Roper Technologies Announces Record Third Quarter Results

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Companies mentioned in this article: Roper Technologies, Inc.
SARASOTA, Fla., Oct. 26, 2015 /PRNewswire/ -- Roper Technologies, Inc. (NYSE: ROP) reported financial results for the third quarter ended September 30, 2015.
Roper reports results, including revenue, gross margin, operating margin, net income and diluted earnings per share, on a GAAP and adjusted basis. Adjusted measures are reconciled to the corresponding GAAP measures at the end of this release.
Third quarter GAAP diluted earnings per share (DEPS) were $1.58, a 3% increase over the prior year, and adjusted DEPS were $1.61, a 4% increase. GAAP revenue was $884 million and adjusted revenue increased to $886 million. GAAP operating profit increased 2% to $250 million, representing 28.3% of revenue. Adjusted operating profit increased to $255 million and adjusted operating margin increased 80 basis points to 28.7%. Orders increased to $894 million and enterprise book-to-bill was 1.01x for the quarter.
GAAP gross margin increased 110 basis points over the prior year to 60.4% and adjusted gross margin increased to 60.7%, a 130 basis point gain. Operating cash flow increased to $227 million, or 25.6% of adjusted revenue, and free cash flow increased to $220 million. Year to date free cash flow increased to $632 million, 15% higher than the prior year.
"Our businesses executed very well in the quarter despite continued headwinds in some energy markets and foreign currency translation," said Brian Jellison, Roper's Chairman, President and CEO. "Margin performance continued to be exceptional across the enterprise. EBITDA margins increased to a record 34.4% in the quarter. Our medical, software and toll and traffic businesses continued to grow organically."
Acquisitions
On October 21, 2015, Roper completed the acquisition of Aderant Holdings, Inc. and on October 2, 2015, Roper completed the sale of ABEL Pumps LP to Hillenbrand, Inc.
"We have now deployed over $1.7 billion in acquisitions in 2015. We continue to execute on our disciplined acquisition strategy focused on companies with leadership positions in niche markets with high recurring revenue, strong cash returns and excellent management teams," said Mr. Jellison.
Roper also announced that it has signed a definitive agreement to acquire CliniSys Group Ltd., a leading European provider of laboratory information management systems, for £170 million. CliniSys expands Roper's suite of diagnostic-related software. Roper expects the acquisition to be completed in the first quarter of 2016, following the completion of customary merger control review.
2015 Outlook and Guidance
Roper is updating its full year adjusted diluted earnings per share guidance to $6.69 - $6.75, from its previous range of $6.61 - $6.75, and establishing fourth quarter adjusted diluted earnings per share guidance of $1.83 - $1.89. The company's guidance excludes the impact of any future acquisitions or divestitures.
Use of Non-GAAP Financial Information
The company supplements its consolidated financial statements presented on a GAAP basis with certain non-GAAP financial information to provide investors with greater insight, increase transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making. Reconciliation of non-GAAP measures to their most directly comparable GAAP measures are included in the accompanying financial schedules or tables. The non-GAAP financial measures disclosed by the company should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP, and the financial results prepared in accordance with GAAP and reconciliations from these results should be carefully evaluated. Table 1: Q3 Revenue Growth Detail Q3 2015 Q3 2014 V% --- Q3 GAAP Revenue $884M $884M --% Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, On Center) 2 1 --- --- Q3 Adjusted Revenue $885M --% $886M Components of Adjusted Revenue Growth Organic (2%) Acquisitions / Divestitures 5% Foreign Exchange (3%) --- Total Growth 0% === Table 2: Reconciliation of GAAP DEPS to Adjusted DEPS Q3 2015 Q3 2014 V% --- GAAP Diluted Earnings Per Share (DEPS) $1.58 $1.54 3% Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, On Center), net of tax @35% $0.01 $0.01 Add: Acquisition-Related Inventory Step-up Charge (IPA, RF IDeas), net of tax @35% $0.01 -- Rounding $0.01 -- --- $1.61 $1.55 4% Table 3: Free Cash Flow Reconciliation YTD 2015 YTD 2014 V% --- Operating Cash Flow $660M $579M 14% Less: Capital Expenditures (28) (30) Free Cash Flow $632M $549M 15% Table 4: Adjusted Revenue and Adjusted Gross Margin Reconciliation 2015 2014 V bps ---- ---- Q3 GAAP Revenue $883.9M $884.1M Add: Purchase Accounting On Center) Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, 2.2 0.9 Rounding -- 0.1 Q3 Adjusted Revenue (A) $886.1M $885.1M Q3 GAAP Gross Profit $533.5M $524.0M Add: Purchase Accounting On Center) Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, 2.2 0.9 Add: Acquisition- Related Inventory Step-up Charge (IPA, RF IDeas) 2.0 0.4 Rounding -- 0.1 Adjusted Gross Profit (B) $537.7M $525.4M GAAP Gross Margin 60.4% 59.3% +110 bps Adjusted Gross Margin (B) / (A) 60.7% 59.4% +130 bps Table 5: Adjusted Revenue and Adjusted Operating Margin Reconciliation 2015 2014 V bps ---- ---- Q3 GAAP Revenue $883.9M $884.1M Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, On Center) 2.2 0.9 Rounding -- 0.1 Q3 Adjusted Revenue (A) $886.1M $885.1M Q3 GAAP Operating Profit $250.4M $245.7M Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, On Center) 2.2 0.9 Add: Acquisition- Related Inventory Step-up Charge (IPA, RF IDeas) 2.0 0.4 Rounding (0.1) -- Adjusted Operating Profit (B) $254.5M $247.0M GAAP Operating Margin 28.3% 27.8% +50 bps Adjusted Operating Margin (B) /(A) 28.7% 27.9% +80 bps Table 6: Adjusted Revenue and EBITDA Margin Reconciliation 2015 2014 V bps ---- ---- Q3 GAAP Revenue $883.9M $884.1M Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations, On Center) 2.2 0.9 Rounding -- 0.1 Q3 Adjusted Revenue (A) $886.1M $885.1M Q3 GAAP Net Earnings $160.4M $155.5M Add: Interest Expense 20.4 20.0 Add: Taxes 69.8 70.7 Add: Depreciation 9.0 10.4 Add: Amortization 41.0 39.7 Add: Purchase Accounting Adjustment to Acquired Deferred Revenue (FoodLink, SHP, Strata, SoftWriters, Data Innovations) 2.2 0.9 Add: Acquisition- Related Inventory Step-up Charge (IPA, RF IDeas) 2.0 0.4 EBITDA (B) $304.8M $297.6M EBITDA Margin (B) / (A) 34.4% 33.6% +80 bps
Conference Call to be Held at 8:30 AM (ET) Today
A conference call to discuss these results has been scheduled for 8:30 AM ET on Monday, October 26, 2015. The call can be accessed via webcast or by dialing +1 888-468-2440 (US/Canada) or +1 719-457-1512, using confirmation code 363379. Webcast information and conference call materials will be made available in the Investors section of Roper's website ( www.ropertech.com ) prior to the start of the call. The webcast can also be accessed directly by using the following URL https://www.webcaster4.com/Webcast/Page/866/11027 . Telephonic replays will be available for up to two weeks by calling +1 719-457-0820 and using the access code 363379.
About Roper Technologies
Roper Technologies is a constituent of the S&P 500, Fortune 1000, and the Russell 1000 indices. Roper designs and develops software (both software-as-a-service and licensed), and engineered products and solutions for healthcare, transportation, food, energy, water, education and other niche markets worldwide. Additional information about Roper is available on the company's website at www.ropertech.com .
The information provided in this press release contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, among others, statements regarding operating results, the success of our internal operating plans, and the prospects for newly acquired businesses to be integrated and contribute to future growth, profit and cash flow expectations. Forward-looking statements may be indicated by words or phrases such as "anticipate," "estimate," "plans," "expects," "projects," "should," "will," "believes" or "intends" and similar words and phrases. These statements reflect management's current beliefs and are not guarantees of future performance. They involve risks and uncertainties that could cause actual results to differ materially from those contained in any forward-looking statement. Such risks and uncertainties include our ability to integrate acquisitions and realize expected synergies. We also face other general risks, including our ability to realize cost savings from our operating initiatives, general economic conditions, unfavorable changes in foreign exchange rates, difficulties associated with exports, risks associated with our international operations, difficulties in making and integrating acquisitions, risks associated with newly acquired businesses, increased product liability and insurance costs, increased warranty exposure, future competition, changes in the supply of, or price for, parts and components, environmental compliance costs and liabilities, risks and cost associated with asbestos related litigation and potential write-offs of our substantial intangible assets, and risks associated with obtaining governmental approvals and maintaining regulatory compliance for new and existing products. Important risks may be discussed in current and subsequent filings with the SEC. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date they are made, and we undertake no obligation to update publicly any of them in light of new information or future events. Roper Technologies, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (unaudited) (Amounts in thousands) September 30, December 31, ASSETS 2015 2014 ---- ---- CURRENT ASSETS: Cash and cash equivalents $700,578 $610,430 Accounts receivable 489,183 511,538 Inventories 200,820 193,766 Unbilled receivable 105,787 96,409 Deferred taxes 62,506 54,199 Assets held for sale 36,780 - Other current assets 52,225 45,763 Total current assets 1,647,879 1,512,105 PROPERTY, PLANT AND EQUIPMENT, NET 105,280 110,876 OTHER ASSETS: Goodwill 5,325,844 4,710,691 Other intangible assets, net 2,246,710 1,978,729 Deferred taxes 31,534 27,496 Other assets 75,752 73,037 Total other assets 7,679,840 6,789,953 TOTAL ASSETS $9,432,999 $8,412,934 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $142,261 $143,847 Accrued compensation 107,266 117,374 Deferred revenue 237,289 190,953 Other accrued liabilities 160,312 160,738 Deferred taxes 2,993 3,943 Current portion of long-term debt 6,911 11,092 Total current liabilities 657,032 627,947 NONCURRENT LIABILITIES: Long-term debt 2,792,067 2,203,031 Deferred taxes 769,730 735,826 Other liabilities 85,265 90,770 Total liabilities 4,304,094 3,657,574 STOCKHOLDERS' EQUITY: Common stock 1,026 1,021 Additional paid- in capital 1,392,296 1,325,338 Retained earnings 3,932,195 3,520,201 Accumulated other comprehensive earnings (177,472) (71,927) Treasury stock (19,140) (19,273) Total stockholders' equity 5,128,905 4,755,360 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,432,999 $8,412,934 Roper Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Earnings (unaudited) (Amounts in thousands, except per share data) Three months ended Nine months ended September 30, September 30, 2015 2014 2015 2014 ---- ---- ---- ---- Net sales $883,933 $884,122 $2,638,755 $2,603,349 Cost of sales 350,450 360,082 1,053,200 1,067,191 Gross profit 533,483 524,040 1,585,555 1,536,158 Selling, general and administrative expenses 283,112 278,382 836,314 820,434 Income from operations 250,371 245,658 749,241 715,724 Interest expense 20,369 20,013 60,382 59,352 Other income/(expense) 251 552 (1,948) 1,042 --- --- Earnings from continuing operations before income taxes 230,253 226,197 686,911 657,414 Income taxes 69,836 70,687 199,441 197,317 Net Earnings $160,417 $155,510 $487,470 $460,097 Earnings per share: Basic $1.59 $1.55 $4.85 $4.61 Diluted $1.58 $1.54 $4.80 $4.56 Weighted average common and common equivalent shares outstanding: Basic 100,681 100,068 100,545 99,837 Diluted 101,607 101,006 101,512 100,803 Roper Technologies, Inc. and Subsidiaries Selected Segment Financial Data (unaudited) (Amounts in thousands and percents of net sales) Three months ended September 30, Nine months ended September 30, 2015 2014 2015 2014 ---- ---- ---- ---- Amount % Amount % Amount % Amount % --- --- --- --- Net sales: Medical & Scientific Imaging $299,621 $268,809 $893,583 $793,899 RF Technology 253,556 238,860 752,068 710,143 Industrial Technology 186,147 205,688 563,342 607,503 Energy Systems & Controls 144,609 170,765 429,762 491,804 Total $883,933 $884,122 $2,638,755 $2,603,349 Gross profit: Medical & Scientific Imaging $222,655 74.3% $193,132 71.8% $660,971 74.0% $572,738 72.1% RF Technology 133,692 52.7% 127,663 53.4% 397,874 52.9% 375,901 52.9% Industrial Technology 92,245 49.6% 104,012 50.6% 281,052 49.9% 306,464 50.4% Energy Systems & Controls 84,891 58.7% 99,233 58.1% 245,658 57.2% 281,055 57.1% Total $533,483 60.4% $524,040 59.3% $1,585,555 60.1% $1,536,158 59.0% ==== ==== ==== ==== Operating profit*: Medical & Scientific Imaging $108,399 36.2% $91,227 33.9% $325,439 36.4% $275,379 34.7% RF Technology 74,604 29.4% 69,351 29.0% 228,521 30.4% 203,183 28.6% Industrial Technology 52,298 28.1% 62,046 30.2% 162,383 28.8% 178,540 29.4% Energy Systems & Controls 42,300 29.3% 49,033 28.7% 110,424 25.7% 130,844 26.6% Total $277,601 31.4% $271,657 30.7% $826,767 31.3% $787,946 30.3% ==== ==== ==== ==== Net Orders: Medical & Scientific Imaging $317,743 $270,881 $900,176 $799,021 RF Technology 245,694 243,363 751,143 713,536 Industrial Technology 184,846 205,945 555,431 611,074 Energy Systems & Controls 145,478 173,172 416,803 490,106 Total $893,761 $893,361 $2,623,553 $2,613,737 * Operating profit is before unallocated corporate general and administrative expenses. These expenses were $27,230 and $25,999 for the three months ended September 30, 2015 and 2014, respectively and $77,526 and $72,222 for the nine months ended September 30, 2015 and 2014, respectively. Roper Technologies, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited) (Amounts in thousands) Nine months ended September 30, 2015 2014 ---- ---- Net earnings $487,470 $460,097 Non-cash items: Depreciation 28,454 30,442 Amortization 119,766 117,179 Stock-based compensation expense 47,035 47,011 Income taxes (35,165) (54,178) Changes in assets and liabilities: Receivables 26,051 (21,840) Inventory (7,047) (8,833) Accounts payable (2,085) (4,969) Accrued liabilities (6,603) 15,311 Other, net 1,691 (988) ---- Cash provided by operating activities 659,567 579,232 Business acquisitions, net of cash acquired (1,024,779) (305,254) Capital expenditures (27,503) (29,835) Other, net (4,369) (5,304) Cash used by investing activities (1,056,651) (340,393) Principal debt payments (4,006) (561) Revolver borrowings/ (payments), net 590,000 (95,000) Dividends (75,210) (59,827) Excess tax benefit from share- based payment 11,593 14,892 Proceeds from stock- based compensation, net 19,237 26,424 Premium on convertible debt conversions (13,126) (1,518) Other, net 844 2,118 --- Cash provided by/(used by) financing activities 529,332 (113,472) Effect of exchange rate changes on cash (42,100) (20,975) Net increase in cash and equivalents 90,148 104,392 Cash and equivalents, beginning of period 610,430 459,720 Cash and equivalents, end of period $700,578 $564,112 ===