Q4 2017 Financial Results - Roper Technologies › sites › default › files › Roper Q4...

A Diversified Technology Company

Q4 2017 Financial ResultsFebruary 2, 2018

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A Diversified Growth Company

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Safe Harbor StatementThe information provided in this presentation contains forward-looking statements within the meaning of thefederal securities laws. These forward-looking statements may include, among others, statements regardingoperating results, the success of our internal operating plans, and the prospects for newly acquired businessesto be integrated and contribute to future growth, profit and cash flow expectations. Forward-looking statementsmay be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should,""will," "believes" or "intends" and similar words and phrases. These statements reflect management's currentbeliefs and are not guarantees of future performance. They involve risks and uncertainties that could causeactual results to differ materially from those contained in any forward-looking statement. Such risks anduncertainties 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 manageother risks associated with, the newly acquired businesses. We also face general risks, including our ability torealize cost savings from our operating initiatives, general economic conditions and the conditions of the specificmarkets in which we operate, changes in foreign exchange rates, difficulties associated with exports, risksassociated with our international operations, increased product liability and insurance costs, increased warrantyexposure, future competition, changes in the supply of, or price for, parts and components, environmentalcompliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offsof our substantial intangible assets, and risks associated with obtaining governmental approvals and maintainingregulatory compliance for new and existing products. Important risks may be discussed in current andsubsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. Thesestatements speak only as of the date they are made, and we undertake no obligation to update publicly any ofthem in light of new information or future events.

We refer to certain non-GAAP financial measures in this presentation. Reconciliations of these non-GAAPfinancial measures to the most directly comparable GAAP financial measures can be found within thispresentation.



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Reg. G Disclosure

Today’s Conference Call Will Discuss Results Primarily on an Adjusted (Non-GAAP) Basis. The Q4 and Full Year 2017 Results are Adjusted for the Following Items:

(1) One-Time $215M Net Gain Resulting from the Tax Cuts and Jobs Act

(2) Acquisition-Related Intangible Amortization Expense

(3) Purchase Accounting Adjustment to Acquired Deferred Revenue and Related Commission Expense

See Appendix and Press Release for Reconciliation from GAAP to Adjusted Results



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Roper Conference Call

» Q4 and FY 2017 Enterprise Financial Results

» 2017 Segment Detail & 2018 Segment Outlook

» 2018 Enterprise Guidance

» Q&A

Q4 2017 Enterprise Highlights

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Strong Revenue Growth and Excellent Cash Performance

» Record Q4 Results: Revenue, Net Earnings, EBITDA, Cash Flow

» Revenue +21% to $1.23B; Organic +5%

» Gross Margin +30 Bps to 62.6%

» DEPS +23% to $2.70

» EBITDA +21% to $441M

» Operating Cash Flow +36% to $369M

» Deltek and ConstructConnect Exceeded 2017 Expectations for Revenue and Cash Flow

» Full Year Debt Reduction $1.06B; Deleveraged Rapidly

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation and press release for reconciliations from GAAP to Adjusted results.



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Q4 Income Statement Metrics

(in $ millions, except Adjusted DEPS) Q4’16 Q4’17

Revenue $1,018 $1,235 +21%, Organic +5%

Gross Profit $634 $773Gross Margin 62.3% 62.6% +30 bps

EBITDA $365 $441 +21%

EBITDA Margin 35.9% 35.7%

Interest Expense $30 $43

Tax Rate 30.6% 26.9% Excludes Q4’17 Tax Reform Impact

Net Earnings $225 $280 +24%

Adjusted DEPS $2.20 $2.70 +23%




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Q4 Segment Results

Energy Systems & Controls(13% of Roper Revenue)

Industrial Technology(17% of 2017 Roper Revenue)


RF Technology & Software(40% of Roper Revenue)

Medical & Scientific Imaging(30% of Roper Revenue)

(in $ millions) Q4’17 V to PY

Revenue $160 +12%

Op Profit $52 +13%

OP Margin 32.2% Flat

EBITDA $56 +11%


Revenue $207 +16%

Op Profit $61 +18%

OP Margin 29.4% +50 bps

EBITDA $65 +16%


Revenue $368 +4%

Op Profit $130 Flat

OP Margin 35.3% (160) bps

EBITDA $160 Flat


Revenue $499 +45%

Op Profit $144 +35%

OP Margin 28.8% Core +350 bps

EBITDA $192 +47%

» Organic Revenue (1%), +4% Excluding Toll & Traffic, Acquisitions +45% (Anniversary of Q4’16 Acquisitions)

» Organic Revenue +14%, FX +2%





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Full Year Income Statement Metrics

(in $ millions, except Adjusted DEPS) FY’16 FY’17

Revenue $3,805 $4,665 +23%, Organic +5%

Gross Profit $2,348 $2,922Gross Margin 61.7% 62.6% +90 bps

EBITDA $1,315 $1,605 +22%

EBITDA Margin 34.6% 34.4%

Interest Expense $112 $181

Tax Rate 30.9% 28.9% Excludes Q4’17 Tax Reform Impact

Net Earnings $804 $975 +21%

Adjusted DEPS $7.84 $9.42 +20%


$3,805

$4,665

2016 2017

$1,315

$1,605

2016 2017

$1,001

$1,234

2016* 2017

Remarkable Year

Revenue

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EBITDA

+23%

Operating Cash Flow

+22% +23%

Full Year 2017 Growth

* Adjusted for Cash Taxes from ABEL Sale, See Reconciliation in Appendix


Compounding Cash Flow

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Cash Remains the Best Measure of Performance

» FY Operating Cash Flow: $1.23B

– 26% of Revenue

» FY Free Cash Flow: $1.17B

– 25% of Revenue

» FY Free Cash Conversion

– 121% of Adjusted Net Earnings

» Reduced Debt by $1.06B in 2017

– Deleveraged Rapidly

Full Year Free Cash Flow(in $ millions)

Free Cash Flow = Operating Cash Flow less Capital Expenditures and Capitalized Software* Adjusted for Cash Taxes from ABEL Sale, See Reconciliation in Appendix


$961

$1,175

2016* 2017

+22%

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Net Working Capital Now a Source of Cash

4.3%

2.7%

(3.3)%

2015 2016 2017

(760) Bps

* Defined as Inventory + A/R + Unbilled Receivables – A/P – Accrued Liabilities – Deferred Revenue; Excludes Acquisitions Completed in Each Quarter and Dividend Accrual

12/31/15 12/31/16 12/31/17

(I) Inventory 5.1% 4.6% 4.2%

(R) Receivables 16.1% 16.3% 16.0%

(P) Payables &Accruals

10.5% 10.9% 12.0%

(D) Deferred Revenue

6.5% 7.2% 11.4%

Total (I+R-P-D) 4.3% 2.7% (3.3)%

($ Millions)

Deferred Revenue $267 $488 $566

Net Working Capital* as % of Q4 Annualized Revenue

Asset-Light Business Model

Notes: Percentages may not sum correctly due to rounding.

Strong Financial Position

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Deleveraged Rapidly; Enhances Capacity for 2018 Deployment

12/31/16 12/31/17

Cash $757 $671

Undrawn Revolver $570 $1,230

Gross Debt $6,210 $5,156

Net Debt $5,452 $4,484

TTM EBITDA $1,315 $1,605

Net Debt-to-EBITDA (TTM) 4.1x 2.8x

(in $ millions)

Results are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

Multiple Tax Reform Benefits

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Tax Reform Increases Future Capital DeploymentResults are presented on an Adjusted (Non-GAAP) basis. See appendix of this presentation for reconciliations from GAAP to Adjusted results.

» Tax Cuts and Jobs Act Provides Meaningful Benefits to Roper

» Effective Tax Rate Expected to be 21 - 23% in 2018

– Increases Earnings and Cash Flow

» Expect to Repatriate $500M+ of Offshore Cash in 2018

– Further Enhances Acquisition Capacity

» Mobility of Worldwide Cash Flows Enhances Ability to Deploy Capital in the United States

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Segment Detail & Outlook



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FY 2017

» Deltek and ConstructConnect Exceeded Initial Revenue and Cash Flow Expectations

– Deltek Growth Balanced Across GovConand Professional Services; OnviaAcquisition Strengthens Market Intelligence Subscription Platform

– ConstructConnect Network Growth Drove Recurring Revenue Increases

» +5% Organic Growth Across Software Businesses

– Led by Freight Match and Aderant

» RF Products Growth Led by RF IDeas

» Toll and Traffic

– Strong Project Execution; MTA and Saudi

– Tag Shipments Improved after Weak Q1

RF Technology & Software


FY 2018

» Deltek (Acquired Dec 2016) and ConstructConnect (Oct 2016) Become Organic

» 5 – 6% Organic Growth for Software Businesses; Strong Margin and Cash Performance

» RF Products Continue to Grow MSD

» Toll and Traffic Flat (~25% of Segment); Pipeline for New Opportunities Remains Strong; Timing Difficult to Forecast

(41% of 2017 Roper Revenue)

(in $ millions) FY’17 V to PYRevenue $1,920 +57%

Op Profit $531 +38%

OP Margin 27.7% Core +130 bps

EBITDA $723 +54%



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Medical & Scientific ImagingFY 2017» Medical Products

– Growth Led by NDI and CIVCO

– Verathon Q4 Successful Product Launches: New BladderScan, Portable GlideScope

» Alternate Site Healthcare

– Broad-Based Growth Across Long Term Care GPO and Software Businesses

» Acute Care Software

– Growth Led by Decision Support SaaS, Diagnostic Connectivity and International Solutions

– Challenges Continued for U.S. Lab Business

» Scientific Imaging

– Large Demand Created Substantial Backlog for Gatan Cryo-EM Products in Q4

FY 2018» 4 – 6% Organic Revenue Growth for the

Segment; Lower Margins (~100 bps)

» Medical Products and Alternate Site: Broad-Based Growth

» Acute Care Software

– Decision Support SaaS and International Diagnostics Rapid Growth

– U.S. Lab Business Declines

» Imaging Strong as Gatan Delivers on Backlog


(30% of 2017 Roper Revenue)

(in $ millions) FY’17 V to PYRevenue $1,410 +3%

Op Profit $487 +1%

OP Margin 34.5% (60) bps

EBITDA $605 +1%



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Industrial Technology / Energy Systems

Energy Segment 2017 Highlights

» Broad-Based Growth Throughout the Segment More Than Offset Expected CCC Declines

» Outstanding 50%+ Operating Leverage from Nimble Execution

» FY 2018: 5 – 7% Organic Growth; Continued Strong Leverage

Industrial Segment 2017 Highlights

» Record Year for Neptune with Market Share Gains

» Excellent Growth from Fluid Handling Businesses Aided by Rebound in Upstream Oil & Gas and Strength in Rental Markets

» Operating Leverage Exceeded 40%

» FY 2018: 5 – 7% Organic Growth; Continued Strong Leverage

Energy Systems & Controls(12% of 2017 Roper Revenue)

Industrial Technology(17% of 2017 Roper Revenue)


(in $ millions) FY’17 V to PYRevenue $784 +11%

Op Profit $235 +16%


EBITDA $252 +14%

(in $ millions) FY’17 V to PYRevenue $551 +8%

Op Profit $151 +17%


EBITDA $168 +12%

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2018 Guidance



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Establishing 2018 Guidance

» Full Year Adjusted DEPS: $10.88 - $11.20– Organic Revenue Growth: +4 – 5%

– Tax Rate: 21 - 23%

» Q1 Adjusted DEPS: $2.44 - $2.50


Guidance excludes the impact of future acquisitions and divestitures.

Year End Summary

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Entering 2018 With Positive Momentum

» Asset-Light, Niche Market Strategy Delivers Outstanding Performance– 20%+ Annual Growth: Revenue, Net Earnings, EBITDA, Cash Flow

» Consistent and Broad-Based Organic Growth Expected to Continue

» Deltek and ConstructConnect Exceeded Expectations in First Year; Poised for Continued Growth

» Ability to Compound Cash Enhanced– Balance Sheet Strengthened: Deleveraged Rapidly, Reduced Debt by $1.06B

– Tax Reform Improves Cash Flow and Ability to Deploy Capital

– Net Working Capital Now a Source of Cash

» Proven CRI Discipline Drives Successful Capital Deployment– Expect to Deploy $7B+ Over The Next Four Years


Appendix

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Reconciliations I

Q4 2017 Revenue GrowthIndustrial

Technology

Energy Systems & Controls

Medical & Scientific Imaging

RF Technology Roper

Organic Growth 14% 9% 3% (1)% 5%

Acquisitions/Divestitures - 1% - 45% 15%

Foreign Exchange 2% 3% 1% 1% 1%

Rounding - (1)% - - -

Total Revenue Growth 16% 12% 4% 45% 21%

Q4 Revenue Detail



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Reconciliations II

(in $ thousands) Q4 2017

Margin Reconciliation Industrial Technology


Medical & Scientific Imaging RF Technology

GAAP Revenue $206,994 $160,440 $367,711 $491,438

Add: Construct Connect / Deltek / Onvia - - - 8,044

Adjusted Revenue 206,994 160,440 367,711 499,482

GAAP Gross Profit 102,778 93,397 262,104 306,833


Less: Deltek Prepaid Commissions Adj - - - (15)

Adjusted Gross Profit 102,778 93,397 262,104 314,862

GAAP Operating Profit 60,901 51,709 129,961 136,605



Adjusted Operating Profit 60,901 51,709 129,961 143,813

Add Amortization 2,212 3,471 26,270 41,981

EBITA 63,113 55,180 156,231 185,794

Add Depreciation 2,004 768 3,490 6,270

EBITDA 65,117 55,948 159,721 192,064

EBITDA Margin 31% 35% 43% 38%

* Excludes Corporate Expenses



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Reconciliations III

(in $ thousands) Q4 2016




GAAP Revenue $178,446 $142,639 $351,987 $337,728

Add: Atlas / CliniSys Adj - - 200 -

Add: ConstructConnect / Deltek Adj 0 0 0 6,990

Adjusted Revenue 178,446 142,639 352,187 344,718

GAAP Gross Profit 90,683 85,824 256,941 193,430


Add: ConstructConnect / Deltek Adj - - - 6,990


Adjusted Gross Profit 90,683 85,824 257,141 200,417



Add: ConstructConnect / Deltek Adj - - - 6,990




EBITA 53,838 49,496 157,008 127,639

Add Depreciation 2,255 977 3,046 2,941

EBITDA 56,093 50,473 160,054 130,580





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Reconciliations IV(in $ thousands) Full Year 2017




GAAP Revenue $783,707 $551,289 $1,410,349 $1,862,126

Add: CliniSys - - 49 -


Adjusted Revenue 783,707 551,289 1,410,398 1,919,569

GAAP Gross Profit 396,188 316,479 1,015,200 1,136,929




Adjusted Gross Profit 396,188 316,479 1,015,249 1,194,243




Less: Deltek Prepaid Commissions Adj - - - (5,372)



EBITA 243,866 164,596 592,001 699,160

Add Depreciation 8,261 3,314 13,266 24,082

EBITDA 252,127 167,910 605,267 723,242





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Reconciliations V(in $ thousands) Full Year 2016




GAAP Revenue $706,625 $510,223 $1,362,813 $1,210,264 Add: Strata / SWI / DI / Atlas / CliniSys - - 1,884 -

Add: Aderant / On Center / ConstructConnect / Deltek - - - 13,243

Adjusted Revenue 706,625 510,223 1,364,697 1,223,507GAAP Gross Profit 357,362 291,459 997,666 685,923Add: Strata / SWI / DI / Atlas / CliniSys / PCI - - 2,141 -


Less: Deltek Prepaid Commissions Adj - - - (3)Adjusted Gross Profit 357,362 291,459 999,807 699,163GAAP Operating Profit 202,451 129,602 477,548 372,467Add: Strata / SWI / DI / Atlas / CliniSys / PCI - - 2,141 -


Less: Deltek Prepaid Commissions Adj - - - (93)Adjusted Operating Profit 202,451 129,602 479,689 385,617Add Amortization 8,964 15,311 106,960 71,919EBITA 211,415 144,913 586,649 457,536Add Depreciation 9,609 4,390 12,288 10,734EBITDA 221,024 149,303 598,937 468,270EBITDA Margin 31% 29% 44% 38%




Reconciliations VI

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Cash Flow Reconciliation(in $ thousands) FY 2016 FY 2017

Operating Cash Flow $963,833 $1,234,482

Cash Paid for Taxes on Sale of ABEL 37,429 -

Adjusted Operating Cash Flow 1,001,262 1,234,482

Capital Expenditures (37,353) (48,752)

Capitalized Software Expenditures (2,801) (10,784)

Free Cash Flow $961,108 $1,174,946

A Diversified Technology Company

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