Roper’s Strong Earnings Mask Weak Organic Growth

Date of Call: Jan 27, 2026

Financials Results

• Revenue: $2.06B, up 10% YOY; Full Year $7.9B, up 12% YOY
• EPS: $5.21 DEPS, up $0.40 YOY; Full Year $20, up 9% YOY
• Gross Margin: Not explicitly provided
• Operating Margin: EBITDA margin expanded 60 bps in Q4; Core EBITDA margin 54% incremental margin; Full Year EBITDA margin 39.8%

Guidance:

• Full year 2026 revenue growth expected in the 8% area.
• Organic revenue growth expected between 5% and 6%.
• Adjusted DEPS expected to be $21.30 to $21.55.
• Q1 2026 adjusted DEPS expected in the range of $4.95 to $5.00.
• Guidance does not assume improvement at Deltek GovCon, DAT freight market recovery, or meaningful AI revenue uplift.

Business Commentary:

Revenue and EBITDA Growth:

• Roper Technologies reported revenue of $2.06 billion for Q4 2025, up 10% year-on-year.
• EBITDA reached $818 million, also up 10% compared to the previous year.
• The growth was driven by acquisitions contributing 5% to revenue and strong margin performance, with core EBITDA margin expanding by 60 basis points.

Organic Growth and Segment Performance:

• Organic revenue growth was 4% in Q4, below expectations, with Application Software segment revenue growing 10% and Network Software growing 14%.
• The Application Software segment saw recurring revenue grow by 6%, while nonrecurring revenue was down 8%.
• The lower organic growth was primarily due to government shutdown impacts on Deltek's commercial activity and perpetual license revenue.

Capital Deployment and Share Repurchase:

• Roper deployed $3.3 billion towards vertical software acquisitions in 2025 and executed a share repurchase of 1.1 million shares for $500 million in Q4.
• The company has over $6 billion in capacity for potential M&A and share repurchases in 2026.
• The capital deployment was aimed at advancing the portfolio and taking advantage of the attractive M&A market.

AI Product Development:

• Roper is focused on leveraging AI within its businesses, particularly in embedded automation that improves customer outcomes.
• The company hired Shane Luke and Eddie Raffaele to lead the Roper AI accelerator team to enhance AI product development.
• AI is seen as an incremental upside opportunity as Roper scales commercialization across its software portfolio.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledges solid execution and growth but notes organic growth was below expectations and maintains a conservative posture on key segments. Statements include: 'organic growth this past year was below our expectations' and 'we're not baking in an organic inflection in 2026.'

Q&A:

• Question from Brent Thill (Jefferies LLC): Regarding Deltek, what are you baking into the '26 guide and how are you protecting against another government shutdown?
  Response: Guidance assumes no improvement in Deltek's GovCon business; the market remains challenging until sustained improvement is seen.

• Question from Brent Thill (Jefferies LLC): On Procare, what needs to happen to get it back to expectations?
  Response: The primary issue is slow implementation timing; improving speed to implementation and delighting customers are the top priorities.

• Question from Clarke Jeffries (Piper Sandler & Co.): Within Deltek's exposure, what segments of the government getting appropriation bills passed would be most significant?
  Response: The OBBB is heavy on defense and DHS funding, which have a higher percentage of contractor spend, providing a tailwind for Deltek's customers.

• Question from Clarke Jeffries (Piper Sandler & Co.): What are expectations for M&A deployment in '26?
  Response: The pipeline is robust, but deployment will be disciplined and focused on high-quality acquisitions; the market is ripe for more assets to become available.

• Question from Joseph Vruwink (Robert W. Baird & Co.): When will you quantify AI's impact on Roper's results?
  Response: AI will not be 'AI washed' into revenue; the focus is on commercialization and monetization across the portfolio, with initial impact seen in bookings and recurring revenue.

• Question from Joseph Vruwink (Robert W. Baird & Co.): What upside possibility exists for 2026 if things improve?
  Response: Guidance is more conservative than 2025, with no assumed improvement in Deltek, DAT, or Neptune; upside potential exists but is not quantified.

• Question from Dylan Becker (William Blair & Company): How does AI opportunity affect the trade-off between platform and bolt-on M&A?
  Response: Bolt-ons are typically first order for advancing organic growth; platform opportunities are also present, but valuation and long-term compounding will guide decisions.

• Question from Brad Reback (Stifel, Nicolaus & Company): What was the software bookings trend in Q4?
  Response: Bookings were up high single digits in Q4, with Deltek's SaaS strong but perpetual licenses down meaningfully.

• Question from Brad Reback (Stifel, Nicolaus & Company): Where is incremental conservatism in the '26 guide?
  Response: Guidance assumes no improvement at Deltek, no DAT market recovery, and a modest decline at Neptune, with acceleration driven by CentralReach and Subsplash turning organic.

• Question from Terrell Tillman (Truist Securities): Did you see any improvement in Deltek perpetual order volumes in December/January? Are DOGE effects lessening?
  Response: December is typically stronger, but two large deals slipped to the first half of 2026; DOGE's impact is lingering but less dominant.

• Question from Terrell Tillman (Truist Securities): On DAT, do you see ARPU lift continuing and are you on track for autonomous load matching in '27?
  Response: ARPU is expected to continue improving through pricing and added value; automated load matching is in early but encouraging stages.

• Question from Hoi-Fung Wong (Oppenheimer & Co.): Could organic growth be below the 5% low end for '26?
  Response: No, guidance assumes mid-single-digit organic growth in Application Software and Network Software, with acceleration in the second half.

• Question from George Michael Kurosawa (Citigroup Inc.): What is the AI leadership team building out and what are their focuses?
  Response: The team is focused on accelerating AI product development by coaching businesses, building a strike team, and enabling reuse of AI components across the portfolio.

• Question from George Michael Kurosawa (Citigroup Inc.): How should we think about margin sustainability?
  Response: Core EBITDA incremental margins are around 45%; Application Software margins may improve, Network may be down due to Convoy outgo, and TEP may be flattish or down in H1 due to consumables.

• Question from Joshua Tilton (Wolfe Research): Aside from Deltek, DAT, and Neptune, what is assumed for the rest of organic business?
  Response: The rest of the organic business is assumed to get slightly better, contributing to the low single-digit to mid-single-digit growth range.

• Question from Joshua Tilton (Wolfe Research): Is there conservatism in expecting inorganic businesses to convert to organic?
  Response: Yes, learnings from Procare governance ensure proactive management of variances for CentralReach and Subsplash, with confidence in their second-half accretion.

• Question from Deane Dray (RBC Capital Markets): How do you weigh absolute dislocations in asset prices versus AI moat opportunities?
  Response: The focus remains on vertical market application-specific businesses with deep moats; AI enhances these moats, making them attractive for capital deployment.

• Question from Deane Dray (RBC Capital Markets): What is the impact of the spike in copper on Neptune?
  Response: The cost shock from tariffs and copper pricing was in the rearview mirror by year-end; current focus is on volume normalization in the market.

• Question from Joseph Giordano (TD Cowen): How do you weigh capital deployment between buybacks and M&A?
  Response: The decision is based on the best risk-adjusted path to long-term cash flow per share compounding; both levers are available given the $6 billion capacity.

• Question from Joseph Giordano (TD Cowen): Did the new AI talent identify any areas where opportunities were less attractive?
  Response: Their reviews were positive on market opportunity; constructive feedback focused on the need to improve AI talent quantity within businesses.

Contradiction Point 1

Deltek's 2026 Guidance Assumptions

Contradiction on whether Deltek's 2026 guidance assumes any improvement.

What assumptions are in Deltek's 2026 guidance, and what mitigation strategies exist for another potential government shutdown? - Brent Thill (Jefferies LLC)

2025Q4: The 2026 guidance does not assume any improvement in Deltek's GovCon business. - Jason Conley(CFO)

How confident are you in a reacceleration of organic growth by 2026? - George Michael Kurosawa (Citigroup Inc., Research Division)

2025Q3: For 2026, trends look positive: Deltek and government contracting should improve with the passage of the 'one big beautiful bill'... timing is uncertain. - Neil Hunn(CEO)

Contradiction Point 2

AI's Impact on Organic Growth Timeline

Contradiction on when AI will meaningfully drive organic growth.

What constraints limit the potential upside in your guidance, and what scenarios could lead to improved performance? - Joseph Vruwink (Robert W. Baird & Co.)

2025Q4: 2026 is about commercialization, sales, deployment, and monetization. Early AI-driven growth is visible in bookings... The guide is more conservative than the prior year. - Neil Hunn(CEO)

When will AI product rollout drive significant organic growth? - Brad Reback (Stifel, Nicolaus & Company, Incorporated, Research Division)

2025Q3: The rollout is happening now through the first half of 2026, but meaningful impact on organic growth is expected in 2027 due to the commercial activity required. - Neil Hunn(CEO)

Contradiction Point 3

Deltek's Business Outlook and Government Spending Impact

Contradiction on Deltek's performance trajectory and sensitivity to government funding.

What assumptions are included in Deltek's '26 guidance and how are potential government shutdown risks being mitigated? - Brent Thill (Jefferies LLC)

2025Q4: The 2026 guidance does not assume any improvement in Deltek's GovCon business. - Jason Conley(CFO)

Did tariffs or government spending impact Q1 business trends, and how are trends developing in July? - Brent Thill (Jefferies)

2025Q2: The 'Big Beautiful Bill' is seen as a catalyst for market growth, with spending priorities unlocking demand, especially in defense contracting. - Laurence Neil Hunn(CEO)

Contradiction Point 4

Procare's Growth Trajectory and Performance Outlook

Contradiction on the expected timing for Procare to return to target growth rates.

What actions are needed to restore Procare to meeting expectations? - Brent Thill (Jefferies LLC)

2025Q4: Procare is a market leader... The fix is focused on accelerating implementation speed... The issue is a slow implementation timeline. - Neil Hunn(CEO)

How is ProCare performing, particularly regarding leadership changes and payment attach rate as it transitions to organic growth? - Terrell Tillman (Truist Securities)

2025Q2: ProCare had a challenging first year... Expected to return to mid-teens (15%) organic growth in the second half. - Laurence Neil Hunn(CEO)

Contradiction Point 5

Deltek's Government Contractor Exposure and Business Durability

Contradiction on the level of direct exposure and the business's recurring nature.

Which government appropriation bills are most significant to Deltek's exposure? - Clarke Jeffries (Piper Sandler & Co.)

2025Q4: Deltek's customers (federal contractors), not Deltek directly, have exposure... The business is 80-85% recurring, providing strong predictability and durability. - Neil Hunn(CEO)

Okay, let me see. The user wants me to rewrite the given earnings call question into a concise version. The original question is: "Can you provide your perspective on private equity (PE) activity and behavior, given the noted hesitancy? Also, what are you seeing regarding Deltek's federal government (Fed) exposure?"First, I need to make sure I understand the main points here. The user is asking two things: one about PE activity and hesitancy, and another about Deltek's federal exposure. The goal is to condense this into a single, concise question without any extra fluff.The first part asks for the perspective on PE activity considering hesitancy. Maybe "noted hesitancy" can be simplified to "hesitancy" to make it shorter. The second part is about Deltek's Fed exposure. The original uses "federal government (Fed) exposure," but since Fed is in parentheses, maybe just using "federal government" is enough. However, the user might prefer to keep "Fed" as an abbreviation if it's commonly used. Let me check the original input again. It says "federal government (Fed) exposure," so perhaps the user wants to keep both terms. Wait, no, the original has "federal government (Fed) exposure," so maybe they want to use "Fed" as an abbreviation. But in the rewritten question, should I keep both or just one? The user's instruction is to make it concise, so maybe just "Fed exposure" is sufficient, since Fed is a common abbreviation for federal government in certain contexts, like in government contracts or technology.So the first part: "Can you provide your perspective on private equity (PE) activity and behavior, given the noted hesitancy?" can be rephrased as "How do you view private equity (PE) activity and behavior amid hesitancy?" That's shorter. Then the second part: "Also, what are you seeing regarding Deltek's federal government (Fed) exposure?" can be "What's Deltek's current federal government (Fed) exposure?" or "What is Deltek's Fed exposure?" since we can drop "federal government" if we're using "Fed."Putting it all together: "How do you view private equity (PE) activity and behavior amid hesitancy? What is Deltek's current Fed exposure?" That's two concise questions. The user wants the output to be only the rewritten question, ending with a question mark. They also mentioned strict output constraints: no prefaces, explanations, analysis, etc. So the final answer should just be the two questions as a single line or two lines? Wait, the original input had two questions, so the rewritten should also have two questions. The user's example input had two parts connected by "Also," so the output should have both parts as separate questions. The original input uses "Also," but the rewritten should be concise. So maybe combining them into two separate questions separated by a question mark. Let me check the example again. The input is two questions, and the output should be the same but more concise. The user's example input is two questions, so the output should be two concise questions. The user's instruction says to output only the rewritten question, so maybe two questions in the output. Let me make sure the output is only the rewritten questions, no other text. The user says "strict output constraints: Output ONLY the rewritten question - No prefaces, no explanations, no analysis - No references to the task, role, or instructions - End with a question mark."So the final answer should be two questions, each ending with a question mark. Let me check the original input again. The original input is two questions connected by "Also," so the output should be two questions. The user's example input is two questions, so the output should be two questions. Therefore, the rewritten version would be two concise questions. Let me make sure the wording is concise. "How do you view private equity (PE) activity and behavior amid hesitancy? What is Deltek's current Fed exposure?" That seems concise. I can check for any redundancies. "Given the noted hesitancy" becomes "amid hesitancy," which is shorter. "What are you seeing regarding..." becomes "What is..." which is more direct. Also, "current" might be optional, but it's okay to include if it's concise. Alternatively, "What is Deltek's Fed exposure?" without "current" if that's acceptable. But the original question is about what they're seeing now, so "current" adds context. However, the user might prefer to keep it as short as possible. Let me see. "What is Deltek's Fed exposure?" is shorter. The original question is "what are you seeing regarding Deltek's federal government (Fed) exposure?" So "What is Deltek's Fed exposure?" captures that. So the final answer is two questions - Brent Thill (Jefferies)

2025Q1: Approximately 60% of Deltek's business focuses on federal government contractors. This typically pushes the sales pipeline to the right (slows growth in the short term). Management views this as a short-term speed bump, not a medium- or long-term issue. - Neil Hunn(CEO)