Condensed Consolidated Statements of Cash Flows (unaudited) - Continued
(in millions)
Nine months ended September 30,
2024
2023
Effect of exchange rate changes on cash
10.8
(1.2)
Net increase (decrease) in cash and cash equivalents
55.3
(493.3)
Cash and cash equivalents, beginning of period
214.3
792.8
Cash and cash equivalents, end of period
$
269.6
$
299.5
See accompanying notes to Condensed Consolidated Financial Statements.
7
Roper Technologies, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
(in millions, except per share data)
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock
Total stockholders’ equity
Balances at June 30, 2024
$
1.1
$
2,923.0
$
15,374.3
$
(142.8)
$
(16.6)
$
18,139.0
Net earnings
—
—
367.9
—
—
367.9
Stock option exercises
—
14.3
—
—
—
14.3
Treasury stock sold
—
4.1
—
—
0.1
4.2
Currency translation adjustments
—
—
—
35.4
—
35.4
Stock-based compensation
—
39.2
—
—
—
39.2
Restricted stock activity
—
(3.7)
—
—
—
(3.7)
Dividends declared ($0.75 per share)
—
—
(80.8)
—
—
(80.8)
Balances at September 30, 2024
$
1.1
$
2,976.9
$
15,661.4
$
(107.4)
$
(16.5)
$
18,515.5
Balances at December 31, 2023
$
1.1
$
2,767.0
$
14,816.3
$
(122.8)
$
(16.8)
$
17,444.8
Net earnings
—
—
1,087.0
—
—
1,087.0
Stock option exercises
—
104.3
—
—
—
104.3
Treasury stock sold
—
14.2
—
—
0.3
14.5
Currency translation adjustments
—
—
—
15.4
—
15.4
Stock-based compensation
—
113.2
—
—
—
113.2
Restricted stock activity
—
(21.8)
—
—
—
(21.8)
Dividends declared ($2.25 per share)
—
—
(241.9)
—
—
(241.9)
Balances at September 30, 2024
$
1.1
$
2,976.9
$
15,661.4
$
(107.4)
$
(16.5)
$
18,515.5
Balances at June 30, 2023
$
1.1
$
2,655.3
$
14,233.2
$
(126.7)
$
(17.0)
$
16,745.9
Net earnings
—
—
347.2
—
—
347.2
Stock option exercises
—
29.9
—
—
—
29.9
Treasury stock sold
—
3.1
—
—
0.1
3.2
Currency translation adjustments
—
—
—
(50.1)
—
(50.1)
Stock-based compensation
—
36.7
—
—
—
36.7
Restricted stock activity
—
(1.2)
—
—
—
(1.2)
Dividends declared ($0.6825 per share)
—
—
(72.9)
—
—
(72.9)
Balances at September 30, 2023
$
1.1
$
2,723.8
$
14,507.5
$
(176.8)
$
(16.9)
$
17,038.7
Balances at December 31, 2022
$
1.1
$
2,510.2
$
13,730.7
$
(187.0)
$
(17.2)
$
16,037.8
Net earnings
—
—
995.2
—
—
995.2
Stock option exercises
—
111.7
—
—
—
111.7
Treasury stock sold
—
11.3
—
—
0.3
11.6
Currency translation adjustments
—
—
—
10.2
—
10.2
Stock-based compensation
—
101.9
—
—
—
101.9
Restricted stock activity
—
(11.3)
—
—
—
(11.3)
Dividends declared ($2.0475 per share)
—
—
(218.4)
—
—
(218.4)
Balances at September 30, 2023
$
1.1
$
2,723.8
$
14,507.5
$
(176.8)
$
(16.9)
$
17,038.7
See accompanying notes to Condensed Consolidated Financial Statements.
8
Roper Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
(Dollar and share amounts are in millions, except per share data)
1. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2024 and 2023 are unaudited. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations, comprehensive income, and cash flows of Roper Technologies, Inc. and its subsidiaries (“Roper,” the “Company,” “we,” “our,” or “us”) for all periods presented. The December 31, 2023 financial position data included herein was derived from the audited consolidated financial statements included in the Company’s 2023 Annual Report on Form 10-K (“Annual Report”) filed on February 22, 2024 with the U.S. Securities and Exchange Commission (“SEC”) but does not include all annual disclosures required by U.S. generally accepted accounting principles (“GAAP”).
Roper’s management has made estimates and assumptions related to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Condensed Consolidated Financial Statements in conformity with GAAP. Actual results could differ from those estimates.
The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the full year. You should read these unaudited Condensed Consolidated Financial Statements in conjunction with Roper’s audited Consolidated Financial Statements and the notes thereto included in its Annual Report. Certain prior period amounts have been reclassified to conform to current period presentation.
In 2022, Roper completed the divestiture of a majority equity stake in its industrial businesses (“Indicor”). The financial results related to Indicor are reported as discontinued operations for all periods presented.
Following the sale of the majority stake, Roper retained a minority equity interest in Indicor. See Note 10 for additional information on this minority equity interest.
Unless otherwise noted, discussion within these Notes to Condensed Consolidated Financial Statements relates to continuing operations.
2. Recent Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any recent ASUs not listed below were assessed and either determined to be not applicable or are expected to have an immaterial impact on the Company’s Consolidated Financial Statements.
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The impact of adopting ASU 2023-07 will include the disclosure of incremental expense information by reportable segment as well as the Company’s chief operating decision maker (CODM).
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which expands income tax disclosure requirements, including disaggregation of rate reconciliation table categories, disaggregation of earnings before income taxes and income tax expense information, and disaggregation of income taxes paid information, among other changes. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its Consolidated Financial Statements and related disclosures.
9
3. Weighted Average Shares Outstanding
Basic earnings per share was calculated using net earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share was calculated using net earnings and the weighted average number of shares of common stock and potential common stock outstanding during the respective period. Potentially dilutive common stock consisted of stock options and restricted stock awards based upon the average trading price of Roper’s common stock. The effects of potential common stock were determined using the treasury stock method.
Weighted average shares outstanding are presented below:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Basic shares outstanding
107.2
106.7
107.1
106.5
Effect of potential common stock:
Common stock awards
0.9
0.9
0.9
0.8
Diluted shares outstanding
108.1
107.6
108.0
107.3
For the three and nine months ended September 30, 2024, there were 0.408 and 0.412 stock-based awards outstanding that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 0.707 and 0.734 stock-based awards outstanding that would have been antidilutive in the respective 2023 periods.
4. Business Acquisitions
On February 26, 2024, Roper acquired Genesis Ultimate Holding Co., the parent company of Procare Software, LLC (“Procare”), a leading provider of cloud-based software and integrated payment processing for the management of early childhood education centers, for a purchase price of $1,860, net of cash acquired and certain liabilities assumed. Additionally, the purchase price contemplated a net present value tax benefit of approximately $110 which is expected to be utilized over the next 13 years. The results of Procare are reported in the Application Software reportable segment.
On August 20, 2024, Roper acquired RCP Vega Holdings, LLC, the parent company of Transact Campus Inc. (“Transact”), a leading provider of innovative campus technology and integrated payment solutions, including campus identity software and secure access, tuition and fees management software and payment processing, as well as point-of-sale campus commerce solutions. Roper’s acquisition of Transact was for a purchase price of $1,607, net of cash acquired and certain liabilities assumed. Additionally, the purchase price contemplated a net present value tax benefit of approximately $100 which is expected to be utilized over the next 14 years. This acquisition is being integrated with our CBORD business and its results are reported in the Application Software reportable segment.
The Company recorded $2,158.5 in goodwill, $80.0 assigned to trade names that are not subject to amortization, and $1,467.0 of other identifiable intangibles in connection with 2024 acquisitions. The amortizable intangible assets include customer relationships of $1,364.0 (19 year weighted average useful life) and technology of $103.0 (5.5 year weighted average useful life).
The results of operations of the acquired businesses are included in Roper’s Condensed Consolidated Financial Statements from the date of each acquisition. Pro forma results of operations and the revenues and net earnings subsequent to each acquisition date have not been presented because the effects of the acquisitions, individually and in the aggregate, were not material to our financial results.
10
5. Stock-Based Compensation
The Roper Technologies, Inc. 2021 Incentive Plan is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock and restricted stock units (collectively “restricted stock awards”), stock appreciation rights, or equivalent instruments to Roper’s employees, officers, directors, and consultants.
The following table provides information regarding the Company’s stock-based compensation expense:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Stock-based compensation
$
39.6
$
35.7
$
112.9
$
99.2
Tax benefit recognized in net earnings
$
6.7
$
6.0
$
19.3
$
16.7
The Company accounts for forfeitures of stock-based awards as they occur, with previously recognized compensation reversed in the period in which the awards are forfeited.
Stock Options – During the nine months ended September 30, 2024, 0.283 options were granted with a weighted-average fair value of $173.30 per option. During the same nine-month period in 2023, 0.373 options were granted with a weighted-average fair value of $129.69 per option. All options were issued with an exercise price equal to the closing price of Roper’s common stock on the date of grant, as required by the Company’s stock-based compensation plan.
Roper records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option pricing model. Historical data is used to estimate the expected price volatility, the expected dividend yield, and the expected option life. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option.
The following weighted average assumptions were used to estimate the fair value of options granted during the current and prior year periods using the Black-Scholes option pricing model:
Nine months ended September 30,
2024
2023
Risk-free interest rate (%)
4.15
3.74
Expected option life (years)
5.73
5.63
Expected volatility (%)
25.55
26.05
Expected dividend yield (%)
0.51
0.63
Cash received from option exercises for the nine months ended September 30, 2024 and 2023 was $104.0 and $110.6, respectively.
Restricted Stock Awards – During the nine months ended September 30, 2024, the Company granted 0.396 shares of restricted stock awards with a weighted-average grant date fair value of $554.52 per share. During the same nine-month period in 2023, the Company granted 0.273 shares of restricted stock awards with a weighted-average grant date fair value of $437.36 per share. These awards were granted at the fair market value of the share on the date of grant.
During 2024, the Company revised its equity compensation strategy to more closely align long-term management incentives with its strategic objective to deliver and sustain higher levels of organic growth. Accordingly, the total number of restricted stock awards granted during the nine months ended September 30, 2024 increased as compared to the nine months ended September 30, 2023 due primarily to the adoption of a supplemental equity compensation program for the Company’s business unit leadership teams under which 0.136 incremental three-year performance-based restricted stock awards were granted.
11
In connection with the revised compensation strategy noted above, certain members of the Roper senior leadership team were granted 0.072 performance-based restricted stock awards during the nine months ended September 30, 2024, that include the ability to earn up to 200% of the number of restricted stock awards originally granted contingent upon Roper’s performance over a three-year period, subject to a market modifier based on relative total shareholder return. Comparably, during the nine months ended September 30, 2023, 0.074 performance-based restricted stock awards were granted to certain members of Roper’s senior leadership team which did not contain a market modifier and do not have the ability to vest beyond 100% of the original shares granted.
Due to the extent of performance required by the vesting conditions noted above, these awards are not expected to materially increase stock-based compensation expense relative to the Company’s financial performance.
During the nine months ended September 30, 2024, 0.122 restricted stock award shares vested with a weighted-average grant date fair value of $433.13 per share and a weighted-average vest date fair value of $555.61 per share.
Employee Stock Purchase Plan – Roper’s employee stock purchase plan (“ESPP”) allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 10% discount on the lower of the closing price of the stock on the first and last day of each quarterly offering period. Common stock sold to employees pursuant to the ESPP may be either treasury stock, stock purchased on the open market, or newly issued shares.
During both the nine months ended September 30, 2024 and 2023, participants in the ESPP purchased 0.029 shares of Roper’s common stock for total consideration of $14.5 and $11.6, respectively. All of these shares were purchased from Roper’s treasury shares.
Roper’s ESPP was amended effective July 1, 2024, under which the six-month minimum employment requirement was removed from the eligibility requirements for employee participation in the ESPP.
6. Inventories
The components of inventories were as follows:
September 30, 2024
December 31, 2023
Raw materials and supplies
$
65.2
$
57.6
Work in process
32.5
28.7
Finished products
42.2
41.8
Inventory reserves
(10.9)
(9.5)
Inventories, net
$
129.0
$
118.6
7. Goodwill and Other Intangible Assets
The carrying value of goodwill by segment was as follows:
Application Software
Network Software
Technology Enabled Products
Total
Balances at December 31, 2023
$
12,563.4
$
3,624.6
$
930.8
$
17,118.8
Goodwill acquired
2,158.5
—
—
2,158.5
Other
(30.1)
—
—
(30.1)
Currency translation adjustments
11.9
8.4
(0.3)
20.0
Balances at September 30, 2024
$
14,703.7
$
3,633.0
$
930.5
$
19,267.2
Other relates to purchase accounting adjustments for acquisitions and is composed primarily of measurement period adjustments of $19.5 and $11.3 to decrease goodwill and deferred tax liabilities in connection with the Procare and Syntellis opening balance sheets, respectively.
12
Other intangible assets were comprised of:
Cost
Accumulated amortization
Net book value
Assets subject to amortization:
Customer related intangibles
$
10,061.7
$
(3,000.5)
$
7,061.2
Unpatented technology
1,047.0
(638.8)
408.2
Software
149.2
(143.4)
5.8
Patents and other protective rights
10.3
(1.4)
8.9
Assets not subject to amortization:
Trade names
728.0
—
728.0
Balances at December 31, 2023
$
11,996.2
$
(3,784.1)
$
8,212.1
Assets subject to amortization:
Customer related intangibles
$
11,277.5
$
(3,304.4)
$
7,973.1
Unpatented technology
853.5
(430.5)
423.0
Patents and other protective rights
9.2
(1.8)
7.4
Assets not subject to amortization:
Trade names
809.2
—
809.2
Balances at September 30, 2024
$
12,949.4
$
(3,736.7)
$
9,212.7
Amortization expense of other intangible assets was $188.7 and $176.7 during the three months ended September 30, 2024 and 2023, respectively, and $552.0 and $517.6 during the nine months ended September 30, 2024 and 2023, respectively.
An evaluation of the carrying value of goodwill and other indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2024. The Company will perform the annual analysis during the fourth quarter of 2024.
8. Long-Term Debt
On August 21, 2024, the Company completed a public offering of $500.0 aggregate principal amount of 4.500% senior unsecured notes due October 15, 2029 (the “2029 Notes”), $500.0 aggregate principal amount of 4.750% senior unsecured notes due February 15, 2032 (the “2032 Notes”), and $1,000.0 aggregate principal amount of 4.900% senior unsecured notes due October 15, 2034 (the “2034 Notes” and, collectively with the 2029 Notes and the 2032 Notes, the “Notes”). The net proceeds from the issuance of the Notes were used to repay a portion of the borrowings outstanding under our unsecured credit facility, including borrowings incurred on August 20, 2024 to fund the purchase price of the Transact acquisition, as well as to repay a portion of the senior notes due September 15, 2024.
Each series of Notes bears interest at a fixed rate, as described above. Interest on the 2029 Notes and the 2034 Notes will be payable semi-annually in arrears on April 15 and October 15 of each year, beginning April 15, 2025. Interest on the 2032 Notes will be payable semi-annually in arrears on February 15 and August 15 of each year, beginning February 15, 2025.
Roper may redeem some or all of the Notes at any time or from time to time, at 100% of their principal amount, plus a make-whole premium based on a spread to U.S. Treasury securities. Roper is also entitled to redeem some or all of the Notes at 100% of their principal amount plus accrued and unpaid interest, on or after applicable par call dates in advance of maturity.
The Notes are unsecured senior obligations of the Company and rank equally in right of payment with all of our existing and future unsecured senior indebtedness. The Notes are effectively subordinated in right of payment to any of our future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The Notes are not, and will not be, guaranteed by any of our subsidiaries and are effectively subordinated in right of payment to all existing and future indebtedness and other liabilities of our subsidiaries.
On September 15, 2024, $500.0 of 2.350% senior notes due 2024 were repaid at maturity using borrowings under our unsecured credit facility as well as a portion of the net proceeds from the issuance of the Notes.
13
9. Fair Value
Financial assets and liabilities are valued using market prices on active markets (Level 1), less active markets (Level 2), and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
Roper’s debt at September 30, 2024 included $7,500 of fixed-rate senior notes with the following fair values:
Fixed-rate senior notes
Fair value
Principal amount
Interest rate
Year of maturity
As of September 30, 2024
$
300
3.850%
2025
$
299
$
700
1.000%
2025
$
678
$
700
3.800%
2026
$
696
$
700
1.400%
2027
$
648
$
800
4.200%
2028
$
800
$
500
4.500%
2029
$
504
$
700
2.950%
2029
$
658
$
600
2.000%
2030
$
528
$
1,000
1.750%
2031
$
846
$
500
4.750%
2032
$
502
$
1,000
4.900%
2034
$
1,008
The fair values of the senior notes are based on the trading prices of each series of notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.
At September 30, 2024 and December 31, 2023, there were $925.0 and $360.0 of borrowings outstanding under our unsecured credit facility, respectively. The carrying value of these borrowings approximates their estimated fair value.
10. Equity Investments
Indicor Investment – As of September 30, 2024 and December 31, 2023, the Company held a 46.0% and 47.3% equity interest in Indicor Equity, LLC, respectively. We elected to apply the fair value option as we believe this is the most reasonable method to value this equity investment. The fair value of Roper’s equity investment in Indicor is estimated on a quarterly basis and the change in fair value is reported as a component of “Equity investments gain, net” in our Condensed Consolidated Statements of Earnings.
Although we believe our assumptions are considered reasonable and are consistent with the plans and estimates included in our Annual Report, there is significant judgment applied to determine fair value. Changes in estimates or the application of alternative assumptions could produce significantly different results. Our valuation methodology utilizes the market multiple approach consisting of comparable guideline public companies revenue and earnings multiples to estimate the fair value of this equity investment. The fair value of the investment reflects management’s estimate of assumptions that market participants would use in pricing the equity interest, which the Company has determined to be Level 3 in the FASB fair value hierarchy.
14
The following table provides a reconciliation of the fair value for our equity investment in Indicor measured using Level 3 inputs:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Beginning balance
$
731.0
$
591.3
$
675.9
$
535.0
Change in fair value
37.6
20.1
92.7
76.4
Ending balance
$
768.6
$
611.4
$
768.6
$
611.4
The Company received dividend distributions from Indicor of $1.1 and $13.2 during the three months ended September 30, 2024 and 2023, respectively, and $9.5 and $25.3 during the nine months ended September 30, 2024 and 2023, respectively, which are reported within “Equity investments gain, net” in our Condensed Consolidated Statements of Earnings. These dividend distributions were intended to offset certain cash taxes payable associated with Roper’s ownership stake and were contemplated in the determination of the fair value for the equity investment in Indicor.
Certinia Investment – In August 2023, Roper acquired an 18.2% limited partnership minority interest in CI Ultimate Holdings, L.P., the parent entity of Certinia Inc., a leading provider of professional services automation software, for $125.0. This equity investment is accounted for under the equity method of accounting whereby our proportionate share of earnings or loss associated with the investment is reported as a component of “Equity investments gain, net” in our Condensed Consolidated Statements of Earnings with a corresponding change in the balance of our equity investment. Our proportionate share of loss associated with our investment in Certinia was $1.8 and $9.8 for the three and nine months ended September 30, 2024, respectively. The balance of our equity investment in Certinia, reported as a component of “Equity investments” in our Condensed Consolidated Balance Sheets, was $110.0 and $119.8 as of September 30, 2024 and December 31, 2023, respectively.
11. Contingencies
Roper, in the ordinary course of business, is party to various pending or threatened legal actions, including product liability, intellectual property, antitrust, data privacy, and employment practices that, in general, are of a nature consistent with those over the past several years. After analyzing the Company’s contingent liabilities on a gross basis and, based upon past experience with resolution of such legal claims and the availability and limits of the primary, excess, and umbrella liability insurance coverages with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on Roper’s consolidated financial position, results of operations, or cash flows. However, no assurances can be given in this regard.
Roper’s subsidiary, PowerPlan, Inc. (“PowerPlan”), is a defendant in an action pending in the U.S. District Court for the Northern District of Georgia (Lucasys Inc. v. PowerPlan, Inc., Case 1:20-cv-02987-AT) in which the plaintiff, a firm started by former PowerPlan employees, alleges PowerPlan has engaged in anticompetitive practices in violation of federal antitrust law. The plaintiff further alleges that PowerPlan violated Georgia’s deceptive trade practices act and undertook other tortious activities which impacted the plaintiff’s ability to commercialize its software and services offerings. The plaintiff claims damages of approximately $66, and seeks treble damages in addition to punitive damages, attorney fees, and pre-judgment interest. PowerPlan strongly denies the allegations in the dispute, and has asserted several affirmative defenses. PowerPlan and the plaintiff have each moved for summary judgment, and oral argument on the motions was held on May 7, 2024. A decision from the District Court on the motions is pending.
15
12. Business Segments
The following table presents selected financial information by reportable segment:
Three months ended September 30,
Nine months ended September 30,
2024
2023
Change %
2024
2023
Change %
Net revenues:
Application Software
$
984.4
$
803.4
22.5
%
$
2,811.4
$
2,335.1
20.4
%
Network Software
367.1
364.1
0.8
%
1,102.1
1,076.7
2.4
%
Technology Enabled Products
413.1
395.9
4.3
%
1,248.6
1,152.5
8.3
%
Total
$
1,764.6
$
1,563.4
12.9
%
$
5,162.1
$
4,564.3
13.1
%
Gross profit:
Application Software
$
672.8
$
557.7
20.6
%
$
1,939.6
$
1,609.2
20.5
%
Network Software
311.8
310.7
0.4
%
935.9
914.0
2.4
%
Technology Enabled Products
237.1
227.9
4.0
%
720.5
658.8
9.4
%
Total
$
1,221.7
$
1,096.3
11.4
%
$
3,596.0
$
3,182.0
13.0
%
Operating profit*:
Application Software
$
259.8
$
206.9
25.6
%
$
750.5
$
601.3
24.8
%
Network Software
166.0
164.4
1.0
%
492.1
465.0
5.8
%
Technology Enabled Products
141.1
137.1
2.9
%
424.0
391.7
8.2
%
Total
$
566.9
$
508.4
11.5
%
$
1,666.6
$
1,458.0
14.3
%
Long-lived assets:
Application Software
$
197.0
$
176.0
11.9
%
Network Software
23.2
26.7
(13.1)
%
Technology Enabled Products
33.6
30.7
9.4
%
Total
$
253.8
$
233.4
8.7
%
*Segment operating profit is before unallocated corporate general and administrative expenses and enterprise-wide stock-based compensation. These expenses were $70.3 and $62.3 for the three months ended September 30, 2024 and 2023, respectively, and $194.5 and $175.6 for the nine months ended September 30, 2024 and 2023, respectively.
16
13. Revenues from Contracts
Disaggregated Revenue –We disaggregate our revenues by reportable segment into four categories: (i) recurring revenue comprised of Software-as-a-Service (“SaaS”), annual term licenses, and software maintenance; (ii) reoccurring revenue comprised of transactional and volume-based fees related to software licenses; (iii) non-recurring revenue comprised of multi-year term and perpetual software licenses, professional services associated with software products and hardware sold with our software licenses; and (iv) product revenue. See details in the table below:
Three months ended September 30, 2024
Three months ended September 30, 2023
Revenue stream
Application Software
Network Software
Technology Enabled Products
Total
Application Software
Network Software
Technology Enabled Products
Total
Software related
Recurring
$
732.7
$
266.5
$
6.7
$
1,005.9
$
630.9
$
262.8
$
4.3
$
898.0
Reoccurring
100.3
66.2
—
166.5
33.4
66.0
—
99.4
Non-recurring
151.4
34.4
—
185.8
139.1
35.3
0.3
174.7
Total Software Revenue
984.4
367.1
6.7
1,358.2
803.4
364.1
4.6
1,172.1
Product Revenue
—
—
406.4
406.4
—
—
391.3
391.3
Total Revenue
$
984.4
$
367.1
$
413.1
$
1,764.6
$
803.4
$
364.1
$
395.9
$
1,563.4
Nine months ended September 30, 2024
Nine months ended September 30, 2023
Revenue stream
Application Software
Network Software
Technology Enabled Products
Total
Application Software
Network Software
Technology Enabled Products
Total
Software related
Recurring
$
2,126.5
$
797.4
$
18.5
$
2,942.4
$
1,798.7
$
777.0
$
12.3
$
2,588.0
Reoccurring
234.4
201.4
—
435.8
103.1
195.9
—
299.0
Non-recurring
450.5
103.3
—
553.8
433.3
103.8
1.1
538.2
Total Software Revenue
2,811.4
1,102.1
18.5
3,932.0
2,335.1
1,076.7
13.4
3,425.2
Product Revenue
—
—
1,230.1
1,230.1
—
—
1,139.1
1,139.1
Total Revenue
$
2,811.4
$
1,102.1
$
1,248.6
$
5,162.1
$
2,335.1
$
1,076.7
$
1,152.5
$
4,564.3
Remaining performance obligations –Remaining performance obligations represent the transaction price of firm orders for which work has not been performed, excluding unexercised contract options. As of September 30, 2024, total remaining performance obligations were $4,506.9. We expect to recognize revenues of $3,026.1, or approximately 67% of our remaining performance obligations over the next 12 months (“Backlog”), with the remainder of the revenue to be recognized thereafter.
Contract balances
Balance sheet account
September 30, 2024
December 31, 2023
Change
Unbilled receivables
$
130.3
$
106.4
$
23.9
Deferred revenue – current
(1,671.0)
(1,583.8)
(87.2)
Deferred revenue – non-current (1)
(143.5)
(130.7)
(12.8)
Net contract assets/(liabilities)
$
(1,684.2)
$
(1,608.1)
$
(76.1)
(1) The non-current portion of deferred revenue is included in “Other liabilities” in our Condensed Consolidated Balance Sheets.
The change in our net contract assets/(liabilities) from December 31, 2023 to September 30, 2024 was primarily due to net contract liabilities assumed of approximately $63 associated with the acquisitions completed during 2024, most notably Transact, and the timing of payments and invoicing related to SaaS and post-contract support (“PCS”) renewals, driven predominantly by the SaaS renewal cycle of our Frontline business which primarily occurs in the third quarter.
17
The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance relating primarily to SaaS and PCS renewals. Revenue recognized from the deferred revenue balance on December 31, 2023 and 2022 was $253.7 and $206.1 for the three months ended September 30, 2024 and 2023, respectively, and $1,411.8 and $1,192.7 for the nine months ended September 30, 2024 and 2023, respectively. In order to determine revenues recognized in the period from contract liabilities, we allocate revenue to the individual deferred revenue balance outstanding at the beginning of the year until the revenue exceeds that balance.
The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Condensed Consolidated Balance Sheets. At September 30, 2024 and December 31, 2023, we had $78.0 and $71.7 of total deferred commissions, respectively.
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”) as filed on February 22, 2024 with the U.S. Securities and Exchange Commission (“SEC”) and the Notes to Condensed Consolidated Financial Statements included elsewhere in this report.
Information About Forward-Looking Statements
This report includes “forward-looking statements” within the meaning of the federal securities laws. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the SEC or in connection with oral statements made to the press, potential investors, or others. All statements that are not historical facts are “forward-looking statements.” 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 expressed or implied in any forward-looking statement.
Examples of forward-looking statements in this report include but are not limited to statements regarding operating results, the success of our operating plans, our expectations regarding our ability to generate cash and reduce debt and associated interest expense, profit and cash flow expectations, the prospects for newly acquired businesses to be integrated and contribute to future growth, and our expectations regarding growth through acquisitions. Important assumptions relating to the forward-looking statements include, among others, demand for our products, the cost, timing, and success of product upgrades and new product introductions, raw materials costs, expected pricing levels, expected outcomes of pending litigation, competitive conditions, and general economic conditions. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:
•general economic conditions;
•difficulty making acquisitions and successfully integrating acquired businesses;
•any unforeseen liabilities associated with future acquisitions;
•information technology system failures, data security breaches, network disruptions, and cybersecurity events, including any litigation arising therefrom;
•failure to comply with new data privacy laws and regulations, including any litigation arising therefrom;
•risks and costs associated with our international sales and operations;
•rising interest rates;
•limitations on our business imposed by our indebtedness;
•product liability, litigation, and insurance risks;
•future competition;
•reduction of business with large customers;
•risks associated with government contracts;
•changes in the supply of, or price for, labor, energy, raw materials, parts, and components, including as a result of impacts from the current inflationary environment, or supply chain constraints;
•potential write-offs of our goodwill and other intangible assets;
•our ability to successfully develop new products;
•failure to protect our intellectual property;
•unfavorable changes in foreign exchange rates;
•difficulties associated with exports/imports and risks of changes to tariff rates;
•increased warranty exposure;
•environmental compliance costs and liabilities;
•the effect of, or change in, government regulations (including tax);
•risks associated with the use of artificial intelligence;
•economic disruption caused by armed conflicts (such as the war in Ukraine and the conflict in the Middle East), terrorist attacks, health crises (such as the COVID-19 pandemic), or other unforeseen geopolitical events; and
•the factors discussed in other reports we file with the SEC from time to time.
19
You should not place undue reliance on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to publicly update any of these statements in light of new information or future events.
Overview
Roper is a diversified technology company. Roper has a proven, long-term, successful track record of compounding cash flow and shareholder value. We operate market leading businesses that design and develop vertical software and technology enabled products for a variety of defensible niche markets.
We pursue consistent and sustainable growth in revenue, earnings, and cash flow by enabling continuous improvement in the operating performance of our businesses and by acquiring other businesses that offer high value-added software, services, technology-enabled products, and solutions that we believe are capable of achieving growth and maintaining high margins.
In 2022, Roper completed the divestiture of a majority equity stake in its industrial businesses (“Indicor”). The financial results related to Indicor are reported as discontinued operations for all periods presented.
Refer to Note 10 of the Notes to Condensed Consolidated Financial Statements for information regarding Roper’s minority equity interest in Indicor.
Unless otherwise noted, discussion within Management’s Discussion and Analysis of Financial Condition and Results of Operations relates to continuing operations.
Critical Accounting Policies
There were no material changes during the nine months ended September 30, 2024 to the items that we disclosed as our critical accounting policies and estimates in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.
Recently Issued Accounting Standards
Information regarding new accounting pronouncements is included in Note 2 of the Notes to Condensed Consolidated Financial Statements.
20
Results of Continuing Operations
All currency amounts are in millions, percentages are of net revenues
Percentages may not sum due to rounding.
The following table sets forth selected information for the periods indicated:
Three months ended September 30,
Nine months ended September 30,
2024
2023
2024
2023
Net revenues:
Application Software
$
984.4
$
803.4
$
2,811.4
$
2,335.1
Network Software
367.1
364.1
1,102.1
1,076.7
Technology Enabled Products
413.1
395.9
1,248.6
1,152.5
Total
$
1,764.6
$
1,563.4
$
5,162.1
$
4,564.3
Gross margin:
Application Software
68.3
%
69.4
%
69.0
%
68.9
%
Network Software
84.9
%
85.3
%
84.9
%
84.9
%
Technology Enabled Products
57.4
%
57.6
%
57.7
%
57.2
%
Total
69.2
%
70.1
%
69.7
%
69.7
%
Selling, general and administrative expenses:
Application Software
(42.0)
%
(43.7)
%
(42.3)
%
(43.2)
%
Network Software
(39.7)
%
(40.2)
%
(40.3)
%
(41.7)
%
Technology Enabled Products
(23.2)
%
(22.9)
%
(23.7)
%
(23.2)
%
Total
(37.1)
%
(37.6)
%
(37.4)
%
(37.8)
%
Segment operating margin:
Application Software
26.4
%
25.8
%
26.7
%
25.8
%
Network Software
45.2
%
45.2
%
44.7
%
43.2
%
Technology Enabled Products
34.2
%
34.6
%
34.0
%
34.0
%
Total
32.1
%
32.5
%
32.3
%
31.9
%
Corporate administrative expenses*
(4.0)
%
(4.0)
%
(3.8)
%
(3.8)
%
Income from operations
28.1
28.5
28.5
28.1
Interest expense, net
(3.8)
(2.7)
(3.6)
(2.5)
Equity investments gain, net
2.1
2.2
1.8
2.2
Other income (expense), net
0.1
0.3
—
—
Earnings before income taxes
26.5
28.3
26.7
27.7
Income taxes
(5.6)
(6.2)
(5.6)
(6.0)
Net earnings from continuing operations
20.8
%
22.1
%
21.1
%
21.7
%
*Includes unallocated corporate general and administrative expenses and enterprise-wide stock-based compensation.
21
Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023
Net revenues for the three months ended September 30, 2024 were $1,764.6 as compared to $1,563.4 for the three months ended September 30, 2023, an increase of 12.9%. The components of revenue growth for the three months ended September 30, 2024 were as follows:
Application Software
Network Software
Technology Enabled Products
Roper
Total Revenue Growth
22.5
%
0.8
%
4.3
%
12.9
%
Less Impact of:
Acquisitions
16.9
—
—
8.7
Foreign Exchange
0.1
—
(0.1)
0.1
Organic Revenue Growth
5.5
%
0.8
%
4.4
%
4.1
%
In our Application Software segment, net revenues in the third quarter of 2024 were $984.4 as compared to $803.4 in the third quarter of 2023. The growth of 5.5% in organic revenues was broad-based across the segment led by our businesses serving the acute healthcare, legal, and government contracting markets. Gross margin decreased to 68.3% in the third quarter of 2024 as compared to 69.4% in the third quarter of 2023 due primarily to a lower gross margin profile associated with the higher payments revenue mix at Procare and Transact, our 2024 acquisitions, partially offset by operating leverage on higher organic revenues. Selling, general and administrative (“SG&A”) expenses as a percentage of net revenues decreased to 42.0% in the third quarter of 2024 as compared to 43.7% in the third quarter of 2023, due primarily to cost synergies resulting from the integration of Syntellis, and a lower SG&A profile associated with the higher payments revenue mix at Transact and Procare. The resulting operating margin was 26.4% in the third quarter of 2024 as compared to 25.8% in the third quarter of 2023.
In our Network Software segment, net revenues in the third quarter of 2024 were $367.1 as compared to $364.1 in the third quarter of 2023. The growth of 0.8% in organic revenues was led by our network software businesses serving the construction and alternate site healthcare markets, partially offset by a decline in our businesses serving the freight match and media and entertainment markets. Gross margin decreased to 84.9% in the third quarter of 2024 as compared to 85.3% in the third quarter of 2023 due primarily to revenue mix. SG&A expenses as a percentage of net revenues decreased to 39.7% in the third quarter of 2024 as compared to 40.2% in the third quarter of 2023 due primarily to expense reductions resulting from cost structure rationalization at our businesses serving the freight match market and operating leverage on higher organic revenues. As a result, operating margin was 45.2% in both the third quarter of 2024 and 2023.
In our Technology Enabled Products segment, net revenues in the third quarter of 2024 were $413.1 as compared to $395.9 in the third quarter of 2023. The growth of 4.4% in organic revenues was led by our medical products businesses, excluding our precision measurement business, and growth in our water meter technology business. These increases were partially offset by declines in our access management businesses, primarily attributable to the easing of supply chain issues in the third quarter of 2023, and our precision measurement business due to customer program timing. Gross margin decreased to 57.4% in the third quarter of 2024 as compared to 57.6% in the third quarter of 2023 due primarily to revenue mix and reduced operating leverage associated with our precision measurement business’s reduced third quarter 2024 revenues. SG&A expenses as a percentage of net revenues increased to 23.2% in the third quarter of 2024 as compared to 22.9% in the third quarter of 2023 due primarily to revenue mix. The resulting operating margin was 34.2% in the third quarter of 2024 as compared to 34.6% in the third quarter of 2023.
Corporate expenses increased to $70.3, or 4.0% of net revenues, in the third quarter of 2024 as compared to $62.3, or 4.0% of net revenues, in the third quarter of 2023. The dollar increase was due primarily to higher stock-based compensation expense.
Interest expense, net, increased to $67.7 for the third quarter of 2024 as compared to $42.4 for the third quarter of 2023 due to higher weighted average debt balances and less interest income earned on our cash and cash equivalents.
Equity investments gain, net, was $37.4 in the third quarter of 2024 due primarily to a $37.6 increase in the fair value of our equity investment in Indicor. Equity investments gain, net, was $33.9 in the third quarter of 2023 due primarily to a $20.1 increase in the fair value of our equity investment in Indicor and $13.2 of dividend distributions received from Indicor.
22
Other income, net, of $0.9 for the third quarter of 2024 was composed primarily of foreign exchange gains at our non-U.S. based subsidiaries. Other income, net, of $5.0 for the third quarter of 2023 was composed primarily of a gain on the sale of non-operating assets and foreign exchange gains at our non-U.S. based subsidiaries.
Income taxes as a percentage of pretax earnings decreased to 21.3% for the third quarter of 2024 as compared to 21.9% for the third quarter of 2023. The 2024 rate was favorably impacted by the recognition of a net tax benefit associated with international legal entity restructuring.
Backlog is equal to our remaining performance obligations expected to be recognized as revenue within the next 12 months as discussed in Note 13 of the Notes to Condensed Consolidated Financial Statements. Backlog increased 3.9% to $3,026.1 at September 30, 2024 as compared to $2,913.7 at September 30, 2023 due primarily to organic growth and acquisitions in our Application Software segment, partially offset by a decrease in our Technology Enabled Products segment.
Backlog as of September 30,
2024
2023
Application Software
$
2,150.3
$
1,887.3
Network Software
487.0
467.1
Technology Enabled Products
388.8
559.3
Total
$
3,026.1
$
2,913.7
Nine Months Ended September 30, 2024 compared to the Nine Months Ended September 30, 2023
Net revenues for the nine months ended September 30, 2024 were $5,162.1 as compared to $4,564.3 for the nine months ended September 30, 2023, an increase of 13.1%. The components of revenue growth for the nine months ended September 30, 2024 were as follows:
Application Software
Network Software
Technology Enabled Products
Roper
Total Revenue Growth
20.4
%
2.4
%
8.3
%
13.1
%
Less Impact of:
Acquisitions
15.0
—
—
7.6
Foreign Exchange
0.1
0.1
(0.1)
0.1
Organic Revenue Growth
5.3
%
2.3
%
8.4
%
5.4
%
In our Application Software segment, net revenues in the nine months ended September 30, 2024 were $2,811.4 as compared to $2,335.1 in the nine months ended September 30, 2023. The growth of 5.3% in organic revenues was broad-based across the segment led by our businesses serving the acute healthcare, legal, property and casualty insurance, and project-based private sector markets. Gross margin increased slightly to 69.0% in the nine months ended September 30, 2024 as compared to 68.9% in the nine months ended September 30, 2023 due primarily to operating leverage on higher organic revenues, mostly offset by a lower gross margin profile associated with the higher payments revenue mix at our Procare and Transact acquisitions. SG&A expenses as a percentage of net revenues decreased to 42.3% in the nine months ended September 30, 2024 as compared to 43.2% in the nine months ended September 30, 2023, due primarily to a lower SG&A profile associated with the higher payments revenue mix at Procare and Transact, operating leverage on higher organic revenues, and cost synergies resulting from the integration of Syntellis. The resulting operating margin was 26.7% in the nine months ended September 30, 2024 as compared to 25.8% in the nine months ended September 30, 2023.
In our Network Software segment, net revenues in the nine months ended September 30, 2024 were $1,102.1 as compared to $1,076.7 in the nine months ended September 30, 2023. The growth of 2.3% in organic revenues was led by our network software businesses serving the alternate site healthcare, life insurance/annuities, and construction markets, partially offset by a decline in our businesses serving the freight match and media and entertainment markets. Gross margin remained consistent at 84.9% in both the nine months ended September 30, 2024 and 2023. SG&A expenses as a percentage of net revenues decreased to 40.3% in the nine months ended September 30, 2024 as compared to 41.7% in the nine months ended September 30, 2023 due primarily to expense reductions resulting from cost structure rationalization at our businesses serving the freight match market and operating leverage on higher organic revenues. As a result, operating margin was 44.7% in the nine months ended September 30, 2024 as compared to 43.2% in the nine months ended September 30, 2023.
23
In our Technology Enabled Products segment, net revenues in the nine months ended September 30, 2024 were $1,248.6 as compared to $1,152.5 in the nine months ended September 30, 2023. The growth of 8.4% in organic revenues was led by our medical products businesses, excluding our precision measurement business, and growth in our water meter technology business. These increases were partially offset by a decline in our access management businesses. Gross margin increased to 57.7% in the nine months ended September 30, 2024 as compared to 57.2% in the nine months ended September 30, 2023 due primarily to operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues increased to 23.7% in the nine months ended September 30, 2024 as compared to 23.2% in the nine months ended September 30, 2023 due primarily to revenue mix. The resulting operating margin was 34.0% in both the nine months ended September 30, 2024 and 2023.
Corporate expenses increased to $194.5, or 3.8% of net revenues, in the nine months ended September 30, 2024 as compared to $175.6, or 3.8% of net revenues, in the nine months ended September 30, 2023. The dollar increase was due primarily to higher stock-based compensation expense.
Interest expense, net, increased to $188.4 for the nine months ended September 30, 2024 as compared to $114.6 for the nine months ended September 30, 2023 due to higher borrowings on our unsecured credit facility and less interest income earned on our cash and cash equivalents, partially offset by lower weighted average fixed-rate debt balances.
Equity investments gain, net, was $93.6 in the nine months ended September 30, 2024 due primarily to a $92.7 increase in the fair value of our equity investment in Indicor and $9.5 of dividend distributions received from Indicor, partially offset by our proportionate share of net loss associated with our investment in Certinia of $9.8 in accordance with the equity method of accounting. Equity investments gain, net, was $98.7 in the nine months ended September 30, 2023 due primarily to a $76.4 increase in the fair value of our equity investment in Indicor and $25.3 of dividend distributions received from Indicor.
Income taxes as a percentage of pretax earnings decreased to 21.0% for the nine months ended September 30, 2024 as compared to 21.8% for the nine months ended September 30, 2023. The 2024 rate was favorably impacted by the recognition of a net tax benefit associated with international legal entity restructuring.
Financial Condition, Liquidity, and Capital Resources
All currency amounts are in millions
Selected cash flows for the nine months ended September 30, 2024 and 2023 were as follows:
Nine months ended September 30,
Cash provided by (used in) continuing operations from:
2024
2023
Operating activities
$
1,671.0
$
1,415.7
Investing activities
$
(3,528.2)
$
(2,010.7)
Financing activities
$
1,901.7
$
103.3
Cash used in discontinued operations
$
—
$
(0.4)
Operating activities – Net cash provided by operating activities from continuing operations increased by 18% to $1,671.0 in the nine months ended September 30, 2024 as compared to $1,415.7 in the nine months ended September 30, 2023 primarily due to higher net earnings from continuing operations net of non-cash expenses, increased collections on accounts receivable, and the cash payment of $45.0 in 2023 related to the settlement of a patent litigation matter, partially offset by higher cash taxes paid.
Investing activities – Cash used in investing activities from continuing operations during the nine months ended September 30, 2024 was primarily for the acquisitions of Procare and Transact. Cash used in investing activities from continuing operations during the nine months ended September 30, 2023 was primarily for business acquisitions, most notably Syntellis and Replicon.
Financing activities – Cash provided by financing activities during the nine months ended September 30, 2024 was primarily from the issuance of $2,000.0 of senior notes and net borrowings under our unsecured credit facility, partially offset by $500.0 of senior notes repaid at maturity and dividend payments. Cash provided by financing activities during the nine months ended September 30, 2023 was primarily from net borrowings under our unsecured credit facility and net proceeds from stock-based compensation, partially offset by $700.0 of senior notes repaid at maturity and dividend payments.
24
Total debt consisted of the following:
As of September 30, 2024
Fixed-rate senior notes
$
7,500.0
Unsecured credit facility
925.0
Other
0.3
Less: Deferred financing costs
(48.7)
Total debt, net of deferred financing costs
8,376.6
Less: Current portion
(699.0)
Long-term debt, net of deferred financing costs
$
7,677.6
The interest rate on borrowings under the $3,500.0 unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At September 30, 2024, we had $925.0 of borrowings outstanding under our unsecured credit facility and $6.8 of outstanding letters of credit.
In relation to our total cash and cash equivalents, amounts held at our foreign subsidiaries represented 51.3% or $138.3 at September 30, 2024 as compared to 69.2% or $148.3 at December 31, 2023. The decrease in foreign cash was due primarily to repatriation of $223.2, partially offset by the cash generated at our foreign subsidiaries during the nine months ended September 30, 2024. We intend to repatriate substantially all historical and future earnings.
We expect existing cash balances, together with cash generated by our operations and amounts available under our credit facility, will be sufficient to fund our operating requirements for the foreseeable future.
We were in compliance with all debt covenants related to our unsecured credit facility throughout the nine months ended September 30, 2024.
Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was negative $1,268.0 at September 30, 2024 as compared to negative $1,196.6 at December 31, 2023 primarily driven by the increase in deferred revenue predominantly due to the timing of SaaS renewals associated with Frontline as well as the acquisition of Transact. Total debt, net of deferred financing costs was $8,376.6 at September 30, 2024 as compared to $6,330.1 at December 31, 2023. Our leverage on a continuing operations basis is presented in the following table:
September 30, 2024
December 31, 2023
Total debt, net of deferred financing costs
$
8,376.6
$
6,330.1
Less: Cash and cash equivalents
(269.6)
(214.3)
Net debt
8,107.0
6,115.8
Stockholders’ equity
18,515.5
17,444.8
Total net capital
$
26,622.5
$
23,560.6
Net debt / Total net capital
30.5
%
26.0
%
Capital expenditures were $39.2 for the nine months ended September 30, 2024 as compared to $37.8 for the nine months ended September 30, 2023. Capitalized software expenditures were $33.4 for the nine months ended September 30, 2024 as compared to $28.7 for the nine months ended September 30, 2023. We expect the aggregate of capital expenditures and capitalized software expenditures for 2024 to be comparable to prior years as a percentage of net revenues.
On September 15, 2024, $500.0 of 2.350% senior notes due 2024 were repaid at maturity using borrowings under our unsecured credit facility as well as a portion of the net proceeds from the issuance of the Notes.
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Outlook
Current geopolitical and economic uncertainties, including the current inflationary environment, supply chain disruptions, and labor shortages, could adversely affect our business prospects. An armed conflict (such as the ongoing war in Ukraine, as well as the conflict in the Middle East), significant terrorist attack, other global conflict, widespread cybersecurity event or information technology failure, or public health crisis could cause changes in world economies that would adversely affect us. It is impossible to isolate each of these potential factor’s future effects on current economic conditions or any of our businesses. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also would similarly disrupt the economy and have an adverse impact on our businesses.
We maintain an active acquisition program; however, future acquisitions will be dependent on numerous factors and it is not feasible to reasonably estimate if or when any such acquisitions will occur and what the impact will be on our business, financial condition, and results of operations. Such acquisitions may be financed by the use of existing credit agreements, future cash flows from operations, future divestitures, the proceeds from the issuance of new debt or equity securities, or any combination of these methods, the terms and availability of which will be subject to market and economic conditions generally.
We anticipate that our businesses will generate positive cash flows from operating activities, and that these cash flows will permit the reduction of currently outstanding debt in accordance with the repayment schedule. However, the rate at which we can reduce our debt (and reduce the associated interest expense) will be affected by, among other things, the financing and operating requirements of any new acquisitions, the financial performance of our existing companies, and the impact of the aforementioned geopolitical and economic uncertainties and the financial markets generally. None of these factors can be predicted with certainty.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report. There were no material changes during the nine months ended September 30, 2024.
ITEM 4. CONTROLS AND PROCEDURES
As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q (“Evaluation Date”). This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation as of the Evaluation Date, these officers have concluded that the design and operation of our disclosure controls and procedures are effective.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information pertaining to legal proceedings can be found in Note 11 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q and is incorporated by reference herein.
ITEM 1A. RISK FACTORS
Information regarding risk factors can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Information About Forward-Looking Statements,” in Part I, Item 2 of this Form 10-Q and in Part I, Item 1A of our 2023 Annual Report on Form 10-K. There have been no material changes during the nine months ended September 30, 2024 to the risk factors reported in our 2023 Annual Report on Form 10-K.
ITEM 5. OTHER INFORMATION
During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408 of Regulation S-K.
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Roper Technologies, Inc.
/s/ L. Neil Hunn
President and Chief Executive Officer
November 1, 2024
L. Neil Hunn
(Principal Executive Officer)
/s/ Jason P. Conley
Executive Vice President and Chief Financial Officer