01—Abstract
Summary
Summary of the 10-Q filed August 1, 2024. Cited figures are marked; the original filing is the authoritative source.
Roper Technologies, Inc. reported net revenues of $1,716.8 milliona for the three months ended June 30, 2024, compared with $1,531.2 million a year earlier, and $3,397.5 million for the six months, compared with $3,000.9 million.
Income from operations was $494.2 millionb for the quarter versus $435.3 million in the prior-year quarter. Net earnings were $337.1 million for the quarter, down from $364.9 million, which included $3.9 million from discontinued operations in 2023. Diluted EPS was $3.12 for the quarter versus $3.40 a year earlier.
The decline in net earnings was driven mainly by higher interest expense of $67.5 millionc (versus $34.8 million) and an equity investment gain of $66.0 million in the prior-year quarter that did not recur. Segment results were broadly positive. Application Software revenue rose 21.0% for the quarter, with organic growth of 4.8% and acquisitions contributing 16.2%, led by the Procare acquisition completed February 26, 2024 for a purchase price of $1,860.0 million net of cash acquired.
Network Software revenue grew 1.7%, with organic growth of 1.8%, and Technology Enabled Products grew 4.5%, with organic growth of 4.7%. Backlog increased 3.3% to $2,836.4 milliond at June 30, 2024. The balance sheet reflects heavier leverage.
Total debt, net of deferred financing costs, rose to $7,423.9 million from $6,330.1 million at year-end 2023, mainly from $1,090.0 million of net revolver borrowings used to fund the acquisition. Net debt to total net capital was 28.3%, up from 26.0%.
Operating cash flow from continuing operations for the six months was $915.6 million, compared with $785.0 million in the prior year. The company also disclosed a pending lawsuit against subsidiary PowerPlan, Inc. in which the plaintiff claims damages of approximately $66 million, and management believes the ultimate liability should not have a material adverse effect.
02—Key points
Key Highlights
- Net revenues rose 12.1% to $1,716.8 million for Q2 2024, with acquisitions contributing 8.1 percentage points and organic growth of 4.1%.
- Net earnings declined to $337.1 million from $364.9 million, and diluted EPS fell to $3.12 from $3.40, as interest expense, net, more than doubled to $67.5 million.
- Application Software segment revenue grew 21.0% in Q2, with 4.8% organic growth and an operating margin of 26.9%, including the Procare acquisition.
- Total debt, net of deferred financing costs, increased to $7,423.9 million from $6,330.1 million at December 31, 2023, and net debt to total net capital rose to 28.3%.
- Six-month operating cash flow from continuing operations increased to $915.6 million from $785.0 million.
- Total remaining performance obligations were $4,277.7 million, with $2,836.4 million (approximately 66%) expected to be recognized in the next 12 months.
- A pending antitrust and deceptive trade practices suit against subsidiary PowerPlan, Inc. seeks damages of approximately $66 million; management believes it should not have a material adverse effect.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Roper Technologies kept $0.20.
- Revenue$1.72B100.0%
- Cost of revenue−$523.5M30.5%
- Gross profit$1.19B69.5%
- Operating costs−$699.1M40.7%
- Operating income$494.2M28.8%
- Interest, other & tax−$157.1M9.2%
- Net income$337.1M19.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 1, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $1.72B$1.53B | +12.1% |
| Cost of Revenue | $523.50M$464.10M | +12.8% |
| Gross Profit | $1.19B$1.07B | +11.8% |
| SG&A Expenses | $699.10M$631.80M | +10.7% |
| Operating Income | $494.20M$435.30M | +13.5% |
| Interest Expense | $67.50M$34.80M | +94.0% |
| Net Income | $337.10M$364.90M | −7.6% |
| EPS (Basic) | $3.15$3.42 | −7.9% |
| EPS (Diluted) | $3.12$3.40 | −8.2% |
| Shares Outstanding (Basic) | 107.10M106.60M | +0.5% |
| Shares Outstanding (Diluted) | 107.90M107.40M | +0.5% |
05—Questions
Frequently Asked Questions
Why did net earnings decline despite higher revenue?
Interest expense, net, rose to $67.5 million in Q2 2024 from $34.8 million, reflecting higher borrowings on the unsecured credit facility and lower interest income on cash. The prior-year quarter also benefited from a $66.0 million equity investment gain, compared with a $0.8 million loss in 2024, and included $3.9 million from discontinued operations.
What drove the revenue increase?
Acquisitions contributed 8.1 percentage points of the 12.1% Roper revenue growth in Q2 2024, with organic growth of 4.1%. Application Software was the main driver, with 21.0% total growth including 16.2 points from acquisitions and 4.8% organic growth, broadly led by its acute healthcare, legal, and project-based private sector businesses.
How was the Procare acquisition financed and what does it add?
Roper acquired Genesis Ultimate Holding Co., parent of Procare Software, LLC, on February 26, 2024 for $1,860.0 million net of cash acquired. The company recorded $1,208.2 million of goodwill and $762.0 million of other identifiable intangibles. Net revolver borrowings of $1,090.0 million in the six months funded the deal, and the results are reported in the Application Software segment.
What is the outlook for debt reduction?
Roper anticipates that its businesses will generate positive operating cash flows that will permit reduction of outstanding debt under the repayment schedule. The company notes that the pace of debt reduction and associated interest expense will depend on acquisition financing needs, existing company performance, and geopolitical and economic conditions. Cash and cash equivalents were $251.5 million at June 30, 2024, and the company stated these resources plus its credit facility should be sufficient for foreseeable operating requirements.
What legal risk should investors be aware of?
PowerPlan, Inc., a subsidiary, is a defendant in Lucasys Inc. v. PowerPlan, Inc., alleging anticompetitive practices under federal antitrust law and violations of Georgia's deceptive trade practices act. The plaintiff claims damages of approximately $66 million, seeks treble and punitive damages, and cross-motions for summary judgment are pending. PowerPlan strongly denies the allegations, and management believes any ultimate liability should not have a material adverse effect.
06—Continue