Roper Technologies, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; compared with the three months ended March 31, 2021. Amounts are in millions except per-share data. Roper is a diversified technology company operating in application software, network software and systems, measurement and analytical solutions, and process technologies.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change or context |
|---|---|---|---|
| Revenue | $1,526.6 | $1,376.1 | Up 10.9%; organic growth was 10.9% overall |
| Gross profit / margin | $1,030.1 / 67.5% | $936.0 / 68.0% | Margin down 0.5 percentage point |
| Income from operations | $421.1 | $374.6 | Operating margin up to 27.6% from 27.2% |
| Net earnings from continuing operations | $287.6 | $269.9 | Diluted EPS of $2.70 versus $2.55 |
| Net earnings, including discontinued operations | $2,020.5 | $289.0 | Includes $1,717.3 after-tax gain on divestitures |
| Cash from continuing operating activities | $473.8 | $525.9 | Down 10% |
| Total debt, net of financing costs | $7,454.3 | $7,921.8 at Dec. 31, 2021 | Cash was $3,237.5; net debt was $4,216.8 |
Segments and material changes
- Revenue increased in all continuing segments: Application Software 9.5%, Network Software & Systems 17.3%, Measurement & Analytical Solutions 6.2%, and Process Technologies 15.9% as reported. Organic growth ranged from 7.3% in Measurement & Analytical Solutions to 17.6% in Process Technologies.
- Network Software & Systems showed the strongest segment operating-margin improvement, to 39.4% from 36.3%. Measurement & Analytical Solutions margin declined to 29.5% from 32.9%, primarily amid higher materials, component, and freight costs and supply-chain challenges.
- Roper completed the Zetec and TransCore divestitures in January and March 2022; CIVCO Radiotherapy had been sold in November 2021. Their results are presented as discontinued operations. The sales generated $3,006.2 of cash proceeds in Q1, and a combined after-tax disposal gain of $1,717.3.
- Cash and cash equivalents rose from $351.5 at year-end to $3,237.5, primarily reflecting divestiture proceeds. Roper used cash to repay borrowings; it reported no outstanding draws on its $3,000 credit facility at quarter-end.
Cash, debt, and liquidity
Continuing-operations operating cash flow fell by $52.1 year over year, mainly due to less favorable working-capital timing, including higher incentive-compensation payments and approximately $36 of accelerated receipts in Q1 2021. Continuing investing activities used $67.8, including the Horizon Lab Systems acquisition and capital expenditures. Continuing financing activities used $508.8, primarily for credit-facility repayments and dividends.
Net debt to total net capital was 23.7% at March 31, 2022, versus 39.6% at December 31, 2021. The company reported compliance with its credit-facility covenants and said cash, operating cash generation, and available credit should fund operating requirements for the foreseeable future. Current liabilities include $793.0 of income taxes payable, which increased largely in connection with the TransCore and Zetec divestitures.
Outlook, risks, and unusual items
- Roper gave no specific numerical earnings or revenue guidance in the supplied filing text. Management expects positive operating cash flow and debt reduction, while noting the pace depends on acquisitions, operating performance, the pandemic, and financial-market conditions.
- Remaining performance obligations were $4,000.3; the company expected to recognize $2,718.0, about 68%, over the next 12 months. Backlog was up 28% year over year, including 27% organic growth and 1% from acquisitions.
- Management cited COVID-19, inflation, supply-chain constraints, geopolitical uncertainty including the Russia-Ukraine conflict, foreign exchange, interest rates, acquisition integration, cybersecurity and data privacy, competition, and litigation among risks that could affect results.
- Q1 2022 other expense included a one-time $4.1 charge to transfer remaining asbestos-claim exposure. The 2021 comparison included $27.1 of income from the sale of a minority investment. The Vertafore Texas driver-data litigation and investigation, and a patent case involving Verathon, remain disclosed legal matters; management said ordinary-course claims are not expected to materially affect the company, but gave no assurance.
- Management reported effective disclosure controls and no material change to internal controls over financial reporting during the quarter.
Key facts for investors to verify
- Assess continuing-operations growth and margins separately from the large one-time divestiture gain that drove reported net earnings.
- Review the use of divestiture proceeds, upcoming debt maturities, and the company’s intended pace of debt reduction and acquisitions.
- Monitor cash conversion and working-capital trends, particularly income taxes payable and the timing of customer receipts and incentive payments.
- Track whether supply-chain and input-cost pressures continue to weigh on Measurement & Analytical Solutions margins, and whether backlog converts to revenue as expected.
- Evaluate developments in the disclosed data-privacy, patent, and other legal matters, as well as geopolitical and pandemic-related risks.