Roper Technologies, Inc. Common Stock Citi’s 2026 Global TMT Conference

Welcome. Thanks. Thanks for having us.

Thanks for having us, and thanks for the opportunity to just go through a little bit of the transformation of the enterprise. Most may not know this, but we grew up as an industrial business. Jason joined 20 years ago. I joined 15. We're 75%-80% industrial pumps and valves then. We closed that chapter early in 2022 and divested all those businesses. About 40% of our enterprise, revenue-wise, we had divested those businesses and went full towards vertical market software and technology products that were not cyclical. The history, though, between sort of the old and the new is there's still a lot of common components. In the industrial days to the current portfolio, it's been we like leaders in small markets, where there's strong product market fit, high gross margins, so we compete on customer intimacy.

A tremendous amount of asset efficiency, so high cash flow generative assets. It had been consistent between the two chapters. Once we divested the industrial businesses, then it really became about growth. We have been on this growth transformation, about the leadership, growth mindset, the assets in a portfolio, the enablement of growth. We can get into that later. I am sure you will have some questions. Then obviously, a couple of years ago, it is another transformation to become AI native in everything we do. It has been the one constant for the last decade or so in Roper has been this pace of change. We have become very comfortable with it. There again, there is this steady through line of the portfolio. Leaders, small markets, customer intimacy, high gross margin, high gross retention, compete on intimacy.

The enterprise today is about $8.5 billion of revenue, 40% EBITDA margins, 30-ish percent free cash flow margins. We then take all that cash flow that the 29 business units generate. Then we bring it to the center, and we deploy it on the next best idea, whether it is a new acquisition, tuck-in, or platform, or the buyback. Taken together, it is a mid-teens cash flow per share compounding, sort of low range of outcome enterprise. We go to work every day to sort of turn that into a high teens. We are not there yet consistently, but we are working to make the double rate at every four years versus every five.

Sure. First, just the context for why decentralization. As I have said now twice, the portfolio construct is we are the largest player in a small market. Which means, by definition, all of our competitors are smaller. It is a common thing they all have, which means probably they are able to execute at a fast, nimble pace. To match the pace of the competitive environment in which we compete, we need to be highly nimble and fast in execution. A huge byproduct of being decentralized is we have massive amounts of accountability, like ownership, entrepreneurial-based accountability. We match the portfolio construct, the competitive environment, with the organizational structure. We are deeply committed to it. About 20,000 people in the company, and there is about 130-ish at the corporate center, to give you a sense of the scale of this.

Now, at the same time, we have 29 businesses that while the end market's very different, the business model's remarkably similar, so there's tons of pattern recognition on what the best practices are in terms of how to build a business that is very effective at improving its organic growth rate over the arc of time. How to do strategy well. How do you run a talent offense? How do you run a structured operating environment? How do you build it on principles of continuous improvement? How do you become AI native in everything you do? How do you drive faster product velocity, commercial excellence? This growth system is something that we sort of put together over the arc of time, and it's very much the combination of the ands.

How do you lean into this decentralized, local accountability, highly autonomous structure, but then avail all these sort of best practices of the portfolio to these leaders so they can be most effective in the way they operate their business?

We have been working on this for a long time. For a decade, I mean, eight or nine years, we've sort of introduced the concept of a talent offense to our business units. We have a lot of admiration for a company called Stryker. It's a medical products business, like a remarkable business, and a lot of their success is built on their talent offense. We benchmarked that, understood from their CEO and their teams what they do, and brought a lot of the core principles to what we do. I will say that, like most things in business, this is not like a particularly novel idea, but the execution or the brilliance or the good things that come from it accrue because you're consistently applying the principles. With a great amount, well, a high degree of rigor.

And so we've done this, and all 29 businesses runs a talent offense. It's focused on employee engagement, employee selection, employee development. At the leader level and the employee base, there's management routines around this. I think every business, twice a year, 4-6 hours, is a deep talent review where they're making commitments across all these dimensions. We've seen the enterprise engagement score, as measured by Gallup, across the enterprise go from the mid-50s to the mid-70s over this period of time. So becoming truly top quartile in terms of employee engagement and sort of what you get, the discretionary effort. This has been a consistent thing. Now when we see these things happen, better selection that's objective, better engagement, better development of the high potential talent, you see a very clear corresponding increase in business results in the business.

You see employee attrition go down, you see product velocity go up, you see commercial excellence go up, and you ultimately see growth go up. This is very clear connection. But it takes time. There's no silver bullet. This just takes the grinding effort of building sort of true talent DNA in the business. On top of that, when we said in the second transition, our transformation here going from the industrial business to a more growth-oriented software business, we've had to re-sort of think what a growth-oriented leader looks like inside the business. We're very behavioral based. We hire leaders that are competitive, intensely competitive, curious learners that love to build, that can connect a long term to what every person in the organization does tomorrow.