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Roper Technologies Announces Third Quarter Results

Company Release - 10/30/2017 6:55 AM ET

GAAP Revenue Increased 23%; Adjusted Revenue Increased 24%

Raising Full Year Adjusted DEPS Guidance

SARASOTA, Fla., Oct. 30, 2017 (GLOBE NEWSWIRE) -- Roper Technologies, Inc. (NYSE:ROP), a diversified technology company, reported financial results for the third quarter ended September 30, 2017.

Roper reports results – including revenue, gross margin, operating margin, net income, and diluted earnings per share (“DEPS”) – on a GAAP basis and an adjusted basis.

Third quarter GAAP revenue increased 23% to $1.16 billion and adjusted revenue grew 24% to $1.17 billion. GAAP gross margin expanded 140 basis points to 62.6% and adjusted gross margin expanded 170 basis points to 63.0%.

GAAP DEPS was $1.84, a 13% increase, while adjusted DEPS was $2.36, a 20% increase. Adjusted EBITDA grew 24% to $407 million and adjusted EBITDA margin expanded 20 basis points to 34.8%.

“Our businesses performed exceptionally well in the third quarter as our asset-light, niche market strategy continues to produce excellent results,” said Brian Jellison, Roper’s Chairman, President and CEO. “We delivered 24% growth in both adjusted revenue and adjusted EBITDA with 5% organic revenue growth and great operating leverage. Our software and network businesses, including Deltek and ConstructConnect, continued to perform well. We also benefited from broad-based growth and strong margin performance in our product businesses.”

“Our cash performance has helped us to reduce debt by $880 million year to date, demonstrating our ability to quickly de-lever after acquisitions. We see continuing broad-based strength across the enterprise that will drive additional growth in the fourth quarter and position us well for a record 2018,” concluded Mr. Jellison.

2017 Guidance Update

Roper is raising its full year 2017 guidance and now expects adjusted DEPS of $9.27 - $9.33, compared to previous guidance of $9.12 - $9.30.

In the fourth quarter of 2017, the Company expects adjusted DEPS to be between $2.56 and $2.62.

The Company’s guidance excludes the impact of future acquisitions or divestitures.

Conference Call to be Held at 8:30 AM (ET) Today

A conference call to discuss these results has been scheduled for 8:30 AM ET on Monday, October 30, 2017.  The call can be accessed via webcast or by dialing +1 800-231-9012 (US/Canada) or +1 719-325-2168, using confirmation code 7559336.  Webcast information and conference call materials will be made available in the Investors section of Roper’s website (www.ropertech.com) prior to the start of the call. The webcast can also be accessed directly by using the following URL https://event.webcast.  Telephonic replays will be available for up to two weeks and can be accessed by using the following registration URL https://event.replay with access code 7559336.

Use of Non-GAAP Financial Information

The Company supplements its consolidated financial statements presented on a GAAP basis with certain non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. Reconciliation of non-GAAP measures to their most directly comparable GAAP measures are included in the accompanying financial schedules or tables. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated.

Table 1:  Adjusted Revenue Reconciliation and Growth Detail ($M)

 Q3 2017 Q3 2016  V % 
GAAP Revenue$ 1,160  $ 945  23% 
Purchase accounting adjustment to acquired deferred revenueA,B 12 A 2 B  
Rounding (1)  -    
Adjusted Revenue$ 1,171  $ 947  24% 
        
Components of Adjusted Revenue Growth       
Organic     5% 
Acquisitions/Divestitures     19% 
Foreign Exchange     1% 
Rounding     (1)% 
Total Adjusted Revenue Growth     24% 

Table 2:  Adjusted DEPS Reconciliation

 Q3 2017 Q3 2016  V % 
GAAP Diluted Earnings Per Share (DEPS)$ 1.84  $ 1.63  13% 
Purchase accounting adjustment to acquired deferred revenueA,B 0.07 A 0.01 B  
Purchase accounting adjustment for commission expenseC  (0.01)  -    
Amortization of Acquisition-related intangible assetsD 0.46   0.31    
Debt Extinguishment ChargeE  -   0.01    
Adjusted DEPS$ 2.36  $ 1.96  20% 

Table 3:  Adjusted Gross Margin Reconciliation ($M)

 Q3 2017 Q3 2016 V Bps 
GAAP Revenue$ 1,160  $ 945    
Purchase accounting adjustment to acquired deferred revenueA,B 12 A 2 B  
Rounding (1)  -    
Adjusted Revenue$ 1,171  $ 947    
       
GAAP Gross Profit$ 726  $ 578    
Purchase accounting adjustment to acquired deferred revenueA,B 12 A 2 B  
Rounding -   1    
Adjusted Gross Profit$ 738  $ 581    
       
GAAP Gross Margin 62.6%  61.2% +140 bps 
Adjusted Gross Margin 63.0%  61.3% +170 bps 

Table 4:  Adjusted EBITDA Reconciliation ($M)

 Q3 2017 Q3 2016 V% / Bps
GAAP Revenue$ 1,160  $ 945   
Purchase accounting adjustment to acquired deferred revenueA,B 12 A 2 B 
Rounding (1)  -   
Adjusted Revenue$ 1,171  $ 947   
      
GAAP Net Earnings$ 190  $ 167   
Taxes 74   73   
Interest expense 46   27   
Depreciation 12   9   
Amortization 74   49   
Rounding 1   -   
EBITDA$ 397  $ 325   
      
Purchase accounting adjustment to acquired deferred revenueA,B 12 A 2 B 
Purchase accounting adjustment for commission expenseC (1)  -   
Debt Extinguishment ChargeE -   1   
Rounding (1)  -   
Adjusted EBITDA$ 407  $ 328  24%
% of Adjusted Revenue 34.8%  34.6% +20bps 

Table 5:  Forecasted Adjusted DEPS Reconciliation

 Q4 2017 Full Year 2017 
 Low End High End Low End High End 
GAAP DEPS$ 2.07 $ 2.13 $ 7.17  $ 7.23  
Purchase accounting adjustments to acquired deferred revenue and commissionsF 0.04  0.04  0.32   0.32  
Amortization of acquisition-related
intangible assets
 0.45  0.45  1.83   1.83  
Gain on sale of divested Energy product lineG -  -  (0.06)  (0.06) 
Impairment charge on minority investmentH -  -  0.01   0.01  
Adjusted DEPS$ 2.56 $ 2.62 $ 9.27  $ 9.33  

A  Acquisition-related fair value adjustments to deferred revenue related to the acquisitions of ConstructConnect ($1.4M pretax, $0.9M after-tax), and Deltek ($10.2M pretax, $6.6M after-tax).

B  Acquisition-related fair value adjustments to deferred revenue related to the acquisitions of On Center Software ($0.1M pretax, $0.1M after-tax), Aderant ($1.8M pretax, $1.2M after-tax), Atlas Medical ($0.1M pretax, $0.1M after-tax) and CliniSys ($0.2M pretax, $0.1M after-tax).

C  Purchase Accounting Adjustment for Commission Expense related to the acquisition of Deltek ($1.2M pretax, $0.8M after-tax).

D  Actual results and forecast of estimated amortization of acquisition-related intangible assets ($M); for comparison purposes, prior period amounts are also shown below. Tax Rate of 35% applied to amortization in all periods.

 Q3 2016A Q4 2016A FY 2016A  

Q3 2017A
 Q4 2017E FY 2017E
Pretax$ 49 $ 54 $ 201 $ 73 $ 73 $ 292
After-tax$ 32 $ 35 $ 131 $ 48 $ 47 $ 190
Per share$ 0.31 $ 0.34 $ 1.27 $ 0.46 $ 0.45 $ 1.83

E  Debt Extinguishment Charge ($0.9M pretax, $0.6M after-tax).

F  Forecasted acquisition-related fair value adjustments to acquired deferred revenue and commissions of ConstructConnect and Deltek, as shown below ($M, except per share data).

 Q4 2017E FY 2017E
Pretax$ 6 $ 51
After-tax$ 4 $ 33
Per Share$ 0.04 $ 0.32

G  Gain on sale of divested Energy product line ($9.4M pretax, $6.1M after-tax).

H  Impairment charge on minority investment ($1.8M pretax, $1.1M after-tax).

About Roper Technologies

Roper Technologies is a constituent of the S&P 500, Fortune 1000, and the Russell 1000 indices. Roper designs and develops software (both software-as-a-service and licensed), and engineered products and solutions for healthcare, transportation, food, energy, water, education and other niche markets worldwide. Additional information about Roper is available on the Company’s website at www.ropertech.com.

The information provided in this press release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements may include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations.  Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes," "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties include our ability to identify and complete acquisitions consistent with our business strategies, integrate acquisitions that have been completed, realize expected benefits and synergies from, and manage other risks associated with, the newly acquired businesses. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions and the conditions of the specific markets in which we operate, changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation, potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events.

Roper Technologies, Inc. and Subsidiaries   
Condensed Consolidated Balance Sheets (unaudited) 
(Amounts in thousands) 
 
 September 30, 2017 December 31, 2016
ASSETS:   
    
Cash and cash equivalents$605,616  $757,200 
Accounts receivable, net 603,874   619,854 
Inventories, net 209,306   181,952 
Unbilled receivables 157,852   129,965 
Other current assets 115,408   87,530 
Total current assets 1,692,056   1,776,501 
    
Property, plant and equipment, net 141,279   141,318 
Goodwill 8,793,956   8,647,142 
Other intangible assets, net 3,502,687   3,655,843 
Deferred taxes 32,459   30,620 
Other assets 84,236   73,503 
    
Total assets$14,246,673  $14,324,927 
    
LIABILITIES AND STOCKHOLDERS' EQUITY:   
    
Accounts payable$163,719  $152,067 
Accrued compensation 168,931   161,730 
Deferred revenue 534,562   488,399 
Other accrued liabilities 261,457   219,339 
Income taxes payable 46,575   22,762 
Current portion of long-term debt, net 401,534   400,975 
Total current liabilities 1,576,778   1,445,272 
    
Long-term debt, net of current portion 4,932,721   5,808,561 
Deferred taxes 1,163,371   1,178,205 
Other liabilities 114,819   104,024 
Total liabilities 7,787,689   8,536,062 
    
Common stock 1,043   1,036 
Additional paid-in capital 1,591,039   1,489,067 
Retained earnings 5,062,926   4,642,402 
Accumulated other comprehensive loss (177,277)  (324,739)
Treasury stock (18,747)  (18,901)
Total stockholders' equity 6,458,984   5,788,865 
    
Total liabilities and stockholders' equity$14,246,673  $14,324,927 
 


Roper Technologies, Inc. and Subsidiaries     
Condensed Consolidated Statements of Earnings (unaudited) 
(Amounts in thousands, except per share data) 
 
  Three months ended
September 30,
 Nine months ended
September 30,
   2017   2016   2017  2016 
Net revenues $1,159,912  $945,144  $3,380,888 $2,779,125 
Cost of sales  433,492   366,651   1,281,204  1,073,593 
Gross profit  726,420   578,493   2,099,684  1,705,532 
         
Selling, general and administrative expenses  415,673   311,103   1,236,423  940,073 
Income from operations  310,747   267,390   863,261  765,459 
         
Interest expense, net  45,523   26,800   137,201  81,076 
Other income/(expense), net  (659)  (534)  5,263  (1,997)
         
Earnings before income taxes  264,565   240,056   731,323  682,386 
         
Income taxes  74,292   72,977   203,423  205,822 
         
Net earnings $190,273  $167,079  $527,900 $476,564 
         
Net earnings per share:        
Basic $1.86  $1.65  $5.17 $4.71 
Diluted  1.84   1.63   5.11  4.65 
         
Weighted average common shares outstanding:        
Basic  102,303   101,372   102,091  101,231 
Diluted  103,680   102,522   103,397  102,424 
         


Roper Technologies, Inc. and Subsidiaries 
Selected Segment Financial Data (unaudited) 
(Amounts in thousands and percents of net sales) 
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2017   2016   2017   2016 
 Amount % Amount % Amount % Amount %
Net revenues:               
RF Technology$480,572   $303,565   $1,370,688   $872,536  
Medical & Scientific Imaging 343,639    338,027    1,042,638    1,010,826  
Industrial Technology 200,442    178,317    576,713    528,179  
Energy Systems & Controls 135,259    125,235    390,849    367,584  
Total$1,159,912   $945,144   $3,380,888   $2,779,125  
                
                
Gross profit:               
RF Technology$298,883 62.2% $169,123 55.7% $830,096 60.6% $492,493 56.4%
Medical & Scientific Imaging 247,138 71.9%  247,432 73.2%  753,096 72.2%  740,725 73.3%
Industrial Technology 102,092 50.9%  90,950 51.0%  293,410 50.9%  266,679 50.5%
Energy Systems & Controls 78,307 57.9%  70,988 56.7%  223,082 57.1%  205,635 55.9%
Total$726,420 62.6% $578,493 61.2% $2,099,684 62.1% $1,705,532 61.4%
                
                
Operating profit*:               
RF Technology$134,148 27.9% $94,785 31.2% $342,690 25.0% $272,905 31.3%
Medical & Scientific Imaging 115,506 33.6%  118,979 35.2%  356,614 34.2%  347,706 34.4%
Industrial Technology 62,255 31.1%  52,800 29.6%  174,117 30.2%  150,850 28.6%
Energy Systems & Controls 36,351 26.9%  31,777 25.4%  99,454 25.4%  83,728 22.8%
Total$348,260 30.0% $298,341 31.6% $972,875 28.8% $855,189 30.8%
                
                
Net Orders:               
RF Technology$475,003   $300,303   $1,404,768   $899,659  
Medical & Scientific Imaging 351,455    332,624    1,054,254    1,014,910  
Industrial Technology 210,110    173,757    607,081    528,629  
Energy Systems & Controls 134,197    121,818    390,434    368,292  
Total$1,170,765   $928,502   $3,456,537   $2,811,490  
 
*Segment operating profit is before unallocated corporate general and administrative expenses. These expenses were $37,513 and $30,951 for the three months ended September 30, 2017 and 2016, respectively, and $109,614 and $89,730 for the nine months ended September 30, 2017 and 2016, respectively.
 


Roper Technologies, Inc. and Subsidiaries 
Condensed Consolidated Statements of Cash Flows (unaudited) 
(Amounts in thousands) 
 
  Nine months ended September 30,
   2017   2016 
Cash flows from operating activities:    
Net earnings $527,900  $476,564 
Adjustments to reconcile net earnings to cash flows from operating activities:    
Depreciation and amortization of property, plant and equipment  36,776   27,954 
Amortization of intangible assets  221,518   149,149 
Amortization of deferred financing costs  5,463   4,080 
Non-cash stock compensation  67,598   60,480 
Gain on sale of assets  (9,393)   
Changes in operating assets and liabilities, net of acquired businesses:    
  Accounts receivable  30,074   (1,660)
  Unbilled receivables  (27,186)  3,684 
  Inventories  (19,577)  (5,916)
  Accounts payable and accrued liabilities  48,276   17,273 
  Deferred revenue  50,554   19,692 
  Income taxes  (48,370)  (52,728)
Other, net  (17,900)  (5,199)
  Cash provided by operating activities  865,733   693,373 
     
Cash flows from investing activities:    
Acquisitions of businesses, net of cash acquired  (88,070)  (277,587)
Capital expenditures  (35,898)  (26,933)
Capitalized software expenditures  (8,043)  (1,528)
Proceeds from sale of assets  10,614   866 
Other, net  (6,932)  1,564 
  Cash used in investing activities  (128,329)  (303,618)
     
Cash flows from financing activities:    
Payments under revolving line of credit, net  (880,000)  (180,000)
Principal payments on convertible notes     (4,010)
Cash premiums paid on convertible note conversions     (13,308)
Cash dividends to stockholders  (106,480)  (90,632)
Proceeds from stock based compensation, net  32,932   13,895 
Treasury stock sales  3,194   2,576 
Other  179   (7,816)
  Cash used in financing activities  (950,175)  (279,295)
     
Effect of foreign currency exchange rate changes on cash  61,187   (6,701)
     
Net (decrease)/increase in cash and cash equivalents  (151,584)  103,759 
     
Cash and cash equivalents, beginning of period  757,200   778,511 
     
Cash and cash equivalents, end of period $605,616  $882,270 
 


Contact Information:
Investor Relations
941-556-2601
investor-relations@ropertech.com

Source: Roper Technologies, Inc.