Roper(ROP) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for the three and six months ended June 30, 2023, show significant revenue and earnings growth from continuing operations compared to the prior year Condensed Consolidated Statements of Earnings For the second quarter of 2023, Roper Technologies reported a 16.8% increase in net revenues to $1.53 billion and a 59.6% increase in net earnings from continuing operations to $361.0 million, compared to the same period in 2022 Q2 2023 vs Q2 2022 Performance (Continuing Operations) (in millions) | Metric | Q2 2023 | Q2 2022 | Change | YTD 2023 | YTD 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $1,531.2M | $1,310.8M | +16.8% | $3,000.9M | $2,590.6M | +15.8% | | Gross Profit | $1,067.1M | $911.5M | +17.1% | $2,085.7M | $1,808.7M | +15.3% | | Income from Operations | $435.3M | $362.9M | +19.9% | $836.3M | $718.8M | +16.3% | | Net Earnings from Continuing Operations | $361.0M | $225.0M | +60.4% | $645.3M | $461.4M | +39.9% | | Diluted EPS from Continuing Operations | $3.36 | $2.11 | +59.2% | $6.02 | $4.32 | +39.4% | - Equity investment activity contributed a net gain of $66.0 million in Q2 2023 and $64.8 million in the first six months of 2023, with no comparable activity in 2022[9] Condensed Consolidated Balance Sheets As of June 30, 2023, Roper's balance sheet shows total assets of $27.46 billion, a slight increase from $26.98 billion at year-end 2022 Key Balance Sheet Items (in millions) | Account | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,462.8 | $792.8 | | Total current assets | $2,606.1 | $1,932.4 | | Goodwill | $16,002.5 | $15,946.1 | | Other intangible assets, net | $7,718.8 | $8,030.7 | | Total assets | $27,460.4 | $26,980.8 | | Total current liabilities | $2,763.9 | $2,892.5 | | Long-term debt, net | $5,966.3 | $5,962.5 | | Total liabilities | $10,714.5 | $10,943.0 | | Total stockholders' equity | $16,745.9 | $16,037.8 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, cash provided by operating activities from continuing operations surged to $785.0 million, a 137% increase from $331.0 million in the prior-year period Six-Month Cash Flow Summary (in millions) | Cash Flow Activity | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Operating Activities (Continuing) | $785.0 | $331.0 | | Investing Activities (Continuing) | $(52.3) | $(287.6) | | Financing Activities (Continuing) | $(75.8) | $(551.5) | | Net increase in cash | $670.0 | $2,527.6 | | Cash at end of period | $1,462.8 | $2,879.1 | - The significant increase in operating cash flow from continuing operations was mainly due to higher net income and the absence of a $377.9 million cash tax payment related to the gain on disposal of businesses that occurred in 2022[13][91] Notes to Condensed Consolidated Financial Statements The notes provide details on accounting policies, discontinued operations, acquisitions, and segment performance - On May 2, 2023, Roper acquired Promium, LLC, a provider of laboratory information management systems, for $16.5 million. The company also entered an agreement to acquire Replicon Inc. for approximately $450 million, expected to close in Q3 2023[25][28] - The company revised its valuation methodology for its equity investment in Indicor to a market multiple approach, resulting in a $56.3 million increase in fair value during the second quarter[48][50] - As of June 30, 2023, the company had remaining performance obligations of $4.2 billion, with approximately 65% ($2.75 billion) expected to be recognized as revenue over the next 12 months (Backlog)[57] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the strong Q2 2023 performance to broad-based organic growth and contributions from acquisitions Results of Continuing Operations In Q2 2023, total revenue increased 16.8% to $1.53 billion, with organic growth of 9.1% Q2 2023 Revenue Growth Breakdown by Segment | Segment | Total Growth | Acquisitions | FX Impact | Organic Growth | | :--- | :--- | :--- | :--- | :--- | | Application Software | 22.8% | 16.5% | (0.1)% | 6.4% | | Network Software | 4.4% | 0.0% | (0.4)% | 4.8% | | Technology Enabled Products | 18.3% | 0.0% | (0.3)% | 18.6% | | Roper Total | 16.8% | 7.9% | (0.2)% | 9.1% | - The Technology Enabled Products segment showed the strongest organic performance in Q2, with 18.6% growth led by medical products and water meter technology businesses as supply chain issues eased[78] - Backlog, representing performance obligations to be recognized in the next 12 months, increased 11% year-over-year to $2.75 billion, with 8% organic growth[82] Financial Condition, Liquidity and Capital Resources The company's liquidity position strengthened significantly in the first half of 2023 - Cash provided by operating activities from continuing operations increased by 137% to $785.0 million in the first six months of 2023, compared to $331.0 million in the same period of 2022[91] Net Debt and Capitalization (in millions) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total debt, net | $6,666.1 | $6,661.7 | | Cash and cash equivalents | $(1,462.8) | $(792.8) | | Net debt | $5,203.3 | $5,868.9 | | Total net capital | $21,949.2 | $21,906.7 | | Net debt / total net capital | 23.7% | 26.8% | - As of June 30, 2023, the company had no outstanding borrowings under its $3.5 billion unsecured credit facility and was in compliance with all debt covenants[95][98] Quantitative and Qualitative Disclosures About Market Risk The company reports that there were no material changes to its market risk disclosures during the six months ended June 30, 2023 - There were no material changes in quantitative and qualitative disclosures about market risk during the first six months of 2023[105] 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, 2023 - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures are effective as of the end of the period[106] - No changes to internal controls over financial reporting occurred during the quarter that would have a material effect[108] PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 10 of the financial statements for information on legal proceedings - Information regarding legal proceedings is detailed in Note 10 of the Notes to Condensed Consolidated Financial Statements[110] Risk Factors The company introduced a new risk factor concerning the use of artificial intelligence (AI) - A new risk factor was added regarding the use of artificial intelligence (AI) in the business[111][112] - Potential AI-related risks include competitive harm, legal liability from deficient or biased outputs, cybersecurity incidents, and reputational damage from ethical issues[112] Other Information The company disclosed that during the second quarter of 2023, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - During Q2 2023, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement[113] Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, CEO and CFO certifications, and XBRL data files - The exhibits filed with the report include certifications from the CEO and CFO, and interactive data files (XBRL)[116]