Roper Technologies Announces Second Quarter Financial Results

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Roper Technologies, Inc.

Fri, Jul 22, 2022, 4:55 AM 12 min read

Second quarter GAAP diluted earnings per share (“DEPS”) was $2.52. During the second quarter, Roper announced an agreement to sell a majority stake in its industrial businesses. The financial results for these businesses are reported as discontinued operations for all periods presented. Including the industrial businesses, adjusted DEPS was $3.95, compared to second quarter guidance of $3.80 - $3.84.

On a continuing operations basis, GAAP and adjusted revenue increased 10% to $1.31 billion, while organic revenue grew 11%. Adjusted EBITDA from continuing operations increased 10% to $515 million.

"Our businesses delivered another great quarter with broad-based strength across the enterprise," said Neil Hunn, Roper Technologies’ President and CEO. "The combination of double-digit software recurring revenue growth and robust product demand generated organic revenue growth of 11%. As a result of our strong Q2 results and continued positive momentum across the portfolio, we are increasing our full year outlook."

"As previously announced, during the quarter we reached an agreement to sell a majority stake in our industrial businesses, which will meaningfully enhance the quality of our enterprise," said Mr. Hunn. "Roper's go-forward portfolio is better positioned to generate higher and less cyclical organic revenue growth, while benefiting from an improved working capital position and continued strong cash conversion. Including the net proceeds from this transaction, our M&A firepower will expand to more than $7 billion, which will be targeted toward our large pipeline of high-quality acquisition opportunities."

Initiating Continuing Operations Guidance

Roper is initiating full year 2022 guidance for adjusted DEPS from continuing operations of $13.46 - $13.62. On a comparable basis, excluding $2.30 for the industrial businesses now reported as discontinued operations, previous guidance would have been $13.20 - $13.45.

For the third quarter of 2022, the Company expects adjusted DEPS from continuing operations of $3.42 - $3.46.

The Company’s guidance excludes the impact of unannounced future acquisitions or divestitures, as well as any redeployment of proceeds from announced or completed divestitures.

Discontinued Operations

On June 1, 2022, Roper announced an agreement to sell a majority stake in its industrial businesses, including its entire historical Process Technologies reportable segment (AMOT, CCC, Cornell, FTI, Metrix, PAC, Roper Pump, and Viatran) and the industrial businesses within its historical Measurement & Analytical Solutions reportable segment (Alpha, Dynisco, Hansen, Hardy, Logitech, Struers, Technolog, and Uson). The financial results for these businesses are reported as discontinued operations for all periods presented.

Roper has completed the divestitures of the TransCore, Zetec, and CIVCO Radiotherapy businesses. The financial results for these businesses are reported as discontinued operations for all periods presented.

Conference Call to be Held at 8:00 AM (ET) Today

A conference call to discuss these results has been scheduled for 8:00 AM ET on Friday, July 22, 2022. The call can be accessed via webcast or by dialing +1 844-750-4898 (US/Canada) or +1 412-317-5294 and referencing Roper Technologies. Webcast information and conference call materials will be made available in the Investors section of Roper’s website (www.ropertech.com) prior to the start of the call. The webcast can also be accessed directly by using the following URL https://event.webcast. Telephonic replays will be available for up to two weeks and can be accessed by dialing +1 412-317-0088 with access code 3443983.

Use of Non-GAAP Financial Information

The Company supplements its consolidated financial statements presented on a GAAP basis with certain non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. Reconciliation of non-GAAP measures to their most directly comparable GAAP measures are included in the accompanying financial schedules or tables. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Table 1: Adjusted DEPS Reconciliation ^A (Including Recently Announced Divestiture of Industrial Businesses)

	Q2 2021			Q2 2022				V %
GAAP DEPS	$	2.69		$	2.52			(6	)%
2021 Divestitures (TransCore, Zetec, CIVCO Radiotherapy) ^B		(0.31	)		0.10
Purchase accounting adjustment to acquired commission expense		(0.01	)		(0.01	)	^C
Amortization of acquisition-related intangible assets ^D		1.08			1.07
Income tax restructuring expense associated with pending industrial sale		—			0.27
Adjusted DEPS	$	3.44		$	3.95			15	%

Table 2: Adjusted Revenue and EBITDA Reconciliation ($M) (From Continuing Operations)

	Q2 2021			Q2 2022				V %
Adjusted Revenue Reconciliation
GAAP Revenue	$	1,190		$	1,311			10	%
Adjusted Revenue	$	1,190		$	1,311			10	%

Components of Adjusted Revenue Growth
Organic								11	%
Acquisitions/Divestitures								1	%
Foreign Exchange								(1	)%
Adjusted Revenue Growth								10	%

Adjusted EBITDA Reconciliation
GAAP Net Earnings	$	204		$	225
Taxes		52			92
Interest Expense		59			45
Depreciation		12			9
Amortization		143			146
EBITDA	$	471		$	516			10	%

Purchase accounting adjustment to acquired commission expense		(1	)		(1	)	^C
Adjusted EBITDA	$	469		$	515			10	%
% of Adjusted Revenue		39.4	%		39.3	%		(10 bps)

Table 3: Forecasted Adjusted DEPS Reconciliation ^A (From Continuing Operations)

	Q3 2022						FY 2022
	Low End			High End			Low End			High End
GAAP DEPS	$	2.37		$	2.41		$	9.00		$	9.16
Purchase accounting adjustment to acquired commission expense ^C		(0.01	)		(0.01	)		(0.04	)		(0.04	)
Amortization of acquisition-related intangible assets ^D		1.06			1.06			4.23			4.23
Income tax restructuring expense associated with pending industrial sale		—			—			0.27			0.27
Adjusted DEPS	$	3.42		$	3.46		$	13.46		$	13.62

A.	All 2021 and 2022 adjustments taxed at 21%.

B.	2021 adjusted for operations of divested businesses as filed in the 2021 10-K; 2022 adjusted for gain / (loss) on disposition of discontinued operations, net of tax, associated with the working capital true-up related to the TransCore divestiture.

C.	2022 actual results and 2022 forecast of estimated acquisition-related fair value adjustments to commission expense related to the acquisition of Vertafore as shown below ($M, except per share data).
		Q2 2021A			Q2 2022A			Q3 2022E			FY 2022E
	Pretax	$	(1	)	$	(1	)	$	(1	)	$	(5	)
	After-tax	$	(1	)	$	(1	)	$	(1	)	$	(4	)
	Per Share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.04	)

D.	Actual results and forecast of estimated amortization of acquisition-related intangible assets as shown below ($M, except per share data).
		Including Industrial Businesses						Continuing Operations
		Q2 2021A			Q2 2022A			Q3 2022E			FY 2022E
	Pretax	$	145		$	144		$	144		$	573
	After-tax	$	114		$	114		$	113		$	452
	Per share	$	1.08		$	1.07		$	1.06		$	4.23

Note: Numbers may not foot due to rounding.

About Roper Technologies

Roper Technologies is a constituent of the S&P 500 and Fortune 500. Roper has a proven, long-term track record of compounding cash flow and shareholder value. The Company operates market leading businesses that design and develop vertical software and technology enabled products for a variety of defensible niche markets. Roper utilizes a disciplined, analytical, and process-driven approach to redeploy its excess free cash flow toward high-quality acquisitions. Additional information about Roper is available on the Company’s website at www.ropertech.com.

Contact Information:
Investor Relations
941-556-2601
investor-relations@ropertech.com

The information provided in this press release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements may include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations. Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes," "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties include any ongoing impacts of the COVID-19 pandemic on our business, operations, financial results and liquidity, which will depend on numerous evolving factors which we cannot accurately predict or assess, including: the duration and scope of the pandemic, new variants of the virus and the distribution and efficacy of vaccines; any negative impact on global and regional markets, economies and economic activity; actions governments, businesses and individuals take in response to the pandemic; the effects of the pandemic, including all of the foregoing, on our customers, suppliers, and business partners, and how quickly economies and demand for our products and services recover after the pandemic subsides. Such risks and uncertainties also include our ability to identify and complete acquisitions consistent with our business strategies, integrate acquisitions that have been completed, realize expected benefits and synergies from, and manage other risks associated with, the newly acquired businesses, as well as complete any announced divestitures, including obtaining any required regulatory approvals with respect thereto. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions and the conditions of the specific markets in which we operate, changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, cybersecurity and data privacy risks, including litigation resulting therefrom, risks related to political instability, armed hostilities, incidents of terrorism, public health crises (such as the COVID-19 pandemic) or natural disasters, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, including as a result of the current inflationary environment and ongoing supply chain constraints environmental compliance costs and liabilities, risks and cost associated with litigation, potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(Amounts in millions)

	June 30, 2022			December 31, 2021
ASSETS:

Cash and cash equivalents	$	2,879.1		$	351.5
Accounts receivable, net		628.5			687.6
Inventories, net		92.5			69.2
Income taxes receivable		21.2			16.8
Unbilled receivables		105.4			81.9
Other current assets		154.0			136.1
Current assets held for sale		1,111.3			1,078.0
Total current assets		4,992.0			2,421.1

Property, plant and equipment, net		77.3			82.7
Goodwill		13,566.6			13,476.3
Other intangible assets, net		6,300.7			6,509.1
Deferred taxes		46.3			50.0
Other assets		367.4			369.8
Assets held for sale		—			804.9
Total assets	$	25,350.3		$	23,713.9

LIABILITIES AND STOCKHOLDERS' EQUITY:

Accounts payable	$	128.8		$	98.3
Accrued compensation		201.4			261.9
Deferred revenue		1,105.2			1,106.3
Other accrued liabilities		388.0			398.7
Income taxes payable		310.4			117.3
Current portion of long-term debt, net		799.9			799.2
Current liabilities held for sale		232.4			340.1
Total current liabilities		3,166.1			3,121.8

Long-term debt, net of current portion		6,657.1			7,122.6
Deferred taxes		1,408.1			1,466.2
Other liabilities		392.5			390.1
Liabilities held for sale		—			49.4
Total liabilities		11,623.8			12,150.1

Common stock		1.1			1.1
Additional paid-in capital		2,417.1			2,307.8
Retained earnings		11,613.5			9,455.6
Accumulated other comprehensive loss		(287.8	)		(183.1	)
Treasury stock		(17.4	)		(17.6	)
Total stockholders' equity		13,726.5			11,563.8

Total liabilities and stockholders' equity	$	25,350.3		$	23,713.9

Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (unaudited)
(Amounts in millions, except per share data)

	Three months ended June 30,						Six months ended June 30,
		2022			2021			2022			2021
Net revenues	$	1,310.8		$	1,189.8		$	2,590.6		$	2,345.1
Cost of sales		399.3			350.6			781.9			689.6
Gross profit		911.5			839.2			1,808.7			1,655.5

Selling, general and administrative expenses		548.6			523.0			1,089.9			1,021.7
Income from operations		362.9			316.2			718.8			633.8

Interest expense, net		44.7			59.5			97.3			120.0
Other (expense) income, net		(1.3	)		(0.2	)		(3.4	)		27.1

Earnings before income taxes		316.9			256.5			618.1			540.9

Income taxes		91.9			52.1			156.7			113.5

Net earnings from continuing operations		225.0			204.4			461.4			427.4

Earnings from discontinued operations, net of tax		54.5			81.9			121.3			147.9
Gain / (loss) on disposition of discontinued operations, net of tax		(10.7	)		—			1,706.6			—
Net earnings from discontinued operations		43.8			81.9			1,827.9			147.9

Net earnings	$	268.8		$	286.3		$	2,289.3		$	575.3

Net earnings per share from continuing operations:
Basic	$	2.13		$	1.94		$	4.36		$	4.06
Diluted	$	2.11		$	1.92		$	4.32		$	4.03

Net earnings per share from discontinued operations:
Basic	$	0.41		$	0.78		$	17.28		$	1.41
Diluted	$	0.41		$	0.77		$	17.12		$	1.39

Net earnings per share:
Basic	$	2.54		$	2.72		$	21.64		$	5.47
Diluted	$	2.52		$	2.69		$	21.44		$	5.42

Weighted average common shares outstanding:
Basic		105.9			105.3			105.8			105.1
Diluted		106.8			106.4			106.8			106.2

Roper Technologies, Inc. and Subsidiaries
Selected Segment Financial Data (unaudited)
(Amounts in millions; percentages of net revenues)

	Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021
	Amount		%		Amount		%		Amount		%		Amount		%
Net revenues:
Application Software	$	627.5			$	587.9			$	1,255.7			$	1,161.0
Network Software		342.9				297.8				681.4				585.3
Technology Enabled Products		340.4				304.1				653.5				598.8
Total	$	1,310.8			$	1,189.8			$	2,590.6			$	2,345.1


Gross profit:
Application Software	$	430.9	68.7	%	$	407.3	69.3	%	$	866.3	69.0	%	$	804.5	69.3	%
Network Software		289.1	84.3	%		250.1	84.0	%		574.0	84.2	%		489.6	83.6	%
Technology Enabled Products		191.5	56.3	%		181.8	59.8	%		368.4	56.4	%		361.4	60.4	%
Total	$	911.5	69.5	%	$	839.2	70.5	%	$	1,808.7	69.8	%	$	1,655.5	70.6	%


*Operating profit:**
Application Software	$	165.3	26.3	%	$	153.5	26.1	%	$	337.6	26.9	%	$	307.0	26.4	%
Network Software		137.1	40.0	%		111.2	37.3	%		273.9	40.2	%		216.8	37.0	%
Technology Enabled Products		111.4	32.7	%		102.3	33.6	%		211.1	32.3	%		207.9	34.7	%
Total	$	413.8	31.6	%	$	367.0	30.8	%	$	822.6	31.8	%	$	731.7	31.2	%

*Segment operating profit is before unallocated corporate general and administrative expenses. These expenses were $50.9 and $50.8 for the three months ended June 30, 2022 and 2021, respectively, and $103.8 and $97.9 for the six months ended June 30, 2022 and 2021, respectively.

Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(Amounts in millions)

	Six months ended June 30,
		2022			2021
Cash flows from operating activities:
Net earnings from continuing operations	$	461.4		$	427.4
Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment		18.7			23.5
Amortization of intangible assets		291.3			285.8
Amortization of deferred financing costs		6.3			6.8
Non-cash stock compensation		61.2			61.5
Gain on sale of assets, net of tax		—			(21.6	)
Income tax provision, excluding tax associated with gain on sale of assets		156.7			108.1
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable		55.2			41.7
Unbilled receivables		(24.7	)		(14.1	)
Inventories		(23.7	)		1.2
Accounts payable		30.9			24.3
Other accrued liabilities		(64.7	)		(16.4	)
Deferred revenue		38.6			39.9
Cash tax paid for gain on disposal of businesses		(377.9	)		—
Cash income taxes paid		(279.4	)		(137.3	)
Other, net		(18.9	)		(25.3	)
Cash provided by operating activities from continuing operations		331.0			805.5
Cash provided by operating activities from discontinued operations		80.1			179.6
Cash provided by operating activities		411.1			985.1


Cash flows from (used in) investing activities:
Acquisitions of businesses, net of cash acquired		(258.9	)		(15.5	)
Capital expenditures		(13.7	)		(12.8	)
Capitalized software expenditures		(15.0	)		(15.3	)
Proceeds from sale of assets		—			27.1
Other, net		—			(1.6	)
Cash used in investing activities from continuing operations		(287.6	)		(18.1	)
Proceeds from disposition of discontinued operations		2,995.9			—
Cash used in investing activities from discontinued operations		(3.3	)		(4.1	)
Cash provided by (used in) investing activities		2,705.0			(22.2	)



Cash flows from (used in) financing activities:
Borrowings (payments) under revolving line of credit, net		(470.0	)		(870.0	)
Cash dividends to stockholders		(130.7	)		(117.8	)
Proceeds from stock-based compensation, net		40.9			45.2
Treasury stock sales		8.5			8.2
Other		(0.2	)		(0.1	)
Cash flows used in financing activities from continuing operations		(551.5	)		(934.5	)
Cash flows used in financing activities from discontinued operations		(11.4	)		(0.1	)
Cash flows used in financing activities		(562.9	)		(934.6	)
(Continued)
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) - (Continued)
(Amounts in millions)

	Six months ended June 30,
		2022			2021

Effect of foreign currency exchange rate changes on cash		(25.6	)		1.2

Net increase in cash and cash equivalents		2,527.6			29.5

Cash and cash equivalents, beginning of period		351.5			308.3

Cash and cash equivalents, end of period	$	2,879.1		$	337.8

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