Roper Technologies Inc (ROP) — Q1 2026 Earnings Call Transcript

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. And now if you 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. And now if you 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, then Jason will walk through the enterprise financials, our balance sheet and provide an update on our share repurchase program. Then 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. So let's go ahead and get started. Next slide, please. As we 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 DEPS 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 remained strong, consistently in the mid-90s area. On that foundation, enterprise software bookings were also strong, core up low double digits on a trailing 12-month 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 to $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 road maps 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 company 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. And our third takeaway centers on capital deployment. 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 deployment 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 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 and disciplined long-term buyers. Before I turn it to Jason, one theme you will hear throughout today's call: organizational velocity across our portfolio continues to build. The investments we've made over the past two years in leadership, in AI, in modern engineering practices and operational rigor are working and demonstrating meaningful results. Our businesses are releasing innovation faster, executing sharper and moving with more confidence. And that's what gives us conviction in the balance of the year and beyond. So 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 DEPS 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 Technology-Enabled Products segment due to mix of more consumables at NDI and Verathon, coupled with higher input costs at Neptune. Core EBITDA margins in our software segment expanded 40 basis points, which includes continued investment in AI. DEPS of $5.16 was above our guidance range of $4.95 to $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 three 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. And 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 and 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 maintained 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 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 and reoccurring revenue, about 85% of the segment, grew in the mid-single-digit plus range, while nonrecurring was essentially flat. Stepping back at the segment level, three themes stand out for the quarter. First, enterprise gross retention remained 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 ground-to-cloud conversions and on bringing new cloud-native products to market. And third, AI progress continued to build to signal a shift 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 a 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. And 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 from reference connect and reconciliation to submission processing and e-mail 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 is exciting to see. And 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. And most importantly, CentralReach continues to be one of our strongest AI proof points. AI-generated session notes have dropped from 5 to 10 minutes to about 30 seconds, giving clinicians back roughly eight hours a week to work with autism learners. BCVAs are saving 140-plus hours a year on report authoring and review and daily claim generation is six times faster. Customers are responding. AI and AI-influenced bookings were 75% of new business in the quarter, up from zero two 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 has delayed 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, but 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 are not baking into our guidance any GovCon inflection or any One Big Beautiful Bill benefit and rather we'll 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, lower in Q2 on some nonrecurring timing, improving in the back half with CentralReach turning organic and easing nonrecurring comps. Please turn us 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, nonrecurring declined mid-singles as customers move 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. And 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. ARPU expansion continues and adoption of our digital freight marketplace solutions remain strong. On the macro, spot rates are up 20% to 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 in 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 is 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's Load Notes is turning brokers' freeform emails and chat messages directly into bookable loads, eliminating manual data entry, and Loadlink's 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 Auto Count, 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 four times the features versus a year ago. Broadening this across the portfolio to drive multifold product velocity gains is a key priority and an exciting one for the enterprise. And 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 writers' 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, and prior to turning to our segment outlook, I'd like to make a couple of quick callouts. 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 callouts. Subsplash turns organic in Q4 and margins will reflect continued investment in our freight platform acquisitions for 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; and 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 multiyear growth vector for NDI. Procedure volumes continue to grow, leading OEMs are introducing new tracking-enabled catheter platforms. NDI has a unique right to win as a 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 in Tallahassee. The market dynamics were largely 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 we'll continue to monitor underlying demand. Rounding out the segment, Verathon delivered solid growth, supported by strong BFlex 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 improve in the back half of the year. With that, please turn us to Page 13. On this slide, we'll cover our Q2 and full year 2026 guidance. Specifically, we're raising our full year 2026 DEPS guidance to $21.80 to $22.05, up from $21.30 to $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% to 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 DEPS guidance of $5.25 to $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 repurchase 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 are 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 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. But when it moves, a large number of opportunities are likely to emerge and we're in an advantaged position to capitalize on this. We 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. So 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.

Nice job here. Maybe, Neil, starting for you. I think it was clear in your commentary, you kind of talked about the accelerating pace of innovation and the right to win and TAM expansion—the TAM-expansive nature of AI. But if we think about kind of 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? Maybe how the platform positioning and embeddability of agents layers in incremental confidence in that right to win around agents?

Yes. If you're asking about embeddability, I want to make sure I'm answering the right question since you were a little muted. A few things I'd start with on this. It really starts with what we talk about internally all the time about the AI 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 what the product can do, their eyes sort of pop out of their head. It's truly a magical experience. They 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, as an example. So in terms of monetization, generally—I'll start there. Second, we believe that the right to win here is on-stack AI embedded natively in workflows; that's a winning play and a huge incumbent advantage. Third, monetization is not going to be one size fits all. There are some businesses today that already price on a consumption basis—think SoftWriters and pharmacy automation or what Convoy does at DAT. Those will likely be monetized on a consumption basis and tend to align with customers' unit economics. More broadly, though, monetization will balance adoption and long-term monetization. Our customers very clearly tell us they need to be able to plan for and budget what the spend is going to be. So it will likely be some sort of subscription with an overage based on utilization of the AI tools. I think that aligns nicely with adoption because then the customers focus on how to realize the value and not worry every time they press a button it costs money. But when usage grows and the capability becomes deeply embedded in workflows, we'll be able to grow with that utilization.

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

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

Yes. It's a strong start to the year and we're very encouraged by what we've seen. But we're just one quarter in, so we want to see how things play out. As Neil talked about, we have some mechanical things in the second quarter—nonrecurring in Application Software will be a little more impacted than the first quarter. In Technology-Enabled Products, we're comping a high watermark in Q2, but that will 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 also have some easing comps in Application Software. All that blends into our decision to hold the range at this point, but we'll see how it plays out.

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

Talking about private markets on M&A? Sure. As I mentioned in the prepared remarks, with the public market drawdown it's gone from the busiest we've been in a long time to less busy. We're still busy and active, but it's more proprietary and more targeted. We actually think the M&A setup has improved a bit for us over the last 90 days given persistent LP pressure and a constrained private credit market. The combination of those two dynamics will likely surface more quality assets in processes, and we're an advantaged buyer in that regard. Timing is still to be determined. We're modeling 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 divest an asset well before maturity, and that's something we and our team are lining up. We think there's potential to acquire very high-quality assets at differentiated values given the backdrop. We'll stay active in processes and prosecute opportunities in front of us.

I would just reiterate we refinanced our 5-year revolver this quarter at a very good cost of capital, tightening the spread a little bit. Shout out to Shannon and Dave Baker for getting that done. It positions us well; we have a lot of balance sheet flexibility and can move quickly when opportunities arise.

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

We asked that very specific question on our call down with Deltek. The short answer is very little, if any. There is a sliver of the aerospace/defense subsector focused on munitions and war efforts, and that is a small portion of the broader contractor population. So there was a minimally negative impact in that narrow area, as those contractors are focused on the war effort rather than on contracting for ERP software, but it wasn't material in the quarter.

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 health care. I think those are the two biggest vertical AI adopters so far. Your respective software exposure there is still doing pretty well. What's your take on this topic? Have you seen any changes year-to-date as we've also seen big ARR numbers come through from the frontier model providers that make you more concerned in coming quarters?

The short answer is no, we are not seeing a negative impact on the budgetary spend that we compete for. Surveys about IT spend can be misleading because the AI effort allows us to monetize labor spend—it's a different bucket of opportunity to capture and provide value to the end market. Across the whole platform, we're not seeing an impact to our allocation of budget, especially not in legal and health care. Aderant, for example, continues to perform very well, and it's been an amazing few years there.

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

It was certainly above double digits in the quarter; we had an easier Q1 comp last year, so the trailing 12-month view is the right way to think about it. And yes, our bookings definition excludes price. Prices held up very well. Historically, we're thoughtful across the portfolio about pricing; you have to earn the right, and companies are doing that as part of our strategic plan work. We've continued to do that methodically over the last several years.

I'd add that relative to what the market will bear on pricing, we have underutilized that lever in growth. It's not a portfolio-wide push to raise pricing everywhere. Where we've earned the right with product value and customer relationships, we are taking more pricing. It's a strategic and earned process. We would hope to see maybe 50 to 100 basis points of pricing impact across the software portfolio over the next two to three years.

I wanted to build on the prior question on legal tech because it's in the media—some remarkable growth from some of these SaaS natives. You've called out Aderant as delivering a couple of years of amazing performance. It does seem like it's showing up in the segment level slides every quarter on record this or that. How much more sustainability is there in terms of momentum for getting folks to move to SaaS? Can this train keep going just on the momentum with Aderant? And then I have a follow-up.

Chris and the team at Aderant have done a great job. Aderant has been strong for a long time, but the underlying strategy has evolved. Initially they outcompeted and grew market share in large law. Then they prosecuted both organic and inorganic strategies to add bolt-on products we could sell to the installed base. Then cloud adoption accelerated—COVID was a catalyst—and we rapidly cloud-enabled the product set. We're still in the early innings of moving this constituency to the cloud with lift-and-shift work remaining, and now AI is an additional tailwind. It's a multi-driver growth story and there's quite a long way to go. Owning businesses for the long term means always looking to horizon two and three for what to build organically or inorganically to sustain or improve growth rates.

That's helpful. My follow-up: with these agentic capabilities, customers may be uncomfortable going fully autonomous and may require change management. Are you seeing the need to deploy forward-deployed engineers or change how you go to market and help customers consume these agentic tools? Does it create incremental costs or handholding?

Short answer: yes. This year is a massive learning year for us on commercialization of AI tools. How to position it, sell it, price it, implement it, get utilization pull-through and drive renewals—this customer's whole journey will generate a lot of learnings. In some cases uptake has been very natural and you don't need forward-deployed engineers because pressing the 'magic button' results in immediate productivity savings the customer can act on. In other cases there's trepidation—customers worry about job displacement—and you need to work through change management. In almost every case customers do task replacement or augmentation rather than wholesale job loss. From an investment point of view, it's often a reallocation of resources from customer support to implementation or field engineering rather than a large incremental cost increase overall.

Just curious on the embeddability and subscription-plus-overage view. I get you don't want customers to worry about every click costing them money. If these capabilities become embedded and efficiencies potentially require fewer people at your customers, how do you judge the ROI of the investment necessary to achieve that? How do you evaluate whether the required investment to build and embed these capabilities is worth it, given potentially similar subscription levels for customers?

These are very hard dollar ROIs. For instance, at DAT, manually brokering a load costs somewhere between $100 and $200 of labor; using our load automation it's around $40. That's a demonstrable hard dollar ROI. At Vertafore, one agent does reconciliation in 30 seconds versus 17 minutes—those time-and-motion studies yield clear dollar ROIs. Sales teams are taking that message to market. These are not theoretical benefit claims; they're measurable and translate to financial ROI.

From a development and cost perspective, we're seeing demonstrable efficiencies from frontier models. We get more output and more roadmap to consume. On OpEx investment, we're assuming productivity gains and folding those back into the roadmap. I don't think this fundamentally changes our P&L structure or margin profile.

That's what I'm getting at—the ROI for Roper specifically. If we're spending to develop new AI tools that are embedded in existing products, how does that increased investment compare to what was required historically to keep the same customer? Are you seeing higher investment needs in 2026 versus prior years?

On the development front, we're seeing productivity improvements with the frontier models themselves, so we're getting far more output. If you talk about OpEx, you're getting more roadmap delivered. So I don't think it changes our margin profile fundamentally; we capture productivity and invest it in the roadmap.

Joe, apologies if I missed the thrust of your question earlier.

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 real success at Vertafore. Can you touch on how they ended up stack-ranking the opportunities they see and the scope of their involvement and how much it's led to an improvement in velocity?

The AI accelerator has three objectives: to coach and teach our software companies so they can accelerate their own AI work, to partner shoulder-to-shoulder and build with operating companies, and where appropriate to build shared componentry we can reuse across Roper. The team allocates effort based on size of prize and impact, so it's an executive-leadership prioritization. Vertafore is one of our largest opportunities from an agentic automation point of view; they released six agents at their Accelerate conference. This quarter we'll broaden from one engagement to many as the team grows. The accelerator brings speed and modern practices and helps unblock change management issues. Partnering with Vertafore delivered step-change improvements in speed and quality—literally an order-of-magnitude improvement in productivity in some cases. It's very early days but the partnership has gone extremely well in the first six months.

When you look across the portfolio, AI commercialization is at different stages. Some businesses like Aderant and CentralReach are advanced; others are coming up behind them. Any pattern matching on why some businesses move faster than others? Is it primarily customer-driven?

Where we're most advanced are the companies that got after this earlier and were able to get agentic SKUs into market first. CentralReach, Aderant, Convoy and DAT are the tip of the spear. Now we have 10 to 12 companies that are getting to market with agentic capabilities, not just chat or embedded GenAI search. The pattern is product readiness and early market focus. We also consider deeper operational pattern recognition for shared components where appropriate.

The benefit of being part of Roper is we held a President Summit a couple months ago and did an AI showcase for companies further along, which accelerates learning. Those that embraced early and solved a true customer problem got ahead, but others are moving up the curve quickly.

I wanted to follow up on the comments around ground-to-cloud conversions advancing meaningfully. What's the impact of SaaS transitions broadly in the Application Software segment? Is that contributing points of growth today? You mentioned 85% of the segment grew mid-single-digit plus while nonrecurring was flat. Is the SaaS transition an increasing benefit or is it already playing out in that segment?

Happy to take that. About two-thirds of our products are cloud-enabled today. We have about $1 billion of maintenance that we think will convert over the next five to ten years, and that should convert at a 2.0x to 2.5x lift from maintenance to SaaS. We're in the first or second inning of that journey. It should add roughly 50 to 100 basis points of growth per year over the next five to ten years.

When we've talked about this in the past, we've said we're pacing ground-to-cloud conversions at our customers' cadence, not forcing it. With the advent of AI, embedding AI features in the cloud product is a compelling pull that could accelerate that transition—what might have been eight to ten years could compress to four to six years. We also made significant investments over the last three years to get product-enabled and much of the cloud product has feature parity or better than on-prem, so the setup is better than a few years ago.

Aderant is a bit further along on cloud migration. Some parts of our portfolio, like certain health care businesses and labs, are a little further behind, which is just the nature of those end markets.

Perfect. That makes sense. One thing that stood out was the margin impact in Application Software. The margin impact of businesses owned for less than four quarters was positive year-over-year. Is the takeaway that earlier-stage acquisitions are getting to margin parity quickly?

In Application Software, that positive margin contribution came from CentralReach, which has high R&D as a percent of revenue, around 20%, but very strong incrementals and a cloud-native platform so margins expand as it scales. In Network Software, we had acquisitions like Convoy and Subsplash. Convoy is an intentional technology investment to automate the spot freight market and is a drag on margins in the near term. Subsplash is a faster-growing, lower-margin business that should scale margins over time. So in network, acquisitions have more of a near-term drag, but over the out years they should be accretive as they grow.

Congrats on a strong start. You're clear that the guidance doesn't assume a recovery at Deltek or DAT. Can you remind us the confidence you have in the rest of the Application and Network Software businesses offsetting that weakness through the year?

Going segment by segment: Application Software—we feel good about what happens in the second half. CentralReach had a really strong start under our ownership and that recurring strength will flow through. We expect about 80 basis points of accretion from that segment in the second half. In Network, DAT looked good in Q1, Foundry is improving and had a great start, and Subsplash turns organic in Q4 which will be accretive. Overall, we feel good about the rest of the business.

Just one: it sounds like the downtick in Q2 is purely due to tough comps, but just to clarify, any geopolitical or macro dynamics baked into that assumption given recent events?

No, not at all. The Q2 softness is timing related in the Application Software segment—nonrecurring perpetual activity. In Technology-Enabled Products, we're comping a high watermark in Q2 last year, so it's a comp effect. Nothing geopolitical is baked in. We're mostly U.S.-centric, and we haven't seen Middle East impacts in our numbers.

To put a finer point on the full year guidance: is the core EBITDA guide essentially unchanged and it's really a share count-driven guide? What is the share count assumption at the guidance midpoint now, and does the guidance embed any buybacks beyond what's already executed?

That's correct. We had a couple hundred million of repurchases between quarter end and today, and the ending share count for Q1 was 102.4 million. We've assumed some dilution on top of that for modeling. The guidance mainly flows our Q1 beat and the buyback activity we've already executed. It does not assume material additional buybacks beyond what we've already done and what we've executed to date.

The first quarter beat was partially from improved operating performance and partially from the buyback activity.

That's helpful. Within the Network business, DAT has faced a tough demand backdrop but executed well. Over the last six months there are better signals in the U.S. freight market. Can you flesh out more what you're seeing in DAT and what's dialed into your assumptions for the balance of the year?

We haven't assumed any freight market improvement in our guidance. We did see carrier counts increase in Q1 for the first time in several years, which is a green shoot we've been waiting for, though diesel spikes compressed carrier margins late in the quarter. Spot rates were up 20% to 30% year-over-year late in the quarter. We're cautiously optimistic but remain conservative in our modeling given volatile input costs and the uncertain path forward.

I wanted to ask about Neptune. One of your peers experienced meaningful project delays and disruption in the quarter for their water meter business. Have you seen anything similar in terms of industry dynamics or any market share changes during the quarter?

For Neptune, we have not seen project delays. The dynamics are a bit different because Neptune plays in smaller municipalities and historically hasn't had a large amount of project-based work. Neptune managed channel inventory well in 2025, and we saw decent short-cycle demand in Q1 as we shipped closer to retail. So it's not an apples-to-apples comparison with the competitor you referenced.

If I can have a follow-up: can you unpack the cost pressure dynamics for Neptune and the overall Technology-Enabled Products segment—magnitude and timeline to offset those pressures for modeling marginal impacts?

At Neptune the primary input cost pressure is the ingot cost for bronze. We pushed a raw material surcharge into the market in July last year which had a negative demand impact; customers preferred regular-way pricing rather than surcharges. Our baseline assumption is ingot costs remain high for a while given demand dynamics such as data centers and raw material constraints. So margin recovery will be captured through regular-way pricing over a couple of quarters as backlog and pricing flow through. In the segment overall, the mix shift towards consumables at NDI and Verathon increases recurring durability but those consumables carry lower gross margins. GP dollars are higher, but GP percentage may be pressured. Below-GP operating leverage remains strong in those businesses, so we don't expect large operating profit compression over the longer arc.

I think Neil covered it well. Thanks.

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