ROP

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 a conference specialist by pressing star zero. I would now like to turn the call over to Zack Moxcey, Vice President, Investor Relations. Please go ahead.

Good morning, and thank you all for joining us as we discuss the first quarter 2026 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 Chief 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. 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'll 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 the first 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. Reconciliations can be found in our press release and in the appendix of this presentation on our website. Now if you'll please turn to page 4, 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 4, you'll see the topics we will cover today. We'll start by highlighting our Q1 enterprise performance. Jason will walk through the enterprise financials, our balance sheet, and provide an update on our share repurchase program. We'll discuss our segment highlights and outlook and introduce our Q2 and increased full-year 2026 guidance. Finally, we'll close with a few summary points before opening the call for questions. Let's go ahead and get started. Next slide, please. As you turn to page 5, I want to highlight three takeaways for today's call. First, we delivered a strong start to 2026 and are raising our full-year debt guidance. Our Q1 results exceeded expectations across every key metric.

Total revenue grew 11%, organic revenue grew 6%, EBITDA grew 8%, free cash flow grew 11%, and DEPS was $5.16. Importantly, enterprise gross retention remains strong, consistently in the mid-90s area. On that foundation, enterprise software bookings were also strong, core up low double digits on a TTM basis. This continues the momentum from our last call and bolsters our confidence for the balance of the year. On the back of this quarter's performance, we're raising our full-year DEPS guidance to a range of $21.80-$22.05, up $0.50 at the midpoint, and more on this later. Second, we're continuing to accelerate AI velocity across the portfolio. In Q1, AI innovation continued to broaden across our businesses, move deeper into core products, and increasingly show up in both product roadmaps and customer conversations.

Businesses like CentralReach, ConstructConnect, Vertafore, iPipeline, Aderant, DAT, Subsplash, and SoftWriters all released meaningful new AI-enabled product capabilities during the quarter. The signal from our own portfolio that AI can be a meaningful growth driver in vertical software keeps getting clearer by the day. On the AI accelerator team at Roper, as a reminder, this is a central strike team that partners directly with our operating companies to accelerate AI product development and capture reusable patterns for deployment across the portfolio. The team is ramping quickly. The team's first partnership was with Vertafore, helping deliver AI agents unveiled at their customer conference last week. This is exactly the kind of portfolio impact we envisioned when we invested in this team, and we expect the pace of partnerships with our operating companies to accelerate throughout the year. Our third takeaway centers on capital employment.

Since November last year, we've repurchased 6 million shares for $2.2 billion, including 4.9 million shares for $1.7 billion year to date in 2026. Importantly, our board authorized an additional $3 billion of repurchase capacity, giving us $3.8 billion of remaining authorization and north of $5 billion of total capital employment capacity over the next 12 months. Our approach remains unchanged. We're disciplined and unbiased between acquisitions and opportunistic buybacks, focusing on driving the best risk-adjusted long-term cash flow compounding per share for our shareholders. Our M&A pipeline today is targeted, focused on high-quality strategic opportunities where we're developing deep relationships and real conviction, and we expect to remain active as disciplined long-term buyers. Before I turn it to Jason, one theme you'll hear throughout today's call: organizational velocity across our portfolio continues to build.

The investments we've made over the past 2 years in leadership, in AI, in modern engineering practices, and in operational rigor are working and demonstrating meaningful results. Our businesses are releasing innovation faster, executing sharper, and moving with more confidence. That's what gives us conviction in the balance of the year and beyond. With that, Jason, let me turn the call over to you.

Thanks, Neil, and good morning, everyone. I'll take you through our first quarter financial performance, starting on slide 6.

As you heard, we delivered a strong first quarter, finishing well above the high end of our debt guidance range and ahead of expectations on organic growth. Revenue of $2.1 billion was up 11%, with organic growth of 6% and acquisitions contributing 5%. Importantly, recurring software revenue growth across our software segments was again strong at 7%, which continues to be the best indicator of business health and durability. EBITDA of $797 million was up 8% over prior year. EBITDA margin was 38.1%. Our core EBITDA margin was down 70 basis points in the quarter, driven by lower gross margins in our tech segment due to mix of more consumables at NDI and Verathon, coupled with higher input costs at Neptune. Core EBITDA margins in our software segments expanded 40 basis points, which includes continued investment in AI.

EPS of $5.16 was above our guidance range of $4.95-$5 and up 8% over prior year. The upside was driven by the combination of stronger organic growth, a lower tax rate, and the benefit of lower share count resulting from our net purchasing activity in Q1. Free cash flow of $562 million was up 11% over prior year. On a trailing 12-month basis, free cash flow is now $2.5 billion and has compounded at a 19% CAGR over the last 3 years or 15%, excluding the impact of Section 174. We continue to view free cash flow per share as the most important metric in evaluating our progress. On that basis, we were up 15% versus the prior year, given the combination of growing cash flow and a declining share count. Relatedly, and for modeling purposes, we exited Q1 with 102.4 million shares outstanding.

Now, if you turn with me to slide 7, I'll walk through our financial position and capital deployment update. We exited Q1 at 3.1x net debt to EBITDA, which is up modestly from 2.9x at year-end, given the $1.5 billion we deployed towards share repurchases in the quarter. We have $383 million of cash and $2 billion drawn on our $3.5 billion revolver. Importantly, we closed on a new 5-year, $3.5 billion revolving credit facility during the quarter, which provides ample liquidity at improved pricing and terms. This also enhances our cost of capital strategic advantage in the face of an increasingly constrained private credit market that other market participants looking to make acquisitions will be facing. Even after significant repurchase activity in Q1, we maintain over $5 billion of annualized capacity for capital deployment, which speaks to the strength of Roper's cash generation engine.

Neil highlighted the share repurchase activity in the opening. To put it in perspective, our cumulative 6 million of share repurchases is about 6% of shares outstanding and brings us back to a share count we have not seen since 2017. Additionally, our board approved expanding our share repurchase authorization by another $3 billion, which provides capital deployment flexibility and reflects continued confidence in our vertical market software position, enhanced capabilities, and execution velocity to capture the AI opportunities in front of us. On M&A, the pipeline of high-quality opportunities remains very attractive. As we've discussed, we believe the structural dynamics in the PE-backed software market and a constrained private credit market continue to create a compelling environment for Roper. We remain active and disciplined. With that, I'll turn it back over to Neil to discuss the segment performance and outlook. Neil?

Thanks, Jason. As you turn to page 9, let's review our application software segment. Revenue for the quarter grew 12% in total, and our organic revenue growth was 5%. EBITDA grew 13%, EBITDA margins were 42%, and core margins improved 50 basis points year-over-year. The quality growth here is notable. Recurring revenue, about 85% of the segment, grew in the mid-single-digit plus range, while non-recurring was essentially flat. Stepping back at a segment level, three themes stand out for the quarter. First, enterprise gross retention remains strong, consistently in the mid-90s area. On that foundation, enterprise bookings were also strong in the quarter, consistent with the momentum we described in our January call and supportive of our confidence for the balance of the year. Second, our SaaS transitions continue to advance meaningfully.

Several of our larger businesses made real progress on on-prem to cloud conversions and on bringing new cloud-native products to market. Third, AI progress continued to build. The signal is shifting from product investment to product shipping, and you'll see this clearly in the three company highlights to follow. First, Aderant delivered a record quarter, strong revenue growth, and a new Q1 bookings record. Strength was broad-based, with particularly strong SaaS momentum on Sierra, Onyx, and ViGlobal. Aderant also launched AI-driven talent evaluation within ViGlobal, continued the rollout of the Stridyn AI platform, and completed a record number of Sierra cloud migrations in the quarter. Simply put, Aderant is winning in the legal market and doing so from a position of strength. Second, Vertafore delivered a solid quarter, steady mid-single-digit revenue growth with EBITDA ahead of revenue.

Recurring revenue continued to build across agency, MGA, and carrier, with MGA again leading on double-digit growth driven by strong bookings and high retention. Last week at their Accelerate user conference in Las Vegas, Vertafore unveiled its new Velocity AI platform, along with a suite of AI agents embedded across the product portfolio, Connect and reconciliation to submission processing and email agent automation. AI is a meaningful TAM expansion opportunity for Vertafore, and they're quickly moving to capture it. As I mentioned earlier, this is where the Roper AI accelerator team had its first impact, and it's exciting to see. Third, CentralReach continues to execute ahead of our deal model. Recurring software revenue grew well north of 20%, with margins expanding, demonstrating the operating leverage in this business as it scales. Most importantly, CentralReach continues to be one of our strongest AI proof points.

AI-generated session notes have dropped from 5-10 minutes to about 30 seconds, giving clinicians back roughly 8 hours a week to work with autism learners. BCBAs are saving 140+ hours a year on report authoring and review, and daily claim generation is 6x faster. Customers are responding. AI and AI-influenced bookings were 75% of new business in the quarter, up from 0 to 2 years ago. This is a textbook example of how the AI right to win we believe exists across our portfolio. CentralReach sits inside mission-critical workflows, has proprietary data, and is translating that advantage into real growing AI revenue. Prior to turning to the outlook for this section, I'll provide an update on Deltek and the GovCon market.

Importantly, Deltek grew recurring revenue in the mid-single digit plus range in the quarter, driven by strong private sector demand, partially offset by continued softness in GovCon enterprise. SaaS remains strong, with ground-to-cloud conversions trending positively. Consistent with January, we're still waiting for the GovCon inflection. This is not new. We continue to work through the tail of last year's disruption to federal procurement, agency reorganizations, and broader budget uncertainty, which is delaying decision-making, particularly on large enterprise perpetual deals. Longer term, we remain encouraged. The One Big Beautiful Bill is a meaningful positive for defense and government contracting spend, though the benefit reaches us only after our customers win awards and invest in systems, and that takes a bit of time. Consistent with January, we're not baking into our guidance any GovCon inflection or any OBBB benefit, and rather will adjust as conditions warrant.

Turning to our outlook for application software, we expect organic growth for the balance of the year to be in the mid-single digit plus range, lowering Q2 on some non-recurring timing, improving in the back half with CentralReach's turning organic, and easing non-recurring comps. Please turn to page 10. Total revenue growth in our network software segment was 14%, and organic revenue grew 5% in the quarter. The quality growth mirrored application software. Organic recurring grew mid-single digit plus. Non-recurring declined mid-single as customers moved to our cloud offerings, and bookings remained strong here. EBITDA margins were 50.7%, down 460 basis points year-over-year, while core margins held steady, down just 20 basis points. The gap reflects two dynamics: our acquisition of Subsplash, a faster-growth business with a lower but steadily improving margin profile, and our ongoing investment in DAT, particularly Convoy.

Stepping back at the segment level, we see similar themes playing out here that we described in application software. First, enterprise bookings were strong and gross retention remained high across our network businesses, together giving us improved visibility into the balance of the year. Second, AI progress is tangible and shipping to customers today. Let me highlight three businesses in this segment. First, DAT is executing well against a mixed freight backdrop. RPU expansion continues, and adoption of our digital freight marketplace solutions remain strong. On the macro, spot rates are up 20%-30% year-over-year, and the carrier side of our ecosystem grew in Q1 for the first time in several years, real green shoots, particularly in the second half of the quarter.

That said, a sharp diesel spike compressed carrier margins late in the quarter, and our guidance continues to assume no meaningful freight market recovery. Our early-stage investment Convoy inside DAT represents a material TAM expansion opportunity. Today, DAT is a subscription-based two-sided network. Brokers and carriers pay to access the largest freight marketplace in North America. With Convoy, DAT is evolving into a full end-to-end agentic and ML-powered marketplace, participating in the workflow and the economics of the transaction itself, a meaningfully larger and more valuable business over time. The innovation that enables this transformation exists, and it's working in the market, and we continue to enhance and extend the tech. In the most recent quarter, DAT's RateView AI agent moved into live production, replacing manual rate lookups with instant conversational lane rate guidance.

Convoy Load Notes is turning brokers' freeform emails and chat messages directly into bookable loads, eliminating manual data entry, and Loadlink Voice to Post is enabling hands-free load posting. The AI work at DAT is not theoretical. It's shipping in production and delivering incredible value to customers today. Turning to ConstructConnect, another strong quarter with recurring revenue up double digits and continued breakout from Boost, their AI-based takeoff solution. AI AutoCount, which reads construction schedules, launches this quarter. Most importantly, ConstructConnect has now moved its entire product and engineering organization into agentic coding processes and tools. Shipping 4x the features versus a year ago. Broadening this across the portfolio to drive multi-fold product velocity gains is a key priority and an exciting one for enterprise. Third, Foundry returned to year-over-year revenue growth in Q1, with Nuke closing the quarter at record ARR.

Net retention returned above 100% for the first time since the 2023 actors and writer strikes, and our recent Griptape acquisition extends Foundry's leadership into AI orchestration across the visual effects and animation pipeline, enabling studios to securely coordinate multiple AI models and agents in their production and post-production workflows. Finally, prior to turning to our segment outlook, I'd like to make a couple quick call-outs. SoftWriters launched its AI-enabled order entry product last week, a meaningful workflow enhancement for long-term care pharmacies, and Subsplash released Trends AI, giving ministry customers the ability to generate custom data insights through natural language prompts, a key unlock for this customer constituency. Turning to our outlook for network software, we expect organic growth for the balance of the year to be in the mid-single digit plus range. A couple of quick call-outs.

Subsplash turns organic in Q4, and margins will reflect continued investment in our freight platform acquisitions through the balance of the year. Now please turn to page 11, and let's review our Technology-Enabled Products segment. Revenue here grew 9% in total and 7% organic, significantly better than expected, driven by strength at NDI and Verathon. EBITDA margins were 33.6%, down 260 basis points year-over-year, reflecting two dynamics. First, input cost pressure at Neptune, principally bronze ingot inflation. Second, a mix shift at both NDI and Verathon towards faster-growing consumables, which carry lower gross margins but more durable recurring revenue profiles. Let me start with NDI. Another record quarter driven by exceptional demand for their electromagnetic tracking solutions across cardiac, neurological, and orthopedic precision measurement applications. The EP market, in particular, is a strong multi-year growth vector for NDI.

Procedure volumes continue to grow, meaning OEMs are introducing new tracking-enabled catheter platforms, and NDI has a unique right to win at the sensor layer. Great job by Dave and the entire team at NDI. Turning to Neptune, revenue declined low single digits in the quarter, which was better than expected, driven by strong execution from Don and the entire team at Deltek. The market dynamics were large as expected, with lower mechanical meter volumes partially offset by strong static meter growth. Importantly, Neptune's cloud-based software adoption continues to scale nicely, though off a small base. Consistent with our Q4 commentary, we're not underwriting a Neptune recovery in our 2026 guidance and will continue to monitor underlying demand. Rounding out the segment, Verathon delivered solid growth supported by strong D-Flex and GlideScope demand, and we're optimistic about new product launches planned for the balance of the year.

Turning to our TEP outlook, we expect organic growth for the balance of the year to be in the mid-single digit range, lower in the second quarter as we face a tougher Q2 comp. We expect net raw material pressure to continue in the second quarter and improving in the back half of the year. With that, please turn to page 13. On this slide, we'll cover our Q2 and full year 2026 guidance. Specifically, we're raising our full year 2026 DPS guidance to $21.80-$22.05, up from $21.30-$21.55, a $0.50 increase at the midpoint, which passes through our Q1 beat and the impact of our already executed share buyback. We're maintaining our full year total revenue growth guidance of approximately 8% and organic revenue growth of 5%-6%.

For the full year, we continue to assume a tax rate in the 21% area and a bit below that in Q2. For Q2, we're establishing our adjusted DPS guidance of $5.25-$5.30. To reiterate key assumptions from our segment commentary, full year guidance assumes no meaningful improvement at Deltek's GovCon market or DAT's freight market and modest top-line weakness at Neptune versus a year ago. Finally, on capital deployment, we're entering the balance of 2026 with meaningful optionality. We have $5 billion of firepower available over the next 12 months, a targeted M&A pipeline, and $3.8 billion of remaining share purchase authorization, giving us substantial flexibility to act opportunistically. We will remain disciplined and unbiased between acquisitions and opportunistic buybacks based on what drives the highest and most durable cash flow per share compounding.

Now please turn to page 14, and then we'll open it up for your questions. We'll conclude with the same three takeaways with which we started. First, we delivered a strong start to 2026 with 11% revenue growth, 6% organic revenue, and 11% free cash flow growth. Retention and bookings remain strong and position us well heading into the balance of the year. Based on this, we've raised our full year DEPS guidance by $0.50 at the midpoint. Second, we're accelerating AI innovation across the portfolio. CentralReach, ConstructConnect, Vertafore, DAT, Aderant, and others continue to move AI deeper into their products and increasingly into customer activity, and our AI accelerator team continues to build velocity across the portfolio. Finally, on capital deployment, as we discussed earlier, our board's authorization of an additional $3 billion of share repurchase capacity gives us $3.8 billion of remaining authorization.

Alongside that, we have $5 billion of capital deployment firepower available over the next 12 months supporting our targeted M&A pipeline. We will remain disciplined and unbiased between acquisitions and opportunistic buybacks based on what drives the highest and most durable cash flow per share compounding. As we wrap up, some additional color on the M&A market. A quarter ago, our pipeline was at record levels. Shortly after our call, the broader public software valuation drawdown caused sellers to pause most active processes. We remain active, and our pipeline leans more proprietary. That said, we expect M&A activity to pick back up, timing of which is still to be determined. When it moves, a large number of opportunities are likely to emerge, and we're in an advantaged position to capitalize on this.

Remain very bullish about being a high conviction acquirer of vertical market software businesses with deep proprietary moats where AI accelerates growth. The signal on that thesis from our own portfolio is becoming clearer and clearer. In closing, the ingredients for accelerated cash flow per share compounding are coming together. Our portfolio is the strongest it has ever been. Our organizational velocity is accelerating. AI is both TAM expanding and growth enabling, and we're excited to see our product work translate into higher growth. Our capital deployment capacity and flexibility are significant differentiators, and our discipline is unchanged. This is how we compete and win, and how we continue to compound for our shareholders. With that, operator, please open the line for questions.

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 any keys. To withdraw your question, please press star, then the digit two. Again, we request that callers limit their question to one main question and one follow-up. Your first question comes from Dylan Becker with William Blair. Your line is now open.

Hey, gentlemen. Really appreciate it. Nice job here. Maybe Neil, starting for you, I think it was clear in your commentary, you talked about the accelerating pace of innovation and the right to win in TAM expansion, kind of TAM expansive nature of AI. But if we think about the embeddability piece and monetization of the platform, I guess maybe how that layers in incremental conviction as well too, right? Is that something that can lower friction around adoption? Is that something that can increase the likelihood of success and value alignment with customers? But maybe how the platform positioning and embeddability of agents maybe layers in incremental confidence in that right to win around agents.

Yeah, you're asking about embeddability. You're a little muted on that. I want to make sure I'm answering the right question.

Yeah. The ability to embed it into the existing platform, right? Kind of understand the value.

Understand completely. Yeah. A few things I'd start with on this. It really starts with what we talk about internally all the time about the AI, the product magic. We're able to create products now across many, if not all of our software businesses, where when the customer sees in early betas and early trials, like what the product can do, their eyes sort of pop out of their head. It's truly like a magical experience, like, "I didn't know software could do that." That's what gets us really excited. We just saw it last week, for instance, at the Vertafore customer conference, just sort of as an example. In terms of monetization, generally. That's one, I'll start there.

Second is we believe that the right to win here is sort of on-stack AI embedded natively into workflows is a winning play, a huge incumbent advantage. Is the second thing. Third thing, monetization, I think for us is, there's not going to be a one size fits all. There are some businesses today that already price on a consumption basis. Think like SoftWriters and pharmacy automation or what Convoy does at DAT. I think those will be monetized on a consumption basis. Also, those customers' unit economics generally are driven on their own consumption, so it aligns with the customer unit economics. I think more broadly, though, the monetization's going to be one that sort of, as you allude in your question, balances adoption and long-term monetization. I think that's going to not be largely consumption-based.

Our customers very much are saying very clearly they need to be able to plan for and budget what the spend's going to be. It'll likely be some sort of a subscription with an overage based on utilization of the AI tools. I think that aligns nicely with adoption because then the customers are going to be focused on how to realize the magic value, if you will, and not be worried every time they press a button, it costs money. When that gets fully adopted and it's deeply embedded in the workflows, we'll be able to sort of grow with that utilization.

I would just add that our CentralReach business is furthest along on this journey. They've been out in the market with AI products for 1.5 or 2 years, and all of their AI is incremental. It's based on learners, which you could say is some form of consumption, right? It's not based on practitioners but learners. Customers are seeing real value, as Neil highlighted on the prepared remarks, in terms of workflow efficiency and better revenue realization.

Very helpful. Thank you both. Maybe Jason, kind of just sticking with you quickly as well too. Obviously, kind of reiterating the full year revenue guide, 5%-6% organic. We just did 6% this year. We've got some mechanics kind of layering in and easier comps in the back half as well too, but maybe kind of just give us a broader sense of how the start of the year kind of layers in conviction, and maybe that kind of conservative view that we continue to take to the guidance framework here going forward. Thank you.

Yeah. Look, it's a strong start to the year, very encouraged by what we've seen. We're just one quarter in, so we want to sort of see how things play out. As Neil talked about, we have a couple, like you said, mechanical things in the second quarter, non-recurring in AS. We'll be a little bit more impacted than the first quarter. We're just comping. In TEP, we're comping a high water mark in Q2, but that'll ease off in the second half. As we've talked about, the second half will improve in software with Subsplash and CentralReach turning organic. We have just some easing comps in AS. All that just sort of blends into our sort of holding the range at this point. We'll see how it plays out.

Great. Thank you very much.

Your next question comes from Brent Thill with Jefferies. Your line is now open.

Hi, this is [Leah] on for Brent Thill. Thank you for taking the question. Neil, just curious to hear your thoughts on the private markets given ongoing volatility. Can you just tell us a little bit more about what you're seeing right now, and if it's changed your outlook at all?

Talking about private markets on M&A?

Correct.

Yeah, sure. As I mentioned in the prepared remarks, it's definitely been with the public market drawdown, it's gone from the busiest we've been in a long time to the least busy. We're still busy. We're still active. As I mentioned, it's more proprietary. It's certainly more targeted. It's actually, we think the M&A setups actually improved a bit for us over the last 90 days in the context that the LP pressure that we've talked about now for a couple of years continues to exist. That has not changed in any capacity. If anything, it's maybe increased over the course of the next 90 days. The other thing that's happened, that's been widely reported, people understand, is now we got the private credit dynamic that also is putting pressure on the asset class.

For us, we think the combination of those two will likely service more quality assets in the processes, and we're a very advanced buyer in that regard. The timing is still to be determined. We're modeling out what these maturities look like on the private credit side. There's not a meaningful maturity cliff this year. If you're a private equity sponsor seller, you want to think about divesting an asset well before maturity. That's something that Janet and her team are sort of aligning up. We think there's an opportunity here to get, potentially, I should underscore potentially, to acquire AA+ assets at differentiated values given the backdrop of the dynamics here. The timing of this is to be determined, but we'll stay active and process and prosecute the opportunities in front of us.

Yeah, I would just reiterate, we refinanced our 5-year revolver this quarter at a very good cost of capital, sort of tightened up the spread a little bit. Shout out to Shannon and Dave Baker for getting that done this quarter. Just a great job there. Just positioned us well. We have a lot of balance sheet flexibility, and we'll be able to move quickly when the opportunities arise.

Got it. That's helpful. Just on Deltek's government contracting business, did you see any impact in the quarter at all from the war in the Middle East, and is it having any impact on your outlook for the remainder of the year?

Yeah, we asked that very specific question on our call down with Deltek, and the short answer is very little, if any. There certainly is a sliver of the sort of aerospace defense sub-sector of government contractors that are focused on munitions and sort of war efforts. That's a small sliver of the population of the broader, say, contractor population. It had, if in effect, a minimally negative impact, just in terms of those contractors are focused on the war effort and not on contracting for ERP software, but it wasn't material in the quarter.

Great. Thanks so much.

You bet.

Your next question comes from Joseph Vruwink with Baird. Your line is now open.

Great. Thank you. I think all application software is facing this question around whether AI-related spending grabs an outsized wallet share and maybe the incumbents get squeezed along the way. I think the interesting thing about Roper is you have exposure to markets like legal and healthcare. I think those are the two biggest vertical AI adopters so far, and yet I think your respective software exposure there is still doing pretty well. What's your take on this topic, and have you seen any changes year to date as we've also seen the big ARR numbers come through from the frontier model providers that make you more concerned in coming quarters?

No, I would say the punchline on that, the TLDR is no. No impact on sort of the budgetary spend that we sort of compete for. I think the double click on that is the obvious answer, which is, and this is a personal opinion, that I think a lot of these surveys around IT spend are a little misleading because the whole point of the AI effort is we get to go monetize labor spend. So it's about a whole different bucket of opportunity to capture and provide value to the end market. Across the whole platform, we're not seeing sort of an impact to us relative to allocation of budget, especially not in legal and healthcare. We've had fairs. We talked about Aderant, which is amazing in the quarter. It's been amazing few years here with Aderant.

Great. That's helpful. I heard enterprise bookings up low double digits over the trailing 12 months. Curious what they were in the quarter, and I think your definition excludes price, maybe can you just comment on pricing power in the aggregate?

Yeah. It was certainly above the double digits. We had an easier Q1 comp last year. I think the TTM is definitely the right way to think about it. Yeah, it does not include price, you're right. Price has held up very well. I think what we've said historically, we're very thoughtful across the portfolio about pricing, and you have to earn the right, and companies are doing that as part of our strategic plan work that we do is understanding that dynamic. We've continued to do that methodically over the last half decade or so.

Yeah, the only thing I'd add on pricing, in addition to what Jason said, is we actually think relative to what the market will bear on pricing, we have underutilized that lever in growth. It's not like a pan-portfolio go raise pricing. That's not how we operate at Roper. As Jason said, it's like where you have earned the right with your product, your product value, and your customer relationships to take a little bit more pricing, then we are doing that. It's a very strategic, it's a very earned process, and we would hope that we would see a little bit, I don't know if it's 50 or 100 basis points over the portfolio software and pricing impact increase over the next couple of years.

Thank you.

You bet.

Your next question comes from Terry Tillman with Truist. Your line is now open.

Yeah, thanks for taking my question and follow-up. I wanted to build on the prior question on legal tech because, yeah, it's in the media reports and some remarkable growth from some of these SaaS natives there. I'm curious, though, Neil, you've called out Aderant a couple years of amazingness, and it does seem like it's like clockwork showing up in the segment level slides every quarter on record, this or that. How much more sustainability is there in terms of just the momentum in terms of getting folks to move to SaaS and just, can this train keep going, just on the momentum with Aderant? I had a follow-up.

Sure. Chris and the team there have done a great job. I'll give you a little bit, a longer answer here. Aderant has been really good for a very long time for us. What's been happening underneath the hood has evolved, to sort of keep it good. It started with how do we just take it to our competitor and out-compete them in the marketplace. That's how we went from 35%-40% market share in large law to 60%-65%. We just absolutely compete and won, and Chris and his predecessor, Deane, did a wonderful job in that sort of era of growth. Well, that era of growth we could see was going to end at some point, so we had to evolve. That's where he sort of said, "Okay, we have this installed base of customers.

How do we sell them more things?" We then prosecuted both an organic and inorganic strategy to add the number of bolt-on products that we could or sort of integrated modules that we could sell to this large law customer base that made strategic sense. We prosecuted or prosecuting that strategy. Came along cloud, right? This was a constituency that did not want to move to the cloud. COVID happened. Soon we rapidly cloud-enabled the totality of the product set, and then we're now in the really still early innings, maybe third or fourth inning, maybe not even that late, of moving this customer constituency to the cloud or that lift and shift. Now we have the tailwind of the AI benefit, in terms of being able.

It's a multiple growth driver story, and I think there's quite a long way to go on this. Part of the benefit of owning any business for the long arc of time is you're always looking out horizon two and horizon three for what you have to build, either organically or inorganically, to sustain or improve growth rates.

Yep. It's very helpful. Thank you. The follow-up is just what we're seeing, though, is with particularly not necessarily generative agentic. That's a pretty big lift and shift and change management, customers being comfortable having things go autonomous, and even getting it beyond kind of the experimental stage. Are you seeing with some of the businesses, you actually have to put in four deployed engineers or kind of change how you go to market or help the customers, and it does create some kind of incremental costs or just handholding, just anything about how you help them consume this agentic stuff? Thanks.

Yeah, I think that the short answer is yes. I think we mentioned last quarter that this year is going to be just a massive learning year for us across the enterprise on, I'll put it in like the commercialization bucket of these AI tools, of which FDEs are certainly a component. How do you position it? How do you sell it? How do you price it? How do you get it implemented? How do you get utilization pull-through? How do you drive renewal rates high? That whole customer journey is going to be, across the portfolio, a huge set of learnings for us. I'll spare you the details inside the portfolios, but we have portfolios where businesses the uptake's just been very natural. We haven't had to have the four deployed engineers.

Because when you press the magic button and you get productivity savings, immediately that productivity savings is taken in the customer's operation as something that they can go do tomorrow. In other cases, there's some trepidation. If I press this button, do I lose my job? You've got to sort of go through the whole change management process of that. I think in almost every case, our customers, it's not lose their job, it's how do you sort of do task replacement, task augmentation. They can go play offense inside their customer to go compete and win. It's certainly sort of something you have to overcome in that regard. Yeah, we do expect across a certain part of the portfolio to do some version of a forward deployed engineer.

Thanks so much.

Yeah. Final thing I'd say on that is I think it's kind of from an investment point of view, it's probably more of a reallocation or rebalancing of investment from customer support, customer service to FDE. I don't know if it's a huge cost increase, it's just a resource allocation dynamic.

Got it. Thanks.

Your next question comes from Joe Giordano with TD Cowen. Your line is now open.

Hey, guys. Morning.

Morning.

Just curious on your talk about embeddability and subscription plus overage in the future. I get the view of, I don't want our customers to think every time they click a button it costs them money. I fully get that. But if these things become embedded and the efficiencies potentially require less people at your customers, how do you kind of judge the ROI of the investment necessary to kind of, maybe not saying, to stay in the same place? The product is getting better, but you're getting the same kind of subscriptions, and it's costing you more to maybe achieve that now than it did in the past. So how do you kind of evaluate the ROI on the required spend to get to that place?

Yeah, these are very hard dollar ROIs. We've said publicly, for instance, at DAT Convoy to manually broker a load, it's somewhere between $100-$200 of labor to do that. You use our load automation, it's somewhere in the $40 range. It's a demonstrable hard dollar ROI. Similar things can be said at, for instance, at Vertafore, one of the agentic tools they released last week, it's a reconciliation tool. The time and motion study is it's 17 minutes per reconciliation. Our tool does it in 30 seconds. Then you do these scores of these a day. You can sort of see the time savings, and then you can get to a financial ROI. These are pretty hard ROI in products, and the sales teams are taking that message to the market, to customer base.

I would just say that.

Sorry, I.

Sorry, Joe. Joe, I would just say we're using local, smaller language models, maybe even older versions. You're not consuming a lot of tokens when you're doing this activity. You can continue to change the prompts to make it more efficient over time. Even at Vertafore, we've taken that cost of goods down meaningfully in a matter of weeks. I think it's still very accretive from a margin perspective.

Yeah, I'm getting at more of the ROI from Roper standpoint. I get the ROI from the customers. It's more like if we're spending money to develop new AI tools that are then embedded in the product that we're already offering, how is the ROI on the increased investment you need in 2026 versus the investment you needed in 2021 to get the same customer and keep the same customer happy?

Well, I would just say on the development front, we're seeing demonstrable efficiencies, with the frontier models itself. We're getting a lot more output and a lot more roadmap consumed. When you talk about just OpEx investment, we're assuming productivity, but we're taking that back into the roadmap. I don't think it changes fundamentally our P&L structure and our margin profile.

Cool. Thanks, guys.

Joe, apologies for missing the thrust of your question.

No problem, Neil.

Yeah.

Your next question comes from George Kurosawa with Citi. Your line is now open.

On the AI strike team led by Shane and Eddie that you put together, it sounded like they completed their listening tour last quarter and have now been put out into the field. It sounds like some early successes at Vertafore. If you could just touch on how they ended up sort of stack ranking the opportunities that they see in front of them, and then maybe the scope of their involvement and how much it's led to an improvement in velocity.

Yeah. I'm delighted to double-click into that. Just to remind everybody sort of the three objectives of this AI, this Roper sort of accelerator team. One, and first and foremost, is to sort of coach and teach, right? This is about enablement of our 21 software companies to do what they've already learned on their own relative to AI and agentic development, and then do it even better. That's number one. Second is to partner shoulder to shoulder and build. The third one is to, where appropriate, build sort of shared componentry where we can share some common runtime or routines on the AI front across the Roper companies where it makes sense. That's sort of the goal and focus of this group. In terms of where we're allocating the team, this is very much an executive leadership team focus.

It is basically size of prize and impact is how we're sort of force ranking this. In terms of Vertafore, it is one of our largest opportunities, if not the largest opportunity we have from an agentic automation point of view. I think there was six agents released last week at their Accelerate conference. That is just the very, very beginning. Then this quarter, we'll sort of broaden that from one engagement with one business to it's now six. As the team grows and we have the now five additional businesses that are sort of in the early stages of partnering with. The final thing is about speed. I think the unlock here is, at least I think Amy and the team at Vertafore would agree, is our team, the Roper team, sort of very much partnered.

You can imagine leadership resources on our team working hand-in-hand with engineers on the Vertafore team on how to do this AI development, one, because there's a little bit of art to this and not just science. Number two, there is a speed coefficient that our team brings, given their history about sort of modern day, current, very contemporary practices of agentic development and just the pace. Then there's just good old-fashioned change management. How do you sort of break bottlenecks and barriers to go fast? We saw literally, I know it's sort of an overused term, but 10X kind of productivity gains partnering with Vertafore on some of this development in terms of speed and quality. We're super encouraged. It's very early days. I don't want Shane and Eddie to hear this and think they've manifested fully.

They've got a lot of work to do, but could not have gone better, in my view, in the first 6 months.

Okay, that's great to hear. I wanted to ask kind of more broadly, when you look across the portfolio, it seems like AI commercialization is in sort of different stages. You've got businesses like Aderant, CentralReach that seem to be resounding successes. Others seem to be coming up right behind them. When you look across that landscape, any pattern matching in terms of why some of these businesses seem to be moving a little faster than others? Is it primarily customer driven or what would you attribute the relative successes there to?

I think it is. Jason, I'll give an opportunity if he wants to add anything. I think if there's a pattern match there's 21 software companies in the business, and while we want everyone to be going as fast as they possibly can, you have an array of where people are in their maturity. Where we're most advanced, they're the ones that got after and were able to sort of get the agentic SKUs in development first, into the market first. Sort of now the next wave of this, we talk a lot about CentralReach and Aderant and Convoy and DAT. They're the tip of the spear. Now we have 10 or 12 companies, maybe a couple more just now, just getting to market with real agentic magic SKUs versus like chatbots and embedded sort of GenAI search inside of existing products where the value unlock is.

We also take this a little bit offline about sort of more deeper operational pattern recognition, but that's what I would say about the commercialization phase, is who sort of had product ready first.

That's right. Yeah, I think the benefit of being part of Roper. We set our president summit a couple of months ago, and we did an AI sort of showcase for those that are along. It just helps with the learning acceleration. I would agree with Neil that it's those that embrace and saw a true customer problem early on and then got after it a little sooner, but others are coming up the curve very quickly.

Great. Thanks for taking the questions.

You bet.

Your next question comes from Clarke Jeffries with Piper Sandler. Your line is now open.

Hello. Thank you for taking the question. I just want to follow up on the comments around ground-to-cloud conversions advancing meaningfully. I'd love to understand the impact of SaaS transitions broadly in the application software segment. Is that contributing points of growth today? You made the comment around 85% of the segment is in the mid-single digit plus range in growth, while non-recurring was essentially flat. I would just wanted to know if it's something that would be of increasing benefit or already playing out in that segment. And then one follow-up.

Yeah, happy to take the question. Just as you think about the percentage of products that are cloud-enabled, it's 2/3 or so today. We have about $1 billion of maintenance, and we think that will convert over, oh, say the next 5-10 years or so, and that should convert at 2x-2.5x lift from maintenance to SaaS. Today, if you think about the percentage that we have to go, we're sort of in the first or second inning of that journey. It does add, call it 50-100 basis points of growth a year, and it should for the next 5-10 years.

The only thing I'd add is we've said, when we talked about this in the past, Clarke, we've also said we are very much pacing this ground-to-cloud conversion at our customers' pacing. We're not like forcing it to them. I'll say with the advent of AI, I should have mentioned earlier on the monetization, another monetization method for AI is embedding the AI sort of features in the cloud product. That is a very compelling pull to make this transition go a little bit faster. Instead of 8-10 years, maybe it's 4-6. I don't know what the right number is, but we would expect to see that go a little bit faster. The other thing is we made a tremendous amount of investment over the last 3 years getting product enabled.

That was because we're going our customer pacing, there was an urgency to get product enabled, and now we are extraordinarily product enabled. Basically feature parity, if not more so in the cloud product than on-prem. I think the setup here is a little bit better than it was a few years ago.

Yeah, I would just say it's mostly in, it's going to be Aderant's a little further along, as you know. PowerPlan's in the early innings, but definitely much more cloud-enabled today than they were. When you think about those that are a little bit further behind, it's more healthcare, but that's our Clinisys business and labs. That's just kind of the nature of that end market. We see the areas of LegalTech, Aderant, and PowerPlan being those that'll be more near term in terms of cloud migration.

Perfect. All makes sense. One thing that stood out to me was the margin impact in the application software segment. The margin impact of businesses owned for less than four quarters was actually positive year-over-year. Just wanted to unpack that. Is the takeaway here that even the earlier stage acquisitions last year are getting to margin parity quickly?

In application software, it's our CentralReach business. That business has ample R&D investment. I think R&D as a percent of revenue is like 20%, but they just have extremely strong incrementals. They're a very cloud-native platform, and so as they expand, they have very good incrementals there. When we talk about the acquisitions in our Network Software segment, we've talked about the business Convoy that we added on to DAT. It's a technology investment. We're super committed to that investment to automate the spot freight market over time. That actually has a drag on margins. That, plus our Subsplash business, which is a lower margin, faster growing business, that as they grow, they will scale margins. You can see in our Network Software segment, it does have a pretty meaningful drag on margins.

Now over time, as Convoy continues to grow, that should be a tailwind as we go into the out years. This year it is a little bit of a drag on margin.

Perfect. Thank you very much.

You bet.

Your next question comes from Josh Tilton with Wolfe Research. Your line is now open.

Hey, guys. Thanks for sneaking me in here, and congrats on a really strong start to the year. I will keep it to one given the hour. My question is just basically, you're very clear that the guidance still doesn't assume a recovery at Deltek and DAT for the rest of the year. Can you just remind us the confidence that you have in the rest of the application and network software business and kind of offsetting that weakness throughout the year?

I'd say just if we go through the segments. With application software, we feel good about sort of what's going to happen in the second half. We just talked about CentralReach. It's just having a really strong start under our ownership, and a lot of that's recurring, and so that's just going to flow through in the second half. We've talked about being 80 basis points or so of accretion in the second half for that segment. We still feel good about that. In network, DAT's looking good in the first quarter. We'll see sort of how things play out. Foundry will continue to be sort of getting better throughout the year. They had a great start to the year. Subsplash turns organic in the fourth quarter, and that's for sure accretive to the segment.

Yeah, feel good about the rest of the segment, or the rest of the business.

Makes sense. Thank you, guys.

You bet.

Your next question comes from Ken Wong with Oppenheimer. Your line is now open.

Hey, great. Like Josh, thanks for sneaking me in. Just one from me. It sounds like the downtick in 2Q is just purely due to tough comps, but just wanted to kind of make sure and clarify any geopolitical macro dynamics that you guys baked into that assumption as well, given kind of the current situation that arose?

No, not at all. This is just timing really in the AS segment. It's our non-recurring perpetual activity. That's squarely what it is. We have clear visibility of that. In TEP, no. I think we're comping 9% quarter as a high water mark last year. It's just a sort of a comp in the second quarter in TEP. It'll get better in the second half. Nothing geopolitical at all. We're mostly U.S., as you know, so we don't see anything in the Middle East.

Okay, fantastic. Thanks a lot, guys.

Your next question comes from Julian Mitchell with Barclays. Your line is now open.

Hi. Good morning. Thanks very much for the question. Maybe first off, just wanted to try and put a finer point on the full year guidance. Is it fair to say that the sort of core EBITDA guide is essentially unchanged and it's really a kind of share count-driven guide? Maybe help us understand what the share count assumption is now at the sort of guidance midpoint. I think the guide embeds no extra buybacks beyond today. Just wanted to check that.

That's correct. Yeah. We had about $200 million of share repurchase between the end of the quarter and today. I think as I mentioned, but the ending share count for Q1 is 102.4, and then you've got some obviously dilution to add on top of that. That's what we're assuming. Yeah, you're right. We've mainly flown through the first quarter beat and then the buyback activity for the balance of the year.

Yeah, the first quarter beat for us, Julian, was partially from our operating model and partially from buyback.

Yeah.

That's helpful. Thank you. Within the network business, DAT has had a very tough sort of demand or macro backdrop, and it's been executing well within that. Finally, the last 6 months, there's better signals in the freight markets in the U.S. Maybe sort of flesh out a little bit more what you're seeing in that business, and sort of what's dialed in for that transport link business in the U.S. for the balance of the year, please.

Yeah. As we mentioned in the call, in the guide, there's not an assumption for improvement. Also I'll just double-click a little bit on the prepared comment. For the first time in, I'll look at Jason, in a couple, 3 years, we've had the carrier count side of the network increased. Which is certainly a green shoot that we've been waiting quite a time. Now we've had some head fakes intra-quarter on that number in the past, and so we're going to remain cautious. Also, the input costs or diesel costs, certainly not helpful, so carrier margins or profitability would be a little bit challenging. We're cautiously optimistic that there might be a freight recovery. Rejection rates got better. The rates got better, as we talked about, 20% or 30% better. We'll see how it plays out, but we've underwritten no improvement in the outlook.

That's great. Thank you.

Your next question comes from Deane Dray with RBC Capital Markets. Your line is now open.

Thank you. This is Kenny [Sim] for Deane. I wanted to ask about Neptune business. One of your peers has some meaningful project delays disruption in the quarter for their water meter business. Have you seen anything similar in terms of industry dynamic or even any market share changes during the quarter?

Yeah, appreciate the question. For us in our Neptune business, we would say largely, no. We've not seen any project delays. Now, the backdrop on that's slightly different than the competitor you described. Now, Neptune plays in the segments that are on the smaller municipalities. We have never had a large amount of project-based work, generally speaking. It's really not an apples to apples sort of question. The other part of this is we had pretty decent sort of short cycle demand in the quarter. I think that's largely because we, and I'm not commenting about our competitor because we don't know their business the way they do, but we and Neptune did a good job managing channel inventory in 2025. The hope or expectation is we'll be able to ship closer to retail in 2026 on the short cycle side.

I think we saw that play out at least early in the year in Q1.

Thank you. If I just could have a follow-up, if you could unpack the cost pressure dynamics for the Neptune business or even at the overall TEP segment level, either in the magnitude or the timeline to offsetting those, that would be helpful as we kind of think about the segment incremental margins moving forward.

Sure. I'll take a crack at this, but I definitely want to ask Jason to sort of correct and sort of amplify anything. On Neptune, it's really the ingot cost. What we decided to do, I think Don and team did a very sort of wise thing here. We did, you remember 3Q, really July of last year, we pushed the sort of call it tariff or a raw material sort of surcharge into the market that really had a negative demand impact in the short run. The signal from the customer was, "Hey, we certainly appreciate, we've got onboard sort of global price inflation, but we'd rather do it through regular way pricing versus surcharging." We expect, by the way, ingot cost. The baseline assumption we have is ingot cost is going to stay high.

I mean, this is with all the data centers and just the demand for copper. This is a derivative impact of that. Our baseline assumption is this input cost is going to stay high for a while, so it'll just be corrected or the margin will be captured through regular way pricing, which takes a couple of quarters to sort of work through backlog and get into the market. We're taking a longer view on that. In terms of the balance of the segment, it's both Northern Digital and it's Verathon. These are businesses that are, per our strategy, per the market opportunity, are becoming more recurring in nature, recurring consumables, which is a great thing about the predictability of growth and the absolute levels of growth in the businesses, but the consumables come with a lower GP percentage.

GP dollars are going up, but GP percentages may be a little pressured on those two businesses. Now, they also do a very good job managing below GP to EBITDA or OP, where we don't think there'll be a lot of OP compression over a long arc of time because they do have natural leverage in the business. Those are the dynamics at play. Jason, anything you want to amplify there?

No, I think you covered it. Thanks.

Thank you.

This concludes our question and answer session. We will now return back to Zack Moxcey for any closing remarks.

Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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 a conference specialist by pressing 0. I would now like to turn the call over to Zack Moxcey, Vice President of Investor Relations. Please go ahead.

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. We have prepared slides to accompany today's call, which are available through the webcast and are also available on our website. 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. 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. For the fourth quarter, the difference between our GAAP results and adjusted results consists of the following: amortization of acquisition-related intangible assets, and financial impacts associated with our minority investment in Indicor. 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. 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. 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. 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. 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 for 2025, and we own that. Our organizational focus and resolve are even stronger coming into this year. We've upscaled talent, sharpened strategy, improved execution across the portfolio and that work is showing up for the enterprise. To this end, our application software business, save for Deltek, improved organic growth in the 70 basis point area demonstrating broad-based growth improvements occurring within the segment. 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 will 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. The way AI can move from productivity to on-stack embedded automation improves outcomes for our customers and is highly monetizable. 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 Raphael to lead the Roper AI accelerator team. They'll coach and partner directly with our businesses, build a small AI development strike team, and leverage reusable 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.

And 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 Central Reach, 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. 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, and 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 fourth quarter 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 the 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 the prior year. 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 million 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 interest expense. Now if you turn it 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, however, nonrecurring 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 O triple B 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%. 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, nonrecurring 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 test segment, revenue grew 6% or 5% organically, while margins held flat to the 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. 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 DEPS performance, despite lower than expected organic revenue. Revenue posted at $7.9 billion or up 12% over the prior year. Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in Central Reach 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 the prior 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 the 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 issued in the 2025. However, Q1 will be a bit lower given the timing of coupon payments for new bonds. 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 a net leverage ratio of 2.9 times and ample near-term liquidity with about $300 million of cash nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion 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. 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 targets' 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. Revenue for the year grew by 16% in total, 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. FY 2025 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. That said, we view the passage of the O triple B 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 we'll monitor customer activity as the year progresses. Vertafore has 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 deliver 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 Raffi 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. And we're excited to welcome Greg Brown, our new CEO at Illumia, 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. We look at the broader portfolio of businesses we've acquired over the last couple of years: Centellus, Transact, SubSplash, Central Reach, and ProCare, 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. Specifically, we improved payments execution, upgraded the entire leadership team, and continued 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. ProCare's leader Joe Gomes has executed this playbook before at PowerPlan. Central Reach 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, they're building a broader growth engine through cross-sell and 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. We also expect a modest back-half weighting as Central Reach turns organic and non-recurring comparables ease in the second half. As mentioned previously, maintaining a conservative posture in GovCon at Deltek until we've seen 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%, 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 network, leading to ARPU expansion. Although the freight recession persisted throughout 2025, DAT is continuing its evolution from a traditional load board into a more automated market where brokers and carriers can match loads with greater trust efficiency and increasingly transact with 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, freight matching automation. This is a pattern we like, AI then improves customer outcomes, lowers transaction friction, expands our TAM, where you 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 in ARR as the market continues to recover. We continue to be excited about the AI product development at Foundry because it fits naturally in the creative workflows small improvements can materially improve artist throughput. Importantly, these are high-frequency, high-value tasks that Foundry already sits inside. AI is being delivered as embedded features that customers should adopt quickly given the clear and integrated efficiency gains offered. MHA, SoftWriter's SHP continued to execute well supported by stable end market demand and strong reoccurring revenue models. Each team is advancing its roadmap with targeted investments in functionality, workflow efficiency, and service levels to deepen customer value and retention. SunSplash 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. 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, 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 remained 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. Great job by Dave and the entire team at NDI. Verathon continues to perform very well with solid growth across its GlideScope and BFlex franchises. Importantly, Verathon is the US market share leader in single-use bronchoscopes, reflects several years of consistent execution and reinforces the durability of a 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 surge program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance. Finally, the balance of the businesses in this segment, Civco, FMI, Innovonix, IPA, and RF Ideas, performed really strong throughout 2025 and are meaningful contributors to the segment's results. For the full year, we expect segment organic growth in the mid-single-digit range with the first half being more in the low singles area as Neptune's backlog continues to normalize. Given the more limited visibility at Neptune, we're taking a cautious approach as we monitor underlying demand over the next couple of quarters. With that, please turn us 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 5-6%, and adjusted DEPS of $21.3 to $21.55. 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'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 Central 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. 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. 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 M&A and buybacks based on what drives the highest and most durable cash flow per share compounding. For the first quarter, we expect adjusted DEPS to be in the range of $4.95 to $5 reflecting the dynamics previously discussed. Now please turn us to page 16 and let's 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 positions us well entering 2026. Second, we're investing for long-term sustainable growth improvements while staying disciplined in our expectations. 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 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. We will remain disciplined and unbiased on valuation, and business quality. 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 strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over a long arc of time with a disciplined strategy anchored on three things. First, we own 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're running 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. It's also how we win in AI. In our markets, AI isn't a generic overlay. It has to be grounded in a real workflow context, tuned to domain-specific use cases, and deployed through trusted embedded relationships. So our AI delivers measurable value and better customer results. Third, we pair that with disciplined, centrally-led 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.

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. Your first question comes from Brent Thill with Jefferies. Your line is now open.

Good morning, Neil. Regarding Deltek, 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 shutdown. Yeah. Go ahead, Jason.

Yeah. So good morning, Brent. Yeah. I think we are not assuming an improvement this year. You know, the fourth quarter was depressed by the perpetual license revenue. As I talked about, most of the Con Enterprise still buys perpetual licenses. So that's what drove our lower organic NAS in the fourth quarter. So we don't think that's gonna 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.

Okay. And, on ProCare, Neil, what do you think needs to happen to get that back meeting expectations?

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've 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 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. 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 one that is imminently fixable, which this one is, the larger problem would be if we had a competitive situation, something like that, which we do not have.

Great. Thanks.

Yep. You bet.

Your next question comes from Clark Jeffries with Piper Sandler. Your line is now open.

Hello. Thank you for taking the question. I wondered if specifically on the GovCon business, you could maybe give a rank order of kind of appropriation bills. What would have the most impact? Or within Deltek's exposure? What segments of the government getting those appropriation bills passed would be most significant?

Yeah. So I'll just draw back to the O triple B. 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 O triple B is heavy on defense, Department of War, Department of Defense, and DHS funding and spending, that tends 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 a lower percentage, so it's not necessarily a bad thing for Deltek's customers. But it's certainly better on the current appropriations, the O triple B.

Perfect. And then the last two 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 $4 billion or a number closer to $2 billion? What are you factoring into the deployment outlook for '26? Thank you.

As we mentioned, there's about $6 billion sort of is what the forward capacity is over the next twelve months. We have the two levers available to us on the capital, the M&A and the buyback. On the M&A side, you know, the thing for us I mean, I've been here fifteen years, Jason's been here twenty. You know, when you're building a business that has an M&A lever, we never view the amount of capital in the next twelve months as the budget or we gotta spend it because we're building a business that's gonna own businesses in perpetuity. 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're gonna get x dollars deployed against the $6 billion, excuse me, in M&A or buyback. But we like having both levers available to us, and we're gonna do what's best objectively to compound cash flow per share at the best rate we can.

I will say that we think this coming into this year, you know, I think the market is right for more assets to become available. I mean, we've been very proactive the last couple of years with a in a very muted market. So as I mentioned, I think it's a net positive for us, but, you know, we'll just stay disciplined and focused.

Yeah. Don't mistake anything I'm saying. Like, was just saying, as 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. There's gonna be there's an aging portfolio of very high-quality assets. A 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 gonna remain, as we always do, disciplined. Finally, on that, over the last really, 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 eight maybe eight small tuck-in acquisitions last year. That'd be more sort of predictable because it's a lower dollar per transaction but more of them.

Perfect. Thank you very much.

Your next question comes from Joseph Vruwink with Baird. Your line is now open.

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 utterance callouts, you know, if 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, 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?

Yep. So appreciate the question. We spent a fair amount of time talking about that internally. A couple of guiding principles that we have internally is, one, we're not gonna AI wash or allocate revenue. Like other companies, have done or are doing. We're not gonna say x dollars, R&D's, therefore, y dollars of revenue is AI-related. So we're not gonna AI wash our revenue stream. That said, we do aspire to be able to report a number, yeah, that's Nick. AI revenue SKU related is x or y. Unfortunately, if we do that, I mean, we're gonna monetize AI in more ways than just AI SKUs. 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 is actually you know, it says simple. It does pretty hard from how we're gonna 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 TAM meaningful TAM expander for us, which means it should be a growth driver for us you'll see it show up initially in bookings and eventually into the recurring or reoccurring base. We see that at Central Reach. 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, 25 the chapter on AI would be how we learned to develop the initial set of products across our software business. 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. 26, I think the chapter is gonna be how we commercialize. How do you sell, deploy, drive implementation? And ultimately sort of monetize all of the product. And so that's gonna 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.

Great. That's helpful. On your approach to guidance this year, I think it's very clear that you're gonna let the upside come to you and, you know, future changes are gonna happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? I'm thinking in the past, you've talked about how your current portfolio could be capable of sub and, in a best-case scenario, eight to nine. That's more of a long-term framework within FY '26. If things go right and you get some redirection and where the pressure is within the portfolio have been what sort of upside possibility could there be?

So I would say the long-term to 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%. You know, we go company by company. About what their entitled realistically achievable growth can be 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 you know, if you sort of thumb each one of those, I don't wanna get into the order of magnitude of what it could look like, but would say it definitely tilts more, conservative than, than in this past year, for instance.

Thank you.

Your next question comes from Dylan Baker with William Blair.

Hey, gentlemen. I 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 nonrecurring 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 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? 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. Thank you.

Yeah. Certainly appreciate the question. I think, you know, we've seen some of this just in our AS segment over the last years, you know, nonrecurring revenue has been sort of flattish, up a little bit, you know, here and there because you know, some of our businesses have moved more to the cloud, be it Aderant or in recent years PowerPlan. We see that at Deltek is gonna be a significant opportunity. So that's a part of our thinking in '26. 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 the year. So we thought through a little bit of those dynamics this year. 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.

Yeah. And just to add to what Jason said, you know, we don't expect a pronounced j curve because we have a very large install base that's on-premise. That's gonna lift that is lifting and shifting at two to three x recurring. So the j curve is less pronounced than if because you're converting an existing recurring base at a higher level. And as you sort of, if you will, can a trip or convert net new perpetual to recurring. So they offset one another, and we think we have that harnessed in our guidance.

Okay. Great. Thank you. And then maybe, Neil, for you too, on the kind of topic between platform and bolt-on M&A, I guess, 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 acquisitions, 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.

Always hard to predict mix. I can tell you that if there is a genetic generally speaking, if there's a rank order, bolt-ons or tuck-ins are gonna be first order because they are advancing sort of the organic growth as direction of one of our platform businesses. At the same time, you always have a little bit of back-office G&A synergy, enables to sort of buy down the initial purchase price pretty quickly, and then you get to a growth-oriented. 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 company. 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. That's a completely new motion for us. That would not have been the case three years ago. I think it bodes well, but these things do take time to matriculate through and mature to where they can become actionable. On the platform side, the number of opportunities and the high quality of assets is very interesting. The question on the table is gonna be what happens relative to valuation. We've never been a short-term, you know, next twelve-month multiple arbitragers. We're not gonna do that. But we definitely have to sort of we have to look at buybacks versus bolt-ons versus platforms on what is the best long-term compounding. In terms of value creation opportunities for us.

Great. Thank you, guys.

Your next question comes from Brad Reback with Stifel. Your line is now open.

Great. Thanks very much. I know you guys gave the software bookings for the entire year. Can you give us what it was in 4Q?

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. 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 twenty-six. And then as I mentioned last quarter, healthcare has been really strong for us, and that was the same in the fourth quarter.

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 '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? Thanks.

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, fan 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 25 compared to 26. And you just go and let me back up. When you look at 25, 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. 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 or right underwriting a modest decline at Neptune versus '25. And the only thing that sort of then you get the accretion to organic growth from SubSplash and Central Reach that turn organic this year. Then we have this easing second half not sort of nonrecurring. 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.

Yeah. And just to remind you, all the Central Reach and SubSplash becomes organic second half. So it's gotta create some of that ramp. And I would just call out too, just again, just a small comp, a couple of call 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 '25 a pretty depressed network number because we were comping against a bigger number in '24. So that comp goes away. So there's some math too. Know, just going from '25 to 26.

Great. Thank you.

Your next question comes from Terry Tillman with Truist Securities. Your line is now open.

Yes. Hey, Neal, Jason, and Zack. Thanks for taking my questions. The first one is going to be on Deltek, the second one the follow-up is going to be on DAT. 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? And also with Deltek, are the effects of Doge kind of lessening, or is that still in POC? And then I had a follow-up.

Yeah. So, Terry, I'll this is Jason. I think the, you know, December's 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, contractor government contractor deals that slipped. So it was, like, 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. But the 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 gonna close the rest of this year.

Yeah. Exactly. This year. And just to pick up on that, Terry, as well, just to add. While the signature is 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, you know, all the this is an environment, unfortunately, that our customers live in. 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 that are likely gonna 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. The has been asked, but zero competitive issue here. It's just deals that are building that are to the right a little bit given the uncertainty. Doge, I would say, is, 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.

Got it. I appreciate that. And just a 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 '27? Thanks.

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 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 gonna get, you know, in the past, it was just load board. So it's load board in pricing. Now it's load board in automation. It's load board in data. Load board in a number of things on both the carrier and the broker sides. In terms of the automated matching, it's early days. But we're encouraged by the progress. 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, complete the commerce with payment sort of overlay across all that. 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 TMS's that we're integrating with. That allows the brokering or the tendering to our platform to be native and the workflow of the brokers. And then we continue to build the carrier side of the network, gotta be a high trust, no fraud environment. 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 wanna see that business scale as Jason and Shannon and the and Satish, the team at DAT look at this on a monthly basis.

Thank you.

Your next question comes from Ken Wong with Oppenheimer. Your line is now open.

Fantastic. Thanks for taking my questions. You guys are guiding to 5% to 6% organic for '26. You know, as we think about 1Q first half, with a lot of faster growth businesses coming in second half 4Q and no Deltek tailwinds, like, is there the possibility that you could be below that 5% low end? Any context there so we could properly level set our numbers?

Yeah. No. I don't think so. We're kind of thinking for AS, we'll be, you know, sort of in the mid-single-digit range with nonrecurring being flat and the recurring reoccurring being, like, mid-single-digit plus. Which is consistent with Q4 levels. I mean, you central reach turning organic. Not we're not gonna have the same nonrecurring, decline, like we did in the fourth quarter. And then as you mentioned, the second half gets better on the We've got this the nonrecurring, 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, on NS, you know, I think sort of the, you know, recurring revenue will be just sort of continue to be mid-single-digit plus out of the gate, and then as we go throughout the year, sub slash actually comes in in the fourth quarter, so that'll be that'll be helpful. And so think that's sort of how it sets up. Nothing nothing outside of that. To call out.

Got it. Really appreciate the color there. And then perhaps just any additional context you provide in terms of what the new business activity pipeline conversion looks like versus maybe the renewal business, you know, term expansion, contraction? And any details would be helpful.

Ken, is that a broad portfolio question or specific to a business?

Broad, broad question? Yeah. 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 Yeah. Across the group?

Understand the question. Yeah. I would say we're broadly encouraged by what we saw in the finishing the year. It was it was the bookings and retention statistics were quite good. You know, as you know, our enterprise, our gross retention in the mid-nineties for our enterprise businesses. That's steady to tick up a little bit during 2025. And then in terms of the bookings activity, hey. You know, 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. You know, we and so it's been it's been pretty good.

Okay. Fantastic. Thanks a lot, guys.

Your next question comes from George Kurosawa with Citi. Your line is now open.

Great. Thanks for taking the questions. You guys brought in some new AI leadership Shane and Edward, Would 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 that you know, learnings they can apply across the portfolio.

Yeah. So we're excited to have Shane and Eddie join and the team. They're starting to build out. So you know, three things they're generally focused on. First is, all in pursuit of accelerating the top-line goals, accelerating sort of our pace of AI product development and ultimately, you know, shipping, selling monetization. That's where the focus is. So three subcomponents to that. It's coaching and teaching. Right? Our businesses did a meaningfully above average, above expectation job in 2025, late twenty-four or '25 learning, making mistakes, learning, making mistakes, learning, around AI, AI AI development, what works, what doesn't, and getting product 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, in this AI development. And so Shane and Eddie and the team, they're bringing really bring just a history. These are people that studied machine learning and AI in university quite a while ago and spent their entire careers. They've seen a lot of pattern recognition. So they're gonna coach and teach our leadership teams, our technical leaders, our product teams on all things AI, ML related. That's one. Number two, they are gonna 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. 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, certain AI-based sort of capabilities we can sort of produce and sort of have if you will, Roper open source model where we can reuse some components and componentry. And so we're gonna 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.

Okay. Great. Did also wanna touch on the margin side. Core gross margins were up over one point in the quarter. Maybe talk through the tailwinds there. How do you how should we think about any sustainability to improvements?

Yeah. I mean, 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, you know, I think AS might be up a little bit. Network's gonna be down just because we've got the full year of convoy and our algo, rolling through. And so that'll accrete up over time, but a little bit of a drag in '26. And then you know, I think our dinner test segment will be for the full year sort of. We've got more consumables rolling through next year. Than normal, which has a little bit lower margin. And that's really more pronounced in the first half. So maybe down a little bit in TAP in the first half, and then it'll improve throughout the year.

Your next question comes from Josh Tilton with Wolfe Research. Your line is now open.

Hey, guys. Thanks for sneaking me in here.

You bet.

Maybe just first kind of appreciate all the color that you gave. A simple high-level one on the guide for next year. I 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, like, 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. Like, how would you characterize what the rest of the business has to do that's baked into the guidance? That make sense?

It does. Yeah. So, I mean, I would say broadly, you know, it gets a little bit better, but not a lot. Not meaningful enough. To draw inflection. That's baked in. I mean, when you think about we finished around 5.4%, the deals are a tailwind. This nonrecurring, in 10 basis points or so to the enterprise. And then, really, the swing factors, I talked about the confidence in Q1 twenty-five that didn't repeat. Then you just talk about like, the swing factors. It's all within Neptune. And that's what our low single-digit to mid-single-digit guidance has for TEP. And that's what kind of bridges you to the from the low to the high end.

And then maybe just a quick follow-up. I understand that some businesses go organic in the second half. Is there any conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following like, kind of 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?

Yes, Josh, it's Neil. I'll take that one. So sure answer is heck yes. There's a lot of learning from our ProCare governance what worked, what didn't work, and how we're governing both SubSplash and Central Reach. 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 the value creation plan. In ProCare, we observed that variance for a longer time we decided to take action to correct it. Now we immediately jump to a corrective action, a countermeasure and, we don't let small variances turn into large variances. And as a result, you know, Central Reach is ahead of the underwrite model and SubSplash is on the underwrite model. For the outlooks for those businesses. Just that we can get in much more detail when we have more time offline, but that's the essence of it.

And I would just say that for know, for Central Reach and SubSplash, know, feel good about the contribution in the second half, you know, 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.

Super helpful. Thanks, guys.

Your next question comes from Deane Dray with RBC Capital Markets. Your line is now open.

Thank you. Good morning, everyone.

Good morning, Dean.

Hey, this has come up several times today about the M&A bias and looking for a durable cash flow compounding. I'd be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some assets 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?

I wanna reframe, Dean, the question to make sure that we answer the right question. If not, if you correct us. And so the question is, you know, looking at both private and public companies that have evaluation dislocation, are we looking at that? And then how does the AI moat influence our thinking? Can you just reframe it? I wanna make sure we answer the right question.

Yes. So, yeah, 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?

Yeah. So I would say so at the again, feel free. We won't ding you on one of your questions if I get I answer it incorrectly 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 deep moats. Right? And so that does not change. We believe in the AI world, you know, these the modes 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 it. We're seeing it playing across our 21 software businesses. Days. So continue to lean in that thesis from a capital deployment point of view.

That's really helpful. That's what I was looking for there. And just a quick one on Neptune. You know, we've talked about the order delays. Is there how much of an impact is the spike in copper played? Is there a sticker shock? Is that does that need to be, kind of ripple through the market to reprice? It's just, you know, what's the impact there?

I would say that, what we talked about last quarter, largely in the bucket of tariffs, but it's tariffs, it's copper pricing, this the generally the shock to the cost structure of a water meter when we started in really July 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 evaded during Q4. So I think our base case assumption is that is really in the rearview mirror and set to the side. And 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 more normalizing range of volumes in the market.

Thank you.

You bet.

Your next question comes from Joe Giordano with TD Cowen. Your line is now open.

Hey, guys. Good morning. How are you doing?

Hey, Jeff. Good morning.

Hey, I'm just curious how you're now weighing like, in terms of capital deployment, like, different, like, timing horizons here. Like, Right? Like, 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 like almost a high single-digit free cash flow yield now. And it's a portfolio that you're intimately like, close to relative to something that you might buy that drives top line 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 like, the certainty of what you know versus, like, the risk-reward of something you don't know at the price that you're paying?

So I'll take the first half of that. I'm sure Jason will have some color he may wanna add. So, again, just to we've said it. It's on repeat. We'll say it again. The objective of M&A versus buybacks, sort of the levers available to us is what's the best risk-adjusted path to long-term cash flow per share 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, we just the valuation dislocation is just is silly. And so we leaned into it in Q4 and we find it obviously you know, more attractive today. And it's a great opportunity to drive long-term cash flow content that way. On top of that, we're very excited and confident about our future. Right? And we get 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, 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. There is commentary about oh my gosh, is the M&A thesis, you know, not intact? As one of those absurd things I've heard in my fifteen years at Roper. 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. The pipeline's enormous. The, you know, the LP pressure is legit. 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. You know, buybacks are great in the short run. M&A generally is gonna beat in the long run, and we like having to balance between the two options in front of us.

Yeah. I would just add that, they're around the confidence, and we've had just these unusual things happen with three of our businesses. Like, the underlying quality is getting better. So there's that. And I would just say the AI or, 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 gonna win. Relative to AI. We're just we're so our customer intimacy is really proven 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 also gonna be an incredibly active year on M&A, so we're just really got an abundance of opportunity in front of us this year.

And what now that you brought in this AI talent, on the accelerator team, were there any instances where like, negative instances where these guys coming in as experts of kind of identified that maybe parts of your business where you thought you had more of an opportunity is gonna be harder to drive or mean, I'm sure they're identifying places that you have opportunities, but was there 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.

Yeah. So I would say, on balance, their reviews and early takes are quite positive about the opportunity market-wise, technical-wise, the prowess of the teams that we have in place. But we also and we had them sort of do a short readout to our board last week. And then there was 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. I'm saying might not have, like, the best acumen in, like, these vertical market spaces to judge that anyway. It was like, hey. As you'd expect, maybe there's 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 the central team to sort of spark some acceleration. It's just gonna take some time because we gotta build these people. You know? It's not something that we're gonna be able to hire en masse. We gotta build these people and did a good job last year. We'll continue to scale that. And compound the learning on that this year.

Yeah. 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 that's they view that as very unique, right, coming from a horizontal player. So I think they see the opportunity just like our businesses do.

Thanks, guys.

This concludes our question and answer session. We will now return back to Zack Moxcey for any closing remarks.

Thanks, everyone, for joining us today. We look forward to speaking with you during our next earnings call.

The conference has now concluded. Thank you for attending today. You may now disconnect.