Roper Technologies Q4 2025 Roper Technologies Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Roper Technologies Inc Earnings Call
Speaker #1: Good morning. The Roper Technologies conference call will now begin. Today's call is being recorded. All participants will be in listen-only mode. Should you need assistance, please signal the conference specialist by pressing star zero.
Speaker #1: I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead.
Speaker #1: ahead. Good
Zack Moxcey: Good morning, and thank you all for joining us as we discuss the fourth quarter and full year 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunn, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Principal Accounting Officer; and Shannon O'Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call.
Speaker #2: Good morning, and thank you all for joining us as we discuss the fourth quarter and full year 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hunt, President and Chief Executive Officer; Jason Conley, Executive Vice President and Chief Financial Officer; Brandon Cross, Vice President and Principal Accounting Officer; and Shannon O'Callaghan, Senior Vice President of Finance.
Speaker #2: Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today's call. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website.
Zack Moxcey: We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. Now, if you please turn to page 2. We begin with our Safe Harbor Statement. During the course of today's call, we will make forward-looking statements which are subject to risks and uncertainties as described on this page in our press release and in our SEC filings. You should listen to today's call in the context of that information. Now, please turn to page 3. Today, we will discuss our results primarily on an adjusted, non-GAAP, and continuing operations basis. For Q4, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets and financial impacts associated with our minority investment in Indico.
We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. Now, if you please turn to page 2. We begin with our Safe Harbor Statement. During the course of today's call, we will make forward-looking statements which are subject to risks and uncertainties as described on this page in our press release and in our SEC filings. You should listen to today's call in the context of that information. Now, please turn to page 3. Today, we will discuss our results primarily on an adjusted, non-GAAP, and continuing operations basis. For Q4, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets and financial impacts associated with our minority investment in Indico.
Speaker #2: And now, if you please turn to page two. We begin with our Safe Harbor statement. During the course of today's call, we will make forward-looking statements, which are subject to risks and uncertainties as described on this page, in our press release, and in our SEC filings.
Speaker #2: You should listen to today's call in the context of that information. And now, please turn to page three. Today, we will discuss our results primarily on an adjusted, non-GAAP, and continuing operations basis.
Speaker #2: For the fourth quarter, the difference between our GAAP results and adjusted results consists of the following items: amortization of acquisition-related intangible assets, and financial impacts associated with our minority investment in Indicor.
Speaker #2: Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now, if you please turn to page four, I'll hand the call over to Neil.
Zack Moxcey: Reconciliations can be found in our press release and in the appendix of this presentation on our website. Now, if you please turn to page four, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil? Thank you, Zack, and thanks to everyone for joining our call. As we turn to page four, you'll see the topics we plan to cover today. We'll start by highlighting our Q4 and full year performance. Then Jason will walk through our enterprise financials, our Q4 segment performance, our balance sheet, and capital limit capacity. Next, we'll discuss our segment highlights and introduce our 2026 guidance, and then we'll close with a few summary thoughts before opening the call for questions. Let's go ahead and get started. Next slide, please.
Reconciliations can be found in our press release and in the appendix of this presentation on our website. Now, if you please turn to page four, I'll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil?
Speaker #2: After our prepared remarks, we will take questions from our telephone participants. Neil?
Neil Hunn: Thank you, Zack, and thanks to everyone for joining our call. As we turn to page four, you'll see the topics we plan to cover today. We'll start by highlighting our Q4 and full year performance. Then Jason will walk through our enterprise financials, our Q4 segment performance, our balance sheet, and capital limit capacity. Next, we'll discuss our segment highlights and introduce our 2026 guidance, and then we'll close with a few summary thoughts before opening the call for questions. Let's go ahead and get started. Next slide, please.
Speaker #3: Thank you, Zack, and thanks to everyone for joining our call. As we turn to page four, you'll see the topics we plan to cover today.
Speaker #3: We'll start by highlighting our Q4 and full year performance, then Jason will walk through our enterprise financials, our Q4 segment performance, our balance sheet, and capital capacity.
Speaker #3: Next, we'll discuss our segment highlights and introduce our 2026 guidance. Then we'll close with a few summary thoughts before opening the call for questions.
Speaker #3: So let's go ahead and get started. Next slide, please. As we turn to page five, I want to highlight three takeaways for today's call.
Zack Moxcey: As we turn to page five, I want to highlight three takeaways for today's call. First, we delivered solid execution in 2025. Revenue was up 12%, EBITDA was up 11%, and Free Cash Flow was up 8%. Importantly, enterprise software bookings grew in the low double-digit range for the year, providing strength as we head into 2026. Second, we continue to invest for our long-term and sustainable growth. That said, organic growth this past year was below our expectations in 2025, and we own that. Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy, and improved execution across the portfolio, and that work is showing up for the enterprise. To this end, our application software business has saved for Deltek improved organic growth in the 70 basis point area, demonstrating broad-based growth improvements occurring within the segment.
As we turn to page five, I want to highlight three takeaways for today's call. First, we delivered solid execution in 2025. Revenue was up 12%, EBITDA was up 11%, and Free Cash Flow was up 8%. Importantly, enterprise software bookings grew in the low double-digit range for the year, providing strength as we head into 2026. Second, we continue to invest for our long-term and sustainable growth. That said, organic growth this past year was below our expectations in 2025, and we own that. Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy, and improved execution across the portfolio, and that work is showing up for the enterprise. To this end, our application software business has saved for Deltek improved organic growth in the 70 basis point area, demonstrating broad-based growth improvements occurring within the segment.
Speaker #3: First, we delivered solid execution in 2025. Revenue was up 12%, EBITDA was up 11%, and free cash flow was up 8%. Importantly, enterprise software bookings grew in the low double-digit range for the year, providing strength as we head into 2026.
Speaker #3: Second, we continue to invest for our long-term and sustainable growth. That said, organic growth this past year was below our expectations in 2025, and we own that.
Speaker #3: Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy, and improved execution across the portfolio, and that work is showing up for the enterprise.
Speaker #3: To this end, our application software business is safe for DelTech, improved organic growth in the 70 basis point area, demonstrating broad-based growth improvements occurring within the segment.
Speaker #3: Importantly, we're not starting the year assuming organic growth will inflect in 2026, despite the traction we believe we're starting to achieve. We're going to execute, and we'll reflect any improvement in organic growth in our guidance as it materializes throughout the year.
Zack Moxcey: Importantly, we're not starting the year assuming organic growth will inflect in 2026 despite the traction we believe we're starting to achieve. We're going to execute, and we'll reflect any improvement in organic growth in our guidance as it materializes throughout the year. We'll have much more to say on this later in the call. On AI specifically, we continue to be excited about the AI product opportunity because our businesses sit directly inside mission-critical, high-frequency workflows where we already have deep domain knowledge, proprietary data, and trusted distribution. So AI can move from productivity to on-stack embedded automation that improves outcomes for our customers and is highly monetizable. Importantly, our decentralized model lets each business deploy AI with the appropriate domain specificity across our various end markets.
Importantly, we're not starting the year assuming organic growth will inflect in 2026 despite the traction we believe we're starting to achieve. We're going to execute, and we'll reflect any improvement in organic growth in our guidance as it materializes throughout the year. We'll have much more to say on this later in the call. On AI specifically, we continue to be excited about the AI product opportunity because our businesses sit directly inside mission-critical, high-frequency workflows where we already have deep domain knowledge, proprietary data, and trusted distribution. So AI can move from productivity to on-stack embedded automation that improves outcomes for our customers and is highly monetizable. Importantly, our decentralized model lets each business deploy AI with the appropriate domain specificity across our various end markets.
Speaker #3: We'll have much more to say on this later in the call. On AI specifically, we continue to be excited about the AI product opportunity because our businesses sit directly inside mission-critical, high-frequency workflows where we already have deep domain knowledge, proprietary data, and trusted distribution—where AI can move from productivity to on-stack embedded automation that improves outcomes for our customers and is highly monetizable.
Speaker #3: Importantly, our decentralized model lets each business deploy AI with the appropriate domain specificity across their various end markets. To further accelerate our pace of AI product development, we hired Shane Luke and Eddie Rafael to lead the Roper AI Accelerator team.
Zack Moxcey: To further accelerate our pace of AI product development, we hired Shane Luke and Eddie Raphael to lead the Roper AI Accelerator team. They will coach and partner directly with our businesses, build a small AI development strike team, and leverage reasonable elements and best practices across the portfolio so we can deploy AI with increasing speed and market-specific precision while scaling what works. Exciting stuff, for sure. Our third key takeaway centers on capital allocation. During 2025, we materially advanced our portfolio and foundation through capital deployment, deploying $3.3 billion towards high-quality vertical software acquisitions during the year, highlighted by CentralReach, Subsplash, and several tuck-in acquisitions. Also, and importantly, we leaned into opportunistic repurchases, buying back 1.1 million shares for $500 million in Q4. As we look to 2026, we have north of $6 billion of capacity for potential M&A and share repurchases.
To further accelerate our pace of AI product development, we hired Shane Luke and Eddie Raphael to lead the Roper AI Accelerator team. They will coach and partner directly with our businesses, build a small AI development strike team, and leverage reasonable elements and best practices across the portfolio so we can deploy AI with increasing speed and market-specific precision while scaling what works. Exciting stuff, for sure. Our third key takeaway centers on capital allocation. During 2025, we materially advanced our portfolio and foundation through capital deployment, deploying $3.3 billion towards high-quality vertical software acquisitions during the year, highlighted by CentralReach, Subsplash, and several tuck-in acquisitions. Also, and importantly, we leaned into opportunistic repurchases, buying back 1.1 million shares for $500 million in Q4. As we look to 2026, we have north of $6 billion of capacity for potential M&A and share repurchases.
Speaker #3: They will coach and partner directly with our businesses to build a small AI development strike team and leverage reasonable elements and best practices across the portfolio.
Speaker #3: So we can deploy AI with increasing speed and market-specific precision while scaling what works. Exciting stuff, for sure. And our third key takeaway centers on capital allocation.
Speaker #3: During 2025, we materially advanced our portfolio and foundation through capital deployment, deploying $3.3 billion towards high-quality, vertical software acquisitions during the year, highlighted by CentralReach, Subsplash, and several Tuckman acquisitions.
Speaker #3: Also, importantly, we leaned into opportunistic repurchases, buying back 1.1 million shares for $500 million in Q4. As we look to 2026, we have north of $6 billion of capacity for potential M&A and share repurchases.
Speaker #3: We're very encouraged by the size and quality of our acquisition pipeline, and we expect to remain active while staying highly disciplined on price and business quality. In parallel, we'll continue to use buybacks opportunistically when they represent the most attractive risk-adjusted path to durable cash flow per share compounding.
Zack Moxcey: We're very encouraged by the size and quality of our acquisition pipeline, and we expect to remain active while staying highly disciplined on price and business quality. In parallel, we'll continue to use buybacks opportunistically when they represent the most attractive, risk-adjusted path to durable cash flow per share compounding. So with that, Jason, let me turn the call over to you so you can walk through our quarterly and full year results. Jason? Thanks, Neil, and good morning, everyone. We'll start off here with the Q4 results. To summarize, we finished ahead of expectations on DEPS, driven by very strong margin performance. Revenue of $2.06 billion was up 10% over prior year, with acquisitions contributing 5% and organic growth of 4%, which was below our expectations. I'll expand on this shortly. EBITDA of $818 million was also up 10% over prior year.
We're very encouraged by the size and quality of our acquisition pipeline, and we expect to remain active while staying highly disciplined on price and business quality. In parallel, we'll continue to use buybacks opportunistically when they represent the most attractive, risk-adjusted path to durable cash flow per share compounding. So with that, Jason, let me turn the call over to you so you can walk through our quarterly and full year results. Jason?
Speaker #3: So with that, Jason, let me turn the call over to you so you can walk through our quarterly and full year results. Jason?
Speaker #2: Thanks, Neil, and good morning, everyone. We'll start off here with the fourth quarter results. To summarize, we finished ahead of expectations on debts, driven by very strong margin performance.
Jason Conley: Thanks, Neil, and good morning, everyone. We'll start off here with the Q4 results. To summarize, we finished ahead of expectations on DEPS, driven by very strong margin performance. Revenue of $2.06 billion was up 10% over prior year, with acquisitions contributing 5% and organic growth of 4%, which was below our expectations. I'll expand on this shortly. EBITDA of $818 million was also up 10% over prior year.
Speaker #2: Revenue of $2.06 billion was up 10% over the prior year, with acquisitions contributing 5% and organic growth of 4%, which was below our expectations. I'll expand on this shortly.
Speaker #2: EBITDA of $818 million was also up 10% over the prior year. Notably, our core EBITDA margin expanded 60 basis points in the quarter, representing a 54% incremental margin.
Zack Moxcey: Notably, our core EBITDA margin expanded 60 basis points in the quarter, representing 54% incremental margin. DEPS of $5.21 was above our guidance range of $5.11 to $5.16 and up $0.40 over the prior year. Shares were reduced by $1.1 billion in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year-over-year basis. However, the repurchase did not impact DEPS in the quarter versus our guidance, given the partial quarter share count benefit and higher entry expense. Now, if you turn with me to slide seven, I'll walk through the Q4 segment performance. Application software revenue grew 10% with organic growth of 4%, and margins were solid, expanding 70 basis points to 42.2%. It's important to outline some details on organic revenue. Recurring revenue grew 6% in the quarter.
Notably, our core EBITDA margin expanded 60 basis points in the quarter, representing 54% incremental margin. DEPS of $5.21 was above our guidance range of $5.11 to $5.16 and up $0.40 over the prior year. Shares were reduced by $1.1 billion in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year-over-year basis. However, the repurchase did not impact DEPS in the quarter versus our guidance, given the partial quarter share count benefit and higher entry expense. Now, if you turn with me to slide seven, I'll walk through the Q4 segment performance. Application software revenue grew 10% with organic growth of 4%, and margins were solid, expanding 70 basis points to 42.2%. It's important to outline some details on organic revenue. Recurring revenue grew 6% in the quarter.
Speaker #2: Debts of $5.21 were above our guidance range of $5.11 to $5.16 and up $0.40 over the prior year. Shares were reduced by 1.1 million in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year-over-year basis.
Speaker #2: However, the repurchase did not impact debts in the quarter versus our guidance, given the partial quarter share count benefit and higher interest expense. Now, if you turn with me to slide seven, I'll walk through the Q4 segment performance.
Speaker #2: Application software revenue grew 10%, with organic growth of 4%, and margins were solid, expanding 70 basis points to 42.2%. It's important to outline some details on organic revenue.
Speaker #2: Recurring revenue grew 6% in the quarter; however, non-recurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid-single-digit outlook.
Zack Moxcey: However, non-recurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid-single-digit outlook. In our last call, we talked about Deltek being the big swing factor in the quarter. With the prolonged government shutdown, large GovCon commercial activity, and perpetual license revenue was meaningfully impacted, leading to Deltek being up at the lower end of mid-single digits for the year as compared to the solid mid-single digit plus grower it's been over the decade that we've owned the business. That said, we are cautiously optimistic about a 2026 improvement for Deltek, given both the 2025 disruptions caused by DOGE and the shutdown, and the forward benefit of the Omnibus appropriations coming into the market. As improvements occur, we will reflect this in our outlook. For network software, revenue grew 14% with organic growth of 5%.
However, non-recurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid-single-digit outlook. In our last call, we talked about Deltek being the big swing factor in the quarter. With the prolonged government shutdown, large GovCon commercial activity, and perpetual license revenue was meaningfully impacted, leading to Deltek being up at the lower end of mid-single digits for the year as compared to the solid mid-single digit plus grower it's been over the decade that we've owned the business. That said, we are cautiously optimistic about a 2026 improvement for Deltek, given both the 2025 disruptions caused by DOGE and the shutdown, and the forward benefit of the Omnibus appropriations coming into the market. As improvements occur, we will reflect this in our outlook. For network software, revenue grew 14% with organic growth of 5%.
Speaker #2: In our last call, we talked about DelTech being the big swing factor in the quarter. With the prolonged government shutdown, large GovCon commercial activity, and perpetual license revenue, it was meaningfully impacted.
Speaker #2: Leading to DelTech being up at the lower end of mid-single digits for the year, as compared to the solid mid-single-digit-plus grower it’s been over the decade that we’ve owned the business.
Speaker #2: That said, we are cautiously optimistic about a 2026 improvement for DelTech, given both the 2025 disruptions caused by DOGE and the shutdown, and the forward benefit of the OBBB appropriations coming into the market.
Speaker #2: As improvements occur, we will reflect this in our outlook. For network software, revenue grew 14%, with organic growth of 5%. Margins were lower at 52.8% due to the recent bolt-ons for DAT that are currently scaling into profitability.
Zack Moxcey: Margins were lower at 52.8% due to the recent bolt-ons for DAT that are currently scaling into profitability. On organic revenue, recurring growth here was also 6%. The recurring performance was consistent with patterns over the last two quarters, with mid-single digit growth at DAT despite a muted market backdrop and steady improvement at Foundry. However, non-recurring revenue was down 3% on lower services revenue and some customers electing to move from perpetual to SaaS, which negatively impacts the quarter but benefits long-term growth and customer lifetime value. For our tech segment, revenue grew 6% or 5% organically, while margins held flat to prior year at 34.8%. NDI outperformed in the quarter, given strong demand for solutions in the cardiac ablation space, while Neptune was down slightly, as expected, as we comped against a stronger prior fourth quarter and worked through the final surcharge negotiations.
Margins were lower at 52.8% due to the recent bolt-ons for DAT that are currently scaling into profitability. On organic revenue, recurring growth here was also 6%. The recurring performance was consistent with patterns over the last two quarters, with mid-single digit growth at DAT despite a muted market backdrop and steady improvement at Foundry. However, non-recurring revenue was down 3% on lower services revenue and some customers electing to move from perpetual to SaaS, which negatively impacts the quarter but benefits long-term growth and customer lifetime value. For our tech segment, revenue grew 6% or 5% organically, while margins held flat to prior year at 34.8%. NDI outperformed in the quarter, given strong demand for solutions in the cardiac ablation space, while Neptune was down slightly, as expected, as we comped against a stronger prior fourth quarter and worked through the final surcharge negotiations.
Speaker #2: On organic revenue, recurring growth here was also 6%. The recurring performance was consistent with patterns over the last two quarters, with mid-single-digit growth at DAT despite a muted market backdrop and steady improvement at Foundry.
Speaker #2: However, non-recurring revenue was down 3% on lower services revenue and some customers electing to move from perpetual to SaaS, which negatively impacts the quarter but benefits long-term growth and customer lifetime value.
Speaker #2: For our Tech segment, revenue grew 6%, or 5% organically, while margins held flat to prior year at 34.8%. NDI outperformed in the quarter given strong demand for solutions in the cardiac ablation space, while Neptune was down slightly as expected as we comped against a stronger prior fourth quarter and worked through the final surcharge negotiations.
Speaker #2: Now, let's turn to slide eight, where I'll summarize our 2025 full year results. 2025 was a solid year in terms of cash flow and debt performance, despite lower-than-expected organic revenue.
Zack Moxcey: Now, let's turn to slide 8, where I'll summarize our 2025 full year results. 2025 was a solid year in terms of cash flow and DEPS performance, despite lower than expected organic revenue. Revenue posted at $7.9 billion, or up 12% over prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in CentralReach and Subsplash that will be accretive to 2026 second-half organic growth. We also made three strategic bolt-ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come, which will ultimately inflect the growth rate for DAT. Organic growth was nearly 5.5%, which Neil will discuss in the segment detail. EBITDA reached $3.1 billion, or 39.8% margin, and was up 11% over prior year.
Now, let's turn to slide 8, where I'll summarize our 2025 full year results. 2025 was a solid year in terms of cash flow and DEPS performance, despite lower than expected organic revenue. Revenue posted at $7.9 billion, or up 12% over prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in CentralReach and Subsplash that will be accretive to 2026 second-half organic growth. We also made three strategic bolt-ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come, which will ultimately inflect the growth rate for DAT. Organic growth was nearly 5.5%, which Neil will discuss in the segment detail. EBITDA reached $3.1 billion, or 39.8% margin, and was up 11% over prior year.
Speaker #2: Revenue posted at $7.9 billion, up 12% over the prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in CentralReach and Subsplash that will be accretive to second half 2026 organic growth.
Speaker #2: We also made three strategic bolt-ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come, which will ultimately inflect the growth rate for DAT.
Speaker #2: Organic growth was nearly 5.5%, which Neil will discuss in the segment detail. EBITDA reached $3.1 billion, or a 39.8% margin, and was up 11% over the prior year.
Speaker #2: Of note, core margin improved 30 basis points and represented 47% incremental margin, which is in line with our long-term growth algorithm. Debt of $20 million was up 9% over prior year and reflects the top end of our 2025 guidance range provided in January, despite lower organic revenue and in-year dilution from recent acquisitions.
Zack Moxcey: Of note, core margin improved 30 basis points and represented 47% incremental margin, which is in line with our long-term growth algorithm. DEPS of $20 was up 9% over prior year and reflects the top end of our 2025 guidance range provided in January, despite lower organic revenue and in-year dilution from recent acquisitions. Free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year. This represents an 18% CAGR since 2022, or excluding the impact from Section 174 in both periods, it was at 14%. As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital and cash tax improvements. This will put us safely over 30% of revenue next year.
Of note, core margin improved 30 basis points and represented 47% incremental margin, which is in line with our long-term growth algorithm. DEPS of $20 was up 9% over prior year and reflects the top end of our 2025 guidance range provided in January, despite lower organic revenue and in-year dilution from recent acquisitions. Free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year. This represents an 18% CAGR since 2022, or excluding the impact from Section 174 in both periods, it was at 14%. As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital and cash tax improvements. This will put us safely over 30% of revenue next year.
Speaker #2: Free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year.
Speaker #2: This represents an 18% CAGR since 2022, or, excluding the impact from Section 174 in both periods, it was at 14%. As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital and cash tax improvements.
Speaker #2: This will put us safely over 30% of revenue next year; however, Q1 will be a bit lower given the timing of coupon payments for new bonds issued in the third quarter of 2025.
Zack Moxcey: However, Q1 will be a bit lower given timing of coupon payments for new bonds issued in the third quarter of 2025. This, of course, does not contemplate future capital deployment towards either M&A or share repurchases, which brings us to our balance sheet discussion on slide nine. We're entering 2026 in a strong financial position with net leverage ratio of 2.9 times and ample near-term liquidity with about $300 million of cash and nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion in capacity for capital deployment this year. Regarding M&A opportunities, we've been proactive and successful in executing high-quality acquisitions for the last couple of years despite a weak M&A market.
However, Q1 will be a bit lower given timing of coupon payments for new bonds issued in the third quarter of 2025. This, of course, does not contemplate future capital deployment towards either M&A or share repurchases, which brings us to our balance sheet discussion on slide nine. We're entering 2026 in a strong financial position with net leverage ratio of 2.9 times and ample near-term liquidity with about $300 million of cash and nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion in capacity for capital deployment this year. Regarding M&A opportunities, we've been proactive and successful in executing high-quality acquisitions for the last couple of years despite a weak M&A market.
Speaker #2: This, of course, does not contemplate future capital deployment towards either M&A or share repurchases. Which brings us to our balance sheet discussion on slide nine.
Speaker #2: We're entering 2026 in a strong financial position with a net leverage ratio of 2.9 times and ample near-term liquidity, with about $300 million of cash and nearly $2.7 billion available on our revolver.
Speaker #2: With this position and strong forward cash generation, we have over $6 billion in capacity for capital deployment this year. Regarding M&A opportunities, we've been proactive and successful in executing high-quality acquisitions for the last couple of years, despite a weak M&A market.
Speaker #2: Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for many acquisition target CEOs.
Zack Moxcey: Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for many acquisition target CEOs. Additionally, we have the attractive optionality of a share repurchase program, which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed $500 million to acquire 1.1 million shares in the quarter at an average price of just under $446. This leaves us $2.5 billion remaining on our current $3 billion authorization. We will remain agile in deploying capital to the best return for shareholders. Given the current valuation dislocation, we are now very pleased to have the buyback option available. With that, I'll turn it back over to Neil to discuss the segment performance and outlook. Thanks, Jason. As we turn to page 11, let's review our application software segment.
Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for many acquisition target CEOs. Additionally, we have the attractive optionality of a share repurchase program, which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed $500 million to acquire 1.1 million shares in the quarter at an average price of just under $446. This leaves us $2.5 billion remaining on our current $3 billion authorization. We will remain agile in deploying capital to the best return for shareholders. Given the current valuation dislocation, we are now very pleased to have the buyback option available. With that, I'll turn it back over to Neil to discuss the segment performance and outlook.
Speaker #2: Additionally, we have the attractive optionality of a share repurchase program, which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed $500 million to acquire 1.1 million shares in the quarter at an average price of just under $446.
Speaker #2: This leaves us with $2.5 billion remaining on our current $3 billion authorization. We will remain agile in deploying capital to the best return for shareholders.
Speaker #2: Given the current valuation dislocation, we are now very pleased to have the buyback option available. With that, I'll turn it back over to Neil to discuss the segment performance and outlook.
Neil Hunn: Thanks, Jason. As we turn to page 11, let's review our application software segment.
Speaker #2: Thanks, Jason. As we turn to page 11, let's review our Application Software segment. Revenue for the year grew by 16% in total, and organic revenue grew by 5%.
Zack Moxcey: Revenue for the year grew by 16% in total, and organic revenue grew by 5%. EBITDA margins were 42.5%, and core margins improved 80 basis points in the year. For the segment, we saw recurring and recurring revenue grow on an organic basis 7% for the year, and total organic revenue improved about 70 basis points save for the Deltek-related market weakness, both of which provide evidence of underlying strength for the businesses in this group. Aderant continues to execute from a position of strength. FY25 revenue grew in the mid-teens area with strong bookings throughout the year. Importantly, they're leaning into the right long-term work, accelerating SaaS and AI-led innovation while modernizing their tech platform and data lake. Deltek was the primary weaker part of the story for this segment and has been straightforward all year, with GovCon remaining a challenging market throughout most of 2025.
Revenue for the year grew by 16% in total, and organic revenue grew by 5%. EBITDA margins were 42.5%, and core margins improved 80 basis points in the year. For the segment, we saw recurring and recurring revenue grow on an organic basis 7% for the year, and total organic revenue improved about 70 basis points save for the Deltek-related market weakness, both of which provide evidence of underlying strength for the businesses in this group. Aderant continues to execute from a position of strength. FY25 revenue grew in the mid-teens area with strong bookings throughout the year. Importantly, they're leaning into the right long-term work, accelerating SaaS and AI-led innovation while modernizing their tech platform and data lake. Deltek was the primary weaker part of the story for this segment and has been straightforward all year, with GovCon remaining a challenging market throughout most of 2025.
Speaker #2: EBITDA margins were 42.5%, and core margins improved 80 basis points in the year. For the segment, we saw recurring and reoccurring revenue grow on an organic basis 7% for the year, and total organic revenue improved about 70 basis points, save for the DELTEC-related market weakness. Both of these provide evidence of underlying strength for these businesses in this group.
Speaker #2: Outer continues to execute from a position of strength. FY25 revenue grew in the mid-teens area with strong bookings throughout the year. Importantly, they're leaning into the right long-term work, accelerating SLAS and AI-led innovation while modernizing their tech platform and data lake.
Speaker #2: DELTEC was the primary weaker part of the story for this segment and has been straightforward all year, with GovCon remaining a challenging market throughout most of 2025.
Speaker #2: That said, we view the passage of the OBBB as a positive development for the market. It should drive upside over time, but we've not included any benefit in our '26 guidance and will monitor customer activity as the year progresses.
Zack Moxcey: That said, we view the passage of the Omnibus as a positive development for the market. It should drive upside over time, but we've not included any benefit in our 2026 guidance and will monitor customer activity as the year progresses. Vertafore had another solid year with growth driven by strong recurring revenue performance and continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of priorities, scaling automation, particularly AI-enabled workflow improvements, while continuing to leverage steady innovation to the agency and carrier ecosystem. PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation, customer experience, and internal operating capabilities, improving their long-term organic growth profile. Shout out to Rafi for carrying the leadership mantle forward at PowerPlan, and great job managing the transition from Joe.
That said, we view the passage of the Omnibus as a positive development for the market. It should drive upside over time, but we've not included any benefit in our 2026 guidance and will monitor customer activity as the year progresses. Vertafore had another solid year with growth driven by strong recurring revenue performance and continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of priorities, scaling automation, particularly AI-enabled workflow improvements, while continuing to leverage steady innovation to the agency and carrier ecosystem. PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation, customer experience, and internal operating capabilities, improving their long-term organic growth profile. Shout out to Rafi for carrying the leadership mantle forward at PowerPlan, and great job managing the transition from Joe.
Speaker #2: VERTFOR had another solid year, with growth driven by strong recurring revenue performance and continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of priorities, scaling automation—particularly AI-enabled workflow improvements—while continuing to leverage steady innovation to the agency and carrier ecosystem.
Speaker #2: PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation, customer experience, and internal operating capabilities, improving their long-term organic growth profile.
Speaker #2: Shout out to Rafi for carrying the leadership mantle forward at PowerPlan, and great job managing the transition from Joe. Illumia, formerly known as Seaboard and Transact, continues to execute well and is progressing in its integration and platform roadmap while maintaining solid commercial momentum.
Zack Moxcey: Illumia, formerly known as CBORD and Transact Campus, continues to execute well and is progressing in its integration and platform roadmap while maintaining solid commercial momentum. We're excited to welcome Greg Brown, our new CEO at Illumia, who brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, Taran, and Rob for executing the VCP, driving the business combination, and achieving the year-one target. When we look at the broader portfolio of businesses we've acquired over the last couple of years, Syntellis, Transact Campus, Subsplash, CentralReach, and Procare, we feel very good about the quality and long-term growth potential of this group. However, Procare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year.
Illumia, formerly known as CBORD and Transact Campus, continues to execute well and is progressing in its integration and platform roadmap while maintaining solid commercial momentum. We're excited to welcome Greg Brown, our new CEO at Illumia, who brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, Taran, and Rob for executing the VCP, driving the business combination, and achieving the year-one target. When we look at the broader portfolio of businesses we've acquired over the last couple of years, Syntellis, Transact Campus, Subsplash, CentralReach, and Procare, we feel very good about the quality and long-term growth potential of this group. However, Procare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year.
Speaker #2: And we're excited to welcome Greg Brown, our new CEO at Illumia, who brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, Taran, and Rob for executing the VCP, driving the business combination, and achieving the year one target.
Speaker #2: When we look at the broader portfolio of businesses we've acquired over the last couple of years—Dentellis, Transact, Subsplash, CentralReach, and ProCare—we feel very good about the quality and long-term growth potential of this group.
Speaker #2: However, ProCare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year. Specifically, we improved payment execution, upgraded the entire leadership team, and continued to win competitively in the market, where ProCare remains a category leader.
Zack Moxcey: Specifically, we improved payments execution, upgraded the entire leadership team, and continue to win competitively in the market where Procare remains a category leader. The biggest constraint was implementation timing across both software and payments, which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities, and Procare's leader, Joe Gomes, has executed this playbook before at PowerPlan. CentralReach is off to an outstanding start and ahead of our deal model. The business is scaling well with strong recurring software momentum and expanding profitability, and they're building a broader growth engine through cross-sell and a steady cadence of new product releases, including AI-enabled offerings. Now, turning to our outlook for 2026, we expect organic growth to be in the higher end of the mid-singles range.
Specifically, we improved payments execution, upgraded the entire leadership team, and continue to win competitively in the market where Procare remains a category leader. The biggest constraint was implementation timing across both software and payments, which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities, and Procare's leader, Joe Gomes, has executed this playbook before at PowerPlan. CentralReach is off to an outstanding start and ahead of our deal model. The business is scaling well with strong recurring software momentum and expanding profitability, and they're building a broader growth engine through cross-sell and a steady cadence of new product releases, including AI-enabled offerings. Now, turning to our outlook for 2026, we expect organic growth to be in the higher end of the mid-singles range.
Speaker #2: The biggest constraint was implementation timing across both software and payments, which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities, and ProCare's leader Joe Gomes has executed this playbook before at Power Plan.
Speaker #2: CentralReach is also an outstanding start and ahead of our deal model. The business is scaling well, with strong recurring software momentum and expanding profitability, and they're building a broader growth engine through cross-sell and a steady cadence of new product releases, including AI-enabled offerings.
Speaker #2: Now, turning to our outlook for 2026, we expect organic growth to be in the higher end of the mid-single digits range. We also expect a modest back-half weighting as CentralReach turns organic and non-recurring comparables ease in the second half.
Zack Moxcey: We also expect a modest back half weighting as CentralReach turns organic and non-recurring comparables ease in the second half. As mentioned previously, we're maintaining a conservative posture in GovCon at Deltek until we see sustained improvement in commercial activity. So overall, application software remains a durable growth engine supported by recurring revenue momentum and continued product execution across this portfolio. Please turn with us to page 12. Total revenue growth in our network segment was 8%, and organic revenue grew 4% for 2025. EBITDA margins came in at 54.1%. DAT continues to execute well on what they can control: broker integrations, value capture, and trust in the network, all leading to RPO expansion.
We also expect a modest back half weighting as CentralReach turns organic and non-recurring comparables ease in the second half. As mentioned previously, we're maintaining a conservative posture in GovCon at Deltek until we see sustained improvement in commercial activity. So overall, application software remains a durable growth engine supported by recurring revenue momentum and continued product execution across this portfolio. Please turn with us to page 12. Total revenue growth in our network segment was 8%, and organic revenue grew 4% for 2025. EBITDA margins came in at 54.1%. DAT continues to execute well on what they can control: broker integrations, value capture, and trust in the network, all leading to RPO expansion.
Speaker #2: As mentioned previously, we're maintaining a conservative posture in GovCon at DELTEC until we see sustained improvement in commercial activity. So overall, application software remains a durable growth engine, supported by recurring revenue momentum and continued product execution across this portfolio.
Speaker #2: Please turn with us to page 12. Total revenue growth in our Network segment was 8%, and organic revenue grew 4% for 2025. EBITDA margins came in at 54.1%.
Speaker #2: DAT continues to execute well on what they can control: broker integrations, value capture, and trust in the network, all leading to RPO expansion. Although the freight recession persisted throughout 2025, DAT has continued its evolution from a traditional load board into a more automated marketplace, where brokers and carriers can match loads with greater trust and efficiency, and increasingly transact within the platform.
Zack Moxcey: Although the freight recession persisted throughout 2025, DAT is continuing its evolution from a traditional load board into a more automated marketplace where brokers and carriers can match loads with greater trust and efficiency and increasingly transact within the platform. And as this happens, DAT's TAM and monetization opportunities grow. To this end, DAT is advancing its AI-first operating model with concrete use cases across carrier onboarding, fraud detection, and freight matching automation. This is a pattern we like. AI then improves customer outcomes, lowers transaction friction, and expands our TAM, where we have a very high rate to win. ConstructConnect had another strong year of recurring revenue growth, and the team made material technical advances with their AI-based takeoff solution, Boost. Foundry is making steady progress with year-over-year growth and ARR as the market continues to recover.
Although the freight recession persisted throughout 2025, DAT is continuing its evolution from a traditional load board into a more automated marketplace where brokers and carriers can match loads with greater trust and efficiency and increasingly transact within the platform. And as this happens, DAT's TAM and monetization opportunities grow. To this end, DAT is advancing its AI-first operating model with concrete use cases across carrier onboarding, fraud detection, and freight matching automation. This is a pattern we like. AI then improves customer outcomes, lowers transaction friction, and expands our TAM, where we have a very high rate to win. ConstructConnect had another strong year of recurring revenue growth, and the team made material technical advances with their AI-based takeoff solution, Boost. Foundry is making steady progress with year-over-year growth and ARR as the market continues to recover.
Speaker #2: And as this happens, DAT's TAM and monetization opportunities grow. To this end, DAT is advancing its AI-first operating model with concrete use cases across carrier onboarding, fraud detection, and freight matching automation.
Speaker #2: This is a pattern we like—AI that improves customer outcomes, lowers transaction friction, and expands our TAM—where we have a very high rate to win.
Speaker #2: ConstructConnect had another strong year of recurring revenue growth, and the team made material technical advances with their AI-based takeoff solution, Boost. Foundry is making steady progress with year-over-year growth in ARR as the market continues to recover.
Speaker #2: We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows, where small improvements can materially improve artists' throughput.
Zack Moxcey: We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows where small improvements can materially improve artist throughput. Importantly, these are high-frequency, high-value tasks that Foundry already sits inside, so AI is being delivered as embedded features that customers should adopt quickly, given the clear and integrated efficiency gains offered. MHA, SoftWriters, and SHP continue to execute well, supported by stable in-market demand and strong recurring revenue models. Each team is advancing its roadmap with targeted investments in functionality, workflow efficiency, and service levels to deepen customer value and retention. Subsplash is off to a great start in the portfolio with strong execution and solid momentum across the business. We're encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time.
We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows where small improvements can materially improve artist throughput. Importantly, these are high-frequency, high-value tasks that Foundry already sits inside, so AI is being delivered as embedded features that customers should adopt quickly, given the clear and integrated efficiency gains offered. MHA, SoftWriters, and SHP continue to execute well, supported by stable in-market demand and strong recurring revenue models. Each team is advancing its roadmap with targeted investments in functionality, workflow efficiency, and service levels to deepen customer value and retention. Subsplash is off to a great start in the portfolio with strong execution and solid momentum across the business. We're encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time.
Speaker #2: Importantly, these are high-frequency, high-value tasks that Foundry already sits inside, so AI is being delivered as embedded features that customers should adopt quickly, given the clear and integrated efficiency gains offered.
Speaker #2: MHA Soft writers and SHP continue to execute well, supported by stable in-market demand and strong recurring revenue models. Each team is advancing its roadmap with targeted investments in functionality, workflow efficiency, and service levels to deepen customer value and retention.
Speaker #2: Subsplash is off to a great start in the portfolio, with strong execution and solid momentum across the business. We're encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time.
Speaker #2: As we turn to the outlook for the year, we expect network software organic growth to be in the higher end of the mid-single digits range, representing a modest improvement versus 2025.
Zack Moxcey: As we turn to the outlook for the year, we expect network software organic growth to be in the higher end of the mid-singles range, representing a modest improvement versus 2025. We expect a stronger Q4 driven by Subsplash turning organic in the quarter. Of note, we remain conservative on DAT by assuming no meaningful improvement in the freight market. Now, please turn to page 13, and let's review our TEP segment's full year results. Revenue here grew 7% on a total and 6% on an organic basis. EBITDA margins remain strong at 35.7%. We'll start with NDI, whose growth is being driven primarily by sustained momentum in its electromagnetic tracking solutions, supported by strong OEM demand and program ramps. Importantly, OEM order activity has remained strong, and the business is converting that demand into higher revenue scale and operating leverage.
As we turn to the outlook for the year, we expect network software organic growth to be in the higher end of the mid-singles range, representing a modest improvement versus 2025. We expect a stronger Q4 driven by Subsplash turning organic in the quarter. Of note, we remain conservative on DAT by assuming no meaningful improvement in the freight market. Now, please turn to page 13, and let's review our TEP segment's full year results. Revenue here grew 7% on a total and 6% on an organic basis. EBITDA margins remain strong at 35.7%. We'll start with NDI, whose growth is being driven primarily by sustained momentum in its electromagnetic tracking solutions, supported by strong OEM demand and program ramps. Importantly, OEM order activity has remained strong, and the business is converting that demand into higher revenue scale and operating leverage.
Speaker #2: We expect a stronger Q4, driven by Subsplash turning organic in the quarter. Of note, we remain conservative on DAT by assuming no meaningful improvement in the freight market.
Speaker #2: Now, please turn to page 13, and let's review our TEPS segment's full-year results. Revenue here grew 7% on a total and 6% on an organic basis.
Speaker #2: EBITDA margins remain strong at 35.7%. We'll start with NDI, whose growth is being driven primarily by sustained momentum in its electromagnetic tracking solutions, supported by strong OEM demand and program ramps.
Speaker #2: Importantly, OEM order activity has remained strong, and the business is converting that demand into higher revenue scale and operating leverage. Great job by Dave and the entire team at NDI.
Zack Moxcey: Great job by Dave and the entire team at NDI. Verathon continues to perform very well with solid growth across its GlideScope and B-Flex franchises. Importantly, Verathon is the U.S. market share leader in single-use bronchoscopes, which reflects several years of consistent execution and reinforces the durability of the model as the business continues to take share in an attractive procedural workflow area. Looking to 2026, we're optimistic about several new product launches planned throughout the year. For the full year, Neptune grew modestly, notwithstanding the year-long backlog normalization supported by demand for its static ultrasonic meters and its cloud-based software solutions. Although the second-half commercial challenges tied to our tariff surcharging program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance.
Great job by Dave and the entire team at NDI. Verathon continues to perform very well with solid growth across its GlideScope and B-Flex franchises. Importantly, Verathon is the U.S. market share leader in single-use bronchoscopes, which reflects several years of consistent execution and reinforces the durability of the model as the business continues to take share in an attractive procedural workflow area. Looking to 2026, we're optimistic about several new product launches planned throughout the year. For the full year, Neptune grew modestly, notwithstanding the year-long backlog normalization supported by demand for its static ultrasonic meters and its cloud-based software solutions. Although the second-half commercial challenges tied to our tariff surcharging program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance.
Speaker #2: Verathon continues to perform very well, with solid growth across its GlideScope and BFlex franchises. Importantly, Verathon is the U.S. market share leader in single-use market scopes, which reflects several years of consistent execution and reinforces the durability of the model as the business continues to take share in an attractive procedural workflow area.
Speaker #2: Looking to 2026, we're optimistic about several new product launches planned throughout the year. For the full year, Neptune grew modestly, notwithstanding the year-long backlog normalization supported by demand for its static ultrasonic meters and its cloud-based software solutions.
Speaker #2: Although the second-half commercial challenges tied to our tariff surcharging program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance.
Speaker #2: Finally, the balance of the businesses in this segment—CIFCO, FMI, and Evonix, IPA, and RF Ideas—were really strong throughout 2025 and were meaningful contributors to the segment's results.
Zack Moxcey: Finally, the balance of the businesses in this segment, CIVCO, FMI, Inovonics, IPA, and rf IDEAS, were really strong throughout 2025 and were meaningful contributors to the segment's results. For the full year, we expect segment organic growth in the mid-single digit range, with first half being more in the low singles area as Neptune's backlog continues to normalize. Given the more limited visibility of Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters. With that, please turn to page 15. So now let's turn to our Q1 and full year 2026 guidance. Based on what we previously discussed in our segment overviews, we're initiating our 2026 financial guidance to grow full year revenue in the 8% area, organic revenue growth between 5% and 6%, and adjusted DEPS of $21.30 to $21.55.
Finally, the balance of the businesses in this segment, CIVCO, FMI, Inovonics, IPA, and rf IDEAS, were really strong throughout 2025 and were meaningful contributors to the segment's results. For the full year, we expect segment organic growth in the mid-single digit range, with first half being more in the low singles area as Neptune's backlog continues to normalize. Given the more limited visibility of Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters. With that, please turn to page 15. So now let's turn to our Q1 and full year 2026 guidance. Based on what we previously discussed in our segment overviews, we're initiating our 2026 financial guidance to grow full year revenue in the 8% area, organic revenue growth between 5% and 6%, and adjusted DEPS of $21.30 to $21.55.
Speaker #2: For the full year, we expect segment organic growth in the mid-single-digit range, with the first half being more in the low single digits as Neptune's backlog continues to normalize.
Speaker #2: Given the more limited visibility of Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters. With that, please turn to page 15.
Speaker #2: So now let's turn to our Q1 and full year 2026 guidance. Based on what we previously discussed in our segment overviews, we're initiating our 2026 financial guidance to grow full year revenue in the 8% area, organic revenue growth between 5% and 6%, and adjusted DEPS of $21.30 to $21.55.
Speaker #2: Our guide assumes a full-year effective tax rate in the 21% area, and more in the 22% area for Q1. To reiterate from earlier, our full-year guidance does not bake in improvement at Deltek GovCon business or in DAT's freight market, and assumes modest top-line weakness at Neptune versus 2025.
Zack Moxcey: Our guidance assumes a full year effective tax rate in the 21% area and more in the 22% area for Q1. To reiterate from earlier, our full year guidance does not bake in improvement at Deltek's GovCon business or in DAT's freight market and assumes modest top-line weakness at Neptune versus 2025. As discussed, we expect stronger second-half organic growth driven largely by CentralReach and Subsplash turning organic and easing non-recurring comparables. Our guidance does not assume a meaningful revenue uplift from our AI development work either. We view AI as incremental upside as we scale commercialization across the portfolio. Finally, we remain positioned to be active and opportunistic on capital deployment.
Our guidance assumes a full year effective tax rate in the 21% area and more in the 22% area for Q1. To reiterate from earlier, our full year guidance does not bake in improvement at Deltek's GovCon business or in DAT's freight market and assumes modest top-line weakness at Neptune versus 2025. As discussed, we expect stronger second-half organic growth driven largely by CentralReach and Subsplash turning organic and easing non-recurring comparables. Our guidance does not assume a meaningful revenue uplift from our AI development work either. We view AI as incremental upside as we scale commercialization across the portfolio. Finally, we remain positioned to be active and opportunistic on capital deployment.
Speaker #2: Second half organic growth driven largely by, as discussed, we expect stronger center reach and Subsplash turning organic and easing non-recurring comparables. Our guidance does not assume a meaningful revenue uplift from our AI development work either.
Speaker #2: We view AI as incremental upside as we scale commercialization across the portfolio. Finally, we remain positioned to be active and opportunistic on capital deployment.
Speaker #2: We continue to have a robust M&A funnel, a meaningful remaining share repurchase authorization, and substantial financial flexibility, and will remain disciplined and unbiased between acquisitions and buybacks based on what drives the highest and most durable cash flow per share compounding.
Zack Moxcey: We continue to have a robust M&A funnel, a meaningful remaining share repurchase authorization, and substantial financial flexibility, and we'll remain disciplined and unbiased between acquisitions and buybacks based on what drives the highest and most durable cash flow per share compounding. For Q1, we expect adjusted DEPS to be in the range of $4.95 to $5, reflecting the dynamics previously discussed. Now, please turn to page 16. I'll open up for your questions. We'll conclude with the same three takeaways with which we started. First, in 2025, we delivered both double-digit revenue and EBITDA growth and solid free cash flow. Enterprise software bookings grew in the low double-digit range, which positioned us well entering 2026. Second, we're investing for long-term sustainable growth improvements while staying disciplined in our expectations.
We continue to have a robust M&A funnel, a meaningful remaining share repurchase authorization, and substantial financial flexibility, and we'll remain disciplined and unbiased between acquisitions and buybacks based on what drives the highest and most durable cash flow per share compounding. For Q1, we expect adjusted DEPS to be in the range of $4.95 to $5, reflecting the dynamics previously discussed. Now, please turn to page 16. I'll open up for your questions. We'll conclude with the same three takeaways with which we started. First, in 2025, we delivered both double-digit revenue and EBITDA growth and solid free cash flow. Enterprise software bookings grew in the low double-digit range, which positioned us well entering 2026. Second, we're investing for long-term sustainable growth improvements while staying disciplined in our expectations.
Speaker #2: For the first quarter, we expect adjusted debts to be in the range of $495 to $5, reflecting the dynamics previously discussed. Now, please turn to page 16, and we'll open up for your questions.
Speaker #2: We'll conclude with the same three takeaways with which we started. First, in 2025, we delivered both double-digit revenue and EBITDA growth, and solid free cash flow.
Speaker #2: Enterprise software bookings grew in the low double-digit range, which positioned us well entering 2026. Second, we're investing for long-term, sustainable growth improvements while staying disciplined in our expectations.
Speaker #2: Throughout 2025, we upskilled talent, sharpened strategy, and improved execution across the portfolio, and we are accelerating AI product development. We're not baking in an organic inflection in 2026, and our guidance will reflect improvement as it materializes.
Zack Moxcey: Throughout 2025, we upskilled talent, sharpened strategy, and improved execution across the portfolio, and we are accelerating AI product development. We're not baking in an organic inflection in 2026, and our guidance will reflect improvement as it materializes. Third, we materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high-quality vertical software acquisitions, executed opportunistic repurchases, and maintained more than $6 billion of forward capacity. As we look ahead, Roper remains an advantage and preferred buyer for both management teams and private equity sellers, and we believe the M&A backdrop remains constructive as private equity firms face increasing pressure to generate liquidity for limited partners. Our pipeline is robust, and our team is deeply engaged, and we will remain disciplined and unbiased on valuation and business quality.
Throughout 2025, we upskilled talent, sharpened strategy, and improved execution across the portfolio, and we are accelerating AI product development. We're not baking in an organic inflection in 2026, and our guidance will reflect improvement as it materializes. Third, we materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high-quality vertical software acquisitions, executed opportunistic repurchases, and maintained more than $6 billion of forward capacity. As we look ahead, Roper remains an advantage and preferred buyer for both management teams and private equity sellers, and we believe the M&A backdrop remains constructive as private equity firms face increasing pressure to generate liquidity for limited partners. Our pipeline is robust, and our team is deeply engaged, and we will remain disciplined and unbiased on valuation and business quality.
Speaker #2: Third, we've materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high-quality vertical software acquisitions, executed opportunistic repurchases, and maintained more than $6 billion of forward capacity.
Speaker #2: advantage and preferred buyer for both management As we look ahead, ROPER remains an teams and private equity sellers, and we believe the M&A backdrop remains constructive.
Speaker #2: Its private equity firms face increasing pressure to generate liquidity for limited partners. Our pipeline is robust, and our team is deeply engaged, and we will remain disciplined and unbiased on valuation and business quality.
Speaker #2: In parallel, we'll continue to balance acquisitions with opportunistic buybacks, allocating capital to whichever path drives the best risk-adjusted and long-term cash flow per share compounding.
Zack Moxcey: In parallel, we'll continue to balance acquisitions with opportunistic buybacks, allocating capital to whichever path drives the best risk-adjusted and long-term cash flow per share compounding. As we turn to your questions, please flip to the final slide, our strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over a long arc of time through a disciplined strategy anchored on three things. First, we are in market-leading vertical-focused businesses, application-specific, deeply embedded, and mission-critical. These are durable franchises with highly recurring revenue and organic cash flow growth that can improve over time. Second, we run a decentralized operating model so our teams stay exceptionally close to customers and their workflows so we can consistently compete and win. That customer intimacy is a core competitive advantage, and it's also how we win in AI. In our markets, AI isn't a generic overlay.
In parallel, we'll continue to balance acquisitions with opportunistic buybacks, allocating capital to whichever path drives the best risk-adjusted and long-term cash flow per share compounding. As we turn to your questions, please flip to the final slide, our strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over a long arc of time through a disciplined strategy anchored on three things. First, we are in market-leading vertical-focused businesses, application-specific, deeply embedded, and mission-critical. These are durable franchises with highly recurring revenue and organic cash flow growth that can improve over time. Second, we run a decentralized operating model so our teams stay exceptionally close to customers and their workflows so we can consistently compete and win. That customer intimacy is a core competitive advantage, and it's also how we win in AI. In our markets, AI isn't a generic overlay.
Speaker #2: As we turn to your questions, please flip to the final slide, or the strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over the long arc of time through a disciplined strategy anchored on three things: First, we earn market-leading, vertical-focused businesses—application-specific, deeply embedded, and mission-critical.
Speaker #2: These are durable franchises with highly recurring revenue and organic cash flow growth that can improve over time. Second, we run a decentralized operating model, so our teams stay exceptionally close to customers and their workflows, so we can consistently compete and win.
Speaker #2: Customer intimacy is a core competitive advantage, and it's also how we win in AI. In our markets, AI isn't a generic overlay. It has to be grounded in real workflow context, tuned to domain-specific edge cases, and deployed through trusted, embedded relationships.
Zack Moxcey: It has to be grounded in a real workflow context, tuned to domain-specific edge cases, and deployed through trusted embedded relationships so our AI delivers measurable value and better customer results. Third, we pair that with disciplined, centralized capital deployment, focused on high-quality M&A and opportunistic share repurchases, allocating capital objectively to maximize durable cash flow per share compounding. Niche-leading businesses, decentralized operations close to customers, and disciplined capital deployment. That's our long-term compounding flywheel. We're excited to compete and win and continue delivering long-term and improving cash flow compounding per share. So with that, thank you for your continued interest and support. Let's open it up to your questions.
It has to be grounded in a real workflow context, tuned to domain-specific edge cases, and deployed through trusted embedded relationships so our AI delivers measurable value and better customer results. Third, we pair that with disciplined, centralized capital deployment, focused on high-quality M&A and opportunistic share repurchases, allocating capital objectively to maximize durable cash flow per share compounding. Niche-leading businesses, decentralized operations close to customers, and disciplined capital deployment. That's our long-term compounding flywheel. We're excited to compete and win and continue delivering long-term and improving cash flow compounding per share. So with that, thank you for your continued interest and support. Let's open it up to your questions.
Speaker #2: So, our AI delivers measurable value and better customer results. Third, we pair that with discipline—centrally-led capital deployment. We focus on high-quality M&A and opportunistic share repurchases, allocating capital objectively to maximize durable cash flow per share compounding.
Speaker #2: Niche-leading businesses, decentralized operations close to customers, and disciplined capital deployment—that's our long-term compounding flywheel. We're excited to compete and win, and continue delivering long-term and improving cash flow compounding per share.
Speaker #2: So, with that, thank you for your continued interest and support. Let's open it up to your questions.
Speaker #2: Questions. We will now go to our
Operator: We will now go to our question-and-answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch-tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then the digit two again. We request that callers limit their questions to one main question and one follow-up. The first question comes from Brent Thiel with Jefferies. Your line is now open.
Operator: We will now go to our question-and-answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch-tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then the digit two again. We request that callers limit their questions to one main question and one follow-up. The first question comes from Brent Thiel with Jefferies. Your line is now open.
Speaker #1: We will now move into the question-and-answer portion of the call. We request that our callers limit their questions to one main question and one follow-up. If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch-tone telephone.
Speaker #1: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then the digit two again.
Speaker #1: We request that callers limit their questions to one main question and one follow-up. Your first question comes from Brent Theal with Jefferies. Your line is now open.
Speaker #1: open. Good morning,
[Analyst] (Aiera): Good morning, Neil. Regarding Deltek, I'm curious if you could just give everyone a sense of what you're baking into the 2026 guide and how you're protecting against another potential government shutdown.
Brent Thill: Good morning, Neil. Regarding Deltek, I'm curious if you could just give everyone a sense of what you're baking into the 2026 guide and how you're protecting against another potential government shutdown.
Speaker #2: Neil. Regarding Deltec, I'm curious if you could just give everyone a sense of what you're baking into the 26 guide and how you're protecting against another potential government
Speaker #2: Shutdown. Yeah. So, good morning, Brent. I—yeah, go ahead, Jason. I think we are not assuming an improvement this year. The fourth quarter was depressed by the perpetual license revenue, as I talked about.
Neil Hunn: Yeah, go ahead, Jason.
Neil Hunn: Yeah, go ahead, Jason.
[Analyst] (Aiera): Yeah, so good morning, Brent. I think we are not assuming an improvement this year. The fourth quarter was depressed by the perpetual license revenue, as I talked about. Most of GovCon Enterprise still buys perpetual licenses. So that's what drove our lower organic in AS in the fourth quarter. So we don't think that's going to repeat next year. So we do have a comp benefit, but otherwise, we're not really assuming improvement in that market until we see it.
Jason Conley: Yeah, so good morning, Brent. I think we are not assuming an improvement this year. The fourth quarter was depressed by the perpetual license revenue, as I talked about. Most of GovCon Enterprise still buys perpetual licenses. So that's what drove our lower organic in AS in the fourth quarter. So we don't think that's going to repeat next year. So we do have a comp benefit, but otherwise, we're not really assuming improvement in that market until we see it.
Speaker #2: Most of GovCon Enterprise still buys perpetual licenses, so that's what drove our lower organic in AS in the fourth quarter. So we don't think that's going to repeat.
Speaker #2: Next year, we do have a comp benefit, but otherwise, we're not really assuming improvement in that market until we see it. Okay. And on ProCare, Neil, what do you think needs to happen to get that back meeting expectations?
Brent Thill: Okay. On Procare, Neil, what do you think needs to happen to get that back meeting expectations?
Brent Thill: Okay. On Procare, Neil, what do you think needs to happen to get that back meeting expectations?
Speaker #3: Yeah, I think it's just to go through a little bit of what we talked about in the prepared remarks, and then add a little bit more to it.
Neil Hunn: Yeah, I think it's just to go through a little bit of what we talked about in the prepared remarks and then add a little bit more to it. So hey, the business is the leader in the marketplace. It is the clear leader. We've done a lot of good things there. We sort of cleaned up and fixed the payments cost infrastructure and processing capability. We fixed and improved the go-to-market. So we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor. And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to implement the software, which means we're slow to implement the payments. And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that.
Neil Hunn: Yeah, I think it's just to go through a little bit of what we talked about in the prepared remarks and then add a little bit more to it. So hey, the business is the leader in the marketplace. It is the clear leader. We've done a lot of good things there. We sort of cleaned up and fixed the payments cost infrastructure and processing capability. We fixed and improved the go-to-market. So we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor. And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to implement the software, which means we're slow to implement the payments. And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that.
Speaker #3: So, hey, the business is the leader in the marketplace. It is the clear leader—we've done a lot of good things there. We sort of cleaned up and fixed the payments cost infrastructure and processing capability.
Speaker #3: We fixed and improved the go-to-market, so we're competing and winning in the marketplace. We're winning a majority of the jump balls versus the primary competitor.
Speaker #3: And so the problem now is just pushed to the right. So now we're winning these opportunities, and we're slow to implement the software, which means we're slow to implement the payments.
Speaker #3: And that's the next sort of objective in front of the team there. So once we get that done, we feel much better about that.
Speaker #3: It's a completely fixable problem. It's one of the problems that—you don't like to have problems, generally, but when you do have them, you want ones that are imminently fixable, which this one is.
Neil Hunn: It's a completely fixable problem. It's one of the problems that you don't like to have problems generally, but when you do have them, you want ones that are imminently fixable, which this one is. The larger problem would be if we had a competitive situation or something like that, which we do not have.
It's a completely fixable problem. It's one of the problems that you don't like to have problems generally, but when you do have them, you want ones that are imminently fixable, which this one is. The larger problem would be if we had a competitive situation or something like that, which we do not have.
Speaker #3: The larger problem would be if we had a competitive situation or something like that, which we do not have.
Speaker #2: Great. Thanks.
Brent Thill: Great. Thanks.
Brent Thill: Great. Thanks.
Speaker #3: Yep. You
Neil Hunn: Yep, you bet.
Neil Hunn: Yep, you bet.
Speaker #3: bet.
Speaker #1: Your next
Operator: Your next question comes from Clarke Jeffries with Piper Sandler. Your line is now open.
Operator: Your next question comes from Clarke Jeffries with Piper Sandler. Your line is now open.
Speaker #1: question comes from Clerk Jefferies with Piper Sandler. Your line is now open.
Speaker #4: Hello. Thank you for taking the question. I wondered if specifically on the GovCon business, you could maybe give a rank order of the kind of appropriation bills what would have the most impact or within Deltec's exposure, what segments of the government getting those appropriation bills passed would be most significant?
Clarke Jeffries: Hello. Thank you for taking the question. I wondered if specifically on the GovCon business, you could maybe give a rank order of the kind of appropriation bills? What would have the most impact within Deltek's exposure? What segments of the government getting those appropriation bills passed would be most significant?
Clarke Jeffries: Hello. Thank you for taking the question. I wondered if specifically on the GovCon business, you could maybe give a rank order of the kind of appropriation bills? What would have the most impact within Deltek's exposure? What segments of the government getting those appropriation bills passed would be most significant?
Speaker #3: Yeah, so I'll draw back to the OEEB, and this is—as you know—Deltec doesn't have direct exposure to the government. It's our customers that are the federal, that have the direct exposure to the government.
Neil Hunn: Yeah. So I'll just draw back to the Omnibus. And this is, as you know, we're not Deltek doesn't have direct exposure to the government. It's our customers that are the federal contractors that have the direct exposure to the government. Just to remind everybody, the Omnibus is heavy on defense, Department of War, Department of Defense, and DHS funding and spending. Those categories tend to have a larger percentage of contractor spend. It could be north of 50% of the whole category. It can be contractor spend. So that's definitely a tailwind. The civilian programs tend to have lower percentage. So it's not necessarily a bad thing for Deltek's customers, but it's certainly better on the current appropriations, the Omnibus.
Neil Hunn: Yeah. So I'll just draw back to the Omnibus. And this is, as you know, we're not Deltek doesn't have direct exposure to the government. It's our customers that are the federal contractors that have the direct exposure to the government. Just to remind everybody, the Omnibus is heavy on defense, Department of War, Department of Defense, and DHS funding and spending. Those categories tend to have a larger percentage of contractor spend. It could be north of 50% of the whole category. It can be contractor spend. So that's definitely a tailwind. The civilian programs tend to have lower percentage. So it's not necessarily a bad thing for Deltek's customers, but it's certainly better on the current appropriations, the Omnibus.
Speaker #3: Just to remind everybody, the OEEB is a heavy on defense, Department of War, Department of Defense, and DHS funding and spending. That tends those categories tend to have larger percentage of contractor spend.
Speaker #3: It could be north of 50% of the whole category. It can be contractor spend, so that's definitely a tailwind. The civilian programs tend to have a lower percentage.
Speaker #3: So, it's not necessarily a bad thing for Deltec's customers, but it's certainly better on the current appropriations of the OEEB.
Speaker #4: Perfect. And then the last two years, hovered around $3 billion deployed towards acquisitions. Wondering if you could talk about the expectations for how much you might deploy—push you towards a number closer to the $4 billion or a number closer to the $2 billion?
Clarke Jeffries: Perfect. And then the last 2 years hovered around $3 billion deployed towards acquisitions. Wondering if you could talk about expectations for how much you might deploy in 2026. What scenario might push you towards a number closer to the $4 billion or a number closer to the $2 billion? So what are you factoring into the deployment outlook for 2026? Thank you.
Clarke Jeffries: Perfect. And then the last 2 years hovered around $3 billion deployed towards acquisitions. Wondering if you could talk about expectations for how much you might deploy in 2026. What scenario might push you towards a number closer to the $4 billion or a number closer to the $2 billion? So what are you factoring into the deployment outlook for 2026? Thank you.
Speaker #4: So, what are you factoring into the deployment outlook for '26? Thank you.
Speaker #4: you. As we mentioned, there's
Neil Hunn: As we mentioned, there's about $6 billion, sort of, is what the forward capacity is over the next 12 months. We have the two levers available to us on the M&A and the buyback. On the M&A side, the thing for us, I've been here 15 years. Jason's been here 20. When you're building a business that has an M&A lever, we never view the amount of capital in the next 12 months as a budget, or we got to spend it because we're building a business that's going to own businesses into perpetuity. So you have to buy very high-quality businesses at an appropriate price. And so that discipline guides us.
Neil Hunn: As we mentioned, there's about $6 billion, sort of, is what the forward capacity is over the next 12 months. We have the two levers available to us on the M&A and the buyback. On the M&A side, the thing for us, I've been here 15 years. Jason's been here 20. When you're building a business that has an M&A lever, we never view the amount of capital in the next 12 months as a budget, or we got to spend it because we're building a business that's going to own businesses into perpetuity. So you have to buy very high-quality businesses at an appropriate price. And so that discipline guides us.
Speaker #3: about 6 billion sort of is what the four capacities are in the next 12 months. We have the two levers available to us on the capital the M&A and the buyback.
Speaker #3: On the M&A side, the thing for us—I've been here 15 years, Jason's been here 20—when you're building a business that has an M&A lever, we never view the amount of capital in the next 12 months of the budget, or 'we got to spend it,' because we're building a business that's going to own businesses in perpetuity.
Speaker #3: So you have to buy very high-quality businesses at an appropriate price. And so that discipline guides us. So it's hard to set an expectation that says we'd be we're going to get X dollars deployed against a 6 billion, excuse me, in M&A.
Neil Hunn: So it's hard to set an expectation that says we're going to get X dollars deployed against the $6 billion in M&A or buyback, but we like having both levers available to us, and we're just going to do what's best objectively to compound cash flow per share at the best rate we can.
So it's hard to set an expectation that says we're going to get X dollars deployed against the $6 billion in M&A or buyback, but we like having both levers available to us, and we're just going to do what's best objectively to compound cash flow per share at the best rate we can.
Speaker #3: Or buyback, but we like having both levers available to us, and we're just going to do what's best objectively to compound cash flow per share.
Speaker #3: at the best rate we can. I
[Analyst] (Aiera): I will say that we think this coming into this year, I think the market is ripe for more assets to become available. I mean, we've been very proactive in the last couple of years in a very muted market. So as I mentioned, I think it's a net positive for us, but we'll just stay disciplined and focused.
Jason Conley: I will say that we think this coming into this year, I think the market is ripe for more assets to become available. I mean, we've been very proactive in the last couple of years in a very muted market. So as I mentioned, I think it's a net positive for us, but we'll just stay disciplined and focused.
Speaker #4: will say that we think this coming into this year, I think the market is ripe for more assets to become available. I mean, we've been very proactive in the last couple of years with a very muted market.
Speaker #4: So, as I mentioned, I think it's a net positive for us, but we'll just stay disciplined and focused.
Speaker #3: Yeah. Don't mistake anything I'm saying. Like I was just saying, Jason said, the opportunity the number of deals, the number of the amount of LP pressure on the GPs and private equity just continues to mount.
Neil Hunn: Yeah. Don't mistake anything I'm saying. Like Jason said, the number of deals, the number of the amount of LP pressure on the GPs and private equity just continues to mount. There's going to be an aging portfolio of very high-quality assets. The number of those assets that we have relationships with and are meeting with management teams and becoming the preferred owner, all that is very, very ripe for opportunity. But we're going to remain, as we always do, disciplined. Finally, on that, over the last really three years, two and a half or three years, we've really leaned in and built capacity for tuck-ins and bolt-ons. That's a more predictable pace. I think we did seven or maybe eight small tuck-in acquisitions last year. That'll be more sort of predictable because it's a lower dollar per transaction, but more of them.
Neil Hunn: Yeah. Don't mistake anything I'm saying. Like Jason said, the number of deals, the number of the amount of LP pressure on the GPs and private equity just continues to mount. There's going to be an aging portfolio of very high-quality assets. The number of those assets that we have relationships with and are meeting with management teams and becoming the preferred owner, all that is very, very ripe for opportunity. But we're going to remain, as we always do, disciplined. Finally, on that, over the last really three years, two and a half or three years, we've really leaned in and built capacity for tuck-ins and bolt-ons. That's a more predictable pace. I think we did seven or maybe eight small tuck-in acquisitions last year. That'll be more sort of predictable because it's a lower dollar per transaction, but more of them.
Speaker #3: There's going to be there's an aging portfolio, very high-quality assets. The number of those assets that were have relationship with and are meeting with management teams and becoming the preferred owner, all that is very, very ripe for opportunity.
Speaker #3: But we're going to remain as we always do, disciplined. Finally, on that over the last really three years, two and a half or three years, we've really leaned in and built capacity for tuck-ins ins and bolt-ons.
Speaker #3: That's a more predictable pace. I think we did seven or maybe eight small tuck-in acquisitions last year. That'll be more sort of predictable because it's a lower dollar per transaction.
Speaker #3: But more of
Speaker #3: them. Perfect.
Clarke Jeffries: Perfect. Thank you very much.
Clarke Jeffries: Perfect. Thank you very much.
Speaker #4: Thank you very much.
Speaker #3: Okay.
Neil Hunn: Good.
Neil Hunn: Good.
Speaker #1: Your next question comes from Joseph Vrewink with Baird. Your line is now open.
Operator: Your next question comes from Joseph Vrouwink with Baird. Your line is now open.
Operator: Your next question comes from Joseph Vrouwink with Baird. Your line is now open.
Speaker #4: Great, thank you for taking my questions. On AI, when would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level?
Joseph Vrouwink: Great. Thank you for taking my questions. On AI, when would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level? I think it's evident in certain areas already. The Aderant callouts, their mid-teens growth, they're 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives. And so there's an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically and attribute some of the organic improvement ex-Deltek you're already seeing and say that's directly or indirectly related to AI investments?
Joseph Vrouwink: Great. Thank you for taking my questions. On AI, when would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level? I think it's evident in certain areas already. The Aderant callouts, their mid-teens growth, they're 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives. And so there's an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically and attribute some of the organic improvement ex-Deltek you're already seeing and say that's directly or indirectly related to AI investments?
Speaker #4: I think it's evident in certain areas already. The adherent callouts, they're mid-teens growth. They're 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives.
Speaker #4: And so there's an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically, and attribute some of the organic improvement, ex-Deltek, you're already seeing, and say that's directly or indirectly related to AI investments?
Speaker #3: Yeah, so appreciate the question. We spend a fair amount of time talking about that internally. Just a couple of guiding principles that we have internally: one, we're not going to AI wash or allocate revenue like other companies have done or are doing.
Neil Hunn: Yeah. So appreciate the question. We spend a fair amount of time talking about that internally. Just a couple of guiding principles that we have internally is one, we're not going to AI wash or allocate revenue like other companies have done or doing. We're not going to say X dollars are R&D, so therefore Y dollars of revenue is AI related. So we're not going to AI wash our revenue stream. That said, we do aspire to be able to report a number AI revenue SKU related is X or Y. Unfortunately, if we do that, I mean, we're going to monetize AI in more ways than just AI SKUs. It's going to be cloud uplift. It's going to be in packaging. There's going to be lots of ways that we monetize this.
Neil Hunn: Yeah. So appreciate the question. We spend a fair amount of time talking about that internally. Just a couple of guiding principles that we have internally is one, we're not going to AI wash or allocate revenue like other companies have done or doing. We're not going to say X dollars are R&D, so therefore Y dollars of revenue is AI related. So we're not going to AI wash our revenue stream. That said, we do aspire to be able to report a number AI revenue SKU related is X or Y. Unfortunately, if we do that, I mean, we're going to monetize AI in more ways than just AI SKUs. It's going to be cloud uplift. It's going to be in packaging. There's going to be lots of ways that we monetize this.
Speaker #3: We're not going to say X dollars are these, therefore Y dollars of revenue is AI-related. So we're not going to AI-wash our revenue stream.
Speaker #3: That said, we do aspire to be able to report a number, AI revenue skew-related is X or Y. Unfortunately, if we do that—I mean, we're going to monetize AI in more ways than just AI skews.
Speaker #3: It's going to be cloud uplift. It's going to be in packaging. It's going to be lots of ways that we monetize this. So this actually, it says, is simple.
Neil Hunn: So this is actually, it says simple, it does pretty hard from how we're going to be able to sort of report this where it's credible. At the end of the day, Joe, you highlight the most important thing, which is we believe this is a meaningful TAM expander for us, which means it should be a growth driver for us. And you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. We see that at Aderant, you have CentralReach. We'd expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper, in 2025, the chapter on AI would be how we learned to develop the initial set of products across our software businesses.
So this is actually, it says simple, it does pretty hard from how we're going to be able to sort of report this where it's credible. At the end of the day, Joe, you highlight the most important thing, which is we believe this is a meaningful TAM expander for us, which means it should be a growth driver for us. And you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. We see that at Aderant, you have CentralReach. We'd expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper, in 2025, the chapter on AI would be how we learned to develop the initial set of products across our software businesses.
Speaker #3: It does make it pretty hard from how we're going to be able to sort of report this where it's credible. At the end of the day, Joe, you highlight the most important thing, which is we believe this is a meaningful TAM expander for us, which means it should be a growth driver for us.
Speaker #3: And you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. So we see that aderent, see that center reach.
Speaker #3: We'd expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper, in 2025, the chapter on AI would be how we learned to develop the initial set of products across our software business.
Speaker #3: Essentially, every one of our software businesses either has or is right on the presses of having AI-related product to deliver to our customers. '26, I think the chapter is going to be how we commercialize.
Neil Hunn: Essentially, every one of our software businesses either has or is right on the precipice of having AI-related product to deliver to our customers. 2026, I think the chapter is going to be how we commercialize. How do you sell, deploy, drive implementation, and ultimately sort of monetize all of the product? And so that's going to be the journey of learning for us across the portfolio organization. We'll look forward to providing updates on that as we get through the year.
Essentially, every one of our software businesses either has or is right on the precipice of having AI-related product to deliver to our customers. 2026, I think the chapter is going to be how we commercialize. How do you sell, deploy, drive implementation, and ultimately sort of monetize all of the product? And so that's going to be the journey of learning for us across the portfolio organization. We'll look forward to providing updates on that as we get through the year.
Speaker #3: How do you sell, deploy, drive implementation, and ultimately, sort of monetize all of the product? And so that's going to be the journey of learning for us across the portfolio organization.
Speaker #3: We'll look forward to providing updates on that as we get through the
Speaker #3: year. Great.
Joseph Vrouwink: Great. That's helpful. On your approach to guidance this year, I think it's very clear that you're going to let the upside come to you and future changes are going to happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? And I'm thinking in the past, you've talked about how your current portfolio could be capable of 7 and, in a best-case scenario, 8 to 9. That's more of a long-term framework within FY26. If things go right and you get some redirection and where the pressures within the portfolio have been, what sort of upside possibility could there be?
Joseph Vrouwink: Great. That's helpful. On your approach to guidance this year, I think it's very clear that you're going to let the upside come to you and future changes are going to happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? And I'm thinking in the past, you've talked about how your current portfolio could be capable of 7 and, in a best-case scenario, 8 to 9. That's more of a long-term framework within FY26. If things go right and you get some redirection and where the pressures within the portfolio have been, what sort of upside possibility could there be?
Speaker #4: That's helpful. On your approach to guidance this year, I think it's very clear that you're going to let the upside come to you, and future changes are going to happen as you see it.
Speaker #4: Can you maybe put some guardrails in magnitude of what that could ultimately mean? And I'm thinking in the past, you've talked about how your current portfolio could be capable of 7 and in a best-case scenario, 8 to 9.
Speaker #4: Long-term framework within FY—that's more of a '26. If things go right and you get some redirection, and where the pressures within the portfolio have been, what sort of upside possibility could there be?
Speaker #4: be? Yeah.
Neil Hunn: Yeah. So I would say the long-term, to first point, the destination, if it were the longer term, certainly not a 2026 comment. The longer-term entitled growth in a portfolio, we still have conviction is north of 8%. We go company by company about what their entitled, realistically achievable growth can be. And so that number, sort of the target destination has not changed. We are definitely, as you've heard from our commentary, taking a much more appropriate and balanced view for the initial guide here. No improvement at Deltek on the government contracting side. No DAT market recovery. Actually underwriting a slight decline at Neptune. And so if you sort of thumb each one of those, I don't want to get into order of magnitude of what it could look like, but I would say it definitely tilts more conservative than this past year, for instance.
Neil Hunn: Yeah. So I would say the long-term, to first point, the destination, if it were the longer term, certainly not a 2026 comment. The longer-term entitled growth in a portfolio, we still have conviction is north of 8%. We go company by company about what their entitled, realistically achievable growth can be. And so that number, sort of the target destination has not changed. We are definitely, as you've heard from our commentary, taking a much more appropriate and balanced view for the initial guide here. No improvement at Deltek on the government contracting side. No DAT market recovery. Actually underwriting a slight decline at Neptune. And so if you sort of thumb each one of those, I don't want to get into order of magnitude of what it could look like, but I would say it definitely tilts more conservative than this past year, for instance.
Speaker #3: So, I would say the long-term—to your first point—the destination for the longer-term, certainly not a '26 comment. The longer-term entitled growth in a portfolio, we still have conviction, is north of 8%.
Speaker #3: We go company by company about what their entitled, realistically achievable growth can be. And so that number, sort of the target destination, is not changed.
Speaker #3: We are definitely, as you've heard from our commentary, taking a much more appropriate and balanced view for the initial guide here. No improvement at DelTech on the government contracting side.
Speaker #3: No DAT market recovery. Actually, underwriting a slight decline at Neptune. And so, if you sort of thumb each one of those—I don't want to get into order of magnitude of what it could look like—but I would say it definitely tilts more conservative than this past year.
Speaker #3: instance. Thank you.
Joseph Vrouwink: Thank you.
Joseph Vrouwink: Thank you.
Speaker #3: Yep.
Neil Hunn: Yep.
Neil Hunn: Yep.
Speaker #1: Your
Operator: Your next question comes from Dylan Baker with William Blair. Your line is now open.
Operator: Your next question comes from Dylan Baker with William Blair. Your line is now open.
Speaker #1: Next question comes from Dylan Baker with William Blair. Your line is now open.
Speaker #4: Hey, gentlemen. Appreciate it. Maybe kind of following up on one of Joe's questions too, I think the DelTech perpetual piece makes sense, but you also called out some softness on non-recurring due to some of those cloud migrations and maybe that's just kind of rev rec of upfront for Rattable.
Clarke Jeffries: Hey, gentlemen. Appreciate it. Maybe kind of following up on one of Joe's questions too. I think the Deltek perpetual piece makes sense, but you also called out some softness on non-recurring due to some of those cloud migrations, and maybe that's just kind of rev rec of upfront for ratable. I guess as you think about kind of AI's opportunity to accelerate this modernization cloud journey, given kind of the heavy maintenance space you still have there, how do you think about kind of that trade-off in those long-term economics? It seems favorable. I think it's kind of evident in the subscription bookings in that low double-digit framework, but maybe kind of walk through some of the nuance between those as well too, if you can. Thanks.
[Analyst] (William Blair): Hey, gentlemen. Appreciate it. Maybe kind of following up on one of Joe's questions too. I think the Deltek perpetual piece makes sense, but you also called out some softness on non-recurring due to some of those cloud migrations, and maybe that's just kind of rev rec of upfront for ratable. I guess as you think about kind of AI's opportunity to accelerate this modernization cloud journey, given kind of the heavy maintenance space you still have there, how do you think about kind of that trade-off in those long-term economics? It seems favorable. I think it's kind of evident in the subscription bookings in that low double-digit framework, but maybe kind of walk through some of the nuance between those as well too, if you can. Thanks.
Speaker #4: I guess as you think about kind of AI's opportunity to accelerate this modernization and cloud journey given kind of the heavy maintenance space you still have there, how do you think about kind of that trade-off in those long-term economics?
Speaker #4: It seems favorable. I think it's kind of evident in the subscription bookings in that low double-digit framework, but maybe kind of walk through some of the nuance between those as well too.
Speaker #4: If you can,
Speaker #3: Yeah, certainly.
[Analyst] (Aiera): Yeah, certainly appreciate the question. I think we've seen some of this just in our AS segment over the last years. Non-recurring revenue has been sort of flattish, up a little bit here and there, because some of our businesses have moved more to the cloud, be it Aderant or, in recent years, PowerPlan. And we see that at Deltek is going to be a significant opportunity. So that's a part of our thinking in 2026. Deltek's really put a lot of AI functionality into their cloud product. And so some of these large government contract customers are contemplating going to the cloud, and they have a big push for that. So you're right, that will obviously increase customer lifetime value, but it'll have a more muted impact in years. So we thought through a little bit of those dynamics this year.
Jason Conley: Yeah, certainly appreciate the question. I think we've seen some of this just in our AS segment over the last years. Non-recurring revenue has been sort of flattish, up a little bit here and there, because some of our businesses have moved more to the cloud, be it Aderant or, in recent years, PowerPlan. And we see that at Deltek is going to be a significant opportunity. So that's a part of our thinking in 2026. Deltek's really put a lot of AI functionality into their cloud product. And so some of these large government contract customers are contemplating going to the cloud, and they have a big push for that. So you're right, that will obviously increase customer lifetime value, but it'll have a more muted impact in years. So we thought through a little bit of those dynamics this year.
Speaker #3: Appreciate the question. Thanks. I think we've seen some of this just in our AS segment over the last year. Non-recurring revenue has been sort of flat-ish, up a little bit.
Speaker #3: Here and there because some of our businesses have moved more to the cloud via aderent or in recent years, power plan. And we see that at DelTech is going to be a significant opportunity.
Speaker #3: So that's a part of our thinking in '26—DelTech's really put a lot of AI functionality into their cloud product. And so some of these large government contract customers are contemplating going to the cloud, and they have a big push for that.
Speaker #3: So you're right, that will obviously increase customer lifetime value, but it'll have a more muted impact in year. So we thought through a little bit of those dynamics this year.
Speaker #3: And I think that's probably the biggest area where we will see that, because a lot of the rest of our businesses are sort of on their cloud journey, but they will continue, to your point, to include only AI features in the cloud.
[Analyst] (Aiera): And I think that's probably the biggest area where we will see that because a lot of the rest of our businesses are sort of on their cloud journey, but they will continue, to your point, to include only AI features in the cloud. And so that'll just increase adoption as we go forward.
And I think that's probably the biggest area where we will see that because a lot of the rest of our businesses are sort of on their cloud journey, but they will continue, to your point, to include only AI features in the cloud. And so that'll just increase adoption as we go forward.
Speaker #3: And so, that'll just increase adoption as we go forward. Yeah. And just to add to what Jason said, we don't expect a pronounced J-curve because we have a very large install base that's on-premise.
Neil Hunn: Yeah. And just to add to what Jason said, we don't expect a pronounced J curve because we have a very large install base that's on-premise. That's going to lift, that is, lifting and shifting at 2 to 3x recurring. So the J curve is less pronounced because you're converting an existing recurring base at a higher level. And as you sort of, if you will, trade or convert net new perpetual to recurring. So they offset one another, and we think we have that harnessed in our guidance.
Neil Hunn: Yeah. And just to add to what Jason said, we don't expect a pronounced J curve because we have a very large install base that's on-premise. That's going to lift, that is, lifting and shifting at 2 to 3x recurring. So the J curve is less pronounced because you're converting an existing recurring base at a higher level. And as you sort of, if you will, trade or convert net new perpetual to recurring. So they offset one another, and we think we have that harnessed in our guidance.
Speaker #3: That's going to lift. That is lifting and shifting it two to three X recurring. So it's the J curve is less pronounced than because you're converting an existing recurring base at a higher level and as you sort of, if you will, tread or convert net new perpetual to a recurring.
Speaker #3: So they offset one another, and we think we have that harnessed in our
Speaker #3: guidance. Okay.
Clarke Jeffries: Okay. Great. Thank you. And then maybe, Neil, for you too, on the topic between platform and bolt-on M&A, I guess could you kind of give us a sense if you see any opportunity, maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate some of the initiatives in one effort? I know we've built out kind of the bolt-on team. There's a little bit more visibility into those. Platform valuations maybe have come down to a particular level as well. But just kind of think about kind of the mix between capital deployments, between bolt-on and platform, if you can. Thank you.
[Analyst] (William Blair): Okay. Great. Thank you. And then maybe, Neil, for you too, on the topic between platform and bolt-on M&A, I guess could you kind of give us a sense if you see any opportunity, maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate some of the initiatives in one effort? I know we've built out kind of the bolt-on team. There's a little bit more visibility into those. Platform valuations maybe have come down to a particular level as well. But just kind of think about kind of the mix between capital deployments, between bolt-on and platform, if you can. Thank you.
Speaker #4: Great. Thank you. And then maybe Neil, for you to, on the topic between platform and bolt-on, M&A, I guess could you kind of give us a sense if you see any opportunity maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate kind of the initiatives in one effort?
Speaker #4: I know we've built out kind of the bolt-on team. There's a little bit more visibility into those. Platform evaluations maybe have come down to a particular level as well, but just kind of think about kind of the mix between capital deployments between bolt-on and platform if you can.
Speaker #4: Thank you.
Speaker #3: Always hard to predict mix. I can tell you that the if there is a generally speaking, if there's a rank order bolt-ons or tuck-ins are going to be first order because they are advancing sort of the organic growth and strategic direction of one of our platform businesses.
Neil Hunn: always hard to predict mix. I can tell you that, generally speaking, if there's a rank order, bolt-ons or tuck-ins are going to be first order because they are advancing sort of the organic growth and strategic direction of one of our platform businesses. At the same time, you always have a little bit of back-office G&A synergy, which enables to sort of buy down the initial purchase price pretty quickly, and then you get to the growth orientation. So that continues and will always be a focus of ours. What we see, by the way, on that front is it takes a little bit of time as we added the resources; they get to know the company, they build a relationship with our companies, they build a relationship with sponsors, targets, and founders.
Neil Hunn: always hard to predict mix. I can tell you that, generally speaking, if there's a rank order, bolt-ons or tuck-ins are going to be first order because they are advancing sort of the organic growth and strategic direction of one of our platform businesses. At the same time, you always have a little bit of back-office G&A synergy, which enables to sort of buy down the initial purchase price pretty quickly, and then you get to the growth orientation. So that continues and will always be a focus of ours. What we see, by the way, on that front is it takes a little bit of time as we added the resources; they get to know the company, they build a relationship with our companies, they build a relationship with sponsors, targets, and founders.
Speaker #3: At the same time, you always have a little bit of back-office G&A synergy, which enables you to sort of buy down the initial purchase price pretty quickly.
Speaker #3: And then you get to the growth orientation. So that continues and will always be a focus of ours. What we see, by the way, on that front is it takes a little bit of time as we added the resources.
Speaker #3: They get to know the company. They build a relationship with our companies. They build a relationship with sponsors and targets and founders. I think something like 60% of our pipeline for bolt-ons is either proprietary or founder-driven.
Neil Hunn: I think something like 60% of our pipeline for bolt-ons is either proprietary or founder-driven. That's a completely new motion for us. That would not have been the case three years ago. So I think that bodes well, but these things do take time to matriculate through the system and mature to where they can become actionable. On the platform side, the number of opportunities and the quality of assets is very interesting. The question on the table is going to be what happens relative to valuation. We've never been a short-term, next 12-month multiple arbitrager, so we're not going to do that. But we definitely have to sort of look at buybacks versus bolt-ons versus platforms on what is the best long-term compounding in terms of value creation opportunities for us.
I think something like 60% of our pipeline for bolt-ons is either proprietary or founder-driven. That's a completely new motion for us. That would not have been the case three years ago. So I think that bodes well, but these things do take time to matriculate through the system and mature to where they can become actionable. On the platform side, the number of opportunities and the quality of assets is very interesting. The question on the table is going to be what happens relative to valuation. We've never been a short-term, next 12-month multiple arbitrager, so we're not going to do that. But we definitely have to sort of look at buybacks versus bolt-ons versus platforms on what is the best long-term compounding in terms of value creation opportunities for us.
Speaker #3: That's a completely new motion for us. That would not have been the case three years ago. So I think that bodes well. But these things do take time to matriculate through the system and mature to where they can become actionable.
Speaker #3: On the platform side, it's a the number of opportunities and the quality of assets is very interesting. The question on the table is going to be what happens relative to valuation.
Speaker #3: We've never been a short-term, next-12-month multiple arbitrageur, so we're not going to do that. But we definitely have to look at buybacks versus bolt-ons versus platforms, and consider what is the best long-term compounding in terms of value creation opportunities for us.
Operator: Your next question comes from Brad Reback with Stifel. Your line is now open.
Operator: Your next question comes from Brad Reback with Stifel. Your line is now open.
Speaker #1: Brad Rebeck with SPFL. Your line is now open.
Speaker #5: Oh, great. Thanks very much. I know you guys gave the software bookings for the entire year. Can you give us what it was in
Deane Dray: Great. Thanks very much. I know you guys gave the software bookings for the entire year. Can you give us what it was in Q4?
Brad Reback: Great. Thanks very much. I know you guys gave the software bookings for the entire year. Can you give us what it was in Q4?
Speaker #5: 4Q? Yeah.
[Analyst] (Aiera): Yeah. It was up high single digits, and that is with Deltek being down in the low double-digit area. Actually, Deltek's SaaS was strong, but like I mentioned, perpetual was down meaningfully. Yeah, the rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a really tough comp last year, so they're continuing to just have success in 2025, and that should be good for them for 2026. And then, as I mentioned, last quarter, healthcare has been really strong for us, and that was the same in the fourth quarter.
Jason Conley: Yeah. It was up high single digits, and that is with Deltek being down in the low double-digit area. Actually, Deltek's SaaS was strong, but like I mentioned, perpetual was down meaningfully. Yeah, the rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a really tough comp last year, so they're continuing to just have success in 2025, and that should be good for them for 2026. And then, as I mentioned, last quarter, healthcare has been really strong for us, and that was the same in the fourth quarter.
Speaker #3: It was up high single digits and that is with DelTech being down in the low double-digit area. Actually, DelTech's SaaS was strong, but like I mentioned, perpetual was down meaningfully.
Speaker #3: But yeah, the rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a very tough comp last year. So they're continuing to just have success in 2025, and that should be good for them for '26.
Speaker #3: And then, as I mentioned last quarter, healthcare has been really strong for us, and that was the same in the fourth.
Speaker #3: quarter. Great.
Deane Dray: Great. Thanks. Neil, this is the second quarter in a row you've missed expectations, and you're guiding to a back half acceleration in 2026. So maybe take a moment and help us understand where the incremental conservatism is in the 2026 guide versus the last couple of quarters. Thanks.
Brad Reback: Great. Thanks. Neil, this is the second quarter in a row you've missed expectations, and you're guiding to a back half acceleration in 2026. So maybe take a moment and help us understand where the incremental conservatism is in the 2026 guide versus the last couple of quarters. Thanks.
Speaker #5: Thanks. Neil, this is the second quarter in a row you've missed expectations. And your guiding to a back half acceleration in '26. So maybe take a moment and help us understand where the incremental conservatism is in the '26 guide versus the last couple of quarters.
Speaker #5: Thanks.
Speaker #3: Sure.
Neil Hunn: Sure. So we did say, and we're certainly disappointed with the last couple of quarters, but we did say this time last quarter we had a wider range of outcome, range of outcome, especially because of the uncertainty at Deltek. And so while disappointing, we try to be sort of very straightforward in that regard. I think for this year, I said it before, I'll say it again. When you look at where we're exiting this year, look at 2025 compared to 2026, and you just go and let me even back up. When you look at 2025, the initial guide versus where we ended up, it really reconciles to three things we talked about. It's Deltek because of GovCon. It's Neptune because of the dynamics we talked about, and it's Procare. That almost fully reconciles the difference between the initial guide and where we ended up.
Neil Hunn: Sure. So we did say, and we're certainly disappointed with the last couple of quarters, but we did say this time last quarter we had a wider range of outcome, range of outcome, especially because of the uncertainty at Deltek. And so while disappointing, we try to be sort of very straightforward in that regard. I think for this year, I said it before, I'll say it again. When you look at where we're exiting this year, look at 2025 compared to 2026, and you just go and let me even back up. When you look at 2025, the initial guide versus where we ended up, it really reconciles to three things we talked about. It's Deltek because of GovCon. It's Neptune because of the dynamics we talked about, and it's Procare. That almost fully reconciles the difference between the initial guide and where we ended up.
Speaker #3: So we did say and we're certainly disappointed with the last couple of quarters, but we did say this time last quarter we had a wider range of outcome fan of outcome.
Speaker #3: Especially because of the uncertainty at DelTech. And so while disappointing, we try to be sort of very straightforward in that regard. I think for this year, I said it before, I'll say it again.
Speaker #3: When you look at where we're exiting this year, look at '25 compared to '26. And you just go—and let me even back up.
Speaker #3: When you look at '25, the initial guide versus where we ended up, it really reconciles to three things we've talked about. It's DelTech because of GovCon, it's Neptune because of the dynamics we talked about, and it's ProCare.
Speaker #3: That almost fully reconciles the difference between the initial guide and where we ended up. You then have that in mind, you take it, you carry it forward.
Neil Hunn: You then have that in mind, you take it, you carry it forward. We're assuming in 2026, there's no improvement in Deltek. There is no acceleration at DAT. There's actually underwriting a modest decline at Neptune versus 2025. And the only thing that sort of then you get the accretion to organic growth from Subsplash and CentralReach that turn organic this year. And then we have this easing second half, sort of non-recurring. So optically, it looks like an acceleration through the year, but when you look at the pieces, it's actually pretty steady, save for the things that we just said.
You then have that in mind, you take it, you carry it forward. We're assuming in 2026, there's no improvement in Deltek. There is no acceleration at DAT. There's actually underwriting a modest decline at Neptune versus 2025. And the only thing that sort of then you get the accretion to organic growth from Subsplash and CentralReach that turn organic this year. And then we have this easing second half, sort of non-recurring. So optically, it looks like an acceleration through the year, but when you look at the pieces, it's actually pretty steady, save for the things that we just said.
Speaker #3: We're assuming in '26 there's no improvement in DelTech. There is no acceleration at DAT. There's actually underwriting a modest decline at Neptune versus '25.
Speaker #3: And the only thing that sort of then you get the accretion to organic growth from subsplash and centuries that turn organic this year. And then we have this easing second half, sort of non-recurring.
Speaker #3: So optically, it looks like an acceleration through the year, but when you look at the pieces, it's actually pretty steady, save for the things that we just said.
Speaker #4: Yeah. And just to remind you, all the centuries and subsplash becomes organic second half. So it's got to create some of that. Some of that ramp.
[Analyst] (Aiera): Yeah. And just to remind you, all the CentralReach and Subsplash becomes organic second half. So it's got to create some of that ramp. And I would just call out too, just again, just a small comp, a couple of comp issues. Foundry gets a little bit better this year, and I know it's small dollars, but in network, it matters. And then we had the first quarter of 2025, a pretty depressed network number because we were comping against a bigger number in 2024. So that comp goes away. So there's some math too, just going from 2025 to 2026.
Jason Conley: Yeah. And just to remind you, all the CentralReach and Subsplash becomes organic second half. So it's got to create some of that ramp. And I would just call out too, just again, just a small comp, a couple of comp issues. Foundry gets a little bit better this year, and I know it's small dollars, but in network, it matters. And then we had the first quarter of 2025, a pretty depressed network number because we were comping against a bigger number in 2024. So that comp goes away. So there's some math too, just going from 2025 to 2026.
Speaker #4: And I would just call out too, just again, just a small comp, a couple of comp issues. A foundry gets a little bit better this year, and I know it's small dollars, but in network, it matters.
Speaker #4: And then we had the first quarter of '25, a pretty depressed network number because we were comping against a bigger number in '24. So.
Speaker #4: That comp goes away. So there's some math too. Just going from 25 to
Speaker #4: 26. Great.
Deane Dray: Great. Thank you.
Brad Reback: Great. Thank you.
Speaker #5: Thank you.
Speaker #3: You bet.
Neil Hunn: You bet.
Neil Hunn: You bet.
Speaker #1: Your next question comes from Terry Tillman with Truist Securities. Your line is now
Operator: Your next question comes from Terry Tillman with Truist Securities. Your line is now open.
Operator: Your next question comes from Terry Tillman with Truist Securities. Your line is now open.
Speaker #1: open. Yeah.
[Analyst] (Oppenheimer): Yeah. Hey, Neil, Jason, and Zack. Thanks for taking my questions. The first one's going to be on Deltek. The second one, the follow-up is going to be on DAT. But on Deltek, and I know these months or at least part of the quarters are probably less seasonally strong, but did you actually see any improvement in order volume for perpetual in December or January? And also with Deltek, are the effects of DOGE kind of lessening, or is that still impactful? And then that follow-up.
Terry Tillman: Yeah. Hey, Neil, Jason, and Zack. Thanks for taking my questions. The first one's going to be on Deltek. The second one, the follow-up is going to be on DAT. But on Deltek, and I know these months or at least part of the quarters are probably less seasonally strong, but did you actually see any improvement in order volume for perpetual in December or January? And also with Deltek, are the effects of DOGE kind of lessening, or is that still impactful? And then that follow-up.
Speaker #6: Hey, Neil, Jason, and Zach, thanks for taking my questions. The first one's going to be on DelTech. The second one, the follow-up, is going to be on DAT.
Speaker #6: But on DelTech, and I know these months or these part of the quarters are probably less seasonally strong, but did you actually see any improvement in order volumes for perpetual in December or January?
Speaker #6: And also with DelTech, are the effects of DOGE kind of lessening, or is that still impactful? And then that
Speaker #6: follow-up. Yeah.
[Analyst] (Aiera): Yeah. So, Terry, this is Jason. I think December is always stronger than the other months, and that's just the natural kind of inertia of how orders flow in Deltek. I will say we had two large government contractor deals that slipped. So it was right at the end. And so we think they'll both land in the first half of next year, but we've also sort of hedged that just in case. So usually we get some big deals, and they were right at the finish line, and they didn't close, but they're still in the queue, and we still think we're going to.
Jason Conley: Yeah. So, Terry, this is Jason. I think December is always stronger than the other months, and that's just the natural kind of inertia of how orders flow in Deltek. I will say we had two large government contractor deals that slipped. So it was right at the end. And so we think they'll both land in the first half of next year, but we've also sort of hedged that just in case. So usually we get some big deals, and they were right at the finish line, and they didn't close, but they're still in the queue, and we still think we're going to.
Speaker #3: So Terry, this is Jason. I think the December's always stronger than the other months, and that's just a natural kind of inertia of how orders flow in DelTech.
Speaker #3: I will say we had two large contractor, government contractor deals that slipped. So it was right at the end. And so we think both land in the first half of next year, but we've also sort of hedged that just in case.
Speaker #3: But so, usually we get some big deals, and they were right at the finish line, and they didn't close. But they're still in the queue, and we still think we're going to.
Speaker #2: Close the rest of this year. This
Neil Hunn: Close the rest of this year.
Neil Hunn: Close the rest of this year.
Speaker #3: Yeah. Exactly.
[Analyst] (Aiera): Yeah. Exactly.
Jason Conley: Yeah. Exactly.
Neil Hunn: This year. And just to pick up on that, Terry, as well, just to add, while the signatures on paper are slower because of the shutdown, the commercial activity, the pipeline build has actually been encouraging. It's been encouraging throughout. It's because all of this is an environment, unfortunately, that our customers live in, and they sort of, they're subject to the vagaries of what's happening in the government, but they have a business to run, and they have contracts they're likely going to get awarded, and they have to sort of manage sort of our software in that regard. And so there's no competitive issue here at all. I mean, it hasn't been asked, but zero competitive issue here. It's just deals that are building that are pushed to the right a little bit given the uncertainty.
Neil Hunn: This year. And just to pick up on that, Terry, as well, just to add, while the signatures on paper are slower because of the shutdown, the commercial activity, the pipeline build has actually been encouraging. It's been encouraging throughout. It's because all of this is an environment, unfortunately, that our customers live in, and they sort of, they're subject to the vagaries of what's happening in the government, but they have a business to run, and they have contracts they're likely going to get awarded, and they have to sort of manage sort of our software in that regard. And so there's no competitive issue here at all. I mean, it hasn't been asked, but zero competitive issue here. It's just deals that are building that are pushed to the right a little bit given the uncertainty.
Speaker #2: year. And just to pick up on that, Terry as well, just to add, the while the. Signatures on paper are slow or because of the shutdown, the commercial activity, the pipeline build, has actually been encouraging.
Speaker #2: It's been encouraging throughout. It's because all the this is an environment, unfortunately, that our customers live in, and they sort of they're subject to the vagaries of what's happening in the government, but they have a business
Speaker #1: to Just run , and they have contracts . going to They're likely get awarded and they have to sort of manage sort of our software in that regard .
Speaker #1: so there's no And issue here at competitive software in regard . that And so there's no competitive issue here at all . Let's take I mean , it hasn't been asked , but zero competitive issue here is just deals that are building that are pushed to the right a little bit .
Neil Hunn: DOGE, I would say, to your question, is lingering impact, but it's not the topic that anybody's talking about the way it was in the first third, the first half of the year of last year.
DOGE, I would say, to your question, is lingering impact, but it's not the topic that anybody's talking about the way it was in the first third, the first half of the year of last year.
Speaker #1: Given the uncertainty dosage , I would say is to your question is , is lingering impact , but it's not the topic that anybody's talking about the way it was in the first , third , the first half of the year of last year .
Deane Dray: Got it. I appreciate that. And just the follow-up is on DAT. Do you see ARPU lift continuing to play out through the year, and are you on track for that autonomous kind of load matching technology innovation to play out in 2027? Thanks.
Terry Tillman: Got it. I appreciate that. And just the follow-up is on DAT. Do you see ARPU lift continuing to play out through the year, and are you on track for that autonomous kind of load matching technology innovation to play out in 2027? Thanks.
Speaker #2: Got it. I get that. And just the follow-up is on that — do you see RPU lift continuing to play out through the year, and are you on track for that autonomous kind of load matching technology innovation to play out in '27?
Neil Hunn: Yeah. So we do expect ARPU to continue improving and growing in 2026. There's a couple of reasons for that. One is you just have like-for-like pricing opportunity that'll sort of get cascaded in during the year as it normally does. But for the second reason is we have more value to sort of sell to both sides of the network. And so you're going to get in the past, it was just load board. So it was load board and pricing. Now it's load board and automation. It's load board and data. It's load board and a number of things on both the carrier and the broker side. In terms of the automated matching, it's early days, but we're encouraged by the progress. Unambiguously, the technology does the job. Let's just be clear.
Neil Hunn: Yeah. So we do expect ARPU to continue improving and growing in 2026. There's a couple of reasons for that. One is you just have like-for-like pricing opportunity that'll sort of get cascaded in during the year as it normally does. But for the second reason is we have more value to sort of sell to both sides of the network. And so you're going to get in the past, it was just load board. So it was load board and pricing. Now it's load board and automation. It's load board and data. It's load board and a number of things on both the carrier and the broker side. In terms of the automated matching, it's early days, but we're encouraged by the progress. Unambiguously, the technology does the job. Let's just be clear.
Speaker #2: Thanks .
Speaker #1: do Yeah . So we expect Rpu to continue improving and growing in in 2026 . There's a couple reasons for that . One is you just have like for like pricing opportunity that'll sort of get cascaded in during the year as it normally does .
Speaker #1: But for the second reason is we have more value to sort of sell to both sides . And network . And so you're going to get , you know , in the past it was just load boards , it was load board and pricing .
Speaker #1: Now it's load board . And automation . It's load board and data . It's load board and a number of things the on both carrier and the broker side in terms of the automated matching , we're it's early days , but we're encouraged by the progress .
Speaker #1: The tech unambiguously the technology does the job . Let's just be clear . It is the ability for a broker to tender to the Dat one platform and automatically match a load and have a carrier pick it up and complete the commerce with payment .
Neil Hunn: It is the ability for a broker to tender to the DAT One platform and automatically match a load and have a carrier pick it up and complete the commerce with payment sort of overlay across all that. It works, and it's working every day in the marketplace. The number one focus of that business is to build both sides of the network. That starts on the broker side by getting native integrations with their TMS systems. And you have seen and will continue to see during 2026 a cascade of announcements about the various TMSs that we're integrating with. That allows the brokering or the tendering to our platform to be native in the workflow of the brokers. And then we continue to build the carrier side of the network. It's got to be a high-trust, no-fraud environment.
It is the ability for a broker to tender to the DAT One platform and automatically match a load and have a carrier pick it up and complete the commerce with payment sort of overlay across all that. It works, and it's working every day in the marketplace. The number one focus of that business is to build both sides of the network. That starts on the broker side by getting native integrations with their TMS systems. And you have seen and will continue to see during 2026 a cascade of announcements about the various TMSs that we're integrating with. That allows the brokering or the tendering to our platform to be native in the workflow of the brokers. And then we continue to build the carrier side of the network. It's got to be a high-trust, no-fraud environment.
Speaker #1: Sort of overlay across all that . It works , and it's in the marketplace working every day . The the number one focus of that business is to build , both sides build of the network .
Speaker #1: That starts on broker side the by getting native integrations with their TMS systems . And you have seen and will continue to see during 2026 , a a of of cascade announcements about the various TMS that were integrating with that allows the brokering or tendering to our platform to be native in the work for the brokers .
Speaker #1: And then we continue to build the carrier side of the network . It's got to be a high trust , no fraud environment .
Neil Hunn: That's part of the core technology that we have and we're integrating. So early days, but we like the tendering percentage. We like the completion percentages. We like the factoring percentages. And we'll want to see that business scale as Jason, Shannon, and Satish, the team at DAT, look at this on a monthly basis.
That's part of the core technology that we have and we're integrating. So early days, but we like the tendering percentage. We like the completion percentages. We like the factoring percentages. And we'll want to see that business scale as Jason, Shannon, and Satish, the team at DAT, look at this on a monthly basis.
Speaker #1: That's part of the core technology that we have, and we're integrating. So, early days, but we like the tendering percentage.
Speaker #1: We like the You completion percentages. We like the factoring percentages. And we'll want to see that business scale as is. Jason and Shannon.
Speaker #1: And and Satish , a team at Dat . Look at this on a monthly basis .
Deane Dray: Thank you.
Terry Tillman: Thank you.
Neil Hunn: You bet.
Neil Hunn: You bet.
Speaker #2: Thank you .
Operator: Your next question comes from Ken Wong with Oppenheimer. Your line is now open.
Operator: Your next question comes from Ken Wong with Oppenheimer. Your line is now open.
Speaker #1: Beth .
Speaker #3: Next, your question comes from Ken Wong with Oppenheimer. Your line is now open.
[Analyst] (Oppenheimer): Fantastic. Thanks for taking my question. You guys are guiding the 5% to 6% organic for 2026. As we think about Q1 first half with a lot of faster growth businesses coming in second half Q4 and no Deltek tailwinds, is there the possibility that you could be below that 5% low end? Any context there so we could properly level set our numbers?
Ken Wong: Fantastic. Thanks for taking my question. You guys are guiding the 5% to 6% organic for 2026. As we think about Q1 first half with a lot of faster growth businesses coming in second half Q4 and no Deltek tailwinds, is there the possibility that you could be below that 5% low end? Any context there so we could properly level set our numbers?
Speaker #4: Fantastic . Thanks for taking my question . You guys are guiding to 5 to 6% organic for 26 . You know , as we think about one Q first half , you know , with a lot of faster growth businesses coming in second half for Q and no , Deltec tailwinds like is there the possibility that you could be below that , that 5% low end in any context there ?
Speaker #4: So we could properly level set our numbers ?
[Analyst] (Aiera): Yeah. No, I don't think so. We're kind of thinking for AS will be sort of in the mid-single digit range with non-recurring being flat and the recurring, recurring being mid-single digit plus, which is consistent with Q4 levels. I mean, we're not going to have the same non-recurring decline like we did in the fourth quarter. And then, as you mentioned, the second half gets better on the CentralReach turning organic. And we've got the non-recurring, as I just mentioned; we get a better comp in the fourth quarter. So not a lot of, I would just say not a lot of go-get in that second half number. And then on NS, I think sort of the recurring revenue will be just sort of continue to be mid-single digit plus out of the gate.
Jason Conley: Yeah. No, I don't think so. We're kind of thinking for AS will be sort of in the mid-single digit range with non-recurring being flat and the recurring, recurring being mid-single digit plus, which is consistent with Q4 levels. I mean, we're not going to have the same non-recurring decline like we did in the fourth quarter. And then, as you mentioned, the second half gets better on the CentralReach turning organic. And we've got the non-recurring, as I just mentioned; we get a better comp in the fourth quarter. So not a lot of, I would just say not a lot of go-get in that second half number. And then on NS, I think sort of the recurring revenue will be just sort of continue to be mid-single digit plus out of the gate.
Speaker #5: No Yeah . , I don't I don't think so . We're kind of thinking for as will be , you know , sort the of in mid single digit range with , with non-recurring being flash and and the recurring reoccurring being like mid digit plus which is consistent with Q4 levels .
Speaker #5: I mean , you you're not we're not going to have the same non-recurring decline like we did in the fourth quarter . And then , as you mentioned , the second half gets better on the central reach .
Speaker #5: Turning organic . the . As I just mentioned , we get a non-recurring better comp in the fourth quarter . So not a lot of I would just say not a lot of go that get in second half number .
Speaker #5: And then on on NS , you know , I think sort of the , you know , recurring revenue would be of just sort continue to be digit plus out of the gate .
[Analyst] (Aiera): Then as we go throughout the year, Subsplash actually comes in in the Q4, so that'll be helpful. So I think that's sort of how it sets up. Nothing outside of that to call out.
Then as we go throughout the year, Subsplash actually comes in in the Q4, so that'll be helpful. So I think that's sort of how it sets up. Nothing outside of that to call out.
Speaker #5: And then as we go throughout the year actually comes in in the fourth quarter . So that'll be that'll be helpful . And so I think that's sort of how it sets up nothing .
Speaker #5: Nothing, nothing outside of that to call out.
[Analyst] (Oppenheimer): Got it. Really appreciate the color there. And then perhaps just any additional context you could provide in terms of what the new business activity pipeline conversion looked like versus maybe the renewal business, turn, expansion, contraction, and any details would be helpful.
Ken Wong: Got it. Really appreciate the color there. And then perhaps just any additional context you could provide in terms of what the new business activity pipeline conversion looked like versus maybe the renewal business, turn, expansion, contraction, and any details would be helpful.
Speaker #4: Got it . Really appreciate the color there . And then and then perhaps just any additional context you can provide in terms of what the new business activity pipeline conversion look like versus maybe the renewal business , you know , term expansion , contraction and any details would be would be helpful .
Neil Hunn: Ken, is that a broad portfolio question or specific to a business? Broad question?
Neil Hunn: Ken, is that a broad portfolio question or specific to a business? Broad question?
Speaker #1: Ken , is that a broad portfolio question or specific to a business ? Broad , broad question .
[Analyst] (Oppenheimer): Yeah. Yeah. Just like a, yeah, correct. It's more of a broad kind of software selling kind of trends that you guys are noticing across the group.
Ken Wong: Yeah. Yeah. Just like a, yeah, correct. It's more of a broad kind of software selling kind of trends that you guys are noticing across the group.
Speaker #4: Yeah . Just like a yeah , correct . It's more of a broad kind of software selling , you know , kind of trends that you guys are noticing across , across the group .
Neil Hunn: Understand the question. Yeah. I would say we're broadly encouraged by what we saw in the finishing of the year. The bookings and retention statistics were quite good. As you know, our enterprise, our gross retentions in the mid-90s for our enterprise businesses, that's steady to ticked up a little bit during 2025. And then in terms of the bookings activity, hey, while there's a little bit, we expect there to be volatility quarter to quarter, low double-digit bookings growth in the year. And being pretty broad-based with sort of weakness at Deltek, I think is all you need to see. And so it's been pretty good.
Neil Hunn: Understand the question. Yeah. I would say we're broadly encouraged by what we saw in the finishing of the year. The bookings and retention statistics were quite good. As you know, our enterprise, our gross retentions in the mid-90s for our enterprise businesses, that's steady to ticked up a little bit during 2025. And then in terms of the bookings activity, hey, while there's a little bit, we expect there to be volatility quarter to quarter, low double-digit bookings growth in the year. And being pretty broad-based with sort of weakness at Deltek, I think is all you need to see. And so it's been pretty good.
Speaker #1: Understand the question . Yeah , I would say we're we're broadly encouraged by what we saw in the finish of the year . It was the bookings and and and retention statistics were quite good .
Speaker #1: You know , as you know , our enterprise , our gross tensions in the mid 90s for our enterprise businesses , that's that's steady to ticked up a little bit during 2025 .
Speaker #1: And then in terms of the bookings activity , hey , you know while there's a little we expect there to be volatility quarter to quarter double digit low bookings growth in the year .
Speaker #1: And being pretty broad based with with sort of weakness at Deltec . I think is all you need to see . You know , we and so it's been it's been pretty good .
[Analyst] (Oppenheimer): Okay. Fantastic. Thanks a lot, guys.
Ken Wong: Okay. Fantastic. Thanks a lot, guys.
Speaker #4: Okay . Fantastic . Thanks a lot guys .
Operator: Your next question comes from George Kurosawa with Citi. Your line is now open.
Operator: Your next question comes from George Kurosawa with Citi. Your line is now open.
Speaker #3: Your next from question comes George Kurosawa with Citi . Your line is now open .
George Kurosawa: Great. Thanks for taking the questions. You guys brought in some new AI leadership, Shane and Eddie. We'd love to hear a little bit about the team they're building out, what you have them focused on, and if there's any kind of low-hanging fruit, learnings they can apply across the portfolio.
George Kurosawa: Great. Thanks for taking the questions. You guys brought in some new AI leadership, Shane and Eddie. We'd love to hear a little bit about the team they're building out, what you have them focused on, and if there's any kind of low-hanging fruit, learnings they can apply across the portfolio.
Speaker #6: Great . Thanks for taking the questions . You guys brought in some new AI leadership . Shane and Edward would love little bit to hear a team .
Speaker #6: They're building out what about the you have them focused on , and if there's any kind of low hanging fruit that , you know , learnings they can apply across the portfolio .
Neil Hunn: Yeah. So we're excited to have Shane and Eddie join and the team that are starting to build out. So three things they're generally focused on. First is it's all in pursuit of accelerating the top line goals, accelerating sort of our pace of AI product development and ultimately shipping, selling, monetization. That's where the focus is. So three sub-components to that. It's coaching and teaching, right? Our businesses did a meaningfully above average, above expectation job in 2025, late 2024 or 2025, learning, making mistakes, learning, making mistakes, learning, and around AI development, what works, what doesn't, and getting products into the hands of customers. That was great to see. But some of these, a lot of these AI tasks are quite complicated, complex from a technical point of view. And also, unlike regular way software development, there's some art in this AI development.
Neil Hunn: Yeah. So we're excited to have Shane and Eddie join and the team that are starting to build out. So three things they're generally focused on. First is it's all in pursuit of accelerating the top line goals, accelerating sort of our pace of AI product development and ultimately shipping, selling, monetization. That's where the focus is. So three sub-components to that. It's coaching and teaching, right? Our businesses did a meaningfully above average, above expectation job in 2025, late 2024 or 2025, learning, making mistakes, learning, making mistakes, learning, and around AI development, what works, what doesn't, and getting products into the hands of customers. That was great to see. But some of these, a lot of these AI tasks are quite complicated, complex from a technical point of view. And also, unlike regular way software development, there's some art in this AI development.
Speaker #1: So we're excited to have Shane and Yeah . Eddie join and the team they're starting to build out . So three three things .
Speaker #1: They're generally focused on—first is all in its pursuit of accelerating the top line goals, sort of accelerating our pace of AI product development.
Speaker #1: And ultimately you know , shipping , selling , monetization . That's focus is . where their So three subcomponents of that . It's coaching and teaching , our business is did a , a a meaningfully above average above expectation job in 2025 .
Speaker #1: Late 24 or 25 learning making mistakes , learning making mistakes , learning around AI development . What works , what doesn't , and getting products into the hands of customers .
Speaker #1: So that's that was great to see . But some of these a lot of these AI tasks are quite complicated , complex from a technical point of view .
Speaker #1: And also unlike way regular software development , there's some , you know , art in this in this AI development . And so Shane and Eddie and the team they're bringing really bringing just a history , these are these are people that machine studied learning and AI in university quite a while ago and have spent their entire careers .
Neil Hunn: Shane and Eddie and the team really bring just a history. These are people that studied machine learning and AI in university quite a while ago, and it's been their entire career. So they've seen a lot of pattern recognitions. They're going to coach and teach our leadership teams, our technical leaders, our product teams on all things AI, ML related. That's one. Number 2, they are going to build an AI sort of development strike team or accelerator team to where when there are a company might have more than it can do from its internal resources, and we'll supplement those teams to accelerate in some pockets. And then third, there is in their first quarter with the business, as they met with most of our software businesses, there is clear opportunity for some reuse inside the portfolio, certain AI-based sort of capabilities.
Shane and Eddie and the team really bring just a history. These are people that studied machine learning and AI in university quite a while ago, and it's been their entire career. So they've seen a lot of pattern recognitions. They're going to coach and teach our leadership teams, our technical leaders, our product teams on all things AI, ML related. That's one. Number 2, they are going to build an AI sort of development strike team or accelerator team to where when there are a company might have more than it can do from its internal resources, and we'll supplement those teams to accelerate in some pockets. And then third, there is in their first quarter with the business, as they met with most of our software businesses, there is clear opportunity for some reuse inside the portfolio, certain AI-based sort of capabilities.
Speaker #1: They've seen a lot of pattern recognition . So they're going to coach and teach our , our , our leadership teams , our technical leaders , our product teams on all things AI , ML related .
Speaker #1: That's one . Number two , they are going to build an AI sort of development strike team or accelerator team to where when there are , you know , a company might have more than it can do from its internal resources and we'll supplement those teams to accelerate in some pockets .
Speaker #1: And then third, there is in their first quarter with the business, and they met with most of our software businesses. There is clear opportunity for some reuse inside the portfolio.
Speaker #1: Certain AI based sort of capabilities . We can sort of produce and sort of have , if you will , a Roper source open model where we can reuse some components and , and componentry .
Neil Hunn: We can sort of produce and sort of have a, if you will, a Roper open-source model where we can reuse some components and componentry. And so they're going to focus there. And early days, it's been just really great. They understand our culture. Our teams have really engaged them, and they're just looking forward to scaling the team and getting to the work.
We can sort of produce and sort of have a, if you will, a Roper open-source model where we can reuse some components and componentry. And so they're going to focus there. And early days, it's been just really great. They understand our culture. Our teams have really engaged them, and they're just looking forward to scaling the team and getting to the work.
Speaker #1: And so they're going to focus there in early days , it's been just really great . They understand our culture . teams Our have really engaged them .
Speaker #1: And they're just looking forward to scaling the team . And and getting to the work .
George Kurosawa: Okay. Great. I did also want to touch on the margin side. Core gross margins were up over a point in the quarter. Maybe just talk through the tailwinds there. How should we think about any sustainability to improvements?
George Kurosawa: Okay. Great. I did also want to touch on the margin side. Core gross margins were up over a point in the quarter. Maybe just talk through the tailwinds there. How should we think about any sustainability to improvements?
Speaker #6: Okay , great . I did also want to touch on the margin side . You know , core gross margins were up over a point in the quarter .
Speaker #6: Maybe just talk through the tailwinds there . How do you how should we think about any sustainability to improvements ?
[Analyst] (Aiera): Yeah. I mean, I think we've always said in our long-term incremental margins at the EBITDA lines around 45%, did a little bit better this year. I think as we go into next year, I think AS might be up a little bit. Network's going to be down just because we've got the full year of convoy and our outgo rolling through. And so that'll create up over time, but a little bit of a drag in 2026. And then I think in our tech segment, we'll be for the full year sort of flat-ish. We've got more consumables rolling through next year than normal, which has a little bit lower margin. That's really more pronounced in the first half. So maybe down a little bit in tech in the first half, and then it'll improve throughout the year.
Jason Conley: Yeah. I mean, I think we've always said in our long-term incremental margins at the EBITDA lines around 45%, did a little bit better this year. I think as we go into next year, I think AS might be up a little bit. Network's going to be down just because we've got the full year of convoy and our outgo rolling through. And so that'll create up over time, but a little bit of a drag in 2026. And then I think in our tech segment, we'll be for the full year sort of flat-ish. We've got more consumables rolling through next year than normal, which has a little bit lower margin. That's really more pronounced in the first half. So maybe down a little bit in tech in the first half, and then it'll improve throughout the year.
Speaker #5: I mean I Yeah , think we've always said in our long term incremental margins at the EBITDA line is around 45% . Did a little bit better this year .
Speaker #5: I think as we go into next year , you know , I think as might be up a little bit , network's going to be down just because we've full got the year of of convoy and our outgo rolling through .
Speaker #5: And so that'll accrete up over time . But a little bit of a drag in 26 . And then , you know , I think our our in our tech segment will be for the full year sort of flattish .
Speaker #5: We've got more consumables rolling through year next normal , than which has a little bit lower margin . And that's really pronounced more in the in the first half .
Speaker #5: So maybe down a little bit in TAP in the first half, and then it will improve throughout the year.
Operator: Your next question comes from Josh Tilton with Wolfe Research. Your line is now open.
Operator: Your next question comes from Josh Tilton with Wolfe Research. Your line is now open.
Speaker #3: Next, your question comes from Josh Tilton with Wolfe Research. Your line is open now.
[Analyst] (Oppenheimer): Hey, guys. Thanks for sneaking me in here. Maybe just first kind of a simple high-level one on the guide for next year. I appreciate all the color that you gave on Deltek and DAT and Neptune. But if you were to take those three businesses aside and treat the rest of the organic business as one, what would be the one line color on the rest of the organic business? Does the guidance assume that everything ex DAT, Neptune, and Deltek gets better, stays the same, gets worse? How would you characterize what the rest of the business has to do that's baked into the guidance? Does that make sense?
Josh Tilton: Hey, guys. Thanks for sneaking me in here. Maybe just first kind of a simple high-level one on the guide for next year. I appreciate all the color that you gave on Deltek and DAT and Neptune. But if you were to take those three businesses aside and treat the rest of the organic business as one, what would be the one line color on the rest of the organic business? Does the guidance assume that everything ex DAT, Neptune, and Deltek gets better, stays the same, gets worse? How would you characterize what the rest of the business has to do that's baked into the guidance? Does that make sense?
Speaker #4: Hey guys . for Thanks thanks for sneaking me in here . Maybe a just first kind of high level one on the guide for next year .
Speaker #4: I appreciate all the color that you gave on Deltec and Dat and Neptune , but if you were to take those three businesses aside and treat the rest of the organic businesses , one like what would be the one line the rest of color on the organic business ?
Speaker #4: Does the guidance assume that everything that Neptune and Deltec get better, stays the same, or gets worse? Like, how would you characterize what the rest of the business has to do that's baked into the guidance? Does that make sense?
[Analyst] (Aiera): It does. Yeah. So I mean, I would say broadly, it gets a little bit better, but not a lot. Not meaningful enough to draw inflection. So that's baked in. I mean, when you think about. We finished around 5.4%. The deals are a tailwind. This non-recurring in AS is going to be somewhat of a tailwind. Foundry does get a little bit better. And so maybe 10 basis points or so to the enterprise. And then really the swing factors, I talked about the confidence in Q1 of 2025 that didn't repeat. Then you just talk about the swing factors, it's all within Neptune. And that's what our low single digit to mid-single digit guidance has for tech. And that's what kind of bridges you from the low to the high end.
Jason Conley: It does. Yeah. So I mean, I would say broadly, it gets a little bit better, but not a lot. Not meaningful enough to draw inflection. So that's baked in. I mean, when you think about. We finished around 5.4%. The deals are a tailwind. This non-recurring in AS is going to be somewhat of a tailwind. Foundry does get a little bit better. And so maybe 10 basis points or so to the enterprise. And then really the swing factors, I talked about the confidence in Q1 of 2025 that didn't repeat. Then you just talk about the swing factors, it's all within Neptune. And that's what our low single digit to mid-single digit guidance has for tech. And that's what kind of bridges you from the low to the high end.
Speaker #4: sense ?
Speaker #5: It does . Yeah . So I mean , I would say broadly , you know , it gets a little bit better , but not a lot .
Speaker #5: Not meaningful enough to draw inflection . So that's I mean , when baked in . you think about we finished around 5.4% . The deals are a tailwind .
Speaker #5: This non-recurring . And as is going to be somewhat of a tailwind foundry does get a little bit better . And so , you know , maybe ten basis points or so to the to the enterprise .
Speaker #5: really And the the swing factors I talked about the comp and NS and Q1 of 25 that then repeat . Then just talk about you like factors , it's all within the swing .
Speaker #5: And that's what our low , low single digits to mid-single digit guidance has for tap . And that's what kind of brings you to the from the low to the high end .
[Analyst] (Oppenheimer): Then maybe just a quick follow-up. I understand that some businesses go organic in the second half. Is there any, I don't know if conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following kind of the little hiccups that you saw in Procare that you're kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year?
Josh Tilton: Then maybe just a quick follow-up. I understand that some businesses go organic in the second half. Is there any, I don't know if conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following kind of the little hiccups that you saw in Procare that you're kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year?
Speaker #4: And then maybe just a quick follow up , I understand that some businesses go organic in the second half . Is there any I don't know if conservatism is the right word , but is there any conservatism ?
Speaker #4: Is there any learnings that you saw following like kind of what the little hiccups that you saw in Procore that you're kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year ?
Neil Hunn: Yeah, Josh, Neil, I'll take that one. So short answer is heck yes. There's a lot of learning from our Procare governance, what worked, what didn't work, worked, and how we're governing both Subsplash and CentralReach. And we can spend more time talking about offline, but in essence, when we see a small variance in a monthly reporting package relative to one of the key levers in value creation plan, in Procare, we observed that variance for a longer time before we decided to take action to correct it. Now we immediately jump to a corrective action and countermeasure. And we don't let small variances turn into large variances. And as a result, you have CentralReach that's ahead of the underwrite model and Subsplash on the underwrite model for the outlooks for those businesses.
Neil Hunn: Yeah, Josh, Neil, I'll take that one. So short answer is heck yes. There's a lot of learning from our Procare governance, what worked, what didn't work, worked, and how we're governing both Subsplash and CentralReach. And we can spend more time talking about offline, but in essence, when we see a small variance in a monthly reporting package relative to one of the key levers in value creation plan, in Procare, we observed that variance for a longer time before we decided to take action to correct it. Now we immediately jump to a corrective action and countermeasure. And we don't let small variances turn into large variances. And as a result, you have CentralReach that's ahead of the underwrite model and Subsplash on the underwrite model for the outlooks for those businesses.
Speaker #1: Josh , it's Yeah . Neil Neil I'll take that one . So short answer is heck yes . There's a lot of learning our pro from governance .
Speaker #1: What worked, what didn't work, and how we're governing both Sub Splash and Centereach. And it... We can spend more time talking about it offline.
Speaker #1: But in essence, when we see a small variance in a monthly reporting package relative to one of the key levers in the value creation plan in Procare, we observed that variance for a longer time before we decided to take action to correct it.
Speaker #1: Now, we immediately jump to a corrective action and countermeasure, and we don't let small variances turn into large variances, and as a result, you have central reach.
Speaker #1: That's ahead of the underwrite model . And sub splash is on the underwrite model for for the outlooks for those businesses . We can we can get in much more detail when we have more time offline .
Neil Hunn: We can get in much more detail when we have more time offline, but that's the essence of it.
We can get in much more detail when we have more time offline, but that's the essence of it.
[Analyst] (Aiera): I would just say that for CentralReach and Subsplash, we feel good about the contribution in the second half, the path that we're on, bookings momentum, the recurring, the gross retention, just the path to get to that accretion in the second half. We feel very good about that.
Jason Conley: I would just say that for CentralReach and Subsplash, we feel good about the contribution in the second half, the path that we're on, bookings momentum, the recurring, the gross retention, just the path to get to that accretion in the second half. We feel very good about that.
Speaker #1: But that's the essence of it.
Speaker #5: I would just that say for , for central region flash , you know , feel good about the contribution in the second half .
Speaker #5: know , the You path that we're on bookings momentum , the recurring , the gross retention , just the path to get to that accretion in the second half .
Operator: Your next question comes from Deane Dray with RBC Capital Markets. Your line is now open.
Operator: Your next question comes from Deane Dray with RBC Capital Markets. Your line is now open.
Speaker #1: You bet . .
Speaker #3: Your next question comes from DeAndre with RBC Capital Markets. Your line is now open.
Deane Dray: Thank you. Good morning, everyone.
Deane Dray: Thank you. Good morning, everyone.
Neil Hunn: Morning, Dean.
Neil Hunn: Morning, Dean.
Speaker #7: Thank you. Good morning, everyone.
Deane Dray: Hey, this has come up several times today about the M&A bias and looking for durable cash flow compounding. I'd be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some asset prices today versus what you perceive as where there might be a wider moat against AI in these assets. So how are you weighing those?
Deane Dray: Hey, this has come up several times today about the M&A bias and looking for durable cash flow compounding. I'd be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some asset prices today versus what you perceive as where there might be a wider moat against AI in these assets. So how are you weighing those?
Speaker #1: Good morning Dean .
Speaker #7: Hey, this has come up several times today about the M&A bias and looking for durable cash flow compounding. I'd be interested in hearing your thoughts about how you rank looking at absolute dislocations in some asset prices today versus what you perceive as where there might be a wider moat against AI in these assets?
Speaker #7: So how are you those weighing ?
Neil Hunn: I'm going to reframe, Deane, the question to make sure that we answer the right question. If not, if you can correct us. So if the question is looking at both private and public companies that have valuation dislocation, are we looking at that? And then how does the AI moat influence our thinking? Can you just reframe that? I want to make sure we answer the right question.
Neil Hunn: I'm going to reframe, Deane, the question to make sure that we answer the right question. If not, if you can correct us. So if the question is looking at both private and public companies that have valuation dislocation, are we looking at that? And then how does the AI moat influence our thinking? Can you just reframe that? I want to make sure we answer the right question.
Speaker #1: I want to I want to reframe , Dean , the question to make sure that we answer the right if you can correct us .
Speaker #1: And so if the question . If not , question is , you know , looking at both private and public companies that have valuation dislocation , are we looking at that ?
Speaker #1: And then how does how does the AI moat influence our thinking ? Can you just reframe that ? I want to make sure we we answer the question right .
Deane Dray: Yes. So I wasn't specifically talking about public valuations, but that would be great to hear that as well because you've done those in the past versus thinking more strategically about where there might be wider moats.
Deane Dray: Yes. So I wasn't specifically talking about public valuations, but that would be great to hear that as well because you've done those in the past versus thinking more strategically about where there might be wider moats.
Speaker #7: Yes . you know , I wasn't So , talking about public that would be great to hear that as well , because you've done those in the past versus thinking more strategically about where there might be wider moats .
Neil Hunn: Yeah. So I would say, so again, feel free. We won't ding you on one of your questions if, again, I answer the wrong question. We're always, for the long history of Roper, we're always investing in these vertical market application-specific businesses with deep moats, right? And so that does not change. We believe in the AI world, the moats where you're intimate with the customer, you have unique and proprietary data, you're embedded in high-frequency workflows where on-stack AI is easier to implement, easier to monetize, and ultimately translates to the automation of tasks, which is this TAM expansion. We really like and are leaning in. We're seeing it play across our 21 software businesses today, so we'll continue to lean in that thesis from a capital deployment point of view.
Neil Hunn: Yeah. So I would say, so again, feel free. We won't ding you on one of your questions if, again, I answer the wrong question. We're always, for the long history of Roper, we're always investing in these vertical market application-specific businesses with deep moats, right? And so that does not change. We believe in the AI world, the moats where you're intimate with the customer, you have unique and proprietary data, you're embedded in high-frequency workflows where on-stack AI is easier to implement, easier to monetize, and ultimately translates to the automation of tasks, which is this TAM expansion. We really like and are leaning in. We're seeing it play across our 21 software businesses today, so we'll continue to lean in that thesis from a capital deployment point of view.
Speaker #1: Yeah . So I say so at would the again , feel free . We won't ding you on one of your questions . If again I answer it the wrong question , we're always for the long history of Oprah .
Speaker #1: We're always investing in these vertical market applications. Specific businesses with deep, with deep moats. Right. So, and that does not change.
Speaker #1: We believe in the AI world . You know , these the moats where you're intimate with the customer . You have a unique and proprietary data .
Speaker #1: You're embedded in high frequency workflows where on stack AI is easier to implement , easier to monetize , and ultimately translates to the automation of tasks , which is this Tam expansion .
Speaker #1: We really like it and are leaning into it. We're seeing it playing across our 21 software businesses today, so we'll continue to lean into that thesis from a capital deployment point of view.
Deane Dray: That's really helpful. That's what I was looking for there. Just a quick one on Neptune. We've talked about the order delays. How much of an impact has the spike in copper played? Is there a sticker shock? Does that need to be kind of rippled through the market to reprice? Just what's the impact there?
Deane Dray: That's really helpful. That's what I was looking for there. Just a quick one on Neptune. We've talked about the order delays. How much of an impact has the spike in copper played? Is there a sticker shock? Does that need to be kind of rippled through the market to reprice? Just what's the impact there?
Speaker #7: That's really helpful . That's what I was looking for there . And just a quick one on You know , Neptune . we've talked about the order delays .
Speaker #7: much of an Is there how impact is the spike in copper played . Is there a sticker shock . Is that does that need to be kind of rippled through the the market to reprice ?
Neil Hunn: I would say that what we talked about last quarter, largely in the bucket of tariffs, but it's tariffs, it's copper pricing. Generally, the shock to the cost structure of a water meter, when we started in really July of last year pushing a surcharge to accommodate for that increase in cost of goods, it was definitely a shock in the system in Q3, and it really abated during Q4. So I think our base case assumption is that is really in the rearview mirror and stepped to the side. Moving forward, it's just about the normalization of volumes in the market sort of on the very tail end of the COVID spike in volumes, and now we're on the backside of that spike into a more normalizing range of volumes in the market.
Neil Hunn: I would say that what we talked about last quarter, largely in the bucket of tariffs, but it's tariffs, it's copper pricing. Generally, the shock to the cost structure of a water meter, when we started in really July of last year pushing a surcharge to accommodate for that increase in cost of goods, it was definitely a shock in the system in Q3, and it really abated during Q4. So I think our base case assumption is that is really in the rearview mirror and stepped to the side. Moving forward, it's just about the normalization of volumes in the market sort of on the very tail end of the COVID spike in volumes, and now we're on the backside of that spike into a more normalizing range of volumes in the market.
Speaker #7: It's just, you know, what's the impact there?
Speaker #1: I would say what we talked about that last quarter , largely in the bucket of but it's tariffs , tariffs . It's copper pricing .
Speaker #1: Just generally the shock to the cost structure of a water meter . When we started really in July of last year , pushing a surcharge to that accommodate for increase in cost of goods .
Speaker #1: It was definitely a shock in the system in Q3 , and it really abated during Q4 . So I think our base case assumption is that is really in the rear view mirror and step to the side and and moving forward , it's just about the normalization of volumes .
Speaker #1: And in the market, sort of on the very end of the tail, the COVID spike in volumes. And now we're on the backside of that spike into a more normalizing range of volumes in the market.
Deane Dray: Thank you.
Deane Dray: Thank you.
Neil Hunn: You bet.
Neil Hunn: You bet.
Operator: Your next question comes from Joe Giordano with TD Cowen. Your line is now open.
Operator: Your next question comes from Joe Giordano with TD Cowen. Your line is now open.
Speaker #7: Thank you .
Speaker #1: You bet . .
Speaker #3: Your next question comes from Joe Giordano with TD Cowan . Your line is now open .
Zack Moxcey: Hey, guys. Good morning. How are you doing?
Joe Giordano: Hey, guys. Good morning. How are you doing?
[Analyst] (Aiera): Hey, Joe.
Neil Hunn: Hey, Joe.
Neil Hunn: Hey, I'm just curious how you're now weighing in terms of capital deployment, different timing horizons here, right? You have stock today is, I don't know, 15% below the average price of the buyback in the fourth quarter. You're trading at almost a high single-digit free cash flow yield now. And it's a portfolio that you're intimately close to relative to something that you might buy that drives topline that is something that inherently has more risk as you don't know it as well. How are you weighing something that the certainty of what you know versus the risk-reward of something you don't know at the price that you're paying? So I'll take a first pass of that. I'm sure Jason will have some color he may want to add. So again, just to we've said it, it's on repeat. We'll say it again.
Joe Giordano: Hey, I'm just curious how you're now weighing in terms of capital deployment, different timing horizons here, right? You have stock today is, I don't know, 15% below the average price of the buyback in the fourth quarter. You're trading at almost a high single-digit free cash flow yield now. And it's a portfolio that you're intimately close to relative to something that you might buy that drives topline that is something that inherently has more risk as you don't know it as well. How are you weighing something that the certainty of what you know versus the risk-reward of something you don't know at the price that you're paying?
Speaker #8: Hey guys, good morning. How are you doing?
Speaker #9: Hey Joe good morning .
Speaker #8: Hey I'm just curious how you're now weighing like in terms of capital deployment . Like different different like timing horizons here . Right ?
Speaker #8: Right. Like, you have stock today that is, I don't know, 15% below the price of the average buyback in the fourth quarter.
Speaker #8: You're trading at like almost a high single digit free cash flow yield . Now . And and it's a portfolio that you're intimately close to relative to something that you might buy that drives top line .
Speaker #8: That is something that inherently has more risk because you don't know it as well . Like , how are you weighing , you know , something that certainty of what like the you know , versus like the risk something reward of you don't know that you're paying .
Neil Hunn: So I'll take a first pass of that. I'm sure Jason will have some color he may want to add. So again, just to we've said it, it's on repeat. We'll say it again.
Speaker #1: So I'll take the first part of that . I'm sure Jason will have some color . He may want to add . So again , just to we've said it .
Neil Hunn: The objective of M&A versus buybacks or the levers available to us is what's the best risk-adjusted path to long-term cash flow for sure compounding. Period. Full stop. We're totally objective and just passionate about the allocation of the two. There's $6 billion available, so a big sort of a large amount of capacity. On the buyback, the valuation dislocation is just silly. So we leaned into it in Q4, and we find it obviously more attractive today. And it's a great opportunity to drive long-term cash flow compounding that way. On top of that, we're very excited and confident about our future, right? I mean, the growth, the AI, the leadership, the strategy, the execution, prowess. I mean, all of it feels very, very good to us and what we see internally. At the same time, M&A is a real lever.
The objective of M&A versus buybacks or the levers available to us is what's the best risk-adjusted path to long-term cash flow for sure compounding. Period. Full stop. We're totally objective and just passionate about the allocation of the two. There's $6 billion available, so a big sort of a large amount of capacity. On the buyback, the valuation dislocation is just silly. So we leaned into it in Q4, and we find it obviously more attractive today. And it's a great opportunity to drive long-term cash flow compounding that way. On top of that, we're very excited and confident about our future, right? I mean, the growth, the AI, the leadership, the strategy, the execution, prowess. I mean, all of it feels very, very good to us and what we see internally. At the same time, M&A is a real lever.
Speaker #1: It's on repeat . We'll say it again . The the objective of M&A versus buybacks . Through the levers available to us is what's the best risk adjusted path to long term cash flow per share .
Speaker #1: Compounding period . Full stop . We're totally objective in dispassionate about the allocation of the two . There's $6 billion available . So a big sort of large amount of capacity on the buyback .
Speaker #1: We just the valuation dislocation is just is silly . And so we leaned into it in Q4 and we find it obviously more attractive today .
Speaker #1: And it's a great opportunity to drive . Long term cash flow compounding that way . On top of that , we're very excited and confident about our future .
Speaker #1: we get the And growth , the I , the leadership , the strategy , the execution prowess . I mean , all of it feels very , very good to us .
Speaker #1: And what we see internally at the same time , you know , M&A is a real lever . I mean , there's not to somewhat to my surprise , you know , we introduced the buyback last quarter .
Neil Hunn: I mean, somewhat to my surprise, we introduced the buyback last quarter. There is commentary about, "Oh my gosh, is the M&A thesis not intact?" That is one of those absurd things I've heard in my 15 years at Roper. We are a preferred buyer of vertical market software leaders. We're absolutely preferred from a management point of view. We're preferred from a seller point of view. The pipeline's enormous. The LP pressure is legit. The number of assets in private equity portfolio have to get liquidity are at levels we've not seen. So that thesis just needs to be eliminated from the talk track because it's not real. And so for us, it's balancing those two. Buybacks are great in the short run. M&A generally is going to beat in the long run. And we like having to balance between the two options in front of us.
I mean, somewhat to my surprise, we introduced the buyback last quarter. There is commentary about, "Oh my gosh, is the M&A thesis not intact?" That is one of those absurd things I've heard in my 15 years at Roper. We are a preferred buyer of vertical market software leaders. We're absolutely preferred from a management point of view. We're preferred from a seller point of view. The pipeline's enormous. The LP pressure is legit. The number of assets in private equity portfolio have to get liquidity are at levels we've not seen. So that thesis just needs to be eliminated from the talk track because it's not real. And so for us, it's balancing those two. Buybacks are great in the short run. M&A generally is going to beat in the long run. And we like having to balance between the two options in front of us.
Speaker #1: There is commentary about , oh my gosh , is M&A the thesis . You know , not intact . That is one of the most absurd things I've heard in my 15 years at Roper .
Speaker #1: We are a preferred buyer of vertical market software leaders. We're absolutely preferred from a management point of view, or preferred from a seller point of view.
Speaker #1: The pipeline's enormous. The, you know, the LP pressure is legit. The number of assets in private equity portfolios that have to get liquidity are at levels we’ve not seen.
Speaker #1: So that thesis just needs to be eliminated from the talk track because it's not real. And so for us, it's balancing those two.
Speaker #1: You know , buybacks are great in the short run . M&A generally is going the long to beat in run . And we like having the balance between the two options in front of us .
[Analyst] (Aiera): Yeah. I would just add that around the confidence, and we've had just these unusual things happen with three of our businesses, but the underlying quality is getting better. So there's that. And I would just say the AI; we have 21 different businesses working through AI right now that are annual operating plan reviews and came out with an increased level of conviction that we're going to win relative to AI. Our customer intimacy is really proving to be a competitive advantage, and we've got the tools and resources to get after the AI just as fast as anyone else. So we feel really good about that. And so buying ourselves in that scenario where there's this dislocation makes all the sense in the world, but it's also going to be an incredibly active year on M&A.
Jason Conley: Yeah. I would just add that around the confidence, and we've had just these unusual things happen with three of our businesses, but the underlying quality is getting better. So there's that. And I would just say the AI; we have 21 different businesses working through AI right now that are annual operating plan reviews and came out with an increased level of conviction that we're going to win relative to AI. Our customer intimacy is really proving to be a competitive advantage, and we've got the tools and resources to get after the AI just as fast as anyone else. So we feel really good about that. And so buying ourselves in that scenario where there's this dislocation makes all the sense in the world, but it's also going to be an incredibly active year on M&A.
Speaker #5: Yeah I would just add that around the confidence . And we've had just these unusual things happen with three of our businesses . But like the underlying quality is getting better .
Speaker #5: So there's that . And I would just say the AI , you know , we have 21 different businesses working through AI right now that are annual operating plan reviews and came out with an increased level of conviction that we're going to win relative to AI .
Speaker #5: We're just—we're so—our customer intimacy is really proving to be a competitive advantage. And we've got the tools and resources to get after AI just as fast as anyone else.
Speaker #5: Anyone, we feel really good about that. And so buying ourselves in that scenario, where there's this dislocation, makes all the sense in the world.
Speaker #5: But it's also going to be an incredibly active year on M&A . we're just really just got an abundance of opportunity in front of us this year .
[Analyst] (Aiera): We've just got an abundance of opportunity in front of us this year.
We've just got an abundance of opportunity in front of us this year.
Zack Moxcey: Now that you brought in this AI talent on the accelerator team, were there any negative instances where these guys coming in as experts kind of identified that maybe parts of your business where you thought you had more of an opportunity is going to be harder to drive? I mean, I'm sure they're identifying places that you have opportunities, but was there any on the negative side where something was like, "Well, maybe this isn't as attractive as I thought in a particular part of the company"?
Joe Giordano: Now that you brought in this AI talent on the accelerator team, were there any negative instances where these guys coming in as experts kind of identified that maybe parts of your business where you thought you had more of an opportunity is going to be harder to drive? I mean, I'm sure they're identifying places that you have opportunities, but was there any on the negative side where something was like, "Well, maybe this isn't as attractive as I thought in a particular part of the company"?
Speaker #8: And brought in now that you this AI talent on the accelerator team , were there any instances where like negative instances where these guys coming in as experts at kind of identified that maybe parts of your you thought business where you had more of an opportunity is going to be harder to drive or I'm sure there identifying places that you have opportunities .
Speaker #8: Was there, but then any on, like, the negative side where something was like, well, maybe this isn't as attractive as I thought in a particular part of the company?
Neil Hunn: Yeah. So I would say on balance, their reviews and early takes are quite positive about the opportunity market-wise, technical-wise, and the prowess of the teams that we have in place. But we also, we had them sort of do a short read-out to our board last week. And then there were a few bullet points of things that were on the constructive ledger. None of it was market opportunity, lack of market opportunity, or lack of opportunity to win. Again, these are more technical resources. So you might not have the best acumen in these vertical market spaces to judge that anyway. But it was like, "Hey, as you'd expect, maybe we definitely need to improve the quantity of AI talent in the businesses." I mean, that's a little bit of why we're adding this central team to sort of spark some acceleration.
Neil Hunn: Yeah. So I would say on balance, their reviews and early takes are quite positive about the opportunity market-wise, technical-wise, and the prowess of the teams that we have in place. But we also, we had them sort of do a short read-out to our board last week. And then there were a few bullet points of things that were on the constructive ledger. None of it was market opportunity, lack of market opportunity, or lack of opportunity to win. Again, these are more technical resources. So you might not have the best acumen in these vertical market spaces to judge that anyway. But it was like, "Hey, as you'd expect, maybe we definitely need to improve the quantity of AI talent in the businesses." I mean, that's a little bit of why we're adding this central team to sort of spark some acceleration.
Speaker #1: Yeah . So I would say on balance there reviews and early takes are quite positive about the opportunity market wise , technical wise , the the prowess of the of the teams that we have in place .
Speaker #1: But we also and we had them sort of do a short read out to our board last week . And then there was a few bullet points of things that that were on were , the , the , the ledger .
Speaker #1: Constructive. None of it was market opportunity, lack of market opportunity, or lack of opportunity to win. Again, these are more technical resources.
Speaker #1: So they might not have like the best , you know , acumen in like these vertical market spaces to judge that anyway . But it was like hey as you'd expect , maybe there's we definitely need to improve the , the quantity of AI talent in the businesses .
Speaker #1: I mean, that's a little bit of why we're adding the central team—to sort of spark some acceleration. And it's just going to take some time because we've got to build these people.
Neil Hunn: And it's just going to take some time because we've got to build these people. It's not something that we're going to be able to hire en masse. We've got to build these people. And we did a good job last year. We'll continue to scale that and compound the learning on that this year.
And it's just going to take some time because we've got to build these people. It's not something that we're going to be able to hire en masse. We've got to build these people. And we did a good job last year. We'll continue to scale that and compound the learning on that this year.
Speaker #1: You know, it's not something that we're going to be able to hire en masse. We've got to build these people.
Speaker #1: And we did a good job last year. We'll continue to scale that and compound the learning on that this year.
[Analyst] (Aiera): Yeah. I think the ideas have been well received by Shane and Eddie. I mean, they understand the specificity of what we're trying to solve at the individual sort of vertical level. And they view that as very unique, right, coming from a horizontal player. So I think they see the opportunity just like our businesses do.
Jason Conley: Yeah. I think the ideas have been well received by Shane and Eddie. I mean, they understand the specificity of what we're trying to solve at the individual sort of vertical level. And they view that as very unique, right, coming from a horizontal player. So I think they see the opportunity just like our businesses do.
Speaker #5: Yeah , I think the ideas have been well received by by by Shane and Eddie . I mean , they they understand the specificity of what we're trying to solve at the individual sort of vertical level .
Speaker #5: And that's why they view that as very unique, right? Coming from a horizontal player. So I think they see the opportunity just like our businesses do.
Zack Moxcey: Thanks, guys.
Joe Giordano: Thanks, guys.
Neil Hunn: Good.
Neil Hunn: Good.
Speaker #8: Thanks guys .
Operator: This concludes our question and answer session. We will now return back to Zack Moxcey for any closing remarks.
Operator: This concludes our question-and-answer session. We will now return back to Zack Moxcey for any closing remarks.
Speaker #9: But .
Speaker #3: concludes This our answer question and session . We will now return back to Zack Moxcey for any closing remarks .
Zack Moxcey: Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.
Zack Moxcey: Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.
Speaker #10: Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
