Roper(US:ROP)2026-01-27 14:00Financial 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]