Roper Technologies, Inc.

Good morning. The Rupert Technologies Conference call will now begin. Today's call is being recorded. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star zero on your telephone keypad. I would now like to turn the call over to Zach Moxie, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you all for joining us to discuss the first quarter 2025 financial results for Rupert 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'Countan, 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've prepared slides to accompany today's call, which are available through the webcast and are also available on our website. And now, 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 first quarter, the difference between our GAAP results and adjusted results consists of the following items. Amortization of acquisition-related intangible assets. transaction-related expenses associated with completed acquisitions, and lastly, 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, Zach, and thanks to everyone for joining our call. As we turn to page four, you'll see the topics we plan to cover today – We'll start with our Q1 highlights, which included reviewing our most recent acquisition, Central Reach. Then we'll go through our segment results and a modestly improved outlook for the year, and then get to your questions. So let's go ahead and get started. Next slide, please. As we turn to page five, let me highlight the four key takeaways for today's call. First, our quarterly financial results were solid with Q1 total revenue growing 12%, organic revenue growing 5%, as expected, and cash flow growing 12% over the last 12 months. Secondly, we successfully completed last week the acquisition of Central Reach, which I'll discuss in a bit. Third, given our solid start to the year and the completion of the Central Reach acquisition, we're raising our full-year total revenue guidance and modestly increasing our full-year debt outlook. And finally, we continue to be very well positioned for capital deployment with more than $5 billion of available firepower over the course of over the next 12 months. As we turn to page six, allow me to remind everyone about the durability of our business model. As a cash flow compounder, it is critical our underlying cash flow generation capability of our enterprise is, in fact, durable. While no business is immune from the current macroeconomic, trade, and policy environment, we feel our enterprise is far better suited than most to withstand the uncertainty. To this end, over 85% of our revenues are generated in the U.S., and over 85% of our software revenues recur. Our enterprise solutions are mission critical, and this criticality is best demonstrated by our 95% gross retention. More importantly, we have a very efficient business model that long-term converts about 30% or at such better of a revenue to free cash flow. All of this is further enhanced by our capital deployment optionality. So with this reminder, let's now discuss the newest acquisition to our family company, Central Reach. As we turn to page seven, I'll start with what Central Reach does. Central Reach is the market-leading cloud-native software solution that enables applied behavior analysis or ABA therapy providers to deliver care for individuals with autism spectrum disorder. On a daily basis, about 200,000 professionals use Central Reach's platform to perform their daily tasks. such as setting up clients, running their practice, scheduling care, collecting clinical data, and processing reimbursement claims. Central Reach's offerings enable an overworked population of therapists to deliver more and better care to the autism community. This is all done in a cloud-native modern tech platform that utilizes GenAI on a robust basis. As it relates to the deal, We paid $1.65 billion net of a $200 million tax benefit. We expect Central Reach to deliver about $175 million of revenue and $75 million of EBITDA for the TPM period ending June 2026. Further, we expect Central Reach's revenue and EBITDA to continue to grow in the 20% area or a touch higher once it turns organic for reporting purposes. As you can see, Central Reach meets all of our longstanding acquisition criteria. Leader in an edge market, competes on the basis of customer intimacy, has strong gross margins, and converts high levels of cash flow. In addition, Central Reach reflects our new maturing leader criteria of being a higher growth business, in this case, in the 20% area. We finance the acquisition, with our revolver and report the results in our application software segment. Now, turning to page eight, we'll briefly walk through the long-term drivers of Central Reach's growth. As you can see at the top here, Central Reach is the leader in a market with strong, sustainable tailwinds. First, there is a long-term persistent shortage of ABA therapists compared to patient demand. To scale this for you, for the U.S. alone, the current annual demand is approximately 900 million hours, where only about 300 million therapist hours are currently being supplied. We estimate the care gap to exist for the next decade, both in the U.S. and throughout the developed world. And finally, Central Reach is winning with the winners, meaning their clients tend to be the industry aggregators, so as Central Reach's customers grow, so does Central Reach. As we talked about on the prior page, central region solutions are mission critical to delivery of care. Their tools help measure outcomes, ensure compliance, and realize reimbursement. Perhaps more so, central region solutions unlock operational efficiencies, which allow for more care hours to be delivered to a grossly underserved patient population. Finally, SocialReach has multiple levers available to both grow revenue and expand margins. Some of these levers include expanding their product portfolio, cross-selling their new AI-powered solutions, continuing to win new logos, opportunistically pursuing adjacent markets, such as speech and occupational therapies, and bringing their solutions to international markets. Importantly, while we grow this business, we expect to see continued margin expansion. In short, This is a powerhouse business that is a critical solution to a huge challenge the world is facing. To the Central Reach team, so excited for you to join Roper. Thank you for all you do for the autism community and for trusting Roper to become your permanent partner. With that, let me turn the call over to Jason to talk through our P&L and our balance sheet. Jason?

Thanks, Neil, and good morning, everyone. As you heard from Neil, we had a good start to the year. Revenue of $1.9 billion was up 12%, led by an 8% contribution from acquisitions, mainly via our Transact and ProPair portfolio additions, and organic growth of 5%. Coming into 2025, we expected Q1 to be our lowest quarter for organic growth, given some comp challenges in our network segment. And so 5% was in line with that expectation. To click into the monthly cadence throughout the quarter, For software, enterprise bookings were up low single digits in the quarter. This was expected following very strong Q4 performance across the portfolio. Importantly, pipelines remain healthy given the essential nature of our solutions. Yet, we are cautiously optimistic and mindful of the current macro environment heading into Q2. For products, demand improved throughout the quarter, particularly at Neptune and Verathon, without any indication of pull-forward activity. EBITDA of $740 million was up over 9% in total and nearly 10% on a segment basis. Reported EBITDA margin of 39.3% was down 90 basis points versus prior year. Core EBITDA margin, which excluded acquisitions, was solid at 40.8%, representing a 50 basis point margin expansion or 53% incrementals. Regarding acquisition margins, Q1 is Transact's lowest margin quarter as about half of Transact's EBITDA comes in the third quarter of each year. This is due to a high concentration of term renewals and back-to-school transaction volume. We'll expect margin expansion from Q1 as we progress throughout the year. For diluted EPS, we delivered $4.78, which was above our guidance range of $4.70 to $4.70, led by strong margin performance. Finally, on free cash flow, Q1 came in at $507 million, which was down 1% versus prior year. Note that this figure includes a legal settlement of $24 million, which was funded in January and we discussed in our last earnings call. Though Q1 pre-cash flow was a bit low, it was not unexpected, given the exceptionally strong Q4 working capital performance that I discussed in our last call. Overall, free cash flow margins, if you look over the last few years, we've been in the 31% to 32% range. Last quarter, I had mentioned that we issued $2 billion of bonds in Q3 2024, yet the first coupon payments are occurring in February and April of this year. This, along with the legal settlement in Q1, has about a $70 million or 80-bis impact on free cash flow margins this year. Operationally, we feel good about working capital conversion and the structural free cash flow margin profile going forward. Now we'll turn to slide 10 to discuss our strong financial position. We finished the quarter with net debt to EBITDA 2.4 times with a fully undrawn revolver. Last week, we closed on central reach and used the revolver to fund the acquisition. This brings our pro forma net leverage to around three times. As we roll forward our expected cash flow and leverage ratios, we remain in a great position even after funding central reach. Over $5 billion of capacity to deploy towards high-quality acquisitions. To that end, we continue to work through a very strong pipeline of opportunities today. Given the uncertain macro backdrop, some PE sponsors are understandably taking a breath. However, as we have discussed, many PE sponsors need to return capital to LPs in the near future, and so the current market dislocation creates a favorable environment for Roper. In summary, our unique and resilient business model creates opportunity during times of uncertainty. So with that, I'll turn the call back over to Neil.

Neil? Thanks, Jason. As we turn to page 12, let's review our application software segment. Revenue for the quarter grew 19% in total, and organic revenue grew by 6%. EBITDA margins were 41.4%, and core margins improved 110 basis points in the quarter. This group of companies continues to demonstrate resilience and deliver on our growth expectations. As we turn to the businesses, we'll start with Deltek. Deltek grew in the mid-singles range in the quarter, both recurring and total revenues. As we highlight on the slide, Deltek continues to have strong migration to their cloud offerings while the business continues to innovate at a rapid pace and has benefited by very strong growth and net retention. Adderick continues to be very strong with record first quarter bookings and strong cloud migration activity in the quarter. Adderick continues to gain market share and carry its momentum forward. Power Plan also was outstanding in the quarter, Over the last several years, the team has done a great job at making the revenue stream more recurring in nature. In addition, they continue to get amazing feedback with their cloud offerings, which are driving strong SaaS migration activity. Also during the quarter, we promoted Rafi Shore, Adderant's COO, to succeed Joe Gomes as the next CEO of PowerPlan. Joe Gomes is now leading ProCare for us. We love seeing our high-potential leaders be placed in positions that have even higher levels of impact. Turning the vertifor, which was once again steady and solid for us, we continue to see consistent ARR growth and strong customer retention here. ProCare, our platform acquisition from a year ago, has done a nice job competing and winning the market, increasing its market share versus the primary competitor. That said, there's a clear opportunity for the business to reach its full potential, both in terms of operational efficiency and growth. Because of this, we asked Joe Gomes, who has been a CEO within the Roper portfolio for eight years, to lead ProCare going forward. We look forward to Joe replicating his prior Roper leadership success at ProCare. Finally, the combination between Transact and Seaboard is going according to our integration plan, and the combined business is performing well in the market. Now, turning to the outlook for the balance of the year, we see no change in the trajectory of the outlook and continue to expect to see organic growth in the mid-single plus range. Also, and as we highlighted last quarter, we want to remind you that transaction revenue, earnings, and margin profile are highest in the third quarter, as Jason mentioned earlier. Please turn with us to page 13. Organic revenue in our network software segment grew 1% in the quarter, as we expected, given the difficult prior year comp at MHA. Even our margins remain strong, 55.3%. As we dig into the individual businesses, we'll start with DAT. DAT grew in the quarter as expected based on increased ARPU driven by carrier and broker price actions, product packaging, and continued customer cross-sell activity. In addition, DAT continues to innovate at a rapid pace and did a great job integrating our recent Trucker Tools bolt-on acquisition. For the balance of the year, we continue to expect to see DAT grow based on the price actions rolling into their current revenue. From a market point of view, spot market volumes and DAP monetized network participation continue to bounce along the bottom, which is what we expect to occur for the balance of the year. Both MHA and foundry declined in the quarter as expected for MHA due to a prior year difficult comp and for foundry due to the final elements of the actors and writers strike hangovers. That said, we did see nice green sheet activity at Foundry during the quarter, and now feel confident that the worst is behind and Foundry's ARR will, in fact, return to growth this year. Construct Connect was strong for us in the quarter. The growth was fueled by strong customer bookings activity and improved customer retention. In addition, building on what Matt Straza started, our new leader, Buck Brody, is doing a terrific job leaning into Gen AI and developing very interesting, innovative, and potentially groundbreaking products. We look forward to talking more about this in future calls. Finally, our alternate-site healthcare businesses, SoftRiders, and SHP continue to grow nicely, winning in the marketplace. As we turn to the outlook, we continue to expect to see revenue growth in the mid-singles range for the balance of the year. Now, please turn to page 14 and let's review our test segment's full-year results. Revenue here grew 6% on a total and organic basis, and EBITDA margins came in at 36.2%, solid results. Before we get into the business specifics, the vast majority of our tariff exposure resides within this segment. The good news is that most of our cross-border flows are USMCA compliant, which obviously mitigates most of the tariff impact. Our teams will continue to work this issue and further mitigate as needed. Though none of us are enjoying the continually evolving tariff situation, it is yet another example of the nimble execution capabilities of our organization. In March, when all the tariff noise started kicking up in earnest, our business leaders went to work to countermeasure the risk, and start reworking the necessary supply chain activity. Nice job by the teams, and keep up the great work. Now turning to Verathon. Verathon continues to be rock solid for us. Coming off an incredible 2024 in Q4, they did a nice job growing in Q1. The source of their strength remained consistent. Their single-use bronchoscope or BFlex product leadership and their video laryngoscopy or glide scope market leadership. Importantly, Verathon has built a true world-class new product development capability with several new product releases slated for this year. We look forward to talking about these new products as soon as they're launched. Coming to Neptune, which was just solid once again for us. They continue to do a great job with their ultrasonic meter go-to-market execution. Also, and importantly in the quarter, we completed the acquisition of a cloud-based utility building software solution for Neptune. The Neptune team has long crafted their strategy based on the unique unmet needs of their customers. From their market research and ongoing discussions with customers, it became abundantly clear that Neptune could solve a persistent industry problem by closing the loop in the meter-to-cash cycle. This acquisition provides Neptune with a final piece of the strategy. So we look forward to talking about the enhanced customer value by fully connecting the water meter read to data management to billing and collection processes. Special thanks to Don Diemer and the entire Neptune leadership team for completing this incredibly strategic acquisition. Exciting stuff. Of note, both Verathon and Neptune order momentum improved as the quarter progressed. turning to our Cisco medical products business. They unfortunately declined in the quarter based on a very difficult prior year comp. Finally, NDI nailed it in the quarter, and we need to brag on this business and the team for a bit. They have proprietary and world-class precision measurement technologies used on healthcare applications worldwide. Over the past few years, the team has done an amazing job of hyper-focusing on their medical markets and their OEM clients. In addition, they have built and are building a world-class go-to-market capability to match their product strengths. Based on this, they're winning an important sub-market within healthcare, namely orthopedic surgery, interventional radiology, and cardiac ablation. Great job, Dave, and your entire team. Turning to the outlook for this segment, we continue to expect to see high single-digit revenue growth for the balance of the year. So, with that, please turn with us to page 16. Let's turn to our Q2 and increased full-year 2025 guidance. Given our solid Q1 start, the closing of our central reach acquisition, and our outlook for the balance of the year, we're increasing our total revenue growth outlook from 10% to be in the 12% area. Our organic growth rate of 6% to 7% for the full year remains unchanged. Finally, we're increasing our full year depth outlook by a nickel on the low and the high end to be 1980 to 2005. Included in this outlook is 15 cents of central reach solution. Our guide continues to assume a full year effective tax rate in the 21% to 22% area. For the second quarter, we expect adjusted deaths to be between 480 and 484, and we are absorbing 5 cents of central rate solution in the quarter. Now, please turn with us to page 17, and then we'll open it up to your questions. We'll conclude with the same four key takeaways with which we started. First, our first quarter financial results were solid. and our businesses remain very resilient to the current trade and macroeconomic dynamics. Second, we successfully completed the acquisition of Central Reach. Third, given our solid start to the year and the completion of the Central Reach acquisition, we're modestly raising our four-year guidance. And finally, we remain well-positioned for capital employment, where we continue to have more than $5 billion of available firepower over the course of the next 12 months. Despite the macroeconomic uncertainties in the market, when it comes to acquisitions, ROPA remains open for business. As it relates to our compounding model, we grew total revenue 12% and organic revenue 5% in the quarter and free cash flow 12% over the last 12 months. We're delighted with our acquisition of Central Reach. As discussed, this vertical market leader is mission critical to the delivery of autism care and has several embedded structural growth drivers that will support its 20% revenue and EBITDA growth outlook. Finally, we continue to be very well positioned with more than $5 billion of available M&A firepower to deploy capital towards leading vertical market software businesses. Our M&A pipeline continues to be very active, and our teams are engaged on several opportunities. It is always difficult to predict timing of deals, but we remain quite bullish on our ability to deploy capital this year. Keep in mind, at least historically, we have found times of uncertainty can be advantageous for deploying capital. Think VertiFOR in the summer of 2020. As usual, we're excited to pursue these opportunities with our unbiased and disciplined approach. Now, as we turn to your questions, and if you could flip to the final slide, our strategic compounding flywheel, We'd like to remind everyone that what we do at Rope is simple. We compound cash flow over a long arc of time by executing a low-risk strategy and running a dual-threat offense. First, we have a proven, powerful business model that begins with operating a portfolio of market-leading, application-specific, and vertically-oriented business. Once a company is part of Roper, we operate a decentralized environment so our businesses can compete and win based on customer intimacy. We coach our businesses on how to structurally improve their long-term and sustainable organic growth rates and underlying business quality. Second, we run a centralized, process-driven capital deployment strategy that focuses in a deliberate and disciplined manner on cultivating, curating and acquiring the next great vertical market leading business to add to our cash flow compounding flywheel. Taken together, we compound our cash flow over a long arc of time in the mid-teens area, meaning we double our cash flow every five years or so. With that, we'd like to thank you for your continued interest and support and open it forward to your questions.

And 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 number 1 on your touchscreen phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, you may do so by pressing the star followed by the number 2. Again, we request the callers to limit their questions to one main question and one follow-up. With that, our first question comes from the line of Brent Thiel with Jeff Rees-Pease. Go ahead.

Good morning. Neil, I'm curious to get your perspective on what's happening with PE and with behavior. Jason mentioned some hesitancy. I think that makes sense, but maybe just give us a quick overview on what you're seeing.

Good morning, Brent. Thanks for joining this morning. Yeah, what we're seeing in the deal, Well, you'd expect to see, by the way, with all the uncertainty generally as a slowdown. But what we're seeing on the ground, you know, with our pipeline, with our conversations with sponsors, investment bankers, companies, is just a consistent drumbeat of activity. The pipeline is as robust as it's been. We're super pleased, obviously, that we got central reach done this year. We still have five billion deployed over the next 12 months or so. But, you know, we would sort of have what we're seeing at the high level, just the general macro uncertainty, disconnect what we're seeing on the ground level. So we'll just have to see how it plays out in terms of the balance of the year. But we're certainly cautiously optimistic. And as we said in the prepared remarks, you know, times of uncertainty oftentimes in our history, you know, present very unique opportunities to deploy capital.

Great. Quick follow-up just on Dell Tech. On the Fed exposure, can you help us understand what you're seeing there? And if you've given up the percent exposed in that sector, it would be helpful. Thanks.

Yeah, sure. Happy to do that. So Dell Tech is 60%. of their business is focused on helping federal government contractors run their business. 40% are on other professional services-oriented markets. The broader – it's a broad set of activities that has – created amount of uncertainty in the government contracting part of the Delta customer base. It's obviously Doge, but it's the budget uncertainty. It's the government shutdown, the debt ceiling, all of that taken together, as you'd expect, creates a fair amount of uncertainty. So what happens in that uncertainty is the pipeline pushes to the right a touch, as we've seen this since we owned this business in 2016. And so we've seen this pattern play out before. So things push to the right a touch. The customer sentiment, when we talked with our leadership team there during our quarterly call-downs, is actually quite good. They feel like this is a short-term speed bump versus any medium or long-term concern. And what happens when the pipeline pushes to the right, Deltec's growth rate just slows the touch. Deltec will grow this year, but we probably will take a point or we have taken a point or two of growth off of Deltec's organic growth rate for this year, given the uncertainty.

Yeah, and it's more acute, too, because the GovCon enterprise segment is mostly, if they're doing expansions or add-ons, it's mostly through professional licenses, so that'll impact in-year.

Great. Thanks. Yep, you bet.

As your next question comes from the line, I'll grab you back with people. Please go ahead.

Great. Thanks very much. As it relates to free cash flow and operating cash flow, should we expect a return to growth here in June, or is it more back-end weighted?

Yeah, thanks for the call, Brad. It's going to be more back-end weighted. Q2 for us, I've mentioned on the prepared remarks we had, we haven't done bonds in a few years, so we did our first offering Q3 of last year, and some of the coupon payments aren't due until April, and so we just got a little bit of a timing between P&L interest and cash interest, so that will impact the second quarter. Also, just noting, The second quarter is usually our lowest quarter of the year because we make two federal tax payments. But then as we roll through to the second half, you're right, it will be a very strong Q3. We have our Transact business will have a full quarter of that. They get most of their EBITDA and cash flow in the third quarter. Our frontline business is particularly strong in the third quarter as well. So expect a better second half than a first half.

That's great. And then just real quick on central reach, given that there are 200,000 providers on the platform, does the gross retention rate look a little different here than maybe other aspects of the software business?

Yeah, it does a bit. If you think about it, just customer only or logo only, it's in the mid to high 90s. But when you add To your point, some of the therapists that come in and out of the market, then it's more of a sort of a low 90s gross retention. But we get that back on the net retention, right? As the market consolidates and those go to the winners, we get that through net retention. So net retention is kind of 115 to 120 range. So that's kind of how we think about it.

Great. Thanks very much. You bet.

And your next question comes from the line of Joshua Hilton with World Research. Please go ahead.

Hey, guys. Can you hear me? We can. Good morning.

Good morning. Thanks for squeezing me in here. Maybe just to start, I guess I just want to take it back and, you know, be a little high level. I guess I heard a lot on the call the word uncertainty. But I also heard a lot of them call the word, you know, durability, and you guys do believe that all the businesses are pretty durable even in the current environment. I guess, can you just help us high-level understand in the context of your decision to pretty much reiterate the guidance on the top line? Like, where are there some offsetting puts and takes in the guidance that maybe either give you or don't give you some wiggle room if the macro gets worse from here or maybe even better? Just to start. Thank you.

Well, you're right. I mean, I think the durability gave us confidence to reiterate. The puts and takes, I'd say, we just talked about Dell Tech might be a little bit weaker, but, you know, you've got other businesses that had, you know, strong bookings that are materializing in terms of recurring revenue throughout the year. So, in AS, we're sort of hold and serve there. I'd say in NS, pretty much the same, hold and serve. You know, we talked about how DAT is going to improve throughout the year. We still believe that to be the case. Foundry saw some green shoots, as Neil talked about, and so we expect our business to exit in sort of the high single-digit range, somewhere in there. And then really within TEP, there hasn't been a lot at the top level, but I would say our NDI business certainly has some good tailwinds. Some of these new indications that they've been targeting for years in terms of cardiac ablation and orthopedics have taken hold. So I'd say that's got us confident in maintaining our guidance for the year.

Super helpful. And then maybe just a little more nuanced follow-up to that. Can you just talk of the durability of Dell Tech, maybe specifically for the third quarter, just how you think about it throughout the rest of the year? I know you guys get some high-level commentary on the moving pieces in that business there, but maybe how we should think about your visibility into that business and then just durability as we move throughout the year.

Yeah, I mean, Dell Tech is 80% to 85% recurring, which gives you an amazing amount of predictability and durability. As Jason alluded, there's a little bit of perpetual that that business still has that we've trimmed off a little bit. That's essentially what's driving our slightly lower growth outlook for the total year. And we'll stop short of giving you any quarterly sort of specifics on individual businesses.

I tried, but I appreciate it, guys. Thank you so much.

Yeah.

And your next question comes from the line of Joseph Brewing with .

Great. Thanks for taking my questions. I guess something about confidence for the remainder of the year, bookings for software, order patterns for products are about as good as it gets when thinking about leading indicators. Maybe beyond what you have in hand, what's been the perspective within businesses that are more reliant on cloud or subscription transitions? That would seem to be maybe something that's a slightly harder proposition relative to the businesses where, you know, when renewals are coming due and you can make an assumption for renewal rates. Are there any indications around the transition-oriented revenues where maybe customer preference could slow if the macro remains uneasy out there?

Yeah, thanks for the question, Joe. So Adirondack is kind of our leader in the pack in terms of cloud transition. And actually, Q1 was very strong for them. And they're starting to actually move into the higher end of the client base in terms of cloud transition. So didn't see any indications. I understand your point, and we didn't see it there. Maybe at Dell Tech, but that's not as much of a tailwind for them. And so that kind of is in this sort of uncertainty bucket with Doge, but that will happen eventually. Otherwise, yeah, we didn't see. PowerPlan had a nice quarter. Actually, great point. So PowerPlan just launched their tax for fixed asset product about two quarters, one or two quarters ago. Saw a really good uptake there. Their recurring revenue is now growing double digits as a result of So, yeah, nothing that we could see in terms of transition to the cloud and slowing customer decision-making. We didn't see any of that.

Okay. That's great. And then you kind of touched on this with Dell Tech, but extending more broadly, how would you frame a stress test around the non-recurring elements of both AF and NF? Could declines be possible there? And I know it's a mix. I'll throw in reoccurring to this question. So you have a mix of perpetual license, I would assume very high margins, but then also services and payments. Is the profit margin implication if the non-recurring pieces are declining? I would imagine it's probably good for your margin mix, just kind of a framing there.

I think the perpetual and the service are fairly offsetting relative to SAS subscription. So I don't think we'll have any meaningful margin impact there. You know, at Network, our non-recurring is really small, so it's not as significant. You know, I think it is a question in terms of NAS, that's probably the only area that has some question in terms of where it's going to be this year. It's probably going to be up a little bit. That's at least our current thinking. But we'll see how the year plays out. Great. Thank you.

And your next question comes from the line of Terry Hillman with Tourist Securities. Please go ahead.

Yeah. Hi, Neil, Jason, and Zach. Thanks for taking my question and follow-up. The first one just relates to the central reach. We enjoyed reading the 2025 market report they put out. I think it said 75% of customers are purchasing AI solutions. I'm curious. I know you just brought this into the fold, but is the AI-driven revenue meaningful at all at this point for central reach? And And are you seeing some of that kind of AI attach rate yet on any of the other app software products and then at a follow-up?

Yeah, sure. So the Central Reach's AI products are new to the market. I mean, they're new in the last 12 months. and that there's three essentially buckets of products and that they didn't all get released, you know, nine or 12 months ago. It's been a rolling release. So, no, we've got a – it's not a material amount of revenue for centuries, but it is one of their meaningful growth drivers going forward that the company and we are excited about. And to your second part of that question, the second part of the question about the rest of Roper – I would say central reach is leading relative to the Roper portfolio, but my guess is the balance of the portfolio will catch up quickly. And the first derivative of AI, sort of the GPTs that ride along with our products or the fraud exposure that was sort of mitigated at DAT, those sorts of applications are We've done a very good job. Now we're, as most companies are, pivoting to the second derivative, which we think is a huge TAM expander for us. This is where you get the agentic digital employees. So our companies are very, very busy extending our software with the agentic capability into the workflows of our customers. We expect to monetize those on a work-completed basis. So we're very excited by that. But it's still pretty early, but it's moving at a very very, very quick clip.

Got it. Thanks. I didn't mean to cut you off, you know, just a follow-up question related to Corey Bidon margins for you, Jason. I think it was up 50 pips in the first quarter. How do we think about Corey Bidon margins for the year realizing, you know, you have another acquisition that's been mixed now? Thanks.

Yeah, I think Corey Bidon margins will be, I think, up a little bit this year, you know, at the segment level, right? Yeah. And then we've got probably with the core P&A, it's more flattish, if you include that, but still strong. I think we had a good, you know, in terms of AS, I think acquisition margins are going to get better throughout the year, and the core will sort of hold. A network will probably get a little bit better in the second half just through scale. And then TEP, you know, TEP had a good quarter. We think that's going to continue throughout the year just with NDI and some of Verathon's products coming to market.

Thank you.

And your next question comes from the line of Ken Wong with Oppenheimer. Please go ahead.

Hi. Thanks for taking my question. You guys mentioned Dell Tech pushed a little to the right. As you look across your portfolio and you think through kind of customer sales conversations, any other areas where you're seeing some modest shift to the right?

Not really.

I mean, we studied that intently. And intensely, as we went through our quarterly reviews and really looked for it, it was clear at Dell Tech. It was just not clear at other places. It doesn't mean that it might not happen a little bit, but it hasn't happened here yet.

Yeah, I would say, I mean, Adderant had the highest bookings quarter they've ever had. Strata had a phenomenal quarter in terms of, you know, in terms of TCVs, the total contract value, which will benefit us over several years. But they had a really good quarter. Vertifor was a little soft, but they had an exceptionally strong Q4, so we weren't surprised. to see a little bit of ear-to-ear weakness there.

We talked about ConstructConnect. We talked about Foundry. We talked about SoftRiders. SHPI pipeline was fine in the quarter.

Got it.

And I guess, should you happen to see some erosion going forward, help us think through, I guess, what are the countermeasures that you guys are thinking about? Would it be more a margin defensive or are there particular actions that you guys would potentially implement to try to maintain growth? What would be your next step should something emerge?

Yeah, so I think for us we kind of have this natural incentive for the businesses. They usually are very thoughtful about the pacing of investment, and so if they start to see some weakness, you know, it's in their best interest to make sure that they're being prudent. Obviously making the right investments, and we're very transparent with areas they should not be cutting, but they naturally have that sort of in their – in their P&L, and also I'd just say the incentives are variable, too, throughout the company, and so it's based on growth, so we get some of that margin preservation there as well.

Perfect. Thanks, guys.

And your next question comes from the line of Scott Davis at Milius Research. Please go ahead.

Hey. Good morning, guys.

Good morning, Scott.

I just wanted to clarify because we just kind of glossed over it a little bit, but it sounds like tariffs are a big kind of nothing burger for you guys and seems somewhat isolated to Verathon. Is that a fair statement?

I wouldn't say it's isolated to Verathon. Most of the product business in the TEP segment have to deal with some amount of tariff impact, but the vast majority, Neptune, Verathon – SIPCO is USMCA compliant. That's why we're able to sort of be a sort of a $10 to $15 million issue.

Okay, fair enough. All right, and moving to something more important. The port activity that we're seeing just seems like it could be hitting an air pocket maybe in 2Q or later in 2Q. You don't seem to be concerned about the freight activity if and when that occurs. Are you guys less exposed, I suppose, at the ports as otherwise for DAT?

We're watching it, as you'd expect, on a weekly basis when we look at the metrics. Scott, I think that Maybe the simplest way to think about it is, you know, the paying or the monetized part of the VAT network on the carrier side flexes but not, like, day-to-day to demand, right? And so if there was, for instance, in March, if there was a pull forward across the economy for pre-tariff shipping, we did not see a surge in demand. in carrier demand in the network, just like if there's a little bit of slack in the system, we won't see it immediately turn off. Now, if it's sustained that way for six months to 12 months, then we would expect to see an impact on the carrier side of the network. But so we just have assumed going into the beginning of the year, sort of flattish on the carrier volume units, and that's where we are maintaining it. VAT will grow this year because of the price actions. And we'll see how things play out from here.

Okay. Good color. Thank you. Appreciate it. Good luck, guys. Pass it on. Thanks.

And your next question comes from the line of Dean Dre with RBC Capital. Please go ahead.

Thank you. Good morning, everyone. You bet, Dr. Dre. How are you? Doing really well. Thank you. So I want to circle back on central reach, and it's a bit unusual. I mean, it's a good problem to have to explain. You don't typically get a business with this type of growth profile. You know, often PE has public company aspirations for someone that has 20% growth plus. So just how is this available, and what percent of the funnel have these kind of growth profiles for you?

Yep. So on sort of how did this come about, I would say it was a very traditional process for us. This was a business that was owned by Insight. We've known the Insight team for a while. It was Jan and her team about a year ago were talking with Insight. This was about this asset. We had an opportunity to meet the CEO plus or minus a year ago. We started doing our proprietary market work. You know, nine months ago or so, we liked a lot of the structural elements of the market, the growth drivers. They're solving a real problem in society. We see AI, Gen AI, as a strong tailwind with very limited sort of headwind or risk associated with it in this end market. And then the process started in a very traditional way with an investment bank. It was very competitive. But as we've been able to do in the last handful of deals, we've really been able to articulate the ROPR value proposition to the management team, right? So what is life like inside a ROPR, the advantages of having permanent long-term forever capital, the way you can grow your business inside of that. And in this case, there were many LOIs submitted, but because we had one management, we were able to get the call back and have the opportunity to essentially have a week to finish the transaction, which we did. So we're very excited by that, the process, the way that it unfolded. In terms of what's in the pipeline, the vast – I mean, the vast majority of the funnel are these maturing leader-type businesses. The growth rates are going to range between, you know, 10% and 25%. This doesn't mean that every deal has to be in the 20s. But, Dean, as you know, what we're solving for here in our revised capital employment strategy is – is sort of 30% or 40% better returns in year five, and we can get there. We can solve for that a couple of different ways, but the opportunities in the market that are plentiful are these more higher-growing businesses to help solve for that, where you get both the growth and the benefit of margin expansion over time.

And also, in terms of funnels, we have a very good mix also of bolt-ons, right? So we've been really active on the bolt-on front, and you'll continue to do that as well.

Got it. And just to confirm here, does central reach, is it accretive to CRI on a total company basis? And at what point does that contribution become positive?

It is working capital. Central reach is working capital negative. And what's important for us through our CRI lens is that we just remain negative from a working capital point of view. So the incremental transaction doesn't have to be incrementally negative to the fleet. It just has to make sure we stay negative. Got it.

Thank you.

You bet.

And your next question comes from the line of Joe Giordano with TD Con. Please go ahead.

Hey, guys. Good morning. Good morning, Joe.

Can you just walk me through the guide mechanics, like the walk from prior to current, like you're, you know, small beat in the quarter versus guide, hold the organic, absorb 15 pence and still raising. Like, is there kind of a contingency that was being removed? Like, where's the offset here?

Yeah, I think you characterized it right. We had a little bit of margin and a little bit of interest contingency in our last guide. And so I talked about all the things that are sort of holding within AS. Deltec's a little bit weaker, but others are offsetting that. NS is about on, as we talked about, probably a little bit better on margin, I would say, versus our last guide. So that's That's what gets you to the revised, pretty much updated guidance that flows through the Q1B.

Okay. That makes sense. And, obviously, I've been getting a lot of calls on Dell Tech as far as what the exposure is. I mean, you've talked about it a lot on this call, so we don't want to go crazy here. But is, like, the primary goad risk kind of, like, done now? Like, if, you know, if Musk is going back to Tesla and we haven't seen these big changes to these businesses yet, like, Are we not just – can we stop worrying that it's happening?

I think the – I think, again, I said it earlier. I just – I don't want to characterize this as just a Doge thing. I mean, it's Doge. But what our pattern recognition of our own business is 2016 is when there is a potential government shutdown – And the budget uncertainty, that too is like people don't know where the spending is going to be at the period, right? So it's all of this that's blended together that's created the uncertainty. But this community of government contractors provide essential services to the government. And so that's why we think this is a short-term thing and not a structural or even a medium-term thing. You know, and I think the most recent, if you just go to Doge, I think the most recent conversations are we're sort of stuck at $160 or $170 billion, and people are going to take that as a win as opposed to trying to get to the trillion or whatever the number is going to be. And then, obviously, with Musk spending more of his time going back to his other day jobs and having the limited number of days and his government sort of contract or his government employment status will certainly probably slow down the Doge impact.

Yeah, that makes sense. Great. Thanks, guys. Appreciate it.

You bet.

And your next question comes from the line of Steve Tussauds with J.P. Morgan. Please go ahead.

Hi. Good morning.

Hey, good morning, Steve.

Just on the organic, just maybe some color on the 2Q organic, and then secondarily on education, there's obviously a lot going on there as well with the government and You know, how they're kind of pressuring some of these higher ed organizations. And anything there that you guys are seeing as well?

Yep. I'll let Jason take the first. I'll take your education question.

Yeah, I mean, I think we're going to – it'll step up from Q on a bit. It's – you know, I think at AS we'll have a little bit of an increase, just as you see ProCare rolling in. Obviously, NS is going to go up to mid-singles, as we talked about at the beginning of the year, with just DAT and Foundry. ramping and you don't have the NHA comp issue. And then high signals-ish range probably for TEP. You know, just with all the things we've talked about, it's true for Q2 as well.

Got it. And on the Department of Education and education generally, it's – There's noise in the system, but when you read through what the administration is thinking about doing with the Department of Education, it's essentially not cutting funding. It's just block granting the funding down to the states. If you look at the 25 CR, Department of Education funding, equals the 24... The Title I sort of funding is like 80%, by the way, and the President and the Secretary on repeat have said that's not going to be touched in terms of the total amount. There's certainly some pressure on DEI and sort of the conflict in Maine on some of the athletes and whatnot about holding back funding. But I think those are bespoke issues. The big overarching thing is the funding dollars are not going to change. Just maybe the administration of the funding dollars might change going forward. So we haven't heard – there's no, like, slowdown or panic at the customer level about their funding. Okay.

Okay. And then just lastly, just in April here, the software bookings, have you actually seen acceleration from the low single digit?

We don't get that information.

Okay.

Great.

Thanks for the detail.

Yep.

Thanks for the detail.

And your next question comes from the line of Julian Mitchell with Barclays. Please go ahead.

Hi. Good morning. Just wanted to follow up a little bit on the organic sales sort of acceleration you've dialed in. So I guess you grew total company 5% organic Q1. I think it's 5% organic over the last 12 months. And, you know, it seems the sort of enterprise software bookings a little slow to start the year. I think the backlog at TEP was down significantly. 40% or so in December. So just wondered sort of the assumption of an acceleration to maybe, you know, 8% plus growth in the back half, the confidence there, and is there anything outside of Foundry that's turning around a lot?

Well, I mean, I think we'll start with network. I mean, Foundry, obviously, but then DAT as well. I mean, we're assuming carriers are going to be flat, but even despite that, we're expecting the business to get better throughout the year and have a decent exit velocity. We've talked about TAP already, I think, which is really just, you know, Neptune, you know, continuing to get better throughout the year. They have an easy comp in the third quarter, if you recall. And then, you know, we talked about NDI being another component of TEP that's given us confidence in the guidance there.

Another thing I'd say, Julian, is as it relates to the bookings activity, on a trailing 12-month bookings activity is up low double digits. And it takes time for that bookings activity to work its way to revenue. So that's in the machine and converting to revenue as we speak. So we have broad tailwind strength on bookings activity. Q4 is amazing. Q3 was a little bit slower, as we expected. So I would not read too much. Just listening to your question, I would not read too much. I think you're reading too much into Q1's booking number because you really have to look at what the buildup of the bookings is that sort of feeds the machine.

That's helpful. Thank you. And then just my follow-up would be on the application software EBITDA margins. So you had this sort of 300 bps headwind, I guess, to the EBITDA margin year-on-year in the first quarter. How are you sort of thinking about that play out over the balance of the year as sort of central reach come in? And is that core OMX you had of 100 bps or so a good run rate for the rest of the year?

Yeah. So, yeah, I think as – I'm just trying to parse out what you're saying here. I think on the core basis, we should see margin expansion this year. Maybe not as much as we saw in the first quarter, but certainly up nicely. We talked about Dell Tech's targeted restructuring last year. We've seen some benefits of that this year. And then the acquisition margins I talked about. Let's just kind of take Park Central Reach to the side for a second. Those will get better throughout the year because you've got a ramping of activity at ProCare, and then you've got Transact having a seasonally strong third quarter and actually better second quarter than first quarter. So that will get better throughout the year. And then Central Reach, to your point, will come in. at sort of low 40s EBITDA margins. That'll benefit.

And Deltek's going to benefit this year because they did a belt tightening in Q4, which carries through for the full year.

That's great. Thank you. You bet.

And this concludes our question and answer session. We will now return back to Zach Moxley for any closing remarks.

Thank you, everyone, for joining us this morning. We look forward to speaking with you during our next earnings call.

And conference call has now concluded. Thank you for attending today's presentation. We may now disconnect.