ROPER TECHNOLOGIES INC

Previous wording

There were no material changes during the three months ended March 31, 2024 to the items that we disclosed as our critical accounting policies and estimates in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Current wording

There were no material changes during the six months ended June 30, 2024 to the items that we disclosed as our critical accounting policies and estimates in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report.

Previous wording

Net revenues for the three months ended March 31, 2024 were $1,680.7 as compared to $1,469.7 for the three months ended March 31, 2023, an increase of 14.4%. The components of revenue growth for the three months ended March 31, 2024 were as follows:

Current wording

Net revenues for the three months ended June 30, 2024 were $1,716.8 as compared to $1,531.2 for the three months ended June 30, 2023, an increase of 12.1%. The components of revenue growth for the three months ended June 30, 2024 were as follows:

Previous wording

In our Application Software segment, net revenues in the first quarter of 2024 were $895.2 as compared to $761.4 in the first quarter of 2023. The growth of 5.7% in organic revenues was broad-based across the segment led by our businesses serving the property and casualty insurance, project-based private sector, acute healthcare, and legal markets. Gross margin increased to 69.9% in the first quarter of 2024 as compared to 68.4% in the first quarter of 2023 due primarily to operating leverage on higher organic revenues. Selling, general and administrative (“SG&A”) expenses as a percentage of net revenues increased marginally to 43.1% in the first quarter of 2024 as compared to 43.0% in the first quarter of 2023 due primarily to higher amortization of acquired intangibles from the acquisitions of Syntellis and Procare, almost entirely offset by operating leverage on higher organic revenues. The resulting operating margin was 26.8% in the first quarter of 2024 as compared to 25.4% in the first quarter of 2023.

Current wording

In our Application Software segment, net revenues in the second quarter of 2024 were $931.8 as compared to $770.3 in the second quarter of 2023. The growth of 4.8% in organic revenues was broad-based across the segment led by our businesses serving the acute healthcare, legal, and project-based private sector markets. Gross margin remained relatively consistent at 68.8% in the second quarter of 2024 as compared to 68.9% in the second quarter of 2023. Selling, general and administrative (“SG&A”) expenses as a percentage of net revenues decreased to 41.9% in the second quarter of 2024 as compared to 42.8% in the second quarter of 2023 due primarily to operating leverage on higher organic revenues, partially offset by higher amortization of acquired intangibles from the acquisitions of Syntellis and Procare. The resulting operating margin was 26.9% in the second quarter of 2024 as compared to 26.1% in the second quarter of 2023.

Previous wording

In our Network Software segment, net revenues in the first quarter of 2024 were $370.8 as compared to $354.5 in the first quarter of 2023. The growth of 4.5% in organic revenues was led by our network software businesses serving the alternate site healthcare, life insurance/financial services, and construction markets, partially offset by a decline in our businesses serving the media and entertainment and freight match markets. Gross margin increased to 85.3% in the first quarter of 2024 as compared to 84.5% in the first quarter of 2023 due primarily to operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues decreased to 40.3% in the first quarter of 2024 as compared to 42.8% in the first quarter of 2023 due primarily to expense reductions resulting from cost structure rationalization at our businesses serving the freight match market and operating leverage on higher organic revenues. As a result, operating margin was 45.0% in the first quarter of 2024 as compared to 41.6% in the first quarter of 2023.

Current wording

In our Network Software segment, net revenues in the second quarter of 2024 were $364.2 as compared to $358.1 in the second quarter of 2023. The growth of 1.8% in organic revenues was led by our network software businesses serving the life insurance/financial services, alternate site healthcare, and construction markets, partially offset by a decline in our businesses serving the freight match and media and entertainment markets. Gross margin decreased to 84.5% in the second quarter of 2024 as compared to 84.9% in the second quarter of 2023 due primarily to revenue mix. SG&A expenses as a percentage of net revenues decreased to 40.8% in the second quarter of 2024 as compared to 42.1% in the second quarter of 2023 due primarily to expense reductions resulting from cost structure rationalization at our businesses serving the freight match market and operating leverage on higher organic revenues. As a result, operating margin was 43.7% in the second quarter of 2024 as compared to 42.8% in the second quarter of 2023.

Previous wording

Corporate expenses increased to $61.5, or 3.7% of net revenues, in the first quarter of 2024 as compared to $55.2, or 3.8% of net revenues, in the first quarter of 2023. The dollar increase was due primarily to higher stock-based compensation.

Current wording

Corporate expenses increased to $62.7, or 3.7% of net revenues, in the second quarter of 2024 as compared to $58.1, or 3.8% of net revenues, in the second quarter of 2023. The dollar increase was due primarily to higher stock-based compensation expense.

Previous wording

Interest expense, net, increased to $53.2 for the first quarter of 2024 as compared to $37.4 for the first quarter of 2023 due to borrowings on our unsecured credit facility and less interest income earned on our cash and cash equivalents, partially offset by lower weighted average fixed-rate debt balances.

Current wording

Interest expense, net, increased to $67.5 for the second quarter of 2024 as compared to $34.8 for the second quarter of 2023 due to higher borrowings on our unsecured credit facility and less interest income earned on our cash and cash equivalents, partially offset by lower weighted average fixed-rate debt balances.

Previous wording

Other expense, net, of $1.2 and $2.3 for the three months ended March 31, 2024 and 2023, respectively, were both composed primarily of foreign exchange losses at our non-U.S. based subsidiaries.

Current wording

Other expense, net, of $0.6 and $2.8 for the second quarter of 2024 and 2023, respectively, were composed primarily of foreign exchange losses at our non-U.S. based subsidiaries.

Previous wording

Backlog is equal to our remaining performance obligations expected to be recognized as revenue within the next 12 months as discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements. Backlog increased 2% to $2,932.4 at March 31, 2024 as compared to $2,872.5 at March 31, 2023 due primarily to acquisitions, partially offset by a decrease in our Technology Enabled Products segment.

Current wording

Backlog is equal to our remaining performance obligations expected to be recognized as revenue within the next 12 months as discussed in Note 12 of the Notes to Condensed Consolidated Financial Statements. Backlog increased 3.3% to $2,836.4 at June 30, 2024 as compared to $2,746.8 at June 30, 2023 due primarily to acquisitions and organic growth in our Application Software segment, partially offset by a decrease in our Technology Enabled Products segment.

Previous wording

In our Technology Enabled Products segment, net revenues in the first quarter of 2024 were $414.7 as compared to $353.8 in the first quarter of 2023. The growth of 17.1% in organic revenues was led by our medical products businesses and water meter technology business. Gross margin increased to 57.6% in the first quarter of 2024 as compared to 56.2% in the first quarter of 2023 due primarily to operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues increased to 24.8% in the first quarter of 2024 as compared to 23.5% in the first quarter of 2023 due primarily to higher compensation expense associated with medical claims. The resulting operating margin was 32.8% in the first quarter of 2024 as compared to 32.6% in the first quarter of 2023.

Current wording

In our Technology Enabled Products segment, net revenues in the six months ended June 30, 2024 were $835.5 as compared to $756.6 in the six months ended June 30, 2023. The growth of 10.4% in organic revenues was led by our medical products businesses, excluding our precision measurement business, and growth in our water meter technology business. Gross margin increased to 57.9% in the six months ended June 30, 2024 as compared to 57.0% in the six months ended June 30, 2023 due primarily to operating leverage on higher organic revenues. SG&A expenses as a percentage of net revenues increased to 24.0% in the six months ended June 30, 2024 as compared to 23.3% in the six months ended June 30, 2023 due primarily to revenue mix and higher expense associated with medical claims. The resulting operating margin was 33.9% in the six months ended June 30, 2024 as compared to 33.7% in the six months ended June 30, 2023.

Previous wording

Equity investments (gain) loss, net, was a gain of $57.0 for the first quarter of 2024 due primarily to $64.4 associated with the change in fair value of our equity investment in Indicor, partially offset by the proportionate share of net loss associated with our investment in Certinia of $7.6 in accordance with the equity method of accounting. Equity investments (gain) loss, net, was a loss of $1.2 for the first quarter of 2023 related to our equity investment in Indicor.

Current wording

Equity investments (gain) loss, net, was a gain of $56.2 in the six months ended June 30, 2024 due primarily to a $55.1 increase in the fair value of our equity investment in Indicor and $8.4 of dividend distributions received from Indicor, partially offset by our proportionate share of net loss associated with our investment in Certinia of $8.0 in accordance with the equity method of accounting. Equity investments (gain) loss, net, was a gain of $64.8 in the six months ended June 30, 2023 due primarily to a $56.3 increase in the fair value of our equity investment in Indicor and $12.1 of dividend distributions received from Indicor.

Previous wording

Selected cash flows for the three months ended March 31, 2024 and 2023 were as follows:

Current wording

Selected cash flows for the six months ended June 30, 2024 and 2023 were as follows:

Previous wording

Operating activities – Net cash provided by operating activities from continuing operations increased by 14% to $531.5 in the three months ended March 31, 2024 as compared to $464.9 in the three months ended March 31, 2023 primarily due to higher net earnings from continuing operations net of non-cash expenses.

Current wording

Operating activities – Net cash provided by operating activities from continuing operations increased by 17% to $915.6 in the six months ended June 30, 2024 as compared to $785.0 in the six months ended June 30, 2023 primarily due to higher net earnings from continuing operations net of non-cash expenses and increased collections on accounts receivable, partially offset by higher cash taxes paid.

Previous wording

Investing activities – Cash used in investing activities from continuing operations during the three months ended March 31, 2024 was primarily for the acquisition of Procare. Cash used in investing activities from continuing operations during the three months ended March 31, 2023 was primarily for capitalized software expenditures and capital expenditures.

Current wording

Investing activities – Cash used in investing activities from continuing operations during the six months ended June 30, 2024 was primarily for the acquisition of Procare. Cash used in investing activities from continuing operations during the six months ended June 30, 2023 was primarily for capital expenditures, capitalized software expenditures, and the acquisition of Promium, partially offset by dividend distributions received from Indicor.

Previous wording

Financing activities – Cash provided by financing activities during the three months ended March 31, 2024 was primarily from net borrowings on our unsecured credit facility to fund the acquisition of Procare, partially offset by dividend payments. Cash used in financing activities during the three months ended March 31, 2023 was primarily for dividend payments.

Current wording

Financing activities – Cash provided by financing activities during the six months ended June 30, 2024 was primarily from net borrowings on our unsecured credit facility to fund the acquisition of Procare, and net proceeds from stock-based compensation, partially offset by dividend payments. Cash used in financing activities during the six months ended June 30, 2023 was primarily for dividend payments, partially offset by net proceeds from stock-based compensation.

Previous wording

The interest rate on borrowings under the $3,500.0 unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At March 31, 2024, we had $1,750.0 of borrowings outstanding under our unsecured credit facility and $7.4 of outstanding letters of credit.

Current wording

The interest rate on borrowings under the $3,500.0 unsecured credit facility is calculated based upon various recognized indices plus a margin as defined in the credit agreement. At June 30, 2024, we had $1,450.0 of borrowings outstanding under our unsecured credit facility and $6.8 of outstanding letters of credit.

Previous wording

In relation to our total cash and cash equivalents, amounts held at our foreign subsidiaries represented 76.3% or $151.3 at March 31, 2024 as compared to 69.2% or $148.3 at December 31, 2023. The dollar increase was due primarily to the cash generated at our foreign subsidiaries during the three months ended March 31, 2024, partially offset by cash repatriation of $81.2. We intend to repatriate substantially all historical and future earnings.

Current wording

In relation to our total cash and cash equivalents, amounts held at our foreign subsidiaries represented 52.1% or $131.0 at June 30, 2024 as compared to 69.2% or $148.3 at December 31, 2023. The decrease in foreign cash was due primarily to repatriation of $153.2, partially offset by the cash generated at our foreign subsidiaries during the six months ended June 30, 2024. We intend to repatriate substantially all historical and future earnings.

Previous wording

We were in compliance with all debt covenants related to our unsecured credit facility throughout the three months ended March 31, 2024.

Current wording

We were in compliance with all debt covenants related to our unsecured credit facility throughout the six months ended June 30, 2024.

Previous wording

Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was negative $1,182.5 at March 31, 2024 as compared to negative $1,196.6 at December 31, 2023 primarily driven by payments for accrued compensation, the reduction in deferred revenue predominantly due to the timing of SaaS renewals associated with Frontline, and payment timing associated with prepaid expenses included within other current assets, partially offset by changes in income tax-related balances and a decrease in accounts receivable. Total debt, net of deferred financing costs was $7,722.0 at March 31, 2024 as compared to $6,330.1 at December 31, 2023. Our leverage on a continuing operations basis is presented in the following table:

Current wording

Net working capital (total current assets, excluding cash, less total current liabilities, excluding debt) was negative $1,069.1 at June 30, 2024 as compared to negative $1,196.6 at December 31, 2023 primarily driven by the reduction in deferred revenue predominantly due to the timing of SaaS renewals associated with Frontline, payments for accrued compensation, and payment timing associated with prepaid expenses included within other current assets, partially offset by increased collections on accounts receivable. Total debt, net of deferred financing costs was $7,423.9 at June 30, 2024 as compared to $6,330.1 at December 31, 2023. Our leverage on a continuing operations basis is presented in the following table:

Previous wording

Capital expenditures were $9.3 for the three months ended March 31, 2024 as compared to $9.8 for the three months ended March 31, 2023. Capitalized software expenditures were $9.6 for the three months ended March 31, 2024 as compared to $9.9 for the three months ended March 31, 2023. We expect the aggregate of capital expenditures and capitalized software expenditures for 2024 to be relatively comparable to prior years as a percentage of net revenues.

Current wording

Capital expenditures were $15.9 for the six months ended June 30, 2024 as compared to $24.9 for the six months ended June 30, 2023. Capitalized software expenditures were $20.5 for the six months ended June 30, 2024 as compared to $19.3 for the six months ended June 30, 2023. We expect the aggregate of capital expenditures and capitalized software expenditures for 2024 to be comparable to prior years as a percentage of net revenues.

Previous wording

Current geopolitical and economic uncertainties, including the current inflationary environment, supply chain disruptions, and labor shortages, could adversely affect our business prospects. An armed conflict (such as the ongoing war in Ukraine, as well as the conflict in the Middle East), significant terrorist attack, other global conflict, or public health crisis could cause changes in world economies that would adversely affect us. It is impossible to isolate each of these potential factor’s future effects on current economic conditions or any of our businesses. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also would similarly disrupt the economy and have an adverse impact on our businesses.

Current wording

Current geopolitical and economic uncertainties, including the current inflationary environment, supply chain disruptions, and labor shortages, could adversely affect our business prospects. An armed conflict (such as the ongoing war in Ukraine, as well as the conflict in the Middle East), significant terrorist attack, other global conflict, widespread cybersecurity event or information technology failure, or public health crisis could cause changes in world economies that would adversely affect us. It is impossible to isolate each of these potential factor’s future effects on current economic conditions or any of our businesses. It is also impossible to predict with any reasonable degree of certainty what or when any additional events may occur that also would similarly disrupt the economy and have an adverse impact on our businesses.