Roper(ROP) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2025, show significant year-over-year revenue and profit growth, driven by both organic performance and acquisitions, with total assets and liabilities increasing primarily due to acquisition-related goodwill and debt financing, while operating cash flow remained strong, funding substantial acquisition activities Condensed Consolidated Statements of Earnings | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,943.6 | $1,716.8 | +13.2% | $3,826.4 | $3,397.5 | +12.6% | | Gross Profit | $1,345.4 | $1,193.3 | +12.7% | $2,639.1 | $2,374.3 | +11.2% | | Income from Operations | $548.3 | $494.2 | +11.0% | $1,074.1 | $975.5 | +10.1% | | Net Earnings | $378.3 | $337.1 | +12.2% | $709.4 | $719.1 | -1.3% | | Diluted EPS | $3.49 | $3.12 | +11.9% | $6.55 | $6.66 | -1.7% | Condensed Consolidated Balance Sheets | Account | June 30, 2025 | Dec 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Current Assets | $1,654.3 | $1,542.7 | +$111.6 | | Goodwill | $20,507.6 | $19,312.9 | +$1,194.7 | | Other Intangible Assets, net | $9,627.4 | $9,059.6 | +$567.8 | | Total Assets | $33,220.4 | $31,334.7 | +$1,885.7 | | Total Current Liabilities | $3,564.5 | $3,832.2 | -$267.7 | | Long-term Debt, net | $7,859.2 | $6,579.9 | +$1,279.3 | | Total Liabilities | $13,586.5 | $12,467.1 | +$1,119.4 | | Total Stockholders' Equity | $19,633.9 | $18,867.6 | +$766.3 | - The increase in Goodwill and Other Intangible Assets is primarily attributable to business acquisitions completed during the first half of 2025[11][45] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $932.8 | $915.6 | | Net cash used in investing activities | $(2,051.3) | $(1,887.4) | | Acquisitions of businesses, net | $(2,005.2) | $(1,858.3) | | Net cash provided by financing activities | $1,140.2 | $1,015.4 | | Borrowings under revolving line of credit, net | $1,275.0 | $1,090.0 | | Net increase in cash and cash equivalents | $54.2 | $37.2 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies and events, including major business acquisitions like CentralReach for $1.85 billion, a legal settlement costing $24 million, strong performance across all three reportable segments, and a backlog of $4.6 billion in remaining performance obligations, with a subsequent event noting a new tax law change expected to provide a cash tax benefit - On April 23, 2025, Roper acquired CentralReach Holdings, LLC for a net purchase price of $1.85 billion, funded by its revolving credit facility, adding $1.05 billion in goodwill[24][25] - Two bolt-on acquisitions, Muni-Link and Outgo, were completed in H1 2025 for a total of $157.4 million[26] - Subsequent to the quarter end, in July 2025, Roper completed three more acquisitions: Subsplash ($800 million), Orchard Software ($175 million), and Convoy (~$250 million)[31][32][33] - In January 2025, the company's subsidiary PowerPlan, Inc. settled a lawsuit for $24.0 million on a pretax basis[55] - As of June 30, 2025, total remaining performance obligations were $4.58 billion, of which $2.96 billion (Backlog) is expected to be recognized as revenue over the next 12 months[58] - On July 4, 2025, the U.S. government enacted the OBBBA, which repeals the requirement to capitalize and amortize domestic R&D expenditures, providing the company with a cash tax benefit[62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a strong second quarter with 13.2% total revenue growth, driven by 6.7% organic growth and contributions from recent acquisitions, with all three segments reporting solid organic growth, and the company's financial condition remaining robust, with strong operating cash flow used to fund an active acquisition pipeline, leading to increased debt levels, while the outlook acknowledges geopolitical and economic uncertainties but expresses confidence in generating positive cash flows to reduce debt Results of Operations For Q2 2025, total revenue increased 13.2% YoY to $1.94 billion, with organic growth of 6.7%, where the Application Software segment grew 17.5% (6.5% organic), Network Software grew 5.8% (4.7% organic), and Technology Enabled Products grew 10.1% (9.1% organic), and for the first six months, total revenue grew 12.6% (5.8% organic), with backlog increasing 4.4% YoY to $2.96 billion | Segment | Total Growth | Acquisition Impact | FX Impact | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Application Software | 17.5% | 10.6% | 0.4% | 6.5% | | Network Software | 5.8% | 1.1% | 0.0% | 4.7% | | Technology Enabled Products | 10.1% | 0.9% | 0.1% | 9.1% | | Roper Total | 13.2% | 6.2% | 0.3% | 6.7% | - Application Software organic growth was broad-based, led by businesses serving acute healthcare, property and casualty insurance, and legal markets[74] - Network Software organic growth was led by businesses serving construction and freight match markets[75] - Technology Enabled Products organic growth was led by medical products and water meter technology businesses[76] - Backlog (remaining performance obligations expected to be recognized in the next 12 months) increased 4.4% to $2,961.3 million at June 30, 2025, compared to the prior year[81] Financial Condition, Liquidity, and Capital Resources The company's liquidity remains strong, with operating cash flow increasing 2% to $932.8 million for the first six months of 2025, where cash was primarily used for acquisitions, funded by borrowings under the revolving credit facility, leading total debt to increase to $8.86 billion, raising the net debt to total net capital ratio to 30.5%, and a new tax law (OBBBA) is expected to provide a significant cash tax benefit of approximately $150 million in 2025 - Cash from operating activities increased by 2% to $932.8 million in H1 2025 compared to H1 2024[90] - Cash used in investing activities was primarily for the acquisitions of CentralReach, Muni-Link, and Outgo[91] | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total debt, net | $8,859.0 | $7,623.0 | | Net debt | $8,616.6 | $7,434.8 | | Net debt / Total net capital | 30.5% | 28.3% | - The enactment of the OBBBA tax law is expected to provide a full-year 2025 cash tax benefit of approximately $150 million[98] Outlook The company acknowledges potential adverse effects from geopolitical and economic uncertainties, including inflation and supply chain disruptions, and plans to continue its active acquisition program, financed through various means, with management anticipating positive cash flows will be sufficient to reduce outstanding debt, though the rate of reduction will depend on acquisition activity and overall financial performance - Management identifies geopolitical and economic uncertainties, such as inflation, supply chain disruptions, and armed conflicts, as potential risks to business prospects[99] - The company maintains an active acquisition program and expects future cash flows from operations to permit the reduction of outstanding debt[100][101] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk disclosures during the six months ended June 30, 2025, as compared to the information provided in its 2024 Annual Report on Form 10-K Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal controls over financial reporting during the quarter PART II. OTHER INFORMATION Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 9 of the Notes to Condensed Consolidated Financial Statements - Details on legal proceedings are located in Note 9 of the financial statements, which discusses the settlement of the PowerPlan, Inc. lawsuit[108][55] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K Unregistered Sales of Equity Securities and Use of Proceeds On May 15, 2025, the company transferred 12,930 shares of common stock from treasury as equity consideration for the acquisition of Outgo, with this transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933 - On May 15, 2025, 12,930 shares of treasury stock were used as equity consideration for the acquisition of Outgo[110] Other Information During the second quarter of 2025, no director or officer of the company adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to compensation plans, officer certifications, and XBRL data files