filings.toolsItem 1. FINANCIAL STATEMENTS
77K characters. Original on sec.gov · Markdown
Item 1. FINANCIAL STATEMENTS
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (unaudited)
(in millions, except per share data)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenues | $ | 1,310.8 | $ | 1,189.8 | $ | 2,590.6 | $ | 2,345.1 | |||||||||||||||
| Cost of sales | 399.3 | 350.6 | 781.9 | 689.6 | |||||||||||||||||||
| Gross profit | 911.5 | 839.2 | 1,808.7 | 1,655.5 | |||||||||||||||||||
| Selling, general and administrative expenses | 548.6 | 523.0 | 1,089.9 | 1,021.7 | |||||||||||||||||||
| Income from operations | 362.9 | 316.2 | 718.8 | 633.8 | |||||||||||||||||||
| Interest expense, net | 44.7 | 59.5 | 97.3 | 120.0 | |||||||||||||||||||
| Other (expense) income, net | (1.3) | (0.2) | (3.4) | 27.1 | |||||||||||||||||||
| Earnings before income taxes | 316.9 | 256.5 | 618.1 | 540.9 | |||||||||||||||||||
| Income taxes | 91.9 | 52.1 | 156.7 | 113.5 | |||||||||||||||||||
| Net earnings from continuing operations | 225.0 | 204.4 | 461.4 | 427.4 | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | 54.5 | 81.9 | 121.3 | 147.9 | |||||||||||||||||||
| Gain / (loss) on disposition of discontinued operations, net of tax | (10.7) | — | 1,706.6 | — | |||||||||||||||||||
| Net earnings from discontinued operations | 43.8 | 81.9 | 1,827.9 | 147.9 | |||||||||||||||||||
| Net earnings | $ | 268.8 | $ | 286.3 | $ | 2,289.3 | $ | 575.3 | |||||||||||||||
| Net earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | 2.13 | $ | 1.94 | $ | 4.36 | $ | 4.06 | |||||||||||||||
| Diluted | $ | 2.11 | $ | 1.92 | $ | 4.32 | $ | 4.03 | |||||||||||||||
| Net earnings per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | 0.41 | $ | 0.78 | $ | 17.28 | $ | 1.41 | |||||||||||||||
| Diluted | $ | 0.41 | $ | 0.77 | $ | 17.12 | $ | 1.39 | |||||||||||||||
| Net earnings per share: | |||||||||||||||||||||||
| Basic | $ | 2.54 | $ | 2.72 | $ | 21.64 | $ | 5.47 | |||||||||||||||
| Diluted | $ | 2.52 | $ | 2.69 | $ | 21.44 | $ | 5.42 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 105.9 | 105.3 | 105.8 | 105.1 | |||||||||||||||||||
| Diluted | 106.8 | 106.4 | 106.8 | 106.2 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(in millions)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net earnings | $ | 268.8 | $ | 286.3 | $ | 2,289.3 | $ | 575.3 | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (81.8) | 17.3 | (104.7) | 31.9 | |||||||||||||||||||
| Total other comprehensive income (loss), net of tax | (81.8) | 17.3 | (104.7) | 31.9 | |||||||||||||||||||
| Comprehensive income | $ | 187.0 | $ | 303.6 | $ | 2,184.6 | $ | 607.2 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in millions)
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 2,879.1 | $ | 351.5 | |||||||
| Accounts receivable, net | 628.5 | 687.6 | |||||||||
| Inventories, net | 92.5 | 69.2 | |||||||||
| Income taxes receivable | 21.2 | 16.8 | |||||||||
| Unbilled receivables | 105.4 | 81.9 | |||||||||
| Other current assets | 154.0 | 136.1 | |||||||||
| Current assets held for sale | 1,111.3 | 1,078.0 | |||||||||
| Total current assets | 4,992.0 | 2,421.1 | |||||||||
| Property, plant and equipment, net | 77.3 | 82.7 | |||||||||
| Goodwill | 13,566.6 | 13,476.3 | |||||||||
| Other intangible assets, net | 6,300.7 | 6,509.1 | |||||||||
| Deferred taxes | 46.3 | 50.0 | |||||||||
| Other assets | 367.4 | 369.8 | |||||||||
| Assets held for sale | — | 804.9 | |||||||||
| Total assets | $ | 25,350.3 | $ | 23,713.9 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY: | |||||||||||
| Accounts payable | $ | 128.8 | $ | 98.3 | |||||||
| Accrued compensation | 201.4 | 261.9 | |||||||||
| Deferred revenue | 1,105.2 | 1,106.3 | |||||||||
| Other accrued liabilities | 388.0 | 398.7 | |||||||||
| Income taxes payable | 310.4 | 117.3 | |||||||||
| Current portion of long-term debt, net | 799.9 | 799.2 | |||||||||
| Current liabilities held for sale | 232.4 | 340.1 | |||||||||
| Total current liabilities | 3,166.1 | 3,121.8 | |||||||||
| Long-term debt, net of current portion | 6,657.1 | 7,122.6 | |||||||||
| Deferred taxes | 1,408.1 | 1,466.2 | |||||||||
| Other liabilities | 392.5 | 390.1 | |||||||||
| Liabilities held for sale | — | 49.4 | |||||||||
| Total liabilities | 11,623.8 | 12,150.1 | |||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Common stock | 1.1 | 1.1 | |||||||||
| Additional paid-in capital | 2,417.1 | 2,307.8 | |||||||||
| Retained earnings | 11,613.5 | 9,455.6 | |||||||||
| Accumulated other comprehensive loss | (287.8) | (183.1) | |||||||||
| Treasury stock | (17.4) | (17.6) | |||||||||
| Total stockholders' equity | 13,726.5 | 11,563.8 | |||||||||
| Total liabilities and stockholders' equity | $ | 25,350.3 | $ | 23,713.9 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions)
| Six months ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings from continuing operations | $ | 461.4 | $ | 427.4 | |||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities: | |||||||||||
| Depreciation and amortization of property, plant and equipment | 18.7 | 23.5 | |||||||||
| Amortization of intangible assets | 291.3 | 285.8 | |||||||||
| Amortization of deferred financing costs | 6.3 | 6.8 | |||||||||
| Non-cash stock compensation | 61.2 | 61.5 | |||||||||
| Gain on sale of assets, net of tax | — | (21.6) | |||||||||
| Income tax provision, excluding tax associated with gain on sale of assets | 156.7 | 108.1 | |||||||||
| Changes in operating assets and liabilities, net of acquired businesses: | |||||||||||
| Accounts receivable | 55.2 | 41.7 | |||||||||
| Unbilled receivables | (24.7) | (14.1) | |||||||||
| Inventories | (23.7) | 1.2 | |||||||||
| Accounts payable | 30.9 | 24.3 | |||||||||
| Other accrued liabilities | (64.7) | (16.4) | |||||||||
| Deferred revenue | 38.6 | 39.9 | |||||||||
| Cash tax paid for gain on disposal of businesses | (377.9) | — | |||||||||
| Cash income taxes paid | (279.4) | (137.3) | |||||||||
| Other, net | (18.9) | (25.3) | |||||||||
| Cash provided by operating activities from continuing operations | 331.0 | 805.5 | |||||||||
| Cash provided by operating activities from discontinued operations | 80.1 | 179.6 | |||||||||
| Cash provided by operating activities | 411.1 | 985.1 | |||||||||
| Cash flows from (used in) investing activities: | |||||||||||
| Acquisitions of businesses, net of cash acquired | (258.9) | (15.5) | |||||||||
| Capital expenditures | (13.7) | (12.8) | |||||||||
| Capitalized software expenditures | (15.0) | (15.3) | |||||||||
| Proceeds from sale of assets | — | 27.1 | |||||||||
| Other, net | — | (1.6) | |||||||||
| Cash used in investing activities from continuing operations | (287.6) | (18.1) | |||||||||
| Proceeds from disposition of discontinued operations | 2,995.9 | — | |||||||||
| Cash used in investing activities from discontinued operations | (3.3) | (4.1) | |||||||||
| Cash provided by (used in) investing activities | 2,705.0 | (22.2) | |||||||||
| Cash flows from (used in) financing activities: | |||||||||||
| Borrowings (payments) under revolving line of credit, net | (470.0) | (870.0) | |||||||||
| Cash dividends to stockholders | (130.7) | (117.8) | |||||||||
| Proceeds from stock-based compensation, net | 40.9 | 45.2 | |||||||||
| Treasury stock sales | 8.5 | 8.2 | |||||||||
| Other | (0.2) | (0.1) | |||||||||
| Cash flows used in financing activities from continuing operations | (551.5) | (934.5) | |||||||||
| Cash flows used in financing activities from discontinued operations | (11.4) | (0.1) | |||||||||
| Cash flows used in financing activities | (562.9) | (934.6) | |||||||||
| (Continued) | |||||||||||
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited) - Continued
(in millions)
| Six months ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Effect of foreign currency exchange rate changes on cash | (25.6) | 1.2 | |||||||||
| Net increase in cash and cash equivalents | 2,527.6 | 29.5 | |||||||||
| Cash and cash equivalents, beginning of period | 351.5 | 308.3 | |||||||||
| Cash and cash equivalents, end of period | $ | 2,879.1 | $ | 337.8 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
(in millions)
| Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total stockholders’ equity | ||||||||||||||||||||||||||||||
| Balances at March 31, 2022 | $ | 1.1 | $ | 2,363.9 | $ | 11,410.4 | $ | (206.0) | $ | (17.5) | $ | 13,551.9 | |||||||||||||||||||||||
| Net earnings | — | — | 268.8 | — | — | 268.8 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 24.2 | — | — | — | 24.2 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 2.9 | — | — | 0.1 | 3.0 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | (81.8) | — | (81.8) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 30.4 | — | — | — | 30.4 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (4.3) | — | — | — | (4.3) | |||||||||||||||||||||||||||||
| Dividends declared ($0.62 per share) | — | — | (65.7) | — | — | (65.7) | |||||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | 1.1 | $ | 2,417.1 | $ | 11,613.5 | $ | (287.8) | $ | (17.4) | $ | 13,726.5 | |||||||||||||||||||||||
| Balances at December 31, 2021 | $ | 1.1 | $ | 2,307.8 | $ | 9,455.6 | $ | (183.1) | $ | (17.6) | $ | 11,563.8 | |||||||||||||||||||||||
| Net earnings | — | — | 2,289.3 | — | — | 2,289.3 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 62.9 | — | — | — | 62.9 | |||||||||||||||||||||||||||||
| Cash settlement of share-based awards in connection with disposition of discontinued operations | — | (11.1) | — | — | — | (11.1) | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 8.3 | — | — | 0.2 | 8.5 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | (104.7) | — | (104.7) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 71.2 | — | — | — | 71.2 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (22.0) | — | — | — | (22.0) | |||||||||||||||||||||||||||||
| Dividends declared ($1.24 per share) | — | — | (131.4) | — | — | (131.4) | |||||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | 1.1 | $ | 2,417.1 | $ | 11,613.5 | $ | (287.8) | $ | (17.4) | $ | 13,726.5 | |||||||||||||||||||||||
| Balances at March 31, 2021 | $ | 1.1 | $ | 2,138.9 | $ | 8,776.0 | $ | (132.4) | $ | (17.9) | $ | 10,765.7 | |||||||||||||||||||||||
| Net earnings | — | — | 286.3 | — | — | 286.3 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 41.9 | — | — | — | 41.9 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 3.4 | — | — | 0.1 | 3.5 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | 17.3 | — | 17.3 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 34.8 | — | — | — | 34.8 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (1.1) | — | — | — | (1.1) | |||||||||||||||||||||||||||||
| Dividends declared ($0.5625 per share) | — | — | (59.2) | — | — | (59.2) | |||||||||||||||||||||||||||||
| Balances at June 30, 2021 | $ | 1.1 | $ | 2,217.9 | $ | 9,003.1 | $ | (115.1) | $ | (17.8) | $ | 11,089.2 | |||||||||||||||||||||||
| Balances at December 31, 2020 | $ | 1.1 | $ | 2,097.5 | $ | 8,546.2 | $ | (147.0) | $ | (18.0) | $ | 10,479.8 | |||||||||||||||||||||||
| Net earnings | — | — | 575.3 | — | — | 575.3 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 61.1 | — | — | — | 61.1 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 8.0 | — | — | 0.2 | 8.2 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | 31.9 | — | 31.9 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 67.2 | — | — | — | 67.2 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (15.9) | — | — | — | (15.9) | |||||||||||||||||||||||||||||
| Dividends declared ($1.1250 per share) | — | — | (118.4) | — | — | (118.4) | |||||||||||||||||||||||||||||
| Balances at June 30, 2021 | $ | 1.1 | $ | 2,217.9 | $ | 9,003.1 | $ | (115.1) | $ | (17.8) | $ | 11,089.2 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
All currency and share amounts are in millions, except per share data
1. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements for the three and six months ended June 30, 2022 and 2021 are unaudited. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations, comprehensive income and cash flows of Roper Technologies, Inc. and its subsidiaries (“Roper,” the “Company,” “we,” “our” or “us”) for all periods presented. The December 31, 2021 financial position data included herein was derived from the audited consolidated financial statements included in the Company’s 2021 Annual Report on Form 10-K (“Annual Report”) filed on February 22, 2022 with the Securities and Exchange Commission (“SEC”) but does not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”).
Roper’s management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Condensed Consolidated Financial Statements in conformity with GAAP. Actual results could differ from those estimates.
The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year. You should read these unaudited Condensed Consolidated Financial Statements in conjunction with Roper’s audited consolidated financial statements and the notes thereto included in its Annual Report. Certain prior period amounts have been reclassified to conform to current period presentation.
Discontinued Operations
During the second quarter of 2022, the Company entered into a definitive agreement to sell a majority equity stake in our industrial businesses, including its entire historical Process Technologies reportable segment and the industrial businesses within its historical Measurement & Analytical Solutions reportable segment, to affiliates of Clayton, Dubilier & Rice, LLC. The businesses included in this transaction are Alpha, AMOT, CCC, Cornell, Dynisco, FTI, Hansen, Hardy, Logitech, Metrix, PAC, Roper Pump, Struers, Technolog, Uson, and Viatran (collectively the “Industrial Businesses”).
During 2021, the Company entered into definitive agreements to divest our TransCore, Zetec and CIVCO Radiotherapy businesses (“2021 Divestitures”). As of March 31, 2022, Roper had completed the 2021 Divestitures.
The financial results for these businesses are presented as discontinued operations for all periods presented. Unless otherwise noted, discussion within these notes to the Condensed Consolidated Financial Statements relate to continuing operations. Refer to Note 5 for additional information on discontinued operations.
Update to Segment Reporting Structure
During the second quarter of 2022, we updated our reportable segment structure following the announcement of the transaction to sell a majority stake in our Industrial Businesses. The Company’s new reporting segment structure is classified based on business model and delivery of performance obligations. The three updated reportable segments (and businesses within each) are as follows:
–Application Software - Aderant, CBORD, CliniSys, Data Innovations, Deltek, IntelliTrans, PowerPlan, Strata, Vertafore
–Network Software - ConstructConnect, DAT, Foundry, iPipeline, iTradeNetwork, Loadlink, MHA, SHP, SoftWriters
–Technology Enabled Products - CIVCO Medical Solutions, FMI, Inovonics, IPA, Neptune, Northern Digital, rf IDEAS, Verathon
The day-to-day operations of our businesses, our organizational structure, and our strategy remain unchanged. All prior periods have been recast to reflect the changes noted above.
2. Recent Accounting Pronouncements
The Financial Accounting Standards Board (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any recent ASUs were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s results of operations, financial position or cash flows.
3. Weighted Average Shares Outstanding
Basic earnings per share were calculated using net earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share were calculated using net earnings and the weighted average number of shares of common stock and potential common stock outstanding during the respective period. Potentially dilutive common stock consisted of stock options based upon the trading price of Roper’s common stock. The effects of potential common stock were determined using the treasury stock method. Weighted average shares outstanding are shown below:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Basic shares outstanding | 105.9 | 105.3 | 105.8 | 105.1 | |||||||||||||||||||
| Effect of potential common stock: | |||||||||||||||||||||||
| Common stock awards | 0.9 | 1.1 | 1.0 | 1.1 | |||||||||||||||||||
| Diluted shares outstanding | 106.8 | 106.4 | 106.8 | 106.2 |
For both the three and six months ended June 30, 2022, there were 0.819 outstanding stock options that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 0.525 and 0.531 outstanding stock options that would have been antidilutive in the respective 2021 periods.
4. Business Acquisitions and Disposition
On January 3, 2022, Roper acquired the outstanding membership interests of Horizon Lab Systems, LLC, a provider of laboratory information management systems in the toxicology, environmental, public health and agricultural markets for an aggregate purchase price of $49.8.
On April 6, 2022, Roper acquired the issued and outstanding shares of Common Cents Systems, Inc. (“ApolloLIMS”) for a purchase price of $25.5, net of cash acquired and debt assumed. ApolloLIMS is a provider of laboratory information management systems in the toxicology and public health markets.
Both of these acquisitions have been integrated into our CliniSys business and their results are reported in the Application Software reportable segment.
On June 27, 2022, Roper acquired the issued and outstanding shares of MGA Systems Holdings, Inc., (“MGA”) for a purchase price of $180.1, net of cash acquired and debt assumed. MGA is a leading provider of purpose-built insurance software for managing general agents. This acquisition will be integrated into our Vertafore business and its results are reported in the Application Software reportable segment.
The Company recorded $162.0 in goodwill, $4.8 assigned to trade names that are not subject to amortization and $111.9 of other identifiable intangibles in connection with these acquisitions. The amortizable intangible assets include customer relationships of $103.7 (16.4 year weighted average useful life) and technology of $8.2 (5 year weighted average useful life).
The results of operations of the acquired businesses are included in Roper’s Condensed Consolidated Financial Statements since the date of acquisition. Pro forma results of operations and the revenue and net income subsequent to the acquisition date has not been presented because the effects of the acquisitions were not material to our financial results.
Disposition
On March 17, 2021, Roper completed the sale of a minority investment in Sedaru, Inc. for $27.1. The pretax gain on the sale was $27.1, which is reported in “Other (expense) income, net” in the Condensed Consolidated Statements of Earnings.
5. Discontinued Operations
The Company concluded that both the 2021 Divestitures and the sale of the Industrial Businesses each represented a strategic shift that will have a major effect on the Company’s operations and financial results. These transactions will greatly reduce the cyclicality and asset intensity of the Company. In addition, the Company will have an improved recurring revenue and higher margin profile. Accordingly, the financial results related to the 2021 Divestitures and the Industrial Businesses are presented in the Condensed Consolidated Financial Statements as discontinued operations for all periods presented. Current and non-current assets and liabilities of the 2021 Divestitures and Industrial Businesses are presented in the Condensed Consolidated Balance Sheets as assets and liabilities of discontinued operations classified as held for sale for both periods presented, as applicable.
2021 Divestitures - During 2021, the Company signed definitive agreements to divest our TransCore, Zetec and CIVCO Radiotherapy businesses as described below.
-
On March 17, 2022, Roper closed on the divestiture of our TransCore business to an affiliate of Singapore Technologies Engineering Ltd., for approximately $2,680.0 in cash. The sale resulted in a pretax gain of $2,073.7 and income tax expense of $550.5, which are reported within “Gain/(loss) on disposition of discontinued operations, net of tax” in the Condensed Consolidated Statements of Earnings. TransCore was previously included in the historical Network Software & Systems reportable segment.
-
On January 5, 2022, Roper closed on the divestiture of our Zetec business to Eddyfi NDT Inc. for approximately $350.0 in cash. The sale resulted in a pretax gain of $255.3 and income tax expense of $60.9, which are reported within “Gain/(loss) on disposition of discontinued operations, net of tax” in the Condensed Consolidated Statements of Earnings. Zetec was previously included in the historical Process Technologies reportable segment.
-
On November 1, 2021, Roper closed the divestiture of our CIVCO Radiotherapy business to an affiliate of Blue Wolf Capital Partners LLC. CIVCO Radiotherapy business was previously included in the historical Measurement & Analytical Solutions reportable segment.
The following tables summarize the major classes of assets and liabilities related to the discontinued operations of the TransCore, Zetec and CIVCO Radiotherapy businesses, as reported in the Condensed Consolidated Balance Sheets at December 31, 2021:
| December 31, 2021 | |||||
| Accounts receivable, net | $ | 74.7 | |||
| Inventories, net | 47.8 | ||||
| Unbilled receivables | 158.2 | ||||
| Goodwill | 405.5 | ||||
| Other intangible assets, net | 31.0 | ||||
| Other current assets | 71.4 | ||||
| Current assets held for sale | $ | 788.6 | |||
| Accounts payable | $ | 40.3 | |||
| Accrued compensation | 27.0 | ||||
| Deferred taxes | 29.5 | ||||
| Other current liabilities | 62.3 | ||||
| Current liabilities held for sale | $ | 159.1 | |||
The following table summarizes the major classes of revenue and expenses constituting net income from discontinued operations attributable to the TransCore, Zetec and CIVCO Radiotherapy businesses:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenues | $ | — | $ | 161.0 | $ | 100.4 | $ | 313.5 | |||||||||||||||
| Cost of sales | — | 94.2 | 71.2 | 188.9 | |||||||||||||||||||
| Gross profit | — | 66.8 | 29.2 | 124.6 | |||||||||||||||||||
| Selling, general and administrative expenses (1) | — | 30.3 | 19.9 | 62.2 | |||||||||||||||||||
| Income from operations | — | 36.5 | 9.3 | 62.4 | |||||||||||||||||||
| Other income (expense), net | — | 1.3 | 0.1 | 1.2 | |||||||||||||||||||
| Earnings before income taxes (2) | — | 37.8 | 9.4 | 63.6 | |||||||||||||||||||
| Income taxes | — | 4.5 | (6.2) | 11.2 | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | — | 33.3 | 15.6 | 52.4 | |||||||||||||||||||
| Gain / (loss) on disposition of discontinued operations, net of tax | (10.7) | — | 1,706.6 | — | |||||||||||||||||||
| Net earnings from discontinued operations | $ | (10.7) | $ | 33.3 | $ | 1,722.2 | $ | 52.4 |
(1) Includes stock-based compensation expense of $0.5 for the three months ended June 30, 2021, and $0.9 and $1.8 for the six months ended June 30, 2022 and 2021, respectively. Stock-based compensation for discontinued operations was previously reported as a component of unallocated corporate general and administrative expenses. In connection with the sale of TransCore and Zetec, we recognized expense of $4.5 associated with accelerated vesting of share-based awards for the six months ended June 30, 2022. The charges associated with accelerated vesting were recorded as a component of “Gain/(loss) on disposition of discontinued operations, net of tax” within the Condensed Consolidated Statements of Earnings.
(2) During the three and six months ended June 30, 2022, there was no depreciation of property, plant and equipment or amortization of intangible assets given the asset classification as held for sale during the period. During the three and six months ended June 30, 2021 depreciation and amortization was $1.6 and $3.5, respectively.
Industrial Businesses - On May 29, 2022, Roper entered into a definitive agreement to sell a 51% majority stake in the Industrial Businesses to affiliates of Clayton, Dubilier & Rice, LLC (“CD&R”). Roper will receive total upfront, pre-tax cash proceeds of approximately $2,600 while retaining a 49% minority equity interest in a new standalone entity, RIPIC Equity LLC (“RIPIC TopCo”). Roper will receive a distribution of $1,775 from RIPIC TopCo, which will be funded by third-party indebtedness of $1,950 on RIPIC TopCo, and $829 of purchase price proceeds related to the 51% majority stake obtained by CD&R in RIPIC TopCo. In addition, Roper shall be entitled to an earnout payment from CD&R of up to $51 million if RIPIC TopCo exceeds a threshold level of earnings before interest, taxes, depreciation and amortization for the year ended December 31, 2022. Roper will also be required to make quarterly payments, directly or indirectly to CD&R, either (i) in cash, with total payments initially equaling approximately $29 million per year on a pre-tax basis, or (ii) in kind through the transfer of Roper’s equity interests in RIPIC TopCo to CD&R, initially representing approximately a 1.7% ownership interest of RIPIC TopCo on an annual basis.
The following tables summarize the major classes of assets and liabilities related to the discontinued operations of the Industrial Businesses, as reported in the Condensed Consolidated Balance Sheets:
| June 30, 2022 (1) | December 31, 2021 | ||||||||||
| Accounts receivable, net | $ | 161.1 | $ | 151.8 | |||||||
| Inventories, net | 133.1 | 106.9 | |||||||||
| Deferred taxes | 48.5 | — | |||||||||
| Goodwill | 597.0 | — | |||||||||
| Other intangible assets, net | 72.8 | — | |||||||||
| Other current assets | 98.8 | 30.7 | |||||||||
| Current assets held for sale | $ | 1,111.3 | $ | 289.4 | |||||||
| Goodwill | — | 618.2 | |||||||||
| Other intangible assets, net | — | 79.4 | |||||||||
| Deferred taxes | — | 51.1 | |||||||||
| Other assets | — | 56.2 | |||||||||
| Assets held for sale | $ | — | $ | 804.9 | |||||||
| Accounts payable | $ | 64.4 | $ | 52.5 | |||||||
| Accrued compensation | 34.7 | 47.9 | |||||||||
| Deferred revenue | 24.5 | 23.9 | |||||||||
| Deferred taxes | 20.1 | — | |||||||||
| Income taxes payable | 13.4 | 14.7 | |||||||||
| Operating lease liabilities | 23.0 | — | |||||||||
| Other current liabilities | 52.3 | 42.0 | |||||||||
| Current liabilities held for sale | $ | 232.4 | $ | 181.0 | |||||||
| Deferred taxes | $ | — | $ | 13.3 | |||||||
| Operating lease liabilities | — | 24.1 | |||||||||
| Other liabilities | — | 12.0 | |||||||||
| Liabilities held for sale | $ | — | $ | 49.4 |
(1) All assets and liabilities held for sale were classified as current as it is probable the sale of the Industrial Businesses will be completed within one year.
The following table summarizes the major classes of revenue and expenses constituting net income from discontinued operations attributable to the Industrial Businesses:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenues | $ | 255.1 | $ | 236.8 | $ | 501.9 | $ | 457.6 | |||||||||||||||
| Cost of sales | 121.4 | 108.7 | 235.3 | 209.8 | |||||||||||||||||||
| Gross profit | 133.7 | 128.1 | 266.6 | 247.8 | |||||||||||||||||||
| Selling, general and administrative expenses (1) | 66.8 | 62.8 | 134.5 | 125.5 | |||||||||||||||||||
| Income from operations | 66.9 | 65.3 | 132.1 | 122.3 | |||||||||||||||||||
| Other income (expense), net | 0.9 | (0.2) | 1.1 | (0.5) | |||||||||||||||||||
| Earnings before income taxes (2) | 67.8 | 65.1 | 133.2 | 121.8 | |||||||||||||||||||
| Income taxes | 13.3 | 16.5 | 27.5 | 26.3 | |||||||||||||||||||
| Earnings from discontinued operations, net of tax | $ | 54.5 | $ | 48.6 | $ | 105.7 | $ | 95.5 | |||||||||||||||
(1) Certain costs previously reported as a component of unallocated corporate general and administrative expenses have been reclassified to discontinued operations. These costs primarily include stock-based compensation expense of $2.6 and $3.4 for the three months ended June 30, 2022 and 2021, respectively, and $5.5 and $6.0 for the six months ended June 30, 2022 and 2021, respectively.
(2) Includes depreciation and amortization expense of $2.5 and $4.8 for the three months ended June 30, 2022 and 2021, respectively, and $6.4 and $9.8 for the six months ended June 30, 2022 and 2021, respectively.
6. Stock Based Compensation
The Roper Technologies, Inc. 2021 Incentive Plan is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to Roper’s employees, officers, directors and consultants.
The following table provides information regarding the Company’s stock-based compensation expense:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Stock-based compensation | $ | 28.2 | $ | 32.5 | $ | 61.2 | $ | 61.5 | |||||||||||||||
| Tax effect recognized in net earnings from continuing operations | 5.9 | 6.8 | 12.9 | 12.9 |
Stock Options - In the six months ended June 30, 2022, 0.373 options were granted with a weighted average fair value of $115.92 per option. During the same period in 2021, 0.504 options were granted with a weighted average fair value of $94.81 per option. All options were issued with an exercise price equal to the closing price of Roper’s common stock on the date of grant, as required by the Company’s stock-based compensation plans.
Roper records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Historical data is used to estimate the expected price volatility, the expected dividend yield, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option.
The following weighted average assumptions were used to estimate the fair value of options granted during current and prior year periods using the Black-Scholes option-pricing model:
| Six months ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Risk-free interest rate (%) | 2.07 | 0.94 | |||||||||
| Expected option life (years) | 5.63 | 5.61 | |||||||||
| Expected volatility (%) | 24.52 | 25.16 | |||||||||
| Expected dividend yield (%) | 0.55 | 0.56 |
Cash received from option exercises for the six months ended June 30, 2022 and 2021 was $62.9 and $61.1, respectively.
Restricted Stock Grants - During the six months ended June 30, 2022, the Company granted 0.236 shares with a weighted average grant date fair value of $451.30 per restricted share. During the same period in 2021, the Company granted 0.216 shares with a weighted average grant date fair value of $406.38 per restricted share. All grants were issued at grant date fair value.
During the six months ended June 30, 2022, 0.147 restricted shares vested with a weighted average grant date fair value of $343.66 per restricted share and a weighted average vest date fair value of $456.79 per restricted share.
Employee Stock Purchase Plan - Roper’s employee stock purchase plan (“ESPP”) allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 10% discount on the lower of the closing price of the stock on the first and last day of each quarterly offering period. Common stock sold to employees pursuant to the ESPP may be either treasury stock, stock purchased on the open market, or newly issued shares.
During the six months ended June 30, 2022 and 2021, participants in the ESPP purchased 0.021 and 0.022 shares of Roper’s common stock for total consideration of $8.5 and $8.2, respectively. All shares were purchased from Roper’s treasury shares.
7. Inventories
The components of inventory were as follows:
| June 30, 2022 | December 31, 2021 | ||||||||||
| Raw materials and supplies | $ | 45.1 | $ | 36.4 | |||||||
| Work in process | 24.9 | 19.1 | |||||||||
| Finished products | 28.9 | 18.4 | |||||||||
| Inventory reserves | (6.4) | (4.7) | |||||||||
| Inventories, net | $ | 92.5 | $ | 69.2 |
8. Goodwill and Other Intangible Assets
The carrying value of goodwill by segment was as follows:
| Application Software | Network Software | Technology Enabled Products | Total | ||||||||||||||||||||||||||
| Balances at December 31, 2021 | $ | 8,889.3 | $ | 3,655.3 | $ | 931.7 | $ | 13,476.3 | |||||||||||||||||||||
| Additions | 162.0 | — | — | 162.0 | |||||||||||||||||||||||||
| Other | 0.1 | (0.7) | — | (0.6) | |||||||||||||||||||||||||
| Currency translation adjustments | (25.4) | (45.5) | (0.2) | (71.1) | |||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | 9,026.0 | $ | 3,609.1 | $ | 931.5 | $ | 13,566.6 |
Other relates primarily to purchase accounting adjustments for acquisitions.
Other intangible assets were comprised of:
| Cost | Accumulated amortization | Net book value | |||||||||||||||
| Assets subject to amortization: | |||||||||||||||||
| Customer related intangibles | $ | 7,379.6 | $ | (1,989.8) | $ | 5,389.8 | |||||||||||
| Unpatented technology | 886.4 | (414.6) | 471.8 | ||||||||||||||
| Software | 149.5 | (122.4) | 27.1 | ||||||||||||||
| Patents and other protective rights | 8.5 | (1.0) | 7.5 | ||||||||||||||
| Trade names | 12.1 | (5.6) | 6.5 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 606.4 | — | 606.4 | ||||||||||||||
| Balances at December 31, 2021 | $ | 9,042.5 | $ | (2,533.4) | $ | 6,509.1 | |||||||||||
| Assets subject to amortization: | |||||||||||||||||
| Customer related intangibles | $ | 7,442.0 | $ | (2,202.2) | $ | 5,239.8 | |||||||||||
| Unpatented technology | 874.2 | (452.9) | 421.3 | ||||||||||||||
| Software | 149.1 | (128.0) | 21.1 | ||||||||||||||
| Patents and other protective rights | 8.5 | (1.1) | 7.4 | ||||||||||||||
| Trade names | 15.8 | (7.6) | 8.2 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 602.9 | — | 602.9 | ||||||||||||||
| Balances at June 30, 2022 | $ | 9,092.5 | $ | (2,791.8) | $ | 6,300.7 |
Amortization expense of other intangible assets was $285.9 and $283.1 during the six months ended June 30, 2022 and 2021, respectively.
An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2022. The Company will perform the annual analysis during the fourth quarter of 2022.
9. Debt
On June 23, 2022, the Company elected to exercise its optional redemption rights to redeem all of its outstanding 3.125% Notes due 2022 (the “Notes”) in the original aggregate principal amount of $500.0, and Computershare Trust Company, N.A., as successor to Wells Fargo Bank, National Association, as trustee under the indenture governing the Notes (the “Indenture”), issued redemption notices to registered holders of the Notes. The date fixed for the redemption of the Notes is August 15, 2022 (the “Redemption Date”). The Notes will be redeemed at 100% of the aggregate principal amount of the Notes, plus accrued and unpaid interest thereon to, but not including, the Redemption Date in accordance with the terms and conditions set forth in the Indenture. The foregoing does not constitute a notice of redemption with respect to any of the Notes.
Subsequent to the end of the quarter, on July 21, 2022, the Company entered into a new five-year unsecured credit facility (the “Credit Agreement”) among Roper, the financial institutions from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bank of America, N.A. and Wells Fargo Bank, N.A., as syndication agents, and Mizuho Bank, Ltd., MUFG Bank, Ltd., PNC Bank, National Association, TD Bank, N.A., Truist Bank and U.S Bank, National Association, as documentation agents, which replaces its existing $3,000.0 unsecured credit facility, dated as of September 2, 2020, as amended. The new facility comprises a five-year $3,500.0 revolving credit facility, which includes availability of up to $150.0 for letters of credit. Loans under the facility will be available in dollars, and letters of credit will be available in dollars and other currencies to be agreed. The Company may also, subject to compliance with specified conditions, request additional term loans or revolving credit commitments in an aggregate amount not to exceed $500.0.
The Company will have the right to add foreign subsidiaries as borrowers under the Credit Agreement, subject to the satisfaction of specified conditions. The Company will guarantee the payment and performance by the foreign subsidiary borrowers of their obligations under the Credit Agreement. The Company’s obligations under the Credit Agreement are not
guaranteed by any of its subsidiaries. However, the Company has the right, subject to the satisfaction of certain conditions set forth in the Credit Agreement, to cause any of its wholly-owned domestic subsidiaries to become guarantors.
Loans under the Credit Agreement can be borrowed as term SOFR loans or ABR Loans, at the Company’s option. Each term SOFR loan will bear interest at a rate per annum equal to the applicable Adjusted Term SOFR rate plus a spread ranging from 0.795% to 1.300%, as determined by the Company’s senior unsecured long-term debt rating at such time. Based on the Company’s current rating, the spread for SOFR loans would be 0.910%. Each ABR Loan will bear interest at a rate per annum equal to the Alternate Base Rate plus a spread ranging from 0.000% to 0.300%, as determined by the Company’s senior unsecured long-term debt rating at such time. Based on the Company’s current rating, the spread for ABR Loans would be 0.000%.
Outstanding letters of credit issued under the Credit Agreement will be charged a quarterly fee depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the quarterly fee would be payable at a rate of 0.910% per annum, plus a fronting fee of 0.125% per annum on the undrawn and unexpired amount of all letters of credit.
Additionally, the Company will pay a quarterly facility fee on the used and unused portions of the revolving credit facility depending on the Company’s senior unsecured long-term debt rating. Based on the Company’s current rating, the quarterly fee would accrue at a rate of 0.090% per annum.
Amounts outstanding under the Credit Agreement may be accelerated upon the occurrence of customary events of default. The Credit Agreement requires the Company to maintain a Total Debt to Total Capital Ratio of 0.65 to 1.00 or less. Borrowings under the Credit Agreement are prepayable at Roper’s option at any time in whole or in part without premium or penalty.
10. Fair Value of Financial Instruments
Roper’s debt at June 30, 2022 included $7,500 of fixed-rate senior notes with the following fair values:
| $500 3.125% senior notes due 2022 | 500 | ||||
| $300 0.450% senior notes due 2022 | 299 | ||||
| $700 3.650% senior notes due 2023 | 701 | ||||
| $500 2.350% senior notes due 2024 | 485 | ||||
| $300 3.850% senior notes due 2025 | 298 | ||||
| $700 1.000% senior notes due 2025 | 634 | ||||
| $700 3.800% senior notes due 2026 | 686 | ||||
| $700 1.400% senior notes due 2027 | 601 | ||||
| $800 4.200% senior notes due 2028 | 785 | ||||
| $700 2.950% senior notes due 2029 | 619 | ||||
| $600 2.000% senior notes due 2030 | 486 | ||||
| $1,000 1.750% senior notes due 2031 | 782 |
The fair values of the senior notes are based on the trading prices of each series of notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.
11. Contingencies
Roper, in the ordinary course of business, is party to various pending or threatened legal actions, including product liability, intellectual property, data privacy and employment practices that, in general, are of a nature consistent with those over the past several years. After analyzing the Company’s contingent liabilities on a gross basis and, based upon past experience with resolution of such legal claims and the availability and limits of the primary, excess, and umbrella liability insurance coverages with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on Roper’s consolidated financial position, results of operations or cash flows. However, no assurances can be given in this regard.
Roper’s subsidiary, Vertafore, Inc., was named in three putative class actions, two in the U.S. District Court for the Southern District of Texas (Allen, et al. v. Vertafore, Inc., Case 4:20-cv-4139, filed December 4, 2020) and Masciotra, et al. v. Vertafore,
Inc., (originally filed on December 8, 2020 as Case 1:20-cv-03603 in the U.S. District Court for the District of Colorado and subsequently transferred), and one in the U.S. District Court for the Northern District of Texas (Mulvey, et al. v. Vertafore, Inc., Case 3:21-cv-00213-E, filed January 31, 2021). In July 2021, the court granted Vertafore’s motion to dismiss the Allen Case. In March 2022, the U.S. Fifth Circuit Court of Appeals affirmed the lower court’s dismissal of the Allen case. In July 2021, the plaintiff in the Masciotra case voluntarily dismissed his action without prejudice. In June 2022, Vertafore filed a motion to dismiss the Mulvey case on similar grounds as the dismissal of the Allen case. The Allen case and the Mulvey case each purport to represent approximately 27.7 million individuals who held Texas driver’s licenses prior to February 2019. In November 2020, Vertafore announced that as a result of human error, three data files were inadvertently stored in an unsecured external storage service that appears to have been accessed without authorization. The files, which included driver information for licenses issued before February 2019, contained Texas driver license numbers, as well as names, dates of birth, addresses and vehicle registration histories. The files did not contain any Social Security numbers or financial account information. These cases seek recovery under the Driver’s Privacy Protection Act, 18 U.S.C. § 2721. In addition, Roper was advised that the Texas Attorney General is investigating the data event.
Roper’s subsidiary, Verathon, Inc. (“Verathon”), is defending a patent infringement action pending in the United States District Court for the Western District of Washington (Berall v. Verathon, Inc., Case No. 2:2021mc00043). Plaintiff claims that video laryngoscopes and certain accessories sold by Verathon from approximately 2006 through 2016 infringe U.S. Patent 5,827,178 (the “‘178 Patent”). The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and pre- and post-judgment interest. The allegations in the complaint are not covered by insurance. Verathon contends that the products at issue do not infringe the ‘178 Patent and that the ‘178 Patent is invalid. Verathon is vigorously defending the matter.
Roper or our subsidiaries have been named defendants along with numerous industrial companies in asbestos-related litigation claims in certain U.S. states. To date, no significant resources have been required by Roper to respond to asbestos claims. In the first quarter of 2022, Roper completed a transaction in which it transferred the remainder of our exposure for asbestos claims to a third party. In connection with this transaction, Roper incurred a one-time charge of $4.1, which is recorded as a component of “Other (expense) income, net” within the Condensed Consolidated Statements of Earnings for the six months ended June 30, 2022.
12. Business Segments
The following table presents selected financial information by reportable segment:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change % | 2022 | 2021 | Change % | ||||||||||||||||||||||||||||||
| Net revenues: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 627.5 | $ | 587.9 | 6.7 | % | $ | 1,255.7 | $ | 1,161.0 | 8.2 | % | |||||||||||||||||||||||
| Network Software | 342.9 | 297.8 | 15.1 | % | 681.4 | 585.3 | 16.4 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 340.4 | 304.1 | 11.9 | % | 653.5 | 598.8 | 9.1 | % | |||||||||||||||||||||||||||
| Total | $ | 1,310.8 | $ | 1,189.8 | 10.2 | % | $ | 2,590.6 | $ | 2,345.1 | 10.5 | % | |||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 430.9 | $ | 407.3 | 5.8 | % | $ | 866.3 | $ | 804.5 | 7.7 | % | |||||||||||||||||||||||
| Network Software | 289.1 | 250.1 | 15.6 | % | 574.0 | 489.6 | 17.2 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 191.5 | 181.8 | 5.3 | % | 368.4 | 361.4 | 1.9 | % | |||||||||||||||||||||||||||
| Total | $ | 911.5 | $ | 839.2 | 8.6 | % | $ | 1,808.7 | $ | 1,655.5 | 9.3 | % | |||||||||||||||||||||||
| Operating profit*: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 165.3 | $ | 153.5 | 7.7 | % | $ | 337.6 | $ | 307.0 | 10.0 | % | |||||||||||||||||||||||
| Network Software | 137.1 | 111.2 | 23.3 | % | 273.9 | 216.8 | 26.3 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 111.4 | 102.3 | 8.9 | % | 211.1 | 207.9 | 1.5 | % | |||||||||||||||||||||||||||
| Total | $ | 413.8 | $ | 367.0 | 12.8 | % | $ | 822.6 | $ | 731.7 | 12.4 | % | |||||||||||||||||||||||
| Long-lived assets: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 136.6 | $ | 127.9 | 6.8 | % | |||||||||||||||||||||||||||||
| Network Software | 27.1 | 25.3 | 7.1 | % | |||||||||||||||||||||||||||||||
| Technology Enabled Products | 27.1 | 27.7 | (2.2) | % | |||||||||||||||||||||||||||||||
| Total | $ | 190.8 | $ | 180.9 | 5.5 | % |
*Segment operating profit is before unallocated corporate general and administrative expenses. These expenses were $50.9 and $50.8 for the three months ended June 30, 2022 and 2021, respectively, and $103.8 and $97.9 for the six months ended June 30, 2022 and 2021, respectively.
13. Revenues from Contracts
Disaggregated Revenue - We disaggregate our revenues by reportable segment into four categories: (i) recurring revenue comprised of SaaS licenses and software maintenance; (ii) reoccurring revenue comprised of transactional and volume-based fees related to software licenses; (iii) non-recurring revenue comprised of term and perpetual software licenses, professional services associated with software products and hardware sold with our software licenses; and (iv) product revenue. See details in the table below.
| Three months ended June 30, 2022 | Three months ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Application Software | Network Software | Technology Enabled Products | Total | Application Software | Network Software | Technology Enabled Products | Total | |||||||||||||||||||||||||||||||||||||||||||
| Revenue Stream | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Software related | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Recurring | $ | 457.9 | $ | 244.5 | $ | 2.8 | $ | 705.2 | $ | 422.3 | $ | 204.0 | $ | 1.8 | $ | 628.1 | ||||||||||||||||||||||||||||||||||
| Reoccurring | 28.6 | 62.0 | — | 90.6 | 27.4 | 59.2 | — | 86.6 | ||||||||||||||||||||||||||||||||||||||||||
| Non-recurring | 141.0 | 36.4 | 0.3 | 177.7 | 138.2 | 34.6 | 0.2 | 173.0 | ||||||||||||||||||||||||||||||||||||||||||
| Total Software Revenues | 627.5 | 342.9 | 3.1 | 973.5 | 587.9 | 297.8 | 2.0 | 887.7 | ||||||||||||||||||||||||||||||||||||||||||
| Product Revenue | — | — | 337.3 | 337.3 | — | — | 302.1 | 302.1 | ||||||||||||||||||||||||||||||||||||||||||
| $ | 627.5 | $ | 342.9 | $ | 340.4 | $ | 1,310.8 | $ | 587.9 | $ | 297.8 | $ | 304.1 | $ | 1,189.8 |
| Six months ended June 30, 2022 | Six months ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Application Software | Network Software | Technology Enabled Products | Total | Application Software | Network Software | Technology Enabled Products | Total | |||||||||||||||||||||||||||||||||||||||||||
| Revenue Stream | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Software related | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Recurring | $ | 919.4 | $ | 481.7 | $ | 5.4 | $ | 1,406.5 | $ | 841.1 | $ | 399.4 | $ | 3.4 | $ | 1,243.9 | ||||||||||||||||||||||||||||||||||
| Reoccurring | 60.3 | 122.5 | — | 182.8 | 53.6 | 118.2 | — | 171.8 | ||||||||||||||||||||||||||||||||||||||||||
| Non-recurring | 276.0 | 77.2 | 0.6 | 353.8 | 266.3 | 67.7 | 0.4 | 334.4 | ||||||||||||||||||||||||||||||||||||||||||
| Total Software Revenues | 1,255.7 | 681.4 | 6.0 | 1,943.1 | 1,161.0 | 585.3 | 3.8 | 1,750.1 | ||||||||||||||||||||||||||||||||||||||||||
| Product Revenue | — | — | 647.5 | 647.5 | — | — | 595.0 | 595.0 | ||||||||||||||||||||||||||||||||||||||||||
| $ | 1,255.7 | $ | 681.4 | $ | 653.5 | $ | 2,590.6 | $ | 1,161.0 | $ | 585.3 | $ | 598.8 | $ | 2,345.1 |
Remaining performance obligations - Remaining performance obligations represent the transaction price of firm orders for which work has not been performed and excludes unexercised contract options. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $3,763.1. We expect to recognize revenue of $2,467.7, or approximately 66% of our remaining performance obligations over the next 12 months (“Backlog”), with the remainder to be recognized thereafter.
Contract balances
| Balance Sheet Account | June 30, 2022 | December 31, 2021 | Change | ||||||||||||||
| Unbilled receivables | $ | 105.4 | $ | 81.9 | $ | 23.5 | |||||||||||
| Deferred revenue - current | (1,105.2) | (1,106.3) | 1.1 | ||||||||||||||
| Deferred revenue - non-current (1) | (96.8) | (69.9) | (26.9) | ||||||||||||||
| Net contract assets/(liabilities) | $ | (1,096.6) | $ | (1,094.3) | $ | (2.3) |
(1) The non-current portion of deferred revenue is included in “Other liabilities” in our Condensed Consolidated Balance Sheets.
The change in our net contract assets/(liabilities) from December 31, 2021 to June 30, 2022 was due primarily to the timing of payments and invoicing relating to Software-as-a-Service (“SaaS”) and post contract support (“PCS”) renewals, partially offset by the increase in unbilled receivables due to the timing of invoicing primarily related to software milestone billings associated with multi-year term license renewals and software implementations.
Most of the Company’s project-based contracts where the input method of revenue recognition is utilized are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Often this results in unbilled receivables where billing occurs after revenue recognition. The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance relating primarily to SaaS and PCS renewals. Revenue recognized from the deferred revenue balance on December 31, 2021 and 2020 was $287.4 and $259.7 for the three months ended June 30, 2022 and 2021, respectively, and $776.7 and $704.4 for the six months ended June 30, 2022 and 2021, respectively.
In order to determine revenues recognized in the period, we allocate revenue to the individual deferred revenue balance outstanding at the beginning of the year until the revenue exceeds that balance.
The current and non-current portions of deferred commissions are included in “Other current assets” and “Other assets,” respectively, in our Condensed Consolidated Balance Sheets. At June 30, 2022 and December 31, 2021, we had $60.2 and $56.7 of total deferred commissions, respectively.
Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS