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01/10 18:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Roper Technologies raised its revenue growth guidance, announced the Subsplash acquisition, and emphasized AI-driven growth, which are positive indicators. Despite some deceleration in software bookings and challenges in the TEP segment, the company maintains confidence in its guidance and portfolio's resilience. The focus on M&A and shareholder returns through buybacks further supports a positive outlook. The Q&A session highlighted management's strategic focus and adaptability, mitigating concerns about setbacks. Overall, the strategic initiatives and raised guidance suggest a positive stock price movement.
Total Revenue Total revenue grew 14% year-over-year, surpassing the $2 billion mark. Acquisitions contributed 8% to this growth, while organic revenue grew 6%. The growth was driven by acquisitions like Transact and CentralReach, which are performing well against expectations.
Free Cash Flow Free cash flow grew 17% year-over-year to $842 million, representing 32% of revenue on a TTM basis. This growth was attributed to strong renewals in software businesses and excellent working capital performance.
EBITDA EBITDA was $810 million, up 13% year-over-year, with an EBITDA margin of 40.2%. Core margins expanded by 10 basis points, and segment core margins expanded by 30 basis points, led by software segments.
DEPS (Diluted Earnings Per Share) DEPS was $5.14, up 11% year-over-year and $0.02 above the high end of the guidance range. This was achieved despite absorbing $0.05 of dilution from Q3 acquisitions.
Net Debt-to-EBITDA Net debt-to-EBITDA stood at 3x, up slightly from 2.9x in Q2, despite deploying $1.3 billion towards acquisitions. The company has over $5 billion in next 12-month capacity for capital deployment.
Application Software Segment Revenue Revenue grew 18% year-over-year, with organic revenue growing 6%. EBITDA margins were 43.4%, and core margins improved by 40 basis points. Growth was driven by strong performance in businesses like Deltek, Aderant, and CentralReach.
Network Segment Revenue Revenue grew 13% year-over-year, with organic revenue growing 6%. EBITDA margins were 53.7%, and core margins improved by 60 basis points. Growth was driven by businesses like DAT, ConstructConnect, and SoftWriters.
TEP Segment Revenue Revenue grew 7% year-over-year, with organic revenue growing 6%. EBITDA margins were 35.2%. Growth was driven by businesses like Neptune, Verathon, and NDI, despite some short-term disruptions due to new copper tariffs.
AI-enabled products: CentralReach now attributes roughly 75% of their bookings to AI-enabled products, automating tasks like reimbursement rule evaluations and clinical summaries. Deltek has released over 40 AI features into their cloud offerings, and DAT has advanced AI/ML-enabled freight matching capabilities.
New acquisitions: Acquired Subsplash for $800 million and completed $500 million in tuck-in acquisitions, including Orchard for Clinisys and Convoy for DAT.
Market expansion in freight automation: DAT is evolving from a freight matching network to a fully automated freight marketplace powered by AI, unlocking significant efficiency and economic value for brokers and carriers.
AI-driven market opportunities: AI is expanding Roper's total addressable market (TAM) by automating tasks across vertical markets, creating new value streams for customers.
Revenue and cash flow growth: Total revenue grew 14%, organic revenue grew 6%, and free cash flow increased by 17% with margins at 32%.
Operational efficiencies through AI: AI is being used internally to drive productivity gains, reinvested into product development and go-to-market initiatives.
M&A strategy: Deployed $1.3 billion in acquisitions this quarter and have over $5 billion in capital deployment capacity for the next 12 months.
Share repurchase program: Announced a $3 billion share repurchase authorization to complement M&A activities.
Government Contracting and Freight Markets: The company is facing challenges in the government contracting and freight markets, which are not cooperating as expected. This could impact revenue and operational performance.
Deltek Business and Government Shutdown: The ongoing government shutdown is causing softness in Deltek's business, particularly in the GovCon sector. This is leading to delays in commercial activity and creating market uncertainty.
Neptune Delays and Copper Tariffs: Neptune is experiencing delays due to the implementation of new copper tariffs, which have disrupted order timing and created short-term headwinds.
DAT Business and Convoy Acquisition: The Convoy acquisition under DAT is currently not profitable, and scaling efficiently to achieve financial returns poses a challenge. Additionally, the freight market's evolution and automation efforts require significant execution.
Economic Uncertainty in M&A Environment: The muted private equity (PE) deal environment and economic uncertainties are impacting the pipeline of high-quality acquisitions, which could affect the company's M&A strategy.
Nonrecurring Revenue Declines: Declines in nonrecurring revenue, particularly in the Deltek business, are anticipated, which could offset growth in recurring revenue streams.
Revenue Growth: For the full year 2025, total revenue is expected to grow by approximately 13%, with organic revenue growth anticipated to land in the 6% area, slightly adjusted from the previous 6%-7% range.
Earnings Per Share (EPS): Adjusted DEPS for the full year 2025 is projected to be in the range of $19.90 to $19.95. For Q4 2025, adjusted DEPS guidance is set between $5.11 and $5.16, including $0.05 of dilution from recent acquisitions.
Capital Deployment: The company has over $5 billion in capital deployment capacity for the next 12 months and has announced a $3 billion share repurchase program with an open-ended time period for execution.
AI as a Growth Driver: AI is expected to significantly expand the company's total addressable market (TAM) by automating tasks and workflows across vertical market offerings. Early product and commercial results are already measurable.
Segment-Specific Guidance: - Application Software: Mid-single-digit organic revenue growth expected in Q4 2025, with high single-digit growth in recurring revenue offset by declines in nonrecurring revenue due to government shutdown impacts on Deltek.
M&A Strategy: The company remains focused on acquiring high-quality growth businesses and strategic bolt-ons, with a strong pipeline of opportunities. Recent acquisitions include Subsplash and several tuck-ins, with $1.3 billion deployed in Q3 2025.
Share Repurchase Authorization: Roper Technologies announced its first-ever share repurchase authorization, amounting to $3 billion. This program is open-ended, allowing the company to execute it opportunistically. While the majority of capital deployment will continue to focus on M&A, the share repurchase program is designed to complement the M&A strategy and reflects confidence in the company's long-term strategy and commitment to shareholder value creation.
Roper Technologies raised its revenue growth guidance, announced the Subsplash acquisition, and emphasized AI-driven growth, which are positive indicators. Despite some deceleration in software bookings and challenges in the TEP segment, the company maintains confidence in its guidance and portfolio's resilience. The focus on M&A and shareholder returns through buybacks further supports a positive outlook. The Q&A session highlighted management's strategic focus and adaptability, mitigating concerns about setbacks. Overall, the strategic initiatives and raised guidance suggest a positive stock price movement.
The earnings call reflected a positive sentiment with several key drivers: the acquisition of CentralReach and its expected contributions, a raised full-year revenue guidance, and strong performance in AI-driven productivity gains. The Q&A highlighted strong bookings and growth prospects, particularly for Aderant and Subsplash, and emphasized strategic reinvestment. Despite some uncertainties in government contracts and AI pricing, the overall outlook is optimistic, suggesting a likely positive stock price movement.
Roper Technologies demonstrated strong financial performance with a 12% revenue increase and positive EPS growth. Despite some concerns about debt and legal settlements, the company has significant acquisition firepower and optimistic revenue and EPS guidance. The Q&A highlighted robust pipeline activity and positive expectations for cash flow and margin improvements. The focus on AI and cloud transitions, along with a strong shareholder return plan, further supports a positive outlook. Overall, the positive financial metrics and strategic initiatives outweigh the risks, suggesting a positive stock price movement.
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