01—Abstract
Summary
Summary of the 10-K filed February 22, 2021. Cited figures are marked; the original filing is the authoritative source.
Roper Technologies, Inc. (NYSE: ROP) reported net revenues of $5,527.1 milliona for 2020, up from $5,366.8 million in 2019, an increase of 3.0%.
The company describes itself as a diversified technology company operating software (license and SaaS) and engineered products businesses across four segments: Application Software, Network Software & Systems, Measurement & Analytical Solutions, and Process Technologies. Net earnings fell to $949.7 millionb from $1,767.9 million, largely because 2019 included an $920.7 million pretax gain on the sale of the Imaging businesses and Gatan. Income from operations declined to $1,431.1 million from $1,498.4 million, and diluted EPS was $8.98 versus $16.82.
The defining event of 2020 was capital deployment: Roper spent $6 billionc on acquisitions, including about $5.4 billion for Vertafore, Inc., a SaaS provider to the property and casualty insurance industry. Funding came largely from $3,300.0 million of senior notes and $1,620.0 million of revolver borrowings, which pushed total debt to $9,566.5 million (net of issuance costs) from $5,275.3 million a year earlier. Goodwill rose to $14,395.2 million, representing 60% of total assets of $24,024.8 million, and the company stated its commitment to reducing debt.
Operating cash flow was $1,525.1 milliond, up from $1,461.8 million, and the dividend was raised to $0.5625 per quarter from $0.5125, the twenty-eighth consecutive annual increase. The filing also discloses a data security incident at Vertafore, in which three data files containing Texas driver's license information were accessed without authorization, leading to three putative class actions that the company is vigorously defending.
02—Key points
Key Highlights
- Net revenues rose 3.0% to $5,527.1 million in 2020, with a 3.9% net acquisition contribution and an organic decline of 1.0%.
- Net earnings fell to $949.7 million from $1,767.9 million, reflecting the absence of the 2019 gains on the disposal of the Imaging businesses and Gatan.
- Roper deployed $6 billion on acquisitions in 2020, including approximately $5.4 billion for Vertafore, Inc.
- Total debt rose to $9,566.5 million at year-end 2020, funded by $3,300.0 million of new senior notes and $1,620.0 million of revolver borrowings; the company stated it remains committed to reducing debt.
- Backlog increased 27% to $2,516.1 million, with organic growth of 3% and acquisitions contributing 24%.
- Process Technologies revenue fell 21% to $518.7 million, all organic, driven by lower upstream oil and gas demand and COVID-19 effects.
- The quarterly dividend was increased to $0.5625 per share from $0.5125, the twenty-eighth consecutive year of dividend increases.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Roper Technologies kept $0.24.
- Revenue$4.02B100.0%
- Cost of revenue−$1.19B29.7%
- Gross profit$2.83B70.3%
- Operating costs−$1.75B43.4%
- Operating income$1.08B26.9%
- Interest, other & tax−$133.2M3.3%
- Net income$949.7M23.6%
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 22, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $4.02B$4.73B | −14.9% |
| Cost of Revenue | $1.19B$1.59B | −24.8% |
| Gross Profit | $2.83B$3.14B | −9.9% |
| R&D Expenses | $382.40M$379.70M | +0.7% |
| SG&A Expenses | $1.75B$1.81B | −3.7% |
| Operating Income | $1.08B$1.33B | −18.5% |
| Interest Expense | $218.50M$186.20M | +17.3% |
| Net Income | $949.70M$1.77B | −46.3% |
| EPS (Basic) | $9.08$17.02 | −46.7% |
| EPS (Diluted) | $8.98$16.82 | −46.6% |
| Shares Outstanding (Basic) | 104.60M103.90M | +0.7% |
| Shares Outstanding (Diluted) | 105.70M105.10M | +0.6% |
05—Questions
Frequently Asked Questions
Why did net earnings decline so sharply in 2020?
Net earnings were $949.7 million in 2020 versus $1,767.9 million in 2019. The 2019 results included a pretax gain of $920.7 million on the disposal of the Imaging businesses ($119.6 million) and Gatan ($801.1 million). Income from operations was $1,431.1 million, down from $1,498.4 million, and 2020 also included $218.9 million of net interest expense.
How is Roper financing its acquisitions, and how has its debt changed?
In 2020 Roper issued $3,300.0 million of senior unsecured notes and drew $1,620.0 million on its revolver, while repaying $600.0 million of 3.000% notes. Total debt excluding unamortized issuance costs was $9,626.2 million, or 47.9% of total capital, compared with $5,307.7 million, or 35.9%, at December 31, 2019. The new three-year $3,000.0 million revolving credit facility requires a Total Debt to Total Capital Ratio of 0.65 to 1.00 or less.
What is the Vertafore data incident, and what is the potential exposure?
Vertafore announced in November 2020 that, due to human error, three data files containing Texas driver license information were stored in an unsecured external storage service and appear to have been accessed without authorization. Three putative class actions have been filed, and the Texas Attorney General is investigating. Management believes adequate provision has been made for potential liabilities not covered by insurance, and the company is vigorously defending the matters.
How much of Roper's business is exposed to international markets and currency risk?
For 2020, 19% of net revenues and 15% of long-lived assets, excluding goodwill and intangibles, were attributable to operations outside the U.S. Revenue from companies with a non-U.S. dollar functional currency was 16% of total revenues, and 74% of those revenues were recognized by companies with a European functional currency. The filing states that a 10% currency movement would have affected net earnings by approximately 1%.
How did the company's segments perform in 2020?
Application Software revenue rose to $1,799.9 million, with a 26.0% operating margin. Network Software & Systems revenue rose to $1,738.6 million, but its operating margin fell to 31.6% from 35.2%. Measurement & Analytical Solutions revenue fell to $1,469.9 million from $1,596.4 million, though its operating margin improved to 32.2%. Process Technologies revenue fell to $518.7 million, with its operating margin declining to 25.4% from 34.6%.
06—Continue