Earnings call transcript: Roper Technologies Q1 2025 beats EPS forecast, stock dips

Roper Technologies Inc. (ROP) reported its first-quarter 2025 earnings, surpassing earnings per share (EPS) expectations with a result of $4.78 compared to the forecasted $4.74. Despite the earnings beat, Roper’s stock experienced a slight pre-market decline, dropping 1.34% to $550.25. According to InvestingPro analysis, the company’s current price aligns closely with its Fair Value, while maintaining a "GOOD" overall financial health score of 2.73 out of 5.

Key Takeaways

• Roper Technologies reported Q1 revenue of $1.9 billion, marking a 12% year-over-year growth.
• The company raised its full-year revenue guidance from 10% to 12%.
• Roper completed the strategic acquisition of Central Reach for $1.65 billion.
• The stock declined by 1.34% pre-market despite beating EPS expectations.

Company Performance

Roper Technologies demonstrated strong performance in Q1 2025, with a total revenue of $1.9 billion, reflecting a 12% increase compared to the previous year. This growth was driven by both organic revenue expansion and strategic acquisitions. The company’s focus on recurring software revenues and high retention rates contributed significantly to its robust financial results.

Financial Highlights

• Revenue: $1.9 billion, up 12% year-over-year
• Organic Revenue Growth: 5%
• Free Cash Flow: Increased by 12% over the last twelve months
• EBITDA: $740 million, a 9% growth
• Core EBITDA Margin: 40.8%, a 50 basis point expansion
• Diluted EPS: $4.78, above guidance range

Earnings vs. Forecast

Roper Technologies reported an EPS of $4.78, slightly surpassing the forecast of $4.74. This minor beat was consistent with the company’s historical performance, where it often meets or slightly exceeds expectations. The revenue matched the forecast at $1.9 billion, indicating stable financial management.

Market Reaction

Despite the positive earnings report, Roper’s stock price fell by 1.34% in pre-market trading, settling at $550.25. The decline could be attributed to broader market conditions and investor concerns over recent acquisition costs. Trading at a P/E ratio of 38.14 and an EV/EBITDA multiple of 23.52, Roper commands premium valuation multiples relative to its peers. The stock remains within its 52-week range of $499.47 to $595.17, suggesting moderate confidence from investors.

Outlook & Guidance

Roper Technologies has increased its full-year total revenue guidance from 10% to 12%, reflecting optimism about its growth trajectory. The company expects Q2 adjusted EPS to range between $4.80 and $4.84, with anticipated improvements in the latter half of the year. Analyst consensus remains bullish, with price targets ranging from $465 to $738, suggesting potential upside. Roper continues to explore merger and acquisition opportunities to enhance its portfolio.

For comprehensive analysis of Roper’s growth prospects and valuation, access the detailed Pro Research Report available exclusively on InvestingPro.

Executive Commentary

Neil Hun, CEO of Roper Technologies, emphasized the company’s strategic focus, stating, "We compound our cash flow over a long arc of time in the mid-teens area, meaning we double our cash flow every five years or so." He also highlighted the company’s proactive approach to acquisitions despite market uncertainties, saying, "Despite the macroeconomic uncertainties in the market, when it comes to acquisitions, Roper remains open for business."

Risks and Challenges

• Macroeconomic Uncertainty: Potential impacts on consumer spending and investment decisions.
• Acquisition Integration: Challenges in successfully integrating Central Reach into Roper’s operations.
• Government Contracting Market: Uncertainties affecting Deltek’s exposure in this segment.
• Competitive Pressures: Maintaining leadership in the Applied Behavior Analysis software market.
• Tariff Impacts: Although minimal, they could affect supply chain costs.

Q&A

During the earnings call, analysts queried Roper’s strategy amid a slowdown in the private equity market and the implications of Deltek’s exposure to government contracting. Executives clarified that tariff impacts are minimal and discussed the strategic rationale behind the Central Reach acquisition, emphasizing its potential to bolster Roper’s software offerings.

Full transcript - Roper Technologies Inc (ROP) Q1 2025:

Conference Operator: Good morning. The RuPOR Technologies Conference Call will now begin. Today’s call is being recorded. All participants will be in a listen only mode. I would now like to turn the call over to Zach Moxce, Vice President of Investor Relations.

Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Good morning and thank you all for joining us to discuss the first quarter twenty twenty five financial results for Roper Technologies. Joining me on the call this morning are Neil Hun, President and Chief Executive Officer Jason Conley, Executive Vice President and Chief Financial Officer Brandon Cross, Vice President and Principal Accounting Officer and Shannon O’Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today’s call. We’ve prepared slides to accompany today’s call, which are available through the webcast and are also available on our website.

And now if you please turn to page two. We begin with our Safe Harbor statement. During the course of today’s call, we will make forward looking statements, are subject to risks and uncertainties as described on this page, in our press release and in our SEC filings. You should listen to today’s call in the context of that information. And now please turn to page three.

Today, we will discuss our results primarily on an adjusted non GAAP and continuing operations basis. For the first quarter, the difference between our GAAP results and adjusted results consists of the following items amortization of acquisition related intangible assets transaction related expenses associated with completed acquisitions and lastly financial impact associated with our minority investment in Indicor. Reconciliations can be found in our press release and in the appendix presentation on our website. And now if you please turn to page four, I’ll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants.

Neil? Thank you, Zach, and thanks to everyone for joining our call. As we turn to page four, you’ll see the topics we plan to cover today. We’ll start with our Q1 highlights, which included reviewing our most recent acquisition, Central Reach. Then we’ll go through our segment results and a modestly improved outlook for the year and then get to your questions.

So let’s go ahead and get started. Next slide, please. As we turn to page five, let me highlight the four key takeaways for today’s call. First, our quarterly financial results were solid with Q1 total revenue growing 12%, organic revenue growing 5% as expected and cash flow growing 12% over the last twelve months. Secondly, we successfully completed last week the acquisition of Central Reach, which I’ll discuss in a bit.

Third, given our solid start to the year and the completion of the Central Reach acquisition, we’re raising our full year total revenue guidance and modestly increasing our full year debt outlook. And finally, we continue to be very well positioned for capital deployment with more than $5,000,000,000 of available firepower over the course of the next twelve months. As we turn to page six, allow me to remind everyone about the durability of our business model. As a cash flow compounder, is critical our underlying cash flow generation capability of our enterprise is in fact durable. While no business is immune from the current macroeconomic, trade and policy environment, we feel our enterprise is far better suited than most to withstand the uncertainty.

To this end, over 85% of our revenues are generated in The U. S. And over 85 of our software revenues recur. Our enterprise solutions are mission critical and this criticality is best demonstrated by our 95% gross retention. More importantly, we have a very efficient business model that long term converts about 30% or a touch better of our revenue to free cash flow.

All of this is further enhanced by our capital deployment optionality. So with this reminder, let’s now discuss the newest acquisition to our family companies, Central Reach. As we turn to page seven, I’ll start with what Central Reach does. Central Reach is the market leading cloud native software solution that enables Applied Behavior Analysis or ABA therapy providers to deliver care for individuals with autism spectrum disorder. On a daily basis, about 200,000 professionals use Central Reach’s platform to perform their daily tasks, such as setting up clients, running their practice, scheduling care, collecting clinical data and processing reimbursement claims.

Central Reach’s offerings enable an overworked population of therapists to deliver more and better care to the autism community. This is all done in a cloud native modern tech platform that utilizes GenAI on a robust basis. As it relates to the deal, we paid $1,650,000,000 net of a $200,000,000 tax benefit. We expect Central Reach to deliver about $175,000,000 of revenue and $75,000,000 of EBITDA for the TTM period ending June 2026. Further, we expect Central Reach’s revenue and EBITDA to continue to grow in the 20% area or a touch higher once it turns organic for reporting purposes.

As you can see, Central Reach meets all of our long standing acquisition criteria: leader in an edge market, competes on the basis of customer intimacy, has strong gross margins and converts high levels of cash flow. In addition, Central Reach reflects our new maturing leader criteria of being a higher growth business in this case in the 20% area. Refinance the acquisition with our revolver and report the results in our Application Software segment. Now turning to page eight, we’ll briefly walk through the long term drivers of Central Reach’s growth. As you can see at the top here, Central Reach is the leader in a market with strong sustainable tailwinds.

First, there is a long term persistent shortage of ABA therapists compared to patient demand. To scale this for you, for The U. S. Alone, the current annual demand is approximately 900,000,000 hours, where only about 300,000,000 therapist hours are currently being supplied. We estimate the Care Gap to exist for the next decade both in The U.

S. And throughout the developed world. And finally, CentraReach is winning with the winners, meaning their clients tend to be the industry aggregators, so as Central Reach’s customers grow, so does Central Reach. As we talked about on the prior page, Central Reach’s solutions are mission critical to delivery of care. Their tools help measure outcomes, ensure compliance and realize reimbursement.

Perhaps more so, Tocareach’s solutions unlock operational efficiencies, which allow for more care hours to be delivered to a grossly unserved underserved patient population. Finally, TocerReach has multiple levers available to both grow revenue and expand margins. Some of these levers include expanding their product portfolio, cross selling their new AI powered solutions, continuing to win new logos, opportunistically pursuing adjacent markets such as speech and occupational therapies and bringing their solutions to international markets. Importantly, while we grow this business, we expect to see continued margin expansion. In short, this is a powerhouse business that is a critical solution to a huge challenge the world is facing.

To the Central Reach team, so excited for you to join Roper, thank you for all you do for the autism community and for trusting Roper to become your permanent partner. With that, let me turn the call over to Jason to talk through our P and L and our balance sheet. Jason? Thanks, Neil, and good morning, everyone. As you heard from Neil, we had a good start to the year.

Revenue of $1,900,000,000 was up 12%, led by an 8% contribution from acquisitions, mainly via our TRANZACT and ProPair portfolio additions and organic growth of 5%. Coming into 2025, we expected Q1 to be our lowest quarter for organic growth, given some comp challenges in our Networks segment. And so 5% was in line with that expectation. To click into the monthly cadence throughout the quarter. For software enterprise bookings were up low single digits in the quarter.

This was expected following very strong Q4 performance across the portfolio. Importantly, pipelines remain healthy given the essential nature of our solutions. Yet we are cautiously optimistic and mindful of the current macro environment heading into Q2. For products, demand improved throughout the quarter, particularly at Neptune and Verathon without any indication of pull forward activity. EBITDA of $740,000,000 was up over 9% in total and nearly 10% on a segment basis.

Reported EBITDA margin of 39.3% was down 90 basis points versus prior year. Core EBITDA margin, which exclude acquisitions was solid at 40.8%, representing a 50 basis point margin expansion or 53% incrementals. Regarding acquisition margins, Q1 is TransAct’s lowest margin quarter as about half of TransAct’s EBITDA comes in the third quarter of each year. This is due to a high concentration of term renewals and back to school transaction volume. We’ll expect margin expansion from Q1 as we progress throughout the year.

For diluted EPS, we delivered $4.78 which was above our guidance range of $4.7 to $4.7 led by strong margin performance. Finally, on free cash flow, Q1 came in at $5.00 $7,000,000 which was down 1% versus prior year. Note that this figure includes a legal settlement of $24,000,000 which was funded in January and we discussed in our last earnings call. Though Q1 free cash flow was a bit low, it was not unexpected, given the exceptionally strong Q4 working capital performance that I discussed in our last call. Overall, free cash flow margins, if you look over the last few years, we’ve been in the 31% to 32% range.

Last quarter, I had mentioned that we issued $2,000,000,000 of bonds in Q3 twenty twenty four, yet the first coupon payments are occurring in February and April of this year. This along with the legal settlement in Q1 has about a $70,000,000 or 80 bps impact on free cash flow margins this year. Operationally, we feel good about working capital conversion and the structural free cash flow margin profile going forward. Now, we’ll turn to slide 10 to discuss our strong financial position. We finished the quarter with net debt to EBITDA of 2.4 times with a fully undrawn revolver.

Last week, we closed on Central Reach and used the revolver to fund the acquisition. This brings our pro form a net leverage to around three times. As we roll forward our expected cash flow and leverage ratios, we remain in a great position even after funding Central Reach, over $5,000,000,000 of capacity to deploy towards high quality acquisitions. To that end, we continue to work through a very strong pipeline of opportunities today. Given the uncertain macro backdrop, some PE sponsors are understandably taking a breath.

However, as we have discussed, many PE sponsors need to return capital to LPs in the near future. And so the current market dislocation creates a favorable environment for Roper. In summary, our unique and resilient business model creates opportunity during times of uncertainty. So with that, I’ll turn the call back over to Neil. Neil?

Thanks, Jason. As we turn to page 12, let’s review our Application Software segment. Revenue for the quarter grew 19% in total and organic revenue grew by 6%. EBITDA margins were 41.4% and core margins improved 110 basis points in the quarter. This group of companies continues to demonstrate resilience and deliver on our growth expectations.

As we turn to the businesses, we’ll start with Deltek. Deltek grew in the mid singles range in the quarter, both recurring and total revenues. As we highlight on the slide, Deltek continues to have strong migration to their cloud offerings, while the business continues to innovate at a rapid pace and has benefited by very strong gross and net retention. Adera continues to be very strong with record first quarter bookings and strong cloud migration activity in the quarter. Adera continues to gain market share and carry its momentum forward.

PowerPlan also was outstanding in the quarter. Over the last several years, the team has done a great job at making the revenue stream more recurring in nature. In addition, they continue to get amazing feedback with their cloud offerings, which are driving strong SaaS migration activity. Also during the quarter, we promoted Raffi Shore, Adderant’s COO to succeed Joe Gomes as the next CEO of PowerPlan. Joe Gomes is now leading ProCare for us.

We love seeing our high potential leaders be placed in position to have even higher levels of impact. Turning to Vertifor, which was once again steady and solid for us. We continue to see consistent ARR growth and strong customer retention here. ProCare, our platform acquisition from a year ago has done a nice job competing and winning in the market, increasing its market share versus the primary competitor. That said, there’s a clear opportunity for the business to reach its full potential both in terms of operational efficiency and growth.

Because of this, we asked Joe Gomes, who has been a CEO within the Roper portfolio for eight years to lead ProCare going forward. We look forward to Joe replicating his prior over leadership success at ProCare. Finally, the combination between TransAct and Seaboard is going according to our integration plan and the combined business is performing well in the market. Now turning to the outlook for the balance of the year, we see no change in the trajectory of the outlook and continue to expect to see organic growth in the mid single plus range. Also, and as we highlighted last quarter, we want to remind you that TransAct’s revenue, earnings and margin profile are highest in the third quarter as Jason mentioned earlier.

Please turn with us to page 13. Organic revenue at our Network Software segment grew 1% in the quarter as we expected given a difficult prior year comp at MHA. EBITDA margins remained strong 55.3%. As we dig into the individual businesses, we’ll start with DAT. DAT grew in the quarter as expected based on increased ARPU driven by carrier and broker price actions, product packaging and continued customer cross sell activity.

In addition, DAT continues to innovate at a rapid pace and did a great job integrating our recent Trucker Tools bolt on acquisition. For the balance of the year, we continue to expect to see DAT grow based on the price actions rolling into their recurring revenue. From a market point of view, spot market volumes and DAT monetized network participation continue to bounce along the bottom, which is what we expect to occur for the balance of the year. Both MHA and Foundry declined in the quarter as expected for MHA due to a prior year difficult comp and for Foundry due to the final elements of the Actors and Riders strike hangover. That said, we did see nice green shoot activity at Foundry during the quarter and now feel confident that the worst is behind and Foundry’s ARR will in fact return to growth this year.

ConstructConnect was strong for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer retention. In addition, building what Matt Strasza started, our new leader, Buck Brody, is doing a terrific job leaning into Gen AI and developing very interesting, innovative and potentially groundbreaking products. We look forward to talking more about this in future calls. Finally, our Ultra to Site Healthcare businesses, SoftWriters and SHP continue to grow nicely winning in the marketplace.

As we turn to the outlook, we continue to expect to see revenue growth in the mid singles range for the balance of the year. Now please turn to page 14 and let’s review our TEP segment’s full year results. Revenue here grew 6% on a total and organic basis and EBITDA margins came in at 36.2%, solid results. Before we get into the business specifics, the vast majority of our tariff exposure resides within this segment. The good news is that most of our cross border flows are USMCA compliant, which obviously mitigates most of the tariff impact.

Our teams will continue to work this issue and further mitigate as needed. Though none of us are enjoying the continually evolving tariff situation, it is yet another example of the nimble execution capabilities of our organization. In March, when all the tariff noise started kicking up in earnest, our business leaders went to work to countermeasure the risk and started working the necessary supply chain activity. Nice job by the teams and keep up the great work. Now turning to Verathon.

Verathon continues to be rock solid for us. Coming off an incredible 2024 in Q4, they did a nice job growing in Q1. The source of their strengths remain consistent. Their single use bronchoscope or B Flex product leadership and their video laryngoscopy or GlideScope market leadership. Importantly, Verathon has built a true world class new product development capability with several new product releases slated for this year.

We look forward to talking about these new products as soon as they’re launched. Turning to Neptune, which was just solid once again for us. They continue to do a great job with their ultrasonic meter go to market execution. Also and importantly in the quarter, we completed the acquisition of a cloud based utility billing software solution for Neptune. The Neptune team has long crafted their strategy based on the unique unmet needs of their customers.

From their market research and ongoing discussions with customers, it became abundantly clear that Neptune could solve a persistent industry problem by closing the loop in the meter to cash cycle. This acquisition provides Neptune with the final piece of the strategy. So we look forward to talking about the enhanced customer value by fully connecting the water meter read to data management to billing and collection processes. Special thanks to Don Diemer and the entire Neptune leadership team for completing this incredibly strategic acquisition. Exciting stuff.

Of note, both Verathon and Neptune order momentum improved as the quarter progressed. Turning to our Civco Medical Products business. They unfortunately declined in the quarter based on a very difficult prior year comp. Finally, NDI nailed it in the quarter and we need to brag on this business and the team for a bit. They have proprietary and world class precision measurement technologies used on health care applications worldwide.

Over the past few years, the team has done an amazing job of hyper focusing on their medical markets and their OEM clients. In addition, they have built and are building a world class go to market capability to match their product strength. Based on this, they’re winning in important submarkets within healthcare, namely orthopedic surgery, interventional radiology and cardiac ablation. Great job, Dave and your entire team. Turning to the outlook for this segment, we continue to expect to see high single digit revenue growth for the balance of the year.

So with that, please turn to page 16. Let’s turn to our Q2 and increased full year 2025 guidance. Given our solid Q1 start, the closing of our Central Reach acquisition and our outlook for the balance of the year, we’re increasing our total revenue growth outlook from 10% to be in the 12% area. Our organic growth rate of 6% to 7% for the full year remains unchanged. Finally, we’re increasing our full year debt outlook by a nickel on the low and the high end to be $19.8 to $20.05 Included in this outlook is $0.15 of Central Reach dilution.

Our guide continues to assume a full year effective tax rate in the 21% to 22% area. For the second quarter, we expect adjusted DEPS to be between $4.8 and $4.84 and we are absorbing $05 of Central Reach dilution in the quarter. Now please turn with the page 17 and then we’ll open it up to your questions. We’ll conclude with the same four key takeaways with which we started. First, our first quarter financial results were solid and our businesses remain very resilient to the current trade and macroeconomic dynamics.

Second, we successfully completed the acquisition of CentraReach. Third, given our solid start to the year and the completion of the SensiReach acquisition, we’re modestly raising our full year guidance. And finally, we remain well positioned for capital deployment where we continue to have more than $5,000,000,000 of available firepower over the course of the next twelve months. Despite the macroeconomic uncertainties in the market, when it comes to acquisitions, Roper remains open for business. As it relates to our compounding model, we grew total revenue 12% and organic revenue 5% in the quarter and free cash flow of 12% over the last twelve months.

We’re delighted with our acquisition of Central Reach. As discussed, this vertical market leader is mission critical to the delivery of autism care and has several embedded structural growth drivers that will support its 20% revenue and EBITDA growth outlook. Finally, we continue to be very well positioned with more than $5,000,000,000 of available M and A firepower to deploy capital towards leading vertical market software businesses. Our M and A pipeline continues to be very active and our teams are engaged on several opportunities. It is always difficult to predict timing of deals, but we remain quite bullish on our ability to deploy capital this year.

Keep in mind, at least historically, we have found times of uncertainty can be advantageous for deploying capital. Think Vertifor in the summer of twenty twenty. As usual, we’re excited to pursue these opportunities with our unbiased and disciplined approach. Now as we turn to your questions, and if you could flip to the final slide, our strategic compounding flywheel, we’d like to remind everyone that what we do at Roper is simple. We compound cash flow over a long arc of time by executing a low risk strategy and running a dual threat offense.

First, we have a proven powerful business model that begins with operating a portfolio of market leading, application specific and vertically oriented business. Once a company is part of Roper, we operate a decentralized environment, so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their long term and sustainable organic growth rates and underlying business quality. Second, we run a centralized process driven capital deployment strategy that focuses in a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market leading business to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid teens area, meaning we double our cash flow every five years or so.

With that, we’d like to thank you for your continued interest and support and open the floor to your questions.

Conference Operator: And we will now go to our question and answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. Session. With that, our first question comes from the line of Brent Thiel with Jefferies. Please go ahead.

Brent Thiel, Analyst, Jefferies: Good morning. Neil, curious to get your perspective on what’s happening with PE and what the behavior Jason mentioned some hesitancy. I think that makes sense. But maybe just give us a quick overview on what you’re seeing.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Good morning, Brent. Thanks for joining this morning. Yes, the what we’re seeing in the deal, what you’d expect to see by the way with all the uncertainty generally is a slowdown. But what we’re seeing on the ground with our pipeline, with our conversations with sponsors, investment bankers, companies is just a consistent drumbeat of activity. The pipeline is as robust as it’s been.

We’re super pleased obviously that we got Central Reach done this year. We still have $5,000,000,000 deployed over the next twelve months or so. But we would sort of have our what we’re seeing at the high level just a general macro uncertainty disconnect what we’re seeing at the on the ground level. So we’ll just have to see how it plays out in terms of the balance of the year, but we’re certainly cautiously optimistic. And we said in the prepared remarks times of uncertainty oftentimes in our history present very unique opportunities to deploy capital.

Brent Thiel, Analyst, Jefferies: Great. Quick follow-up just on Deltek on the site exposure. Can you help us understand what you’re seeing there? And if you’ve given out the percent exposed in that sector would be helpful? Thanks.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Yes. Sure. Happy to do that. So, Deltek is 60% of their business is focused on helping federal government contractors run their business 40% are on other professional services oriented markets. The broader it’s a broad set of activities that has created amount of uncertainty in the government contracting part of the Deltek customer base.

It’s obviously Doge, but it’s the budget uncertainty. It’s the government shutdown, the debt ceiling, all of that taken together as you’d expect creates a fair amount of uncertainty. So what happens in that uncertainty is the pipeline pushes to the right a touch as we’ve seen this as since we own this business since 2016. And so we’ve seen this pattern play out before. So things push to the right a touch.

The customer sentiment when we talked with our leadership team there during our quarterly call downs is actually quite good. They feel like this is a short term speed bump versus any medium or long term concern. And what happens when the pipeline pushes to the right, Deltek’s growth rate just slows a touch. Deltek will grow this year, but we probably will take a point or we have taken a point or two of growth off of Deltek’s organic growth rate for this year given the uncertainty. Yes.

It’s more acute too because the GovCon Enterprise segment is mostly if they’re doing expansions or add ons, it’s mostly through perpetual licenses. So that will impact in year. Great. Thanks. You bet.

Conference Operator: And your next question comes from the line of Brad Repack with Stifel. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Great. Thanks very much. As it relates to free cash flow and operating cash flow, should we expect to return to growth here in June? Or is it more back end weighted? Yes.

Thanks for the call Brad. It’s going to be more back end weighted. Q2 for us, I’ve mentioned on the prepared remarks we had. Remarks we had. We haven’t done bonds in a few years.

So we did our first offering Q3 of last year and some of the coupon payments aren’t due until April. And so we just got a little bit of a timing between P and L interest and cash interest. So that will impact the second quarter. Also just noting, the second quarter is usually our lowest quarter of the year because we made two federal tax payments. But then as we roll through to the second half, you’re right, it will be a very strong Q3.

We have our TRANZACT business will have a full quarter of that. They get most of their EBITDA and cash flow in the third quarter. Our frontline business is particularly strong in the third quarter as well. So expect a better second half than the first half. That’s great.

And then just real quick on Central Reach. Given that they’re 200,000 providers on the platform, does the gross retention rate look a little different here than maybe other aspects of the software business? Yes, it does a bit. If you think about it just customer only or logo only, it’s in the mid to high 90s. But when you add to your point some of the therapists that come in and out of the market, then it’s more of a sort of a low 90s gross retention.

But we get that back on the net retention rate. We get as the market consolidates and those go to the winners, we get that through net retention. So net retention is kind of 115 to 120 range. So that’s kind of how we think about it. Great.

Thanks very much. You bet.

Conference Operator: And your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Hey, guys. Can you hear me? We can. Good morning.

Brent Thiel, Analyst, Jefferies: Good morning, guys. Thanks for squeezing me in here. Maybe just to start, I guess, just want to take it back and be a little high level. I guess, I heard a lot on the call the word uncertainty, but I also heard a lot on the call the word durability and you guys do believe that all the businesses are pretty durable even in the current environment. I guess, you just help us high level understand in the context of your decision to pretty much reiterate the guidance on the top line?

Like where are there some offsetting puts and takes in the guidance that maybe either give you or don’t give you some wiggle room if the macro gets worse from here or maybe even better? Just to start. Thank you.

Neil Hun, President and Chief Executive Officer, Roper Technologies: You’re right. I mean, think the durability gave us confidence to reiterate. The puts and takes I’d say, we just talked about Deltek might be a little bit weaker, but you’ve got other businesses that had strong bookings that are materializing in terms of recurring revenue throughout the year. So in AS, we’re sort of holding serve there. I’d say at NS, pretty much the same holding serve.

We talked about how DAT is going to improve throughout the year. We still believe that to be the case. Foundry saw some grease shoots as Neil talked about. And so we expect that business to exit in sort of the high single digit range somewhere in there. And then really within TEP, there hasn’t been a lot at the top level, but I would say our NDI business certainly has some good tailwinds, some of these new indications that they’re they’ve been targeting for years in terms of cardiac ablation and orthopedics have taken hold.

So I’d say that got us confident in maintaining our guidance for the year.

Brent Thiel, Analyst, Jefferies: Super helpful. And then maybe just a little more nuanced follow-up to that. Can you just talk of the durability of Deltek maybe specifically for the third quarter just how you think about it throughout the rest of the year? I know you guys gave some high level commentary on the moving pieces in that business there, but maybe how we should think about your visibility into that business and then just durability as we move throughout the year?

Neil Hun, President and Chief Executive Officer, Roper Technologies: I mean, Deltek is 80% to 85% recurring, which gives you amazing amount of predictability and durability. As Jason alluded, there’s a little bit of perpetual that that business still has that trimmed off a little bit. As I mentioned, that’s essentially what’s driving our slightly lower growth outlook for the total year. And we’ll stop short to give you any quarterly sort of specifics on individual businesses.

Brent Thiel, Analyst, Jefferies: I tried. But I appreciate it guys. Thank you so much.

Neil Hun, President and Chief Executive Officer, Roper Technologies: And

Conference Operator: your next question comes from the line of Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Hi, great. Thanks for taking my questions. I guess when thinking about confidence for the remainder of the year bookings for software order patterns for products are about as good as it gets when thinking about leading indicators. Maybe beyond what you have in hand, what’s been the perspective within businesses that are more reliant on cloud or subscription transitions? That would seem to be maybe something that’s a slightly harder proposition relative to the businesses where when renewals are coming due and you can make an assumption for renewal rates.

Are there any indications around the transition oriented revenues where maybe customer preference could slow if the macro remains uneasy out there? Yes. Thanks for the question, Joe. So, Aderant is our kind of our leader in this in the pack in terms of cloud transition. And actually Q1 was very strong for them.

And they’re starting to actually move into the higher end of the client base in terms of cloud transition. Didn’t see any indications that I understand your point and we didn’t see it there. Maybe at Deltek, but that’s not as much of a tailwind for them. And so that kind of is in this sort of uncertainty bucket with Doge, but that’ll happen eventually. Otherwise, yes, we didn’t see had a nice quarter.

Actually great point. So PowerPlan just launched their tax for fixed asset product about two quarters, one or two quarters ago. So really good uptake there. The recurring revenue is now growing double digits as a result of that. So yes, nothing that we could see in terms of transition to the cloud and slowing customer decision making.

We didn’t see any of that. Okay. That’s great. And then you kind of touched on this with Deltek, but extending more broadly, how would you frame a stress test around the nonrecurring elements of both AS and MS? Could declines be possible there?

And I know it’s a mix. I’ll throw in reoccurring to this question. So you have a mix of perpetual license, I would assume very high margin, but then also services and payments. Is the profit margin implication if the nonrecurring pieces are declining? I would imagine it’s probably good for your margin mix just kind of a framing there.

I think the perpetual and the service are fairly offsetting relative to recurring relative to SaaS subscription. So I don’t think we’ll have any meaningful margin impact there. At network, our non recurring is really small, so it’s not as significant. I think it is a question in terms of in AS, that’s probably the only area that has some question in terms of where it’s going be this year. It’s probably going to be up a little bit.

That’s at least our current thinking. But we’ll see how the year plays out. Great. Thank you.

Conference Operator: And your next question comes from the line of Terry Tillman with Ture Securities. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Yeah. Hi, Neil, Jason and Zach. Thanks for taking my question and follow-up. The first one just relates to the central reach. We enjoyed reading the 2025 market report they put out.

I think it said 75% of customers are purchasing AI solutions. I’m curious, I know you just brought this into the fold, but is the AI driven revenue meaningful at all at this point for Central Reach? And are you seeing some of that kind of AI attach rate yet on any of the other app software products? And then I had a follow-up. Yes, sure.

So Central Reach’s AI products are new to the market. I mean they’re new in the last twelve months. And that there’s three essentially buckets of products and that they didn’t all get released nine or twelve months ago, it’s been a rolling release. So no, we’ve got a it’s not a material amount of revenue for Centuri’s, but it is a one of their meaningful growth drivers going forward that the company both the company and we are excited about. To your second part of that question, the second part of your question about the rest of Roper, it’s I would say Central Reach is leading relative to the Roper portfolio, but my guess is the balance of the portfolio will catch up quickly.

In the first derivative of AI sort of GPTs that ride along with our products or the fraud exposure that was sort of mitigated at DAT those sorts of applications, we’ve done a very good job. Now we’re as most companies are pivoting to the second derivative, which we think is a huge TAM expander for us. This is where you get the AgenTik digital employees. So our companies are very, very busy extending our software with the Aejemtiv capability into the workflows of our customers. We expect to monetize those on a work completed basis.

So we’re very excited by that. But it’s still pretty early, but it’s moving at a very, very, very quick clip. Got it. Thanks. And I didn’t mean to cut you off, Neil.

Just a follow-up question related to core EBITDA margin for you Jason. I think it was up 50 bps in the first quarter. How do we think about core EBITDA margins for the year realizing you have another acquisition that’s in the mix now? Thanks. Yes.

I think core EBITDA margins will be I think up a little bit this year at the segment level, right? And then we’ve got probably with the core G and A, it’s more flattish if you include that, but still strong. I think we had a good in terms of AS, I think acquisition margins are going to get better throughout the year and then core will sort of hold Network will probably get a little bit better in the second half just through scale. And then TEP, TEP had a good quarter. We think that’s going to continue throughout the year just with NDI and some of Verathon’s products coming to market.

Thank you.

Conference Operator: And your next question comes from the line of Ken Wong with Oppenheimer. Please go ahead.

Brent Thiel, Analyst, Jefferies: Great. Thanks for taking my question. You guys mentioned Deltek pushed a little to the right. As you look across your portfolio and you think through kind of customer sales conversations, any other areas where you’ve seen some modest shift to the right?

Neil Hun, President and Chief Executive Officer, Roper Technologies: Not really. I mean, we studied that intently and intensely as we went through our quarterly reviews and really look for it. It was clear at Deltek. It was just not clear at other places. Doesn’t mean that it might not happen a little bit, but it hasn’t happened here yet.

Yes. I would say, mean, Aderant had the highest bookings quarter they’ve ever had. Strata had a phenomenal quarter in terms of TCVs, the total contract value, which will benefit us over several years. But they had a really good quarter. Vertiflo was a little soft, but they had an exceptionally strong Q4.

So we weren’t surprised to see a little bit of year over year weakness there. Talked about ConstructConnect. We talked about Foundry. We talked about SoftWire’s SHPI pipeline was fine in the quarter. Got it.

And I guess should

Brent Thiel, Analyst, Jefferies: you happen to see some erosion going forward? Help us think through I guess what are the counter play countermeasures that you guys are thinking about? Would it be more margin defensive? Or are there particular actions that you guys would potentially implement to try to maintain growth? What would be your next step should something emerge?

Neil Hun, President and Chief Executive Officer, Roper Technologies: Yes. So I think for us we kind of have this natural incentive for the businesses. They usually are very thoughtful about the pacing of investment. And so if they start to see some weakness, it’s in their best interest to make sure that they’re being prudent. Obviously, making the right investments and we’re very transparent with areas they should not be cutting.

But they naturally have that sort of in their P and L. And also I’d just say the incentives are variable too throughout the company. And so it’s based on growth. So we get some of that margin preservation there as well. Perfect.

Thanks guys. You bet.

Conference Operator: And your next question comes from the line of Scott Davis with Melius Research. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Hey, good morning guys. Good morning, Scott. Hey, I just wanted to clarify because we just kind of glossed over a little bit. But it sounds like tariffs are a big kind of nothing burger for you guys and seems somewhat isolated to Verathon. Is that a fair statement?

I wouldn’t say it’s isolated to Verathon. It’s most of the product business in the TEP segment have to deal with some amount of tariff impact, but the vast majority Neptune, Verathon, CIPCO is USMCA compliant. That’s why we’re able to sort of be a sort of a 10,000,000 to $15,000,000 issue. Okay. Fair enough.

All right. And moving to something more important. The port activity that we’re seeing just seems like it could be hitting an air pocket maybe in 2Q or later in 2Q. You don’t seem to be concerned about the freight activity kind of if and when that occurs. Is there particular are you guys less exposed I suppose at the ports as otherwise for DAT?

So we’re watching it as you’d expect on a daily on a weekly basis when we look at the metrics. Scott, I think that maybe the simplest way to think about it is the paying or the monetized part of the DAT network on the carrier side flexes, but not like day to day to demand, right? And so if there was for instance in March, if there was a pull forward across the economy for pre tariff shipping, we did not see a surge in carrier demand in the network just like if there’s a little bit of slack in the system, we won’t see it immediately turn off. Now if it’s sustained that way for six months to twelve months, then we would expect to see an impact on the carrier side of the network. But so we just have assumed going into the beginning of the year sort of flattish on the carrier volume units and that’s where we are maintaining it.

VAT will grow this year because of the price actions and we’ll see how things play out from here. Okay. Good color. Thank you. Appreciate it.

Good luck guys. Bet. Pass it on. Thanks.

Conference Operator: And your next question comes from the line of Deane Dray with RBC Capital Markets. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Thank you. Good morning, everyone. You bet, Doctor. Dre. How are you?

Doing really well. Thank you. So I want to circle back on central reach and it’s a bit unusual. I mean, it’s a good problem to have to explain. You don’t typically get a business with this type of growth profile.

Often PE has public company aspirations for someone at a 20% growth plus. So just how was this available? And what percent of the funnel have these kind of growth profile for you? Yes. So on sort of how did this come about, I would say it was a very traditional process for us.

This was a business that was owned by Insight. We’ve known the Insight team for a while. It was Jan and her team about a year ago. We’re talking with Insight. This wasn’t about this asset.

We had an opportunity to meet the CEO We started doing our proprietary market work nine months ago or so. We liked a lot of the structural elements of the market, the growth drivers. They’re solving a real problem in society. We see AI, Gen AI as a strong tailwind with very limited sort of headwind or risk associated with it in this end market.

And then the process started in a very traditional way with an investment bank. It was very competitive. But as we’ve been able to do in the last handful of deals, we’ve really been able to articulate the Roper value proposition to the management team, right? So what is life like inside of Roper, the advantages of having permanent long term forever capital, the way you can grow your business inside of that. And in this case, were many LOIs submitted, but because we had won management we were able to get the call back and have the opportunity to essentially have a week to finish the transaction which we did.

So we’re very excited by that the process the way that it unfolded. In terms of what’s in the pipeline, the vast I mean, the vast majority of the funnel are these maturing leader type businesses. The growth rates could are going to range between 1025%. This doesn’t mean that every deal has to be in the 20s. But Dean, as you know, what we’re solving for here in our revised capital deployment strategy is sort of 30% or 40% better returns in year five.

And we can get there. We can solve for that a couple of different ways, but the opportunities in the market that are plentiful are these more higher growing businesses to help solve for that where you get both the growth and the benefit of margin expansion over time. I’d also just say in terms of funnel, have a very good mix also of bolt ons, right? So we’ve been really active on the bolt on front and I continue to see that as well. Got it.

And just to confirm Pierre, does Central Reach, is it accretive to CRI on a total company basis? And at what point does that contribution become positive? It is working capital. Central Reach is working capital negative. And what’s important for us through our CRI lens is that we just remain negative from a working capital point of view.

So the incremental transaction doesn’t have to be incrementally negative to the fleet. It just has to make sure we stay negative. Got it. Thank you. You bet.

Conference Operator: And your next question comes from the line of Joe Giordano with TD Cowen. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Hey, Good morning. Good morning, Can you just walk me through the guide mechanics like the walk from prior to current like your small beat in the quarter versus guide, hold all organic, absorbed $0.15 and still raising. So like is there kind of a contingency that was being removed? Like where is the offset here? Yes.

I think you characterized it right. We had a little bit of margin and a little bit of interest contingency in our last guide. And so I talked about all the things that are sort of holding within AS. Delphex is a little bit weaker, but others are offsetting that. And us is about on as we talked about TEP probably a little bit better on margin, I would say, versus our last guide.

So that’s what gets you to the revised pretty much updated guidance that flows through the Q1 beat. Okay. That makes sense. And obviously, I’ve been getting a lot of calls on Deltek as far as what the exposure is. I mean, you’ve talked about it a lot on this call, so we don’t have to go crazy here.

But is that the primary Doge risk kind of like done now? Like if MUC is going back to Tesla and we haven’t seen these big changes to these businesses yet, like are we not just could we stop worrying that it’s happening? I think the I think again, said it earlier, I just I don’t want to characterize this as just a Doge thing. I mean, it’s Doge. But what our pattern recognition of running this business is 2016 is when there is a potential government shutdown and the budget uncertainty that too is like just people don’t know where the spending is going to be at the period, right?

So it’s all of this that’s blended together has created the uncertainty. But this community of government contractors provide essential services to the government. And so that’s why we think this is a short term thing and not a structural or even a medium term thing. And I think the most recent if you just go to Doge, I think the most recent conversations are we’re sort of stuck in 160,000,000,000 or $170,000,000,000 and people are going to take that as a win as opposed to trying to get to the trillion or whatever the number is going to be. And obviously with Musk spending more of his time going back to his other day jobs and having the limited number of days and his government sort of contractors, government employment status will certainly probably slow down the Doge impact.

Yes. That makes sense. Great. Thanks guys. Appreciate it.

You bet.

Conference Operator: And your next question comes from the line of Steve Tusa with JPMorgan. Please go ahead.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Hi. Good morning. Hey, good morning, Steve.

Steve Tusa, Analyst, JPMorgan: Just on the organic, just maybe some color on the 2Q organic. And then secondarily on education, there’s obviously a lot going on there as well with the government and how they’re kind of pressuring some of these higher ed organizations. Anything

Neil Hun, President and Chief Executive Officer, Roper Technologies: there that you guys are seeing as well? Yes. I’ll let Jason take the first. I’ll take your education question. Yes.

I mean, I think we’re going to it will step up from Q1 a bit. It’s I think at AS we’ll have a little bit of an increase just as you see ProCare rolling in. Obviously, NS is going to go up to mid singles as we talked about at the beginning of the year with just DAT and foundry ramping and we don’t have the MHA comp issue. And then high singles ish range probably for Kev. Just with all the things we’ve talked about, it’s true for Q2 as well.

Got Department of Education and Education generally, it’s there’s noise in the system, but when you read through what the administration is thinking about doing with Department of Education, it’s essentially not cutting funding. It’s just block granting the funding down to the states. If you look at the ’25 CR Department of Education funding equals 24%. The Title I sort of funding is like 80% by the way. And the President and Secretary on repeat have said that’s not going to be touched in terms of the total amount.

There’s certainly some pressure on DEI and sort of the conflict in Maine on some of the athletes and whatnot about holding back funding. But I think those are bespoke issues. The big arching overarching thing is the funding dollars are not going to change just maybe the administration of the funding dollars might change going forward. So we haven’t heard there’s been no like slowdown or panic at the customer level about their funding.

Steve Tusa, Analyst, JPMorgan: Okay. And then just lastly just in April here the software bookings. Have you actually seen acceleration from the low single digit?

Neil Hun, President and Chief Executive Officer, Roper Technologies: We don’t get that information. Great. Thanks for the detail. Thanks for the detail.

Conference Operator: And your next question comes from the line of Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell, Analyst, Barclays: Hi, good morning. Just wanted to follow-up a little bit on the organic sales sort of acceleration you’ve dialed in. So I guess you grew total company 5% organic Q1. I think it’s 5% organic over the last twelve months. And it seems the sort of enterprise software bookings a little slow to start the year.

I think the backlog at TET was down 40% or so in December. So just wondered sort of the assumption of an acceleration to maybe 8% plus growth in the back half, the confidence there? And is there anything outside of foundry that’s turning around a lot?

Neil Hun, President and Chief Executive Officer, Roper Technologies: Well, I mean, think we just we’ll start with network. I mean, obviously, but then DAT as well. I mean, we’re assuming carriers are going to be flat, but even despite that we’re expecting the business to get better throughout the year and have a decent exit velocity. We’ve talked about TAP already, I think, which is really just Neptune continuing to get better throughout the year. They have an easy comp in the third quarter, if you recall.

And then we talked about NDI being another component of TEP that’s given us confidence in the guidance there. The other thing I’d say Julien is as it relates to the bookings activity, trailing twelve months bookings activity is up low double digits. And it takes time for that bookings activity to work its way into revenue. So that’s in the machine and converting to revenue as we speak. So we have broad tailwind strength on bookings activity.

Q4 is amazing. Q3 was a little bit slower as we expected. So I would not read too much just listening to your question, I would not read too I think you’re reading too much into Q1’s booking number because you really have to look at what the buildup of the bookings is that sort of feeds the machine.

Julian Mitchell, Analyst, Barclays: That’s helpful. Thank you. And then just my follow-up would be on the application software EBITDA margins. So you had this sort of 300 bps headwind I guess to the EBITDA margin year on year in the first quarter. How are you sort of thinking about that play out over the balance of the year as sort of central reach come in?

And is that core OMX you had of 100 bps or so a good run rate for the rest of the year?

Neil Hun, President and Chief Executive Officer, Roper Technologies: So, yes, I think as I’m just trying to parse out what you’re saying here. I think on the core basis, we should see margin expansion this year, Maybe not as much as we saw in the first quarter, but certainly up nicely. We talked about Deltek targeted restructuring last year. We’ve seen some benefits of that this year. And then the acquisition margins I talked about, let’s just kind of take Park Centaurice to the side for a second.

Those will get better throughout the year because you’ve got a ramping of activity at ProCare and then you’ve got TRANZACT having a seasonally strong third quarter and actually better second quarter than first quarter. So that will get better throughout the year. And then Central Reach to your point will come in at sort of low-40s EBITDA margins that And Deltek’s got a benefit this year because of they did a belt tightening in Q4, which carries through for the full year. That’s great.

Thank you. You bet.

Conference Operator: And this concludes our question and answer session. We will now return back to Zach Moxey for any closing remarks.

Neil Hun, President and Chief Executive Officer, Roper Technologies: Thank you everyone for joining us this morning. We look forward to speaking with you during our next earnings call.

Conference Operator: The conference call has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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