Roper Technologies, Inc. Common Stock Oppenheimer 29th Annual Technology, Internet & Communications Conference

Good morning. Good to see you, Ken.

Sure. Love to. Roper is a vertical market software and technology company. We are focused on sustainably compounding free cash flow per share in the mid-teens over a long period of time. We are kind of an N of one in the software space because we have this sustainable M&A motion, so we have a lot of M&A optionality. With that, we own 29 businesses. They are leaders in their niche vertical markets. Typically, we choose fairly smaller TAMs. We think they are attractive because of their protective nature. With our market leadership, and especially with AI, this provides multiple paths to growth. Today, I think organically, we are sort of mid-single digit plus, and that converts a sort of high single-digit cash flow just because of the margin and the low CapEx and our working capital intensity is very low.

We take that cash flow, and then we just use a little bit of investment-grade leverage, to acquire first call on capital as bolt-ons for our businesses because they just have such great returns or, of course, buying the next great vertical leader. With this, you get this sort of continuous growth flywheel. Then, obviously, in the last three quarters, we have been much more active on the share repurchase front, just given, we think, our really attractive valuations at Roper and I would say, I would call it a somewhat paralyzed private equity market for the last several years and increasingly over the last six months because of everything that has happened with the public market. So we have a proven track record of acquiring great businesses and for reasonable valuations, and we make them better over time.

I think we are increasingly harnessing the collective learnings and value of those learnings and best practice methods across the portfolio. Anything from AI product acceleration to what we call the product operating model and deploying that to continuous improvement methods, and then even into commercial excellence. So I think we are still getting going on how we think we can increase the organic growth across the portfolio and also just capturing more value from M&A. That is sort of Roper in a nutshell.

Yeah, sure. Would love to. About three years ago, we decidedly said, it's an opportunity for us to look at businesses that were maybe think of first-term private equity that had sort of a faster current of growth that we could capture and help professionalize and mature that business under our ownership, build a bigger platform, right? Put on bolt-ons that make strategic sense for that business because we have a permanent ownership versus maybe buying later cycle where some bolt-ons were done, maybe they weren't great for the long term, and so you inherit that, and you sort of have to work through that. So finding businesses that have faster growth currents and that we can help them continue to grow and then capture margin opportunity as they scale, not cost takeout, but just kind of scaling as the business grows.

The last couple of years, we've acquired CentralReach and Subsplash. We've done some interesting bolt-ons for our DAT business in a business called Convoy and also Outgo. We put together a much tighter governance structure around that. We have a value creation thesis when we're looking at a deal and then a value creation plan. I'm happy to report the platform deals of CentralReach and Subsplash have performed against our VTP in the first year. They're tracking against our forecast on revenue and EBITDA. It's just been great to have this tighter governance coupled with greater collaboration, with our management teams. We built on the lessons of some of the earlier deals that we did, especially with Procare Solutions, and so these are tracking quite well. The bolt-ons are continuing to be a motion for us.

We've invested in a team here to go and help source our deals for our businesses and collaborate with our businesses to be much more proactive and do more reach outs. Some of the products of that is like our DAT business, where we've now acquired a technology called Convoy. We bought that. It was owned by a broker at some point, and then ultimately came into our hands. We're essentially automating the spot freight market. Instead of it being 10 calls between a broker and a carrier, we're trying to reduce that down to an automatic freight match ultimately. We're pleased with that. We've also bought a factoring technology business, and both of those are tracking well. It's going to take time. You're developing a new market, so it's a little bit of a wider range of outcomes in terms of timing.

But we really like the dynamic work that the DAT business is doing to create demand generation, to build that network, and then be iterative on the tech. They're moving at pace. It's going to help our organic growth a little bit in the second half as that rolls organic. I'd just say broadly, the buying faster growth businesses is obviously good for organic growth, but also allows us to just capture more value for shareholders.

Yeah, sure. When we started the year, our initial guidance was $21.30 to $21.55, and now we're at $22.15 to $22.30. Obviously, the buyback was a component of that, so that plus better operating performance has enabled a 4% raise at the midpoint. I think operationally, we've been very pleased with the first half progression. Growth is particularly in our Neptune Technology Group business. We took a cautious approach given where that business was in its cycle relative to COVID demand and how that was churning through. But they've actually executed very well in the first half, so they helped drive some of the outperformance at our technology-enabled product segment. It's just been better than expected. This allowed us to raise our organic growth from 5%-6% to now 6%.