rop-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021.


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number 1-12273

ROPER TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		51-0263969
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6901 Professional Pkwy., Suite 200
Sarasota,	Florida	34240
(Address of principal executive offices)		(Zip Code)

(941) 556-2601

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange On Which Registered

Common Stock, $0.01 Par Value

ROP

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


☒	Large accelerated filer	☐	Accelerated filer

☐	Non-accelerated filer (Do not check if a smaller reporting company)	☐	Smaller reporting company

		☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the registrant’s common stock as of April 30, 2021 was 105,239,028.

ROPER TECHNOLOGIES, INC.

REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

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		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited):

	Condensed Consolidated Statements of Earnings	3

	Condensed Consolidated Statements of Comprehensive Income	4

	Condensed Consolidated Balance Sheets	5

	Condensed Consolidated Statements of Cash Flows	6

	Condensed Consolidated Statements of Changes in Stockholders' Equity	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22

Item 4.	Controls and Procedures	22

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	23

Item 1A.	Risk Factors	23

Item 6.	Exhibits	24

	Signatures	25

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Roper Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (unaudited)

(in millions, except per share data)


	Three months ended March 31,
	2021		2020
Net revenues	$	1,528.6	$	1,350.7
Cost of sales	534.8		493.9
Gross profit	993.8		856.8

Selling, general and administrative expenses	593.3		507.6
Income from operations	400.5		349.2

Interest expense, net	60.6		45.4

Other income (expense), net	27.0		0.8


Earnings before income taxes	366.9		304.6

Income taxes	77.9		64.3

Net earnings	$	289.0	$	240.3

Net earnings per share:
Basic	$	2.75	$	2.30
Diluted	$	2.73	$	2.28

Weighted average common shares outstanding:
Basic	105.0		104.3
Diluted	106.0		105.3

See accompanying notes to Condensed Consolidated Financial Statements.

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Roper Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in millions)


	Three months ended March 31,
	2021		2020
Net earnings	$	289.0	$	240.3

Other comprehensive income, net of tax:
Foreign currency translation adjustments	14.6		(128.2)
Total other comprehensive income (loss), net of tax	14.6		(128.2)

Comprehensive income	$	303.6	$	112.1

See accompanying notes to Condensed Consolidated Financial Statements.

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Roper Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

(in millions)


	March 31, 2021		December 31, 2020
ASSETS:

Cash and cash equivalents	$	331.0	$	308.3
Accounts receivable, net	792.0		863.0
Inventories, net	206.0		198.4
Income taxes receivable	13.2		21.9
Unbilled receivables	268.0		241.7
Other current assets	129.2		119.0
Total current assets	1,739.4		1,752.3

Property, plant and equipment, net	134.6		140.6
Goodwill	14,405.3		14,395.2
Other intangible assets, net	7,066.8		7,206.9
Deferred taxes	102.3		104.0
Other assets	422.7		425.8
Total assets	$	23,871.1	$	24,024.8

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Accounts payable	$	190.9	$	177.8
Accrued compensation	234.0		286.1
Deferred revenue	1,023.4		994.6
Other accrued liabilities	448.5		457.0
Income taxes payable	64.0		26.9
Current portion of long-term debt, net	502.1		502.0
Total current liabilities	2,462.9		2,444.4

Long-term debt, net of current portion	8,571.8		9,064.5
Deferred taxes	1,571.6		1,562.5
Other liabilities	499.1		473.6
Total liabilities	13,105.4		13,545.0

Commitments and contingencies (Note 8)

Common stock	1.1		1.1
Additional paid-in capital	2,138.9		2,097.5
Retained earnings	8,776.0		8,546.2
Accumulated other comprehensive loss	(132.4)		(147.0)
Treasury stock	(17.9)		(18.0)
Total stockholders’ equity	10,765.7		10,479.8

Total liabilities and stockholders’ equity	$	23,871.1	$	24,024.8

See accompanying notes to Condensed Consolidated Financial Statements.

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Roper Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

(in millions)


	Three months ended March 31,
	2021		2020
Cash flows from operating activities:
Net earnings	$	289.0	$	240.3
Adjustments to reconcile net earnings to cash flows from operating activities:
Depreciation and amortization of property, plant and equipment	14.7		12.8
Amortization of intangible assets	146.6		101.8
Amortization of deferred financing costs	3.4		2.1
Non-cash stock compensation	32.9		27.7

Gain on sale of assets, net of tax	(21.6)		—
Income tax provision, excluding tax associated with gain on sale of assets	72.4		64.3
Changes in operating assets and liabilities, net of acquired businesses:
Accounts receivable	70.3		69.1
Unbilled receivables	(22.2)		(43.1)
Inventories	(8.2)		(10.3)
Accounts payable and accrued liabilities	(46.4)		(70.2)
Deferred revenue	60.5		3.6

Cash income taxes paid	(17.8)		(24.1)
Other, net	(14.0)		(10.1)
Cash provided by operating activities	559.6		363.9

Cash flows from (used in) investing activities:
Acquisitions of businesses, net of cash acquired	—		(2.8)
Capital expenditures	(9.1)		(7.9)
Capitalized software expenditures	(7.2)		(2.6)
Proceeds from (used in) disposal of businesses	(0.1)		(3.7)
Proceeds from sale of assets	27.1		—

Cash provided by (used in) investing activities	10.7		(17.0)

Cash flows from (used in) financing activities:


Borrowings (payments) under revolving line of credit, net	(495.0)		—


Cash dividends to stockholders	(58.8)		(53.1)
Proceeds from stock-based compensation, net	4.4		12.1
Treasury stock sales	4.7		2.8

Other	(0.5)		(0.5)
Cash flows used in financing activities	(545.2)		(38.7)

Effect of foreign currency exchange rate changes on cash	(2.4)		(18.1)

Net increase in cash and cash equivalents	22.7		290.1

Cash and cash equivalents, beginning of period	308.3		709.7

Cash and cash equivalents, end of period	$	331.0	$	999.8

See accompanying notes to Condensed Consolidated Financial Statements.

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Roper Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)

(in millions)


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Treasury stock		Total stockholders’ equity











Balances at December 31, 2020	$	1.1	$	2,097.5	$	8,546.2	$	(147.0)	$	(18.0)	$	10,479.8

Net earnings	—		—		289.0		—		—		289.0
Stock option exercises	—		19.2		—		—		—		19.2
Treasury stock sold	—		4.6		—		—		0.1		4.7
Currency translation adjustments	—		—		—		14.6		—		14.6
Stock-based compensation	—		32.4		—		—		—		32.4
Restricted stock activity	—		(14.8)		—		—		—		(14.8)
Dividends declared ($0.5625 per share)	—		—		(59.2)		—		—		(59.2)
Balances at March 31, 2021	$	1.1	$	2,138.9	$	8,776.0	$	(132.4)	$	(17.9)	$	10,765.7












Balances at December 31, 2019	$	1.1	$	1,903.9	$	7,818.0	$	(212.8)	$	(18.3)	$	9,491.9

Adoption of ASC 326	—		—		(1.7)		—		—		(1.7)
Net earnings	—		—		240.3		—		—		240.3
Stock option exercises	—		22.9		—		—		—		22.9
Treasury stock sold	—		2.7		—		—		0.1		2.8
Currency translation adjustments	—		—		—		(128.2)		—		(128.2)
Stock-based compensation	—		27.6		—		—		—		27.6
Restricted stock activity	—		(10.8)		—		—		—		(10.8)
Dividends declared ($0.5125 per share)	—		—		(53.5)		—		—		(53.5)
Balances at March 31, 2020	$	1.1	$	1,946.3	$	8,003.1	$	(341.0)	$	(18.2)	$	9,591.3

See accompanying notes to Condensed Consolidated Financial Statements.

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Roper Technologies, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (unaudited)

All currency and share amounts are in millions, except per share data

1. Basis of Presentation

The accompanying Condensed Consolidated Financial Statements for the three months ended March 31, 2021 and 2020 are unaudited. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly the financial position, results of operations, comprehensive income and cash flows of Roper Technologies, Inc. and its subsidiaries (“Roper,” the “Company,” “we,” “our” or “us”) for all periods presented. The December 31, 2020 financial position data included herein was derived from the audited consolidated financial statements included in the Company’s 2020 Annual Report on Form 10-K (“Annual Report”) filed on February 22, 2021 with the Securities and Exchange Commission (“SEC”) but does not include all disclosures required by U.S. generally accepted accounting principles (“GAAP”).

Roper’s management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these Condensed Consolidated Financial Statements in conformity with GAAP. Actual results could differ from those estimates.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year. You should read these unaudited Condensed Consolidated Financial Statements in conjunction with Roper’s audited consolidated financial statements and the notes thereto included in its Annual Report. Certain prior period amounts have been reclassified to conform to current period presentation.

On March 17, 2021, Roper completed the sale of a minority investment in Sedaru, Inc. for $27.1. The pretax gain on the sale was $27.1, which is reported in Other income/(expense), net in the Condensed Consolidated Statement of Earnings.

2. Recent Accounting Pronouncements

The Financial Accounting Standards Board FASB (“FASB”) establishes changes to accounting principles under GAAP in the form of accounting standards updates (“ASUs”) to the Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs. Any recent ASUs not listed below were assessed and determined to be either not applicable or are expected to have an immaterial impact on the Company’s results of operations, financial position or cash flows.

Recently Adopted Accounting Pronouncements

The Company adopted ASC Topic 326, Financial Instruments - Credit Losses (“ASC 326”), as of January 1, 2020 using the modified retrospective transition method. This ASU amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments, including trade receivables, and unbilled receivables. We recorded a noncash cumulative effect decrease to retained earnings of $1.7, net of income taxes, on our opening consolidated balance sheet as of January 1, 2020.

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3. Weighted Average Shares Outstanding

Basic earnings per share were calculated using net earnings and the weighted average number of shares of common stock outstanding during the respective period. Diluted earnings per share were calculated using net earnings and the weighted average number of shares of common stock and potential common stock outstanding during the respective period. Potentially dilutive common stock consisted of stock options based upon the trading price of Roper’s common stock. The effects of potential common stock were determined using the treasury stock method. Weighted average shares outstanding are shown below:


	Three months ended March 31,
	2021	2020
Basic shares outstanding	105.0	104.3
Effect of potential common stock:
Common stock awards	1.0	1.0
Diluted shares outstanding	106.0	105.3

For the three months ended March 31, 2021, there were 0.647 outstanding stock options that were not included in the determination of diluted earnings per share because doing so would have been antidilutive, as compared to 1.318 outstanding stock options that would have been antidilutive in the respective 2020 period.

4. Stock Based Compensation

The Roper Technologies, Inc. 2016 Incentive Plan (“2016 Plan”) is a stock-based compensation plan used to grant incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights or equivalent instruments to Roper’s employees, officers, directors and consultants.

The following table provides information regarding the Company’s stock-based compensation expense:


	Three Months Ended March 31,
	2021		2020
Stock-based compensation	$	32.9	$	27.7
Tax effect recognized in net earnings	6.9		5.8

Stock Options - In the three months ended March 31, 2021, 0.498 options were granted with a weighted average fair value of $94.69 per option. During the same period in 2020, 0.725 options were granted with a weighted average fair value of $62.02 per option. All options were issued with an exercise price equal to the closing price of Roper’s common stock on the date of grant, as required by the 2016 Plan.

Roper records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. Historical data is used to estimate the expected price volatility, the expected dividend yield, the expected option life and the expected forfeiture rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The following weighted average assumptions were used to estimate the fair value of options granted during current and prior year periods using the Black-Scholes option-pricing model:


	Three months ended March 31,
	2021	2020
Risk-free interest rate (%)	0.94	0.83
Expected option life (years)	5.61	5.64
Expected volatility (%)	25.16	20.18
Expected dividend yield (%)	0.56	0.62

Cash received from option exercises for the three months ended March 31, 2021 and 2020 was $19.2 and $22.9, respectively.

Restricted Stock Grants - During the three months ended March 31, 2021, the Company granted 0.207 shares with a weighted average grant date fair value of $404.14 per restricted share. During the same period in 2020, the Company granted 0.179

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shares with a weighted average grant date fair value of $340.92 per restricted share. All grants were issued at grant date fair value.

During the three months ended March 31, 2021, 0.116 restricted shares vested with a weighted average grant date fair value of $311.33 per restricted share and a weighted average vest date fair value of $394.23 per restricted share.

Employee Stock Purchase Plan - Roper’s employee stock purchase plan (“ESPP”) previously allowed employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 5% discount to the average closing price of the stock at the beginning and end of a quarterly offering period. Common stock sold to employees pursuant to the stock purchase plan may be either treasury stock, stock purchased on the open market, or newly issued shares.

We amended the ESPP effective July 1, 2020, which allows employees in the U.S. and Canada to designate up to 10% of eligible earnings to purchase Roper’s common stock at a 10% discount on the lower of the closing price of the stock on the first and last day of each quarterly offering period. Common stock sold to employees pursuant to the ESPP may be either treasury stock, stock purchased on the open market, or newly issued shares.

During the three months ended March 31, 2021 and 2020, participants in the ESPP purchased 0.013 and 0.008 shares of Roper’s common stock for total consideration of $4.7 and $2.8, respectively. All shares were purchased from Roper’s treasury shares.

5. Inventories

The components of inventory were as follows:


	March 31, 2021		December 31, 2020
Raw materials and supplies	$	134.0	$	128.4
Work in process	30.3		28.2
Finished products	83.4		82.2
Inventory reserves	(41.7)		(40.4)
Inventories, net	$	206.0	$	198.4

6. Goodwill and Other Intangible Assets

The carrying value of goodwill by segment was as follows:


	Application Software		Network Software & Systems		Measurement & Analytical Solutions		Process Technologies		Total
Balances at December 31, 2020	$	8,802.3	$	4,083.1	$	1,190.8	$	319.0	$	14,395.2
Additions	—		—		—		—		—

Other	(4.0)		0.7		—		—		(3.3)
Currency translation adjustments	3.5		10.4		(0.7)		0.2		13.4
Balances at March 31, 2021	$	8,801.8	$	4,094.2	$	1,190.1	$	319.2	$	14,405.3

Other relates primarily to purchase accounting adjustments for acquisitions.

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Other intangible assets were comprised of:


	Cost		Accumulated amortization		Net book value
Assets subject to amortization:
Customer related intangibles	$	7,494.7	$	(1,703.8)	$	5,790.9
Unpatented technology	942.8		(363.9)		578.9
Software	172.4		(127.4)		45.0
Patents and other protective rights	13.0		(6.7)		6.3
Trade names	7.3		(5.6)		1.7
Assets not subject to amortization:
Trade names	784.1		—		784.1

Balances at December 31, 2020	$	9,414.3	$	(2,207.4)	$	7,206.9

Assets subject to amortization:
Customer related intangibles	$	7,499.6	$	(1,817.2)	$	5,682.4
Unpatented technology	943.3		(392.4)		550.9
Software	172.5		(131.3)		41.2
Patents and other protective rights	13.3		(6.9)		6.4
Trade names	7.3		(5.9)		1.4
Assets not subject to amortization:
Trade names	784.5		—		784.5

Balances at March 31, 2021	$	9,420.5	$	(2,353.7)	$	7,066.8

Amortization expense of other intangible assets was $145.4 and $100.7 during the three months ended March 31, 2021 and 2020, respectively.

An evaluation of the carrying value of goodwill and indefinite-lived intangibles is required to be performed on an annual basis and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. There have been no events or changes in circumstances which indicate an interim impairment review is required in 2021. The Company will perform the annual analysis during the fourth quarter of 2021.

7. Fair Value of Financial Instruments

Roper’s debt at March 31, 2021 included $8,000 of fixed-rate senior notes with the following fair values:


$500 2.800% senior notes due 2021			508
$500 3.125% senior notes due 2022			518
$300 0.450% senior notes due 2022			300
$700 3.650% senior notes due 2023			750
$500 2.350% senior notes due 2024			523
$300 3.850% senior notes due 2025			332
$700 1.000% senior notes due 2025			689
$700 3.800% senior notes due 2026			778
$700 1.400% senior notes due 2027			677
$800 4.200% senior notes due 2028			902
$700 2.950% senior notes due 2029			730
$600 2.000% senior notes due 2030			574
$1,000 1.750% senior notes due 2031			929

The fair values of the senior notes are based on the trading prices of each series of notes, which the Company has determined to be Level 2 in the FASB fair value hierarchy.

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8. Contingencies

Roper, in the ordinary course of business, is party to various pending or threatened legal actions, including product liability, intellectual property, data privacy and employment practices that, in general, are of a nature consistent with those over the past several years. After analyzing the Company’s contingent liabilities on a gross basis and, based upon past experience with resolution of such legal claims and the availability and limits of the primary, excess, and umbrella liability insurance coverages with respect to pending claims, management believes that adequate provision has been made to cover any potential liability not covered by insurance, and that the ultimate liability, if any, arising from these actions should not have a material adverse effect on Roper’s consolidated financial position, results of operations or cash flows.

Roper’s subsidiary, Vertafore, Inc., has been named in three putative class actions, two in the U.S. District Court for the Southern District of Texas (Allen, et al. v. Vertafore, Inc., Case 4:20-cv-4139, filed December 4, 2020 and Masciotra, et al. v. Vertafore, Inc., originally filed on December 8, 2020 as Case 1:20-cv-03603 in the U.S. District Court for the District of Colorado and subsequently transferred), and one in the U.S. District Court for the Northern District of Texas (Mulvey, et al. v. Vertafore, Inc., Case 3:21-cv-00213-E, filed January 31, 2021). All three cases purport to represent approximately 27.7 million individuals who held Texas driver’s licenses prior to February 2019. In November 2020, Vertafore announced that as a result of human error, three data files were inadvertently stored in an unsecured external storage service that appears to have been accessed without authorization. The files, which included driver information for licenses issued before February 2019, contained Texas driver license numbers, as well as names, dates of birth, addresses and vehicle registration histories. The files did not contain any Social Security numbers or financial account information. The cases each seek recovery under the Driver’s Privacy Protection Act, 18 U.S.C. § 2721. Vertafore is vigorously defending the matters. In addition, Roper has been advised that the Texas Attorney General is investigating the data event.

Roper or its subsidiaries have been named defendants along with numerous industrial companies in asbestos-related litigation claims in certain U.S. states. No significant resources have been required by Roper to respond to these cases and Roper believes it has valid defenses to such claims and, if required, intends to defend them vigorously. Given the state of these claims, it is not possible to determine the potential liability, if any.

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9. Business Segments

Net revenues and operating profit by segment are set forth in the following table:


	Three months ended March 31,
	2021		2020		Change %
Net revenues:
Application Software	$	576.6	$	405.1	42.3	%
Network Software & Systems	440.2		438.2		0.5	%
Measurement & Analytical Solutions	381.0		365.2		4.3	%
Process Technologies	130.8		142.2		(8.0)	%
Total	$	1,528.6	$	1,350.7	13.2	%
Gross profit:
Application Software	$	398.7	$	270.4	47.4	%
Network Software & Systems	299.4		293.2		2.1	%
Measurement & Analytical Solutions	224.7		214.6		4.7	%
Process Technologies	71.0		78.6		(9.7)	%
Total	$	993.8	$	856.8	16.0	%
Operating profit*:
Application Software	$	153.7	$	97.6	57.5	%
Network Software & Systems	135.5		138.7		(2.3)	%
Measurement & Analytical Solutions	124.1		114.0		8.9	%
Process Technologies	38.3		43.3		(11.5)	%
Total	$	451.6	$	393.6	14.7	%
Long-lived assets:

SEC Form 10-Q filed by Roper Technologies, Inc.