Roper Technologies, Inc (ROP) Q4 2025 Earnings Call Transcript

Roper Technologies, Inc (NASDAQ: ROP) Q4 2025 Earnings Call dated Jan. 27, 2026

Corporate Participants:

Zack Moxcey — Vice President of Investor Relations

Neil Hunn — President, Chief Executive Officer & Director

Jason Conley — Chief Financial Officer

Analysts:

Brent Thill — Analyst

Clarke Jeffries — Analyst

Joseph Vruwink — Analyst

Dylan Becker — Analyst

Brad Reback — Analyst

Terrell Tillman — Analyst

Hoi-Fung Wong — Analyst

George Kurosawa — Analyst

Joshua Tilton — Analyst

Deane Dray — Analyst

Joseph Giordano — Analyst

Presentation:

operator

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

Zack Moxcey — Vice President of Investor Relations

Good morning and thank you all for joining us as we discuss the fourth quarter and full year 2025 financial results for Roper Technologies. Joining me on the call this morning are Neil Hun, President and Chief Executive Officer Jason Connolly, Executive Vice President and Chief Financial Officer Brandon Cross, Vice President and Principal Accounting Officer and Shannon o’, Callaghan, Senior Vice President of Finance. Earlier this morning, we issued a press release announcing our financial results. The press release also includes replay information for today’s call. We have prepared slides to accompany today’s call, which are available through the webcast and are also available on our website.

And now, if you please turn to page two. We begin with our Safe harbor statement. During the course of today’s call, we will make forward looking statements which are subject to risks and uncertainties as described on this page in our press release and in our SEC filings. You should listen to today’s call in the context of that information. And now please turn to page three. Today we will discuss our results primarily on an adjusted, non GAAP and continuing operations basis for the fourth quarter. The difference between our GAAP results and adjusted results consists of the following amortization of acquisition related intangible assets and financial impacts associated with our minority investment in indicor.

Reconciliations can be found in our press release and in the appendix of this presentation on our website. And now if you please turn to page four. I’ll hand the call over to Neil. After our prepared remarks, we will take questions from our telephone participants. Neil.

Neil Hunn — President, Chief Executive Officer & Director

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 by highlighting our Q4 and full year performance. Then Jason will walk through our Enterprise. Financials, our Q4 segment performance, our balance sheet and capital deployment capacity. Next, we’ll discuss our segment highlights and. Introduce our 2026 guidance. And then we’ll close with a few. Summary thoughts before opening the call for questions. So let’s go ahead and get started. Next slide please. As we turn to page five, I want to highlight three takeaways for today’s call. First, we delivered solid execution. In 2025. Revenue was up 12% EBITDA was up. 11% and free cash flow is up 8%. Importantly, enterprise software bookings grew in the low double digit range for the year. Providing strength as we head into 2026. Second, we continue to invest for our long term and sustainable growth. That said, organic growth this past year. Was below our expectations in 2025 and we own that our organizational focus and resolve are even stronger coming into this year. We’ve upscaled talent, sharpened strategy and improved execution across the portfolio and that work. Is showing up for the enterprise. To this end, our application software businesses. Save for Deltec improved organic growth in the 70 basis point area, demonstrating broad based growth improvements occurring within the segment. Importantly, we’re not starting the year assuming. Organic growth will inflect in 2026 despite the traction we believe we’re starting to achieve. We’re going to execute and will reflect. Any improvement in organic growth in our. Guidance as it materializes throughout the year. We’ll have much more to say on this later in the call on AI. Specifically, we continue to be excited about. The AI product opportunity because our businesses sit directly inside mission critical high frequency workflows where we already have deep domain. Knowledge, proprietary data and trusted distribution. The way I can move from productivity to on stack embedded automation that improves. Outcomes for our customers and is highly monetizable. Importantly, our decentralized model lets each business deploy AI with the appropriate domain specificity across our various end markets. To further accelerate our pace of AI. Product development, we hired Shane Luke and Eddie Rafael to lead the Roper AI Accelerator team. They will coach and partner directly with. Our businesses, build a small AI development strike team and leverage reasonable elements and best practices across the portfolio so we can deploy AI with increasing speed and market specific precision while scaling what works. Exciting stuff for sure, and our third. Key takeaway centers on capital allocation. During 2025 we materially advanced our portfolio. And foundation through capital deployment, deploying $3.3. Billion towards high quality vertical software acquisitions. During the year highlighted by Central Reach, Subsplash and several tuck in acquisitions. Also importantly, we leaned into opportunistic repurchases buying back 1.1 million shares for 500 million in Q4. As we look to 2026 we have north of 6 billion of capacity for potential MA and share repurchases. We’re very encouraged by the size and quality of our acquisition pipeline and we. Expect to remain active while staying highly disciplined on price and business quality. And in parallel we’ll continue to use. Buybacks opportunistically when they represent the most. Attractive risk adjusted path to durable cash flow per share compounding. So with that Jason, let me turn. The call over to you so you. Can walk through our quarterly and full year results. Jason

Jason Conley — Chief Financial Officer

thanks Neil and good morning everyone. We’ll start off here with the fourth quarter results. To summarize, we finished ahead of expectations on depths driven by very strong margin performance. Revenue of $2.06 billion was up 10% over prior year with acquisitions contributing 5% and organic growth up 4% which was below our expectations. I’ll expand on this Shortly. EBITDA of $818 million was also up 10% over prior year. Notably, our core EBITDA margin expanded 60 basis points in the quarter representing 54% incremental margin deficit. $5.21 was above our guidance range of 5.11 to $5.16 and up $0.40 over the prior year.

Shares were reduced by $1.1 million in the quarter for repurchases, which you see partially showing up here in our diluted share count on a year over year basis. However, the repurchase did not impact debts in the quarter versus our guidance given the partial quarter share count benefit and higher interest expense. Now if you turn with me to slide 7, I’ll walk through the Q4 segment Performance Application Software revenue grew 10% with organic growth of 4% and margins were solid, expanding 70 basis points to 42.2%. It’s important to outline some details on organic revenue. Recurring revenue grew 6% in the quarter, however, non recurring revenue was down 8% in the quarter and was the primary driver to the lower end of our mid single digit outlook.

In our last call we talked about Delltec being the big swing factor in the quarter with the prolonged government shutdown, large govcon, commercial activity and perpetual license. Revenue was meaningfully impacted leading to Deltec being up at the lower end of mid single digits for the year as compared to the solid mid single digit plus grower it’s been over the decade that we’ve owned the business. That said, we are cautiously optimistic about a 2026 improvement for Delltec given both the 2025 disruptions caused by DOGE and the shutdown and the forward benefit of the O Triple B appropriations coming into the market as improvements occur.

We will reflect this in our outlook for network software. Revenue grew 14% with organic growth of 5%. Margins were lower at 52.8% due to the recent bolt ons for DAT that are currently scaling into profitability on organic revenue. Recurring growth here was also 6%. The recurring performance was consistent with patterns over the last two quarters with mid single digit growth at DAT despite a muted market backdrop and steady improvement at Foundry. However, Nonrecurring revenue was down 3% on lower services revenue and some customers electing to move From Perpetual to SaaS which negatively impacts the quarter but benefits long term growth and customer lifetime value.

For our test segment, revenue grew 6% or 5% organically while margins held flat to prior year at 34.8%. NDI outperformed in the quarter given strong demand for solutions in the cardiac ablation space while NEPTUNE was down slightly as expected as we comped against a stronger prior fourth quarter and worked through the final surcharge negotiations. Now let’s turn to slide 8 where I’ll summarize our 2025 full year results. 2025 was a solid year in terms of cash flow and debt performance despite lower than expected organic revenue. Revenue posted at 7.9 billion or up 12% over a prior year.

Acquisitions contributed nearly 7% growth. Of note, we acquired two great platform businesses in Central Reach and subsplash that will be accretive to 2026 second half organic growth. We also made three strategic bolt ons for DAT that significantly automate workflow in the spot freight market and will gain adoption in the years to come which will ultimately inflect the growth rate for DAT. Organic growth was nearly 5.5% which Neil will discuss in the segment detail. EBITDA reached $3.1 billion or 39.8% margin and was up 11% over prior year. Of note, core margin improved 30 basis points and represented 47% incremental margin which is in line with our long term growth algorithm.

Debts of $20 was up 9% over prior year and reflects the top end of our 2025 guidance range provided in January. Despite lower organic revenue and in year dilution from recent acquisitions, free cash flow of nearly $2.5 billion was up 8% and represented 31% of revenue, which is in line with our initial free cash flow margin framing for the year. This represents an 18% CAGR since 2022 or excluding the impact from Section 174. In both periods it was at 14%. As we look forward to 2026, we expect higher growth than in 2025 through benefits from working capital and cash tax improvements.

This will put us safely over 30% of revenue next year. However, Q1 will be a bit lower given timing of coupon payments for new bonds issued in the third quarter of 2025. This of course does not contemplate future capital deployment towards either MA or share repurchases. Which brings us to our balance sheet discussion on slide 9. We’re entering 2026 in a strong financial position with net leverage ratio of 2.9 times and ample near term liquidity with about $300 million of cash, nearly $2.7 billion available on our revolver. With this position and strong forward cash generation, we have over $6 billion in capacity for capital deployment this year.

Regarding MA opportunities, we’ve been proactive and successful in executing high quality acquisitions for the last couple of years. Despite a weak MA. Most anticipate the market to pick up in 2026, which we view as a net positive given Roper is a home of choice for many acquisition target CEOs. Additionally, we have the attractive optionality of a share repurchase program which was authorized and commenced in the fourth quarter. As Neil mentioned, we deployed 500 million to acquire 1.1 million shares in the quarter at an average price of just under $446. This leaves us 2.5 billion remaining on our current $3 billion authorization.

We will remain agile in deploying capital to the best return for shareholders given the current valuation dislocation. We are now very pleased to have the buyback option available. With that, I’ll turn it back over to Neil to discuss the segment performance and outlook.

Neil Hunn — President, Chief Executive Officer & Director

Thanks Jason. As we turn to page 11, let’s review our application software. Segment revenue for the year grew by. 16% in total and organic revenue grew by 5%. EBITDA margins were 42.5% and core margins. Improved 80 basis points in the year for the segment. We saw recurring and reoccurring revenue grow on an organic basis 7% for the year and total organic revenue improve about. 70% basis points, save for the Deltec. Related market weakness, both of which provide. Evidence of underlying strength for the businesses in this group. Adera continues to execute from a position of strength. FY25 revenue grew in the mid teens. Area with strong bookings throughout the year. Importantly, they’re leaning into the right long term work, accelerating SaaS and AI led innovation while modernizing their tech platform and data lake. Deltec was the primary weaker part of the story for this segment and has. Been straightforward all year with Govcon remaining. A challenging market throughout most of 2025. That said, we view the passage of. The O triple BBB as a positive. Development for the market. It should drive upside over time, but. We’Ve not included any benefit in our. 2026 guidance and will monitor customer activity as the year progresses. Bird 4 had another solid year with. Growth driven by strong recurring revenue performance. And continued execution on product and customer outcomes. Looking ahead, the team is leaning into a focused set of priorities, scaling automation. Particularly AI enabled workflow improvements while continuing. To deliver steady innovation to the agency and carrier ecosystem. PowerPlan delivered another strong year with healthy recurring growth and steady progress on product modernization and cloud migration. They continue to invest in product innovation. Customer experience and internal operating capabilities, improving their long term organic growth profile. Shout out to Rafi for carrying the. Leadership mantle forward at Power Plan and. Great job managing the transition from Joe Illumia, formerly known as Seaboard and Transact continues to execute well and is progressing in its integration and platform roadmap while maintaining solid commercial momentum. And we’re excited to welcome Greg Brown, our new CEO at Allumia who brings a long and successful history of leading scaled software businesses. Congrats and thanks to Laura, Rachel, Taran. And Rob for executing the vcp, driving. The business combination and achieving the Year one target. We look at the broader portfolio of. Businesses we’ve acquired over the last couple. Years, Centellus, Transact, Subsplash, Central Reach and procarement. We feel very good about the quality. And long term growth potential of this group. However, ProCare did not perform to our expectations in 2025, although we do feel good about the business building that occurred last year. Specifically, we improved payments execution, upgraded the entire leadership team and continued to win competitively in the market where ProCare remains a category leader. The biggest constraint was implementation timing across. Both software and payments which delayed customer time to value and weighed on payments volumes. Improving implementation speed and delighting the customer base are the top priorities and procares. Leader Joe Gomes has executed this playbook before at Power Plantrees is off to an outstanding start and ahead of our deal model. The business is scaling well with strong. Recurring software momentum and expanding profitability and they’re building a broader growth engine through. Cross sell and a steady cadence of. New product releases including AI enabled offerings. Now turning to our outlook for 2026. We expect organic growth to be in the higher end of the mid singles range. We also expect a modest back half. Weighting as Central Reach turns organic and non recurring comparables ease in the second half. As mentioned previously, we’re maintaining a conservative. Posture in GovCon at Deltec until we. See sustained improvement and commercial activity. So overall application software remains a durable. Growth engine supported by recurring revenue momentum and continued product execution across this portfolio. Please turn with us to page 12. Total revenue growth in our network segment. Was 8% and organic revenue grew 4%. For 2025, EBITDA margins came in at 54.1%. DAT continues to execute well on what. They can control, broker integrations, value capture and trust in a network, all leading to ARPU expansion. Although the freight recession persisted throughout 2025. DAT is continuing its evolution from a traditional load board into a more automated marketplace where brokers and carriers can match loads with greater trust and efficiency and. Increasingly transact into the platform. And as this happens, dat’s TAM and monetization opportunities grow. To this end, DAT is advancing its. AI first operating model with concrete use. Cases across carrier onboarding, fraud detection and freight matching automation. This is a pattern we like AI. That improves customer outcomes, lowers transaction friction. Expands our TAM where we have a very high right to win. ConstructConnect had another strong year of recurring revenue growth and the team made material. Technical advances with their AI based takeoff solution Boost. Foundry is making steady progress with year. Over year growth in ARR as the market continues to recover. We continue to be excited about the AI product development at Foundry because it. Fits naturally in the creative workflows where small improvements can materially improve artist throughput. Importantly, these are high frequency, high value. Tasks that Foundry already sits inside, so AI is being delivered as embedded features that customers should adopt quickly given the clear and integrated efficiency gains offered. Mha, softwriters and SHP continue to execute. Well, supported by stable end market demand and strong reoccurring revenue models. Each team is advancing its roadmap with. Targeted investments in functionality, workflow efficiency and service levels to deepen customer value and retention. Subsplash is off to a great start. In the portfolio with strong execution and. Solid momentum across the business. We’re encouraged by the durability of the revenue model and the opportunity to continue expanding value delivered to customers over time. As we turn to the outlook for the year, we expect network software organic growth to be in the higher end of the mid singles range representing a modest improvement versus 2025. We expect a stronger Q4 driven by. Subsplash turning organic in the quarter of note. We remain conservative on DAT by assuming no meaningful improvement in the freight market. Now please turn to page 13 and let’s review our TEP segment’s full year Results. Revenue here grew 7% on a total. And 6% on an organic basis. EBITDA margins remain strong at 35.7%. We’ll start with NDI whose growth is being driven primarily by sustained momentum in. Its electromagnetic tracking solutions supported by strong OEM demand and program ramps. Importantly, OEM order activity has remained strong. And the business is converting that demand into higher revenue scale and operating leverage. Great job by Dave and the entire team at ndi. Verithon continues to perform very well with solid growth across its glidescope and B Flex franchises. Importantly, Verithon is the US Market share. Leader in single use bronchoscopes which reflects several years of consistent execution and reinforces the durability of a model as the business continues to take share in an. Attractive procedural workflow area. Looking to 2026, we’re optimistic about several. New product launches planned throughout the year. For the full year, Neptune grew modestly notwithstanding the year long backlog normalization supported. By demand for its static ultrasonic meters. And its cloud based software solutions. Although the second half commercial challenges tied. To our tariff surcharging program eased late in the year, we remain cautious and are not underwriting a recovery in our 2026 guidance. Finally, the balance of the businesses in. This segment Sifco, SMI, Enovonix, IPA and. RF ideas were really strong throughout 2025. And were meaningful contributors to the segment’s results. For the full year, we expect segment. Organic growth in the mid single digit. Range with first half being more in the low singles area as neptune’s backlog continues to normalize. Given the more limited visibility of neptune, we’re taking a cautious approach as we. Monitor underlying demand over the next couple quarters. With that, please turn us to page 15. So now let’s turn to our Q1 and full year 2026 guidance. Based on what we previously discussed in. Our segment overviews, we’re initiating our 2026 financial guidance to grow full year revenue in the 8% area, organic revenue growth. Between 5 and 6% and adjusted depths. Of 2130 to 2155. Our guide assumes a full year effective. Tax rate in the 21% area and more in the 22% area for Q1. To reiterate from earlier, our full year guidance does not bake in improvement at Deltec’s govcon business or in dat’s freight. Market and assumes modest top line weakness at Neptune versus 2025. As discussed, we expect stronger second half. Organic growth driven largely by central reach and subsplash turning organic and easing non recurring comparableness. Our guidance does not assume a meaningful. Revenue uplift from our AI development work either. We view AI as incremental upside as. We scale commercialization across the portfolio. Finally, we remain positioned to be active and opportunistic on capital deployment. We continue to have a robust M. And a funnel, a meaningful remaining share repurchase authorization and substantial financial flexibility, and. Will remain disciplined and unbiased between acquisitions and buybacks based on what drives the highest and most durable cash flow per share. Compounding for the first quarter, we expect. Adjusted debts to be in the range. Of 495 to $5, reflecting the dynamics previously discussed. Now please turn us to page 16 and we’ll open up for your questions. We’ll conclude with the same three takeaways. With which we started. First, in 2025 we delivered both double. Digit revenue and EBITDA growth and solid free cash flow. Enterprise software bookings grew in the low double digit range which positioned us well entering 2026. Second, we’re investing for long term sustainable growth improvements while staying disciplined in our expectations throughout 2025. We upskilled talent, sharpened strategy and improved execution across the portfolio and we are accelerating AI product development. We’re not baking in an organic inflection in 2026 and our guidance will reflect. Improvement as it materializes. Third, we materially advanced our portfolio through capital deployment. We deployed $3.3 billion into high quality. Vertical software acquisitions, executed opportunistic repurchases and maintained more than 6 billion of forward capacity. As we look ahead, ROPA remains an advantage and preferred buyer for both management teams and private equity sellers, and we. Believe the M and A backdrop remains. Constructive as private equity firms face increasing pressure to generate liquidity for limited partners. Our pipeline is robust and our team. Is deeply engaged and we will remain disciplined and unbiased on valuation and business quality. In parallel, we’ll continue to balance acquisitions with opportunistic buybacks, allocating capital to whichever path drives the best risk adjusted and. Long term cash flow per share compounding. As we turn to your questions, please flip to the final slide or strategic compounding flywheel. What we do at Roper is simple. We compound cash flow over the long. Arc of time through a disciplined strategy anchored on three things. First, we earn market leading, vertical focused. Businesses, application specific, deeply embedded and mission critical. These are durable franchises with highly recurring. Revenue and organic cash flow growth that. Can improve over time. Second, we run a decentralized operating model so our teams stay exceptionally close to. Customers and their workflows so we can consistently compete and win. That customer intimacy is a core competitive. Advantage and it’s also how we win in AI in our markets. AI isn’t a generic overlay. It has to be grounded in a real workflow context, tuned to domain specific edge cases and deployed through trusted embedded relationships so our AI delivers measurable value and better customer results. Third, we pair that with disciplined central. ED capital deployment, focus on high quality. M and A and opportunistic share repurchases, allocating capital objectively to maximize durable cash. Flow per share, compounding niche leading businesses. Decentralized operations close to customers and disciplined capital deployment. That’s our long term compounding flywheel. We’re excited to compete and win and. Continue delivering long term and improving cash flow compounding per share. So with that, thank you for your continued interest and support. Let’s open it up to your questions.

Questions and Answers:

operator

We will now go to our question and answer portion of the call. We request that our callers limit their questions to one main question and one follow up. If you would like to ask a question, you may do so by pressing the star key followed by the digit one on your touch tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then the digit 2. Again, we request that callers limit their questions to one main question and one follow up. Your first question comes from Brent Thiel with Jeffries.

Your line is now open.

Brent Thill

Good morning Neil. Regarding Deltec, I’m curious if you could. Just give everyone a sense of what. You’Re baking into the 26 guide and how you’re protecting against another potential government shutdown.

Neil Hunn

Yes, go ahead Jason.

Jason Conley

Yes, so good morning Brent. I think we are not assuming an improvement this year. The fourth quarter was depressed by the perpetual license revenue. As I talked about, most of govcon Enterprise still buys perpetual licenses. So that’s what drove our lower organic in as in the fourth quarter. So we don’t think that’s going to repeat next year. So we do have a comp benefit but otherwise we’re not really assuming improvement in that market until we see it. Okay.

Brent Thill

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

Neil Hunn

Yeah, I think it’s just to go through a little bit of what we talked about in the prepared remarks and. Then add a little bit more to it. So hey, the business is the leader in the marketplace. It is the clear leader. We’ve done a lot of good things there. We sort of cleaned up and fixed. The payments cost infrastructure and processing capability. We fixed and improved the go to market. So we’re competing and winning in the marketplace. We’re winning a majority of the jump. Balls versus the primary competitor. And so the problem now is just. Push to the right. So now we’re winning these opportunities. And we’re slow to implement the software, which means we’re slow to implement the payments. And that’s the next, the next sort of, you know, objective in front of the team there. So once we get that done, we feel much better about that. It’s a complete fixable problem. It’s one of the problems that you don’t like to have problems generally, but when you do have ones that are eminently fixable, which this one is, the larger problem would be if we had a competitive situation or something like that. Which we do not have.

Brent Thill

Great, thanks.

Neil Hunn

You bet.

operator

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

Clarke Jeffries

Hello. Thank you for taking the question. I wondered if specifically on the Govconn business you could maybe give a rank order of the kind of appropriation bills, what would have the most impact or within Deltec’s exposure, what segments of the government getting those appropriation bills passed would be most significant.

Neil Hunn

Yeah, so I’ll just draw back to the O triple B and this is as you know, we’re not. Deltec doesn’t have direct expenses exposure to the government. It’s our customers that are the federal have the direct exposure to the government. Just to remind everybody, the O triple B is heavy on Defense, Department of War, Department of Defense and DHS funding and spending. Those categories tend to have larger percentage of contractor spend. It could be north of 50% of the whole category. It can be contractor spend. So that’s definitely a tailwind. The civilian programs tend to have lower percentage. So it’s not necessarily a bad thing for Deltec’s customers, but it’s certainly better on the current appropriations. The O triple B.

Clarke Jeffries

Perfect. And then, you know, the last two years hovered around 3 billion deployed towards acquisitions. Wondering if you could talk about expectations for how much you might deploy in 26. What scenario might push you towards, you know, a number closer to 4 billion. Or a number closer to 2 billion. So what are you factoring into, you. Know, the Deployment outlook for 26? Thank you.

Neil Hunn

As you mentioned we mentioned there’s about, you know, about 6 billion sort of is what the forward capacity is over the next 12 months. We have the two levers available to us on the capital, the M and A and the buyback on the M and A side. You know, the thing for us, I’ve been here 15 years, Jason’s been here 20. You know, when you’re building a business. That has an M and A lever. We never view the amount of capital next 12 months of the budget or we got to spend it because we’re building a business that’s going to own businesses in perpetuity. So you have to buy very high quality businesses at an appropriate price. And so that discipline guides us. So it’s hard to set an expectation. That says we’d be, we’re going to. Get X dollars deployed against the 6 billion, Excuse me, in M and A or buyback. But we like having both levers available. To us and we’re just going to. Do what’s best objectively to compound cash flow per share at the best rate we can.

Jason Conley

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

Neil Hunn

Don’t mistake anything I’m saying, like I was just saying, Jason said, the opportunity. The number of deals, the number, the. Amount of LP pressure on the GPS and private equity just continues to mount. There’s going to be, there’s an aging. Portfolio, very high quality assets, a number of those assets that we have relationship with and are meeting with management teams and becoming the preferred owner. All that is very, very ripe for opportunity. But we’re going to remain as we always do, discipline. Finally on that, over the last really. Three years, two and a half or. Three years, we’ve really leaned in and built capacity for tuck ins and bolt ons. That’s a more predictable pace. I think we did seven or eight. Maybe eight small tuck in acquisitions last year. That’ll be more sort of predictable because it’s a lower dollar per transaction, but more of them.

Clarke Jeffries

Perfect. Thank you very much.

operator

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

Joseph Vruwink

Great. Thank you for taking my questions on AI. When would you expect to get to the point of quantifying what AI means for Roper at maybe a more precise level? I think it’s evident in certain areas already the adorant call out, you know, their mid teens growth, they’re 10 points above the segment. I would imagine customers want the cloud as part of their AI initiatives and so there’s an inherent uplift and positive correlation between Roper and AI for the legal space. Can you do that more holistically and attribute some of the organic improvement X del Tech you’re already seeing and say that’s directly or indirectly related to AI investment?

Neil Hunn

Yeah, so appreciate the question. We spend a fair amount of time. Talking about that internally. Just a couple guiding principles that we. Have internally is one, we’re not going. To AI wash or allocate revenue like other companies have done or doing. We’re not going to say X dollars, R and D. So therefore Y dollars of revenue is AI related. So we’re not going to AI wash our revenue stream. That said, we do aspire to be able to report a number AI revenue SKU related is X or Y. Unfortunately if we do that, I mean we’re going to monetize AI in more ways than just AI SKUs. It’s going to be cloud uplift, it’s going to be in packaging. There’s going to be lots of ways that we monetize this.

So this is actually, you know, it says simple. It does pretty hard from how we’re going to be able to sort of report this where it’s credible. At the end of the day, Joe, you highlight the most important thing which is we believe this is a TAM. Meaningful TAM expander for us, which means it should be a growth driver for. Us and you’ll see it show up initially in bookings and eventually into the. Recurring or reoccurring base. We see that adora, we see it at center reach. We’d expect to see it across several of our businesses starting this year. More broadly, as we sort of write the chapters on Roper in 2025, the chapter on AI would be how we learned to develop the initial set of. Products across our software program. Essentially every one of our software businesses either has or is right on the precipice of having AI related product to. Deliver to our customers. 26Th, I think the chapter is going to be how we commercialize, how do you sell, deploy, drive implementation and ultimately. Sort of monetize all of the product. And so that’s going to be the journey of learning for us across the portfolio organization. We look forward to providing updates on. That as we get through the year.

Joseph Vruwink

Great. That’s helpful on your approach to guidance this year. I think it’s very clear that you’re going to let the upside come to you and future changes are going to happen as you see it. Can you maybe put some guardrails in magnitude of what that could ultimately mean? And I’m thinking in the past you’ve talked about how your current portfolio could be capable of seven and in a best case scenario eight to nine. That’s more of a long term framework within FY26, if things go right and you get some redirection and where the pressures within the portfolio have been, what sort of upside possibility could there be?

Neil Hunn

Yeah, so I would say the long term to first point the destination for the longer term certainly not a the. Longer term entitled growth in a portfolio we still have conviction is north of 8%. You know we go company by company. About what their entitled realistically achievable growth can be. And so that number sort of the target destination has not changed. We are definitely as you’ve heard from. Our commentary, taking a much more appropriate. And balanced view for the initial guide here. You know no improvements at Deltec on the government contracting side. No dat market recovery actually underwriting a. Slight decline at Neptune. And so you know if you sort of thumb each one of those, I don’t want to get into order magnitude. Of what it could look like but. I would say it definitely tilts more conservative than this past year for instance.

Joseph Vruwink

Thank you.

Neil Hunn

Yep.

operator

Your next question comes from Dylan Baker with William Blair. Your line is now open.

Dylan Becker

Hey gentlemen. Appreciate it. Maybe kind of following up on one of Joe’s questions too. I think the Deltec Perpetual piece makes sense but you also called out some softness on non recurring due to some of those cloud migrations and maybe that’s just kind of revreck of upfront for ratable. I guess as you think about kind of AI’s opportunity to accelerate this modernization cloud journey given kind of the heavy maintenance base you still have there, how do you think about kind of that trade off in those long term economics? It seems favorable. I think it’s kind of evident in the subscription bookings in that low double digit framework but maybe kind of walk through some of the nuance between those as well too if you can.

Jason Conley

Thank yeah, I certainly appreciate the question. I think you know we’ve seen some of this just in our as segment over the last year’s non recurring revenue has been sort of flattish up a little bit here and there because some of our businesses have moved more to the cloud be it adorant or in recent years power plan. We see that at Deltec is going to be a significant opportunity. So that’s a part of our thinking in 26. Deltec’s really put a lot of AI functionality into their cloud product and so some of these large government contract customers are contemplating going to the cloud and they have a big push for that.

So you’re right that will obviously increase customer lifetime value but it will have a more muted impact in the year. So we thought through a little bit of those dynamics this year. And I think that’s probably the biggest area where we will see that because a lot of the rest of our businesses are sort of on their cloud journey. But they will continue to your point to include only AI features in the cloud and so that will just increase adoption as we go forward. Yeah.

Neil Hunn

And just to add to what Jason. Said, we don’t expect a pronounced J. Curve because we have a very large install base that’s on premise that’s going to lift, that is lifting and shifting. At 2 to 3x recurring. So it’s the J curve is less pronounced because you’re converting an existing recurring.

Neil Hunn

Base at a higher level.

Neil Hunn

And as you sort of, if you will trid or convert net new perpetual.

Neil Hunn

To recurring so they offset one another.

Neil Hunn

And we think we have that harnessed in our guidance.

Dylan Becker

Okay, great, thank you. And then maybe Neil, for you too on the topic between platform and bolt on M and A, I guess could you kind of give us a sense if you see any opportunity maybe as a part of AI, maybe not, but given kind of the current backdrop to accelerate some of the initiatives in one effort I know we’ve built out kind of the bolt on team. There’s a little bit more visibility into those platform valuations maybe have come down to a particular level as well. But just kind of think about kind of the mix between capital deployments between bolt on and platform if you can.

Thank you.

Neil Hunn

Always hard to predict mix. I can tell you that if there is a.

Neil Hunn

Generally speaking, if there’s a rank order.

Neil Hunn

Bolt ons or tuck ins are going.

Neil Hunn

To be first order because they are advancing sort of the organic growth and.

Neil Hunn

Strategic direction of one of our platform businesses. At the same time you always have a little bit of back office G.

Neil Hunn

And a synergy which enables to sort of buy down the initial purchase price.

Neil Hunn

Pretty quickly and then you get to the growth orientation. So that continues and will always be a focus of ours. What we see by the way on that front is it takes a little.

Neil Hunn

Bit of time as we do added the resources, they get to know the company, they build a relationship with their.

Neil Hunn

Companies, they build a relationship with sponsors and targets and founders.

Neil Hunn

I think something like 60% of our pipeline for bolt on is either proprietary or founder driven. That’s a completely new motion for us.

Neil Hunn

That would not have been the case three years ago. I think that bodes well, but these things do take time to matriculate through the system and mature to where they can become actionable. On the platform side, it’s a. The Number of opportunities and the quality of assets is very interesting.

Neil Hunn

The question on the table is going.

Neil Hunn

To be what happens relative to valuation. We’ve never been a Short term Next 12 month Multiple arbitrager so we’re not going to do that. But we definitely have to sort of, we have to look at buybacks versus bolt ons versus platforms on what is the best long term compounding in terms.

Neil Hunn

Of value creation opportunities for us.

Dylan Becker

Great, thank you guys.

Jason Conley

You bet.

operator

Your next question comes from Brad Rieback with Spifel. Your line is now open.

Brad Reback

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

Neil Hunn

Yeah, it was up high single digits and that is with Deltec being down in the low double digit area. Actually Deltec’s SaaS was strong but like I mentioned, Perpetual was down meaningfully. Yeah, the rest of the portfolio performed pretty well. Vertafore had a strong quarter off of a really tough comp last year. So they’re continuing to just have success in 2025 and that should be good for them for 26. And then as I mentioned last quarter, healthcare has been really strong for us and that was the same in the fourth quarter.

Brad Reback

Great, thanks Neil. This is the second quarter in a row you’ve missed expectations and you’re guiding to a back half acceleration in 26. So maybe take a moment and help us understand where the incremental conservatism is in the 26 guide versus the last couple of quarters.

Neil Hunn

Thanks. Sure.

Neil Hunn

So we did say we’re certainly disappointed with the last couple quarters, but we did say this time last quarter we had a wider range of outcomes, fan of outcome, especially because of the uncertainty of Deltec. And so while disappointing, we try to.

Neil Hunn

Be sort of very straightforward in that regard. I think for this year. I said it before, I’ll say it again.

Neil Hunn

When you look at where we’re exiting this year, look at 25 compared to 26 and you just go and let me back up. When you look at 25, the initial guide versus oriented up, it really reconciles to three things we talked about about. It’s Deltec because of Govcon, it’s Neptune because of the dynamics we talked about and it’s ProCare that almost fully reconciles the difference between the initial guide and.

Neil Hunn

Where we ended up. You then have that in mind. You take it, you carry it forward.

Neil Hunn

We’re assuming in 2026 there’s no improvement.

Neil Hunn

In Deltec, there is no acceleration at dat.

Neil Hunn

There’s actually underwriting a modest decline at Neptune versus 25.

Neil Hunn

And. And the only thing that sort of. Then you get the accretion to organic.

Neil Hunn

Growth from subsplash and centuries that turn organic this year. And then we have this easing second.

Neil Hunn

Half sort of non recurring.

Neil Hunn

So optically it looks like an acceleration.

Neil Hunn

Through the year, but when you look.

Neil Hunn

At the pieces, it’s actually pretty steady.

Neil Hunn

Save for the things that we just said.

Jason Conley

Yeah. And just to remind you all the central region subsplash becomes organic second half. So it’s got a. Create some of that ramp. And I would just call out too, just again, just a small comp, a couple comp issues. Foundry gets a little bit better this year and I know it’s small dollars, but in network it matters. And then we had 1Q25, a pretty depressed network number because we were comping against a bigger number in 24. So that comp goes away. So there’s some math too. Just going from 25 to 26.

Brad Reback

Great, thank you.

Jason Conley

You bet.

operator

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

Terrell Tillman

Yeah. Hey Neil, Jason and Zach, thanks for taking my questions. The first one’s going to be on Deltec. The second one, the follow up is going to be on dat, but on Deltec. And I know these months or these. Part of the quarters are probably less. Seasonally strong, but did you actually see. Any improvement in order volumes for perpetual. In December or January? And also with Deltec, are the effects of doge kind of lessening or is that still impactful? And then add a follow up?

Jason Conley

Yes. So Terry, this is Jason. I think the December is always stronger than the other months and that’s just the natural kind of inertia of how orders flow. In Deltec, I will say we had. Two large. Contractor government contractor deals that slipped. So it’s like right at the end. And so we think they’ll both land in the first half of next year, but we’ve also sort of hedged that just in case. But so usually we get some big deals and they were right at the finish line and they didn’t close, but they’re still in the queue and we still think we’re going to close the.

Neil Hunn

Rest of this year.

Jason Conley

Yeah, exactly this year.

Neil Hunn

And just to pick up on that, Terry as well, just to add the.

Neil Hunn

While the signatures on paper are slower.

Neil Hunn

Because of the shutdown, the commercial activity, the pipeline build has actually been encouraging. It’s been encouraging throughout. It’s because you know, all the. This is an environment unfortunately that our.

Neil Hunn

Customers live in and they sort of.

Neil Hunn

They’Re subject to the vagaries of what’s happening in the government, but they have.

Neil Hunn

A business to run and they have.

Neil Hunn

Contracts they’re likely going to get awarded.

Neil Hunn

And they have to sort of manage.

Neil Hunn

Sort of our software in that regard.

Neil Hunn

And so there’s no competitive issue here at all.

Neil Hunn

It hasn’t been asked, but zero competitive issue here.

Neil Hunn

It’s just deals that are building that are pushed to the right a little.

Neil Hunn

Bit given the uncertainty. Doge, I would say is to your question is lingering impact, but it’s not the topic that anybody’s talking about.

Neil Hunn

The way it was in the first third. The first half of the year, year of last year.

Terrell Tillman

Got it. I appreciate that. Just a follow up is on dat. Do you see ARPU lift continuing to. Play out through the year and are. You on track for that autonomous kind. Of load matching technology innovation to play out in 27? Thanks.

Neil Hunn

Yep.

Neil Hunn

So we do expect ARPU to continue improving and growing in 2026. There’s a couple reasons. One is you just have like, for like pricing opportunity that will sort of.

Neil Hunn

Get cascaded in during the year as it normally does.

Neil Hunn

But for the second reason is we have more value to sort of sell.

Neil Hunn

To both sides of the network. And so you’re going to get, you know, in the past it was just load board. So it’s load board and pricing.

Neil Hunn

Now it’s load board and automation. It’s load board in data, it’s load board and a number of things on.

Neil Hunn

Both the carrier and the broker side.

Neil Hunn

In terms of the automated matching, it’s early days but we’re encouraged by the progress. Unambiguously the technology does the job.

Neil Hunn

Let’s just be clear. It is the ability for a broker.

Neil Hunn

To tender to the DAT1 platform and.

Neil Hunn

Automatically match a load and have a carrier pick it up and complete the.

Neil Hunn

Commerce with payment sort of overlay across all that. It works and it’s working every day in the marketplace. The number one focus of that business is to build both sides of the network that starts on the broker side.

Neil Hunn

By getting native integrations with their TMS systems.

Neil Hunn

And you have seen and will continue to see during 2026 a cascade of announcements about the various TMSs that we’re integrating with.

Neil Hunn

That allows the brokering or tendering to our platform to be native in the.

Neil Hunn

Workflow of the brokers and then we continue to build the carrier side of the network. It’s got to be a high trust.

Neil Hunn

No fraud environment that’s part of the.

Neil Hunn

Core technology that we have and we’re.

Neil Hunn

Integrating so early days but we like.

Neil Hunn

The tendering percentage, we like the completion percentages, we like the factoring percentages and we’ll want to see that business scale as Jason Shannon and satish the team at DAT look at this on a monthly basis.

Terrell Tillman

Thank you Beth.

operator

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

Hoi-Fung Wong

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

Jason Conley

Yeah, no, I don’t think so. We’re kind of thinking for as we’ll be you know sort of in the mid single digit range with non recurring being flash and the recurring reoccurring being like mid single digit plus which is consistent with Q4 levels. I mean we’re not going to have the same non recurring decline like we. Did in the fourth quarter. And then as you mentioned the second half gets better on the central reach turning organic and we’ve got this, the non recurring as I just mentioned we get a better comp in the fourth quarter. So not a lot of. I would just say not a lot of go get in that second half number and then on ns, you know I think sort of the you know recurring revenue just sort of continue to be mid single digit plus out of the gate and then as we go throughout the year subslash actually comes in. In the fourth quarter. So that’ll be helpful. And so I think that’s sort of how it sets up. Nothing outside of that to call out. Got it.

Hoi-Fung Wong

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

Neil Hunn

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

Jason Conley

Yeah.

Hoi-Fung Wong

Yeah, just like a. Yeah, correct. It’s more of a broad kind of software selling kind of trends that you guys are noticing across the group.

Neil Hunn

Fair enough.

Neil Hunn

Understand the question. Yeah, I would say we’re broadly encouraged by what we saw in the finishing the year. The bookings and retention statistics were quite good. As you know our enterprise, our gross.

Neil Hunn

Retention’S in the mid-90s for our enterprise.

Neil Hunn

Businesses that steady to ticked up a little bit during 2025 and then in terms of the bookings activity, hey while there’s a little, we expect there to.

Neil Hunn

Be volatility, quarter to quarter, low double digit bookings, growth in the year and.

Neil Hunn

Being pretty broad based with sort of weakness at Deltec I think is all you need to see and so it’s been pretty good.

Hoi-Fung Wong

Okay, fantastic. Thanks a lot guys.

operator

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

George Kurosawa

Great, thanks for taking the questions. You guys brought in some new AI leadership. Shane and Edward would love to hear a little bit about the team they’re building out, what you have them focused on and if there’s any kind of low hanging fruit that you know learnings they can apply across the portfolio.

Neil Hunn

Yeah so we’re excited to have Shane and Eddie join and the team they’re.

Neil Hunn

Starting to build out.

Neil Hunn

So you three things they’re generally focused on. First is it’s all in pursuit of.

Neil Hunn

Accelerating the top line goals, accelerating sort.

Neil Hunn

Of our pace of AI product development and ultimately shipping, selling, monetization, that’s where the focus is. So three subcomponents of that it’s coaching and teaching.

Neil Hunn

Right.

Neil Hunn

Our businesses did a meaningfully above average, above expectation job in 2025, late 24 or 25 learning, making mistakes, learning, making mistakes, learning around AI development, what works, what doesn’t and getting products into the hands of customers. That was great to see. But some of these, a lot of these AI tasks are quite complicated, complex from a technical point of view and also unlike regular way software development there’s some art in this AI development and so Shane and Eddie and the team.

Neil Hunn

Really bring just a history. These are, these are people that studied.

Neil Hunn

Machine learning and AI in university quite.

Neil Hunn

A while ago and spent their entire.

Neil Hunn

Career so they’ve seen a lot of pattern recognitions.

Neil Hunn

They’re going to coach and teach our.

Neil Hunn

Leadership teams, our technical leaders, our product teams on all things AI ML related. That’s one number two, they are going.

Neil Hunn

To build an AI sort of development.

Neil Hunn

Strike team or accelerator team to where when there are a company might have more than it can do from its.

Neil Hunn

Internal resources and we’ll supplement those teams.

Neil Hunn

To accelerate in some pockets and then third there is in their first quarter.

Neil Hunn

With the business and they met with.

Neil Hunn

Most of our software businesses there is clear opportunity for some reuse inside the portfolio certain AI based sort of capabilities we can sort of produce and sort.

Neil Hunn

Of have if you will a roper.

Neil Hunn

Open source model where we can reuse some components and componentry and so they’re going to focus there and early days, it’s been just really great. They understand our culture, our teams have really engaged them and they’re just looking forward to scaling the team and getting to the work.

George Kurosawa

Okay, great. I did also want to touch on the margin side. You know, core gross margins were up over a point in the quarter. Maybe talk through the tailwinds there. How should we think about any sustainability to improvements?

Jason Conley

Yes, I mean I think we’ve always said in our long term incremental margins at the ebitda lines, around 45% did a little bit better this year. I think as we go into next year, I think as might be up a little bit. Network’s going to be down just because we’ve got the full year of convoy and our algo rolling through. And so that’ll accrete up over time but a little bit of a drag in 26. And then I think our dinner tep segment will be for the full year, sort of flat ish. We’ve got more consumables rolling through next year than normal, which has a little bit lower margin.

That’s really more pronounced in the first half. So maybe down a little bit in TEP in the first half and then it’ll improve throughout the year.

operator

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

Joshua Tilton

Hey guys, thanks for sneaking me in here. Maybe just first kind of a simple high level one on the guide for next year. I appreciate all the color that you gave on Deltec and Dat and Neptune, but if you were to take those three businesses aside and treat the rest of the organic business as one, what would be the one line color on the rest of the organic business? Does the guidance assume that everything xdat, Neptune and Deltec gets better, stays the same, gets worse? How would you characterize what the rest of the business has to do that’s baked into the guidance? Does that make sense?

Jason Conley

It does, yeah. So I mean, I would say broadly and you know, it gets a little bit better but not a lot, not meaningful enough to draw inflection. So that’s baked in. I mean when you think about we finished around 5.4%, the deals are a tailwind. This nonrecurring NAS is going to be somewhat of a tailwind. Foundry does get a little bit better and so, you know, maybe 10 basis points or so to the enterprise. And then really the swing factors I talked about the confident S&Q1 of 25 to then repeat. Then you just talk about like the swing factors.

It’s all within Neptune and that’s what our low single digit to mid single digit guidance has for tep and that’s what kind of bridges you to the from the low to the high end.

Joshua Tilton

And then maybe just a quick follow up. I understand that some businesses go organic in the second half. Is there any, I don’t know if conservatism is the right word, but is there any conservatism? Is there any learnings that you saw following like kind of the little hiccups that you saw in procore that you’re kind of applying or embedding or assuming will happen as some of these inorganic businesses convert to organic in the second half of next year?

Neil Hunn

Yeah, Josh, Neil, I’ll take that one. So sure answer is heck yes.

Neil Hunn

There’s a lot of learning from our.

Neil Hunn

Procare governance, what worked, what didn’t work and how we’re governing both subsplash and centerreach. We can spend more time talking about offline, but in essence when we see a small variance in a monthly reporting package relative to one of the key levers in value creation plan in Procare.

Neil Hunn

We observed that variance for a longer.

Neil Hunn

Time before we decided to to take.

Neil Hunn

Action to correct it.

Neil Hunn

Now we immediately jump to a corrective action, a countermeasure and we don’t let small variances turn into large variances. And as a result you have central REITs. That’s ahead of the underwrite model and subsplashes on the underwrite model for the outlooks for those businesses.

Neil Hunn

We can get in much more detail.

Neil Hunn

When we have more time offline, but.

Neil Hunn

That’S the essence of it.

Jason Conley

And I would just say that for, for Central Reach and cesflash, feel good about the contribution in the second half, the path that we’re on, bookings, momentum, the recurring, the gross retention, just the path to get to that accretion in the second half. We feel very good about that.

Joshua Tilton

Super helpful. Thanks guys.

Neil Hunn

You bet.

operator

Your next question comes from Dean Dray with RMOC Capital Markets. Your line is now open.

Deane Dray

Thank you. Good morning everyone.

Neil Hunn

Morning Gene.

Deane Dray

Hey. This has come up several times today about the M and A bias and looking for durable cash flow compounding. I’d be interested in hearing your thoughts about how do you rank looking at absolute dislocations in some asset prices today versus what you perceive as where there might be a wider moat against AI in these assets. So how are you weighing those?

Neil Hunn

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

Deane Dray

Yes.

Neil Hunn

So yeah, I wasn’t specifically talking about public valuations, but that would be great to hear that as well because you’ve done those in the past versus thinking more strategically about where there might be wider moats.

Neil Hunn

Yeah. So I would say so at the. Again, feel free, we won’t ding you on one of your questions if again I answer it the wrong question. We’re always for the long history of.

Neil Hunn

Roper, we’re always investing in these vertical.

Neil Hunn

Market application specific businesses with deep moats.

Neil Hunn

Right.

Neil Hunn

And so that does not change.

Neil Hunn

We believe in the AI world, you.

Neil Hunn

Know, these moats where you’re intimate with.

Neil Hunn

The customer, you have unique and proprietary.

Neil Hunn

Data, you’re embedded in high frequency workflows where on stack AI is easier to implement, easier to monetize and ultimately translates to the automation of tasks, which is this TAM expansion. We really like and are leaning in it. We’re seeing it playing across our 21 software business today. So we’ll continue to lean into that thesis from a capital deployment point of view.

Neil Hunn

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

Neil Hunn

I would say that what we talked.

Neil Hunn

About last quarter largely in the bucket of tariffs.

Neil Hunn

But it’s tariffs, it’s copper pricing. Generally the shock to the cost structure of a water meter when we started in really July of last year, pushing a surcharge to accommodate for that increase.

Neil Hunn

In cost of goods.

Neil Hunn

It was definitely a shock in the.

Neil Hunn

System in Q3 and it really abated during Q4. So I think our base case assumption is that is really in the rearview.

Neil Hunn

Mirror and set to the side and moving forward, it’s just about the normalization of volumes and in the market sort.

Neil Hunn

Of on the very tail end of the COVID spike in volumes.

Neil Hunn

And now we’re on the backside of.

Neil Hunn

That spike into a more normalizing range of volumes in the market. Thank you. You bet.

operator

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

Joseph Giordano

Hey guys, good morning. How you doing.

Neil Hunn

Hi Josh. Hey.

Joseph Giordano

I’m just curious how you’re now weighing like in terms of capital deployment, like different timing horizons here. Like you have stock today is, I don’t know, 15% below the average price of the buyback in the fourth quarter. You’re trading at almost a high single digit free cash flow yield now. And it’s a portfolio that you’re intimately close to relative to something that you might buy that drives top line, that is something that inherently has more risk if you don’t know it as well. Like how are you weighing something that, like the certainty of what you know versus like the risk reward of something you don’t know at the price that you’re paying.

Neil Hunn

So I’ll take the first pass of that. I’m sure Jason will have some color he may want to add. So again, just to. We’ve said it, it’s on repeat, we’ll say it again.

Neil Hunn

The objective of MA versus buybacks or.

Neil Hunn

The levers available to us is what’s the best risk adjusted path to long term cash flow per share compound, period, full stop. We’re totally objective and dispassionate about the allocation of the two. There’s $6 billion available, so a big sort of large amount of capacity on the buyback.

Neil Hunn

We just.

Neil Hunn

The valuation dislocation is just silly.

Neil Hunn

And so we leaned into it in.

Neil Hunn

Q4 and we find it obviously more attractive today. And it’s a great opportunity to drive long term cash flow compound that way. On top of that, we’re very excited.

Neil Hunn

And confident about our future. Right?

Neil Hunn

And we get the growth, the eye, the leadership, the strategy, the execution prowess. I mean, all of it feels very.

Neil Hunn

Very good to us.

Neil Hunn

And what we see internally at the same time, you know, M and A is a real lever. I mean there’s not to somewhat to my surprise, you know, we introduced the buyback last quarter. There is commentary about oh my gosh, is the M and A thesis not intact?

Neil Hunn

That is one of the most absurd.

Neil Hunn

Things I’ve heard in my 15 years at Roper.

Neil Hunn

We are a preferred buyer of vertical market software leaders.

Neil Hunn

We’re absolutely preferred from a management point of view.

Neil Hunn

We’re preferred from a seller point of view.

Neil Hunn

The pipeline is enormous. The LP pressure is legit. The number of assets in private equity.

Neil Hunn

Portfolio have to get liquidity are at levels we’ve not seen.

Neil Hunn

So that thesis just needs to be eliminated from the talk track because it’s not real. And so for us it’s balancing. Those two buybacks are great in the short run.

Neil Hunn

MA generally is going to beat in the long run. And we like having the balance between. The two options in front of us.

Jason Conley

Yeah, I would just add that around the confidence. And we’ve had just these unusual things happen with three of our businesses, but, like, the underlying quality is getting better. So there’s that. And I would just say the AI, we have 21 different businesses working through AI right now that are annual operating plan reviews and came out with an increased level of conviction that we’re going to win relative to AI, Our customer intimacy is really proving to be a competitive advantage, and we’ve got the tools and resources to get after the AI just as fast as anyone else.

So we feel really good about that. And so buying ourselves in that scenario where there’s this dislocation makes all the sense in the world. But it’s also going to be an incredibly active year on ma, so we’re just really. We’ve just got an abundance of opportunity in front of us this year.

Joseph Giordano

Now that you brought in this AI talent on the accelerator team, were there any instances where, like, negative instances where these guys coming in as experts kind of identified that maybe parts of your business where you thought you had more of an opportunity is going to be. Harder to drive, or. I mean, I’m sure they’re identifying places that you have opportunities, but was there any on, like, the negative side where something was like, well, maybe this isn’t as attractive as I thought in a particular part of the company?

Neil Hunn

Yeah.

Neil Hunn

So I would say, on balance, their.

Neil Hunn

Reviews and early takes are quite positive about the opportunity, market wise, technical wise.

Neil Hunn

The prowess of the teams that we have in place. But we also, and we had them.

Neil Hunn

Sort of do a short readout to our board last week, and then there.

Neil Hunn

Was a few bullet points of things that were on the constructive ledger. None of it was market opportunity, lack of market opportunity, or lack of opportunity to win. Again, these are more technical resources, so you might not have, like, the best acumen in, like, these vertical market spaces.

Neil Hunn

To judge that anyway.

Neil Hunn

But it was like, hey, as you’d expect, maybe there’s. We definitely need to improve the quantity of AI talent in the businesses. I mean, that’s a little bit of.

Neil Hunn

Why we’re adding the central team to sort of spark some acceleration.

Neil Hunn

And it’s just going to take some.

Neil Hunn

Time because we’ve got to build these people.

Neil Hunn

It’s not something that we’re going to.

Neil Hunn

Be able to hire en masse. We’ve got to build these people. And we did a good job last year.

Neil Hunn

We’ll continue to scale that and compound.

Neil Hunn

The learning on that this year.

Jason Conley

Yeah, I think the ideas have been well received by Shane and Eddie. I mean, they understand the specificity of what we’re trying to solve at the individual sort of vertical level. And that’s. They view that as very unique. Right. Coming from a horizontal player. So I think they see the opportunity just like our businesses do.

Joseph Giordano

Thank you, Ed.

operator

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

Zack Moxcey

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

operator

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