Hello. My name is Donna, and I will be your conference facilitator this morning. At this time, I would like to welcome everyone to Ralliant Corporation's Fourth Quarter and Full Year 2025 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Mr. Nathan McCurren, Vice President of Relations. Mr. McCurren, you may begin your conference.

Thank you, Donna. Good morning, everyone. And thank you for joining Ralliant's fourth quarter and full year 2025 earnings call. I'm Nathan McCurren, Vice President of Investor Relations. Today, we'll walk through our results, highlight key operational progress, and provide our outlook for the first quarter and full year 2026. I'm joined today by Tamara Newcombe, our President and Chief Executive Officer, and Neill Reynolds, our Chief Financial Officer. Our earnings release issued yesterday and today's presentation can be accessed on the Investor section of our website at ralliant.com. Please note that we'll be discussing certain non-GAAP financial measures on today's call. A reconciliation of these items to U.S. GAAP can be found in the appendix to our presentation. During today's call, and unless otherwise stated, we will be comparing our fourth quarter 2025 results to the same period in 2024. During the call, we will make forward-looking statements, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to a number of risks and uncertainties, and actual results might differ materially from any forward-looking statements we make today. Information regarding these risks and uncertainties is available in our information statement filed with the SEC on 05/28/2025, our quarterly report on Form 10-Q filed with the SEC on 11/06/2025, and our annual report on Form 10-K for the year ended 12/31/2025 to be filed later with the SEC. With that, I'd like to turn the call over to Tamara Newcombe.

Thank you, Nathan. Good morning, everyone. Thank you for joining us for Ralliant's fourth quarter and full year 2025 earnings call. Before we get into the numbers, I want to take a moment to recognize our teams for the incredible work they have done to establish Ralliant as a standalone public company and position us well for the future. That progress sets the stage for today's discussion. I'll start with a high-level overview of our financial performance, share how we're building on our momentum, and discuss where we're investing for growth. I'll then turn it over to Neill to walk through the details of our results and outlook before I come back to close and, of course, open it up for questions. Let's turn to the key takeaways from the quarter on Slide five. 2025 was a pivotal year. We sharpened our long-term strategy, ramped innovation across the portfolio, and strengthened our culture to inspire growth and execution. In the fourth quarter, we exceeded our revenue guidance with stable to improving trends across most of our end markets. Adjusted EBITDA and adjusted EPS were both at or above the high end of our guidance ranges. Another clear demonstration of our operating discipline. We delivered strong free cash flow with a conversion above our long-term target. As we look ahead to 2026, we are well-positioned with secular growth drivers, a healthy balance sheet to create long-term value, and clear strategic priorities guiding where we invest. Drilling down into our Q4 financial results on Slide six. Revenue was $555 million, a 1% improvement year over year. Consistent with our expectations to start the year, we showed sequential improvement every quarter with 5% sequential growth in Q4. The Sensors and Safety Systems segment grew year over year across all end markets. A record…

Thank you, Tammy. Good morning, everyone. Please turn to Slide 13. During Q4, we generated $555 million in revenue, up 1% year over year and flat on an organic basis. Healthy demand across the Sensors and Safety Systems segment, coupled with enterprise-wide pricing actions, mostly offset by lower Test and Measurement volume. Before I go through the remainder of the results, I want to briefly address the $1.4 billion noncash goodwill impairment that we recorded during the fourth quarter in connection with our annual goodwill impairment testing. As previously discussed, the EA Electroautomatique business was acquired in January 2024 as part of Fortive, has experienced electric vehicle demand headwinds and is now trending below previous expectations. As a reminder, EA was purchased for €1.6 billion or the equivalent of approximately $1.7 billion at that time. When you consider FX movement, since the time of the acquisition, the carrying value for EA included in the Test and Measurement segment was approximately $1.8 billion immediately prior to the impairment. Due to the slower than anticipated progression, and recent reduction in industry forecasts of future EV adoption, we revised our long-term revenue and operating profit expectations lower as part of our annual long-range planning process, which is leveraged in our standard goodwill impairment testing actions. The noncash charge has been excluded from the adjusted results presented in the press release and presentation published yesterday, which I will now discuss. Adjusted EBITDA margin in the fourth quarter was 20.8%. As expected, this was a year-over-year decline due to lower Test and Measurement volume and a step up in operating expenses, primarily related to standalone public company costs and higher employee costs such as healthcare. Sequentially, adjusted EBITDA margin increased 40 basis points driven by higher revenue and our cost savings program, partially offset by…

Thank you, Neill. Let me wrap our prepared remarks on Slide 20. 2025 was a pivotal year as we became a standalone public company and charted our course for outperformance. From the announcement of our separation in September 2024, to creating our leadership team and Board of Directors, to fulfilling our public company commitments. The team has stayed focused on ensuring we meet our customers' needs and create shareholder value. We completed our separation earlier than anticipated and immediately launched a focused cost savings program aimed at offsetting post-spin dis-synergies. We established a quarterly dividend, and our Board authorized $200 million share repurchases, reinforcing our commitment to returning capital to shareholders. During this time, we delivered on our financial commitments despite a year with a dynamic macro backdrop. We set guidance as a public company and delivered our first two quarters as a standalone enterprise with all metrics at or above the high end of our guidance ranges. We have confidence as we enter the year with the separation behind us, strong secular tailwinds at our back, and strategic clarity on growth investments. As I wrap, a big shout out to our approximately 7,000 employees around the globe for their ownership and grit to win as one team. Operator, please open the line for questions.

Thank you. The floor is now open for questions. Our first question is coming from Julian Mitchell of Barclays. Please go ahead.

Hi, good morning. Maybe wonder if you could flesh out the segment cost growth and how you see that playing out? Thank you very much. And what the main focus points are?

Thank you very much, Julian. I'll address your question in the context of the targets that we set at SPIN, which was our Investor Day in June, as well as our growth strategy. And to start, we remain confident in the targets that we shared at Investor Day, and just as a reminder, through cycle, we talked about revenue growth of 3% to 5%. 3% of that organic. And then low twenties to mid-twenties on adjusted EBITDA. That remains our target. And this year, our first capital allocation priority was around executing our growth strategy and investing in that organic growth. So as you heard in the prepared remarks, we're fueling some of that across innovation, manufacturing, and commercial. And then as I look out on the horizon and the annual guidance that we gave, we gave a range of year over year growth. And if you think about the mid of that range, about our sensors and safety systems a little bit on the higher end of that range. And, they have the stronger adjusted EBITDA margins. Also, where we're gonna do most of the growth investments, and then think about our test and measurement a little below that expectation, which puts them in the, you know, we talked about test and measurement mid-teens. To the low twenties from an adjusted EBITDA. It would put them in the low end of that range. So that's what we're seeing over the next twelve months. Wanted to give that guidance to everyone.

That's very helpful. Thanks very much. And just try and understand how much reinvestment or top up is sort of contemplated here. You have the step up to stand up costs you talked about in midyear. Now we have this step up on the segment costs. Maybe just flesh out kind of what you learned and why we're hearing about this now.

Yes. So thanks, Julian. This is Neill. A couple of things on that. So if you go back and see kind of where we landed, obviously, we've only spun two quarters ago. We're gaining more experience, running the company. And that's actually one of the reasons we wanted to give the full year guide, to everyone here to help with modeling purposes to really kind of catch that investment as we start to look forward. As you think about the investment, more geared towards sensors and safety systems, where we think about higher growth rates over time, thinking about utilities, thinking about defense, and areas where we feel we've got really nice tailwinds. So we'll continue to invest in those. And look to increase the growth rates and I think, you know, get very nice returns on that. Narrowing that down to be a bit more specific, baked into that guidance for six is about at a company level, you know, about 50 to 100 basis points of reinvestment back into the business and that's incorporated into the margin numbers that we talked about.

Thank you. The next question is coming from Deane Dray of RBC Capital Markets. Please go ahead.

Thank you. Good morning, everyone. Good morning. I was hoping to get some clarification on this 250 basis points headwind. How does that spread across the quarters? Is it front-end loaded or should we be expecting does that get spread evenly across the year?

Yes. So great question. I'll hit that. So I think if you look at the cost structure of the business, there's obviously a lot of puts and takes. Number of days in the quarter can change things in terms of what we see. Obviously, you can see a little bit of lumpiness there. I think what we're trying to say here is previously, back in the 2Q call, we talked about a run rate to leverage about $170 million a quarter. What we're saying now is that's about $175 million a quarter. So that gets you closer to $700 million or so of OpEx for the year. When you think about 2025 then as we move into 2026, I would only think about a modest increase as we're thinking about some of the reinvestment. We obviously leverage RBS everywhere. The teams are working on productivity programs related to operating expenses and our cost of sales on a regular basis. So wouldn't see it stepping up much further from here. But I think that's I think the $1.75 a quarter which gets you closer to the $700 million that includes our corporate stand-up costs as well. That's a better I think jump-off point as to how we think about leaving 25 and going to 26 and that that would that would translate to the 250 bps.

Got it. And then just in terms of putting the impairment in context, I mean, that's a sizable write-off for the investment in EA. Can you just take us through any other implications in the business? Are there other test and measurement businesses vulnerable here? It's just the magnitude of the write-off was really surprising given how recently the business had been acquired.

Yes. And this is Neill. We went through this in the prepared remarks. So this was primarily related to EA. I wouldn't read into other parts of test and measurement as a kind of a general statement. So, you know, looking at the write-down, we obviously spun two quarters ago, as I mentioned earlier. We've had some time to evaluate the strategy, evaluate the business. We've been working through that, obviously, and we saw some of the areas we've refined and we're looking forward in terms of advancing forward 2026. But what changed recently there was we saw the reduction in the EV subsidies in the US. I think to a certain extent that also translated some pretty significant write-downs with some large OEMs as it relates to EVs. And that just triggered us to reevaluate our own forecast. As we went through our forecast, as we went through our strategy, and we went through the, you know, the impairment procedures, towards the end of the year which we do every year it just became clear that we needed to take an impairment and execute that write-down.

Yeah. Deane, the business fits nicely, folds nicely into the T&M business. It's still a best-in-class technology, measurement technology, got a standout engineering team. An advanced manufacturing facility that we're taking advantage of. And expect the business at the new levels to be additive to 2026 for us. And, nothing else in the test and measurement portfolio that would be that would that we'd have any other issues with.

Thank you. The next question is coming from Ian Zaffino of Oppenheimer. Please go ahead.

Can you try to get a little bit more color on T&M and how to think about it throughout the year? We're seeing sequential growth kind of still down year over year, but maybe give us color on what to expect over the next few quarters or so from that? And maybe you could do it by, maybe call it, subcategory, whether, you know, it's Europe or communications or diversified electronics, Just any kind of color you could give there would be certainly helpful. Thank you.

Yes. Thank you very much, Ian. And the test and measurement you saw, it's 40% of our overall business, that segment. You saw Q4 down 6%. But what's positive in there is if you look at diversified electronics, that's about 50% of that segment. And we do testing for electronics so a lift in semiconductor globally. Will help the diversified electronics space. Predominantly, our go-to-market there is through our distribution partners. And we've seen sequential improvement in that business, about a 10% improvement quarter over quarter as we're coming into this year. So the positive part is our partners are seeing good quote activity. We're also very normalized inventory levels, and we're seeing good point of sale. So that's a really good signal for us in this business that a diversified electronics, is 50%, is strong. The next piece of the business which you saw just communications. We know those customers. We're working with those customers every single day. Predominantly your aerospace and defense customers, your hyperscalers. And great growth in Q4. I think it was up 29%. This is also where the new products that were launched by Tektronix in Q4 play. They take some time. These are very high-end expensive instruments, so you go through a pretty long sales cycle here. But we start to see traction in North America in that business. Third piece of the business, it's the smallest piece of the business, but you get nine, 10%. It's our it's the pure semiconductor players. And in that business, we're lapping a large customer project so we'll have some headwinds this year. Although, underlying, you know, semiconductor is doing well.

Okay. Thank you. And then, you know, maybe you could talk a little bit about how to expect how we should think about or how you're thinking about M&A going forward? And I know you just kind of just write down, but and I think you're focused more internally. But how are you of kind of M&A this year and anything you want to add to or we just kind of going to sit back for right now? Thanks.

Yeah. Ian, you know, M&A is very tied to how we think about our innovation. We've got a really nice RBS process around looking at markets and doing market work. So we are continually active in markets that are adjacent or tuck-ins that will fold nicely into our business. So we continue doing all the work. As we said, and we remain confident in our strategy around tuck-ins. And the first we're looking is where we're seeing growth, those structural markets that we expect to grow for the next five, seven years.

And let me just add to that. I think, from a capital allocation perspective, as we think about the we talked about organic we talked about returning cash to shareholders, talked about the tuck-in M&A and Tammy talked about, but first and foremost, we're gonna be disciplined, you know, capital allocators, you know, as we think about this going forward. So we're taking like anything we wanna be disciplined, we wanna have drive excellence in terms of how we manage this. And that's really what we're focused on right now ensuring that we find the right targets and as that time comes. We get the right returns on them as well.

Okay, great. Thank you very much for the color.

Our next question is coming from Joseph Giordano of TD Cowen. Please go ahead.

Hi, good morning. This is Chris on for Joe. Can you comment on order activity in the quarter for Test and Measurement and how orders trended sequentially? Maybe also the book to bill for the segment and overall?

Yes. Thank you very much, Chris. We like the positive signals that we're seeing in the test and measurement business. Think about a one-to-one book to bill in the products piece of that business. We monitor sales funnels. So our direct sellers spend a lot of time with semiconductor customers and those large communications customers that are predominantly aerospace and defense. And we've seen sales funnels build. We need to see that convert into orders, to see the momentum continue throughout the quarters. We've also seen strength in our distribution partners. And that's 50% of the overall T&M business how we get scale and reach to every single place around the globe that's involved in electronics design. And our partners are giving us good signals. Our partners are saying quoting activity is up. They've got normalized inventory levels, and we should see that continue, you know, need to see that continue.

Great. And could you help us better understand the level and the nature of the corporate costs embedded in the guidance and the fiscal outlook? Specifically, how large the level of the corporate costs and the cadence as we move through the year? And should we expect that to scale with volume? Or are they largely fixed at this point? Thank you.

Yes. So, first of me just take you back to, we talked about some of the costs as we ramp throughout the year. I think the last update we gave was kind of ramping up to about $170 million a quarter in 2025, which is inclusive of corporate costs annually of $50 million to $55 million. And I think the corporate costs in totality, I think, have kind of landed where we kind of anticipated last year. Although I would say other costs as relates to segment, we have plus 7,000 employees around the world. You know, how we have health insurance and other things that support them. There's business insurance and other items that support them. I think it's really talking about getting a hold on those things that are embedded into the segments that support the operating teams that are out there right now. As we think about OpEx going into next year, like I said, I think the jump-off point is kind of think about it on a run rate basis at $175 a quarter. I think that will come up a little bit. Modestly, maybe $700 million to $720 million something along those lines as you get into the guidance range into next year. Just a modest step up as we look into '26. But as you look at the framework for our margins into next year, think Tammy hit on it earlier. I think it's the you if you at the two segments between test and measurement and you look sensors and safety systems. You know, right now, test and measurement with that you know, growth maybe just below the midpoint of the overall revenue guidance. Is at the low end of our longer-term range at that kind of mid-teens to low 20s with the lower end of that range and as we get more volume in there that's really the way to try margin as we think about executing in 2026 and beyond.

And Chris maybe this is Nathan referring I just wanted to jump in and add quickly Neil talking $175 million of adjusted OpEx. So just to be clear, that excludes amortization. And so we averaged about $175 million in the second half of the year, which is what we're saying is really more of the kind of run rate entering 2026.

Thank you. Our next question is coming from Piyush Avasthy of Citi. Please go ahead.

Good morning, guys. Morning. Maybe, like, one clarification on margin performance in sensor and Safety segment in 4Q. I think revenues were up sequentially from 3Q to 4Q, but margins came down. Can you elaborate a bit on that? Like if there is a different mix in the quarter, like is there any competitive or cost pressure or anything that was unique to the quarter? Or is it just like higher investments? And I think I maybe I missed it, but like can you also frame how you're thinking of margin in '26 for the segment in the construction of your 15% to 20% margin?

Thank you very much, Piyush. If you look at Q4, I called out our defense and space business, specifically PACSCI EMC. Had a record revenue quarter in Q4, and that growth which is the real positive, comes at a different margin profile.

And then if you look out into yeah. And it did sorry. Have a question?

No. Go ahead.

I think the so so this construct, as you think about going out into 2026, so we talked about 2% to 6% growth overall think about 2026 that's the measurement being maybe just below the midpoint of that. But sensors and safety systems being above the midpoint. So solid growth here to and utilities going into next year. And then the margin structure we've talked about long-term targets of kind high twenties as you go into 2026 for sensors and safety systems. We're also seeing a lot of strength in defense, as Tammy mentioned, which is at lower margins than the segment average. It'll mix that down a little bit. Add a little bit of the organic investment by mid to high 20s is kind of the framework we're thinking about now. But we also see some really nice you know, growth tailwind in that business.

Gotcha. Helpful. And based on your 1Q and full-year guidance, can you comment on your for your major regions? Like which regions would you say would have you have more visibility or confidence and seems easier comps? Like, the board, especially in Europe, but any incremental color on the demand trends from a geographic perspective? I think growth in 4Q was primarily driven by Western Europe while North America was a little flattish. So maybe anything to call out there?

Yeah. Thanks. Piyush. North America and Europe make up 65% of our overall business. And as we've talked about, we have strong secular tailwinds in the defense and utility space. So expecting that to continue into 2026 and certainly banked into the guidance that we gave. Rest of the world, I think it's a sign. We're a very global company. And we have opportunities across the globe that pop up in different regions. Predominantly in our test and measurement in our utility space. That's been a pretty good mid-single-digit grower for us. And then there's China. And we talked about China as we went through our investor day, the place that historically, we had seen a lot of growth in the electronics space. And we've resized that and have lowered our expectations. I will say we've seen some green shoots in the sensors and industrial space there where we have a really strong local for local strategy. We've seen strength in the utilities end market in China. But generally, that's where we have lower expectations baked into our guide for the year.

I appreciate all the color guys and good luck.

Thank you. Our next question is coming from Kevin Wilson of Truist Securities. Please go ahead.

Hey, good morning. Thanks for the time. In QUALETROL, I'm wondering if you could expand on that award with the large cloud provider that you mentioned I think you mentioned initial orders received in the fourth quarter. I wonder, is this kind of customer win the first of its kind for Qualitrol, which typically sells more to the utilities and OEs? And should we expect more from Qualitrol specific to data centers over and above the general transmission infrastructure Qualitrol sells into.

Yes. Thank you very much for the question, Kevin. Very good observation. So traditionally, the Qualitrol team and customer has been two-part. One is directly into the utilities who manage their own health systems monitoring systems. And into transformer OEMs who sell a full solution into some utilities. So this is a third area that is ramping in their business, which is the hyperscalers that are directly building out their own grid infrastructure for data centers. So, yes, this is a new customer space the win that we shared. something we've seen coming for a couple of quarters here. And wanted to highlight that.

Thanks. That's helpful. And then maybe sticking on that slide, the Tektronix AI robotics highlight, I thought was also interesting. Particularly as it's on the validation side. Any more color on that engagement? And then maybe broadly, how do you view the market share opportunity in validation for Tektronix? Maybe if you could provide an update on the customer adoption of the new product and platform introductions in that workflow that you announced? Last quarter? Thank you.

Okay, Kevin. There's a lot to unpack in that one. Apologies. Let me start with I think the win as we spoke of as a customer, it's a broader statement to AI moving into the edge and all of the electronics I mean, we're seeing this in our own lives. Electronics are popping up in industries that never had electronics before. And that's good for test and measurement when you're an electronic test and measurement company. So that's a signal of more to come as whether it's robotics, or other electronics going to new end markets. The platform that you're speaking of, the MP 5,000 platform that Tektronix launched in Q4. It's the first time that Tektronix has a purpose-built solution for automated testing. This platform is one that has been well received. We also it will take some time to ramp because it's a new go-to-market for us with system integrators that tend to build the test systems in the validation space. We have a small share in that space today. Just they take our bench instruments and kind of pull them into validation. We're expecting this to be a nice growth opportunity for us as we go throughout the year and get the adoption on that space. So it is some greenfields for Tektronix, and so far, really nice feedback from customers.

That's great. Thanks, Tammy.

Thank you. The next question is coming from Rob Jamieson of Vertical Research Partners. Please go ahead.

Hey, thanks for taking my questions. Just wanted to follow-up on Deane's question here on EA. A lot of these EV headwinds and everything were at least on the CapEx side, being flagged earlier in the year or even when the new administration came in. So I'm just trying to kind of understand when you went through that process. The revised expectations, let's you know, how much was of that was the actual reduction in the industry forecast versus EA specific execution or competitive issues? You know, like, what's the competitive landscape in high power, like, load and supply test? And, you know, have you seen you know, any of EA's differentiation holding or eroding?

Yes. So in terms of the timing as you called out, I think what's changed, over the last couple of quarters is, I think, the change in the EV subsidies. And I think that's translated into other large auto OEMs taking write-downs as well. So I think as we look at that, backdrop as end customers for EVs start to make those types of changes as it relates to not just the overall industry backdrop but also the change in the subsidies. It just became more clear as we went through our evaluation that a write-down, you know, that a write-down was needed.

The customers many of the customers you can imagine in that space, the many of the write-downs are our customers. That had ongoing projects or promises of projects that then, you know, instantly disappear. So the opportunity in automotive is smaller. However, the technology is applicable to other energy storage spaces, which is where we're directing the EA business now.

Okay. No, thank you for that. And then I guess, you mentioned data center on the test and measurement side as well. In communication. Can you give us a little bit more on exactly what you're doing in data center, whether that's power or the signal side? And then also, what's the size within communication for data centers? Is it I mean, assume it's a relatively small piece of that. I guess same question on defense and government, that was called out as being strong communication. But you know, of that bucket, like, how big are those three areas?

Yeah. If you're speaking or I'll frame it directly in T&M. So let's stay in T&M because we do have a large defense business in the Sensors and Safety Systems segment. But within T&M, we talk about yeah. When we talk about communications, I'd say 70, 80% of that is aerospace and defense. The other piece of that is directly to hyperscale. But the AI data center, I talk about it as almost a second derivative to raising the tide for all electronics. Because there's people testing all of the pieces that go into the data center. Not only the communications, but the compute, the memory, the storage, and that's part of the ecosystem that ends up in a data center that certainly provides additional electronic test and measurement opportunity for us.

Okay, great. Thank you.

Our next question is coming from Scott Graham of Seaport Research Partners. Please go ahead.

Hi, good morning. Thanks for taking my question. I'm just hoping for additional color on the projected margin decline in '26. I know you're investing in growth vectors. I know EA is part of that. But the delta does suggest underinvestment from prior. And I guess I'm just wondering which businesses are you investing in most? Again, I understand the growth factors, but which businesses maybe do you need to kind of get to a baseline to support their growth because of what appears to be prior underinvestment?

Yeah. We and if you look at the annual guide, we had a range on the adjusted EBITDA, 18% to 20%. In that range? And do you think about the Sensors and Safety Systems towards that, that will contribute to the higher ends and test and measurement at the volume in our guide would be more towards the low end part of that. The investments across commercial manufacturing, innovation. I'll start with the most obvious which is manufacturing. We've had tremendous growth in defense and utilities over several year period. We're starting to plant the seeds to expand our manufacturing footprint. In this particular year, those investments will be in increased shifts, RBS productivity in the footprint we have, but starting to stand up second lines in buy equipment so that by '27 and '28, we expand that capacity. So that that's squarely in the sensors and safety systems as well as where we're fueling some of those sales resources. We talked about, to get after the growth and to extend our reach. Now the people part of that will be smaller because we're augmenting that with AI and with digital. And then, last is platforms. And we've had some recent launches from our Qualitrol business around arc detection, leveraging AI to get more intelligence to those operators who have to keep the electric grid up. We're gonna fuel that with some platform investments. In innovation. So predominantly, in the sensors and safety systems, where you're gonna see those growth investments.

Very good. Thank you for that. Diversified electronics down 13%. I know you indicated that's up 10% sequentially. And maybe you could just tease out how much of that up 10% is seasonal. And maybe a comment on January for the company.

Through, higher quoting activity, which are all good signals in the diversified electronic space.

And so the sequential, the 10 sequentially that was not seasonal you? You think?

There is definitely some seasonal piece to the test and measurement business, but the 10% sequential it's a broader sequential. It's improved as we've gone throughout the year. The 10 and Measurement, like the overall business, has sequentially improved every quarter since Q1. Now that business tends to have a step down in Q1, which we factored into our guide. But I still think the signs there are very good.

Thank you. Our next question is coming from Chris Schneider of Morgan Stanley. Please go ahead.

Thank you. And I apologize, I joined a little bit late. But I'm not sure if this question has been asked. I understand, obviously, that there's margin headwinds into 2026. But I guess when we specifically look at the Q4 to Q1 kind of sequential progression, I think at the midpoint you guys are guiding it down about 330 basis points, which seems steeper than normal. So is that sequential is that is that all just the higher investment that you guys are making in sensors and Safety? Is it some of the mix headwinds that are continuing in sensor and safety? Just kind of why is that stepping down so sharply? Thank you.

Yeah, Chris. Great question. This is Neill. So let me take a shot at that. So as you look at the transition from one Q sorry, four Q into one Q. We've discussed previously, and I think we laid this out last quarter, that we anticipated from a guide, I think, give you 20% to 21% EBITDA for the company going out of Q4, about a to 300 basis point decline going into Q1. So that would get us close to 18%. We're guiding just a little bit below that. So I think that what we have here is maybe a little lower, but consistent with how we talk about it in terms of seasonality in the business. As it relates to why is it a bit higher, I think from a just a natural perspective, it's going down a bit. We're also seeing a few things like, you know, compensation true-ups as you get into the, you know, start of the year. We are gonna see a small initiation. Some of these organic investments. So I would think about that outside of Q1 for the most part. But healthcare costs being a little bit inflationary. So I think outside of the kind of mid of what we thought about, there's a couple of pieces that are driving a slight increase versus what we had said, but I think, otherwise more or less in line.

Thank you. I appreciate that. And then on some of the investments that you guys are making into the businesses, when do you think that will have a positive impact on top line? Is there some of that benefit that's included in the '20 sales guide? Or do you think those benefits will more so pay off in '27 and beyond? Thank you.

Yeah. We have embedded the goodness those investments into the guide for 2026. And there's always room to overdrive, especially on sales resources if they can come online faster. But predominantly, that investment will be in 2027, will pay off in 2027.

Thank you. Ladies and gentlemen, this brings us to the end of the question and answer session. I'd like to turn the floor back over to Ms. Newcombe for closing comments.

Thank you for your questions and for being with us today. I'd like to wrap up the call with a few closing remarks. While public for only a short time, over the last several years, we've undertaken deliberate actions to create a sustained streamlined portfolio with world-class leaders. One of our greatest strengths is the passion and commitment of our employees, to win as one team. We're executing against our growth strategy by leveraging RBF to compete across businesses stronghold positions and in secular high growth vectors. Expect the RBS to continue to serve as a competitive advantage enabling customer innovation and operating efficiencies. Ultimately enabling us to perform with financial discipline. Our teams have demonstrated operating rigor with the ability to profitably evolve our portfolio and deliver in any environment. We are resolute in our commitment to supporting our customers, inspiring employees, and delivering for our shareholders. Thank you for joining us today. I hope you have a great one.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.