Core Insights - Roper Technologies' shares have decreased by 13% following fourth-quarter earnings that fell short of Wall Street expectations, despite a 12% increase in sales and an 8% rise in free cash flow [1] - The company's guidance of only 8% revenue growth for 2026 has contributed to the stock's decline, which is now down 40% from its 52-week high [1] Group 1: Company Performance - Roper Technologies reported a 12% growth in sales and an 8% increase in free cash flow for the fourth quarter [1] - The company's management has indicated that two major business segments are facing significant challenges, impacting overall performance [2] Group 2: Market Conditions - The software market is experiencing a sell-off due to concerns about AI disruption, which is affecting many software stocks, including Roper [2] - Deltek, a key business unit of Roper, has not rebounded from previous government budget cuts and shutdowns, negatively impacting Roper's stock [4] Group 3: Future Outlook - Roper Technologies has the potential for growth through mergers and acquisitions, with management indicating a capacity for $6 billion in M&A or stock buybacks in 2026 [5] - The company is currently trading at 16 times free cash flow, which may present a buying opportunity for shareholders, especially given its consistent sales growth over the past five years [5]

Core Insights - Roper Technologies reported solid execution in its fourth-quarter and full-year 2025 results, although organic growth was below expectations, leading to a more conservative outlook for 2026 [5][7] Financial Performance - Fourth-quarter revenue reached $2.06 billion, marking a 10% year-over-year increase, with acquisitions contributing 5% and organic growth at 4% [4][7] - Adjusted EBITDA for the quarter was $818 million, up 10%, with a core EBITDA margin expansion of 60 basis points, representing a 54% incremental margin [3] - Full-year 2025 revenue totaled $7.9 billion, up 12% year over year, with acquisitions contributing nearly 7% and organic growth around 5.5% [9] Cash Flow and Capital Deployment - Free cash flow for FY2025 was nearly $2.5 billion, representing 31% of revenue, with expectations for higher growth in 2026 due to working capital and cash tax improvements [6][10] - Roper invested $3.3 billion in vertical software acquisitions in 2025 and repurchased $500 million in Q4, ending the year with a net leverage ratio of 2.9x [12] 2026 Guidance - The company provided a conservative 2026 outlook, projecting full-year revenue growth of about 8% and adjusted diluted earnings per share (DEPS) between $21.30 and $21.55 [7][13] - Management emphasized that the guidance does not assume recoveries in Deltek's GovCon market or significant revenue from AI initiatives [19] Segment Performance - In Application Software, fourth-quarter revenue grew 10%, with a segment margin expansion of 70 basis points to 42.2% [2] - Network Software revenue rose 14% in the quarter, with organic growth of 5%, although margins declined to 52.8% due to recent acquisitions [8] AI Initiatives - Management discussed AI as a significant opportunity, focusing on mission-critical workflows and the establishment of an AI Accelerator team to drive development and commercialization [15][16] - The company aims to report credible AI-related revenue over time, with 2025 focused on product development and 2026 on commercialization [16] Strategic Focus - Roper intends to maintain a disciplined approach between acquisitions and share repurchases, emphasizing the best risk-adjusted path to durable cash flow per share [17]

Core Viewpoint - Roper Technologies has projected 2026 revenue and profit figures that fall short of Wall Street expectations, primarily due to weakened demand in its government contracting unit, Deltek, resulting in a 14.9% decline in the company's shares [1] Group 1 - Roper Technologies' forecast for 2026 revenue and profit is below Wall Street estimates [1] - The decline in demand is specifically attributed to the government contracting unit, Deltek [1] - Following the announcement, Roper Technologies' shares experienced a significant drop of 14.9% [1]

Core Viewpoint - Roper Technologies reported quarterly earnings of $5.21 per share, exceeding the Zacks Consensus Estimate of $5.14 per share, and showing an increase from $4.81 per share a year ago, indicating a positive earnings surprise of +1.44% [1] Financial Performance - The company achieved revenues of $2.06 billion for the quarter ended December 2025, which was below the Zacks Consensus Estimate by 1.56%, but an increase from $1.88 billion year-over-year [2] - Over the last four quarters, Roper Technologies has surpassed consensus EPS estimates four times and topped revenue estimates two times [2] Stock Performance - Roper Technologies shares have declined approximately 8.2% since the beginning of the year, contrasting with the S&P 500's gain of 1.5% [3] Future Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $5.21 on revenues of $2.08 billion, and for the current fiscal year, it is $21.45 on revenues of $8.59 billion [7] Industry Context - The Computers - IT Services industry, to which Roper Technologies belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - Revenue for Q4 was $2.06 billion, up 10% year-over-year, with acquisitions contributing 5% and organic growth of 4% [10] - EBITDA reached $818 million, also up 10% year-over-year, with core EBITDA margin expanding 60 basis points to 54% incremental margin [10] - For the full year 2025, revenue was $7.9 billion, up 12% from the previous year, with acquisitions contributing nearly 7% growth [14] - Free cash flow was nearly $2.5 billion, up 8%, representing 31% of revenue [15] Business Line Data and Key Metrics Changes - Application software revenue grew 10% in Q4, with organic growth of 4% and margins expanding 70 basis points to 42.2% [11] - Network software revenue grew 14% with organic growth of 5%, but margins decreased to 52.8% due to recent acquisitions [12] - Tech segment revenue grew 6% or 5% organically, with margins holding flat at 34.8% [13] - For the full year, application software revenue grew 16% in total, with organic revenue growth of 5% [18] Market Data and Key Metrics Changes - The government contracting (GovCon) market remains challenging, impacting Deltek's performance, particularly in perpetual license revenue [12][20] - The freight market experienced a recession throughout 2025, affecting DAT's performance, although they are evolving into a more automated marketplace [24] Company Strategy and Development Direction - The company is focused on long-term sustainable growth, investing $3.3 billion in high-quality vertical software acquisitions during 2025 [9] - The company is excited about AI product opportunities, leveraging deep domain knowledge and proprietary data to enhance customer outcomes [8] - The company maintains a robust M&A pipeline and plans to remain active while being disciplined on pricing and business quality [9][33] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2026, expecting organic growth to be in the higher end of the mid-singles range, with a conservative posture on GovCon until improvements are seen [23][30] - The company does not anticipate a meaningful revenue uplift from AI development in 2026 but views it as an incremental upside [30][56] Other Important Information - The company has a net leverage ratio of 2.9 times and approximately $300 million in cash, with nearly $2.7 billion available on its revolver [16] - The company executed opportunistic share repurchases, buying back 1.1 million shares for $500 million in Q4 [9][17] Q&A Session Summary Question: What is the outlook for Deltek in 2026? - Management is not assuming an improvement in the GovCon market for 2026, citing lower organic growth due to perpetual license revenue issues [38] Question: What needs to happen for Procare to meet expectations? - Management indicated that the primary issue is the slow implementation of software, which is being addressed [40] Question: What segments of government appropriations would impact Deltek the most? - Management highlighted that defense-related appropriations would have a significant positive impact on Deltek's customers [45] Question: How much capital deployment is expected in 2026? - Management stated that while there is a $6 billion capacity for capital deployment, the focus will be on high-quality acquisitions at appropriate prices [47][50] Question: When will AI contributions be quantifiable? - Management aims to report AI-related revenue but emphasizes that AI will be monetized in various ways beyond just direct sales [54][56]

Financial Data and Key Metrics Changes - Revenue for Q4 was $2.06 billion, up 10% year-over-year, with acquisitions contributing 5% and organic growth of 4% [10] - EBITDA reached $818 million, also up 10% year-over-year, with core EBITDA margin expanding 60 basis points to 54% incremental margin [10] - For the full year 2025, revenue was $7.9 billion, up 12% from the previous year, with acquisitions contributing nearly 7% growth [14] - Free cash flow for 2025 was nearly $2.5 billion, up 8%, representing 31% of revenue [15] Business Line Data and Key Metrics Changes - Application software revenue grew 10% in Q4, with organic growth of 4% and margins expanding 70 basis points to 42.2% [11] - Network software revenue grew 14% in Q4, with organic growth of 5% and margins at 52.8% [12] - Tech segment revenue grew 6% in Q4, with organic growth of 5% and margins holding flat at 34.8% [13] - For the full year, application software revenue grew 16% in total, with organic revenue growth of 5% [18] Market Data and Key Metrics Changes - The government contracting (GovCon) market remains challenging, impacting Deltek's performance, particularly in perpetual license revenue [20] - The freight market has been in a recession, affecting DAT's performance, although the company is evolving into a more automated marketplace [24] Company Strategy and Development Direction - The company is focused on long-term sustainable growth, with a commitment to investing in AI product development and capital deployment [9][32] - A robust M&A pipeline is anticipated, with over $6 billion in capacity for potential acquisitions and share repurchases [9][16] - The company aims to balance acquisitions with opportunistic buybacks to maximize durable cash flow per share compounding [33] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2026, expecting organic growth to be in the higher end of the mid-singles range, with a conservative posture on GovCon until improvements are seen [23][30] - The company does not anticipate a significant uplift from AI development in the near term but views it as a long-term growth driver [30][56] Other Important Information - The company deployed $3.3 billion towards high-quality vertical software acquisitions in 2025, including CentralReach and Subsplash [9] - The company repurchased 1.1 million shares for $500 million in Q4, with a remaining authorization of $2.5 billion [17] Q&A Session Summary Question: What is the outlook for Deltek in 2026? - Management is not assuming an improvement in the GovCon market for 2026, citing lower organic growth due to perpetual license revenue issues [38] Question: What needs to happen for ProCare to meet expectations? - Management indicated that the implementation speed of software and payments needs improvement, which is a fixable issue [40][41] Question: What segments of government appropriations would impact Deltek the most? - Management highlighted that defense-related appropriations would have a larger impact on contractor spending, which is beneficial for Deltek's customers [45] Question: How much capital might be deployed in 2026? - Management stated that while there is a $6 billion capacity for capital deployment, the focus will be on high-quality acquisitions at appropriate prices [47][48] Question: When will AI's impact be quantifiable? - Management aims to report AI-related revenue but emphasizes that AI will be monetized in various ways beyond just direct sales [54][56]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $2.06 billion, up 10% year-over-year, with acquisitions contributing 5% and organic growth of 4% [9] - EBITDA reached $818 million, also up 10% over the prior year, with a core EBITDA margin expansion of 60 basis points [9][14] - For the full year 2025, total revenue was $7.9 billion, reflecting a 12% increase, with acquisitions contributing nearly 7% growth [13] - Free cash flow for 2025 was nearly $2.5 billion, up 8%, representing 31% of revenue [15] Business Line Data and Key Metrics Changes - Application software revenue grew 10% in Q4, with organic growth of 4% and EBITDA margins expanding to 42.2% [10] - Network software revenue increased by 14% in Q4, with organic growth of 5%, although margins decreased to 52.8% due to recent acquisitions [11] - Tech segment revenue grew 6% in Q4, with organic growth of 5% and margins holding flat at 34.8% [12] - For the full year, application software revenue grew by 16% in total, with organic revenue growth of 5% [18] Market Data and Key Metrics Changes - The government contracting market remains challenging, impacting Deltek's performance, particularly in perpetual license revenue [11][19] - The freight market experienced a recession throughout 2025, affecting DAT's performance, although the company is evolving into a more automated marketplace [23] Company Strategy and Development Direction - The company is focused on long-term sustainable growth, with a commitment to investing in AI product development and enhancing operational execution [5][6] - Capital allocation strategy includes deploying $3.3 billion towards high-quality vertical software acquisitions and opportunistic share repurchases [8][30] - The company anticipates remaining active in M&A while maintaining discipline on pricing and business quality [16][30] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding improvements in the Deltek segment, contingent on government appropriations and market conditions [11][19] - The outlook for 2026 includes expectations for organic growth in the higher end of the mid-singles range, with a conservative approach to guidance [22][28] - AI is viewed as a significant growth driver, with plans to commercialize AI-related products across various business segments [54] Other Important Information - The company has a robust M&A pipeline and substantial financial flexibility, with over $6 billion in capacity for capital deployment in 2026 [16][30] - The company is not assuming a meaningful revenue uplift from AI development in its guidance but views it as an incremental upside [28] Q&A Session Summary Question: What is included in the 2026 guidance for Deltek and how is the company protecting against potential government shutdowns? - Management is not assuming improvement in the Deltek segment for 2026, citing lower organic growth due to perpetual license revenue issues [36] Question: What needs to happen for ProCare to meet expectations? - Management indicated that the primary issue is the slow implementation of software and payments, which is being addressed [38] Question: What segments of government appropriations would significantly impact Deltek? - Management highlighted that appropriations heavy on Defense and DHS funding would positively impact Deltek's customers [43] Question: What is the expected capital deployment for 2026? - Management stated that while there is a $6 billion capacity for capital deployment, the focus will be on high-quality acquisitions rather than a set budget [46] Question: When will the company quantify AI's impact on revenue? - Management expressed that while they aim to report AI-related revenue, they will not "AI wash" their revenue streams and expect AI to be a meaningful growth driver [54]

Q4 2025 Financial results January 27, 2026 Safe harbor statement The information provided in this presentation 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 in ...

Revenue and Earnings - Total revenue for 2025 increased by 12% to $7.90 billion, with acquisition contribution at +7% and organic revenue growth at +5%[4] - GAAP net earnings for 2025 decreased by 1% to $1.54 billion, while adjusted net earnings increased by 9% to $2.16 billion[6] - Adjusted EBITDA for 2025 rose by 11% to $3.14 billion, with an adjusted EBITDA margin of 39.8%[6] - The company reported a decrease in GAAP DEPS by 1% to $14.20 for 2025, while adjusted DEPS increased by 9% to $20.00[6] - Net earnings for 2025 were $1,536.3 million, a slight decrease from $1,549.3 million in 2024, representing a decline of 0.9%[27] Cash Flow and Investments - Free cash flow for 2025 increased by 8% to $2.47 billion, and operating cash flow rose by 6% to $2.54 billion[6] - Cash provided by operating activities increased to $2,540.3 million in 2025, up from $2,393.2 million in 2024, reflecting a growth of 6.2%[27] - Cash used in investing activities was $3,388.0 million in 2025, compared to $3,468.5 million in 2024, indicating a decrease of 2.3%[27] - Cash provided by financing activities decreased to $923.6 million in 2025 from $1,069.5 million in 2024, a decline of 13.7%[27] - The company reported a net increase in cash and cash equivalents of $109.2 million for 2025, compared to a decrease of $26.1 million in 2024[28] Assets and Liabilities - Cash and cash equivalents increased to $297.4 million as of December 31, 2025, compared to $188.2 million a year earlier[23] - Total assets grew to $34,577.0 million in 2025, up from $31,334.7 million in 2024[23] - Long-term debt increased to $8,595.8 million in 2025, compared to $6,579.9 million in 2024[23] - Deferred revenue rose to $1,906.8 million in 2025, up from $1,737.4 million in 2024, indicating strong future revenue visibility[23] Quarterly Performance - Net revenues for Q4 2025 reached $2,058.6 million, a 9.7% increase from $1,877.1 million in Q4 2024[24] - Operating income for Q4 2025 was $588.3 million, a 12.1% increase from $524.7 million in Q4 2024[24] - Net earnings for Q4 2025 were $428.4 million, down from $462.3 million in Q4 2024, resulting in diluted earnings per share of $3.97[24] - Gross profit margin improved to 69.5% in Q4 2025, compared to 68.3% in Q4 2024[26] - The Application Software segment generated $1,158.9 million in Q4 2025, a 9.6% increase from $1,056.9 million in Q4 2024[26] Future Outlook - For 2026, the company expects adjusted DEPS to be between $21.30 and $21.55, with total revenue growth projected at approximately 8%[7] - The first quarter of 2026 is expected to yield adjusted DEPS of $4.95 to $5.00[7] Acquisitions and Strategic Focus - Roper Technologies deployed $3.3 billion towards high-quality vertical software businesses in 2025, including CentralReach and Subsplash[4] - The company made acquisitions of businesses totaling $3,290.0 million in 2025, down from $3,612.9 million in 2024, a decrease of 8.9%[27] - Roper is focused on enhancing AI capabilities and has a significant pipeline of attractive acquisition opportunities[5] Other Financial Metrics - Amortization of intangible assets increased to $858.4 million in 2025 from $775.7 million in 2024, a rise of 10.6%[27] - Proceeds from the sale of equity investments were $0 million in 2025, compared to $245.6 million in 2024, indicating a significant decline[27] - The effect of exchange rate changes on cash resulted in a positive impact of $33.3 million in 2025, contrasting with a negative impact of $20.3 million in 2024[28]

Core Insights - Roper Technologies demonstrated strong financial performance in 2025, achieving 12% total revenue growth, 11% EBITDA growth, and 8% free cash flow growth, while also executing a significant M&A strategy with $3.3 billion deployed towards high-quality vertical software businesses [4][8] - The company is entering 2026 with a stronger foundation, focusing on innovation and capital deployment, particularly in AI, with a robust pipeline of acquisition opportunities [5][6] Financial Performance - Fourth quarter 2025 revenue increased by 10% to $2.06 billion, with acquisition contributions of 5% and organic revenue growth of 4% [8] - Full year 2025 revenue rose by 12% to $7.90 billion, with acquisition contributions of 7% and organic revenue growth of 5% [8] - GAAP net earnings for Q4 2025 decreased by 7% to $428 million, while adjusted net earnings increased by 8% to $561 million [8][12] - Adjusted EBITDA for Q4 2025 increased by 10% to $818 million, and for the full year, it rose by 11% to $3.14 billion [8][12] Shareholder Returns - The company repurchased 1.12 million shares for $500 million as part of its share repurchase program [4][8] - For 2026, Roper expects adjusted diluted earnings per share (DEPS) of $21.30 to $21.55, with total revenue growth projected at approximately 8% and organic revenue growth of 5% to 6% [6][15] Strategic Focus - Roper is enhancing its leadership talent, AI capabilities, and capital deployment discipline to capture significant opportunities in AI across its businesses [5] - The company has a large pipeline of attractive acquisition opportunities and the flexibility to utilize its share repurchase program to support long-term growth [5]