• Total Revenue Growth: 12% increase in Q1.
• Organic Revenue Growth: 5% increase in Q1.
• Cash Flow Growth: 12% increase over the last 12 months.
• Revenue: $1.9 billion for Q1.
• EBITDA: $740 million, up over 9% in total.
• EBITDA Margin: 39.3%, down 90 basis points year-over-year.
• Diluted EPS: $4.78, above guidance range.
• Free Cash Flow: $507 million, down 1% versus prior year.
• Net Debt to EBITDA: 2.4 times, with a fully undrawn revolver.
• Application Software Segment Revenue Growth: 19% total, 6% organic.
• Network Software Segment Organic Revenue Growth: 1% in Q1.
• TEP Segment Revenue Growth: 6% total and organic.
• Full-Year Revenue Growth Outlook: Increased from 10% to 12%.
• Full-Year DEPS Outlook: Increased to $19.80 to $20.05.
• CentralReach Acquisition: $1.65 billion net of a $200 million tax benefit, expected to deliver $175 million in revenue and $75 million in EBITDA by June 2026.

• Warning! GuruFocus has detected 4 Warning Sign with ROP.

Release Date: April 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Roper Technologies Inc (NASDAQ:ROP) reported a solid Q1 2025 with total revenue growth of 12% and organic revenue growth of 5%.
• The company successfully completed the acquisition of CentralReach, which is expected to contribute significantly to revenue and EBITDA growth.
• Roper Technologies Inc (NASDAQ:ROP) raised its full-year total revenue guidance and modestly increased its full-year DEPS outlook.
• The company has more than $5 billion available for capital deployment over the next 12 months, positioning it well for future acquisitions.
• Roper Technologies Inc (NASDAQ:ROP) maintains a strong financial position with a net debt to EBITDA ratio of 2.4 times and a fully undrawn revolver.

Negative Points

• Free cash flow for Q1 2025 was down 1% compared to the prior year, impacted by a legal settlement and bond coupon payments.
• The Network Software segment experienced only 1% organic revenue growth due to a difficult prior year comparison at MHA.
• Deltek's growth is expected to slow slightly due to uncertainty in the government contracting sector, impacting its organic growth rate.
• The company's EBITDA margin for Q1 2025 was down 90 basis points year-over-year, with core EBITDA margin showing only a modest expansion.
• There is ongoing macroeconomic uncertainty, which could impact future acquisition opportunities and organic growth.

Q & A Highlights

Q: Can you provide an overview of the current private equity (PE) landscape and its impact on Roper's acquisition strategy? A: L. Neil Hunn, President and CEO, explained that despite general macroeconomic uncertainty, Roper's acquisition pipeline remains robust. The company successfully completed the CentralReach acquisition and has $5 billion available for future acquisitions. Historically, times of uncertainty have presented unique opportunities for Roper to deploy capital effectively.

Q: What is the current exposure of Deltek to federal government contracts, and how is it impacting growth? A: L. Neil Hunn noted that 60% of Deltek's business is focused on federal government contractors. The uncertainty surrounding government budgets and potential shutdowns has caused some pipeline delays. However, Deltek is expected to grow this year, albeit with a slightly reduced growth rate due to these uncertainties.

Q: Should we expect a return to growth in free cash flow and operating cash flow in the near term? A: Jason Conley, CFO, indicated that growth in free cash flow is expected to be more back-end weighted. The second quarter typically sees lower cash flow due to federal tax payments, but a strong performance is anticipated in the second half, particularly in the third quarter.

Q: How does CentralReach's retention rate compare to other software businesses within Roper? A: Jason Conley explained that CentralReach's gross retention rate is in the low 90s due to the nature of the therapist market. However, the net retention rate is strong, ranging from 115% to 120%, as the market consolidates and clients grow.

Q: Are there any concerns about the durability of Roper's businesses given the current macroeconomic environment? A: Jason Conley emphasized the durability of Roper's businesses, noting that while Deltek may experience some short-term challenges, other segments like Network Software and TEP are expected to perform well. The company remains confident in its guidance for the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.