Roper Technologies, Inc. Q4 FY2025 earnings call

2025 Performance: Delivered solid execution with 12% revenue growth, 11% EBITDA growth, and 8% free cash flow growth. Enterprise software bookings in low double-digit range. Investment in Growth: Upscaled talent, sharpened strategy, improved execution across portfolio. Application software (except Deltek) saw 70 basis points organic growth improvement. AI Initiatives: Hired Shane Luke and Eddie Raphael to lead AI accelerator team. AI in mission-critical workflows, decentralized deployment. Capital Allocation: Deployed $3.3B in acquisitions in 2025, bought back 1.1M shares for $500M in Q4. Over $6B capacity for M&A and repurchases in 2026.

Application Software: Q4 revenue grew 10% with organic growth of 4% and margins expanding 70 basis points to 42.2%. Full-year 2025 revenue grew 16% with organic growth 5%, EBITDA margins 42.5% and core margins improved 80 basis points. Network Software: Q4 revenue grew 14% with organic growth 5%, margins 52.8% (lower due to scaling bolt-ons). Full-year 2025 revenue grew 8% with organic growth 4%, EBITDA margin 54.1%. TEP: Q4 revenue grew 6% with organic growth 5%, margins 34.8%. Full-year 2025 revenue grew 7% with organic growth 6%, EBITDA margin 35.7%.

2026 full-year revenue growth expected in 8% area, organic growth 5-6%, adjusted DEPS $21.3 to $21.55. Q1 2026 adjusted DEPS expected $4.95 to $5. Guidance assumes no improvement at Deltek's GovCon or DAT's freight market, modest top-line weakness at Neptune. Second-half organic growth driven by Central Reach and SubSplash turning organic.

Deltek GovCon: Perpetual license revenue impact in Q4, ongoing challenges in GovCon market. ProCare: Implementation timing delays affecting customer time to value and payments volumes. Neptune: Top-line weakness compared to 2025 due to various market dynamics.

Q: Regarding Deltek, what's baked into the 2026 guide and protection against another shutdown?

A: Good morning, Brent. Yeah. I think we are not assuming an improvement this year. You know, the fourth quarter was depressed by the perpetual license revenue. As I talked about, most of the Con Enterprise still buys perpetual licenses. So that's what drove our lower organic NAS in the fourth quarter. So we don't think that's gonna repeat next year. So we do have a comp benefit, but otherwise, we're not really assuming improvement in that market until we see it.

Q: On ProCare, what's needed to meet expectations?

A: I think it's just to go through a little bit of what we talked about in the prepared remarks and then add a little bit more to it. So, hey, the business is the leader in the marketplace. It is the clear leader. We've done a lot of good things there. We sort of cleaned up and fixed the payments cost infrastructure and processing capability. We've fixed and improved the go-to-market. So, we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor. And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to the software, which means we're slow to implement the payments. And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that. It's a completely fixable problem. It's one of the problems that you don't like to have problems generally, but when you do have one that is imminently fixable, which this one is, the larger problem would be if we had a competitive situation, something like that, which we do not have.

Q: On AI quantification, when to expect precise quantification?

A: Yep. So appreciate the question. We spent a fair amount of time talking about that internally. A couple of guiding principles that we have internally is, one, we're not gonna AI wash or allocate revenue. Like other companies, have done or are doing. We're not gonna say x dollars, R&D's, therefore, y dollars of revenue is AI-related. So we're not gonna AI wash our revenue stream. That said, we do aspire to be able to report a number, yeah, that's Nick. AI revenue SKU related is x or y. Unfortunately, if we do that, I mean, we're gonna monetize AI in more ways than just AI SKUs. It's going to be cloud uplift. It's going to be in packaging. It's going to be lots of ways that we monetize this. So this is actually you know, it says simple. It does pretty hard from how we're gonna be able to sort of report this where it's credible. At the end of the day, Joe, you highlight the most important thing, which is we believe this is a TAM meaningful TAM expander for us, which means it should be a growth driver for us you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. We see that at Central Reach. We'd expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper, 25 the chapter on AI would be how we learned to develop the initial set of products across our software business. Essentially, every one of our software businesses either has or is right on the precipice of having AI-related product to deliver to our customers. 26, I think the chapter is gonna be how we commercialize. How do you sell, deploy, drive implementation? And ultimately sort of monetize all of the product. And so that's gonna be the journey of learning for us across the portfolio organization. We'll look forward to providing updates on that as we get through the year.

Q: On 2026 guidance conservatism, any learnings from ProCare?

A: Yes, Josh, it's Neil. I'll take that one. So sure answer is heck yes. There's a lot of learning from our ProCare governance what worked, what didn't work, and how we're governing both SubSplash and Central Reach. And we can spend more time talking about offline. But in essence, when we see a small variance in a monthly reporting package, relative to one of the key levers in the value creation plan. In ProCare, we observed that variance for a longer time we decided to take action to correct it. Now we immediately jump to a corrective action, a countermeasure and, we don't let small variances turn into large variances. And as a result, you know, Central Reach is ahead of the underwrite model and SubSplash is on the underwrite model. For the outlooks for those businesses. Just that we can get in much more detail when we have more time offline, but that's the essence of it.