Roper Technologies, Inc. (NYSE: ROP), a leading diversified technology company, reported financial results for the second quarter ended June 30, 2019.

Second quarter GAAP and adjusted revenue increased 3% to $1.33 billion. GAAP gross margin expanded 80 basis points to 63.9% and adjusted gross margin expanded 90 basis points to 64.0%. GAAP diluted earnings per share (“DEPS”) was $2.38, a 9% increase, while adjusted DEPS was $3.07, a 6% increase.

EBITDA increased 5% to $471 million and EBITDA margin expanded 70 basis points to 35.3%. Operating cash flow increased 13% to $301 million and free cash flow increased 14% to $286 million.

"Our diverse set of software and product businesses continued its strong execution in the second quarter with organic growth, margin expansion and, most important, excellent cash flow growth,” said Neil Hunn, Roper’s President and CEO.

“Our balance sheet positions us exceptionally well to continue executing against our active pipeline of high-quality acquisition opportunities," concluded Mr. Hunn.

Increasing 2019 Guidance

The Company now expects full year adjusted DEPS of $12.94 - $13.06, compared to previous guidance of $12.70 - $13.00.

For the third quarter of 2019, the Company expects adjusted DEPS of $3.16 - $3.20.

The Company’s guidance excludes the impact of unannounced future acquisitions or divestitures.

The Company’s agreement to divest its Gatan business to Thermo Fisher was terminated on June 10. As such, the Company’s guidance now includes Gatan for the full year.

Use of Non-GAAP Financial Information

The Company supplements its consolidated financial statements presented on a GAAP basis with certain non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. Reconciliation of non-GAAP measures to their most directly comparable GAAP measures are included in the accompanying financial schedules or tables. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Conference Call to be Held at 8:00 AM (ET) Today

A conference call to discuss these results has been scheduled for 8:00 AM ET on Thursday, July 25, 2019.  The call can be accessed via webcast or by dialing +1 888-204-4368 (US/Canada) or +1 929-477-0402, using confirmation code 3884712.  Webcast information and conference call materials will be made available in the Investors section of Roper’s website (www.ropertech.com) prior to the start of the call. The webcast can also be accessed directly by using the following URL https://event.webcast.  Telephonic replays will be available for up to two weeks and can be accessed by using the following registration URL https://event.replay with access code 3884712.

Table 1: Adjusted Revenue Reconciliation and Growth Detail ($M)    
           
  Q2 2018   Q2 2019   V %
GAAP Revenue $ 1,294     $ 1,330     3 %
Purchase accounting adjustment to acquired deferred revenue 2     2    A  
Adjusted Revenue $ 1,296     $ 1,332     3 %
           
           
Components of Adjusted Revenue Growth          
Organic         2 %
Acquisitions/Divestitures         2 %
Foreign Exchange         (1 )%
Total Adjusted Revenue Growth         3 %
           
           
Table 2: Adjusted Gross Margin Reconciliation ($M)      
           
  Q2 2018   Q2 2019   V% / Bps
GAAP Revenue $ 1,294     $ 1,330     3 %
Purchase accounting adjustment to acquired deferred revenue 2     2    A  
Adjusted Revenue $ 1,296     $ 1,332     3 %
           
GAAP Gross Profit $ 816     $ 850      
Purchase accounting adjustment to acquired deferred revenue 2     2    A  
Adjusted Gross Profit $ 818     $ 852     4 %
           
GAAP Gross Margin 63.1 %   63.9 %   +80 bps
Adjusted Gross Margin 63.1 %   64.0 %   +90 bps
           
           
Table 3: Adjusted EBITDA Reconciliation ($M)
           
  Q2 2018   Q2 2019   V% / Bps
GAAP Revenue $ 1,294     $ 1,330     3 %
Purchase accounting adjustment to acquired deferred revenue 2     2    A  
Adjusted Revenue $ 1,296     $ 1,332     3 %
           
GAAP Net Earnings 228     250      
Taxes 85     73      
Interest Expense 43     45      
Depreciation 13     12      
Amortization 78     87      
EBITDA $ 447     $ 466     4 %
           
Purchase accounting adjustment to acquired deferred revenue and commission expense 2     2    A  
Transaction-related expenses for the Foundry acquisition B —     3      
Adjusted EBITDA $ 449     $ 471     5 %
% of Adjusted Revenue 34.6 %   35.3 %   +70 bps
           
Table 4: Adjusted DEPS Reconciliation C
           
  Q2 2018   Q2 2019   V %
GAAP DEPS $ 2.19     $ 2.38     9 %
Purchase accounting adjustment to acquired deferred revenue and commission expense 0.01     0.01    A  
Amortization of acquisition-related intangible assets D 0.58     0.65      
Transaction-related expenses for the Foundry acquisition B —     0.03      
Adjustment to income tax expense related to the gain on sale of Scientific Imaging businesses E —     0.01      
Recognition of deferred tax expense due to held-for-sale classification of Gatan 0.10     —      
Measurement period adjustment to 2017 provisional income tax amounts resulting from the Tax Cuts and Jobs Act 0.01     —      
Rounding —     (0.01 )    
Adjusted DEPS $ 2.89     $ 3.07     6 %
Table 5: Cash Flow Reconciliation ($M)
           
  Q2 2018   Q2 2019   V %
Operating Cash Flow $ 266     $ 301     13 %
Capital Expenditures (13 )   (12 )    
Capitalized Software Expenditures (3 )   (3 )    
Free Cash Flow $ 250     $ 286     14 %
Table 6: Forecasted Adjusted DEPS Reconciliation C
           
  Q3 2019   Full Year 2019
  Low End   High End   Low End   High End
GAAP DEPS $ 2.50     $ 2.54     $ 11.15     $ 11.27  
Amortization of acquisition-related intangible assets D 0.65     0.65     2.58     2.58  
Purchase accounting adjustment to acquired deferred revenue F 0.01     0.01     0.03     0.03  
Gain on sale of Scientific Imaging businesses G —     —     (0.85 )   (0.85 )
Transaction-related expenses for the Foundry acquisition B —     —     0.03     0.03  
Adjusted DEPS $ 3.16     $ 3.20     $ 12.94     $ 13.06  

A.   Q2'19 acquisition-related fair value adjustment to deferred revenue related to the acquisition of Foundry ($2M pretax, $1M after-tax).

B.   Transaction-related expenses for the Foundry acquisition ($3M pretax, $3M after-tax).

C.   All 2018 and 2019 adjustments taxed at 21%, except for the gain on sale of the Scientific Imaging businesses which was taxed at 25%.

D.  Actual results and forecast of estimated amortization of acquisition-related intangible assets ($M, except per share data); for comparison purposes, prior period amounts are also shown below. Tax rate of 21% applied to amortization.

  Q2 18A   Q2 19A   Q3 19E   FY 19E
Pretax $ 77     $ 86     $ 87     $ 343  
After-tax $ 61     $ 68     $ 69     $ 271  
Per share $ 0.58     $ 0.65     $ 0.65     $ 2.58  

E.   Adjustment to income tax expense related to sale of Scientific Imaging businesses ($1M).

F.   Forecasted acquisition-related fair value adjustments to acquired deferred revenue of Foundry and PowerPlan as shown below ($M, except per share data).

  Q3 19E   FY 19E    
Pretax $ 1     $ 5      
After-tax $ 1     $ 4      
Per share $ 0.01     $ 0.03      

G.  Gain on sale of Scientific Imaging businesses ($120M pretax, $89M after-tax).

Note: Numbers may not foot due to rounding.

About Roper Technologies

Roper Technologies is a constituent of the S&P 500, Fortune 1000, and the Russell 1000 indices. Roper operates businesses that design and develop software (both license and software-as-a-service) and engineered products and solutions for a variety of niche end markets. Additional information about Roper is available on the Company’s website at www.ropertech.com.

The information provided in this press release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements may include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations. 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 contained in any forward-looking statement. Such risks and uncertainties include our ability to identify and complete acquisitions consistent with our business strategies, integrate acquisitions that have been completed, realize expected benefits and synergies from, and manage other risks associated with, the newly acquired businesses. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions and the conditions of the specific markets in which we operate, changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation, potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Roper Technologies, Inc. and Subsidiaries      
Condensed Consolidated Balance Sheets (unaudited)    
(Amounts in millions)      
       
  June 30, 2019   December 31, 2018
ASSETS:      
       
Cash and cash equivalents $ 320.8     $ 364.4  
Accounts receivable, net 698.2     700.8  
Inventories, net 203.5     190.8  
Income taxes receivable 34.3     21.7  
Unbilled receivables 206.6     169.4  
Other current assets 88.9     80.0  
Current assets held for sale 50.0     83.6  
Total current assets 1,602.3     1,610.7  
       
Property, plant and equipment, net 134.2     128.7  
Goodwill 9,657.7     9,346.8  
Other intangible assets, net 3,943.1     3,842.1  
Deferred taxes 92.1     52.2  
Other assets 381.7     101.1  
Assets held for sale 97.2     167.9  
       
Total assets $ 15,908.3     $ 15,249.5  
       
LIABILITIES AND STOCKHOLDERS' EQUITY:      
       
Accounts payable $ 162.2     $ 165.3  
Accrued compensation 186.8     248.3  
Deferred revenue 729.1     677.9  
Other accrued liabilities 288.1     258.0  
Income taxes payable 46.8     58.3  
Current portion of long-term debt, net 2.1     1.5  
Current liabilities held for sale 28.1     38.9  
Total current liabilities 1,443.2     1,448.2  
       
Long-term debt, net of current portion 4,718.9     4,940.2  
Deferred taxes 948.9     931.1  
Other liabilities 425.8     191.5  
Liabilities held for sale 20.5     —  
Total liabilities 7,557.3     7,511.0  
       
Common stock 1.1     1.1  
Additional paid-in capital 1,840.5     1,751.5  
Retained earnings 6,771.0     6,247.7  
Accumulated other comprehensive loss (243.2 )   (243.3 )
Treasury stock (18.4 )   (18.5 )
Total stockholders' equity 8,351.0     7,738.5  
       
Total liabilities and stockholders' equity $ 15,908.3     $ 15,249.5  
Roper Technologies, Inc. and Subsidiaries          
Condensed Consolidated Statements of Earnings (unaudited)
(Amounts in millions, except per share data)                
                 
    Three months ended June 30,   Six months ended June 30,
    2019   2018   2019   2018
Net revenues   $ 1,330.3     $ 1,293.7     $ 2,617.5     $ 2,496.2  
Cost of sales   480.3     477.8     956.9     929.8  
Gross profit   850.0     815.9     1,660.6     1,566.4  
                 
Selling, general and administrative expenses   481.6     461.6     945.8     911.9  
Income from operations   368.4     354.3     714.8     654.5  
                 
Interest expense, net   45.1     43.2     88.8     86.4  
Other income (expense), net   (1.0 )   2.3     (4.1 )   0.6  
Gain on disposal of business   —     —     119.6     —  
                 
Earnings before income taxes   322.3     313.4     741.5     568.7  
                 
Income taxes   72.6     85.0     122.2     129.0  
                 
Net earnings   $ 249.7     $ 228.4     $ 619.3     $ 439.7  
                 
Net earnings per share:                
Basic   $ 2.40     $ 2.21     $ 5.97     $ 4.26  
Diluted   $ 2.38     $ 2.19     $ 5.90     $ 4.22  
                 
Weighted average common shares outstanding:                
Basic   103.9     103.2     103.7     103.1  
Diluted   105.1     104.4     104.9     104.3  
Roper Technologies, Inc. and Subsidiaries
Selected Segment Financial Data (unaudited)
(Amounts in millions; percentages of net revenues)
                               
                               
  Three Months Ended June 30,   Six Months Ended June 30,
  2019   2018   2019   2018
  Amount   %   Amount   %   Amount   %   Amount   %
Net revenues:                              
Application Software $ 390.6         $ 358.2         $ 771.8         $ 682.1      
Network Software & Systems 366.8         333.9         712.5         647.8      
Measurement & Analytical Solutions 408.4         425.8         810.2         829.8      
Process Technologies 164.5         175.8         323.0         336.5      
Total $ 1,330.3         $ 1,293.7         $ 2,617.5         $ 2,496.2      
                               
                               
Gross profit:                              
Application Software $ 262.7     67.3 %   $ 242.9     67.8 %   $ 516.1     66.9 %   $ 456.8     67.0 %
Network Software & Systems 252.7     68.9 %   225.4     67.5 %   491.7     69.0 %   438.1     67.6 %
Measurement & Analytical Solutions 240.2     58.8 %   249.9     58.7 %   471.4     58.2 %   483.9     58.3 %
Process Technologies 94.4     57.4 %   97.7     55.6 %   181.4     56.2 %   187.6     55.8 %
Total $ 850.0     63.9 %   $ 815.9     63.1 %   $ 1,660.6     63.4 %   $ 1,566.4     62.8 %
                               
                               
Operating profit*:                              
Application Software $ 98.4     25.2 %   $ 97.7     27.3 %   $ 189.8     24.6 %   $ 167.9     24.6 %
Network Software & Systems 129.2     35.2 %   115.6     34.6 %   254.5     35.7 %   221.6     34.2 %
Measurement & Analytical Solutions 130.3     31.9 %   128.3     30.1 %   248.4     30.7 %   243.7     29.4 %
Process Technologies 57.2     34.8 %   57.6     32.8 %   107.3     33.2 %   107.9     32.1 %
Total $ 415.1     31.2 %   $ 399.2     30.9 %   $ 800.0     30.6 %   $ 741.1     29.7 %
                               
                               
*Segment operating profit is before unallocated corporate general and administrative expenses; these expenses were $46.7 and $44.9 for the three months ended June 30, 2019 and 2018, respectively, and $85.2 and $86.6 for the six months ended June 30, 2019 and 2018, respectively.
Roper Technologies, Inc. and Subsidiaries  
Condensed Consolidated Statements of Cash Flows (unaudited)
(Amounts in millions)
         
    Six months ended June 30,
    2019   2018
Cash flows from operating activities:        
Net earnings   $ 619.3     $ 439.7  
Adjustments to reconcile net earnings to cash flows from operating activities:        
Depreciation and amortization of property, plant and equipment   23.4     25.2  
Amortization of intangible assets   169.4     153.0  
Amortization of deferred financing costs   3.3     3.2  
Non-cash stock compensation   54.3     54.0  
Gain on disposal of businesses, net of associated income tax   (88.5 )   —  
Changes in operating assets and liabilities, net of acquired businesses:        
Accounts receivable   38.5     (28.4 )
Unbilled receivables   (37.0 )   (24.0 )
Inventories   (18.4 )   (15.2 )
Accounts payable and accrued liabilities   (94.0 )   (30.8 )
Deferred revenue   51.2     39.5  
Income taxes, excluding tax associated with gain on disposal of businesses   (77.6 )   (61.7 )
Cash tax paid for gain on disposal of businesses   (39.4 )   —  
Other, net   (13.4 )   (6.7 )
Cash provided by operating activities   591.1     547.8  
         
Cash flows used in investing activities:        
Acquisitions of businesses, net of cash acquired   (539.2 )   (1,182.3 )
Capital expenditures   (27.9 )   (23.1 )
Capitalized software expenditures   (4.9 )   (4.4 )
Proceeds from disposal of business   220.5     —  
Other, net   (2.6 )   (0.8 )
Cash used in investing activities   (354.1 )   (1,210.6 )
         
Cash flows from (used in) financing activities:        
Borrowings (payments) under revolving line of credit, net   (225.0 )   465.0  
Cash dividends to stockholders   (95.6 )   (84.5 )
Proceeds from stock-based compensation, net   33.0     32.7  
Treasury stock sales   3.6     2.8  
Other   1.1     0.4  
Cash provided by (used in) financing activities   (282.9 )   416.4  
         
Effect of foreign currency exchange rate changes on cash   2.3     (3.1 )
         
Net decrease in cash and cash equivalents   (43.6 )   (249.5 )
         
Cash and cash equivalents, beginning of period   364.4     671.3  
         
Cash and cash equivalents, end of period   $ 320.8     $ 421.8  
Contact Information: Investor Relations941-556-2601  investor-relations@ropertech.com
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