For industrials here at TD. As you all know, Extel is open and live, we appreciate your support. If you think we've earned it, we will be cross-referencing. Lunch does not get delivered unless you guys vote. Just keep that in the back of your head. Excited to have Ralliant here with us. We have Neill and Nathan. If anyone has questions as we go, feel free to raise your hand, I'll stop. I assume that won't happen, so we'll just go. Guys, thanks a lot for being here. Appreciate the time. Let's just get right into it. Pretty uneventful first two quarters, right? Out of the gate. We've had two very different quarters in terms of the reaction, in terms of what was said. Maybe let's compare now what you're seeing to when you reported 4Q, what have been the biggest changes. Yeah, thanks. Thanks, Joe, for having us here. Yeah. Terrific to be here and talk to everyone today. Yeah, I think we have seen kind of an inflection in the business versus where we were. One thing I think about is, we're only three quarters old now. Yeah as a public company. Yeah. Clearly we're seeing some changes as we start to manage through this. I think we can talk about this, changes in what's happened since spin even, as the world has changed a lot since then, and our exposure to areas in hardware and in inflection in test and measurement and defense, have clearly been a positive for us as we've spun out. As you go back to Q4 where we stood, I think even going back to that December quarter, book to bills in the business were kind of closer to one to one, even in test and measurement. I think as we saw things change in power electronics where we're very strong and started to pick up in Q1, in test and measurement, that's been a positive for us. We talked about book to bill going between 1.1 and 1.2 in the quarter, and a lot of that was in the mid to later part of the quarter as you started to see that inflection. I think that's been the biggest thing. Overall, I think it's been relatively broad-based within the business. We see both- Yeah Test and Measurement stronger. We see Defense. We've talked about $1 billion of backlog now. Yeah in our defense business. I think overall very solid, clearly the inflection and test and measurement has been probably the biggest driver since if you go back and look at where we were. How- 90 days ago. How much of that snuck up on you versus, look, I know guidance is one thing that you're-? Yep speaking externally, but we saw a lot of- competitors starting to see stuff happen and talk about orders growing. At the time when you reported 4Q, you said book to bill around, but did it feel like this might be something that was coming, but maybe we're not ready to talk about it yet? Look, I think when you go back at that timeframe, and we talked about it last quarter, we were seeing the sales funnel start to build. Yeah. That would naturally start to translate into better ordering activity, but we hadn't seen those funnels translating to actual orders. Yeah. While there were positive signs out there, I would say, as you got into 1Q, I wouldn't say they were strong enough yet to say, "Hey, we can really count on that," to kind of guide and say we're starting to see that turn. Yeah. Clearly what you saw is those sales funnels continued, and I think they built even stronger, throughout the quarter, and then those funnels started translating into real orders. That ordering activity picked up in Q1, and I think that's what gave us the confidence then to say, "Let's take the guidance up, and let's think about a stronger growth rate, not just for Q1 and Q2, but for the year. Yep. We're almost in June now. I'm not going to try to pin you down for new guides, but have those trends, those are probably pretty durable. Has that kind of stayed through the quarter at this point? Look, I think demand remains healthy. Yeah. I think it's been healthy in Q1. I think that healthy demand continues. We feel good about what we guided going into the quarter. I think what we see is still supportive of that. If I told you, now let's talk top line. If I told you you end up doing better than your guide for the year. Yeah What would've been the likely driver of that? Which market? Look, I think that we talked about a couple things in terms of the growth rate for the year. I think we talked about 5%-8% for the year, which is actually would mark a little bit of a lower-. Yeah growth rate in the second half. Obviously, with geopolitical events and things like that, we're a little bit cautious on the second half just to see how things are. Are there going to be supply issues or other things that come out of that? We've been a little bit cautious on that, but if you break down the business more, we talked about higher growth at the high end of our kind of guidance for Test and Measurement. We talked about sensors and safety systems, still nice growth, maybe towards the lower end of that range though, but good growth for the year. The other piece of that that I don't think we talked a lot about is from an industrial perspective. Everyone's seen the PMI pick up. It's been a couple of cold years, so to speak, from an industrial perspective. We did return to growth in sensors and safety systems in the industrial portion of the business. Look, if that continued to pick up, that could be a tailwind for us as you get into the second half of the year. Again, we don't want to get ahead of ourselves. We'd like to see some more experience in that. Yeah over the next quarter plus. If that continues, then that could be an opportunity for us, but we're going to continue to remain prudent until we start to see stickiness in terms of that type of activity. That's fair. I think I might push you on, it seems unlikely that a Test and Measurement or defense or grid would reverse any near term, but I understand the prudence of a second half kind of view here. One thing I'd jump in real quick, Joe, is we get asked, "Are you seeing evidence of pre-buy or inventory build or some of these other pieces?" The answer is no, we haven't, and we've been asking our sales leaders and our distributors, are we seeing evidence of that? The answer so far is no. There's a big portion of the business, about 70% of the business is short cycle. Right. We only have about 90-120 days of visibility. I think that's where there's some prudence that's built in as we look out more than a quarter out that we're still cautious. Yeah until we actually see the orders for it continue to come in. Just if you look back over the last two, maybe I ask both of you this. What lessons kind of came out of that from a communication standpoint? Just, some of these moves are violent, some of the largest I've seen. How would you maybe have done that differently if you had a second go at it? Yeah, that's a really good question, Joe. I'm sure that's on other people's minds. I think first of all, let me just say this, if you think about Ralliant, what we pride ourselves on is being a company that's based on our business system, the Ralliant Business System, and we think about driving continuous improvement every day. This is very important to us and our culture, and that's in everything, including our communication. Yep. As we think about how do we think about that going forward, I think one thing to think about is, just it being very direct in terms of the communication around how we think about the guidance. Yep How do we think about things over multiple periods. Even if you look at what's out there right now, we talked about, if you even look at street numbers out going forward, we talked about 2027 timeframe. We gave a framework. As Nathan said, we don't have that much visibility. I think Defense has a nice backlog- Yep The rest of the business doesn't. We talked about a framework in 2027 plus of being that 5% or so growth rate as a framework to help guide where the margin improvements may come from. I think it'd be unlikely that we would guide above that until we got better visibility going forward. So those are the type of things we just want to be forward-leaning and ensure that we are clear and transparent on going forward. Is it fair to say if you say something like that at this point about 2027, given that you don't want to overextend yourself, you'd have to see some sort of negative change to think that in the underlying markets to be below something like that? Yeah, I think that's a little bit of a learning, I think, as we're a new company. Yeah. Looking at the cycles in terms of seasonality and other elements of the business, like I said, we have a nice backlog, $1 billion in Defense. Yep. Most of the business, though, as Nathan had said, is probably 90-100 days of visibility. We do see good growth in Defense. We do see good visibility, although maybe not the backlog in utilities, but we have good visibility to the ordering with our customers. We do see some nice growth rates there, and probably something that's got some legs in it. Because of the visibility, we have to be, I'd say, prudent around what we have. Yeah from a backlog perspective in order to give longer-term guidance. Yeah, that's fair. All right, let's talk about test and measurement a little bit. I think the common belief, at least with investors, is that under prior ownership, this business had been a little bit starved for capital. How'd you respond to that, first of all? Do you agree with that? What's your assessment of the business? Look, I think that when you think about how the business was invested in previously, it was invested probably for a lower growth rate. We talked about 3% organic coming out of the investor day when we spun. I think about that's probably how the business was invested in, and I don't think that was under or over. I think there was just an intentional investment at those levels. I think as you look forward, I think it's really all about focus. Now, how do I think about that? I think about it as competitiveness, like driving competitiveness in the business. If you take test and measurement, for example, this is a business where we have high exposure to power electronics. We're expanding out beyond that now. Right. I think you think about AI and workflows and semiconductor workflows and other areas, data centers and whatnot. There are opportunities for us, but it's about driving competitiveness in the products. We talked about some of the product releases. I think there was the MP5000, a modular system that we put out recently that can be used in a lot of applications. Releasing products, making sure they're very competitive, but also ensuring we're increasing the velocity in R&D in these businesses like test and measurement to become very, very competitive. I think going forward, it's really just the focus. I'd also say that from an investment perspective, we think about having capital compete within the business. Tami and I have, I think, very good visibility to incremental investments in the business. We'll balance margins with investment, and we've got pretty clean visibility and a framework in how we think about those things going forward. I would say, look, it was invested for what it was before, and I think we just have a different focus, but really balancing margins and capital allocation as we think about doing that going forward. And we're- One Yeah. Go ahead one tactical point, Joe, is that we've tried to help people better understand the level of investment that goes into each side of the business because it's quite different, that on the test and measurement side, R&D investments, mid-teens, high teens in some years% of revenue. Right the Test and Measurement side. Whereas on the Sensor and Safety System segment, it's more in line with industrial peers, so more low single-digit% of revenue that goes into R&D. The Test and Measurement business has actually had more investment than if people are looking at the total company R&D level, Test and Measurement's actually skewed higher in terms of where that investment's coming in. What has been the R&D focus at Test and Measurement now, and how do you kind of weigh, to your point on margins, you're doing a lot of research-oriented work. You almost have to guess correctly on the products that you need as to what your customers may want in the future. How are you weighing, we need to make a bigger investment in order to position ourselves, and how do you mitigate that risk? Well, first of all, obviously, I think Nathan's exactly right, though. I think there is a reasonable amount of investment that goes in from an R&D perspective. Yep into the business. I think the question, and competitively you could benchmark that as well as being a kind of reasonable level of investment. There can be some incremental investments on top of that for things like you're talking about. Yep Joe, where you think about is there an application or something where we really feel strongly that we need to go drive incremental investment? I think we manage that really well. I'll go back to what I said originally. I think it's about competitiveness, and we really have to think about, in each of those both segments, but as you talk about Test and Measurement, what are those end applications where we have to compete? I think step one for us is being great at power electronics. This is something that the Test and Measurement business has been very good at over the years. We think about expanding out beyond that, and we talked about that a little bit, I think, on the earnings call. As you think about electrification, you think about that at the edge, AI applications, other workflow applications, validation systems, making sure that we have the full capability as we start to compete. Balancing that with efficiency in R&D, like. Yep leveraging tools that exist today and bringing that into the system so we can be even more efficient by bringing out products even faster. I think that's a little bit of the focus change, too, that I think that we're driving, is really pushing on our competitiveness on one hand, and then improving our R&D velocity on the other side. Those are the areas I think we're really focused on. How do you benchmark yourself in that framework against your biggest competitors? I know you have an edge in power electronics. Where do you think you have a gap? What's involved in trying to fill that gap? Look, I think if you look at the segment in Test and Measurement, like I said, I think our precision instruments that we bring to the market today are very competitive. I think we're very strong in these areas. If you think about that both in power electronics and battery testing, we talk about communications as a segment for the business, but I think the significant majority of that is military, government type applications. Yeah for next generation research. We also sell directly to semiconductor customers, as you start to see that power electronics transition happen. I think we can build on that going forward. Like I mentioned before, you think about AI workflows and new AI type of testing applications that are leveraged in these areas, or expanding beyond that into workflows or validation where we can certainly play a role and expand beyond our core base, which we've been good at for many years. What happens if EV investment? feels like an inevitability to me globally. As that starts to pick up again, you have EA in there, what can that look like if some of these larger markets that have been pressured? Yeah start to come back? I think if you look at, for instance, battery testing, I think that's what's gone on, and certainly with us, as EV hasn't panned out exactly like everyone kind of anticipated going into that last cycle. We've kind of pivoted towards other opportunities. Yeah In power electronics and battery specifically, where that leaves us with EA is this is a very good business for us. I think it's got very nice growth rates. It has very nice margin. I think they've been able to make the pivot over to other areas like batteries in data centers or battery power systems, and things like that outside of EVs. Right. Clearly, look, over time, if EVs come back, then that's an opportunity for us. I think the business has gone through the transition, and we're starting to see nice growth in the battery testing area right now. As we start to get into more normal volumes here and probably a pretty decent runway here for growth, how do we think about the multi-year margin opportunity at that business? I think if you look at the overall business, and that specifically, I think there is good margin opportunity. I think that particularly is running at very solid margins today. Yep. I think even above the segment average for those products. I think it's in good shape. Maybe not what we expected overall, maybe when it was underwritten originally. As a business, I think it's performing very nicely. Like I said, I think the team's gone through a great transition. As you step back and just think about the margins overall, obviously we announced an Enterprise Productivity Program- Yep At the company level, I think all of those things will affect margins in various places. I think there'll be some tailwinds from that as well. What can you do broadly for T&M to smooth the cyclicality? Just even in a normal year, you're having huge declines in 1 Q from fourth quarter, and it's just volume driven. Is there anything you could do to make that a little smoother ride? I think it goes back to exactly what we said. Naturally, I think that business or market is going to have some level of cyclicality or seasonality. Yep in the business. How do we think about it going forward? I think it goes back to competitiveness. How can we create great products with high level of velocity of getting them out into the marketplace and invest in those things? I think the other piece of that, as you just kind of talked about, in terms of the battery testing business that we have. If that can drive a different cycle, expand out into different areas like workflows or validation that makes sense for us, then those are areas that I think if we compete better, then you have a better baseline and a better bottom to the business through cycles. I think focusing on that competitiveness for us is absolutely number one. All right. Let's shift over to defense. You recently got an investment announcement from DoD. Yep to increase capacity at PacSci. Where are you running on that business now? Are you full out on capacity right now? Well, one is, yes, we've talked about the $1 billion plus in backlog. We did get an award recently, which we're thrilled about, but think about that as capacity growth for kind of 2028 and beyond. Yep like facilities expansion Yep over time, which I think that we'll need. If you look at where the business is today with a significant amount of backlog, clearly the execution's a big part of this. This is where we go back to the business system. You look at RBS, we have legacy teams who are very good practitioners of the business system, driving Kaizen and Lean within the facilities that we have. A lot of the growth that you're seeing today, I think if you look back at defense, we've grown double digit for a number of years now. Yeah. I think we posted 20% growth here in Q1, and a lot of that's off the back of execution within the facilities we had and leveraging RBS. Now we're investing into the business as well for that. You think about industrial engineering resources to drive more Lean process in the business and drive performance. Think about by diversifying our supply base, we have a strategic sourcing team that we've put in place to think about diversification there, and readiness for build in terms of how we bring on capacity. I think in the meantime, it's a lot of self-help on driving performance, but you've seen that's what we've been doing the last several years. That's been off of the back of a team that's very good and very focused on driving lean process and driving capacity expansion until we start bringing on additional capacity through some of those awards that you talked about. How should we think about a $1 billion backlog for a business that's, I don't know, give or take $350 or something, $400-ish now? Should we think about that as being delivered over two years? Yeah, two to three years, I would think, of it getting delivered. No, I don't think that's the end of the ordering that's going to happen there for sure. No, I would think not. I think the backlog, you can think about that over the next couple of years, two or three years. You have the capacity as currently situated to handle that? I think it's still an execution story, so I think we have to go and execute within what we've got and continue to build out and leverage. Okay the investments that we've been making to make that happen. Then as you get out beyond 2027 into 2028 plus, then you have to start thinking about different facilities that we'll bring online to support that capacity. I think there's a limitation eventually, I think, physically as to what we can go. Yeah execute on. It's obviously a very exciting time for the business to be able to support that level of capacity expansion and growth. I think it's going to be important for both of you guys on the messaging on this, so it is margin dilutive. Yeah. How do we think about what this does if we have this type of growth here over the next couple of years? How much of this is cost plus? Yeah just so that we're all kind of aligned on this. I think if you look at the defense business, we talked about low to mid-20% margin over time with the inclusion of the productivity program. Breaking that down, we see sensors and safety systems more in that kind of mid to high 20% EBITDA kind of zone over time. The defense products run, I would say, more towards the company average, which is like we guided this year about 20%. Within those products, you're going to see more and more of the defense business go to TINA compliance, which basically means there's guardrails around the margins that we would achieve. Right in that business over time. What you'd expect then is that not only will it be a bit of a mixed headwind because it's lower overall, but you'll see some transition within the business as well. That being said, those are still very good margins I think competitively and at a high growth rate. You'll see, I think still very, very solid margins in the business. What does that mean going forward? I think it's what we have baked into that mid to high 20s is a double-digit growth rate for defense. Yep. Obviously, if it went higher than that, you'd see a little bit of a drag, but at a higher growth rate, which I think will still be good dollars for us as we think about that going forward. Right now, what we've baked in is kind of a double-digit growth rate. Some degradation of the margins, but that's baked into the incrementals that we communicated. We want to be clear about that. I think as we're bringing on capacity right now and executing that, there's going to be some variation as some of these programs flip over to compliance from a margin perspective. There's going to be some change in the absorption rate in factories that are bringing on a lot of capacity. I would expect some variability probably in the profitability moving forward, somewhat of a drag, but at a higher growth rate as you think about this over multiple years. Is it fair to think like the fastest parts of defense, maybe more like a mid-teenish EBITDA multiple, margin? You can think about closer to the company level and maybe going a little bit below that. Okay. One thing, a proof point of this is, we talked about incremental margin framework for the next few years, and we said 2026, think baseline incremental margin 35%-40%, add in our productivity program gets you to 45%-50% total company. Whereas, 2027 and 2028, we said baseline incremental margin, we're 30%-35%. About 5 points lower than what we're expecting in 2026. It's because 2026, we're expecting higher growth from Test and Measurement, and that Test and Measurement growth moderating a little bit in 2027 and 2028, whereas more contribution or I would say continuous contribution from the defense business. Just highlighting that there's a pretty broad spectrum of incremental margins between Test and Measurement and the defense business. Where that growth comes from really matters in terms of the margin trickle-down that it has. That was an interesting framework when you put that out. When you come up with that, how bottoms-up is that? Are you building that out of, okay, here's our expected growth of this piece of defense- Yeah What are we going to make it out? It's easy to kind of say 35%-40% and then shift it down 500 basis points, but how granular was that analysis? I'd say a pretty solid buildup from the team. It's not just like, I think, the bottoms-up build-up, but you have to look at the various corner cases that can happen. Yeah. I think that what that's led us to is say, look, these are the guardrails around what we think are reasonable framework. We also want to include with that really transparent communication around some of the variability that can happen around it, depending on what the various scenarios are. I think what Nathan talked about was exactly right. I think as you look at 2026, you see a buildup of, okay, you're probably looking at 45% or so, I think, fall through if you look at the 20% or so midpoint EBITDA margins we talked about this year. The mix of that will change. I think the natural fall-through going forward, it's not changed. I think it's about 30%-35%. That includes some mix degradation. Yeah includes some investment back into the business. Naturally, I think we'd want to be a little bit higher than that, but we've judged it back a bit because of those headwinds we think are in there. Separately, we add on the productivity program, which gets us closer to that 50% fall-through. Yeah. We've leveraged, we've looked at a lot of different corner cases, but I think what's really important is to ensure that we have that transparent communication around what makes up those pieces, because obviously things can change as time goes on. If you think about Qualitrol and grid, what's the backlog visibility look like there right now? As you look at utilities, and you mentioned Qualitrol, I think from a orders perspective, I think in Q1, we had a record orders quarter. Good. Thank you. The growth rate wasn't as high as you'd normally expect. I think that's timing on shipments is kind of what we talked about. As you start to look forward, I think the visibility is strong. I think we plan to play in two components there. One, you kind of think about smart sensors on transformers that ship. There's a long backlog of these, so we think that provides good visibility. It's not a backlog business per se, just because the ordering pattern is closer to when the actual transformers ship. About half of those products are, more or less half, you can think about as project-based. If someone's doing a refurbishment of a power plant or a transmission area, you would think about, we would do project work with them as well. I would say good visibility to both what's shipping for new projects, but also in terms of some of the solutions project work that we're doing with people. It just seems like that's a business that should be growing above trend for several years here. What's standing in the way of that? Is there capacity constraints here? I think the growth rate would say that similarly, we have to drive capacity expansion and execution in terms of doing that, but it's the same playbook. I think we leverage RBS. I think the team's very good at this in terms of executing. I think in Q1, we likely built some backlog there. I don't normally do that, but we did see some backlog. Yeah build in the business. The growth rate we've taken up from, we talked, I think at Investor Day, mid-single-plus kind of digit growth in utilities, and now we're thinking it's high single digit. Even with the lower growth rate in the first half this year, I think as you get into the back half of the year and get into next year, we'd anticipate some of that capacity work we're executing on in alignment with the strong demand that we're seeing to pick up and that's all kind of built into what we talked about and seeing that kind of 5% growth rate as you get into 2027. Mm-hmm. Good problem, you have multiple businesses running really hard right now. What do you need to do from a supply chain standpoint to make sure you have what you need, and how are you balancing. Paying extra to get stuff versus maintaining. Yeah margins and keeping up with demand. Yeah, look, I think this is something that falls right into the RBS kind of playbook. Something that it's really nice to see and work with teams that have that level of focus on operational execution. I've said it so many times as I come into this business, we have just really, really, really strong operating discipline leveraging the RBS, and I think this is an area in supply chain that we talk about and think about just about every day. As you start to think about supply chain security, that's all part of that. Diversifying our supply base, looking at in-country for country type supply, managing through these things. You also saw our inventory was a little bit higher in Q1, and we're just going to go out and ensure that we have raw material supply for the build-outs that we want to do. I think this is also, as you look forward, that can be challenging, right? It's always in that one area that you get surprised by, and we're trying to limit the amount of risk that we have and ensuring that we've got the right capability from a supply base perspective, bring on the reasonable amounts of inventory to support potential growth out, not just the second half of this year, but into 2027, and ensure we're positioned to do that. That's what we're focusing on, and that's what we're prioritizing. You mentioned RBS a couple times. I'm interested in both of your takes just because you're both coming from the outside. Yeah. Danaher Business System becomes Fortive Business System becomes Ralliant Business System. What is the ability to challenge this thing? When you have new people coming in, is this the ideal framework? Could we do this differently? Could we do this better? To me, from an outsider who has never been any of those companies, sometimes it almost gets annoying, the conversation around these things. It's just a thing that's existed forever and we keep saying in different letters around it. How much does this really get challenged and optimized for this iteration of this company? I think that's a great question, because I think what a lot of people probably think is that we're taking RBS, we're more focused on hardware businesses. You can kind of go back to its legacy, right? This is where it was built, and it was kind of meant for, which is great. That's not actually how it's approached internally. I think there is a lot of challenge on it. I think we've just done a refresh of all the RBS tools. We have new leadership who's thinking about how do we implement, and combine AI with our RBS tool sets. We're always thinking forward in terms of implementation of new programs and projects. I think the discipline that's associated with it, I'm super impressed by. I think it's actually great to be working with teams with that level of operating rigor, I think that's also been challenged by some of the team that Tami's brought in around how do we modernize it with new tools, but also embedding AI into that. There's been a lot of workshops and a lot of work put into modernizing those tools for what we're looking at today. We've got a couple minutes left. Maybe we just touch on capital allocation quickly. Sure. You talked about $100 million accelerated repurchase program. Yep. You have 500 out there, I think is the total. Yep. How should we think about how opportunistic do you want to be versus how consistent do you want to be on those programs, and how do you weigh that versus M&A? Yeah, look, I think our capital allocation priorities have not changed. I think number 1, it's organic investments, and thinking about how do we improve our growth rates and profitable growth through organic. We talked about that. We have, I think, a very disciplined capital allocation program for organic investments about how we think about capital competing across the portfolio for incremental investments, ensure we get the best return for shareholders as we think about those investments. That doesn't change as you move down to returning capital to shareholders, number 2, and then looking at M&A, number 3. You talked about the shareholder piece. I think it was important that we said, look, that's number 2. We have to be clear and direct on what we're going to go do there. I think the accelerated share repurchase program we put in place gets us to about, I think, roughly 50% of free cash flow for the year. Yep. We want to be clear with that. That also leaves what do you do with the other 50%. I do think that at the right return, where we've got great ROIC, where we believe we can execute tuck-in acquisitions, that's something we would think about doing and toggling between those two things. As it relates to the share repurchase, I wouldn't think of this as programmatic going forward. I think of that as a target over time of approximately 50%, and then we'll balance that with tuck-in M&A. I don't think it's different than what we've said, but being a new company, we wanted to be clear with that as we get out of the gate here with our capital allocation program. Fair to think of some modest baseline, though, right? Yeah. I think that's a good way to frame it going forward, yes. Okay. We just got 40 seconds left. Any questions from the audience? We could take it. If not, I think we'll probably just leave it there. Great. Thank you, guys. Thanks, Joe. Appreciate it. Thanks, Joe. Thanks for coming.