Financial Performance and Outlook

FY26Q1 Financial Performance

• Revenue: $2.10B, up 11% year-over-year; organic growth of 6%, acquisition contribution of 5%
• Adjusted EBITDA: $797M, up 8%; EBITDA margin of 38.1% (down 120 bps year-over-year)
• Core EBITDA margin: down 70 bps, driven by lower gross margins in TEP (consumables mix at NDI/Verathon and bronze ingot inflation at Neptune), partially offset by 40 bps of core margin expansion in software segments
• Adjusted DEPS: $5.16, above the guidance range of $4.95–$5.00, and up 8% year-over-year
• Free cash flow: $562M, up 11%; trailing-twelve-months free cash flow of $2.5B
• Recurring software revenue growth: +7% across software segments

FY26Q2 Guidance

• Adjusted DEPS: $5.25–$5.30
• Application Software organic growth will be lower in Q2 due to nonrecurring timing, improving in the back half as CentralReach turns organic and nonrecurring comps ease
• TEP faces a tough Q2 comp (Q2 2025 was the segment's high-watermark quarter), easing in the back half

Full-Year FY26 Guidance

• Adjusted DEPS raised to $21.80–$22.05 (prior: $21.30–$21.55), a $0.50 increase at the midpoint
• Total revenue growth: ~8% (unchanged)
• Organic revenue growth: 5%–6% (unchanged)
• Full-year effective tax rate: ~21% area
• Key assumptions: no meaningful improvement at Deltek GovCon, no DAT freight market recovery, and modest Neptune revenue decline versus FY25
• Guidance does not assume a meaningful revenue contribution from AI
• Share count: guidance uses 102.4M shares exiting Q1, with no additional buyback assumption embedded beyond what is already executed

Business Drivers

Application Software: Broad Strength, Deltek Still Waiting

• Application Software grew 12% total (5% organic) in FY26Q1; recurring and reoccurring revenue (~85% of the segment) grew mid-single-digit plus, while nonrecurring was essentially flat
• Enterprise gross retention remained in the mid-90s; enterprise bookings were above the low double-digit trailing-twelve-month rate in Q1 on an easier comp
• Aderant delivered a record quarter — record Q1 bookings, record Sierra Cloud migrations, and new AI-driven talent evaluation within viGlobal. Aderant's multi-year run of strength is now being fueled by a combination of continued market share gains in large law, cloud migration, and AI-enabled billing and time-capture products
• CentralReach is tracking ahead of its deal model: recurring software revenue grew well above 20%, margins expanded, and AI-influenced bookings were 75% of new business — up from zero two years ago. AI-generated session notes now take ~30 seconds versus 5–10 minutes, and daily claim generation is 6x faster; customers are responding to measurable workflow savings
• Vertafore delivered steady mid-single-digit growth with EBITDA ahead of revenue. At its Accelerate customer conference, Vertafore unveiled its Velocity AI platform with six AI agents embedded across the product, including submission processing, reconciliation, and email automation — the first product built with direct involvement from Roper's central AI Accelerator team
• Deltek's recurring revenue grew mid-single-digit plus, driven by private-sector demand (construction, architecture, engineering), but GovCon enterprise remains soft. Management still characterizes the GovCon issue as a timing/decision-making delay rather than a competitive or structural loss, noting that the One Big Beautiful Bill is a positive but the benefit flows to customers only after awards are made and systems are purchased — which takes time

Network Software: DAT Green Shoots, Convoy Margin Drag Continues

• Network Software grew 14% total (5% organic); recurring revenue grew mid-single-digit plus, while nonrecurring declined mid-singles as customers transition to cloud
• EBITDA margins were 50.7%, down 460 bps year-over-year; core margins declined only 20 bps, with the gap driven by Subsplash (lower margin, scaling) and investment in Convoy at DAT
• DAT: for the first time in several years, the carrier side of the DAT ecosystem grew in Q1 — a concrete early indicator management flagged as a green shoot. Spot rates were up 20%–30% year-over-year. That said, a diesel spike compressed carrier margins late in the quarter, and guidance still assumes no meaningful freight recovery
• DAT launched its RateView AI agent into live production (conversational lane rate guidance), Convoy's Load Notes product automates entry of broker emails and chat into bookable loads, and Loadlink's voice-to-post enables hands-free load posting — AI is shipping in production
• ConstructConnect grew recurring revenue double digits with continued momentum from Boost (AI-based takeoff solution). The engineering team has shifted entirely to agentic coding tools and is now shipping 4x the features compared to a year ago
• Foundry returned to year-over-year revenue growth, with Nuke at record ARR and net retention above 100% for the first time since the 2023 writers/actors strikes
• Subsplash turns organic in Q4 2026, which will provide a tailwind to Network segment organic growth in Q4

Technology Enabled Products: NDI Record, Neptune Still Pressured

• TEP grew 9% total (7% organic) — better than expected, driven by NDI and Verathon strength
• NDI posted another record quarter on exceptional demand for electromagnetic tracking in cardiac ablation, neurological, and orthopedic procedures
• Neptune declined low single digits, better than expected; solid static meter growth partially offset lower mechanical meter volumes. Cloud-based software adoption is scaling but from a small base. Input cost pressure from bronze ingot inflation persists; Neptune is absorbing this through regular-way pricing rather than surcharges (the surcharge approach tried in Q3 2025 caused customer friction and is not being repeated)
• Verathon delivered solid growth driven by BFlex and GlideScope demand, with new product launches expected through the balance of the year
• TEP EBITDA margins contracted 260 bps: input cost pressure at Neptune plus a mix shift at NDI and Verathon toward lower-gross-margin consumables (which carry more durable reoccurring revenue characteristics)

AI Accelerator Team and Portfolio Velocity

• Roper's central AI Accelerator team (led by Shane Luke and Eddie Raphael) completed its first direct partnership — with Vertafore — contributing to the six agents launched at Vertafore's April customer conference. Management describes a 10x improvement in development speed in specific workstreams during the partnership
• The team has now expanded from one concurrent engagement to six; management expects the pace of partnerships to accelerate throughout 2026
• Management's general AI monetization framework: subscription-plus-consumption-overage models are the expected long-term structure; pure consumption (as at Convoy/DAT) applies where customer unit economics are transaction-based

M&A Pipeline Pause

• After reaching record pipeline levels in January 2026, the broader public software valuation drawdown caused sellers to pause active processes; management describes the pipeline as now more proprietary and targeted
• Management believes the M&A setup has improved: LP pressure on private equity is unchanged or intensified, and private credit market constraints are adding pressure on PE sponsors. No meaningful PE debt maturity cliff exists in 2026, but sponsors are motivated to exit well before maturity
• Roper views its refinancing of the revolver (new 5-year $3.5B facility with tighter spreads) as a cost-of-capital advantage versus other acquirers facing a constrained private credit market

One-Offs

• Share Repurchase Impact: The FY26Q1 DEPS beat versus guidance was partially driven by a lower share count from $1.5B of share repurchases in the quarter, reducing weighted-average diluted shares. The full-year guidance raise of $0.50 at the midpoint reflects Q1 operating outperformance plus the already-executed share repurchase activity; no additional buybacks are embedded in the forward guide. The company exited Q1 with 102.4M shares outstanding versus 106.6M at year-end 2025.
• Network Software Margin Suppression: Reported Network Software EBITDA margins of 50.7% are down 460 bps year-over-year, but core margins declined only 20 bps. The gap is structural for 2026: Convoy (loss-making technology investment within DAT) and Subsplash (faster-growth, below-segment-average margin) will continue to suppress reported Network margins until each scales into profitability. Subsplash turns organic in Q4, and Convoy's economics are expected to improve as the freight automation platform scales.
• TEP Gross Margin Mix Shift: The TEP margin compression in FY26Q1 (operating margin 32.4% vs. 35.0% in FY25Q1) is driven by (1) higher bronze ingot costs at Neptune and (2) a deliberate mix shift at NDI and Verathon toward consumables/reoccurring products, which carry lower gross margins but more predictable revenue. Gross profit dollars are growing at both businesses; the percentage compression reflects mix rather than pricing or cost-control deterioration.
• Nonrecurring Timing in Q2: Application Software organic growth will be lower in Q2 than Q1 due to nonrecurring perpetual license timing. This is a known mechanic and not a sign of deterioration in the recurring base.

Thesis Updates

The Organic Growth Floor Appears Stable — but the Ceiling Remains Unclear

• Roper delivered 6% organic growth in FY26Q1, consistent with the past two quarters and at the high end of its 5–6% full-year guidance range. The quarter provides evidence that the portfolio's recurring revenue base is durable and modestly improving, with recurring software revenue growing 7% across software segments
• However, 6% organic growth with no assumed GovCon improvement, no freight recovery, and a Neptune decline still represents organic performance running below management's stated 7–7.5% structural target. The question of when — or whether — that structural target is achievable remains open
• The pattern is now consistent: Roper guides conservatively, delivers at or slightly above the guidance midpoint, and raises DEPS primarily via buybacks. This approach is producing per-share compounding but not accelerating the underlying organic growth rate

Deltek GovCon: Now Three-Plus Years of Waiting

• Management noted Q1 GovCon softness is continuing — "still waiting for the GovCon inflection" was the direct characterization. Private-sector Deltek demand remains strong; the issue is exclusively the GovCon enterprise perpetual license market
• The One Big Beautiful Bill is framed as a positive for defense contractor spend, but management is explicit: it only reaches Deltek's customers after those customers win awards and invest in systems, which "takes a bit of time"
• The longer GovCon remains soft, the more the thesis shifts from "temporary delay" to questioning whether the segment will sustain its historical mid-single-digit-plus growth profile. Roper has now embedded zero GovCon improvement in guidance for a second consecutive annual period

CentralReach Is the Strongest AI Proof Point in the Portfolio

• CentralReach's 75% AI-influenced bookings share — up from zero two years ago — is the clearest example in the Roper portfolio of AI actually driving incremental commercial outcomes
• Management's framing that CentralReach "sits inside mission-critical workflows, has proprietary data, and is translating that advantage into real growing AI revenue" is consistent with the thesis that vertical incumbency is a structural AI advantage
• As Vertafore, DAT, ConstructConnect, and others follow CentralReach's commercialization path, this proof point should support the argument that AI will drive bookings acceleration across the portfolio — though the timeline remains FY27 and beyond

Aggressive Buybacks Signal Management Confidence — and Are Compressing the Share Count

• Roper has repurchased 6 million shares (~6% of shares outstanding) for $2.2B since November 2025, at an average price that management characterizes as a valuation dislocation. The Board expanded authorization by $3B, leaving $3.8B available
• Free cash flow per share grew 15% year-over-year in FY26Q1, combining operating cash flow growth with a declining share count — the compounding model is working at the per-share level even if total organic growth remains below management's stated target
• The buyback-first posture also reflects an M&A market that has temporarily paused; if and when deal flow resumes, the tension between deploying capital into buybacks versus acquisitions will re-emerge, and the prior pattern of $3B+/year in M&A could resume

Network Software Margin Trajectory Deserves Monitoring

• Network Software operating margins fell to 40.6% in FY26Q1, down from 44.3% in FY25Q1 and 45.2% in FY24. The compression is attributed to Convoy investment and Subsplash scaling, but it represents a meaningful structural change to what had been the highest-margin segment in the portfolio
• Management argues this is temporary and that Convoy will eventually generate highly attractive returns. The risk is that Convoy's break-even timeline extends, and the segment's margin profile remains structurally impaired longer than expected