1 % 9.0 % 10.8 % 8.7 % Components of Sales Growth Three Months Ended June 27, 2025 vs. Comparable 2024 Period Six Months Ended June 27, 2025 vs. Comparable 2024 Period Total revenue growth (GAAP) (14.9) % (19.0) % Impact of: Currency exchange rates (1.9) % (0.1) % Organic revenue growth (Non-GAAP) (16.8) % (19.1) % 28 The decreases in sales for both the second quarter and year-to-date period were primarily driven by decreases in organic revenue of 16.8% and 19.1%, respectively, partially offset by the favorable impact from foreign currency exchange rates. The decrease in organic revenue in the second quarter and year-to-date period was primarily attributable to declines in sales volumes of 19.2% and 20.5%, respectively, primarily in product lines for oscilloscopes and related accessories and high-power solutions which were driven by demand weakness across all end markets. Geographically, in the second quarter, year-over-year organic revenue in developed markets decreased by low-twenties year-over-year, driven by a mid-forties decline in Western Europe and a low double-digit decline in North America. Organic revenue in high growth markets decreased by low double-digits in the second quarter year-over-year, driven by a low double-digit decline in China and a high-teens decline in the rest of Asia. Geographically, in the year-to-date period, year-over-year organic revenue in developed markets decreased by mid-twenties, driven by high-fifties decline in Western Europe and a low double-digit decline in North America. Organic revenue in high growth markets decreased by low double-digit, driven by low double-digit decline in China and low double-digit decline in the rest of Asia. Operating loss margin was 7.4% for the second quarter, a decrease of 1,830 basis points compared with operating profit margin of 10.9% for the comparable period in 2024, primarily impacted by: • The year-over-year decrease in results from existing businesses — unfavorable 1,540 basis points, primarily driven by: ◦ -925 basis points driven by volume declines due to demand weakness in all end markets, partially offset by price increases; -400 basis points primarily from higher salaries and wages; -210 basis points from corporate costs allocations; -110 basis points from the net impact of tariffs; partially offset by +100 basis points from benefits from productivity measures and RBS initiatives. • The year-over-year effect of amortization from existing businesses — unfavorable 210 basis points Operating loss margin was 6.9% for the year-to-date period, a decrease of 2,440 basis points compared with operating profit margin of 17.5% for the comparable period in 2024, primarily impacted by: • The year-over-year decrease in results from existing businesses — unfavorable 1,430 basis points, primarily driven by: ◦ -1,150 basis points driven by volume declines due to demand weakness in all end markets, partially offset by price increases; -250 basis points primarily from higher salaries and wages; -115 basis points from corporate cost allocations; -60 basis points from the net impact of tariffs; partially offset by +150 basis points from benefits from productivity measures and RBS initiatives. • The year-over-year effect of the gain on sale of land and certain office buildings in 2024 — unfavorable 1,340 basis points • The year-over-year effect of acquisition-related transaction costs incurred in 2024 related to the EA acquisition — favorable 520 basis points • The year-over-year effect of amortization from existing businesses — unfavorable 210 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. 29 Sensors and Safety Systems Selected Financial Data Three Months Ended Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Sales $ 310.8 $ 307.3 $ 604.1 $ 604.3 Operating profit $ 79.5 $ 80.5 $ 166.5 $ 163.9 Depreciation $ 2.9 $ 3.2 $ 5.7 $ 6.4 Amortization $ 0.6 $ 0.6 $ 1.2 $ 1.2 Operating profit as a % of sales 25.6 % 26.2 % 27.6 % 27.1 % Depreciation as a % of sales 0.9 % 1.0 % 0.9 % 1.1 % Amortization as a % of sales 0.2 % 0.2 % 0.2 % 0.2 % Components of Sales Growth Three Months Ended June 27, 2025 vs. Comparable 2024 Period Six Months Ended June 27, 2025 vs. Comparable 2024 Period Total revenue growth (GAAP) 1.1 % — % Impact of: Acquisitions and divestitures 1.8 % 1.8 % Currency exchange rates (0.7) % — % Organic revenue growth (Non-GAAP) 2.2 % 1.8 % The increase in sales for the second quarter was driven by an increase in organic revenue of 2.2% and favorable impact from foreign currency exchange rates, partially offset by a 1.8% unfavorable impact from the Invetech Divestiture. The sales result for the year-to-date period was driven a net price and volume increase of 1.8%, equally offset by the 1.8% unfavorable impact from the Invetech Divestiture. Year-over-year price increases in the Sensors and Safety Systems segment contributed 4.2% and 3.5% to sales growth during the second 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 decrease in the second quarter and year-to-date period resulted from declines in the energetic materials product line from aero, defense, and space customers, along with liquid and air sensors in manufacturing and other end markets, and automation and control applications within the industrial manufacturing end market. The volume declines were partially offset by increased demand in the utilities sector for grid modernization. Geographically, in the second quarter, year-over-year organic revenue in developed markets decreased low single-digit year-over-year, driven by slight decline in North America, low single-digit decline in Western Europe, and a low-forties decline in Japan. Organic revenue in high growth markets increased by high-teens year-over-year, driven primarily by mid-teens growth in China, mid-teens growth in the rest of Asia, and low-twenties growth in Latin America. Geographically, in the year-to-date period, year-over-year organic revenue in developed markets decreased low single-digits, driven by slight decline in North America, low single-digit decline in Western Europe, and high-twenties decline in Japan. Organic revenue in high growth markets increased by mid-teens year-over-year, driven primarily by low double-digit growth in China, high-twenties growth in Latin America, and low double-digit growth in the rest of Asia. Operating profit margin was 25.6% for the second quarter, a decrease of 60 basis points compared with 26.2% for the comparable period in 2024, primarily impacted by: • The year-over-year decrease in results from existing businesses — unfavorable 200 basis points, primarily driven by: ◦ -225 basis points from corporate cost allocations; -160 basis points from higher employee compensation; -100 basis points from the net impact of tariffs; partially offset by +175 basis points from contract cost adjustments; and +100 basis points from net pricing and volume impacts. • The year-over-year net effect of changes in certain Invetech businesses that were divested in 2024 — favorable 135 basis points 30 Operating profit margin was 27.6% for the year-to-date period, an increase of 50 basis points, compared with 27.1% for the comparable period in 2024, primarily impacted by: • The year-over-year net effect of changes in certain Invetech businesses that were divested in 2024 — favorable 185 basis points • The year-over-year decrease in results from existing businesses — unfavorable 140 basis points, driven by: ◦ -175 basis points from higher employee compensation; -130 basis points from corporate cost allocations; -60 basis points from the net impact of tariffs; partially offset by +125 basis points from contract cost adjustments; +100 basis points from net pricing and volume impacts. COST OF SALES AND GROSS PROFIT Three Months Ended Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Sales $ 503.3 $ 533.7 $ 985.1 $ 1,074.9 Cost of sales (255.0) (259.0) (493.4) (524.3) Gross profit $ 248.3 $ 274.7 $ 491.7 $ 550.6 Gross profit margin 49.3 % 51.5 % 49.9 % 51.2 % The year-over-year decreases in gross profit during the second quarter and year-to-date period were primarily due to net volume declines, higher employee compensation costs, and tariffs, partially offset by year-over-year increases in price, benefits from productivity measures and RBS initiatives. OPERATING EXPENSES Three Months Ended Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024 Sales $ 503.3 $ 533.7 $ 985.1 $ 1,074.9 Selling, general, and administrative (“SG&A”) expenses $ 147.4 $ 130.7 $ 275.7 $ 285.9 Research and development (“R&D”) expenses $ 42.0 $ 38.8 $ 83.3 $ 81.5 SG&A as a % of sales 29.3 % 24.5 % 28.0 % 26.6 % R&D as a % of sales 8.3 % 7.3 % 8.5 % 7.6 % The year-over-year increase in SG&A expenses during the second quarter was due to higher employee compensation, Ralliant corporate costs incurred to establish a separate corporate function, in addition to Fortive allocated corporate costs, 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. The year-over-year decrease in SG&A expenses during the year-to-date period was due to lower year-over-year transaction expenses related to the EA acquisition in 2024 and benefits from productivity measures through RBS initiatives, partially offset by higher employee compensation, Ralliant corporate costs incurred to establish a separate corporate function, in addition to Fortive allocated corporate costs in the second quarter, and standalone public company costs. R&D, consisting principally of internal and contract engineering personnel costs, increased during the second quarter and year-to-date period compared with the comparable periods of 2024 due to continuing investments in innovation. NON-OPERATING INCOME (EXPENSE), NET Loss from divestiture During the three and six-month periods ended June 28, 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 to the combined condensed financial statements. 31 INCOME TAXES Ralliant’s effective tax rates were 19.2% and 15.7% for the three and six months ended June 27, 2025, respectively, compared with 18.2% and 17.7% for the three and six months ended June 28, 2024, respectively. The increase in the effective tax rate for the three months ended June 27, 2025 compared with the three months ended June 28, 2024 was primarily related to changes in valuation allowances recorded in the three months ended June 27, 2025. The decrease in the effective tax rate for the six months ended June 27, 2025 compared with the six months ended June 28, 2024 was primarily related to the impact of credits and deductions provided by law, including those associated with state income taxes, and changes in the Company’s uncertain tax position reserves. 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. 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. The Company is currently assessing the impact of OBBBA on its consolidated financial statements. COMPREHENSIVE INCOME Comprehensive income increased by $164.7 million during the second quarter compared with the comparable period in 2024 due to favorable changes in foreign currency translation of $181.5 million, partially offset by a decrease in net income of $17.2 million. Comprehensive income increased by $244.4 million during the year-to-date period compared with the comparable period in 2024 due to favorable changes in foreign currency translation of $313.5 million, partially offset by a decrease in net income of $69.5 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 three and six months ended June 27, 2025, only cash, cash equivalents and borrowings clearly associated with Ralliant and related to the Separation, including the financing transactions described below, have been included in the 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 during the period were accounted for through the Net 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, make interest payments on its outstanding indebtedness, fulfill its contractual obligations, and manage its capital structure on a short- and long-term basis. In connection with the Separation, Parent transferred to the Company certain cash balances and amounts due to banks. 32 On May 15, 2025 (the “Closing Date”), the Company en tered into a credit agreement (“Credit Agreement”), with a syndicate of banks, consisting of an eighteen month, $600.0 million senior unsecured delayed-draw term loan facility (the “Eighteen-Month Term Loan”), a three-year, $700.0 million senior unsecured delayed-draw term loan facility (the “Three-Year Term Loan”, and together with the Eighteen-Month Term Loan, the “Term Loans”) and a three-year $750.0 million senior unsecured multi-currency revolving credit facility, including a $25.0 million sublimit for swingline loans and a $75.0 million sublimit for the issuance of letters of credit (the “Revolving Credit Facility” and, together with the Term Loans, the “Credit Facilities”). The Credit Agreement also contains an expansion option permitting Ralliant to request increases of the Credit Facilities (in any combination thereof) of up to an aggregate additional amount of $500.0 million from lenders that elect to make such increase available, upon the satisfaction of certain conditions. The Company incurred $1.5 million of debt issuance costs associated with the Revolving Credit Facility that have been recorded as a prepaid asset within Other assets in the accompanying Combined Condensed Balance Sheets, as this facility was undrawn as of June 27, 2025. 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 will be calculated at the end of each fiscal quarter commencing with the fiscal quarter ending September 26, 2025. On June 27, 2025, Ralliant borrowed $1.15 billion, drawn pro rata under the Three-Year Term Loan and the Eighteen-Month Term Loan, the proceeds of which 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 in the notes to the 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. 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. On August 6, 2025, the Board declared a quarterly common stock dividend of $0.05 per share, payable on September 23, 2025 to stockholders of record as of the close of business on September 8, 2025. 33 Overview of Cash Flows and Liquidity Following is an overview of the Company’s cash flows and liquidity: Six Months Ended ($ in millions) June 27, 2025 June 28, 2024 Net cash provided by operating activities $ 157.4 $ 155.4 Purchases of property, plant and equipment $ (17.2) $ (13.7) Proceeds from sale of property 1.5 10.2 Cash paid for acquisitions, net of cash received — (1,718.1) Cash infusion into divestiture — (14.0) Net cash used in investing activities $ (15.7) $ (1,735.6) Proceeds from borrowings $ 1,146.8 $ — Consideration paid to Parent in connection with Separation (1,150.0) — Net transfers from Parent 47.3 1,588.6 Net cash provided by financing activities $ 44.1 $ 1,588.6 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 $157.4 million during the year-to-date period, representing an increase of $2.0 million, or 2.1%, 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 $31.8 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, and trade accounts payable used $17.2 million of cash during the year-to-date period compared with generating $2.5 million in the comparable period of 2024. The amount of cash provided by the aggregate of trade accounts receivable, inventories, 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 used $7.0 million of cash in the year-to-date period compared with using $60.5 million of cash in the comparable period of 2024. The year-over-year changes were 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 $1,719.9 million during the second 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 $17.2 million for the six months ended June 27, 2025 and $13.7 million for the six months ended June 28, 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 Parent in connection with the Separation of $1,150.0 million. Other financing activity represents net cash transferred from Fortive of $47.3 million. 34 Cash and Cash Requirements The Company held $198.6 million of cash and equivalents as of June 27, 2025. Pursuant to the terms of the Separation and Distribution Agreement, the Company is subject to cash adjustment provisions, with payment of such adjustments to be made within five business days of the determination of the applicable final cash balance. Pursuant to the adjustment provisions, if Ralliant’s aggregate cash balance at the time of the Separation, excluding any cash in certain restricted jurisdictions, is determined to have been greater than the reference cash balance of $150 million, Ralliant is obligated to pay Fortive the excess. Subsequent to the Separation, Fortive notified Ralliant the aggregate cash balance exceeded such reference cash balance by approximately $41 million and Ralliant paid Fortive in accordance with the terms of the Separation and Distribution Agreement. Pursuant to the terms of the Tax Matters Agreement, Ralliant expects to reimburse Fortive or pay taxing authorities directly for an amount asserted by Fortive to be approximately $50 million, with $16 million paid in July 2025 and the remainder expected to be paid in third quarter 2025, for certain tax transaction costs recognized upon Separation. 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. As of June 27, 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 six months ended June 27, 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.