filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
Roper Technologies, Inc.
Condensed Consolidated Statements of Earnings (unaudited)
(in millions, except per share data)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net revenues | $ | 1,716.8 | $ | 1,531.2 | $ | 3,397.5 | $ | 3,000.9 | |||||||||||||||
| Cost of sales | 523.5 | 464.1 | 1,023.2 | 915.2 | |||||||||||||||||||
| Gross profit | 1,193.3 | 1,067.1 | 2,374.3 | 2,085.7 | |||||||||||||||||||
| Selling, general and administrative expenses | 699.1 | 631.8 | 1,398.8 | 1,249.4 | |||||||||||||||||||
| Income from operations | 494.2 | 435.3 | 975.5 | 836.3 | |||||||||||||||||||
| Interest expense, net | 67.5 | 34.8 | 120.7 | 72.2 | |||||||||||||||||||
| Equity investments (gain) loss, net | 0.8 | (66.0) | (56.2) | (64.8) | |||||||||||||||||||
| Other expense, net | 0.6 | 2.8 | 1.8 | 5.1 | |||||||||||||||||||
| Earnings before income taxes | 425.3 | 463.7 | 909.2 | 823.8 | |||||||||||||||||||
| Income taxes | 88.2 | 102.7 | 190.1 | 178.5 | |||||||||||||||||||
| Net earnings from continuing operations | 337.1 | 361.0 | 719.1 | 645.3 | |||||||||||||||||||
| Loss from discontinued operations, net of tax | — | — | — | (1.2) | |||||||||||||||||||
| Gain on disposition of discontinued operations, net of tax | — | 3.9 | — | 3.9 | |||||||||||||||||||
| Net earnings from discontinued operations | — | 3.9 | — | 2.7 | |||||||||||||||||||
| Net earnings | $ | 337.1 | $ | 364.9 | $ | 719.1 | $ | 648.0 | |||||||||||||||
| Net earnings per share from continuing operations: | |||||||||||||||||||||||
| Basic | $ | 3.15 | $ | 3.38 | $ | 6.72 | $ | 6.06 | |||||||||||||||
| Diluted | $ | 3.12 | $ | 3.36 | $ | 6.66 | $ | 6.02 | |||||||||||||||
| Net earnings per share from discontinued operations: | |||||||||||||||||||||||
| Basic | $ | — | $ | 0.04 | $ | — | $ | 0.03 | |||||||||||||||
| Diluted | $ | — | $ | 0.04 | $ | — | $ | 0.02 | |||||||||||||||
| Net earnings per share: | |||||||||||||||||||||||
| Basic | $ | 3.15 | $ | 3.42 | $ | 6.72 | $ | 6.09 | |||||||||||||||
| Diluted | $ | 3.12 | $ | 3.40 | $ | 6.66 | $ | 6.04 | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 107.1 | 106.6 | 107.0 | 106.4 | |||||||||||||||||||
| Diluted | 107.9 | 107.4 | 107.9 | 107.2 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc.
Condensed Consolidated Statements of Comprehensive Income (unaudited)
(in millions)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net earnings | $ | 337.1 | $ | 364.9 | $ | 719.1 | $ | 648.0 | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (0.9) | 36.2 | (20.0) | 60.3 | |||||||||||||||||||
| Total other comprehensive income (loss), net of tax | (0.9) | 36.2 | (20.0) | 60.3 | |||||||||||||||||||
| Comprehensive income | $ | 336.2 | $ | 401.1 | $ | 699.1 | $ | 708.3 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc.
Condensed Consolidated Balance Sheets (unaudited)
(in millions)
| June 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 251.5 | $ | 214.3 | |||||||
| Accounts receivable, net | 739.9 | 829.9 | |||||||||
| Inventories, net | 128.8 | 118.6 | |||||||||
| Income taxes receivable | 48.0 | 47.7 | |||||||||
| Unbilled receivables | 123.8 | 106.4 | |||||||||
| Other current assets | 198.2 | 164.5 | |||||||||
| Total current assets | 1,490.2 | 1,481.4 | |||||||||
| Property, plant and equipment, net | 116.4 | 119.6 | |||||||||
| Goodwill | 18,313.1 | 17,118.8 | |||||||||
| Other intangible assets, net | 8,645.3 | 8,212.1 | |||||||||
| Deferred taxes | 30.7 | 32.2 | |||||||||
| Equity investments | 842.8 | 795.7 | |||||||||
| Other assets | 409.0 | 407.7 | |||||||||
| Total assets | $ | 29,847.5 | $ | 28,167.5 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY: | |||||||||||
| Accounts payable | $ | 149.4 | $ | 143.0 | |||||||
| Accrued compensation | 189.5 | 250.0 | |||||||||
| Deferred revenue | 1,468.3 | 1,583.8 | |||||||||
| Other accrued liabilities | 469.7 | 446.5 | |||||||||
| Income taxes payable | 30.9 | 40.4 | |||||||||
| Current portion of long-term debt, net | 500.0 | 499.5 | |||||||||
| Total current liabilities | 2,807.8 | 2,963.2 | |||||||||
| Long-term debt, net of current portion | 6,923.9 | 5,830.6 | |||||||||
| Deferred taxes | 1,585.4 | 1,513.1 | |||||||||
| Other liabilities | 391.4 | 415.8 | |||||||||
| Total liabilities | 11,708.5 | 10,722.7 | |||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Common stock | 1.1 | 1.1 | |||||||||
| Additional paid-in capital | 2,923.0 | 2,767.0 | |||||||||
| Retained earnings | 15,374.3 | 14,816.3 | |||||||||
| Accumulated other comprehensive loss | (142.8) | (122.8) | |||||||||
| Treasury stock | (16.6) | (16.8) | |||||||||
| Total stockholders’ equity | 18,139.0 | 17,444.8 | |||||||||
| Total liabilities and stockholders’ equity | $ | 29,847.5 | $ | 28,167.5 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in millions)
| Six months ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net earnings from continuing operations | $ | 719.1 | $ | 645.3 | |||||||
| Adjustments to reconcile net earnings from continuing operations to cash flows from operating activities: | |||||||||||
| Depreciation and amortization of property, plant and equipment | 18.5 | 17.3 | |||||||||
| Amortization of intangible assets | 377.2 | 350.6 | |||||||||
| Amortization of deferred financing costs | 4.5 | 5.1 | |||||||||
| Non-cash stock compensation | 73.3 | 63.5 | |||||||||
| Equity investments gain, net | (56.2) | (64.8) | |||||||||
| Income tax provision | 190.1 | 178.5 | |||||||||
| Changes in operating assets and liabilities, net of acquired businesses: | |||||||||||
| Accounts receivable | 96.7 | 46.7 | |||||||||
| Unbilled receivables | (17.7) | (14.9) | |||||||||
| Inventories | (11.0) | (5.9) | |||||||||
| Accounts payable | 4.5 | 17.9 | |||||||||
| Other accrued liabilities | (47.3) | (91.0) | |||||||||
| Deferred revenue | (122.6) | (98.3) | |||||||||
| Cash income taxes paid | (284.3) | (231.5) | |||||||||
| Other, net | (29.2) | (33.5) | |||||||||
| Cash provided by operating activities from continuing operations | 915.6 | 785.0 | |||||||||
| Cash used in operating activities from discontinued operations | — | (1.7) | |||||||||
| Cash provided by operating activities | 915.6 | 783.3 | |||||||||
| Cash flows from (used in) investing activities: | |||||||||||
| Acquisitions of businesses, net of cash acquired | (1,858.3) | (17.3) | |||||||||
| Capital expenditures | (15.9) | (24.9) | |||||||||
| Capitalized software expenditures | (20.5) | (19.3) | |||||||||
| Distributions from equity investment | 8.4 | 12.1 | |||||||||
| Other, net | (1.1) | (2.9) | |||||||||
| Cash used in investing activities from continuing operations | (1,887.4) | (52.3) | |||||||||
| Cash provided by disposition of discontinued operations | — | 2.0 | |||||||||
| Cash used in investing activities | (1,887.4) | (50.3) | |||||||||
| Cash flows from (used in) financing activities: | |||||||||||
| Borrowings under revolving line of credit, net | 1,090.0 | — | |||||||||
| Cash dividends to stockholders | (160.6) | (144.8) | |||||||||
| Proceeds from stock-based compensation, net | 75.9 | 60.8 | |||||||||
| Treasury stock sales | 10.3 | 8.4 | |||||||||
| Other | (0.2) | (0.2) | |||||||||
| Cash provided by (used in) financing activities | 1,015.4 | (75.8) | |||||||||
| Effect of exchange rate changes on cash | (6.4) | 12.8 | |||||||||
| Net increase in cash and cash equivalents | 37.2 | 670.0 | |||||||||
| Cash and cash equivalents, beginning of period | 214.3 | 792.8 | |||||||||
| Cash and cash equivalents, end of period | $ | 251.5 | $ | 1,462.8 | |||||||
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)
(in millions, except per share data)
| Common stock | Additional paid-in capital | Retained earnings | Accumulated other comprehensive loss | Treasury stock | Total stockholders’ equity | ||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | $ | 1.1 | $ | 2,837.1 | $ | 15,118.0 | $ | (141.9) | $ | (16.7) | $ | 17,797.6 | |||||||||||||||||||||||
| Net earnings | — | — | 337.1 | — | — | 337.1 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 42.6 | — | — | — | 42.6 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 4.4 | — | — | 0.1 | 4.5 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | (0.9) | — | (0.9) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 39.4 | — | — | — | 39.4 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (0.5) | — | — | — | (0.5) | |||||||||||||||||||||||||||||
| Dividends declared ($0.75 per share) | — | — | (80.8) | — | — | (80.8) | |||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | 1.1 | $ | 2,923.0 | $ | 15,374.3 | $ | (142.8) | $ | (16.6) | $ | 18,139.0 | |||||||||||||||||||||||
| Balances at December 31, 2023 | $ | 1.1 | $ | 2,767.0 | $ | 14,816.3 | $ | (122.8) | $ | (16.8) | $ | 17,444.8 | |||||||||||||||||||||||
| Net earnings | — | — | 719.1 | — | — | 719.1 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 90.0 | — | — | — | 90.0 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 10.1 | — | — | 0.2 | 10.3 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | (20.0) | — | (20.0) | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 74.0 | — | — | — | 74.0 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (18.1) | — | — | — | (18.1) | |||||||||||||||||||||||||||||
| Dividends declared ($1.50 per share) | — | — | (161.1) | — | — | (161.1) | |||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | 1.1 | $ | 2,923.0 | $ | 15,374.3 | $ | (142.8) | $ | (16.6) | $ | 18,139.0 | |||||||||||||||||||||||
| Balances at March 31, 2023 | $ | 1.1 | $ | 2,570.4 | $ | 13,941.2 | $ | (162.9) | $ | (17.1) | $ | 16,332.7 | |||||||||||||||||||||||
| Net earnings | — | — | 364.9 | — | — | 364.9 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 48.1 | — | — | — | 48.1 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 3.6 | — | — | 0.1 | 3.7 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | 36.2 | — | 36.2 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 33.8 | — | — | — | 33.8 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (0.6) | — | — | — | (0.6) | |||||||||||||||||||||||||||||
| Dividends declared ($0.6825 per share) | — | — | (72.9) | — | — | (72.9) | |||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | 1.1 | $ | 2,655.3 | $ | 14,233.2 | $ | (126.7) | $ | (17.0) | $ | 16,745.9 | |||||||||||||||||||||||
| Balances at December 31, 2022 | $ | 1.1 | $ | 2,510.2 | $ | 13,730.7 | $ | (187.0) | $ | (17.2) | $ | 16,037.8 | |||||||||||||||||||||||
| Net earnings | — | — | 648.0 | — | — | 648.0 | |||||||||||||||||||||||||||||
| Stock option exercises | — | 81.8 | — | — | — | 81.8 | |||||||||||||||||||||||||||||
| Treasury stock sold | — | 8.2 | — | — | 0.2 | 8.4 | |||||||||||||||||||||||||||||
| Currency translation adjustments | — | — | — | 60.3 | — | 60.3 | |||||||||||||||||||||||||||||
| Stock-based compensation | — | 65.2 | — | — | — | 65.2 | |||||||||||||||||||||||||||||
| Restricted stock activity | — | (10.1) | — | — | — | (10.1) | |||||||||||||||||||||||||||||
| Dividends declared ($1.365 per share) | — | — | (145.5) | — | — | (145.5) | |||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | 1.1 | $ | 2,655.3 | $ | 14,233.2 | $ | (126.7) | $ | (17.0) | $ | 16,745.9 |
See accompanying notes to Condensed Consolidated Financial Statements.
Roper Technologies, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
(Dollar 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, 2024 and 2023 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, 2023 financial position data included herein was derived from the audited consolidated financial statements included in the Company’s 2023 Annual Report on Form 10-K (“Annual Report”) filed on February 22, 2024 with the U.S. Securities and Exchange Commission (“SEC”) but does not include all annual disclosures required by U.S. generally accepted accounting principles (“GAAP”).
Roper’s management has made estimates and assumptions related 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, 2024 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.
In 2022, Roper completed the divestiture of a 51% majority equity stake in its industrial businesses (“Indicor”). The financial results related to Indicor are reported as discontinued operations for all periods presented.
Following the sale of the majority stake, Roper retained a minority equity interest in Indicor. See Note 9 for additional information on this minority equity interest.
Unless otherwise noted, discussion within these Notes to Condensed Consolidated Financial Statements relates to continuing operations.
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 FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any recent ASUs not listed below were assessed and either determined to be not applicable or are expected to have an immaterial impact on the Company’s Consolidated Financial Statements.
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its Consolidated Financial Statements and related disclosures.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which expands income tax disclosure requirements, including disaggregation of rate reconciliation table categories, disaggregation of earnings before income taxes and income tax expense information, and disaggregation of income taxes paid information, among other changes. This guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its Consolidated Financial Statements and related disclosures.
3. Weighted Average Shares Outstanding
Basic earnings per share was calculated using net earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share was 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 and restricted stock awards based upon the average 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 presented below:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Basic shares outstanding | 107.1 | 106.6 | 107.0 | 106.4 | |||||||||||||||||||
| Effect of potential common stock: | |||||||||||||||||||||||
| Common stock awards | 0.8 | 0.8 | 0.9 | 0.8 | |||||||||||||||||||
| Diluted shares outstanding | 107.9 | 107.4 | 107.9 | 107.2 |
For the three and six months ended June 30, 2024, there were 0.387 and 0.384 stock-based awards outstanding that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 0.735 and 0.737 stock-based awards outstanding that would have been antidilutive in the respective 2023 periods.
4. Business Acquisitions
On February 26, 2024, Roper acquired Genesis Ultimate Holding Co., the parent company of Procare Software, LLC (“Procare”), a leading provider of cloud-based software and integrated payment processing for the management of early childhood education centers, for a purchase price of $1,860.0, net of cash acquired and certain liabilities assumed. Additionally, the purchase price contemplated a net present value tax benefit of approximately $110 which is expected to be utilized over the next 13 years. The results of Procare are reported in the Application Software reportable segment.
The Company recorded $1,208.2 in goodwill, $39.0 assigned to trade names that are not subject to amortization, and $762.0 of other identifiable intangibles in connection with this acquisition. The amortizable intangible assets include customer relationships of $708.0 (20 year useful life) and technology of $54.0 (5 year useful life).
The results of operations of the acquired business are included in Roper’s Condensed Consolidated Financial Statements from the date of acquisition. Pro forma results of operations and the revenues and net earnings subsequent to the acquisition date have not been presented because the effects of the acquisition were not material to our financial results.
5. 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 and restricted stock units (collectively “restricted stock awards”), 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, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Stock-based compensation | $ | 39.7 | $ | 33.3 | $ | 73.3 | $ | 63.5 | |||||||||||||||
| Tax benefit recognized in net earnings | 6.7 | 5.5 | 12.6 | 10.7 |
The Company accounts for forfeitures of stock-based awards as they occur, with previously recognized compensation reversed in the period in which the awards are forfeited.
Stock Options – During the six months ended June 30, 2024, 0.263 options were granted with a weighted-average fair value of $173.72 per option. During the same six-month period in 2023, 0.363 options were granted with a weighted-average fair value of $129.01 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 plan.
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, and the expected option life. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the option.
The following weighted average assumptions were used to estimate the fair value of options granted during the current and prior year periods using the Black-Scholes option pricing model:
| Six months ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Risk-free interest rate (%) | 4.17 | 3.73 | |||||||||
| Expected option life (years) | 5.73 | 5.63 | |||||||||
| Expected volatility (%) | 25.57 | 26.04 | |||||||||
| Expected dividend yield (%) | 0.51 | 0.64 |
Cash received from option exercises for the six months ended June 30, 2024 and 2023 was $88.1 and $70.9, respectively.
Restricted Stock Awards – During the six months ended June 30, 2024, the Company granted 0.368 shares of restricted stock awards with a weighted-average grant date fair value of $555.12 per share. During the same six-month period in 2023, the Company granted 0.242 shares of restricted stock awards with a weighted-average grant date fair value of $431.05 per share. These awards were granted at the fair market value of the share on the date of grant.
During 2024, the Company revised its equity compensation strategy to more closely align long-term management incentives with its strategic objective to deliver and sustain higher levels of organic growth. Accordingly, the total number of restricted stock awards granted during the six months ended June 30, 2024 increased as compared to the six months ended June 30, 2023 due primarily to the adoption of a supplemental equity compensation program for the Company’s business unit leadership teams under which 0.129 incremental three-year performance-based restricted stock awards were granted.
In connection with the revised compensation strategy noted above, certain members of the Roper senior leadership team were granted 0.072 performance-based restricted stock awards during the six months ended June 30, 2024, that include the ability to earn up to 200% of the number of restricted stock awards originally granted contingent upon Roper’s performance over a three-year period, subject to a market modifier based on relative total shareholder return. Comparably, during the six months ended June 30, 2023, 0.071 performance-based restricted stock awards were granted to certain members of Roper’s senior leadership team which did not contain a market modifier and do not have the ability to vest beyond 100% of the original shares granted.
Due to the extent of performance required by the vesting conditions noted above, these awards are not expected to materially increase stock-based compensation expense relative to the Company’s financial performance.
During the six months ended June 30, 2024, 0.105 restricted stock award shares vested with a weighted-average grant date fair value of $438.44 per share and a weighted-average vest date fair value of $555.71 per 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 both the six months ended June 30, 2024 and 2023, participants in the ESPP purchased 0.021 shares of Roper’s common stock for total consideration of $10.3 and $8.4, respectively. All of these shares were purchased from Roper’s treasury shares.
Roper’s ESPP was amended effective July 1, 2024, under which the six-month minimum employment requirement was removed from the eligibility requirements for employee participation in the ESPP.
6. Inventories
The components of inventories were as follows:
| June 30, 2024 | December 31, 2023 | ||||||||||
| Raw materials and supplies | $ | 58.0 | $ | 57.6 | |||||||
| Work in process | 33.2 | 28.7 | |||||||||
| Finished products | 47.7 | 41.8 | |||||||||
| Inventory reserves | (10.1) | (9.5) | |||||||||
| Inventories, net | $ | 128.8 | $ | 118.6 |
7. 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, 2023 | $ | 12,563.4 | $ | 3,624.6 | $ | 930.8 | $ | 17,118.8 | |||||||||||||||||||||
| Goodwill acquired | 1,208.2 | — | — | 1,208.2 | |||||||||||||||||||||||||
| Other | (7.0) | — | — | (7.0) | |||||||||||||||||||||||||
| Currency translation adjustments | (4.0) | (2.2) | (0.7) | (6.9) | |||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | 13,760.6 | $ | 3,622.4 | $ | 930.1 | $ | 18,313.1 |
Other relates to purchase accounting adjustments for acquisitions and is composed primarily of a measurement period adjustment of $9.8 to decrease goodwill and deferred tax liabilities in connection with the Syntellis opening balance sheet.
Other intangible assets were comprised of:
| Cost | Accumulated amortization | Net book value | |||||||||||||||
| Assets subject to amortization: | |||||||||||||||||
| Customer related intangibles | $ | 10,061.7 | $ | (3,000.5) | $ | 7,061.2 | |||||||||||
| Unpatented technology | 1,047.0 | (638.8) | 408.2 | ||||||||||||||
| Software | 149.2 | (143.4) | 5.8 | ||||||||||||||
| Patents and other protective rights | 10.3 | (1.4) | 8.9 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 728.0 | — | 728.0 | ||||||||||||||
| Balances at December 31, 2023 | $ | 11,996.2 | $ | (3,784.1) | $ | 8,212.1 | |||||||||||
| Assets subject to amortization: | |||||||||||||||||
| Customer related intangibles | $ | 10,608.3 | $ | (3,141.8) | $ | 7,466.5 | |||||||||||
| Unpatented technology | 803.5 | (399.5) | 404.0 | ||||||||||||||
| Software | 109.8 | (108.5) | 1.3 | ||||||||||||||
| Patents and other protective rights | 9.2 | (1.7) | 7.5 | ||||||||||||||
| Assets not subject to amortization: | |||||||||||||||||
| Trade names | 766.0 | — | 766.0 | ||||||||||||||
| Balances at June 30, 2024 | $ | 12,296.8 | $ | (3,651.5) | $ | 8,645.3 |
Amortization expense of other intangible assets was $184.9 and $170.5 during the three months ended June 30, 2024 and 2023, respectively, and $363.3 and $340.9 during the six months ended June 30, 2024 and 2023, respectively.
An evaluation of the carrying value of goodwill and other 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 2024. The Company will perform the annual analysis during the fourth quarter of 2024.
8. Fair Value
Financial assets and liabilities are valued using market prices on active markets (Level 1), less active markets (Level 2), and little or no market activity (Level 3). Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. Level 2 instrument valuations are obtained from readily available pricing sources for comparable instruments, identical instruments in less active markets, or models using market observable inputs. Level 3 instrument valuations typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.
Roper’s debt at June 30, 2024 included $6,000 of fixed-rate senior notes with the following fair values:
| Fixed-rate senior notes | Fair value | |||||||||||||||||||
| Principal amount | Interest rate | Year of maturity | As of June 30, 2024 | |||||||||||||||||
| $ | 500 | 2.350% | 2024 | $ | 496 | |||||||||||||||
| $ | 300 | 3.850% | 2025 | $ | 293 | |||||||||||||||
| $ | 700 | 1.000% | 2025 | $ | 663 | |||||||||||||||
| $ | 700 | 3.800% | 2026 | $ | 676 | |||||||||||||||
| $ | 700 | 1.400% | 2027 | $ | 622 | |||||||||||||||
| $ | 800 | 4.200% | 2028 | $ | 772 | |||||||||||||||
| $ | 700 | 2.950% | 2029 | $ | 629 | |||||||||||||||
| $ | 600 | 2.000% | 2030 | $ | 500 | |||||||||||||||
| $ | 1,000 | 1.750% | 2031 | $ | 804 |
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.
At June 30, 2024 and December 31, 2023, there were $1,450.0 and $360.0 of borrowings outstanding on our unsecured credit facility, respectively. The carrying value of these borrowings approximates their estimated fair value.
9. Equity Investments
Indicor Investment – As of June 30, 2024 and December 31, 2023, the Company held a 46.4% and 47.3% equity interest in Indicor Equity, LLC, respectively. We elected to apply the fair value option as we believe this is the most reasonable method to value this equity investment. The fair value of Roper’s equity investment in Indicor is estimated on a quarterly basis and the change in fair value is reported as a component of “Equity investments (gain) loss, net” in our Condensed Consolidated Statements of Earnings.
Although we believe our assumptions are considered reasonable and are consistent with the plans and estimates included in our Annual Report, there is significant judgment applied to determine fair value. Changes in estimates or the application of alternative assumptions could produce significantly different results. Our valuation methodology utilizes the market multiple approach consisting of comparable guideline public companies revenue and earnings multiples to estimate the fair value of this equity investment. The fair value of the investment reflects management’s estimate of assumptions that market participants would use in pricing the equity interest, which the Company has determined to be Level 3 in the FASB fair value hierarchy.
The following table provides a reconciliation of the fair value for our equity investment in Indicor measured using Level 3 inputs:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Beginning balance | $ | 740.3 | $ | 535.0 | $ | 675.9 | $ | 535.0 | |||||||||||||||
| Change in fair value | (9.3) | 56.3 | 55.1 | 56.3 | |||||||||||||||||||
| Ending balance | $ | 731.0 | $ | 591.3 | $ | 731.0 | $ | 591.3 |
The Company received dividend distributions from Indicor of $8.4 during the three and six months ended June 30, 2024 and $12.1 during the three and six months ended June 30, 2023, which are reported within “Equity investments (gain) loss, net” in our Condensed Consolidated Statements of Earnings. These dividend distributions were intended to offset certain cash taxes payable associated with the Company’s ownership stake and were contemplated in the determination of the fair value for the equity investment in Indicor.
Certinia Investment – In 2023, Roper acquired an 18.2% limited partnership minority interest in CI Ultimate Holdings, L.P., the parent entity of Certinia Inc., a leading provider of professional services automation software. This equity investment is accounted for under the equity method of accounting whereby our proportionate share of earnings or loss associated with the investment is reported as a component of “Equity investments (gain) loss, net” in our Condensed Consolidated Statements of Earnings with a corresponding change in the balance of our equity investment. Our proportionate share of loss associated with our investment in Certinia was $0.4 and $8.0 for the three and six months ended June 30, 2024, respectively. The balance of our equity investment in Certinia, reported as a component of “Equity investments” in our Condensed Consolidated Balance Sheets, was $111.8 as of June 30, 2024.
10. Contingencies
Roper, in the ordinary course of business, is party to various pending or threatened legal actions, including product liability, intellectual property, antitrust, 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, PowerPlan, Inc. (“PowerPlan”), is a defendant in an action pending in the U.S. District Court for the Northern District of Georgia (Lucasys Inc. v. PowerPlan, Inc., Case 1:20-cv-02987-AT) in which the plaintiff, a firm started by former PowerPlan employees, alleges PowerPlan has engaged in anticompetitive practices in violation of federal antitrust law. The plaintiff further alleges that PowerPlan violated Georgia’s deceptive trade practices act and undertook other tortious activities which impacted the plaintiff’s ability to commercialize its software and services offerings. The plaintiff claims damages of approximately $66, and seeks treble damages in addition to punitive damages, attorney fees, and pre-judgment interest. PowerPlan strongly denies the allegations in the dispute, and has asserted several affirmative defenses. PowerPlan and the plaintiff have each moved for summary judgment, and oral argument on the motions was held on May 7, 2024. A decision from the District Court on the motions is pending.
11. Business Segments
The following table presents selected financial information by reportable segment:
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||||||||||
| 2024 | 2023 | Change % | 2024 | 2023 | Change % | ||||||||||||||||||||||||||||||
| Net revenues: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 931.8 | $ | 770.3 | 21.0 | % | $ | 1,827.0 | $ | 1,531.7 | 19.3 | % | |||||||||||||||||||||||
| Network Software | 364.2 | 358.1 | 1.7 | % | 735.0 | 712.6 | 3.1 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 420.8 | 402.8 | 4.5 | % | 835.5 | 756.6 | 10.4 | % | |||||||||||||||||||||||||||
| Total | $ | 1,716.8 | $ | 1,531.2 | 12.1 | % | $ | 3,397.5 | $ | 3,000.9 | 13.2 | % | |||||||||||||||||||||||
| Gross profit: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 641.1 | $ | 531.0 | 20.7 | % | $ | 1,266.8 | $ | 1,051.5 | 20.5 | % | |||||||||||||||||||||||
| Network Software | 307.8 | 303.9 | 1.3 | % | 624.1 | 603.3 | 3.4 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 244.4 | 232.2 | 5.3 | % | 483.4 | 430.9 | 12.2 | % | |||||||||||||||||||||||||||
| Total | $ | 1,193.3 | $ | 1,067.1 | 11.8 | % | $ | 2,374.3 | $ | 2,085.7 | 13.8 | % | |||||||||||||||||||||||
| Operating profit *: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 251.1 | $ | 201.2 | 24.8 | % | $ | 490.7 | $ | 394.4 | 24.4 | % | |||||||||||||||||||||||
| Network Software | 159.1 | 153.1 | 3.9 | % | 326.1 | 300.6 | 8.5 | % | |||||||||||||||||||||||||||
| Technology Enabled Products | 146.7 | 139.1 | 5.5 | % | 282.9 | 254.6 | 11.1 | % | |||||||||||||||||||||||||||
| Total | $ | 556.9 | $ | 493.4 | 12.9 | % | $ | 1,099.7 | $ | 949.6 | 15.8 | % | |||||||||||||||||||||||
| Long-lived assets: | |||||||||||||||||||||||||||||||||||
| Application Software | $ | 189.0 | $ | 161.9 | 16.7 | % | |||||||||||||||||||||||||||||
| Network Software | 23.8 | 28.7 | (17.1) | % | |||||||||||||||||||||||||||||||
| Technology Enabled Products | 33.3 | 29.8 | 11.7 | % | |||||||||||||||||||||||||||||||
| Total | $ | 246.1 | $ | 220.4 | 11.7 | % |
- Segment operating profit is before unallocated corporate general and administrative expenses and enterprise-wide stock-based compensation. These expenses were $62.7 and $58.1 for the three months ended June 30, 2024 and 2023, respectively, and $124.2 and $113.3 for the six months ended June 30, 2024 and 2023, respectively.
12. Revenues from Contracts
Disaggregated Revenue – We disaggregate our revenues by reportable segment into four categories: (i) recurring revenue comprised of Software-as-a-Service (“SaaS”), annual term licenses, and software maintenance; (ii) reoccurring revenue comprised of transactional and volume-based fees related to software licenses; (iii) non-recurring revenue comprised of multi-year 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, 2024 | Three months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue stream | Application Software | Network Software | Technology Enabled Products | Total | Application Software | Network Software | Technology Enabled Products | Total | ||||||||||||||||||||||||||||||||||||||||||
| Software related | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Recurring | $ | 700.2 | $ | 263.1 | $ | 6.2 | $ | 969.5 | $ | 587.2 | $ | 258.3 | $ | 4.2 | $ | 849.7 | ||||||||||||||||||||||||||||||||||
| Reoccurring | 80.5 | 66.6 | — | 147.1 | 34.3 | 65.7 | — | 100.0 | ||||||||||||||||||||||||||||||||||||||||||
| Non-recurring | 151.1 | 34.5 | — | 185.6 | 148.8 | 34.1 | 0.4 | 183.3 | ||||||||||||||||||||||||||||||||||||||||||
| Total Software Revenue | 931.8 | 364.2 | 6.2 | 1,302.2 | 770.3 | 358.1 | 4.6 | 1,133.0 | ||||||||||||||||||||||||||||||||||||||||||
| Product Revenue | — | — | 414.6 | 414.6 | — | — | 398.2 | 398.2 | ||||||||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 931.8 | $ | 364.2 | $ | 420.8 | $ | 1,716.8 | $ | 770.3 | $ | 358.1 | $ | 402.8 | $ | 1,531.2 | ||||||||||||||||||||||||||||||||||
| Six months ended June 30, 2024 | Six months ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue stream | Application Software | Network Software | Technology Enabled Products | Total | Application Software | Network Software | Technology Enabled Products | Total | ||||||||||||||||||||||||||||||||||||||||||
| Software related | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Recurring | $ | 1,393.8 | $ | 530.9 | $ | 11.8 | $ | 1,936.5 | $ | 1,167.8 | $ | 514.2 | $ | 8.0 | $ | 1,690.0 | ||||||||||||||||||||||||||||||||||
| Reoccurring | 134.1 | 135.2 | — | 269.3 | 69.7 | 129.9 | — | 199.6 | ||||||||||||||||||||||||||||||||||||||||||
| Non-recurring | 299.1 | 68.9 | — | 368.0 | 294.2 | 68.5 | 0.8 | 363.5 | ||||||||||||||||||||||||||||||||||||||||||
| Total Software Revenue | 1,827.0 | 735.0 | 11.8 | 2,573.8 | 1,531.7 | 712.6 | 8.8 | 2,253.1 | ||||||||||||||||||||||||||||||||||||||||||
| Product Revenue | — | — | 823.7 | 823.7 | — | — | 747.8 | 747.8 | ||||||||||||||||||||||||||||||||||||||||||
| Total Revenue | $ | 1,827.0 | $ | 735.0 | $ | 835.5 | $ | 3,397.5 | $ | 1,531.7 | $ | 712.6 | $ | 756.6 | $ | 3,000.9 | ||||||||||||||||||||||||||||||||||
Remaining performance obligations – Remaining performance obligations represent the transaction price of firm orders for which work has not been performed, excluding unexercised contract options. As of June 30, 2024, total remaining performance obligations were $4,277.7. We expect to recognize revenues of $2,836.4, or approximately 66% of our remaining performance obligations over the next 12 months (“Backlog”), with the remainder of the revenue to be recognized thereafter.
Contract balances
| Balance sheet account | June 30, 2024 | December 31, 2023 | Change | ||||||||||||||
| Unbilled receivables | $ | 123.8 | $ | 106.4 | $ | 17.4 | |||||||||||
| Deferred revenue – current | (1,468.3) | (1,583.8) | 115.5 | ||||||||||||||
| Deferred revenue – non-current (1) | (132.8) | (130.7) | (2.1) | ||||||||||||||
| Net contract assets/(liabilities) | $ | (1,477.3) | $ | (1,608.1) | $ | 130.8 |
(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, 2023 to June 30, 2024 was primarily due to the timing of payments and invoicing related to SaaS and post-contract support (“PCS”) renewals, driven predominantly by the SaaS renewal cycle of our Frontline business which primarily occurs in the third quarter.
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, 2023 and 2022 was $464.2 and $396.7 for the three months ended June 30, 2024 and 2023, respectively, and $1,158.1 and $986.6 for the six months ended June 30, 2024 and 2023, respectively. In order to determine revenues recognized in the period from contract liabilities, 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, 2024 and December 31, 2023, we had $75.6 and $71.7 of total deferred commissions, respectively.
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